<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
VYSIS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2835 36-3803405
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
3100 WOODCREEK DRIVE, DOWNERS GROVE, ILLINOIS 60515
(630) 271-7000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
JOHN L. BISHOP
PRESIDENT AND CHIEF EXECUTIVE OFFICER
VYSIS, INC.
3100 WOODCREEK DRIVE, DOWNERS GROVE, ILLINOIS 60515
(630) 271-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
DAVID A. SCHUETTE WILLIAM J. GRANT, JR.
Mayer, Brown & Platt Willkie Farr & Gallagher
190 S. LaSalle Street One Citicorp Center
Chicago, Illinois 60603 153 East 53rd Street
(312) 782-0600 New York, New York 10022
(212) 821-8000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------
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, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value.............. 4,025,000 $15.00 $60,375,000 $18,296
</TABLE>
(1) Includes 525,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any. See "Underwriting."
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act.
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 WHICH 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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 17, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
3,500,000 SHARES
[LOGO]
VYSIS, INC.
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by Vysis,
Inc., a Delaware corporation ("Vysis" or the "Company"). Prior to this offering,
there has been no public market for the Common Stock of the Company. It is
currently estimated that the initial public offering price will be between
$13.00 and $15.00 per share. See "Underwriting" for a discussion of the factors
to be considered in determining the initial public offering price. The Company
will apply to have the Common Stock approved for quotation on the Nasdaq Stock
Market under the symbol "VYSI."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share................................. $ $ $
Total(3).................................. $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $ .
(3) The Company has granted to the several Underwriters a 30-day option to
purchase up to 525,000 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discounts and Commissions and Proceeds to Company
will be $ , $ and $ , respectively. See
"Underwriting."
------------------------
The shares are being offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters, and subject to various prior
conditions, including the right to reject orders in whole or in part. It is
expected that delivery of share certificates will be made against payment
therefor at the offices of Furman Selz LLC in New York, New York on or about
, 1997.
FURMAN SELZ
DEUTSCHE MORGAN GRENFELL
EVEREN SECURITIES, INC.
---------------
The date of this Prospectus is , 1997.
<PAGE>
INSIDE FRONT COVER
(GRAPHICS)
A two-color collage of four photographs arranged within a box and entitled
"Genomic Diagnostic Products." Overlaid in the center of the box is the term
"Genetic Assessment." The picture in the upper left-hand corner of the box is a
young girl being examined by a physician with a stethoscope. The picture in the
upper right-hand corner of the box is that of an unborn fetus in utero. The
picture in the lower left-hand corner of the box is an elderly man dressed in a
hospital robe. The picture in the lower right-hand corner of the box is a woman
performing a self breast exam to screen for breast cancer. At the bottom of the
page is the Company's logo and the words "Managing Disease With Molecular
Techniques."
GATEFOLD, 2 PAGE SPREAD
(GRAPHICS)
A color spread of seven photographs entitled "Product Platforms for Genomic
Diagnostics." The photographs are grouped into three categories. The first
category has the heading entitled "FISH System" and is placed on the top
two-thirds of the left-hand page and contains three photographs. One of the
three photographs is a computer workstation with a woman looking at the computer
screen and has the caption "Quips-TM- FISH Workstation." The second photograph
is a cell with multiple colored spots (signals) and has the caption
"MultiVysion-TM- PGT 5-color FISH probe panel for preimplantation genetic
testing of chromosomes 13, 18, 21, X and Y." The third and last photograph in
this group shows multiple chromosomes each represented in a different color with
the caption "Quips mFISH Software for multi-color fluorescent probe imaging and
analysis."
The second category of photographs positioned on the bottom third of the
left-hand page contains two photographs and is entitled "gCGH-TM- Array." One of
the photographs has the caption "gCGH Array System" and is a drawing of the gCGH
disposable device, a blow-up of an example array and a mock report showing which
genes in the example array are amplified or deleted. The second photograph in
this group is a color image of an actual hybridized array and has the caption
"Hybridized gCGH Array."
The third category of photographs positioned on the right-hand page is
entitled "Molecular Lawn-TM-" and contains two photographs. One of the
photographs is a drawing of a prototype Molecular Lawn device with the caption
"Molecular Lawn Device." The second photograph is a drawing of the Molecular
Lawn amplification reaction and has the caption "Molecular Lawn System."
A DNA double helix weaves throughout the three categories of platforms. The
Company's logo and the words "Managing Disease With Molecular Techniques" are
placed at the bottom of the right-hand page.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS OR EFFECTING SYNDICATE COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS," AND CONSOLIDATED FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS
OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS (I) REFLECTS A
1-FOR-1.37 REVERSE STOCK SPLIT TO BE EFFECTED PRIOR TO THE COMPLETION OF THIS
OFFERING, (II) REFLECTS THE CONVERSION OF ALL OUTSTANDING SHARES OF PREFERRED
STOCK OF THE COMPANY INTO COMMON STOCK UPON COMPLETION OF THIS OFFERING AND
(III) ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED.
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THIS PROSPECTUS CONTAINS
FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS
STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. THE
CAUTIONARY STATEMENTS MADE IN THIS PROSPECTUS SHOULD BE READ AS BEING APPLICABLE
TO ALL RELATED FORWARD LOOKING STATEMENTS WHEREVER THEY APPEAR IN THIS
PROSPECTUS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED HEREIN. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES TO THE
"COMPANY" AND "VYSIS" SHALL MEAN VYSIS, INC., A DELAWARE CORPORATION, AND ITS
PREDECESSORS AND SUBSIDIARIES, AND ALL REFERENCES TO "AMOCO" SHALL MEAN AMOCO
CORPORATION, AN INDIANA CORPORATION, AND ITS WHOLLY OWNED SUBSIDIARY AMOCO
TECHNOLOGY COMPANY, A DELAWARE CORPORATION. A GLOSSARY OF TECHNICAL TERMS USED
IN THIS PROSPECTUS IS ANNEXED HERETO.
GENOMIC DIAGNOSTICS
Genetic abnormalities are a fundamental source of human disease. Genetic
based diseases and disorders include cancer, birth defects, mental retardation,
coronary artery disease, autoimmune diseases and diabetes. Genomic Diagnostics
is an emerging field that seeks to develop new genetic tests based on
correlations between genetic abnormalities and disease. Genomic Diagnostic
tests, by providing new information not currently available through existing
methods, enable physicians to diagnose disease more quickly and accurately, to
determine the most appropriate treatment and to monitor disease progression and
recurrence during therapy. Genomic Diagnostic tests also enable the detection of
disease at the very early or developing stages when treatment is likely to be
most effective. In addition, Genomic Diagnostic tests allow physicians to
identify genetic predisposition to disease well before the disease is
manifested, thus enabling early intervention either through lifestyle changes or
preventive therapy.
THE COMPANY
Vysis is a leading Genomic Diagnostics company that develops, commercializes
and markets clinical products that provide information critical to the
evaluation and management of cancer, prenatal disorders and other genetic
diseases. The Company has assembled a management team experienced in developing,
commercializing and marketing DNA based diagnostic products and associated
genetic workstations. The Company was the first to obtain Food and Drug
Administration ("FDA") clearance for a genetic diagnostic product using
fluorescence IN SITU hybridization ("FISH"). Vysis currently markets four FDA
cleared clinical products in addition to distributing over 240 research products
through its direct sales operations in the United States and Europe and a
worldwide distribution network covering 28 countries. It has an installed base
of over 320 proprietary genetic workstations at 224 laboratories in 18
countries. The Company has a pipeline of nine clinical products under
development and an expanding list of clinical product leads based upon its
collaborations with leading medical research institutions which include the
University of California, San Francisco, the Mayo Clinic, St. Jude Children's
Research Hospital, the University of Chicago and the Reproductive Genetics
Institute. The Company's revenues have grown from $5.4 million in 1994 to $13.2
million in 1996. The Company's revenues for the first six months of 1997 were
$8.1 million compared to $5.4 million for the first six months of 1996.
The Company's business represents the consolidation of multiple research
units and programs of Amoco. Over the past ten years, Amoco has invested over
$80 million to fund Vysis' research and development in nucleic acid
technologies. As a result of this investment, Vysis has compiled a broad
portfolio of intellectual property and expertise, which forms the basis of its
core technologies. Vysis owns or has an exclusive license to 92 issued United
States patents or allowed United States patent applications
3
<PAGE>
and 67 pending United States patent applications that protect its core
technologies, diagnostic platforms and genetic targets. Upon completion of this
offering, Amoco will beneficially own approximately 63% of the Company's
outstanding Common Stock.
The Company is currently focusing its cancer product development efforts on
leukemia, breast, bladder, prostate and cervical cancers. The American Cancer
Society estimates that approximately 1.4 million people in the United States
will be diagnosed with some form of cancer in 1997. Approximately 27,600
patients developed some form of leukemia in 1996. Breast cancer is the second
leading cause of death from cancer among women aged 35 to 54, and prostate
cancer is the second leading cause of death from cancer in men. The American
Cancer Society estimates that in 1996 there were approximately 52,900 new cases
of bladder cancer. In 1996, approximately 63 million Papanicolaou ("PAP") tests
were performed to screen for cervical cancer.
Studies indicate that early detection and the selection of appropriate
therapies can improve the survival rates of certain types of cancer. Vysis'
initial clinical cancer products are expected to improve patient survival rates
and quality of life by providing information that will enable selection of the
best possible therapy. Three of the Company's products for leukemia and other
myeloid disorders are currently FDA cleared for clinical diagnostic use in the
United States. The Company's first breast cancer product, currently in late
stage clinical trials, is for the detection of HER-2/neu gene amplification, an
important predictive marker for the response to various therapeutic agents.
The Company's prenatal testing products provide information on genetic
abnormalities involved in mental retardation and other birth defects. In the
United States and Western Europe more than 600,000 amniocentesis procedures were
performed in 1996. Using traditional technology, 7 to 10 days are required to
complete chromosomal testing from amniocentesis specimens. In contrast, Vysis'
clinical products provide accurate test results within 24 hours. The French
regulatory agency, Agence du Medicament, has registered the Company's TriGen-TM-
prenatal panel for the diagnosis of Down Syndrome and sex chromosome
abnormalities. Marketing of this product was initiated in France in June 1997.
In the United States, clinical trials have been completed and a 510(k) premarket
notification is under review by the FDA for the Company's AneuVysion-TM-
prenatal panel for the diagnosis of Down Syndrome, sex chromosome abnormalities
and two additional chromosomal abnormalities, which together account for 85% to
90% of chromosomal causes of mental retardation and other birth defects.
TECHNOLOGY PLATFORMS AND PRODUCTS
Genomic Diagnostic testing requires the ability to assess abnormalities of
chromosomes, individual genes within chromosomes and specific DNA sequences
within genes. No single technology is capable of assessing all of these
different types of abnormalities. To address this issue, the Company has
developed three complementary technology platforms that detect the full range of
genetic abnormalities from large chromosomal aberrations to smaller
abnormalities associated with abnormal numbers of the same gene and the smallest
mutations within specific gene sequences. The Company believes these
complementary technologies will enable the clinician to provide a comprehensive
approach to genomic assessment in the management of disease.
Vysis' three technology platforms include: the FISH SYSTEM, which detects
chromosomal copy number and rearrangement (large genetic structures), the
GCGH-TM- ARRAY SYSTEM, which detects gene copy number and expression (smaller
genetic structures), and the MOLECULAR LAWN-TM- SYSTEM, which detects specific
gene sequences and their mutations (smallest genetic structures). Each platform
provides the advantage of being able to simultaneously detect multiple genetic
abnormalities in the same specimen. Vysis expects to introduce a broad range of
products based on each of these platforms. This product development strategy is
expected to reduce the time to market and associated development costs for each
product.
- FISH SYSTEM: This platform uses FISH technology, which provides the
ability to simultaneously assess multiple chromosomal and gene
abnormalities in a single intact cell. FISH also provides the
4
<PAGE>
ability to perform cell by cell quantitative assessment of genetic changes
in tissue specimens routinely used by pathologists for diagnosis. The
Company's FISH System consists of instruments and image analysis
workstations used with the Company's patented direct label FISH probes.
Vysis believes that its direct label FISH probes are superior because the
result produced is easier to obtain and interpret. Three of the Company's
FISH System products for leukemia and other myeloid disorders are
currently cleared for clinical diagnostic use in the United States.
Additionally, a FISH based clinical diagnostic product for prenatal
testing is registered and marketed in France, and a similar product is
under FDA review in the United States. Clinical trials are underway for a
breast cancer product (HER-2/neu), which is intended to allow physicians
to choose the most effective and appropriate patient therapy.
- GCGH ARRAY SYSTEM: This platform uses the Company's patented comparative
genomic hybridization technology to survey the entire genome for
chromosomal changes in a single test, when a suspected genetic aberration
is unknown. Vysis is developing a ready-to-use array of DNA probes on a
miniaturized chip ("gCGH Array"). A camera based array reader and
customized software will be used to analyze each target on the array. This
system is intended to enable simultaneous assessment of a large number of
genes in a patient's specimen for abnormalities in the specific gene
count. The Company is currently developing products that are intended to
detect in a single specimen substantially all genes known to be amplified
in certain cancers. The Company is also developing a prenatal product that
is intended to simultaneously detect in a single test essentially all
chromosomal abnormalities known to be associated with common mental
retardation and other birth defects.
- MOLECULAR LAWN SYSTEM: This platform uses the Company's patented Q-beta
replicase ("QBR") amplification technology to detect specific gene
sequences. QBR provides a quantitative measure of a specific gene sequence
in either human, viral or bacterial DNA. Because the Molecular Lawn is a
self contained system and is being specifically designed for clinical use,
this QBR based system is intended to provide a more accurate, simple and
cost-effective alternative to other amplification technologies such as
polymerase chain reaction. This technology platform enables the detection
of small genetic targets associated with disease predisposition and early
detection of disease. The system includes a disposable test device and an
automated reader that will provide both qualitative and quantitative
results. The Company's initial product will be designed for the detection
of Human Papilloma Virus, which causes cervical cancer.
An integral part of the Company's technology platforms is its Image Analysis
Software, which is comprised of proprietary algorithms that enable the automated
display and analysis of FISH, gCGH Array and Molecular Lawn tests. The Company
believes that this technology will be essential to the development of its future
automated diagnostic systems.
5
<PAGE>
COMPANY STRATEGY
The Company's goal is to strengthen its position as a leading Genomic
Diagnostics company providing products for the clinical assessment and
management of cancer, prenatal disorders and other genetic diseases. The key
elements of the Company's strategy are to:
- Focus on clinical disease management by developing rapid, accurate,
reliable, cost-effective and easy-to-use products that assess the genome
at all levels.
- Leverage the existing FISH System to develop products providing the
highest near-term medical value and significant revenue potential while
continuing to develop the next generation of Genomic Diagnostic products
utilizing the gCGH Array and Molecular Lawn platforms.
- Capitalize on the Company's existing international sales and marketing
infrastructure to expand access to market opportunities worldwide.
- Obtain additional product leads through collaborations with leading
medical research institutions, incorporation of research results from the
Human Genome Project and continued expansion of the research product line
to help establish new clinical correlations.
- Continue to expand and strengthen the Company's intellectual property
position.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 3,500,000 shares
Common Stock to be outstanding after the
offering (1)................................ 9,501,260 shares
Use of Proceeds.............................. To accelerate product development, expand
sales and marketing capability, acquire
complementary technologies and intellectual
property rights as opportunities arise and
repay indebtedness. See "Use of Proceeds."
Proposed Nasdaq Stock Market symbol.......... VYSI
</TABLE>
- ------------------------
(1) Includes 4,525,547 shares issuable upon the conversion of the Company's
outstanding Series A Preferred Stock and 403,741 shares issuable upon the
conversion of the Company's outstanding Series B Preferred Stock, all of
which preferred stock is owned by Amoco Technology Company ("ATC"). See
"Description of Capital Stock." Excludes, as of October 17, 1997, 957,920
shares issuable upon exercise of outstanding stock options under the
Company's Stock Incentive Plan. See "Management-- Stock Incentive Plan."
6
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------- ----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales....................................... $ 5,373 $ 6,296 $ 11,022 $ 4,311 $ 6,931
Grant and other revenue............................. 30 921 2,216 1,065 1,136
---------- ---------- ---------- ---------- ----------
Total revenue..................................... 5,403 7,217 13,238 5,376 8,067
Cost of goods sold.................................... 3,486 4,022 5,529 2,254 3,184
---------- ---------- ---------- ---------- ----------
Gross profit.......................................... 1,917 3,195 7,709 3,122 4,883
---------- ---------- ---------- ---------- ----------
Operating expenses:
Research and development............................ 11,639 8,871 9,456 4,221 5,313
Selling, general and administrative................. 8,937 12,025 16,286 8,256 7,077
---------- ---------- ---------- ---------- ----------
Total operating expense........................... 20,576 20,896 25,742 12,477 12,390
---------- ---------- ---------- ---------- ----------
Loss from operations.................................. (18,659) (17,701) (18,033) (9,355) (7,507)
---------- ---------- ---------- ---------- ----------
Interest income--Amoco................................ -- -- 107 107 --
Interest expense--Amoco............................... -- -- (255) -- (122)
---------- ---------- ---------- ---------- ----------
Net loss.............................................. $ (18,659) $ (17,701) $ (18,181) $ (9,248) $ (7,629)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Pro forma net loss per share(1)....................... $ (2.98) $ (1.51) $ (1.25)
---------- ---------- ----------
---------- ---------- ----------
Shares used in computing pro forma net loss per
share(1)............................................ 6,107 6,107 6,107
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------
AS
ACTUAL ADJUSTED(2)
---------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................................ $ 171 $ 39,904
Working capital (deficit)................................................................ (9,889) 40,037
Total assets............................................................................. 14,571 59,391
Notes payable--Amoco..................................................................... 10,193 --
Accumulated deficit...................................................................... (22,624) (22,624)
Total stockholder's equity (deficit)..................................................... (2,470) 47,456
</TABLE>
- ------------------------
(1) See Note 1 to the Consolidated Financial Statements for information
concerning the number of shares used in computing pro forma net
loss per share.
(2) As adjusted to give effect to (i) the conversion of $5,106,000 of the note
payable to Amoco at December 31, 1996 into 553,126 shares of Series B
Preferred Stock, which stock is to be converted into 403,741 shares of
Common Stock, and (ii) the sale of the 3,500,000 shares of Common Stock
offered by the Company at an assumed initial public offering price of $14.00
per share and the application of the net proceeds therefrom. See "Use of
Proceeds," "Capitalization" and "Description of Capital Stock."
7
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS:
UNCERTAIN CLINICAL MARKET ACCEPTANCE OF COMPANY PRODUCTS
Most of the Company's genetic testing products are currently being
distributed for research use only ("RUO"). If the Company's clinical diagnostic
products receive regulatory approval, Vysis will seek to introduce them into the
larger clinical diagnostic market. Acceptance of such products by geneticists,
clinicians, pathologists, oncologists, physicians and their patients for use in
clinical markets and the rate of such acceptance, if any, is uncertain and will
depend upon, among other things, the Company's ability to (i) increase the level
of awareness of its FISH, CGH, QBR and other technologies among the clinical
laboratories and physicians who are expected to order such tests, (ii) educate
the medical community regarding the benefits of managing disease with Genomic
Diagnostics, (iii) provide data demonstrating clinical correlations to disease
outcomes of the gene targets or genetic abnormalities detected by the Company's
products and (iv) obtain third party payers' approval of the Company's products.
There can be no assurance that the clinical market will accept the Company's
products to the extent necessary to make them commercially viable. Failure of
the Company to gain acceptance of its diagnostic products in the clinical market
or any significant delay in such acceptance may have a material adverse effect
on the Company's business, financial condition and results of operations.
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL
The preclinical and clinical testing, manufacturing, labeling, distribution
and promotion of the Company's products are subject to extensive and rigorous
government regulation in the United States and other countries. Noncompliance
with applicable requirements can result in enforcement action by the Food and
Drug Administration ("FDA") or comparable foreign regulatory bodies including,
among other things, warning letters, fines, injunctions, civil penalties, recall
or seizure of products, refusal to grant premarket clearances or approvals,
withdrawal of marketing approvals and criminal prosecution.
The Company generally is prohibited from marketing its diagnostic products
in the United States unless it obtains either 510(k) clearance or premarket
approval ("PMA") from the FDA. The Company believes that it usually takes from
four to 12 months from submission to obtain 510(k) clearance, but it can take
longer. The process of obtaining PMA approval is much more costly, lengthy and
uncertain. In any event, there can be no assurance that 510(k) clearance or PMA
approval will ever be obtained in a timely fashion or at all. Such clearance or
approval may also have limitations on how the device may be marketed that will
limit its sales potential.
Distribution of the Company's products outside the United States is also
subject to regulation, which varies widely from country to country. The time
required to obtain needed regulatory clearance by particular foreign governments
may be longer or shorter than that required for FDA clearance or approval. In
addition, the export by the Company of certain of its products that have not yet
been cleared for domestic distribution may be subject to FDA export
restrictions. There can be no assurance that the Company will receive on a
timely basis, if at all, any foreign government or United States export
approvals necessary for the marketing of its products.
The Company submitted a 510(k) notification on the AneuVision-TM- prenatal
aneuploidy detection kit for chromosomes 13, 18, 21, X and Y to the FDA in May
1997. There can be no assurance that the product will receive FDA 510(k)
clearance in a timely manner, if at all.
The Company is conducting clinical trials for the FISH detection of
HER-2/neu amplification in breast cancer. Clinical trials are scheduled to be
completed in late 1997 with a PMA submission expected to be made to the FDA in
1998. There can be no assurance that this product will be approved by the FDA.
8
<PAGE>
The Company's AKS-Registered Trademark- II Karyotype Imaging System (now
named Quips-TM-) received 510(k) clearance in 1990. The Company has made
modifications to this device that the Company believes do not require the
submission of new 510(k) notices. There can be no assurance, however, that the
FDA would agree with any of the Company's determinations not to submit a new
510(k) notice for any of these changes or would not require the Company to
submit a new 510(k) notice for any of the changes made to the device. If the FDA
requires the Company to submit a new 510(k) notice for any device modification,
the Company may be prohibited from marketing the modified device until the
510(k) notice is cleared by the FDA.
The Company has developed tests, software and instrument systems that it
distributes in the United States on a "research use only" ("RUO") or
"investigational use only" ("IUO") basis. Failure of the Company or recipients
of the Company's RUO and IUO devices to comply with the regulatory limitations
on the distribution and use of such devices could result in enforcement action
by the FDA that would adversely affect the Company's ability to distribute the
tests prior to obtaining FDA clearance or approval. Such restrictions could have
a material adverse effect on the Company's business, financial condition and
results of operations.
Purchasers of the Company's clinical diagnostic products in the United
States may be regulated under the Clinical Laboratory Improvement Amendments of
1988 ("CLIA") and related federal and state regulations. CLIA is intended to
ensure the quality and reliability of clinical laboratories in the United States
by mandating specific standards in the areas of personnel qualifications,
administration, participation in proficiency testing, patient test management,
quality control, quality assurance and inspections. The regulations promulgated
under CLIA established three levels of diagnostic tests ("waived," "moderately
complex" and "highly complex") and the standards applicable to a clinical
laboratory depend on the level of the tests it performs. The Company believes
that its FISH, gCGH Array and Molecular Lawn tests will be placed in the "high
complexity" category under CLIA regulations, which will limit their use to
larger hospitals and clinical reference laboratories. CLIA requirements may
prevent some clinical laboratories from using any or all of the Company's
diagnostic products. There can be no assurance that the CLIA regulations or
future administrative interpretations of CLIA will not have a material adverse
impact on the Company by limiting the potential market for the Company's FISH
tests and other products.
Some clinical laboratories prepare their own finished diagnostic tests using
purchased reagents. The FDA generally has not exercised regulatory authority
over these individual reagents or such finished tests. In March 1996, the FDA
proposed new rules for these reagents, individually termed an analyte specific
reagent ("ASR") that would apply a regulatory framework to them, including
restrictions on sales or promotional claims that could be made about these
products and the restriction of sales to clinical laboratories certified under
CLIA as high complexity testing laboratories. The Company sells on an RUO basis
a number of individual reagents, that could fall within the ASR regulatory
framework, which if adopted could require changes in the Company's marketing.
Adoption of the ASR regulations could also lead to increased competition for the
Company's diagnostic products from suppliers of ASRs.
The Company anticipates marketing a panel of FISH probes for use in
connection with IN VITRO fertilization ("IVF") procedures for preimplantation
genetic testing ("PGT"). Current FDA policy permits the distribution of certain
IN VITRO assays on an RUO basis, provided that the assays are not commercialized
on an unrestricted basis. The Company therefore believes that it can distribute
its MultiVysion-TM- PGT panel, as well as its Quips Genetic Workstations, to IVF
centers. In addition, the Company believes that FDA policy regarding its IVF
panel and similar products may evolve over time in a manner that would permit
such products to be commercially distributed on an unrestricted basis with only
specified labeling and Quality System Regulations ("QSR") requirements being
imposed. The FDA has to date not developed a definitive policy in this area, and
there can be no assurance that the FDA will not issue guidelines or take other
regulatory actions that might adversely impact the Company's anticipated
revenues from its RUO sales or subsequent unrestricted commercial sales of its
MultiVysion PGT panel to IVF centers.
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Any devices manufactured or distributed by the Company pursuant to FDA
clearances or approvals will be subject to pervasive and continuing regulation
by the FDA and certain state agencies. The Company will be subject to routine
inspection by the FDA and will have to comply with the host of regulatory
requirements that usually apply to medical devices marketed in the United
States, including labeling regulations, the QSR, the Medical Device Reporting
regulation (which requires a manufacturer to report to the FDA certain types of
adverse events involving its products), and the FDA's prohibitions against
promoting products for unapproved or "off-label" uses. Unanticipated changes in
existing regulatory requirements or adoption of new requirements could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company's failure to comply with applicable
regulatory requirements could result in enforcement action by the FDA or foreign
governments, which could have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business--Government Regulation."
HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
The Company has incurred operating losses in each year since its inception.
The Company's losses have resulted principally from costs incurred in research
and development and from selling, general and administrative costs associated
with the Company's operations. These costs have exceeded the Company's revenues
which, to date, have principally been due to genetic testing product sales to
the clinical research market, food testing product sales, funding from
government research grants and payments from collaborators. The Company may
incur additional operating losses as a result of increases in its expenses for
research and product development, litigation, clinical trials/regulatory
approvals and expansion of sales and marketing capability.
The amount of future operating losses and time required by the Company to
reach profitability, if ever, are highly uncertain. The Company's ability to
generate significant revenues and become profitable is dependent in large part
on the ability of the Company to successfully commercialize products for
delivery to the clinical market. Delays in receipt of any necessary regulatory
approvals by the Company, or receipt of approvals by competitors, could
adversely affect the successful commercialization of the Company's products.
There can be no assurance that the Company will successfully commercialize any
of the clinical products that it is currently developing.
INTENSE COMPETITION
Competition in clinical diagnostics and genomics is intense and is expected
to increase as the market for Genomic Diagnostic products develops. Competition
is and will continue to be based on quality, reliability, accuracy, ease of use,
price and product line offering. Oncor, Inc. ("Oncor") is a major competitor in
the supply of FISH products to the clinical research market and is seeking to
enter the clinical market with FISH products. Applied Imaging Corp. and
Perceptive Scientific Instruments, Inc. compete with Vysis in the marketing of
genetic imaging workstations. The Company is aware of other entities that
currently market RUO nucleic acid products, which may have the ability to
compete with the Company in the clinical market. In addition, many reference
laboratories and research institutions produce their own FISH probes for
internal use.
Other companies are developing genomic assessment products, including "DNA
Chip" products for assessment of gene expression or gene sequence with potential
use for clinical diagnostics. Other diagnostic companies may enter the genetic
disease diagnostic market with nucleic acid based technologies. Many of the
Company's existing and potential competitors have substantially greater
financial, marketing, sales, distribution and technological resources than the
Company or may have substantial advantages over the Company in terms of research
and development expertise, experience in conducting clinical trials, experience
in regulatory matters, manufacturing efficiency, name recognition, ability to
obtain necessary intellectual property licenses, sales and marketing expertise
and distribution channels.
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There can be no assurance that the Company will be able to compete successfully
against current or future competitors. See "Business--Competition."
DEPENDENCE UPON THE GENE DISCOVERY AND DISEASE CORRELATION EFFORTS OF OTHERS;
NEED TO OBTAIN DIAGNOSTIC APPLICATIONS OF DISCOVERIES
The Company's future prospects are dependent upon the rate at which
particular genes or genetic abnormalities are discovered and are correlated with
disease and upon the Company's ability to obtain the necessary rights to develop
and sell genetic tests based on these discoveries. There are a number of other
companies, institutions and government-financed entities engaged in the
discovery of the structure and function of the human genome, many of which have
greater financial, technical and human resources than the Company and its
collaborators. In addition, there are a finite number of genes in the human
genome, and companies and institutions performing gene discovery may seek to
identify, sequence and determine in the shortest time possible the biological
function of a large number of genes in order to obtain proprietary positions.
The Company's ability to obtain such rights also depends in part upon its
research collaborations and its ability to maintain and expand such
collaborations. No assurance can be given that the Company will be able to
obtain, on commercially reasonable terms, the rights to genes or correlations of
genetic abnormalities to disease necessary for marketing the Company's clinical
products. Failure to obtain such rights may have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business--Collaborations" and "Business--Ability to Practice Technology."
UNCERTAINTIES RELATING TO TECHNOLOGICAL APPROACHES
There can be no assurance that the Company will be able to overcome
technical challenges that may arise in connection with the development of its
clinical diagnostic products or, if resolved, the ultimate products will be
suitable for successful clinical commercialization. The development of such
products will require additional investment by the Company of its financial,
technical and other resources. Products incorporating the Company's technology
will also need to compete against well-established techniques and enhancements
to such techniques for analyzing genes and for diagnostics. There can be no
assurance that the Company's technology will compete successfully against
existing or future diagnostic techniques and products. In addition, the
development and commercialization of the Company's planned clinical products
will be subject to the risks of failure inherent in the development and
commercialization of any new technology. These risks include the possibilities
that any products based on these technologies will be found to be ineffective or
otherwise fail to receive the necessary regulatory clearances; that proprietary
rights of third parties will preclude the Company from marketing the products;
or that government and private third party payers will increasingly attempt to
contain health care costs by limiting both the extent of coverage and the
reimbursement rate for new diagnostic products and services.
The Company's development of its genetic imaging software products is
subject to all of the risks of the software development industry. There can be
no assurance that the Company's software development will not be adversely
impacted or delayed due to changes in its suppliers' products or software,
unforeseen programming needs, delay or failure to receive software development
services from third parties, or the Company's inability to obtain necessary
computer products, software and components on a timely basis. Any inability of
the Company to develop its genetic imaging software products on a timely basis
may have a material adverse effect on the Company.
DEPENDENCE UPON COLLABORATIVE PARTNERS
The Company relies on its relationships with collaborators at academic and
other institutions that conduct research in areas of interest to the Company.
These collaborators are not employees of the Company. As a result, the Company
has limited control over their activities and, except as otherwise required by
its collaboration agreements, can expect only limited amounts of their time to
be dedicated to the Company's activities. The Company's collaborations with
third parties are an important element of the
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Company's strategy to obtain rights to gene discoveries. There can be no
assurance that the Company will be able to negotiate additional collaboration
arrangements with others or that its existing or future collaborations will be
successful. See "Business--Collaborations" and "Business--Ability to Practice
Technology."
UNCERTAIN ABILITY TO PRACTICE TECHNOLOGY
The Company's success will depend to a substantial degree upon its ability
to operate its business and to develop, manufacture, market and sell its
products without infringing the proprietary rights of third parties. However,
numerous United States and foreign issued patents and pending patent
applications, which are owned by third parties, exist in the general fields of
nucleic acid technology and clinical diagnostic technology. The Company expects
that additional United States and foreign patents owned by third parties will
issue and additional United States. and foreign patent applications owned by
third parties will be filed in these fields. The Company further believes that
the level of patent competition in these fields is sufficiently high that patent
litigation in these fields is likely to occur.
Consequently, the Company believes that its management of the business risks
presented by the intense patent competition in these fields is critical to its
ability to operate its business and to develop, manufacture, market and sell its
products. There can be no assurance that the Company will be able to
successfully manage these patent business risks to avoid infringing the
proprietary rights of others nor can there be any assurance that patent
infringement suits will not be brought against the Company. Any failure in its
management of these patent business risks may have a material adverse impact on
the Company's business, financial condition and results of operations.
The Company's success will also depend to a substantial degree upon its
ability to obtain and maintain patent protection, both in the United States and
in foreign countries, for its diagnostic products and methods and other
inventions that the Company believes patentable, as well as upon the Company's
ability to preserve its trade secrets and to protect its copyrights in software.
The Company's success will also depend to a substantial degree upon its
collaborators' and future licensors' ability to obtain and maintain patent
protection, both in the United States and in foreign countries, on gene
discoveries, the correlations of disease to genomic abnormalities and other
inventions relevant to the Company's business, as well as upon the Company's
collaborators' and future licensors' ability to preserve trade secrets and to
protect copyrights in software.
The patent position of a company utilizing biotechnology generally is highly
uncertain and involves complex legal and factual questions. There can be no
assurance that any patents owned by or licensed to the Company will not be
challenged and subsequently invalidated or circumvented, or that such patents
will be sufficiently broad to afford protection against third parties who
develop or use similar technology, or that any of such patents will be
successfully asserted against any infringing activity, or that any of the
Company's patent rights will be successfully cross-licensed to third parties in
exchange for a license under their patent rights. In addition, there can be no
assurance that any pending U.S. or foreign patent applications owned or licensed
by the Company or those acquired or licensed by the Company in the future will
result in issued patents, or that such applications will not be subject to
foreign opposition seeking the revocation of a Company patent or to United
States patent interference seeking a determination that the Company or its
collaborators were not the first inventor of a particular patent or patent
application, or that the Company or its collaborators will develop additional
technologies that are patentable, or that any patents owned or licensed to the
Company will provide a basis for commercially viable products or services.
The Company is also aware of issued United States and foreign patents and
pending patent applications owned or controlled by third parties, which are
related to the Company's current or anticipated technologies. Specifically, the
Company is aware of issued United States and foreign patents and pending patent
applications owned or controlled by third parties, which are related to
significant
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elements of the Company's FISH, CGH and direct labeling technologies, or to
significant elements of the Company's anticipated use of its QBR technologies,
or to reagents useful in the performance of CGH or gCGH assays. Although the
Company believes that certain of these issued patents are not infringed by the
Company's current and planned operations, there can be no assurance that the
Company would be able to successfully assert such a position in the courts, nor
that such a position could be asserted without the Company's incurring
substantial or prohibitive costs. Furthermore, because United States patent
applications are maintained under conditions of confidentiality while the
applications are pending in the United States Patent and Trademark Office, there
may be pending patent applications filed by third parties of which the Company
is unaware and which relate to the Company's current or planned technologies. In
addition, third parties may in the future file patent applications having claims
that relate to the Company's services, processes or products. Persons holding or
licensing patent rights could bring legal actions against the Company claiming
that any of the Company's marketing, services, processes or products, of the
Company's collaborators' or its suppliers' services or products or of the
Company's customers' use of the Company's services or products infringe one or
more of their patents, and seek damages or injunctive relief. Patent litigation
is costly, and there can be no assurance that the Company would prevail in any
patent litigation brought against it. Further, the Company could be subject to
significant liabilities to such persons, may be required to obtain licenses from
such persons, or may be required to cease certain activities, and any of these
could have a material adverse effect upon the Company's business, financial
condition or results of operations. In addition, there can be no assurance that
the Company will be able to obtain such licenses on commercially reasonable
terms, or at all.
The Company is party to various license and license option agreements, which
give the Company rights to use certain technologies fundamental to the Company's
business. Failure of the Company to meet all performance criteria contained in
such license and option agreements in the future could cause the loss of such
licenses or options, or a change in license status from exclusive to
nonexclusive. Licensors of the Company may disagree with the Company as to the
interpretation of the terms and conditions of the Company's licenses, as to
whether the Company or licensor have properly fulfilled the provisions of such
license contracts, and may challenge the Company's activities under such
licenses in the courts or in arbitration proceedings. Any of the foregoing could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Certain of the Company's licensed patent rights claim inventions, which were
developed in whole or in part using grants or funding from United States
Government agencies. The United States Government's funding of the Company's
licensors and of the Company provide that the United States Government is
provided certain rights to use the technology developed by its grants or funding
and to practice or license under the applicable patent rights for the United
States Government's benefit. The applicable United States statute governing the
United States government's rights (the "Dole-Bayh Act") also provides that third
parties may petition the government for a grant of a non-exclusive license upon
reasonable terms under these patent rights owned or exclusively licensed to the
Company if the Company is found to not be diligently developing the technology
or market covered by the patent(s) in question. There can be no assurance that
the United States Government will not exercise such rights, or that the exercise
of such rights would not have a material adverse effect on the Company.
The Company also relies upon copyrights, copyright licenses and trade
secrets to protect its software and upon trade secrets to protect certain of its
unpatented proprietary technology. There can be no assurance that the Company
will be able to adequately protect its rights in such software and such
unpatented proprietary technology or that others will not independently develop
substantially equivalent technology or information, or that others will not
otherwise gain access to the Company's software and unpatented proprietary
technology or disclose the Company's software and unpatented proprietary
technology to third parties in a non-confidential manner.
Any of the risks and uncertainties concerning the ability to practice
technology which are described herein apply to the Company's collaborators just
as they apply to the Company itself. As a licensee or
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strategic partner of such collaborators, the Company could be materially
adversely affected by any event adversely affecting one or more of the Company's
collaborators.
LITIGATION
The Regents of the University of California (the "Regents") and the Company,
as exclusive licensee, are plaintiffs in a patent infringement suit against
Oncor in the United States District Court in San Francisco, California. The suit
asserts that Oncor's marketing of various DNA probe products infringes the
Regents' U.S. Patent No. 5,447,841. Oncor's answer to the complaint asserts that
the patent is invalid based on prior art and the failure to disclose the best
mode of practicing the invention and that it is unenforceable due to inequitable
conduct that occurred during prosecution of the patent. In a pre-trial order
dated August 19, 1997, the court granted the Company summary judgment that the
patent's claims are valid over the prior art and that use of certain of Oncor's
probes infringe the claims. The Company expects that the trial of the remaining
issues will be held in 1998. If Oncor were to succeed in invalidating the patent
or having it declared unenforceable, this may have a material adverse effect on
the Company's market position and future business prospects.
The Company and Amoco are defendants in a suit pending in the United States
District Court in San Diego, California brought by Gen-Probe, Inc.
("Gen-Probe"). The suit alleges infringement of U.S. Patent Nos. 4,851,330 and
5,288,611 (the "Kohne Patents"). The Kohne Patents are alleged to apply
generally to the detection, identification and quantification of non-viral
organisms using DNA probes selected to target sequences of ribosomal RNA. The
allegedly infringing activities are the manufacture, use and sale of reagents
and kits for detecting certain food and environmental pathogens. The suit also
alleges various claims that the Company competed unfairly with Gen-Probe. This
suit has been stayed pending the outcome of a separate suit brought against
Gen-Probe by the Center for Neurologic Study ("CNS") challenging Gen-Probe's
claim to sole ownership of the Kohne Patents. CNS asserts that the invention of
the Kohne Patents were made by David Kohne while he was affiliated with CNS and
supported by a grant from the National Institutes of Health naming CNS as the
grantee institution. CNS seeks damages and title in the Kohne Patents. The
Company has contingent rights to acquire an exclusive license under such rights
as CNS may obtain in the Kohne Patents. There can be no assurance that the
Company will obtain rights under such Kohne Patents.
Counterpart applications to the Kohne Patents were filed in Europe, Japan
and elsewhere. Patents were granted and the Company has opposed these patents in
Europe and Japan. The opposition has not been resolved in Europe. In Japan, the
Company's opposition has been rejected and the patent maintained.
There can be no assurance that Gen-Probe will not assert additional counts
of infringement based on any additional patents issued from the applications
underlying the Kohne Patents or will not assert additional causes of action
against the Company. Although the Company believes that it has meritorious
defenses to the suit by Gen-Probe against the Company, there can be no assurance
that the Company will ultimately prevail. An adverse determination could include
an award of treble damages and/or attorneys' fees, which could have a material
adverse effect on the financial condition and results of operations of the
Company. Furthermore, an adverse determination in such suit may limit future
business opportunities that the Company might otherwise be able to exploit in
the area of infectious disease detection.
Prior to the closing of this offering, the Company and Amoco, will enter
into a Cooperation Agreement that will provide that Amoco and the Company will
cooperate in the defense of the suit brought by Gen-Probe and will include an
agreement relating to the allocation of any resulting liability between the
Company and Amoco. See "Business--Litigation."
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SOCIAL AND LEGAL IMPLICATIONS OF GENETIC DIAGNOSTIC TESTING
The use of genetic tests raises a number of social issues and concerns and
is the subject of considerable controversy. These controversies may lead to
efforts (including legislative efforts) to prohibit or otherwise limit the use
of such products. These efforts could result in a reduction in the size of the
potential market for the Company's products. The Company is unable to predict
how concerns regarding the social and legal implications of genetic testing will
affect the market for genetic diagnostic tests.
The prospect of broadly available diagnostic tests which evaluate genetic
predisposition to disease has also raised issues regarding the appropriate
utilization and the confidentiality of information provided by such testing. It
is possible that insurers or employers could discriminate against persons with a
genetic predisposition for disease. Such discrimination could cause governmental
authorities, for social or other purposes, to limit the use of genetic testing
or prohibit testing for genetic predispositions to certain conditions. If
efforts by the Company and others to mitigate potential discrimination are not
successful, the Company could experience a delay or reduction in test
acceptance, which could have a material adverse effect on the Company's ability
to commercialize its potential diagnostic products for genetic predisposition.
FUTURE CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company has funded its operations to date primarily through capital
contributions and loans from Amoco. Amoco has advised the Company that it does
not intend to continue such funding following this offering. The Company's
future capital requirements will depend on many factors, including progress of
the Company's research and development programs, the results and cost of
clinical correlation testing of the Company's genetic products, the cost of
filing, prosecuting, enforcing and defending patent claims, the cost and timing
associated with obtaining regulatory approval for proposed clinical products,
competing technological and market developments, payments received or disbursed
under collaborative agreements, changes in collaborative research relationships,
payments under government research grants, the costs and license revenue
associated with potential commercialization of its gene discovery opportunities
and other administrative and legal expenses. Because of the Company's potential
long-term capital requirements, it may need to access the public or private
equity or debt markets from time to time. There can be no assurance that any
such additional funding will be available to the Company, or if available, that
it will be on reasonable terms. If adequate funds are not available, the Company
may be required to scale down research and development programs, curtail capital
expenditures, and reduce marketing and other operating expenses. There can be no
assurance that the Company will be successful in conducting its operations on an
independent basis. See "Certain Transactions."
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT
The future success of the Company's diagnostic products in the clinical
market will depend, in part, on the availability of adequate reimbursement from
third-party payers such as United States or foreign government entities, managed
care organizations and private insurance plans. Significant uncertainty exists
concerning third-party reimbursement for the use of medical tests incorporating
new technology. Reimbursement by a third-party payer generally depends on
factors such as the payer's determination that the product is clinically useful
and cost-effective, is not experimental or investigational, and is medically
necessary and appropriate for the specific patient. Since reimbursement approval
is required from each individual payer, seeking such approvals is a time
consuming and costly process which requires the Company to provide scientific
and clinical support for the use of its products for their approved indications
to each payer separately. There can be no assurance that third-party
reimbursement will be consistently available for the Company's products or that
such third-party reimbursement will be adequate. In addition, health care
reimbursement systems vary from country to country and, accordingly, there can
be no assurance that third-party reimbursement will be available for the
Company's products in any particular country in which the Company markets its
products.
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LIMITED SALES AND MARKETING EXPERIENCE
To date the Company has sold almost all of its genetic testing products for
RUO purposes and has only limited experience in selling to the clinical market.
There can be no assurance that the Company will be able to establish a sales
force sufficient to meet the demands of the clinical market, educate the market
as to the utility of the Company's products or otherwise successfully distribute
its products. Failure to do so would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Sales and Marketing."
LIMITED MANUFACTURING EXPERIENCE
The Company has limited commercial scale manufacturing experience and
capabilities. The Company anticipates it will need to expand substantially its
manufacturing capabilities in order to commercialize effectively its clinical
products. There can be no assurance that the Company will be able to recruit and
retain skilled manufacturing personnel to establish sufficient manufacturing
capability and capacity or manufacture the Company's products in a timely
manner, at a cost or in quantities necessary to make them commercially viable,
in conformance with ISO 9001 requirements or the FDA's QSR, or in a manner that
otherwise ensures product quality. See "Business--Manufacturing."
UNCERTAINTIES RELATED TO GOVERNMENT FUNDING
A substantial portion of the Company's current genetic testing products are
sold to reference laboratories and academic institutions for research purposes.
Certain of these entities rely on United States or foreign government grants to
fund their research efforts. In addition, government funding supports many of
the gene discovery efforts and disease correlation studies currently conducted
by academic research institutions and others. A significant reduction in
government funding of these entities may have a material adverse effect on the
Company by reducing sales of the Company's RUO products or by slowing the rate
of gene discoveries or of correlations of abnormalities to disease on which new
diagnostic products will be based.
PRODUCT LIABILITY
The Company's business is subject to product liability risks inherent in the
design, development, testing, manufacturing and marketing of the Company's
products, including its clinical diagnostics and its food testing products, for
their particular applications. There can be no assurance that product liability
claims will not be asserted against the Company nor any assurance that product
liability claims or defense of such claims will not have a material adverse
effect on the Company's financial results. There is also a significant
difference in the applicable federal law governing preemption of state law based
product liability claims concerning medical devices that are certified by the
FDA under the 510(k) process, compared to those approved by the FDA under a PMA.
The United States Supreme Court recently held that there is no federal
preemption of such state law claims where the medical device is certified under
the 510(k) process. Thus a federal preemption defense may not be available in
product liability claims against medical devices approved via the 510(k)
process, whereas the defense may be available for PMA approved devices. The
Company currently maintains product liability insurance coverage of $1.0 million
per occurrence, and $10 million in the aggregate. There can be no assurance that
this coverage will be adequate to protect the Company against future product
liability claims or that product liability insurance will be available to the
Company in the future on commercially reasonable terms, if at all. Furthermore,
there can be no assurance that the Company will be able to avoid significant
adverse publicity resulting from any future product liability claims.
ENVIRONMENTAL REGULATION
The Company is subject to a variety of local, state and federal government
regulations relating to the storage, discharge, handling, emission, generation,
manufacture and disposal of toxic, infectious or other
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hazardous substances used to manufacture the Company's products and in the
Company's research. The failure to comply with current or future regulations
could result in the imposition of substantial fines against the Company,
suspension of production or research, alteration of its manufacturing processes
or cessation of operations. There can be no assurance that the Company will not
be required to incur significant costs to comply with any such laws and
regulations in the future, or that such laws or regulations will not have a
material adverse effect on the Company's business, financial condition and
results of operations. Any failure by the Company to control the use, disposal,
removal or storage of, or to adequately restrict the discharge of, or assist in
the cleanup of, hazardous chemicals or hazardous, infectious or toxic substances
could subject the Company to significant liabilities, including joint and
several liability under certain statutes. The imposition of such liabilities may
have a material adverse effect on the Company's business, financial condition
and results of operations.
DEPENDENCE ON SINGLE SOURCE SUPPLIERS
Certain key components of the Company's products are currently provided to
the Company by single sources. The Company does not have long-term supply
contracts with any of such suppliers, and the Company has not arranged
alternative supply sources. In the event that the Company is unable to obtain
sufficient quantities of such components on commercially reasonable terms, or in
a timely manner, the Company would not be able to manufacture its products on a
timely and cost-competitive basis.
DEPENDENCE ON KEY PERSONNEL
Because of the specialized scientific nature of the Company's business, the
Company is highly dependent upon its ability to attract and retain qualified
scientific and executive personnel. There can be no assurance that the Company
will be successful in attracting and retaining these skilled persons who
generally are in high demand by pharmaceutical and biotechnology companies and
by universities and other research institutions. The loss of, or the inability
to attract, key scientific and executive personnel may have a material adverse
effect on the Company. The Company does not maintain any "key-man" life
insurance policies. See "Business--Employees."
INTERNATIONAL BUSINESS UNCERTAINTIES
Approximately 35% of the Company's revenues in 1996 was generated from
sources outside of the United States and significant future growth potential for
the Company's products is located outside of the United States. In the near
term, product revenue from sources outside the United States may increase as a
percentage of total product revenue due to the introduction of clinical
diagnostic products in the European market prior to their introduction in the
United States. As a result of this significant foreign source revenue, the
Company's business is subject to the risks of doing business abroad, including
exchange rate fluctuations, import and export regulations, possible restrictions
on the transfer of funds and greater difficulty in collecting accounts
receivable. In addition, products made available in the United States and
internationally may be subject to regulation by various foreign countries
pursuant to laws which may vary widely from those in the United States. The
Company may incur substantial expense in complying with such laws. Finally,
legal and non-legal entry barriers may prevent the Company from entering certain
foreign markets or limit its market penetration.
CONTINUED CONTROL BY PRINCIPAL STOCKHOLDER
Following completion of this offering, Amoco will beneficially own
approximately 63% of the Company's outstanding shares of Common Stock (or
approximately 60% if the Underwriters' over-allotment option is exercised in
full). As a result, Amoco will control the Company and will be able to elect all
of the Company's directors and to determine the outcome of corporate actions
requiring stockholder approval. Amoco also will be able to prevent a change of
control of the Company. The Company
17
<PAGE>
anticipates that immediately following this offering three of the Company's
seven directors will be employees of Amoco.
NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market for the
Common Stock will develop or be sustained. The initial public offering price
will be determined through negotiations between the Company and the
representatives of the Underwriters and may not be indicative of prices that
will prevail in the trading market. See "Underwriting" for information relating
to the factors considered in determining the initial public offering price. The
stock market in recent years has experienced extreme price and volume
fluctuations that have particularly affected the market prices of many
biotechnology companies. These fluctuations, as well as factors such as
announcements of technological developments or new products by the Company or
its competitors, litigation involving the Company or its licensors, developments
concerning intellectual property rights, regulatory changes, or variations in
the Company's quarterly results of operations, as well as announcements relating
to the Company's industry generally, may materially and adversely affect the
market price of the Common Stock.
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation allows the Board of Directors,
without stockholder approval, to issue additional shares of Common Stock or
establish one or more series of preferred stock with such preferences and rights
as the Board of Directors may determine. This provision may have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of the Company. In addition, the
Company is subject to Section 203 of the Delaware General Corporation law which
restricts the ability of certain stockholders of the Company to enter into a
merger or other business combination with the Company. The foregoing could limit
the price that certain investors might be willing to pay in the future for
shares of Common Stock. See "Description of Capital Stock."
FUTURE SALES OF COMMON STOCK
Upon completion of this offering, there will be 9,501,260 shares of Common
Stock outstanding. The 3,500,000 shares of Common Stock sold pursuant to this
offering (plus any shares sold pursuant to the Underwriters' over-allotment
option) will be tradeable without restrictions by persons other than
"affiliates" of the Company. Amoco may also sell shares into the market pursuant
to Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). Pursuant to a registration rights agreement with the Company,
Amoco, the Company's principal stockholder, may demand that the Company register
its shares of Common Stock under the Securities Act at any time following 180
days after the date of this Prospectus. (However, Amoco has agreed with the
Underwriters that it will not sell any shares of Common Stock for a period of
one year following the date of this Prospectus without the consent of Furman
Selz LLC. See "Underwriting.") The Company intends to file, shortly after
completion of this offering, a registration statement covering all 971,823
shares of Common Stock reserved for issuance in connection with the Company's
Stock Incentive Plan. Sales of any of the foregoing shares into the public
market could adversely affect the then prevailing market price of the Common
Stock. See "Shares Eligible for Future Sale."
DILUTION
Based upon an assumed initial public offering price per share of $14.00 (and
assuming no exercise of the Underwriters' over-allotment option), the Company's
pro forma net tangible book value per share of Common Stock as of June 30, 1997,
after giving effect to the transactions set forth in "Capitalization," would be
$4.69. Accordingly, purchasers of Common Stock offered hereby would suffer
immediate and substantial dilution in book value per share of $9.31. See
"Dilution."
18
<PAGE>
THE COMPANY
The Company was incorporated in Delaware on April 18, 1991. The Company's
business represents the consolidation of multiple research units and programs of
Amoco. In 1994, Amoco began consolidation of all of its medical diagnostic
businesses and related research under the Company. In March 1994, Amoco
contributed to the Company all of its genetic disease related assets, including
the stock of Imagenetics Incorporated (an Illinois corporation). Also in March
1994, Amoco contributed all of its infectious disease related assets and the
stock of Gene-Trak, Inc. to the Company. Gene-Trak, Inc. had previously acquired
certain infectious disease related assets from Genzyme Corporation and Amoco,
including all of the interest in Gene-Trak Systems, a joint venture partnership
for infectious disease diagnostics established by Amoco and Integrated Genetics
in 1986. The Company's wholly owned subsidiary, Gene-Trak Systems Industrial
Diagnostics Corporation, manufactures and markets food testing kits based on DNA
probes.
The Company's executive offices are located at 3100 Woodcreek Drive, Downers
Grove, Illinois 60515 and its telephone number is (630) 271-7000.
USE OF PROCEEDS
The Company will receive approximately $44,820,000 from the sale of the
3,500,000 shares of Common Stock in this offering based on an assumed price to
the public of $14.00 per share (after deducting underwriting discounts and
commissions and estimated expenses payable by the Company). The Company intends
to use the net proceeds of this offering to: (i) accelerate product development,
including the gCGH Array and Molecular Lawn platforms and related automated
instrumentation, (ii) expand direct sales and marketing capability in the United
States and Europe in anticipation of further clinical product introductions,
(iii) acquire complementary technologies and intellectual property rights as
opportunities arise and (iv) repay outstanding principal and accrued interest
(approximately $7.5 million as of September 30, 1997) on a note held by Amoco,
which bears interest at 7.5% per annum, and which is due and payable upon
completion of this offering. The remainder of the net proceeds will be used for
working capital and general corporate purposes. Pending use of the net proceeds
as set forth above, they will be invested in short-term, investment grade,
interest bearing securities.
DIVIDEND POLICY
The Company currently intends to retain its earnings to finance future
growth and does not anticipate paying any cash dividends on its Common Stock in
the foreseeable future. Any determination as to the payment of dividends will
depend upon the future results of operations, capital requirements and financial
condition of the Company and its subsidiaries and such other facts as the Board
of Directors of the Company may consider, including any contractual or statutory
restrictions on the Company's ability to pay dividends.
19
<PAGE>
CAPITALIZATION
The following table sets forth, as of June 30, 1997, (i) the actual
capitalization of the Company, (ii) pro forma to give effect to the conversion
of all of the outstanding shares of Series A Preferred Stock into 4,525,547
shares of Common Stock upon completion of this offering (the "Conversion") and
(iii) pro forma as adjusted to give effect to the Conversion, the conversion of
$5,106,000 of the note payable balance at December 31, 1996 due to Amoco into
553,126 shares of Series B Preferred Stock, which stock is to be converted into
403,741 shares of Common Stock upon completion of this offering, and to give
effect to the sale by the Company of the 3,500,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $14.00 per share,
after deducting underwriting discounts and commissions and estimated expenses of
the offering payable by the Company and the application of the net proceeds
therefrom. See "Use of Proceeds." This table should be read in conjunction with
the Company's Consolidated Financial Statements and the Notes thereto included
elsewhere herein.
<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Notes payable - Amoco........................................................ $ 10,193 $ 10,193 $ --
Stockholder's equity (deficit):
Preferred stock, $0.001 par value; 10,000,000 shares authorized and
designated Series A; 6,200,000 shares issued and outstanding actual; no
shares issued and outstanding pro forma and pro forma as adjusted........ 6 -- --
Common stock, $0.001 par value; 20,000,000 shares authorized; 1,058,394
shares issued and outstanding actual; 5,583,941 shares issued and
outstanding pro forma and 9,487,682 shares issued and outstanding pro
forma as adjusted(1)..................................................... 1 6 9
Additional paid-in capital................................................. 20,245 20,246 70,169
Deferred compensation...................................................... (58) (58) (58)
Cumulative translation adjustment.......................................... (40) (40) (40)
Accumulated deficit........................................................ (22,624) (22,624) (22,624)
---------- ----------- -----------
Total stockholder's equity (deficit)..................................... (2,470) (2,470) 47,456
---------- ----------- -----------
Total capitalization..................................................... $ 7,723 $ 7,723 $ 47,456
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
- ------------------------
(1) Excludes as of October 17, 1997 (i) 13,578 shares of Common Stock issued
after June 30, 1997 upon the exercise of stock options, (ii) 957,920 shares
of Common Stock issuable upon exercise of outstanding options and (iii)
13,903 shares of Common Stock reserved for future option grants or stock
issuances under the Company's Stock Incentive Plan. See "Management--Stock
Incentive Plan," and Note 8 of Notes to Consolidated Financial Statements.
20
<PAGE>
DILUTION
The pro forma net tangible book value of the Company at June 30, 1997 was
approximately $(324,000), or $(0.05) per share. "Pro forma net tangible book
value" per share is determined by dividing net tangible book value of the
Company (total tangible assets less total liabilities, adjusted for the
$5,106,000 note payable to Amoco assumed to be converted to Series B Preferred
Stock and conversion of the Series B Preferred Stock to Common Stock) by the
number of shares of Common Stock outstanding (after giving effect to the
conversion of $5,106,000 of the note payable to Amoco into 553,126 shares of
Series B Preferred Stock which stock is to be converted into 403,741 shares of
Common Stock, and the conversion of all outstanding Series A Preferred Stock of
the Company). Without taking into account any other changes in the net tangible
book value at June 30, 1997, other than to give effect to the receipt by the
Company of the net proceeds from the sale of 3,500,000 shares of Common Stock by
the Company offered hereby at an assumed initial public offering price of $14.00
per share, and after deducting estimated underwriting discounts and commissions
and offering expenses, the Company's pro forma net tangible book value as of
June 30, 1997 would have been $44,496,000, or $4.69 per share. This represents
an immediate increase in pro forma net tangible book value of $4.74 per share to
existing stockholders and an immediate dilution of $9.31 per share to new
investors purchasing Common Stock in this offering. The following table
illustrates this dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price.................................................... $ 14.00
Pro forma net tangible book value per share at June 30, 1997............................. $ (0.05)
Increase per share attributable to new investors in this offering........................ 4.74
---------
Pro forma net tangible book value per share after offering............................... 4.69
---------
Dilution per share to new investors...................................................... $ 9.31
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis at June 30, 1997, the
difference between existing stockholders and new investors with respect to the
number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average consideration paid per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ ------------------------ PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------- --------- ------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1).................... 5,987,682 63.1% $ 25,125,000 33.9% $ 4.20
New investors in this offering (2)........... 3,500,000 36.9 49,000,000 66.1 14.00
------------- --------- ------------- ---------
9,487,682 100.0% $ 74,125,000 100.0% 7.81
------------- --------- ------------- ---------
------------- --------- ------------- ---------
</TABLE>
- ------------------------
(1) Includes 4,525,547 shares issuable upon the conversion of the Company's
outstanding Series A Preferred Stock, all of which preferred stock is owned
by Amoco, and 403,741 shares issuable upon the conversion of 553,126 shares
of Series B Preferred Stock which stock is issuable upon conversion of
$5,106,000 of the Company's note payable to Amoco. See "Description of
Capital Stock."
(2) If the Underwriters' over-allotment option is exercised in full, the shares
purchased from the Company will increase to 4,025,000 (40.2% of the shares
outstanding after this offering) and the total consideration paid to the
Company by new investors will increase to $56,350,000 (69.2% of the
consideration paid to the Company by all shareholders).
The foregoing tables (i) assume no exercise of options to purchase an
aggregate of 891,480 shares of Common Stock outstanding at June 30, 1997 and
(ii) exclude 13,578 shares of Common Stock issued after June 30, 1997, upon the
exercise of stock options. To the extent outstanding options are exercised,
there will be further dilution to new investors. See Note 8 of Notes to
Consolidated Financial Statements.
21
<PAGE>
SELECTED FINANCIAL INFORMATION
The statement of operations data presented below for the years ended
December 31, 1994, 1995 and 1996 and the balance sheet data at December 31, 1995
and 1996 have been derived from the financial statements of the Company, which
have been audited by Price Waterhouse LLP, independent accountants. The
statement of operations data for the years ended December 31, 1992 and 1993, the
balance sheet data at December 31, 1992, 1993 and 1994, the statement of
operations data for the six months ended June 30, 1996 and 1997 and the balance
sheet data at June 30, 1997 are unaudited but have been prepared on the same
basis as the audited consolidated financial statements and in the opinion of
management include all adjustments, consisting of normal recurring adjustments,
necessary for the fair presentation thereof. The data for the six months ended
June 30, 1997 are not necessarily indicative of the results for an entire year.
The data presented below should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales.................... $ 4,541 $ 3,513 $ 5,373 $ 6,296 $ 11,022 $ 4,311 $ 6,931
Grant and other revenue.......... -- 67 30 921 2,216 1,065 1,136
--------- --------- --------- --------- --------- --------- ---------
Total revenue.................. 4,541 3,580 5,403 7,217 13,238 5,376 8,067
Cost of goods sold................. 2,383 2,831 3,486 4,022 5,529 2,254 3,184
--------- --------- --------- --------- --------- --------- ---------
Gross profit....................... 2,158 749 1,917 3,195 7,709 3,122 4,883
--------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Research and development......... 11,601 10,550 11,639 8,871 9,456 4,221 5,313
Selling, general and
administrative................. 2,920 4,541 8,937 12,025 16,286 8,256 7,077
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses....... 14,521 15,091 20,576 20,896 25,742 12,477 12,390
--------- --------- --------- --------- --------- --------- ---------
Loss from operations............... (12,363) (14,342) (18,659) (17,701) (18,033) (9,355) (7,507)
--------- --------- --------- --------- --------- --------- ---------
Interest income--Amoco............. -- -- -- -- 107 107 --
Interest expense--Amoco............ -- -- -- -- (255) -- (122)
--------- --------- --------- --------- --------- --------- ---------
Net loss........................... $ (12,363) $ (14,342) $ (18,659) $ (17,701) $ (18,181) $ (9,248) $ (7,629)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Pro forma net loss per
share(1)(2)...................... $ (2.98) $ (1.51) $ (1.25)
--------- --------- ---------
--------- --------- ---------
Shares used in computing pro forma
net loss per share(1)(2)......... 6,107 6,107 6,107
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------------------------------------------- ----------
1992 1993 1994 1995 1996 1997
--------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ -- $ -- $ 10 $ 247 $ 48 $ 171
Working capital (deficit).................. 1,179 1,045 758 (2,250) (5,334) (9,889)
Total assets............................... 5,414 12,718 17,574 19,167 15,115 14,571
Notes payable--Amoco....................... -- -- -- -- 5,106 10,193
Accumulated deficit........................ -- -- -- -- (14,995) (22,624)
Total stockholder's equity (deficit)....... 4,340 11,720 15,510 13,185 2,493 (2,470)
</TABLE>
- ------------------------
(1) See Note 1 to Consolidated Financial Statements for information concerning
the number of shares used in computing pro forma net loss per share.
22
<PAGE>
(2) Pro forma supplementary net loss per share for the six months ended June 30,
1997 amounts to $(1.15) based upon an assumed 6,504,000 weighted average
common shares outstanding and a net loss of $(7,507,000). Pro forma
supplementary net loss per share is calculated as if the Company sold on
January 1, 1997, 397,245 shares of Common Stock, representing the number of
shares of Common Stock required to be sold at the initial public offering
price of $14.00 per share, net of underwriting discounts commissions and
estimated expenses, in order for the Company to repay the note payable to
Amoco.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Vysis is a leading Genomic Diagnostics company that develops, commercializes
and markets clinical products that provide information critical to the
evaluation and management of cancer, prenatal disorders and other genetic
diseases. Vysis currently markets four FDA cleared clinical products in addition
to distributing over 240 research products through its direct sales operations
in the United States and Europe and a worldwide distribution network covering 28
countries. It also markets proprietary genetic imaging workstations for clinical
and research use, with an installed base of over 320 proprietary genetic
workstations at 224 laboratories in 18 countries. The Company also develops,
manufactures and commercializes products used by food processors and quality
control laboratories for the detection and identification of food-borne
pathogens. See Note 9 of Notes to Consolidated Financial Statements for
financial information of the Company by geographic area.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
Total revenue increased to $8.1 million for the six months ended June 30,
1997 from $5.4 million for the six months ended June 30, 1996, an increase of
$2.7 million or 50%. Product sales increased by $2.6 million, primarily as a
result of increased product shipments in the United States and the incorporation
of six full months of operations in France and the United Kingdom. Grant and
other revenue in 1997 included $736,000 earned under two United States
Department of Commerce research grants awarded to Vysis in 1995. Both grants are
administered through the Advanced Technology Program of the National Institute
of Standards and Technology. Grant and other revenue in 1997 also included
revenue of $300,000 from Fujisawa Pharmaceutical Co., Ltd. ("Fujisawa") pursuant
to a distribution agreement signed in July 1995. Grant and other revenue for the
six months ended June 30, 1996 consisted primarily of $902,000 earned under the
Company's two research grants and the Fujisawa agreement.
Cost of goods sold increased to $3.2 million for the six months ended June
30, 1997 from $2.3 million for the six months ended June 30, 1996. The increase
in cost of goods sold resulted from an increase in the volume of product sold.
As a percentage of total revenue, gross profit increased from 58.1% for the six
months ended June 30, 1996 to 60.5% for the six months ended June 30, 1997,
primarily as a result of a change in product sales mix toward higher margin
products.
Research and development expense increased to $5.3 million for the six
months ended June 30, 1997 from $4.2 million for the six months ended June 30,
1996. The $1.1 million increase reflects the hiring of additional scientists to
support the development of the Company's three technology platforms and expense
of $600,000 for the six months ended June 30, 1997 relating to an agreement with
a collaborative partner.
Selling, general and administrative expense decreased to $7.1 million for
the six months ended June 30, 1997 from $8.3 million for the six months ended
June 30, 1996. This decrease was attributable to lower litigation costs,
partially offset by the hiring of additional sales and marketing personnel and
other expenses incurred in line with the overall expansion of operations.
The Company sold two buildings in Framingham, Massachusetts in January 1996
for $6.7 million in cash. The Company earned interest income from Amoco of
$107,000 during the six months ended June 30, 1996 as a result of Amoco's
investment of the Company's real estate sale proceeds. The Company incurred
interest expense of $122,000 during the six months ended June 30, 1997 related
to the note payable to Amoco.
24
<PAGE>
TWELVE MONTHS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
Total revenue increased to $13.2 million for the twelve months ended
December 31, 1996 from $7.2 million for the twelve months ended December 31,
1995, an increase of $6.0 million or 83%. Product sales, primarily DNA probe
products and genetic imaging workstations, increased by $4.7 million primarily
as a result of increased product shipments in the United States and Germany and
the incorporation of approximately nine months of operations in France and the
United Kingdom. Grant and other revenue in 1996 consisted primarily of $1.4
million earned in connection with the two United States Department of Commerce
grants and approximately $600,000 recognized pursuant to the Fujisawa agreement.
Grant and other revenue in 1995 included $559,000 earned in connection with the
two United States Department of Commerce grants and approximately $300,000
recognized pursuant to the Fujisawa agreement.
Cost of goods sold increased to $5.5 million for the twelve months ended
December 31, 1996 from $4.0 million for the twelve months ended December 31,
1995. The increase in cost of goods sold resulted from an increase in the volume
of product sold. As a percentage of total revenue, gross profit increased from
44.3% during 1995 to 58.2% for 1996, primarily as a result of an increase in
grant and other revenue and as a result of a change in product sales mix toward
higher margin products.
Research and development expense increased to $9.5 million for the twelve
months ended December 31, 1996 from $8.9 million for the twelve months ended
December 31, 1995. The hiring of additional scientists in 1996 to support
development of the Company's three technology platforms and DNA probe products
accounted for a majority of the $600,000 increase.
Selling, general and administrative expense increased to $16.3 million for
the twelve months ended December 31, 1996 from $12.0 million for the twelve
months ended December 31, 1995. This increase was attributable to the hiring of
additional sales and marketing personnel and other expenses incurred in line
with the overall expansion of operations, partially offset by lower litigation
costs.
Interest income in 1996 totaled $107,000 from Amoco based on the proceeds
from the sale of two facilities in Framingham, Massachusetts. Interest expense
in 1996 of $255,000 related to the note payable to Amoco.
TWELVE MONTHS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
Total revenue increased to $7.2 million for the twelve months ended December
31, 1995 from $5.4 million for the twelve months ended December 31, 1994, an
increase of $1.8 million or 33%. Product sales increased by $923,000, primarily
as a result of increased product shipments. Grant and other revenue in 1995
included $559,000 earned in connection with the two United States Department of
Commerce grants and approximately $300,000 recognized pursuant to the Fujisawa
agreement.
Cost of goods sold increased to $4.0 million for the twelve months ended
December 31, 1995 from $3.5 million for the twelve months ended December 31,
1994. The increase in cost of goods sold resulted from an increase in the volume
of product sales. As a percentage of total revenue, gross profit increased from
35.5% during 1994 to 44.3% for 1995, primarily as a result of an increase in
grant and other revenue and as a result of a change in product sales mix toward
higher margin products.
Research and development expense decreased to $8.9 million for the twelve
months ended December 31, 1995 from $11.6 million for the twelve months ended
December 31, 1994. The $2.7 million decrease reflected a more clearly defined
research and development effort and the consolidation of the Company's two
research and development locations into one facility.
Selling, general and administrative expense increased to $12.0 million for
the twelve months ended December 31, 1995 from $8.9 million for the twelve
months ended December 31, 1994. This increase was primarily attributable to the
hiring of additional personnel and other expenses incurred in line with the
overall expansion of operations and additional litigation costs. See
"Business--Litigation."
25
<PAGE>
INCOME TAXES
During the years ended December 31, 1994, 1995 and 1996, the Company's
results of operations were included in the consolidated income tax returns of
Amoco, accordingly, the Company's domestic net operating losses have been
utilized by Amoco in its consolidated income tax returns and are not available
to offset the Company's future taxable income.
A full valuation allowance has been provided for all deferred tax assets
(net of liabilities) at December 31, 1996, as management does not consider
realization of such amounts more likely than not. On an unaudited pro forma
separate income tax return basis, assuming the Company was not included in the
consolidated income tax returns of Amoco, no tax provision or benefit would have
been recorded in the consolidated financial statements due to the ongoing losses
of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
capital contributions and loans from Amoco. Capital contributions totaled $22.4
million, $15.4 million and $2.3 million for the years ended December 31, 1994,
1995 and 1996, respectively. Loans from Amoco totaled $10.1 million during the
year ended December 31, 1996 and $7.8 million during the six months ended June
30, 1997. The amounts due to Amoco under these loans have been reduced by $5.0
million and $2.7 million, respectively, for the tax benefits recorded by Amoco
resulting from the inclusion of the Company's domestic net operating losses in
Amoco's consolidated income tax returns. Additional working capital was provided
as a result of the Company having sold, in January 1996, its two facilities in
Framingham, Massachusetts. Net sale proceeds totaled $6.7 million and were
sufficient to fund the Company's operations for the first five months of 1996.
The net amount due under the note payable to Amoco of $5.1 million at December
31, 1996 was converted into 553,126 shares of Series B Preferred Stock during
September 1997. Amounts received under research grants and a distribution
agreement have provided cumulative funding of approximately $4.4 million through
June 30, 1997.
Net cash used in operating activities was $7.1 million for the six months
ended June 30, 1997; $18.3 million, $11.7 million and $16.2 million for the
years ended December 31, 1996, 1995 and 1994, respectively. Cash used in
operating activities relates primarily to ongoing operating losses associated
with research and development of the Company's products and the development of a
sales and administrative infrastructure to support the Company's business plan.
Net cash used in investing activities was $496,000 for the six months ended
June 30, 1997; $3.0 million and $4.8 million for the years ended December 31,
1995 and 1994, respectively, primarily relating to the purchase of property and
equipment. Net cash provided by investing activities was $5.7 million for the
year ended December 31, 1996, primarily resulting from the sales of two
properties in Framingham, Massachusetts.
Net cash provided by financing activities was $7.8 million for the six
months ended June 30, 1997; $12.4 million, $14.9 million and $21.0 million for
the years ended December 31, 1996, 1995 and 1994, respectively, resulting from
capital contributions and loans received from Amoco.
The Company has entered into various license agreements pursuant to which it
has been granted exclusive use of certain patented technologies. The agreements
require the Company to pay royalties ranging from 0.5% to 8.0% on net sales of
specified products, with certain minimum royalties due each year. As additional
consideration for certain of the licenses, the Company is obligated to fund
certain research of the licensors. Future minimum amounts due under all such
agreements approximates $310,000 for the six months ending December 31, 1997,
and range from $1.8 million to $2.2 million per year for 1998 through 2001.
At June 30, 1997, the Company had cash of $171,000 and an accumulated
deficit of $22.6 million (post-recapitalization). Amoco has committed to fund
the Company's operations through the completion
26
<PAGE>
of this offering, which will result in an increase in the note payable to Amoco.
Amoco has advised the Company, however, that it does not intend to continue such
funding following the completion of this offering. The Company believes that the
net proceeds from this offering, and the interest to be earned thereon, and cash
to be generated from operations will be sufficient to fund the Company's
operations well into 1999. The Company's estimate of the time period for which
cash funds will be adequate to fund its operations is a forward looking estimate
subject to risks and uncertainty, and actual results may differ materially.
The Company's requirements for additional capital will depend on many
factors, including payments received under existing and potential collaborative
agreements; the availability of government research grant payments; the progress
of the Company's collaborative and independent research and development
projects; the costs of preclinical and clinical trials for the Company's
products; the prosecution, defense and enforcement of patent claims and other
intellectual property rights; and the development of manufacturing, sales and
marketing capabilities. To the extent capital resources, including payments from
existing and possible future collaborative agreements and grants, together with
the net proceeds of this offering are insufficient to meet future capital
requirements, the Company will have to raise additional funds to continue the
development of its technologies. There can be no assurance that such funds will
be available on favorable terms, or at all. To the extent that additional
capital is raised through the sale of equity or convertible debt securities, the
issuance of such securities could result in dilution to the Company's
shareholders. If adequate funds are not available, the Company may be required
to curtail operations significantly or to obtain funds through entering into
collaborative agreements on unattractive terms. The Company's inability to raise
capital as and when needed would have a material adverse effect on the Company's
business, financial condition and results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128 "Earnings Per Share," which establishes new standards for computing
and presenting earnings per share information. SFAS No. 128 will be effective
for the Company's 1997 annual financial statements. Reported pro forma net loss
per share data for 1996 and 1997 are the same as that computed under the new
standard.
In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes new standards for
reporting information about operating segments in interim and annual financial
statements. SFAS No. 131 will be effective for the Company in 1998. The Company
is currently evaluating the impact, if any, this statement will have on
disclosures in the consolidated financial statements.
27
<PAGE>
BUSINESS
INTRODUCTION
Vysis is a leading Genomic Diagnostics company that develops, commercializes
and markets clinical products that provide information critical to the
evaluation and management of cancer, prenatal disorders and other genetic
diseases. The Company has assembled a management team experienced in developing,
commercializing and marketing DNA based diagnostic products and associated
genetic workstations. The Company was the first to obtain Food and Drug
Administration ("FDA") clearance for a genetic diagnostic product using
fluorescence IN SITU hybridization ("FISH"). Vysis currently markets four FDA
cleared clinical products in addition to distributing over 240 research products
through its direct sales operations in the United States and Europe and a
worldwide distribution network covering 28 countries. It has an installed base
of over 320 proprietary genetic workstations at 224 laboratories in 18
countries. The Company has a pipeline of nine clinical products under
development and an expanding list of clinical product leads based upon its
collaborations with leading medical research institutions, which include the
University of California, San Francisco, the Mayo Clinic, St. Jude Children's
Research Hospital, the University of Chicago and the Reproductive Genetics
Institute. The Company's revenues have grown from $5.4 million in 1994 to $13.2
million in 1996. The Company's revenues for the first six months of 1997 were
$8.1 million compared to $5.4 million for the first six months of 1996.
The Company's business represents the consolidation of multiple research
units and programs of Amoco. Over the past ten years, Amoco has invested over
$80 million to fund Vysis' research and development in nucleic acid
technologies. As a result of this investment, Vysis has compiled a broad
portfolio of intellectual property and expertise, which forms the basis of its
core technologies. Vysis owns or has an exclusive license to 92 issued United
States patents or allowed United States patent applications, and 67 pending
United States patent applications that protect its core technologies, diagnostic
platforms and genetic targets. Upon completion of this offering, Amoco will
beneficially own approximately 63% of the Company's outstanding Common Stock.
The Company is currently focusing its cancer product development efforts on
leukemia, breast, bladder, prostate and cervical cancers. The American Cancer
Society estimates that approximately 1.4 million people in the United States
will be diagnosed with some form of cancer in 1997. Approximately 27,600
patients developed some form of leukemia in 1996. Breast cancer is the second
leading cause of death from cancer among women aged 35 to 54, and prostate
cancer is the second leading cause of death from cancer in men. The American
Cancer Society estimates that in 1996 there were approximately 52,900 new cases
of bladder cancer. In 1996, approximately 63 million Papanicolaou ("PAP") tests
were performed to screen for cervical cancer.
Studies indicate that early detection and the selection of appropriate
therapies can improve the survival rates of certain types of cancer. Vysis'
initial clinical cancer products are expected to improve patient survival rates
and quality of life by providing information that will enable selection of the
best possible therapy. Three of the Company's products for leukemia and other
myeloid disorders are currently FDA cleared for clinical diagnostic use in the
United States. The Company's first breast cancer product, currently in late
stage clinical trials, is for the detection of HER-2/neu gene amplification, an
important predictive marker for the response to various therapeutic agents.
The Company's prenatal testing products provide information on genetic
abnormalities involved in mental retardation and other birth defects. In the
United States and Western Europe more than 600,000 amniocentesis procedures were
performed in 1996. Using traditional technology, 7 to 10 days are required to
complete chromosomal testing from amniocentesis specimens. In contrast, Vysis'
clinical products provide accurate test results within 24 hours. The French
regulatory agency, Agence du Medicament, has registered the Company's TriGen-TM-
prenatal panel for the diagnosis of Down Syndrome and sex chromosome
abnormalities. Marketing of this product was initiated in France in June 1997.
In the United States, clinical trials have been completed and a 510(k) premarket
notification is under review by the FDA for the
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<PAGE>
Company's AneuVysion-TM- prenatal panel for the diagnosis of Down Syndrome, sex
chromosome abnormalities and two additional chromosomal abnormalities, which
together account for 85% to 90% of chromosomal causes of mental retardation and
other birth defects.
SCIENTIFIC OVERVIEW
Genetic abnormalities are a fundamental source of human disease. Genetic
based diseases and disorders include cancer, birth defects, mental retardation,
coronary artery disease, autoimmune diseases and diabetes. Genomic Diagnostics
is an emerging field that uses new genetic tests based on correlations between
genetic abnormalities and disease. Genomic Diagnostic tests, by providing new
information not currently available through existing methods, enable physicians
to diagnose disease more quickly and accurately, to determine the most
appropriate treatment and to monitor disease progression and recurrence during
therapy. Genomic Diagnostic tests also enable the detection of disease at the
very early or developing stages when treatment is likely to be most effective.
In addition, Genomic Diagnostic tests allow physicians to identify genetic
predisposition to disease well before the disease is manifested, thus enabling
early intervention either through lifestyle changes or preventive therapy.
The genetic code, consisting of DNA, contains all the information necessary
for any organism to develop and function. The information is encoded in the
specific sequence of DNA's four nucleotide bases: Adenine, Thymine, Cytosine and
Guanine. These units, or "bases," are strung together like beads on a string.
DNA is a double-stranded molecule composed of two single strands entwined around
the other in the form of a double helix. The bases of one strand always bind to
the bases of the other in a specific fashion: A pairs with T, and C with G. This
pairing of bases is referred to as base pairs.
STRUCTURE OF HUMAN GENETIC INFORMATION
[GRAPHIC]
GENOMIC DIAGNOSTICS: HUMAN DNA IS CONTAINED IN 46 CHROMOSOMES AND EACH
CHROMOSOME HAS, ON AVERAGE, 5,400 GENES. AN AVERAGE GENE IS BUILT FROM A
SEQUENCE OF 24,000 NUCLEOTIDE BASES (A, T, G, C), THE MOST FUNDAMENTAL PART OF A
GENE. GENETIC DISEASE CAN BE ASSOCIATED WITH A LARGE CHROMOSOMAL ABNORMALITY,
SUCH AS A MISSING OR EXTRA CHROMOSOME; WITH A GENE ABNORMALITY, SUCH AS GENE
DELETION OR AMPLIFICATION OR WITH A SINGLE NUCLEOTIDE ABNORMALITY, SUCH AS A
BASE PAIR MUTATION.
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<PAGE>
Cells carry out their normal biological functions through the genetic
instructions encoded in their DNA. This process, known as gene expression,
involves several steps. In the first step, bases in a gene are copied into a
related nucleic acid molecule called messenger ribonucleic acid ("mRNA"). In the
second step, mRNA instructs the cells to produce proteins. Proteins are
molecules that regulate or perform most of the physiological functions of the
body. Because the order of bases in each gene is different, each gene directs
the production of a different protein. Each organism's characteristics are,
therefore, ultimately determined by proteins encoded by its DNA.
Aberrations in the genetic code, that is, changes in the arrangement of the
nucleic acid bases, can cause a wide range of diseases and defects. Some genetic
diseases are manifested by "gross changes" at the chromosomal level such as an
extra copy (a "trisomy") of an entire chromosome, e.g., Down Syndrome; a missing
("deleted") or extra ("duplicated") part of a chromosome, e.g., Cri-du-chat
Syndrome; or different chromosomes exchanging parts or combining (a
"translocation"), e.g., the bcr/abl translocation causing chronic myelogenous
leukemia ("CML"). Some diseases are associated with an abnormal number of a
particular gene ("gene amplification") such as the HER-2/neu gene amplification
exhibited in some forms of breast cancer. Other genetic-related diseases or
defects are caused by changes at a more minute level, such as a change in the
sequence of only a few base pairs, e.g., the change at location 508 in the
cystic fibrosis ("CF") gene as evidenced in certain cases of CF, or a change in
only one base pair, known as a point mutation, e.g., sickle cell disease.
A principal method of detecting genomic abnormalities in medical research is
through the use of DNA probes. DNA probes are designed to identify the presence,
absence or location of a particular target sequence by hybridization or the
failure to hybridize to the particular target sequence. A DNA probe is a
particular single stranded piece of DNA or RNA, which is configured to have the
specific sequence of bases, which is complementary to, and thus will bind to a
specific target sequence. This binding of two complementary nucleic acid strands
is called "hybridization." The DNA probe and the sample DNA or RNA extracted
from or in a cell are mixed under conditions which permit the probe to hybridize
to its target. The DNA probes are generally labeled with markers, such as
fluorescent molecules, to permit their detection upon hybridization. The
unreacted probe is washed away and the mixture is then examined to detect the
presence of the label on the hybridized probe.
TECHNOLOGY PLATFORMS
Genomic Diagnostic testing requires the ability to assess abnormalities of
chromosomes, individual genes within chromosomes and specific DNA sequences
within genes. No single technology is capable of assessing all of these
different types of abnormalities. To address this issue, the Company has
developed three complementary technology platforms that detect the full range of
genetic abnormalities from large chromosomal aberrations to smaller
abnormalities associated with abnormal numbers of the same gene and the smallest
mutations within specific gene sequences. The Company believes these
complementary technologies will enable the clinician to provide a comprehensive
approach to genomic assessment in the management of disease.
Vysis' three technology platforms include: the FISH SYSTEM, which detects
chromosomal copy number and rearrangement (large genetic structures), the
GCGH-TM- ARRAY SYSTEM, which detects gene copy number and expression (smaller
genetic structures), and the MOLECULAR LAWN-TM- SYSTEM, which detects specific
gene sequences and their mutations (smallest genetic structures). Each platform
provides the advantage of being able to simultaneously detect multiple genetic
abnormalities in the same specimen. Vysis expects to introduce a broad range of
products based on each of these platforms. This product development strategy is
expected to reduce time to market and associated development costs for each
product. Each of these three technology platforms also relies upon the Company's
image analysis software, which is comprised of proprietary algorithms that
enable the automated display and analysis of FISH, gCGH Array and Molecular Lawn
tests.
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<PAGE>
FISH SYSTEM
The FISH System provides the ability to simultaneously assess multiple
chromosomal and gene abnormalities in a single intact cell. FISH also provides
the ability to perform cell by cell quantitative assessment of genetic changes
in tissue specimens routinely used by pathologists for diagnosis. The Company's
FISH System consists of instruments and image analysis workstations used with
the Company's patented direct label FISH probes.
FISH, illustrated in the figure below, is generally faster, easier-to-use
and more cost-effective than alternate technologies. FISH assays test the DNA of
a sample while in its native setting in the cell ("IN SITU") and thus provide
genomic assessment on intact cells. Alternate technologies destroy surrounding
tissue and cells resulting in the loss of valuable diagnostic information. FISH
probes can be used to detect chromosomal abnormalities present in "interphase
cells" commonly found in tissues processed in pathology laboratories. This
eliminates the time-consuming culture of tissue to obtain metaphase cells, which
in the case of many solid tumor cancers is difficult, if not impossible. FISH
technology provides clinical information on certain genetic abnormalities in
interphase cells not obtainable with any other techniques known to the Company.
DIRECT LABEL FISH TECHNOLOGY
[GRAPHIC]
FISH: SLIDES WITH TISSUE SPECIMENS ON THEM, SIMILAR TO THOSE USED IN ROUTINE
PATHOLOGY LABORATORIES FOR CLINICAL DIAGNOSIS, ARE HYBRIDIZED WITH FLUORESCENTLY
LABELED FISH PROBES. WITH THE USE OF A FLUORESCENCE MICROSCOPE, A GENETICIST OR
PATHOLOGIST IS ABLE TO SEE CHROMOSOMAL AND GENE ABNORMALITIES IN THE NUCLEUS OF
INDIVIDUAL CELLS ON THE SLIDE.
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<PAGE>
FISH uses DNA probes that are large, typically at least 30,000 base pairs in
length. Consequently, FISH is useful primarily to detect gross or large
chromosomal changes, such as extra chromosomes, missing chromosomes, chromosomal
translocations, and gene amplifications and deletions.
Vysis' FISH technology uses its patented direct label DNA probes. The
Company has pioneered the use of direct label FISH probes and the high-quality,
reproducible manufacture of these probes. Vysis believes that its direct label
FISH probes are superior to other probes because they produce sharper and
brighter fluorescent signals and decrease assay time by eliminating procedural
steps and reagents which are required with indirect label probes. All of these
benefits produce results that are easier to obtain and interpret.
FISH provides the unique ability to simultaneously assess multiple
chromosomal and gene abnormalities in a single intact cell. Currently as many as
seven different FISH probes can be identified in a single interphase cell with
the Company's multi-color direct label technology. This provides physicians with
the ability to detect multiple genetic aberrations in the same cell, which is
important for certain cancers and prenatal birth defects. The Company is not
aware of any other molecular diagnostic technology that has this capability.
Vysis has developed and is continuing to refine instruments and image
analysis workstations used in conjunction with the Company's direct label FISH
probes. The Company's HYBrite-TM- instrument automates the hybridization process
in a temperature controlled environment. The Company's Quips Genetic
Workstations provide integrated solutions to enhance and automate the
visualization, analysis, and storage of FISH images. The Company is currently
undertaking development of a high throughput instrument that will automate both
specimen preparation and the hybridization process. This development program and
subsequent manufacturing is expected to be completed in conjunction with an
outside engineering firm.
GCGH-TM- ARRAY SYSTEM
The gCGH Array System uses the Company's patented comparative genomic
hybridization ("CGH") technology to survey the entire genome for chromosomal
changes in a single test. The fundamental principle of CGH is to compare an
abnormal or test DNA (or RNA) specimen to a reference DNA (or RNA) in order to
detect genetic aberrations. This method, like the FISH System, does not require
culturing of "metaphase cells" for a metaphase spread preparation from the
sample. For this reason, CGH enables genetic testing of tissues that are not
amenable to culture such as tumor tissues. In contrast to traditional FISH
technology that typically involves use of a specific probe to a known
chromosomal abnormality, CGH can be used to investigate an entire genome even
when a suspected genetic aberration is unknown.
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Vysis is developing a ready-to-use array of DNA probes on a miniaturized
chip ("gCGH array") which incorporates its patented CGH technology. Each element
of the array will contain DNA from a defined location on a normal human
chromosome and, in total, the collection of elements may represent the entire
genome. This system is intended to enable simultaneous assessment of a large
number of genes in a patient's specimen for abnormalities in the specific gene
count. An example of a gCGH array is shown below.
GCGH ARRAY SYSTEM
[GRAPHIC]
GCGH ARRAY: PATIENT DNA, LABELED WITH A GREEN (BLACK IN THE PICTURE),
FLUORESCENT MOLECULE, IS MIXED WITH NORMAL REFERENCE DNA, LABELED WITH A RED
FLUORESCENT MOLECULE (WHITE IN THE PICTURE), AND APPLIED TO A GCGH ARRAY
CONTAINING 10'S TO 1,000'S OF INDIVIDUAL GENE TARGETS. UPON COMPLETION OF THE
REACTION, THE GCGH ARRAY IS READ BY MEASUREMENT OF THE RATIO OF GREEN TO RED
FLUORESCENT LIGHT AND THE RESULTS REPORTED, INDICATING WHETHER THE PATIENT DNA
HAS TOO MANY OR TOO FEW COPIES OF A PARTICULAR GENE.
By allowing the simultaneous assessment of abnormalities in multiple genes
associated with cancer, the Company believes that the use of gCGH arrays will
allow the clinician to more reliably select the most effective treatment for
cancer patients and will also provide important prognostic information. The
Company also believes that gCGH arrays will simplify determination of prenatal
abnormalities by the simultaneous detection of chromosome aneusomies,
microdeletions and unbalanced chromosome translocations. These abnormalities may
account for essentially all of the causes of common mental retardation and other
birth defects detectable with conventional amniocentesis and karyotyping. The
Company expects that the automation possible with arrays will improve the
reliability and accuracy of diagnosis, reduce the time to obtain the result and
reduce the cost for prenatal testing. The Company further believes that
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<PAGE>
gCGH arrays will be applicable to the determination of gene expression which may
provide an indication of early disease manifestation.
The gCGH Array System, consisting of individual arrays, a high speed camera
based reader and specimen processing reagents is currently at the prototype
stage of development. The Company currently has the capability of manufacturing
research quantities of gCGH Arrays and is developing a high throughput robotic
system for production of commercial quantities of arrays.
MOLECULAR LAWN SYSTEM
The Molecular Lawn System uses the Company's patented Q-beta replicase
("QBR") amplification technology to detect specific gene sequences. QBR provides
a quantitative measure of a specific gene sequence in either human, viral or
bacterial DNA. Because the Molecular Lawn is a self contained system and is
being specifically designed for clinical use, this QBR based product is intended
to provide a more accurate, simple and cost-effective alternative to other
amplification technologies such as polymerase chain reaction ("PCR"). This
technology platform enables the detection of small genetic targets associated
with disease predisposition and early detection of disease. The system includes
a disposable test device and an automated reader that will provide both
qualitative and quantitative results. The Company's initial product will be
designed for the detection of Human Papilloma Virus ("HPV"), which causes
cervical cancer.
A Molecular Lawn consists of individual or multiple probe sequences attached
to the surface of a miniaturized solid support, similar to the blades of grass
on a lawn (see figure below).
MOLECULAR LAWN SYSTEM
[GRAPHIC]
MOLECULAR LAWN: PATIENT SPECIMEN IS PLACED ON THE MOLECULAR LAWN, CONTAINING
HALF PROBE MOLECULES. THE SECOND HALF OF THE PROBE MOLECULES ARE THEN PLACED ON
THE SURFACE OF THE MOLECULAR LAWN CONTAINING THE CAPTURED DNA IN THE PATIENT
SPECIMEN. IF A PARTICULAR HUMAN, VIRAL OR BACTERIAL DNA EXISTS IN THE PATIENT
SPECIMEN, A SIGNAL WILL BE GENERATED BY QBR. IF THE PARTICULAR HUMAN, VIRAL OR
BACTERIAL DNA BEING TESTED FOR DOES NOT EXIST, A SIGNAL WILL NOT BE PRESENT.
34
<PAGE>
PRODUCTS
CLINICAL DIAGNOSTIC PRODUCTS
Vysis is developing, commercializing and marketing clinical products that
provide information critical to the evaluation and management of cancer,
prenatal disorders and other genetic diseases. Having already received three FDA
approvals for its products via the 510(k) process, the Company has established a
track record of successfully obtaining required regulatory clearances for its
products. As advances in molecular biology lead to the discovery of additional
correlations between genetic mutations and disease, the Company believes that it
is well positioned to take advantage of these developments and the resulting
increase in market demand for Genomic Diagnostic products. The Company's
clinical diagnostic product commercialization process involves four distinct
stages prior to marketing which include, in order, research, development,
clinical trials and regulatory review.
CLINICAL PRODUCTS
<TABLE>
<CAPTION>
PRODUCT TECHNOLOGY PLATFORM DISEASE/PROCEDURE INTENDED UTILITY STAGE
- ----------------- --------------------- ----------------- ----------------- ------------
<S> <C> <C> <C> <C>
CANCER
CEP-Registered Trademark- FISH System Chronic Disease MARKETING
8 Myelogenous monitoring (FDA 510(k)
Leukemia, myeloid cleared
disorders November
1996)
CEP-Registered Trademark- FISH System Chronic Disease MARKETING
12 Lymphocytic progression and (FDA 510(k)
Leukemia disease cleared
monitoring January
1997)
CEP-Registered Trademark- FISH System Bone marrow Disease MARKETING
X/Y transplantation monitoring (FDA 510(k)
cleared
January
1997)
HER-2/neu FISH System Breast cancer Selection of CLINICAL
therapy and TRIALS
prognosis
bcr/abl ES FISH System Chronic Diagnosis and DEVELOPMENT
Myelogenous disease
Leukemia monitoring
Breast Panel gCGH Array System Breast cancer Selection of RESEARCH
therapy and
prognosis
Bladder Panel FISH System Bladder cancer Disease RESEARCH
recurrence
monitoring
Prostate Panel gCGH Array System Prostate cancer Disease RESEARCH
progression
Human Papilloma Molecular Lawn System Cervical cancer Early disease RESEARCH
Virus Panel detection
</TABLE>
35
<PAGE>
CLINICAL PRODUCTS (CONTINUED)
<TABLE>
<CAPTION>
PRODUCT TECHNOLOGY PLATFORM DISEASE/PROCEDURE INTENDED UTILITY STAGE
- ----------------- --------------------- ----------------- ----------------- ------------
<S> <C> <C> <C> <C>
PRENATAL
TriGen-TM- Panel FISH System Down Syndrome, Detection of MARKETING
sex chromosome mental (ADM
disorders retardation and registered
other birth in France
defects June 1997)
AneuVysion-TM- FISH System Down Syndrome, Detection of REGULATORY
and other mental REVIEW
chromosomal retardation and (FDA 510(k)
disorders other birth submitted
defects June 1997)
Aneu-Del-Tel-TM- gCGH Array System Down Syndrome, Detection of RESEARCH
Chip and other essentially all
chromosomal chromosomal
disorders abnormalities
causing common
mental
retardation and
other birth
defects
Fetal Screen FISH System Down Syndrome, Detection of RESEARCH
and other mental
chromosomal retardation and
disorders other birth
defects from
fetal cells in
maternal blood
circulation
</TABLE>
CANCER PRODUCTS
The American Cancer Society estimates that approximately 1.4 million people
in the United States will be diagnosed with some form of cancer in 1997.
Approximately $35 billion is spent annually in the United States alone on direct
medical costs in managing cancer patients. For most cancers, five year survival
rates increase by a factor of up to 100% if diagnosed and treated in a localized
state; however, only 54% of breast cancers, 57% of prostate cancers and 51% of
cervical cancers are detected in a localized state.
In the management of patients with cancer, there is an unmet clinical need
for tests that will diagnose disease at an earlier stage, predict therapeutic
response to chemotherapy and monitor patients for disease recurrence at an
earlier stage. Vysis' initial Genomic Diagnostic cancer products are expected to
enable selection of the best possible therapy and thereby improve patient
survival rates and quality of life. The Company is directing its product
development and commercialization efforts toward various cancers including
leukemia, breast, bladder, prostate and cervical.
LEUKEMIA. There are four primary forms of leukemia with an estimated
aggregate of 27,600 new cases in 1996, approximately evenly divided between
acute leukemia and chronic leukemia. CML accounts for approximately one-fourth
of all leukemia cases, with an incidence of approximately 1 case per 100,000
persons. In the United States, there are about 6,000 newly diagnosed patients
each year. The disease has two major phases: the initial chronic phase and the
terminal blast crisis phase. The transition from chronic to blast phase is often
associated with abnormal occurrence of three copies of chromosome 8 (trisomy 8)
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<PAGE>
which is present in approximately 20% to 50% of those patients entering the
blast phase. This abnormality often precedes the clinical blast phase by 2 to 6
months. The success rate of long term survival following bone marrow
transplantation is less than 20% for patients in blast crisis as compared to a
40% to 70% success rate for patients treated before the onset of blast crisis.
The detection of trisomy 8 in conjunction with other tests may serve as an early
indication to initiate bone marrow transplantation when the patient has a better
chance for survival.
The Company's first clinical product, CEP 8 Probe Kit, which is based on the
FISH System, was cleared by the FDA in November 1996 by a 510(k) premarket
notification. The CEP 8 Probe Kit is used for the detection of trisomy 8. Used
in conjunction with other tests, this product is used to monitor disease
activity during treatment to assess therapeutic effectiveness and during
remission for disease recurrence. This information provides the physician with
an indication of early blast crisis which is important when considering bone
marrow transplantation therapy.
The Company's second clinical product, CEP 12 Probe Kit, which is based on
the FISH System, was cleared by the FDA in January 1997 by a 510(k) premarket
notification. The CEP 12 Probe Kit is used for the detection of trisomy 12, one
of the more common genetic abnormality in chronic lymphocytic leukemia ("CLL").
The incidence of CLL in the United States is approximately 7,200 new cases per
year with about 60,000 individuals currently afflicted with this disease. These
patients have a widely variable clinical course and many do not require therapy
at the time of diagnosis. The detection of trisomy 12 provides the physician the
ability to distinguish patients whose disease will rapidly progress. These
patients may require immediate treatment while others may be monitored for
disease progression without therapeutic intervention.
The Company's third clinical product, CEP X/Y Probe Kit, which is based on
the FISH System, was cleared by the FDA in January 1997 by a 510(k) premarket
notification. The CEP X/Y Probe Kit is used to assess how well donor cells are
accepted by the recipient in sex-mismatched bone marrow transplantation and to
determine the recurrence of malignant cells. In the management of many leukemias
and other myeloid disorders, bone marrow transplantation is a critical
therapeutic strategy. Approximately 4,200 sex-mismatched transplantations were
performed in the United States in 1996. Having an estimate of the proportions of
donor and recipient cells following a transplanation can be useful in assessing
the success of the procedure and to diagnose recurrence. The improved
sensitivity and precision of the CEP X/Y product, as compared to standard
cytogenetic analysis, permits a more reliable detection of therapeutic efficacy
or failure at a stage when modification of therapy will still be possible.
A fourth product, a bcr/abl translocation probe currently under development,
is expected to be submitted for regulatory review in the United States and
Europe. The bcr/abl ES product, which is based on the FISH System, is intended
to be used to confirm the diagnosis of CML and to monitor the presence of
residual disease.
BREAST CANCER. Breast cancer is the second leading cause of cancer-related
deaths among women age 35 to 54. In 1996 there were approximately 184,300 new
cases of breast cancer diagnosed in the United States. Over 900,000 biopsies to
determine the presence of breast cancer are performed in the United States each
year. The annual direct medical cost of breast cancer management in the United
States alone is approximately $6 billion.
The management of breast cancer is difficult because there has been no
reliable method to determine the response of individual women to different
therapeutic options, each of which have different toxicities and side-effects.
These toxicities and side-effects impact the quality of life and long term
survival of individual patients. It is clearly beneficial to identify which
women have progressive disease and to restrict aggressive treatment to that
group. The specific genetic abnormalities of a tumor are associated with
progressive disease and therapeutic response. A Genomic Diagnostic test that
adds to the physician's ability to select the most appropriate therapy during
clinical decision-making and that results in a more favorable outcome for the
patient would be highly valued.
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<PAGE>
The Company's first breast cancer product, currently in late stage clinical
trials, is HER-2/neu. Results from the HER-2/neu test are intended to rapidly
assess the amplification of HER-2/neu gene for use as a predictive marker for
response to chemotherapy and/or hormone therapy. Results will also be used as a
prognostic marker for risk assessment.
HER-2/neu is an oncogene whose normal function is to serve as a growth
factor receptor. Amplification of this gene is associated with rapid growth of
the tumor cells and resistance to less toxic chemotherapy and/or hormone
therapy. Approximately 25% to 30% of breast cancers have amplification of this
gene. A study of 442 breast cancer patients, published in the NEW ENGLAND
JOURNAL OF MEDICINE in May 1994, supports the use of HER-2/neu gene
amplification as a predictive marker for response to chemotherapy. This study
demonstrated that lymph node positive women with HER-2/neu amplification in
their tumor cells respond to higher doses of adriamycin chemotherapy
substantially better than those without amplification. Further, patients without
amplification do not appear to benefit from the more aggressive adriamycin
treatment. The ability to identify amplification in breast cancer patients will
allow such patients to be more effectively treated with aggressive chemotherapy,
which in turn should produce better patient outcomes. Additionally, those
patients who are not amplified do not require the more aggressive chemotherapy
and may benefit from an improved quality of life by avoiding the side effects
inherent with the more aggressive therapeutic approach. Another study at
Georgetown University's Lombardi Cancer Center on 94 breast cancer patients
indicates that women with HER-2/neu amplified tumors respond more poorly to
hormone therapy than women without amplification.
The Company's HER-2/neu product, which is based on the FISH System, is a
locus specific, direct label DNA probe for the HER-2/neu gene. This assay is
designed for the detection and quantification of the HER-2/neu gene and
chromosome 17 in cells. Occasionally, extra copies of the chromosome 17 will
result in a false positive HER-2/neu result. The Company's product includes a
second DNA probe specific for chromosome 17, which is intended to serve as a
built in control for false positive results due to extra copies of chromosome
17. The Company, in collaboration with independent laboratories, conducted
performance studies of the Company's HER-2/neu gene product which indicate that
the product may be able to detect HER-2/neu amplification in 50 percent more
women with breast cancer than detected by antibody based immunohistochemistry in
standard paraffin tissue sections.
Vysis expects that this product will provide reliable and accurate
determination of HER-2/neu gene amplification to physicians to assist them in
selection of the most appropriate therapeutic alternatives for the patient. The
product's initial claim will be for prediction of response to low or high dose
adriamycin therapy. Adriamycin and its equivalents are among the most commonly
used cancer therapeutics.
The Company's strategy is to maximize value to the medical community by
expanding the utility of the HER-2/neu product through supplemental clinical
trials. These trials include studies to determine selection of therapy between
methotrexate and adriamycin based on HER-2 amplification, to determine whether
the patient will benefit from hormone therapy and to predict the risk that
benign breast lesions will progress to cancer.
Because cancer is considered a multi-gene event, the Company believes that
appropriate patient management may require simultaneous testing for multiple
genetic abnormalities, such as amplification of the c-myc gene, the Cyclin D1
gene and the q13.2 region on chromosome 20 in addition to HER-2/neu. The Company
is developing products based on the Company's gCGH Array System which are
intended to provide the ability to simultaneously detect both gene amplification
abnormalities and gene deletion abnormalities, such as deletion of the p53 tumor
suppressor gene.
BLADDER CANCER. The American Cancer society estimates there were
approximately 52,900 new cases of bladder cancer in 1996. The most common
symptom of this cancer is blood in the urine, which occurs in approximately 80%
of diagnosed patients. The diagnosis of a tumor often is confirmed by performing
urine cytology, which has a false negative rate of about 25%. Due to poor
sensitivity of cytology and other
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existing tests, examination of the bladder wall with a cystoscope, a slender
tube fitted with a lens and light that is inserted through the urethra, is
required to confirm the presence of bladder cancer.
Bladder cancer can be divided into superficial and invasive tumors.
Superficial tumors have not grown through the wall of the bladder to its
muscular lining. While the majority of tumors are superficial and are associated
with a high five-year survival rate (75% overall), approximately 80% of the
superficial tumors will recur. The most successful treatments are performed
early in the course of the diagnosis and include regular monitoring for disease
recurrence through the frequent use of cystoscopy. While cystoscopy will provide
definitive results, it is an invasive procedure requiring that the patient be
under anesthesia and is therefore expensive, costing over $500 per procedure.
Tests are currently on the market which will provide a result from a urine
specimen. However, these tests are relatively insensitive, detecting only 40% to
70% of positive specimens. For this reason, patients continue to have cystoscopy
procedures 1 to 4 times per year. The Company believes that a non-invasive
Genomic Diagnostic test with high sensitivity and specificity that enables
physicians to easily monitor patients on a quarterly basis for disease
recurrence would be highly valued.
The Company is developing a highly sensitive product based on the FISH
System technology platform intended to provide simultaneous analysis of multiple
genetic markers for bladder cancer from a routine urine specimen. A number of
published studies have demonstrated that these genetic markers are correlated to
bladder cancer.
PROSTATE CANCER. Prostate cancer is the second leading cause of death from
cancer in men in the United States with an estimated 317,100 new cases in 1996.
Between 1989 and 1993, prostate cancer incidence rates increased 50%. Further
increased incidence detection is expected with continuing widespread use of
prostate serum screening tests. The incidence of prostate cancer increases with
age; over 80% of all prostate cancers are diagnosed in men over age 65. The
American Cancer Society recommends that men age 50 and over have an annual PSA
(prostate specific antigen) blood test and a digital rectal exam. If either
result is suspicious, further evaluation is recommended. This has resulted in
over 725,000 prostate biopsies being performed in the United States in 1996.
According to the American Cancer Society, the annual direct medical cost of
prostate cancer management in the United States alone is approximately $5
billion. The management of prostate cancer is difficult because its course is
extremely variable. Some prostate cancers grow rapidly, quickly leading to
death, while others grow so slowly as not to compromise expected life duration.
It is estimated that approximately 30% of men who die over the age of 45 from
various causes also have concurrent asymptomatic prostate cancer. Because there
is no reliable method to determine which cancers will progress, patients are
currently receiving unnecessary radical prostatectomies which have significant
side effects, which may negatively impact the quality of life. Side effects of
radical prostatectomy include impotence in about 30% of cases, bladder
incontinence in 10% to 20% of cases and difficulty with urination in about 10%
of cases. It is clearly beneficial to identify which men have progressive
disease and to restrict aggressive treatment to that group. A Genomic Diagnostic
test that adds to the physician's ability to determine which patients to treat
versus which patients to monitor has been identified as highly desirable by the
medical community.
The Company believes that information regarding the genetic composition of
prostate cancer tumors could distinguish between men who should be monitored
without surgical intervention and those whose prostates should be removed. The
Company is developing a product that includes a panel of genetic markers
designed to provide information indicating which patients should receive more
aggressive therapeutic intervention. Because prostate cancer is also considered
a multi-gene event, the Company believes that appropriate patient management
will require simultaneous testing for multiple genetic abnormalities. Products
based on the Company's gCGH Array System are intended to provide the ability to
simultaneously detect both gene amplification abnormalities and gene deletion
abnormalities, each of which have been associated with disease progression. In
conjunction with the Mayo Clinic, the Company is evaluating several potential
leads for its initial gCGH Array product panel.
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<PAGE>
CERVICAL CANCER. An estimated 15,700 cases of invasive cervical cancer were
diagnosed in the United States in 1996 with an estimated 4,900 cervical cancer
deaths. Eighty-eight percent of patients survive one year after diagnosis, and
the five-year relative survival rate is 68%. However, for women diagnosed in the
early stages of the disease, the five-year survival rate is 91%; but only 51%
are diagnosed in the early stages of the disease.
The American Cancer Society recommends that women who are, or have been,
sexually active or who have reached age 18, have an annual pelvic exam and a PAP
test. Approximately 63 million PAP tests are performed annually in the United
States at an estimated patient cost of $7 to $15 per test. Although PAP testing
has been useful in reducing deaths due to cervical cancer, the PAP test has
significant limitations. PAP testing has a false negative rate of 10% to 50% and
a false positive rate of 1% to 10%. A false-negative test means that a true
carcinoma has escaped detection and may advance to potentially irreversible
disease before an accurate test is performed. A false-positive result can lead
to unwarranted patient anxiety as well as unnecessary inconvenience, discomfort,
and expense for follow-up diagnostic procedures. Given the frequency of false
positive and false negative tests, the Company estimates that each year there
are about 5 million inaccurate test results. Positive PAP test results are
typically confirmed by a second PAP test, a colposcopy costing the patient
approximately $150, or cryosurgery costing approximately $500.
According to the American Cancer Society and the National Institutes of
Health ("NIH"), cervical cancer risk is closely linked to certain types of HPV,
a common sexually transmitted infection. Studies have shown that several types
of HPV have been directly implicated as a cause of cervical cancer. Furthermore,
there is a delay between HPV infection and the earliest manifestation of cancer.
The Company believes that a test specific for HPV performed in conjunction with
PAP testing would significantly improve the rate of early detection of cervical
cancer.
Vysis is developing a product for the simultaneous detection of specific
high and low risk types of HPV based on the Company's Molecular Lawn System
technology platform. The initial product application will be to test patient
specimens classified as atypical with PAP testing. The Company expects that this
product would be introduced as a patient screening test performed in conjunction
with a PAP test. The Company believes this product will be easier to use and
more cost effective than currently available technologies.
Additionally, the Company believes that assessing changes in the genetic
composition of cervical cells will also be important for the early
identification of cells in a pre-cancerous state. Combined with HPV testing,
genetic screening has a high potential for accurately predicting malignant
transformation not currently possible. The Company is assessing potential
genetic targets to be combined with its HPV tests.
PRENATAL PRODUCTS
Each year there are approximately 4 million live births in the United States
and a similar number in Western Europe. Chromosomal disorders are relatively
common affecting approximately 1 in 200 births. This has led to efforts to
perform screening to identify pregnancies at risk for fetal mental retardation
or other birth defects. In an attempt to diagnose fetal abnormalities, indirect
tests have been employed such as the immunoassay based blood tests known as the
"Triple Screen." Indirect testing has a high rate of false positive and false
negative results. Because of the inadequacies of indirect testing, a more
definitive genetic test is required to confirm the presence of fetal
abnormalities. To perform direct genetic testing, it is necessary to obtain
fetal cells. These cells may be obtained either through sampling the fluid
surrounding the fetus (amniocentesis), chorionic villus sampling, or potentially
through isolation of fetal cells that have crossed the placenta and are
circulating in the mother's blood. Pregnancies at high risk for chromosomal
abnormalities include women over age 35, a family history of chromosome
abnormalities, an abnormal Triple Screen result or abnormal ultrasound results.
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AMNIOCENTESIS TESTING. Amniocentesis is an invasive procedure required to
obtain the fetal cells for diagnosis of chromosomal abnormalities. In
amniocentesis, amniotic fluid containing fetal cells is removed from the uterus
with an ultrasound-guided needle passed through the abdominal wall. Traditional
testing of the fetal cells is accomplished by direct visualization of stained
chromosomes. This analysis, which is known as karyotyping, is a standard
cytogenetic method which requires 7 to 10 days for completion at an estimated
patient cost of $400 to $800 per analysis. The Company believes that a Genomic
Diagnostic test which provides rapid test results for chromosomal abnormalities
enabling timely decisions regarding patient treatment and care would be highly
valued by expecting parents and physicians.
The Company's first prenatal diagnostic product, based on the FISH System,
is the TriGen Assay for the direct diagnosis of Down Syndrome (three copies of
chromosome 21) and sex chromosome abnormalities (aneuploidies of chromosomes X
and Y). The product is designed to diagnose these abnormalities on a single
slide within 24 hours from cells obtained by amniocentesis. Clinical trials
conducted by the Company at 18 laboratories involving 558 patients demonstrated
100% correlation of TriGen results to standard karyotyping results. The French
regulatory agency, Agence du Medicament ("ADM"), registered the product in May
1997, as a stand alone diagnostic test.
In December 1996, France became the first country to provide reimbursement
for testing of chromosome 21 disorders for all pregnancies regardless of age.
The French Cytogenetics Society has recommended to the French government a
reimbursement rate specifically for a FISH based prenatal test of approximately
$425 per test.
The Company's AneuVysion-TM- product is a FISH System for the direct
diagnosis of Down Syndrome, sex chromosome abnormalities and two additional
chromosomal abnormalities. The Company made a 510(k) submission on its
AneuVysion prenatal product to the FDA in June 1997 and expects to make a
submission to the French ADM. Clinical trials conducted by the Company at 31
laboratories involving 1,364 patients demonstrated 99.9% correlation of
AneuVysion results to standard karyotyping for those chromosomal abnormalities
that represent 85% to 90% of the chromosomal abnormalities associated with
mental retardation and other birth defects. In the United States, the AneuVysion
product is expected to be cleared as an adjunct to standard cytogenetic testing
of amniocentesis specimens while in Europe the Company expects the product to be
registered as a stand alone diagnostic test.
The Company is developing a gCGH Array prenatal product that is intended to
simultaneously detect multiple chromosome aneusomies, microdeletions and
unbalanced chromosome translocations. These abnormalities may account for
essentially all of the causes of common mental retardation and other birth
defects detectable with conventional amniocentesis and karyotyping.
MATERNAL BLOOD TESTING. Due to the invasive nature of the amniocentesis
procedure, current prenatal genetic testing is indicated only in high risk
pregnancies. Although the risk of having a child with Down Syndrome increases
with maternal age, most pregnancies occur in younger women and, hence, most
births of children with Down Syndrome occur to younger women for whom
amniocentesis is not indicated. The ability to detect and analyze fetal cells in
maternal blood would permit women to be routinely screened for genetic
abnormalities associated with mental retardation and birth defects by direct
genetic analysis of fetal cells.
Maternal blood has been shown to contain cells derived from the fetus,
although these cells are exceedingly rare. The feasibility of genetic analysis
of fetal cells isolated from maternal blood has been demonstrated, but obtaining
a sufficient number of fetal blood cells for analysis has been difficult and
generally not suitable to routine clinical application. Vysis is currently
researching a system to identify fetal cells in maternal blood specimens and
detect chromosomal abnormalities in those cells. Such a system is expected to
include reagents to identify fetal cells, the Company's currently developed FISH
probe products (for chromosomes 13, 18, 21, X and Y) and a rapid imaging system.
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Several other companies are also developing approaches to fetal cell
detection and identification. However, the Company believes that chromosomal
abnormalities in fetal cells derived from maternal blood specimens will be more
effectively analyzed with FISH probes. Based upon its patented technology, the
Company expects to participate in this market either through strategic
partnering with other companies who will use the Company's FISH probes to
complete the genetic analysis, or through the introduction of its own fetal cell
detection and identification system.
RESEARCH PRODUCTS
Vysis currently markets over 240 research use only ("RUO") DNA probes and
related reagent products. The Company's principal customers are genetics testing
laboratories and research centers around the world. The Company expects to
introduce approximately 50 new RUO products in 1997. The research reagent
product line represented approximately $600,000 of the Company's $5.4 million of
product revenues in 1994, approximately $1.5 million of the Company's $6.3
million of product revenue in 1995, and approximately $2.8 million of the
Company's $11.0 million product revenue in 1996. In addition to providing the
Company with significant revenues and margins, research reagent products provide
the Company with the ability to participate in clinical research programs to
establish correlations of various genes and genetic markers to disease
occurrence and outcome. Once correlations to disease have been established, the
Company believes that certain of its RUO products may become candidates for high
volume clinical use. Because RUO products are not used for routine clinical
diagnosis, these products are not subject to regulatory review. Although not
required to do so, the Company manufactures all of these RUO products according
to the FDA's QSR guidelines.
The Company's research product commercialization process involves three
distinct stages prior to marketing which include, in order, research,
development and trials.
RESEARCH PRODUCTS
<TABLE>
<CAPTION>
PRODUCT TECHNOLOGY PLATFORM DISEASE/PROCEDURE POSSIBLE UTILITY STAGE
- ----------------- --------------------- ----------------- ----------------- ------------
<S> <C> <C> <C> <C>
WCP-Registered Trademark- FISH system Prenatal, Analysis of MARKETING
Probes (103 postnatal and metaphase
products) cancer chromosomes,
additions,
deletions and
translocations
CEP-Registered Trademark- FISH System Prenatal, Determination of MARKETING
Probes (45 postnatal and chromosome copy
products) cancer number
LSI-Registered Trademark- FISH System Prenatal, Determination of MARKETING
Probes (41 postnatal and gene copy number,
products) cancer chromosomal
translocations,
and presence of
microdeletions
CGH Probes and FISH System Prenatal, Determination of MARKETING
solutions (10 postnatal and chromosome region
products) cancer of amplification
and deletion
</TABLE>
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<PAGE>
RESEARCH PRODUCTS (CONTINUED)
<TABLE>
<CAPTION>
PRODUCT TECHNOLOGY PLATFORM DISEASE/PROCEDURE POSSIBLE UTILITY STAGE
- ----------------- --------------------- ----------------- ----------------- ------------
<S> <C> <C> <C> <C>
MultiVysion-TM- FISH System Preimplantation Improved success TRIALS
PGT genetic testing rate of IN VITRO
fertilization
implantation and
successful birth
Telomere Probes FISH System Mental Detects hidden DEVELOPMENT
(42 products retardation chromosomal
planned) analysis deletions and/or
translocations
not possible with
traditional
karyotyping
Spectral FISH System Cancer and Detects hidden DEVELOPMENT
Karyotyping prenatal chromosomal
Reagent karyotyping rearrangements
analysis in 24 not possible with
colors traditional
karyotyping
Ampli-Onc-TM- gCGH Array System All cancers Detects RESEARCH
Chip substantially all
genes amplified
in cancer
Onc-Express-TM- gCGH Array System All cancers Detects genes RESEARCH
Chip expressed in
cancer
</TABLE>
The Company markets three FISH probe product lines, respectively marketed as
WCP-Registered Trademark-, CEP-Registered Trademark- and
LSI-Registered Trademark- probes and various reagents. These products are used
in a wide range of genetic research.
WCP WHOLE CHROMOSOME PAINT FISH PROBES. WCP probes fluorescently label or
"paint" the unique sequences of an entire chromosome allowing analysis of the
chromosome number as well as indicating chromosome additions and simple and
complex translocations in human metaphase cells.
CEP CHROMOSOME ENUMERATION FISH PROBES. CEP probes hybridize to repeat
sequence targets on specific chromosomes. This allows for rapid counting of
chromosomes to determine if there are too few or too many chromosomes within
interphase or metaphase cells.
LSI LOCUS SPECIFIC IDENTIFIER FISH PROBES. LSI probes hybridize to specific
locations on individual chromosomes and identify specific sequences of DNA,
which are typically gene or disease specific. By highlighting specific regions
of the chromosome, these probes quickly identify if specific genes are present
as expected or whether certain gross chromosomal changes exist.
COMPARATIVE GENOMIC HYBRIDIZATION (CGH) REAGENTS. CGH reagents are a line
of products for performing comparative genomic hybridization, a tool for
determining previously unidentified gene amplifications and deletions in genetic
diseases and cancers.
PREIMPLANTATION GENETIC TESTING ("PGT"). Each year some two million couples
are treated for infertility resulting in approximately 52,800 IN VITRO
fertilization ("IVF") cycles. It is not unusual for patients to undergo two or
three cycles before they successfully conceive. The direct cost for a single
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fertilization cycle is approximately $7,800. Overall, approximately $2 billion
is spent in the United States annually on infertility treatments. An important
contributing factor for a failed attempt at IN VITRO fertilization is the
presence of a chromosomal abnormality in the implanted embryo. Therefore, the
IVF success rate may be improved by using embryos that do not have chromosomal
abnormalities. With only a single cell available for this analysis, it is
necessary to use a chromosomal assessment technology capable of detecting a
large number of abnormalities in a single cell. FISH is currently the only
diagnostic technology known to the Company that has this capability.
The Company's first PGT product, based on the FISH System, is MultiVysion
PGT, which simultaneously detects abnormalities of chromosomes 13, 18, 21, X and
Y in a single cell within 4 hours. The Company believes that completing a PGT
analysis using Vysis' patented multi-color probes will increase the probability
of a successful implantation and birth at a substantially lower cost for
patients undergoing this procedure.
TELOMERE PROBES. Telomeres are unique sequences of DNA at the end of
chromosomes that contain a large number of genes. Telomeres play an integral
role in chromosome biology, structure, and function. Changes in telomeres, such
as deletions or translocations frequently missed by traditional karyotyping,
have been implicated as causes of mental retardation and cancer. There are
approximately 60,000 peripheral blood lymphocyte specimens tested each year to
evaluate patients for chromosomal causes of mental retardation. The Company is
developing a line of individual locus specific FISH probes and a multi-color
telomere panel for research in chromosomal causes of mental retardation and
cancer.
SPECTRAL KARYOTYPING REAGENT. Traditional karyotypes employ black and white
images of chromosomes and interpretation of these karyotypes requires
sophisticated training in recognition of chromosome patterns and changes in the
chromosomes. Frequently subtle translocations are missed utilizing traditional
black and white karyotyping. The Company's Spectral Karyotyping Reagent is
intended to simplify and improve the accuracy of karyotyping by providing a
unique color to each chromosome, thus allowing the detection of chromosomal
rearrangements not possible with traditional karyotyping. The Company is
developing a spectral karyotyping system comprised of a 24 color probe reagent
set and a genetic workstation that incorporates proprietary software for image
analysis of the multi-color karyotype provided by the reagent.
AMPLI-ONC AND ONC-EXPRESS CHIPS. The Company is developing an Ampli-Onc
Chip based on its gCGH Array System that will detect substantially all currently
known genes amplified in cancer. This ready-to-use array of DNA probes on a
miniaturized chip is intended to enable simultaneous assessment of a large
number of genes in patient specimens for abnormalities in specific gene counts.
The Company is also developing Onc-Express Chip, an array of DNA probes for the
simultaneous assessment of a large number of expressed genes in patient
specimens. The Company believes that simultaneous testing for multiple genetic
abnormalities is likely to accelerate research and provide clinical correlations
between chromosomal abnormalities and disease. Both of these products may enable
researchers to discover new correlations that may yield Genomic Diagnostic
products for improved diagnosis, prognosis and predictive outcome.
INSTRUMENT PRODUCTS
Vysis currently markets a line of instrument products which includes genetic
imaging workstations and other processing instruments. Because instrument
products are developed for use in connection with both clinical and research
products, the commercialization process for instrument products mirrors the
previously described commercialization process for clinical or research reagent
products. See "-- Products: Clinical Diagnostic Products" and "-- Products:
Research Products." These workstations provide an integrated solution to enhance
and automate the visualization, analysis, and storage of FISH, mFISH
(simultaneous imaging of multiple FISH probes), CGH, and karyotype images. These
workstations
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<PAGE>
integrate proprietary software, and readily available hardware, such as
high-resolution cameras, microscopes and desktop computer systems. The Company's
principal customers for these workstations are genetic testing laboratories and
research centers around the world. The Company has an installed base of over 320
proprietary genetic workstations at 224 laboratories in 18 countries. The
Company expects to introduce three new instrument products in 1997. The
instrument product line represented approximately $2.2 million of the Company's
$5.4 million of product revenue in 1994, approximately $2.2 million of the
Company's $6.3 million of product revenues in 1995, and approximately $4.3
million of the Company's $11.0 million of product revenues in 1996.
INSTRUMENT PRODUCTS
<TABLE>
<CAPTION>
PRODUCT TECHNOLOGY PLATFORM DISEASE/PROCEDURE UTILITY STAGE
- ------------------- ----------------------- ------------------- ------------------- -------------
<S> <C> <C> <C> <C>
Karyotyping Image Analysis Software Cancer and prenatal Clinical and MARKETING
Software testing research automated (FDA 510(k)
classification of cleared
chromosomes February
1990)
FISH Software FISH System Cancer and prenatal Clinical and MARKETING
testing research imaging of
FISH probes
CGH Software FISH System All cancers Research for MARKETING
chromosomal
amplifications and
deletions
Lab Manager-TM- Database Software Cancer and prenatal Patient data MARKETING
Software testing management
incorporated in
karyotyping, CGH
and FISH software
HYBrite-TM- System FISH System Cancer and prenatal Clinical and MARKETING
testing research semi-
automated
hybridization of
FISH probes
Quips mFISH FISH System Cancer and prenatal Clinical and DEVELOPMENT
Software testing research
simultaneous
imaging of multiple
FISH probes
Spectral FISH System Cancer and prenatal Clinical and DEVELOPMENT
Karyotyping testing research automated
Software classification and
imaging of
chromosomes in
24-colors
Automated Specimen FISH System, gCGH Cancer, prenatal Automates steps of RESEARCH
Processor and Test Arrays System, and viral testing FISH, gCGH Array
Instrument Molecular Lawn System and Molecular Lawn
assays
gCGH Array Reader gCGH Array System Cancer and prenatal Reads gCGH Arrays RESEARCH
testing
Molecular Lawn Molecular Lawn System Cancer, prenatal Reads Molecular RESEARCH
Reader and viral testing Lawn tests
</TABLE>
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<PAGE>
QUIPS-TM- GENETIC WORKSTATIONS AND IMAGING SOFTWARE. Genetic workstations
consist of computer hardware, imaging cameras, microscopes purchased from third
party vendors and proprietary software designed to capture, analyze, document
and store data required for cytogenetic analyses. The genetic workstation
product line includes various combinations of hardware and software for
karyotyping, FISH, mFISH (multi-target FISH) and CGH.
HYBRITE-TM-. HYBrite is a semi-automated instrument for denaturation and
hybridization of FISH probes. The HYBrite system eliminates the need for
denaturation reagents and other temperature devices. The HYBrite shortens assay
time, eliminates steps and reduces user variability.
FOOD TESTING PRODUCTS
The Company develops, manufactures and commercializes products for the
detection and identification of food-borne pathogens to food processors and
quality control laboratories. These products, marketed under the
Gene-Trak-Registered Trademark- name, include both DNA probe products and
antibody kits for the detection of organisms found to contaminate food such as,
Salmonella, E. coli, Listeria and Listeria monocytogenes. The Company's food
testing product sales were approximately $2.5 million in 1994, 1995 and 1996,
respectively.
SALES AND MARKETING
MARKETS AND CUSTOMERS
There are approximately 350 cytogenetics laboratories in the United States
that include hospital-based laboratories and non-hospital-based reference
laboratories. In addition, there are approximately 5,200 hospital-based
pathology laboratories and approximately 200 cancer research laboratories in the
United States. The combination of these laboratories creates more than 5,750
potential customers for the Company's products in the United States alone. The
Company estimates the international market for its products to be approximately
two times the size of the United States market.
MARKETING STRATEGY
The Company currently markets its products to cytogenetic laboratories,
hospitals, reference laboratories, academic and commercial research institutions
and managed care organizations. Vysis expects that the principal customers for
its clinical diagnostic products will include cytogeneticists, pathologists,
oncologists and other physicians. In order to accelerate clinical market
acceptance of its Genomic Diagnostic products, the Company is developing
programs designed to (i) increase the level of awareness of FISH System products
among the clinical laboratories and the physicians who are expected to order
these tests, (ii) educate the medical community regarding the benefits of
managing disease with Genomic Diagnostic tests, and (iii) provide data
demonstrating clinical correlation of the disease target to disease outcome,
progression and predisposition. The Company will pursue these programs through
the use of collaborations with external laboratories and scientists who are
influential opinion leaders, the use of third-party published articles and the
publication of data obtained in product clinical trials.
SALES STRATEGY
Sales in the United States are conducted by a direct sales force, currently
consisting of a national sales manager and eight technical sales
representatives. Four representatives are dedicated to clinical and research
reagent sales. The remaining four representatives are dedicated to sales of
genetic workstations.
European sales are managed by country specific managers supported by a nine
person direct sales organization for Germany, France and the United Kingdom.
This organization is further supported by independent distributors in Austria,
Czech Republic, Egypt, Finland, Greece, Holland/Belgium, Hungary,
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<PAGE>
India, Israel, Italy, Poland, Saudi Arabia, Spain, Sweden, Switzerland, Turkey
and the United Arab Emirates.
Sales and marketing in Japan is conducted through a marketing partnership
with Fujisawa Pharmaceutical Co., Ltd. ("Fujisawa"). The partnership, entered
into in July 1995, provides Fujisawa with a ten-year exclusive distribution
right to market Vysis FISH probes and genetic workstations in Japan. Fujisawa is
responsible for funding all clinical regulatory compliance for the Japanese
market. Vysis will supply all of its United States and European clinical trial
data for its FISH products to assist Fujisawa in its regulatory approval
efforts. The agreement provides that Fujisawa will pay the Company $600,000 per
year through July 1999. Fujisawa introduced the Company's clinical research
reagent product line in December 1995 and released the Company's genetic
workstations in 1996.
Sales in the other world markets are conducted through the use of local
distributors. To date, additional Far East distribution channels have been
established in Australia, China, Korea, Philippines, Singapore, Taiwan and
Thailand. Other distributors have also been established for Canada and
Argentina. These distributors are supported through the Company's United States
headquarters.
MANUFACTURING
The Company's manufacturing operations encompass the production and
packaging of DNA probes and reagents, as well as the integration of the
Company's imaging software with off-the-shelf electronic cameras, computer
systems and other computer peripheral equipment. The Company's manufacturing
operations utilize a complete material requirements planning system fully
integrated with the Company's finance department for operational control. The
Company believes that current manufacturing processes are readily scaleable to
meet expected growth.
The reagent and instrument manufacturing processes are performed according
to the FDA's Quality System Regulation ("QSR"), which replaced the FDA's Good
Manufacturing Practices ("GMP") criteria. The Company trains employees for
compliance with current QSR requirements as specified by the FDA. The Company is
ISO 9001 certified. ISO 9001 is the most comprehensive of all the International
Organization for Standardization quality standards and is an important element
of the Company's strategy to commercialize its products globally.
COLLABORATIONS
The Company has established a series of collaborations designed to
accelerate gene discovery efforts and correlation studies to link genetic
abnormalities to disease outcomes, from which it will obtain diagnostic and
therapeutic rights. The Company also monitors on-going worldwide medical
research in this area, such as the Human Genome Project. It is anticipated that
the Human Genome Project will complete the sequencing of the entire human genome
by 2005, which the Company believes will give rise to additional clinical
product leads. In addition, the Company has collaborations for the further
development of its technology platforms.
UNIVERSITY OF CALIFORNIA, SAN FRANCISCO
The Company funds research at the Department of Laboratory Medicine,
University of California, San Francisco ("UCSF") Cancer Center at the UCSF
Medical School, directed by Dr. Joseph Gray, in the field of molecular
cytometry. This research examines correlations of chromosome abnormalities to
disease and discovery of genes related to regions of abnormalities identified by
CGH. This research has resulted in CGH studies of samples of all major solid
tumor cancers to identify common regions of chromosome abnormality. These
studies will be used as leads for gene discovery efforts. This work has resulted
in the discovery of gene sequences in the chromosome region 20q13.2 related to
an aggressive form of breast cancer. The Company has an exclusive license to
patent rights covering inventions made from this research which relate to FISH
or CGH. The Company has an option to obtain an exclusive license for both
diagnostic and therapeutic use to patent rights covering gCGH and any gene
discoveries made from this
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<PAGE>
research. The research collaboration with UCSF also involves work on imaging
software with the Company holding an exclusive license to any software
improvements.
THE MAYO CLINIC
The Company funds research by Dr. Robert Jenkins at the Mayo Clinic's
Department of Cytology in the area of correlation of chromosomal abnormalities
to aggressive forms of prostate cancer and genes associated with metastatic
potential. As part of the collaboration, Dr. Jenkins has developed correlations
of chromosomal aneuploidies to prostate cancers. These correlations are under
investigation as potential targets for clinical products relating to prostate
cancer. The Company has an option to obtain an exclusive license to any
correlations discovered during this collaboration.
DIGITAL SCIENTIFIC
In January 1996, the Company and Digital Scientific Ltd. ("Digital") entered
into an exclusive marketing and software co-development agreement to market
Digital's SmartCapture-TM- FISH imaging software under which the Company also
acquired a worldwide exclusive license to market all of Digital's imaging
software products. In addition, the Company and Digital agreed to co-develop
imaging software to be marketed by the Company as part of its Quips Genetic
Workstations. The Company and Digital will co-own the software products
developed under the agreement. The Company has an option to acquire an exclusive
license from Digital on certain of these co-owned products.
PUBLIC HEALTH RESEARCH INSTITUTE OF NEW YORK
The Company funds a research and development collaboration and supports
broad based QBR research activities in the laboratory of Dr. Fred Kramer at the
Public Health Research Institute ("PHRI") of New York in New York City. Dr.
Kramer is one of the principal inventors of QBR amplification technology and has
been actively involved in QBR research since 1985. The Company has an exclusive
license to pending United States and foreign patent applications claiming
QBR-based binary probe ligation assay, as well as to any inventions made at PHRI
in this collaboration.
INCYTE PHARMACEUTICALS
In July 1996, the Company entered into a collaboration with Incyte
Pharmaceuticals, Inc. ("Incyte"), a leading genomic database company, and with
Genome Systems, Inc., a subsidiary of Incyte providing positional cloning and
library screening services, to produce a "bottoms-up" genomic map which will map
expressed human gene sequences to their human chromosome locations. The
collaborators expect that use of the map and its associated BAC library will
reduce the time to generate a BAC based "contig" by one to two years. As part of
the collaboration, the Company will have access to Incyte's LifeSeq-TM- database
for sequence data on expressed human gene sequences, use of the developed
genomic map and the associated BAC contigs.
The Company believes that the BAC contigs will be used to develop additional
FISH RUO probes and may provide a source of targets to be placed on the gCGH
Arrays. The Company believes that access to the LifeSeq database and the map
will accelerate the discovery of genes located in regions of chromosomes
identified as important in cancer by CGH technology.
NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY GRANTS
The Company has been awarded two United States Department of Commerce grants
totaling $4 million for research related to the Company's technologies. These
grants are administered through the Advanced Technology Program ("ATP") of the
National Institute of Standards and Technology ("NIST") within the United States
Department of Commerce. The first grant, for research related to the gCGH
technology platform, was initiated in March 1995 and runs through March 1998.
The second grant, for research related to the development of the Company's
Molecular Lawn technology platform and other research, was initiated in August
1995 and will run through August 1998.
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PATENTS AND LICENSE RIGHTS AND PROPRIETARY INFORMATION
The Company currently holds or has exclusive licenses to 92 issued United
States patents or allowed United States patent applications, to 67 pending
United States patent applications, and to additional foreign patents and pending
patent applications in various areas of genetic and infectious disease testing.
The exclusive licenses held by the Company relating to these patents and patent
applications also grant the Company the exclusive right to grant sublicenses.
The Company believes that its patent portfolio covering FISH, CGH, gCGH and QBR
contains several patents of commercial significance to its activities in the
clinical market. The Company also believes that its FISH, CGH and gCGH patent
portfolio will provide opportunities to obtain an exclusive position in the
clinical market on certain general assay formats as well as particular targets
and to seek licenses and cross-licenses. The Company further believes that, in
the absence of any licensing or cross-licensing to third parties by the Company,
its QBR patent portfolio will provide an exclusive opportunity to use QBR
amplification methods. The following describes significant patent assets of the
Company.
FISH TECHNOLOGY
U.S. Patent 5,447,841, issued September 5, 1995, licensed exclusively from
the University of California covers methods of IN SITU hybridization using
unique sequence probes and unlabeled blocking DNA. These methods permit the use
as DNA probes of DNA sequences which are produced by standard cloning procedures
without removal of any repeat DNA sequences which are present. The Company
believes that the alternative manufacturing technologies to produce labeled FISH
probes which do not contain the repeat DNA sequences are difficult to implement
and are not proven commercially. The Company is also licensed exclusively under
three pending United States divisional patent applications stemming from the
'841 patent. Each of these applications claims priority of the '841 patent
applications filed on January 16, 1986 and December 1, 1986. The divisional
applications cover other embodiments of IN SITU hybridization using unique
sequence probes, including detection of abnormalities on chromosome 21 and
detection of gene amplification or gene deletion.
