<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 1999
REGISTRATION NO. 333-88827
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CALIPER TECHNOLOGIES CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 3826 33-0675808
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
------------------------
605 FAIRCHILD DRIVE
MOUNTAIN VIEW, CA 94043-2234
(650) 623-0700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DANIEL L. KISNER, M.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
605 FAIRCHILD DRIVE
MOUNTAIN VIEW, CA 94043-2234
(650) 623-0700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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ROBERT L. JONES, ESQ. JONATHAN L. KRAVETZ, ESQ.
BRETT D. WHITE, ESQ. MINTZ, LEVIN, COHN, FERRIS,
COOLEY GODWARD LLP GLOVSKY AND POPEO, P.C.
FIVE PALO ALTO SQUARE ONE FINANCIAL CENTER
3000 EL CAMINO REAL BOSTON, MA 02111
PALO ALTO, CA 94306-2155 (617) 542-6000
(650) 843-5000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM
AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE(3)
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Common Stock, $0.001 par value...... 5,175,000 $15.00 $77,625,000 $21,363
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(1) Includes 675,000 shares subject to the underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act.
(3) $17,264 of this fee was previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 14, 1999
4,500,000 Shares
Caliper TechnologiesCorp.Logo
Common Stock
------------------
Caliper Technologies Corp. is selling shares of common stock. Prior to this
offering, there has been no public market for our common stock. The initial
public offering price of our common stock is expected to be between $13.00 and
$15.00 per share. Our common stock has been approved for listing on The Nasdaq
Stock Market's National Market under the symbol "CLPR."
The underwriters have an option to purchase a maximum of 675,000 additional
shares to cover over-allotments of shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 7.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS CALIPER
------------------- ------------------- -------------------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about ,
1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
CREDIT SUISSE FIRST BOSTON
CIBC WORLD MARKETS
HAMBRECHT & QUIST
The date of this prospectus is , 1999.
<PAGE> 3
[DESCRIPTION OF GRAPHICS]
Captions
Headline: CALIPER'S LABCHIP SYSTEMS
PUTTING THE LAB ON A CHIP
Illustration: This illustration, centered on the page, depicts Caliper's
LabChip technology by showing how laboratory experimental
functions, processes and equipment can be miniaturized,
integrated and automated and put on a microfluidic chip. In the
top half of the illustration, a cross-section of a laboratory
environment is pictured in which five researchers at various lab
stations are shown carrying out various steps of experiments
manually, using various pieces of equipment. The various
processes and pieces of equipment they are using are identified
with a number in a color dot that corresponds to the legend and
captions on the page. Below the illustration of the lab is an
illustration of a LabChip. The activities of the researchers that
are carried out on the chip are identified with connecting lines
to the area on the chip where they take place. The dimensions of
the chip are also described.
Caption:
Researchers typically conduct experiments by performing a series
of steps requiring multiple pieces of equipment and significant
manual handling. In our LabChip systems, these functions can be
performed on a single chip.
Caption for side of chip: Actual size ~ 1"
Legend:
Red dot#1 Test tubes, beakers and other glassware are replaced by
microscopic channels in the chip.
Lime dot#2 The chip measures and dispenses fluids, performing the functions
of manual liquid measuring instruments and robotic workstations.
Yellow dot#3 Chemicals are mixed as they move through the channels, allowing
reactions to take place.
Purple dot#4 Like an incubator, the LabChip system controls temperature
and reaction time.
Orange dot#5 The chip replaces the manual work of moving samples from one lab
station to another.
Blue dot#6 Like chemical analysis equipment, the chip can separate molecules
from each other.
Green dot#7 The results of the experiment are automatically detected and
displayed.
<PAGE> 4
Fold-Out P.2
Inside Front Cover
The series of four photographs on the right side of the page shows actual
elements of Caliper's personal laboratory system, based on the Agilent 2100
Bioanalyzer. The first image shows a LabChip device with wells and channels. The
second image shows one of the first chips that Caliper and its commercialization
partner, Agilent, are commercializing. The third image shows the chip inside
the Agilent 2100 Bioanalyzer with the top of the Agilent 2100 Bioanalyzer
open. The fourth image shows the entire Agilent 2100 Bioanalyzer system,
including chips, reagents, the chip instrument and a personal computer,
monitor, keyboard and printer.
Top Caption: We have developed two types of LabChip systems. Our first
personal laboratory system, the Agilent 2100 Bioanalyzer,
is designed to enhance individual researcher
productivity. Our high throughput system, which rapidly
conducts experiments using different chemicals in each
experiment, is designed for use by centralized laboratories
that produce large amounts of data.
Headline Personal Laboratory System
Captions:
Magnified chip: Each chip contains a network of microchannels through which
chemicals are moved to perform experiments.
Actual Agilent A menu of LabChip kits is being developed for a wide
2100 chip: range of routine laboratory experiments.
Chip in Agilent The chip is placed in an instrument that controls the
2100: movement of chemicals and detects the results of the
experiment.
Full System: The Agilent 2100 Bioanalyzer is currently being marketed
and sold by Agilent Technologies, a subsidiary of
Hewlett-Packard.
<PAGE> 5
Fold-out P.3
This series of photographs shows actual elements of Caliper's high throughput
system. The first image shows two Sipper chips in the palm of a hand. One chip
has a single capillary or sipper, the other has 4 capillaries. The second image
is a close-up photograph of the capillary of the Sipper chip poised over a
96-well plate. It is just about to draw a one nanoliter sample from one of the
wells. The third image shows the assay development station that Caliper provides
to customers. The fourth image shows the current high throughput system that
Caliper's technology access program customers are using for drug screening.
Top Caption: Same as above; text will apply to both pages
Headline: High Throughput System
Captions:
Hand with Sipper chips: Sipper chips are the core of our high throughput
systems. They have a short glass tube which draws minute
samples into the chip.
Close-up of sipper: The Sipper chip can access chemical samples from
standard laboratory storage systems.
Development station: Our development systems enable our pharmaceutical
company customers to modify experimental conditions in
ways that suit their needs.
Full System: Our first high throughput system combines the Sipper
chip with automated sample handling to perform thousands
of experiments per day.
<PAGE> 6
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TABLE OF CONTENTS
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PAGE
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PROSPECTUS SUMMARY.................... 3
RISK FACTORS.......................... 7
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS.................. 15
USE OF PROCEEDS....................... 16
DIVIDEND POLICY....................... 16
CAPITALIZATION........................ 17
DILUTION.............................. 18
SELECTED FINANCIAL DATA............... 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 20
BUSINESS.............................. 27
</TABLE>
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PAGE
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MANAGEMENT............................ 44
TRANSACTIONS WITH EXECUTIVE OFFICERS,
DIRECTORS AND FIVE PERCENT
STOCKHOLDERS........................ 55
PRINCIPAL STOCKHOLDERS................ 57
DESCRIPTION OF CAPITAL STOCK.......... 60
SHARES ELIGIBLE FOR FUTURE SALE....... 63
UNDERWRITING.......................... 64
NOTICE TO CANADIAN RESIDENTS.......... 66
LEGAL MATTERS......................... 67
EXPERTS............................... 67
WHERE YOU CAN FIND MORE INFORMATION... 67
INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 7
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all the information you should consider before
buying shares in the offering. You should read the entire prospectus carefully.
CALIPER
We are a leader in lab-on-a-chip technologies, which enable experiments
that ordinarily require laboratories full of equipment and people to be
conducted on a chip small enough to fit in the palm of a child's hand. Each chip
contains a network of microscopic channels through which fluids and chemicals
are manipulated in order to perform experiments. We believe our LabChip systems
have the potential to revolutionize experimentation in a wide range of
industries by enabling individuals and organizations to perform laboratory
experiments at a speed, cost and scale previously unattainable.
We believe that we are the first company to sell and deliver lab-on-a-chip
products to customers. During 1999, we introduced our first two LabChip systems:
- Personal Laboratory System. In collaboration with Hewlett-Packard, we
launched the Agilent 2100 Bioanalyzer system, our first personal
laboratory system for use by individual laboratory researchers.
Hewlett-Packard is transferring our collaboration to its subsidiary,
Agilent Technologies.
- High Throughput System. High throughput systems rapidly conduct
experiments using different chemicals in each experiment. Under our
technology access program, we have sold and delivered initial versions of
our high throughput systems for drug screening to Amgen and Hoffmann-La
Roche, and have contracted to deliver a high throughput system to Eli
Lilly.
We develop, manufacture and sell our proprietary LabChip systems to
pharmaceutical and other companies. The pharmaceutical, agriculture, clinical
diagnostics and chemical industries rely on laboratory experimentation to obtain
important information that can be used to discover and develop new products.
These companies, however, still rely on manual, multi-step experiments that use
tools such as test tubes, beakers and large pieces of equipment that utilize
decades-old technology. These tools and processes are expensive and
labor-intensive, rendering them inadequate to handle these companies'
accelerating needs for greater research and development productivity.
We believe that our LabChip systems represent a revolutionary advance in
laboratory experimentation. Our LabChip systems have the potential to expand the
capabilities and improve the productivity of individual researchers and, on an
institutional level, enable pharmaceutical companies to perform the massive
scale experimentation they need to advance the drug discovery process. As a
result, our LabChip technology has the potential to reduce the time it takes to
discover and commercialize new drugs.
Our LabChip systems miniaturize, integrate and automate experimentation to
an unprecedented degree. Because we have great flexibility in channel design and
can exert split-second computer control over fluid flow, we have the ability to
create chips for a multitude of experiments, or applications. We believe the key
benefits of our LabChip systems are:
- High Speed. Our LabChip systems accelerate experiments as much as 10-fold
or more, depending on the application.
- Reduced Reagent and Labor Cost. Our LabChip systems use only a small
fraction of the normal amount of expensive reagents, as little as
1/100,000th in some cases, and also reduce labor involved in each
experiment.
- Expanded Individual Researcher Capability. Because our LabChip systems
can collapse a multi-step, complex experiment into one step, individual
researchers can perform experiments previously outside their areas of
expertise.
- Improved Data Accuracy. Our LabChip systems generally produce more
accurate and consistent data by reducing human error and the variability
caused by the use of multiple instruments.
3
<PAGE> 8
- Improved Enterprise-Wide Productivity. We believe our LabChip systems can
improve data quality to the point where researchers can rely on data
generated outside their laboratory or organization, thereby improving
enterprise-wide productivity.
Our objective is to be the leading lab-on-a-chip company. Key elements of
our strategy to achieve this objective are as follows:
- Focus on the pharmaceutical industry first
- Rapidly build our installed customer base
- Leverage our installed customer base by expanding the menu of chip
applications
- Generate recurring revenue from high-value chips
- Build a substantial intellectual property estate
- Maintain leadership in chip technology and manufacturing
- Opportunistically penetrate new industries
We have applied for registration of the following trademarks: Caliper, the
Caliper logo, LabChip, the LabChip logo, and LibraryCard. Sipper is a trademark
of Caliper. This prospectus also includes trademarks of companies other than
Caliper.
Caliper was incorporated in Delaware on July 26, 1995. Our principal
offices and manufacturing facilities are located at 605 Fairchild Drive,
Mountain View, California 94043-2234, and our telephone number is (650)
623-0700. Our website is located at http://www.calipertech.com. Information
contained on our website is not a part of this prospectus.
4
<PAGE> 9
THE OFFERING
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Common stock offered.................................... 4,500,000 shares
Common stock to be outstanding after the offering....... 20,304,501 shares
Use of proceeds......................................... For general corporate purposes, including
capital expenditures, manufacturing
scale-up, product development and technology
research. See "Use of Proceeds."
Nasdaq National Market symbol........................... CLPR
</TABLE>
The number of shares to be outstanding after this offering is based on the
number of shares outstanding on September 30, 1999 and excludes:
- 1,669,891 shares that may be issued upon exercise of options outstanding
as of September 30, 1999 at a weighted average exercise price of $0.82
per share
- 2,008,211 additional shares that we could issue under our stock option
plans, of which options to purchase 740,048 shares of common stock were
granted from October 1999 to December 13, 1999 at a weighted average
exercise price of $5.44 per share
- 300,000 shares that we could issue under our employee stock purchase plan
- 74,503 shares that may be issued upon exercise of warrants outstanding as
of September 30, 1999 at a weighted average exercise price of $1.22 per
share
- 38,460 shares that may be issued at an exercise price of $1.22 per share
upon exercise of warrants that will be issued if a patent milestone is
met
ASSUMPTIONS USED IN THIS PROSPECTUS
Unless otherwise indicated, information in this prospectus assumes the
following:
- the conversion of all of our outstanding shares of convertible preferred
stock into shares of common stock upon the closing of this offering
- a 1-for-1.56 reverse stock split that has been completed
- the filing of our amended and restated certificate of incorporation
immediately following the closing of this offering
- no exercise of the underwriters' over-allotment option
We entered into a collaboration agreement with Hewlett-Packard in May 1998
under which Hewlett-Packard agreed to manufacture, market and distribute some of
our products, as we further describe in this prospectus. Hewlett-Packard is
transferring our collaboration to its subsidiary, Agilent Technologies. Where we
refer to Agilent in this prospectus, we are referring to Hewlett-Packard prior
to the transfer of this collaboration and Agilent following the transfer of this
collaboration.
5
<PAGE> 10
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(JULY 26, 1995) NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, --------------------------- -----------------
1995 1996 1997 1998 1998 1999
--------------- ------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
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STATEMENTS OF OPERATIONS DATA:
Revenue.............................. $ -- $ 132 $ 2,266 $ 8,155 $ 4,425 $ 8,859
Costs and expenses................... 534 4,952 9,678 12,516 9,228 17,786
Operating loss....................... (534) (4,820) (7,412) (4,361) (4,803) (8,927)
Net loss............................. (536) (4,710) (6,281) (2,975) (3,745) (8,126)
Accretion on redeemable convertible
preferred stock.................... -- (262) (1,470) (2,174) (1,587) (1,822)
Net loss attributable to common
stockholders....................... $ (536) $(4,972) $(7,751) $(5,149) $(5,332) $(9,948)
Net loss per common share, basic and
diluted............................ $(1.71) $ (3.90) $ (4.38) $ (2.39) $ (2.54) $ (3.71)
Shares used in computing net loss per
common share, basic and diluted.... 313 1,274 1,768 2,157 2,099 2,684
Pro forma net loss per share, basic
and diluted (unaudited)............ $ (0.21) $ (0.53)
Shares used in computing pro forma
net loss per share, basic and
diluted (unaudited)................ 14,347 15,217
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $ 27,820 $85,460
Working capital............................................. 23,278 80,918
Total assets................................................ 34,658 92,298
Long-term obligations, less current portion................. 3,483 3,483
Redeemable convertible preferred stock...................... 50,538 --
Total stockholders' equity (deficit)........................ (25,262) 82,916
</TABLE>
The increase in net loss attributable to common stockholders due to
accretion on redeemable convertible preferred stock will not occur after this
offering because all of the outstanding preferred stock will be converted to
common stock at the closing of the offering.
See Note 1 of notes to our financial statements for an explanation of the
determination of the number of shares used in computing per share data.
The as adjusted balance sheet data reflects the receipt and application of
the net proceeds from the sale of the 4,500,000 shares of common stock in this
offering at an assumed initial public offering price of $14.00 per share after
deducting underwriting discounts and commissions and estimated offering expenses
and the conversion of all outstanding preferred stock into common stock. See
"Use of Proceeds" and "Capitalization."
6
<PAGE> 11
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. If any of the
following risks actually occurs, we may not be able to conduct our business as
currently planned and our financial condition and operating results could be
seriously harmed. In addition, the trading price of our common stock could
decline due to the occurrence of any of these risks, and you may lose all or
part of your investment. See "Special Note Regarding Forward-Looking
Statements."
RISKS RELATED TO OUR BUSINESS
OUR LABCHIP SYSTEMS MAY NOT ACHIEVE MARKET ACCEPTANCE, WHICH COULD CAUSE OUR
REVENUE TO DECLINE.
Our technologies are still in the early stages of development, and our
LabChip systems incorporating these technologies have only recently been made
commercially available. If our LabChip systems do not gain market acceptance, we
will be unable to generate sales and our revenue will decline. The commercial
success of our LabChip systems will depend upon market acceptance of the merits
of our LabChip systems by pharmaceutical and biotechnology companies, academic
research centers and other companies that rely upon laboratory experimentation.
We have not yet demonstrated these benefits. Market acceptance will depend on
many factors, including:
- our ability to demonstrate the advantages and potential economic value of
our LabChip systems over alternative well-established technologies and
products
- the extent of Agilent's efforts to market the Agilent 2100 Bioanalyzer
- our ability to market our high throughput systems through our technology
access program
Because the products comprising our LabChip systems have been in operation
for a limited period of time, their accuracy, reliability, ease of use and
commercial value have not been fully established. If the initial Agilent 2100
Bioanalyzer customers or our initial technology access program customers do not
approve of our initial LabChip systems because these systems fail to generate
the quantities and quality of data they expect, are too difficult or costly to
use, or are otherwise deficient, market acceptance of these LabChip systems
would suffer and we may not be able to generate further sales. We cannot assure
you that these customers' efforts to put our LabChip systems into use will
continue or will be expeditious or effective. Potential customers for our high
throughput systems may also wait for indications from our three initial
technology access program customers that our high throughput systems work
effectively and generate substantial benefits. Further, non-acceptance by the
market of our initial LabChip systems could undermine not only those systems but
subsequent LabChip systems as well.
WE EXPECT TO INCUR FUTURE OPERATING LOSSES AND MAY NOT ACHIEVE PROFITABILITY.
We have experienced significant operating losses each year since our
inception and expect to incur substantial additional operating losses for at
least the next two years, primarily as a result of expected increases in
expenses for manufacturing capabilities, research and product development costs
and general and administrative costs. We may never achieve profitability. For
example, we experienced net losses of approximately $6.3 million in 1997, $3.0
million in 1998 and $8.1 million in the first nine months of 1999. As of
September 30, 1999, we had an accumulated deficit of approximately $28.4
million, which includes $5.7 million of accretion on redeemable convertible
preferred stock. Our losses have resulted principally from costs incurred in
research and development and from general and administrative costs associated
with our operations. These costs have exceeded our revenue and interest income
which, to date, have been generated principally from collaborative research and
development agreements, technology access fees, cash and investment balances
and, to a lesser extent, product sales and government grants.
7
<PAGE> 12
OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY AND ANY FAILURE TO MEET FINANCIAL
EXPECTATIONS MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A
DECLINE IN OUR STOCK PRICE.
Our quarterly operating results have fluctuated significantly in the past
and we expect they will fluctuate in the future as a result of many factors,
some of which are outside of our control. For example, our revenues have varied
dramatically as a result of the timing of fees obtained under our technology
access program, as these fees are comparatively large and are recognized
unevenly over time. It is possible that in some future quarter or quarters, our
operating results will be below the expectations of securities analysts or
investors. In this event, the market price of our common stock may fall abruptly
and significantly. Because our revenue and operating results are difficult to
predict, we believe that period-to-period comparisons of our results of
operations are not a good indication of our future performance.
If revenue declines in a quarter, whether due to a delay in recognizing
expected revenue or otherwise, our earnings will decline because many of our
expenses are relatively fixed. In particular, research and development and
general and administrative expenses are not affected directly by variations in
revenue.
WE ARE INVOLVED IN INTELLECTUAL PROPERTY LITIGATION WITH ACLARA BIOSCIENCES THAT
MAY HURT OUR COMPETITIVE POSITION, MAY BE COSTLY TO US AND MAY PREVENT US FROM
SELLING OUR PRODUCTS.
Our suit against Aclara is costly to litigate and if we are not successful
then we will not recover these costs. We have filed a suit against Aclara
Biosciences, Inc. and our former patent counsel alleging that they
misappropriated our trade secrets, and that our former patent counsel breached
their duties to us as our attorneys. We may not be successful in our lawsuit
against them, in which case we will have incurred substantial litigation costs
that we will not recover.
If we lose Aclara's suit against us it will hurt our competitive position,
may be costly to us and may prevent us from selling our products. In addition,
subsequent to the filing of our suit, Aclara sued us claiming we are infringing
one of its patents with our LabChip systems that use electrical charges to move
fluids and chemicals through the channels of the chip. If we lose this case, we
will need to obtain from Aclara a license to this technology in order to
continue to market our products that have been found to infringe Aclara's
patent, which may include all products currently marketed by Agilent. This
license could be expensive, or could require us to license to Aclara some of our
technology which would result in a partial loss of our competitive advantage in
the marketplace, each of which could seriously harm our ability to conduct our
business, and hurt our financial condition and results of operations. We believe
that we have meritorious defenses in this action. However, litigation is
unpredictable and we may not prevail with any of these defenses. If Aclara is
successful in its suit against us and is unwilling to grant us a license, we
will be required to stop selling our products that are found to infringe
Aclara's patent unless we can redesign them so they do not infringe Aclara's
patent, which we may be unable to do. In addition, if we lose the patent suit,
we could be required to pay Aclara damages, including treble damages, which
could be substantial and seriously harm our financial position.
This litigation will be expensive to us, may be protracted and our
confidential information may be compromised. Whether or not we are successful in
these lawsuits, we expect this litigation to consume substantial amounts of our
financial and managerial resources. At any time Aclara may file additional
claims against Caliper, or we may file additional claims against Aclara, which
could increase the risk, expense and duration of the litigation. Further,
because of the substantial amount of discovery required in connection with this
type of litigation, there is a risk that some of our confidential information
could be compromised by disclosure. For more information on our litigation with
Aclara, see "Business -- Legal Proceedings."
PUBLIC ANNOUNCEMENTS OF LITIGATION EVENTS WITH ACLARA BIOSCIENCES MAY HURT OUR
STOCK PRICE.
During the course of our lawsuits with Aclara there may be public
announcements of the results of hearings, motions, and other interim proceedings
or developments in the litigation. If securities analysts or investors perceive
these results to be negative, it could have a substantial negative effect on the
trading price of our stock.
8
<PAGE> 13
IF AGILENT DETERMINES THAT WE MAY BE VIOLATING A THIRD-PARTY PATENT, IT MAY
TERMINATE SALES OF THE AGILENT 2100 BIOANALYZER, WHICH WILL DECREASE OUR
REVENUE.
Under our collaboration agreement with Agilent, Agilent may elect at any
time to stop developing, manufacturing or distributing any product that it
reasonably determines, on the advice of counsel, poses a substantial risk of
infringing a third-party patent. For example, if we lose the Aclara litigation,
or if any adverse developments occur during the course of this litigation, or if
any other third-party claims that we are violating their patent, then Agilent
may terminate marketing and selling of the Agilent 2100 Bioanalyzer system,
which Agilent began marketing and selling in September 1999, which will decrease
our future revenue.
OUR PRODUCTS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH
MAY CAUSE US TO ENGAGE IN COSTLY LITIGATION AND, IF WE ARE NOT SUCCESSFUL, COULD
ALSO CAUSE US TO PAY SUBSTANTIAL DAMAGES AND PROHIBIT US FROM SELLING OUR
PRODUCTS.
Third parties may assert infringement or other intellectual property claims
against us, such as in the Aclara litigation described above and under
"Business-Legal Proceedings." We may have to pay substantial damages, including
treble damages, for past infringement if it is ultimately determined that our
products infringe a third party's proprietary rights. Further, we may be
prohibited from selling our products before we obtain a license, which, if
available at all, may require us to pay substantial royalties. Even if these
claims are without merit, defending a lawsuit takes significant time, may be
expensive and may divert management attention from other business concerns. We
are aware of third-party patents that may relate to our technology or potential
products. We have also been notified that third parties have attempted to
provoke an interference with one issued U.S. patent that we have exclusively
licensed to determine the priority of inventions. Any public announcements
related to litigation or interference proceedings initiated or threatened
against us could cause our stock price to decline.
WE MAY NEED TO INITIATE LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS, WHICH WOULD
BE EXPENSIVE AND, IF WE LOSE, MAY CAUSE US TO LOSE SOME OF OUR INTELLECTUAL
PROPERTY RIGHTS, WHICH WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.
We rely on patents to protect a large part of our intellectual property and
our competitive position. In order to protect or enforce our patent rights, we
may initiate patent litigation against third parties, such as infringement suits
or interference proceedings. These lawsuits could be expensive, take significant
time, and could divert management's attention from other business concerns. They
would put our patents at risk of being invalidated or interpreted narrowly and
our patent applications at risk of not issuing. We may also provoke these third
parties to assert claims against us. Patent law relating to the scope of claims
in the technology fields in which we operate is still evolving and,
consequently, patent positions in our industry are generally uncertain. We
cannot assure you that we will prevail in any of these suits or that the damages
or other remedies awarded, if any, will be commercially valuable. During the
course of these suits, there may be public announcements of the results of
hearings, motions and other interim proceedings or developments in the
litigation. If securities analysts or investors perceive any of these results to
be negative, it could cause our stock to decline.
THE RIGHTS WE RELY UPON TO PROTECT OUR INTELLECTUAL PROPERTY UNDERLYING OUR
PRODUCTS MAY NOT BE ADEQUATE, WHICH COULD ENABLE THIRD PARTIES TO USE OUR
TECHNOLOGY AND WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.
In addition to patents, we rely on a combination of trade secrets,
copyright and trademark laws, nondisclosure agreements and other contractual
provisions and technical measures to protect our intellectual property rights.
Nevertheless, these measures may not be adequate to safeguard the technology
underlying our products. If they do not protect our rights, third parties could
use our technology, and our ability to compete in the market would be reduced.
In addition, employees, consultants and others who participate in the
development of our products may breach their agreements with us regarding our
intellectual property, and we may not have adequate remedies for the breach. We
also may not be able to
9
<PAGE> 14
effectively protect our intellectual property rights in some foreign countries.
For a variety of reasons, we may decide not to file for patent, copyright or
trademark protection outside of the United States. We also realize that our
trade secrets may become known through other means not currently foreseen by us.
Notwithstanding our efforts to protect our intellectual property, our
competitors may independently develop similar or alternative technologies or
products that are equal or superior to our technology and products without
infringing on any of our intellectual property rights or design around our
proprietary technologies. For further information on our intellectual property
and the difficulties in protecting it, see "Business -- Intellectual Property."
IF WE DO NOT SUCCESSFULLY INTRODUCE NEW PRODUCTS AND EXPAND THE RANGE OF
APPLICATIONS FOR OUR LABCHIP SYSTEMS, WE MAY EXPERIENCE A DECLINE IN REVENUE OR
SLOW REVENUE GROWTH AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY.
We intend to develop LabChip systems with increasingly high throughput
capabilities and develop a broad range of applications for our LabChip
technology. If we are unable to do so, our LabChip systems may not become widely
used and we may experience a decline in revenue or slow revenue growth and may
not achieve or maintain profitability.
In order for our high throughput systems to achieve the levels of
throughput necessary to meet customers' demands, we need to develop and
manufacture Sipper chips with more than one capillary, which we may not be able
to do. Our current high throughput systems operate with Sipper chips with only
one capillary, a small glass tube used to draw compounds into the chip. In order
to achieve the levels of throughput that our customers desire, we will need to
develop a LabChip system accommodating multiple capillaries, which we may not be
able to do. If we cannot cost-effectively deliver chips with multiple
capillaries, we may not be able to attract new customers to purchase our high
throughput systems, which would seriously harm our future prospects. Further,
our existing technology access program customers may decide not to renew their
annual access subscriptions, which would seriously reduce our revenue.
We must develop new applications for existing LabChip instruments, which we
may not be able to do. The Agilent 2100 Bioanalyzer uses LabChip kits that we
specifically design for each application. We currently have LabChip kits
commercially available for only three applications relating to DNA and RNA
sizing and quantification. DNA and RNA are commonly used acronyms for chemicals
that contain, or transmit, genetic information in living things. We currently
are developing LabChip kits for other applications. If we are unable to develop
LabChip kits for specific applications required by potential customers, those
customers will not purchase the Agilent 2100 Bioanalyzer.
We must also continue to develop applications for our high throughput
systems. If we are not able to complete the development of these applications,
or if we experience difficulties or delays, we may lose our current technology
access program customers and may not be able to obtain new customers.
WE RELY HEAVILY ON AGILENT TO MANUFACTURE, MARKET AND DISTRIBUTE THE AGILENT
2100 BIOANALYZER. IF AGILENT FAILS TO PERFORM UNDER OUR AGREEMENT OR
SUCCESSFULLY COMMERCIALIZE OUR COLLABORATIVE PRODUCTS, OUR REVENUE FROM THE
AGILENT 2100 BIOANALYZER WOULD BE REDUCED AND WE MAY LOSE THE DEVELOPMENT
FUNDING WE CURRENTLY RECEIVE FROM AGILENT.
Agilent manufactures, markets and distributes the Agilent 2100 Bioanalyzer
under an agreement we entered into in May 1998. We also rely on Agilent for
significant financial and technical contributions in the development of products
covered by the agreement. Our ability to develop, manufacture and market these
products successfully depends significantly on Agilent's performance under this
agreement. If Agilent experiences manufacturing or distribution difficulties,
does not actively market the Agilent 2100 Bioanalyzer, or does not otherwise
perform under this agreement, our revenue from the Agilent 2100 Bioanalyzer
would be reduced. In addition, Agilent may terminate the agreement at their
discretion at any time after May 2001. If Agilent terminates this agreement, we
would need to obtain development funding from other sources, and we may be
required to find one or more other collaborators for the development and
commercialization of our products. Our inability to enter into agreements with
commercialization
10
<PAGE> 15
partners or develop our own marketing, sales, and distribution capabilities
would increase costs and impede the commercialization of our products.
AGILENT MAY COMPETE WITH US IF OUR COLLABORATION TERMINATES AFTER MAY 2003,
WHICH COULD REDUCE THE POTENTIAL REVENUE FROM OUR INDEPENDENT PRODUCT SALES.
Under the terms of our agreement with Agilent, if they, or we, terminate
our agreement after May 2003, we will grant to Agilent a non-exclusive license
to our LabChip technologies as then developed for use in the research products
field. Consequently, there is the possibility that we may experience competition
from Agilent after May 2003, which would reduce our ability to sell products
independently or through other commercial partners. See
"Business -- Commercialization -- Strategic Alliance with Agilent" for a further
description of the terms of our collaboration with Agilent.
WE HAVE LIMITED EXPERIENCE IN MANUFACTURING OUR PRODUCTS AND MAY ENCOUNTER
MANUFACTURING PROBLEMS OR DELAYS WHICH COULD RESULT IN LOST REVENUE.
Although Agilent manufactures the Agilent 2100 Bioanalyzer, we manufacture
the chips used in this instrument and also currently manufacture instruments and
Sipper chips for our high throughput systems. We currently have limited
manufacturing capacity for our LabChip systems and products and experience
variability in manufacturing yields for chips, particularly Sipper chips. If we
fail to deliver chips and high throughput screening products in a timely manner,
our relationships with our customers could be seriously harmed, and revenue
would decline. We currently have one manufacturing facility located in Mountain
View, California. The actual number of chips we are able to sell or use depends
in part upon the manufacturing yields for these chips. We have only recently
begun to manufacture significant numbers of Sipper chips and are continuing to
develop our quality control procedures for these chips. In order to offer Sipper
chips with multiple capillaries for ultra high throughput applications, we will
need to achieve consistently high yields in the process of inserting
capillaries. We cannot assure you that manufacturing or quality control problems
will not arise as we attempt to scale-up our production of chips or that we can
scale-up manufacture and quality control in a timely manner or at commercially
reasonable costs. If we are unable to consistently manufacture Sipper chips or
chips for the Agilent 2100 Bioanalyzer on a timely basis because of these or
other factors, our product sales will decline. We are currently manufacturing
high throughput instruments in-house, in limited volumes and with largely manual
assembly. If demand for our high throughput instruments increases, we will
either need to expand our in-house manufacturing capabilities or outsource to
Agilent or other manufacturers.
IF A NATURAL DISASTER STRIKES OUR MANUFACTURING FACILITY WE WOULD BE UNABLE TO
MANUFACTURE OUR PRODUCTS FOR A SUBSTANTIAL AMOUNT OF TIME AND WE WOULD
EXPERIENCE LOST REVENUE.
We rely on a single manufacturing facility to produce our chips and high
throughput systems, and have no alternative facilities. The facility and some
pieces of manufacturing equipment are difficult to replace and could require
substantial replacement lead-time. Our manufacturing facility may be affected by
natural disasters such as earthquakes and floods. Earthquakes are of particular
significance since the manufacturing facility is located in Mountain View,
California, an earthquake-prone area. In the event our existing manufacturing
facility or equipment is affected by man-made or natural disasters, we would be
unable to manufacture products for sale, meet customer demands or sales
projections. If our manufacturing operations were curtailed or ceased, it would
seriously harm our business.
BECAUSE A SMALL NUMBER OF CUSTOMERS AND AGILENT HAVE ACCOUNTED FOR, AND ARE
LIKELY TO CONTINUE TO ACCOUNT FOR, A SUBSTANTIAL PORTION OF OUR REVENUE, OUR
REVENUE COULD DECLINE DUE TO THE LOSS OF ONE OF THESE CUSTOMERS OR THE
TERMINATION OF OUR AGREEMENT WITH AGILENT.
Historically we have had very few customers and one commercial partner,
Agilent, from which we have derived the majority of our revenue and, if we were
to lose any one of these, our revenue would decrease substantially. Agilent and
three customers accounted for 91% of total revenue in the nine months ended
September 30, 1999, and two customers and Agilent accounted for 97% of total
revenue in fiscal
11
<PAGE> 16
year 1998. We and Agilent introduced the Agilent 2100 Bioanalyzer system in
September 1999 and have not yet derived significant revenue from the sale of
this product on a commercial scale. Although we anticipate that the introduction
of the Agilent 2100 Bioanalyzer system will expand our revenue base, we expect
that we will continue to rely on our large customers and on Agilent for the
majority of our revenue.
FAILURE TO RAISE ADDITIONAL CAPITAL OR GENERATE THE SIGNIFICANT CAPITAL
NECESSARY TO EXPAND OUR OPERATIONS AND INVEST IN NEW PRODUCTS COULD REDUCE OUR
ABILITY TO COMPETE AND RESULT IN LOWER REVENUE.
We anticipate that our existing capital resources and the net proceeds from
this offering will enable us to maintain currently planned operations through at
least the year 2000. However, we premise this expectation on our current
operating plan, which may change as a result of many factors. Consequently, we
may need additional funding sooner than anticipated. Our inability to raise
capital would seriously harm our business and product development efforts. In
addition, we may choose to raise additional capital due to market conditions or
strategic considerations even if we believe we have sufficient funds for our
current or future operating plans. To the extent that additional capital is
raised through the sale of equity or convertible debt securities, the issuance
of these securities could result in dilution to our stockholders.
We currently have no credit facility or committed sources of capital other
than an equipment lease line with $1.7 million unused and available. To the
extent operating and capital resources are insufficient to meet future
requirements, we will have to raise additional funds to continue the development
and commercialization of our technologies. These funds may not be available on
favorable terms, or at all. If adequate funds are not available on attractive
terms, we may be required to curtail operations significantly or to obtain funds
by entering into financing, supply or collaboration agreements on unattractive
terms.
WE DEPEND ON OUR KEY PERSONNEL, THE LOSS OF WHOM WOULD IMPAIR OUR ABILITY TO
COMPETE.
We are highly dependent on Daniel L. Kisner, M.D., our President and Chief
Executive Officer, and our three founding executive officers, Calvin Y. H. Chow,
Michael R. Knapp, Ph.D. and J. Wallace Parce, Ph.D., as well as the other
principal members of our management and scientific staff. The loss of services
of any of these persons could seriously harm our product development and
commercialization efforts. In addition, research, product development and
commercialization will require additional skilled personnel in areas such as
chemistry and biology, software engineering and electronic engineering. Our
business is located in Silicon Valley, California, where demand for personnel
with these skills is extremely high and is likely to remain high. As a result,
competition for and retention of personnel, particularly for employees with
technical expertise, is intense and the turnover rate for these people is high.
If we are unable to hire, train and retain a sufficient number of qualified
employees, our ability to conduct and expand our business could be seriously
reduced. The inability to retain and hire qualified personnel could also hinder
the planned expansion of our business.
OUR OR THIRD PARTIES' COMPUTER SYSTEMS MAY FAIL IN THE YEAR 2000, WHICH WOULD
DELAY OUR PRODUCT DEVELOPMENT AND THE MANUFACTURING OF OUR PRODUCTS.
Failure of our computer systems could seriously delay our product
development processes and/or reduce our ability to cost-effectively manage our
business during the time required to fix these problems. In addition, computer
failures could cause Agilent to incur delays in manufacturing the Agilent 2100
Bioanalyzer, or our customers to postpone or cancel orders for our products. We
have assessed the readiness of our computer systems to handle dates beyond the
year 1999. We have not assessed the readiness of our non-software suppliers or
our customers. Unforeseen problems may arise in our own computers, our products,
and embedded systems, and from customers, suppliers and other organizations with
which we conduct transactions worldwide. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Year 2000
Readiness" for more information on the status of our preparation relating to
this issue.
12
<PAGE> 17
RISKS RELATED TO THIS OFFERING
NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION.
The initial public offering price will be substantially higher than the
book value per share of our common stock. Investors purchasing common stock in
this offering will, therefore, incur immediate dilution of $9.92 in net tangible
book value per share of common stock, based on an assumed public offering price
of $14.00 per share. In addition, the number of shares available for issuance
under our stock option and employee stock purchase plans will automatically
increase without stockholder approval. Investors will incur additional dilution
upon the exercise of outstanding stock options and warrants. See "Dilution" for
a more detailed discussion of the dilution new investors will incur in this
offering.
CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND
PRINCIPAL STOCKHOLDERS MAY PREVENT NEW INVESTORS FROM INFLUENCING SIGNIFICANT
CORPORATE DECISIONS.
Following this offering our directors, entities affiliated with our
directors, and our executive officers will beneficially own, in the aggregate
approximately 31% of our outstanding common stock. These stockholders as a group
will be able to substantially influence the management and affairs of Caliper
and, if acting together, would be able to influence most matters requiring the
approval by our stockholders, including the election of directors, any merger,
consolidation or sale of all or substantially all of our assets and any other
significant corporate transaction. The concentration of ownership may also delay
or prevent a change of control of Caliper at a premium price if these
stockholders oppose it. See "Principal Stockholders" for details on our stock
ownership.
PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER,
WHICH COULD LIMIT THE PRICE INVESTORS MIGHT BE WILLING TO PAY IN THE FUTURE FOR
OUR COMMON STOCK.
Provisions in our certificate of incorporation and bylaws may have the
effect of delaying or preventing an acquisition, merger in which we are not the
surviving company or changes in our management. In addition, because we are
incorporated in Delaware, we are governed by the provisions of Section 203 of
the Delaware General Corporation Law. These provisions may prohibit large
stockholders, in particular those owning 15% or more of the outstanding voting
stock, from consummating a merger or combination including us. These provisions
could limit the price that investors might be willing to pay in the future for
our common stock.
THERE IS A LARGE NUMBER OF SHARES THAT MAY BE SOLD IN THE MARKET FOLLOWING THIS
OFFERING, WHICH MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
Sales of a substantial number of shares of our common stock in the public
market following this offering could cause the market price of our common stock
to decline. If there are more shares of our common stock offered for sale than
buyers are willing to purchase, then the market price of our common stock may
decline to a market price at which buyers are willing to purchase the offered
shares of common stock and sellers remain willing to sell the shares. The number
of shares of common stock available for sale in the public market is limited by
restrictions under federal securities law and under lock-up agreements that our
stockholders have entered into with the underwriters and with us. Those lock-up
agreements restrict our stockholders from selling, pledging our otherwise
disposing of their shares for a period of 180 days after the date of this
prospectus without the prior written consent of Credit Suisse First Boston
Corporation. However, Credit Suisse First Boston Corporation may, in its sole
discretion, release all or any portion of the common stock from the restrictions
of the lock-up agreements. The following table indicates approximately when the
15,804,501 shares of our common stock that are not being sold in the
13
<PAGE> 18
offering but which were outstanding as of September 30, 1999 will be eligible
for sale into the public market:
<TABLE>
<CAPTION>
DAYS AFTER THE SHARES ELIGIBLE
EFFECTIVE DATE FOR SALE COMMENT
-------------- --------------- ------------------------------------------------
<S> <C> <C>
On Effectiveness....... 289,676 Shares not locked-up and saleable under Rule 144
90 days................ 79,293 Shares not locked-up and saleable under Rules
144 and 701
180 days............... 15,435,532 Lock-up released: shares saleable under Rules
144 and 701
</TABLE>
Additionally, of the 1,669,891 shares that may be issued upon the exercise
of options outstanding as of September 30, 1999, approximately 472,161 shares
will be vested and eligible for sale 180 days after the date of this prospectus.
For a further description of the eligibility of shares for sale into the public
market following the offering, see "Shares Eligible for Future Sale."
14
<PAGE> 19
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance. We have attempted
to identify forward-looking statements by terminology including "anticipates,"
"believes," "can," "continue," "could," "estimates," "expects," "intends,"
"may," "plans," "potential," "predicts," "should" or "will" or the negative of
these terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties and other
factors, including the risks outlined under "Risk Factors," that may cause our
or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels or
activity, performance or achievements expressed or implied by these
forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are not under any duty to update any
of the forward-looking statements after the date of this prospectus to conform
these statements to actual results, unless required by law.
15
<PAGE> 20
USE OF PROCEEDS
Our net proceeds from the sale of the 4,500,000 shares of common stock we
are offering, at an assumed initial public offering price of $14.00 per share,
are estimated to be approximately $57.6 million after deducting underwriting
discounts and commissions and estimated offering expenses payable by us. We
expect to use the net proceeds for general corporate purposes, including capital
expenditures, manufacturing scale-up, product development and technology
research.
The amounts and timing of our actual expenditures will depend upon numerous
factors, including the status of our product development and commercialization
efforts, the amount of proceeds actually raised in this offering, the amount of
cash generated by our operations, competition, and sales and marketing
activities. We may also use a portion of the proceeds for the acquisition of, or
investment in, companies, technologies or assets that complement our business.
However, we have no present understandings, commitments or agreements to enter
into any potential acquisitions and investments. Further, we have not determined
the amounts we plan to spend on any of the areas listed above or the timing of
these expenditures. As a result, our management will have broad discretion to
allocate the net proceeds from this offering. Pending application of the net
proceeds as described above, we intend to invest the net proceeds of the
offering in short-term, investment-grade, interest-bearing securities.
DIVIDEND POLICY
We have never paid any cash dividends on our capital stock. We currently
anticipate that we will retain earnings to support operations and to finance the
growth and development of our business and do not anticipate paying cash
dividends for at least the next 24 months.
16
<PAGE> 21
CAPITALIZATION
The following table presents the following information:
- Our actual capitalization as of September 30, 1999
- Our pro forma capitalization reflecting the conversion of all outstanding
shares of preferred stock into common stock upon the closing of this
offering
- Our pro forma as adjusted capitalization reflecting the sale of the
4,500,000 shares of common stock offered by us at an assumed initial
public offering price of $14.00 per share, less the underwriting
discounts and commissions and estimated offering expenses
This table should be read with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements and
notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term obligations, less current portion............... $ 3,483 $ 3,483 $ 3,483
-------- -------- --------
Redeemable convertible preferred stock, $0.001 par value;
19,579,039 shares authorized, 11,703,692 shares issued and
outstanding, actual; no shares authorized or outstanding
pro forma and pro forma as adjusted....................... 50,538 -- --
-------- -------- --------
Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par value; 1,420,961
shares authorized, 829,142 shares issued and
outstanding, actual; 5,000,000 shares authorized, no
shares issued and outstanding pro forma and pro forma
as adjusted.......................................... 1 -- --
Common stock, $0.001 par value; 32,000,000 shares
authorized, 3,271,667 shares issued and outstanding,
actual; 70,000,000 shares authorized pro forma and
pro forma as adjusted, 15,804,501 shares issued and
outstanding pro forma, 20,304,501 shares issued and
outstanding pro forma as adjusted.................... 3 16 20
Additional paid-in capital................................ 8,948 59,474 117,110
Deferred stock compensation............................... (5,858) (5,858) (5,858)
Accumulated deficit....................................... (28,356) (28,356) (28,356)
-------- -------- --------
Total stockholders' equity (deficit).................... (25,262) 25,276 82,916
-------- -------- --------
Total capitalization................................. $ 28,759 $ 28,759 $ 86,399
======== ======== ========
</TABLE>
This table excludes the following shares:
- 1,669,891 shares that may be issued upon exercise of options outstanding
as of September 30, 1999 at a weighted average exercise price of $0.82
per share
- 2,008,211 additional shares that we could issue under our stock option
plans, of which options to purchase 740,048 shares of common stock were
granted from October 1999 to December 13, 1999 at a weighted average
exercise price of $5.44 per share
- 300,000 shares that we could issue under our employee stock purchase plan
- 74,503 shares that may be issued upon exercise of warrants outstanding as
of September 30, 1999 at a weighted average exercise price of $1.22 per
share
- 38,460 shares that may be issued at an exercise price of $1.22 per share
upon exercise of warrants that will be issued if a patent milestone is
met
17
<PAGE> 22
DILUTION
The pro forma net tangible book value of our common stock on September 30,
1999, reflecting the conversion of all outstanding shares of preferred stock
into shares of common stock upon the closing of this offering, was approximately
$25.3 million, or approximately $1.60 per share. Pro forma net tangible book
value per share represents the amount of our total tangible assets less total
liabilities divided by the number of shares of common stock outstanding.
Dilution in pro forma net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering and the net tangible book value per share of our common
stock immediately afterwards. Assuming our sale of 4,500,000 shares of common
stock offered by this prospectus at an assumed initial public offering price of
$14.00 per share, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses, our net tangible book value at
September 30, 1999 would have been approximately $82.9 million or $4.08 per
share. This represents an immediate decrease in net tangible book value of $9.92
per share to new investors purchasing shares of common stock in this offering.
The following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $14.00
Pro forma net tangible book value per share at September 30,
1999........................................................ $1.60
Increase per share attributable to new investors....... 2.48
-----
Pro forma net tangible book value per share after this
offering.................................................. 4.08
------
Dilution per share to new investors......................... $ 9.92
======
</TABLE>
The following table summarizes, on a pro forma basis, as of September 30,
1999, the differences between the number of shares of common stock purchased
from us, the total consideration paid and the average price per share paid by
existing stockholders and by the new investors purchasing shares in this
offering. We have assumed an initial public offering price of $14.00 per share,
and we have not deducted estimated underwriting discounts and commissions and
estimated offering expenses in our calculations.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................. 15,804,501 77.8% $ 43,754,000 41.0% $ 2.77
New investors......................... 4,500,000 22.2 63,000,000 59.0 14.00
---------- ----- ------------ -----
Total............................ 20,304,501 100.0% $106,754,000 100.0%
========== ===== ============ =====
</TABLE>
The foregoing discussion and tables assume no exercise of any outstanding
stock options or warrants. The exercise of all options and warrants outstanding
as of September 30, 1999 having an exercise price less than the offering price
would increase the dilutive effect to new investors to $10.17 per share. See
"Capitalization," "Management -- Employee Benefit Plans" and "Description of
Capital Stock."
If the underwriters exercise their over-allotment in full, the following
will occur:
- the number of shares of common stock held by existing stockholders will
decrease to approximately 75.3% of the total number of shares of our
common stock outstanding
- the number of shares held by new investors will increase to 5,175,000
shares, or approximately 24.7% of the total number of our common stock
outstanding after this offering
18
<PAGE> 23
SELECTED FINANCIAL DATA
The statements of operations data for each of the years ended December 31,
1996, 1997 and 1998, and the balance sheet data as of December 31, 1997 and
1998, have been derived from our audited financial statements included elsewhere
in this prospectus which have been audited by Ernst & Young LLP, independent
auditors. The statements of operations data for the nine months ended September
30, 1998 and 1999, and the balance sheet data as of September 30, 1999, have
been derived from our unaudited financial statements included elsewhere in this
prospectus. The balance sheet data as of December 31, 1996 have been derived
from our audited financial statements not included in this prospectus. The
statements of operations data for the period from inception (July 26, 1995)
through December 31, 1995 and the balance sheet data at December 31, 1995 have
been derived from our unaudited financial statements not included in this
prospectus. Our historical results are not necessarily indicative of results to
be expected for any future period. The data presented below have been derived
from financial statements that have been prepared in accordance with generally
accepted accounting principles and should be read with our financial statements,
including the notes, and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(JULY 26, 1995) YEAR ENDED ENDED
THROUGH DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, --------------------------- -----------------
1995 1996 1997 1998 1998 1999
--------------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue.................................................. $ -- $ 132 $ 2,266 $ 8,155 $ 4,425 $ 8,859
Costs and expenses:
Research and development............................... 406 2,734 7,200 9,584 7,232 12,302
General and administrative............................. 128 1,240 2,478 2,932 1,996 3,487
Amortization of deferred stock compensation............ -- -- -- -- -- 1,997
Acquired in-process research and development........... -- 978 -- -- -- --
------ ------- ------- ------- ------- -------
Total costs and expenses................................. 534 4,952 9,678 12,516 9,228 17,786
------ ------- ------- ------- ------- -------
Operating loss........................................... (534) (4,820) (7,412) (4,361) (4,803) (8,927)
Interest income (expense), net........................... (2) 110 1,131 1,386 1,058 801
------ ------- ------- ------- ------- -------
Net loss................................................. (536) (4,710) (6,281) (2,975) (3,745) (8,126)
Accretion on redeemable convertible preferred stock...... -- (262) (1,470) (2,174) (1,587) (1,822)
------ ------- ------- ------- ------- -------
Net loss attributable to common stockholders............. $ (536) $(4,972) $(7,751) $(5,149) $(5,332) $(9,948)
====== ======= ======= ======= ======= =======
Net loss per common share, basic and diluted............. $(1.71) $ (3.90) $ (4.38) $ (2.39) $ (2.54) $ (3.71)
====== ======= ======= ======= ======= =======
Shares used in computing net loss per common share, basic
and diluted............................................ 313 1,274 1,768 2,157 2,099 2,684
Pro forma net loss per share, basic and diluted
(unaudited)............................................ $ (0.21) $ (0.53)
======= =======
Shares used in computing pro forma net loss per share,
basic and diluted (unaudited).......................... 14,347 15,217
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------- SEPTEMBER 30,
1995 1996 1997 1998 1999
----- ------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $ 40 $12,450 $ 26,549 $ 31,052 $ 27,820
Working capital............................................. 74 11,783 24,679 30,074 23,278
Total assets................................................ 83 13,112 29,107 35,730 34,658
Long-term obligations, less current portion................. -- 417 1,430 2,008 3,483
Redeemable convertible preferred stock...................... -- 16,913 38,283 48,716 50,538
Total stockholders' deficit................................. (536) (4,986) (12,665) (17,654) (25,262)
</TABLE>
The increase in net loss attributable to common stockholders due to
accretion on redeemable convertible preferred stock will not occur after this
offering because all of the outstanding preferred stock will be converted to
common stock at the closing of the offering.
The financial data as of December 31, 1996 and for the year then ended
reflects the acquisition of ChemCore Corporation in February 1996. This
acquisition was accounted for as a purchase. See Note 3 of notes to our
financial statements.
See Note 1 of notes to our financial statements for an explanation of the
determination of the number of shares used in computing per share data.
19
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read with "Selected
Financial Data" and our financial statements and notes included elsewhere in
this prospectus. The discussion in this prospectus contains forward-looking
statements that involve risks and uncertainties, such as statements of our
plans, objectives, expectations and intentions. The cautionary statements made
in this prospectus should be read as applying to all related forward-looking
statements wherever they appear in this prospectus. Our actual results could
differ materially from those discussed here. Factors that could cause or
contribute to these differences include those discussed in "Risk Factors," as
well as those discussed elsewhere. See "Risk Factors" and "Special Note
Regarding Forward-Looking Statements."
OVERVIEW
We are a leader in lab-on-a-chip technologies that miniaturize, integrate
and automate many laboratory processes. We develop, manufacture and sell our
proprietary LabChip systems to pharmaceutical and other companies. We believe
our LabChip systems have the potential to assemble the power and reduce the
scale of entire laboratories full of equipment and people. From inception in
July 1995 through September 1999, our operating activities were primarily
devoted to research and development of technologies involving the manipulation
of very small amounts of fluid, which are referred to as "microfluidic
technologies," and first-generation products such as the Agilent 2100
Bioanalyzer, LabChip kits and our high throughput system, recruiting personnel,
business development, raising capital and acquiring assets. In the first half of
1999, we recognized revenue from our first product sales when we sold initial
versions of our high throughput system for drug screening to two of our
technology access program customers. In addition, in September 1999, Agilent,
our commercial partner, introduced our first LabChip system for use by
individual researchers.
Since our inception, we have incurred significant losses and, as of
September 30, 1999, we had an accumulated deficit of $28.4 million, which
includes $5.7 million of accretion on redeemable convertible preferred stock.
Our losses have resulted principally from costs incurred in research and
development, manufacturing scale-up, and from general and administrative costs
associated with our operations. We expect to continue to incur substantial
research and development, manufacturing scale-up, and general and administrative
costs. As a result, we will need to generate significantly higher revenue to
achieve profitability.
Our quarterly operating results will depend upon many factors, including
market acceptance of our products, the success and timing of signing new
customers to our technology access program, the introduction of new products by
our competitors, the timing of commercial availability of new applications for
our LabChip technology, and the timing and extent of our research and
development efforts. For a more complete discussion of factors that could cause
our quarterly operating results to vary, see "Risk Factors -- Our operating
results fluctuate significantly and any failure to meet financial expectations
may disappoint securities analysts or investors and result in a decline in our
stock price."
Our revenue has been derived principally from contract revenue earned under
our collaboration agreement with Agilent and from our technology access program
customers. To a lesser extent, we have derived revenue from the sale of products
and government grants. Although we are developing and plan to introduce future
products, we cannot assure you that we will be successful in these efforts. To
date, we have generated a substantial portion of our revenue from a limited
number of sources. Our three technology access program customers, Hoffmann-La
Roche, Amgen and Eli Lilly, and our commercial partner, Agilent, each accounted
for in excess of 10% of our revenue in the nine months ended September 30, 1999.
Agilent alone accounted for 50% of our revenue in this period, and our three
technology access program customers collectively accounted for 41% of our
revenue in this period. Hoffmann-La Roche and Agilent each accounted for 40% of
our revenue in the year ended December 31, 1998, and Amgen accounted for 17% of
our revenue in this period. Hoffmann-La Roche alone accounted for 94% of our
revenue in the year ended December 31, 1997. Although we are seeking to expand
our customer base, we cannot assure you that these efforts will be successful.
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<PAGE> 25
Under our agreement, Agilent funds our research and development
expenditures related to the collaboration, reimburses us for our costs of
supplying chips, and chemicals used in the experiment, which are referred to as
"reagents," to Agilent and pays us a share of the gross margin earned on all
components of LabChip systems they sell. We recognize revenue related to
research and development funding received from Agilent as we actually conduct
the related activities. We recognize revenue related to the reimbursement of our
costs of supplying chips and reagents to Agilent when we ship these products. We
expect to recognize revenue from our share of the gross margin earned on all
components of LabChip systems as Agilent ships these products. Under our
technology access program agreements, we recognize as revenue non-refundable
license fees upon the transfer of a license, subscription fees over the term of
the subscription, product sales upon the transfer of title to the customer, and
development and support fees in the period in which the costs are incurred.
Subscription fees and development and support fees may be received annually or
quarterly in advance depending upon the terms of the agreement. Payments
received in advance under all of these agreements are recorded as deferred
revenue until earned. As of September 30, 1999, a total of $2.4 million of
revenue was deferred. We expect to recognize this deferred revenue through the
third quarter of year 2000.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1999 and 1998
Revenue. Revenue increased to $8.9 million for the nine months ended
September 30, 1999 from $4.4 million for the comparable period in 1998. Of the
$4.5 million increase, $2.5 million was derived from our collaboration with
Agilent, which began in May 1998, and $1.4 million was derived from our
technology access program customers. The remaining $571,000 increase was derived
from our grant from the Advanced Technology Program of the National Institute of
Standards and Technology, which began in January 1999. This grant is for $2
million in aggregate and will continue until December 2001.
Research and Development Expenses. Research and development expenses
consist primarily of salaries and related personnel costs, fees paid to
consultants and outside service providers for chip development, material costs
for prototype and test units, legal expenses resulting from intellectual
property prosecution and litigation, and other expenses related to the design,
development, testing, and enhancement of our products. We expense our research
and development costs as they are incurred. Research and development expenses
increased to $12.3 million during the nine months ended September 30, 1999 from
$7.2 million in the comparable period in 1998. The increase of $5.1 million was
attributable to continued growth of research and development activities,
including $2.1 million related to increased personnel and services to support
our technology access program and initial product launches, $1.4 million related
to higher operating expenses as a result of our move to a larger facility in
January 1999, $1.2 million for costs related to intellectual property protection
and the remainder due to expansion in operating activities. We expect research
and development spending to increase significantly over the next several years
as we expand our research and product development efforts.
General and Administrative Expenses. General and administrative expenses
consist primarily of salaries and related expenses for executive, finance and
other administrative personnel, recruiting expenses, professional fees, and
other corporate expenses including business development and general legal
activities. General and administrative expenses increased to $3.5 million during
the nine months ended September 30, 1999 from $2.0 million in the comparable
period in 1998. The increase of $1.5 million was due to $790,000 related to
compensation for general and administrative personnel, $298,000 related to
higher operating expenses as a result of our move to a larger facility in
January 1999, $101,000 related to increased general and administrative supply
costs and the remaining balance due to overall expansion in our operations. We
expect general and administrative expenses to continue to increase over the next
several years to support our growing business activities, the commercialization
of our products, and due to the costs associated with operating a public
company.
Amortization of Deferred Stock Compensation. Deferred stock compensation
represents the difference between the deemed fair value of our common stock for
accounting purposes and the exercise price of options at the date of grant.
During the year ended December 31, 1998 and the nine months ended September 30,
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<PAGE> 26
1999, we recorded deferred stock compensation totaling $7.9 million. We
anticipate that additional deferred compensation totalling $5.3 million will be
recorded for options granted in October 1999. These amounts are being amortized
over the respective vesting periods of the individual stock options using the
graded vesting method. We recorded amortization of deferred compensation of $2.0
million for the nine months ended September 30, 1999. We expect to record
amortization expense for deferred compensation as follows: $1.9 million during
the quarter ended December 31, 1999, $4.6 million during 2000, $2.5 million
during 2001, $1.4 million during 2002, $670,000 during 2003 and $122,000 during
2004. The amount of deferred compensation expense to be recorded in future
periods may decrease if unvested options for which deferred compensation has
been recorded are subsequently canceled.
Interest Income (Expense), Net. Net interest income consists of income
from our cash and investments offset by expenses related to our financing
obligations. Interest income decreased to $801,000 in the nine months ended
September 30, 1999 from net interest income of $1.1 million in the comparable
period of 1998. This decrease resulted from a declining cash and investment
balance due to cash used in operating activities and from higher financing
obligation balances.
Income Taxes. As of December 31, 1998, we had federal and California net
operating loss carryforwards of approximately $10.3 million and $1.4 million. We
also had federal research and development tax credit carryforwards of
approximately $700,000. The net operating loss and credit carryforwards will
expire at various dates beginning on 2002 through 2018, if not utilized.
Utilization of the net operating losses and credits may be substantially limited
due to the change in ownership provisions of the Internal Revenue Code of 1986
and similar state provisions. The annual limitation may result in the expiration
of net operating losses and credits before utilization.
As of December 31, 1998 and 1997, we had deferred tax assets of
approximately $6.3 million and $5.3 million. The net deferred tax asset has been
fully offset by a valuation allowance. The net valuation allowance increased by
$1 million during the year ended December 31, 1998. Deferred tax assets relate
primarily to net operating loss carryforwards, research credit carryforwards,
and capitalized research and development costs.
Years Ended December 31, 1998 and 1997
Revenue. Revenue increased to $8.2 million in 1998 from $2.3 million in
1997. Of the $5.9 million increase, $3.2 million was due to revenue received
through the collaboration agreement with Agilent entered into in May 1998, and
$2.6 million was due to revenue received through technology access program
agreements with Hoffmann-La Roche and Amgen, which we entered into at the end of
1998.
Research and Development Expenses. Our research and development expenses
increased to $9.6 million in 1998 from $7.2 million in 1997. The increase of
$2.4 million was due to $1.4 million related to compensation for additional
scientific personnel, $503,000 due to supplies required to assemble, build and
test prototypes of LabChip systems, $357,000 for costs related to intellectual
property protection and the remaining balance due to expansion in our operating
activities.
General and Administrative Expenses. General and administrative expenses
increased to $2.9 million in 1998 from $2.5 million in 1997. The increase was
due to hiring of additional personnel to support our growing business
activities.
Interest Income (Expense), Net. Net interest income increased to $1.4
million in 1998 from $1.1 million in 1997. This increase was due to increases in
cash and investment balances as a result of our equity financing in May 1998.
Years Ended December 31, 1997 and 1996
Revenue. Revenue increased to $2.3 million in 1997 from $132,000 in 1996.
The increase was due primarily to increased efforts devoted to our previous
collaboration agreement with Hoffmann-La Roche that was executed in October 1996
and a research agreement with Perkin Elmer, each of which has since expired.
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<PAGE> 27
Research and Development Expenses. Our research and development expenses
increased to $7.2 million in 1997 from $2.7 million in 1996. The increase of
$4.5 million was due to $1.6 million in compensation for research and
development personnel, $1.5 million was due to sponsored research, $554,000 was
related to higher operating expenses as a result of our move to a larger
facility in May 1997, $411,000 was due to supplies required to assemble, build
and test prototypes of LabChip systems, $235,000 was paid to outside service
providers for chip development and the remaining balance was due to expansion in
our operating activities.
General and Administrative Expenses. General and administrative expenses
increased to $2.5 million in 1997 from $1.2 million in 1996. The increase was
due to $933,000 in compensation and fees for additional general and
administrative personnel and consultants, $119,000 was related to higher
operating expenses as a result of our move to a larger facility in May 1997,
$105,000 was for recruiting fees and the remainder was due to overall expansion
in our operations.
Interest Income (Expense), Net. Net interest income increased to $1.1
million in 1997 from $110,000 in 1996. This increase was due to an increase in
our cash and investment balances from the proceeds of our equity financings in
the first half of 1997.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations from inception primarily through private
sales of preferred stock, contract and milestone payments to us under our
collaboration and technology access program agreements, and equipment financing
arrangements. As of September 30, 1999, we had received net proceeds of $43.8
million from issuances of common and preferred stock and $21.4 million from
collaborations, technology access program customers and government grants. In
addition, through September 30, 1999 we had financed equipment purchases and
leasehold improvements totaling approximately $6.3 million. We have used leases
and loans to finance capital expenditures. As of September 30, 1999, we had $4.6
million in capitalized lease obligations. These obligations are secured by the
equipment financed, bear interest at a weighted-average fixed rate of
approximately 10.4%, and are due in monthly installments through June 2004.
Under the terms of one equipment financing agreement, the financed equipment may
be purchased by us at a fair value at the end of the financing term. Other
equipment financing agreements require a balloon payment at the end of each loan
term.
As of September 30, 1999, we had $27.8 million in cash, cash equivalents
and marketable securities, as compared to $31.1 million as of December 31, 1998.
We used $2.2 million for operations in the nine months ended September 30, 1999.
This consisted of the net loss for the period of $8.1 million offset in part by
non-cash charges of $2.9 million related to deferred stock compensation
amortization and depreciation expense, and working capital changes of $3.2
million. We used $3.0 million in investing activities for the nine month period
ended September 30, 1999, which consisted of capital expenditures. We received
$2.0 million from financing activities for the nine months ended September 30,
1999, which consisted principally of proceeds from equipment financing of $2.5
million offset by repayments of equipment financing arrangements of $821,000.
See Note 7 of notes to our financial statements.
In January 1999 we entered into a $2.5 million financing arrangement for
the purchase of property and equipment. As of September 30, 1999, we had drawn
down approximately $752,000 and had $1.7 million remaining available under this
arrangement. As of September 30, 1999, we had $4.6 million in capitalized lease
obligations outstanding compared to $2.9 million at December 31, 1998. See Note
7 of notes to our financial statements.
Our capital requirements depend on numerous factors, including market
acceptance of our products, the resources we devote to developing and supporting
our products, and other factors. We expect to devote substantial capital
resources to continue our research and development efforts, to expand our
support and product development activities, and for other general corporate
activities. We believe that our current cash balances, together with the net
proceeds of this offering and revenue to be derived from our collaboration with
Agilent and our technology access program agreements will be sufficient to fund
our operations at least through the year 2000. During or after this period, if
cash generated by operations is insufficient to
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<PAGE> 28
satisfy our liquidity requirements, we may need to sell additional equity or
debt securities or obtain additional credit arrangements. Additional financing
may not be available on terms acceptable to us or at all. The sale of additional
equity or convertible debt securities may result in additional dilution to our
stockholders.
IMPACT OF INFLATION
The effect of inflation and changing prices on our operations was not
significant during the periods presented.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities" which provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS 133 is effective for fiscal years beginning after June
15, 1999 and is not anticipated to have an impact on our results of operations
or financial condition when adopted as we hold no derivative financial
instruments and do not currently engage in hedging activities.
In March 1998, the AICPA issued Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1
requires that entities capitalize costs related to internal use software once
criteria have been met. We adopted the provisions of SOP 98-1 on January 1,
1999. Through September 30, 1999, we had not capitalized any cost related to
internal use software.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we invest in
may have market risk. This means that a change in prevailing interest rates may
cause the principal amount of the investment to fluctuate. For example, if we
hold a security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises, the principal
amount of our investment will probably decline. To minimize this risk in the
future, we intend to maintain our portfolio of cash equivalents and short-term
investments in a variety of securities, including commercial paper, money market
funds, government and non-government debt securities. The average duration of
all of our investments in 1998 was less than one year. Due to the short term
nature of these investments, we believe we have no material exposure to interest
rate risk arising from our investments. Therefore, no quantitative tabular
disclosure is required.
We have operated primarily in the United States and all sales to date have
been made in U.S. dollars. Accordingly, we have not had any material exposure to
foreign currency rate fluctuations.
YEAR 2000 READINESS
The "Year 2000 issue" refers generally to the problems that some software
may have in determining the correct century for the year. For example, software
with date-sensitive functions that is not Year 2000 compliant may not be able to
distinguish whether "00" means 1900 or 2000, which may result in failures or the
creation of erroneous results.
We designed the Agilent 2100 Bioanalyzer to be Year 2000 compliant when
configured and used with the related documentation, and provided that the
underlying operating system of the host machine and any other software used with
or in the host machine or our product are Year 2000 compliant. However, we have
not exhaustively tested our other products for Year 2000 compliance. We continue
to respond to customer questions about our products.
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<PAGE> 29
We have defined Year 2000 compliance as the ability to:
- correctly handle date information needed for the December 31, 1999 to
January 1, 2000 date change
- function according to the product documentation provided for this date
change, without changes in operation resulting from the advent of a new
century, assuming correct configuration
- respond to two-digit date input in a way that resolves the ambiguity as
to century in a disclosed, defined and predetermined manner
- store and provide output of date information in ways that are unambiguous
as to century if the date elements in interfaces and data storage specify
the century
- recognize Year 2000 as a leap year
We have sought and received certifications from our material software
vendors that licensed software is Year 2000 compliant. Despite testing by us and
current and potential customers, and assurances from developers of products
incorporated into our products, our products may contain undetected errors or
defects associated with Year 2000 date functions. Known or unknown errors or
defects in our product could result in delay or loss of revenues, diversion of
development resources, damage to our reputation, increased service and warranty
costs, or liability from our customers, any of which could harm our business.
Some commentators have predicted significant litigation regarding Year 2000
compliance issues. Because of the unprecedented nature of this litigation, it is
uncertain whether or to what extent we may be affected by it. Congress recently
passed a law that is intended to limit liability for some failures to achieve
Year 2000 compliance. We cannot assure you that this bill will provide us with
any protection, and it does not provide us with protection from any violations
arising under federal securities laws.
We have assessed our material internal information technology systems,
including both our own software products and third-party software and hardware
technology. We have also assessed our non-information technology systems. To the
extent that we are not able to test the technology provided by third-party
vendors, we have sought and received certifications from these vendors that
their systems are Year 2000 compliant. We are not currently aware of any
material operational issues or costs associated with preparing our internal
information technology and non-information technology systems for the Year 2000.
However, we may experience material unanticipated problems and costs caused by
undetected errors or defects in the technology used in our internal information
technology and non-information technology systems.
Other than publicly available information, we do not currently have any
information concerning the Year 2000 compliance status of our technology access
customers or Agilent. Our current or future customers may incur significant
expenses to achieve Year 2000 compliance. If our customers are not Year 2000
compliant, they may experience material costs to remedy problems, or they may
face litigation costs. In either case, Year 2000 issues could reduce or
eliminate the budgets that current or potential customers could have for or
delay purchases of our products and services. As a result, our business could be
harmed. If Agilent experiences problems related to Year 2000 compliance, it may
delay manufacture or distribution of our current products or development of our
future products.
We have funded our Year 2000 plan from operating cash flows and have not
separately accounted for these costs in the past. To date, these costs have not
been material. We will incur additional costs related to the Year 2000 plan for
administrative personnel to manage the project, outside contractor assistance,
technical support for our products, product engineering and customer
satisfaction. In addition, we may experience material problems and costs with
Year 2000 compliance that could harm our business.
We do not have a contingency plan to address situations that may result if
our critical operations are not Year 2000 compliant, and we do not anticipate
the need to do so. The cost of developing and implementing the plan may itself
be material. In addition, we may also experience external forces that
25
<PAGE> 30
might generally affect industry and commerce, including utility or
transportation company Year 2000 compliance failure interruptions.
Year 2000 issues affecting our business, if not adequately addressed by us,
our third party vendors or suppliers or our customers, could have a number of
"worst case" consequences. These include:
- claims from our customers asserting liability, including liability for
breach of warranties related to the failure of our product and services
to function properly, and any resulting settlements or judgments
- our inability to manage our own business.
26
<PAGE> 31
BUSINESS
OVERVIEW
We are a leader in lab-on-a-chip technologies. We believe our LabChip
systems can assemble the power and reduce the size of entire laboratories full
of equipment and people. Our LabChip systems miniaturize, integrate and automate
many laboratory processes, and put them on a chip that can fit in the palm of a
child's hand. Each chip contains a network of microscopic channels through which
fluids and chemicals are moved, using electricity or pressure, in order to
perform experiments. The chips are the key components of our LabChip systems,
which also include reagents as well as instruments and software that together
control and read the chips. We believe our LabChip systems have the potential to
revolutionize experimentation in a wide range of industries by enabling
individuals and organizations to perform laboratory experiments at a speed, cost
and scale previously unattainable. Our initial commercialization focus is the
pharmaceutical industry, where there is an urgent need to improve the efficiency
and reduce the cost of drug discovery and development. Future target industries
potentially include agriculture, clinical diagnostics, chemicals and consumer
products. We believe that we are the first company to sell and deliver
lab-on-a-chip products to customers. During 1999 we introduced our first two
LabChip systems, a personal laboratory system and a high throughput system.
INDUSTRY BACKGROUND
Laboratory Technology
The pharmaceutical, agriculture, clinical diagnostics and chemical
industries rely on laboratory experimentation to obtain important information
that can be used to discover and develop new products. Despite the critical
value of laboratory results to these industries, improvements to the basic
processes and tools used in laboratory experiments have only been incremental
and have not kept pace with technological advances in other industries,
including electronics and computing. Laboratory work still relies on manual
steps and tools, such as test tubes and beakers, and large pieces of equipment
that utilize technology that is decades old. These tools and processes are
expensive, labor-intensive and often imprecise, presenting significant
productivity and efficiency challenges for these industries.
New processes and tools are needed to enable individual researchers and
organizations to work more productively and efficiently. This need has been
recognized and some improvements have been made. In an attempt to increase speed
and reduce costs in many laboratory experiments, researchers have replaced test
tubes with plastic plates having 96 small reservoirs, or "wells," to facilitate
parallel experimentation. Further attempts to reduce costs have led researchers
to replace the 96-well plate with 384- and 1536-well plates in which reactions
can be performed in volumes that are 10 to 100-fold smaller. To enhance
efficiency, some suppliers have integrated multiple pieces of equipment into one
large piece of equipment. Organizations that perform high value, high volume
experimentation have attempted to automate processes by using liquid-handling
robotics to improve the quality and quantity of data achieved in centralized
testing. While these and other advances have helped researchers to work faster
and more efficiently, they still represent only incremental, not revolutionary,
improvements because they continue to rely on time-consuming, imprecise and
labor-intensive processes that can create bottlenecks throughout the entire
experimental process.
