<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Check One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarterly Period Ended April 2, 1995 Commission File Number: 0-12798
CHIRON CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 94-2754624
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(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4560 Horton Street, Emeryville, California 94608
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(Address of principal executive offices) (Zip code)
(510) 655-8730
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Security 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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 2, 1995
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Common Stock, $.01 par value 40,045,138
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CHIRON CORPORATION
TABLE OF CONTENTS
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PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheet as of
March 31, 1995 and December 31, 1994.................................3
Consolidated Statement of Operations for the
three months ended March 31, 1995 and 1994...........................4
Consolidated Statement of Cash Flows for the
three months ended March 31, 1995 and 1994...........................5
Notes to Consolidated Financial Statements...........................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS...............................................24
ITEM 2. CHANGES IN SECURITIES...........................................25
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................25
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS..............25
ITEM 5. OTHER INFORMATION...............................................25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................25
SIGNATURES....................................................................37
2
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CHIRON CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
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<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
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(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 91,122 $ 84,876
Short-term investments in marketable debt securities 109,807 137,619
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Total cash and short-term investments 200,929 222,495
Accounts receivable 221,189 140,476
Inventories 159,229 47,592
Other current assets 39,472 23,252
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Total current assets 620,819 433,815
Noncurrent investments in marketable debt securities 135,783 171,328
Property, equipment and leasehold improvements, at cost:
Land and buildings 168,000 60,930
Laboratory, production and office equipment 230,094 140,438
Leasehold improvements 86,536 82,145
Construction in progress 76,662 78,998
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561,292 362,511
Less: accumulated depreciation and amortization 90,297 76,337
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Net property, equipment and leasehold improvements 470,995 286,174
Intangible assets, net 164,132 85,803
Investments in equity securities and affiliated companies 31,165 51,425
Other assets 61,049 21,197
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$ 1,483,943 $ 1,049,742
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 74,349 $ 27,778
Accrued compensation and related expenses 54,484 24,010
Short-term borrowings 84,786 --
Current portion of long-term debt 3,478 3,461
Taxes payable 25,610 10,060
Other current liabilities 150,644 54,332
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Total current liabilities 393,351 119,641
Long-term debt 405,994 338,061
Other noncurrent liabilities 51,999 19,409
Commitments and contingencies
Stockholders' equity:
Common stock 400 334
Additional paid-in capital 1,597,457 1,161,942
Accumulated deficit (961,014) (575,236)
Cumulative foreign currency translation adjustment 439 (1,719)
Unrealized loss from investments (4,683) (12,690)
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Total stockholders' equity 632,599 572,631
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$ 1,483,943 $ 1,049,742
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</TABLE>
SEE ACCOMPANYING NOTES.
3
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CHIRON CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
March 31, March 31,
1995 1994
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<S> <C> <C>
Revenues:
Product sales, net $ 183,909 $ 45,484
Equity in earnings of unconsolidated joint businesses 18,178 15,487
Collaborative agreement revenues 5,567 22,462
Other revenues 10,592 7,948
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Total revenues 218,246 91,381
Expenses:
Research and development 99,055 38,409
Cost of sales 90,282 21,724
Selling, general and administrative 84,894 23,518
Write-off of purchased in-process technologies 230,657 --
Costs related to Ciba transaction 49,520 --
Restructuring and reorganization costs 37,641 --
Other operating expenses 2,280 906
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Total expenses 594,329 84,557
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Income (loss) from operations (376,083) 6,824
Other income (expense), net (1,389) 282
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Income (loss) before income taxes (377,472) 7,106
Provision for income taxes 8,306 2,289
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Net income (loss) $ (385,778) $ 4,817
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Net income (loss) per share $ (9.64) $ 0.14
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Weighted average number of shares
used in computing per share amounts 40,013 34,606
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</TABLE>
SEE ACCOMPANYING NOTES.
4
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CHIRON CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
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<TABLE>
<CAPTION>
Three Months Ended
------------------------------
March 31, March 31,
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (385,778) $ 4,817
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Write-off of purchased in-process technologies 230,657 --
Reserves and write-offs 28,370 1,944
Depreciation and amortization 22,666 10,031
Deferred income taxes (557) --
Undistributed earnings of affiliates (189) (247)
Changes, excluding the effect of acquisitions, to:
Accounts receivable 63,604 (15,263)
Inventories (26,749) (3,295)
Other current assets 2,771 (2,182)
Accounts payable 3,035 (7,187)
Current portion of unearned revenue 1,955 (3,347)
Accrued compensation and related expenses 4,670 (5,998)
Taxes payable 7,906 1,906
Other current liabilities 45,369 (2,201)
Other noncurrent liabilities (2,053) (201)
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Net cash used in operating activities (4,323) (21,223)
Cash flows from investing activities:
Purchase of investments in marketable debt securities (19,877) (96,635)
Sale and maturities of investments in marketable debt securities 86,880 51,486
Capital expenditures (28,586) (24,813)
Purchase of IOLAB (96,013) --
Cash acquired from the Acquisitions, net of cash paid 14,225 --
Investments in equity securities and affiliates (2,650) (18,500)
Distributions from affiliates -- 518
Increase in other assets (12,204) (5,939)
------------ ------------
Net cash used in investing activities (58,225) (93,883)
Cash flows from financing activities:
Borrowings under line of credit arrangements 42,971 --
Repayment of notes payable and capital leases (2,450) (77)
Proceeds from capital contribution from Ciba 24,845 --
Proceeds from issuance of common stock 3,060 7,326
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Net cash provided by financing activities 68,426 7,249
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Effect of exchange rate changes on cash and cash equivalents 368 --
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Net increase (decrease) in cash and cash equivalents 6,246 (107,857)
Cash and cash equivalents at beginning of the period 84,876 156,516
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Cash and cash equivalents at end of period $ 91,122 $ 48,659
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</TABLE>
SEE ACCOMPANYING NOTES.
5
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CHIRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The information at March 31, 1995, and for the periods ended March 31, 1995
and 1994, is unaudited, but includes all adjustments which Chiron's
management believes to be necessary for fair presentation of the periods
presented. The consolidated balance sheet amounts at December 31, 1994,
have been derived from audited financial statements. Certain 1994 balances
have been reclassified to conform to the 1995 presentation. Interim
results are not necessarily indicative of results for a full year. The
consolidated financial statements should be read in conjunction with
Chiron's audited consolidated financial statements for the year ended
December 31, 1994, and with Amendment No. 1 to the Company's filing on Form
8-K dated January 4, 1995.
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Investments in joint ventures, partnerships and
interests in other companies in which Chiron has an equity interest of 50
percent or less are accounted for by the equity method, cost method or in
accordance with Statement of Financial Accounting Standards No. 115, as
appropriate. All significant intercompany transactions and balances have
been eliminated.
FISCAL YEAR
Effective for fiscal year 1995, the Company adjusted its fiscal year end
from December 31 to the 52 or 53-week period that ends on the Sunday
nearest December 31. As a result, the first quarter of 1995 represents
the thirteen-week period ended April 2, 1995. For presentation purposes,
dates used in the consolidated financial statements and notes refer to the
calendar month end.
INVENTORIES
Pharmaceutical inventories are stated at the lower of cost or market using
the average cost method or, in the case of vaccine products, using the
last-in, first-out ("LIFO") method. Diagnostic and ophthalmic products are
valued at cost using the first-in, first-out ("FIFO") method which is less
than fair value. Inventories consist of the following:
MARCH 31, DECEMBER 31,
1995 1994
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(IN MILLIONS)
Finished goods $ 98 $ 24
Work in process 23 9
Raw materials 38 15
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$ 159 $ 48
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6
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INCOME TAXES
Income tax expense for the quarters ended March 31, 1995 and 1994, includes
a provision for federal, state and foreign taxes based on the annual
estimated effective rates applicable to certain of the Company's
subsidiaries.
PER SHARE DATA
Per share information is based on the weighted average number of common
shares and dilutive common share equivalents outstanding. Shares issuable
upon the exercise of stock options and certain warrants are included in the
calculations, utilizing the treasury stock method, to the extent they are
dilutive. Shares assumed to be issued upon conversion of the Company's
convertible debentures and certain warrants are not included since their
inclusion would be antidilutive. Fully diluted per share data has not been
presented as the amount would not differ materially from primary per share
data.
REVENUE RECOGNITION
Revenue from product sales consists of shipments of ophthalmic products,
therapeutics, diagnostic materials and instruments and other biologicals
and is generally recognized upon shipment. Revenue from service contracts
is recognized ratably over the life of the contract. Revenue from the sale
of equipment under sales-type leases is recognized at the inception of the
lease. All of the above revenues are included in "Product sales, net" in
the Consolidated Statement of Operations.
2. BUSINESS COMBINATIONS
TRANSACTION WITH CIBA-GEIGY LTD. AND AFFILIATES ("CIBA")
Effective January 1, 1995, Chiron entered into a series of agreements with
Ciba, including an investment agreement, a cooperation and collaboration
agreement and a governance agreement (collectively "agreements"). Ciba now
holds approximately a 49.5 percent ownership interest in Chiron common
stock, partially through a tender offer for approximately 38 percent of
Chiron's outstanding common stock for $117 per share. At the same time,
Chiron acquired all of the outstanding common stock of Ciba Corning
Diagnostics Corp. ("CCD") and Ciba's interests in The Biocine Company and
JV Vax B.V. (a Netherlands company which owns Biocine SpA) in exchange for
6.6 million newly-issued Chiron common shares and a cash payment of $24
million. These two acquisitions of Chiron common stock by Ciba, together
with Ciba's prior holdings of approximately 1.4 million shares, result in
the aforementioned 49.5 percent ownership of the Company's common stock.
Under the terms of the agreements, Ciba is entitled to name three new
members to Chiron's Board of Directors and has limited rights to review and
approve certain Chiron transactions. In connection with these agreements,
Ciba has agreed to guarantee $425 million of new debt for Chiron and has
agreed to provide $250 million (and up to $300 million subject to certain
reductions in the debt guarantee) over five years in support of research at
Chiron, and Chiron has the option of issuing up to $500 million of new
equity to Ciba. In the event Chiron utilizes this research funding, Chiron
will be obligated to offer to Ciba the opportunity to share in the market
opportunities of any resulting
7
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products. Alternatively, Chiron is entitled to reacquire all rights to
any resulting products by repaying to Ciba, in cash or common stock, an
amount equal to the funding plus an agreed upon return.
The acquisitions of CCD and Ciba's interests' in The Biocine Company and JV
Vax B.V. (the "Acquisitions") were accounted for by the purchase method.
The purchase price of approximately $433 million was allocated to the
acquired assets and assumed liabilities based upon their estimated fair
value on the acquisition date. The fair value of the net assets acquired in
the Acquisitions, including in-process technology, was estimated based on
an independent valuation of the acquired net assets. The aggregate
purchase price of approximately $433 million was less than the fair value
of the net assets acquired by approximately $62 million. This amount was
ratably allocated as a reduction of the noncurrent assets of the acquired
companies.
The Acquisitions include the following components:
(IN MILLIONS)
Fair value of assets acquired $ 692
Common stock issued (408)
Cash paid (24)
Acquisition costs (1)
------
Liabilities assumed $ 259
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------
As required under generally accepted accounting principles, Chiron
recognized as an expense the amount allocated to in-process technology in
the first quarter of 1995. This resulted in a noncash charge against
earnings of $220 million. Other transaction-related charges totaling $50
million related to employee payments and the related taxes, and legal and
investment advisor fees were also recognized as expenses in the first
quarter of 1995. Ciba has agreed to reimburse the Company $25 million for
a portion of the employee payments and such reimbursement has been
recorded as a capital contribution. Other purchased intangible assets of
approximately $33 million consisting of a customer list and base
technology will be amortized over their estimated useful lives of 10 to 15
years, using the straight-line method.
The results of operations of CCD, JV Vax B.V. and The Biocine Company are
included in Chiron's consolidated operating results from January 1, 1995,
forward. Chiron's interest in the operating results of JV Vax B.V. and The
Biocine Company were included in the Company's 1994 operating results under
the equity method of accounting. The following unaudited proforma
consolidated financial information for the three months ended March 31,
1994, gives effect to the terms of the agreements as if such transactions
had been consummated on January 1, 1994.
THREE MONTHS ENDED MARCH 31, 1994
---------------------------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Total revenues $ 203
Net income 3
Net income per share 0.07
The above proforma financial information does not purport to be indicative
of actual financial results which would have been obtained had the
acquisitions occurred on January 1, 1994, and should not be construed as
representative of future results of operations. Also, the proforma
financial information does not include the write-off of purchased in-
process technology of $220 million or other
8
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transaction-related costs totaling $50 million (related to employee
payments and the related taxes, and investment advisor and legal fees)
which were recognized as expense in the first quarter of 1995.
ACQUISITION OF IOLAB
Effective March 31, 1995, Chiron Vision acquired the surgical division of
IOLAB from Johnson & Johnson. The purchase price of approximately $96
million was allocated to the acquired assets and assumed liabilities based
upon their estimated fair value on the acquisition date. The fair value of
the net assets acquired, including in-process technology, was estimated
based on independent valuations of the acquired net assets.
The acquisition includes the following components:
(IN MILLIONS)
Fair value of assets acquired $ 109
Cash paid (95)
Acquisition costs (1)
-------
Liabilities assumed $ 13
------
------
The acquisition was accounted for by the purchase method, and the amount
allocated to in-process technology of $10 million was charged against
earnings in the first quarter of 1995. Other purchased intangible assets
of approximately $46 million consisting of base technology, goodwill, trade
name and a customer list will be amortized over their estimated useful
lives of 10 to 15 years using the straight-line method. IOLAB's results of
operations are included in Chiron's results of operations from March 31,
1995, forward.
Also, the Company recorded additional charges for restructuring and
integration-related expenses totaling $17 million in the first quarter of
1995. Of this amount, approximately $8 million was related to write-downs
of assets. The remaining $9 million consists primarily of $6 million in
employee costs and $3 million for the cost of lease terminations. The
majority of the accrued costs are expected to be paid over the next two
years.
3. RESTRUCTURING AND REORGANIZATION COSTS
Costs totaling $38 million related to restructuring and reorganization
plans, including $17 million arising from the acquisition and integration
of IOLAB (Note 2), represent the expected costs of integrating the acquired
businesses (Note 2) with Chiron's existing businesses, as well as costs
related to the idling of the Company's Puerto Rico manufacturing facility
and the scale-back of manufacturing operations at the Company's Amsterdam
facility, the write-down of duplicate facilities and the postponement of
plans to expand the Company's research and administrative facilities.
Of the approximately $21 million in charges for actions other than the
integration of IOLAB, approximately $15 million related to write-downs of
assets. The remaining costs of approximately $6 million consist primarily
of employee costs of $1 million and $5 million related to additional tax
obligations and lease termination costs. The majority of the accrued costs
are expected to be paid over the next two years.
9
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4. COLLABORATIONS AND JOINT BUSINESS ARRANGEMENTS
GENERAL
The Company has entered into a number of collaborative arrangements with
other pharmaceutical and biotechnology companies for the development and
marketing of certain technologies and products. The majority of these
collaborations are in the development or clinical trial phase. Chiron and
its collaborative partners generally contribute certain technologies and
research efforts to the collaboration. In addition, Chiron and its
collaborative partners commit, subject to certain limitations and
cancellation clauses, to share in the funding of the collaboration's
ongoing research and clinical trial costs. Chiron, under certain of the
arrangements, has purchased equity securities, including common and
preferred stock and warrants to purchase common and preferred stock, of the
collaborative partner. During the first quarter of 1995 the Company
entered into the following new collaborations:
PROGENITOR, INC.
In March 1995, the Company reached an agreement with Progenitor, Inc.
("Progenitor"), a subsidiary of Interneuron Pharmaceuticals, Inc., to
collaborate in the development and commercialization of therapeutic and
vaccine products incorporating Progenitor's proprietary gene therapy
technology. Under the agreement, Chiron received a license to Progenitor's
nonviral gene expression system for use in the development of products for
the treatment of certain cancers and cardiovascular disorders, development
of infectious disease vaccines and for development of certain other gene
therapy products. Chiron will have the right to manufacture and market any
resulting products of the collaboration. In return for the license and
other rights, Chiron made an initial license payment of $2.5 million to
Progenitor, which was expensed in the first quarter of 1995, and agreed to
make an additional funding payment of $0.5 million and make additional
license payments totaling $1.0 million to retain certain rights to
development of infectious disease vaccines. Also, Chiron has agreed to pay
to Progenitor various product development milestone payments which could
total approximately $3 million per product plus certain other milestone
payments which would be treated as prepaid royalties. In addition,
Progenitor will receive a royalty from any commercial sales of products
resulting from the collaboration.
GENELABS TECHNOLOGIES, INC.,
In March 1995, the Company reached an agreement with Genelabs Technologies,
Inc. ("Genelabs"), whereby Chiron and Genelabs cross-licensed certain
rights to hepatitis C virus ("HCV"), hepatitis G virus ("HGV"), a novel
hepatitis virus discovered by Genelabs, human T-cell leukemia virus-I
("HTLV-I") and human T-cell leukemia virus-II ("HTLV-II") diagnostic
tests. Under the agreement, Chiron acquired certain rights to develop and
market diagnostic products for the detection of HGV, HTLV-I and HTLV-II.
In return, Genelabs acquired development and marketing rights in Asia,
except Japan, for certain products incorporating Chiron's HCV technology.
Chiron has agreed to pay $5.0 million in up front license fees and up to
$9.0 million in HGV development milestones. Chiron also agreed to invest
a total of $10 million in equity securities of Genelabs at the closing.
Of an initial payment of $5.0 million, approximately $4.2 million was
expensed in the first quarter of 1995, while the remainder was recorded
as an investment in securities of Genelabs. Also, under the terms of
the agreement, Chiron has the option to acquire substantially all of the
diagnostics business of Genelabs in the year 2000 at the then fair market
value through the conversion of the $10 million equity investment for
approximately one-half of the business and an additional payment in an
amount to be
10
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determined for the remaining half. Chiron's agreement to provide the HCV
license is subject to the approval of Ortho, Chiron's joint diagnostic
business partner. Chiron intends to offer Ortho participation in the
collaboration with Genelabs as an equal partner, whereby Ortho would share
equally in all payments under the agreement.
NEW YORK UNIVERSITY
In March 1995, the Company reached an agreement with New York University
("NYU"), for the license of optical mapping technology for use by Chiron
and its sublicensee, Ciba, in development of diagnostics, therapeutics and
vaccines, and Chiron also acquired the right to commercialize a potential
optical mapping instrument. Under the terms of the agreement, Chiron made
a $5.0 million initial payment to NYU, which was expensed in the first
quarter of 1995, for the license and for funding certain research
facilities at NYU. If Chiron decides to continue development of the
instrument, Chiron will be obligated to make a $4.0 million milestone
payment to NYU and will make royalty payments to NYU based upon any future
product sales of the instrument, subject to certain minimum royalties. In
addition, Ciba has agreed to make certain further research payments to NYU
in connection with development of the instrument in exchange for the
sublicense and in exchange for royalty payments by Chiron to Ciba based
upon sales of the instrument.
5. DEBT OBLIGATIONS
ACQUIRED DEBT OF CCD
As part of the Acquisitions, the Company assumed approximately $96 million
in debt of CCD. This debt consists primarily of short-term borrowings
under revolving foreign line of credit arrangements totaling $41 million at
March 31, 1995, and a note payable to Ciba in the amount of $56 million
which is due in the year 2000. The foreign line of credit arrangements
bear interest at local interest rates ranging from 3 percent to 17 percent.
The note payable to Ciba bears interest at a variable rate (6.45 percent
at March 31, 1995).
LINE OF CREDIT ARRANGEMENT
On March 24, 1995, the Company entered into a revolving, unsecured line of
credit arrangement with an international bank under which the Company may
borrow up to $50 million. This credit facility is guaranteed by Ciba and
bears interest at a rate based on LIBOR (6.33 percent on the $40 million
outstanding at March 31, 1995).
6. CONTINGENCIES
See Item 1, Legal Proceedings, on page 24 of this Form 10-Q for a
discussion of certain lawsuits filed against the Company.
7. SUBSEQUENT EVENT - PROPOSED ACQUISITION OF VIAGENE, INC.
On April 23, 1995, the Company entered into an agreement to acquire by
merger Viagene, Inc. ("Viagene") by making a payment of 0.155 share of
Chiron Common Stock or a cash payment of $9 for each Viagene common share
equivalent for a total consideration of approximately $95 million (based
on the closing price of Chiron Common Stock on April 23, 1995 and the
assumption that all Viagene options and warrants not held by Chiron are
exercised prior to the transaction). The agreement stipulates that 40
percent of the aggregate consideration will be in cash and the
11
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remaining 60 percent will be in Chiron Common Stock. The Company
anticipates that the aggregate consideration will not exceed approximately
$38 million in cash and will result in the issuance of approximately 1
million shares of Chiron Common Stock. The Company has an ongoing
collaboration with Viagene in the area of gene therapy and, due to an
earlier investment as part of the collaboration arrangement, currently
holds approximately 17 percent of the outstanding voting stock of Viagene
(which had a carrying value of approximately $14 million on Chiron's books
at March 31, 1995). The proposed merger is subject to regulatory approval
and approval by Viagene stockholders and is expected to close in the third
quarter of 1995. If the proposed merger is completed, the Company will
account for the merger using the purchase method, and accordingly will
record an expense for the amount of the purchase price allocated to in-
process technology.
12
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
GENERAL
Chiron Corporation (the "Company" or "Chiron"), a human healthcare company,
applies biotechnology and other techniques of modern biology and chemistry to
develop, produce and sell products intended to improve the quality of life by
diagnosing, preventing and treating human disease. Chiron participates in the
global healthcare industry in four markets: diagnostics, including
immunodiagnostics, critical care diagnostics and quantitative probe diagnostics;
therapeutics, including Betaseron-Registered Trademark- (interferon beta 1-b)
for multiple sclerosis and Proleukin-Registered Trademark- (Aldesleukin) for
metastatic kidney cancer; vaccines, including a recombinant acellular pertussis
vaccine and other pediatric vaccines, and vaccines under development for genital
herpes, cytomegalovirus ("CMV"), human immunodeficiency virus ("HIV"), and
hepatitis C virus ("HCV"); and ophthalmic surgical products.
Effective January 1, 1995, Chiron entered into a series of agreements with Ciba-
Geigy Limited of Basel, Switzerland ("Ciba"), including an investment agreement,
a cooperation and collaboration agreement and a governance agreement
(collectively the "agreements"). Ciba now holds approximately a 49.5 percent
ownership interest in Chiron common stock, partially through a tender offer for
approximately 38 percent of Chiron's outstanding common stock for $117 per
share. At the same time, Chiron acquired all of the outstanding common stock of
Ciba Corning Diagnostics Corp. ("CCD") and Ciba's interests in The Biocine
Company and JV Vax B.V. (a Netherlands company which owns Biocine SpA) in
exchange for 6.6 million newly-issued Chiron common shares and a cash payment of
$24 million. These two acquisitions of Chiron common stock by Ciba, together
with Ciba's prior holdings of approximately 1.4 million shares, result in the
aforementioned 49.5 percent ownership of the Company's common stock.
Under the terms of the agreements, Ciba is entitled to name three new members to
Chiron's Board of Directors and has limited rights to review and approve certain
Chiron transactions. In connection with these agreements, Ciba has agreed to
guarantee $425 million of new debt for Chiron and has agreed to provide at least
$250 million (and up to $300 million subject to certain reductions in the debt
guarantee) over five years in support of research at Chiron, and Chiron has the
option of issuing up to $500 million of new equity to Ciba. In the event Chiron
utilizes Ciba's research funding, Chiron will be obligated to offer to Ciba the
opportunity to share in the market opportunities of any resulting products.
Alternatively, Chiron is entitled to reacquire all rights to any resulting
products by repaying to Ciba, in cash or common stock, an amount equal to the
funding plus an agreed upon return.
The acquisitions of CCD and Ciba's interests' in The Biocine Company and JV Vax
B.V. ("the Acquisitions") were accounted for by the purchase method in the first
quarter of 1995. The purchase price of approximately $433 million was allocated
to the acquired assets and assumed liabilities based upon their estimated fair
value on the acquisition date. As required under generally accepted accounting
principles, Chiron recognized as an expense the amount allocated to in-process
technology in the first quarter of 1995. This resulted in a noncash charge
against earnings of $220 million. Other transaction-related charges totaling
$50 million (related to legal and investment advisor fees, as well as employee
payments and related tax liabilities) were also recognized as expenses in the
first quarter of 1995. The results of operations of CCD, Biocine SpA and The
Biocine Company are included in Chiron's consolidated operating results from
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January 1, 1995, forward. Chiron's share of the operating results of Biocine
SpA and The Biocine Company were included in the Company's 1994 operating
results under the equity method of accounting.
Effective March 31, 1995, Chiron Vision acquired the surgical division of IOLAB
from Johnson & Johnson for approximately $96 million. The acquisition was
accounted for by the purchase method, and resulted in a $10 million charge to
earnings in the first quarter of 1995 to expense purchased in-process
technology. Chiron Vision plans to consolidate its intraocular lens
manufacturing in Lyon, France and at IOLAB's plant in Claremont, California.
The Company recorded additional charges for restructuring and integration-
related expenses totaling $17 million. IOLAB's results of operations are
included in Chiron's consolidated operating results from March 31, 1995,
forward.
On April 23, 1995, the Company entered into an agreement to acquire by merger
Viagene, Inc. ("Viagene") by making a payment of 0.155 share of Chiron common
stock or a cash payment of $9 for each Viagene common share equivalent for a
total consideration of approximately $95 million. The agreement stipulates
that 40 percent of the aggregate consideration will be in cash and the remaining
60 percent will be in Chiron common stock. The Company anticipates that the
aggregate consideration will not exceed approximately $38 million in cash and
will result in the issuance of approximately 1 million shares of Chiron Common
Stock. The Company has an ongoing collaboration with Viagene in the area of
gene therapy and, due to an earlier investment as part of the collaboration
arrangement, currently holds approximately 17 percent of the outstanding voting
stock of Viagene (which had a carrying value of approximately $14 million on
Chiron's books at March 31, 1995). The proposed merger is subject to regulatory
approval and approval by Viagene stockholders and is expected to close in the
third quarter of 1995. If the proposed merger is completed, the Company will
account for the merger using the purchase method, and accordingly will record an
expense for the amount of the purchase price allocated to in-process technology.
