<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 0-10961
QUIDEL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2573850
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10165 McKellar Court, San Diego, California 92121
(Address of principal executive offices)
Registrant's telephone number, including area code (619) 552-1100
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the Registrant's Common Stock as of
September 30, 1998 was 23,787,882.
<PAGE> 2
QUIDEL CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Numbers
-------
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets
September 30, 1998 and March 31, 1998..........................................................3
Condensed Consolidated Statements of Operations
Three months ended September 30, 1998 and 1997.................................................4
Condensed Consolidated Statements of Operations
Six months ended September 30, 1998 and 1997...................................................5
Condensed Consolidated Statements of Cash Flows
Six months ended September 30, 1998 and 1997...................................................6
Notes to Unaudited Condensed Consolidated Financial Statements......................................7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................................8
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk..........................14
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings...................................................................14
ITEM 2. Changes in Securities and Use of Proceeds...........................................14
ITEM 3. Defaults upon Senior Securities.....................................................14
ITEM 4. Submission of Matters to a Vote of Security Holders.................................14
ITEM 5. Other Information...................................................................14
ITEM 6. Exhibits and Reports on Form 8-K....................................................14
Signatures..............................................................................................16
Exhibit Index...........................................................................................17
</TABLE>
2
<PAGE> 3
QUIDEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1998 1998
------------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................... $ 8,615,000 $ 9,720,000
Accounts receivable, net ..................................... 6,772,000 8,524,000
Inventories, at lower of cost (first-in, first-out) or market:
Raw materials ............................................ 2,888,000 3,190,000
Work in process .......................................... 2,196,000 1,420,000
Finished goods ........................................... 1,363,000 1,287,000
------------- -------------
6,447,000 5,897,000
Prepaid expenses and other current assets .................... 368,000 540,000
------------- -------------
Total current assets ................................ 22,202,000 24,681,000
Property and equipment, net ....................................... 18,040,000 16,797,000
Deferred tax asset ................................................ 2,707,000 2,707,000
Intangible assets, net ............................................ 3,283,000 3,466,000
Other assets ...................................................... 111,000 131,000
------------- -------------
$ 46,343,000 $ 47,782,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable ............................................. $ 2,631,000 $ 3,246,000
Accrued payroll and related expenses ......................... 932,000 1,261,000
Current portion of long-term debt and obligations
under capital leases ..................................... 185,000 199,000
Deferred contract research revenue ........................... 1,696,000 1,690,000
Accrued royalties ............................................ 529,000 622,000
Other current liabilities .................................... 1,182,000 873,000
------------- -------------
Total current liabilities ........................... 7,155,000 7,891,000
Long-term debt and obligations under capital leases ............... 2,917,000 3,002,000
Stockholders' equity:
Common stock ................................................. 24,000 24,000
Additional paid-in capital ................................... 116,644,000 116,564,000
Accumulated deficit .......................................... (80,397,000) (79,699,000)
------------- -------------
Total stockholders' equity ............................... 36,271,000 36,889,000
------------- -------------
$ 46,343,000 $ 47,782,000
============= =============
</TABLE>
See accompanying notes.
3
<PAGE> 4
QUIDEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended September 30, 1998 1997
------------ ------------
<S> <C> <C>
Revenues:
Net sales ......................................... $ 10,344,000 $ 11,254,000
Research contracts and royalties .................. 1,076,000 733,000
------------ ------------
Total revenues ........................... 11,420,000 11,987,000
Costs and expenses:
Cost of sales ..................................... 6,074,000 5,908,000
Research and development .......................... 2,067,000 2,037,000
Sales and marketing ............................... 2,251,000 2,469,000
General and administrative ........................ 1,551,000 1,233,000
Restructuring related to European subsidiaries .... 267,000 --
------------ ------------
Total costs and expenses ................. 12,210,000 11,647,000
Operating income (loss) ................................ (790,000) 340,000
Other income and expense:
Interest and other income ......................... 119,000 122,000
Interest and other expense ........................ (45,000) (158,000)
------------ ------------
Net income (loss) ...................................... $ (716,000) $ 304,000
============ ============
Basic and diluted earnings (loss) per share ............ $ (.03) $ .01
============ ============
Shares used in basic per share calculation ............. 23,780,000 23,602,000
============ ============
Shares used in diluted per share calculation ........... 23,813,000 23,942,000
============ ============
</TABLE>
See accompanying notes.
4
<PAGE> 5
QUIDEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended September 30, 1998 1997
------------ ------------
<S> <C> <C>
Revenues:
Net sales .................................... $ 20,147,000 $ 20,001,000
Research contracts and royalties ............. 2,144,000 1,355,000
------------ ------------
Total revenues ...................... 22,291,000 21,356,000
Costs and expenses:
Cost of sales ................................ 11,099,000 10,625,000
Research and development ..................... 4,114,000 3,784,000
Sales and marketing .......................... 4,473,000 5,012,000
General and administrative ................... 2,756,000 2,390,000
Restructuring related to European subsidiaries 687,000 --
------------ ------------
Total costs and expenses ............ 23,129,000 21,811,000
Operating loss .................................... (838,000) (455,000)
Other income and expense:
Interest and other income .................... 273,000 230,000
Interest and other expense ................... (133,000) (262,000)
------------ ------------
Net loss .......................................... $ (698,000) $ (487,000)
============ ============
Basic and diluted loss per share .................. $ (.03) $ (.02)
============ ============
Shares used in basic per share calculation ........ 23,767,000 23,577,000
============ ============
Shares used in diluted per share calculation ...... 23,819,000 23,577,000
============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 6
QUIDEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended September 30, 1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................... $ (698,000) $ (487,000)
Adjustments to reconcile net (loss) to net cash
flows provided by operating activities:
Depreciation and amortization ...................... 1,588,000 1,502,000
Changes in operating assets and liabilities:
Accounts receivable ........................... 1,752,000 725,000
Inventories ................................... (550,000) (398,000)
Prepaid expenses and other current assets ..... 172,000 200,000
Accounts payable .............................. (615,000) 178,000
Accrued payroll and related expenses .......... (329,000) (368,000)
Deferred contract research revenue ............ 6,000 --
Accrued royalties ............................. (93,000) 400,000
Other current liabilities ..................... 309,000 (146,000)
----------- -----------
Net cash flows provided by operating activities 1,542,000 1,606,000
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Additions to equipment and improvements ................ (2,570,000) 2,765,000
Increase (decrease) in intangible and other assets ..... (58,000) 2,415,000
----------- -----------
Net cash flows used for investing activities .. (2,628,000) 5,180,000
CASH FLOWS (USED FOR) PROVIDED BY FINANCING ACTIVITIES:
Net proceeds from issuance of common stock ............. 80,000 447,000
Payments on notes payable, long term debt and
obligations under capital leases ....................... (99,000) (91,000)
----------- -----------
Net cash flows used for financing activities .. (19,000) 356,000
Net decrease in cash and cash equivalents ................... (1,105,000) (3,218,000)
Cash and cash equivalents at beginning of period ............ 9,720,000 10,096,0000
----------- -----------
Cash and cash equivalents at end of period .................. $ 8,615,000 $ 6,878,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest ............... $ 175,000 $ 170,000
=========== ===========
Income taxes paid during the period .................... $ 69,000 $ 13,000
=========== ===========
</TABLE>
See accompanying notes.
6
<PAGE> 7
QUIDEL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
QUIDEL Corporation ("QUIDEL" or the "Company") discovers, develops,
manufactures and markets diagnostic products for human health care. The
unaudited financial information included herein is condensed and has
been prepared in accordance with generally accepted accounting
principles applicable to interim periods; consequently it does not
include all generally accepted accounting disclosures required for
complete annual financial statements. The condensed financial
information contains, in the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary to state fairly
the financial position, results of operations and cash flows. The
results of operations for the six months ended September 30, 1998 are
not necessarily indicative of the results to be expected for the full
year.
Management suggests that these condensed financial statements be read
in conjunction with the financial statements and notes thereto for the
year ended March 31, 1998, included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission.
NET INCOME (LOSS) PER SHARE - Effective December 31, 1997, the Company
adopted Statement of Financial Accounting Standards No. 128 "Earnings
per Share". In accordance with this statement, the Company has changed
the method used to calculate earnings per share for the current and
prior periods. The new requirements include a calculation of basic
earnings per share, from which the dilutive effect of stock options and
warrants are excluded, and the calculation of diluted earnings per
share, both of which did not differ from the previous primary earnings
per share calculation.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for the historical information contained herein, the matters discussed in
this report are by their nature forward-looking. Disclosures which use words
such as the Company "believes" "anticipates" or "expects" or use similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and for the reasons stated in this report or in the
Company's other Securities and Exchange Commission filings, or for various
unanticipated reasons, actual results may differ materially. Readers are
cautioned not to place undue reliance on these forward-looking statements. The
Company undertakes no obligation to republish revised forward-looking
statements. The Company's operating results may continue to fluctuate on a
quarter-to-quarter basis as a result of a number of factors, including
seasonality, the competitive and economic factors affecting the Company's
domestic and international markets, actions of major distributors, manufacturing
and production delays or difficulties, adverse actions or delays in product
reviews by United States Food and Drug Administration ("FDA"), and the degree of
acceptance that our new products achieve during the year. Readers are urged to
carefully review and consider the various disclosures made by the Company in
this report which seek to advise interested parties of the risks and other
factors that affect the Company's business. All forward-looking statements,
whether made in this report or elsewhere should be considered in context with
the various disclosures made by the Company about its business.
Results of Operations. The Company's financial results for the second quarter
ended September 30, 1998 were impacted by sales being 8% lower than the prior
years period. Net loss for the quarter was $716,000 or $.03 per share, compared
to income of $304,000 or $.01 per share in the second quarter of the prior year.
NET SALES TRENDS BY MAJOR SALES CHANNELS
<TABLE>
<CAPTION>
INC. INC.
