<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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 September 29, 1996 Commission File Number: 0-12798
CHIRON CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-2754624
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4560 Horton Street, Emeryville, California 94608
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(510) 655-8730
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(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 Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
-------- --------
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 November 1, 1996
----- -------------------------------
Common Stock, $0.01 par value 170,513,610 shares
<PAGE>
CHIRON CORPORATION
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of
September 30, 1996 and December 31, 1995 ................... 3
Consolidated Statements of Operations for the
three months and nine months ended September 30,
1996 and 1995 .............................................. 4
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1996 and 1995 .............. 5
Notes to Consolidated Financial Statements ................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ........... 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ..................................... 27
ITEM 2. CHANGES IN SECURITIES .................................. 27
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ........................ 27
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .... 27
ITEM 5. OTHER INFORMATION ..................................... 27
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ....................... 27
SIGNATURES ........................................................... 39
2
<PAGE>
CHIRON CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 53,967 $ 74,318
Short-term investments in marketable debt securities 45,080 61,066
----------- ---------
Total cash and short-term investments 99,047 135,384
Accounts receivable 340,358 285,779
Inventories 186,786 165,941
Other current assets 54,495 49,899
----------- ---------
Total current assets 680,686 637,003
Noncurrent investments in marketable debt securities 30,752 88,833
Property, plant, equipment and leasehold improvements, at cost:
Land and buildings 212,488 208,233
Laboratory, production and office equipment 365,864 292,828
Leasehold improvements 113,693 95,472
Construction in progress 52,313 62,046
----------- ---------
744,358 658,579
Less: accumulated depreciation and amortization (193,612) (140,761)
----------- ---------
Net property, plant, equipment and leasehold improvements 550,746 517,818
Purchased technology, net 75,175 80,600
Other intangible assets, net 80,036 71,571
Investments in equity securities and affiliated companies 189,452 54,359
Other assets 61,409 40,014
----------- ---------
$ 1,668,256 $ 1,490,198
----------- ---------
----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $76,821 $81,081
Accrued compensation and related expenses 51,698 56,994
Short-term borrowings 137,178 50,036
Current portion of unearned revenue 21,525 20,838
Taxes payable 34,281 27,551
Other current liabilities 141,794 132,095
----------- ---------
Total current liabilities 463,297 368,595
Long-term debt 420,044 413,248
Other noncurrent liabilities 37,478 35,943
Commitments and contingencies
Stockholders' equity:
Common stock 1,700 417
Additional paid-in capital 1,763,227 1,727,711
Accumulated deficit (1,047,823) (1,087,699)
Cumulative foreign currency translation adjustment (2,093) 721
Unrealized gain from investments 32,426 31,262
----------- ---------
Total stockholders' equity 747,437 672,412
----------- ---------
$1,668,256 $1,490,198
----------- ---------
----------- ---------
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THIS STATEMENT.
3
<PAGE>
CHIRON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- ----------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
Product sales, net $ 240,530 $ 230,311 $ 729,877 $ 662,553
Equity in earnings of unconsolidated joint
businesses 30,073 16,898 75,689 56,436
Collaborative agreement revenues 31,231 18,346 85,792 28,868
Other revenues 19,715 9,133 51,677 26,828
---------- ---------- ---------- ----------
Total revenues 321,549 274,688 943,035 774,685
Expenses:
Cost of sales 107,861 102,513 316,973 301,343
Research and development 89,921 88,689 265,758 259,649
Selling, general and administrative 96,782 85,280 287,841 258,539
Write-off of purchased in-process technologies -- 132,535 -- 364,951
Costs related to Ciba transaction -- -- -- 49,478
Restructuring and reorganization costs -- -- -- 39,055
Other operating expenses 3,193 3,536 8,793 9,323
---------- ---------- ---------- ----------
Total expenses 297,757 412,553 879,365 1,282,338
---------- ---------- ---------- ----------
Income (loss) from operations 23,792 (137,865) 63,670 (507,653)
Other expense, net (6,820) (2,781) (5,878) (6,281)
---------- ---------- ---------- ----------
Income (loss) before income taxes 16,972 (140,646) 57,792 (513,934)
Provision for income taxes 5,194 4,461 17,916 16,122
---------- ---------- ---------- ----------
Net income (loss) $ 11,778 $ (145,107) $ 39,876 $ (530,056)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income (loss) per share $ 0.07 $ (0.90) $ 0.22 $ (3.30)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of shares
used in computing per share amounts 175,848 161,716 177,292 160,840
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE
AN INTEGRAL PART OF THIS STATEMENT.
4
<PAGE>
CHIRON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------
September 30, September 30,
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 39,876 $(530,056)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 82,036 67,761
Gain on sale of interest in affiliated company (12,226) --
Write-off of purchased in-process technologies -- 364,951
Other 7,347 23,768
Changes to:
Accounts receivable (57,072) 42,300
Inventories (44,073) (36,720)
Other current assets (10,588) (3,401)
Accounts payable (14,904) (7,151)
Accrued compensation and related expenses (5,257) (1,021)
Taxes payable 6,746 10,961
Other current liabilities 13,073 32,079
Other noncurrent liabilities 5,087 (20,428)
---------- --------
Net cash provided by (used in) operating activities 10,045 (56,957)
Cash flows from investing activities:
Purchase of investments in marketable debt securities (55,008) (122,177)
Sale and maturity of investments in marketable debt securities 128,648 278,919
Capital expenditures (69,514) (70,559)
Businesses acquired, net of cash acquired (374) (112,633)
Proceeds from sale of interest in affiliated company 14,000 --
Investments in equity securities and affiliates (133,700) (1,103)
Increase in other assets (32,702) (547)
---------- --------
Net cash used in investing activities (148,650) (28,100)
Cash flows from financing activities:
Net borrowings (payments) under line of credit arrangements (23,899) 16,769
Proceeds from issuance of short-term debt 111,040 --
Repayment of notes payable and capital leases (5,725) (3,017)
Proceeds from capital contribution from Ciba -- 24,845
Proceeds from issuance of common stock 36,838 30,630
---------- --------
Net cash provided by financing activities 118,254 69,227
---------- --------
Net decrease in cash and cash equivalents (20,351) (15,830)
Cash and cash equivalents at beginning of the period 74,318 84,876
---------- --------
Cash and cash equivalents at end of the period $ 53,967 $ 69,046
---------- --------
---------- --------
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE
AN INTEGRAL PART OF THIS STATEMENT.
5
<PAGE>
CHIRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Chiron Corporation (the "Company" or "Chiron") is a science-driven
healthcare company that 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 four global human
healthcare markets: diagnostics, therapeutics, pediatric and adult
vaccines and ophthalmic surgical products. Chiron also develops or
acquires new technologies, employing these technologies to discover and
develop new products for the Company or for its partners.
Chiron's diagnostic business includes automated immunodiagnostic systems,
quantitative probe tests and critical blood analyte systems which are
used by hospitals to diagnose and monitor patients in critical care
settings. Chiron also provides blood screening tests, used to detect the
presence of the human immunodeficiency virus ("HIV"), hepatitis virus and
retroviruses, through its joint business with Ortho Diagnostic Systems,
Inc. ("Ortho"), a Johnson & Johnson company. Chiron's therapeutics
business emphasizes oncology and infectious diseases and provides
products to hospitals and large clinics in the United States and Europe.
Chiron's vaccine business is based primarily on the sale of pediatric and
flu vaccines in Italy and other non-U.S., non-European geographic regions
and to certain international health services, and through the Chiron
Behring joint venture the sale of vaccines in Germany. Chiron is also
involved in the development and marketing of new pediatric and adult
vaccines. Through its ophthalmic business, Chiron provides products for
the surgical correction of vision, as well as intraocular implants that
deliver drugs to the eye. Chiron's ophthalmic business markets its
products in the United States, Europe, and other geographic regions.
BASIS OF PRESENTATION
The information at September 30, 1996, and for the periods ended
September 30, 1996 and 1995, is unaudited, but includes all normal
recurring adjustments which Chiron's management believes to be necessary
for fair presentation of the periods presented. The consolidated balance
sheet amounts at December 31, 1995, have been derived from audited
financial statements. Certain previously reported amounts have been
reclassified to conform with the current period presentation. Interim
results are not necessarily indicative of results for a full year. This
information should be read in conjunction with Chiron's audited
consolidated financial statements for the year ended December 31, 1995.
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Investments in joint ventures, partnerships and interests in which Chiron
has an equity interest of 50 percent or less are accounted for using the
equity or cost method, or in accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," as appropriate. Certain foreign subsidiaries and
investments in affiliated companies are accounted for on a one-month lag.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ materially from
those estimates.
6
<PAGE>
FISCAL YEAR
The fiscal year of the Company is a 52 or 53-week year ending on the
Sunday nearest the last day in December of each year. As a result, the
third quarters of 1996 and 1995 represent the thirteen-week periods ended
September 29, 1996, and October 1, 1995, respectively. 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 market value. Inventories consist of the
following:
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(IN THOUSANDS)
Finished goods $ 108,502 $ 96,327
Work in progress 33,989 28,794
Raw materials 44,295 40,820
------------- ------------
$ 186,786 $ 165,941
------------- ------------
------------- ------------
INCOME TAXES
Income tax expense for the quarter ended September 30, 1996 is based on
an estimated annual effective income tax rate. Income tax expense for
the quarter ended September 30, 1995 includes a provision for state and
foreign taxes based on estimated annual 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
and dilutive common equivalent shares outstanding. Common equivalent
shares result from the assumed exercise of outstanding options and
warrants that have a dilutive effect when applying the treasury stock
method. Shares assumed to be issued upon conversion of the Company's
convertible debentures are not included for any of the periods presented
since their inclusion would be anti-dilutive. Fully diluted per share
data has not been presented, as the amounts would not differ materially
from primary per share data.
At the annual meeting of stockholders in May 1996, stockholders
approved an amendment to the Company's restated certificate of
incorporation, increasing the number of authorized common shares from 100
million to 500 million. Subsequently, Chiron's Board of Directors
declared a 4-for-1 stock split effected in the form of a dividend on the
Company's common stock that was distributed on August 2, 1996, to
stockholders of record on July 19, 1996. As a result, the Company
increased its common stock balance by $1.3 million for the par value of
the common stock issued to effect the stock split, and correspondingly
reduced additional paid-in capital. All warrants, stock options and
convertible bond conversion rates were adjusted for the effect of the
split. All references in these financial statements to per share amounts
have been retroactively restated to reflect the increased number of
common shares outstanding.
7
<PAGE>
2. BUSINESS COMBINATIONS
FIRST QUARTER 1995 ACQUISITIONS
Effective January 1, 1995, under a series of agreements between Chiron
and Ciba-Geigy Ltd. and its affiliates ("Ciba"), Chiron acquired all of
the outstanding common stock of Chiron Diagnostics Corporation ("Chiron
Diagnostics"), formerly Ciba Corning Diagnostics Corp., and Ciba's
interests in Chiron Vaccines Company, formerly Chiron Biocine Company,
and Biocine S.p.A. On March 31, 1995, Chiron Vision acquired the
ophthalmic surgical division of IOLAB from Johnson & Johnson. These
acquisitions were accounted for under the purchase method of accounting.
As a result of the acquisitions and as required by generally accepted
accounting principles, during the first quarter of 1995, Chiron
recognized as an expense the amount allocated to purchased in-process
technology resulting in a charge against earnings of $230.7 million.
Costs related to the Ciba transaction totaling $49.5 million were also
included in the first quarter of 1995, primarily representing employee
payments and related taxes, and legal and investment advisor fees.
ACQUISITION OF VIAGENE, INC. ("VIAGENE")
On September 29, 1995, Chiron acquired all of the outstanding common
stock of Viagene, not previously owned by the Company, in exchange for
approximately $35.5 million in cash and 3.7 million shares of Chiron
common stock. Additionally, on September 29, 1995, unexercised options
to purchase Viagene common stock were converted into options to purchase
approximately 528,000 shares of Chiron common stock. These shares and
options have been adjusted for the stock split effected in August 1996.
Prior to the acquisition, Chiron had an ongoing collaboration with
Viagene in the area of gene therapy and, pursuant to the collaboration
arrangement, held an investment in the outstanding voting stock of
Viagene with a carrying value, net of unrealized gains and a realized
loss, of approximately $14.1 million as of September 29, 1995. The
Viagene acquisition has been accounted for under the purchase method of
accounting, and accordingly, Viagene's financial results are included in
Chiron's consolidated operating results from September 29, 1995 forward.
The following unaudited pro forma information presents the results of
operations of Chiron and Viagene for the three-month and nine-month
periods ended September 30, 1995, with pro forma adjustments as if the
acquisition had been consummated on January 1, 1995. This pro forma
information does not purport to be indicative of what would have occurred
had the acquisition been made as of those dates or of results which may
occur in the future. The pro forma information does not include the
write-off of purchased in-process technology of $130.3 million related to
the acquisition recognized as an expense in the third quarter of 1995.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1995
------------------ ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Total revenues $ 276,930 $ 781,643
Loss before non-recurring
charges (20,263) (145,070)
Loss before non-recurring
charges per share (0.12) (0.88)
AGREEMENT WITH BEHRINGWERKE AG
Effective July 1, 1996, Chiron purchased a 49 percent interest in the
human vaccine business of Behringwerke AG, a subsidiary of Hoechst AG, a
German company. The total acquisition price, which was payable in cash
and subject to adjustment pending the completion of an audited opening
balance sheet, was $119.0 million and includes costs directly related to
the acquisition. This amount has been reflected as a component of
investments in equity securities and affiliated companies in the
accompanying September 30, 1996 consolidated balance sheet. Of the total
acquisition price, $96.4 million was allocated to various intangible
assets such as goodwill, trademarks and patents, and is being amortized
on a straight-line basis
8
<PAGE>
over lives ranging from 5 to 20 years.
Under the terms of the agreement, Chiron has an option to purchase the
remaining 51 percent interest in March 1998, 1999, 2000 or 2001, and
Behringwerke AG has the option to have Chiron acquire the remaining 51
percent interest in March 2001. During the period of mutual ownership,
Chiron and Behringwerke AG will operate the vaccine business as a joint
venture, which has been named Chiron Behring.
During the quarter ended September 30, 1996, Chiron recognized $0.8
million as its share of the joint venture's results, which includes
amortization of the aforementioned intangible assets, as equity in
earnings of unconsolidated joint businesses. The results of the venture
are reported on a one-month lag.
3. RESTRUCTURING AND REORGANIZATION COSTS
During 1995, Chiron recorded $39.1 million in restructuring and
reorganization charges, including $16.9 million arising from the
acquisition and integration of IOLAB, representing the expected costs of
integrating the acquired business with Chiron's existing business as well
as write-downs of previously capitalized costs. Of the total charge of
$39.1 million, $8.0 million was due to a change in plans to expand the
Company's Emeryville research and development facilities, $7.7 million was
related to the idling of the Company's Puerto Rico manufacturing facility
and $1.0 million was related to a scale-back of manufacturing operations
at the Company's Amsterdam facility. The majority of these
facility-related charges, as well as $3.7 million of other
facility-related charges, were paid in 1995. Of the $16.9 million
recorded as a result of the acquisition of IOLAB, approximately $6.7
million related to write-downs of previously capitalized facility and
inventory costs. The remaining $10.2 million consists of $5.5 million of
employee termination costs and $4.7 million of lease termination and
other costs. The integration process is expected to be substantially
complete by the end of 1997.
The current status of the accrued restructuring charges is summarized
below:
<TABLE>
<CAPTION>
AMOUNT
AMOUNT OF UTILIZED AMOUNT TO
TOTAL THROUGH BE UTILIZED
RESTRUCTURING SEPTEMBER 30 IN FUTURE
CHARGE 1996 PERIODS
------------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Chiron Vision restructuring charges:
Employee-related costs $ 5,506 $ (5,506) $ --
Facility and lease termination costs 6,242 (3,296) 2,946
Duplicate and excess inventory 3,476 (2,564) 912
Other 1,724 (1,041) 683
------------- ------------- -----------
16,948 (12,407) 4,541
Puerto Rico manufacturing facility 7,650 (3,670) 3,980
Postponement of Emeryville facility expansion 7,990 (7,990) --
Amsterdam manufacturing facility 1,000 (1,000) --
Other facility-related 3,718 (3,718) --
Other 1,750 (1,450) 300
------------- ------------- -----------
$ 39,056 $ (30,235) $ 8,821
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
9
<PAGE>
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 collaborations'
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.