A Need for Better Laboratory Technology in the Pharmaceutical Industry
Pharmaceutical companies have realized that to stay competitive and meet
their goals for growth they will have to increase significantly the number of
new drugs they introduce each year. To achieve this, pharmaceutical companies
have found that they will have to engage in experimentation on a massive scale.
Pharmaceutical companies' investments in the comprehensive study of genetic
material, or "genomics," and novel methods of producing large numbers of new
chemical compounds, or "combinatorial chemistry," are examples of this decision.
These activities are generating a wealth of potential targets and new compounds
to be tested and offer the opportunity to discover many new drugs. However, they
also create a
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technological quandary: how to perform significantly more experiments, in less
time, without unacceptable increases in research and development spending. We
believe that recent incremental advances in laboratory technology are not enough
to enable pharmaceutical companies to achieve their growth targets. New
technologies are needed to improve the volume and quality of information
generated in each stage of the drug discovery process, while simultaneously
reducing the cost of experimentation.
THE STAGES OF PHARMACEUTICAL DISCOVERY
Target identification involves acquiring knowledge about the role a particular
molecule, usually a protein, plays in the body in order to determine whether it
might be a good target for further investigation. Today, this activity is most
often initiated with genomics studies, in particular by DNA sequencing, RNA
analysis and genetic mapping.
Target validation is the demonstration that affecting the function of a
particular target has a positive effect on the course of a disease. Target
validation employs a variety of methods including RNA analysis, protein analysis
and cell biology.
Primary screening involves the large-scale testing of collections of chemical
compounds, or libraries, against validated targets. The goal is to find "hits,"
or individual members of the compound library that bind to, inhibit, or activate
a particular target. These libraries are tested in high throughput experiments.
The major pharmaceutical companies are moving towards screening up to 100
targets annually with libraries of up to one million compounds.
Lead optimization is a term that describes the process of sorting through the
compounds that emerge from the primary screen and conducting successive rounds
of chemical alterations and biological tests to find compounds likely to have
appropriate drug properties. Like target validation, lead optimization involves
a variety of methods, including protein analysis, cell biology, chemical
synthesis, as well as high throughput experiments. This stage also involves the
testing of compounds for therapeutic activity in animal models of disease.
Preclinical development involves testing of compounds to assure that they are
safe, have appropriate distribution throughout the body and are appropriately
metabolized. Formulation tests to ensure convenient delivery to patients are
performed, as are tests to ensure that the compounds can be manufactured with
consistent quality.
Clinical development is the testing of pharmaceutical compounds in humans to
demonstrate their safety and efficacy. Because clinical trials are the most
expensive part of drug development, pharmaceutical companies are trying to
improve the outcomes of clinical trials by using the methods of
"pharmacogenetics," the scientific discipline focused on how genetic differences
determine or predict responsiveness or adverse reactions to particular drugs. In
order to use pharmacogenetics in a clinical trial, each patient in the trial
will need his genetic make-up analyzed. This could entail analysis of
approximately 100,000 different sites in a patient's DNA. For a 1,000 patient
trial, this would require generating approximately 100 million data points.
The drug discovery process can be summarized by the six stages described
above. In each of these stages, researchers face many productivity bottlenecks
due to the limitations of current laboratory technologies. Individual
researchers conducting even the simplest, most common experiments must often
perform labor-intensive, time-consuming, multi-step processes on multiple pieces
of equipment. For example, to analyze DNA, researchers must first extract the
DNA and treat it with reagents. Then they pour gels and mount them in equipment
to separate the DNA. After loading the samples into the gels, they activate the
gels for a precise period of time. The gels must then be processed to reveal the
location of the DNA and scanned to see the results. The whole process takes
approximately half a day and produces only a few dozen data points of genetic
information. Thousands of pharmaceutical company researchers perform this
experiment on a routine basis.
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Even "automated" experiments, such as high throughput screening, are still
laborious and time-consuming. For example, to perform one high throughput
screen, researchers typically need to remove thousands of compounds from storage
and transfer small amounts of these compounds to hundreds of new plates. Then
they add fluid to dilute them and transfer a portion of the diluted compound to
another set of plates. After adding more reagents, they move the plates to an
incubation station and incubate the mixture for a precise period of time. They
then transfer the plates to a detection instrument and scan the plates to see
the results. Finally, they discard all the plates. The whole process can take a
team of researchers weeks or months to complete, and has to be repeated to test
the same compounds against the next pharmaceutical target.
As currently performed, these processes are not well suited to the massive
scale-up we believe pharmaceutical companies are seeking. The number of people
and pieces of equipment required would be unmanageable. More importantly, data
quality has often suffered as companies have tried to implement higher
throughput versions of existing procedures, such as 384-well plates in place of
96-well plates. Pharmaceutical companies need a breakthrough in tools for
experimentation to free scientists from the limitations of current technology.
A Broad Need Across Industries for New Laboratory Technology
Other industries dependent upon biological and chemical information face
technology challenges similar to those facing the pharmaceutical industry. The
agricultural-biotechnology industry, for example, is adopting many of the same
research strategies used by the pharmaceutical industry, including genomics,
screening and combinatorial chemistry. In addition, the multi-billion dollar
clinical diagnostics industry continues to search for miniaturized and automated
equipment solutions that will facilitate patient point-of-care testing, as well
as high throughput, automated analysis platforms for use in centralized
reference laboratories. In these and other industries, technology for laboratory
experimentation is limiting the ability to access information about chemicals
and biochemicals, and therefore is limiting companies' ability to transform that
information into novel and commercially valuable products.
CALIPER SOLUTIONS
We believe that our LabChip technology represents a revolutionary advance
in laboratory experimentation needed by the pharmaceutical and other industries
today. The chips are the key components of our LabChip systems that also include
a particular LabChip instrument together with experiment-specific reagents and
software. Our chips contain a network of microscopic channels through which
fluids and chemicals are moved to perform experiments. A single type of chip
used with particular reagents and software to perform a particular experiment
make up one LabChip application. Depending on the chip format, reagents are
introduced either automatically or by the user. The chip is placed in the
instrument, which uses software to control the movement of fluids with pressure
or electricity. The instrument also has an optical system for detecting the
results. Because we have great flexibility in channel design and can exert
split-second computer control over fluid flow, we have the ability to create
chips for a multitude of experiments. Our LabChip systems miniaturize, integrate
and automate experiments providing, we believe, the benefits of high speed,
reduced cost, expanded individual researcher capability, improved data accuracy
and improved enterprise-wide productivity.
Features of LabChip Systems
- Miniaturization. Conventional laboratory equipment typically uses about a
drop of fluid, or 50 to 100 microliters, to perform each experiment. In
some LabChip applications, this volume is reduced to 1 nanoliter, or one
billionth of a liter, an improvement of up to 100,000-fold over
conventional systems.
- Integration. Integration is the compression of multiple processes into a
single process. Today most laboratory systems perform only one or two
steps of an experimental protocol. Our LabChip systems can integrate
complete experiments involving half a dozen or more steps into one
continuous process performed on a single chip.
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- Automation. Today most laboratory experiments are performed using
multiple instruments in combination with multiple manual steps. With our
LabChip systems, entire experiments can be automated and performed inside
a chip using one instrument. The same instrument is used with different
chips to perform other automated experiments.
MINIATURIZATION, INTEGRATION AND AUTOMATION ON A SIPPER CHIP
LOGO
[This illustration is an actual schematic of a current Sipper chip that can be
used to prepare drug samples for analysis and to determine their potency, all on
the same high throughput chip. The specific functions that are part of this
experiment, and where they take place on the chip, are described in the
caption.]
Above is a diagram of a Sipper chip that can be used to prepare drug samples for
analysis and to determine their potency at high throughput. This is an example
of one of the many types of complicated experiments that our chips can perform,
which would normally be performed in a laboratory full of people and equipment.
Potency studies are done by diluting a drug into different concentrations and
testing each one for its effect on a pharmaceutical target. Higher potency drugs
will reduce target activity even at low concentrations. Potency provides
critical information for determining the quality of a drug candidate. We expect
to make this chip commercially available in the first half of the year 2000.
A one nanoliter drug sample, 1/50,000th of a drop, is drawn into the chip
through a small glass tube, or a capillary, attached at point (a). In assembly
line fashion, a different drug enters the chip every 30 seconds, and multiple
experiments are processed on the chip simultaneously. Each nanoliter is divided
sequentially into four portions (b), each of which contains ten times less than
the previous portion. Each portion is then diluted with an appropriate solution
to restore the original volume of sample and achieve four different
concentrations (c). Each of the four diluted drug samples is then mixed with the
target (d), and later, another reagent (e), and incubated for precisely the same
amount of time (f), to enable direct comparison of the results which are
detected on all reactions simultaneously (g).
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Key Benefits of LabChip Systems
- High Speed. We believe our LabChip systems accelerate experiments as much
as 10-fold or more, depending on the application. For example, molecular
separations such as electrophoresis normally take one hour or more using
conventional equipment. On a chip, we can perform these separations in
less than one minute. Another example is that chemical reactions are
usually incubated for 30 minutes or more before the results are
determined. Often, these long incubation periods are necessary only to
provide enough time for manual steps to be performed on large numbers of
samples. By integrating sample processing and detection, we can perform
reactions in one minute or less and achieve comparable results. We
believe our customers can take advantage of this acceleration to increase
throughput or to complete experiments faster, depending on their needs.
- Reduced Reagent and Labor Cost. Our LabChip systems use only a small
fraction of the normal amount of expensive reagents used in experiments
performed in test tubes or 96-well plates, sometimes as little as
1/100,000th, and also reduce labor involved in each experiment. We
believe that saving on reagent cost and labor can enable pharmaceutical
companies to expand the scale of experimentation in ways that would
otherwise not be feasible.
- Expanded Individual Researcher Capability. Because our LabChip systems
can collapse a multi-step, complex experiment into one step, we believe
that individual researchers can perform experiments previously outside
their areas of expertise. By comparison, with conventional, non-
integrated equipment researchers need to acquire the equipment and master
the complexities of performing each individual step.
- Improved Data Accuracy. We believe our LabChip systems generally produce
more accurate and consistent data by reducing human error and the
variability caused by the use of multiple instruments. With higher
quality data, our customers can make better decisions. For example,
biochemical determinations typically require accurate liquid measurements
and precise incubation times. When these are manually performed
significant variations can occur in liquid dispensing and in the duration
of reaction times.
- Improved Enterprise-Wide Productivity. We believe our LabChip systems can
improve data quality to the point where researchers can rely on data
generated outside their laboratory or organization. We believe this would
improve enterprise-wide productivity by supporting data sharing and
reducing the need to repeat experiments. When different research groups
use different assortments of conventional equipment to perform
experiments, they often produce data that is not strictly comparable.
We believe that our LabChip systems have the potential to expand the
capabilities and improve the productivity of individual researchers and, on an
institutional level, to streamline and bring greater efficiency and speed to the
drug discovery and development process. Not all laboratory processes, however,
are ideally suited to be performed with our LabChip systems. For example,
detecting clinically important materials that appear in low concentrations in a
sample, such as the virus that causes AIDS or some hormones, is not always
practical with our LabChip systems. This is because there is a risk that these
materials will not be found in the very small volume employed by our chips. As a
result, without pre-processing the sample to increase the concentration our
LabChip system may fail to detect the material. Furthermore, if the analysis of
a sample must involve even one process that cannot currently be performed in the
LabChip system, then use of the LabChip system for the parts it can perform is
often impractical. This is because the very small scale of the chip experiment
does not generally produce enough material to be analyzed by conventional
laboratory equipment.
The faster pharmaceutical companies can identify and validate targets,
screen massive numbers of compounds, optimize leads and identify promising
compounds to take into clinical development, the greater their chances of seeing
a return on investment for their research and development dollars. LabChip
technology has the potential to reduce the time it takes to discover and
commercialize new drugs. In the future, we believe we can bring similar benefits
to other industries.
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STRATEGY
Our objective is to be the leading lab-on-a-chip company. Key elements of
our strategy to achieve this objective include:
Focus on the Pharmaceutical Industry First. We are focusing on developing
our LabChip systems for the pharmaceutical industry, where the investment in
research and development is large and growing and the need for new technologies
to improve research and development efficiency is urgent. We are addressing the
need for enhanced productivity for individual pharmaceutical researchers with
our first LabChip personal laboratory system, featuring the Agilent 2100
Bioanalyzer, developed in collaboration with Agilent. We also have developed a
high throughput system for use by pharmaceutical companies for drug screening.
We are developing ultra high throughput systems and new chip applications to
bring greater efficiency to the drug discovery process.
Rapidly Build Our Installed Customer Base. We intend to take advantage of
our first-to-market position to rapidly build our installed customer base. Our
goal is to increase customer familiarity with lab-on-a-chip technology and to
establish our LabChip systems as the platform of choice. Our strategy is to
offer products for applications that are practiced widely and to bring LabChip
technology to market through the combination of a major commercialization
partnership and direct selling. Our first commercial collaborator, Agilent, is
an established leader in analytical instrumentation and has initiated a
multi-faceted sales and marketing campaign designed to achieve wide penetration.
Our direct selling strategy is focused primarily on large pharmaceutical
companies and is designed to encourage early adoption of our LabChip systems
through our technology access program.
Leverage Our Installed Customer Base by Expanding the Menu of Chip
Applications. A significant portion of our internal research and development
efforts is dedicated to new chip applications development. We intend to expand
our menu of chip applications and sell them to customers that have already
purchased LabChip instruments. For example, we are developing LabChip
applications for genomics to bring significant advances in functionality to this
technology-hungry area. We also intend to expand current markets by implementing
a LabChip instrumentation "operating system" strategy that encourages other
companies, such as reagent manufacturers, to develop compatible products that
can operate with our chips.
Generate Recurring Revenue From High-Value Chips. We expect to generate
recurring revenue from the sale of single-use chips for the Agilent 2100
Bioanalyzer. In addition, we intend to value price the chips for our high
throughput systems to reflect the cost savings and other benefits that our
customers may achieve, possibly by charging customers for the amount of data
they generate. While we are focused on generating revenues from the sale and use
of our chips, we also will receive revenue from the sale of the Agilent 2100
Bioanalyzer, software and reagents. We also intend to generate recurring revenue
from our technology access program through license fees and ongoing subscription
fees as well as through the sale of instruments.
Build a Substantial Intellectual Property Estate. We pursue an
intellectual property strategy of licensing important patents and pursuing
patent protection for our own inventions. As of September 30, 1999, we owned, or
held licenses to, 34 issued U.S. patents and 120 pending U.S. patent
applications. These patents and applications are directed to various
technological areas that we believe are valuable to our business. We believe
that maintaining a deep and broad intellectual property estate will be an
important competitive advantage.
Maintain Leadership in Chip Technology and Manufacturing. We believe that
our long-term success will derive from maintaining leadership in lab-on-a-chip
technology and chip manufacturing. We focus on improving the power and
capabilities of our chips to increase their value. We are also working to
enhance manufacturing processes to reduce our production costs.
Opportunistically Penetrate New Industries. We believe that LabChip
technology has the potential to transform the way that laboratory
experimentation is performed across multiple industries. We expect to
selectively pursue these other industries, leveraging our pharmaceutical
industry experience and products. We may pursue these opportunities alone or
with collaborators.
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PRODUCTS AND SERVICES
We have developed two types of LabChip systems, personal laboratory systems
and high throughput systems, based on distinct chip formats. Our personal
laboratory systems use chips with reservoirs for the various chemical reagents,
which the user introduces manually. Our high throughput systems use our Sipper
chips that have a short glass tube, or capillary, that draws nanoliter volumes
of reagents into the chip.
Personal Laboratory Systems
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION STATUS
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Agilent 2100 Bioanalyzer Desktop LabChip instrument and Marketed by Agilent
software
- -----------------------------------------------------------------------------------------------
DNA 7500 LabChip Kit Chips and reagents for analyzing Marketed by Agilent
small DNA fragments
- -----------------------------------------------------------------------------------------------
DNA 12000 LabChip Kit Chips and reagents for analyzing Marketed by Agilent
large DNA fragments
- -----------------------------------------------------------------------------------------------
RNA 6000 LabChip Kit Chips and reagents for analyzing Marketed by Agilent
RNA samples
- -----------------------------------------------------------------------------------------------
New LabChip Kits A series of kits containing In development
chips and reagents for
applications in molecular and
cell biology
- -----------------------------------------------------------------------------------------------
</TABLE>
Agilent 2100 Bioanalyzer System. Our first personal laboratory system is
based on the Agilent 2100 Bioanalyzer, a desktop instrument designed to perform
a wide range of everyday scientific applications using a menu of different
LabChip kits. Each kit contains a chip and reagents designed specifically for
the application. This LabChip system brings the benefits of miniaturized,
integrated and automated experimentation to the researcher's desktop. Agilent
launched this product in September 1999.
Agilent is selling the Agilent 2100 Bioanalyzer with an initial menu of
three LabChip kits for DNA and RNA sizing and concentration analysis. For these
initial applications, we believe the system's principal advantages are that it:
- reduces analysis time from hours to minutes
- integrates several experimentation steps into one
- significantly reduces consumption of costly reagents
- produces higher quality data than conventional methods
Because these applications are among the most common experiments performed
in genetic research, the potential customer base for these applications includes
most pharmaceutical and biotechnology companies, as well as human genome
research centers and other academic laboratories.
We are developing new applications involving analysis of protein and cells,
as well as additional applications involving DNA and RNA analysis. We believe
that protein and cell applications on the Agilent 2100 Bioanalyzer may be
particularly attractive to researchers in those disciplines because their
existing tools are generally less advanced than those available to genetic
researchers.
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High Throughput Systems
<TABLE>
- -----------------------------------------------------------------------------------------------
PRODUCT DESCRIPTION STATUS
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
Caliper 110 Sipper System High throughput LabChip Direct sales to customers
instrument and software for
single capillary Sipper chips
- -----------------------------------------------------------------------------------------------
Fluorogenic Assay Sipper Sipper chip for screening Direct sales to customers
Chip several types of enzyme and
protein receptor targets
- -----------------------------------------------------------------------------------------------
Mobility Shift Assay Sipper Sipper chip for screening other Direct sales to customers
Chip types of enzyme and protein
receptor targets
- -----------------------------------------------------------------------------------------------
Assay Development Station Instrument system and software Direct sales to customers
for developing LabChip
experimental methods
- -----------------------------------------------------------------------------------------------
Assay Development Chips Chips for use with the assay Direct sales to customers
development station
- -----------------------------------------------------------------------------------------------
Cell-based Assay Sipper Sipper chip for screening cell In development
Chip receptor targets
- -----------------------------------------------------------------------------------------------
Dilutor Sipper Chips Sipper chips that do sample In development
preparation and screening on the
same chip
- -----------------------------------------------------------------------------------------------
Caliper 220 Sipper System Ultra high throughput LabChip In development
instrument and software for
multiple capillary Sipper chips
- -----------------------------------------------------------------------------------------------
Multi-capillary Sipper Multiple capillary versions of In development
Chips the Sipper chips described above
- -----------------------------------------------------------------------------------------------
</TABLE>
Our high throughput systems are being designed to perform thousands or tens
of thousands of pharmaceutical experiments per day on each Sipper chip.
Caliper 110 Sipper System. Our first high throughput system is based on
the Caliper 110, which uses a Sipper chip with a single capillary. Like the
Agilent 2100 Bioanalyzer, the Caliper 110 is designed to perform a wide range of
experiments using a menu of different chips. We currently offer two Sipper chips
used for performing drug screening experiments for several classes of enzymes.
High throughput enzyme experiments are among the most common experiments used in
primary drug screening. Some of the reagents used in these experiments are
expensive and it can take months to produce them in the quantities required for
conventional screening systems. We believe the principal advantages of the
Caliper 110 are that it:
- reduces costly reagent consumption up to 100,000-fold
- integrates multiple experimental functions
- reduces the need for user intervention
- produces higher data quality than conventional methods
We expect to add several more Sipper chips enabling our technology access
program customers to use the Caliper 110 for a significant percentage of the
types of experiments they run. Another important advantage of the Caliper 110 is
that it can be used not only for primary screening but also for lead
optimization. Furthermore, the Caliper 110 is compact and could be placed in
locations outside the centralized screening group, allowing for more efficient
drug development efforts.
Caliper 220 Ultra High Throughput System. We expect to increase throughput
by increasing the number of channels and capillaries on each chip. We intend to
introduce chips with four and then eight or
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more capillaries per chip and to enable customers to effectively utilize
multiple instruments by providing integrated plate handling capabilities. We are
currently testing a prototype of our Caliper 220 ultra high throughput
instrument and expect to offer this product to technology access program
customers in 2000. In this way, we expect to offer systems that can perform more
than 100,000 experiments per day.
We are also working to integrate compound storage and sample preparation
into our screening systems. These activities represent major expenses for
pharmaceutical companies. We believe that our LabChip systems can offer dramatic
cost reductions in these areas. We intend to offer a Sipper chip which can
dilute compounds on the chip prior to performing the screening experiment, or
"assay." We expect that this will reduce the amount of expensive compounds used
by approximately 1,000-fold and eliminate the major expense of diluting
thousands of compounds in wells. The next integration step will be to enable
researchers to place entire compound libraries onto our proprietary LibraryCard
reagent array, and then dilute and access compounds using the capillary of our
Sipper chips. For a description of our LibraryCard reagent array program, see
"-- Research and Development."
We sell our current high throughput systems to technology access program
customers and provide training and support. We also develop initial assays for
them and offer some level of customization in order to integrate our systems
most effectively into each customer's production processes.
We sell assay development systems to our technology access program
customers so that they can modify experimental conditions used with our standard
assay chips to be suitable for each new pharmaceutical target. This process is
comparable to the assay development they already carry out with existing
screening systems, which typically takes several weeks to a few months. In fact,
we believe that the process likely will be accelerated and improved using
chip-based systems.
Services
<TABLE>
- -----------------------------------------------------------------------------------------------
SERVICE DESCRIPTION STATUS
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
Value Added Screening Assay development, compound Direct sales to customers
Collaborations leasing and screening services
for customers' pharmaceutical
targets
- -----------------------------------------------------------------------------------------------
</TABLE>
We are using our high throughput systems internally to offer screening
services to pharmaceutical and biotechnology customers that prefer to outsource
this activity. Under our value added screening collaboration program, we develop
LabChip assays for targets selected by a customer. We then screen the targets
against the customer's compound library, our own library, or both, and provide
the data to the customer.
We believe that our screening services also add substantial value to our
product businesses. We deploy our most advanced high throughput screening
systems in our internal screening services operation. By making intensive use of
those systems in this business, we can provide critical feedback to our product
development groups. This accelerates development and enables us to deliver
better systems to our technology access program customers. We also intend to use
our screening services capability to demonstrate to potential technology access
program customers how our LabChip systems can streamline screening operations
and enhance productivity.
COMMERCIALIZATION
We currently are commercializing our first personal laboratory system, the
Agilent 2100 Bioanalyzer system, through our collaboration with Agilent. We are
also directly selling our high throughput systems through our technology access
program and are providing high throughput screening services through our value
added screening collaboration program.
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Strategic Alliance with Agilent
We have established a broad relationship with Agilent to create a line of
commercial research products based on our LabChip technologies. This
relationship provides us with the scale and expertise of a leading analytical
instrumentation company to bring these novel products to market. When this
relationship was established in May 1998, Agilent and Caliper publicly stated
their intention to invest over $100 million collectively to create and
commercialize this line of products over the ensuing five years. In September
1999, Agilent introduced the Agilent 2100 Bioanalyzer with three different
LabChip kits, our first LabChip products under this agreement.
In this collaboration, Caliper primarily focuses on developing core
technology and LabChip applications. We also manufacture the chips and supply
the chips and reagents to Agilent. If we elect, however, not to manufacture
chips for a LabChip application or we are unable to meet minimum supply
commitments to be mutually established in the future, Agilent would have the
right to manufacture those chips. Agilent primarily focuses on developing
instruments and software, manufacturing instruments, and marketing, selling and
supporting complete systems. Agilent has the contractual right to develop the
marketing plan under the collaboration, although to date we and Agilent have
made these decisions in a collaborative manner.
Agilent funds our product development efforts under the collaboration,
reimburses our costs of supplying chips and reagents, and pays us a share of the
gross margin on all components of LabChip systems. The gross margin share varies
depending on the type of collaboration product, whether we or Agilent
manufacture the collaboration product, and whether the collaboration product is
sold during the collaboration or after the collaboration has terminated. These
financial arrangements allow us to offset a portion of the substantial risks
inherent in introducing novel technologies. At the same time, they enable us to
support a broad product development program and to retain a substantial
financial interest in the products we create.
Our agreement with Agilent is mutually exclusive in the field of
lab-on-a-chip technologies for the research products market. It requires our
consent before Agilent may offer products exceeding established sample
throughput limits, and it requires Agilent's consent before we may offer these
products outside the collaboration in excess of established volume limitations.
The term of the Agilent agreement is eight years, beginning in May 1998.
After three years, Agilent may elect not to meet annual funding requirements, in
which case either party may terminate the agreement. In any event either party
may terminate the agreement after five years. If the agreement terminates after
three years, we will continue to offer the collaboration's products through
Agilent but Agilent will have no rights to our technologies for the development
of new products. If either party terminates the agreement after five years, we
will grant Agilent a non-exclusive license to use the lab-on-a-chip technologies
that we have developed up to that time in order to develop new products in
substantially the same field that applied during the collaboration. We will also
transfer chip manufacturing know-how and receive royalties on Agilent's sales of
systems that employ our patented technologies. Regardless of whether the
collaboration terminates after three or five years, both Caliper and Agilent
will have the right to sell collaboration products, with reciprocal supply
arrangements.
Technology Access Program
Our technology access program is initially focused on high throughput
systems for drug screening. In this program, we work directly with
pharmaceutical company customers during the product development process to
create successive generations of products. We provide technology access program
customers with early access to new products, and offer technical training,
support and customization services. By working closely with these customers, we
focus our technology and product development efforts where we believe they can
have maximum impact for the pharmaceutical marketplace.
Our technology access program customers have non-exclusive access to all of
the high throughput screening products we offer during the term of the
agreement. These agreements generally provide for
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<PAGE> 41
customers to pay an up-front license fee and annual subscription fees, and to
reimburse us for our costs of providing development and support services.
Instruments and chips are generally sold separately on a product-by-product
basis, although some agreements establish prices for critical instruments or
estimates of the price we will charge them for Sipper chips based on the amount
of data they generate. Our technology access program customers can terminate
their participation in the program and still have the right to purchase those
products that we offered to them during their participation in the program.
We currently have three technology access program customers for our high
throughput screening systems: Eli Lilly, Amgen, and Hoffmann-La Roche. Our
agreements with these customers generally contain the terms described above. Key
terms unique to each agreement are described below.
Eli Lilly. We signed our most recent technology access agreement with Eli
Lilly in August 1999. The term is three years, although Eli Lilly may
temporarily suspend its technology access program participation and later
reinitiate participation, during which time our support and assistance
obligations will also be suspended. Under this agreement our obligations include
support for assay development for targets, training for Eli Lilly personnel, and
support for custom development projects. Eli Lilly may terminate the agreement
on any anniversary.
Amgen. We entered into a technology access agreement with Amgen in
December 1998. Under this agreement, Amgen may delay payment of its second
annual subscription fee until we have delivered an initial ultra high throughput
system. The term of this agreement is three years, although Amgen may terminate
the agreement on any anniversary or if we fail to deliver the ultra high
throughput screening system in a timely manner.
Hoffmann-La Roche. We entered into a technology access agreement with
Hoffmann-La Roche in November 1998, which is due to expire in July 2000. This
agreement supersedes an earlier agreement under which Roche funded early
development of the high throughput screening technology in exchange for
exclusive rights to an ultra high throughput screening system. Roche now has
non-exclusive rights similar to other technology access program customers. We
did not receive an up-front license fee or annual subscription fee from
Hoffmann-La Roche.
Value Added Screening Collaboration Program
In our value added screening collaboration program we offer high throughput
screening services using our LabChip systems. This can enable smaller companies
that may not be able to afford to participate in our technology access program
to take advantage of our high throughput systems in the early phases of
commercialization. Our first value added screening collaboration agreement was
established with Neurocrine Biosciences in December 1998. We receive screening
fees based on the amount of data generated, preclinical milestones and royalties
on Neurocrine products emerging from the collaboration. This agreement has a
three-year term, but may be terminated by either party under limited
circumstances after the first year.
TECHNOLOGY
We believe that we have established a leading position in three areas of
lab-on-a-chip technology.
Microfabrication
We create lab-on-a-chip devices using the same manufacturing methods that
are used to make microchips in the computer industry called "microfabrication."
Microfabrication makes it possible to create intricate designs of interconnected
channels that are extremely small. Each pattern is designed to produce the
series of fluid manipulation steps that will execute an experiment. We use the
principles of fluid dynamics, chemical and electrical engineering and biophysics
to create initial designs using computer-aided design tools. Because we have
designed, manufactured and tested hundreds of different chips, we have developed
proprietary design rules that make each round of chip creation more predictable
and likely to succeed. We design our chips to be disposable and relatively
inexpensive to manufacture. We place the more expensive electronic controls and
sensing capability in a separate instrument.
Once a design pattern is completed, we use microchip manufacturing methods
to recreate the design as channels in a sheet of quartz, glass or plastic. This
process creates highly precise channels with
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dimensions that can be varied by width and depth. A typical channel is roughly
50 microns wide and 10 microns deep, approximately the size of a strand of hair.
In the next step, a second sheet of quartz, glass or plastic with a precise
pattern of holes is fused to the first sheet using a proprietary process. This
covers the channels and converts them to closed microfluidic conduits. The end
of each channel connects to an open reservoir through which fluids are
introduced. The sheets are then cut into individual chips, which can be less
than one inch to a few inches on a side. The individual chips are then packaged
into plastic holders that make them easier for the user to handle.
We currently make two basic chip formats. In our planar chips, such as
those used in the Agilent 2100 Bioanalyzer, the user introduces all of the
chemical reagents into the reservoirs, including the various samples to be
tested, using pipets. In our Sipper chips, such as those used in the Caliper
110, a small glass tube, or capillary, inserted into the chip draws a few
nanoliters of each sample into the channel network. In this way, minute
quantities of a large number of samples can be tested in a single chip. The
samples are introduced into the capillary one after the other, spaced by buffer
solution. They proceed through the channel network in a continuous flow,
assembly-line fashion to perform a complete experiment. We have an issued U.S.
patent claiming this assay technique.
Microfluidics
In our LabChip systems the movement of minute quantities of fluids, or
"microfluidics," is actively controlled by computer programs. We use two
different methods of generating fluid motion in microchannels: electrokinetics
and pressure.
Electrokinetic flow is generated when electrodes attached to
computer-driven power supplies are placed in the reservoirs at each end of a
channel and activated to generate electrical current through the channel. Under
these conditions, fluids of the appropriate type will move by a process known as
"electro-osmosis." Typical flow rates within the channel are about a millimeter
per second and the flow rate can be controlled with a high degree of precision.
Programs can then be written to generate highly specific and complex networks of
flow. One key to designing complex systems is controlling and directing the flow
at intersections. Fundamental techniques for accomplishing this were invented by
Dr. J. Michael Ramsey, one of our co-founders and a member of our Scientific
Advisory Board, and are covered by a series of issued and pending U.S. patent
applications. We hold an exclusive license to these patents for most
applications and a non-exclusive license for remaining applications.
Another electrokinetic phenomenon known as "electrophoresis" occurs in the
channels. This is the movement of charged molecules or particles in an electric
field. Electrophoresis is often used in conventional laboratories for analyzing
molecules since they move differently according to their physical make-up.
Electrophoresis can be used to move molecules in solution, or to separate
molecules with very subtle differences. Electrophoresis and electro-osmosis
generally occur at the same time in channels. However, we have developed
proprietary techniques for minimizing either force while maintaining the other,
as appropriate, for a given application.
Pressure can also be used to move fluid in the channels. On the
microfluidic scale, small amounts of pressure produce highly predictable and
reproducible fluid flow. We use both computer-controlled pressure and
electrokinetic forces to gain precise control over fluid flow in the
microfluidic channel network. It is possible to use electrokinetic forces alone,
pressure forces alone, or a combination of the two methods.
Lab-on-a-Chip Applications Development
We have developed a large amount of expertise at discovering new functions
that microfluidic chips can perform. We have generated proprietary computer
models of how an experiment can be carried out. We store these functional
designs and we can incorporate them into new designs that simulate complete
experiment pathways. In this way, we believe the value of new microfluidic
inventions can be rapidly expanded across many application development projects.
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We have also developed expertise at making experiments work in our chips.
Currently, all of our systems use fluorescent chemical reagents and optical
detection instruments to read experimental results. We often need to explore
chemical strategies for labeling relevant reagents that can reveal how different
molecular interactions take place. Another area of investigation addresses the
fact that in these small dimensions, the amount of channel surface material
relative to the amount of liquid is many times higher than in a test tube or
microwell plate. Because of this, the surface material can exert a chemical
influence on the biochemical reactions taking place. We have created strategies
to avoid the problems this can cause, or benefit from it if possible. We have
developed Sipper chips that perform and analyze enzyme reactions using part of
the channel design as a tiny, continuously operating electrophoresis machine.
Thus, reactions with one sample are going on in one area of the chip while
electrophoretic separation of the products of another sample is taking place in
a different part of the chip. We have also found that, in many cases,
fluorescence polarization spectroscopy, an optical detection method that can
determine the proportion of a fluorescent molecule that is attached to a larger
molecule or is unbound in solution, can be used to read reaction results without
needing to electrophoretically separate the biochemicals. We have built this
optical detection capability into our high throughput systems. In general, our
experience is that microfabrication and microfluidics provide a rich tool set
with which to create innovative new applications.
RESEARCH AND DEVELOPMENT
We have made substantial investments in lab-on-a-chip research and product
development since our inception. We explored fundamental issues of lab-on-a-chip
technology as early as possible in order to find solutions to important
technical challenges and seek patent protection for our solutions. Today we are
supplementing these core technology research efforts with applied product
development efforts in several areas.
Technology Research
Our technology research activities fall into several classes.
Chemical Engineering. We are increasing our understanding of the design
rules guiding the development of new chips. Using the principles of chemical
engineering we create patterns of interconnected channels that permit execution
of the various common steps of experimentation. Designs from one chip can be
used for other chips needing similar fluidic functions for a different
application. Mathematics and computer models also help minimize the number of
iterations necessary to achieve new functional chip designs.
Chip Manufacturing. We continue to seek ways to improve the yield and
decrease the cost of manufacturing our chips. We are exploring novel fabrication
techniques and the use of new materials that offer functional advantages, such
as manufacturing in quartz to take advantage of its superior optical features.
We have development programs in manufacturing technology for chips made of
plastic. Plastic devices potentially offer cost advantages and can offer
favorable surface chemical features for some applications. A major area of
development is micromachining technology for precisely attaching capillaries to
our Sipper chips to access reagents. In high throughput experimentation, the
number of capillaries and channels determines the level of throughput.
Accordingly we are developing high yield fabrication methods to enable us to
cost-effectively manufacture chips with many capillaries to perform ultra high
throughput experimentation.
Engineering and Software. We use the skills of electrical engineers,
optical engineers, mechanical engineers, product designers and software
engineers to create new instrumentation to run our chips. These instruments
control fluid movement inside the chip, present the reagents to the chip from
conventional fluid sources, and detect the results of biochemical or cell-based
experiments with optical methods. Software engineers write computer programs
that control the sources of fluid motion, communicate between different
instrument components and interpret signals from the detection system. Currently
we develop the software for our high throughput systems. We collaborate with
Agilent to develop software for our personal laboratory systems.
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Product Development
Our product development efforts are currently focused on new applications
and capabilities for
our existing instruments, our LibraryCard system, and high throughput genomic
systems.
Extensions of Existing Product Lines. For each of our first generation
instruments, we are expanding the menu of applications to address other stages
of the pharmaceutical development process. For the Agilent 2100 Bioanalyzer, we
intend to introduce new applications that address everyday productivity needs in
many areas of genomics, protein chemistry and cell biology. We are broadening
the application menu for high throughput systems as well to include assays that
measure many important activities of cells and proteins.
LibraryCard System. We are developing a new format for storing and
accessing reagents, which we call the LibraryCard reagent array. We have learned
how to reconstitute very small quantities of dried reagents stored at high
density on a planar surface. We can conveniently access reagents stored in this
way using our Sipper chips. The LibraryCard reagent array could produce a
fundamental change in the way large libraries of reagents are used. Today, these
libraries are only accessible in centralized reference-style laboratories that
can conveniently work with automated warehouses of reagents. When libraries can
be reduced to the size of a postcard, high throughput experimentation involving
massive data acquisition can be decentralized. We believe that this will
increase the size of the market for applications that run on this type of
system. We believe this type of system could significantly impact several stages
of the pharmaceutical development process, particularly primary screening and
pharmacogenetic studies.
Genomics. Genomics is the high throughput analysis of DNA and RNA.
Genomics applications include sequencing DNA and DNA genotyping. Genotyping is
the determination of the DNA sequence variation present at a particular site in
an individual's DNA. One type of these variations, called single nucleotide
polymorphisms or "SNPs," are believed to be important determinants of disease.
Like all experimentation processes, these applications are a combination of
various fluid manipulations, biochemical reactions, molecular separations and
detection. We believe they can be performed on the same basic high throughput
platform we have built for other applications. In early 1999, we began a
project, funded in part by the Advanced Technology Program of the National
Institute of Standards and Technology, to adapt the platform and develop chips
to run high throughput nucleic acids analyses. While the specific aim of the
program is to develop a diagnostics system, the first commercial products to
emerge from the technology could be genomics products, such as a system for high
throughput SNP genotyping. Our goal is to apply lab-on-a-chip technology to some
of the most important areas of biology today, including DNA sequencing, and
emerging areas such as genetic analysis for pharmacogenetics.
Our research and development expenses for the first nine months of 1999,
and for the years ended 1998, 1997 and 1996, were approximately $12.3 million,
$9.6 million, $7.2 million, and $2.7 million, respectively. We intend to
increase our research and development budget and staffing levels during the
remainder of 1999 and into 2000. As of September 30, 1999, we had 70 employees
engaged in research and development, including 42 with advanced degrees.
MANUFACTURING
We manufacture our chips in-house and are currently manufacturing high
throughput instruments in limited volumes. We rely upon Agilent to manufacture
the Agilent 2100 Bioanalyzer. Our high throughput instruments are generally
integrated with plate stacking and handling units offered commercially by other
companies. We contract with third parties to supply most reagents for the
research products business. We currently depend on suppliers to supply prepared
materials for use in the manufacture of chips. We intend to continue and may
extend the subcontracting of portions of our manufacturing processes to
subcontractors where we feel it best leverages the supplier's manufacturing
experience, costs, and/or improves our ability to meet customer demands. For a
discussion of the methods we use to manufacture our chips see "-- Technology"
and "-- Research and Development."
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COMPETITION
Although we believe that we are currently the only company selling and
delivering lab-on-a-chip products to customers, we expect to encounter intense
competition from a number of companies that offer products for laboratory
experimentation. We anticipate that our competitors will come primarily from the
following two sectors:
- companies providing conventional products based on established
technologies
- companies developing their own microfluidics or lab-on-a-chip
technologies
In order to compete against vendors of conventional products, we will need
to demonstrate the advantages of our LabChip products over alternative
well-established technologies and products. We will also need to demonstrate the
potential economic value of our LabChip products relative to these conventional
technologies and products. Some of the companies that provide these products
include PE Corp., Agilent, Beckman-Coulter, Amersham Pharmacia Biotech, Bio-Rad
Laboratories, Molecular Devices, and LJL BioSystems.
We will also need to compete effectively with companies developing their
own microfluidics or lab-on-a-chip technologies and products, such as Aclara
Biosciences and Orchid Biocomputer. Other companies known to have initiated
microfluidic programs include Motorola, 3M and PE Corp. Microfluidic
technologies have undergone and are expected to continue to undergo rapid and
significant change. Our future success will depend in large part on our ability
to establish and maintain a competitive position in these and future
technologies which we may not be able to do. Rapid technological development may
result in our products or technologies becoming obsolete. Products offered by us
could be made obsolete either by less expensive or more effective products based
on similar or other technologies.
In addition, there is the possibility that we may experience competition
from Agilent if they, or we, terminate our agreement after May 2003. Under the
terms of our agreement, upon termination we will grant to Agilent a
non-exclusive license to our LabChip technologies as then developed for use in
the research products field.
In many instances, our competitors have or will have substantially greater
financial, technical, research, and other resources and larger, more established
marketing, sales, distribution, and service organizations than we do. Moreover,
competitors may have greater name recognition than we do, and may offer
discounts as a competitive tactic. We cannot assure you that our competitors
will not succeed in developing or marketing technologies or products that are
more effective or commercially attractive than our products, or that would
render our technologies and products obsolete. Also, we may not have the
financial resources, technical expertise or marketing, distribution or support
capabilities to compete successfully in the future. Our success will depend in
large part on our ability to maintain a competitive position with our
technologies.
INTELLECTUAL PROPERTY
We seek patent protection on our lab-on-a-chip technologies. As of
September 30, 1999, we owned or held licenses to 34 issued U.S. patents and 120
pending U.S. patent applications, some of which derive from a common parent
application. Our issued patents expire between 2012 and 2018. Foreign
counterparts of many of these patents and applications have been filed and/or
issued in one or more other countries, resulting in a total of more than 330
issued patents and pending patent applications in the United States and foreign
countries. Our issued patents expire between 2012 and 2019. These patents and
applications are directed to various technological areas which we believe are
valuable to our business, including:
- control of movement of fluid and other material through interconnected
microchannels
- continuous flow high throughput screening assay methods and systems
- analytical and control instrumentation
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- analytical system architecture
- chip-based assay chemistries and methods
- chip compatible sample accession
- software for control of microfluidic based systems and data analysis
- chip manufacturing processes
We also rely upon copyright protection, trade secrets, know-how, continuing
technological innovation and licensing opportunities to develop and maintain our
competitive position. Our success will depend in part on our ability to obtain
patent protection for our products and processes, to preserve our copyrights and
trade secrets, to operate without infringing the proprietary rights of third
parties and to acquire licenses related to enabling technology or products used
with our lab-on-a-chip technology.
We are party to various exclusive and non-exclusive license agreements with
third parties which give us rights to use certain technologies. For example, we
have an exclusive license in the fields we are currently operating in from
Lockheed Martin Energy Research Corporation, relating to patents covering
inventions by Dr. J. Michael Ramsey. A failure to maintain some or all of the
rights to these technologies could seriously harm our business.
EMPLOYEES
As of September 30, 1999, we had a total of 101 employees, including 70 in
research and development, 14 in manufacturing and 17 in administration and
finance. None of our employees is represented by a collective bargaining
agreement, nor have we experienced any work stoppage. We consider our relations
with our employees to be good.
FACILITIES
Our principal research and development, manufacturing and administrative
facilities are currently located in approximately 53,000 square feet of leased
space in Mountain View, California. The lease for this space will expire in
December 2008. We believe that our current facilities are adequate for our needs
through the year 2000.
LEGAL PROCEEDINGS
On March 22, 1999, we filed a lawsuit in California Superior Court for the
County of Santa Clara (Case No. CV 780743), against Aclara Biosciences Inc., a
patent attorney named Bertram Rowland and the law firm of Flehr, Hohbach, Test,
Albritton and Herbert LLP, alleging that all three defendants misappropriated
our trade secrets relating to our business plans, patents and intellectual
property strategy. The suit also alleges that Mr. Rowland and Flehr Hohbach
committed a breach of the duties they owed to us as our former attorneys. The
suit seeks damages and equitable remedies to prevent Aclara, Mr. Rowland and
Flehr Hohbach from benefiting from the alleged misappropriation and breach of
duties. While we believe that our complaint is meritorious, we cannot assure you
that we will prevail in our action against any or all of the defendants, or that
if we prevail, the damages or equitable remedies awarded, if any, will be
commercially valuable. Furthermore, we have incurred and are likely to continue
to incur substantial costs and expend substantial personnel time in pursuing our
claims against Aclara, Mr. Rowland and Flehr Hohbach.
On April 23, 1999, Aclara Biosciences filed a lawsuit in United States
District Court for the Northern District of California (Case No. C-99-1968BZ)
alleging that we are making, using, selling or offering for sale microfluidic
devices that infringe United States Patent Number 5,750,015 in willful disregard
of Aclara's patent rights. This patent concerns methods and devices for moving
molecules by the application of electrical fields. The Aclara action seeks
damages for past and future reduced sales or lost profits based upon the making,
using, selling and offering for sale of our products and processes, and seeks to
enjoin our continued activities relating to these products. This action subjects
us to potential liability for damages,
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including treble damages, and could require us to cease making, using or selling
the affected products, or to obtain a license in order to continue to
manufacture, use or sell the affected products. While we believe we have
meritorious defenses to this action, we cannot assure you that we will prevail
in this action nor can we assure you that any license required would be made
available on commercially acceptable terms, if at all. Furthermore, we have
incurred and are likely to continue to incur substantial costs and expend
substantial personnel time in defending against the claims filed by Aclara.
Failure to successfully defend ourselves against the Aclara action could have a
material adverse effect on our business, financial condition and operating
results. For further information on the risks associated with this litigation
see "Risk Factors -- We are involved in intellectual property litigation with
Aclara Biosciences that may hurt our competitive position, may be costly to us
and may prevent us from selling our products."
SCIENTIFIC ADVISORY BOARD
We have assembled a group of scientific advisors who are leaders in fields
related to microfluidics technology and systems. These advisors assist us in
formulating our research, development and commercialization strategy and
include:
George Whitesides, Ph.D., Chair, Mallinckrodt Professor of Chemistry at Harvard
University and Member of the National Academy of Sciences. Dr. Whitesides is the
Chairman of our Scientific Advisory Board.
J. Michael Ramsey, Ph.D., a co-founder of Caliper and Corporate Research Fellow
and Head of the Laser Spectroscopy and Microinstrumentation Group in the
Chemical and Analytical Sciences Division at Oak Ridge National Laboratory.
Robert H. Austin, Ph.D., Professor of Physics at Princeton University.
Charles P. Cantor, Ph.D., Professor of Biomedical Engineering and Biophysics at
Boston University, and Member of the National Academy of Sciences.
George Church, Ph.D., Senior Investigator at the Howard Hughes Medical Institute
at Harvard Medical School.
Jed Harrison, Ph.D., Professor of Analytical Chemistry at the University of
Alberta.
Richard Haugland, Ph.D., President and Corporate Research Director of Molecular
Probes, Inc.
James W. Jorgenson, Ph.D., Francis P. Venable Professor of Chemistry at the
University of North Carolina.
Barry Karger, Ph.D., James L. Waters Chair in Analytical Chemistry and Director
of the Barnett Institute of Chemical Analysis and Materials Science at
Northeastern University, Boston, Massachusetts.
Butrus T. Khuri-Yakub, Ph.D., Professor of Electrical Engineering at the E.L.
Ginzton Laboratory of Stanford University.
Andreas Manz, Ph.D., SmithKline Beecham Chair of Analytical Chemistry at the
Imperial College of Science, London.
Stephen D. Senturia, Ph.D., Barton L. Weller Professor of Electrical Engineering
at the Massachusetts Institute of Technology.
Christopher T. Walsh, Ph.D., Hamilton Kuhn Professor of Biological Chemistry and
Molecular Pharmacology at Harvard Medical School and Member of the National
Academy of Sciences.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND FOUNDERS
The following presents information about our directors, executive officers
and co-founders as of September 30, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Daniel L. Kisner, M.D. ................... 52 President, Chief Executive Officer and Director
Calvin Y. H. Chow......................... 44 Chief Operating Officer and Co-founder
James L. Knighton......................... 45 Chief Financial Officer
Michael R. Knapp, Ph.D. .................. 47 Vice President of Science and Technology and
Co-founder
J. Wallace Parce, Ph.D. .................. 49 Vice President of Research and Co-founder
William M. Wright III..................... 51 Vice President of Operations
David V. Milligan, Ph.D.(1)(2)............ 59 Chairman of the Board of Directors
Anthony B. Evnin, Ph.D.(1)................ 58 Director
Charles M. Hartman(2)..................... 58 Director
Regis P. McKenna.......................... 60 Director
Robert T. Nelsen(2)....................... 36 Director
Michael Steinmetz, Ph.D.(1)............... 52 Director
Lawrence A. Bock.......................... 40 Co-founder
J. Michael Ramsey, Ph.D. ................. 47 Co-founder
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
DANIEL L. KISNER, M.D., has served as our President and Chief Executive
Officer since February 1999 and as a Director since March 1999. From May 1994 to
January 1999, Dr. Kisner served as President and Chief Operating Officer of Isis
Pharmaceuticals, Inc., a biotechnology company. From February 1993 to May 1994,
Dr. Kisner served as Executive Vice President and Chief Operating Officer of
Isis Pharmaceuticals, Inc. From March 1991 to February 1993, he served as
Executive Vice President of Isis Pharmaceuticals, Inc. and was responsible for
business and product development, and manufacturing. From December 1988 to March
1991, Dr. Kisner served as Division Vice President of Pharmaceutical Development
for Abbott Laboratories. Dr. Kisner has held a tenured position in the Division
of Oncology at the University of Texas, San Antonio School of Medicine and is
certified by the American Board of Internal Medicine and certified in Medical
Oncology. Dr. Kisner holds a B.A. from Rutgers University and an M.D. from
Georgetown University.
CALVIN Y. H. CHOW, co-founded Caliper and has served as our Chief Operating
Officer since February 1998. Mr. Chow also served as our Vice President of
Development from September 1995 to February 1998. From October 1985 to September
1995, Mr. Chow served as Vice President of Engineering and Operations of
Molecular Devices Corporation, a bioanalytical instrumentation company, where he
was responsible for product development and company-wide manufacturing. Mr. Chow
holds a B.S. in Electrical Engineering from Illinois Institute of Technology and
an M.S. in Electrical Engineering from Stanford University.
JAMES L. KNIGHTON, has served as our Chief Financial Officer since
September 1999. From October 1998 to September 1999, Mr. Knighton served as
Senior Vice President and Chief Financial Officer of SUGEN, Inc., a
biotechnology company. From July 1997 to October 1998, Mr. Knighton served as
Vice President of Investor Relations and Corporate Communications at Chiron
Corporation, a biotechnology company. From 1985 to 1994, Mr. Knighton served in
various operations, planning and R&D functions at
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E. I. DuPont de Nemours Inc., a global, diversified chemical and life science
company. Mr. Knighton holds a B.S. in Biology from the University of Notre Dame,
an M.S. in Genetics from the University of Pennsylvania and an M.B.A. from the
Wharton School at the University of Pennsylvania.
MICHAEL R. KNAPP, PH.D., co-founded Caliper and has served as our Vice
President of Science and Technology since September 1995. From November 1994
through August 1995, Dr. Knapp was engaged in activities related to forming
Caliper, including securing our core technology license and procuring financing.
From October 1988 to October 1994, Dr. Knapp served as President and Scientific
Director at Molecular Tool, Inc., a genetics technology company he co-founded in
1988. Previously, Dr. Knapp was on the staff of the Center for Neurobiology and
Behavior at Columbia University and was a Scientific Director of Genetica SARL,
an affiliate of Rhone Poulenc SA in Paris, France. Dr. Knapp holds a B.S. in
Biology from Trinity College (Hartford) and a Ph.D. in Medical Microbiology from
Stanford University.
J. WALLACE PARCE, PH.D., co-founded Caliper and has served as our Vice
President of Research since October 1995. Prior to joining Caliper, Dr. Parce
spent 12 years with Molecular Devices Corporation as a founder, consultant,
Director of Research and Vice President of Research. From 1980 until 1984 he was
an Assistant Professor in the Department of Biochemistry at Wake Forest
University, from 1982 until 1987 an associate in the Department of Microbiology
and Immunology, and from 1984 until 1987, an Associate Professor of
Biochemistry. Dr. Parce received his B.A. in Chemistry from Western Maryland
College in 1972 and his Ph.D. in Biochemistry from Wake Forest University in
1976. From 1976 until 1980 Dr. Parce was a Post Doctoral Fellow in Chemistry at
Stanford University.
WILLIAM M. WRIGHT III, has served as our Vice President of Operations since
September 1998. From November 1995 to May 1998, Mr. Wright served as Vice
President of Operations of Biocircuits Corporation, a medical diagnostic
company, where he was responsible for instrument and immunoassay cartridge
manufacturing. From 1984 to 1995, Mr. Wright was Vice President of Site
Operations with Dade International Inc., formerly a division of Baxter
International, Inc., a medical products manufacturing company, where he assisted
in the start-up and launch of the Baxter International Paramax Analytical
Clinical Chemistry Business. Mr. Wright holds a B.S. in Industrial Technology
from California State University at Long Beach.
DAVID V. MILLIGAN, PH.D., has been a Director since October 1996 and the
Chairman of the Board since April 1997. He has been a Vice President and Special
Limited Partner of Bay City Capital, Merchant Bank since 1997. From 1979 to
1996, Dr. Milligan served in a variety of management positions at Abbott
Laboratories, a healthcare products company. During his career at Abbott
Laboratories he led both the diagnostic products and pharmaceutical products
research and development organizations and was Senior Vice President and Chief
Scientific Officer when he retired at the end of 1996. He is also a director of
ICOS Corporation and Diametrics Medical, Inc. He is a member of the chemistry
department advisory boards of the University of California at Berkeley and
Princeton University. Dr. Milligan holds an A.B. in Chemistry from Princeton
University and an M.S. and a Ph.D. in Organic Chemistry from the University of
Illinois.
ANTHONY B. EVNIN, PH.D., has been a Director since June 1996. He has been a
General Partner of Venrock Associates, a venture capital partnership since 1975.
He is also a director of Centocor, Inc., Ribozyme Pharmaceuticals, Inc. and
Triangle Pharmaceuticals, Inc. Dr. Evnin holds an A.B. from Princeton University
and a Ph.D. in Chemistry from Massachusetts Institute of Technology.
CHARLES M. HARTMAN, has been a Director since June 1996. He has been a
General Partner of CW Group, a manager of medical venture capital funds since
April 1983. From 1966 to 1983, Mr. Hartman served in various positions at
Johnson & Johnson where he was responsible for identification, evaluation and
negotiation situations ranging from single product opportunities to company
acquisitions, both domestically and internationally. Mr. Hartman is a director
of The Hastings Center, a non-profit organization devoted to the study of
bioethical issues in medicine and the life sciences. Mr. Hartman holds a B.S. in
Chemistry from the University of Notre Dame and an M.B.A. from the University of
Chicago.
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REGIS P. MCKENNA, has been a Director since September 1998. Mr. McKenna has
been Chairman of The McKenna Group, an international consulting firm
specializing in the application of information and telecommunications
technologies to business strategies since 1973. Mr. McKenna is on the board of
The Economic Strategies Institute and the Competitiveness Council. He is
Chairman of the Board of the Santa Clara University Center for Science,
Technology and Society and was a founding board member of Smart Valley. He is a
trustee at Santa Clara University and President of the Board of Trustees for The
New Children's Shelter of Santa Clara County. Mr. McKenna is on the board of
directors of a number of high technology start-up companies. Mr. McKenna holds a
B.A. from Duquesne University.
ROBERT T. NELSEN, has been a Director since September 1995. Since July
1994, Mr. Nelsen has served as a senior principal of various venture capital
funds associated with ARCH Venture Partners, including ARCH Venture Fund II,
L.P., ARCH Venture Fund III, L.P. and ARCH Venture Fund IV, L.P. From April 1987
to July 1994, Mr. Nelsen was Senior Manager at ARCH Development Corporation, a
company affiliated with the University of Chicago, where he was responsible for
new company formation. He holds a B.S. in Biology and Economics from the
University of Puget Sound and an M.B.A. from the University of Chicago.
MICHAEL STEINMETZ, PH.D., has been a Director since July 1997. He has been
a partner of MPM Asset Management LLC in Cambridge, MA, a venture capital firm
focusing on investments in private biotechnology companies in the U.S. and
Europe, since 1997. From 1997 to 1998, Dr. Steinmetz was also a partner of the
Bellevue Group in Zurich, Switzerland. From 1986 to 1997, Dr. Steinmetz worked
at Hoffmann-La Roche Inc. He headed the Biology Department in Basel and its
worldwide biotechnology research activities. He also was Vice President of
Preclinical Research and Preclinical Research and Development in Nutley, New
Jersey. Dr. Steinmetz was a member of the Board of Directors at Roche USA and
Millennium Pharmaceuticals. Dr. Steinmetz holds a Ph.D. in Natural Sciences from
the University of Munich, has lectured at the University of Basel and is Adjunct
Professor at Rutgers University.
LAWRENCE A. BOCK, co-founded Caliper and served as a director of Caliper
and acting Chief Executive Officer from inception until April 1997 and since
then has been an advisor to Caliper. He has been a General Partner of CW Group,
a medical venture capital fund since June 1998. From 1988 to 1998, Mr. Bock was
General Partner of Avalon Ventures, a seed stage venture capital firm, where he
founded Vertex Pharmaceuticals, Athena Neurosciences, Pharmacopeia, Neurocrine
Biosciences and Argonaut Technologies. He is a founder and director of Illumina
Inc. and FastTrack Systems, Inc. Mr. Bock holds a B.S. in Biochemistry from
Bowdoin College and an M.B.A. from the University of California, Los Angeles.
J. MICHAEL RAMSEY, PH.D., co-founded Caliper and has served on our
Scientific Advisory Board since September 1995. Since February 1979 Dr. Ramsey
has served on the research staff at Oak Ridge National Laboratory where he is
presently a Corporate Research Fellow and Head of the Laser Spectroscopy and
Microinstrumentation Group. Dr. Ramsey holds a B.S. degree in Chemistry from
Bowling Green State University and a Ph.D. in Chemistry from Indiana University.
BOARD COMPOSITION
We currently have seven directors. Upon the closing of this offering the
terms of office of the board of directors will be divided into three classes. As
a result, a portion of our board of directors will be elected each year. The
division of the three classes, the initial directors and their respective
election dates are as follows:
- the class I directors will be Anthony B. Evnin, Ph.D. and Robert T.
Nelsen and their term will expire at the annual meeting of stockholders
to be held in 2000
- the class II directors will be Charles M. Hartman, David V. Milligan,
Ph.D. and Michael Steinmetz, Ph.D. and their term will expire at the
annual meeting of stockholders to be held in 2001
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<PAGE> 51
- the class III directors will be Daniel L. Kisner, M.D. and Regis P.
McKenna and their term will expire at the annual meeting of stockholders
to be held in 2002
At each annual meeting of stockholders after the initial classification, the
successors to directors whose terms will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. In addition, the authorized number of directors may be
changed only by resolution of the board of directors. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the directors. This classification of the board of
directors may have the effect of delaying or preventing changes in control or
management of Caliper.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, Mr. Hartman and Drs. Milligan and Steinmetz served as
members of the compensation committee of our board of directors. No member of
the compensation committee serves as a member of the board of directors or
compensation committee of any other entity that has one or more executive
officers serving as a member of our board of directors or compensation
committee. Prior to the formation of the compensation committee in June 1996,
our board of directors as a whole made decisions relating to compensation of our
executive officers.
BOARD COMMITTEES
Audit Committee. Our audit committee reviews our internal accounting
procedures and consults with, and reviews the services provided by, our
independent auditors. Current members of our audit committee are Drs. Evnin,
Milligan and Steinmetz.
Compensation Committee. Our compensation committee reviews and recommends
to the board of directors the compensation and benefits of all our officers and
reviews general policy relating to compensation and benefits of our employees.
The compensation committee also administers the issuance of stock options and
other awards under our stock plans. Current members of the compensation
committee are Messrs. Hartman and Nelsen and Dr. Milligan.
DIRECTOR COMPENSATION
Directors currently receive no cash compensation from us for their services
as members of the board or for attendance at committee meetings. Directors may
be reimbursed for expenses in connection with attendance at board of directors
and committee meetings.
In September of 1996, we granted Dr. Milligan, in connection with his
attendance at our board and committee meetings, the right to purchase 19,230
shares of common stock at $0.11 per share. Our right to repurchase these shares
lapses in 60 equal monthly installments. In November 1997, we granted Dr.
Milligan an additional stock option to purchase 6,410 shares of common stock at
an exercise price of $0.62 per share. This option fully vested in September
1998. In April 1999, we granted Dr. Milligan an additional stock option to
purchase 6,410 shares of common stock at an exercise price of $0.97 per share.
This option fully vested in September 1999. In October 1999, we granted Dr.
Milligan an additional stock option to purchase 6,410 shares of common stock at
an exercise price of $3.12. This option will fully vest in September 2000. In
September 1998, we granted Mr. McKenna, in connection with his attendance at our
board meetings, a stock option to purchase 19,230 shares of common stock at an
exercise price of $0.97 per share. This option vests in 60 equal monthly
installments. In October 1999, we granted Mr. McKenna an additional stock option
to purchase 3,205 shares of common stock at an exercise price of $3.12 per
share. This option fully vests in September 2000. We have also entered into
consulting agreements with each of Dr. Milligan and Mr. McKenna. See
"Transactions with Executive Officers, Directors and Five Percent Stockholders"
for a description of these agreements.
In October 1999, we adopted the 1999 Non-Employee Directors' Stock Option
Plan to provide for the automatic grant of options to purchase shares of common
stock to our non-employee directors who are not employees of Caliper or of any
affiliate of Caliper. Any non-employee director elected after the closing of
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<PAGE> 52
this offering will receive an initial option to purchase 20,000 shares of common
stock. Starting at the annual stockholder meeting in 2000, all non-employee
directors will receive an annual option to purchase 3,200 shares of common stock
and the chairman of the board will receive an annual option to purchase 6,400
shares of common stock. See "-- Employee Benefit Plans -- 1999 Non-Employee
Directors' Stock Option Plan" for a more detailed explanation of the terms of
these stock options.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY
Our bylaws provide that we will indemnify our directors and executive
officers and may indemnify our other officers, employees and other agents to the
fullest extent permitted by Delaware law. We are also empowered under our bylaws
to enter into indemnification contracts with our directors and officers and to
purchase insurance on behalf of any person we are required or permitted to
indemnify. Pursuant to this provision, we expect to enter into indemnification
agreements with each of our directors and executive officers.
We have obtained officer and director liability insurance to cover
liabilities our officers and directors may incur in connection with their
services to Caliper, including matters arising under the Securities Act. In
addition, our certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, our directors will not be liable for monetary damages
for breach of the directors' fiduciary duty of care to us and our stockholders.
This provision in the certificate of incorporation does not eliminate the duty
of care, and in appropriate circumstances, equitable remedies including an
injunction or other forms of non-monetary relief would remain available under
Delaware law. Under current Delaware law, a director's liability to us or our
stockholders may not be limited:
- to any breach of the director's duty of loyalty to us or our stockholders
- for acts or omissions not in good faith or involving intentional
misconduct
- for knowing violations of law
- for any transaction from which the director derived an improper personal
benefit
- for improper transactions between the director and us
- and for improper distributions to stockholders and loans to directors and
officers
This provision also does not affect a director's responsibilities under any
other laws including the federal securities laws or state or federal
environmental laws.
There is no pending litigation or proceeding involving a director or
officer of Caliper as to which indemnification is being sought, nor are we aware
of any pending or threatened litigation that may result in claims for
indemnification by any director or officer.
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<PAGE> 53
EXECUTIVE COMPENSATION
The following table presents summary information for the fiscal year ended
December 31, 1998, regarding the compensation of each of our most highly
compensated executive officers whose salary and bonus for 1998 were in excess of
$100,000. We did not have a Chief Executive Officer or Chief Financial Officer
during 1998. Dr. Daniel L. Kisner joined Caliper in February 1999 as our
President and Chief Executive Officer, and Mr. James L. Knighton joined Caliper
in September 1999 as our Chief Financial Officer. See "-- Employment Agreements"
below for a description of Dr. Kisner's and Mr. Knighton's employment
arrangements.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
- --------------------------- -------- ------- ------------
<S> <C> <C> <C>
Calvin Y. H. Chow......................................... $194,775 $38,000 64,102
Chief Operating Officer
Michael R. Knapp, Ph.D. .................................. 165,746 22,000 32,051
Vice President of Science and Technology
J. Wallace Parce, Ph.D. .................................. 186,200 22,000 32,051
Vice President of Research
</TABLE>
Mr. Chow's bonus figure includes $19,000 received in cash and 19,644 shares
of common stock received in lieu of cash. Dr. Knapp's bonus figure includes
$14,740 received in cash and 7,506 shares of common stock received in lieu of
cash. Dr. Parce's bonus figure includes $14,740 received in cash and 7,506
shares of common stock received in lieu of cash.
OPTION GRANTS IN FISCAL YEAR 1998
The following table presents each grant of stock options during the fiscal
year ended December 31, 1998, to each of the individuals listed in the Summary
Compensation Table.
The exercise price of each option was equal to the fair market value of our
common stock as valued by the board of directors on the date of grant. In
determining the fair market value of our common stock on the date of grant our
board of directors considered many factors, including:
- the option grants involved illiquid securities in a nonpublic company
- prices of preferred stock issued by Caliper to outside investors in
arm's-length transactions
- the rights, preferences and privileges of the preferred stock over the
common stock
- Caliper's performance and operating results at the time of grant
- Caliper's stage of development and business strategy
- the likelihood of achieving a liquidity event for the shares of common
stock underlying these options, such as an initial public offering or a
sale of Caliper
The exercise price may be paid in cash, promissory notes, in shares of our
common stock valued at fair market value on the exercise date or through a
cashless exercise procedure involving a same-day sale of the purchased shares.
The options granted to Mr. Chow, Drs. Knapp and Parce vest as to 20% on
September 16, 1999 and 1/60th per month thereafter.
The potential realizable value is calculated based on the ten-year term of
the option at the time of grant. Stock price appreciation of 5% and 10% is
assumed pursuant to rules promulgated by the Securities
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<PAGE> 54
and Exchange Commission and does not represent our prediction of our stock price
performance. The potential realizable values at 5% and 10% appreciation are
calculated by:
- multiplying the number of shares of common stock under the option by the
assumed initial public offering price of $14.00 per share
- assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table until the
expiration of the options
- subtracting from that result the aggregate option exercise price
Percentages shown under "Percentage of Total Options Granted in 1998" are
based on an aggregate of 423,253 options granted to employees, consultants and
directors of Caliper under our stock option plans during 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES APPRECIATION FOR
UNDERLYING PERCENTAGE OF TOTAL EXERCISE OPTION TERM
OPTIONS OPTIONS PRICE PER EXPIRATION -----------------------
NAME GRANTED GRANTED IN 1998 SHARE DATE 5% 10%
- ---- ---------- ------------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Calvin Y. H. Chow............ 64,102 15.15% $0.97 09/16/08 $1,330,026 $2,053,909
Michael R. Knapp, Ph.D. ..... 32,051 7.57 0.97 09/16/08 665,014 1,026,959
J. Wallace Parce, Ph.D. ..... 32,051 7.57 0.97 09/16/08 665,014 1,026,959
</TABLE>
OPTION VALUES AT DECEMBER 31, 1998
The following table presents the number and value of securities underlying
unexercised options that are held by each of the individuals listed in the
Summary Compensation Table as of December 31, 1998. No shares were acquired on
the exercise of stock options by these individuals during the year ended
December 31, 1998.
Amounts shown under the column "Value of Unexercised In-the-Money Options
at December 31, 1998" are based on the assumed initial public offering price of
$14.00, without taking into account any taxes that may be payable in connection
with the transaction, multiplied by the number of shares underlying the option,
less the exercise price payable for these shares.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Calvin Y. H. Chow.......................... 23,236 106,250 $313,157 $1,401,834
Michael R. Knapp, Ph.D..................... 30,663 74,200 416,319 984,223
J. Wallace Parce, Ph.D..................... 22,701 74,734 305,919 991,448
</TABLE>
EMPLOYMENT AGREEMENTS
In January 1999, we entered into an employment agreement with Daniel L.
Kisner, M.D. to serve as our President and Chief Executive Officer at a base
salary of $350,000 a year starting on February 28, 1999, with an annual
discretionary bonus of up to 50% of his base salary based upon specific
objectives to be agreed upon by Dr. Kisner and the board. Pursuant to the
employment agreement, Dr. Kisner received an option to purchase 641,025 shares
of our common stock at an exercise price of $0.97 per share. This option vests
over a period of five years in 60 equal monthly installments. In addition, Dr.
Kisner is entitled to a housing loan of up to $500,000 which may be forgiven
over time, and monthly mortgage assistance to support a $500,000 mortgage, plus
additional payments to compensate for the tax payable on these portions of his
compensation. The employment agreement is at-will and contains a
non-solicitation agreement. This agreement also provides that if Dr. Kisner is
terminated without cause or Dr. Kisner voluntarily terminates
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<PAGE> 55
his employment after a constructive termination, he will be paid his then
current salary for 12 months in monthly installments or until he becomes
employed, whichever is earlier, and a portion of his options will be partially
accelerated.
In September 1999, we entered into an employment agreement with James L.
Knighton to serve as our Chief Financial Officer at a base salary of $245,000 a
year starting in September, 1999, with a sign-on bonus of $50,000 and an annual
discretionary bonus set by the board based upon specific objectives to be
determined, with a minimum bonus of 30% of his base salary guaranteed during the
first 12 months of employment. In addition, Mr. Knighton will receive a stock
bonus equal to $100,000 divided by the initial public offering price when our
common stock trades at or above 125% of the initial public offering price for
six consecutive months. Pursuant to the employment agreement, Mr. Knighton
received an option to purchase 269,230 shares of our common stock at an exercise
price of $3.12 per share, plus a bonus payable at the time of exercise in the
amount of $1.56 per share of stock exercised, plus an additional amount to cover
taxes on the bonus. Mr. Knighton's stock option was approved by our board in
October 1999. In addition, Mr. Knighton is entitled to a housing loan of up to
$500,000. The employment agreement is at-will, and provides that if Mr. Knighton
is terminated without cause or Mr. Knighton voluntarily terminates his
employment after a constructive termination, he will be paid his base salary for
12 months in monthly installments or until he becomes employed, whichever is
earlier, and a portion of his options will be partially accelerated.
EMPLOYEE BENEFIT PLANS
1999 Equity Incentive Plan
We adopted our 1999 equity incentive plan in October 1999. The incentive
plan is an amendment and restatement of our 1996 stock incentive plan and will
terminate in 2009 unless the board terminates it sooner.
Share Reserve. We have reserved a total of 4,000,000 shares of our common
stock for issuance under the 1999 equity incentive plan. As of September 30,
1999, under the 1999 equity incentive plan (a) options to purchase 1,578,492
shares of common stock were outstanding and (b) options to purchase 613,307
shares had been exercised. If the recipient of a stock award does not purchase
the shares under the stock award before the stock award expires or otherwise
terminates, the shares that are not purchased again become available for
issuance under the incentive plan.
On the day after each annual meeting of our stockholders for 10 years,
beginning in 2000, the number of shares in the reserve automatically will be
increased by the greater of:
- 5% of our outstanding shares on a fully-diluted basis; or
- that number of shares that could be issued under awards granted under the
incentive plan during the prior 12-month period.
The automatic share reserve increase in the aggregate may not exceed 12,820,000
shares over the 10-year period.
Effect on Options of a Merger. If we dissolve or liquidate, then
outstanding stock awards will terminate immediately prior to the event. If we
sell, lease or dispose of all, or substantially all, of our assets, or are
acquired pursuant to a merger or consolidation then, the surviving entity will
either assume or substitute all outstanding awards under the incentive plan. If
it declines to do so, then generally the vesting and exercisability of the stock
awards will accelerate.
1996 Equity Incentive Plan
Our 1996 equity incentive plan was adopted by the board of directors in
January 1996 and approved by the stockholders in August 1996. The board
authorized and reserved an aggregate of 705,128 shares of Caliper common stock
for issuance under the 1996 equity incentive plan. The 1996 equity incentive
plan provides for the grant of incentive stock options to employees and
nonstatutory stock options to employees,
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<PAGE> 56
directors and consultants of Caliper and its affiliates. The 1996 equity
incentive plan provides that it will be administered by the board, or a
committee appointed by the board, which determines recipients and types of
options to be granted, including number of shares under the option and the
exercisability of the shares.
As of September 30, 1999, under the 1996 equity incentive plan (a) options
to purchase 91,399 shares of common stock were outstanding and (b) options to
purchase 116,425 shares had been exercised. In July 1996, the board voted that
no additional grants would be made under the 1996 equity incentive plan.
Effect on Options of a Merger. If we dissolve or liquidate, then
outstanding stock awards will terminate immediately prior to the event. If we
sell, lease or dispose of all, or substantially all, of our assets, or are
acquired pursuant to a merger or consolidation then, the surviving entity will
either assume or substitute all outstanding awards under the incentive plan. If
it declines to do so, then generally the vesting and exercisability of the stock
awards will accelerate.