RESULTS OF OPERATIONS
REVENUES
PRODUCT SALES
The Company's revenues are derived from a variety of sources, including product
sales, collaborative agreements, product royalty agreements and joint business
arrangements. Product sales, Chiron's largest revenue category, consists of the
following product lines in the human healthcare industry for each of the three-
month periods ended March 31:
1995 1994
------- ------
(IN MILLIONS)
Diagnostic products $ 127 $ 4
Ophthalmic products 24 22
Betaseron-Registered Trademark- sales 2 11
Oncology products 13 8
Vaccine products 16 --
Other products 2 --
------ -----
$ 184 $ 45
------ -----
------ -----
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As a result of the January 1995 acquisition of CCD, diagnostic product sales now
represent the largest component of product sales. CCD had sales of $120 million
for the three months ended March 31, 1995. CCD's product sales for the first
quarter of 1994, which are not included in Chiron's 1994 results, were
approximately $101 million. CCD product sales include direct sales and sales-
type leases of CCD's fully-automated random-access immunodiagnostic testing
systems and reagents for these systems, as well as sales of critical blood
analyte systems, clinical chemistry products and manual immunodiagnostic
systems. CCD's sales increased from the prior year primarily due to increased
sales of the immunodiagnostic and critical blood analyte product lines and due
to favorable foreign currency exchange rates. Sales of diagnostic systems
often include the sale of service and maintenance contracts. Revenue from
these service contracts is included in product sales revenue and is recognized
ratably over the life of the contracts.
Diagnostic product sales also include sales of nucleic acid probe products and
instrumentation and sales of antigens and RIBA-Registered Trademark- HCV tests.
Nucleic acid probe products are sold at cost to Daiichi Pure Chemical Co., Ltd.
("Daiichi"), which markets the product in Japan and pays Chiron a royalty based
upon its sales of the product. Nucleic acid probe products are also sold by
Chiron on a research-use only basis in the United States and Europe. Antigens
and RIBA-Registered Trademark- HCV test kits are sold at cost to Ortho
Diagnostic Systems, Inc. ("Ortho"), Chiron's partner in a joint diagnostic
business.
Sales of ophthalmic surgical products increased between years largely due to the
impact of the May 1994 acquisition of Laboratoires Domilens S.A. ("Domilens")
and due to favorable foreign currency rate fluctuations. For the quarter ended
March 31, 1995, sales of intraocular lenses by Domilens contributed $6 million
in incremental revenues. Offsetting these increases were lower sales of
refractive surgery products, particularly of ophthalmic surgical knives used in
radialkeratotomy procedures. Sales of surgical knives have decreased as
refractive surgery procedures are increasingly shifting towards newer
technologies, including the use of corneal shapers and excimer lasers in place
of surgical knives.
During 1994, Chiron operated under an amended Betaseron-Registered Trademark-
supply agreement whereby Chiron recognized substantially all of its Betaseron
- -Registered Trademark- revenue at the time of shipment to its marketing partner,
Berlex Laboratories, Inc. ("Berlex"). Chiron was required to revert to the
terms of the original Betaseron-Registered Trademark- supply agreement by
sometime in 1995 or no later than June of 1996. Chiron exercised its option to
revert to the terms of the original Betaseron-Registered Trademark- supply
agreement effective January 1, 1995. Under those original terms, Chiron will
earn a partial payment for Betaseron-Registered Trademark- upon shipment to
Berlex and a subsequent final payment based upon Berlex's net sales of the
product. Further, because adequate inventory levels had been built by Berlex,
Chiron's Betaseron-Registered Trademark- revenue dropped between years as no
commercial-use vials were shipped during the first quarter of 1995. Total 1995
shipments of Betaseron-Registered Trademark- to Berlex are expected to be
roughly comparable to, or slightly above or below 1994 levels. Assuming
comparable 1994 and 1995 annual vial shipments to Berlex, total 1995 revenues
from Betaseron-Registered Trademark- shipments will be lower than 1994 revenues
by approximately $25 million to $30 million as a result of the reversion to the
original supply agreement.
Sales of oncology products, principally Proleukin-Registered Trademark-,
increased by approximately $5 million between 1994 and 1995 as the number of
vials sold increased in both the European and domestic markets. Average selling
prices were comparable between periods.
Vaccine product sales totaling approximately $16 million consist of sales of
pediatric and adult vaccines primarily in Italy and to public health
organizations by the Company's Biocine SpA subsidiary. Biocine
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SpA's product sales for the first quarter of 1994, which are not included in
Chiron's 1994 results, were approximately $11 million. Biocine SpA's vaccine
products include Acelluvax-Registered Trademark-, a recombinant acellular
pertussis vaccine, Agrippal-Registered Trademark-, a flu vaccine, and
Polioral-Registered Trademark-, an oral polio vaccine. Sales of certain of
Biocine SpA's vaccines are seasonal, particularly the flu vaccine, with strong
sales generally occurring during the pre-flu season in the fourth quarter of
the year.
The Company markets many of its commercial products internationally. As a
result, product revenues are affected by fluctuating foreign currency exchange
rates. Foreign product sales were approximately $118 million and $12 million
for the three months ended March 31, 1995 and 1994, respectively, with
international sales of diagnostic products by CCD and vaccine sales by Biocine
SpA accounting for substantially all of the increase in foreign product sales.
Product sales would have been approximately 4 percent lower in 1995 if currency
exchange rates had remained the same as in 1994. The Company's other revenues,
discussed below, are largely denominated in U.S. dollars.
EQUITY IN EARNINGS OF JOINT BUSINESSES
As of March 31, 1995, Chiron had a 50 percent equity interest in three joint
businesses: a joint diagnostic business with Ortho, a generic cancer
chemotherapeutics business with Ben Venue Laboratories, Inc., and a German
ophthalmic excimer laser business. Chiron's one-half interest in the pretax
operating earnings of its joint diagnostic business with Ortho represents the
largest component of joint business revenues. Approximately 80 percent of the
sales of the Chiron-Ortho joint business arise from sales of HCV blood screening
tests. The joint business also receives a royalty from Abbott Laboratories
("Abbott") for Abbott's sales of HCV tests which use the Chiron technology and
which compete directly with tests marketed by Ortho. Chiron's share of the
profits of the joint business increased by approximately $3 million from the
prior year as lower margins on domestic sales of diagnostic kits by the joint
business were more than offset by increased profits from sales by Ortho's
foreign affiliates and lower research and development spending by the joint
business.
COLLABORATIVE AGREEMENT REVENUES
Collaborative agreement revenues consist of fees received for research services
as they are performed, fees received for completed research or technology, fees
received upon attainment of benchmarks specified in the related research
agreements, and proceeds of sales of biological materials to research partners
for clinical and preclinical testing. Collaborative agreement revenues
decreased from the prior year period due to the January 1995 acquisition of
Ciba's interest in The Biocine Company, Chiron's joint vaccine venture with
Ciba. Prior to the acquisition, Chiron received reimbursement for its vaccine
research expenses from The Biocine Company and recorded such reimbursement as
collaborative agreement revenue. After the acquisition, The Biocine Company
became a wholly owned subsidiary of Chiron and thus no longer provides research
revenues to Chiron. In the first quarter of 1994, Chiron recognized revenues of
$11 million from The Biocine Company. Further contributing to the decrease in
collaborative agreement revenues was the completion of a nucleic acid probe
development program with Daiichi, which had provided first quarter 1994 revenues
of $3 million.
As part of the agreements with Ciba, Ciba has agreed to provide research funding
to Chiron of $250 million over the next five years. Annual funding amounts are
subject to certain limitations and the specific programs to be funded are
subject to Ciba's approval. In the event Chiron utilizes this research funding
arrangement, Chiron will be obligated to offer to Ciba the opportunity to share
in the market opportunities of any resulting products.
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In addition, Chiron is entitled to re-acquire all rights to any resulting
products by repaying to Ciba, in cash or common stock, an amount equal to Ciba's
funding plus interest. During the first quarter of 1995, no research funding
was earned from Ciba under this arrangement.
OTHER REVENUES
Other revenues consist principally of product royalties, government grants and
sales fees earned by the Company for sales and marketing services rendered on
behalf of its generic chemotherapeutics joint venture and on behalf of Ciba.
Sales fees received from Ciba for sales of Aredia-Registered Trademark-, for
which Chiron began earning sales fee revenue in late 1994, accounted for the
increase in other revenues for the first quarter of 1995 as compared with the
first quarter of 1994. Royalty revenue, the largest component of other
revenues, was comparable between periods.
COST AND EXPENSES
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased significantly between 1994 and 1995
due to the acquisitions of CCD and Biocine SpA, which on a combined basis added
$21 million in incremental research and development expenses. In addition, the
Company entered into new collaboration agreements and funded development
expenses in a number of its existing collaborative arrangements with other
pharmaceutical and biotechnology companies for the research, development and
marketing of certain technologies and products. As part of these collaborative
arrangements, Chiron has made various investments in the equity securities of
the collaborative partners and, in some cases, agreed to provide specified
levels of funding to the collaboration. During the first quarter of 1995, new
collaborative arrangements include the following:
- - In March 1995, the Company reached an agreement with Genelabs Technologies,
Inc. ("Genelabs"), whereby Chiron and Genelabs cross-licensed certain
rights to hepatitis C virus ("HCV"), hepatitis G virus ("HGV"), a novel
hepatitis virus discovered by Genelabs, human T-cell leukemia virus-I
("HTLV-I") and human T-cell leukemia virus-II ("HTLV-II") diagnostic
tests. Under the agreement, Chiron acquired certain rights to develop
and market diagnostic products for the detection of HGV, HTLV-I and
HTLV-II. In return, Genelabs acquired development and marketing
rights in Asia, except Japan, for certain products incorporating Chiron's
HCV technology. Chiron has agreed to pay $5 million in up front license
fees and up to $9 million in HGV development milestones. Chiron also
agreed to invest a total of $10 million in equity securities of Genelabs at
the closing. Of an initial payment of $5 million, approximately $4 million
was expensed in the first quarter of 1995, while the remainder was
recorded as an investment in securities of Genelabs. Also, under the
terms of the agreement, Chiron has the option to acquire substantially all
of the diagnostics business of Genelabs in the year 2000 at the then fair
market value through the conversion of the $10 million equity investment
for approximately one-half of the business and an additional payment in an
amount to be determined for the remaining half. Chiron's agreement to
provide the HCV license is subject to the approval of Ortho, Chiron's joint
diagnostic business partner. Chiron intends to offer Ortho participation
in the collaboration with Genelabs as an equal partner, whereby Ortho would
share equally in all payments under the agreement.
- - An agreement with Progenitor, Inc. ("Progenitor"), a subsidiary of
Interneuron Pharmaceuticals, Inc., to collaborate in the development and
commercialization of therapeutic and vaccine products incorporating
Progenitor's proprietary gene therapy technology. Under the agreement,
Chiron received a license to Progenitor's nonviral gene expression system
for use in the development of products for the
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treatment of certain cancers, cardiovascular disorders, development of
infectious disease vaccines and for development of certain other gene
therapy products. Chiron will have the right to manufacture and market any
resulting products of the collaboration. In return for the license and
other rights, Chiron made an initial payment of $2.5 million to Progenitor,
agreed to make an additional funding payment of $0.5 million, agreed to
make additional license payments totaling $1 million to retain certain
rights to development of infectious disease vaccines and agreed to
make additional product development milestone payments which could total
approximately $3 million for each of the resulting products plus certain
other milestone payments which are treated as prepaid royalties. In
addition, Progenitor will receive a royalty from any commercial sales of
products resulting from the collaboration.
- - An agreement with New York University ("NYU") under which Chiron acquired
rights to optical mapping technology for use by Chiron and its sublicensee,
Ciba, in development of diagnostics, therapeutics and vaccines, and Chiron
also acquired the right to commercialize a potential optical mapping
instrument. Chiron made a $5 million payment to NYU for the license and
for funding of certain research facilities at NYU. If Chiron decides to
continue development of the instrument, Chiron will be obligated to make a
$4 million milestone payment to NYU and will make royalty payments based on
a percentage of sales of the instrument, subject to certain minimum
amounts. In addition, Ciba has agreed to make certain further research
payments to NYU in connection with development of the instrument in
exchange for the sublicense and in exchange for royalty payments by Chiron
to Ciba based upon sales of the instrument.
Incremental research and development expense recognized as a result of the
Company's funding of its collaborations, including the new agreements with
Genelabs, Progenitor and NYU, during the first quarter of 1995 totaled $31
million. In addition to these new agreements, the Company exercised an option
to fulfill its funding requirement through 1996 in a collaboration with G.D.
Searle & Co. ("Searle") by making a $9 million payment to Searle in return for
a lower overall funding amount and the exclusive option to negotiate for the
manufacturing rights to certain of Searle's products. Chiron also made a $4
million payment to DepoTech, Inc. ("DepoTech") related to the attainment of a
development milestone in a therapeutic collaboration and made a $1.5 million
payment to CytoMed, Inc. ("CytoMed") for funding of a collaboration utilizing
complement inhibitors for use in therapeutic and diagnostic applications and
for the purchase of additional equity securities of CytoMed. In addition,
beginning in the first quarter of 1995, the Company began funding 100 percent
of the expenses of its neurological disease collaboration with Cephalon, Inc.
("Cephalon"), resulting in a $6 million expense for the first quarter
collaborative expenses.
With respect to Chiron's in-house research and development programs, Chiron
continued to devote substantial resources to its vaccine programs, growth factor
and nucleic acid therapeutics programs and internal biological therapeutics
programs. In particular, spending in the vaccines program increased by
approximately $4 million (excluding the impact of the acquisition of Biocine
SpA) over the prior year due to clinical trial and manufacturing expenses for
herpes simplex type 2 vaccines and other vaccines currently in development. The
Company also recognized $1.5 million in expense during the first quarter from
the purchase of an option from Johnson & Johnson to participate in a home-access
HIV testing business. During the remainder of 1995, the Company expects that
research and development expense will remain significantly higher than prior
years due to the impact of the acquisitions and to continued expenses in all of
its collaborations. Product development, manufacturing start-up, and regulatory
expenses may also increase in future periods as Chiron's products in development
advance towards commercialization.
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COST OF SALES
Cost of sales increased consistent with the increase in product sales between
years. Gross profit margins decreased slightly from the prior year to 51
percent from 52 percent. Margins on existing product sales decreased from the
prior year due to increased obsolescence reserves on ophthalmic products and
operating expenses associated with the idled Puerto Rico facility. Partially
offsetting these decreases in gross profit margins was the addition of CCD's and
Biocine SpA's product sales which have higher margins than those of the
Company's existing products. Gross profit margins will be adversely impacted
during the remainder of 1995 due to the impact of the reversion to the original
terms of the Betaseron-Registered Trademark- supply agreement which will result
in lower revenues over the next two to three quarters. Further, gross profit
margin percentages may fluctuate significantly in future periods as the
Company's product mix continues to evolve, as the increased costs of new
manufacturing facilities are included in cost of goods sold and as the
restructurings of the Company's ophthalmic, diagnostics, and vaccine businesses
are completed.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A expenses") increased between
1994 and 1995, largely due to the impact of the acquisitions of CCD and Biocine
SpA, which together added $46 million in SG&A expenses. SG&A expenses were
higher in the ophthalmic business due to the acquisition of Domilens and
increased costs related to the ophthalmic sales force arising from the
anticipated integration of Chiron Vision's operations with IOLAB. SG&A expenses
also increased due to increased selling costs for the Company's therapeutic
product lines and due to increased professional fees arising from ongoing patent
litigation.
OTHER EXPENSES
The write-off of purchased in-process technology includes $220 million for the
acquisitions of CCD, Biocine SpA and The Biocine Company and $10 million for the
acquisition of IOLAB. The fair value of the net assets acquired in these
acquisitions, including in-process technology, was estimated based on valuations
of the acquired net assets.
Other costs related to the Ciba transaction consist primarily of employee
payments and related tax liabilities and legal and investment advisor fees.
Under the agreements reached with Ciba, Ciba has agreed to reimburse the Company
$25 million for a portion of the employee payments and such reimbursement has
been recorded as a capital contribution.
Restructuring and reorganization costs represent certain accrued costs of
integrating the acquired businesses with Chiron's existing businesses, costs
related to the idling of the company's Puerto Rico manufacturing facility and
the scaling-back of manufacturing operations at the Company's Amsterdam
facility, and costs related to the write-down of duplicate facilities at the
Company's Emeryville, California headquarters. Also included is a charge
related to the postponement of plans to expand the Company's Emeryville research
and administrative facilities. Of the $38 million in total charges,
approximately $23 million related to write-downs of assets. The remaining
charges of $15 million consist of employee costs of $7 million and other accrued
costs of $8 million primarily for lease termination costs and additional tax
obligations. The majority of the accrued costs are expected to be paid over the
next two years.
Other income (expense) consists primarily of investment income on the Company's
cash and investment balances and interest expense accrued on debt and capital
leases. Other income (expense) decreased
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between 1994 and 1995, due to increased interest expense resulting from the
acquired debt of CCD and Biocine SpA and due to lower yields on the Company's
investment portfolio.
The provision for income taxes in 1995 consists primarily of foreign taxes on
certain foreign operations of the Company. Substantially all of the write-off
of purchased in-process technologies is not deductible for income tax purposes
and thus does not create a tax benefit in 1995. The provision for income taxes
in 1994 was based on the estimated annual effective income tax rate. The income
tax provision increased between periods primarily due to the acquisition of
foreign operations which were not included in 1994 results.
OUTLOOK
Chiron may incur a loss in the second quarter of 1995 and expects to incur a
loss in the third quarter of 1995 due to the continuing impact of integrating
CCD, Biocine SpA, The Biocine Company and IOLAB, as well as significant charges
associated with the planned acquisition of Viagene. Profitability of the
Company beyond the third quarter of 1995 depends upon a number of factors.
These factors include: successful integration of the newly acquired businesses
with Chiron; substantial profit contribution from CCD and the newly integrated
ophthalmic business; continuation of substantial profit contribution from the
Chiron-Ortho joint business; continued product sales of Betaseron-Registered
Trademark- in the United States and Proleukin-Registered Trademark- worldwide;
the successful completion of clinical trials and subsequent FDA approval for
commercialization of additional vaccines, diagnostics and pharmaceuticals under
development; and expense reduction in several of the Company's businesses.
There can be no assurance whether any combination of these factors can be
achieved, or that any such combination will result in profitability of the
Company. The integration of CCD, The Biocine Company, Biocine SpA and IOLAB
will have a material impact on the results of operations of the Company going
forward. Although the Company has recorded the majority of the expected cost of
these integrations in the first quarter of 1995, the Company expects to incur
additional charges in subsequent quarters as these integrations are completed.
Profitability of the Company is also dependent on utilization of research
funding available from Ciba. As part of the agreements with Ciba, Ciba agreed
to provide the Company with funding totaling $250 million over the next five
years in support of the Company's research programs.
Achievement and maintenance of profitability are substantially dependent upon
the success of Chiron's collaborations with others. Under the joint business
agreement with Ortho, Chiron and Ortho together determine strategy and budgets
for their joint diagnostics business, but Ortho conducts all commercial
activities, except research and antigen manufacturing, and exercises broad
control over the conduct of day-to-day operations. The Company is also
dependent upon Schering AG, Germany, and its U.S. affiliate, Berlex, for
development, marketing and distribution of Betaseron-Registered Trademark-.
There can be no assurance that the corporate interests of Berlex and Ortho, or
any other corporate partners, are or will remain consistent with those of Chiron
or that any collaborator will succeed in developing new markets or retaining and
expanding the markets served by the commercial collaborations.
In addition, Chiron's 50 percent share of the operating earnings of the
Chiron-Ortho joint business has been a significant source of Chiron's revenues.
The market for immunodiagnostic viral screening tests has evolved rapidly since
the introduction of HCV tests by the Chiron-Ortho joint business and by Abbott.
The joint business may be adversely affected in future periods by increasing
margin pressures, the overall demand for current tests and new diagnostic
products, and by the introduction of competing tests by unlicensed third
parties.
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Furthermore, other Chiron programs will require substantial additional
investment including the cost of funding collaborative research arrangements
with third parties, the cost of clinical trials, the completion of commercial
scale manufacturing facilities, and marketing and sales expenses associated with
product introductions. Also, the planned merger with Viagene will result in a
charge for the expensing of purchased in-process technology and will also result
in increased research and development expenses in future periods. Chiron has
significantly expanded its manufacturing capability to support both approved
products and products in development which has resulted in higher levels of
operating expenses and depreciation, and may result in even higher levels of
operating expenses in future periods. The research, development and market
introduction of new products will require the application of considerable
technical and financial resources by Chiron, while revenues generated from such
products, assuming they are successfully developed, may not be realized for
several years. Other material and unpredictable factors which could affect
operating results include the uncertainty, timing and costs associated with
product approvals and commercialization; the issuance and use of patents and
proprietary technology by Chiron or its competitors; the effect of technology
and other business acquisitions or transactions; the increasing emphasis on
controlling healthcare costs and potential legislation or regulation of
healthcare pricing; and actions by collaborators, customers and competitors.
Chiron exercised its option to revert to the terms of the original Betaseron
- -Registered Trademark- supply agreement effective January 1, 1995. Under those
original terms, Chiron will earn a partial payment for Betaseron -Registered
Trademark- upon shipment to Berlex and a subsequent final payment based upon
Berlex's net sales of the product. Total 1995 shipments of Betaseron
- -Registered Trademark- are expected to be roughly comparable to, or slightly
above or below 1994 levels. Assuming comparable 1994 and 1995 annual vial
shipments to Berlex, total 1995 revenues from Betaseron-Registered Trademark-
shipments will be lower than 1994 revenues by approximately $25 million to $30
million as a result of the reversion to the original supply agreement.
In March 1995, the Company decided to idle its Puerto Rico facility and scale-
back the manufacturing operations at the Company's Amsterdam facility. This
decision was based on the belief that current demand for Betaseron -Registered
Trademark- can be adequately supplied with the expanded manufacturing capacity
at the Company's Emeryville, California facility. Utilization of this idled
manufacturing capacity will require a significant increase in Betaseron
- -Registered Trademark- demand and/or the introduction of new products which
would require significant manufacturing capacity.
The market price of the Company's common stock is subject to significant
volatility, particularly on a quarterly basis. Any shortfall in revenue or
earnings from levels expected by securities analysts could have an immediate and
significant adverse effect on the trading price of the Company's stock in any
given period. Additionally, announcements of technological innovations by the
Company or its competitors, developments concerning proprietary rights, public
concern as to the safety of biotechnology and economic or other external factors
may have a significant impact on the market price of the Company's common stock.
The Company does not currently believe that inflation has a significant impact
upon its business.
LIQUIDITY AND CAPITAL RESOURCES
Chiron has financed product development, operations and capital expenditures
primarily from public and private sales of equity and convertible debt, product
sales, collaborative research revenues and from the earnings of the Chiron-Ortho
joint business. In addition to these sources of capital, future cash
requirements, including possible operating deficits, will be financed through a
combination of debt, mortgage, leases, possible off-balance-sheet financing
(such as R&D limited partnerships), and the use of existing cash and investment
balances. In addition, Ciba has agreed to guarantee $425 million of new debt
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for Chiron, and has agreed to provide $250 million (and up to $300 million
subject to certain reductions in the debt guarantee) over five years in support
of research programs at Chiron. Chiron also has the option of issuing up to
$500 million of new equity to Ciba. Until required for operations, Chiron's
policy is to keep its cash and investments in a diversified portfolio of
investment grade financial instruments, including money market instruments,
corporate notes and bonds, government or government agency securities, or other
debt securities. By policy, the amount of credit exposure to any one
institution is limited. These investments are generally not collateralized and
primarily mature within three years. Investments with original maturities in
excess of one year are presented on the balance sheet as noncurrent investments.
Chiron's liquidity may be impacted in future periods by its decision to fund its
share of expenses in certain of its joint ventures and collaboration
arrangements. Over the next several years, Chiron anticipates funding
collaborations with a number of its research partners, and may make additional
equity investments in collaborative partners. During the first quarter of 1995
the Company funded $34 million under third party collaborations for both
additional equity investments and development expenses. Also, Chiron has agreed
to provide one of its collaborative partners, Cephalon Inc., with an $18 million
credit facility through 1999 and has made advances to Cephalon Inc. totaling $14
million through March 31, 1995.
During the quarter ended March 31, 1995, cash and cash equivalents increased by
approximately $6 million. Of this amount, approximately $4 million was used in
the Company's operating activities, compared to $21 million used in operating
activities in the first quarter of 1994.
Investing activities consumed cash of $58 million in 1995, versus $94 million in
1994. The first quarter of 1995 included the acquisition of IOLAB for $96
million in cash. The first quarter of 1994 included net purchases of marketable
debt securities of $45 million, compared to net sales of marketable debt
securities of $67 million in the first quarter of 1995. Capital expenditures
on plant and equipment were $29 million during 1995 versus $25 million in 1994.
The Company also made investments in the equity securities of collaborative
partners totaling $3 million in the first quarter of 1995 and $19 million in the
first quarter of 1994.
Cash provided by financing activities in the first three months of 1995 of $68
million includes a $25 million capital contribution by Ciba to fund certain
payments to employees which resulted from the agreements with Ciba and $3
million from the issuance of common stock under the Company's employee benefit
plans. Also, in March 1995, the Company borrowed $40 million under a line of
credit arrangement, representing the first utilization of the debt guarantee
provided by Ciba. In addition, as part of the acquisitions, Chiron assumed
approximately $96 million in debt of CCD. This debt consists primarily of
short-term borrowings under foreign line of credit arrangements and a long-term
loan with Ciba.
The proposed acquisition of Viagene will require approximately $38 million in
cash and result in the issuance of approximately 1 million new shares of Chiron
common stock.
More than 60 percent of the Company's product sales in the first quarter of 1995
were made in foreign countries primarily Western European countries and Japan.
Foreign product sales are typically denominated in the currency of the country
in which the sale occurs. To the extent that foreign activities give rise to
receivable and payable balances that are denominated in foreign currencies, the
Company's policy is to mitigate its exposure to fluctuating foreign currency
exchange rates by hedging this exposure by entering into forward foreign
currency contracts which are settled quarterly. The gains and losses on these
hedging contracts are recorded in "Other income (expense)" in the consolidated
statement of operations
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and serve to offset the loss and gain on the underlying exposures. At March 31,
1995, the Company had outstanding forward foreign currency contracts totaling
approximately $37 million.