JAPAN TOBACCO INC. ("JT")
In March 1996, the Company and JT entered into a technology transfer and
development agreement whereby the pharmaceutical division of JT acquired
a non-exclusive, perpetual license to apply certain of Chiron's
combinatorial chemistry technologies in JT's research and product
development programs. Both Chiron and JT will share in certain
improvements to the technology made by either party, subject to certain
conditions. The agreement provides an initial technology transfer term of
two years and may be extended at the option of JT for an additional two
years. Through September 30, 1996, Chiron received collaborative research
agreement revenues from JT of $7.6 million, substantially all of which
was recognized in the first quarter of 1996.
CIBA AND FOCAL INC. ("FOCAL")
In April 1996, Chiron, Ciba and Focal entered into an agreement in the
area of restenosis, the reclosure of arteries following angioplasty.
Chiron and Ciba will each individually utilize its own cardiovascular
drugs together with Focal's drug delivery technology to develop products
designed to prevent restenosis. Under the terms of the agreement, Chiron
and Ciba will receive exclusive worldwide rights to Focal's technology in
selected restenosis fields for their respective drug compounds entered
into the research program. Chiron and Ciba will be individually
responsible for developing and marketing the resulting products, and
Focal will retain manufacturing rights for the final products. Chiron
and Ciba will jointly provide funding for certain preclinical studies,
after which each company will fund development for its own products. Each
company will also be individually responsible to make milestone payments
to Focal for its products developed, totaling $10.0 million per product.
Through September 30, 1996, Chiron paid Focal $0.3 million for its share
of costs which was recorded as research and development expense.
RIBOZYME PHARMACEUTICALS INC. ("RPI")
In May 1996, Chiron and RPI entered into a collaboration to use RPI's
ribozyme technology to determine the function of a number of genetic
sequences. Chiron will select a certain number of gene sequences and RPI
will synthesize ribozymes that will selectively inhibit the action of the
target sequences in Chiron's assays. Chiron will have the option to
develop, and, in certain circumstances, manufacture ribozymes or other
products found to be important in disease pathology. Under the terms of
the agreement, Chiron will pay RPI for the ribozymes used in the research
and make milestone payments depending upon the number of products
successfully developed. Chiron also agreed to pay RPI royalties from the
sale of commercialized products. The royalty payments will be reduced by
up to 50 percent of the milestone payments made as it relates to specific
products. Through September 30, 1996, no costs have been incurred.
10
<PAGE>
Under the terms of a separate agreement dated February 29, 1996, RPI
committed to provide funding for certain research projects. During the
quarter ended September 30, 1996, Chiron recognized $1.8 million of
collaborative agreement revenues pursuant to this agreement.
GENERAL INJECTABLES & VACCINES, INC. ("GIV")
In September 1996, Chiron reached an agreement with Biological and
Popular Culture, Inc. ("BPC"), a newly organized holding company for GIV
and affiliated companies, pursuant to which GIV and its affiliates agreed
to perform certain distribution and promotional services for Chiron's
vaccine products in the U.S. The initial term of the service agreement
is five years, with potential one year extensions thereafter.
In connection with the agreement, Chiron invested $30.0 million in BPC,
of which $13.8 million consisted of BPC voting preferred stock which is
convertible at Chiron's option into 30 percent of the outstanding common
stock of BPC. Alternatively, Chiron, at its option, may require BPC to re-
deem the preferred stock at par plus accrued dividends at a future date. Of
the preferred stock investment, a significant amount represents excess
purchase price and will be amortized over the term of the five-year
initial service agreement. The remainder of the $30.0 million investment
consisted primarily of two interest-bearing loans to BPC and its
subsidiaries with various maturities. Chiron agreed to make additional
capital contributions in the event BPC exceeds certain earnings
requirements and which BPC agreed to use to repay one of the loans.
Chiron will report its share of BPC's results, including amortization
of the aforementioned excess purchase price, as equity in earnings of
unconsolidated joint businesses.
BEN VENUE LABORATORIES, INC. ("BEN VENUE")
Effective May 1, 1996, Chiron sold its 50 percent interest in a generic
oncology business to Ben Venue, Chiron's joint venture partner, for $14.0
million in cash, resulting in a $12.2 million gain which has been
included in other expense, net in the accompanying consolidated
statements of operations.
5. FINANCIAL INSTRUMENTS
FOREIGN CURRENCY CONTRACTS
To reduce its exposure to foreign currency risk, the Company enters into
forward currency contracts ("forwards") and, starting in 1996, purchases
average rate put options ("options"). Forward currency contracts are
used to hedge material foreign currency denominated receivables and
payables, while the options are used to hedge anticipated transactions.
The Company does not use these financial instruments for trading or
speculative purposes.
The Company has purchased, and may in the future purchase options to
reduce the exchange rate impact of a strengthening U.S. dollar on the
underlying hedged amounts. The Company's exposure is limited to the
amount paid for the options. The cost of the options, which is recorded
in other current assets, is deferred and amortized over the relevant term
of the period hedged. Any corresponding gains are reported in income at
the conclusion of the period hedged.
At September 30, 1996, the notional amount of the forwards and options
totaled $69.9 million and $19.1 million, respectively. The options were
denominated in the following currencies: Japanese yen, French francs,
Australian dollars, Canadian dollars, Belgian francs and Spanish pesetas.
All option contracts expire through December 1996. The fair value of the
options at September 30, 1996, based upon dealer quotes, totaled
approximately $0.3 million.
11
<PAGE>
CROSS CURRENCY INTEREST RATE SWAPS
The Company selectively enters into cross currency interest rate swaps
("swaps") through major financial institutions to modify the interest
and/or currency characteristics of specific outstanding debt obligations.
Each swap agreement corresponds to all or a portion of the principal
balance and term of a specific debt obligation. These swap agreements
involve the exchange of interest payments denominated in different
currencies, based upon the terms described in the swap agreements, with
an exchange of the underlying notional principal amounts upon maturity.
The net difference between the interest amounts paid and received is
recognized as an adjustment of interest expense. The related interest
amount payable or receivable from the major financial institutions is
included in other current liabilities or assets.
In May 1996, the Company entered into a swap agreement that matures in
June 1997 with a notional amount of $24.9 million. The Company
effectively converted debt denominated in U.S. dollars to Japanese yen.
The agreement provides for the Company to make quarterly interest
payments starting June 30, 1996, based on a variable rate tied to
three-month Japanese LIBOR (0.56% at September 30, 1996) while receiving
interest based on a variable rate tied to three-month U.S. dollar LIBOR
(5.6% at September 30, 1996).
In July 1996, the Company also entered into swap agreements that mature
in July 2001 with an aggregate notional amount of $112.6 million. The
Company effectively converted debt denominated in U.S. dollars to German
marks. The agreements provide for the Company to make quarterly interest
payments based upon a fixed German mark rate of 6.2% while receiving
interest based on a variable rate tied to three-month U.S. dollar LIBOR.
6. LINE OF CREDIT ARRANGEMENTS
During 1996, the Company expanded its short-term borrowing capacity by
entering into two separate one-year revolving, unsecured credit
agreements with major financial institutions for borrowing capabilities
up to $50.0 million and $100.0 million, respectively. These facilities
bring the total committed, unsecured short-term revolving credit
facilities available to the Company in the U.S. to $200.0 million. The
credit facilities in the U.S. are guaranteed by Ciba and provide for
various borrowing rate options, as defined in the agreements. As of
September 30, 1996, $100.0 million was outstanding under these facilities
with interest rates tied to U.S. dollar LIBOR (5.7% at September 30,
1996).
7. OPERATING LEASE
In June 1996, the Company entered into a seven-year operating lease
agreement with a group of financial institutions to rent a research and
development facility to be constructed in Emeryville, California. Under
the terms of the lease agreement, the financial institutions have
committed $195.0 million toward the total construction cost of the
project. No lease payments are required during the construction period
which is expected to last less than three years. Thereafter, rent
amounts will be due quarterly, based upon the total construction costs
incurred.
Under the lease arrangement, which has been guaranteed by Ciba through
December 31, 1999, the Company has the option to purchase the constructed
properties. Alternatively, Chiron can cause the property to be sold to a
third party. The Company is also contingently liable under residual
value guarantees in the event of market value declines.
8. CONTINGENCIES
ABBOTT LABORATORIES. On December 13, 1993, Chiron filed a patent
infringement action against Abbott Laboratories ("Abbott") in the United
States District Court for the Northern District of California, alleging
infringement of Chiron's U.S. Patent No. 5,156,949 ("the '949 patent").
The patent claims the use of recombinant envelope antigens in immunoassays
for HIV antibodies. On April 1, 1996, Chiron and Ortho,
12
<PAGE>
Chiron's exclusive licensee under the '949 patent, entered into a
settlement agreement with Abbott under which Abbott will be granted a
royalty-bearing, non-exclusive license under the '949 patent and
foreign counterparts thereof. The litigation was dismissed on August
31, 1996, and in the third quarter of 1996 Chiron received $6.9 million
of royalties related to prior period sales of HIV immunodiagnostics
tests. This amount has been reflected in equity in earnings of
unconsolidated joint businesses in the accompanying consolidated
statements of operations. Under the terms of the settlement agreement,
the Chiron-Ortho joint business will also receive an ongoing royalty
from Abbott based on the sale of products incorporating the patents.
On September 12, 1995, the United States Patent & Trademark Office
("PTO") declared an interference between the '949 patent and an
application owned by the U.S. Government and Centocor, Inc. ("Centocor").
Chiron is the junior party. In the above described litigation with
Abbott, the District Court granted Chiron's request for summary judgment
that the U.S. Government/Centocor application in the subject
interference, which is senior to Chiron's, neither enabled the claimed
invention nor disclosed the best mode of practicing the invention. If
the PTO makes a similar ruling on either enablement or best mode, Chiron
could then become the senior party. It is not known when or on what
basis the PTO will resolve the subject interference.
On April 26, 1994, Abbott filed suit against Chiron in the United States
District Court for the Northern District of Illinois alleging that the
Company's bDNA probe assays infringed three patents licensed or acquired
by Abbott from third parties. On April 1, 1996, Chiron and Abbott
entered into a settlement agreement under which Chiron will be granted a
royalty-bearing, non-exclusive license under the three patents in suit
and the foreign counterparts thereof. The litigation was dismissed on
August 20, 1996.
BIOANALYSIS/GEN-PROBE. On March 22, 1996, Chiron Diagnostics filed suit
in the United States District Court for the Southern District of
California against Bioanalysis Limited, Gen-Probe Incorporated and the
University of Wales College of Medicine alleging, among other things,
patent infringement, intentional interference with contractual rights and
breach of contract. Chiron Diagnostics' claims arose under its 1984
license from Bioanalysis of chemiluminescent technology used by Chiron
Diagnostics in its ACS-TM- and Magic-Registered Trademark- Lite
diagnostic test kits. After Chiron Diagnostics filed suit, Bioanalysis
made certain demands and counterclaims. On July 1, 1996, the parties
entered into a settlement agreement. Under the terms of the
settlement, among other things, Chiron Diagnostics and Bioanalysis have
entered into an amended and restated license, Chiron Diagnostics and
Gen-Probe Incorporated agreed to certain cross-licenses, and each of
the actions brought among the parties has been dismissed.
DANIEL W. BRADLEY. On December 20, 1994, Dr. Daniel W. Bradley, formerly
with 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. Subsequently, Bradley dismissed the United
States as a defendant. Bradley, who collaborated with Chiron scientists
on the research that led to the discovery of HCV, alleged he has been
wrongly excluded as an inventor of HCV. He requested various forms of
relief, including declarations that he was an inventor of Chiron's
patents related to HCV and that these patents were unenforceable. Bradley
further sought monetary damages and a constructive trust on all past and
future profits, as well as penalties under federal and state Racketeering
and Corrupt Organization (RICO) statutes. On July 15, 1996, the Court
dismissed Bradley's second amended complaint with prejudice and without
further leave to amend. Bradley has appealed the District Court's
decision to the United States Court of Appeals for the Federal Circuit.
The Company intends to oppose that appeal.
EVANS. Biocine S.p.A. ("Biocine") filed an action against Evans Medical
Limited (a division of Medeva plc) ("Evans") in the Tribunal of Milan on
October 23, 1995, seeking a declaration of invalidity of Evans' Italian
counterpart to its European Patent No. 0 162 639 ("the '639 patent"),
allegedly relating to the p69 antigen of BORDATELLA PERTUSSIS. Biocine
later filed a claim against Evans with the Milan court seeking a
declaration of noninfringement with respect to Biocine's Acelluvax-TM-
and Acelluvax-TM- DTP vaccines. Evans has responded that Biocine's
vaccines infringe the '639 patent. Also, in February 1996, Chiron and
Chiron B.V. filed an action seeking a declaration of invalidity and non-
infringement with respect to Evans' Dutch equivalent to the '639 patent
13
<PAGE>
in the District Court of The Hague in The Netherlands. On April 4, 1996,
a similar action was filed by Chiron against Evans' U.K. equivalent to
the '639 patent in the High Court of Justice, Chancery Division, Patents
Court of the U.K. SmithKline Beecham Biologicals S.A. ("SKBB"), Evans'
exclusive licensee, and Medeva plc were also named as defendants. On
April 4, 1996, Evans filed suit against Chiron in the United States
District Court for the Eastern District of Texas. The complaint, which was
not served on Chiron until July 1996, alleges that Chiron infringes the
U.S. Patent Nos. 5,237,052 and 5,438,120 which are counterparts of the
'639 patent. Evans seeks a permanent injunction, plus damages. Chiron
believes that the Biocine vaccines do not infringe any valid claim of the
'639 patent or its U.S. counterparts. Biocine previously had opposed
issuance of the '639 patent before the European Patent Office
("EPO") and, along with other parties, has appealed the EPO opposition
decision which maintained the patent in amended form.
INTERNATIONAL MUREX TECHNOLOGIES CORPORATION. Chiron, Ortho, and certain
Ortho affiliates (the "Chiron/Ortho parties") have been involved in a
series of legal actions against subsidiaries of International Murex
Technologies Corporation ("IMTC") related to infringement of Chiron's HCV
patents in HCV immunodiagnostics. The first such action was filed on March
2, 1992 in the High Court for England and Wales. Subsequent infringement
suits were filed in Germany, The Netherlands, Italy, Belgium and Australia.
Chiron sought damages and injunctions against future infringement in these
actions. On June 11, 1996, Murex Diagnostics Australia, Pty. Limited
("MDAUS") filed an action against Chiron and Ortho in the Federal Court of
Australia, New South Wales District Registry, General Division, alleging
violation of the Australian 1974 Trade Practices Act and seeking an order
which would restrain Chiron and Ortho from engaging in allegedly anti-
competitive activities in connection with their HCV tests. On August 27,
1996, the Chiron/Ortho parties and IMTC entered into a settlement
agreement the specific terms of which are confidential. Under the terms of
the settlement agreement, all of the litigation referenced above, with
the exception of litigation with IMTC's subsidiary, Murex Diagnostics,
Ltd. ("MD") will be dismissed. On February 22, 1996, MD made it known that
it had changed its name to Specialist Diagnostics Ltd. ("SDL"), and filed
a petition for voluntary liquidation. The Chiron/Ortho parties and the
trustees for SDL entered into a settlement agreement in September 1996.
It is expected that the U.K. bankruptcy court will approve the settlement
and that the subject litigation will be dismissed.
On March 5, 1996, IMTC filed a complaint against Chiron, Johnson &
Johnson ("J&J"), Institut Pasteur and Abbott Laboratories with
the European Commission ("EC"), alleging violations of Articles 85
and 86 of the EC Treaty and Articles 53 and 54 of the European
Economic Area Agreement concerning licensing practices under
Chiron's U.K. Patent No. 2,212,511 ("the '511 patent") and
European Patent No. 0 318 216 ("the '216 patent"), a counterpart of
the '511 patent. The EC complaint charges that Chiron and J&J have
entered into license agreements with competitors which constitute
market sharing and price fixing in the HCV and other blood testing fields,
thus abusing an allegedly dominant position in the HCV market. IMTC claims
that Chiron's HCV patents constitute an "essential facility" which must be
"freely licensed on reasonable commercial terms." The EC complaint seeks,
among other things, interim measures in the form of a compulsory license
from Chiron to IMTC applicable in all European Union member states for the
manufacture of HCV antigen and nucleic acids for immunodiagnostic reasons.
The EC has posed certain questions to the parties and Chiron has responded.