1999 Non-Employee Directors' Stock Option Plan
We adopted the 1999 non-employee directors' stock option plan in October
1999. The directors' plan provides for the automatic grant to our non-employee
directors of options to purchase shares of our common stock. The directors' plan
will terminate in 2009 unless the board terminates it sooner.
Share Reserve. We have reserved a total of 200,000 shares of our common
stock for issuance under the directors' plan. On the day after each annual
meeting of our stockholders, for 10 years, starting in 2000, the share reserve
will automatically be increased by a number of shares equal to the greater of:
- 0.3% of our outstanding shares on a fully-diluted basis, or
- that number of shares that could be issued under options granted under
the directors' plan during the prior 12-month period.
If an optionholder does not purchase the shares under the option before the
option expires or otherwise terminates, the shares that are not purchased again
become available for issuance under the directors' plan.
Eligibility and Option Terms. Each person who is first elected or appointed
as a non-employee director after this initial public offering will automatically
receive an option for 20,000 shares. The initial grant will be fully exercisable
upon date of grant and will vest monthly over 5 years.
In addition, on the day after each of our annual meetings of the
stockholders, starting with the annual meeting in 2000, each non-employee
director will automatically receive another option if the recipient has been a
non-employee director for at least the prior six months. The annual grant will
cover 6,400 shares for the chairman of the board and 3,200 shares otherwise,
will be fully exercisable upon date of grant and will vest in 12 months. Options
have an exercise price equal to 100% of the fair market value of our common
stock on the grant date. The option term is 10 years.
Effect on Options of a Merger. If we dissolve or liquidate, then
outstanding options will terminate immediately prior to the event. If we sell,
lease or dispose of all, or substantially all, of our assets, or are acquired
pursuant to a merger or consolidation then, the surviving entity will either
assume or replace all outstanding options under the directors' plan. If it
declines to do so, then generally the vesting and exercisability of the options
will accelerate. However, if an option is assumed or replaced but the
optionholder is not elected to the board of directors of the acquiring or
surviving corporation at the first meeting of the board after the event, then
the vesting of that option will accelerate by 18 months.
Options Issued. The directors' plan will not be effective until the date of
this initial public offering of our stock. Therefore, we have not issued any
options under the directors' plan.
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<PAGE> 57
1999 Employee Stock Purchase Plan
We adopted the 1999 employee stock purchase plan in October 1999. The
purchase plan has no set termination date. It will terminate when all of the
shares reserved under it have been issued unless the board terminates it
earlier.
Share Reserve. We authorized the issuance of 300,000 shares of our common
stock pursuant to purchase rights granted to eligible employees under the
purchase plan. On the day after each annual meeting of our stockholders for 10
years, beginning in 2000, the number of shares in the reserve automatically will
be increased by the greater of:
- 0.5% of our outstanding shares on a fully-diluted basis, or
- that number of shares that have been issued under the purchase plan
during the prior 12-month period.
The automatic share reserve increase in the aggregate may not exceed
3,000,000 shares over the 10-year period.
Eligibility. We intend to qualify the purchase plan as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code.
The purchase plan provides a means by which eligible employees may purchase our
common stock through payroll deductions. We implement the purchase plan by
offerings of purchase rights to eligible employees. Generally, all of our
full-time employees and full-time employees of our affiliates incorporated in
the United States who have been employed for at least 10 days may participate in
offerings under the purchase plan. However, no employee may participate in the
purchase plan if immediately after we grant the employee a purchase right, the
employee has voting power over 5% or more of our outstanding capital stock. As
of the date hereof, no shares of common stock have been purchased under the
purchase plan.
Offerings. Under the purchase plan, the board may specify offerings of up
to 27 months. Unless the board otherwise determines, common stock is purchased
for accounts of participating employees at a price per share equal to the lower
of:
- 85% of the fair market value of a share on the first day of the offering,
or
- 85% of the fair market value of a share on the purchase date.
The board may provide that employees who become eligible to participate
after the offering period begins nevertheless may enroll in the offering. These
employees will purchase our stock at the lower of:
- 85% of the fair market value of a share on the day they began
participating in the purchase plan, or
- 85% of the fair market value of a share on the purchase date.
Participating employees may authorize payroll deductions of up to 10% of
their compensation for the purchase of stock under the purchase plan. Employees
may end their participation in the offering at any time up to 10 days before a
purchase period ends. Their participation ends automatically on termination of
their employment.
Other Provisions. The board may grant eligible employees purchase rights
under the purchase plan only if the purchase rights together with any other
purchase rights granted under other employee stock purchase plans established by
us or by our affiliates, if any, do not permit the employee's rights to purchase
our stock to accrue at a rate which exceeds $25,000 of fair market value of our
stock for each calendar year in which the purchase rights are outstanding.
If we sell, lease or dispose of all, or substantially all, of our assets,
or are acquired pursuant to a merger or acquisition then, the board may provide
that the successor corporation will assume or substitute for outstanding
purchase rights. Alternatively, the board may shorten the offering period and
provide that our stock will be purchased for the participants immediately before
the event.
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<PAGE> 58
401(k) Plan and Deferred Compensation Plan
We maintain a retirement and deferred savings plan for our employees that
is intended to qualify as a tax-qualified plan under the Internal Revenue Code.
The 401(k) Plan provides that each participant may contribute up to a statutory
limit, which is $10,000 in calendar year 1999. In December 1999, we established
a deferred compensation plan, which is an unfunded plan established primarily
for the purpose of providing deferred compensation for our executive officers
and highly compensated employees. The plan will take effect on February 1, 2000.
Under the terms of the plan, participants in the plan are permitted to defer
receipt and therefore income taxation on a portion or all of their taxable wages
from Caliper until they terminate their employment with Caliper.
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<PAGE> 59
TRANSACTIONS WITH EXECUTIVE OFFICERS, DIRECTORS AND
FIVE PERCENT STOCKHOLDERS
The following executive officers, directors or holders of more than five
percent of our voting securities purchased securities in the amounts as of the
dates shown below.
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK
COMMON --------------------------------------------------------
STOCK SERIES B SERIES C SERIES D SERIES E
----------------- ------------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Daniel L. Kisner, M.D............... 64,101 -- -- -- --
Calvin Y. H. Chow................... 218,178 -- -- -- --
Michael R. Knapp, Ph.D.............. 210,263 20,479 5,342 -- --
J. Wallace Parce, Ph.D.............. 193,220 -- -- -- --
William M. Wright III............... 10,256 -- -- -- --
David V. Milligan, Ph.D............. 96,152 -- -- -- --
Charles M. Hartman.................. 7,692 -- -- -- --
Regis P. McKenna.................... 19,230 -- -- 32,051 --
5% STOCKHOLDERS
Venrock Associates(1)............... 76,181 1,062,536 44,267 55,128 --
Venrock Associates II, L.P.(1)...... 46,692 652,779 66,401 73,077 --
CW Partners III, L.P.(2)............ 122,874 -- -- -- --
CW Ventures II, L.P.(2)............. -- 1,414,831 90,906 -- --
Lombard Odier & Cie................. -- 409,594 641,026 480,769 224,359
The Dow Chemical Company............ -- -- -- 1,041,667 --
Hoffmann-La Roche Inc............... -- -- 854,701 -- --
BB BioVentures, L.P.(3)............. -- -- -- 801,282 --
Price Per Share..................... $0.00156 to $0.97 $1.2207211 $4.68 $6.24 $9.36
Date(s) of Purchase................. 8/95 to 9/99 4/96 to 10/96 10/96 to 12/96 1/97 to 3/98 5/98
</TABLE>
- ---------------
(1) Anthony B. Evnin, Ph.D., one of our directors, is a general partner of
Venrock Associates.
(2) Charles M. Hartman, one of our directors, is a general partner of CW Group.
(3) Michael Steinmetz, Ph.D., one of our directors, is a partner of MPM Asset
Management LLC, the management advisor of BB BioVentures, L.P.
We have entered into the following agreements with our executive officers,
directors and holders of more than five percent of our voting securities.
Amended and Restated Investors' Rights Agreement. Caliper and the
preferred stockholders described above have entered into an agreement, pursuant
to which these and other preferred stockholders will have registration rights
with respect to their shares of common stock following this offering. Upon the
completion of this offering, all shares of our outstanding preferred stock will
be automatically converted into common stock on a one for one basis. See
"Description of Capital Stock -- Registration Rights" for a further description
of the terms of this agreement.
Dow Chemical Agreement. On January 14, 1997, we entered into a development
agreement with The Dow Chemical Company to work together on polymer chip
manufacturing technologies. This work concluded in 1998. In consideration of
Dow's contribution under the development agreement, we issued 240,385 shares of
our Series D preferred stock to Dow. The remaining shares of Series D preferred
stock held by Dow were purchased with cash in connection with our Series D
financing.
MPM Capital Advisors LLC Agreement. On July 24, 1997, we entered into an
agreement with MPM Capital Advisors LLC. Under the terms of this agreement, MPM
agreed to develop a strategic overview and business plan for Caliper. In
consideration for these services we paid MPM $125,000 and issued 39,262 shares
of our common stock. This agreement was terminated on April 23, 1998.
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<PAGE> 60
David V. Milligan, Ph.D. Consulting Agreement. As part of our ongoing
program of research and development, we entered into a twelve-month consulting
agreement with Dr. David V. Milligan, our Chairman of the Board, effective April
30, 1997. The term of this agreement may be renewed annually for up to five
years. Under the terms of this agreement, Dr. Milligan has agreed to provide
consultation and advice concerning our core competitive strengths and the
development of optimal growth strategies. In exchange, we have agreed to pay Dr.
Milligan $80,000 per year and granted Dr. Milligan a stock option to purchase
64,102 shares of our common stock at $0.47 per share. This option vests monthly
over a period of five years. This agreement has been renewed and remains in
effect. We have also granted Dr. Milligan stock options in connection with his
services as one of our directors. See "Management -- Director Compensation."
Regis P. McKenna Consulting Agreement. We entered into a twelve-month
consulting agreement with Regis P. McKenna, one of our directors, on April 30,
1997. Under the terms of this agreement, Mr. McKenna agreed to provide
assistance in developing our technology and business strategies. In exchange,
Mr. McKenna was allowed to purchase 19,230 shares of common stock at $0.62 per
share. In July 1998, Mr. McKenna was granted a stock option for 19,230 shares of
common stock at $0.97 per share. In August 1999, Mr. McKenna was granted a stock
option for 19,230 shares of common stock at $0.97 per share. This option vests
in twelve equal monthly installments beginning in May 1999. This agreement has
been renewed and remains in effect. We have also granted Mr. McKenna stock
options in connection with his services as one of our directors. See
"Management -- Director Compensation."
Executive Employment Agreements. We have entered into employment contracts
with Daniel L. Kisner, M.D. our President and Chief Executive Officer, and James
L. Knighton, our Chief Financial Officer. See "Management -- Employment
Agreements."
Indebtedness of Management. In March 1997, we loaned Michael R. Knapp, our
Vice President of Science and Technology, $200,000 in connection with the
purchase of a residence. The interest on this loan is 6.61% per year and begins
to accrue on January 1, 2002. The principal and accrued interest is to be repaid
in five equal annual installments beginning June 30, 2002. The promissory note
will accelerate and become due and payable should Dr. Knapp's employment with us
be terminated for any reason. The promissory note is full recourse and is
secured by a deed of trust on the residence. In September 1999, we loaned Daniel
L. Kisner, M.D. our President and Chief Executive Officer, $425,000 in
connection with the purchase of a residence. The loan has a maximum term of six
years with an annual interest rate of 5.96%. The loan may be forgiven by our
board based upon Dr. Kisner's performance over five years.
Warrants. In August 1995, we entered into an agreement, as amended, with
Michael R. Knapp, Ph.D., our Vice President of Science and Technology, under
which we agreed to issue to Dr. Knapp two warrants, each for 19,230 shares of
our common stock at $1.22 per share, upon the achievement of performance
milestones. In October 1996, we issued to Dr. Knapp the first of the two
warrants. This warrant is exercisable until October 11, 2006.
Stock Options. In October 1996, in connection with his services as a
consultant to us, we granted to Charles M. Hartman, one of our directors, a
stock option to purchase 7,692 shares of common stock at an exercise price $0.47
per share.
We believe that all of the transactions described above were made on terms
no less favorable to Caliper than could have been obtained from unaffiliated
third parties. All future transactions, including loans, between Caliper and its
officers, directors, principal stockholders and their affiliates will be
approved by a majority of the board of directors, including a majority of the
independent and disinterested directors, and will continue to be on terms no
less favorable to Caliper than could be obtained from unaffiliated third
parties.
Indemnification Agreements. We intend to enter into indemnification
agreements with our directors and officers for the indemnification of these
persons to the full extent permitted by law. We also intend to execute these
agreements with our future directors and officers.
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<PAGE> 61
PRINCIPAL STOCKHOLDERS
The following table presents information regarding the beneficial ownership
of our common stock as of September 30, 1999, and as adjusted to reflect the
sale of our common stock offered by this prospectus, by:
- each of the individuals listed in the "Summary Compensation Table" above
- each of our directors
- each person, or group of affiliated persons, who is known by us to own
beneficially five percent or more of our common stock
- all current directors and executive officers as a group
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock under options held by that person that are currently
exercisable or exercisable within 60 days of September 30, 1999 are considered
outstanding. These shares, however, are not considered outstanding when
computing the percentage ownership of each other person.
Except as indicated in the footnotes to this table and pursuant to state
community property laws, each stockholder named in the table has sole voting and
investment power for the shares shown as beneficially owned by them. Percentage
of ownership is based on 15,804,501 shares of common stock outstanding on
September 30, 1999 and 20,304,501 shares of common stock outstanding after
completion of this offering. This table assumes no exercise of the underwriters'
over-allotment option. Unless otherwise indicated in the footnotes, the address
of each of the individuals named below is: c/o Caliper Technologies Corp., 605
Fairchild Drive, Mountain View, California 94043.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRIOR TO OFFERING
-------------------------------------------------
SHARES ISSUABLE
PURSUANT TO
OPTIONS AND SHARES
WARRANTS CALIPER MAY PERCENTAGE
EXERCISABLE REPURCHASE BENEFICIALLY
NUMBER OF WITHIN WITHIN OWNED
SHARES 60 DAYS OF 60 DAYS OF -------------------
BENEFICIALLY SEPTEMBER 30, SEPTEMBER 30, BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED 1999 1999 OFFERING OFFERING
- ------------------------------------ ------------ ----------------- ------------- -------- --------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Daniel L. Kisner, M.D.(1)................... 64,101 32,050 -- * *
Calvin Y. H. Chow(2)........................ 218,178 5,373 25,641 1.4% 1.1%
Michael R. Knapp, Ph.D...................... 236,084 29,944 4,807 1.7 1.3
J. Wallace Parce, Ph.D.(3).................. 193,220 10,180 28,205 1.3 1.0
David V. Milligan, Ph.D..................... 96,152 -- 39,102 * *
Anthony B. Evnin, Ph.D.(4).................. 2,077,061 -- -- 13.1 10.2
Charles M. Hartman(5)....................... 1,636,303 -- -- 10.4 8.1
Regis P. McKenna(6)......................... 51,281 33,332 -- * *
Robert T. Nelsen(7)......................... 708,837 -- -- 4.5 3.5
Michael Steinmetz, Ph.D.(8)................. 840,544 -- -- 5.3 4.1
5% STOCKHOLDERS
Venrock Associates(4)....................... 2,077,061 -- -- 13.1 10.2
Lombard Odier & Cie(9)...................... 1,755,748 -- -- 11.1 8.7
CW Group(5)................................. 1,628,611 -- -- 10.3 8.0
The Dow Chemical Company(10)................ 1,041,667 -- -- 6.6 5.1
Hoffmann-La Roche Inc.(11).................. 854,701 -- -- 5.4 4.2
BB BioVentures, L.P.(8)..................... 840,544 -- -- 5.3 4.1
All directors and executive officers as a
group (12 persons)(12).................... 6,132,017 112,587 97,755 39.2% 30.6%
</TABLE>
57
<PAGE> 62
- ---------------
* Represents beneficial ownership of less than 1 percent.
(1) Includes 38,461 shares held by The Kisner Revocable Trust u/a/d 9/23/99, of
which Dr. Kisner is a trustee, 12,820 shares held by The Jordan Renee
Kisner Exempt Irrevocable Trust u/a/d 9/23/99, of which Dr. Kisner is a
trustee and 12,820 shares held by The Griffin Daniel Kisner Exempt
Irrevocable Trust u/a/d 9/23/99, of which Dr. Kisner is a trustee.
(2) Includes 25,872 shares that are held by Tiffany Chow, 12,820 shares held by
Harrison Chow and 12,820 shares held by Stephanie Chow, the children of Mr.
Chow.
(3) Includes 12,820 shares held by Charles Andrew Parce and 12,820 shares held
by Laura Marie Parce, the children of Dr. Parce.
(4) Consists of 1,238,112 shares held by Venrock Associates, and 838,949 shares
held by Venrock Associates II, L.P. Venrock Associates is located at 30
Rockefeller Plaza, Suite 5508, New York, NY 10112. Dr. Evnin, David R.
Hathaway, Patrick F. Latterell, Ted H. McCourtney, Ray A. Rothrock,
Kimberley A. Rummelsburg and Anthony Sun are general partners of Venrock
Associates and disclaim beneficial ownership of these shares except to the
extent of each of their proportionate partnership interest in these shares.
(5) Includes 122,874 shares held by CW Partners III, L.P., and 1,505,737 shares
held by CW Ventures II, L.P. CW Group is located at 1041 Third Avenue, 2nd
Floor, New York, NY 10021. Mr. Hartman, Barry Weinberg and Walter Channing
are general partners of CW Ventures and disclaim beneficial ownership of
these shares except to the extent of each of their proportionate
partnership interest in these shares.
(6) Includes 32,051 shares held by The Regis P. and Dianne T. McKenna Trust, of
which Mr. McKenna is a trustee.
(7) Consists of 708,837 shares held by ARCH Venture Fund II, L.P., a limited
partnership managed by ARCH Management Partners II, L.P. ARCH Venture
Partners, L.P. is the general partner of ARCH Management Partners II, L.P.
Mr. Nelsen, is the Managing Director of ARCH Venture Corporation, which is
the general partner of ARCH Venture Partners, L.P. Messrs. Steven Lazarus
and Keith Crandell are each a Managing Director of ARCH Venture Partners,
L.P. ARCH Venture Fund II, L.P. is located at 8725 W. Higgins Road, Suite
290, Chicago, Illinois 60631. Messrs. Nelsen, Lazarus and Crandell each
disclaim beneficial ownership of these shares except to the extent of each
of their pecuniary interest in these shares.
(8) Includes 801,282 shares held by BB BioVentures, L.P. BB BioVentures, L.P.
is located at One Cambridge Center, 9th Floor, Cambridge, MA 02142. Dr.
Steinmetz is a partner of MPM Asset Management LLC, the management advisor
of BB BioVentures, L.P. Dr. Steinmetz disclaims beneficial ownership of
these shares. Also includes 39,262 shares held by MPM Capital Advisors LLC,
a wholly owned subsidiary of MPM Capital L.P. MPM Capital L.P. also owns
51% of MPM Asset Management LLC. Dr. Steinmetz disclaims beneficial
ownership of these shares except to the extent of his proportional
partnership interest in these shares. Ansbert Gadicke is the managing
director of BAB BioVentures, N.V., the general partner of BAB BioVentures
L.P., which is the general partner of BB BioVentures, L.P. Mr. Gadicke
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in these shares.
(9) Lombard Odier & Cie is located at 11, Rue de la Corraterie, 1204 Geneva,
Switzerland. Lombard Odier & Cie is a private Swiss banking institution.
Approximately 88% of the shares held by Lombard Odier & Cie are held for
Lombard Odier Immunology Fund, with the remaining being held for private
banking clients. There is no one single person at Lombard Odier & Cie that
exercises voting control over the shares held by Lombard Odier & Cie.
Voting of the shares is conducted by an internal mechanism at Lombard Odier
& Cie which requires, prior to any vote, that two of more than two hundred
designated employees sign on behalf of Lombard Odier & Cie. In addition,
any one of eight managing partners could sign on behalf of Lombard Odier &
Cie without a separate concurring signature.
(10) The Dow Chemical Company is located at 2030 Dow Center, Midland, Michigan
48674. The Dow Chemical Company is a publicly traded company and is listed
on the NYSE under the symbol "DOW".
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<PAGE> 63
(11) Hoffmann-La Roche Inc. is located at 340 Kingland Street, Nutley, New
Jersey 07110. Hoffmann-La Roche Inc. is a subsidiary of Roche Holding Ltd.
which is a publicly traded company and is listed on the Swiss Market.
(12) Total number of shares includes 5,255,053 shares of common stock held by
entities affiliated with directors and executive officers. See footnotes 1
through 8 above.
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<PAGE> 64
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, our authorized capital stock will consist
of 70,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of
undesignated preferred stock, $0.001 par value.
COMMON STOCK
As of September 30, 1999, there were 15,804,501 shares of common stock
outstanding held of record by 158 stockholders. The holders of common stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of the stockholders. The holders of common stock are entitled to receive
ratably any dividends as may be declared by the board of directors out of
legally available funds, after the superior rights of the holders of preferred
stock have been satisfied. See "Dividend Policy." Upon a liquidation,
dissolution or winding up of Caliper, holders of the common stock are entitled
to share ratably in all assets remaining after payment of liabilities and
amounts due to the holders of preferred stock as described below. Holders of
common stock have no preemptive rights and no right to convert their common
stock into any other securities. There are no redemption or sinking fund
provisions that apply to the common stock. All outstanding shares of common
stock are, and all shares of common stock to be outstanding upon completion of
this offering will be, fully paid and non-assessable.
PREFERRED STOCK
The board of directors has the authority to issue up to 5,000,000 shares of
preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions granted to or imposed upon the preferred stock,
including dividend rights, conversion rights, terms of redemption, liquidation
preference, sinking fund terms and the number of shares constituting any series
or the designation of a series, without any further vote or action by the
stockholders. The board of directors, without stockholder approval, can issue
preferred stock with voting and conversion rights which could adversely affect
the voting power of the holders of common stock. The issuance of preferred stock
could have the effect of delaying, deferring or preventing a change in control
of Caliper. We have no present plan to issue any shares of preferred stock.
WARRANTS
As of September 30, 1999, one warrant to purchase 32,767 shares of Series B
preferred stock was outstanding at an exercise price of $1.22 per share. This
warrant expires upon the earlier of May 10, 2002 or three years after completion
of this offering. The warrant contains provisions for the adjustment of the
exercise price and the aggregate number of shares that may be issued upon the
exercise of the warrant if a stock dividend, stock split, reorganization,
reclassification or consolidation occurs. Upon the closing of this offering, the
warrant to purchase Series B preferred stock will become exercisable for common
stock at the rate of one share of common stock for each share of preferred stock
underlying the warrant.
As of September 30, 1999, three warrants to purchase a total of 41,736
shares of common stock were outstanding at an exercise price of $1.22 per share.
One of the warrants expires on the earlier of January 3, 2002 or the closing of
a merger or acquisition of Caliper. Two of the warrants expire on October 11,
2006. Each warrant contains provisions for the adjustment of the exercise price
and the aggregate number of shares that may be issued upon the exercise of the
warrants if a stock dividend, stock split, reorganization, reclassification or
consolidation occurs.
Upon the achievement of a patent milestone we will be obligated to issue
two warrants, each to purchase 19,230 shares of common stock at an exercise
price of $1.22 per share. If issued, the warrants will expire in January 2006.
REGISTRATION RIGHTS
On the date 180 days after the completion of this offering, the holders of
11,855,090 shares of common stock or their transferees will be entitled to
rights to register these shares under the Securities Act of 1933. If we propose
to register any of our securities under the Securities Act, either for our own
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<PAGE> 65
account or for the account of other securityholders, the holders of these shares
will be entitled to notice of the registration and will be entitled to include,
at our expense, their shares of common stock. In addition, the holders of these
shares may require us, at our expense and on not more than two occasions at any
time beginning approximately six months from the date of the closing of this
offering, to file a registration statement under the Securities Act covering
their shares of common stock, and we will be required to use our best efforts to
have the registration statement declared effective. Further, the holders may
require us at our expense to register their shares on Form S-3 when this form
becomes available. These rights shall terminate on the earlier of five years
after the effective date of this offering, or when a holder is able to sell all
its shares pursuant to Rule 144 under the Securities Act in any 90-day period.
Attached to these registration rights are conditions and limitations, including
the right of the underwriters to limit the number of shares included in the
registration statement.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW AND CHARTER PROVISIONS
Delaware Law
In general, Section 203 of the Delaware General Corporation Law prohibits a
publicly held Delaware corporation from engaging in any business combination
with any interested stockholder for a period of three years following the date
that the stockholder became an interested stockholder unless:
- prior to the date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who
are directors and also officers, and employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held under the plan will be tendered in a tender or
exchange offer; or
- on or subsequent to the date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines "business combination" to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- in general, any transaction that results in the issuance or transfer by
the corporation of any stock of the corporation to the interested
stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
Charter Provisions
Our certificate of incorporation and bylaws include a number of provisions
that may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of Caliper. First, our certificate
of incorporation provides that all stockholder actions upon completion of this
offering must be effected at a duly called meeting of holders and not by a
consent in writing. Second, our bylaws provide that special meetings of the
holders may be called only by the chairman of the board of directors, the
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<PAGE> 66
chief executive officer, or our board of directors pursuant to a resolution
adopted by a majority of the total number of authorized directors. Third, our
certificate of incorporation provides that our board of directors can issue up
to 5,000,000 shares of preferred stock, as described under "-- Preferred Stock"
above. Fourth, our certificate of incorporation and the bylaws provide for a
classified board of directors, in which approximately one-third of the directors
would be elected each year. Consequently, any potential acquiror would need to
successfully complete two proxy contests in order to take control of the board
of directors. Finally, our bylaws establish procedures, including advance notice
procedures with regard to the nomination of candidates for election as directors
and stockholder proposals. These provisions of our certificate of incorporation
and bylaws could discourage potential acquisition proposals and could delay or
prevent a change in control or management of Caliper.
California Law.
We are currently subject to Section 2115 of the California Corporations
Code. Section 2115 provides that, regardless of a company's legal domicile,
provisions of California corporate law relating to shareholder rights, election
and removal of directors and distributions to shareholders will apply to that
company if the company meets the requirements of Section 2115. We will not be
subject to Section 2115 if:
- we are qualified for trading as a national market security on the Nasdaq
National Market, and we have at least 800 stockholders of record as of
the record date of our most recent annual meeting, or
- during any income year less than 50% of our outstanding voting securities
are held of record by persons having addresses in California.
Our certificate of incorporation includes a provision requiring cumulative
voting for directors whenever Section 2115 of the California Corporations Code
applies to us. Under cumulative voting, a minority stockholder holding a
sufficient percentage of a class of shares may be able to ensure the election of
one or more directors.
TRANSFER AGENT AND REGISTRAR
Norwest Bank Minnesota, N.A. has been appointed as the transfer agent and
registrar for our common stock.
NATIONAL MARKET LISTING
Our common stock has been approved for listing on the Nasdaq Stock Market's
National Market under the symbol "CLPR."
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<PAGE> 67
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices. Furthermore, because a
large number of our shares of common stock outstanding will not be available for
sale shortly after this offering because of contractual and legal restrictions
on resale as described below. Sales of substantial amounts of our common stock
in the public market after these restrictions lapse could depress the prevailing
market price and limit our ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
20,304,501 shares of common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants. Of
these shares, all of the shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, unless
these shares are purchased by affiliates. The remaining 15,804,501 shares of
common stock held by existing stockholders are restricted securities. Restricted
securities may be sold in the public market only if registered or if they
qualify for an exemption from registration under the Securities Act.
As a result of the contractual restrictions described below and the rules
under the Securities Act, the restricted shares will be available for sale in
the public market as follows:
<TABLE>
<CAPTION>
DAYS AFTER THE SHARES ELIGIBLE
EFFECTIVE DATE FOR SALE COMMENT
-------------- --------------- ------------------------------------------------
<S> <C> <C>
On Effectiveness....... 289,676 Shares not locked-up and saleable under Rule 144
90 days................ 79,293 Shares not locked-up and saleable under Rules
144 and 701
180 days............... 15,435,532 Lock-up released: shares saleable under Rules
144 and 701
</TABLE>
Additionally, of the 1,669,891 shares that may be issued upon the exercise
of options outstanding as of September 30, 1999, approximately 472,161 shares
will be vested and eligible for sale 180 days after the date of this prospectus.
Lock-Up Agreements
All of our officers and directors, and a majority of our stockholders,
warrant holders and option holders, have agreed not to transfer or dispose of,
directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for shares of our common stock,
for a period of 180 days after the date the registration statement of which this
prospectus is a part is declared effective. Transfers or dispositions can be
made sooner with the prior written consent of Credit Suisse First Boston
Corporation.
Registration Rights
On the date 180 days after the completion of this offering, the holders of
11,855,090 shares of our common stock will have rights to require us to register
their shares under the Securities Act. Upon the effectiveness of a registration
statement covering these shares, the shares would become freely tradeable.
Stock Options
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering approximately 3,978,102 shares of common stock
reserved for issuance under our stock option plans and employee stock purchase
plan. The registration statement is expected to be filed and become effective as
soon as practicable after the closing of this offering. Accordingly, shares
registered under the registration statements will be available for sale in the
open market, beginning 180 days after the effective date of the registration
statement of which this prospectus is a part.
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<PAGE> 68
UNDERWRITING
Under the terms and conditions contained in the underwriting agreement
dated , 1999, we have agreed to sell to the underwriters named below,
for whom Credit Suisse First Boston Corporation, CIBC World Markets Corp. and
Hambrecht & Quist LLC are acting as representatives, the following respective
number of shares of common stock:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ----------
<S> <C>
Credit Suisse First Boston Corporation......................
CIBC World Markets Corp. ...................................
Hambrecht & Quist LLC.......................................
----------
Total............................................. 4,500,000
==========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 675,000 additional shares from us at the initial public
offering price less the underwriting discounts and commissions. This option may
be exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock to the public
initially at the public offering price on the cover page of this prospectus and
to selling group members at that price less a concession of $ per share.
The underwriters and selling group members may allow a discount of $ per
share on sales to other broker/dealers. After the initial public offering, the
public offering price and concession and discount to broker/dealers may be
changed by the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------------------------- --------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and
commissions paid by us............. $ $ $ $
Expenses payable by us............... $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We, our directors, officers and the majority of our stockholders have
agreed that we and they will not:
- offer, sell, contract to sell, announce our intention to sell, pledge or
otherwise dispose of, directly or indirectly; or
- file with the Securities and Exchange Commission a registration statement
under the Securities Act of 1933 relating to;
any additional shares of our common stock or securities convertible into or
exchangeable or exercisable for any of our common stock without the prior
consent of Credit Suisse First Boston Corporation for a period of 180 days after
the date of this prospectus, except in connection with our stock option and
employee stock purchase plans.
The underwriters have reserved for sale, at the initial public offering
price, up to 180,000 shares of the common stock for employees, directors and
other persons associated with us who may wish to purchase
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<PAGE> 69
common stock in the offering. The number of shares available for sale to the
general public in the offering will be reduced to the extent these persons
purchase these reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the other
shares.
A limited number of shares may be made available via the Internet to
customers of one or more underwriters participating in this offering. If any
underwriter uses the Internet to make offers and sales, a copy of our
preliminary prospectus in electronic format will be made available on a web site
maintained by the underwriter or pursuant to a hosting arrangement entered into
by the underwriter with a third party. After the prospectus is made available,
the underwriter will accept conditional offers to purchase shares from its
customers that complete and pass an online eligibility profile. All conditional
offers to purchase shares must be reconfirmed by the customer or they will not
be accepted. Conditional offers may be withdrawn at any time before the customer
receives a notice of acceptance from the underwriter. In the event that the
demand for shares from customers submitting online conditional offers exceeds
the amount of shares available for Internet distribution, the underwriter will
use a random allocation method to distribute shares to customers. There are no
plans to direct shares to particular purchasers via the Internet.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act of 1933 or to contribute to payments which the underwriters may
be required to make as a result of these liabilities.
We have applied to list our shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "CLPR."
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the underwriters. The principal factors to be considered in
determining the public offering price include:
- the information presented in this prospectus and otherwise available to
the underwriters
- the history and the prospects for the industry in which we will compete
- the ability of our management
- the prospects for our future earnings
- the present state of our development and our current financial condition
- the general condition of the securities markets at the time of this
offering
- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of these transactions. These transactions may be effected on The
Nasdaq Stock Market's National Market or otherwise and, if commenced, may be
discontinued at any time.
65
<PAGE> 70
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the province in Canada in which the resale is made, and which
may require resales to be made in accordance with statutory exemptions available
in the province in which the resale is made or pursuant to a discretionary
exemption granted by the securities regulatory authority in that province.
Purchasers are advised to seek legal advice prior to any resale of the common
stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (1) the purchaser is entitled under the
securities laws of the province in which the common stock is purchased to
purchase the common stock without the benefit of a prospectus qualified under
these securities laws, (2) if required by the laws of the province in which the
common stock is purchased, that the purchaser is purchasing as principal and not
as agent, and (3) the purchaser has reviewed the text above under "Resale
Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or recission or rights of action under the civil liability provisions of
the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or these persons. All or a substantial portion of the assets of the
issuer and these persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or these persons in
Canada or to enforce a judgment obtained in Canadian courts against the issuer
or these persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from Caliper. Only one report must be
filed for common stock acquired on the same date and under the same prospectus
exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult their own legal and tax
advisors about the tax consequences of an investment in the common stock in
their particular circumstances and regarding the eligibility of the common stock
for investment by the purchaser under relevant Canadian legislation.
66
<PAGE> 71
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for us by Cooley Godward LLP, Palo Alto, California. As of the date of this
prospectus, partners and associates of Cooley Godward LLP own an aggregate of
approximately 18,696 shares of common stock through an investment partnership.
The underwriters have been represented by Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., Boston, Massachusetts.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1997 and 1998, and for each of the three years in the
period ended December 31, 1998, presented in their report. We have included our
financial statements in this prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act of 1933 regarding the shares of
common stock offered by us. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information contained in the
registration statement, some items of which are contained in exhibits to the
registration statement as permitted by the rules and regulations of the
Commission. For further information on Caliper and the common stock offered,
reference is made to the registration statement, including the exhibits, and the
financial statements and notes filed as a part of the registration statement. A
copy of the registration statement, including the exhibits and the financial
statements and notes filed as a part of it, may be inspected without charge at
the public reference facilities maintained by the Securities and Exchange
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of all or any part of the registration statement may be obtained from the
Securities and Exchange Commission upon the payment of fees prescribed by it.
The Securities and Exchange Commission maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding companies that file electronically with it.
67
<PAGE> 72
CALIPER TECHNOLOGIES CORP.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statement of Redeemable Convertible Preferred Stock and
Stockholders' Equity (Deficit)............................ F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 73
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Caliper Technologies Corp.
We have audited the accompanying balance sheets of Caliper Technologies Corp. as
of December 31, 1997 and 1998, and the related statements of operations,
redeemable convertible preferred stock and stockholders' equity (deficit), and
cash flows for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Caliper Technologies Corp. at
December 31, 1997 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Palo Alto, California
March 5, 1999
F-2
<PAGE> 74
CALIPER TECHNOLOGIES CORP.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31, (DEFICIT) AT
------------------- SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1999 1999
-------- -------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 312 $ 5,158 $ 3,628
Marketable securities..................................... 26,237 25,894 24,192
Accounts receivable....................................... -- 1,082 390
Inventories............................................... -- -- 206
Prepaid expenses and other current assets................. 189 600 761
-------- -------- --------
Total current assets........................................ 26,738 32,734 29,177
Property and equipment, net................................. 2,050 2,796 4,856
Deposits and other assets................................... 119 -- --
Notes receivable............................................ 200 200 625
-------- -------- --------
Total assets................................................ $ 29,107 $ 35,730 $ 34,658
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 148 $ 228 $ 912
Accrued compensation...................................... 283 432 690
Other accrued liabilities................................. 1,142 493 606
Deferred revenue.......................................... -- 626 2,399
Current portion of equipment financing.................... 486 881 1,292
-------- -------- --------
Total current liabilities................................... 2,059 2,660 5,899
Noncurrent portion of equipment financing................... 1,430 2,008 3,299
Deferred rent............................................... -- -- 184
Commitments
Redeemable convertible preferred stock, $0.001 par value,
issuable in series; 17,308,333 shares authorized in 1997
and 19,579,039 shares authorized in 1998 and 1999 (none
pro forma); 10,774,309 shares issued and outstanding in
1997, 11,703,692 shares issued and outstanding in 1998 and
1999 (none pro forma); aggregate liquidation preference of
$44,810 at December 31, 1998 and September 30, 1999 (none
pro forma)................................................ 38,283 48,716 50,538 $ --
Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par value; 1,691,667
shares authorized in 1997, 1,420,961 shares authorized
in 1998 and 1999 (5,000,000 shares pro forma); 829,142
shares issued and outstanding in 1997, 1998, and 1999
(none pro forma); aggregate liquidation preference of
$1,009 at December 31, 1998 and September 30, 1999 (none
pro forma).............................................. 1 1 1 --
Common stock, $0.001 par value; 28,000,000 shares
authorized in 1997, 32,000,000 shares authorized in 1998
and 1999 (70,000,000 shares pro forma); 2,478,711,
2,772,343, and 3,271,667 shares issued and outstanding
in 1997, 1998, and 1999, respectively (15,804,501 shares
pro forma).............................................. 3 3 3 16
Additional paid-in capital................................ 590 1,250 8,948 59,474
Deferred stock compensation............................... -- (500) (5,858) (5,858)
Accumulated deficit....................................... (13,259) (18,408) (28,356) (28,356)
-------- -------- -------- --------
Total stockholders' equity (deficit)........................ (12,665) (17,654) (25,262) $ 25,276
-------- -------- -------- ========
$ 29,107 $ 35,730 $ 34,658
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 75
CALIPER TECHNOLOGIES CORP.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue.................................................... $ 132 $ 2,266 $ 8,155 $ 4,425 $ 8,859
Costs and expenses:
Research and development................................. 2,734 7,200 9,584 7,232 12,302
General and administrative............................... 1,240 2,478 2,932 1,996 3,487
Amortization of deferred stock compensation.............. -- -- -- -- 1,997
Acquired in-process research and development............. 978 -- -- -- --
------- ------- ------- ------- -------
Total costs and expenses................................... 4,952 9,678 12,516 9,228 17,786
------- ------- ------- ------- -------
Operating loss............................................. (4,820) (7,412) (4,361) (4,803) (8,927)
Interest income............................................ 179 1,191 1,581 1,183 1,076
Interest expense........................................... (69) (60) (195) (125) (275)
------- ------- ------- ------- -------
Net loss................................................... (4,710) (6,281) (2,975) (3,745) (8,126)
Accretion on redeemable convertible preferred stock........ (262) (1,470) (2,174) (1,587) (1,822)
------- ------- ------- ------- -------
Net loss attributable to common stockholders............... $(4,972) $(7,751) $(5,149) $(5,332) $(9,948)
======= ======= ======= ======= =======
Net loss per common share, basic and diluted............... $ (3.90) $ (4.38) $ (2.39) $ (2.54) $ (3.71)
======= ======= ======= ======= =======
Shares used in computing net loss per common share, basic
and diluted.............................................. 1,274 1,768 2,157 2,099 2,684
Pro forma net loss per share, basic and diluted
(unaudited).............................................. $ (0.21) $ (0.53)
======= =======
Shares used in computing pro forma net loss per share,
basic and diluted (unaudited)............................ 14,347 15,217
</TABLE>
See accompanying notes.
F-4
<PAGE> 76
CALIPER TECHNOLOGIES CORP.
STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
STOCKHOLDERS EQUITY (DEFICIT)
REDEEMABLE ----------------------------------------------------
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- ------------------ ------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ------- --------- ------ --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995....... -- $ -- -- $-- 416,660 $1 $ --
Issuance of common stock for cash... -- -- -- -- 1,208,237 1 26
Issuance of common stock and Series
A convertible preferred stock in
exchange for all of the
outstanding common and preferred
stock of ChemCore Corporation..... -- -- 829,142 1 678,786 1 492
Issuance of Series B redeemable
convertible preferred stock for
cash.............................. 5,448,454 6,651 -- -- -- -- --
Issuance of Series C redeemable
convertible preferred stock for
cash.............................. 2,136,752 10,000 -- -- -- -- --
Accretion on redeemable convertible
preferred stock................... -- 262 -- -- -- -- --
Net loss and comprehensive net
loss.............................. -- -- -- -- -- -- --
---------- ------- --------- -- --------- -- -------
Balances at December 31, 1996....... 7,585,206 16,913 829,142 1 2,303,683 3 518
Issuance of Series D redeemable
convertible preferred stock for
cash.............................. 3,089,744 19,280 -- -- -- -- --
Issuance of Series D redeemable
convertible preferred stock for
services.......................... 99,359 620 -- -- -- -- --
Issuance of common stock upon
exercise of stock options......... -- -- -- -- 155,798 -- 60
Issuance of common stock for cash... -- -- -- -- 19,230 -- 12
Accretion on redeemable convertible
preferred stock................... -- 1,470 -- -- -- -- --
Net loss and comprehensive loss..... -- -- -- -- -- -- --
---------- ------- --------- -- --------- -- -------
Balances at December 31, 1997....... 10,774,309 38,283 829,142 1 2,478,711 3 590
Issuance of Series D redeemable
convertible preferred stock for
services.......................... 141,026 880 -- -- -- -- --
Issuance of Series E redeemable
convertible preferred stock for
cash.............................. 788,357 7,379 -- -- -- -- --
Issuance of common stock upon
exercise of stock options......... -- -- -- -- 191,831 -- 84
Issuance of common stock for
services.......................... -- -- -- -- 101,801 -- 76
Accretion on redeemable convertible
preferred stock................... -- 2,174 -- -- -- -- --
Deferred stock compensation......... -- -- -- -- -- -- 500
Net loss and comprehensive loss..... -- -- -- -- -- -- --
---------- ------- --------- -- --------- -- -------
Balances at December 31, 1998....... 11,703,692 48,716 829,142 1 2,772,343 3 1,250
Issuance of common stock upon
exercise of stock options
(unaudited)....................... -- -- -- -- 490,040 -- 260
Issuance of common stock for
services (unaudited).............. -- -- -- 9,294 -- 83
Accretion on redeemable convertible
preferred stock (unaudited)....... -- 1,822 -- -- -- -- --
Deferred stock compensation
(unaudited)....................... -- -- -- -- -- -- 7,355
Amortization of deferred stock
compensation (unaudited).......... -- -- -- -- -- -- --
Net loss and comprehensive loss
(unaudited)....................... -- -- -- --
---------- ------- --------- -- --------- -- -------
Balances at September 30, 1999
(unaudited)....................... 11,703,692 $50,538 829,142 $1 3,271,667 $3 $ 8,948
========== ======= ========= == ========= == =======
<CAPTION>
STOCKHOLDERS EQUITY (DEFICIT)
--------------------------------------------
TOTAL
STOCKHOLDERS'
DEFERRED STOCK ACCUMULATED EQUITY
COMPENSATION DEFICIT (DEFICIT)
-------------- ----------- -------------
<S> <C> <C> <C>
Balances at December 31, 1995....... $ -- $ -- $ 1
Issuance of common stock for cash... -- -- 27
Issuance of common stock and Series
A convertible preferred stock in
exchange for all of the
outstanding common and preferred
stock of ChemCore Corporation..... -- -- 494
Issuance of Series B redeemable
convertible preferred stock for
cash.............................. -- -- --
Issuance of Series C redeemable
convertible preferred stock for
cash.............................. -- -- --
Accretion on redeemable convertible
preferred stock................... -- (262) (262)
Net loss and comprehensive net
loss.............................. -- (5,246) (5,246)
------- -------- --------
Balances at December 31, 1996....... -- (5,508) (4,986)
Issuance of Series D redeemable
convertible preferred stock for
cash.............................. -- -- --
Issuance of Series D redeemable
convertible preferred stock for
services.......................... -- -- --
Issuance of common stock upon
exercise of stock options......... -- -- 60
Issuance of common stock for cash... -- -- 12
Accretion on redeemable convertible
preferred stock................... -- (1,470) (1,470)
Net loss and comprehensive loss..... -- (6,281) (6,281)
------- -------- --------
Balances at December 31, 1997....... -- (13,259) (12,665)
Issuance of Series D redeemable
convertible preferred stock for
services.......................... -- -- --
Issuance of Series E redeemable
convertible preferred stock for
cash.............................. -- -- --
Issuance of common stock upon
exercise of stock options......... -- -- 84
Issuance of common stock for
services.......................... -- -- 76
Accretion on redeemable convertible
preferred stock................... -- (2,174) (2,174)
Deferred stock compensation......... (500) -- --
Net loss and comprehensive loss..... -- (2,975) (2,975)
------- -------- --------
Balances at December 31, 1998....... (500) (18,408) (17,654)
Issuance of common stock upon
exercise of stock options
(unaudited)....................... -- -- 260
Issuance of common stock for
services (unaudited).............. -- -- 83
Accretion on redeemable convertible
preferred stock (unaudited)....... -- (1,822) (1,822)
Deferred stock compensation
(unaudited)....................... (7,355) -- --
Amortization of deferred stock
compensation (unaudited).......... 1,997 -- 1,997
Net loss and comprehensive loss
(unaudited)....................... -- (8,126) (8,126)
------- -------- --------
Balances at September 30, 1999
(unaudited)....................... $(5,858) $(28,356) $(25,262)
======= ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 77
CALIPER TECHNOLOGIES CORP.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(4,710) $ (6,281) $ (2,975) $ (3,745) $ (8,126)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 87 356 921 656 935
Amortization of deferred stock compensation............. -- -- -- -- 1,997
Acquired in-process research and development............ 978 -- -- -- --
Issuance of common and preferred stock for services..... -- 620 956 951 83
Changes in operating assets and liabilities:
Accounts receivable................................... -- -- (1,082) (158) 692
Notes receivable...................................... -- (200) -- -- (425)
Inventories........................................... -- -- -- -- (206)
Prepaid expenses and other assets..................... (58) (88) (411) (73) (161)
Deposits and other assets............................. -- (119) 119 100 --
Accounts payable and other accrued liabilities........ (674) 1,022 (569) (800) 797
Accrued compensation.................................. 75 208 149 69 258
Deferred revenue...................................... 275 (275) 626 77 1,773
Deferred rent......................................... -- -- -- -- 184
------- -------- -------- -------- --------
Net cash used in operating activities..................... (4,027) (4,757) (2,266) (2,923) (2,199)
------- -------- -------- -------- --------
INVESTING ACTIVITIES
Purchases of available-for-sale securities................ (5,050) (51,448) (39,996) (35,203) (16,610)
Proceeds from sales of available-for-sale securities...... -- -- 6,233 2,143 4,813
Proceeds from maturities of available-for-sale
securities.............................................. 147 30,114 34,106 29,283 13,499
Capital expenditures...................................... (648) (1,845) (1,667) (1,252) (2,995)
------- -------- -------- -------- --------
Net cash used in investing activities..................... (5,551) (23,179) (1,324) (5,029) (1,293)
------- -------- -------- -------- --------
FINANCING ACTIVITIES
Proceeds from equipment financing......................... 640 1,574 1,586 1,337 2,523
Payments of obligations under equipment financing......... (73) (225) (613) (404) (821)
Proceeds from issuance of common and preferred stock...... 16,678 19,352 7,463 7,423 260
Repayments of notes payable............................... (160) -- -- -- --
------- -------- -------- -------- --------
Net cash provided by financing activities................. 17,085 20,701 8,436 8,356 1,962
------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents...... 7,507 (7,235) 4,846 404 (1,530)
Cash and cash equivalents at beginning of period.......... 40 7,547 312 312 5,158
------- -------- -------- -------- --------
Cash and cash equivalents at end of period................ $ 7,547 $ 312 $ 5,158 $ 716 $ 3,628
======= ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid............................................. $ 69 $ 60 $ 195 $ 125 $ 275
======= ======== ======== ======== ========
SCHEDULE OF NONCASH TRANSACTIONS
Issuance of common and preferred stock upon acquisition of
ChemCore................................................ $ 494 $ -- $ -- $ -- $ --
======= ======== ======== ======== ========
Deferred stock compensation............................... $ -- $ -- $ 500 $ -- $ 7,355
======= ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 78
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Caliper Technologies Corp. ("Caliper") was incorporated in the state of
Delaware on July 26, 1995. Caliper develops lab-on-a-chip technologies and
manufactures LabChip systems. These systems perform laboratory experiments for
use in the pharmaceutical industry and other industries.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INTERIM FINANCIAL INFORMATION
The financial information at September 30, 1999 and for the nine months
ended September 30, 1998 and 1999 is unaudited but, in the opinion of
management, has been prepared on the same basis as the annual financial
statements and includes all adjustments (consisting only of normal recurring
adjustments) that Caliper considers necessary for a fair presentation of the
financial position at such date and the operating results and cash flows for
such periods. Results for the nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for any subsequent period.
UNAUDITED PRO FORMA INFORMATION
If Caliper's initial public offering as described in Note 11 is
consummated, all of the preferred stock outstanding will automatically be
converted into common stock. The unaudited pro forma redeemable convertible
preferred stock and stockholders' equity at September 30, 1999 has been adjusted
for the assumed conversion of preferred stock based on the shares of preferred
stock outstanding at September 30, 1999.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets, generally
five years. Furniture and equipment acquired under equipment financing is
amortized over the shorter of the useful lives or the financing period.
Leasehold improvements are amortized over the shorter of the estimated useful
life of the assets or lease term.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS 121"), Caliper reviews long-lived
assets, including property and equipment, for impairment whenever events or
changes in business circumstances indicate that the carrying amount of the
assets may not be fully recoverable. Under SFAS 121, an impairment loss would be
recognized when estimated undiscounted future cash flows expected to result from
the use of the asset and its eventual disposition is less than its carrying
amount. Impairment, if any, is assessed using discounted cash flows. Through
September 30, 1999, there have been no such losses.
F-7
<PAGE> 79
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS AND MARKETABLE SECURITIES
Caliper considers all highly liquid investments with maturities of three
months or less from the date of purchase to be cash equivalents. Management
determines the appropriate classification of its cash equivalents and investment
securities at the time of purchase and reevaluates such determination as of each
balance sheet date. Management has classified Caliper's cash equivalents and
marketable securities as available-for-sale securities in the accompanying
financial statements. Available-for-sale securities are carried at fair value,
with unrealized gains and losses reported in a separate component of
stockholders' equity, when material. Realized gains and losses are included in
interest income. The cost of securities sold is based on the specific
identification method.
Caliper invests its excess cash in U.S. government and agency securities,
debt instruments of financial institutions and corporations, and money market
funds with strong credit ratings. Caliper has established guidelines regarding
diversification of its investments and their maturities which should maintain
safety and liquidity.
STOCK-BASED COMPENSATION
Caliper accounts for employee stock option grants in accordance with
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Employee
Stock Issued to Employees." Stock option grants to nonemployees are accounted
for in accordance with Financial Accounting Standards Board Statement No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123") and Emerging Issues Task
Force Consensus No. 96-18.
REVENUE RECOGNITION
Revenues are earned from services performed pursuant to collaboration
agreements, technology access program agreements and government grants.
Non-refundable license fees under technology access programs are recognized as
revenues upon the transfer of the license to third parties and when no further
performance obligations exist. Subscription fees received under the technology
access programs are recognized ratably over the subscription period. Payments
received in advance under these arrangements are recorded as deferred revenue
until earned.
Revenue from grants and development and support activities under
collaboration agreements and technology access programs are recorded in the
period in which the costs are incurred. Direct costs associated with these
contracts and grants are reported as research and development expense. Milestone
fees are recognized upon completion of specified milestones according to
contract terms. Revenue related to the reimbursement of costs for the supply of
chips and reagents to collaboration partners is recognized upon shipment.
Caliper's share of gross margin on components of the LabChip system sold by the
collaboration partners is recognized as revenue upon shipment by the
collaboration partner.
Product revenue is recognized upon the transfer of title to customers and
is recorded net of discounts, rebates and allowances.
RESEARCH AND DEVELOPMENT
Caliper expenses research and development costs as incurred.
F-8
<PAGE> 80
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories are stated at the lower of standard cost (which approximates
actual cost) or market. At September 30, 1999, inventories consisted mainly of
raw materials.
COMPREHENSIVE INCOME (LOSS)
As of January 1, 1998, Caliper adopted Financial Accounting Standards Board
Statement No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
requires unrealized gains or losses on Caliper's available-for-sale securities
to be included in other comprehensive income. For the years ended December 31,
1997 and 1998 and for the nine months ended September 30, 1999, comprehensive
loss approximated net loss as other comprehensive income (loss) was not
material.
SEGMENT REPORTING
Effective in January 1998, Caliper adopted Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 131 establishes annual and interim
reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
Caliper has determined that it operates in only one segment. Accordingly, the
adoption of SFAS 131 had no impact on Caliper's financial statements.
NET LOSS PER SHARE
Basic earnings per share is calculated based on the weighted-average number
of common shares outstanding during the period. Diluted earnings per share would
give effect to the dilutive effect of common stock equivalents consisting of
stock options and warrants (calculated using the treasury stock method).
Potentially dilutive securities have been excluded from the diluted earnings per
share computations as they have an antidilutive effect due to Caliper's net
loss.
The computation of pro forma net loss per share includes shares issuable
upon the conversion of outstanding shares of convertible preferred stock (using
the as-if converted method) from the original date of issuance.
F-9
<PAGE> 81
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A reconciliation of shares used in the calculations is as follows (in
thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic and diluted:
Net loss............................... $(4,710) $(6,281) $(2,975) $(3,745) $(8,126)
Accretion on redeemable convertible
preferred stock..................... (262) (1,470) (2,174) (1,587) (1,822)
------- ------- ------- ------- -------
Net loss attributable to common
stockholders........................... $(4,972) $(7,751) $(5,149) $(5,332) $(9,948)
======= ======= ======= ======= =======
Weighted-average shares of common stock
outstanding............................ 2,052 2,365 2,596 2,563 2,953
Less: weighted-average shares subject to
repurchase............................. (778) (597) (439) (464) (269)
------- ------- ------- ------- -------
Weighted-average shares used in basic and
diluted net loss per share............. 1,274 1,768 2,157 2,099 2,684
======= ======= ======= ======= =======
Pro forma basic and diluted:
Net loss............................... $(2,975) $(8,126)
======= =======
Shares used above........................ 2,157 2,684
Adjustment to reflect weighted-average
effect of assumed conversion of
preferred stock (unaudited)............ 12,190 12,533
------- -------
Weighted-average shares used in pro forma
basic and diluted net loss per share
(unaudited)............................ 14,347 15,217
======= =======
</TABLE>
The following outstanding options and warrants (prior to the application of
the treasury stock method), and convertible preferred stock (on an as-converted
basis) were excluded from the computation of diluted net loss per share as they
had an antidilutive effect (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Options and warrants................. 625 1,359 1,263 1,308 1,744
Convertible preferred stock.......... 8,414 11,603 12,533 12,533 12,533
</TABLE>
SIGNIFICANT CONCENTRATIONS
Financial instruments that potentially subject Caliper to concentrations of
credit risk primarily consist of cash equivalents and marketable securities (see
Note 4).
In 1996, two companies represented 66% and 34% of total revenues. In 1997,
Hoffmann-La Roche represented 94% of total revenues. In 1998, Hoffmann-La Roche,
Agilent Technologies and Amgen represented 40%, 40%, and 17% of total revenues,
respectively. For the nine months ended September 30, 1998, Hoffmann-La Roche
and Agilent Technologies represented 51% and 45% of total revenues,
respectively. For the nine months ended September 30, 1999, Agilent Technologies
represented 50% of
F-10
<PAGE> 82
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
total revenues and Caliper's three technology access program customers accounted
for 17%, 13% and 11% of total revenues.
Caliper relies on several companies as the sole source of various materials
in its manufacturing process. Any extended interruption in the supply of these
materials could result in the failure to meet customer demand.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities" ("SFAS 133") which provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. SFAS 133 is effective for fiscal years
beginning after June 15, 1999 and is not anticipated to have an impact on
Caliper's results of operations or financial condition when adopted as Caliper
holds no derivative financial instruments and does not currently engage in
hedging activities.
In March 1998, the AICPA issued Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP
98-1"). SOP 98-1 requires that entities capitalize certain costs related to
internal use software once certain criteria have been met. The Company adopted
the provisions of SOP 98-1 on January 1, 1999. Through September 30, 1999, the
Company has not capitalized any costs related to internal use software.
2. CONTRACTS AND GRANTS
Strategic Alliance with Agilent
In May 1998, Caliper executed a collaboration agreement with
Hewlett-Packard Company ("Hewlett-Packard") to create a line of commercial
research products based on LabChip technologies. In November 1999,
Hewlett-Packard transferred this collaboration to its subsidiary, Agilent
Technologies, Inc. ("Agilent"). In this collaboration, Caliper primarily focuses
on developing core technology and LabChip applications. Caliper also
manufactures the chips and supplies the chips and reagents to Agilent. If
Caliper elects, however, not to manufacture chips for a LabChip application or
is unable to meet minimum supply commitments to be mutually established in the
future, Agilent would have the right to manufacture those chips. Agilent
primarily focuses on developing instruments and software, manufacturing
instruments, and marketing, selling and supporting complete systems.
Agilent funds Caliper's product development efforts under the
collaboration, reimburses Caliper's costs of supplying chips and reagents, and
pays Caliper a share of the gross margin on all components of LabChip systems.
The gross margin share varies depending on the type of collaboration product,
whether Caliper or Agilent manufacture the collaboration product, and whether
such collaboration product is sold during the collaboration or after the
collaboration has terminated. Under this agreement, Hewlett-Packard purchased
534,188 shares of Caliper's redeemable convertible preferred stock Series E with
an aggregate cost of $5.0 million. At December 31, 1998 this represented 3.5% of
Caliper's outstanding common and convertible preferred stock.
The term of the Agilent agreement is eight years, beginning in May 1998.
After three years, Agilent may elect not to meet certain annual funding
requirements, in which case either party may terminate the agreement. In any
event either party may terminate the agreement after five years.
F-11
<PAGE> 83
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
2. CONTRACTS AND GRANTS (CONTINUED)
Technology Access Program
Caliper maintains a technology access program which provides customers with
early access to new products, and offers technical training, support and
customization services. Technology access program customers have non-exclusive
access to all of the high throughput screening products Caliper offers during
the term of the agreement. These agreements generally provide for customers to
pay an up-front license fee and annual subscription fees, and to reimburse
Caliper for its costs of providing development and support services. Instruments
and chips are generally sold separately on a product-by-product basis, although
some agreements establish prices for initial instruments or estimates of per
data point charges for Sipper chips.
Caliper currently has three technology access program customers for its
high throughput screening systems: Eli Lilly and Company ("Eli Lilly"), Amgen,
Inc. ("Amgen"), and Hoffmann-La Roche Inc. ("Roche").
Eli Lilly. Caliper signed a technology access agreement with Eli Lilly in
August 1999. The term is three years, although Eli Lilly may temporarily suspend
its technology access program participation and later reinitiate participation,
during which time Caliper's support and assistance obligations will also be
suspended. Eli Lilly may terminate the agreement on any anniversary.
Amgen. Caliper entered into a technology access agreement with Amgen in
December 1998. Under this agreement, Amgen may delay payment of its second
annual subscription fee until Caliper has delivered an initial ultra high
throughput system. The term of this agreement is three years, although Amgen may
terminate the agreement on any anniversary or if Caliper fails to deliver the
ultra high throughput screening system in a timely manner.
Hoffmann-La Roche. Caliper entered into a technology access agreement with
Hoffmann-La Roche in November 1998, which is due to expire in July 2000. This
agreement supersedes an earlier agreement under which Roche funded early
development of the high throughput screening technology in exchange for certain
exclusive rights to an ultra high throughput screening system. Under this
earlier agreement, Roche purchased 854,701 shares of Caliper's redeemable
convertible preferred stock Series C with an aggregate cost of $4.0 million. At
December 31, 1998, this represented 5.6% of Caliper's outstanding common and
convertible preferred stock. Roche now has non-exclusive rights similar to other
technology access program customers. Caliper did not receive an up-front license
fee or annual subscription fee from Hoffmann-La Roche.
Caliper relies on several companies as the sole source of various materials
in its manufacturing process. Any extended interruption in the supply of these
materials could result in the failure to meet customer demand.
Value Added Screening Collaboration Program
Caliper's value added screening collaboration program offers high
throughput screening services using Caliper's LabChip systems. Caliper's first
value added screening collaboration agreement was established with Neurocrine
Biosciences in December 1998. Caliper receives screening fees on a per data
point basis, preclinical milestones and royalties on Neurocrine products
emerging from the collaboration. This agreement has a three-year term, but may
be terminated by either party under certain circumstances after the first year.
Caliper recognized approximately $132,000, $2.1 million, and $7.9 million
under the above agreements in 1996, 1997, and 1998, respectively, and $4.3
million and $8.2 million for the nine months ended
F-12
<PAGE> 84
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
2. CONTRACTS AND GRANTS (CONTINUED)
September 30, 1998 and 1999, respectively. Revenue earned from reimbursement of
development and support activities approximated actual costs incurred.
In September 1998, Caliper received a grant from the Advanced Technology
Program of the National Institute of Standards and Technology ("NIST") to
develop a Reference Laboratory DNA Diagnostics System based on Caliper's
"lab-on-a-chip" technology of approximately $2 million over three years. The
grant period began in January 1999.
3. ACQUISITION OF CHEMCORE CORPORATION
In February 1996, Caliper completed the acquisition of ChemCore Corporation
("ChemCore"), an early stage research and development entity. Caliper assumed
all of the liabilities of ChemCore and acquired all of the outstanding common
stock and Series A preferred stock of ChemCore in exchange for 678,786 shares of
Caliper's common stock and 829,142 shares of Series A preferred stock at an
exchange ratio of 0.552762 to 1.
The acquisition was accounted for using the purchase method. Under the
purchase method, the results of operations of acquired companies are included
prospectively from the date of acquisition, and the aggregate acquisition cost
is allocated to the acquiree's assets, liabilities, and intangibles, if any,
based upon the fair values on the date of acquisition. On the date of the
acquisition, ChemCore had no significant assets, liabilities of approximately
$484,000, an exclusive license under a sponsored research and development
agreement, and certain patents, most of which were pending. Caliper allocated
the aggregate purchase cost of $978,000 to in-process research and development.
The technology acquired had no alternative future uses.
4. CASH EQUIVALENTS AND MARKETABLE SECURITIES
The following is a summary of cash equivalents and marketable securities at
December 31, 1997 and 1998:
<TABLE>
<CAPTION>
AMORTIZED COST AND
ESTIMATED FAIR VALUE
--------------------
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Money market fund........................................ $ 312 $ 1,381
Bonds of the U.S. Government and its agencies............ 12,861 12,217
Commercial paper......................................... 12,355 17,454
Time deposits............................................ 1,021 --
------- -------
$26,549 $31,052
======= =======
Reported as:
Cash equivalents....................................... $ 312 $ 5,158
Marketable securities.................................. 26,237 25,894
------- -------
$26,549 $31,052
======= =======
</TABLE>
As of December 31, 1997 and 1998, the difference between the fair value and
the amortized cost of available-for-sale securities was immaterial. As of
December 31, 1997 and 1998, the average portfolio duration was less than one
year.
F-13
<PAGE> 85
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
4. CASH EQUIVALENTS AND MARKETABLE SECURITIES (CONTINUED)
There were no material gross realized gains or losses from sales of
securities or material unrealized gains and losses on investments at December
31, 1997 and 1998.
5. NOTES RECEIVABLE
At December 31, 1998, Caliper held a note receivable of $200,000 from an
officer of Caliper. This note, which bears interest at 6.61% per year from
January 2002, is collateralized by certain personal assets of the officer and
has certain amortization schedules for periodic payments with the final payment
to be made at the end of 2006.
At September 30, 1999, in addition to the $200,000 note receivable, Caliper
held an unsecured promissory note of $425,000 in connection with a loan to a
second officer of Caliper. The note bears interest at 5.96% per year and is
repayable upon the earlier of July 29, 2005 or the voluntary termination of his
employment with Caliper.
6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1998
------ -------
(IN THOUSANDS)
<S> <C> <C>
Machinery, equipment, and furniture....................... $2,207 $ 3,775
Leasehold improvements.................................... 286 385
------ -------
2,493 4,160
Accumulated depreciation and amortization................. (443) (1,364)
------ -------
Property and equipment, net............................... $2,050 $ 2,796
====== =======
</TABLE>
Property and equipment at December 31, 1997 and 1998 includes assets
acquired under capital leases of approximately $2.2 million and $3.8 million.
Accumulated amortization related to leased assets was approximately $441,000 and
$1.4 million at December 31, 1997 and 1998.
7. EQUIPMENT FINANCING AND RENTAL COMMITMENTS
As of December 31, 1998, Caliper had $3.8 million of property and equipment
financed through long-term obligations, and approximately $1.8 million unused
and available under an equipment financing credit line. The draw down period
under the equipment financing credit line expired on June 30, 1999. The
obligations under the equipment financings are secured by the equipment
financed, bear interest at a weighted-average fixed rate of approximately 9.5%,
and are due in monthly installments through December 2003. Under the terms of
one equipment financing agreement, ownership of the financed equipment may be
purchased by Caliper at fair value at the end of the financing term. Other
equipment financing agreements require a balloon payment at the end of each loan
term.
F-14
<PAGE> 86
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
7. EQUIPMENT FINANCING AND RENTAL COMMITMENTS (CONTINUED)
As of December 31, 1998, future minimum lease payments under operating and
capital leases and principal payments on equipment loans are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES
AND
OPERATING EQUIPMENT
LEASES LOANS
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
Years ending December 31:
1999...................................................... $ 1,664 $1,004
2000...................................................... 1,669 925
2001...................................................... 1,674 672
2002...................................................... 1,722 280
2003...................................................... 1,765 216
Thereafter................................................ 9,116 --
------- ------
Total minimum lease and principal payments........ $17,610 3,097
=======
Amount representing interest................................ (208)
------
Present value of future payments............................ 2,889
Current portion of equipment financing...................... (881)
------
Noncurrent portion of equipment financing................... $2,008
======
</TABLE>
Rent expense relating to operating leases was approximately $97,000 in
1996, $525,000 in 1997, $695,000 in 1998 and $1.2 million for the nine months
ended September 30, 1999.
In December 1998, Caliper entered into a 10-year facility operating lease
agreement. Caliper also entered into a sublease agreement through November 1999
for a total amount of $198,000. The appropriate amount has been offset against
the operating lease commitment for 1999, as shown above.
In connection with the facility lease, Caliper has a $1 million standby
letter-of-credit arrangement with a bank expiring on October 20, 2008. Caliper
has pledged a certificate of deposit of $1 million as collateral to this letter
of credit.
In January 1999, Caliper entered into a $2.5 million financing agreement
with Transamerica Business Credit Corporation ("Transamerica") for the purchase
of property and equipment which bears interest commensurate to the weekly
average of the four-year U.S. Treasury Securities. The drawdown period under the
equipment financing credit line expires on June 30, 2000. During the nine months
ended September 30, 1999, Caliper drew down the remaining $1.8 million balance
of the equipment financing credit line which existed as of December 31, 1998 at
a weighted-average interest rate of 11.8% and financed an additional $752,000 of
property and equipment purchases under the financing agreement with Transamerica
at a weighted-average interest rate of 12.1%. These obligations will be repaid
in monthly installments through June 2004. As of September 30, 1999, Caliper has
approximately $1.7 million unused and available balance with Transamerica.
F-15
<PAGE> 87
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
Convertible preferred stock is issuable in series, with rights and
preferences designated by series. The shares designated and outstanding are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
-------------------------------------- --------------------------------------
REDEMPTION/ REDEMPTION/
ISSUED AND LIQUIDATION ISSUED AND LIQUIDATION
AUTHORIZED OUTSTANDING VALUE AUTHORIZED OUTSTANDING VALUE
---------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Convertible preferred
stock:
Series A............. 1,293,500 829,142 $ 1,008,900 1,293,462 829,142 $ 1,008,900
Undesignated
preferred
stock............ 398,167 -- -- 127,499 -- --
---------- ---------- ----------- ---------- ---------- -----------
1,691,667 829,142 1,008,900 1,420,961 829,142 1,008,900
---------- ---------- ----------- ---------- ---------- -----------
Redeemable
convertible
preferred stock:
Series B........... 8,600,000 5,448,454 7,157,964 8,550,706 5,448,454 7,515,862
Series C........... 3,333,333 2,136,752 10,600,864 3,333,333 2,136,752 11,130,907
Series D........... 5,375,000 3,189,103 20,524,486 5,195,000 3,330,129 22,460,607
Series E........... -- -- -- 2,500,000 788,357 7,608,461
---------- ---------- ----------- ---------- ---------- -----------
17,308,333 10,774,309 38,283,314 19,579,039 11,703,692 48,715,837
---------- ---------- ----------- ---------- ---------- -----------
Total.......... 19,000,000 11,603,451 $39,292,214 21,000,000 12,532,834 $49,724,737
========== ========== =========== ========== ========== ===========
<CAPTION>
SEPTEMBER 30, 1999
--------------------------------------
REDEMPTION/
ISSUED AND LIQUIDATION
AUTHORIZED OUTSTANDING VALUE
---------- ----------- -----------
<S> <C> <C> <C>
Convertible preferred
stock:
Series A............. 1,293,462 829,142 $ 1,008,900
Undesignated
preferred
stock............ 127,499 -- --
---------- ---------- -----------
1,420,961 829,142 1,008,900
---------- ---------- -----------
Redeemable
convertible
preferred stock:
Series B........... 8,550,706 5,448,454 7,796,935
Series C........... 3,333,333 2,136,752 11,547,172
Series D........... 5,195,000 3,330,129 23,300,572
Series E........... 2,500,000 788,357 7,892,996
---------- ---------- -----------
19,579,039 11,703,692 50,537,675
---------- ---------- -----------
Total.......... 21,000,000 12,532,834 $51,546,575
========== ========== ===========
</TABLE>
The holders of Series A, B, C, D, and E preferred stock are entitled to
receive noncumulative dividends at a rate of 5% of the original issue price, if
declared, prior to and in preference to the payment of dividends to holders of
common stock. At December 31, 1998, no such dividends had been declared.
Each share of Series A, B, C, D, and E preferred stock is convertible into
common stock at the option of the holder on a one-for-one basis, subject to
adjustments for antidilution purposes. Series A, B, C, D, and E preferred shares
are automatically converted into common stock at the earlier of (i) the closing
of Caliper's initial underwritten public offering which is at a price to the
public of at least $7.80 per share and which results in aggregate proceeds to
Caliper of $10 million, or (ii) a vote or written consent of a majority of the
shares of preferred stock then outstanding, voting together as a single class.
All preferred shares have voting rights equal to common stock on an
as-if-converted basis.
The holders of Series B preferred stock, voting as a separate class, are
entitled to elect four members of the board of directors. The holders of Series
A, B, C, D, and E preferred stock and common stock, voting together as a class,
are entitled to elect the remaining members to the board of directors.
At any time subsequent to February 19, 2001, Caliper shall, upon written
request from the holders of a majority of the then outstanding shares of Series
B, C, D, and E preferred stock, redeem in whole or in part the Series B, C, D,
and E preferred stock by paying in cash a sum equal to (i) the original issue
price per share, plus all declared but unpaid dividends on such shares, and (ii)
an amount equal to 5% of the original issue price per annum, compounded
annually, from the date such shares were originally issued through the
redemption date. The carrying amount of Series B, C, D, and E preferred stock
has been increased by periodic accretions so as to equal the redemption amount
at the redemption date.
Series B, C, D and E preferred stockholders are entitled to receive, upon
liquidation, a distribution of $1.22, $4.68, $6.24 and $9.36 per share,
respectively (subject to adjustment for a recapitalization) plus all
F-16
<PAGE> 88
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
declared but unpaid dividends, in preference to series A preferred stockholders
and common stockholders. Following the distribution of liquidation preferences
to series B, C, D and E preferred stockholders, series A preferred stockholders
are entitled to receive a distribution of $1.22 per share in preference to the
common stockholders. Thereafter, the remaining assets and funds, if any, shall
be distributed ratably on a per share basis among all preferred and common
stockholders.
WARRANTS
In January 1996, in connection with an equipment financing agreement,
Caliper issued a warrant that entitles the holder to purchase 3,276 shares of
common stock at an exercise price of $1.22 per share. This warrant is
exercisable through the earlier of the effective date of a merger of Caliper or
January 3, 2002.