PERIODS ENDED SEPTEMBER 30, THREE MONTHS (DEC) SIX MONTHS (DEC)
(IN THOUSANDS) 1998 1997 % 1998 1997 %
------- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Domestic sales:
Professional sales $ 6,735 $ 7,845 (14%) $13,066 $13,367 (2%)
OTC, OEM and Clinical lab sales 1,183 986 20% 1,841 1,546 19%
------- ------- ------ ------- ------- --------
Total domestic sales 7,918 8,831 (10%) 14,907 14,913 (0%)
Percent of total sales 77% 78% 74% 75%
------- ------- ------ ------- ------- --------
International sales:
Export sales 1,415 1,496 (5%) 3,113 2,980 4%
European subsidiary sales 1,011 927 9% 2,127 2,108 1%
------- ------- ------ ------- ------- --------
Total international sales 2,426 2,423 0% 5,240 5,088 3%
Percent of total sales 23% 22% 26% 25%
------- ------- ------ ------- ------- --------
Total net sales $10,344 $11,254 (8%) $20,147 $20,001 1%
======= ======= ====== ======= ======= ========
</TABLE>
8
<PAGE> 9
Overall sales for the second quarter were $910,000 or 8% lower than the same
period last year. U.S. Professional sales dropped to $6,735,000 in 1998 from
$7,845,000 in 1997. In the domestic market, lower sales were recorded for most
of the Company's products with the exception of H.Pylori. Factors contributing
to the lower sales included late introduction of new products, back-orders and
changing distributor buying practices.
International sales were unchanged from the prior year period. European
subsidiary sales rose 9% due to continued growth in sales of the German
subsidiary. The Company is in the process of closing its sales subsidiaries in
France, The Netherlands and Spain. Sales in these markets are expected to
continue through new distribution partners and two new distribution agreements
were implemented during the quarter. These agreements cover substantially all of
our products in the Netherlands and the majority of the Company's sales in
France. The shift from direct to distributor sales will initially result in
lower sales and gross profit, due to reduced unit sales prices to the
distributor. The impact of the gross profit reduction is expected to be offset
by reduced subsidiary sales, marketing, and administrative expenses.
REVENUE FROM RESEARCH CONTRACTS, LICENSE FEES AND ROYALTIES
<TABLE>
<CAPTION>
PERIODS ENDED SEPTEMBER 30, THREE MONTHS SIX MONTHS
(IN THOUSANDS) 1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Contract research and development $ 970 $ 713 $1,998 $1,300
License Fees 100 -- 125 25
Royalty Income 6 20 21 30
------ ------ ------ ------
Total $1,076 $ 733 $2,144 $1,355
====== ====== ====== ======
</TABLE>
Revenue from research contracts and royalties is principally related to revenue
from the Glaxo influenza and genital herpes diagnostic product development
programs which commenced in March 1996 and October 1997, respectively. If
successful, the products developed under these programs are expected to be
submitted to the FDA for marketing approval during the second half of calendar
year 1999. The amount of contract research revenue recognized is substantially
equal to the sum of the direct program research cost (see Operating Expenses,
below) and allocated support service cost.
9
<PAGE> 10
COST OF SALES AND GROSS PROFIT
<TABLE>
<CAPTION>
PERIODS ENDED SEPTEMBER 30, THREE MONTHS SIX MONTHS
(IN THOUSANDS) 1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Direct Cost - material,labor and other
variable cost $ 3,953 $ 4,116 $ 6,940 $ 7,302
As a percentage of sales 38.2% 36.6% 34.4% 36.5%
Royalty expense- patent licenses 504 505 975 900
As a percentage of sales 4.9% 4.5% 4.8% 4.5%
--------- --------- --------- ---------
Total direct cost 4,457 4,621 7,915 8,202
As a percentage of sales 43.1% 41.1% 39.3% 41.0%
--------- --------- --------- ---------
Direct Margin- contribution per sales dollar 56.9% 58.9% 60.7% 59.0%
Manufacturing overhead cost 1,617 1,287 3,184 2,423
As a percentage of sales 15.6% 11.4% 15.8% 12.1%
--------- --------- --------- ---------
Total cost of sales 6,074 5,908 11,099 10,625
Gross profit $ 4,270 $ 5,346 $ 9,048 $ 9,376
As a percentage of sales 41.3% 47.5% 44.9% 46.9%
========= ========= ========= =========
</TABLE>
Gross profit as a percentage of sales declined to 41.3% which represents a
decrease of 6.2 percentage points from the prior year level. The average direct
margin percentage provided by products sold decreased 2.0 % to 56.9%. This
decrease resulted from cost increases in scrap and unfavorable production cost
variances. Manufacturing overhead cost increased as a result of expanded
production capacity, production supervision to cover multiple shift operations,
and the addition of purchasing and engineering support staff
10
<PAGE> 11
OPERATING EXPENSES
<TABLE>
<CAPTION>
PERIODS ENDED SEPTEMBER 30, THREE MONTHS SIX MONTHS
(IN THOUSANDS) 1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Research and development
Quidel research projects $ 1,144 $ 1,479 $ 2,302 $ 2,755
As a percentage of sales 11.1% 13.1% 11.4% 13.8%
Contract research---direct costs 923 558 1,812 1,029
As a percentage of sales 8.9% 5.0% 9.0% 5.1%
------- ------- ------- -------
Total research and development 2,067 2,037 4,114 3,784
As a percentage of sales 20.0% 18.1% 20.4% 18.9%
Sales and marketing
Domestic professional sales and marketing 1,417 1,631 2,923 3,229
Domestic OTC sales and marketing 75 92 131 147
International sales and marketing 759 746 1,419 1,636
------- ------- ------- -------
Total sales and marketing 2,251 2,469 4,473 5,012
As a percentage of sales 21.8% 21.9% 22.2% 25.1%
General and administrative 1,551 1,233 2,756 2,390
As a percentage of sales 15.0% 11.0% 13.7% 11.9%
======= ======= ======= =======
Restructuring costs 267 687
As a percentage of sales 2.5% 0.0% 3.4% 0.0%
======= ======= ======= =======
Total operating expenses $ 6,136 $ 5,739 $12,030 $11,186
As a percentage of sales 59.3% 51.0% 59.7% 55.9%
======= ======= ======= =======
Total operating expenses excluding
contract research and restructuring $ 4,946 $ 5,181 $ 9,531 $10,157
As a percentage of sales 47.8% 46.0% 47.3% 50.8%
======= ======= ======= =======
</TABLE>
Operating expenses increased $397,000 in the current quarter over the prior year
level. This was a result of expenses related to management changes made during
the quarter and restructuring costs associated with the Company's product
rationalization program, offset in part by reductions in marketing expenditures.
Research and Development. Research and development expense reflects increased
contract research expense due to the October 1997 commencement of the second
program with Glaxo Wellcome for the development of the two point-of-care
diagnostic tests to detect genital herpes; this program was not present in the
prior year period. Spending on Quidel research projects dropped from $1.5
million in 1997 to $1.1 million in 1998.
11
<PAGE> 12
Sales and Marketing. Sales and marketing efficiency remained unchanged in the
quarter as reflected by the total expense as a percent of sales. Sales and
marketing expenditures declined to $2.3 million in 1998 from $2.5 million in
1997. Marketing costs were down 41% from the prior period due to temporary
reductions in staffing and programs.
General and Administrative. General and administrative expense as a percent of
sales increased 4% in the current quarter to $1.6 million from $1.2 million for
the second quarter of 1997. The 1998 increases were primarily costs associated
with management personnel transition costs, outside consulting and increases in
information technology personnel to support conversion to a new business
software platform.
Net Income (Loss). The net loss for the quarter primarily resulted from
decreases in sales and gross profit, costs associated with management changes in
sales, finance and human resources, and the restructuring cost related to the
Company's product rationalization program.
Liquidity and Capital Resources. At September 30, 1998, the Company had cash and
cash equivalents of $8,615,000, compared to $9,720,000 at March 31, 1998. During
the six months ended September 30, 1998 the Company generated $1,542,000 in cash
from operating activities. Net cash used as a result of the increase in
inventory and payment of accounts payable and the net loss was more than offset
by non-cash depreciation and amortization, and the reduction in accounts
receivable.
Net cash used for investment activities of $2,628,000 related primarily to
$2,570,000 in capital expenditures for equipment and improvements to increase
production capacity and reduce product manufacturing cost.
Net cash used in financing activities totaled $19,000, primarily related to
$99,000 in debt repayment offset by $80,000 in proceeds from the exercise of
employee stock options.
QUIDEL's principal capital requirements are currently for working capital. These
requirements fluctuate as a result of numerous factors, such as the extent to
which the Company uses or generates cash in operations, progress in research and
development projects, competition and technological developments and the time
and expenditures required to obtain governmental approval of its products. Based
on its current cash position and its current assessment of future operating
results, management believes that its existing sources of liquidity should be
adequate to meet its operating needs for the next 12 months.
12
<PAGE> 13
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries to represent years. For example, the year "1998"
would be represented by "98". These systems and products will need to be able to
accept four digit entries to distinguish years beginning with 2000 from prior
years. As a result, systems and products that do not accept four digit year
entries will need to be upgraded or replaced to comply with such "Year 2000"
requirements. The Company believes that its internal systems are Year 2000
compliant or will be upgraded or replaced in connection with previously planned
changes to information systems prior to the need to comply with Year 2000
requirements without material cost or expense. The Company has an enterprise
resource planning ("ERP") project underway, which will replace the majority of
the management information systems currently utilized by the Company by April
1999. This system is certified by the software vendor to be Year 2000 compliant,
but has not yet been tested by the Company. This project was initiated to
support the Company's current and future growth plans and is not the result of
Year 2000 information technology issues. Plans to address vendor issues and
contingency plans are in process. The anticipated costs of any Year 2000
modifications are based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to the availability or cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes and similar uncertainties. In addition, there can be no assurance
that Year 2000 compliance problems will not be revealed in the future which
could have a material adverse affect on the Company's business, financial
condition and results of operations. Many of the Company's customers and
suppliers may be affected by Year 2000 issues that may require them to expend
significant resources to modify or replace their existing systems. This may
result in those customers having reduced funds to purchase the Company's
products or in those suppliers experiencing difficulties in producing or
shipping key components to the Company on a timely basis or at all.
Except for the historical information contained herein, the matters discussed in
this report are by their nature forward-looking. For the reasons stated in this
report or in the Company's other Securities and Exchange Commission filings, or
for various unanticipated reasons, actual results may differ materially.