DIRECT LABELING TECHNOLOGY
U.S. Patent 5,491,224, issued February 13, 1996, and its pending foreign
counterpart applications, claim the Company's direct label FISH DNA probes and
their manufacture. U.S. Patent 5,663,319, issued September 2, 1997 covers
multiple direct label FISH probe compositions. The Company has received a
counterpart European patent on its direct label FISH DNA probes and on methods
of IN SITU hybridization using multiple direct label FISH DNA probes. The
Company has a pending United States divisional patent application of the '224
patent claiming use of direct label FISH DNA probes.
CGH AND GCGH TECHNOLOGY
The Company is exclusively licensed by the University of California under
U.S. Patent 5,665,549, issued September 9, 1997, and other pending United States
and foreign patent applications claiming basic CGH methods to detect changes in
copy number of DNA sequences at a particular chromosome location. The Company
also holds an option from the University of California to obtain an exclusive
license to pending U.S. and foreign patent applications claiming gCGH assays.
Q-BETA REPLICASE TECHNOLOGY
The Company holds exclusive licenses from Columbia University/Salk Institute
and from PHRI on United States and foreign patents and pending patent
applications relating to the use of QBR as an amplification technology to detect
nucleic acid targets. These include U.S. Patent 4,786,600 issued November 22,
1988, claiming "substrate" molecules having inserted probe sequences which are
replicatable by QBR and U.S. Patent 4,957,858, issued September 18, 1990,
claiming nucleic acid detection assays
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using QBR. The Company also has a number of United States and foreign patents
and pending patent applications covering QBR and the Molecular Lawn technology.
CORRELATIONS OF CHROMOSOMAL ABNORMALITIES TO DISEASE
The Company is pursuing a strategy to acquire rights to methods correlating
particular genetic aberrations to disease. These rights will potentially provide
opportunities for exclusive positions on clinical assays. For example, U.S.
Patent 5,472,842 and its pending foreign counterpart applications, licensed
exclusively from the University of California, cover methods of detection of a
chromosomal abnormality on chromosome 20 at locus 20q13 which has been
correlated to certain forms of breast cancer. The Company holds an option from
the University of California for an exclusive license for therapeutic and
diagnostic uses to United States and foreign patent applications claiming gene
sequences in the chromosome 20q13 locus. The Company is also exclusively
licensed under United States and foreign patent applications from the University
of California, St. Jude Children's Research Hospital and Canji, Inc. claiming
methods to diagnose disease based upon correlations of particular chromosomal
abnormalities for colon cancer, breast cancer, lung cancer, bladder cancer,
ovarian cancer, prostate cancer, gliomas and leukemias.
ABILITY TO PRACTICE TECHNOLOGY
The Company's success will depend to a substantial degree upon its ability
to operate its business and to develop, manufacture, market and sell its
products without infringing the proprietary rights of third parties. However,
numerous United States and foreign issued patents and pending patent
applications, which are owned by third parties, exist in the general fields of
nucleic acid technology and clinical diagnostic technology. A partial list of
more specific technologies in these general fields includes patents and patent
applications relevant to nucleic acid probe manufacturing, labels for nucleic
acid probes, nucleic acid probe compositions, nucleic acid probe hybridization
assays, nucleic acid amplification methods, full length gene sequences, full
length expressed gene sequences, partial gene and expressed gene sequences, gene
expression assays, correlations of chromosome or gene abnormalities to disease,
gene point mutation detection assays, oligonucleotide array hybridization
methods, patient sample processing, fetal cell identification and separation,
imaging apparatus and methods, infectious disease detection assays, food testing
assays and apparatus related to these technologies. The Company expects that
additional United States and foreign patents owned by third parties will issue
and additional United States and foreign patent applications owned by third
parties will be filed in these fields. The Company further believes that the
level of patent competition in these fields is sufficiently high that patent
litigation in these fields is likely to occur.
Consequently, the Company believes that its management of the business risks
presented by the intense patent competition in these fields is critical to its
ability to operate its business and to develop, manufacture, market and sell its
products. There can be no assurance that the Company will be able to
successfully manage these patent business risks to avoid infringing the
proprietary rights of others nor can there be any assurance that patent
infringent suits will not be brought against the Company. Any failure in its
management of these patent business risks may have a material adverse impact on
the Company's business, financial condition and results of operations.
The Company's success will also depend to a substantial degree upon its
ability to obtain and maintain patent protection, both in the United States and
in foreign countries, for its diagnostic products and methods and other
inventions, which the Company believes patentable, as well as upon the Company's
ability to preserve its trade secrets and to protect its software copyrights.
The Company's success will also depend to a substantial degree upon its
collaborators' and future licensors' ability to obtain and maintain patent
protection, both in the United States and in foreign countries, on gene
discoveries, the correlations of disease to genomic abnormalities and other
inventions relevant to the Company's business, as well as upon the Company's
collaborators' and future licensors' ability to preserve trade secrets and to
protect their software copyrights.
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The patent position of a company utilizing biotechnology generally is highly
uncertain and involves complex legal and factual questions. There can be no
assurance that any patents owned by or licensed to the Company will not be
challenged and subsequently invalidated or circumvented, or that such patents
will be sufficiently broad to afford protection against third parties who
develop or use similar technology, or that any of such patents will be
successfully asserted against any infringing activity, or that any of the
Company's patent rights will be successfully cross-licensed to third parties in
exchange for a license under their patent rights. In addition, there can be no
assurance that any pending United States or foreign patent applications owned or
licensed by the Company or those acquired or licensed by the Company in the
future will result in issued patents, or that such applications will not be
subject to foreign opposition seeking the revocation of a Company patent or to
United States patent interference seeking a determination that the Company or
its collaborators were not the first inventor of a particular patent or patent
application, or that the Company or its collaborators will develop additional
technologies that are patentable, or that any patents owned or licensed to the
Company will provide a basis for commercially viable products or services.
The Company is also aware of issued United States and foreign patents and
pending patent applications owned or controlled by third parties, which are
related to the Company's current or anticipated technologies. Specifically, the
Company is aware of issued United States and foreign patents and pending patent
applications owned or controlled by third parties, which are related to
significant elements of the Company's FISH, CGH and direct labeling
technologies, or to significant elements of the Company anticipated use of its
QBR technologies, or to reagents useful in the performance of CGH or gCGH
assays. Although the Company believes that certain of these issued patents are
not infringed by the Company's current and planned operations, there can be no
assurance that the Company would be able to successfully assert such a position
in the courts, nor that such a position could be asserted without the Company
incurring substantial or prohibitive costs. Furthermore, because United States
patent applications are maintained under conditions of confidentiality while the
applications are pending in the United States Patent and Trademark Office, there
may be pending patent applications filed by third parties of which the Company
is unaware and which relate to the Company's current or planned technologies. In
addition, third parties may in the future file patent applications having claims
that relate to the Company's services, processes or products. Persons holding or
licensing patent rights could bring legal actions against the Company claiming
that any of the Company's marketing, services, processes or products, or the
Company's collaborators' or its suppliers' services or products or of the
Company's customers' use of the Company's services or products infringe one or
more of their patents, and seek damages or injunctive relief. Patent litigation
is costly, and there can be no assurance that the Company would prevail in any
patent litigation brought against it. Further, the Company could be subject to
significant liabilities to such persons, may be required to obtain licenses from
such persons, or may be required to cease certain activities, and any of these
could have a material adverse effect upon the Company's business, financial
condition or results of operations. In addition, there can be no assurance that
the Company will be able to obtain such licenses on commercially reasonable
terms, or at all.
The Company is party to various license and license option agreements
(including but not limited to agreements with the University of California, Ciba
Corning Diagnostics, PHRI, Columbia University and the Salk Institute), which
give the Company rights to use certain technologies fundamental to the Company's
business. Although the Company believes it is currently in compliance with all
performance criteria contained in such license and option agreements, failure of
the Company to meet such criteria in the future could cause the loss of such
licenses or options, or a change in license status from exclusive to
nonexclusive. Furthermore, any contractual relationship with a third party may
involve complications and the potential for disputes. Licensors of the Company
may disagree with the Company as to the interpretation of the terms and
conditions of the Company's licenses, as to whether the Company or licensor have
properly fulfilled the provisions of such license contracts, and may challenge
the Company's activities under such licenses in the courts or in arbitration
proceedings. Any of the foregoing could have a material adverse effect on the
Company's business, financial condition and results of operations.
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Certain of the Company's licensed patent rights claim inventions, which were
developed in whole or in part using grants or funding from United States
Government agencies, such as the National Institutes of Health and the
Department of Energy. The Company is also developing technology funded in part
by two ATP grants from the NIST. The Company expects that patentable inventions
and patent rights covering such inventions could result from the activities
funded by these two ATP grants. The terms of the United States Government's
funding of the Company's licensors and of the Company provide that the United
States Government is provided certain rights to use the technology developed by
the grants or funding and to practice or license under the applicable patent
rights for the United States Government's benefit. The applicable United States
statute governing the United States government's rights (the "Dole-Bayh Act")
also provides that third parties may petition the government for a grant of a
non-exclusive license upon reasonable terms under these patent rights owned or
exclusively licensed to the Company if the Company is found to not be diligently
developing the technology or market covered by the patent(s) in question. There
can be no assurance that the United States Government will not exercise such
rights, or that the exercise of such rights would not have a material adverse
effect on the Company.
The Company also relies upon copyrights, copyright licenses and trade
secrets to protect all of its software and upon trade secrets to protect certain
of its unpatented proprietary technology. There can be no assurance that the
Company will be able to adequately protect its rights in such software and such
unpatented proprietary technology or that others will not independently develop
substantially equivalent technology or information, or that others will not
otherwise gain access to the Company's software and unpatented proprietary
technology or disclose the Company's software and unpatented proprietary
technology to third parties in a non-confidential manner.
The Company's development of its imaging software products is subject to all
of the risks of the software development industry. There can be no assurance
that the Company's software development will not be adversely impacted or
delayed due to changes in its suppliers' products or software, unforeseen
programming needs, delay or failure to receive software development services
from third parties, or the Company's inability to obtain necessary computer
products, software and components on a timely basis. Any inability of the
Company to develop its imaging software products or its disease modeling
software on a timely basis may have a material adverse impact on the Company.
The Company does not presently attempt to obtain patent rights covering its
software developments. However, third parties may have pending patent
applications or obtain patents covering imaging software or disease modeling
software technologies. There can be no assurance that the Company would not be
forced to begin additional patenting efforts in the imaging software and disease
modeling software fields, nor that the Company's attempts to obtain such patents
on its software developments would be successful, nor that the Company would not
be adversely affected by third parties obtaining patents on such software.
Any of the risks and uncertainties concerning the ability to practice
technology which are described herein apply to the Company's collaborators just
as they apply to the Company itself. As a licensee or strategic partner of such
collaborators, the Company could be materially adversely affected by any event
adversely affecting one or more of the Company's collaborators.
COMPETITION
Competition in clinical diagnostics and genomics is intense and is expected
to increase as the market for Genomic Diagnostic products develops. Competition
is and will continue to be based on quality, reliability, accuracy, ease of use,
price and product line offering. Oncor, Inc. ("Oncor") is a major competitor in
the supply of FISH products to the research market and is seeking to enter the
clinical market with FISH products. Applied Imaging Corp. and Perceptive
Scientific Instruments, Inc. compete with Vysis in the marketing of genetic
imaging workstations. The Company is aware of other entities that currently
market RUO nucleic acid products, which may have the ability to compete with the
Company in
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the clinical market. In addition, many reference laboratories and research
institutions produce their own FISH probes for internal use.
Other companies are developing genomic assessment products including "DNA
Chip" products for assessment of gene expression or gene sequence with potential
use for clinical diagnostics. Other diagnostic companies may enter the genetic
disease diagnostic market with nucleic acid based technologies. Many of the
Company's existing and potential competitors have substantially greater
financial, marketing, sales, distribution and technological resources than the
Company or may have substantial advantages over the Company in terms of research
and development expertise, experience in conducting clinical trials, experience
in regulatory matters, manufacturing efficiency, name recognition, ability to
obtain necessary intellectual property licenses, sales and marketing expertise
and distribution channels. There can be no assurance that the Company will be
able to compete successfully against current or future competitors.
LITIGATION
The Regents of the University of California (the "Regents") and the Company
as exclusive licensee, are plaintiffs in a patent infringement suit filed
September 5, 1995, against Oncor. The suit was filed in the United States
District Court in San Francisco, California and asserts that Oncor's marketing
of various DNA probe products infringes the Regents' U.S. Patent No. 5,447,841.
The Company and the Regents share equally the legal costs of this suit. Oncor's
answer to the complaint asserts that the patent is invalid based on prior art
and the failure to disclose the best mode of practicing the invention and that
it is unenforceable due to inequitable conduct which occurred during prosecution
of the patent. On August 19, 1997, the court issued an order which (i) granted
the Regents' and Vysis' motion for claim construction and denied Oncor's
competing motion for claim construction, (ii) granted the Regents'and Vysis'
motion for summary judgment that the claims were novel and denied Oncor's motion
for summary judgment that the claims were invalid as anticipated, (iii) granted
the Regents' and Vysis' motion for summary judgment that the claims were
unobvious and denied Oncor's motion for summary judgment that the claims were
invalid as obvious, (iv) granted in part and denied in part the Regents' and
Vysis' motion for summary judgment that Oncor's challenged FISH probes infringed
the claims and denied Oncor's motion for summary judgment that none of its FISH
probes infringed, (v) granted in part and denied in part the Regents' and Vysis'
motion for summary judgment regarding the best mode of practicing the invention,
(vi) denied Oncor's motion for summary judgment that the claims were
unenforceable because of material misrepresentations made to the U.S. Patent &
Trademark Office by the Regents during prosecution of the patent, and (vii)
struck Oncor's motion for summary judgment that the claims were unenforceable
because the Regents failed to submit material prior art to the U.S. Patent &
Trademark Office. The Company expects that the trial of the remaining issues
will be held in 1998. If Oncor were to succeed in invalidating the patent or
having it declared unenforceable, this may have a material adverse effect on the
Company's market position and future business prospects.
The Company and Amoco are defendants in a suit pending in the United States
District Court in San Diego, California brought by Gen-Probe, Inc. ("Gen-Probe")
in June 1995. The suit alleges infringement of U.S. Patent Nos. 4,851,330 and
5,288,611 (the "Kohne Patents"). The Kohne Patents are alleged to apply
generally to the detection, identification and quantification of non-viral
organisms using DNA probes selected to target sequences of ribosomal RNA. The
allegedly infringing activities are the manufacture, use and sale of reagents
and kits for detecting certain food and environmental pathogens currently used
in the Company's food testing business. The suit also alleges various claims
that the Company competed unfairly with Gen-Probe. This suit has been stayed
pending the outcome of a separate suit brought in California Superior Court in
San Diego, California against Gen-Probe by the Center for Neurologic Study
("CNS") challenging Gen-Probe's claim to sole ownership of the Kohne Patents.
CNS asserts that the invention of the Kohne Patents were made by David Kohne
while he was affiliated with CNS and supported by a grant from the National
Institutes of Health naming CNS as the grantee
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institution. CNS seeks damages and title in the Kohne Patents. Pursuant to
separate agreements between Amoco and CNS, which has been assigned to the
Company by Amoco, the Company reimburses CNS for legal costs incurred in the
suits. In return, the Company receives contingent rights to acquire an exclusive
license under such rights as CNS may obtain in the Kohne Patents. Discovery is
closed and the suit is set for trial in November 1997. There can be no assurance
that the Company will obtain rights under such Kohne Patents.
Counterpart applications to the Kohne Patents were filed in Europe, Japan
and elsewhere. Patents were granted and the Company has opposed these patents in
Europe and Japan. The opposition has not been resolved in Europe. In Japan, the
Company's opposition has been rejected and the patent maintained. There can be
no assurance that Gen-Probe will not assert additional counts of infringement
based on any additional patents issued from the applications underlying the
Kohne Patents or will not assert additional causes of action against the
Company. Although the Company believes that it has meritorious defenses to the
suit by Gen-Probe against the Company, there can be no assurance that the
Company will ultimately prevail. An adverse determination could include an award
of treble damages and/or attorneys' fees, which could have a material adverse
effect on the financial condition and results of operations of the Company.
Furthermore, an adverse determination in such suit may limit future business
opportunities that the Company might otherwise be able to exploit in the area of
infectious disease detection.
Prior to the closing of this offering, the Company and Amoco will enter into
a Cooperation Agreement relating to the establishment of the Company as a
stand-alone entity. The Cooperation Agreement will provide that Amoco and the
Company will cooperate in the defense of the suit brought by Gen-Probe and will
include an allocation of any liability arising from the Gen-Probe suit or the
suit brought by CNS. Under this allocation, Amoco will agree to indemnify the
Company against any loss or damage based upon Gen-Probe's allegations of unfair
competition and related claims in the suit. The Company will agree to indemnify
Amoco against any loss or damage based upon the patent infringement count in the
suit or any other cause of action not yet asserted by Gen-Probe. Under this
indemnity the Company will also be responsible for the attorney's fees and costs
associated with the defense of the patent infringement count. There can be no
assurance that the indemnity of the Company by Amoco will prevent an adverse
determination from having a material adverse impact upon the Company.
GOVERNMENT REGULATION
The preclinical and clinical testing, manufacturing, labeling, distribution
and promotion of the Company's products are subject to extensive and rigorous
government regulation in the United States and other countries. Noncompliance
with applicable requirements can result in enforcement action by the Food and
Drug Administration ("FDA") or comparable foreign regulatory bodies including,
among other things, warning letters, fines, injunctions, civil penalties, recall
or seizure of products, refusal to grant premarket clearances or approvals,
withdrawal of marketing approvals and criminal prosecution.
Unless specifically exempted, a medical device may be marketed in the United
States only with the FDA's prior authorization. Devices classified by FDA as
posing less risk are placed either in class I or II and require the manufacturer
to seek 510(k) clearance from the FDA. Such clearance generally is granted when
submitted information establishes that a proposed device is "substantially
equivalent" in intended use and safety and effectiveness to a "predicate
device," which is either a class I or II device already legally on the market or
a "preamendment" class III device (i.e., one that has been in commercial
distribution since before May 28, 1976) for which the FDA has not called for PMA
applications. Obtaining a 510(k) clearance usually takes from four to twelve
months or more from the date of submission. There can be no assurance that
510(k) clearance will ever be obtained. During this process, the FDA may
determine that it needs additional information or that a proposed device is
precluded from receiving clearance because it is not substantially equivalent to
a predicate device. After a device receives clearance, any modification that
could significantly affect its safety or effectiveness, or would constitute a
major change in the intended use of the device, will require a new 510(k)
submission.
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A device that does not qualify for 510(k) clearance is placed in class III,
which is reserved for devices classified by the FDA as posing the greatest risk
(E.G., life-sustaining, life-supporting or implantable devices, or devices that
are not substantially equivalent to a predicate device). A class III device
generally must obtain PMA approval, which requires the manufacturer to establish
the safety and effectiveness of the device to the FDA's satisfaction. A PMA
application must provide extensive preclinical and clinical trial data and also
information about the device and its components regarding, among other things,
manufacturing, labeling and promotion. As part of the PMA review, the FDA will
inspect the manufacturer's facilities for compliance with the Quality System
Regulation ("QSR"), which mandates elaborate testing, control, documentation and
other quality assurance procedures.
Upon submission, the FDA determines if the PMA application is sufficiently
complete to permit a substantive review, and, if so, the application is accepted
for filing. The FDA then commences an in-depth review of the PMA application,
which typically takes one to three years or more. The review time is often
significantly extended as a result of the FDA asking for more information or
clarification of information already provided. The FDA also may respond with a
"not approvable" determination based on deficiencies in the application and
require additional clinical trials that are often expensive and time consuming
and can delay approval for months or even years. During the review period, an
FDA advisory committee, typically a panel of clinicians, likely will be convened
to review the application and recommend to the FDA whether, or upon what
conditions, the device should be approved. Although the FDA is not bound by the
advisory panel decision, the panel's recommendation is important to the FDA's
overall decision making process.
If the FDA's evaluation of the PMA application is favorable, the FDA
typically issues an "approvable letter" requiring the applicant's agreement to
specific conditions (E.G., changes in labeling) or specific additional
information (E.G., submission of final labeling) in order to secure final
approval of the PMA application. Once the approvable letter is satisfied, the
FDA will issue a PMA for the approved indications, which can be more limited
than those originally sought by the manufacturer. The PMA can include
postapproval conditions that the FDA believes necessary to ensure the safety and
effectiveness of the device including, among other things, restrictions on
labeling, promotion, sale and distribution.
Failure to comply with the conditions of approval can result in material
adverse enforcement actions, including the loss or withdrawal of the approval.
The PMA process can be expensive and lengthy, and no assurance can be given that
any PMA application will ever be approved for marketing. Even after approval of
a PMA, a new PMA or PMA supplement is required in the event of a modification to
the device, its labeling or its manufacturing process.
In January 1996, the Company reviewed its clinical trial protocols for the
AneuVision prenatal aneuploidy detection kit for chromosomes 13, 18, 21, X and Y
that incorporates FISH technology with the FDA. The Company was given verbal
permission by the FDA to seek 510(k) clearance as opposed to PMA approval. A
510(k) was submitted to the FDA in May 1997. There can be no assurance that the
product will receive FDA 510(k) clearance in a timely manner, if at all.
The Company is conducting clinical trials for the FISH detection of
HER-2/neu amplification in breast cancer. The clinical trial protocols were
reviewed by the FDA for adequate design to meet the intended use and clinical
utility claims. The Company obtained verbal permission in March 1997 to conduct
these trials. Clinical trials are scheduled to be completed in late 1997 with a
PMA submission made to the FDA by the end of 1997. There can be no assurance,
however, that the FDA's PMA Advisory Panel will agree with the adequacy of the
study design. There can be no assurance that this product will by approved by
the FDA.
Although clinical investigations of most devices are subject to the
investigational device exemption ("IDE") requirements, clinical investigations
of IN VITRO diagnostic ("IVD") tests are exempt from the IDE requirements,
including FDA approval of investigations, provided that the testing meets
certain exemption criteria. IVD manufacturers must also establish distribution
controls to assure that IVDs distributed for the purpose of conducting research
use or clinical investigations are used only for that purpose. Pursuant
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to current FDA policy, manufacturers of IVDs labeled for research use only
("RUO") or investigational use only ("IUO") are strongly encouraged by the FDA
to establish a certification program under which investigational IVDs are
distributed to or utilized only by individuals, laboratories or health care
facilities that have provided the manufacturer with a written certification of
compliance indicating that the RUO or IUO product will be restricted in use and
will, among other things, meet institutional review board ("IRB") and informed
consent requirements. The FDA recently issued a Compliance Policy Guide setting
forth, among other things, the FDA's intent to undertake a heightened
enforcement effort with respect to RUO and IUO devices improperly commercialized
prior to receipt of FDA clearance or approval.
The Company has developed tests, software and instrument systems that it
distributes in the United States on a RUO or IUO basis. Failure of the Company
or recipients of the Company's RUO and IUO devices to comply with the regulatory
limitations on the distribution and use of such devices could result in
enforcement action by the FDA that would adversely affect the Company's ability
to distribute the tests prior to obtaining FDA clearance or approval. Such
restrictions could have a material adverse effect on the Company's business,
financial condition and results of operations.
Purchasers of the Company's clinical diagnostic products in the United
States may be regulated under the Clinical Laboratory Improvement Amendments of
1988 ("CLIA") and related federal and state regulations. CLIA is intended to
ensure the quality and reliability of clinical laboratories in the United States
by mandating specific standards in the areas of personnel qualifications,
administration, participation in proficiency testing, patient test management,
quality control, quality assurance and inspections. The regulations promulgated
under CLIA established three levels of diagnostic tests ("waived", "moderately
complex" and "highly complex") and the standards applicable to a clinical
laboratory depend on the level of the tests it performs. The Company believes
that its FISH, gCGH Array and Molecular Lawn tests will be placed in the "high
complexity" category under CLIA regulations, which will limit their use to
larger hospitals and clinical reference laboratories. CLIA requirements may
prevent some clinical laboratories from using any or all of the Company's
diagnostic products. There can be no assurance that the CLIA regulations and
future administrative interpretations of CLIA will not have a material adverse
impact on the Company by limiting the potential market for the Company's FISH
and other products.
Some clinical laboratories purchase individual reagents intended for
specific analytes, which they use to develop and prepare their own finished
diagnostic tests. The FDA generally has not exercised regulatory authority over
these individual reagents or the finished tests prepared from them by clinical
laboratories. In March 1996, the FDA proposed new rules for analyte specific
reagents ("ASRs") that would apply a regulatory framework to them, including
restrictions on sales to promotional claims that could be made about these
products and restrictions on sales to clinical laboratories certified under CLIA
as high complexity testing laboratories. The Company sells a number of
individual reagents on an RUO basis, which it intends ultimately to commercially
distribute, that would fall within the ASR regulatory framework.
The Company anticipates marketing a panel of FISH probes for use in
connection with IN VITRO fertilization ("IVF") procedures for preimplantation
genetic testing ("PGT"). Current FDA policy permits the distribution of certain
IN VITRO assays on an RUO basis, provided that the assays are not commercialized
on an unrestricted basis. The Company therefore believes that it can distribute
its PGT panel, as well as its Quips Genetic Workstations, to IVF centers. In
addition, the Company believes that FDA policy regarding its IVF panel and
similar products may evolve over time in a manner which would permit such
products to be commercially distributed on an unrestricted basis with only
specified labeling and QSR requirements being imposed. The FDA has to date not
developed a definitive policy in this area, and there can be no assurance that
FDA will not issue guidelines or take other regulatory actions which might
adversely impact the Company's anticipated revenues from its RUO sales or
subsequent unrestricted commercial sales of its PGT panel to IVF centers.
Any devices manufactured or distributed by the Company pursuant to FDA
clearances or approvals will be subject to pervasive and continuing regulation
by the FDA and certain state agencies. The Company
56
<PAGE>
will be subject to routine inspection by the FDA and will have to comply with
the host of regulatory requirements that usually apply to medical devices
marketed in the United States, including labeling regulations, the QSR, the
Medical Device Reporting regulation (which requires a manufacturer to report to
the FDA certain types of adverse events involving its products), and the FDA's
prohibitions against promoting products for unapproved or "off-label" uses.
Unanticipated changes in existing regulatory requirements or adoption of new
requirements could have a material adverse effect on the Company. The Company's
failure to comply with applicable regulatory requirements could result in
enforcement action by the FDA or foreign governments, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Government Regulation."
Unanticipated changes in existing regulatory requirements, failure of the
Company to comply with such requirements or adoption of new requirements could
have a material adverse effect on the Company. The Company also is subject to
numerous federal, state and local laws relating to such matters as safe working
conditions, manufacturing practices, environmental protection, fire hazard
control and hazardous substance disposal. There can be no assurance the Company
will not be required to incur significant costs to comply with such laws and
regulations in the future or that such laws or regulations will not have a
material adverse effect upon the Company's business, financial condition and
results of operations.
Distribution of the Company's products outside the United States is also
subject to regulation, which varies widely from country to country. The time
required to obtain needed regulatory clearance by particular foreign governments
may be longer or shorter than that required for FDA clearance or approval. In
addition, the export by the Company of certain of its products that have not yet
been cleared for domestic distribution may be subject to FDA export
restrictions. There can be no assurance that the Company will receive on a
timely basis, if at all, any foreign government or United States export
approvals necessary for the marketing of its products.
EMPLOYEES
As of June 30, 1997, the Company had 145 full-time employees, of whom 31
hold Ph.D. degrees, one holds an M.D. degree and 27 hold other advanced degrees.
Of the Company's total work force, 45 are in research and development, 43 are in
sales/marketing, 15 are in regulatory affairs, 21 are in operations, and 21 are
in business development, legal, finance, human resources, and administration.
The Company believes that its future success will depend, in part, on its
continuing ability to attract, retain, and motivate qualified scientific,
technical, and managerial personnel. The Company faces intense competition in
this regard from other companies, research and academic institutions, government
entities and other organizations. None of the Company's employees is represented
by a collective bargaining agreement, nor has the Company experienced work
stoppages. The Company believes that its relations with its employees are good.
FACILITIES
The Company's executive offices, research and development activities,
manufacturing operations and administrative support are located in Downers
Grove, Illinois. This 56,551 square foot facility is leased pursuant to a lease
that expires on November 30, 2004. Capacity exists at such location to expand
production to accommodate future growth.
The Company also leases 3,300 square feet of space in Stuttgart, Germany
under a lease that expires in October 2000. The Company has leased 3,014 square
feet near Paris, France under a lease that expires in May 2005. The Company's
food testing business leases 10,237 square feet in Hopkinton, Massachusetts
under a lease that expires in January 1999.
SCIENTIFIC ADVISORY BOARD
The following individuals comprise Vysis' Scientific Advisory Board, which
plays an active role in guiding Vysis' research and development activities.
57
<PAGE>
KURT HIRSCHHORN, M.D., is Chairman, Department Of Pediatrics, Mount Sinai
School of Medicine, New York, New York. Dr. Hirschhorn is a founding member of
the American College of Medical Genetics; serves on the Editorial Board or
Committee of eight scientific journals; is the Chief Pediatrician at Mount Sinai
School of Medicine; and has worked on IN SITU hybridization since the early
1970's.
ROBERT B. JENKINS, M.D., PH.D., is Associate Professor of Laboratory
Medicine, and co-Director of the clinical Cytogenetics and clinical Molecular
Genetic Laboratories at the Mayo Clinic, Rochester, Minnesota. Dr. Jenkins is
the Associate Director of the Mayo Clinic's Cytogenetics Laboratory and has
on-going research programs into the molecular pathology of prostate, breast and
ovarian cancers and gliomas. Dr. Jenkins has published 43 scientific articles on
the use of FISH to assess cancer pathology.
FRED R. KRAMER, PH.D., is Chairman, Department of Molecular Genetics, Public
Health Research Institute, New York, New York. Dr. Kramer is the co-author of
over 30 scientific articles; is the inventor or co-inventor on fundamental
patents covering QBR based diagnostic assays, which are exclusively licensed to
the Company; and has led active research on QBR assays since 1985.
DAVID H. LEDBETTER, PH.D., is Professor of Genetics and Director of the
Center for Medical Genetics, University of Chicago, Chicago, Illinois. He served
as Chief, Diagnostic Development Branch of the National Center for Human Genome
Research at the National Institutes of Health from 1993 to May 1996, is a
Founding Fellow of the American College of Medical Genetics, is on the Editorial
Board of HUMAN MOLECULAR GENETICS and is also the Chairman of the Company's
Scientific Advisory Board.
KENNETH L. MELMON, M.D., is Professor of Medicine and Molecular
Pharmacology, Stanford University School of Medicine, Department of Medicine and
Clinical Pharmacology, Stanford, California. Dr. Melmon was the Arthur L.
Bloomfield Professor of Medicine at Stanford University School of Medicine from
1978-1988; was the Chairman from 1978 to 1984 and Associate Chairman from 1989
to 1993 of the Department of Medicine at Stanford University School of Medicine;
is the Associate Dean for Postgraduate Medical Education; and serves as an
Editorial Board member or consultant for six scientific journals.
DAVID H. PERSING, M.D., PH.D., is Associate Professor, Department of
Laboratory Medicine and Pathology and Department of Clinical Microbiology, Mayo
Clinic, Rochester, Minnesota. Dr. Persing leads active research into infectious
disease diagnosis by nucleic acid detection; is the inventor of two pending U.S.
patent applications on detection of particular pathogens by nucleic acid
amplification assays; and serves as a regular reviewer for the NEW ENGLAND
JOURNAL OF MEDICINE.
DAN PINKEL, PH.D., is Professor, Department of Laboratory Medicine, UCSF
Cancer Center, University of California, San Francisco. Dr. Pinkel is the author
or co-author of over 50 publications on the uses of FISH; is the co-inventor of
U.S. patents on FISH probes for specific chromosomal locations and CGH; and
leads active research on gCGH assays.
HANS J. TANKE, PH.D., is Chairman, Department of Cytochemistry and
Cytometry, Sylvius Laboratory, Leiden University, Leiden, The Netherlands. Dr.
Tanke is the author or co-author of over 130 publications in the fields of
cytology and molecular biology; is a member of the Editorial Board of CYTOMETRY,
ANALYTICAL CELLULAR PATHOLOGY AND BIOIMAGING; is the Chairman of the EC Network
"FISH and Image Analysis"; and leads active research programs on detection of IN
SITU hybridization results.
STEPHEN T. WARREN, PH.D., is Investigator, Howard Hughes Medical Institute,
the William Patterson Timmie Professor of Human Genetics, and Professor of
Biochemistry and of Pediatrics at Emory University School of Medicine, Atlanta,
Georgia. Dr. Warren is a Founding Fellow of the American College of Medical
Genetics and is board certified in clinical cytogenetics and clinical molecular
genetics; is on the Editorial Boards of the AMERICAN JOURNAL OF MEDICAL
GENETICS, GENOMICS, MAMMALIAN GENOME, BIOCHEMICAL AND MOLECULAR MEDICINE, and
HUMAN MOLECULAR GENETICS; and leads active research into the molecular basis of
X chromosome-linked diseases and trinucleotide repeat expansion disorders.
58
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their ages as of
October 1, 1997 and their present positions with the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
John L. Bishop...................... 52 President, Chief Executive Officer and Director
George R. Kennedy................... 43 Senior Vice President, Sales and Marketing
Russel K. Enns...................... 48 Vice President, Regulatory Affairs
James J. Habschmidt................. 42 Vice President of Finance and Chief Financial Officer
James P. Marcella................... 54 Vice President, Operations
William E. Murray................... 44 General Counsel and Secretary
Steven A. Seelig.................... 48 Vice President, Research and Development and Chief Medical Officer
Robert C. Carr...................... 57 Chairman of the Board of Directors
William M. Bartlett................. 65 Director
Kenneth L. Melmon................... 62 Director
Walter R. Quanstrom................. 54 Director
Frank J. Sroka...................... 48 Director
Richard C. Williams................. 54 Director
</TABLE>
All Directors are elected to serve until the next annual meeting of
stockholders and until their successors are elected and qualified. Officers
serve at the pleasure of the Board of Directors.
MR. JOHN L. BISHOP has served as President and as a Director since November
1993 and became Chief Executive Officer in February 1996. Mr. Bishop has over 25
years experience in developing and operating diagnostics businesses. From 1991
until November 1993, Mr. Bishop was Chairman and Chief Executive Officer of
MicroProbe Corporation, a manufacturer of DNA probe diagnostics and therapeutics
and, from 1987 until 1991 of Source Scientific Systems, an original equipment
manufacturer of automated diagnostic systems. From 1984 until 1986, Mr. Bishop
was President and Chief Operating Officer of Gen-Probe, Inc., a developer and
manufacturer of DNA probe diagnostics for infectious diseases. From 1968 until
1984, Mr. Bishop held various management positions with American Hospital Supply
Company and its affiliates, including a three year assignment in Japan as an
Executive Vice President and Chief Executive Officer of International Reagents
Corp., a joint venture between American Hospital Supply Company and Green Cross
Corporation.
MR. GEORGE R. KENNEDY has served as Senior Vice President, Sales and
Marketing since September 1997. From April 1996 to September 1997 he served as
Vice President, Sales and Marketing. Prior to joining the Company in April 1996,
Mr. Kennedy was Director of Sales and Marketing of Difco Laboratories, a
microbiology diagnostic products manufacturer, from June 1992 to April 1996.
From May 1990 to June 1992, Mr. Kennedy was Director of Marketing for Dianon
Systems, Inc., an oncology reference laboratory.
DR. RUSSEL K. ENNS, PH.D. has served as Vice President, Regulatory Affairs
since he joined the Company in December 1995. Prior to joining the Company, Dr.
Enns was Vice President of Technical Affairs of MicroProbe Corporation from
February 1992 to November 1995. From August 1984 to February 1992, Dr. Enns held
several positions with Gen-Probe, Inc., including Director of Product
Development and Clinical Development and Director, Technical Affairs.
MR. JAMES J. HABSCHMIDT accepted the Company's offer to serve as Vice
President of Finance and Chief Financial Officer in August 1997. He is expected
to commence performance of his duties in
59
<PAGE>
November 1997. He is currently and since September 1993, has been, Vice
President, Development & Finance and Chief Financial Officer of Rand McNally &
Co., a maker and publisher of maps. From January 1991 to September 1993 he
served as Executive Vice President Operations & Finance of Silvestri
Corporation, a designer and marketer of home accessories. From 1986 until 1991,
Mr. Habschmidt was Vice President, Finance and Administration of Kewaunee
Scientific Corporation, a developer and manufacturer of laboratory equipment,
furnishings and accessories. From 1982 until 1986 he served in financial
management positions at American Hospital Supply Company prior to and after its
acquisition by Baxter International, a diagnostic product manufacturer.
MR. JAMES P. MARCELLA has served as Vice President, Operations since March
1994. Prior to then Mr. Marcella held various managerial positions in
manufacturing and operations with the Company since December 1991. From April
1990 to December 1991 he served as Chief Executive Officer of Betagen
Corporation, a biotechnology company.
MR. WILLIAM E. MURRAY, J.D., has served as Vice President and Secretary of
the Company since March 1994 and Assistant Secretary of the Company from
September 1992 to March 1994, while employed by Amoco. In January 1996, Mr.
Murray joined the Company as an executive officer, assuming the additional role
of General Counsel. Mr. Murray served from 1983 through 1995 in Amoco's Law
department in both attorney and patent attorney positions.
DR. STEVEN A. SEELIG, M.D., PH.D., has served as Vice President, Research
and Development and Chief Medical Officer since February 1996. He has held
various research management positions with the Company and its predecessors
since May 1989. Dr. Seelig was Associate Professor and Director of pediatric
endocrinology and metabolism at the University of Minnesota from 1985 to 1989.
MR. ROBERT C. CARR was appointed to the Board of Directors of the Company in
October 1993 and was elected Chairman of the Company's Board of Directors in
February 1997. Mr. Carr has served as President of ATC since October 1993. Mr.
Carr joined Amoco in 1990 and has held various positions with Amoco, including
Vice President of Chemicals Development and Diversification, Vice President and
Treasurer, Vice President of Planning and Administration, and Vice President and
Controller. He has served as Vice President Corporate Planning since May 1997.
MR. WILLIAM M. BARTLETT has been a Director since September 1997. Mr.
Bartlett is a director of Medco Research, Inc., an adenosine technology and
cardiovascular development company, and a director and Vice Chairman of Medicor
Corporation, a privately held manufacturer of minimally invasive surgical
instruments. Mr. Bartlett has a significant amount of experience in the health
care industry, having been Chief Executive Officer--Medical Products Group and
Corporate Vice President for G.D. Searle & Co., a manufacturer and distributor
of hospital equipment and diagnostic equipment from 1978 to 1982. He was also
President, Atlantic International Division of American Hospital Supply Company
from 1975 to 1978 and of the V. Mueller Surgical Instrument Division from 1971
to 1975.
DR. KENNETH L. MELMON, M.D., has been a Director since September 1997. Mr.
Melmon has been a Scientific Advisory Board member of the Company since August
1994. He is also a director of Epoch, Inc. a biotechnology corporation. Since
July 1994 he has been Associate Dean, Postgraduate Medical Education at Stanford
University School of Medicine. Dr. Melmon was Associate Chairman, Department of
Medicine at the Stanford University School of Medicine from July 1989 to July
1993 and was Chairman, Stanford University Hospital Technology Transfer Program
from July 1988 to July 1993. He was Chairman, Department of Medicine at the
Stanford University School of Medicine from 1978 to 1984 and has been Professor
of Medicine and Molecular Pharmacology since 1978.
DR. WALTER R. QUANSTROM, PH.D., has been a Director since September 1997.
Dr. Quanstrom is presently Vice President of Environment, Health and Safety and
has held such position with Amoco since 1987.
60
<PAGE>
MR. FRANK J. SROKA, J.D., was appointed to the Board of Directors of the
Company in September 1993. Mr. Sroka has served as General Attorney for Amoco
with responsibility for the legal matters of ATC and its subsidiaries since
September 1993. Prior to such position, Mr. Sroka held positions in the
Research, Patents & Licensing and Law departments of Amoco since 1970.
MR. RICHARD C. WILLIAMS has been a Director since September 1997. Mr.
Williams has served as President of Connor-Thoele Limited, a consulting and
financial advisory firm which serves the healthcare and pharmaceuticals industry
since March 1989. Mr. Williams has served as Chairman of the Board of Directors
since October 1992 and as a director of Medco Research, Inc. since January 1991,
as a director of Centaur, Inc., a private equine diagnostic company, since
January 1991 and as a director of Immunomedics, Inc., a biopharmaceutical
research company, since March 1993. Prior to these positions Mr. Williams has
gained extensive experience in the healthcare industry, most notably as Vice
President and Chief Financial Officer of Erbamont, N.V., a pharmaceutical
company, and at Abbott Laboratories and American Hospital Supply Company where
he held a variety of financial management positions.
The Board of Directors has established Audit and Compensation Committees.
The members of the Audit Committee are Messrs. Bartlett, Sroka and Williams. The
Audit Committee is empowered by the Board of Directors to review the financial
books and records of the Company in consultation with the Company's accounting
staff and its independent auditors and to review with the accounting staff and
independent auditors any questions raised with respect to accounting and
auditing policy and procedure. The members of the Compensation Committee are
Messrs. Bartlett, Carr, Melmon, and Williams. The Compensation Committee will
make recommendations to the Board of Directors as to general levels of
compensation for all employees of the Company and the annual salary of each of
the executive officers of the Company. In addition, the Compensation Committee
will grant options to employees under the Company's option plan, and review and
approve compensation and benefit plans of the Company.
61
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the amounts paid during the fiscal year ended
December 31, 1996 by the Company to (i) the Company's Chief Executive Officer
(the "CEO") and (ii) the four other most highly compensated executive officers
(the "Named Executive Officers") whose compensation exceeded $100,000 for
services rendered to the Company.
<TABLE>
<CAPTION>
STOCK ALL OTHER
NAMES AND PRINCIPAL POSITION SALARY BONUS OPTIONS# COMPENSATION(1)
- -------------------------------------------------------------- ---------- --------- ----------- ----------------
<S> <C> <C> <C> <C>
John L. Bishop................................................ $ 210,000 $ 36,500 131,386 $ 18,946
President and
Chief Executive Officer
Steven A. Seelig.............................................. 130,200 -- 65,693 4,007
Vice President
Research and Development and
Chief Medical Officer
James P. Marcella............................................. 125,000 15,000 32,846 3,822
Vice President
Operations
George R. Kennedy............................................. 123,258 -- 36,496 36,480
Senior Vice President
Sales and Marketing
Russel K. Enns................................................ 110,000 -- 21,897 635
Vice President
Regulatory Affairs
</TABLE>
- ------------------------
(1) Amounts represent the Company's 401(k) contributions made on behalf of each
of the named individuals and the reimbursement of relocation expenses in the
amounts of $14,446 for Mr. Bishop and $34,305 for Mr. Kennedy.
DIRECTOR COMPENSATION
Messrs. Bartlett, Melmon and Williams will each receive a fee of $2,000 per
month and $2,000 per board meeting attended. None of the remaining directors
will receive any compensation for serving on the Board of Directors.
62
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes options to purchase shares of the Company's
common stock granted during the fiscal year ended December 31, 1996 to the
Company's CEO and the Named Executive Officers. The amounts shown as potential
realizable values on the options identified in the table are based on assumed
annualized rates of appreciation in the price of the Common Stock of five
percent and ten percent over the term of the options, as set forth in the rules
of the Securities and Exchange Commission. Actual gains, if any, on stock option
exercises depend on the future performance of the common stock. There can be no
assurance that the potential realizable values reflected in this table will be
achieved.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SHARES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- -------------------------------------- ----------- --------------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
John L. Bishop........................ 131,386 16.9% $ 0.53 11/1/05 $ 44,148 $ 111,881
Steven A. Seelig...................... 65,693 8.4 0.53 11/1/05 22,074 55,940
James P. Marcella..................... 32,846 4.2 0.53 11/1/05 11,037 27,970
George R. Kennedy..................... 36,496 4.7 0.53 4/8/06 12,263 31,078
Russel K. Enns........................ 21,897 2.8 0.53 12/1/05 7,358 18,647
</TABLE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth for the Company's CEO and the Named Executive
Officers aggregated information concerning each exercise of stock options during
the fiscal year ended December 31, 1996, and the fiscal year-end value of
unexercised options.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END
(#) ($)(1)
---------------- -------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- --------------------------------------------------- --------------- ------------- ---------------- -------------------
<S> <C> <C> <C> <C>
John L. Bishop..................................... -- -- 38,322/93,064 $ 84,528/$205,272
Steven A. Seelig................................... -- -- 19,161/46,532 42,264/102,636
James P. Marcella.................................. -- -- 9,581/23,265 21,133/51,317
George R. Kennedy.................................. -- -- 0/36,496 0/80,500
Russel K. Enns..................................... -- -- 5,930/15,967 13,080/35,220
</TABLE>
- ------------------------
(1) Based on a December 31, 1996 estimate of fair market value of $2.74 per
share.
STOCK INCENTIVE PLAN
The Company has adopted and the stockholder of the Company has approved, the
Vysis, Inc. 1996 Stock Incentive Plan (the "Stock Incentive Plan"). The
committee appointed under the Stock Incentive Plan may make awards of stock
options (both incentive and nonqualified) and rights to purchase shares of
restricted stock to officers, employees, board members and service providers of
the Company; provided, however, that incentive stock options ("ISOs") can be
awarded only to officers or other key employees of the Company.
63
<PAGE>
Options may be granted at not less than 100% of the fair market value of the
Common Stock of the Company on the date of grant (or 110% of the fair market
value if the option is an ISO and the grantee is a 10% shareholder of the
Company or its affiliates). Options granted under the Incentive Plan are
generally exercisable for a period specified at the time of grant, not to exceed
10 years from the date of grant (5 years for an ISO granted to a 10%
shareholder). ISOs are also subject to other requirements imposed by section 422
of the Internal Revenue Code of 1996.
Upon a change in control of the Company (as defined in the Stock Incentive
Plan), all unexercised stock options and purchase rights shall become fully
exercisable.
The maximum number of shares of Common Stock reserved for issuance under the
Stock Incentive Plan is 985,401 shares, subject to adjustment as provided in the
Stock Incentive Plan to reflect certain corporate transactions affecting the
number or type of outstanding shares.
CONSULTING AGREEMENTS
Prior to their appointment to the Board of Directors in September 1997, each
of Messrs. Bartlett, Melmon and Williams was a party to an advisory board
consulting agreement with the Company pursuant to which each of such individuals
provided consulting services to the Company through service on the Company's
advisory board. Such advisory board had been maintained since August 1994 for
the purpose of rendering informal advice to the Company regarding medical and
technology issues as well as business, operational and financial matters. Under
such consulting agreements, these individuals were paid the following amounts in
1994, 1995, 1996 and through June 30, 1997, respectively: Mr. Bartlett, $18,136,
$36,557, $87,572 and $30,365; Mr. Melmon, $13,551, $53,891, $82,396 and $22,656;
and Mr. Williams, $19,124, $38,178, $64,236 and $32,352. (In the case of Mr.
Williams, the amounts shown include amounts paid to Connor-Thoele Limited, an
advisory firm of which Mr. Williams is president). In addition, as consideration
for rendering such consulting services, the Company granted during 1996 to each
of the foregoing individuals, options to purchase 18,248 shares of Common Stock
at an exercise price of $0.53 per share. In February 1997, such individuals were
granted additional options to purchase an aggregate of 25,546 shares of Common
Stock at an exercise price of $2.74 per share as follows: Mr. Bartlett, 7,299
shares; Mr. Melmon, 10,948 shares; and Mr. Williams, 7,299 shares. Such
consulting agreements have been terminated.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation information with respect to the Company's CEO and the Named
Executive Officers for 1996 reflects compensation earned while the Company was
an indirect, wholly owned subsidiary of Amoco. During 1996, the Company had no
compensation committee. Executive compensation levels during 1996 were
established by the Company's Board of Directors.
64
<PAGE>
PRINCIPAL STOCKHOLDER AND SECURITIES OWNERSHIP OF MANAGEMENT
OWNERSHIP OF COMPANY COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of Common Stock by each person known by the Company to be the
beneficial owner of 5% or more of the outstanding Common Stock, by each of the
Company's directors and the Named Executive Officers and by all directors and
executive officers of the Company as a group, as of October 1, 1997, and as
adjusted for the sale by the Company of the shares in the offering. The
beneficial ownership reflected in the following table is calculated in
accordance with Section 13(d) of the Exchange Act after giving effect to the
conversion of all outstanding Preferred Stock into Common Stock. Unless
otherwise indicated, ownership includes sole voting and investment power.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY
OWNED AFTER THE
BEFORE THE OFFERING(1) OFFERING(1)
-------------------------- ---------------------
NAME NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------------------------ ------------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Amoco Corporation................................................. 5,987,682(2) 99.8% 5,987,682 63.0%
200 East Randolph Drive
Chicago, Illinois 60601
John L. Bishop.................................................... 68,429 1.1 68,429 *
Russel K. Enns.................................................... 10,948 * 10,948 *
George R. Kennedy................................................. 15,205 * 15,205 *
James P. Marcella................................................. 17,107 * 17,107 *
Steven A. Seelig.................................................. 34,215 * 34,215 *
William M. Bartlett............................................... 7,222 * 7,222 *
Robert C. Carr.................................................... -- * -- *
Kenneth L. Melmon................................................. 7,222 * 7,222 *
Walter R. Quanstrom............................................... -- * -- *
Frank J. Sroka.................................................... -- * -- *
Richard C. Williams............................................... 7,222 * 7,222 *
Directors and Executive Officers as a Group (12 persons).......... 175,173 2.8 175,173 1.8
</TABLE>
- ------------------------
* Less than 1%
(1) Except in the case of Amoco, shares listed as beneficially owned represent
shares subject to options granted by the Company, which are exercisable
within 60 days of October 1, 1997.
(2) Includes 1,058,394 outstanding shares of Common Stock, 4,929,288 shares of
Common Stock issuable upon conversion of the Company's outstanding Series A
and Series B Preferred Stock. All such shares of Common Stock and Preferred
Stock are owned of record by ATC, a wholly owned subsidiary of Amoco.
OWNERSHIP OF PARENT STOCK
The following table sets forth at October 6, 1997, the ownership of common
stock, no par value per share, of Amoco Corporation by the Company's directors,
the Named Executive Officers, and all directors and executive officers of the
Company as a group. Unless otherwise indicated, the persons named below have
sole voting and investment power with respect to the shares beneficially owned
by them. The directors
65
<PAGE>
and executive officers of Vysis own in the aggregate less than one percent of
the common stock of Amoco Corporation.
<TABLE>
<CAPTION>
TOTAL SHARES
BENEFICIALLY
NAME OWNED(1)
- -------------------------------------------------------------------------------------------- --------------------
<S> <C>
John L. Bishop.............................................................................. 55
Russel K. Enns.............................................................................. --
George R. Kennedy........................................................................... --
James P. Marcella........................................................................... --
Steven A. Seelig............................................................................ 3,886
William M. Bartlett......................................................................... --
Robert C. Carr.............................................................................. 59,547
Kenneth L. Melmon........................................................................... --
Walter R. Quanstrom(2)...................................................................... 71,956
Frank J. Sroka(3)........................................................................... 29,550
Richard C. Williams......................................................................... --
Directors and Executive Officers as a Group (12 persons)(2)(3).............................. 167,422
</TABLE>
- ------------------------
(1) The share amounts include those shares as to which the following persons had
a right to acquire beneficial ownership by exercising stock options as of
October 6, 1997, or within 60 days after that date: Mr. Seelig, 800 shares;
Mr. Carr, 59,500 shares; Mr. Quanstrom, 55,000 shares; Mr. Sroka, 19,800;
and all directors and executive officers as a group, 135,100 shares. Also
included are shares owned in the Amoco Performance Share Plan and those
allocable to the Amoco Stock Fund accounts of participants in the Amoco
Employee Savings Plan.
(2) Includes 500 shares as to which Mr. Quanstrom shares voting and dispositive
authority.
(3) Includes 2,068 shares as to which Mr. Sroka shares voting and dispositive
authority.
CERTAIN TRANSACTIONS
Prior to the consummation of this offering, the Company operated as a
subsidiary of Amoco. In connection therewith, the Company engaged in a variety
of transactions with Amoco and may continue to do so on a more limited basis in
the future.
The Company has in the past received certain legal services (internal and
external), research and development support, and administrative support from
Amoco and has paid for such services and support on an actual usage or pro rata
basis. The amount of these costs allocated to the Company aggregated
$11,569,000, $3,058,000, $452,000 and $123,000 in 1994, 1995, 1996 and the six
months ended June 30, 1997, respectively. Amoco has informed the Company that it
does not intend to provide any such services or support after completion of this
offering. In addition, the Company received funding requirements and assets from
Amoco.
The costs of these services, funding requirements and asset transfers were
accounted for by Amoco as intercompany receivables from Vysis. These receivables
were periodically converted into equity of Vysis. This investment by Amoco in
the Company aggregated $22,445,000, $15,384,000 and $2,315,000 in 1994, 1995 and
1996. Additionally in 1996, such amounts were also represented by a note payable
to Amoco. At December 31, 1996, the balance of the note payable was $5,106,000.
In 1997, the sharing of costs and funding has continued, however, the
outstanding balance will not be treated as additional capital but instead is
represented by a promissory note that bears interest at 7.5% per annum. At June
30, 1997, the balance of the notes payable was $10,193,000 due from the Company
to Amoco. Amoco will fund ongoing cash requirements through the completion of
this offering resulting in an increase to the 1997 note payable. This note will
be retired with a portion of the proceeds of this offering. Amoco has advised
the
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Company that it does not intend to continue such funding after completion of
this offering. See "Use of Proceeds."
The Company and Amoco will enter into a Cooperation Agreement, which sets
out the terms on which Amoco and the Company will cooperate after the closing of
this offering in handling various matters. These matters include (i)
documentation of the assignment to the Company of certain intellectual property
rights, (ii) the Gen-Probe litigation, (iii) retention by Amoco of certain
liabilities relating to discontinued operations, and (iv) access to Amoco's and
the Company's business records. See "Business-- Litigation."
Prior to the completion of this offering, the Company has been included in
the consolidated or combined federal and state income tax returns of Amoco. For
periods after the completion of this offering, the Company will no longer be
included in Amoco's federal consolidated returns, although it may continue to be
included in one or more state or local combined returns. Pursuant to a Tax
Allocation Agreement, for periods during which the Company is included in
Amoco's federal consolidated return, the Company generally receives no credit
for tax benefits accruing during such periods to other members of the Amoco
consolidated group as a result of any deductions or losses incurred by the
Company; except that beginning in 1996, debt obligations of the Company owed to
Amoco are to be reduced to the extent of any such tax benefits. For any combined
state or local return in which the Company is included, the Company pays Amoco,
or Amoco pays the Company, as the case may be, on the basis of a comparison
between the actual combined tax liability and the liability that would have
arisen had the Company been excluded.
Immediately prior to the completion of this offering, Vysis and Amoco will
enter into a registration rights agreement (the "Registration Agreement")
pursuant to which Vysis will grant Amoco registration rights under the
Securities Act with respect to the shares of Common Stock owned by Amoco. Under
the Registration Agreement, Amoco will have the right commencing 180 days after
the date of this Prospectus to demand that the Company register its shares under
the Securities Act. However, Amoco has agreed with the Underwriters that it will
not sell any shares of Common Stock for a period of one year following the date
of this Prospectus without the prior written consent of Furman Selz LLC. See
"Underwriting." Under the Registration Agreement, Amoco may only sell securities
under one effective demand registration per calender year and the right may only
be exercised with respect to specified minimum amounts of shares of Common
Stock. The Company may postpone such a demand under certain circumstances. Amoco
will have the right to include shares of Common Stock owned by it in any
registration proposed by the Company under the Securities Act, subject to
certain limitations.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, $0.001 par value, and 10,000,000 shares of Preferred Stock, $0.001
par value. Upon completion of this offering there will be 9,501,260 shares of
Common Stock outstanding (10,026,260 shares if the Underwriters' over-allotment
option is exercised in full), and no shares of Preferred Stock outstanding. The
authorized and unissued shares of the Preferred Stock and Common Stock may be
utilized for a variety of corporate purposes, including future public offerings
and corporate acquisitions, and could be utilized, under certain circumstances,
as a method of preventing or making more difficult a takeover or change in
control of the Company.
COMMON STOCK
Prior to completion of the offering 1,071,972 shares of Common Stock were
issued and outstanding and were held of record by six holders. All such shares
are validly issued, fully paid and nonassessable. All shares of Common Stock are
entitled to participate in dividends, subject to preference rights of holders of
the Preferred Stock, when, as and if declared by the Board of Directors out of
funds legally available therefor, are entitled to participate equally in the
assets of the Company, after paying or setting aside
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sufficient assets to fully pay the preferential amounts owed to holders of
Preferred Stock, in the event of liquidation, and have no right of conversion,
redemption, preemptive or preferential rights to subscribe for any additional
shares of any class of capital stock of the Company, whether now or hereafter
authorized. Holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders. Such voting rights are
non-cumulative, so that stockholders holding more than 50% of the outstanding
shares entitled to vote are able to elect all members of the Board of Directors.
See "Risk Factors--Continued Control by Principal Stockholder."
PREFERRED STOCK
No shares of Preferred Stock will be outstanding after this offering. The
Board of Directors is authorized to issue, by resolution and without any action
by stockholders, up to 10,000,000 shares of Preferred Stock and may establish
the designations, dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preference, sinking fund terms and all other
preferences, relative rights and limitations of the shares of each series of
Preferred Stock.
SERIES A PREFERRED STOCK.
Prior to the completion of this offering, 6,200,000 shares of Preferred
Stock are issued and outstanding, designated as Series A Preferred Stock.
CONVERSION INTO COMMON STOCK. Each share of Series A Preferred Stock is
convertible at any time, at the option of the holder, into shares of Common
Stock. The Series A Preferred Stock will automatically convert into an aggregate
of 4,525,547 shares of Common Stock upon completion of this offering.
VOTING RIGHTS. Each share of Series A Preferred Stock is entitled to a
number of votes per share equal to the number of shares of Common Stock into
which such share is then convertible. Each holder of Series A Preferred Stock is
entitled to vote on all matters submitted to a vote of the holders of the Common
Stock, voting together as a single class.
DIVIDENDS. Holders of Series A Preferred Stock are entitled to receive,
before any dividends are declared and set aside for any class or series of stock
ranking as to dividends or upon liquidation junior to the Series A Preferred
Stock, when, as and if declared by the Board of Directors, dividends in cash
equal to six percent per annum times the liquidation preference (initially
$8.064) per share. Such dividends are cumulative, and unless such cumulative
dividends are paid, no sums may be set aside for or applied to the purchase or
redemption of, and no dividends may be declared or paid or any other
distribution ordered or made upon, any shares of any class or series of stock
ranking as to dividends or upon liquidation junior to the Series A Preferred
Stock. Holders of Series A Preferred Stock are also entitled to share in any
dividends paid on the Common Stock in an amount equal to the product of the per
share amount of such dividend times the number of shares of Common Stock into
which such Series A Preferred Stock is then convertible.
LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary, the holders of Series A
Preferred Stock are entitled to receive out of the assets of the Company legally
available for distribution to stockholders, prior and in preference to any
distribution of any assets to the holders of Common Stock or any stock ranking
junior in liquidation to the Series A Preferred Stock, the sum of $8.064 per
share plus any unpaid dividends with respect to such shares. If the assets of
the Company available for distribution are insufficient to pay the holders of
Series A Preferred Stock the amounts to which they are entitled, the holders of
Series A Preferred Stock share ratably in any such distribution of assets. After
payment to the holders of Series A Preferred Stock as described above, the
entire remaining assets of the Company legally available for distribution are to
be distributed among the holders of the Series A Preferred Stock and the Common
Stock in proportion to
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number of shares of Common Stock into which such Series A Preferred shares are
convertible, or the number of shares of Common Stock held by such holders, as
the case may be.
SERIES B PREFERRED STOCK.
Prior to the completion of this offering, 553,126 shares of Preferred Stock
are issued and outstanding, designated as Series B Preferred Stock. The Series B
Preferred Stock is identical to the Series A Preferred Stock except that the
liquidation preference of the Series B Preferred Stock is equal to $9.23 per
share. The Series B Preferred Stock will automatically convert into an aggregate
of 403,741 shares of Common Stock upon completion of this offering.
DELAWARE ANTI-TAKEOVER LAW
The Company is a Delaware corporation that is subject to Section 203 of the
Delaware General Corporation Law ("Section 203"). Under Section 203 certain
"business combinations" between a Delaware corporation, whose stock generally is
publicly traded or held of record by more than 2,000 stockholders, and an
"interested stockholder" are prohibited for a three-year period following the
date that such stockholder became an interested stockholder, unless (i) the
corporation has elected in its certificate of incorporation not to be governed
by Section 203 (the Company has not made such election), (ii) the business
combination was approved by the board of directors of the corporation before the
other party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan) or (iv) the business combination is approved by the board of directors
of the corporation and ratified by two-thirds of the voting stock which the
interested stockholder did not own. The three-year prohibition also does not
apply to certain business combinations proposed by an interested stockholder
following the announcement or notification of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of a majority of the corporation's directors. The
term "business combination" is defined generally to include mergers or
consolidations between a Delaware corporation and an interested stockholder,
transactions with an interested stockholder involving the assets or stock of the
corporation or its majority-owned subsidiaries, and transactions which increase
an interested stockholder's percentage ownership of stock. The term "interested
stockholder" is defined generally as those stockholders who become beneficial
owners of 15% or more of a Delaware corporation's voting stock, together with
the affiliates or associates of that stockholder.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is
.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock.
Future sales of substantial amounts of Common Stock in the public market
following this offering could adversely affect the prevailing market price of
the Common Stock.
Upon completion of this offering, the Company will have 9,501,260 shares of
Common Stock outstanding. Of these shares, the 3,500,000 shares sold in the
offering will be freely tradeable without restriction under the Securities Act,
except any shares purchased by persons deemed to be "affiliates" of the Company
which will be subject to certain resale limitations of Rule 144 under the
Securities Act. The remaining shares, all but 13,578 of which will be owned by
Amoco, will be "restricted securities" within the meaning of Rule 144 and may
not be sold unless registered under the Securities Act or sold in accordance
with an exemption therefrom, such as Rule 144 or Rule 701 thereunder.
In general, under Rule 144, as currently in effect, if a period of at least
one year has elapsed between the later of the date on which "restricted
securities" were acquired from the Company or an "affiliate" of the Company then
the holder of such restricted securities is entitled to sell a number of shares
within any three-month period that does not exceed the greater of (i) one
percent of the then outstanding shares of the Common Stock (approximately 95,000
after the offering) or (ii) the average weekly reported volume of trading of the
Common Stock during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain requirements pertaining to the manner of
such sales, notices of such sales and the availability of current public
information concerning the Company. Affiliates of the Company may sell shares
not constituting restricted shares in accordance with the foregoing volume
limitations and other requirements but without regard to the one-year period.
Under Rule 144(k), if a period of at least two years has elapsed between the
later of the date on which restricted shares were acquired from the Company or
the date on which they were acquired from an affiliate of the Company, a holder
of such restricted shares who is not an affiliate of the Company at the time of
the sale and has not been an affiliate of the Company for at least three months
prior to the sale would be entitled to sell the shares immediately without
regard to the volume limitations and other conditions described above. Amoco is
an affiliate of the Company and could begin selling shares of Common Stock of
the Company owned by it pursuant to Rule 144 subject to the volume restrictions
described above.
Rule 701 may be relied upon with respect to the resale of securities
originally purchased from the Company by its employees, directors, officers,
consultants or advisers prior to the closing of this offering, pursuant to
written compensatory benefit plans or written contracts relating to the
compensation of such persons. Securities issued in reliance on Rule 701 are
restricted securities and, beginning 90 days after the date of this Prospectus,
may be sold by non-affiliates subject only to the manner of sale provisions of
Rule 144, and by affiliates under Rule 144 without compliance with its one-year
minimum holding period requirement.
The Company has agreed that during the period beginning from the date of
this Prospectus and continuing to and including the date 180 days after the date
of this Prospectus, not to offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock, any securities of the Company that are substantially
similar to the shares of the Common Stock or that are convertible or
exchangeable into securities that are substantially similar to the shares of the
Common Stock (other than pursuant to employee stock option plans existing on the
date of this Prospectus) without the prior written consent of Furman Selz LLC,
except for the shares of Common Stock offered in connection with this offering.
The Company has also agreed to require, pursuant to its rights under the Stock
Incentive Plan, that each option holder not sell or otherwise transfer or
dispose of any shares of Common Stock acquired upon exercise of such holders'
options, without the prior written consent of Furman Selz LLC, during the same
180 day period. Amoco has agreed that during the period beginning from the date
of this Prospectus and continuing to and including the date one year after the
date of this Prospectus, not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock, any securities of the Company that are
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substantially similar to the shares of Common Stock or that are convertible or
exchangeable into Common Stock or securities, which are substantially similar to
the shares of Common Stock without the prior written consent of Furman Selz LLC.
See "Underwriting."
The Company will grant Amoco registration rights with respect to shares of
Common Stock owned by Amoco. See "Certain Transactions."
The Company intends to file, shortly after completion of this offering, a
registration statement covering all 971,823 shares of Common Stock reserved for
issuance under the Stock Incentive Plan. Following the registration of such
shares, all shares purchased under such plan will be available for resale to the
public market without restriction, except that affiliates of the Company must
comply with the provisions of Rule 144 other than the holding period
requirement.
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UNDERWRITING
Each of the Underwriters named below (collectively, the "Underwriters"), for
which Furman Selz LLC, Deutsche Morgan Grenfell Inc. and EVEREN Securities, Inc.
are acting as representatives (the "Representatives"), have severally agreed,
subject to the terms and conditions set forth in the underwriting agreement
dated as of , 1997 (the "Underwriting Agreement"), to purchase, and
the Company has agreed to sell to each of the Underwriters, the aggregate number
of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Furman Selz LLC..................................................................
Deutsche Morgan Grenfell Inc.....................................................
EVEREN Securities, Inc...........................................................
----------
Total........................................................................ 3,500,000
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters are subject to the approval of certain legal matters by counsel and
various other conditions. The nature of the Underwriters' obligations is such
that they are committed to purchase all of the above shares if any are
purchased. The Representatives have advised the Company that the Underwriters
propose to offer the shares of Common Stock directly to the public at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may re-allow, a concession not in
excess of $ per share to certain other dealers. After the offering, the
offering price and other selling terms may be changed by the Representatives.
Prior to the offering made hereby, there has been no public market for the
Common Stock. Accordingly, the initial public offering price for the Common
Stock will be determined by negotiations among the Company and the
Representatives. Among the factors to be considered in such negotiations are the
Company's results of operations and current financial condition, estimates of
the business potential and prospects of the Company, the experience of the
Company's management, the economics of the industry in general, the general
condition of the equities market and other relevant factors. There can be no
assurance that any active trading market will develop for the Common Stock or as
to the price at which the Common Stock may trade in the public market from time
to time subsequent to the offering.
Certain persons participating in the offering may over-allot or effect
transactions that stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids or effecting syndicate covering
transactions. A stabilizing bid means the placing of any bid or the effecting of
any purchase, for the purpose of pegging, fixing or maintaining the price of the
Common Stock. A syndicate covering transaction means the placing of any bid on
behalf of the underwriting syndicate or the effecting of any purchase to reduce
a short position created in connection with the offering. Such transactions may
be effected on the Nasdaq National Market, in the over-the-counter market, or
otherwise. Such stabilizing, if commenced, may be discontinued at any time.
The Company has granted to the Underwriters an option, expiring 30 days from
the date of this Prospectus, to purchase up to 525,000 additional shares of
Common Stock on the same terms as set forth on the cover page of this
Prospectus, solely to cover over-allotments, if any, incurred in the sale of the
shares of Common Stock offered hereby. If the Underwriters exercise the option,
each Underwriter will have a firm commitment, subject to certain conditions, to
purchase such number of additional shares of Common Stock as is proportional to
such Underwriter's initial commitment to purchase shares from the Company.
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The Company has agreed that during the period beginning from the date of
this Prospectus and continuing to and including the date 180 days after the date
of this Prospectus, not to offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock, any securities of the Company that are substantially
similar to the shares of the Common Stock or that are convertible or
exchangeable into securities that are substantially similar to the shares of the
Common Stock (other than pursuant to employee stock option plans existing on the
date of this Prospectus) without the prior written consent of Furman Selz LLC,
except for the shares of Common Stock offered in connection with this offering.
The Company has also agreed to require, pursuant to its rights under the Stock
Incentive Plan, that each option holder not sell or otherwise transfer or
dispose of any shares of Common Stock acquired upon exercise of such holders'
options without the prior written consent of Furman Selz LLC during the same 180
day period. Amoco has agreed that during the period beginning from the date of
this Prospectus and continuing to and including the date one year after the date
of this Prospectus, not to offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock, any securities of the Company that are substantially
similar to the shares of Common Stock or that are convertible or exchangeable
into Common Stock or securities that are substantially similar to the shares of
Common Stock without the prior written consent of Furman Selz LLC.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
The principal address of Furman Selz LLC is 230 Park Avenue, New York, New
York 10169. The principal address of Deutsche Morgan Grenfell Inc. is 31 West
52nd Street, New York, New York 10019. The principal address of EVEREN
Securities, Inc. is 77 West Wacker Drive, 31st Floor, Chicago, Illinois 60601.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Mayer, Brown & Platt, Chicago, Illinois. Certain legal
matters relating to this offering will be passed upon for the Underwriters by
Willkie Farr & Gallagher, New York, New York.
EXPERTS
The consolidated financial statements as of December 31, 1995 and 1996 and
for each of the three years in the period ended December 31, 1996 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
Certain statements set forth in this Prospectus under the captions "Risk
Factors--Uncertain Ability to Practice Technology," "Business--Ability to
Practice Technology," "Business--Litigation" and "Business--Patents and License
Rights and Proprietary Information" have been passed upon by McCutchen, Doyle,
Brown & Enerson, San Francisco, California, patent counsel to the Company, as
experts on such matters, and are included herein based upon that review and
approval.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (the "Registration
Statement," which term shall include any and all amendments, exhibits, annexes
and schedules thereto) under the Securities Act with respect to the shares of
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the
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Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and such Common Stock, reference is
hereby made to such Registration Statement, which can be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the
Commission at Seven World Trade Center, New York, New York 10048 and 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material also can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. In addition, the Registration
Statement may be accessed electronically at the Commission's site on the World
Wide Web at http://www.sec.gov.
Statements contained in this Prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference.
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the offering of the Company's Common Stock, the Company will become
subject to the informational requirements of the Exchange Act. The Company
intends to furnish its stockholders with annual reports containing financial
statements audited by independent accountants.
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ANNEX
GLOSSARY
AMNIOCENTESIS: An invasive procedure used to test for fetal abnormalities in
which amniotic fluid (which contains fetal cells) is withdrawn by syringe and
needle from the amniotic sac surrounding the fetus.
AMNIOCYTE: A particular type of embryo cell that is contained within amniotic
fluid. Cells contained in the amniotic fluid are sloughed off from the fetus and
are representative of the genetic make-up of the fetus.
AMPLIFICATION: An increase in amount or intensity. Gene amplification refers to
an increase in the number of copies of a gene beyond the normal number. This
occurs spontaneously in many forms of cancer. Amplification also refers to the
copying of gene sequences, for example, as in PCR or Q-beta replicase
amplification, to increase the number of copies of gene sequences available for
detection.
ANEUPLOIDY: See Aneusomy.
ANEUSOMY: Having an abnormal number of chromosomes other than the normal pair
per cell. Also termed aneuploidy.
ARRAY: A matrix of DNA probes that are attached to a solid surface, where the
identity of each probe and its location on the surface is known.
BAC (BACTERIAL ARTIFICIAL CHROMOSOME): Used for molecular cloning of DNA
fragments that are approximately 100 to 200 kilobases in length.
BANDING: A technique of staining chromosomes to produce a characteristic pattern
of lateral bands across a metaphase chromosome.
BASE: Refers to the part of a nucleotide in a DNA molecule such as Adenine,
Thymine, Guanine or Cytosine, which chemically distinguishes them from one
another.
BASE PAIR (BP): Base pair refers to a complementary set of nucleotides in DNA.
Adenine (A) is always paired to thymine (T), and guanine (G) is always paired to
cytosine (C). A thousand base pairs is one kilobase (kb). The base pair is a
unit of measurement of the length of double stranded DNA sequence.
CELL: The smallest unit of living structure capable of independent existence,
composed of a membrane-enclosed mass of protoplasm and containing a nucleus.
CENTROMERE OR CENTROMERIC REGION: The constricted region usually near the center
of a chromosome consisting of highly repeated DNA sequences.
CHEMOTHERAPY: The use of drugs (such as methotrexate and adriamycin) in the
treatment or control of diseases.
CHORIONIC VILLI: Fingerlike projections extending from the vascular region of
the membrane surrounding the fetus to the uterine lining. The cells in this
tissue have the same genetic profile as that of the embryo and therefore can be
used to detect genetic defects of the embryo.
CHORIONIC VILLI SAMPLING (CVS): A procedure used to obtain a specimen of
chorionic villi for the purposes of prenatal diagnosis at 8 to 10 weeks
gestation.
CHROMOSOME: Structure in a cell on which genes are located, consisting of a
highly compacted stretch of DNA with associated proteins.
C-MYC: An oncogene found on chromosome 8 at locus 8q24. Translocation or
amplification of this oncogene may result in cancer.
COMPARATIVE GENOMIC HYBRIDIZATION (CGH): A method for analyzing DNA for
unbalanced genetic alterations. Using CGH one can observe the gains and losses
of whole chromosomes or parts of chromosomes.
CONTIG: A set of DNA clones or probes which collectively span, without gaps, a
particular gene region.
A-1
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CRI-DU-CHAT SYNDROME: A non-hereditary congenital disease caused by the loss of
DNA on the short arm of chromosome 5.
CYSTOSCOPY: The use of a flexible scope inserted through the urethra to examine
the bladder.
CYTOGENETICS: The study of heredity, human chromosomes and their abnormalities.
CYTOLOGY: The study of cells, their formation, structure, function and
pathology.
DENATURATION: The separation of double stranded chromosomal DNA into its
component single strands.
DIRECT LABELING: The attachment of a fluorophore directly onto a DNA probe.
DNA: An acronym for deoxyribonucleic acid, the chemical basis of heredity. DNA
contains all the information necessary for any organism to develop and function.
The four chemical building blocks of DNA are Adenine, Thymine, Cytosine and
Guanine.
DOWN SYNDROME: A non-hereditary congenital disease caused by an extra copy of
chromosome 21 (trisomy 21).
FLUORESCENCE: Visible light of various colors that is emitted by certain
fluorescent molecules when irradiated with light of a particular wavelength.
FLUORESCENCE IN SITU HYBRIDIZATION (FISH): A technique utilizing a fluorophore
labeled DNA probe to detect a particular chromosome or gene that is visualized
by fluorescence microscopy.
FLUOROPHORE: A fluorescent dye that may be attached to another molecule such as
a DNA probe which emits fluorescent light to detect the presence or location of
the molecule.
GENE: A functional unit of heredity which occupies a specific place or locus on
a chromosome.
GENE AMPLIFICATION: Increase in the normal copy number of a gene.
GENE DELETION: Loss of a copy of a gene.
GENE EXPRESSION: The process by which a gene's coded information creates the
structures present and operating in the cell. Expressed genes include those that
are transcribed into the mRNA and then translated into protein and those that
are transcribed into RNA but not translated into protein.
GENE TRANSLOCATION: Movement of a gene from its normal chromosomal location to
another location on the same or different chromosome.
GENOME: The entire complement of genetic material of an organism.
GENOMIC DNA: DNA representative of the entire genome.
GENOMIC DIAGNOSTICS: An emerging field that seeks to develop new genetic tests
based on correlations between genetic abnormalities and disease.
HER-2/NEU: An oncogene associated with progression of certain cancers, e.g.,
breast and ovarian.
HYBRIDIZATION (E.G., DNA HYBRIDIZATION): The binding of complementary sequences
of DNA or RNA through specific base pairing of A:T and G:C.
IN SITU: In the natural or original position in the cell.
IN SITU HYBRIDIZATION: Hybridization occurring within an intact cell.
IN VITRO: Outside the living body.
INTERPHASE: The period of the cell cycle when the cell is not actively dividing.
IVF (IN VITRO FERTILIZATION): A process in which fertilization occurs between an
egg and sperm in an artificial environment outside of the body.
KARYOTYPE: The chromosomal characteristics (number, size and morphology) of an
individual cell, usually presented as a systematized display.
A-2
<PAGE>
KARYOTYPING: The process of generating a karyotype which is documented by the
use of a photomicrograph or a digital image generated by a genetic workstation.
METAPHASE: The stage of cell division when chromosomes are aligned at the center
of the cell prior to separation. A "metaphase spread" refers to the view of a
cell's chromosomes in the metaphase stage on a slide.
MESSENGER RNA (MRNA): An RNA that carries the genetic code for a particular gene
from the chromosome in the nucleus into the cytoplasm and acts as a template for
the formation of the protein product of the gene.
MYELOID: Cells of the blood.
NUCLEIC ACID: DNA or RNA.
NUCLEIC ACID PROBE: A specifically designed piece of DNA or RNA used to detect a
homologous target sequence of chromosomes, genes or gene sequences by nucleic
acid hybridization.
NUCLEIC ACID SEQUENCE: Refers to the order of the nucleotides in a segment of
DNA or RNA.
NUCLEOTIDE: A subunit of DNA or RNA consisting of a base (adenine, guanine,
thymine, or cytosine in DNA), a phosphate molecule and a sugar (deoxyribose)
molecule.
NUCLEUS: A cellular organelle enclosed in a definite membrane that is essential
to cell function (as reproduction and protein synthesis) and that contains
chromosomes.
OLIGONUCLEOTIDE: A synthetically developed short linear sequence of up to
approximately 40 to 50 nucleotides.
ONCOGENE: A gene that causes a cell to grow in an uncontrolled manner and is
responsible for tumor development. Mutation, over-expression, or amplification
of oncogenes in cells may cause the cell to "transform" to a cancerous state.
PAP (PAP TEST): A common test utilizing cells that are scraped from the cervix
and vagina. The cells are studied for histological and physiological changes
that may be indicative of disease after being treated with Papanicolaou stain.
PCR (POLYMERASE CHAIN REACTION): An enzymatic method of directing replication of
a segment containing a specific DNA sequence of interest, to rapidly produce
many copies of the sequence.
POINT MUTATION: A single base change of DNA sequence.
Q-BETA REPLICASE (QBR): A RNA polymerase occurring naturally in the
bacteriophage QB. Its enzymic function is to make many copies of its RNA
substrate and can be used as a sensitive method of rapidly generating an easily
detectable signal, serving as a functional alternative amplification technology.
Q-BETA REPLICASE AMPLIFICATION (QBR AMPLIFICATION): Amplification of the probe
(as opposed to the target) by Q-beta replicase provides a sensitive method of
generating a large detectable signal. QBR amplification achieves a billion-fold
increase of the probe in as little as 30 minutes without temperature cycling.
RNA (RIBONUCLEIC ACID): Any of a family of polynucleotides characterized by
their component sugar (ribose) and one of their pyrimidines (uracil). There are
three classes of RNA: messenger RNA (mRNA), ribosomal RNA (rRNA) and transfer
RNA (tRNA).
RECEPTOR: (1) A chemical group or protein molecule in a cell that has an
affinity for a specific hormone, chemical, molecule or virus or (2) a cellular
entity that acts as an intermediary between a chemical agent and a tissue in
which the interaction results in an identifiable physical response by the cells
of tissue.
TRISOMY: A chromosomal abnormality where three copies of a chromosome exist
within a cell nucleus.
A-3
<PAGE>
VYSIS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY
OF AMOCO CORPORATION)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants..................................................... F-2
Consolidated Balance Sheet............................................................ F-3
Consolidated Statement of Operations.................................................. F-4
Consolidated Statement of Stockholder's Equity (Deficit).............................. F-5
Consolidated Statement of Cash Flows.................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Vysis, Inc.
The reverse stock split described in Note 15 to the Consolidated Financial
Statements has not been consummated at October 17, 1997. When it has been
consummated, we will be in a position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, of stockholder's equity
(deficit) and of cash flows present fairly, in all material respects,
the financial position of Vysis, Inc. (an indirect wholly owned
subsidiary of Amoco Corporation) and its subsidiaries at December 31,
1995 and 1996, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of Vysis, Inc's. management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards
which 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,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
the opinion expressed above."
PRICE WATERHOUSE LLP
Chicago, Illinois
April 25, 1997, except for
Note 15, which is as
of November , 1997
F-2
<PAGE>
VYSIS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY
OF AMOCO CORPORATION)
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------
PRO FORMA
DECEMBER 31, STOCKHOLDER'S
-------------------- DEFICIT
1995 1996 ACTUAL (NOTE 1)
--------- --------- --------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash............................................................ $ 247 $ 48 $ 171
Accounts receivable, net........................................ 1,568 2,801 2,991
Inventories..................................................... 1,336 2,390 2,681
Other current assets............................................ 581 2,049 1,309
--------- --------- ---------
Total current assets.......................................... 3,732 7,288 7,152
Property and equipment, net....................................... 13,205 5,557 5,047
Investments....................................................... 715 100 100
Goodwill, net..................................................... -- 388 341
Other assets...................................................... 1,515 1,782 1,931
--------- --------- ---------
Total assets.................................................. $ 19,167 $ 15,115 $ 14,571
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities........................ $ 5,632 $ 7,109 $ 6,753
Notes payable--Amoco............................................ -- 5,106 10,193
Deferred revenue................................................ 350 407 95
--------- --------- ---------
Total current liabilities..................................... 5,982 12,622 17,041
--------- --------- ---------
Commitments and contingencies (Notes 6, 10 and 11)
Stockholder's equity (deficit):
Preferred stock, $0.001 par value; 10,000,000 shares authorized
and designated Series A; none issued and outstanding at
December 31, 1995; 6,200,000 shares issued and outstanding at
December 31, 1996 and June 30, 1997; none issued and
outstanding pro forma......................................... -- 6 6 $ --
Common stock, $0.001 par value; 20,000,000 shares authorized;
none issued and outstanding at December 31, 1995; 1,058,394
shares issued and outstanding at December 31, 1996 and
June 30, 1997; 5,583,941 shares issued and outstanding pro
forma......................................................... -- 1 1 6
Additional paid-in capital...................................... -- 17,555 20,245 20,246
Capital contribution--Amoco..................................... 13,189 -- -- --
Deferred compensation........................................... -- (90) (58) (58)
Cumulative translation adjustment............................... (4) 16 (40) (40)
Accumulated deficit............................................. -- (14,995) (22,624) (22,624)
--------- --------- --------- ------------
Total stockholder's equity (deficit).......................... 13,185 2,493 (2,470) $ (2,470)
--------- --------- --------- ------------
------------
Total liabilities and stockholder's equity (deficit).......... $ 19,167 $ 15,115 $ 14,571
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
VYSIS, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY
OF AMOCO CORPORATION)
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------- --------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales.......................................... $ 5,373 $ 6,296 $ 11,022 $ 4,311 $ 6,931
Grant and other revenue................................ 30 921 2,216 1,065 1,136
---------- ---------- ---------- --------- ---------
Total revenue........................................ 5,403 7,217 13,238 5,376 8,067
Cost of goods sold....................................... 3,486 4,022 5,529 2,254 3,184
---------- ---------- ---------- --------- ---------
Gross profit............................................. 1,917 3,195 7,709 3,122 4,883
---------- ---------- ---------- --------- ---------
Operating expenses:
Research and development............................... 11,639 8,871 9,456 4,221 5,313
Selling, general and administrative.................... 8,937 12,025 16,286 8,256 7,077
---------- ---------- ---------- --------- ---------
Total operating expenses............................. 20,576 20,896 25,742 12,477 12,390
---------- ---------- ---------- --------- ---------
Loss from operations..................................... (18,659) (17,701) (18,033) (9,355) (7,507)
---------- ---------- ---------- --------- ---------
Interest income--Amoco................................... -- -- 107 107 --
Interest expense--Amoco.................................. -- -- (255) -- (122)
---------- ---------- ---------- --------- ---------
Net loss................................................. $ (18,659) $ (17,701) $ (18,181) $ (9,248) $ (7,629)
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
Pro forma net loss per share............................. $ (2.98) $ (1.51) $ (1.25)
---------- --------- ---------
---------- --------- ---------
Shares used in computing pro forma
net loss per share...................................... 6,107 6,107 6,107
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
---------- ---------- ---------- SIX MONTHS ENDED
JUNE 30,
----------------
1997
----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Preferred stock:
Beginning balance......................................... $ -- $ -- $ -- $ 6
Recapitalization.......................................... -- -- 6 --
---------- ---------- ---------- --------
Ending balance............................................ -- -- 6 6
---------- ---------- ---------- --------
Common stock:
Beginning balance......................................... -- -- -- 1
Recapitalization.......................................... -- -- 1 --
---------- ---------- ---------- --------
Ending balance............................................ -- -- 1 1
Additional paid-in capital:
Beginning balance......................................... -- -- -- 17,555
Recapitalization.......................................... -- -- 12,311 --
Income tax benefit from Amoco............................. -- -- 5,031 2,670
Deferred compensation..................................... -- -- 213 20
---------- ---------- ---------- --------
Ending balance............................................ -- -- 17,555 20,245
---------- ---------- ---------- --------
Capital contribution - Amoco:
Beginning balance......................................... 11,720 15,506 13,189 --
Net loss (pre-recapitalization)........................... (18,659) (17,701) (3,186) --
Advances from Amoco....................................... 22,445 15,384 2,315 --
Recapitalization.......................................... -- -- (12,318) --
---------- ---------- ---------- --------
Ending balance............................................ 15,506 13,189 -- --
---------- ---------- ---------- --------
Deferred compensation:
Beginning balance......................................... -- -- -- (90)
Stock option grants....................................... -- -- (213) (20)
Amortization.............................................. -- -- 123 52
---------- ---------- ---------- --------
Ending balance............................................ -- -- (90) (58)
---------- ---------- ---------- --------
Cumulative translation adjustment:
Beginning balance......................................... -- 4 (4) 16
Current period activity................................... 4 (8) 20 (56)
---------- ---------- ---------- --------
Ending balance............................................ 4 (4) 16 (40)
---------- ---------- ---------- --------
Accumulated deficit:
Beginning balance......................................... -- -- -- (14,995)
Net loss (post-recapitalization).......................... -- -- (14,995) (7,629)
---------- ---------- ---------- --------
Ending balance............................................ -- -- (14,995) (22,624)
---------- ---------- ---------- --------
Total stockholder's equity (deficit)........................ $ 15,510 $ 13,185 $ 2,493 $ (2,470)
---------- ---------- ---------- --------
---------- ---------- ---------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------- --------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................... $ (18,659) $ (17,701) $ (18,181) $ (9,248) $ (7,629)
Reconciliation of net loss to net cash used in
operating activities:
Depreciation and amortization........................ 2,019 2,065 1,805 1,072 1,676
Loss (gain) on disposition of assets................. 11 305 (246) (32) --
Donation of marketable securities.................... -- -- 515 -- --
Deferred compensation................................ -- -- 123 77 52
Changes in assets and liabilities:
Accounts receivable................................ (418) (480) (943) (183) (190)
Inventories........................................ (273) 204 (804) (982) (291)
Other current assets............................... 22 (22) (1,380) (77) (32)
Accounts payable and accrued liabilities........... 1,066 3,568 770 1,594 (355)
Deferred revenue................................... -- 350 57 (282) (313)
---------- ---------- ---------- --------- ---------
Net cash used in operating activities................ (16,232) (11,711) (18,284) (8,061) (7,082)
---------- ---------- ---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.................... (4,234) (2,873) (509) (307) (200)
Acquisition of Techgen................................. -- -- (295) (295) --
Proceeds from sale of property and equipment........... -- -- 6,778 6,778 --
Proceeds from sale of investment....................... -- -- 314 -- --
Increase in other assets............................... (521) (110) (635) (644) (296)
---------- ---------- ---------- --------- ---------
Net cash provided by (used in) investing
activities......................................... (4,755) (2,983) 5,653 5,532 (496)
---------- ---------- ---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions--Amoco, net...................... 9,424 11,882 2,315 2,315 --
Increase (decrease) in notes payable--Amoco............ -- -- 9,649 (60) 7,512
Operating expenses funded by Amoco..................... 11,569 3,058 452 112 245
---------- ---------- ---------- --------- ---------
Net cash provided by financing activities............ 20,993 14,940 12,416 2,367 7,757
Effect of exchange rate changes on cash.................. 4 (9) 16 8 (56)
---------- ---------- ---------- --------- ---------
Net increase (decrease) in cash.......................... 10 237 (199) (154) 123
Cash at beginning of period.............................. -- 10 247 247 48
---------- ---------- ---------- --------- ---------
Cash at end of period.................................... $ 10 $ 247 $ 48 $ 93 $ 171
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BUSINESS
Vysis, Inc. ("Vysis" or the "Company") was incorporated in Delaware in 1991.
The Company is a wholly owned subsidiary of Amoco Technology Corporation
("ATC"), which is a wholly owned subsidiary of Amoco Corporation ("Amoco"). In
1991, ATC acquired from Genzyme its remaining interest in Gene-Trak Systems, a
joint venture focused on infectious disease diagnostics originally formed by
Amoco and Integrated Genetics in 1986, and established Gene-Trak, Inc., a
Delaware corporation, which at that time was named Gene-Trak Systems
Corporation. In March 1994, ATC contributed all of its infectious disease
business related assets and the stock of Gene-Trak, Inc. to the Company. Also,
in March 1994, ATC contributed to the Company all of its genetic disease
business related assets, including the stock of Vysis, Inc. (an Illinois
corporation), which at that time was named Imagenetics, Incorporated. These
assets included patent rights from Amoco's nucleic acid based research, which
began in the late 1970s. In January 1995, ATC contributed to the Company all of
the assets of its bioinformatics software activities. All references to Amoco
shall mean Amoco Corporation, an Indiana corporation, and its wholly owned
subsidiary Amoco Technology Company, a Delaware corporation.
Vysis is a genomic diagnostics company focused on developing and marketing
clinical products to assess the structure and function of the human genome. The
Company's DNA probe technologies provide the clinician with an enhanced ability
to manage disease by assessing the human genome at all levels, including the
ability to determine the presence, absence, number and structure of chromosomes,
individual genes, and specific base pair mutations within genes. The Company
currently markets its genomic testing products for research and clinical use and
markets its food testing products for commercial use.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include those assets,
liabilities, revenues and expenses directly attributable to the Company's
operations. The Company's organization, capitalization and outstanding shares
prior to the 1996 recapitalization, as described in Note 7, are not indicative
of the Company's future operations. Consequently, the accumulated deficit, net
loss and equity contributions are reflected as a single line item "Capital
Contribution - Amoco" in the accompanying consolidated financial statements
prior to February 29, 1996.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts. Actual results may differ from
those estimates.
F-7
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INTERIM FINANCIAL INFORMATION--UNAUDITED
Interim financial information for the six month periods ended June 30, 1996
and 1997 included herein is unaudited; however, in the opinion of management,
the interim financial information includes all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the results
for the interim periods. The results of operations for the six months ended June
30, 1997 are not necessarily indicative of the results for an entire year.
PROFITABILITY UNCERTAIN AND NEED FOR FUTURE CAPITAL
The Company has funded its operations to date primarily through capital
contributions and loans from Amoco and cash flows from operations. Amoco has
committed to fund the Company's operations through December 31, 1997. In order
to continue operating and expand its business, however, the Company will need to
raise additional funds. There can be no assurance that any such additional
capital will be available to the Company, or if available, that it will be
available on terms acceptable to Vysis management. The inability of the Company
to obtain additional financing beyond 1997 would have a material adverse impact
on the Company's ability to execute its business plan.
REVENUE RECOGNITION
Product sales revenue is recognized upon shipment of products to customers.
Grant and license fee revenue is recognized as earned pursuant to the related
agreements. Payments received under these agreements prior to the completion of
the related work are recorded as deferred revenue. Revenue on equipment
maintenance contracts is deferred and recognized ratably over the period of the
contract, generally one year.
RESEARCH AND DEVELOPMENT EXPENDITURES
Research and development costs are expensed as incurred and include amounts
relating to grant revenues.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined on
the first-in, first-out method.
CAPITALIZED SOFTWARE COSTS
Software development costs incurred subsequent to the establishment of
technological feasibility are capitalized in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Cost of
Computer Software to be Sold, Leased, or Otherwise Marketed." Amortization of
capitalized software development costs is the greater of the amount computed
using (a) the ratio of current revenues to the total of current and anticipated
future revenues or (b) the straight-line method over the estimated economic life
of the product.
F-8
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided on the
straight-line basis over the following expected useful lives:
Buildings and improvements 10 to 45 years
Furniture, fixtures and equipment 3 to 7 years
Leasehold improvements are depreciated over the shorter of their useful life or
lease term. Significant improvements are capitalized and repairs and maintenance
charges are expensed as incurred.
INTANGIBLE ASSETS
Intangible assets include capitalized license fees, which are carried at
cost less accumulated amortization, and goodwill. Amortization expense is
calculated on a straight-line basis over the estimated economic useful lives of
the assets, ranging from one to seventeen years. The Company periodically
reviews the recoverability of these assets based primarily upon estimated future
cash flows.
FINANCIAL INSTRUMENTS
The carrying value of accounts receivable, accounts payable and the note
payable to Amoco approximates their fair value. Financial instruments that
potentially subject the Company to concentrations of credit risk consist
principally of accounts receivable. Such credit risk is generally limited due to
the large number of organizations comprising the Company's customer base and
their dispersion across different geographic locations. The Company maintains an
allowance for potentially doubtful accounts based upon specific circumstances,
historical trends and other information.
FOREIGN CURRENCY TRANSLATION
The functional currency for the Company's foreign subsidiaries is the local
currency. Translation from the applicable foreign currency to U.S. dollars is
performed for assets and liabilities using exchange rates in effect at the
balance sheet date and for the statement of operations using the average
exchange rates in effect during the period. Gains or losses from such
translations are accumulated in a separate component of stockholder's equity.
Gains and losses resulting from foreign currency transactions are included in
the results of operations and have not been significant.
STOCK-BASED COMPENSATION
Effective January 1, 1996, the Company adopted SFAS No. 123 "Accounting for
Stock-Based Compensation." As permitted, the Company continues to recognize
stock-based compensation costs under the intrinsic value based method of
accounting as prescribed by Accounting Principles Board Opinion No. 25. The pro
forma effects of applying the provisions of SFAS No. 123 are shown in Note 8 to
the consolidated financial statements.
F-9
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES
Amoco has utilized the tax benefits associated with the Company's net
operating losses for the years ended December 31, 1994, 1995 and 1996 and the
six months ended June 30, 1997, pursuant to the terms of a tax sharing
agreement. The Company did not record any tax benefit associated with its losses
for the years ended December 31, 1994 and 1995 (see Note 2).
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128 "Earnings Per Share," which establishes new standards for computing
and presenting earnings per share information. SFAS No. 128 will be effective
for the Company's 1997 annual financial statements. Reported pro forma net loss
per share data for 1996 and 1997 are the same as that computed under the new
standard.
In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes new standards for
reporting information about operating segments in interim and annual financial
statements. SFAS No. 131 will be effective for the Company in 1998. The Company
is currently evaluating the impact, if any, this statement will have on
disclosures in the consolidated financial statements.
PRO FORMA NET LOSS PER SHARE AND PRO FORMA SHAREHOLDER'S DEFICIT
The Company's historical capital structure is not indicative of its
prospective structure given the conversion of all shares of Preferred Stock into
Common Stock concurrent with the closing of the Company's anticipated initial
public offering (see Note 14). Accordingly, historical net loss per common share
is not considered meaningful and has not been presented herein. The calculation
of shares used in computing pro forma net loss per share includes the effect of
the conversion of the Series A Preferred Stock into 4,525,547 shares of Common
Stock. The calculation also includes the conversion of $5,106,000 of the note
payable to Amoco into 553,126 shares of Series B Preferred Stock, which shares
will subsequently convert into 403,741 shares of Common Stock. These conversions
are assumed to occur concurrent with the closing of the Company's anticipated
initial public offering as if they were converted as of January 1, 1996. Common
Stock equivalent shares arising from stock options and warrants are excluded
from the calculation because their effect is antidilutive, except that Common
Stock equivalent shares arising from stock options and warrants (using the
treasury stock method and the anticipated initial public offering price) issued
during the twelve month period preceding the initial public offering are
included in the computation of pro forma net loss per share in accordance with
Staff Accounting Bulletin No. 83.
NOTE 2--RELATED PARTY TRANSACTIONS:
The Company has in the past received certain legal services, research and
development support, and administrative support from Amoco and has paid for such
services and support on an actual usage or pro
F-10
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 2--RELATED PARTY TRANSACTIONS: (CONTINUED)
rata basis. The amount of these costs included in the consolidated statement of
operations were as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Research and development......................... $ 8,441 $ 2,099 $ -- $ -- $ --
Selling, general and administrative.............. 3,128 959 452 112 245
--------- --------- --------- --------- ---------
$ 11,569 $ 3,058 $ 452 $ 112 $ 245
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Management of the Company believes these costs are reasonable under the
circumstances. These charges may not be indicative of the actual costs that
would have been incurred if the Company had operated independently. The Company
also received cash advances, to meet its working capital requirements, and other
capital assets from Amoco. Through December 31, 1995, all such amounts were
recorded as contributed capital and aggregated $22,445,000 and $15,384,000 in
1994 and 1995, respectively. During 1996, such amounts consisted of contributed
capital of $2,315,000 and advances of $10,137,000 under a note payable to Amoco.
The balance due under the note at December 31, 1996 has been reduced by a tax
benefit of $5,031,000. Commencing January 1, 1997, all such amounts received by
the Company from Amoco will be in the form of convertible debt bearing a market
rate of interest.
The Company has entered into a tax sharing agreement, in principle, with
Amoco, which commencing January 1, 1996 provides for a capital contribution to
the Company in an amount approximating the tax effect of including the Company's
results of operations in Amoco's consolidated income tax returns. Under this
agreement, $5,031,000 was recorded as contributed capital and a reduction of the
note payable to Amoco during 1996. Under the terms of the tax sharing agreement,
the Company will continue to receive during 1997 and beyond a capital
contribution approximating the amounts realized by Amoco, which relate to
deductions or losses to be generated by the Company for as long as the Company
is included in Amoco's consolidated tax returns.
The Company participates in Amoco's centralized cash management program. As
a result, excess cash receipts are transferred to a centralized cash account
maintained by Amoco.
The note payable to Amoco of $5,106,000 at December 31, 1996 bore interest
at 7.5% and will be converted into 553,126 shares of Series B Preferred Stock in
1997 (see Note 7).
F-11
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 3--COMPOSITION OF BALANCE SHEET COMPONENTS:
Accounts receivable consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
Accounts receivable............................................. $ 1,788 $ 2,957 $ 3,154
Less: allowance for doubtful accounts........................... (220) (156) (163)
--------- --------- -----------
$ 1,568 $ 2,801 $ 2,991
--------- --------- -----------
--------- --------- -----------
</TABLE>
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
Raw materials and supplies...................................... $ 588 $ 997 $ 1,355
Finished goods.................................................. 748 1,393 1,326
--------- --------- -----------
$ 1,336 $ 2,390 $ 2,681
--------- --------- -----------
--------- --------- -----------
</TABLE>
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Land......................................................... $ 1,320 $ -- $ --
Buildings and improvements................................... 6,516 2,382 2,382
Furniture, fixtures and equipment............................ 11,005 8,191 8,362
--------- --------- ---------
18,841 10,573 10,744
Less: accumulated depreciation............................... (5,636) (5,016) (5,697)
--------- --------- ---------
$ 13,205 $ 5,557 $ 5,047
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-12
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 3--COMPOSITION OF BALANCE SHEET COMPONENTS: (CONTINUED)
Other assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
License fees (net of accumulated amortization of $144, $509 and
$1,015 in 1995, 1996 and 1997, respectively)................... $ 1,385 $ 2,535 $ 1,835
Prepaid royalties............................................... 402 -- 25
Software development costs (net of accumulated amortization of
$0, $40 and $119 in 1995, 1996 and 1997, respectively)......... 97 535 759
Other........................................................... 6 -- --
--------- --------- -----------
1,890 3,070 2,619
Less: current portion........................................... 375 1,288 688
--------- --------- -----------
$ 1,515 $ 1,782 $ 1,931
--------- --------- -----------
--------- --------- -----------
</TABLE>
Accounts payable and accrued liabilities consisted of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
Trade accounts payable.......................................... $ 3,523 $ 3,546 $ 2,638
Accrued rent.................................................... 828 1,141 1,127
Employee related costs.......................................... 577 743 967
Other taxes payable............................................. 189 423 486
Accrued legal costs............................................. 75 504 526
Other........................................................... 440 752 1,131
--------- --------- -----------
$ 5,632 $ 7,109 $ 6,875
--------- --------- -----------
--------- --------- -----------
</TABLE>
NOTE 4--INVESTMENTS:
CANJI, INC.
The Company entered into a license agreement with Canji, Inc. ("Canji") in
1994, whereby the Company was granted an exclusive license to use certain
patented technology. In exchange for the license, the Company paid $600,000 in
cash and surrendered preferred stock of Canji aggregating approximately
$900,000. Accumulated amortization related to the license aggregated $132,000
and $221,000 at December 31, 1995 and 1996, respectively. The agreement provides
that the Company will pay Canji royalties of up to 5 percent of net sales of the
licensed products. Additionally, at December 31, 1995, the Company held
preferred stock in Canji, a private company, which was carried at cost and
approximated $515,000. In 1996, Canji was acquired by Schering-Plough
Corporation and the Company's investment in Canji was exchanged for shares of
Schering-Plough. During September 1996, the Company donated its investment in
Schering-Plough to a not-for-profit organization affiliated with Amoco.
F-13
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 4--INVESTMENTS: (CONTINUED)
GENOME SYSTEMS, INC.
In 1994, the Company acquired 1,400 shares of preferred stock in Genome
Systems, Inc. for cash consideration of $200,000. In 1996, Genome Systems, Inc.
was acquired by Incyte Pharmaceuticals, Inc. ("Incyte") and the Company's
investment was exchanged for restricted common stock of Incyte, a publicly held
company. During 1996, a portion of this investment with a cost of $100,000 was
sold and a gain of $214,000 was included in the Company's results of operations.
The remaining investment balance consists of Incyte restricted common stock and
is therefore recorded at cost of $100,000 at December 31, 1996.
NOTE 5--INCOME TAXES:
During the years ended December 31, 1994, 1995 and 1996, the Company's
results of operations were included in the consolidated income tax returns of
Amoco, accordingly, the Company's domestic net operating losses have been
utilized by Amoco in its consolidated income tax returns and are not available
to offset the Company's future taxable income.
The approximate income tax effect of each temporary difference giving rise
to deferred tax assets and liabilities is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Patents and purchased software........................................... $ 274 $ 255
Deferred rent............................................................ 318 457
Foreign net operating loss carryforwards................................. 200 374
Accrued vacation......................................................... 117 130
Bad debt accrual......................................................... 88 62
Other.................................................................... 40 158
--------- ---------
Total deferred tax assets.................................................. 1,037 1,436
Valuation allowance........................................................ (997) (790)
--------- ---------
Net deferred tax assets.................................................... 40 646
Deferred tax liabilities:
Software development costs and license fees.............................. (40) (646)
--------- ---------
Net deferred tax assets.................................................... $ -- $ --
--------- ---------
--------- ---------
</TABLE>
A full valuation allowance has been provided for all deferred tax assets
(net of liabilities) as management does not consider realization of such amounts
more likely than not. On an unaudited pro forma separate income tax return
basis, assuming the Company was not included in the consolidated
F-14
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 5--INCOME TAXES: (CONTINUED)
income tax returns of Amoco, no tax provision or benefit would have been
recorded in the consolidated financial statements due to the ongoing losses of
the Company.
NOTE 6--DEVELOPMENT AND LICENSE AGREEMENTS:
The Company has entered into various license agreements pursuant to which it
has been granted exclusive licenses to certain patented technologies. The
agreements require the Company to pay royalties ranging from 0.5 to 8.0 percent
on net sales of specified products, with certain agreements requiring minimum
royalties due each year. As additional consideration for certain of the
licenses, the Company is obligated to fund certain research of the licensors.
Future minimum amounts due for such licenses, minimum royalties and research
funding are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- -------------------------------------------------------------------------------------
<S> <C>
1997................................................................................. $ 625
1998................................................................................. 1,820
1999................................................................................. 2,185
2000................................................................................. 1,810
2001................................................................................. 1,810
---------
$ 8,250
---------
---------
</TABLE>
NOTE 7--RECAPITALIZATION:
On February 29, 1996, pursuant to a recapitalization, the Company issued
6,200,000 shares of its Series A Preferred Stock, par value $0.001 per share,
and 1,058,394 shares of the Common Stock, par value $0.001 per share, to Amoco
as consideration for the cumulative investment by Amoco in the Company, which
was $12,318,000. In connection with the recapitalization, $6,000 and $1,000 was
assigned to the par value of the Series A Preferred Stock and Common Stock,
respectively, while the remaining $12,311,000 was credited to additional paid-in
capital.
The holder of Series A Preferred Stock is entitled to receive cumulative
dividends at an annual rate of 6 percent of the Series A liquidation value
(initially $8.0645 per share), when and if declared by the Board of Directors.
In the event of a liquidation, the holder of the Series A Preferred Stock shall
receive the sum of $8.0645 per share and any declared but unpaid dividends.
Additionally, the holder of the Series A Preferred Stock is entitled to share in
any dividends paid on Common Stock.
The holder of the Series A Preferred Stock is entitled to vote together with
the holders of Common Stock, as a single class in all matters. The Series A
holder is entitled to votes equal to the number of common shares into which such
holder's shares are convertible. Each share of Series A Preferred Stock is
convertible, at any time at the option of the holder, into one share of Common
Stock. Each share of Series A Preferred Stock shall automatically convert into
one share of Common Stock upon closing of an initial public offering of the
Company's Common Stock resulting in aggregate net proceeds of not less than
F-15
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 7--RECAPITALIZATION: (CONTINUED)
$10,000,000. In the event of any one or more third party equity investments,
prior to the closing of an initial public offering, the Series A Preferred Stock
is subject to anti-dilution adjustments.
NOTE 8--EMPLOYEE INCENTIVE STOCK OPTION PLAN:
In February 1996, the Company adopted a non-qualified Employee Stock
Incentive Plan (the "1996 Plan"). A total of 985,401 shares of Common Stock have
been authorized for issuance under the 1996 Plan, subject to anti-dilution and
other adjustments. Under the 1996 Plan, options may be granted at a price not
less than 100 percent of the estimated fair value of the Common Stock on the
date of grant, as determined by the Compensation Committee of the Board of
Directors. Options generally vest over 4 years and expire within 10 years from
the date of grant.
Option activity under the 1996 Plan is summarized below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES PRICE
---------- -----------
<S> <C> <C>
Options Outstanding:
Beginning of year.................................................... -- --
Granted.............................................................. 878,941 $ 0.58
Exercised............................................................ -- --
Surrendered or terminated............................................ 21,641 $ 0.60
----------
End of year.......................................................... 857,300 $ 0.58
----------
----------
Options exercisable at December 31, 1996............................... 177,021 $ 0.53
Options available for future grant at December 31, 1996................ 128,101
Weighted-average fair value of options granted during the year......... $ 0.34
</TABLE>
During 1996, the Company issued options to consultants to purchase 44,160
shares of Common Stock at an exercise price of $0.53 per share, exercisable
through 2000. The Company recorded deferred compensation of $213,000 in
connection with these options, based upon the difference between the estimated
fair value of the services received and the exercise price of the options
granted, and recognized $123,000 as compensation expense during the year ended
December 31, 1996.
The following summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING
RANGE OF NUMBER CONTRACTUAL WEIGHTED AVERAGE NUMBER
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE
- ----------------- ----------- --------------- ----------------- -----------
<S> <C> <C> <C> <C>
$0.53 818,358 9.2 $ 0.53 177,021
$1.34 38,941 9.5 $ 1.34 0
</TABLE>
F-16
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 8--EMPLOYEE INCENTIVE STOCK OPTION PLAN: (CONTINUED)
The fair value of each option was estimated on the date of grant using the
Black-Scholes option pricing model. The principal determinants of option pricing
are: the estimated fair value of the Company's Common Stock at the date of
grant, expected volatility, risk-free interest rate, expected option lives and
dividend yields. Weighted average assumptions employed by the Company for 1996
were: expected volatility of 50.3 percent and a risk-free interest rate of 6.2
percent. In addition, the Company assumed an expected option life of 7 years and
no dividend yield.
The Company applies Accounting Principles Board Opinion No. 25 in accounting
for its fixed stock option plan and, accordingly, has not recognized
compensation cost in the accompanying consolidated statement of operations for
options granted and exercisable at their estimated fair value on the grant date.
Had compensation cost been recognized based on fair value as of the grant dates
as defined in SFAS No. 123, the Company's net loss would have increased by
approximately $57,000, or $0.01 per share pro forma, for the year ended December
31, 1996.
NOTE 9--SEGMENT AND GEOGRAPHIC INFORMATION:
The Company operates in one business segment. Substantially all revenues
result from the sale of genomic testing products and related instrumentation and
the receipt of grant and other revenue. All significant intercompany revenues
and expenses are eliminated in the presentation of revenues and net loss.
Certain geographic information is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
United States............................................. $ 4,716 $ 5,488 $ 8,655
Europe.................................................... 687 1,729 4,583
---------- ---------- ----------
Total................................................. $ 5,403 $ 7,217 $ 13,238
---------- ---------- ----------
---------- ---------- ----------
Net loss:
United States............................................. $ (18,076) $ (17,334) $ (18,094)
Europe.................................................... (583) (367) (87)
---------- ---------- ----------
Total................................................. $ (18,659) $ (17,701) $ (18,181)
---------- ---------- ----------
---------- ---------- ----------
<CAPTION>
DECEMBER 31,
----------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Assets:
United States............................................. $ 16,853 $ 17,155 $ 12,166
Europe.................................................... 721 2,012 2,949
---------- ---------- ----------
Total................................................. $ 17,574 $ 19,167 $ 15,115
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-17
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 9--SEGMENT AND GEOGRAPHIC INFORMATION: (CONTINUED)
Export sales from U.S. operations amounted to approximately $353,000,
$547,000 and $694,000 for the years ended December 31, 1994, 1995 and 1996,
respectively, and consisted of sales principally to customers in the Far East.
In 1994, 1995 and 1996, there were no sales to customers that exceeded 10
percent of total revenues.
NOTE 10--LEASE OBLIGATIONS:
The Company operates in leased facilities and also leases certain
manufacturing and other equipment. These leases generally require the Company to
pay taxes, maintenance, insurance and certain other operating costs of the
leased property. Most of the Company's leases contain renewal clauses.
Future minimum lease payments under non-cancelable operating leases are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- -------------------------------------------------------------------------------------
<S> <C>
1997................................................................................. $ 699
1998................................................................................. 751
1999................................................................................. 591
2000................................................................................. 509
2001................................................................................. 523
Thereafter........................................................................... 1,979
---------
$ 5,052
---------
---------
</TABLE>
Rental expense totaled $140,000, $695,000 and $606,000 in 1994, 1995 and
1996, respectively.
NOTE 11--COMMITMENTS AND CONTINGENCIES:
The Company is an exclusive licensee of certain technology. The Company and
the licensor of the technology are plaintiffs in a patent infringement suit
filed in September 1995 against one of the Company's competitors. The Company
and the licensor share equally the legal costs of this matter. Discovery in this
suit is complete; however, no trial date has been set. An unfavorable outcome
for the Company is considered neither probable nor remote by management. The
Company does not believe that a loss of this suit would have a material adverse
impact on the results of operations or the Company's financial position as set
forth in the accompanying consolidated financial statements.
The Company and Amoco are defendants in a law suit pending in the U.S.
District Court in California alleging infringement of certain patents. The suit
has been stayed pending the outcome of another suit brought against the
plaintiff challenging the plaintiff's claim to sole ownership to the patents at
issue in the first case. Pursuant to a separate agreement between Amoco and the
plaintiff in the latter case, the Company reimburses the legal costs incurred by
the plaintiff in that suit. In return, Amoco and the Company receive contingent
rights to acquire an exclusive license under such rights as either party may
obtain in the patents. Although the Company believes that it has meritorious
defenses in the first suit, there can be no assurance that the Company will
ultimately prevail. An unfavorable outcome for the Company is considered neither
probable nor remote by management. However, an adverse determination
F-18
<PAGE>
VYSIS, INC.
(An indirect wholly owned subsidiary
of Amoco Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 11--COMMITMENTS AND CONTINGENCIES: (CONTINUED)
against the Company, which may include a finding of willful infringement and the
awarding of plaintiff's attorney's fees, could have a material adverse effect on
the Company's financial position and results of operations.
NOTE 12--ACQUISITIONS:
On April 3, 1996, the Company acquired all of the outstanding common stock
of TechGen International Sarl ("TechGen") for $295,000. TechGen is a French
manufacturer and distributor of chemical, biological, health and hygiene
products and equipment. The acquisition has been accounted for under the
purchase method of accounting. Accordingly, the cash paid of $295,000 and
liabilities assumed of $711,000 were allocated to the tangible assets acquired.
The excess of the purchase price over the estimated fair value of net assets
acquired of $457,000 has been assigned to goodwill and is being amortized using
the straight-line method over a five year period.
The following unaudited pro forma financial information presents the
combined results of operations of the Company and TechGen as if the acquisition
had occurred at the beginning of each fiscal year. The pro forma information is
based on historical results of operations and does not necessarily reflect the
actual results that would have occurred, nor is it necessarily indicative of
future results of operations of the combined enterprises (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
Revenues.............................................................. $ 8,549 $ 13,285
Net loss.............................................................. $ (17,796) $ (18,230)
</TABLE>
NOTE 13--SUPPLEMENTAL CASH FLOW INFORMATION:
Amoco contributed property and equipment aggregating $532,000, $444,000 and
$36,000 to the Company in 1994, 1995 and 1996, respectively, and $920,000 of
other assets in 1994. These amounts were reflected as a capital contribution
from Amoco.
NOTE 14--INITIAL PUBLIC OFFERING: (UNAUDITED)
In October 1997, the Board of Directors authorized the Company to proceed
with an initial public offering of the Company's Common Stock (the "Offering").
In connection with the Offering, all of the Company's Preferred Stock will
automatically convert into 4,525,547 shares of Common Stock. The pro forma
effect of this conversion has been reflected on the accompanying pro forma
balance sheet assuming it had occurred at June 30, 1997 and is unaudited.
NOTE 15--STOCK SPLIT
On November , 1997 the Board of Directors approved a 1 for 1.37 reverse
stock split of its Common Stock. All share and per share amounts in the
consolidated financial statements and notes thereto have been adjusted
retroactively to reflect this stock split. This stock split was approved by the
Company's stockholders on November , 1997.
F-19
<PAGE>
INSIDE BACK COVER
(GRAPHICS)
A collage of eight color photographs representing a variety of the Company's
products and entitled "Current Products for Genomic Diagnostics." The first
photograph in the upper left-hand corner is a snapshot of three of the Company's
clinical products and has the caption, "CEP-Registered Trademark- 8, CEP 12 and
CEP X/Y Kits for the assessment of leukemia and myeloid disorders." The
photograph in the upper right-hand corner is an image of a tissue section with
cells containing multiple colored spots (signals) and has the caption "Breast
tumor section hybridized with LSI-Registered Trademark- HER-2/neu and CEP 17
control probes. Multiple orange-pink fluorescent signals indicate amplification
of the HER-2/neu gene."
In the center left of the page is a pair of photographs each showing a cell
containing multiple colored spots (signals) and has the caption "TriGen-TM-
Assay. Fluorescence images demonstrating hybridization of the CEP X/Y and LSI 21
probes on uncultured amniocytes. The cell on the left is normal for sex
chromosome X (green signal) and Y (pink signal). The cell on the right
demonstrates three copies of chromosome 21, indicating Down Syndrome."
In the center right of the page is a pair of photographs each showing a cell
containing multiple colored spots (signals) and has the caption "AnueVysion-TM-
Assay. Fluorescence images demonstrating hybridization of the CEP 18, X and Y,
and LSI 13 and 21 probes on uncultured amniocytes. The cell on the left shows
three copies of chromosome 18 (aqua signal) and normal copies of chromosome X
(green signal) and Y (pink signal). The cell on the right is normal for
chromosomes 13 (green signal) and 21 (pink signal)."
In the lower left-hand corner of the page is a photograph of a computer
screen from one of the Company's software products and has the caption "Quips
CGH Software showing color karyotype of metaphase cells." The photograph in the
lower right-hand corner is a snapshot of some of the Company's research products
with the HYBrite system and is captioned "HYBrite-TM- semi-automatic system for
IN SITU hybridization and research FISH probes."
The Company's logo and the words "Managing Disease With Molecular
Techniques" are placed at the bottom center of the page.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
The Company............................................................... 19
Use of Proceeds........................................................... 19
Dividend Policy........................................................... 19
Capitalization............................................................ 20
Dilution.................................................................. 21
Selected Financial Information............................................ 22
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 24
Business.................................................................. 28
Management................................................................ 59
Principal Stockholder and Securities Ownership of Management.............. 65
Certain Transactions...................................................... 66
Description of Capital Stock.............................................. 67
Shares Eligible for Future Sale........................................... 70
Underwriting.............................................................. 72
Legal Matters............................................................. 73
Experts................................................................... 73
Available Information..................................................... 73
Glossary.................................................................. A-1
Financial Statements...................................................... F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
3,500,000 SHARES
[LOGO]
VYSIS, INC.
COMMON STOCK
------------------
PROSPECTUS
------------------
FURMAN SELZ
DEUTSCHE MORGAN GRENFELL
EVEREN SECURITIES, INC.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses of the Registrant in connection with the issuance and distribution
of the securities being registered, other than underwriting discounts and
commissions, are as set forth below. All expenses listed below are estimates,
except for the Commission, NASD and Nasdaq fees.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............................ $ 18,296
NASD Filing Fee................................................................ 6,538
Nasdaq Filing Fee.............................................................. *
Blue Sky Fees and Expenses (including attorneys' fees)......................... *
Printing and Engraving Expenses................................................ *
Legal Fees and Expenses........................................................ *
Accounting Fees and Expenses................................................... *
Transfer Agent and Registrar Fees and Expenses................................. *
Miscellaneous.................................................................. *
---------
Total...................................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law authorizes
indemnification of directors and officers of the Company; allows the advancement
of costs of defending against litigation; and permits companies incorporated in
Delaware to purchase insurance on behalf of directors and officers against
liabilities whether or not in the circumstances such companies would have the
power to indemnify against such liabilities under the provisions of the statute.
The Company's Certificate of incorporation provides for indemnification of
the Company's officers and directors to the fullest extent permitted by Section
145 of the Delaware General Corporation Law. The Company intends to obtain
directors and officers insurance covering its executive officers and directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On February 29, 1996, in connection with the reorganization of the Company,
each share of Common Stock, par value $1.00 per share, of the Company was
converted into 14,356.43564 shares of Common Stock, par value $0.001 per share
of the Company and 61,386.13861 shares of Series A Preferred Stock, par value
$0.001 per share of the Company. All such shares (which totaled 1,450,000 shares
of Common Stock and 6,200,000 shares of Series A Preferred Stock) were issued to
Amoco Technology Company ("ATC"), the Company's principal stockholder, in
reliance upon the exemption contained in Section 3(a)(9) of the Securities Act.
On September 17, 1997, the Company issued 553,126 shares of Series B
Preferred Stock to ATC, the Company's principal stockholder, in reliance upon
the exemption contained in Section 4(2) of the Securities Act. The shares of
Series B Preferred Stock were issued in settlement of a $5,106,000 intercompany
balance between the Company and ATC.
On September 30, 1997, the Company issued an aggregate of 18,603 shares of
Common Stock to five individuals upon exercise of employee stock options held by
them, in reliance upon Rule 701 under the Securities Act. The aggregate exercise
price of such options was $7,255.
II-1
<PAGE>
On October 15, 1997, the Company agreed to issue an aggregate of 110,000
shares of Common Stock to a corporation engaged in the development of diagnostic
test systems as partial consideration for certain patents and other intellectual
property rights of such corporation. The shares are to be issued in reliance
upon the exemption contained in Section 4(2) of the Securities Act.
None of the share amounts in this Item 15 have been adjusted to reflect the
Company's proposed 1-for-1.37 reverse stock split.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1.1 Certificate of Incorporation of Vysis, Inc. (formerly Framingham Development Company) filed April 18,
1991.
3.1.2 Certificate of Amendment of Certificate of Incorporation filed March 30, 1994.
3.1.3 Certificate of Merger filed February 1, 1996.
3.1.4 Certificate of Amendment of Certificate of Incorporation filed February 29, 1996.
3.1.5 Certificate of Correction of Certificate of Amendment filed July 22, 1996.
3.1.6 Certificate of Amendment of Certificate of Incorporation filed September 16, 1997.
3.1.7 Certificate of Designations of Series B Preferred Stock, filed September 17, 1997.
3.2* Bylaws of Vysis, Inc.
4.1* Form of Common Stock Certificate.
5.1* Opinion of Mayer, Brown & Platt.
5.2* Opinion of McCutchen, Doyle, Brown & Enerson.
10.1 Vysis, Inc. 1996 Stock Incentive Plan.
10.2* Industrial Building Lease between American National Bank and Trust Company of Chicago and Vysis, Inc.
dated November 29, 1994.
10.3 License Agreement for Chromosome Analysis Technology with Chromosome-Specific Probes between ATC and The
Regents of The University of California dated August 15, 1989, as amended October 6, 1989; July 1, 1991;
April 15, 1992; June 1, 1994; June 6, 1994; June 28, 1994; July 1, 1994; September 1, 1994.
10.4 Exclusive License Agreement between The Regents of The University of California and Imagenetics for
Inventions made in the field of Molecular Cytogenetics dated July 1, 1994.
10.5 Option Agreement between The Regents of The University of California and Imagenetics for Inventions made
in the field of Molecular Cytogenetics dated July 1, 1994.
10.6 Exclusive Option Agreement between Vysis and the University of California for the Glass Chromosome.
10.7 Exclusive License Agreement between the Regents of the University of California and Vysis, Inc. for
Molecular Cytogenetics Software dated June 1, 1995.
10.8 Exclusive License Agreement between the Regents of The University of California and ATC dated July 30,
1992, as amended, December 7, 1994.
10.9 License Agreement between The Trustees of Columbia University, The Salk Institute for Biological Studies
and Gene-Trak Systems dated October 7, 1988.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.10 Research and License Agreement between Gene-Trak Inc. and Public Health Research Institute dated July
14, 1994 and Letter re: Research and License dated July 18, 1994.
10.11 Exclusive Distributor Agreement between Vysis, Inc. and Fujisawa Pharmaceutical Co., Ltd. dated July 31,
1995.
10.12+ Sublicense Agreement between Ciba Corning Diagnostics Corp. and Vysis, Inc. dated May 24, 1996.
10.13 Software Development and Marketing Agreement between Digital Scientific Limited and Vysis, Inc. dated
January 1, 1996.
10.14 Form of Cooperation Agreement between the Company and Amoco Technology Company.
10.15 Form of Registration Rights Agreement between the Company and Amoco Technology Company.
10.16 Tax Allocation Agreement between the Company and Amoco Technology Company.
11.1 Statement Re Computation of Per Share Net Loss.
21.1 Subsidiaries of Vysis, Inc.
23.1 Consent of Price Waterhouse LLP.
23.2* Consent of Mayer, Brown & Platt (appears in Exhibit 5.1).
23.3* Consent of McCutchen, Doyle, Brown & Enerson (appears in Exhibit 5.2).
24.1 Power of Attorney (appears on the signature page of this Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* to be filed by amendment
+ confidential treatment requested
(b) Financial Statement Schedules
The following financial statement schedules of the Company are filed as part
of this Registration Statement and should be read in conjunction with the
Consolidated Financial Statements of the Company:
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Schedules other than those listed above have been omitted for the reason
that they are not required or are not applicable, or the required information is
shown in the financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such 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 such 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 whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of 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 of 1933, as
amended, shall be deemed to be part of this registration statement as of
the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act of
1933, as amended, 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 such securities at
that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly caused this registration statement, or amendment
thereto, to be signed on its behalf by the undersigned, thereunto duly
authorized, in Downers Grove, Illinois on October 16, 1997.
<TABLE>
<S> <C> <C>
VYSIS, INC.
By: /s/ JOHN L. BISHOP
-----------------------------------------
Name: John L. Bishop
TITLE: CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John L. Bishop and William E. Murray, and each of them, the true and lawful
attorneys-in-fact and agents of the undersigned, with full power of substitution
and resubstitution, for and in the name, place and stead of the undersigned, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, including any filings pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute, or substitutes, may lawfully do or cause to be
done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURES TITLE (CAPACITY) DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chief Executive Officer
/s/ JOHN L. BISHOP and
- ------------------------------ Director (Principal October 16, 1997
John L. Bishop Executive
Officer and Director)
Vice President, Planning
/s/ KENT D. HERTZING and Business Development
- ------------------------------ (Acting Principal October 16, 1997
Kent D. Hertzing Financial and Accounting
Officer)
/s/ WILLIAM M. BARTLETT
- ------------------------------ Director October 11, 1997
William M. Bartlett
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE (CAPACITY) DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ ROBERT C. CARR
- ------------------------------ Director October 16, 1997
Robert C. Carr
- ------------------------------ Director October , 1997
Kenneth L. Melmon
/s/ WALTER R. QUANSTROM
- ------------------------------ Director October 11, 1997
Walter R. Quanstrom
/s/ FRANK J. SROKA
- ------------------------------ Director October 14, 1997
Frank J. Sroka
/s/ RICHARD C. WILLIAMS
- ------------------------------ Director October 16, 1997
Richard C. Williams
</TABLE>
II-6
<PAGE>
VYSIS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
DESCRIPTION OF BEGINNING END OF
ALLOWANCE AND RESERVES OF PERIOD ADDITIONS DEDUCTIONS PERIOD
- ------------------------------------------------------------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
1994
Allowance for doubtful accounts................................... $ 115 $ 50 $ 5 $ 160
1995
Allowance for doubtful accounts................................... $ 160 $ 60 $ -- $ 220
1996
Allowance for doubtful accounts................................... $ 220 $ -- $ 64 $ 156
Six months ended June 30, 1997
Allowance for doubtful accounts (unaudited)....................... $ 156 $ 23 $ 16 $ 163
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1.1 Certificate of Incorporation of Vysis, Inc. (formerly Framingham Development Company) filed April 18,
1991.
3.1.2 Certificate of Amendment of Certificate of Incorporation filed March 30, 1994.
3.1.3 Certificate of Merger filed February 1, 1996.
3.1.4 Certificate of Amendment of Certificate of Incorporation filed February 29, 1996.
3.1.5 Certificate of Correction of Certificate of Amendment filed July 22, 1996.
3.1.6 Certificate of Amendment of Certificate of Incorporation filed September 16, 1997.
3.1.7 Certificate of Designations of Series B Preferred Stock, filed September 17, 1997.
3.2* Bylaws of Vysis, Inc.
4.1* Form of Common Stock Certificate.
5.1* Opinion of Mayer, Brown & Platt.
5.2* Opinion of McCutchen, Doyle, Brown & Enerson.
10.1 Vysis, Inc. 1996 Stock Incentive Plan.
10.2* Industrial Building Lease between American National Bank and Trust Company of Chicago and Vysis, Inc.
dated November 29, 1994.
10.3 License Agreement for Chromosome Analysis Technology with Chromosome-Specific Probes between ATC and The
Regents of The University of California dated August 15, 1989, as amended October 6, 1989; July 1, 1991;
April 15, 1992; June 1, 1994; June 6, 1994; June 28, 1994; July 1, 1994; September 1, 1994.
10.4 Exclusive License Agreement between The Regents of The University of California and Imagenetics for
Inventions made in the field of Molecular Cytogenetics dated July 1, 1994.
10.5 Option Agreement between The Regents of The University of California and Imagenetics for Inventions made
in the field of Molecular Cytogenetics dated July 1, 1994.
10.6 Exclusive Option Agreement between Vysis and the University of California for the Glass Chromosome.
10.7 Exclusive License Agreement between the Regents of the University of California and Vysis, Inc. for
Molecular Cytogenetics Software dated June 1, 1995.
10.8 Exclusive License Agreement between the Regents of The University of California and ATC dated July 30,
1992, as amended, December 7, 1994.
10.9 License Agreement between The Trustees of Columbia University, The Salk Institute for Biological Studies
and Gene-Trak Systems dated October 7, 1988.
10.10 Research and License Agreement between Gene-Trak Inc. and Public Health Research Institute dated July
14, 1994 and Letter re: Research and License Agreement July 18, 1994.
10.11 Exclusive Distributor Agreement between Vysis, Inc. and Fujisawa Pharmaceutical Co., Ltd. dated July 31,
1995.
10.12+ Sublicense Agreement between Ciba Corning Diagnostics Corp. and Vysis, Inc. dated May 24, 1996.
10.13 Software Development and Marketing Agreement between Digital Scientific Limited and Vysis, Inc. dated
January 1, 1996.
10.14 Form of Cooperation Agreement between the Company and Amoco Technology Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.15 Form of Registration Rights Agreement between the Company and Amoco Technology Company.
10.16 Tax Allocation Agreement between the Company and Amoco Technology Company.
11.1 Statement Re Computation of Per Share Net Loss.
21.1 Subsidiaries of Vysis, Inc.
23.1 Consent of Price Waterhouse LLP.
23.2* Consent of Mayer, Brown & Platt (appears in Exhibit 5.1).
23.3* Consent of McCutchen, Doyle, Brown & Enerson (appears in Exhibit 5.2).
24.1 Power of Attorney (appears on the signature page of this Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* to be filed by amendment
+ confidential treatment requested
<PAGE>
CERTIFICATE OF INCORPORATION
OF
FRAMINGHAM DEVELOPMENT COMPANY
FIRST: The name of the corporation (hereinafter called the
"corporation") is
FRAMINGHAM DEVELOPMENT COMPANY
SECOND: The address, including street, number, city, and county, of
the registered off ice of the corporation in the State of Delaware is 32
Loockerman Square, Suite L-100. City of Dover, County of Kent, Delaware 19901;
and the name of the registered agent of the corporation in the State of Delaware
at such address is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the corporation in to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is One Thousand (1,000). The par value of each of
such shares of stock is One Dollar ($1.00). All such shares are of one class and
are shares of Common Stock.
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
Robin L. Pollack 200 E. Randolph Drive
Chicago, Illinois 60601
SIXTH: The corporation is to have perpetual existence.
SEVENTH: The number of directors which shall constitute the whole
Board of Directors shall be fixed by, or in the manner provided in, the By-Laws.
Election of directors need not be by written ballot.
EIGHTH: The power to adopt, amend, or repeal the By-Laws of the
corporation may be exercised by the Board of Directors of the corporation.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by paragraph (7) of subsection
(b) of Section 102 of the General Corporation Law of the State of Delaware, as
the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all of the
expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
<PAGE>
ELEVENTH: From time to time any of the provisions of this certificate
of incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
I, THE UNDERSIGNED, being the Incorporator, for the purpose of forming
a corporation pursuant to the General Corporation Law of the State of Delaware,
do make, file and record this Certificate of Incorporation, do hereby certify
the facts stated herein are true, and have accordingly hereunto set my hand this
16th day of April, 1991.
/s/ Robin L. Pollack
-----------------------------
Robin L. Pollack
Incorporator
-2-
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
FRAMINGHAM DEVELOPMENT COMPANY
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
FRAMINGHAM DEVELOPMENT COMPANY.
2. The certificate of incorporation of the corporation is hereby amended
by striking out Article First and by substituting in lieu of said
Article the following new Article:
The name of the corporation (hereinafter called the "corporation") is
ATC Diagnostics Inc.
3. The amendment of the certificate of incorporation herein certified has
been duly adopted in accordance with the provisions of Section 242 of
the General Corporation Law of the State of Delaware.
/s/ R. Carr
-----------------------------
R. C. Carr, Vice President
The undersigned Assistant Secretary of the Company hereby certifies
that the above signature is the true and correct signature of the Vice President
of the Company as of March 30, 1994.
/s/ T.W. Tolpin
-----------------------------
T.W. Tolpin
<PAGE>
CERTIFICATE OF MERGER OF
VYSIS, INC. AND ATC DIAGNOSTICS, INC.
It is hereby certified that:
1. The constituent business corporations participating in
the merger herein certified are:
(i) ATC Diagnostics, Inc., which is
incorporated under the laws of the
State of Delaware;
(ii) VYSIS, INC., which is incorporated under the laws
of the State of Delaware.
2. An Agreement of Merger has been approved, adopted,
certified, executed, and acknowledged by each of
the aforesaid constituent corporations in
accordance with the provisions of subsection (c)
of Section 251 of the General Corporation Law of
the State of Delaware.
3. The name of the surviving corporation in the
merger herein certified is ATC Diagnostics,
Inc., which will continue its existence as
said surviving corporation under its present
name upon the effective date of said merger
pursuant to the provisions of the General
Corporation Law of the State of Delaware.
4. The Certificate of Incorporation of ATC
Diagnostics, Inc., as now in force and effect,
shall continue to be the Certificate of
Incorporation of said surviving corporation,
except the Certificate of Incorporation of ATC
Diagnostics, Inc. is hereby amended by striking
out Article First and by substituting in lieu of
said Article the following new Article:
The name of the corporation (hereinafter called the "Corporation") is VYSIS,
INC.
5. The executed Agreement of Merger among the
aforesaid constituent corporations is on file
at the principal place of business of the
aforesaid survival corporation, the address of
which is as follows: 3100 Woodcreek Drive,
Downers Grove, IL 60515.
<PAGE>
6. A copy of the aforesaid Agreement of Merger will
be furnished by the aforesaid surviving
corporation, on request, and without cost, to any
stockbolder of each of the aforesaid constituent
corporations.
Dated: February 1, 1996
By: /s/ J. L. Bishop
-----------------------------
J. L. Bishop
President, ATC Diagnostics, Inc.
Attest:
/s/ F.J. Sroka
- ----------------------------------
F.J. Sroka
Assistant Secretary, ATC Diagnostics, Inc.
By: /s/ R. E. Yates
-----------------------------
R. E. Yates
Sole Incorporator, Vysis, Inc.
Attest:
/s/ Holly M. Blodgett
- --------------------------------
Holly M. Blodgett, Notary Public
Cook County Acting
In DuPage County, IL
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND
CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "VYSIS, INC.",
FILED IN THIS OFFICE ON THE TWENTY-NINTH DAY OF FEBRUARY, A.D.
1996, AT 4 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO
THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[GREAT SEAL OF THE STATE OF DELAWARE]
EDWARD J. FREEL
---------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION: 7848452
[seal]
DATE: 02-29-96
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
VYSIS, INC.
VYSIS, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "COMPANY"), does hereby certify:
FIRST: That the Board of Directors of the Company has duly adopted
resolutions setting forth a proposed amendment of the Certificate of
Incorporation of the Company, declaring said amendment to be advisable and
directing said amendment to be submitted to the stockholders of the Company.
The resolution setting forth the proposed amendment is as follows:
RESOLVED, that Article FOURTH of the Certificate of Incorporation of
the Company be amended to read, in its entirety, as follows:
FOURTH:
A. This Company is authorized to issue two classes of shares to
be designated, respectively, Preferred Stock ("PREFERRED STOCK") and
Common Stock ("COMMON STOCK"). The total number of shares of capital
stock that this Company shall have authority to issue is Thirty
Million (30,000,000). The total number of shares of Preferred Stock
this Company shall have authority to issue is Ten Million
(10,000,000). The total number of shares of Common Stock this Company
shall have authority to issue is Twenty Million (20,000,000). The
Preferred Stock shall have a par value of $0.001 per share and the
Common Stock shall have a par value of $0.001 per share.