In May 1996, in connection with a capital lease agreement, Caliper granted
a warrant that entitles the holder to purchase 32,767 shares of Series B
preferred stock at an exercise price of $1.22 per share. This warrant is
exercisable through the earlier of three years after the effective date of
Caliper's initial public offering or May 10, 2002.
In October 1996, in connection with certain agreements, Caliper issued two
warrants that entitle the holders to purchase a total of 38,460 shares of common
stock at an exercise price of $1.22 per share. These warrants are exercisable
through October 11, 2006.
No amounts have been recorded by Caliper for the above warrant issuances,
as the amounts were determined to be immaterial at the time of issuance.
In August 1995, Caliper executed an agreement which calls for the issue of
two warrants to purchase a total of 38,460 shares of common stock at an exercise
price of $1.22 per share. These warrants will be issued if a certain patent
milestone is met and would expire in January 2006.
COMMON STOCK SUBJECT TO REPURCHASE
Common stock issued to founders of Caliper vest generally over five years
at 20% one year from the date of grant and on a monthly, pro rata basis
thereafter. From inception through December 31, 1998, the founders of Caliper
have purchased 1,708,234 shares of common stock, of which 340,539 shares are
unvested and remain subject to repurchase at the original issuance price in the
event of termination of employment or services to Caliper. Caliper has not
repurchased any shares in accordance with these rights.
STOCK OPTION PLANS
On August 31, 1996, Caliper's board of directors and stockholders adopted
the 1996 Stock Incentive Plan (the "Plan"). This Plan supersedes the 1996 Equity
Incentive Plan and provides for the issuance of common stock and the granting of
options to purchase common stock to employees, officers, directors, and
consultants of Caliper. Caliper grants shares of common stock for issuance under
the Plan at no less than the fair value of the stock (no less than 85% of fair
value for nonqualified options). Options granted under the Plan generally vest
over 5 years at a rate of 20% one year from the grant date and 1/60 monthly
thereafter. Options canceled under the 1996 Equity Incentive Plan are not
available for future grants.
F-17
<PAGE> 89
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
A summary of activity under the Plan is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING WEIGHTED-
------------------------- AVERAGE
OPTIONS NUMBER OF EXERCISE EXERCISE
AVAILABLE OPTIONS PRICE PRICE
---------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Balance at inception (July 26, 1995)........... -- -- -- --
Authorized................................... 705,128 -- -- --
Granted...................................... (449,402) 449,402 $ 0.06-$0.47 $0.25
Exercised.................................... -- (24,999) $ 0.06-$0.47 $0.33
Canceled..................................... -- (6,410) $0.11 $0.11
---------- ---------
Balance at December 31, 1996................... 255,726 417,993 $ 0.06-$0.47 $0.25
Authorized................................... 961,538 -- -- --
Granted...................................... (890,051) 890,051 $ 0.47-$0.62 $0.51
Exercised.................................... -- (155,798) $ 0.06-$0.62 $0.38
Canceled..................................... 962 (962) $0.47 $0.47
---------- ---------
Balance at December 31, 1997................... 328,175 1,151,284 $ 0.06-$0.62 $0.43
Authorized................................... 1,282,038 -- -- --
Granted...................................... (423,253) 423,253 $ 0.62-$0.97 $0.86
Exercised.................................... -- (181,881) $ 0.06-$0.62 $0.45
Canceled..................................... 318,088 (326,649) $ 0.06-$0.62 $0.45
---------- ---------
Balance at December 31, 1998................... 1,505,048 1,066,007 $ 0.06-$0.97 $0.59
Granted (unaudited).......................... (988,406) 988,406 $0.97 $0.97
Exercised (unaudited)........................ -- (367,054) $ 0.06-$0.97 $0.59
Canceled (unaudited)......................... 17,468 (17,468) $ 0.62-$0.97 $0.66
---------- ---------
Balance at September 30, 1999 (unaudited)...... 534,110 1,669,891 $ 0.06-$0.97 $0.82
========== =========
</TABLE>
Included in options granted for the nine months ended September 30, 1999 is
an option grant to purchase 641,025 shares of common stock issued to an
executive officer pursuant to the terms of his employment contract.
Caliper granted nonqualified options of 234,856, 458,010, 79,484, and
140,842 for the years ended December 31, 1996, 1997, 1998 and the nine months
ended September 30, 1999, respectively.
As part of the ChemCore merger in February 1996, Caliper exchanged, at the
ratio of 0.552762 to 1, outstanding options to purchase 240,499 shares of
ChemCore common stock at an exercise price of $0.20 for options to purchase
132,936 shares of Caliper's common stock at an exercise price $0.36 per share.
These options were initially granted at the fair value of ChemCore's common
stock and generally vest over five years at a rate of 20% per year.
F-18
<PAGE> 90
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
A summary of activity of options assumed as part of the ChemCore merger is
as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------
NUMBER OF EXERCISE
OPTIONS PRICE
--------- --------
<S> <C> <C>
Balance at December 31, 1996 and 1997....................... 132,936 $0.36
Exercised................................................... (9,950) $0.36
--------
Balance at December 31, 1998................................ 122,986 $0.36
Exercised (unaudited)....................................... (122,986) $0.36
--------
Balance at September 30, 1999 (unaudited)................... --
========
</TABLE>
At December 31, 1998 and September 30, 1999, options to purchase 235,348
and 173,841 shares of common stock were exercisable at a weighted-average
exercise price of $0.41 and $0.64 per share.
At December 31, 1998 and September 30, 1999, the remaining contractual life
of outstanding options ranged from 5.00 to 9.13 years and 6.42 to 9.84 years,
respectively, with a weighted-average contractual life of 8.14 and 8.83 years,
respectively. The weighted-average fair value of options granted during 1996,
1997, 1998, and for the nine months ended September 30, 1999 was $0.06, $0.13,
$0.22, and $0.25 respectively.
STOCK BASED COMPENSATION
Pro forma information regarding net loss and net loss per share is required
by SFAS 123, and has been determined as if Caliper had accounted for its
employee stock options under the fair-value method of that Statement. The fair
value of these options was estimated at the date of grant using the
Black-Scholes method and the following assumptions for 1996, 1997, and 1998, and
the nine months ended September 30, 1999: volatility of 0.01, risk-free interest
rate of 6%, an expected life of five years, and no dividends.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the options using the
straight-line method. Caliper's pro forma information follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
--------------------------- SEPTEMBER 30,
1996 1997 1998 1999
------- ------- ------- -------------
<S> <C> <C> <C> <C>
Net loss attributable to common stockholders:
As reported........................................... $(4,972) $(7,751) $(5,149) $ (9,948)
Pro forma............................................. $(4,977) $(7,776) $(5,185) $(10,006)
Basic and diluted net loss per share:
As reported........................................... $ (3.90) $ (4.38) $ (2.39) $ (3.71)
Pro forma............................................. $ (3.91) $ (4.40) $ (2.40) $ (3.73)
</TABLE>
The effects of applying SFAS 123 for pro forma disclosures are not likely
to be representative of the effects on reported net loss for future years.
Caliper has recorded deferred stock compensation of approximately $500,000
for the year ended December 31, 1998 and $7.4 million for the nine months ended
September 30, 1999, representing the difference between the exercise price of
the options granted and the deemed fair value of the common
F-19
<PAGE> 91
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (CONTINUED)
stock. These amounts are being amortized by charges to operations over the
vesting periods of the individual stock options using the graded vesting method.
Such amortization expense amounted to approximately $2.0 million for the nine
months ended September 30, 1999.
RESERVED STOCK
As of December 31, 1998, Caliper had reserved shares of common stock for
future issuance as follows:
<TABLE>
<S> <C>
Stock options............................................ 2,694,041
Warrants................................................. 41,736
Preferred stock.......................................... 12,565,601
Stock agreement.......................................... 7,692
----------
15,309,070
==========
</TABLE>
In addition, Caliper has reserved 32,767 shares of Series B convertible
redeemable preferred stock for issuance upon exercise of warrants.
9. INCOME TAXES
Caliper has no provision for U.S. federal or state income taxes for any
period as it has incurred operating losses.
As of December 31, 1998, Caliper had federal and California net operating
loss carryforwards of approximately $10.3 million and $1.4 million. Caliper also
had federal research and development tax credit carryforwards of approximately
$700,000. The net operating loss and credit carryforwards will expire at various
dates beginning on 2002 through 2018, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial limitation due to the change in ownership provisions of the Internal
Revenue Code of 1986 and similar state provisions. The annual limitation may
result in the expiration of net operating losses and credits before utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
Caliper's deferred tax assets and liabilities for federal and state income taxes
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net operating loss carryforwards......................... $ 2,600 $ 3,600
Research credit carryforwards............................ 500 1,000
Capitalized research and development..................... 1,700 1,600
Other, net............................................... 500 100
------- -------
Net deferred tax assets.................................. 5,300 6,300
Valuation allowance...................................... (5,300) (6,300)
------- -------
Total.......................................... $ -- $ --
======= =======
</TABLE>
F-20
<PAGE> 92
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
9. INCOME TAXES (CONTINUED)
Because of Caliper's lack of earnings history, the deferred tax assets have
been fully offset by a valuation allowance. The valuation allowance increased by
$2.1 million, $3.2 million, and $1 million, respectively during the years ended
December 31, 1996, 1997, and 1998.
10. LITIGATION
On March 22, 1999, Caliper filed a lawsuit in California Superior Court for
the County of Santa Clara against Aclara Biosciences, Inc., and Caliper's former
patent counsel Bertram Rowland and the law firm of Flehr, Hohbach, Test,
Albritton and Herbert LLP, alleging that all three defendants misappropriated
certain of Caliper's trade secrets relating to our business plans, patents and
intellectual property strategy. The suit also alleges that Mr. Rowland and Flehr
Hohbach committed a breach of the duties they owed to Caliper as its former
attorneys. The suit seeks damages and equitable remedies to prevent Aclara, Mr.
Rowland and Flehr Hohbach from benefiting from the alleged misappropriation and
breach of duties. While Caliper believes that its complaint is meritorious,
there can be no assurance that Caliper will prevail in its action against any or
all of the defendants, or that if Caliper prevails, any damages or equitable
remedies awarded, if any, will be commercially valuable. Furthermore, Caliper
has incurred and is likely to continue to incur substantial costs and expend
substantial personnel time in pursuing its claims against Aclara, Mr. Rowland
and Flehr Hohbach.
On April 23, 1999, Aclara Biosciences filed a lawsuit in United States
District Court for the Northern District of California alleging that Caliper is
making, using, selling or offering for sale microfluidic devices that infringe
United States Patent Number 5,750,015 in willful disregard of Aclara's patent
rights. This patent concerns methods and devices for moving molecules by the
application of electrical fields. The Aclara action seeks damages for past and
future reduced sales or lost profits based upon the making, using, selling and
offering for sale of Caliper's products and processes, and seeks to enjoin
Caliper's continued activities relating to these products. This action subjects
Caliper to potential liability for damages and could require Caliper to cease
making, using or selling the affected products, or to obtain a license in order
to continue to manufacture, use or sell the affected products. While Caliper
believes that it has meritorious defenses in this action, there can be no
assurance that Caliper will prevail or that any license required would be made
available on commercially acceptable terms, if at all. Furthermore, Caliper has
incurred and is likely to continue to incur substantial costs and expend
substantial personnel time in defending against the claims filed by Aclara.
Caliper's failure to successfully defend itself against the Aclara action could
have a material adverse effect on Caliper's business, financial condition and
operating results.
11. SUBSEQUENT EVENTS (UNAUDITED)
In October 1999, the board of directors adopted, subject to stockholder
approval, the 1999 Equity Incentive Plan ("1999 Equity Plan"). The 1999 Equity
Plan amended and restated the 1996 Stock Incentive Plan and increased the shares
reserved for issuance to 4 million. In addition, the 1999 Equity Plan provides
for an automatic increase in the shares reserved for issuance by the greater of
5% of outstanding shares on a fully-diluted basis or the number of shares that
have been made subject to awards granted under the 1999 Equity Plan during the
prior 12-month period. The automatic share reserve increase may not exceed
12,820,000 shares in aggregate over the 10-year period.
From October 1999 to December 13, 1999, options to purchase 740,048 shares
were granted pursuant to the 1999 Equity Plan with a weighted average exercise
price of $5.44 per share. The Company estimates that additional deferred
compensation of approximately $5.3 million will be recorded as a result of these
option grants and amortized to compensation expense in accordance with Caliper's
policy.
F-21
<PAGE> 93
CALIPER TECHNOLOGIES CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
11. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
In October 1999, the board of directors adopted, subject to stockholder
approval, the 1999 Non-Employee Directors' Stock Option Plan ("1999 Directors'
Plan") which provides for the automatic grant of options to non-employee
directors. A total of 200,000 shares of common stock has been reserved for
issuance under this plan. The number of shares reserved for issuance will
automatically increase by the greater of 0.3% of outstanding shares on a
fully-diluted basis or the number of shares subject to options granted under the
1999 Directors' Plan during the prior 12-month period.
In October 1999, the board of directors adopted, subject to stockholder
approval, the 1999 Employee Stock Purchase Plan ("1999 Purchase Plan"). A total
of 300,000 shares of common stock has been reserved for issuance under the 1999
Purchase Plan. The number of shares reserved automatically increases by the
greater of 0.5% of outstanding shares on a fully-diluted basis or the number of
shares issued under the 1999 Purchase Plan during the prior 12-month period. The
automatic share reserve increase may not exceed 3 million shares in aggregate
over the 10-year period. The 1999 Purchase Plan permits eligible employees to
acquire shares of Caliper's common stock through payroll deductions of up to 10%
of their base compensation. No employee may participate in the 1999 Purchase
Plan if immediately after the grant the employee has voting power over 5% or
more of the outstanding capital stock. Under the 1999 Purchase Plan, the board
may specify offerings of up to 27 months. Unless the board determines otherwise,
common stock may be purchased at the lower of 85% of the fair market value of
Caliper's common stock on the first day of the offering or 85% of the fair
market value of Caliper's common stock on the purchase date. The initial
offering period will begin on the effective date of the initial public offering.
In October 1999, Caliper's board of directors authorized management to file
a registration statement with the Securities and Exchange Commission to permit
Caliper to sell its common stock to the public. Upon completion of Caliper's
initial public offering, all of the outstanding preferred stock will be
converted into shares of common stock.
In October 1999, Caliper's board of directors approved a 1-for-1.56 reverse
stock split. The reverse stock split became effective on December 7, 1999. The
accompanying financial statements have been adjusted retroactively to reflect
the reverse split of all outstanding common and convertible preferred stock.
F-22
<PAGE> 94
[Caliper Technologies Corp. Logo]
<PAGE> 95
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by Caliper in connection with the sale of the
Common Stock being registered. All the amounts shown are estimates except for
the registration fee, the NASD filing fee and the Nasdaq National Market
application fee.
<TABLE>
<S> <C>
Registration fee............................................ $ 21,363
NASD filing fee............................................. 8,263
Nasdaq National Market application fee...................... 90,000
Blue sky qualification fee and expenses..................... 5,000
Printing and engraving expenses............................. 150,000
Legal fees and expenses..................................... 400,000
Accounting fees and expenses................................ 250,000
Transfer agent and registrar fees........................... 10,000
Miscellaneous............................................... 15,374
----------
Total.................................................. $ 950,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
As permitted by Delaware law, our amended and restated certificate of
incorporation provides that no director of ours will be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
- for any breach of duty of loyalty to us or to our stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
Our amended and restated certificate of incorporation further provides that
we must indemnify our directors and executive officers and may indemnify its
other officers and employees and agents to the fullest extent permitted by
Delaware law. We believe that indemnification under our amended and restated
certificate of incorporation covers negligence and gross negligence on the part
of indemnified parties.
We have entered into indemnification agreements with each of our directors
and officers. These agreements, among other things, require us to indemnify each
director and officer for some expenses including attorneys' fees, judgments,
fines and settlement amounts incurred by any of these persons in any action or
proceeding, including any action by or in the right of Caliper, arising out of
person's services as our director or officer, any subsidiary of ours or any
other company or enterprise to which the person provides services at our
request.
The underwriting agreement will provide for indemnification by the
underwriters of Caliper, our directors, our officers who sign the registration
statement, and our controlling persons for some liabilities, including
liabilities arising under the Securities Act.
II-1
<PAGE> 96
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The number of shares and price per share presented below have been adjusted
to reflect a 1-for-1.56 reverse stock split. Since January 1, 1996, Caliper has
sold and issued the following unregistered securities:
(1) From January 1996 through December 13, 1999, Caliper has granted stock
options to purchase 3,491,160 shares of common stock, at a weighted
average exercise price of $1.69, to employees, consultants and
directors pursuant to its 1999 Equity Incentive Plan and 1996 Equity
Incentive Plan. Of these stock options, 354,870 shares have been
cancelled or have lapsed without being exercised, 751,572 shares have
been exercised in common stock, no shares of which have been
repurchased and 2,384,718 shares remain outstanding.
(2) In February 1996, Caliper issued an aggregate of 829,142 shares of
Series A preferred stock and 678,786 shares of common stock to
shareholders of ChemCore Corporation in connection with the merger of
ChemCore with and into Caliper. Each share of ChemCore's Common stock
and Series A preferred stock were converted into 0.552762 shares of
Caliper's Common stock and Series A preferred stock, respectively.
Shares of Series A preferred stock are convertible into shares of
common stock at the rate of one share of common stock for each share
of Series A preferred stock outstanding. In addition, Caliper issued
options to purchase 132,936 shares of common stock at $0.36 per share,
which options were exercised from March 1998 through February 1999.
(3) From April 1996 to October 1996, Caliper issued an aggregate of
5,448,454 shares of Series B preferred stock to 12 accredited
investors and 1 officer at $1.2207 per share, for an aggregate
purchase price of $6,651,043. In May 1996, Caliper issued a warrant to
purchase 32,767 shares of Series B preferred stock to Comdisco, Inc.
at an exercise price of $1.2207 per share. Shares of Series B
preferred stock are convertible into shares of common stock at the
rate of one share of common stock for each share of Series B preferred
stock outstanding.
(4) From January 1996 to October 1996, Caliper issued warrants to purchase
an aggregate of 41,736 shares of common stock to 3 purchasers at an
exercise price of $1.2207 per share.
(5) From October 1996 to December 1996, Caliper issued an aggregate of
2,136,752 shares of Series C preferred stock to 15 accredited
investors and 1 officer at $4.68 per share, for an aggregate purchase
price of $9,999,999. Shares of Series C preferred stock are
convertible into shares of common stock at the rate of one share of
common stock for each share of Series C preferred stock outstanding.
(6) From January 1997 to April 1998, Caliper issued an aggregate of
3,089,744 shares of Series D preferred stock to 17 accredited
investors at $6.24 per share, for an aggregate purchase price of
$19,280,000. In this period, Caliper issued an additional 240,385
shares of Series D preferred stock to Dow Chemical Company as payment
for services rendered pursuant to the terms of a development agreement
dated January 14, 1997. Shares of Series D preferred stock are
convertible into shares of common stock at the rate of one share of
common stock for each share of Series D preferred stock outstanding.
(7) In May 1998, Caliper issued an aggregate of 788,357 shares of Series E
preferred stock to 6 accredited investors at $9.36 per share, for an
aggregate purchase price of $7,379,004. Shares of Series E preferred
stock are convertible into shares of common stock at the rate of one
share of common stock for each share of Series E preferred stock
outstanding.
(8) In January 1996, Caliper issued an aggregate of 471,152 shares of
common stock to 3 founders, at $0.0016 per share.
(9) From January 1996 to April 1996, Caliper issued an aggregate of
447,110 shares of common stock to 10 scientific advisors and 1
consultant at $0.0016 per share.
II-2
<PAGE> 97
(10) From February 1996 to April 1996, Caliper issued an aggregate of
245,747 shares of common stock to 3 accredited investors in connection
with the Series B preferred stock financing, at $0.06 per share.
(11) From October 1996 to September 1997, Caliper issued 19,230 shares of
common stock to one board member at $0.11 per share and 19,230 shares
of common stock to another board member at $0.62 per share.
(12) From January 1998 to July 1999, Caliper issued 76,439 shares of common
stock to 8 individuals for services rendered to Caliper, with an
aggregate value of $125,520.
(13) In September 1998, Caliper issued 34,656 shares of common stock to 3
officers of Caliper in lieu of cash, with an aggregate value of
$33,520.
The sales and issuances of securities described in paragraphs (1), (8),
(9), (11), (12) and (13) above were deemed to be exempt from registration under
the Securities Act by virtue of Rule 701 promulgated thereunder in that they
were offered and sold either pursuant to a written compensatory benefit plan or
pursuant to a written contract relating to compensation, as provided by Rule
701.
The sale and issuance of securities described in paragraphs (2) through (7)
and (10) above were deemed to be exempt from registration under the Securities
Act by virtue of Section 4(2), Regulation D or Regulation S promulgated
thereunder. With respect to the grant of stock options and restricted stock
awards described in paragraphs (1), (9), (11) and (13), an exemption from
registration was unnecessary in that none of the transactions involved a "sale"
or securities as this term is used in Section 2(3) of the Securities Act.
II-3
<PAGE> 98
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1+ Form of Underwriting Agreement.
3.1+ Amended and Restated Certificate of Incorporation of
Caliper, filed May 19, 1998.
3.2+ Amendment to Certificate of Incorporation.
3.2.1+ Form of Certificate of Amendment effecting the reverse stock
split.
3.3+ Form of Certificate of Incorporation of Caliper to be filed
immediately following the closing of the offering.
3.4+ Bylaws of Caliper.
4.1+ Reference is made to Exhibits 3.1 through 3.4.
4.2+ Specimen Stock Certificate.
5.1++ Opinion of Cooley Godward LLP.
10.1+ Lease Agreement, dated December 1, 1998, between Caliper and
605 East Fairchild Associates, L.P.
10.2+ 1996 Equity Incentive Plan.
10.3+ 1999 Equity Incentive Plan.
10.4+ 1999 Employee Stock Purchase Plan.
10.5+ 1999 Non-Employee Directors' Stock Option Plan.
10.6+ Employment Agreement, dated January 18, 1999, between
Caliper and Daniel L. Kisner, M.D.
10.7+ Promissory Note, dated July 29, 1999, between Caliper and
Daniel L. Kisner, M.D.
10.8+ Amended and Restated Investor Rights Agreement, dated May 7,
1998, among Caliper and certain stockholders of Caliper.
10.9+ Form of Indemnification Agreement entered into between
Caliper and its directors and executive officers.
10.10++** Collaboration Agreement, dated May 2, 1998, between Caliper
and Hewlett-Packard Company.
10.11++** Termination, Transition and Technology Access Program
Agreement, dated November 24, 1998, between Caliper and
Hoffmann-La Roche Inc.
10.12++** Technology Access Agreement, dated December 21, 1998,
between Caliper and Amgen, Inc.
10.13++** Technology Access Agreement, dated August 12, 1999, between
Caliper and Eli Lilly and Company.
10.14++** Screening Collaboration Agreement, dated December 16, 1998,
between Caliper and Neurocrine Biosciences, Inc.
10.15++** Sole Commercial Patent License Agreement, effective
September 1, 1995, between Lockheed Martin Energy Research
Corporation and Caliper, as amended (domestic).
10.16++** Sole Commercial Patent License Agreement, effective
September 1, 1995, between Lockheed Martin Energy Research
Corporation and Caliper, as amended (international).
10.17+ Consulting Agreement, dated April 30, 1997, between Caliper
and Dr. David V. Milligan.
10.18+ Employment Agreement, dated September 23, 1999, between
Caliper and James L. Knighton.
10.19+ Consulting Agreement, dated May 1, 1997, between Caliper and
Regis McKenna.
10.20+ Promissory Note, dated March 25, 1997, between Caliper and
Michael R. Knapp, Ph.D.
10.21+ Option Agreement, dated August 9, 1995, between Caliper and
Michael R. Knapp, Ph.D.
10.22+ Amendment to Option Agreement, dated August 25, 1995,
between Caliper, Michael R. Knapp, Ph.D., J. Michael Ramsey,
Ph.D. and Avalon Medical Partners.
</TABLE>
II-4
<PAGE> 99
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
10.23+ The Corporate Plan for Retirement Select Plan Adoption
Agreement and related Basic Plan Document.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2+ Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1+ Power of Attorney.
27.1+ Financial Data Schedule.
</TABLE>
- ---------------
+ Previously filed.
** Confidential treatment has been requested for a portion of this exhibit.
++ Replaces previously filed exhibit.
(B) FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted because they are not required, they are not
applicable or the information is already included in the financial statements or
notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the Securities
Act, the information omitted from the form of this prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this Registration Statement as of the time it was
declared effective.
(2) That for purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referenced in Item 15 of this
Registration Statement or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission this
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against these liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by a director, officer, or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether the indemnification by
it is against public policy as expressed in the Securities Act of 1933,
and will be governed by the final adjudication of this issue.
(4) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in the denomination and registered
in the names required by the Underwriters to permit prompt delivery to
each purchaser.
II-5
<PAGE> 100
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant has
caused this Amendment No. 3 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of Santa
Clara, State of California, on the 14th day of December 1999.
CALIPER TECHNOLOGIES CORP.
By: /s/ DANIEL L. KISNER, M.D.
------------------------------------
Daniel L. Kisner, M.D.
President and Chief Executive
Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ DANIEL L. KISNER, M.D. President, Chief Executive December 14, 1999
- --------------------------------------------------- Officer and Director
Daniel L. Kisner, M.D. (principal executive
officer)
/s/ JAMES L. KNIGHTON Chief Financial Officer December 14, 1999
- --------------------------------------------------- (principal financial and
James L. Knighton accounting officer)
DAVID V. MILLIGAN, PH.D.* Chairman of the Board of December 14, 1999
- --------------------------------------------------- Directors
David V. Milligan, Ph.D.
ANTHONY B. EVNIN, PH.D.* Director December 14, 1999
- ---------------------------------------------------
Anthony B. Evnin, Ph.D.
CHARLES M. HARTMAN* Director December 14, 1999
- ---------------------------------------------------
Charles M. Hartman
REGIS P. MCKENNA* Director December 14, 1999
- ---------------------------------------------------
Regis P. McKenna
ROBERT T. NELSEN* Director December 14, 1999
- ---------------------------------------------------
Robert T. Nelsen
MICHAEL STEINMETZ, PH.D.* Director December 14, 1999
- ---------------------------------------------------
Michael Steinmetz, Ph.D.
*By: /s/ DANIEL L. KISNER, M.D.
- ---------------------------------------------------
Daniel L. Kisner, M.D.
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 101
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1+ Form of Underwriting Agreement.
3.1+ Amended and Restated Certificate of Incorporation of
Caliper, filed May 19, 1998.
3.2+ Amendment to Certificate of Incorporation.
3.2.1+ Form of Certificate of Amendment effecting the reverse stock
split.
3.3+ Form of Certificate of Incorporation of Caliper to be filed
immediately following the closing of the offering.
3.4+ Bylaws of Caliper.
4.1+ Reference is made to Exhibits 3.1 through 3.4.
4.2+ Specimen Stock Certificate.
5.1++ Opinion of Cooley Godward LLP.
10.1+ Lease Agreement, dated December 1, 1998, between Caliper and
605 East Fairchild Associates, L.P.
10.2+ 1996 Equity Incentive Plan.
10.3+ 1999 Equity Incentive Plan.
10.4+ 1999 Employee Stock Purchase Plan.
10.5+ 1999 Non-Employee Directors' Stock Option Plan.
10.6+ Employment Agreement, dated January 18, 1999, between
Caliper and Daniel L. Kisner, M.D.
10.7+ Promissory Note, dated July 29, 1999, between Caliper and
Daniel L. Kisner, M.D.
10.8+ Amended and Restated Investor Rights Agreement, dated May 7,
1998, among Caliper and certain stockholders of Caliper.
10.9+ Form of Indemnification Agreement entered into between
Caliper and its directors and executive officers.
10.10++** Collaboration Agreement, dated May 2, 1998, between Caliper
and Hewlett-Packard Company.
10.11++** Termination, Transition and Technology Access Program
Agreement, dated November 24, 1998, between Caliper and
Hoffmann-La Roche Inc.
10.12++** Technology Access Agreement, dated December 21, 1998,
between Caliper and Amgen, Inc.
10.13++** Technology Access Agreement, dated August 12, 1999, between
Caliper and Eli Lilly and Company.
10.14++** Screening Collaboration Agreement, dated December 16, 1998,
between Caliper and Neurocrine Biosciences, Inc.
10.15++** Sole Commercial Patent License Agreement, effective
September 1, 1995, between Lockheed Martin Energy Research
Corporation and Caliper, as amended (domestic).
10.16++** Sole Commercial Patent License Agreement, effective
September 1, 1995, between Lockheed Martin Energy Research
Corporation and Caliper, as amended (international).
10.17+ Consulting Agreement, dated April 30, 1997, between Caliper
and Dr. David V. Milligan.
10.18+ Employment Agreement, dated September 23, 1999, between
Caliper and James L. Knighton.
10.19+ Consulting Agreement, dated May 1, 1997, between Caliper and
Regis McKenna.
10.20+ Promissory Note, dated March 25, 1997, between Caliper and
Michael R. Knapp, Ph.D.
10.21+ Option Agreement, dated August 9, 1995, between Caliper and
Michael R. Knapp, Ph.D.
10.22+ Amendment to Option Agreement, dated August 25, 1995,
between Caliper, Michael R. Knapp, Ph.D., J. Michael Ramsey,
Ph.D. and Avalon Medical Partners.
</TABLE>
<PAGE> 102
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
10.23+ The Corporate Plan for Retirement Select Plan Adoption
Agreement and related Basic Plan Document.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2+ Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1+ Power of Attorney.
27.1+ Financial Data Schedule.
</TABLE>
- ---------------
+ Previously filed.
** Confidential treatment has been requested for a portion of this exhibit.
++ Replaces previously filed exhibit.
<PAGE> 1
EXHIBIT 5.1
[COOLEY GODWARD LETTERHEAD]
December 13, 1999
Caliper Technologies Corp.
605 Fairchild Drive
Mountain View, California 94043
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Caliper Technologies Corp. (the "Company") of a Registration
Statement on Form S-1 (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission"), including a prospectus to be filed with
the Commission pursuant to Rule 424(b) of Regulation C promulgated under the
Securities Act of 1933, as amended (the "Prospectus"), and the underwritten
public offering of up to 5,175,000 shares of Common Stock (the "Common Stock").
In connection with this opinion, we have (i) reviewed the Registration
Statement, the Company's Certificate of Incorporation and Bylaws and the
originals or copies certified to our satisfaction, of such records, documents,
certificates, memoranda and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below, and (ii)
assumed that the shares of the Common Stock will be sold to the Underwriters at
a price established by the Pricing Committee of the Board of Directors of the
Company.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Common Stock, when sold and issued in accordance with the Registration
Statement and related Prospectus, will be validly issued, fully paid and
nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included on the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By /s/ BRETT D. WHITE
-------------------
Brett D. White
<PAGE> 1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.10
COLLABORATION AGREEMENT
THIS COLLABORATION AGREEMENT (the "Agreement") is entered into as of
May 2, 1998 (the "Effective Date"), by and between CALIPER TECHNOLOGIES CORP., a
corporation organized under the laws of the State of Delaware ("Caliper"), and
HEWLETT-PACKARD Company, a corporation organized under the laws of the State of
California, acting through its Chemical Analysis Group ("HP").
RECITALS
A. Caliper is a company engaged in the development of new technology
and products in microfluidics and related areas that can be used to improve the
chemical and biochemical analysis activities of pharmaceutical and other types
of companies.
B. HP is a multinational company which through its Chemical Analysis
Group is a leading worldwide developer and supplier of instrumentation, supplies
and services to customers in pharmaceutical and other industries.
C. HP and Caliper wish to form a collaboration to develop and
commercialize products based on Caliper's microfluidics technology and HP's
instrumentation technology for use in the field of chemical and biochemical
research and analysis, and to provide a business infrastructure for the
manufacture, sale, distribution and support of those products.
THE PARTIES THEREFORE AGREE:
1. DEFINITIONS
Each of the capitalized terms in this Agreement shall have the
meaning as defined below. Terms defined in singular form shall include the
plural form and vice versa.
"AFFILIATES" shall mean any company or entity controlled by,
controlling, or under common control with a party hereto and shall include
without limitation any company more than fifty percent (50%) of whose voting
stock or participating profit interest is owned or controlled, directly or
indirectly, by a party, and any company which owns or controls, directly or
indirectly, more than fifty percent (50%) of the voting stock of a party.
"AFM" shall mean HP's Accounting and Finance Manual which is intended
to provide financial policy guidelines and specific instructions concerning HP's
accounting and reporting processes in effect as of the Effective Date and as
updated from time to time provided Caliper has been furnished with such updates
and afforded a reasonable opportunity to object to its use
<PAGE> 2
with this Agreement. Where applicable and mutually agreed, the AFM will be
extended to provide guidelines and specific instructions for the collaboration.
"ALLOWABLE EXPENSE" shall mean those expenses incurred by a party
consisting of [ * ], and any other amounts on which the parties agree from time
to time to the extent such amounts are not included in Cost of Sales.
"APPLICATION" means a particular task, experiment or biochemical or
chemical manipulation, or series thereof, that a potential user of a
Collaboration Product wishes or needs to perform.
"APPLICATION KIT" shall mean a set of Components that are sold
together as a package to System users for purposes of performing a specific
Application, including without limitation, LabChips, Reagents and the
Application-specific portion of System Software.
"BUSINESS PLAN" shall mean the Collaboration business plan
established by the parties pursuant to Article 3, in accordance with the HP Ten
Step Planning Process.
"CALIPER DEVELOPMENT EXPENSES" shall mean all expenses actually
incurred by Caliper for directed product development and marketing activities
under the Product Plan for Collaboration Products calculated as [ * ]. All these
expenses shall be applicable to such activities, beginning from the time a
Component is placed on the Development Plan.
"CALIPER KNOW-HOW" shall mean all scientific, technical and
engineering information which Caliper owns or controls or to which Caliper has a
license including the right of sublicense as of the Effective Date or during the
term of the Collaboration, which Caliper uses reasonable efforts to protect as a
trade secret, and which is not publicly accessible in an issued patent or
otherwise.
"CALIPER OPERATING EXPENSES" shall mean all monies applied by Caliper
and its Third Party collaborators to research or development programs relating
to Lab-on-a-Chip Technology or systems utilizing Lab-on-a-Chip Technology, to
the extent that such research or development efforts are relevant to the Field
of Interest as reasonably determined by Caliper, except to the extent that
intellectual property developed therein is contractually prohibited from being
used in the Collaboration throughout the intended eight (8) year term for
development of Collaboration Products in the Field of Interest, and excluding
any amounts provided to Caliper by HP under Section 7.2, consisting of but not
limited to, [ * ].
"CALIPER PATENTS" shall mean (i) all patents, including, without
limitation, any substitutions, extensions, reissues, renewals, supplementary
protection certificates and inventors' certificates, which have not been held
invalid or unenforceable by a non-appealable or non-appealed decision of a court
of competent jurisdiction, and (ii) all patent applications filed in any
jurisdiction, including, without limitation, any provisionals, divisionals,
continuations, continuations-in-part, which in each case Caliper owns, controls
or has a license to (with the right to sublicense) as of the Effective Date or
during the term of the Collaboration.
"CALIPER TECHNOLOGY" shall mean Caliper Patents and Caliper Know-How
relating to Lab-on-a-Chip Technology. Rights to Caliper Technology under this
Agreement shall be subject to any restrictions or obligations (including payment
obligations) contained in agreements between Caliper and a Third Party.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2
<PAGE> 3
"CLASS A PRODUCTS" shall mean LabChips; Reagents [ * ].
"CLASS B PRODUCTS" shall mean Instruments [ * ].
"CLASS C PRODUCTS" shall mean general purpose products that are sold
separately by HP or Third Parties for end use separate from LabChip-based
Systems. This is in contrast to components or devices embedded in Instruments.
Examples of Class C Products include [ * ].
"COLLABORATION" shall mean all activities relating to Collaboration
Products conducted by the parties pursuant to this Agreement.
"COLLABORATION MANAGERS" shall mean the persons assigned by each
party to the management of the Collaboration as further described in Section
3.2(b) below.
"COLLABORATION PRODUCTS" shall mean the Systems in the Field of
Interest that the parties put on a Product Plan and all Components that make up
such Systems. "Collaboration Products" shall include HP Collaboration Products
(as defined below). For purposes of Article 10 only, "Collaboration Products"
shall only include such [ * ] during the Collaboration.
"COMPONENT" shall mean one of the elements of a complete System,
including but not limited to, the LabChip, the Instrument, the System Software
or a Reagent.
"CONFIDENTIAL INFORMATION" shall mean any trade secret information
disclosed by one party to the other in connection with activities under this
Agreement, including but not limited to scientific, technical and engineering
information, reports exchanged between the parties, marketing and other business
plans, information relating to a party's products, sales, financial and
corporate affairs, suppliers, customers, employees, or investors, and other
comparable information; provided, that information will be "Confidential
Information" only if it is marked as confidential at the time of disclosure or,
if the material is not in written form (e.g. orally disclosed), it is treated as
confidential at the time of disclosure and is designated as confidential in a
written memorandum sent to the recipient within thirty days of disclosure,
summarizing the confidential information sufficiently for identification.
"COST OF SALES" shall mean total costs of manufacture, including
Standard Cost of a Collaboration Product or Transfer Price (whichever is
applicable), [ * ]. Notwithstanding the AFM, as used in this Agreement the term
Cost of Sales does not include [ * ].
"DATA ACQUISITION SOFTWARE" shall mean software that sends data
measured by the Instrument to a file, database or memory. Such data set is used
for generating the measurement information from an Application or for displaying
status information of the Application in the user interface of the System
Software or the Instrument.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
3
<PAGE> 4
"DATA INTERPRETATION SOFTWARE" shall mean software that evaluates
data measured by the Instrument according to algorithms with Distinct
Functionality for a particular Application. Parameters for the Data
Interpretation Software are defined in the Experimental Method and are entered
through the user interface component of the Data Interpretation Software module
of the System Software. For example, Data Interpretation Software could use a
pattern recognition algorithm to interpret the data generated by an Application.
"DEVELOPMENT PLAN" shall mean the component of the Product Plan that
sets forth a detailed plan for the development of a particular Collaboration
Product as described in Section 3.2(b) below.
"DISTINCT FUNCTIONALITY" shall mean functionality of a Component or
System that a reasonable user would consider to be meaningfully distinct from
the functionality of another Component or System. For example, a [ * ] would not
have Distinct Functionality.
"ENGINEERING RESPONSIBILITY" shall mean ultimate responsibility for
deciding upon final specifications and for developing the manufacturing
processes for meeting such specifications.
"EXECUTIVE SPONSOR" shall mean the persons assigned by each party to
the oversight of the Collaboration between the parties created by this
Agreement, and responsible for dispute resolution as further described in
Section 3.2(a) below.
"EXPERIMENTAL METHOD" shall mean a set of data or instructions, not
necessarily in the form of software, used to control the Components of a System,
which Components may be common to multiple Applications, for performance of a
particular Application. For a particular Application, for example, the
Experimental Method performs control of Instruments (e.g., control chip voltages
and detector setpoints) and defines the particular data interpretation
algorithm, information presentation or information management routines in the
System Software.
"FIRMWARE" shall mean software that physically resides in the
Instrument. Firmware controls the hardware functions of the Instrument,
communicates with other functional modules in the System and executes the
Instrument control part of the Experimental Method for a particular Application.
"FDA" shall mean the United States Food and Drug Administration, and
any successor thereto.
"FIELD OF INTEREST" shall have the meaning provided in Section 2.2
below.
"GROSS MARGIN" shall mean [ * ].
"GROSS REVENUES" shall mean the price invoiced by HP to Third Parties
for the sale of Collaboration Products and New Products. Handling of bundling
will be set forth in Article 7.
"HP COLLABORATION PRODUCT" shall have the meaning set forth in
Section 4.2(d).
"HP KNOW-HOW" shall mean all scientific, technical and engineering
information which HP owns or controls or to which HP has a license including the
right of sublicense as of the
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
4
<PAGE> 5
Effective Date or during the term of the Collaboration, which HP uses reasonable
efforts to protect as a trade secret, which HP elects to incorporate into or use
in the design, development or manufacturing of Collaboration Products during the
course of the Collaboration, and which is not publicly accessible in an issued
patent or otherwise.
"HP OPERATING EXPENSES" shall mean the expenses incurred by HP for
development (including but not limited to development payments to Caliper),
marketing, distribution, sales, administration and support of Collaboration
Products, consisting of but not limited to, [ * ].
"HP PATENTS" shall mean (i) all patents, including, without
limitation, any substitutions, extensions, reissues, renewals, supplementary
protection certificates and inventors' certificates, which have not been held
invalid or unenforceable by a non-appealable or non-appealed decision of a court
of competent jurisdiction, and (ii) all patent applications filed in any
jurisdiction, including, without limitation, any provisionals, divisionals,
continuations, continuations-in-part, which in each case HP owns, controls or
has a license to (with the right to sublicense) as of the Effective Date or
during the term of the Collaboration.
"HP TECHNOLOGY" shall mean HP Patents and HP Know-How. Rights to HP
Technology under this Agreement shall be subject to any restrictions or
obligations (including payment obligations) contained in Third Party agreements.
"INFORMATION MANAGEMENT SOFTWARE" shall mean software that manages
data, including the Experimental Method-, measured- or results data for a
particular Application. The functions of such software include, but are not
limited to, archiving, retrieving, searching for or mailing information. Such
tasks are initiated through a user interface component of this functional module
of the System Software.
"INFORMATION PRESENTATION SOFTWARE" shall mean software that
visualizes or saves evaluated data through various media (e.g., display, disc,
printer). Other software tools may also be used for reporting or accessing the
results (e.g., standard office software packages like MS WinWord(TM),
Browsers(TM)). Specific parameters for Information Presentation Software are
defined in the Experimental Method and are entered through the user interface
component of the Information Presentation Software functional module.
"INSTRUMENT" shall mean all hardware in a System, excluding [ * ].
"INSTRUMENT CONTROL SOFTWARE" shall mean software that communicates
data to and from the Instrument through the appropriate instrument driver and
physical link driver, including but not limited to, Scripts. Such data is either
entered through the user interface of the System or System Software or received
and saved in the Experimental Method data file or database. Data received can
also be shown by other means, e.g., a display on the Instrument.
"LABCHIP" shall mean a chip, based on Caliper Technology, which is
designed to perform an Application or portion thereof when used in a System. As
of the Effective Date, such chips typically consist of [ * ].
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
5
<PAGE> 6
"LAB-ON-A-CHIP TECHNOLOGY" shall mean microfluidic systems, methods,
devices, and structures which have microfluidic processing elements that have
[ * ] as further defined in Exhibit A to this Agreement.
"MANUFACTURING PLAN" shall mean the component of the Product Plan
that sets forth a detailed plan for the manufacturing of a Collaboration Product
as set forth in Section 5.2(a) below.
"MARKETING PLAN" shall mean the component of the Product Plan that
sets forth a detailed plan for the marketing, distribution and support of a
Collaboration Product.
"NET REVENUES" shall mean Gross Revenues less trade discounts, cash
discounts and other corrections (e.g., for product returns, price protection
and currency hedging) following HP standard practice as outlined in the AFM.
"NEW PRODUCT" shall mean a Component or a System in the Field of
Interest, having Distinct Functionality compared to a Collaboration Product,
that is developed independently by either party after the termination or
expiration of the Collaboration.
"NON-COLLABORATION PRODUCT" shall mean any product that includes HP
Technology or Caliper Technology and does not fall within the definition of a
Collaboration Product.
"OEM" stands for original equipment manufacturer.
"PATENT COSTS" shall mean the fees and expenses paid to outside
counsel and other Third Parties, direct costs of in-house counsel, and filing
and maintenance fees and expenses, incurred in connection with the establishment
and maintenance of rights under patents, including costs of patent interference,
opposition, reissue, reexamination or other proceedings before the USPTO or
other patent offices. In-house counsel costs shall be determined on the basis of
time actually spent on patents applicable to Collaboration Products.
"PMA" shall mean a Premarket Approval Application filed with the FDA,
or foreign equivalent, as applicable.
"PRODUCT PROGRAM MANAGER" shall mean the persons assigned by each
party to the management of the development of a Collaboration Product as further
described in Section 3.2(c).
"PRODUCT PLAN" shall mean the plan established by the parties
pursuant to Article 3 of this Agreement. The Product Plan shall include the
following components for each Collaboration Product: the Development Plan, the
Manufacturing Plan and the Marketing Plan, in accordance with CAG's Project
Lifecycle.
"REAGENT" shall mean a chemical or biochemical substance to be used
with a LabChip for a particular Application.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
6
<PAGE> 7
"SCRIPT" shall mean a set of instructions (typically, a software
file) that is sent to the Instrument to control the LabChip environment and
fluidic manipulations inside the LabChip, including but not limited to [ * ].
Typically there will be a [ * ].
"STANDARD COST" shall mean all manufacturing costs which add value
to the manufactured Collaboration Product. Such costs include but are not
limited to [ * ]. Overhead Expenses include [ * ]. All of these Overhead Expense
items consist of, but are not limited to, [ * ]. These Standard Costs for a
Collaboration Product are [ * ].
"SYSTEM" shall mean a complete set of chips, hardware, software and
reagents that makes use of Caliper Technology to perform a single Application,
excluding Class C Products.
"SYSTEM SOFTWARE" shall mean all software used in a System. System
Software defines and executes the Experimental Method for a particular
Application and includes, but is not limited to, Instrument Control Software,
Data Acquisition Software, Data Interpretation Software, Information
Presentation Software, Information Management Software and Firmware.
"THIRD PARTY" shall mean any individual or entity other than Caliper,
HP or Affiliates of either.
"TRANSFER PRICE" shall mean the price HP pays to Caliper for any
Collaboration Products that are manufactured by Caliper and sold to HP. This
price is equal to [ * ].
"U.S. GAAP" shall mean `Generally Accepted Accounting Principles' and
refers to accounting policies and procedures that are widely used in the U.S.
"VAR" stands for value added reseller.
2. LICENSES AND EXCLUSIVITY
2.1 LICENSES TO HP
(a) COLLABORATION PRODUCTS. Subject to the terms and conditions
of this Agreement, Caliper hereby grants to HP a worldwide license, co-exclusive
with Caliper, under the Caliper Technology to develop, manufacture for
Commercial Sale, market, distribute, sell and support Collaboration Products.
Notwithstanding, HP, except as provided in Sections 4.2(d) and 5.1(c), is not
granted a license to develop or manufacture LabChips. Caliper represents that it
has not heretofore granted any licenses under the Caliper Technology that would
grant the licensee the right to develop, manufacture for Commercial Sale,
market, distribute, sell or support Collaboration Products, except as heretofore
disclosed.
(b) SUBLICENSING. HP may sublicense the manufacturing rights
granted to it under subsection 2.1(a) under the procedures set forth in Section
5.1(b), and HP may sublicense the distribution rights as provided in Section 6.3
of this Agreement. No other license rights under subsection 2.1(a) may be
sublicensed or transferred except by mutual written agreement.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
7
<PAGE> 8
(c) DIAGNOSTIC APPLICATIONS OF [*]. Subject to the terms and
conditions of this Agreement, Caliper hereby grants to HP a worldwide,
non-exclusive, non-transferable (except as provided below) license, under
Caliper Technology to make, use, sell and have sold Collaboration Products for
use as Diagnostic Products (as defined in Section 2.2(c)), in which Caliper
Technology is used solely for preparing samples for analysis by [*] and in which
the data of interest is derived directly from such [*]. Notwithstanding the
foregoing, HP may sublicense the license granted under this Section 2.1(c)
solely for the purpose of having a product manufactured on behalf of HP. Such
license may not otherwise be assigned, sublicensed or in any way transferred to
a Third Party.
(d) RESTRICTIONS ON USE OF CALIPER KNOW-HOW. HP acknowledges that
the use of Caliper Know-How under the licenses to HP set forth above in this
Section 2.1 is limited to use of such Caliper Know-How solely in the Field of
Interest. HP agrees to use reasonable business efforts to avoid use of the
Caliper Know-How outside the Field of Interest by HP, its Affiliates or
sublicensees, and to avoid disclosure of such Caliper Know-How by HP or its
Affiliates and sublicensees to any party who does not have a need to know such
Caliper Know-How for purposes of the Collaboration. HP agrees that if it
discovers at any time that Caliper Know-How is being used by any such person
outside the Field of Interest, it will promptly disclose such use to Caliper and
the parties will confer in order to determine a reasonable and effective means
of addressing such unauthorized use.
(e) SOFTWARE.
(i) Subject to the terms and conditions of this Agreement,
Caliper hereby grants HP a non-exclusive, non-transferable license under Caliper
Technology and any applicable copyright to reproduce, create derivative works,
publicly distribute, publicly perform and publicly display System Software (both
source and object code) for use in Collaboration Products; provided, that HP may
not disclose any source code provided by Caliper to Third Parties except to
contractors under duty of confidentiality to HP. Caliper will provide updates to
source and object code and available documentation from time to time upon
request of HP. Under this license HP may sublicense manufacturing and
distribution rights to the same extent as HP may sublicense other Caliper
Technology under section 2.1(b).
(ii) Caliper hereby grants HP a royalty-free, non-exclusive
license including the right of sublicense under Caliper Technology and any
applicable copyright to reproduce, create derivative works, publicly distribute,
publicly perform and publicly display any improvements to software originally
created by HP (both source and object code) for use in all fields. Caliper will
provide updates to any such improvements from time to time upon request of HP.
(f) RETAINED RIGHTS. All rights in Caliper Technology not
expressly granted to HP in this Agreement are retained exclusively by Caliper.
2.2 FIELD OF INTEREST. The term "Field of Interest" shall mean
Commercial Sale of Limited Through-Put products for research, development,
analytical or manufacturing Applications, including Diagnostic Products to the
extent permitted in subparagraph 2.1(c) above, but not other Diagnostic
Products, and excluding [ * ], which products are designed (i) to introduce and
prepare chemical, biochemical and biological samples, (ii) to perform assays,
synthesis and other reactions, or (iii) to perform physical separations and
detection.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
8
<PAGE> 9
(a) THROUGH-PUT LIMITS.
(i) "Limited Through-Put" as used herein shall mean sample
throughput per System not exceeding the volume limits set forth below based on
operation of the product for [ * ]:
<TABLE>
<CAPTION>
<S> <C> <C>
Years [ * ] [ * ]
Years [ * ] [ * ]
Years [ * ] [ * ]
Years [ * ] [ * ]
Years [ * ] [ * ]
[ * ]. The limit will be based on Systems that have actually been used, at
Caliper or a Third Party, in any commercial activity (not experimental Systems).
The limit will be determined on a System-by-System basis.
</TABLE>
(ii) The parties intend to develop Collaboration Products
that will have a leading edge relative to the competition. The parties will
strive to maintain a leading edge by proactively reviewing the state of
competitors' development and commercial efforts, to the extent information is
available. If at any time the through-put limits set forth above would prevent a
Collaboration Product from having a leading edge with regard to a particular
Application over competing products being actively developed or marketed for
Commercial Sale by Third Parties, then the parties will review such limits and
reasonably discuss potential changes in good faith with regard to the particular
Application, subject to any existing Third Party commitments.
(iii) The parties acknowledge that customers may purchase
multiple Systems for certain Applications in order to increase their through-put
capacity, and that it may be beneficial to the Collaboration for HP to assist
such customers in these efforts. Accordingly, HP is authorized to [ * ] .
Notwithstanding the foregoing, the parties agree that all Systems that are
developed and commercialized under this Collaboration shall be [ * ].
(b) "COMMERCIAL SALE" as used herein shall mean sale of
Collaboration Products in volumes of [ * ]. A proposed Collaboration Product
will be considered to be for "Commercial Sale" provided there is a reasonable
projection in the Product Plan that it will be sold in such quantity [ * ]. The
parties recognize that sales volume projections are inexact. HP will retain
rights to Instruments, System Software and related Systems that do not actually
meet these sales projections, provided the volume estimates were reasonable
throughout the development process for such Instruments, System Software and
related Systems. "Commercial Sale" does not include the use of Caliper
Technology to commercialize [ * ], but Collaboration Products offered for
Commercial Sale may be used by customers for such purposes. "Commercial Sale"
does not include the use of Caliper Technology to provide [ * ].
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(i) The parties acknowledge that HP may introduce
Instruments to selected customers on a limited basis [ * ] prior to general
commercial introduction, for the purpose of obtaining customer feedback prior to
introduction, and that such beta testing shall not be considered general
commercial introduction.
(ii) Caliper may, acting independently or in collaboration
with others, develop, make and distribute to Third Parties any System. However,
Caliper may only do this if Caliper limits actual sales of Systems to [ * ].
Systems must have Distinct Functionality to be counted separately under this
Subsection. Caliper may sell any number of LabChips, Reagents and other
consumables for use on such Systems. Caliper will label such Instruments "not
for resale," [ * ].
(c) "DIAGNOSTIC PRODUCTS" as used herein shall mean products that
are subject to regulatory approval requirements under applicable law,
regulations or policies of regulatory agencies (i.e., PMA or 510(k), or foreign
equivalent) and are useful for chemical or biochemical analysis of human samples
in a health care setting, such as a reference laboratory, hospital laboratory,
hospital, clinic, doctor's office or at home, and veterinary products utilizing
similar technology to the above products. HP will not be prohibited from selling
Collaboration Products designed for research, development, analytical or
manufacturing use to such customers, provided all products are labeled in
accordance with Section 6.4. Caliper will not be prohibited from introducing
products designed for diagnostic use by such customers while Caliper is in the
course of pursuing FDA approval on such a product, or from transferring such
rights to any Third Party.
2.3 EXCLUSIVITY
(a) During the Collaboration, the relationship will be mutually
exclusive with respect to the application of Lab-on-a-Chip Technology to the
Field of Interest, meaning that during the Collaboration (i) each party shall
use reasonable business efforts to disclose to the other party Lab-on-a-Chip
Technology activities it is conducting or funding (including activities in
collaboration with Third Parties, who may or may not be providing the
Lab-on-a-Chip Technology) to the extent such technology is either relevant to
the Field of Interest as reasonably determined by such party, or is actually
used in the development of products in the Field of Interest, and (ii) the
parties may develop and commercialize products utilizing Lab-on-a-Chip
Technology in the Field of Interest only as Collaboration Products under this
Agreement.
(b) Caliper acknowledges that HP has been and will continue to be
engaged in [ * ], and that this Section does not prohibit HP from (i) pursuing
its internally developed Lab-on-a-Chip Technology, outside the Field of
Interest, such as diagnostics; or (ii) working with any Third Party (including
microfluidics companies) on diagnostics, including arrays for diagnostics. To
the extent that these activities constitute application of Lab-on-a-Chip
Technology to the Field of Interest, they will be subject to the provisions of
Section 2.3(a). Caliper will not be free to use HP Lab-on-a-Chip Technology
disclosed under confidentiality for any purpose outside the Collaboration
(except as otherwise expressly licensed under this Agreement), and HP will not
be free to use Caliper Lab-on-a-Chip Technology disclosed under confidentiality
for any purpose outside the Collaboration (except as otherwise expressly
licensed under this Agreement). HP and Caliper will use all reasonable business
efforts to manage their collaborative and independent activities so as to foster
an environment of open communication for collaborative purposes while protecting
the integrity of independent activities.
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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2.4 LICENSES TO CALIPER
(a) HP Know-How License. Subject to the terms and conditions of
this Agreement, HP hereby grants to Caliper a worldwide, fully-paid,
non-exclusive, license, with the right to grant sub-licenses, to develop, make,
use, import and sell all Non-Collaboration Products that make use of Caliper
Technology for use in all fields during and after the term of the Agreement,
using all HP Know-How, excluding any HP Confidential Information directed to
HP's [ * ]. Upon request from Caliper, HP will use reasonable business efforts
to provide such HP Know-How or to allow Caliper access to such HP Know-How in a
reasonable format.
(b) HP Patent License. HP will notify Caliper in writing at the
time HP proposes to incorporate subject matter claimed in an HP Patent that was
first applied for prior to or during the Collaboration into a Collaboration
Product, or to practice such an HP Patent in the development or manufacture of a
Collaboration Product, or at the time HP learns that such an HP Patent covers a
Collaboration Product. HP hereby grants Caliper a non-exclusive worldwide
license to any such HP Patent (except to the extent such HP Patent covers HP's
[ * ]) subject to agreement of the parties on a commercially reasonable royalty.
Such license includes:
(i) a license under such HP Patent to develop
Non-Collaboration Products that include Caliper Technology for use in all fields
during and after the term of the Agreement; and
(ii) a license under such HP Patent including the right of
sublicense to make, have made, use, sell, offer for sale and import
Non-Collaboration Products that include Caliper Technology for use in all fields
during and after the term of the Agreement.
(c) HP SOFTWARE LICENSE. HP hereby grants Caliper a license under
HP Technology and any applicable copyright to any System Software (both source
and object code) subject to agreement of the parties on a commercially
reasonable royalty; provided, that Caliper may not disclose the source code to
Third Parties except to contractors under duty of confidentiality to Caliper. HP
will provide updates to source and object code and available documentation from
time to time upon request of Caliper. Such license includes:
(i) a non-exclusive, worldwide license under such System
Software to create derivative works for use in Non-Collaboration Products that
make use of Caliper Technology for use in all fields during and after the term
of the Agreement; and
(ii) a non-exclusive, worldwide license including the right
of sublicense under such System Software to reproduce, publicly distribute,
publicly perform and publicly display Non-Collaboration Products that make use
of Caliper Technology for use in all fields during and after the term of the
Agreement.
(d) SOFTWARE IMPROVEMENTS. HP hereby grants Caliper a
royalty-free, non-exclusive license including the right of sublicense under HP
Technology and any applicable copyright to reproduce, create derivative works,
publicly distribute, publicly perform and publicly display any improvements to
software originally created by Caliper (both source and
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object code) for use in all fields. HP will provide updates to any such
improvements from time to time upon request of Caliper.
(e) PURCHASE OF PARTS. Caliper shall have the right to purchase
from HP for use in any Non-Collaboration Product any part manufactured or
supplied by HP that is incorporated into a Collaboration Product in development
or on the market, if Caliper cannot or elects not to manufacture such part or
have it manufactured. HP will identify such parts in HP's product design
documentation. Upon notification by HP, Caliper may elect to purchase such parts
from HP at any time during and after the term of this Agreement so long as such
parts are not obsolete. If Caliper elects to purchase such HP parts, promptly
after Caliper notifies HP of such election the parties shall agree on a
commercially reasonable price for such HP parts. The sale by HP of such parts
shall be subject to HP's standard terms and conditions of sale and service.
(f) LIMITED LICENSE FOR COLLABORATION PRODUCTS. Subject to the
terms and conditions of this Agreement, HP hereby grants to Caliper a worldwide,
fully-paid, non-exclusive, license, to develop, make, use, import and sell
Collaboration Products in accordance with Section 2.2(b)(ii), under HP
Technology, excluding any HP Confidential Information directed to HP's [ * ].
(g) ROYALTY CAP. The compensation due from Caliper to HP in
consideration for all HP intellectual property licensed to Caliper under
Sections 2.4(b) and 2.4(c) above shall not exceed royalties of [ * ]. The rates
set forth in this Section 2.4 are subject to adjustment as provided in Section
10.4(f). Payments due under this Section 2.4 shall be subject to the same terms
and conditions applicable to Gross Margin share payments on Collaboration
Products under Sections 7.6, 7.7 and 7.9. If any such product does not clearly
fall into one of the above classifications, the parties shall mutually agree on
an appropriate classification for such product prior to commercial introduction.
(h) RETAINED RIGHTS. All rights in HP Technology not expressly
granted to Caliper in this Agreement are retained exclusively by HP.
2.5 THIRD PARTY LICENSES
(a) EXISTING THIRD PARTY LICENSES. Any royalty chargeable against
Collaboration Products based on a function of sales of Collaboration Products or
on revenue per unit sold or number of units sold [ * ] Any other fee or cost
associated with such license [ * ]. Each party acknowledges that it is subject
to the terms and conditions of any existing third party licenses of the other
party that it practices under this Agreement, so long as such other party has
provided a copy of the license agreement.
(b) FUTURE THIRD PARTY LICENSES. After the Effective Date, if
either HP or Caliper believes that additional intellectual property or
technology controlled by a Third Party ("Third Party Technology") is required or
desirable in order to proceed with the development or commercialization of one
or more Collaboration Products for use in the Field of Interest, then the
parties will discuss the situation in good faith in order to agree upon whether
to seek a license to such Third Party Technology, and if so, on what terms. If
those terms include a license payment to the third party, any portion of the
license payment that consists of a royalty based on a function of sales of
Collaboration Products or on revenue per unit sold or number of units sold
[ * ]. The parties will agree on how to share any other portion of the
consideration provided to obtain such license.
2.6 MAJOR TRANSACTIONS. During the Collaboration, neither party may
enter into any agreement or arrangement respecting Collaboration Products [ * ]
for distribution or for the
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purpose of [ * ], unless the other party gives written consent, which consent
will not be unreasonably withheld.
3. COLLABORATION MANAGEMENT
3.1 COLLABORATION PLANNING. The process of business planning will be
based upon Hewlett-Packard's Ten-Step Business Planning and Review Process. This
process is documented in various HP publications which have been made available
to Caliper at the Effective Date (Ref.: Booklet "Ten-Step Business Planning
Fundamentals" Hewlett-Packard Corporate Education Oct. 1997). The Business Plan
will include an assessment of customer needs and the competitive situation in
the markets addressed, a detailed 15-months Product Development Roadmap
including a 5-Year Product Development Vision, Marketing/Distribution and
Support, and Manufacturing Plans covering these periods and other elements as
deemed necessary by the parties. The parties will use reasonable business
efforts to complete the initial Business Plan at the end of the third month
following the Effective Date. The Business Plan will be at least reviewed on an
annual basis, revisions of the Business Plan being due at [ * ] of each year
during the term of the Collaboration. The process will be managed by the
Collaboration Managers of both parties, who designate Business Planning Teams
representing the functional areas of Marketing/Sales/Support, Research and
Development, Manufacturing and Finance.
3.2 COLLABORATION MANAGEMENT. The purpose of the Collaboration
management structure set forth below is to coordinate and expedite development
and commercialization of Collaboration Products. The activities of the parties
under this Agreement shall be managed in this structure only to the extent set
forth herein. Each party shall assign individuals from within their respective
organizations to each of the following positions. Each party may, in its sole
discretion, may replace the assigned individuals at any time as necessary.
(a) EXECUTIVE SPONSORS.
(i) APPOINTMENT; MEETINGS. Within thirty (30) days of the
Effective Date, each party shall appoint one (1) individual to be its Executive
Sponsor for the Collaboration. Each party's Executive Sponsor shall be a senior
executive of such party with the authority to make decisions on behalf of such
party.
(ii) RESPONSIBILITIES. The Executive Sponsors shall have the
following specific responsibilities:
(1) approving the Business Plan,
(2) settling disputes or disagreements that are
unresolved by the Collaboration Managers; and
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(3) performing such other functions as appropriate to
further the purposes of this Agreement as determined by the parties.
(iii) DECISION-MAKING. The Executive Sponsors shall make
decisions by unanimous vote. Whenever the Executive Sponsors are unable to reach
a consensus on a particular issue, such issue shall be discussed [ * ].
(b) COLLABORATION MANAGERS.
(i) APPOINTMENT; MEETINGS. Within thirty (30) days of the
Effective Date, each party shall appoint one (1) individual to be its
Collaboration Manager. The Collaboration Managers shall meet monthly during the
term of the Agreement, unless otherwise mutually agreed by the parties. Meetings
of the Collaboration Managers will be held alternately at the facilities of the
parties in Palo Alto or Waldbronn or by teleconference. Each party shall
promptly report to the Collaboration Managers on all material issues relating to
the development or commercialization of the Collaboration Products. Minutes of
the meetings of the Collaboration Managers shall be prepared alternately by the
parties and such minutes shall be provided to the Executive Sponsors for review.
(ii) RESPONSIBILITIES. In addition to having the general
responsibility of conducting the business planning and review process of the
Collaboration in order to achieve the goal of the parties to develop and market
Collaboration Products, the Collaboration Managers shall have the following
specific responsibilities:
(1) directing the process of preparing the Business Plan
and the Product Plans. The first complete Business Plan will be prepared by the
Collaboration Managers within ninety (90) days of the Effective Date;
(2) updating and revising the Business Plan annually or
as mutually agreed;
(3) monitoring and reviewing the progress of research,
development, manufacturing, marketing, distribution and finance activities in
order to ensure that satisfactory progress is being made with respect to the
Business Plan and the Product Plans;
(4) discussing and agreeing upon remedial measures if
the Collaboration Managers determine that the progress for a particular project
covered by a Product Plan is unsatisfactory;
(5) settling disputes or disagreements that are
unresolved by the Product Program Managers;
(6) performing such other functions as appropriate to
further the purposes of this Agreement as determined by the parties.
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(iii) DECISION-MAKING. Decisions of the Collaboration
Managers shall be made by unanimous vote. If the Collaboration Managers become
deadlocked on an issue, the issue shall be presented to the Executive Sponsors
for resolution.
(c) PRODUCT PROGRAM MANAGERS. Each party shall appoint one of its
employees as a Product Program Manager for each System included in the Product
Plan. Such Product Program Manager will be responsible for overseeing the
day-to-day operations of such party with respect to such System and for
facilitating the achievement of agreed development milestones. A Product Program
Manager may be responsible for more than one such System.
(d) PROJECT TEAMS. Wherever practical, the Collaboration Managers
will consider teaming employees from one party to assist the other in areas
where those employees have relevant experience, provided that any disagreements
regarding staffing that cannot be resolved between the Collaboration Managers
will be resolved by [ * ].
4. DEVELOPMENT COLLABORATION
4.1 SCOPE. HP and Caliper will jointly develop Collaboration Products
in the Field of Interest during the term of the Collaboration. The activities
under the Collaboration will be governed by the Business Plan established
jointly by the parties. The parties agree to use the CAG Project Lifecycle
(Revision of October 1997 and future revisions) as the management tool for
establishing detailed Product Plans, Development Plans, Marketing/Sales/Support
Plans and Manufacturing Plans and for managing the execution and review of these
plans in a consistent and logical process framework. A copy of the CAG Project
Lifecycle will be provided to Caliper as reference material.
4.2 ALLOCATION OF DEVELOPMENT RESPONSIBILITIES.
(a) CALIPER RESPONSIBILITIES. Caliper will have Engineering
Responsibility for development of LabChips, [ * ]. With respect to LabChips,
this includes responsibility for development of processes for the manufacture of
LabChips.
(b) HP RESPONSIBILITIES. HP will have Engineering Responsibility
for Instruments. HP will have Engineering Responsibility for [ * ], subject to
Caliper's Engineering Responsibility as described in Section 4.2(a). The parties
expect that work on software will be particularly collaborative, with Caliper
generally focusing on the [ * ] portion of System Software and HP generally
focusing on [ * ]. HP will have responsibility for the overall system
integration of Collaboration Products, meaning that HP will make recommendations
to the party with Engineering Responsibility for each element regarding the
performance characteristics of such element that are necessary to ensure that
all elements function as a complete System when assembled.
(c) ALLOCATION OF FURTHER RESPONSIBILITIES IN THE DEVELOPMENT
PLANS. If Engineering Responsibility for an element of a Collaboration Product
is not specified by Sections 4.2(a) and 4.2(b) above, such responsibility will
be specified in the Development Plan. The
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Collaboration Managers may mutually agree to assign Engineering Responsibility
differently than provided in Sections 4.2(a) and 4.2(b) above on a case-by-case
basis.
(d) POTENTIAL DEVELOPMENT BY HP. If HP proposes to develop a
System within the Field of Interest and if after joint discussion, Caliper
declines to develop the LabChip, [ * ] for such System, HP will have the right
to develop such LabChip, [ * ]; provided, however, HP's right to perform such
development is subject to HP's compliance with the provision under Section 7.2.
If HP develops such Collaboration Products, they shall be "HP Collaboration
Products" for purposes of this Agreement. In the event that HP elects to develop
an HP Collaboration Product, Caliper will provide HP, at reasonable cost to HP,
with available equipment, tools, documentation and training necessary to develop
such HP Collaboration Product(s).
4.3 EXCHANGE OF INFORMATION. Each party will share with the other
party relevant information in its possession that is necessary or useful for the
development of Collaboration Products. The parties will foster a spirit of
uninhibited exchange of information with the goal of creating an attitude of
joint project ownership in the parties' employees engaged in the development of
Collaboration Products.
4.4 DUE DILIGENCE. Each party shall use reasonable business efforts
to carry out development of each Collaboration Product in accordance with the
mutually agreed Product Plans, including applying the level of resources
specified in such plans; provided that Caliper's efforts are subject to HP
providing funding under Section 7.2. Any verification of such efforts will be
performed by independent auditors applying U.S. GAAP.
5. MANUFACTURING
5.1 MANUFACTURING RESPONSIBILITIES
(a) MANUFACTURE BY CALIPER. Except as set forth in Section 5.1(c)
below, Caliper shall be responsible for manufacturing and supplying all LabChips
and Reagents included in the Collaboration Products. Caliper may engage Third
Parties to manufacture and supply LabChips and Reagents, provided that Caliper
retains ultimate responsibility for the final LabChips and Reagents, and subject
to Section 5.1(c).
(b) MANUFACTURE BY HP. HP shall be responsible for manufacturing
and supplying all Instruments, [ * ] included in the Collaboration Products. HP
may engage Third Parties to manufacture and supply Components, provided that HP
retains ultimate responsibility for the final Instruments, [ * ]. If HP supplies
Caliper with Instruments for use outside the Field of Interest or
post-Collaboration, the applicable supply document will provide that HP will not
make engineering changes after the manufacturing release of a product without
notification of Caliper.
(c) CONTINGENT MANUFACTURING RIGHT OF HP FOR LABCHIPS.
(i) If Caliper elects not to manufacture LabChips for a
System included on the Product Plan, or if Caliper fails to meet minimum supply
commitments to be
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agreed upon in future supply agreements under Section 5.2(b), HP shall have the
option to manufacture the LabChips not being supplied by Caliper.
(ii) If HP exercises its contingent manufacturing right for
LabChips as set forth under Section 5.1(c)(i), Caliper will provide HP at
reasonable cost to HP with available technical information, documentation,
training and consulting resources required to manufacture such LabChips. Caliper
will use reasonable business efforts to secure for HP supply terms that are
similar to the terms in Caliper's agreements with its suppliers of pre-produced
LabChip elements and LabChip raw materials. If HP develops new manufacturing
processes and technology in the course of manufacturing such LabChips, HP will
provide Caliper at reasonable cost to Caliper with available technical
information, documentation, training and consulting resources regarding such
new manufacturing processes and technology.
(III) [ * ].
5.2 PRODUCTION PLANNING
(a) ESTABLISHMENT OF MANUFACTURING CAPACITY. The Collaboration
Managers shall develop a manufacturing plan (the "Manufacturing Plan") as part
of the Product Plan for each Collaboration Product, which shall be designed to
ensure sufficient supply of all Collaboration Products to satisfy market demand.
(b) LABCHIP SUPPLY AGREEMENTS. The sale of LabChips by Caliper to
HP will be governed by the terms and conditions of the OEM Purchase Agreement,
as outlined in Exhibit B hereto. In addition to the terms set forth in Exhibit
B, the following key terms are agreed to herein by the parties: (a) transfer
pricing will be as determined by and set forth in this Agreement, including
[ * ]; and (b) HP shall be obligated to buy, and Caliper shall be obligated to
sell, all of HP's requirements for such LabChips during the term of the
Collaboration. HP may revise any forecasts as set forth in the OEM Purchase
Agreement.
5.3 DUE DILIGENCE. Each party will use diligent and reasonable
business efforts in manufacturing the Collaboration Products for which such
party has manufacturing responsibility.
6. MARKETING OF COLLABORATION PRODUCTS
6.1 SCOPE. HP will have the exclusive right to, and responsibility
for, marketing, selling, distributing and supporting Collaboration Products at
HP's expense in accordance with the terms of this Agreement and the Product
Plans jointly developed and agreed to by the parties as provided in Article 3,
except as otherwise specifically provided in this Agreement.
6.2 BRANDING.
(a) Caliper will mark LabChips supplied by Caliper with
appropriate "Caliper" and "LabChip" trademarks. Subject to HP's internal
trademark clearance procedures and Corporate Identity standards, Caliper will
also mark LabChips, or permit HP to mark LabChips, with the HP company and
product trademarks as a prominent sub-brand.