13
<PAGE> 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
<TABLE>
<CAPTION>
Not Applicable
<S> <C>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE None
OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
</TABLE>
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<S> <C>
3.1 Certificate of Incorporation, as amended. (Incorporated
by reference to Exhibit 3.1 to the Registrant's Current
Report on Form 8-K dated February 26, 1991.)
3.2 Amended and Restated Bylaws. (Incorporated by reference
to Exhibit 3.2 to the Registrant's Current Report on
Form 8-K dated June 16, 1995.)
4.1 Form of Warrant Agreement between Registrant and
American Stock Transfer & Trust Company. (Incorporated
by reference to Exhibit 10.3 to the Registrant's Form
10-K dated March 31, 1995.)
4.2 Warrant to Purchase Common Stock issued to Imperial
Bank. Issued February 8, 1994, 117,871 shares with an
initial exercise price of $5.94 per share. Warrant
expires February 8, 1999.(Incorporated by reference to
Exhibit 10.43 to the Registrant's Form 10-Q dated
December 31, 1993.)
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<S> <C>
4.3 Warrant to Purchase 275,000 Shares of Common Stock
issued to Genesis Merchant Group Securities on May 16,
1995 at an initial exercise price of $4.50 per share.
Warrant expires January 15,2000. (Incorporated by
reference to Exhibit 10.17 to the Registrant's Form 10-K
dated March 31, 1995.) .
10.25* Employment Agreement dated September 30,1998 between the
Registrant and Glenn Holmes.
10.26* Employment Agreement dated September 8,1998 between the
Registrant and Steven C. Burke.
10.27* Employment Agreement dated September 8,1998 between the
Registrant and Darryll J. Getzlaff.
27* Financial Data Schedule
* Attached hereto.
</TABLE>
(b) Reports on Form 8-K filed in the second quarter of fiscal 1999
None
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUIDEL CORPORATION
------------------------------------
(Registrant)
Date: November 16, 1998
/s/ ANDRE DE BRUIN
------------------------------------
ANDRE DE BRUIN
President and Chief Executive
Officer
(Principal Executive Officer)
Date: November 16, 1998 /s/ WILLIAM D. ATHING
------------------------------------
WILLIAM D. ATHING
Controller
(Chief Accounting Officer)
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<S> <C>
3.1 Certificate of Incorporation, as amended. (Incorporated
by reference to Exhibit 3.1 to the Registrant's Current
Report on Form 8-K dated February 26, 1991.)
3.2 Amended and Restated Bylaws. (Incorporated by reference
to Exhibit 3.2 to the Registrant's Current Report on
Form 8-K dated June 16, 1995.)
4.1 Form of Warrant Agreement between Registrant and
American Stock Transfer & Trust Company. (Incorporated
by reference to Exhibit 10.3 to the Registrant's Form
10-K dated March 31, 1995.)
4.2 Warrant to Purchase Common Stock issued to Imperial
Bank. Issued February 8, 1994, 117,871 shares with an
initial exercise price of $5.94 per share. Warrant
expires February 8, 1999.(Incorporated by reference to
Exhibit 10.43 to the Registrant's Form 10-Q dated
December 31, 1993.)
4.3 Warrant to Purchase 275,000 Shares of Common Stock
issued to Genesis Merchant Group Securities on May 16,
1995 at an initial exercise price of $4.50 per share.
Warrant expires January 15,2000. (Incorporated by
reference to Exhibit 10.17 to the Registrant's Form 10-K
dated March 31, 1995.) .
10.25* Employment Agreement dated September 30,1998 between the
Registrant and Glenn Holmes.
10.26* Employment Agreement dated September 8,1998 between the
Registrant and Steven C. Burke.
10.27* Employment Agreement dated September 8,1998 between the
Registrant and Darryll J. Getzlaff.
27* Financial Data Schedule
* Attached hereto.
</TABLE>
(b) Reports on Form 8-K filed in the second quarter of fiscal 1999
None
17
<PAGE> 1
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the 30th day of September, 1998, by and between QUIDEL CORPORATION, a
Delaware corporation ("QUIDEL") and GLENN HOLMES, an individual ("HOLMES").
BACKGROUND
A. HOLMES has been employed by QUIDEL as its Vice President - Sales and
Marketing since July 1997.
B. HOLMES is voluntarily resigning as an officer of QUIDEL and each
subsidiary thereof and as a trustee of any and all benefit plans.
C. QUIDEL and HOLMES wish to agree upon an orderly executive transition
plan that enables QUIDEL, on an interim basis, to have the benefits of HOLMES'
continuing advice and input regarding important corporate matters.
AGREEMENT
1. RESIGNATION AS OFFICER. Concurrent with the execution and delivery
of this Agreement, HOLMES has executed and delivered to QUIDEL his resignation,
effective immediately, of all positions as an officer of QUIDEL and each
subsidiary thereof (other than the position expressly provided for herein) and
as a trustee of any and all benefit plans of QUIDEL and its affiliates. The form
of such resignation is in the form attached as Exhibit A and incorporated herein
by this reference.
2. FUTURE EMPLOYMENT. HOLMES shall continue to be employed by QUIDEL as
"Special Assistant to the President" from the date hereof until December 31,
1998. On January 1, 1999, all employment and/or consulting relationships between
the parties are forever terminated. Except as provided in Section 4 and Section
7 hereof, nothing herein shall prohibit or limit HOLMES' right, on and after the
date hereof, to accept employment and/or consulting relationships with other
third parties as long as HOLMES makes himself reasonably available from time to
time from the date hereof until December 31, 1998 to promptly respond to and
fulfill the reasonable requests for information and assistance from QUIDEL's
President and Chief Executive Officer.
3. RESPONSIBILITIES. On and after the date hereof, HOLMES shall report
for his duties directly to QUIDEL's President and Chief Executive Officer. The
President and Chief Executive Officer shall determine HOLMES' reasonable duties
and responsibilities. Notwithstanding anything to the contrary herein, in the
event HOLMES is unable to carry out his responsibilities hereunder because of
his death or disability, such inability shall not be deemed a breach or
termination of this Agreement and HOLMES or his estate, as
18
<PAGE> 2
applicable, shall continue to enjoy all of the benefits provided herein as
though HOLMES were not disabled or deceased.
4. NON-COMPETITION/NON-SOLICITATION.
(a) Non-Competition. From the date hereof until December 31, 1998,
HOLMES covenants and agrees that he shall not, directly or indirectly, have any
interest in or enter into or maintain any relationship with (whether as
director, officer, employee, agent, representative, security holder, consultant,
advisor or otherwise) any of the entities listed on Exhibit B attached hereto
and incorporated by this reference or any affiliate of such listed entities. In
the event of any breach by HOLMES of this Section 4(a), QUIDEL shall have the
right to immediately terminate this Agreement upon written notice. In the event
of such early termination, HOLMES and QUIDEL expressly agree that (i) QUIDEL
shall have no further obligation or liability to make the cash payments or
provide the benefit coverages contemplated by Section 5 below for or
attributable to any period after the date of such early termination, and (ii) no
portion of HOLMES' unvested Options shall enjoy the benefit of vesting
acceleration on December 31, 1998 as provided in Section 6 below.
(b) Non-Solicitation of Employees. From the date hereof until the
second (2nd) anniversary date hereof, HOLMES covenants and agrees that he shall
not, directly or indirectly, by or for himself, or as the agent of another, or
through others, in any way solicit or induce, or attempt to solicit or induce,
any employee, officer, representative, consultant or other agent of QUIDEL or
any subsidiary thereof (a "QUIDEL Person") to leave the employ of or other
relationship with QUIDEL or such subsidiary or otherwise interfere with the
employment or other relationship between such person and QUIDEL or any
subsidiary thereof. Notwithstanding the foregoing, HOLMES shall have no
liability under this Section 4(b) with respect to any QUIDEL Person who leaves
the employ of or other relationship with QUIDEL or any subsidiary thereof if
such QUIDEL Person does not, within six (6) months thereafter, enter into any
employment, consulting, representative, agency or investor relationship with
HOLMES or any entity in which HOLMES has an employment, director,
representative, consulting, or investment role.
5. CASH COMPENSATION AND BENEFITS. Subject to HOLMES' fulfillment of
his obligations under this Agreement (including without limitation those set
forth in Section 4(a) and Section 7 hereof but subject to the last sentence of
Section 3), the parties agree as follows:
(a) Base Salary. Concurrent with the execution and delivery of this
Agreement, QUIDEL is paying to HOLMES an aggregate employment compensation
amount, in lump sum, equal to three times his monthly salary rate of $15,416.67,
less tax withholdings from such compensation as required by law and consistent
with past practice. To the extent permitted under applicable plans, HOLMES will
continue to be eligible for group insurance programs and benefits until December
31, 1998.
19
<PAGE> 3
(b) Severance. Concurrent with the execution and delivery of this
Agreement, QUIDEL is paying to HOLMES an aggregate severance payment, in lump
sum, equal to three times his monthly salary rate of $15,416.67, less applicable
withholdings required by law.
(c) Incentive Plan. HOLMES shall not be eligible to participate in or
receive payments pursuant to any incentive programs or bonus adopted for any
period commencing after March 31, 1998.
(d) Medical Insurance. QUIDEL shall, at its own expense and until the
first anniversary of the date hereof, continue to provide to HOLMES and his
dependents who are currently covered under QUIDEL's insurance program medical,
vision and dental benefits at the same levels and on the same terms as HOLMES
and his qualifying dependents enjoy and receive as of the date hereof; provided,
however, that (i) these benefits shall be earlier terminated or reduced, as
applicable, if, when and to the extent HOLMES receives concurrent coverage
through another program, (ii) HOLMES shall be responsible for any and all taxes
if the value of such benefits must be included in his income, and (iii) the
levels and nature of such benefits may be modified by QUIDEL if, when and to the
same extent modifications to such benefits are made applicable to all other
executive officers of QUIDEL.
(e) Vacation/Other Benefits. No vacation benefits or, except as
expressly provided herein, other employee-type benefits shall accrue to or for
HOLMES from and after the date hereof. All of HOLMES' accrued but unused
vacation up to the date hereof shall be paid to him, less applicable
withholdings required by law, within two days of the date hereof.