B. The Preferred Stock shall be divided into series. The first
series shall consist of Six Million Two Hundred Thousand (6,200,000)
shares and is designated as "SERIES A PREFERRED STOCK". The remaining
shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors of the Company is expressly
authorized to provide for the issuance of all or any of the remaining
shares of Preferred Stock in one or more series and, by filing a
certificate pursuant to the applicable law of the State of Delaware,
to fix the number of shares and determine or alter, for each such
series, such designations, preferences, and relative, participating,
optional, or other rights and the qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the
resolution or resolutions adopted by the Board of directors providing
for the issuance of such shares and as may be permitted by the General
Company Law of the State of Delaware. The Board of Directors is also
expressly authorized to increase or
<PAGE>
decrease (but not below the number of shares of such series then
outstanding) the number of shares of any series other than the Series A
Preferred Stock subsequent to the issuance of shares of that series. In
case the number of shares of any such series shall be so decreased, the
shares constituting such decrease shall resume the status that they had
prior to the adoption of the resolution originally fixing the number of
shares of such series.
The authority of the Board of Directors with respect to each
series shall include, but not be limited to, determination of the
following: (i) the number of shares constituting that series and the
distinctive designation of that series; (ii) the dividend rate on the
shares of that series, whether dividends shall be cumulative, and, if
so, from which date or dates, and the relative rights of priority, if
any, of payment of dividends on shares of that series; (iii) whether
that series shall have voting rights, in addition to the voting rights
provided by law, and if so, the terms of such voting rights, including
the number of votes, if any, per share and the number or the
percentage, if any, of members of the Board of Directors each series
is entitled to elect; (iv) whether that series shall have conversion
privileges, and, if so, the terms and conditions of such conversion,
including provision for adjustment of the conversion rate in such
events as the Board of Directors shall determine; (v) whether or not
the shares of that series shall be redeemable, and, if so, the terms
and conditions of such redemption, including the date or date upon or
after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different
conditions and at different redemption dates; (vi) whether that series
shall have a sinking fund for the redemption or purchase of shares of
that series, and, if so, the terms and amount of such sinking fund;
and (vii) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Company, and the relative rights of priority, if any, of payment of
shares of that series.
C. The designations, powers, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations and restrictions thereof in respect of the
Series A Preferred Stock are as follows:
1. DIVIDENDS.
(a) The holder of each share of Series A Preferred Stock shall
be entitled to receive, before any dividends shall be declared and set
aside for any class or series of stock ranking as to dividends or upon
liquidation junior to the Series A Preferred Stock, when, as and if
declared by the Board of Directors of the Company, out of funds
legally available for that purpose, dividends in cash at the rate of
six percent
2
<PAGE>
(6%) per annum of the Series A Liquidation Preference (as such term is
defined in Section C.2(a) below). Dividends on shares of Series A
Preferred Stock shall be cumulative from the original date of issuance of
such shares of Series A Preferred Stock (whether or not there shall be
net profits or net assets of the Company legally available for the
payment of such dividends), so that, if at any time Full Cumulative
Dividends (as hereinafter defined) upon the Series A Preferred Stock
shall not have been paid or declared and a sum sufficient for payment
thereof set apart, the amount of the deficiency in such dividends shall
be fully paid or dividends in such amount shall have been declared on the
shares of the Series A Preferred Stock and a sum sufficient for the
payment thereof shall have been set apart for such payment, before any
sum or sums shall be set aside for or applied to the purchase or
redemption of any shares of any class or series of stock ranking as to
dividends or upon liquidation junior to the Series A Preferred Stock and
before any dividend shall be declared or paid or any other distribution
ordered or made upon any class or series of stock ranking as to dividends
or upon liquidation junior to the Series A Preferred Stock. All Unpaid
Dividends (as hereinafter defined) on any share of Series A Preferred
Stock which is converted pursuant to Section C.5 of this Article Fourth
shall be extinguished at the time of such conversion, and the Company
shall have no further obligation with respect thereto. All dividends
declared upon the Series A Preferred Stock shall be declared pro rata per
share. All payments due under this Section C.l to any holder of shares
of Series A Preferred Stock shall be made to the nearest cent.
As used in this Article Fourth, (i) the term "FULL CUMULATIVE
DIVIDENDS" shall mean, with respect to any shares of the Series A
Preferred Stock and any specific date (whether or not there shall have
been net profits or net assets of the Company legally available for
the payment of such dividends), that amount which shall be equal to
dividends using the applicable Dividend Rate and otherwise computed in
the manner set forth in this Section C.1(a) from the original date of
issuance thereof to the date as of which Full Cumulative Dividends are
to be computed with respect to such shares, and (ii) the term "UNPAID
DIVIDENDS" at any time with respect to any shares of Series A
Preferred Stock shall mean Full Cumulative Dividends to the date of
determination with respect to such shares, less the amount of all
dividends paid pursuant to this Section C.1(a) upon the relevant
shares, plus any additional declared but unpaid dividends with respect
to such shares of Series A Preferred Stock up to such date.
(b) After Full Cumulative Dividends with respect to the Series A
Preferred Stock shall have been declared and paid or set apart, the
holder of each share of Series A Preferred Stock shall be entitled to
receive, before any dividends shall be declared and paid upon or set
3
<PAGE>
aside for the Common Stock, when, as and if declared by the Board of
Directors of the Company, out of funds legally available for that
purpose, dividends in cash, stock or otherwise; PROVIDED, HOWEVER,
that the per share amount of any dividend for a share of Series A
Preferred Stock shall be equal to the product of (i) the per share
amount of any dividend for the Common Stock and (ii) the number of
shares of Common Stock into which such share of Series A Preferred
Stock is convertible on the record date for such dividend. All
payments due under this Section C.1(b) to any holder of shares of
Series A Preferred Stock shall be made to the nearest cent.
2. RIGHTS ON LIQUIDATION, DISSOLUTION OR WIND UP.
(a) In the event of any liquidation, dissolution or winding up
of the Company, whether voluntary or involuntary (an "EVENT OF
LIQUIDATION"), each holder of shares of Series A Preferred Stock then
outstanding shall be entitled to receive out of the assets of the
Company available for distribution to the stockholders, whether from
capital, surplus or earnings, prior and in preference to any
distribution of any of the assets of the Company to the holders of
Common Stock or to the holders of any stock ranking on liquidation
junior of the Series A Preferred Stock by reason of their ownership
thereof, the following amounts: (i) the sum of $8.0645 per share (the
"SERIES A LIQUIDATION PREFERENCE"), and (ii) an amount equal to the
Unpaid Dividends with respect to such shares up to and including the
date of payment. If upon the occurrence of such Event of Liquidation
the assets of the Company available for distribution to its
stockholders shall be insufficient to pay the holders of shares of
Series A Preferred Stock the full amounts to which they shall be so
entitled, the holders of shares of Series A Preferred Stock shall
share ratably in any distribution of assets according to the
respective amounts which would be payable in respect of the shares
held by them upon such distribution if all amounts payable on or with
respect to said shares were paid in full.
(b) In the event of any Event of Liquidation, and subject to the
payment in full of the Series A Liquidation Preference as provided in
subparagraph (a) of this Section C.2, each holder of shares of Common
Stock then outstanding shall be entitled to receive out of the assets
of the Company available for distribution to the stockholders, whether
from capital, surplus or earnings, prior and in preference to any
further distribution of any of the assets of the Company to the
holders of Series A Preferred Stock by reason of their ownership
thereof, the sum of $0 per share and no more. Subject to the payment
in full of the Series A Liquidation Preference as provided in
subparagraph (a) of this Section C.2, if upon the occurrence of such
Event of Liquidation the assets of the Company available for distribution
to its stockholders shall be insufficient
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<PAGE>
to pay the holders of shares of Common Stock the full amounts to which
they shall be so entitled, then the entire remaining assets of the
Company legally available for distribution, if any, shall be distributed
among the holders of Common Stock in proportion to the numbers of shares
of Common Stock held by them.
(c) After payment to the holders of Series A Preferred Stock and
Common Stock of the amounts set forth in Sections C.2(a) and (b)
above, respectively, the entire remaining assets of the Company
legally available for distribution, if any, shall be distributed among
the holders of the Series A Preferred Stock and the Common Stock in
proportion to the numbers of shares of Common Stock held by them and
the shares of Common Stock which they then have the right to acquire
upon conversion of the shares of Series A Preferred Stock then held by
them.
(d) The merger or consolidation of the Company into or with
another corporation or the merger or consolidation of any other
corporation into or with the Company (in which consolidation or merger
the stockholders of the Company receive in exchange for their stock in
the Company distributions of cash or securities (other than securities
of the Company) as a result of such consolidation or merger), or the
sale, transfer or other disposition of all or substantially all of the
assets of the Company, shall be deemed to be an Event of Liquidation.
Anything contained in this Section C.2 or in Section C.5(a) to the
contrary notwithstanding, each holder of shares of Series A Preferred
Stock shall have the right to convert, conditioned upon the
consummation of the Event of Liquidation, all or any part of the
shares of Series A Preferred Stock held by such holder as herein
provided into shares of Common Stock pursuant to Section C.5 of this
Article Fourth in lieu of receiving the amount to which such holder
would be entitled under this Section C.2 in connection with any Event
of Liquidation.
3. REDEMPTION. The shares of Series A Preferred Stock shall not be
redeemable.
4. VOTING. Each share of Series A Preferred Stock shall entitle the
holder thereof to such number of votes per share as shall equal the
number of shares of Common Stock (including any fraction to one decimal
place) into which such share of Series A Preferred Stock is then
convertible, and each such holder of Series A Preferred Stock shall be
entitled to vote on all matters as to which holders of Common Stock shall
be entitled to vote, in the same manner and with the same effect as such
holders of Common Stock, voting together with the holders of Common Stock
as one class. Anything contained in this Certificate of Incorporation to
the contrary notwithstanding, the number of authorized shares of Common
Stock may be increased or decreased (but not below
5
<PAGE>
the number of shares thereof then outstanding or reserved for issuance
upon the conversion, exercise or exchange of securities, options,
warrants or rights then outstanding) by the affirmative vote of the
holders of a majority of the shares of Series A Preferred Stock and
Common Stock, voting together as one class.
5. CONVERSION. The holders of Series A Preferred Stock shall have
conversion rights as follows (the "SERIES A CONVERSION RIGHTS"):
(a) RIGHT TO CONVERT. Each share of Series A Preferred Stock
shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share, at the office of the Company
or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing
$7.89 by the Series A Conversion Price applicable to such share,
determined as hereinafter provided, in effect on the date the
certificate is surrendered for conversion. The price at which shares
of Common Stock shall be deliverable upon conversion of shares of the
Series A Preferred Stock (the "SERIES A CONVERSION PRICE") shall
initially be $7.89 per share of Common Stock. The Series A Conversion
Price shall be subject to adjustment as hereinafter provided.
(b) AUTOMATIC CONVERSION. Each share of Series A Preferred
Stock shall automatically be converted into fully paid and
nonassessable shares of Common Stock, at the then-effective Series A
Conversion Price applicable to such share, immediately upon the
closing of the sale of the Company's Common Stock in a firm
commitment, underwritten public offering registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), other than
any such registration relating solely to a transaction under Rule 145
under the Securities Act (or any successor thereto) or to an employee
benefit plan of the Company, resulting in aggregate proceeds to the
Company (after deduction for underwriters' discounts and commissions)
of not less than $10,000,000.
(c) MECHANICS OF CONVERSION. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of
Common Stock, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of this Company or of any transfer
agent for the Series A Preferred Stock, and give written notice to this
Company at its principal corporate office of such holder's election to
convert the same, and shall state therein the name or names in which the
certificate or certificates for shares of Common Stock are to be issued.
This Company shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Series A Preferred Stock, or to the
nominee or nominees of such holders, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be
6
<PAGE>
entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender
of the shares of Series A Preferred Stock to be converted, and the person
or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering Series A Preferred
Stock for conversion, be conditioned upon the closing with the
underwriters of the sale of securities pursuant to such offering, in
which event the person or persons entitled to receive the Common Stock
upon conversion of Series A Preferred Stock shall not be deemed to have
converted such Series A Preferred Stock until immediately prior to the
closing of such sale of securities.
(d) CONVERSION PRICE ADJUSTMENTS OF SERIES A PREFERRED STOCK FOR
CERTAIN DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS. The Series A
Conversion Price shall be subject to adjustment from time to time as
follows:
(i) (A) Upon each issuance by this Company of any
Additional Stock (as hereinafter defined) after the first date of
original issuance of shares of Series A Preferred Stock (the
"EFFECTIVE DATE"), including Additional Stock deemed to be issued
pursuant to Section C.5(d)(i)(E), without consideration or for a
consideration per share less than the Series A Conversion Price in
effect immediately prior to the issuance of such Additional Stock, the
Series A Conversion Price in effect immediately prior to each issuance
shall forthwith (except as otherwise provided in this clause (i)) be
adjusted to a price determined by multiplying the Series A Conversion
Price by a fraction, (x) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to the issuance
of such Additional Stock plus the number of shares of Common Stock
which the aggregate consideration received by the Company for the
total number of shares of Additional Stock so issued would purchase at
the Series A Conversion Price in effect immediately prior to such
issuance, and (y) the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance
of Additional Stock plus the number of shares of such Additional Stock
so issued. For the purpose of the above calculation, the number of
shares of Common Stock outstanding immediately prior to such issuance
of Additional Stock shall be calculated on a fully diluted basis, as
if all shares of Series A Preferred Stock and convertible securities
had been fully converted into shares of Common Stock immediately prior
to such issuance, and any outstanding options, warrants or other
rights for the purchase of shares of stock or convertible securities
had been fully exercised immediately prior to such
7
<PAGE>
issuance (and the resulting securities fully converted into shares of
Common Stock if so convertible) as of such date, but not including in
such calculation any additional shares of Common Stock issuable with
respect to shares of Series A Preferred Stock, convertible securities, or
outstanding options, warrants or other rights for the purchase of shares
of stock or convertible securities, solely as a result of the adjustment
of the Conversion Price (or other conversion ratios) resulting from the
issuance of the Additional Stock causing the adjustment in question.
For purposes of this Article Fourth, (i) the term "ADDITIONAL
STOCK" shall mean any shares of Common Stock issued (or deemed to have
been issued pursuant to Section C.5(d)(i)(E) of this Article Fourth)
by this Company after the Effective Date, other than Excluded Stock
(as hereinafter defined), and (ii) the term "EXCLUDED STOCK") shall
mean: (a) shares of Common Stock issued or issuable from time to time
upon conversion of any shares of the Series A Preferred Stock,
including additional shares, if any, which are issued or issuable as a
result of an adjustment in the Series A Conversion Price; (b) shares
of Common Stock issued or issuable in a public offering registered
under the Securities Act; (c) shares of Common Stock or related
options exercisable for such Common Stock issued to employees,
officers, and directors of, and consultants, customers, and vendors
to, the Company, pursuant to an arrangement approved by the Board of
Directors of the Company; (d) shares of Common Stock issued pursuant
to a transaction described in Section C.5(d)(ii) below; (e) shares of
Common Stock issued or issuable in connection with the acquisition by
the Company of all of the outstanding voting stock or substantially
all of the assets of another entity; and (f) shares of Common Stock or
related warrants exercisable for such Common Stock issued to (A) any
lessor of capital equipment or (B) any lender of borrowed monies
pursuant to financing arrangements with such lessor or lender approved
by the Board of Directors of the Company.
(B) No adjustment of the Series A Conversion Price
shall be made in an amount less than one cent ($0.01) per share,
provided that any adjustments that are not required to be made by
reason of this sentence shall be carried forward and shall be either
taken into account in any subsequent adjustment made prior to three
(3) years from the date of the event giving rise to the adjustment
being carried forward, or shall be made at the end of three (3) years
from the date of the event giving rise to the adjustment being carried
forward, and upon such adjustment the Series A Conversion Price shall
be rounded up or down to the nearest cent. Except to the limited
extent provided for in subsections (E)(3) and (E)(4), no adjustment of
such Series A Conversion Price pursuant to this Section C.5(d)(i)
shall have the effect
8
<PAGE>
of increasing the Series A Conversion Price above the Series A Conversion
Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by this Company for any
underwriting or otherwise in connection with the issuance and sale
thereof.
(D) In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value
thereof as determined in good faith by the Board of Directors
irrespective of any accounting treatment.
(E) In the case of the issuance of options to purchase
or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock or options to
purchase or rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all purposes of
this Section C.5(d)(i):
(1) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (whether or not then
exercisable) of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in
Sections C.5(d)(i)(C) and (d)(i)(D)), if any, received by the Company
upon the issuance of such options or rights plus the minimum exercise
price provided in such options or rights for the Common Stock covered
thereby.
(2) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (whether or
not then convertible or exchangeable) for any such convertible or
exchangeable securities or upon the exercise of options to purchase or
rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities were issued or such options or
rights were issued and for a consideration equal to the consideration,
if any, received by the Company for any such securities and related
options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of any
related
9
<PAGE>
options or rights (the consideration in each case to be determined in the
manner provided in Sections C.5(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
this Company upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Series A Conversion Price, to the
extent in any way affected by or computed using such options, rights
or securities, shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of Common
Stock or any payment of such consideration upon the exercise of any
such options or rights or the conversion or exchange of such
securities.
(4) Upon the expiration of any such options
or rights, the termination of any such rights to convert or exchange
or the expiration of any options or rights related to such convertible
or exchangeable securities, the Series A Conversion Price, to the
extent in any way affected by or computed using such options, rights
or securities, shall be recomputed to reflect the issuance of only the
number of shares of Common Stock (and convertible or exchangeable
securities that remain in effect) actually issued upon the exercise of
such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to
such securities.
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
Sections C.5(d)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either Section C.5(d)(i)(E)(3) or (4).
(ii) In the event the Company should at any time or from
time to time after the Effective Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into,
or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "COMMON
STOCK EQUIVALENTS") without payment of any consideration by such
holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable
upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no
record date is fixed), the Series A Conversion Price shall be
appropriately decreased so that the
10
<PAGE>
number of shares of Common Stock issuable on conversion of each share of
Series A Preferred Stock shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents.
(iii) If the number of shares of Common Stock
outstanding at any time after the Effective Date is decreased by a
combination of the outstanding shares of Common Stock, then, following
the record date of such combination, the Series A Conversion Price
shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of the Series A
Preferred Stock shall be decreased in proportion to such decrease in
outstanding shares.
(e) OTHER DISTRIBUTIONS. In the event this Company shall
declare a distribution payable in securities of other persons,
evidences of indebtedness issued by this Company or other persons,
assets (excluding cash dividends) or options or rights not referred to
in Section C.5(d)(ii), then, in each such case for other purposes of
this Section C.5(e), the holders of Series A Preferred Stock shall be
entitled to a proportionate share of any such distribution as though
they were the holders of the number of shares of Common Stock of the
Company into which their shares of Series A Preferred Stock are
convertible as of the record date fixed for the determination of the
holders of Common Stock of the Company entitled to receive such
distribution.
(f) RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a
subdivision, combination or merger or sale of assets transaction
provided for elsewhere in this Section C.5 or Section C.2), provision
shall be made so that the holders of Series A Preferred Stock shall
thereafter be entitled to receive upon conversion of such Series A
Preferred Stock the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common
Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section C.5 with
respect to the rights of the holders of Series A Preferred Stock after
the recapitalization to the end that the provisions of this
Section C.5 (including adjustment of the Series A Conversion Price
then in effect and the number of shares purchasable upon conversion of
Series A Preferred Stock) shall be applicable after that event as
nearly equivalent as may be practicable.
(g) NO IMPAIRMENT. This Company will not, by amendment of its
Restated Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution,
11
<PAGE>
issue or sale of securities or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be observed
or performed hereunder by this Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section
C.5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Series A Conversion Rights of the
holders of Series A Preferred Stock against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of Series A Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded to the
nearest whole share. Whether or not fractional shares are issuable
upon such conversion shall be determined on the basis of the total
number of shares of Series A Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock
issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Series A Conversion Price pursuant to this Section C.5, this
Company, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. This
Company shall, upon the written request at any time of any holder of
Series A Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Series A Conversion Price at the time in effect,
and (C) the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon the
conversion of a share of Series A Preferred Stock.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This Company
shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of Series A Preferred Stock
such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of
Series A Preferred Stock; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series A Preferred
Stock, in addition to such other remedies as shall be available to the
holder of such Series A Preferred Stock, this Company will take such
corporate action as may, in the opinion of its counsel, be necessary
to increase its
12
<PAGE>
authorized but unissued shares of Common Stock to such number of shares
as shall be sufficient for such purposes, including, without limitation,
engaging in best efforts to obtain the requisite stockholder approval of
any necessary amendment to these articles.
(j) NOTICES. Any notice required by the provisions of this
Section C.5 to be given to the holders of shares of Series A Preferred
Stock shall be deemed given if deposited in the United States mail,
postage prepaid, and addressed to each holder of record at his address
appearing on the books of this Company.
6. PROTECTIVE PROVISIONS.
(a) For so long as any shares of Series A Preferred Stock are
outstanding, the Company shall not, without the affirmative vote of
the holders of shares representing at least a majority in voting power
of the Series A Preferred Stock then outstanding, voting separately as
one class, given by written consent (in the manner provided by law) or
by vote at a meeting called for such purpose, for which notice shall
have been given to the holders of the Series A Preferred Stock:
(i) in any manner issue any shares of Common Stock or
Preferred Stock or authorize or create any class or series of capital
stock;
(ii) voluntarily dissolve, liquidate or wind up or carry out
any partial liquidation or distribution or transaction in the nature
of a partial liquidation or distribution;
(iii) sell or otherwise dispose of any material properties
or assets of the Company or merge or consolidate with or onto
any other corporation, corporations, entity or entities;
(iv) purchase or lease all or substantially all of the
assets of another corporation, corporations, entity, or entities
(whether by way of purchase or lease of assets, merger or
consolidation or purchase of capital stock);
(v) declare any dividend (whether in cash, properties or
otherwise) upon any of its Common Stock or distribute to the holders
of its Common Stock shares of its capital stock, stock or other
securities of other persons, evidences of indebtedness issued by the
Company or other persons, or other assets or options or rights; or
(vi) except for Excluded Stock, authorize or issue any
options, warrants or other rights to purchase or otherwise acquire any
shares of capital stock of the Company.
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<PAGE>
(b) For so long as any shares of Series A Preferred Stock are
outstanding, the Company shall not, without the affirmative vote of
the holders of shares representing at least a majority in voting power
of the Series A Preferred Stock then outstanding, voting separately as
one class, given by written consent (in the manner provided by law) or
by vote at a meeting called for such purpose, for which notice shall
have been given to the holders of the Series A Preferred Stock:
(i) in any manner alter or change the designations or the
powers, preferences or rights, or the qualifications, limitations or
restrictions of the Series A Preferred Stock in any respect
prejudicial to the holders thereof; or
(ii) amend, alter or repeal any of the provisions of the
Company's Certificate of Incorporation or Bylaws in any manner which
adversely affects the Series A Preferred Stock.
D. Simultaneously with the effective date of the amendment of
Article FOURTH to read as set forth above (the "Reclassification Date"), each
share of the common stock, par value $1.00 per share, of the Company issued
and outstanding immediately before the Reclassification Date (the "Old Common
Stock") shall, automatically and without further action on the part of the
holder thereof, be reclassified as and become (i) 131,818.1818 shares of the
common stock, par value $0.001 per share, of the Company (the "New Common
Stock"), and (ii) 563,636.3636 shares of the Series A Preferred Stock, par
value $0.001 per share, of the Company (the "New Preferred Stock"). From and
after the Reclassification Date, the Company shall issue, upon surrender for
cancellation of the certificates representing the Old Common Stock, new
certificates representing the shares of New Common Stock and New Preferred
Stock which shall become outstanding by reason of the foregoing
reclassification.
* * * * *
SECOND: The foregoing amendment of the Certificate of Incorporation of the
Company was duly adopted by the stockholders of the Company by written consent
given in accordance with the applicable provisions of Sections 228 and 242 of
the General Corporation Law of the State of Delaware and written notice of such
action has been given as provided in Section 228 of the General Corporation Law
of the State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment
to be executed by John L. Bishop, its President, and attested to by William
E. Murray, its Secretary, this 1st day of February, 1996.
VYSIS, INC.
[SEAL] By: /s/ John L. Bishop
-------------------------
John L. Bishop
President
ATTEST:
By: /s/ William E. Murray
--------------------------
William E. Murray
Secretary
15
<PAGE>
State of Delaware
PAGE 1
Office of the Secretary of State
---------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
CORRECTION OF "VYSIS, INC.", FILED IN THIS OFFICE ON THE TWENTY-SECOND DAY OF
JULY, A.D. 1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL]
/s/ Edward J. Freel
---------------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION: 8042169
[SEAL]
2260476 8100
960212937 DATE: 07-25-96
<PAGE>
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF AMENDMENT
OF
VYSIS, INC.
- --------------------------------------------------------------------------
Vysis, Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Company"), does
hereby certify:
1. The Certificate of Amendment (the "Certificate") of the Company as
filed with the Secretary of State of the State of Delaware on February 29,
1996, contains an inaccurate record of the corporate action taken in
connection therewith and the Certificate requires correction as permitted by
subsection (f) of Section 103 of the General Corporation Law of the State of
Delaware.
2. The inaccuracy in the Certificate appears at Article FIRST thereof as
it relates to amended Article FOURTH, Paragraph D of the Certificate of
Incorporation of the Company. The Company did not and never intended to
reclassify each share of common stock, par value $1.00 per share, of the
Company issued and outstanding immediately before the effective date of the
Certificate as (i) 131,818.1818 shares of common stock, par value $0.001 per
share, of the Company, and (ii) 563,636.3636 shares of Series A Preferred
Stock, par value $0.001 per share, of the Company.
3. The inaccuracy in the Certificate at Article FIRST thereof as it
relates to amended Article FOURTH, Paragraph D of the Certificate of the
Incorporation of the Company is corrected so that the first sentence of
Article FOURTH, Paragraph D of the amended Certificate of Incorporation of
the Company reads as follows:
Simultaneously with the effective date of the amendment of Article
FOURTH to read as set forth above (the "Reclassification Date"), each
share of the common stock, par value $1.00 per share, of the Company
issued and outstanding immediately before the Reclassification Date (the
"Old Common Stock") shall, automatically and without further action on
the part of the holder thereof, be reclassified as and become (i)
14,356.43564 shares of the common stock, par value $0.001 per share, of
the Company (the "New Common Stock"), and (ii) 61,386.13861 shares of
the Series A Preferred Stock, par value $0.001 per share, of the Company
(the "New Preferred Stock").
<PAGE>
IN WITNESS WHEREOF, the Company has caused the Certificate to be
executed by its President this 16th day of July, 1996.
VYSIS, INC.
/s/ John L. Bishop
-------------------
Title: President
John L. Bishop
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
-----------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "VYSIS, INC.", FILED IN THIS OFFICE ON THE SIXTEENTH DAY OF
SEPTEMBER, A.D. 1997, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
[SEAL] ---------------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
AUTHENTICATION: 8654519
DATE: 09-17-97
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
VYSIS, INC.
VYSIS, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "COMPANY"), does hereby certify:
FIRST: That the Board of Directors of the Company has duly adopted
resolutions setting forth a proposed amendment of the Certificate of
Incorporation of the Company, declaring said amendment to be advisable and
directing said amendment to be submitted to the stockholders of the Company.
The resolution setting forth the proposed amendment is as follows:
RESOLVED, that Section C of Article FOURTH of the Certificate of
Incorporation of the Company be amended to read, in its entirety, as
follows:
FOURTH:
C. The designations, powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations and restrictions thereof in respect of the Series A Preferred
Stock are as follows:
1. DIVIDENDS.
(a) The holder of each share of Series A Preferred Stock shall be
entitled to receive, before any dividends shall be declared and set aside
for any class or series of stock ranking as to dividends or upon
liquidation junior to the Series A Preferred Stock, when, as and if
declared by the Board of Directors of the Company, out of funds legally
available for that purpose, dividends in cash at the rate of six percent
(6%) per annum of the Series A Liquidation Preference (as such term is
defined in Section C.2(a) below), Dividends on shares of Series A
Preferred Stock shall be cumulative from the original date of issuance of
such shares of Series A Preferred Stock (whether or not there shall be
net profits or net assets of the Company legally available for the
payment of such dividends), so that, if at any time Full Cumulative
Dividends (as hereinafter defined) upon the Series A Preferred Stock
shall not have been paid or declared and a sum sufficient for payment
thereof set apart, the amount of the deficiency in such dividends shall
be fully paid or dividends in such amount shall have been declared on the
shares of the Series A Preferred Stock and a sum sufficient for the payment
thereof shall have been set apart for such payment, before any sum or
sums shall be set aside for or applied to the purchase or redemption of
any shares of any class or series of
<PAGE>
stock ranking as to dividends or upon liquidation junior to the Series A
Preferred Stock and before any dividend shall be declared or paid or any
other distribution ordered or made upon any class or series of stock
ranking as to dividends or upon liquidation junior to the Series A
Preferred Stock. All Unpaid Dividends (as hereinafter defined) on any
share of Series A Preferred Stock which is converted pursuant to Section
C.5 of this Article Fourth shall be extinguished at the time of such
conversion, and the Company shall have no further obligation with respect
thereto. All dividends declared upon the Series A Preferred Stock shall
be declared pro rata per share. All payments due under this Section C.1 to
any holder of shares of Series A Preferred Stock shall be made to the
nearest cent. At any time another series of Preferred Stock ranking on a
parity with the Series A Preferred Stock as to payment of dividends is
outstanding, all dividends declared upon the Series A Preferred Stock and
all dividends declared upon such other series of Preferred Stock shall be
declared ratably in proportion to the respective amounts of dividends
accumulated and unpaid on the Series A Preferred Stock and accumulated
and unpaid on such other series of Preferred Stock.
As used in this Article Fourth, (i) the term "FULL CUMULATIVE
DIVIDENDS" shall mean, with respect to any shares of the Series A
Preferred Stock and any specific date (whether or not there shall have
been net profits or net assets of the Company legally available for the
payment of such dividends), that amount which shall be equal to dividends
using the applicable Dividend Rate and otherwise computed in the manner
set forth in this Section C.1(a) from the original date of issuance
thereof to the date as of which Full Cumulative Dividends are to be
computed with respect to such shares, and (ii) the term "UNPAID
DIVIDENDS" at any time with respect to any shares of Series A Preferred
Stock shall mean Full Cumulative Dividends to the date of determination
with respect to such shares, less the amount of all dividends paid
pursuant to this Section C.1(a) upon the relevant shares, plus any
additional declared but unpaid dividends with respect to such shares of
Series A Preferred Stock up to such date.
(b) After Full Cumulative Dividends with respect to the Series A
Preferred Stock shall have been declared and paid or set apart (and after
full cumulative dividends with respect to any other series of Preferred
Stock shall have been declared and paid or set apart), the holder of each
share of Series A Preferred Stock shall be entitled to receive, before
any dividends shall be declared and paid upon or set aside for the Common
Stock, when, as and if declared by the Board of Directors of the Company,
out of funds legally available for that purpose, dividends in cash, stock
or otherwise; PROVIDED, HOWEVER, that the per share amount of any
dividend for a share of Series A Preferred Stock shall be equal to the
product of (i) the per share amount of any dividend for the Common Stock
and (ii) the number of shares of Common
2
<PAGE>
Stock into which such share of Series A Preferred Stock is convertible on the
record date for such dividend. All payments due under this Section C.1(b) to
any holder of shares of Series A Preferred Stock shall be made to the nearest
cent.
2. RIGHTS ON LIQUIDATION, DISSOLUTION OR WIND UP.
(a) In the event of any liquidation. dissolution or winding up
of the Company, whether voluntary or involuntary (an "EVENT OF
LIQUIDATION"), each holder of shares of Series A Preferred Stock then
outstanding shall be entitled to receive out of the assets of the Company
available for distribution to the stockholders, whether from capital, surplus
or earnings, prior and in preference to any distribution of any of the assets
of the Company to the holders of Common Stock or to the holders of any stock
ranking on liquidation junior to the Series A Preferred Stock by reason of
their ownership thereof. the following amounts: (i) the sum of $8.0645 per
share (the "SERIES A LIQUIDATION PREFERENCE"), and (ii) an amount equal to
the Unpaid Dividends with respect to such shares up to and including the date
of payment. If upon the occurrence of such Event of Liquidation the assets of
the Company available for distribution to its stockholders shall be
insufficient to pay the holders of shares of Series A Preferred Stock and the
holders of shares of any other series of Preferred Stock ranking on a parity
with the Series A Preferred Stock upon liquidation, dissolution or winding up
the full amounts to which they shall be so entitled, the holders of shares of
Series A Preferred Stock and the holders of such other series of Preferred
Stock shall share ratably in any distribution of assets according to the
respective amounts which would be payable in respect of the shares held by
them upon such distribution if all amounts payable on or with respect to said
shares were paid in full.
(b) After payment to the holders of Series A Preferred Stock of
the amounts set forth in Sections C.2(a) above (and after payment to the
holders of any other series of Preferred Stock of the amounts to which they
may be entitled to receive upon liquidation, dissolution or winding up of the
Company prior and in preference to any distribution of any assets of the
Company to the holders of Common Stock), the entire remaining assets of the
Company legally available for distribution, if any, shall be distributed
among the holders of the Series A Preferred Stock and the Common Stock (and
the holders of any other series of Preferred Stock entitled to participate in
any distribution of assets with the holders of Common Stock upon liquidation,
dissolution or winding up of the Company) in proportion to the numbers of
shares of Common Stock held by them and the shares of Common Stock which they
then have the right to acquire upon conversion of the shares of Series A
Preferred Stock (or such other series of Preferred Stock) then held by them.
3
<PAGE>
(c) The merger or consolidation of the Company into or with
another corporation or the merger or consolidation of any other corporation
into or with the Company (in which consolidation or merger the stockholders
of the Company receive in exchange for their stock in the Company
distributions of cash or securities (other than securities of the Company) as
a result of such consolidation or merger), or the sale, transfer or other
disposition of all or substantially all of the assets of the Company, shall
be deemed to be an Event of Liquidation. Anything contained in this Section
C.2 or in Section C.5(a) to the contrary notwithstanding, each holder of
shares of Series A Preferred Stock shall have the right to convert,
conditioned upon the consummation of the Event of Liquidation, all or any
part of the shares of Series A Preferred Stock held by such holder as herein
provided into shares of Common Stock pursuant to Section C.5 of this Article
Fourth in lieu of receiving the amount to which such holder would be entitled
under this Section C.2 in connection with any Event of Liquidation.
3. REDEMPTION. The shares of Series A Preferred Stock shall not be
redeemable.
4. VOTING. Each share of Series A Preferred Stock shall entitle the
holder thereof to such number of votes per share as shall equal the number of
shares of Common Stock (including any fraction to one decimal place) into
which such share of Series A Preferred Stock is then convertible, and each
such holder of Series A Preferred Stock shall be entitled to vote on all
matters as to which holders of Common Stock shall be entitled to vote, in the
same manner and with the same effect as such holders of Common Stock, voting
together with the holders of Common Stock as one class. Anything contained in
this Certificate of Incorporation to the contrary notwithstanding, the number
of authorized shares of Common Stock may be increased or decreased (but not
below the number of shares thereof then outstanding or reserved for issuance
upon the conversion, exercise or exchange of securities, options, warrants or
rights then outstanding) by the affirmative vote of the holders of a majority
of the shares of Series A Preferred Stock and Common Stock, voting together
as one class.
5. CONVERSION. The holders of Series A Preferred Stock shall have
conversion rights as follows (the "SERIES A CONVERSION RIGHTS");
(a) RIGHT TO CONVERT. Each shares of Series A Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after
the date of issuance of such share, at the office of the Company or any
transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $7.89 by
the Series A Conversion Price applicable to such share, determined as
hereinafter provided, in effect on
4
<PAGE>
the date the certificate is surrendered for conversion. The price at which
shares of Common Stock shall be deliverable upon conversion of shares of the
Series A Preferred Stock (the "SERIES A CONVERSION PRICE") shall initially be
$7.89 per share of Common Stock. The Series A Conversion Price shall be
subject to adjustment as hereinafter provided.
(b) AUTOMATIC CONVERSION. Each share of Series A Preferred
Stock shall be automatically be converted into fully paid and nonassessable
shares of Common Stock, at the then-effective Series A Conversion Price
applicable to such share, immediately upon the closing of the sale of the
Company's Common Stock in a firm commitment, underwritten public offering
registered under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), other than any such registration relating solely to a transaction
under Rule 145 under the Securities Act (or any successor thereto) or to an
employee benefit plan of the Company, resulting in aggregate proceeds to the
Company (after deduction for underwriters' discounts and commissions) of not
less than $10,000,000.
(c) MECHANICS OF CONVERSION. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of this Company or of any transfer agent for the
Series A Preferred Stock, and give written notice to this Company at its
principal corporate office of such holder's election to convert the same, and
shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This Company shall,
as soon as practicable thereafter, issue and deliver at such office to such
holder of Series A Preferred Stock, or to the nominee or nominees of such
holders, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion
shall be deemed to have been made immediately prior to the close of business
on the date of such surrender of the shares of Series A Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If
the conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act of 1933, as amended, the conversion
may, at the option of any holder tendering Series A Preferred Stock for
conversion, be conditioned upon the closing with the underwriters of the sale
of securities pursuant to such offering, in which event the person or persons
entitled to receive the Common Stock upon conversion of Series A Preferred
Stock shall not be deemed to have converted such Series A Preferred Stock until
immediately prior to the closing of such sale of securities.
5
<PAGE>
(d) CONVERSION PRICE ADJUSTMENTS OF SERIES A PREFERRED STOCK FOR
CERTAIN DILUTIVE ISSUANCES. SPLITS AND COMBINATIONS. The Series A
Conversion Price shall be subject to adjustment from time to time as
follows:
(i) (A) Upon each issuance by this Company of any
Additional Stock (as hereinafter defined) after the first date of
original issuance of shares of Series A Preferred Stock (the "EFFECTIVE
DATE"), including Additional Stock deemed to be issued pursuant to
Section C.5(d)(i)(E), without consideration or for a consideration per
share less than the Series A Conversion Price in effect immediately prior
to the issuance of such Additional Stock, the Series A Conversion Price
in effect immediately prior to each issuance shall forthwith (except as
otherwise provided in this clause (i)) be adjusted to a price determined
by multiplying the Series A Conversion Price by a fraction, (x) the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such Additional Stock
plus the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of shares of
Additional Stock so issued would purchase at the Series A Conversion
Price in effect immediately prior to such issuance, and (y) the
denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance of Additional Stock plus
the number of shares of such Additional Stock so issued. For the purpose
of the above calculation, the number of shares of Common Stock
outstanding immediately prior to such issuance of Additional Stock shall
be calculated on a fully diluted basis, as if all shares of Series A
Preferred Stock and convertible securities had been fully converted into
shares of Common Stock immediately prior to such issuance, and any
outstanding options, warrants or other rights for the purchase of shares
of stock or convertible securities had been fully exercised immediately
prior to such issuance (and the resulting securities fully converted into
shares of Common Stock if so convertible) as of such date, but not
including in such calculation any additional shares of Common Stock
issuable with respect to shares of Series A Preferred Stock, convertible
securities, or outstanding options, warrants or other rights for the
purchase of shares of stock or convertible securities, solely as a result
of the adjustment of the Conversion Price (or other conversion ratios)
resulting from the issuance of the Additional Stock causing the
adjustment in question.
For purposes of this Article Fourth, (i)
the term "ADDITIONAL STOCK" shall mean any shares of Common Stock issued
(or deemed to have been issued pursuant to Section C.5(d)(i)(E) of this
Article Fourth) by this Company after the Effective Date, other than
Excluded Stock (as hereinafter defined), and (ii) the term "EXCLUDED
STOCK") shall mean; (a) shares of Common Stock issued or issuable from
time to time upon conversion of any shares of the Series A Preferred
Stock, including additional shares, if any,
6
<PAGE>
which are issued or issuable as a result of an adjustment in the Series A
Conversion Price; (b) shares of Common Stock issued or issuable in a
public offering registered under the Securities Act; (c) shares of Common
Stock or related options exercisable for such Common Stock issued to
employees, officers, and directors of, and consultants, customers, and
vendors to, the Company, pursuant to an arrangement approved by the Board
of Directors of the Company; (d) shares of Common Stock issued pursuant
to a transaction described in Section C.5(d)(ii) below; (e) shares of
Common Stock issued or issuable in connection with the acquisition by the
Company of all of the outstanding voting stock or substantially all of
the assets of another entity; and (f) shares of Common Stock or related
warrants exercisable for such Common Stock issued to (A) any lessor of
capital equipment or (B) any lender of borrowed monies pursuant to
financing arrangements with such lessor or lender approved by the Board
of Directors of the Company.
(B) No adjustment of the Series A Conversion
Price shall be made in an amount less than one cent ($0.01) per share,
provided that any adjustments that are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into
account in any subsequent adjustment made prior to three (3) years from
the date of the event giving rise to the adjustment being carried
forward, or shall be made at the end of three (3) years from the date of
the event giving rise to the adjustment being carried forward, and upon
such adjustment the Series A Conversion Price shall be rounded up or down
to the nearest cent. Except to the limited extent provided for in
subsections (E)(3) and (E)(4), no adjustment of such Series A
Conversion Price pursuant to this Section C.5(d)(i) shall have the effect
of increasing the Series A Conversion Price above the Series A Conversion
Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common
Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions
or other expenses allowed, paid or incurred by this Company for any
underwriting or otherwise in connection with the issuance and sale
thereof.
(D) In the case of the issuance of the Common
Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value
thereof as determined in good faith by the Board of Directors
irrespective of any accounting treatment.
(E) In the case of the issuance of options to
purchase or rights to subscribe for Common Stock, securities by their
terms convertible into or exchangeable for Common Stock or options to
purchase or rights to
7
<PAGE>
subscribe for such convertible or exchangeable securities, the following
provisions shall apply for all purposes of this Section C.5(d)(i):
(1) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (whether or not then exercisable)
of such options to purchase or rights to subscribe for Common Stock shall
be deemed to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration (determined in
the manner provided in Sections C.5(d)(i)(C) and (d)(i)(D)), if any,
received by the Company upon the issuance of such options or rights plus
the minimum exercise price provided in such options or rights for the
Common Stock covered thereby.
(2) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (whether or
not then convertible or exchangeable) for any such convertible or
exchangeable securities or upon the exercise of options to purchase or
rights to subscribe for such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights
were issued and for a consideration equal to the consideration, if any,
received by the Company for any such securities and related options or
rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the minimum additional consideration, if any, to
be received by the Company upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in
Sections C.5(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in the number
of shares of Common Stock deliverable or in the consideration payable to
this Company upon exercise of such options or rights or upon conversion
of or in exchange for such convertible or exchangeable securities,
including, but not limited to, a change resulting from the antidilution
provisions thereof, the Series A Conversion Price, to the extent in any
way affected by or computed using such options, rights or securities,
shall be recomputed to reflect such change, but no further adjustment
shall be made for the actual issuance of Common Stock or any payment of
such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
(4) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the Series A Conversion Price, to the extent in
any way affected by or computed using such options, rights or securities,
shall be recomputed to
8
<PAGE>
reflect the issuance of only the number of shares of Common Stock
(and convertible or exchangeable securities that remain in effect)
actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the
options or rights related to such securities.
((5) The number of shares of Common
Stock deemed issued and the consideration deemed paid therefor pursuant
to Sections C.5(d)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either Section C.5(d)(i)(E)(3) or (4).
(ii) In the event the Company should at any time
or from time to time after the Effective Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into,
or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "COMMON
STOCK EQUIVALENTS") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable
upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no
record date if fixed), the Series A Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of Series A Preferred Stock shall
be increased in proportion to such increase of the aggregate of shares
of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents.
(iii) If the number of shares of Common Stock
outstanding at any time after the Effective Date is decreased by a
combination of the outstanding shares of Common Stock, then, following
the record date of such combination, the Series A Conversion Price
shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of each share of the Series A Preferred
Stock shall be decreased in proportion to such decrease in outstanding
shares.
(d) OTHER DISTRIBUTIONS. In the event this Company shall
declare a distribution payable in securities of other persons,
evidences of indebtedness issued by this Company or other persons,
assets (excluding cash dividends) or options or rights not referred to
in Section C.5(d)(ii), then, in each such case for other purposes of
this Section C.5(e), the holders of Series A Preferred Stock shall be
entitled to a proportionate share of any such distribution as
9
<PAGE>
though they were the holders of the number of shares of Common Stock of
the Company into which their shares of Series A Preferred Stock are
convertible as of the record date fixed for the determination of the
holders of Common Stock of the Company entitled to receive such
distribution.
(e) RECAPITALIZATIONS. If at any time or from time to
time there shall be a recapitalization of the Common Stock (other than
a subdivision, combination or merger or sale of assets transaction
provided for elsewhere in this Section C.5 or Section C.2), provision
shall be made so that the holders of Series A Preferred Stock shall
thereafter be entitled to receive upon conversion of such Series A
Preferred Stock the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be
made in the application of the provisions of this Section C.5 with
respect to the rights of the holders of Series A Preferred Stock after
the recapitalization to the end that the provisions of this Section C.5
(including adjustment of the Series A Conversion Price then in effect
and the number of shares purchasable upon conversion of Series A
Preferred Stock) shall be applicable after that event as nearly
equivalent as may be practicable.
(f) NO IMPAIRMENT. This Company will not, by amendment of
its Restated Certificate of Incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by this Company, but
will at all times in good faith assist in the carrying out of all the
provisions of this Section C.5 and in the taking of all such action as
may be necessary or appropriate in order to protect the Series A
Conversion Rights of the holders of Series A Preferred Stock against
impairment.
(g) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of Series A Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded to the
nearest whole share. Whether or not fractional shares are issuable upon
such conversion shall be determined on the basis of the total number of
shares of Series A Preferred Stock the holder is at the time converting
into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Series A Conversion Price pursuant to this Section
C.5, this Company,
10
<PAGE>
at its expense, shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. This Company shall, upon the
written request at any time of any holder of Series A Preferred Stock,
furnish or cause to be furnished to such holder a like certificate
setting forth (A) such adjustment and readjustment, (B) the Series A
Conversion Price at the time in effect, and (C) the number of shares of
Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series A
Preferred Stock.
(h) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose
of effecting the conversion of the shares of Series A Preferred Stock
such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series
A Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of Series A Preferred Stock,
in addition to such other remedies as shall be available to the holder
of such Series A Preferred Stock, this Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including, without
limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to these articles.
(i) NOTICES. Any notice required by the provisions of
this Section C.5 to be given to the holders of shares of Series A
Preferred Stock shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of record at his
address appearing on the books of this Company.
6. (a) For so long as any shares of Series A Preferred Stock
are outstanding, the Company shall not, without the affirmative vote of
the holders of shares representing at least a majority in voting power
of the Series A Preferred Stock then outstanding, voting separately as
one class, given by written consent (in the matter provided by law) or
by vote at a meeting called for such purpose, for which notice shall
have been given to the holders of the Series A Preferred Stock:
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<PAGE>
(i) in any manner issue any shares of Common Stock or
Preferred Stock, including any authorized but unissued Preferred Stock,
or authorize or create any class or series of capital stock;
(ii) voluntarily dissolve, liquidate or wind up or carry
out any partial liquidation or distribution or transaction in the nature
of a partial liquidation or distribution;
(iii) sell or otherwise dispose of any material properties
or assets of the Company or merge or consolidate with or into any other
corporation, corporations, entity or entities;
(iv) purchase or lease all or substantially all of the
assets of another corporation, corporations, entity, or entities (whether
by way of purchase or lease of assets, merger or consideration or
purchase of capital stock);
(v) declare any dividend (whether in cash, properties or
otherwise) upon any of its Common Stock or distribute to the holders of
its Common Stock shares of its capital stock, stock or other securities
of other persons, evidences of indebtedness issued by the Company or
other persons, or other assets or options or rights; or
(vi) except for Excluded Stock, authorize or issue any
options, warrants or other rights to purchase or otherwise acquire any
shares of capital stock of the Company.
(b) For so long as any shares of Series A Preferred Stock are
outstanding, the Company shall not, without the affirmative vote of the
holders of shares representing at least a majority in voting power of the
Series A Preferred Stock then outstanding, voting separately as one
class, given by written consent (in the manner provided by law) or by
vote at a meeting called for such purpose, for which notice shall have
been given to the holders of the Series A Preferred Stock;
(i) in any manner alter or change the designations or
the powers, preferences or rights, or the qualifications, limitations or
restrictions of the Series A Preferred Stock in any respect prejudicial
to the holders thereof; or
(ii) amend, alter or repeal any of the provisions of the
Company's Certificate of Incorporation or Bylaws in any manner which
adversely affects the Series A Preferred Stock.
* * * * *
12
<PAGE>
SECOND: The foregoing amendment of the Certificate of Incorporation of
the Company was duly adopted by the stockholders of the Company by written
consent given in accordance with the applicable provisions of Sections 228
and 242 of the General Corporation Law of the State of Delaware and written
notice of such action has been given as provided in Section 228 of the
General Corporation Law of the State of Delaware.
13
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment
to be executed by John L. Bishop, its President, and attested to by William
E. Murray, its Secretary, this 29 day of August, 1997.
VYSIS, INC.
[SEAL] By: /s/ John L. Bishop
---------------------------
John L. Bishop
President
ATTEST:
By: /s/ William E. Murray
------------------------
William E. Murray
Secretary
14
<PAGE>
CERTIFICATE OF DESIGNATIONS
of
SERIES B PREFERRED STOCK
of
VYSIS, INC.
(Pursuant to Section 151 of
the Delaware General Corporation Law)
VYSIS, INC., a corporation duly organized and existing under and by virtue
of the laws of the State of Delaware (the "Company"), HEREBY CERTIFIES THAT the
following Resolution was adopted by the Board of Directors of the Company as
required by Section 151 of the General Corporation Law of the State of Delaware
and pursuant to authority expressly vested in it by the provisions of its
Certificate of Incorporation, as amended:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of the Company in accordance with the provisions of the Certificate
of Incorporation, as amended, the Board of Directors hereby creates a series of
Preferred Stock, par value $0.001 per share, of the Company and hereby states
the designation and authorized number of shares of such Preferred Stock, and
fixes the relative rights, preferences, and limitations thereof, as follows:
Series B Preferred Stock:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as "Series B Preferred Stock" (the "SERIES B PREFERRED STOCK")
and the number of shares constituting the Series B Preferred Stock shall be
553,126. Such number of shares may be increased or decreased by resolution of
the Board of Directors; PROVIDED, that no decrease shall reduce the number of
shares of Series B Preferred Stock to a number less than the number of shares
then outstanding.
Section 2. DIVIDENDS.
(a) The holder of each share of Series B Preferred Stock shall
be entitled to receive, before any dividends shall be declared and set
aside for any class or series of stock ranking as to dividends or upon
liquidation junior to the Series B Preferred Stock, when, as and if
declared by the Board of Directors of the Company, out of funds legally
available for that purpose, dividends in cash at the rate of six percent
(6%) per annum
<PAGE>
of the Series B Liquidation Preference (as such term is defined in Section
3(a) below). Dividends on shares of Series B Preferred Stock shall be
cumulative from the original date of issuance of such shares of Series B
Preferred Stock (whether or not there shall be net profits or net assets
of the Company legally available for the payment of such dividends), so
that, if at any time Full Cumulative Dividends (as hereinafter defined)
upon the Series B Preferred Stock shall not have been paid or declared
and a sum sufficient for payment thereof set apart, the amount of the
deficiency in such dividends shall be fully paid or dividends in such
amount shall have been declared on the shares of Series B Preferred Stock
and a sum sufficient for the payment thereof shall have been set apart
for such payment, before any sum or sums shall be set aside for or
applied to the purchase or redemption of any shares of any class or
series of stock ranking as to dividends or upon liquidation junior to the
Series B Preferred Stock and before any dividend shall be declared or
paid or any other distribution ordered or made upon any class or series
of stock ranking as to dividends or upon liquidation junior to the Series
B Preferred Stock. All Unpaid Dividends (as hereinafter defined) on any
share of Series B Preferred Stock which is converted pursuant to Section
6 hereof shall be extinguished at the time of such conversion, and the
Company shall have no further obligation with respect thereto. All
dividends declared upon the Series B Preferred Stock shall be declared
pro rata per share. All payments due under this Section 2 to any holder
of shares of Series B Preferred Stock shall be made to the nearest cent.
At any time another series of Preferred Stock ranking on a parity with
the Series B Preferred Stock as to payment of dividends is outstanding,
all dividends declared upon the Series B Preferred Stock and all
dividends declared upon such other series of Preferred Stock shall be
declared ratably in proportion to the respective amounts of dividends
accumulated and unpaid on the Series B Preferred Stock and accumulated
and unpaid on such other series of Preferred Stock.
As used herein, (i) the term "FULL CUMULATIVE DIVIDENDS"
shall mean, with respect to any shares of the Series B Preferred Stock and
any specific date (whether or not there shall have been net profits or net
assets of the Company legally available for the payment of such dividends),
that amount which shall be equal to dividends using the applicable
Dividend Rate and otherwise computed in the manner set forth in this
Section 2(a) from the original date of issuance thereof to the date as
of which Full Cumulative Dividends are to be computed with respect to
such shares, and (ii) the term "UNPAID DIVIDENDS" at any time with respect
to any shares of Series B Preferred Stock shall mean Full Cumulative
Dividends to the date of determination with respect to such shares, less
the amount of all dividends paid pursuant to this Section 2(a) upon the
relevant shares, plus any additional declared but unpaid dividends with
respect to such shares of Series B Preferred Stock up to such date.
(b) After Full Cumulative Dividends with respect to the Series B
Preferred Stock shall have been declared and paid or set apart (and after
full cumulative dividends with respect to any other series of Preferred
Stock shall have been declared and paid or set apart), the holder of each
share of Series B Preferred Stock shall be entitled to
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<PAGE>
receive, before any dividends shall be declared and paid upon or set aside
for the common stock, par value $.001 per share, of the Company (the
"COMMON STOCK"), when, as and if declared by the Board of Directors of
the Company, out of funds legally available for that purpose, dividends
in cash, stock or otherwise; PROVIDED, HOWEVER, that the per share amount
of any dividend for a share of Series B Preferred Stock shall be equal to
the product of (i) the per share amount of any dividend for the Common
Stock and (ii) the number of shares of Common Stock into which such share
of Series B Preferred Stock is convertible on the record date for such
dividend. All payments due under this Section 2(b) to any holder of
shares of Series B Preferred Stock shall be made to the nearest cent.
Section 3. RIGHTS ON LIQUIDATION, DISSOLUTION OR WIND UP.
(a) In the event of any liquidation, dissolution or winding up
of the Company, whether voluntary or involuntary (an "EVENT OF
LIQUIDATION"), each holder of shares of Series B Preferred Stock then
outstanding shall be entitled to receive out of the assets of the Company
available for distribution to the stockholders, whether from capital,
surplus or earnings, prior and in preference to any distribution of any of
the assets of the Company to the holders of Common Stock or to the holders
of any stock ranking on liquidation junior to the Series B Preferred Stock
by reason of their ownership thereof, the following amounts: (i) the sum
of $9.23 per share (the "SERIES B LIQUIDATION PREFERENCE"), and (ii) an
amount equal to the Unpaid Dividends with respect to such shares up to
and including the date of payment. If upon the occurrence of such Event
of Liquidation the assets of the Company available for distribution to
its stockholders shall be insufficient to pay the holders of shares of
Series B Preferred Stock and the holders of shares of any other series of
Preferred Stock ranking on a parity with the Series B Preferred Stock
upon liquidation, dissolution or winding up the full amounts to which
they shall be so entitled, the holders of shares of Series B Preferred
Stock and the holders of such other series of Preferred Stock shall share
ratably in any distribution of assets according to the respective amounts
which would be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to said shares
were paid in full.
(b) After payment to the holders of Series B Preferred Stock of
the amounts set forth in Section 3(a) above (and after payment to the
holders of any other series of Preferred Stock of the amounts to which they
may be entitled to receive upon liquidation, dissolution or winding up of
the Company prior and in preference to any distribution of any assets of
the Company to the holders of Common Stock), the entire remaining assets
of the Company legally available for distribution, if any, shall be
distributed among the holders of the Series B Preferred Stock and the
Common Stock (and the holders of any other series of Preferred Stock
entitled to participate in any distribution of assets with the holders of
Common Stock upon the liquidation, dissolution or winding up of the
Company) in proportion to the numbers of shares of Common Stock held by
them and the shares of Common Stock which they then have the right to
acquire upon conversion
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<PAGE>
of the shares of Series B Preferred Stock (or such other series of
Preferred Stock) then held by them.
(c) The merger or consolidation of the Company into or with
another corporation or the merger or consolidation of any other corporation
into or with the Company (in which consolidation or merger the stockholders
of the Company receive in exchange for their stock in the Company
distributions of cash or securities (other than securities of the
Company) as a result of such consolidation or merger), or the sale,
transfer or other disposition of all or substantially all of the assets
of the Company, shall be deemed to be an Event of Liquidation. Anything
contained in this Section 3 or in Section 6(a) to the contrary
notwithstanding, each holder of shares of Series B Preferred Stock shall
have the right to convert, conditioned upon the consummation of the Event
of Liquidation, all or any part of the shares of Series B Preferred Stock
held by such holder as herein provided into shares of Common Stock
pursuant to Section 6 hereof in lieu of receiving the amount to which
such holder would be entitled under this Section 3 in connection with any
Event of Liquidation.
Section 4. REDEMPTION. The shares of Series B Preferred Stock shall
not be redeemable.
Section 5. VOTING. Each share of Series B Preferred Stock shall
entitle the holder thereof to such number of votes per share as shall equal the
number of shares of Common Stock (including any fraction to one decimal place)
into which such share of Series B Preferred Stock is then convertible, and each
such holder of Series B Preferred Stock shall be entitled to vote on all matters
as to which holders of Common Stock shall be entitled to vote, in the same
manner and with the same effect as such holders of Common Stock, voting together
with the holders of Common Stock as one class. Anything contained in this
Certificate of Designations to the contrary notwithstanding, the number of
authorized shares of Common Stock may be increased or decreased (but not below
the number of shares thereof then outstanding or reserved for issuance upon the
conversion, exercise or exchange of securities, options, warrants or rights then
outstanding) by the affirmative vote of the holders of a majority of the shares
of Series B Preferred Stock and Common Stock, voting together as one class.
Section 6. CONVERSION. The holders of Series B Preferred Stock shall
have conversion rights as follows (the "SERIES B CONVERSION RIGHTS"):
(a) RIGHT TO CONVERT. Each share of Series B Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after
the date of issuance of such share, at the office of the Company or any
transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $9.23 by
the Series B Conversion Price applicable to such share, determined as
hereinafter provided, in effect on the date the certificate is surrendered
for conversion. The price at which shares of Common Stock shall be
deliverable upon conversion of shares of the Series B Preferred Stock (the
"SERIES B CONVERSION PRICE") shall initially
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<PAGE>
be $9.23 per share of Common Stock. The Series B Conversion Price shall be
subject to adjustment as hereinafter provided.
(b) AUTOMATIC CONVERSION. Each share of Series B Preferred Stock
shall automatically be converted into fully paid and nonassessable shares
of Common Stock, at the then-effective Series B Conversion Price applicable
to such share, immediately upon the closing of the sale of the Company's
Common Stock in a firm commitment, underwritten public offering registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), other
than any such registration relating solely to a transaction under Rule 145
under the Securities Act (or any successor thereto) or to an employee
benefit plan of the Company, resulting in aggregate proceeds to the Company
(after deduction for underwriters' discounts and commissions) of not less
than $10,000,000.
(c) MECHANICS OF CONVERSION. Before any holder of Series B
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of this Company or of any transfer agent for
the Series B Preferred Stock, and give written notice to this Company at its
principal corporate office of such holder's election to convert the same,
and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This Company
shall, as soon as practicable thereafter, issue and deliver at such office
to such holder of Series B Preferred Stock, or to the nominee or nominees
of such holders, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of Series B
Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities
Act of 1933, as amended, the conversion may, at the option of any holder
tendering Series B Preferred Stock for conversion, be conditioned upon the
closing with the underwriters of the sale of securities pursuant to such
offering, in which event the person or persons entitled to receive the
Common Stock upon conversion of Series B Preferred Stock shall not be
deemed to have converted such Series B Preferred Stock until immediately
prior to the closing of such sale of securities.
(d) CONVERSION PRICE ADJUSTMENTS OF SERIES B PREFERRED STOCK FOR
CERTAIN DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS. The Series B
Conversion Price shall be subject to adjustment from time to time as
follows:
(i) (A) Upon each issuance by this Company of any Additional
Stock (as hereinafter defined) after the first date of original issuance of
shares of Series B Preferred Stock (the "EFFECTIVE DATE"), including
Additional Stock deemed to be issued pursuant Section 6(d)(i)(E), without
consideration or for a consideration per share less
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<PAGE>
than the Series B Conversion Price in effect immediately prior to the
issuance of such Additional Stock, the Series B Conversion Price in
effect immediately prior to each issuance shall forthwith (except as
otherwise provided in this clause (i)) be adjusted to a price determined
by multiplying the Series B Conversion Price by a fraction, (x) the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such Additional Stock
plus the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of shares of
Additional Stock so issued would purchase at the Series B Conversion
Price in effect immediately prior to such issuance, and (y) the
denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance of Additional Stock plus
the number of shares of such Additional Stock so issued. For the purpose
of the above calculation, the number of shares of Common Stock
outstanding immediately prior to such issuance of Additional Stock shall
be calculated on a fully diluted basis, as if all shares of Series B
Preferred Stock and convertible securities had been fully converted into
shares of Common Stock immediately prior to such issuance, and any
outstanding options, warrants or other rights for the purchase of shares
of stock or convertible securities had been fully exercised immediately
prior to such issuance (and the resulting securities fully converted into
shares of Common Stock if so convertible) as of such date, but not
including in such calculation any additional shares of Common Stock
issuable with respect to shares of Series B Preferred Stock, convertible
securities, or outstanding options, warrants or other rights for the
purchase of shares of stock or convertible securities, solely as a result
of the adjustment of the Conversion Price (or other conversion ratios)
resulting from the issuance of the Additional Stock causing the
adjustment in question.
For purposes hereof, (i) the term "ADDITIONAL STOCK" shall mean
any shares of Common Stock issued (or deemed to have been issued pursuant
to Section 6(d)(i)(E) hereof) by this Company after the Effective Date,
other than Excluded Stock (as hereinafter defined), and (ii) the term
"EXCLUDED STOCK") shall mean: (a) shares of Common Stock issued or
issuable from time to time upon conversion of any shares of the Series B
Preferred Stock, including additional shares, if any, which are issued or
issuable as a result of an adjustment in the Series B Conversion Price; (b)
shares of Common Stock issued or issuable in a public offering registered
under the Securities Act; (c) shares of Common Stock or related options
exercisable for such Common Stock issued to employees, officers, and
directors of, and consultants, customers, and vendors to, the Company,
pursuant to an arrangement approved by the Board of Directors of the
Company; (d) shares of Common Stock issued pursuant to a transaction
described in Section 6(d)(ii) below; (e) shares of Common Stock issued or
issuable in connection with the acquisition by the Company of all of the
outstanding voting stock or substantially all of the assets of another
entity; and (f) shares of Common Stock or related warrants exercisable for
such Common Stock issued to (A) any lessor of capital equipment or (B) any
lender of borrowed monies pursuant to financing arrangements with such
lessor or lender approved by the Board of Directors of the Company.
-6-
<PAGE>
(B) No adjustment of the Series B Conversion Price shall be
made in an amount less than one cent ($0.01) per share, provided that any
adjustments that are not required to be made by reason of this sentence
shall be carried forward and shall be either taken into account in any
subsequent adjustment made prior to three (3) years from the date of the
event giving rise to the adjustment being carried forward, or shall be made
at the end of three (3) years from the date of the event giving rise to the
adjustment being carried forward, and upon such adjustment the Series B
Conversion Price shall be rounded up or down to the nearest cent. Except
to the limited extent provided for in subsections (E)(3) and (E)(4), no
adjustment of such Series B Conversion Price pursuant to this Section
6(d)(i) shall have the effect of increasing the Series B Conversion Price
above the Series B Conversion Price in effect immediately prior to such
adjustment.
(C) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this Company for any underwriting or otherwise
in connection with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined in
good faith by the Board of Directors irrespective of any accounting
treatment.
(E) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their terms convertible
into exchangeable for Common Stock or options to purchase or rights to
subscribe for such convertible or exchangeable securities, the following
provisions shall apply for all purposes of this Section 6(d)(i):
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (whether or not then exercisable) of such
options to purchase or rights to subscribe for Common Stock shall be deemed
to have been issued at the time such options or rights were issued and for
a consideration equal to the consideration (determined in the manner
provided in Sections 6(d)(i)(C) and (d)(i)(D)), if any, received by the
Company upon the issuance of such options or rights plus the minimum
exercise price provided in such options or rights for the Common Stock
covered thereby.
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange (whether or not then
convertible or exchangeable) for any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed
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<PAGE>
to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the Company for any such securities
and related options or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Company upon the conversion
or exchange of such securities or the exercise of any related options or
rights (the consideration in each case to be determined in the manner
provided in Sections 6(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to this Company
upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but
not limited to, a change resulting from the antidilution provisions
thereof, the Series B Conversion Price, to the extent in any way affected
by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be made
for the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
(4) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration
of any options or rights related to such convertible or exchangeable
securities, the Series B Conversion Price, to the extent in any way
affected by or computed using such options, rights or securities, shall be
recomputed to reflect the issuance of only the number of shares of Common
Stock (and convertible or exchangeable securities that remain in effect)
actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the
options or rights related to such securities.
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to Sections
6(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either Section
6(d)(i)(E)(3) or (4).
(ii) In the event the Company should at any time or from
time to time after the Effective Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "COMMON STOCK EQUIVALENTS") without payment of
any consideration by such holder for the additional shares of Common Stock
or the Common Stock Equivalents (including the additional shares of Common
Stock issuable upon conversion or exercise thereof), then, as of such
record date (or the date of such dividend distribution, split or
subdivision if no record date is fixed), the Series B Conversion Price
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<PAGE>
shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of Series B Preferred Stock
shall be increased in proportion to such increase of the aggregate of
shares of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents.
(iii) If the number of shares of Common Stock outstanding at
any time after the Effective Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Series B Conversion Price shall be appropriately increased
so that the number of shares of Common Stock issuable on conversion of each
share of the Series B Preferred Stock shall be decreased in proportion to
such decrease in outstanding shares.
(e) OTHER DISTRIBUTIONS. In the event this Company shall declare a
distribution payable in securities of other persons, evidences of
indebtedness issued by this Company or other persons, assets (excluding
cash dividends) or options or rights not referred to in Section 6(d)(ii),
then, in each such case for other purposes of this Section 6(e), the
holders of Series B Preferred Stock shall be entitled to a proportionate
share of any such distribution as though they were the holders of the
number of shares of Common Stock of the Company into which their shares of
Series B Preferred Stock are convertible as of the record date fixed for
the determination of the holders of Common Stock of the Company entitled to
receive such distribution.
(f) RECAPITALIZATIONS. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere
in this Section 6 or Section 3), provision shall be made so that the
holders of Series B Preferred Stock shall thereafter be entitled to receive
upon conversion of such Series B Preferred Stock the number of shares of
stock or other securities or property of the Company or otherwise, to which
a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this
Section 6 with respect to the rights of the holders of Series B Preferred
Stock after the recapitalization to the end that the provisions of this
Section 6 (including adjustment of the Series B Conversion Price then in
effect and the number of shares purchasable upon conversion of Series B
Preferred Stock) shall be applicable after that event as nearly equivalent
as may be practicable.
(g) NO IMPAIRMENT. This Company will not, by amendment of its
Restated Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by this Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 6 and in
the taking of all such action as may be necessary or appropriate in order
to protect the Series B Conversion Rights of the holders of Series B
Preferred Stock against impairment.
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<PAGE>
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the conversion of
any share or shares of Series B Preferred Stock, and the number of shares
of Common Stock to be issued shall be rounded to the nearest whole share.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Series B Preferred
Stock the holder is at the time converting into Common Stock and the number
of shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of
the Series B Conversion Price pursuant to this Section 6, this Company, at
its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Series B Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This Company shall, upon the written request at any
time of any holder of Series B Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Series B Conversion Price at the time
in effect, and (C) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the
conversion of a share of Series B Preferred Stock.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This Company
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of Series B Preferred Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series B Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding shares
of Series B Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Series B Preferred Stock, this Company will
take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes, including,
without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to these articles.
(j) NOTICES. Any notice required by the provisions of this Section 6
to be given to the holders of shares of Series B Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of
this Company.
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Section 7. PROTECTIVE PROVISIONS.
(a) For so long as any shares of Series B Preferred Stock are
outstanding, the Company shall not, without the affirmative vote of the
holders of shares representing at least a majority in voting power of the
Series B Preferred Stock then outstanding, voting separately as one class,
given by written consent (in the manner provided by law) or by vote at a
meeting called for such purpose, for which notice shall have been given to
the holders of the Series B Preferred Stock:
(i) in any manner issue any shares of Common Stock or
Preferred Stock, including any authorized but unissued Preferred Stock, or
authorize or create any class or series of capital stock;
(ii) voluntarily dissolve, liquidate or wind up or carry out
any partial liquidation or distribution or transaction in the nature of a
partial liquidation or distribution;
(iii) sell or otherwise dispose of any material properties or
assets of the Company or merge or consolidate with or into any other
corporation, corporations, entity or entities;
(iv) purchase or lease all or substantially all of the assets
of another corporation, corporations, entity, or entities (whether by way of
purchase or lease of assets, merger or consolidation or purchase of capital
stock);
(v) declare any dividend (whether in cash, properties or
otherwise) upon any of its Common Stock or distribute to the holders of its
Common Stock shares of its capital stock, stock or other securities of
other persons, evidences of indebtedness issued by the Company or other
persons, or other assets or options or rights; or
(vi) except for Excluded Stock, authorize or issue any
options, warrants or other rights to purchase or otherwise acquire any
shares of capital stock of the Company.
(b) For so long as any shares of Series B Preferred Stock are
outstanding, the Company shall not, without the affirmative vote of the
holders of shares representing at least a majority in voting power of the
Series B Preferred Stock then outstanding, voting separately as one class,
given by written consent (in the manner provided by law) or by vote at a
meeting called for such purpose, for which notice shall have been given to
the holders of the Series B Preferred Stock:
(i) in any manner alter or change the designations or the
powers, preferences or rights, or the qualifications, limitations or
restrictions of the Series B Preferred Stock in any respect prejudicial to
the holders thereof; or
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(ii) amend, alter or repeal any of the provisions of the
Company's Certificate of Incorporation or Bylaws in any manner which
adversely affects the Series B Preferred Stock.
Section 8. RANKING. The Series B Preferred Stock shall rank on a
parity with the Company's Series A Preferred Stock as to payment of dividends
and distribution of assets upon liquidation, dissolution or winding up.
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<PAGE>
WITNESS WHEREOF, Vysis, Inc. has caused this certificate to be executed on
its behalf by its President this 29th day of August, 1997.
VYSIS, INC.
[SEAL]
By: /s/ John L. Bishop
_______________________________
John L. Bishop
Attest: President
By: /s/ William E. Murray
_________________________________
William E. Murray
Secretary
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<PAGE>
VYSIS, INC.
1996 STOCK INCENTIVE PLAN
This 1996 STOCK INCENTIVE PLAN (the "Plan") is hereby established by Vysis,
Inc. (the "Company") and adopted by its Board of Directors as of the 1st day of
February, 1996 (the "Effective Date").
ARTICLE 1.
PURPOSES OF THE PLAN
1.1 PURPOSES. The purposes of the Plan are (a) to enhance the Company's
ability to attract and retain the services of qualified employees, officers and
directors (including non-employee officers and directors), and consultants and
other service providers upon whose judgment, initiative and efforts the
successful conduct and development of the Company's business largely depends,
and (b) to provide additional incentives to such persons or entities to devote
their utmost effort and skill to the advancement and betterment of the Company,
by providing them an opportunity to participate in the ownership of the Company
and thereby have an interest in the success and increased value of the Company.
ARTICLE 2.
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
indicated:
2.1 ADMINISTRATOR. "Administrator" means the Board or, if the Board
delegates responsibility for any matter to the Committee, the term Administrator
shall mean the Committee.
2.2 AFFILIATED COMPANY. "Affiliated Company" means any "parent
corporation" or "subsidiary corporation" of the Company, whether now existing or
hereafter created or acquired, as those terms are defined in Sections 424(e) and
424(f) of the Code, respectively.
2.3 BOARD. "Board" means the Board of Directors of the Company.
2.4 CODE. "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.5 COMMITTEE. "Committee" means a committee of two or more members of
the Board appointed to administer the Plan, as set forth in Section 7.1 hereof.
2.6 COMMON STOCK. "Common Stock" means the Common Stock, $.001 par value,
of the Company, subject to adjustment pursuant to Section 4.2 hereof.
<PAGE>
2.7 DISABILITY. "Disability" means permanent and total disability as
defined in Section 22(e)(3) of the Code. The Administrator's determination of a
Disability or the absence thereof shall be conclusive and binding on all
interested parties.
2.8 EFFECTIVE DATE. "Effective Date" means the date on which the Plan is
adopted by the Board, as set forth on the first page hereof.
2.9 EXERCISE PRICE. "Exercise Price" means the purchase price per share
of Common Stock payable upon exercise of an Option.
2.10 FAIR MARKET VALUE. "Fair Market Value" on any given date means the
value of one share of Common Stock, determined as follows:
(a) If the Common Stock is then listed or admitted to trading on a
Nasdaq market system or a stock exchange which reports closing sale prices, the
Fair Market Value shall be the closing sale price on the date of valuation on
such Nasdaq market system or principal stock exchange on which the Common Stock
is then listed or admitted to trading, or, if no closing sale price is quoted on
such day, then the Fair Market Value shall be the closing sale price of the
Common Stock on such Nasdaq market system or such exchange on the next preceding
day on which a closing sale price is quoted.
(b) If the Common Stock is not then listed or admitted to trading on
a Nasdaq market system or a stock exchange which reports closing sale prices,
the Fair Market Value shall be the average of the closing bid and asked prices
of the Common Stock in the over-the-counter market on the date of valuation.
(c) If neither (a) nor (b) is applicable as of the date of valuation,
then the Fair Market Value shall be determined by the Administrator in good
faith using any reasonable method of evaluation, which determination shall be
conclusive and binding on all interested parties.
2.11 INCENTIVE OPTION. "Incentive Option" means any Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the Code.
2.12 INCENTIVE OPTION AGREEMENT. "Incentive Option Agreement" means an
Option Agreement with respect to an Incentive Option.
2.13 NASD DEALER. "NASD Dealer" means a broker-dealer that is a member of
the National Association of Securities Dealers, Inc.
2.14 NONQUALIFIED OPTION. "Nonqualified Option" means any Option that is
not an Incentive Option. To the extent that any Option designated as an
Incentive Option fails in whole or in part to qualify as an Incentive Option,
including, without limitation, for failure to meet the limitations applicable to
a 10% Shareholder or because it exceeds the annual limit provided for in
Section 5.6 below, it shall to that extent constitute a Nonqualified Option.
2.15 NONQUALIFIED OPTION AGREEMENT. "Nonqualified Option Agreement" means
an Option Agreement with respect to a Nonqualified Option.
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2.16 OFFEREE. "Offeree" means a Participant to whom a Right to Purchase
has been offered or who has acquired Restricted Stock under the Plan.
2.17 OPTION. "Option" means any option to purchase Common Stock granted
pursuant to the Plan.
2.18 OPTION AGREEMENT. "Option Agreement" means the written agreement
entered into between the Company and the Optionee with respect to an Option
granted under the Plan.
2.19 OPTIONEE. "Optionee" means a Participant who holds an Option.
2.20 PARTICIPANT. "Participant" means an individual or entity who holds an
Option, a Right to Purchase or Restricted Stock under the Plan.
2.21 PURCHASE PRICE. "Purchase Price" means the purchase price per share
of Restricted Stock payable upon acceptance of a Right to Purchase.
2.22 RESTRICTED STOCK. "Restricted Stock" means shares of Common Stock
issued pursuant to Article 6 hereof, subject to any restrictions and conditions
as are established pursuant to such Article 6.
2.23 RIGHT TO PURCHASE. "Right to Purchase" means a right to purchase
Restricted Stock granted to an Offeree pursuant to Article 6 hereof.
2.24 SERVICE PROVIDER. "Service Provider" means a consultant or other
person or entity who provides services to the Company or an Affiliated Company
and who the Administrator authorizes to become a Participant in the Plan.
2.25 STOCK PURCHASE AGREEMENT. "Stock Purchase Agreement" means the
written agreement entered into between the Company and the Offeree with respect
to a Right to Purchase offered under the Plan.
2.26 10% SHAREHOLDER. "10% Shareholder" means a person who, as of a
relevant date, owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of an
Affiliated Company.
ARTICLE 3.
ELIGIBILITY
3.1 INCENTIVE OPTIONS. Officers and other key employees of the Company or
of an Affiliated Company (including members of the Board if they are employees
of the Company or of an Affiliated Company) are eligible to receive Incentive
Options under the Plan.
3.2 NONQUALIFIED OPTIONS AND RIGHTS TO PURCHASE. Officers and other
employees of the Company or of an Affiliated Company, members of the Board
(whether or not employed by the
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Company or an Affiliated Company), and Service Providers are eligible to receive
Nonqualified Options or Rights to Purchase under the Plan.
ARTICLE 4.
PLAN SHARES
4.1 SHARES SUBJECT TO THE PLAN. A total of 1,350,000 shares of Common
Stock may be issued under the Plan, subject to adjustment as to the number and
kind of shares pursuant to Section 4.2 hereof. For purposes of this limitation,
in the event that (a) all or any portion of any Option or Right to Purchase
granted or offered under the Plan can no longer under any circumstances be
exercised, or (b) any shares of Common Stock are reacquired by the Company
pursuant to an Incentive Option Agreement, Nonqualified Option Agreement or
Stock Purchase Agreement, the shares of Common Stock allocable to the
unexercised portion of such Option or such Right to Purchase, or the shares so
reacquired, shall again be available for grant or issuance under the Plan.
4.2 CHANGES IN CAPITAL STRUCTURE. In the event that the outstanding
shares of Common Stock are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, stock split, combination of shares,
reclassification, stock dividend, or other similar change in the capital
structure of the Company, then appropriate adjustments shall be made by the
Administrator to the aggregate number and kind of shares subject to this Plan,
and the number and kind of shares and the price per share subject to outstanding
Option Agreements, Rights to Purchase and Stock Purchase Agreements in order to
preserve, as nearly as practical, but not to increase, the benefits to
Participants.
ARTICLE 5.
OPTIONS
5.1 OPTION AGREEMENT. Each Option granted pursuant to this Plan shall be
evidenced by an Option Agreement which shall specify the number of shares
subject thereto, the Exercise Price per share, and whether the Option is an
Incentive Option or Nonqualified Option. As soon as is practical following the
grant of an Option, an Option Agreement shall be duly executed and delivered by
or on behalf of the Company to the Optionee to whom such Option was granted.
Each Option Agreement shall be in such form and contain such additional terms
and conditions, not inconsistent with the provisions of this Plan, as the
Administrator shall, from time to time, deem desirable, including, without
limitation, the imposition of any rights of first refusal and resale obligations
upon any shares of Common Stock acquired pursuant to an Option Agreement. Each
Option Agreement may be different from each other Option Agreement.
5.2 EXERCISE PRICE. The Exercise Price per share of Common Stock covered
by each Option shall be determined by the Administrator, subject to the
following: (a) the Exercise Price of an Incentive Option shall not be less than
100% of Fair Market Value on the date the Incentive Option is granted, (b) the
Exercise Price of a Nonqualified Option shall not be less than 100% of Fair
Market Value on the date the Nonqualified Option is granted, and (c) if the
person to whom an
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<PAGE>
Incentive Option is granted is a 10% Shareholder on the date of grant, the
Exercise Price shall not be less than 110% of Fair Market Value on the date the
Option is granted.
5.3 PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price shall be
made upon exercise of an Option and may be made, in the discretion of the
Administrator, subject to any legal restrictions, by: (a) cash; (b) check;
(c) the surrender of shares of Common Stock owned by the Optionee that have
been held by the Optionee for at least six (6) months, which surrendered shares
shall be valued at Fair Market Value as of the date of such exercise; (d) the
Optionee's promissory note in a form and on terms acceptable to the
Administrator; (e) the cancellation of indebtedness of the Company to the
Optionee; (f) the waiver of compensation due or accrued to the Optionee for
services rendered; (g) provided that a public market for the Common Stock
exists, a "same day sale" commitment from the Optionee and an NASD Dealer
whereby the Optionee irrevocably elects to exercise the Option and to sell a
portion of the shares so purchased to pay for the Exercise Price and whereby the
NASD Dealer irrevocably commits upon receipt of such shares to forward the
Exercise Price directly to the Company; (h) provided that a public market for
the Common Stock exists, a "margin" commitment from the Optionee and an NASD
Dealer whereby the Optionee irrevocably elects to exercise the Option and to
pledge the shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such shares to
forward the Exercise Price directly to the Company; (i) any other consideration
or method of payment as shall be permitted by applicable corporate law; or
(j) any combination of the foregoing methods of payment.
5.4 TERM AND TERMINATION OF OPTIONS. The term and termination of each
Option shall be as fixed by the Administrator, but no Option may be exercisable
more than ten (10) years after the date it is granted. An Incentive Option
granted to a person who is a 10% Shareholder on the date of grant shall not be
exercisable more than five (5) years after the date it is granted.
5.5 VESTING AND EXERCISE OF OPTIONS. Each Option shall vest and be
exercisable in one or more installments at such time or times and subject to
such conditions, including without limitation the achievement of specified
performance goals or objectives, as shall be determined by the Administrator.
5.6 ANNUAL LIMIT ON INCENTIVE OPTIONS. To the extent required for
"incentive stock option" treatment under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the Common Stock shall
not, with respect to which Incentive Options granted under this Plan and any
other plan of the Company or any Affiliated Company become exercisable for the
first time by an Optionee during any calendar year, exceed $100,000.
5.7 NONTRANSFERABILITY OF OPTIONS. No Option shall be assignable or
transferable except by will or the laws of descent and distribution, and during
the life of the Optionee shall be exercisable only by such Optionee; provided,
however, that, in the discretion of the Administrator, any Option may be
assigned or transferred in any manner which an "incentive stock option" is
permitted to be assigned or transferred under the Code.
5.8 RIGHTS AS SHAREHOLDER. An Optionee or permitted transferee of an
Option shall have no rights or privileges as a shareholder with respect to any
shares covered by an Option until such Option has been duly exercised and
certificates representing shares purchased upon such exercise have been issued
to such person.
5
<PAGE>
ARTICLE 6.
RIGHTS TO PURCHASE
6.1 NATURE OF RIGHT TO PURCHASE. A Right to Purchase granted to an
Offeree entitles the Offeree to purchase, for a Purchase Price determined by the
Administrator, shares of Common Stock subject to such terms, restrictions and
conditions as the Administrator may determine at the time of grant ("Restricted
Stock"). Such conditions may include, but are not limited to, continued
employment or the achievement of specified performance goals or objectives.
6.2 ACCEPTANCE OF RIGHT TO PURCHASE. An Offeree shall have no rights with
respect to the Restricted Stock subject to a Right to Purchase unless the
Offeree shall have accepted the Right to Purchase within ten (10) days (or such
longer or shorter period as the Administrator may specify) following the grant
of the Right to Purchase by making payment of the full Purchase Price to the
Company in the manner set forth in Section 6.3 hereof and by executing and
delivering to the Company a Stock Purchase Agreement. Each Stock Purchase
Agreement shall be in such form, and shall set forth the Purchase Price and such
other terms, conditions and restrictions of the Restricted Stock, not
inconsistent with the provisions of this Plan, as the Administrator shall, from
time to time, deem desirable. Each Stock Purchase Agreement may be different
from each other Stock Purchase Agreement.
6.3 PAYMENT OF PURCHASE PRICE. Subject to any legal restrictions, payment
of the Purchase Price upon acceptance of a Right to Purchase Restricted Stock
may be made, in the discretion of the Administrator, by: (a) cash; (b) check;
(c) the surrender of shares of Common Stock owned by the Offeree that have been
held by the Offeree for at least six (6) months, which surrendered shares shall
be valued at Fair Market Value as of the date of such exercise; (d) the
Offeree's promissory note in a form and on terms acceptable to the
Administrator; (e) the cancellation of indebtedness of the Company to the
Offeree; (f) the waiver of compensation due or accrued to the Offeree for
services rendered; or (g) any combination of the foregoing methods of payment or
any other consideration or method of payment as shall be permitted by applicable
corporate law.
6.4 RIGHTS AS A SHAREHOLDER. Upon complying with the provisions of
Section 6.2 hereof, an Offeree shall have the rights of a shareholder with
respect to the Restricted Stock purchased pursuant to the Right to Purchase,
including voting and dividend rights, subject to the terms, restrictions and
conditions as are set forth in the Stock Purchase Agreement. Unless the
Administrator shall determine otherwise, certificates evidencing shares of
Restricted Stock shall remain in the possession of the Company in accordance
with the terms of the Stock Purchase Agreement.
6.5 RESTRICTIONS. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in the Stock Purchase Agreement or by the Administrator.
In the event of termination of a Participant's employment, service as a director
of the Company or Service Provider status for any reason whatsoever (including
death or disability), the Stock Purchase Agreement may provide, in the
discretion of the Administrator, that the Company shall have the right,
exercisable at the discretion of the Administrator, to repurchase (i) at the
original Purchase Price, any shares of Restricted Stock which have not vested as
of the date of termination, and (ii) at Fair Market Value, any shares of
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Restricted Stock which have vested as of such date, on such terms as may be
provided in the Stock Purchase Agreement.
6.6 VESTING OF RESTRICTED STOCK. The Stock Purchase Agreement shall
specify the date or dates, the performance goals or objectives which must be
achieved, and any other conditions on which the Restricted Stock may vest.
6.7 DIVIDENDS. If payment for shares of Restricted Stock is made by
promissory note, any cash dividends paid with respect to the Restricted Stock
may be applied, in the discretion of the Administrator, to repayment of such
note.
6.8 NONASSIGNABILITY OF RIGHTS. No Right to Purchase shall be assignable
or transferable except by will or the laws of descent and distribution or as
otherwise provided by the Administrator.
ARTICLE 7.
ADMINISTRATION OF THE PLAN
7.1 ADMINISTRATOR. Authority to control and manage the operation and
administration of the Plan shall be vested in the Board, which may delegate such
responsibilities in whole or in part to a committee consisting of two (2) or
more members of the Board (the "Committee"). Members of the Committee may be
appointed from time to time by, and shall serve at the pleasure of, the Board.
As used herein, the term "Administrator" means the Board or, with respect to any
matter as to which responsibility has been delegated to the Committee, the term
Administrator shall mean the Committee.
7.2 POWERS OF THE ADMINISTRATOR. In addition to any other powers or
authority conferred upon the Administrator elsewhere in the Plan or by law, the
Administrator shall have full power and authority: (a) to determine the persons
to whom, and the time or times at which, Incentive Options or Nonqualified
Options shall be granted and Rights to Purchase shall be offered, the number of
shares to be represented by each Option and Right to Purchase and the
consideration to be received by the Company upon the exercise thereof; (b) to
interpret the Plan; (c) to create, amend or rescind rules and regulations
relating to the Plan; (d) to determine the terms, conditions and restrictions
contained in, and the form of, Option Agreements and Stock Purchase Agreements;
(e) to determine the identity or capacity of any persons who may be entitled to
exercise a Participant's rights under any Option or Right to Purchase under the
Plan; (f) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Option Agreement or Stock Purchase
Agreement; (g) to accelerate the vesting of any Option or release or waive any
repurchase rights of the Company with respect to Restricted Stock; (h) to extend
the exercise date of any Option or acceptance date of any Right to Purchase;
(i) to provide for rights of first refusal and/or repurchase rights; (j) to
amend outstanding Option Agreements and Stock Purchase Agreements to provide
for, among other things, any change or modification which the Administrator
could have provided for upon the grant of an Option or Right to Purchase or in
furtherance of the powers provided for herein; and (k) to make all other
determinations necessary or advisable for the administration of the Plan, but
only to the extent not contrary to the express provisions of the Plan. Any
action, decision, interpretation or determination made in good faith by the
Administrator in the exercise of its authority conferred upon it under the Plan
shall be final and binding on the Company and all Participants.
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7.3 LIMITATION ON LIABILITY. No employee of the Company or member of the
Board or Committee shall be subject to any liability with respect to duties
under the Plan unless the person acts fraudulently or in bad faith. To the
extent permitted by law, the Company shall indemnify each member of the Board or
Committee, and any employee of the Company with duties under the Plan, who was
or is a party, or is threatened to be made a party, to any threatened, pending
or completed proceeding, whether civil, criminal, administrative or
investigative, by reason of such person's conduct in the performance of duties
under the Plan.
ARTICLE 8.
MERGERS AND OTHER REORGANIZATIONS
8.1 MERGERS AND OTHER REORGANIZATIONS. In the event that the Company at
any time proposes to enter into any transaction approved by the Board to sell
substantially all of its assets or merge or consolidate with any other entity as
a result of which either the Company is not the surviving corporation or the
Company is the surviving corporation and the ownership of the voting power of
the Company's capital stock changes by more than 50% as a result of such
transaction, or in the event of a "Recommended Share Purchase Offer" (as defined
below) (a "Change in Control"), all unexercised Options and Rights to Purchase,
if not already exercisable, shall concurrent with and conditioned upon the
effective date of the proposed transaction, be accelerated and the Participant
shall have the right to exercise such Options and Rights to Purchase in respect
to any or all of the shares pursuant thereto at such time. In addition, in the
event of a Change in Control. the Plan and all unexercised Options and Rights to
Purchase shall terminate upon the effective date of such transaction, unless
provision is made in writing in connection with such transaction for the
continuance of the Plan and for the assumption of outstanding Options and Rights
to Purchase, or the substitution for such Options and Rights to Purchase of new
options and new rights to purchase of comparable value covering shares of a
successor corporation, with appropriate adjustments as to the number and kind of
shares and prices, in which event the Plan and such Options and Rights to
Purchase, or the new options and rights to purchase substituted therefor, shall
continue in the manner and under the terms so provided. If such provision is
not made in such transaction, then the Administrator shall cause written notice
of the proposed transaction to be given to all Participants not less than
fifteen (15) days prior to the anticipated effective date of the proposed
transaction. For purposes of this Section 8.1, a "Recommended Share of Purchase
Offer" shall be a transaction in which an offer is made to purchase outstanding
securities of the Company constituting more than 50% of the voting power of the
Company's capital stock, which offer is recommended to the Company's
securityholders by the Company's Board.
ARTICLE 9.
AMENDMENT AND TERMINATION OF THE PLAN
9.1 AMENDMENTS. The Board may from time to time alter, amend, suspend or
terminate the Plan in such respects as the Board may deem advisable. No such
alteration, amendment, suspension or termination shall be made which shall
substantially affect or impair the rights of any Participant under an
outstanding Option Agreement or Stock Purchase Agreement without such
Participant's consent. The Board may alter or amend the Plan to comply with
requirements under
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the Code relating to Incentive Options or other types of options which give
Optionees more favorable tax treatment than that applicable to Options granted
under this Plan as of the date of its adoption. Upon any such alteration or
amendment, any outstanding Option granted hereunder may, if the Administrator so
determines and if permitted by applicable law, be subject to the more favorable
tax treatment afforded to an Optionee pursuant to such terms and conditions.
9.2 PLAN TERMINATION. Unless the Plan shall theretofore have been
terminated, the Plan shall terminate on the tenth (10th) anniversary of the
Effective Date and no Options or Rights to Purchase may be granted under the
Plan thereafter, but Option Agreements, Stock Purchase Agreements and Rights to
Purchase then outstanding shall continue in effect in accordance with their
respective terms.
ARTICLE 10.
TAX WITHHOLDING
10.1 WITHHOLDING. The Company shall have the power to withhold, or require
a Participant to remit to the Company, an amount sufficient to satisfy any
applicable Federal, state, and local tax withholding requirements with respect
to any Options exercised or Restricted Stock issued under the Plan. To the
extent permissible under applicable tax, securities and other laws, the
Administrator may, in its sole discretion and upon such terms and conditions as
it may deem appropriate, permit a Participant to satisfy his or her obligation
to pay any such tax, in whole or in part, up to an amount determined on the
basis of the highest marginal tax rate applicable to such Participant, by
(a) directing the Company to apply shares of Common Stock to which the
Participant is entitled as a result of the exercise of an Option or as a result
of the purchase of or lapse of restrictions on Restricted Stock or
(b) delivering to the Company shares of Common Stock owned by the Participant.
The shares of Common Stock so applied or delivered in satisfaction of the
Participant's tax withholding obligation shall be valued at their Fair Market
Value as of the date of measurement of the amount of income subject to
withholding.
ARTICLE 11.
MISCELLANEOUS
11.1 BENEFITS NOT ALIENABLE. Other than as provided above, benefits under
the Plan may not be assigned or alienated, whether voluntarily or involuntarily.
Any unauthorized attempt at assignment, transfer, pledge or other disposition
shall be without effect.
11.2 NO ENLARGEMENT OF EMPLOYEE RIGHTS. This Plan is strictly a voluntary
undertaking on the part of the Company and shall not be deemed to constitute a
contract between the Company and any Participant to be consideration for, or an
inducement to, or a condition of, the employment of any Participant. Nothing
contained in the Plan shall be deemed to give the right to any Participant to be
retained as an employee of the Company or any Affiliated Company or to interfere
with the right of the Company or any Affiliated Company to discharge any
Participant at any time.
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11.3 APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to Option Agreements and Stock Purchase
Agreements, except as otherwise provided herein, will be used for general
corporate purposes.
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LICENSE AGREEMENT FOR
CHROMOSOME ANALYSIS TECHNOLOGY
WITH CHROMOSOME-SPECIFIC PROBES
THIS LICENSE AGREEMENT is made and is effective this 15th day of August
1989 by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, a California
corporation having its statewide administrative offices at 300 Lakeside Drive,
22nd Floor, Oakland, California 94612-3550, hereinafter referred to as "The
Regents", and AMOCO TECHNOLOGY COMPANY, a Delaware corporation having a
principal place of business at Warrenville Road and Mill Street, P.O. Box 3011,
Naperville, Illinois 60566, hereinafter referred to as "Licensee".
RECITALS
WHEREAS, certain inventions, generally characterized as FLUORESCENCE
HYBRIDIZATION WITH CHROMOSOME-SPECIFIC PROBES, herein collectively referred to
as "the Invention", were made in the course of research at the Lawrence
Livermore National Laboratory (LLNL) by Dr. Joe W. Gray, et al. and are covered
by Regents' Patent Rights as defined below;
WHEREAS, The Regents and another company have entered into an exclusive
option agreement for an exclusive license to make, use, and sell "clinical
diagnostic products" in the prenatal field of use under Regents' Patent Rights;
and as a consequence such rights are expressly
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excluded from this Agreement; make, have made, use, and sell methods,
processes, compositions of matter, and articles of manufacture as a research
reagent for prenatal test subjects under Regents' Patent Rights; and as a
consequence such rights granted to licensee hereunder are expressly subject
to and limited by such preexisting rights of such third party;
WHEREAS, Licensee is desirous of acquiring an exclusive license to any and
all of Regents' Patent Rights covering the Invention in Licensee's Field of
Interest, subject to said option granted to a third party and rights retained by
the U.S. government as hereinafter described;
WHEREAS, both parties recognize and agree that royalties due hereunder will
be paid on both pending patent applications (for a limited period of time) and
issued patents;
WHEREAS, the Invention has utility for the detection of chromosome
abnormalities, and the Licensee has an interest in obtaining rights to pursue
commercial development of the Invention in Licensee's Field of Interest subject
to the outstanding option to another party, and The Regents is willing to grant
a license for the Invention's commercialization; and WHEREAS, The Regents is
desirous that the Invention be developed and utilized to the fullest extent so
that the benefits can be enjoyed by the general public.
The parties agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the meaning set
forth below:
1.1 "Research Program" shall mean the research which is proposed in the
Research Proposal entitled "A Proposal to Develop Fluorescence Hybridization
with Chromosome-
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Specific Probes to Facilitate Cytogenetic Analysis" submitted by Lawrence
Livermore National Laboratory (LLNL) to Licensee.
1.2 "Research" shall mean the work which is carried out in performance of
the Research Program.
1.3 "Research Agreement" shall mean the agreement entitled Research
Agreement for the Development of Fluorescence Hybridization with Chromosome-
Specific Probes between The Regents and Licensee dated 15 August, 1989, for the
conduct of Research under the Research Program and any extensions or renewals
thereof, and incorporated herein by reference. In the event of any
inconsistencies between the Research Agreement and this Agreement, the terms of
this Agreement shall control.
1.4 "Background Biological Materials" shall mean biological materials
developed prior to the effective date of the present agreement by The Regents
relating to in situ hybridization with chromosome-specific probes under the
direction of Joe W. Gray at LLNL under Contract W-7405-ENG-48 between The
Regents and United States Department of Energy (DOE). Background Biological
Materials includes biological materials generally described as comprising a
heterogeneous mixture of nucleic acid fragments, which fragments are derived
from known chromosome types. The fragments have selective hybridization
capacity to chromosomes of interest and are carried on plasmid constructs known
as pBS-1, pBS-2, pBS-3, pBS-4, pBS-5, pBS-6, pBS-7, pBS-8, pBS-9, pBS-10, pBS-
11, pBS-12, pBS-13, pBS-14, pBS-15, pBS-16, pBS-17, pBS-18, pBS-19, pBS-20,
pBS-21, pBS-22, pBS-X and pBS-Y (nomenclature of LLNL).
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1.5 "Background Information" shall mean all technical data, processes,
methods, inventions, Background Biological Materials, equipment, instruments,
apparatuses, devices, and articles of manufacture developed or acquired prior to
the effective date of the present Agreement (to the extent that such Background
Information may be revealed to Licensee) by The Regents relating to in situ
hybridization with chromosome-specific probes under the direction of Joe W. Gray
at LLNL under Contract W-7405-ENG-48 between the United States Department of
Energy (DOE) and The Regents. Background Information does not include computer
software, information management systems, or equipment comprising a cell sorter
or component part(s) thereof. Under this Agreement, there shall be no transfer
of the physical possession of equipment, instruments, apparatuses, devices,
articles of manufacture or component part(s) thereof or intellectual property
rights to computer software, information management systems or equipment
comprising a cell sorter or component part(s) thereof that are not covered by
Regents' Patent Rights.
1.6 "Research Information" shall mean technical data, processes, methods,
inventions, compositions-of-matter, and biological materials, equipment,
instruments, apparatuses, devices, articles of manufacture or component parts(s)
thereof developed under or resulting from the performance of Research under the
Research Agreement and improvements thereof, except for improvements on new
subject matter not funded by Licensee. There shall be no creation or
development of computer software or information management systems in the
performance of Research under the Research Agreement, and there shall be no
transfer of the physical possession
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of equipment, instruments, apparatuses, devices, articles of manufacture or
component part(s) thereof comprising Research Information.
1.7 "Regents' Patent Rights" shall mean all U.S. and foreign patents and
patent applications, including any reissues, extensions, continuations,
divisions, and continuations-in-part (to the extent that such continuations-in-
part are dependent upon the parent case and subject matter of the claims funded
by Licensee under the Research Agreement) based on inventions and improvements
thereof arising out of Background Information or Research Information including:
a. Pending U.S. Patent Application Serial No. 819,314 entitled "Method
and Compositions for Chromosome-Specific Staining", filed 16 January
1986 by Joe W. Gray and Daniel Pinkel and assigned to The Regents;
b. Pending U.S. Patent Application Serial No. 6-937,793 entitled "Methods
and Compositions for Chromosome-Specific Staining" filed 4 December
1986 by Joe W. Gray and Daniel Pinkel and assigned to The Regents, a
continuation-in-part application of U.S. Serial No. 819,314;
c. Pending U.S. Patent Application Serial No. 6-934,188 entitled "Method
of Preparing and Applying Single Stranded DNA Probes to Double
Stranded Target DNAs, filed 24 November 1986 by Joe W. Gray and Daniel
Pinkel and assigned to The Regents;
d. Any U.S. Patent Application based on subject matter described in UC
Case Number 87-095-1 (renumbered UC Case Number 85-157-4) entitled
"Method for
5
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Determining Aneuploidy in Fetal Cells from Maternal Blood
Samples" by Joe W. Gray and assigned to The Regents;
e. Any future patent rights to subject matter claimed in or covered by a
patent application(s) covering any invention arising in the
performance of work under the Research Agreement and elected by
Licensee under the provisions of Article VIII of the Research
Agreement.
1.8 "Protected Composition Products" shall mean kits, reagents and
compositions, or the performance of a process or method, or kits, reagents, or
compositions produced by processes or methods, falling within the scope of one
or more claims of Regents' Patent Rights during the term of the patent grant, in
such countries in which such claim or claims have issued, and have not expired,
been abandoned, disclaimed or found invalid or unenforceable.
1.9 "Unprotected Composition Products" shall mean kits, reagents, and
compositions or the performance of processes or methods, or kits,.reagents, or
compositions produced by processes or methods, which are not Protected
Composition Products; i) falling within the scope of one or more pending claims
of Regents' applications identified in Paragraph 1.7 a.-d. as originally filed
and set forth in Schedule A, incorporated by reference herein; or ii) one or
more pending claims which claims recite subject matter arising in the
performance of Research under the Research Agreement that does not fall within
the scope of claims originally filed as set forth in Schedule A; or iii) one or
more pending claims directed to locus specific probes, arising in the
performance of Research under the Research Agreement; during the period and in
such countries
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in which such claim or claims have not issued and are pending, and have not
expired, been abandoned, disclaimed, or found invalid or unenforceable, such
period not to exceed five years from the effective date of this Agreement, or
five years from the date in which substantially the same subject matter (set
forth in i, ii, and iii immediately above) is introduced in a patent
application in each country that such patent application is filed, whichever
is longer. For the purposes of this section only, claims attached hereto as
Schedule A, Part 4 shall be considered pending.
1.10 "Protected Instrument Products" shall mean equipment, instruments,
apparatuses, devices, articles of manufacture or component part(s) thereof or
equipment, instruments, apparatuses, devices, articles of manufacture or
component part(s) thereof produced by processes or methods, falling within the
scope of one or more claims of Regents' Patent Rights during the term of the
patent grant, in such countries in which such claim or claims have issued, and
have not expired, been abandoned, disclaimed, or found invalid or unenforceable.
1.11 "Unprotected Instrument Products" shall mean equipment, instruments,
apparatuses, devices, articles of manufacture or component part(s) thereof or
equipment, instruments, apparatuses, devices, articles of manufacture or
component part(s) thereof produced by processes or methods, which are not
Protected Instrument Products; 1) falling within the scope of one or more
pending claims of Regents' Patent Rights identified in Paragraph 1.7 a.-d. as
originally filed and set
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forth in Schedule A, incorporated by reference herein; or ii) one or more
pending claims which claims recite subject matter arising in the performance
of Research under the Research Agreement that does not fall within the scope
of claims originally filed as set forth in Schedule A; during the period and
in such countries in which such claim or claims have not issued and are
pending, and have not expired, been abandoned, disclaimed, or found invalid
or unenforceable, such period not to exceed five years from the effective
date of this Agreement, or five years from the date in which substantially
the same subject matter (set forth in i, and ii, immediately above) is
introduced in a patent application in each country that such patent
application is filed, whichever is longer. For the purposes of this Section
only claims attached hereto as Schedule A, Part 4 shall be considered pending.
1.12 "Products" shall mean Protected Composition Products Unprotected
Composition Products, Protected Instrument Products, and Unprotected Instrument
Products.
1.13 "Net Sales" shall mean Licensee's or Licensee's sublicensee's invoice
prices to purchasers or lessees, less all quantity discounts or discounts
allowed for prompt payment or cash payment, credits or allowances for returned
goods, transportation charges or allowances, sales, use, tariff, import/export
duties or other excise taxes imposed upon particular sales.
1.14 "Field of Interest" shall mean relating to analytical, research, and
diagnostic applications of technology based on chromosomal staining, marking,
and labeling. Field of Interest shall specifically exclude therapies and
treatments derived from analytical, research, and diagnostic applications.
1.15 "Affiliates" of a party means any entity, which, directly or
indirectly, controls such party, is controlled by such party or is under common
control with such party, "control" for these purposes being defined as the
actual, present capacity to elect a majority of the directors of such
affiliate. Each reference to Licensee herein shall be meant to include
its Affiliates.
8
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1.16 "Infringement Litigation Costs" shall mean costs incurred in an
infringement suit, provided for in Paragraphs 18.2 a. and 18.4 of this
Agreement, consisting of outside attorney's fees billed to Licensee or The
Regents, and other reasonable out-of-pocket expenss.
2. REPRESENTATIONS AND WARRANTS
2.1 Licensee represents and warrants the following:
a. Licensee intends to fund Research under the Research Agreement,
which Research shall be under the direction of Joe W. Gray as
Principal Investigator.
2.2 The Regents represents and warrants the following:
a. Regents' Patent Rights were developed under Contract W-7405-ENG-48
between The Regents and the United States Department of Energy (DOE)
with additional funding and assistance from a third party(s);
b. Pursuant to the terms of Contract W-7405-ENG-48, title to Regents'
Patent Rights rests in DOE without action on the Regents' part to
acquit or retain title;
c. The Regents has petitioned the DOE for a waiver of rights which has
been granted or is pending for Regents' Patent Rights as summarized
below:
i. Pending U.S. Patent Application Serial No. 819,314 entitled
"Method and Compositions for Chromosome-Specific Staining", filed
16 January 1986 by Joe W. Gray and Daniel Pinkel and assigned to
The Regents, waiver applied for June 30, 1986, and waiver granted
November 23, 1987;
9
<PAGE>
ii. Pending U.S. Patent Application Serial No. 6-937,793 entitled
"Methods and Compositions for Chromosome-Specific Staining" filed
4 December 1986 by Joe W. Gray and Daniel Pinkel and assigned to
The Regents, a continuation-in-part application of U.S. Serial
No. 819,314, waiver applied for June 30, 1986, and waiver granted
November 23, 1987;
iii. Pending U.S. Patent Application Serial No. 6-934,188 entitled
"Method of Preparing and Applying Single Stranded DNA Probes to
Double Stranded Target DNAs", filed 24 November 1986 by Joe W.
Gray and Daniel Pinkel and assigned to The Regents, waiver
applied for August 18, 1986, and waiver granted on October 8,
1987;
iv. Subject matter described in UC Case Number 87-095-1 (renumbered
UC Case Number 85-157-4) entitled "Method for Determining
Aneuploidy in Fetal Cells from Maternal Blood Samples: by Joe W.
Gray and assigned to The Regents, waiver applied for March 22,
1988, and presently pending;
d. The list of patent and patent applications identified in subparagraphs
a.-d. of Paragraph 1.7 is a complete list of Regents' Patent Right
arising at LLNL, and that there are no other patents or patent
applications at LLNL which may constitute background patents or patent
applications;
e. The Regents own or are in the process of acquiring title to Regents'
Patent Rights, which are subject to a nontransferable, nonexclusive,
irrevocable paid-up license to practice or have practiced, such
Regent's Patent Rights for or on behalf of the
10
<PAGE>
United States throughout the world, pursuant to 35 USC 202(c) (4)
and which are subject to an option to obtain an exclusive license
to make, use and sell methods, processes, compositions-of-matter,
articles of manufacture expressly limited to clinical diagnostic
testing in prenatal test subjects and a nonexclusive license to
make, have made, use and sell methods, processes, compositions of
matter, and articles of manufacture as a research reagent for use
in prenatal test subjects granted to one other company. No other
rights have been granted.
2.3 The Regents represents to the best of its knowledge and warrants that:
a. There are no conflicts between rights and obligations set forth in the
present Agreement and presently existing rights;
b. It is not aware of any conduct (including but not limited to
inequitable conduct of fraud) before the U.S. Patent and Trademark
Office which would invalidate or materially narrow the scope of
pending claims of Regents' Patent Rights;
c. It is not aware of anything which would be made, used, sold, or
otherwise, disposed of, performed, or played under any license granted
herein that will constitute infringement of patents of third parties
except for U.S. Patent No. 4,468,464 entitled "Process and Composition
for Biologically Functional Molecular Chimeras" by S. Cohen, et al.
and issued 28 August 1984, U.S. Patent no. 4,237,224 entitled "Process
and Composition for Biologically Functional Molecular Chimeras" by S.
Cohen, et al. and issued 26 April 1988;
11
<PAGE>
d. The subject matter of Regents' Patent Rights was made in the course of
research by Joe W. Gray and Daniel Pinkel at the Lawrence Livermore
National Laboratory, and there are no other inventors or co-inventors
for patent applications filed at the time of the effective date of
this Agreement;
e. The license and rights granted are provided WITHOUT WARRANTY OR
MERCHANTABILITY OF FITNESS FOR A PARTICULAR PURPOSE. THE REGENTS
MAKES NO REPRESENTATION OR WARRANTY THAT THE PRODUCTS OR METHODS MADE
IN ACCORDANCE WITH REGENTS' PATENT RIGHTS WILL NOT INFRINGE ANY PATENT
OR OTHER PROPRIETARY RIGHT;
f. Nothing in this Agreement shall be construed as a warranty or
representation by The Regents as to the validity or scope of any of
Regents' Patent Rights; an obligation to bring or prosecute actions or
suits against third parties for patent infringement except as provided
in Article 18; or conferring by implication, estoppel or otherwise any
license or rights under any patents of The Regents other than Regents'
Patent Rights as defined herein, regardless of whether such patents
are dominant or subordinate to Regents' Patent Rights. Specifically,
The Regents does not grant to Licensee any rights under U.S. Patent
No. 4,468,464, U.S. Patent No. 4,237,224 and U.S. Patent No. 4,740,470
set forth in Paragraph 2.3 c. supra.
g. It is not aware of any computer software or information management
systems created or developed under the research program identified as
"IN SITU
12
<PAGE>
Hybridization Using Chromosome-Specific Probes for Chromosomal
Analysis" under the direction of Joe W. Gray at LLNL.
3. GRANT
3.1 Subject to the prior outstanding rights in Paragraph 2.2 e. supra and
to The Regents' continuing rights in Paragraph 3.4 infra, The Regents hereby
grants to Licensee exclusive, worldwide licenses under Regents' Patent Rights
within the Field of Interest to make, have made, use, sell, distribute, and
lease machines, articles of manufacture, and compositions-of-matter and to
perform processes and have others perform processes.
3.2 During the pendency of the outstanding rights described in 2.2 (e) and
during such period and to the extent such outstanding rights have vested and
have not been terminated, abandoned, disclaimed, or revoked or have not expired,
the licenses set forth in Paragraph 3.1 supra shall be limited as follows:
a. the right to make, have made, use and sell methods, processes,
compositions-of-matter for clinical diagnostic testing or hereditary
diseases in the prenatal subjects within the Field of Interest is
expressly excluded from this Agreement;
b. the right to make, have made, use and sell methods, processes and
compositions-of-matter comprising a research reagent for use in
research including prenatal subjects within the Field of Interest
shall be nonexclusive.
In the event the outstanding rights described in 2.2 (e) expire or after vesting
are terminated, abandoned, disclaimed, or revoked, such license and right shall
pass to Licensee under the grant
13
<PAGE>
of Paragraph 3.1. In order to maintain such license and right, Licensee shall
within ninety (90) days of obtaining such rights, fund additional research at
LLNL under terms and conditions consistent with the Research Funding
Agreement in an amount not to exceed two hundred and fifty thousand dollars
($250,000) per year for a period of time not less, than two years, under a
research program and scope of the research to be negotiated.
3.3 The licenses granted in Paragraph 3.1 of this Agreement are subject to
Contract W-7405-ENG-48 between The Regents and the DOE and subject to the
limitations set forth in this Agreement.
3.4 The Regents expressly reserves the right to use Background
Information, Research Information, and Regents' Patent Rights for educational
and research purposes for so long as such educational and research purposes do
not compete with Licensee.
3.5 The licenses granted hereunder shall be subject to all the applicable
provisions of The Regents' license granted back to the United States Government.
3.6 The Regents also grants to Licensee the right to issue sublicenses to
third parties to make, have made, use, sell, distribute, lease machines,
articles of manufacture, and compositions-of-matter and to perform processes and
have others perform processes, provided that Licensee has current exclusive
rights thereto under this Agreement. To the extent applicable, such sublicenses
shall include all of the rights of and obligations due The Regents and the
United States Government that are contained in this Agreement except that
Licensee shall not be bound by the royalty rate and license issue fee contained
herein with respect to its negotiation with third parties seeking such
sublicenses, provided that no sublicense shall be
14
<PAGE>
issued with royalty rates lower than those contained herein. However,
Licensee shall, in such third party negotiations, use its best efforts in
reaching royalty rates and license issue fees. Licensee shall be entitled to
five percent (5%) of all income generated from sublicensing as an
administration fee, and of the remaining income one half shall be paid The
Regents and one half shall be retained by Licensee. In the event Licensee
grants a sublicense under paragraph 3.7 Licensee shall be entitled to fifteen
percent (15%) of all income generated from such sublicensing as an
administration fee, and of the remaining income one half shall be paid The
Regents and one half shall be retained by Licensee.
3.7 If The Regents are approached by an applicant for a license to
Regents' Patent Rights, and if said applicant agrees to fund research at LLNL to
further develop the technology covered by Regents' Patent Rights in the Field of
Interest but outside the fields of use of cancer identification, hereditary
disease testing in postnatal subjects, hereditary disease testing in prenatal
subjects and dosimetry to test subjects for exposure to toxins during the period
when Licensee has exclusive rights herein, it will refer the request of the
applicant to the Licensee. Within ninety (90) days of such referral, Licensee
shall submit to The Regents a written report outlining Licensee's interest in
the field of use proposed by the applicant. If Licensee has no interest in
marketing Products in the field of use proposed by the applicant, then Licensee
shall enter into good-faith negotiations with the applicant for a sublicense to
Regents' Patent Rights in said field of use. If Licensee expresses an interest
in marketing such Products in the field of use proposed by applicant, then The
Regents and Licensee shall enter into good-faith negotiations to sponsor
research at least at the level of applicant and to establish reasonable
diligence provisions
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<PAGE>
requiring reasonable performance standards for Licensee to achieve
substantial sales of said Products within a reasonable time period in the
field of use requested by applicant.
3.8 Licensee shall identify sublicenses and the royalty rate thereof
issued hereunder, collect and guarantee payment of all royalties due The Regents
from sublicensees; and summarize and deliver all reports due The Regents from
sublicensees.
3.9 Upon termination of this Agreement for any reason, all sublicenses
shall be assigned to The Regents.
4. LICENSE ISSUE FEE
4.1 The Licensee agrees to pay or cause to be paid to The Regents a
License Issue Fee of One Hundred and Twenty-Five Thousand Dollars ($125,000.00)
in the following manner: Licensee shall pay The Regents fifty thousand dollars
($50,000) within ten (10) days of execution of this Agreement, and seventy-five
thousand dollars ($75,000) on or before the one-year anniversary of the date
this agreement is fully executed.
4.2 This fee is non-refundable and not an advance against royalties.
5. ROYALTIES
5.1 As consideration for this license, Licensee shall pay or cause to be
paid to The Regents an earned royalty in the following manner:
a. Licensee shall pay or cause to be paid to The Regents a royalty of
four percent (4.0%) of Net Sales on Unprotected Composition Products.
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<PAGE>
b. Licensee shall pay or cause to be paid to the Regents a royalty of
four percent (4.0%) of Net Sales on Protected Composition Products.
c. Licensee shall pay or cause to be paid to The Regents a royalty rate
of two percent (2%) of Net Sales on Unprotected Instrument Products.
d. Licensee shall pay or cause to be paid to The Regents a royalty rate
of three and one-half percent (3.5%) of Net Sales on Protected
Instrument Products.
5.2 Beginning in the calendar year 1992, Licensee shall pay to the Regents
a minimum annual royalty as set forth below:
1992 - Five Thousand Dollars ($5,000.00)
1993 - Five Thousand Dollars ($5,000.00)
1994 - Sixty Thousand Dollars ($60,000.00)
1995 - Sixty Thousand Dollars ($60,000.00)
1996 - One Hundred Sixty Thousand Dollars ($160,000.00)
1997 - One Hundred Sixty Thousand Dollars ($160,000.00)
1998 - Four Hundred Thousand Dollars ($400,000.00)
1999 - Four Hundred Thousand Dollars ($400,000.00)
2000 - Five Hundred Thousand Dollars ($500,000.00)
In each succeeding calendar year after the year 2000, Licensee shall pay a
minimum annual royalty of Five Hundred Thousand Dollars ($500,000.00) for the
life of the Agreement. These minimum royalties shall be paid to the Regents by
February 28 of each year and shall be credited against income paid to The
Regents under Paragraph 3.6 and earned royalties quarter to quarter until
consumed for that year. In the event minimum annual royalties exceed earned
royalties, the excess may be applied to earned royalties in succeeding years
until such excess is consumed.
5.3 In addition to the minimum royalties paid under Section 5.2, beginning
in the year 1990, Licensee shall fund research within the Field of Interest at a
level of Five Hundred
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<PAGE>
Thousand Dollars ($500,000.00) per calendar year. Licensee's obligations to
fund research under this section shall terminate on December 31, 1997, or at
such time earned royalties exceed Five Hundred Thousand Dollars ($500,000.00)
per calendar year, or at such time total research expenditures within the
Field of Interest, from the effective date forward, exceed Seven Million
Dollars ($7,000,000.00) whichever occurs first. For the purpose of this
section, Licensee's funding of Research at Lawrence Livermore National
Laboratory shall not apply to total research expenditures. Licensee shall be
entitled to credit to funding, the reasonable value of research staff,
equipment and services owned or controlled by Licensee, including Licensee's
research facilities, employees, consultants, and research performed by third
parties on behalf of Licensee.
5.4 Products shall be considered sold when invoiced and, if not invoiced,
when delivered to a third party.
5.5 Royalties accruing to The Regents shall be paid to The Regents
quarterly on or before the following dates each year:
February 28 for the preceding
calendar quarter ending December 31
May 31 for the preceding calendar
quarter ending March 31
August 31 for the preceding calendar
quarter ending June 30
November 30 for the preceding
calendar quarter ending September 30
Each such payment will be for royalties which accrued with Licensee's most
recently completed calendar quarter.
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5.6 All monies due The Regents shall be payable in United States funds
collectible at par in San Francisco, California. When Products are sold for
monies other than United States dollars, the earned royalties will first be
determined in the foreign currency of the country in which such Products were
sold and then converted into equivalent United States funds. The exchange rate
will be that established by the Bank of America in New York, New York on the
last day of the reporting period and will be quoted in the Continental terms
method of quoting exchange rates (local currency per U.S. dollar).
5.7 Royalties earned with respect to sales occurring in any country
outside the United States shall not be reduced by any value-added taxes, fees,
or other charges imposed by the government of such country on the remittance of
royalty income. The Licensee shall also be responsible for all bank transfer
charges.
5.8 If at any time legal restrictions prevent the prompt remittance of
part of all royalties by the Licensee with respect to any country where a
Product is sold, the Licensee shall have the right and option to make such
payments by depositing the amount thereof in local currency to The Regents'
account in a bank or other depository in such country.
5.9 No royalties shall be collected or paid hereunder on sales of Products
sold to the United States Government. Licensee agrees, and its sublicensees
shall be required, to reduce the amount charged for Products sold to the United
States Government by an amount equal to the royalty otherwise due The Regents.
5.10 In the event The Regents reduces Licensee's exclusive license to a
nonexclusive license under Article 6 herein and grants rights to any third party
under Regents' Patent Rights
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(except for the U.S. government and for a license to the field-of-use
specified in Paragraph 2.2 supra) on financial terms and conditions different
than the financial terms of this Agreement, then The Regents shall notify
Licensee of such different terms and conditions. Licensee shall have the
option of adopting such terms and conditions by giving notice to The Regents
within sixty (60) days of The Regents' notification to Licensee.
6. DUE DILIGENCE
6.1 The Licensee, upon execution of this Agreement, shall diligently
proceed with the development, manufacture and sale of Products and shall
earnestly and diligently endeavor to market same within a reasonable time after
execution of this Agreement and in quantities sufficient to meet the market
demands therefore.
6.2 The Licensee shall be entitled to exercise prudent and reasonable
business judgment in meeting its due diligence obligations hereunder.
6.3 Subject to rights under the option described in Paragraph 2.2e. and
the Licensee's freedom to practice Regents' Patent Rights without infringement
of third party rights, if Licensee is unable to market a research reagent
specific for each normal human chromosome covered by Regents' Patent Rights in
the United States by 1 January 1992, then The Regents shall have the right and
option to reduce Licensee's exclusive license to a nonexclusive license. This
right, if exercised by The Regents, supersedes the rights granted in Article 3
(GRANT).
6.4 The Licensee shall endeavor to obtain necessary FDA approvals for the
manufacture, use and sale of clinical diagnostic Products.
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<PAGE>
6.5 Subject to Licensee's rights under 6.2 and subject to the Licensee's
freedom to practice Regents' Patent Rights without infringement of third party
rights, if the Licensee is unable to perform any of the following:
a. in the event any party has demonstrated Products having a utility in
clinical diagnostic applications for cancer identification, Licensee
shall submit an application for marketing in the U.S., including, by
way of example, an IDE for a PMA, an IND for an NDA, or 510k, for
Products (but not necessarily all Products) in the field of use of
cancer identification to the appropriate United States agency,
including, by way of example, FDA on or before two (2) years from such
demonstrations;
b. market Products (but not necessarily all Products) in the field of use
of cancer identification in the United States within six (6) months of
receiving U.S. government marketing approval from the FDA, if such
approval is required for such Products;
c. market Products (but not necessarily all Products) in the field of use
of cancer identification in the United States within one (1) year from
submission of a 510k to FDA, if a 510k is required from FDA to market
such Products; or
d reasonably fill the market demand for such Products (but not
necessarily all Products) in the field of cancer identification
following commencement of marketing at any time during the exclusive
period of this Agreement;
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<PAGE>
then the Regents shall have the right and option to reduce the Licensee's
exclusive license to a nonexclusive license with respect to clinical diagnostic
applications for cancer identification. This right, if exercised by The
Regents, supersedes the rights granted in Article 3 (GRANT). Subject to
Licensees rights under 6.2 and subject of Licensee's freedom to practice
Regents' Patent Rights without infringement of third party rights if the
Licensee is unable to perform any of the following:
e. in the event any party demonstrates Products having clinical
diagnostic applications for hereditary disease in postnatal test
subjects, Licensee shall submit an application for marketing in the
U.S., including by way of example, an IDE for a PMA, an IND for an
NDA, or 510k Products (but not necessarily all Products) in the field
of hereditary disease testing in postnatal subjects within two (2)
years of such demonstration;
f. market Products (but not necessarily all Products) in the field of
hereditary disease testing in postnatal subjects in the United States
within six (6) months of receiving U.S. Government marketing approval,
from FDA, if such approval is required for such Products;
g. market Products (but not necessarily all Products) in the field of use
of hereditary disease testing in postnatal subjects in the United
States within one (1) year from submission of a 510k to FDA if a 510k
is required to market such Products; or;
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<PAGE>
h. reasonably fill the market demand for such Products in the field of
hereditary disease testing in postnatal subjects following
commencement of marketing at any time during the exclusive period of
this Agreement;
then The Regents shall have the right and option to reduce the Licensee's
exclusive license to a nonexclusive license. This right, if exercised by The
Regents, supersedes the rights granted in Article 3 (GRANT). Subject to
Licensee's rights under 6.2 and subject to the Licensee's freedom to practice
Regents' Patent Rights without infringement of third party rights, if the
Licensee is unable to perform any of the following:
i. in the event any party has demonstrated Products having a utility in
clinical diagnostic applications for toxic substance dosimetry,
Licenses shall submit an application for marketing in the U.S.
including, by way of example, an IDE for a PMA, an IND for an NDA, or
510k, for Products (but not necessarily all Products) in the field of
use of toxic substance dosimetry to the appropriate United States
agency, including, by way of example, FDA on or before two (2) years
from such demonstration;
j. market Products (but not necessarily all Products) for toxic substance
dosimetry in the United States within six (6) months of receiving U.S.
government marketing approval from the FDA, if such approval is
required for such Products;
k. market Products (but not necessarily all Products) for toxic substance
dosimetry in the United States within one (1) year from submission of
a 510k to FDA, if a 510k is required from FDA to market such Products;
or
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1. reasonably fill the market demand for such Products (but not
necessarily all Products) for toxic substance dosimetry following
commencement of marketing at any time during the exclusive period of
this Agreement;
then the Regents shall have the right and option to reduce the Licensee's
exclusive license to a nonexclusive license with respect to clinical diagnostic
applications for toxic substance dosimetry. This right, if exercised by The
Regents, supersedes the rights granted in Article 3 (GRANT). Subject to
Licensee's rights under 6.2, subject to Licensee obtaining exclusive rights to
clinical diagnostic applications of hereditary disease testing in prenatal
subjects, and subject to Licensee's freedom to practice Regents' Patent Rights
without infringement of third party rights, if Licensee is unable to perform any
of the following:
m. in the event any party has demonstrated Products having a utility in
clinical diagnostic applications for hereditary disease testing in
prenatal subjects, Licensee shall submit an application for marketing
in the U.S. including, by way of example, an IDE for a PMA, an IND for
an NDA, or 510k, for Products (but not necessarily all Products for
hereditary disease testing in prenatal subjects to the appropriate
United States agency, including, by way of example, FDA on or before
two (2) years from such demonstration;
n. market Products (but not necessarily all Products) for hereditary
disease testing in prenatal subjects in the United States within six
(6) months of receiving U.S. government market approval from the FDA,
if such approval is required for such Products;
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o. market Products (but not necessarily all Products) for hereditary
disease testing in prenatal subjects in the United States within one
(1) year from submission of a 510k to FDA, if a 510k is required from
FDA to market such Products; or
p. reasonably fill the market demand for such Products (but not
necessarily all Products) for hereditary disease testing in prenatal
subjects following commencement of marketing at any time during the
exclusive period of this Agreement;
then The Regents shall have the right and option to reduce the Licensee's
exclusive license to a nonexclusive license with respect to clinical diagnostic
applications for hereditary disease tests in prenatal subjects. This right, if
exercised by The Regents, supersedes the rights granted in Article 3 (GRANT).
6.6 At the request of either party, any controversy or claim arising out
of or relating to the diligence provisions of this Agreement shall be settled by
arbitration conducted in San Francisco, California in accordance with the then
current Licensing Agreement Arbitration Rules of the American Arbitration
Association. Judgment upon the award rendered by Arbitrator(s) shall be binding
on the parties and may be entered by either party in the court of forum, state
or federal, having jurisdiction.
6.7 To exercise the right to reduce Licensee's grant to one of
nonexclusivity under Paragraph 6.3 or 6.5, The Regents must give the Licensee
written notice of the deficiency. The Licensee thereafter has sixty (60) days
to cure the deficiency or to request arbitration. If The Regents has not
received a written request for arbitration or satisfactory tangible evidence
that
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the deficiency has been cured by the end of the sixty (60) day period, then
The Regents may, at its option, reduce the Licensee's exclusive license to a
nonexclusive license by giving written notice to the Licensee.
7. PROGRESS AND ROYALTY REPORTS
7.1 Beginning 30 November 1989 and yearly thereafter, the Licensee shall
submit The Regents a progress report covering the Licensee's activities related
to the commercialization of each Product until quarterly royalty reports are
made under Paragraph 7.2 for each such Product.
7.2 After the commercial sale of the Product anywhere in the world, the
Licensee will make quarterly royalty reports to The Regents, which report shall
accompany the payments made in accordance with Paragraph 5.5. Each such royalty
report will cover the Licensee's most recently completed calendar quarter and
will show (a) the gross sales and Net Sales of Products sold by the Licensee
during the most recently completed calendar quarter; (b) a brief description of
the items sold and the quantity sold; (c) the royalties, in U.S. dollars,
payable hereunder with respect to such Net Sales; and (d) the exchange rates
used.
7.3 If no Products have been sold during any reporting period, a statement
to this effect shall be required.
8. BOOKS AND RECORDS
8.1 The Licensee shall keep books and records accurately showing all
Products manufactured, used, and/or sold under the terms of this Agreement.
Such books and records
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shall be preserved for at least five (5) years from the date of the royalty
payment to which they pertain and shall be open to inspection, upon seven (7)
days notice during normal business hours at Licensee's normal place of
business, to a mutually agreed upon independent accountant or auditor.
Audits of Licensee's books and records shall not take place more than once in
any twelve-month period.
8.2 The fees and expenses of the accountant or auditor performing such
examination shall be borne by The Regents. However, if an error in royalties of
more than five percent (5%) of the total royalties due for any year is
discovered, then the fees and expenses of the accountant or auditor shall be
borne by the Licensee.
9. LIFE OF THE AGREEMENT
9.1 Unless otherwise terminated by operation of law or by acts of the
parties in accordance with the terms of this Agreement, this Agreement shall be
in force from the effective date recited on page one and shall remain in effect
for the life of the last-to-expire patent licensed under this Agreement.
9.2 Any Termination of this Agreement shall not affect the rights and
obligations set forth in the following Articles:
Article 8 Books and Records
Article 13 Proprietary Information
Article 16 Use of Names and Trademarks
and Nondisclosure of Agreement
Article 19 Indemnification
9.3 Termination of this Agreement shall not relieve the Licensee of any
obligation or liability accrued hereunder prior to such termination or rescind
anything done by the Licensee or
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any payments made to The Regents hereunder prior to the time such termination
becomes effective and such termination shall not affect in any manner any
rights of The Regents arising under this Agreement prior to such termination.
10. TERMINATION BY THE REGENTS
10.1 If the Licensee should violate or fail to perform any term or covenant
of this Agreement, then The Regents may give written notice of such default
(Notice of Default) to the
Licensee. If the Licensee should fail to repair such default within sixty (60)
days of the effective date of such notice, The Regents shall have the right to
terminate this Agreement and the licenses herein by a second written notice
(Notice of Termination) to the Licensee. If a Notice of Termination is sent to
the Licensee, this Agreement shall automatically terminate on the effective date
of such notice. These notices shall be subject to Article 23 (NOTICES).
10.2 The Regents shall also have the right and option to terminate this
Agreement if the Research Agreement is prematurely terminated by Licensee and
there has been no breach of failing thereof by the Regents. Said termination of
this Agreement shall be carried out in the manner set forth in Paragraph 10.1
above.
11. TERMINATION BY THE LICENSEE
11.1 The Licensee shall have the right upon ninety (90) days written notice
to The Regents to terminate this Agreement in whole or as to any portion of
Regents' Patent Rights. Upon expiration of the ninety (90) day period,
Licensee's termination shall be effective and
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Licensee shall stand unlicensed hereunder. Such notice of termination shall
be subject to Article 23 (NOTICES).
12. RESUPPLY OF THE BIOLOGICAL MATERIALS
12.1 The Regents agrees to initially supply Licensee with viable samples of
the Background Biological Materials and biological materials comprising Research
Information (to the extent that such biological materials are in a form
acceptable for transfer) within thirty (30) days upon request from Licensee up
until three (3) months after termination of the Research Agreement. To the
extent Licensee requires and requests additional samples from The Regents during
the term hereof, and The Regents has such additional samples in its possession,
The Regents agrees to supplY such additional samples. Licensee agrees to pay
the actual handling and shipping costs for any additional samples provided.
12.2 To the extent Licensee is able to produce biologicals, reagents,
compositions, and materials derived from Background Information or Research
Information, and subject to prudent and reasonable business judgement, Licensee
shall make reasonable efforts to provide biologicals, reagents, compositions and
materials derived from Background Information or Research Information at no
charge to The Regents for research purposes only in the Biomedical Science
Division of LLNL only. In the event Licensee provides biologicals, reagents,
compositions and materials to The Regents, such biologicals, reagents,
compositions and materials are provided WITHOUT WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. Licensee's obligations to provide materials
shall not exceed a fair market value for such materials in excess of one hundred
fifty thousand dollars ($150,000).
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13. PROPRIETARY INFORMATION
13.1 a. Licensee and The Regents respectively shall hold the other
party's proprietary business, patent prosecution, and technical
information in confidence for a period of five (5) years from the
date of disclosure. All proprietary information shall be labeled
or marked as appropriate by the disclosing party. All oral
information shall be reduced to writing or some other physically
tangible form, marked and labeled as above, by the disclosing
party and delivered to the receiving party within thirty (30)
days of disclosure as a record of the disclosure.
b. Nothing contained herein shall in any way restrict or impair the right
of Licensee or The Regents to use, disclose or otherwise deal with any
information or data which:
i. at the time of disclosure to a receiving party is generally
available to the public or thereafter becomes generally available
to the public by publication or otherwise through no act of the
receiving party;
ii. the receiving party can show was in its possession prior to the
time of disclosure to it hereunder and was not acquired directly
or indirectly from the disclosing party;
iii. is independently made available to the receiving party as a
matter of right by a third party; or
iv. is independently developed by agents or employees of the
receiving party without use of any disclosed information.
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13.2 The Licensee and The Regents agree to destroy or return to the
disclosing party proprietary information received from the other in its
possession within fifteen (15) days following the effective date of
termination. However, each party may retain one copy of proprietary
information for archival purposes in nonworking files. Licensee and The
Regents are to provide each other, within thirty (30) days following
termination, with a written notice that proprietary information has been
returned or destroyed.
14. PATENT PROSECUTION AND MAINTENANCE
14.1 The Regents shall diligently prosecute and maintain the United States
and foreign patent applications and patents in Regents' Patent Rights using
counsel of its choice and after due consultation with Licensee. The Regents
shall provide Licensee with copies of all relevant documentation so that
Licensee may be currently and promptly informed and apprised of the continuing
prosecution, and Licensee agrees to keep this documentation confidential.
14.2 The Regents shall use all reasonable efforts to prepare or amend any
patent application to include claims requested by Licensee and required to
protect the Products contemplated to be sold or Patent Methods or procedures to
be practiced under this Agreement.
14.3 All past, present and future reasonable outside and LLNL in-house
counsel costs and government charges incurred by The Regents, after due
consultation with Licensee, in the filing, prosecuting and maintaining of the
United States and foreign patent applications and patents referred to in
Paragraph 14.1 above shall be borne by Licensee, subject to Paragraph 14.4,
below. In the event of the declaration of an interference by the United States
Patent and Trademark Office, The Regents may discontinue, at its sole
discretion, further prosecution. If
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The Regents license Regents' Patent Rights to a third party in a field of
use other than that of Licensee, then such other third party shall share
equally with Licensee in all filing, prosecution and maintenance fees for
each patent and patent application licensed to such third party. Licensee
shall reimburse The Regents within thirty (30) days following receipt of a
proper invoice from The Regents to which relevant law-firm billings or LLNL
counsel fees (page billings invoiced from DOE or LLNL, and such reasonable
and customary service charges), shall be attached. The Regents shall set
forth the number of licensees and identify Licensee's share of such costs.
14.4 The Regents shall obtain, at the request of Licensee, patent
prosecution on the Invention(s) covered by Regents' Patent Rights in foreign
countries if available and if Licensee so desires. Licensee must notify the
Regents within seven (7) months of the filing of the corresponding United States
application of its decision to obtain foreign patents. This notice concerning
foreign filing shall be in writing and must identify the countries desired. The
absence of such a notice from Licensee to The Regents shall be considered an
election not to secure foreign rights. The Regents shall have the right to file
patent applications at its own expense in any country in which Licensee has not
included in the list of desired countries and such applications and resultant
patents shall not be subject to this Agreement. However, The Regents shall
notify Licensee of such foreign countries in which The Regents filed patent
applications and in which Licensee elected not to secure foreign rights.
Subject to the availability of relevant rights, Licensee shall have the right
and option to include in this Agreement those patent applications and patents
issuing thereon filed in countries not originally included in Licensee's
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desired list at any time up to five (5) years from the filing date of such
patent applications, provided, however, that Licensee shall notify The
Regents in writing of its decision and shall share equally with other
licensees in all filing, prosecution, and maintenance fees for such
additional patents and patent applications.
14.5 All patents and patent applications under this Agreement shall be held
in the name of The Regents, shall be obtained using counsel of The Regents'
choice, and shall be subject to the terms and provisions hereof.
14.6 Licensee's obligation to underwrite and to pay patent prosecution and
maintenance costs shall continue for so long as this Agreement remains in
effect, provided, however, that Licensee may terminate its obligations with
respect to any patent application or patent in any or all designated countries,
upon three (3) months written notice to The Regents. The Regents will use its
best efforts to curtail the associated patent costs after such notice is
received from Licensee. The Regents may continue prosecution and/or maintenance
of such applications or patent(s) at its sole discretion and expense, provided,
however, that Licensee shall have no further right or licenses thereunder in or
with respect to those countries wherein Licensee has terminated its obligations
in accordance with the aforementioned notice.