23
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ITEM 1. LEGAL PROCEEDINGS
MUREX DIAGNOSTICS, LTD. In a series of actions, the first of which was
brought on March 2, 1992, Chiron together with Ortho Diagnostic Systems, Inc.
("Ortho") and Ortho Diagnostic Systems, Ltd., filed suit in the High Court for
England and Wales against Murex Diagnostics, Ltd. ("Murex"), alleging
infringement of Chiron's U.K. Patent No. 2,212,511 ("the '511 patent") as a
result of Murex's manufacture and sale of HCV immunoassay kits in the U.K.
Murex is a subsidiary of International Murex Technologies Corp., a Canadian
company. Chiron and Ortho sought injunctive relief and unspecified damages. On
May 27, 1994, the court granted judgment for Chiron and Ortho, holding the '511
patent valid and infringed, and ordered Murex to pay damages in an amount to be
determined. Chiron's and Ortho's request for an injunction was granted on
November 30, 1994. Murex has appealed. Chiron is informed that officials
within the British Ministry of Health have in the past raised the possibility of
authorizing Murex's infringement of the `511 patent under the "Crown use"
provisions of British law, with respect to the sale of HCV immunoassay kits to
the British National Health Service. Further, Murex has stated that it will
apply for a compulsory license under the '511 patent. Infringement proceedings
against Murex on German and European patents corresponding to the '511 patent
have also been filed by Chiron and Ortho in Germany, Italy, The Netherlands and
Belgium. On January 23, 1995, Chiron and Ortho were granted an injunction in
Germany. On May 8, 1995, Chiron was granted a cross-border preliminary
injunction by the Dutch court preventing infringement by Murex and certain of
its affiliates covering The Netherlands, Belgium, France, Spain and Luxembourg.
Murex has brought an action in Australia seeking the revocation of the
Australian counterpart of the '511 patent. Chiron has counterclaimed for
infringement.
DANIEL W. BRADLEY. On December 20, 1994, Dr. Daniel W. Bradley, a former
scientist at the U.S. Centers for Disease Control (the "CDC") brought suit in
the United States District Court for the Northern District of California against
Chiron, Ortho, certain employees of Chiron, and the United States government.
Bradley, who collaborated with Chiron scientists on the research that led to the
discovery of HCV, alleges he has been wrongly excluded as an inventor of HCV.
He requests various forms of relief, including declarations that he is an
inventor of Chiron's patents related to HCV and that these patents are
unenforceable. Bradley further seeks monetary damages and a constructive trust
on all past and future profits derived from Chiron's HCV invention, which are
estimated by Bradley to be in excess of $1 billion, as well as penalties under
federal and state Racketeering and Corrupt Organization (RICO) statutes. Chiron
believes that this suit is without merit and that substantial defenses exist.
In 1990, Bradley and the CDC entered into a settlement agreement regarding his
claims of inventorship in which any rights either might have were assigned to
Chiron. Chiron believes that the settlement agreement is valid and bars nearly
all of the claims in the subject litigation. Chiron and the other defendants
have filed a motion to dismiss.
SICOR. In April 1991, Alco Chemicals, Ltd. ("Alco") and Sicor, SpA
("Sicor"), Cetus Ben Venue Therapeutics' ("CBVT") former suppliers of bulk
doxorubicin, filed suit in the United States District Court for the Northern
District of California against Cetus Corporation ("Cetus"), Ben Venue
Laboratories, Inc. ("Ben Venue"), CBVT and Erbamont, Inc. ("Erbamont") and its
affiliates. Sicor had been prevented from manufacturing product for CBVT since
September 1990, when Sicor's facilities in Italy were ordered closed by the
government in connection with trade secret litigation in Italy. In March 1991,
CBVT entered into an agreement with Erbamont which provided for, among other
things, the settlement of several legal proceedings then pending relating to
Erbamont's alleged doxorubicin proprietary rights, and the exclusive supply of
doxorubicin to CBVT by Erbamont. The Sicor complaint alleges breach of the CBVT
contract to purchase bulk doxorubicin from Sicor, as well as antitrust
violations and interference with contract and prospective advantage and seeks
unspecified damages. Cetus has denied any entitlement to recovery in this
lawsuit and has filed a counterclaim against the plaintiffs for fraud and breach
of contract based on Sicor's
24
<PAGE>
failure to deliver the bulk product. In an order filed on January 11, 1993, the
judge granted summary judgment motions in favor of the Cetus parties and
Erbamont with respect to the Sicor and Alco claims. Sicor appealed the summary
judgment and, in August 1993, dismissed its claims against Erbamont. In an
opinion issued April 3, 1995, the Ninth Circuit Court of Appeals affirmed the
summary judgment on the antitrust claims, but reversed and remanded to the
District Court for further proceedings the claims of breach of contract and
interference with prospective advantage. The Cetus parties filed a motion for
rehearing by the Ninth Circuit Court of Appeals, and, on May 3, 1995, the Court
directed the Sicor parties to file a response to such motion. In the event that
the Ninth Circuit Court of Appeals decision is not changed on rehearing, the
Company believes it has substantial defenses to the remanded claims. A
related arbitration before the International Chamber of Commerce in Paris
brought by Sicor against Chiron, Cetus and Ben Venue has been stayed pending
the resolution of the Cetus parties counterclaims in the above described
litigation.
In February 1995, Sicor and Alco filed a further action in the United
States District Court for the Northern District of California against CBVT for
amounts allegedly owed by CBVT to Sicor and Alco for the supply of doxorubicin,
plus interest and attorneys' fees. This case has been assigned to the same
judge as the above referenced District Court case. Internal investigation of
the claim is under way, and there has been no further action in this suit.
AMERICAN HOME PRODUCTS. On April 27, 1995, American Home Products
Corporation ("AHP") filed suit against Chiron in the Superior Court in New
Castle County, Delaware, claiming compensatory, consequential and punitive
damages based on an alleged breach and repudiation by Chiron of a contract
pursuant to which Chiron had agreed to purchase certain assets from AHP for a
purchase price of $9.75 million. Chiron has not yet answered the complaint.
However, a preliminary review of the facts of the case indicates that Chiron has
significant defenses.
BRILLIANT TRADING CO., WOLFSON. Following the announcement by Chiron of
the signing of a definitive agreement to acquire Viagene, two lawsuits
purporting to be class actions were filed on April 24 and May 1, 1995,
respectively, in the Court of Chancery of the State of Delaware against named
directors and officers of Viagene and against Viagene and Chiron. In one case,
Chiron is sued on a theory that it aided and abetted alleged breaches of
fiduciary duty by Viagene's directors and officers in approving the proposed
acquisition by Chiron; in the other case, Chiron is sued for alleged breaches of
fiduciary duty as a controlling stockholder of Viagene. The defendants seek
declaratory and injunctive relief, an accounting and costs and disbursements.
Chiron believes these suits are without merit.
The Company is party to certain other lawsuits, each of which is described in
Item 3, Legal Proceedings on page 9 of the Company's report on Form 10-K for the
period ended December 31, 1994, and as to which lawsuits there have been no
material developments since such Form 10-K was filed.
ITEM 2. CHANGES IN SECURITIES. None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 5. OTHER INFORMATION. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
25
<PAGE>
(a) EXHIBITS.
2.01 Agreement and Plan of Merger, made as of February 6,
1987, incorporated by reference to Exhibit 2.01 of the
Registrant's Form 10-Q report for the period ended
September 30, 1994.
4.01 Indenture, dated as of May 21, 1987, between Cetus
Corporation and Bankers Trust Company, Trustee,
incorporated by reference to Exhibit 4.01 of the
Registrant's Form 10-Q report for the period ended
September 30, 1994.
4.02 First Supplemental Indenture, dated as of December 12,
1991, by and among Registrant, Cetus Corporation, and
Bankers Trust Company, incorporated by reference to
Exhibit 4.02 of the Registrant's Form 10-K report for
fiscal year 1992.
4.03 Indenture, dated as of November 15, 1993, between
Registrant and The First National Bank of Boston, as
Trustee, incorporated by reference to Exhibit 4.03 of
the Registrant's Form 10-K report for fiscal year 1993.
4.04 Rights Agreement, dated as of August 25, 1994, between
the Company and Continental Stock Transfer & Trust
Company, which includes the Certificate of Designations
for the Series A Junior Participating Preferred Stock
as Exhibit A, the form of Right Certificate as
Exhibit B and the Summary of Rights to Purchase
Preferred Shares as Exhibit C, incorporated by
reference to Exhibit 4.04 of the Registrant's current
report on Form 8-K dated August 25, 1994.
4.05 Amendment No. 1 to Rights Agreement dated as of
November 20, 1994, between Chiron Corporation and
Continental Stock Transfer & Trust Company,
incorporated by reference to Exhibit 4.05 of the
Registrant's current report on Form 8-K, dated
November 20, 1994.
4.06 $1,000,000 County of Lorain, Ohio Variable Rate
Industrial Revenue Bonds dated as of July 1, 1984, due
July 1, 2014. The Registrant agrees to furnish to the
Commission upon request a copy of such agreement which
it has elected not to file under the provisions of
Regulation 601(b)(4)(iii).
4.07 $1,000,000 Walpole Industrial Development Authority
6.75% Industrial Revenue Bonds dated as of July 1,
1979, due July 1, 2004. The Registrant agrees to
furnish to the Commission upon request a copy of such
agreement which it has elected not to file under the
provisions of Regulation 601(b)(4)(iii).
26
<PAGE>
10.01 Lease between Registrant and BGR Associates, a
California limited partnership, dated May 26, 1989,
incorporated by reference to Exhibit 10.01 of the
Registrant's Form 10-Q report for the period ended
September 30, 1994.
10.02 Lease between Registrant and BGR Associates II, a
California limited partnership, dated May 26, 1989,
incorporated by reference to Exhibit 10.02 of the
Registrant's Form 10-Q report for the period ended
September 30, 1994.
10.03 Agreement and Plan of Merger dated as of April 23, 1995
between Viagene, Inc., a Delaware corporation, and
Chiron Corporation, incorporated by reference to
Exhibit 10.67 of the Registrant's current report on
Form 8-K dated April 24, 1995.
10.04 Stockholders' Agreement dated as of April 23, 1995
among certain stockholders of Viagene, Inc., a Delaware
corporation, and Chiron Corporation, incorporated by
reference to Exhibit 10.68 of the Registrant's current
report on Form 8-K dated April 24, 1995.
10.05 Stock and Asset Purchase Agreement dated as of March 6,
1995, by and among Johnson & Johnson, a New Jersey
corporation, Site Microsurgical Systems, Inc., a
Pennsylvania corporation, and Chiron Corporation and
Amendment No. 1 to Stock and Asset Purchase Agreement,
entered into March 31, 1995 by and among Johnson &
Johnson, Site Microsurgical Systems, Inc. and Chiron
Corporation.
10.06 Revolving Credit Facility dated as of March 24, 1995,
between Chiron Corporation and Swiss Bank Corporation,
San Francisco Branch.
10.07 Lease between Acorn Development, Inc., a West Virginia
corporation, and IntraOptics, Inc., a Delaware
corporation, dated September 12, 1991, incorporated by
reference to Exhibit 10.06 of the Registrant's Form 10-
K report for fiscal year 1992.
10.08 Joint Venture Agreement by and between Chiron Biocine
Corporation, a California corporation, and CIBA-GEIGY
Biocine Corporation, a Delaware corporation, dated
April 15, 1987 (with certain confidential information
deleted), incorporated by reference to Exhibit 10.23 of
the Registrant's Form 8 filed with the Commission on
February 14, 1992.
27
<PAGE>
10.09 Amendment to Biocine Joint Venture Agreement by and
between Chiron Biocine Corporation, a California
corporation, and CIBA-GEIGY Biocine Corporation, a
Delaware corporation, effective as of January 1, 1992,
incorporated by reference to Exhibit 10.63 to
Registrant's Form 10-Q report for the period ended
June 30, 1992.
10.10 Research and License Agreement by and between
Registrant and The Biocine Company, a Delaware
partnership, dated April 15, 1987 (with certain
confidential information deleted), incorporated by
reference to Exhibit 10.24 of the Registrant's Form 8
filed with the Commission on February 14, 1992.
10.11 License Agreement by and between CIBA-GEIGY Biocine
Corporation, a Delaware corporation, and The Biocine
Company, a Delaware partnership, dated April 15, 1987
(with certain confidential information deleted),
incorporated by reference to Exhibit 10.25 of the
Registrant's Form 8 filed with the Commission on
February 14, 1992.
10.12 License Agreement by and between Chiron Biocine
Corporation, a California corporation, and The Biocine
Company, a Delaware partnership, dated April 15, 1987
(with certain confidential information deleted),
incorporated by reference to Exhibit 10.26 of the
Registrant's Form 8 filed with the Commission on
February 14, 1992.
10.13 Letter Agreement signed by CIBA-GEIGY Corporation,
dated April 15, 1987, incorporated by reference to
Exhibit 10.13 of the Registrant's Form 10-Q report for
the period ended September 30, 1994.
10.14 Agreement between the Registrant and Ortho Diagnostic
Systems, Inc., a New Jersey corporation, dated
August 17, 1989, and Amendment to Collaboration
Agreement between Ortho Diagnostic Systems, Inc. and
Registrant, dated December 22, 1989 (with certain
confidential information deleted), incorporated by
reference to Exhibit 10.14 of the Registrant's
Form 10-Q report for the period ended September 30,
1994.
10.15 License and Supply Agreement between Ortho Diagnostic
Systems, Inc., a New Jersey corporation, the Registrant
and Abbott Laboratories, an Illinois corporation, dated
August 17, 1989 (with certain confidential information
deleted), incorporated by reference to Exhibit 10.15 of
the Registrant's Form 10-Q report for the quarter ended
June 30, 1994.
28
<PAGE>
10.16 Chiron 1991 Stock Option Plan, as amended, incorporated
by reference to Annex 1 of the Registrant's Proxy
Statement dated April 18, 1995.*
10.17 Forms of Option Agreements, Chiron 1991 Stock Option
Plan, as amended, incorporated by reference to
Exhibit 10.17 of the Registrant's Form 10-K report for
fiscal year 1993.*
10.18 Forms of Option Agreements, Cetus Corporation Amended
and Restated Common Stock Option Plan, incorporated by
reference to Exhibit 10.33 of Registrant's Form 10-K
report for fiscal year 1991.*
10.19 Forms of Supplemental Letter concerning the assumption
of Cetus Corporation options by Chiron, incorporated by
reference to Exhibit 10.34 of Registrant's Form 10-K
report for fiscal year 1991.*
10.20 Agreement and Plan of Reorganization dated as of
October 11, 1991 by and among the Registrant, Chiron
Ophthalmics, Inc., COI Acquisition Corp., IntraOptics,
Inc. and James R. Cook, M.D., incorporated by reference
to Exhibit 28.2 of Registrant's current report on Form
8-K dated October 14, 1991.
10.21 Indemnification Agreement between the Registrant and
Dr. William J. Rutter, dated as of February 12, 1987
(which form of agreement is used for each member of
Registrant's Board of Directors), incorporated by
reference to Exhibit 10.21 of the Registrant's Form 10-
Q report for the period ended September 30, 1994.
10.22 Stock Purchase Agreement by and between the Registrant
and Johnson & Johnson Development Corporation, a
corporation organized and existing under the laws of
the State of New Jersey, dated as of October 3, 1986,
incorporated by reference to Exhibit 10.22 of the
Registrant's Form 10-Q report for the period ended
September 30, 1994.
10.23 Stock Purchase Agreement between the Registrant and
CIBA-GEIGY, Limited, a corporation organized and
existing under the laws of Switzerland, dated November
14, 1988, incorporated by reference to Exhibit 10.23 of
the Registrant's Form 10-Q report for the period ended
September 30, 1994.
10.24 Form of Debenture Purchase Agreement between the
Registrant and CIBA-GEIGY, Limited, a corporation
organized and existing under the laws of Switzerland,
dated June 22, 1990,
29
<PAGE>
incorporated by reference to Exhibit 10.25 of the
Registrant's Form 10-K report for fiscal year 1994.
10.25 Chiron Corporation 1.90% Convertible Subordinated Note
due 2000, Series B, incorporated by reference to
Exhibit 10.25 of the Registrant's Form 10-K report for
fiscal year 1993.
10.26 Investment Agreement dated as of November 20, 1994
among Ciba-Geigy Limited, Ciba-Geigy Corporation, Ciba
Biotech Partnership, Inc. and Chiron Corporation,
incorporated by reference to Exhibit 10.54 of the
Registrant's current report on Form 8-K dated
November 20, 1994.
10.27 Governance Agreement dated as of November 20, 1994
among Ciba-Geigy Limited, Ciba-Geigy Corporation and
Chiron Corporation, incorporated by reference to
Exhibit 10.55 of the Registrant's current report on
Form 8-K dated November 20, 1994.
10.28 Subscription Agreement dated as of November 20, 1994
among Ciba-Geigy Limited, Ciba-Geigy Corporation, Ciba
Biotech Partnership, Inc. and Chiron Corporation,
incorporated by reference to Exhibit 10.56 of the
Registrant's current report on Form 8-K dated
November 20, 1994.
10.29 Cooperation and Collaboration Agreement dated as of
November 20, 1994, between Ciba-Geigy Limited and
Chiron Corporation, incorporated by reference to
Exhibit 10.57 of the Registrant's current report on
Form 8-K dated November 20, 1994.
10.30 Registration Rights Agreement dated as of November 20,
1994 between Ciba Biotech Partnership, Inc. and Chiron
Corporation, incorporated by reference to Exhibit 10.58
of the Registrant's current report on Form 8-K dated
November 20, 1994.
10.31 Market Price Option Agreement dated as of November 20,
1994 among Ciba-Geigy Limited, Ciba-Geigy Corporation,
Ciba Biotech Partnership, Inc. and Chiron Corporation,
incorporated by reference to Exhibit 10.59 of the
Registrant's current report on Form 8-K dated
November 20, 1994.
10.32 Amendment dated as of January 3, 1995 among Ciba-Geigy
Limited, Ciba-Geigy Corporation, Ciba Biotech
Partnership, Inc. and Chiron Corporation, incorporated
by reference to Exhibit 10.60 of the Registrant's
current report on Form 8-K dated January 4, 1995.
30
<PAGE>
10.33 Supplemental Agreement dated as of January 3, 1995
among Ciba-Geigy Limited, Ciba-Geigy Corporation, Ciba
Biotech Partnership, Inc. and Chiron Corporation,
incorporated by reference to Exhibit 10.61 of the
Registrant's current report on Form 8-K dated
January 4, 1995.
10.34 Amendment with Respect to Employee Stock Option
Arrangements dated as of January 3, 1995 among Ciba-
Geigy Limited, Ciba-Geigy Corporation, Ciba Biotech
Partnership, Inc. and Chiron Corporation, incorporated
by reference to Exhibit 10.62 of the Registrant's
current report on Form 8-K dated January 4, 1995.*
10.35 Supplemental Benefits Agreement, dated July 21, 1989,
between the Registrant and Dr. William J. Rutter,
incorporated by reference to Exhibit 10.27 of the
Registrant's Form 10-Q report for the period ended
September 30, 1994.*
10.36 Lease dated as of July 1, 1983 between Cetus
Corporation and H.B. Chapman, Jr., incorporated by
reference to Exhibit 10.28 of the Registrant's Form
10-Q report for the period ended September 30, 1994.
10.37 Amendment to Lease, made as of March 20, 1990, amending
Lease dated July 1, 1983, between Harold B. Chapman,
Jr. and Cetus Corporation.
10.38 Lease commencing March 1, 1987, between EuroCetus B.V.
and the Municipal Land Company of the City of Amsterdam
(Translation), incorporated by reference to Exhibit
10(k) of Cetus Corporation's Form 10-K report for its
fiscal year 1987 (Commission File No. 0-10003).
10.39 Form of Option Agreement (with Purchase Agreements
attached thereto) between Cetus Corporation and each
former limited partner of Cetus Healthcare Limited
Partnership, a California limited partnership,
incorporated by reference to Exhibit 10.31 of the
Registrant's Form 10-Q report for the period ended
September 30, 1994.
10.40 Form of Option Agreement (with forms of Purchase
Agreements attached thereto), dated December 30, 1986,
between Cetus Corporation and each former limited
partner of Cetus Healthcare Limited Partnership II, a
California limited partnership, incorporated by
reference to Exhibit 10.32 of the Registrant's Form 10-
Q report for the period ended September 30, 1994.
31
<PAGE>
10.41 Big-O Property Purchase and Leaseback Agreement, dated
as of October 31, 1988, between Cetus Corporation and
Richard K. Robbins, incorporated by reference to
Exhibit 10.33 of the Registrant's Form 10-Q report for
the period ended September 30, 1994.
10.42 Triple Net Lease dated as of January 20, 1989, between
Cetus Corporation and BGR Associates III, a California
limited partnership, and Marin County Exchange
Corporation, incorporated by reference to Exhibit 10.34
of the Registrant's Form 10-Q report for the period
ended September 30, 1994.
10.43 License Agreement between the Registrant and the Board
of Trustees of the Leland Stanford Junior University,
dated December 15, 1981, incorporated by reference to
Exhibit 10.07 of the Registrant's Form 10-Q report for
the period ended September 30, 1994.
10.44 Stock Purchase and Warrant Agreement dated May 9, 1989,
between Cetus Corporation and Hoffmann-La Roche Inc.,
incorporated by reference to Exhibit 10.36 of the
Registrant's Form 10-Q report for the period ended
September 30, 1994.
10.45 Letter Agreement, dated as of December 12, 1991,
relating to Stock Purchase and Warrant Agreement
between Registrant and Hoffmann-La Roche Inc.,
incorporated by reference to Exhibit 10.59 of
Registrant's Form 10-K report for fiscal year 1991.
10.46 Agreement and Plan of Merger dated as of July 21, 1991,
by and among Registrant, Chiron Acquisition Subsidiary,
Inc. and Cetus Corporation, incorporated by reference
to Exhibit 28.2 of Registrant's Form 8-K report dated
July 22, 1991.
10.47 Letter Agreement dated September 26, 1990 between the
Registrant and William G. Green, incorporated by
reference to Exhibit 10.41 of the Registrant's Form 10-
K report for fiscal year 1992.*
10.48 Letter Agreement dated December 18, 1991 between
Registrant and Jack Schuler, incorporated by reference
to Exhibit 10.42 of the Registrant's Form 10-K report
for fiscal year 1992.*
10.49 Lease between Sclavo S.p.A. and Biocine Sclavo S.p.A.,
dated January 7, 1992.
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<PAGE>
10.50 Agreement made as of November 11, 1993 by and between
Kodak Clinical Diagnostics Limited, a company
registered in England, and Ciba Corning Diagnostics
Corp., a Delaware corporation, and Letter dated
October 7, 1994 from Kodak Clinical Diagnostics
Limited to Ciba Corning Diagnostics Corp. [Certain
information has been omitted from the Agreement
pursuant to a request by Registrant for confidential
treatment pursuant to Rule 24b-2.]
10.51 Letter Agreement dated September 9, 1991 between the
Registrant and Walter Moos, incorporated by reference
to Exhibit 10.47 of the Registrant's Form 10-K report
for fiscal year 1992.*
10.52 Letter Agreement between the Registrant and Walter
Moos, dated February 1, 1993, incorporated by reference
to Exhibit 10.48 of the Registrant's Form 10-K report
for fiscal year 1992.*
10.53 Letter Agreement between Registrant and Renato Fuchs,
dated May 13, 1993, incorporated by reference to
Exhibit 10.47 of the Registrant's Form 10-K report for
fiscal year 1993.*
10.54 Agreement made as of December 6, 1984, by and between
Corning Glass Works, a New York corporation, and
Bioanalysis Limited, a company incorporated in England
and Wales, and Letter dated July 26, 1985 from
Bioanalysis Limited to Corning Glass Works. [Certain
information has been omitted from the Agreement
pursuant to a request by Registrant for confidential
treatment pursuant to Rule 24b-2.]
10.55 Description of Executive Variable Compensation
Program., incorporated by reference to Exhibit 10.58 of
the Registrant's Form 10-K report for fiscal year
1994.*
10.56 Chiron Corporation 1995 Executive Officer Variable Cash
Compensation Plan, incorporated by reference to Annex 2
of the Registrant's Proxy Statement dated April 18,
1995.*
10.57 Regulatory Filing, Development and Supply Agreement
between the Registrant, Cetus Oncology Corporation, a
wholly owned subsidiary of the Registrant, and Schering
AG, a German company, dated as of May 10, 1993 (with
certain confidential information deleted), incorporated
by reference to Exhibit 10.50 of the Registrant's
current report on Form 8-K dated February 9, 1994.
33
<PAGE>
10.58 Letter Agreement dated December 30, 1993 by and between
Registrant and Schering AG, a German company (with
certain confidential information deleted), incorporated
by reference to Exhibit 10.51 of the Registrant's
Form 10-K report for fiscal year 1993.
10.59 Guaranty, dated as of September 29, 1994, made by
Registrant, in favor of Bankers Trust Company, as
trustee, incorporated by reference to Exhibit 10.52 of
the Registrant's Form 10-Q report for the period ended
September 30, 1994.
10.60 Guaranty, dated as of September 29, 1994, made by Cetus
Corporation, in favor of The First National Bank of
Boston, as trustee, incorporated by reference to
Exhibit 10.53 of the Registrant's Form 10-Q report for
the period ended September 30, 1994.
10.61 Letter Agreements dated September 11, 1992, July 15,
1994 and September 14, 1994 between the Registrant and
Lewis T. Williams, incorporated by reference to
Exhibit 10.54 of the Registrant's Form 10-Q report for
the period ended September 30, 1994.*
10.62 Letter dated January 4, 1995 to C. William Zadel.,
incorporated by reference to Exhibit 10.65 of the
Registrant's Form 10-K report for fiscal year 1994.*
10.63 Letter to Dino Dina dated April 24, 1984, incorporated
by reference to Exhibit 10.66 of the Registrant's
Form 10-K report for fiscal year 1994.*
10.64 Research Agreement, dated as of July 15, 1985, between
Ciba-Geigy Limited, a Swiss corporation, and Ciba
Corning Diagnostics Corp., a Delaware corporation.
10.65 Licensing Agreement, effective December 18, 1986, by
and between Miles Laboratories, Inc., a Delaware
corporation, and Ciba Corning Diagnostics Corp., a
Delaware corporation, and Letter dated December 18,
1992 from Ciba Corning Diagnostics Corp. to Miles
Laboratories, Inc. [Certain information has been
omitted from the Agreement pursuant to a request by
Registrant for confidential treatment pursuant to
Rule 24b-2].