(f) Outplacement. QUIDEL shall also pay for up to a maximum of six (6)
months of the reasonable expenses of Drake Beam Morin, an executive outplacement
firm, it being understood that QUIDEL shall in no event have an obligation to
pay for any such services for any period after March 31, 1999.
(g) No Offsets. The amounts payable to HOLMES pursuant to this
Agreement shall not be subject to reduction or offset as a result of
compensation or benefits received by HOLMES attributable to other employment
and/or consulting arrangements HOLMES may enter into with third parties on or
after the date hereof.
(h) No Other Amounts. Except as expressly provided in this Agreement
and pursuant to the Options referred to in Section 6 below, HOLMES acknowledges
and agrees that he is entitled to no further compensation or benefits from
QUIDEL, including without limitation any further severance payments.
6. OPTIONS. The following schedule sets forth certain particulars as to
the issued and outstanding stock options (the "Options") that have been granted
to and are currently held by HOLMES:
20
<PAGE> 4
<TABLE>
<CAPTION>
SHARES UNDERLYING
GRANT DATE EXPIRATION DATE EXERCISE PRICE ($/SH) OPTION (#) SHARES EXERCISABLE (#)
---------- --------------- --------------------- ---------- ----------------------
<S> <C> <C> <C> <C>
07/07/97 07/07/07 3.500 50,000 12,500
07/28/98 07/28/08 3.375 13,101 0
07/28/98 07/28/08 3.375 1,899 0
------ ------
TOTALS 65,000 12,500
====== ======
</TABLE>
Subject to HOLMES' fulfillment of his obligations under this Agreement
(including without limitation the obligations set forth in Section 4(a) and
Section 7 hereof but subject to the last sentence of Section 3), all unvested
Options set forth above which have not vested prior to December 31, 1998 --
except for the last two grants of Options covering an aggregate of 15,000 shares
that were granted on 7/28/98 (the "Excluded Options") -- shall fully and
automatically vest and become exercisable on December 31, 1998. (The Excluded
Options shall not be accelerated and shall therefore not become exercisable.)
QUIDEL represents and warrants that the foregoing vesting acceleration has been
authorized by the Compensation Committee of the Board of Directors acting
pursuant to its authority as set forth in Section 4(b)(vi) of QUIDEL's 1990
Employee Stock Option Plan, as amended (the "Plan"). HOLMES understands and
accepts that the foregoing vesting acceleration may have the effect of
disqualifying Options originally granted as Incentive Stock Options so that such
Options shall, for federal and state tax purposes, be treated as Non-Qualified
Stock Options. HOLMES further acknowledges that all required tax withholdings
attributable to his exercise of the Options will either be tendered by him at
the time of his exercise or will be withheld as part of the exercise
authorization provided herein.
For all Options other than Incentive Stock Options (if any), and
pursuant to the Compensation Committee's authorization pursuant to Section
8(a)(iii) of the Plan, the consideration payable by HOLMES to QUIDEL upon
exercise of the Options and representing the aggregate exercise price may -- at
HOLMES' election -- be payable in or by:
(1) cash;
(2) check;
(3) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to
QUIDEL the amount of sale or loan proceeds required to pay the
exercise price (in which event QUIDEL shall pay for or
reimburse HOLMES for all reasonable broker commissions
attributable to such transaction); or
(4) any combination of the foregoing.
21
<PAGE> 5
Similarly, the amount of tax required to be withheld by the Company as a result
of exercise of the Options may also be effected by one or any combination of the
foregoing at the election of HOLMES.
Except as otherwise provided in this Agreement, all Options shall
continue to be subject to and governed by the terms and conditions of the
relevant Stock Option Agreements and the Plan. Such terms include the period of
time within which HOLMES must exercise his Options after termination of his
employment with QUIDEL (i.e., 90 calendar days). Subject to the preceding
sentences, HOLMES may exercise already vested Options at any time or from time
to time during the term of this Agreement.
7. INVENTION AND CONFIDENTIALITY AGREEMENT. Nothing herein shall be
deemed to terminate or limit HOLMES' continuing obligations under that certain
Invention and Confidential Information Agreement, dated as of July 7, 1997, a
copy of which is attached hereto as Exhibit C and incorporated herein by this
reference (the "Prior Agreement"). HOLMES acknowledges the fundamental
importance of the Prior Agreement to QUIDEL and agrees to strictly honor his
obligations thereunder.
8. GENERAL RELEASES.
(a) By HOLMES. Except as provided in Section 8(c) herein, HOLMES hereby
irrevocably and unconditionally releases, acquits and forever discharges QUIDEL
and all of its current, former and future subsidiaries, affiliates, divisions,
successors, predecessors, assigns, stockholders, directors, officers, employees,
agents, representatives, attorneys, accountants and all persons acting by,
through, under or in concert with any of them (collectively, the "QUIDEL
Releasees"), from any and all charges, complaints, claims, liabilities,
obligations, promises, agreements, damages, actions, causes of action, suits,
rights, demands, costs, losses, debts and expenses (including attorneys' fees
and costs) actually incurred of any nature whatsoever, known or unknown,
suspected or unsuspected ("Claim" or "Claims") which HOLMES now has, owns or
holds, or claims to have, own or hold, or which HOLMES at any time heretofore
had, owned or held, or claimed to have had, owned or held, or which HOLMES at
any time hereafter may have, own or hold, or claim to have, own or hold, against
any of the QUIDEL Releasees relating to any event, act or omission that has
occurred prior to or as of the date of this Agreement.
(b) By QUIDEL. Except as provided in Section 8(c) herein, QUIDEL hereby
irrevocably and unconditionally releases, acquits and forever discharges HOLMES
and all of his heirs, successors, agents, representatives, attorneys,
accountants and all persons acting by, through, under or in concert with any of
them (collectively, the "HOLMES Releasees"), from any and all known or unknown,
suspected or unsuspected, Claims which QUIDEL now has, owns or holds, or claims
to have, own or hold, or which QUIDEL at any time heretofore had owned or held,
or claimed to have had, owned or held, or which QUIDEL at any time hereafter may
have, own or hold, or claim to have, own or hold, against any of the HOLMES
Releasees relating to any event, act or omission that has occurred prior to or
as of the date of this Agreement.
22
<PAGE> 6
(c) No Release of Indemnity Rights. The releases provided herein do not
include any release of any right of indemnity or contribution as between HOLMES
and/or QUIDEL in the event that any person subsequently brings an action against
HOLMES and/or QUIDEL pertaining to or arising from, in whole or in part,
HOLMES's performance of his duties as an officer or employee of QUIDEL, or any
act or omission alleged on the part of HOLMES in those capacities. All such
rights of indemnity or contribution, whether arising under the California Labor
Code, the Articles of Incorporation or Bylaws of Quidel, common law, or
otherwise are expressly reserved by both parties. QUIDEL further agrees that it
will maintain, for the term of this Agreement, directors and officers insurance
coverage providing the same or greater protection for HOLMES as existed on
September 1, 1998.
(d) Waiver. Except as provided in Section 8(c) herein, HOLMES and
QUIDEL each expressly waives and relinquishes all rights and benefits afforded
by Section 1542 of the Civil Code of the State of California, and does so
understanding and acknowledging the significance and consequence of such
specific waiver of Section 1542. Section 1542 of the Civil Code of the State of
California states as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
Thus, notwithstanding the provisions of Section 1542, and for the
purpose of implementing a full and complete release and discharge of the QUIDEL
Releasees and the HOLMES Releasees, HOLMES and QUIDEL each expressly
acknowledges that this Agreement is intended to include in its effect, without
limitation, all Claims which he or it does not know or suspect to exist in his
or its favor at the time of execution hereof, and that this Agreement
contemplates the extinguishment of any such Claim or Claims.
HOLMES and QUIDEL each represents and warrants to the QUIDEL Releasees
and the HOLMES Releasees, respectively, that he or it has not heretofore
assigned or transferred, or purported to assign or transfer, to any person or
entity, any Claim or any portion thereof, or interest therein, and agrees to
indemnify, defend and hold the QUIDEL Releasees and the HOLMES Releasees,
respectively, harmless from and against any and all Claims, based on or arising
out of any such assignment or transfer, or purported assignment or transfer, of
any Claims or any portion thereof or interest therein.
HOLMES agrees that the releases contained herein apply without
limitation to any and all rights, claims and remedies he may have under the Age
Discrimination in Employment Act and the Older Workers Benefit Protection Act.
In accordance with those laws, HOLMES will have 21 days from receipt of this
Agreement to consider this Agreement, he shall have 7 days following the signing
of this Agreement to revoke it in writing, and this Agreement shall not be
effective or enforceable until the revocation period has expired. HOLMES may, if
he so desires, waive the full 21 day period to consider this Agreement.
23
<PAGE> 7
9. MISCELLANEOUS.
(a) Entire Agreement; Modification. This Agreement and the Exhibits
attached hereto constitute the full and entire understanding and agreement of
the parties hereto with regard to the subjects hereof, and supersede all prior
agreements or understandings, written or oral, between the parties with respect
to the subject hereof. This Agreement may not be amended or modified except by a
written instrument signed by both of the parties hereto.
(b) Governing Law. This Agreement shall be governed by the internal
laws of the State of California, except to the extent to which the laws of the
United States may be applicable.
(c) Severability. In the event any provision of this Agreement is
invalid, void, illegal, or unenforceable, the remaining provisions hereof
nevertheless will continue in full force and effect without being impaired or
invalidated in any way.
(d) Notices. All notices and other communications required or permitted
under this Agreement, other than routine operational communications, will be in
writing and will be deemed to have been duly given, made and received only when
personally delivered or delivered by Federal Express, United Parcel Service or
other nationally recognized courier service, or three (3) calendar days after
having been deposited in the United States mail, certified mail, postage
prepaid, return receipt requested, addressed as set forth below:
If to QUIDEL: Quidel Corporation
10165 McKellar Court
San Diego, CA 92121
Attention: President and Chief
Executive Officer
If to HOLMES: Glenn Holmes
4979 Flaxon Terrace
San Diego, CA 92130
Any party may change the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.