15. MAINTENANCE OF THE BIOLOGICAL MATERIALS
15.1 The Regents agrees to instruct Dr. Joe W. Gray and Dr. Daniel Pinkel that
when circulating replicable Background Biological Materials and replicable
biological materials comprising Research Information that have not been released
in an unrestricted manner to third parties to do
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so under the terms and conditions set forth in the Biological Material
Transmission Letter attached hereto as Appendix A. The Regents expressly
reserves the right to transfer replicable Background Biological Materials and
replicable biological materials comprising Research Information as provided
in this Paragraph 15.1 to Universities and nonprofit research organizations
to the extent that such transfer does not compete with Licensee. The Regents
shall inform Licensee of third party requests for biological materials and
shall provide Licensee with a copy of the fully executed copy of the
Biological Material Transmittal Letter. The Regents shall inform Licensee of
comments, suggestions and information provided The Regents by recipients of
biological material. Licensee shall not interfere with The Regents efforts
to bail these materials to third parties.
15.2 The Licensee agrees to maintain the proprietary value of the
replicable Background Biological Materials and replicable biological materials
comprising Research Information (to the extent that such materials are not part
of Products sold by Licensee) that are not freely available to others.
16. USE OF NAMES AND TRADEMARKS AND NONDISCLOSURE OF AGREEMENT
16.1 Nothing contained in this Agreement shall be construed as conferring
any right to use in advertising, publicity or other promotional activities any
name, trade name, trademark, or other designation of either party hereto
(including any contraction, abbreviation, or simulation of any of the
foregoing). The use of the name "The Regents of the University of California
or the name of any University of California campus is expressly prohibited
except as provided for under Article 17.
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16.2 Each party hereto further agrees not to use or refer to this Agreement
or any license granted hereunder in any promotional activity without the express
written approval of the other party. However, The Regents shall be free to
release to the inventors of inventions covered by this Agreement the terms and
conditions of this Agreement upon request of the inventors. If such release is
made, The Regents shall request that the inventors not disclose such terms and
conditions to others. It is further understood that should a third party
inquire whether a license is available, The Regents may disclose the existence
of this Agreement and the extent of the grant in Article 3 to such third party,
but shall not disclose the name of the Licensee, except where The Regents is
required to release information under either the California Public Records Act
or other applicable law.
17. PATENT MARKING
17.1 Licensee agrees to mark products falling within the scope of an issued
claim within Regents' Patent Rights for anything under the terms of this
Agreement, or their containers, in accordance with the applicable patent marking
laws.
17.2 Licensee shall have the right to include in any NDA for a product, a
list of patents included within Regents' Patent Rights identifying The Regents
as patent owner.
18. PATENT INFRINGEMENT
18.1 In the event that either party learns of substantial infringement of
the exclusive rights licensed under this Agreement, the informed party shall
call such infringement to the other party's attention thereto in writing and
shall provide the other party with reasonable evidence of such infringement.
Both parties to this Agreement agree that during the period and in a
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<PAGE>
jurisdiction where Licensee has exclusive rights under this Agreement, neither
will notify an infringing third party of the infringement of any of Regents'
Patent Rights limited to the exclusive rights granted under this Agreement
without first obtaining consent of the other party, which consent shall not be
unreasonably denied. Both parties shall use their best efforts in cooperation
with each other to terminate such infringement without litigation.
18.2 Licensee may request that the Regents take legal action against the
infringement of Regents' Patent Rights. Such request shall be made in writing
and shall include reasonable evidence of such infringement and damages to
Licensee. If the infringing activity has not been abated within ninety (90)
days following the date of such request, The Regents shall have the right to:
a. commence suit on their own account to terminate the infringement. In
the event The Regents commences suit, Licensee shall reimburse The
Regents for fifty percent (50%) of The Regents' actual Infringement
Litigation Costs. In the event other licensees, in addition to
Licensee, request legal action, 'The Regents and Licensee shall share
equally in the contribution of such other licensee. Licensee's share
of The Regents' Infringement Litigation Costs shall be paid to The
Regents on a quarterly basis within sixty (60) days of receiving
notice from The Regents of the amount of such costs. Such
reimbursement shall continue until the suit is finally adjudicated or
settled. All recoveries shall first be applied to fully repay The
Regents and participating licensees for the cost of the suit. Any
remainder shall be shared among The Regents and licensees who joined
the suit who have
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shared in the reimbursement, with The Regents entitled to fifty
percent (50%) of the recovery and the remainder being shared
equally among the licensees joining in the action who have shared
in the reimbursement of The Regents; or
b. refuse to participate in such suit (other than as a nominal party
plaintiff). In the event The Regents refuses to participate in such
suit, The Regents shall give notice of its election in writing to
Licensee by the end of the one-hundredth (100th) day after receiving
notice of such request from Licensee. Licensee thereafter may bring
suit for patent infringement in Licensee's own name and in the name of
The Regents as nominal party plaintiff and if the infringement
occurred during the period and in a jurisdiction where Licensee has
exclusive rights under this Agreement. In the event Licensee elects
to bring suit in accordance, with this Paragraph, The Regents may
thereafter join such suit at its own expense.
18.3 Subject to Paragraph 18.2 b. above, legal action brought jointly by
The Regents and Licensee and fully participated in by both shall be at the joint
expense of the parties and all recoveries be shared jointly by them in
proportion to the share of expense paid by each party.
18.4 In the event that The Regents refuses to participate in a suit and the
Licensee brings same, the Licensee may withhold, during pendency of the suit, up
to fifty percent (50%) of the minimum and earned royalty income otherwise due
The Regents to offset one-half of Licensee's Infringement Litigation Costs.
Licensee's Infringement Litigation Costs shall be deducted from royalty payments
on a quarterly basis, and an accounting of such deductions shall
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be reflected in Licensee's quarterly royalty reports to The Regents provided
for in Article 7 (PROGRESS AND ROYALTY REPORTS). Said withheld royalty
income shall be applied to only those Infringement Litigation Costs that
Licensee incurred during the quarter in which such royalty income was due and
owing. Should one-half of the Infringement Litigation Costs of the suit
exceed one-half of the royalties allowed to be withheld in accordance with
this Paragraph 18.4, Licensee may apply such excess to the following quarter.
This same application of excess cost will continue until such time as the
suit is finally adjudicated. All recoveries shall first be applied to fully
repay both parties for the cost of the suit, and any remainder shall be
shared equally.
18.5 Each party agrees to cooperate with the other in litigation
proceedings instituted hereunder. Such litigation shall be controlled by the
party bringing the suit, except that The Regents may be represented by counsel
of its choice pursuant to The Regents' determination in any suit brought by
Licensee.
19. INDEMNIFICATION
19.1 Licensee and The Regents are acting as independent contractors under
this Agreement and nothing continued herein shall make either party the agent,
employee, partner, or representative of the other.
19.2 Licensee agrees to indemnify, hold harmless and defend The Regents,
its officers, employees, and agents; the sponsors of the research that lead to
the inventions covered by
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Regents' Patent Rights; and the inventors of the patents and patent
applications comprising Regents' Patent Rights to which The Regents is owner
or co-owner of record, for any loss of or damage to the property of any
person or persons and any injury or death of any person or persons resulting
from or arising out of the exercise of this license or any sublicense granted
herein, excluding acts of negligence on the part of The Regents and claims of
infringement brought by The Regents against Licensee. Where The Regents are
held to be negligent, liability shall be apportioned according to the
percentage of negligence accorded to The Regents by an appropriate court or
forum having jurisdiction. In those states or countries where such an
allocation of the percentage of negligence is not awarded, any controversy or
claim relating to such allocation or negligence between the parties to this
Agreement shall be settled by arbitration conducted in San Francisco,
California in accordance with the then current Licensing Arbitration Rules of
the American Arbitration Association. Judgment upon the award rendered by
Arbitrator(s) shall be binding on the parties and may be entered by either
party in the court or forum, state or federal, having jurisdiction. IN NO
EVENT WILL THE REGENTS BE LIABLE FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES RESULTING FROM THE EXERCISE OF LICENSES OR RIGHTS GRANTED HEREIN OR
THE USE OF THE PRODUCTS OR PROCESSES MADE IN ACCORDANCE WITH REGENTS' PATENT
RIGHTS OR THE REGENTS' PROPERTY RIGHTS. In no event shall The Regents be
liable for normal commercial activities of Licensee.
19.3 The Regents shall promptly notify Licensee in writing of any claim or
suit brought against The Regents in respect of which The Regents intends to
invoke the provisions of
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this Article 19. Licensee will keep The Regents informed on a current basis
of its defense of any claims pursuant to this Section 19.
20. WAIVER
20.1 It is agreed that 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 and/or similar breach or default.
21. ASSIGNABILITY
21.1 This agreement is binding upon and shall inure to the benefit of The
Regents, its successors and assigns, but shall be personal to Licensee and
assignable by the Licensee only with written notice to The Regents.
22. LATE PAYMENTS
22.1 In the event royalty payments or fees are not received by The Regents
when due, Licensee shall pay to The Regents interest charges at the rate of five
(5) percent plus the rate of interest which is charged by the San Francisco
Federal Reserve Bank to member banks twenty-five (25) days prior to the date the
payment was due. Such interest shall be calculated from the date payment was
due until actually received by The Regents.
23. NOTICES
23.1 Any payment, 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 (a) on the date of delivery if delivered
in person or (b) on the fourth day after mailing if
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mailed by first-class certified mail, postage paid, to the respective address
given below, or to such other address as it shall designate by written notice
given to the other party as follows:
In the case of the Licensee:
AMOCO TECHNOLOGY COMPANY
Warrenville Road and Mill Street
P. O. Box 3011
Naperville, Illinois 60566
Attention: Dr. Carl Orgell
In the case of The Regents:
THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA (C/N 85-187-1)
Patent, Trademark & Copyright Office
1320 Harbor Bay Parkway, Suite 150
Alameda, California 94501
Attention: Director
24. GOVERNING LAWS
24.1 This Agreement shall be interpreted and construed in accordance with the
laws of the State of California.
25. FOREIGN GOVERNMENT APPROVAL OR REGISTRATION
25.1 If this Agreement or any associated transaction is required by the law
of any nation to be either approved or registered with any governmental agency,
the Licensee shall assume all legal obligations and associated costs to do so.
The Regents shall cooperate in all the Licensee's efforts.
26. EXPORT CONTROL LAWS
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26.1 The Licensee shall observe all applicable United States and foreign
laws with respect to the transfer of Products and related technical data to
foreign countries, including, without limitation, the International Traffic in
Arms Regulations (ITAR) and the Export Administration Regulations.
27. FORCE MAJEURE
27.1 The parties to this Agreement shall be excused from any performance
required hereunder if such performance is rendered impossible or unfeasible due
to any catastrophes or other major events beyond their reasonable control,
including, without limitation, war, riot, and insurrection; laws, proclamations,
edicts, ordinances or regulations; strikes, lockouts or other serious labor
disputes; and floods, fires, explosions, or other natural disasters. When such
events have abated, the parties' respective obligations hereunder shall resume.
28. FULL DISCLOSURE
28.1 The Regents shall make its best effort to disclose Research
Information and Background Information to Licensee and shall allow Licensee
reasonable access to facilities and faculty and staff participating in Research
sponsored by Licensee. The Regents shall identify and collect relevant
materials which comprise Research Information and Background Information (to the
extent such materials do not violate the proprietary rights of others) and make
such information available in a timely manner to Licensee. To the extent The
Regents are able to do so, The Regents shall make such Background Information
and Research Information available to Licensee in a form most convenient for
transfer to and use by Licensee, including electronic media. The Regent's duty
of disclosure to Licensee for Background Information shall not extend
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beyond the term of the Research Agreement, and the Regent's duty of
disclosure to Licensee for Research Information shall not extend beyond one
year from the date of expiration of the Research Agreement.
29. MISCELLANEOUS
29.1 The headings of the several sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
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29.2 This Agreement will not be binding upon the parties until it has been
signed below on behalf of each party, in which event, it shall be effective as
of the date recited on page one.
29.3 No amendment or modification hereof shall be valid or binding upon the
parties unless made in writing and signed on behalf of each party.
29.4 This Agreement embodies the entire understanding of the parties and
shall supersede all previous communications, representations or understandings,
either oral or written, between the parties relating to the subject matter
hereof.
29.5 In case any of the provisions contained in this Agreement shall be
held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions hereof, but
this Agreement shall be construed as if such invalid or illegal or unenforceable
provisions had never been contained herein.
29.6 This Agreement includes Schedule A and Appendices A, B and C which are
attached hereto.
IN WITNESS WHEREOF, both The Regents and the Licensee have executed this
Agreement, in duplicate originals, by their respective officers hereunto duly
authorized, on the day and year hereinafter written.
AMOCO TECHNOLOGY COMPANY THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
By By
------------------------- --------------------------
(Signature) (Signature)
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Name L.V. Triggiani Name Carl B. Wooten
--------------------------- --------------------
(Please Print)
Title President Title Director--Patent,
--------------------------- Trademark & Copyright Office
Date 9/27/89 Date 10/4/89
--------------------------- --------------------
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Schedule A - Part I
Methods and Compositions
for Chromosome-Specific
Staining
U.S. Serial No. 819314
UC Case No. 85-157-1
CLAIMS:
1. A chromosome-specific staining reagent comprising a heterogeneous
mixture of labeled nucleic acid fragments, the labeled nucleic acid fragments
being derived from the same chromosome type, and being substantially free of
repetitive nucleic acid sequences having hybridization capacity.
2. The chromosome-specific staining reagent according to claim 1
wherein said chromosome type is an abnormal human chromosome type.
3. The chromosome-specific staining reagent according to claim 1
wherein said chromosome type is selected from the group consisting of normal
human chromosomes 1 through 22, X, and Y.
4. The chromosome-specific staining reagent of claim 3 wherein said
heterogeneous mixture comprises labeled nucleic acid fragments derived from
substantially equal amounts of between about 10-1000 distinct cloned inserts.
5. The chromosome-specific staining reagent of claim 4 wherein said
labeled nucleic acid fragments are derived from substantially equal amounts of
between about 10-1000 distinct cloned inserts each having a length within the
range of between about 20-45 kilobases.
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6. The chromosome-specific staining reagent of claim 5 wherein said
distinct cloned inserts form said labeled nucleic acid fragments, each fragment
having a length within the range of between about 50-500 bases.
7. The chromosome-specific staining reagent of claim 6 wherein said
labeled nucleic acid fragments are single stranded.
8. The chromosome-specific staining reagent of claim 7 wherein said
labeled nucleic acid fragments are biotinylated or modified with N-acetoxy-N-2-
acetylaminofluorene.
9. The chromosome-specific staining reagent of claim 4 wherein said
labeled nucleic acid fragments are derived from substantially equal amounts of
between about 100-400 distinct cloned unique sequence inserts.
10. The chromosome-specific staining reagent of claim 9 wherein said
distinct cloned inserts form said labeled nucleic acid fragments, each fragment
having a length within the range of between about 50-5000 bases.
11. The chromosome-specific staining reagent of claim 10 wherein said
distinct cloned inserts form said labeled nucleic acid fragments, each fragment
having a length within the range of between about 50-500 bases.
12. The chromosome-specific staining reagent of claim 11 wherein said
labeled nucleic acid fragments are single stranded.
13. The chromosome-specific staining reagent of claim 12 wherein said
labeled nucleic acid fragments Are biotinylated or modified with N-acetoxy-N-2-
acetylaminofluorene.
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14. A chromosome-specific staining reagent produced by the process
of:
isolating chromosome-specific DNA; cloning pieces of the isolated
chromosome-specific DNA;
disabling the hybridization capacity of repeated sequences
contained in the cloned pieces of the isolated chromosome-
specific DNA to form a collection of nucleic acid fragments which
hybridize to unique chromosomal DNA sequences;
labeling the nucleic acid fragments of the collection to form a
heterogeneous mixture a of nucleic acid fragments.
15. The chromosome-specific staining reagent of claim 14, wherein
said step of disabling said hybridization capacity includes selecting cloned
pieces of said isolated chromosome-specific DNA which have substantially unique
base sequences.
16. The chromosome-specific staining reagent of claim 14 wherein said
stop of disabling said hybridization capacity includes preassocating said cloned
pieces of said isolated chromosome-specific DNA with unlabeled repetitive
sequence nucleic acid fragments.
17. A method of staining chromosomal DNA of a particular chromosome
type or portion thereof, or a particular group of chromosome types, the method
comprising the steps of:
providing a heterogeneous mixture of labeled nucleic acid
fragments, substantial portions of each labeled nucleic acid
fragment in the heterogeneous mixture having base
sequences substantially complementary to base sequences
of the Chromosomal DNA; and
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reacting the heterogeneous mixture with the chromosomal DNA
by in situ hybridization.
49
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Schedule A - Part 2
Methods and Compositions
for Chromosome-Specific
Staining
U.S. Serial No. 937793
UC Case No. 85-157-2
CLAIMS:
1. A chromosome-specific staining reagent comprising a heterogeneous
mixture of labeled nucleic acid fragments, tne libeled nucleic acid fragments
being derived from the same chromosome type and being substantially free of
repetitive nucleic acid sequences having hybridization capacity.
2. The chromosome-specific staining reagent according to claim 1
wherein said chromosome type is in abnormal human Chromosome type.
3 The Chromosome-specific staining reagent according to claim 1
wherein said chromosome type is selected from the group consisting of normal
human chromosomes I through 22, X, & Y.
4. The chromosome-specific staining reagent of claim 3 wherein said
heterogeneous mixture comprises labeled nucleic acid fragments derived from
substantially equal amounts of between about 10-1000 distinct cloned inserts.
5. The chromosome-specific staining reagent of claim 4 wherein said
labeled nucleic acid fragments are derived from substantially equal amounts of
between about 10-1000 distinct cloned inserts each having a length within the
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range of between about 20-45 kilobases.
6 . The chromosome-specific staining reagent of claim 5 wherein said
distinct cloned inserts form said labeled nucleic acid fragments, each having a
length within the range of between about 50-500 bases.
7 . The chromosome-specific staining reagent of claim 6 wherein said
labeled nucleic acid fragments are single stranded.
8 . The chromosome-specific staining reagent of claim 7 wherein said
labeled nucleic acid fragments are biotinylated or modified with N-acetoxy-N-2-
acetylamino-fluorene.
9 . The chromosome-specific staining reagent of claim 4 wherein said
labeled nucleic acid fragments are derived from substantial equal amounts of
between about 100-400 distinct cloned unique sequence inserts.
10. The chromosome-specific staining reagent of claim 9 wherein said
distinct cloned inserts form said labeled nucleic acid fragments, each fragment
having a length within the range of between about 50-5000 bases.
11. The chromosome-specific staining reagent of claim 10 wherein said
distinct cloned inserts form said labeled nucleic acid fragments, each fragment
having a length within the range of between about 50-500 bases.
12. The chromosome-specific staining reagent of claim 1 wherein said
labeled nucleic acid fragments are single stranded.
13. The chromosome-specific staining reagent of claim 12 wherein
said labeled nucleic acid fragments are biotinylated or modified with
N-sacetoxy-N-2-acetylamino-fluorene.
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14. A chromosome-specific staining reagent produced by the process
of:
isolating chromosome-specific DNA;
cloning pieces of the isolated chromosome-specific DNA;
disabling the hybridization capacity of repeated sequences contained
in the cloned pieces of the isolated chromosome-specific DNA to form a
collection of nucleic acid fragments which hybridize to unique chromosomal DNA
sequences;
labeling the nucleic acid fragments of the collection to form a
heterogeneous mixture of nucleic acid fragments.
15. The chromosome-specific staining reagent of claim 14, wherein
said step of disabling said hybridization capacity includes selecting cloned
pieces of said isolated chromosome-specific DNA which have substantially unique
base sequences.
16. The chromosome-specific staining reagent of claim 14 wherein said
step of disabling said hybridization capacity includes prereassociating said
cloned pieces of said isolated chromosome-specific DNA with unlabeled repetitive
sequence nucleic acid fragments.
17. A method of staining chromosomal DNA of a particular chromosome
type or portion thereof, or a particular group of chromosome types, the method
comprising the steps of:
providing a heterogeneous mixture of labeled nucleic acid fragments,
substantial portions of each labeled nucleic acid fragment in the heterogeneous
mixture having base sequences substantially complementary to base sequences of
the chromosomal DNA; and
reacting the heterogeneous mixture with the chromosomal DNA by in situ
hybridization.
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Schedule A - Part 3
Method of Preparing and
Applying Single Stranded
Probes to Double Stranded
DNAs
U.S. Serial No. 934188
UC Case No. 85-157-3
WE CLAIM:
1. A method of preparing and applying single stranded DNA probes to
double stranded target DNA, the method comprising the steps of:
providing restriction fragments having staggered ends, the staggered
ends each consisting of a protruding strand and a recessed strand;
treating the restriction fragments with an exonuclease to digest a
portion of the recessed strand to form template/primers;
treating the template/primers with a DNA polymerase so that the
single strands digested by the exonuclease are resynthesized in the presence of
a labeled nucleoside triphosphate precursor to form resynthesized fragments;
breaking the resynthesized fragments into smaller pieces, so that the
labeled regions on opposite ends of each resynthesized fragment are on
separate pieces of DNA;
denaturing the broken resynthesized fragments; separating the labeled
strands of the DNA fragments from the denatured broken resynthesized
fragments to form the single stranded DNA probe;
treating the double stranded target DNA with the same restriction
endonuclease used to generate the restriction fragments;
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after treatment with the restriction endonuclease treating the double
stranded target DNA with an exonuclease; and
after treatment with the exonuclease, applying the single stranded DNA
probe to the double. stranded target DNA.
2. The method of Claim 1 wherein said labeled nucleoside
triphosphate precursor is biotinylated uracil triphosphate and wherein said step
of separating includes passing said denatured broken synthesized fragments over
an avidin affinity column.
3. The method of Claim 2 wherein said step of breaking includes
sonicating said resynthesized fragments so that said broken resynthesized
fragments are on average about half the length of said resynthesized fragments.
4. The method of Claim 3 wherein said exonuclease is exonuclease III
and said DNA polymerase is T4 DNA polymerase.
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Schedule A-Part 4: "Method for Determining
Aneyploid, in Fetal Cells from Maternal
Blood Samples" U.C. Case No. 87-095-1
(renumbered U.C. Case Number 85-157-4)
CLAIMS:
1. High complexity nucleic acid probes for cytogenetic analysis.
2. High complexity nucleic acid probes according to Claim 1 wherein
the complexity is greater than 100,000 bases.
3. High complexity nucleic acid probes according to Claim 2 wherein
the complexity is greater than one million bases.
4. High complexity nucleic acid probes according to Claim 3 wherein
the complexity is greater than two million bases.
5. A method of staining targeted chromosomal material with high
complexity nucleic acid probes.
6. A method according to Claim 5 wherein the probes are at a
complexity greater than 100,000 bases.
7. A method according to Claim 6 wherein the complexity is greater
than one million bases.
8. High complexity nucleic acid probes according to Claim 1 derived
from normal and/or abnormal chromosomal material.
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9. High complexity nucleic acid probes according to Claim 8 wherein
chromosomal material is human.
10. High complexity nucleic acid probes according to Claim 9 wherein
the human chromosomal material is normal and selected from DNA of chromosomes 1
through 22, X and Y.
11. High complexity nucleic acid probes according to Claim 10 wherein
the human chromosomal material is abnormal and selected from DNA of chromosomes
1 through 22, X and Y.
12. High complexity nucleic acid probes according to Claim 1 wherein
the probe nucleic acid sequences are propagated in one or more vectors.
13. High complexity nucleic acid probes according to Claim 12
wherein said one or more vectors is or are selected from the group consisting of
hybrid cells, yeast artificial chromosomes, plasmids, bacteriophages and
cosmids.
14. High complexity nucleic acid probes according to Claim 13 wherein
the hybrid cells are selected from the group consisting of human/hamster and
human/rodent hybrid cells; wherein the plasmids are Bluescribe plasmids; wherein
the bacteriophages are lambda insertion vectors selected from the group
consisting of Charon 4A, Charon 21A, Charon 35, Charon 40 and GEM11; and wherein
the cosmids are selected from the group consisting of Lawrist 4, Lawrist 5 and
sCosl.
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15. High complexity nucleic acid probes comprising high copy
repetitive probes and target-specific probes.
16. High complexity nucleic acid probes according to Claim 15 wherein
the repetitive probes are alpha-satellite probes and/or Alu sequence probes.
17. A method of staining targeted chromosomal material with high
complexity nucleic acid probes wherein the probe nucleic acid sequences prior to
hybridization to the targeted chromosomal material are broken into fragments of
from about 200 bases to about 2000 bases.
18. A method according to Claim 17 wherein the size of the fragments
are about 1 Kb.
19. A method according to Claim 18 wherein the size of the fragments
is from about 800 bases to about 1000 bases and, wherein the hybridization is
performed at a temperature of about 30 degrees C to about 45 degrees C, and
wherein the subsequent washing steps are performed at a temperature of from
about 40 degrees C to about 50 degrees C.
20. A method according to Claim 19 wherein the hybridization is
performed at a temperature of from about 35 degrees C to about 40 degrees C.
21. A method according to Claim 20 wherein the hybridization is
performed at a temperature of about 37 degrees C, and the subsequent washing
steps are performed at a temperature of about 45 degrees C.
22. A method according to Claim 17 wherein the labeled fragments are
detected after hybridization by flow cytometry.
23. A method according to Claim 17 wherein detection is by
microscopy.
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24. A method according to Claim 17 wherein detection is by
fluorescent-activated cell sorting.
25. A method according to Claim 23 wherein light scattering is used.
26. High complexity probes according to Claim 1 wherein the targeted
chromosomal material of said probes is chromosomal material of fetal cells.
27. High complexity probes according to Claim 26 wherein said fetal
cells have been separated from maternal blood by non-invasive means.
28. High complexity probes according to Claim 27 wherein said non-
invasive means comprise the use of monoclonal antibodies specific for said fetal
cells.
29. High complexity probes according to Claim 28 wherein said fetal
cells are leukocytes and cytotrophoblasts.
30. High complexity probes according to Claim 26 wherein said probes
comprise chromosome-specific probes for chromosome 13, 18 and/or chromosome 21.
31. High complexity probes according to Claim 29 wherein said probes
comprise the chromosome-specific Bluescribe plasmid libraries for chromosome 13
and/or chromosome 21.
32. High complexity probes according to Claim 25 wherein the targeted
chromosomal material is in interphase and/or metaphase.
33. High complexity probes according to Claim 32 wherein the targeted
chromosomal material is in interphase.
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34. A prenatal screening test kit comprising the high complexity
nucleic acid probes of Claim 25.
35. A method of staining targeted chromosomal material of fetal cells
with high complexity nucleic acid probes.
36. A method according to Claim 35 wherein the fetal cells have been
separated from maternal blood by non-invasive means.
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37. A method according to Claim 36 wherein said non-invasive means
comprise the use of monoclonal antibodies specific for said fetal cells.
38. A method according to Claim 37 wherein said fetal cells are
leukocytes and cytotrophoblasts.
39. A target-specific staining reagent comprising a high complexity,
heterogeneous mixture of labeled nucleic acid fragments, wherein the labeled
nucleic acid fragments are complementary to sites on the targeted chromosomal
material and are substantially free of nucleic acid sequences having
hybridization capacity to sites on non-targeted chromosomal material.
40. The target-specific staining reagent of Claim 39 wherein said
targeted material is human chromosomal material that is either normal or
abnormal.
41. The target-specific staining reagent of Claim 40 wherein the
human chromosomal material is normal and selected from the group consisting of
DNA sequences from normal human chromosomes 1 through 22, X, and Y.
42. The target-specific staining reagent of Claim 39 wherein said
labeled nucleic acid fragments are single stranded.
43. The target-specific staining reagent of Claim 42 wherein said
nucleic acid fragments are labeled with radioactive, enzymatic, immunoreactive
and/or affinity detectable reagents.
44. The target-specific staining reagent of Claim 41 wherein said
fragments are biotinylated, modified with N-acetoxy-N-2-acetylaminofluorene,
modified with fluorescein isothiocyanate, modified with mercury/TNP ligand, or
sulfonated.
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45. A target-specific staining reagent produced by the process of:
isolating target-specific DNA;
cloning pieces of the isolated target-specific DNA;
disabling the hybridization capacity of or removing shared repetitive sequences
contained in the cloned pieces of the isolated target-specific DNA to form a
collection of nucleic acid fragments which hybridize to the targeted chromosomal
DNA; and
labeling the nucleic acid fragments of the collection to form a
heterogeneous mixture of nucleic acid fragments.
46. The target-specific staining reagent of Claim 45 wherein said
step of disabling said hybridization capacity of or removing said shared
repetitive sequences comprises selecting cloned pieces of said isolated target-
specific DNA which pieces are substantially free of nucleic acid sequences which
are complementary to non-targeted chromosomal material.
47. A target-specific staining reagent of Claim 46 wherein said
selection of said cloned pieces comprises the use of southern hybridization.
48. A target-specific staining reagent of Claim 47 wherein said
selection of said cloned pieces comprises screening said clones for the presence
of repetitive sequences by hybridization with genomic DNA.
49. A target-specific staining reagent of Claim 48 wherein said
clones are plasmid clones.
50. A target-specific staining reagent of Claim 45 wherein said
selection of said cloned pieces comprises screening said clones for
hybridization to single-copy or repetitive
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sequences which are known to be in the targeted chromosomal material, and
removing the clones which do not so hybridize.
51. The target-specific staining reagent of Claim 45 wherein said
step of disabling said hybridization capacity comprises hybridizing said cloned
pieces of said isolated target-specific DNA with unlabeled high copy shared
nucleic acid sequences.
52. The target-specific staining reagent of Claim 45 wherein said
step of disabling said hybridization capacity comprises the addition of
unlabeled blocking DNA during hybridization to the targeted chromosomal
material.
53. The target-specific staining reagent of Claim 52 wherein the
unlabeled blocking DNA is genomic.
54. The target-specific staining reagent of Claim 53 wherein the
genomic DNA is a high-copy fraction.
55. The target-specific staining reagent of Claim 52 wherein the
unlabeled blocking DNA is from a mixture of a few clones containing the highest
copy sequences from a genome.
56. The target-specific staining reagent of Claim 45 wherein said
step of disabling said hybridization capacity of said shared repetitive
sequences comprises self-reassociating the high complexity probe.
57. The target-specific staining reagent of Claim 45 wherein said
step of removing the shared repetitive sequences comprises the use of
hydroxyapatite chromatography.
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58. The target-specific staining reagent of Claim 45 wherein said
step of removing the shared repetitive sequences comprises reacting the cloned
pieces of the isolated target-specific DNA with immobilized, single-stranded
nucleic acid sequences which are complementary to said shared repetitive
sequences.
59. A method of staining targeted chromosomal material with a high
complexity nucleic acid probe wherein the targeted chromosomal material is
hybridized to unlabeled high copy repetitive nucleic acid sequences prior to or
during the hybridization to the high complexity nucleic acid probe.
60. A method of staining targeted chromosomal material with high
complexity nucleic acid probes comprising the steps of:
providing a heterogeneous mixture of labeled nucleic acid
fragments, wherein substantial portions of each labeled nucleic acid fragment in
the heterogeneous mixture has base sequences substantially complementary to the
targeted chromosomal material; and
reacting the heterogeneous mixture with the targeted chromosomal DNA by in situ
hybridization.
61. High complexity nucleic acid probes which are substantially free
of shared repetitive sequences produced by a process incorporating a polymerase
chain reaction (PCR) procedure.
62. High complexity nucleic acid probes according to Claim 61 wherein
before performing said PCR procedure sequences complementary to said shared
repeats which have extended non-complementary ends or which are terminated in
nucleotides which do not permit extension by a polymerase are hybridized to said
shared repeats.
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63. A method of staining targeted chromosomal material with high
complexity nucleic acid probes wherein the probes are not directly labeled and
detection of the probes bound to the targeted chromosomal material is by means
other than direct labeling.
64. A method of staining targeted chromosomal material according to
Claim 63 wherein the means of detecting the probes bound to the targeted
chromosomal material comprise the use of anti-RNA/DNA duplex antibodies and/or
anti-thymidine diner antibodies.
65. High complexity nucleic acid probes for cytogenetic analysis by
in situ hybridization.
66. High complexity nucleic acid probes according to Claim 65 wherein
the complexity is greater than 100,000 bases.
67. High complexity nucleic acid probes according to Claim 65 which
produce one or more bands on the targeted chromosome(s) for detection of
cytogenetic aberrations in metaphase chromosomes.
68. High complexity nucleic acid probes according to Claim 67 wherein
the bands can be spectrally distinguished.
69. High complexity nucleic acid probes according to Claim 67 wherein
the bands are placed at specific disease loci.
70. High complexity nucleic acid probes according to Claim 67 wherein
the band characteristics (location, dimension, colors) are optimized for
detection by automated means.
71. High complexity nucleic acid probes according to Claim 67 for
detection of random structural chromosome abnormalities induced by exposure to
clastogenic agents.
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72. High complexity nucleic acid probes according to Claim 71 wherein
the probes have been optimized for rapid detection of random structural
chromosome aberrations.
73. High complexity nucleic acid probes according to Claim 71 wherein
probes have been optimized for rapid, efficient, automated detection of
aberrations.
74. High complexity nucleic acid probes according to Claim 67 for
detection of cytogenetic abnormalities in tumor cells.
75. High complexity nucleic acid probes according to Claim 74 where
detection of abnormalities is by automated means.
76. High complexity nucleic acid probes according to Claim 65 for
detection of numerical and structural chromosome abnormalities in interphase
cells.
77. High complexity nucleic acid probes according to Claim 76 wherein
the probes are optimized for detection of specific disease-linked numerical
abnormalities of entire or partial chromosomes.
78. High complexity nucleic acid probes according to Claim 76
wherein the probes have been optimized to detect specific disease-linked
structural abnormalities.
79. High complexity nucleic acid probes according to Claim 76 wherein
the probes have been optimized to detect numerical and structural abnormalities
in tumor cells.
80. High complexity nucleic acid probes according to Claim 76 wherein
the probes have been optimized to random abnormalities induced by clastogenic
agents.
81. High complexity nucleic acid probes according to Claim 76
wherein the probes have been optimized for detection of aberrations by automated
means.
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FOR THE PURPOSE OF THIS LICENSE AGREEMENT, THE TERM "HIGH COMPLEXITY
NUCLEIC ACID PROBE(S)" MEANS PROBES CONTAINING MORE THAN 100,000 BASES OF NON-
REPEATING NUCLEIC ACID SEQUENCES THAT CAN BE USED IN AN IN SITU HYBRIDIZATION
REACTION TO STAIN REGIONS OF CHROMOSOMES OR CELL NUCLEI TO FACILITATE
CYTOGENETIC ANALYSIS.
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AMOCO TECHNOLOGY COMPANY THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
By /s/ L.V. Triggiani By /s/ C.B. Wooten
------------------------ -----------------------------
(Signature) (Signature)
Name L.V. Triggiani Name Carl B. Wooten
----------------------- ---------------------------
(Please Print)
Title President Title Director--Patent,
Trademark & Copyright Office
Date 9/27/89 Date 10/4/89
------------------------ ---------------------------
67
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APPENDIX A - PAGE 1A
University of California/
Lawrence Livermore National Laboratory (LLNL)
Instructions for Standard Letter Transmitting
Biological Materials to Universities and Nonprofit Institutions
The attached letter is authorized for use by University of California/LLNL
Principal Investigators and Administrators only with scientists at other
universities and nonprofit research institutions when transmitting cell lines,
plasmids and the like for non-commercial research purposes.
1. Choose the appropriate form of university or nonprofit research institution
in Paragraph 2.
2. Choose whether or not to include the phrase "our cooperative" in Paragraph
3. Insert in Paragraph 4 the amount of processing charge. If the material is
to be shipped at no charge, insert the words "no charge".
4. Send the letter IN DUPLICATE to the other scientist.
5. Do not send biological materials until you receive the duplicate copy
executed by both the scientist and the other institution.
6. Send a copy of the fully executed letter agreement to:
Carl B. Wootten, Director
Patent, Trademark and Copyright Office
University of California
1320 Harbor Bay Parkway, Suite 150
Alameda, CA 94501
7. Any changes in the wording of this standard letter must be reviewed by the
Director of the Patent, Trademark and Copyright office before acceptance.
68
<PAGE>
NOTE: Do not use this letter for the exchange of living plants. A separate
"Testing Agreement for Plant Varieties" is available for that purpose.
APPENDIX A - PAGE 2A
SAMPLE LETTER FOR USE PRIOR TO TRANSMISSION OF BIOLOGICAL
MATERIALS TO INVESTIGATORS AT UNIVERSITIES OR NON-PROFIT
RESEARCH INSTITUTIONS
(Date)
IN DUPLICATE
To:
This is to (acknowledge receipt of your letter) (confirm our telephone
conversation) in which you requested certain research materials developed in
this laboratory be sent to you for scientific research purposes. The materials
concerned, which belong to The Regents of the University of California/Lawrence
Livermore National Laboratory (LLNL), are: _____________________________. While
I cannot transfer ownership of these materials to you, I will be pleased to
permit your use of these materials within your (university) (Non-Profit Research
Institution) laboratory for (our cooperative) scientific research. However,
before forwarding them to you, I would like your agreement that the materials
will be received by you only for use in (our cooperative work) (scientific
research), that you will bear all risk to you or any others resulting from your
use, and that you will not pass these materials, their progeny or derivatives,
on to any other party or use them for commercial purposes without the express
written consent of The Regents of the University of California. You understand
that no other right or license to these materials, their progeny or derivatives,
is granted or implied as a result of our transmission of these materials to you.
These materials are to be used with caution and prudence in any experimental
work, since all of their characteristics are not known.
As you recognize, there is a processing cost to us involved in providing these
materials to you. We will bill you for our processing costs, which will amount
to $ .
If you agree to accept these materials under the above conditions, please sign
the enclosed duplicate copy of this letter, then have it signed by an authorized
representative of your
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institution, and return it to me. Upon receipt of that confirmation I will
forward the material(s) to you.
APPENDIX A - PAGE 3A
(Note: other paragraphs discussing the relevant literature, the nature of the
work, hazards relating to materials to be sent, etc., may be appropriate. These
will vary depending on the individual circumstances and the relationship between
the two parties previously established. Be sure to retain signed copy when
received and send a photocopy of the completed agreement to the University of
California Patent Administrator, Patent Office, Systemwide Administration, 1320
Harbor Bay Parkway, Suite 150, Alameda, CA 94501.)
Sincerely yours,
ACCEPTED:
RESEARCH INVESTIGATOR
- -------------------------
Printed Name
- -------------------------
(Signature)
- -------------------------
Date
RESEARCH UNIVERSITY OR
NON-PROFIT INSTITUTION
- -------------------------
Printed Name
- -------------------------
(Signature)
- -------------------------
Date
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APPENDIX B
The INVENTORS listed below understand and agree to abide by the terms and
conditions
of Article 15 of the License Agreement between The Regents of the University of
California and Amoco Technology Corporation effective October 4, 1989 and to
instruct all relevant personnel working within their laboratory to act
accordingly. Said paragraph reads, in part, as follows:
15.1 The Regents agrees to instruct Dr. Joe W. Gray and Dr. Daniel Pinkel
that when circulating replicable Background Biological Materials and replicable
biological materials comprising Research Information that have not been released
in an unrestricted manner to third parties to do so under the terms and
conditions set forth in the Biological Material Transmission Letter attached
hereto as Appendix A. The Regents expressly reserves the right to transfer
replicable Background Biological Materials and replicable biological materials
comprising Research Information as provided in this Paragraph 15.1 to
Universities and nonprofit research organizations to the extent that such
transfer does not compete with Licensee. The Regents shall inform Licensee of
third party requests for biological materials and shall provide Licensee with a
copy of the fully executed copy of the Biological Material Transmittal Letter.
The Regents shall inform Licensee of comments, suggestions and information
provided The Regents by recipients of biological material. Licensee shall not
interfere with. The Regents efforts to bail these materials to third parties.
By /s/ Joe W. Gray
-------------------
Joe W. Gray
Date 10/2/89
------------------
By /s/ Daniel Pinkel
--------------------
Daniel Pinkel
Date 9/29/89
------------------
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APPENDIX C
Mortimer Mendelsohn, Associate Director for Biomedical and Environmental
Research of the Lawrence Livermore National Laboratory has read and approved the
terms and conditions of the license agreement titled "License Agreement For
Chromosome Analysis Technology with Chromosome-Specific Probes".
By /s/ Mortimer Mendelsohn Date September 29, 1989
--------------------------------- ------------------------------
Mortimer Mendelsohn
Associate Director for Biomedical
and Environmental Research
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ADDENDUM TO LICENSE AGREEMENT FOR CHROMOSOME ANALYSIS TECHNOLOGY WITH
CHROMOSOME-SPECIFIC PROBES BETWEEN AMOCO TECHNOLOGY COMPANY AND THE REGENTS OF
THE UNIVERSITY OF CALIFORNIA DATED AUGUST 15, 1989 (US CASE NO. 85-187; 072889)
PAGE 2, RECITALS, TOP OF PAGE.
DELETE:
"make, have made, use, and sell methods, processes, compositions of matter, and
articles of manufacture as a research reagent for prenatal test subjects under
Regents' Patent Right; and as a consequence such rights granted to Licensee
hereunder are expressly subject to and limited by such preexisting rights of
third party;"
INSERT:
"WHEREAS, The Regents and another company have entered into a nonexclusive
option agreement for a nonexclusive license to make, have made, use and sell
methods, processes, compositions of matter, and articles of manufacture as a
research reagent for prenatal test subjects under Regents' Patent Rights; and as
a consequence such rights granted to Licensee hereunder are expressly subject to
and limited by such preexisting rights of such third party;"
73
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AMOCO TECHNOLOGY COMPANY THE REGENTS OF THE
UNIVERSITY OF CALIFORNIA
By /s/ Leonard V. Triggiani By /s/ C.B. Wooten
--------------------------- ------------------------
(Signature) (Signature)
Name Leonard V. Triggiani Name C.B. Wooten
--------------------------- ------------------
Title President Title Director; PTCO
--------------------------- -----------------
Date 9/29/89 Date 10/4/89
--------------------------- ------------------
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EXHIBIT 10.3a
[LETTERHEAD]
October 6, 1989
Ms. Candace Voelker
University of California
Patent, Trademark and
Copyright Office
1320 Harbor Bay Parkway
Suite 150
Alameda, California 94501
Re: License Agreement for Chromosome Analysis Technology
with Chromosome-Specific Probes between Amoco Technology
Corporation and The Regents of the University of California
---------------------------------------------------------------
Dear Ms. Voelker:
We are indeed pleased to learn that there are no significant problems with the
License Agreement and that Amoco Technology Company will be receiving a fully
executed copy shortly. In your conversation of October 5, 1989 with Mr. Anthony
J. Janiuk, you noted that on page 12 of the License Agreement, Paragraph 2.3(c),
a reference to U.S. Patent 4,740,470 had been omitted.
Please accept our sincere apologies. Paragraph 2.3(c) should be modified to
read as follows:
c. It is not aware of anything which would be made, used, sold, or
otherwise disposed of, performed, or played under any license granted
herein that will constitute infringement of patents of third parties
except for U.S. Patent No. 4,468,464 entitled "Process and Composition
For Biologically Functional Molecular Chimeras" by S. Cohen, et al.
and issued 28 August 1984, U.S. Patent No. 4,237,224 entitled "Process
and Composition For Biologically Functional Molecular Chimeras" by S.
Cohen, et al. and issued 2 December 1980, and U.S. Patent No.
4,740,470 entitled "Process and Composition For Biologically
Functional Molecular Chimeras" by S. Cohen, et al. and issued 26
April, 1988;
We have provided duplicative originals of the present letter with signature of
Dr. L.V. Triggiani below indicating Amoco Technology Company's agreement to the
modification. If the Regents of the University of California agree to the
modification, the present letter should be executed in duplicate by Mr. Carl
Wooten or some other individual authorized by The Regents to effect
modifications of this type.
<PAGE>
Ms. Candace Voelker
October 6, 1989
Page 2
You may retain one copy of the present letter for your files. Please return one
fully executed copy to me.
Turning now to the related Research Agreement, accompanying this letter is a
check for two-hundred eighty-two dollars ($282.00). The check reflects the
difference between what we sent to The Regents, $122,000, and the contract
amount, $122,282. We also sincerely apologize for our error in drafting the
original check.
If you have any further comments or questions, please do not hesitate to contact
me.
Very truly yours,
/s/ Carl Orgell
Carl Orgell
Mail Code 1907
AJJ:vay
Enclosures
In witness whereof, both The Regents and The Licensee have executed this
modification of the above identified License Agreement, Paragraph 2.3(c), in
duplication originals, by their respective officers hereunto duly authorized, on
the day and year hereinafter written.
AMOCO TECHNOLOGY COMPANY THE REGENTS OF THE
UNIVERSITY OF CALIFORNIA
By /s/ L. V. Triggiani By /s/ Carl B. Wootten
---------------------------- -------------------------
Name L.V. Triggiani Name: Carl B. Wooten
--------------------------
Title: President Title: Director-Patents, Trademark
---------------------------- and Copyright Office
Date: October 9, 1989 Date: October 13, 1989
----------------------------- --------------------------
<PAGE>
EXHIBIT 10.3b
AMENDMENT TO LICENSE AGREEMENT FOR
CHROMOSOME ANALYSIS TECHNOLOGY
WITH CHROMOSOME-SPECIFIC PROBES
BETWEEN
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
AND
AMOCO TECHNOLOGY COMPANY
THIS AMENDMENT is made and is effective this 1st day of July 1991 by and
between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, a California corporation
having its statewide administrative offices at 300 Lakeside Drive, 22nd Floor,
Oakland, California 94612-3550, hereinafter referred to as "The Regents", and
AMOCO TECHNOLOGY COMPANY, a Delaware corporation having its office at 305 East
Shuman Boulevard, Naperville, Illinois, 60563, hereinafter referred to as
"Licensee".
RECITALS
WHEREAS, Licensee and The Regents entered into a license agreement
effective August 15, 1989 having U.C. Agreement Control Number 89-03-0021,
hereinafter referred to as "License Agreement", covering licensure to
Licensee by The Regents of certain inventions generally characterized as
FLUORESCENCE HYBRIDIZATION WITH CHROMOSOME-SPECIFIC PROBES, hereinafter
collectively referred to as the "Invention", made in the course of research
at the Lawrence Livermore National Laboratory (LLNL) by Joe W. Gray et al.;
WHEREAS, Licensee and The Regents entered into a research agreement
entitled RESEARCH AGREEMENT FOR THE DEVELOPMENT OF FLUORESCENCE HYBRIDIZATION
WITH CHROMOSOME SPECIFIC PROBES, hereinafter referred to as "Research
Agreement", effective August 15, 1989 for the purpose of developing the
Invention under a cooperative arrangement funded in part by Licensee at LLNL
under the direction of Principal Investigator, Joe W. Gray;
WHEREAS, Licensee and The Regents entered into a second Research
Agreement entitled MOLECULAR CYTOGENETICS IN MEDICINE AND BIOLOGY, hereinafter
referred to as "Second Research Agreement" effective July 1, 1991 to expand the
work to be performed under the First Research Agreement to include development
of Repeat-Sequence Probes and Low-Complexity Probes as defined below and to
perform research in human cancer diagnosis and prognosis; and
WHEREAS, the purpose of this Amendment is to modify the License
Agreement to provide for rights in inventions and
Amendment to License Agreement 1
<PAGE>
discoveries made in the performance of work under the Second Research Agreement
to be conveyed to Licensee.
Now, therefore, in consideration of the foregoing and the mutual promises
and covenants contained herein, the parties hereto agree as follows:
1. Article 1 (DEFINITIONS) of the License Agreement shall be amended to
include the following definitions:
1.1 "Research Program" shall mean the research which is
proposed in the Research Proposal entitled "A Proposal to
Develop Fluorescence Hybridization with Chromosome-Specific
Probes to Facilitate Cytogenetic Analysis" submitted by LLNL
to Licensee and "Molecular Cytogenetics in Medicine and
Biology" submitted under the Second Research Agreement by
the University of California to Licensee. For the purposes
of this License Agreement LLNL shall mean Lawrence Livermore
National Laboratory for events and activities transpiring
before July 1, 1991, and the University of California, San
Francisco shall be substituted for LLNL for events and
activities subsequent to July 1, 1991.
1.3. "Research Agreement" shall mean the agreement entitled
Research Agreement for the Development of Fluorescence
Hybridization with Chromosome Specific Probes between The
Regents and Licensee dated 15 August, 1989, and Research
Agreement for Molecular Cytogenetics in Medicine and Biology
dated July 1, 1991, for the conduct of Research under the
Research Program and any extensions or renewals thereof, and
incorporated herein by reference. In the event of any
inconsistencies between the Research Agreement and this
Agreement, the terms of this Agreement shall control.
1.17 "Repeat-Sequence Probe" shall mean a low complexity (up to
several tens of kb) collection of nucleic acid sequence.
Repeat sequence probes are targeted to sequences that are
repeated in the genome so that the target site is many times
larger than the complexity of the probe.
1.18 "High-Complexity Probe" shall mean a heterogeneous mixture
of nucleic acid fragments, with a complexity of 40 kb or
greater, that have selective hybridization capacity to the
genomic region of interest.
Amendment to License Agreement 2
<PAGE>
1.19 "Low-Complexity Probe" shall mean a chromosome probe with
selective hybridization capacity to a single-copy (or near
single-copy) target in the genomic region of interest, and
having a complexity of less than 40 kb.
2. Subparagraph 2.2e of the License Agreement shall be replaced in its
entirety with the following:
The Regents own or are in the process of acquiring
title to Regents' Patent Rights, which are subject to a
nontransferable, nonexclusive, irrevocable paid-up license to practice
or have practiced, such Regents' Patent Rights for or on behalf of the
United States throughout the world, pursuant to 35 USC 202(c) (4) and
which are subject to an exclusive license to make, use and sell
methods, processes, and articles of manufacture covering
High-Complexity Probes and compositions-of-matter comprising
High-Complexity Probes expressly limited to clinical diagnostic
testing in prenatal test subjects and a nonexclusive license to make,
have made, use and sell methods, processes, and articles of
manufacture covering High-Complexity Probes and compositions-of-matter
comprising High-Complexity Probes as a research reagent for use in
prenatal test subjects to one other company. No other rights have
been granted.
3. Paragraph 3.2 shall be replaced in its entirety with the following:
3.2 During the pendency of the outstanding rights described in
2.2 (e) and during such period to the extent such outstanding rights have
vested and have not been terminated, abandoned, disclaimed, or revoked or
have not expired, the licenses set forth in Paragraph 3.1 supra shall be
limited as follows:
a. the right to make, have made, use and sell methods and
processes, covering High-Complexity Probes and
compositions-of-matter comprising High-Complexity Probes for
clinical diagnostic testing or hereditary disease testing in
prenatal subjects within the Field of Interest is expressly
excluded from this Agreement.
b. the right to make, have made, use and sell methods and
processes covering High-Complexity Probes and
compositions-of-matter comprising High-Complexity Probes as
a research reagent for use in research including prenatal
subjects within the Field of Interest shall be nonexclusive.
Amendment to License Agreement 3
<PAGE>
In the event the outstanding rights described in 2.2 (e) expire or
after vesting are terminated, abandoned, disclaimed, or revoked, such
license and right shall pass to Licensee under the grant of Paragraph
3.1. In order to maintain such license and right, Licensee shall
within ninety (90) days of obtaining such rights, fund additional
research at LLNL, under terms and conditions consistent with the
Research Funding Agreement in an amount not to exceed two hundred and
fifty thousand dollars ($250,000.00) per year for a period of time not
less than two years under a research program and scope of the research
to be negotiated.
4. As consideration for this Amendment, Licensee shall pay earned
royalties to The Regents on all Products resulting from the Second Research
Agreement as future patent rights specified in Paragraph 1.7e of the License
Agreement at the royalty rate therein specified under Article 5. It is
understood that at no additional minimum royalties are due from Licensee, beyond
those presently specified in Paragraph 5.2 of the License Agreement.
5. Unless otherwise terminated by operation of law or by the acts of the
parties in accordance with the terms of the License Agreement, this Amendment
shall be in force from the effective date recited on page one and for a term
concurrent with the License Agreement.
IN WITNESS WHEREOF, both the Regents and the Licensee have executed this
Amendment, in duplicate originals, by their respective officers hereunto duly
authorized, on the day and year hereinafter written.
AMOCO TECHNOLOGY COMPANY THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
By: /s/ L.V. Triggiani By: /s/ Carl B. Wootten
---------------------------- ---------------------------------
Name: L. V. Triggiani Name: Carl B. Wootten
Title: President Title: Director--Patent
Amoco Technology Company Trademark and Copyright
Office
Date: July 24, 1991 Date: 7/25/91
Amendment to License Agreement 4
<PAGE>
EXHIBIT 10.3c
SECOND AMENDMENT TO LICENSE AGREEMENT FOR
CHROMOSOME ANALYSIS TECHNOLOGY
WITH CHROMOSOME-SPECIFIC PROBES
BETWEEN
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
AND
AMOCO TECHNOLOGY COMPANY
This Second Amendment to the License Agreement is made and is effective
this 15th day of April 1992 by and between THE REGENTS OF THE UNIVERSITY OF
CALIFORNIA, a California corporation having its statewide administrative offices
at 300 Lakeside Drive, 22nd Floor, Oakland, California 94612-3550,
hereinafter referred to as "The Regents", and AMOCO TECHNOLOGY COMPANY, a
Delaware corporation having offices at 305 East Shuman Boulevard, Naperville,
Illinois, 60563, hereinafter referred to as "Licensee".
RECITALS
WHEREAS, Licensee and The Regents entered into a license agreement
effective August 15, 1989, having U.C. Agreement Control No.: 89-03-0021,
amended on July 1, 1991 (Control No.: 89-03-0021), hereinafter referred to as
"License Agreement", covering licensure to Licensee by The Regents of
certain inventions generally characterized as FLUORESCENCE HYBRIDIZATION WITH
CHROMOSOME-SPECIFIC PROBES, hereinafter collectively referred to as the
"Invention", made in the course of research at the Lawrence Livermore
"Invention", National Laboratory (LLNL) by Joe W. Gray et al.;
1
<PAGE>
WHEREAS, Licensee and The Regents entered into a research agreement
entitled RESEARCH AGREEMENT FOR THE DEVELOPMENT OF FLUORESCENCE HYBRIDIZATION
WITH CHROMOSOME-SPECIFIC PROBES, hereinafter referred to as "First Research
Agreement", effective August 15, 1989 and terminated on June 30, 1991, for the
purpose of developing the Invention under a cooperative arrangement funded in
part by Licensee at LLNL under the direction of Principal Investigator, Joe W.
Gray;
WHEREAS, Licensee and The Regents entered into a second research
agreement entitled MOLECULAR CYTOGENETICS IN MEDICINE AND BIOLOGY, hereinafter
referred to as "Second Research Agreement" effective July 1, 1991 to expand the
work to be performed under the First Research Agreement to include development
of Repeat-Sequence Probes and Low-Complexity Probes and to perform research in
human cancer diagnosis and prognosis;
WHEREAS, certain inventions were made in the course of research at
LLNL and at the University of California, San Francisco campus (UCSF) and are
specified in Subparagraphs 1.7n through 1.7s hereinafter collectively referred
to as "New Inventions", relating to the subject matter of this Second Amendment
to the License Agreement, as previously amended, and such New Inventions were
made under funding provided by the U.S. Government but were not made with
funding provided by Licensee under the Research Agreement;
WHEREAS, certain inventions were made in the course of research at
LLNL and at UCSF and are specified in Subparagraphs 1.7t through 1.7v,
hereinafter referred to as
2
<PAGE>
"Funded Inventions" and were made under funding provided in part by Licensee and
in part by the U.S. Government;.
WHEREAS, The Regents may elect to retain title to any inventions
funded by the U.S. Government at any of its campuses; and if title is elected by
The Regents, The Regents in turn grants back to the U.S. Government a
non-transferrable, non-exclusive, irrevocable, royalty-free license to practice
or have practiced, the invention for or on behalf of the United States
throughout the world;
WHEREAS, The Regents has elected to retain title to the New Inventions
and Funded Inventions as specified in Paragraph 2.2c herein;
WHEREAS, Licensee is desirous of acquiring exclusive licenses from The
Regents to patent rights covering said New Inventions and Funded Inventions in
Licensee's Field of Interest (defined in the License Agreement) with the intent
of commercializing such New Inventions, Funded Inventions, and Products
identified directly from their use;
WHEREAS, The Regents is willing to amend the License Agreement to
grant such exclusive licenses to Licensee for the patent rights covering the New
Inventions and Funded Inventions to insure their commercialization and the
commercialization of Products identified therefrom so that the benefits can be
enjoyed by the general public; and
WHEREAS, as of the effective date recited on page one of this Second
Amendment to the License Agreement, the parties hereto have concluded, for their
convenience, that a proper value of the material that identify Protected and
Unprotected Derived Probe Products (defined below) be paid to The Regents on the
Net Sales of Protected and Unprotected Derived Probe Products at a rate set
forth herein.
3
<PAGE>
The parties agree as follows:
1. Paragraph 1.4 (BACKGROUND BIOLOGICAL MATERIALS) shall be replaced in
its entirety with the following:
1.4 "Background Biological Materials" shall mean:
a. biological materials developed prior to the effective date
of this License Agreement by The Regents relating to in
situ hybridization with chromosome-specific probes under
the direction of Joe W. Gray at LLNL under Contract
W-7405-ENG-48 between The Regents and United States
Department of Energy (DOE). Background Biological
Materials includes High-Complexity Probes and biological
materials comprising a heterogeneous mixture of nucleic
acid fragments, which fragments are derived from known
chromosome types. The fragments have selective
hybridization capacity to chromosomes of interest and are
carried on plasmid constructs known as pBS-l, pBS-2,
pBS-3, pBS -4, pBS-5, pBS-6, pBS-7, pBS-8, pBS-9, pBS-10,
pBS-ll, pBS-12, pBS-13, pBS-14,pBS-15, pBS-16, pBs-17,
pBS-18, pBS-l9, pBS-20, pBS-21, pB5-22, pBS-X and pBS-Y
(nomenclature of LLNL).
b. biological materials developed prior to the effective date
of the Second Amendment to this License Agreement by the
Regents relating to in situ hybridization with
chromosome specific probes including High Complexity
Probes, Low Complexity Probes and Repeat-Sequence Probes
and biological materials comprising a heterogeneous
mixture of nucleic acid fragments, which fragments are
derived from known chromosome types. The fragments have
selective hybridization capacity to the target of interest
and were developed:
(i) under the direction of Joe. W. Gray at LLNL.
Background Biological Materials include biological
materials generally described as primers and as a
heterogeneous mixture of nucleic acid fragments
consisting of oligonucleotides, genomic DNA, and/or
cDNA clones comprising highly specific Repeat-
Sequence Probes that bind with interspersed and/or
clustered repeat-sequences to the target of interest
and include: Oligonucleotides (WYR2, WYR4, WYR5,
WYR6, WYR7, WYR8, WYR9, WYR10, WA1, WA2,
4
<PAGE>
WA8, WA9, WAll, WA12, W21R1, W21R2, JUN1); PCR
Products (1548 [chromosome 9], 1555 [chromosome 9],
704 [chromosome 1], 197 [chromosome 3], 864
[chromosome 6], 1004 [chromosome 9], 630 [chromosome
10], 745 [chromosome 11], 865 [chromosome 18], 554
[chromosome 12], 712 [chromosome 8], 207 [chromosome
12], 208 [chromosome 12-biot], tubes 6,7,8
containing Y-chromosome specific fragments; 248 bp
Y-chromosome-specific fragments; Bacterial clones
(W21R2-13, W21R2-17, W21R2-20, W21R2-24 [chromosome
9], 8B/7-1 [chromosome 13/21], PCR Generated SAU 3A
Libraries for Chromosomes 2,3,5 and 17 in PCR1000,
pBS609-51 [chromosome 10], 680TA-17 [chromosome 7],
pBS124Y-7 [Y chromosome]); Other DNA's and labeled
probes, such as nick translated probes etc. (FITC-,
TRITC-and AMCA-labeled nick translation products
from Imagenetics Y-specific DNA, biotinylated
pBS609-51 [chromosome 10] (nomenclature of UCSF);
(ii) under the direction of John Murnane at UCSF.
Background Biological Materials include biological
materials generally described as comprising a
heterogenous mixture of nucleic acid fragments
consisting of genomic DNA and/or cDNA clones of the
ATDC gene located at chromosome position 11q23 and
are carried on genetic constructs consisting of
cosmid clones K1, K41, 3-1 and 4-1 (nomenclature
of UCSF);
(iii) under the direction of Timothy Meeker at UCSF.
Background Biological Materials include biological
materials generally described as comprising a
heterogeneous mixture of nucleic acid fragments
consisting of genomic DNA and/or cDNA clones of the
BCL-1 gene located at chromosome position 11ql3 and
are carried on genetic constructs consisting of
plasmids, phages and cosmids know as BCL-1
(nomenclature of UCSF);
2. Paragraph 1.5 (BACKGROUND INFORMATION) shall be replaced in its
entirety with the following:
1.5 "Background Information" shall mean
5
<PAGE>
a. all technical data, processes, methods, inventions,
Background Biological Materials, equipment, instruments,
apparatuses, devices, and articles of manufacture developed
or acquired prior to August 15, 1989 (to the extent that
such Background information may be revealed to Licensee) by
The Regents relating to IN SITU hybridization with
chromosome specific probes under the direction of Joe W.
Gray at LLNL under Contract W-7405-ENG-48 between the United
States Department of Energy (DOE) and The Regents.
Background information does not include computer software,
information management systems, or equipment comprising a
cell sorter or component part(s) thereof. Under this
Agreement, there shall be no transfer of the physical
possession of equipment, instruments, apparatuses,
devices, articles of manufacture or component part(s)
thereof or intellectual property rights to computer
software, information management systems or equipment
comprising a cell sorter or component part(s) thereof that
are not covered by Regents' Patent Rights.
b. all technical data, processes, methods, inventions,
Background Biological Materials, equipment, instruments,
apparatuses, devices, and articles of manufacture developed
or acquired prior to the effective date of the Second
Amendment to this License Agreement (to the extent that such
Background Information may be revealed to the Licensee)
by The Regents relating to the New Inventions set forth
under Subparagraphs 1.7n through 1.7q under the direction of
Joe W. Gray at LLNL. Background Information does not
include computer software, information management systems,
or equipment comprising a cell sorter or component part(s)
thereof. Under this Agreement, there shall be no transfer
of physical possession of equipment, instruments,
apparatuses, devices, articles of manufacture or component
part(s) thereof or intellectual property rights to computer
software, information management systems or equipment
comprising a cell sorter or component part(s) thereof that
are not covered by Regents' Patent Rights.
c. all technical data, processes, methods, inventions,
Background Biological Materials, equipment, instruments,
apparatuses, devices, and articles of manufacture developed
or acquired prior to the Second Amendment to this License
Agreement (to the extent that such Background Information
may be revealed to the Licensee) by The Regents relating to
the New Inventions set forth under Subparagraph 1.7r under
the direction of John
6
<PAGE>
Murnane at UCSF. Background Information does not include
computer software, information management systems, or
equipment comprising a cell sorter or component part(s)
thereof. Under this Agreement, there shall be no transfer of
physical possession of equipment, instruments, apparatuses,
devices, articles of manufacture or component part(s)
thereof or intellectual property rights to computer
software, information management systems or equipment
comprising a cell sorter or component part(s) thereof that
are not covered by Regents' Patent Rights.
d. all technical data, processes, methods, inventions,
Background Biological Materials, equipment, instruments,
apparatuses, devices, and articles of manufacture developed
or acquired prior to the Second Amendment to this License
Agreement (to the extent that such Background Information
may be revealed to the Licensee by The Regents relating to
the New Inventions set forth under Subparagraph 1.7s under
the direction of Timothy Meeker at UCSF. Background
Information does not include computer software, information
management systems, or equipment composing a cell sorter or
component part(s) thereof. Under this Agreement, there
shall be no transfer of physical possession of equipment,
instruments, apparatuses, devices, articles of manufacture
or component part(s) thereof or intellectual property
rights to computer software, information management systems
or equipment comprising a cell sorter or component part(s)
thereof that are not covered by Regents' Patent Rights.
3. Paragraph 1.6 (RESEARCH INFORMATION) shall be replaced in its entirety
with the following:
1.6 "Research Information" shall mean technical data, processes,
methods, inventions, compositions-of-matter, and biological materials
(including but not limited to High-Complexity Probes, Low-Complexity
Probes and/or Repeat-Sequence Probes), equipment, instruments,
apparatuses, devices, articles of manufacture or component part(s)
thereof developed under or resulting from the performance of Research
under the Research Agreement and improvements
7
<PAGE>
thereof, except for improvements on new subject matter not funded by
Licensee. There shall be no creation or development of computer
software or information management systems in the performance of
Research under the First Research Agreement and there shall be no
transfer of the physical possession of equipment, instruments,
apparatuses, devices, articles of manufacture or component part(s)
thereof comprising Research Information.
4. Paragraph 1.7 (REGENTS' PATENT RIGHTS) shall be replaced in its
entirety by the following:
1.7 "Regents' Patent Rights" shall mean all U.S. and foreign
patents and patent applications, including any reissues,
extensions, continuations, divisions, and continuations-in-part
(to the extent that such continuations-in-part are dependent upon
the parent case and subject matter arising out of the Research
Agreement) based on inventions and improvements thereof arising
out of Background Information or Research Information including:
a. Pending U.S. Patent Application Serial No.: 819,314
(UC Case No.: 85-157-1) entitled "Method and
Compositions for Chromosome Specific Staining", by
Joe W. Gray and Daniel Pinkel filed 16 January 1986
and assigned to The Regents, abandoned in favor
of U.S. Patent Application Serial No.: 382,094 (UC
Case No.: 85-157-5);
b. U.S. Patent Application Serial No.: 937,793 (UC Case
No.: 85-157-2) entitled "Methods and Compositions
for Chromosome Specific Staining" by Joe W. Gray and
Daniel Pinkel filed 4 December 1986 and assigned to
The Regents, a continuation-in-part application of
U.S. Serial No.: 819,314 (UC Case No.: 85-157-1),
abandoned in favor of US Application Serial No.:
627,707 (UC Case No.: 85-157-9);
8
<PAGE>
c. U.S. Patent Application Serial No.: 934,188 (UC
Case No.: 85-157-3) entitled "Method of Preparing
and Applying Single Stranded DNA Probes to Double
Stranded Target DNAs, by Joe W. Gray and Daniel
Pinkel filed 24 November 1986 and assigned to The
Regents, abandoned in favor of U.S Patent No.:
5,028,525 (UC Case No.: 85-157-8);
d. U.S. Patent Application Serial No.: 444,669 (UC Case
No.: 85-157-4) entitled "Method for Determining
Aneuploidy in Fetal Cells from Maternal Blood
Samples" by Joe W. Gray and Daniel Pinkel filed 1
December, 1989 and assigned to The Regents, a
continuation-in-part application of U.S. Patent
Application Serial No.: 937,793 (UC Case No.:
85-157-2),
e. U.S. Patent Application Serial No.: 382,094 (UC Case
No.: 85-157-5) entitled "Methods and Compositions for
Chromosome-Specific Staining", by Joe W. Gray and
Daniel Pinkel filed 19 July, 1989 and assigned to
The Regents, a file-wrapper-continuation of U.S.
Patent Application Serial No.: 819,314(UC Case No.:
85-157-1).
f. U.S. Patent Application Serial No.: 497,098 (UC Case
No.: 85-157-6) entitled "Chromosome-Specific Staining
to Detect Genetic Rearrangements" by Joe W. Gray,
Daniel Pinkel and Douglas Tkachuk, filed 20 March
1990 and assigned to The Regents, a
continuation-in-part application of U.S. Patent
Application Serial No.: 446,669 (UC Case No.:
85-157-4);
g. U.S. Patent Application Serial No.: 537,305 (UC Case
No.: 85-157-7) entitled "Chromosome Specific Staining
to Detect Genetic Rearrangements" by Joe W. Gray,
Daniel Pinkel and Douglas Tkachuk filed 12 June 1990
and assigned to The Regents, a
continuation-in-part-application of U.S. Patent
Application Serial No.: 497,098 (UC Case No.:
85-176-6).
h. U.S Patent No.: 5,028,525 (UC Case No.: 85-157-8)
entitled "Method of Preparing and Applying Single
Stranded DNA Probes to Double Stranded Target DNAs
In Situ", by Joe Gray and Daniel Pinkel filed 26
June 1990 and assigned to The Regents, issuing from
a continuation application of Patent Application
Serial No.: 934,188 (UC Case No.: 85-157-3);
i. U.S. Patent Application Serial No.: 627,707 (UC Case
No.: 85-157-9) entitled "Methods and Compositions for
Chromosome-
9
<PAGE>
Specific Staining) by Joe W. Gray and Daniel Pinkel
filed 14 December 1990 and assigned to The Regents,
a continuation application of U.S. Patent
Application Serial No.: 937-793 (UC Case No.:
85-157-2);
j. U.S. Patent Application Serial No.: 659,974 (UC Case
No.: 85-157-A entitled "Chromosome-Specific Staining
to Detect Genetic Rearrangements" by Joe W. Gray,
Daniel Pinkel, Anne Kallioniemi, Masara Sakamoto,
and Olli-Pekka Kallioniemi filed 22 February 1991
and assigned to The Regents, a continuation-in-part
application of U.S. Patent Application Serial No.:
537-305 (UC Case No.: 85-157-7),
k. U.S. Patent Application Serial No.: 670,242 (UC Case
No.: 85-157-B) entitled "Chromosome-Specific Staining
to Detect Genetic Rearrangements" by Joe W. Gray,
Daniel Pinkel, Anne Kallioniemi, Masara Sakamoto,
and Olli-Pekka Kallioniemi filed 14 March 1991 and
assigned to The Regents, a continuation-in-part
application of U.S. Patent Application Serial No.:
659,974 (UC Case No.: 85-157-A);
1. U.S. Patent Application Serial No.: 721,236 (UC
Case No.: 91-155-2) entitled "Linker
Chromosome-Specific Painting Probes" by Joe W. Gray,
Daniel Pinkel, Douglas Tkachuk and Dan Johnson filed
27 June, 1991 and assigned to The Regents and
separately to the University of Miami, a
continuation-in-part application of Patent
Application Serial No.: 659,974 (UC Case No.:
85-157-A)
m. U.S. Patent Application Serial No.: 743,524 (UC Case
No.: 91-155-3) entitled "Linker Chromosome-Specific
Painting Probes and Painting Therewith" by Joe W.
Gray, Daniel Pinkel, Douglas Tkachuk and Dan
Johnson filed 9 August, 1991 and assigned to The
Regents and separately to the University of Miami, a
continuation-in-part application of Patent
Application Serial No.: 721,236 (UC Case No.:
91-155-2);
n. U.S. Patent Application Serial No.: 594,922 (UC Case
No.: 89-269-1) entitled "Y Specific Nucleic Acid
Probe and Diagnostic Method for Determining Fetal
Gender from Maternal Blood Samples" by Heinz-Ulrich
G. Weier et al., filed 10 October, 1990 and
assigned to The Regents;
10
<PAGE>
o. U.S. Patent Application Serial No.: 683,441 (UC Case
No.: 89-263-1) entitled "Repeat Sequence Chromosome
Specific Nucleic Acid Probes" by Heinz-Ulrich G.
Weier et al., filed 9 April, 1991 and assigned to
The Regents;
p. U.S. Patent Application Serial No.: 594,921 (UC Case
No.: 90-249-1) entitled "Y Chromosome Specific
Nucleic Acid Probe and Method for Identifying the Y
Chromosome In Situ" by Dr. Joe Gray et al., filed 10
October, 1990 and assigned to The Regents;
q. Any future patent application describing any
invention disclosed under UC Case No.: 91-196
entitled "Specific Oglionucleotide to Stain the
Centromeric Region of Human Chromosomes" by
Heinz-Ulrich G. Weier et al;
r. Any patent application describing any invention
disclosed under UC Case No.: 91-077 entitled "Probe
for AT Genes" by John Murnane et al;
s. Any patent application describing any invention
disclosed under UC Case No.: 91-210 entitled "Human
Oncogene Probes" by Timothy Meeker et al;
t. Any patent application describing any invention
disclosed under UC Case No.: 92-005 entitled "Gene
Probes" by Daniel Pinkel et al;
u. Any patent application describing any invention
disclosed under UC Case No.: 92-006 entitled "B/B
-erb-B2" by Daniel Pinkel et al;
v. U.S. Patent Application Serial No.: 776,550 (UC Case
No.: 91-053) entitled "Simultaneous In-Situ
Hybridization and Cell Proliferation Analyses" by
Joe W. Gray, Daniel Pinkel and Frederick Waldman
filed 1 October, 1991 and assigned to The Regents;
w. Any future patent rights to subject matter claimed
in or covered by a patent application(s) covering
any invention arising in the performance of work
under the Research Agreement and elected by Licensee
under the provisions of Article VIII of the Research
Agreement.
11
<PAGE>
x. U.S. Patent Application Serial No.: ____________ (UC
Case No.: 85-157-C) entitled "Method for Determining
Aneuploidy in Fetal Cells from Maternal Blood
Samples" by Joe W. Gray and Daniel Pinkel filed, 2
April, 1992 and assigned to The Regents, a
continuation of U.S. Patent Application Serial No.:
444,669 (UC Case No.: 85-157-4)
5. Paragraph 1.8 (PROTECTED COMPOSITION PRODUCTS) shall be replaced
in its entirety with the following:
1.8 "Protected Composition Products" shall mean kits, reagents and
compositions (including, but not limited to, High-Complexity Probes,
Low-Complexity Probes, and/or Repeat-Sequence Probes), or the
performance of a process or method, or such kits, reagents, or
compositions produced by processes or methods, falling within the
scope of one or more claims of Regents' Patent Rights during the
term of the patent grant, in such countries in which such claim or
claims have issued, and have not expired, been abandoned, disclaimed
or found invalid or unenforceable.
6. Paragraph 1.9 (UNPROTECTED COMPOSITION PRODUCTS) shall be replaced in
its entirety with the following:
1.9 "Unprotected Composition Products" shall mean kits, reagents, and
compositions (including but not limited to, High-Complexity Probes,
Low-Complexity Probes and/or Repeat Sequence Probes) or the
performance of processes or methods, or kits, reagents, or
compositions produced by processes or methods, which are not Protected
Compositions Products; i)
12
<PAGE>
falling within the scope of one or more pending claims of Regents'
applications identified in Subparagraph 1.7a through Subparagraph 1.7d
as originally filed and set forth in Schedule A, incorporated by
reference herein; or ii) falling within the scope of one or more
pending claims of Regents' applications identified in Subparagraph
1.7e through Subparagraph 1.7x; during the period and in such
countries in which such claim or claims have not issued and are
pending, and have not expired, been abandoned, disclaimed, or found
invalid or unenforceable, such period not to exceed five years from
the effective date of this Agreement, or five years from the date in
which substantially the same subject matter (set forth in i and ii
immediately above) is first introduced in a patent application in each
country that such patent application is filed, whichever is longer.
7. Paragraph 1.11 (UNPROTECTED INSTRUMENT PRODUCTS) shall be replaced in
its entirety with the following:
1. 11 "Unprotected Instrument Products" shall mean equipment,
instruments, apparatuses, devices, articles of manufacture or
component part(s) thereof or equipment, instruments, apparatuses,
devices, articles of manufacture or component part(s) thereof produced
by processes or methods, which are not Protected Instrument Products;
i) falling within the scope of one or more pending claims of Regents'
Patent Rights identified in Subparagraph 1.7a.-d. as originally filed
and set forth in Schedule A, incorporated by reference herein; or ii)
falling within the scope of one or more pending claims of
13
<PAGE>
Regents' applications identified in Subparagraph 1.7e through
Subparagraph 1.7x; during the period and in such countries in which
such claim or claims have not issued and are pending, and have not
expired, been abandoned, disclaimed, or found invalid or
unenforceable, such period not to exceed five years from the effective
date of this Agreement, or five years from the date in which
substantially the same subject matter (set forth in i and ii
immediately above) is first introduced in a patent application in each
country that such patent application is filed, whichever is longer.
8. Paragraph 1.17 (REPEAT-SEQUENCE PROBES) shall be replaced in its
entirety with the following:
1.17 "Repeat-Sequence Probes" shall mean a heterogeneous mixture of
nucleic acid fragments comprising highly specific chromosome
Repeat-Sequence Probes that bind with interspersed and/or clustered
sequences that are repeated in the genome so that the target site is
many times larger than the complexity of the probe.
9. Paragraph 1.18 (HIGH-COMPLEXITY PROBES) shall be replaced in its
entirety with the following:
1.18 "High Complexity Probe" shall mean a heterogeneous mixture that
contains labeled nucleic acid fragments that are substantially
complementary to targeted unique sequence regions of complexity of at
least 35 kilobases (kb) on one or more specific chromosomes, one or
more specific subsets of chromosomes, or one or more specific
sub-regions of specific chromosomes
14
<PAGE>
which mixture either is substantially free of repetitive nucleic acid
sequences or contains sufficient unlabeled repetitive nucleic acid
sequences to inhibit substantial binding of the labeled repetitive
nucleic acid sequences to repetitive nucleic acid sequences in said
chromosomes, said subsets of chromosomes or said sub-regions of
chromosomes such that the targeted sequences bind sufficiently more
labeled probe during in situ hybridization than non-targeted sequences
so that they can be detected and distinguished from non-targeted
sequences whether the targeted sequences are present at copy numbers
that are normal for haploid or diploid cells or are present at higher
copy numbers.
10. Paragraph 1.19 (LOW-COMPLEXITY PROBES) shall be replaced in its
entirety with the following:
1.19 "Low-Complexity Probe" shall mean a heterogeneous mixture of
nucleic acid fragments that have selective hybridization capacity to a
single-copy (or near single-copy) target in the genomic region of
interest, and having a complexity of less than 35 kb.
12. Article 1 (DEFINITIONS) shall be further amended to include the
following definitions:
1.20 "Protected Derived Probe Products" shall mean kits, reagents, or
compositions both a) comprising a chromosome probe, DNA sequence, or
fragment thereof, or any other material produced through any method,
including but not limited to chemical synthesis, whereby said kits,
reagents or compositions were identified using any material or
maternal fragment, or any
15
<PAGE>
material or material fragment produced by any process or method and b)
falling within the scope of one or more claims under Regents' Patent
Rights during the term of the patent grant, in such countries in which
such claim or claims have issued, and have not expired, been
abandoned, disclaimed, or found invalid or unenforceable.
1.21 "Unprotected Derived Probe Products" shall mean kits, reagents
and compositions both a) comprising a chromosome probe, DNA sequence
or fragment thereof, or any other material produced through any
method, including but not limited to chemical synthesis, whereby
said kits, reagents and compositions were identified using any
material or material fragment, or any material or material fragment
produced by any process or method and b) falling within the scope of
one or more pending claims of Regents' Patent Rights during the
period and in such countries in which such claim or claims have not
issued and are pending, and have not expired, been abandoned,
disclaimed, or found invalid or unenforceable, such period not to
exceed five (5) years from the effective date of the Second
Amendment to this License Agreement, or for five (5) years from the
date in which a first patent application covering the material used,
or any material produced by processes or methods used, to identify
such Unprotected Derived Probe Product, is introduced in each
country that such patent application is filed, whichever is longer.
12. Paragraph 1.12 (PRODUCTS) shall be replaced in its entirety as
follows:
16
<PAGE>
1.12 Products shall mean Protected Composition Products, Unprotected
Composition Products, Protected Instrument Products, Unprotected
Instrument Products, Protected Derived Probe Products, and Unprotected
Derived Probe Products.
13. Paragraph 2.2 (REPRESENTATIONS AND WARRANTS) shall be replaced in its
entirety with the following:
2.2 The Regents represents and warrants the following:
a. Regents' Patent Rights were developed under
Contract W-7405-ENG-48 between The Regents and the United
States Department of Energy (DOE) and from grants provided
by other U.S. Government agencies and with additional
funding and assistance from a third party(s) as well as by
Licensee;
b. Pursuant to the terms of Contract W-7405-ENG-48 and
PL96-517, as amended, title to Regents' Patent Rights rests
in the U.S. Government without action on the Regents' part
to acquire or retain title;
c. The Regents has petitioned the DOE for a waiver of rights
which has been granted or has elected to retain title to an
invention covered by Regents' Patent Rights as summarized
below:
i. Pending U.S. Patent Application Serial No.: 819,314
(UC Case No.: 85-157-1) entitled "Method and
Compositions for Chromosome Specific Staining" by
Joe W. Gray and Daniel Pinkel, filed 16 January 1986
and assigned to The Regents, waiver applied for 30
June 1986 and waiver granted November 23, 1987;
ii. U.S. Patent Application Serial No.: 937,793 (UC Case
No.: 85-157-2) entitled "Methods and Compositions
for Chromosome Specific Staining" by Joe W. Gray and
Daniel Pinkel, filed 4 December 1986 and assigned to
The Regents, waiver applied for June 30, 1986 and
waiver granted November 23, 1987
17
<PAGE>
iii. U.S. Patent Application Serial No.: 934,188 (UC Case
No.: 85-157-3) entitled "Method of Preparing and
Applying Single Stranded DNA Probes to Double
Stranded Target DNAs" by Joe W. Gray and Daniel
Pinkel, filed 24 November 1986 and assigned to The
Regents, waiver applied for August 18, 1986 and
waiver granted October 8, 1987;
iv. U.S. Patent Application Serial No.: 444,669 (UC
Case No.: 85-157-4) entitled "Method for Determining
Aneuploidy in Fetal Cells from Maternal Blood
Samples" by Joe W. Gray and Daniel Pinkel, filed 1
December, 1989 and assigned to The Regents, waiver
granted November 23, 1987;
v. U.S. Patent Application Serial No.: 382,094 (UC Case
No.: 85-157-5) entitled "Methods and Compositions
for Chromosome-Specific Staining" by Joe W. Gray and
Daniel Pinkel, filed 19 July, 1989 and assigned to
The Regents, waiver applied for June 30, 1986 and
waiver granted November 23, 1987;
vi. U.S. Patent Application Serial No.: 497,098 (UC Case
No.: 85-157-6) entitled "Chromosome-Specific
Staining to Detect Genetic Rearrangements" by Joe W.
Gray, Daniel Pinkel and Douglas Tkachuk, filed 20
March 1990 and assigned to The Regents, elected
April 30, 1990;
vii. U.S. Patent Application Serial No.: 537,305 (UC Case
No.: 85-157-7) entitled "Chromosome Specific
Staining to Detect Genetic Rearrangements" by Joe W.
Gray, Daniel Pinkel and Douglas Tkachuk, filed 12
June 1990 and assigned to The Regents, elected
November 27, 1990;
viii. U.S Issued Patent No.: 5,028,525 (UC Case No.:
85157-8) entitled "Method of Preparing and Applying
Single Stranded DNA Probes to Double Stranded Target
DNA's in Situ" by Joe Gray and Daniel Pinkel, filed
26 June 1990 and assigned to The Regents, elected
November 27, 1990;
18
<PAGE>
ix. U.S. Patent Application Serial No.: 627,707 (UC Case
No.: 85-157-9) entitled "Methods and Compositions
for Chromosome-Specific Staining" by Joe W. Gray and
Daniel Pinkel, filed 14 December 1990 and assigned
to The Regents, waiver applied for August 18, 1986
and waiver granted October 8, 1987;
x. U.S. Patent Application Serial No.: 659,974 (UC Case
No.: 85-157-A) entitled "Chromosome-Specific
Staining to Detect Genetic Rearrangements" by Joe W.
Gray, Daniel Pinkel, Anne Kallioniemi, Masara
Sakamoto, and Olli-Pekka Kallioniemi, filed 22
February 1991 and assigned to The Regents, elected
March 27, 1991;
xi. U.S. Patent Application Serial No.: 670,242 (UC Case
No.: 85-157-B) entitled "Chromosome-Specific
Staining to Detect Genetic Rearrangements" by Joe W.
Gray, Daniel Pinkel, Anne Kallioniemi, Masara
Sakamoto, and Olli-Pekka Kallioniemi, filed 14 March
1991 and assigned to The Regents, elected February
25, 1992;
xii. U.S. Patent Application Serial No.: 721,236 (UC
Case No.: 91-155-2) entitled "Linker
Chromosome-Specific Painting Probes" by Joe W. Gray,
Daniel Pinkel, Douglas Tkachuk and Don Johnson, filed
27 June, 1991 and assigned to The Regents and
separately to the University of Miami, elected March
16, 1992.
xiii. U.S. Patent Application Serial No.: 743,524 (UC
Case No.: 91-155-3) entitled "Linker
Chromosome-Specific Painting Probes and Painting
Therewith" by Joe W. Gray, Daniel Pinkel, Douglas
Tkachuk and Don Johnson, filed 9 August, 1991 and
assigned to The Regents and separately to the
University of Miami, elected March 16, 1992;
xiv. U.S. Patent Application Serial No.: 594,922 (UC Case
No.: 89-269) entitled "Y Specific Nucleic Acid Probe
and Diagnostic Method for Determining Fetal Gender
from Maternal Blood Samples" by Heinz-Ulrich G.
Weier et al., filed 10 October, 1990 and assigned to
The Regents, elected September 26, 1989;
19
<PAGE>
xv. U.S. Patent Application Serial No.: 683,441 (UC Case
No.: 89-263) entitled "Repeat Sequence Chromosome
Specific Nucleic Acid Probes" by Heinz-Ulrich G.
Weier et al., filed 9 April, 1991 and assigned to
The Regents elected November 19, 1990;
xvi. U.S. Patent Application Serial No.: 594,921 (UC Case
No.: 90-249) entitled "Y Chromosome Specific Nucleic
Acid Probe and Method for Identifying the Y
Chromosome in Situ" by Dr. Joe Gray et al., filed 10
October, 1990 and assigned to The Regents, waiver
applied for September 26, 1989, not yet granted;
xvii. Any patent application describing any invention
disclosed under UC Case No.: 91-196 entitled
"Specific Oglionucleotide to Stain the Centromeric
Region of Human Chromosomes" by Heinz-Ulrich G.
Weier et al., and assigned to The Regents; elected
March 18, 1992;
xviii. Any patent application describing any invention
disclosed under UC Case No.: 91-077 entitled " Probe
for AT Genes" by John Murnane et al., and assigned
to The Regents, elected October 1, 1991;
xix. U.S. Patent Application Serial No.: 776,550 (UC
Case No.: 91-053) entitled "Simultaneous In-Situ
Hybridization and Cell Proliferation Analyses" by
Joe W. Gray, Daniel Pinkel and Frederick Waldman,
filed 1 October, 1991 and assigned to The Regents,
elected March 28, 1991;
xx. Any patent application describing any invention
disclosed under UC Case No.: 91-210 entitled "Human
Oncogene Probes" by Timothy Meeker, and assigned to
The Regents, to be elected by The Regents;
xxi. Any patent application describing any invention
disclosed under UC Case No.: 92-005 entitled "Gene
Probes" by Daniel Pinkel et al., and assigned to The
Regents, elected 2/24/92;
xxii. Any patent application describing any invention
disclosed under UC Case No.: 92-006 entitled
"C-erb-B2" by
20
<PAGE>
Daniel Pinkel et al., and assigned to
The Regents, to be elected by The Regents;
xxiii. U.S. Patent Application Serial No.:________________
(UC Case No.: 85-157- C) entitled "Method for
Determining Aneuploidy in Fetal Cells from
Maternal Blood Samples" by Joe W. Gray and Daniel
Pinkel, filed 2 April, 1992 and assigned to The
Regents.
d. The list of patent and patent applications identified in
subparagraph 1.7a. through subparagraph 1.7x is a complete
list of Regents' Patent Right arising at LLNL and UCSF, and
that there are no other patents or patent applications at
LLNL covering inventions made under the direction of Joe
Gray which may comprise Background Biological Materials and
Background Information;
e. The Regents own or are in the process of acquiring title to
Regents' Patent Rights, which are subject to a
nontransferable, nonexclusive, irrevocable paid-up license
to practice or have practiced, such Regent's Patent Rights
for or on behalf of the United States throughout the world,
pursuant to 35 USC 202(c) (4) and which are subject to an
exclusive license to make, use and sell methods, processes,
articles of manufacture covering High-Complexity Probes and
compositions-of-matter comprising High-Complexity Probes
expressly limited to clinical diagnostic testing in prenatal
test subjects and a nonexclusive license to make, have made,
use and sell methods, processes and articles of manufacture
covering High-Complexity Probes and compositions of matter
comprising High-Complexity Probes as a research reagent for
use in prenatal test subjects granted to one other company.
No other rights have been granted.
14. Paragraph 3.2 (GRANT) shall be replaced in its entirety with the
following:
3.2 During the pendency of the outstanding rights described in 2.2 (e)
to one other company and during such period to the extent such
outstanding rights have vested and have not been terminated,
abandoned, disclaimed, or revoked or have not expired, the licenses
set forth in Paragraph 3.1 above shall be limited as follows:
21
<PAGE>
a. the right to make, have made, use and sell methods and
processes, covering High-Complexity Probes and
compositions-of-matter comprising High-Complexity Probes
for clinical diagnostic testing or hereditary disease
testing in prenatal subjects within the Field of Interest
is expressly excluded from this Agreement.
b. the right to make, have made, use and sell methods and
processes covering High-Complexity Probes and
compositions-of-matter comprising High-Complexity Probes
as a research reagent for use in research including
prenatal subjects within the Field of Interest shall be
nonexclusive.
In the event the outstanding rights described in 2.2(e) to said one
other company expire or after vesting are terminated, abandoned,
disclaimed, or revoked, Licensee shall be permitted to acquire, at its
option, such license and right under the same terms and conditions as
such license and right were granted to said one other company.
Licensee shall have ninety (90) days following its receipt of said
terms and conditions in writing to exercise its option. In addition,,
in order to maintain such license and right, Licensee shall within
ninety (90) days of obtaining such rights, fund additional research at
LLNL, under terms and conditions consistent with the Research
Agreement in the amount of Two Hundred and Fifty Thousand Dollars
($250,000) per year for a period of time not less than two years under
a research program to be negotiated.
15. Paragraph 3.3 (GRANT) shall be replaced in its entirety with the
following:
3.3. The licenses granted in Paragraph 3.1 of this Agreement are
subject to Contract W-7405-ENG-48 between The Regents and the DOE, PL
96-517 as amended, and subject to the limitations set forth in this
Agreement.
22
<PAGE>
16. The Regents and Licensee agree that U. S. Patent Application Serial No.
721,236 (UC Case No. 91-155-2)) filed June 27, 1991 (Subparagraph 1.71) and
U.S. Patent Application Serial; No. 743,524 (UC Case No. 91-155-3) filed August
9, 1991 (Subparagraph 1.7m) and any corresponding foreign patent applications
and any patents issuing therefrom within Regents' Patent Rights are exempt from
the provisions of Article 6 (Due Diligence). In addition, Licensee will pay The
Regents the costs reasonably incurred by The Regents in resolving issues as to
inventorship and title to said patent applications and patents, and in obtaining
the assignment from the University of Miami of its full right, title and
interest in said patent applications and patents issuing therefrom.
17. Paragraph 15.1 (MAINTENANCE OF BIOLOGICAL MATERIALS) shall be
replaced in its entirety. as follows:
15.1 The Regents agrees to instruct Dr. Joe W. Gray, Dr. Daniel
Pinkel, Dr. Heinz-Ulrich Weier, Dr. John Murnane and Dr. Timothy
Meeker that when circulating replicable Background Biological
Materials and replicable biological materials comprising Research
Information that has not been released in an unrestricted manner to
third parties to do so under the terms and conditions set forth in the
Biological Material Transmission Letter attached hereto as Appendix A.
The Regents expressly reserves the right to transfer replicable
Background Biological Materials and replicable biological materials
comprising Research Information as provided in this Paragraph 15.1 to
Universities and nonprofit research organizations to the extent that
such transfer does not compete with Licensee. The Regents shall inform
Licensee of
23
<PAGE>
third party requests for biological materials and shall provide
Licensee with a copy of the fully executed copy of the Biological
Material Transmittal Letter. The Regents shall inform Licensee of
comments, suggestions and information provided The Regents by
recipients of biological material. Licensee shall not interfere with
The Regents efforts to bail these materials to third parties.
18. As partial consideration for this Second Amendment to the License
Agreement, Paragraph 5.1 shalt be replaced in its entirety with the following:
5.1 As consideration for this license, Licensee shall pay or cause to
be paid to The Regents an earned royalty in the following manner:
a Licensee shall pay or cause to be paid to The Regents a
royalty of four percent (4.0%) of Net Sales on Unprotected
Composition Products.
b Licensee shall pay or cause to be paid to The Regents a
royalty of four percent (4.0%) of Net Sales on Protected
Composition Products.
c Licensee shall pay or cause to be paid to The Regents a
royalty rate of two percent (2%) of Net Sales on Unprotected
Instrument Products.
d Licensee shall pay or cause to be paid to The Regents a
royalty rate of three and one-half percent (3.5%) of Net
Sales on Protected Instrument Products.
e Licensee shall pay or cause to be paid to The Regents a
royalty of four percent (4%) of Net Sales on Protected
Derived Probe Products.
f Licensee shall pay or cause to be paid to The Regents a
royalty of four percent (4%) of Net Sales on Unprotected
Derived Probe Products.
24
<PAGE>
The Regents and Licensee agree that in no case shall Licensee be
obligated to pay to The Regents a royalty rate greater than four
percent (4%) of Net Sales for Protected Derived Probe Products or
Unprotected Derived Probe Products.
19. As further consideration for this Second Amendment to the License
Agreement, Licensee agrees to pay The Regents a license issue fee of Ninety-Five
Thousand Dollars ($95,000) as follows:
a Licensee agrees to pay The Regents Fifty Thousand Dollars
($50,000) within ten working days of the day this Second
Amendment to the License Agreement is fully executed; and
b Forty-Five Thousand Dollars ($45,000) on or before January 15,
1993.
25
<PAGE>
20. Unless otherwise terminated by operation of law or by the acts of the
parties in accordance with the terms of the License Agreement, this Second
Amendment to the License Agreement shall be in force from the effective date
recited on page one and for a term concurrent with the License Agreement.
IN WITNESS WHEREOF, both The Regents and the Licensee have executed this
Second Amendment to the License Agreement, in duplicate originals, by their
respective officers hereunto duly authorized, on the day and year hereinafter
written.
AMOCO TECHNOLOGY COMPANY THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
By: /s/ L.V. Triggiani By: /s/ [ILLEGIBLE]
------------------------------- --------------------------------
(signature) (signature)
Name: L. V. Triggiani Name: Carl B. Wootten
Title: President Title: Assoc. Director
Amoco Technology Company Office of Technology
Date: June 25, 1992 Date: 6/29/92
----------------------------- ------------------------------
[STAMP]
26
<PAGE>
EXHIBIT 10.3d
SUBSTITUTION OF LICENSEE
This substitution of licensee agreement ("Agreement") is effective this 1st
day of June, 1994 among THE REGENTS OF THE UNIVERSITY OF CALIFORNIA ("The
Regents"), a California corporation having statewide administrative headquarters
at 300 Lakeside Drive, 22nd Floor, Oakland, California 94612-3550; AMOCO
TECHNOLOGY COMPANY ("ATC"), a Delaware Corporation having a principal place of
business at Warrenville Road and Mill Street, P.O. Box 3011, Naperville,
Illinois 60566; and IMAGENETICS INCORPORATED ("Imagenetics"), an Illinois
corporation having a principal place of business at 150 West Warrenville Road,
P.O. Box 3011, Naperville, Illinois 60566-7011.
RECITALS
Whereas, The Regents and ATC entered into a license agreement effective
August 15, 1989 (UC Control No. 89-03-0021) entitled CHROMOSOME ANALYSIS
TECHNOLOGY WITH CHROMOSOME-SPECIFIC PROBES ("License Agreement") and under this
License Agreement The Regents granted a license under Regents' Patent Rights (as
defined in the License Agreement);
Whereas, ATC desires that Imagenetics be substituted as Licensee (defined
in the License Agreement) in place of ATC and The Regents is agreeable to such
substitution; and
Whereas, Imagenetics has read the License Agreement and agrees to abide by
its terms and conditions:
The parties agree as follows:
1. Imagenetics assumes all liability under the License Agreement and is
bound by all the terms in all respects as if it were the original Licensee in
place of ATC.
2. The Regents allows the substitution of the Licensee and acknowledges
that Imagenetics assumes all liability and obligations under the License
Agreement as if
<PAGE>
Imagenetics were originally named as the Licensee as of the effective date of
the License Agreement.
3. The Regents releases ATC from all liability and obligations under the
License Agreement arising before or after the effective date of this Agreement.
The parties have executed this Agreement in triplicate originals by their
respective authorized officers on the following day and year.
AMOCO TECHNOLOGY COMPANY: THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA:
By /s/ R.C. Carr By /s/ Candace L. Voelker
------------------------------ ----------------------------------
(Signature) (Signature)
Name R. C. Carr Name: Candace L. Voelker
---------------------------- ---------------------------------
Title President Title: Manager, Licensing
---------------------------- Office of Technology Transfer
Date June 1, 1994 Date 6/20/94
---------------------------- ---------------------------------
IMAGENETICS INCORPORATED
By /s/ J.L. Bishop
------------------------------
Name: J. L. Bishop
----------------------------
Title: President
---------------------------
Date: June 1, 1994
----------------------------
2
<PAGE>
EXHIBIT 10.3e
[LETTERHEAD]
June 6, 1994
The Regents of the University of California
Office of Technology Transfer
1320 Habor Bay Parkway, Suite 150
Alameda, CA 94502
Attention: Director
Letter Agreement re Third Party Licensing under
License Agreement Control No. 89-03-0021
- ----------------------------------------
Gentlemen:
This is to confirm Imagenetics Incorporated's and The Regents of the
University of California's agreement concerning certain third party licensing
by Imagenetics under License Agreement Control No. 89-03-0021 (the "1st
License") between Imagenetics' parent company Amoco Technology Company
("ATC") and The Regents of the University of California ("The Regents").
Whereas, Imagenetics and The Regents simultaneously herewith are entering into a
new Research Agreement covering Molecular Cytogenetics Research beginning July
1, 1994 at the University of California - San Francisco, which excludes
instrumentation research, and
Whereas, Dr. Joe Gray, a Principal Investigator under the Research Agreement for
The Regents from time to time may explore third party instrument research which
may require licenses from Imagenetics to commercialize.
Imagenetics and The Regents in consideration of the above and the promises
below, agree as follows:
(1) Imagenetics agrees that upon the request of Dr. Joe Gray it will hold
discussions with a limited number of third parties interested in performing
instrument research jointly with Dr. Gray concerning a license under the rights
granted to ATC to permit commercialization by the third party of instruments
developed jointly with Dr. Gray.
(2) The Regents agrees that Imagenetics is not obligated hereunder to grant any
license under the rights granted to ATC, and that any license granted will be
on terms and conditions satisfactory to Imagenetics.
<PAGE>
(3) This Letter Agreement shall terminate upon the date of termination of the
Research Agreement.
(4) This Letter Agreement is the entire agreement between the parties
concerning Imagenetics' discussions with research collaborators of Dr. Gray.
If The Regents finds the above acceptable, please show your agreement by signing
below.
Accepted and agreed to:
IMAGENETICS INCORPORATED
/s/ J. L. Bishop
- ------------------------------------------------
J. L. Bishop
President
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
/s/ C. B. Wootten
- ------------------------------------------------
By: Carl B. Wootten
--------------------------------------------
Title: Director, Office of Technology Transfer
------------------------------------------
<PAGE>
EXHIBIT 10.3f
UNIVERSITY OF CALIFORNIA
[LETTERHEAD]
June 28, 1994
IMAGENETICS INCORPORATED
55 Shuman Blvd.
Suite 600
Naperville, IL 60563-8487
Attention: Mr. Larry Fox
Reference: Letter Agreement re Third Party Licensing under License
Agreement Control No. 89-03-0021, UC Case No. 85-157
----------------------------------------------------
Gentlemen:
This letter is to confirm Imagenetics Incorporated's and The Regents of the
University of California's understanding concerning licensing rights owed to
Imagenetics Incorporated that arise under a third-party collaboration between an
employee of the Division of Molecular Cytometry at UCSF receiving funding under
the new Research Agreement covering Molecular Cytogenetics (July 1, 1994) and a
third-party collaborator either at the University of California outside of the
Division of Molecular Cytometry or outside of the University of California.
The new Research Agreement covering Molecular Cytogenetics beginning July 1,
1994, grants to Imagenetics exclusive licenses only to patent applications
claiming inventions made within the field of Research by the Principal
Investigators or employees under their direction in the Division of Molecular
Cytometry at UCSF. If said Principal Investigator(s) or his/her employee(s)
collaborates with scientists employed outside the Division of Molecular
Cytometry at UCSF or at another campus of the University of California and a
joint invention is made, then Imagenetics would be granted an exclusive license
to such inventions subject to outstanding rights to the third party. If a third
party has rights to the other scientist's inventions, then Imagenetics would be
granted a limited nonexclusive license where the total number of licenses
granted would be limited to Imagenetics and the third party.
Secondly, it was agreed that the Principal Investigators and their employees are
not restricted from collaborating with scientists outside the University. If a
joint invention is made with a scientist that is not an employee of the
University, subject to the terms of the new Research Agreement,
<PAGE>
IMAGENETICS INCORPORATED
June 28, 1994
Page 2
Imagenetics is entitled to an exclusive license to the University's undivided
interest in any patent applications claiming inventions made jointly by the
Principal Investigator or his/her employee in the Division of Molecular
Cytometry at UCSF and the outside scientist.
If you are in agreement with the above understanding, please show your agreement
by signing below.
Very truly yours,
/s/Venus Kirk for
Candace L. Voelker
Manager, Licensing
AGREED:
IMAGENETICS INCORPORATED
- ------------------------------------
By: /s/ Larry Fox
---------------------------------
Title: Vice President
------------------------------
Date: 7 July 1994
-------------------------------
<PAGE>
EXHIBIT 10.3g
THIRD AMENDMENT TO LICENSE AGREEMENT
CHROMOSOME ANALYSIS TECHNOLOGY
WITH CHROMOSOME-SPECIFIC PROBES
BETWEEN
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
AND
IMAGENETICS INCORPORATED
<PAGE>
THIRD AMENDMENT TO LICENSE AGREEMENT
CHROMOSOME ANALYSIS TECHNOLOGY
WITH CHROMOSOME-SPECIFIC PROBES
BETWEEN
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
AND
IMAGENETICS INCORPORATED
This Third Amendment to the License Agreement is made and is effective this
1st day of July 1994 by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA,
a California corporation having its statewide administrative offices at 300
Lakeside Drive, 22nd Floor, Oakland, California 94612-3550 ("The Regents"), and
IMAGENETICS INCORPORATED, a Delaware corporation having offices at 150 West
Warrenville Road, P.O. Box 3011, Naperville, Illinois 60566-7011 ("Licensee").
RECITALS
WHEREAS, Licensee and The Regents entered into a license agreement
effective August 15, 1989, having U.C. Agreement Control No.: 89-03-0021,
amended on July 1, 1991 (Control No.: 89-03-0021), and on April 15, 1992
(Control No. 89-03-0021M), covering licensure to Licensee by The Regents of
certain inventions generally characterized as FLUORESCENCE HYBRIDIZATION WITH
CHROMOSOME-SPECIFIC PROBES, ("Invention"), made in the course of research at the
Lawrence Livermore National Laboratory ("LLNL") and The University of
California, San Francisco Campus ("UCSF") by Joe W.Gray, et al.;
WHEREAS, Licensee and The Regents entered into a research agreement
1
<PAGE>
entitled RESEARCH AGREEMENT FOR THE DEVELOPMENT OF FLUORESCENCE HYBRIDIZATION
WITH CHROMOSOME-SPECIFIC PROBES, ("First Research Agreement"), effective August
15, 1989 and terminated on June 30, 1991, for the purpose of developing the
Invention under a cooperative arrangement funded in part by Licensee at LLNL
under the direction of Principal Investigator, Joe W. Gray;
WHEREAS, Licensee and The Regents entered into a second research agreement
entitled MOLECULAR CYTOGENETICS IN MEDICINE AND BIOLOGY ("Second Research
Agreement"), effective July 1, 1991, to expand the work to be performed under
the First Research Agreement to include development of chromosome Probes and to
perform research in human cancer diagnosis and prognosis;
WHEREAS, under the terms of the First Research Agreement and the Second
Research Agreement, The Regents granted the right to Licensee to elect to
include any and all inventions made in the conduct of research performed under
the First Research Agreement and the Second Research Agreement in the Licensee
Agreement;
WHEREAS, Licensee and The Regents want to continue the collaborative
relationship developed under the First Research Agreement and the Second
Research Agreement and, consequently, have entered into a third research
agreement entitled "Research Agreement for the Development of Molecular
Cytogenetics" effective July 1, 1994 ("Third Research Agreement");
WHEREAS, this third amendment to the License Agreement grants to Licensee
the right to elect to include inventions that employ the technique of In Situ
2
<PAGE>
Hybridization and that are made in the performance of research under the Third
Research Agreement in this Agreement;
WHEREAS, Joe W. Gray and Daniel Pinkel hold joint appointments at UCSF and
at the Lawrence Berkeley Laboratory ("LBL");
WHEREAS, this third amendment to the License Agreement grants to Licensee
the right to elect to include in the License Agreement any inventions employing
the technique of In Situ Hybridization and made in the performance of work at
LBL under the direction of Joe W. Gray or Daniel Pinkel;
WHEREAS, difficulties with provisions contained in the License Agreement
have arisen due to circumstances unforeseen by the parties at the time of the
Invention's licensure; and
WHEREAS, this third amendment to the License Agreement solves these
difficulties.
The parties agree as follows:
1. Subparagraph 1.7.5 of the License Agreement is replaced in its
entirety with the following:
1.7.5 Any future patent rights to subject matter claimed in or
covered by a patent application(s) covering any Inventions
used in or requiring the performance of the technique In
Situ Hybridization and elected (1) by Licensee under the
provisions of Article VIII of the Third Research Agreement
or (2) by Licensee and made in the performance of research
at LBL under the direction of Joe W. Gray or Daniel Pinkel.
3
<PAGE>
2. "In Situ Hybridization" shall mean a nucleic acid hybridization
technique where the target nucleic acid remains in its natural biological
setting, e.g. DNA in chromosomes or cell nucleic, albeit fixed or altered by
preparative techniques.
3. Paragraph 1.8 (Protected Composition Products) is replaced in its
entirety with the following:
1.6 "Protected Composition Products" shall mean (a) any kit,
composition of matter, material, or product; (b) any kit,
composition of matter, material, or product to be used in a
manner requiring the performance of the Patent Method, or
any kit, composition of matter, material, or product
produced by the Patent Method, or (c) the practice of the
Patent Method itself to the extent the manufacture, use, or
sale of (a), (b), or (c) immediately above falls within the
scope of one or more claims of Regents' Patent Rights during
the term of the patent grant, in countries in which such
claim or claims have issued and have not expired, been
abandoned, disclaimed, or found invalid or unenforceable.
4. Paragraph 1.9 ("Unprotected Composition Products") is replaced in its
entirety with the following:
1.9 "Unprotected Composition Products" shall mean (a) any kit,
composition, of matter, material or product; (b) any kit,
composition of matter, material, or product to be used in a
manner requiring the performance of the Unprotected Method,
or any kit, composition of matter, material, or product
produced by the Unprotected Method, or (c) the practice of
the Unprotected Method itself to the extent the manufacture,
use, or sale of (a), (b), or (c) immediately above falls
within the scope of one or more pending claims within
Regents' Patent Rights during the period and in such
countries in which such claim or claims have not issued, and
have not expired, been abandoned, disclaimed, or found
invalid or unenforceable, such period not to exceed five
years from the effective date of the License Agreement, or
five years from the date in which substantially the same
subject matter is first introduced in a patent application
in each country that such patent application is filed,
whichever is longer.
4
<PAGE>
5. Paragraph 1.10 (Protected Instrument Products) is replaced in its
entirety with the following:
1.10 "Protected Instrument Products" shall mean (a) equipment,
instruments, apparatuses, devices , articles of manufacture,
or component parts thereof, or (b) equipment, instruments,
apparatuses, devices, articles of manufacture, or component
parts thereof produced by the Patent Method to the extent
the manufacture, use, or sale of (a) or (b) immediately
above falls within the scope of one or more claims of
Regents's Patent Rights during the term of the patent grant,
in countries in which such claim or claims have issued and
have not expired, been abandoned, disclaimed, or found
invalid or unenforceable. When a Protected Instrument
Product carries out a Patent Method, then The Regents and
Licensee shall promptly enter into good-faith negotiations
to determine a reasonable royalty based on the Net Sales of
the Protected Instrument Product.
6. Paragraph 1.11 (Unprotected Instrument Products) is replaced in its
entirety with the following:
1.11 "Unprotected Instrument Products" shall mean (a) equipment,
instruments, apparatuses, devices, articles of manufacture
or component parts thereof, equipment, or (b) equipment,
instruments, apparatuses, devices, articles of manufacture
or component parts thereof produced by the Unprotected
Method to the extent the manufacture, use, or sale of (a) or
(b) immediately above falls within the scope of one or more
pending claims within Regents' Patent Rights during the
period and in such countries in which such claim or claims
have not issued, and have not expired, been abandoned,
disclaimed, or found invalid or unenforceable, such period
not to exceed five years from the effective date of the
License Agreement, or five years from the date in which
substantially the same subject matter is first introduced
in a patent application in each country that such patent
application is filed, whichever is longer. When an
Unprotected Instrument Product carries out an Unprotected
Method, then The Regents and Licensee shall promptly enter
into good-faith negotiations to determine a reasonable
royalty based on the Net Sales of the Unprotected Instrument
Product.
7. The definitions of "Patent Method" and "Unprotected Method" shall be
5
<PAGE>
included in the License Agreement as follows:
a) "Patent Method" means any process or method the use or
practice of which would constitute in a particular country,
but for the license granted to the Licensee pursuant to this
Agreement, an infringement of an unexpired claim of a patent
within Regents' Patent Rights in that country in which the
Patent Method is used or practiced.
b) "Unprotected Method" means any process or method the use or
practice of which would constitute in a particular country,
but for the license granted to the Licensee pursuant to this
Agreement an infringement of any unabandoned, pending claim
of a patent application within Regents' Patent Rights if
such patent application in that country in which the
Unprotected Method is used or practiced had issued.
8. "Prenatal Test Subjects" shall mean any test of fetal nucleic acid or
any nucleic acid resulting from fertilization of an egg cell suitable as a
target for In Situ Hybridization regardless of how such fetal nucleic acid or
nucleic acid resulting from fertilization is obtained.
9. Paragraph 1.16 (Infringement Litigation Costs) is replaced in its
entirety with the following:
1.16 "Infringement Litigation Costs" means costs incurred in the
infringement suit, provided for in Article 18 (PATENT
INFRINGEMENT) of this Agreement, consisting of outside
attorney's fees billed to Licensee and The Regents,
royalties (due The Regents) that were used to offset the
infringement suit costs in accordance with Paragraph 18.4,
Licensee's outside attorney fees that were used to offset
the infringement suit costs in accordance with Paragraph
18.2a, and other out-of-pocket expenses of both parties.
10. Paragraph 2.2e is replaced in its entirety with the following:
e. The Regents own or are in the process if acquiring title to
Regents' Patent Rights, which are subject to a
nontransferable, nonexclusive, irrevocable paid-up license
to practice or have
6
<PAGE>
practiced, such Regents' Patent Rights for or on behalf of
the United States throughout the world, pursuant to 35 USC
202(c) (4) and which are subject to an exclusive license to
make, use and sell methods, processes, articles of
manufacture, and compositions of matter expressly limited to
clinical diagnostic testing in Prenatal Test Subjects and a
nonexclusive license to make, have made, use and sell
methods, processes, articles of manufacture and compositions
of matter as a research reagent for use in Prenatal Test
Subjects granted to one other company. No other rights have
been granted.
11. Paragraphs 3.2.1 and 3.2.2 are replaced in their entirety with the
following:
3.2.1 the right to make, have made, use and sell methods,
processes compositions-of-matter for clinical diagnostic
products to detect hereditary diseases in Prenatal Test
Subjects within the Field of Interest is expressly excluded
from this Agreement;
3.2.2 the right to make, have made, use and sell methods,
processes and compositions-of-matter comprising a research
reagent for use in research including Prenatal Test Subjects
within the Field of Interest shall be nonexclusive.
12. Paragraph 3.7 is replaced in its entirety with the following:
3.7 If the Regents is approached by an applicant for a license
to Regents' Patent Rights, and if said applicant agrees to
fund research at the University of California under the
direction of Joe Gray or Daniel Pinkel to further develop
the technology covered by Regents' Patent Rights in the
Field of Interest but outside the fields of use of cancer
identification, hereditary disease testing in postnatal
subjects, hereditary disease testing in Prenatal Test
Subjects and dosimetry to test subjects for exposure to
toxins during the period when Licensee has exclusive rights
herein, it will refer the request of the applicant to the
Licensee. Within ninety (90) days of such referral,
Licensee shall submit to The Regents a written report
outlining Licensee's interest in the Field of Use proposed
by the applicant. If Licensee has no interest in marketing
Products in the Field of Use proposed by the applicant, then
Licensee shall enter into good-faith negotiations with the
applicant for a sublicense to Regents' Patent Rights in said
Field
7
<PAGE>
of Use. If Licensee expresses an interest in marketing such
Products in the Field of Use proposed by applicant, then The
Regents and Licensee shall enter into good-faith
negotiations to sponsor research at least at the level of
applicant and to establish reasonable diligence provisions
requiring reasonable performance standards for Licensee to
achieve substantial sales of said Products within a
reasonable time period in the Field of Use requested by
applicant.
13. Paragraph 1.17 (Repeat-Sequence Probe), Paragraph 1.18
(High-Complexity Probe), and Paragraph 1.19 (Low-Complexity Probe) as defined in
the second amendment to the License Agreement effective April 15, 1992 (UC
Agreement Control No. 89-03-0021M) are removed in their entirety from the
License Agreement.
14. Paragraph 6.5 shall be replaced in its entirety with the following:
6.5 Subject to Licensee's rights under 6.2 and subject to the
Licensee's freedom to practice Regents' Patent Rights
without infringement of third party rights, if the Licensee
is unable to perform any of the following:
6.5.1 If a chromosome abnormality is independently correlated with
a disease by at least two independent studies (each study
having at least 100 patients and having a correlation p
value of .01), and if Licensee has rights to a Clinically
Useful Product that identifies the chromosome abnormality,
and if the chromosome abnormality correlates to a disease
that has a potential market of 100,000 tests per year in the
United States, then Licensee shall enter into preclinical
trials for each such Product within one (1) year of the
above conditions being satisfied;
6.5.2 Licensee shall submit an application for marketing in the
United States, including, by way of example, an IDE for a
PMA, an IND for an NDA, or 510k, for products to the
appropriate United States agency, including, by way of
example, FDA, on or before one year from entering
preclinical trials for each Product, provided that Licensee
shall not be obligated to submit applications for marketing
in the United States for more than two Products at any one
time.
8
<PAGE>
6.5.3 Market Products in the United States within six (6) months
of receiving U.S. government marketing approval from the
FDA, if such approval is required for such Products; or
6.5.4 Reasonably fill the clinical market demand for such Products
following commencement of marketing at any time during the
exclusive period of this Agreement;
then The Regents shall have the right and option to reduce the Licensee's
exclusive license to a nonexclusive license. This right, if exercised by The
Regents, supersedes the rights granted in Article 3 (GRANT).
15. "Clinically Useful" shall mean (a) that there is an available
treatment for the disease, condition, or symptoms caused by a chromosomal
abnormality, (b) that there is a recommended lifestyle change to improve the
quality of life for patients or progeny of patients having the chromosomal
abnormality, or (c) that there is useful information available due to the
diagnosis of the chromosomal abnormality that will enable patients to make
informed choices about current or future reproductive activities.
16. Paragraph 7.1 is replaced in its entirety with the following:
7.1 Beginning November 30, 1994, and annually thereafter, the
Licensee shall submit to The Regents a progress report
covering the Licensee's activities related to the
development and testing of each Product and the obtaining of
the governmental approvals necessary for marketing. These
progress reports shall be provided to The Regents to cover
the progress of the research and development of the Product
until its first commercial sale in the United States These
progress reports shall include, but not be limited to, the
following topics so that The Regents may be able to
determine the progress of the development of each Product
and may also be able to determine whether or not Licensee
has met its diligence obligations set forth in Article 6
(DUE DILIGENCE) above:
- summary of work completed
9
<PAGE>
- key scientific discoveries
- summary of work in progress
- current schedule of anticipated events or
milestones specified in Paragraph 6.5
- market plans for introduction of each Product
- activities of sublicensees, if any.
The Licensee also agrees to report to The Regents in its immediately subsequent
progress and royalty report the date of first commercial sale of a Product in
each country.
17. Paragraph 15.2 of the License Agreement will be replaced in its
entirety with the following:
15.2 Licensee may distribute biological materials comprising
Background Biological Materials and Research Information to
the research community. Biological materials that Licensee
will distribute to the research community will be limited to
only those biological materials that Licensee accepts for
retransfer or sale. If Licensee sells such biological
materials to the research community, it will offer them at a
price reasonable for a typical research product. In the
alternative, Licensee may elect to make the biological
materials available through other means, including, without
limitation, by ATCC deposit. If Licensee declines to accept
the biological materials for distribution to the research
community, then The Regents shall be free to distribute the
materials by any means without further obligation to
Licensee.
18. Unless otherwise terminated by operation of law or by the acts of the
parties in accordance with the terms of the License Agreement, this Second
Amendment to the License Agreement shall be in force from the effective date
recited on Page One and for a term concurrent with the License Agreement.
10
<PAGE>
IN WITNESS WHEREOF, both The Regents and the Licensee have executed this
Third Amendment to the License Agreement, in duplicate originals, by their
respective officers hereunto duly authorized, on the day and year hereinafter
written.
IMAGENETICS INCORPORATED THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
By: /s/ John L. Bishop By: /s/ Carl B. Wootten
----------------------------- --------------------------------------
(Signature) (Signature)
Name: John L. Bishop Name: Carl B. Wootten
--------------------------- ------------------------------------
(Please Print) (Please Print)
Title: President Title: Director
-------------------------- -----------------------------------
Office of Technology Transfer
Date: June 7, 1994 Date: June 11, 1994
-------------------------- -----------------------------------
[STAMP]
11
<PAGE>
EXHIBIT 10.3h
FOURTH AMENDMENT TO THE LICENSE AGREEMENT FOR
CHROMOSOME ANALYSIS TECHNOLOGY
WITH CHROMOSOME-SPECIFIC PROBES
BETWEEN
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
AND
VYSIS, INC.
<PAGE>
FOURTH AMENDMENT TO THE LICENSE AGREEMENT FOR
CHROMOSOME ANALYSIS TECHNOLOGY
WITH CHROMOSOME-SPECIFIC PROBES
BETWEEN
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
AND
VYSIS, INC.
This fourth amendment ("Fourth Amendment") to the License Agreement is made
and is effective this 1st day of September 1994, by and between The Regents of
the University of California ("The Regents"), a California corporation having
its statewide administrative offices at 300 Lakeside Drive, 22nd Floor, Oakland,
California 94612-3550, and Vysis, Inc. ("Licensee"), an Illinios corporation
having offices at 150 West Warrenville Road, P. O. Box 3011, Naperville,
Illinois 60566-7011.
RECITALS
Whereas, Licensee and The Regents entered into a license agreement
effective August 15, 1989 ("License Agreement"), having UC Agreement Control No.
89-03-0021, which was amended on July 1, 1991 (Control No. 89-03-0021I), on
April 15, 1992 (Control No. 89-03-0021M), and on July 1, 1994 (Control No.
89-03-0021R-33), covering licensure to Licensee by The Regents of certain
inventions generally characterized as Fluorescence Hybridization with
Chromosome-Specific Probes ("Invention"), made in the course of research at the
Lawrence Livermore National Laboratory ("LLNL") and The University of
California, San Francisco Campus ("UCSF") by Joe W. Gray et al.;
1
<PAGE>
Whereas, Licensee and The Regents entered into a research agreement
entitled "Research Agreement for the Development of Molecular Cytogenetics"
("Research Agreement"), effective July 1, 1994, granting to Licensee the right
to elect to include in the Licensee Agreement inventions that employ the
technique of In Situ Hybridization and that are made in the performance of
research under the Research Agreement under the direction of Joe W. Gray or
Daniel Pinkel;
Whereas, The Regents originally licensed to another company the exclusive
rights to make, use, and sell methods, processes, compositions-of-matter, and
articles of manufacture expressly limited to clinical diagnostic testing in
prenatal test subjects;
Whereas, The Regents has terminated the agreement with the other company,
and, consequently, the rights to clinical diagnostic testing in prenatal test
subjects are available;
Whereas, the License Agreement provides that if such rights become
available, then Licensee would be granted such rights in exchange for Licensee's
funding additional research by The Regents;
Whereas, Licensee and The Regents entered into a letter agreement dated
June 6, 1994, having UC Agreement Control No. 89-03-0021R-34, which provides
that if The Regents obtained the right to grant prenatal test rights, then The
Regents would waive certain research funding rights under the License Agreement
that would be owed by Licensee to The Regents in return for Licensee's agreeing
to delay its right to terminate the Research Agreement, thus guaranteeing
funding of $1.5 million under the Research Agreement;
Whereas, Licensee and The Regents entered into a first amendment to the
Research Agreement, effective September 1, 1994, providing that Licensee will
waive its rights to
2
<PAGE>
terminate the agreement without cause until after August 1, 1996, thus
guaranteeing funding of $1.5 million under the Research Agreement;
Whereas, the execution of the first amendment to the Research Agreement, to
be executed concurrently with this Fourth Amendment, is the consideration for
this Fourth Amendment;
Whereas, Licensee agrees to undertake negotiations in good faith for a
grant of a sublicense under such rights to at least one clinical testing
laboratory under terms acceptable to Licensee;
Whereas, The Regents is desirous that the prenatal rights be developed and
utilized to the fullest extent so that the benefits can be enjoyed by the
general public.
The parties agree as follows:
1. Subparagraph 3.2 of Article 3 (Grant) of the License Agreement is
deleted entirely.
2. Subparagraph 3.10 of Article 3 (Grant) of the License Agreement is
added as follows:
3.10 Licensee will undertake negotiations in good faith for a
grant of a sublicense under the prenatal test rights to at least one
clinical testing laboratory under terms acceptable to Licensee.
3. Subparagraph 4.3 of Article 4 (License Issue Fee) of the License
Agreement is added as follows:
3
<PAGE>
4.3 As consideration for this Fourth Amendment to the License
Agreement, Licensee will guarantee $1.5 million in research funding
under the research agreement entitled "Research Agreement for the
Development of Molecular Cytogenetics," effective July 1, 1994, by
entering into the first amendment to the Research Agreement for the
Development of Molecular Cytogenetics, effective September 1, 1994,
that waives its right to terminate the Research Agreement until after
August 1, 1996.
Unless otherwise terminated by operation of law or by the acts of the
parties in accordance with the terms of the License Agreement, this Fourth
Amendment to the License Agreement will be in force from the effective date
recited on page one and for a term concurrent with the License Agreement.
In witness whereof, both The Regents and the Licensee have executed this
Fourth Amendment to the License Agreement, in duplicate originals, by their
respective officers hereunto duly authorized, on the day and year hereinafter
written.
VYSIS, INC. The Regents of the University
of California
By: /s/ J. L. Bishop By: /s/ Candace L. Voelker
--------------------------- ---------------------------
(Signature) (Signature)
Name: J. L. Bishop Name: Candace L. Voelker
------------------------- -------------------------
(Please Print) (Please Print)
Title: President Title: Manager, Licensing
------------------------ -------------------------
(Please Print) (Please Print)
Date: November 18, 1994 Date: December 16, 1994
------------------------- -------------------------
[STAMP]
4
<PAGE>
EXCLUSIVE LICENSE AGREEMENT
BETWEEN
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
AND
IMAGENETICS INCORPORATED
FOR
INVENTIONS MADE IN THE FIELD
OF MOLECULAR CYTOGENETICS
<PAGE>
TABLE OF CONTENTS
Article No. Title Page
- ----------- ----- ----
RECITALS..................................................................... 2
1. DEFINITIONS.............................................................. 5
2. REPRESENTATIONS AND WARRANTS............................................. 10
3. GRANT.................................................................... 12
4. LICENSE ISSUE FEE........................................................ 14
5. ROYALTIES................................................................ 15
6. DUE DILIGENCE............................................................ 19
7. TERMS TO BE NEGOTIATED................................................... 21
8. PROGRESS AND ROYALTY REPORTS............................................. 25
9. BOOKS AND RECORDS........................................................ 26
10. LIFE OF THE AGREEMENT................................................... 27
11. TERMINATION BY THE REGENTS.............................................. 28
12. TERMINATION BY THE LICENSEE............................................. 28
13. SUPPLY OF THE BIOLOGICAL MATERIALS...................................... 29
14. CONFIDENTIALITY......................................................... 30
15. PATENT PROSECUTION AND MAINTENANCE...................................... 31
16. MAINTENANCE OF THE BIOLOGICAL MATERIALS................................. 34
17. USE OF NAMES AND TRADEMARKS
AND NONDISCLOSURE OF AGREEMENT.......................................... 35
18. PATENT MARKING.......................................................... 36
19. PATENT INFRINGEMENT..................................................... 37
20. INDEMNIFICATION......................................................... 39
21. WAIVER.................................................................. 40
22. ASSIGNABILITY........................................................... 40
23. LATE PAYMENTS........................................................... 41
24. NOTICES................................................................. 41
25. GOVERNING LAWS.......................................................... 42
26. FOREIGN GOVERNMENT APPROVAL OR REGISTRATION............................. 42
27. EXPORT CONTROL LAWS..................................................... 42
28. FORCE MAJEURE........................................................... 43
29. FULL DISCLOSURE......................................................... 43
30. DISPOSITION OF PRODUCT ON HAND UPON TERMINATION......................... 44
31. MISCELLANEOUS........................................................... 44
SCHEDULE A - PAGE 1A.................................................... 46
SCHEDULE A - PAGE 2A.................................................... 47
SCHEDULE A - PAGE 3A.................................................... 48
SCHEDULE B - PAGE 1B.................................................... 49
SCHEDULE C - PAGE 1C.................................................... 50
<PAGE>
UC Case No. 85-157
EXCLUSIVE LICENSE AGREEMENT FOR
CHROMOSOME ANALYSIS TECHNOLOGY
WITH CHROMOSOME-SPECIFIC PROBES
THIS LICENSE AGREEMENT is made and is effective this 1st day of July, 1994
by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, a California
corporation, having its statewide administrative offices at 300 Lakeside Drive,
22nd Floor, Oakland, California 94612-3550, hereinafter referred to as "The
Regents", and IMAGENETICS INCORPORATED, an Illinois corporation, having a
principal place of business at 150 West Warrenville Road, P.O. Box 3011,
Naperville, Illinois 60566-7011, hereinafter referred to as "Licensee".
RECITALS
WHEREAS, certain inventions, generally characterized as specific nucleic
acids, gene products, and gene expression pathways, herein collectively referred
to as "the Invention(s)", were made in the course of research at the University
of California, San Francisco (UCSF) in the Division of Molecular Cytometry under
the direction of Joe W. Gray, Daniel Pinkel, Maria Pallavicini, Frederic
Waldman, Burt Feurstein, Brian Mayall, and Ronald Jensen ("Principal
Investigators") and are covered by Regents' Patent Rights as defined below;
WHEREAS, The Regents owns an undivided interest in U.S. Patent No.
4,468,464 entitled "Process and Composition for Biologically Functional
Molecular
<PAGE>
Chimeras" by S. Cohen, et al. and issued August 28, 1984, U.S. Patent No.
4,740,470 entitled "Biologically Functional Molecular Chimeras" by S. Cohen, et
al. and issued April 26, 1988, and U.S. Patent No. 4,237,224 entitled "Process
and Composition for Biologically Functional Molecular Chimeras" by S. Cohen, et
al. and issued December 2, 1980, which patents may prevent the practice of
Invention(s) claimed in Regents' Patent Rights contained in Paragraph 1.5 of
this Agreement;
WHEREAS, if it is necessary for Licensee to be licensed under the
aforementioned U.S. Patent No. 4,468,464, U.S. Patent 4,740,470, or U.S. Patent
No. 4,237,224 to practice the Invention(s) claimed in Regents' Patent Rights,
then Licensee shall obtain the necessary licenses from Stanford University; in
no case do the rights and licenses granted to Licensee under the terms of this
Agreement cover U.S. Patent No. 4,468,464, U.S. Patent No. 4,740,470, or U.S.
Patent No. 4,237,224;
WHEREAS, The Regents and Licensee entered into a Research Agreement
entitled "Research Agreement for the Development of Molecular Cytogenetics"
dated July 1, 1994 to provide funding by Licensee to the Principal Investigators
at UCSF to perform research in the detection and treatment of disease related to
chromosome abnormalities ("Research Agreement");
WHEREAS, The Regents and Licensee entered into an Option Agreement entitled
"Option to Invention(s) Made In The Field of Molecular Cytogenetics" dated July
1, 1994 ("Option Agreement");
WHEREAS, under the terms of the Research Agreement, Licensee may elect to
include patent applications and resulting patents covering Invention(s) arising
in the
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conduct of work performed under the Research Agreement in either the Option
Agreement or in this Agreement;
WHEREAS, under the terms of the Option Agreement, Licensee may elect to
include patent applications and resulting patents covered therein under the
terms of this Agreement;
WHEREAS, if Licensee elects to include patent applications and resulting
patents covering Invention(s) arising in the conduct of work performed under the
Research Agreement directly under the terms of this Agreement, or patent
applications and resulting patents covered by the Option Agreement under the
terms of this Agreement, then Licensee shall provide The Regents with a Plan of
Commercialization required under the terms of the Option Agreement or the
Research Agreement whichever is appropriate covering commercial development of
the Invention(s) claimed in such patent applications and resulting patents, and
thereafter, Licensee and The Regents shall negotiate the following terms to be
included in this Agreement based on the information contained in the Plan of
Commercialization: a) license issue fee (Paragraph 4.1); b) royalty rate
(Paragraph 5.1); c) minimum annual royalties (Paragraph 5.4); and d) diligence
provisions in the form of specific performance milestones (Paragraph 6.4);
WHEREAS, Licensee is desirous of acquiring exclusive licenses to any and
all of Regents' Patent Rights covering the Invention(s) arising in the conduct
of work performed under the Research Agreement in Licensee's Field, subject to
rights granted by to the U.S. government as hereinafter described;
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WHEREAS, both parties recognize and agree that royalties due hereunder will
be paid on both pending patent applications (for a limited period of time) and
issued patents;
WHEREAS, the Invention(s) have utility for the detection and treatment of
chromosome abnormalities relating to specific diseases, and the Licensee has an
interest in obtaining rights to pursue commercial development of the Invention
in Licensee's Field; and
WHEREAS, The Regents desires to grant such licenses to Licensee in order
that the Invention(s) be developed, utilized, and marketed to the fullest extent
so that the products therefrom and other benefits can be enjoyed by the general
public.
The parties agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the meaning set
forth below:
1.1 "Research" means investigations leading to the development of
information, reagents and/or techniques useful for and/or resulting in
identification and/or characterization of the following:
1) genetic abnormalities
2) genes
3) gene transcripts
4) gene products
relevant to human genetic disease and for their detection or characterization.
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1.2 "Research Agreement" means the agreement entitled "Research Agreement
for the Development of Molecular Cytogenetics" between The Regents and Licensee
dated July 1, 1994, for the conduct of Research under the Research Program and
any extensions or renewals thereof, and incorporated herein by reference. In the
event of any inconsistencies between the Research Agreement and this Agreement,
the terms of this Agreement shall control.
1.3 "Research Information" means technical data, processes, methods,
inventions, compositions-of-matter, and biological materials, equipment,
instruments, apparatuses, devices, articles of manufacture or component parts(s)
thereof developed under or resulting from the performance of Research under the
Research Agreement and improvements thereof, except for improvements on new
subject matter not funded by Licensee. In the event that computer software or
information management systems are created or developed in the performance of
Research under the Research Agreement such computer software or information
management systems shall be treated as Research Information. There shall be no
transfer of the physical possession of equipment, instruments, apparatuses,
devices, articles of manufacture or component part(s) thereof (except biological
materials) comprising Research Information.
1.4 "Regents' Patent Rights" means all U.S. patents and patent
applications and foreign patents and patent applications assigned to The Regents
and requested under Paragraph 15.4 infra, including any reissues, extensions,
substitutions, continuations, divisions and continuations-in-part (only to the
extent, however, that claims in the continuations-in-part are entitled to the
priority filing date of the parent
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patent application) based on and including any subject matter claimed in or
covered by any of the following:
(1.4a) Any future patent rights to subject matter claimed in or
covered by a patent application(s) covering any Inventions
elected by Licensee under the provisions of Article VIII of
the Research Agreement or pursuant to Licensee's exercise of
the option under the provisions of Article 4 (EXERCISE OF
THE OPTION) of the Option Agreement.
1.5 "Patent Products" means (a) any kit, composition of matter, material,
or product; (b) any kit, composition of matter, material, or product to be used
in a manner requiring the performance of the Patent Method, or any kit,
composition of matter, material, or product produced by the Patent Method, or
(c) the practice of the Patent Method itself to the extent the manufacture, use,
or sale of (a), (b), or (c) immediately above falls within the scope of one or
more claims of Regents' Patent Rights during the term of the patent grant, in
countries in which such claim or claims have issued and have not expired, been
abandoned, disclaimed, or found invalid or unenforceable.
1.6 "Unprotected Products" means (a) any kit, composition of matter,
material, or product; (b) any kit, composition of matter, material, or product
to be used in a manner requiring the performance of the Unprotected Method, or
any kit, composition of matter, material, or product produced by the Unprotected
Method, or (c) the practice of the Unprotected Method itself to the extent the
manufacture, use, or sale of (a), (b), or (c) immediately above falls within the
scope of one or more pending claims within Regents' Patent Rights during the
period and in such countries in which such claim or claims have not issued, and
have not expired, been abandoned,
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disclaimed, or found invalid or unenforceable, such period not to exceed five
years from the date in which the subject matter is introduced in a patent
application in each country that such patent application is filed.
1.7 "Patent Method" means any process or method the use or practice of
which would constitute in a particular country, but for the license granted to
the Licensee pursuant to this Agreement, an infringement of an unexpired claim
of a patent within Regents' Patent Rights in that country in which the Patent
Method is used or practiced.
1.8 "Unprotected Method" means any process or method the use or practice
of which would constitute in a particular country, but for the license granted
to the Licensee pursuant to this Agreement an infringement of any unabandoned,
pending claim of a patent application within Regents' Patent Rights if such
patent application in that country in which the Unprotected Method is used or
practiced had issued.
1.9 "Product(s)" means Patent Products and Unprotected Products.
1.10 "Method" means Patent Method and Unprotected Method.
1.11 "Field" means research Product, diagnostic Product, and therapeutic
Product based on (a) detection of normal or altered specific nucleic acid
sequences, gene products, specific nucleic acid sequences, or gene expression
pathways, or (b) therapies targeted to specific nucleic acid sequences, gene
products, or gene expression pathways, provided that the above specific Products
do not employ or are not employed in the technique of IN SITU hybridization.
1.12 "Net Sales" means the gross invoice prices from the sale of a Product
by Licensee, an Affiliate, a Joint Venture or a sublicensee to independent third
parties for
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cash or tangible consideration in accordance with Generally Acceptable
Accounting Principles limited to the following deductions (if not already
deducted from the gross invoice price and at rates customary within the
industry): (i) allowances (actually paid and limited to rejections, returns,
and prompt payment and volume discounts granted to customers of a Product,
whether in cash or a Product in lieu of cash), (ii) freight, transport packing,
insurance charges associated with transportation, and (iii) taxes, tariff, or
import/export duties based on sales when included in gross sales, but not
value-added taxes or taxes assessed on income derived from such sales. Where
Licensee distributes a Product for end use for purposes other than internal
research and development or clinical trials to itself, an Affiliate, or a Joint
Venture, then such distribution shall be considered a sale at list price
normally charged to independent third parties, and The Regents shall be entitled
to collect a royalty on such sale in accordance with Article 5 (ROYALTIES).