10.66 Magnetocluster Binding Assay Technology Agreement,
dated as of January 21, 1983, by and between
Bioclinical Group, Inc., a Delaware corporation, and
Corning Glass Works, a New York corporation. [Certain
information has been omitted from
34
<PAGE>
the Agreement pursuant to a request by Registrant for
confidential treatment pursuant to Rule 24b-2].
10.67 Turn-back License Agreement, dated as of May 30, 1986,
by and between Ciba Corning Diagnostics Corp., a
Delaware corporation, and Advanced Magnetics, Inc., a
Delaware corporation. [Certain information has been
omitted from the Agreement pursuant to a request by
Registrant for confidential treatment pursuant to
Rule 24b-2].
10.68 Settlement Agreement, dated August 30, 1989, between
Ciba Corning Diagnostics Corp. and Advanced Magnetics,
Inc. [Certain information has been omitted from the
Agreement pursuant to a request by Registrant for
confidential treatment pursuant to Rule 24b-2].
10.69 Lease made and entered into December 17, 1984 between
BGR Associates, a California limited partnership, and
Cetus Corporation and Amendment to Lease dated
December 17, 1984 entered into effective February 1,
1986.
10.70 Agreement, effective as of December 21, 1988, by and
between Hoffmann-La Roche Inc., a New Jersey
corporation, and Cetus Corporation. [Certain
information has been omitted from the Agreement
pursuant to a request by Registrant for confidential
treatment pursuant to Rule 24b-2].
10.71 Agreement, effective as of December 21, 1988, by and
among F. Hoffmann-La Roche Ltd., a Swiss corporation,
Cetus Corporation, and EuroCetus International, B.V., a
Netherlands Antilles corporation. [Certain information
has been omitted from the Agreement pursuant to a
request by Registrant for confidential treatment
pursuant to Rule 24b-2].
10.72 Agreement, by and between Cetus Oncology Corporation,
EuroCetus International, N.V., and F. Hoffmann-La Roche
Ltd.. [Certain information has been omitted from the
Agreement pursuant to a request by Registrant for
confidential treatment pursuant to Rule 24b-2].
10.73 Agreement commencing January 1, 1991, between EuroCetus
B.V. and the Municipal Development Corporation
(Translation), incorporated by reference to
Exhibit 10.41 of the Registrant's Form 10-K report
for fiscal year 1994.
11 Statement of Computation of Earnings per Share.
27 Financial Data Schedule.
35
<PAGE>
---------------------------------
*Management contract, compensatory plan or arrangement.
(b) REPORTS ON FORM 8-K.
Chiron filed a current report on Form 8-K, dated January 4, 1995,
reporting under Item 2 the completion of a transaction with Ciba-
Geigy Limited ("Ciba") whereby Ciba acquired through a partial
tender offer an approximate 49.5 percent interest in the Company
and Chiron acquired all of the outstanding common stock of Ciba
Corning Diagnostics Corp. and Ciba's interests in The Biocine
Company and JV Vax B.V. in exchange for 6.6 million new shares of
Chiron common stock and a cash payment of $24 million. On
March 17, 1995, Chiron filed Amendment No. 1 to its current
report on Form 8-K, dated January 4, 1995, to include under
Item 7 the audited financial statements of Ciba Corning
Diagnostics Corp., The Biocine Company and JV Vax B.V. and
pro forma combined condensed financial information.
Chiron filed a current report on Form 8-K, dated March 6, 1995,
reporting under Item 5 the issuance of a press release announcing
the reaching of an agreement to acquire the ophthalmic surgical
division of IOLAB, a Johnson & Johnson company.
Chiron filed a current report on Form 8-K, dated March 10, 1995,
reporting under Item 5 the issuance of a press release by Chiron
and Genelabs Technologies, Inc. announcing they have signed a
heads of agreement to form a worldwide diagnostic alliance.
36
<PAGE>
CHIRON CORPORATION
March 31, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 1 to the report to be signed on
its behalf by the undersigned thereunto duly authorized.
CHIRON CORPORATION
DATE: July 27, 1995 BY: /s/Edward E. Penhoet
----------------------- ----------------------------------
Edward E. Penhoet
President and Chief
Executive Officer
DATE: July 27, 1995 BY: /s/Dennis L. Winger
----------------------- ----------------------------------
Dennis L. Winger
Senior Vice President, Finance
and Administration
37
<PAGE>
EXHIBIT 10.50
[CONFIDENTIAL TREATMENT REQUESTED]
[Certain information has been omitted herein pursuant to a request for
confidential treatment pursuant to Rule 24b-2.]
AGREEMENT
This Agreement made as of the 11th day of November, 1993, by and
between:
KODAK CLINICAL DIAGNOSTICS LIMITED, a company registered in
England, having its principal office at Mandeville House, 62 The
Broadway, Amersham, Buckinghamshire, HP7 0HJ, England, (hereinafter
KCDL); and
CIBA CORNING DIAGNOSTICS CORP., a Delaware corporation, having its
principal office at 63 North Street, Medfield, Massachusetts 02052,
U.S.A. (hereinafter CCD).
WHEREAS, KCDL has acquired the full power, right, and authority to
grant nonexclusive license under U.S. Patent 4,745,077 issued May 17, 1988, as
well as corresponding patents and patent applications applied for in the
European Patent Office and in the United Kingdom, France, Germany, and Japan
relating to a method useful, in part, for the conduct of human, in vitro
diagnostic immunoassays and genetic probe assays for detection of an analyte in
a human sample contained in a liquid medium characterized by the use of a
labelled reagent which forms a chemiluminescent label system and another reagent
bound to magnetically attractable particles.
WHEREAS, CCD has requested a nonexclusive license under the above-
referenced patents and patent applications for use in certain human, in vitro
diagnostic immunoassay and genetic probe assay systems developed by CCD for the
detection of analytes in human samples contained in a liquid medium, which are
characterized by the use of a labelled reagent to form a chemiluminescent label
system and another reagent bound to magnetically attractable particles.
<PAGE>
-2-
WHEREAS, KCDL and CCD acknowledge and agree that technology
developments related to new and improved human, in vitro diagnostic assay
systems have recently been and are expected to continue to be numerous and
rapid; and that new human, in vitro diagnostic immunoassay products and genetic
probe products are complex systems involving many different technologies,
including but not limited to biotechnology, chemistry, optics, electronics,
fluid management, reagent handling, reaction detection, and equipment design;
and that new human, in vitro diagnostic immunoassay and genetic probe assay
systems must offer a sufficient number of different assays to be attractive to
the marketplace and to be manufacturable on a cost-effective basis;
[CONFIDENTIAL TREATMENT REQUESTED]
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
A. "Licensed Patents" shall mean U.S. Patent 4,745,077 issued May
17, 1988, and any corresponding patents or patent applications applied for in
the European Patent Office or in the United Kingdom, France, Germany, or Japan
as listed in Schedule 1 hereto, and any continuation, continuation-in-part,
reissue, re-examination, extension, substitution, or division of such patents
and applications.
B. "Class A Licensed Products" shall mean any human, in vitro
diagnostic immunoassay products, including but not limited to instruments,
instrument kits, systems, assays or chemical products (but excluding assay
products using genetic probe reagents or a combination of immunoassay reagents
and genetic probe reagents), employing a labelled reagent to form a
chemiluminescent label and another reagent which is bound to magnetically
attractable particles, the manufacture, use or sale of which would, but for the
license granted in Article II hereof, infringe one or more of the License
Patents.
<PAGE>
-3-
C. "Class B Licensed Products" shall mean any human, in vitro
diagnostic genetic probe products, including but not limited to instruments,
instrument kits, systems, assays, or chemical products (including assay products
using a combination of genetic probe reagents and immunoassay reagents),
employing a labelled reagent to form a chemiluminescent label and another
reagents which is bound to magnetically attractable particles, the manufacture,
use or sale of which would, but for the license granted in Article II hereof,
infringe one or more of the Licensed Patents.
D. "Licensed Products" shall mean Class A Licensed Products and
Class B Licensed Products.
E. "Improvement Patent" shall mean any patent or patent
application which (a) CCD or any of its Subsidiaries other than Biotrack,
Inc. owns or has the right to license as of the effective date of this
Agreement, (b) relates to test elements, devices, or methods for the conduct
of human, invitro diagnostic assays and (c) claims a filing priority date on
or before the effective date of this Agreement; and all patents and
patent applications in the U.S. or in any foreign country corresponding
thereto, including any patent granted on any continuation, continuation-in-part,
reissue, re-examination, extension, substitution, or division of such patents
or applications. The term "Improvement Patent" does not include any patent or
patent application or any claim of any patent or patent application relating to
the chemical structure of a chemiluminescent label, any patent or patent
application, or any claim of any patent or patent application relating to
magnetic particle technology, any patent or patent application or any claim of
any patent or patent application relating to the following genetic probe
amplification methods: amplification of midivariant DNA templates, amplification
of midivariant RNA templates, and nucleic acid amplification with DNA-dependent
RNA polymerase activity of RNA replicases (but not excluding any patent
application or any claim of any patent or any patent application to the extent
that they may be applicable to other methods of genetic probe amplification),
or any patent or patent application or any claim of any patent or patent
application that is part of the patent estate acquired by CCD from Triton
Diagnostics, Inc. and relating to cancer diagnostics, or that relates to any
specific markers for measurement of cancer antigens. CCD hereby represents
that, as of the date of this Agreement, no license under patent rights of any
Affiliate of CCD that is not a
<PAGE>
-4-
Subsidiary of CCD is held by CCD or needed for the conduct of CCD's in vito
diagnostics business.
F. "Net Sales" shall mean the actual total revenue received
resulting from the transfer of licensed products, whether through sale,
lease, or other commercial transaction, to a third party, less the following
deductions: (i) actual cash discounts and/or quantity discounts allowed; (ii)
actual credits for customers' returns and allowances; (iii) the value of the
service components of an operating or capital lease which includes a transfer
of licensed products; provided that the deduction for such service components
shall not exceed the actual value (determined by a reasonable accounting
method) or [Confidential Treatment Requested] (iv) actual, separately stated
and billed charges for freight handling and transportation paid by CCD or its
Affiliates; (v) actual, separately stated and billed charges for insurance
charges; and (vi) actual, separately stated and billed sales and use taxes
and other similar taxes incurred; provided, however, that (a) the value of
such Net Sales received from a Royalty-Bearing Distributor which is used
solely for the purpose of calculating ongoing royalty under this Agreement
shall not be less than [Confidential Treatment Requested] of the actual total
revenue received resulting from the transfer of the same quantity of the same
licensed products to End-Users made by CCD and its Affiliates in the United
States during the same royalty reporting period less the appropriate
deductions for items (i) through (vi) above, and (b) the foregoing
information relating to the actual total revenue received from the transfer
of licensed products to End-Users in the United States which is used solely
for royalty calculation purposes hereunder shall be made available only to
auditors of KCDL pursuant to Article V-E of this Agreement.
G. "Affiliate(s)" shall mean any company, partnership, joint
venture, or other entity which directly or indirectly controls, is controlled by
or is under common control with a party. Control shall mean the possession of
[Confidential Treatment Requested] or more of the voting share capital or the
power to direct or cause the direction of the management and policies of the
controlled entity, whether through the ownership of shares, by contract or
otherwise. In the case of CCD, the term "Affiliate" 1) shall also include
Ciba Corning Diagnostics de Mexico, S.A. de C.V., a corporation of Mexico,
having its principal office at Vito Allessio Robles #68 Primer Piso, Cal.,
Florida, CP01030, Mexico DF, Mexico, but only for so long as at least forty-nine
percent (49%) of such company is
<PAGE>
-5-
controlled by CCD, and 2) shall exclude, Biotrack, Inc., a California
corporation with a principal address at 1058 Huff Avenue, Mountain View,
California 94043.
H. "Authorized distributor(s)" shall mean any company,
partnership, joint venture or other entity (other than an End-User) which is
identified in subparagraph (1) below or meets the conditions of subparagraph (2)
below:
(1) The entity is CCD, an Affiliate of CCD, or a
distributor of CCD diagnostics products as of the effective date hereof to be
identified on Schedule 2 to be prepared by CCD and furnished to KCDL within
three (3) months of the effective date of this Agreement; or
(2) The entity meets each of conditions (a) through (c)
below:
(a) the entity is not, and no greater than
[Confidential Treatment Requested] of the voting share capital of the entity is
owned or controlled by, and no power to direct or cause the direction of the
management policies of the entity is under the control of, a manufacturer of
human in vitro diagnostic products with annual net sales revenue of human in
vitro diagnostic products, during the fiscal year immediately prior to the
fiscal year in which such entity is granted the right to sell Licensed Products,
of greater than [Confidential Treatment Requested] as set forth in information
reported by the Venture Planning Group,
(b) in the fiscal year immediately prior to the fiscal
year in which such entity is granted the right to sell Licensed Products, the
entity has annual net sales revenue of human in vitro diagnostic products no
greater than [Confidential Treatment Requested] as set forth in information
reported by the Venture Planning Group, and
(c) Kodak receives a written certification from CCD or
the entity verifying (a) above.
The foregoing annual net sales revenue values of
[Confidential Treatment Requested] as set forth in (a) and (b) above shall be
adjusted annually
<PAGE>
-6-
in accordance with the change in the size of the worldwide in vitro diagnostic
market from the effective date of this Agreement to January 1 of the year in
question, as reported by Boston Biomedical Consultants.
I. "Royalty-Bearing Distributor(s)" shall mean any company,
partnership, venture or other entity which meets the conditions of both
subparagraphs (1) and (2) below:
(1) is not an End Use or an Authorized Distributor; and
(2) is not, and no greater than [Confidential Treatment Requested]
of the voting share capital is owned or controlled by, and no power to direct
or cause the direction of the management policies of the entity is under the
control of, a manufacturer of human, in vitro diagnostic products with annual
net sales revenue of human, in vitro diagnostic products, during the fiscal
year immediately prior to the fiscal year in which such entity is granted the
right to sell licensed products, of greater than [Confidential Treatment
Requested] as set forth in information published annually by the Venture
Planning Group; provided, however, that CCD may designate not more than two
entities (in each case together with all affiliates of such entity) as
Royalty-Bearing distributors, without regard to the condition set forth in this
subparagraph (2), subject to the conditions that:
(a) neither such entity nor any of its Affiliates has
manufactured products which infringed the Licensed Patents; and
(b) neither CCD nor any Affiliate of CCD obtains in
connection with the designation of such an entity as a distributor of Licensed
Products any right to use patented technology of such entity or any of its
Affiliates in the manufacture of Licensed Products by or for CCDs, unless such
license is extended to KCDL and its Affiliates at the same royalty rate and on
the same terms and conditions.
Any Royalty-Bearing Distributor designated by CCD pursuant to the foregoing
proviso to subparagraph (2) is hereinafter in this paragraph referred to as a
"Special Royalty-Bearing Distributor" and also shall be considered included in
all references in this Agreement to Royalty-Bearing Distributors. Satisfaction
of the specified conditions
<PAGE>
-7-
(a) and (b) of the proviso to the foregoing subparagraph (2) shall be confirmed
by a certificate signed by an officer of CCD and a certificate signed by an
officer of the Special Royalty-Bearing Distributor, which certificate shall be
given to the best of the knowledge of such officer in the case of CCD's
certificate regarding satisfaction of said condition (a). It shall be presumed,
subject to rebuttal by a preponderance of the evidence, that any license
agreement entered into by CCD with a Special Royalty-Bearing Distributor after
the date of this Agreement and within three years before or five years after the
date that such Special Royalty-Bearing Distributor is authorized by CCD to sell
Licensed Products, and before termination by CCD of such authorization to sell
Licensed Products, is entered into in connection with such distribution
arrangement, and CCD shall provide to KCDL upon request at any time during such
period and at the end of such period a certificate of continued compliance with
the specified condition (b) of the proviso to the foregoing subparagraph (2).
The foregoing annual net sales revenue value of [Confidential Treatment
Requested] in subparagraph (2) above shall be adjusted annually in
accordance with the change in the size of the worldwide in vitro diagnostic
market from the effective date of this Agreement to January 1 of the year in
question, as reported by Boston Biomedical Consultants.
J. "Special Authorized Distributor" shall mean an Authorized
Distributor qualified as such pursuant to subparagraph (1) of Article I-H
which is, or greater than [Confidential Treatment Requested] of the voting
share capital is owned or controlled by, or the power to direct or cause the
direction of the management policies of the entity is under the control of, a
manufacturer of human in vitro diagnostic products with annual net sales
revenue of human, in vitro diagnostic products, during the fiscal year
immediately prior to the fiscal year in which this Agreement is executed, of
greater than [Confidential Treatment Requested] as set forth in information
reported by the Venture Planning Group. To the extent that Net Sales of
Licensed Products by CCD and its Affiliates to Special Authorized
Distributors in any calendar quarter exceed [Confidential Treatment Requested]
of total Net Sales of Licensed Products by CCD and it Affiliates during such
calendar quarter, such excess shall be treated as Net Sales to Royalty
Bearing Distributors for purposes of Article V and Article III-H.
<PAGE>
-8-
K. "End-User(s)" shall mean the customers, such as hospitals,
clinical laboratories, and doctors, who purchase Licensed Products for the
conduct of diagnostic assays. End-Users shall exclude resellers, such as
dealers, distributors, and other manufacturers of diagnostic products, who
purchase diagnostic products for the purpose of reselling them to others.
L. "Subsidiary" shall mean, with respect to CCD, any company in
which more than [Confidential Treatment Requested] of the voting share capital
is owned by CCD as of the date of this Agreement.
ARTICLE II -- LICENSE GRANT
A. KCDL grants to CCD and its Affiliates a non-exclusive license
(without sublicensing rights) under Licensed Patents to make, have made, use,
and sell or otherwise dispose of Licensed Products bearing the name and
trademark of CCD or an Affiliate of CCD prominently displayed thereon to
End-Users, Authorized Distributors and Royalty-Bearing Distributors.
(1) The aforesaid nonexclusive license to have made
Licensed Products includes the right for CCD and/or its Affiliates to work with
third parties who either develop or manufacture, in whole or in part, Licensed
Products, which are supplied for use, resale, or other commercial purposes
solely to CCD and/or its Affiliates.
(2) Under the aforesaid nonexclusive license, CCD and/or
its Affiliates may include on the Licensed Products the name and trademark
of an Authorized Distributor, together with the name and trademark of CCD or an
Affliate of CCD, provided that the name and trademark of CCD or an Affliate of
CCD is displayed on the Licensed Products at least as prominently as the name
and the trademark of the Authorized Distributor.
B. The license granted hereunder shall be subject to and is
conditioned on KCDL's timely receipt of the applicable license payments as
provided under Article III of this Agreement.
<PAGE>
-9-
C. Upon written request by CCD on or before December 31, 1996,
KCDL is willing to [Confidential Treatment Requested] Licensed Products
bearing prominently displayed thereon the name and trademark of CCD, an
Affiliate of CCD, [Confidential Treatment Requested] or a combination of CCD
(or an Affiliate of CCD) and [Confidential Treatment Requested] to End-Users
and to distributors corresponding to those designated as Authorized
Distributors, Royalty-Bearing Distributors, or Special Authorized
Distributors (but who are defined in terms of [Confidential Treatment Requested]
rather than CCD). KCDL will [Confidential Treatment Requested] on reasonable
terms and conditions, including:.
(1) an ongoing royalty based on a percentage of the net selling price
of Licensed Products not to exceed the rates specified in attached Schedule 3;
(2) a nonexclusive license grant to KCDL and its affiliates on
reasonable terms and conditions under selected patents or patent applications
[Confidential Treatment Requested] owns or has the right to license relating to
human, in vitro diagnostic products; and/or
(3) a combination of items (1) and (2) above, with or without any other
license fees and payments.
In the event subparagraph (2) above does not apply, either because
[Confidential Treatment Requested] does not own or have the right to license any
such patents or patent applications or because KCDL and its Affiliates do not
desire to be licensed under any such patents or patent applications, the KCDL
will [Confidential Treatment Requested] on reasonable terms and conditions based
on an ongoing royalty equal to a percentage of the net selling price of
Licensed Products as specified in attached Schedule 3, an initial license
payment not to exceed [Confidential Treatment Requested] and an annual minimum
royalty payment not to exceed [Confidential Treatment Requested]
D. KCDL agrees to use reasonable efforts to conclude negotiation
of license agreements pursuant to Article II-C within a period of time that is
reasonably
<PAGE>
-10-
practical based on the circumstances. Following receipt of CCD's written
request [Confidential Treatment Requested] KCDL shall have a period of four
(4) months from receipt of a full written disclosure of all patents and
patent applications [Confidential Treatment Requested] to December 31, 1996
or the then current date, whichever is earlier, relating to human, in vitro
diagnostics to specify the patents or patent applications [Confidential
Treatment Requested] with respect to which KCDL and/or its Affiliates wish
to obtain a license. In the even the KCDL and/or its Affiliates do not wish
to obtain a license under any selected patents or patent applications
[Confidential Treatment Requested] KCDL shall use diligent efforts to conclude
within an additional four (4) week period (following the end of the
aforementioned 4 month period) a license agreement [Confidential Treatment
Requested] based on the financial terms set forth in Article II-C. In the case
of a license agreement [Confidential Treatment Requested] pursuant to Article
II-C that involves a cross license, KCDL shall be under no obligation whatsoever
to conclude such license agreement if [Confidential Treatment Requested] is
unwilling to grant KCDL and/or its Affiliates a license under those patents or
patent applications which it owns or has the right to license and which KCDL has
selected for inclusion in such cross license.
E. KCDL hereby agrees that upon written request KCDL is willing
to grant [Confidential Treatment Requested] on reasonable terms and conditions
to be negotiated. KCDL agrees to use reasonable efforts to conclude negotiation
of such licenses within a reasonable period of time.
ARTICLE III - LICENSE PAYMENTS AND ROYALTIES
A. CCD shall pay to KCDL an Initial License Payment of
[Confidential Treatment Requested] which shall be payable no later than
December 15, 1993, by electronic wire transfer to an account designated in
writing by KCDL.
B. In addition to the Initial License Payment under Article III-
A, beginning on or before August 31, 1994, and continuing on or before August 31
each year thereafter through and including 2005, CCD shall pay to KCDL, in lieu
of ongoing royalties on sales of Class A Licensed Products by CCD or its
Affiliates to Authorized Distributors or End-Users, an annual, lump-sum license
payment in an amount as shown in Table 1 below.
<PAGE>
-11-
<TABLE>
<CAPTION>
Table 1 - Annual, Lump-Sum License Payments
-------------------------------------------
Calendar Year Lump-Sum License Payment
------------- ------------------------
[Confidential Treatment Requested]
<S> <C>
[Confidential [Confidential Treatment Requested]
Treatment [Confidential Treatment Requested]
Requested] [Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
</TABLE>
C. Of the total of the annual, lump-sum license payments
specified in Table 1 above, [Confidential Treatment Requested] of
the payments specified in Table 1 represents the total of the annual, lump-sum
license payments to be paid by CCD to KCDL as set forth in Article III-B of this
Agreement under the United States patent of the Licensed Patents. The remainder
of the Payments specified in Table 1 represent the total of the annual, lump-sum
license payments to be paid by CCD to KCDL as set forth in Article III-B of this
Agreement under the non-Untied States patents and patent applications of the
Licensed Patents.
D. In the event that European patent 149565 B1 of Licensed
Patents is revoked by the European Patent Office; KCDL shall promptly
[Confidential Treatment Requested].
E. In the event of a final decision of the Japanese Patent
Office, including any appeal to the Japanese courts, as a result of which the
Japanese Patent Office (1) does not lay open for opposition the Japanese patent
application of Licensed
<PAGE>
-12-
Patents by December 31, 2000, or (2) does not grant a patent on the Japanese
patent application (Kokoku) of the Licensed Patents following the opposition of
such application (Kokoku) by December 31, 2000, CCD shall not be required to
make any of the annual, lump-sum license payments specified in Table 1 after the
year 2000; provided, however, that if a Japanese patent is granted on such
Japanese patent application (Kokoku) after December 31, 2000, CCD shall make any
payments which are specified in Table 1 for the year in which such Japanese
patent is granted through the year 2005 (but excluding any payments specified in
Table 1 for the year(s) after 2000 through the year immediately preceding the
grant of such Japanese patent).
F. In addition to the license payments specified in Article III-A
through Article III-E above, with respect to any sales or other transfer of
Class A Licensed Products and/or Class B Licensed Products on or after the
effective date of this Agreement by CCD or its Affiliates to any Royalty-Bearing
Distributors, CCD shall pay to KCDL an ongoing royalty of [Confidential
Treatment Requested] of Net Sales of such Licensed Products.
G. In addition to the license payments specified in Article
III-A through III-E above, with respect to any sales or other transfer of
Class B Licensed Products, on or after the effective date of this Agreement
by CCD or its Affiliates to any End-Users or Authorized Distributors, CCD
shall pay to KCDL an on going royalty of [Confidential Treatment Requested]
of Net Sales of Class B Licensed Products.
ARTICLE IV -- OPTION FOR LICENSE UNDER CCD PATENTS
A. In partial consideration of the license granted to CCD under
this Agreement, CCD grants to KCDL an irrevocable option to obtain a non-
exclusive, royalty-bearing license (without sublicensing rights) to KCDL and its
Affiliates to make, have made, use and sell or otherwise dispose of products
under any [Confidential Treatment Requested] Improvement Patent including all
patents in any other country corresponding to such Improvement Patent, subject
to KCDL's payment to CCD of total cumulative payments for such license such
that:
(1) In the case of an Improvement Patent whose claims have
applicability to diagnostic assays in general, the present value of such total
cumulative
<PAGE>
-13-
payments, calculated from the date of signing such license, does not exceed
[Confidential Treatment Requested]
(2) In the case of an Improvement Patent whose claims have
applicability only to one or several specific diagnostic assays,
[Confidential Treatment Requested]
B. In both subparagraphs (1) and (2) of paragraph IV-A above,
1. The present values of both streams of payments shall be
calculated:
a. using a discount rate of 10%,
b. on a monthly basis from the date of signing each such
license, and
2. KCDL shall also pay an initial license payment of
[Confidential Treatment Requested], due within thirty (30) days of KCDL
exercising the option. The amount in the case of both clauses (1) and (2) of
paragraph IV-A above shall be reduced if, with respect to the particular
Improvement Patent for which KCDL exercises such option, CCD does not have
corresponding patents in each of the United States, Europe, and Japan. The
amount of such reductions shall be as follows: [Confidential Treatment
Requested] if CCD does not have a corresponding patent in the United States,
[Confidential Treatment Requested] if CCD does not have a corresponding European
patent, and [Confidential Treatment Requested] if CCD does not have a
corresponding Japanese patent.