(e) Further Assurances. Each party agrees to promptly execute,
acknowledge and deliver such other and further instruments, writings and
documents as may reasonably be requested in writing by the other party to carry
out this Agreement. Each party agrees to use all reasonable efforts and to
exercise good faith in fulfilling its or his obligations under this Agreement.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
24
<PAGE> 8
(g) Voluntary Agreement/Conflicts Waiver. HOLMES represents and
warrants (i) that he has carefully read the terms of this Agreement and fully
understands and accepts these terms, and (ii) that he has had full and adequate
opportunity and time, and has been advised by QUIDEL, to consult with counsel of
his choosing prior to executing this Agreement.
(h) Construction. The language herein shall be construed simply and in
accordance with its plain meaning and shall not be construed or interpreted
strictly for or against any party hereto, regardless of the source of
draftsmanship.
(i) Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and their representatives, heirs, administrators,
successors and assigns.
(j) Non-Disparagement. The parties mutually agree that, from and after
the date hereof, neither shall disparage or defame the other in any verbal or
written communications with any third party (including without limitation any
prospective or actual employer, customer, client or other industry participant).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
QUIDEL CORPORATION GLENN HOLMES
By:_______________________________ By:_________________________________
Andre de Bruin Glenn Holmes
President and Chief Executive Officer
25
<PAGE> 9
EXHIBIT A
TO: QUIDEL CORPORATION BOARD OF DIRECTORS
FROM: GLENN HOLMES
RE: RESIGNATION
Please accept this notice as my resignation, effective immediately, of
all positions as an employee or officer of QUIDEL CORPORATION and any subsidiary
thereof (other than the position contemplated by my Employment Agreement dated
of even date herewith) and all positions as a trustee of any and all benefit
plans of QUIDEL CORPORATION or any subsidiary thereof.
September 30, 1998 ____________________________________
Glenn Holmes
<PAGE> 10
EXHIBIT B
DIRECT COMPETITORS
Applied Biotech, Inc.
Biostar, Inc.
Meridian Diagnostics Inc.
Pharmatech
Smithkline Diagnostics/Beckman Coulter Primary Care
Trinity Biotech PLC
Unipath/Unilever/Carter Wallace
Wyntek Diagnostics, Inc.
<PAGE> 11
EXHIBIT C
INVENTION AND CONFIDENTIALITY AGREEMENT
28
<PAGE> 1
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the _8th_ day of September, 1998, by and between QUIDEL CORPORATION, a
Delaware corporation ("QUIDEL") and STEVEN C. BURKE, an individual ("BURKE").
BACKGROUND
A. BURKE has been employed by QUIDEL as its Vice President - Finance
and Administration for a number of years.
B. BURKE is voluntarily resigning as an officer of QUIDEL and each
subsidiary thereof and as a trustee of any and all benefit plans.
C. QUIDEL and BURKE wish to agree upon an orderly executive transition
plan that enables QUIDEL, on an interim basis, to have the benefits of BURKE's
continuing advice and input regarding important corporate matters.
AGREEMENT
1. RESIGNATION AS OFFICER. Concurrent with the execution and delivery
of this Agreement, BURKE has executed and delivered to QUIDEL his resignation,
effective immediately, of all positions as an officer of QUIDEL and each
subsidiary thereof (other than the position expressly provided for herein) and
as a trustee of any and all benefit plans of QUIDEL and its affiliates. The form
of such resignation is in the form attached as Exhibit A and incorporated herein
by this reference.
2. FUTURE EMPLOYMENT. BURKE shall continue to be employed by QUIDEL as
"Special Assistant to the President" from the date hereof until August 31, 2001.
On September 1, 2001, all employment and/or consulting relationships between the
parties are and shall automatically be forever terminated. Except as provided in
Section 4 and Section 7 hereof, nothing herein shall prohibit or limit BURKE's
right, on and after the date hereof, to accept employment and/or consulting
relationships with other third parties as long as BURKE makes himself reasonably
available from time to time from the date hereof until August 31, 2001 to
promptly respond to and fulfill the reasonable requests for information and
assistance from QUIDEL's President and Chief Executive Officer or Chief
Financial Officer.
3. RESPONSIBILITIES. On and after the date hereof, BURKE shall report
for his duties directly to QUIDEL's President and Chief Executive Officer. The
President and Chief Executive Officer shall determine BURKE's reasonable duties
and responsibilities.
29
<PAGE> 2
Notwithstanding anything to the contrary herein, in the event BURKE is unable to
carry out his responsibilities hereunder because of his death or disability,
such inability shall not be deemed a breach or termination of this Agreement and
BURKE or his estate, as applicable, shall continue to enjoy all of the benefits
provided herein as though BURKE were not disabled or deceased.
4. NON-COMPETITION/NON-SOLICITATION.
(a) Non-Competition. From the date hereof until August 31, 2001, BURKE
covenants and agrees that he shall not, directly or indirectly, have any
interest in or enter into or maintain any relationship with (whether as
director, officer, employee, agent, representative, security holder, consultant,
advisor or otherwise) any of the entities listed on Exhibit B attached hereto
and incorporated by this reference or any affiliate of such listed entities. In
the event of any breach by BURKE of this Section 4(a), QUIDEL shall have the
right to immediately terminate this Agreement upon written notice. In the event
of such early termination, BURKE and QUIDEL expressly agree that (i) QUIDEL
shall have no further obligation or liability to make the cash payments or
provide the benefit coverages contemplated by Section 5 below for or
attributable to any period after the date of such early termination, and (ii) no
portion of BURKE's unvested Options shall enjoy the benefit of vesting
acceleration on December 31, 1998 as provided in Section 6 below.
(b) Non-Solicitation of Employees. From the date hereof until the third
(3rd) anniversary date hereof, BURKE covenants and agrees that he shall not,
directly or indirectly, by or for himself, or as the agent of another, or
through others, in any way solicit or induce, or attempt to solicit or induce,
any employee, officer, representative, consultant or other agent of QUIDEL or
any subsidiary thereof (a "QUIDEL Person") to leave the employ of or other
relationship with QUIDEL or such subsidiary or otherwise interfere with the
employment or other relationship between such person and QUIDEL or any
subsidiary thereof. Notwithstanding the foregoing, BURKE shall have no liability
under this Section 4(b) with respect to any QUIDEL Person who leaves the employ
of or other relationship with QUIDEL or any subsidiary thereof if such QUIDEL
Person does not, within six (6) months thereafter, enter into any employment,
consulting, representative, agency or investor relationship with BURKE or any
entity in which BURKE has an employment, director, representative, consulting,
or investment role.
5. CASH COMPENSATION AND BENEFITS. Subject to BURKE's fulfillment of
his obligations under this Agreement (including without limitation those set
forth in Section 4(a) and Section 7 hereof but subject to the last sentence of
Section 3), the parties agree as follows:
(a) Base Salary. QUIDEL will continue to pay to BURKE a base salary of
$13,833.33 per month though August 31, 1999, and $100 per month from September
1, 1999 through August 31, 2001.
30
<PAGE> 3
(b) Incentive Plan. BURKE shall not be eligible to participate in or
receive payments pursuant to any incentive or bonus programs adopted for any
period commencing after March 31, 1998.
(c) Medical Insurance. QUIDEL shall, at its own expense and until the
first anniversary of the date hereof, continue to provide to BURKE (and his
dependents who are currently covered under QUIDEL's insurance program) medical,
vision and dental benefits, life insurance, disability insurance and AD&D
coverage at the same levels and on the same terms as BURKE and his qualifying
dependents enjoy and receive as of the date hereof; provided, however, that (i)
these benefits shall be earlier terminated or reduced, as applicable, if, when
and to the extent BURKE receives concurrent coverage through another program,
(ii) BURKE shall be responsible for any and all taxes if the value of such
benefits must be included in his income, (iii) the levels and nature of such
benefits may be modified by QUIDEL if, when and to the same extent modifications
to such benefits are made applicable to all other executive officers of QUIDEL,
and (iv) notwithstanding BURKE'S continuing employment with QUIDEL, no further
insurance benefits shall be provided after the first anniversary of the date of
this Agreement.
(d) Vacation/Other Benefits. No vacation benefits or, except as
expressly provided herein, other employee-type benefits shall accrue to or for
BURKE from and after the date hereof. All of BURKE's accrued but unused vacation
up to the date hereof shall be paid to him, less applicable withholdings
required by law, within two days of BURKE's execution and delivery hereof.
(e) Outplacement. QUIDEL shall also pay for up to a maximum of six (6)
months of the reasonable expenses of Drake Beam Morin, an executive outplacement
service, it being understood that QUIDEL shall in no event have an obligation to
pay for any such services for any period after March 31, 1999.
(f) D&O Insurance. QUIDEL will continue to provide BURKE with Directors
and Officers liability insurance covering BURKE as to actions or omissions
during the period of time BURKE served as an Officer or other position with
QUIDEL or any of its affiliates. Such coverage shall continue without
interruption until the expiration of the last applicable statute of limitations
and shall be pursuant to an insurance policy with substantially the same terms
and coverages as are contained in the policy covering QUIDEL's then-current
Directors and Officers.
(g) No Offsets. The amounts payable to BURKE pursuant to this Agreement
shall not be subject to reduction or offset as a result of compensation or
benefits received by BURKE attributable to other employment and/or consulting
arrangements BURKE may enter into with third parties on or after the date
hereof.
(h) No Other Amounts. Except as expressly provided in this Agreement
and pursuant to the Options referred to in Section 6 below, BURKE acknowledges
and agrees that he is entitled to no further compensation or benefits from
QUIDEL, including without limitation any further severance payments.