(b) Subject to HP's internal trademark clearance procedures and
Corporate Identity standards relating to co-branding, HP will mark, or allow
Caliper to mark, all System
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Components including Instruments, Reagents and Software with appropriate
"Caliper" and "LabChip" trademarks as a prominent sub-brand.
6.3 DISTRIBUTORS. [ * ]
6.4 PACKAGING AND LABELING. The Collaboration Products for commercial
sale under this Agreement shall be packaged and labeled consistent with the
requirements of the applicable laws of the countries where a Collaboration
Product is sold.
(a) The parties agree to discuss patent marking on a case-by-case
basis prior to product introduction in accordance with HP internal guidelines on
patent marking to preserve patent rights or protect the product from
infringement. If applicable, such patent marking shall identify HP and Caliper
as the manufacturers of such Collaboration Product.
(b) The parties agree to label Collaboration Products in a way
that makes it clear that no license is granted for diagnostic use but that does
not hurt marketing efforts.
6.5 ADVERTISING, PROMOTIONAL AND EDUCATIONAL MATERIALS. The parties
shall mutually establish guidelines for the use of HP's and Caliper's corporate
names, logos and trademarks in written sales, promotional, educational and
advertising materials relating to Collaboration Products. All such written and
visual materials and all documentary information and promotional materials will
portray HP, Caliper and their respective corporate names, logos and trademarks
in a manner consistent with their respective roles under this Agreement.
6.6 CUSTOMER SUPPORT. HP shall manage the customer interface and
shall provide a first level of service and support to end-user customers for all
Collaboration Products. Caliper will use reasonable business efforts to provide
backup technical support to HP. The Collaboration Managers will agree on a
mechanism by which Caliper will provide such backup technical support and obtain
direct end-user customer feedback regarding Collaboration Products. [ * ]. Upon
termination, the parties will negotiate a reasonable fee for such technical
support as part of the OEM agreement between the parties.
6.7 DUE DILIGENCE. HP will [ * ]. HP shall use reasonable business
efforts in marketing, promoting, selling and supporting the Collaboration
Products.
7. FINANCIAL AND COMMERCIAL TERMS
7.1 EQUITY INVESTMENT. Within three days after the Effective Date,
the parties shall enter into a Preferred Stock Purchase Agreement, pursuant to
which HP shall pay to Caliper a total amount of four million nine hundred
ninety-nine thousand, nine hundred ninety eight dollars ($4,999,998) cash in
consideration for eight hundred thirty three thousand three hundred thirty
three (833,333) shares of Caliper Series E Preferred Stock at a purchase price
of six dollars ($6.00) per share.
7.2 DEVELOPMENT FUNDING.
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(a) MINIMA. HP will provide projects for development of
Collaboration Products by Caliper sufficient to meet the funding minima set
forth in this section. HP will pay Caliper Development Expenses for such
projects in the minimum amount of [ * ] dollars during [ * ], provided Caliper
actually incurs that amount of Caliper Development Expenses. HP will pay Caliper
Development Expenses for such projects in the minimum amount of [ * ] dollars in
the aggregate during years [ * ], provided Caliper actually incurs that amount
of Caliper Development Expenses. HP will pay Caliper Development Expenses for
such projects in the minimum amount of [ * ] dollars per year during years
[ * ], provided Caliper actually incurs that amount of Caliper Development
Expenses.
(b) CHANGES IN FUNDING LEVEL. Subject to the requirements of
subparagraph 7.2(a) above, at the start of year [ * ] HP may reduce or increase
the amount of Caliper Development Expenses that HP will pay for during year
[ * ] as compared with the actual funding in year [ * ] by any amount up to
[ * ], or a larger amount with Caliper's advance consent. Similarly, at the
start of year [ * ] HP may reduce or increase the amount of Caliper Development
Expenses that HP will pay for during year [ * ] as compared with the actual
funding in year [ * ] by any amount up to [ * ], or a larger amount with
Caliper's advance written consent. At the start of any subsequent year HP may
increase the amount of Caliper Development Expenses that HP will pay for during
such year as compared with the actual funding in the previous year by [ * ]
percent [ * ], or a larger amount with Caliper's advance written consent.
(c) HP will advance funds to Caliper on a monthly basis
sufficient to pay for the Caliper Development Expenses estimated and agreed to
for work to be conducted during each year under the Product Plan. Such payments
will be independent of any goals or milestones set forth in the Product Plan.
(d) Caliper will report actual incurred Caliper Development
Expenses by project to HP quarterly, not later than thirty days after the end of
each quarter. The report will include the information specified in the
definition of "Caliper Development Expenses".
(e) Deviations between amounts advanced by HP and actual incurred
Caliper Development Expenses at the end of each quarter will be carried over to
the next quarter and will reduce or increase the estimated funding payments for
the following month. Deviations at the end of any year will be carried over to
the following year.
(f) [ * ] used in calculating Caliper Development Expenses will
be reviewed annually and [ * ] will be adjusted by mutual agreement. The [ * ]
includes but is not necessarily limited to [ * ].
7.3 HP OPERATING EXPENSES
(a) YEARS [ * ]. HP shall expend not less than [ * ] in HP
Operating Expenses during the first [ * ] of the Agreement, including at least
[ * ] in Caliper Development Expenses funded by HP pursuant to Section 7.2.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(b) YEARS [ * ]. If HP desires to continue the Collaboration
after the [ * ] anniversary of the Effective Date, HP shall expend at least
[ * ] dollars [ * ] in HP Operating Expenses in the [ * ] year of the Agreement
and at least [ * ] dollars [ * ] in HP Operating Expenses in the [ * ] year of
the Agreement, again including Caliper Development Expenses funded by HP. HP
shall notify Caliper in writing at least one hundred and thirty five (135) days
prior to the [ * ] of the Effective Date, respectively, whether it will or will
not meet its spending requirements for Caliper Development Expenses and HP
Operating Expenses for the following year. In the event HP does not make such
spending commitments for [ * ] either party may terminate the Collaboration,
pursuant to Section 10.5.
(c) YEARS [ * ]. At the beginning of year [ * ] of the
Collaboration, the parties shall initiate discussions regarding the appropriate
level of HP Operating Expenses or alternative performance criteria which HP must
meet in each of the [ * ] years of the Collaboration.
(d) CREDIT FOR EXCESS SPENDING. If HP expends HP Operating
Expenses in excess of the amounts required in a particular year of the
Collaboration, such excess amounts shall be carried forward and applied against
the HP Operating Expense requirement in any subsequent year up to the end of
year [ * ]. In no event, however, may funding for Caliper Development Expenses
be reduced below the minima provided in Section 7.2.
(e) CERTIFICATION BY HP. Within forty five (45) days after the
last day of each year of the Collaboration, HP shall provide to Caliper (i)
written certification by an appropriate HP financial officer that HP has
expended the minimum amounts for HP Operating Expenses to date and (ii) a report
of the cumulative HP Operating Expenses as of the last day of the applicable
year.
7.4 CALIPER OPERATING EXPENSES
(a) YEARS [ * ]. Caliper together with its Third Party
collaborators shall expend not less than [ * ] dollars [ * ] in Caliper
Operating Expenses during the first [ * ] years of the Agreement.
(b) YEARS [ * ]. The parties intend that the Caliper Operating
Expenses will be at least [ * ] dollars [ * ] in the [ * ] year of the Agreement
and at least [ * ] dollars [ * ] in the [ * ] year of the Agreement. However,
Caliper's expenditure of such amounts is at Caliper's sole discretion. Caliper
will notify HP in writing at least [ * ] days prior to the anniversary of the
Effective Date in years [ * ] whether it will or will not meet its spending
requirements for Caliper Operating Expenses for such years. If Caliper notifies
HP that it will not meet such spending requirements for either year [ * ], then
HP shall not be required to meet the HP Operating Expense requirements of
Section 7.3 for such year. HP's obligations under Section 7.2 shall not be
affected however. All other terms of this Agreement shall continue in such
event, and neither party shall have the right to terminate this Agreement
pursuant to Article 10.
(c) YEARS [ * ]. At the beginning of the [ * ] year of the
Collaboration, the parties shall initiate discussions regarding the appropriate
level of Caliper Operating Expenses or
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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alternative performance criteria which Caliper must meet in each of the [ * ]
years of the Collaboration. Such obligations shall be determined in view of the
[ * ], and other reasonable criteria which either party may wish to discuss in
good faith.
(d) CREDIT FOR EXCESS SPENDING. If Caliper expends Caliper
Operating Expenses in excess of the amounts required in a particular year of the
Collaboration, such excess amounts shall be carried forward and applied against
the Caliper Operating Expense requirement in any subsequent year up to the end
of year [ * ].
(e) CERTIFICATION BY CALIPER. Within forty five (45) days after
the last day of each year of the Collaboration, Caliper shall provide to HP (i)
written certification by an appropriate Caliper financial officer that Caliper
has expended the appropriate amounts for Caliper Operating Expenses to date and
(ii) a report of the cumulative Caliper Operating Expenses as of the last day of
the applicable year.
(f) Where intellectual property developed with Caliper Operating
Expenses is prohibited from being used in the Collaboration for a time, such
Caliber Operating Expenses will be recognized in full only when such
intellectual property is no longer prohibited from being used in the
Collaboration and provided such intellectual property is relevant to the Field
of Interest as reasonably determined by Caliper.
7.5 GROSS MARGIN SHARING
(a) COLLABORATION PRODUCTS. During the term of the Collaboration,
HP and Caliper will share the Gross Margin on all Collaboration Products as
follows, on a product-by-product basis:
Class A Products [ * ] [ * ]
Class B Products [ * ] [ * ]
Class C Products [ * ].
If any product does not clearly fall into one of the above classifications, or
there is disagreement between the parties as to which category a particular
product falls into, the parties shall mutually agree on an appropriate Gross
Margin sharing rate for such product in connection with Product Plan
discussions, before commercial manufacture begins.
That portion of the Gross Margin generated by System Software which will be
considered to be attributable to a Class A Product will be calculated by [ * ].
That portion of the Gross Margin generated by System Software which will be
considered to be attributable to a Class B Product will be calculated by [ * ].
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(b) HP COLLABORATION PRODUCTS. If Caliper elects not to develop a
LabChip and HP performs the development of such LabChip as set forth in Section
4.2(d), then HP and Caliper will share Gross Margin on the System in which the
LabChip is used as follows:
(i) if Caliper elects to manufacture the LabChip:
Class A Products [ * ] [ * ]
Class B Products [ * ] [ * ]
Class C Products [ * ].
(ii) if Caliper elects not to manufacture the LabChip:
Class A Products [ * ] [ * ]
Class B Products [ * ] [ * ]
Class C Products [ * ].
(c) ADJUSTMENTS. The parties acknowledge that the Gross Margin
share percentages set forth above have been negotiated based in part upon the
assumption that the average discount (as per the AFM) for Collaboration
Products, treated as a class, will be similar to the average discount for HP
Chemical Analysis Group's non-Collaboration Products. Accordingly, the parties
will review the average discount for all Collaboration Products on the [ * ]
anniversary of the Effective Date, and [ * ] thereafter, in each case reviewing
the previous [ * ] period. If the average discount for Collaboration Products in
any such [ * ] period is more than [ * ] percent [ * ] above or below the
average discount for non-Collaboration Products in such period, then the parties
shall meet and reasonably discuss in good faith corresponding changes to the
Gross Margin share percentages and HP Operating Expense commitments.
(d) TRANSFER OF PRODUCTS: All Collaboration Products supplied by
Caliper and shipped to HP will be invoiced to HP at Caliper's Transfer Price and
HP will pay against such invoice. This price will be part of HP's Cost of Sales
and therefore part of the Gross Margin calculation.
(e) INTEGRATED [ * ] PRODUCTS. Where HP's [ * ] technology is
integrated into a Collaboration Product, the parties will mutually agree, prior
to entry into the laboratory prototype phase, on a Gross Margin sharing rate
that reflects the proportional value of HP's [ * ] technology to the value of
the Caliper Technology. The Gross Margin share rate applicable to the value of
HP's [ * ]. Where the [ * ] qualifies as a Class C Product, [ * ].
7.6 BUNDLING AND PRICING. HP will establish prices for Components
that reflect in good faith the fair market value of each such Component.
Furthermore, the parties understand that certain Collaboration Products may be
sold together as a kit or separately, as customers may require from time to
time. The Gross Margin of Collaboration Products sold together in a kit shall be
shared pursuant to the Gross
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Margin share rules set forth in Section 7.5 based on [ * ]. If [ * ], the
parties shall mutually agree on an appropriate Gross Margin sharing rate for
such Collaboration Product in connection with Product Plan discussions, before [
* ]. HP will individually price such bundled Collaboration Products in
accordance with its good faith estimate of the value of each such product in the
bundle to allow the determination of the Gross Margin share calculated as set
forth in this Section 7.6. After the initial sale of bundles consisting of [ *
], the [ * ] will be sold at prices that are [ * ]. [ * ].
7.7 CASH FLOW
(a) Payment for Caliper Development Expenses will be made monthly
in advance on the first workday of the month.
(b) Caliper's Gross Margin share will be paid not later than the
last workday of the month following the shipment month of the Collaboration
Product.
(c) Royalty payments for New Products will be paid quarterly
(based on HP's fiscal year quarter) not later than the last workday of the month
following the shipment quarter.
(d) Payment for all products supplied by Caliper and shipped to
HP will be made in accordance with the applicable OEM contract.
7.8 COST OF SALES
(a) REVISION OF TRANSFER PRICE. The Transfer Price will reflect
[ * ]. The Transfer Price will be revised at least twice a year [ * ]. If the
[ * ], the Transfer Price must also be revised prospectively (per interim
revision rules of the AFM).
(b) EXCESS CAPACITY COSTS. Excess capacity costs (machinery and
personnel) will [ * ]. In the event that manufacturing capacity extensions
result in excess capacity, then [ * ]. The maximum capacity achievable through
said capacity extension and its related impact on [ * ] will be mutually agreed
to in advance.
(c) EXCESS AND OBSOLETE INVENTORY. Excess and obsolete inventory
will [ * ].
7.9 ACCOUNTING AND AUDIT
(a) HP will follow HP's standard financial practices, processes
and procedures as listed in the AFM. Caliper will follow the U.S.GAAP and will
make reasonable efforts to follow HP's standard financial practices, processes
and procedures as listed in the AFM. HP will disclose the AFM and any other
appropriate information to Caliper as necessary to enable Caliper to do this.
(b) All Gross Margin share and royalty payments made pursuant to
this Agreement will be accompanied by a report detailing the calculation of such
payments. Each party will keep adequate records regarding the basis for such
calculations in accordance with its standard practices but in no event for less
than three years.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(c) Each party may audit the financial records of the other party
for the limited purpose of ensuring compliance with the financial obligations of
that other party under this Agreement. Such an audit may be conducted not more
often than annually, during regular business hours, and on reasonable advance
notice. Such audit will be conducted by an independent auditor which will be
obligated to keep strictly confidential the audited party's financial records
and other information. The auditor will disclose such information to the
auditing party only to the extent necessary to establish compliance or
non-compliance with the audited party's financial obligations and, if the
latter, the magnitude of any discrepancy. The auditing party will pay the costs
of such audit unless the audit shows that the audited party is more than [ * ]
percent [ * ] delinquent in its obligations for the period of the audit as of
the end of such period, in which case the audited party will pay the costs of
the audit.
8. INTELLECTUAL PROPERTY MATTERS
8.1 REPRESENTATIONS AND WARRANTIES. Each party warrants that it has
the right to grant the licenses set forth in Section 2 of this Agreement.
Neither party: (a) makes any other representations or warranties, express or
implied, (b) assumes any liability with respect to any infringement of patents
or other rights of third parties due to the other party's operation under the
licenses granted herein, (c) assumes any responsibility for enforcement of its
Licensed Patents against third parties; or (d) assumes any responsibility for
continued maintenance of any Licensed Patent.
8.2 OWNERSHIP OF TECHNOLOGY
(a) Caliper shall retain all right, title and interest in and to
the Caliper Technology, and to any and all software, inventions, discoveries and
information made or developed solely by Caliper in the course of the
Collaboration, subject only to the licenses expressly granted to HP hereunder.
(b) HP shall retain all right, title and interest in and to the
HP Technology, and to any and all software, inventions, discoveries and
information made or developed solely by HP in the course of the Collaboration,
subject only to the licenses expressly granted to Caliper hereunder.
(c) The parties will jointly own all Joint Inventions (the term
"Joint Inventions" is defined in Section 8.3(b)). The parties shall each have
full rights of joint ownership of such Joint Inventions without restriction to
the Field of Interest. Each party may exploit patents on any Joint Inventions
[ * ]. In particular, each party may use a Joint Invention or a patent thereon
[ * ].
8.3 PATENT PROSECUTION AND MAINTENANCE
(a) SOLE INVENTIONS.
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(i) A "Sole Invention" is an invention or improvement
conceived entirely by one or more employees of Caliper or by one or more
employees of HP in the course of the Collaboration.
(ii) Each party shall have the right, but not the obligation,
at its expense and using patent counsel of its choice, to file, prosecute and
maintain patent applications claiming its Sole Inventions.
(iii) All Patent Costs related to the filing, prosecution
and maintenance of patents claiming Sole Inventions shall be borne by the party
making the invention. Patent Costs are not reimbursed and shall not be
considered as Caliper Development Expenses, Cost of Sales, or Allowable
Expenses.
(b) JOINT INVENTIONS.
(i) A "Joint Invention" is an invention or improvement
conceived jointly by one or more employees of Caliper and one or more employees
of HP in the course of the Collaboration. The determination of whether an
invention or improvement is conceived "jointly" will be made under United States
law by assuming all the inventors were United States citizens and were located
within the territorial limits of the United States at the time of conception,
regardless of the actual nationality of the inventors or the actual location
where the invention was conceived.
(ii) The parties shall confer to determine how to allocate
responsibility and expenses for filing, prosecuting and maintaining patent
applications claiming any Joint Inventions. Unless the parties mutually agree
otherwise, Caliper shall have the right to file, prosecute and maintain patent
applications claiming Joint Inventions relating primarily to Lab-on-a-Chip
Technology and HP shall have the right to file, prosecute and maintain patent
applications claiming Joint Inventions relating primarily to Instruments. If the
party determined to be responsible elects not to file and prosecute applicable
patent applications on such Joint Inventions, the other party may undertake such
prosecution at its own expense in both parties' names. Each party is responsible
for compliance with any inventor law provisions and for any legally required
inventor compensation of its employees
(c) MUTUAL DISCLOSURE OF PATENT APPLICATIONS. If either party
files a patent application covering a Sole or Joint Invention, the filing party
will promptly disclose such patent application to the other party. The filing
party will keep the other party reasonably informed of the course of patent
prosecution or other proceedings with regard to such patent applications and
will provide reasonable advance notice to the other party of all filings and
correspondence with patent authorities regarding such patent applications,
including without limitation office actions, responses to office action,
amendments, restrictions, elections, requests for terminal disclaimer, and
requests for reissue or reexamination of any patent issuing from such
application, and any election to discontinue prosecution or maintenance thereof.
The other party will have an opportunity to review and comment on such filings
and correspondence prior to any applicable filing deadline.
(d) LICENSED PATENTS. Each party will promptly inform the other
if it elects to discontinue prosecution or maintenance of any patent or patent
application licensed hereunder.
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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8.4 THIRD PARTY PATENTS
(a) PATENT REVIEW. The parties acknowledge that there is a risk
that the use, manufacture or sale of Collaboration Products may infringe Third
Party patents. The parties agree to proactively review relevant Third Party
patents on a periodic basis and discuss any such Third Party patents that
represent a material risk of such infringement. Either party may elect at any
time to cease developing, manufacturing or distributing any Collaboration
Product that it reasonably determines on the advice of counsel poses a
substantial risk of infringing a third party patent.
(b) NOTICE OF CLAIMS. If the use, manufacture or sale of
Collaboration Products within the Field of Interest results in a claim, suit or
action, or an overt threat of same, (collectively, "Claims") against either or
both parties for patent infringement or for inducing or contributing to patent
infringement, the party first having notice of such Claim shall promptly notify
the other. The notice shall set forth the facts of such Claim in reasonable
detail.
(c) DEFENSE OF CLAIMS. Upon notice of a Claim, the parties shall
jointly confer regarding the manner in which they will defend against such
Claim and how they will apportion the costs of such defense; unless the parties
otherwise agree, those costs of defense that relate to Collaboration Products
[ * ]. Each party retains the right to settle the Claim against it on such terms
as it may desire and at its own expense.
(d) NO ESCROW. No payments under this Agreement shall be subject
to escrow or otherwise delayed or waived by reason of any patent litigation.
8.5 INFRINGEMENT CLAIMS AGAINST THIRD PARTIES
(a) NOTIFICATION. If a Third Party infringes or misappropriates
any Caliper Technology or HP Technology by commercializing products in the Field
of Interest, the party to this Agreement first having knowledge of such
infringement or misappropriation shall promptly notify the other in writing. The
notice shall set forth the available facts of such infringement or
misappropriation in reasonable detail. The parties shall discuss the matter
and seek to address it jointly.
(b) PROSECUTION OF INFRINGEMENT ACTIONS. The owner of the patent
or trade secret that is the subject of infringement or misappropriation shall
have the primary right, but not the obligation, to institute, prosecute and
control any action or proceeding with respect to infringement or
misappropriation of such patent or technology by counsel of its own choice. If
an infringement action infringes on both Caliper Technology and HP Technology,
the parties shall coordinate their prosecution with respect to such
infringement. The parties shall confer to determine which party shall have the
primary responsibility to institute, prosecute and control any action or
proceeding with respect to misappropriation of trade secrets or infringement of
patents claiming Joint Inventions.
(c) DECISION NOT TO PROSECUTE. Either party may elect not to
have any patent owned or exclusively licensed by it enforced in an adversarial
proceeding by either party. If the alleged infringer is selling products that
constitute substantial competition with Collaboration Products, the other party
shall no longer be obliged to make any royalty payments in respect of such
patent.
(d) EXPENSES AND RECOVERY. If the parties mutually agree to
prosecute an enforcement action, then they will also agree to sharing of any
costs of pursuing an enforcement action under this Section 8.5, and of any
recovery under such an action.
9. CONFIDENTIALITY
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9.1 CONFIDENTIALITY. Except to the extent expressly authorized by
this Agreement or otherwise agreed in writing by the party who originally
disclosed such Confidential Information (the "Disclosing Party"), the party to
whom such Confidential Information was disclosed (the "Recipient") agrees to
keep the Disclosing Party's Confidential Information strictly confidential, as
if it were its own, for five years from the date of disclosure. Furthermore,
neither party shall use Confidential Information for any purpose other than for
performing its obligations or exercising its rights under this Agreement, except
that general business information may be used (but not disclosed) in the
ordinary course of business.
9.2 EXCEPTIONS. The above obligations of non-disclosure and non-use
shall not apply to information of which the recipient can document that:
(a) it was in the public domain at the time it was communicated
to the recipient by the disclosing party;
(b) it entered the public domain subsequent to the time it was
communicated to the recipient by the disclosing party through no fault of the
recipient;
(c) it was in the recipient's possession free of any obligation
of confidence at the time it was communicated to the recipient by the disclosing
party;
(d) it was rightfully communicated to the recipient free of any
obligation of confidence subsequent to the time it was communicated to the
recipient by the disclosing party;
(e) it was independently developed by employees or agents of the
recipient who had no knowledge of any Confidential Information communicated to
the recipient by the disclosing party;
(f) the communication was in response to a valid order by a court
or other governmental body, was otherwise required by law, or was necessary to
establish the rights of either party under this Agreement.
9.3 AUTHORIZED DISCLOSURES
(a) Notwithstanding Sections 9.1 and 9.2 above, the parties
hereby acknowledge each other's right to disclose Confidential Information to
Third Parties with whom they have entered into agreements for the purpose of
developing and commercializing Collaboration Products. If either party desires
to disclose any of the other's Confidential Information for the purposes set
forth in the preceding sentence, the parties shall meet to review such planned
disclosure and shall mutually agree on the Confidential Information, if any, to
be so disclosed prior to any such disclosure by either party.
(b) Notwithstanding Sections 9.1 and 9.2 above, each party may
disclose Confidential Information belonging to the other party to Affiliates and
sublicensees who agree to be bound by terms of confidentiality at least as
stringent as those in this Article 9. In addition, each party may disclose
Confidential Information of the other party to the extent such disclosure
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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is reasonably necessary to: (i) comply with applicable securities laws and
regulations and other applicable governmental regulations, (ii) file or
prosecute patents relating to Sole Inventions or Joint Inventions, and (iii)
prosecute or defend litigation relating to Collaboration Products.
Notwithstanding the foregoing, in the event a party is required to make a
disclosure of Confidential Information as provided in this Section 9.3, it will,
except where impracticable, give reasonable advance notice to the other party of
such disclosure and use reasonable business efforts to maintain the information
as confidential or to secure confidential treatment of such information. In any
event, the parties agree to take all reasonable action to avoid disclosure of
Confidential Information hereunder.
9.4 COMMUNICATION AND PUBLICITY
(a) Promptly after the Effective Date, the parties may announce
the establishment of the Collaboration under this Agreement and its key terms in
a mutually agreed press release issued simultaneously by both parties. Subject
to the further provisions of this Section, no party shall originate any
subsequent written publicity, news release, or other announcement relating to
this Agreement or to performance hereunder or the existence of an arrangement
between the parties (collectively, "Written Disclosure"), without the prior
prompt review and written approval of the other. Once specific information has
been approved for disclosure, that information may be reiterated in any
subsequent Written Disclosure without further approval.
(b) Notwithstanding the foregoing provisions of this Article 9,
any party may make any public Written Disclosure it believes in good faith based
upon the advice of counsel is required by applicable law or any listing or
trading agreement concerning its publicly traded securities, provided that prior
to making such Written Disclosure, the disclosing party shall provide the other
party with a copy of the materials proposed to be disclosed and provide such
party with an opportunity to review and comment on the proposed Written
Disclosure.
(c) The terms of this Agreement may be disclosed to Third Parties
so long as such disclosure is made under a binder of confidentiality and so long
as material financial terms are not disclosed.
10. TERM AND TERMINATION
10.1 TERM.
(a) The term of the Collaboration will commence on the Effective
Date and will expire on the eighth (8th) anniversary of the Effective Date (the
"Expiration Date") unless earlier terminated pursuant to this Article 10.
(b) This Agreement will become effective upon the Effective Date
and continue until the last to expire payment obligation of either party, unless
terminated earlier pursuant to this Article 10.
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10.2 TERMINATION FOR BREACH.
(a) Either party may terminate this Agreement for material breach
of the Agreement by the other party on [ * ] written notice. The notice will
describe the breach in detail, and the allegedly breaching party will have [ * ]
in which to cure such breach.
(b) If during the Collaboration Caliper fails to cure a material
breach within such [ * ] period, HP at its option may terminate this Agreement
or may continue the Agreement in force. If HP elects to continue this Agreement
in force, HP may [ * ] for the remaining term of the Agreement.
(c) If during the Collaboration HP fails to cure a material
breach within such [ * ] period, Caliper at its option may terminate this
Agreement or may continue the Agreement in force. If Caliper elects to continue
this Agreement in force, Caliper may [ * ] for the remaining term of the
Agreement.
(d) If HP terminates the Agreement due to a Clear and Serious
Breach by Caliper (as described below), which breach remains uncured after the [
* ] day cure period, then upon termination the rights and obligations set forth
below in Section 10.4 for early termination after year five and beyond will
apply. For purposes of this Section, a "Clear and Serious Breach" shall mean
that Caliper materially breaches the Agreement by either (i) failing to apply at
least [ * ] percent [ * ] of the Caliper resources set forth in applicable
Product Plans in any year or (ii) willfully selling products that are clearly
within HP's exclusive rights in the Field of Interest as set forth in Article 2
above, either directly or through Third Parties, [ * ]. The rights and
obligations set forth in Section 10.4 shall not apply if the alleged breach is
the subject of a dispute resolution proceeding under Section 12.2 or if the
failure to perform results from Force Majeure as set forth in Section 13.2.
(e) The remedies set forth in subsections (b), (c) and (d) above
are in addition to any other remedies to which the parties may be entitled.
10.3 TERMINATION FOR CONVENIENCE. Either party may terminate the
Collaboration for any reason or no reason with at [ * ] prior written notice,
such termination to be effective at any time after the fifth anniversary of the
Effective Date. The date on which the termination takes effect is referred to
herein as the "Termination Date".
10.4 EFFECT OF EXPIRATION OR TERMINATION. If the Collaboration
expires at the end of its eight-year term, or if the Collaboration is terminated
for breach under Section 10.2(d) or for convenience under Section 10.3, then:
(a) PAYMENTS. Any outstanding payment obligations must be
satisfied as of the Termination or Expiration Date. Any overpayment must be
returned forthwith.
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(b) RESEARCH AND DEVELOPMENT. All joint research and development
under the Collaboration and HP funding of such research and development will end
on the Termination or Expiration Date.
(c) SUPPLY OF PRODUCTS BY CALIPER. For [ * ] years following the
Termination or Expiration Date, HP will have the option to have Caliper continue
to supply HP with all Collaboration Products being supplied by Caliper as of the
Termination or Expiration Date. Whether or not HP elects to have Caliper supply
such Collaboration Products, the financial terms will be as set forth in Section
10.4(h) below, subject to Section 10.4(f).
(d) SUPPLY OF PRODUCTS BY HP. For [ * ] years following the
Termination or Expiration Date, HP will supply all of Caliper's requirements for
Collaboration Products being supplied by HP as of the Termination or Expiration
Date. Pricing and other terms shall be [ * ].
(e) TRAINING. During the [ * ] after any notice of termination is
given pursuant to this Article 10, or during the first [ * ] after the fifth
anniversary of the Effective Date if such notice is given before the fifth
anniversary of the Effective Date, the party manufacturing and supplying a
Component will use reasonable business efforts to instruct and train personnel
of the other party so that the other party will [ * ] manufacture and supply
such Components in a similar manner. Additional instruction and training will be
provided upon reasonable request during the ensuing [ * ] period, provided the
requesting party reimburses the other party's [ * ]. If the Collaboration is
terminated for Clear and Serious Breach, such training will be given during the
[ * ] period after such termination becomes effective, and not during the
pendency of any dispute resolution proceeding respecting such termination.
(f) [*]. If following the Termination or Expiration Date, a party
purchases its supply of any Collaboration Product from the other party under
Sections 10.4(c) or 10.4(d), the purchasing party will be supplied with such
Collaboration Product [*]. Similarly, if either party licenses technology or
intellectual property from the other and [*].
(g) RIGHTS TO COMMERCIALIZE COLLABORATION PRODUCTS. After the
Termination or Expiration Date, HP shall have a worldwide, non-exclusive,
non-transferable license under Caliper Technology and software to market, sell
and support Collaboration Products in the Field of Interest. Caliper shall also
have the right to market, sell and support Collaboration Products, independently
or with Third Parties; provided, however, that if the Termination Date occurs
within a period of time that begins [ * ] years after the Effective Date and
ends [ * ] years and [ * ] months after the Effective Date, Caliper may not
market, sell or support Collaboration Products in the Field of Interest during
such period. Notwithstanding the foregoing, neither party may enter into an
agreement [ * ] for the sale of the Collaboration Products during the [ * ]
months following the Expiration or Termination Date. After such [ * ] month
period, either party may enter into any agreement with any Third Party
(h) PAYMENTS ON COLLABORATION PRODUCTS AFTER TERMINATION. After
the Termination or Expiration Date, HP shall pay Caliper the percentage of the
Gross Margin from sales of all Class A and Class B Collaboration Products during
the respective time periods as follows and shall [ * ] for Collaboration
Products supplied by Caliper. The rates set forth below
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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are subject to the adjustment as provided in Section 10.4(f). These payments
will be made on the same schedule and terms as during the Collaboration under
Article 7 and will continue [ * ].
<TABLE>
<CAPTION>
PRODUCT [ * ] MONTHS [ * ] MONTHS FOLLOWING MORE THAN [ * ] MONTHS
FOLLOWING TERMINATION FOLLOWING TERMINATION FOLLOWING TERMINATION
<S> <C> <C> <C>
CLASS A PRODUCTS
Collaboration Products [ * ] [ * ] [ * ]
other than HP
Collaboration Products
HP Collaboration Products; [ * ] [ * ] [ * ]
LabChip manufactured by
Caliper*
HP Collaboration Products; [ * ] [ * ] [ * ]
LabChip manufactured by
HP*
CLASS B PRODUCTS [ * ] [ * ] [ * ]
</TABLE>
- -----------------
*These Gross Margin rates only apply if Caliper elects not to develop a LabChip
and HP performs the development of such LabChip as set forth in Section 4.2(d).
That portion of the Gross Margin generated by System Software which will be
considered to be attributable to a Class A Product will be calculated by [ * ].
That portion of the Gross Margin generated by System Software which will be
considered to be attributable to a Class B Product will be calculated by [ * ].
(i) COMMERCIALIZATION OF NEW PRODUCTS.
(i) HP RIGHTS. In the event of expiration or termination of the
Collaboration pursuant to Section 10.4, Caliper agrees to grant to HP a
non-transferable (except to a successor in interest to the HP Chemical Analysis
Group), royalty-bearing, worldwide, non-exclusive license under certain of the
Caliper Technology specified in this Section to develop, manufacture, market,
sell and support products in the Field of Interest. The products developed
pursuant to this license and covered by Caliper Patents will be "New Products,"
as defined in Article 1. Such license will be subject to the following potential
adjustments over time.
(1) The through-put limits applicable to this license will
continue to be subject to adjustment to ensure a leading edge relative to the
competition pursuant to Section 2.2(a)(ii) as applied to Collaboration Products,
and New Products which HP may
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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develop, after the Collaboration ends. In addition, the through-put limits
applicable to this license will be proactively adjusted as follows to maintain
parity with programs established by Caliper or its other licensees to develop
products utilizing Caliper Technology with higher through-put for sale on the
market in the Field of Interest. If Caliper [ * ], or if Caliper grants any
Third Party the right [ * ], then in either of such events Caliper shall
promptly notify HP in writing of such fact and the nature of the Application(s)
[ * ], and the through-put limits applicable to HP's license will automatically
be adjusted to [ * ] with respect to such Application(s).
(2) On the [ * ] anniversary of the Termination or Expiration
Date, HP will deliver to Caliper a written notice that lists the patents and
patent applications within the Caliper Technology that HP intends to use in New
Products for which [ * ]. Any patents or patent applications within the Caliper
Technology not listed in the notice will then be removed from the non-exclusive
license granted to HP under this Section 10.4(i)(i).
(3) On the [ * ] anniversary of the Termination or Expiration
Date, HP will deliver to Caliper a written notice that lists the patents and
patent applications within the Caliper Technology from the list provided under
clause (i) above that HP still intends to use in New Products for which [ * ].
Any patents or patent applications within the Caliper Technology not listed in
the notice will then be removed from the non-exclusive license granted to HP
under this Section 10.2(i)(i).
(4) Upon the [ * ] anniversary of the Termination or
Expiration Date, the patents and patent applications within the Caliper
Technology subject to the non-exclusive license granted under this Section
10.4(i)(i) shall be limited to the patents and patent applications listed as
aforesaid and actually utilized [ * ] prior to that date.
(ii) CALIPER RIGHTS. In the event of expiration or termination of
the Collaboration pursuant to Section 10.4, Caliper will retain exclusive rights
(except for the non-exclusive license granted to HP under Section 10.4(i)(i)
above) under Caliper Technology to make, use and sell products for all uses in
the Field of Interest. Caliper will retain all licenses to HP Technology granted
under the Collaboration and will continue to have access to HP Patents, System
Software and parts as provided in Section 2.4. Caliper will be free to develop
and market new systems that are compatible with all Collaboration Products.
(iii) ROYALTIES ON NEW PRODUCTS. HP shall pay royalties to
Caliper on all Net Revenues from the sale of New Products in Class A and Class B
as set forth below, provided that and for so long as the manufacture, use or
sale of at least one Component in the applicable class (Class A or Class B) is
claimed in a Caliper Patent in the country of manufacture, use or sale,
respectively. The royalty rates [ * ]. All of the rates set forth in this
Section 10.4(i)(iii) are subject to adjustment as provided in Section 10.4(f).
ROYALTY RATE [ * ] CLASS A PRODUCTS [ * ] CLASS B PRODUCTS
(PERCENT OF NET REVENUES)
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<TABLE>
<CAPTION>
<S> <C> <C>
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
</TABLE>
Class C Products [ * ].
That portion of the royalty arising from System Software which will be
considered to be attributable to a Class A Product will be calculated by [ * ].
That portion of the royalty arising from System Software which will be
considered to be attributable to a Class B Product will be calculated by [ * ].
If any New Product does not clearly fall into one of the above classifications,
the parties shall mutually agree on an appropriate royalty rate for such New
Product prior to commercial introduction.
[ * ].
By way of example, [ * ].
Payments due under this Section 10.4(i)(iii) shall be subject to the same terms
and conditions applicable to Gross Margin share payments on Collaboration
Products under Sections 7.6, 7.7 and 7.9.
Where HP's [ * ] technology is integrated into a New Product, the parties will
mutually agree, prior to commercial launch, on a royalty rate that reflects the
proportional value of HP's [ * ] technology to the value of the Caliper
Technology. The royalty rate applicable to the value of HP's [ * ] will be [ * ]
percent and the rate applicable to the value of the Caliper Technology will be
the [ * ] under this Agreement. Where the [ * ] qualifies as a Class C Product,
[ * ].
(iv) ACCESS TO DISTRIBUTION CHANNELS. After any notice of
termination is given by either party, each party will review all its
relationships with Third Parties who had sales of Collaboration Products in the
previous year consisting of more than [ * ]. If there are any agreements or
arrangements with such Third Parties that would make it commercially impractical
for Caliper to sell Collaboration Products or New Products through such Third
Parties after the Collaboration ends, then the parties will agree in good faith
on practical means to ensure Caliper such ability.
10.5 TERMINATION OF COLLABORATION PRIOR TO THE FIFTH YEAR.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(a) Either party may terminate the Collaboration, with at least [ * ]
written notice, at any time if HP does not commit in writing to Caliper to meet
the HP Operating Expense commitments as provided in Section 7.3 or actually
fails to meet any such commitment. If Caliper delivers such termination notice
to HP, HP may cure by meeting the required HP Operating Expense commitment
within [ * ] of such notice.
(b) If the Collaboration is terminated pursuant to Section 10.5(a),
all of the terms under Section 10.4 will apply, except that:
(i) HP shall not have a license under Caliper Technology to
develop, manufacture or sell New Products; and
(ii) With regard to Collaboration Products,
(1) Caliper shall have the right to contract with any
company, including [ * ], at any time;
(2) Caliper may cease taking supply from HP for some or all
of Caliper's Instrument requirements before the end of the [ * ] year period
described in Section 10.4(c);
(3) Caliper may elect to continue to supply HP's requirements
for LabChips [ * ] for longer than the [ * ] year period described in Section
10.4(c). Caliper will not be required to train HP in LabChip manufacture as
provided in Section 10.4(e), and HP will not have rights to manufacture
LabChips, unless and until Caliper notifies HP that it intends to cease
supplying HP's requirements for LabChips. Any such notice must be delivered at
least [ * ] months in advance of ceasing supply; and
(4) HP shall continue to make Gross Margin share payments to
Caliper on all Collaboration Products at the rates applicable during the
Collaboration [ * ]. These payments will be made on the same schedule and terms
as during the Collaboration under Article 7.
11. INDEMNIFICATION AND LIMITATION OF LIABILITY
11.1 INDEMNIFICATION BY CALIPER. Caliper shall indemnify HP, its
Affiliates, and all their officers, directors, employees and agents, for any
reasonable out-of-pocket costs and expenses (including court and arbitration
costs and reasonable attorneys' fees), non-appealed or non-appealable judicial
or arbitration damage awards, and settlement payments, payable or owed by HP in
connection with any demands, law suits and other legal actions by Third Parties
("Third Party Claim") against HP arising from any negligent actions or willful
misconduct by Caliper, its Affiliates, agents or sublicensees.
11.2 INDEMNIFICATION UNDERTAKING BY HP. HP shall indemnify Caliper,
its Affiliates and sublicensees, and all their officers, directors, employees
and agents, for any reasonable out-of-pocket costs and expenses (including court
and arbitration costs and reasonable attorneys'
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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fees), non-appealed or non-appealable judicial or arbitration damage awards, and
settlement payments agreed with the Third Party claimants payable or owed by
Caliper in connection with any Third Party Claim against Caliper arising from
any negligent actions or willful misconduct by HP, its Affiliates, or agents.
11.3 CONDITIONS AND LIMITATIONS OF INDEMNIFICATION OBLIGATION.
(a) In order to maintain the right to be indemnified by the other
party ("Indemnitor"), the party claiming indemnification ("Indemnitee") must:
(i) notify the Indemnitor promptly after learning of a Third
Party Claim;
(ii) allow the Indemnitor to manage and control (by way of
intervention or otherwise) the defense and settlement of any such Third Party
Claim against the Indemnitee;
(iii) cooperate with the Indemnitor in the defense or the
settlement negotiations of Third Party Claims as reasonable required by the
Indemnitor; and
(iv) abstain from making any statements or taking any actions
which damage the defense against a Third Party Claim (including, without
limitation, any statements against the interest of the Indemnitee or admissions
of causation or guilt).
(b) The Indemnitor shall not agree to any settlement that
adversely affects the Indemnitee's rights or interest without the Indemnitee's
prior written approval (which approval shall not be unreasonably withheld).
(c) The Indemnitor shall have no obligation to indemnify the
Indemnitee to the extent that a Third Party Claim results from the negligence or
willful misconduct of the Indemnitee.
11.4 LIMITATION OF LIABILITY. Subject to the indemnification
obligation set forth above and unless otherwise expressly stated in this
Agreement, neither party will be liable to the other for any indirect,
consequential, special, or punitive damages regardless of whether such damages
are based on tort, warranty, contract or any other legal theory, even if advised
of the possibility of such damages.
12. GOVERNING LAW; DISPUTE RESOLUTION
12.1 GOVERNING LAW. This Agreement shall be governed by California
law, excluding its choice of law rules.
12.2 DISPUTE RESOLUTION
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(a) RISK OF FAILURE. The parties recognize that risk is inherent
in development efforts such as those being undertaken in this collaboration.
Both parties voluntarily assume this risk. Accordingly, a failure of any HP
Technology, Caliper Technology or Collaboration Product developed under this
Agreement to perform as desired despite the reasonable efforts of the
responsible party or parties will not be deemed to be a breach of this
Agreement.
(b) NOTICE OF DISPUTE.
(i) If a purported breach has not been cured to the
satisfaction of both parties within the cure period, either party may give
notice to the other that there is a Dispute between them specifying the matter
in dispute. The Dispute will be resolved according to the Dispute Resolution
Procedure set forth in this Section 12.
(ii) The parties recognize that disagreements may occur
between them in the absence of any breach. If such a disagreement occurs
respecting the parties' rights and obligations under this Agreement, the parties
will meet and confer at the working level in a reasonable attempt to resolve the
disagreement. If the parties are unable to resolve the disagreement at the
working level, either may give notice to the other that there is a Dispute
between them specifying the matter in dispute. The Dispute will be resolved
according to the Dispute Resolution Procedure set forth in this Section 12.
(c) DISPUTE RESOLUTION PROCEDURE.
(i) Within thirty days after receipt of a notice of Dispute,
the Executive Sponsors will meet and confer using reasonable efforts to resolve
the Dispute. If they are unable to resolve the Dispute within thirty days,
either party may give notice of escalation to the other that the Dispute is
being escalated to the Senior Executive level.
(ii) Within thirty days after delivery of the notice of
escalation, each party will designate a Senior Executive having the rank of Vice
President or higher. The Senior Executives of the parties will meet and engage
in good faith efforts to resolve the Dispute.
(iii) If the Senior Executives are unable to resolve the
Dispute within thirty days, either party may by notice to the other request a
conference to determine a procedure for resolving the Dispute. Within thirty
days after delivery of the notice, the parties will meet and confer using
reasonable efforts to determine a mutually agreeable procedure for resolving the
Dispute, taking into consideration the relative advantages, disadvantages and
costs of such procedures as mediation, arbitration, mini-trials, or other
alternative dispute resolution mechanisms. The parties will have thirty days to
agree on a procedure for resolving the Dispute.
(iv) No other remedy may be sought by either party until all
the steps of this Dispute Resolution Procedure have first been used. Neither
party may bring an action in a court of law against the other respecting any
issue arising under this Agreement unless the issue has been the subject of a
Dispute and the parties have been unable to resolve such Dispute even after
following all the steps of the Dispute Resolution Procedure set forth above.
Neither party may refuse to perform its obligations under this Agreement because
of any breach purportedly
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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committed by the other unless the purported breach has been the subject of a
Dispute and parties have been unable to resolve such dispute even after
following all the steps of the Dispute Resolution Procedure.
(v) Any applicable statute of limitations will be tolled
during the Dispute Resolution Procedure.
13. MISCELLANEOUS
13.1 EFFECTS OF BANKRUPTCY. The parties understand and agree that the
rights and licenses granted under or pursuant to this Agreement by one party to
the other are, for all purposes of Section 365(n) of Title 11 of the United
States Code, licenses of rights to "intellectual property" as defined in Title
11, and that each party, as licensee of such rights under this Agreement shall
retain and may fully exercise all of its rights and elections under Title 11.
13.2 FORCE MAJEURE. Neither party shall lose any rights hereunder or
be liable to the other party for damages or losses on account of failure of
performance by the defaulting party if the failure is occasioned by government
action, war, fire, earthquake, explosion, flood, strike, lockout, embargo, act
of God, or any other similar or dissimilar cause beyond the control of the
defaulting party, provided that the party claiming force majeure has exerted all
reasonable efforts to avoid or remedy such force majeure.
13.3 NO RECRUITING. Neither party shall solicit or seek to employ any
person who is an employee of the other party during the term of this Agreement
and for one (1) year thereafter. However, this clause does not prevent either
party from engaging in recruiting activities directed to the community at large
and not targeted specifically at employees of the other, even if such activities
result in recruiting an employee of the other. This shall not preclude either
party from receiving and accepting unsolicited applications from such employees.
13.4 ASSIGNMENT.
(a) Except as expressly permitted by this Agreement, neither
party may assign any of its rights or obligations under this Agreement to a
Third Party except in connection with a merger, acquisition or similar
reorganization or the sale of all or substantially all of its assets, or
otherwise with the prior written consent of the other party. This Agreement
shall survive any such merger, acquisition or reorganization of either party
with or into, or such sale of assets to, another party and no consent for such
merger, acquisition, reorganization or sale shall be required hereunder;
provided, that in the event of such merger, acquisition, reorganization or sale,
no intellectual property rights of the acquiring corporation shall be included
in the technology licensed hereunder. With regard to HP, this Section shall
refer to HP's Chemical Analysis Group and not the mother ship.
(b) This Agreement shall be binding upon and inure to the benefit
of the successors and permitted assigns of the parties. Any assignment not in
accordance with this Agreement shall be void.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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13.5 SEVERABILITY. If any term, condition or provision of this
Agreement is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other terms, conditions
and provisions of this Agreement shall be deemed valid and enforceable to the
full extent.
13.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
13.7 ENTIRE AGREEMENT; AMENDMENTS IN WRITING. This Agreement and the
Stock Purchase Agreement described in Section 7.1 together comprise the entire
understanding between the parties with respect to their subject matter and
supersede any previous communications, representations, or agreements, whether
oral or written, including without limitation the Draft Outline of Principal
Terms dated March 5, 1998. All information heretofore exchanged between the
parties pursuant to the Confidentiality Agreement heretofore entered into
between the parties will henceforth be subject to the applicable provisions of
this Agreement. For purposes of construction, this Agreement will be deemed to
have been drafted by both parties. No modification of this Agreement will be
binding on either party unless in writing and signed by an authorized
representative of each party.
13.8 NOTICE. Any notice or other communication required or permitted
to be given to either party hereto shall be in writing and shall be deemed to
have been properly given and to be effective on the date of delivery if
delivered in person, by facsimile or by nationally recognized express courier,
or effective fourteen (14) days after mailing by U.S. Postal Service, postage
prepaid, as Registered or Express Mail, postage paid, to the other party at the
following address:
<TABLE>
<CAPTION>
<S> <C> <C>
Caliper: Caliper Technologies Corp. with copy to:
1275 California Avenue Cooley Godward LLP
Palo Alto CA 94304 Five Palo Alto Square
Attention: Chief Executive Officer 3000 El Camino Real
Palo Alto, CA 94306
Fax: (650) 857-0663
Attn: Brian C. Cunningham
HP: Hewlett-Packard GmbH with copy to:
Waldbronn Analytical Division Hewlett-Packard Company
Hewlett-Packard Strasse 8 Office of General Counsel
76337 Waldbronn 3000 Hanover Street
Germany Palo Alto CA 94304
Attention: General Manager
</TABLE>
Either party may change its address for communications by a notice to
the other party in accordance with this section.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first set forth above.
CALIPER TECHNOLOGIES CORP. HEWLETT PACKARD COMPANY
By: /s/ Calvin Chow By: /s/ Mark J. Hawkins
----------------------------------- ----------------------------
Calvin Chow, Chief Operating Officer Mark Hawkins, Controller
Chemical Analysis Group
By: /s/ K. Bruderle
----------------------------
Karlheinz Bruderle,
General Manager
Waldbronn Analytical Division
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT A
LAB ON A CHIP TECHNOLOGY
General Description: see "Definitions" section of Agreement
The following are examples of what's included in the above-referenced
definition:
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
The following are examples of what's not included in the above-referenced
definition:
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT B
Outline of selected terms of OEM Agreement
The parties agree to use reasonable business efforts to execute a formal OEM
agreement [ * ] including the following terms:
1. A [ * ] rolling forecast using reasonable forecasting processes.
2. Orders will become firm [ * ] prior to scheduled delivery.
3. A [ * ] target supply response time (SRT).
4. Caliper will use reasonable business efforts to maintain stable target SRT
and if greater than [ * ] then the parties agree to meet and agree on a
correction plan. If the SRT is greater than [ * ], then Caliper agrees to
enable HP to manufacture chips. However, this clause will not become
effective until after the [ * ].
5. The parties will mutually agree to the [ * ] and will use reasonable business
efforts to accelerate such date.
6. Caliper will not make engineering changes after the manufacturing release of
a product without notification of HP.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.11
TERMINATION, TRANSITION AND
TECHNOLOGY ACCESS PROGRAM AGREEMENT
THIS TERMINATION, TRANSITION, AND TECHNOLOGY ACCESS PROGRAM AGREEMENT
("Agreement") dated as of November 24, 1998 (the "Effective Date") is entered
into by and between CALIPER TECHNOLOGIES CORP., a Delaware corporation
("Caliper"), having a place of business located at 1275 California Avenue, Palo
Alto, California 94304 and HOFFMANN-LA ROCHE INC., a New Jersey corporation
("Roche"), having a place of business located at 340 Kingsland Street, Nutley,
New Jersey 07110-1199.
RECITALS:
WHEREAS, Caliper and Roche entered into a Collaborative Development
Agreement dated October 11, 1996 (the "Collaborative Development Agreement")
wherein Roche provided substantial development funding to Caliper to develop an
ultra high through-put screening system and as a result of such funding Roche
was granted exclusive rights to such ultra high through-put screening system;
and
WHEREAS, the parties wish to terminate the Collaborative Development
Agreement as provided for hereinbelow under Article 2; and
WHEREAS, the parties wish to enter into a Technology Access Program (as
defined hereinbelow) which involves reduced funding by Roche and non-exclusive
rights to a broader range of high throughput screening technologies under terms
provided for in this Agreement; and
WHEREAS, the parties wish to provide for a transition period between
termination of the Collaborative Development Agreement and Roche's entry into
the Technology Access Program as provided for hereinbelow under Article 2;
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
1. DEFINITIONS
The following terms shall have the following meanings in this Agreement:
1.1 "AFFILIATES" shall mean any company or entity controlled by,
controlling, or under common control with a party hereto, and shall include
without limitation, any company fifty percent (50%) or more of whose voting
stock, participating profit, or other interest is owned or controlled, directly
or indirectly, by a party, and any company which owns or controls, directly or
indirectly, fifty percent (50%) or more of the voting stock or otherwise of a
party.
For the purposes of this Agreement, Genentech, Inc. ("Genentech"), a
Delaware corporation, shall not be considered an Affiliate of Roche, unless
Roche, in its sole discretion, notifies Caliper that Genentech shall be so
considered an Affiliate, and Genentech agrees to be bound by the terms and
obligations of this Agreement.
1.2 "DATA HANDLING SOFTWARE" means software supplied by Caliper which
permits the retrieval of raw data collected by the Hardware Unit Software for
differential analysis such that results for the potential pharmaceutical agents
can be determined and presented, including at a minimum the ability to correlate
results to a particular well on any multi-well plate.
1.3 "HARDWARE UNIT SOFTWARE" means software supplied by Caliper which
controls the Hardware Unit such that the Hardware Unit can perform at least the
following tasks: process a multi-well plate containing potential pharmaceutical
agents through the dilutor; align the multi-well plate to the LabChip
support/manipulator; activate the LabChip to start evaluation of the compounds
from the multi-well plate; detect reaction of the compounds on the LabChip
through the detection system; and collect and store raw data from the detector
system for further analysis.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2.
<PAGE> 3
1.4 "HARDWARE UNIT" shall mean a unit supplied by Caliper which
comprises at least a compound plate handling system capable of manipulating a
test plate both prior to and after evaluation of potential pharmaceutical agents
from the plates, a dilutor capable of diluting wells on a multi-well plate, a
LabChip support/manipulator which physically positions the LabChip to accept
potential pharmaceutical agents from the plate, a system to detect reactions on
a LabChip, and electronic means for controlling the movement and operation of
each of the foregoing steps, said means being under the control of Hardware Unit
Software.
1.5 "HIGH THROUGHPUT SCREENING" or "HTS" shall mean screening potential
pharmaceutical agents against a pharmaceutically-relevant target (e.g., an
enzyme, receptor or cell type) to determine each agent's potential utility as a
human pharmaceutical at a minimum of [ * ] assays per machine day and the
results of each assay are determined and reported as discreet data points. As
used herein, a machine day shall be from [ * ] hours ("Machine Day").
1.6 "INSTRUMENT" shall mean a combination of a Hardware Unit, Hardware
Unit Software, and Data Handling Software offered by Caliper to TAP participants
to perform High Throughput Screening or Ultra High Through-put Screening using
LabChips.
1.7 "LABCHIP" shall mean a chip which is sold or supplied by Caliper to
Roche, other TAP participants, or otherwise made commercially available by
Caliper for use on an Instrument. A LabChip typically consists of a glass or
polymer base with microchannels, bonded to a cover with reservoirs, together
with an attached pipettor capillary, but may include other components.
1.8 "LABCHIP HTS ASSAY" or "LABCHIP UHTS ASSAY" shall mean a particular
combination of a LabChip, a set of reagents and Hardware Unit Software, all
designed for assessing the interaction of a potential pharmaceutical agent
against a pharmaceutically relevant target on one or more types of Instruments
for a particular pharmaceutically-relevant target.
1.9 "LABCHIP IMPROVEMENT INVENTIONS" shall mean all inventions for which
patent applications are filed that are conceived or first reduced to practice by
an employee or contractor of Roche in the course of developing or using
Screening Technology [ * ] improvements to the Screening Technology or to
LabChip-based microfluidic systems, including but not limited to the
world-to-LabChip interface or LabChip-to-world interface, LabChip construction,
composition or design, assay strategies or reagent conditions which are
specifically related to a LabChip, electrical or other means of controlling
fluids or molecules on a LabChip, detection of results produced by a LabChip, or
software techniques for extracting raw data from a LabChip. LabChip Improvement
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
3.
<PAGE> 4
Inventions shall not include screening data, potential pharmaceutical compounds
identified through the use of the Screening Technology, [ * ].
1.10 "SCREENING TECHNOLOGY" shall mean Instruments, Hardware Units,
Hardware Unit Software, Data Handling Software, LabChip HTS Assays, LabChip UHTS
Assays, and LabChips for HTS or UHTS that Caliper offers for commercial sale to
TAP participants.
1.11 "TECHNOLOGY ACCESS PROGRAM" or "TAP" shall mean Caliper's program
for developing HTS Instruments, UHTS Instruments, LabChip HTS Assays, and
LabChip UHTS Assays and providing these systems to customers who are engaged in
the screening of potential pharmaceutical agents against a pharmaceutically
relevant target to determine each agent's potential utility as a human
pharmaceutical.
1.12 "UHTS" or "ULTRA HIGH THROUGH-PUT SCREENING" shall mean the process
of screening potential pharmaceutical agents against a pharmaceutically-relevant
target (e.g., an enzyme, receptor or cell type) to determine each agent's
potential utility as a human pharmaceutical, at a minimum of [ * ] assays per
Machine Day, on an Instrument. The results of each assay shall be determined and
reported as discreet data points.
2. TERMINATION OF COLLABORATIVE DEVELOPMENT AGREEMENT; TRANSITION AGREEMENT
2.1 TERMINATION OF COLLABORATIVE DEVELOPMENT AGREEMENT. Caliper and
Roche hereby agree to terminate the Collaborative Development Agreement as of
the Effective Date of this Agreement. Notwithstanding the foregoing, the parties
agree that Roche's obligation to fund development work under Section 4.1 of the
Collaborative Development Agreement shall be deemed terminated effective as of
July 1, 1998.
2.2 PURPOSE OF TRANSITION AGREEMENT. Because of the relationship which
existed between the parties pursuant to the Collaborative Development Agreement,
the parties agree to a transition period between the termination of the
Collaborative Development Agreement and
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
4.
<PAGE> 5
Roche's entry into the TAP. The parties agree that during this transition
period, Caliper will deliver an Instrument to Roche, and Roche will make certain
payments, including the purchase price for said Instrument.
2.3 TERM OF TRANSITION PERIOD. The transition period will begin as of
the Effective Date as first written above and end on the date that Roche pays
the second transition payment as provided in Section 2.5 or the invoice for the
Instrument as provided for in Section 2.3, whichever is later.
2.4 TRANSITION PAYMENTS. Roche shall make a first transition payment to
Caliper in the amount of [ * ] within thirty (30) days after the Effective Date
and receipt of an invoice for that amount. Roche shall make a second transition
payment to Caliper in the amount of [ * ] within thirty (30) days after delivery
of the Instrument specified in Art. 2.5 below and receipt of an invoice for that
amount.
2.5 DELIVERY OF AN INSTRUMENT; PURCHASE PRICE. Caliper will deliver to
Roche's Nutley, New Jersey facility an Instrument that is based on the
instrument and software developed under the Collaborative Development Agreement.
The purchase price for this first Instrument shall be [ * ]; subsequent
Instruments may be priced differently. Caliper will invoice Roche for this
amount upon delivery of the Instrument to Roche; payment will be due within
thirty (30) days of delivery of the Instrument. Upon payment of the invoice,
Roche shall take ownership of the Instrument. Caliper will provide reasonable
technical support for the Instrument, Hardware Unit Software, and Data Handling
Software pursuant to Section 3.2. Such technical support will include, but not
be limited to, [ * ].
3. TECHNOLOGY ACCESS PROGRAM AGREEMENT
3.1 SUBSCRIPTION. Roche shall become a TAP participant under the terms
and conditions as found in Articles 1, 3, 4, 5, 6, and 7. As part of Roche
becoming a TAP participant,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
5.
<PAGE> 6
Caliper hereby grants to Roche the non-exclusive right to purchase all Screening
Technology that Caliper offers for commercial sale to other TAP participants as
part of the TAP during the term set forth in Art. 3.4(a) below. Caliper will
notify Roche when Caliper is prepared to offer each Instrument or LabChip HTS
Assay or LabChip UHTS Assay to TAP participants, together with commercial terms.
3.2 ASSAY DEVELOPMENT AND SYSTEM CUSTOMIZATION. Roche may call upon
Caliper to develop customized versions of the Screening Technology for its
operations, or to develop LabChip HTS Assays or LabChip UHTS Assays for
pharmaceutical targets nominated by Roche, or to provide training, service or
support for Screening Technology, subject in each case to Caliper's reasonable
approval regarding technical feasibility. For LabChip HTS Assay or LabChip UHTS
Assay development, Caliper will develop the LabChip and software to carry out
the assay, and the parties will collaborate on appropriate reagents. Roche shall
reimburse Caliper for its participation in such custom development activities or
LabChip HTS Assay or LabChip UHTS Assay development activities at [ * ]. From
time to time, Caliper and Roche may mutually establish development plans and
budgets to coordinate such activities. Caliper will not be required to provide
more than [ * ] full-time equivalents at any time for Roche development
activities under this Agreement, unless the parties mutually agree otherwise.
Should Caliper develop for Roche customized versions of Screening Technology or
develop LabChip HTS Assays or LabChip UHTS Assays for pharmaceutical compounds
selected by Roche, any screening data generated, or potential pharmaceutical
compounds identified, as a result of a program under this Article shall be owned
by Roche and shall not fall within the definition of LabChip Improvement
Inventions or within Article 4.2.
3.3 RESTRICTIONS ON USE OF SCREENING TECHNOLOGY. Roche agrees that it
will use all Screening Technology only for the purpose of screening in its and
its Affiliate's in-house drug discovery programs. Specifically, Roche shall not
(i) transfer any Screening Technology to any third party except that Roche can
transfer the Screening Technology to any of its Affiliates, (ii) provide
screening services on behalf of any third party using any Screening Technology
except that Roche can provide screening services for its Affiliates or where
such screening services are part of a collaboration between Roche and/or its
Affiliates and a third party to develop products
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
6.
<PAGE> 7
for sale by Roche and/or its Affiliates, or (iii) allow a third party to use any
Screening Technology except that Roche can allow its Affiliates to use the
Screening Technology.
3.4 TERM AND TERMINATION OF THE TECHNOLOGY ACCESS PROGRAM.
(a) The term of the TAP shall commence upon the expiration of the
transition period as provided for in Art. 2.3 hereinabove and, unless terminated
earlier pursuant to this Article 3, shall expire one (1) year from date that the
Instrument is delivered to Roche as provided for under Article 2.5. The term may
be renewed by mutual agreement of the parties. Should the term of the TAP be
extended, Roche shall pay no initiation or subscription fees or payments for
access to Screening Technology offered under the TAP prior to the expiration or
termination of this Agreement.
(b) Either party may terminate this Agreement upon any material
breach of this Agreement by the other party if the other party has not cured
such breach within thirty (30) days after written notice thereof by the
non-breaching party. All other rights and obligations under this Agreement shall
terminate except as otherwise provided herein.
(c) Roche shall have the right to terminate its participation in
the TAP, after the transition period has expired pursuant to Art. 2.3, upon
[ * ] written notice to Caliper for any reason.
(d) Caliper shall notify Roche in writing of its intention to
file a voluntary petition in bankruptcy or of another's intention, of which
Caliper is aware, to file an involuntary petition in bankruptcy, said written
notice to be received by Roche at least thirty (30) days prior to filing such
petition. Upon such notice, Roche can terminate this Agreement within thirty
(30) days. Any filing without conforming to this requirement shall be deemed a
material, pre-petition incurable breach and shall have the effect of
automatically terminating this Agreement prior to the filing of such petition
without the need for written notice.
This Agreement shall terminate automatically (a) in the event
that Caliper attempts to or enters into any scheme with its creditors or makes
an unauthorized assignment for the
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
7.
<PAGE> 8
benefit of its creditors; (b) in the event that the assets of Caliper are seized
or attached in conjunction with any action against it by any third party; or (c)
in the event that Caliper is dissolved other than in connection with a change in
control permitted under Art. 7.4.
(e) No expiration or termination of this Agreement shall relieve
either party of any obligation accruing prior to such expiration or termination.
The provisions of Sections 2.1, 3.3, 3.4 and 3.5, and Articles 4, 5, 6, and 7
shall survive the expiration or termination of this Agreement.
3.5 POST-TERMINATION ACCESS. Following expiration of this Agreement,
Roche may continue to purchase Instruments and LabChip HTS Assays and LabChip
UHTS Assays that it purchased prior to the expiration of its TAP subscription
for so long as Caliper continues to offer such items for commercial sale to TAP
participants. Otherwise, rights to purchase Caliper Screening Technology shall
expire with the expiration of this Agreement.
3.6 TAP PARTICIPANT MEETINGS. Caliper agrees to conduct [ * ] meetings
for all TAP participants for the purpose of informing the TAP participants of
new Screening Technology developments. Each TAP participant will receive an
invitation to each [ * ] meeting as long as that TAP participant has not
breached its TAP agreement. Participation in such [ * ] meetings will be
strictly voluntary on the part of the TAP participants. At each meeting, each of
the TAP participants may elect, but will be under no obligation, to discuss
their experiences and findings using the Screening Technology.
3.7 MOST FAVORED LICENSEE. If Caliper enters into a future TAP agreement
with a third party and such third party TAP agreement contains terms or
conditions which in the aggregate are more favorable to the third party than the
terms and conditions of this Agreement are to Roche excluding consideration of
Art. 2, Caliper agrees to notify Roche of such terms and conditions. Roche and
Caliper agree to [ * ]. Should Roche extend its participation in the TAP
pursuant to Art. 3.4(a), the parties agree that this Art. 3.7 will be subject to
review at the time the TAP is extended.
4. PROPERTY RIGHTS.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
8.
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4.1 PATENTS. Except as provided in Section 4.2, below, each party shall
own inventions conceived or reduced to practice solely by its employees and/or
consultants during the course of the Technology Access Program. Caliper and
Roche shall jointly own inventions conceived or reduced to practice jointly by
employees and/or consultants of both parties during the course of the Technology
Access Program. Each party shall execute all documents and take all actions
reasonably necessary to perfect such ownership rights in the other and to file
patent applications under the Paris Convention. Inventorship shall be determined
under U.S. patent laws.
4.2 LABCHIP IMPROVEMENT INVENTIONS. Roche hereby assigns to Caliper all
right, title and interest in all LabChip Improvement Inventions. In exchange for
this assignment, Caliper grants Roche and its Affiliates a royalty-free,
non-exclusive license to use such LabChip Improvement Inventions in their
in-house therapeutic, diagnostic and other discovery programs; provided that no
rights in any other Caliper patents or know-how (e.g., background patents) are
granted pursuant to this section. Notwithstanding the foregoing, Roche shall not
be under any obligation to provide any screening data or potential
pharmaceutical compounds identified through its or its Affiliate's use of
Screening Technology or where such compounds are identified by Roche and/or its
Affiliate together with a third party collaborator using Screening Technology
or, software techniques for analyzing raw data extracted from a LabChip to
Caliper.
5. CONFIDENTIALITY
5.1 CONFIDENTIAL INFORMATION. During the term of this Agreement, and for
a period of five (5) years following the expiration or termination of this
Agreement, each party shall maintain in confidence any and all information
disclosed to it by the other party (the "Confidential Information"). Each party
further agrees that it shall not use for any purpose not authorized under this
Agreement or disclose the Confidential Information to any third party, except
that either party may disclose Confidential Information under a similar
obligation of confidentiality and non-use and on a need-to-know basis to its
directors, officers, employees, consultants, agents or Affiliates, or as
required by law, order or regulation of a governmental agency. The disclosing
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
9.
<PAGE> 10
party shall provide written notice to the other party of any such disclosure
required by law, order or regulation of a governmental agency.
5.2 RELIEF. Each party shall be relieved of any and all obligations
under Section 5.1 regarding Confidential Information which:
(a) was already known to the receiving party or its Affiliates,
other than under an obligation of confidentiality, at the time of disclosure by
the other party;
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving party;
(c) became generally available to the public or otherwise part of
the public domain after its disclosure through no fault attributable to the
receiving party;
(d) was disclosed to the receiving party or its Affiliates, other
than under an obligation of confidentiality to a third party, by a third party
who had no obligation to the disclosing party not to disclose such information
to others; or
(e) was independently discovered or developed by the receiving
party or its Affiliates without the use of Confidential Information belong to
the disclosing party.
5.3 PRESS RELEASE/NON-USE. Neither party shall (a) issue a press release
or make any other public statement that references this Agreement or the
contents thereof, or (b) use the other party's or its Affiliates' name or
trademarks for publicity or advertising purposes, except with prior written
consent of the other party or as required by law, order or regulation of a
governmental agency.
6. WARRANTIES AND INDEMNIFICATION.
6.1 DISCLAIMER CONCERNING TECHNOLOGY. CALIPER MAKES NO REPRESENTATION
AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NONINFRINGEMENT OF THE INTELLECTUAL
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
10.
<PAGE> 11
PROPERTY RIGHTS OF THIRD PARTIES, WITH RESPECT TO ANY CALIPER TECHNOLOGY,
SCREENING TECHNOLOGY OR OTHER PRODUCTS DEVELOPED OR PROVIDED PURSUANT TO THIS
AGREEMENT.
6.2 DISCLAIMER CONCERNING ROCHE COMPOUNDS AND ASSAYS. Caliper
understands that Roche will be supplying compounds and assays (including their
reagents) to Caliper as part of the Technology Access Program. Caliper accepts
these compounds and assays (including their reagents) with the knowledge that
they are experimental biological materials and agrees to comply with all laws
and regulations for the handling and use thereof. BECAUSE THESE COMPOUNDS AND
ASSAYS (INCLUDING THEIR REAGENTS) ARE EXPERIMENTAL IN NATURE, AND ARE FURNISHED
WITHOUT CHARGE, THEY ARE BEING SUPPLIED TO CALIPER WITH NO WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR WARRANTY OF NONINFRINGEMENT.
6.3 INDEMNIFICATION. Caliper shall indemnify, defend and hold Roche and
its Affiliates (and their respective directors, officers, employees, and agents)
harmless against any and all liabilities, loss, cost or damage, together with
all reasonable costs and expenses related thereto (including legal and
accounting fees and expenses), arising from, relating to, or connected with the
untruth, inaccuracy or breach of any statements, representations, warranties or
covenants of Caliper contained herein, including, but not limited to, all
statements, representations, warranties or covenants concerning environmental
matters.
7. MISCELLANEOUS
7.1 NOTICES. Any consent, notice or report required or permitted to be
given or made under the Agreement by one party to the other party shall be in
writing, delivered personally or by facsimile, first class mail postage prepaid,
courier nationally-recognized delivery service, and addressed to the other party
at is address indicated below, or to such other address as the addressee shall
have last furnished in writing to the addresser. Except as otherwise provided in
the Agreement, such consent, notice or report shall be effective upon receipt by
the addressee.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
11.
<PAGE> 12
If to Caliper: Caliper Technologies Corp.
1275 California Avenue
Palo Alto, California 94304
Attention: Chief Operating Officer
Facsimile: (650) 842-1970
If to Roche: Hoffmann-La Roche Inc.
340 Kingsland Street
Nutley, New Jersey 07110-1199
Attention: Corporate Secretary
Facsimile: (973) 235-3500
7.2 GOVERNING LAW. The Agreement shall be governed by and construed in
accordance with the laws of [ * ], without regard to the conflicts of law
principles thereof.
7.3 EXTENSION OF BENEFITS AND OBLIGATIONS. Roche shall have the right to
extend the benefits and obligations of this Agreement with respect to countries
outside the United States, to its Affiliate, F. Hoffmann-La Roche Ltd, a Swiss
corporation.
7.4 ASSIGNMENT. This Agreement is personal in its character, and neither
party shall assign its rights or obligations under this Agreement, in whole or
in part, without the prior written consent of the other party; provided,
however, that either party may assign this Agreement to any of its Affiliates or
to any successor by merger or sale of substantially all of the business assets
of the party. This Agreement shall be binding on and inure to the benefit of the
successors or permitted assigns of the parties hereto, and all entities
controlled by them.
7.5 WAIVERS AND AMENDMENTS. No change, modification, extension or waiver
of this Agreement, or any of the provisions herein contained, shall be valid
unless made in writing and signed by duly authorized representatives of the
parties hereto.
7.6 ENTIRE AGREEMENT. This Agreement, together with Exhibit A and
Exhibit B, embodies the entire understanding between the parties and supersedes
any prior understanding
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
12.
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and agreements between and among Caliper and Roche with respect to the subject
matter hereof, including without limitation the Collaborative Development
Agreement. All payments made hereunder shall be non-refundable and
non-creditable against any future payments.
7.7 SEVERABILITY. If a court of competent jurisdiction declares any
provision of this Agreement invalid or unenforceable, or if any government or
other agency having jurisdiction over either party deems any provision to be
contrary to any laws, then that provision shall be severed and the remainder of
the Agreement shall continue in full force and effect. To the extent possible,
the parties shall revise such invalidated provision in a manner that will render
such provision valid without impairing the parties' original intent.
7.8 NO WAIVER. The failure of a party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not constitute a waiver or relinquishment, to any extent, of the
right to assert or rely upon any such terms or conditions on any future
occasion.