On April 11, 1996, the Opposition Division of the EPO upheld the
'216 patent in amended form over the oppositions of MD/SDL, United
Biomedical, Inc., F. Hoffmann-LaRoche & Co. AG., Behringwerke AG and
the Research Foundation for Microbial Diseases of Osaka University.
The Opposition Division's decision is subject to appeal.
14
<PAGE>
NATIONAL TRANSPORTATION SAFETY BOARD ("NTSB"). On September 5, 1996, a
DC-10 aircraft operated by Federal Express Corporation, and the majority
of its cargo, was destroyed by fire. The NTSB, an agency of the federal
government, is investigating all of the circumstances surrounding the
incident. One area of the NTSB investigation concerns possible linkage
between the fire and certain Chiron laboratory equipment which was
shipped in a Federal Express container aboard the aircraft. Chiron
elected to become a party to that investigation and is providing
information and assistance to the NTSB. The NTSB has not yet reached any
conclusions concerning the cause of the fire.
LUIS RUIZ AND SERGIO LENCHIG. On October 1, 1996, Luis Ruiz and Sergio
Lenchig, owners of U.S. Patent No. 5,133,726 and certain other
proprietary rights related to corneal shaping, filed a lawsuit against
Chiron Vision in the United States District Court for the Eastern
District of Virginia. The lawsuit alleges that Chiron Vision breached
the license agreement among Ruiz, Lenchig, and Chiron for such
technology. Plaintiffs seek declaratory relief and damages according to
proof. The Company has not yet filed its response.
SICOR. As of April 10, 1996, Chiron entered into a settlement
agreement which resulted in dismissal of a 1991 lawsuit filed
in the United States District Court for the Northern District
of California against Cetus Oncology Corporation ("Cetus"),
Ben Venue Laboratories, Inc., Cetus Ben Venue Therapeutics ("CBVT")
and Erbamont, Inc. and its affiliates by Alco Chemicals, Ltd. ("Alco")
and Sicor, S.p.A. ("Sicor"). The Sicor complaint alleged breach of a CBVT
contract to purchase bulk doxorubicin from Sicor, as well as antitrust
violations and interference with contract and prospective advantage, and
sought unspecified damages. Cetus denied any entitlement to recovery in
this lawsuit and had filed counterclaims. In February 1995, Sicor and
Alco filed a further action in the United States District Court for the
Northern District of California and an arbitration against CBVT for
amounts allegedly owed by CBVT to Sicor and Alco for the supply of
doxorubicin, plus interest and attorneys' fees. Under the April 10,
1996 settlement agreement, each of the actions brought among the parties
was dismissed with prejudice.
SMITHKLINE BEECHAM BIOLOGICALS S.A. Chiron owns issued
European Patent No. 0 120 551 ("the '551 patent") which relates to
yeast expression vectors containing foreign gene sequences including,
for example, hepatitis B virus ("HBV") surface antigen, and expression
methods thereof. Chiron also owns European Patent No. 0 460 716 ("the
'716 patent") which contains related claims. Chiron believes that
SKBB's Engerix-B-Registered Trademark- vaccine against HBV infringes
the '551 patent and the '716 patent. In April 1996, SKBB filed suit
against Chiron in the Tribunal of First Instance of Brussels seeking a
declaration that the '551 and '716 patents are: (1) null and void in
Belgium; and (2) not infringed by SKBB in a variety of European
countries. SKBB also filed an application for preliminary relief
which, if granted, would suspend the effects of the '551 and '716
patents and would allow SKBB to continue production and
commercialization of Engerix-B-Registered Trademark- in all designated
countries until a decision on validity and infringement is rendered.
A substantive hearing on SKBB's preliminary relief application is expected
to be held in the first quarter of 1997.
STAAR SURGICAL COMPANY ("STAAR"). On May 7, 1996, Chiron Vision filed a
lawsuit in the Superior Court of the State of California for the County
of Los Angeles against Staar for specific performance, indemnity,
breach of contract, an accounting and declaratory relief. The
lawsuit asserts, among other things, that Staar failed to honor
certain indemnity obligations related to Staar's rights in certain
foldable lens technology licensed to Chiron Vision, failed to
extend to Chiron Vision most favored rates and/or terms in connection
with its license from Staar of certain foldable lens technology, which
includes US Patent No. 4,573,998, and failed to transfer to Chiron Vision
rights to certain technology as contractually obligated. Chiron Vision
seeks damages, declaratory and other relief. Staar has denied Chiron
Vision's allegations and filed a cross-complaint against Chiron Vision
alleging breach of contract and other claims and seeking declaratory
relief and damages according to proof.
15
<PAGE>
STOCKHOLDER LITIGATION. In November 1994, Chiron, its directors, and
certain of its officers were sued in three essentially identical lawsuits
filed as class actions on behalf of Chiron stockholders, alleging that
the directors had violated their fiduciary duty by failing to maximize
stockholder value in connection with the series of transactions effected
with Ciba-Geigy, Ltd. which were announced on November 20, 1994. Two of
the actions filed respectively on November 14, 1994 and November 22, 1994
(HANNA V. CHIRON CORP., ET AL., C.A. No. 13874, and DEZUBE V. CHIRON
CORPORATION ET AL., C.A. 13896) were filed in the Court of Chancery of
the State of Delaware in and for New Castle County. These complaints
sought injunctive relief, rescission and attorneys' fees. Plaintiff in
the HANNA action additionally sought damages in an unspecified amount.
Plaintiff in the DEZUBE action additionally sought an accounting. The
complaints were answered by all defendants, who denied the material
allegations of the complaints. The third action was filed in the Superior
Court of California, Alameda County, Northern Division, on December 1,
1994 (PERERA ET AL., V. CHIRON CORPORATION ET AL., C.A. No. 744522-2).
Plaintiffs there sought injunctive and declaratory relief, an
accounting, costs and disbursements, including attorneys' and experts'
fees, and other relief.
On October 17, 1995, the PERERA plaintiffs commenced a new action (the
"Federal Action") in the United States District Court for the Northern
District of California, against the same defendants and Ciba-Geigy, Ltd.,
Ciba-Geigy's Chairman Alex Krauer, Ciba-Geigy Corporation, and Ciba
Biotech Partnership, Inc. (collectively, the "Ciba Defendants"). The
Federal Action asserts both state and federal claims, including a claim
under Sections 10(b), 14(d) and 14(e) of the Securities Exchange Act of
1934, and seeks damages and injunctive relief. On October 23, 1995, in
light of the filing of the Federal Action, the PERERA action was
dismissed by stipulation of the parties.
Plaintiffs and all of the defendants other than the Ciba Defendants
entered into an agreement to settle the Federal Action on a class-wide
basis, subject to approval by the Court. Under the terms of that
settlement agreement, Chiron has paid attorneys fees and expenses to
plaintiffs' counsel and agreed to redeem or otherwise render ineffective
the stockholder rights plan created under that certain Rights Agreement
dated as of August 25, 1994, as amended. Chiron has no other obligations
under the settlement agreement. The HANNA and DEZUBE actions are to be
dismissed as moot following approval of the settlement and dismissal of
the Federal Action. The settlement received final approval of the court
on May 21, 1996.
SUMMIT TECHNOLOGY, INC. On June 11, 1996, the German Federal Patent
Court dismissed an action filed by Chiron Technolas, a subsidiary of
Chiron Vision, which sought to invalidate the German counterpart of a
European patent held by an affiliate of Summit Technology, Inc., a
manufacturer of ophthalmic lasers. The Company has decided not to
appeal this decision. Summit's German patent is also the subject of a
separate infringement action filed on September 24, 1994 by Summit
against Chiron Technolas and another subsidiary of Chiron Vision, Chiron
Adatomed, in the German Regional Court. The Regional Court granted
judgment for Summit in August 1995, including an injunction, and awarded
damages in an amount to be determined. The Company's appeal of the
judgment is pending.
UNITED BIOMEDICAL, INC. On May 14, 1992, the Chiron/Ortho parties brought
an infringement action against United Biomedical, Inc. ("UBI") and certain
companies of the Akzo Nobel Group ("Organon") for infringement of the '511
patent directed to HCV immunodiagnostics. On May 4, 1994, Chiron
instituted summary legal proceedings against UBI and Organon in the
District Court of The Hague, The Netherlands, alleging infringement of the
'216 patent as a result of the defendants' manufacture and sale of HCV
immunoassay kits. UBI supplied and Organon marketed HCV immunoassay test
kits throughout Europe. Both the U.K. and Dutch courts granted Chiron
injunctions against future infringement by UBI and Organon, and the U.K.
court ordered Organon and UBI to pay damages. The Chiron/Ortho parties
and Organon settled all HCV litigation pending between them on October 9,
1995, and the Chiron/Ortho parties were compensated for past infringement.
The Chiron/Ortho parties and UBI entered into a settlement agreement
effective May 1, 1996 the terms of which are confidential and under
which the U.K. and Dutch litigation has been dismissed.
16
<PAGE>
OTHER MATTERS. The Company is party to other matters of litigation,
certain of which are described in Item 3, Legal Proceedings, on page 10
of the Company's report on Form 10-K for the period ended December 31,
1995, and as to which there have been no material changes since such
Form 10-K was filed.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The discussion below contains forward-looking statements that involve
risks and uncertainties relating to the future financial performance of Chiron
Corporation (the "Company" or "Chiron"), and actual events or results may
differ materially. In evaluating such statements, stockholders and investors
should specifically consider the various factors identified below and under
the caption "Factors That May Affect Future Operating Results" which could
cause actual results to differ materially from those indicated by such
forward-looking statements.
Chiron is a science-driven healthcare company that 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 four human
healthcare markets: diagnostics, including blood screening tests, automated
immunodiagnostic systems, critical blood analyte systems and new quantitative
probe tests; therapeutics, with an emphasis on oncology, serious infectious
diseases and critical care diseases; adult and pediatric vaccines; and
ophthalmic surgical products, including instruments and devices used for the
surgical correction of vision and intraocular implants to deliver drugs to
the eye. Chiron also develops or acquires new technologies, employing these
technologies to discover and develop new products for the Company or for its
partners.
RESULTS OF OPERATIONS
REVENUES
The Company's revenues are derived from a variety of sources, including
product sales, joint business arrangements, collaborative agreements and
product royalty agreements. Product sales, Chiron's largest revenue category,
consists of the following product lines for the three-month and nine-month
periods ended September 30:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- --------------------
1996 1995 1996 1995
--------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Diagnostic products $134,816 $131,194 $412,300 $396,461
Ophthalmic products 49,911 45,884 154,365 122,640
Vaccine products 21,374 18,217 61,680 53,652
Betaseron-Registered Trademark- sales 16,807 18,490 49,948 42,706
Oncology products 16,595 15,826 48,415 43,761
Other products 1,027 700 3,169 3,333
--------- -------- -------- --------
$240,530 $230,311 $729,877 $662,553
--------- -------- -------- --------
--------- -------- -------- --------
</TABLE>
As Chiron continues to expand its presence in international markets,
particularly European markets, seasonal fluctuations in product sales and the
related gross profit amounts have become more significant. For this reason,
revenues and gross profit amounts from certain product lines are generally
higher in the first half and fourth quarter of the year. As a result,
Chiron's results in any one quarter are not necessarily indicative of results
to be expected for a full year.
Diagnostic product sales include direct sales and sales-type leases of
fully-automated, random-access immunodiagnostic
(ACS:180-Registered Trademark-, automated chemiluminescence system) testing
systems and reagents for these systems, as well as sales of critical blood
analyte systems, clinical chemistry products and manual immunodiagnostic
systems. Sales of diagnostic products increased in both the third quarter
and first nine months of 1996 over the comparable periods in 1995, primarily
due to increased sales of branched DNA probe tests for human immunodeficiency
virus ("HIV") and immunodiagnostic products. The growth in immunodiagnostic
product sales
18
<PAGE>
resulted from continued penetration of the instruments market and increased
sales volume of reagents resulting from increased system placements and an
expanded menu of tests on the ACS:180-Registered Trademark- system, partially
offset by reduced sales of manual immunodiagnostics.
Sales of ophthalmic products increased for both the third quarter of
1996 and on a year-to-date basis as compared to 1995. The sales growth in
the third quarter of 1996 was primarily due to sales of the Company's new
Vitrasert-TM- Implant (Cytovene-Registered Trademark-; Roche Laboratories)
product, the first drug delivery system to provide local, sustained therapy
for the eye. Chiron received approval from the U.S. Food and Drug
Administration ("FDA") during the first quarter of 1996 to market the
product. As a result, the Company recorded $3.3 million and $9.1 million of
Vitrasert-TM- Implant sales during the third quarter and first nine months of
1996, respectively. The sales growth during the nine months ended September
30, 1996 was also due to increased sales of viscoelastic products and sales
of foldable intraocular lenses as a result of the March 1995 acquisition of
the surgical product division of IOLAB from Johnson & Johnson and the
continuing evolution in the marketplace favoring foldable lens
technology-based products.
Vaccine product sales consist of sales of pediatric and adult vaccines
primarily in Italy and to international public health organizations by
Chiron's Biocine S.p.A. subsidiary ("Chiron Biocine"). Chiron Biocine's
vaccine products include Acelluvax-Registered Trademark-, a recombinant
acellular pertussis vaccine; Agrippal-Registered Trademark-, a flu vaccine;
and Polioral-TM-, an oral polio vaccine. Vaccine product sales increased for
both the third quarter of 1996 and on a year-to-date basis as compared to
1995 due to Chiron Biocine's expansion into new export markets for its polio
vaccine and its combined measles-mumps-rubella vaccine. In addition, in
September 1996 Chiron Biocine submitted a product license application to the
FDA, seeking approval to market its recombinant acellular pertussis vaccine,
combined with diphtheria and tetanus ("DTaP"), for infants and children in
the U.S., under the tradename Pertugen-TM-.
Under the terms of a development and supply agreement with Schering AG,
Germany ("Schering"), and its U.S. affiliate, Berlex Laboratories, Inc.
("Berlex"), Chiron manufactures Betaseron-Registered Trademark- (interferon
beta-1b) for Berlex. Under the terms of the agreement, Chiron earns an
initial partial payment for Betaseron-Registered Trademark- upon shipment to
Berlex and a subsequent secondary payment upon Berlex's final net sales of
the product to customers. Betaseron-Registered Trademark- product sales
during the third quarter of 1996 are comprised primarily of initial and
secondary revenues and revenues for Betaseron-Registered Trademark-
distributed by Schering for use in an early access program for European
patients prior to commercial approval in Europe. Betaseron-Registered
Trademark- product sales during the third quarter of 1995 relate primarily to
initial payments for shipments of Betaseron-Registered Trademark- product to
Berlex. On a year-to-date basis, Betaseron-Registered Trademark- product
revenues increased in 1996 compared to 1995 primarily due to secondary
revenues arising from net sales by Berlex, and European revenues arising from
product distributed by Schering for use in an early access program for
European patients. Chiron expects to continue shipments to Berlex during the
fourth quarter of 1996 and, accordingly, expects to earn initial and
secondary revenues from sales to Berlex. Chiron also expects to earn
revenues from shipments to Schering for sales into non-U.S. markets in the
fourth quarter of 1996.
Future levels of Chiron's Betaseron-Registered Trademark- shipments will
depend upon the rate at which new patients are enrolled from existing and
future markets, the extent to which patients, once enrolled, remain compliant
with the prescribed treatment regimen and continue to regularly receive
Betaseron-Registered Trademark-, and the impact of competing products,
including other beta interferon products that were approved for sale in the
U.S. during 1996. In addition, based upon the level of inventories carried
by Berlex, the timing of future shipments to Berlex and the related revenue
may vary by quarter.
Sales of oncology products, principally Proleukin-Registered
Trademark-(aldesleukin, interleukin-2), increased during the three-month and
nine-month periods ended September 30, 1996, over the same periods in 1995,
primarily due to increased unit sales. Average worldwide selling prices
remained roughly constant between the third quarters of 1996 and 1995 and for
the first nine months of 1996 compared to 1995.
The Company markets many of its commercial products internationally. As
a result, product revenues in almost all product lines are affected by
fluctuating foreign currency exchange rates. Foreign product sales were $132.6
million and $407.4 million for the three-month and nine-month periods ended
September 30, 1996, respectively, versus $125.6 million and $373.0 million for
the comparable periods in 1995, respectively. International
19
<PAGE>
sales of diagnostic, vaccine and ophthalmic products accounted for the
majority of the increase in foreign product sales between periods. For the
three-month and nine-month periods ended September 30, 1996, approximately 56
percent of Chiron's product sales were denominated in foreign currencies.