C. KCDL shall have the right to exercise the aforesaid option
upon written notice to CCD of the Improvement Patent which KCDL wishes to
license. The option granted under this Article IV-A shall become exercisable
by KCDL upon signing this Agreement, and shall remain exercisable until the
earlier of [Confidential Treatment Requested] or the termination of this
Agreement (unless such termination is due to the material breach
<PAGE>
-14-
of CCD in which case such option shall remain exercisable by KCDL until
[Confidential Treatment Requested]. Upon KCDL's exercise of its option
hereunder, the parties shall use diligent efforts to complete within three
months negotiation of a license agreement containing the terms set forth in
this Article, and any such additional terms not inconsistent therewith as are
customary in similar agreements, provided that such additional terms shall be
consistent with the corresponding provisions of this Agreement applicable to
the license granted to CCD hereunder.
ARTICLE V - STATEMENTS, RECORDS AND
ACCOUNTS
A. CCD shall furnish to KCDL two (2) times per year on or before
February 28 and August 31 during the years in which license payments are made
hereunder a written statement that CCD has continued to sell Class A Licensed
Products to Authorized Distributors and End-Users during the preceding six (6)
month periods ending, respectively, on December 31 and June 30.
B. During February, May, August, and November, following each
calendar quarter year, or portion thereof, in which this Agreement is in effect,
CCD shall, with respect to Class A Licensed Products and/or Class B Licensed
Products sold or otherwise transferred by CCD or its Affiliates to Royalty-
Bearing Distributors and/or Class B Licensed Products sold or otherwise
transferred by CCD or its Affiliates to End-Users and Authorized Distributors
during the preceding quarter calendar year, furnish to KCDL.
(1) a written royalty statement separately setting forth:
(a) in each geographic region (i.e., the Americas; Europe,
Middle East, and Africa; and Asia/Pacific), the total Net Sales of all such
Class A Licensed Products and Class B Licensed Products made by CCD and its
Affiliates during the preceding calendar quarter-year, itemized by instrument
model in the case of instruments, and by disease-specific or organ-specific
assay group in the case of assays, the applicable class of Licensed Products to
which it belongs, and the applicable ongoing royalty rate;
<PAGE>
-15-
(b) the total royalty accruing on Net Sales of all such
Class A and Class B Licensed Products; and
(2) payment of any royalty owed for said Net Sales during the
preceding calendar quarter-year.
C. If no Net Sales of Class A Licensed Products or Class B
Licensed Products to Royalty-Bearing Distributors and Class B Licensed Products
to End-Users or Authorized Distributors shall have been made during any calendar
quarter year, or portion thereof, this Agreement is in effect, CCD's royalty
statement shall so report. The first such royalty statement submitted under
this Agreement by CCD shall be due in May, 1994, and shall be applicable to all
such Net Sales of Licensed Products made on or after the effective date of this
Agreement.
D. Within ninety (90) days after termination of this Agreement or
any license under Article II, CCD shall furnish to KCDL a similar royalty
statement covering all Net Sales of Class A Licensed Products to Royalty-Bearing
Distributors and all Class B Licensed Products and Class B Licensed Products to
End-Users and Authorized Distributors made prior to the termination date.
E. CCD shall maintain complete and accurate records of Net Sales
of Licensed Products made by CCD and its Affiliates under this Agreement, and
shall retain such records for a period of three (3) years after submitting the
royalty statement to which they pertain. Such records may, upon thirty (30)
days prior written request by KCDL and at its expense, be audited once per
calendar year during CCD's normal business hours by a public accounting firm
selected by KCDL for the purpose of verifying CCD's compliance with this
Agreement. The accounting firm shall execute a confidentiality agreement with
CCD and shall report to KCDL only whether there is a royalty underpayment and,
if so, the amount thereof. In the event of any underpayment, CCD shall promptly
remit to KCDL all amounts due. If any such inspection discloses an aggregate
underpayment of more than [Confidential Treatment Requested] during any calendar
year, CCD shall reimburse KCDL for the cost of the audit and shall pay interest
to KCDL on the back royalty due KCDL at an annual interest rate equal to
[Confidential Treatment Requested].
<PAGE>
-16-
F. CCD may withhold from its license and royalty payments to KCDL
any income taxes required to be withheld by CCD under the laws of foreign
countries where Licensed Products are sold. Such amount shall be paid to the
appropriate taxing authorities and CCD shall provide KCDL with official receipts
issued by said taxing authority or such other evidence as is reasonabley
available to establish that such taxes have been paid and are available for
credit by KCDL for English income tax purposes. CCD shall cooperate with KCDL
and take all actions reasonably necessary in order to secure a reduction or
elimination of withholding taxes pursuant to applicable income tax treaties
between England and such foreign countries.
ARTICLE VI -- RELEASE OF LIABILITY
KCDL on its own behalf and on behalf of its Affiliates hereby
fully, finally and forever releases CCD and its Affiliates from any and all
claims of liability for any infringement or alleged infringement of Licensed
Patents resulting from the manufacture, use, or sale of Licensed Products prior
to the effective date of this Agreement.
ARTICLE VII -- ENFORCEMENT OF LICENSED PATENTS
A. During the pendency of any opposition proceeding with respect
to the European patent of the Licensed Patents, KCDL will use reasonable efforts
to enforce the United States patent of Licensed Patents upon receipt of credible
evidence which constitutes a reasonable showing that a third party having annual
worldwide net sales revenue of human in vitro diagnostic products in excess of
[Confidential Treatment Requested] as set forth in information published
annually by the Venture Planning Group is engaging in the conduct of activity
which constitutes an infringement of such United States patent.
B. Following the final decision of any opposition proceeding with
respect to the European patent of the Licensed Patents which sustains the grant
of a patent on such European patent, KCDL will use reasonable efforts to enforce
the United Kingdom patent, the French patent, and the German patent of Licensed
Patents upon receipt of credible evidence which constitutes a reasonable showing
that a third party
<PAGE>
-17-
having annual worldwide net sales revenue of human in vitro diagnostic products
in excess of [Confidential Treatment Requested] as set forth in information
published annually by the Venture Planning Group is engaging in the conduct of
activity which constitutes an infringement of any one of the foregoing United
Kingdom, French, or German patents of the Licensed Patents.
In the event that within twelve (12) months following KCDL's
receipt of such evidence, KCDL has not:
(1) entered into a royalty-bearing license under Licensed
Patents with such third party in regard to such infringing activity; or
(2) filed and maintained a claim of patent infringement
against such third party or company in a tribunal of competent jurisdiction in
at least one of the foregoing countries in which such third party is continuing
to engage in such infringing activity; or
(3) taken other action such that the infringing activity of
such third party constitutes a level of annual net sales revenue of less than
[Confidential Treatment Requested];
then any subsequent license payments due KCDL by CCD as specified in Article
III-B and Article III-D of this Agreement shall be reduced by [Confidential
Treatment Requested] until such time as KCDL has taken the action specified in
at least one of clauses (1) through (3) of this paragraph. Thereafter, such
license payments shall be paid in full to KCDL by CCD without any reduction.
C. Following the final decision of any opposition proceeding with
respect to the Japanese patent application (Kokoku) of the Licensed Patents
which results in the grant of a patent on such Japanese patent application
(Kokoku), KCDL will use reasonable efforts to enforce the Japanese patent of
Licensed Patents upon receipt of credible evidence which constitutes a
reasonable showing that a third party having annual net sales revenue of human
in vitro diagnostic products in Japan in excess of [Confidential Treatment
Requested] as set forth in information published annually by the
Venture Planning Group (or other similar source which is acceptable to
<PAGE>
-18-
both parties) is engaging in the conduct of activity which constitutes an
infringement of such Japanese patent.
In the event that within twelve (12) months following KCDL's
receipt of such evidence, KCDL has not:
(1) entered into a royalty-bearing license under Licensed
Patents with such third party in regard to such infringing activity; or
(2) filed and maintained a claim of patent infringement
against such third party in a tribunal of competent jurisdiction; or
(3) taken other action such that the infringing activity
of such third party constitutes a level of annual net sales revenue of less than
[Confidential Treatment Requested];
then any subsequent license payments due KCDL by CCD as specified in Article
III-B of this Agreement shall be reduced by [Confidential Treatment Requested]
until such time as KCDL has taken the action specified in at least one of
clauses (1) through (3) of this paragraph. Thereafter, such license payments
shall be paid in full to KCDL by CCD without any reduction.
D. Any decision to file a claim of patent infringement against a
third party under Licensed Patents shall be a matter within the sole discretion
of KCDL. Upon request and at the expense of KCDL, CCD shall cooperate with KCDL
in regard to prosecuting legal actions relating to such claims of patent
infringement, including but not limited to the furnishing of information and
witnesses and providing reasonable assistance in securing evidence in support of
such actions.
ARTICLE VIII -- TERMINATION
A. Either party shall have the right to terminate this Agreement
following any material breach or default in performance under this Agreement by
the other party upon [Confidential Treatment Requested] prior written notice to
the breaching party specifying the nature of the breach or default. Unless the
breaching party has cured the breach or
<PAGE>
-19-
default prior to the expiration of such [Confidential Treatment Requested]
period, the non-breaching party, at its sole option, may terminate this
Agreement upon written notice to the breaching party. Termination of this
Agreement shall become effective upon receipt of such notice by the breaching
party.
B. During the term of this Agreement, in the event that CCD and
its Affiliates shall cease the manufacture, use, and sale of all Licensed
Products for a continuous period of [Confidential Treatment Requested] or more,
CCD shall have the right to terminate this Agreement.
C. Upon termination of this Agreement for any reason, the license
granted hereunder by KCDL shall terminate and CCD's obligations under this
Agreement to pay any further license payments and ongoing royalties shall cease.
D. Unless sooner terminated under the provisions of this Article
VIII, all licenses granted hereunder shall continue in force for the full term
of all patents licensed hereunder and this Agreement shall terminate on the
expiration of the last such patent to expire. However, in the event that after
[Confidential Treatment Requested], a Licensed Patent has been held permanently
revoked, unenforceable or invalid in any country by a final decision of a court
or other governmental agency of competent jurisdiction, unappealable or
unappealed within the time allowed for appeal, which is rendered in a proceeding
other than the European and Japanese examination or opposition proceedings
referenced in Article III of this Agreement, each of the license payments due as
specified in Table 1 after such final decision shall be reduced by [Confidential
Treatment Requested] for each such country in which such a final decision is
made, except for the United Kingdom in which case such reduction shall be
[Confidential Treatment Requested]. In the event that after August 31, 1996,
such final decisions are effective as to all Licensed Patents, no further
license payments in any amount shall be due as specified in Table 1 after the
date the last such final decision becomes effective. In the event that at any
time a Licensed Patent has been held permanently revoked, unenforceable or
invalid in any country by a final decision of a court or other governmental
agency of competent jurisdiction, unappealable or unappealed within the time
allowed for appeal, no further royalty payments shall be due as specified in
Article III-F or Article III-G under such Licensed Patent in such country.
<PAGE>
-20-
E. Termination of this Agreement shall not relieve the parties of
any obligation accruing prior to the effective date of such termination.
ARTICLE IX -- WARRANTIES AND REPRESENTATIONS
A. KCDL represents and warrants that:
(a) it is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction in which it was
incorporated;
(b) it has the full right, power and authority to enter
into this Agreement and to convey the non-exclusive license granted under this
Agreement;
(c) it has not previously granted, and will not grant to
any third party during the term of this Agreement, any rights that are in
conflict with the license granted to CCD herein; and
(d) there are no patents corresponding to the Licensed
Patents in any countries other than the United States, United Kingdom, France,
Germany and Japan.
B. CCD represents and warrants that:
(a) it is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction in which it was
incorporated;
(b) it has the full right, power and authority to enter
into this Agreement and to convey the option for a non-exclusive license granted
to KCDL under this Agreement; subject to the approval or ratification of CCD's
Board of Directors, as set forth in Section XI below; and
(c) it has not previously granted, and will not grant to
any third party during the term of this Agreement, any rights that are in
conflict with the option granted to KCDL herein; and
<PAGE>
-21-
(d) so far as its representatives negotiating this
Agreement are aware, neither it nor any of its Affiliates have as of the
effective date of this Agreement any existing distributor which constitutes a
company, partnership, joint venture or other entity who is, or greater than
[Confidential Treatment Requested] of the voting share capital is owned or
controlled by, or the power to direct or cause the direction of the management
policies of the entity is under the common control of, a manufacturer of human,
in vitro diagnostic products with annual net sales revenue of human, in vitro
diagnostic products of greater than [Confidential Treatment Requested], except
for [Confidential Treatment Requested] and [Confidential Treatment Requested].
ARTICLE X -- ASSIGNMENT
This Agreement and the license, option and other rights and
obligations hereunder may not be assigned or otherwise transferred, by either
party without the written consent of the other party, which consent shall not be
withheld unreasonably. Notwithstanding the foregoing, either party may assign
this Agreement and the license, and other rights and obligations hereunder, in
connection with the transfer or sale of all or substantially all of that portion
of its business or assets relating to performance of its obligations hereunder,
or in the event of its merger or consolidation with another company at any time
during the term of this Agreement. Any purported assignment in violation of the
preceding two sentences shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement. No assignment shall relieve
either party of responsibility for the performance of any accrued obligation
which such party then has hereunder.
ARTICLE XI -- MISCELLANEOUS
A. No reference to this license and no trademark, trade name or
trade dress or copyrighted work of either party or its Affiliates shall appear
on product that is made, sold or used under this Agreement by the other party,
or on its packaging or in advertising or promotional materials for such product.
B. The specific terms and conditions of this Agreement shall be
treated as confidential information by the parties hereto and shall not be
disclosed to third parties during the term of this Agreement. Notwithstanding
the foregoing, 1) neither
<PAGE>
-22-
party shall be required to maintain the fact or the extent of the license
granted hereunder to CCD and its Affiliates in confidence, 2) KCDL may issue a
press release, in form and content mutually agreeable to KCDL and CCD,
disclosing the license grant hereunder, 3) CCD shall be permitted to disclose
the terms and conditions of this Agreement on a confidential basis to Amersham
International plc of England, and 4) either party hereto may be permitted to
make disclosures relating to the terms and conditions of this Agreement on a
confidential basis in contemplation of a permitted assignment of this Agreement
pursuant to Article X hereof. Furthermore, the content of Schedule 2 to this
Agreement and of the royalty statements delivered pursuant to Article V shall be
treated as confidential information by KCDL and its Affiliates and shall not be
disclosed by KCDL or its Affiliates to third parties during the term of, or at
any time following the termination of, this Agreement, unless required by
operation of applicable law or regulatory requirements.
C. Except as otherwise expressly provided herein, nothing
contained in this Agreement shall:
(1) Grant any license or sublicensing right or confer any
right, by implication, estoppel or otherwise;
(2) Impose any obligation or confer any right to enforce
any patent; or
(3) Constitute any representation, warranty, assurance,
guarantee or inducement whatsoever by either party or any affiliate thereof.
D. KCDL and CCD agree they are independent contractors and that
the relationship between the parties shall not constitute a partnership, joint
venture or agency. Neither party shall have the authority to make any
statements, representations or commitments of any kind, or to take any action,
which shall be binding on the other, without the prior written authorization of
the other party to do so.
E. Failure at any time to require strict performance of any of
the provisions herein shall not waive or diminish a party's right thereafter to
demand strict compliance therewith or with any other provision. Waiver of any
default shall not waive
<PAGE>
-23-
any other default. A party shall not be deemed to have waived any rights
hereunder unless such waiver is in writing and signed by a duly authorized
officer of the party making such waiver.
F. All notices and other communications required or permitted
under the Agreement must be in writing. They may be delivered personally or
sent by telex, commercial courier, postage prepaid mail or facsimile, at the
option of the sending party, except that CCD's Initial License Payment under
Article III-A hereof shall be made by electronic wire transfer to an account
designated in writing by KCDL. All communications and payments, other than the
aforementioned CCD electronic wire transfer payment, must be sent to, and shall
be effective on the date of delivery at, the receiving party's Address for
Notice or Address for Statements and Payments. The initial Address for Notice
and Address for Statements and Payments set forth below and any subsequent
Address for Notice or Address for Statements and Payments may be changed by a
communication as provided herein.
KCDL Address for Notices, Statement and Payments:
The Company Secretary
KODAK CLINICAL DIAGNOSTICS LIMITED
Mandeville House
62 The Broadway
Amersham
Buckinghamshire
HP7 0HJ, England
Facsimile No: 494-431-165
CCD Address for Notices and Payments:
Ciba Corning Diagnostics Corp.
63 North Street
Medfield, MA 02052
U.S.A.
Attn.: President
Facsimile No. 508-359-3879
<PAGE>
-24-
with a copy to:
Ciba Corning Diagnostics Corp.
63 North Street
Medfield, MA 02052
U.S.A.
Attn.: General Counsel
Facsimile No. 508-359-3885
G. This Agreement, which shall be governed by the substantive
laws of the State of New York, U.S.A. (without regard to its conflicts of law
provisions), constitutes the entire Agreement between the parties with respect
to the subject matter hereof. Any modification of this Agreement shall be set
forth in writing and duly executed by both parties.
H. The headings of the several articles of this Agreement are
intended for convenience of reference only and are not intended to be part of or
to affect the meaning of interpretation of this Agreement.
I. If any provision of this Agreement is held invalid, illegal,
or in any other way becomes void or unenforceable, this Agreement and the
remaining provisions thereof shall not in any way be affected or be impaired and
shall continue in full force and effect. In such event, however, at any time
any provision of this Agreement violates or conflicts with, or otherwise does
not satisfy, any provision of applicable law or regulation in any country or
jurisdiction, including the competition laws of the European Communities, then
the parties shall negotiate in good faith such changes or amendments to such
provision as are necessary to eliminate such violation or conflict, or satisfy
such law or regulation, and in so doing, shall attempt to preserve as much as
practicable the economic and other benefits to each party as set forth in such
provision.
J. KCDL shall make those filings in the Commission of the
European Community which are required in order to obtain approval of this
Agreement by the Commission of the European Community. In addition, KCDL shall
prepare responses within a reasonable period of time in writing to any
communications from the Commission of the European Community regarding such
filings. CCD shall reasonably cooperate with KCDL in the preparation of any
such filings and responses.
<PAGE>
-25-
IN WITNESS WHEREOF, the parties have caused their respective
corporate names to be affixed hereto and this instrument to be signed by their
duly authorized officers, all as of the day and year first above written.
KODAK CLINICAL DIAGNOSTICS LIMITED
By /s/ Jose J. Coronas
-------------------------------------
Jose J. Coronas
Title Director
-------------------------------------
CIBA CORNING DIAGNOSTICS CORP.
By /s/ Michael D. Webb
-------------------------------------
Michael D. Webb
Title
-------------------------------------
Vice President
<PAGE>
SCHEDULE 1
LICENSED PATENTS
Country Number Issue Date or Filing Date
------- ------ -------------------------
United States P-4,745,077 5/17/88
European P-149565 B1 12/23/92
German P-3586909 2/4/93
France P-149565 12/23/92
Japan Appln. PA-85/7298 Filed 1/17/85
United Kingdom P-149565 12/23/92
- --------
P = Patent
PA = Patent Application
<PAGE>
SCHEDULE 2 -- 11 pages
[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
SCHEDULE 3
1. The ongoing royalty for Class A Licensed Products is equal to the ongoing
royalty percentage as specified in Table 1 or Most Favorable Terms granted to
another licensee (other than CCD) as hereinafter defined in this Schedule.
2. The ongoing royalty for Class B Licensed Products shall be equal to
[Confidential Treatment Requested] of the annual net sales of Class B Licensed
Products or the Most Favorable Terms1 granted to another licensee (other than
CCD) as hereinafter defined in this Schedule.
Table 1
-------
Annual net sales of Class A Licensed Products Ongoing Royalty Percentage 1
- -------------------------------------------------------------------------
On the first [Confidential Treatment Requested] of annual net
sales [Confidential
On the second [Confidential Treatment Requested] of annual net
sales Treatment
On the third [Confidential Treatment Requested] of annual net
sales Requested]
On the fourth [Confidential Treatment Requested] of annual net
sales
On any annual net sales in excess of [Confidential Treatment
Requested]
- -------------
1 Most Favorable Terms:
A. If KCDL grants a license to another licensee (other than CCD) based on
ongoing royalty percentages more favorable than those specified above in this
Schedule 3, KCDL shall immediately reduce the above-noted ongoing royalty
percentages to those granted to such other licensee.
B. The provisions of Section A above shall not apply:
(a) Where the consideration payable by such other licensee includes
substantial rights or immunities in, to or under patent rights held by such
licensee, including rights with respect to patent applications or other
proprietary rights;
(b) Where the more favorable royalty terms for license rights cover only
past infringement or are the result of the settlement or compromise of a claim
of past infringement;
(c) To any license which may be granted to any government;
(d) To any license which may be granted by KCDL to any Affiliate or to an
Affiliate of such Affiliate; or
(e) To any license granted by order of any court or any government agency.
<PAGE>
[KODAK LETTERHEAD]
7 October 1994
General Counsel
Ciba Corning Diagnostics Corp
63 North Street
Medfield
Massachusetts 02052
USA
Dear Sir or Madam
As you may be aware, Eastman Kodak Company ("Kodak") has agreed to sell the
business and assets of its Clinical Diagnostics Division, which includes the
directly wholly owned subsidiary of Kodak Clinical Diagnostics Limited ("KCDL"),
to Johnson & Johnson ("J&J").
In connections with the sale of the business, Kodak desires to assign to J&J, or
to a subsidiary of J&J, all of KCDL's right, title and interest under the
License Agreement, dated 11 November 1993, between you and KCDL, and J&J desires
to assume and discharge or perform when due, or to cause a subsidiary of J&J to
assume and discharge or perform when due, all liabilities or obligations of KCDL
arising out of or relating thereto.
Please indicate your consent to the assignment described above by returning a
signed copy of this letter to the undersigned at:
Legal Department, Kodak Limited, PO Box 66, Kodak House, Station Road, Hemel
Hempstead, Herts HP1 1JU, England
no later than 24 October 1994. If you have any questions, please do not
hesitate to telephone me.
Thank you for your co-operation.
CONSENTED TO:
Yours faithfully CIBA CORNING DIAGNOSTICS CORP
By: /s/
/s/ Terence J. Charlton --------------------
Title: SVP WW Marketing
--------------------
Date: 11/8/94
Terence J Charlton --------------------
Legal Adviser
Kodak Clinical Diagnostics Limited
<PAGE>
EXHIBIT 10.65
[CONFIDENTIAL TREATMENT REQUESTED]
[Certain information has been omitted herein pursuant to a request for
confidential treatment pursuant to Rule 24b-2.]
LICENSING AGREEMENT
THIS AGREEMENT shall be effective on the last date of execution hereof by
and between MILES LABORATORIES, INC. (MILES), a corporation of the State of
Delaware and having its principal place of business at 1127 Myrtle Street,
Elkhart, Indiana 46515 and CIBA CORNING DIAGNOSTICS CORP. (CIBA CORNING), a
corporation of the State of Delaware and having its principal place of
business at 63 North Street, Medfield, Massachusetts 02052.
WHEREAS, MILES owns all rights to United States Patent No. 4,380,580 and
its corresponding foreign-filed counterparts covering certain
chemiluminescent specific binding assay methods and reagent systems;
WHEREAS, CIBA CORNING owns or controls patent rights and confidential
know-how relating to certain chemiluminescent specific binding assay methods
and reagent systems;
WHEREAS, MILES intends to research and develop reagent systems for
performing chemiluminescent specific binding assays which incorporate the
above CIBA CORNING patent rights and/or confidential know-how;
1
<PAGE>
WHEREAS, CIBA CORNING intends to develop and market instruments and
reagent systems for performing chemiluminescent immunoassays and desires to
receive a nonexclusive license under the above MILES patent rights;
WHEREAS, MILES is willing to grant such a license under the terms hereof
which provide in part that MILES receive certain access and license rights to
patent rights, know-how, and other proprietary rights owned or licensed to
CIBA CORNING concerning its chemiluminescent immunoassay instrument and
reagent systems; and
WHEREAS, CIBA CORNING is willing to grant MILES such access and licensing
rights under the terms hereof.
NOW THEREFORE, in consideration of the mutual promises herein, the parties
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "CLAIM" shall mean a patent claim which defines an invention which the
patentee has been granted the right to exclude others from making, using, or
selling throughout the granting country. The term does NOT include any claim
which has
2
<PAGE>
been disclaimed, cancelled, or held to be invalid by a court of competent
jurisdiction in a final decision from which no appeal has or can be taken.
1.2 "LICENSED PATENTS" and "LICENSED PATENT APPLICATIONS" shall mean the
patents and patent applications, including U.S. Patent No. 4,380,580 and its
foreign filed counterparts, listed in Exhibit A attached hereto.
1.3 "LIQUID-PHASE" as applied to any assay shall mean an assay in which
the assay reaction and/or the measurement of generated signal takes place in
the presence of a bulk solution or liquid, and specifically shall NOT include
a solid-phase assay in which an assay reaction and/or the measurement of
generated signal takes place in or on a solid, porous or nonporous, carrier
such as, without limitation, a reagent strip, which solid carrier is not in
contact with a bulk solution or liquid during such reaction or measurement.
1.4 "CHEMILUMINESCENT IMMUNOASSAY" shall mean a LIQUID-PHASE heterogeneous
chemiluminescent assay employing a chemiluminescent reactant as label and
wherein the substance or condition to be determined, i.e., analyte of
interest, is determined by binding thereto of an antibody or other specific
binding protein.
3
<PAGE>
1.5 "CHEMILUMINESCENT BINDING ASSAY" shall mean a LIQUID-PHASE
chemiluminescent assay employing a chemiluminescent reactant as label and
wherein the analyte of interest is determined by binding of any kind of
specific binding substance such as an antibody or other binding protein,
nucleic acid, or the like. A CHEMILUMINESCENT IMMUNOASSAY is one type of
CHEMILUMINESCENT BINDING ASSAY.
1.6 "LICENSED PRODUCT" shall mean a product for performing a
CHEMILUMINESCENT IMMUNOASSAY only, and no other product, which when made,
used, or sold would infringe a CLAIM of a LICENSED PATENT.