7.9 DISCLAIMER OF AGENCY. The relationship between Caliper and Roche is
that of independent contractors. Roche and Caliper are not joint venturers,
partners, principal and agent, master and servant, employer or employee, and
have no other relationship other than independent contracting parties. Neither
party shall have the right or authority to assume, create, or incur any third
party liability or obligation of any kind, express or implied, against or in the
name of or on behalf of another except as expressly set forth in this Agreement.
7.10 COUNTERPARTS. The Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
CALIPER TECHNOLOGIES CORP. HOFFMANN-LA ROCHE INC.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
13.
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By: /s/ Calvin Chow By: /s/ Lee E. Babiss
------------------------------- -------------------------------
Name: Calvin Y. H. Chow Name: Lee E. Babiss
--------------------------- ----------------------------
Title: Chief Operating Officer Title: Vice President, Preclinical R&D
------------------------------- -------------------------------
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
14.
<PAGE> 1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
EXHIBIT 10.12
TECHNOLOGY ACCESS
AGREEMENT
THIS TECHNOLOGY ACCESS AGREEMENT ("Agreement") dated as of December 21,
1998 (the "Effective Date") is entered into by and between AMGEN INC. having an
address at One Amgen Center Drive, Thousand Oaks, California 91320-1799
("Amgen") and CALIPER TECHNOLOGIES CORP. ("Caliper") having offices at 1275
California Avenue, Palo Alto, California 94304.
RECITALS:
WHEREAS, Caliper has developed proprietary microfluidics and
miniaturization technology applicable to high throughput screening;
WHEREAS, Caliper and Amgen desire to establish a technology access
program to implement high throughput screening capabilities utilizing Caliper
technology at Amgen's facilities;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
1. DEFINITIONS
1.1 "AFFILIATE" shall mean (i) any corporation or other entity
which directly or indirectly owns or controls at least fifty percent (50%) of
the outstanding voting securities of a party (a "Parent"), (ii) any corporation
or other entity in which a party directly or indirectly owns or controls at
least fifty percent (50%) of the outstanding voting securities, and (iii) any
corporation or other entity in which a Parent of a party owns or controls at
least fifty percent (50%) of the outstanding voting securities.
1.1 "AMGEN COLLABORATOR" shall mean any third party with which Amgen
or its Affiliates is collaborating to develop a pharmaceutical product as part
of Amgen's in-house drug discovery programs.
1.2 "AMGEN TECHNOLOGY" shall mean any and all (i) assays, compounds,
substrates, reagents and materials provided by Amgen to Caliper pursuant to this
Agreement (together with all processes, ideas, data, techniques, information,
know-how, technology, trade secrets and the like, provided by Amgen to Caliper
(except to the extent such
<PAGE> 2
information is not confidential under Section 5.2) and any and all other
intellectual property rights with respect to any or all of the foregoing), (ii)
Targets, and (iii) any and all [ * ] developed solely by either party or
jointly by the parties with respect to any and all of the foregoing in
connection with the TAP and any and all other activities contemplated by this
Agreement.
1.4 "CALIPER KNOW-HOW" shall mean all discoveries, materials,
techniques, procedures, data, trade secrets and other technical information
which Caliper owns, controls or has any interest capable of being licensed (with
rights to license to Amgen hereunder) and treats as confidential or proprietary
as of the Effective Date or during the Term. Caliper Know-How does not include
Caliper Patents.
1.5 "CALIPER PATENTS" shall mean any and all Patents which Caliper
owns, controls or has any interest capable of being licensed (with rights to
license to Amgen hereunder) as of the Effective Date or during the Term.
1.6 "CALIPER TECHNOLOGY" shall mean, collectively, the Caliper
Patents and the Caliper Know-How.
1.7 "CONFIDENTIAL INFORMATION" shall mean this Agreement and the
contents hereof and any and all information owned and provided by one party to
the other party pursuant to this Agreement, including, without limitation,
Materials (as defined in Section 4.3), data, knowledge, practices, processes,
ideas, Amgen know-how, Caliper Know-How, research plans, engineering designs and
drawings, research data, manufacturing processes and techniques, scientific,
manufacturing, marketing, and business plans, financial or personnel matters
relating to the party, its present or future products, sales, suppliers,
customers, employees, investors or business.
1.8 "FTE" or full-time equivalent, shall mean one or more Caliper
person(s), whether employees, contractors or consultants, working on activities
under this Agreement for the equivalent of one full-time employee's time
(assuming a 40 hour work week) over the course of one year.
1.9 "INSTRUMENT" shall mean the hardware component(s) of a system
offered for sale by Caliper to develop or use LabChips, including but not
limited to [ * ].
1.10 "LABCHIP" shall mean a chip offered for sale by Caliper to
perform microfluidic or miniaturization experimentation.
1.11 "LABCHIP ASSAY" shall mean a Screening assay for a particular
Target
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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designed to run on a Caliper Screening Product system, consisting of a
particular Caliper LabChip, a set of reagents and software, one or more
instruments on which such chip, reagents and software are designed to run and a
protocol for performing such assay.
1.12 "LABCHIP IMPROVEMENTS" shall mean [ * ] developed solely by
either party or jointly by the parties with respect to (i) any and all Screening
Products and [ * ] provided by Caliper to Amgen pursuant to this Agreement, and
(ii) all processes, ideas, data, techniques, information, know-how, technology,
trade secrets and the like provided by Caliper to Amgen with respect to the
foregoing (except to the extent such information is not confidential under
Section 5.2) in connection with the TAP and any and all other activities
contemplated by this Agreement. By way of example, such technologies include but
are not limited to the world-to-chip interface or chip-to-world interface, chip
construction, composition or design, on-chip assay strategies or reagent
conditions, electrical or other means of controlling fluids or molecules on a
chip, detection of results produced by chips, or software techniques for
extracting or processing data from chips.
1.13 "PATENTS" shall mean any and all patents and patent applications
and any substitutions, extensions, reissues, and renewals thereof, any
supplementary protection certificates relating thereto, and any inventors'
certificates, which have not been held invalid or unenforceable by a
non-appealable or non-appealed decision of a court of competent jurisdiction,
issuing from patent applications or patents filed in any jurisdiction and any
provisionals, divisionals, continuations, and continuations-in-part of such
applications or patents.
1.14 "SCREENING" shall mean the process of screening potential
pharmaceutical agents or compounds against a pharmaceutically-relevant target
(e.g., an enzyme, receptor or cell type) to determine each agent's potential
safety or efficacy as a human pharmaceutical. For purposes of this Agreement,
Screening shall include, but not be limited to, primary, high throughout
screening against potential therapeutic targets, secondary screening of
analogues and derivatives against such targets, and screens of potential
pharmaceutical compounds for specificity, toxicity and other parameters relevant
to safety or efficacy.
1.15 "SCREENING PRODUCTS" shall mean all Instruments, LabChips and
other hardware, software or reagents that Caliper offers during the Term for
general commercial sale to third parties or for sale to TAP members for use in
Screening.
1.16 "TARGETS" shall mean the pharmaceutically relevant molecules,
complexes or cell lines (such as enzymes, binding proteins, receptors,
transporters, or ion channels) nominated by Amgen for LabChip Assay development
in accordance with Section 2.3.
1.17 "TECHNOLOGY ACCESS PROGRAM" OR "TAP" shall mean
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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the program described in this Agreement for developing Screening Products and
implementing them at Amgen.
1.18 "TERM" shall mean the period of three (3) years commencing on the
Effective Date, unless earlier terminated pursuant to Section 8 or modified by
mutual written agreement of the parties.
2. TECHNOLOGY ACCESS PROGRAM.
2.1 LICENSE GRANT.
(a) Caliper hereby grants to Amgen and its Affiliates a
non-exclusive, non-transferable (except as provided in Section 9.3),
royalty-free license, with no right to sublicense, under Caliper Technology to
use Screening Products provided by Caliper to Amgen pursuant to this Agreement
for any purpose in Amgen's in-house drug discovery programs (the "product
license"). (Throughout this Agreement, references to Amgen's in-house drug
discovery programs shall include collaborations with Amgen Collaborators). With
respect to each of the Screening Products described on Exhibit A, the product
license shall immediately become fully-paid, irrevocable and perpetual upon
Caliper's receipt of the up-front license fee described in Section 3.1(a), the
first installment of the 1999 subscription fee under Section 3.1(b)(i) and the
milestone payment under Section 3.1(b) corresponding to each product. With
respect to Screening Products offered in 2000 and beyond, the product license
shall immediately become fully-paid, irrevocable and perpetual upon Caliper's
receipt of the total amount of the annual subscription fee for such year as
provided in Section 3.1(b)(ii).
(b) Caliper also hereby grants to Amgen a non-exclusive,
non-transferable (except as provided in Section 9.3), royalty-free, irrevocable,
perpetual license, with no right to sublicense, to use Caliper Know-How provided
pursuant to this Agreement for any purpose in Amgen's in-house drug discovery
programs (the "know-how license").
(c) Caliper specifically permits Amgen under the licenses
granted above to develop novel applications for the Screening Products
purchased hereunder, including uses outside Screening, and to use such products
in such applications. Caliper agrees to supply chips for such applications on
commercially reasonable terms, conditions and prices to be mutually agreed, and
such terms, conditions and prices shall be subject to Section 3.3(c). If Caliper
and its licensee are not ready, willing and able to supply to Amgen, then
Caliper will promptly so notify Amgen and Amgen may be supplied by a third
party. In such event, the third party's manufacture and sale, and Amgen's use,
of such products shall be covered by the licenses under Caliper Technology
granted above. Otherwise, the licenses granted hereunder shall not include
rights to use third party chips, if the manufacture, use or sale of such chips
would infringe any Caliper Patent. Should Caliper develop products for
applications outside Screening and offer such products through other technology
access programs or other commercial arrangements, Amgen shall not be deemed to
have rights to such products solely by reason of this section.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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(d) Each of these licenses is subject to the terms and
conditions set forth in this Agreement and other reasonable terms and
conditions, if any, mutually agreed upon at the time each Screening Product is
sold to Amgen. Following expiration or termination of this Agreement, such
licenses shall continue as further provided in Section 8.5.
2.2 PROGRAM LEADERS AND PLAN. Caliper and Amgen shall each designate
a program leader. The program leaders shall jointly coordinate the activities
carried out under this Agreement and monitor the progress of such activities on
a periodic BASIS. From time to time, the program leaders shall mutually prepare
and update a program plan describing (i) goals in terms of milestones and
deliverables, (ii) the tasks and budget for Amgen support to be provided by
Caliper personnel under Section 2.3, and (iii) such other matters as the program
leaders may agree upon. The plan for 1999 is attached as Exhibit A (which shall
be amended or modified only by mutual agreement of the parties). Plans for each
subsequent year shall be mutually agreed by the parties not later than thirty
(30) days prior to each such year (and thereafter shall be amended or modified
only by mutual agreement of the parties). The dates set forth on the program
plan for completion of tasks shall be good faith projections provided by Caliper
and agreed to by Amgen. Caliper shall apply commercially reasonable efforts to
achieve such objectives by such date and at all times thereafter until the
objectives are achieved.
[ * ] days prior to the end of each quarter, Caliper shall
notify Amgen of its ability or inability to achieve that quarter's objectives
within [ * ] days of the end of the quarter. If Caliper notifies Amgen that it
is unable to satisfy that quarter's objectives within [ * ] days after the end
of the quarter, or Caliper otherwise fails to satisfy such objectives within
[ * ] days after the end of the quarter, then [ * ]. If Caliper fails to deliver
within [ * ] days after the end of the [ * ] quarter of [ * ] the Multi Sipper
Instrument scheduled to be delivered that quarter, then, in addition to the
foregoing, Amgen's subscription under the TAP for 1999 shall automatically
extend until [ * ] days following Amgen's purchase and receipt of the same or
its written notice to Caliper of its election not to purchase the same (which
purchase or notice shall occur not later than [ * ] days after Caliper notifies
Amgen that such Multi Sipper Instrument is available for purchase). If Amgen
elects to renew its subscription for 2000 (which election must be made prior to
the expiration of the extended term of the 1999 subscription described in the
foregoing sentence), then it must pay to Caliper the full year 2000 subscription
fee of [ * ] prior to the expiration of the extended term of the 1999
subscription.
2.3 AMGEN SUPPORT.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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(a) GENERAL. In addition to describing milestones and
deliverables, the program plan prepared by the program leaders shall also plan
and budget for activities of Caliper personnel specifically directed to
supporting Amgen's implementation of Screening Products. Such activities may
include (i) assay development for Amgen Targets, (ii) training and support for
Amgen personnel developing LabChip Assays or using Screening Products, and (iii)
custom development projects requested by Amgen (each discussed further below).
Funding for such Caliper personnel shall be provided pursuant to Section 3.2
below. Amgen's program leader shall propose priorities and tasks for Caliper to
support Amgen. Caliper's program leader will determine the necessary personnel
resources, provide estimates of the projected time needed to perform relevant
tasks and provide estimates of the technical feasibility of various tasks. Based
on this information, the project leaders will mutually agree on an appropriate
plan and budget for Amgen support activities utilizing up to the number of FTEs
of Caliper time agreed upon at the beginning of the year as provided in Section
3.2 [ * ]. Requests for more than [ * ] FTEs of support at any time shall be
subject to mutual agreement.
(b) ASSAY DEVELOPMENT. LabChip Assays for Amgen's Targets will
be developed collaboratively by the parties or by Amgen independently, as
determined by Amgen. In general, Amgen will develop the appropriate biochemical
and/or cellular reagents for the assay and provide necessary quantities of
reagents to Caliper. Initially, Caliper will be primarily responsible for
adapting the assay to the LabChip format. Over time, the parties expect that
Amgen will assume an increasing role in LabChip-specific development tasks and
eventually conduct such activities independently.
(c) TRAINING AND SUPPORT. At Amgen's request, some of the
Caliper FTEs shall provide training and support for Amgen employees in
development of LapChip Assays and use of Screening Products. This training will
be in addition to customary introductory set-up and training provided when new
Screening Products are purchased for the first time (which will be included with
the purchase price). Amgen personnel will have access to information concerning
all Caliper Technology relevant to Screening throughout the Term and may
regularly or periodically communicate (by telephone, e mail, fax, etc.) or visit
Caliper's facilities for such purposes at mutually arranged times.
(d) CORE SCREENING PRODUCT OFFERINGS; CUSTOM DEVELOPMENT.
Caliper intends to consult all of its TAP participants as it decides on core
Screening Product offerings, and Caliper will include Amgen in such discussions.
From time to time, Caliper will notify Amgen of the particular Screening
Products that Caliper has decided to develop for general commercial sale. Such
products will be based upon the technical suggestions and
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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contributions and the funding anticipated to be provided by all TAP
participants. Upon Amgen's request (but in no event more frequently than
quarterly, Caliper will provide Amgen with written reports summarizing the
progress of the TAP and the development of the Screening Products. If Amgen is
interested in having Caliper develop additional products, or accessories to core
products, then Amgen may elect to apply a portion of the Amgen support FTEs to
such custom development efforts. If such projects would cause the aggregate
Amgen support to exceed [ * ] FTEs at any time, then Caliper's agreement to the
project will be required.
2.4 NON-EXCLUSIVE PROGRAM. The TAP is a mutually non-exclusive
collaboration anticipated to involve Caliper and multiple pharmaceutical
companies. Amgen and Caliper are each free to work with any other company in any
area. Amgen acknowledges that other customers, independently or together with
Caliper, may develop LabChip Assays for the same or similar targets as those
pursued by Amgen or pursue development of drugs that may compete with drugs
Amgen is developing or commercializing; subject in all cases to Sections 5.1
and 5.2 and the other terms of this Agreement. Similarly, Caliper acknowledges
that Amgen will continue to perform Screening on non-Caliper systems and may
collaborate with third parties on microfluidics and miniaturization
technologies; subject in all cases to Sections 5.1 and 5.2 and the other terms
of this Agreement.
2.5 RESTRICTIONS ON USE OF SCREENING PRODUCTS. Amgen agrees that it
will use all Screening Products only in its and its Affiliate's in-house drug
discovery programs. Specifically, Amgen shall not (i) transfer for valuable
consideration or resell any Screening Products or screening data generated
therefrom to any third party other than Affiliates or Amgen Collaborators, (ii)
use any Screening Products to provide services on behalf of any third party,
except that Amgen can provide services for its Affiliates or an Amgen
Collaborator, or (iii) allow a third party other than an Affiliate or an Amgen
Collaborator to use any Screening Products. Caliper agrees to supply Instruments
and replacement parts for use with LabChips purchased by Amgen, and LabChips for
use with Instruments and replacement parts purchased by Amgen, on commercially
reasonable terms, conditions and prices to be mutually agreed, and such terms,
conditions and prices shall be subject to Section 3.3(c). If Caliper
and its licensees are not ready, willing and able to supply Amgen with such
products, then Caliper will promptly so notify Amgen [ * ]. In such event, [ * ]
such products shall be covered by the licenses under Caliper Technology granted
in Section 2. Otherwise, the licenses granted hereunder shall not include rights
to [ * ], if the [ * ] would infringe any Caliper Patent.
2.6 COMMERCIALIZATION OF SCREENING PRODUCTS. Caliper acknowledges
that a portion of the value of this Agreement to Amgen comes from early access
to Screening Products that are not yet, or may never be, generally available
outside the TAP. Caliper represents to Amgen that as of the Effective Date it
does not have present plans to commence sales outside the TAP of Screening
Products listed on Exhibit A for Screening against therapeutic targets within
[ * ] of the date they are projected on Exhibit A for delivery to Amgen. If
Caliper should commence sales of any such Screening Products outside the TAP
within such [ * ] period, then the parties shall mutually agree in good faith
on an appropriate repayment in the form of a refund or credit (but in any event
in the form of a refund if Amgen determines not to renew the subscription for
the next then applicable year) of a portion of the up-front license fee paid to
Caliper hereunder (not to exceed [ * ]).
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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2.7 NO CALIPER RIGHTS. Caliper, its employees, agents and/or
consultants shall have no rights, claims or interests whatsoever (including but
not limited to any intellectual property rights) with respect to any [ * ]
developed in connection with, relating to, or resulting from the Screening
Products provided to Amgen hereunder or otherwise in connection with the
technology access provided to Amgen by this Agreement.
3. FINANCIAL TERMS.
3.1 TECHNOLOGY ACCESS FEES.
(a) UP-FRONT LICENSE FEE. Amgen shall pay to Caliper a
non-refundable up-front license fee of [ * ] on or prior to December 31, 1998.
(b) ANNUAL SUBSCRIPTION FEES. Amgen shall pay to Caliper a
non-refundable annual subscription fee of [ * ] for each year of the TAP, as
follows:
(i) The subscription fee for the year 1999 shall be
paid as follows. Amgen shall pay Caliper [ * ] on or prior to December 31, 1998.
The balance of [ * ] shall be paid in installments based upon Caliper's
achievement of the milestones and deliverables set forth on Exhibit A, in the
amounts set forth in Exhibit A, without regard to (a) the date when such
milestone or deliverable is achieved (provided that Amgen's obligation to pay
each such installment shall be accelerated or suspended until the date such
milestone or deliverable is achieved), (b) any decision by Amgen not to purchase
any Screening Product, or (c) any termination of this Agreement other than under
Section 8.3. Each installment payment shall be invoiced by Caliper to Amgen and
due within thirty (30) days of the receipt of invoice.
(ii) Unless Amgen terminates this Agreement early under
Section 8.2, or except as otherwise provided in Section 2.2, Amgen shall pay
Caliper the annual subscription fee for 2000 and 2001 on or before January 15th
of each such year.
3.2 AMGEN SUPPORT FUNDING.
(a) Amgen shall provide funding for Amgen support activities
provided by Caliper under Section 2.3 at the rate of [ * ] per FTE per year. For
1999, Caliper agrees to provide, and Amgen agrees to fund, [ * ] FTEs for Amgen
support activities. Prior to the beginning of each subsequent year, the parties
shall mutually agree on a schedule for Amgen support personnel to be provided by
Caliper and funded by Amgen; provided, however that this shall be
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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determined quarterly for the period of time, if any, that the Multi Sipper
Instrument scheduled to be delivered in the [ * ] quarter of [ * ] has not yet
been delivered. [ * ] of FTEs shall apply after 1999 unless the parties mutually
agree otherwise, and Caliper shall not be obliged to provide more than [ * ]
FTEs in any such year unless the parties mutually agree otherwise.
(b) Amgen support funding shall be paid in advance in
quarterly installments due fifteen (15) days after the beginning of each quarter
(i.e., January 15th, April 15th, July 15th, or October 15th). The funding for
each quarter shall be based on the number of Amgen support FTEs scheduled in the
program plan for such quarter. Caliper shall deliver quarterly reports to Amgen
describing the actual time applied to Amgen support tasks. The project leaders
may adjust the Amgen support FTEs scheduled for subsequent quarters based on
such reports. In any event, the parties will reconcile any discrepancy between
funding and actual FTE time provided once per year, after the last quarter's
report has been delivered to Amgen. If actual FTE time is less than the funding
provided, Caliper shall refund the difference or credit it towards the next
year's funding, at Amgen's option. If actual FTE time exceeds the funding
provided, Caliper may invoice Amgen for the difference but Amgen shall not be
obligated to pay such amount unless such time was previously authorized by
Amgen.
3.3 SCREENING PRODUCTS.
(a) Caliper will notify Amgen when Caliper is prepared to
offer each Screening Product for sale to Amgen, together with standard
commercial terms to be established by Caliper including price, warranty, set-up
and training, et cetera. The parties agree, however, that the purchase price
(excluding tax and shipping) for the following initial deliverables set forth in
the program plan shall be as set forth below:
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
(b) Amgen hereby agrees to take delivery of and to pay for the
Instruments listed under [ * ] on Exhibit A. The purchase price of [ * ] for the
[ * ] and [ * ] shall be paid on or before [ * ]; provided that [ * ]. Orders
for the Screening Products for 1999 described in Exhibit A shall be considered
firm unless and until otherwise provided in Section 2.2. Amgen shall pay the
purchase price for the other deliverables within thirty (30) days of receipt by
Amgen of the invoice for the deliverable, which will be sent at the time the
product is shipped. Amgen shall pay standard sales taxes applicable to each
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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sale of Screening Products.
(c) The prices charged to Amgen for sales of Screening Products
[*], including but not limited to terms such as volume purchases, minimum
purchase commitments, warranties and service contracts.
4. INTELLECTUAL PROPERTY.
4.1 AMGEN TECHNOLOGY. Amgen shall have all right, title and interest
in and to the Amgen Technology. Caliper hereby assigns to Amgen all of its
right, title and interest, if any, in and to all Amgen Technology discovered,
invented (inventions conceived or reduced to practice) or developed in
connection with the TAP and any and all other activities contemplated by this
Agreement. Caliper agrees to cooperate with Amgen to execute any documents or
take any other actions necessary or desirable to effect such assignment and
perfect such ownership rights in Amgen, at Amgen's expense. Caliper shall use
reasonable efforts to notify Amgen of any new Amgen Technology (Amgen Technology
not specifically provided by Amgen to Caliper under this Agreement). Any such
new Amgen Technology for which no patent application is filed shall be treated
as Amgen's Confidential Information. The intent of this Section 4.1 is to vest
in Amgen all intellectual property rights, if any, resulting from or in
connection with the working relationship created by this Agreement which relate
to its business - research, development and commercialization of pharmaceutical
products and in the event of question or issue regarding intellectual property
rights this principle shall be followed.
4.2 CALIPER TECHNOLOGY. Caliper shall have all right, title and
interest in and to the Caliper Technology and LabChip Improvements. Amgen hereby
assigns to Caliper all of its right, title and interest (except the licenses
granted to Amgen under this Agreement), if any, in and to all Caliper Technology
and LabChip Improvement discovered, invented (inventions conceived or reduced to
practice) or developed in connection with the TAP and any and all other
activities contemplated by this Agreement; provided, however, that Amgen shall
have a non-exclusive, royalty-free, irrevocable and perpetual license to such
Caliper Technology and LabChip Improvements for the use by it, its Affiliates
and Amgen Collaborators for any purpose in Amgen's in-house drug discovery
program. Amgen agrees to cooperate with Caliper to execute any documents or take
any other actions necessary or desirable to effect such assignment and perfect
such ownership rights in Caliper, at Caliper's expense. Amgen shall use
reasonable efforts to notify Caliper of any new Caliper Technology or LabChip
Improvements (Caliper Technology or LabChip Improvements not specifically
provided by Caliper to Amgen under this Agreement). Any such new Caliper
Technology or LabChip Improvements for which no patent application is filed
shall be treated as Caliper's Confidential Information. The intent of this
Section 4.2 is to vest in Caliper all intellectual property rights, if any,
resulting from or in
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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connection with the working relationship created by this Agreement which relate
to its business - research, development, manufacture and commercialization of
chip-based microfluidic systems, and in the event of question or issue regarding
intellectual property rights this principle shall be followed.
4.3 AMGEN MATERIALS. Amgen may provide to Caliper pursuant to this
Agreement certain assays, compounds, substrates, reagents and other materials
(collectively, the "Materials"), which are and shall be the sole property of
Amgen. The provision of Materials to Caliper under this Agreement does not grant
Caliper any license or other right to Amgen Technology, except the limited right
to use the Materials for the sole purpose of satisfying its obligations to Amgen
under this Agreement and for no other purpose, including without limitation
other research purposes. Caliper understands that some Materials may have
unpredictable or unknown biological and/or chemical properties and that they
should be used with caution. Upon termination of this Agreement, Caliper shall
promptly return the Materials to Amgen.
5. CONFIDENTIALITY; PUBLICITY; USE OF NAME.
5.1 CONFIDENTIAL INFORMATION. During the term of this Agreement, and
for a period of five (5) years following the expiration or termination of this
Agreement, each party shall maintain in confidence any and all Confidential
Information. Each party further agrees that it shall not use for any purpose not
authorized under this Agreement or disclose the Confidential Information to any
third party, except that either party may disclose Confidential Information
under a similar obligation of confidentiality and non-use on a need-to-know
basis to its directors, officers, employees, consultants, agents and Affiliates.
Notwithstanding the foregoing, this Agreement and the contents hereof may be
disclosed under a similar obligation of confidentiality and non-use on a
need-to-know basis to investors and their representatives in a private financing
transaction, potential acquirers or targets and their representatives in an
acquisition transaction, or as required by law (including but not limited to as
an exhibit to a registration statement filed with the Securities and Exchange
Commission), order or regulation of a governmental agency. The disclosing party
shall provide written notice to the other party of any such disclosure required
by law, order or regulation of a governmental agency, reasonably in advance if
practical. If Caliper intends to file this Agreement with the Securities and
Exchange Commission, Caliper agrees to provide Amgen with a copy of the proposed
filing for review and comment reasonably in advance of the filing date. Upon
termination of this Agreement, each party shall return to the other party
Confidential Information received from the other in tangible form.
5.2 RELIEF. Each party shall be relieved of any and all obligations
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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under Section 5 regarding Confidential Information which:
(a) was already known to the receiving party or its
Affiliates, other than under an obligation of confidentiality, at the time of
disclosure by the other party;
(b) was generally available or known to the public or
otherwise part of the public domain at the time of its disclosure to the
receiving party;
(c) became generally available or known to the public or
otherwise part of the public domain after its disclosure through no fault
attributable to the receiving party;
(d) was disclosed to the receiving party or its Affiliates,
other than under an obligation of confidentiality to a third party, by a third
party who had no obligation to the disclosing party not to disclose such
information to others; or
(e) was independently discovered or developed by the receiving
party or its Affiliates without the use of Confidential Information belonging to
the disclosing party.
5.3 PUBLICITY. Neither party shall originate any news release or
other public announcement relating to this Agreement or the contents hereof
without the prior written approval of the other party, which approval shall not
be unreasonably withheld or delayed for longer than five (5) working days.
5.4 USE OF NAME. Except as otherwise provided in Section 5.1, neither
party shall use the name or logo of the other party without the prior written
consent of such other party.
6. REPRESENTATIONS AND WARRANTIES AND COVENANTS.
6.1 CORPORATE POWER. Each party represents and warrants to the other
that as of the Effective Date it is duly organized and validly existing under
the laws of its state of incorporation, and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof.
6.2 DUE AUTHORIZATION. Each party represents and warrants to the
other that as of the Effective Date it is duly authorized to execute and deliver
this Agreement and to perform its obligations hereunder, and the person
executing this Agreement on its behalf has been duly authorized to do so by all
requisite corporate action.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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6.3 BINDING AGREEMENT. This Agreement is legally binding upon it and
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by it does not breach any agreement to which it is
a party, nor violate any law or regulation of any court, governmental body or
administrative or other agency having jurisdiction over it, in each case in any
material respect. The parties agree that this covenant shall be applicable on
the Effective Date and throughout the Term.
7. INDEMNIFICATION; DISCLAIMER; LIMITATION OF LIABILITY.
7.1 INDEMNIFICATION BY CALIPER. Amgen shall be entitled to the quiet
enjoyment of the Screening Products and therefore, subject to Section 7.4 below,
Caliper shall defend, indemnify and hold harmless Amgen and its Affiliates and
all their officers, directors, employees and agents from and against any and all
damages, awards, costs and expenses (including court and arbitration costs,
witness fees and reasonable attorneys' fees) incurred by Amgen or any such
person or entity arising from or in connection with any claim, demand, law
suits or other legal actions by any third party against any such person or
entity alleging infringement of any patent claim or other intellectual property
right of a third party with respect to the possession, development,
manufacture, use or sale of, or otherwise relating to any Screening Product.
7.2 INDEMNIFICATION BY AMGEN. Amgen shall defend, indemnify and hold
harmless Caliper, its Affiliates and sublicensees, and all their officers,
directors, employees and agents from any damages, awards, costs and expenses
(including court and arbitration costs, witness fees and reasonable attorneys'
fees) incurred by Caliper and/or any such person or entity arising from or in
connection with any claim, demand law suits or other legal actions by any third
party against any such person or entity arising from the possession,
development, manufacture, use, sale or administration of Amgen's Targets or
Materials by Caliper or by Amgen, its Affiliates or sublicensees.
7.3 INDEMNIFICATION PROCEDURE. The party seeking indemnification
under this Article 7 (the "Indemnified Party") shall (i) give the other party
(the "Indemnifying Party") notice of the relevant claim and the related facts
with reasonable promptness after becoming aware of same, (ii) reasonably
cooperate with the Indemnifying Party, at the Indemnifying Party's expense, in
the defense of such claim, and (iii) give the Indemnifying Party the ability to
control the defense and settlement of any such claim, except that the
Indemnifying Party shall not enter into any settlement that materially adversely
affects the Indemnified Party without the Indemnified Party's prior written
approval. The Indemnified Party shall have no authority to settle any claim on
behalf of the Indemnifying Party.
7.4 INTELLECTUAL PROPERTY. Caliper' obligation to indemnify Amgen for
claims under Section 7.1 above shall be subject to the following conditions.
Caliper shall determine which Screening Products to offer and when
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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they will be offered. Caliper may impose reasonable restrictions upon the use of
any Screening Product for intellectual property reasons, provided it notifies
Amgen of such restriction at the time of sale. Following sale of any product, if
Caliper determines that third party intellectual property concerns warrant,
Caliper may, in its sole discretion, (i) obtain for Amgen a license to continue
to use the relevant Screening Product, (ii) replace or modify the relevant
Screening Product so as to make the Screening Product non-infringing, or (iii)
if (i) and (ii) are not commercially and technically reasonable, in Caliper's
sole discretion, terminate Amgen's rights to use the relevant Screening Product
or restrict Amgen from using it in a manner Caliper believes may be infringing.
In the event of (iii), Amgen may elect to have the purchase price paid by Amgen
for such Screening Product refunded, and Amgen will return the relevant
Screening Product. Such a refund shall be Amgen's sole remedy against Caliper
for the loss of use of such Screening Product. Caliper shall not be obligated to
indemnify Amgen for claims arising out of any Screening Product's infringement
of any intellectual property right of a third party resulting from Amgen's
combination of such Screening Product with technology other than the Caliper
Technology, Amgen's use of such Screening Product in a manner not authorized by
Caliper at the time of sale, Amgen's misuse or mishandling of such Screening
Product, Amgen's unauthorized modification of such Screening Product or Amgen's
continued use of such Screening Product notwithstanding termination of Amgen's
right to use such Screening Product pursuant to this Section 7.4.
7.5 CALIPER DISCLAIMER. Caliper makes no representation and extends
no warranties of any kind, either express or implied, including warranties of
merchantability or fitness for a particular purpose, with respect to any caliper
technology, screening product or other products developed or provided pursuant
to this agreement. Amgen acknowledges that the Screening Products to be provided
to Amgen pursuant to this Agreement are prototype units, and as such are neither
equipped with standard safety features nor completely tested for defects. Amgen
acknowledges that such products require a greater degree of caution than other
standard laboratory equipment. Caliper shall not be liable to Amgen for any
personal injury or property damage resulting from use of such equipment in a
manner other than that recommended by Caliper at the time of sale.
7.6 AMGEN DISCLAIMER. AMGEN MAKES NO REPRESENTATION AND EXTENDS NO
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO ANY AMGEN
TARGETS OR OTHER MATERIALS OR TECHNOLOGY DEVELOPED OR PROVIDED PURSUANT TO THIS
AGREEMENT.
7.7 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE
TO THE OTHER FOR ANY INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT
LIMITATION, LOST PROFITS), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY THEREOF. Each party acknowledges that the foregoing limitations are
an essential element of the Agreement between the parties and that in the
absence of such limitations the pricing and other terms set forth in this
Agreement would be substantially different.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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8. TERM AND TERMINATION.
8.1 TERM. The term of this Agreement shall commence on the Effective
Date and, unless terminated earlier pursuant to this Section 8, shall expire
December 31, 2001. The Agreement may be extended by mutual written agreement of
the parties hereto.
8.2 TERMINATION BY AMGEN. Amgen may terminate this Agreement, with or
without cause, effective on January 1 of any year after January 1, 1999, with at
least [ * ] days prior written notice; provided, however, that Amgen may also
terminate this Agreement if Caliper has not delivered within [ * ] days of the
end of the [ * ] quarter of [ * ] the Multi Sipper Instrument scheduled to be
delivered that quarter by providing Caliper with written notice at any time
prior to the expiration of the extended term of the 1999 subscription described
in Section 2.2. All rights and obligations applicable under this Agreement
through the effective date of termination shall continue to apply until such
date irrespective of any delivery of notice of termination, including but not
limited to [ * ].
8.3 TERMINATION FOR MATERIAL BREACH. Either party may terminate this
Agreement upon any material breach of this Agreement by the other party if the
other party has not cured such breach within sixty (60) days after written
notice thereof by the non-breaching party.
8.4 SURVIVING OBLIGATIONS. No expiration or termination of this
Agreement shall relieve either party of any obligation accruing prior to such
expiration or termination. The provisions of Sections 2.1(a) (third and fourth
sentences), 2.1(b), 2.1(c), 2.1(d), 2.4, 2.5, 2.7, 3.1(b)(i), 3.3(c ), 4, 5, 7,
8.4, 8.5 and 9 shall survive the expiration or termination of this Agreement.
8.5 POST-TERM LICENSE. Following expiration or termination of this
Agreement, the product license granted to Amgen under Section 2.1 shall continue
to be fully-paid, irrevocable and perpetual and, in addition, Amgen shall be
entitled to continue to purchase such Instruments, LabChips and other Screening
Products for so long as Caliper continues to offer such items for sale to third
parties. Caliper will notify Amgen before ceasing production of any Screening
Product which Amgen has purchased in the [ * ] period before production is due
to cease. The know-how license granted under Section 2.1 shall continue to be
fully-paid, irrevocable and perpetual with respect to Caliper Know-How provided
to Amgen during the Term. The non-exclusive license granted to Amgen under
Section 4.2 shall continue to be royalty-free, irrevocable and perpetual with
respect to Caliper Technology and LabChip Improvements covered thereby.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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9. MISCELLANEOUS
9.1 NOTICES. Any consent, notice or report required or permitted to
be given or made under the Agreement by one party to the other party shall be in
writing, delivered personally or by confirmed facsimile, first class mail
postage prepaid, courier, or nationally-recognized delivery service, and
addressed to the other party at its address indicated below, or to such other
address as the addressee shall have last furnished in writing to the addresser.
Such consent, notice or report shall be effective upon delivery to the
addressee.
If to Caliper: Caliper Technologies Corp.
605 Fairchild Drive
Mountain View, California 94043
ATTENTION: CHIEF OPERATING OFFICER
If to Amgen: Amgen Inc.
One Amgen Center Drive
Thousand Oaks, California 91320-1799
Attention: Senior Vice President, General Counsel and
Secretary
Copy to: Senior Vice President, Research
Facsimile: (805) 499-8011
9.2 GOVERNING LAW. The Agreement shall be governed by and construed
in accordance with the laws of the State of California, without regard to the
conflicts of law principles thereof. With respect to any dispute under this
Agreement, the parties submit to the exclusive jurisdiction of the courts of the
State of California (both state and federal).
9.3 ASSIGNMENT. This Agreement is personal in its character, and
neither party shall assign its rights or obligations under this Agreement, in
whole or in part, without the prior written consent of the other party;
provided, however, that either party may assign this Agreement (i) to any
successor by merger or sale of substantially all of the business assets of the
party or (ii) to any Affiliate so long as such Affiliate expressly agrees to be
bound by the terms of this Agreement. This Agreement shall be binding on and
inure to the benefit of the successors or permitted assigns of the parties
hereto, and all entities controlled by them.
9.4 WAIVERS AND AMENDMENTS. No change, modification, extension or
waiver of this Agreement, or any of the provisions herein contained, shall be
valid unless made in writing and signed by duly authorized representatives of
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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the parties hereto.
9.5 ENTIRE AGREEMENT. This Agreement embodies the entire
understanding between the parties and supersedes any prior understanding and
agreements between and among Caliper and Amgen with respect to the subject
matter of this Agreement.
9.6 SEVERABILITY. If a court of competent jurisdiction declares any
provision of this Agreement invalid or unenforceable, or if any government or
other agency having jurisdiction over either party deems any provision to be
contrary to any laws, then that provision shall be severed and the remainder of
the Agreement shall continue in full force and effect. To the extent possible,
the parties shall revise such invalidated provision in a manner that will render
such provision valid without impairing the parties' original intent.
9.7 NO WAIVER. The failure of a party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not constitute a waiver or relinquishment, to any extent, of the
right to assert or rely upon any such terms or conditions on any future
occasion.
9.8 DISCLAIMER OF AGENCY. The relationship between Caliper and Amgen
is that of independent contractors. Caliper and Amgen are not joint venturers,
partners, principal and agent, master and servant, employer or employee, and
have no other relationship other than independent contracting parties. Neither
party shall have the right or authority to assume, create, or incur any third
party liability or obligation of any kind, express or implied, against or in the
name of or on behalf of another except as expressly set forth in this Agreement.
9.9 COUNTERPARTS. The Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.10 USE OF TERMS. As used in Sections 1.3, 1.12, 2.7 and 4, the terms
"Amgen", "Caliper", "party" or "parties" shall also include it and their
employees, consultants, agents and Affiliates.
9.11 MISCELLANEOUS. In order for each party to fulfill its obligations
hereunder with respect to intellectual property and Confidential Information,
each party has or will have each of its relevant employees, consultants, agents
or Affiliates to execute agreements providing for the assignment of intellectual
property rights and for the protection of Confidential Information.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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IN WITNESS WHEREOF, the parties have executed the Agreement as of the
date first set forth above.
CALIPER TECHNOLOGIES CORP. AMGEN INC.
By: /s/ Calvin Chow By: /s/ Gordon M. Binder
-------------------------- ---------------------------------------
Title: Chief Operating Officer Title: Chairman and Chief Executive Officer
----------------------- ------------------------------------
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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EXHIBIT A
1999 PROGRAM PLAN
The following program plan describes the experimental systems scheduled for
delivery and the technology developments scheduled to be demonstrated during
1999. [ * ].
[ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 133, AS AMENDED.
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.13
TECHNOLOGY ACCESS AGREEMENT
THIS TECHNOLOGY ACCESS AGREEMENT ("Agreement"), dated as of August 12,
1999 (the "Effective Date"), is entered into by and between ELI LILLY AND
COMPANY, having offices at Lilly Corporate Center, Indianapolis, Indiana 46285
("Lilly") and CALIPER TECHNOLOGIES CORP. ("Caliper"), having offices at 605
Fairchild Drive, Mountain View, California 94043-2234.
RECITALS
WHEREAS, Lilly is in the business of discovering, developing,
manufacturing and marketing actual or potential pharmaceutical, therapeutic,
animal health and agricultural agents, compounds and products (collectively,
"Lilly Products"); and
WHEREAS, Lilly uses Screening techniques in its business activities; and
WHEREAS, Caliper has developed proprietary microfluidics and
miniaturization technology applicable to Screening techniques; and
WHEREAS, Caliper and Lilly desire to establish a technology access
program to implement Screening capabilities utilizing Caliper Technology at
Lilly's facilities;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
1. DEFINITIONS
1.1 "AFFILIATE" shall mean, with respect to any Person, any other
Person controlling, controlled by or under common control with,
such Person. For purposes of this definition, the term "control"
means the possession, directly or indirectly, of the power to
direct the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
1.2 "ANNUAL SUBSCRIPTION FEE" shall have the meaning specified in
Section 3.1.2.
1.3 "CALIPER KNOW-HOW" shall mean all discoveries, materials,
techniques, procedures, data, trade secrets and other technical
information that (a) either as of the Effective Date or during
the Term Caliper owns or controls, or in which Caliper has an
interest that it is not legally or contractually prohibited
from licensing or sublicensing to Lilly,
<PAGE> 2
and (b) Caliper treats as confidential or proprietary. Caliper
Know-How does not include Caliper Patents.
1.4 "CALIPER PATENTS" shall mean any and all Patents that either as
of the Effective Date or during the Term Caliper owns or
controls, or in which Caliper has an interest that it is not
legally or contractually prohibited from licensing or
sublicensing to Lilly.
1.5 "CALIPER SCREENING SYSTEM" shall mean a system for performing
Screening that consists of a LabChip, a set of reagents and
software, one or more Instruments on which such LabChip,
reagents and software are designed to operate, and a protocol
for performing a LapChip Assay.
1.6 "CALIPER TECHNOLOGY" shall mean, collectively, the Caliper
Patents and the Caliper Know-How.
1.7 "CONFIDENTIAL INFORMATION" of a party shall mean all information
provided by such party to the other party either in connection
with the discussions and negotiations pertaining to this
Agreement or in the course of performing this Agreement, which
information is considered to be proprietary and confidential by
the disclosing party, including without limitation, data;
knowledge; practices; processes; ideas; research plans; chemical
compounds; engineering designs and drawings; research data;
manufacturing processes and techniques; scientific,
manufacturing, marketing and business plans; and financial and
personnel matters relating to the disclosing party or to its
present or future products, sales, suppliers, customers,
employees, investors or business. Notwithstanding the foregoing,
information shall not be deemed Confidential Information for
purposes of this Agreement if such information:
(a) was already known to the receiving party or its
Affiliates, other than under an obligation of
confidentiality, at the time of disclosure by the
disclosing party;
(b) was generally available or known to the public or
otherwise part of the public domain at the time of its
disclosure to the receiving party;
(c) became generally available or known to the public or
otherwise part of the public domain after its disclosure
to the receiving party through no fault of the receiving
party;
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(d) was disclosed to the receiving party or its Affiliates,
other than under an obligation of confidentiality to a
third party, by a third party who had no obligation to
the disclosing party not to disclose such information to
others; or
(e) was independently discovered or developed by the
receiving party or its Affiliates without the use of
Confidential Information belonging to the disclosing
party.
[ * ].
1.8 "CONTRACT YEAR" shall mean a period of one year commencing on
the Effective Date or on any anniversary of the Effective Date.
1.9 "EFFECTIVE DATE" shall have the meaning stated in the
introductory paragraph of this Agreement.
1.10 "FTE" shall mean one or more Caliper full-time equivalent
person(s), whether employees, contractors or consultants,
engaged in activities on Lilly's behalf under this Agreement for
the equivalent of one full-time employee's time (assuming a
40-hour workweek).
1.11 "INSTRUMENT" shall mean any hardware component of a system
offered for sale by Caliper to develop LabChip Assays or perform
Screening.
1.12 "LABCHIP" shall mean a chip offered for sale by Caliper to
perform microfluidic or miniaturization experimentation
utilizing Caliper Technology. LabChip(tm) is a Caliper trademark
but is printed without the trademark designation (tm) in this
Agreement for convenience.
1.13 "LABCHIP ASSAY" shall mean a Screening assay for a particular
Target designed to be performed on a Caliper Screening System.
1.14 "LABCHIP IMPROVEMENTS" shall mean all inventions (whether or not
patentable), discoveries, techniques, procedures, trade secrets
and other technical information (and any Patents claiming the
foregoing) that are conceived or first reduced to practice [*]
and that specifically relate to Caliper's proprietary Screening
Products that incorporate Caliper Technology (or to improvements
to such Screening Products), including but not limited to the
world-to-chip interface or chip-to-world interface, chip
construction, composition or design, assay strategies or reagent
conditions directed to chip-based microfluidic systems,
electrical or other means of controlling fluids or molecules on
a chip, or detection of results produced by chips. LabChip
Improvements shall not include any inventions, discoveries,
techniques, procedures, trade secrets, information or Patents
that (a) are conceived or first reduced to practice after
expiration or termination of the Term or (b) relate to Targets,
Lilly compounds, Materials, Lilly Products, or technology
unrelated to Screening Products.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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1.15 "LICENSE" shall mean the license granted to Lilly and its
Affiliates by Caliper in Section 2.1 of this Agreement.
1.16 "LICENSE FEE" shall have the meaning specified in Section 3.1.1.
1.17 "LILLY PRODUCTS" shall have the meaning specified in the
Recitals.
1.18 "LILLY PROGRAM" shall mean any joint venture, alliance,
collaboration, program or similar relationship between Lilly or
any of its Affiliates and a third party, or any activity or
project that Lilly or any of its Affiliates performs or
undertakes without the participation of a third party, the
purpose of which, in either case, is to research, discover,
develop, improve, manufacture or commercialize Lilly Products;
[ * ].
1.19 "MATERIALS" shall have the meaning specified in Section 4.3.
1.20 "PARTICIPANT" shall mean a Person participating in the
Technology Access Program under the terms and conditions of an
agreement such as this Agreement.
1.21 "PATENTS" shall mean any and all patents, together with any
substitutions, reissues, renewals, divisions, continuations,
continuations-in-part, reexaminations, patent term restorations,
patents of additions and extensions thereof, any supplementary
protection certificates relating thereto, and any inventors'
certificates, which have not been held invalid or unenforceable
by a non-appealable or non-appealed decision of a court of
competent jurisdiction, issuing from patent applications filed
in any jurisdiction and any provisionals, divisionals,
continuations, and continuations-in-part of such applications.
1.22 "PERSON" shall mean an individual, partnership, firm,
corporation, limited liability company, joint venture,
association, trust or other entity, or any governmental agency
or political subdivision thereof.
1.23 "PROGRAM COLLABORATOR" shall mean a third party participant in a
Lilly Program.
1.24 "PROGRAM LEADER" shall have the meaning specified in Section
2.2.
1.25 "PROGRAM PLAN" shall have the meaning specified in Section 2.2.
1.26 "REINSTATEMENT ELECTION" shall have the meaning specified in
Section 7.6.4.
1.27 "REINSTATEMENT PAYMENT" shall have the meaning specified in
Section 7.6.4.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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1.28 "SCREENING" shall mean the process of performing a screening
assay of a designated agent or compound against a target (e.g.,
an enzyme, receptor or cell type) to determine the agent's or
compound's potential safety, efficacy, biological activity,
chemical activity or other characteristics relevant to its use
as a Lilly Product. For purposes of this Agreement, Screening
shall include, but not be limited to, primary high throughput
screening assays of specified agents or compounds and secondary
screening assays of analogues and derivatives of such agents or
compounds.
1.29 "SCREENING DATA" shall have the meaning specified in Section
4.4.
1.30 "SCREENING PRODUCTS" shall mean all Instruments, LabChips and
other hardware, software or reagents that Caliper offers in
writing during the Term for sale to Participants for use in
Screening.
1.31 "SUSPENSION" shall have the meaning specified in Section 7.6.
1.32 "SUSPENSION PERIOD" shall have the meaning specified in Section
7.6.
1.33 "SUSPENSION YEAR" shall have the meaning specified in Section
7.6.
1.34 "TARGETS" shall mean the molecules, complexes or cell lines
(such as enzymes, binding proteins, receptors, transporters, or
ion channels) selected by Lilly for LabChip Assay development in
accordance with Section 2.3.
1.35 "TECHNOLOGY ACCESS PROGRAM" or "TAP" shall mean Caliper's
program for providing access to its evolving line of Screening
Products in the context of an ongoing, renewable business
relationship. In addition to sales of finished products, this
relationship involves customer input into development, early
access to prototypes and substantial training and support.
1.36 "TERM" shall mean the period commencing on the Effective Date
and ending on the third anniversary of the Effective Date,
unless extended or earlier terminated pursuant to Section 7 or
modified by mutual written agreement of the parties pursuant to
Section 9.4.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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2. TECHNOLOGY ACCESS PROGRAM
2.1 LICENSE GRANT. Caliper hereby grants to Lilly and its Affiliates
a worldwide, nonexclusive, nontransferable (except as provided
in Section 9.3) license, with no right to sublicense, under
Caliper Technology:
(a) to use Screening Products to develop LabChip Assays and
to perform Screening, for itself or for Program
Collaborators, in Lilly Programs; and
(b) to carry out any and all activities contemplated from
time to time pursuant to this Agreement or the Program
Plan.
With respect to each of the Screening Products offered for sale
by Caliper in the first Contract Year, this license shall become
fully-paid, irrevocable and perpetual upon Caliper's receipt of
the License Fee and the first Annual Subscription Fee. With
respect to Screening Products offered in each subsequent
Contract Year, this license shall become fully-paid,
irrevocable and perpetual upon Caliper's receipt of the Annual
Subscription Fee for such Contract Year. For the avoidance of
doubt, the parties intend that Lilly shall have a fully-paid,
irrevocable and perpetual license with respect to all Screening
Products offered to Participants in each Contract Year for
which the Annual Subscription Fee is paid. Accordingly, as
provided in Section 7.5, after payment of the applicable Annual
Subscription Fee, this license, insofar as it relates to
Screening Products offered in the Contract Year for which such
Annual Subscription Fee was paid, shall survive in perpetuity
despite the expiration or termination of this Agreement.
2.2 PROGRAM LEADERS AND PLAN. Caliper and Lilly shall each designate
a TAP leader (each, a "Program Leader") who shall jointly
coordinate the activities carried out under this Agreement and
monitor the progress of such activities on a periodic basis. The
initial Program Leader of Lilly shall be Jeff G. Wegrzyn, Ph.D.,
and the initial Program Leader of Caliper shall be Steven A.
Sundberg, Ph.D. From time to time, the Program Leaders shall
jointly prepare and update a program plan (the "Program Plan")
describing Lilly's goals as a Participant, the tasks for Lilly
support to be provided by Caliper personnel under Section 2.3,
and such other matters as the Program Leaders determine to be
appropriate. The initial Program Plan is attached hereto as
Exhibit A. Either party, in its sole discretion, may change its
Program Leader by delivering written notice of the name and
qualifications of the proposed successor Program Leader to the
other party. If the other party questions the qualifications of
the proposed successor, then the parties shall consult with one
another in good faith for the purpose of resolving any issues.
In the event of a change in Program Leader, a reasonable
transition period shall be
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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allowed for, if possible, in order to maximize continuity of
Lilly's participation in the TAP.
2.3 LILLY SUPPORT.
2.3.1. GENERAL. [ * ] Caliper shall provide to Lilly, up to the
limits set forth below, assistance and support in
implementing the Program Plan and otherwise carrying out
the activities contemplated by this Agreement. Such
activities may include, without limitation, (i) assay
development for Lilly Targets, (ii) training and support
for Lilly personnel developing LabChip Assays or using
Screening Products, and (iii) custom development
projects requested by Lilly (each discussed further
below). The Program Leaders will jointly propose
priorities and tasks to be accomplished by the FTEs
assigned by Caliper to provide such assistance and
support to Lilly. Caliper's Program Leader will
determine the necessary personnel resources, and provide
estimates (in writing, if requested) of the projected
time needed to perform relevant tasks and the technical
feasibility of various tasks. Based on this information,
the Program Leaders will update the Program Plan to
include the applicable tasks for Lilly support
activities. Absent Caliper's agreement to the contrary,
the amount of assistance and support shall not exceed [
* ] FTEs in any calendar quarter. Administrative
activities of the Caliper Program Leader shall not be
counted toward this limit. The Program Leaders shall
attempt to schedule the activities of the FTEs in order
to avoid significant fluctuations in the number of
Caliper personnel devoted to Lilly support over the
course of the Contract Year. [ * ]. The parties expect
that the skills, experience, training and qualifications
required of such FTEs will vary from time to time during
the Term. Caliper will use its best efforts at all times
to assign FTEs with the proper skills, experience,
training and qualifications, and will not assign FTEs to
whom Lilly reasonably objects on the grounds of improper
skills, experience, training and qualifications. In
addition, Caliper agrees not to discriminate against
Lilly in selection or assignment of FTEs. Caliper shall
deliver quarterly reports to Lilly describing the actual
time applied by its FTEs to Lilly support tasks. The
Program Leaders may adjust the Lilly support FTEs
scheduled for subsequent quarters based on such reports.
2.3.2. LABCHIP ASSAY DEVELOPMENT. LabChip Assays for Lilly's
Targets will be developed collaboratively by the parties
or solely by Lilly, as determined by Lilly. In general,
Lilly will develop the appropriate biochemical and/or
cellular reagents for a Screening assay and will provide
necessary quantities of reagents to Caliper as
determined by Lilly. Initially, Caliper will be
primarily responsible for adapting the Screening assay
to the LabChip format. Over time, the parties expect
that Lilly will assume an increasing role in developing
LabChip Assays and eventually conduct such activities
independently.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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2.3.3. TRAINING AND SUPPORT. At Lilly's request, [ * ] or more
of the Caliper FTEs shall provide training and support
for Lilly employees in development of LabChip Assays and
use of Screening Products, with the intended result of
making Lilly independent in its use of Caliper
Technology. The parties will schedule such training and
support at mutually convenient times and locations,
including a reasonable number of visits to Lilly's
facilities in Indiana, North Carolina or elsewhere.
2.3.4. CORE SCREENING PRODUCT OFFERINGS; CUSTOM DEVELOPMENT.
Caliper will consult with Lilly with respect to the
Screening Products it offers during each Contract Year.
From time to time, Caliper will notify Lilly of the
particular Screening Products that Caliper has decided
to develop and offer to Participants. If Lilly is
interested in having Caliper develop additional
products, or accessories to core products, then Lilly
may elect to apply a portion of the Lilly support FTEs
to such custom development efforts.
2.4 NON-EXCLUSIVITY. The TAP is a mutually non-exclusive
collaboration. Lilly and Caliper are each free to work with any
third party in any area. Screening Products developed by
Caliper, independently or jointly with Lilly, will be sold on a
non-exclusive basis (subject to Section 5.1). Lilly acknowledges
that other customers, independently or together with Caliper,
may develop LabChip Assays for the same or similar targets as
those pursued by Lilly or pursue development of drugs that may
compete with drugs Lilly is developing or commercializing,
subject in all cases to Section 5.1 and the other terms of this
Agreement. Similarly, Caliper acknowledges that Lilly may
continue to perform Screening on non-Caliper systems and may
collaborate with third parties on [ * ]; subject in all cases to
Section 5.1 and the other terms of this Agreement.
2.5 SPECIAL PROJECTS. Lilly may propose to Caliper special product
development projects that combine Lilly proprietary technology
and Caliper Technology and that could involve a period of [ * ].
In such case, the parties shall discuss in good faith
alternative business arrangements, including a period of [ * ],
which would accomplish the objectives of such special projects.
In the first Contract Year, however, the parties intend to focus
on core technology implementation and do not expect to initiate
special projects.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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2.6 USE AND TRANSFER OF SCREENING PRODUCTS. Caliper authorizes Lilly
and its Affiliates to use Screening Products to pursue all
activities within the scope of the License. Caliper authorizes
Lilly and its Affiliates to transfer or resell Screening
Products among themselves. Subject to the foregoing, Lilly shall
not transfer or resell Screening Products to others, use
Screening Products to provide services to others (except in the
context of a Lilly Program), or authorize others to use
Screening Products. Lilly's use of information and data derived
from its use of Screening Products is governed by Section 4.4 of
this Agreement and not by this Section.
2.7 COMMERCIALIZATION OF SCREENING PRODUCTS. Caliper represents and
warrants to Lilly that, as of the Effective Date, Caliper has no
plans to sell to parties other than Participants any Screening
Products currently in development for performing custom LabChip
Assays (i.e., assays for targets selected by the user, rather
than by Caliper); however, Caliper reserves the right to do so
should Caliper determine that technical or business reasons
warrant such a change in plans. However, with respect to any
Screening Product offered to Lilly in the first Contract Year
for performing custom LabChip Assays, if Caliper sells within [
* ] of the date such Screening Product is first offered to
Lilly, such Screening Product to any party other than a
Participant, then (a) the parties shall mutually agree in good
faith on an appropriate repayment in the form of a refund or
credit of a portion of the License Fee and the Annual
Subscription Fee for the first Contract Year, and (b) the
parties shall mutually agree on a [ * ], from which Lilly may
thereafter [ * ].
2.8 OTHER PRODUCTS. During the course of this Agreement, Caliper
may offer Lilly the opportunity to receive products other than
Screening Products. For example, Lilly may receive products
being commercialized through Caliper's research collaboration
with Hewlett-Packard Company. Terms related to such transactions
will be agreed upon separately or established for all customers
by Caliper and Hewlett-Packard and are not intended to be
included under the scope of this Agreement.
3. FINANCIAL TERMS
3.1 TECHNOLOGY ACCESS FEES.
3.1.1. LICENSE FEE. Lilly shall pay to Caliper a non-refundable
(except as provided in Section 2.7) license fee of [ * ]
Dollars [ * ] within thirty (30) days of the Effective
Date (the "License Fee").
3.1.2. ANNUAL SUBSCRIPTION FEES. Lilly shall pay to Caliper a
non-refundable (except as provided in Section 2.7)
annual subscription fee of [ * ] Dollars [ * ] for each
Contract Year of the TAP (each, an "Annual Subscription
Fee"). Each Annual Subscription Fee shall be due within
[ * ] of the commencement of the applicable Contract
Year, except that, with respect to the Annual
Subscription Fee payable with respect to the first
Contract Year, [ *
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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] Dollars [ * ] of such Annual Subscription Fee shall be
payable within thirty (30) days of the commencement of
the first Contract Year, [ * ] Dollars [ * ] of such
Annual Subscription Fee shall be payable [ * ] pursuant
to this Agreement. For purposes of clarity, [ * ] shall
not be deemed to constitute [ * ].
3.2 SCREENING PRODUCTS AVAILABLE FOR PURCHASE. Exhibit B-1 sets
forth the complete list of Screening Products available for
purchase by Lilly as of the Effective Date. Exhibit B-2 sets
forth a list of additional Screening Products that Caliper
expects to make available for purchase by Lilly during the first
Contract Year.
3.3 LABCHIP PRICING. Caliper estimates that when commercially
available, LabChips will be priced at between [ * ] per data
point measured. Both parties recognize that this cost is an
estimate based only on preliminary information. This estimate
applies to LabChips for the LabChip Assays described on Exhibit
B-1 when run on Instruments with the functionality described on
Exhibit B-1.
3.4 PRODUCT SALES. Caliper will notify Lilly in writing when Caliper
is prepared to offer each Screening Product for sale to Lilly,
together with standard commercial terms and conditions to be
established by Caliper, such as price, warranty, service
arrangements and the like. Throughout the Term, Lilly shall have
the right to purchase [ * ]. Notwithstanding the foregoing,
during the first Contract Year, [ * ]. Caliper agrees [ * ].
3.5 MINIMUM WARRANTY AND SERVICE. The specific warranty terms and
service arrangements relating to Screening Products will be
stated in a supply agreement or other documents governing the
purchase and sale thereof. However, the parties expect that, at
a minimum, Caliper will warrant to Lilly, in connection with
each sale of a LabChip to Lilly, that the LabChip will (a)
operate in accordance with the documentation provided by Caliper
with respect thereto, (b) conform to the specifications
established when the LabChip was ordered and (c) operably
interface with any Instrument specified by Caliper for use
therewith. Each Instrument purchased by Lilly under the TAP
(other than Instruments designated by Caliper in writing as
development stage Instruments) will carry a standard commercial
manufacturer's warranty that will be passed through to Lilly.
Caliper will cause reasonable service arrangements to be made
available to Lilly for all Screening Products sold by Caliper
hereunder.
3.6 PRODUCT DELIVERY AND ALLOCATION. At the time Caliper offers any
Screening Product for sale to Lilly, unless Caliper has advised
Lilly in writing that such Screening Product is in the
development stage, Caliper shall have sufficient manufacturing
capability, or shall have made adequate outsourcing
arrangements, to enable it to meet the reasonably anticipated
demand for such Screening Product within a commercially
reasonable delivery period. If Caliper is unable to satisfy the
demand for a Screening Product within a commercially reasonable
time frame [ * ], then Lilly's orders for such Screening Product
will be [ * ]. Notwithstanding the foregoing, during the first
Contract Year, [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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4. INTELLECTUAL PROPERTY
4.1 OWNERSHIP OF INVENTIONS. Except as provided in Section 4.2,
below, each party shall own all inventions, whether patentable
or not, conceived or reduced to practice solely by its employees
and/or consultants during the course of the Technology Access
Program. Caliper and Lilly shall jointly own inventions
conceived or reduced to practice jointly by employees and/or
consultants of both parties during the course of the Technology
Access Program. Each party shall execute all documents and take
all actions reasonably necessary to perfect such ownership
rights of the other party and to enable the filing of patent
applications. Inventorship shall be determined under U.S. patent
laws.
4.2 LABCHIP IMPROVEMENTS. To the extent Lilly owns a LabChip
Improvement:
4.2.1. Patented Improvements. Lilly hereby assigns to Caliper
all of Lilly's right, title and interest in and to all LabChip
Improvements for which patent applications are filed. Lilly
shall give Caliper thirty (30) days' advance written notice
before filing any such patent application. If requested by
Caliper, Lilly agrees to cooperate in patenting activities for
such LabChip Improvements, at Caliper's expense, and agrees to
execute any documents necessary to effect such assignment. In
exchange for this assignment, Caliper hereby grants to Lilly a
royalty-free, non-exclusive, non-transferable (except as
provided in Section 9.3), perpetual license to use such LabChip
Improvements in Lilly Programs; provided that no rights in any
other Caliper Technology (e.g. background patents) are granted
pursuant to this Section 4.2.1.
4.2.2. Unpatented Improvements. For any LabChip Improvement with
respect to which Lilly elects not to file a patent application,
Lilly may elect either to disclose information regarding such
LabChip Improvement to Caliper or to retain such information as
confidential to Lilly. Caliper may use or disclose freely in the
course of its business, without restriction under Article 5
below, any such information that Lilly discloses to Caliper.
Such use or disclosure may include, without limitation,
inclusion of such information in any patent application filed by
Caliper. If Lilly would like to work with Caliper on an
un-patented LabChip Improvement but retain a proprietary
interest in such LabChip Improvement, it may propose a special
project to Caliper as described in Section 2.5 by first
providing Caliper with a non-confidential summary of the LabChip
Improvement for discussion.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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4.3 LILLY MATERIALS. Lilly and/or its Affiliates may provide to
Caliper pursuant to this Agreement certain compounds,
substrates, reagents and other materials (collectively, the
"Materials"), which are and shall remain the sole property of
Lilly. Any information provided in connection with the Materials
shall be treated as Confidential Information. The provision of
Materials to Caliper under this Agreement does not grant Caliper
any license or other right to such Materials, except the limited
right to use the Materials for the sole purpose of satisfying
its obligations to Lilly under this Agreement and for no other
purpose. Caliper understands that some Materials may have
unpredictable or unknown biological and/or chemical properties
and that they should be used with caution. Upon request by
Lilly, Caliper shall promptly return to Lilly or destroy any
remaining Materials.
4.4 SCREENING DATA. Subject to Sections 4.1 and 4.2, Lilly shall own
all information and data resulting from or arising out of its
Screening activities (collectively, "Screening Data") and all
discoveries and Lilly Products based on or resulting from such
Screening Data. [ * ] Subject to such restriction and to the
provisions of Section 5.1. Lilly shall be free without further
restriction to use, disclose, transfer or otherwise take
commercial advantage of Screening Data.
5. CONFIDENTIALITY; PUBLICITY
5.1 CONFIDENTIAL INFORMATION. During the Term, and for a period of
[ * ] years following the expiration or termination of this
Agreement, each party shall maintain in confidence any and all
Confidential Information received from the other party. Each
party further agrees that it shall not use for any purpose not
authorized under this Agreement or disclose to any third party
the Confidential Information of the other party, except that
either party may disclose Confidential Information of the other
party on a need-to-know basis to its directors, officers,
employees, consultants, agents, Affiliates and third-party
collaborators if it shall have first required such recipients to
undertake an obligation of confidentiality and non-use similar
to this Section 5.1. Upon request from the disclosing party, the
receiving party shall return to the disclosing party any
Confidential Information of the disclosing party received from
it in tangible form.
5.2 PUBLICITY. Neither party shall originate any news release or
other public announcement relating to the contents of this
Agreement without the prior written approval of the other party,
which approval shall not be unreasonably withheld or delayed for
longer than [ * ]. Notwithstanding the foregoing,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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either party may disclose the existence and/or the provisions of
this Agreement, under standard obligations of confidentiality
and non-use on a need-to-know basis, to investors and their
representatives in a private or public financing transaction, to
potential acquirers or targets and their representatives in a
corporate change of control transaction, or as required by law
(including but not limited to the filing of this Agreement as an
exhibit to a document filed with the Securities and Exchange
Commission), order or regulation of a governmental agency;
provided, however, that no such disclosure shall be permitted to
the extent it would constitute a violation of Section 5.1. The
disclosing party shall provide written notice to the other party
of any such disclosure required by law, order or regulation of a
governmental agency, reasonably in advance if practical. If
Caliper intends to file this Agreement with the Securities and
Exchange Commission, Caliper agrees to provide Lilly with a copy
of the proposed filing for review and comment at least ten days
in advance of the filing date. Caliper shall not unreasonably
withhold its acceptance of any comments made by Lilly.
5.3 PUBLICATIONS. Subject to their obligations under Section 5.1,
Caliper and Lilly shall have the right to publish data they
acquire in the course of the TAP, provided that the publishing
party will provide the other party with [ * ] to review and
approve any publication disclosing subject matter involving the
other party. Approval of such publications shall not be
unreasonably withheld. For the avoidance of doubt, the use and
disclosure of any Confidential Information shall remain subject
to Section 5.1. In addition, if the reviewing party determines
that a patent application should be filed in advance of
publication, the reviewing party shall have an additional [ * ]
days in order to file an application.
6. INDEMNIFICATION; DISCLAIMERS; LIMITATION OF LIABILITY
6.1 INDEMNIFICATION BY CALIPER. Caliper shall defend, indemnify and
hold harmless Lilly and its Affiliates and all of their
officers, directors, employees and agents (collectively, the
"Lilly Indemnitees") from and against any and all damages,
awards, costs and expenses (including court and arbitration
costs, witness fees and reasonable attorneys' fees) incurred by
any Lilly Indemnitee in connection with any claim, demand,
lawsuit or other legal action by any third party against such
Lilly Indemnitee:
(a) arising out of any breach by Caliper of any representation
or warranty contained in this Agreement; or
(b) arising out of any breach of Caliper of any covenant or
obligation contained in this Agreement; or
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(c) alleging infringement of any patent claim or other
intellectual property right of a third party with
respect to Lilly's purchase, possession or use of any
Screening Product; provided, however, that no such
indemnification shall apply with respect to any such
damages, awards, costs or expenses arising primarily as
a result of (i) Lilly's use of Screening Products in
violation of this Agreement or in violation of any
reasonable restrictions on use imposed by Caliper in
accordance with Section 6.4 below, (ii) Lilly's
combination of Screening Products with technology other
than Caliper Technology, (iii) Lilly's unauthorized
modification of Screening Products, or (iv) Lilly's
continued use of Screening Products notwithstanding
termination of Lilly's right to use such Screening
Products pursuant to Section 6.4 below.
6.2 INDEMNIFICATION BY LILLY. Lilly shall defend, indemnify and hold
harmless Caliper and its Affiliates and all of their officers,
directors, employees and agents (collectively, the "Caliper
Indemnitees") from any damages, awards, costs and expenses
(including court and arbitration costs, witness fees and
reasonable attorneys' fees) incurred by any Caliper Indemnitee
in connection with any claim, demand, lawsuit or other legal
action by any third party against such Caliper Indemnitee
arising out of:
(a) any breach by Lilly of any representation or warranty
contained in this Agreement; or
(b) any breach by Lilly of any covenant or obligation
contained in this Agreement; or
(c) Caliper's possession or use of Lilly's Targets
or Materials; provided, however, that Lilly shall not
defend, indemnify and hold harmless any Caliper
Indemnitee under this Section 6.2(c) to the extent
Caliper or any Caliper Indemnitee that is the subject of
such claim, demand, lawsuit or other legal action
possessed or used the Target and/or Materials that are
the subject of such claim, demand, lawsuit or other
legal action in a negligent manner or in a manner
inconsistent with any instructions pertaining to such
possession or use given by Lilly or any of its
Affiliates to Caliper.
6.3 INDEMNIFICATION PROCEDURE. Promptly after receipt by a Lilly
Indemnitee or Caliper Indemnitee (in either case, the
"Indemnified Party") of notice of any pending or threatened
third-party claim against it (a "Third-Party Claim") with
respect to which it asserts a claim for indemnification under
this Article 6, such Indemnified Party shall give written notice
to the Person against whom it asserts its claim for
indemnification (the "Indemnifying Party") of the existence and
nature of the Third-Party Claim; provided, however, that failure
to give such notice in a timely manner shall not relieve the
Indemnifying Party of any liability that it may have to the
Indemnified Party hereunder except to the extent the
Indemnifying Party is prejudiced by such failure.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Thereafter, the Indemnified Party shall deliver to the
Indemnifying Party, within five (5) business days after the
Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified
Party relating to the Third-Party Claim. The Indemnifying Party
will be entitled to participate in the defense of such
Third-Party Claim and, if it chooses, to assume the defense
thereof with counsel selected by the Indemnifying Party. Should
the Indemnifying Party so elect to assume the defense of a
Third-Party Claim, the Indemnifying Party will not be liable to
the Indemnified Party for any legal expenses subsequently
incurred by the Indemnified Party in connection with the defense
thereof, except as stated below. If the Indemnifying Party
assumes such defense, the Indemnified Party shall have the right
to participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by the
Indemnifying Party, it being understood that the Indemnifying
Party shall control such defense. The Indemnifying Party shall
be liable for the fees and expenses of counsel employed by the
Indemnified Party for any period during which the Indemnifying
Party has not assumed the defense thereof (other than any period
during which the Indemnified Party shall have failed to give
notice of the Third-Party Claim). Notwithstanding an
Indemnifying Party's election to assume the defense of any such
Third-Party Claim, the Indemnified Party shall have the right to
employ separate counsel and to participate in the defense of
such Third-Party Claim, and the Indemnifying Party shall bear
the reasonable fees, costs and expenses of such separate counsel
if: (i) the use of counsel chosen by the Indemnifying Party to
represent the Indemnified Party would present such counsel with
a conflict of interest; (ii) the actual or potential defendants
in, or targets of, any such Third-Party Claim include both the
Indemnifying Party and the Indemnified Party, and the
Indemnified Party shall have reasonably concluded that there may
be legal defenses available to it that are different from or in
addition to those available to the Indemnifying Party (in which
case the Indemnifying Party shall not have the right to assume
the defense of such Third-Party Claim on the Indemnified Party's
behalf); (iii) the Indemnifying Party shall not have employed
counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party within a reasonable time after
notice of the institution of such Third-Party Claim; or (iv) the
Indemnifying Party shall authorize the Indemnified Party to
employ separate counsel at the Indemnifying Party's expense. If
the Indemnifying Party chooses to defend or prosecute a
Third-Party Claim, all the parties thereto shall cooperate in
the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the Indemnifying Party's
request) the provision to the Indemnifying Party of records and
information that are reasonably relevant to such Third-Party
Claim, and making employees available on a mutually convenient
basis to provide additional
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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information and explanation of any material provided hereunder.