The net effect of changing foreign currency exchange rates did not
significantly impact product sales when compared with the quarterly and
year-to-date periods in 1995. Changing currency exchange rates have had, and
will continue to have, an impact on Chiron's results. The Company's other
revenues, discussed below, are largely denominated in U.S. dollars but are
impacted by the Company's joint partners' and collaborators' non-U.S.
operations.
Joint business revenues consist substantially of Chiron's one-half
interest in the pretax operating earnings of its joint diagnostic business
with Ortho Diagnostic Systems, Inc. ("Ortho"). The joint business receives a
royalty from Abbott Laboratories ("Abbott") for Abbott's sales of hepatitis C
virus ("HCV") tests which use the Chiron technology and which compete
directly with tests marketed by Ortho. Results from the joint business are
recorded by Chiron on a one-month lag based upon estimates supplied by Ortho
and are subject to a final annual accounting during the first quarter of the
subsequent year. For the third quarter of 1996, Chiron's share of the pretax
earnings increased to $29.9 million from $15.6 million for the comparable
quarter in 1995. In 1996, the joint business recorded increased sales from
the introduction of a new HIV antigen test as well as increased profits from
sales growth to Ortho's overseas affiliates. The increase in profits was
offset by increased sales and marketing costs associated with the
introduction of the new HIV antigen test and by sales of certain lower margin
products. Also included in Chiron's share of the operating results of the
joint business during the third quarter of 1996 are $6.9 million in royalties
resulting from a settlement with Abbott related to prior period sales of HIV
immunodiagnostic tests. Under the terms of the settlement agreement, the
joint business will receive an ongoing royalty from Abbott based on the sale
of products incorporating technology covered by certain Chiron HIV patents.
For the nine-month period ended September 30, 1996, Chiron's share of the
pretax earnings of the joint business with Ortho increased by $18.4 million as
compared to 1995, due to the increasing volume of HCV and HIV tests sold,
increased royalties from Abbott, adjustments arising from the final 1995
accounting, and the settlement agreement with Abbott. These increases more
than offset a reduction between periods in gross profit margins and an
increase in sales and marketing, and research and development expenses.
Joint business revenues for the third quarter of 1996 also include $0.8
million related to Chiron's 49 percent share of the operating results of a new
joint venture with Behringwerke AG. Chiron's interest in the joint venture
was purchased in July 1996. The results of the venture are reported on a one-
month lag.
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 related
research agreements, and proceeds from sales of biological materials to
research partners for clinical and preclinical testing. Collaborative
agreement revenues for the three-month and nine-month periods ended September
30, 1996 increased when compared to the comparable periods of 1995. The
increase between periods is primarily attributable to revenues of $21.0
million and $52.0 million recognized during the third quarter and first nine
months of 1996, respectively, as compared to revenues of $12.0 million
recognized during the third quarter and first nine months of 1995 from
Ciba-Geigy Limited of Basel, Switzerland ("Ciba") under the terms of a
research funding agreement. In 1995, Ciba agreed to provide $250 million
(which may be increased up to $300 million subject to certain conditions) in
support of research at Chiron. Chiron anticipates continued utilization of
the research funding provided by Ciba under the terms of the research funding
agreement.
Also contributing to the increase in collaborative agreement revenues are
amounts earned by Chiron's wholly
20
<PAGE>
owned subsidiary, Viagene, Inc. ("Chiron Viagene") which was acquired in
September 1995. During the three-month and nine-month periods ended
September 30, 1996, Chiron recognized revenues of $2.3 million and $6.9
million, respectively, from Chiron Viagene's collaborative agreement with
Green Cross Corporation of Japan for HIV gene therapy research and clinical
development. During the first nine months of 1996, Chiron also received
initial revenues of $7.5 million from Japan Tobacco Inc. ("JT") pursuant to
the terms of a technology transfer and development agreement whereby the
pharmaceutical division of JT acquired a non-exclusive, perpetual license to
apply certain of Chiron's combinatorial chemistry technologies in JT's
research and product development programs. In addition, during the third
quarter of 1996, Chiron received $1.8 million from Ribozyme Pharmaceuticals
Inc. for Chiron's expenditures on various gene therapy and delivery research
projects.
Other revenues consist principally of product royalties, laboratory
services, and sales fees earned by the Company for sales and marketing
services rendered on behalf of Ciba. Other revenues increased in the third
quarter and first nine months of 1996 primarily due to increased sales fees
received from Ciba for sales of Aredia-Registered Trademark- (pamidronate
disodium for injection), as well as increased nucleic acid probes reference
laboratory service revenues and royalties to Chiron from Schering's European
sales of Betaferon-TM-. Chiron currently promotes Aredia-Registered
Trademark- for Ciba on an exclusive basis in the U.S. under the terms of a
contract which expires in March 1997. Ciba has informed Chiron that Ciba
will resume marketing of the product following the expiration of the
contract. Chiron and Ciba are negotiating the transition of the marketing
responsibilities for Aredia-Registered Trademark-, including whether Chiron
will have any ongoing role in the promotion of the product.
COSTS AND EXPENSES
Gross profit margins during the third quarters of 1996 and 1995 remained
constant at 55 percent of product sales. Increases in gross profit margins
resulting from the receipt of secondary revenues from Berlex's net sales of
Betaseron-Registered Trademark- and sales of immunodiagnostic assays and
branched DNA probes were offset by reduced margins resulting from sales of
clinical chemistry products and a change in the mix of vaccine product sales.
On a year-to-date basis, however, gross profit margins increased in 1996 to 57
percent from 55 percent in 1995 due to secondary revenues related to Betaseron
- -Registered Trademark- sales; improved margins arising from changes in the
sales mix of ophthalmic products and non-recurring 1995 costs resulting from
the acquisition of IOLAB; and sales of immunodiagnostic assays and branched
DNA probes. These increases were partially offset by reduced margins
resulting from sales of clinical chemistry products, a change in the mix of
vaccine product sales and costs arising during the second quarter of 1996 of
temporarily idled manufacturing facilities in Italy. Gross margin percentages
may fluctuate significantly in future periods as the Company's product mix
continues to evolve and as the costs of new facilities are included in cost of
goods sold.
Research and development expenses increased slightly in the third quarter
and first nine months of 1996, as compared to 1995, partially due to the
Company's acquisition of Chiron Viagene in September 1995. Chiron Viagene is
engaged in the discovery and development of gene transfer drugs for the
treatment of severe viral infections, cancers and other diseases and added
$4.7 million and $13.8 million of research and development expense during the
third quarter and first nine months of 1996, respectively. In addition,
vaccine research and development expense increased by $6.8 million and $15.3
million during the third quarter and first nine months of 1996, respectively,
primarily due to Chiron's effort to obtain FDA approval of its DTaP vaccine.
During the third quarter and first nine months of 1996, diagnostic research
and development expenses increased by $7.0 million and $5.0 million,
respectively, as compared to the comparable periods in 1995, due to continued
improvements of existing immunodiagnostic instrument systems and continued
development of branched DNA probe tests, used to quantify levels of virus and
other indicators of disease. Partially offsetting these increases is a $3.0
million reduction in September 1996 arising from the annual collaboration
accounting with G.D. Searle & Co. ("Searle"), related to research and
development costs of tissue factor pathway inhibitor products.
Further offsetting these increases to research and development expense
during the three-month and nine-month periods ended September 30, 1996 are the
following items, recognized as research and development expense pursuant to
collaborative arrangements with other pharmaceutical and biotechnology
companies during the comparable periods in 1995:
21
<PAGE>
- - Chiron paid $16.4 million to Cephalon, Inc. in the third quarter of 1995
related to the funding of certain collaboration expenses and the purchase
of additional program rights;
- - The Company paid $8.8 million to Searle for the development and marketing
of tissue factor pathway inhibitor products;
- - Chiron made a $3.5 million milestone payment to DepoTech Corporation
("DepoTech") for the research, development and marketing of products
incorporating certain drug delivery technologies developed by DepoTech;
- - An initial license payment of $2.5 million was paid by Chiron to
Progenitor, Inc. ("Progenitor"), pursuant to a collaboration for the
development and commercialization of therapeutic and vaccine products
incorporating Progenitor's proprietary gene therapy technology;
- - The Company reached an agreement with Genelabs Technologies, Inc.
("Genelabs"), whereby Chiron and Genelabs cross-licensed certain rights to
HCV, hepatitis G virus, human T-cell leukemia virus - I and human T-cell
leukemia virus - II diagnostic tests. From payments totaling $8.5 million,
approximately $6.4 million was recognized as expense during the first nine
months of 1995;
- - Chiron made payments totaling $5.0 million to New York University ("NYU")
under an agreement whereby Chiron and its sublicensee, Ciba, acquired
certain rights to NYU's optical gene mapping technology.
Additionally, Chiron, together with Johnson & Johnson ("J & J"),
co-funded the development and introduction of a home HIV testing service
business, Direct Access Diagnostics, and has had an option to participate as
an equal partner with J&J in this business. As a result of an adverse
arbitration decision and subsequent affirming court decision, J&J must
transfer the business and certain assets of the Direct Access Diagnostics
business to a third party. Accordingly, Chiron does not currently expect to
participate in the further development of this business opportunity. The
Company is discussing with J&J a resolution of its previous interest.
Selling, general and administrative ("SG&A") expenses increased during
the three-month and nine-month periods ended September 30, 1996 as compared
to the comparable periods in 1995. SG&A expenses in 1996 were higher due to
selling and marketing costs to support Chiron's vaccine, immunodiagnostic and
branched DNA probes products; Chiron's new Vitrasert-TM- Implant product; and
due to increased costs in the ophthalmic business resulting from the
acquisition of IOLAB, including costs related to an expanded international
sales force. Selling and marketing expenses continue to represent the largest
portion of total SG&A expenses, as Chiron devoted significant resources to
support sales volumes in its product lines.
The write-off of purchased in-process technology during the third quarter
of 1995 consists primarily of $130.3 million related to the acquisition of
Chiron Viagene in September 1995. During the nine months ended September 30,
1995, the write-off of purchased in-process technology also consists of $222.6
million for the acquisitions from Ciba of Chiron Diagnostics Corporation
("Chiron Diagnostics"), formerly Ciba Corning Diagnostics Corp., and
Ciba's interests in Chiron Biocine and Chiron Vaccines Company ("Chiron
Vaccines"), formerly The Biocine Company; $10.3 million for the acquisition of
IOLAB; and $1.8 million from an increase in Chiron's ownership of Technolas
GmbH, a German laser ophthalmic business.
In 1995, costs related to the Ciba transaction consist primarily of
employee payments and related tax liabilities and legal and investment advisor
fees.
Restructuring and reorganization costs for the first nine months of 1995
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 was a charge related to the change in plans to
expand the Company's Emeryville research and administrative facilities.
OTHER ITEMS
Other expense, net, consists primarily of investment income on
the Company's cash and investment balances and interest expense on outstanding
debt and capital lease obligations. Other expense, net, was
negatively effected during the third quarter of 1996 by increased interest
expense as a result of increased debt borrowings, and reduced investment
income arising from lower cash balances in the Company's investment portfolio.
Comparatively, other expense, net, during the third quarter of 1995
includes a $3.0 million gain on the sale of property. On a year-to-date
comparative basis, the other expense, net, balance reflects lower
investment income amounts. This decrease was more than offset by a $12.2
million gain arising from the sale of the Company's
22
<PAGE>
one-half interest in a generic cancer chemotherapeutics business, effective
May 1, 1996.
Through completion of the sale, Chiron recognized in 1996 $1.9 million of
equity in earnings of joint businesses from its one-half interest in the
generic cancer chemotherapeutics business that is described above. During the
nine months ended September 30, 1995, Chiron recognized $2.5 million of equity
in earnings.
The provision for income taxes in the third quarter and the first nine
months of 1996 is based on an estimated annual effective income tax rate. The
provision for income taxes during the comparable periods in 1995 was
comprised primarily of foreign taxes on certain foreign operations of the
Company. Substantially all of the write-off of purchased in-process
technologies was not deductible for income tax purposes and thus did not
create a tax benefit in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Chiron's capital requirements are generally funded from public and
private sales of debt and equity. In addition to these sources of capital,
future capital requirements may be financed through a combination of debt,
utilization of research funding from Ciba, possible off-balance sheet
financing (such as R&D limited partnerships and operating leases), and the use
of existing cash and investment balances. Until required for operations,
Chiron's policy is to keep its cash and investments, which totaled
approximately $129.8 million at September 30, 1996, 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 maturities in excess of
one year are presented on the balance sheet as noncurrent investments.
Chiron attempts to reduce its exposure to fluctuations in foreign
currency exchange rates by entering into forward currency contracts
("forwards") and average rate put options ("options"). Forwards are used to
hedge balance sheet exposure resulting from completed transactions denominated
in a foreign currency, and options are used to hedge anticipated transactions.
Forward contracts are settled monthly and currently outstanding option
contracts mature within three months. As of September 30, 1996, the Company
held forward and option contracts totaling $69.9 million and $19.1 million,
respectively.
In future periods, Chiron expects to incur substantial capital
spending consistent with the Company's commitment to expand its manufacturing
capacity for specific products. During the nine months ended September 30,
1996, Chiron continued the expansion of certain vaccine production facilities
in Italy as well as the expansion of its research and development and certain
administrative facilities in Emeryville. The expansion of the Emeryville
facilities is projected to occur in stages over the next thirty years. In
June 1996, Chiron entered into a seven-year operating lease agreement with a
group of financial institutions to rent a research and development facility to
be constructed as part of the Emeryville expansion project. Under the terms
of this agreement, the financial institutions have committed $195.0 million
towards the total construction cost of the project. No lease payments will
be required during the construction period which is expected to last less
than three years.
During 1996, Chiron expanded its short-term borrowing capacity by
entering into two separate one-year revolving, unsecured credit agreements
with major financial institutions for borrowing capabilities up to $50.0
million and $100.0 million, respectively. These facilities bring the total
committed, unsecured short-term revolving credit facilities available to the
Company in the U.S. to $200.0 million. These credit facilities in the U.S.
are guaranteed by Ciba and provide for various borrowing rate options,
as defined in the agreements. As of September 30, 1996, $100.0 million was
outstanding under these facilities.
During 1996, Chiron selectively entered into cross currency interest rate
swaps ("swaps") to modify the interest and/or currency characteristics
of specific outstanding debt obligations. During the second quarter of 1996,
Chiron entered into a one-year swap agreement with a notional amount of $24.9
million, effectively converting debt denominated in U.S. dollars to Japanese
yen and lowering the effective variable interest rate. During July 1996,
23
<PAGE>
Chiron also entered into swap agreements that mature in July 2001 with an
aggregate notional amount of $112.6 million, effectively converting debt
denominated in U.S. dollars to German marks and modifying the interest rate
from a variable rate to a fixed German mark rate of 6.2%.
In July 1996, Chiron purchased a 49 percent interest in the human
vaccine business of Behringwerke AG, a subsidiary of Hoechst AG. The total
acquisition price was $119.0 million and includes costs directly related to
the acquisition. This amount is subject to adjustment pending the completion
of an audited opening balance sheet. Under the terms of the agreement,
Chiron has an option to purchase the remaining 51 percent interest over the
next five years and Behringwerke AG has the option to have Chiron acquire the
remaining interest in March 2001. During the period of mutual ownership,
Chiron and Behringwerke AG will operate the vaccine business as a joint
venture, which has been named Chiron Behring. In addition, during September
1996, Chiron invested $30.0 million in General Injectables & Vaccines, Inc.
("GIV") for a combination of preferred stock and debt. GIV will distribute
and actively promote Chiron's vaccine products in the U.S.
Chiron's liquidity may be further impacted in future periods by its
decision to fund its share of expenses in certain of its joint ventures and
collaboration agreements. Over the next several years, Chiron anticipates
funding collaborations with a number of research partners, and may
make additional equity investments in collaborative partners.
During the nine months ended September 30, 1996, cash and cash
equivalents decreased by $20.4 million. Of this amount, $10.0 million was
provided by the Company's operating activities, compared to $57.0 million used
during the nine months ended September 30, 1995.
Investing activities consumed cash of $148.7 million during the first
nine months of 1996, versus $28.1 million in 1995. During 1996, net sales of
marketable debt securities and capital expenditures totaled $73.6 million
and $69.5 million, respectively, versus $156.7 million and $70.6 million,
respectively, during 1995. Additionally, in 1995 Chiron received $14.2
million, net of cash paid, through its acquisition of Chiron Diagnostics,
Chiron Biocine and Chiron Vaccines and paid $95.0 million and $35.5 million in
cash for the acquisitions of IOLAB and Viagene, respectively. During the
first nine months of 1996, Chiron received $14.0 million from the sale of its
one-half interest in a generic cancer chemotherapeutics business and paid
$114.3 million and $30.0 million for the Company's 49 percent interest in
Chiron Behring and investment in GIV, respectively.