1.7 "INSTRUMENT SYSTEM" shall mean the hardware and software components
of an instrument capable of running CHEMILUMINESCENT BINDING ASSAYS.
1.8 "MILES" and "CIBA CORNING" shall include, unless expressly provided
otherwise herein, all of their respective Affiliates, and shall in the case
of MILES specifically include Bayer AG, Germany, and its Affiliates.
Affiliates shall mean any corporation or other business entity controlled by,
controlling, or under common control with the affected party, wherein control
means direct or indirect beneficial ownership of at least fifty
-4-
<PAGE>
percent (50%) of the voting stock or the maximum amount allowed under local
law, or at least fifty percent (50%) interest in the income, of such
corporation or other business entity.
1.9 "NET SALES" shall mean invoiced price for sales less actual credited
allowances to customers for spoiled, damaged, outdated, or returned LICENSED
PRODUCT.
1.10 "CONFIDENTIAL MATTER" shall mean information or material, whether of
a technical, business, or other nature, which constitutes a trade secret,
know-how or other confidential asset not within the public domain.
1.11 "PROPRIETARY TECHNOLOGY" shall mean patent rights and CONFIDENTIAL
MATTER.
ARTICLE 2
LICENSE TO CIBA CORNING
2.1 MILES grants to CIBA CORNING a worldwide, nonexclusive,
nontransferable right and license, with no right to grant any sublicenses, to
make, have made, use, and sell LICENSED PRODUCTS. Accordingly, the license to
CIBA CORNING includes the right of CIBA CORNING and purchasers of its
LICENSED PRODUCTS to practice
-5-
<PAGE>
methods covered by the LICENSED PATENTS and LICENSED PATENT APPLICATIONS only
by using such LICENSED PRODUCTS.
ARTICLE 3
ROYALTY TO MILES
3.1 In consideration for the above license, CIBA CORNING shall pay MILES
a royalty of [Confidential Treatment Requested] of NET SALES of LICENSED
PRODUCTS by CIBA CORNING. LICENSED PRODUCT shall be considered as sold when
invoiced to the customer. Royalty shall be due for sales to an Affiliate only
if LICENSED PRODUCT is consumed by such Affiliate, in which case, royalty shall
be calculated from the invoiced price to such Affiliate or a reasonable
arms-length invoice price if such Affiliate is treated on a more favorable
basis than the general trade. Otherwise, royalty shall be due when sold by
such Affiliate to a third party and NET SALES calculated based on the
invoiced price to such party.
3.2 No royalty shall be due for sales of a LICENSED PRODUCT covered by a
LICENSED PATENT APPLICATION but not by a LICENSED PATENT.
3.3 If during the term of the license granted to CIBA CORNING hereunder
MILES grants a license to a third party other than an Affiliate to make, have
made, use, or sell LICENSED
-6-
<PAGE>
PRODUCT at a royalty rate that is less than [Confidential Treatment Requested],
MILES shall so notify CIBA CORNING in writing and the royalty rate set forth in
Paragraph 3.1 above shall thereupon become the same as the royalty rate for such
third party.
ARTICLE 4
PAYMENTS AND RECORDS
4.1 CIBA CORNING shall keep complete and accurate records containing all
information required for the computation and verification of the royalties to
be paid hereunder.
4.2 CIBA CORNING shall, upon request of MILES, permit an independent
public accountant selected by MILES to have access during ordinary business
hours to such records as may be necessary to determine either the accuracy of
any report or the sufficiency of any payment made under this Agreement within
two (2) years prior to such request. Such accountant shall disclose to MILES
only information necessary to inform MILES of:
a) the accuracy of the reports of CIBA CORNING and payments to MILES; and
b) the extent of any inaccuracy or noncompliance.
-7-
<PAGE>
The accountant shall be paid by MILES unless a deficiency of greater than ten
percent (10%) is reported, whereupon CIBA CORNING shall pay all such
accountant costs and fees.
4.3 On or before thirty (30) days after March 31, June 30, September 30,
and December 31 of each year throughout the term of this Agreement, CIBA
CORNING shall deliver to MILES a quarterly written statement of account of
NET SALES of LICENSED PRODUCT. The first written statement delivered to MILES
shall include an accounting of all NET SALES of LICENSED PRODUCT which
occurred prior to the effective date hereof.
4.4 Payment of royalties shall accompany each statement submitted in
accordance with Paragraph 4.3 above.
4.5 If the manufacture, use or sale of a LICENSED PRODUCT in a particular
country infringes a dominant patent of a third party, CIBA CORNING shall,
upon written notice to MILES, have the right to deduct from royalty due MILES
on account of sales of such LICENSED PRODUCT in such country any royalty
required to be paid to such third party to continue the manufacture, use and
sale thereof, provided, however, that any such deduction shall not exceed
fifty-percent (50%) of such royalty due MILES. For the purposes of this
Paragraph, a dominant patent shall mean a patent having a claim that is of
such breadth that there is no
-8-
<PAGE>
subject matter of any claim in the LICENSED PATENTS in such country that
could be made, used and sold without infringing such patent.
4.6 If royalties are not paid when due, interest shall be accrued on the
unpaid royalties from the date due until paid, at a rate per annum which
shall be the lesser of either:
a) the prime rate of the Citibank, N.A., New York, then in force for
short-term borrowing; or
b) the maximum legal rate then permitted under the laws of the
Commonwealth of Massachusetts.
4.7 All amounts due hereunder shall be payable in United States dollars.
All royalty due as a result of sales in countries foreign to the United
States shall be converted for calculation purposes into equivalent United
States dollars at the exchange rate of Citibank, N.A., New York, at the close
of business on the last business day of the quarterly reporting period.
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ARTICLE 5
MILES' PATENTS
5.1 MILES shall pay for all expenses in prosecuting, maintaining, and
litigating the LICENSED PATENTS and LICENSED PATENT APPLICATIONS. MILES shall
maintain the LICENSED PATENTS in all countries in which CIBA CORNING is
selling LICENSED PRODUCT and paying MILES royalty therefor.
5.2 CIBA CORNING shall provide MILES with any reasonable assistance in
furtherance of MILES' performance in Paragraph 5.1 above, provided that MILES
requests such assistance in writing and is willing to either pay CIBA CORNING
or credit CIBA CORNING against royalties for CIBA CORNING's reasonable
expenses in providing such assistance.
5.3 MILES warrants that it has good, clear title to the LICENSED PATENTS
and LICENSED PATENT APPLICATIONS.
5.4 MILES shall retain the exclusive right and power to institute and
prosecute, at its sole discretion, actions for infringement of any LICENSED
PATENT and to seek and receive any relief appropriate under the governing
law. However, if during the term of the license granted to CIBA CORNING
hereunder CIBA CORNING notifies MILES in writing of infringement by a third
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<PAGE>
party of any LICENSED PATENT in a particular country on account of the
manufacture, use or sale of a product substantially competitive with a then
existing LICENSED PRODUCT sold by CIBA CORNING in such country, and MILES
does not within a period of one (1) year from the date of such notice
(a) institute legal action to attempt to abate such infringement or cause it
to cease, or (b) cause such infringement to cease by means deemed appropriate
by MILES other than legal action and including the grant of a license, then
CIBA CORNING shall have the right to withhold any and all royalties due
thereunder for sales of such LICENSED PRODUCT in such country after the end
of such one (1) year period; provided, however, that if MILES shall institute
legal action against one infringer of its LICENSED PATENTS, it shall not be
obligated to institute legal action against a second or subsequent infringers
during the pending of such action. If after CIBA CORNING has rightfully
begun withholding royalty to MILES the infringement ceases for whatever
reason, MILES shall have the right to reinstate the royalty due hereunder by
written notice to CIBA CORNING, and if such cessation occurred as the result
of legal action taken by MILES, CIBA CORNING shall, within ninety (90) days
of such notice, pay MILES fifty-percent (50%) of all royalty withheld because
of such infringement.
5.5 Except as provided expressly above, nothing in this Agreement shall
be construed as:
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(a) A warranty or representation by MILES as to the scope or validity of
any CLAIM in any LICENSED PATENT;
(b) A warranty or representation by MILES that any product made, used, or
sold by CIBA CORNING under any license granted hereunder is or will be
free from infringement of patents of any third parties;
(c) An obligation or requirement on the part of MILES to bring or prosecute
any action or suit against any third party for infringement of any
LICENSED PATENT;
(d) Conferring a right to CIBA CORNING to use in advertising, publicity,
or any other manner any trademark or trade name of MILES without
specific written consent; or
(e) A warranty or representation by MILES as to the safety or efficacy of
any LICENSED PRODUCT made, used, or sold by CIBA CORNING.
5.6 CIBA CORNING shall mark LICENSED PRODUCTS with the appropriate patent
numbers of the covering LICENSED PATENTS in compliance with the laws of
the country in which such PRODUCTS are sold.
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ARTICLE 6
TECHNOLOGY ACCESS
6.1 In further consideration of the license granted to CIBA CORNING under
Article 2 above, MILES is granted limited, reasonable access, as defined by the
provisions set forth below, to CIBA CORNING PROPRIETARY TECHNOLOGY to enable
MILES at its discretion to develop and commercialize CHEMILUMINESCENT BINDING
ASSAYS for use on INSTRUMENT SYSTEMS marketed by CIBA CORNING.
6.2 For so long as CIBA CORNING is engaged in research, development,
manufacture, and/or marketing of CHEMILUMINESCENT IMMUNOASSAY products and/or
INSTRUMENT SYSTEMS therefor, MILES and CIBA CORNING shall exchange information
and materials under the confidentiality provisions of ARTICLE 8 hereof for the
purpose of enabling MILES at its discretion to develop, commercialize and
maintain CHEMILUMINESCENT BINDING ASSAYS for new analytes or using new assay
methodologies (such new assays being referred to herein as MILES Assays, with
the assays developed by CIBA CORNING being referred to herein as CIBA Corning
Assays) which are compatible with CIBA CORNING INSTRUMENT SYSTEMS for
CHEMILUMINESCENT IMMUNOASSAYS, while making CIBA CORNING aware in advance of
such MILES Assays that MILES wishes to develop and commercialize. Examples of
specific information and materials which are appropriate for exchange and which
in
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particular MILES shall need to know and/or have concerning the CIBA CORNING
efforts are set forth in Exhibit B attached hereto.
6.3 MILES shall be granted [Confidential Treatment Requested] licenses and
sublicenses under CIBA CORNING PROPRIETARY TECHNOLOGY relating to
CHEMILUMINESCENT BINDING ASSAYS to perform research and development of MILES
Assays as provided in Article 7 hereof.
6.4 Any materials needed by one party from the other in order to meet the
above objectives shall be supplied in reasonable amounts and purchased at a
[Confidential Treatment Requested].
6.5 The procedure for the exchanges referred to in Paragraph 6.2 above
shall be as follows unless modified by an agreement in writing by both parties:
a) MILES and CIBA CORNING hereby designate Dr. Robert T. Buckler and Dr.
Graham P. Lidgard as their respective Official Correspondents
hereunder;
b) All documents shall be sent inter partes through the Official
Correspondents;
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c) All meetings shall be attended by the Official Correspondents or their
designated alternate;
d) Quarterly face-to-face meetings shall be scheduled through the
Official Correspondents so as to discuss any progress by either party;
e) Quarterly written reports of a summary nature on the progress by each
party shall be exchanged between the Official Correspondents;
f) Special interim meetings can be scheduled as needed and agreed upon
through the agreement of the Official Correspondents; and
g) Any change in Official Correspondent for a party shall be made by
written notification to the other party.
6.6 In the event that MILES in cooperation with CIBA CORNING is successful
in developing MILES Assays for the CIBA CORNING INSTRUMENT SYSTEMS and desires
to proceed to have such Assay marketed for such INSTRUMENT SYSTEMS, the parties
will engage in good faith discussions concerning the manufacture, labeling, and
marketing of products for such Assays on a
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case-by-case basis, it being understood that neither party shall require
unreasonable terms in order to reach agreement. It is presently intended that:
(1) The manufacture of Assay reagents and/or assembly of the finished
product will be performed by the party which can do so most
economically,
(2) An appropriate MILES trade name or trademark will appear prominently
on the product,
(3) CIBA CORNING will use reasonable efforts to promote and market the
product,
(4) If the result of negotiation is that CIBA CORNING makes and sells a
particular MILES Assay, then CIBA CORNING shall pay MILES
[Confidential Treatment Requested] which in the normal case will be
generally equal to the [Confidential Treatment Requested],
(5) If the result of negotiation is that MILES makes and CIBA CORNING
sells a particular MILES Assay, then a transfer price from MILES to
CIBA CORNING shall be negotiated which in the normal course will
provide
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Miles with a [Confidential Treatment Requested] and
(6) If the result of negotiation is that each party makes one or more
components of a particular MILES Assay and CIBA CORNING sells the
finished product, then the transfer price or prices for goods
transferred between the parties shall be negotiated and CIBA CORNING
shall pay MILES a [Confidential Treatment Requested].
6.7 The design and development of the INSTRUMENT SYSTEMS and CIBA CORNING
Assays shall be at the sole discretion of CIBA CORNING. MILES shall have no
right to require any particular performance or design features, however, CIBA
CORNING will reasonably consider the needs of MILES for performing MILES Assays
on its INSTRUMENT SYSTEMS and if changes are made which incur additional costs
to CIBA CORNING, MILES shall be required to pay its fair share of such costs
which in appropriate cases may constitute the entire amount of such costs.
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<PAGE>
6.8 In the event that CIBA CORNING decides to end its marketing of
INSTRUMENT SYSTEMS for which MILES Assays are being or have been developed,
MILES shall have the right upon prompt written request to CIBA CORNING to
receive the transfer of all necessary PROPRIETARY TECHNOLOGY from CIBA CORNING
within a reasonable time to enable MILES to continue the manufacture and
marketing of such INSTRUMENT SYSTEMS and the MILES and CIBA CORNING Assays.
Appropriate compensation, including royalties, shall be paid by MILES for such
transfer, which compensation shall be negotiated in good faith. CIBA CORNING
shall have no obligation to transfer PROPRIETARY TECHNOLOGY to MILES for any
INSTRUMENT SYSTEM that has no connection to any MILES Assay.
6.9 In the event that MILES decides to end its involvement with a
particular MILES Assay after such has been commercially introduced for use on a
CIBA CORNING INSTRUMENT SYSTEM, CIBA CORNING shall have the right upon prompt
written request to MILES to receive the transfer of all necessary PROPRIETARY
TECHNOLOGY from MILES within a reasonable time to enable CIBA CORNING to
continue the manufacture and marketing of such MILES Assay, but only on
INSTRUMENT SYSTEMS of CIBA CORNING. CIBA CORNING shall pay MILES appropriate
compensation, including royalties, for such transfer, which compensation shall
be negotiated in good faith.
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6.10 In the event that MILES sees a marketing opportunity for
CHEMILUMINESCENT BINDING ASSAYS which would require the design and
development of a new INSTRUMENT SYSTEM and [Confidential Treatment Requested]
MILES shall pay CIBA CORNING appropriate compensation, including royalties,
for such transfer, which compensation shall be negotiated in good faith.
6.11 ALL PROPRIETARY TECHNOLOGY resulting during the term hereof solely
from the efforts of employees, officers or agents of one of the parties hereto
shall be the property of such party and the other party hereto shall have no
right or license with respect to such PROPRIETARY TECHNOLOGY except as expressly
provided in this Agreement.
6.12 In the event that PROPRIETARY TECHNOLOGY results during the term
hereof from the joint efforts of employees, officers, or agents of both parties,
such PROPRIETARY TECHNOLOGY shall be the property of the party whose research
and development efforts were most closely related to such PROPRIETARY TECHNOLOGY
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at the time of its creation. The other party hereto shall
[Confidential Treatment Requested] If the owning party decides not to seek
patent protection for such PROPRIETARY TECHNOLOGY, the other party shall have
the right to do so at its own expense and through counsel of its own
choosing. If patent protection is sought, the non-filing party shall
cooperate in the preparation, filing, and prosecution of covering patent
applications without additional consideration. Furthermore, if the owning
party declines to sue or license a third party for infringement after written
notice by the other party, such other party shall have the right and power to
do so at its own expense and through counsel of its own choosing.
ARTICLE 7
LICENSES TO MILES
7.1 CIBA CORNING grants MILES [Confidential Treatment Requested]
licenses and sublicenses under any PROPRIETARY TECHNOLOGY owned, controlled,
or licensed to CIBA CORNING relating to chemiluminescent and instrument
technology as used in CHEMILUMINESCENT BINDING ASSAYS needed by MILES to
perform research and development of MILES Assays as contemplated under
Paragraph 6.2 hereof.
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7.2 Any licenses and sublicenses to MILES pursuant to Paragraphs 6.6,
6.8 and 6.10 shall be negotiated in good faith and reduced to a written
agreement. Neither party shall take a position in any such negotiations that
would unreasonably restrict the commercialization of MILES Assays.
7.3 CIBA CORNING represents and warrants that it has the right and
power to grant licenses and sublicenses to MILES under all PROPRIETARY
TECHNOLOGY presently owned, controlled, or licensed to CIBA CORNING relating
to CHEMILUMINESCENT BINDING ASSAYS, including, without limitation, the
licenses held by CIBA CORNING [Confidential Treatment Requested]. Further,
CIBA CORNING shall be obligated to use its best efforts to obtain the right
to sublicense MILES under any PROPRIETARY TECHNOLOGY hereafter licensed to
CIBA CORNING relating to CHEMILUMINESCENT BINDING ASSAYS. If hereafter CIBA
CORNING negotiates with a third party to be granted a license under
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PROPRIETARY TECHNOLOGY relating to CHEMILUMINESCENT BINDING ASSAYS and such
third party refuses to include a right to grant sublicenses in general, CIBA
CORNING's best efforts shall require that [Confidential Treatment Requested].
ARTICLE 8
CONFIDENTIALITY
8.1 All information and materials exchanged between the parties in
performing hereunder shall be deemed CONFIDENTIAL MATTER as provided below.
8.2 CONFIDENTIAL MATTER received by a party from the other shall not be
disclosed by such receiving party to any third party, or used by such receiving
party for its benefit, or that of a third party, except as expressly provided
herein.
8.3 To be accorded treatment as CONFIDENTIAL MATTER, however, such MATTER:
22
<PAGE>
(a) must be first disclosed to the receiving party in
writing and plainly marked "Confidential", or similar
words: or
(b) if first disclosed orally, must be reduced to writing
by the disclosing party and plainly marked "Confidential",
or similar words, and delivered to the receiving party
within ninety (90) days of its first oral disclosure to
the receiving party; or
(c) if a physical thing, must be marked "Confidential", or
similar words, or be accompanied by a writing
specifically identifying such thing as "Confidential".
Information and material provided by one party to the other
hereunder which is not identified as "Confidential" as provided
above shall be considered as given and received without any
obligation of confidentiality or nonuse and the receiving party
shall be free to use such information in any way it sees fit,
subject only to any rights that the disclosing party may have under
the Patent Laws.
8.4 The terms of this Agreement, including all Exhibits, shall
be considered CONFIDENTIAL MATTER.
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<PAGE>
8.5 This Agreement shall supersede the Letter of Confidentiality dated
May 13, 1986 between the parties, attached hereto as Exhibit C, and all
information protected thereunder shall be considered CONFIDENTIAL MATTER
hereunder and subject to the terms and conditions hereof.
8.6 The obligations of confidentiality and nonuse of this ARTICLE 8 shall
not apply to information or material:
(a) Which is known by the receiving party prior to receipt from the
disclosing party as evidenced by documents in the possession of
the receiving party at the time of disclosure,
(b) Which, after receipt from the disclosing party, is disclosed to the
receiving party by a third party having the legal right to do so,
(c) Which is available to the public at the time of receipt from the
disclosing party,
(d) Which becomes available to the public after receipt from the
disclosing party through no fault of the receiving party,
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<PAGE>
(e) Which is required, in the opinion of legal counsel of the receiving
party, to be disclosed for securing approval of governmental health
regulatory agencies, including but not limited to the U.S. Food and
Drug Administration, to market products contemplated hereunder,
provided that the receiving party shall use its reasonable efforts to
seek to obtain from such agencies such protection for such information
against public disclosure as may be legally available,
(f) Which is required, in the opinion of legal counsel for the receiving
party, to be disclosed for the filing of patent applications by the
receiving party, provided that the disclosing party is timely advised
of the receiving party's intention to include such information in a
patent application of the receiving party and the disclosing party
does not notify the receiving party within thirty (30) days of its
objection to such disclosure,
(g) Which is reasonably necessary to be disclosed by the receiving party
to its individual agents or third parties who require knowledge hereof
in order to perform their normal duties or services, such as legal
counsel, certified public accountants, and the like.
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<PAGE>
provided that such agents and third parties are advised of and
acknowledge the confidential nature of such disclosure, or
(h) Which is otherwise reasonably necessary to be disclosed in order to
perform hereunder, including marketing and promotional activities
relating to successfully developed Assays.
8.7 Each party shall use the same level of care in complying with the
obligations hereof respecting CONFIDENTIAL MATTER as it does with respect to
its own information of similar nature. The parties mutually represent and
warrant that each and every employee who will have access to the other
party's CONFIDENTIAL MATTER hereunder shall be under contractual obligation
not to disclose or use such CONFIDENTIAL MATTER except as directed by such
party.
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<PAGE>
ARTICLE 9
TERM AND TERMINATION
9.1 Either party may terminate this Agreement at anytime if the other
party fails to perform any material covenant, condition, or limitation
herein, provided such other party shall not have remedied its failure within
sixty (60) days after receipt of written notice of such failure.
9.2 If performance of this Agreement or any part hereof by either party
shall be rendered unenforceable or impossible under, or in conflict with any
law, regulation, or official action by any government agency having
jurisdiction over such party; then such party shall not be considered in
default by reason of failure to perform and the validity of all remaining
provisions hereof shall not be affected by such result.
9.3 CIBA CORNING may terminate that portion of this Agreement consisting
of ARTICLES 2, 3, 4 and 5 concerning the nonexclusive license grant by MILES
at any time for any reason upon ninety (90) days written notice to MILES,
provided that any such termination shall not relieve CIBA CORNING of the
obligation to pay royalties or make any other payments accruing to MILES
prior to the effective termination date and further that the remaining
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portion hereof, particularly the provision of ARTICLES 6, 7 and 8 shall be
unaffected and continue in full force and effect.
9.4 Unless earlier terminated by CIBA CORNING as provided in Paragraph
9.1 or 9.3 above, the provisions of ARTICLES 2, 3, 4 and 5 shall continue
until the expiration of the last patent to expire in the LICENSED PATENTS.
9.5 The provisions of ARTICLES 6 and 7 shall remain in full force and
effect until the parties mutually agree in writing to their termination,
unless earlier terminated under the provisions of Paragraph 9.1 above,
provided, however, that the provisions of ARTICLES 6 and 7 shall terminate
upon written notice by CIBA CORNING if MILES does not approach CIBA CORNING
to negotiate for the commercialization of a MILES Assay under Paragraph 6.6
hereof within six (6) years of the effective date hereof or thereafter if no
MILES Assays are sold for a continuous period of two (2) years. All
obligations of confidentiality and nonuse created under ARTICLE 8 shall
survive the termination of the provisions of ARTICLES 6 and 7 for three (3)
years.
9.6 Neither party shall be liable to the other for any failure to perform
or any delay in performance hereunder where such delay is occasioned by
strikes or other labor difficulties, civil disorders, armed conflict,
embargoes, fires, floods,
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accidents or other causes or any kind or extent beyond the control of such
party.
ARTICLE 10
NOTICES
10.1 Any notice required or permitted by this Agreement shall be in
writing. A notice shall be considered served when deposited in the national
postal system in a sealed envelope with sufficient postage affixed,
registered, or certified with return receipt requested, and addressed to the
party to whom such notice is directed at its post office address given below:
If to MILES: Miles Laboratories, Inc.
P.O. Box 40
Elkhart, IN 46515
Attention: (Official Correspondent)
and Director of Patents, Trademarks and Licensing
If to CIBA CORNING: Ciba Corning Diagnostics Corp.
67 North Street
Medfield, MA 02051
Attention: (Official Correspondent)
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ARTICLE 11
INTERPRETATION
11.1 This Agreement shall be construed and the rights of the parties
hereunder shall be determined in the Commonwealth of Massachusetts, in
accordance with the laws of the Commonwealth of Massachusetts.
11.2 All section captions or titles are inserted herein for ready
reference only and are without contractual significance or effect.
ARTICLE 12
ASSIGNMENT
12.1 Except where the assignee is a successor in business, CIBA CORNING
must have written consent from MILES in order to assign this Agreement.
12.2 Except where the assignee is a successor in business, MILES must
have written consent from CIBA CORNING in order to assign this Agreement.
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ARTICLE 13
ENTIRE AGREEMENT
13.1 This writing constitutes the entire agreement between MILES and CIBA
CORNING relating to the subject matter hereof. There are no understandings,
representations, or warranties of any kind except as expressly set forth
herein.
13.2 The Agreement may NOT be waived, altered, extended, or modified
except by written agreement of the parties.
ARTICLE 14
INDEPENDENT CONTRACTORS
14.1 The performance of each party thereunder is undertaken as an
independent contractor and not as an agent or partner of the other party.
Neither party shall enter into or incur, or hold itself out to third parties
as having authority to enter into or incur on behalf of the other party, any
contractual obligation, expense, or liability whatsoever.
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IN WITNESS WHEREOF, CIBA CORNING and MILES have duly signed and have made
delivery to the other.
MILES LABORATORIES, INC.
By_______________________________
Executive Vice President
Title _________________________________
December 18, 1986
Date ___________________________________
CIBA CORNING DIAGNOSTICS CORP.
By_______________________________________
Vice President and General Manager
Special Chemistry Systems
Title ___________________________________
December 4, 1986
Date ____________________________________
ALK/mc
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[CIBA-CORNING LETTERHEAD]
December 18, 1992
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Miles Laboratories, Inc.
P.O. Box 40
Elkhart, IN 46515
Attention: Director of Patents, Trademarks and Licensing
RE: Licensing Agreement between Miles Laboratories, Inc. and
Ciba Corning Diagnostics Corp.
Dear Sir or Madam:
Pursuant to Article 9.5 of our Agreement of December 18, 1986, Ciba
Corning Diagnostics Corp. hereby gives Miles Laboratories, Inc. notice of
termination of the provisions of ARTICLES 6 and 7 of that Agreement.