If the Indemnifying Party chooses to defend or prosecute any
Third-Party Claim, the Indemnified Party will consent to any
settlement, compromise or discharge of such Third-Party Claim
that the Indemnifying Party may recommend and that, by its
terms, obligates the Indemnifying Party to pay the full amount
of the liability in connection with such Third-Party Claim and
otherwise holds the Indemnified Party harmless from any
damages, awards, costs and expenses in connection therewith.
If the Indemnifying Party shall have assumed the defense of a
Third-Party Claim, the Indemnified Party shall not admit any
liability with respect to, or settle, compromise or discharge
such Third-Party Claim without the Indemnifying Party's prior
written consent, which consent shall not be unreasonably
withheld or delayed. If the Indemnifying Party does not assume
the defense of the Third-Party Claim, then the Indemnified Party
may investigate and defend such Third-Party Claim without the
assistance of the Indemnifying Party; provided that the
Indemnifying Party shall have no liability for indemnification
under this Article 6 with respect to the settlement of such
Third-Party Claim unless the Indemnifying Party shall have
consented in writing to such settlement, which consent shall not
be unreasonably withheld or delayed.
6.4 INTELLECTUAL PROPERTY. Caliper shall determine which Screening
Products to offer and when they will be offered. Caliper may
impose, in writing, reasonable restrictions upon the use of any
Screening Product for intellectual property reasons, provided it
notifies Lilly of such restriction at the time of sale.
Following sale of any product, if Caliper determines that third
party intellectual property concerns warrant, Caliper may, in
its sole discretion, (i) obtain for Lilly a license to continue
to use the relevant Screening Product, (ii) replace or modify
the relevant Screening Product so as to make the Screening
Product non-infringing or (iii) terminate Lilly's rights to use
the relevant Screening Product or restrict Lilly from using it
in a manner Caliper believes my be infringing. Caliper will use
all commercially reasonable efforts to take the actions
described in clauses (i) or (ii) above as opposed to the actions
described in clause (iii) above. However, if in spite of such
efforts, Caliper determines to proceed under clause (iii) above,
Lilly may elect to have the purchase price paid by Lilly for
such Screening Product refunded, and Lilly will return the
relevant Screening Product. Such a refund shall be Lilly's sole
remedy against Caliper for the loss of use of such Screening
Product.
6.5 CALIPER DISCLAIMER. EXCEPT AS SET FORTH IN ARTICLE 8, THE
PROVISIONS OF THIS AGREEMENT SHALL NOT BE CONSTRUED AS A PRODUCT
WARRANTY BY CALIPER OF ANY KIND, EITHER EXPRESS OR IMPLIED,
INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO ANY CALIPER TECHNOLOGY,
SCREENING PRODUCT OR OTHER PRODUCTS DEVELOPED OR PROVIDED
PURSUANT TO THIS AGREEMENT. Lilly acknowledges that some of the
Screening Products to be provided to Lilly pursuant to this
Agreement are prototype units, and as such are neither equipped
with standard safety features nor completely tested for defects.
Lilly acknowledges that such products require a greater degree
of caution than other standard laboratory equipment. Caliper
shall not be liable to Lilly for any personal injury or property
damage resulting from use of such equipment in a manner other
than that recommended by Caliper, except in the case of
negligence by Caliper.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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6.6 LILLY DISCLAIMER. EXCEPT AS SET FORTH IN ARTICLE 8, THE
PROVISIONS OF THIS AGREEMENT SHALL NOT BE CONSTRUED AS A
WARRANTY BY LILLY OF ANY KIND, EITHER EXPRESS OR IMPLIED,
INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO ANY LILLY TARGETS OR OTHER
MATERIALS OR TECHNOLOGY DEVELOPED OR PROVIDED PURSUANT TO THIS
AGREEMENT. Caliper acknowledges that some of the Targets and/or
Materials to be provided to Caliper pursuant to this Agreement
are for research purposes. Caliper acknowledges that such
Targets and/or Materials can carry risks and must be handled
appropriately. Lilly shall not be liable to Caliper for any
personal injury or property damage resulting from the improper
handling of such Targets and/or Materials, except in the case of
negligence by Lilly.
6.7 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER FOR ANY INDIRECT OR CONSEQUENTIAL DAMAGES
(INCLUDING WITHOUT LIMITATION, LOST PROFITS), EVEN IF SUCH PARTY
HAS BEEN ADVISED OF THE POSSIBILITY THEREOF. Each party
acknowledges that the foregoing limitations are an essential
element of the Agreement between the parties and that in the
absence of such limitations the pricing and other terms set
forth in this Agreement would be substantially different.
7. TERM AND TERMINATION; SUSPENSION
7.1 TERM. The Term of this Agreement shall commence on the Effective
Date and, unless extended or terminated earlier pursuant to this
Section 7, shall expire on the third anniversary of the
Effective Date. The Term also may be modified by mutual written
agreement of the parties pursuant to Section 9.4.
7.2 TERMINATION BY LILLY. Lilly may terminate this Agreement, with
or without cause, effective on any anniversary of the Effective
Date, with at least [ * ] prior written notice to Caliper. All
rights and obligations applicable under this Agreement through
the date of termination shall continue to apply until such date
irrespective of any delivery of notice of termination.
7.3 TERMINATION BY EITHER PARTY. Either party may terminate this
Agreement prior to the expiration of the Term in accordance with
one of the following paragraphs:
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(a) Either party may terminate this Agreement upon written
notice to the other party in the event of a material
breach of this Agreement by such other party; provided,
however, that prior to any such termination the
terminating party shall have provided the breaching
party with written notice of the circumstances
constituting such breach and the breaching party shall
have failed to cure such breach within a period [ * ]
days thereafter.
(b) Either party may terminate this Agreement immediately
upon written notice to the other party if the other
party:
(1) is dissolved;
(2) fails or is unable to pay its debts generally as
they become due;
(3) commences a voluntary case in bankruptcy or any
other action or proceeding for any other relief
under any law affecting creditors' rights that
is similar to a bankruptcy law (collectively, a
"Bankruptcy Proceeding") or makes an assignment
for the benefit of creditors;
(4) consents by answer or otherwise to the
commencement against it of any involuntary
Bankruptcy Proceeding; or
(5) a court having jurisdiction in the premises
enters an order for relief or a decree in
respect of such party in any involuntary
Bankruptcy Proceeding, or a receiver, trustee or
similar official is appointed in respect of such
party or any of its property, and that order or
decree is not dismissed or stayed, or that
appointment is not terminated, on or before the
sixtieth (60th) day after the entry of the order
or decree or after the appointment (as the case
may be), or any such dismissal or stay ceases to
remain in effect.
7.4 SURVIVING OBLIGATIONS. No expiration or termination of this
Agreement shall relieve either party of any obligation accruing
prior to such expiration or termination. The provisions of
Sections 2.4, 2.6, 7.4, 7.5, 9.3 and Articles 4, 5, 6 and 8,
together with any provisions required for their interpretation
or enforcement, shall survive the expiration or termination of
this Agreement.
7.5 POST-TERM LICENSE. Following expiration or termination of this
Agreement, the License shall continue with respect to the
Screening Products for which the License has been fully-paid
pursuant to Section 3.1. Lilly shall be entitled to
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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continue to purchase such Instruments, LabChips and other
Screening Products for so long as Caliper continues to offer
such items for sale to third parties. Caliper will notify Lilly
in writing at least [ * ] before ceasing production of any
Screening Product which Lilly has purchased in the [ * ] period
before production is due to cease.
7.6 OPTION TO SUSPEND PARTICIPATION. Notwithstanding any other
provision of this Agreement, Lilly shall be entitled, in its
sole discretion, to suspend its participation in the TAP during
the [ * ] Contract Year of the Term (a "Suspension") by giving
written notice to Caliper of its election to do so no later than
[ * ] to which the suspension applies (the "Suspension Year"). A
Suspension shall not constitute a termination of this Agreement
or an interruption of the Term, and, except as expressly
provided in this Section 7.6, all of the terms and provisions of
this Agreement shall continue to apply during the period from
the first day of the Suspension Year until Lilly exercises its
Reinstatement Election or such Suspension Year ends, whichever
comes first (the "Suspension Period"). Lilly shall be permitted
a maximum of [ * ] Suspension.
7.6.1. ANNUAL SUBSCRIPTION FEE. Lilly shall not be required to
pay an Annual Subscription Fee for the Suspension Year
unless and until Lilly exercises its Reinstatement
Election.
7.6.2. STATUS OF LICENSE DURING SUSPENSION PERIOD. During the
Suspension Period, the License shall continue in effect
as to all Screening Products offered for sale by Caliper
in prior Contract Years but shall not extend to
Screening Products first offered for sale by Caliper
during the Suspension Year unless and until Lilly
exercises its Reinstatement Election. Caliper shall
disclose to Lilly during the Suspension Year all new
Screening Products offered by Caliper during such year.
Such disclosure shall be made to Lilly at the same time
it is made to other Participants and shall include the
same information provided to the other Participants with
respect to such Screening Products.
7.6.3. STATUS OF LILLY SUPPORT DURING SUSPENSION PERIOD. During
the Suspension Period, Caliper shall not be obligated to
provide to Lilly assistance and support as contemplated
by Section 2.3.
7.6.4. REINSTATEMENT ELECTION. If Lilly shall have initiated a
Suspension, it shall be entitled, in its sole
discretion, to elect to reinstate its participation in
the TAP by giving written notice to Caliper of such
election (a "Reinstatement Election") no later than
[ * ]. If Lilly exercises the Reinstatement Election:
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(a) Lilly shall pay to Caliper, concurrent with
delivery of the Reinstatement Election, [ * ]
(the "Reinstatement Payment").
(b) Upon payment of the Reinstatement Payment, the
License shall become fully-paid, irrevocable and
perpetual with respect to all Screening Products
offered for sale by Caliper in the Suspension
Year.
(c) If Lilly exercises the Reinstatement Election
during the [ * ] Contract Year, the Term
automatically shall be extended by [ * ] on the
same terms applicable to the [ * ] Contract
Years, subject to earlier termination as
provided for in this Section 7.
(d) If Lilly exercises the Reinstatement Election,
Caliper shall resume providing to Lilly
assistance and support as contemplated by
Section 2.3 effective as of the date of the
Reinstatement Election; provided, however, that
Lilly recognizes that Caliper may require a
reasonable period of time, not to exceed [ * ]
days, to reassign FTEs to work on Lilly
assistance and support activities pursuant to
this Agreement. Caliper agrees to use
commercially reasonable efforts to minimize this
period of time.
If Lilly does not exercise the Reinstatement Election,
then the Term shall expire as of the last day of the
Suspension Year.
8. REPRESENTATIONS AND WARRANTIES
8.1 MUTUAL REPRESENTATIONS. Each of the parties represents and
warrants to the other as follows:
8.1.1. DUE ORGANIZATION, GOOD STANDING AND POWER. It is a
corporation duly organized, validly existing and, if
relevant in its jurisdiction of incorporation, in good
standing under the laws of its jurisdiction of
incorporation, and has the power and authority to own,
lease and operate its assets and to conduct the business
now being conducted by it. It has all requisite power
and authority to enter into this Agreement and to
perform its obligations hereunder.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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8.1.2. AUTHORIZATION AND VALIDITY OF AGREEMENT. The execution,
delivery and performance by it of this Agreement, and
the consummation by it of the transactions contemplated
hereby, have been duly authorized and approved by all
necessary corporate action on its part. This Agreement
has been duly executed and delivered by it and
constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms,
except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting creditors' rights
generally and by general equity principles.
8.1.3. ABSENCE OF CONFLICTS. The execution, delivery and
performance by it of this Agreement and the consummation
by it of the transactions contemplated hereby do not and
will not (i) violate any federal, state or local laws,
ordinances, rules, regulations or requirements or any
judgments, orders, writs, rulings, decrees, awards or
similar directives of any arbitrator or any governmental
or regulatory agency or authority, (ii) conflict with,
or result in the breach of any provision of, its charter
or bylaws or (iii) violate, conflict with or result in
the breach or termination of, or otherwise give any
third party the right to terminate, or constitute a
default under the terms of, any license, permit,
contract or agreement to which it is party or by which
its properties or businesses are bound.
8.1.4. NO MISSTATEMENTS OR OMISSIONS. No representation or
warranty by it set forth herein contains any untrue
statement of a material fact, or omits to state a
material fact necessary to make the statements or facts
contained therein not misleading.
8.1.5. CONSENTS. No authorization, consent or approval of, or
notice to or filing by it with, any governmental
authority is required for the execution, delivery and
performance by it of this Agreement.
8.2 CALIPER REPRESENTATIONS. Caliper hereby represents and warrants
to Lilly that, as of the Effective Date:
8.2.1. NO PROCEEDINGS. Caliper is not aware of any third-party
intellectual property that is reasonably likely to have
a material adverse effect on (a) Caliper's ability to
fulfill its obligations under this Agreement with
respect to the Screening Products identified on Exhibits
B-1 and B-2 or (b) the purchase, possession or use by
Lilly of the Screening Products. This representation and
warranty includes, without limitation, the intellectual
property at issue in the litigation pending as of the
Effective Date between Caliper and Aclara Biosciences
(the "Aclara Litigation").
8.2.2. OWNERSHIP OF CALIPER TECHNOLOGY. Caliper owns all of the
Caliper Technology, free and clear of all liens or
encumbrances, subject to existing license grants. The
consummation of the transactions contemplated by this
Agreement will not result in the loss or impairment of
Caliper's rights
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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to own or use any of the Caliper Technology, nor will it
require the consent of any third party in respect of any
Caliper Technology.
8.2.3. NO CLAIM OF INFRINGEMENT. Except in connection with the
Aclara Litigation, neither Caliper nor any of its
Affiliates has received written notice from any third
party regarding any actual or potential infringement by
Caliper or any of its Affiliates of any intellectual
property of such third party.
8.2.4. NO CHALLENGE TO VALIDITY OF CALIPER TECHNOLOGY. Neither
Caliper nor any of its Affiliates has received written
notice from any third party regarding any assertion or
claim challenging the validity of any issued Caliper
Patent, except for an opposition to European Patent
Number 637998. The opposition was denied and is
currently on appeal.
8.2.5. RIGHT TO GRANT LICENSES. Caliper has all requisite right
and authority to grant to Lilly the License.
9. MISCELLANEOUS
9.1 NOTICES. Any consent, notice or report required or permitted to
be given or made under this Agreement by one party to the other
party shall be in writing, delivered personally or by confirmed
facsimile, first class mail postage prepaid, courier, or
nationally-recognized delivery service, and addressed to the
other party at its address indicated below, or to such other
address as the addressee shall have last furnished in writing to
the addresser. Such consent, notice or report shall be effective
upon delivery to the addressee.
If to Caliper: Caliper Technologies Corp.
605 Fairchild Drive
Mountain View, California 94043-2234
Attention: Chief Executive Officer
If to Lilly: Eli Lilly and Company
Lilly Corporate Center
Indianapolis, Indiana 46285
Attention: General Counsel
9.2 GOVERNING LAW. The Agreement shall be governed by and construed
in accordance with the laws of the State of Indiana, without
regard to the conflicts of law principles thereof.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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9.3 ASSIGNMENT. This Agreement is personal in its character, and
neither party shall assign its rights or obligations under this
Agreement, in whole or in part, without the prior written
consent of the other party; provided, however, that either
party, without the consent of the other, may assign this
Agreement to any Affiliate of such party so long as such
Affiliate expressly agrees to be bound by the terms of this
Agreement and the assigning party continues to be obligated to
perform all of its duties and obligations hereunder. If either
party merges into another Person or sells to another Person all
or substantially all of its assets comprising the line of
business to which this Agreement relates, then such party shall
seek the consent of the other party to the assignment of this
Agreement to the successor Person. The party whose consent was
requested shall not unreasonably withhold or delay such consent
but shall be permitted to deny such consent if it concludes, in
the exercise of its reasonable business judgment, that the
proposed successor Person is not an appropriate technology
collaborator for such party for purposes of this Agreement. This
Agreement shall be binding on and inure to the benefit of the
successors or permitted assigns of the parties hereto, and all
entities controlled by them.
9.4 WAIVERS AND AMENDMENTS. No waiver shall be deemed to have been
made by any party hereto of any of its rights under this
Agreement unless such waiver is in writing and is signed on
behalf of such party by its duly authorized officer. Any such
waiver shall constitute a waiver only with respect to the
specific matter described in such writing and shall in no way
impair the rights of the waiving party in any other respect or
at any other time. No change or modification of this Agreement,
or any of the provisions herein contained, shall be valid unless
made in writing and signed by duly authorized representatives of
the parties hereto.
9.5 ENTIRE AGREEMENT. This Agreement embodies the entire
understanding between the parties, and supersedes any prior
understanding or agreement between them, with respect to the
subject matter of this Agreement.
9.6 SEVERABILITY. If a court of competent jurisdiction declares any
provision of this Agreement invalid or unenforceable, or if any
government or other agency having jurisdiction over either party
deems any provision to be contrary to any laws, then that
provision shall be severed and the remainder of this Agreement
shall continue in full force and effect. To the extent possible,
the parties shall revise such invalidated provision in a manner
that will render such provision valid without impairing the
parties' original intent.
9.7 NO WAIVER. The failure of a party in any one or more instances
to insist upon strict performance of any of the terms or
conditions of this Agreement shall not
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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constitute a waiver or relinquishment, to any extent, of the
right to assert or rely upon any such terms or conditions on any
future occasion.
9.8 DISCLAIMER OF AGENCY. The relationship between Caliper and Lilly
is that of independent contractors. Caliper and Lilly are not
joint venturers, partners, principal and agent, master and
servant, or employer and employee, and have no relationship
other than independent contracting parties. Neither party shall
have the right or authority to assume, create, or incur any
third party liability or obligation of any kind, express or
implied, against or in the name of or on behalf of the other
party except as expressly set forth in this Agreement.
9.9 NON-SOLICITATION. Neither party may actively solicit or induce
any employee of the other party to leave the employ of that
party during the Term. If either party receives an unsolicited
employment inquiry from an employee of the other party, it shall
not make any written offer of employment to such individual
without notifying the other party in writing at least five (5)
days before making such an offer.
9.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
9.11 LABELS AND HEADINGS. The labels and headings contained in this
Agreement are for the convenience of the parties only and shall
in no way affect the meaning or interpretation of this
Agreement.
9.12 THIRD-PARTY RIGHTS. This Agreement is not intended to confer any
benefit upon, or create any right in favor of, any Person other
than the parties hereto and, where expressly provided, their
Affiliates and the respective Indemnified Parties.
9.13 CONSTRUCTION OF AGREEMENT. This Agreement was prepared as a
result of negotiation and mutual agreement between the parties.
Accordingly, no provision of this Agreement shall be construed
against any party on the basis that such party drafted this
Agreement or such provision.
9.14 FURTHER ASSURANCES. The parties covenant and agree that,
subsequent to the execution and delivery of this Agreement, and
without any additional consideration therefor, each party shall
execute and deliver any further legal instruments and perform
any further acts that are or may become necessary to effectuate
the purposes of this Agreement.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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IN WITNESS WHEREOF, the parties have executed the Agreement as of the
date first set forth above.
CALIPER TECHNOLOGIES CORP. ELI LILLY AND COMPANY
By: /s/ Calvin Chow By: /s/ August Watanabe
----------------------------- ------------------------------
Name: Calvin Chow Name: August M. Watanabe M.D.
--------------------------- ----------------------------
Title: Chief Operating Officer Title: Executive Vice President
-------------------------- ---------------------------
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT A
WORK PLAN FOR YEAR ONE
[ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT B-1
SCREENING PRODUCTS OFFERED
AS OF THE EFFECTIVE DATE
[ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT B-2
SCREENING PRODUCTS IN DEVELOPMENT
FOR CONTRACT YEAR ONE
[ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.14
SCREENING COLLABORATION AGREEMENT
THIS AGREEMENT ("AGREEMENT") is entered into as of the 16th day of
December, 1998 ("EFFECTIVE DATE") by and between CALIPER TECHNOLOGIES CORP., a
Delaware corporation ("CALIPER"), and NEUROCRINE BIOSCIENCES, INC.
("NEUROCRINE"), a Delaware corporation.
RECITALS
WHEREAS, Caliper has developed proprietary microfluidics technology
which has application in high throughput screening activities; and
WHEREAS, Neurocrine has and will continue to identify targets against
which it plans to screen chemical compounds, which screening activities would
benefit from Caliper's high throughput screening systems; and
WHEREAS, Neurocrine and Caliper possess and/or will acquire libraries of
compounds which may have potential therapeutic pharmaceutical utility for such
targets; and
WHEREAS, Caliper and Neurocrine desire to establish a relationship
whereby Caliper and Neurocrine will develop assays for such targets in Caliper's
LabChip format, and Caliper will screen compound libraries in such assays; and
WHEREAS, Neurocrine intends to develop and commercialize compounds
directed against targets screened in this program, and Caliper intends to
include the screening data as part of a structure-activity database to be
commercialized for use in drug discovery efforts against other targets on terms
to be further negotiated in good faith;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
promises contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "AFFILIATE" shall mean (i) any corporation or other entity which
directly or indirectly owns or controls at least fifty percent (50%) of the
outstanding voting securities of a party (a "Parent"), (ii) any corporation or
other entity in which a party owns or controls at least fifty percent (50%)
equity interest, and (iii) any corporation or other entity in which a Parent of
a party owns or controls at least fifty percent (50%) equity interest.
<PAGE> 2
1.2 "CALIPER COMPOUNDS" shall mean those compounds which Caliper owns or
possesses and has the right to make available to Neurocrine for screening as of
the Effective Date or during the Screening Term. For purposes of this Agreement,
Caliper Compounds shall not include the Neurocrine Compounds transferred to
Caliper pursuant to Sections 2.5(a) and 3.4.
1.3 "CALIPER KNOW-HOW" shall mean all discoveries, materials,
techniques, procedures, data and other technical information which Caliper
possesses and treats as confidential as of the Effective Date or during the
Screening Term, excluding Screening Data. Caliper Know-How does not include
Caliper Patents.
1.4 "CALIPER PATENTS" shall mean any and all patents, including, without
limitation, any substitutions, extensions, reissues, renewals, supplementary
protection certificates and inventors' certificates, which have not been held
invalid or unenforceable by a non-appealable or non-appealed decision of a court
of competent jurisdiction, issuing from patent applications filed in any
jurisdiction, including, without limitation, any provisionals, divisionals,
continuations, and continuations-in-part, which Caliper owns or has a license to
(with the right to sublicense to Neurocrine) as of the Effective Data or during
the Screening Program.
1.5 "CALIPER ROYALTY COMPOUND" shall mean a Royalty Compound which is
derived from, a Caliper Compound screened under this Agreement.
1.6 "CALIPER TECHNOLOGY" shall mean, collectively, the Caliper Patents,
the Caliper Know-How, and the Caliper Compounds.
1.7 "CONFIDENTIAL INFORMATION" shall mean all information provided by
one party to the other during the Screening Term, including, without limitation,
Neurocrine Know-How, Caliper Know-How, Screening Data, research plans,
engineering designs and drawings, research data, manufacturing processes and
techniques, scientific, manufacturing, marketing, and business plans, financial
or personnel matters relating to the party, its present or future products,
sales, suppliers, customers, employees, investors or business.
1.8 "DATA POINT" shall mean the experimental measurement reported to
Neurocrine from a high throughput LabChip Assay of a single discrete volume of
liquid (e.g., from a single well on a microtiter plate) containing a single
Neurocrine Compound, Neurocrine Limited Compound or Caliper Compound or a "pool"
of such compounds.
1.9 "FDA" shall mean the United States Food and Drug Administration.
1.10 "GLP TOXICOLOGY STUDIES" shall mean preclinical toxicology studies
carried out in accordance with Good Laboratory Practices described in the U.S.
Federal Register dated December 22, 1988, as amended, which are intended to
enable the filing of an IND.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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1.11 "IND" stands for "Investigational New Drug Application" and shall
mean an application for permission from the FDA, or comparable non-U.S.
regulatory authorities, to commence human clinical testing of a new drug.
1.12 "INSTRUMENT" shall mean an instrument designed to actuate fluid
manipulations on LabChips and to detect the results of such manipulations. An
Instrument may also perform other functions, such as introducing samples into
LabChips.
1.13 "LABCHIP" shall mean a Caliper chip, which typically consists of a
glass or polymer base with microchannels, bonded to a cover with reservoirs, and
which may have an attached pipettor capillary.
1.14 "LABCHIP ASSAY" shall mean a particular combination of a LabChip, a
set of reagents and software, all designed for use on one or more types of
Instruments to perform a high throughput screening assay for a particular
Target.
1.15 "LABCHIP IMPROVEMENT INVENTIONS" shall mean [ * ] by an employee or
contractor of Neurocrine, solely or jointly with others, in the course of the
Screening Program during the term of this Agreement and that specifically relate
to improvements to the Screening Technology or to chip-based microfluidic
systems, including but not limited to the world-to-chip interface or
chip-to-world interface, chip construction, composition or design, on-chip assay
strategies or reagent conditions, electrical or other means of controlling
fluids or molecules on a chip, detection of results produced by chips, or
software techniques for extracting or processing data from chips. LabChip
Improvement Inventions specifically shall not include Screening Data or
potential pharmaceutical compounds identified as hits in the Screening Program.
1.16 "NET SALES" shall mean, with respect to a Product, and on a
country-by-country basis, the gross invoice price of all Products sold by
Neurocrine, its Affiliates, and sublicensees to independent third party
customers after deducting, if not already deducted in the amount invoiced (a)
trade, quantity and cash discounts actually taken, (b) returns and rebates, (c)
duties, sales and excise taxes and (d) transportation and insurance costs
charged to the customer. Product transfers among Neurocrine and its Affiliates
or sublicensees shall not be deemed sales; the sale shall be deemed to take
place upon transfer to a bona fide customer. Products shall be considered sold
when invoiced.
1.17 "NEUROCRINE COMPOUNDS" shall mean those compounds which Neurocrine
owns or possesses and has the right to use in the Screening Program as of the
Effective Date.
1.18 "NEUROCRINE KNOW-HOW" shall mean all discoveries, materials,
techniques, procedures, data and other technical information which Neurocrine
possesses and treats as confidential as of the Effective Date or during the
Screening Term, excluding Screening Data. Neurocrine Know-How does not include
Neurocrine Patents.
1.19 "NEUROCRINE LIMITED COMPOUND" shall mean any compound which
Neurocrine acquires after the Effective Date and which Neurocrine elects to
provide to Caliper to enter into the Screening Program.
1.20 "NEUROCRINE PATENTS" shall mean any and all patents, including,
without limitation, any substitutions, extensions, reissues, renewals,
supplementary protection certificates
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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and inventors' certificates, which have not been held invalid or unenforceable
by a non-appealable or non-appealed decision of a court of competent
jurisdiction, issuing from patent applications filed in any jurisdiction,
including, without limitation, any provisionals, divisionals, continuations, and
continuations-in-part, which Neurocrine owns or has a license to (with the right
to sublicense to Caliper) as of the Effective Date or during the Screening Term.
1.21 "NEUROCRINE ROYALTY COMPOUND" shall mean a Royalty Compound which
is, or is derived from, a Neurocrine Compound or Neurocrine Limited Compound
screened under this Agreement.
1.22 "NEUROCRINE TECHNOLOGY" shall mean, collectively, the Neurocrine
Patents, the Neurocrine Know-How, the Neurocrine Compounds and the Neurocrine
Limited Compounds.
1.23 "PRODUCT" shall mean any product, including all formulations, line
extensions or modes of administration thereof, which contains a Royalty Compound
as an active ingredient.
1.24 "ROYALTY COMPOUND" shall mean a compound that is selected for
GLP Toxicology Studies or subsequent development or commercialization, which
compound either is, or is derived from, a Caliper Compound, Neurocrine Compound
or Neurocrine Limited Compound for which Screening Data was provided and [ * ].
For purposes of this definition, "derivatives" of a Caliper Compound, Neurocrine
Compound or Neurocrine Limited Compound will include direct derivatives and all
subsequent derivatives of derivatives.
1.25 "SCREENING COMMITTEE" shall mean that committee formed pursuant to
Section 2.2 hereof.
1.26 "SCREENING DATA" shall mean all Data Points delivered to Neurocrine
pursuant to instructions from the Screening Committee, as described in Section
2.6(b).
1.27 "SCREENING PROGRAM" shall mean the collaborative LabChip Assay
development and high throughput screening program described in Article 2.
1.28 "SCREENING TECHNOLOGY" shall mean the Instruments, LabChips,
reagents and software, and associated Caliper Patents and Caliper Know-how,
utilized by Caliper for high throughput screening activities under this
Agreement, excluding Caliper Compounds.
1.29 "SCREENING TERM" shall mean the period of three (3) years
commencing on the Effective Date, unless modified by mutual agreement of the
parties.
1.30 "TARGETS" shall mean the pharmaceutically relevant molecules,
complexes or cell lines nominated by Neurocrine for LabChip Assay development
and screening in accordance with Section 2.3, such as enzymes, binding proteins,
receptors, transporters, or ion channels.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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ARTICLE 2
SCREENING PROGRAM
2.1 CONDUCT OF THE SCREENING PROGRAM. Caliper and Neurocrine will
conduct the Screening Program under the direction of the Screening Committee.
2.2 SCREENING COMMITTEE.
(a) The Screening Committee shall consist of an equal number of
not less than two members from each of Neurocrine and Caliper, appointed and
substituted by each party as necessary from time to time. All decisions of the
Screening Committee shall be unanimous.
(b) The Screening Committee shall meet at such times as shall be
mutually agreed upon by the parties and at a site alternating between Caliper's
and Neurocrine's place of business, or as otherwise mutually agreed. Neurocrine
and Caliper shall each bear the travelling expenses and accommodation charges of
its own members attending meetings of the Screening Committee.
(c) The Screening Committee shall coordinate the activities
carried out under the Screening Program and monitor the progress of the
Screening Program. The Screening Committee shall conduct the Screening Program
as necessary to achieve the overall goals of developing LabChip Assays for the
Targets, screening the LabChip Assays, and discovering Royalty Compounds.
2.3 NOMINATION OF TARGETS.
(a) Neurocrine shall nominate Targets for LabChip Assay
development. The Screening Committee will determine whether the Target and
proposed assay conditions are appropriate for LabChip Assay development. The
Screening Committee will also prioritize Targets for LabChip Assay development
and screening. In the event that development work upon any molecule, complex, or
cell line nominated as a Target pursuant to this Section 2.3(a) is abandoned by
Neurocrine, or LabChip development or screening efforts are discontinued by the
Screening Committee, such molecule, complex, or cell line shall no longer
constitute a Target.
(b) Neurocrine agrees to provide at least thirty five (35)
Targets for screening under this Agreement during the Screening Term; provided
that [ * ] thirty five (35) for LabChip Assay development and screening.
(c) Caliper shall not be responsible for conducting due diligence
regarding third party intellectual property rights applicable to the Targets.
Neurocrine represents and warrants to Caliper as of the date of transfer of
each Target sample to Caliper that, to Neurocrine's knowledge (without having
undertaken any specific investigation with regard to third party intellectual
property rights) there are no third party intellectual property rights that
would be infringed by Caliper's use of such Target as provided under this
Agreement. If Neurocrine is aware of any published or issued third party patent
which it believes applies to
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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such Target, it shall notify Caliper in writing referencing such patent(s)
before LabChip Assay development commences for such Target.
2.4 ASSAY DEVELOPMENT.
(a) The Screening Committee will allocate responsibilities
between the parties for specific assay development tasks. In general, Neurocrine
will develop the appropriate biochemical and/or cellular reagents for the assay
and provide necessary quantities to Caliper for LabChip Assay development and
screening. Initially, Caliper will direct work to adapt the assay into the
LabChip format. Over time, the parties expect that Neurocrine will assume an
increasing role in LabChip Assay development. The parties will arrange for
Neurocrine scientists to train in LabChip Assay development at Caliper and/or
for certain LabChip Assay development tools to be provided to Neurocrine. The
Screening Committee will determine, or establish criteria for others to
determine, when a LabChip Assay is ready for screening on Caliper's high
throughput system.
(b) Caliper and Neurocrine shall each use commercially reasonable
efforts to collaboratively develop LabChip Assays for the Targets selected by
the Screening Committee. The parties intend to [ * ]. Therefore, the parties
have [ * ]. The parties may mutually agree to pursue such research for certain
Targets, but Caliper shall not be required under this Agreement to [ * ].
2.5 COMPOUND LIBRARIES.
(a) Neurocrine shall provide its chemical library of Neurocrine
Compounds to Caliper promptly following the Effective Date. The timing and
details will be mutually agreed, but the library will consist of approximately
[ * ] discrete compounds plated in 96 well master plates of [ * ]. Each plate
will contain [ * ] of compound at a concentration of [ * ] in 100% DMSO. SDF
files will be provided containing structural information and plate mapping.
Neurocrine agrees to provide to Caliper all data in Neurocrine's possession
concerning the library of Neurocrine Compounds including (a) the criteria
utilized by Neurocrine in selecting compounds, (b) commercial or academic
sources of compounds, and (c) chemical structures of all compounds (and records
of tests performed to determine the chemical structures). Caliper will have
rights to use the library of Neurocrine Compounds as further provided in Section
3.4. If Neurocrine modifies its library after this initial transfer, it may
elect at its sole option to update the collection held at Caliper for use in
screening Neurocrine's Targets pursuant to Section 2.5(b).
(b) Neurocrine may at any time during the Screening Term in its
sole discretion elect to provide Neurocrine Limited Compounds to Caliper for use
in the Screening Program, in reasonable quantities and format to be mutually
agreed. Neurocrine Limited Compounds shall only be used by Caliper within the
Screening Program hereunder unless agreed in writing in advance by the parties.
(c) Neurocrine will determine which compounds it elects to have
screened in each LabChip Assay. However, if Caliper has previously screened
certain Caliper Compounds
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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against the Target of such LabChip Assay on behalf of a third party, then
Caliper may [ * ], provided that Caliper shall not [ * ]. Otherwise, Caliper
will provide available information concerning the structures represented in the
Caliper Compound library to facilitate Neurocrine's determination of whether or
not to screen Caliper Compounds. If Caliper elects to screen Caliper Compounds,
the parties may mutually agree on terms on which such data may be provided to
Neurocrine, provided that if either Neurocrine of Caliper elects to have Caliper
Compounds screened against a Target, then Neurocrine shall have the right of
first refusal to purchase such Screening Data. If Neurocrine declines to
purchase such Screening Data, Caliper shall not thereafter [ * ] unless Caliper
provides Neurocrine with [ * ] days written notice of such intent [ * ]. Caliper
shall not utilize any Neurocrine Know-How or data that is subject to non-use
obligations under Section 6.2 or data developed in the Screening Program that is
specific to such Target in [ * ] on behalf of a third party [ * ]. Caliper shall
not disclose any data generated for Neurocrine Targets against Caliper Compounds
to any third party except as may be permitted under Section 3.3. Neurocrine
acknowledges that [ * ].
(d) During the term of this Agreement, the parties may agree to
acquire new libraries of compounds to screen hereunder and to split the compound
supplies and share the cost of acquiring such compounds. Such compounds acquired
by both parties would be deemed to be Neurocrine Compounds for purposes of the
payment provisions of this Agreement.
2.6 SCREENING.
(a) Caliper shall use commercially reasonable efforts to
establish internal screening operations using its Screening Technology as soon
as practicable. As of the Effective Date, Caliper's first screening system is
in the prototype phase and has not yet been put into operations at Caliper or
elsewhere. A higher throughput system is in development. Neurocrine
acknowledges that a higher throughput system will be required to carry out the
Screening Program and there can be no assurance that such a system will be
successfully developed or will be operational within Neurocrine's desired time
frame.
(b) All screening will be conducted at Caliper's facility, unless
the parties mutually agree otherwise as discussed in subparagraph (d) below.
Neurocrine will provide the necessary reagents, and Caliper will run the high
throughput screens, according to protocols established by the Screening
Committee. The Screening Committee will determine how the Screening Data will be
processed and presented, along with relevant reaction parameters such as
temperature, currents, concentrations and data for reference or control
compounds. The Screening Committee will also establish any procedures necessary
to validate the Screening Data prior to commencement of actual screening.
Screening Data will be conveyed to Neurocrine and also retained by Caliper, all
in accordance with the rights described in Article 3 below and the payment
provisions of Article 4. Caliper will provide all available information
concerning hit compounds, such as the source or synthesis process, including
samples of Hit compounds sufficient for confirmation in the Lab Chip Assay.
Caliper will not be required to provide samples of hit compounds sufficient for
additional follow-up experimentation outside LabChip systems.
(c) The parties may mutually agree to perform other experiments
in addition to high throughput primary screening, such as separate IC50
measurements on hits or other follow-up assays, such as serum protein binding or
other target-independent assays. Financial and other business terms for such
activities will be negotiated in good faith in writing in advance and are not
included in this Agreement.
(d) Caliper acknowledges that Neurocrine has expressed an
interest in having Caliper transfer screening Instruments to Neurocrine.
Neurocrine acknowledges that such a transfer is neither technically nor
commercially practical as of the Effective Date. Caliper will use commercially
reasonable efforts to develop the capability to transfer the screening
Instruments to Neurocrine. The parties will confer from time to time regarding
the technical feasibility of such a transfer. When such a transfer becomes
technically feasible,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Caliper agrees to negotiate in good faith with Neurocrine regarding appropriate
commercial terms for such a transfer. In any event, Caliper will retain the
exclusive right to supply LabChips for use on all screening systems that
practice Caliper Technology.
2.7 NON-EXCLUSIVE COLLABORATION. The Screening Program is a mutually
non-exclusive collaboration. Neurocrine and Caliper are each free to work with
any other company in any area, provided that the Screening Data is used by each
company in accordance with Article 3 below and each party complies with the
other terms of this Agreement, including but not limited to Section 2.5(c).
Neurocrine acknowledges that Caliper may use, or allow third parties to use, the
Screening Technology and Caliper Compounds, to (i) pursue development of drugs
that may compete with drugs Neurocrine is developing, or (ii) develop assays and
screen the same and similar targets as those pursued by Neurocrine, in each case
subject to Section 2.5(c) (Compound Libraries), Article 6 (Confidentiality) and
the other terms of this Agreement. Caliper acknowledges that Neurocrine may
elect to screen certain targets in its own facility rather than in the Screening
Program, and that Neurocrine may collaborate with third parties for screening,
again subject to Article 6 (Confidentiality) and the other terms of this
Agreement.
ARTICLE 3
INTELLECTUAL PROPERTY; SCREENING DATA
3.1 INTELLECTUAL PROPERTY.
(a) Except as expressly provided elsewhere in this Agreement, all
patent applications and issued patents claiming inventions made in the course of
the Screening Program shall be owned by the inventing party, or jointly if
invented jointly. Inventorship shall be determined under U.S patent laws.
(b) Except as expressly provided elsewhere in this Agreement, all
non-patented know-how, including but not limited to discoveries, materials,
techniques, procedures, data and other technical information, that is created in
the course of the Screening Program shall be owned by (for physical materials)
or deemed Confidential Information of (for information) the party that generated
such know-how.
(c) Neurocrine shall retain all of its rights in Neurocrine
Technology and Caliper shall have no rights in any Neurocrine Technology except
the rights expressly granted in this Agreement. Caliper shall retain all of its
rights in Caliper Technology and Neurocrine shall have no rights in any Caliper
Technology except the rights expressly granted in this Agreement.
3.2 NEUROCRINE DRUG DISCOVERY RIGHTS.
(a) Neurocrine shall have the exclusive (even as to Caliper),
worldwide right to use the Screening Data delivered to Neurocrine for each
LabChip Assay to discover, develop and commercialize Products directed against
the Target of such LabChip Assay, subject to the terms of this Agreement.
Neurocrine may assign or sublicense any or all such rights to third parties,
provided all assignees and sublicensees agree in writing to be bound by the
terms of this Agreement as they apply to the transferred rights. Neurocrine will
notify Caliper of any transaction involving such rights within thirty (30) days
of such transaction. If the use of
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Screening Data to discover, develop or commercialize a Product would require the
practice of a Caliper Patent claiming the Target or compounds screened, Caliper
agrees to grant to Neurocrine a non-exclusive, sublicenseable, worldwide
license under such Caliper Patent for such use, without consideration beyond
that set forth in this Agreement. If Neurocrine wishes to receive an exclusive
license to any Caliper Patent, or to have Caliper remove certain compounds from
the Caliper Compound library, then such matters shall be the subject of good
faith negotiations regarding a separate agreement.
(b) In addition to the exclusive rights described above,
Neurocrine shall also have the non-exclusive, worldwide right to use the
Screening Data in drug discovery efforts directed against all Targets and
pharmaceutical targets other than the Targets screened in the Screening Program.
Neurocrine may sublicense such rights along with other rights to Neurocrine
Technology in connection with agreements to develop or commercialize
Neurocrine's drug products, but may not otherwise assign, sublicense or transfer
such rights.
3.3 CALIPER USE OF SCREENING DATA. Neurocrine grants to Caliper the
exclusive (but for Neurocrine, per Section 3.2) worldwide right to use the data
generated for each LabChip Assay pursuant to this Agreement in drug discovery
efforts directed against pharmaceutical targets other than the Target of such
LabChip Assay, including the right to assign or sublicense any or all such
rights to third parties in the form of an SAR database or otherwise, provided
that such grant shall not be effective unless and until the parties can mutually
agree on reasonably necessary mechanisms to preserve Neurocrine's Technology,
Confidential Information and rights under Section 3.2(a) of this Agreement. The
parties recognize that Caliper's use or disclosure of the Screening Data could
compromise Neurocrine Technology, Confidential Information and Neurocrine's
exclusive rights under Section 3.2(a) above unless careful precautions are
taken, and Caliper acknowledges that Neurocrine may refuse to permit disclosure
of the structure of compounds that have been used as the basis for chemistry
efforts in active Neurocrine programs, and in no event shall Neurocrine be
required to permit disclosure of any data for hits with regard to Targets within
active Neurocrine's research programs. Caliper may not have entered into this
Agreement, and in any event the financial terms would have been different, if
Caliper did not have the ability to commercialize data generated under the
Screening Program. Accordingly, the parties shall negotiate in good faith in an
effort to mutually agree on reasonably necessary mechanisms to permit Caliper's
use and disclosure of data as provided in this Section 3.3 while preserving
Neurocrine's Technology Confidential Information and Neurocrine's rights under
Section 3.2(a). If the parties cannot agree on such terms within 60 days after
the date of Neurocrine's receipt of Screening Data for the tenth Target in the
Research Program, (i) Caliper may elect to increase the per Data Point Screening
fees set forth in Section 4.1, or (ii) either party may elect to terminate this
Agreement under Section 7.4.
3.4 NEUROCRINE COMPOUNDS. Caliper shall be free to use the Neurocrine
Compounds to be shipped to Caliper pursuant to Section 2.5(a) [ * ]; provided,
however, that the restrictions set forth in Section 2.5(c) with respect to
screening Caliper Compounds against third party targets shall also apply to the
Neurocrine Compounds. In no event may Neurocrine Compounds be screened against
third party targets which are the same as or substantially identical to the
Targets as defined in Section 2.5(c). Neurocrine represents and warrants to
Caliper as of the Effective Date that (i) it is the sole owner of all of the
Neurocrine Compounds samples provided to Caliper, (ii) Neurocrine has not
entered into any agreement in which a third party retains rights or any economic
interest pertaining to any such compounds, and (iii) there are no Neurocrine
Patents or, to Neurocrine's knowledge without having conducted any
investigations, any third party intellectual property rights, that would be
infringed by Caliper's use of the compounds as described above. No interest in
any Neurocrine Patent Rights is conveyed to Caliper under this Section 3.4.
3.5 LABCHIP IMPROVEMENT INVENTIONS. Neurocrine hereby assigns to Caliper
all right, title and interest in all LabChip Improvement Inventions. If
requested by Caliper, Neurocrine agrees to cooperate in patenting activities for
LabChip Improvement Inventions and to execute any documents necessary to effect
such assignment, at Caliper's expense. Neurocrine also agrees to notify Caliper
of any significant non-patentable improvements Neurocrine may make to the
Screening Technology or to chip-based microfluidic systems during the term of
this
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Agreement, and agrees that Caliper may use such developments in its business
without restriction and transfer or sublicense such knowledge in connection with
the development or commercialization of Caliper's technologies and products.
Caliper hereby grants to Neurocrine a royalty-free, non-exclusive, license to
use LabChip Improvement Inventions for Neurocrine's drug discovery and
development programs, including the right to sublicense such rights in
connection with such programs. This license shall not be construed as conferring
on Neurocrine any license to any other Caliper Patents or Screening Technology.
ARTICLE 4
FINANCIAL TERMS
4.1 SCREENING FEES. Neurocrine shall pay to Caliper the following
amounts within thirty (30) days of receiving an invoice from Caliper, which will
be delivered concurrent with delivery of the Screening Data:
[ * ]/Data Point for the [ * ] LabChip Assays or [ * ], whichever comes
first.
[ * ]/Data Point for each LabChip Assay or Data Point thereafter up to a
total of 35 LabChip Assays (including the [ * ] LabChip Assays).
If the parties agree to develop and screen more than 35 LabChip Assays,
they will mutually agree on screening fees, milestones, royalties and/or other
financial terms for such work.
4.2 DEVELOPMENT MILESTONES.
(a) Neurocrine shall pay to Caliper the following amounts for
each Royalty Compound within thirty (30) days of the achievement of the
following milestone events by Neurocrine, its Affiliate, sublicensee or other
transferee of rights to a Royalty Compound:
<TABLE>
<CAPTION>
Milestone Event Amount
--------------- ------
Neurocrine Caliper
Royalty Compound Royalty Compound
---------------- ----------------
<S> <C> <C>
Start of GLP Toxicology Studies [ * ] [ * ]
IND Filing [ * ] [ * ]
</TABLE>
(b) If Neurocrine develops a Neurocrine Royalty Compound that
acts on a Target for which Neurocrine also received Screening Data from Caliper
Compounds, Neurocrine shall pay to Caliper an additional [ * ] upon the start of
GLP toxicology studies and an additional [ * ] upon an IND filing for such
Neurocrine Royalty Compound.
(c) Neurocrine shall keep Caliper informed regarding the status
of development efforts directed at each Target screened in a LabChip Assay by
means of semi-
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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annual written reports due January 30 and July 30 each year. Such reports will
continue so long as compounds against any such Targets are being developed.
4.3 ROYALTIES. Neurocrine shall pay to Caliper a royalty on all Net
Sales of Products by Neurocrine, its Affiliates, sublicensees, or other
transferees of rights to a Product as follows, [ * ]:
<TABLE>
<CAPTION>
PRODUCT ROYALTY RATE
<S> <C>
Products containing a Caliper Royalty Compound [ * ]
Products containing a Neurocrine Royalty Compound (and no
Caliper Royalty Compound) [ * ]
</TABLE>
4.4 ROYALTY PAYMENTS.
(a) Neurocrine will notify Caliper in writing when regulatory
filings are made and when approvals are received to market a Product in each
country, in addition to the semi-annual reports described in Section 4.2(b).
Each payment of royalties shall be accompanied by a statement detailing the
calculation of the amount of royalties due in such period.
(b) Royalty payments and reports for the sale of Products shall
be made for each three month period ending on the last day of March, June,
September and December and shall be due within forty-five (45) days of the end
of each such month. For the purpose of calculating royalties on Net Sales
generated in currencies other than U.S. dollars, such Net Sales shall be
converted into U.S. dollars at the rate of exchange on the last business day of
the relevant royalty period, established by the Wall Street Journal. All royalty
payments owed under this Agreement shall be made by means of wire transfer to
Caliper's account in a bank in the United States to be designated by Caliper.
(c) If Caliper does not receive payment of any sum on the date it
is due, simple interest shall thereafter accrue on the sum due to Caliper until
the date of payment at the per annum rate of three percent (3%) over the then
current prime rate of Citibank in New York City, which rate shall vary
concurrently with any change in the prime rate.
(d) Any withholding tax levied at source relating to the
royalties payable to Caliper under Section 4.3 shall be borne by Caliper.
Neurocrine shall reasonably assist Caliper in obtaining a tax credit under the
applicable taxation treaties and laws, including by providing appropriate
evidence of Caliper's payment of the withholding tax.
4.5 RECORDS AND AUDIT.
(a) During the term of this Agreement and for a period of three
(3) years thereafter, Neurocrine shall keep complete and accurate records
pertaining to the achievement of milestones and the sale or other disposition of
the Products commercialized by it, in sufficient
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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detail to permit Caliper to confirm the accuracy of all payments due hereunder.
In the event Neurocrine grants sublicenses to others to use or sell Products,
Neurocrine shall require the sublicensee and any subsequent sublicensees to
retain records and account for and report achievement of milestones and Net
Sales of Products on the same basis as if such sales were Net Sales of Products
by Neurocrine, and Neurocrine shall pay royalties to Caliper as if such sales
were Net Sales of Products by Neurocrine
(b) Caliper shall have the right to cause an independent,
certified public accountant to audit all records reasonably necessary to confirm
Neurocrine's Net Sales and royalty payments; provided, however, that such
auditor shall not disclose Neurocrine's confidential information to Caliper,
except to the extent such disclosure is necessary to verify the amount of
royalties due under this Agreement.
(c) Such audits may be exercised once a year, within three (3)
years after the royalty period to which such records relate, upon notice to
Neurocrine and during normal business hours.
(d) Caliper shall bear the full cost of such audit unless such
audit discloses an understatement of more than five percent (5%) from the amount
of the Net Sales or royalties previously paid during any payment period. In such
case, Neurocrine shall bear the full cost of such audit and pay the difference
with interest as provided in Section 4.4(c). If such audit discloses an
overpayment of royalties by Neurocrine, such overpayment shall be refunded to
Neurocrine.
ARTICLE 5
DISCLAIMERS; INDEMNIFICATION
5.1 CALIPER DISCLAIMER. THE CALIPER TECHNOLOGY, INCLUDING THE CALIPER
COMPOUNDS, PROVIDED HEREUNDER, IS PROVIDED "AS IS" AND CALIPER EXPRESSLY
DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL
CASES WITH RESPECT THERETO. Without limiting the generality of the foregoing,
Caliper expressly does not warrant (i) the success of any study or test
commenced pursuant to the Screening Program, or (ii) the safety or usefulness
for any purpose of Caliper Technology.
5.2 NEUROCRINE DISCLAIMER. THE NEUROCRINE TECHNOLOGY, INCLUDING THE
NEUROCRINE COMPOUNDS AND TARGETS, PROVIDED HEREUNDER ARE PROVIDED "AS IS" AND
NEUROCRINE EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY
RIGHTS OF THIRD PARTIES OR ARISING FROM A COURSE OF DEALING, USAGE OR
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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TRADE PRACTICES, IN ALL CASES WITH RESPECT THERETO, EXCEPT AS EXPRESSLY PROVIDED
IN SECTIONS 2.3(c) OR 3.4. Without limiting the generality of the foregoing,
Neurocrine expressly does not warrant the safety or usefulness for any purpose
of the Neurocrine Technology or any Target or any compound developed as a result
of the Screening Program.
5.3 INDEMNIFICATION.
(a) INDEMNIFICATION BY NEUROCRINE.
(i) Neurocrine shall defend, indemnify and hold harmless
Caliper, its Affiliates and sublicensees, and all their officers, directors,
employees and agents from any costs and expenses (including court and
arbitration costs, witness fees and reasonable attorneys' fees), non-appealed or
non-appealable judicial or arbitration damage awards, and settlement payments
agreed with third party claimants payable or owed by Caliper in connection with
any demand, law suits or other legal actions by third parties arising from the
possession, development, manufacture, use, sale or administration of Targets,
compounds, Royalty Compounds or Products by Neurocrine or Neurocrine's
Affiliates or sublicensees.
(ii) In order to maintain the right to be defended,
indemnified and held harmless by Neurocrine, Caliper will:
(iii) notify Neurocrine promptly after learning of a
third party claim;
(iv) allow Neurocrine to manage and control (by way of
intervention or otherwise) the defense and settlement of any such third party
claim against the Caliper, with input from Caliper; and
(v) cooperate with Neurocrine in the defense or the
settlement negotiations of third party claims as reasonable required by
Neurocrine.
(vi) Neurocrine shall not take any position in the
dispute, or agree to any settlement, that adversely affects Caliper's rights or
interest without Caliper's prior written approval (which approval shall not be
unreasonably withheld).
(vii) Neurocrine shall have no obligation to indemnify
Caliper to the extent that a third party claim results from the negligence or
willful misconduct of Caliper.
(b) INDEMNIFICATION BY CALIPER.
(i) Caliper shall defend, indemnify and hold harmless
Neurocrine, its Affiliates and sublicensees, and all their officers, directors,
employees and agents from any costs and expenses (including court and
arbitration costs, witness fees and reasonable attorneys' fees), non-appealed or
non-appealable judicial or arbitration damage awards, and settlement payments
agreed with third party claimants payable or owed by Neurocrine in connection
with any demand, law suits or other legal actions by third parties arising from
Caliper's use, disclosure or commercialization of screening data under Section
3.3 of this Agreement.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 14
(ii) In order to maintain the right to be defended,
indemnified and held harmless by Caliper, Neurocrine will:
(iii) notify Caliper promptly after learning of a third
party claim;
(iv) allow Caliper to manage and control (by way of
intervention or otherwise) the defense and settlement of any such third party
claim against the Neurocrine, with input from Neurocrine; and
(v) cooperate with Caliper in the defense or the
settlement negotiations of third party claims as reasonable required by Caliper.
(vi) Caliper shall not take any position in the dispute,
or agree to any settlement, that adversely affects Neurocrine's rights or
interest without Neurocrine's prior written approval (which approval shall not
be unreasonably withheld).
(vii) Caliper shall have no obligation to indemnify
Neurocrine to the extent that a third party claim results from the negligence or
willful misconduct of Neurocrine.
ARTICLE 6
CONFIDENTIALITY
6.1 DISCLOSURE OF CONFIDENTIAL INFORMATION. Confidential Information
disclosed by one party to the other pursuant to and during the term of this
Agreement shall be subject to the confidentiality obligations set forth below:
(a) if disclosed in writing and marked "confidential" or
"proprietary" by the disclosing party prior to or at the time of the disclosure
thereof; or
(b) if within 30 days after disclosure of Confidential
Information, the disclosing party informs the receiving party in writing of the
confidential nature of the disclosed information, describing such information
and referencing the place and date of the oral, visual or written disclosure and
the names of the employees or officers of the receiving party to whom such
disclosure was made.
6.2 CONFIDENTIALITY AND NON-USE. Except to the extent expressly
authorized by this Agreement or unless otherwise agreed in writing by the
parties, each party agrees that, during the Screening Term and for five (5)
years thereafter, it shall keep confidential and shall not publish or otherwise
disclose and shall not use for any purpose other than as provided for in this
Agreement any Confidential Information received from the other party, unless the
receiving party can demonstrate by competent proof that such Confidential
Information:
(a) was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure by the other party;
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving party;
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 15
(c) became generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of such Agreements;
(d) is obtained by the receiving party from a third party who is
lawfully in possession of such Confidential Information and is not subject to an
obligation of confidentiality or non-use owed to the disclosing party; or
(e) was independently discovered or developed by the receiving
party without the use of Confidential Information belonging to the disclosing
party.
6.3 AUTHORIZED DISCLOSURE.
(a) Each party may disclose Confidential Information received
from the other party to Affiliates, sublicensees and other commercial partners
for the purpose of exercising rights provided under this Agreement, provided
such recipients agree to be bound by similar terms of confidentiality. In
addition, each party may disclose Confidential Information of the other party to
the extent such disclosure is reasonably necessary to (i) comply with applicable
securities laws and regulations and other applicable governmental regulations,
(ii) file or prosecute patents, or (iii) prosecute or defend litigation.
Notwithstanding the foregoing, Caliper shall have no right to disclose
Confidential Information that could identify a chemical series containing a
compound being developed as a drug lead by Neurocrine for the purpose of filing
or prosecuting patent(s) on Screening Technology or Caliper Technology, and
Neurocrine shall have no right to disclose Confidential Information specific to
a Caliper Compound, for the purpose of filing or prosecuting patent(s) on
Neurocrine Technology.
(b) Notwithstanding the foregoing, in the event a party is
required to make a disclosure of the other party's Confidential Information
pursuant to subparagraph (a) above, it will, except where impracticable, give
reasonable advance notice to the other party of such disclosure and use best
efforts to secure confidential treatment of such information. In any event, the
parties agree to take all reasonable action to avoid disclosure of Confidential
Information hereunder.
6.4 PUBLICITY. Except as otherwise provided herein or required by law,
no party shall originate any publication, news release or other public
announcement, written or oral, whether in the public press, or stockholders'
reports, or otherwise, relating to the material terms of or the performance
under this Agreement, without the prior written approval of the other party,
which approval shall not be unreasonably withheld, but in no case shall be
withheld for longer than fifteen (15) days; provided, however, that each party
may disclose the existence of and the general nature of this Agreement.
ARTICLE 7
TERM; TERMINATION
7.1 TERM. This Agreement shall commence upon the Effective Date and
expire upon the completion of the Screening Term. This Agreement may not be
terminated unilaterally by either party except pursuant to Sections 7.2 and 7.3
below.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 16
7.2 TERMINATION FOR MATERIAL BREACH. If either party materially breaches
this Agreement, and the breaching party has not within sixty (60) days of notice
of breach from the non-breaching party (i) cured the breach or (ii) initiated
good faith efforts to cure such breach to the reasonable satisfaction of the
non-breaching party, the non-breaching party may terminate this Agreement upon
expiration of such sixty (60)-day period.
7.3 TERMINATION FOR TECHNICAL REASONS. Either party may terminate this
Agreement upon [ * ] written notice to the other party at any time after the
first anniversary of this Agreement if it becomes reasonably apparent that
technical constraints of LabChip Assay development and Caliper's screening
capacity will make it commercially impractical or impossible to perform LabChip
Assay development and screening for thirty five (35) Targets in accordance with
the terms of this Agreement.
7.4 TERMINATION UNDER SECTION 3.3. Either party may terminate this
Agreement upon sixty (60) days written notice to the other party if the parties
are unable to reach agreement under Section 3.3.
7.5 EFFECT OF TERMINATION. In the event this Agreement is terminated by
either party before Screening Data is delivered for the [ * ] LabChip Assay, the
parties shall negotiate in good faith the terms and conditions under which
Caliper may retain a portion of the Neurocrine Compounds. In the event the
parties are unable to reach an agreement after sixty (60) days from the date of
termination, [ * ].
7.6 SURVIVING RIGHTS. The obligations and rights of the parties under
Article 3 and Sections 4.2 through 4.5, 5.3, 6.2, 6.3, 7.4, 7.5, 8.3 and 8.5
shall survive expiration or termination of this Agreement.
ARTICLE 8
MISCELLANEOUS
8.1 WAIVER. No waiver by either party hereto of any breach or default of
any of the covenants or agreements herein set forth shall be deemed a waiver as
to any subsequent or similar breach or default.
8.2 ASSIGNMENT. Neither party shall assign any of its rights and
obligations hereunder except (i) as incident to the merger, consolidation,
reorganization or acquisition of stock affecting actual voting control or of
substantially all of the assets of the assigning party or the line of business
to which this Agreement relates, or (ii) to an Affiliate; or (iii) after
termination or expiration of the Screening Term, Caliper may assign its rights
to receive milestone and royalty payments to any third party who is not a
competitor of Neurocrine; provided, however, that in no event shall either
party's rights and obligations hereunder be assigned without prior written
notice to the other party. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 17
8.3 NOTICES. Any notice or other communication required or permitted to
be given to either party hereto shall be in writing and shall be deemed to have
been properly given and to be effective on the date of delivery if delivered in
person or by facsimile or fourteen (14) days after mailing by registered or
certified airmail, postage paid, to the other party at the following address:
In the case of Caliper: Caliper Technologies Corp.
1275 California Avenue
Palo Alto, CA 94304
Fax: (650) 842-1970
Attention: Chief Operating Officer
In the case of Neurocrine: Neurocrine Biosciences, Inc.
10555 Science Center Drive
San Diego, CA 92121
Fax: (619) 658-7605
Attention: Chief Executive Officer
8.4 AMENDMENT. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by authorized
representatives of both parties.
8.5 CHOICE OF LAW; RESOLUTION OF DISPUTES.
(a) This Agreement shall be governed exclusively by and construed
according to the laws of California, U.S.A., excluding its choice of law
provisions.
(b) All disputes which may arise between the parties hereto in
relation to the interpretation or administration of this Agreement shall be
first referred to the Screening Committee for resolution. Any disputes which the
Screening Committee is unable to resolve within a reasonable period of time
shall be referred to the Chief Executive Officers or the Presidents of the
respective parties, whether before or after termination or expiration of this
Agreement. If such officers are unable to resolve the matter, either party may
elect to pursue any available dispute resolution forum.
8.6 FORCE MAJEURE. Any delays in performance by any party under this
Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the reasonable control of the party
affected, including but not limited to acts of God, embargoes, governmental
restrictions, strikes or other concerted acts of workers, fire, earthquake,
flood, or explosion. The party suffering such occurrence shall immediately
notify the other party as soon as practicable and any time for performance
hereunder shall be extended by the actual time of delay caused by the
occurrence.
8.7 INDEPENDENT CONTRACTORS. In making and performing this Agreement,
Neurocrine and Caliper are, and shall act at all times as independent
contractors and nothing contained in this Agreement shall be construed or
implied to create an agency, partnership or employer and employee relationship
between Caliper and Neurocrine. At no time shall one party make commitments or
incur any charges or expenses for or in the name of the other party.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 18
8.8 SEVERABILITY. If any term, condition or provision of this Agreement
is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other terms, conditions
and provisions of this Agreement shall be deemed valid and enforceable to the
full extent.
8.9 CUMULATIVE RIGHTS. The rights, powers and remedies hereunder shall
be in addition to, and not in limitation of, all rights, powers and remedies
provided at law or in equity, or under any other agreement between the parties.
All of such rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.
8.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
8.11 ENTIRE AGREEMENT. This Agreement embodies the final and complete
understanding of the parties with respect to the subject matter hereof and shall
supersede all previous communications, representations or understandings, either
oral or written, between the parties relating to the subject matter hereof.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 19
IN WITNESS WHEREOF, both parties have executed this Agreement, in
duplicate originals, by their respective officers hereunto duly authorized, as
of the day and year set forth in the introductory paragraph of this Agreement.
CALIPER TECHNOLOGIES CORP. NEUROCRINE BIOSCIENCES, INC.
By: /s/ Calvin Chow By: /s/ Gary Lyons
--------------------------- ----------------------------
Name: Calvin Chow Name: Gary Lyons
Title: Chief Operating Officer Title: CEO
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.15
AMENDMENT B TO PATENT LICENSE AGREEMENT (U.S.)
THIS AMENDMENT B TO PATENT LICENSE AGREEMENT (U.S.) ("Amendment B") is
made and entered into effective as of June 16, 1997 (the "Amendment B Date"), by
and between CALIPER TECHNOLOGIES CORP., a Delaware corporation having its
principal place of business at 1275 California Avenue, Palo Alto, California
94304 ("Licensee"), and LOCKHEED MARTIN ENERGY RESEARCH CORPORATION ("LMER"), a
Delaware corporation whose address for notices is Post Office Box 2009, Oak
Ridge, Tennessee 37831-8242. Capitalized terms used in this Amendment B that are
not otherwise defined herein shall have the same meanings as such terms are
defined in the Prior Agreement (as defined below).
RECITALS
A. Licensee and LOCKHEED MARTIN ENERGY SYSTEMS, INC. ("Energy Systems")
entered into a Patent License Agreement dated September 1, 1995 and Amendment A
to Patent License Agreement (U.S.) dated May 1, 1996 (collectively, the "Prior
Agreement"), under which Energy Systems granted to Licensee a sole commercial
license in the United States to manufacture, use, sell, or offer for sale
Products.
B. Energy Systems, by virtue of an assignment dated February 14, 1997,
did assign its undivided right, title, and interest in the Proprietary Rights to
LMER.
C. The parties desire to amend the terms of the Prior Agreement to
replace Energy Systems with LMER as licensor, to establish royalty rates on
Products as contemplated in Exhibit B1 of the Prior Agreement; to alter the
terms of Sublicense Royalties under Exhibit B2 of the Prior Agreement; to revise
Section 6 pertaining to patent prosecution and reimbursement of patent costs;
and to make one correction. The Prior Agreement, as amended by this Amendment B,
shall constitute the "Agreement."
NOW, THEREFORE, the parties agree as follows:
1. AMENDMENT OF THE PRIOR AGREEMENT
The parties hereby agree to amend the terms of the Prior Agreement as of
the Amendment B Date as provided below.
1.1 ROYALTIES. The second paragraph of Exhibit B1 of the Prior
Agreement is hereby deleted and shall be replaced by the
following provisions:
<PAGE> 2
"Licensee shall pay to LMER earned royalties on Net Sales of Products in
the following amounts:
(a) Licensee shall pay to LMER a [ * ] royalty on Net Sales of Chips;
provided, however that if Licensee must pay royalties to one or
more third parties on sales of Chips ("Third Party Payments"),
then the royalty to LMER on Chips shall be reduced by [ * ] of
the Third Party Payments, but not lower than a minimum of [ * ]
of Net Sales of Chips in any quarter. "Chips" shall mean chips
consisting of a glass or polymer base with reservoirs,
microchannels or similar features and a glass or polymer cover,
which chips are covered by one or more Claims of the Proprietary
Rights licensed hereunder.
(b) Licensee shall pay to LMER a [ * ] royalty on Net Sales of
Products other than Chips.
1.2 SUBLICENSE ROYALTIES. Exhibit B2 of the Prior Agreement is hereby
amended to delete the last sentence of the first paragraph, so
such paragraph will read in its entirety as follows:
"In order to maximize the commercialization of the
"Products" and LMER's overall income from this Agreement, Licensee may grant
sublicenses to third parties under which Licensee agrees to pay LMER a
"Sublicensee Royalty" of [ * ] percent [ * ] of the total "Sublicensing Revenue"
owed Licensee under said sublicenses."
1.3 PATENT PROSECUTION AND COSTS. Article 6 of the Prior Agreement is
hereby amended to read in its entirety as follows:
"6. PATENT PROSECUTION.
6.1 LMER shall, during the term of this Agreement, seek
patent protection for the Proprietary Rights listed in Exhibit A. The
securing of patent protection for all Proprietary Rights shall be the
sole responsibility and at the sole discretion of LMER; provided,
however that (i) Licensee shall have a reasonable opportunity to review
and comment on patent filings in advance and to consult and cooperate
with LMER in securing patent protection, and (ii) LMER will timely keep
Licensee advised of the status of such prosecution and maintenance by
providing Licensee with copies of all official communications,
amendments and responses with respect to the patent applications and
patents contained in the Proprietary Rights. Licensee may request and
LMER, at its sole discretion, may seek patent extension for patents
licensed under the Proprietary Rights listed in Exhibit A, under such
applicable laws and regulations where such patent extension rights are
available currently or are available in the future. In the event that
LMER elects to abandon a patent application included in the Proprietary
Rights or elects not to seek an extension of a patent included in the
Proprietary Rights, it will so notify Licensee at least ninety (90) days
prior to any
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE> 3
applicable deadline. Upon receipt of such notice, and to the extent
allowed by the LMER Prime Contract with DOE, Licensee may, following
written notice to LMER, seek, at its own expense, a waiver from DOE to
continue the prosecution of such application or extend such application
at Licensee's expense.
6.2 Reimbursement of all LMER's external costs and
fees, and a reasonable allocation of internal costs, relating to the
securing of patent protection for the Proprietary Rights after the
Amendment B Date ("Patent Costs") shall be the responsibility of
Licensee. LMER shall bill Licensee for Patent Costs, and Licensee shall
reimburse LMER within thirty (30) days of receipt of the invoice."
1.4 CORRECTIONS. In the Prior Agreement, replace every occurrence of
the term "Lockheed Martin Energy Systems, Inc." with the term
"Lockheed Martin Energy Research Corporation".
In the Prior Agreement, replace every occurrence of the term "Energy
Systems, Inc." with the term "LMER".
In the Prior Agreement, replace every occurrence of the term with the
term "DE-AC05-84OR21400" with the term "DE-AC05-96OR22464."
In the first line of Section 7.3 of the Prior Agreement, the cross
reference to Section 6.2 is hereby amended to refer to Section 7.2 instead.
2. MISCELLANEOUS
2.1 NO OTHER CHANGES. Except as expressly provided in this Amendment
B, all terms of the Prior Agreement shall remain in full force
and effect.
2.2 COUNTERPARTS. This Amendment B may be executed in two or more
counterparts, each of which shall be deemed an original, but both
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment B in
duplicate originals by their authorized officers as of the date and year first
above written.
LOCKHEED MARTIN ENERGY RESEARCH CORPORATION
By: /s/ William R. Martin
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Date: 6/16/97
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 4
CALIPER TECHNOLOGIES CORPORATION
By: /s/ Michael R. Knapp
-----------------------------------------
Name: Michael R. Knapp
Title: VP Science & Technology
Date: 6-23-97
LOCKHEED MARTIN ENERGY SYSTEMS, INC.
By: /s/ William R. Martin
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Date: 6/16/97
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 5
AMENDMENT A TO PATENT LICENSE AGREEMENT (U.S.)
This Amendment A, made effective on this first day of May 1996, by and
between LOCKHEED MARTIN ENERGY SYSTEMS, INC. (formerly Martin Marietta Energy
Systems), and CALIPER TECHNOLOGIES, CORP., with both hereinafter referred to as
the "Parties."
WITNESSETH:
WHEREAS, the Parties have entered into a Patent License Agreement having an
effective date of September 1, 1995.
WHEREAS, the parties hereby desire to amend said Agreement.
NOW THEREFORE, the Parties agree to this Amendment A as follows:
Exhibit A, add the following paragraph:
"PCT application SN PCT/US95/09492 for Energy Systems Invention
Disclosure 1781-X, filed on August 1, 1995."
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment A to
be duly executed in their respective names by their duly authorized
representatives.
LOCKHEED MARTIN ENERGY SYSTEMS, INC.
By: /s/ William R. Martin
--------------------------------
Name: (Typed) William R. Martin
Title: Vice President, Technology Transfer
Date: 4/17/91
CALIPER TECHNOLOGIES, CORP.
By: /s/ Lawrence A. Bock
Name: (Typed) Lawrence A. Bock
Title: Chief Executive Officer
Date: 4/17/96
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 6
SOLE COMMERCIAL PATENT LICENSE AGREEMENT
THIS AGREEMENT, made effective on the 1st day of September, 1995, by and
between LOCKHEED MARTIN ENERGY SYSTEMS, INC., (hereinafter "Energy Systems"), a
corporation organized and existing under the laws of the State of Delaware and
whose address for notices is Post Office Box 2009, Oak Ridge, Tennessee
37831-8242, and CALIPER TECHNOLOGIES, CORP. (hereinafter "Licensee"), a
corporation organized and existing under the laws of the State of Delaware and
whose address for notices is 1020 Prospect Street, Suite 405, La Jolla,
California 92037. Energy Systems and Licensee are herein after referred to as
the "Party" or "Parties."
W I T N E S S E T H:
A. Energy Systems, pursuant to Contract No. DE-AC05-84OR21400
(hereinafter "Prime Contract") with the United States Government as represented
by the Department of Energy (hereinafter "DOE") has developed and/or obtained
rights to Proprietary Rights relating to Products, as defined below, subject to
the DOE non-exclusive, nontransferable, irrevocable, paid-up license for the
United States Government and certain march-in rights and any other conditions of
waivers granted by the DOE; and
B. Licensee desires to obtain rights, in the United States, under Energy
Systems' Proprietary Rights.
C. This Agreement supersedes the patent license agreement between Energy
Systems and Caliper Microanalytic Systems, Inc., effective February 14, 1995,
and any obligations contained in said agreement.
THEREFORE, in consideration of the foregoing premises, covenants and
agreements contained herein, the Parties hereto agree to be bound as follows:
1. DEFINITIONS
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 7
1.1 "Affiliate" shall mean any entity which controls, is controlled by or is
under common control with Licensee, where "control" means beneficial ownership
of more than fifty percent (50%) of the outstanding shares or securities.
1.2 "Proprietary Rights" shall mean all inventions or discoveries covered by the
claims and specifications in the Energy Systems U.S. patent application listed
in Exhibit A attached hereto and hereby incorporated into this Agreement by
reference and any and all patents issuing on any such patent application,
including, without limitation, all continuations, continuations-in-part,
divisions, reissues, reexaminations and temporal extensions of any of the
foregoing.
1.3 "Products" shall mean any and all products manufactured, used, sold or
transferred by Licensee, or manufactured, used or sold by Licensee's Affiliates
or "Sublicensee(s)," covered by one or more Claims, including Dominant Claims as
defined below, of the Proprietary Rights licensed hereunder.