Cash provided by financing activities of $118.3 million during the nine
months ended September 30, 1996 reflects cash proceeds of $36.8 million
received from the exercise of stock options and issuance of stock under the
Company's employee stock purchase plan, and increased net debt borrowings
totaling $81.4 million. Cash provided by financing activities of $69.2
million during the comparable period in 1995 includes approximately $13.8
million of net debt borrowings, $30.6 million related to the issuance of
common stock under the Company's employee benefit plans, and a capital
contribution of $24.8 million pursuant to the 1995 agreements with Ciba.
Chiron believes that its cash and investments, funds provided by
operations, and funding arrangements discussed above, together with Ciba's
agreement in 1995 to guarantee $425.0 million of debt for Chiron and Chiron's
option to issue up to $500.0 million of new equity to Ciba, will be sufficient
to meet its cash requirements during the upcoming twelve months and through
the foreseeable future.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Chiron wishes to caution stockholders and investors that the following
important factors, among others, in some cases have affected, and in the
future could affect, Chiron's actual results and could cause Chiron's actual
consolidated results for the fourth quarter of 1996, and beyond, to differ
materially from those expressed in any forward-looking statements made by, or
on behalf of, Chiron. The statements under this caption are intended to serve
as cautionary statements within the meaning of the Private Securities
Litigation Reform Act of 1995. The following information is not intended to
limit in any way the characterization of other statements or information under
other captions as cautionary statements for such purpose:
24
<PAGE>
- - Delays, difficulties or failure in obtaining regulatory approval
(including approval of its systems, procedures and facilities for
production) for the Company's products. These may include, for
example, approval of the Company's Italian manufacturing facilities and
processes as satisfying FDA requirements for production of the
Company's DTaP vaccines, approval for Myotrophin, a drug under
development by Chiron and Cephalon, Inc., for which additional clinical
trials may be required by the FDA, and approval for Quantiplex-TM- for
HIV and follow-on bDNA probe products, for which the FDA may require
substantial additional process and systems validation.
- - Inability to maintain or initiate third party arrangements
which generate revenues, in the form of license fees, research and
development support, royalties, sales fees and other payments, in
return for rights in technology or products under development or
promotional or other services provided by the Company.
- - The issuance and use of patents and proprietary technology
by Chiron and its competitors, including the possible negative effect
on the Company's ability to develop, manufacture and sell its products
if it is unable to obtain licenses to patents which may be required for
such products.
- - Delays or difficulties in developing and acquiring technology and
technical and managerial personnel to manufacture and/or deliver the
Company's products in commercial quantities at reasonable costs and
in compliance with applicable quality assurance and environmental
regulations and governmental permitting requirements.
- - Possible changes in laws, regulations and guidelines of regulatory
agencies, which may affect the scope, standards, timelines and sales of
certain of the Company's products including, for example, off-label
sales of pharmaceuticals and research use only sales of diagnostic
instruments.
- - The ability and willingness of customers to substitute competitive
products for the Company's products once other products for similar
indications are approved for marketing.
- - Difficulties in obtaining key raw materials and supplies for the
manufacture of the Company's products.
- - Increased costs of development, regulatory approval, manufacture,
sales, and marketing associated with the introduction of novel products
and fluctuation of such costs between periods.
- - Difficulties in launching or marketing the Company's products,
many of which are novel products based on biotechnology, and
unpredictability of customer acceptance of such products.
- - Decline in the Betaseron-Registered Trademark- customer base in
the U.S.; the extent to which patients, once enrolled, remain compliant
with the prescribed treatment regimen and continue to regularly receive
Betaseron-Registered Trademark-; the impact of competing products,
including other beta interferon products; pricing, promotional and
marketing decisions by the Company's partner, Schering.
- - Continued lower product margins resulting from the Chiron-Ortho
joint business' renegotiated contract with the American Red Cross;
changes in the product mix whereby the proportion of higher margin HCV
tests sold relative to other lower margin products is less;
expanding sales of competing HCV tests by unlicensed third parties.
- - Continued increases in research and development spending in order
to develop new products and increase market share.
- - Continued or increased pressure to reduce selling prices of the
Company's products.
- - Underutilization of the Company's existing or new manufacturing
facilities or of any facility expansions, resulting in production
inefficiencies and higher costs; start-up costs and inefficiencies and
delays and increased depreciation costs in connection with the start of
production in new plants and expansions.
- - The cost of acquiring in-process technology, either by license,
collaboration or purchase of another entity.
- - Increased financing costs resulting from the expanded use of debt
for operating and acquisition-related activities.
- - Amount and rate of growth in Chiron's selling, general and
administrative expenses; and the impact of unusual or infrequent
charges resulting from Chiron's ongoing evaluation of its business
strategies and organizational structures, including the continued costs
of integration of newly acquired businesses.
- - The acquisition of fixed assets and other assets, including
inventories and receivables; and the making or incurring of any
expenditures and expenses, including, among others, depreciation and
research and development expenses; any revaluation of assets,
including, among others, the Company's investments in the equity
securities of other companies with whom it collaborates, or
related expenses, and the amount of, and any changes to, tax rates.
25
<PAGE>
- - The ability or inability of Chiron to obtain, or hedge against,
foreign currency, foreign exchange rates and fluctuations in those
rates.
- - The costs and other effects of legal and administrative cases and
proceedings (whether civil, such as product-related or environmental,
or criminal); settlements and investigations; developments or
assertions by or against Chiron relating to intellectual property
rights and licenses.
- - Failure of corporate partners to commercialize successfully the
Company's products or to retain and expand the markets served by the
commercial collaborations; conflicts of interest, priorities and
commercial strategies which may arise between the Company and such
corporate partners.
- - Seasonal fluctuations in product sales and resulting gross margin
amounts.
26
<PAGE>
ITEM 1. LEGAL PROCEEDINGS.
Information responding to Item 1 is set forth in Part 1., Item 1.,
Notes to Consolidated Financial Statements, Note 8. "Contingencies,"
which information is incorporated herein by reference.
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.
(a) Exhibits.
EXHIBIT
NUMBER EXHIBIT
------- -------
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.
3.01 Restated Certificate of Incorporation of the Registrant, dated
August 18, 1987, incorporated by reference to Exhibit 3.01 of
the Registrant's Form 10-K report for fiscal year 1991.
3.02 Certificate of Amendment of Restated Certificate of
Incorporation of the Registrant, dated December 12, 1991,
incorporated by reference to Exhibit 3.01 of the Registrant's Form
10-K report for fiscal year 1991.
3.03 Bylaws of the Registrant, as amended, incorporated by reference
to Exhibit 3.03 of the Registrant's Form 10-K report for fiscal
year 1994.
3.04 Certificate of Amendment of Restated Certificate of
Incorporation of the Registrant, dated May 21, 1996, incorporated by
reference to Exhibit 3.04 of the Registrant's Form 10-Q report for
the period ended June 30, 1996.
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 Second Supplemental Indenture, dated as of March 25, 1996, by
and among the Registrant, Cetus Oncology Corporation (formerly
Cetus Corporation), and Bankers Trust Company, incorporated by
reference to Exhibit 4.03 of the Registrant's Form 10-Q report for
the period ended June 30, 1996.
27
<PAGE>
4.04 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.
4.05 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.
4.06 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.
4.07 $1,000,000 County of Lorain, Ohio Variable Rate Industrial
Revenue Bonds dated as of July 1, 1984, due July 1, 2014,
incorporated by reference to Exhibit 4.06 of the Registrant's Form
10-Q report for the period ended April 2, 1995. 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).
4.08 $1,000,000 Walpole Industrial Development Authority 6.75%
Industrial Revenue Bonds dated as of July 1, 1979, due July 1, 2004,
incorporated by reference to Exhibit 4.07 of the Registrant's Form
10-Q report for the period ended April 2, 1995. 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).
4.09 Amendment No. 2 to Rights Agreement dated as of August 9,
1996, between Chiron Corporation and Continental Stock Transfer &
Trust Company, incorporated by reference to Exhibit 4.09 of the
Registrant's Form 10-Q report for the period ended June 30, 1996.
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 First Amendment to Lease between Registrant and BGR
Associates, a California limited partnership, incorporated by
reference to Exhibit 10.02 of the Registrant's Form 10-K report for
fiscal year 1995.
10.03 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.
28
<PAGE>
10.04 First Amendment to Lease between Registrant and BGR
Associates II, a California limited partnership, dated as of March
15, 1995, incorporated by reference to Exhibit 10.04 of the
Registrant's Form 10-K report for fiscal year 1995.
10.05 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.
10.06 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.
10.07 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,
incorporated by reference to Exhibit 10.05 of the Registrant's Form
10-Q report for the period ended April 2, 1995.
10.08 Revolving Credit Facility dated as of March 24, 1995,
between Chiron Corporation and Swiss Bank Corporation, San Francisco
Branch, incorporated by reference to Exhibit 10.06 of the
Registrant's Form 10-Q report for the period ended April 2, 1995.
10.09 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.
10.10 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.
10.11 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.
10.12 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.
29
<PAGE>
10.13 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.
10.14 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.
10.15 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.
10.16 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.
10.17 Chiron 1991 Stock Option Plan, as amended, incorporated by
reference to Annex 2 of the Registrant's Proxy Statement dated
April 11, 1996.*
10.18 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.*
10.19 Form of Automatic Share Right Agreement, Chiron 1991 Stock
Option Plan, as amended.
10.20 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.*
10.21 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.*
10.22 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.
10.23 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.
30
<PAGE>
10.24 Revolving Credit Agreement, dated as of July 12, 1996,
between Registrant and Bank of America National Trust and Savings
Association, incorporated by reference to Exhibit 10.24 of the
Registrant's Form 10-Q report for the period ended June 30, 1996.
10.25 Form of Debenture Purchase Agreement between the
Registrant and CIBA-GEIGY, Limited, a Swiss corporation, dated June
22, 1990, incorporated by reference to Exhibit 10.25 of the
Registrant's Form 10-K report for fiscal year 1994.
10.26 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.
10.27 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.
10.28 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.
10.29 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.
10.30 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.
10.31 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.
10.32 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.
10.33 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.
10.34 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.
31
<PAGE>
10.35 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.*
10.36 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.*
10.37 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.
10.38 Amendment to Lease, made as of March 20, 1990, amending
Lease dated July 1, 1983, between Harold B. Chapman, Jr. and Cetus
Corporation, incorporated by reference to Exhibit 10.37 of the
Registrant's Form 10-Q report for the period ended April 2, 1995.
10.39 Second Amendment to Lease made as of January 1, 1995
between Harold B. Chapman, Jr. and the Registrant, incorporated by
reference to Exhibit 10.39 of the Registrant's Form 10-K report for
fiscal year 1995.
10.40 Option Agreement between Harold B. Chapman, Jr., and the
Registrant, dated January 1, 1995 and Letter dated February 28, 1996
to Harold B. Chapman, Jr.
10.41 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 10.40 of the Registrant's Form
10-K report for fiscal year 1995.
10.42 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.
10.43 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.
10.44 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.
32
<PAGE>
10.45 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.
10.46 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.
10.47 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.
10.48 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.
10.49 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.*
10.50 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.*
10.51 Lease between Sclavo S.p.A. and Biocine Sclavo S.p.A.,
dated January 7, 1992, incorporated by reference to Exhibit 10.49 of
the Registrant's Form 10-Q report for the period ended April 2,
1995.
10.52 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., incorporated by reference to
Exhibit 10.50 of Amendment No. 1 to the Registrant's Form 10-Q
report for the period ended April 2, 1995. [Certain information has
been omitted from the Agreement pursuant to a request by Registrant
for confidential treatment pursuant to Rule 24b-2.]
10.53 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.
10.54 Description of Executive Officer Variable Compensation
Program, incorporated by reference to Exhibit 10.57 of the
Registrant's Form 10-K report for fiscal year 1995.*
33
<PAGE>
10.55 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.*
10.56 Amended and Restated License Agreement effective April 1,
1996 between Ciba Corning Diagnostics Corp., a Delaware corporation,
and Bioanalysis Limited, a corporation organized under the laws of
the United Kingdom of Great Britain and Northern Ireland. [Certain
confidential information has been omitted from the Agreement and
filed separately with the Securities and Exchange Commission
pursuant to a request by Registrant for confidential treatment
pursuant to Rule 24b-2.]
10.57 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.
10.58 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.
10.59 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.
10.60 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.*
10.61 Letters dated May 6, 1996 and May 25, 1996 to Magnus
Lundberg.*
10.62 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.*
10.63 Research Agreement, dated as of July 15, 1985, between
Ciba-Geigy Limited, a Swiss corporation, and Ciba Corning
Diagnostics Corp., a Delaware corporation, incorporated by reference
to Exhibit 10.64 of the Registrant's Form 10-Q report for the period
ended April 2, 1995.
10.64 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., incorporated by reference to Exhibit 10.65 of
Amendment No. 1 to the Registrant's Form 10-Q report for the period
ended April 2, 1995.[Certain information has been omitted from the
Agreement pursuant to a request by Registrant for confidential
treatment pursuant to Rule 24b-2.]
34
<PAGE>
10.65 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, incorporated by reference to Exhibit 10.66 of Amendment
No. 1 to the Registrant's Form 10-Q report for the period ended
April 2, 1995. [Certain information has been omitted from the
Agreement pursuant to a request by Registrant for confidential
treatment pursuant to Rule 24b-2.]
10.66 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, incorporated
by reference to Exhibit 10.67 of the Registrant's Form 10-Q report
for the period ended April 2, 1995. [Certain information has been
omitted from the Agreement pursuant to a request by Registrant for
confidential treatment pursuant to Rule 24b-2.]
10.67 Settlement Agreement, dated August 30, 1989, between Ciba
Corning Diagnostics Corp. and Advanced Magnetics, Inc., incorporated
by reference to Exhibit 10.68 of the Registrant's Form 10-Q report
for the period ended April 2, 1995. [Certain information has been
omitted from the Agreement pursuant to a request by Registrant for
confidential treatment pursuant to Rule 24b-2.]
10.68 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, incorporated by reference to Exhibit
10.69 of the Registrant's Form 10-Q report for the period ended
April 2, 1995.
10.69 Second Amendment to Lease dated as of March 15, 1995
between BGR Associates, a California limited partnership, and
Registrant, incorporated by reference to Exhibit 10.73 of the
Registrant's Form 10-K report for fiscal year 1995.
10.70 Agreement, effective as of December 21, 1988, by and
between Hoffmann-La Roche Inc., a New Jersey corporation, and Cetus
Corporation, incorporated by reference to Exhibit 10.70 of the
Registrant's Form 10-Q report for the period ended April 2, 1995.
[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, incorporated by reference to Exhibit 10.71 of the
Registrant's Form 10-Q report for the period ended April 2, 1995.
[Certain information has been omitted from the Agreement pursuant to
a request by Registrant for confidential treatment pursuant to Rule
24b-2.]
35
<PAGE>
10.72 Agreement, by and between Cetus Oncology Corporation,
EuroCetus International, N.V., and F. Hoffmann-La Roche Ltd.,
incorporated by reference to Exhibit 10.72 of the Registrant's Form
10-Q report for the period ended April 2, 1995. [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.
10.74 Settlement Agreement on Purified IL-2, made as of April
14, 1995, by and between Cetus Oncology Corporation, dba Chiron
Therapeutics, a Delaware corporation, and Takeda Chemical
Industries, Ltd., a Japanese corporation, incorporated by reference
to Exhibit 10.74 of the Registrant's Form 10-Q report for the period
ended July 2, 1995. [Certain information has been omitted from the
Agreement pursuant to a request by Registrant for confidential
treatment pursuant to Rule 24b-2.]
10.75 License Agreement made and entered into December 1, 1987,
by and between Sloan Kettering Institute for Cancer Research, a
not-for-profit New York corporation, and Cetus Corporation,
incorporated by reference to Exhibit 10.75 of the Registrant's Form
10-Q report for the period ended July 2, 1995. [Certain information
has been omitted from the Agreement pursuant to a request by
Registrant for confidential treatment pursuant to Rule 24b-2.]