1.13 "Affiliate(s)" of a party means any entity which, directly or
indirectly, controls such party, is controlled by such party or is under common
control with such party ("control" for these purposes being defined as the
actual, present capacity to elect a majority of the directors of such affiliate,
or if not, the capacity to elect the members that control fifty percent (50%) of
the outstanding stock or other voting rights entitled to elect directors)
provided, however, that in any country where the local law shall not permit
foreign equity participation of a majority, then an "Affiliate" shall include
any company in which the Licensee shall own or control, directly or indirectly,
the maximum percentage of such outstanding stock or voting rights
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permitted by local law. Each reference to Licensee herein shall be meant to
include its Affiliates.
1.14 "Joint Venture" means any separate entity established pursuant to an
agreement between a third party and Licensee to constitute a vehicle for a joint
venture, which separate entity manufacture, uses, purchases, sells, or acquires
a Product from Licensee. Each reference to Licensee herein shall be meant to
include its Joint Ventures.
1.15 "Plan of Commercialization" means a reasonably detailed plan
containing information regarding, but not limited to, a development plan
outlining specific performance milestones and timetable for a Product's
commercial development and its introduction to the market place, projected sales
for the Product, the date of the anticipated first commercial sale of a Product,
projected costs and profits for such Product, and other terms commonly included
in business plans.
1.16 "Infringement Litigation Costs" means costs incurred in the
infringement suit, provided for in Article 19 (PATENT INFRINGEMENT) of this
Agreement, consisting of outside attorney's fees billed to Licensee and The
Regents, royalties (due The Regents) that were used to offset the infringement
suit costs in accordance with Paragraph 19.4, Licensee's outside attorney fees
that were used to offset the infringement suit costs in accordance with
Paragraph 19.2a, and other out-of-pocket expenses of both parties.
2. REPRESENTATIONS AND WARRANTS
2.1 Licensee represents and warrants the following:
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(2.1a) Licensee shall fund Research under and according to the
Research Agreement, which Research shall be under the
direction of the Principal Investigators.
2.2 The Regents represents and warrants the following:
(2.2a) Regents' Patent Rights were developed under funding provided
in part by the Department of Health and Human Services
(DHHS);
(2.2b) Pursuant to 35 USC 200-212, The Regents may elect to retain
title to any invention (including the Inventions) made by it
under U.S. Government funding;
(2.2c) If The Regents elects to retain title to the Inventions, The
Regents is required by law to grant to the U.S. Government a
nontransferable, paid up, non-exclusive, irrevocable license
to use the Inventions by or on behalf of the U.S. Government
throughout the world.
2.3 The Regents represents to the best of its knowledge and accordingly
warrants that:
(2.3a) these licenses and the associated Invention(s) are provided
WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESSED OR
IMPLIED. THE REGENTS MAKES NO REPRESENTATION OR WARRANTY
THAT EACH PATENT PRODUCT, UNPROTECTED PATENT PRODUCT, OR
METHOD WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY
RIGHT;
(2.3b) IN NO EVENT WILL THE REGENTS BE LIABLE FOR ANY INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF
THIS LICENSE OR THE USE OF THE INVENTION(S), METHOD,
UNPROTECTED PATENT PRODUCT, OR PATENT PRODUCT;
(2.3c) Nothing in this Agreement shall be construed as a warranty
or representation by The Regents as to the validity,
enforceability, or scope of any of Regents' Patent Rights; a
warranty or representation that anything made, used, sold,
or otherwise disposed of under any license granted in
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this Agreement is or will be free from infringement of
patents of third parties; an obligation to bring or
prosecute actions or suits against third parties for
patent infringement except as provided in Article 19
(PATENT INFRINGEMENT); or conferring by implication,
estoppel or otherwise any license or rights under any
patents of The Regents other than Regents' Patent Rights
as defined herein, regardless of whether such patents are
dominant or subordinate to Regents' Patent Rights
(specifically, The Regents does not grant to Licensee any
rights under U.S. Patent No. 4,468,464, U.S. Patent No.
4,237,224 and U.S. Patent No. 4,740,470 set forth in the
Recitals of this Agreement); or an obligation to furnish
any know-how that does not constitute Research Information
not provided under the Research Agreement or not provided
in Regents' Patent Rights.
3. GRANT
3.1 Subject to the licenses granted to the U.S. Government set forth in
Paragraph 2.2 supra and to The Regents' continuing rights in Paragraph 3.4
infra, The Regents hereby grants to Licensee exclusive licenses under Regents'
Patent Rights within the Field to make, have made, use, sell, and distribute
Products and to practice the Method.
3.2 The licenses granted in Paragraph 3.1 hereunder shall be subject to
the rights of the U.S. Government including those set forth in 35 U.S.C. 200-212
and applicable governmental implementing regulations.
3.3 The manufacture of each Product and the practice of the Method shall
be subject to applicable government importation laws and regulations of a
particular country on each Product made outside said particular country in which
such Product is used or sold.
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3.4 Nothing in this Agreement shall be deemed to limit The Regents' right
to publish and use technical data from any research performed by The Regents,
Research information, and Regents' Patent Rights relating to the Invention(s)
and to make and use Products, Methods, and associated technology for educational
and research purposes.
3.5 The Regents also grants to Licensee the right to issue sublicenses to
third parties to make, have made, use, sell, and distribute a Product and to
practice the Method and have others practice the Method, provided that Licensee
has current exclusive rights thereto under this Agreement. Licensee, however,
may grant sublicenses to others in the form of label licenses even though
Licensee's licenses granted under this Agreement are non-exclusive. To the
extent applicable, such sublicenses shall include all of the rights of and
obligations due The Regents and the United States Government that are contained
in this Agreement except that Licensee shall not be bound by the royalty rate
and license issue fee contained herein with respect to its negotiation with
third parties seeking such sublicenses. However, Licensee shall, in such third
party negotiations, use its best efforts in reaching favorable royalty rates and
license issue fees. Licensee shall be entitled to five percent (5%) of all
income generated from sublicensing as an administrative fee, and of the
remaining income, one half (1/2) of all income generated from sublicensing shall
be paid to The Regents and one half (1/2) shall be retained by Licensee.
3.6 Licensee shall notify The Regents of each sublicense granted hereunder
and provide The Regents with a summary of the major terms of each sublicense.
Licensee shall collect and pay all income from fees and royalties due The
Regents (and
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guarantee all such payments) received from sublicensees. Licensee shall require
sublicensees to provide it with progress and royalty reports in accordance with
the provisions herein, and Licensee shall collect and deliver to The Regents all
such reports due from sublicensees.
3.7 Upon termination of this Agreement for any reason, The Regents, at its
sole discretion, shall determine whether any or all sublicenses shall be
canceled or assigned to The Regents.
3.8 Pursuant to 35 USC Section 204, because this Agreement grants the
exclusive right to make, use, or sell a Product in the United States, the
Licensee agrees that each Product embodying the Invention(s) or produced through
the use thereof will be manufactured substantially in the United States absent a
waiver from the United States Government.
4. LICENSE ISSUE FEE
4.1 The Licensee shall pay or cause to be paid to The Regents a license
issue fee for each Product licensed hereunder commensurate with the value of
each such Product. The cash amount of the license issue fee shall be negotiated
in good faith by The Regents and Licensee pursuant to Paragraph 7.1 infra and
the Product's value shall be based on information contained in the Plan of
Commercialization for that Product. The license issue fee shall be paid to The
Regents at the time the negotiated terms and conditions for the Product are
incorporated in Appendix A of this Agreement.
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4.2 The fees set forth in Paragraph 4.1 supra are non-refundable,
non-creditable, and not an advance against royalties.
5. ROYALTIES
5.1 In consideration for all the rights and licenses granted to Licensee,
the Licensee shall also pay to The Regents an earned royalty rate based on the
Net Sales of each Product. The royalty rate for each Product licensed hereunder
shall be negotiated in accordance with the provisions of Paragraph 7.1 infra,
but the basis for such negotiation shall be the profitability of each Product
calculated in accordance with the information contained in the Plan of
Commercialization provided to The Regents by Licensee for each such Product.
5.2 The Licensee shall be entitled to reduce the royalty rate pursuant to
Paragraph 5.1 supra in the event that it becomes necessary for Licensee to
license patent applications and patents owned by a third party(s) to make, use,
sell, or distribute a Product, provided that the combined royalties due The
Regents and the third party(s) for the Product having therapeutic applications
exceed ten percent (10%) or for the Product having diagnostic applications
exceed eight percent (8%) . Such reduction shall be equal to one-half (1/2) the
sum of the royalty rates due such third party(s), and in no event shall the
royalty rate paid to The Regents on Net Sales of a Product be less than four
percent (4%). Licensee shall not, however, be entitled to reduce the royalty
rate under the provisions of this Paragraph 5.2 for licenses obtained from
Stanford University to U.S. Patent No. 4,468,464, U.S. Patent No. 4,740,470, or
U.S. Patent No. 4,237,224.
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5.3 In the event that a Patent Product for which the royalty rate is not
reduced pursuant to Paragraph 5.2 above is sold in combination with another
active component that has independent cash value that is substantially the same
as the Patent Product, but such active components is not a Patent Product, then
The Regents shall be entitled to a royalty payment equal to the amount it would
otherwise receive if the Patent Product was sold as a single product. In the
event that no such separate sales are made by Licensee, then the Net Sales from
the sales of the combination product, for purposes of calculating the amounts
due under Paragraph 4.1 herein, shall be calculated by multiplying the Net Sales
of that combination product by the fraction A/(A+B), where A is the number of
Patent Product(s) comprising the combination product, and B is the number of
active components in the combination product that are not Patent Product(s). In
no case, however, shall the fraction A/(A+B) be less than four percent (4%).
5.4 Regents' Patent Rights, Product, and Method are defined so that
royalties shall be payable on products and methods covered by both pending
patent applications and issued patents. Earned royalties shall accrue in each
country for the duration of Regents' Patent Rights in that country and shall be
payable to The Regents when a Product is invoiced, or if not invoiced, when
delivered to a third party or to itself, an Affiliate, or Joint Venture in the
case where such delivery of a Product to Licensee, an Affiliate, or Joint
Venture is intended for end use for purposes other than internal research and
development or clinical trials.
5.5 Royalties accruing to The Regents shall be paid to The Regents
quarterly on or before the following dates of each calendar year:
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February 28 for the calendar quarter ending December 31
May 31 for the calendar quarter ending March 31
August 31 for the calendar quarter ending June 30
November 30 for the calendar quarter ending September 30
Each such payment will be for royalties which accrued up to the Licensee's most
recently completed calendar quarter.
5.6 The Regents and Licensee shall enter into good-faith negotiations
pursuant to Paragraph 7.1 infra to establish dates and amounts comprising
minimum annual royalty payments to be paid to The Regents. These minimum annual
royalties shall be paid to The Regents and shall be based on a percentage of the
anticipated income due The Regents from royalty income based on the anticipated
Net Sales of Products. A U.S. dollar amount comprising the minimum annual
royalties shall be paid to The Regents on dates established by the parties
during the good-faith negotiation in which market introduction is expected for a
Product based on information provided in the Plan of Commercialization. The
minimum annual royalties shall be paid to The Regents in the negotiated amounts
and at the negotiated times whether or not a Product is available for sale in
any country. These minimum annual royalty payments shall be paid to The Regents
by February 28 of each year and shall be credited against income paid to The
Regents under Paragraph 3.5 and earned royalties quarter to quarter until
consumed for that year. In the event minimum annual royalties exceed earned
royalties, the excess may be credited against earned royalties in succeeding
years until such excess is consumed.
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5.7 All monies due The Regents shall be payable in United States funds
collectible at par in San Francisco, California. When a Product is sold for
monies other than United States dollars, the earned royalties will first be
determined in the foreign currency of the country in which such Product was sold
and then converted into equivalent United States funds. The exchange rate will
be that rate quoted in the Wall Street Journal on the last business day of the
reporting period.
5.8 Earned royalties on sales of a Product occurring in any country
outside the United States shall not be reduced by any taxes, fees, or other
charges imposed by the government of such country on the remittance of royalty
income. The Licensee shall also be responsible for all bank transfer charges.
5.9 Notwithstanding the provisions of Article 28 (FORCE MAJEURE), if at
any time legal restrictions other than tax withholding on sublicensing revenues
prevent prompt remittance of part or all royalties owed to The Regents by the
Licensee with respect to any country where a Patent Product is sold or
distributed, the Licensee shall convert the amount owed to The Regents into
United States funds and shall pay The Regents directly from another source of
funds for the amount impounded.
5.10 In the event that any patent or any claim thereof included within the
Regents' Patent Rights shall be held invalid or unenforceable in a final
decision by a court of competent jurisdiction and last resort and from which no
appeal has or can be taken, all obligation to pay royalties based on such patent
or claim or any claim patentably indistinct therefrom shall cease as of the date
of such final decision. The Licensee shall not, however, be relieved from
paying any royalties that accrued before
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such decision or that are based on another patent or claim that has not expired
or that is not involved in such decision.
5.11 No royalties shall be collected or paid hereunder to The Regents on
Patent Products sold to the account of the U.S. Government. Licensee and its
sublicensee shall reduce the amount charged for a Product distributed to the
United States Government by an amount equal to the royalty for such a Product
otherwise due The Regents as provided herein.
5.12 In the event The Regents reduces Licensee's exclusive license to a
nonexclusive license under Article 6 (DUE DILIGENCE) herein and grants rights to
any third party under Regents' Patent Rights (except for the U.S. government) on
financial terms and conditions different than the financial terms of this
Agreement, then The Regents shall notify Licensee of such different terms and
conditions. Licensee shall have the option of adopting such terms and
conditions by giving notice to The Regents within sixty (60) days of The
Regents' notification to Licensee.
6. DUE DILIGENCE
6.1 The Licensee, upon execution of this Agreement, shall diligently
proceed with the development manufacture and sale of each Product and shall
earnestly and diligently endeavor to market same within a reasonable time after
execution of this Agreement and in quantities sufficient to meet the market
demands therefore.
6.2 The Licensee shall be entitled to exercise prudent and reasonable
business judgment in the manner in which it meets its due diligence obligations
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hereunder. In no case, however, shall Licensee be relieved of its obligations
to meet the due diligence provisions of this Article 6 (DUE DILIGENCE).
6.3 The Licensee shall endeavor to obtain all necessary governmental
approvals in each country for the manufacture, use and sale of each Product.
6.4 Licensee and The Regents shall negotiate in good faith to establish
diligence provisions in the form of specific performance milestones representing
technical and regulatory achievements needed to be attained in order to
commercialize each Product licensed hereunder and the corresponding date each
such milestone will be met by Licensee. The negotiation establishing specific
performance milestone and the corresponding date it will be met will be based on
information provided in the Plan of Commercialization for each Product provided
to The Regents pursuant to Paragraph 7.1 infra.
6.5 Subject to Licensee's rights under Paragraph 6.2 and subject to the
Licensee's freedom to practice Regents' Patent Rights without infringement of
third-party rights, if the Licensee is unable to attain any of the performance
milestones established for a Product and the corresponding dates for meeting
each such milestone, pursuant to Paragraph 6.4 supra, then the Regents shall
have the right and option to terminate Licensee's licenses to that Product or
reduce the Licensee's exclusive license to a nonexclusive license with respect
to the Product. This right, if exercised by The Regents, supersedes the rights
granted in Article 3 (GRANT).
6.6 At the request of either party, any controversy or claim arising out
of or relating to meeting the diligence provisions of this Agreement shall be
settled by
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arbitration conducted in accordance with the arbitration provisions set forth in
Paragraphs 7.4 through 7.10 infra.
6.7 To exercise the right to terminate the licenses to a Product or to
reduce Licensee's grant to one of nonexclusivity under this Article 6 (DUE
DILIGENCE), The Regents must give the Licensee written notice of the deficiency.
The Licensee thereafter has sixty (60) days to cure the deficiency or to request
arbitration. If The Regents has not received a written request for arbitration
or satisfactory tangible evidence that the deficiency has been cured by the end
of the sixty (60) day period, then The Regents may, at its option, terminate the
license to that Product or reduce the Licensee's exclusive license to a
nonexclusive license to such Product by giving written notice to the Licensee.
These notices shall be subject to Article 24 (NOTICES).
7. TERMS TO BE NEGOTIATED
7.1 Licensee shall provide a Plan of Commercialization to The Regents in
accordance with the provisions of the Research Agreement or the Option
Agreement, whichever is appropriate, to cover the commercial development of each
Product claimed in a patent application(s) and patent(s) issuing thereon and
elected by Licensee to be included in Regents' Patent Rights and covered by the
terms of this Agreement. Upon receipt of such Plan of Commercialization by The
Regents, The Regents and Licensee shall promptly enter into good-faith
negotiations to determine the following provisions covering each such Product to
be included in the terms of this Agreement:
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(7.1a) pursuant to Paragraph 4.1 herein, the cash amount of the
license issue fee for each Product licensed hereunder to be
paid to The Regents;
(7.1b) pursuant to Paragraph 5.1 herein, the royalty rate based on
Net Sales of each Product licensed hereunder;
(7.1c) pursuant to Paragraph 5.4 herein, the amount of the minimum
annual royalty payments and the years that each such payment
will be paid to The Regents for each Product licensed
hereunder; and
(7.1d) pursuant to Paragraph 6.4 herein, diligence provisions in
the form of specific performance milestones needed to
commercialize the Product and the corresponding date each
such milestone will be met by Licensee.
7.2 Upon successful conclusion of the negotiation pursuant to
Subparagraphs 7.1a through 7.1d supra, the terms agreed upon by the parties
hereto covering each Product or Method claimed in a patent application(s) and
patent(s) issuing thereon and elected by Licensee to be included in Regents'
Patent Rights shall be set forth in Appendix A of this Agreement, which shall be
attached hereto and incorporated herein.
7.3 If Licensee and The Regents are unsuccessful in establishing terms and
conditions covering each Product or Method in accordance with the provisions of
Subparagraphs 7.1a through 7.1d supra, then either party may refer any
controversy or claim arising out of or relating to this Article 7 (TERMS TO BE
NEGOTIATED) to arbitration under the provisions of this Paragraph 7.3 by so
notifying the other party in writing in accordance with the provisions of
Article 24 (NOTICES) stating the nature of the dispute to be resolved.
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7.4 Within fifteen (15) business days following such notice three
arbitrators shall be selected by the following process:
(7.4a) Each party shall designate one individual, not an employee,
director, paid consultant, or shareholder of the party to
serve as an arbitrator; and
(7.4b) These two arbitrators shall select a third individual, who
shall be an attorney experienced in arbitration proceedings,
to serve as the third arbitrator and to preside in
resolution of the dispute. The third arbitrator shall not
be an employee, director or shareholder of either party.
7.5 Promptly after selection of the three arbitrators, the arbitrators
shall meet with the parties at which time the parties shall each present in
writing the issue to be resolved and a proposed ruling on it. Such writing
shall be served on the other party in advance and be limited to no more than
twenty (20) pages.
7.6 The following general provisions shall apply to the arbitration
proceeding:
(7.6a) No later than thirty (30) days after the appointment of the
third arbitrator, the arbitrators shall set a date for a
hearing to resolve the issue identified by the parties. The
hearing shall take place no later than one hundred twenty
(120) days from the original notice requesting arbitration;
(7.6b) The arbitrators shall permit the taking of not more than one
(1) deposition by each party, and shall permit, subject to
the provisions of a mutually agreeable protective order, the
production of only those documents immediately and directly
bearing on the issue or issues subject to arbitration and
only to the extent necessary for the convenience and use of
the arbitrators, and shall not require or permit any other
discovery by any means, including, but not limited to,
depositions interrogatories or production of documents;
(7.6c) No later than ten (10) business days prior to the hearing,
each party may submit a single written brief or memorandum
in support of its position which may be no more than twenty
(20) pages. Each party shall be entitled to no more than
three (3) hours of hearing to present
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testimony or documentary evidence. Such time limitation
shall include any direct, cross or rebuttal testimony, but
such time limitation shall only be charged against the party
conducting such direct, cross or rebuttal testimony. It
shall be the responsibility of the arbitrators to determine
whether each party has had the three (3) hours to which it
is entitled or may, upon good cause shown, have additional
time to present its case;
(7.6d) Each party shall have the right to be represented by
counsel. The arbitrators shall have sole discretion with
regard to the admissibility of evidence. Admissibility will
be decided by two-thirds vote; and
(7.6e) Within fifteen (15) days of the conclusion of the hearing,
each party must submit a proposal finding to the
arbitrators.
7.7 The arbitrators shall rule on the disputed issue within thirty (30)
days following the completion of the testimony of both parties. Such ruling
shall adopt in their entirety the proposed findings of one of the parties on the
disputed issue, or the arbitrators shall adopt alternative findings. The issue
shall be resolved upon two-thirds (2/3) vote of the arbitrators.
7.8 Arbitration shall take place in the location of choice of the party
who has not requested arbitration, but such location shall be in the state of
California.
7.9 The arbitrators shall be paid reasonable fees plus expenses, which
shall be shared equally between The Regents and Licensee.
7.10 The decision of the arbitrators shall be enforceable, but not
appealable, in any court of competent jurisdiction.
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8. PROGRESS AND ROYALTY REPORTS
8.1 Beginning one year from the effective date recited on page one of this
Agreement and annually thereafter, the Licensee shall submit to The Regents a
progress report covering the Licensee's activities related to the development
and testing of each Product and the obtaining of the governmental approvals
necessary for marketing. These progress reports shall be provided to The
Regents to cover the progress of the research and development of the Product
until its first commercial sale in the United States.
8.2 The progress reports submitted under section 8.1 shall include, but
not be limited to, the following topics so that The Regents may be able to
determine the progress of the development of each Product and may also be able
to determine whether or not Licensee has met its diligence obligations set forth
in Article 6 (DUE DILIGENCE) above:
- summary of work completed
- key scientific discoveries
- summary of work in progress
- current schedule of anticipated events or milestones
- market plans for introduction of each Product
- activities of sublicensees, if any.
8.3 The Licensee also agrees to report to The Regents in its immediately
subsequent progress and royalty report the date of first commercial sale of a
Product in each country.
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8.4 After the first commercial sale of a Product, the Licensee will
provide The Regents with quarterly royalty reports to The Regents on or before
each February 28, May 31, August 31 and November 30 of each year. Each such
royalty report will cover the Licensee's most recently completed calendar
quarter (October through December, January through March, April through June,
and July through September) and will show:
(8.4a) the gross sales and Net Sales of each Product sold by the
Licensee and reported to Licensee as sold by its
sublicensees during the most recently completed calendar
quarter;
(8.4b) the number of each Products sold or distributed by Licensee
and reported to Licensee as sold or distributed by its
sublicensees;
(8.4c) the royalties, in U.S. dollars, payable hereunder with
respect to Net Sales; and
(8.4d) the exchange rates used, if any.
8.5 If no Product has been made during any reporting period, a statement
to this effect shall be required.
9. BOOKS AND RECORDS
9.1 The Licensee shall keep books and records accurately showing each
Product manufactured, used, and/or sold under the terms of this Agreement. Such
books and records shall be preserved for at least five (5) years from the date
of the royalty payment to which they pertain and shall be open to inspection,
upon seven (7) days notice during normal business hours at Licensee's normal
place of business, to
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a mutually agreed upon independent accountant or auditor who shall be bound by
an obligation of confidentiality for such audit. Audits of Licensee's books and
records shall not take place more than once in any twelve-month period.
9.2 The fees and expenses of the accountant or auditor performing such
examination shall be borne by The Regents. However, if an error in royalties of
more than five percent (5%) of the total royalties due for any year is
discovered, then the fees and expenses of the accountant or auditor shall be
borne by the Licensee.
10. LIFE OF THE AGREEMENT
10.1 Unless otherwise terminated by operation of law or by acts of the
parties in accordance with the terms of this Agreement, this Agreement shall be
in force from the effective date recited on page one and shall remain in effect
for the life of the last-to-expire patent licensed under this Agreement, or
until the last patent application licensed under this Agreement is abandoned.
10.2 Any termination of this Agreement shall not affect the rights and
obligations set forth in the following Articles:
Article 9 Books and Records
Article 14 Confidentiality
Article 17 Use of Names and Trademarks
Article 20 Indemnification
Article 30 Disposition of each Product on Hand Upon Termination
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11. TERMINATION BY THE REGENTS
11.1 If the Licensee should violate or fail to perform any term or covenant
of this Agreement, then The Regents may give written notice of such default
("Notice of Default") to the Licensee. If the Licensee should fail to repair
such default within sixty (60) days of the effective date of such notice, The
Regents shall have the right to terminate this Agreement and the licenses herein
by a second written notice ("Notice of Termination") to the Licensee. If a
Notice of Termination is sent to the Licensee, this Agreement shall
automatically terminate on the effective date of such notice. These notices
shall be subject to Article 24 (NOTICES).
11.2 The Regents shall also have the right and option to terminate this
Agreement if the Research Agreement is prematurely terminated by Licensee and
there has been no breach of failing thereof by The Regents. Said termination of
this Agreement shall be carried out in the manner set forth in Paragraph 11.1
above.
12. TERMINATION BY THE LICENSEE
12.1 The Licensee shall have the right upon ninety (90) days written notice
to The Regents to terminate this Agreement in whole or as to any portion of
Regents' Patent Rights. Upon expiration of the ninety (90) day period,
Licensee's termination shall be effective and Licensee shall stand unlicensed
hereunder. Such notice of termination shall be subject to Article 24 (NOTICES).
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13. SUPPLY OF THE BIOLOGICAL MATERIALS
13.1 The Regents agrees to initially supply Licensee with viable samples of
the biological materials comprising Research Information (to the extent that
such biological materials are in a form acceptable for transfer) within thirty
(30) days upon request from Licensee up until three (3) months after termination
of the Research Agreement. To the extent Licensee requires and requests
additional samples from The Regents during the term hereof, and The Regents has
such additional samples in its possession, The Regents agrees to supply such
additional samples. Licensee agrees to pay the actual handling and shipping
costs for any additional samples provided.
13.2 To the extent Licensee is able to produce biological materials,
reagents, compositions, and materials derived from Research Information, and
subject to prudent and reasonable business judgment, Licensee shall make
reasonable efforts to provide biological materials, reagents, compositions, and
materials derived from Research Information at no charge to The Regents for
research purposes only in the Division of Molecular Cytometry or in research
programs at Lawrence Berkeley Laboratory under the direction of Joe W. Gray and
Daniel Pinkel. In the event Licensee provides biological materials, reagents,
compositions, and materials to The Regents, such biological materials, reagents,
compositions, and materials are provided WITHOUT WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. Licensee's obligations to provide materials
shall not exceed a fair market value for such materials in excess of one hundred
fifty thousand dollars ($150,000).
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14. CONFIDENTIALITY
14.1 Licensee and The Regents respectively shall treat and maintain the
other party's proprietary business, patent prosecution, software, engineering
drawings, process and technical information, and other proprietary information
(hereinafter referred to as "Proprietary Information") in confidence using at
least the same degree of care as that party uses to protect its own proprietary
information of a like nature for a period from the date of disclosure until five
(5) years after the date of termination of this Agreement, provided that all
Proprietary Information shall be labeled or marked confidential or as otherwise
similarly appropriate by the disclosing party, or if the Proprietary Information
is orally disclosed, it shall be reduced to writing or some other physically
tangible form, marked and labeled as set forth above by the disclosing party and
delivered to the receiving party within thirty (30) days of the oral disclosure
as a record of the disclosure and the confidential nature thereof.
Notwithstanding the foregoing, Licensee and The Regents may use and disclose
Proprietary Information to its employees, agents, consultants, contractors, and
sublicensees, or as is deemed necessary by Licensee or The Regents to market and
sell each Product, and for any purpose set forth or relating to this Agreement,
provided that any such parties are bound by a like duty of confidentiality.
(14.1a) Nothing contained herein shall in any way restrict or impair the
right of Licensee or The Regents to use, disclose or otherwise
deal with any Proprietary Information:
i) which recipient can demonstrate by written records was
previously known to it; or
ii) which is now, or becomes in the future, public knowledge
other than through acts or omissions of recipient; or
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iii) which is lawfully obtained without restrictions by recipient
from sources independent of the disclosing party; or
iv) which is required to be disclosed to a governmental entity
or agency in connection with seeking any governmental or
regulatory approval, or pursuant to the lawful requirement
or request of a governmental entity or agency; or
v) which is furnished to a third party by the recipient with
similar confidentiality restrictions imposed on such third
party, as evidenced in writing; or
vi) which The Regents is required to disclose pursuant to the
California Public Records Act or other applicable law.
If The Regents is required to disclose Licensee's Proprietary Information
pursuant to Subparagraphs (iv) and (vi) above, The Regents shall give Licensee
ten (10) days notice prior to disclosure.
14.2 The Licensee and The Regents agree to destroy or return to the
disclosing party Proprietary Information received from the other in its
possession within fifteen (15) days following the effective date of termination.
However, each party may retain one copy of proprietary information for archival
purposes in nonworking files. Licensee and The Regents agree to provide each
other, within thirty (30) days following termination, with a written notice that
Proprietary Information has been returned or destroyed.
15. PATENT PROSECUTION AND MAINTENANCE
15.1 The Regents shall diligently prosecute and maintain the United States
and foreign patent applications and patents comprising Regents' Patent Rights
using counsel of its choice. The Regents shall promptly provide Licensee with
copies of all
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relevant documentation so that Licensee may be currently and promptly informed
and apprised of the continuing prosecution, and may comment upon such
documentation sufficiently in advance of any initial deadline for filing a
response, provided, however, that if Licensee has not commented upon such
documentation prior to the initial deadline for filing a response with the
relevant government patent office or The Regents must act to preserve Regent's
Patent Rights, The Regents shall be free to respond appropriately without
consideration of Licensee's comments, if any. Both parties hereto agree to keep
this documentation in confidence in accordance with the provisions of Article 14
(CONFIDENTIALITY) herein. The Regents' counsel will take instructions only from
The Regents. The Regents shall retain counsel of its choice that is reasonably
acceptable to Licensee, provided, however, that if Licensee rejects The Regents'
choice of counsel three (3) times consecutively (i.e., three different new
attorneys), then The Regents shall be free, in its sole discretion, to choose an
attorney of its choice.
15.2 The Regents shall use all reasonable efforts to amend any patent
application to include claims requested by the Licensee and required to protect
each Product contemplated to be sold or Method to be practiced under this
Agreement.
15.3 The Regents and Licensee shall cooperate in applying for an extension
of the term of any patent included within Regents' Patent Rights, if
appropriate, under the Drug Price Competition and Patent Term Restoration Act of
1984. The Licensee shall prepare all such documents, and The Regents agrees to
execute such documents and to take such additional action as the Licensee may
reasonably request in connection therewith.
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15.4 The Regents shall, at the request of Licensee, file, prosecute, and
maintain patent applications and patents covered by Regents' Patent Rights in
foreign countries if available. The Licensee must notify The Regents within
seven (7) months of the filing of the corresponding United States application of
its decision to request The Regents to file foreign counterpart patent
applications. This notice concerning foreign filing shall be in writing and
must identify the countries desired. The absence of such a notice from the
Licensee to The Regents within the seven (7) month period shall be considered an
election by Licensee not to request The Regents to secure foreign patent rights
on behalf of the Licensee. The Regents shall have the right to file patent
applications at its own expense in any country Licensee has not included in its
list of desired countries, and such applications and resultant patents, if any,
shall not be included in the licenses granted under this Agreement. However,
The Regents shall notify Licensee of such foreign countries in which The Regents
filed patent applications and in which Licensee elected not to secure foreign
rights. Subject to the availability of relevant rights, Licensee shall have the
right and option to include in this Agreement (if not already licensed
exclusively to a third party) those patent applications and patents issuing
thereon filed in countries not originally included in Licensee's desired list at
any time up to five (5) years from the filing date of such patent applications,
provided, however, that Licensee shall notify The Regents in writing of its
decision and shall share equally with other licensees in all filing,
prosecution, and maintenance fees for such additional patents and patent
applications.
15.5 1/n of past, present and future costs of preparing, filing,
prosecuting and maintaining all United States and foreign patent applications
and all costs and fees
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relating to the preparation and filing of patents covered by Regents' Patent
Rights in Paragraph 1.5 shall be borne by Licensee. The costs of all
interferences and oppositions shall be considered prosecution expenses and also
shall be borne by Licensee. Licensee shall reimburse The Regents for all costs
and charges within thirty (30) days following receipt of a proper itemized
invoice from The Regents to which relevant law firm billings shall be attached.
For purposes of this Paragraph, "n" means the number of Regents' licensees to
Regents' Patent Rights. But, the United States Government shall not be
considered a licensee of The Regents.
15.6 The Licensee's obligation to underwrite and to pay patent filing costs
and related costs, prosecution and maintenance costs shall continue for so long
as this Agreement remains in effect, provided, however, that the Licensee may
terminate its obligations with respect to any patent application or patent in
any or all designated countries upon three (3) months written notice to The
Regents. The Regents will use its best efforts to curtail the associated patent
costs after such a notice is received from the Licensee. The Regents may
continue prosecution and/or maintenance of such application(s) or patent(s) at
its sole discretion and expense, provided, however, that the Licensee shall have
no further right or licenses thereunder.
16. MAINTENANCE OF THE BIOLOGICAL MATERIALS
16.1 The Regents agrees to instruct the Principal Investigators that when
circulating replicable biological materials comprising Research Information to
third parties to do so under the terms and conditions set forth in the
Biological Material Transmission Letter attached hereto as Schedule A. The
Regents expressly reserves
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the right to transfer replicable biological materials comprising Research
Information as provided in this Paragraph 16.1 to Universities and nonprofit
research organizations to the extent that such transfer does not compete with
Licensee. The Regents shall inform Licensee of third party requests for
biological materials and shall provide Licensee with a copy of the
fully-executed copy of the Biological Material Transmittal Letter. The Regents
shall inform Licensee of comments, suggestions, and information provided The
Regents by recipients of biological material. Licensee shall not interfere with
The Regents efforts to bail these materials to third parties.
16.2 The Licensee agrees not to transfer of the replicable biological
materials comprising Research Information (to the extent that such materials are
not part of any Product sold by Licensee) that are not freely available to
others accept to Affiliates, Joint Ventures, sublicensees, and potential
sublicensees.
17. USE OF NAMES AND TRADEMARKS
AND NONDISCLOSURE OF AGREEMENT
17.1 Nothing contained in this Agreement shall be construed as conferring
any right to use in advertising, publicity, or other promotional activities any
name, trade name, trademark, or other designation of either party hereto by the
other (including any contraction, abbreviation, or simulation of any of the
foregoing). The use of the name by Licensee of "The Regents of the University of
California" or the name of any University of California campus or national
laboratory is expressly prohibited except as provided for under Articles 14
(CONFIDENTIALITY) and 17 (USE OF NAMES AND TRADEMARKS AND NONDISCLOSURE OF
AGREEMENT).
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17.2 Each party hereto further agrees not to use or refer to this Agreement
or any license granted hereunder in any promotional activity without the express
written approval of the other party. However, The Regents shall be free to
release to the inventors of Invention(s) covered by this Agreement and senior
administration officials employed by The Regents the terms and conditions of
this Agreement upon their request. If such release is made, The Regents shall
request that the inventors not disclose such terms and conditions to others. It
is further understood that should a third party inquire whether a license is
available, The Regents may disclose the existence of this Agreement and the
extent of the grant in Article 3 (GRANT) to such third party, but shall not
disclose the name of the Licensee, except where The Regents is required to
release information under either the California Public Records Act or other
applicable law.
18. PATENT MARKING
18.1 Licensee agrees to mark each Product falling within the scope of an
issued claim within Regents' Patent Rights for anything under the terms of this
Agreement, or their containers, in accordance with the applicable patent marking
laws.
18.2 Licensee shall have the right to include in any NDA for a Product, a
list of patents included within Regents' Patent Rights identifying The Regents
as patent owner.
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19. PATENT INFRINGEMENT
19.1 In the event that either party responsible for administering this
Agreement learns of substantial infringement of any patent licensed under this
Agreement, the informed party shall call such infringement to the other party's
attention thereto in writing and shall provide the other party with reasonable
evidence of such infringement. Both parties to this Agreement agree that during
the period and in a jurisdiction where Licensee has exclusive rights under this
Agreement, neither will notify an infringing third party of the infringement of
any of Regents' Patent Rights limited to the exclusive rights granted under this
Agreement without first obtaining consent of the other party, which consent
shall not be unreasonably denied. Both parties shall use their best efforts in
cooperation with each other to terminate such infringement without litigation.
19.2 Licensee may request that The Regents take legal action against the
infringement of Regents' Patent Rights. Such request shall be made in writing
and shall include reasonable evidence of such infringement and damages to
Licensee. If the infringing activity has not been abated within ninety (90)
days following the date of such request, The Regents shall have the right to:
(19.2a) commence suit on its own account to terminate the
infringement. In the event The Regents commences suit,
Licensee shall reimburse The Regents for fifty percent (50%)
of The Regents' actual Infringement Litigation Costs.
Licensee's share of The Regents' Infringement Litigation
Costs shall be paid to The Regents on a quarterly basis
within sixty (60) days of receiving notice from The Regents
of the amount of such costs. Such reimbursement shall
continue until the suit is finally adjudicated or settled.
All recoveries shall first be applied to fully repay The
Regents and Licensee for the cost of the suit. Any
remainder shall
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be shared between The Regents and Licensee, with The Regents
and Licensee sharing equally in the recovery; or
(19.2b) refuse to participate in such suit. In the event The
Regents refuses to participate in such suit, The Regents
shall give notice of its election in writing to Licensee by
the end of the one-hundredth (100th) day after receiving
notice of such request from Licensee. Licensee thereafter
may bring suit for patent infringement in Licensee's own
name and if the infringement occurred during the period and
in a jurisdiction where Licensee has exclusive rights under
this Agreement. In the event Licensee elects to bring suit
in accordance with this Paragraph, The Regents may
thereafter join such suit at its own expense.
19.3 Subject to Paragraph 19.2b above, legal action brought jointly by The
Regents and Licensee and participated in by both shall be at the joint expense
of the parties and all recoveries be shared jointly by them in proportion to the
share of expense paid by each party.
19.4 In the event that The Regents refuses to participate in a suit and the
Licensee brings same, the Licensee may withhold, during pendency of the suit, up
to fifty percent (50%) of the minimum and earned royalty income otherwise due
The Regents to offset one-half of Licensee's Infringement Litigation Costs.
Licensee's Infringement Litigation Costs shall be deducted from royalty payments
on a quarterly basis, and an accounting of such deductions shall be reflected in
Licensee's quarterly royalty reports to The Regents provided for in Article 8
(PROGRESS AND ROYALTY REPORTS). Said withheld royalty income shall be applied
to only those Infringement Litigation Costs that Licensee incurred during the
quarter in which such royalty income was due and owing. Should one-half of the
Infringement Litigation Costs of the suit exceed one-half of the royalties
allowed to be withheld in accordance with this
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Paragraph 19.4, Licensee may apply such excess to the following quarter. This
same application of excess cost will continue until such time as the suit is
finally adjudicated. All recoveries shall first be applied to fully repay both
parties for the cost of the suit, and any remainder shall be shared equally.
19.5 Each party agrees to cooperate with the other in litigation
proceedings instituted hereunder. Such litigation shall be controlled by the
party bringing the suit, except that The Regents may be represented by counsel
of its choice pursuant to The Regents' determination in any suit brought by
Licensee.
20. INDEMNIFICATION
20.1 Licensee and The Regents are acting as independent contractors under
this Agreement and nothing continued herein shall make either party the agent,
employee, partner, or representative of the other.
20.2 Licensee agrees (and requires its sublicensees) to indemnify, hold
harmless and defend The Regents, its officers, employees, and agents; the
sponsors of the research that lead to the Invention(s) covered by Regents'
Patent Rights; and the inventors of any Invention(s) covered by the patents and
patent applications comprising Regents' Patent Rights to which The Regents is
owner or co-owner of record, for any loss of or damage to the property of any
person or persons and any injury or death of any person or persons resulting
from or arising out of the exercise of this license or any sublicense granted
herein, excluding acts of negligence on the part of The Regents and claims of
infringement brought by The Regents against Licensee. Where The Regents is held
to be negligent, liability shall be apportioned
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according to the percentage of negligence accorded to The Regents by an
appropriate court or forum having jurisdiction. In those states or countries
where such an allocation of the percentage of negligence is not awarded, any
controversy or claim relating to such allocation or negligence between the
parties to this Agreement shall be settled by arbitration in accordance with the
arbitration provisions of Paragraphs 17.4 through 17.10 supra. In no event
shall The Regents be liable for normal commercial activities of Licensee nor
will The Regents be liable for any product liability under any related cause of
action.
20.3 The Regents shall promptly notify Licensee in writing of any claim or
suit brought against The Regents in respect of which The Regents intends to
invoke the provisions of this Article 20 (INDEMNIFICATION). Licensee will keep
The Regents informed on a current basis of its defense of any claims pursuant to
this Article 20 (INDEMNIFICATION).
21. WAIVER
21.1 It is agreed that 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 and/or similar breach or default.
22. ASSIGNABILITY
22.1 This Agreement is binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns, provided, however,
this Agreement shall be personal to the Licensee and shall be assignable by the
Licensee
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only with the written consent of The Regents, which consent shall not be
unreasonably withheld, except that Licensee may freely assign this Agreement to
an Affiliate or to a business entity that acquires all or substantially all of
the business or assets of the Licensee and that assumes, in writing, the
performance of all provisions of this Agreement, the Option Agreement, and the
Research Agreement.
23. LATE PAYMENTS
23.1 In the event royalty payments, fees, or patent prosecution costs are
not received by The Regents when due, Licensee shall pay to The Regents interest
charges at the rate of five percent (5%) plus the rate of interest which is
charged by the San Francisco Federal Reserve Bank to member banks twenty-five
(25) days prior to the date the payment was due. Such interest shall be
calculated from the date payment was due until actually received by The Regents.
Acceptance by The Regents of any late payment interest from Licensee under this
Paragraph 23.1 shall in no way affect the provision of Article 21 (WAIVER)
herein.
24. NOTICES
24.1 Any payment, 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 (a) on the date of delivery if delivered
in person or (b) on the fourth day after mailing if mailed by first-class
certified mail, postage paid, to the respective address given below, or to such
other address as it shall designate by written notice given to the other party
as follows:
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In the case of the Licensee: IMAGENETICS INCORPORATED
150 West Warrenville Road
P. 0. Box 3011
Naperville, Illinois 60566-7011
Attention: Vice President, Research & Development
In the case of The Regents: THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA (C/N 85-157-1)
Office of Technology Transfer
1320 Harbor Bay Parkway, Suite 150
Alameda, California 94502
Attention: Director
25. GOVERNING LAWS
25.1 THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA, but the scope and validity of any patent or
patent application shall be governed by the applicable laws of the country of
such patent or patent application.
26. FOREIGN GOVERNMENT APPROVAL OR REGISTRATION
26.1 If this Agreement or any associated transaction is required by the law
of any nation to be either approved or registered with any governmental agency,
the Licensee shall assume all legal obligations to do so and costs in connection
therewith. The Regents shall cooperate in all the Licensee's efforts.
27. EXPORT CONTROL LAWS
27.1 The Licensee shall observe all applicable United States and foreign
laws with respect to the transfer of Products and related technical data to
foreign
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countries, including, without limitation, the International Traffic in Arms
Regulations (ITAR) and the Export Administration Regulations.
28. FORCE MAJEURE
28.1 The parties to this Agreement shall be excused from any performance
required hereunder if such performance is rendered impossible or unfeasible due
to any catastrophes or other major events beyond their reasonable control,
including, without limitation, war, riot, and insurrection; laws, proclamations,
edicts, ordinances or regulations; strikes, lockouts or other serious labor
disputes; and floods, fires, explosions, or other natural disasters. When such
events have abated, the parties' respective obligations hereunder shall resume.
29. FULL DISCLOSURE
29.1 The Regents shall make its best effort to disclose Research
Information to Licensee and shall allow Licensee reasonable access to facilities
and faculty and staff participating in Research sponsored by Licensee. The
Regents shall identify and collect relevant materials which comprise Research
Information (to the extent such materials do not violate the proprietary rights
of others) and make such information available in a timely manner to Licensee.
To the extent The Regents are able to do so, The Regents shall make such
Research Information available to Licensee in a form most convenient for
transfer to and use by Licensee, including electronic media. The Regent's duty
of disclosure to Licensee for Research Information shall not extend beyond one
year from the date of expiration of the Research Agreement.
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30. DISPOSITION OF PRODUCT ON HAND UPON TERMINATION
30.1 Upon termination of this Agreement, the Licensee shall have the
privilege of disposing of each previously made or partially made Product, but no
more, within a period of one hundred and twenty (120) days, provided, however,
that the sale of such Product shall be subject to the terms of this Agreement
including, but not limited to the payment of royalties on the Net Sales of a
Product at the rates and at the times provided herein and the rendering of
reports in connection therewith.
31. MISCELLANEOUS
31.1 The headings of the several sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
31.2 This Agreement will not be binding upon the parties until it has been
signed below on behalf of each party, in which event, it shall be effective as
of the date recited on page one.
31.3 No amendment or modification hereof shall be valid or binding upon the
parties unless made in writing and signed on behalf of each party.
31.4 This Agreement and the Research Agreement embody the entire
understanding of the parties and shall supersede all previous communications,
representations or understandings, either oral or written, between the parties
relating to the subject matter hereof.
31.5 In case any of the provisions contained in this Agreement shall be
held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality or
44
<PAGE>
unenforceability shall not affect any other provisions hereof, but this
Agreement shall be construed as if such invalid or illegal or unenforceable
provisions had never been contained herein.
31.6 This Agreement includes Schedule A, B, and C and Appendix A which are
attached hereto.
IN WITNESS WHEREOF, both The Regents and the Licensee have executed this
Agreement, in duplicate originals, by their respective officers hereunto duly
authorized, on the day and year hereinafter written.
IMAGENETICS INCORPORATED THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
By /s/ John L. Bishop By /s/ Carl B. Wootten
----------------------- -----------------------------------
(Signature) (Signature)
Name John L. Bishop Name: Carl B. Wootten
---------------------
(Please Print)
Title President Title: Director;
-------------------- Office of Technology Transfer
Date June 7, 1994 Date July 11, 1994
--------------------- --------------------------------
45
<PAGE>
SCHEDULE A - PAGE 1A
University of California/San Francisco Campus (UCSF)
Instructions for Standard Letter Transmitting
Biological Materials to Universities and
Nonprofit Institutions
The attached letter is authorized for use by University of
California/(UCSF) Principal Investigators and Administrators ONLY with
Scientists at other UNIVERSITIES AND NONPROFIT RESEARCH INSTITUTIONS when
transmitting cell lines, plasmids and the like for non-commercial research
purposes.
1. Choose the appropriate form of university or nonprofit research
institution in paragraph 2.
2. Choose whether or not to include the phrase "our cooperative" in
paragraph 2.
3. Insert in paragraph 4 the amount of processing charge. If the
material is to be shipped at no charge, insert the words "no charge".
4. Send the letter IN DUPLICATE to the other scientists.
5. Do not send biological materials until you receive the duplicate copy
executed by both the scientist and the other institution.
6. Send a copy of the fully executed letter agreement to:
Carl B. Wootten
Director
Office of Technology Transfer
1320 Harbor Bay Parkway
Suite 150
Alameda, CA 94501
7. Any changes in the wording of this standard letter must be reviewed by
the Director of the Office of Technology Transfer before acceptance.
Note: Do not use this letter for the exchange of living plants. A separate
"Testing Agreement for the Plant Varieties" is available for that
purpose.
46
<PAGE>
SCHEDULE A - PAGE 2A
SAMPLE LETTER FOR USE PRIOR TO TRANSMISSION OF BIOLOGICAL
MATERIALS TO INVESTIGATORS AT UNIVERSITIES OR NON-PROFIT
RESEARCH INSTITUTIONS
(date)
IN DUPLICATE
To:_____________________
This is to (acknowledge receipt of your letter) (confirm our telephone
conversation) in which you requested certain research materials developed in
this laboratory be sent to you for scientific research purposes. The materials
concerned, which belong to The Regents of the University of California/San
Francisco Campus (UCSF) are:__________________________________________.
While I cannot transfer ownership of these materials to you, I will be
pleased to permit your use of these materials within your (university)
(Non-Profit Research Institution) laboratory for (our cooperative) scientific
research. However, before forwarding them to you, I require your agreement that
the materials will be received by you only for use in (our cooperative work)
(scientific research), that you will bear all risk to you or any others
resulting from your use, and that you will not pass these materials, their
progeny or derivatives, on to any other party or use them for commercial
purposes without the express written consent of The Regents of the University of
California. You understand that no other right or license to these materials,
their progeny or derivatives, is granted or implied as a result of our
transmission of these materials to you.
These materials are to be used with caution and prudence in any
experimental work, since all of their characteristics are not known.
As you recognize, there is a processing cost to us involved in providing
these materials to you. We will bill you for our processing costs, which will
amount to $___________________.
If you agree to accept these materials under the above conditions, please
sign the enclosed duplicate copy of this letter, then have it signed by an
authorized representative of your institution, and return it to me. Upon
receipt of that confirmation I will forward the material(s) to you.
47
<PAGE>
SCHEDULE A - PAGE 3A
(Note: other paragraphs discussing the relevant literature, the nature of the
work, hazards relating to materials to be sent etc. may be appropriate. These
will vary depending on the individual circumstances and the relationship between
the two parties previously established. Be sure to retain a signed copy when
received and send a photocopy of the completed agreement to the University of
California Patent Administrator, Office of Technology Transfer, Systemwide
Administration, 1320 Harbor Bay Parkway, Suite 150, Alameda, CA 94502)
Sincerely yours,
ACCEPTED:
RESEARCH INVESTIGATOR
- ----------------------
Printed Name
- ----------------------
(Signature)
- ----------------------
Date
RESEARCH UNIVERSITY OR
NON-PROFIT INSTITUTION
- ----------------------
Printed Name
- -----------------------
(Signature)
- -----------------------
Date
48
<PAGE>
SCHEDULE B - PAGE 1B
The PRINCIPAL INVESTIGATORS listed below understand and agree to abide by
the terms and conditions of Articles 16 (MAINTENANCE OF THE BIOLOGICAL
MATERIALS) and 29 (FULL DISCLOSURE) of the License Agreement between The Regents
of the University of California and Imagenetics Incorporated effective
July 01, 1994 and to instruct all relevant personnel
working within their laboratory to act accordingly. Said paragraph reads, in
part, as follows:
16.1 THE REGENTS AGREES TO INSTRUCT THE PRINCIPAL INVESTIGATORS THAT WHEN
CIRCULATING REPLICABLE BIOLOGICAL MATERIALS COMPRISING RESEARCH INFORMATION
THAT HAVE NOT BEEN RELEASED IN AN UNRESTRICTED MANNER TO THIRD PARTIES TO
DO SO UNDER THE TERMS AND CONDITIONS SET FORTH IN THE BIOLOGICAL MATERIAL
TRANSMISSION LETTER ATTACHED HERETO AS APPENDIX A.
By /s/ Joe W. Gray 5/24/94
--------------------- --------------------
Joe W. Gray Date
By /s/ Daniel Pinkel 5-31-94
--------------------- --------------------
Daniel Pinkel Date
By /s/ Maria Pallavicini 5/24/94
--------------------- --------------------
Maria Pallavicini Date
By /s/ Fredric Waldman 5/24/94
--------------------- --------------------
Frederic Waldman Date
By /s/ Burt Feurstein 5/25/94
--------------------- --------------------
Burt Feurstein Date
By /s/ Brian Mayall 5/31/94
--------------------- --------------------
Brian Mayall Date
By /s/ Ronald Jensen 5/24/94
--------------------- --------------------
Ronald Jensen Date
49
<PAGE>
SCHEDULE C - PAGE 1C
Chancellor Joseph B. Martin of the University of California at San
Francisco has read and approved the terms and conditions of the license
agreement titled EXCLUSIVE LICENSE AGREEMENT FOR INVENTIONS MADE IN THE FIELD OF
MOLECULAR CYTOGENETICS.
By /s/ Joseph B. Martin 7/15/94
---------------------------------- ---------------
Chancellor Joseph B. Martin Date
50
<PAGE>
OPTION AGREEMENT
BETWEEN
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
AND
IMAGENETICS INCORPORATED
FOR
INVENTIONS MADE IN THE FIELD
OF MOLECULAR CYTOGENETICS
<PAGE>
TABLE OF CONTENTS
ARTICLE NO. TITLE PAGE
- ----------- ----- ----
RECITALS..................................................................... 1
1. DEFINITIONS.............................................................. 4
2. OPTION FOR EXCLUSIVE LICENSE............................................. 8
3. OPTION FEE............................................................... 10
4. EXERCISE OF THE OPTION................................................... 10
5. TERMS TO BE NEGOTIATED................................................... 12
6. PROGRESS REPORTS......................................................... 15
7. PATENT PROSECUTION AND MAINTENANCE....................................... 16
8. LIFE OF THE AGREEMENT.................................................... 19
9. TERMINATION BY THE REGENTS............................................... 19
10. TERMINATION BY OPTIONEE................................................. 20
11. DISPOSITION OF PATENT PRODUCT(S)
ON HAND UPON TERMINATION................................................ 20
12. USE OF NAMES AND TRADEMARKS............................................. 21
13. REPRESENTATIONS AND WARRANTS............................................ 21
14. INDEMNIFICATION......................................................... 23
15. NOTICES................................................................. 23
16. ASSIGNABILITY........................................................... 24
17. LATE PAYMENTS........................................................... 24
18. WAIVER.................................................................. 25
19. GOVERNING LAWS.......................................................... 25
20. CONFIDENTIALITY......................................................... 25
21. SUPPLY OF THE BIOLOGICAL MATERIALS...................................... 27
22. MAINTENANCE OF THE BIOLOGICAL MATERIALS................................. 28
23. MISCELLANEOUS........................................................... 29
SCHEDULE A - PAGE 1A.................................................... 31
SCHEDULE A - PAGE 2A.....................................................32
SCHEDULE A - PAGE 3A.................................................... 33
SCHEDULE B - PAGE 1B.................................................... 34
SCHEDULE C - PAGE 1C.................................................... 35
<PAGE>
Draft date: 2/25/94
Revised: 4/15/94
OPTION AGREEMENT
FOR
INVENTIONS MADE IN THE FIELD OF MOLECULAR CYTOGENETICS
THIS OPTION AGREEMENT (the "Agreement") is made and is effective this 1st
day of July, 1994, by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, a
California corporation having its statewide administrative offices at 300
Lakeside Drive, 22nd Floor, Oakland, California 94612-3550, hereinafter
referred to as "The Regents", and IMAGENETICS INCORPORATED, an Illinois
corporation, having a principal place of business at 150 West Warrenville Road,
P.O. Box 3011, Naperville, Illinois 60566-7011, hereinafter referred to as the
"Optionee".
RECITALS
WHEREAS, certain inventions, generally characterized as specific nucleic
acids, gene products, and gene expression pathways, herein collectively referred
to as "the Invention(s)", were made in the course of research at the University
of California, San Francisco (UCSF) in the Division of Molecular Cytometry under
the direction of Joe W. Gray, Daniel Pinkel, Maria Pallavicini, Frederic
Waldman, Burt Feurstein, Brian Mayall, and Ronald Jensen ("Principal
Investigators") and are covered by Regents' Patent Rights as defined below;
WHEREAS, The Regents owns an undivided interest in U.S. Patent No.
4,468,464 entitled "Process and Composition for Biologically Functional
Molecular
<PAGE>
Chimeras" by S. Cohen, et al. and issued August 28, 1984, U.S. Patent No.
4,740,470 entitled "Biologically Functional Molecular Chimeras" by S. Cohen, et
al. and issued April 26, 1988, and U.S. Patent No. 4,237,224 entitled "Process
and Composition for Biologically Functional Molecular Chimeras" by S. Cohen, et
al. and issued December 2, 1980, which patents may prevent the practice of
Invention(s) claimed in Regents' Patent Rights contained in Paragraph 1.5 of
this Agreement;
WHEREAS, if it is necessary for Optionee to be licensed under the
aforementioned U.S. Patent No. 4,468,464, U.S. Patent 4,740,470, or U.S. Patent
No. 4,237,224 to practice the Invention(s) claimed in Regents' Patent Rights,
then Optionee shall obtain the necessary licenses from Stanford University; in
no case do the rights and options granted to Optionee under the terms of this
Agreement cover U.S. Patent No. 4,468,464, U.S. Patent No. 4,740,470, or U.S.
Patent No. 4,237,224;
WHEREAS, funding for any Invention made in the conduct of Research
performed under this Agreement is provided in part by the U.S. Department of
Health and Human Services (DHHS);
WHEREAS, under 35 USC Section 200-212, The Regents may elect to retain
title to any invention (including Inventions) made by it under U.S. Government
funding;
WHEREAS, if The Regents elects to retain title to the Invention, then the
law requires that The Regents grant to the U.S. Government a nontransferable,
paid-up, monexclusive, irrevocable license to use the Invention by or on behalf
of the U.S. Government throughout the world;
WHEREAS, The Regents and Optionee entered into a Research Agreement
2
<PAGE>
entitled "Research Agreement for the Development of Molecular Cytogenetics"
dated July 1, 1994 to provide funding by Optionee to the Principal Investigators
at UCSF to perform research in the detection and treatment of disease related to
chromosome abnormalities ("Research Agreement");
WHEREAS, under the terms of the Research Agreement, Optionee may elect to
include patent applications and resulting patents covering Invention(s) arising
in the conduct of work performed under the Research Agreement in this Agreement;
WHEREAS, The Regents and Optionee entered into a License Agreement entitled
"Exclusive License Agreement to Inventions Made in the Field of Molecular
Cytogenetics", effective July 1, 1994, ("License Agreement") and Optionee may
elect to include patent applications and resulting patents covered under the
terms of this Agreement in the License Agreement;
WHEREAS, if Optionee elects to include patent applications and resulting
patents covering Invention(s) arising in the conduct of work performed under the
Research Agreement under the terms of this Agreement, then prior to exercise of
the option and inclusion of such patent applications and resulting patents into
the License Agreement, Optionee shall provide The Regents with a Plan of
Commercialization required under the terms of this Agreement covering commercial
development of the Invention(s) claimed in such patent applications and
resulting patents, and thereafter, Optionee and The Regents shall negotiate the
following terms to be included in the License Agreement based on the information
contained in the Plan of Commercialization: a) license issue fee (Paragraph
4.1); b) royalty rate (Paragraph 5.1); c) minimum annual royalties (Paragraph
5.4); and d) diligence provisions in the
3
<PAGE>
form of specific performance milestones (Paragraph 6.4);
WHEREAS, Optionee is desirous of acquiring exclusive licenses to any and
all of Regents' Patent Rights covering the Invention(s) arising in the conduct
of work performed under the Research Agreement in Optionee's Field, subject to
rights granted by to the U.S. government as hereinafter described;
WHEREAS, the Invention(s) has utility for the detection and treatment of
chromosome abnormalities relating to specific diseases, and the Optionee has an
interest in obtaining rights to pursue the evaluation of commercial development
of the Invention(s) in Optionee's Field; and
WHEREAS, The Regents desires to grant such rights to Optionee in order that
the Invention(s) be developed and utilized to the fullest extent so that the
benefits can be enjoyed by the general public.
The parties agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the meaning set
forth below:
1.1 "Research" means investigations leading to the development of
information, reagents and/or techniques useful for and/or resulting in
identification and/or characterization of the following:
1) genetic abnormalities
2) genes
3) gene transcripts
4) gene products
relevant to human genetic disease and for their detection or characterization.
4
<PAGE>
1.2 "Research Agreement" means the agreement entitled "Research Agreement
for the Development of Molecular Cytogenetics" between The Regents and Licensee
dated July 1, 1994, for the conduct of Research and any extensions or renewals
thereof, and incorporated herein by reference. In the event of any
inconsistencies between the Research Agreement and this Agreement, the terms of
this Agreement shall control.
1.3 "Research Information" means technical data, processes, methods,
inventions, compositions-of-matter, and biological materials, equipment,
instruments, apparatuses, devices, articles of manufacture or component parts(s)
thereof developed under or resulting from the performance of Research under the
Research Agreement and improvements thereof, except for improvements on new
subject matter not funded by Licensee. In the event that computer software or
information management systems are created or developed in the performance of
Research under the Research Agreement such computer software or information
management systems shall be treated as Research Information. There shall be no
transfer of the physical possession of equipment, instruments, apparatuses,
devices, articles of manufacture or component part(s) thereof (except biological
materials) comprising Research Information.
1.4 "Regents' Patent Rights" means all U.S. patents and patent
applications and foreign patents and patent applications assigned to The Regents
and requested under Paragraph 1.3 infra, including any reissues, extensions,
substitutions, continuations, divisions and continuations-in-part (only to the
extent, however, that claims in the continuations-in-part are entitled to the
priority filing date of the parent
5
<PAGE>
patent application) based on and including any subject matter claimed in or
covered by any of the following:
(1.4a) Any future patent rights to subject matter claimed in or
covered by a patent application(s) covering any Inventions
elected by Licensee under the provisions of Article VIII of
the Research Agreement.
1.5 "Patent Products" means (a) any kit, composition of matter, material,
or product; (b) any kit, composition of matter, material, or product to be used
in a manner requiring the performance of the Patent Method, or any kit,
composition of matter, material, or product produced by the Patent Method, or
(c) the practice of the Patent Method itself to the extent the manufacture, use,
or sale of (a), (b), or (c) immediately above falls within the scope of one or
more claims of Regents' Patent Rights during the term of the patent grant, in
countries in which such claim or claims have issued and have not expired, been
abandoned, disclaimed, or found invalid or unenforceable.
1.6 "Unprotected Products" means (a) any kit, composition of matter,
material, or product; (b) any kit, composition of matter, material, or product
to be used in a manner requiring the performance of the Unprotected Method, or
any kit, composition of matter, material, or product produced by the Unprotected
Method, or (c) the practice of the Unprotected Method itself to the extent the
manufacture, use, or sale of (a), (b), or (c) immediately above falls within the
scope of one or more pending claims within Regents' Patent Rights during the
period and in such countries in which such claim or claims have not issued, and
have not expired, been abandoned, disclaimed, or found invalid or unenforceable,
such period not to exceed five years
6
<PAGE>
from the date in which the subject matter is first introduced in a patent
application in each country that such patent application is filed.
1.7 "Patent Method" means any process or method the use or practice of
which would constitute in a particular country, but for the license granted to
the Licensee pursuant to this Agreement, an infringement of an unexpired claim
of a patent within Regents' Patent Rights in that country in which the Patent
Method is used or practiced.
1.8 "Unprotected Method" means any process or method the use or practice
of which would constitute in a particular country, but for the license granted
to the Licensee pursuant to this Agreement an infringement of any unabandoned,
pending claim of a patent application within Regents' Patent Rights if such
patent application in that country in which the Unprotected Method is used or
practiced had issued.
1.9 "Product(s)" means Patent Products and Unprotected Products.
1.10 "Method" means Patent Method and Unprotected Method.
1.11 "Field" means research Product, diagnostic Product, and therapeutic
Product based on (a) detection of normal or altered specific nucleic acid
sequences, gene products, specific nucleic acid sequences, or gene expression
pathways, or (b) therapies targeted to specific nucleic acid sequences, gene
products, or gene expression pathways, provided that the Products in (a) or (b)
above do not employ or are not employed in the technique of IN SITU
hybridization.
1.12 "Affiliate(s)" of a party means any entity which, directly or
indirectly, controls such party, is controlled by such party or is under common
control with such party ("control" for these purposes being defined as the
actual, present capacity to
7
<PAGE>
elect a majority of the directors of such affiliate, or if not, the capacity to
elect the members that control fifty percent (50%) of the outstanding stock or
other voting rights entitled to elect directors) provided, however, that in any
country where the local law shall not permit foreign equity participation of a
majority, then an "Affiliate" shall include any company in which the Licensee
shall own or control, directly or indirectly, the maximum percentage of such
outstanding stock or voting rights permitted by local law. Each reference to
Licensee herein shall be meant to include its Affiliates.
1.13 "Joint Venture" means any separate entity established pursuant to an
agreement between a third party and Licensee to constitute a vehicle for a joint
venture, which separate entity manufacture, uses, purchases, sells, or acquires
a Product from Licensee. Each reference to Licensee herein shall be meant to
include its Joint Ventures.
1.14 "License Agreement(s)" means any agreement(s) entered into by The
Regents and Optionee entitled "Exclusive License Agreement to Inventions Made in
the Field of Molecular Cytogenetics", effective July 1, 1994, which grants
Optionee the exclusive right to make, use, distribute, or sell Products covered
by the Regents' Patent Rights.
2. OPTION FOR EXCLUSIVE LICENSE
2.1 Subject to the limitations set forth in this Agreement and subject to
the licenses granted to the U.S. Government set forth in Paragraph 13.2 infra,
The Regents hereby grants to Optionee under the Regents' Patent Rights, a
royalty-free
8
<PAGE>
right to practice the Method and a royalty-free right to make and use the
Product(s) for the development, test, and evaluation of such Product(s) to
evaluate Optionee's interest in exercising the option specified in Paragraph 2.2
infra.
2.2 Subject to the limitations set forth in this Agreement and subject to
the licenses granted to the U.S. Government set forth in Paragraph 13.2 infra,
The Regents hereby grants to Optionee a time-limited option to separately
negotiate in good faith the outstanding terms of the License Agreement specified
in Article 5 (TERMS TO BE NEGOTIATED) for an exclusive license to patent
applications and patents contained in Regents' Patent Rights claiming each
separate Product if Optionee exercises its option pursuant to Article 4
(EXERCISE OF THE OPTION).
2.3 The terms of the option set forth in Paragraph 2.2 supra for each
patent applications and patents contained in Regents' Patent Rights claiming a
Product shall be for eighteen (18) months commencing on the date Optionee
elected to include such patent applications and patents in this Agreement.
Optionee shall be entitled to renew the eighteen (18) month term of the option
set forth in this Paragraph 2.2 for such patent application for a period of one
(1) additional year, provided that Optionee pays an option renewal fee for that
Product as specified in Paragraph 3.1 infra.
2.4 This Agreement does not constitute a license to make, have made, use,
or sell Product(s) or to practice the Method except for the sole purpose of
conducting research and evaluating Optionee's interest in exercising its option.
In no case, however, shall Optionee sell Products under the terms of this
Agreement.
2.5 The licenses granted in Paragraph 3.1 hereunder shall be subject to
the rights of the U.S. Government in the Research including those set forth in
35 U.S.C.
9
<PAGE>
200-212 and applicable governmental implementing regulations.
2.6 Nothing in this Agreement shall be deemed to limit The Regents' right
to publish and use technical data from any research performed by The Regents,
Research Information, and Regents' Patent Rights relating to the Invention(s)
and to make and use Products, Methods, and associated technology for educational
and research purposes.
3. OPTION FEE
3.1 As consideration for all the rights granted to Optionee herein,
Optionee shall pay to The Regents an option fee of Twenty-Five Thousand Dollars
($25,000.00) for each U.S. patent application(s) and U.S. patent(s) claiming a
Product elected by Optionee to be included in Regents' Patent Rights. If
Optionee elects to renew the term of the option covering the Product in
accordance with the terms of Paragraph 2.3 supra, then Optionee shall pay to The
Regents an option renewal fee of Twenty-Five Thousand Dollars ($25,000.00) for
the renewal option period for the U.S. patent application(s) and U.S. patent(s)
claiming such Product.
3.2 These fees are nonrefundable, noncreditable, and not an advance
against reimbursement for any patent costs or fees due The Regents in this
Agreement or reimbursement for any patent costs, fees, or royalties due The
Regents specified in the License Agreement.
4. EXERCISE OF THE OPTION
4.1 If Optionee elects to exercise its rights to enter negotiations to
include
10
<PAGE>
the patent applications and patents claiming a Product in the License Agreement,
then Optionee shall notify The Regents in writing pursuant to Article 15
(NOTICES) prior to the expiration of this Agreement. Failure of Optionee to so
notify The Regents of its election hereunder shall be deemed to be an election
by Optionee not to secure a license.
4.2 Within thirty (30) days after Optionee's notification to The Regents
pursuant to Paragraph 4.1 immediately above, Optionee shall specify in writing
those particular patent applications, patents, and territories for which it
desires a license covering the Product from The Regents and those in which it
has no interest. Such notification shall include a copy of a Plan of
Commercialization covering the specific Product(s) to be made, used, or sold by
Optionee. "Plan of Commercialization" means a reasonably detailed plan
containing information regarding, but not limited to, a development plan
outlining specific performance milestones and timetable for a Product's
commercial development and its introduction to the market place, projected sales
for the Product, the date of the anticipated first commercial sale of a Product,
projected costs and profits for such Product, and other terms commonly included
in business plans. Failure of Optionee to provide a Plan of Commercialization
to The Regents in accordance with this Paragraph 4.2 shall be deemed to be an
election by Optionee not to secure a license.
4.3 With respect to Optionee's election not to secure a license under
Paragraph 4.1 or 4.2 to any patent application claiming both an ISH Invention
and a Non-ISH Invention, Optionee's election will not be deemed to be an
abandonment or termination of rights to an ISH Invention under the 1st License
Agreement.
11
<PAGE>
4.4 Within two (2) months after Optionee's notification to The Regents of
its election to exercise its option, Optionee and The Regents shall enter into
good-faith negotiations for the purpose of negotiating the outstanding terms and
conditions of the License Agreement specified in Article 5 (TERMS TO BE
NEGOTIATED).
5. TERMS TO BE NEGOTIATED
5.1 If Optionee exercises its rights to patent applications and patents
claiming a specific Product under Article 4 (EXERCISE OF THE OPTION), then
Optionee and The Regents shall thereafter negotiate in good-faith to determine
the following provisions covering each such Product to be included in the terms
of the License Agreement:
(5.1a) the cash amount of the license issue fee for each Product
licensed hereunder to be paid to The Regents; the cash
amount of the license issue fee shall reflect the Product's
value and shall be based on information contained in the
Plan of Commercialization for that Product;
(5.1b) the royalty rate based on each Product to be included in the
License Agreement. The basis for the negotiated royalty
rate shall be the profitability of each Product calculated
in accordance with the information contained in the Plan of
Commercialization provided to The Regents by Optionee for
each such Product;
(5.1c) the amount of minimum annual royalty payments to be paid to
The Regents for each Product; these minimum annual
royalties shall be paid to The Regents and shall be based on
a percentage of the anticipated income due The Regents from
royalty income based on the anticipated net sales of a
Product; a U.S. dollar amount comprising the minimum annual
royalties shall be paid to The Regents on dates established
by the parties during the good-faith negotiation in which
market introduction is expected for a Product based on
information provided in the Plan of Commercialization; the
minimum annual royalties shall be
12
<PAGE>
paid to The Regents in the negotiated amounts and at the
negotiated times whether or not a Product is available for
sale in any country;
(5.1d) diligence provisions in the form of specific performance
milestones representing technical and regulatory
achievements needed to be attained in order to commercialize
each Product elected hereunder and the corresponding date
each such milestone will be met by Optionee; the
negotiation establishing specific performance milestone and
the corresponding date it will be met will be based on
information provided in the Plan of Commercialization for
each Product;
5.2 Upon successful conclusion of the negotiation pursuant to
Subparagraphs 5.1a through 5.1d supra, the terms agreed upon by the parties
hereto covering each Product or Method claimed in a patent application(s) and
patent(s) issuing thereon and elected by Optionee to be included in the License
Agreement shall be set forth in Appendix A thereof, which shall be attached
thereto and incorporated therein.
5.3 If Optionee and The Regents are unsuccessful in establishing terms and
conditions covering each Product or Method in accordance with the provisions of
Subparagraphs 5.1a through 5.1d supra, then either party may refer any
controversy or claim arising out of or relating to this Article 5 (TERMS TO BE
NEGOTIATED) binding arbitration under the provisions of this Paragraph 5.3 by so
notifying the other party in writing in accordance with the provisions of
Article 15 (NOTICES) stating the nature of the dispute to be resolved.
5.4 Within fifteen (15) business days following such notice three
arbitrators shall be selected by the following process:
(5.4a) Each party shall designate one individual, not an employee,
director, paid consultant, or shareholder of the party to
serve as an arbitrator; and
13
<PAGE>
(5.4b) These two arbitrators shall select a third individual, who
shall be an attorney experienced in arbitration proceedings,
to serve as the third arbitrator and to preside in
resolution of the dispute. The third arbitrator shall not
be an employee, director or shareholder of either party.
5.5 Promptly after selection of the three arbitrators, the arbitrators
shall meet with the parties at which time the parties shall each present in
writing the issue to be resolved and a proposed ruling on it. Such writing
shall be served on the other party in advance and be limited to no more than
twenty (20) pages.
5.6 The following general provisions shall apply to the arbitration
proceeding:
(5.6a) No later than thirty (30) days after the appointment of the
third arbitrator, the arbitrators shall set a date for a
hearing to resolve the issue identified by the parties. The
hearing shall take place no later than one hundred twenty
(120) days from the original notice requesting arbitration;
(5.6b) The arbitrators shall permit the taking of not more than one
(1) deposition by each party, and shall permit, subject to
the provisions of a mutually agreeable protective order, the
production of only those documents immediately and directly
bearing on the issue or issues subject to arbitration and
only to the extent necessary for the convenience and use of
the arbitrators, and shall not require or permit any other
discovery by any means, including, but not limited to,
depositions interrogatories or production of documents;
(5.6c) No later than ten (10) business days prior to the hearing,
each party may submit a single written brief or memorandum
in support of its position which may be no more than twenty
(20) pages. Each party shall be entitled to no more than
three (3) hours of hearing to present testimony or
documentary evidence. Such time limitation shall include
any direct, cross or rebuttal testimony, but such time
limitation shall only be charged against the party
conducting such direct, cross or rebuttal testimony. It
shall be the responsibility of the arbitrators to determine
whether each party has had the three (3) hours to which it
is entitled or may, upon good cause shown, have additional
time to present its case;
14
<PAGE>
(5.6d) Each party shall have the right to be represented by
counsel. The arbitrators shall have sole discretion with
regard to the admissibility of evidence. Admissibility will
be decided by two-thirds vote; and
(5.6e) Within fifteen (15) days of the conclusion of the hearing,
each party must submit a proposal finding to the
arbitrators.
5.7 The arbitrators shall rule on the disputed issue within thirty (30)
days following the completion of the testimony of both parties. Such ruling
shall adopt in their entirety the proposed findings of one of the parties on the
disputed issue, or the arbitrators shall propose alternative findings. The
issue shall be resolved upon two-thirds vote of the arbitrators.
5.8 Arbitration shall take place in the location of choice of the party
who has not requested arbitration, but such location shall be in the state of
California.
5.9 The arbitrators shall be paid reasonable fees plus expenses, which
shall be shared equally between The Regents and Optionee.
5.10 The decision of the arbitrators shall be enforceable, but not
appealable, in any court of competent jurisdiction.
6. PROGRESS REPORTS
6.1 Beginning six (6) months from the election by Optionee to include
patent applications under Paragraph 1.1 supra (Regents' Patent Rights), Optionee
shall submit to The Regents a progress report covering the Optionee's activities
related to the development and testing of each Product covered by this
Agreement. Such progress report shall thereafter be submitted semi-annually.
6.2 The progress reports submitted under Paragraph 6.1 immediately above
15
<PAGE>
shall include, but not be limited to, the following topics so that The Regents
may be able to determine the progress of the development of each Product:
- summary of work completed
- key scientific discoveries
- summary of work in progress
7. PATENT PROSECUTION AND MAINTENANCE
7.1 The Regents shall diligently prosecute and maintain the United States
and foreign patent applications and patents comprising Regents' Patent Rights
using counsel of its choice. The Regents shall promptly provide Optionee with
copies of all relevant documentation so that Optionee may be currently and
promptly informed and apprised of the continuing prosecution, and may comment
upon such documentation sufficiently in advance of any initial deadline for
filing a response, provided, however, that if Optionee has not commented upon
such documentation prior to the initial deadline for filing a response with the
relevant government patent office or The Regents must act to preserve Regent's
Patent Rights, The Regents shall be free to respond appropriately without
consideration of Optionee's comments, if any. Both parties hereto agree to keep
this documentation in confidence in accordance with the provisions of Article 20
(CONFIDENTIALITY) herein. The Regents' counsel will take instructions only from
The Regents. The Regents shall retain counsel of its choice that is reasonably
acceptable to Licensee, provided, however, that if Licensee rejects The Regents'
choice of counsel three (3) times consecutively (i.e., three different new
attorneys), then The Regents shall be free, in its sole discretion, to choose an
attorney
16
<PAGE>
of its choice.
7.2 The Regents shall use all reasonable efforts to amend any patent
application to include claims requested by the Optionee and required to protect
each Product contemplated to be sold or Method to be practiced under the License
Agreement.
7.3 The Regents shall, at the request of Optionee, file, prosecute, and
maintain patent applications and patents covered by Regents' Patent Rights in
foreign countries if available. The Optionee must notify The Regents within
seven (7) months of the filing of the corresponding United States application of
its decision to request The Regents to file foreign counterpart patent
applications. This notice concerning foreign filing shall be in writing and
must identify the countries desired. The absence of such a notice from the
Optionee to The Regents within the seven (7) month period shall be considered an
election by Optionee not to request The Regents to secure foreign patent rights
on behalf of the Optionee. The Regents shall have the right to file patent
applications at its own expense in any country Optionee has not included in its
list of desired countries, and such applications and resultant patents, if any,
shall not be included in the licenses granted under this Agreement. However,
The Regents shall notify Optionee of such foreign countries in which The Regents
filed patent applications and in which Optionee elected not to secure foreign
rights. Subject to the availability of relevant rights, Optionee shall have the
right and option to include in the License Agreement (if not already licensed
exclusively to a third party) those patent applications and patents issuing
thereon filed in countries not originally included in Optionee's desired list at
any time up to five (5) years from the filing date
17
<PAGE>
of such patent applications, provided, however, that Optionee shall notify The
Regents in writing of its decision and shall share equally with other licensees
in all filing, prosecution, and maintenance fees for such additional patents and
patent applications.
7.4 1/n of past, present and future costs of preparing, filing,
prosecuting and maintaining all United States and foreign patent applications
and all costs and fees relating to the maintenance of patents covered by
Regents' Patent Rights in Paragraph 1.5 shall be borne by Optionee. The costs
of all interferences and oppositions shall be considered prosecution expenses
and also shall be borne by Optionee. Optionee shall reimburse The Regents for
all costs and charges within thirty (30) days following receipt of a proper
itemized invoice from The Regents to which relevant law firm billings shall be
attached. For purposes of this Paragraph, "n" means the number of Regents'
licensees to Regents' Patent Rights. But, the United States Government shall
not be considered a licensee of The Regents.
7.5 The Optionee's obligation to underwrite and to pay patent filing costs
and related costs, prosecution and maintenance costs shall continue for so long
as this Agreement covers the relevant patent application and patent issuing
thereon, provided, however, that the Optionee may terminate its obligations with
respect to any patent application or patent in any or all designated countries
upon three (3) months written notice to The Regents. The Regents will use its
best efforts to curtail the associated patent costs after such a notice is
received from the Optionee. The Regents may continue prosecution and/or
maintenance of such application(s) or patent(s) at its sole discretion and
expense, provided, however, that the Optionee shall have no further right or
licenses thereunder.
18
<PAGE>
8. LIFE OF THE AGREEMENT
8.1 Unless otherwise terminated by operation of law or by acts of the
parties in accordance with the terms of this Agreement, this Agreement shall be
in force from the effective date recited on page one and shall remain in effect
for the term of any outstanding option under Paragraph 2.3.
8.2 Any termination of this Agreement shall not affect the rights and
obligations set forth in the following Articles:
Article 12 Disposition of Product on Hand Upon Termination
Article 13 Use of Names and Trademarks
Article 14 Indemnification
Article 17 Late Payments
Article 20 Confidentiality
8.3 Any termination of this Agreement shall not relieve Optionee of its
obligation to pay any monies due or owing at the time of such termination and
shall not impair any accrued right of The Regents or Optionee.
9. TERMINATION BY THE REGENTS
9.1 If Optionee should violate or fail to perform any term or covenant of
this Agreement, then The Regents may give written notice of such default
("Notice of Default") to Optionee. If Optionee should fail to repair such
default within sixty (60) days of the effective date of such notice, then The
Regents shall have the right to terminate this Agreement and the rights herein
by a second written notice ("Notice of Termination") to Optionee. If a Notice
of Termination is sent to Optionee, then this
19
<PAGE>
Agreement shall automatically terminate on the effective date of such notice.
Such termination shall not relieve Optionee of its obligation to pay any fees
owing at the time of such termination and shall not impair any accrued right of
The Regents. These notices shall be subject to Article 15 (NOTICES).
10. TERMINATION BY OPTIONEE
10.1 Optionee shall have the right at any time to terminate this Agreement
in whole or as to any portion of Regents' Patent Rights by giving notice in
writing to The Regents. Such notice of termination shall be subject to Article
15 (NOTICES) and termination of this Agreement shall be effective sixty (60)
days from the effective date of such notice.
10.2 Any termination pursuant to Paragraph 10.1 immediately above shall not
relieve Optionee of any obligation or liability accrued hereunder prior to such
termination or rescind anything done by Optionee or any payments made to The
Regents hereunder prior to the time such termination becomes effective, and such
termination shall not affect in any manner any rights of The Regents arising
under this Agreement prior to such termination.
11. DISPOSITION OF PATENT PRODUCT(S) ON HAND UPON TERMINATION
11.1 Upon termination of this Agreement or election by Optionee not to
include patent applications and patents issuing thereon claiming a Product in
the License Agreement, Optionee shall destroy or return to the Principal
Investigators the relevant Product(s) in its possession within fifteen (15) days
following the effective
20
<PAGE>
date of its election of termination of this Agreement. Optionee shall provide
The Regents within thirty (30) days following said termination date with written
notice that the relevant Product(s) have been destroyed.
12. USE OF NAMES AND TRADEMARKS
12.1 Nothing contained in this Agreement shall be construed as conferring
any right to use in advertising, publicity, or other promotional activities any
name, trade name, trademark, or other designation of either party hereto by the
other (including contraction, abbreviation, or simulation of any of the
foregoing). Unless required by law, the use by Optionee of the name, "The
Regents of the University of California" or the name of any campus of the
University of California is expressly prohibited.
12.2 It is understood that The Regents shall be free to release to the
inventors and senior administrative officials employed by The Regents the terms
and conditions of this Agreement upon their request. If such release is made,
then The Regents shall request that such terms and conditions not be disclosed
to others. It is further understood that should a third party inquire whether a
license to Regents' Patent Rights is available, The Regents may disclose the
existence of this Agreement and the extent of the grant in Article 2 to such
third party, but shall not disclose the name of Optionee, except where The
Regents is required to release such information under either the California
Public Records Act or other applicable law.
13. REPRESENTATIONS AND WARRANTS
13.1 Optionee represents and warrants the following:
21
<PAGE>
(13.1a) Optionee shall fund Research under and according to the
Research Agreement, which Research shall be under the
direction of the Principal Investigators.
13.2 The Regents represents and warrants the following:
(13.2a) Regents' Patent Rights were developed under funding provided
in part by the Department of Health and Human Services
(DHHS);
(13.2b) Pursuant to 35 USC 200-212, The Regents may elect to retain
title to any invention (including the Inventions) made by it
under U.S. Government funding;
(13.2c) If The Regents elects to retain title to the Inventions, The
Regents is required by law to grant to the U.S. Government a
nontransferable, paid up, non-exclusive, irrevocable license
to use the Inventions by or on behalf of the U.S. Government
throughout the world.
13.3 The Regents represents to the best of its knowledge and accordingly
warrants that:
(13.3a) Invention(s) are provided WITHOUT WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY
OTHER WARRANTY, EXPRESSED OR IMPLIED. THE REGENTS MAKES NO
REPRESENTATION OR WARRANTY THAT EACH PATENT PRODUCT,
UNPROTECTED PATENT PRODUCT, OR METHOD WILL NOT INFRINGE ANY
PATENT OR OTHER PROPRIETARY RIGHT;
(13.3b) IN NO EVENT WILL THE REGENTS BE LIABLE FOR ANY INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF
THIS OPTION OR THE USE OF THE INVENTION(S), METHOD,
UNPROTECTED PATENT PRODUCT, OR PATENT PRODUCT;
(13.3c) Nothing in this Agreement shall be construed as a warranty
or representation by The Regents as to the validity,
enforceability, or scope of any of Regents' Patent Rights; a
warranty or representation that anything made, used, sold,
or otherwise disposed of under any rights granted in this
Agreement is or will be free from infringement of
22
<PAGE>
patents of third parties; an obligation to bring or
prosecute actions or suits against third parties for patent
infringement; or conferring by implication, estoppel or
otherwise any license or rights under any patents of The
Regents other than Regents' Patent Rights as defined herein,
regardless of whether such patents are dominant or
subordinate to Regents' Patent Rights (specifically, The
Regents does not grant to Optionee any rights under U.S.
Patent No. 4,468,464, U.S. Patent No. 4,237,224 and U.S.
Patent No. 4,740,470 set forth in the Recitals of this
Agreement); or an obligation to furnish any know-how that
does not constitute Research Information not provided under
the Research Agreement or Regents' Patent Rights.
14. INDEMNIFICATION
14.1 Optionee agrees to indemnify, hold harmless, and defend The Regents,
its officers, employees, and agents; the sponsors of the research that led to
the Invention; the inventors (and their employers) of any invention covered by
any patents and patent applications comprising Regents' Patent Rights,
Invention, Method, and Product(s) contemplated hereunder against any and all
claims, suits, losses, damage, costs, fees, and expenses resulting from or
arising out of anything performed under this Agreement.
15. NOTICES
15.1 Any payment, 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 (a) on the date of delivery if delivered
in person or (b) on the fourth day after mailing if mailed by first-class
certified mail, postage paid, to the respective address given below, or to such
other address as it shall designate by written notice given to the other party
as follows:
23
<PAGE>
In the case of the Optionee: IMAGENETICS INCORPORATED
150 West Warrenville Road
P. 0. Box 3011
Naperville, Illinois 60566-7011
Attention: Vice President, Research & Development
In the case of The Regents: THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
Office of Technology Transfer
1320 Harbor Bay Parkway, Suite 150
Alameda, California 94502
Attention: Director
16. ASSIGNABILITY
16.1 This Agreement is binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns, provided, however,
this Agreement shall be personal to the Licensee and shall be assignable by the
Licensee only with the written consent of The Regents, which consent shall not
be unreasonably withheld, except that Licensee may freely assign this Agreement
to an Affiliate or to a business entity that acquires all or substantially all
of the business or assets of the Licensee and that assumes, in writing, the
performance of all provisions of this Agreement, the 2nd License Agreement, and
the Research Agreement.
17. LATE PAYMENTS
17.1 In the event royalty payments, fees, or patent prosecution costs are
not received by The Regents when due, Optionee shall pay to The Regents interest
charges at the rate of five percent (5%) plus the rate of interest which is
charged by the San Francisco Federal Reserve Bank to member banks twenty-five
(25) days prior to the date the payment was due. Such interest shall be
calculated from the date
24
<PAGE>
payment was due until actually received by The Regents. Acceptance by The
Regents of any late payment interest from Optionee under this Paragraph 17.1
shall in no way affect the provision of Article 18 (WAIVER) herein.
18. WAIVER
18.1 It is agreed that 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 and/or similar breach or default.
19. GOVERNING LAWS
19.1 THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA, but the scope and validity of any patent or
patent application shall be governed by the applicable laws of the country of
such patent or patent application.
20. CONFIDENTIALITY
20.1 Optionee and The Regents respectively shall treat and maintain the
other party's proprietary business, patent prosecution, software, engineering
drawings, process and technical information, and other proprietary information
(hereinafter referred to as "Proprietary Information") in confidence using at
least the same degree of care as that party uses to protect its own proprietary
information of a like nature for a period from the date of disclosure until five
(5) years after the date of termination of this Agreement, provided that all
Proprietary Information shall be
25
<PAGE>
labeled or marked confidential or as otherwise similarly appropriate by the
disclosing party, or if the Proprietary Information is orally disclosed, then it
shall be reduced to writing or some other physically tangible form, marked and
labeled as set forth above by the disclosing party and delivered to the
receiving party within thirty (30) days of the oral disclosure as a record of
the disclosure and the confidential nature thereof. Notwithstanding the
foregoing, Optionee may disclose Proprietary Information to its employees,
agents, consultants, and contractors, or as is deemed necessary by Optionee for
any purpose set forth or relating to this Agreement, provided that any such
parties are bound by a like duty of confidentiality.
(20.1a) Nothing contained herein shall in any way restrict or impair the
right of Optionee or The Regents to use, disclose, or otherwise
deal with any Proprietary Information:
i) which recipient can demonstrate by written records was previously
known to it; or
ii) which is now, or becomes in the future, public knowledge other
than through acts or omissions of recipient; or
iii) which is lawfully obtained without restrictions by recipient from
sources independent of the disclosing party; or
iv) which is required to be disclosed to a governmental entity or
agency in connection with seeking any governmental or regulatory
approval, or pursuant to the lawful requirement or request of a
governmental entity or agency; or
v) which is furnished to a third party by the recipient with similar
confidentiality restrictions imposed on such third party, as
evidenced in writing; or
vi) which The Regents is required to disclose pursuant to the
California Public Records Act or other applicable law.
If The Regents is required to disclose Optionee's Proprietary Information
pursuant to
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<PAGE>
Subparagraphs (iv) and (vi) above, The Regents shall give Licensee ten (10) days
notice prior to disclosure.
20.2 The Optionee and The Regents agree to destroy or return to the
disclosing party Proprietary Information received from the other in its
possession within fifteen (15) days following the effective date of termination.
However, each party may retain one copy of proprietary information for archival
purposes in nonworking files. Optionee and The Regents agree to provide each
other, within thirty (30) days following termination, with a written notice that
Proprietary Information has been returned or destroyed.
21. SUPPLY OF THE BIOLOGICAL MATERIALS
21.1 The Regents agrees to initially supply Optionee with viable samples of
the biological materials comprising Research Information (to the extent that
such biological materials are in a form acceptable for transfer) within thirty
(30) days upon request from Optionee up until three (3) months after termination
of the Research Agreement. To the extent Optionee requires and requests
additional samples from The Regents during the term hereof, and The Regents has
such additional samples in its possession, The Regents agrees to supply such
additional samples. Optionee agrees to pay the actual handling and shipping
costs for any additional samples provided.
21.2 To the extent Optionee is able to produce biological materials,
reagents, compositions, and materials derived from Research Information, and
subject to prudent and reasonable business judgment, Optionee shall make
reasonable efforts to provide biological materials, reagents, compositions, and
materials derived from
27
<PAGE>
Research Information at no charge to The Regents for research purposes only in
the Division of Molecular Cytometry or in research programs at Lawrence Berkeley
Laboratory under the direction of Joe W. Gray and Daniel Pinkel. In the event
Optionee provides biological materials, reagents, compositions, and materials to
The Regents, such biological materials, reagents, compositions, and materials
are provided WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. Optionee's obligations to provide materials shall not exceed a fair
market value for such materials in excess of one hundred fifty thousand dollars
($150,000).
22. MAINTENANCE OF THE BIOLOGICAL MATERIALS
22.1 The Regents agrees to instruct the Principal Investigators that when
circulating replicable biological materials comprising Research Information to
third parties to do so under the terms and conditions set forth in the
Biological Material Transmission Letter attached hereto as Schedule A. The
Regents expressly reserves the right to transfer replicable biological materials
comprising Research Information as provided in this Paragraph 16.1 to
Universities and nonprofit research organizations to the extent that such
transfer does not compete with Optionee. The Regents shall inform Optionee of
third party requests for biological materials and shall provide Optionee with a
copy of the fully-executed copy of the Biological Material Transmittal Letter.
The Regents shall inform Optionee of comments, suggestions, and information
provided The Regents by recipients of biological material. Optionee shall not
interfere with The Regents efforts to bail these materials to third parties.
22.2 The Optionee agrees not to transfer the replicable biological
materials
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<PAGE>
comprising Research Information (to the extent that such materials are not part
of any Product sold by Optionee) that are not freely available to others accept
to Affiliates, Joint Ventures, sublicensees, and potential sublicensees.
23. MISCELLANEOUS
23.1 The headings of the several sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
23.2 This Agreement will not be binding upon the parties until it has been
signed below on behalf of each party, in which event, it shall be effective as
of the date recited on page one.
23.3 No amendment or modification hereof shall be valid or binding upon the
parties unless made in writing and signed on behalf of each party.
23.4 This Agreement and the Research Agreement embody the entire
understanding of the parties and shall supersede all previous communications,
representations, or understandings, either oral or written, between the parties
relating to the subject matter hereof.
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23.5 In case any of the provisions contained in this Agreement shall be
held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provisions hereof,
but this Agreement shall be construed as if such invalid or illegal or
unenforceable provisions had never been contained herein.
IN WITNESS WHEREOF, both The Regents and Optionee have executed this
Agreement, in duplicate originals, by their respective officers hereunto duly
authorized, on the day and year hereinafter written.
IMAGENETICS INCORPORATED THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
By /s/ John L. Bishop By /s/ Carl B. Wootten
----------------------- ---------------------------
(Signature) (Signature)
Name John L. Bishop Name Carl B. Wootten
--------------------- --------------------------
(Please Print)
Title President Title: Director
-------------------- Office of Technology Transfer
Date June 7, 1994 Date 7/11/94
--------------------- --------------------------
[STAMP]
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SCHEDULE A - PAGE 1A
University of California/San Francisco Campus (UCSF)
Instructions for Standard Letter Transmitting
Biological Materials to Universities and
Nonprofit Institutions
The attached letter is authorized for use by University of
California/(UCSF) Principal Investigators and Administrators ONLY with
Scientists at other UNIVERSITIES AND NONPROFIT RESEARCH INSTITUTIONS when
transmitting cell lines, plasmids and the like for non-commercial research
purposes.
1. Choose the appropriate form of university or nonprofit research
institution in paragraph 2.
2. Choose whether or not to include the phrase "our cooperative" in
paragraph 2.
3. Insert in paragraph 4 the amount of processing charge. If the
material is to be shipped at no charge, insert the words "no charge".
4. Send the letter IN DUPLICATE to the other scientists.
5. Do not send biological materials until you receive the duplicate copy
executed by both the scientist and the other institution.
6. Send a copy of the fully executed letter agreement to:
Carl B. Wootten
Director
Office of Technology Transfer
1320 Harbor Bay Parkway
Suite 150
Alameda, CA 94501
7. Any changes in the wording of this standard letter must be reviewed by
the Director of the Office of Technology Transfer before acceptance.
Note: Do not use this letter for the exchange of living plants. A separate
"Testing Agreement for the Plant Varieties" is available for that
purpose.
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<PAGE>
SCHEDULE A - PAGE 2A
SAMPLE LETTER FOR USE PRIOR TO TRANSMISSION OF BIOLOGICAL
MATERIALS TO INVESTIGATORS AT UNIVERSITIES OR NON-PROFIT
RESEARCH INSTITUTIONS
(date)
IN DUPLICATE
To:_____________________
This is to (acknowledge receipt of your letter) (confirm our telephone
conversation) in which you requested certain research materials developed in
this laboratory be sent to you for scientific research purposes. The materials
concerned, which belong to The Regents of the University of California/San
Francisco Campus (UCSF) are:__________________________________________.
While I cannot transfer ownership of these materials to you, I will be
pleased to permit your use of these materials within your (university)
(Non-Profit Research Institution) laboratory for (our cooperative) scientific
research. However, before forwarding them to you, I require your agreement that
the materials will be received by you only for use in (our cooperative work)
(scientific research), that you will bear all risk to you or any others
resulting from your use, and that you will not pass these materials, their
progeny or derivatives, on to any other party or use them for commercial
purposes without the express written consent of The Regents of the University of
California. You understand that no other right or license to these materials,
their progeny or derivatives, is granted or implied as a result of our
transmission of these materials to you.
These materials are to be used with caution and prudence in any
experimental work, since all of their characteristics are not known.
As you recognize, there is a processing cost to us involved in providing
these materials to you. We will bill you for our processing costs, which will
amount to $___________________.
If you agree to accept these materials under the above conditions, please
sign the enclosed duplicate copy of this letter, then have it signed by an
authorized representative of your institution, and return it to me. Upon
receipt of that confirmation I will forward the material(s) to you.
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<PAGE>
SCHEDULE A - PAGE 3A
(Note: other paragraphs discussing the relevant literature, the nature of the
work, hazards relating to materials to be sent etc. may be appropriate. These
will vary depending on the individual circumstances and the relationship between
the two parties previously established. Be sure to retain a signed copy when
received and send a photocopy of the completed agreement to the University of
California Patent Administrator, Office of Technology Transfer, Systemwide
Administration, 1320 Harbor Bay Parkway, Suite 150, Alameda, CA 94502)
Sincerely yours,
ACCEPTED:
RESEARCH INVESTIGATOR
- -------------------
Printed Name
- -------------------
(Signature)
- -------------------
Date
RESEARCH UNIVERSITY OR
NON-PROFIT INSTITUTION
- -------------------
Printed Name
- -------------------
(Signature)
- -------------------
Date
33
<PAGE>
SCHEDULE B - PAGE 1B
The PRINCIPAL INVESTIGATORS listed below understand and agree to abide by
the terms and conditions of Articles 22 (MAINTENANCE OF THE BIOLOGICAL
MATERIALS) of this Agreement between The Regents of the University of
California and Imagenetics Incorporated effective July 01, 1994 and to
instruct all relevant personnel working within their laboratory to act
accordingly. Said paragraph reads, in part, as follows:
16.1 THE REGENTS AGREES TO INSTRUCT THE PRINCIPAL INVESTIGATORS THAT WHEN
CIRCULATING REPLICABLE BIOLOGICAL MATERIALS COMPRISING RESEARCH INFORMATION
THAT HAVE NOT BEEN RELEASED IN AN UNRESTRICTED MANNER TO THIRD PARTIES TO
DO SO UNDER THE TERMS AND CONDITIONS SET FORTH IN THE BIOLOGICAL MATERIAL
TRANSMISSION LETTER ATTACHED HERETO AS APPENDIX A.
By /s/ Joe W. Gray 4/24/94
--------------------- --------------------
Joe W. Gray Date
By /s/ Daniel Pinkel 5-31-94
--------------------- --------------------
Daniel Pinkel Date
By /s/ Maria Pallavicini 5/24/94
--------------------- --------------------
Maria Pallavicini Date
By /s/ Frederic Waldman 5/24/94
--------------------- --------------------
Frederic Waldman Date
By /s/ Burt Feurstein 8/25/94
--------------------- --------------------
Burt Feurstein Date
By /s/ Brian Mayall 5/31/94
--------------------- --------------------
Brian Mayall Date
By /s/ Ronald Jensen 5/24/94
--------------------- --------------------
Ronald Jensen Date
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SCHEDULE C - PAGE 1C
Chancellor Joseph B. Martin of the University of California at San
Francisco has read and approved the terms and conditions of the option agreement
titled OPTION AGREEMENT FOR INVENTIONS MADE IN THE FIELD OF MOLECULAR
CYTOGENETICS.
By /s/ Joseph B. Martin 7/15/94
---------------------------------- ---------------
Chancellor Joseph B. Martin Date
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OPTION AGREEMENT
BETWEEN
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
AND
VYSIS, INC.
FOR
THE GLASS CHROMOSOME
UC CASE NOS. 95-095 AND 95-097
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TABLE OF CONTENTS
ARTICLE NO. TITLE PAGE
----------- ----- ----
RECITALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. OPTION FOR EXCLUSIVE LICENSE. . . . . . . . . . . . . . . . . . . . 10
3. OPTION FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4. EXERCISE OF THE OPTION. . . . . . . . . . . . . . . . . . . . . . . 13
5. TERMS TO BE NEGOTIATED. . . . . . . . . . . . . . . . . . . . . . . 14
6. PROGRESS REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. PATENT PROSECUTION AND MAINTENANCE. . . . . . . . . . . . . . . . . 18
8. LIFE OF THE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 21
9. TERMINATION BY THE REGENTS. . . . . . . . . . . . . . . . . . . . . 22
10. TERMINATION BY OPTIONEE . . . . . . . . . . . . . . . . . . . . . . 22
11. DISPOSITION OF PRODUCT(S) ON HAND UPON TERMINATION. . . . . . . . . 23
12. USE OF NAMES AND TRADEMARKS . . . . . . . . . . . . . . . . . . . . 23
13. REPRESENTATIONS AND WARRANTS. . . . . . . . . . . . . . . . . . . . 24
14. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 25
15. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
16. ASSIGNABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
17. LATE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
18. WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
19. GOVERNING LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
20. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . 28
21. SUPPLY OF THE BIOLOGICAL MATERIALS. . . . . . . . . . . . . . . . . 30
22. MAINTENANCE OF THE BIOLOGICAL MATERIALS . . . . . . . . . . . . . . 31
23. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
<PAGE>
OPTION AGREEMENT
FOR
THE GLASS CHROMOSOME
THIS OPTION AGREEMENT ("Agreement") is made and is effective this 3rd day
of April 1996, by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, a
California corporation having its statewide administrative offices at 300
Lakeside Drive, 22nd Floor, Oakland, California 94612-3550 ("The Regents"), and
VYSIS, INC., an Illinois corporation, having a principal place of business at
3100 Woodcreek Drive, Downers Grove, Illinois 60511 ("Optionee").
RECITALS
WHEREAS, certain inventions, generally characterized as a method for
comparing copy number of nucleic acid sequences where the target nucleic acid is
bound to a solid surface and a high density array fabrication and readout method
for a fiber-optic biosensor ("Invention"), were made in the course of research
at the University of California, San Francisco (UCSF) in the Division of
Molecular Cytometry under the direction of Joe W. Gray and Daniel Pinkel
("Principal Investigators") and at Medical Research Council (MRC), London,
England, by Donna Albertson and are covered by Patent Rights as defined below;
WHEREAS, The Regents owns an undivided interest in U.S. Patent No.
4,468,464 entitled "Process and Composition for Biologically Functional
Molecular Chimeras" by S. Cohen, et al. and issued August 28, 1984, U.S. Patent
No.
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4,740,470 entitled "Biologically Functional Molecular Chimeras" by S. Cohen, et
al. and issued April 26, 1988, and U.S. Patent No. 4,237,224 entitled "Process
and Composition for Biologically Functional Molecular Chimeras" by S. Cohen, et
al. and issued December 2, 1980, which patents may prevent the practice of
Invention(s) claimed in Patent Rights contained in Paragraph 1.5 of this
Agreement;
WHEREAS, if it is necessary for Optionee to be licensed under the
aforementioned U.S. Patent No. 4,468,464, U.S. Patent 4,740,470, or U.S. Patent
No. 4,237,224 to practice the Invention claimed in Patent Rights, then Optionee
shall obtain the necessary licenses from Stanford University; in no case do the
rights and options granted to Optionee under the terms of this Agreement cover
U.S. Patent No. 4,468,464, U.S. Patent No. 4,740,470, or U.S. Patent No.
4,237,224;
WHEREAS, The Regents and MRC entered into an Interinstitutional Agreement
(UC Control No. 95-28-1729) effective April 12, 1995, that grants to The Regents
the right to exclusively manage the Patent Rights contained in Subparagraphs
1.5a and 1.5b and administer their licensure for commercial development of
Products claimed therein;
WHEREAS, the research conducted at UCSF under which the Invention was made
was funded in part by the U.S. Department of Health and Human Services (DHHS);
WHEREAS, under 35 USC Section 200-212, The Regents may elect to retain
title to any invention (including the Invention) made by it under U.S.
Government funding;
WHEREAS, if The Regents elects to retain title to the Invention, then the
law requires that The Regents grant to the U.S. Government a nontransferable,
paid-up,
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nonexclusive, irrevocable license to use the Invention by or on behalf of the
U.S. Government throughout the world;
WHEREAS, The Regents and Optionee entered into a Research Agreement
entitled "Research Agreement for the Development of Molecular Cytogenetics"
dated July 1, 1994, to provide funding by Optionee to the Principal
Investigators at UCSF to perform research in the detection and treatment of
disease related to chromosome abnormalities ("Research Agreement");
WHEREAS, the Research Agreement has been amended to include the conduct of
research related to the Invention to be performed thereunder;
WHEREAS, under the terms of the amended Research Agreement, Optionee may
elect to include patent applications and resulting patents claiming inventions
arising in the conduct of work performed thereunder in this Agreement;
WHEREAS, The Regents and Optionee entered into a CRADA (defined below) to
provide funding by Optionee, which funding is partially provided under a NIST
grant, to the Principal Investigators at the Lawrence Berkeley Laboratory (LBL)
to perform research for detecting and mapping genetic abnormalities associated
with various diseases;
WHEREAS, LBL is managed by The Regents for the United States Department of
Energy (DOE) under Contract No. DE-AC03-76SF00098;
WHEREAS, pursuant to the terms of CRADA, Optionee may elect to retain title
to inventions made by The Regents in the course of work performed under the
CRADA;
WHEREAS, if Optionee elects to retain title to the inventions, Optionee is
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required to grant to the U.S. Government a nontransferable, paid-up, non-
exclusive, irrevocable license to use the inventions by or on behalf of the U.S.
Government throughout the world;
WHEREAS, under the terms of Paragraphs 2.7 and 2.8 herein, Optionee will
assign title to The Regents to any and all patent applications claiming
inventions made by it under the CRADA and Optionee may elect to include such
patent applications and resulting patents claiming the inventions in this
Agreement;
WHEREAS, Optionee is desirous of acquiring exclusive licenses to any and
all of Patent Rights covering the Invention and any inventions arising in the
conduct of work performed under the Research Agreement and the CRADA, subject to
rights granted by to the U.S. Government as hereinafter described;
WHEREAS, the Invention has utility for the identification of differences in
gene dosage or expression among all populations for the study and detection of
disease, and the Optionee has an interest in obtaining rights to pursue the
evaluation of commercial development of the Invention; and
WHEREAS, The Regents desires to grant such rights to Optionee in order that
the Invention and any related inventions made under the Research Agreement and
the CRADA be developed and utilized to the fullest extent so that the benefits
can be enjoyed by the general public.
The parties agree as follows:
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1. DEFINITIONS
As used in this Agreement, the following terms shall have the meaning set
forth below:
1.1 "Derived Product(s)" means any product containing (a) a plasmid, a
protein structure, a cDNA clone, a promoter, a gene or a chimeric gene, or
fragments thereof and their sequences derived from or comprising the biological
materials that are provided to Optionee by The Regents or any product identified
through the use of such biological materials, even if such product is
subsequently modified after its original identification; (b) any protein
structure produced or encoded by the biological materials; or (c) a compound
(substantially similar or identical to a compound in (a) or (b) above), produced
by chemical synthesis or by any other method which could not have been produced
but for the use of the biological materials; or (d) any nucleic acid-based
biosensor that employs protocols or concepts for its manufacture or use that are
provided to Optionee by The Regents that may comprise a solid support, methods
of DNA deposition or attachment, processes for DNA preparation for
hybridization, hybridization, signal detection, analysis, or any other feature
of the nucleic acid-based biosensor. Derived Products do not include Patent
Products and Unprotected Products.
1.2 "Research Agreement" means the agreement entitled "Research Agreement
for the Development of Molecular Cytogenetics" between The Regents and Optionee
dated July 1, 1994, for the conduct of research, and any extensions or renewals
thereof, and incorporated herein by reference. In the event of any
inconsistencies between the Research Agreement and this Agreement, the terms of
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this Agreement shall control.
1.3 "CRADA" means the cooperative research and development agreement
entitled "Stevenson-Wydler (15 USC 3710) Cooperative Research and Development
Agreement (No. BG95-046/00)" between The Regents and Optionee for the conduct
of research, and any extensions or renewals thereof, and incorporated herein by
reference. In the event of any inconsistencies between the CRADA and this
Agreement, the terms of this Agreement shall control.
1.4 "Research Information" means technical data, processes, methods,
inventions, compositions-of-matter, and biological materials, nucleic acid-based
biosensors, equipment, instruments, apparatuses, devices, articles of
manufacture or component parts(s) thereof developed under or resulting from the
performance of research under the Research Agreement or the CRADA and
improvements thereof, except for improvements on new subject matter not funded
by Optionee. There shall be no transfer of the physical possession of
equipment, instruments, apparatuses, devices, articles of manufacture or
component part(s) thereof (except biological materials and nucleic acid-based
biosensors) comprising Research Information.
1.5 "Patent Rights" means all U.S. patents and patent applications and
foreign patents and patent applications assigned to The Regents and requested
under Paragraph 7.3 infra, including any reissues, extensions, substitutions,
continuations, divisions and continuations-in-part (only to the extent, however,
that claims in the continuations-in-part are entitled to the priority filing
date of the parent patent application) based on and including any subject matter
claimed in or covered by any of the following:
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(1.5a) USSN 08/448,043 entitled "High Density Array Fabrication and
Read Out Method for a Fiber Optic Biosensor" filed May 23,
1995, by Joe W. Gray and Daniel Pinkel, who assigned to The
Regents, and Donna Albertson, who assigned to MRC;
(1.5b) USSN 08/353,018 entitled "Comparative Fluorescence
Hybridization to Nucleic Acid Arrays" filed December 9,
1994, by Joe W. Gray and Daniel Pinkel, who assigned to The
Regents, and Donna Albertson, who assigned to MRC; and
(1.5c) Any future patent rights to subject matter claimed in or
covered by a patent application(s) covering any inventions
elected by Optionee under the provisions of Article VIII of
the Research Agreement or Paragraphs 2.7 and 2.8 of this
Agreement.
1.6 "Patent Products" means (a) any kit, composition of matter, material,
or product; (b) any kit, composition of matter, material, or product to be used
in a manner requiring the performance of the Patent Method, or any kit,
composition of matter, material, or product produced by the Patent Method, or
(c) the practice of the Patent Method itself to the extent the manufacture, use,
or sale of (a), (b), or (c) immediately above falls within the scope of one or
more claims of Patent Rights during the term of the patent grant, in countries
in which such claim or claims have issued and have not expired, been abandoned,
disclaimed, or found invalid or unenforceable.
1.7 "Unprotected Products" means (a) any kit, composition of matter,
material, or product; (b) any kit, composition of matter, material, or product
to be used in a manner requiring the performance of the Unprotected Method, or
any kit, composition of matter, material, or product produced by the Unprotected
Method, or (c) the practice of the Unprotected Method itself to the extent the
manufacture, use, or sale of (a), (b), or (c) immediately above falls within the
scope of one or more
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pending claims within Patent Rights during the period and in such countries in
which such claim or claims have not issued, and have not expired, been
abandoned, disclaimed, or found invalid or unenforceable, such period not to
exceed five (5) years from the date in which the subject matter is first
introduced in a patent application in each country that such patent application
is filed.
1.8 "Patent Method" means any process or method the use or practice of
which would constitute in a particular country, but for the license granted to
the Optionee pursuant to this Agreement, an infringement of an unexpired claim
of a patent within Patent Rights in that country in which the Patent Method is
used or practiced.
1.9 "Unprotected Method" means any process or method the use or practice
of which would constitute in a particular country, but for the license granted
to the Optionee pursuant to this Agreement an infringement of any unabandoned,
pending claim of a patent application within Patent Rights if such patent
application in that country in which the Unprotected Method is used or practiced
had issued.
1.10 "Product(s)" means Patent Products, Unprotected Products, and Derived
Products.
1.11 "Method" means Patent Method and Unprotected Method.
1.12 "Research Product" means any Product sold to the research market for
experimental use only and not approved for marketing by a regulatory agency of
the country in which it is sold.
1.13 "Clinical Product" means any Product sold to the clinical market for
the diagnosis, prognosis or treatment of disease that requires marketing
approval from a
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regulatory agency, by way of example, an NDA, PMA, or 510K from an appropriate
regulatory agency of the country in which such Product is sold including by way
of example, the United States Food and Drug Administration.
1.14 "Affiliate(s)" of a party means any entity which, directly or
indirectly, controls such party, is controlled by such party or is under common
control with such party ("control" for these purposes being defined as the
actual, present capacity to elect a majority of the directors of such affiliate,
or if not, the capacity to elect the members that control fifty percent (50%) of
the outstanding stock or other voting rights entitled to elect directors)
provided, however, that in any country where the local law shall not permit
foreign equity participation of a majority, then an "Affiliate" shall include
any company in which the Licensee shall own or control, directly or indirectly,
the maximum percentage of such outstanding stock or voting rights permitted by
local law. Each reference to Optionee herein shall be meant to include its
Affiliates.
1.15 "Joint Venture" means any separate entity established pursuant to an
agreement between a third party and Optionee to constitute a vehicle for a joint
venture, which separate entity manufacture, uses, purchases, sells, or acquires
a Product from Optionee. Each reference to Optionee herein shall be meant to
include its Joint Ventures.
1.16 "License Agreement" means any agreement entered into by The Regents
and Optionee that grants Optionee the exclusive right to make, use, sell, offer
for sale, or import Products claimed in Patent Rights.
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2. OPTION FOR EXCLUSIVE LICENSE
2.1 Subject to the limitations set forth in this Agreement and subject to
the licenses granted to the U.S. Government set forth in Paragraphs 2.6 and 13.2
infra, The Regents hereby grants to Optionee under the Patent Rights, a royalty-
free right to practice the Method and a royalty-free right to make and use the
Products for their development, test, and evaluation in determining the interest
by Optionee in exercising the option.
2.2 Subject to the limitations set forth in this Agreement and subject to
the licenses granted to the U.S. Government set forth in Paragraphs 2.6 and 13.2
infra, The Regents hereby grants to Optionee a time-limited exclusive right to
negotiate in good faith the terms of the License Agreement.
2.3 During the period this Agreement is in effect, The Regents will not
license Patent Rights to any other party or negotiate with respect to a license
with any other party other than the U.S. Government, and will not otherwise
encumber the Patent Rights in a manner inconsistent with the provisions of this
Agreement.
2.4 This Agreement does not constitute a license to make, have made, or
use Products or a license to practice the Method except for the sole purpose of
conducting an evaluation and developing Products to determine the interest by
Optionee in exercising its option. The right to sell Products is excluded from
this Agreement. Optionee will not attempt to sell, donate, abandon, or
otherwise transfer Products to any third party, except for the transfer of
Products for the sole purpose of conducting an evaluation and developing the
Products.
2.5 The rights granted to Optionee hereunder shall be subject to the
rights
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of the U.S. Government including those set forth in 35 U.S.C. 200-212.
2.6 Nothing in this Agreement shall be deemed to limit the right of The
Regents to publish and use technical data from any research performed by The
Regents, Research Information, and Patent Rights relating to the Invention and
inventions specified under Subparagraph 1.5 and to make and use Products,
Methods, and associated technology for educational and research purposes.
2.7 The Regents will provide the Optionee with a copy of any manuscript
or abstract disclosing data or information comprising CRADA Research Information
prior to submission to any third party other than the U.S. Government not less
that fifteen (15) days after submission of such disclosure for the purpose of
obtaining comments on possible patentable subject matter, and The Regents will
withhold publication for up to sixty (60) days following disclosure to Optionee
for the purpose of filing a patent application. A request by Optionee for a
delay in publication to file a patent application shall be considered an
election by Optionee to include such patent application in this Agreement under
the provisions of Paragraph 2.8 infra. Optionee shall have the right to use the
technical reports, data and information comprising Research Information
delivered hereunder to Optionee by The Regents.
2.8 The Regents shall promptly disclose to Optionee any invention
conceived and reduced to practice in the performance of research conducted under
the CRADA. Optionee shall notify The Regents in writing of any and all
inventions or potentially patentable subject matter for which it desires to be
included in this Agreement and shall request The Regents to file patent
applications claiming such inventions or covering such potentially patentable
subject matter within sixty (60) days from the
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date of disclosure of the invention or potentially patentable subject matter to
Optionee by The Regents. Optionee will promptly assign such patent applications
to The Regents at the time to be selected by Optionee but not later than four
(4) years from the effective date recited on page one of this Agreement. In the
event Optionee elects not to request The Regents to file a patent application,
such subject matter shall be deemed Research Information. If, however, The
Regents subsequently elects to file patent applications claiming the invention
or covering the potentially patentable subject matter, then Optionee will
promptly assign such patent applications to The Regents and The Regents shall be
free to grant licenses to others to such patent applications and resulting
patents without further obligation to Optionee, and Optionee shall have no
rights or licenses thereunder. Failure by Optionee to notify The Regents of its
request to file a patent application shall be deemed to be an election by
Optionee not to secure a license to that invention or potentially patentable
subject matter, and such invention or potentially patentably subject matter
shall no longer be subject to this Agreement. If any joint inventions are made
by employees of Optionee and The Regents in the performance of research under
the CRADA, then Optionee will assign to The Regents an undivided interest in the
patent applications claiming the joint inventions at a time to be selected by
Optionee but not later than four (4) years from the effective date recited on
page one of this Agreement, and the undivided interest owned by The Regents in
patent applications and resulting patents claiming such joint inventions shall
be disposed of in accordance with the terms of this Agreement. Optionee shall
own an undivided interest in the patent applications claiming such joint
inventions.
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2.9 The Regents shall reasonably cooperate with Optionee in the subject
area of the Principal Investigators to aid Optionee in meeting its obligations
to NIST.
3. OPTION FEE
3.1 As consideration for all the rights granted to Optionee in the patent
applications contained in Subparagraphs 1.5a and 1.5b, Optionee shall pay to The
Regents an option fee of Thirty Thousand Dollars ($30,000) to be paid in two
equal installments of Fifteen Thousand Dollars ($15,000) each at the following
times:
(3.1a) $15,000 to be paid by Optionee to The Regents within thirty
(30) days of execution of this Agreement by both parties;
and
(3.1b) $15,000 to be paid by Optionee to The Regents on or before
June 30, 1996.
3.2 As further consideration for all the rights granted to Optionee
herein, Optionee shall pay to The Regents an option fee of Fifteen Thousand
Dollars ($15,000) for each U.S. patent application elected by Optionee to be
included in Patent Rights under Subparagraph 1.5c of this Agreement. The
Fifteen Thousand Dollar ($15,000) fee for each U.S. patent application shall be
paid to The Regents at the time Optionee requests that The Regents file the
patent application.
3.3 These fees are nonrefundable, noncreditable, and not an advance
against any fees or reimbursement of patent costs due The Regents under the
terms of this Agreement or fees, royalties, or reimbursement for any patent
costs due The Regents under the terms of the License Agreement.
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4. EXERCISE OF THE OPTION
4.1 If Optionee elects to exercise its rights to enter negotiations to
determine the terms of the License Agreement, then Optionee shall notify The
Regents in writing pursuant to Article 15 (NOTICES) prior to the expiration of
this Agreement. Failure of Optionee to so notify The Regents of its election
hereunder shall be deemed to be an election by Optionee not to secure a license.
4.2 Within thirty (30) days after notification by Optionee to The Regents
pursuant to Paragraph 4.1 immediately above, Optionee shall specify in writing
those particular patent applications, patents, and territories for which it
desires a license from The Regents and those in which it has no interest. Such
notification shall include a copy of a Plan of Commercialization covering the
specific Product(s) to be made, used, or sold by Optionee. "Plan of
Commercialization" means a reasonably detailed plan containing information
regarding, but not limited to, a development plan outlining specific performance
milestones and timetable for the commercial development of a Product and its
introduction to the market place, projected sales for the Product, the date of
the anticipated first commercial sale of a Product, projected costs and profits
for such Product, and other terms commonly included in business plans. Failure
of Optionee to provide a Plan of Commercialization to The Regents within sixty
(60) days of the notice date shall be deemed to be an election by Optionee not
to secure a license.
5. TERMS TO BE NEGOTIATED
5.1 If Optionee exercises its rights to patent applications and patents
under Article 4 (EXERCISE OF THE OPTION), then Optionee and The Regents will
thereafter
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negotiate in good faith to determine the following provisions covering each such
Product to be included in the terms of the License Agreement:
(5.1a) the cash amount of the license issue fee for each Product
licensed hereunder to be paid to The Regents; the cash
amount of the license issue fee shall reflect the value of
the Product and shall be based on information contained in
the Plan of Commercialization for that Product;
(5.1bi) a royalty rate of four percent (4%) based on the net sales
(sales less customary allowances) of Research Products,
provided that Optionee shall not be charged a royalty rate
greater than four percent (4%) for Research Products whether
or not such royalty rate is due under the License Agreement
to any other license agreement between Optionee and The
Regents;
(5.1bii) a negotiated royalty rate based on the net sales (sales less
customary allowances) of Derived Products not covered by
Patent Rights. The negotiated royalty rate for such Derived
Products will be based on the competitive advantage of the
contributions provided by The Regents for the Derived
Products;
(5.1biii) a negotiated royalty rate based on the net sales (sales less
customary allowances) for Clinical Products. The negotiated
royalty rate shall be based on the profitability of each
Clinical Product calculated in accordance with the
information contained in the Plan of Commercialization;
(5.1c) minimum annual royalty payments to be paid to The Regents
for each Product; these minimum annual royalties shall be
paid to The Regents and shall be based on a percentage of
the anticipated income due The Regents from royalty income
based on the anticipated net sales of a Product; a U.S.
dollar amount comprising the minimum annual royalties shall
be paid to The Regents on dates established by the parties
during the good-faith negotiation in which market
introduction is expected for a Product; the minimum annual
royalties shall be paid to The Regents in the negotiated
amounts and at the negotiated times whether or not a Product
is available for sale in any country;
(5.1d) diligence provisions in the form of specific performance
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milestones representing technical and regulatory
achievements needed to be attained in order to commercialize
each Product elected hereunder and the corresponding date
each such milestone will be met by Optionee; the negotiation
establishing each specific performance milestone and the
corresponding date it will be met will be based on
information provided in the Plan of Commercialization for
each Product;
5.2 If Optionee and The Regents are unsuccessful in establishing terms and
conditions covering each Product or Method in accordance with the provisions of
Subparagraphs 5.1a through 5.1d supra, then either party may refer any
controversy or claim arising out of or relating to this Article 5 (TERMS TO BE
NEGOTIATED) binding arbitration by so notifying the other party in writing in
accordance with the provisions of Article 15 (NOTICES) stating the nature of the
dispute to be resolved.
5.3 Within fifteen (15) business days following such notice three
arbitrators shall be selected by the following process:
(5.4a) Each party shall designate one individual, not an employee,
director, paid consultant, or shareholder of the party, to
serve as an arbitrator; and
(5.4b) These two arbitrators shall select a third individual, who
shall be an attorney experienced in arbitration proceedings,
to serve as the third arbitrator and to preside in
resolution of the dispute. The third arbitrator shall not
be an employee, director, or shareholder of either party.
5.5 Promptly after selection of the three arbitrators, the arbitrators
shall meet with the parties at which time the parties shall each present in
writing the issue to be resolved and a proposed ruling on it. Such writing
shall be served on the other party in advance and be limited to no more than
twenty (20) pages.
5.6 The following general provisions shall apply to the arbitration
proceeding:
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(5.6a) No later than thirty (30) days after the appointment of the
third arbitrator, the arbitrators shall set a date for a
hearing to resolve the issue identified by the parties. The
hearing shall take place no later than one hundred twenty
(120) days from the original notice requesting arbitration;
(5.6b) The arbitrators shall permit the taking of not more than one
(1) deposition by each party, and shall permit, subject to
the provisions of a mutually agreeable protective order, the
production of only those documents immediately and directly
bearing on the issue or issues subject to arbitration and
only to the extent necessary for the convenience and use of
the arbitrators, and shall not require or permit any other
discovery by any means, including, but not limited to,
depositions interrogatories or production of documents;
(5.6c) No later than ten (10) business days prior to the hearing,
each party may submit a single written brief or memorandum
in support of its position which may be no more than twenty
(20) pages. Each party shall be entitled to no more than
three (3) hours of hearing to present testimony or
documentary evidence. Such time limitation shall include
any direct, cross, or rebuttal testimony, but such time
limitation shall only be charged against the party
conducting such direct, cross or rebuttal testimony. It
shall be the responsibility of the arbitrators to determine
whether each party has had the three (3) hours to which it
is entitled or may, upon good cause shown, have additional
time to present its case;
(5.6d) Each party shall have the right to be represented by
counsel. The arbitrators shall have sole discretion with
regard to the admissibility of evidence. Admissibility will
be decided by two-thirds vote; and
(5.6e) Within fifteen (15) days of the conclusion of the hearing,
each party must submit a proposal finding to the
arbitrators.
5.7 The arbitrators shall rule on the disputed issue within thirty (30)
days following the completion of the testimony of both parties. Such ruling
shall adopt in their entirety the proposed findings of one of the parties on the
disputed issue, or the arbitrators shall propose alternative findings. The
issue shall be resolved upon two-
17
<PAGE>
thirds vote of the arbitrators.
5.8 Arbitration shall take place in the location of choice of the party
who has not requested arbitration, but such location shall be in the state of
California.
5.9 The arbitrators shall be paid reasonable fees plus expenses, which
shall be shared equally between The Regents and Optionee.
5.10 The decision of the arbitrators shall be enforceable, but not
appealable, in any court of competent jurisdiction.
6. PROGRESS REPORTS
6.1 Beginning February 28, 1996, and annually thereafter, Optionee shall
submit to The Regents a progress report covering the activities of Optionee
related to the development and testing of Products covered by this Agreement.
6.2 The progress reports submitted under Paragraph 6.1 immediately above
shall include, but not be limited to, the following topics so that The Regents
may be able to determine the progress of the development of Products:
- summary of work completed
- key scientific discoveries
- summary of work in progress
7. PATENT PROSECUTION AND MAINTENANCE
7.1 The Regents will diligently prosecute and maintain the United States
and foreign patent applications and patents comprising Patent Rights using
counsel of its choice. The Regents shall promptly provide Optionee with copies
of all relevant
18
<PAGE>
documentation so that Optionee may be currently and promptly informed and
apprised of the continuing prosecution, and may comment upon such documentation
sufficiently in advance of any initial deadline for filing a response, provided,
however, that if Optionee has not commented upon such documentation prior to the
initial deadline for filing a response with the relevant government patent
office, then The Regents will be free to respond appropriately without
consideration of comments or input by Optionee, if any. Both parties hereto
agree to keep this documentation in confidence in accordance with the provisions
of Article 20 (CONFIDENTIALITY) herein. The counsel of The Regents will take
instructions only from The Regents.
7.2 The Regents will use all reasonable efforts to amend any patent
application to include claims requested by the Optionee and required to protect
the Product contemplated to be sold or Method to be practiced under this
Agreement or the License Agreement.
7.3 The Regents will, at the request of Optionee, file, prosecute, and
maintain patent applications and patents covered by Patent Rights in foreign
countries if available. The Optionee must notify The Regents within seven (7)
months of the filing of the corresponding United States application of its
decision to request The Regents to file foreign counterpart patent applications.
This notice concerning foreign filing shall be in writing and must identify the
countries desired. The absence of such a notice from the Optionee to The
Regents within the seven (7)-month period will be considered an election by
Optionee not to request The Regents to secure foreign patent rights on behalf of
the Optionee. The Regents will have the right to file patent applications at
its own expense in any country Optionee has not included in its list of
19
<PAGE>
desired countries, and such applications and resultant patents, if any, will not
be included in the rights granted under this Agreement. The Regents, however,
shall notify Optionee of such foreign countries in which The Regents filed
patent applications and in which Optionee elected not to secure foreign rights.
Subject to the availability of relevant rights, Optionee shall have the right
and option to include in this Agreement (if not already licensed exclusively to
a third party) those patent applications and patents issuing thereon filed in
countries not originally included in desired list of Optionee at any time up to
five (5) years from the filing date of such patent applications, provided,
however, that Optionee shall reimburse The Regents for any and all associated
patent costs in accordance with Paragraph 7.4 infra.
7.4 All past, present and future costs of preparing, filing, prosecuting
and maintaining all United States and foreign patent applications and patents
covered by Patent Rights in Paragraph 1.5 will be borne by Optionee. The costs
of all interferences and oppositions shall be considered prosecution expenses
and also shall be borne by Optionee. Optionee shall reimburse The Regents for
all costs and charges within thirty (30) days following receipt of an itemized
invoice from The Regents to which relevant law-firm billings shall be attached.
7.5 The obligation of Optionee to underwrite and to pay patent filing
costs and related costs, prosecution and maintenance costs will continue for
costs incurred until three (3) months after receipt by either party of a Notice
of Termination. Optionee will reimburse The Regents for all patent costs
incurred during the term of the Agreement and for three (3) months thereafter,
whether or not invoices for such costs are received during the three (3)-month
period after receipt of a Notice of
20
<PAGE>
Termination. Optionee may, with respect to any particular patent application or
patent, terminate its obligations to the patent application or patent in any or
all designated countries upon three (3) months written notice to The Regents.
The Regents will use its best efforts to curtail the associated patent costs
after such a notice is received from Optionee. The Regents may continue
prosecution and/or maintenance of such application(s) or patents(s) at its sole
discretion and expense, provided, however, that Optionee will have no further
rights thereunder.
8. LIFE OF THE AGREEMENT
8.1 Unless otherwise terminated by operation of law or by acts of the
parties in accordance with the terms of this Agreement, this Agreement shall be
in force from the effective date recited on page one and shall remain in effect
for three (3) years thereafter, or if Optionee has exercised its rights under
Paragraph 4.1 with respect to any Product, this Agreement shall not terminate
until the effective date of the License Agreement covering such Product.
8.2 Any termination of this Agreement shall not affect the rights and
obligations set forth in the following Articles:
Article 7 Patent Prosecution and Maintenance
Article 11 Disposition of Product on Hand Upon Termination
Article 12 Use of Names and Trademarks
Article 14 Indemnification
Article 17 Late Payments
Article 20 Confidentiality
21
<PAGE>
8.3 Any termination of this Agreement shall not relieve Optionee of its
obligation to pay any monies due or owing at the time of such termination and
shall not impair any accrued right of The Regents or Optionee.
9. TERMINATION BY THE REGENTS
9.1 If Optionee should violate or fail to perform any term or covenant of
this Agreement, then The Regents may give written notice of such default
("Notice of Default") to Optionee. If Optionee should fail to repair such
default within sixty (60) days of the effective date of such notice, then The
Regents shall have the right to terminate this Agreement and the rights herein
by a second written notice ("Notice of Termination") to Optionee. If a Notice
of Termination is sent to Optionee, then this Agreement shall automatically
terminate on the effective date of such notice. Such termination shall not
relieve Optionee of its obligation to pay any fees owing at the time of such
termination and shall not impair any accrued right of The Regents. These
notices shall be subject to Article 15 (NOTICES).
10. TERMINATION BY OPTIONEE
10.1 Optionee shall have the right at any time to terminate this Agreement
in whole or as to any portion of Patent Rights by giving notice in writing to
The Regents. Such notice of termination shall be subject to Article 15
(NOTICES) and termination of this Agreement shall be effective sixty (60) days
from the effective date of such notice.
10.2 Any termination pursuant to Paragraph 10.1 immediately above shall not
22
<PAGE>
relieve Optionee of any obligation or liability accrued hereunder prior to such
termination or rescind anything done by Optionee or any payments made to The
Regents hereunder prior to the time such termination becomes effective, and such
termination shall not affect in any manner any rights of The Regents arising
under this Agreement prior to such termination.
11. DISPOSITION OF PRODUCT(S) ON HAND UPON TERMINATION
11.1 Upon termination of this Agreement or election by Optionee not to
include specific patent applications and patents issuing thereon in the License
Agreement, Optionee shall destroy or return to the Principal Investigators the
relevant Products in its possession within fifteen (15) days following the
effective date of its election to terminate the patent application or the
effective date of termination or expiration of this Agreement. Optionee shall
provide The Regents within thirty (30) days following said termination or
expiration date with written notice that the relevant Products have been
destroyed.
12. USE OF NAMES AND TRADEMARKS
12.1 Nothing contained in this Agreement shall be construed as conferring
any right to use in advertising, publicity, or other promotional activities any
name, trade name, trademark, or other designation of either party hereto by the
other (including contraction, abbreviation, or simulation of any of the
foregoing). Unless required by law, the use by Optionee of the name, "The
Regents of the University of California" or the name of any campus of the
University of California is expressly prohibited.
23
<PAGE>
12.2 It is understood that The Regents shall be free to release to the
inventors and senior administrative officials employed by The Regents and MRC
the terms and conditions of this Agreement upon their request. If such release
is made, then The Regents shall request that such terms and conditions not be
disclosed to others. It is further understood that should a third party inquire
whether a license to Patent Rights is available, The Regents may disclose the
existence of this Agreement and the extent of the grant in Article 2 to such
third party, but shall not disclose the name of Optionee, except where The
Regents is required to release such information under either the California
Public Records Act or other applicable law.
13. REPRESENTATIONS AND WARRANTS
13.1 Optionee represents and warrants the following:
(13.1a) Optionee shall fund research under and according to the
Research Agreement and CRADA, which research shall be under
the direction of the Principal Investigators.
13.2 The Regents represents and warrants the following:
(13.2a) Patent Rights were developed under funding provided in part
by the Department of Health and Human Services (DHHS);
(13.2b) pursuant to 35 USC 200-212, The Regents may elect to retain
title to any invention (including the Invention) made by it
under U.S. Government funding;
(13.2c) if The Regents elects to retain title to the Invention, The
Regents is required by law to grant to the U.S. Government a
nontransferable, paid-up, non-exclusive, irrevocable license
to use the Invention by or on behalf of the U.S. Government
throughout the world; and
(13.2d) The Regents elected to retain title to the portion of the
Invention claimed in the patent application contained in
24
<PAGE>
Subparagraph 1.5a on October 14, 1994, and elected to retain
title to the portion of the Invention claimed in the patent
application contained in Subparagraph 1.5b on October 14,
1994, and accordingly, granted the required licenses to the
U.S. Government.
13.3 The Regents and MRC represent to the best of their knowledge and
accordingly warrant that:
(13.3a) Invention and inventions specified under Subparagraph 1.5
are provided WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR
IMPLIED. THE REGENTS AND MRC MAKE NO REPRESENTATION OR
WARRANTY THAT PRODUCTS OR METHOD WILL NOT INFRINGE ANY
PATENT OR OTHER PROPRIETARY RIGHT;
(13.3b) IN NO EVENT WILL THE REGENTS OR MRC BE LIABLE FOR ANY
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM
EXERCISE OF THIS OPTION OR THE USE OF THE INVENTION OR
INVENTIONS SPECIFIED UNDER SUBPARAGRAPH 1.5, METHOD, OR
PRODUCTS.
(13.3c) Nothing in this Agreement shall be construed as a warranty
or representation by The Regents or MRC as to the validity,
enforceability, or scope of any of Patent Rights; a warranty
or representation that anything made, used, sold, or
otherwise disposed of under any rights granted in this
Agreement is or will be free from infringement of patents of
third parties; an obligation to bring or prosecute actions
or suits against third parties for patent infringement; or
conferring by implication, estoppel or otherwise any license
or rights under any patents of The Regents or MRC other than
Patent Rights as defined herein, regardless of whether such
patents are dominant or subordinate to Patent Rights
(specifically, The Regents does not grant to Optionee any
rights under U.S. Patent No. 4,468,464, U.S. Patent No.
4,237,224 and U.S. Patent No. 4,740,470 set forth in the
Recitals of this Agreement); or an obligation to furnish any
know-how that does not constitute Derived Products or
Research Information not provided under the Research
Agreement, CRADA, or Patent Rights.
25
<PAGE>
14. INDEMNIFICATION
14.1 Optionee agrees to indemnify, hold harmless, and defend MRC and The
Regents, their officers, employees, and agents; the sponsors of the research
that led to the Invention and inventions specified under Subparagraph 1.5; the
inventors (and their employers) of any invention covered by any patents and
patent applications comprising Patent Rights, Method, and Products contemplated
hereunder against any and all claims, suits, losses, damage, costs, fees, and
expenses resulting from or arising out of anything performed under this
Agreement. Acts performed under the CRADA or the Research Agreement shall be
governed by the allocation of risk under Article XI of the Research Agreement
and applicable Articles of the CRADA.
15. NOTICES
15.1 Any payment, 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 (a) on the date of delivery if delivered
in person or (b) on the fourth day after mailing if mailed by first-class
certified mail, postage paid, to the respective address given below, or to such
other address as it shall designate by written notice given to the other party
as follows:
In the case of the Optionee: VYSIS, INC.
3100 Woodcreek Drive
Downers Grove, Illinois
Attention: Vice President, Technology and
Business Development
26
<PAGE>
In the case of The Regents: THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
Office of Technology Transfer
1320 Harbor Bay Parkway, Suite 150
Alameda, California 94502
Attention: Executive Director
16. ASSIGNABILITY
16.1 This Agreement is binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns, provided, however,
this Agreement shall be personal to the Optionee and shall be assignable by the
Optionee only with the written consent of The Regents, except that Optionee may
freely assign this Agreement to an Affiliate or to a business entity that
acquires all or substantially all of the business or assets of the Optionee.