31
<PAGE> 4
6. OPTIONS. The following schedule sets forth certain particulars as to
the issued and outstanding stock options (the "Options") that have been granted
to and are currently held by BURKE:
<TABLE>
<CAPTION>
SHARES UNDERLYING
GRANT DATE EXPIRATION DATE EXERCISE PRICE ($/SH) OPTION (#) SHARES EXERCISABLE (#)
---------- --------------- --------------------- ----------------- ----------------------
<S> <C> <C> <C> <C>
03/08/91 03/08/01 $5.500 23,760 23,760
02/18/92 03/18/02 4.625 15,000 15,000
04/29/93 04/29/03 4.500 22,222 22,222
04/29/93 04/29/03 4.500 5,778 5,778
04/27/94 04/27/04 4.125 15,000 15,000
05/11/95 05/11/05 3.625 25,000 0
07/30/96 07/30/06 3.625 25,000 0
04/29/97 04/29/07 2.875 25,000 0
07/28/98 07/28/08 3.375 13,101 0
07/28/98 07/28/08 3.375 1,899 0
------- ------
TOTALS 171,760 81,760
======= ======
</TABLE>
Subject to BURKE's fulfillment of his obligations under this Agreement
(including without limitation the obligations set forth in Section 4(a) and
Section 7 hereof but subject to the last sentence of Section 3), all unvested
Options set forth above -- except for the last two grants of Options covering an
aggregate of 15,000 shares that were granted on 7/28/98 (the "Excluded Options")
- -- shall continue to vest and shall be exerciseable during the term of this
Agreement in accordance with their respective terms and, if and to the extent
any remain unvested, shall fully and automatically vest and become exercisable
on December 31, 1998. (The Excluded Options shall not under any circumstances
become exercisable and the parties hereto, by mutual agreement, hereby cancel
and terminate the Excluded Options. BURKE also acknowledges that he will receive
no further grants of Options after the date hereof.) QUIDEL represents and
warrants that the foregoing vesting acceleration has been authorized by the
Compensation Committee of the Board of Directors acting pursuant to its
authority as set forth in Section 4(b)(vi) of QUIDEL's 1990 Employee Stock
Option Plan, as amended (the "Plan"). BURKE understands and accepts that the
foregoing vesting acceleration may have the effect of disqualifying Options
originally granted as Incentive Stock Options so that such Options shall, for
federal and state tax purposes, be treated as Non-Qualified Stock Options. BURKE
further acknowledges that all required tax withholdings attributable to his
exercise of the Options will either be tendered by him at the time of his
exercise or will be withheld as part of the exercise authorization provided
herein.
For all Options other than Incentive Stock Options (if any), and
pursuant to the Compensation Committee's authorization pursuant to Section
8(a)(iii) of the Plan, the consideration payable by BURKE to QUIDEL upon
exercise of the Options and
32
<PAGE> 5
representing the aggregate exercise price may -- at BURKE's election -- be
payable in or by:
(1) cash;
(2) check;
(3) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to
QUIDEL the amount of sale or loan proceeds required to pay the
exercise price (in which event QUIDEL shall pay for or
reimburse BURKE for all reasonable broker commissions
attributable to such transaction); or
(4) any combination of the foregoing.
Similarly, the amount of tax required to be withheld by the Company as a result
of exercise of the Options may also be effected by one or any combination of the
foregoing at the election of BURKE.
Except as otherwise provided in this Agreement, all Options shall
continue to be subject to and governed by the terms and conditions of the
relevant Stock Option Agreements and the Plan. Such terms include the period of
time within which BURKE must exercise his Options after termination of his
employment with QUIDEL (i.e., 90 calendar days). Subject to the preceding
sentences, BURKE may exercise already vested Options at any time or from time to
time during the term of this Agreement.
7. INVENTION AND CONFIDENTIALITY AGREEMENT. Nothing herein shall be
deemed to terminate or limit BURKE's continuing obligations under that certain
Invention and Confidential Information Agreement, dated as of August 18, 1986, a
copy of which is attached hereto as Exhibit C and incorporated herein by this
reference (the "Prior Agreement"). BURKE acknowledges the fundamental importance
of the Prior Agreement to QUIDEL and agrees to strictly honor his obligations
thereunder.
8. GENERAL RELEASES.
(a) By BURKE. BURKE hereby irrevocably and unconditionally releases,
acquits and forever discharges QUIDEL and all of its current, former and future
subsidiaries, affiliates, divisions, successors, predecessors, assigns,
stockholders, directors, officers, employees, agents, representatives,
attorneys, accountants and all persons acting by, through, under or in concert
with any of them (collectively, the "QUIDEL Releasees"), from any and all
charges, complaints, claims, liabilities, obligations, promises, agreements,
damages, actions, causes of action, suits, rights, demands, costs, losses, debts
and expenses (including attorneys' fees and costs) actually incurred of any
nature whatsoever, known or unknown, suspected or unsuspected ("Claim" or
"Claims") which BURKE now has, owns or holds, or claims to have, own or hold, or
which BURKE at any time heretofore had, owned or held, or claimed to have had,
owned or held, or which BURKE at any time hereafter may have, own or hold, or
claim to have, own or hold, against any of the
33
<PAGE> 6
QUIDEL Releasees relating to any event, act or omission that has occurred prior
to or as of the date of this Agreement.
(b) By QUIDEL. QUIDEL hereby irrevocably and unconditionally releases,
acquits and forever discharges BURKE and all of his heirs, successors, agents,
representatives, attorneys, accountants and all persons acting by, through,
under or in concert with any of them (collectively, the "BURKE Releasees"), from
any and all known or unknown, suspected or unsuspected, Claims which QUIDEL now
has, owns or holds, or claims to have, own or hold, or which QUIDEL at any time
heretofore had owned or held, or claimed to have had, owned or held, or which
QUIDEL at any time hereafter may have, own or hold, or claim to have, own or
hold, against any of the BURKE Releasees relating to any event, act or omission
that has occurred prior to or as of the date of this Agreement.
(c) Waiver. BURKE and QUIDEL each expressly waives and relinquishes all
rights and benefits afforded by Section 1542 of the Civil Code of the State of
California, and does so understanding and acknowledging the significance and
consequence of such specific waiver of Section 1542. Section 1542 of the Civil
Code of the State of California states as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Thus, notwithstanding the provisions of Section 1542, and for the
purpose of implementing a full and complete release and discharge of the QUIDEL
Releasees and the BURKE Releasees, BURKE and QUIDEL each expressly acknowledges
that this Agreement is intended to include in its effect, without limitation,
all Claims which he or it does not know or suspect to exist in his or its favor
at the time of execution hereof, and that this Agreement contemplates the
extinguishment of any such Claim or Claims.
BURKE and QUIDEL each represents and warrants to the QUIDEL Releasees
and the BURKE Releasees, respectively, that he or it has not heretofore assigned
or transferred, or purported to assign or transfer, to any person or entity, any
Claim or any portion thereof, or interest therein, and agrees to indemnify,
defend and hold the QUIDEL Releasees and the BURKE Releasees, respectively,
harmless from and against any and all Claims, based on or arising out of any
such assignment or transfer, or purported assignment or transfer, of any Claims
or any portion thereof or interest therein.
BURKE agrees that the releases contained herein apply without
limitation to any and all rights, claims and remedies he may have under the Age
Discrimination in Employment Act and the Older Workers Benefit Protection Act.
In accordance with those laws, BURKE will have 21 days from receipt of this
Agreement to consider this Agreement, he shall have 7 days following the signing
of this Agreement to revoke it in writing, and this Agreement shall not be
effective or enforceable until the revocation period
34
<PAGE> 7
has expired. BURKE may, if he so desires, waive the full 21 day period to
consider this Agreement.
9. MISCELLANEOUS.
(a) Entire Agreement; Modification. This Agreement and the Exhibits
attached hereto constitute the full and entire understanding and agreement of
the parties hereto with regard to the subjects hereof, and supersede all prior
agreements or understandings, written or oral, between the parties with respect
to the subject hereof. This Agreement may not be amended or modified except by a
written instrument signed by both of the parties hereto.
(b) Governing Law. This Agreement shall be governed by the internal
laws of the State of California, except to the extent to which the laws of the
United States may be applicable.
(c) Severability. In the event any provision of this Agreement is
invalid, void, illegal, or unenforceable, the remaining provisions hereof
nevertheless will continue in full force and effect without being impaired or
invalidated in any way.
(d) Notices. All notices and other communications required or permitted
under this Agreement, other than routine operational communications, will be in
writing and will be deemed to have been duly given, made and received only when
personally delivered or delivered by Federal Express, United Parcel Service or
other nationally recognized courier service, or three (3) calendar days after
having been deposited in the United States mail, certified mail, postage
prepaid, return receipt requested, addressed as set forth below:
If to QUIDEL: Quidel Corporation
10165 McKellar Court
San Diego, CA 92121
Attention: President and Chief
Executive Officer
If to BURKE: Steven C. Burke
1736 Hawk View
Encinitas, CA 92024
Any party may change the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.
(e) Further Assurances. Each party agrees to promptly execute,
acknowledge and deliver such other and further instruments, writings and
documents as may reasonably be requested in writing by the other party to carry
out this Agreement. Each party agrees to use all reasonable efforts and to
exercise good faith in fulfilling its or his obligations under this Agreement.
35
<PAGE> 8
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
(g) Voluntary Agreement/Conflicts Waiver. BURKE represents and warrants
(i) that he has carefully read the terms of this Agreement and fully understands
and accepts these terms, and (ii) that he has had full and adequate opportunity
and time, and has been advised by QUIDEL, to consult with counsel of his
choosing prior to executing this Agreement.
(h) Construction. The language herein shall be construed simply and in
accordance with its plain meaning and shall not be construed or interpreted
strictly for or against any party hereto, regardless of the source of
draftsmanship.
(i) Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and their representatives, heirs, administrators,
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
QUIDEL CORPORATION STEVEN C. BURKE
By:_______________________________ By:_________________________________
Andre de Bruin Steven C. Burke
President and Chief Executive Officer
36
<PAGE> 9
EXHIBIT A
TO: QUIDEL CORPORATION BOARD OF DIRECTORS
FROM: STEVEN C. BURKE
RE: RESIGNATION AS OFFICER
Please accept this notice as my resignation, effective immediately, of
all positions as an officer of QUIDEL CORPORATION and any subsidiary thereof
(other than the employment position contemplated by my Employment Agreement
dated of even date herewith) and all positions as a trustee of any and all
benefit plans of QUIDEL CORPORATION or any subsidiary thereof.