10.76 Chiron Funding L.L.C. Limited Liability Company Agreement,
entered into and effective as of December 28, 1995, among the
Registrant, Chiron Biocine Company and Biocine S.p.A. and Ciba-Geigy
Corporation, incorporated by reference to Exhibit 10.80 of the
Registrant's Form 10-K report for fiscal year 1995. [Certain
information has been omitted from the Agreement and filed separately
with the Securities and Exchange Commission pursuant to a request by
Registrant for confidential treatment pursuant to Rule 24b-2. The
omitted confidential information has been identified by the
following statement: "Confidential Treatment Requested".]
10.77 Agreement between Ciba-Geigy Limited and the Registrant
made November 15, 1995, incorporated by reference to Exhibit 10.81
of the Registrant's Form 10-K report for fiscal year 1995. [Certain
information has been omitted from the Agreement and filed separately
with the Securities and Exchange Commission pursuant to a request by
Registrant for confidential treatment pursuant to Rule 24b-2. The
omitted confidential information has been identified by the
following statement: "Confidential Treatment Requested".]
10.78 Reimbursement Agreement dated as of March 24, 1995,
between Ciba-Geigy Limited, a Swiss corporation, and the Registrant,
incorporated by reference to Exhibit 10.76 of the Registrant's Form
10-Q report for the period ended July 2, 1995.
36
<PAGE>
10.79 Promissory Note, as amended and restated, dated January 1,
1995 by Ciba Corning Diagnostics Corp., incorporated by reference to
Exhibit 10.83 of the Registrant's Form 10-K report for fiscal year
1995.
10.80 Commercial lease between Domilyon Corporation and Domilens
Laboratories and Amendment No. 1 to Commercial Lease dated May 9,
1994, incorporated by reference to Exhibit 10.84 of the Registrant's
Form 10-K report for fiscal year 1995.
10.81 Agreement between the Registrant and Cephalon, Inc. dated
as of January 7, 1994, and Letter Agreements between the Registrant
and Cephalon dated January 13, 1995 and May 23, 1995, incorporated
by reference to Exhibit 10.85 of the Registrant's Form 10-K report
for fiscal year 1995. [Certain information has been omitted from
the Agreements and filed separately with the Securities and Exchange
Commission pursuant to a request by Registrant for confidential
treatment pursuant to Rule 24b-2. The omitted confidential
information has been identified by the following statement:
"Confidential Treatment Requested".]
10.82 Reimbursement Agreement, dated as of June 28, 1996,
between Ciba-Geigy Limited, a Swiss corporation, and the Registrant,
incorporated by reference to Exhibit 10.94 of the Registrant's Form
10-Q report for the period ended June 30, 1996.
10.83 Reimbursement Agreement, dated as of May 20, 1996, between
Ciba-Geigy Limited, a Swiss corporation, and the Registrant,
incorporated by reference to Exhibit 10.95 of the Registrant's Form
10-Q report for the period ended June 30, 1996.
10.84 Letter Agreement between the Registrant and Dr. Richard W.
Barker dated May 1, 1996, incorporated by reference to Exhibit 10.88
of the Registrant's Form 10-Q report for the period ended June 30,
1996.*
10.85 Revolving Credit Agreement, dated as of March 23, 1996,
between the Registrant and Morgan Guaranty Trust Company of New
York, incorporated by reference to Exhibit 10.89 of the Registrant's
Form 10-Q report for the period ended June 30, 1996.
10.86 Purchase and Assignment Agreement between Behringwerke
Aktiengesellschaft, on the one side, and 31. CORSA
Verwaltungsgesellschaft mbH and the Registrant, on the other side,
dated February 17, 1996, Closing Agreement, by and among
Behringwerke Aktiengesellschaft, on the one side, and the Registrant
and 31. CORSA Verwaltungsgesellschaft mbH, on the other side, dated
June 29, 1996 and Letter Agreement dated June 29, 1996 between the
Registrant, 31. CORSA Verwaltungsgesellschaft mbH and Behringwerke
Aktiengesellschaft. [Certain confidential information has been
omitted from the Agreements and filed separately with the Securities
and Exchange Commission pursuant to a request by Registrant for
confidential treatment pursuant to Rule 24b-2.]
37
<PAGE>
10.87 Royalty Projects Agreement by and between Ciba Corning
Diagnostics Corp., a Delaware corporation, and Ciba-Geigy Limited, a
Swiss corporation. [Certain confidential information has been
omitted from the Agreement and filed separately with the Securities
and Exchange Commission pursuant to a request by Registrant for
confidential treatment pursuant to Rule 24b-2.]
10.88 Purchase Agreement between BNP Leasing Corporation and the
Registrant, dated June 28, 1996, incorporated by reference to
Exhibit 10.90 of the Registrant's Form 10-Q report for the period
ended June 30, 1996.
10.89 Lease Agreement between BNP Leasing Corporation and the
Registrant, dated June 28, 1996, incorporated by reference to
Exhibit 10.91 of the Registrant's Form 10-Q report for the period
ended June 30, 1996.
10.90 Ground Lease between BNP Leasing Corporation and the
Registrant, dated June 28, 1996, incorporated by reference to
Exhibit 10.92 of the Registrant's Form 10-Q report for the period
ended June 30, 1996.
10.91 Reimbursement Agreement, dated as of July 12, 1996,
between Ciba-Geigy Limited, a Swiss corporation, and the Registrant,
incorporated by reference to Exhibit 10.93 of the Registrant's Form
10-Q report for the period ended June 30, 1996.
11 Statement of Computation of Earnings per Share.
27 Financial Data Schedule.
- ------------------------------------------
*Management contract, compensatory plan or arrangement.
(b) Reports on Form 8-K
None.
38
<PAGE>
CHIRON CORPORATION
September 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHIRON CORPORATION
DATE: November 12, 1996 BY: /s/ Edward E. Penhoet
--------------------------------- --------------------------------
Edward E. Penhoet
President and Chief
Executive Officer
DATE: November 12, 1996 BY: /s/ Dennis L. Winger
--------------------------------- --------------------------------
Dennis L. Winger
Senior Vice President,
Finance and Administration,
Chief Financial Officer, and
Principal Accounting Officer
39
<PAGE>
[Date]
[Director name and address]
Re: Automatic Share Right Grant
Dear [ ]:
Pursuant to the Chiron 1991 Stock Option Plan (the "Plan"),
Chiron Corporation (the "Company") hereby grants you [ ] restricted share
rights ("share rights") with respect to its Common Stock ("Common Stock")
effective[ ] ("Grant Date"). These share rights are granted to
you in accordance with the terms of this letter and the provisions of the Plan.
1. Each share right entitles you to receive one share of
Common Stock on the date that the share right vests in accordance with
paragraph 2 (the "Vesting Date"), if you continue to provide services to the
Company or its subsidiaries as a director, an employee, a consultant or an
independent contractor through such date. A certificate representing the
shares of Common Stock will be issued without restriction on or as soon as
practicable following the Vesting Date of the share right, provided that such
share right has not been terminated or canceled before such date.
Your share rights will vest in five equal annual installments on each of
the first five anniversaries of the Grant Date, provided that, in each case, you
continue to provide services to the Company or its subsidiaries as a director,
an employee, a consultant or an independent contractor through such date. In
addition, if you terminate your service with the Company by reason of death or
Permanent Disability (as defined below), all your outstanding share rights will
immediately vest in full. If you cease to provide services to the Company or
its subsidiaries as a director, an employee, a consultant or an independent
contractor for any reason other than death or Permanent Disability, any share
right held by you that has not vested before the date of your termination of
such services will be canceled automatically and will no longer be outstanding
and no shares of Common Stock will be issued hereunder. "Permanent Disability"
means your inability to engage in any substantial gainful activity by reason of
any medically determinable
<PAGE>
Page 2
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more. In the event of an agreement to dispose of all or substantially all of
the assets or outstanding capital stock of the Company by means of a sale,
merger, reorganization, or liquidation, all of your outstanding share rights
will immediately vest. However, no acceleration of vesting will occur if the
terms of the agreement require as a prerequisite to the consummation of any such
sale, merger, reorganization or liquidation that your share rights will be
either assumed by the successor corporation or parent thereof or be replaced
with a comparable award subject to shares of the successor corporation or parent
thereof. Upon consummation of the sale, merger, reorganization or liquidation
contemplated by the agreement, share rights, whether or not accelerated, will
terminate unless assumed pursuant to a written agreement by the successor
corporation or parent thereof.
Your share rights hereunder may not be sold, assigned,
transferred, alienated, subject to garnishment or otherwise encumbered in any
manner other than by transfer by will or the laws of descent and distribution.
In the event of your death before the issuance of shares of Common Stock under
your share rights, any shares issuable thereunder by reason of your death will
pass pursuant to your will or by the laws of descent and distribution.
The issuance of shares of Common Stock hereunder is subject to
the procurement by the Company of all approvals and permits required by
regulatory authorities having jurisdiction over the share rights and stock to be
issued hereunder. The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the
lawful issuance of any Common Stock hereunder will relieve the Company of any
liability with respect to the non-issuance of the Common Stock as to which such
approval is not obtained. The Company, however, will use its best efforts to
obtain all such approvals.
If any change is made to the Common Stock issuable hereunder by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without receipt of consideration, the Compensation Committee of
the Board of Directors of the Company (the "Compensation Committee") will make
appropriate adjustments to such share rights to prevent the enlargement or
dilution of your rights thereunder.
Neither you nor, in the event of your death, your beneficiary
will have any rights as a shareholder with respect to the shares of Common Stock
issuable hereunder until you have been issued a stock certificate for such
shares. It is the intention of the parties that the Company's obligations under
your share rights are unfunded for purposes of the Internal Revenue Code and
that the Employee Retirement Income Security Act of 1974 does not apply to your
share rights.
This agreement does not constitute a contract of employment or
services. Neither the grant of this share right, nor any action taken under the
terms of this share right or the Plan, nor any provision of this share right or
the Plan will be construed to grant you the right to remain in the employ or
service of the Company (or any subsidiary or parent of the Company) for any
period of specific duration.
<PAGE>
Page 3
If the foregoing is satisfactory, please sign, date, and return the enclosed
copy of this letter to_______________________________________________
Very truly yours,
CHIRON CORPORATION
By
--------------------
AGREED AND ACCEPTED:
- ----------------------
[Director]
<PAGE>
OPTION AGREEMENT
----------------
between
HAROLD B. CHAPMAN, JR.,
("Seller")
and
CHIRON CORPORATION
("Buyer")
<PAGE>
OPTION AGREEMENT
----------------
THIS OPTION AGREEMENT ("Agreement") is entered as of January 1, 1995
("Effective Date") by and between HAROLD B. CHAPMAN, JR., an individual
("Seller"), and CHIRON CORPORATION, a Delaware corporation ("Buyer").
THE PARTIES ENTER THIS AGREEMENT on the basis of the following facts,
understandings and intentions of the parties:
A. Seller is owner of the real property more particularly described on
EXHIBIT A, attached hereto, together with all improvements thereon, including
the buildings known as Buildings "M" and "G", and all appurtenances thereto
(collectively, the "Property"). The Property is more particularly described
in the Lease (as defined in Recital B).
B. Buyer (as successor to Cetus Corporation) currently leases the
Property from Seller pursuant to a lease agreement ("Original Lease") dated
as of July 1, 1983, as amended by (i) the Amendment to Lease ("First
Amendment to Lease") dated as of March 20, 1990, and (ii) the Second
Amendment to Lease dated as of January 1, 1995. The Original Lease, as
amended by the First Amendment to Lease and the Second Amendment to Lease, is
hereinafter referred to as the "Lease". A copy of the Lease is attached
hereto as EXHIBIT B.
C. Buyer desires to obtain an option ("Option") to purchase the
Property from Seller, and Seller is willing to grant to Buyer an Option to
purchase the Property, upon all of the terms, covenants and conditions of
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises of
the parties, the parties hereto agree as follows:
1. GRANT OF OPTION. Seller grants to Buyer the Option to purchase
the Property on the terms of this Agreement.
2. OPTION TERM. The term of the Option ("Option Term") shall be five
(5) years, commencing as of the Effective Date. There shall be no
extension of the Option Term except by a written executed agreement by
Seller and Buyer.
3. CONSIDERATION.
a. OPTION PAYMENT; SECOND AMENDMENT TO LEASE.
As consideration for the Option, Buyer shall pay Seven Hundred Fifty
Thousand Dollars ($750,000.00) ("Option Payment") to Seller.
1.
<PAGE>
b. TIME OF PAYMENT. The Option Payment shall be made within five
(5) days after (i) execution of the Second Amendment to Lease (to the extent
not previously executed); (ii) execution of this Agreement by Seller and
Buyer; and (iii) recordation of the Memorandum of Option (as provided in
Section 18.a), which shall be recorded by Buyer within five (5) days after
the last execution of the documents referred to in Sections (i) and (ii) of
this Section 3.b.
c. OPTION PAYMENT EARNED. The Option Payment shall be deemed
earned in full upon (i) execution of this Agreement, (ii) execution of all
documents required to be executed concurrently with execution of this
Agreement, and (iii) completion of all of the items listed in Section 3.b.
d. RETENTION OF OPTION CONSIDERATION. If Buyer fails to exercise
the Option, Seller shall retain the Option Payment.
e. APPLICATION OF OPTION PAYMENT. If the Option is exercised, the
Option Payment shall be applied as a credit against the Purchase Price.
4. EXERCISE.
a. EXERCISE NOTICE. If not then in breach of this Agreement, Buyer
shall have the right to exercise the Option prior to the expiration of the
Option Term by delivering a written notice ("Exercise Notice") to Seller by
registered mail or personal delivery stating that Buyer desires to close
Escrow (as hereinafter defined). The date of the closing of Escrow shall be
determined by Seller in accordance with the terms of Section 11.a.
b. AGREEMENT FOR PURCHASE AND SALE. Upon the exercise of the
Option, this Agreement shall become a contract for the purchase and sale of
the Property, and Buyer shall thereupon agree to buy and Seller shall
thereupon agree to sell the Property, upon all of the terms, covenants and
conditions set forth in this Agreement.
c. EXTENSION OF LEASE. If Buyer delivers the Exercise Notice and
the close of Escrow is to occur after the date the Lease would have expired
if there were no further extension, Optionee shall be deemed to have
exercised the right to extend the Lease for a period of two (2) years (I.E.,
from July l, 2000 to June 31, 2002). Extension of the Lease pursuant to this
Section 4.c shall not be affected if close of Escrow does not occur.
2.
<PAGE>
5. PURCHASE PRICE.
a. AMOUNT. If the Option is exercised, Buyer shall deliver to
Chicago Title Insurance Company ("Escrow Agent") prior to the close of Escrow
("Close of Escrow") cash or other readily available funds in the amount of
Ten Million Five Hundred Thousand Dollars ($10,500,000.00) ("Purchase
Price"), subject to any adjustment pursuant to Section 5.c, reduced by
credits for (i) the amount of the Option Payment; and (ii) amounts necessary
to remove any liens against the Property, other than the Permitted Exceptions
(as hereinafter defined), which are caused by Seller.
b. CPI. For purposes of this Section 5, the "CPI" shall mean the
Consumer Price Index (CPI) for All Urban Consumers, All Items, for the San
Francisco-Oakland Metropolitan Area (1982-84 = 100), as published by the
Bureau of Labor Statistics of the United States Department of Labor
("Bureau"). If the Bureau discontinues publication of the CPI, publishes the
CPI less frequently, or alters the CPI in any manner, Buyer shall adopt a
substitute CPI procedure which Buyer and Seller feel reasonably reflects and
monitors the consumer prices.
c. CPI ADJUSTMENT. The Purchase Price shall increase by the
percentage increase in the CPI in excess of five percent (5%) per annum from
the date of this Agreement to the date of the Exercise Notice. For example,
(i) if the period between the date of this Agreement and the date of the
Exercise Notice is four (4) years, and (ii) the CPI increases by twenty-three
percent (23%) during the four (4) year period, then the Purchase Price shall
increase by three percent (3%) to Ten Million Eight Hundred Fifteen Thousand
Dollars ($10,815,000.00).
6. REPRESENTATIONS OF SELLER. Seller hereby makes the following
representations and warranties for the benefit of Buyer (which
representations are made by Seller as of both the date of this Agreement and
as of the Closing Date):
a. NO ADDITIONAL LEASES. Except for the Lease, (i) there are no
leases of all or any portion of the Property, and (ii) Seller has not
entered, nor is Seller aware that any other person or entity other than Buyer
has entered, any other agreements affecting the occupancy of the Property.
b. NO LITIGATION. Except as described in Exhibit C, attached
hereto, there are no civil, governmental, quasi-governmental or
administrative investigations, actions, suits, proceedings or claims pending
or, to the best of Seller's knowledge, threatened against or affecting Seller
or the Property (including the use, occupancy, operation or value of the
3.