17. LATE PAYMENTS
17.1 In the event payments, fees, or patent prosecution costs are not
received by The Regents when due, Optionee shall pay to The Regents interest
charges at the rate of five percent (5%) plus the rate of interest which is
charged by the San Francisco Federal Reserve Bank to member banks twenty-five
(25) days prior to the date the payment was due. Such interest shall be
calculated from the date payment was due until actually received by The Regents.
Acceptance by The Regents of any late payment interest from Optionee under this
Paragraph 17.1 shall in no way affect the provision of Article 18 (WAIVER)
herein.
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18. WAIVER
18.1 It is agreed that 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 and/or similar breach or default.
19. GOVERNING LAWS
19.1 THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA excluding any choice of law rules that would
direct the application of the laws of another jurisdiction, but the scope and
validity of any patent or patent application shall be governed by the applicable
laws of the country of such patent or patent application.
20. CONFIDENTIALITY
20.1 Optionee and The Regents respectively shall treat and maintain the
proprietary business, patent prosecution, software, engineering drawings,
process and technical information, and other proprietary information
("Proprietary Information") of the other party in confidence using at least the
same degree of care as that party uses to protect its own proprietary
information of a like nature for a period from the date of disclosure until five
(5) years after the date of termination of this Agreement, provided that all
Proprietary Information shall be labeled or marked confidential or as otherwise
similarly appropriate by the disclosing party, or if the Proprietary Information
is orally disclosed, then it shall be reduced to writing or some other
physically tangible form, marked and labeled as set forth above by the
disclosing party and delivered to
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<PAGE>
the receiving party within thirty (30) days of the oral disclosure as a record
of the disclosure and the confidential nature thereof. Notwithstanding the
foregoing, Optionee may disclose Proprietary Information to its employees,
agents, consultants, and contractors, or as is deemed necessary by Optionee for
any purpose set forth or relating to this Agreement, provided that any such
parties are bound by a like duty of confidentiality.
(20.1a) Nothing contained herein shall in any way restrict or impair the
right of Optionee or The Regents to use, disclose, or otherwise
deal with any Proprietary Information:
i) that recipient can demonstrate by written records was previously
known to it; or
ii) that is now, or becomes in the future, public knowledge other
than through acts or omissions of recipient; or
iii) that is lawfully obtained without restrictions by recipient from
sources independent of the disclosing party; or
iv) that is required to be disclosed to a governmental entity or
agency in connection with seeking any governmental or regulatory
approval, or pursuant to the lawful requirement or request of a
governmental entity or agency; or
v) that is furnished to a third party by the recipient with similar
confidentiality restrictions imposed on such third party, as
evidenced in writing; or
vi) that The Regents is required to disclose pursuant to the
California Public Records Act or other applicable law.
If The Regents is required to disclose the Proprietary Information of Optionee
pursuant to Subparagraphs (iv) and (vi) above, The Regents shall give Optionee
ten (10) days notice prior to disclosure.
20.2 The Optionee and The Regents agree to destroy or return to the
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<PAGE>
disclosing party Proprietary Information received from the other in its
possession within fifteen (15) days following the effective date of termination
or expiration of this Agreement. However, each party may retain one copy of
Proprietary Information for archival purposes in nonworking files. Optionee
and The Regents agree to provide each other, within thirty (30) days following
termination, with a written notice that Proprietary Information has been
returned or destroyed. The parties agree that the Indemnification provisions
contained in Article 14 shall not apply to a breach by The Regents under this
Article 20.
21. SUPPLY OF THE BIOLOGICAL MATERIALS
21.1 The Regents will initially supply Optionee with viable samples of the
biological materials and nucleic acid-based biosensors comprising Research
Information (to the extent that such biological materials and nucleic acid-based
biosensors are in a form acceptable for transfer) within thirty (30) days upon
request from Optionee up until three (3) months after termination of the
Research Agreement and the CRADA. To the extent Optionee requires and requests
additional samples from The Regents during the term hereof, and The Regents has
such additional samples in its possession, The Regents will supply Optionee with
such additional samples. Optionee will pay the actual handling and shipping
costs for any additional samples provided.
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<PAGE>
22. MAINTENANCE OF THE BIOLOGICAL MATERIALS
22.1 The Regents will instruct the Principal Investigators that when
circulating replicable biological materials comprising Research Information
or Derived Products to third parties to do so under the terms and conditions
set forth in the Biological Material Transmission Letter attached hereto as
Appendix A. The Regents expressly reserves the right to transfer replicable
biological materials comprising Research Information as provided in this
Paragraph 22.1 to Universities and nonprofit, research organizations to the
extent that such transfer does not compete with Optionee. The Regents shall
inform Optionee of third party requests for biological materials and shall
provide Optionee with a copy of the fully executed copy of the Biological
Material Transmittal Letter. The Regents shall inform Optionee of comments,
suggestions, and information provided to The Regents by recipients of the
biological materials. Optionee shall not
31
<PAGE>
interfere with the efforts of The Regents to bail these materials to third
parties.
22.2 The Optionee shall not transfer the replicable biological materials or
nucleic acid-based biosensors comprising Research Information that are not
freely available to others accept to Affiliates, Joint Ventures, sublicensees,
and potential sublicensees.
23. MISCELLANEOUS
23.1 The headings of the several sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
23.2 This Agreement will not be binding upon the parties until it has been
signed below on behalf of each party, in which event, it shall be effective as
of the date recited on page one.
23.3 No amendment or modification hereof shall be valid or binding upon the
parties unless made in writing and signed on behalf of each party.
23.4 This Agreement, the CRADA, secrecy agreements covering Patent Rights,
and the Research Agreement embody the entire understanding of the parties and
shall supersede all previous communications, representations, or understandings,
either oral or written, between the parties relating to the subject matter
hereof.
23.5 In case any of the provisions contained in this Agreement shall be
held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provisions hereof,
but this Agreement shall be construed as if such invalid or illegal or
unenforceable provisions had never been
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<PAGE>
contained herein.
IN WITNESS WHEREOF, both The Regents and Optionee have executed this
Agreement, in duplicate originals, by their respective officers hereunto duly
authorized, on the day and year hereinafter written.
VYSIS, INC. THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
By /s/ J. Lawrence Fox By /s/ Terence A. Feuerborn
--------------------------- -------------------------------------
(Signature) (Signature)
Name J. Lawrence Fox Name Terence A. Feuerborn
-------------------------- -----------------------------------
(Please Print)
Title: Vice President Title: Executive Director
------------------------ Research Administration
and Office of Technology Transfer
Date 28 March 1996 Date 4-3-96
-------------------------- -----------------------------------
[STAMP]
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APPENDIX A - PAGE 1A
University of California/San Francisco
Instructions for Standard Letter Transmitting
Biological Materials to Universities and
Nonprofit Institutions
The attached letter is authorized for use by University of California
(Lawrence Berkeley Laboratory) Principal Investigators and Administrators ONLY
with Scientists at other UNIVERSITIES AND NONPROFIT RESEARCH INSTITUTIONS when
transmitting cell lines, plasmids and the like for non-commercial research
purposes.
1. Choose the appropriate form of university or nonprofit research
institution in paragraph 2.
2. Choose whether or not to include the phrase "our cooperative" in
paragraph 2.
3. Insert in paragraph 4 the amount of processing charge. If the
material is to be shipped at no charge, insert the words "no charge".
4. Send the letter IN DUPLICATE to the other scientists.
5. Do not send biological materials until you receive the duplicate copy
executed by both the scientist and the other institution.
6. Send a copy of the fully executed letter agreement to:
Terence A. Feuerborn
Executive Director
Office of Technology Transfer
1320 Harbor Bay Parkway
Suite 150
Alameda, CA 94502
7. Any changes in the wording of this standard letter must be reviewed by
the Executive Director of the Office of Technology Transfer before
acceptance.
Note: Do not use this letter for the exchange of living plants. A separate
"Testing Agreement for the Plant Varieties" is available for that purpose.
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<PAGE>
APPENDIX A - PAGE 2A
SAMPLE LETTER FOR USE PRIOR TO TRANSMISSION OF BIOLOGICAL
MATERIALS TO INVESTIGATORS AT UNIVERSITIES OR NON-PROFIT
RESEARCH INSTITUTIONS
(date)
IN DUPLICATE
To:
______________________________
This is to (acknowledge receipt of your letter) (confirm our telephone
conversation) in which you requested certain research materials developed in
this laboratory be sent to you for scientific research purposes. The materials
concerned, which belong to The Regents of the University of California, Lawrence
Berkeley Laboratory are: _______________________________________________________
________________________________________________________________________________
While I cannot transfer ownership of these materials to you, I will be
pleased to permit your use of these materials within your (university) (Non-
Profit Research Institution) laboratory for (our cooperative) scientific
research. However, before forwarding them to you, I require your agreement that
the materials will be received by you only for use in (our cooperative work)
(scientific research), that you will bear all risk to you or any others
resulting from your use, and that you will not pass these materials, their
progeny or derivatives, on to any other party or use them for commercial
purposes without the express written consent of The Regents of the University of
California. You understand that no other right or license to these materials,
their progeny or derivatives, is granted or implied as a result of our
transmission of these materials to you.
These materials are to be used with caution and prudence in any
experimental work, since all of their characteristics are not known.
As you recognize, there is a processing cost to us involved in providing
these materials to you. We will bill you for our processing costs, which will
amount to $_________________________.
If you agree to accept these materials under the above conditions, please
sign the enclosed duplicate copy of this letter, then have it signed by an
authorized representative of your institution, and return it to me. Upon
receipt of that confirmation I will forward the material(s) to you.
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<PAGE>
APPENDIX A - PAGE 3A
(Note: other paragraphs discussing the relevant literature, the nature of the
work, hazards relating to materials to be sent etc. may be appropriate. These
will vary depending on the individual circumstances and the relationship between
the two parties previously established. Be sure to retain a signed copy when
received and send a photocopy of the completed agreement to the Executive
Director, University of California, Office of Technology Transfer, 1320 Harbor
Bay Parkway, Suite 150, Alameda, CA 94502.)
UNIVERSITY OF CALIFORNIA
MATERIAL PROVIDED BY:
_________________________
Printed Name
_________________________
(Signature)
________________________
Date
ACCEPTED:
RECIPIENT RESEARCH INVESTIGATOR
_________________________
Printed Name
_________________________
(Signature)
_________________________
Date
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APPENDIX B - PAGE 1B
The INVENTORS listed below understand and agree to abide by the terms and
conditions of Article 22 (MAINTENANCE OF THE BIOLOGICAL MATERIALS) of the Option
Agreement between The Regents of the University of California and Vysis, Inc.
effective July 1, 1995, and to instruct all relevant personnel working within
their laboratory to act accordingly. Said paragraph reads, in part, as follows:
22.1 The Regents agrees to instruct the Principal Investigators that when
circulating replicable biological materials comprising Research Information
or Derived Products to third parties to do so under the terms and
conditions set forth in the Biological Material Transmission Letter
attached hereto as Appendix A. The Regents expressly reserves the right to
transfer replicable biological materials comprising Research Information or
Derived Products as provided in this Paragraph 22.1 to Universities and
nonprofit, research organizations to the extent that such transfer does not
compete with Optionee. The Regents shall inform Optionee of third party
requests for biological materials and shall provide Optionee with a copy of
the fully-executed copy of the Biological Material Transmittal Letter. The
Regents shall inform Optionee of comments, suggestions, and information
provided The Regents by recipients of the biological materials. Optionee
shall not interfere with the efforts of The Regents to bail these materials
to third parties.
The Derived Product(s) are defined in said Agreement as follows:
1.1 "Derived Product(s)" means any product containing (a) a plasmid, a
protein structure, a cDNA clone, a promoter, a gene or a chimeric gene, or
fragments thereof and their sequences derived from or comprising the
biological materials that are provided to Optionee by The Regents or any
product identified through the use of such biological materials, even if
such product is subsequently modified after its original identification;
(b) any protein structure produced or encoded by the biological materials;
or (c) a compound (substantially similar or identical to a compound in (a)
or (b) above), produced by chemical synthesis or by any other method which
could not have been produced but for the use of the biological materials;
or (d) any nucleic acid-based biosensor that employs protocols or concepts
for its manufacture or use that are provided to Optionee by The Regents
that may comprise a solid support, methods of DNA deposition or attachment,
processes for DNA preparation for hybridization, hybridization, signal
detection, analysis, or any other feature of the nucleic acid-based
biosensor.
By: /s/ Daniel Pinkel 7-31-95
--------------------------- ---------------------------------
Daniel Pinkel Date
By: /s/ Joe W. Gray 8/1/95
--------------------------- ---------------------------------
Joe W. Gray Date
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APPENDIX C - PAGE 1C
DIRECTOR APPROVAL OF COMMERCIAL RESTRICTIONS OF TANGIBLE
RESEARCH PRODUCTS
In May 1989, the University of California issued the GUIDELINES ON
UNIVERSITY-INDUSTRY RELATIONS ("Guidelines"). Guideline 10 entitled "Tangible
Research Products" requires that when the commercial availability of tangible
research products resulting from the conduct of research are restricted by a
license, approval must be obtained from the Director of Lawrence Berkeley
Laboratory (or his designee) where the research took place.
The attached Option entitled "The Glass Chromosome" ("Option") contains
provisions that restrict the tangible research products from transfer to
commercial competitors of Vysis, Inc., and requires that tangible research
products transferred for educational and research purposes be conveyed under a
biological material transfer agreement (Appendix A). In accordance with the
Guidelines, this Option permits the University to retain the discretion to
publish any results of research at any time and to disseminate the tangible
materials for educational and research purposes.
Director Shank of the University of California at Lawrence Berkeley
Laboratory approves of the provisions of the attached Option that restrict the
commercial availability of tangible research products.
Director Approval:
- ------------------------------------ ----------------------------------
Director Charles V. Shank Date
38
<PAGE>
APPENDIX C - PAGE 1C
DIRECTOR APPROVAL OF COMMERCIAL RESTRICTIONS OF TANGIBLE
RESEARCH PRODUCTS
In May 1989, the University of California issued the GUIDELINES ON
UNIVERSITY-INDUSTRY RELATIONS ("Guidelines"). Guideline 10 entitled "Tangible
Research Products" requires that when the commercial availability of tangible
research products resulting from the conduct of research are restricted by a
license, approval must be obtained from the Director of Lawrence Berkeley
Laboratory (or his designee) where the research took place.
The attached Option entitled "The Glass Chromosome" ("Option") contains
provisions that restrict the tangible research products from transfer to
commercial competitors of Vysis, Inc., and requires that tangible research
products transferred for educational and research purposes be conveyed under a
biological material transfer agreement (Appendix A). In accordance with the
Guidelines, this Option permits the University to retain the discretion to
publish any results of research at any time and to disseminate the tangible
materials for educational and research purposes.
Director Shank of the University of California at Lawrence Berkeley
Laboratory approves of the provisions of the attached Option that restrict the
commercial availability of tangible research products.
Director Approval:
/s/ Rod M. Fleischman 3 Aug 95
- ----------------------------------- ----------------------------------
Rod M. Fleischman Date
Assoc. Laboratory Director, IGP
for Director Charles V. Shank
39
<PAGE>
EXCLUSIVE LICENSE AGREEMENT
BETWEEN
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
AND
VYSIS, INC.
FOR
MOLECULAR CYTOGENETICS SOFTWARE
<PAGE>
TABLE OF CONTENTS
ARTICLE NO. TITLE PAGE
----------- ----- ----
RECITALS ........................................................ 1
1. DEFINITIONS ..................................................... 3
2. REPRESENTATIONS AND WARRANTS .................................... 8
3. GRANT .......................................................... 10
4. LICENSE ISSUE FEE ............................................... 14
5. ROYALTIES ....................................................... 14
6. DUE DILIGENCE .................................................. 21
7. PROGRESS AND ROYALTY REPORTS ................................... 24
8. BOOKS AND RECORDS .............................................. 26
9. LIFE OF THE AGREEMENT .......................................... 27
10. TERMINATION BY THE REGENTS ..................................... 28
11. TERMINATION BY THE LICENSEE ..................................... 28
12. SUPPLY OF THE SOFTWARE ......................................... 29
13. CONFIDENTIALITY ................................................ 29
14. PATENT PROSECUTION AND MAINTENANCE ............................. 31
15. USE OF NAMES AND TRADEMARKS AND NONDISCLOSURE OF AGREEMENT ..... 34
16. PROPERTY PROTECTION ............................................ 35
17. INFRINGEMENT ................................................... 37
18. INDEMNIFICATION ................................................ 39
19. WAIVER ......................................................... 41
20. ASSIGNABILITY .................................................. 41
21. LATE PAYMENTS .................................................. 41
22. NOTICES ........................................................ 42
23. GOVERNING LAWS ................................................. 42
24. GOVERNMENT APPROVAL OR REGISTRATION ............................ 43
25. EXPORT CONTROL LAWS ............................................ 43
26. FORCE MAJEURE .................................................. 43
27. DISPOSITION OF PRODUCT ON HAND UPON TERMINATION ................ 44
28. MISCELLANEOUS .................................................. 45
<PAGE>
EXCLUSIVE LICENSE AGREEMENT FOR
MOLECULAR CYTOGENETICS SOFTWARE
THIS LICENSE AGREEMENT ("Agreement") is made and is effective this 1st day
of June, 1995, by and between The Regents of the University of California, a
California corporation, having its statewide administrative offices at 300
Lakeside Drive, 22nd Floor, Oakland, California 94612-3550, hereinafter
referred to as "The Regents", and Vysis Incorporated, an Illinois corporation,
having a principal place of business at 3100 Woodcreek Drive, Downers Grove,
Illinois 60515, hereinafter referred to as "Licensee".
RECITALS
WHEREAS, certain inventions and discoveries, generally characterized as
Molecular Cytogenetics Software ("Discovery"), useful for acquisition of
multi-color images, for fluorescently stained cells and chromosomes for
localization of probe hybridization domains along metaphase chromosomes, and
for analysis of chromosomes stained using Comparative Genomic Hybridization
were made in the course of research at the University of California, Lawrence
Berkeley Laboratory (LBL) by Damir Sudar, et al., under the direction of Joe W.
Gray and Daniel Pinkel and are covered by Patent Rights, Copyrights, and
Property Rights as defined below;
WHEREAS, The Regents and Licensee entered into a License Agreement
entitled "License Agreement For Chromosome Analysis Technology With
<PAGE>
Chromosome Specific Probes" effective August 15, 1989, and having UC
Agreement Control Number 89-03-0021 ("Prior License Agreement");
WHEREAS, under the terms of the Prior License Agreement, The Regents
granted to Licensee exclusive licenses to make, use, and sell products covered
by patent applications and any patents issuing thereon claiming the techniques
of Chromosome Painting and Comparative Genomic Hybridization;
WHEREAS, The Regents and Licensee acknowledge that the use or practice of
the Discovery but for the licenses granted to Licensee under the Prior License
Agreement would constitute contributory infringement of the patent applications
and resulting patents comprising the patent portfolios of Chromosome Painting
and Comparative Genomic Hybridization;
WHEREAS, The Regents and Licensee have concluded that the competitive
advantage comprising the economic value of Products is essentially the same
regardless of the available form of current protection in Copyright and
Property Rights that The Regents has provided to Licensee covering such
Products, and accordingly, the royalty paid to The Regents is independent of
such protection ascribed to the Product at any given time;
WHEREAS, if patent protection claiming the Products becomes available in
the future, the parties agree to limit the total royalty exposure of Licensee;
WHEREAS, both parties recognize and agree that royalties due hereunder
will be paid on pending patent applications (for a limited period of time) and
issued patents;
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WHEREAS, The Regents recognizes that Licensee has dedicated its business
to the development of the technology licensed under the Prior License
Agreement, and accordingly, The Regents concludes that Licensee is the best
possible party to commercialize the Discovery to the fullest extent;
WHEREAS, Licensee is desirous of acquiring exclusive licenses to any and
all of Patent Rights, Copyrights, and Property Rights covering the Discovery,
subject to rights granted to the U.S. Government as hereinafter described; and
WHEREAS, The Regents desires to grant such licenses to Licensee in order
that the Discovery be developed, utilized, and marketed to the fullest extent
so that tho Products therefrom and other benefits can be enjoyed by the general
public.
The parties agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the meaning set
forth below:
1.1 "Patent Rights" means all U.S. patents and patent applications and
foreign patents and patent applications assigned to The Regents and requested
under Paragraph 15.4 infra, including any reissues, extensions,
substitutions, continuations, divisions and continuations-in-part (only to
the extent, however, that claims in the continuations-in-part are entitled to
the priority filing date of the parent patent application) based on and
including any subject matter claimed in or covered by any of or covered by
any of the following:
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1.1.1 any subject matter claiming the Discovery or Software made by
employees at LBL under the direction of Joe W. Gray and Daniel
Pinkel for a period not to exceed two (2) years from the
effective date hereof to which such employees are obligated under
their employment agreement to assign the patent applications and
resulting patents to The Regents.
1.2 "Patent Products" means (a) any Software Product, kit, composition of
matter, material, or product; (b) any Software Product, kit, composition of
matter, material, or product to be used in a manner requiring the performance
of the Patent Method, or any Software Product, kit, composition of matter,
material, or product produced by the Patent Method, or (c) the practice of the
Patent Method itself to the extent the manufacture, use, or sale of (a), (b),
or (c) immediately above falls within the scope of one or more claims of Patent
Rights during the term of the patent grant, in countries in which such claim or
claims have issued and have not expired, been abandoned, disclaimed, or found
invalid or unenforceable.
1.3 "Unprotected Products" means (a) any Software Product, kit,
composition of matter, material, or product; (b) any Software Product, kit,
composition of matter, material, or product to be used in a manner requiring
the performance of the Unprotected Method, or any Software Product, kit,
composition of matter, material, or product produced by the Unprotected
Method, or (c) the practice of the Unprotected Method itself to the extent
the manufacture, use, or sale of (a), (b), or (c) immediately above falls
within the scope of one or more pending claims within Patent Rights during
the period and in such countries in which such claim or claims have not
issued, and have not expired, been
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<PAGE>
abandoned, disclaimed, or found invalid or unenforceable, such period not to
exceed five (5) years from the date in which the subject matter is introduced
in a patent application in each country that such patent application is filed.
1.4 "Patent Method" means any process or method the use or practice of
which would constitute in a particular country, but for the license granted
to the Licensee pursuant to this Agreement, an infringement of an unexpired
claim of a patent within Patent Rights in that country in which the Patent
Method is used or practiced.
1.5 "Unprotected Method" means any process or method the use or practice
of which would constitute in a particular country, but for the license granted
to the Licensee pursuant to this Agreement an infringement of any unabandoned,
pending claim of a patent application within Patent Rights during the period
and in such countries in which such claim or claims have not issued, and have
not expired, been abandoned, disclaimed, or found invalid or unenforceable,
such period not to exceed five (5) years from the date in which the subject
matter is introduced in a patent application in each country that such patent
application is filed.
1.6 "Method" means Patent Method and Unprotected Method.
1.7 "Application" means one or more subroutines transferred to Licensee
by The Regents that when utilized in aggregate constitute a fully functional
unit that performs a complete task for the end user. An example of an
Application is an aggregate of subroutines that when utilized in combination
perform CGH analysis.
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1.8 "Software" means the QUIPS-TM- multi-color image acquisition
Application, the CGH image analysis and profile analysis Application, the
fractional length metaphase mapping Application, and any new Applications
transferred to Licensee by The Regents after the effective date recited on
page one of this Agreement, created by Damir Sudar, et al., at LBL and
further described in Appendix A attached hereto and incorporated herein.
1.9 "Copyright" means those rights that: (i) cover Software Products
obtained under Title 17 of the United States Code and applicable related treaty
provisions with other countries, and (ii) are assigned to The Regents.
1.10 "Software Products" means the Software supplied to Licensee by The
Regents under this Agreement and any Derivative Works thereof for which the
reproduction, Distribution, display, performance, or preparation of such
Software or Derivative Works would constitute, but for the licenses granted
to Licensee pursuant to this Agreement, an infringement of Copyright or
Patent Rights and would constitute but for the licenses granted to Licensee
pursuant to this Agreement a misappropriation of Property Rights.
1.11 "Derivative Works" means any revisions, modifications, translations,
abridgements, condensations, expansions, enhancements or supplements of the
Software Products or any other form in which such Software Products may be
recast, transferred or adapted.
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1.12 "Source Code" means the source code, the internal documentation to the
source code, and the external reference specifications to the source code of
the Software Products.
1.13 "Distribute/Distribution" means transfer by any means whatsoever,
including, but not limited to, sale, rental, lease, display, loan, sublicense,
or the like.
1.14 "Products" means Patent Products, Unprotected Products, and Software
Products.
1.15 "Property Rights" means all the personal proprietary rights covering
the tangible personal property in Software Products owned or managed by The
Regents. In no case, however, shall Property Rights include Patent Rights or
Copyright or any tangible personal property or Derivative Works developed or
produced by or for Licensee whether independently or pursuant to any agreement
between Licensee and a third party.
1.16 "Affiliate(s)" of a party means any entity which, directly or
indirectly, controls such party, is controlled by such party or is under
common control with such party ("control" for these purposes being defined as
the actual, present capacity to elect a majority of the directors of such
affiliate, or if not, the capacity to elect the members that control fifty
percent (50%) of the outstanding stock or other voting rights entitled to
elect directors) provided, however, that in any country where the local law
shall not permit foreign equity participation of a majority, then an
"Affiliate" shall include any company in which the Licensee shall
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<PAGE>
own or control, directly or indirectly, the maximum percentage of such
outstanding stock or voting rights permitted by local law. Each reference to
Licensee herein shall be meant to include its Affiliates.
1.17 "Joint Venture" means any separate entity established pursuant to an
agreement between a third party and Licensee to constitute a vehicle for a
joint venture, which separate entity manufacture, uses, purchases, sells, or
acquires a Product from Licensee. Each reference to Licensee herein shall be
meant to include its Joint Ventures.
1.18 "Infringement Litigation Costs" means costs incurred in the
infringement suit, provided for in Article 17 (INFRINGEMENT) of this
Agreement, consisting of (i) outside attorney's and in-house attorney's fees
(who are specifically hired for the purpose of litigating intellectual
property related matters) billed to Licensee or The Regents, (ii) royalties
(due The Regents) that were used to offset the infringement suit costs in
accordance with Paragraph 17.4, (iii) outside attorney fees of the Licensee
that were used to offset the infringement suit costs in accordance with
Paragraph 17.2a, and (iv) other out-of-pocket expenses of both parties.
2. REPRESENTATIONS AND WARRANTS
2.1 The Regents represents and warrants the following:
2.1.1 Patent Rights and Copyrights were developed under Contract No.
DE-AC03-76SF00098 between The Regents and the United States
Department of Energy (DOE);
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<PAGE>
2.1.2 Pursuant to the terms of Contract No. DE-AC03-76SF00098, title to
Patent Rights and Copyrights rests in DOE without action on the
part of The Regents to acquire or retain title;
2.1.3 The Regents has petitioned the DOE on March 15, 1995, for the
right to assert Copyright covering the Software Products and was
granted such right on ________________________________.
2.1.4 Pursuant to Contract No. DE-AC03-76SF00098, The Regents may elect
to retain title to any invention, (including the Discovery) made
by it under U.S. Government funding.
2.1.5 If The Regents elects to retain title to the intellectual
property rights covering the Discovery, The Regents is required
by law to grant to the U.S. Government a nontransferable,
paid-up, nonexclusive, irrevocable license to use the Discovery
by or on behalf of the U.S. Government throughout the world.
2.2 The Regents represents to the best of its knowledge and accordingly
warrants that:
2.2.1 These licenses and the associated Invention(s) are provided
WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR ANY OTHER WARRANTY, EXPRESSED OR IMPLIED. THE REGENTS
MAKES NO REPRESENTATION OR WARRANTY THAT EACH PRODUCT, OR METHOD
WILL NOT INFRINGE ANY PATENT, COPYRIGHT, OR OTHER PROPRIETARY
RIGHT;
2.2.2 IN NO EVENT WILL THE REGENTS BE LIABLE FOR ANY INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS
LICENSE OR THE USE OF THE DISCOVERY, METHOD, OR PRODUCT;
2.2.3 Nothing in this Agreement shall be construed as a warranty or
representation by The Regents as to the validity, enforceability,
or scope of any of Patent Rights or Copyrights; a warranty or
representation that anything made, used, sold, or otherwise
disposed of under any license granted in this Agreement is or
will be free from infringement of patents of third parties; an
obligation to bring or prosecute actions or suits against third
parties for patent infringement except as provided in Article
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<PAGE>
17, 17 (INFRINGEMENT); or conferring by implication, estoppel or
otherwise any license or rights under any patents or copyrights
of The Regents other than Patent Rights and Copyrights as
defined herein, regardless of whether such patents are dominant
or subordinate to Patent Rights; or an obligation to furnish any
know-how not provided in Patent Rights, Copyrights, or Property
Rights; and
2.2.4 The Regents has not granted licenses to the Software to any third
parties other than the U.S. Government and that as of the
effective date recited on page one (1) of this Agreement, to the
best of their knowledge, Daniel Pinkel, Joe Gray, and Damir Sudar
do not know of any third-party patent or copyright claim against
the Software.
3. GRANT
3.1 Subject to: (i) the limitations set forth in this Agreement, (ii) the
grant by DOE to The Regents to assert Copyright to the Software Products, (iii)
the rights and licenses granted to the U.S. Government as set forth in
paragraph 2.1e supra, and (iv) the continuing rights of The Regents in
Paragraph 3.9 infra, The Regents grants to Licensee exclusive licenses under
Patent Rights to practice the Method to make, have made, use, and Distribute
Patent Products and Unprotected Products where Patent Rights exist.
3.2 Subject to: (i) the limitations set forth in this Agreement, (ii) the
grant by DOE to The Regents to assert Copyright to the Software Products, (iii)
the rights and licenses granted to the U.S. Government as set forth in
Paragraph 2.1e supra, and (iv) the continuing rights of The Regents in
Paragraph 3.9 infra, The Regents grants to Licensee licenses under Copyright to
Distribute, use, copy, format, edit, and reproduce partial or complete object
code versions of the Software Products
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<PAGE>
and to use, copy, format, reproduce, and to prepare Derivative Works to the
Source Code and Software Products where Copyright exists.
3.3 Subject to: (i) the limitations set forth in this Agreement, (ii) the
grant by DOE to The Regents to assert Copyright to the Software Products, (iii)
the rights and license granted to the U.S. Government as set forth in Paragraph
2.1e supra, and (iv) the continuing rights of The Regents in Paragraph 3.9
infra, The Regents grants to Licensee licenses under Property Rights to
possess, use, and Distribute the Software Products and to possess and use the
Source Code throughout the world where The Regents may lawfully grant such a
license.
3.4 The licenses granted in Paragraphs 3.2 and 3.3 supra shall be exclusive
for a period of five (5) years from the effective date recited on page one of
this Agreement. Thereafter, the licenses granted in Paragraphs 3.2 and 3.3
shall be non-exclusive. Licensee, however, shall be entitled to extend the
exclusive period of this Agreement for two (2) additional renewal periods of
five (5) years each upon the written approval of DOE.
3.5 The licenses granted under Property Rights set forth in Paragraph 3.3
immediately above, expressly limit the rights granted to Licensee in the
Software Products and the Source Code to those licenses expressly stated in
this Agreement and for no other purpose.
3.6 Under Property Rights, the right to transfer possession of the
Source Code by Licensee to third parties other than its agents, consultants,
contractors, sublicensees, and such other third parties within the scope of
the rights and licenses granted to Licensee hereunder, is expressly excluded
from this Agreement.
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<PAGE>
Except as otherwise stated in this Agreement, Licensee shall not attempt to
sell, donate, abandon or otherwise transfer Source Code to any third party.
Subject to Paragraph 16.4, Licensee acknowledges that title to the tangible
material comprising the Source Code is owned by The Regents and that title is
not being transferred to Licensee under this Agreement.
3.7 The Regents shall have no obligation to provide support, advice, or
maintenance services for the Software Products.
3.8 The manufacture of each Product and the practice of the Method shall
be subject to applicable government importation laws and regulations of a
particular country on each Product made outside the particular country in which
such Product is used or sold.
3.9 Nothing in this Agreement shall be deemed to limit the right of The
Regents to publish and use technical data from any research performed by The
Regents relating to the Discovery and to make and use Products, Methods, and
associated technology for educational and research purposes.
3.10 The licenses granted in Paragraphs 3.1, 3.2, and 3.3 hereunder shall
be subject to the rights of the U.S. Government including those set forth in 35
U.S.C. 200-212 and applicable governmental implementing regulations, and
Article XII, Clause 7(c) of Contract DE-AC03-76SF00098 attached hereto as
Appendix B and incorporated herein.
3.11 Licensee may grant sublicenses to others in the form of label
licenses for purchase of Software Products. The Regents also grants to
Licensee the right
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<PAGE>
to issue sublicenses under its rights hereunder to third parties to make,
have made, Distribute, use, copy, format, edit, and reproduce Products and
prepare Derivative Works thereof and to practice the Method and have others
practice the Method, provided that Licensee has current exclusive rights
thereto under this Agreement. To the extent applicable, such sublicenses
shall include all of the rights of and obligations due The Regents and the
U.S. Government that are contained in this Agreement except that Licensee
shall not be bound by the royalty rate and license issue fee contained herein
with respect to its negotiation with third parties seeking such sublicenses.
However, Licensee shall, in such third-party negotiations, use its best
efforts in reaching favorable royalty rates and license issue fees. Licensee
shall be entitled to five percent (5%) of all income generated from
sublicensing as an administrative fee, and of the remaining income, one-half
(1/2) of all income generated from sublicensing shall be paid to The Regents
and one-half (1/2) shall be retained by Licensee.
3.12 Licensee shall notify The Regents of each sublicense other than label
licenses granted hereunder and provide The Regents with a summary of the major
terms of each sublicense. Licensee shall collect and pay all income from fees
and royalties due The Regents (and guarantee all such payments) received from
sublicensees. Licensee shall require sublicensees to provide it with progress
and royalty reports in accordance with the provisions herein, and Licensee
shall collect and deliver to The Regents all such reports due from
sublicensees.
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3.13 Upon termination of this Agreement for any reason, The Regents, at its
sole discretion, shall determine whether any or all sublicenses shall be
canceled or assigned to The Regents.
3.14 Pursuant to 35 USC Section 204, because this Agreement grants the
exclusive right to make, Distribute, use, copy, format, edit, and reproduce
Products in the United States, each Software Product embodying the Discovery or
produced through the use thereof will be manufactured substantially in the
United States absent a waiver from the U.S. Government.
4. LICENSE ISSUE FEE
4.1 As consideration for all the rights and licenses granted to Licensee,
Licensee will pay to The Regents a license issue fee of Twenty Thousand Dollars
($20,000) in two (2) installments at the times set forth below:
4.1.1 Ten Thousand Dollars ($10,000) within thirty (30) days after the
grant by DOE to The Regents of the right to assert Copyright to
the Software Products;
4.1.2 Ten Thousand Dollars ($10,000) on the first anniversary of the
effective date recited on page one of this Agreement.
4.2 The fee set forth in Paragraph 4.1 above is non-refundable,
noncreditable, and not an advance against royalties.
5. ROYALTIES
5.1 As and in further consideration for all the rights and licenses
granted herein, Licensee shall pay to The Regents an earned royalty in the
following
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amount to be paid on the Distribution of any instrument or device on which the
Software Products run or the Distribution of Software Products Distributed to
upgrade the capability of an instrument or device:
5.1.1 Two Thousand Five Hundred Dollars ($2,500) on the Distribution
of each instrument or device on which the Software Products
covered by Copyright run; or
5.1.2 Two Thousand Five Hundred and One Dollars ($2,501) on the
Distribution of each instrument or device on which the Patent
Products and Unprotected Products run;
5.1.3 One Thousand Dollars ($1,000) on each Software Product covered
by Copyright Distributed to run on any instrument or device
where the customer has never received a Software Product for
that instrument or device; or
5.1.4 One Thousand One Dollars ($1,001) on each Patent Product or
Unprotected Product Distributed to run on any instrument or
device where the customer has never received a Patent Product
or Unprotected Product for that instrument or device;
5.1.5 Two Hundred Fifty Dollars ($250) on each functionally enhanced
Software Product (as opposed to correction of a Software
malfunction) covered by Copyright Distributed to update a
previous version of the Software Products where such updated
Software Products are not Distributed to run in combination with
a new instrument or device, provided, however, that Licensee
shall pay to The Regents an earned royalty per Application for
each new Application transferred from The Regents to Licensee
after the effective date of this Agreement that is Distributed
to update a version of the existing Software Products already in
the possession of the customer when the customer of Licensee has
not previously received such new Application. The royalty rate
paid to The Regents for a Software Product containing such new
Application shall be Five Hundred Dollars ($500) for each copy
Distributed to the customers of Licensee; or
5.1.6 Two Hundred Fifty-One Dollars ($251) on each functionally
enhanced Patent Product or Unprotected Product (as opposed to
correction of a Software malfunction) Distributed to update a
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previous version of the Patent Product or Unprotected Product
where such updated Products or Unprotected Product is not
Distributed to run in combination with a new instrument or
device, provided, however, that Licensee shall pay to The
Regents an earned royalty per Application for each new
Application transferred from The Regents to Licensee after the
effective date of this Agreement that is Distributed to update a
version of the existing Patent Product or Unprotective Product
already in the possession of the customer when the customer of
Licensee has not previously received such new Application. The
royalty rate paid to The Regents for a Software Product
containing such new Application shall be Five Hundred and One
Dollars ($501) for each copy Distributed to the customers of
Licensee.
The earned royalty paid to The Regents for Products covered by both Copyright
and Patent Rights and specified in Paragraphs 5.1.1 and 5.1.2 shall not
exceed Two Thousand Five Hundred and One Dollars ($2,501). The earned royalty
paid to The Regents for Products covered by both Copyright and Patent Rights
and specified in Paragraphs 5.1.3 and 5.1.4 shall not exceed One Thousand-One
Dollars ($1,001). The earned royalty paid to The Regents for Products covered
by both Copyright and Patent Rights specified in Paragraphs 5.1.5 and 5.1.6
shall not exceed Two Hundred Fifty-One Dollars ($251) for any updated version
of the Software Products not containing a new Application and shall not
exceed Five Hundred and One Dollars ($501) for a Software Product containing
new Application Distributed with an updated version of the Software Products.
5.2 Licensee shall be entitled to reduce the royalty rates specified in
Paragraphs 5.1.1 and 5.1.2 supra to One Thousand Dollars ($1,000) and One
Thousand and One Dollars ($1,001) respectively, if the Contribution by The
Regents to subsequent versions of the first Derivative Work deemed to be a
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commercially acceptable Produet is reduced below fifty percent (50%).
"Contribution" for the purposes of this Paragraph 5.2 means inclusion of
lines of Source Code and object code originating with The Regents either
explicitly, or by transference to Licensee from The Regents of concepts,
algorithms, methods of operation, look and feel, and the like. In the event
that the Contribution to the Software Products provided by The Regents is
less than five percent (5%), then Licensee shall make a one-time payment in
the amount of Ten Thousand Dollars ($10,000) to The Regents. Such Ten
Thousand Dollar ($10,000) payment shall constitute a paid-up license to
Licensee, and Licensee shall owe no further consideration to The Regents for
the licenses granted hereunder for Software Products. But if Licensee accepts
Contributions from The Regents at a later time, the royalties shall revert to
the original royalty rate specified in Paragraphs 5.1.1 through 5.1.6.
5.3 Beginning in the year 1996, Licensee shall pay to The Regents a minimum
annual royalty as set forth below:
1996 - $ 40,000
1997 - $ 25,000
1998 - $ 20,000
1999 - $ 10,000
In each succeeding calendar year after the year 1999, Licensee shall pay a
minimum annual royalty of Ten Thousand Dollars ($10,000) thereafter for the
life of this Agreement. The amount by which minimum royalties for any given
year
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exceed earned royalties for that year shall be paid to The Regents by
February 28th of each year and shall be credited against earned royalties
quarter to quarter until consumed for that year. In the event minimum annual
royalties exceed earned royalties, the excess may be credited against earned
royalties in succeeding years until such excess is consumed.
5.4 Patent Rights, Products, and Methods are defined so that royalties
shall be payable on Products and Methods covered by both pending patent
applications and issued patents. Earned royalties shall accrue in each
country for the period of time specified in Paragraph 9.1 infra and shall be
payable to The Regents when a Product is invoiced, or if not invoiced, when
delivered to a third party or to itself, an Affiliate, or Joint Venture in
the case where such delivery of a Product to Licensee, an Affiliate, or Joint
Venture is intended for end use for purposes other than inventory, Product
demonstration, or internal research and development.
5.5 Royalties accruing to The Regents shall be paid to The Regents
quarterly on or before the following dates of each calendar year:
February 28th
May 31st
August 31st
November 30th
Each such payment will be for royalties which accrued within the most
recently completed calendar quarter.
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5.6 All monies due The Regents shall be payable in United States funds
collectible at par in San Francisco, California. When a Product is Distributed
for monies other than United States dollars, the earned royalties will first be
determined in the foreign currency of the country in which such Product was
Distributed and then converted into equivalent United States funds. The
exchange rate will be that rate quoted in the Wall Street Journal on the last
business day of the reporting period.
5.7 Earned royalties on sales of a Product occurring in any country outside
the United States shall not be reduced by any taxes (including value-added
taxes), fees, or other charges imposed by the government of such country on the
remittance of royalty income. The Licensee shall also be responsible for all
bank transfer charges.
5.8 Notwithstanding the provisions of Article 26 (FORCE MAJEURE), if at any
time legal restrictions other than tax withholding on sublicensing revenues
prevent prompt remittance of part or all royalties owed to The Regents by the
Licensee with respect to any country where a Product is Distributed, the
Licensee shall convert the amount owed to The Regents into United States funds
and shall pay The Regents directly from another source of funds for the amount
impounded.
5.9 In the event that any patent or any claim thereof included within the
Patent Rights shall be held invalid or unenforceable in a final decision by a
court of competent jurisdiction and last resort and from which no appeal has or
can be taken, all obligation to pay royalties based on such patent or claim or
any claim
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patentably indistinct therefrom shall cease as of the date of such final
decision. The Licensee shall not, however, be relieved from any royalties
that accrued before such decision or that are based on another patent or
claim that has not expired or that is not involved in such decision.
5.10 No royalties shall be collected or paid hereunder to The Regents on
Products sold to the account of the U.S. Government. Licensee and its
sublicensee shall reduce the amount charged for a Product distributed to the
U.S. Government by an equal amount to the royalty for such a Product otherwise
due The Regents as provided herein.
5.11 In the event the exclusive license granted to Licensee herein is
reduced to nonexclusive licenses under Article 6 (DUE DILIGENCE) and The
Regents grants rights to any third party under Patent Rights, Copyrights, or
Property Rights (except for the U.S. Government) on financial terms and
conditions different than the financial terms of this Agreement, then The
Regents shall notify Licensee of such different terms and conditions.
Licensee shall have the option of adopting such different terms and
conditions by giving notice to The Regents within sixty (60) days of
notification by The Regents to Licensee.
5.12 To the maximum extent permitted under applicable law, the Licensee
shall be responsible for the administration and payment of all taxes in the
United States other than income or related taxes, whether federal, state, or
local government taxes, however designated or levied on this Agreement or
related Software Products transferred by The Regents to the Licensee,
including any sales
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and use taxes and state and local privilege or excise taxes based on gross
revenues. Any such payments made under this Paragraph 5.12 shall not be
deductible or creditable against the fees and royalties due The Regents.
6. DUE DILIGENCE
6.1 The Licensee, upon execution of this Agreement, shall diligently
proceed with the development, manufacture, and Distribution of Products and
shall earnestly and diligently endeavor to market same within a reasonable
time after execution of this Agreement and in quantities sufficient to meet
the market demands therefore.
6.2 The Licensee shall be entitled to exercise prudent and reasonable
business judgment in the manner in which it meets its due diligence
obligations hereunder. In no case, however, shall Licensee be relieved of its
obligations to meet the due diligence provisions of this Article 6 (DUE
DILIGENCE).
6.3 The Licensee shall endeavor to obtain all necessary governmental
approvals in each country for the manufacture, use and sale of each Product.
6.4 The Regents shall have the right and option to either terminate this
Agreement or reduce the exclusive licenses granted to Licensee to nonexclusive
licenses in accordance with Paragraph 6.5 hereof if Licensee is unable to meet
the obligations set forth in Paragraph 6.1 above or is unable to introduce the
Products (or the functional equivalent of Software Products) to the market
place anywhere in the world before March 1, 1996, subject to Article 26 (FORCE
MAJEURE) or the
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freedom to practice Patent Rights and Copyrights by Licensee without
infringement of third-party rights. The exercise of such right and option by
The Regents supersedes the rights granted in Article 2 (REPRESENTATIONS AND
WARRANTS).
6.5 To exercise the right to terminate the licenses to a Product or to
reduce the grant to Licensee to one of nonexclusivity under this Article 6
(DUE DILIGENCE), The Regents must give the Licensee written notice of the
deficiency. The Licensee thereafter has sixty (60) days to cure the
deficiency or to request arbitration. If The Regents has not received a
written request for arbitration or satisfactory tangible evidence that the
deficiency has been cured by the end of the sixty (60)-day period, then The
Regents may, at its option, terminate the license to that Product or reduce
the exclusive license granted to Licensee to a nonexclusive license to such
Product by giving written notice to the Licensee. These notices shall be
subject to Article 22 (NOTICES).
6.6 Either party may refer any controversy or claim arising out of or
relating to this Article 6 (DUE DILIGENCE) or the breach thereof, to
arbitration under the provisions of this Article 6 (DUE DILIGENCE) by so
notifying the other party in writing in accordance with the provisions of
Article 22 (NOTICES) stating the nature of the dispute to be resolved.
6.7 Within fifteen (15) business days following such notice, three (3)
arbitrators shall be selected by the following process:
6.7.1 each party shall designate one individual, not an employee,
director, paid consultant, or shareholder of the party to serve
as an arbitrator; and
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6.7.2 these two arbitrators shall select a third individual, who shall
be an attorney experienced in arbitration proceedings, to serve
as the third arbitrator and to preside in resolution of the
dispute. The third arbitrator shall not be an employee, director,
or shareholder of either party.
6.8 Promptly after selection of the three arbitrators, the arbitrators
shall meet with the parties at which time the parties shall each present in
writing the issue to be resolved and a proposed ruling on it. Such writing
shall be served on the other party in advance and be limited to no more than
twenty (20) pages.
6.9 The following general provision shall apply to the arbitration
proceeding:
6.9.1 no later than thirty (30) days after the appointment of the
third arbitrator, the arbitrators shall set a date for a hearing
to resolve the issue identified by the parties. The hearing shall
take place no later than one hundred twenty (120) days from the
original notice requesting arbitration;
6.9.2 the arbitrators shall permit the taking of not more than one (1)
deposition by each party, and shall permit, subject to the
provision of a mutually agreeable protective order, the
production of only those documents immediately and directly
bearing on the issue or issues subject to arbitration and only to
the extent necessary for the convenience and use of the
arbitrators, and shall not require or permit any other discovery
by any means, including, but not limited to, depositions
interrogatories or production of documents;
6.9.3 no later than ten (10) business days prior to the hearing, each
party may submit a single written brief or memorandum in support
of its position which may be no more than twenty (20) pages. Each
party shall be entitled to no more than three (3) hours of
hearing to present testimony or documentary evidence. Such time
limitation shall include any direct, cross or rebuttal testimony,
but such time limitation shall only be charged against the party
conducting such direct, cross or rebuttal testimony. It shall be
the responsibility of the arbitrators to determine whether each
party has had the three (3) hours to which it is
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entitled or may, upon good cause shown, have additional time to
present its case.
6.9.4 each party shall have the right to be represented by counsel. The
arbitrators shall have sole discretion with regard to the
admissibility of evidence. Admissibility will be decided by
two-thirds vote; and
6.9.5 within fifteen (15) days of the conclusion of the hearing, each
party must submit a proposal finding to the arbitrators.
6.10 The arbitrators shall rule on the disputed issue within thirty (30)
days following the completion of the testimony of both parties. Such ruling
shall adopt in their entirety the proposed findings of one of the parties on
the disputed issue, or the arbitrators shall adopt alternative findings. The
issue shall be resolved upon two-thirds vote of the arbitrators.
6.11 Arbitration shall take place in the location of choice of the party who
has not requested arbitration, but such location shall be in the State of
California.
6.12 The arbitrators shall be paid reasonable fees plus expenses, which
shall be shared equally between The Regents and Licensee.
6.13 The decision of the arbitrators shall be enforceable, but not
appealable, in any court of competent jurisdiction.
7. PROGRESS AND ROYALTY REPORTS
7.1 Beginning on February 15, 1996, and annually thereafter, the Licensee
shall submit to The Regents a progress report covering the activities of the
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Licensee related to the development and testing of each Product and the
obtaining of the governmental approvals necessary for marketing. These progress
reports shall be provided to The Regents to cover the progress of the research
and development of the Product until its first commercial sale in the United
States.
7.2 The progress reports submitted under Section 8.1 shall include, but
not be limited to, the following topics so that The Regents may be able to
determine the progress of the development of each Product and may also be
able to determine whether or not Licensee has met its diligence obligations
set forth in Article 6 (DUE DILIGENCE) above:
- summary of work completed
- key scientific discoveries
- summary of work in progress
- date of introduction of each Product to the market
- activities of sublicensees, if any
7.3 The Licensee also agrees to report to The Regents in its immediately
subsequent progress and royalty report the date of first commercial sale of a
Product in each country.
7.4 After the first commercial sale of a Product, the Licensee will
provide The Regents with quarterly royalty reports to The Regents on or
before each February 28, May 31, August 31, and November 30 or each year.
Each such royalty report will cover the most recently completed calendar
quarter (October
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through December, January through March, April through June, and July through
September) and will show:
7.4.1 the number of instruments and devices on which the Software
Products run Distributed by Licensee and the number and type of
each Product Distributed by Licensee in accordance with the
royalty categories specified in SubParagraphs 5.1a through 5.1f
during the most recently completed calendar quarter;
7.4.2 the number of instruments an devices on which the Software
Products run Distributed by the sublicensees of Licensee and the
number and type of each Product Distributed by the sublicensees
of Licensee in accordance with the royalty categories specified
in SubParagraphs 5.1a through 5.1f during the most recently
completed calendar quarter;
7.4.3 the royalties in U.S. dollars, payable hereunder with respect to
the royalty categories specified in Sub Paragraphs 5.1a through
5.1f;
7.4.4 the exchange rates used, if any.
7.5 If no Product has been made during any reporting period, a statement
to this effect shall be required.
8. BOOKS AND RECORDS
8.1 The Licensee shall keep books and records accurately showing each
Product manufactured, used, Distributed, copied, formatted, edited, and
reproduced under the terms of this Agreement. Such books and records shall be
preserved for at least five (5) years from the date of the royalty payment to
which they pertain and shall be open to inspection, upon seven (7) days
notice during normal business hours at the normal place of business of
Licensee to a mutually
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agreed upon independent accountant or auditor who shall be bound by an
obligation of confidentiality for such audit. Audits of the books and records
of Licensee shall not take place more than once in any twelve (12)-month
period.
8.2 The fees and expenses of the accountant or auditor performing such
examination shall be borne by The Regents. However, if an error in royalties
of more than five percent (5%) of the total royalties due for any year is
discovered, then the fees and expenses of the accountant or auditor shall be
borne by the Licensee.
9. LIFE OF THE AGREEMENT
9.1 Unless otherwise terminated by operation of law or by acts of the
parties in accordance with the terms of this Agreement, this Agreement shall
be in force from the effective date received on page one and shall remain in
effect for the life of the last-to-expire patent licensed under this
Agreement or until the last patent application licensed under this Agreement
is abandoned. In the event none of the patents licensed under this Agreement
issues or all patents are abandoned, this Agreement shall be in force for a
period of twenty (20) years from market introduction for the last to be
introduced Software Product covered by Copyright and Property Rights in the
United States.
9.2 Any termination of this Agreement shall not affect the rights and
obligations set forth in the following Articles:
Article 8 Books and Records
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Article 13 Confidentiality
Article 15 Use of Names and Trademarks
Article 18 Indemnification
Article 27 Disposition of each Product on Hand Upon Termination
10. TERMINATION BY THE REGENTS
10.1 If the Licensee should violate or fail to perform any term or
covenant of this Agreement, then The Regents may give written notice of such
default ("Notice of Default") to the Licensee. If the Licensee should fail to
repair such default within sixty (60) days of the effective date of such
notice, The Regents shall have the right to terminate this Agreement and the
licenses herein by a second written notice ("Notice of Termination") to the
Licensee. If a Notice of Termination is sent to the Licensee, this Agreement
shall automatically terminate on the effective date of such notice. These
notices shall be subject to Article 22 (NOTICES).
11. TERMINATION BY THE LICENSEE
11.1 The Licensee shall have the right upon ninety (90) days written
notice to The Regents to terminate this Agreement in whole or as to any
portion of Patent Rights, Copyright, and Property Rights. Upon expiration of
the ninety (90)-day period, termination by Licensee shall be effective and
Licensee shall stand
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unlicensed hereunder. Such notice of termination shall be subject to
Article 22 (NOTICES).
12. SUPPLY OF THE SOFTWARE
12.1 The Regents agrees to initially supply Licensee with one copy of all
applicable Source Code materials and existing documentation relating to the
Software Products. During the term hereof, The Regents, upon the mutual
agreement of the parties hereto, may supply Licensee with updated versions of
the Software Products and any new Applications developed therefor. Licensee
shall promptly supply The Regents with at least one copy of each latest version
of all applicable Source Code materials and existing documentation relating to
the Software Products for so long as this Agreement is in effect. The Regents
agrees to keep Derivative Works of the Licensee in confidence in accordance
with the provisions of Article 13 (CONFIDENTIALITY).
13. CONFIDENTIALITY
13.1 Licensee and The Regents respectively shall treat and maintain the
proprietary business, patent prosecution, software, engineering drawings,
process and technical information, and other proprietary information of the
other party ("Proprietary Information") in confidence using at least the same
degree of care as that party uses to protect its own proprietary information
of a like nature for a period from the date of disclosure until five (5)
years after the date of termination
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of this Agreement, provided that all Proprietary Information shall be labeled
or marked confidential or as otherwise similarly appropriate by the
disclosing party, or if the Proprietary Information is orally disclosed, it
shall be reduced to writing or some other physically tangible form, marked
and labeled as set forth above by the disclosing party and delivered to the
receiving party within thirty (30) days of the oral disclosure as a record of
the disclosure and the confidential nature thereof. Notwithstanding the
foregoing, Licensee and The Regents may use and disclose Proprietary
Information to its employees, agents, consultants, contractors, and
sublicensees, or as is deemed necessary by Licensee or The Regents to market
and Distribute each Product, and for any purpose set forth or relating to
this Agreement, provided that any such parties are bound by a like duty of
confidentiality.
13.1.1 Nothing contained herein shall in any way restrict or
impair the right of Licensee or The Regents to use,
disclose or otherwise deal with any Proprietary
Information:
13.1.1.1 that recipient can demonstrate by written records was
previously known to it; or
13.1.1.2 that is now, or becomes in the future, public knowledge
other than through acts or omissions of recipient; or
13.1.1.3 that is lawfully obtained without restrictions by
recipient from sources independent of the disclosing
party; or
13.1.1.4 that is required to be disclosed to a governmental
entity or agency in connection with seeking any
governmental or regulatory approval, or pursuant to
the lawful requirement or request of a governmental
entity or agency; or
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13.1.1.5 that is furnished to a third party by the recipient
with similar confidentiality restrictions imposed on
such third party, as evidenced in writing; or
13.1.1.6 that The Regents is required to disclose pursuant to
the California Public Records Act or other applicable
law.
If The Regents is required to disclose Proprietary Information of the
Licensee pursuant to SubParagraphs (iv) and (vi) above, The Regents shall
give Licensee ten (10) days notice prior to disclosure.
13.2 The Licensee and The Regents agree to destroy or return to the
disclosing party Proprietary Information received from the other in its
possession within fifteen (15) days following the effective date of
termination. However, each party may retain one copy of Proprietary
Information for archival purposes in nonworking files. Licensee and The
Regents agree to provide each other, within thirty (30) days following
termination, with a written notice that Proprietary Information has been
returned or destroyed.
14. PATENT PROSECUTION AND MAINTENANCE
14.1 The Regents shall diligently prosecute and maintain the United
States and foreign patent applications and patents comprising Patent Rights
using counsel of its choice. The Regents shall promptly provide Licensee with
copies of all relevant documentation so that Licensee may be currently and
promptly informed and apprised of the continuing prosecution, and may comment
upon such documentation sufficiently in advance of any initial deadline for
filing a response,
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provided, however, that if Licensee has not commented upon such documentation
prior to the initial deadline for filing a response with the relevant
government patent office or The Regents must act to preserve Patent Rights,
The Regents shall be free to respond appropriately without consideration of
the comments made by Lieensee, if any. Both parties hereto agree to keep this
documentation in confidence in accordance with the provisions of Article 13
(CONFIDENTIALITY) herein. The counsel of The Regents will take instructions
only from The Regents. The Regents shall retain counsel of its choice that is
reasonably acceptable to Licensee, provided, however, that if Licensee
rejects choice of counsel made by The Regents three (3) times consecutively
(i.e., three different new attorneys), then The Regents shall be free, in its
sole discretion, to choose an attorney of its choice.
14.2 The Regents shall use all reasonable efforts to amend any patent
application to include claims requested by the Licensee and required to
protect each Product contemplated to be sold or Method to be practiced under
this Agreement.
14.3 The Regents shall, at the request of Licensee, file, prosecute, and
maintain patent applications and patents covered by Patent Rights in foreign
countries if available. The Licensee must notify The Regents within seven (7)
months of the filing of the corresponding United States application of its
decision to request The Regents to file foreign counterpart patent
applications. This notice concerning foreign filing shall be in writing and
must identify the countries desired. The absence of such a notice from the
Licensee to The Regents within the seven
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(7)-month period shall be considered an election by Licensee not to request
The Regents to secure foreign patent rights on behalf of the Licensee. The
Regents shall have the right to file patent applications at its own expense
in any country Licensee has not included in its list of desired countries,
and such applications and resultant patents, if any, shall not be included in
the licenses granted under this Agreement. However, The Regents shall notify
Licensee of such foreign countries in which The Regents filed patent
applications and in which Licensee elected not to secure foreign rights.
Subject to the availability of relevant rights, Licensee shall have the right
and option to include in this Agreement (if not already licensed exclusively
to a third party) those patent applications and patents issuing thereon filed
in countries not originally included in the desired list of the Licensee at
any time up to five (5) years from the filing date of such patent
applications, provided, however, that Licensee shall notify The Regents in
writing of its decision and shall share equally with other licensees in all
filing, prosecution, and maintenance fees for such additional patents and
patent applications.
14.4 1/n of past, present and future costs of preparing, filing,
prosecuting and maintaining all United States and foreign patent applications
and all costs and fees relating to the preparation and filing of patents
covered by Patent Rights in Paragraph 1.1 shall be borne by Licensee. The
costs of all interferences and oppositions shall be considered prosecution
expenses and also shall be borne by Licensee. Licensee shall reimburse The
Regents for all costs and charges within thirty (30) days following receipt
of a proper itemized invoice from The Regents to
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which relevant law firm billings shall be attached. For purposes of this
Paragraph, "n" means the number of licensees of the Regents to Patent Rights.
But, the United States Government shall not be considered a licensee of The
Regents.
14.5 The obligation by Licensee to underwrite and to pay patent filing
costs and related costs, prosecution and maintenance costs shall continue for
so long as this Agreement remains in effect, provided, however, that the
Licensee may terminate its obligations with respect to any patent application
or patent in any or all designated countries upon three (3) months written
notice to The Regents. The Regents will use its best efforts to curtail the
associated patent costs after such a notice is received from the Licensee.
The Regents may continue prosecution and/or maintenance of such
application(s) or patent(s) at its sole discretion and expense, provided,
however, that the Licensee shall have no further right or licenses thereunder.
15. USE OF NAMES AND TRADEMARKS AND NONDISCLOSURE OF AGREEMENT
15.1 Nothing contained in this Agreement shall be construed as conferring
any right to use in advertising, publicity, or other promotional activities
any name, trade name, trademark, or other designation of either party hereto
by the other (including any contraction, abbreviation, or simulation of any
of the foregoing). The use of the name by Licensee of "The Regents of the
University of California" or the name of any University of California campus
or national laboratory is expressly
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prohibited except as provided for under Articles 13 (CONFIDENTIALITY) and 15
(USE OF NAMES AND TRADEMARKS AND NONDISCLOSURE OF AGREEMENT).
15.2 Each party hereto further agrees not to use or refer to this
Agreement or any license granted hereunder in any promotional activity
without the express written approval of the other party. However, The Regents
shall be free to release to the inventors of the Discovery and authors of the
Software covered by this Agreement and senior administration officials
employed by The Regents the terms and conditions of this Agreement upon their
request. If such release is made, The Regents shall request that the
inventors not disclose such terms and conditions to others. It is further
understood that should a third party inquire whether a license is available,
The Regents may disclose the existence of this Agreement and the extent of
the grant in Article 2 (REPRESENTATIONS AND WARRANTS) to such third party,
but shall not disclose the name of the Licensee, except where The Regents is
required to release information under either the California Public Records
Act or other applicable law.
15.3 Licensee shall be entitled to file at its expense for a trademark
registration on the mark QUIPS-TM-. In any event, The Regents and Licensee
have the right to use such mark. If this Agreement is terminated in its
entirety by either party hereto, then title to the QUIPS-TM- trademark shall
be assigned to The Regents.
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16. PROPERTY PROTECTION
16.1 Licensee agrees to mark each Product falling within the scope of an
issued claim within Patent Rights or Copyright for anything made and
Distributed under the terms of this Agreement, or their containers, in
accordance with the applicable patent marking laws.
16.2 The Licensee shall provide in each copy of Software Products a
notice of copyright in the name of The Regents of the University of
California in such reasonable manner as is designated by The Regents. Subject
to the rights granted to the U.S. Government specified in Appendix B,
Licensee will maintain the proprietary nature of the Source Code and take
such reasonable precautions to prevent the unauthorized disclosure of the
Source Code to the same extent that Licensee protects the proprietary
information contained in source code of its own. Licensee shall be entitled
to register the Copyright covering the Software Products with the Library of
Congress in the United States in the name of The Regents at the time it
desires. The Regents shall use its best efforts to cooperate fully with
Licensee in the timely execution of all documents necessary to register said
Copyright in the name of The Regents.
16.3 Licensee shall copy protect each copy of Software Products
Distributed or transferred to a third party. Such copy protection for the
Software Products shall be provided by means of non-copyable media or
hardware security device.
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16.4 Any tangible personal property or Derivative Works developed or
produced by or for Licensee independently or pursuant to any agreement
between Licensee and a third party shall be the exclusive property of and
owned by Licensee.
17. INFRINGEMENT
17.1 In the event that either party responsible for administering this
Agreement learns of substantial infringement of any patent or copyright
licensed under this Agreement, the informed party shall call such
infringement to the attention of the other party thereto in writing and shall
provide the other party with reasonable evidence of such infringement. Both
parties to this Agreement agree that during the period and in a jurisdiction
where Licensee has exclusive rights under this Agreement, neither will notify
an infringing third party of the infringement of any Patent Rights or
Copyright limited to the exclusive rights granted under this Agreement
without first obtaining consent of the other party, which consent shall not
be unreasonably denied. Both parties shall use their best efforts in
cooperation with each other to terminate such infringement without litigation.
17.2 Licensee may request that The Regents take legal action against the
infringement of Patent Rights or Copyright. Such request shall be made in
writing and shall include reasonable evidence of such infringement and
damages to
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Licensee. If the infringing activity has not been abated within ninety (90)
days following the date of such request, The Regents shall have the right to:
17.2.1 commence suit on its own account to terminate the
infringement. In the event The Regents commences suit,
Licensee shall reimburse The Regents for fifty percent (50%)
of the actual Infringement Litigation Costs of the Regents.
Licensee's share of the Infringement Litigation Costs of the
Regents shall be paid to The Regents on a quarterly basis
within sixty (60) days of receiving notice from The Regents
of the amount of such costs. Such reimbursement shall
continue until the suit is finally adjudicated or settled.
All recoveries shall first be applied to fully repay The
Regents and Licensee for the Infringement Litigation Costs.
Any remainder shall be shared between The Regents and
Licensee, with The Regents and Licensee sharing equally in
the recovery; or
17.2.2 refuse to participate in such suit. In the event The Regents
refuses to participate in such suit, The Regents shall give
notice of its election in writing to Licensee by the end of
the one-hundredth (lOOth) day after receiving notice of such
request from Licensee. Licensee thereafter may bring suit
for patent or Copyright infringement in the name of Licensee
and if the infringement occurred during the period and in a
jurisdiction where Licensee has exclusive rights under this
Agreement. In the event Licensee elects to bring suit in
accordance with this Paragraph, The Regents may thereafter
join such suit at its own expense.
17.3 Subject to Paragraph 17.2b above, legal action brought jointly by
The Regents and Licensee and participated in by both shall be at the joint
expense of the parties and all recoveries be shared jointly by them in
proportion to the share of expense paid by each party.
17.4 In the event that The Regents refuses to participate in a suit and
the Licensee brings same, the Licensee may withhold, during pendency of the
suit, up
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to fifty percent (50%) of the minimum and earned royalty income otherwise due
The Regents to offset one-half of Infringement Litigation Costs of Licensee.
The Infringement Litigation Costs of Licensee shall be deducted from royalty
payments on a quarterly basis, and an accounting of such deductions shall be
reflected in the quarterly royalty reports provided by Licensee to The
Regents as set forth in Article 7 (PROGRESS AND ROYALTY REPORTS). Said
withheld royalty income shall be applied to only those Infringement
Litigation Costs that Licensee incurred during the quarter in which such
royalty income was due and owing. Should one-half (1/2) of the Infringement
Litigation Costs of the suit exceed one-half (l/2) of the royalties allowed
to be withheld in accordance with this Paragraph 17.4, Licensee may apply
such excess to the following quarter. This same application of excess cost
will continue until such time as the suit is finally adjudicated. All
recoveries shall first be applied to fully repay both parties for the cost of
the suit, and any remainder shall be shared equally.
17.5 Each party shall cooperate with the other in litigation proceedings
instituted hereunder. Such litigation shall be controlled by the party
bringing the suit, except that The Regents may be represented by counsel of
its choice pursuant to the determination of The Regents in any suit brought
by Licensee.
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18. INDEMNIFICATION
18.1 Licensee and The Regents are acting as independent contractors
under this Agreement and nothing contained herein shall make either party the
agent, employee, partner, or representative of the other.
18.2 Licensee agrees (and requires its sublicensees other than label
sublicensees) to indemnify, hold harmless and defend The Regents, its
officers, employees, and agents; the sponsors of the research that led to the
Discovery covered by Copyright, Patent Rights, and Property Rights; and the
inventors of any Discovery covered by the patents and patent applications
comprising Patent Rights and the authors of any Software covered by the
Copyright to which The Regents is owner or co-owner of record, for any loss
of or damage to the property of any person or persons and any injury or death
of any person or persons resulting from or arising out of the exercise of
this license or any sublicense granted herein, excluding acts of negligence
on the part of The Regents and claims of infringement brought by The Regents
against Licensee. Where The Regents is held to be negligent, liability shall
be apportioned according to the percentage of negligence accorded to The
Regents by an appropriate court or forum having jurisdiction. In those states
or countries where such an allocation of the percentage of negligence is not
awarded, any controversy or claim relating to such allocation of negligence
between the parties to this Agreement shall be settled by arbitration in
accordance with the arbitration provisions of Paragraphs 6.7 through 6.13
supra. In no event
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shall The Regents be liable for normal commercial activities of Licensee nor
will The Regents be liable for any product liability under any related cause
of action.
18.3 The Regents shall promptly notify Licensee in writing of any claim
or suit brought against The Regents in respect of which The Regents intends
to invoke the provisions of this Article 18 (INDEMNIFICATION). Licensee will
keep The Regents informed on a current basis of its defense of any claims
pursuant to this Article 18 (INDEMNIFICATION).
19. WAIVER
19.1 It is agreed that 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 and/or similar breach or default.
20. ASSIGNABILITY
20.1 This Agreement is binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns, provided,
however, this Agreement shall be personal to the Licensee and shall be
assignable by the Licensee only with the written consent of The Regents,
which consent shall not be unreasonably withheld, except that Licensee may
freely assign this Agreement to an Affiliate or to a business entity that
acquires all or substantially all of the business or assets of the Licensee
and that assumes, in writing, the performance of all provisions of this
Agreement.
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<PAGE>
21. LATE PAYMENTS
21.1 In the event royalty payments, fees, or patent prosecution costs
are not received by The Regents when due, Licensee shall pay to The Regents
interest charges at the rate of five percent (5%) plus the rate of interest
which is charged by the San Francisco Federal Reserve Bank to member banks
twenty-five (25) days prior to the date the payment was due. Such interest
shall be calculated from the date payment was due until actually received by
The Regents. Acceptance by The Regents of any late payment interest from
Licensee under this Paragraph 21.1 shall in no way affect the provision of
Article 19 (WAIVER) herein.
22. NOTICES
22.1 Any payment, 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 (a) on the date of delivery if
delivered in person or (b) on the fourth day after mailing if mailed by
first-class certified mail, postage paid, to the respective address given
below, or to such other address as it shall designate by written notice given
to the other party as follows:
In the case of the Licensee: VYSIS, INC.
3100 Woodcreek Drive
Downers Grove, IL 60515
Attn: Vice President, Technology and Bus. Dev.
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<PAGE>
In the case of The Regents: THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA (C/N 85-157-1)
Office of Technology Transfer
Harbor Bay Parkway, Suite 150
Alameda, California 94502
Attention: Director
23. GOVERNING LAWS
23.1 This Agreement shall be interpreted and construed in accordance
with the laws of the State of California, excluding any choice of law rules
that would direct the application of the laws of another jurisdiction, but
the scope and validity of any Copyright, patent, or patent application shall
be governed by the applicable laws of the country of such Copyright, patent,
or patent application.
24. GOVERNMENT APPROVAL OR REGISTRATION
24.1 If this Agreement or any associated transaction is required by the
law of any nation to be either approved or registered with any governmental
agency, Licensee shall assume all legal obligations to do so. Licensee will
notify The Regents if it becomes aware that this Agreement is subject to a
United States or foreign government reporting or approval requirement.
Licensee will make all necessary filings and pay all costs including fees,
penalties, and all other out-of-pocket costs associated with such reporting
or approval process.
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<PAGE>
25. EXPORT CONTROL LAWS
25.1 The Licensee shall observe all applicable United States and foreign
laws with respect to the transfer of Products and related technical data to
foreign countries, including, without limitation, the International Traffic
in Arms Regulations (ITAR) and the Export Administration Regulations.
26. FORCE MAJEURE
26.1 The parties to this Agreement shall be excused from any performance
required hereunder if such performance is rendered impossible or unfeasible
due to any catastrophes or other major events beyond their reasonable
control, including, without limitation, war, riot, and insurrection; laws,
proclamations, edicts, ordinances or regulations; strikes, lockouts or other
serious labor disputes; and floods, fires, explosions, or other natural
disasters. When such events have abated, the parties' respective obligations
hereunder shall resume.
27. DISPOSITION 0F PRODUCT ON HAND UPON TERMINATION
27.1 Upon termination of this Agreement, the Licensee shall have the
privilege of disposing of each previously made or partially made Product, but
no more, within a period of one hundred and twenty (120) days, provided,
however, that the sale of such Product shall be subject to the terms of this
Agreement including, but not limited to the payment of royalties for each
Product at the rates
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<PAGE>
and at the times provided herein and the rendering of reports in connection
therewith.
27.2 Subject to Paragraph 27.1 supra, upon termination of this Agreement
for any reason, Licensee shall destroy the Products (including Source Code
and documentation) in its possession within thirty (30) days following the
offective date of termination. Licensee shall provide The Regents within
forty (40) days of said destruction with written notice that the products
have been destroyed.
28. MISCELLANEOUS
28.1 The headings of the several sections are inserted for convenience
of reference only and are not intended to be a part of or to affect the
meaning or interpretation of this Agreement.
28.2 This Agreement will not be binding upon the parties until it has
been signed below on behalf of each party, in which event, it shall be
effective as of the date recited on page one.
28.3 No amendment or modification hereof shall be valid or binding upon
the parties unless made in writing and signed on behalf of each party.
28.4 This Agreement embodies the entire understanding of the parties and
supersedes all previous communications, representations, or understandings,
either oral or written, between the parties relating to the subject matter
hereof.
28.5 In case any of the provisions contained in this Agreement shall be
held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality or
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<PAGE>
unenforceability shall not affect any other provisions hereof, but this
Agreement shall be construed as if such invalid or illegal or unenforceable
provisions had never been contained herein.
28.6 This Agreement includes Appendix A and Appendix B which are attached
hereto.
IN WITNESS WHEREOF, both The Regents and the Licensee have executed
this Agreement, in duplicate originals, by their respective officers hereunto
duly authorized, on the day and year hereinafter written.
VYSIS, INC. THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
By /s/John L. Bishop By: /s/ Terence A. Feuerborn
--------------------- --------------------------
(Signature) (Signature)
Name John L. Bishop Name: Terence A. Feuerborn
____________________________
(Please Print)
Title President Title: Interim Director
_____________________________ Office of Technology Transfer
Date May 18, 1995 Date 5-23-95
_____________________________ ______________________________
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<PAGE>
APPENDIX A
Description of imaging applications to be licensed to Vysis
1) QUIPS multi-color image acquisition Application
The image acquisition Application is a software package that drives the
acquisition of multiple fluorescence color images in registration under
interactive control. It is specifically designed to control an automated
microscope configured with a high resolution digital CCD camera (Xillix
MicroImager 1400 or Photometric. 200 series/KAF1400), multi bandpass filters
(Chrome Technology), an automated filterwheel in the excitation lightpath
(LEP or Sutter Instruments), and optionally a X-Y scanning stage (LEP or
Marzhauser).
The functionality of the Application:
- - let the user interactively configure the acquisition parameters
- - perform auto-focussing
- - accurate relocation of fields from previous experiments or from an
automated metaphase scan
- - allow independent control of the exposure times for up to 6
fluorochrome images
- - calculate suggested exposure times
- - show intensity histograms for each fluorochrome images
- - show the acquired images individually or as color composites in full
or reduced resolution
- - allow selection of multiple regions-of-interest for saving
- - save image date in standard format including all associated
experiment information
Subroutines in this Application:
- - autofocussing (JM)
- - camera control (DS)
- - microscope automation control (DS)
- - importing/relocation of metaphase lists (DS)
- - automatic exposure time calculation (JM)
- - image data storage in ICS format (JM, DS)
- - dark field correction (JM)
- - contrast enhancement (DS)
- - intensity/exposure histogram calculation (JM)
- - selection of regions-of-interest for saving (JM, DS)
- - interactive parameter configuration (DK)
- - acquisition control panel (DK)
<PAGE>
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2) CGH image analysis and profile analysis Application
The CGH image analysis Application extracts ratio profile information from
images of CGH experiments acquired with the QUIPS Application. The ratio
profiles show the relative copy number of DNA sequences along each chromosome
in the metaphase spread between test DNA and reference DNA used in the
experiment. The profile analysis part of the Application combines profile
date from multiple metaphase spreads into a single "copy number karyogram"
showing statistical significance of the entire experiment.
The functionality of the Application:
- read in the image data and extract required experiment information data
- perform background correction using non-linear filters in each
fluorochrome image
- segment the chromosomes in the image using non-linear filtering and
model-based correction
- calculate normalizer for each fluorochrome image interactively
identify chromosomes
- calculate the medial axis for each identified chromosome, integrate
intensities perpendicular to the medial axis, calculate a local estimate for
the background intensity, and save the normalized and background corrected
profile data to file.
- normalize the lengths of the chromosome profiles for each chromosome
type in the experiment, show the average profile and the statistical
distribution as standard deviation, confidence intervals, range, etc.
- support output to file, screen, and printer of the "copy number
karyograms"
Subroutines in this Application:
- image and experiment information import (DS)
- interactive segmentation (DS)
- enhanced DAPI image calculation (JM)
- background correction (DS, JP)
- fallset calculation and background correction (DS, JP)
- medial axis extraction (DS, LM)
- profile calculation (DS)
- automatic segmentation (MdK, JM)
- normalization (JP, DS)
- CGH analysis control panel (DS)
- profile averaging (JP)
- profile interpretation (JP)
- averaged profile export (DS)
<PAGE>
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3) Fractional length metaphase mapping Application
The fractional length mapping Application calculates the location along
the length of a chromosome of a specific locus DNA probe for the purpose of
characterizing the probe.
The functionality of the Application:
- read in sub-images containing one chromosome each
- segment the chromosome
- calculate the medial axis
- segment the DNA probe hybridization domain and select domains
interactively
- report the location of the probe relative to the length of the
chromosome
Subroutines in this Application:
- image and experiment information import (DS)
- chromosome segmentation (LM, DS)
- DRT hybridization spot segmentation (LM)
- medial axis extraction (DS, LM)
<PAGE>
APPENDIX B
MODIFICATION NO. M145
SUPPLEMENTAL AGREEMENT TO
CONTRACT NO. DE-AC03-76SF00098
Copyright Office. The University grants to the Government, and others acting
on its behalf, a paid-up, nonexclusive, irrevocable worldwide license in such
copyrighted data to reproduce, prepare derivative works, distribute copies to
the public, and perform publicly and display publicly, by or on behalf of the
Government.
(e) Copyrighted works (other than scientific and technical articles).
(1) The University may obtain permission to assert copyright, on an individual
work, group or class basis, subsisting in technical data and computer software
first produced by the University in performance of this contract, where the
University can show that commercialization would be enhanced by such copyright
protection, subject to the following:
(i) University Request to Assert Copyright.
(A) For data other than scientific and technical articles, the University
shall submit in writing to Patent Counsel its request to assert copyright in
data first produced in the performance of this contract pursuant to this
clause. Each request by the University to be complete must include: (1) the
identity of the data (including any computer program) for which the
University requests permission to assert copyright, as well as an abstract
which is descriptive of the data and is suitable for dissemination purposes,
(2) the program under which it was funded, (3) on a best effort basis whether
the data is subject to an international treaty or agreement, (4) whether the
data is subject to export control, (5) a statement that the University plans
to commercialize the data within five years of obtaining permission to assert
copyright, and (6) for data other than computer software, a statement
explaining why the assertion of copyright is necessary to enhance
commercialization. For data that is developed using other funding sources in
addition to DOE funding, the permission to assert copyright in accordance
with this clause must also be obtained by the University from all other
funding sources prior to the University's request to Patent Counsel. The
request shall include the University's certification or other documentation
acceptable to Patent Counsel demonstrating such permission has been obtained.
(B) Permission for the University to assert copyright in excepted categories
of data as determined by DOE is expressly withheld. Such excepted categories
include data whose release (1) would be detrimental to national security,
i.e., involve classified information or data or sensitive information under
Section 148 of the Atomic Energy Act of 1954, as amended, or are subject to
export control for nonproliferation and other nuclear-related national security
purposes, (2) would not enhance the appropriate transfer or dissemination and
commercialization of such data, (3) would have a negative impact on U.S.
industrial competitiveness, (4) would prevent DOE from meeting its obligations
under treaties and international agreements, or (5) would be detrimental to one
or more of DOE's programs. Additional excepted categories may be added by the
Assistant General Counsel for Intellectual Property. Where data are determined
to be under an export control restriction, the University may still obtain
permission to assert copyright in such restricted data for purposes of limited
commercialization within the constraints provided by the export control
statutes and regulations subject to the provisions of this clause. However,
notwithstanding any other provision of this contract, all data developed with
Naval Reactors' funding and those data that are classified fall within the
above excepted categories and permission to assert copyright will not be
granted by DOE for those data. Additionally, the rights of the University in
data are subject to the disposition of data rights in the treaties and
international agreements
<PAGE>
identified under this contract as well as those additional treaties and
international agreements which DOE may from time to time identify by
unilateral amendment to the contract; such amendment listing added treaties
and international agreements is effective only for data which is developed
after the date such treaty or international agreement is added to this
contract. Also, the University will not be permitted to assert copyright in
data in the form of various technical reports generated by the University
under the contract without first obtaining the advanced written permission of
the Contracting Officer.
(ii) DOE Review and Response to University's Request. The Patent Counsel
shall use its best efforts to respond in writing within 90 days of receipt of a
compete request by the University to assert copyright in technical data and
computer software pursuant to this clause. Such response shall either give or
withhold DOE's permission for the University to assert copyright or advise the
University that DOE needs additional time to respond and the reasons therefor.
(iii) Permission for University to Assert Copyright.
(A) For computer software, the University shall furnish to the contractor
designated by DOE to serve as the DOE centralized software distribution and
control point, at the time permission to assert copyright is given under (ii)
above: (1) an abstract describing the software suitable for publication, (2)
the source code for each software program, and (3) the object code and at
least the minimum support documentation needed by a technically competent
user to understand and use the software. The Patent Counsel, for good cause
shown by the University, may allow the minimum support documentation to be
delivered within 60 days after permission to assert copyright is given or at
such time the minimum support documentation becomes available. The
University acknowledges that the above-identified DOE-designated contractor
may provide a technical description of the software in an announcement
identifying its availability from the copyright holder. If adequate
documentation is not available at the time of assertion of copyright, then
the University shall require its licensee to supply such documentation within
6 months of license issuance.
(B) Unless otherwise directed by the Contracting Officer, for data other than
computer software to which the University has received permission to assert
copyright under paragraph (ii) above, the University shall within sixty (60)
days of obtaining such permission furnish to DOE's Office of Scientific and
Technical Information (OSTI) a copy of such data as well as an abstract of the
data suitable for dissemination purposes. The University acknowledges that
OSTI may provide an abstract of the data in an announcement to DOE, its
contractors and to the public identifying its availability from the copyright
holder.
(C) For a period of five (5) years beginning on the date the University is
given permission to assert copyright in data, the University grants to the
Government, and others acting on its behalf, a paid-up, nonexclusive,
irrevocable worldwide license in such copyrighted data to reproduce, prepare
derivative works, and perform publicly and display publicly, by or on behalf of
the Government. Subject to DOE approval, the five-year period is renewable for
two more five-year periods. The DOE approval will be based on the standard
that the work is still commercially viable and the market demand is being met.
<PAGE>
(D) After the five (5) year period set forth in (C) above, or if, prior to the
end of such periods, the University abandons commercialization activities
pertaining to the data to which the University has been given permission to
assert copyright, the University grants to the Government, and others acting on
its behalf, a paid-up, nonexclusive, irrevocable worldwide license in such
copyrighted data to reproduce, distribute copies to the public, prepare
derivative works, perform publicly and display publicly, and to permit others
to do so.
(E) Whenever the University obtains permission to assert copyright in data,
the University shall affix the applicable copyright notice of 17 U.S.C.
Section 401 or Section 402 on the copyrighted data and also an
acknowledgement of the Government sponsorship and license rights of
paragraphs (C) and (D) above. Such action shall be taken when the data are
delivered to the Government, published, licensed, or deposited for
registration as a published work in the U.S. Copyright Office. The
acknowledgement of Government sponsorship and license rights shall be as
follows:
NOTICE: The Government is granted for itself and others acting on its
behalf a paid-up, nonexclusive, irrevocable worldwide license in this
data to reproduce, prepare derivative works, and perform publicly and
display publicly. Beginning five (5) years after (date permission to
assert copyright was obtained), subject to two possible five year
renewals, the Government is granted for itself and others acting on its
behalf a paid-up, nonexclusive, irrevocable worldwide license in this
data to reproduce, prepare derivative works, distribute copies to the
public, perform publicly and display publicly, and to permit others to
do so. NEITHER THE UNITED STATES NOR THE UNITED STATES DEPARTMENT OF
ENERGY, NOR ANY OF THEIR EMPLOYEES, MAKES ANY WARRANTY, EXPRESS OR
IMPLIED, OR ASSUMES ANY LEGAL LIABILITY OR RESPONSIBILITY FOR THE
ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY INFORMATION, APPARATUS,
PRODUCT, OR PROCESS DISCLOSED, OR REPRESENTS THAT ITS USE WOULD NOT
INFRINGE PRIVATELY OWNED RIGHTS.
(F) With respect to any data to which the University has received permission
to assert copyright, the DOE has the right, during the five-year period(s) set
forth in subparagraph (e) (1) (i) (A) above, to request the University to grant
a nonexclusive, partially exclusive or exclusive license in any field of use to
a responsible applicant(s) upon terms that are reasonable under the
circumstances, and if the University refuses such request, to grant such
license itself, if the DOE determines that the University has not made a
satisfactory demonstration that either it or its licensee(s) is actively
pursuing commercialization of the data as set forth in subparagraph
(e)(1)(i)(A) above. Before licensing under this subparagraph (F), DOE shall
furnish the University a written request for the University to grant the stated
license, and the University shall be allowed thirty (30) days (or such longer
period as may be authorized by the Contracting Officer for good cause shown in
writing by the University) after such notice to show cause why the license
should not be granted. The University shall have the right to appeal the
decision of the DOE to grant the stated license to the Invention Licensing
Appeal Board as set forth in 10 C.F.R. 781.65 - "Appeals."
(G) No costs shall be allowable for maintenance of copyrighted data for
commercial purposes, primarily for the benefit of the University and/or a
licensee and which exceeds DOE Program needs, except as expressly
124
<PAGE>
EXCLUSIVE LICENSE AGREEMENT
between
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
and
AMOCO TECHNOLOGY COMPANY
for
DETECTION OF MYCOPLASMA BY DNA HYBRIDIZATION
U.C. Case No. 84-099-2
<PAGE>
TABLE OF CONTENTS
Article No. Title Page
- ----------- ----- ----
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. LIFE OF PATENT EXCLUSIVE GRANT AND OPTION . . . . . . . . . . . . . . . 4
3. SUBLICENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. LICENSE-ISSUE FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. ROYALTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6. DUE DILIGENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7. PROGRESS AND ROYALTY REPORTS . . . . . . . . . . . . . . . . . . . . . . 11
8. BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9. LIFE OF THE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 13
10. TERMINATION BY THE REGENTS . . . . . . . . . . . . . . . . . . . . . . . 14
11. TERMINATION BY LICENSEE. . . . . . . . . . . . . . . . . . . . . . . . . 14
12. DISPOSITION OF LICENSED PRODUCTS
ON HAND UPON TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . 15
13. USE OF NAMES AND TRADEMARKS. . . . . . . . . . . . . . . . . . . . . . . 15
14. LIMITED WARRANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15. PATENT PROSECUTION AND MAINTENANCE . . . . . . . . . . . . . . . . . . . 17
16. PATENT MARKETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
17. PATENT INFRINGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
18. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
19. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
20. ASSIGNABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
21. LATE PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
22. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
23. FAILURE TO PERFORM . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
24. ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
25. GOVERNING LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
26. PREFERENCE FOR UNITED STATES INDUSTRY. . . . . . . . . . . . . . . . . . 25
27. FOREIGN GOVERNMENT APPROVAL
OR REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
28. EXPORT CONTROL LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
29. FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
30. SECRECY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
31. INFRINGEMENT UNDER DRUG PRICE COMPETITION ACT. . . . . . . . . . . . . . 27
32. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
<PAGE>
EXCLUSIVE LICENSE AGREEMENT
for
DETECTION OF MYCOPLASMA BY DNA HYBRIDIZATION
THIS LICENSE AGREEMENT (the "Agreement") is made and is effective
this__________ day of _______, 1992 by and between THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA, a California corporation having its statewide administrative
offices at 300 Lakeside Drive, 22nd Floor, Oakland California 94612-3550,
hereinafter referred to as "The Regents", and AMOCO TECHNOLOGY COMPANY, a
Delaware corporation having a principal place of business at 305 East Shuman
Boulevard, Naperville, Illinois 60563, hereinafter referred to as the
"Licensee".
RECITALS
WHEREAS, certain inventions, generally characterized as DETECTION OF
MYCOPLASMA BY DNA HYBRIDIZATION, hereinafter collectively referred to as the
"Invention", were made in the course of research at the University of
California, Irvine by Drs. Eric Stanbridge and Ulf Gobel and are covered by
Regents' Patent Rights as defined below;
WHEREAS, the Licensee entered into a Secrecy Agreement (U.C. Control No.
88-20-0280) with The Regents effective October 17, 1988 and terminating on
October 16, 1993 for the purpose of evaluating the Invention;
WHEREAS, the Licensee entered into a letter agreement (U.C. Control No.
88-30-007) with The Regents on October 4, 1988 by which the Licensee paid The
Regents approximately one-half of the then existing direct patent prosecution
costs that had been paid by The Regents to outside counsel in prosecuting
Regents' Patent Rights, and this sum of sixteen-thousand dollars ($16,000.00)
was to be credited against any patent prosecution costs that would in the future
be owed by Licensee if Licensee were to take an option or license to Regents'
Patent Rights, and in return, the Licensee received full access, under the above
cited Secrecy Agreement, to information and records in the possession of The
Regents relating to
<PAGE>
Regents' Patent Rights, but Licensee acknowledges that The Regents has made no
express or implied commitment to Licensee prior to the execution of this
Agreement regarding Regents' Other Rights;
WHEREAS, the development of the Invention was sponsored in part by the
Department of Health and Human Services and the Department of Energy and as a
consequence this license is subject to overriding obligations to the Federal
Government as set forth in 35 U.S.C. 200-212 and applicable governmental
implementing regulations;
WHEREAS, the Licensee asserts on Licensee's information and belief that
The Regents may own additional rights other than Regents' Patent Rights in
inventions related to the field of the detection of organisms with a nucleic
acid probe directed to a ribosomal RNA target which is covered by Regents' Other
Rights as defined below;
WHEREAS, both parties recognize and agree that royalties due hereunder
will be paid both on pending patent applications for five years after the
execution of this Agreement and on issued patents for the term of those patents;
WHEREAS, The Regents is desirous that the Invention be developed and
utilized to the fullest extent so that the benefits can be enjoyed by the
general public; and
WHEREAS, the Licensee is desirous of obtaining certain rights from The
Regents for the commercial development, use, and sale of the Invention, and The
Regents is willing to grant such rights;
the parties agree as follows:
1. DEFINITIONS
1.1 "Regents' Patent Rights" means patent rights to any subject matter
claimed in or covered by any of the following: Pending U.S. Patent Application
serial no. 191,852 entitled a "Detection of Mycoplasma by DNA Hybridization"
filed May 6, 1988 as a
-2-
<PAGE>
continuation of U.S. Patent Application Serial No. 707,725 filed March 4, 1985
by Drs. Eric Stanbridge and Ulf Gobel and assigned to The Regents; and
continuing applications thereof including divisions, substitutions, and that
part of any continuation-in-part applications that relates to substantially the
same subject matter as defined in the claims as originally filed in Serial No.
707,725; any patents issuing on said application including reissues; and any
corresponding foreign applications or patents.
1.2 "Regents' Other Rights" means patent rights owned by The Regents
relating to the detection of one or more organisms with a nucleic acid probe
directed to a ribosomal RNA target (the "Other Invention"). It is limited to
rights owned by The Regents prior to November 1, 1989 in such Other Inventions
as were developed or invented by one or more of the following: David E. Kohne,
J.E. Galpin, D.T. Kingsbury, G. Kalmanson,, L.B. Guze, Wesley M. Sugino, Ronald
C. Weh and Gary H. Butler. Regents' Other Rights shall not include rights in any
work performed by any other person unless that work was done in collaboration
with one or more of the above identified persons. It is understood that the
Other Invention is intended to include the inventions disclosed and claimed in
U.S. Patent No. 4,851,330 issued to David E. Kohne, as well as directly related
work where The Regents has no conflicting obligations.
1.3 "Licensed Product" means any material that is either produced by
the Licensed Method, or the manufacture, use or sale of which would constitute,
but for the license granted to the Licensee pursuant to this Agreement, an
infringement of any pending or issued claim within Regents' Patent Rights.
1.4 "Licensed Method" means any method, the use or practice of which
would constitute, but for the license granted to the Licensee pursuant to this
Agreement, an infringement of any claim within Regents' Patent Rights.
1.5 "Net Sales" means the total of the gross invoice prices of Licensed
Products sold less the sum of the following actual and customary deductions
where applicable: cash, trade, or quantity discounts; sales, use, tariff,
import/export duties or other excise taxes imposed upon particular sales;
transportation charges and allowances or credits to customers because of
rejections or returns.
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1.6 "Partners" shall mean any third party that has or will enter a
marketing or distribution agreement with Licensee, which marketing or
distribution agreement includes a contingent license and right from Licensee to
manufacture, to have manufactured, use, sell, distribute or lease articles of
manufacture, machines and compositions, or to perform processes and methods, and
to extend to end-users a license to perform methods and processes with respect
to products developed by Licensee.
1.7 "Affiliate" means any corporation or other business entity
controlled by, controlling or under common control with Licensee. For this
purpose, "control" means direct or indirect beneficial ownership of at least
fifty percent (50%) of the voting stock, or at least fifty percent (50%)
interest in the income of such corporation or other business.
2. LIFE OF PATENT EXCLUSIVE GRANT AND OPTION
2.1 Subject to the limitations set forth in this Agreement, The Regents
hereby grants to the Licensee a world-wide license under Regents' Patent Rights
to make have made, use, and sell Licensed Products and to practice Licensed
Method where the Regents' Patent Rights exist.
2.2 Except as otherwise provided herein, the license granted in section
2.1 shall be exclusive from the effective date of this agreement until the date
of expiration of the last to expire of any patents within Regents' Patent
Rights.
2.3 The license granted hereunder shall be subject to all the
applicable provisions of the License to the United States Government executed by
The Regents on August 9, 1986 (U.C. Control No. 85-25-0729).
2.4 The license granted hereunder shall be subject to the overriding
obligations to the U.S. Government set forth in 35 U.S.C. 200-212 and applicable
governmental implementing regulations.
2.5 The Regents expressly reserves the right to use the Invention and
associated technology for noncommercial educational and research purposes.
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2.6 The Regents retains the right to grant a single additional
nonexclusive license to Regents' Patent Rights solely for the purpose of
acquiring Regents' Other Rights. However, Licensee shall have the option for a
period of one year after the grant of such additional license to substitute all
royalty rates of the additional License for all corresponding royalty rates of
this Agreement in the event such additional License is granted.
2.7a Subject to the limitations set forth in this Agreement, The Regents
grants to Licensee an option to obtain a license to Regents' Other
Rights, providing all of the following provisions are met:
(i) such a grant will not violate any law or University policy,
and
(ii) The Regents is able to make such grant, and
(iii) The Regents is under no obligation to bring any suit as a
result of such a grant, and
(iv) Licensee agrees not bring suit against any of The Regents'
present or previous employees with regard to ownership
rights in the Invention or the Other Invention.
2.7b The License to Regents' Other Rights will contain the following
provisions:
(i) a license-issue fee of Fifty Thousand U.S. dollars
($50,000); and
(ii) to the extent The Regents is able to grant such, shall be
worldwide, exclusive, include the right to grant
sublicenses, and be generally comparable in scope to the
terms of this License Agreement as applied to Regents'
Patent Rights; and
(iii) a provision for an earned royalty of 2.5% of the total of
the gross invoice prices of any material or any method whose
manufacture, use or sale would constitute, but for the
license granted to Licensee, an infringement of any claim of
an issued patent within Regents' Other Rights, wherein the
license is
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exclusive; or 2.0% of same wherein the license is
nonexclusive. However, cash trade, or quantity discounts;
sales, use, tariff, import/export duties or other excise
taxes imposed upon particular sales; transportation charges
and allowances or credits to customers because of rejections
or returns, and such other actual or customary costs as are
applicable shall be subtracted from the gross invoice
prices. Moreover, such earned royalties shall be adjusted so
that the total earned royalty obligation for Licensee's
manufacture, use and sale of Licensed Products shall not
exceed three percent (3%) of Net Sales of Licensed Products
to Partners, distributors and end users.
2.7c In the event The Regents chooses to perfect legal title to any part
of Regents' Other Rights, including but not limited to U.S. Patent
No. 4,851,330 to David E. Kohne, The Regents shall be free to do so
by any means The Regents chooses. However, any agreement or
settlement between The Regents and third parties regarding such
legal title shall provide Licensee with freedom to operate with no
additional financial burden under Regents' Patent Rights and
Regents' Other Rights than are set forth herein. In addition,
Licensee shall have the option for a period of one year after such
agreement or settlement to substitute all royalty rates accepted by
such third parties in such settlement for all corresponding royalty
rates specified in this Agreement
2.7d If The Regents determines that litigation is required in order for
The Regents to secure legal title in Regents' Other Rights, the
license to Regents' Other Rights shall be exclusive provided that
Licensee at its option pays the reasonable costs of such
litigation, and except that The Regents shall retain the right to
grant one additional license in order to settle the litigation.
Such additional license shall be nonexclusive.
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If, however, Licensee declines to pay the reasonable costs
of such litigation, the license to Regents' Other Rights
shall be nonexclusive and Licensee shall not be entitled to
participate in such settlement discussions.
3. SUBLICENSES
3.1 The Regents also grants to the Licensee the right to issue
sublicenses to third parties to make, have made, use, and sell Licensed Products
and to practice Licensed Method, provided the Licensee has current exclusive
rights thereto under this Agreement. To the extent applicable, such sublicenses
shall include all of the rights of and obligations due to The Regents (and, if
applicable, the United States Government) that are contained in this Agreement.
3.2 Licensee shall provide The Regents with a copy of each sublicense
issued hereunder; collect and guarantee payment of all royalties due The Regents
from sublicensees; and summarize and deliver all reports due The Regents from
sublicensees.
3.3 Upon termination of this Agreement for any reason, The Regents, at
its sole discretion, shall determine whether any or all sublicenses shall be
canceled or assigned to The Regents.
4. LICENSE-ISSUE FEE
4.1 The Licensee agrees to pay to The Regents a License-Issue Fee of
Fifty Thousand Dollars ($50,000.00) within fourteen days after the execution of
this Agreement.
4.2 This fee is non-refundable and not an advance against royalties.
5. ROYALTIES
5.1 The Licensee shall also pay to The Regents an earned royalty of two
percent (2%) of the Net Sales of Licensed Products to Partners, distributors or
end users.
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5.2 Paragraphs 1.1, 1.3 and 1.4 define Regents' Patent Rights, Licensed
Products and Licensed Methods so that royalties shall be payable on products and
methods covered by both pending patent applications for a period of five (5)
years from the date of the execution of this Agreement and on issued patents.
Earned royalties shall accrue in each country for the duration of Regents'
Patent Rights in that country and shall be payable to The Regents when Licensed
Products are invoiced, or if not invoiced, when delivered to a third party.
5.3 Royalties accruing to The Regents shall be paid to The Regents
quarterly on or before the following dates of each calendar year
February 28
May 31
August 31
November 30
Each such payment will be for royalties which accrued within the Licensee's most
recently completed calendar quarter.
5.4 The Licensee shall pay to The Regents a minimum annual royalty of
Ten Thousand Dollars ($10,000) for the life of Regents' Patent Rights, beginning
with the calendar year 1994. This minimum annual royalty shall be paid to The
Regents by February 28 of each year and shall be credited against the earned
royalty due and owing for the calendar year in which the minimum payment was
made.
5.5 In the event that Licensee fails to pay the minimum royalty
specified in paragraph 5.4 above for any year during which such is due and
owing, The Regents shall have the right to reduce Licensee's exclusive license
to a non-exclusive license. However, to exercise the right to reduce the license
to a non-exclusive license for failure to pay a minimum royalty specified in
paragraph 5.4,, The Regents must give the Licensee written notice of Licensee's
failure to pay. The Licensee shall thereafter have sixty (60) days to pay the
outstanding minimum royalty. If The Regents has not received satisfactory
tangible evidence that the minimum royalty has been paid by the end of the sixty
(60) day period, then The
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Regents may reduce the Licensee's exclusive license to a nonexclusive license by
giving written notice to the Licensee. These notices shall be subject to Article
19 (Notices).
5.6 All monies due The Regents shall be payable in United States funds
collectible at par in San Francisco, California When Licensed Products are sold
for monies other than United States dollars, the earned royalties will first be
determined in the foreign currency of the country in which such Licensed
Products were sold and then converted into equivalent United States funds. The
exchange rate will be that established by the Bank of America in New York, New
York on the last day of the reporting period and will be quoted in the
Continental terms method of quoting exchange rates (local currency per U.S.
dollar).
5.7 Royalties earned with respect to sales occurring in any country
outside the United States shall not be reduced by any taxes, fees, or other
charges imposed by the government of such country on the remittance of royalty
income. The Licensee shall also be responsible for all bank transfer charges.
5.8 If at any time legal restrictions prevent the prompt remittance of
part or all royalties by the Licensee with respect to any country where a
Licensed Product is sold, the Licensee shall pay such royalties to The Regents
from its U.S. source of funds.
5.9 In the event that any patent or any claim thereof included within
the Regents' Patent Rights shall be held invalid in a final decision by a court
of competent jurisdiction and last resort and from which no appeal has or can be
taken, all obligations to pay royalties based on such patent or claim or any
claim patentably indistinct therefrom shall cease as of the date of such final
decision. The Licensee shall not, however, be relieved from paying any
royalties that accrued before such decision or that are based on another patent
or claim not involved in such decision.
5.10 No royalties shall be collected or paid hereunder on Products sold
to the account of the U.S. Government, any agency thereof, state or domestic
municipal government as provided for in the License to the Government.
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6. DUE DILIGENCE
6.1 The Licensee, upon execution of this Agreement, shall diligently
proceed with the development, manufacture and sale of Licensed Products and
shall earnestly and diligently endeavor to market the same within a reasonable
time after execution of this Agreement and in quantities sufficient to meet the
market demands thereof.
6.2 The Licensee shall be entitled to exercise prudent and reasonable
business judgment in meeting its due diligence obligations hereunder.
6.3 The Licensee shall endeavor to obtain all necessary governmental
approvals for the manufacture, use and sale of Licensed Products.
6.4 If the Licensee is unable to perform any of the following:
(6.4a) submit an INDA or 510K or equivalent, whichever is
appropriate, covering Licensed Products to the United
States Food & Drug Administration within three (3) years
from the effective date of this Agreement if such is
required for the sale of Licensed Product; or
(6.4b) market Licensed Products in the United States within six
(6) months of receiving approval of such Licensed Products
from the United States Food and Drug Administration; or
(6.4c) reasonably fill the market demand for Licensed Products
following commencement of marketing at any time during the
exclusive period of this Agreement;
then The Regents shall have the right and option to reduce the Licensee's
exclusive license to a nonexclusive license. This right, if exercised by The
Regents, supersedes the rights granted in Article 2 (GRANT).
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6.5 At the request of either party, any controversy or claim arising
out of or relating to the diligence provisions of this Agreement shall be
settled by arbitration according to the procedures of Article 24 (ARBITRATION).
Judgment upon the award rendered by the Arbitrator(s) shall be binding on the
parties and may be entered by either party in the court or forum, state or
federal, having jurisdiction.
6.6 To exercise the right to reduce the license to a nonexclusive
license for lack of diligence, The Regents must give the Licensee written notice
of the deficiency. The Licensee thereafter has sixty (60) days to cure the
deficiency or to request arbitration. If The Regents has not received a written
request for arbitration or satisfactory tangible evidence that the deficiency
has been cured by the end of the sixty (60) day period, then The Regents may, at
its option, reduce the Licensee's exclusive license to a nonexclusive license by
giving written notice to the Licensee. These notices shall be subject to
Article 19 (Notices).
7. PROGRESS AND ROYALTY REPORTS
7.1 On or before February 28 and August 31 of each year during the term
of this Agreement, the Licensee shall submit to The Regents a progress report
covering the Licensee's activities relates to the development and testing of all
Licensed Products and the obtaining of the governmental approvals necessary for
marketing. These progress reports should be of sufficient scope and detail to
allow The Regents to monitor the Licensee's progress in meeting its diligence
obligations set forth in Article 6 (DUE DILIGENCE). These progress reports shall
be mate for each Licensed Product until the first commercial sale of that
Licensed Product occurs in the United States.
7.2 The progress reports submitted under section 7.1 should include,
but not be limited to, the following topics:
(a) summary of work completed
(b) summary of work in progress
(c) current schedule of anticipated events or milestones
(d) market plans for introduction of Licensed Products, and
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(e) a summary of resources (dollar value) spent in the reporting period
7.3 The Regents agrees to keep information obtained from Licensee under
Articles 7 (Progress and Royalty Reports) and 8 (Books and Records) as
confidential with the same degree of care as The Regents keep similar
information of its own, and for a period of five (5) years, except The Regents
shall not be prevented from using or disclosing any of this information:
(a) which The Regents can demonstrate by written records was previously
know to it;
(b) which is now, or becomes in the future, public knowledge other than
through acts or omissions of The Regents; or
(c) which is lawfully obtained by The Regents from sources independent
of Licensee.
In the event The Regents is required by law to disclose information obtained
from Licensee under Articles 7 and 8, The Regents shalt notify Licensee within a
reasonable time before The Regents is legally obligated to disclose such
information.
7.4 The Licensee also agrees to report to The Regents in its
immediately subsequent progress and royalty report the date of first commercial
sale of a Licensed Product in each country.
7.5 After the first commercial sale of a Licensed Product anywhere in
the world, the Licensee will make quarterly royalty reports to The Regents on or
before each February 28, May 31, August 31 and November 30 of each year. Each
such royalty report will cover the Licensee's most recently completed calendar
quarter and will show (a) the gross sales and Net Sales of Licensed Products
sold by the Licensee during the most recently completed calendar quarter, (b)
the number of each type of Licensed Product sold; (c) the royalties, in U.S.
dollars, payable hereunder with respect to such sales; (d) the method used to
calculate the royalty; and (c) the exchange rates used.
7.6 If no sales of Licensed Products has been made during any reporting
period, a statement to this effect shall be required.
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8. BOOKS AND RECORDS
8.1 The Licensee shall keep books and records accurately showing all
Licensed Products manufactured, used, and/or sold under the terms of this
Agreement. Such books and records shall be preserved for at least five (5) years
from the date of the royalty payment to which they pertain and shall be open to
inspection by representatives or agents of The Regents at reasonable times.
8.2 The fees and expenses incurred by The Regents' representatives
performing such an examination shall be borne by The Regents unless the
examination uncovers an error showing royalties of more than five percent (5%)
of the total royalties due and owing to The Regents for any year, then the fees
and expenses of these representatives shall be borne by the Licensee.
9. LIFE OF THE AGREEMENT
9.1 Unless otherwise terminated by operation of law or by acts of the
parties in accordance with the terms of this Agreement, this Agreement shall be
in force from the effective date recited on page one and shall remain in effect
for the life of the last-to-expire patent licensed under this Agreement; or
until the last patent application licensed under this Agreement is abandoned and
no patent in Regents' Patent Rights ever issues.
9.2 Any termination of this Agreement shall not affect the rights and
obligations set forth in the following Articles:
Article 8 Books and Records
Article 12 Disposition of Licensed Products on Hand Upon
Termination
Article 13 Use of Names and Trademarks
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Article 18 Indemnification
Article 23 Failure to Perform
Article 30 Secrecy
10. TERMINATION BY THE REGENTS
10.1 If the Licensee should violate or fail to perform any material term
or covenant of this Agreement, then The Regents may give written notice of such
default (Notice of Default) to the Licensee. If the Licensee should fail to
repair such default within sixty (60) days of the effective date of such notice,
The Regents shall have the right to terminate this Agreement and the licenses
herein by a second written notice (Notice of Termination) to the Licensee. If a
Notice of Termination is sent to the Licensee, this Agreement shall
automatically terminate on the effective date of such notice. Such termination
shall not relieve the Licensee of its obligation to pay any royalty or license
fees owing at the time of such termination and shall not impair any accrued
right of The Regents. These notices shall be subject to Article 19 (Notices).
11. TERMINATION BY LICENSEE.
11.1 The Licensee shall have the right at any time to terminate this
Agreement in whole or as to any portion of Regents' Patent Rights by giving
notice in writing to The Regents. Such notice of termination shall be subject
to Article 19 (Notices) and termination of this Agreement shall be effective
ninety (90) days from the effective date of such notice.
11.2 Any termination pursuant to the above paragraph shall not relieve
the Licensee of any obligation or liability accrued hereunder prior to such
termination or rescind anything done by the Licensee or any payments made to The
Regents hereunder prior to the time such termination becomes effective, and such
termination shall not affect in any manner any rights of The Regents arising
under this Agreement prior to such termination.
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11.3 Upon termination of this Agreement the Licensee shall stand.
12. DISPOSITION OF LICENSED PRODUCTS
ON HAND UPON TERMINATION
12.1 Upon termination of this Agreement prematurely under Article 10
(TERMINATION BY REGENTS) or 11 (TERMINATION BY LICENSEE), the Licensee shall
stand unlicensed.
13. USE OF NAMES AND TRADEMARKS
13.1 Nothing contained in this Agreement shall be construed as
conferring any right to use in advertising, publicity, or other promotional
activities any name, trade name, trademark, or other designation of either party
hereto (including contraction, abbreviation or simulation of any of the
foregoing). Unless required by law, the use of the name of "The Regents of the
University of California" or the name of any campus of the University of
California by the licensee is expressly prohibited.
13.2 It is understood that The Regents shall be free to release to the
named inventors of Regents' Patent Rights and senior administrative officials
employed by The Regents the terms and conditions of this Agreement upon their
request. If such release is made, The Regents shall request that such terms and
conditions not be disclosed to others. It is further understood that should a
third party inquire whether a license to Regents' Patent Rights is available,
The Regents may disclose the existence of this Agreement and the extent of the
grant in Article 2 to such third party, but shall not disclose the name of the
Licensee, except where The Regents is required to release such information under
either the California Public Records Act or other applicable law.
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14. LIMITED WARRANTY
14.1 The Regents warrants to the Licensee that it has the lawful right
to grant this license.
14.2 This license and the associated Invention are provided WITHOUT
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER
WARRANTY, EXPRESS OR IMPLIED. THE REGENTS MAKES NO REPRESENTATION OR WARRANTY
THAT THE LICENSED PRODUCTS OR LICENSED METHODS WILL NOT INFRINGE ANY PATENT OR
OTHER PROPRIETARY RIGHT.
14.3 IN NO EVENT WILL THE REGENTS BE LIABLE FOR ANY INCIDENTAL, SPECIAL
OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS LICENSE OR THE USE OF
THE INVENTION OR LICENSED PRODUCTS.
14.4 Nothing in this Agreement shall be construed as:
(14.4a) a warranty or representation by The Regents as to the
validity or scope of any Regents' Patent Rights; or
(14.4b) a warranty or representation that anything made, used,
sold or otherwise disposed of under any license granted in
this Agreement is or will be free from infringement of
patents of third parties; or
(14.4c) an obligation to bring or prosecute actions or suits
against third parties for patent infringement except as
provided in Articles 17 and 30; or
(14.4d) conferring by implication, estoppel or otherwise any
license or rights under any patents of The Regents other
than Regents' Patent Rights or Regents' Other Rights as
defined herein, regardless of whether such patents are
dominant or subordinate to Regents' Patent Rights; or
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(14.4e an obligation to furnish any know-how not provided in
Regents' Patent Rights
14.5 IT IS UNDERSTOOD BY BOTH PARTIES THAT REGENTS' OTHER RIGHTS MAY BE
NONE AND THAT REGENTS' PATENT RIGHTS MAY BE THE ONLY REGENTS' RIGHTS RELATING TO
THE DETECTION OF ONE OR MORE ORGANISMS WITH NUCLEIC ACID PROBE DIRECTED TO A
RIBOSOMAL RNA TARGET. THE PURSUIT OF RIGHTS UNDER REGENTS' OTHER RIGHTS WILL BE
AT THE SOLE DISCRETION OF THE REGENTS. THE REGENTS WILL DECIDE IF THE REGENTS
HAS RIGHTS BEFORE ANY SUCH DISCRETIONARY LITIGATION CONCERNING THESE RIGHTS IS
BROUGHT BY THE REGENTS.
15. PATENT PROSECUTION AND MAINTENANCE
15.1 The regents shall diligently prosecute and maintain the United
States and foreign patents and patent applications comprising Regents' Patent
Rights using counsel of its choice. The Regents shall provide the Licensee with
copies of all relevant documentation so that the Licensee may be informed and
apprised of the continuing prosecution and maintenance of Regents' Patent
Rights, and the Licensee agrees to keep this documentation confidential. The
Regents' counsel will take instructions only from The Regents. However, The
Regents shall use all reasonable efforts to amend any patent application to
include claims reasonably requested by the Licensee to protect the products
contemplated to be sold subject to this Agreement
15.2 The regents shall cooperate with the Licensee in applying for an
extension of the term of any patent included within Regents' Patent Rights if
appropriate under the Drug Price Competition and Patent Term Restoration Act
of 1984. The Licensee shall prepare all such documents, and The Regents agrees
to execute such documents and to take such additional action as the Licensee may
reasonably request in connection therewith.
15.3 The past and future costs of preparing, filing, prosecuting and
maintaining all United States patent applications contemplated by this Agreement
shall be borne by Licensee. As of February 14, 1992, these costs were
$52,265.25 of which $16,000 has already been paid by Licensee. Such costs will
be due upon execution of this Agreement and shall be payable at the time that
the License-Issue Fee is due. The Regents will
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provide Licensee with bills for prosecution costs approximately quarterly; such
bills will be accompanied by appropriate invoices showing such costs in detail.
15.4 The regents shall seek patent protection on the Invention in
foreign countries if available and if the Licensee so desires. The Licensee
must notify The Regents within seven (7) months of the filing of the
corresponding United States application of its desire to obtain foreign patents.
This notice concerning foreign filing shall be in writing, must identify the
countries desired, and reaffirm Licensee's obligation to underwrite the costs
thereof. The absence of such a notice from the Licensee to The Regents shall be
considered an election by the Licensee not to secure foreign rights.
15.5 The preparation, filing and prosecuting of all foreign patent
applications filed at the Licensee's request, as well as the maintenance of all
resulting patents, shall be at the sole expense of the Licensee. Such patents
shall be held in the name of The Regents and shall be obtained using counsel of
The Regents' choice.
15.6 The Licensee's obligation to underwrite and to pay patent
prosecution costs shall continue for so long as this Agreement remains in
effect, provided, however, that the Licensee may terminate its obligations with
respect to any given patent application or patent upon three (3) months written
notice to The Regents. The Regents will use its best efforts to curtail patent
costs when such a notice is received from the Licensee. The Regents may
continue prosecution and/or maintenance of such application(s) or patent(s) at
its sole discretion and expense; provided, however, that the Licensee shall have
no further right or licenses thereunder.
15.7 The Regents shall have the right to file patent applications at its
own expense in any country in which the Licensee has not elected to secure
patent rights, and such applications and resultant patents shall not be subject
to this Agreement.
16. PATENT MARKING
16.1 The Licensee agrees to mark all Licensed Products made, used or
sold under the terms of this Agreement, or their containers, in accordance with
the applicable patent marking laws.
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17. PATENT INFRINGEMENT
17.1 In the event that the Licensee shall learn that an unlicensed
non-party to this License Agreement is (a) substantially making, using or
selling subject matter within the scope of any claim of any pending patent
application within Regents' Patent Rights, or (b) the substantial infringement
of any issued patent within Regents' Patent Rights, the Licensee shall call The
Regents' attention thereto in writing and shall provide The Regents with
reasonable evidence of such activity by the non-party. The Licensee and The
Regents agree that during the period and in a jurisdiction where the Licensee
has exclusive rights under this Agreement, neither will notify such non-party of
the infringement of any of Regents' Patent Rights without first obtaining the
consent of the other party, which consent shall not be unreasonably denied.
Both parties shall use their best efforts in cooperation with each other to
terminate such infringement without litigation.
17.2 In the event that a non-party continues to substantially make, use
or sell subject matter within the scope of any claim of any pending patent
application within Regents' Patent Rights and that does not otherwise fall
within the scope of any issued patent within Regents' Patent Rights, Licensee
shall be permitted to suspend its royalty obligations for making, using or
selling subject matter within the scope of any claim of such pending patent
application until such activity by such non-party ceases or until a patent
issues from such pending patent application claiming such subject matter.
"Substantially" as used herein means a decrease in sales by Licensee by at
least ten percent (10%) as a result of such infringement.
17.3 The Licensee may request that The Regents take legal action against
the infringement of Regents' Patent Rights. Such request shall be made in
writing and shall include reasonable evidence of such infringement and damages
to the Licensee. If the infringing activity has not been abated within ninety
(90) days following the effective date of such request, The Regents shall have
the right to:
(17.3a) commence suit on its own account; or
(17.3b) refuse to participate in such suit,
and The Regents shall give notice of its election in writing to the Licensee by
the end of the one-hundredth (100th) day after receiving notice of such request
from the Licensee. The Licensee may thereafter bring suit for patent
infringement if and only if The Regents elects not
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to commence suit and if the infringement occurred during the period and in a
jurisdiction where the Licensee had exclusive rights under this Agreement.
However, in the event the Licensee elects to bring Suit in accordance with this
paragraph, The Regents may thereafter join such suit at its own expense.
17.4 Such legal action as is decided upon shall be at the expense of the
party on account of whom suit is brought and all recoveries recovered thereby
shall belong to such party, provided, however, that legal action brought jointly
by The Regents and the Licensee and fully participated in by both shall be at
the joint expense of the parties and all recoveries shall be shared jointly by
them in proportion to the share of expense paid by each party.
17.5 Each party agrees to cooperate with the other in litigation
proceedings instituted hereunder but at the expense of the party on account of
whom suit is brought. Such litigation shall be controlled by the party bringing
the suit, except that The Regents may be represented by counsel of its choice
pursuant to The Regents' determination in any suit brought by the Licensee.
18. INDEMNIFICATION
18.1 The Licensee agrees to indemnify, hold harmless and defend The
Regents, its officers, employees, and agents; the sponsors of the research that
led to the Invention; and the inventors of the patents and patent applications
in Regents' Patent Rights and their employers against any and all claims, suits,
losses, damage, costs, fees, and expenses resulting from or arising out of
exercise of this license or any sublicense. This indemnification will include,
but will not be limited to, any product liability. Licensee agrees not to use
Licensed Product for human consumption.
18.2 The Licensee, at its sole cost and expense, shall insure its
activities in connection with the work under this Agreement.
18.3 The Regents shall promptly notify Licensee in writing of any claim
or suit brought against The Regents in respect of which The Regents intends to
involve the provisions of this Article 18. Licensee will keep The Regents
informed on a current basis of its defense of any claims pursuant to this
Article 18, and The Regents will provide reasonable cooperation to the Licensee
during any litigation proceedings under this Article 18.
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19. NOTICES
19.1 Any notice or payment required to be given to either party shall be
deemed to have been properly given and to be effective (a) on the date of
delivery if delivered in person or (b) five (5) days after mailing by
first-class certified mail, postage paid, to the respective addresses given
below, or to such other address as it shall designate by written notice given to
the other party.
In the case of the Licensee: AMOCO TECHNOLOGY COMPANY
55 Shuman Blvd.
Naperville, Illinois 60563
Attention: Vice President, Technology Division
With a copy to GENE-TRAK SYSTEMS CORPORATION
31 New York Avenue
Framingham, Massachusetts 01701
Attention: General Manager, Clinical Diagnostics
In the case of The Regents: THE REGENTS OF THE UNIVERSITY OF CALlFORNIA
Office of Technology Transfer
1320 Harbor Bay Parkway, suite 150
Alameda, California 94501
Attention: DIRECTOR:
Office of Technology Transfer
Referring to: U.C. Case No. 84-099-2
20. ASSIGNABILITY
20.1 This Agreement is binding upon and shall inure to the benefit of
The Regents, its successors and assigns, but shall be personal to the Licensee
and assignable by the Licensee only with the written consent of The Regents,
which consent shall not be unreasonably withheld; except the Licensee may,
without the consent of The Regents, (a) assign or extent this Agreement to its
Affiliates; and (b) assign this Agreement, or that part of this Agreement that
applies to a particular business line, to a bona fide purchaser of substantially
the entirety of Licensee's business relating to the invention on a particular
business line relating thereto, provided that such purchaser agrees to the terms
and conditions of this Agreement.
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21. LATE PAYMENTS
21.1 In the event royalty payments or fees are not received by The
Regents when due, the Licensee shall pay to The Regents interest charges of ten
percent (10%) per annum. Such interest shall be calculated from the date
payment was due until actually received by The Regents.
22. WAIVER
22.1 It is agreed that 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 and/or similar breach or default.
23. FAILURE TO PERFORM
23.1 In the event of a failure of performance due under the terms of
this Agreement and if it becomes necessary for either party to undertake legal
action against the other on account thereof, then the prevailing party shall be
entitled to reasonable attorney's fees in addition to costs and necessary
disbursements.
24. ARBITRATION
24.1 Either party to this Agreement may refer a dispute arising under
the diligence provisions of this Agreement (Article 6) to arbitration. Such
referral to arbitration shall be made by so notifying the other party in writing
in accordance with the provisions of Article 19 hereto (NOTlCES), stating the
nature of the dispute to be resolved. Any such arbitration shall be controlled
by the provisions of this Article 24.
24.2 Within fifteen (15) business days following such notice three
arbitrators shall be selected by the following process:
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(24.2a) Each Party shall designate one individual, not an
employee, director, or shareholder of the Party or
sublicensee of the Party to serve as an arbitrator.
(24.2b) These arbitrators shall select a third individual, who
shall be an attorney experienced in arbitration
proceedings, to serve as the third arbitrator and to
preside in resolution of the dispute. The third
arbitrator shall not be an employee, director or
shareholder of either Party or sublicensee of either
Party.
24.3 Within five (5) business days after selection the arbitrators shall
meet with the Parties at which time the Parties shall each present in writing
the issue to be resolved and a proposed ruling on it. Such writing shall be
served on the other Party in advance and be limited to no more than twenty (20)
pages.
24.4 The following general provisions shall apply to the arbitration
proceeding:
(24.4a) No later than thirty (30) days after the appointment of
the third arbitrator, the arbitrators shall set a date for
a hearing to resolve the issue identified by the Parties.
The hearing shall take place no later than one hundred
twenty (120) days from the original notice to arbitrate.
(24.4b) The arbitrator shall permit the taking of not more than
one (1) deposition by each Party, and shall permit,
subject to the provisions of a mutually agreeable
protective order, the production of only those documents
immediately and directly bearing on the issue or issues
subject to arbitration and only to the extent necessary
for the convenience and use of the arbitrators, and shall
not require or permit any other discovery by any means,
including, but not limited to, depositions,
interrogatories or production of documents.
(24.4c) Not later than ten (10) business days prior to the
hearing, each party may submit a single written brief or
memorandum
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in support of its position which may be no more than
twenty (20) pages. Each Party shall be entitled to no
more than three (3) hours of hearing to present testimony
or documentary evidence. Such time limitation shall
include any direct, cross or rebuttal testimony, but such
time limitation shall only be charged against the Party
conducting such direct, cross or rebuttal testimony. It
shall be the responsibility of the arbitrators to
determine whether each Party has had the three (3) hours
to which it is entitled or may, upon good cause shown,
have additional time to present its case.
(24.4d) Each Party shall have the right to be represented by
counsel. The arbitrators shall have sole discretion with
regard to the admissibility of evidence. Admissibility
will be decided by two-thirds vote.
(24.4e) Within Fifteen (15) days of the conclusion of the hearing,
each Party must submit a proposed finding to the
arbitrators.
24.5 The arbitrators shall rule on the disputed issue within thirty (30)
days following the completion of the testimony of both Parties. Such ruling
shall encompass in its entirety the proposed findings of one of the Parties on
the disputed issue. The issue shall be resolved upon two-thirds vote of the
arbitrators.
24.6 Arbitration shall take place in the location of choice of the party
who has not requested arbitration. All hearing costs for a hearing shall be
shared equally between the Parties.
24.7 The arbitrators shall be paid reasonable fees plus expenses, which
fees and expenses shall be shared equally by the Parties.
24.8 The decision of the arbitrators shall be enforceable, but not
appealable, in any court of competent jurisdiction.
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25. GOVERNING LAWS
25.1 THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED [N ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA, but the scope and validity of any
patent or patent application shall be governed by the applicable laws of the
country of such patent or patent application.
26. PREFERENCE FOR UNITED STATES INDUSTRY
26.1 Because this Agreement grants the exclusive right to use or sell
Licensed Products and to practice Licensed Methods in the United States, the
Licensee agrees that any Licensed Products which are intended for sale in the
United States will be manufactured substantially in the United States.
27. FOREIGN GOVERNMENT APPROVAL
OR REGISTRATION
27.1 If this Agreement or any associated transaction is required by the
law of any nation to be either approved or registered with any governmental
agency, the Licensee shall assume all legal obligations to do so.
28. EXPORT CONTROL LAWS
28.1 The Licensee shall observe all applicable United States and foreign
laws with respect to the transfer of Licensed Products and related technical
data to foreign countries, including, without limitation, the International
Traffic in Arms Regulations (ITAR) and the Export Administration Regulations.
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29. FORCE MAJEURE
29.1 The parties to this Agreement shall be excused from any performance
required hereunder if such performance is rendered impossible or unfeasible due
to any catastrophes or other major events beyond their reasonable control,
including, without limitation, war, riot, and insurrection; laws, proclamations,
edicts, ordinances or regulations; strikes, lock-outs or other serious labor
disputes; and floods, fires, explosions, or other natural disasters. When such
events have abated, the parties' respective obligations hereunder shall resume.
30. SECRECY
30.1 With regard to confidential information ("Data"), which can be oral
or written or both, received from The Regents regarding this Invention, the
Licensee agrees:
(1) not to use the Data except for the sole purpose of
performing under the terms of this Agreement;
(2) to safeguard Data against disclosure to others with the
same degree of care as it exercises with its own data of a
similar nature;
(3) not to disclose Data to others (except to its employees,
agents or consultants who are bound to Licensee by a like
obligation of confidentiality) without the express written
permission of The Regents, except that Licensee shall not
be prevented from using or disclosing any of the Data:
(a) which Licensee can demonstrate by written records
was previously known to it;
(b) which is now, or becomes in the future, public
knowledge other than through acts or omissions of
Licensee; or
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(c) which is lawfully obtained by Licensee from
sources independent of The Regents; and
(4) that the secrecy obligations of Licensee with respect to
Data shall continue for a period ending five (5) years
from the termination date of this Agreement.
31. INFRINGEMENT UNDER DRUG PRICE COMPETITION ACT
31.1 In the event either party receives notice pertaining to any patent
included within Regents' Patent Rights pursuant to the DRUG PRICE COMPETITION
AND PATENT TERM RESTORATION ACT OF 1984, (Public Law 98-417, hereinafter, "the
Act") including but not necessarily limited to notices pursuant to Sections 101
and 103 of the Act from persons who have filed an abbreviated NDA ("ANDA") or a
"paper" NDA, or in the case of an infringement of Regents' Patent Rights as
defined in Section 271(e) of Title 35 of the United States Code, such party
shall notify the other party promptly but in no event later than ten (10) days
after receipt of such notice.
31.2 If the Licensee wishes action to be taken against such
infringement, as provided in the Act, the Licensee shall request such action by
written notice to The Regents. Within thirty (30) days of receiving said
request, The Regents will give written notice to the Licensee of its election
to:
(31.2a) commence suit on its own account; or
(31.2b) refuse to participate in such suit.
The Licensee may thereafter bring suit for patent infringement as provided by
the Act if and only if The Regents elects not to commence suit and if the
infringement occurred during the period that the Licensee had exclusive rights
in the United States under this Agreement. However, in the event the Licensee
elects to bring suit in accordance with this paragraph, The Regents may
thereafter join such suit at its own expense.
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31.3 The provisions of paragraphs 17.4 and 17.5 shall likewise apply to
any legal action brought under this Article 30.
31.4 The Regents hereby authorized the Licensee to include in any NDA
for a Licensed Product, a list of patents included within Regents' Patent Rights
identifying The Regents as patent owner.
32. MISCELLANEOUS
32.1 The headings of the several sections are inserted for convenience
of reference only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
32.2 This Agreement will not be binding upon the parties until it has
been signed below on behalf of each party, in which event, it shall be effective
as of the date recited on page one.
32.3 No amendment or modification hereof shall be valid or binding upon
the parties unless made in writing and signed on behalf of each party.
32.4 This Agreement embodies the entire understanding of the parties and
shall supersede all previous communications, representations or understandings,
either oral or written, between the parties relating to the subject matter
hereof. The Secrecy Agreement (U.C. Control No. 88-20-0280) effective October
17, 1988 is hereby terminated, and The Regents and Licensee reaffirm that the
letter agreement (U.C. Control No. 88-30-0007) has expired and all its
provisions and intent are incorporated into this Agreement.
32.5 In case any of the provisions contained in this Agreement shall be
held to be valid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions hereof, but
this Agreement shall be construed as if such invalid or illegal or unenforceable
provisions had never been contained herein.
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IN WITNESS WHEREOF, both The Regents and the Licensee have executed this
Agreement, in duplicate originals, by their respective officers hereunto duly
authorized, on the day and year hereinafter written.
AMOCO TECHNOLOGY COMPANY THE REGENTS OF THE
UNIVERSITY OF CALIFORNIA
By: /s/ L. V. TRIGGIANI By: /s/ W. T. DAVIS
-------------------------- ---------------------------
(Signature) (Signature)
Name: L. V. TRIGGIANI Name: William T. Davis
------------------------
(Please Print)
Title: President Title: Associate Director;
----------------------- Office of Technology Transfer
Date: July 1, 1992 Date: 7/30/92
------------------------ -------------------------
[STAMP]
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EXHIBIT 10.8a
AMENDMENT TO EXCLUSIVE LICENSE
AGREEMENT BETWEEN THE REGENTS OF
THE UNIVERSITY OF CALIFORNIA
AND AMOCO TECHNOLOGY COMPANY
Dated December 7, 1994
To facilitate resolution of issues and litigation regarding U.S. Patents No.
4,851,330 and No. 5,288,611 to D. E. Kohne and presently held by Gen-Probe
Incorporated and to clarify rights and obligations provided in the Exclusive
License Agreement Between The Regents Of The University of California and
Amoco Technology Company for Detection of Mycoplasma By DNA Hybridization (UC
Case No. 84-099-2), The Regents and Amoco Technology Company agree to amend
the Exclusive License Agreement as follows:
1) Subparagraph 2.7b(iii) of the Exclusive License Agreement shall be deleted
from the Agreement in its entirety and replaced with the following:
(iii) a provision for an earned royalty of 2.0% of the total of the
gross invoice prices of any material or any method whose
manufacture, use or sale would constitute, but for the license
granted to Licensee, an infringement of any claim of an issued
patent within Regents' Other Rights. However, cash, trade, or
quantity discounts; sales, use, tariff, import/export duties or
other excise taxes imposed upon particular sales; transportation
charges and allowances or credits to customers because of
rejections or returns, and such other actual or customary costs
as are applicable shall be subtracted from the gross invoice
prices. Moreover, such earned royalties shall be adjusted so
that the total earned royalty obligation for Licensee's
manufacture, use and sale of licensed products shall not exceed
three percent (3%) of Net Sales of Licensed Products to Partners,
distributors and end users.
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<PAGE>
2) Subparagraph 2.7c of the Exclusive License Agreement shall be deleted from
the Agreement in its entirety and replaced with the following:
2.7c In the event the Regents chooses to perfect legal title to any
part of Regents' Other Rights, including but not limited to
U.S. Patent No. 4,851,330 to David E. Kohne, The Regents shall be
free to do so by any means The Regents chooses. However, any
agreement or settlement between the Regents and third parties
regarding such legal title shall provide Licensee with freedom to
operate with no additional financial burden under Regents' Patent
Rights and Regents' Other Rights than are set forth therein.
Agreed By and On Behalf Of:
THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
By: John F. Lundberg
-------------------------------
Title: Deputy General Counsel
----------------------------
Date: 12/7/94
-----------------------------
AMOCO TECHNOLOGY COMPANY
By: R Clan
-------------------------------
Title: President
----------------------------
Date: Dec 7, 1994
-----------------------------
2
<PAGE>
LICENSE AGREEMENT
Between THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK, a not-for-
profit corporation of the State of New York ("Columbia"), THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES, a not-for-profit institute of the State of California
("Salk"), and GENE-TRAK SYSTEMS ("GTS"), an Illinois Partnership.
WITNESSETH
WHEREAS, Columbia is the assignee of U.S. Patent Application Serial No.
614,350, entitled "Autocatalytic Replication of Recombinant RNA, "by Kramer,
Miele, and Mills, including all related domestic continuations,
continuations-in-part, divisions, reissues, and reexaminations, and all patents
and related foreign counterpart application and patents issued thereon;
WHEREAS, Salk and Columbia are coassignees of U.S. Patent Application
Serial No. 852,692, entitled "Replicative RNA Reporter System", by Kramer, Chu,
Lizardi, and Orgel, including all related foreign counterpart applications, all
domestic and foreign continuations, continuations-in-part, divisions, reissues,
and reexaminations, and all patents issued thereon; and
WHEREAS, Columbia and/or Salk are the assignees of additional patent
applications covering related subject matter; and
WHEREAS, Columbia, and Salk are willing to grant a license to GTS and GTS
is willing to accept a license under the following terms and conditions:
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NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants set forth below, GTS, Columbia, and Salk mutually agree as
follows:
1. DEFINITIONS.
a. "Affiliate" shall mean any corporation or other entity which
directly or indirectly controls, is controlled by, or is under
common control with GTS. Control means ownership or other
beneficial interest in 40% or more of the voting stock or other
voting interest corporation or other business entity.
b. "Effective Date" shall mean the date on which the last
of all parties shall have attached its authorized
signature hereto.
c. "Application 1" shall mean the Patent Application
filed May 25, 1984, in the United States Patent
and Trademark Office (USPTO) by Kramer, Miele and
Mills, U.S. Serial No. 614,350, entitled
"Autocatalytic Replication of Recombinant RNA"
including continuations, continuations-in-part,
divisions, reissues, and reexaminations and
related foreign counterpart applications on any
continuation-in-part applications.
d. "Application 2" shall mean the Patent Application
filed April 16, 1986, in the USPTO by Kramer, Chu,
Lizardi and Orgel, U.S. Serial No. 852,692,
entitled "Replicative RNA Reporter Systems,"
including continuations, continuations-in-part
including without limitation USSN 191,450, filed
May 9, 1988, divisions, reissues, reexaminations,
and all foreign counterpart patent applications.
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e. "Application 3" shall mean the Patent Application filed September
8, 1988 in the USPTO by Chu et al., U.S. Serial No. 241,969,
entitled "Replicative RNA-based Amplification/Detection Systems",
including continuations, continuations-in-part, divisions,
reissues, reexaminations, and all foreign counterpart patent
applications.
f. "Application 4" shall mean the Patent Application filed September
8, 1988 in the USPTO by Chu et al., U.S. Serial No. 241,942,
entitled "Replicative RNA-based Amplification/Detection Systems",
including continuations, continuations-in-part, divisions,
reissues, reexaminations, and all foreign counterpart patent
applications.
g. "Application 5" shall mean the Patent Application filed September
8, 1988 in the USPTO by Axelrod et al., U.S. Serial No. 241,624,
entitled "Replicative RNA-based Amplification/Detection Systems",
including continuations, continuations-in-part, divisions,
reissues, reexaminations, and all foreign counterpart patent
applications.
h. "Patent 1" shall mean any patent issuing on Application 1 and
all continuations, continuations-in-part, divisions, reissues,
and reexaminations and foreign counterpart applications on
continuations-in-part.
i. "Patent 2" shall mean any patent issuing on Application 2 and on
all continuations, continuations-in-part, divisions, reissues,
reexaminations, and foreign counterpart applications of
Application 2.