September __8__, 1998 ____________________________________
Steven C. Burke
<PAGE> 10
EXHIBIT B
DIRECT COMPETITORS
Applied Biotech, Inc.
Pharmatech
Smithkline Diagnostics/Beckman Coulter Primary Care Division
Wyntek Diagnostics, Inc.
<PAGE> 11
EXHIBIT C
INVENTION AND CONFIDENTIALITY AGREEMENT
39
<PAGE> 1
EXHIBIT 10.27
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the 8th day of September, 1998, by and between QUIDEL CORPORATION, a
Delaware corporation ("QUIDEL") and DARRYLL J. GETZLAFF, an individual
("GETZLAFF").
BACKGROUND
A. GETZLAFF has been employed by QUIDEL as its Vice President - Human
Resources for a number of years.
B. GETZLAFF is voluntarily resigning as an officer of QUIDEL and each
subsidiary thereof and as a trustee of any and all benefit plans.
C. QUIDEL and GETZLAFF wish to agree upon an orderly executive
transition plan that enables QUIDEL, on an interim basis, to have the benefits
of GETZLAFF's continuing advice and input regarding important corporate matters.
AGREEMENT
1. RESIGNATION AS OFFICER. Concurrent with the execution and delivery
of this Agreement, GETZLAFF has executed and delivered to QUIDEL his
resignation, effective immediately, of all positions as an officer of QUIDEL and
each subsidiary thereof (other than the position expressly provided for herein)
and as a trustee of any and all benefit plans of QUIDEL and its affiliates. The
form of such resignation is in the form attached as Exhibit A and incorporated
herein by this reference.
2. FUTURE EMPLOYMENT. GETZLAFF shall continue to be employed by QUIDEL
as "Special Assistant to the President" from the date hereof until December 31,
1998. On January 1, 1999, all employment and/or consulting relationships between
the parties are forever terminated. Except as provided in Section 4 and Section
7 hereof, nothing herein shall prohibit or limit GETZLAFF's right, on and after
the date hereof, to accept employment and/or consulting relationships with other
third parties as long as GETZLAFF makes himself reasonably available from time
to time from the date hereof until December 31, 1998 to promptly respond to and
fulfill the reasonable requests for information and assistance from QUIDEL's
President and Chief Executive Officer.
3. RESPONSIBILITIES. On and after the date hereof, GETZLAFF shall
report for his duties directly to QUIDEL's President and Chief Executive
Officer. The President and Chief Executive Officer shall determine GETZLAFF's
reasonable duties and responsibilities. Notwithstanding anything to the contrary
herein, in the event GETZLAFF is unable to carry out his responsibilities
hereunder because of his death or disability, such inability shall not be deemed
a breach or termination of this Agreement and GETZLAFF or
40
<PAGE> 2
his estate, as applicable, shall continue to enjoy all of the benefits provided
herein as though GETZLAFF were not disabled or deceased.
4. NON-COMPETITION/NON-SOLICITATION.
(a) Non-Competition. From the date hereof until December 31, 1998,
GETZLAFF covenants and agrees that he shall not, directly or indirectly, have
any interest in or enter into or maintain any relationship with (whether as
director, officer, employee, agent, representative, security holder, consultant,
advisor or otherwise) any of the entities listed on Exhibit B attached hereto
and incorporated by this reference or any affiliate of such listed entities. In
the event of any breach by GETZLAFF of this Section 4(a), QUIDEL shall have the
right to immediately terminate this Agreement upon written notice. In the event
of such early termination, GETZLAFF and QUIDEL expressly agree that (i) QUIDEL
shall have no further obligation or liability to make the cash payments or
provide the benefit coverages contemplated by Section 5 below for or
attributable to any period after the date of such early termination, and (ii) no
portion of GETZLAFF's unvested Options shall enjoy the benefit of vesting
acceleration on December 31, 1998 as provided in Section 6 below.
(b) Non-Solicitation of Employees. From the date hereof until the
second (2nd) anniversary date hereof, GETZLAFF covenants and agrees that he
shall not, directly or indirectly, by or for himself, or as the agent of
another, or through others, in any way solicit or induce, or attempt to solicit
or induce, any employee, officer, representative, consultant or other agent of
QUIDEL or any subsidiary thereof (a "QUIDEL Person") to leave the employ of or
other relationship with QUIDEL or such subsidiary or otherwise interfere with
the employment or other relationship between such person and QUIDEL or any
subsidiary thereof. Notwithstanding the foregoing, GETZLAFF shall have no
liability under this Section 4(b) with respect to any QUIDEL Person who leaves
the employ of or other relationship with QUIDEL or any subsidiary thereof if
such QUIDEL Person does not, within six (6) months thereafter, enter into any
employment or consulting relationship with GETZLAFF or any entity in which
GETZLAFF has an employment, director, representative, consulting, or investment
role.
5. CASH COMPENSATION AND BENEFITS. Subject to GETZLAFF's fulfillment of
his obligations under this Agreement (including without limitation those set
forth in Section 4(a) and Section 7 hereof but subject to the last sentence of
Section 3), the parties agree as follows:
(a) Base Salary. QUIDEL will continue to pay to GETZLAFF a base salary
equal to his current salary rate (i.e., $11,750 per month) through December 31,
1998. QUIDEL will make tax withholdings from such compensation as required by
law and consistent with past practice. To the extent permitted under the
applicable plans, GETZLAFF will continue to be eligible for group insurance
programs and benefits (life, healthcare, long-term disability, flex (Section
125) and 401(k)) during this period.
41
<PAGE> 3
(b) Severance. QUIDEL will pay to GETZLAFF as severance compensation
monthly payments equal to his current salary rate (i.e., $11,750 per month) from
January 1, 1999 through August 31, 1999. QUIDEL will make tax withholdings from
such compensation as required by law and consistent with past practice. To the
extent permitted under the applicable plans, GETZLAFF will continue to be
eligible for group insurance programs and benefits (life, healthcare, long-term
disability, flex (Section 125) and 401(k)) during this period.
(c) Incentive Plan. GETZLAFF shall not be eligible to participate in or
receive payments pursuant to any incentive or bonus programs adopted for any
period commencing after March 31, 1998.
(d) Medical Insurance. QUIDEL shall, at its own expense and until the
first anniversary of the date hereof, continue to provide to GETZLAFF and his
dependents who are currently covered under QUIDEL's insurance program medical,
vision and dental benefits at the same levels and on the same terms as GETZLAFF
and his qualifying dependents enjoy and receive as of the date hereof; provided,
however, that (i) these benefits shall be earlier terminated or reduced, as
applicable, if, when and to the extent GETZLAFF receives concurrent coverage
comparable to current coverage through another program, (ii) GETZLAFF shall be
responsible for any and all taxes if the value of such benefits must be included
in his income, and (iii) the levels and nature of such benefits may be modified
by QUIDEL if, when and to the same extent modifications to such benefits are
made applicable to all other executive officers of QUIDEL.
(e) Vacation/Other Benefits. No vacation benefits or, except as
expressly provided herein, other employee-type benefits shall accrue to or for
GETZLAFF from and after the date hereof. All of GETZLAFF's accrued but unused
vacation up to the date hereof shall be paid to him, less applicable
withholdings required by law, within two (2) days of the date hereof.
(f) Outplacement. QUIDEL shall also pay for up to a maximum of six (6)
months of the reasonable expenses of Drake Beam Morin, an executive outplacement
service, it being understood that QUIDEL shall in no event have an obligation to
pay for any such services for any period after March 31, 1999. QUIDEL and
GETZLAFF will also develop and make available for GETZLAFF's use a mutually
agreeable letter of reference.
(g) Professional Fees. QUIDEL will reimburse GETZLAFF for any legal
and/or tax advisory fees and costs -- up to an aggregate maximum of $1,500 --
incurred by GETZLAFF in connection with this Agreement and the matters
contemplated herein.
(h) Computer. QUIDEL will permit GETZLAFF to acquire the laptop
computer previously used by GETZLAFF at a price reasonably determined as fair by
the Company.
(i) No Offsets. Except as set forth in subparagraph (d) hereof, the
amounts payable to GETZLAFF pursuant to this Agreement shall not be subject to
reduction or
42
<PAGE> 4
offset as a result of compensation or benefits received by GETZLAFF attributable
to other employment and/or consulting arrangements GETZLAFF may enter into with
third parties on or after the date hereof.
(j) No Other Amounts. Except as expressly provided in this Agreement
and pursuant to the Options referred to in Section 6 below, GETZLAFF
acknowledges and agrees that he is entitled to no further compensation or
benefits from QUIDEL, including without limitation any further severance
payments.
6. OPTIONS. The following schedule sets forth certain particulars as to
the issued and outstanding stock options (the "Options") that have been granted
to and are currently held by GETZLAFF:
<TABLE>
<CAPTION>
SHARES UNDERLYING
GRANT DATE EXPIRATION DATE EXERCISE PRICE ($/SH) OPTION (#) SHARES EXERCISABLE (#)
---------- --------------- --------------------- ----------------- ----------------------
<S> <C> <C> <C> <C>
03/08/91 03/08/01 $5.500 14,120 14,120
02/18/92 03/18/02 4.625 5,000 5,000
04/29/93 04/29/03 4.500 20,000 20,000
04/27/94 04/27/04 4.125 15,000 15,000
05/11/95 05/11/05 3.625 25,000 0
07/30/96 07/30/06 3.625 25,000 0
04/29/97 04/29/07 2.875 25,000 0
07/28/98 07/28/08 3.375 13,101 0
07/28/98 07/28/08 3.375 1,899 0
------- ------
TOTALS 144,120 54,120
======= ======
</TABLE>
Subject to GETZLAFF's fulfillment of his obligations under this
Agreement (including without limitation the obligations set forth in Section
4(a) and Section 7 hereof but subject to the last sentence of Section 3), all
unvested Options set forth above which have not vested prior to December 31,
1998 -- except for the last two grants of Options covering an aggregate of
15,000 shares that were granted on 7/28/98 (the "Excluded Options") -- shall
fully and automatically vest and become exercisable on December 31, 1998. (The
Excluded Options shall not be accelerated and shall therefore not become
exercisable.) QUIDEL represents and warrants that the foregoing vesting
acceleration has been authorized by the Compensation Committee of the Board of
Directors acting pursuant to its authority as set forth in Section 4(b)(vi) of
QUIDEL's 1990 Employee Stock Option Plan, as amended (the "Plan"). GETZLAFF
understands and accepts that the foregoing vesting acceleration may have the
effect of disqualifying Options originally granted as Incentive Stock Options so
that such Options shall, for federal and state tax purposes, be treated as
Non-Qualified Stock Options. GETZLAFF further acknowledges that all required tax
withholdings attributable to his exercise of the Options will either be tendered
by him at the time of his exercise or will be withheld as part of the exercise
authorization provided herein.