Sincerely,
Jeffrey Rudin
Vice President and
General Counsel
JR/gg
<PAGE>
EXHIBIT 10.66
[CONFIDENTIAL TREATMENT REQUESTED]
[Certain information has been omitted herein pursuant to a request for
confidential treatment pursuant to Rule 24b-2.]
MAGNETOCLUSTER BINDING ASSAY TECHNOLOGY AGREEMENT
- -------------------------------------------------------------------------------
by and between
BIOCLINICAL GROUP, INC.
and
CORNING GLASS WORKS
Dated as of January 21, 1983
MAGNETOCLUSTER BINDING ASSAY TECHNOLOGY AGREEMENT
-------------------------------------------------
Dated as of January 21, 1983
BIOCLINICAL GROUP, INC. (herein called "BioClinical"), a Delaware
corporation, having its principal place of business at 767-B Concord
Avenue, Cambridge, Massachusetts 02138, and CORNING GLASS WORKS (herein
called "Corning"), a New York corporation, having its principal place of
business at Houghten Park, Corning, New York 14831, acting for and on
behalf of its CORNING MEDICAL & SCIENTIFIC DIVISION, having its offices
at Medfield Industrial Park, Medfield, Massachusetts 02052, hereby agree
as follows:
1. BASIS FOR AGREEMENT. BioClinical has advised Corning (a) that
BioClinical has developed methods and techniques for producing what are
believed to be new and unique magnetically separable particles
containing substances capable of binding other substances which, in
turn, can be used for IN VITRO immunoassay and binding protein assay
systems (the "BioClinical Magnetocluster Binding Assay Technology"); and
(b) that this development encompasses trade secrets and confidential
information (the "BioClinical Confidential Information") as well as
certain inventions on which BioClinical is applying for United States
and foreign counterpart patent protection (the "BioClinical Patent
Rights"). Corning has developed and markets world-wide a number of IN
VITRO immunoassays and binding protein assay
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<PAGE>
medical diagnostic products which Corning believes has advised
BioClinical could benefit from use of the BioClinical Magnetocluster
Binding Assay Technology. Upon verification of the applicability of the
BioClinical Magnetocluster Binding Assay Technology to Corning's medical
diagnostic products, Corning desires to acquire from BioClinical the
exclusive right and license to use the BioClinical Confidential
Information and BioClinical Patent Rights and to apply the BioClinical
Magnetocluster Binding Assay Technology to IN VITRO diagnostic
immunoassay and binding protein assay systems developed or to be
developed by Corning. The purpose of this Magnetocluster Binding Assay
Technology Agreement is to set forth the terms and conditions under
which BioClinical is willing to grant such exclusive rights and licenses
to Corning, and under which Corning is willing to receive such rights
and licenses, for this field-of-use.
2. DEFINITIONS. For the purposes of this Agreement, the
following terms, whether used in the singular or in the plural, shall
have the following meanings:
2.1. AFFILIATE. The term "Affiliate" shall mean any entity in
which a party owns or controls fifty percent (50%) or more of the voting
securities, equity participation or beneficial interest.
2.2. BINDING ASSAY. The term "Binding Assay" shall mean a
test to detect or measure the presence or amount of an analyte in a
solution using as a mechanism the
-3-
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binding properties of the analyte and another substance for IN VITRO
diagnostic testing.
2.3. BIOCLINICAL CONFIDENTIAL INFORMATION. The term
"BioClinical Confidential Information" shall mean and collectively
include all technical information which is owned by BioClinical,
disclosed to Corning hereunder from time to time and which is included
in the BioClinical Magnetocluster Binding Assay Technology, to the
extent that such information: (a) as of the date of disclosure to
Corning, was not (1) known to Corning; or (2) disclosed in published
literature; or (b) becomes generally available to industry; or (c) is
subsequently obtained by Corning from a third party without binder of
secrecy upon Corning, provided that Corning has no reason to believe
that such third party is in breach of any confidentiality obligations to
BioClinical. The term "BioClinical Confidential Information" does not
include any confidential information relating solely to the Excluded
Technology.
2.4. BIOCLINICAL IMPROVEMENTS. The term "BioClinical
Improvements" shall mean and collectively include all improvements in or
modifications to the BioClinical Magnetocluster Binding Assay Technology
(a) which are made apart from any collaboration with
Corning at any time either by BioClinical, by any BioClinical Affiliate,
by any third party under contract to or for the benefit of
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<PAGE>
BioClinical or any BioClinical Affiliate, or by any two or more of such
parties; or
(b) which are acquired by BioClinical or by any
BioClinical Affiliate; or
(c) which are licensed by any third party to BioClinical
or to any BioClinical Affiliate with the right to grant sublicenses to
non-affiliates without accounting to others.
2.5. BIOCLINICAL MAGNETIC PARTICLE TECHNOLOGY. The term
"BioClinical Magnetic Particle Technology" shall mean and collectively
include all technical information, including all inventions, methods,
plans, processes, specifications, characteristics, raw material data,
equipment design, know-how, experience, and trade secrets, (a) which was
developed by or for BioClinical or any BioClinical Affiliate; and (b)
which pertain to the production, processing and/or finishing of
Uncoupled Magnetic Particles.
2.6. BIOCLINICAL MAGNETOCLUSTER BINDING ASSAY TECHNOLOGY. The term
"BioClinical Magnetocluster Binding Assay Technology" shall mean and
collectively include all technical information, including all inventions,
methods, plans, processes, specifications, characteristics, raw material data,
equipment design, know-how, experience and trade secrets (a) which was or which
may be developed by or for BioClinical or any BioClinical Affiliate; and
(b) which
-5-
<PAGE>
pertains to (1) the production of magnetocluster particles used in
Binding Assays or magnetically separable particles used in Binding
Assays and/or (2) the use of such magnetocluster particles or
magnetically separable particles in diagnostic kits and/or in components
thereof, for IN VITRO immunoassays and/or protein-binding assays. The
term "BioClinical Magnetocluster Binding Assay Technology" shall not
include any technical information which relates solely to any of the
Excluded Technology.
2.7. BIOCLINICAL PATENT RIGHTS. The term "BioClinical Patent
Rights" shall mean and collectively include
(a) all patentable inventions specifically pertaining to
the BioClinical Magnetocluster Binding Assay Technology (1) which are
subject to protection under the provisions of the Patent Act
[Title 35, United States Code] and/or any foreign patent laws; (2) which
were in existence on the effective date of this Agreement and/or which
may be made at any time during the Contract Period prior to December 31,
1992; and (3) which are legally and/or beneficially owned and/or
controlled by BioClinical; and
(b) any and all applications for United States Letters
Patent which may be filed at any time covering such patentable
inventions, as well as any
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and all divisions, continuations, continuations-in-part and renewals
thereof, any and all United States Letters Patent which may be granted
thereon, any and all reissues and extensions thereof, and any and all
foreign counterpart applications and/or Letters Patent granted thereon.
The term "BioClinical Patent Rights" shall not include any patentable
inventions and/or patent rights relating solely to any of the Excluded
Technology.
2.8. CONTRACT PERIOD. The term "Contract Period" shall mean
the period beginning with the effective date of this Agreement and
ending on the date on which this Agreement terminates in accordance with
the provisions of Section 19 hereof.
2.9. CORNING CONFIDENTIAL INFORMATION. The term "Corning
Confidential Information" shall mean and collectively include
(a) all business information pertaining to Corning or to
any Corning Affiliate which BioClinical may learn in connection with any
audit of Corning's and/or any Corning Affiliate's records pursuant to
the provisions hereof; and
(b) all technical information which is disclosed by
Corning to BioClinical to the extent that such information: (1) as of
the date of disclosure to BioClinical, was not (i) known to BioClinical;
or (ii)
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disclosed in published literature; or (2) becomes generally available to
industry; or (3) is subsequently obtained by BioClinical from a third
party without binder of secrecy upon BioClinical, provided that
BioClinical has no reason to believe that such third party is in breach
of any confidentiality obligations to Corning.
2.10. CORNING QUARTER. The term "Corning Quarter" shall
mean the time encompassed by Period 1-3, 4-6, 7-10, and 11-13 of a
Corning fiscal year, which approximates the calendar year. A Period
shall mean a Corning standard four-week accounting period.
2.11. DESIGNATED BINDING ASSAYS. The term "Designated
Binding Assays" shall mean and collectively include the Binding Assays
listed in Schedule A.
2.12. EFFECTIVE DATE. The term "effective date of this
Agreement" shall mean January 21, 1983.
2.13. EXCLUDED TECHNOLOGY. The term "Excluded Technology"
shall mean and collectively include all technical information, including
all inventions, methods, plans, processes, specifications,
characteristics, raw material data, equipment design, know-how,
experience, and trade secrets (a) which was or may be developed by or
for BioClinical or any BioClinical Affiliate; and (b) which solely
pertains to the use of Magnetocluster particles for any products
(including any Excluded Products) other than
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for use as Magnetocluster Binding Assay Products. The term "Excluded
Technology" shall not include any technical information which is
contained in the BioClinical Magnetocluster Binding Assay Technology.
2.14. EXCLUDED PRODUCTS. The term "Excluded Products"
shall mean and collectively include any products made by coupling an
organic or inorganic moiety to Uncoupled Magnetic Particles, to form
Magnetocluster particles which are not Magnetocluster Binding Assay
Products.
2.15. MAGNETOCLUSTER. The term "magnetocluster" shall
mean those magnetic-gradient-dependent colloidal suspensions, within an
appropriate solvent or carrier liquid, of ferrospinel compounds in which
an organic and/or inorganic moiety is coupled by adsorptive and/or
covalent bonding to a ferrospinel having the structure
Fe(I)(I)(I)M(I)(I)(I)M(I)(I)M(o)(I)(I)O(4)
where the trivalent and divalent metal cations M(I)(I)(I) and M(o)(I)(I)
each represents transition metals having an ionic radius small enough to
fit within the interstitial sites located within such ferrospinel, the
inorganic and/or organic moiety coupled to the ferrospinel being
sufficiently insoluble in the solvent and/or carrier liquid to permit
the magnetocluster to be separated from such solvent and/or carrier
liquid by the application of a strong magnetic field gradient.
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2.16. MAGNETOCLUSTER BINDING ASSAY PRODUCTS. The term
"Magnetocluster Binding Assay Products" shall mean and collectively
include all products (a) which include Magnetoclusters used in a Binding
Assay; and (b) which are used solely in diagnostic kits or components
thereof for IN VITRO immunoassays and/or protein-binding assays. The
term "Magnetocluster Binding Assay Products" shall not include any
Excluded Products.
2.17. NET ROYALTIES. The term "Net Royalties" shall mean
the net royalties actually received by Corning from non-affiliated third
party licensees under any of the BioClinical Confidential Information
and/or BioClinical Patent Rights after deduction of all reasonable legal
costs actually incurred by Corning in the licensing of such BioClinical
Confidential Information and/or BioClinical Patent Rights to such
non-affiliated third party licensees.
2.18. NET SALES. The term "Net Sales" shall mean sales at
the invoiced price of Magnetocluster Binding Assay Products after
deduction of (a) all trade and quantity discounts actually allowed; (b)
allowance or credits for returns; (c) sales commissions actually paid to
non-affiliated third parties; and (d) sales or purchase or turnover
taxes (if any) borne by Corning and its Affiliates but before any
deduction for cash or prompt payment discounts.
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2.19. PRIOR AGREEMENT. The term "Prior Agreement" shall
mean the Agreement to Supply Information in Confidence, dated September
10, 1982, by and between Corning and BioClinical.
2.20. UNCOUPLED MAGNETIC PARTICLES. The term "Uncoupled
Magnetic Particles" shall mean all magnetic ferrospinel particles (a)
which embody or are made in accordance with the BioClinical Magnetic
Particle Technology; and (b) which are suitable for utilization in
Binding Assays.
3. REPRESENTATIONS AND WARRANTIES. The following provisions
relate to representations and warranties by the parties:
3.1. BY BIOCLINICAL. BioClinical represents and warrants to
Corning as follows:
3.1.1. CORPORATE STANDING. BioClinical is a corporation
duly organized, validly existing, and in good standing under the laws of
the State of Delaware.
3.1.2. CORPORATE POWER AND AUTHORIZATION. BioClinical
has all necessary corporate power to enter into and perform its
obligations under this Agreement and has taken all necessary corporate
action under the laws of the State of Delaware and its certificate of
incorporation and by-laws to authorize the execution and consummation of
this Agreement.
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3.1.3. OWNERSHIP. BioClinical either legally or
beneficially owns or controls the entire right, title, and interest in
and to
(a) the BioClinical Confidential Information,
including the right (1) to grant licenses under any of the BioClinical
Confidential Information; and (2) to preclude the unauthorized
disclosure of any of the BioClinical Confidential Information; and
(b) the BioClinical Patent Rights, including the
right (1) to grant licenses under any of the BioClinical Patent Rights;
and (2) to enforce any issued patent or patents of the BioClinical
Patent Rights against any third parties infringing any claim or claims
of any patents including in such Patent Rights.
3.1.4. NO LITIGATION. To the best of BioClinical's
knowledge, there is no action, suit, claim, proceeding or governmental
investigation pending or threatened against BioClinical with respect to
the BioClinical Confidential Information or the BioClinical Patent
Rights, either at law or in equity, before any court or administrative
agency or before any governmental department, commission, board, bureau,
agency or instrumentality, whether United States or foreign.
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3.1.5. NO OPTIONS. There are no outstanding options or
rights in any third party to acquire any of the BioClinical Confidential
Information, BioClinical Improvements or the BioClinical Patent Rights
to be licensed to Corning hereunder.
3.1.6. NO DEFAULT. To the best of BioClinical's
knowledge, BioClinical is not in default with respect to any term or
provision of any charter, by-law, mortgage, indenture, statute, rule or
regulation applicable to it, or with respect to any order, writ,
injunction, decree, rule or regulation of any court or administrative
agency, which will preclude the performance of its obligations under
this Agreement.
3.1.7. NO CONFLICT. Neither the execution nor delivery
of this Agreement, nor the consummation of the transactions herein
contemplated, nor the fulfillment of or compliance with the terms and
provisions hereof will, to the best of BioClinical's knowledge, (1)
violate any provisions of law, administrative regulation or court decree
applicable to BioClinical; or (2) conflict with or result in a breach of
any of the terms, conditions or provisions of or constitute a default
under the certificate of incorporation or by-laws of
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BioClinical, or of any agreement or instrument to which BioClinical is a
party or by which it is bound.
3.1.8. NO PRIOR DISCLOSURES. There have been no
disclosures of BioClinical Magnetocluster Binding Assay Technology to
any third parties whomsoever, and each employee of BioClinical having
access to BioClinical Binding Assay Technology has executed and
delivered to BioClinical an effective agreement whereby such employee
will not disclose any such Technology except as directed by BioClinical.
3.2. BY CORNING. Corning represents and warrants to
BioClinical, as follows:
3.2.1. CORPORATE STANDING. Corning is a corporation
duly organized, validly existing, and in good standing under the laws of
the State of New York.
3.2.2. CORPORATE POWER AND AUTHORIZATION. Corning has
all necessary corporate power to enter into and perform its obligations
under this Agreement and has taken all necessary corporate action under
the laws of the State of New York and its certificate of incorporation
and by-laws to authorize the execution and consummation of this
Agreement.
3.2.3. NO DEFAULT. To the best of its knowledge,
Corning is not in default with respect to any term or provision of any
charter, by-law, mortgage, indenture, statute, rule or regulation
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applicable to it, or with respect to any order, writ, injunction,
decree, rule or regulation of any court or administrative agency, which
will preclude the performance of its obligations under this Agreement.
3.2.4. NO CONFLICT. Neither the execution nor the
delivery of this Agreement, nor the consummation of the transactions
herein contemplated, nor the fulfillment of or compliance with the terms
and provisions hereof will, to the best of Corning's knowledge and
belief, (1) violate any provision of law, administrative regulations or
court decree applicable to Corning; or (2) conflict with or result in a
breach of any of the terms, conditions or provisions of or constitute a
default under the certificate of incorporation or by-laws of Corning, or
any agreement or instrument to which Corning is a party or by which it
is bound.
4. GRANT OF LICENSE. The following provisions relate to the
licenses to be granted by BioClinical to Corning hereunder:
4.1 EXCLUSIVE LICENSE. Subject to the terms and conditions
hereunder contained, BioClinical hereby grants to Corning the exclusive
right and license throughout the world, with the right to grant
sublicenses to others,
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(a) to produce, process or otherwise manufacture, to
use, and to sell, Magnetocluster Binding Assay Products embodying or
made in accordance with any of the BioClinical Confidential Information
and/or BioClinical Patent Rights;
(b) to preclude the unauthorized disclosure of such
BioClinical Confidential Information to any third parties; and
(c) to enforce any issued patent or patents of such
BioClinical Patent Rights against any third-party infringers who utilize
such Patent Rights for the manufacture, use and/or sale of
Magnetocluster Binding Assay Products.
4.2 EXCLUSIONS. Nothing contained in this Agreement shall be
construed as granting Corning any right or license:
(a) to produce, process or otherwise manufacture, to
use, and to sell, any products other than Magnetocluster Binding Assay
Products under the BioClinical Confidential Information and/or
BioClinical Patent Rights;
(b) to use the Excluded Technology and related
confidential information and/or patent rights for any purpose
whatsoever; and
(c) to utilize BioClinical Magnetic Particle Technology
to produce, process or otherwise
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manufacture, to use, and to sell, Uncoupled Magnetic Particles for any
purpose other than for the manufacture, use and/or sale of
Magnetocluster Binding Assay Products by Corning or any sublicensed
Corning Affiliate in accordance with the provisions of Sections 4.1 and
4 hereof.
4.3 IRREVOCABILITY. After Corning has paid BioClinical all
of the basic payments required pursuant to the provisions of Section 10
hereof, the exclusive license granted by BioClinical to Corning pursuant
to the provisions of Section 4.1 and 4 hereof shall become irrevocable.
5. TECHNICAL DEMONSTRATIONS. The following provisions relate to
technical demonstrations by BioClinical and Corning's acceptance of the
feasibility of using the BioClinical Magnetocluster Binding Assay
Technology:
5.1. CORNING'S SPECIFICATIONS. Corning has established
performance specifications for the Designated Binding Assays listed in
Schedule A, and Schedule B sets forth these performance specifications,
the dates for completion of the documentation and the format for the
documentation, by which Corning shall require BioClinical to certify
that it has met such performance specifications pursuant to the
provisions of Section 5.2 hereof.
5.2. PERFORMANCE. As a condition precedent to the
effectiveness of the license granted by BioClinical to Corning pursuant
to the provisions of Section 4.1 hereof
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and as a condition concurrent to Corning's obligations to pay
BioClinical pursuant to the provisions of Section 10 hereof, BioClinical
shall demonstrate that it can meet the performance specifications for
the Binding Assays listed in Schedule B within the time periods set
forth in such schedule, using materials for such Binding Assays
furnished to it by Corning. BioClinical shall document that is has met
each performance specification for Binding Assays on Schedule B to
Corning in accordance with the data format provided to it by Corning and
shall certify to Corning that it has met the performance specifications
for such Magnetocluster Binding Assay Product established by Corning
pursuant to the provisions of Section 5.1 hereof.
5.3. ACCEPTANCE AND VALIDATION. Within twenty (20) days of
receipt of BioClinical's certified documentation that it has met
performance specifications for each particular Binding Assay in
accordance with the provisions of Section 5.2 hereof, Corning shall
notify BioClinical in writing either (a) that it has accepted the
results set forth in such certified documentation as meeting its
performance specifications for such Binding Assay; or (b) that it has
rejected such results, particularly specifying the reasons for such
rejection. In the event Corning rejects such results, BioClinical shall
have sixty (60) days from the date of such notice of rejection to submit
further documentation that it has
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complied with the Corning performance specification for such
Magnetocluster Binding Assay Product to Corning's reasonable
satisfaction.
5.4. DISCLOSURE OF EXISTING TECHNOLOGY. Upon the execution of
this Agreement, BioClinical agrees to disclose promptly to Corning all
existing BioClinical Magnetocluster Binding Assay Technology which
BioClinical deems necessary or useful to enable Corning to produce,
process or otherwise manufacture, to use, and to sell, Magnetocluster
Binding Assay Products.
5.5. CONSULTING SERVICES. Recognizing that Corning
contemplates the continuing development of Magnetocluster Binding Assay
Products during the Contract Period after Corning's acceptance of
BioClinical's documentation pursuant to the provisions of Sections 5.2
and 5.3 hereof, during the period between January 1, 1984 and December
31, 1988 BioClincial shall make available to Corning the consulting
services of a competent senior scientist and technologist employed by
BioClinical, without charge to Corning, for an aggregate of one man-year
time for each BioClinical employee. Corning agrees to reimburse
BioClinical the reasonable travel costs and living expenses incurred by
BioClinical in making such BioClinical employees available to Corning
outside the area of Eastern Massachusetts.
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6. DISCLOSURE OF IMPROVEMENTS BY BIOCLINICAL. Throughout that
part of the Contract Period commencing with the effective date of this
Agreement and ending December 31, 1992, BioClinical agrees to disclose
to Corning in writing all BioClinical Improvements.
7. BIOCLINICAL'S RIGHT TO ACQUIRE SUBLICENSES. Whenever
BioClinical or any BioClinical Affiliate hereafter successfully develops
a new Magnetocluster Binding Assay Product for other than a Designated
Binding Assay, BioClinical shall disclose to Corning in writing all data
concerning such coupling. Within one hundred twenty (120) days
following the date of such disclosure, Corning shall notify BioClinical
in writing either (a) that it rejects the resultant product for
inclusion in its product line of clinical immunoassays; or (b) that it
desires to manufacture, to use, and to sell, such product or products
under its licenses on enumerated terms and conditions (the "Corning
Proposal") proposed by Corning, which proposal shall be either accepted
or rejected by BioClinical within sixty (60) days after receipt. If
Corning rejects such product or if BioClinical rejects the Corning
Proposal, then Corning shall grant to BioClinical such royalty-free
sub-licenses under BioClinical Confidential Information, BioClinical
Improvements and BioClinical Patent Rights as may be necessary to enable
BioClinical to make, use and sell such product throughout the world for
the life of such rights.
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8. RESTRICTIONS ON DISCLOSURE AND USE OF CONFIDENTIAL
INFORMATION. The following provisions relate to restrictions on the
disclosure and the use of Confidential Information by the parties:
8.1. RESTRICTIONS BINDING ON BIOCLINICAL. BioClinical agrees
as follows:
8.1.1. CONFIDENTIALITY. BioClinical agrees to treat as
confidential and to use only in the conduct of its business (a) all
BioClinical Confidential Information which BioClinical has disclosed to
Corning under the Prior Agreement and this Agreement; and (b) all Corning
Confidential Information disclosed to it by Corning, except insofar as this
Agreement authorizes the use of such BioClinical Confidential Information for
other purposes.
8.1.2. NON-DISCLOSURE AND NON-USE OF BIOCLINICAL
CONFIDENTIAL INFORMATION. Unless this Agreement is terminated prior to
December 31, 1992, BioClinical agrees until December 31, 2002 (a) not to
disclose any of the BioClinical Confidential Information to any
unauthorized third parties; and (b) not to use any of the BioClinical
Confidential Information (1) except in its continuing program to create
BioClinical Improvements to the BioClinical Magnetocluster Binding Assay
Technology, and (2)
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except as otherwise permitted under the provisions of Sections 7 and
11.5 hereof.
8.1.3. NON-DISCLOSURE AND NON-USE OF CORNING
CONFIDENTIAL INFORMATION. Until either (1) December 31, 1992, or (2)
ten (10) years from the date of initial disclosure to BioClinical of
Corning Confidential Information, whichever occurs later, BioClinical
agrees (a) not to disclose any of the Corning Confidential Information
to any unauthorized third parties; and (b) not to use any of the Corning
Confidential Information for the manufacture, use and/or sale of any
products or for any other purpose whatsoever absent an express license
from Corning.
8.2. RESTRICTIONS BINDING UPON CORNING. To protect
BioClinical's remainderman rights to the BioClinical Confidential
Information in the event of termination of this Agreement in accordance
with Section 19, and to protect BioClinical's confidential information
on the Excluded Technology, Corning agrees as follows:
8.2.1. CONFIDENTIALITY. Until December 31, 1992,
Corning agrees to treat as confidential and to use only in the conduct
of its business all BioClinical Confidential Information disclosed to
Corning under the Prior Agreement and this Agreement, except insofar as
this Agreement authorizes its use for other purposes.
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8.2.2. NON-DISCLOSURE AND NON-USE. In the event this
Agreement is terminated prior to December 31, 1992, Corning covenants
that it will cease and refrain from disclosing or using any BioClinical
Confidential Information disclosed to it by BioClinical under the
provisions of the Prior Agreement or this Agreement until December 31,
2002.
9. FURTHER PROVISIONS CONCERNING THE FILING, PROSECUTION, AND
MAINTENANCE OF PATENT RIGHTS. The following further provisions relate
to the filing, prosecution and maintenance of the licensed BioClinical
Patent Rights:
9.1. DOMESTIC PATENTS. BioClinical shall at its sole expense
diligently pursue (a) filing and prosecuting any United States patent
applications covering the BioClinical Patent Rights based on inventions
made on or before its completion of the performance specifications for
the Designated Binding Assays listed on Schedule B and the filing and
prosecution of all divisions, continuations, continuations-in-part,
reissues or re-examinations thereof; (b) prosecuting and defending any
interference involving such domestic applications or any United States
Letters Patent granted thereon; and (c) upon and after the grant of any
Letters Patent on any of such applications, maintaining such Letters
Patent in force and paying all fees and filing all necessary papers
required for such purposes, provided that if the invention covered by
any Letters Patent of such
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Patent Rights has become obsolete or has for any other reason become
commercially unimportant, then BioClinical, at its sole option but
subject to Section 9.4 may discontinue all further expenditures in
connection with maintaining such Letters Patent in force. Within thirty
(30) days after the filing by BioClinical of each United States patent
application relating to BioClinical's Patent Rights, BioClinical shall
provide a copy of such application to Corning.
9.2. FOREIGN PATENTS. Subject to the provisions of Section
9.3 hereof, BioClinical shall at its sole expense diligently pursue (a)
filing any foreign counterpart applications and all divisions,
continuations, and continuations-in-part thereof in Canada, France,
Federal German Republic, Japan and the United Kingdom; (b) prosecuting
such foreign applications and defending against conflicts or oppositions
filed by third parties against such foreign applications; and (c) upon
and after the grant of any Letters Patent on any of such applications,
maintaining such Letters Patent in force and paying all taxes and filing
all necessary papers required for such purposes by the patent laws of
the particular country in which such Letters Patent were granted,
provided that if the invention covered by any Letters Patent for such
Patent Rights has become obsolete or has for any other reason become
commercially unimportant, then BioClinical, at its
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sole option but subject to Section 9.4, may discontinue all further
expenditures in connection with maintaining such Letters Patent in force.