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j. "Patent 3" shall mean any patent issuing on Application 3 and all
continuations, continuations-in-part, divisions, reissues, and
reexaminations and foreign counterpart applications on
continuations-in-part.
k. "Patent 4" shall mean any patent issuing on Application 4 and all
continuations, continuations-in-part, divisions, reissues, and
reexaminations and foreign counterpart applications on
continuations-in-part.
l. "Patent 5" shall mean any patent issuing on Application 5 and all
continuations, continuations-in-part, divisions, reissues, and
reexaminations and foreign counterpart applications on
continuations-in-part.
m. "Licensed Patents" shall mean Patent 1, Patent 2, Patent 3,
Patent 4, Patent 5, Application 1, Application 2, Application 3,
Application 4, Application 5, and any other patent applications
filed covering inventions which are conceived of by employees of
Salk and/or by Dr. F. Kramer up to July 1, 1991, including
continuations, continuations-in-part, divisions, reissues,
reexaminations, and foreign counterpart applications thereof, and
any patents issuing thereon, which relate to RNA-based
amplification/detection systems which employ exponential
amplification of replicative RNA by QB Replicase or a related
enzyme, and which is owned or controlled by Columbia and/or Salk.
n. "Licensed Products" shall mean all assays, kits, compositions,
reagents used in assays, and Diagnostic
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Instruments for performing assays where GTS realizes a profit on
cumulative Net Sales of such Diagnostic Instruments, which relate
to RNA-based amplification/detection systems which employ
exponential amplification of replicative RNA by QB Replicase or a
related enzyme, whether or not used in or on Diagnostic
Instruments, and which are covered by a claim of a Licensed
Patent that has neither expired nor been declared invalid by a
court of last resort ("Issued Valid Claim"), or which use
Licensed Research Information. "Licensed Products" shall exclude
reusable physical structures such as, by way of example,
containment, filters, detection means, temperature control
elements, transport mechanisms, sonication means, mixing
elements, film software, computing hardware, manuals, recording
devices, paper and packing.
o. "Licensed Research Information" shall mean information developed,
owned or controlled by Columbia and/or Salk up to July 1, 1991,
which relates to RNA-based amplification/detection systems which
employ exponential amplification of replicative RNA by QB
Replicase or a related enzyme, but is not covered by a claim of a
Licensed Patent and is not published or part of the public
domain.
p. "Diagnostic Instrument" shall mean a manual, semi-automated or
automated instrument in which or with which Licensed Products may
be utilized and which is manufactured by or for GTS or a GTS
sublicensee.
q. "Net Sales" shall mean all fees or other payments charged by GTS
or an Affiliate for the use, sale, rental or lease of Licensed
Products, less credits for returns and customary trade discounts
actually taken, outbound
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freight, value added, sales or use taxes and custom duties. In
the case of sale, rental, lease or use of Licensed Products by an
Affiliate, Net Sales shall be based upon the greater of: i) the
total fee and payment per Licensed Product charged to an
Affiliate, or ii) the total fee or payment per Licensed Product
charged by the Affiliate to its customers.
r. "First Commercial Sale" shall mean the first date upon which GTS
or a GTS Affiliate or sublicensee shall sell a Licensed Product
to an independent third party in an arms-length transaction.
s. "Payment Year" shall mean a one-year period beginning with the
Effective Date hereof and a one-year period beginning upon each
annual anniversary thereafter; Payment Year One shall be the
first such year, Payment Year Two shall the second such year,
such series continuing thereafter and in like manner.
t. "Sublicensees" shall mean third parties to whom GTS has granted
sublicensees pursuant to this Agreement
2. LICENSE GRANT.
a. Columbia and Salk grant to GTS, upon and subject to all terms and
conditions of this Agreement:
(i) a worldwide exclusive license under the Licensed Patents
to manufacture, have manufactured, use, sell, rent and
lease Licensed Products for the term provided under
Section 17 hereof;
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(ii) a worldwide exclusive license to use any Licensed Research
Information to manufacture, have manufactured, use, sell,
rent and lease Licensed Products for the term provided
under Section 17 hereof or until such time as such
information is published or otherwise publicly distributed
after which GTS shall have a fully paid up royalty free
license to such published information;
(iii) in the event GTS makes the election set forth in section
2(c), a worldwide non-exclusive license to use the
Licensed Patents to manufacture, have Manufactured, use,
sell, rent and lease Licensed Products for the term set
forth in Section 17 hereof, and a worldwide non-exclusive
license to use Licensed Research Information to
manufacture, have manufactured, use, sell, rent or lease
Licensed Products for the term set forth in Section 17
hereof or until such information is published or otherwise
publicly distributed after which GTS shall have a fully
paid up royalty free license to such published
information; and
(iv) For so long as GTS possesses an exclusive license under
this Agreement, a first right of refusal to a license
under Licensed Patents and/or Licensed Research
Information for application of technology covered thereby
which applications do not constitute Licensed Products
within the terms of this Agreement. Such license, which
may be exclusive or non-exclusive, shall not be offered to
any other party upon financial terms more
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favorable than those offered GTS without first providing
GTS a 60 day opportunity to accept such license with such
more favorable terms.
b. Columbia and Salk grant to GTS the right to provide standard
Uniform Commercial Code rights to customers during the term of
any licenses granted hereunder, and the right to sublicense third
parties so long as GTS retains an exclusive license under this
Agreement, provided that the terms and conditions of this
Agreement are met where applicable and that GTS obtains the
approval of Columbia and Salk of any proposed sublicense prior to
execution, which approval shall not be unreasonably withheld by
Columbia and Salk, and which shall be granted or denied within
thirty days of receipt of notice by Columbia and Salk of a
proposed sublicense and which shall be deemed granted if Columbia
and Salk do not respond to such notice. In the event GTS makes
the election set forth in Section 2(c), any sublicense granted by
GTS hereunder, excluding those to customers, shall be transferred
to Columbia and Salk, at the sole discretion of Columbia and
Salk.
c. GTS, at its sole exclusive option and upon thirty days written
notice to Columbia and Salk, may elect to transform the exclusive
license set forth in Section 2(a)(i) and (ii) to the non-
exclusive license set forth in Section 2(a)(iii) at any time
after the payments specified in Section 3(a) are made to
Columbia and Salk. In the event GTS elects to maintain a
non-exclusive license, GTS shall have no further obligation to
make payments under Sections 3(b), 3(c) and Section 4(b).
However, all payments made prior to such election shall be
non-refundable.
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d. All rights granted by Columbia and Salk to GTS under this Section
2 and under this Agreement are subject to the requirements of
Public Law 96-517, as amended, and implementing regulations.
3. LICENSE PAYMENTS.
a. In consideration of the licenses and rights granted under this
Agreement, GTS shall pay or cause to be paid $500,000 to
Columbia/Salk in the following manner:
(i) $100,000 upon the Effective Date of this Agreement;
(ii) $150,000 one hundred eighty days after the Effective Date
of this Agreement;
(iii) $250,000 one year after the Effective Date of this
Agreement.
b. In order to maintain an exclusive license hereunder, GTS shall
further pay or cause to be paid $500,000 to Columbia/Salk in the
following manner:
(i) $250,000 eighteen months after the Effective Date of this
Agreement;
(ii) $250,000 twenty-four months after the Effective Date of
this Agreement.
c. In order to maintain an exclusive license hereunder, GTS shall
make or cause to be made, in addition to the payments under
Sections 3(a) and 3(b), the milestone payments described below,
but not earlier than fourteen months after the Effective Date of
this Agreement:
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(i) $300,000 to Columbia/Salk upon the earlier of: (A) 30 days
after the First Commercial Sale of a Diagnostic
Instrument; or (B) December 31, 1991;
(ii) $200,000 to Columbia within 30 days of receipt of written
notice to GTS of the issuance of a patent on Patent
Application U.S. Serial No. 614,350, filed May 25, 1984 in
the USPTO by Kramer, Miele and Mills, entitled
"Autocatalytic Replication of Recombinant RNA."
(iii) $500,000 to Columbia/Salk within 30 days of receipt of
written notice to GTS of the issuance of a patent
Application U.S. Serial No. 852,692, filed April 16, 1986
in the USPTO by Kramer, Chu, Lizardi and Orgel, entitled
"Replicative RNA Reporter Systems".
(iv) $500,000 to Columbia/Salk within 30 days of receipt of
written notice to GTS of the issuance of the foreign
counterpart of the patent described in subsection (iii)
above from the European Patent Office.
d. All license payments pursuant to Section 3(c) above shall be
fully creditable against future royalties payable under Section
4, and shall be rolled over quarter to quarter until fully
consumed.
e. If GTS does not make any payments in accordance with Sections
3(b) and 3(c) above, its exclusive license shall be converted to
a non-exclusive license, upon 30 days' written notice by Columbia
and Salk, provided such
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payment deficiency is not cured during such period, and
thereafter Columbia and Salk shall be free to grant other parties
a non-exclusive license to the Licensed Patents and Licensed
Research Information.
f. License payments pursuant to this Section 3 shall be paid to
Columbia's Office of Science and Technology Development, which
shall receive such payments on behalf of both Columbia and Salk.
4. ROYALTIES.
a. In further consideration of the licenses and rights hereunder,
GTS shall pay to Columbia/Salk a royalty as follows:
(i) Until July 1, 1991, a royalty of 4 1/2% shall be paid on
all Net Sales by GTS or an Affiliate of Licensed Product
regardless of whether such Licensed Product is covered by
an Issued Valid Claim of Patent 1 and/or Patent 2.
(ii) After July 1, 1991, a royalty of 4 1/2% shall be paid on
all Net Sales by GTS or an Affiliate of Licensed Product
provided such is covered by an Issued Valid Claim of a
patent within Licensed Patents in the country of sale or
manufacture.
(iii) After July 1, 1991, if no Issued Valid Claim of a patent
within Licensed Patents cover a Licensed Product in the
country of sale or manufacture, no royalty shall be paid
on Net Sales of such Licensed Product until such a claim
does issue regardless whether such Licensed Product
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<PAGE>
incorporates Licensed Research Information, except as
provided in subsections (iv) and (v) below.
(iv) Notwithstanding subsections (i) through (iii) above, if
GTS manufactures, has manufactured, uses, sells, rents or
leases a Licensed Product which is not covered by an
Issued Valid Claim of Patent l or Patent 2, but which uses
new technology comprising a new Licensed Patent defined
by the filing of Patent 3, Patent 4 or Patent 5 or
another patent application, covering technology not
previously disclosed in Patent Applications 1 or 2, then a
royalty of 4 1/2% on all Net Sales by GTS or an Affiliate
of such Licensed Product shall be paid for five years
following the initial filing of Patent 3, Patent 4, Patent
5 or such another patent application covering such new
technology.
(v) For five years following the First Commercial Sale on a
country-by-country basis, a royalty of 1% shall be paid on
all Net Sales of Licensed Product which, although not
covered by an Issued Valid Claim of a Licensed Patent,
uses Licensed Research Information.
(vi) Only a single royalty obligation under paragraphs 4a(i)
through 4a(v) shall be payable on Net Sales of any
individual Licensed Product.
(vii) If GTS exercises its option pursuant to Section 2(c) of
this Agreement to convert its exclusive license to a non-
exclusive license, GTS shall continue to pay the royalty
rates specified in
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<PAGE>
this Section 4(a), but not the minimum royalties
specified in Section 4(b) below, until such time as
Columbia and/or Salk grant a non-exclusive license for
commercial purposes to a third party, at which time the
royalty rates paid by GTS for a non-exclusive license
shall be the lower of:
(a) one-half the rates specified in this section 4(a), or
(b) the royalty rates specified in such commercial
third-party license.
b. In order to maintain an exclusive license hereunder and in lieu
of any best efforts obligation, GTS shall pay Columbia/Salk
minimum annual royalties within 60 days of the end of a Payment
Year as specified in Schedule A below. If royalties paid by GTS
under this Agreement plus supplemental payments made by GTS, in
any Payment Year do not equal or exceed the Minimum Annual
Royalty for such Payment Year as set forth in Schedule A, then
upon 30 days written notice by Columbia and Salk, such
circumstance shall be deemed an election by GTS under Section
2(c) to maintain a non-exclusive license unless such deficiency
shall be cured during such period.
SCHEDULE A
The schedule of minimum annual royalties payable at the end of a Payment
Year is as follows:
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Payment Year Royalty Minimum Annual
-------------------- --------------
4 100,000
5 200,000
6 300,000
7 400,000
8 500,000
9 600,000
10 and each year 700,000
thereafter in
which royalties
are paid under
Section 4(a)
c. In the event GTS exercises its option pursuant to Section 2c of
this Agreement to convert its exclusive license to a
non-exclusive license, the royalties payable under this Agreement
shall be solely as set forth in Section 4a and GTS shall have no
obligation to pay any minimum annual royalties.
d. In consideration of the right to sublicense third parties granted
under Section 2b, GTS shall pay to Columbia/Salk a total of 40%
of all royalties, license fees, and other payments or
consideration (including stock), received by GTS pursuant to its
sublicense, which payments shall constitute royalties paid under
this Agreement for purposes of GTS satisfying the requirements to
pay minimum annual royalties pursuant to Section 4b above.
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<PAGE>
e. Royalties payable to Columbia/Salk under sections 4a-d shall be
reduced in any country, on a country-by-country-basis, where a
compulsory license is granted. The new royalty rate shall be the
royalty rate mandated by the compulsory license or the royalty
rate for a non exclusive license under Section 4a(vii), whichever
is lower.
5. REPORTS AND PAYMENTS.
a. Beginning with the earlier of (i) the First Commercial Sale of a
Licensed Product or (ii) the First Commercial Sale of a
Diagnostic Instrument, or (iii) Payment Year Four, GTS shall
deliver or cause to be delivered to Columbia and Salk, within 60
days after the end of each calendar quarter, a written report
with respect to the preceding calendar quarter (the "Payment
Report") stating:
(i) Net Sales of Licensed Products made by GTS and any
Affiliate during such quarter;
(ii) In the case of transfers or sales of Licensed Products by
GTS to an Affiliate for sale by the Affiliate, Net Sales
made by GTS to the Affiliate and by the Affiliate to its
customers during such quarters;
(iii) Amounts accruing to GTS from its Sublicensees under
section 4d during such quarter;
(iv) Net Sales made by Sublicensees during such quarter; and
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<PAGE>
(v) A calculation under Section 4 of the amounts due to
Columbia, making reference to each subsection.
All such royalty reports shall be treated as Confidential
Information subject to Section 14c and except to the extent
disclosure is required i) for audit purposes, ii) by contract,
or iii) by law.
b. Simultaneously with the submission of each Payment Report to
Columbia, GTS shall make payments to Columbia's Office of Science
and Technology Development of the amounts due for the calendar
quarter covered by the Payment Report, and Columbia shall receive
such payment on behalf of both Columbia and Salk.
c. GTS shall maintain usual books of account and records showing its
actions under this Agreement. Upon reasonable notice, but not
more frequently than once in each calendar year, such books and
records shall be open to inspection, and copying solely with
respect to the information required under Section 5a, at its
principal office, during usual business hours, by an independent
certified public accountant to whom GTS has no reasonable
objection, for two years after the calendar quarter to which they
pertain, for purposes of verifying the accuracy of the amount
paid by GTS under this Agreement. Said accountant shall not
disclose to Columbia, Salk or any other party any information
except that which should properly be contained in the royalty
report required under this Agreement.
d. Royalties on Net Sales of Licensed Products shall accrue and be
computed in the currency of the country in which such sales have
been made by GTS or its Affiliates and shall be paid to a
location or person designated by Salk
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<PAGE>
and Columbia in the United States in United States Dollars, at
the rate of exchange quoted by the Wall Street Journal for the
last business day of the calendar quarter in which such royalties
were earned. If by law, regulations, or fiscal policy of a
particular country, conversion into or transfer to the United
States in United States Dollars is restricted or forbidden,
notice therefore in writing will be given to Salk and Columbia,
and no such royalties shall be paid until such conversion or
transfer can be made legally, at which time royalties shall be
paid in United States dollars at the rate of exchange as quoted
by the Wall Street Journal for the last business day of the
quarter during which the restriction on conversion was lifted.
However, Columbia and Salk shall have the right to have royalties
paid by GTS or its Affiliate in the blocked currency by
depositing the same in Columbia and Salk's name in a foreign bank
in any such country as designated by Columbia and Salk, at which
time the royalties shall be deemed paid. However, in the event
GTS chooses to use the earned royalty in the country from which
conversion or transfer cannot be made, GTS shall cause such
royalties to be paid to Columbia and Salk in U.S. dollars based
upon the last rate of exchange quoted (in the Wall Street Journal
or if not there in any other similar publication) or, if none is
available, at such other rate mutually agreed upon by the
parties.
6. USE FOR RESEARCH PURPOSES OF LICENSES GRANTED.
Columbia and Salk reserve the right to use the Licensed Patents and
Licensed Research Information for research purposes and to permit
other entities or individuals to use same for research purposes
provided such is without the
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<PAGE>
payment of royalties, license fees, stock or other compensation.
Columbia and Salk shall obtain from all such entities or individuals
an agreement in writing not to use the Licensed Patents or Licensed
Research Information for commercial purposes and shall inform GTS of
the identity of such entities or individuals.
7. PROSECUTION.
a. Columbia and Salk shall with due diligence file, prosecute and
maintain patent applications and the Licensed Patents, when in
any party's judgment such action may be reasonable, proper and
justified. Columbia and Salk shall copy GTS on all patent office
related correspondence and provide GTS a reasonable opportunity
to comment thereon. Columbia and Salk shall reasonably confer
with GTS, at such times as is appropriate, upon the selection of
foreign countries for purposes of filing patent applications.
b. GTS will pay Columbia and Salk 50% of the expenses incurred after
the Effective Date in filing and prosecuting the Licensed Patents
including reasonable outside attorney's fees, taxes, annuities,
issue fees, working fees, maintenance fees, and renewal charges
(Patent Expenses), until such time as Columbia and/or Salk grant
a non-exclusive license to a third party, whereupon GTS shall pay
Columbia and Salk its pro rata share of the Patent Expenses
incurred thereafter which pro-rata share shall be computed by
dividing the Patent Expenses by the number of third-party
licenses granted.
8. INFRINGEMENT.
a. Columbia and/or Salk shall have the first right to protect their
Licensed Patents from infringement and prosecute infringers at
their own expense when in their
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<PAGE>
sole judgment such action may be reasonably necessary, proper
and justified.
b. If GTS shall have supplied Columbia and Salk with written
evidence demonstrating to Columbia's and Salk's reasonable
satisfaction prima facie infringement of a claim of a Licensed
Patent or misappropriation of Licensed Research Information by a
third party, GTS may by notice request Columbia and Salk to take
steps to protect the Licensed Patent or Licensed Research
Information. Unless Columbia and/or Salk shall within three
months of the receipt of such notice either (i) cause such
infringement to terminate or (ii) initiate and diligently pursue
legal proceedings against the infringer, GTS may upon notice to
Columbia and Salk initiate legal proceedings against the
infringer at GTS's expense and in Columbia and Salk's name if
appropriate. In such event GTS may deduct from payments due
hereunder to Columbia and Salk reasonable costs and legal fees
incurred to conduct such proceedings, but in no event shall any
such payments be reduced by more than 50 percent of the amount
otherwise due to Columbia and Salk hereunder. Any recovery by GTS
in such proceedings shall (i) first be used to reimburse GTS for
reasonable costs and legal fees incurred to conduct such
proceedings, (ii) next be used to pay any amounts withheld from
Columbia and Salk by GTS under this Section 8 during the pendency
of the proceedings, (iii) thereafter 40% of the remainder to
Columbia and Salk, until $500,000 shall have been paid to
Columbia and Salk, and (iv) finally, any remainder shall be kept
by GTS.
c. In the event one party shall initiate or carry on legal
proceedings to enforce any Licensed Patent against an alleged
infringer, the other party shall use all
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<PAGE>
reasonable efforts to fully cooperate with and shall
supply all assistance reasonably requested by the party
initiating or carrying on such proceedings. The party which
institutes any proceeding to protect or enforce a Licensed Patent
shall have sole control of that proceeding and shall bear the
reasonable expenses incurred by said other party in providing
such assistance and cooperation as is requested pursuant to this
paragraph.
d. In the event that the Licensed Patents cannot be practiced
without infringing an issued patent in the country where
practiced, GTS shall have the right, at GTS' sole election,
either:
(i) to stop use of Licensed Patents under this Agreement in
such country and to stop all royalty payment for such
country upon giving Columbia and Salk one month's notice;
or
(ii) to practice Licensed Patents directly or through its
sublicensees and to negotiate a license, the terms of
which shall be subject to Columbia/Salk's reasonable
approval (not to be unreasonably withheld or delayed),
and/or stand suit for patent infringement, in which case
GTS shall be permitted to deduct from 50% of the royalties
payable hereunder in such country, the costs of such
license or suit, and/or the royalty to which GTS and/or
any sublicense shall become obligated to pay to said third
party through negotiated agreement, settlement or final
order of a court of competent jurisdiction for the right
to continue to use Licensed Patents in that country free
from charges of infringement thereafter.
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<PAGE>
e. If the cumulative royalties that GTS must pay to Columbia, Salk
and third parties to manufacture, use and sell Licensed Products
make such manufacturing use or sale commercially unattractive to
GTS, then, upon request by GTS, Columbia, Salk and GTS shall meet
and in good faith discuss whether royalties and payments due
hereunder can be reduced.
9. WARRANTY.
9.1 Nothing in this Agreement shall be construed as a warranty or
representation by any party as to the validity of any Licensed
Patent. Nothing in this Agreement shall be construed as a
warranty or representation by any party that anything made, used,
sold or otherwise disposed of under any license granted under
this Agreement is or will be free from infringement of domestic
or foreign patents of other parties.
9.2 Columbia and Salk hereby represent and warrant that:
(i) Columbia and/or Salk are the Assignees of Licensed Patents
and to the best of their knowledge that it (they) has
(have) good and complete valid title in and to Patent 1,
Patent 2, Patent 3, Patent 4, and Patent 5 and that it
(they) has (have) to the best of their knowledge the
complete and sole right to license same and Licensed
Research Information to GTS pursuant to the terms of this
Agreement;
(ii) Columbia and Salk are unaware of any patents owned by
others and any trade secret or proprietary rights of
others which would be infringed or violated by the use of
Licensed
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<PAGE>
Patents or Licensed Research Information by GTS, its
Affiliates and/or sublicensees anywhere in the world;
(iii) to the best of their knowledge, there are no adverse
actions, suits or claims pending against Columbia or Salk
or any of their Affiliates in any court or by or before
any governmental body or agency with respect to Licensed
Patents or Licensed Research Information and no such
actions, suits or claims have been threatened;
(iv) for so long as the licenses granted to GTS pursuant to
this Agreement remain exclusive in favor of GTS, Columbia
and Salk, and any of their agents or anyone acting on
their behalf will not grant any licenses to Licensed
Patents and/or Licensed Research Information to third
parties other than as specified in Section 2(a)(iv) and
Section 6. If prior to July 1, 1991 Columbia and/or Salk
invents an alternative nucleic acid amplification
technology other than the Licensed Patents or Licensed
Research Information, Columbia and/or Salk, as the case
may be, shall not license such alternative technology to
any third party without first discussing the technology
with GTS, unless Columbia and/or Salk is contractually
prevented from making such disclosure.
10. PROHIBITION AGAINST USE OF NAME.
a) Neither party shall use the name, insignia, or symbols of any
other party, its faculties or departments, or any variation or
combination thereof, or the name of any trustee, faculty member,
other employee or student of any other party for any purpose
whatsoever without the prior written consent of such other party
whose name is sought to he used.
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<PAGE>
b) No party shall unreasonably withhold or delay its consent
requested pursuant to 10a to an announcement of the existence of
this Agreement or to such other announcement which in the opinion
of legal counsel to the party making such announcement is
required by law or practice to be made. The party making any
announcement shall give the party whose name is to be used, an
opportunity to review the form of the announcement before it is
made and comments from such reviewing party shall be reasonably
incorporated. It is presently anticipated that GTS will issue,
subject to review pursuant to this Section, a press release
regarding generally the licensure of Q-Beta replicase technology
to GTS. Routine oral references to this Agreement and the
arrangements hereunder without undue frequency and without
emphasis shall be allowed in the usual course of business
provided that notice of such use is given to the other party.
11. COMPLIANCE WITH GOVERNMENTAL OBLIGATIONS.
a. Notwithstanding any provisions in this agreement, Columbia and
Salk disclaim any obligations or liabilities arising under the
license provisions of this Agreement if GTS is charged in a
governmental action for not complying with or fails to comply
with governmental regulations in the course of taking effective
steps to bring any Licensed Product to a point of practical
application.
b. GTS shall comply upon reasonable notice from Columbia and/or Salk
with all governmental requests authorized by statute, regulation,
or judicial decree and directed to either Columbia, Salk, or GTS
and provide the necessary information and assistance to comply
with such governmental requests regarding this Agreement.
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<PAGE>
c. GTS shall insure that research, development, and marketing under
this Agreement will comply with all government regulations in
force and effect including, but not limited to, Federal, State,
and Municipal legislation.
12. INDEMNITY AND INSURANCE.
a. GTS will indemnify and hold Columbia and Salk harmless against
any and all actions, suits, claims, demands, prosecutions,
liabilities, costs and expenses (including reasonable attorney's
fees) based on or arising out of this Agreement, including,
without limitation, the manufacture, packaging, use, sale, rental
or lease of Licensed Products or Licensed Research Information by
GTS, its Affiliates, its Sublicensees or its (or their) customers
and any representation made or warranty given by GTS, its
Affiliates or Sublicensees with respect to Licensed Products.
This indemnity does not apply to liabilities, costs and expenses
arising out of any action, suits, claims, demands or prosecutions
between the parties to this Agreement.
b. GTS shall maintain, during the term of this Agreement,
comprehensive general liability insurance, and beginning with the
First Commercial Sale further maintain products liability
insurance in the same or separate policy, with reputable and
financially secure insurance carriers, to cover the activities of
GTS and its Affiliates, for minimum limits of $2,000,000
combined single limit for bodily injury and property damage per
occurrence and in the aggregate. Any sublicensee(s) shall be
required to carry insurance of like character and amount. Such
insurance shall include Columbia, Salk, and the trustees,
directors, officers, employees, and agents of
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<PAGE>
each, as additional insureds. GTS shall furnish a certificate of
insurance evidencing such coverage, within 30 days written notice
to Columbia and Salk of cancellation or material change.
The GTS insurance shall be primary coverage; any insurance
Columbia and Salk may purchase shall be excess and
non-contributory. Such insurance shall be written to cover claims
incurred, discovered, manifested, or made during or after the
expiration of this Agreement. GTS shall at all times comply with
all statutory workers' compensation and employers' liability
requirements covering its employees with respect to activities
performed under this Agreement.
13. MARKETING.
Prior to the issuance of patents GTS will, where feasible, mark
Licensed Products made, sold, or otherwise disposed of by it under the
license granted under Licensed Patents in the Agreement with the words
"Patent Pending" and following the issuance of one or more Licensed
Patents, with the numbers of such patent.
14. CONFIDENTIALITY.
a. GTS will treat as confidential all information, and materials
furnished hereunder which Columbia or Salk has designated as
"Confidential". For the term of this Agreement and for three
years following termination, GTS will not disclose or make
available such confidential information to any third party
without the prior written permission of the other parties.
b. Columbia and Salk may, but are not obligated to, receive
confidential information from GTS. Columbia and Salk will not
disclose or make available confidential information received from
GTS to third parties without
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<PAGE>
GTS's written permission. Columbia's and Salk's obligations under
this paragraph apply only to information which GTS has designated
in writing as "Confidential" and which GTS submits so marked to
Columbia's Office of Science and Technology Development and to
Salk.
c. The obligations of confidentiality under this Section 14 do not
apply to any information which:
(i) was known to the party receiving the information prior to
receipt thereof from the other party;
(ii) was or becomes a matter of public information or publicity
available through no act or failure to act on the part of
the party receiving the information;
(iii) is acquired by the party receiving the information from a
third party entitled to disclose the information to it;
(iv) the receiving party develops independently;
(v) GTS must disclose in order to commercially exploit and/or
sublicense the licenses granted herein to GTS; or
(vi) GTS is reasonably required to disclose pursuant to
governmental regulation, statute or agency request.
15. FREEDOM OF PUBLICATION.
GTS acknowledges that Columbia and Salk are each dedicated to a free
scholarly exchange and to public dissemination of the
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results of their scholarly activity. Regarding Licensed Patents and
Licensed Research Information, Salk agrees, that up to July 1, 1991,
it shall provide to GTS a copy of any invention memorandum, manuscript
accepted for publication or anything regarding oral disclosures,
received by the Patent Administration at the Salk Institute of
Biological Studies, whenever possible at least 60 days in advance of
such public dissemination or publication in order to allow GTS the
opportunity to review same in order to ensure the filing of
appropriate patent application(s) prior to publication or
dissemination. Except as set forth in Section 14 and this section
nothing in this agreement shall restrict the right of Columbia or
Salk, or the faculty, employees and students of each, to publish,
disseminate or otherwise disclose information relating to their
research activities, however, when they do so, such no longer
qualifies as Licensed Research Information.
16. BREACH AND CURE.
a. In addition to applicable legal standards, GTS shall be
considered to be in material breach of this Agreement for (i)
failure to comply with governmental requests pursuant to Section
11b.
b. Any party shall have the right to cure its material breach. The
cure shall be effected within a reasonable period of time but in
no event later than thirty days after notice of any breach given
by the party alleging the breach.
17. TERM OF AGREEMENT.
a. This Agreement shall be effective as of the Effective Date and
shall continue in full force and effect until its expiration or
termination in accordance with this Section 17.
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b. Unless terminated earlier under any provision of this Agreement,
the term of the exclusive license granted under the Licensed
Patents and Licensed Research Information shall extend until the
expiration of the last to expire of the Licensed Patents after
which GTS shall have a fully paid up, royalty free license
thereto.
c. The license granted under this Agreement may be terminated (i) by
either GTS or Columbia and Salk upon 30 days written notice to
the other party of its material breach of the Agreement and such
party fails to cure such material breach; or (ii) by Columbia and
Salk should GTS commit any act of bankruptcy or insolvency act.;
or (iii) after one year after the Effective Date hereof, by GTS
upon ninety days written notice to Columbia and Salk.
d. Upon any termination of this Agreement pursuant to Section 17c
(i), all sublicenses granted by GTS shall be assigned to Columbia
and Salk.
18. NOTICES.
Any notice required under this Agreement shall be sufficient if sent
by certified mail (return receipt requested), postage prepaid.
If to Columbia, to: Office of Science and
Technology Development
Columbia University
411 Low Library
New York, New York 10027
copy to: General Counsel
Columbia University
110 Low Library
New York, New York 10027
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<PAGE>
If to Salk, to: The Salk Institute For
Biological Studies
10010 North Torrey Pines Rd.
La Jolla, California 92037
Attention: Ms. Natalie Jensen
Patent Administrator
copy to: Dr. Julius Tabin
Fitch, Even, Tabin & Flannery
125 South La Salle Street
Chicago, Illinois 60603
If to GTS, to: GENE-TRAK Systems
31 New York Avenue
Framingham, Massachusetts 01701
Attention: Patrick J. Connoy
President
Copies to: Amoco Technology Co.
Warrenville Road
P.O. Box 400
Naperville, Illinois 60566
Attention: John Triebe
and: Integrated Genetics
One Mountain Road
Framingham, Massachusetts 01701
Attention: Mark A. Hofer, Esq.
Chief Patent Counsel
or to such other address as a party may specify by notice hereunder
19. ASSIGNMENT.
This Agreement may not be assigned without the written consent of the
other parties, provided, however, that GTS may assign, upon prior
written notice to Columbia and Salk, its rights and obligations to an
Affiliate or to an assignee or purchaser acquiring all or
substantially all of GTS's business assets to which this Agreement
pertains.
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<PAGE>
20. AMENDMENTS.
This Agreement may be amended only by an instrument in writing duly
executed on behalf of each of the parties.
21. GOVERNING LAW.
This Agreement shall be governed by New York law applicable to
agreements made to be performed in New York.
22. WAIVER.
The waiver by any of the parties of this Agreement or any provision
hereof by another party shall not be construed to be a waiver of any
succeeding breach of any such provision or a waiver of the provision
itself.
23. FORCE MAJEURE.
Neither party shall be liable for failure to perform as required by
any provision of this Agreement where such failure results from a
force majeure beyond such party's control. In the event of any delay
attributable to a force majeure, the time for performance affected
thereby shall be extended for a period equal to the time lost by
reason of the delay
24. REPRESENTATIONS.
a. All parties are acting as independent contractors and nothing
contained herein shall be construed as making Columbia, Salk or
GTS the agent, representative or employee of the other.
b. Each party hereto acknowledges and agrees:
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(i) that this Agreement is not being entered into on the basis
of, or in reliance on, any promise or representation,
expressed or implied, covering the subject matter hereof,
other than those which are set forth expressly in this
Agreement; and
(ii) that each party has had the opportunity to be represented
by counsel of its own choice in this matter, including
negotiations which preceded the execution of this
Agreement.
IN WITNESS THEREOF, Columbia, Salk and GTS have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
written above.
THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK
By: /s/ Jack M. Granowitz
--------------------------------
Title: Director, Office of Science
----------------------------
and Technology Development
----------------------------
Date: October 7, 1988
----------------------------
THE SALK INSTITUTE FOR BIOLOGICAL
STUDIES
By: /s/ Dilbert E. Glanz
--------------------------------
Title: Vice President Operations
----------------------------
Date: October 7, 1988
----------------------------
GENE-TRAK SYSTEMS
By: /s/ Patrick Connoy
--------------------------------
Title: President
----------------------------
Date: October 8, 1988
----------------------------
Page 31
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE
I. DEFINITIONS 1
II. RESEARCH PROGRAM 5
III. GRANTS, CONVERSION AND CANCELLATION 7
IV. SUBLICENSES 8
V. CONSIDERATION FOR WORK AND LICENSE AND RIGHTS 9
VI. ACCOUNTING 14
VII. INTELLECTUAL PROPERTY 15
VIII. CONFIDENTIALITY 21
IX. PATENT INFRINGEMENT 24
X. REPRESENTATIONS AND WARRANTIES 26
XI. INDEMNIFICATION AND INSURANCE 28
XII. MARKING 32
XIII. TERM AND TERMINATION 32
XIV. ASSIGNMENT 34
XV. FORCE MAJEURE 34
XVI. MISCELLANEOUS 34
i
<PAGE>
RESEARCH AND LICENSE AGREEMENT
THIS AGREEMENT, by and between the Public Health Research Institute of the
City of New York, Inc. (hereinafter referred to as "PHRI"), a not-for-profit
corporation of the state of New York and GENE-TRAK, Inc. (hereinafter referred
to as "GENE-TRAK"), a Delaware corporation,
WITNESSETH THAT:
WHEREAS, PHRI has the exclusive right to license the inventions which are the
subject of and may be claimed in U.S. Patent Applications Serial No. 08/004,993,
Serial No. 08/006,073 and Serial No. 08/005,893, all filed January 15, 1993, and
PHRI has disclosed such patent applications to GENE-TRAK for review and
evaluation for licensing them from PHRI;
WHEREAS, PHRI has certain obligations to the General Hospital Corporation doing
business as Massachusetts General Hospital (hereinafter referred to as "MGH")
regarding PHRI's license of the inventions which are the subject of and may be
claimed in U.S. Patent Application Serial No. 08/005,893, filed January 15,
1993;
WHEREAS, PHRI is willing to grant a license to GENE-TRAK under such patents and
patent applications and GENE-TRAK is willing to accept such a license under the
following terms and conditions;
WHEREAS, GENE-TRAK is willing to engage PHRI to do certain research and PHRI is
willing to do certain research under the following terms and conditions;
NOW, THEREFORE, in consideration of the premises and the mutual promises and
covenants set forth below, GENE-TRAK and PHRI mutually agree as follows:
ARTICLE I. DEFINITIONS
1.1 The terms PHRI, MGH and GENE-TRAK shall have the meanings as stated
above.
1.2 The term Affiliate shall mean any corporation or other entity which
directly or indirectly controls, is controlled by, or is under common
control with GENE-TRAK. Control means ownership or other beneficial
interest in 40% or more of the voting stock or other voting interest
of a corporation or other business activity.
1.3 The term Effective Date shall mean the date this Agreement is fully
executed.
1.4 The term Initial Patents shall mean the following:
(a) U.S. Serial No. 08/004,993 entitled Diagnostic Assays And Kits
For RNA Using RNA Binary Probes And A Protein That Is An
RNA-Directed RNA
1
<PAGE>
Ligase by Tyagi, filed January 15, 1993 and otherwise designated
as A37 by PHRI; and
(b) U.S. Serial No. 08/006,073 entitled Sensitive Nucleic Acid
Sandwich Hybridization Assays And Kits by Tyagi et al., filed
January 15, 1993 and otherwise designated as A38 by PHRI; and
(c) U.S. Serial No. 08/005,893 entitled Diagnostic Assays And Kits
For RNA Using RNA Binary Probes And A Ribozyme Ligase by Lizardi
et al., filed January 15, 1993 and otherwise designated as A39 by
PHRI; and
(d) all continuation, divisional, reexamination, reissue and foreign
counterpart applications deriving therefrom; and
(e) those claims of all continuation-in-part applications and
continuation, divisional, reexamination, reissue and foreign
counterpart applications of such continuation-in-part
applications which claim the inventions disclosed in the
applications identified in subparagraphs (a) - (c) above; and
(f) all U.S., foreign and reissue patents issued from the
applications identified in subparagraphs 1.4(a) - (d), and the
pertinent claims of patents issuing from the applications of
subparagraph 1.4(e).
1.5 The term Research Program shall mean the research by PHRI which is
described in the work plan entitled, "Amplification Methods Using QB
Replicase" and attached hereto as Appendix I, and subsequent additions
and modifications thereto as mutually agreed to by the parties. To
the extent the work plans are inconsistent with this Agreement, the
provisions of this Agreement shall control.
1.6 The term Research Information shall mean all information, data,
inventions, equipment, instruments, methods and compositions conceived
or developed in the performance of the Research Program.
1.7 The term Research Patents shall mean the claims of all U.S. and
foreign patents and patent applications, including any reissues,
extensions, continuations, divisions and continuations-in-part based
on Research Information. It is understood that a continuation-in-part
application of an Initial Patent disclosing and claiming Research
Information shall also be considered a Research Patent as to the
Research Information claimed therein.
1.8 The term GENE-TRAK Information shall mean all information, data,
inventions, equipment, instruments, methods and compositions developed
by or for GENE-TRAK and provided to PHRI. GENE-TRAK Information shall
include sales and accounting information reported to or made available
to PHRI by GENE-TRAK as required
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<PAGE>
herein but shall not include Research Information.
1.9 The term Post-Research Patents shall mean the claims of all U.S. and
foreign patents and patent applications, including any reissues,
extensions, continuations, divisions and continuations-in-part based
on inventions by employees or agents of PHRI utilizing non-public
GENE-TRAK Information and made following termination of the Research
Program but prior to the expiration of three (3) years after
termination of the Research Program.
1.10 (a) The term Royalty-Bearing Product shall mean generally:
(i) all products (except instruments):
(A) within the scope of one or more claims of a pending
patent application or an issued patent within Initial
Patents, Research Patents or Post-Research Patents, or
(B) used or expected to be used to perform a method or
process within the scope of one or more claims of a
pending patent application or an issued patent within
Initial Patents, Research Patents or Post-Research
Patents; and
(ii) a method or process within the scope of one or more claims
of a pending application or an issued patent within Initial
Patents, Research Patents or Post-Research Patents;
provided, however, that such one or more claims have not been
held invalid by a court of last resort and competent
jurisdiction.
(b) The status of a product or the performance of a method or process
as a Royalty-Bearing Product shall be determined regionally as
follows.
(i) In the event that an issued patent or pending application,
if issued, of Initial Patents, Research Patents or
Post-Research Patents has or would have legal effect toward
such product or performance, such issued patent or pending
application shall be used to determine whether such product
or performance is a Royalty-Bearing Product.
(ii) If no issued patent or pending application, if issued, of
Initial Patents Research Patents or Post-Research Patents
has or would have legal effect toward such product or
performance, the status of such product or performance as a
Royalty-Bearing Product shall be determined as follows.
3
<PAGE>
(A) Such products and the performance of such methods or
processes as are exploited commercially in Central,
South and North America shall be evaluated against the
Initial Patents, Research Patents and Post Research
Patents in the United States.
(B) Such products and performances as are exploited
commercially in Asia other than the countries of the
former Soviet Union shall be evaluated against the
Initial Patents, Research Patents and Post-Research
Patents in Japan.
(C) Such products and performances as are exploited
commercially in Western and Eastern Europe,
Scandinavia, the former Soviet Union, Africa and all
other countries shall be evaluated against the
applications for Initial Patents, Research Patents and
Post-Research Patents filed in the European Patent
Office and issued Initial Patents, Research Patents and
Post-Research Patents in Germany. However, in the
event such claims of a European national patent are
declared invalid by a court of competent jurisdiction
and last resort such products and/or performances shall
not be Royalty-Bearing Products unless subject to
another issued Initial Patent, Research Patent and
Post-Research Patent resulting from those filed in the
European Patent Office.
(c) Notwithstanding the foregoing, Royalty-Bearing Products shall not
include any instrument per se or the repair and parts of an
instrument.
1.11 The term Net Sales shall mean all fees, other payments or
consideration of any kind received or charged by GENE-TRAK or its
sublicensees or its Affiliates for Royalty-Bearing Products, less
credits for returns and customary trade discounts actually taken,
outbound freight, value added, sales or use taxes or custom duties.
Notwithstanding the foregoing, the value of Net Sales for sales to
those having a special course of dealing with GENE-TRAK or its
Affiliates shall be determined on the basis of sales to end users
without a special course of dealing, except in the case of sales of
Royalty-Bearing Products by an Affiliate in which case Net Sales shall
be based upon the greater of (i) the total fee and payment charged to
or received from the Affiliate or (ii) the total fee and payment
charged or received by the Affiliate. It is understood that the term
special course of dealing shall not include conventional distribution
arrangements with unrelated third party distributors and that as
applied to distribution arrangements Net Sales shall mean all fees,
other payments or consideration charged to or received by GENE-TRAK, a
sublicensee or an Affiliate from the unrelated third party
distributor.
1.12 The term First Commercial Sale shall mean the first date upon which
GENE-TRAK,
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<PAGE>
a distributor, an Affiliate or sublicensee sells a Royalty-Bearing
Product to an independent third party in an arms-length transaction or
uses a Royalty-Bearing Product in a commercial manner.
ARTICLE II. RESEARCH PROGRAM
2.1 Subject to the terms and conditions set forth in this Agreement, PHRI
agrees to carry out the Research Program and shall provide PHRI owned
and available scientific equipment and laboratory and service
facilities as reasonably required to carry out the Research Program.
2.2 The Research Program shall be performed under the direction of
Dr. F. R. Kramer who will serve as Principal Investigator. Dr. Kramer
will apply approximately 40% of his professional time to the Research
Program.
2.3 In the event Dr. Kramer is unable or unwilling to serve as Principal
Investigator on behalf of PHRI as required by Paragraph 2.2 herein, he
shall be replaced by an individual of at least equivalent capability.
Notwithstanding the foregoing, GENE-TRAK has the right to reject any
replacement proposed by PHRI and GENE-TRAK may terminate the Research
Program effective as of the next six (6) month anniversary of the
Effective Date.
2.4 Unless PHRI's obligation to perform work under this Agreement is
terminated early in accordance with the provisions of Paragraph 2.3 or
Article XIII herein, PHRI will perform work as follows:
(a) Commencing on the Effective Date, PHRI will perform the
procedures as described in Appendix II attached hereto in
GENE-TRAK laboratories using materials and reagents supplied by
PHRI (Appendix II is incorporated herein by reference);
(b) Also commencing on the Effective Date, PHRI will advise GENE-TRAK
as reasonably necessary to permit GENE-TRAK to execute the
procedures described in paragraphs 1-4 of Appendix II in GENE-TRAK
laboratories using materials and reagents supplied by GENE-TRAK;
(c) Upon the successful execution of the procedures described in
Paragraphs 1-4 of Appendix II by PHRI and GENE-TRAK as described
in Paragraphs 2.4(a) and 2.4(b) or upon GENE-TRAK's election in
writing to proceed, but not in any event later than July 15,
1994, GENE-TRAK will elect either to terminate the Agreement or
to have PHRI begin the Research Program for the initial six (6)
months from the Effective Date;
5
<PAGE>
(d) On or about five (5) months after the Effective Date but not
later than six (6) months after the Effective Date, GENE-TRAK
will elect to terminate the Research Program or to have the
Research Program continued by PHRI, provided that GENE-TRAK makes
the election in writing (such termination of the Research Program
by GENE-TRAK shall be subject to Paragraph 13.3(a));
(e) In the event GENE-TRAK so elects to have the Research Program
continued by PHRI, PHRI will carry out the Research Program
through three full years after the Effective Date;
(f) On or about eleven months after the Effective Date and on or
about that date each year thereafter for as long as PHRI will
conduct research under the Research Program, PHRI will develop a
work plan for the following year's research. The work plan will
be developed in collaboration with GENE-TRAK and be within the
field defined in Appendix I or such other field as the parties
agree in writing. Failure by the parties to agree on any
particular work plan shall not be considered a breach of this
Agreement;
(g) For as long as PHRI is conducting research under the Research
Program, on or about twenty-three months after the Effective
Date and on or about that date of each year thereafter GENE-TRAK
may elect to extend the term of the Research Program for an
additional year. GENE-TRAK's election shall be subject to
approval by PHRI, in writing and not later than the anniversary
of the Effective Date of the relevant calendar year. (In the
event GENE-TRAK and PHRI extend the Research program in this
manner, the period of committed research by and to PHRI will be
two years.)
2.5 During the period of the Research Program set forth in Paragraph 2.4
herein, all significant information and data resulting from the
Research Program shall be reported to GENE-TRAK on a timely basis. In
addition, GENE-TRAK shall be provided with quarterly reports on or
about April 30, July 31, October 31 and January 31 of each calendar
year. Such quarterly reports shall set forth the significant
accomplishments and findings of the Research Program for the preceding
quarter. In addition, the quarterly report submitted on or about
April 30 will serve as an annual report and include the significant
accomplishments and findings for the preceding twelve months.
2.6 During the period of the Research Program, GENE-TRAK will provide at
no cost to PHRI reasonable amounts of such proprietary research
reagents as GENE-TRAK deems necessary for PHRI to carry out the
pending work plan.
2.7 During PHRI's performance of the Research Program, GENE-TRAK at its
option and expense may assign GENE-TRAK representatives to visit PHRI
facilities to observe research under the Research Program. All such
visits shall be conducted during
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<PAGE>
mutually convenient and agreed upon times.
2.8 During the course of the Research Program, the Principal Investigator
and other PHRI agents, employees and representatives carrying out the
Research Program shall not undertake any research effort with any
commercial third party which conflicts with the Research Program or
prevents the Principle Investigator from carrying out his
responsibilities under the Research Program. PHRI will consult with
GENE-TRAK in the event of a possible conflict.
ARTICLE III. GRANTS, CONVERSION AND CANCELLATION
3.1 Subject to the terms and conditions of this Agreement, PHRI grants to
GENE-TRAK:
(a) Under Initial Patents and Research Patents, a worldwide exclusive
license, including the right to grant sublicenses, to make, have
made, use and sell or otherwise dispose of Royalty-Bearing
Products including the right to grant immunity from suit under
Initial Patents and Research Patents to authorized third parties
for the use and sale of such Royalty-Bearing Products hereunder;
(b) Under Post-Research Patents, a worldwide exclusive license,
including the right to grant sublicenses, to make, have made, use
and sell or otherwise dispose of Royalty-Bearing Products using
amplification by QB -replicase or a comparable enzyme including
the right to grant immunity from suit under Post-Research Patents
to authorized third parties for the use and sale of such
Royalty-Bearing Products hereunder;
(c) The right and option to convert the exclusive license and right
under one or more of Initial Patents, Research Patents and
Post-Research Patents granted in subparagraphs 3.1(a) and (b)
herein to a nonexclusive license and right under such patent(s).
GENE-TRAK shall be permitted to make such conversion at any time
following four (4) years after the Effective Date upon written
notification to PHRI;
(d) In the event GENE-TRAK converts its exclusive license and right
under Initial Patents to a nonexclusive license and right, and
PHRI grants an additional nonexclusive license and right under
Initial Patents to one or more third parties, GENE-TRAK shall be
permitted at its option to elect to substitute all terms of such
other nonexclusive license and right under Initial Patents for
the terms of its license and right hereunder; and
(e) The right and option to give up its license and right under
Initial Patents while retaining its license and right under
Research Patents and Post-Research Patents. GENE-TRAK shall be
permitted to give up such license and right
7
<PAGE>
under Initial Patents at any time during the term of this
Agreement. In the event GENE-TRAK gives up its license and
rights under Initial Patents as provided hereunder, GENE-TRAK
shall stand unlicensed under Initial Patents and, notwithstanding
any other license or right GENE-TRAK may have hereunder, PHRI
shall have the right to enforce Initial Patents against GENE-TRAK
under the patent laws of the United States and elsewhere.
3.2 Notwithstanding the foregoing:
(a) all license and rights granted by PHRI herein shall be subject to
rights reserved to itself by the United States Government and
agencies thereof in research grants used to fund research
underlying Initial Patents, Research Patents and Post-Research
Patents;
(b) for as long as GENE-TRAK retains an exclusive license to one or
more of Initial Patents, Research Patents and Post-Research
Patents, PHRI shall be permitted to use the information embodied
in such exclusively licensed Initial Patents, Research Patents or
Post-Research Patents for research, clinical and educational
purposes except that PHRI shall not be permitted to use the
information embodied in such exclusively licensed Initial Patent,
Research Patent or Post-Research Patent in any manner which
inures to the benefit of any other commercial third party; and
(c) for as long as GENE-TRAK retains an exclusive license to U.S.
Serial No. 08/005,893, MGH shall not use the information embodied
in U.S. Serial No. 08/005,893 except for research, clinical and
educational purposes.
ARTICLE IV. SUBLICENSES
4.1 GENE-TRAK shall have the exclusive right to grant sublicenses to
others directly or via a cross-license under such Initial Patents,
Research Patents and Post-Research Patents as GENE-TRAK retains
exclusive license and rights. The granting of such sublicenses shall
be at the discretion of GENE-TRAK and GENE-TRAK shall have the sole
power to determine whether or not to grant any such sublicense, the
identity of any sublicensee and the terms and conditions of such
sublicense including specification of royalty rate; provided however
that each such sublicense includes provisions between GENE-TRAK and
the sublicensee which correspond to Paragraphs 4.3, 4.4, Article VI,
8.10, 10.5(c), 11.4, 11.5, 12.1 and 13.4 herein between PHRI and
GENE-TRAK and paragraphs 11.6 - 11.13 between MGH and GENE-TRAK, and
that no such sublicense shall contain any provision inconsistent with
the provisions of this Agreement.
4.2 Within sixty (60) days after the grant by GENE-TRAK of any sublicense
hereunder,
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<PAGE>
GENE-TRAK will provide PHRI with the identity of the sublicensee and a
copy of the sublicense agreement.
4.3 Upon the early termination of this agreement or the loss or
relinquishing by GENE-TRAK of any of its license and rights under
Initial Patents, Research Patents or Post-Research Patents, GENE-TRAK
will terminate the corresponding license and rights of its
sublicensees or assign them to PHRI. In the event GENE-TRAK elects to
assign such license and rights to PHRI, PHRI shall be permitted to
terminate such license and rights at PHRI's sole option.
4.4 Upon conversion by GENE-TRAK pursuant to Paragraph 3.1(c) of the
exclusive license and rights under Initial Patents to nonexclusive
license and rights, GENE-TRAK will terminate the corresponding license
and rights of its sublicensees or assign them to PHRI. In the event
GENE-TRAK elects to assign such license and rights to PHRI, PHRI shall
be permitted to terminate such license and rights at PHRI's sole
option.
4.5 As to any license and rights granted to GENE-TRAK hereunder which have
been sublicensed directly or by cross-license as provided hereunder
and which have not been terminated or assigned to PHRI, GENE-TRAK will
pay and account to PHRI under Articles V and VI as if the sublicensee
were GENE-TRAK under this Agreement.
ARTICLE V. CONSIDERATION FOR WORK AND LICENSE AND RIGHTS
5.1 In consideration of the execution of this Agreement and the other
rights and obligations described herein, GENE-TRAK agrees to pay
PHRI Fifty Thousand U.S. Dollars ($50,000). Such Fifty Thousand
Dollars shall be due and owing as of the Effective Date.
5.2 In consideration of the successful completion by PHRI and GENE-TRAK of
the procedures as described in Paragraphs 2.4(a) and (b) herein and
Paragraphs 1-4 of Appendix II, GENE-TRAK agrees to pay PHRI One
Hundred Thousand U.S. Dollars ($100,000). Such One Hundred Thousand
U.S. Dollars ($100,000) will be due and owing as of the successful
completion of the procedures by GENE-TRAK. Notwithstanding the
foregoing, if GENE-TRAK elects for PHRI to Initiate the Research
Program as provided in Paragraph 2.4(c) herein, then GENE-TRAK agrees
to pay the One Hundred Thousand U.S. Dollars ($100,000) to PHRI.
5.3 Upon election by GENE-TRAK under Paragraph 2.4(c) to have PHRI
initiate the Research Program and in consideration of the work
actually performed by PHRI through six (6) months after the Effective
Date, GENE-TRAK shall pay to PHRI Two Hundred Thousand U.S. Dollars
($200,000). Such Two Hundred Thousand Dollars
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will be due and owing as of the election by GENE-TRAK.
5.4 Upon election by GENE-TRAK for PHRI to continue the Research Program
beyond the first six (6) months after the Effective Date as provided
in Paragraph 2.4(d) herein and for work actually performed by PHRI,
GENE-TRAK will pay to PHRI:
(a) Two Hundred Thousand U.S. Dollars ($200,000) which will be due and
owing as of the election by GENE-TRAK for PHRI to continue the
Research Program;
(b) One Hundred Seventy-Five Thousand U.S. Dollars ($175,000) which
will be due and owing twelve (12) months following the Effective
Date;
(c) One Hundred Seventy-Five Thousand U.S. Dollars ($175,000) which
will be due and owing eighteen (18) months following the Effective
Date;
(d) One Hundred Seventy-Five Thousand U.S. Dollars ($175,000) which
will be due and owing twenty-four (24) months following the
Effective Date; and
(e) One Hundred Seventy-Five Thousand U.S. Dollars which will be due
and owing thirty (30) months following the Effective Date.
5.5 In consideration of the license and other rights and obligations
specified herein, GENE-TRAK agrees to pay PHRI a running royalty as
follows:
(a) 0.875% of Net Sales for the first One Hundred Million U.S. Dollars
($0 - $100,000,000) in Net Sales in any calendar year;
(b) 1.0% of Net Sales for the second One Hundred Million U.S. Dollars
($100,000,000 - $200,000,000) in Net Sales in any calendar year;
(c) 1.5% of Net Sales for the third One Hundred Million U.S. Dollars
($200,000,000 - $300,000,000) in Net Sales in any calendar year;
and
(d) 2.0% of Net Sales for all Net Sales in excess of Three Hundred
Million U.S. Dollars ($300,000,000) in any calendar year.
5.6 Notwithstanding the provisions of Paragraph 5.5 hereof, GENE-TRAK
agrees to pay PHRI the following minimum annual royalties in each year
after the Effective Date:
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Year Minimum Royalty
---- ---------------
1 - 3 $ 0
4 $150,000
5 $250,000
6 $350,000
7 $450,000
8 $550,000
9 $650,000
10 $750,000
>10 0
Such minimum annual royalties shall be calculated and become due and
owing at the end of each full year following the Effective Date. No
additional minimum annual royalties are due for any year following the
tenth full year after the Effective Date.
5.7 In the event GENE-TRAK exercises either of (a) its right and option
granted in Paragraph 3.1(c) to convert its exclusive license and right
under all Initial Patents to a non-exclusive license and right, or (b)
its right and option granted in Paragraph 3.1(e) to give up its
license and right to Initial Patents, GENE-TRAK shall pay to PHRI a
minimum annual royalty on a pro rata basis for that part of the year
in which GENE-TRAK has retained the exclusive license under any of
Initial Patents. Thereafter, GENE-TRAK shall have no further
obligation to pay minimum annual royalties to PHRI. Notwithstanding
the foregoing, all minimum royalties which have accrued or have been
paid prior to exercise by GENE-TRAK of such right and option are not
refundable.
5.8 (a) In further consideration of the license and other rights granted
to GENE-TRAK by PHRI, GENE-TRAK agrees to pay or have paid each
of the following payments to PHRI upon the occurrence of the
corresponding milestone event:
<TABLE>
<CAPTION>
Milestone Payment
--------- -------
<S> <C>
(i) Election by GENE-TRAK under Paragraph 2.4(d) $250,000
to continue the Research Program
(ii) The Earlier of Commencement of Clinical Trials for $200,000
a Royalty-Bearing Product or July 15, 1996
(iii) The Earlier of an Application for FDA Approval $200,000
for a Royalty-Bearing Product or July 15, 1997
(iv) The First Commercial Sale of A Royalty-Bearing $400,000
Product
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(v) The First Commercial Sale of a Royalty-Bearing $500,000
Product within the Scope of One or More Valid
Claims of an Exclusively Licensed Issued U.S.
Initial Patent, Research Patent or Post-Research
Patent
(vi) The First Cumulative Net Sales of $ One Hundred $500,000
Million for Royalty-Bearing Product
(vii) The First $ One Hundred Million in Net Sales of $500,000
Royalty-Bearing Product in a Single Calendar year
(viii) The First $ Two Hundred Fifty Million in Net Sales $500,000
of Royalty-Bearing Product in a Single Calendar
year
</TABLE>
The milestone events are separate and independent of one another and
each payment will be incurred notwithstanding that one or more
milestones result from the same event.
(b) Notwithstanding the foregoing, GENE-TRAK will not be required to
make milestone payments in excess of Five Hundred Thousand U.S.
Dollars ($500,000) in any six (6) month period. In the event more
than one milestone payment accrues within any six (6) month
period, GENE-TRAK will be permitted to defer payment of the
balance of milestone payments in excess of Five Hundred Thousand
U.S. Dollars ($500,000) to the next six (6) month period(s) until
such payments are complete.
(c) GENE-TRAK's obligation(s) to make payments for milestone events
will accrue upon the occurrence of the milestone and remain in
effect irrespective of any subsequent elections or actions by
GENE-TRAK. All milestone payments are non-refundable once made
by GENE-TRAK.
5.9 Notwithstanding the foregoing:
(a) As determined regionally pursuant to Paragraph 1.10.
(i) In the event that no claim has issued in an Initial
Patent in the United States, Japan or from the European
Patent Office within seven years of the initial filing
date in the United States, Japan and the European
Patent Office, respectively, for Initial Patents which
(i) covers a Royalty-Bearing Product and (ii) has not
been held invalid by a court of competent jurisdiction
and last resort, any running royalties specified in
Paragraph 5.5 which accrue for Initial Patents shall be
reduced by thirty-seven and one half percent (37.5%)
until such a claim issues
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from Initial Patents at which time the running royalties
shall be fully restored to the rate specified in
Paragraph 5.5.
(ii) In the event that no claim has issued in an Initial
Patent in the United States, Japan or from the European
Patent Office within nine years of the initial filing
date in the United States, Japan and the European
Patent Office, respectively, for Initial Patents which
(i) covers a Royalty-Bearing Product and (ii) has not
been held invalid by a court of competent jurisdiction
and last resort, any running royalties specified in
Paragraph 5.5 which accrue for Initial Patents shall be
reduced to zero percent (0%) until such a claim issues
from Initial Patents at which time the running
royalties shall be fully restored to the rate specified
in Paragraph 5.5.
(iii) As to any particular Research Patent filed in the
United States, Japan or the European Patent Office, in
the event that no claim has issued in the Research
Patent within seven (7) years after the date the
Research Patent is first filed in the United States,
Japan or the European Patent Office, respectively for
such Research Patent which claim (i) covers a
Royalty-Bearing Product and (ii) has not been held
invalid by a court of competent jurisdiction and last
resort, the running royalties specified in Paragraph
5.5 which accrue for the Research Patent shall be
reduced by thirty-seven and one half percent (37.5%)
until such a claim issues from the Research Patent at
which time the running royalties shall be fully
restored to the rate specified in Paragraph 5.5.
(iv) As to any particular Research Patent filed in the
United States, Japan or the European Patent Office, in
the event that no claim has issued in the Research
Patent within nine (9) years after the date the
Research Patent is first filed in the United States,
Japan or the European Patent Office, respectively, for
such Research Patent which claim (i) covers a
Royalty-Bearing Product and (ii) has not been held
invalid by a court of competent jurisdiction and last
resort, the running royalties specified in Paragraph
5.5 for the corresponding Research Patent shall be
reduced to zero percent (0%) until such a claim issues
from the corresponding Research Patent at which time
the running royalties shall be fully restored to the
rate specified in Paragraph 5.5.
(v) It is understood that a product or the performance of a
method or process may be a Royalty-Bearing Product due
to one or more of Initial Patents, Research Patents or
Post-Research Patents and that a single royalty
obligation will accrue whether such product or
performance is a Royalty-Bearing Product under one or
more of Initial Patents, Research
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Patents or Post-Research Patents. It is further
understood that no corresponding reduction in the
running royalties due under Paragraph 5.5 for any
particular Royalty-Bearing Product shall result under
Subparagraphs (i)-(iv) above for a particular Initial
Patent, Research Patent or Post-Research Patent if such
Royalty-Bearing Product is subject to a higher royalty
under another Initial Patent, Research Patent or
Post-Research Patent.
(b) In the event (i) no claim has issued in an Initial Patent or (ii)
all such claims as have issued have been held invalid by a court
of competent jurisdiction and last resort; the minimum annual
royalties specified in Paragraph 5.6 herein shall be reduced by
thirty-seven and one half percent (37.5%) for years 7-10 as
specified in Paragraph 5.6 until such a claim issues from Initial
Patents in the United States at which time the running royalties
shall be fully restored to the rate specified in Paragraph 5.5.
ARTICLE VI. ACCOUNTING
6.1 Beginning with the earlier of (a) the First Commercial Sale of a
Royalty-Bearing Product or (b) the fourth year following the Effective
Date, GENE-TRAK shall deliver or cause to be delivered to PHRI, within
sixty (60) days after the end of each calendar quarter, a written
report (hereinafter referred to as a "Payment Report") for the
preceding calendar quarter. The Payment Reports shall include the
following:
(a) The Net Sales for each Royalty-Bearing Product and resulting
royalty obligations. The Payment Report shall provide such
information in sufficient detail to permit PHRI a reasonable
understanding of the Net Sales made and royalties due.
(b) Each Payment Report shall also identify in particular the Net
Sales for those Royalty-Bearing Products which:
(i) Are within the scope of one or more claims of U.S.
Serial No. 08/005,893 entitled, "Diagnostic Assays And
Kits For RNA Using RNA Binary Probes And A Ribozyme
Ligase" or foreign counterparts thereof; and
(ii) Are within the scope of one or more claims of U.S.
Serial No. 08/005,893 and any other U.S. Initial
Patent(s), Research Patents and Post-Research Patents
and the identity of such other U.S. Initial Patent(s),
Research Patents and Post-Research Patents.
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6.2 Concurrently with the submission of each Payment Report, GENE-TRAK's
payment to PHRI of the accrued royalties specified in the Payment
Report shall be due and owing upon receipt by PHRI of the Payment
Report.
6.3 GENE-TRAK will keep or cause to be kept such detailed and accurate
records and books of account as will enable a determination of the
amounts payable hereunder to PHRI. GENE-TRAK further agrees to
permit such records and books of account to be examined once per year
during reasonable business hours for two (2) years following the end
of the particular quarter to which they pertain. Such inspection
shall be limited in purpose to the verification of the Payment Reports
provided PHRI pursuant to Paragraph 6.1 hereof. Such examination
shall be made by an independent auditor appointed by PHRI but
acceptable to GENE-TRAK, whose acceptance shall not be unreasonably
withheld. Such examination shall further be made at the expense of
PHRI unless such examination shows GENE-TRAK's payments have been
deficient by five percent (5%) or more, in which case the examination
will be at the expense of GENE-TRAK.
6.4 All payments made by GENE-TRAK under this Agreement shall be made
within thirty (30) days of coming due, be accompanied by a statement
explaining the reason for the payment and be made in the lawful money
of the United States of America.
6.5 In the event that a running royalty is based upon Net Sales or
sublicensing revenues made in a currency other than the lawful money
of the United States of America, the rate of exchange used in
calculating such royalty for each calendar quarter shall be the
arithmetic average of the selling prices for the currency in question
as quoted by leading banks of New York, New York and reported by the
Wall Street Journal at the end of business on the last business day of
such calendar quarter in which the Royalty-Bearing product was sold.
ARTICLE VII. INTELLECTUAL PROPERTY
7.1 Except as provided herein, GENE-TRAK Information is and shall remain
the exclusive property of GENE-TRAK and nothing shall create any
right, title or interest whatsoever in PHRI to GENE-TRAK Information.
7.2 Except as provided in Paragraph 7.3 herein, as between GENE-TRAK and
PHRI, PHRI shall have sole charge of and be solely responsible for the
prosecution and filing of Initial Patents and the maintenance of such
Letters Patents as issue therefrom. PHRI will bear all costs and
expenses in connection therewith.
7.3 (a) Notwithstanding the provisions of Paragraph 7.2 herein and for as
long as GENE-TRAK retains any license and rights under Initial
Patents, GENE-TRAK will have the right to require that PHRI
prosecute and maintain Initial
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Patents in the U.S. and elsewhere, provided that GENE-TRAK
requests such from PHRI in writing. GENE-TRAK hereby requires
that PHRI prepare, file, maintain and prosecute applications for
each of Initial Patents in Japan and in the European Patent
Office. PHRI will (i) consult with and advise GENE-TRAK
regarding the preparation, maintenance and prosecution of
applications for Initial Patents including the choice of counsel
to prosecute such applications; (ii) provide GENE-TRAK with
copies of all relevant documentation regarding the prosecution of
such applications; and (iii) use all reasonable efforts to obtain
and maintain issued United States and foreign Letters Patents for
the inventions within Initial Patents as is requested by
GENE-TRAK.
(b) In the event GENE-TRAK elects to have the Research Program
continued as provided in Paragraph 2.4(d) herein, GENE-TRAK will
bear all reasonable costs and expenses in the preparation,
filing, maintenance and prosecution of such applications and
maintenance of such Initial Patents as GENE-TRAK requires PHRI to
prosecute and maintain. GENE-TRAK will reimburse PHRI for
out-of-pocket costs and expenses reasonably incurred by PHRI with
respect to (i) the preparation, filing, maintenance and
prosecution of Initial Patents prior to the Effective Date and
(ii) prosecution and maintenance of such applications thereafter
and maintenance of such patents as issue therefrom. GENE-TRAK
will be permitted to withdraw its request to have one or more
Initial Patents prosecuted and maintained in the United States,
Japan and the European Patent Office or European nations, as the
case may be, after three (3) years after the Effective Date. In
the event GENE-TRAK withdraws its request to have an application
for an Initial Patent prosecuted and maintained or patent
maintained in any country, GENE-TRAK shall have no obligation to
bear all further costs and expenses in connection therewith,
provided that GENE-TRAK withdraws its request in writing. It is
understood that PHRI may continue to have such application
prepared, maintained and prosecuted or such patent maintained at
its own expense and that GENE-TRAK shall stand unlicensed
thereunder.
(c) In the event GENE-TRAK elects to exercise its option under
Paragraph 3.1(c) to convert its exclusive license and rights
under Initial Patents to a non-exclusive license and right,
GENE-TRAK's obligation to reimburse PHRI for subsequent costs and
expenses for prosecution and maintenance of Initial Patents will
be reduced to fifty percent (50%) of those costs and expenses
reasonably incurred by PHRI. Further, in the event PHRI issues
additional licenses to Initial Patents, GENE-TRAK's obligation to
reimburse PHRI shall be further reduced such that the subsequent
costs and expenses shall be shared equally by GENE-TRAK, and the
licensees.
7.4 All inventions made by employees or agents of PHRI in the course of
the Research
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Program shall be promptly and fully made known to GENE-TRAK.
7.5 As between GENE-TRAK and PHRI, all inventions made only by employees
or agents of PHRI in the course of the Research Program shall be the
property of PHRI and PHRI shall have the right to obtain and hold in
its own name United States and foreign Letters Patents (Research
Patents) relating thereto. Except as provided in Paragraph 7.6
herein, PHRI will have sole charge of and be solely responsible for
the preparation and filing of all applications for such Research
Patents and will bear all costs and expenses in connection therewith.
7.6 (a) Notwithstanding the provisions of Paragraph 7.5 herein, GENE-TRAK
will have the right to require that PHRI prepare, file, maintain
and prosecute applications for United States and foreign Research
Patents for any such invention resulting from the Research
Program and maintain such Research Patents as may issue
therefrom, provided that GENE-TRAK requests such from PHRI in
writing within ninety (90) days of PHRI's initial disclosure of
such invention to GENE-TRAK. PHRI will (i) consult with and
advise GENE-TRAK regarding the preparation, maintenance and
prosecution of such applications and the maintenance of such
Research Patents including the choice of counsel to prepare and
prosecute such applications for Research Patents; (ii) provide
GENE-TRAK with copies of all relevant documentation regarding the
prosecution of such applications; and (iii) use all reasonable
efforts to obtain and maintain issued United States and foreign
Research Patents for such subject matter as is requested by
GENE-TRAK.
(b) It is further understood that GENE-TRAK will bear all reasonable
costs and expenses in the preparation, filing, maintaining and
prosecution of such applications and maintenance of such Research
Patents. GENE-TRAK will reimburse PHRI for out-of-pocket costs
and expenses reasonably incurred by PHRI with respect to the
preparation, filing, maintenance or prosecution of such
applications and maintenance of such Research Patents. In the
event PHRI has already incurred costs and expenses in connection
with the preparation, filing, maintenance and prosecution of an
application for a Research Patent before GENE-TRAK has required
PHRI to obtain such, GENE-TRAK will reimburse PHRI for such costs
and expenses as were reasonably incurred for such applications as
GENE-TRAK thereafter requires PHRI to prepare, file, maintain and
prosecute. If, however, GENE-TRAK withdraws its request to have
such an application prepared, maintained or prosecuted or
Research Patent maintained, GENE-TRAK shall have no obligation to
bear all further costs and expenses in connection therewith,
provided that GENE-TRAK withdraws its request in writing. It is
understood that PHRI may continue to have such application
prepared and prosecuted or such Research Patent maintained at its
own expense and that GENE-TRAK
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shall stand unlicensed thereunder.
7.7 The parties contemplate that GENE-TRAK employees and agents will
collaborate with PHRI employees and agents during the Research Program
and that inventions may be made jointly by employees or agents of both
GENE-TRAK and PHRI. In the event that an invention is made jointly by
an employee or agent from each party:
(a) Each party shall promptly and fully insure that the invention is
made known to the other party;
(b) Such inventions shall be owned by PHRI, but subject to Paragraph
7.15 herein; and
(c) PHRI shall be permitted to elect to seek U.S. and foreign patents
for such inventions and GENE-TRAK shall be permitted to require
that PHRI seek U.S. and foreign patents for such inventions.
It is understood that such joint inventions are not intended to
include inventions which are made only by agents and employees of
GENE-TRAK and GENE-TRAK will be the sole owner of inventions made
solely by GENE-TRAK's agents and employees.
7.8 In the event PHRI elects to seek U.S. and foreign patents or GENE-TRAK
requires PHRI to seek U.S. and foreign patents for inventions made
jointly by employees or agents of both parties, such patents and
patent applications shall be Research Patents as described herein and
the preparation, filing and maintenance of such patents and patent
applications shall be subject to Paragraphs 7.5 and 7.6 hereof. In
addition, GENE-TRAK will execute such papers as are reasonably
necessary to evidence PHRI's ownership in the inventions.
7.9 For three full years following completion of the Research Program,
PHRI shall promptly and fully make known to GENE-TRAK any inventions
made by employees or agents of PHRI which utilize non-public GENE-TRAK
Information.
7.10 As between GENE-TRAK and PHRI, all inventions made by employees or
agents of PHRI in the first three years following completion of the
Research Program and utilizing non-public GENE-TRAK Information shall
be the property of PHRI and PHRI shall have the right to obtain and
hold in its own name United States and foreign Letters Patents
(Post-Research Patents) relating thereto. Except as provided in
Paragraph 7.11 herein, PHRI will have sole charge of and be solely
responsible for the preparation, filing, maintenance and prosecution
of all applications for such Post-Research Patents and will bear all
costs and expenses in connection therewith.
7.11 (a) Notwithstanding the provisions of Paragraph 7.10 herein,
GENE-TRAK will have the right to require that PHRI prepare, file
and prosecute applications for
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United States and foreign Post-Research Patents for any such
invention made by employees or agents of PHRI in the first three
years following completion of the Research Program and utilizing
non-public GENE-TRAK Information and maintain such Post-Research
Patents as may issue therefrom, provided that GENE-TRAK requests
such from PHRI in writing within ninety (90) days of PHRI's
initial disclosure of such invention to GENE-TRAK. PHRI will (i)
consult with and advise GENE-TRAK regarding the preparation,
filing, maintenance and prosecution of such applications and the
maintenance of such patents including the choice of counsel to
prepare and prosecute such applications for Post-Research
Patents; (ii) provide GENE-TRAK with copies of all relevant
documentation regarding the prosection of such applications; and
(iii) use all reasonable efforts to obtain and maintain issued
United States and foreign Post-Research Patents for such subject
matter as is requested by GENE-TRAK.
(b) It is further understood that GENE-TRAK will bear all reasonable
costs and expenses in the preparation, filing, maintaining and
prosecution of such applications and maintenance of such
Post-Research Patents. GENE-TRAK will reimburse PHRI for
out-of-pocket costs and expenses reasonably incurred by PHRI with
respect to the preparation or prosecution of such applications
and maintenance of such patents. In the event PHRI has already
incurred costs and expenses in connection with the preparation,
filing and prosecution of an application for a Post-Research
Patent before GENE-TRAK has required PHRI to obtain such,
GENE-TRAK will reimburse PHRI for such costs and expenses as were
reasonably incurred for such applications as GENE-TRAK thereafter
requires PHRI to prepare and prosecute. If, however, GENE-TRAK
withdraws its request to have such an application prepared or
prosecuted or patent maintained, GENE-TRAK shall have no
obligation to bear all further costs and expenses in connection
therewith, provided that GENE-TRAK withdraws its request in
writing. It is understood that PHRI may continue to have such
application prepared, maintained and prosecuted or such patent
maintained at its own expense and that GENE-TRAK shall stand
unlicensed thereunder.
7.12 All literary, artistic, computational or other material (including
reports, computer programs, manuals, disks, listings and other
programming documentation) created or composed by employees or agents
of PHRI in connection with the Research Program shall be promptly and
fully made known to GENE-TRAK.
7.13 All literary, artistic, computational or other material (including
reports, computer programs, manuals, disks, listings and other
programming documentation) created or composed by employees or agents
of PHRI in connection with the Research Program shall be the property
of PHRI and PHRI shall have the right to obtain and hold in its own
name copyrights, trademarks, registrations or such other protection as
may be
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appropriate. Except as provided in Paragraph 7.14 herein, PHRI will
have sole charge and be solely responsible for the preparation and
filing of all applications for such copyrights, trademarks,
registrations or other protection and will bear all costs and expenses
in connection therewith.
7.14 (a) Notwithstanding the provisions of Paragraph 7.13 herein,
GENE-TRAK shall have the right to require that PHRI obtain and
hold copyrights, trademarks, registrations or such other
protection as may be appropriate for all literary, artistic,
computational or other material (including reports, computer
programs, manuals, disks, listings and other reprogramming
documentation) created or composed by employees or agents of PHRI
in connection with PHRI's services hereunder, provided that
GENE-TRAK requests such from PHRI within ninety (90) days of
PHRI's initial disclosure of such literary, artistic,
computational or other material to GENE-TRAK. PHRI will (i)
consult with GENE-TRAK regarding the preparation and prosecution
of applications for such copyrights, trademarks, registrations or
other appropriate protection including the choice of counsel to
prepare and prosecute such applications; (ii) provide GENE-TRAK
with copies of all relevant documentation regarding the
prosection of such applications; and (iii) use all reasonable
efforts to obtain copyrights, trademarks, registrations or other
appropriate protection for such subject matter as requested by
GENE-TRAK.
(b) It is further understood that GENE-TRAK will bear all costs and
expenses in connection with the preparation and prosecution of
all such applications. In the event that PHRI has already
incurred costs and expenses in connection with the preparation
and prosecution of an application for copyright, trademark,
registration or other protection before GENE-TRAK has required
PHRI to obtain such, GENE-TRAK will reimburse PHRI for such costs
and expenses as were reasonably incurred by PHRI. If GENE-TRAK
withdraws its request to have such an application prepared or
prosecuted, GENE-TRAK shall have no obligation to bear all
further costs and expenses in connection therewith, provided that
GENE-TRAK withdraws its request in writing. It is understood
that PHRI may continue to have such application prepared and
prosecuted at its own expense.
7.15 Subject to the terms of this Agreement and PHRI's rights under the
patent laws of the United States and elsewhere, following termination
of the Research Program or this Agreement, there will be no
restriction to GENE-TRAK's right to use, disclose or otherwise deal
with any tangible form of information, data or inventions which may
result from the Research Program.
7.16 In the event GENE-TRAK elects to have the Research Program continued
as provided in Paragraph 2.4(d), PHRI will submit to GENE-TRAK an
invoice for patent expenses reimbursable by GENE-TRAK hereunder.
Thereafter, PHRI will submit
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invoices to GENE-TRAK for reimbursable patent expenses approximately
quarterly. Payment by GENE-TRAK of such invoices shall be due and
owing upon receipt by GENE-TRAK of such invoices.
7.17 Notwithstanding the provisions of Paragraphs 7.3, 7.6 and 7.11, fifty
percent (50%) of all costs and expenses paid by GENE-TRAK for the
preparation, filing, prosecution and maintenance of Initial Patents,
Research Patents and Post-Research Patents shall accumulate and,
beginning in year four (4) after the Effective Date, be fully
creditable against royalties payable by GENE-TRAK in excess of the
minimum annual royalties payable by GENE-TRAK in each year pursuant to
Paragraph 5.6 herein.
ARTICLE VIII. CONFIDENTIALITY
8.1 All GENE-TRAK Information shall be treated as confidential by PHRI.
PHRI will not use GENE-TRAK Information except as and to the extent
necessary for the purposes of this Agreement. PHRI will limit access
to GENE-TRAK Information only to those:
(a) PHRI employees and agents who reasonably require such access for
the purposes of the Research Program or for determining
compliance with the Agreement, and who are obligated to treat
GENE-TRAK Information as confidential in the same manner and to
the same extent as provided herein; and
(b) Authorized MGH agents and employees who reasonably require such
access to permit MGH to determine its rights to royalties as
between PHRI and MGH, provided that such employees and agents of
MGH are obligated to treat GENE-TRAK Information as confidential
and not use GENE-TRAK information except for the purposes stated
in this Paragraph 8.1(b). Upon request by GENE-TRAK, MGH will
provide GENE-TRAK with written assurances that such authorized
employees and agents of MGH are obligated to treat GENE-TRAK
Information in such a confidential manner.
8.2 Notwithstanding the provisions of paragraphs 8.1 herein, PHRI, MGH and
their respective agents and employees shall have no obligation with
regard to GENE-TRAK Information that:
(a) can be demonstrated to have been in the public domain or publicly
known or available prior to the date of disclosure to PHRI or
MGH; or
(b) can be demonstrated to have been in PHRI's or MGH's possession or
made available to PHRI or MGH from another source prior to the
disclosure; or
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(c) becomes part of the public domain or publicly known or available
not due to any unauthorized act or omission on the part of PHRI
or MGH; or
(d) can be demonstrated to be derived independently of GENE-TRAK
Information by PHRI or MGH or their Affiliates; or
(e) is rightfully received by PHRI or MGH from a third party.
8.3 PHRI will return to GENE-TRAK all papers, drawings, tapes, disks and
other tangible forms containing GENE-TRAK Information in its
possession upon completion or early termination of the Research
Program unless otherwise directed by GENE-TRAK in writing.
8.4 PHRI may publish or otherwise disclose Research Information to the
public or to any third party except that prior to such publication or
disclosure, PHRI shall notify GENE-TRAK of its intent to publish or
disclose and submit such Research Information to GENE-TRAK for
GENE-TRAK's review prior to such publication or disclosure.
GENE-TRAK will notify PHRI within thirty (30) days of receipt of such
Research Information of GENE-TRAK's objections, suggestions or
modifications to the publication or disclosure. GENE-TRAK may require
deletion of information that is or reveals GENE-TRAK Information but
PHRI shall make the final determination as to such other Research
Information to be included in the publication or disclosure.
GENE-TRAK may also request an additional delay up to a maximum of
sixty (60) days from GENE-TRAK's initial receipt in order to reach
agreement on suggested changes. PHRI agrees to withhold such
publication or disclosure for up to six (6) months from GENE-TRAK's
initial receipt in order to permit GENE-TRAK to investigate the
patentability of and, if GENE-TRAK so requests, to permit PHRI to
prepare and file application(s) for United States and foreign Letters
Patents for such Research Information, provided that GENE-TRAK
requests such withholding from PHRI in writing within sixty (60) days
of GENE-TRAK's initial receipt of the Research Information to be
published or disclosed.
8.5 All Research Information shall be treated as confidential by GENE-TRAK
during the course of the Research Program and during such time
GENE-TRAK will not use Research Information except as and to the
extent necessary for the purposes of this Agreement. GENE-TRAK will
limit access to Research Information only to those of its employees
and agents who reasonably require such access for the purposes of this
Agreement and who are obligated to treat Research Information as
confidential in the same manner and to the same extent as provided
herein.
8.6 Notwithstanding the provisions of Paragraph 8.5 herein, GENE-TRAK may
publish or otherwise disclose Research Information to the public or to
any third party during the course of the Research Program except that
Prior to such publication or disclosure,
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GENE-TRAK shall notify PHRI of its intent to publish or disclose and
submit such Research Information to PHRI for PHRI's review prior to
such publication or disclosure. PHRI will notify GENE-TRAK within
thirty (30) days of receipt of such Research Information of PHRI's
objections, suggestions or modifications to the publication or
disclosure but GENE-TRAK shall make the final determination as to such
Research Information to be included in the publication or disclosure.
PHRI may request an additional delay up to a maximum of sixty (60)
days from PHRI's initial receipt in order to reach agreement on
suggested changes. GENE-TRAK agrees to withhold such publication or
disclosure for up to (6) months from PHRI's initial receipt in order
to permit PHRI to investigate the patentability of and, if PHRI so
chooses to prepare and file application(s) for United States and
foreign Letters Patents for such Research Information provided that
PHRI requests such withholding from GENE-TRAK in writing within sixty
(60) days of PHRI's initial receipt of the Research Information to be
published or disclosed.
8.7 Notwithstanding the provisions of paragraphs 8.5 and 8.6 herein,
GENE-TRAK shall have no obligation with regard to Research Information
that:
(a) can be demonstrated to have been in the public domain or publicly
known or available prior to the date of disclosure; or
(b) can be demonstrated to have been in GENE-TRAK's possession or
available to GENE-TRAK from another source prior to the
disclosure; or
(c) becomes part of the public domain or publicly known or available
not due to any unauthorized act or omission on the part of
GENE-TRAK or its Affiliates; or
(d) can be demonstrated to be derived independently of Research
Information by GENE-TRAK or its Affiliates; or
(e) is rightfully received by GENE-TRAK from a third party.
8.8 PHRI may reference this Agreement and list GENE-TRAK as a source of
funding in its standard project award publications with the revised
title "Studies of Assay Methodologies" provided that no GENE-TRAK
Information of a confidential nature is made available as a result of
such notice.
8.9 Except as may be required to meet professional standards for
publication, upon timely request by GENE-TRAK, PHRI authors will to
the extent possible delete mention of GENE-TRAK's involvement in the
Research Program.
8.10 (a) GENE-TRAK will not use PHRI's name or the name of any member of
PHRI's project staff in any publicity, advertising or news
release without the prior written approval of PHRI.
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(b) PHRI will not use GENE-TRAK's name or the name of any GENE-TRAK
employee in any publicity, advertising or news release without
the prior written approval of GENE-TRAK.
8.11 (a) GENE-TRAK will not use MGH's name or the name of any MGH inventor
named to U.S. Serial No. 08/005,893, or the name of any member of
MGH's professional staff in any publicity, advertising or news
release without the prior written approval of MGH.
(b) MGH will not use GENE- TRAK's name or the name of any GENE-TRAK
employee in any publicity, advertising or news release without
the prior written approval of GENE-TRAK.
ARTICLE IX. PATENT INFRINGEMENT
9.1 As between GENE-TRAK and PHRI, PHRI shall have the first right to
assert or defend Initial Patents, Research Patents and Post-Research
Patents against any third party PHRI perceives to be a challenger or
infringer of Initial Patents, Research Patents and Post-Research
Patents. In the event PHRI chooses of its own to assert one or more
of Initial Patents, Research Patents and Post-Research Patents, PHRI
shall do so at its own expense, have sole control over the prosecution
of any resulting patent litigation and related settlement discussions
and be the sole beneficiary of any settlement or judicial awards
resulting from its assertion of such Initial Patents, Research Patents
or Post-Research Patents. Notwithstanding the foregoing, in the event
GENE-TRAK retains an exclusive license and right under such Initial
Patents, Research Patents or Post-Research Patents as PHRI intends to
assert against a perceived infringer of same, PHRI will discuss its
intentions with GENE-TRAK before asserting such patents against the
perceived infringer.
9.2 Notwithstanding the provisions of Paragraph 9.1 herein and to the
extent that GENE-TRAK retains exclusive license and rights under one
or more of Initial Patents, Research Patents or Post-Research Patents:
(a) If (i) a third party seeks to invalidate one or more of such
exclusively licensed Initial Patents, Research Patents or
Post-Research Patents or (ii) GENE-TRAK provides to PHRI
reasonable evidence of commercial infringement of one or more of
such exclusively licensed Initial Patents, Research Patents or
Post-Research Patents by one or more unauthorized third parties,
and requests in writing that PHRI cause such allegedly infringing
activity to cease; then PHRI shall promptly advise GENE-TRAK of
PHRI's decision to take reasonable action to defend such patents
or stop such activity, or not to do so. If PHRI elects to defend
such patent or take action to cause such activity to cease, PHRI
shall do so pursuant to the terms of Paragraph 9.1 herein.
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(b) (i) If, however:
(A) PHRI expressly declines to defend such patent or
take action to cause such allegedly infringing
activity to cease; or
(B) within one hundred eighty (180) days of a request
by GENE-TRAK to cause such allegedly infringing
activity to stop PHRI has not caused such activity
to stop or initiated patent infringement
litigation against at least one of said allegedly
infringing third parties;
(ii) then GENE-TRAK shall be permitted to:
(A) deduct from royalties due hereunder thirty percent
(30%) of its reasonable costs and legal fees
incurred to conduct such proceedings as are
undertaken by GENE-TRAK pursuant to subparagraph C
hereunder, but in no event shall royalty payments
be reduced by more than thirty percent (30%) of
the amount otherwise due in any royalty payment
period;
(B) postpone payment of thirty percent (30%) of any
such milestone payments as come due until such
alleged infringing activity has ceased or been
declared noninfringing by a court of competent
jurisdiction and last resort; and
(C) defend such patent or initiate and prosecute at
GENE-TRAK's expense patent infringement litigation
against one or more of such allegedly infringing
third parties as GENE-TRAK chooses. PHRI will
join such litigation to the extent required to
permit GENE-TRAK to continue such litigation.
GENE-TRAK will be permitted to seek any remedy
permitted by law and control such litigation
including the settlement thereof and the selection
of counsel therefore. Any settlement award or
other recovery from such litigation shall be used
first to reimburse GENE-TRAK for reasonable
remaining costs and legal fees incurred to conduct
such litigation; next be used to pay any amounts
withheld from PHRI during the pendency of the
litigation; next be used to pay PHRI an effective
royalty as though the infringing party were a
sublicensee and the infringing products were
Royalty-Bearing Products provided, however, that
such effective royalty is not to exceed
twenty-five percent (25%) of the settlement award
or other recovery remaining after the payments
named above; and the remainder to GENE-TRAK.
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(c) As between GENE-TRAK and PHRI, as to any country in which
GENE-TRAK or one or more of its sublicensees reasonably
determines that it cannot make, use or sell inventions disclosed
and claimed in Initial Patents, Research Patents or Post-Research
Patents without infringing one or more issued patents held
adversely to GENE-TRAK and not licensed by GENE-TRAK as of the
Effective Date, GENE-TRAK shall be permitted to acquire license
and rights under such adversely held patents and deduct expenses
incurred per calendar year for such license and rights from
royalties due hereunder up to a maximum thirty percent 30% of the
running royalties due to PHRI for activities in that country
provided, however, that such running royalties shall not be
reduced below a minimum of 0.75% of the Net Sales in that
country.
9.3 As to issued Initial Patents, Research Patents or Post-Research
Patents under which GENE-TRAK holds a nonexclusive license and right,
in the event that GENE-TRAK: provides to PHRI reasonable evidence of
commercial infringement of one or more of such Initial Patents,
Research Patents or Post-Research Patents by one or more unauthorized
third parties and that such infringement places GENE-TRAK at a
competitive disadvantage with respect to one or more of such
unauthorized third parties; GENE-TRAK shall be permitted to postpone
payment of any running royalty due to PHRI for sales of
Royalty-Bearing Product in the country where such infringing activity
occurs until PHRI commences action to cause such infringement to
cease.
9.4 In the event either of GENE-TRAK or PHRI shall initiate and prosecute
patent litigation against a non-party, the other shall provide
reasonable cooperation with the party prosecuting the patent
litigation. Such cooperation shall include making relevant records,
papers, information, samples and the like reasonably available and
providing relevant employees for testimony on an appropriate basis.
The party seeking cooperation will reimburse the party providing
cooperation for all out-of-pocket expenses incurred by the party
providing cooperation.
ARTICLE X. REPRESENTATIONS AND WARRANTIES
10.1 PHRI represents and warrants that it has full legal power to extend
the rights granted to GENE-TRAK herein. Except as provided in
Paragraph 10.2 herein, PHRI is aware of no outstanding assignments,
grants, licenses, encumbrances, obligations or agreements, written or
oral, with respect to Initial Patents or that are inconsistent with
PHRI's obligations hereunder.
10.2 PHRI represents and warrants that PHRI and MGH have entered into an
Agreement effective December 10, 1993, a copy of which is attached
hereto as Appendix III and incorporated herein by reference, which
Agreement concerns the Initial Patent U.S. Patent Application Serial
No. 08/005,893 entitled Diagnostic Assays And Kits For
26
<PAGE>
RNA Using RNA Binary Probes And A Ribozyme Ligase by Lizardi et al.
and certain other pending patent applications relating to the use
of ribozymes (the latter are herein after collectively referred to as
the Ribozyme Applications). PHRI represents and warrants that upon
GENE-TRAK's reasonable showing to PHRI and MGH that one or more of the
MGH Ribozyme Applications significantly impairs the development or use
of the inventions which are the subject of Serial No. 08/005,893, MGH
will, at PHRI's request, use reasonable efforts to obtain for
GENE-TRAK a non-exclusive license or sublicense to such one or more
MGH Ribozyme Applications. PHRI further represents and warrants that
it will make such request of MGH upon GENE-TRAK's request for same and
GENE-TRAK's reasonable showing to PHRI and MGH.
10.3 As of the Effective Date, PHRI represents and warrants that it does
not own or have conveyable rights to pending patent applications or
issued patents directed to inventions which would preclude GENE-TRAK
from commercially utilizing the inventions which are the subject of
Initial Patents.
10.4 PHRI represents and warrants that:
(a) it is not aware of any inequitable or fraudulent conduct by its
employees, agents or the inventors of any Initial Patent which
would render any Initial Patent invalid or unenforceable; and
(b) prior to January 15, 1994, PHRI has prepared and filed a foreign
patent application under the Patent Cooperation Treaty for each
of Initial Patents designating Japan and the European Patent
Office and including at least, France, Germany, Italy, and the
United Kingdom.
10.5 Notwithstanding the foregoing, nothing contained in this Agreement
shall be construed as:
(a) a representation or warranty by PHRI that any invention described
in Initial Patents is patentable or that any patent issuing
therefrom will be valid;
(b) a representation or warranty by PHRI that anything made, used,
sold, or otherwise disposed of under any license granted in this
Agreement is or will be free from infringement of any patents
held by third parties;
(c) A REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, BY PHRI OR MGH
OF THE MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF
ANYTHING MADE, USED, SOLD OR OTHERWISE DISPOSED OF UNDER THIS
AGREEMENT;
(d) an obligation by either party to initiate or prosecute actions or
suits against any
27
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third party for infringement of any patent licensed hereunder; or
(e) granting by implication, estoppel or otherwise any license or
rights under anything other than Initial Patents, Research
Patents and Post-Research Patents.
10.6 PHRI represents and warrants that all of its employees and agents
assigned to work on the Research Program will have entered into an
agreement with PHRI which is sufficient to enable PHRI to comply with
all terms of this Agreement.
10.7 GENE-TRAK represents and warrants that it is an Affiliate of Amoco
Corporation, an Indiana Corporation.
ARTICLE XI. INDEMNIFICATION AND INSURANCE
11.1 PHRI and GENE-TRAK are acting as independent contractors under this
Agreement and nothing contained herein shall make PHRI the agent,
partner, representative or employee of GENE-TRAK.
11.2 PHRI shall at all times exercise such precautions as may be reasonably
necessary for the safety of its employees and agents in carrying out
the Research Program.
11.3 PHRI accepts full responsibility for any injury to or death of any
person or persons and any loss of or damage to the property of any
person or persons caused by or arising out of PHRI's negligence during
PHRI's performance of the Research Program.
11.4 Absent gross negligence or willful misconduct by PHRI, GENE-TRAK shall
at all times during the term of this Agreement and thereafter,
indemnify, defend and hold PHRI, its trustees, officers, directors and
employees harmless against all claims and expenses, including legal
expenses and reasonable attorney's fees, arising out of the death of
or injury to any person or persons, any damage to property or against
any other claim, proceeding, demand and liability resulting from the
production, manufacture, sale, use, lease or consumption of any
Royalty-Bearing Product or arising from the rights and license granted
herein to GENE-TRAK by PHRI provided, however, that PHRI shall (a)
notify GENE-TRAK promptly in writing after it receives notice of any
claim subject to this Paragraph 11.4, (b) permit GENE-TRAK, at its
option, to participate in and control the defense and trial of such
claim and related settlement negotiations; and (c) fully cooperate
with GENE-TRAK in the defense of any such claim. GENE-TRAK will keep
PHRI reasonably informed as to any defense undertaken by GENE-TRAK
hereunder.
11.5 (a) For as long as GENE-TRAK is an Affiliate of Amoco Corporation,
GENE-
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TRAK shall be permitted to stand self-insured.
(b) In the event GENE-TRAK is no longer an Affiliate of Amoco
Corporation, PHRI shall be permitted to determine whether
GENE-TRAK shall obtain and maintain primary coverage
comprehensive general liability insurance and, upon the First
Commercial Sale, products liability insurance. In the event PHRI
so determines and notifies GENE-TRAK in writing, GENE-TRAK shall
obtain such insurance for minimum limits of Two Million U.S.
Dollars ($2,000,000) combined single limit for bodily injury and
property damage per occurrence and Ten Million U.S. Dollars
($10,000,000) in the aggregate. Such insurance shall include as
insureds PHRI, its officers, directors and employees; and The
General Hospital Corporation, its officers, directors and
employees.
11.6 The term "MGH Product" shall mean those Royalty Bearing Products which
are subject to those claims of Initial Patents which claim the
inventions which are the object of U.S. Serial No. 08/005,893 entitled
Diagnostic Assays And Kits For RNA Using RNA Binary Probes And A
Ribozyme Ligase by Lizardi et al.
11.7 (a) GENE-TRAK shall indemnify, defend and hold harmless MGH and its
trustees, officers, medical and professional staff, employees and
agents, and their respective successors, heirs and assigns ("MGH
Indemnitees"), against any liability, damage, loss or expense,
including reasonable attorney's fees, and expenses of litigation,
incurred by or imposed upon the MGH Indemnitees or any one of
them in connection with any claims, suits, actions, demands or
judgments, whether or not rightly or wrongly brought, arising out
of any theory of product liability, including but not limited to
actions in the form of tort, warranty or strict liability,
concerning any MGH Product made, used or sold pursuant to any
right or license granted hereunder.
(b) GENE-TRAK further agrees to provide at its own expense attorneys
which are reasonably acceptable to MGH for the defense of any
claim, suit or action to be indemnified by GENE-TRAK hereunder
and to keep MGH reasonably informed of the progress in such
defense and the disposition of such claim, including all
decisions, appeals and settlements of such claim, suit or action.
11.8 In consideration for the indemnification and other benefits accruing
to MGH Indemnitees hereunder, MGH Indemnitees agree to:
(a) Promptly notify GENE-TRAK in writing of any claim, suit or
action, demand or judgment for which indemnification is sought
hereunder; and
(b) Allow GENE-TRAK to conduct and control such defense and
disposition of such claim, suit or action, including all
decisions relating to litigation, appeal and settlement; and
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(c) Provide GENE-TRAK with reasonable cooperation in the defense of
such claim, suit or action.
GENE-TRAK shall have no obligation to indemnify an MGH Indemnitee who
has not performed as provided in this Paragraph 11.8. However,
GENE-TRAK will provide reasonable cooperation to such nonperforming
MGH Indemnitee to permit same to mitigate such liability, damage, loss
or expense as may result from such claim, suit or action.
11.9 Notwithstanding the provisions of Paragraphs 11.7 and 11.8 herein,
GENE-TRAK shall have no obligation to indemnify an MGH Indemnitee
hereunder for any liability, damage, loss or expense to the extent
that such is attributable to:
(a) The negligent activities, reckless misconduct, or intentional
misconduct of the MGH Indemnitee; or
(b) The settlement of a claim, suit, action or demand by the MGH
Indemnitee which has not been approved by GENE-TRAK in writing.
11.10 During the period that GENE-TRAK, an Affiliate, a sub-licensee or
agent of GENE-TRAK is commercially distributing or selling any MGH
Product pursuant to any license and right granted hereunder and for
three (3) years thereafter,
(a) GENE-TRAK shall at its sole cost and expense:
(i) Maintain self-insurance through its Affiliate Amoco
Corporation which is reasonably acceptable to MGH and
the Risk Management Foundation of the Harvard Medical
Institution, Inc. ("RMF"); or
(ii) Maintain or procure from third party insurers, product
and contractual liability insurance with limits of at
least $ Two Million per occurrence and at least
$ Two Million annual aggregate. The minimum amounts of
insurance coverage required under this Paragraph 11.10
shall not be construed to create a limit of GENE-TRAK's
liability with respect to its obligation of
indemnification under Paragraph 11.7 herein.
(b) In the event GENE-TRAK cancels, fails to renew or otherwise
materially changes its insurance provisions relative to
subparagraph (a) above:
(i) GENE-TRAK will provide MGH with written notice of its
cancellation, non-renewal or material change in the
insurance at least fifteen (15) days prior to such
cancellation, non-renewal or material change. In the
event GENE-TRAK does not obtain replacement insurance
providing comparable coverage prior to such
cancellation, non-renewal or
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material change to its insurance, MGH shall have the
right to terminate the license and rights granted to
GENE-TRAK hereunder as to MGH's interests in the claims
of Initial Patents which claim the inventions which are
the object of U.S. Serial No. 08/005,893 entitled
Diagnostic Assays And Kits For RNA Using RNA Binary
Probes And A Ribozyme Ligase by Lizardi et al.;
provided, however, that MGH shall notify GENE-TRAK of
such termination in writing.
(ii) Notwithstanding the foregoing, such license and right
which has been terminated by MGH will be reinstated if,
within sixty (60) days of receipt of MGH's notice of
termination, GENE-TRAK provides MGH with written
evidence that GENE-TRAK has obtained insurance as
provided in Paragraph 11.10 hereof and effective no
later than the end of said sixty (60) day period. The
reinstatement of such license and rights shall be
effective as of the effective date of the replacement
insurance. It is understood that GENE-TRAK's right of
reinstatement hereunder shall lapse if GENE-TRAK has
failed to provide MGH with evidence of replacement
insurance on or before expiration of the sixty (60) day
period specified herein.
11.11 Upon request by MGH, GENE-TRAK shall provide MGH with written evidence
of the self-insurance or third party insurance specified in Paragraph
11.10 hereof.
11.12 As between MGH and GENE-TRAK, MGH shall be permitted to enforce
separately and independently of PHRI those obligations incurred by
GENE-TRAK to MGH under this Agreement.
11.13. (a) As between GENE-TRAK and MGH:
(i) As to any controversy or dispute between them arising
out of or in connection with Paragraphs 11.6 through
Paragraph 11.13 herein, their interpretation of such
Paragraphs or the performance of MGH, GENE-TRAK or an
MGH Indemnitee thereunder which MGH and GENE-TRAK are
unable to resolve within a reasonable time and after
written notice by either of GENE-TRAK or MGH to the
other of the existence of such controversy or dispute,
such dispute or controversy may be submitted to
arbitration by either of GENE-TRAK or MGH. If so
submitted to arbitration, the controversy or dispute
shall be finally settled by arbitration conducted in
accordance with the rules of conciliation and
arbitration of the International Chamber of Commerce in
effect on the date of such notice. Any such
arbitration shall take place in the city of Boston,
Massachusetts of the United States of America. Such
arbitration shall be conducted in the English language
and shall apply the laws of the state of New York of
the United States
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of America.
(ii) The decisions by the arbitrator(s) with respect to such
controversy or dispute shall be binding and conclusive
upon GENE-TRAK and MGH's successors and assigns and
they shall comply with such decision in good faith, and
each hereby submits to the jurisdiction of Boston,
Massachusetts, but only for the entry of judgment with
respect to the decisions of the arbitration hereunder.
Notwithstanding the foregoing, judgment upon such award
may be entered in any court in Boston, Massachusetts,
or any other court having jurisdiction.
(b) Notwithstanding the foregoing, as to any controversy or dispute
between GENE-TRAK and MGH regarding an alleged obligation of
GENE-TRAK under Paragraphs 11.7 and 11.8 herein and for which
MGH or GENE-TRAK has requested arbitration hereunder, GENE-TRAK
shall assume such obligation until a decision has been made to
the contrary by the arbitrator(s). At such time as the
arbitrators have decided that GENE-TRAK does not bear such
alleged obligation, GENE-TRAK and MGH shall arrange for the
orderly transfer of such obligation to MGH or its designee. In
addition, MGH shall reimburse GENE-TRAK for GENE-TRAK's expenses
reasonably incurred with respect to such obligation.
ARTICLE XII. MARKING
12.1 GENE-TRAK agrees to mark all Royalty-Bearing Products sold in the
United States of America under the license and rights granted by this
Agreement with the word "Patent" or "Patents" or the abbreviation
"Pat." and the number of any applicable issued Initial Patent,
Research Patent or Post-Research Patent.
ARTICLE XIII. TERM AND TERMINATION
13.1 Unless previously terminated in accordance with the provisions of
Paragraphs 13.2 or 13.4 herein, this Agreement shall continue in full
force from the Effective Date until the expiration of the last to
expire of Initial Patents, Research Patents or Post-Research Patents
under which GENE-TRAK retains the license and rights provided
hereunder.
13.2 GENE-TRAK shall have the right to terminate this Agreement at any time
during the term of this Agreement upon written notice to PHRI,
provided that:
(a) In the event GENE-TRAK elects to terminate the Agreement within
six (6) months of the Effective Date, GENE-TRAK shall have no
further obligation to
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pay PHRI as provided in Paragraph 5.4 herein and all existing
licenses shall terminate immediately.
(b) In the event GENE-TRAK elects to terminate the Agreement after
six (6) months after the Effective Date, PHRI will wind down and
stop the Research Program effective as of one year from the date
of such termination. GENE-TRAK will continue to pay for such
research pursuant to Paragraph 5.4 on a pro rata basis for work
performed by PHRI.
13.3 GENE-TRAK shall be permitted to terminate the Research Program as
follows:
(a) Except as provided in subparagraph (b) herein,
(i) During the first three years of this Agreement,
GENE-TRAK shall be permitted to terminate the Research
Program only with concurrent termination of its license
and rights under Initial Patents and in accordance with
Paragraph 13.2.
(ii) GENE-TRAK may terminate the Research Program after the
first three years of this Agreement by declining to
extend the Research Program as provided in Paragraph
2.4(g).
(b) In the event Dr. Kramer is unable or unwilling to serve as
Principal Investigator on behalf of PHRI as required by Paragraph
2.2 herein, GENE-TRAK may terminate the Research Program as
provided in Paragraph 2.3 without affecting as to any of its
license and rights granted herein.
13.4 Should either party fail to fully and promptly perform any material
obligation hereunder, and fail to cure such failure within sixty (60)
days after receipt of written notice from the other party specifying
the nature of such failure, the other party may seek whatever other
relief to which it may be entitled and:
(a) terminate the Research Program effective immediately upon notice
to the party failing to perform without terminating any other
license and rights granted hereunder; or
(b) terminate the Agreement, including the Research Program,
effective immediately upon notice to the party failing to
perform.
13.5 Termination of the Research Program separately or in conjunction with
termination of this Agreement shall not relieve either party of its
obligations under Paragraphs 2.6 - 2.8 through completion of the
Research Program by PHRI.
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13.6 Termination of this Agreement shall not relieve any party of its
continuing obligations under Articles VI, VII, VIII and XI and shall
not relieve GENE-TRAK of royalty and milestone obligations accrued
under Article V.
ARTICLE XIV. ASSIGNMENT
14.1 This Agreement is not assignable by GENE-TRAK without the prior
written consent of PHRI, which shall not be unreasonably withheld,
except that GENE-TRAK may assign or extend all of its rights and
obligations hereunder to any Affiliate or to the bona fide successor
to GENE-TRAK's ownership or control of substantially the entire
business of GENE-TRAK relating to the subject matter of Initial
Patents, Research Patents and Post-Research Patents without the prior
consent of PHRI provided that such Affiliate or bona fide successor
agrees to be bound to the terms and obligations hereunder. It is
understood that it would not be unreasonable for PHRI to withhold
consent to an assignment which would be reasonably construed as:
(a) harming PHRI's reputation; or
(b) raising an irreconcilable conflict of interest; or
(c) being to a party which does not agree to generally exploit the
inventions which are the subject of Initial Patents, Research
Patents and Post-Research Patents.
14.2 PHRI's obligation to perform research under the Research Program is
not assignable by PHRI without the prior written consent of GENE-TRAK.
ARTICLE XV. FORCE MAJEURE
Neither party shall be liable for failure to perform as required by
any provision of this Agreement where such failure results from a
force majeure beyond the party's control. In the event of any delay
attributable to a force majeure, the time for performance affected
thereby shall be extended for a period equal to the time lost by
reason of the delay.
ARTICLE XVI. MISCELLANEOUS
16.1 (a) Until otherwise specified by a party in writing, the mailing
addresses of the parties to this Agreement shall be as follows:
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PHRI: Public Health Research Institute
455 First Avenue
New York, New York 10016
Attention: President
GENE-TRAK: GENE-TRAK, Inc.
31 New York Avenue
Framingham, MA 01701
Attention: General Manager
Clinical Diagnostics
(b) Until otherwise specified by MGH in writing, the mailing address
of MGH shall be as follows:
MGH: The Massachusetts General Hospital
Office of Technology Affairs
Bldg. 149, Suite 1101
Thirteenth Street
Charlestown, MA 02129
Attention: Director
16.2 Any notice expressly provided for under this Agreement shall be in
writing and shall be deemed sufficiently given at the earlier of (a)
when received manually or by mail by the entity to be notified at its
address provided in Paragraph 16.1 or at such address as may from time
to time be designated in writing by the entity; or (b) four (4) full
business days after mailing or one (1) full day after delivery to a
commercial courier.
16.3 This Agreement constitutes the full understanding of the parties
hereto and a complete statement of the terms of their agreement in
respect to the subject matter hereof. This Agreement shall not be
subject to any change or modification except by an instrument of equal
formality signed by the duly authorized representatives of the
respective parties.
16.4 The waiver of a breach of any part of this Agreement by either party
shall in no event constitute a waiver as to any future breach, whether
similar or dissimilar in nature.
16.5 This Agreement shall be construed and the legal relations between the
parties determined in accordance with the laws of the state of New
York, excluding any choice of law rules which may direct the
application of the laws of any other jurisdiction. The parties agree
to the exclusive jurisdiction and venue of the United States District
Courts for the Southern District of New York in the city of New York.
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In the event GENE-TRAK becomes or its successor to this Agreement is
resident in the State of New York, the exclusive jurisdiction and
venue shall include the Courts of the State of New York in the City of
New York.
16.6 Each party shall perform under this Agreement in compliance with
applicable laws and governmental regulations. Nothing in this
Agreement shall be construed to require either party to commit any act
contrary to law or governmental regulation; wherever there is any
conflict between a provision of this Agreement and a law or
governmental regulation the latter shall prevail and the affected
provision shall be limited only to the extent necessary to avoid the
conflict.
16.7. If any provision of this Agreement is held by a court of competent
jurisdiction and last resort to be unenforceable, the provision shall
be adjusted, if possible, rather than voided to achieve the intent of
the parties. In any event, all other provisions of this Agreement
shall be deemed valid and enforceable to the fullest extent possible.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective authorized representatives as of the dates written below.
THE PUBLIC HEALTH RESEARCH
INSTITUTE OF THE CITY OF
NEW YORK, INC.
By: /s/ Louis M. Weinstein
-------------------------------------
Title: President
----------------------------------
Date: 7/14/94
-----------------------------------
GENE-TRAK, INC.
By: /s/ John L. Bishop
-------------------------------------
Title: President
----------------------------------
Date: 7/14/94
-----------------------------------
/s/ [ILLEGIBLE] 7/14/94
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As between PHRI and MGH and pursuant to the December 10, 1993 Agreement between
them attached hereto as Appendix III, MGH approves this Agreement. Further, in
consideration for the various benefits it receives hereunder, MGH accepts its
various obligations herein including those under Paragraphs 8.1, 8.2, 8.11 and
11.7 - 11.13.
THE GENERAL HOSPITAL CORPORATION
By: /s/ Marvin C. Guthrie
------------------------------------------
Title: Director
Office of Technology Affairs
---------------------------------------
Date: 7/15/94
----------------------------------------
Acknowledged and Agreed to:
/s/ Fred Russell Kramer / July 14, 1994
- ------------------------------------------------
Fred Russell Kramer Date
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APPENDIX I
Research Program
Amplification Methods Using QB Replicase
Research will be conducted at PHRI in the field of diagnostic assays that
utilize QB amplification. The anticipated topics to be investigated are listed
below. These may be modified during the course of the Research Program, by PHRI
in collaboration with GENE-TRAK, taking into account experimental results
obtained during the course of the research and strategic decisions regarding the
development and commercialization of the technology made by GENE-TRAK.
PHRI's primary goals for the first 6 months of the Research Program will be
directed at identifying and exploring the critical performance parameters of the
binary probe ligation system described in US serial No. 08/004,993 by Tyagi to
assist GENE-TRAK in making its initial evaluation of the commercial viability of
the system. These are indicated by the designation, (*), on the list of "Likely
Research Topics," below. Goals for the second 6 months of the Research Program
will be defined following the initial commercial viability evaluation, but will
include the following general types of activities: 1) more detailed evaluation
of options for controlling and implementing critical assay steps, 2) evaluation
of the generalizability of the assay format, including the development of a
number of different model systems, and 3) optimization of a specific model assay
which may be used as the first commercial product utilizing the binary probe
ligation technology, and likely will include a number of the specific topics
listed below.
LIKELY RESEARCH TOPICS
1. Characterization of binary probes
a. Effect of different nucleotides at the ligation junction on ligation
efficiency
b. Effect of probe length on target specificity
c. Effect of mismatches at the ligation junction on the ability to detect
allelic differences
2. Improvements in binary probe synthesis
a. Synthesis of probes by transcription from cloned vectors *
b. Use of different nucleotides and dinucleotides as initiators of probe
transcription
1
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(Appendix I, cont'd)
3. Analysis of assay design
a. Determination of the efficiency of each stop in the assay *
b. Determination of which assay parameters most affect background
reactions, such as replication of unligated probes, retention of
unhybridized probes and target-independent ligation *
c. Determination of the factors that govern the efficiency of release of
probe-target hybrids by digestion with ribonuclease H (e.g., geometry
of capture probes)
d. Determination of the effect of buffer concentration, nucleotide
concentration, replicase concentration, and magnesium ion
concentration on the rate of replication and the generation of
background signals
4. Determination of the effect of different sample matrices on the sensitivity
of the assay
a. Effect of lymphocytes on the HIV-1 assay
b. Effect of sputum on MYCOBACTERIUM TUBERCULOSIS assays
5. Development of a binary probe assay that determines the drug sensitivity of
M. TUBERCULOSIS from a sputum sample within 3 days
a. Preparation of probes against M. TUBERCULOSIS messenger RNAs that are
synthesized in response to cell division
b. Determination of the turnover rate of the messenger RNA targets
6. Preparation of binary probes (and capture probes) specific for pathogenic
viruses
a. HIV-1, HIV-2, HTLV-1, and HTLV-3
b. Hepatitis C virus
GENE-TRAK will provide to PHRI such proprietary reagents and equipment as
GENE-TRAK deems necessary to carry out the Research Program and which are
generally unavailable from commercial sources. Such reagents will include QB
replicase enzyme and may include various GENE-TRAK proprietary buffers. Such
equipment will include a magnetic separation device.
2
<PAGE>
(Appendix I, cont'd)
Budget And Personnel
1st 6 mo. 2nd 6 mo. 2nd year
--------- --------- --------
Fred Kramer, Ph.D. (50%)
Sanjay Tyagi, Ph.D. (50%)
Mounssef Tazi, M.S. (50%)
David Zhang, M.D., Ph.D. (100%)
Summer Student
Benefits
Supplies
Equipment
Travel
Miscellaneous
Indirect Costs
Renovation of Lab
Debt Repayment
Carryover
Total $ $ $
The budget for the 3rd year of the Research Program will total $_________ as
provided for in paragrah 5.4 of the Research and License Agreement and will be
developed, along with the work plan as specified in paragraph 2.4(f) of the
Research and License Agremeent, prior to initiating the third year of the
Research Program.
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APPENDIX II
REPLICATION OF PHRI RESULTS
AND
TRANSFER OF LICENSED TECHNOLOGY TO GENE-TRAK
The objectives of this series of experiments is to verify the replicatability of
the binary probe ligation methods described in US Serial No. 08/004,993 by
Tyagi, and to transfer the technology to GENE-TRAK personnel so that they may
expeditiously initiate an evaluation of the commercial viability of the
technology. This appendix also specifies the criteria to be used in judging the
successful outcome of the procedures referred to in the attached RESEARCH AND
LICENSE AGREEMENT at Paragraphs 2.4(a) and (b) and 5.2.
1. As soon as practical after the Effective Date, Sanjay Tyagi and Mounssef
Tazi of PHRI and designated GENE-TRAK scientists will carry out, in
parallel or in succession, a set of experiments at GENE-TRAK that are based
on experiments originally carried out at PHRI. These experiments,
utilizing binary probes specific for HIV-1 RNA, are designed to demonstrate
that an assay can be carried out that is able to detect as few as 100
molecules of HIV-1 RNA and that, in the absence of HIV-1 RNA, the assay
gives no signal (background).
Assays will be run against at least 24 different samples containing 100
molecules of HIV-1 RNA transcript, at least 24 different samples containing
1,000 molecules of HIV-1 RNA transcript, and at least 24 different samples
containing no (zero) molecules of HIV-1 RNA transcript.
2. Immediately after the Effective Date, Dr. Tyagi will give GENE-TRAK
scientists written protocols that will enable them to prepare or purchase
their own binary probes, capture probes, target transcripts, enzymes,
reagents, and buffer solutions required to carry out the experiments
described in Paragraph 1. Dr. Tyagi also will provide such oral
instructions and guidance as he deems necessary to enable GENE-TRAK
scientists to successfully perform these experiments.
3. GENE-TRAK will pay the travel, room and board expenses reasonably incurred
by Dr. Tyagi and Mr. Tazi in carrying out these experiments upon receipt of
a written expense report specifying such expenses.
1
<PAGE>
(Appendix II, cont'd)
4. Successful performance of the experiments shall be based on the outcome of
the experiments carried out by GENE-TRAK scientists with GENE-TRAK reagents
and shall mean:
a) that at least 18 of 24 (75%) samples containing 100 target molecules
give a positive signal within a 30 minute amplification period, and
b) that at least 22 of 24 (92%) samples containing 1,000 target molecules
give a positive signal within 30 minute amplification period, and
c) that no more than 2 of the 24 (8%) samples containing no target
molecules give a positive signal within a 30 minute amplification
period.
All amplification reactions yielding a signal will be subjected to gel
analysis to determine whether the amplification product arises from
replication of the ligated probe. Experiments will be deemed 'failed
attempts' if more than 20% of no-target controls run without reporter probe
fragments (no-probe controls) produce signal. An experiment will be deemed
a 'successful attempt' (as distinct from a successful outcome) if less than
20% of such no-probe controls produce signal. In the case of less than 20%
contamination, the frequency of such contamination in no-probe controls may
be subtracted from the frequency of false-positives (no-target controls
with probe) to meet the criteria of successful performance established
above in 4.c. In the event of a 'failed attempt' due to contamination, the
experiment shall be repeated with new reagents and/or equipment and/or in a
different location (within GENE-TRAK) as deemed appropriate.
5. GENE-TRAK and PHRI will utilize their best efforts to successfully perform
the experiments as described in Paragraph 1 and 4 as soon as possible.
6. While at GENE-TRAK, Dr. Tyagi and Mr. Tazi also will perform binary probe
ligation assays demonstrating: 1) the capability of the HIV-1 to detect
HIV-1 RNA in the presence of uninfected human lymphocytes, and 2) the
capability of the MYCOBACTERIUM TUBERCULOSIS assay to detect MYCOBACTERIUM
TUBERCULOSIS rRNA. These assays shall not be considered replication
experiments for purposes of the RESEARCH AND LICENSE AGREEMENT.
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APPENDIX III
AGREEMENT
This Agreement, effective the day last executed by either party, is between
THE GENERAL HOSPITAL CORPORATION doing business as MASSACHUSETTS GENERAL
HOSPITAL (hereinafter "MGH") AND THE PUBLIC HEALTH RESEARCH INSTITUTE OF THE
CITY OF NEW YORK, INC. (hereinafter "PHRI").
WHEREAS, PHRI and MGH have pursued research directed to improved nucleic
acid hybridization assays;
WHEREAS, most of that research has been performed solely at PHRI, but some
has been performed by Paul Lizardi and Jack Szostak at MGH under a consortium
arrangement between PHRI and MGH that was supported by a National Institutes of
Health grant to Fred Kramer at PHRI;
WHEREAS, such research has led to inventions claimed in three patent
applications, recently filed, one of which is jointly owned by MGH and PHRI;
WHEREAS, PHRI desires to be able to offer its rights in the inventions
claimed in the patent applications and any patents issuing thereon, to potential
licensees, including a potential exclusive licensee, and MGH desires to be able
to offer its rights in the jointly owned patent application and patents(s)
issuing thereon; and
WHEREAS, PHRI and MGH desire to share income from the jointly owned
invention, and patents thereon, if any, in an equitable manner.
NOW, THEREFORE, the parties agree as follows:
1. The jointly owned invention (hereinafter "the A39 invention") is the
subject of a U.S. patent application, USSN 08/005,893, filed January 15, 1993 by
PHRI's patent attorneys, Davis, Hoxie, Faithful and Hapgood. The inventors of
the A39 invention are Paul Lizardi, Sanjay Tyagi, Ulf Landegren, Fred Kramer and
Jack Szostak.
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2. The A39 invention is or will be jointly assigned to PHRI and MGH as
follows: Tyagi, Landegren and Kramer will assign their interests to PHRI;
Szostak will assign his interest to MGH; and Lizardi will assign 50% of his
interest to PHRI and 50% of his interest to MGH.
3. MGH appoints PHRI its sole and exclusive agent to prosecute U.S.
application 08/005,893, claiming the A39 invention and any foreign counterparts,
including continuations, division or extensions, and to maintain any and all
patents issuing therefrom. MGH will be consulted on all prosecution matters.
Should PHRI elect at any time not to file, prosecute or maintain any U.S. or
foreign application or patent, MGH may do so at its own expense and for its own
account, subject to pre-existing licenses, and PHRI will assign its interest in
said application or patent to MGH.
4. MGH and PHRI represent that they have the right and ability to grant
an exclusive worldwide license to their respective rights in the A39 invention.
MGH has identified three pending U.S. patent applications, assigned in whole or
in part to MGH, believed to be the only U.S. applications assigned to MGH,
besides the A39 application, pertaining to the use of ribozymes (hereinafter
"the MGH Ribozyme Applications"). MGH requested an opinion from patent counsel
as to whether the A39 invention can be practiced without infringing the claims
of any of the MGH Ribozyme Applications, and patent counsel has advised MGH
that the A39 invention can be practiced without infringing the MGH Ribozyme
Applications. MGH therefore represents to the best of its knowledge and belief
that the MGH Ribozyme Applications will not impair significantly the commercial
development or use of the A39 invention by a licensee who does not have a
license to the MGH Ribozyme Applications. MGH agrees that, if a licensee shows
to MGH's reasonable satisfaction that development or use of the A39 invention is
significantly impaired by one or more of the MGH Ribozyme Applications, MGH
will, at PHRI's request, use reasonable efforts to obtain for the licensee a
non-exclusive license or sub-license to any such MGH Ribozyme Application,
subject to existing obligations to third party licensees or sponsors of research
at MGH.
5. MGH appoints PHRI its sole and exclusive licensing agent for the A39
invention, including applications and patents thereon.
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6. The parties intend that the A39 invention be successfully and
diligently commercially developed and used to the good of humankind. To that
end the parties agree to share patenting expenses and licensing income, as
follows:
a. PHRI will file, prosecute and maintain U.S. and foreign
applications for the A39 invention and patents issuing thereon subject to
paragraph 3 above. Unreimbursed patent expenses of either party for the A39
invention shall be equally shared by the parties.
b. PHRI will seek to license the A39 invention and applications and
patents claiming the A39 invention. The invention may be licensed individually
or in combination with other PHRI owned inventions, exclusively or
non-exclusively. Any license agreement or amendment thereto that includes the
A39 invention or any application or patent thereon shall be approved by MGH,
such approval not to be unreasonably withheld.
c. License income shall be apportioned and shared between PHRI and
MGH as follows:
(1) First, to reimburse PHRI's and MGH's out-of-pocket
patenting and licensing expenses, which shall not include
internal expenses or institutional overhead; then as follows
in (2) and (3) as appropriate.
(2) If license income is attributable to a specific product
which, but for the license of the A39 invention, would
infringe a pending or issued claim covering the A39
invention by its manufacture, use, or sale, (an "A39
product") the portion of such license income attributable to
the A39 invention shall be shared 50% PHRI and 50% MGH.
Unless otherwise agreed, if the manufacture, use or sale of
an A39 product would, but for the licenses granted under a
particular license agreement, infringe more than one patent
or patent application licensed therein, each shall be
assumed to be of equal value.
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(3) If license income is not attributable to a specific
product but rather results from a license agreement which
covers several patents or patent applications, one of which
is the patent or patent application claiming the A39
invention, then the portion of such non-product specific
license income attributable to the A39 invention shall be
shared 50% PHRI and 50% MGH. Unless otherwise agreed, if
more than one patent or patent application is included in a
particular license agreement, each shall be assumed to be of
equal value.
d. The parties will consult with one another regarding defense of
patent rights and prosecution of infringes, to the extent these matters are
not covered by a license to a third party. If the parties agree to proceed
with a defense or prosecution, expenses and recovery will be shared 50% by
PHRI and 50% MGH. If the parties do not agree, the party wishing to defend
or proceed (hereinafter "the Paying Party") will decide the course of action,
and will proceed at its own expense. The Paying Party shall keep the other
party informed of the progress of such proceedings and said other party shall
be entitled to counsel in such proceedings at its own expense. Any award
paid by third parties as the result of such proceedings (whether by way of
settlement or otherwise) shall first be applied to reimbursement of the
unreimbursed legal fees and expenses incurred by either party and then the
remainder shall be divided between the parties as follows: seventy-five
percent (75%) to the Paying Party and twenty-five percent (25%) to the other
party. Each party agrees to cooperate with the other in defense or
prosecution proceedings whether or not such party agrees to share the cost of
such proceedings.
7. PHRI will account to MGH under this Agreement on a quarterly
basis, with a report, any invoice for expenses, and payment of any royalty share
to be submitted, within 30 days after each quarter. MGH will reimburse PHRI for
expenses invoiced within 60 days of receipt of an invoice.
8. Each party will share its income under this Agreement with its
inventors and/or their laboratories according to its own policy. For purposes
of this paragraph 8 Kramer, Lizardi, Tyagi, Landegren and all other PHRI
employees
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will be considered PHRI inventors only, and Szostak and all other MGH employees
will be considered MGH inventors only.
9. This Agreement will continue until the last-to-expire of any patent
claiming the A39 invention or the last to terminate of any license thereon,
whichever is later.
10. If a licensee of a patent or patent application claiming the A39
invention wishes to enter into a research agreement with either party or a
consulting agreement with any individual inventor named in said patent or patent
application, that shall be separate and apart from this Agreement, and no
payment thereunder will be considered revenue from licensing or otherwise
subject to sharing under this Agreement.
11. Any notice required under this Agreement will be considered given one
day after such notice, properly addressed and shipped overnight service, is sent
by either party.
Copies of all correspondence related to this Agreement will be sent by either
party, properly addressed and mailed, to the parties listed below.
PHRI:
The Public Health Research Institute
455 First Avenue
New York, NY 10016
Attn.: President
MGH:
Massachusetts General Hospital
Office of Technology Affairs
13th Street, Bldg. 149
Charlestown, MA 02129
Attn.: Director
12. This Agreement constitutes the entire agreement between the parties
regarding the subject hereof. It may be amended only by written agreement
signed by both parties.
13. This Agreement will be interpreted in and according to the laws of the
State of New York.
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14. The provisions of this Agreement are separable, and in the event that
any of its provisions are determined to be invalid or unenforceable by a court
of competent jurisdiction, such validity or unenforceability shall not effect
the validity or enforceability of the remaining provisions.
IN WITNESS WHEREOF, the parties have hereto set their hands on the date(s)
given below, and each signer warrants that he is empowered and authorized to
execute this Agreement.
THE GENERAL HOSPITAL CORPORATION THE PUBLIC HEALTH RESEARCH
INSTITUTE OF THE CITY OF NEW
YORK, INC.
Date: 12/10/93 Date: 12/2/93
----------------------- ----------------------
By: /s/ Marvin C. Guthrie By: /s/ Louis M. Weinstein
-------------------------------- --------------------------------
Marvin C. Guthrie
Director
Title: Office of Technology Affairs Title: President
----------------------------- -----------------------------
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EXHIBIT 10.10a
July 18, 1994
Public Health Research Institute The Massachusetts General Hospital
455 First Avenue Office of Technology Affairs
New York, New York 10016 Bldg. 149, Suite 1101
Thirteenth Street
Attention: President Charlestown, MA 02129
Attention: Director
Research And License Agreement
Between GENE-TRAK, Inc., PHRI and MGH
- -------------------------------------
Gentlemen:
Following execution of the subject agreement on July 14, 1994 by GENE-TRAK,
Inc., the Public Health Research Institute (PHRI) and The Massachusetts General
Hospital (MGH), it has been brought to our attention that Subparagraph 5.9(b)
incorrectly refers to running royalties and Paragraph 5.5 instead of minimum
annual royalties and Paragraph 5.6 as was intended by the parties and as is
necessary to make Subparagraph 5.9(b) truly meaningful. Accordingly, in
consideration for the benefit all parties will obtain in replacing the present
Subparagraph 5.9(b) with Subparagraph 5.9(b) as it was intended to be, we
propose the following:
Subparagraph 5.9(b) of the Research And License Agreement between the parties
executed July 14, 1994 shall be deleted in its entirety and replaced by the
following new Subparagraph 5.9(b):
(b) In the event (i) no claim has issued in an Initial Patent or (ii) all
such claims as have issued have been held invalid by a court of
competent jurisdiction and last resort; the minimum annual royalties
specified in Paragraph 5.6 herein shall be reduced by thirty-seven and
one half percent (37.5%) for years 7-10 as specified in Paragraph 5.6
until such a claim issues from Initial Patents in the United
States at which time minimum annual royalties shall be fully restored
to the rate specified in Paragraph 5.6.
<PAGE>
Public Health Research Institute The Massachusetts General Hospital
July 18, 1994
Page 2
If PHRI and MGH are agreeable to the new Subparagraph 5.9(b) proposed herein,
please arrange for an appropriate person from each organization to signify its
agreement by executing this letter agreement and the duplicates enclosed
herewith.
Very truly yours,
GENE-TRAK, INC.
By: Jeffrey Klinger
------------------------------------
Title: Vice President & General Manager
---------------------------------
Date: 8/1/94
----------------------------------
I hereby confirm agreement to the foregoing:
PUBLIC HEALTH RESEARCH INSTITUTE
By: Lewis M Weinstein
----------------------------------
Title: President
----------------------------------
Date: 8/3/94
----------------------------------
THE MASSACHUSETTS GENERAL HOSPITAL
By: Marvin Guthrie
----------------------------------
Title: Vice President, Patents, Licensing & Sponsored Research
---------------------------------------------------------
Date: 8/12/94
----------------------------------
<PAGE>
Final version 28 June 1995
CONTENTS
Section 1 Definitions page 1
Section 2 Appointment 2
Section 3 Not to Offer Products Outside of Japan 4
Section 4 Fujisawa Obligations 4
Section 5 Vysis Obligations 6
Section 6 Consideration for Exclusive Japanese
Marketing Rights 9
Section 7 Japanese Regulatory Approvals and Costs 9
Section 8 Orders 10
Section 9 Delivery and Title 11
Section 10 Pricing, Invoicing and Payment 12
Section 11 Warranties, Liabilities and Claims 15
Section 12 Vysis Trademarks and Trademarks 17
Section 13 Terms of Agreement/Termination 19
Section 14 Japanese Patent or Trademark Infringement 21
Section 15 Independent Contractor 22
Section 16 Assignment 22
Section 17 Waiver 22
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Final version 28 June 1995
Section 18 Language of Agreement 23
Section 19 Governing Law and Dispute Resolution 23
Section 20 Confidentiality 24
Section 21 Notices 24
Section 22 Entirety of Agreement and Modifications 25
Section 23 Force Majeure 25
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Final version 28 June 1995
EXCLUSIVE DISTRIBUTOR AGREEMENT
THIS AGREEMENT (the "Agreement") is made effective as of the 31st day of July,
1995, by and between VYSIS, INC., a company organized under the laws of the
State of Illinois, U.S.A. and having its principal office at 3100 Woodcreek
Drive, Downers Grove, Illinois, U.S.A. 60515 ("Vysis") and FUJISAWA
PHARMACEUTICAL CO., LTD., a company organized under the laws of Japan and having
its principal office at 4-7, Doshomachi 3-chome, Chuo-ku, Osaka 541 Japan
("Fujisawa").
Vysis and Fujisawa agree as follows:
1. Definitions
In this Agreement the following terms shall be defined as follows:
(a) Products - The products of Vysis as listed in Schedule 1 (attached and
incorporated herein) and designed for use in the research or management of
genetic diseases.
(b) Vysis Patent Rights - (1) Any Japanese patent applications, and any
patents issuing therefrom, which cover diagnostic-related products for the Field
of Use and are filed by Vysis or are licensed exclusively to Vysis during this
Agreement and (2) the pending Japanese patent applications listed in Schedule 2
(attached and incorporated herein.)
(c) Clinical Diagnostics - all uses of Products in the Field of Use in the
diagnosis of disease in humans which require the Japanese government's
regulatory approval to market the Products for such uses.
(d) Research - all applications of IN VITRO Products in the Field of Use
other than those specifically designated for clinical diagnostic use and
approved by regulatory agencies (such as
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Final version 28 June 1995
Final version 28 June 1995
Koseisho).
(e) Field of Use - shall mean use of Products in the Research and Clinical
Diagnostics markets for the screening, diagnosis, prognosis, monitoring, etc. of
genetic disease and predisposition and cancer in humans.
(f) Contract Year - each twelve month period January 1 to
December 31, with the exception of 1995, which shall be adjusted for the start
date of this Agreement.
2. Appointment
(a) Vysis hereby appoints Fujisawa as its exclusive distributor in Japan to
promote and extend the sale of the Products to customers located in Japan for
use in (1) the Research market and (2) the Clinical Diagnostics market; except
that Fujisawa is appointed only as a co-exclusive distributor for the Whole
Chromosome Paint Products until June 30, 1995, from which time such co-exclusive
appointment shall be changed to exclusive. Fujisawa hereby accepts the
appointment and agrees to purchase the Products for resale to customers in Japan
and to use its reasonable efforts to promote, develop, and increase the sale of
the Products for the Field of Use in the Research market and the Clinical
Diagnostics market in Japan.
(b) Fujisawa's continued appointment as an exclusive distributor in Japan
is conditioned upon Fujisawa's satisfaction of minimum Product purchase
obligations for each Contract Year during this Agreement. Fujisawa's minimum
purchase obligations for each Contract Year from 1995 through 1997 are listed in
Schedule 3 (attached and incorporated herein). Vysis and Fujisawa will agree
annually on the minimum purchase obligations for each Contract Year thereafter
by no later than two (2) months prior to the end of the preceding Contract Year.
If Fujisawa and Vysis fail to agree on the minimum purchase obligations for any
Contract Year after 1997,
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Final version 28 June 1995
then the minimum purchase obligations for Contract Year 1997 shall be used for
that Contract Year.
(c) If Fujisawa does not meet its minimum purchase obligations for a
Contract Year, then within sixty (60) days after the end of the Contract Year,
Vysis may, in its sole discretion and upon giving Fujisawa ninety (90) days
prior written notice either:
i) terminate the exclusive appointment of Fujisawa hereunder,
resulting in an appointment of Fujisawa as a non-exclusive
distributor in Japan hereunder, or
ii) terminate this Agreement.
Provided, however, that:
i) if Fujisawa demonstrates the reasonableness of the failure to meet its
minimum purchase obligations, Vysis shall not exercise the above
right, and
ii) if the exclusive appointment of Fujisawa hereunder is converted to the
non-exclusive one and Vysis grants to such third party nonexclusive
distributor in Japan any term and condition more favorable than those
provided herein, then such more favorable term and condition shall be
thereafter applicable to Fujisawa.
(d) During the period for which its appointment hereunder is exclusive,
unless otherwise agreed upon between Vysis and Fujisawa, Fujisawa shall not
manufacture, distribute or sell in the Research or Clinical Diagnostics markets
any other nucleic acid-based diagnostic products capable of hybridization to any
gene, mRNA or chromosome, instrument or software which directly compete with
Products in the Field of Use. Fujisawa's obligations in this paragraph shall not
apply to any reagent product, instrument or software which have been distributed
and marketed by Fujisawa as
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Final version 28 June 1995
of the beginning date described in the first sentence of this Agreement.
(e) During the period for which Fujisawa's appointment is exclusive, Vysis
agrees (1) not to appoint any other distributor for Products for the Field of
Use in the Research and Clinical Diagnostics markets in Japan, (2) not to sell
any Product to any third party for use or for soliciting orders or seeking
customers for the Products in the Field of Use in Japan, and (3) not to grant
any license under Vysis Patent Rights in the Field of Use. Vysis' performance
of its existing Agreement with Life Technologies, Inc. for worldwide
distribution of Whole Chromosome Paint Products, which expires on June 30, 1995,
shall not be deemed a breach of these obligations.
3. Not to Offer Products Outside Japan
Subject to the requirements of applicable laws and regulations, Fujisawa shall
not directly or indirectly (a) solicit orders or seek customers for the Products
outside Japan, nor (b) sell Products outside Japan.