43
<PAGE> 5
For all Options other than Incentive Stock Options (if any), and
pursuant to the Compensation Committee's authorization pursuant to Section
8(a)(iii) of the Plan, the consideration payable by GETZLAFF to QUIDEL upon
exercise of the Options and representing the aggregate exercise price may -- at
GETZLAFF's election -- be payable in or by:
(1) cash;
(2) check;
(3) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to
QUIDEL the amount of sale or loan proceeds required to pay the
exercise price (in which event QUIDEL shall pay for or
reimburse GETZLAFF for all reasonable broker commissions
attributable to such transaction); or
(4) any combination of the foregoing.
Similarly, the amount of tax required to be withheld by the Company as a result
of exercise of the Options may also be effected by one or any combination of the
foregoing at the election of GETZLAFF.
Except as otherwise provided in this Agreement, all Options shall
continue to be subject to and governed by the terms and conditions of the
relevant Stock Option Agreements and the Plan. Such terms include the period of
time within which GETZLAFF must exercise his Options after termination of his
employment with QUIDEL (i.e., 90 calendar days). Subject to the preceding
sentences, GETZLAFF may exercise already vested Options at any time or from time
to time during the term of this Agreement.
7. INVENTION AND CONFIDENTIALITY AGREEMENT. Nothing herein shall be
deemed to terminate or limit GETZLAFF's continuing obligations under that
certain Invention and Confidential Information Agreement, dated as of April 15,
1987, a copy of which is attached hereto as Exhibit C and incorporated herein by
this reference (the "Prior Agreement"). GETZLAFF acknowledges the fundamental
importance of the Prior Agreement to QUIDEL and agrees to strictly honor his
obligations thereunder.
8. GENERAL RELEASES.
(a) By GETZLAFF. Except as provided in Section 8(c) herein, GETZLAFF
hereby irrevocably and unconditionally releases, acquits and forever discharges
QUIDEL and all of its current, former and future subsidiaries, affiliates,
divisions, successors, predecessors, assigns, stockholders, directors, officers,
employees, agents, representatives, attorneys, accountants and all persons
acting by, through, under or in concert with any of them (collectively, the
"QUIDEL Releasees"), from any and all charges, complaints, claims, liabilities,
obligations, promises, agreements, damages, actions, causes of action, suits,
rights, demands, costs, losses, debts and expenses (including attorneys' fees
and
44
<PAGE> 6
costs) actually incurred of any nature whatsoever, known or unknown, suspected
or unsuspected ("Claim" or "Claims") which GETZLAFF now has, owns or holds, or
claims to have, own or hold, or which GETZLAFF at any time heretofore had, owned
or held, or claimed to have had, owned or held, or which GETZLAFF at any time
hereafter may have, own or hold, or claim to have, own or hold, against any of
the QUIDEL Releasees relating to any event, act or omission that has occurred
prior to or as of the date of this Agreement.
(b) By QUIDEL. Except as provided in Section 8(c) herein, QUIDEL hereby
irrevocably and unconditionally releases, acquits and forever discharges
GETZLAFF and all of his heirs, successors, agents, representatives, attorneys,
accountants and all persons acting by, through, under or in concert with any of
them (collectively, the "GETZLAFF Releasees"), from any and all known or
unknown, suspected or unsuspected, Claims which QUIDEL now has, owns or holds,
or claims to have, own or hold, or which QUIDEL at any time heretofore had owned
or held, or claimed to have had, owned or held, or which QUIDEL at any time
hereafter may have, own or hold, or claim to have, own or hold, against any of
the GETZLAFF Releasees relating to any event, act or omission that has occurred
prior to or as of the date of this Agreement.
(c) No Release of Indemnity Rights. The releases provided herein do not
include any release of any right of indemnity or contribution as between
GETZLAFF and/or QUIDEL in the event that any person subsequently brings an
action against GETZLAFF and/or QUIDEL pertaining to or arising from, in whole or
in part, GETZLAFF's performance of his duties as an officer or employee of
QUIDEL, or any act or omission alleged on the part of GETZLAFF in those
capacities. All such rights of indemnity or contribution, whether arising under
the California Labor Code, the Articles of Incorporation or Bylaws of Quidel,
common law, or otherwise are expressly reserved by both parties. QUIDEL further
agrees that it will maintain, for the term of this Agreement, directors and
officers insurance coverage providing the same or greater protection for
GETZLAFF as existed on September 1, 1998.
(d) Waiver. Except as provided in Section 8(c) herein, GETZLAFF and
QUIDEL each expressly waives and relinquishes all rights and benefits afforded
by Section 1542 of the Civil Code of the State of California, and does so
understanding and acknowledging the significance and consequence of such
specific waiver of Section 1542. Section 1542 of the Civil Code of the State of
California states as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
Thus, notwithstanding the provisions of Section 1542, and for the
purpose of implementing a full and complete release and discharge of the QUIDEL
Releasees and the GETZLAFF Releasees, GETZLAFF and QUIDEL each expressly
acknowledges that this Agreement is intended to include in its effect, without
limitation, all Claims which he or it
45
<PAGE> 7
does not know or suspect to exist in his or its favor at the time of execution
hereof, and that this Agreement contemplates the extinguishment of any such
Claim or Claims.
GETZLAFF and QUIDEL each represents and warrants to the QUIDEL
Releasees and the GETZLAFF Releasees, respectively, that he or it has not
heretofore assigned or transferred, or purported to assign or transfer, to any
person or entity, any Claim or any portion thereof, or interest therein, and
agrees to indemnify, defend and hold the QUIDEL Releasees and the GETZLAFF
Releasees, respectively, harmless from and against any and all Claims, based on
or arising out of any such assignment or transfer, or purported assignment or
transfer, of any Claims or any portion thereof or interest therein.
GETZLAFF agrees that the releases contained herein apply without
limitation to any and all rights, claims and remedies he may have under the Age
Discrimination in Employment Act and the Older Workers Benefit Protection Act.
In accordance with those laws, GETZLAFF will have 21 days from receipt of this
Agreement to consider this Agreement, he shall have 7 days following the signing
of this Agreement to revoke it in writing, and this Agreement shall not be
effective or enforceable until the revocation period has expired. GETZLAFF may,
if he so desires, waive the full 21 day period to consider this Agreement.
9. MISCELLANEOUS.
(a) Entire Agreement; Modification. This Agreement and the Exhibits
attached hereto constitute the full and entire understanding and agreement of
the parties hereto with regard to the subjects hereof, and supersede all prior
agreements or understandings, written or oral, between the parties with respect
to the subject hereof. This Agreement may not be amended or modified except by a
written instrument signed by both of the parties hereto.
(b) Governing Law. This Agreement shall be governed by the internal
laws of the State of California, except to the extent to which the laws of the
United States may be applicable.
(c) Severability. In the event any provision of this Agreement is
invalid, void, illegal, or unenforceable, the remaining provisions hereof
nevertheless will continue in full force and effect without being impaired or
invalidated in any way.
(d) Notices. All notices and other communications required or permitted
under this Agreement, other than routine operational communications, will be in
writing and will be deemed to have been duly given, made and received only when
personally delivered or delivered by Federal Express, United Parcel Service or
other nationally recognized courier service, or three (3) calendar days after
having been deposited in the United States mail, certified mail, postage
prepaid, return receipt requested, addressed as set forth below:
46
<PAGE> 8
If to QUIDEL: Quidel Corporation
10165 McKellar Court
San Diego, CA 92121
Attention: President and Chief
Executive Officer
If to GETZLAFF: Darryll J. Getzlaff
11551 Petenwell Road
San Diego, CA 92131
Any party may change the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.
(e) Further Assurances. Each party agrees to promptly execute,
acknowledge and deliver such other and further instruments, writings and
documents as may reasonably be requested in writing by the other party to carry
out this Agreement. Each party agrees to use all reasonable efforts and to
exercise good faith in fulfilling its or his obligations under this Agreement.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
(g) Voluntary Agreement/Conflicts Waiver. GETZLAFF represents and
warrants (i) that he has carefully read the terms of this Agreement and fully
understands and accepts these terms, and (ii) that he has had full and adequate
opportunity and time, and has been advised by QUIDEL, to consult with counsel of
his choosing prior to executing this Agreement.
(h) Construction. The language herein shall be construed simply and in
accordance with its plain meaning and shall not be construed or interpreted
strictly for or against any party hereto, regardless of the source of
draftsmanship.
(i) Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and their representatives, heirs, administrators,
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
QUIDEL CORPORATION DARRYLL J. GETZLAFF
By:_______________________________ By:_________________________________
Andre de Bruin Darryll J. Getzlaff
President and Chief Executive Officer
47
<PAGE> 9
EXHIBIT A
TO: QUIDEL CORPORATION BOARD OF DIRECTORS
FROM: DARRYLL J. GETZLAFF
RE: RESIGNATION
Please accept this notice as my resignation, effective immediately, of
all positions as an officer or employee of QUIDEL CORPORATION and any subsidiary
thereof (other than the position contemplated by my Employment Agreement dated
of even date herewith) and all positions as a trustee of any and all benefit
plans of QUIDEL CORPORATION or any subsidiary thereof.
September 8,1998 ____________________________________
Darryll J. Getzlaff
<PAGE> 10
EXHIBIT B
DIRECT COMPETITORS
Applied Biotech, Inc.
Pharmatech
Smithkline Diagnostics/Beckman Coulter Primary Care Division
Wyntek Diagnostics, Inc.
<PAGE> 11
EXHIBIT C
INVENTION AND CONFIDENTIALITY AGREEMENT
50
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