1.4 "Dominant Claims" shall mean claims 1, 2, 5, 11 and 21 of the patent
application set forth in Exhibit A and included in the Proprietary Rights,
pending on the date of execution of this Agreement.
1.5 "Other Field" shall mean the field of "Analysis of Nucleic Acids for
Diagnostic Applications and Non-Electrophoretic Means of Gene Discovery."
1.6 "Net Sales" shall mean the total amounts received by Licensee and its
Affiliates for the commercial sale of Products by Licensee or its Affiliates,
less allowances for returns of Products, discounts, commissions, allowances
actually granted (including any allowances for bad debt), transportation and
delivery charges, including insurance premiums, and excise or other taxes on
Products. Net Sales in the case of Products used or transferred by Licensee
shall mean the fair market value of Products as if they were sold to an
unrelated third party in similar quantities. It is the Parties' intention that
"Net Sales" will not include any transfer of Products to any Affiliate, unless
the Affiliate is the end user of such Products.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2
<PAGE> 8
With respect to any product that is developed and sold by Licensee or
its Affiliates and is comprised in part of one or more Products and of one or
more other products or parts which could be sold separately (a "Combination
Product"), Net Sales shall be determined by multiplying the amounts received by
Licensee or its Affiliates attributable to Combination Products by a fraction,
the numerator of which is the fair market value of the Product included in the
Combination Product, and the denominator of which is the sum of the fair market
value of such Product and the fair market value of the products or parts which
are not Products. Whenever possible, the fair market value of the Product
included in the Combination Product will be the market price at which such
Product is sold on a stand-alone basis; provided that fair market value shall be
determined reasonably and in good faith by Licensee in the event that no market
price is available.
1.7 "New Developments" shall mean any improvements based on the Proprietary
Rights, and any inventions or discoveries in the field of miniaturization of
instrumentation for analysis and synthesis by the inventor of the Proprietary
Rights, which are designed to be used in combination with Products based on the
Proprietary Rights herein. These do not include improvements, inventions or
discoveries for which the title to same may be elected by another company under
existing Energy Systems policies, unless such rights revert to Energy Systems
and are applicable to the definition of "New Developments" as defined in this
paragraph.
1.8 "Sublicensee" shall mean third parties (other than Affiliates) to whom
Licensee has granted a sublicense.
1.9 "Sublicensing Revenue" shall mean the amount actually paid to Licensee by a
Sublicensee, in consideration for the sublicense, including any license fees,
royalties and milestone payments. Sublicensing Revenue shall not mean research
and development support payments (other than in consideration for the
Proprietary Rights) and any payments
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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to Licensee by a Sublicensee to compensate Licensee for the grant of rights to
any other intellectual property of Licensee.
1.10 "Claim" shall mean a pending claim of the patent application within the
Proprietary Rights or a claim of an issued and unexpired patent within the
Proprietary Rights that has not been held unenforceable, unpatentable, or
invalid by a decision of a court of competent jurisdiction, and that has not
been admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise.
2. GRANTS
2.1 Subject to the terms and conditions of this Agreement, Energy Systems hereby
grants to Licensee and its Affiliates, in the United States, the exclusive
(non-governmental) commercial right and license to manufacture, use, sell or
offer for sale Products, with the right to grant sublicenses in all fields,
excluding the "Other Field" as defined herein under the same non-financial terms
and conditions as this license for a Sublicense Royalty as provided in Exhibit
B2 hereof. Licensee agrees to provide Energy Systems a copy of each sublicense
granted prior to the effective date thereof.
2.2 For a period of [ * ] from the time Energy Systems notifies Licensee, in
writing, of any New Development (as limited by the definition in 1.7 above),
Licensee shall have the right of first refusal to negotiate in good faith, with
Energy Systems, the same right and license for any New Development. During this
period, the Parties will exclusively negotiate with each other. If the Parties
are unable to reach agreement during this period, Energy Systems will have the
right, during an additional [ * ] period, to execute a license with a third
party or parties, on terms which are no more favorable than those last offered
to Licensee by Energy Systems during the initial period. If a license agreement
is not reached with a third party or parties by Energy Systems for any New
Development, Energy Systems agrees to offer Licensee more favorable terms than
those initially offered.
2.3 In the event that rights under the Proprietary Rights in the Other Field
revert to Energy Systems, Energy Systems shall so notify Licensee, and Licensee
shall have the right to include the Other Field in the license granted under
this Agreement, upon payment to Energy Systems of an amount equal to the
remaining installment of the up-front fee owed to Energy Systems by a third
party, and, by
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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amendment of Exhibit B, the addition of the minimum royalty still owed to
Energy Systems by the third party, to the minimum royalty agreed to in this
Agreement by Licensee. Such addition shall occur to the extent that the
installment or minimum royalty payments owed Energy Systems by the third party
are reduced or eliminated.
2.4 Energy Systems hereby agrees not to grant to any other party right and
license to Proprietary Rights in accordance with the three above paragraphs, as
long as Licensee abides by the terms and conditions of this Agreement, unless
required to so grant such right and license in accordance with Federal Statutory
or Regulatory enactments conditioning the waiver of rights to Energy Systems by
the DOE, particularly as set forth in 41 CFR 9-9.109-(6)i; 10 CFR Part 781; or
37 CFR Part 404.
2.5 Licensee agrees that any Products for use or sale in the United States shall
be manufactured substantially in the United States.
2.6 Licensee agrees to affix appropriate markings of the applicable Energy
Systems Proprietary Rights (and the fact that Energy Systems was the source of
these rights) upon or in association with Licensee's Products and Licensee
agrees to use its best efforts to follow any guidance from Energy Systems
concerning such markings.
2.7 Should Licensee fail to meet the developmental commitments described in
Exhibit C, Energy Systems shall have the option, to be exercised on [ * ]
written notice to Licensee at any time during the [ * ] period following the
date that such developmental commitment was to be achieved, to convert this
license grant to a non-exclusive license. Energy Systems agrees to negotiate
with Licensee, in good faith, a lower royalty rate for such non-exclusive
license, than the rate contained in Exhibit B. Furthermore, such royalty rate
shall [ * ].
3. ROYALTIES AND COMMERCIALIZATION PLAN
3.1 In consideration of the right and license granted herein, Licensee agrees to
the provisions of Exhibit B and Exhibit C attached hereto and hereby
incorporated herein by reference.
3.2 No royalties shall be owing on any Products produced for or under any
Federal governmental agency contract pursuant to the DOE non-exclusive license
for Federal governmental purposes but only to the extent that Licensee can show
that the Federal
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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government received a discount on Product sales which discount is equivalent to
or greater than the amount of any such royalty that would otherwise be due. Any
sales for Federal governmental purposes shall be reported under the Records and
Reports Section herein below by providing: (a) a Federal government contract
number; (b) identification of the Federal government agency; and (c) a
description as to how the benefit of the royalty-free sale was passed onto the
Federal government.
3.3 The royalty provisions of Exhibit B shall be offset by any advances made by
Licensee in the Infringement by Third Parties Section herein below.
3.4 Upon termination of this Agreement for any reason whatsoever, any royalties
that remain unpaid, and any pro-rata portion that is due Energy Systems per
Article 10.6, shall be properly reported and paid to Energy Systems within
thirty (30) days of any such termination.
4. RECORDS AND REPORTS
4.1 Licensee agrees to keep adequate records of Licensee, its Affiliates and
Sublicensees in sufficient detail to enable royalties and Sublicensing Revenue
payable hereunder to be determined and to provide such records for inspection by
authorized representatives of Energy Systems, with reasonable notice, at any
time during regular business hours of Licensee up to a maximum of two times per
calendar year. Licensee agrees that any additional records of Licensee, its
Affiliates and Sublicensees as Energy Systems may reasonably determine are
necessary to verify the above records, shall also be provided to Energy Systems
for inspection. If the audit discloses that Energy Systems was underpaid
royalties by at least five percent (5.0%) for any calendar half-year, then
Licensee shall reimburse Energy Systems for any documented and reasonable Energy
Systems costs associated with the audit, together with an amount equal to the
additional royalties to which Energy Systems is entitled as disclosed by the
audit.
4.2 Beginning in calendar year 1997, and within thirty (30) calendar days after
the close of each calendar half-year during the term of this Agreement (i.e.,
January 31 and July 31), Licensee will furnish Energy Systems a written report
providing: (a) all United States Net
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Sales in U.S. Dollars during the preceding calendar half-year period, including
any Federal governmental agency under section 3.2 herein above, if none so
indicate; (b) amount of royalties due in U.S. Dollars for the preceding calendar
half-year period pursuant to the provisions hereof; and (c) payment of the
royalties due in U.S. Dollars payable to the order of Lockheed Martin Energy
Systems, Inc., pursuant to the report to be transmitted in accordance with the
"Notices" section of this Agreement herein below.
4.3 Should Licensee fail to make any payment to Energy Systems within the time
period prescribed for such payment, then the unpaid amount shall bear interest
at the rate of one and one half percent (1.5%) per month from the date when
payment was due until payment in full, with interest, is made.
5. TECHNICAL ASSISTANCE
5.1 Energy Systems agrees, upon the written request of Licensee, to assist
Licensee in obtaining necessary DOE approvals for technical assistance at Energy
Systems' facilities under appropriate agreements. The cost of such technical
assistance shall be paid for by the Licensee.
5.2 Energy Systems agrees to permit its employees, within Energy Systems'
corporate policy guidelines then in effect and subject to DOE requirements then
in effect, to provide consulting services to Licensee with reference to
Licensee's use and commercial exploitation of the Proprietary Rights as
contemplated herein. Licensee shall make payment directly to the individual
consultant(s) for all such services.
6. PATENT PROSECUTION
6.1 Energy Systems shall have full control over prosecution and maintenance of
the patent applications and patents contained in the Proprietary Rights. Energy
Systems will use, at its sole discretion, reasonable efforts to establish patent
protection for the information, inventions and discoveries included in the
Proprietary Rights and will timely keep Licensee advised of the status of such
prosecution and maintenance by providing Licensee with copies of all official
communications, amendments and responses with respect to the patent
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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applications and patents contained in the Proprietary Rights. In addition, with
respect to New Developments which are licensed by Energy Systems to Licensee,
Licensee may offer, at its own expense, assistance to Energy Systems in the
drafting of claims and specifications. In the event that Energy Systems elects
to abandon a patent application included in the Proprietary Rights, it will so
notify Licensee within ninety (90) days of its proposed abandonment. Upon
receipt of such notice, and to the extent allowed by the Energy Systems Prime
Contract with DOE, Licensee may, following written notice to Energy Systems,
seek, at its own expense, a waiver from DOE to continue the prosecution of such
application at Licensee's expense.
7. INFRINGEMENT BY THIRD PARTIES
7.1 Licensee shall give notice of any discovered or threatened third-party
infringement of Proprietary Rights to Energy Systems. In the event that Energy
Systems does not take appropriate action to stop or prevent such infringement
within ninety (90) days after receiving such notice and diligently pursue such
action, Licensee has the right to take appropriate action to stop and prevent
the infringement, including the right to file suit.
7.2 Except for any liability resulting from any negligent acts or omissions of
Energy Systems, in the event that Licensee files suit to stop infringement or
defends any action against the validity of the patent, Licensee shall indemnify
and hold Energy Systems harmless against all liability, expense and costs,
including attorneys' fees incurred as a result of any such suit.
7.3 Licensee may, however, apply all such costs under Section 6.2 as a reduction
of any royalties due and payable to Energy Systems under the terms of this
Agreement at such time as verified bills of costs actually incurred are reported
to Energy Systems in accordance with the Records and Reports Section herein
above.
7.4 All recoveries, damages and awards, after reimbursement of any litigation
expenses of Licensee shall belong to Licensee. To the extent Licensee's
recoveries, damages and awards exceed Licensee's expenses with respect to such
infringement action, such excess monetary amounts (exclusive of any award of
punitive damages) shall be considered Net Sales under this Agreement, giving
rise to the royalty obligations under Section 3. In such event, Licensee will
provide documented litigation costs to Energy Systems, for purposes of
determining the monetary amount subject to Net Sales in accordance with this
paragraph.
7.5 The Parties hereby agree to cooperate with each other in the prosecution of
any such legal actions or settlement actions undertaken under this section and
each will provide to the other all pertinent data in its possession which may be
helpful in the prosecution of such
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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actions; provided, however, that the Party in control of such action shall
reimburse the other Party for any and all costs and expenses in providing data
and other information necessary to the conduct of the action.
7.6 The Party having filed such action shall be in control of such action and
shall have the right to dispose of such action in whatever reasonable manner it
determines to be the best interest of the Parties hereto, except that any
settlement which affects or admits issues of patent validity shall require the
advance written approval of Energy Systems.
7.7 In the event any Product becomes the subject of a claim for patent or other
proprietary-right infringement anywhere in the world by virtue of the
incorporation of the Proprietary Rights herein, the Parties shall promptly give
notice to the other and meet to consider the claim and the appropriate course of
action. Licensee shall have the right to conduct the defense of any such suit
brought against Licensee and shall have the sole right and authority to settle
any such suit, provided that any settlement which affects or admits issues of
the validity of Energy Systems Proprietary Rights shall require advance written
approval of Energy Systems. Energy Systems shall cooperate with Licensee, as
reasonably requested by Licensee, in connection with defense of such claim, at
Licensee's expense.
8. REPRESENTATIONS AND WARRANTIES
8.1 Energy Systems represents and warrants that Exhibit A contains a complete
and accurate listing of all the Proprietary Rights licensed and that Energy
Systems has the right to grant the rights, licenses, and privileges granted
herein.
8.2 Energy Systems represents and warrants that there are no claims of
infringement filed against Energy Systems for practicing the Exhibit A
Proprietary Rights anywhere in the world.
8.3 Except as set forth herein above, Energy Systems makes NO REPRESENTATIONS OR
WARRANTIES, express or implied, with regard to the infringement of proprietary
rights of any third party.
8.4 Licensee acknowledges that the export of any of the Proprietary Rights from
the United States or the disclosure of any of the Proprietary Rights to a
foreign national may require some form of license from the U.S. Government.
Failure to obtain any required
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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export licenses by Licensee may result in Licensee subjecting itself to criminal
liability under U.S. laws.
9. DISCLAIMERS
9.1 Neither Energy Systems, the DOE, nor persons acting on their behalf will be
responsible for any injury to or death of persons or other living things or
damage to or destruction of property or for any other loss, damage, or injury of
any kind whatsoever resulting from Licensee's manufacture, use, or sale of
materials, information, or Proprietary Rights hereunder. In no event will Energy
Systems, the DOE, or any person acting on behalf of any of them be liable for
any incidental, special or consequential damages resulting from the license
granted pursuant to this Agreement or the use or commercial development of the
Proprietary Rights.
9.2 EXCEPT AS SET FORTH HEREINABOVE, NEITHER ENERGY SYSTEMS, THE DOE, NOR
PERSONS ACTING ON THEIR BEHALF MAKE ANY WARRANTY, EXPRESS OR IMPLIED: (1) WITH
RESPECT TO THE MERCHANTABILITY, ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY
SERVICES, MATERIALS, OR INFORMATION FURNISHED HEREUNDER; (2) THAT THE USE OF ANY
SUCH SERVICES, MATERIALS, OR INFORMATION WILL NOT INFRINGE PRIVATELY OWNED
RIGHTS; (3) THAT THE SERVICES, MATERIALS, OR INFORMATION FURNISHED HEREUNDER
WILL NOT RESULT IN INJURY OR DAMAGE WHEN USED FOR ANY PURPOSE; OR (4) THAT THE
SERVICES, MATERIALS, OR INFORMATION FURNISHED HEREUNDER WILL ACCOMPLISH THE
INTENDED RESULTS OR ARE SAFE FOR ANY PURPOSE, INCLUDING THE INTENDED OR
PARTICULAR PURPOSE. FURTHERMORE, ENERGY SYSTEMS AND THE DOE HEREBY SPECIFICALLY
DISCLAIM ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, FOR ANY PRODUCTS
MANUFACTURED, USED, OR SOLD BY LICENSEE. NEITHER ENERGY SYSTEMS NOR THE DOE
SHALL BE LIABLE FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES IN ANY EVENT.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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9.3 Licensee agrees to indemnify Energy Systems, the DOE, and persons acting on
their behalf for all damages, costs, and expenses, including attorneys' fees,
arising from, but not limited to Licensee's, its Affiliates' and Sublicensees'
making, using, selling, or exporting of any Proprietary Rights, information,
Products or services, in whatever form furnished hereunder.
10. TERM OF AGREEMENT AND EARLY TERMINATION
10.1 This Agreement shall extend from the effective date of this Agreement to
the date of expiration of the last-to-expire of the United States patents which
arise from the Proprietary Rights of Exhibit A. This Agreement is subject to
early termination as set forth herein below and the terms and conditions set
forth in Exhibit B and Exhibit C attached hereto and hereby incorporated into
this Agreement by reference thereto.
10.2 Either Party shall have the right to terminate this Agreement without
judicial resolution upon written notice to the other after a breach of any
provision by the other Party has gone uncorrected for sixty (60) days after the
other Party has been notified in writing of such breach. Practice of the
licensed Proprietary Rights outside the scope of the grant by Licensee, its
Affiliates, and Sublicensees shall be an uncorrectable breach of this Agreement
and this Agreement may be terminated upon written notice thereof by Energy
Systems.
10.3 This Agreement shall terminate automatically upon the extinguishment of all
of the Exhibit A Proprietary Rights, for any reason, but only after the time for
appealing said extinguishment has expired.
10.4 Licensee shall provide notice to Energy Systems of its intention to file a
voluntary petition in bankruptcy or of another party's intention to file an
involuntary petition in bankruptcy for Licensee, said notice to be received by
Energy Systems at least thirty (30) days prior to filing such a petition.
Licensee's failure to provide such notice to Energy Systems of such intentions
shall be deemed a material, pre-petition, incurable breach of this Agreement.
10.5 Licensee agrees that this Agreement shall automatically terminate upon any
attempt by Licensee to offer Licensee's rights under this Agreement as
collateral to a third party.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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10.6 Licensee may terminate this Agreement without further payment upon written
notice to Energy Systems, if such notice is received by Energy Systems on or
before December 31, 1995. On any decision to terminate, made after December 31,
1995, Licensee agrees to pay Energy Systems the pro rata portion of the next
payment obligation that is due. Such portion of the next payment obligation due
shall be based on a period which ends sixty days after Licensee submits, to
Energy Systems, a written notice of termination.
10.7 Termination under any of the provisions of this Article of the license
granted to Licensee in this Agreement shall terminate all sublicenses which may
have been granted by Licensee, provided that any Sublicensee may elect to
continue its sublicense by advising Energy Systems in writing, within sixty (60)
days of the Sublicensee's receipt of written notice of such termination, of its
election, and of its agreement to assume, in respect to Energy Systems, all the
obligations (including obligations for payment) contained in its sublicensing
agreement with Licensee. Any sublicense granted by Licensee shall contain
provisions corresponding to those of this paragraph respecting termination and
the conditions of continuance of sublicenses.
11. RIGHTS OF PARTIES AFTER TERMINATION
11.1 Neither Party shall be relieved of any obligation or liability under this
Agreement arising from any act or omission committed prior to the effective date
of such termination. In the event of expiration of this Agreement or termination
of this Agreement for any reason whatsoever, the rights and obligations of the
Parties under Sections 8.1, 8.2, 10 and 12 shall survive any expiration or
termination of this Agreement.
11.2 From and after any termination of this Agreement, Licensee shall have the
right to sell any Products that Licensee had already manufactured prior to
termination, provided that all royalties and reports required herein above shall
be timely submitted to Energy Systems.
11.3 From and after any termination of this Agreement, Licensee shall not
manufacture, nor have manufactured any Products pursuant to this Agreement.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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11.4 The rights and remedies granted herein, and any other rights or remedies
which the Parties may have, either at law or in equity, are cumulative and not
exclusive of others. On any termination, Licensee shall duly account to Energy
Systems and transfer to it all rights to which Energy Systems may be entitled
under this Agreement.
12. CONFIDENTIALITY
12.1 The Parties agree that during the term of this Agreement and for a period
of three (3) years after it terminates, a Party receiving information of the
other Party, which is marked "confidential," will not use or intentionally
disclose such confidential information to any third party without prior written
consent of the disclosing Party, except to those necessary to enable the Parties
to perform under this Agreement or as may be required by the Energy Systems
Prime Contract with the DOE under the same restrictions as set forth herein.
12.2 A Party shall have no obligations with respect to any portion of such
confidential information of the other Party which:
a) is publicly disclosed through no fault of any Party hereto, either before or
after it becomes known to the receiving Party; or
b) was known to the receiving Party prior to the date of this Agreement which
knowledge was acquired independently and not from the other Party; or
c) is subsequently disclosed to the receiving Party in good faith by a third
party which has a right to make such a disclosure; or
d) has been published by a third party as a matter of right; or
e) is subsequently independently invented or discovered by the receiving Party
without reference to the other Party's confidential information.
13. FORCE MAJEURE
13.1 No failure or omission by Energy Systems or by Licensee in the performance
of any obligation under this Agreement shall be deemed a breach of this
Agreement or create any liability if the same shall arise from acts of God, acts
or omissions of any government or agency thereof, compliance with requests,
recommendations, rules, regulations, or orders of
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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any governmental authority or any office, department, agency, or instrumentality
thereof, fire, storm, flood, earthquake, accident, acts of the public enemy,
war, rebellion, insurrection, riot, sabotage, invasion, quarantine, restriction,
transportation embargoes, or failures or delays in transportation.
14. NOTICES
14.1 All notices and reports shall be addressed to the Parties hereto as
follows:
If to Energy Systems:
Business Manager, Technology Transfer Facsimile No.:
Lockheed Martin Energy Systems, Inc. (615) 576-9465
701 Scarboro Road Verify No.:
Oak Ridge, Tennessee 37831-8242 (615) 574-4193
If to Licensee:
President Facsimile No.
Caliper Technologies Corp. (619) 454-5329
1020 Prospect Street, Suite 405 Verify No.:
La Jolla, California 92037 (619) 454-3803
14.2 All minimum and royalty payments due Energy Systems shall be sent to:
Lockheed Martin Energy Systems, Inc.
Department 888058
Knoxville, Tennessee 37995-8058
14.3 Any notice, report or any other communication required or permitted to be
given by one Party to the other Party by this Agreement shall be in writing and
either (a) served personally on the other Party, (b) sent by express, registered
or certified first-class mail, postage prepaid, addressed to the other Party at
its address as indicated above, or to such other address as the addressee shall
have previously furnished to the other Party by proper
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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notice, (c) delivered by commercial courier to the other Party, or (d) sent by
facsimile to the other Party at its facsimile number indicated above or to such
other facsimile number as the Party shall have previously furnished to the other
Party by proper notice, with machine confirmation of transmission.
15. NON-ABATEMENT OF ROYALTIES
15.1 Energy Systems and Licensee acknowledge that certain of the Proprietary
Rights may expire prior to the conclusion of the term of this Agreement;
however, Energy Systems and Licensee agree that the royalty rates provided for
herein above shall be uniform and undiminished except pursuant to this
Agreement.
16. WAIVERS
16.1 The failure of either Party at any time to enforce any provisions of this
Agreement or to exercise any right or remedy shall not be construed to be a
waiver of such provisions or of such rights or remedy or the right of either
Party thereafter to enforce each and every provision, right or remedy.
17. MODIFICATIONS
17.1 It is expressly understood and agreed by the Parties hereto that this
instrument contains the entire agreement between the Parties with respect to the
subject matter hereof and that all prior representations, warranties, or
agreements relating hereto have been merged into this document and are thus
superseded in totality by this Agreement. This Agreement may be amended or
modified only by a written instrument signed by the duly authorized
representatives of both of the Parties.
18. HEADINGS
18.1 The headings for the sections set forth in this Agreement are strictly for
the convenience of the parties hereto and shall not be used in any way to
restrict the meaning or interpretation of the substantive language of this
Agreement.
19. LAW
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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19.1 This Agreement shall be construed according to the laws of the State of
Tennessee and the United States of America.
20. ASSIGNMENT
20.1 Upon timely written approval by Energy Systems, not to be unreasonably
withheld, Licensee may assign this Agreement and the rights of Licensee
thereunder to any of its Affiliates, any purchaser of all or substantially all
of its assets or to any successor corporation, including a successor corporation
resulting from any merger or consolidation of Licensee with or into such
corporation. Any assignee of Licensee must abide by the terms and conditions of
this Agreement, in conformance with all Energy Systems obligations to DOE under
the Prime Contract. Upon written notice to Licensee, Energy Systems may transfer
its Administration of this Agreement to DOE or its designee, and Energy Systems
shall have no further responsibilities except for the confidentiality and/or
non-disclosure obligations of this Agreement.
21. SEVERABILITY
21.1 If any term, condition or provision of this Agreement is held to be
unenforceable other than as provided in Article 13, all other terms, conditions,
and provisions of this Agreement shall be deemed valid and enforceable to the
extent possible.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed in their respective names by their duly authorized
representatives.
"ENERGY SYSTEMS"
LOCKHEED MARTIN ENERGY SYSTEMS, INC.
By: /s/ William R. Martin
----------------------------------------
Name (typed): Mr. William R. Martin
Title: Vice President, Technology Transfer
Date: 1 Sept 95
"LICENSEE"
CALIPER TECHNOLOGIES, CORP.
By: /s/ Lawrence A. Bock
----------------------------------------
Name (typed): Lawrence A. Bock
Title: President
Date: September 1, 1995
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT A, PROPRIETARY RIGHTS
U.S. Patent Application for ESID 1401-X, entitled "Apparatus and Method for
Performing Microfluidic Manipulations for Chemical Analysis," filed August 1,
1994, as identified by Serial No. 08/283,769.
Initials:
Energy Systems: /s/ WRM
---------
Date: 1 Sept 95
Licensee: /s/ LAB
Date: September 1, 1995
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
18
<PAGE> 24
EXHIBIT B 1, EXECUTION FEE, ROYALTIES AND
MINIMUM ANNUAL ROYALTIES AMOUNTS
In consideration of the rights and licenses granted herein, Licensee
agrees to pay Energy Systems an up-front fee of [ * ], with a payment of [ * ]
on execution of the Agreement, and [ * ] on the six-month anniversary date of
execution.
The royalty rate shall not exceed [ * ] Percent [ * ] of Net Sales of
Products. Energy Systems agrees to negotiate with Licensee in good faith, a
lower royalty rate, provided adequate and documented justification for a lower
royalty rate is supplied to Energy Systems by Licensee. Such royalty rate shall
not be less than [ * ] Percent [ * ] of Net Sales of Products.
The minimum annual royalties shall be calculated as follows:
If, by the third anniversary date of execution, the royalties on Net
Sales of Products shall not equal the minimum annual royalty amount of [ * ]
U.S. Dollars [ * ], then Licensee shall pay the difference between the amount of
actual royalties paid and the minimum annual royalty within thirty (30) days of
said anniversary date.
If, by the [ * ] anniversary date of execution, and each anniversary
date thereafter, a U.S. Patent with Dominant Claims [ * ], based on the
Proprietary Rights of Exhibit A, has issued, Licensee shall pay Energy Systems
the minimum annual royalty amount of [ * ] or royalties on actual Net Sales of
Products, whichever amount is greater. If such U.S. patent issuance does not
occur by the [ * ] anniversary date of execution, the minimum annual royalty
amount will remain at [ * ]. Such a payment requirement will automatically
increase to a [ * ] annual minimum royalty amount, due on yearly anniversary
dates, beginning with
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 25
the execution anniversary date of the year in which such patent issuance, with
the issuance of Dominant claims [ * ], occurs.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
20
<PAGE> 26
EXHIBIT B2, SUBLICENSE ROYALTIES
In order to maximize the commercialization of the "Products" and Energy
Systems' overall income from this Agreement, Licensee may grant sublicenses to
third parties under which Licensee agrees to pay Energy Systems a "Sublicense
Royalty" of [ * ] percent [ * ] of the total "Sublicensing Revenue" owed
Licensee under said sublicenses. In no event shall the sum of "Sublicensing
Royalty" and royalty on Licensee's Net Sales paid to Energy Systems by Licensee
be less than the royalty Energy Systems would have received from Licensee's Net
Sale of Products.
N O T I C E
THIS EXHIBIT CONTAINS FINANCIAL AND COMMERCIAL INFORMATION THAT IS
BUSINESS CONFIDENTIAL AND THE PARTIES HEREBY AGREE NOT TO USE OR DISCLOSE THIS
EXHIBIT TO ANY THIRD PARTY WITHOUT THE ADVANCE WRITTEN APPROVAL OF THE OTHER
PARTY HERETO, EXCEPT TO THOSE NECESSARY TO ENABLE THE PARTIES TO PERFORM UNDER
THIS AGREEMENT OR AS MAY BE REQUIRED BY THE ENERGY SYSTEMS CONTRACT WITH THE DOE
THE SAME RESTRICTIONS AS SET FORTH HEREIN.
Initials:
Energy Systems: /s/ WRM
---------
Date: 1 Sept 95
Licensee: /s/ LAB
Date: September 1, 1995
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
21
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EXHIBIT C, DEVELOPMENT AND COMMERCIALIZATION PLAN
Licensee agrees to invest in the development of technology and markets
for Products by committing Licensee's resources in accordance with the
following:
For expenditures associated with the development of technical strategy,
research, product development, and administration associated with these
activities, the following commitments will be made on a calendar-year basis:
- 1995 - an expenditure of $75,000;
- 1996 - an expenditure of $600,000;
- 1997 - an expenditure of $1,925,000;
- 1998 - an expenditure of $2,310,000; and
- 1999 - an expenditure of $3,234,000.
For expenditures associated with market research, finance, product
marketing, sales, and administration associated with these activities, the
following commitments will be made on a calendar-year basis:
- 1995 - an expenditure of $125,000;
- 1996 - an expenditure of $200,000;
- 1997 - an expenditure of $825,000;
- 1998 - an expenditure of $1,540,000; and
- 1999 - an expenditure of $2,156,000.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT C., CONTINUED
Progress and substantiation of Licensee meeting these requirements shall
be provided to Energy Systems in the form of an annual written report submitted
to Energy Systems by Licensee or at a meeting between the Parties to be held at
the mutual convenience of said Parties, but no later than December 31, 1996 and
each anniversary thereafter.
N O T I C E
THIS EXHIBIT CONTAINS FINANCIAL AND COMMERCIAL INFORMATION THAT IS
BUSINESS CONFIDENTIAL AND THE PARTIES HEREBY AGREE NOT TO USE OR DISCLOSE THIS
EXHIBIT TO ANY THIRD PARTY WITHOUT THE ADVANCE WRITTEN APPROVAL OF THE OTHER
PARTY HERETO, EXCEPT TO THOSE NECESSARY TO ENABLE THE PARTIES TO PERFORM UNDER
THIS AGREEMENT OR AS MAY BE REQUIRED BY THE ENERGY SYSTEMS CONTRACT WITH THE DOE
UNDER THE SAME RESTRICTIONS AS SET FORTH HEREIN.
Initials:
Energy Systems: /s/ WRM
---------
Date: 1 Sept 95
Licensee: /s/ LAB
Date: September 1, 1995
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
23
<PAGE> 1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.16
AMENDMENT A TO
PATENT LICENSE AGREEMENT (INTERNATIONAL)
THIS AMENDMENT A TO PATENT LICENSE AGREEMENT (INTERNATIONAL) ("AMENDMENT
A") is made and entered into effective as of June 16, 1997 (the "Amendment A
Date"), by and between CALIPER TECHNOLOGIES CORP., a Delaware corporation having
its principal place of business at 1275 California Avenue, Palo Alto, California
94304 ("Licensee"), and LOCKHEED MARTIN ENERGY RESEARCH CORPORATION ("LMER"), a
Delaware corporation whose address for notices is Post Office Box 2009, Oak
Ridge, Tennessee 37831-8242. Capitalized terms used in this Amendment A that are
not otherwise defined herein shall have the same meanings as such terms arc
defined in the Prior Agreement (as defined below).
RECITALS
A. Licensee and LOCKHEED MARTIN ENERGY SYSTEMS, INC. ("Energy Systems")
entered into a Patent License Agreement dated September 1, 1995 (the "Prior
Agreement"), under which Energy Systems granted to Licensee a sole commercial
license outside the United States to manufacture, use, sell, or offer for sale
Products.
B. Energy Systems, by virtue of an assignment dated February 14, 1997, did
assign its undivided right, title, and interest in the Proprietary Rights to
LMER.
C. The parties desire to amend the terms of the Prior Agreement to replace
Energy Systems with LMER as licensor, to establish royalty rates on Products as
contemplated in Exhibit B1 of the Prior Agreement; to alter the terms of
Sublicense Royalties under Exhibit B2 of the Prior Agreement; to revise Section
6 pertaining to patent prosecution and reimbursement of patent costs; and to
make one correction. The Prior Agreement, as amended by this Amendment A, shall
constitute the "Agreement."
NOW, THEREFORE, the parties agree as follows:
I. AMENDMENT OF THE PRIOR AGREEMENT.
The parties hereby agree to amend the terms of the Prior Agreement as of
the Amendment A Date as provided below.
1.1 ROYALTIES. The second paragraph of Exhibit B 1 of the Prior
Agreement is hereby deleted and shall be replaced by the following provisions:
"Licensee shall pay to LMER earned royalties on Net Sales of
Products in the following amounts:
(a) Licensee shall pay to LMER a [*] royalty on Net Sales of
Chips; provided, however that if Licensee must pay royalties to one or
more third parties on sales of
<PAGE> 2
Chips ("Third Party Payments"), then the royalty to LMER on Chips shall be
reduced by [*] of the Third Party Payments, but not lower than a minimum
of [*] of Net Sales of Chips in any quarter. "Chips" shall mean chips
consisting of a glass or polymer base with reservoirs, microchannels or
similar features and a glass or polymer cover, which chips are covered by
one or more Claims of the Proprietary Rights licensed hereunder.
(b) Licensee shall pay to LMER a [*] royalty on Net Sales of
Products other than Chips.
1.2 SUBLICENSE ROYALTIES. Exhibit B2 of the Prior Agreement is
hereby amended to delete the last sentence of the first paragraph, so such
paragraph will read in its entirety as follows:
"In order to maximize the commercialization of the "Products"
and LMER's overall income from this Agreement, Licensee may grant
sublicenses to third parties under which Licensee agrees to pay LMER a
"Sublicense Royalty" of [*] percent [*] of the total "Sublicensing
Revenue" owed Licensee under said sublicenses."
1.3 PATENT PROSECUTION AND COSTS. Article 6 of the Prior Agreement
is hereby amended to read in its entirety as follows:
"6. PATENT PROSECUTION.
6.1 LMER shall, during the term of this Agreement, seek
patent protection for the Proprietary Rights listed in Exhibit A. The
securing of patent protection for all Proprietary Rights shall be the sole
responsibility and at the sole discretion of LMER; provided, however that
(i) Licensee shall have a reasonable opportunity to review and comment on
patent filings in advance and to consult and cooperate with LMER in
securing patent protection, and (ii) LMER will timely keep Licensee
advised of the status of such prosecution and maintenance by providing
Licensee with copies of all official communications, amendments and
responses with respect to the patent applications and patents contained in
the Proprietary Rights. Licensee may request and LMER, at its sole
discretion, may seek patent extension for patents licensed under the
Proprietary Rights listed in Exhibit A, under such applicable laws and
regulations where such patent extension rights are available currently or
are available in the future. In the event that LMER elects to abandon a
patent application included in the Proprietary Rights or elects not to
seek an extension of a patent included in the Proprietary Rights, it will
so notify Licensee at least ninety (90) days prior to any applicable
deadline. Upon receipt of such notice, and to the extent allowed by the
LMER Prime Contract with DOE, Licensee may, following written notice to
LMER, seek, at its own expense, a waiver from DOE to continue the
prosecution of such application or extend such application at Licensee's
expense.
6.2 Reimbursement of all LMER's external costs and
fees, and a reasonable allocation of internal costs, relating to the
securing of patent protection for the Proprietary Rights after the
Amendment A Date ("Patent Costs") shall be the responsibility of Licensee.
LMER shall bill Licensee for Patent Costs, and Licensee shall reimburse
LMER within thirty (30) days of receipt of the invoice."
1.4 CORRECTIONS.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 3
In the Prior Agreement, replace every occurrence of the term "Lockheed
Martin Energy Systems, Inc." with the term "Lockheed Martin Energy Research
Corporation".
In the Prior Agreement, replace every occurrence of the term "Energy
Systems, Inc." with the term "LMER".
In the Prior Agreement, replace every occurrence of the term
"DE-AC05-84OR21400" with the term "DE-AC05-96OR22464."
In the first line of Section 7.3 of the Prior Agreement, the cross
reference to Section 6.2 is hereby amended to refer to Section 7.2 instead.
II. MISCELLANEOUS.
2.1 NO OTHER CHANGES. Except as expressly provided in this Amendment
A, all terms of the Prior Agreement shall remain in full force and effect.
2.2 COUNTERPARTS. This Amendment A may be executed in two or more
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment A in
duplicate originals by their authorized officers as of the date and year first
above written.
LOCKHEED MARTIN ENERGY RESEARCH CORPORATION
By: /s/ William R. Martin
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
Date: 6/16/97
-------------------------------------
CALIPER TECHNOLOGIES CORPORATION
By: /s/ Michael R. Knapp
-------------------------------------
Name: Michael R. Knapp
-------------------------------------
Title: VP Science & Technology
-------------------------------------
Date: 6-23-97
-------------------------------------
LOCKHEED MARTIN ENERGY SYSTEMS,
INCORPORATION
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 4
By: /s/ William R. Martin
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
Date: 6/16/97
-------------------------------------
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 5
SOLE COMMERCIAL PATENT LICENSE AGREEMENT
THIS AGREEMENT, made effective on the 1st day of September, 1995, by and
between LOCKHEED MARTIN ENERGY SYSTEMS, INC., (hereinafter "Energy Systems"), a
corporation organized and existing under the laws of the State of Delaware and
whose address for notices is Post Office Box 2009, Oak Ridge, Tennessee
37831-8242, and CALIPER TECHNOLOGIES, CORP. (hereinafter "Licensee"), a
corporation organized and existing under the laws of the State of Delaware and
whose address for notices is 1020 Prospect Street, Suite 405, La Jolla,
California 92037. Energy Systems and Licensee are herein after referred to as
the "Party" or "Parties."
WITNESS:
A. Energy Systems, pursuant to Contract No. DE-AC05-84OR21400 (hereinafter
"Prime Contract") with the United States Government as represented by the
Department of Energy (hereinafter "DOE") has developed and/or obtained rights to
Proprietary Rights relating to Products, as defined below, subject to the DOE
non-exclusive, nontransferable, irrevocable, paid-up license for the United
States Government and certain march-in rights and any other conditions of
waivers granted by the DOE; and
B. Licensee desires to obtain rights, outside the United States, under
Energy Systems' Proprietary Rights.
C. This Agreement supersedes the patent license agreement between Energy
Systems and Caliper Microanalytic Systems, Inc., effective February 14, 1995,
and any obligations contained in said agreement.
THEREFORE, in consideration of the foregoing premises, covenants and
agreements contained herein, the Parties hereto agree to be bound as follows:
1. DEFINITIONS
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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1.1 "Affiliate" shall mean any entity which controls, is controlled by or is
under common control with Licensee, where "control" means beneficial ownership
of more than fifty percent (50%) of the outstanding shares or securities.
1.2 "Proprietary Rights" shall mean all inventions or discoveries covered by the
claims and specifications in the Energy Systems PCT filing listed in Exhibit A
attached hereto and hereby incorporated into this Agreement by reference and any
and all patents issuing on any such patent application, including, without
limitation, all continuations, continuations-in-part, divisions, reissues,
reexaminations and temporal extensions of any of the foregoing.
1.3 "Products" shall mean any and all products manufactured, used, sold or
transferred by Licensee, or manufactured, used or sold by Licensee's Affiliates
or "Sublicensee(s)," covered by one or more Claims, including Dominant Claims as
defined below, of the Proprietary Rights licensed hereunder.
1.4 "Dominant Claims" shall mean claims 1, 2, 5, 11 and 21 of the PCT filing set
forth in Exhibit A and included in the Proprietary Rights, pending on the date
of execution of this Agreement.
1.5 "Other Field" shall mean the field of "Analysis of Nucleic Acids for
Diagnostic Applications and Non-Electrophoretic Means of Gene Discovery."
1.6 "Net Sales" shall mean the total amounts received by Licensee and its
Affiliates for the commercial sale of Products by Licensee or its Affiliates,
less allowances for returns of Products, discounts, commissions, allowances
actually granted (including any allowances for bad debt), transportation and
delivery charges, including insurance premiums, and excise or other taxes on
Products. Net Sales in the case of Products used or transferred by Licensee
shall mean the fair market value of Products as if they were sold to an
unrelated third party in similar quantities. It is the Parties' intention that
"Net Sales" will not include any transfer of Products to any Affiliate, unless
the Affiliate is the end user of such Products.
With respect to any product that is developed and sold by Licensee or its
Affiliates and is comprised in part of one or more Products and of one or more
other products or parts which could be sold separately (a "Combination
Product"), Net Sales shall be determined by
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 7
multiplying the amounts received by Licensee or its Affiliates attributable to
Combination Products by a fraction, the numerator of which is the fair market
value of the Product included in the Combination Product, and the denominator of
which is the sum of the fair market value of such Product and the fair market
value of the products or parts which are not Products. Whenever possible, the
fair market value of the Product included in the Combination Product will be the
market price at which such Product is sold on a stand-alone basis; provided that
fair market value shall be determined reasonably and in good faith by Licensee
in the event that no market price is available.
1.7 "New Developments" shall mean any improvements based on the Proprietary
Rights, and any inventions or discoveries in the field of miniaturization of
instrumentation for analysis and synthesis by the inventor of the Proprietary
Rights, which are designed to be used in combination with Products based on the
Proprietary Rights herein. These do not include improvements, inventions or
discoveries for which the title to same may be elected by another company under
existing Energy Systems policies, unless such rights revert to Energy Systems
and are applicable to the definition of "New Developments" as defined in this
paragraph.
1.8 "Sublicensee" shall mean third parties (other than Affiliates) to whom
Licensee has granted a sublicense.
1.9 "Sublicensing Revenue" shall mean the amount actually paid to Licensee by a
Sublicensee, in consideration for the sublicense, including any license fees,
royalties and milestone payments. Sublicensing Revenue shall not mean research
and development support payments (other than in consideration for the
Proprietary Rights) and any payments to Licensee by a Sublicensee to compensate
Licensee for the grant of rights to any other intellectual property of Licensee.
1.10 "Claim" shall mean a pending claim of the patent application within the
Proprietary Rights or a claim of an issued and unexpired patent within the
Proprietary Rights that has not
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 8
been held unenforceable, unpatentable, or invalid by a decision of a court of
competent jurisdiction, and that has not been admitted to be invalid or
unenforceable through reissue, disclaimer or otherwise.
2. GRANTS
2.1 Subject to the terms and conditions of this Agreement, Energy Systems hereby
grants to Licensee and its Affiliates, outside the United States, the exclusive
(non-governmental) commercial right and license to manufacture, use, sell or
offer for sale Products, with the right to grant sublicenses in all fields,
excluding the "Other Field" as defined herein under the same non-financial terms
and conditions as this license for a Sublicense Royalty as provided in Exhibit
B2 hereof. Licensee agrees to provide Energy Systems a copy of each sublicense
granted prior to the effective date thereof.
2.2 For a period of [*] from the time Energy Systems notifies Licensee, in
writing, of any New Development (as limited by the definition in 1.7 above),
Licensee shall have the right of first refusal to negotiate in good faith, with
Energy Systems, the same right and license for any New Development. During this
period, the Parties will exclusively negotiate with each other. If the Parties
are unable to reach agreement during this period, Energy Systems will have the
right, during an additional [*] period, to execute a license with a third party
or parties, on terms which are no more favorable than those last offered to
Licensee by Energy Systems during the initial period. If a license agreement is
not reached with a third party or parties by Energy Systems for any New
Development, Energy Systems agrees to offer Licensee more favorable terms than
those initially offered.
2.3 In the event that rights under the Proprietary Rights in the Other Field
revert to Energy Systems. Energy Systems shall so notify Licensee, and Licensee
shall have the right to include the Other Field in the license granted under
this Agreement, upon payment to Energy Systems of an amount equal
to the remaining installment of the up-front fee owed to Energy Systems by a
third party, and, by amendment of Exhibit B, the addition of the minimum
royalty still owed to Energy Systems by the third party, to the minimum royalty
agreed to in this Agreement by Licensee. Such addition shall occur to the extent
that the installment or minimum royalty payments owed Energy Systems by the
third party are reduced or eliminated.
2.4 Energy Systems hereby agrees not to grant to any other party right and
license to Proprietary Rights in accordance with the three above paragraphs, as
long as Licensee abides
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 9
by the terms and conditions of this Agreement, unless required to so grant such
right and license in accordance with Federal Statutory or Regulatory enactments
conditioning the waiver of rights to Energy Systems by the DOE, particularly as
set forth in 41 CFR 9-9.109-(6)i; 10 CFR Part 781; or 37 CFR Part 404.
2.5 Licensee agrees that any Products for use or sale in the United States shall
be manufactured substantially in the United States.
2.6 Licensee agrees to affix appropriate markings of the applicable Energy
Systems Proprietary Rights (and the fact that Energy Systems was the source of
these rights) upon or in association with Licensee's Products and Licensee
agrees to use its best efforts to follow any guidance from Energy Systems
concerning such markings.
2.7 Should Licensee fail to meet the developmental commitments described in
Exhibit C, Energy Systems shall have the option, to be exercised on [*] written
notice to Licensee at any time during the [*] period following the date that
such developmental commitment was to be achieved, to convert this license grant
to a non-exclusive license. Energy Systems agrees to negotiate with Licensee, in
good faith, a lower royalty rate for such non-exclusive license, than the rate
contained in Exhibit B. Furthermore, such royalty rate shall [*].
3. ROYALTIES AND COMMERCIALIZATION PLAN
3.1 In consideration of the right and license granted herein, Licensee agrees to
the provisions of Exhibit B and Exhibit C attached hereto and hereby
incorporated herein by reference.
3.2 No royalties shall be owing on any Products produced for or under any
Federal governmental agency contract pursuant to the DOE non-exclusive license
for Federal governmental purposes but only to the extent that Licensee can show
that the Federal government received a discount on Product sales which discount
is equivalent to or greater than the amount of any such royalty that would
otherwise be due. Any sales for Federal governmental purposes shall be reported
under the Records and Reports Section herein below by providing: (a) a Federal
government contract number; (b) identification of the
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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<PAGE> 10
Federal government agency; and (c) a description as to how the benefit of the
royalty-free sale was passed onto the Federal government.
3.3 The royalty provisions of Exhibit B shall be offset by any advances made by
Licensee in the Infringement by Third Parties Section herein below.
3.4 Upon termination of this Agreement for any reason whatsoever, any royalties
that remain unpaid, and any pro-rata portion that is due Energy Systems per
Article 10.6, shall be properly reported and paid to Energy Systems within
thirty (30) days of any such termination.
3.5 In the event Licensee is required to withhold taxes under the laws of any
foreign country for the account of Energy Systems, then such payments will be
made by Licensee on behalf of Energy Systems to the appropriate governmental
authority, and Licensee shall furnish proof of payment of such tax together with
official or other appropriate evidence issued by the appropriate government
authority. Any such tax actually paid on Energy Systems' behalf shall be
deducted from royalty payments then due and owing Energy Systems.
4. RECORDS AND REPORTS
4.1 Licensee agrees to keep adequate records of Licensee, its Affiliates and
Sublicensees in sufficient detail to enable royalties and Sublicensing Revenue
payable hereunder to be determined and to provide such records for inspection by
authorized representatives of Energy Systems, with reasonable notice, at any
time during regular business hours of Licensee up to a maximum of two times per
calendar year. Licensee agrees that any additional records of Licensee, its
Affiliates and Sublicensees as Energy Systems may reasonably determine are
necessary to verify the above records, shall also be provided to Energy Systems
for inspection. If the audit discloses that Energy Systems was underpaid
royalties by at least five percent (5.0%) for any calendar half-year, then
Licensee shall reimburse Energy Systems for any documented and reasonable Energy
Systems costs associated with the audit, together with an amount equal to the
additional royalties to which Energy Systems is entitled as disclosed by the
audit.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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4.2 Beginning in calendar year 1997, and within thirty (30) calendar days after
the close of each calendar half-year during the term of this Agreement (i.e.,
January 31 and July 31), Licensee will furnish Energy Systems a written report
providing: (a) all Net Sales outside of the United States in U.S. Dollars during
the preceding calendar half-year period, including any Federal governmental
agency under section 3.2 herein above, if none so indicate; (b) amount of
royalties due in U.S. Dollars for the preceding calendar half-year period
pursuant to the provisions hereof; and (c) payment of the royalties due in U.S.
Dollars payable to the order of Lockheed Martin Energy Systems, Inc., pursuant
to the report to be transmitted in accordance with the "Notices" section of this
Agreement herein below.
4.3 Should Licensee fail to make any payment to Energy Systems within the time
period prescribed for such payment, then the unpaid amount shall bear interest
at the rate of one and one half percent (1.5%) per month from the date when
payment was due until payment in full, with interest, is made.
5. TECHNICAL ASSISTANCE
5.1 Energy Systems agrees, upon the written request of Licensee, to assist
Licensee in obtaining necessary DOE approvals for technical assistance at Energy
Systems' facilities under appropriate agreements. The cost of such technical
assistance shall be paid for by the Licensee.
5.2 Energy Systems agrees to permit its employees, within Energy Systems'
corporate policy guidelines then in effect and subject to DOE requirements then
in effect, to provide consulting services to Licensee with reference to
Licensee's use and commercial exploitation of the Proprietary Rights as
contemplated herein. Licensee shall make payment directly to the individual
consultant(s) for all such services.
6. PATENT PROSECUTION
6.1 Energy Systems shall have full control over prosecution and maintenance of
the patent applications and patents contained in the Proprietary Rights. Energy
Systems will use, at its sole discretion, reasonable efforts to establish patent
protection for the information,
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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inventions and discoveries included in the Proprietary Rights and will timely
keep Licensee advised of the status of such prosecution and maintenance by
providing Licensee with copies of all official communications, amendments and
responses with respect to the patent applications and patents contained in the
Proprietary Rights. In addition, with respect to New Developments which are
licensed by Energy Systems to Licensee, Licensee may offer, at its own expense,
assistance to Energy Systems in the drafting of claims and specifications. In
the event that Energy Systems elects to abandon a patent application included in
the Proprietary Rights, it will so notify Licensee within ninety (90) days of
its proposed abandonment. Upon receipt of such notice, and to the extent allowed
by the Energy Systems Prime Contract with DOE, Licensee may, following written
notice to Energy Systems, seek, at its own expense, a waiver from DOE to
continue the prosecution of such application at Licensee's expense.
6.2 Energy Systems agrees to expend up to [*] U.S. Dollars [*] for foreign
patenting expenses associated with the Proprietary Rights of Exhibit A.
Additional expenditures associated with such expenses will be incurred by
Licensee by reimbursement to Energy Systems within 30 days of Licensee's receipt
of such documented and previously agreed upon foreign patenting expenses by
Energy Systems.
7. INFRINGEMENT BY THIRD PARTIES
7.1 Licensee shall give notice of any discovered or threatened third-party
infringement of Proprietary Rights to Energy Systems. In the event that Energy
Systems does not take appropriate action to stop or prevent such infringement
within ninety (90) days after receiving such notice and diligently pursue such
action, Licensee has the right to take appropriate action to stop and prevent
the infringement, including the right to file suit.
7.2 Except for any liability resulting from any negligent acts or omissions of
Energy Systems, in the event that Licensee files suit to stop infringement or
defends any action against the validity of the patent, Licensee shall indemnify
and hold Energy Systems harmless against all liability, expense and costs,
including attorneys' fees incurred as a result of any such suit.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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7.3 Licensee may, however, apply all such costs under Section 6.2 as a reduction
of any royalties due and payable to Energy Systems under the terms of this
Agreement at such time as verified bills of costs actually incurred are reported
to Energy Systems in accordance with the Records and Reports Section herein
above.
7.4 All recoveries, damages and awards, after reimbursement of any litigation
expenses of Licensee shall belong to Licensee. To the extent Licensee's
recoveries, damages and awards exceed Licensee's expenses with respect to such
infringement action, such excess monetary amounts (exclusive of any award for
punitive damages) shall be considered Net Sales under this Agreement, giving
rise to the royalty obligations under Section 3. In such event, Licensee will
provide documented litigation costs to Energy Systems, for purposes of
determining the monetary amount subject to Net Sales in accordance with this
paragraph.
7.5 The Parties hereby agree to cooperate with each other in the prosecution of
any such legal actions or settlement actions undertaken under this section and
each will provide to the other all pertinent data in its possession which may be
helpful in the prosecution of such actions; provided, however, that the Party in
control of such action shall reimburse the other Party for any and all costs and
expenses in providing data and other information necessary to the conduct of the
action.
7.6 The Party having filed such action shall be in control of such action and
shall have the right to dispose of such action in whatever reasonable manner it
determines to be the best interest of the Parties hereto, except that any
settlement which affects or admits issues of patent validity shall require the
advance written approval of Energy Systems.
7.7 In the event any Product becomes the subject of a claim for patent or other
proprietary-right infringement anywhere in the world by virtue of the
incorporation of the Proprietary Rights herein, the Parties shall promptly give
notice to the other and meet to consider the claim and the appropriate course of
action. Licensee shall have the right to conduct the defense of any such suit
brought against Licensee and shall have the sole right and authority to settle
any such suit, provided that any settlement which affects or admits issues of
the validity of Energy Systems Proprietary Rights shall require advance written
approval of Energy Systems. Energy Systems shall cooperate with Licensee, as
reasonably requested by Licensee, in connection with defense of such claim, at
Licensee's expense.
8. REPRESENTATIONS AND WARRANTIES
8.1 Energy Systems represents and warrants that Exhibit A contains a complete
and accurate listing of all the Proprietary Rights licensed and that Energy
Systems has the right to grant the rights, licenses, and privileges granted
herein.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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8.2 Energy Systems represents and warrants that there are no claims of
infringement filed against Energy Systems for practicing the Exhibit A
Proprietary Rights anywhere in the world.
8.3 Except as set forth herein above, Energy Systems makes NO REPRESENTATIONS OR
WARRANTIES, express or implied, with regard to the infringement of proprietary
rights of any third party.
8.4 Licensee acknowledges that the export of any of the Proprietary Rights from
the United States or the disclosure of any of the Proprietary Rights to a
foreign national may require some form of license from the U.S. Government.
Failure to obtain any required export licenses by Licensee may result in
Licensee subjecting itself to criminal liability under U.S. laws.
9. DISCLAIMERS
9.1 Neither Energy Systems, the DOE, nor persons acting on their behalf will be
responsible for any injury to or death of persons or other living things or
damage to or destruction of property or for any other loss, damage, or injury of
any kind whatsoever resulting from Licensee's manufacture, use, or sale of
materials, information, or Proprietary Rights hereunder. In no event will Energy
Systems, the DOE, or any person acting on behalf of any of them be liable for
any incidental, special or consequential damages resulting from the license
granted pursuant to this Agreement or the use or commercial development of the
Proprietary Rights.
9.2 EXCEPT AS SET FORTH HEREINABOVE, NEITHER ENERGY SYSTEMS, THE DOE, NOR
PERSONS ACTING ON THEIR BEHALF MAKE ANY WARRANTY, EXPRESS OR IMPLIED: (1) WITH
RESPECT TO THE MERCHANTABILITY, ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY
SERVICES, MATERIALS, OR
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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INFORMATION FURNISHED HEREUNDER; (2) THAT THE USE OF ANY SUCH SERVICES,
MATERIALS, OR INFORMATION WILL NOT INFRINGE PRIVATELY OWNED RIGHTS; (3) THAT THE
SERVICES, MATERIALS, OR INFORMATION FURNISHED HEREUNDER WILL NOT RESULT IN
INJURY OR DAMAGE WHEN USED FOR ANY PURPOSE: OR (4) THAT THE SERVICES, MATERIALS,
OR INFORMATION FURNISHED HEREUNDER WILL ACCOMPLISH THE INTENDED RESULTS OR ARE
SAFE FOR ANY PURPOSE, INCLUDING THE INTENDED OR PARTICULAR PURPOSE. FURTHERMORE,
ENERGY SYSTEMS AND THE DOE HEREBY SPECIFICALLY DISCLAIM ANY AND ALL WARRANTIES,
EXPRESS OR IMPLIED, FOR ANY PRODUCTS MANUFACTURED, USED, OR SOLD BY LICENSEE.
NEITHER ENERGY SYSTEMS NOR THE DOE SHALL BE LIABLE FOR CONSEQUENTIAL OR
INCIDENTAL DAMAGES IN ANY EVENT.
9.3 Licensee agrees to indemnify Energy Systems, the DOE, and persons acting on
their behalf for all damages, costs, and expenses, including attorneys' fees,
arising from, but not limited to, Licensee's, its Affiliates' and Sublicensees'
making, using, selling, or exporting of any Proprietary Rights, information,
Products or services, in whatever form furnished hereunder.
10. TERM OF AGREEMENT AND EARLY TERMINATION
10.1 This Agreement shall extend from the effective date of this Agreement to
the date of expiration of the last-to-expire of the patents which arise from the
Proprietary Rights of Exhibit A, on a country-by-country basis. This Agreement
is subject to early termination as set forth herein below and the terms and
conditions set forth in Exhibit B and Exhibit C attached hereto and hereby
incorporated into this Agreement by reference thereto.
10.2 Either Party shall have the right to terminate this Agreement without
judicial resolution upon written notice to the other after a breach of any
provision by the other Party has gone uncorrected for sixty (60) days after the
other Party has been notified in writing of such breach. Practice of the
licensed Proprietary Rights outside the scope of the grant by Licensee, its
Affiliates, and Sublicensees shall be an uncorrectable breach of this Agreement
and this Agreement may be terminated upon written notice thereof by Energy
Systems.
10.3 This Agreement shall terminate automatically upon the extinguishment of all
of the Exhibit A Proprietary Rights, for any reason, but only after the time for
appealing said extinguishment has expired.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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10.4 Licensee shall provide notice to Energy Systems of its intention to file a
voluntary petition in bankruptcy or of another party's intention to file an
involuntary petition in bankruptcy for Licensee, said notice to be received by
Energy Systems at least thirty (30) days prior to filing such a petition.
Licensee's failure to provide such notice to Energy Systems of such intentions
shall be deemed a material, pre-petition, incurable breach of this Agreement.
10.5 Licensee agrees that this Agreement shall automatically terminate upon any
attempt by Licensee to offer Licensee's rights under this Agreement as
collateral to a third party.
10.6 Licensee may terminate this Agreement without further payment upon written
notice to Energy Systems, if such notice is received by Energy Systems on or
before December 31, 1995. On any decision to terminate, made after December 31,
1995, Licensee agrees to pay Energy Systems the pro rata portion of the next
payment obligation that is due. Such portion of the next payment obligation due
shall be based on a period which ends sixty days after Licensee submits, to
Energy Systems, a written notice of termination.
10.7 Termination under any of the provisions of this Article of the license
granted to Licensee in this Agreement shall terminate all sublicenses which may
have been granted by Licensee, provided that any Sublicensee may elect to
continue its sublicense by advising Energy Systems in writing, within sixty (60)
days of the Sublicensee's receipt of written notice of such termination, of its
election, and of its agreement to assume, in respect to Energy Systems, all the
obligations (including obligations for payment) contained in its sublicensing
agreement with Licensee. Any sublicense granted by Licensee shall contain
provisions corresponding to those of this paragraph respecting termination and
the conditions of continuance of sublicenses.
11. RIGHTS OF PARTIES AFTER TERMINATION
11.1 Neither Party shall be relieved of any obligation or liability under this
Agreement arising from any act or omission committed prior to the effective date
of such termination. In the event of expiration of this Agreement or termination
of this Agreement for any reason
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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whatsoever, the rights and obligations of the Parties under Sections 8.1, 8.2,
10 and 12 shall survive any expiration or termination of this Agreement.
11.2 From and after any termination of this Agreement, Licensee shall have the
right to sell any Products that Licensee had already manufactured prior to
termination, provided that all royalties and reports required herein above shall
be timely submitted to Energy Systems.
11.3 From and after any termination of this Agreement, Licensee shall not
manufacture, nor have manufactured any Products pursuant to this Agreement.
11.4 The rights and remedies granted herein, and any other rights or remedies
which the Parties may have, either at law or in equity, are cumulative and not
exclusive of others. On any termination, Licensee shall duly account to Energy
Systems and transfer to it all rights to which Energy Systems may be entitled
under this Agreement.
12. CONFIDENTIALITY
12.1 The Parties agree that during the term of this Agreement and for a period
of three (3) years after it terminates, a Party receiving information of the
other Party, which is marked "confidential," will not use or intentionally
disclose such confidential information to any third party without prior written
consent of the disclosing Party, except to those necessary to enable the Parties
to perform under this Agreement or as may be required by the Energy Systems
Prime Contract with the DOE under the same restrictions as set forth herein.
12.2 A Party shall have no obligations with respect to any portion of such
confidential information of the other Party which:
a) is publicly disclosed through no fault of any Party hereto, either before or
after it becomes known to the receiving Party; or
b) was known to the receiving Party prior to the date of this Agreement which
knowledge was acquired independently and not from the other Party; or
c) is subsequently disclosed to the receiving Party in good faith by a third
party which has a right to make such a disclosure; or
d) has been published by a third party as a matter of right; or
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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e) is subsequently independently invented or discovered by the receiving Party
without reference to the other Party's confidential information.
13. FORCE MAJEURE
13.1 No failure or omission by Energy Systems or by Licensee in the performance
of any obligation under this Agreement shall be deemed a breach of this
Agreement or create any liability if the same shall arise from acts of God, acts
or omissions of any government or agency thereof, compliance with requests,
recommendations, rules, regulations, or orders of any governmental authority or
any office, department, agency, or instrumentality thereof, fire, storm, flood,
earthquake, accident, acts of the public enemy, war, rebellion, insurrection,
riot, sabotage, invasion, quarantine, restriction, transportation embargoes, or
failures or delays in transportation.
14. NOTICES
14.1 All notices and reports shall be addressed to the Parties hereto as
follows:
If to Energy Systems:
Business Manager, Technology Transfer Facsimile No.:
Lockheed Martin Energy Systems, Inc. (615) 576-9465
701 Scarboro Road Verify No.:
Oak Ridge, Tennessee 37831-8242 (615) 574-4193
If to Licensee:
President Facsimile No.
Caliper Technologies Corp. (619) 454-5329
1020 Prospect Street, Suite 405 Verify No.:
La Jolla, California 92037 (619) 454-3803
14.2 All minimum and royalty payments due Energy Systems shall be sent to:
Lockheed Martin Energy Systems, Inc.
Department 888058
Knoxville, Tennessee 37995-8058
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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14.3 Any notice, report or any other communication required or permitted to be
given by one Party to the other Party by this Agreement shall be in writing and
either (a) served personally on the other Party, (b) sent by express, registered
or certified first-class mail, postage prepaid, addressed to the other Party at
its address as indicated above, or to such other address as the addressee shall
have previously furnished to the other Party by proper notice, (c) delivered by
commercial courier to the other Party, or (d) sent by facsimile to the other
Party at its facsimile number indicated above or to such other facsimile number
as the Party shall have previously furnished to the other Party by proper
notice, with machine confirmation of transmission.
15. NON-ABATEMENT OF ROYALTIES
15.1 Energy Systems and Licensee acknowledge that certain of the Proprietary
Rights may expire prior to the conclusion of the term of this Agreement;
however, Energy Systems and Licensee agree that the royalty rates provided for
herein above shall be uniform and undiminished except pursuant to this
Agreement.
16. WAIVERS
16.1 The failure of either Party at any time to enforce any provisions of this
Agreement or to exercise any right or remedy shall not be construed to be a
waiver of such provisions or of such rights or remedy or the right of either
Party thereafter to enforce each and every provision, right or remedy.
17. MODIFICATIONS
17.1 It is expressly understood and agreed by the Parties hereto that this
instrument contains the entire agreement between the Parties with respect to the
subject matter hereof and that all prior representations, warranties, or
agreements relating hereto have been merged into this document and are thus
superseded in totality by this Agreement. This Agreement may be amended or
modified only by a written instrument signed by the duly authorized
representatives of both of the Parties.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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18. HEADINGS
18.1 The headings for the sections set forth in this Agreement are strictly for
the convenience of the parties hereto and shall not be used in any way to
restrict the meaning or interpretation of the substantive language of this
Agreement.
19. LAW
19.1 This Agreement shall be construed according to the laws of the State of
Tennessee and the United States of America.
20. ASSIGNMENT
20.1 Upon timely written approval by Energy Systems, not to be unreasonably
withheld, Licensee may assign this Agreement and the rights of Licensee
thereunder to any of its Affiliates, any purchaser of all or substantially all
of its assets or to any successor corporation, including a successor corporation
resulting from any merger or consolidation of Licensee with or into such
corporation. Any assignee of Licensee must abide by the terms and conditions of
this Agreement, in conformance with all Energy Systems obligations to DOE under
the Prime Contract. Upon written notice to Licensee, Energy Systems may transfer
its Administration of this Agreement to DOE or its designee, and Energy Systems
shall have no further responsibilities except for the confidentiality and/or
non-disclosure obligations of this Agreement.
21. SEVERABILITY
21.1 If any term, condition or provision of this Agreement is held to be
unenforceable other than as provided in Article 13, all other terms, conditions,
and provisions of this Agreement shall be deemed valid and enforceable to the
extent possible.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed in their respective names by their duly authorized
representatives.
"ENERGY SYSTEMS"
LOCKHEED MARTIN ENERGY SYSTEMS, INC.
By: /s/ William R. Martin
------------------------------------
Name (typed): Mr. William R. Martin
-----------------------------
Title: Vice President, Technology Transfer
------------------------------------
Date: 1 Sept 95
------------------------------------
"LICENSEE"
CALIPER TECHNOLOGIES, CORP.
By: /s/ Lawrence A. Bock
------------------------------------
Name (typed): Lawrence A. Bock
-----------------------------
Title: President
------------------------------------
Date: September 1, 1995
------------------------------------
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT A, PROPRIETARY RIGHTS
PCT Filing on August 1, 1995 Associated with U.S. Patent Application for
ESID1401-X, entitled "Apparatus and Method for Performing Microfluidic
Manipulations for Chemical Analysis," filed August 1, 1994, in the U.S. Patent
and Trademark Office, as identified by Serial No. 08/283,769.
Initials:
Energy Systems: /s/ WRM
---------------------------
Date: 1 Sept 95
---------------------------
Licensee: /s/ LAB
---------------------------
Date: September 1, 1995
---------------------------
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT B1, EXECUTION FEE, ROYALTIES AND
MINIMUM ANNUAL ROYALTIES AMOUNTS
In consideration of the rights and licenses granted herein, Licensee
agrees to pay Energy Systems an up-front fee of [*] U.S. Dollars [*], with a
payment of [*] on execution of the Agreement, and [*] on the six-month
anniversary date of execution.
The royalty rate shall not exceed [*] Percent [*] of Net Sales of
Products. Energy Systems agrees to negotiate with Licensee in good faith, a
lower royalty rate, provided adequate and documented justification for a lower
royalty rate is supplied to Energy Systems by Licensee. Such royalty rate shall
not be less than [*] Percent [*] of Net Sales of Products.
Licensee shall be entitled to credit [*] percent [*] of any royalty paid
to a non-Affiliate third party by Licensee in order for Licensee to be able to
make, use, and sell Products against the royalty payable in this Exhibit B
herein above; provided that in no event will the royalty payable in this Exhibit
B herein above be reduced by more than [*] percent [*] in any quarter as a
result of the credit available to Licensee under this paragraph.
The minimum annual royalties shall be calculated as follows:
If, by the third anniversary date of execution, the royalties on Net Sales
of Products shall not equal the minimum annual royalty amount of [*] U.S.
Dollars [*], then Licensee shall pay the difference between the amount of actual
royalties paid and the minimum annual royalty within thirty (30) days of said
anniversary date.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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If, by the [*] anniversary date of execution, and each anniversary date
thereafter, a U.S. Patent with Dominant Claims [*], based on the Proprietary
Rights of Exhibit A, has issued, Licensee shall pay Energy Systems the minimum
annual royalty amount of [*] or royalties on actual Net Sales of Products,
whichever amount is greater. If such U.S. patent issuance does not occur by the
[*] anniversary date of execution, the minimum annual royalty amount will remain
at [*]. Such a payment requirement will automatically increase to a [ * ] annual
minimum royalty amount, due on yearly anniversary dates, beginning with the
execution anniversary date of the year in which such patent issuance, with the
issuance of Dominant claims [*], occurs.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT B2, SUBLICENSE ROYALTIES
In order to maximize the commercialization of the "Products" and Energy
Systems' overall income from this Agreement, Licensee may grant sublicenses to
third parties under which Licensee agrees to pay Energy Systems a "Sublicense
Royalty" of [*] percent [*] of the total "Sublicensing Revenue" owed Licensee
under said sublicenses. In no event shall the sum of "Sublicensing Royalty" and
royalty on Licensee's Net Sales paid to Energy Systems by Licensee be less than
the royalty Energy Systems would have received from Licensee's Net Sale of
Products.
NOTICE
THIS EXHIBIT CONTAINS FINANCIAL AND COMMERCIAL INFORMATION THAT IS
BUSINESS CONFIDENTIAL AND THE PARTIES HEREBY AGREE NOT TO USE OR DISCLOSE THIS
EXHIBIT TO ANY THIRD PARTY WITHOUT THE ADVANCE WRITTEN APPROVAL OF THE OTHER
PARTY HERETO, EXCEPT TO THOSE NECESSARY TO ENABLE THE PARTIES TO PERFORM UNDER
THIS AGREEMENT OR AS MAY BE REQUIRED BY THE ENERGY SYSTEMS CONTRACT WITH THE DOE
THE SAME RESTRICTIONS AS SET FORTH HEREIN.
Initials:
Energy Systems: /s/ WRM
---------------------------
Date: 1 Sept 95
---------------------------
Licensee: /s/ LAB
---------------------------
Date: September 1, 1995
---------------------------
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT C, DEVELOPMENT AND COMMERCIALIZATION PLAN
Licensee agrees to invest in the development of technology and markets for
Products by committing Licensee's resources in accordance with the following:
For expenditures associated with the development of technical strategy,
research, product development, and administration associated with these
activities, the following commitments will be made on a calendar-year basis:
o 1995 -- an expenditure of $75,000;
o 1996 -- an expenditure of $600,000;
o 1997 -- an expenditure of $1,925,000;
o 1998 -- an expenditure of $2,310,000; and
o 1999 -- an expenditure of $3,234,000.
For expenditures associated with market research, finance, product
marketing, sales, and administration associated with these activities, the
following commitments will be made on a calendar-year basis:
o 1995 -- an expenditure of $125,000;
o 1996 -- an expenditure of $200,000;
o 1997 -- an expenditure of $825,000;
o 1998 -- an expenditure of $1,540,000; and
o 1999 -- an expenditure of $2,156,000.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT C., CONTINUED
Progress and substantiation of Licensee meeting these requirements shall
be provided to Energy Systems in the form of an annual written report submitted
to Energy Systems by Licensee or at a meeting between the Parties to be held at
the mutual convenience of said Parties, but no later than December 31, 1996 and
each anniversary thereafter.
NOTICE
THIS EXHIBIT CONTAINS FINANCIAL AND COMMERCIAL INFORMATION THAT IS
BUSINESS CONFIDENTIAL AND THE PARTIES HEREBY AGREE NOT TO USE OR DISCLOSE THIS
EXHIBIT TO ANY THIRD PARTY WITHOUT THE ADVANCE WRITTEN APPROVAL OF THE OTHER
PARTY HERETO, EXCEPT TO THOSE NECESSARY TO ENABLE THE PARTIES TO PERFORM UNDER
THIS AGREEMENT OR AS MAY BE REQUIRED BY THE ENERGY SYSTEMS CONTRACT WITH THE DOE
UNDER THE SAME RESTRICTIONS AS SET FORTH HEREIN.
Initials:
Energy Systems: /s/ WRM
---------------------------
Date: 1 Sept 95
---------------------------
Licensee: /s/ LAB
---------------------------
Date: September 1, 1995
---------------------------
23
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our report dated March 5, 1999, in
Amendment No. 3 to the Registration Statement (Form S-1) and related Prospectus
of Caliper Technologies Corp. for the registration of 5,175,000 shares of its
common stock.
/s/ ERNST & YOUNG LLP
Palo Alto, California
December 13, 1999