4. Fujisawa Obligations
(a) Fujisawa shall at all times use its reasonable efforts to promote,
develop, and increase the sale of the Products to customers within Japan and
generally to enhance the reputation of the Products and of Vysis. For these
purposes, Fujisawa shall meet its minimum purchase obligations as referred to in
Paragraph (b) of Section 2 hereof and shall, at its cost and expense use its
reasonable efforts to:
(1) maintain in its inventory in Japan the Products under suitable
storage conditions, which include cold storage for all reagent Products. Such
inventory and storage conditions may be verified by periodic visits with
reasonable prior written request by
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Final version 28 June 1995
Vysis to Fujisawa no more often than once each Contract Year during normal
business hours by a Vysis representative;
(2) provide adequate qualified personnel and equipment to perform its
duties and obligations described herein;
(3) make its personnel available at its expense to attend Vysis
training sessions held in English to ensure that its personnel have the skills
and knowledge to perform its duties and obligations described herein. The
parties will agree upon the location for and number of training sessions to be
held;
(4) hold technical training seminars in Japan at such frequency as
agreed upon from time to time between Vysis and Fujisawa for customers on use of
Products as considered necessary or appropriate to hold such seminars;
(5) provide its customers Product price lists and Japanese translations
of Vysis promotional and technical literature, such as Operator's Manuals,
advertising brochures with artwork supplied by Vysis, sales literature, point of
sales literature, and Japanese extensions of promotional programs of Vysis;
(6) subject to the provision of Paragraph (a) of Section 11 hereof,
provide its customers with suitable installation of systems and upgrades,
technical service, repair and spare part replacement services for Products;
(7) provide Vysis before the start of each calendar quarter, beginning
October 1, 1995, with a twelve (12) month rolling forecast of its requirements
for the Products;
(8) provide Vysis opportunities at Vysis' cost and expense to meet with
Japanese customers and thought leaders in the Research and Clinical Diagnostics
markets together with Fujisawa personnel when requested by Vysis;
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Final version 28 June 1995
(9) provide Vysis an annual sales and marketing report, including (i)
analysis of the state of the Research and Clinical Diagnostics markets in Japan,
(ii) a summary of its sales of Products by customer and wholesaler, (iii)
competitor activity and (iv) a listing of new applications for Products;
(10) provide written notification to Vysis within thirty (30) days of
any material change to the organization, personnel, or structure of Fujisawa or
any transfer of a material portion of Fujisawa's assets which could at
Fujisawa's sole judgement materially impact on Fujisawa's obligations hereunder;
(11) provide Vysis promptly after filing with copies of all new original
Japanese patent applications which are filed by Fujisawa or licensed to Fujisawa
during this Agreement which cover Product-related inventions in the Field of
Use; and
(12) provide Vysis with scientific publications in the Field of Use by
or funded by Fujisawa and related to Products.
5. Vysis Obligations
(a) Vysis, at its cost and expense, shall:
(1) provide Fujisawa in writing within thirty (30) days following the end
of each half year of each Contract Year with semi-annual updates of its planned
new diagnostic-related product introduction schedule;
(2) introduce to Fujisawa any and all of its new reagent products designed
for use in research or management of genetic disease, and instrument and
software products used for image analyses, detection and/or enumeration of such
reagent products by providing Fujisawa with (i) catalog, (ii) promotional
materials, (iii) Price List, and (iv) product data sheets for such reagent
products,
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Final version 28 June 1995
instruments and software within sixty (60) days of Vysis' introduction in the
USA of such products for the Field of Use into the Research or Clinical
Diagnostics markets and grant Fujisawa a first refusal right to list any of such
products in Schedule 1. If Fujisawa exercises such first refusal right in
writing on any of such products ("Exercised Products"), such Exercised Products
shall be automatically included in Schedule 1. If Fujisawa does not exercise
within ninety (90) days of date of introduction to Fujisawa such first refusal
right in writing on any of such products ("Refused Products"), Vysis may
thereafter offer and sell such Refused Products to any third party in Japan;
(3) provide Fujisawa with copies of its English language promotional
material and with at least sixty (60) days advance notice of the details and the
start of Vysis U.S. promotional programs for all Products;
(4) provide Fujisawa with artwork from its U.S. promotional material for
use in preparing Japanese promotional materials;
(5) provide the instructors and English materials for training sessions for
Fujisawa personnel in the U.S. as mutually agreed upon. For training provided
by Vysis upon Fujisawa's request in Japan, Fujisawa will reimburse Vysis for the
travel expenses for Vysis personnel;
"Travel expenses" shall mean:
i) a minimum of business class airfare,
ii) an ordinary train transportation in Japan,
iii) reasonable hotel costs associated with a business class hotel, and
iv) reasonable other living expenses.
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Final version 28 June 1995
Such travel expenses to be reimbursed by Fujisawa shall in no event include such
Vysis personnel's personal expenses and benefits including, but not limited to,
the salaries, insurance and contributions to the retirement plan of such Vysis
personnel.
Vysis shall bill to Fujisawa such travel expenses together with supporting
documents and invoices and Fujisawa shall pay to Vysis such travel expenses
within thirty (30) days following receipt by Fujisawa of said bill if Fujisawa
has confirmed the reasonableness of such bill.
(6) provide Fujisawa promptly after filing with copies of all new original
U.S. patent applications and its equivalent Japanese patent applications which
are filed by Vysis or licensed to Vysis during this Agreement and cover
diagnostic-related inventions in the Field of Use and/or relate to the Products;
(7) provide Fujisawa with copies of scientific publications in the Field of
Use by Vysis or funded by Vysis;
(8) provide Fujisawa within thirty (30) days following the end of each
Contract Year with an annual research progress report on its diagnostic
research efforts in the Field of Use and will provide a written mid-year summary
update. If both parties consider it necessary, Vysis and Fujisawa shall also
hold from time to time technical exchange meetings to exchange and discuss each
party's relevant research information on products for the Research and Clinical
Diagnostics markets in the Field of Use. All costs incurred by each party for
attendance at the technical exchange meetings shall be borne by such party; and
(9) file, prosecute, and maintain Vysis Patent RIghts; provided that Vysis
shall have the right to abandon prosecution or maintenance of any Japanese Vysis
Patent Rights upon sixty (60) days prior written notice to Fujisawa. If Fujisawa
thereafter
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Final version 28 June 1995
requests within sixty (60) days of the date of the Vysis notice, that Vysis
continue to prosecute or maintain the Vysis Patent Rights of which Vysis wishes
to abandon prosecution or maintenance, then Vysis and Fujisawa shall discuss and
agree how to deal with the matter.
6. Consideration for Exclusive Japanese Marketing Rights
In consideration of its appointment as Vysis' exclusive distributor of
Products in Japan for the Research and Clinical Diagnostics markets, Fujisawa
agrees to pay to Vysis, subject to the provision of Paragraph (e) of Section 13
hereof, Three Million U.S. Dollars (US $3,000,000), to be used by Vysis at its
discretion in support of its on-going research and clinical trials on the
Products. Fujisawa shall pay this amount to Vysis by making five annual
marketing payments of Six Hundred Thousand U.S. Dollars (US $600,000), with the
first payment paid on signing of this Agreement and the remaining payments due
annually thereafter on each anniversary of the signing of this Agreement
(Marketing Payments).
7. Japanese Regulatory Approvals and Costs
(a) Fujisawa agrees to use its reasonable efforts to obtain regulatory
approval for the sale of such Products as selected pursuant to Paragraph (b) of
this Section in Japan for Clinical Diagnostics.
(b) Vysis and Fujisawa will cooperate in determining which Products
will be selected for obtaining Japanese regulatory approval for Clinical
Diagnostics.
(c) Fujisawa shall be responsible for all costs associated with
obtaining regulatory approval for Clinical Diagnostics of such Products as
selected pursuant to Paragraph (b) of this Section in Japan.
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Final version 28 June 1995
(d) Vysis shall provide reasonable assistance to Fujisawa in obtaining
regulatory approval for the sale of such Products as selected pursuant to
Paragraph (b) of this Section for Clinical Diagnostics in Japan and will
provide Fujisawa free of charge with English language copies of all data related
to obtaining approval from the U.S. FDA which Vysis obtains on Products
provided, however, that at least the data on storage conditions and expiration
dating shall be in conformity with the requirements of Koseisho. If the data
provided to Fujisawa is insufficient for obtaining said regulatory approval for
the sale of such Products as selected pursuant to Paragraph (b) of this Section
because of requirements specific to Koseisho, Fujisawa will be responsible for
developing the necessary additional data at its own expense.
(e) Fujisawa will keep Vysis informed on the status of its Japanese
regulatory efforts, including at Vysis' request, a written annual report.
(f) Fujisawa will provide Vysis free of charge with copies of each IN
VITRO diagnostic application for obtaining regulatory approval for the sale of
such Products as selected pursuant to Paragraph (b) of this Section for Clinical
Diagnostics in Japan submitted to Koseisho and subsequently submitted data.
8. Orders
(a) Fujisawa shall place its orders to Vysis in accordance with Vysis'
existing procedures. Typographical and clerical errors shall be subject to
correction. Fujisawa and Vysis will review Vysis' existing order placement
procedures promptly after signing of this Agreement and will agree upon any
necessary changes. Fujisawa shall submit firm purchase orders for the Products
to Vysis not less than (i) sixty (60) days with respect to reagents, or (ii)
ninety (90) days with respect to instrumentation (including spare parts thereof)
and optical filters, in advance of the
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Final version 28 June 1995
date on which Fujisawa wishes the shipment from Vysis of the Products. Vysis
shall promptly acknowledge such orders and deliver all ordered Products as
instructed in such orders except that if Fujisawa places purchase orders with
delivery dates less than the sixty (60) or ninety (90) days as indicated above,
Vysis will use its best efforts to supply Products. All sales of Products shall
be made under the terms and conditions set forth herein and shall not be
modified or supplemented by purchase orders, shipping instructions, or any other
form containing terms at variance with or in addition to those provided herein.
(b) Fujisawa shall not cancel any of its firm purchase orders for the
Products, or return previously delivered Products without providing written
notice to Vysis and receiving the written consent of Vysis. Fujisawa shall pay
for all costs of any returns except for the Defective Products defined in
Paragraph (c) of Section II hereof.
(c) Vysis shall have the right to cease manufacturing and sale of any
Product upon ninety (90) days notice to Fujisawa and mutual agreement.
9. Delivery and Title
(a) Except as otherwise mutually agreed upon in writing, Vysis shall
deliver and Fujisawa shall accept the Products FOB Downers Grove, Illinois,
U.S.A. in accordance with Incoterms 1990. Title to and risk of loss of the
Products shall pass from Vysis to Fujisawa upon delivery of the Products FOB
Downers Grove in accordance with Incoterms 1990. Upon Fujisawa's request, Vysis
will arrange for freight to Japan and will invoice Fujisawa for such freight.
The term "delivery" and any connotation thereof wherever used in this Agreement
shall have the meaning as stated in this Section.
(b) Vysis will deliver Products with packaging and
11
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Final version 28 June 1995
shipping labels in English and in Japanese if requested by Fujisawa, together
with the certificate of analysis thereof. Fujisawa must provide the Japanese
translations necessary to fulfill this requirement.
10. Pricing, Invoicing and Payment
(a) Subject to the requirements of applicable laws and regulations, the
price to be paid by Fujisawa for reagent Products delivered during the first
three Contract Years of this Agreement shall be twenty-five percent (25%)
discount from Vysis' U.S. List Price for the ordered Products in effect at the
time of order placement. During the first three Contract Years of this
Agreement, instrument Products will be delivered at a discount from Vysis' U.S.
List Price for the ordered Products in effect at the time of order placement of
fifteen percent (15%) for the first four instruments ordered in a year or a
twenty percent (20%) discount for the fifth or greater instrument ordered in
that year. During the first three Contract Years of this Agreement, filter
Products will be delivered at a ten percent (10%) discount from Vysis' U.S. List
Price for the ordered Products in effect at the time of order placement.
The price to be paid by Fujisawa for Products delivered after the first three
years of this Agreement shall be mutually agreed to by Fujisawa and Vysis on an
annual basis before the end of each Contract Year to be effective on the
following April 1. Fujisawa and Vysis will begin negotiations over each annual
price at least sixty (60) days before the end of each Contract Year. If the
parties fail to agree upon a new annual price, the price shall remain at the
current percentage of the U.S. List Price.
Vysis and Fujisawa further agree:
(i) that the price to be paid by Fujisawa for any Product shall not be
increased through increase in the U.S. List Price by more than ten percent (10%)
in any one year of this Agreement unless due to
12
<PAGE>
Final version 28 June 1995
circumstances outside of Vysis' control and mutually agreed upon;
(ii) that any increases in the U.S. List Price for any Product made by
Vysis shall only apply to calculation of the purchase price hereunder if Vysis
provides written notice of the increase to Fujisawa by January 1 to be effective
for twelve months beginning the following April 1;
(iii) that, upon Fujisawa's request, Vysis shall negotiate in good faith
upon a discount for the purchase price for an order, except that Vysis shall not
be obligated to agree to any discount; and
(iv) that Vysis will provide free of charge to Fujisawa sample quantities
of kits of reagent Products for the Contract Years 1995 - 1997 as follows:
(1) for the Contract Year 1995, forty (40) twenty test equivalent kits
will be provided;
(2) for the Contract Year 1996, such quantities as are equivalent to
20% of the total purchase price of all reagent Products which Fujisawa
has ordered from Vysis for purchase during the Contract Year 1995, but
not to exceed eighty (80) twenty test equivalent kits will be
provided; and
(3) for the Contract Year 1997, such quantities as equivalent to 10%
of the total purchase price of all reagent Products which Fujisawa has
ordered for purchase from Vysis during the Contract Year 1996 will be
provided.
In addition to those, for any new reagent Exercised Products, two (2)
twenty test equivalent kits per each new reagent Executed Product will be
provided. Fujisawa at its discretion
13
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Final version 28 June 1995
shall select what Products will be considered the sample products under
this paragraph.
From time to time after the Contract Year 1997, Vysis agrees to favorably
consider, and discuss with Fujisawa in good faith, Fujisawa's reasonable
request, if any, for such free samples of reagent Products.
All taxes and duties including any income or other tax which are levied in
respect to the Products in Japan shall be for the account of and paid by
Fujisawa. Vysis shall invoice Fujisawa upon each shipment. Fujisawa shall pay
such invoices in U.S. Dollars in the invoice, without any deductions, to the
bank account Vysis directs. The obligation to make any such payments shall
survive termination of this Agreement.
Fujisawa shall be responsible for obtaining all applicable exchange control
approvals to make payments to Vysis hereunder.
(b) Payment of invoices will be due thirty (30) days from date of invoice,
which date shall in any event be on or after the date of shipment of the
Products in question, unless otherwise agreed to by Vysis on a case-by-case
basis before order acceptance. Any bank charges associated with letters of
credit, letters of guarantee or bid bonds for the Products hereunder will be
paid by Fujisawa.
(c) If Fujisawa fails to make payment to Vysis when due, Vysis shall have
the right to declare all other outstanding invoices immediately due and payable,
and Vysis also shall have the right to cancel deliveries agreed to but not yet
made. With respect to any amount not paid on or before the due date, Vysis may
charge Fujisawa: (1) interest on the overdue amount for the period from the
due date to the date said amount is paid, at a rate of eighteen percent (18%)
per annum; and (2) for all bank charges incurred by Vysis for any returned
check. This right to receive bank charges and interest on overdue amounts shall
be without prejudice to the right
14
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Final version 28 June 1995
of Vysis to seek collection of such amounts through judicial or other
proceedings.
11. Warranties, Liabilities and Claims
(a) Vysis warrants that the Products sold to Fujisawa hereunder shall meet,
at the time of delivery to Fujisawa, the specifications for the Products agreed
upon between Vysis and Fujisawa ("Specifications") set forth in Schedule 4.
This warranty to meet Product specifications shall remain in effect for each
class of Products as follows:
(i) for optical filter Products, three (3) months from the date of
delivery to Fujisawa;
(ii) for all other instrument Products, including software, one (1) year
from the date of installation (accepted by the customer following customer's
inspection) at the customer site; and
(iii) for reagent Products, until the date of expiration of the shelf life
for the particular Product shown on the Product label.
Vysis agrees that all reagent Products shipped to Fujisawa shall have, beginning
1 January 1996, at least ten (10) months or 50% of remaining shelf life,
whichever is greater, before the expiration date at the time of shipment,
provided, however, that Fujisawa accepts that (i) all reagent products shipped
to Fujisawa on or before December 31, 1995, and (ii) any reagent Exercised
Product shipped to Fujisawa within one (1) year after Vysis' introduction in the
U.S.A. of such reagent Exercised Product shall have at least six (6) months or
50% of remaining shelf life, whichever is greater, before the expiration date at
the time of shipment.
Vysis agrees with respect to those instrumentation and/or optical filter
Products (including spare parts thereof) originated by any
15
<PAGE>
Final version 28 June 1995
third party ("Originator") whose agent or distributor thereon exists in Japan,
to secure that Fujisawa and/or its customers may obtain from such agent or
distributor on substantially the same terms and conditions including the
maintenance services (including warranty service) as those which customers who
purchase such instrumentation (including spare parts thereof) and/or optical
filters can obtain directly from such Originator's agent or distributor. Vysis
further agrees with respect to any defective instrumentation (including spare
parts thereof) or optical filter Products other than those described above, to
secure that Vysis shall, or shall cause the Originator or its agent or
distributor to, make any and all necessary replacement, repairs, mending and
reconditioning (except those which Fujisawa may perform by itself). Any and all
costs and expenses to be incurred for such replacement, repairs, mending and
reconditioning of Defective Products shall be borne by Vysis (exclusive of labor
and travel costs and expenses for Fujisawa's employees) during such warranty
period as referred to in (i) and (ii) above of this Paragraph, and by Fujisawa
thereafter.
Vysis shall have the right at any time to change the Specifications in Schedule
4 upon thirty (30) days prior written notice to Fujisawa. In the event that
Vysis changes the Specifications for a Product on which Japanese regulatory
approval for Clinical Diagnostics has been obtained, Vysis agrees to continue to
provide Product under the original Specifications until Koseisho approves
Product under the new Specifications. Such new Specifications shall not apply to
deliveries of the Products made under orders accepted by Vysis before said
notice of such change of the Specifications.
VYSIS MAKES (1) NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE FOR PRODUCTS AND (2) NO WARRANTY OF RESULTS FROM CLINICAL DIAGNOSTICS
TRIALS OR FROM VYSIS RESEARCH, AND ANY WARRANTIES OTHER THAN THOSE EXPRESSLY
STATED IN THIS PARAGRAPH ARE EXCLUDED.
(b) Vysis shall not be responsible for results obtained by the
16
<PAGE>
Final version 28 June 1995
use of the Products either alone or in combination with other materials,
instruments or procedures.
(c) If Fujisawa has found that any quantity of the Products does not meet
the Specifications, Fujisawa agrees to claim such defective Products ("Defective
Products") to Vysis. All claims for the Defective Products shall be made in
writing within ninety (90) days from the date of delivery to Fujisawa's
customers, provided, however, in the event that any defect in the Products could
not have been reasonably identified by Fujisawa or its customer within the
ninety (90) day period, all claims for such Defective Products shall be made in
writing within thirty (30) days after Fujisawa or its customer becomes first
aware of such defect, but in any event prior to the expiration date of the
warranty period referred to in Paragraph (a) of this Section of these products.
Failure to file a claim within said period shall constitute a waiver of
Fujisawa's rights in respect of the Defective Products. Vysis shall not be
liable to Fujisawa for any claims for the Defective Products if the Products
have been repackaged by Fujisawa or not maintained under the storage conditions
specified above. Vysis' liability for the Defective Product shall be limited to
Fujisawa's option of repair or replacement of the Defective Product or refund of
the price paid by Fujisawa for the Defective Product. Vysis shall reimburse
Fujisawa for the expense of returning the Defective Product. In no event shall
Vysis' liability to Fujisawa for Defective Product exceed the price applicable
to the Product.
(d) Upon notice from Fujisawa, Vysis agrees to negotiate with Fujisawa for
changes in the Specifications which in Fujisawa's reasonable judgment are
necessary to comply with applicable Japanese laws and regulations.
(e) Neither party shall be liable to the other party for any consequential,
indirect or special damages, including loss of profits, arising from this
Agreement.
17
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Final version 28 June 1995
12. Vysis Trademarks and Tradenames
(a) Fujisawa shall offer the Products for sale as goods manufactured by
Vysis, and it shall offer the Products for sale only under such Vysis
trademarks, trade name, and/or brand names as separately agreed upon between
Vysis and Fujisawa ("Trademarks") and, if Fujisawa considers necessary or
appropriate, together with Fujisawa's company name and logo. Fujisawa shall
have the right to use "Vysis" and other Trademarks for Products in (i)
promotional material, etc. and (2) in Product packaging, including Japanese
labels for Products. Fujisawa shall not use the Trademarks as part of the
Fujisawa's own trade name or trademarks or in any other manner.
(b) Fujisawa and any of its subsidiaries, affiliates, agents of
representatives shall not during the term of this Agreement or thereafter
incorporate under, register, or otherwise make use of the word "Vysis" as a
name, or incorporate under, register, or otherwise make use of the Trademark.
(c) It is understood and agreed that the right to sell the Products under
"Vysis" and the Trademarks does not constitute, in any manner, a direct or
implied assignment of "Vysis" and the Trademarks.
(d) Vysis shall at its expense and responsibility file, prosecute and
maintain the Trademarks in Japan.
(e) Upon the expiration or termination of this Agreement for any reason
whatsoever, Fujisawa shall immediately cease using "Vysis" and the Trademarks.
Fujisawa also shall return at Vysis' expense to Vysis or dispose of as Vysis
indicates, all signs, decals and other promotional and advertising materials
carrying "Vysis" and the Trademarks. Fujisawa shall, if so requested by Vysis,
upon termination of this Agreement for any reason, promptly assign to Vysis or
its designated nominee any rights Fujisawa may have
18
<PAGE>
Final version 28 June 1995
acquired in "Vysis" and the Trademarks because of their use, operation of law,
or otherwise.
13. Term of Agreement/Termination
(a) The initial term of this Agreement begins on the date first set out
above, and terminates on the tenth anniversary of the beginning date described
in the first sentence of this Agreement. Thereafter, this Agreement shall be
renewed in five year extensions each time, unless terminated at any time during
the renewal period by either party upon at least one year prior notice.
(b) Vysis shall have the right to terminate this Agreement for cause at any
time by providing written notice to Fujisawa if any of the following events
occur:
(1) Fujisawa commits a material breach of any of the terms or conditions
of this Agreement.
(2) Fujisawa goes into bankruptcy, voluntary or involuntary liquidation
or winding up (other than a voluntary liquidation for the purpose of
amalgamation or reorganization), comes under judicial management, enters into a
settlement agreement or composition with its creditors, or takes or suffers any
similar action in consequence of debt or insolvency.
(3) Fujisawa's business, directly or indirectly, shall come under the
control of persons or entities different from those having ownership or control
of Fujisawa's business on the effective date of this Agreement.
(4) Fujisawa is prevented from performing its duties hereunder due to
any reason (except for such force majeure as referred to in Section 23 hereof)
for sixty (60) consecutive days or for a total period of one hundred twenty
(120) days in any one period of three hundred sixty-five (365) consecutive days.
19
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Final version 28 June 1995
(c) Upon termination of this Agreement for any reason, neither Vysis nor
Fujisawa shall be liable to the other party for any loss or damages whatsoever
sustained or alleged to have been sustained by reason of such termination
including, but not limited to, termination compensation, loss of profits or
goodwill indemnity. However, upon termination of this Agreement for any reason,
Vysis shall buy back at Fujisawa's original purchase cost instrumentation
(including spare parts thereof) and optical filters in Fujisawa's inventory
which are in saleable condition as mutually determined.
(d) Fujisawa shall have the right to terminate this Agreement at any time
effective upon one year prior written notice to Vysis or in the event of
termination of this Agreement by Fujisawa for the same cause as provided in
Paragraph (b) of this Section upon the date of notice to Vysis.
(e) Fujisawa shall have the right to terminate this Agreement upon sixty
days (60) written notice to Vysis upon:
(i) Vysis' failure to maintain Fujisawa as its exclusive Japanese
distributor of Products;
(ii) Vysis' failure to introduce to Fujisawa new Products introduced
by Vysis in the U.S., as set out in Section 5 (a) (2); or
(iii) Vysis' failure repeatedly over a six (6) month period to
provide Product within the specified delivery dates provided under
purchase orders as in Section 8, except for failure excused as Force
Majeure under Section 23.
If Fujisawa terminates the Agreement under any of the conditions in Paragraphs
(i), (ii), or (iii) above, Fujisawa is relieved of its obligations to make any
unpaid Marketing Payments as per Section 6.
(f) If this Agreement is terminated for any reason, except as set out in
Section 13 (e), before Fujisawa has paid to Vysis all of the Marketing Payments
set out in Section 6, Fujisawa shall pay to Vysis all of the remaining Marketing
Payments in one lump sum on
20
<PAGE>
Final version 28 June 1995
the date of termination.
(g) In the event of termination of this Agreement for any reason, upon
request by Fujisawa, Vysis shall, or shall cause its designated nominee to, take
over any and all maintenance services on the instrumentation (including spare
parts thereof) and optical filters to be required by the customers to which
Fujisawa has sold the same before such termination.
14. Japanese Patent or Trademark Infringement
(a) Vysis warrants that to the best knowledge of Vysis, there are no
issued Japanese patents and/or trademarks which would be infringed by the sale
of Products in Japan. If Fujisawa or Vysis learn of the issuance for opposition
purposes of a Japan patent or trademark raising infringement issues or if either
party receives a claim of patent or trademark infringement in Japan for sale of
Products in Japan or for export of Products to Japan, such party shall inform
the other party to that effect. In such event, the parties shall cooperate to
settle such patent and/or trademark infringement claim and Vysis shall indemnify
and hold harmless Fujisawa, its directors, officers, employees and agents from
and against any and all damages, liabilities, losses, costs, and expenses
(including reasonable attorney's fees) of any kind or nature resulting from such
patent and/or trademark infringement claim.
(b) If Fujisawa or Vysis learns that a third party is infringing any of
Vysis Patent Rights and/or the Trademark in Japan, such party shall inform the
other party to that effect. Vysis shall have the option to institute
proceedings for such infringement of Vysis Patent Rights and/or the Trademark at
its expense and responsibility. In such event, Fujisawa agrees to give a
reasonable assistance (excluding financial assistance) to Vysis and Fujisawa may
join such proceedings with its own counsel at its own expenses and seek its own
damages and other relief. If Vysis does not institute infringement proceedings
against such third party within
21
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Final version 28 June 1995
ninety (90) days after confirming that said third party appears to be infringing
any of Vysis Patent Rights and/or the Trademark, Fujisawa shall be entitled at
its expense to institute proceedings for the infringement of Vysis Patent Rights
and/or the Trademark. Vysis shall execute any necessary documents to enable
Fujisawa to take such proceedings, and shall make available all those relevant
records, papers, information and witnesses which may be in its employment or
possession and Vysis may join such proceedings with its own counsel at its own
expense and seek its own damages and other relief. If neither party choose to
join the other, any amount payable by said third party as a result of such
proceedings shall belong to the party which instituted such proceedings.
15. Independent Contractor
Either party hereto is an independent contractor in the performance of this
Agreement and is not an agent or employee of the other party. Either party
hereto shall have no power or authority to pledge the other party's credit, to
enter into any agreement on behalf of the other party, or to give any warranty,
representation, or guarantee on behalf of the other party.
16. Assignment
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party shall have the
right without such consent to assign this Agreement or any part hereof to any of
its Affiliates or to a successor or transferee of substantially all of its
assets. Any company shall be deemed an "Affiliate" of a party if, at the
relevant time during the term of this Agreement, the company directly or
indirectly controls, is controlled by, or is under common control with the
party. Control shall be deemed to be direct or indirect ownership of fifty
percent (50%) or more of the issued voting share capital of a company. Any
assignee pursuant to this Article shall have the same rights and be bound by the
same obligations as the assignor.
22
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Final version 28 June 1995
17. Waiver
Unless otherwise specified herein, the failure of either party to require
performance of any term or condition of this Agreement or the waiver by either
party of any breach of this Agreement shall not prevent a subsequent enforcement
of such term or condition and will not be deemed a waiver of any subsequent
breach.
18. Language of Agreement
The text of this Agreement and the Schedules shall be written in the
English language and only the English text shall have force and effect. All
notices described herein shall be in the English language.
19. Governing Law and Dispute Resolution
(a) The formation of this Agreement and the rights and obligations of the
parties hereunder shall be exclusively governed by and exclusively construed in
accordance with the laws of the State of Illinois, U.S.A., excluding any rule of
law which would direct application of the law of any other jurisdiction.
(b) The parties agree to work diligently towards resolving any dispute
arising under this Agreement, including referral of the dispute to senior
executives of each party for mutual discussion.
(c) Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled by binding arbitration by a single
arbitrator in accordance with the Arbitration Rules of the International Chamber
of Commerce in effect at the date of any arbitration, and judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Any such arbitration shall take place in Chicago,
Illinois if requested by Fujisawa and in Osaka, Japan if requested by Vysis and
shall be conducted in the English language. The parties shall agree
23
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Final version 28 June 1995
upon the arbitrator, or failing such agreement, the arbitrator shall be named in
accordance with the ICC Arbitration Rules.
20. Confidentiality
(a) Except as required for the performance of this Agreement, neither party
shall disclose to any third party or use any confidential information received
or acquired from the other party, including but not limited to, IN VITRO
diagnostic applications, marketing plans and methods, product pricing, product
designs, manufacturing process data, research data, inventions, trade secrets
and know how. Each party shall take all reasonable steps required to keep such
information strictly confidential, and shall take all necessary precautions to
prevent any disclosure of any such confidential information by any of its
employees or officers. Each party agrees to return any such information to the
other party at any time upon the request of the other party therefor. This
obligation of confidentiality shall continue throughout the term of this
Agreement and for five (5) years after termination of this Agreement.
(b) The obligations of confidentiality and limited use above shall not
apply to information which (1) is or becomes available to the public through no
act of the receiving party, or (2) is disclosed to the receiving party by a
third party who did not obtain the information from the other party to this
Agreement or (3) is independently developed by the receiving party as
demonstrated in written records.
21. Notices
All notices hereunder shall be made by facsimile or by mail to the
facsimile number or mail address below:
Vysis, Inc.
3100 Woodcreek Drive
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Final version 28 June 1995
Downers Grove, Illinois, U.S.A. 60515
Attention: Vice President, Technology & Business Development
Facsimile No. 708-271-7078
Fujisawa Pharmaceutical Co., Ltd.
4-7, Doshomachi 3-chome
Chuo-ku, Osaka 541, Japan
Attention: Executive Director,
Medical Supplies &
Systems Division
Facsimile No. 81-6-206-7934
With a copy to: Executive Director,
Legal Affairs Division
22. Entirety of Agreement and Modifications
(a) The parties represent that, in entering into this Agreement, all prior
representations, discussions, or agreements between Vysis and Fujisawa relating
to the subject matter hereof are canceled. This Agreement and its Schedules
contain the entire understanding and agreement between the parties concerning
the subject matter hereof.
(b) This Agreement shall not be modified except by a formal written
instrument signed by an authorized representative of each party.
(c) No right or license under any patent or technical information rights is
granted under this Agreement except for those as specifically provided herein.
23. Force Majeure
Except for any obligations (i) to make payment for Products actually delivered
and (ii) to make the Marketing Payments specified in
25
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Final version 28 June 1995
Section 6, neither party shall be held responsible to the other for failure to
comply with its obligations hereunder if such failure is due to Force Majeure,
provided that the party affected by Force Majeure has given to the other party
prompt notice of the Force Majeure occurrence. Force Majeure shall mean any
event beyond the control of the party claiming to be affected by such event,
including, but not limited to the following events; government regulation,
hostilities, terrorist acts, sabotage, riots, epidemic, quarantine, natural
disaster, fire, earthquake, storm, lightning, tide, tidal wave, work stoppages,
strikes, lockouts or labor disturbances.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized representatives as of the day and year first
written above.
VYSIS, INC. FUJISAWA PHARMACEUTICAL CO., LTD.
/s/ John L. Bishop /s/ A. Fujiyama
- ------------------- ------------------------
John L. Bishop By: A. Fujiyama
President Title: President & CEO
26
<PAGE>
Final version 28 June 1995
SCHEDULE 1
Prices as of 4/15/95 VYSIS INSTRUMENTATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DISTRIBUTE PRICE
INSTRUMENTS (USD) U.S. LIST
1-4 5 or more
------------- ----------
<S> <C> <C> <C>
Vysis AKS-Registered Trademark-
/SmartCapture-TM- System $88,400 $83,200 $104,000 /system
- ----------------------------------------------------------------------------------------------------------
</TABLE>
REQUIRED SERVICE INVENTORY FOR THE AKS-Registered Trademark-
/SMARTCAPTURE-TM- SYSTEM
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DISTRIBUTOR PRICE
DESCRIPTION QTY REQUIRED (USD) U.S. LIST
<S> <C> <C> <C> <C>
Filter Wheel w/ filters 1 $7,334 $8,294
Optical Drive 2 $3,111 $3,808
Cohu Camera 2 $1,500 $1,752
SCSI Cable 2 $38 $38
SCSI Daisy Chain cable 2 $63 $63
XLI Video card 1 $2,200 $2,860 < - No longer required for Power PC systems
QuickCapture card 1 $1,685 $1,875
Photometrics Camera 1 $22,500 $25,500
Power Strip 1 $79 $100
Software kit 1 No charge
- --------------------------------------------------------------------------------
</TABLE>
REQUIRED CONSUMABLE SUPPLIES FOR THE AKS-Registered Trademark- /
SMARTCAPTURE-TM- SYSTEM
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTOR
DESCRIPTION PART NUMBER PACKAGE SIZE QTY REQUIRED PRICE (USD) U.S. LIST PRICE
<S> <C> <C> <C> <C> <C>
Tektronix Phaser 440 Printer Supplies
A4 210x297 mm 016-1300-00 200 sheets 4 n/a n/a
8.5 x 11 paper 016-1299-00 200 sheets 4 $125 $153.00
8.5 x 11 Transparencies 016-1296-00 50 sheets 4 n/a n/a
4 color Ribbon 016-1302-00 100 prints 4 $245 $300.00
Black ribbon 016-1301-00 200 prints 4 $200 $245.00
Extra transfer tray 436-0286-00 1 ea 2 $49 $60.00
Pinnacle Sema Optical Drive Supplies
Optical Disks 1.3GB 30-102384 4 $225 $260.00
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
n/a - not applicable
27
<PAGE>
Final version 28 June 1995
SCHEDULE 2
VYSIS JAPANESE PATENT RIGHTS
U of Cal No 85-157-4* Japan App No 2-220946
U of Cal No 85-157-B* Japan App No 4-72635
U of Cal No 89-263* Japan App No 4-117042
U of Cal No 91-077* Japan App 6-502450
U of Cal No 91-155* Japan App No 5-15833
U of Cal No 92-005* PCT US 93/01775
U of Cal No 93-306-1* PCT US 94/10869
U of Cal No 93-310-1* PCT US 94/10864
U of Cal No 94-042-1* PCT App No 95/00346
U of Mich No 697* PCT US 92/10429
Amoco Case No 31,43301 PCT US 91/06811
Japan App No 516984/91
Amoco Case No 30,434 Japan App No 293252/91
Amoco Case No 30,437 Japan App No 36765/92
Amoco Case No 30,439 Japan App No 293264/91
Amoco Case No 30,448 PCT US 92/07962
Japan App No 501194/93
Amoco Case No 30,456 PCT US 92/08029
Japan App No 506320
Amoco Case No 31,402 PCT US 93/01718
Japan App No 515084/93
Amoco Case No 31,489 PCT US 93/08559
Amoco Case No 33,422 PCT US 94/11808
* Applications licensed exclusively to Vysis
28
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Final version 28 June 1995
SCHEDULE 3
MINIMUM CONTRACT YEAR PURCHASE OBLIGATIONS
MINIMUM PRODUCT PURCHASES - CONTRACT YEAR 1995
TOTAL PRODUCT PURCHASES $50,000
Fujisawa agrees to purchase during 1995 one AKS/SmartCapture System containing a
microscope and one AKS/SmartCapture System without a microscope, containing
components as agreed to by Fujisawa and Vysis.
MINIMUM PRODUCT PURCHASES - CONTRACT YEAR 1996
TOTAL PRODUCT PURCHASES $200,000
MINIMUM PRODUCT PURCHASES - CONTRACT YEAR 1997
TOTAL PRODUCT PURCHASES $300,000
29
<PAGE>
Confidential treatment requested for portions of this document,
portions for which confidential treatment is requested are noted.
SUBLICENSE AGREEMENT
This is an AGREEMENT effective as of the 24th day of May, 1996 between CIBA
CORNING DIAGNOSTICS CORP., a Delaware corporation with offices at 63 North
Street, Medfield, MA 02052 ("CCD") and VYSIS INC., a corporation with offices at
3100 Woodcreek Drive, Downers Grove, IL 60515 ("Vysis").
WHEREAS CCD possesses an exclusive license (with rights to sublicense) to
certain patents from The Regents of the University of California ("Licensor");
WHEREAS Vysis is interested in obtaining a sublicense from CCD to enable
Vysis to manufacture and commercialize in-vitro diagnostic tests under the
patents licensed by CCD from Licensor;
WHEREAS CCD is willing to grant the aforementioned sublicense to Vysis
under the terms and conditions specified herein;
NOW THEREFORE, in consideration of the respective agreements hereinafter
set forth, the parties hereto agree as follows:
1. DEFINITIONS
1.1 "Basic License Agreement", as used herein, shall mean the License
Agreement between CCD and Licensor.
1.2 "Effective Date", as used herein, shall mean the date first above
written.
1.3 "Patent Rights", as used herein, shall mean patent rights to any
subject matter claimed in or covered by either or both of the
following:
(a) U.S. Patent Application Serial No. 421,096 entitled "Methods and
Compositions for Detecting Human Tumors" which is assigned to the
Licensor and was filed by Drs. Dennis Slamon and Martin Cline on
October 12, 1989 (UC Case No. 82-215-R), which is a reissue
application of U.S. Patent Number 4,699,877 entitled "Methods and
Compositions for Detecting Human Tumors", assigned to the
Licensor and filed by Drs. Dennis Slamon and Martin Cline on
November 20, 1984 (UC Case No. 82-215-3) which is a
continuation-in-part application of U.S. Patent Application No.
496,027, filed on May 19, 1983 (82-215-2) (abandoned), which is
a continuation-in-part application of U.S. Patent Application No.
439,252, filed on November 4, 1982 (UC Case No. 82-215-1)
(abandoned);
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(b) U.S. Patent 4,968,603 entitled "Determination of Status In
Neoplastic Disease" which is assigned jointly to the
Licensor, the University of Texas at San Antonio and
Genentech, Inc. and was filed by Drs. Dennis Slamon, William
McGuire and Axel Ullrich (respectively) on December 31, 1986
(UC Case No. 86-243) and any reissues, reexaminations and
corrections thereof, to the extent that such patent rights
are owned by the Licensor as at least a co-assignee;
and continuing applications and continuations-in-part applications
thereof, including divisions, substitutions, any patents or reissues
issuing on said patents, applications, continuing applications and
continuations-in-part, and any corresponding foreign applications or
patents and any reissue, reexamination or corrections of any of the
foregoing.
1.4 "Field of Use", as used herein, shall mean for use as nucleic acid
probe, protein or antibodies, or a combination thereof for research or
diagnostic purposes.
1.5 "Licensed Product", as used herein, shall mean any kit, composition of
matter, or material either covered by the Patent Rights or produced by
the Licensed Method, the use of which would constitute, but for the
license granted to Vysis pursuant to this Agreement, an infringement
of any pending or issued claim within the Patent Rights.
1.6 "Licensed Method", as used herein, shall mean any process or method
that is covered by the Patent Rights, the use of which would
constitute, but for the license granted to Vysis pursuant to this
Agreement, an infringement of any claim within the Patent Rights.
1.7 "Net Sales", as used herein, shall mean the amount billed by Vysis or
its Affiliates to third parties for the sale of Licensed Products,
less the following: (a) cash discounts and/or quantity discounts
allowed, credits for customers' returns and allowances; and (b) sales
and use taxes incurred, as determined in accordance with generally
accepted accounting practices. Royalties shall accrue only once in
respect to a particular Licensed Product.
1.8 "Affiliate", as used herein, shall mean any corporation or other
business entity in which Vysis owns or controls, directly or
indirectly, at least fifty percent (50%) of the outstanding stock or
other voting rights entitled to elect directors; provided, however,
that in any country where the local law shall not permit foreign
equity participation of at least 50%, then an "Affiliate" shall
include any company in which Vysis shall own or control, directly or
indirectly, the maximum percentage of such outstanding stock or voting
rights permitted by local law.
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2. SUBLICENSE GRANT
2.1 Subject to the terms and conditions herein set forth, CCD hereby
grants Vysis a non-exclusive, non-transferable, worldwide, right and
license to make, use, and sell the Licensed Products and to practice
the Licensed Method for the Field of Use for the term of this
Agreement. This license shall not include the right to sell the
Licensed Product if such Licensed Product is used in conjunction with
a third parties' automated instrument. Notwithstanding the above,
Vysis may contract with a third party to manufacture an automated
instrument for Vysis' exclusive use in conjunction with the sale of
Licensed Product.
2.2 Vysis shall have no right to grant further sublicenses of its rights
hereunder. Vysis, and its Affiliates, however, shall have the right,
upon request from its customers, to state that such customers shall
not be sued by Vysis' licensor (CCD) under the applicable Licensed
Patents for use of the quantity of Licensed Products purchased from
Vysis or its Affiliates.
2.3 The sublicense granted hereunder shall be subject to all the
applicable provisions of the license to the United States
government executed by The Regents of the University of California
and to the ownership of the other parties set forth in Paragraph
1.3(b).
3. LICENSE FEE AND ROYALTY PAYMENTS
In consideration for the rights granted hereunder, Vysis shall pay to CCD
the following amounts:
3.1 Vysis shall pay to CCD a non-refundable, non-creditable fee of
$* U.S. dollars within thirty (30) days of execution of this
Agreement.
3.2 In addition to the fee described in Section 3.1 above, Vysis shall pay
to CCD a royalty of *% of Net Sales utilizing technology claimed in
the patent described in Section 1.3(b) (Slamon and McGuire) and a
royalty payment of *% of Net Sales utilizing technology claimed in
the patent described in Section 1.3(a) (Slamon and Cline). If a
product utilizes technology claimed in both of the above-described
patents, then the royalty rate shall be *% of Net Sales. Such
royalties shall be payable within thirty (30) days of the end of
each calendar quarter with respect to sales made during such calendar
quarter.
3.3 Minimum royalty payments shall commence in the year Vysis receives
clearance for marketing in the United States from the U.S. Food and
Drug
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* Confidential treatment requested, material omitted has been filed
separately with the Securities and Exchange Commission.
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Administration (FDA) for any Licensed Product. Those minimum royalty
payments are described below:
Year One $*
Year Two $*
Year Three to Sublicense $*
Agreement Termination
(For example, if Vysis receives clearance for a Licensed Product on
March 15, 1997, then 1997 shall be Year One.)
3.4 Within thirty (30) days after a Licensed Product has received
clearance from the FDA to sell in the U.S., Vysis shall pay to CCD, in
addition to the fee set forth in Section 3.1, a fee of $*
U.S. dollars. One half of this fee shall be creditable against future
minimum annual royalty payments, described in Section 3.3 above, but
only up to one half of such minimum royalty payment. For example, in
the first year of FDA approval (Year One), Vysis will receive a
credit in the amount of one half of its minimum royalty obligation.
Thus, Vysis' actual minimum royalty obligation shall be reduced from
$30,000 to $15,000. These credits will continue until Vysis has
exhausted one half of its $* FDA clearance fee ($*).
3.5 Paragraphs 1.3, 1.5, and 1.6 define Patent Rights, Licensed Products
and Licensed Methods so that royalties shall be payable on products
and methods covered by both pending patent applications and issued
patents. Earned royalties shall accrue in each country for sales
made in that country and shall be payable to CCD when Licensed
Products are invoiced, or if not invoiced, when delivered to a third
party.
3.6 Earned royalties accruing to CCD shall be paid to CCD quarterly on or
before the following dates of each calendar year: February 28, May 31,
August 31, and November 30. Each payment will be for earned royalties
which accrued within Vysis' most recently completed calendar quarter.
3.7 All monies due CCD shall be payable in United States currency. When
Licensed Products are sold for monies other than United States
dollars, the earned royalties will first be determined in the
foreign currency of the country in which Licensed Products were sold
and then converted into equivalent United States funds. The exchange
rate will be that rate quoted in the WALL STREET JOURNAL on the last
business day of the reporting period.
3.8 Royalties earned with respect to sales occurring in any country
outside the United States shall not be reduced by any taxes, fees, or
other charges
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* Confidential treatment requested, material omitted has been filed
separately with the Securities and Exchange Commission.
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imposed on the remittance of royalty income by the government of such
country. Vysis shall also be responsible for all bank transfer
charges.
3.9 If at any time legal restrictions prevent the prompt remittance of
part or all royalties by Vysis with respect to any country where a
Licensed Product is sold, Vysis shall pay CCD such royalties directly
from its U.S. source of funds.
3.10 In the event that any patent or any claim thereof included within the
Patent Rights shall be held invalid in a final decision by a court of
competent jurisdiction and last resort and from which no appeal has or
can be taken, all obligation to pay royalties based on such patent or
claim or any claim patentably indistinct therefrom shall cease as of
the date of such final decision. Vysis shall not, however, be
relieved from paying any royalties that accrued before such
decision or that are based on another patent or claim not involved in
such decision.
4. DUE DILIGENCE
Vysis shall use commercially diligent efforts to develop and bring to
market all Licensed Products. In addition, Vysis shall use commercially
diligent efforts to receive clearance for marketing in the United States
from the FDA for any such Licensed Product.
5. WARRANTY
5.1 CCD warrants and represents that it has the full power and authority
to enter into this Agreement to grant Vysis rights under Patent
Rights and to carry out its obligations hereunder.
5.2 Except as set forth in Section 5.1 above, this Sublicense is
provided WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. CCD
MAKES NO REPRESENTATION OR WARRANTY THAT THE LICENSED PRODUCTS OR
LICENSED METHODS WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY
RIGHT.
5.3 IN NO EVENT WILL CCD BE LIABLE FOR ANY INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS SUBLICENSE OR
THE USE OF THE LICENSED METHODS OR LICENSED PRODUCTS.
5.4 Nothing in this Agreement shall be construed as:
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5.4.1 a warranty or representation by CCD as to the validity,
enforceability, or scope of the Patent Rights; or
5.4.2 a warranty or representation that anything made, used, sold
or otherwise disposed of under any sublicense granted in this
Agreement is or will be free from infringement of patents of
third parties; or
5.4.3 an obligation to bring or prosecute actions or suits against
third parties for patent infringement; or
5.4.4 conferring by implication, estoppel or otherwise any license
or rights under any patents of CCD other than the Patent
Rights as defined herein, regardless of whether such patents
are dominant or subordinate to the Patent Rights; or
5.4.5 an obligation to furnish any know-how not provided in the
Patent Rights.
6. INDEMNIFICATION
6.1 Vysis agrees to indemnify, hold harmless and defend CCD, its officers,
employees, and agents against any and all claims, suits, losses,
damage, costs, fees and expenses resulting from or arising out of
exercise of this Sublicense. This indemnification will include, but
will not be limited to, any product liability.
6.2 Vysis, at its sole cost and expense, shall insure its activities in
connection with the work under this Agreement and obtain, keep in
force and maintain insurance as follows, or an equivalent program of
self insurance:
Comprehensive or Commercial Form General Liability Insurance
(contractual liability included) with limits as follows:
Each Occurrence: $1,000,000
Products/Completed Operations Aggregate: $5,000,000
Personal and Advertising Injury: $1,000,000
General Aggregate (commercial form only): $5,000,000
It should be expressly understood, however, that the coverage and
limits referred to under the above shall not in any way limit the
liability of Vysis. Vysis shall furnish CCD with certificates of
insurance evidencing compliance with all requirements. Such
certificates shall:
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provide for thirty (30) day advance written notice to CCD of any
modification;
indicate that CCD has been endorsed as an additional insured
under the coverage referred to under the above.
6.3 CCD shall promptly notify Vysis in writing of any claim or suit
brought against CCD in respect of which CCD intends to invoke the
provisions of this Article. Vysis will keep CCD informed on a current
basis of its defense of any claims pursuant to this Article.
6.4 This Article 5 shall survive expiration or termination of this
Agreement.
7. BOOKS, RECORDS AND REPORTS
7.1 Vysis shall keep books and records accurately showing all Licensed
Products manufactured, used, and/or sold under the terms of this
Agreement. Books and records shall be preserved for at least five (5)
years from the date of the royalty payment to which they pertain and
shall be open to inspection by auditors or accounting firms employed
by or representing CCD at reasonable times for the purpose of
verifying quarterly reports and royalties due, provided that such
inspections shall not take place more than once a year and that such
auditors or accounting firm shall report to CCD only as to the
accuracy of the quarterly reports and royalties due.
7.2 The fees and expenses of CCD's representatives performing such an
examination shall be borne by CCD. However, if an error in royalties
of more than five percent (5%) of the total royalties due for any
year is discovered, then the fees and expenses of these
representatives shall be borne by Vysis.
7.3 Vysis will make quarterly royalty reports to CCD on or before each
February 28, May 31, August 31 and November 30 of each year. Royalty
reports will cover Vysis' most recently completed calendar quarter
and will show (a) the gross sales and Net Sales of Licensed Products
sold by Vysis during the most recently completed calendar quarter;
(b) the number of each type of Licensed Product sold; (c) the
royalties, in U.S. dollars, payable hereunder with respect to sales;
(d) the method used to calculate the royalty; and (e) the exchange
rates used.
7.4 If no sales of Licensed Products have been made during any reporting
period, a statement to this effect is required.
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8. USE OF NAMES AND TRADENAMES
Nothing contained in this Agreement shall be construed as conferring any
right upon Vysis to use in advertising, publicity, or other promotional
activities any name, trade name, trademark, or other designation of The
Regents of the University of California (including contraction,
abbreviation or simulation of any of the foregoing). Unless required by
law, the use by Vysis of the name "The Regents of the University of
California" or any abbreviation or version thereof is expressly prohibited.
In addition, Vysis shall not use the name "Ciba Corning Diagnostics Corp."
(including contraction, abbreviation, or simulation of any of the
foregoing) in the name of any Licensed Product. However, Vysis may state
that the Licensed Products are licensed under the applicable patent
numbers.
9. PREFERENCE FOR UNITED STATES INDUSTRY
Vysis agrees that, to the extent reasonably feasible to Vysis, any products
embodying the Patent Rights or produced through the use thereof will be
manufactured substantially in the United States.
1O. COLLABORATION
Vysis and CCD may collaborate during the term of this Agreement in the
areas of research and development and/or market development to enhance each
party's knowledge of the measurement and importance of c-erbB-2 in the
disease process.
11. LATE PAYMENTS
In the event royalty payments or fees are not received by CCD when due,
Vysis shall pay to CCD interest charges at a rate of ten percent (10%)
simple interest per annum. Such interest shall be calculated from the date
payment was due until actually received by CCD.
12. CONFIDENTIALITY
CCD and Vysis shall not disclose the terms and conditions of this Agreement
to any third party except for the limited purpose of obtaining financing or
in conjunction with a public offering, and then only by (1) entering into a
satisfactory confidentiality agreement with the third party and (2)
receiving the other party's prior written consent. Such consent shall not
be unreasonably withheld.
13. TERM AND TERMINATION
13.1 Unless otherwise terminated by operation of law or by acts of the
parties in accordance with the terms of this Agreement, this Agreement
shall be in
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force from the effective date and shall remain in effect for the life
of the last to expire patent under this Agreement.
13.2 If Vysis shall violate or fail to perform any term or covenant of this
Agreement, then CCD may give written notice of default ("Notice of
Default") to Vysis. If Vysis should fail to repair the default within
ninety (90) days of the effective date of notice, then CCD shall have
the right to terminate this Agreement by a second written notice
("Notice of Termination") to Vysis. If a Notice of Termination is sent
to Vysis, this Agreement shall automatically terminate on the
effective date of notice. Termination shall not relieve Vysis of its
obligation to pay any royalty or license fees due at the time of
termination and shall not impair any accrued right to CCD.
13.3 This sublicense is subordinate to the Basic License Agreement.
Accordingly, if the Basic License Agreement is terminated, this
sublicense may, at the discretion of the Licensor, also terminate.
13.4 Any termination of this Agreement shall not effect the rights and
obligations set forth in the following sections: Section 6,
Indemnification, Section 7, Books, Records and Reports, Section 8, Use
of Names and Tradenames, Section 12, Confidentiality and Section 14,
Disposition of Licensed Products On Hand Upon Termination.
14. DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION
Upon termination of this Agreement, Vysis shall have the right to dispose
of all previously made or partially made Licensed Products within a period
of one hundred eighty (180) days, provided, however, that the sale of such
Licensed Products shall be subject to the terms of this Agreement,
including, but not limited to, the payment of royalties at the rate and at
the time provided herein and the rendering of reports thereon.
15. INFRINGEMENT
If at any time any third party shall infringe any Licensed Patents
hereunder in a particular country(s) to such an extent that Vysis is placed
at a substantial commercial disadvantage ("substantial commercial
disadvantage" shall be deemed to have occurred in a country if Vysis incurs
a fifteen percent (15%) reduction in sales in such country in a three-month
period, which reduction continues for a cumulative period of six months,
due to such third party infringement) with respect to its operations under
its license in such country(s) and Vysis so notifies CCD in writing,
furnishing adequate evidence of the infringement and CCD does not within
one (1) year after receipt of said notice (1) obtain a discontinuance of
such infringing operations, or (2) bring suit against at least one
infringer, Vysis may reduce its royalty payments by fifty percent (50%) in
the country(s) where
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such infringement occurred to Vysis' substantial commercial disadvantage.
Notwithstanding the above, Vysis' royalty payments shall not be reduced
below a rate where, based on sales for a given country, Vysis' royalty
payments to CCD are less than CCD's royalty payment obligations to
Licensor. Should CCD bring suit against at least one infringer, Vysis shall
execute such legal papers necessary for the prosecution of such suit as may
be reasonably requested by CCD and CCD shall be liable for all costs and
expenses of such litigation and shall be entitled to receive and retain all
recoveries therefrom. If such infringement stops, full royalties shall
forthwith become payable.
16. ASSIGNABILITY
This Sublicense Agreement shall be personal to Vysis and non-assignable by
Vysis. Notwithstanding the above, Vysis may assign this Sublicense
Agreement with CCD's written consent.
17. NOTICES
Any payment, notice, or other communication required or permitted to be
given to either party hereto shall be deemed to have been properly given
and to be effective on the date of delivery if delivered (a) in person, (b)
by first-class, certified mail, postage prepaid, return receipt requested,
or (c) by confirmed telecopy, in each case to the respective address or
telecopy number given below or to such other address or telecopy number as
it shall designate by written notice given to the other party in accordance
with this Section 12, as follows:
In the case of Vysis:
Vysis Inc.
3100 Woodcreek Drive
Downers Grove, IL 60515
Attention: Vice President, Technology and Business Development
Telecopy: (708)271-7078
In the case of CCD:
Ciba Corning Diagnostics Corp.
63 North Street
Medfield, MA 02052
Attention: Vice President, Licensing and Acquisitions
Telecopy: (508) 359-3980
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With a copy to:
Ciba Corning Diagnostics Corp.
63 North Street
Medfield, MA 02052
Attention: General Counsel
Telecopy: (508)359-3885
18. GOVERNING LAW
This Agreement shall be construed, interpreted, and applied in
accordance with the laws of the Commonwealth of Massachusetts, without
regard to its principles of conflicts of laws.
19. MISCELLANEOUS
19.1 The headings of the several sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the
meaning or interpretation of this Agreement.
19.2 This Agreement will not be binding upon the parties until it has been
signed on behalf of each party, in which event, it shall be effective
as of the Effective Date.
19.3 No amendment or modification hereof shall be valid or binding upon the
parties unless made in writing and signed by an authorized
representative of each party.
19.4 It is agreed that 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 and/or similar breach or
default.
19.5 This Agreement embodies the entire understanding of the parties
relating to the subject matter hereof and except as noted herein shall
supersede all previous communications, representations, or
understandings, either oral or written, between the parties relating
to the subject matter hereof.
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IN WITNESS WHEREOF both CCD and Vysis have executed this Agreement, in
duplicate originals, by their respective duly authorized representatives, on the
day and year first above written.
VYSIS, INC. CIBA CORNING DIAGNOSTICS CORP.
By: /s/ John L. Bishop By: /s/ Dr. Mickey Urdea
------------------ ----------------------
John L. Bishop Dr. Mickey Urdea
Title: President Title: Vice President
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SOFTWARE DEVELOPMENT AND MARKETING AGREEMENT
This Software Development and Marketing Agreement is between Digital Scientific
Limited ("Digital"), a corporation under the laws of the United Kingdom, and
Vysis, Inc. ("Vysis''), a corporation under the laws of the State of Delaware,
U.S.A., and is effective 1 January 1996.
WHEREAS, Digital and Vysis' predecessor company, Vysis, Inc., an Illinois
corporation, have entered into a Software Marketing Agreement in 1994 and a
Software Derivative License Agreement in 1995 (the "Prior Agreements") relating
to marketing of the Digital's SmartCapture software program and of derivatives
of the SmartCapture program;
WHEREAS, under the Prior Agreements Vysis was granted marketing rights outside
the UK, with Digital retaining all rights to market its software products in
the United Kingdom including responsibility for UK sales, marketing and
technical service;
WHEREAS, under the Prior Agreements Vysis was granted a right of first refusal
to obtain an exclusive license to any new software products developed by
Digital;
WHEREAS, Digital and Vysis wish to enter into this Software Development and
Marketing Agreement providing for Vysis to take over responsibility for
marketing of Digital's products in the UK and for Vysis and Digital to begin
codevelopment of new software products.
In consideration of the above and the terms herein, Digital and Vysis agree as
follows.
I. VYSIS LICENSES
1. Licensed Products shall be defined as the following products
manufactured or developed by Digital, either before or during the term of this
Agreement:
(a) the "Tools for in Situ Hybridization" SmartCapture software suite and
software related products for fluorescent imaging and FISH studies
("SmartCapture") and all technology and products associated with the
application of SmartCapture and products, including the filter wheel and its
associated control software. The SmartCapture software suite includes the
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routines listed on Exhibit A, attached and incorporated herein, including any
routines added in 1994 and 1995; and
(b) all subsequent versions of the SmartCapture software developed or made
available during the term of this Agreement, including those products developed
under Section II. below; and
(c) all software products developed by Digital during the term of this
Agreement, including those products developed under Section II. below.
2. Digital hereby grants Vysis a world-wide, royalty-free, exclusive
license to use, copy, market, sell and lease the Licensed Products defined
above, including the rights to:
(a) grant sublicenses to affiliates and non-affiliates of Vysis; and
(b) grant sublicenses to customers for the use of Licensed Products; and
(c) make, have made, copy, use, market, sell and lease derivatives of
Licensed Products and of any portions of software included within Licensed
Products. Such derivatives include any software which is marketed, sold or used
as part of the Vysis QUIPS Workstation.
3. Digital agrees that during the term of this Agreement, it will not
grant to any third party any license relating to Licensed Products.
4. Digital grants to Vysis a right of first refusal to obtain an exclusive
license under Digital's rights under Section Vl.3. below in any Co-Developed
Software, as defined in Section II.4. below, which was developed by Vysis.
II. SOFTWARE/NEW PRODUCT CO-DEVELOPMENT
1. Digital and Vysis will jointly develop additional software products
during the term of this Agreement, including upgrade versions of existing
products and new software products. As part of this effort, Digital agrees to
provide three (3) man years of software development work during each of the
first two years of this Agreement and two (2) man years of software
development work during each of the last two years of this Agreement. Digital
and Vysis will jointly agree upon and coordinate their software development
work and will meet on at least a quarterly basis to review progress and make
adjustments as necessary.
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2. Vysis and Digital will each make available to the other their respective
source code for programs under co-development. At the completion of a
particular software development project, the party responsible for producing
the source code for the particular project will provide a copy of the source
code to the other party.
3. (a) Digital has under development the following new software products:
"Viewpoint", for FISH image capture, and "Formatter", for color printing of
FISH images and CGH profiles, and "VideoCapture", for FISH imaging with a less
expensive camera, (collectively "the 1996 Products"). Vysis and Digital will
jointly review the 1996 Products and Digital's planned development schedule for
each of the 1996 Products for inclusion in Vysis' QUIPS Workstation or for
stand-alone marketing.
(b) Digital's obligation to provide software development work in Section
II. 1. above will not begin until the completion of its development work on the
1996 Products or 1 May 1996, whichever is earlier; except that Digital will
provide software development for the Video Image capturing for the QUIPS-LS
release due 1 March and for the 1 April release of QUIPS-XL based on the
Photometrics Sensys camera.
(c) Digital is also developing a camera interface for Photometrics and
Digital's completion of this program up to 1 May 1996 is expressly permitted
hereunder. Digital shall have the right to peform additional contract work for
Photometrics during the term of this Agreement, provided that Digital fulfills
its obligations hereunder, that it uses additional programmers besides those
working with Vysis, and that Vysis consents to the assignment of programmers to
work on the Photometrics and the Vysis projects.
4. "Co-developed Software" shall mean any and all Licensed Products and
derivatives thereof and of any Vysis software program coupled with any Licensed
Product or derivative thereof, including the Vysis QUIPS Workstation software,
which Vysis markets during the term of this Agreement.
5. Digital and Vysis will jointly own title to all Co-developed
Software, including any copyrights, patents or other rights therein. Digital
and Vysis will cooperate to obtain all agreed-upon proprietary protections
for the Co-developed Software. Vysis will be responsible for the cost of
obtaining any necessary patent or copyright protection for the Co-developed
Software.
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III. VYSIS MARKETING RESPONSIBILITIES
1. Promptly after signing of this Agreement, Vysis and Digital will
cooperate in Vysis' start-up of sales, marketing and technical service efforts
in the UK. Digital and Vysis agree that this cooperation will include:
(a) joint drafting of a notice to Digital's existing customers of Vysis'
assumption of UK responsibilities;
(b) the assignment by Digital to Vysis, subject to any necessary customer
consents, of all of Digital's existing maintenance and product sales
agreements. Vysis and Digital will use reasonable efforts to obtain novations
releasing Digital from responsiblity under the agreements assigned to Vysis;
(c) provision by Digital to Vysis of all necessary copies of software,
including dongles and security keys, source code, software documentation and
marketing and advertising materials;
(d) provision by Digital to Vysis of all customer records relating to
Digital's sales, marketing and technical service in the UK. Vysis agrees to
maintain these records and to provide Digital access to them upon request at
any time;
(e) hiring of Digital's Peter Collins by Vysis as its full-time
representative in the UK, subject to Mr. Collins' and Vysis' agreement on
employment terms for the position;
(f) provision by Digital of technical service support services for a
reasonable period to permit Vysis to establish its technical services in the
UK. This technical service assistance will include bug fixing and field service
until 1 May 1966. Digital will remain responsible to provide bug fixing for
SmartCapture and for all other software provided by Digital during the term of
this Agreement; and
(g) development of marketing campaigns for the UK for Vysis products.
2. Vysis shall have the right to determine software product introduction
and discontinuance on a worldwide basis.
3. Vysis agrees to continue use of the SmartCapture FISH imaging
software in its QUIPS Workstation and in conjunction with its marketing of
Licensed
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Products the SmartCapture trademark. Vysis in its marketing will indicate that
SmartCapture is a trademark of Digital and that the SmartCapture software
functions are copyright of Digital.
4. Digital agrees that it will maintain sufficient documentation and
records concerning software products developed hereunder to permit Vysis: (i)
to obtain ISO 9000 certification or (ii) to comply with applicable governmental
regulations concerning medical devices, including U.S. Food and Drug
Administration regulations. Vysis and Digital will cooperate in developing the
necessary documentation and record-keeping practices for Digital to comply with
this obligation.
IV. PAYMENTS TO DIGITAL
1. In consideration of Digital's performance of its obligations and of
its grants hereunder, Vysis agrees to pay to Digital Three-Hundred-
Seventy-Five Thousand U.S. Dollars (US $375,000.00) for each twelve (12)
month period that this Agreement remains in effect, payable by Ninty-Three-
Thousand-Seven-Hundred-Fifty U.S. Dollar (US $93,750) installments paid
quarterly in advance, with the first quarterly installment due upon signing
of this Agreement, up to a total maximum amount paid to Digital of One-Million-
Five-Hundred-Thousand US Dollars (US $1,500,000).
2. Vysis will pay to Digital an amount equal to the total of 50% of Vysis'
Gross Margin received on the completion of each of the outstanding Digital
product sales agreements assigned to Vysis under Section IlI.(b) above. Vysis'
Gross Margin for each such product sales agreement will be calculated by Net
Sales Price received - Taxes - Material Costs = Gross Margin. Vysis will make
this payment on a quarterly basis for all product sales agreements for which
Vysis receives payment from the customer. The payments to Digital under this
Section IV.2. will be reduced by the amount of any customer deposit or payment
advance previously received by Digital for the sales agreements assigned to
Vysis.
3. Vysis agrees to reimburse Digital for all travel expenses incurred by
Digital for travel, both to the U.S. and otherwise, requested by Vysis.
4. Vysis agrees to reimburse Digital for Mr. Collins' cash advance from
Digital for January 1996 in the amount of Five-Thousand Pounds Sterling (L5000).
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5. Vysis agrees to purchase the following hardware items from Digital for a
total purchase price, payable promptly after signing, of L27,837:
(i) new Photometrics KAF 1400 camera and import duty thereon;
(ii) new Tectronics Phaser 440 printer and Ethernet interface;
(iii) new Apple 20" Monitor and 24 bit colour board;
(iv) two Plasmon Data 7300 Disk Drives;
(v) tape backup unit;
(vii) internal 3.5" disk drive; and
(viii) Mitsubishi 3400 printer.
V. CONSULTING SERVICES/STOCK OPTION GRANT
1. Digital agrees to arrange for the provision of consulting services
to Vysis by Mr. Colin Grace relating to Vysis' marketing of its imaging
software-based products for up to ten (10) working days per month.
2. In consideration of the consulting services, Vysis agrees to offer to
Colin Grace a Common Stock Option Agreement in substantially the form attached
and incorporated herein as Exhibit B, which if accepted would grant Mr. Grace
an option to acquire 50,000 shares of common stock of Vysis, upon the following
conditions:
(i) the Common Stock Option Agreement will be offered under the terms of
the Vysis 1996 Stock Incentive Plan ("Plan"), in substantially the form
attached and incorporated herein as Exhibit C. The Common Stock Option
Agreement is expressly subject to all the provisions of the Plan. If there is
any conflict between the terms of this Agreement and the provisions of the
Plan, the provisions of the Plan shall control. If there is any conflict
between the terms of this Agreement and the Common Stock Option Agreement, then
the provisions of the Common Stock Option Agreement shall prevail;
(ii) the Common Stock Option Agreement will provide for an exercise price
per share of Vysis common stock of Thirty-Nine Cents in U.S. Dollars (US
$0.39);
(iii) the Common Stock Option Agreement will provide for vesting of Mr.
Grace's right to exercise the option over a four year period beginning 1
January 1996, with a right to exercise an option for 25% of the total number
of shares vesting upon each Anniversary of this Agreement;
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(iv) Colin Grace acknowledges and agrees that the Common Stock Option
Agreement will not be in effect until it is executed by both he and Vysis;
(v) the Plan, the Common Stock Option Agreement, Vysis common stock and
Vysis' and Mr. Grace's rights and obligations with respect thereto shall be
governed by the law of the U.S.A. and the State of Illinois;
(vi) Mr. Grace acknowledges and agrees that the Common Stock Option
Agreement and Vysis common stock are each not a security registered for public
sale in the United States; and
(vii) Mr. Grace agrees that any tax, either in the UK or in the U.S.A.
based upon the issuance or exercise of the Common Stock Option Agreement will
be his or any permitted assignee's responsibility.
3. Vysis makes no warranty or representation concerning (i) its sales and
marketing of any software-based products, including Licensed Products,
Co-developed Software, or derivatives of either; (ii) the results obtained from
Vysis' business, including any profits or change in the value of Vysis common
stock; and (iii) the future marketability of Vysis common stock, including the
success or timing of any Initial Public Offering of Vysis common stock.
4. Vysis agrees that Vysis will consent to any assignment by Mr. Grace of
the Common Stock Option Agreement, after its execution by both Vysis and Mr.
Grace, to Digital or to any other individual.
VI. TERM/TERMINATION OF THE PRIOR AGREEMENTS
1. This Agreement shall be effective for four (4) years, commencing upon
the signing of this Agreement. This Agreement may be extended thereafter by
mutual agreement.
2. The Common Stock Option Agreement will terminate automatically with any
termination of this Agreement before 31 January 2000, except that any vested
portion of the Option may be exercised within thirty (30) days after the date
of termination of this Agreement.
3. After any termination of this Agreement, either party shall have the
worldwide right to use, sell, lease, market and make copies and derivatives of
any Co-developed Software without obligation to the other party; provided that
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no right or license under any patent rights is granted to either party. Vysis
grants Digital an option to acquire a worldwide, non-exclusive, royalty-bearing
license to market, sell, lease and use imaging software products for research
purposes under Vysis' rights in the CGH patent application, PCT/US93/01755,
licensed exclusively to Vysis by the University of California.
4. The Prior Agreements shall terminate and all obligations and rights of
each of Vysis and Digital thereunder shall terminate upon the signing of this
Agreement.
VII. WARRANTY/DISCLAIMER
1. Digital warrants that it has the right to grant the licenses granted
Vysis hereunder.
2. Neither Vysis nor Digital make any warranty or representation
concerning the Co-developed Software, including any performance specifications
or product development completion dates.
3. Digital makes no warranty or representation concerning its software
development services provided hereunder or the consulting services provided by
Colin Grace.
VIII. MISCELLANEOUS PROVISIONS
1. Digital shall not be involved in any way in competition with Vysis
throughout the term of this Agreement.
2. This Agreement creates no implied licenses and only the express licenses
granted herein are created.
3. This Agreement is the entire agreement between the parties with respect
to the subject matter hereof, and all other prior agreements or understandings,
oral or written, are merged herein. This Agreement shall be amended only in a
writing signed by an authorized representative of each of the parties. No
purchase order, invoice, shipping acknowledgment, exchange of correspondence or
the like shall be deemed as a modification of or supplement to this Agreement.
4. Either party shall have the right to assign this Agreement to any
transferee of substantially all of the assets of that party or to any of its
affiliate, subsidiary or
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direct or indirect parent companies. All other assignments without the
consent of the other party shall be null and void.
5. This Agreement shall be governed and construed under the law of the
State of Illinois, U.S.A., excepting any choice of law rules which would
direct the application of the law of another jurisdiction.
6. This Agreement shall not be deemed effective until signed by an
authorized representative of each of Digital and Vysis and by Mr. Colin Grace,
individually, with respect to the provisions of Section V. above.
In witness whereof, Digital and Vysis show their agreement by signing below.
DIGITAL SCIENTIFIC LIMITED VYSIS, INC.
/s/ Colin Grace /s/ John L. Bishop
- -------------------------- --------------------------
By: Colin Grace By: John L. Bishop
Title: Managing Director Title: President
The provisions of Section V. Consulting Services/Stock Option Grant are
accepted and agreed to:
COLIN GRACE
/s/ Colin Grace
- --------------------------
Date: 16 February 1996
---------------------
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EXHIBIT A
SMARTCAPTURE SOFTWARE ROUTINES
- - SmartCapture
- - ColourRatio
- - Convolution (DAPI banding)
- - MinMax (Cosmid enhancement)
- - ApplyLUT
- - ColourNormalise
- - GraphPolygon
- - ScaleRotate
- - ConfocalOpen
- - ColourAdjust
- - Join
- - PrintPreparation
- - VideoInterface
- - Photometrics II
- - DataBase interface
- - Clinical Conferencing*
- - Combined karyotype/Fish platform
* This routine is still under development and will be provided when deemed
available by DS. Imagenetics understands that additional hardware to implement
this routine will be necessary and that DS is not responsible to provide such
hardware.
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EXHIBIT B
VYSIS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement (the "Agreement") is entered into
as of _______________________, 199 , by and between Vysis, Inc., a Delaware
corporation (the "Company"), and_____________________________________________
_____________________________________________________________ (the "Optionee")
pursuant to the Company's 1996 Stock Incentive Plan (the "Plan").
R E C I T A L S :
A. Optionee is eligible to receive options under the Plan.
B. The Company desires to grant to Optionee, and Optionee desires to
receive the grant of, options under the Plan on the terms, provisions and
conditions, and subject to the restrictions and agreements, hereinafter
provided.
NOW, THEREFORE, for good and valuable consideration, the parties agree as
follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee an option
(the "Option") to purchase all or any portion of a total of___________________
_____________________ (__________) shares (the "Shares") of the Common Stock of
the Company at a purchase price of
Dollars ($_____________________) per share (the "Exercise Price"), subject to
the terms and conditions set forth herein and the provisions of the Plan. This
Option is intended to constitute an "incentive stock option" within the meaning
of the Plan.
2. VESTING OF OPTION. The right to exercise this Option shall vest in
installments, and this Option shall be exercisable from time to time in whole
or in part as to any vested installment, as follows: this Option shall be
exercisable with respect to 25% of the Shares one year following the date of
grant and this Option shall be exercisable with respect to an additional 2.084%
of the Shares each month thereafter until fully vested.
No additional Shares shall vest after the date of termination of Optionee's
"Continuous Service" (as defined in Section 3 below), but this Option shall
continue to be exercisable in accordance with Section 3 hereof with respect to
that number of Shares that have vested as of the date of termination of
Optionee's Continuous Service.
3. TERM OF OPTION. Optionee's right to exercise this Option shall
terminate upon the first to occur of the following:
(a) the expiration of____________________ (__________) years from the
date of this Agreement;
(b) the expiration of three (3) months from the date of termination of
Optionee's Continuous Service if such termination occurs for any reason other
than permanent disability or
<PAGE>
death; provided, however, that if Optionee dies during such three-month
period the provisions of Section 3(d) below shall apply;
(c) the expiration of one (1) year from the date of termination of
Optionee's Continuous Service if such termination is due to permanent
disability of the Optionee (as defined in Section 22(e)(3) of the Code);
(d) the expiration of one (1) year from the date of termination of
Optionee's Continuous Service if such termination is due to Optionee's death or
if death occurs during either the three-month or one-month period following
termination of Optionee's Continuous Service pursuant to Section 3(b) or 3(c)
above, as the case may be; or
(e) a Change in Control of the Company if such options are terminated
pursuant to Section 12.
As used herein, the term "Continuous Service" means (i) employment by either
the Company or any parent or subsidiary corporation of the Company, or by a
corporation or a parent or subsidiary of a corporation issuing or assuming a
stock option in a transaction to which Section 424(a) of the Code applies,
which is uninterrupted except for vacations, illness (except for permanent
disability, as defined in Section 22(e)(3) of the Code) or leaves of absence
which are approved in writing by the Company or any of such other employer
corporations, if applicable, (ii) service as a member of the Board of Directors
of the Company, or (iii) so long as Optionee is engaged as a consultant or
service provider to the Company or other corporation referred to in clause (i)
above.
4. EXERCISE OF OPTION. On or after the vesting of any portion of this
Option in accordance with Section 2 above, and until termination of this Option
in accordance with Section 3 above, the portion of this Option which has vested
may be exercised in whole or in part by the Optionee (or, after Optionee's
death, by the successor designated in Section 5 below) upon delivery of the
following to the Company at its principal executive offices:
(a) a written notice of exercise which identifies this Agreement and
states the number of Shares then being purchased (but no fractional Shares may
be purchased);
(b) a check or cash in the amount of the Exercise Price (or payment of
the Exercise Price in such other form of lawful consideration as the
Administrator may approve from time to time under the provisions of Section 5.3
of the Plan);
(c) a check or cash in the amount reasonably requested by the Company
to satisfy the Company's withholding obligations under federal, state or other
applicable tax laws with respect to the taxable income, if any, recognized by
the Optionee in connection with the exercise of this Option (unless the Company
and Optionee shall have made other arrangements for deductions or withholding
from Optionee's wages, bonus or other compensation payable to Optionee, or by
the withholding of Shares issuable upon exercise of this Option or the delivery
of Shares owned by the Optionee in accordance with Section 10.1 of the Plan,
provided such arrangements satisfy the requirements of applicable tax laws);
and
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<PAGE>
(d) a letter, if requested by the Company, in such form and substance
as the Company may require, setting forth the investment intent of the Optionee,
or person designated in Section 5 below, as the case may be.
Notwithstanding the foregoing, the Optionee may not exercise any
portion of this Option more than once during any calendar quarter.
5. DEATH OF OPTIONEE; NO ASSIGNMENT. The rights of the Optionee under
this Agreement may not be assigned or transferred except by will or by the laws
of descent and distribution, and may be exercised during the lifetime of the
Optionee only by such Optionee. Any attempt to sell, pledge, assign,
hypothecate, transfer or dispose of this Option in contravention of this
Agreement or the Plan shall be void and shall have no effect. If the
Optionee's Continuous Service terminates as a result of Optionee's death, and
provided Optionee's rights hereunder shall have vested pursuant to Section 2
hereof, Optionee's legal representative, Optionee's legatee, or the person who
acquired the right to exercise this Option by reason of the death of the
Optionee (individually, a "Successor") shall succeed to the Optionee's rights
and obligations under this Agreement. After the death of the Optionee, only a
Successor may exercise this Option.
6. REPRESENTATIONS AND WARRANTIES OF OPTIONEE.
(a) Optionee represents and warrants that this Option is being
acquired by Optionee for Optionee's personal account, for investment purposes
only, and not with a view to the distribution, resale or other disposition
thereof.
(b) Optionee acknowledges that the Company may issue Shares upon the
exercise of the Option without registering such Shares under the Securities Act
of l933, as amended (the "Act"), on the basis of certain exemptions from such
registration requirement. Accordingly, Optionee agrees that Optionee's
exercise of the Option may be expressly conditioned upon Optionee's delivery to
the Company of an investment certificate including such representations and
undertakings as the Company may reasonably require in order to assure the
availability of such exemptions, including a representation that Optionee is
acquiring the Shares for investment and not with a present intention of selling
or otherwise disposing thereof and an agreement by Optionee that the
certificates evidencing the Shares may bear a legend indicating such non-
registration under the Act and the resulting restrictions on transfer.
Optionee acknowledges that, because Shares received upon exercise of an Option
may be unregistered, Optionee may be required to hold the Shares indefinitely
unless they are subsequently registered for resale under the Act or an
exemption from such registration is available.
(c) Optionee acknowledges receipt of a copy of the Plan and
understands that all rights and obligations connected with this Option are set
forth in this Agreement and in the Plan.
7. RESTRICTIVE LEGENDS. Optionee hereby acknowledges that federal
securities laws and the securities laws of the state in which Optionee resides
may require the placement of certain restrictive legends upon the Shares issued
upon exercise of this Option, and Optionee hereby consents to the placing of
any such legends upon certificates evidencing the Shares as the Company, or its
counsel, may deem necessary or advisable.
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<PAGE>
8. LIMITATION OF COMPANY'S LIABILITY FOR NONISSUANCE. The Company
agrees to use its reasonable best efforts to obtain from any applicable
regulatory agency such authority or approval as may be required in order to
issue and sell the Shares to the Optionee pursuant to this Option. Inability
of the Company to obtain, from any such regulatory agency, authority or
approval deemed by the Company's counsel to be necessary for the lawful
issuance and sale of the Shares hereunder and under the Plan shall relieve
the Company of any liability in respect of the nonissuance or sale of such
Shares as to which such requisite authority or approval shall not have been
obtained.
9. RIGHT OF FIRST REFUSAL.
(a) The Shares acquired pursuant to the exercise of this Option may be
sold by the Optionee only in compliance with the provisions of this Section 9,
and subject in all cases to compliance with the provisions of Section 6(b)
hereof. Prior to any intended sale, Optionee shall first give written notice
(the "Offer Notice") to the Company specifying (i) Optionee's bona fide
intention to sell or otherwise transfer such Shares, (ii) the name and address
of the proposed purchaser(s), (iii) the number of Shares the Optionee proposes
to sell (the "Offered Shares"), (iv) the price for which Optionee proposes to
sell the Offered Shares, and (v) all other material terms and conditions of
the proposed sale.
(b) Within 30 days after receipt of the Offer Notice, the Company or
its nominee(s) may elect to purchase all or any portion of the Offered Shares at
the price and on the terms and conditions set forth in the Offer Notice by
delivery of written notice (the "Acceptance Notice") to the Optionee specifying
the number of Offered Shares that the Company or its nominees elect to
purchase. Within 15 days after delivery of the Acceptance Notice to the
Optionee, the Company and/or its nominee(s) shall deliver to the Optionee a
check (or, at the discretion of the Company, such other form of consideration
set forth in the Offer Notice) in the amount of the purchase price of the
Offered Shares to be purchased pursuant to this Section 9, against delivery by
the Optionee of a certificate or certificates representing the Offered Shares
to be purchased, duly endorsed for transfer to the Company or such nominee(s),
as the case may be. If the Company and/or its nominee(s) do not elect to
purchase all of the Offered Shares, the Optionee shall be entitled to sell the
balance of the Offered Shares to the purchaser(s) named in the Offer Notice at
the price specified in the Offer Notice or at a higher price and on the terms
and conditions set forth in the Offer Notice, provided, however, that such sale
or other transfer must be consummated within 60 days from the date of the Offer
Notice and any proposed sale after such 60-day period may be made only by again
complying with the procedures set forth in this Section 9.
(c) The Optionee may transfer all or any portion of the Shares to a
trust established for the sole benefit of the Optionee and/or his or her spouse
or children without such transfer being subject to the right of first refusal
set forth in this Section 9, provided that the Shares so transferred shall
remain subject to the terms and conditions of this Agreement and no further
transfer of such Shares may be made without complying with the provisions of
this Section 9.
(d) Any Successor of Optionee pursuant to Section 5 hereof, and any
transferee of the Shares pursuant to this Section 9, shall hold the Shares
subject to the terms and conditions of this Agreement and no further transfer
of the Shares may be made without complying with the provisions of this
Section 9.
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(e) All stock certificates evidencing the Shares shall be imprinted
with a legend substantially as follows:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS AGAINST TRANSFER, INCLUDING A RIGHT OF FIRST
REFUSAL IN FAVOR OF THE COMPANY, AS SET FORTH IN A STOCK OPTION
AGREEMENT DATED______________________, 19_____________. TRANSFER OF
THESE SHARES MAY BE MADE ONLY IN COMPLIANCE WITH THE PROVISIONS OF
SAID AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY."
(f) The rights provided the Company and its nominee(s) under this
Section 9 shall terminate upon the closing of an underwritten public offering
of Shares of the Company's Common Stock pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act").
10. REPURCHASE OPTION UPON TERMINATION OF CONTINUOUS SERVICE.
(a) In the event Optionee ceases Continuous Service with the Company
for any reason (the "Termination"), any Shares acquired or which may thereafter
be acquired pursuant to the exercise of this Option (the "Purchased Shares")
(whether held by Optionee or one or more of Optionee's transferees) will be
subject to repurchase by the Company pursuant to the terms and conditions set
forth in this Section 10 (the "Repurchase Option").
(b) The purchase price for each Purchased Share will be the "Fair
Market Value" (as defined below) for such share as determined on the date of
Termination (the "Repurchase Price").
(c) The Company's board of directors (the "Board") may elect to
purchase all or any portion of the Purchased Shares by delivering written notice
(the "Repurchase Notice") to the holder or holders of the Purchased Shares
within 120 days after the later to occur of (i) the Termination or (ii) the date
upon which the Purchased Shares are acquired pursuant to this Option. The
Repurchase Notice will set forth the number of Purchased Shares to be acquired
from Optionee, the aggregate consideration to be paid for such Shares and the
time and place for the closing of the transaction. The number of Purchased
Shares to be repurchased by the Company shall first be satisfied to the extent
possible from the Purchased Shares held by Optionee at the time of delivery of
the Repurchase Notice. If the number of Purchased Shares then held by Optionee
is less than the total number of Purchased Shares which the Company has elected
to purchase, the Company shall purchase the remaining Purchased Shares elected
to be purchased from the other holder(s) of Purchased Shares under this
Agreement, pro rata according to the number of Purchased Shares held by such
other holder(s) at the time of delivery of such Repurchase Notice (determined
as nearly as practicable to the nearest share).
(d) The closing of the purchase of the Purchased Shares pursuant to
the Repurchase Option shall take place on the date designated by the Company in
the Repurchase Notice, which date shall not be more than one (1) month nor less
than five (5) days after the delivery of such notice (the "Repurchase Date").
The Company may, at its option, pay for the Purchased Shares to be purchased
pursuant to the Repurchase Option either (i) in one lumpsum payment by delivery
of
5
<PAGE>
a check or wire transfer on the Repurchase Date in an amount equal to the
Repurchase Price, or (ii) by delivery on the Repurchase Date of (A) a check or
wire transfer in an amount equal to the sum of the aggregate original cost of
the Purchased Shares to be repurchased, in any event not exceeding in the
aggregate the Repurchase Price (the "Cash Repurchase Payment"), and (B) a
promissory note of the Company in a principal amount equal to the Repurchase
Price minus the Cash Repurchase Payment, bearing interest at the rate of nine
percent (9%) per annum non-compounded commencing on the Repurchase Date and
providing for payment of the principal amount, plus accrued interest, in twelve
(12) installments on the last day of each calendar month for the next twelve
(12) months following the Repurchase Date. In addition, the Company may pay
the Repurchase Price for such Shares by offsetting amounts outstanding under
any bona fide debts owed by Optionee to the Company. The Company will be
entitled to receive customary representations and warranties from the sellers
regarding such sale and to require all sellers' signatures be guaranteed.
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Purchased Shares by the Company shall be subject
to applicable restrictions contained in the applicable state law and in the
Company's and its subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Purchased Shares hereunder which
the Company has otherwise elected to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions;
provided, however, that, notwithstanding such restrictions, the Company shall
deliver the Repurchase Notice as provided in paragraph 10(c) above, and shall
remain bound by the terms of such Repurchase Notice until such time as the
Purchased Shares are actually purchased by the Company pursuant to such notice.
(f) For purposes of this Section 10, the Fair Market Value will be
the fair value of the Common Stock determined as provided in Section 2.10 of the
Plan.
(g) The rights provided the Company under this Section 10 shall
terminate upon the closing of an underwritten public offering of Shares of the
Company's Common Stock pursuant to an effective registration statement under the
Securities Act.
11. ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE. In the event that the
outstanding Shares of Common Stock of the Company are hereafter increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of a recapitalization, stock
split, combination of shares, reclassification, stock dividend or other similar
change in the capital structure of the Company, then appropriate adjustment
shall be made by the Administrator to the number of Shares subject to the
unexercised portion of this Option and to the Exercise Price per share, in
order to preserve, as nearly as practical, but not to increase, the benefits of
the Optionee under this Option, in accordance with the provisions of
Section 4.2 of the Plan.
12. MERGERS AND OTHER REORGANIZATIONS. In the event that the Company at
any time proposes to enter into any transaction approved by the Board to sell
substantially all of its assets or merge or consolidate with any other entity
as a result of which either the Company is not the surviving corporation or the
Company is the surviving corporation and the ownership of the voting power of
the Company's capital stock changes by more than 50% as a result of such
transaction, or in the event of a "Recommended Share Purchase Offer" (as
defined below) (a "Change in Control"), this Option, if not already
exercisable, shall concurrent with and conditioned upon the effective date of
the proposed transaction, be accelerated and the Optionee shall have the right
to exercise the
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<PAGE>
Option in respect to any or all of the Shares at such time. In addition, in
the event of a Change in Control, this Option shall terminate upon the
effective date of such transaction unless provision is made in writing in
connection with such transaction for the continuance or assumption of this
Option or the substitution for this Option of a new option of comparable
value covering shares of a successor corporation, with appropriate
adjustments as to the number and kind of shares and the Exercise Price, in
which event this Option or the new option substituted therefor shall continue
in the manner and under the terms so provided. If such provision is not made
in such transaction, then the Administrator shall cause written notice of the
proposed transaction to be given to Optionee not less than fifteen (15) days
prior to the anticipated effective date of the proposed transaction. For
purposes of this Section 12, a "Recommended Share Purchase Offer" shall be a
transaction in which an offer is made to purchase outstanding securities of
the Company constituting more than 50% of the voting power of the Company's
capital stock, which offer is recommended to the Company's securityholders by
the Company's Board.
13. CO-SALE RIGHTS.
(a) SALE OF CONTROLLING INTEREST. Except as provided in subsection
(b) below, in the event that Amoco Technology Company, a Delaware corporation or
any Permitted Transferee (the "Controlling Shareholder") desires, at any time,
to sell, transfer, assign or otherwise dispose of an interest in the Company
representing more than fifty percent (50%) of the voting power of the Company
(the "Offered Shares") in any one transaction or a series of related
transactions, the Controlling Shareholder shall deliver a notice (the "Notice")
to the Optionee stating (i) the Controlling Shareholder's bona fide intention
to sell or transfer the Offered Shares, (ii) the nature of the Offered Shares
to be sold or transferred, (iii) the price for which the Controlling
Shareholder proposes to sell or transfer such Offered Shares, (iv) the name of
the proposed purchaser or transferee and (v) all other material terms and
provisions relating to the proposed sale or transfer. The Controlling
Shareholder may indicate in such Notice that the Optionee must sell to the
proposed purchaser a proportion of this Option (whether or not vested)
representing an amount of Shares (and to the extent any portion of this option
is exercised, the Shares) equal to the proportion that the Offered Shares bears
to the Controlling Shareholder's entire interest in the Company (the
"Participating Ratio"). In such case, Optionee must sell his or her
Participating Ratio of this Option or Shares acquired hereunder on the terms
specified in the Notice. If the Notice does not require such mandatory sale,
within thirty (30) days after receipt by the Optionee from the Controlling
Shareholder of the Notice, the Optionee shall have the right, exercisable upon
written notice to the Controlling Shareholder, to participate in the
Controlling Shareholder's sale of the Offered Shares based on the Participating
Ratio. To the extent the Controlling Shareholder requires the Optionee to sell
or if the Optionee exercises such right of participation, the number of Offered
Shares which the Selling Shareholder may sell pursuant to the Notice shall be
correspondingly reduced. Notwithstanding the foregoing, if the Optionee holds
Shares acquired upon exercise of any portion of this Option, such Shares, to
the extent of the Participating Ratio must be sold before any portion of this
Option is sold. To the extent that the Optionee sells any portion of this
Option pursuant to this Section 13, the purchase price for the sale of such
portion shall be equal to the purchase price per share proposed for the Offered
Shares times the number of Shares exercisable (as if this entire Option is then
fully vested) pursuant to the portion of this Option that is sold, minus the
aggregate exercise price for such Shares.
(b) PERMITTED TRANSFERS. Notwithstanding subsection (a), above, the
Controlling Shareholder may transfer all or any portion of its interest in the
Corporation free of any rights or
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obligations under subsection (a), above if the transferee (a "Permitted
Transferee") is a corporation or other entity in which more than 50% (by
vote) of the stock or other incidents of ownership is owned by the same
persons or entities who, immediately prior to such transfer, owned more than
50% (by vote) of the Controlling Shareholder.
14. NO EMPLOYMENT CONTRACT CREATED. Neither the granting of this Option
nor the exercise hereof shall be construed as granting to the Optionee any
right with respect to continuance of employment by the Company or any of its
subsidiaries. The right of the Company or any of its subsidiaries to terminate
at will the Optionee's employment at any time (whether by dismissal, discharge
or otherwise), with or without cause, is specifically reserved, subject to any
other written employment agreement to which the Company and Optionee may be a
party.
15. RIGHTS AS SHAREHOLDER. The Optionee (or transferee of this option by
will or by the laws of descent and distribution) shall have no rights as a
shareholder with respect to any Shares covered by this Option until the date of
the issuance of a stock certificate or certificates to him or her for such
Shares, notwithstanding the exercise of this Option.
16. "MARKET STAND-OFF" AGREEMENT. Optionee agrees that, if requested by
the Company or the managing underwriter of any proposed public offering of the
Company's securities, Optionee will not sell or otherwise transfer or dispose
of any Shares held by Optionee without the prior written consent of the Company
or such underwriter, as the case may be, during such period of time, not to
exceed 180 days following the effective date of the registration statement
filed by the Company with respect to such offering, as the Company or the
underwriter may specify.
17. INTERPRETATION. This Option is granted pursuant to the terms of the
Plan, and shall in all respects be interpreted in accordance therewith. The
Administrator shall interpret and construe this Option and the Plan, and any
action, decision, interpretation or determination made in good faith by the
Administrator shall be final and binding on the Company and the Optionee. As
used in this Agreement, the term "Administrator" shall refer to the committee
of the Board of Directors of the Company appointed to administer the Plan, and
if no such committee has been appointed, the term Administrator shall mean the
Board of Directors.
18. NOTICES. Any notice, demand or request required or permitted to be
given under this Agreement shall be in writing and shall be deemed given when
delivered personally or three (3) days after being deposited in the United
States mail, as certified or registered mail, with postage prepaid, and
addressed, if to the Company, at its principal place of business, Attention:
the Chief Financial Officer, and if to the Optionee, at Optionee's most recent
address as shown in the employment or stock records of the Company.
19. SEVERABILITY. Should any provision or portion of this Agreement be
held to be unenforceable or invalid for any reason, the remaining provisions
and portions of this Agreement shall be unaffected by such holding.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be deemed one instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
VYSIS, INC. "OPTIONEE"
By:
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Its: (Signature)
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(Type or print name)
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COOPERATION AGREEMENT
THIS COOPERATION AGREEMENT is made the ____ day of October, 1997, between VYSIS,
INC. ("Vysis"), a Delaware corporation, and AMOCO TECHNOLOGY COMPANY ("ATC"), a
Delaware corporation.
WHEREAS, Vysis is a wholly-owned subsidiary of ATC and ATC has consolidated
its medical diagnostics businesses and research efforts (the "Diagnostics
Business") into Vysis;
WHEREAS, ATC has previously made capital contributions to Vysis of various
assets of the Diagnostics Business, including the stock of Vysis, Inc., an
Illinois corporation, and of Gene-Trak, Inc., a Delaware corporation; and
WHEREAS, as part of this consolidation ATC and Vysis wish to set out their
agreement on corporate transactions necessary to complete the consolidation and
establishment of Vysis as a stand-alone company.
NOW, THEREFORE, for and in consideration of the mutual covenants, and
subject to the terms and conditions contained herein, the parties hereto agree
as follows:
1. DOCUMENTATION OF ASSET TRANSFERS TO VYSIS
(a) ATC agrees to execute and deliver, or cause to be executed and
delivered, to Vysis all such additional documents as shall be reasonably
requested by Vysis in order to fully evidence in Vysis title to any intellectual
property assets previously assigned to Vysis pursuant to an assignment dated
September 27, 1996, including without limitation, assignments of foreign patents
and patent applications. ATC and Vysis acknowledge and agree that the necessary
filings in the appropriate patent offices to evidence the assignment of the
patents and patent applications to Vysis may take an extended period of time to
complete. ATC and Vysis will cooperate in carrying out these filings. Vysis
agrees that the filing costs and fees associated with any such assignments are
its sole responsibility.
(b) ATC hereby assigns, subject to any necessary consents of third
parties, to Vysis: (i) the License Agreement between ATC and the University of
California signed July 30, 1992, and (ii) the Agreement between ATC and the
Center for Neurological Studies dated June 3, 1993. ATC and Vysis will
cooperate in obtaining any necessary consents of the University or the Center
for these assignments.
2. LITIGATION
(a) ATC and Vysis and their respective affiliates are defendants in a
patent infringement suit, Gen-Probe, Inc. v. Amoco Corporation, et al., pending
in the Federal Court for the Southern District of California (the "Gen-
<PAGE>
Probe suit"). The Gen-Probe suit alleged two counts of patent infringement
of U.S. Patent Numbers 4,851,330 and 5,288,611 (the "Kohne patents"), based
upon (a) Vysis' Food Diagnostics business operations and (b) the Gallileo
infectious disease program. The suit also alleged three additional counts:
(c) unfair competition, (d) conspiracy to commit unfair competition and (e)
violation of the Cartwright Act. The conspiracy to commit unfair competition
and violation of the Cartwright Act counts have been dismissed without
prejudice. ATC and Vysis agree to allocate any liabilities which may arise
from the Gen-Probe suit or from any suit filed against ATC and Vysis and
their affiliates by Gen-Probe, Gen-Probe's affiliates or any successor in
interest to or assignee of Gen-Probe in any jurisdiction as follows:
(i) ATC indemnifies Vysis and its subsidiaries against any and
all liabilities and claims arising from any of the pending unfair competition
count in the Gen-Probe suit or from any reinstatement of a claim of
substantially similar content to the dismissed counts of conspiracy to commit
unfair competition and violation of the Cartwright Act which may be brought by
Gen-Probe or its affiliates, successors or assignees, and
(ii) Vysis indemnifies ATC and Amoco Corporation and their
affiliates against any and all other liabilities and claims arising from the
Gen-Probe suit (including the two pending counts of patent infringement) or from
the facts and circumstances relating to the Gen-Probe suit or any litigation
concerning the ownership of the Kohne patents.
(iii) Vysis and ATC agree that Vysis shall be responsible for the
attorney's fees incurred in defending the Gen-Probe suit; provided that ATC
shall have the right to be represented by separate counsel at its expense and
ATC shall be responsible for any attorney's fees for counsel which the parties
agree to retain to represent Vysis and ATC with respect to the unfair
competition count.
(b) Vysis and ATC further agree to cooperate in the defense of the
Gen-Probe suit. Vysis and ATC agree that neither will settle any claim or
liability to Gen-Probe arising from the Gen-Probe suit, any successor suit to
it or from the activities related to the Gen-Probe suit without the consent
of the other party.
3. ACCESS TO RECORDS
Vysis and ATC agree that each shall afford the other party and its
authorized accountants, counsel and designated representatives reasonable access
to their employees and shall make available or provide reasonable access and
duplicating rights to all records, books, contracts, instruments, computer data
and other data and information within their possession and
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relating to the Diagnostics Business insofar as such information is
reasonably required for the purposes of financial and governmental compliance
and reporting, tax calculation and reporting and third party claims and
litigation handling and resolution.
4. LIABILITIES FROM DISCONTINUED OPERATIONS
ATC agrees that it shall retain responsibility for matters arising from the
following discontinued business and research efforts of certain of its prior
businesses related to the Diagnostics Business (the "Discontinued Operations")
as follows: (i) except as otherwise provided in Paragraph 2. above, the Galileo
infectious disease program, (ii) the Nissui Termination Agreement, (iii) the
shut-down of the Diagnostics Business' operations in Framingham, Massachusetts,
(iv) the sale of the Diagnostics Business' facility in Framingham,
Massachusetts, (v) the Betagen business, (vi) the investment in and dealings
with GDP Technologies, and (vii) the operations and sale of IntelliGenetics,
Inc. ATC therefore indemnifies Vysis and its subsidiaries against any
liabilities and claims arising from the Discontinued Operations, whether or not
these liabilities and claims are alleged as or are due to the negligence of
Vysis or any of its subsidiaries, including without limitation employee
severance claims and litigation, COBRA medical payment liabilities, obligations
under contractual settlement agreements and reasonable attorneys' fees spent in
preparing for or responding to any such liabilities or claims, except to the
extent that Vysis specifically accepts a liability or claim under this
Cooperation Agreement. Vysis agrees to notify ATC promptly after it receives
notice of any liability or claim subject to this indemnity and to cooperate with
ATC in the handling and resolution of any such liability or claim.
5. GOVERNING LAW
This Agreement shall be governed by and construed under the laws of the
State of Illinois, excluding any choice of law rules which would direct the
application of the law of another jurisdiction.
In witness whereof, Vysis and ATC show their agreement by signing below.
VYSIS, INC. AMOCO TECHNOLOGY COMPANY
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President President
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REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT, made as of ________, 1997, is by and between Vysis, Inc., a
Delaware corporation (the "Company"), and Amoco Technology Company, a Delaware
corporation (the "Stockholder").
This Agreement is made in connection with the registration for sale to the
public of shares of common stock, $.001 par value, of the Company (the "Common
Stock") pursuant to a registration statement on Form S-1 and any amendments
thereto (the "Registration Statement") originally filed with the Securities and
Exchange Commission (the "Commission") on October ___, 1997 (File No. 333-XXXX)
(the "Initial Public Offering").
Prior to the Initial Public Offering, the Stockholder owned approximately
100% of the issued and outstanding shares of common stock of the Company and
upon consummation of the Initial Public Offering the Stockholder will own
approximately ____% of the outstanding Common Stock.
THE PARTIES HERETO AGREE AS FOLLOWS:
1. DEFINITIONS. As used in this Agreement, the following capitalized
terms shall have the following respective meanings:
AFFILIATE -- Of any Person is any Person which, directly or
indirectly, controls or is controlled by or is under common control with, such
Person. A Person shall be deemed to be "controlled by" any other Person if such
other Person possesses, directly or indirectly, power (i) to vote 10% or more of
the securities having ordinary voting power for the election of managing general
partners or directors (or Persons holding equivalent positions) of such Person
(or, at the time extraordinary voting powers are available, to vote 10% or more
of the securities having extraordinary voting power); or (ii) to direct or cause
the direction of the management and policies of such Person whether by contract
or otherwise.
EXCHANGE ACT - The Securities Exchange Act of 1934, as amended, or any
similar federal statute then in effect, and a reference to a particular section
thereof shall be deemed to include a reference to the comparable section, if
any, of any such similar federal statute.
HOLDER - The Stockholder and any Person to whom it has assigned rights
hereunder as permitted by Section 10(c).
PERSON - Any individual, partnership, joint venture, corporation,
trust, unincorporated organization or government or any department or agency
thereof.
<PAGE>
REGISTRABLE SECURITIES - The Common Stock owned by the Stockholder on
the date hereof, Common Stock issuable to the Stockholder upon conversion of the
Company's outstanding shares of Series A Preferred Stock or Series B Preferred
Stock and any Common Stock or other securities which may be issued or
distributed in respect thereof by way of or in connection with a stock dividend
or stock split or other distribution, recapitalization, reclassification,
combination of shares, merger, consolidation or other reorganization. As to any
particular Registrable Securities, such Registrable Securities shall cease to be
Registrable Securities when they cease to be owned by a Holder.
SECURITIES ACT - The Securities Act of 1933, as amended, or any
similar federal statute then in effect, and a reference to a particular section
thereof shall be deemed to include a reference to the comparable section, if
any, of any such similar federal statute.
SHELF REGISTRATION STATEMENT - A registration statement on Form S-3
filed pursuant to Rule 415 under the Securities Act.
2.(a) DEMAND REGISTRATION. In the event that following 180 days after the
effective date of the Registration Statement any Holder or Holders desire to
sell shares of Registrable Securities owned by such Holder or Holders then upon
the written request of any Holder or Holders requesting that the Company effect
the registration under the Securities Act of all or part of such Holder's or
Holders' Registrable Securities and specifying the intended method of
disposition thereof, but subject to the limitations set forth herein, the
Company will promptly give written notice of such requested registration to all
other Holders of Registrable Securities, and the Company shall file with the
Commission as promptly as practicable after sending such notice, and use its
best efforts to cause to become effective, a registration statement under the
Securities Act registering the offering and sale of:
(i) the Registrable Securities which the Company has been so requested
to register by such Holder or Holders; and
(ii) all other Registrable Securities which the Company has been
requested to register by any other Holder thereof by written request given
to the Company within 15 days after the giving of such written notice by
the Company (which request shall specify the intended method of disposition
of such Registrable Securities),
all to the extent necessary to permit the disposition (in accordance with the
intended method thereof as aforesaid) of the
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<PAGE>
Registrable Securities so to be registered; PROVIDED, that the Company shall
not be obligated to file a registration statement relating to any
registration request under this Section 2(a) (A) unless the aggregate
requests by the Holder or Holders for such registration cover not less than
an aggregate of 1,000,000 shares (adjusted for any stock splits, reverse
stock splits or combination of shares) or (B) with respect to more than one
such registration per calendar year; provided that a request may cover fewer
than 1,000,000 shares (but not less than 500,000 shares) if the total number
of shares of Registrable Securities then outstanding is less than 1,000,000.
A request for registration under this Section 2(a) shall not be counted for
purposes of the foregoing limitation (i) unless a registration statement has
become effective and has been kept continuously effective for the period
required under Section 4(b), (ii) if after it has become effective, use of such
registration statement is suspended by any stop order, injunction or other order
or requirement of the Commission or other governmental agency or court, (iii) if
no Registrable Securities are sold within the period during which the
registration statement has been kept continuously effective as required under
Section 4(b).
A Holder may, in connection with a request for registration under this
Section 2(a), specify that the Registrable Securities are to be sold on a
delayed or continuous basis, in which case the Company shall file a Shelf
Registration Statement with respect thereto; provided, that each of the
following conditions has been satisfied: (i) the Company is eligible to file a
registration statement on Form S-3, (ii) a period of six years has elapsed since
the effective date of the Registration Statement and (iii) the total number of
Registrable Securities outstanding constitutes 30% or less of the total number
of shares of Common Stock outstanding.
(b) PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration
pursuant to this Section 2 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities requested to be included in such registration (including securities
of the Company which are not Registrable Securities) exceeds the number which
can be sold in such offering, the Company will include in such registration only
the Registrable Securities requested to be included in such registration. In
the event that the number of Registrable Securities requested to be included in
such registration exceeds the number which, in the opinion of such managing
underwriter, can be sold, the number of such shall be allocated first to the
Stockholder and its Affiliates, and then pro rata among all other requesting
Holders on the basis of the
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<PAGE>
relative number of shares of Registrable Securities originally requested to
be included by each such Holder.
(c) LIMITATION ON REGISTRATION RIGHTS.
(i) If a request for registration pursuant to Section 2(a) hereof is
made within 30 days prior to the conclusion of the Company's then current
fiscal year, or within 40 days after the end of a fiscal year, the Company
shall not be required to file a registration statement until such time as
the Company receives its audited financial statements for such fiscal year.
(ii) The Company shall be entitled to postpone for a reasonable period
of time (not to exceed 90 days, which may not thereafter be extended
without the mutual agreement of the Company and the Holder or Holders
requesting registration) the filing of any registration statement otherwise
required to be prepared and filed by it pursuant to Section 2(a) hereof if,
at the time it receives a request for such registration, (w) the Company is
conducting or about to conduct an offering of any class of its securities
and the Company is advised by the investment banker or financial advisor
engaged by the Company to advise the Company thereon that such offering
would be affected adversely by the registration so demanded and the Company
shall have furnished to the Holder or Holders of Registrable Securities
requesting such registration an Officers' Certificate to that effect,
(x) the Company is in possession of material information that has not been
disclosed to the public and the Company deems it advisable not to disclose
such information in the registration statement, (y) the Company is engaged
in any active program for repurchase of its Common Stock or (z) the board
of directors of the Company shall determine in good faith that such
offering will interfere with a pending or contemplated financing, merger,
acquisition, sale of assets, recapitalization or other similar corporate
action of the Company and the Company shall have furnished to the Holder or
Holders of Registrable Securities requesting such registration an Officers'
Certificate to that effect. The Company may only exercise its right to
postpone the filing of registration statement under this Section 2(c)(ii)
once in any calendar year. In the event of the exercise by the Company of
such postponement right, it shall furnish the requesting Holders with an
estimate as to when the circumstances permitting the Company to postpone
such filing shall cease to exist and thereafter give the Holders prompt
notice of such cessation. After such period of postponement the Company
shall effect such registration as promptly as practicable without further
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<PAGE>
request from the Holder or Holders of Registrable Securities, unless such
request has been withdrawn.
(iii) Except as otherwise provided herein, any request by a Holder or
Holders for registration of Registrable Securities pursuant to Section 2(a)
hereof, which is subsequently withdrawn prior to the registration statement
becoming effective, shall not constitute a registration statement for
purposes of determining the number of registrations to which the Holder of
such Registrable Securities is entitled pursuant to Section 2(a); PROVIDED,
HOWEVER, that the Holder of such Registrable Securities shall reimburse the
Company for all expenses incurred, including, without limitation,
reasonable fees and expenses of the Company's attorneys, accountants and
investment bankers, in connection with the preparation and filing, if
filed, of such registration statement, unless such withdrawal is the result
of a postponement by the Company under Section 2(c)(ii).
(d) In connection with any request for registration under this Section 2
involving an underwritten offering, the requesting Holders shall have the right
to select the underwriter or underwriters with the consent of the Company, which
consent shall not be unreasonably withheld.
3.(a) INCIDENTAL REGISTRATION. If the Company shall at any time propose to
file a registration statement under the Securities Act for an offering of Common
Stock of the Company for cash (other than an offering relating to (i) a business
combination that is to be filed on Form S-4 under the Securities Act (or any
successor form thereto) or (ii) an employee benefit plan or (iii) securities of
the Company convertible into Common Stock where no separate consideration is
received by the Company for such Common Stock), the Company shall provide prompt
written notice of such proposal to all Holders of Registrable Securities of its
intention to do so and of such Holders' rights under this Section 3 and shall
use its reasonable efforts to include such number or amount of Registrable
Securities in such registration statement, which the Company has been so
requested to register by the Holders thereof, which request shall be made to the
Company within 10 business days after the Holder receives notice from the
Company of such proposed registration; PROVIDED, that (i) if, at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register such
securities, the Company may, at its election, give written notice of such
determination to each Holder of Registrable Securities and, thereupon, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration
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<PAGE>
(but not from its obligation to pay the registration expenses referred to in
Section 5 incurred in connection therewith), and (ii) if such registration
involves an underwritten offering, all Holders of Registrable Securities
requesting to be included in the Company's registration must sell their
Registrable Securities to the underwriters selected by the Company on the
same terms and conditions as apply to the Company, with such differences,
including any with respect to indemnification and liability insurance, as may
be customary or appropriate in combined primary and secondary offerings. The
Holders shall have the right to revoke their election to have their shares
included in such registration at any time prior to the filing of the
registration statement.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If a registration pursuant to
this Section 3 involves an underwritten offering and the managing underwriter
advises the Company in writing that, in its opinion, the number of securities to
be included in such registration exceeds the number which can be sold in such
offering, so as to be likely to have a significant adverse effect on such
offering as contemplated by the Company (including the price, timing or
distribution of which the Company proposes to sell such securities), then the
Company will include in such registration (i) first, 100% of the securities the
Company proposes to sell, (ii) second, to the extent of the number of
Registrable Securities requested to be included in such registration which, in
the opinion of such managing underwriter, can be sold without having the
significant adverse effect referred to above, the number of Registrable
Securities which the Holders have requested to be included in such registration,
such amount to be allocated first to the Stockholder and its Affiliates, and
then pro rata among all requesting Holders on the basis of the relative number
of shares of Registrable Securities initially requested to be included by each
such Holder.
4. REGISTRATION PROCEDURES. Whenever a Holder or Holders have requested
that any Registrable Securities be registered pursuant to this Agreement, the
Company will use its best efforts to effect the registration and the sale of
such Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto the Company will as expeditiously as
possible:
(a) prepare and file with the Commission a registration statement with
respect to such Registrable Securities (which shall be effected within 30
days of a request in the case of a registration under Section 2(a)) and use
its best efforts to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will furnish to the counsel
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<PAGE>
selected by the Holders of a majority of the Registrable Securities covered
by such registration statement copies of all such documents proposed to be
filed, which documents shall be subject to review of such counsel;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for such period as is necessary to complete the
disposition of all securities covered by such registration statement during
such period in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement;
PROVIDED, HOWEVER, that such period shall not exceed 90 days unless the
registration statement is a Shelf Registration Statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including
each preliminary prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other
acts and things that may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller (provided that the Company will
not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
subparagraph, (ii) subject itself to taxation in any such jurisdiction or
(iii) consent to general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act,(i) of the occurrence of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein, in light of the circumstances under which made, not
misleading, and at the request of any such seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
will not contain an untrue statement of a
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<PAGE>
material fact or omit to state any fact necessary to make the statements
therein, in light of the circumstances under which made, not misleading;
or (ii) of the issuance by the Commission of any stop order suspending
the effectiveness of the registration statement or of any order
preventing or suspending the use of any preliminary prospectus, or of
the suspension of the qualification of the registration statement for
offering or sale in any jurisdiction, or of the institution or threatening
of any proceedings for any of such purposes; PROVIDED, HOWEVER, that
the Company shall not be required to notify a seller of Registrable
Securities of the occurrence of any event described in clause (i) hereof
that relates to a prospectus contained in a Shelf Registration Statement
unless within the 30 days prior thereto the seller has given the Company
notice of its intention to offer or sell Registrable Securities pursuant
to Section 5(e) below;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which securities issued by the Company that are of
the same class as the Registrable Securities are then listed;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration
statement;
(h) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other agent
retained by any such seller or underwriter all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors, employees and independent certified public
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(i) use its best efforts to cause such Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the sellers thereof to consummate the disposition of such Registrable
Securities;
(j) obtain a "cold comfort" letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by "cold comfort" letters as the seller or sellers of a
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majority of the Registrable Securities being sold reasonably request;
(k) if underwriters are engaged by the Company in connection with any
registration referred to in this Agreement (such underwriters shall be
reasonably satisfactory to the Holders of a majority of the Registrable
Securities covered by such registration), the Company shall provide
indemnification, representations, covenants, opinions and other assurance
to the underwriters in form and substance reasonably satisfactory to such
underwriters; and
(l) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
Holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities.
(m) obtain an opinion of outside counsel (or inside counsel if
satisfactory to each underwriter) for the Company covering such matters of
the type customarily covered in opinions of issuer's counsel as the seller
or sellers of a majority of the Registrable Securities being sold
reasonably request;
(n) file the reports required by the Exchange Act for companies
registered under such act and otherwise comply with all applicable rules
and regulations of the Commission;
(o) keep the sellers advised as to the initiation and progress of any
demand or other registration; and
(p) promptly deliver to the Holders copies of all public announcements
made by the Company regarding disposition, acquisitions or other material
transactions involving the Company.
5. HOLDERS' OBLIGATIONS IN REGISTRATION.
(a) Each Holder agrees, that, upon receipt of notice of an event
described in Section 4(e) above, such Holders will immediately discontinue
disposition of the Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by
Section 4(e) or until it is advised in writing by the Company that the use
of the prospectus may be resumed, and has received copies of any additional
or supplemental filings which are incorporated by reference in the
prospectus. If so directed by the Company, such Holder will, or will
request the managing underwriter or agent, if
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<PAGE>
any, to deliver to the Company at the Company's expense all copies
(other than permanent file copies) then in such Holder's possession, of
the prospectus covering such Registrable Securities current at the time
of receipt of such notice.
(b) In respect of a registration pursuant to this Agreement, each
Holder of Registrable Securities covered by a registration statement shall
advise the Company immediately if such Holder knows or becomes aware of any
matter which such Holder believes may result in the inclusion in a
prospectus contained in such registration statement of an untrue statement
of a material fact or the omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
shall promptly notify the Company and assist the Company in preparation and
filing with the Commission of any such amendments or supplements to said
registration statement that may be necessary or appropriate to permit the
prospectus included therein to be used under the Securities Act during the
period during which the prospectus must be delivered in connection with the
offering and sale of the Registrable Securities.
(c) The Company may require each Holder of Registrable Securities as
to which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Securities and
such other information relating to the Holder and its ownership of
Registrable Securities as the Company may from time to time reasonably
request and each Holder agrees to furnish the Company with such information
and to cooperate with the Company as necessary to enable the Company to
comply with the provisions of this Agreement.
(d) In the case of any underwritten public offering by the Company of
any shares of Common Stock or securities convertible into shares of Common
Stock, each Holder of Registrable Securities agrees, if and to the extent
requested in writing by the managing underwriter of such offering, not to
effect any public sale or distribution of the Common Stock of the Company
(except as part of such underwritten offering), during the period ending on
the earlier of (i) 90 days after the effective date of the registration
statement relating to such underwritten public offering and (ii) the date
such sale or distribution is permitted by such managing underwriter.
(e) In the event that a Shelf Registration Statement has been filed and
declared effective with respect to any Registrable Securities, the Holder
of such Registrable
-10-
<PAGE>
Securities agrees to notify the Company of any proposed offer or sale
thereof at least two business days prior to the proposed offer or sale.
Such notice shall include such information relating to the Holder and
the proposed distribution of Registrable Securities by the Holder as shall
be required to be included in the prospectus, to the extent such
information has not already been included therein. If within such two
business day period the Company advises the Holder furnishing such notice
that the Company is in possession of material information that has not been
disclosed to the public and the Company deems it advisable not to disclose
such information in the prospectus, then the Holder furnishing such notice
shall postpone the contemplated offering or sale until the earlier to occur
of (i) the date as of which the Company is no longer in possession of such
undisclosed material information (notice of which the Company agrees to
promptly furnish to the Holder)or (ii) the date which is 30 days following
the receipt by the Company of the notice of proposed offer or sale. A
Holder furnishing a notice of proposed offer or sale to the Company
pursuant to this Section 5(e) shall promptly notify the Company of the
termination of such offering or completion of such sale.
6. REGISTRATION EXPENSES. All expenses incidental to the Company's
performance of or compliance with this Agreement, including, without limitation,
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding discounts and commissions)
and other persons retained by the Company, including, without limitation, all
salaries and expenses of the Company's officers and employees performing legal
or accounting duties, the expense of any annual audit or quarterly review, the
expense of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which securities
issued by the Company that are of the same class as the Registrable Securities
are then listed will be borne by the Company, except that underwriting discounts
and commissions relating to the sale of Registrable Securities will be the
responsibility of each seller, and each seller shall be responsible for all fees
and disbursements of their own counsel.
7. TERM. This Agreement shall terminate at such time as the shares of
Registrable Securities owned by the Holders of Registrable Securities constitute
less than 5% of the issued and outstanding shares of Common Stock of the
Company.
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<PAGE>
8. INDEMNIFICATION. The provisions of this Section 8 shall be applicable
in respect of each registration pursuant to this Agreement.
(a) The Company shall hold harmless and indemnify each Holder of
Registrable Securities, any underwriter or agent participating in an offering
and their respective Affiliates (including any director, officer, employee,
agent or controlling Person of any of the foregoing), from and against all
losses, claims, damages, liabilities and expenses (including reasonable
attorneys' fees and expenses of investigation) incurred by such indemnified
party pursuant to any actual or threatened third-party action, suit, proceeding
or investigation (including reasonable attorneys' fees and expenses of
investigation) arising out of or based upon any untrue or alleged untrue
statement of material fact contained in any registration statement, any
amendment or supplement thereto, any prospectus or preliminary prospectus or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances under which they were made) not
misleading, except insofar as the same arise out of or are based upon any such
untrue statement or omission based upon information with respect to such Holder
furnished in writing to the Company by such Holder expressly for use therein.
(b) In connection with any registration statement in which a Holder of
Registrable Securities is participating, each such Holder will furnish to the
Company in writing such information, as the Company reasonably requests for use
in connection with any such registration statement or prospectus, and shall
severally and not jointly hold harmless and indemnify each other Holder of
Registrable Securities, any underwriter or agent participating in an offering,
the Company and its Affiliates (including any director, officer, employee,
agent, or controlling Person of each of the foregoing) from and against any
losses, claims, damages, liabilities and expenses (including reasonable
attorneys' fees and reasonable expenses of investigation) incurred by such
indemnified party pursuant to any actual or threatened third-party action, suit,
proceeding or investigation (including reasonable attorneys' fees and expenses
of investigation) arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in any registration statement, any
amendment or supplement thereto, any prospectus or preliminary prospectus or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in case of a prospectus, in the light
of the circumstances under which they were made) not misleading, to the extent,
but only to the extent, that such untrue statement or omission is contained in
or failed to be contained in any information with respect to such Holder
furnished in writing by
-12-
<PAGE>
such Holder specifically for inclusion in any prospectus or registration
statement; PROVIDED, HOWEVER, that the liability of such indemnifying party
under this Section 8(b) shall be limited to the amount of net proceeds
received by such indemnifying party in the offering giving rise to such
liability.
(c) The obligation of the Company under Section 8(a) and of the Holders
of Registrable Securities under Section 8(b) to hold harmless and indemnify
any underwriter or agent who participates in an offering or any of their
respective Affiliates shall be conditioned on the underwriting or agency
agreement containing an agreement by such underwriter or agent to hold
harmless and indemnify each of the Company, the Holders of Registrable
Securities participating in the offering, and their respective Affiliates
(including any director, officer, employee, agent, or controlling Person of
each of the foregoing) from and against any losses, claims, damages,
liabilities and expenses (including reasonable attorneys' fees and expenses
of investigation) incurred by such indemnified parties pursuant to any actual
or threatened third-party action, suit, proceeding or investigation
(including reasonable attorneys' fees and expenses of investigation) arising
out of or based upon any untrue or alleged untrue statement of a material
fact contained in any registration statement, any amendment or supplement
thereof, any prospectus or preliminary prospectus or any omission or alleged
omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained or
failed to be contained in any information with respect to such underwriter or
agent furnished in writing by such underwriter or agent specifically for
inclusion in any prospectus or registration statement.
(d) The indemnity provisions in Sections 8(a) and 8(b) above are subject to
the condition that, insofar as they relate to any untrue statement (or alleged
untrue statement) or omission (or alleged omission) made in a preliminary
prospectus or prospectus but eliminated or remedied in any amended prospectus,
such indemnity provisions shall not inure to the benefit of any indemnified
Person, if the Company has previously and in a timely manner delivered
sufficient copies of such amended prospectus to such indemnified Person and if a
copy of such amended prospectus required to be sent or given in accordance with
any applicable law or regulation was not furnished by such indemnified Person to
the person asserting the loss, liability, claim or damage.
(e) Promptly after receipt by an indemnified party under this Section 8 of
any notice of the commencement of any lawsuit or other proceeding or
investigation thereof, such indemnified party will, if a claim in respect
thereof is to be made against
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<PAGE>
the indemnifying parties hereunder, notify in writing the indemnifying
parties of the commencement thereof; but the omission so to notify the
indemnifying parties will not relieve the indemnifying parties from any
liability which they may have to any indemnified party, unless such failure
to notify is materially prejudicial to the indemnifying parties and
materially increases their risk of loss. In case any such lawsuit or other
proceeding or investigation shall be brought against any indemnified party
and such indemnified party shall notify the indemnifying parties of the
commencement thereof, the indemnifying parties shall be entitled to
participate therein and, unless in the opinion of counsel to the indemnified
party a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, to the extent that it shall wish,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying parties in such action). In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel,(ii) the
indemnifying parties shall have failed to assume the defense of such action
or proceeding or shall have failed to employ counsel reasonably satisfactory
to such indemnified party in any action or proceeding; or (iii) the named
parties (including any impleaded parties) to any such action or proceeding
include both such indemnified party and the indemnifying parties, and such
indemnified party shall have been advised by counsel in writing (with a copy
to the indemnifying parties) that there may be one or more defenses available
to such indemnified party or other indemnified parties or other indemnified
parties which are different from or additional to those available to the
indemnifying parties, then, such separate counsel shall be at the expense of
the indemnifying parties and the indemnifying parties shall not have the
right to assume the defense of such action or proceeding on behalf of such
indemnified person. After notice from the indemnifying parties to such
indemnified party of their election so to assume the defense thereof, and
provided that the exception in the foregoing sentence does not apply, the
indemnifying parties shall not be liable to such indemnified party under
these indemnification provisions for any legal expenses of other counsel or
any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. In any event, unless there exists a conflict among
indemnified parties, the indemnifying parties shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the
same general allegations or
-14-
<PAGE>
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys at any time for all such indemnified parties. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding. The indemnifying parties shall not be subject to any
liability for any settlement made without their consent.
(f) In order to provide for the just and equitable contribution in
circumstances under which the indemnity provided for in this Section 8 is for
any reason held to be unenforceable by the indemnified parties though applicable
in accordance with its terms, each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of any losses, claims, damages,
liabilities or expenses of a nature contemplated by such indemnity in such
proportion as is appropriate to reflect not only the relative benefits received
by the indemnifying parties and the indemnified parties, but also to reflect the
relative fault of the indemnifying and indemnified parties in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations;
PROVIDED, HOWEVER, that no Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. Notwithstanding anything in this subsection (f) to the
contrary, no Holder shall be required to contribute any amount in excess of the
net proceeds received by such Holder from the offering to which the losses,
claims, damages, liabilities or expenses relate.
The relative fault of such indemnifying and indemnified parties shall be
determined by reference to, among other things, whether any untrue or alleged
untrue statement of a material fact, or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include any legal or other fees or expenses incurred by such party in
connection with investigating or defending such claim
-15-
<PAGE>
9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No person may participate
in any registration hereunder that is underwritten unless such person (a) agrees
to sell such person's securities on the basis provided in any underwriting
arrangements approved by the person or persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. MISCELLANEOUS.
(a) REMEDIES. Any person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
(b) AMENDMENT AND WAIVERS. The provisions of this Agreement may be amended
and the Company may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, only if the Company has obtained the
written consent of the Stockholder and its Affiliates (to the extent they are
holders of Registrable Securities) and of Holders of at least 50% of the
Registrable Securities held by any other Persons.
(c) SUCCESSORS AND ASSIGNS. All covenants and agreements in this Agreement
by or on behalf of any of the parties hereto will bind and inure to the benefit
of the respective successors and permitted assigns of the parties hereto whether
so expressed or not. A Holder shall be permitted to assign its rights hereunder
to any Person to whom it transfers any Registrable Securities in a transaction
not involving any public offering, provided that (A)(i) the number of
Registrable Securities so transferred is not less than 1,000,000 shares
(adjusted for any stock split, reverse stock split or combination of shares) and
(ii) the assignee agrees with the Company in writing to be bound by the
provisions of this Agreement or (B) such Person is an Affiliate of Stockholder.
(d) SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
(e) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, any one of which need not contain the
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<PAGE>
signatures of more than one party, but all such counterparts taken together
will constitute one and the same Agreement.
(f) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
(g) GOVERNING LAW. The General Corporation Law of Delaware will govern all
issues concerning the relative rights of the Company and the Holders of
Registrable Securities. All other questions concerning the construction,
validity and interpretation of this Agreement and the exhibits and schedules
hereto will be governed by the internal law, and not the law of conflicts, of
the State of Delaware.
(h) NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally or two
days after deposit in the mail, certified or registered mail, return receipt
requested and postage prepaid, to the recipient. Such notices, demands and
other communication will be sent to the Stockholder initially as set forth below
and to each other Holder of Registrable Securities at such Holder's address as
it appears in the records of the Company (unless otherwise indicated by any such
Holder to the Company in writing) and to the Company at its principal executive
offices.
For ATC: 3100 Woodcreek Drive
Downers Grove, Illinois 60515
Attn: President
with a copy to: Amoco Corporation
200 East Randolph Drive
Chicago, Illinois 60601
Attn: General Attorney --
Corporate Law Department
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
VYSIS, INC.
By:____________________________________
Name:_______________________________
Title:______________________________
AMOCO TECHNOLOGY COMPANY
By:____________________________________
Name:_______________________________
Title:______________________________
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<PAGE>
TAX ALLOCATION AGREEMENT
This Agreement is entered into as of July 30, 1997, by and between Amoco
Corporation, an Indiana corporation ("Amoco"), and Vysis, Inc., a Delaware
corporation ("Vysis").
WHEREAS, Amoco and Vysis are part of an affiliated group as defined in section
1504(a) of the Internal Revenue Code, and join in the filing of a consolidated
federal income tax return and may, from time to time, join in the filing of one
or more consolidated or combined state and local income tax returns.
WHEREAS, Vysis is an indirect, wholly-owned subsidiary of Amoco.
WHEREAS, Vysis owns all the issued and outstanding stock of other companies.
WHEREAS, Vysis anticipates selling its own common stock to investors in one or
more series of issues such that Vysis and its domestic subsidiaries will
eventually no longer be entitled to file consolidated federal income tax returns
or, in some cases, consolidated or combined state and local income tax returns,
effective as of a date yet to be determined.
WHEREAS, Amoco and Vysis desire to clarify the method for allocating among
themselves and their respective affiliates their consolidated federal income tax
liability, together with their consolidated or combined state and local income
tax liability or foreign tax liability, and any adjustments thereto.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the
parties agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings set
forth herein:
(a) "AMOCO AFFILIATED GROUP": The affiliated group of corporations, of which
Amoco is the common parent, that joins in the filing of a consolidated federal
income tax return under Subtitle A, Chapter 6 of the Code.
(b) "AMOCO ALLOCATION METHODOLOGY": The consolidated tax allocation methodology
currently used by the Amoco Affiliated Group under sections 1.1552-1(a)(2)(ii)
and 1.1502-33(d)(2)(ii) of the Regulations as in effect prior to 1995, using 100
percent as the fixed percentage for purposes of allocating the additional amount
under section 1.1502-33(d)(2)(ii)(b).
(c) "AMOCO MEMBER": A corporation, including Amoco, which is a member of the
Amoco Affiliated Group.
(d) "CODE": The Internal Revenue Code of 1986, as amended.
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<PAGE>
(e) "DECONSOLIDATION DATE": The date, if any, on which Vysis ceases to be an
Amoco Member.
(f) "REGULATIONS": Federal income tax regulations.
(g) "THIRD PARTY INVESTORS": Holders of Vysis common stock other than Amoco or
an Amoco Member.
(h) "VYSIS MEMBER": A corporation, including Vysis, that would join in the
filing of a federal consolidated income tax return under Subtitle A, Chapter 6
of the Code with Vysis as the common parent if Vysis were not an Amoco Member,
whether or not such corporation is also an Amoco Member.
(i) "VYSIS SUBSIDIARY": A corporation, not a Vysis Member, in which a Vysis
Member owns at least 50 percent of the common stock.
2. FILING OF TAX RETURNS; LIABILITY FOR TAX (IN GENERAL)
Amoco shall be responsible for the filing of consolidated federal income tax
returns for a Vysis Member for each year during which such corporation shall
continue to be an Amoco Member, including any partial year ending with the
Deconsolidation Date. Amoco shall also file or cause to be filed all required
state and local income and franchise tax returns for years in which both an
Amoco Member and a Vysis Member or Vysis Subsidiary are required to be included.
Amoco shall not otherwise be responsible for the filing of any federal, state or
local tax returns for or on behalf of any Vysis Member, including any federal
income tax returns for years beginning on or after the Deconsolidation Date, nor
shall Amoco be responsible for the filing of any foreign tax returns. Except as
otherwise provided in Section 4, Amoco shall be responsible for the payment of
all taxes (and shall be entitled to all refunds) with respect to which Amoco is
required to file a return under this section, but shall not be responsible for
the payment of any other taxes (of any kind) that may be assessed against or
owed or incurred by any Vysis Member or Vysis Subsidiary.
3. ALLOCATION OF CONSOLIDATED FEDERAL INCOME TAX LIABILITY
For so long as Vysis shall continue to be an Amoco Member, every Vysis Member
that is an Amoco Member shall remain subject to the Amoco Allocation
Methodology. Consistently with that methodology, it is understood and agreed
that Amoco shall not be required to credit or reimburse any Vysis Member for any
tax benefit Amoco has received or may receive as a result of deductions or
losses attributable to any Vysis Member for any year prior to 1996. However,
for any taxable year, including a partial year, beginning in 1996 and ending on
the Deconsolidation Date, in which the Vysis Group in the aggregate has
deductions or losses which provide a tax benefit to Amoco, computed in a manner
consistent with the Amoco Allocation Methodology, Amoco shall reimburse Vysis
for such tax benefit by reducing, by the amount of the benefit, the Vysis equity
or debt to which Amoco would otherwise have been or will be entitled as a result
of its incremental funding of Vysis. Amoco shall not, however, be required to
reimburse Vysis for any research
2
<PAGE>
credits or any other tax credits which Amoco may claim, whether or not based in
whole or in part on activities conducted by Vysis. Vysis Members leaving the
Amoco Affiliated Group during a taxable year shall not retain any tax attributes
acquired while an Amoco Member except those attributes specifically addressed in
section 1.1502-79 of the Regulations.
4. ALLOCATION OF STATE AND LOCAL TAX LIABILITY
For any year, including a partial year, beginning on or after the
Deconsolidation Date in which any Vysis Member or Vysis Subsidiary is required
to be included in any combined or consolidated state or local income or
franchise tax filing by an Amoco Member, Vysis shall pay Amoco an amount equal
to the total incremental tax liability occasioned by the inclusion of Vysis
Members or Vysis Subsidiaries in such filings, and Amoco shall pay Vysis an
amount equal to the total incremental tax savings occasioned by the inclusion of
Vysis Members or Vysis Subsidiaries in such filings. The payment by Amoco or by
Vysis shall be determined by taking the total combined or consolidated state and
local tax liability resulting from such filings for such year, and comparing
that liability to the liability computed with respect to the same filings as if
no Vysis Member or Vysis Subsidiary were included.
5. PAYMENT
Payments, if any, due to Amoco from Vysis under Section 3 of this Agreement,
including estimated tax payments, shall be made the later of the dates Amoco is
required to pay estimated and final taxes or within ten days after the date
Amoco notifies the Vysis Group that payment is due. Any amounts due Amoco from
Vysis under Section 4 shall be made within 10 days after Amoco shall have
notified Vysis of such amounts due, after computation under the methodology set
forth in that Section. Any amounts due Vysis from Amoco under Section 4 shall
be made within 45 days after Amoco shall have filed the last state return
required to make the computation described in that Section.
6. ADJUSTMENTS TO STATE, LOCAL, OR CONSOLIDATED FEDERAL INCOME TAX LIABILITY
If state or local tax liability is adjusted, whether by amended return or audit,
and such adjustment shall affect the allocation prescribed in Section 4, the
liability of each Amoco Member or Vysis Member or Vysis Subsidiary under that
Section shall, where appropriate, be recomputed, and Vysis or Amoco, as the case
may be, shall pay the other party such amounts as may be determined by the
recomputation; but no amounts shall be paid during any year in which the net
amount due to one party or the other does not exceed $50,000. Except as
provided in the preceding sentence, any deficiencies or refunds on any tax with
respect to any Vysis Member or Vysis Subsidiary, whether by amended return or
audit, for any period up to and including the Deconsolidation Date shall be for
the sole account of Amoco. In no event shall there be any recomputation of
reimbursements due from Amoco to Vysis for tax benefits pursuant to Section 3 on
account of such deficiencies or refunds.
3
<PAGE>
7. TERMINATION
This Agreement shall terminate on December 31, 1998. It may, however, be
renewed for an additional term of three years at Amoco's option upon written
notice to Vysis, which notice must be delivered or postmarked no later than
November 30, 1998.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized Officers on the dates indicated below.
AMOCO CORPORATION
By: Date:
---------------------------------------- --------------------
Its:
----------------------------------------
VYSIS, INC.
By: Date:
--------------------------------------- --------------------
Its:
---------------------------------------
4
<PAGE>
EXHIBIT 11.1
VYSIS, INC.
STATEMENT RE COMPUTATION OF PER SHARE NET LOSS
(IN THOUSANDS, EXCEPT NET LOSS PER SHARE)
<TABLE>
<CAPTION>
PRO FORMA
---------------------------------- SUPPLEMENTAL
FOR THE YEAR FOR THE SIX MONTHS -------------
ENDED ENDED JUNE 30, FOR THE SIX
DECEMBER 31, -------------------- MONTHS ENDED
1996 1996 1997 JUNE 30, 1997
------------ --------- --------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net loss per statement of operations........................... $ (18,181) $ (9,248) $ (7,629) $ (7,507)
Weighted average common shares outstanding:
Shares attributable to common stock outstanding.............. 1,058 1,058 1,058 1,058
Shares attributable to common stock equivalents.............. 4,929 4,929 4,929 4,929
Shares attributable to options pursuant to Staff Accounting
Bulletin No. 83............................................ 120 120 120 120
Shares to be issued in proposed offering..................... -- -- -- 397
------------ --------- --------- -------------
Total........................................................ 6,107 6,107 6,107 6,504
------------ --------- --------- -------------
------------ --------- --------- -------------
Pro forma net loss per share................................... $ (2.98) $ (1.51) $ (1.25)
------------ --------- ---------
------------ --------- ---------
Supplemental pro forma net loss per share...................... $ (1.15)
-------------
-------------
</TABLE>
<PAGE>
Exhibit 21.1
Subsidiaries of Registrant
Name Jurisdiction of Incorporation Percentage
Ownership
- -------------- ------------------------------ ------------
Vysis, Inc. Illinois 100%
Vysis Sarl France 100%
Vysis GmbH Germany 100%
Gene-Trak, Inc. Delaware 100%
Gene-Trak Systems Delaware 100%
Industrial Diagnostics
Corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated April 25, 1997, except as
to the stock split described in Note 15 which is as of November , 1997,
relating to the consolidated financial statements of Vysis, Inc., which appears
in such Prospectus. We also consent to the application of such report to the
Financial Statement Schedule for the three years ended December 31, 1996 listed
under Item 16(b) of this Registration Statement when such schedule is read in
conjunction with the consolidated financial statements referred to in our
report. The audits referred to in such report also include this schedule. We
also consent to the references to us under the headings "Experts" and "Selected
Financial Information" in such Prospectus. However, it should be noted that
Price Waterhouse LLP has not prepared or certified such "Selected Financial
Information."
PRICE WATERHOUSE LLP
Chicago, Illinois
November , 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
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