9.3. FOREIGN PATENTS REQUESTED BY CORNING. Within one hundred
eighty (180) days after the filing by BioClinical of each such United
States patent application relating to BioClinical's Patent Rights, BioClinical
shall inform Corning of the additional countries (over those referred to in
Section 9.2), if any, in which BioClinical intends to file corresponding patent
applications. Upon written request by Corning, BioClinical agrees to file,
prosecute and maintain foreign counterpart patent rights in any country or
countries not covered by the provisions of Section 9.2 hereof. Whenever Corning
requests BioClinical to perform such services, Corning agrees to bear all
reasonable costs incurred in the filing, prosecution and maintenance of
such foreign Patent Rights.
9.4. TRANSFER TO CORNING. In the event BioClinical exercises
its right to discontinue all further expenses in connection with
maintaining any such domestic or foreign patent applications or Letters
Patent in force in accordance with Sections 9.1 and 9.2 hereof, then
BioClinical shall provide notice thereof to Corning at least 120 days
prior to the lapse of such rights. Upon timely written request,
BioClinical shall timely assign such Letters Patent to Corning or to its
nominee at least 90 days prior to the lapse of any such rights.
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10. BASIC PAYMENTS. Subject to the terms and conditions herein
contained, in consideration for the exclusive license granted by
BioClinical pursuant to the provisions of Section 4.1 hereof, Corning
agrees to pay BioClinical basic payments in the aggregate amount of
Four Million Three Hundred Thousand ($4,300,000.00) Dollars, as follows:
10.1. INITIAL BASIC PAYMENT. Upon the acceptance by
Corning pursuant to the provisions of Section 5.3 hereof of, BioClinical's
certified documentation that it has met the performance specifications
for free thyroxine (T(4)) as set forth in Schedule B, Corning shall pay
BioClinical the sum of One Hundred Thousand ($100,000.00) Dollars.
10.2. SECOND BASIC PAYMENT. Upon acceptance by Corning
pursuant to the provisions of Section 5.3 hereof of BioClinical's
certified documentation that it has met the performance specifications
for thyroid stimulating hormone (TSH) as set forth in Schedule B,
Corning shall pay BioClinical the sum of Two Hundred Thousand ($200,000.00)
Dollars.
10.3. ENSUING BASIC PAYMENTS. Following the First and
Second Basic Payments to BioClinical, subject to the prepayment provisions
of Section 10.4 hereof and the provisions of Section 16 hereof, Corning
agrees to pay the remaining Four Million ($4,000,000.00) Dollars to
BioClinical at the rate of Eighty-Three Thousand Three
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Hundred Thirty-Three Dollars and Thirty-Three Cents ($83,333.33) a month
for forty-eight (48) consecutive months beginning the first month
Corning receives and accepts certified documentation from BioClinical
pursuant to the provisions of Section 5.3 relating to the remaining
Binding Assays in accordance with the performance specifications set
forth in Schedule B. All such monthly payments shall be made on the
last day of each month on which such monthly payment is due.
10.4. PREPAYMENT. Upon giving ten (10) days' written
notice to BioClinical, Corning may at any time prepay the remaining
amount due under Section 10.3 hereof at the net present value of such
amount computed by applying the prime rate established by Citibank,
N.A., New York, New York, in effect on the first day of the month on
which Corning gives BioClinical notice of its election to prepay such
remainder.
11. EARNED AND MINIMUM ROYALTIES. In further consideration for
the exclusive license granted by BioClinical pursuant to the provisions
of Section 4.1 hereof, Corning agrees to pay BioClinical earned and
minimum royalties as follows:
11.1. EARNED ROYALTIES. In addition to the basic payments
due BioClinical pursuant to the provisions of Section 10 hereof, Corning
Agrees to pay BioClinical earned royalties at the rate set forth in the
following
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Royalty Schedule on all Net Sales of Magnetocluster Binding Assay
Products sold by Corning and by its sublicensed Affiliates which embody
or are made in accordance with the BioClinical Confidential Information
(including all BioClinical Improvements) and/or BioClinical Patent
Rights:
ROYALTY SCHEDULE
[A] With respect to the Magnetocluster Binding Assay Products based on
Binding Assays listed in Schedule A, the royalty rates shall be as
follows:
[1] On the first [Confidential Treatment Requested] of Net Sales of such
Magnetocluster Binding Assay Products, the royalty rate shall be [Confidential
Treatment Requested];
[2] On the next [Confidential Treatment Requested] of Net Sales of such
Magnetocluster Binding Assay Products, the royalty rate shall be [Confidential
Treatment Requested];
[3] On the next [Confidential Treatment Requested] of Net Sales of such
Magnetocluster Binding Assay Products, the royalty rate shall be [Confidential
Treatment Requested]; and
[4] On all Net Sales of such Magnetocluster Binding Assay Products
in excess of [Confidential Treatment Requested], prior to [Confidential
Treatment Requested] the royalty rate shall be [Confidential Treatment
Requested].
[B] With respect to the Magnetocluster Binding Assays other than those
listed in Schedule A and which have been independently developed by
Corning in accordance with the Corning Improvements, the royalty rate
shall be either (1)
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three percent (3%) of the Net Sales of such Magnetocluster Binding Assay
Products through December 31, 1992; or (2) the prevailing royalty rate
set forth in subparagraph [A] above, whichever rate is higher.
[C] With respect to Magnetocluster Binding Assays other than those
listed in Schedule A and which have been independently developed by
BioClinical in accordance with the BioClinical Improvements and accepted
by Corning pursuant to the provisions of Paragraph 7 hereof, the royalty
rate shall be that mutually agreeable to BioClinical and Corning based
on BioClinical's acceptance of the Corning Proposal.
11.2. CONVERSION TO DOLLAR AMOUNTS. For the purposes of
computing the applicable royalty payments in accordance with the
provisions of Section 1.1 hereof, all Net Sales of Magnetocluster
Binding Assay Products which are invoiced in currencies other than
United States funds shall be converted to dollar amounts by multiplying
the unit sales represented by each such transaction times the average
dollar-denominated value of such unit sales during the same period.
11.3. SUBLICENSES. In the event Corning grants any
sublicenses to any non-affiliated third parties under the BioClinical
Magnetocluster Binding Assay Technology (including any BioClinical
Improvements), BioClinical Confidential Information and/or BioClinical
Patent Rights
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at any time during the Contract period, then for each such sublicense
Corning further agrees to pay BioClinical additional earned royalties at
a rate equal to three-fourths (3/4) of the Net Royalties collected by
Corning under such sublicense.
11.4. WHEN SALE MADE. For the purposes of this Agreement,
Magnetocluster Binding Assay Products made by Corning shall be
considered sold (a) when billed out to a customer other than to a
Corning Affiliate; or (b) when transferred or sold by Corning to a
Corning Affiliate, except that upon the termination of this Agreement in
accordance with the provisions of Section 19 hereof, all Magnetocluster
Binding Assay Products manufactured and placed in inventory on or prior
to the date of such termination which shall not have been billed out
prior thereto shall be considered sold and therefore subject to royalty.
Royalties paid on Magnetocluster Binding Assay Products not accepted by
the customer and returned to Corning or to the particular sublicensed
Corning Affiliate shall be credited against and deducted from future
royalties, PROVIDED, HOWEVER, that if such returned Magnetocluster
Binding Assay Products are resold by Corning or by any sublicensed
Corning Affiliate, royalties shall be paid thereon.
11.5. MINIMUM ROYALTIES. In the event that the earned
royalties paid by Corning to BioClinical pursuant to
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the provisions of Section 11.1 hereof in any calendar year of the
Contract Period do not equal or exceed the Minimum Royalty Schedule set
forth in Schedule C, then Corning may elect either
(a) to continue its exclusive license under the
provisions of Section 4.1 hereof by paying BioClinical the difference
between the Earned Royalty paid BioClinical for such calendar year
and the amount for such calendar year set forth in Schedule C, such
difference to be paid to BioClinical within sixty (60) days after the
end of such calendar year; or
(b) to grant BioClinical and its Affiliates an
irrevocable, royalty-free right and license, with no right to grant
sublicenses to others, to produce, process or otherwise manufacture, to
use, and to sell, throughout the world, Magnetocluster Binding Assay
Products embodying or made in accordance with the BioClinical
Confidential Information (including BioClinical Improvements) and/or
BioClinical Patent Rights.
11.6. CARRYOVER CREDIT. If for any calendar year the
earned royalty paid or payable by Corning exceeds the minimum royalty
for that year, such excess shall be available to Corning in later years
as a credit against minimum royalties due BioClinical.
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12. RECORDS, REPORTS, AND ROYALTY PAYMENTS. The following
provisions relate to records, reports, and royalty payments:
12.1. RECORDS. Corning agrees to keep adequate and
complete records showing all Magnetocluster Binding Assay Products sold
with respect to which royalty is due under this Agreement. Such records
shall include all information necessary to verify the total amount and
computation of royalties due hereunder, and shall be open to inspection
by BioClinical during reasonable business hours to the extent necessary
to verify the amount thereof. Such inspection shall be made not more
often than once each calendar year at the expense of BioClinical by a
Certified Public Accountant appointed by BioClinical and to whom Corning
has no reasonable objection, PROVIDED, HOWEVER, that if such inspection
reveals that BioClinical was entitled to receive more than ten percent
(10%) in excess of the amount reported by Corning to be due and payable
to BioClinical during the period covered by such inspection, then
Corning shall pay the cost of such audit. Corning shall not be required
to retain said records for more than three (3) years after the close of
any Corning Quarter.
12.2. REPORTS. Within sixty (60) days from the close of
any Corning Quarter throughout the Contract Period until December 31,
1992, Corning shall furnish BioClinical
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with a written report, signed by an authorized employee of Corning,
showing (a) the dollar value of each Magnetocluster Binding Assay
Product sold by Corning and by each of its sublicensees (if any) during
the preceding Corning Quarter; (b) the dollar value of all
Magnetocluster Binding Assay Products sold by Corning and by its
sublicensees (if any) during the preceding calendar quarter-year; and
(c) the amount of earned royalties due on Magnetocluster Binding Assay
Products sold by Corning and its sublicensees (if any) during the
preceding Corning Quarter, computed pursuant to the provisions of
Sections 11.1 and 11.2 hereof.
12.3. ROYALTY PAYMENTS. With each such quarterly report,
Corning shall remit to BioClinical the total amount of earned royalties
shown thereby to be due and payable. If such earned royalties are
unpaid when due and payable, interest shall be payable on the unpaid
royalties from the due date until paid at a rate per annum which shall
be at all times be the lesser of either (a) one percent (1%) in excess
of the prime rate of the Citibank, N.A., New York, New York, then in
force for short-term borrowings; or (b) the maximum legal rate then
permitted under the laws of the State of New York.
13. SUPPLY OF UNCOUPLED MAGNETIC PARTICLES. To enable Corning to
manufacture Magnetocluster Binding Assay Products in accordance with the
exclusive license granted by
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BioClinical to Corning pursuant to the provisions of Section 4.1 hereof,
BioClinical agrees to supply Corning's requirements for such Uncoupled
Magnetic Particles as follows:
13.1. INITIAL REQUIREMENTS. Throughout the calendar year
1983, BioClinical agrees to sell to Corning, and Corning agrees to
purchase from BioClinical, all of Corning's requirements of Uncoupled
Magnetic Particles at a price of [Confidential Treatment Requested] Dollars
per gram, dry-weight basis, f.o.b. Cambridge, Massachusetts. All Uncoupled
Magnetic Particles furnished by BioClinical to Corning pursuant to the
provisions of this Section 13.1 shall meet mutually agreed
specifications.
13.2. SUBSEQUENT SUPPLY ARRANGEMENTS. During each
calendar year of the Contract Period commencing January 1, 1984, and
ending December 31, 1992, BioClinical and Corning agree to negotiate an
annual requirements contract, satisfactory in form and substance to each
party, under which INTER ALIA, BioClinical would sell to Corning, all of
Corning's requirements of Uncoupled Magnetic Particles for such calendar
year at a price not to exceed BioClinical's direct manufacturing cost
for the next preceding year plus [Confidential Treatment Requested] as
determined in accordance with generally accepted accounting principles
consistently applied by BioClinical. Corning shall have the right through
an auditor, who shall be reasonably acceptable to BioClinical, to verify
BioClinical's
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manufacturing cost from original records no more frequently than once
annually. Corning shall bear the cost of such audit and shall reimburse
BioClinical for out of pocket costs reasonably incurred thereby.
13.3. CORNING'S ELECTION TO MANUFACTURE. Corning may
give written notice to BioClinical (i) whenever control of the
management of BioClinical shall change prior to January 1, 1993, by
transfer of capital stock, merger, consolidation, amalgamation or
otherwise, or (ii) at any time on or after December 1, 1991, that
Corning elects to manufacture or have manufactured its requirements of
Uncoupled Magnetic Particles and BioClinical agrees thereafter to
disclose and license its Magnetic Particle Technology to Corning in
accordance with the provisions of Section 13.4 hereof.
13.4. CONTINGENT DISCLOSURE AND LICENSE OF BIOCLINICAL MAGNETIC
PARTICLE TECHNOLOGY. In the event either (1) that BioClinical is unable (for
any reason, whether or not such inability may be a result of an event of force
majeure) or unwilling to meet Corning's requirements for Uncoupled Magnetic
Particles during any calendar year of the Contract Period commencing January 1,
1984, or (2) that Corning elects to manufacture or have manufactured its own
requirements for Uncoupled Magnetic Particles pursuant to the provisions of
Section 13.3 hereof, then BioClinical agrees
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(a) to disclose to Corning within 30 days after
Corning's written request therefore BioClinical Magnetic Particle
Technology in sufficient detail to enable Corning to construct or to
have constructed a turn-key plant to manufacture its requirements of
Uncoupled Magnetic Particles; and
(b) if the exclusive license granted pursuant to the
provisions of Section 4.1 hereof has not been terminated, to grant
Corning a non-exclusive, royalty-free right and license, with the right to
grant sublicenses solely to the Corning Affiliates, to produce, process
or otherwise manufacture, and to use, Uncoupled Magnetic Particles in
accordance with BioClinical's Magnetic Particle Technology and/or any related
confidential information and/or patent rights, solely for Corning's and for
Corning's sublicensed Affiliate's manufacture of Magnetocluster Binding Assay
Products and for no other purpose whatsoever.
14. EXTENSION OF SUBLICENSES. All sublicenses extended by Corning
under any of the BioClinical Confidential Information and/or BioClinical
Patent Rights shall include the following provisions:
14.1. RECORDS. The sublicensee shall (a) keep adequate
and complete records showing the place of manufacture, and the net sales
at each place, of all Magnetocluster Binding Assay Products sold by it
pursuant
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to its sublicensee; (b) allow such records to be inspected at reasonable
business hours by Corning; and (c) furnish Corning on or before the last
day of each January , April, July and October with a signed written
report, showing the places of manufacture and sale and the net sales at
each place of all Magnetocluster Binding Assay Products sold or used by
the sublicensee during the preceding calendar quarter-year.
14.2. CONFIDENTIALITY. The sublicensee shall agree to
treat as confidential and to use only in the conduct of its business all
BioClinical Confidential Information disclosed to it by Corning. The
sublicensee shall further covenant that it will exercise every
reasonable precaution to preclude the disclosure by any of its
directors, officers, employees or agents to other parties of BioClinical
Confidential Information disclosed to it by Corning.
14.3. NON-DISCLOSURE AND NON-USE. In the event that the
sublicense agreement is terminated prior to December 31, 1992, the
sublicensee shall agree that it will cease and refrain from disclosing
or using any BioClinical Confidential Information disclosed to it by
Corning until December 31, 2002.
15. INFRINGEMENT CHARGES AGAINST CORNING. The following
provisions relate to infringement charges against Corning:
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15.1. CORNING'S OPTIONS. In the event any claim is made
against Corning during the first five (5) calendar years of the Contract
Period alleging that its manufacture of Magnetocluster Binding Assay
Products in accordance with the BioClinical Confidential Information
and/or BioClinical Patent Rights infringes any United States Letters
Patent of a third party, Corning shall promptly notify BioClinical in
writing and BioClinical shall grant Corning the option for a period of
one hundred twenty (120) days from the date of such claim either
(a) to negotiate directly with such third party for a
license under the third party's patent, upon the election of which
BioClinical will agree to reduce Corning's royalty payments pursuant to
the provisions of Section 15.2 hereof; or
(b) to have BioClinical, at BioClinical's own expense,
undertake to settle such claim or to defend any legal proceedings based
thereon, upon the election of which option BioClinical will agree (1) to
undertake to settle such claim or defend such legal proceeding pursuant
to the provisions set forth in Section 15.3 hereof; and (2) to reimburse
Corning pursuant to the provisions set forth in Section 15.4 hereof.
15.2. CORNING'S RIGHT TO NEGOTIATE. In the event Corning
elects to negotiate directly with such third
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party for a license under the third party's patent, BioClinical agrees
to reduce Corning's royalty payments to BioClinical by the amount which
Corning has to pay such third party for such patent license, provided
that such reduction does not reduce the continuing royalties to be paid
to BioClinical under this Agreement below seventy-five (75%) percent of
the rates set forth in Section 11.1 of this Agreement and provided
further that any royalty payments made by Corning to any such third
parties shall be credited to Corning against Earned Royalties for the
purpose of determining whether Corning has met the minimum royalty
payment as provided in Schedule C.
15.3. BIOCLINICAL'S OBLIGATIONS TO DEFEND. In the event
that Corning elects to have BioClinical undertake to settle such claim
or to defend any legal proceedings based thereon, BioClinical agrees at
its own expense to undertake to settle such claim or to defend any legal
proceeding based thereon in the event settlement cannot be reached
permitting Corning to manufacture Magnetocluster Binding Assay Products
in accordance with the BioClinical Confidential Information and/or
BioClinical Patent Rights, PROVIDED, HOWEVER, that if Corning declines
to make any reasonable modifications (i.e., that do not materially and
adversely affect the utility, marketability or value of the product) to
the Magnetocluster Binding Assay Product(s) which BioClinical proposes
be made to avoid the alleged
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infringement or to minimize the risk of liability therefor,
BioClinical's obligations to settle such claim or to defend such legal
proceeding shall thereupon terminate. Throughout the pendency of such
legal proceedings, Corning shall continue to pay royalties to
BioClinical in accordance with the terms of this Agreement. Corning
shall cooperate fully in any defense of such legal proceedings and
shall, among other things, furnish information and evidence, including
testimony by Corning, its agents and employees, as BioClinical may
request with respect to the acts of Corning allegedly constituting
infringement.
15.4. CORNING'S RIGHT IF INFRINGEMENT UPHELD. If any such
legal proceedings are finally determined against Corning by a court of
competent jurisdiction from which no appeal is taken within the time
permitted for appeals, and if the adjudication is such that Corning
cannot make, use or sell Magnetocluster Binding Assay Products in
accordance with the BioClinical Confidential Information and/or
BioClinical Patent Rights licensed hereunder without infringing the
United States Letters Patent held infringed in such legal proceedings,
then Corning may elect either
(a) to terminate this Agreement forthwith by written
notice to BioClinical, in which event BioClinical shall reimburse
Corning for damages assessed against and paid by Corning in such legal
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proceedings to the extend of royalties theretofore paid under Section
11.1 of this Agreement; or
(b) to continue this Agreement, in which event (1)
BioClinical shall reimburse Corning for damages assessed against and
paid by Corning in such legal proceedings to the extent of royalties
theretofore paid under Section 11.1 of this Agreement; and (2)
thereafter, Corning shall continue to pay royalties to BioClinical
throughout the remainder of the Contract Period at fifty percent (50%)
of the rates set forth in Section 11.1 of this Agreement.
16. CONTINGENT REDUCTION OF ROYALTIES. If no United States patent
covering BioClinical Magnetocluster Binding Assay Technology issues on
or before December 31, 1986 or if such patent issues but is declared
invalid or unenforceable during the Contract Period, or if Corning is
not using such patent, or if a substantial amount of the BioClinical
Confidential Information licensed hereby to Corning shall become public
information without breach of this Agreement, and a third party is using
or selling Magnetocluster Binding Assay Products in the United States
that compete with Magnetocluster Binding Assay Products sold by Corning
resulting in gross revenues to such party in excess of (i) One Million
Dollars ($1,000,000) per year for all such Magnetocluster Binding Assay
Products, or (ii) Five Hundred Thousand Dollars ($500,000) with respect
to Magnetocluster Binding Assay Products for a single Binding
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Assay and as to which Products payments are being made by Corning to
BioClinical under Sections 10 and 11 hereof, then future payments to be
made under Sections 10 and 11 shall be reduced to one-half of the
amounts therein provided.
17. PRODUCT LIABILITY INDEMNIFICATIONS. Neither BioClinical nor
any of its subsidiaries or other affiliates assume any responsibility
for the manufacture or product specifications or end-use of any products
which are manufactured by or for or sold by Corning or by any
sublicensed Corning Affiliate under the BioClinical Magnetocluster
Binding Assay Technology, BioClinical Confidential Information and/or
BioClinical Patent Rights. All warranties in connection with such
products shall be made by Corning (or by the particular Corning
Affiliate involved) as manufacturer and/or seller and shall not directly
or impliedly obligate BioClinical or any of its subsidiaries or other
affiliates. Corning hereby indemnifies and hold harmless BioClinical,
its subsidiaries and other affiliates rom any claim by third parties
alleging that the manufacture, recommended use, deliver or operating
performance of any Magnetocluster Binding Assay Products have failed to
comply with any warranty or contract between Corning (or the Corning
Affiliates) and such third party.
18. ARBITRATION. In the event any dispute shall arise between
BioClinical and Corning with respect to any of the terms and conditions
of this Agreement, then such dispute shall be submitted and finally
settled by arbitration which
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shall be held in Boston, Massachusetts, pursuant to the prevailing Rules
of the American Arbitration Association. The arbitrators shall include
one nominee of BioClinical and nominee of Corning and a third person
jointly selected by said nominees. In the vent the respective nominees
of BioClinical and Corning are unable to jointly select such third
person, then BioClinical and Corning shall request the American
Arbitration Association at Philadelphia, Pennsylvania, to designate the
third arbitrator.
19. TERM AND TERMINATION. The following provisions shall relate
to the term and termination of this Agreement:
19.1. TERM. Unless sooner terminated in a manner herein
provided, this Agreement shall continue in force until either (a) the
last-to-expire of any patent included in BioClinical Patent Rights; or
(b) December 31, 1997 if no patents are included in BioClinical Patent
Rights.
19.2. TERMINATION. This Agreement may be terminated at
any time prior to the term set forth in Paragraph 19.1 hereof, as
follows:
19.2.1. BY CORNING. In the event either that
BioClinical fails to meet performance specifications for each of the
Binding Assays in Schedule B in accordance with the provisions of
Section 5.2 or Section 5.3 hereof, then Corning may terminate this
Agreement by giving BioClinical sixty
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(60) days' written notice setting forth the effective date of such
termination.
19.2.2. BY BREACH. In the event either party shall
materially breach any of the terms, conditions and agreements contained
herein to be kept, observed and performed b y it, then the other party
may terminate this Agreement, at its option and without prejudice to any
of its other legal and equitable fights and remedies, by giving the
party which committed the breach sixty (60) days' notice in writing,
particularly specifying the breach, unless the notified party within
such sixty (60) day period shall have cured the breach.
19.2.3. BY BANKRUPTCY. In the event (1) BioClinical
shall become insolvent or shall suspend business, or shall file a
voluntary petition or any answer admitting the jurisdiction of the Court
and the material allegations of, or shall consent to an involuntary
petition pursuant to or purporting to be pursuant to any reorganization
or insolvency law of any jurisdiction, or shall make an assignment for
the benefit of creditors, or shall apply for or consent to the
appointment of a receiver or trustee of a substantial part of its
property, and (2) no BioClinical Affiliate shall undertake to assume
BioClinical's obligation under the provisions of this
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Agreement within ninety (90) days from the date on which BioClinical
becomes so disabled, then to the extent permitted by law Corning may
thereafter immediately terminate this Agreement by giving written notice
of termination to BioClinical.
20. MISCELLANEOUS PROVISIONS. The following miscellaneous
provisions shall apply to this Agreement:
20.1. INDEPENDENT CONTRACTORS. No agency, partnership or
joint venture is hereby established. Neither BioClinical nor Corning
shall enter into, or incur, or hold itself out to third parties as
having authority to enter into or incur on behalf of the other party any
contractual obligations, expenses or liabilities whatsoever.
20.2. NOTICES. All notices and communications provided
for hereunder shall be in writing and shall be mailed or delivered to the
business address of the respective parties aforementioned, or to such
other address as either party shall designate in writing to the other.
20.3. BENEFITS. All terms and provisions of this
Agreement shall bind and inure to the benefit of the parties hereto and
to their respective successors and assignees.
20.4. GOVERNING LAW. This Agreement shall be executed
within, governed by and interpreted in accordance with the laws of the
State of New York.
20.5. COUNTERPARTS. This Agreement shall be
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executed simultaneously in multiple counterparts, each of which shall be deemed
to be an original but all of which together shall constitute one and the same
agreement.
20.6. ENTIRE UNDERSTANDING. This Agreement constitutes
the entire understanding between the parties hereto with respect to the
subject matter hereof. No modifications, extensions, or waiver of any
provisions hereof or any release of any right hereunder shall be valid,
unless the same is in writing, contains reference to this Agreement and
sets forth the plan or intention to modify same, and is consented to by
all parties hereto.
20.7. HEADINGS. The headings of this Agreement are
intended solely for convenience of reference and shall be given no
effect in the construction or interpretation of this Agreement.
IN WITNESS WHEREOF, BioClinical and Corning have caused their
respective corporate seals to be hereto affixed and duly witnessed and
these presents to be signed by their respective corporate officers
thereunto duly authorized.
BIOCLINICAL GROUP, INC.
By ------------------------------------
Signed at Norwood, Mass.
on the 21st day of January, 1983
ATTEST: [SEAL]
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CORNING GLASS WORKS
By ------------------------------------
Signed at Norwood, Mass.
on the 21st day of January, 1983
ATTEST: [SEAL]
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Assistant Secretary
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