<PAGE>
Property). Seller does not know of any basis for any such investigations,
actions, suits, proceedings or claims.
c. OWNERSHIP OF PROPERTY. Seller is the owner of the Property and
has the authority, acting alone, to enter this Agreement and to convey title
to the Property in accordance with this Agreement.
d. NO ADDITIONAL REPRESENTATIONS. Seller makes no warranties
whatsoever except those specifically set forth in this Agreement.
7. INSPECTIONS.
a. INSPECTION RIGHTS. During the Option Period, Buyer shall have
the right to conduct any and all studies, tests (including environmental
tests) and inspections that Buyer deems appropriate to determine the
condition and status of the Property.
b. WAIVER BY BUYER. Purchase of the Property pursuant to
exercise of the Option by Buyer shall constitute a waiver by Buyer of any
defects in either the title or the physical condition of the Property
(including the improvements comprising part of the Property). Purchase of
the Property pursuant to exercise of the Option constitutes acceptance by
Buyer of the Property in an "as is" condition.
8. COOPERATION OF SELLER.
a. RIGHT OF BUYER. During the Option Term, Buyer shall have the
right to apply for and obtain all Approvals (as defined below) relating to
the Property which Buyer desires from governmental agencies,
quasi-governmental agencies, and other entities and persons having authority
over the Property. The Approvals may relate to Buyer's plans to develop the
Property, together with other property located near the Property, with a new
life science facility. To the extent requested by Buyer, Seller shall assist
Buyer in obtaining the Approvals.
b. SCOPE OF ASSISTANCE. Seller's assistance shall include
execution of all applications for Approvals which Buyer requests Seller to
execute and, when required by the City of Emeryville ("City"), recordation
against the Property of any Approvals obtained by Buyer for development of
the Project.
c. APPROVALS. The Approvals may include (i) a development
agreement; (ii) a participation agreement under redevelopment law; (iii) a
vesting tentative map and any final subdivision maps pursuant to the vesting
tentative map; (iv) a
4.
<PAGE>
planned unit development and other zoning approvals; and (v) a General Plan
amendment.
d. REIMBURSEMENT OF SELLER. For time spent at Buyer's request, in
activities necessary for Buyer to obtain the Approvals, Seller shall be
entitled to (i) Two Hundred Dollars ($200.00) per hour and (ii) reimbursement
for reasonable out-of-pocket costs and expenses incurred by Seller. Buyer
shall notify Seller before Buyer commences activities for which Seller will
seek payment or reimbursement totalling more than Two Thousand Dollars
($2,000.00).
e. OBLIGATION OF BUYER. Buyer shall indemnify Seller against any
net reduction in the value of the Property, or net increase in the costs paid
by Seller, resulting from the conditions imposed against the Property
pursuant to the Approvals if (i) the Approvals reduce the value of the
Property and (ii) for any reason other than default by Seller, Buyer does not
exercise the Option and purchase the Property.
9. TITLE ISSUES.
a. PERMITTED EXCEPTIONS. For purposes of this Agreement, the
term "Permitted Exceptions" shall mean (i) the exceptions to title recorded
against the Property as of January 12, 1995, as shown in the Preliminary
Report (Order No. 105494), dated as of January 12, 1995 and issued by Chicago
Title Company of Alameda County, a copy of which is attached hereto as
EXHIBIT D, exclusive of the deed of trust ("Home Savings Deed of Trust") for
the benefit of Home Savings of America, F.A. ("Home Savings"), and (ii) any
exceptions created by Buyer after the Effective Date.
b. DEED. Seller shall convey title to the Property to Buyer by a
standard grant deed ("Deed").
c. TITLE POLICY. At the Close of Escrow, Title Company shall
issue to Buyer, upon payment of Title Company's regularly scheduled premium,
an ALTA owner's extended coverage policy of title insurance ("Title Policy"),
in the amount of the Purchase Price, showing title vested in Buyer, subject
only to the Permitted Exceptions and the standard printed exceptions in the
Title Policy. The Title Policy shall contain such endorsements as Buyer
desires.
10. ESCROW. Buyer shall establish the escrow ("Escrow") for the close
of this transaction at the office of Title Company after Buyer delivers the
Exercise Notice. Prior to the Close of Escrow, the parties shall deposit the
following funds and documents into Escrow, and Title Company shall close
Escrow as provided below.
5.
<PAGE>
a. SELLER. Seller shall deposit into Escrow the following:
(i) DEED. The duly executed and acknowledged Deed;
(ii) NON-FOREIGN CERTIFICATE. A duly executed certificate
("Non-Foreign Certificate") from Seller certifying that Seller is not a
"foreign person" within the meaning of Section 1445(f)(3) of the Internal
Revenue Code ("Code"), to the extent Seller is so qualified;
(iii) SELLER'S CERTIFICATE. A duly executed certificate from
Seller stating that the warranties and representations of Seller which are
made under this Agreement are valid as of the Closing Date;
(iv) RECONVEYANCE DOCUMENTS. All documents necessary to
reconvey any mortgages and deeds of trust that are then of record against the
Property ("Deeds of Trust"); and
(v) FUNDS. All funds necessary to reconvey the Deeds of
Trust to the extent (A) the proceeds due to Seller upon the sale are
insufficient to pay off all of the obligations secured by the Deeds of Trust
and (B) the Deeds of Trust are secured by Seller's (and not Buyer's) interest
in the Property.
b. BUYER: Buyer shall deposit into Escrow the following:
(i) PURCHASE PRICE. The Purchase Price, subject to the
adjustments described in Section 5 (and possible credits under Sections 12
and 13); and
(ii) ADDITIONAL CASH. Additional cash in the amount necessary
to pay all Escrow costs and prorations, as hereinafter set forth.
11. CLOSE OF ESCROW.
a. CLOSING DATE. Close of Escrow ("Close of Escrow") shall occur
on the date ("Closing Date") determined by Seller; provided that (i) the
Closing Date shall be within one (1) year after the date of the Exercise
Notice, (ii) the Closing Date shall not be less than six (6) months after the
date of the Exercise Notice and (iii) Seller shall give Buyer not less than
forty-five (45) days' prior written notice of the Closing Date. When Title
Company is in a position to issue the Title Policy and all documents and
funds have been deposited with Title Company, Title Company shall close
Escrow as provided below. The failure
6.
<PAGE>
of Seller or Buyer to be in a position to close Escrow by the Closing Date
shall be a default under this Agreement.
b. PROCEDURE. Title Company shall close Escrow as follows:
(i) RECORD DEED. Record the Deed and deliver the Deed to
Buyer;
(ii) DELIVER PURCHASE PRICE. Deliver the Purchase Price to
Seller by federal wire transfer or cashier's check, or as instructed by
Seller, reduced by the credits to Buyer described in Section 5 (and possible
credits under Sections 12 and 13) and Seller's share of costs and prorations
as provided below; and
(iii) DELIVER TITLE POLICY. Deliver the Title Policy to Buyer.
c. COSTS AND PRORATIONS.
(i) CLOSING COSTS. Buyer and Seller each shall pay its own
attorneys' fees. Buyer shall pay all Escrow fees, recording costs, title
insurance premiums and documentary transfer taxes.
(ii) PRORATIONS. Real estate taxes and assessments (both
principal and interest) shall be the obligation of Chiron.
d. INCORPORATION. The parties shall execute for the benefit of
Title Company such additional Escrow instructions as Title Company shall
require, provided that the additional Escrow instructions do not modify or
alter the terms of this Agreement.
12. EMINENT DOMAIN.
a. CREDIT OR ASSIGNMENT OF PROCEEDS. If there is an exercise of
the power of eminent domain by a governmental agency in regard to all or any
portion of the Property, all the proceeds from the eminent domain action
(with interest at the rate of five percent (5%) per annum from the date the
proceeds are received by Seller to the Closing Date) shall be credited
against the Purchase Price (subject to the limitation in Section 12.b). If
the proceeds from the eminent domain action have not been paid to Seller as
of the Closing Date, Seller shall assign to Buyer all rights to the proceeds
(subject to the limitation in Section 12.b), including the sole right to
settle or approve the settlement of any eminent domain action.
7.
<PAGE>
b. LIMITATION ON CREDIT OR ASSIGNMENT. The maximum amount of the
proceeds credited to the Purchase Price or assigned by Seller to Buyer under
Section 12.a shall be the Purchase Price, with Seller to retain the right to
receive the balance of the proceeds, unless Buyer delivers the Exercise
Notice to Seller prior to expiration of the Option Term.
13. DAMAGE AND DESTRUCTION.
a. CREDIT OR ASSIGNMENT OF INSURANCE PROCEEDS. If there is damage
or destruction of all or any portion of the Property, all of the insurance
proceeds paid to Seller in connection with the restoration of the Property
(with interest at the rate of five percent (5%) per annum from the date the
insurance proceeds are received by Seller to the Closing Date) shall be
credited against the Purchase Price (subject to the limitation in Section
13.b). If the insurance proceeds have not been paid as of the Closing Date,
Seller shall assign to Buyer all the rights to the insurance proceeds
(subject to the limitation in Section 13.b), including the sole right to
settle or approve the settlement of any action against the insurer.
b. LIMITATION ON CREDIT OR ASSIGNMENT. The maximum amount of the
insurance proceeds credited to the Purchase Price or assigned by Seller to
Buyer under Section 13.a shall be the Purchase Price, with Seller to retain
the right to receive the balance of the insurance proceeds, unless Buyer
delivers the Exercise Notice to Seller prior to expiration of the Option Term.
14. TAX DEFERRED EXCHANGE.
a. COOPERATION; INDEMNITY. To the extent requested by Seller,
Buyer shall cooperate with Seller in effecting the transfer of the Property
as an exchange in accordance with Section 1031 of the Code. Seller shall
indemnify, defend, protect and hold harmless Buyer for all costs, expenses,
liabilities and claims arising out of the exchange. Any such exchange shall
not delay the Close of Escrow, require Buyer to incur any additional costs or
expenses (except as provided in Section 14.b), or require Buyer to take title
to any replacement property for the benefit of Seller.
b. REIMBURSEMENT BY SELLER. Seller shall reimburse Buyer for all
additional costs and expenses resulting from Seller effecting the transfer
of the Property as an exchange under Section 1031 of the Code (I.E., costs
and expenses in addition to the costs and expenses Buyer would have incurred
if the transfer were a sale). Buyer shall not incur in excess of Five
Thousand Dollars ($5,000.00) of additional costs and expenses for which Buyer
will seek reimbursement from Seller without Seller's prior consent.
8.
<PAGE>
15. BROKERAGE COMMISSION. Buyer and Seller each warrants for the
benefit of the other that no brokerage commission or finder's fee shall be
due with respect to the sale of the Property by Seller to Buyer other than
the fees due from Buyer to AMB Corporate Real Estate Advisors, Inc. ("AMB")
under a separate agreement for services performed by AMB on Buyer's behalf.
Buyer and Seller each shall indemnify, defend and hold the other harmless
from and against any loss, cost or expense, including attorneys' fees and
court costs, resulting from any claim for a commission or fee by any broker
or finder, resulting from activities of the indemnifying party in connection
with the execution of this Agreement or Buyer's purchase of the Property.
16. SUCCESSORS AND ASSIGNS.
a. GENERAL PROVISION. The terms, covenants and conditions herein
contained shall be binding upon and inure to the benefit of the successors
and assigns of the parties hereto.
b. ASSIGNMENT BY BUYER. Buyer shall have the right to assign its
rights and obligations under this Agreement without the consent of Seller,
except that Seller shall have the right to either consent to or reject an
assignee that, in Seller's reasonable opinion, is not sufficiently
financially capable to carry out the obligations of Buyer under this
Agreement.
c. ASSIGNMENT BY SELLER. Seller shall have the right, without
Buyer's consent, to assign all his right, title and interest in the Property
to a living trust which is under the sole control of Seller.
17. SURVIVAL. The terms, covenants and conditions herein contained
required to be operative after delivery of the Deed or after termination or
expiration of the Option, in order to be fully effective, shall be operative
and shall not be deemed to have merged in the Deed or to terminate upon
termination of this Agreement or the Option.
18. MEMORANDUM OF OPTION AGREEMENT.
a. RECORDATION. Prior to delivery of the Option Payment, the
parties shall cause to be recorded in the Official Records of Alameda County
the Memorandum of Option Agreement, attached hereto as EXHIBIT E.
b. QUITCLAIM. Buyer shall deliver to Title company a quitclaim
deed concurrently with execution of this Agreement. The quitclaim deed,
which shall remove the Memorandum of Option Agreement from title to the
Property, shall be held by
9.
<PAGE>
Title Company for recordation if, for any reason, the option is not
exercised within the Option Term.
19. SPECIFIC PERFORMANCE. The parties hereby acknowledge that, in the
event of a breach or a threatened breach of any of the provisions of this
Agreement by a party, damages are an inadequate remedy. Accordingly, without
limiting any other remedies of either party, the obligations of the parties
under this Agreement may be enforced by specific performance.
20. ENTIRE AGREEMENT. This Agreement contains all of the covenants,
conditions and agreements between the parties regarding the Option and shall
supersede all prior correspondence, agreements and understandings, both
verbal and written, between the parties regarding the Option. No addition or
modification of any term or provision shall be effective unless set forth in
writing and signed by both Seller and Buyer.
21. ASSURANCES FROM EXISTING LENDER.
a. NO RECOGNITION AGREEMENT INITIALLY. Prior to execution of
this Agreement, it was not practical to obtain a recognition agreement for
this Agreement from Home Savings in connection with the Home Savings Deed
of Trust. As a result, Seller and Buyer agree as follows:
(i) RIGHT TO CURE. If Seller is in default of its
obligations under the Home Savings Deed of Trust, Buyer shall have the right,
but not the obligation, to cure the default and credit against the rent due
under the Lease any amounts expanded by Buyer in connection with the cure
(with any balance credited to the Purchase Price); and
(ii) PURCHASE AT FORECLOSURE. If Home Savings (or its
successor) begins a foreclosure action in connection with the Property, Buyer
shall have the right to purchase the Property at the foreclosure sale so long
as the foreclosure did not result either directly or indirectly from any
act(s) of Buyer or its agents, assign(s), representative(s), related
entity(ies), or those acting in concert with Buyer, whether by breach of any
agreements between Buyer and Seller or otherwise, and otherwise subject to
Seller's rights as set forth in Section 2l.b below.
b. RIGHT TO SEEK RECOGNITION AGREEMENT. After this Agreement is
executed by Buyer and Seller, Buyer shall have the right to seek a
recognition agreement for this Agreement from Home Savings in connection with
the Home Savings Deed of Trust. Actions by Buyer in seeking the recognition
agreement shall not adversely impact Seller. Buyer assumes and shall
compensate Seller for any adverse impact on Seller as a result of Buyer
10.
<PAGE>
seeking a recognition agreement. For purposes of this section 21.b,
adverse impacts include, but are not limited, to any charges imposed on
Seller which are over and above Seller's obligation to Home Savings, either
financially or temporally, or which result in a reduction in any manner of
Seller's interest in the Property, including, but not limited to,
foreclosure of Seller's interest in the Property, whether the Property is
purchased at any foreclosure by Buyer or others.
22. NO FURTHER ENCUMBRANCES. Seller shall not subject all or any
portion of the Property to any lien or encumbrance or otherwise revise the
status of the title to the Property after the date of this Agreement;
provided, however, that Seller may subject the Property to liens for monetary
obligations to the extent that the credits to which Buyer is entitled (under
Section 5(ii)) do not exceed eighty percent (80%) of the Purchase Price.
23. ATTORNEYS' FEES. In the event of any litigation regarding the
rights and obligations of the parties under this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees and court costs.
24. NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and delivered either by hand or deposited in
the United States mail first-class, postage prepaid, and addressed to Buyer
at Buyer's Address (as shown on Page i) or to Seller at Seller's Address (as
shown on Page i), as applicable. The foregoing addresses may be changed by
written notice to the other party as provided in this Section.
25. LEASE. Except as provided in this Agreement, the Lease shall
remain in full force and effect and unamended. In the event of conflict
between the terms of this Agreement and the terms of the Lease, the terms of
the Lease shall control.
26. EXHIBITS. Exhibits A, B, C, D and E are attached hereto and
incorporated herein by reference thereto.
27. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
28. CONFIDENTIALITY. Seller and Buyer agree to keep confidential, and
not publicly disclose, the terms of this Agreement and the transaction
contemplated hereby. However, both Buyer and Seller may disclose the terms
of this Agreement to: (i) their respective lenders, consultants, agents,
architects, independent contractors, attorneys or surveyors associated with
the purchase and sale of the Property; (ii) any governmental
11.
<PAGE>
authority to which such disclosure is required by law; or (iii) any third
party to whom the non-disclosing party to this Agreement has given its
prior written consent for such a disclosure.
29. TIME. Time is of the essence of every provision herein contained.
IN WITNESS WHEREOF, the parties hereto have executed one (1) or more
copies of this Agreement, on the date(s) set forth below, as of the day and
year first above written.
"Seller"
/s/ H.B. Chapman Jr.
------------------------------
HAROLD B. CHAPMAN, JR.
an individual
Date: June 7, 1995
------------------------
"Buyer"
CHIRON CORPORATION,
a Delaware corporation
By: /s/ Dennis L. Winger
--------------------------
Name: Dennis L. Winger
-------------------------
Its: Vice President
-------------------------
Date: June 7, 1995
-------------------------
12.
<PAGE>
EXHIBIT A
----------
PROPERTY DESCRIPTION
CITY OF EMERYVILLE
PARCEL "B", PARCEL MAP NO. 2108, FILED JUNE 17, 1977, IN MAP BOOK
97, PAGE 40, ALAMEDA COUNTY RECORDS.
ASSESSOR'S PARCEL NO. 049-1041-049
<PAGE>
EXHIBIT B
----------
LEASE
THIS LEASE AGREEMENT is made as of this 1st day of July, 1983, between
H. B. CHAPMAN, JR. ("Chapman"), an individual, and CETUS CORPORATION, a
Delaware corporation ("Cetus").
In consideration of their mutual promises herein, the parties agree as
follows;
LEASED PREMISES
1.1 DEFINITION OF PREMISES. Chapman hereby leases to Cetus, and
Cetus hereby hires from Chapman, for the term and subject to the provisions
of this Agreement that certain real property (the "Premises") commonly
known as 1400 and 1450 53rd Street, Emeryville, California and more
particularly described by metes and bounds on Exhibit A hereto and depicted
on the size plan attached as Exhibit A-1 hereto. The Premises include the
land described on Exhibit A, all appurtenances thereto and all improvements
thereon, including without limitation two buildings (the "Buildings")
described as Building M and Building G on Exhibit A-1, a parking lot, a
loading dock, driveway access to the loading dock, driveway access to the
parking lot, a bridgeway connection between the Buildings and the property
owned by Cetus at 4560 Horton Street, Emeryville, California, exterior
walkways, stairways and other facilities exterior to the Buildings. Cetus
acknowledges and agrees that it receives the Premises in "as is" physical
condition.
<PAGE>
1.2 LESSOR'S TITLE. Chapman warrants that he has fee simple title to
the real property described on Exhibit A and Exhibit A-1, the improvements
thereon and the appurtenances thereto. Chapman shall vacate Area 1 of
Building G, as marked in blue on Exhibit A-1, by August 1, 1983. Chapman
shall vacate Area 2 of Building G, as marked in red on Exhibit A-1, by
September 1, 1983. Chapman shall vacate Area 3 of Building G, as marked in
yellow on Exhibit A-1, and shall cause the existing tenant of Area 3 to
vacate the Premises, by October 1, 1983. Chapman shall secure to Cetus the
quiet, peaceful and undisturbed possession of the Premises during the term
of this Lease against any persons who claim any title to or interest in the
Premises; provided, however, that Cetus acknowledges the rights of the
existing tenants of Building M and the existing tenant of Area 3 of
Building G pursuant to the leases (the "Prior Leases") described on Exhibit
B hereto; provided further however that as of the date hereof Chapman
hereby (a) represents and warrants that no default exists under any of the
Prior Leases, (b) assigns to Cetus all of his right, title and interest
pursuant to the Prior Leases including all right to modify or extend the
Prior Leases, (c) delivers to Cetus subordination and attornment agreements
in favor of Cetus from each of the tenants ("Prior Tenants") under the
Prior Leases, and (d) confirms that upon expiration or earlier termination
of
-2-
<PAGE>
any Prior Lease, Cetus shall have without exception the quiet, peaceful,
undisturbed possession of that portion of the Premises covered by the Prior
Lease.
1.3 HORTON STREET. The term "Horton Street" refers to the paved
automobile access route (I.E., paved road) on the immediate west side of
Building G. So long as Cetus retains control of Horton Street it agrees to
maintain it at its own expense.
TERM
2.1 TERM AND OPTIONS TO RENEW.
The term of this Lease shall be 7 years from July 1, 1983 (the
"Commencement Date"). Cetus shall, however, have the option to extend this
Lease and all of its other provisions for 7 additional 2-year terms. The
exercise of each of these 2 year options shall be automatic unless Cetus
gives at least 60 days notice of its intent not to exercise each such
option. However, if not more than 70 days prior to the expiration of the
then current term Chapman delivers to Cetus written notice that Chapman
seeks notification as to whether Cetus is exercising its option to extend,
then Cetus must deliver to Chapman within 10 days after Cetus receives such
notice from Chapman Cetus' written notification as to whether Cetus is
exercising its option to extend. If Cetus does not deliver the notices
required of it pursuant to this Section 2.1, then Chapman shall be under no
obligation to further extend the Lease.
-3-
<PAGE>
RENT
3.1 RENT. Rent for the premises shall be $57,362.50 per month.
3.2 PERIODIC PAYMENTS OF RENT. The rent shall be paid in equal
monthly installments due on the first day of each month; except, however,
that on or before July 1, 1983 Cetus shall pay Chapman the monthly rent for
the month of July 1983 and for the month of June 1984. Cetus' prepayment
of the rent for the month of June 1984 shall be the only advance rental
payment required under this Lease. If this Lease terminates on a day other
than the last day of a calendar month, the monthly rental for the last
fractional month shall be prorated.
3.3 MANNER OF PAYMENT. Rental shall be paid to Chapman in lawful
money of the United States of America at the address set forth herein for
delivery of notices to Chapman or to such other person or at such other
place as Chapman may from time to time designate in writing.
3.4 PRIOR LEASES. The parties acknowledge that pursuant to the Prior
Leases portions of the Premises are currently rented out to various other
tenants. Cetus acknowledges and agrees that in leasing the Premises from
Chapman it takes "subject to" the Prior Leases. Cetus understands and
accepts that Chapman makes no guarantees as to the validity or terms of the
Prior Leases. However, along with the right to occupy the Premises, Cetus
by execution of this Lease gains the right to sublease space in the
Premises to new
-4-
<PAGE>
tenants and collect rents from existing tenants and to negotiate new rental
terms with Cetus' subtenants or the said existing tenants. By executing
this Lease Cetus also agrees that it relieves Chapman of the responsibility
of removing existing tenants for violation of provisions of their rental
agreements occurring from and after the Commencement Date and agrees to
waive any claims against Chapman for any breaches of the Prior Leases
occurring after the Commencement Date. Cetus also agrees that it waives
any claims against Chapman for any damage Cetus may have sustained or may
in the future sustain as a result of Chapman's failure to evict Roger
Schmidt.
TAXES
4.1 TAXES. The parties agree that the real property tax obligation
on the Premises which accrues during the term of this Lease shall be paid
by Cetus.
UTILITIES
5.1 UTILITIES. Immediately upon the Commencement Date Cetus shall
become solely responsible for payment of all utilities supplied to the
Premises including, but not limited to, gas, electricity and water and
shall immediately notify said utility suppliers. Cetus may thereafter
charge each other tenant on the Premises its prorated share of the cost of
each said utility.
5.2 METERING. Cetus may at its own expense install any utility
metering system it desires.
-5-
<PAGE>
USE
6.1 PERMITTED USE. Cetus may use the Premises for all purposes
consistent with the current zoning laws to which the Premises are subject.
6.2 SAFETY. Should Cetus cease its use of the Premises while Chapman
remains owner of the Premises, Cetus agrees to leave the Premises in a
condition which is safe and nonhazardous to human and other forms of life.
Cetus agrees that if after it has so left the Premises an unsafe condition
caused and left by Cetus is responsible for injury to any individual, Cetus
will hold Chapman harmless and indemnify him for any and all costs or
compensation reasonably paid by Chapman as a result of such injury. Cetus
also agrees to fully reimburse Chapman for any expenditures reasonably made
by Chapman for the purpose of making the Premises safe after Cetus has left
the Premises. The covenants contained in this Section 6.2 are personal to
Chapman and are not transferable to his successors and assigns and further
shall expire on the second anniversary of the date Cetus ceases to use the
Premises.
BUILDING SERVICES
7.1 PROVISIONS BY CETUS. Cetus, at Cetus' expense, shall furnish the
Premises with such (i) elevator service, (ii) lighting replacement (for
building standard lights) in common areas, (iii) restroom supplies in
common areas, and (iv) janitor service in common areas as Cetus may require
or as is required pursuant to the Prior Leases.
-6-
<PAGE>
SECURITY
7.2 SECURITY. Throughout the term hereof Cetus shall provide for
the security of the Premises, including the breezeway, as it sees fit, and
may, at Cetus' expense, implement an increased security system.
7.3 LOADING DOCK-BREEZEWAY DOOR. Cetus shall be responsible for the
security of the door between the loading dock and the breezeway, which is
located at the north end of the breezeway.
MAINTENANCE; REPAIRS
8.1 CETUS' OBLIGATIONS. Cetus, at Cetus' expense, shall at all times
during the term hereof maintain all public and common areas (including
lobbies, stairs, elevators, corridors and restrooms), windows, doors, the
breezeway, the mechanical, plumbing and electrical equipment, the parking
area, and foundations, exterior walls and roof, of the Premises all as
Cetus may require or as may be required of the landlord pursuant to terms
of the Prior Leases.
8.2 CETUS' GENERAL OBLIGATIONS. Cetus shall, at all times during the
terms hereof and at Cetus' sole cost and expense, keep the Premises in good
order, condition and repair, excepting only that portion of the Premises
for which tenants under Prior Leases are responsible and ordinary wear and
tear and damage to the Premises by fire, earthquake, the elements or other
causes beyond Cetus' reasonable control.
-7-
<PAGE>
8.3 CETUS' RIGHTS WITH RESPECT TO HVAC. Cetus shall maintain (at
Cetus' expense) the heating, ventilating and air conditioning systems in
the Buildings as Cetus may require or as may be required of the landlord
pursuant to the terms of the Prior Leases. Cetus may, at Cetus' expense,
put into working order, operate and maintain exhaust fans and exhaust
systems on the Premises.
8.4 HEAT. Cetus shall be responsible for providing an operating
boiler system at the Commencement Date for Cetus' and other tenants' use.
Cetus, at Cetus' expense, shall maintain the boiler system during the term
of this Lease and furnish the fuel therefor.
ALTERATIONS
9.1 ALTERATIONS. Cetus may, at Cetus' expense, make any structural
or nonstructural alterations, additions or improvements in, on or to any
space in the Premises as Cetus desires as long as the present value of the
Premises is not diminished and all such changes conform to the requirements
of and receive the approval of all relevant government agencies including
those of the City of Emeryville, County of Alameda, State of California,
and the United States of America. If and only if Cetus intends to make
alterations which materially affect the structure or exterior face of the
Buildings, Cetus shall within 10 days prior to actually commencing work on
said alterations provide to Chapman copies of all plans, prints,
blueprints, details, working drawings and all other relevant
-8-
<PAGE>
construction documents and shall also provide an adequate work space on the
Premises for Chapman to review the said documents. Cetus shall not have
the right to actually commence physical work on alterations which
materially affect the structure or exterior face of the Buildings without
the prior written approval of Chapman; provided however that Chapman shall
not unreasonably withhold prior written approval, and if Chapman has not
approved or disapproved of the alterations within 10 days of submission of
the material plans and specifications therefor, he shall be deemed to have
granted prior written approval.
9.2 MECHANICS' LIENS. Cetus shall keep the Premises free from any
liens arising out of any work which it causes to be performed for materials
furnished to or obligations incurred by Cetus. Each party shall have the
right to post and keep posted on the Premises any notices that may be
provided by law or which either party may deem to be proper for the
protection of the Premises against such liens. If within 10 days following
the imposition of any lien the obligated party has not caused the lien to
be released of record by payment or by posting of a proper bond, the other
party, in addition to all other remedies provided in this Lease and by law,
shall have the right, but shall not be obligated, to cause the lien to be
released by such means as it deems proper, including payment of the claim
giving rise to the lien. All payments made and expenses incurred by that
party in connection with the lien shall be reimbursed to that party.
-9-
<PAGE>
INSURANCE
10.1 PROPERTY INSURANCE. Cetus at its own expense shall carry
throughout the term hereof property insurance on the Premises in the amount
of the fair market value of the Buildings and improvements
("Improvements"). The fair market value of the Improvements shall be
redetermined at least once every two years in a manner reasonably
acceptable to both parties and to Cetus' insurance carrier by an
independent appraiser. Such appraisal shall delineate the amount of
coverage for (a) the exterior walls and the roof of each of the two
Buildings, the on-site improvements and other improvements made to the
Premises by Chapman or his predecessors in interest at his or their
expense, and (b) the leasehold improvements previously or hereafter made to
the Premises by Cetus at its expense and Cetus' fixtures and personality.
The insurance shall name H. B. Chapman, Jr. as an additional insured. Such
insurance shall contain coverage against loss or damage by fire and such
other risks as are now or hereafter included under "All Risks" coverage in
common use for commercial structures in the vicinity of the Premises. Said
coverage may provide for a deductible amount of up to $15,000; Cetus shall
not accept a greater deductible amount without first obtaining Chapman's
prior written consent, which Chapman shall not unreasonably withhold, and
Chapman's consent shall be presumed if Chapman does not object to a
proposed greater deductible within 20 days after notice thereof from Cetus.
-10-
<PAGE>
10.2 LIABILITY INSURANCE. Cetus, at its own expense, shall carry
throughout the term hereof comprehensive general liability insurance to
protect against liability to the public incident to or resulting from any
accident on the Premises. The coverage of such insurance shall be not less
than $1,000,000 for any one person injured, $3,000,000 for any one accident
and $1,000,000 for property damage. By endorsement Cetus shall include
contractual obligation protection under said liability coverage. In any
policy of liability insurance purchased by either party to this Lease the
other party shall be named as a co-insured.
10.3. CHAPMAN'S SEPARATE COVERAGE. Chapman, at his expense, may
also place any other or additional insurance coverage he desires, which
shall be in Chapman's name and in which Cetus shall have no interest.
10.4 BOILER AND MACHINERY INSURANCE. Cetus at its cost shall maintain
boiler and machinery insurance on all boilers, heating and air conditioning
equipment and other standard equipment in, on or about the Buildings
routinely covered by such insurance, if any of these items and the damage
that may be caused by them are not covered by the "All Risk" insurance
referred to in Section 10.1. The boiler and machinery insurance shall have
limits of not less than $100,000 per occurrence.
-11-
<PAGE>
10.5 SUBROGATION. Each party shall cause each insurance policy obtained
by it and relating to the Premises to provide that the insurance company
waives all right of recovery by way of subrogation against the other in
connection with any damage covered by any policy.
10.6 FORM OF POLICIES. The policies evidencing the coverage carried by a
party under this Article 10 shall be issued by insurance companies licensed
to do business in the State of California and provide that (a) the coverage
is primary and noncontributing to any insurance that may be carried by the
other party; (b) the coverage cannot be cancelled, modified, reduced or
otherwise materially changed except after 30 days prior written notice to the
other party; and (c) the other party shall be included as an additional
insured.
10.7 PROCEDURES AND REMEDIES. The party hereto responsible for carrying
insurance under this Article 10 shall deliver to the other party, in the
manner required for notices, (a) certificates or binders evidencing all
insurance policies and endorsements this Lease requires the party to carry,
and (b) proof satisfactory to the other party that the premiums for the
procurement and maintenance of such coverage are fully paid, all within the
following time limits:
(i) for insurance required at the commencement of the term of this
Lease within 60 days from the Commencement Date; and
-12-
<PAGE>
(ii) for any renewal or replacement of a policy already in
existence, at least 30 days before expiration or other termination of the
existing policy.
If a party fails or refuses to procure or to maintain the insurance
coverage required hereunder or fails or refuses to furnish the other party
with proof that said coverage has been procured and is in force and paid
for, the other party shall have the right, without notice, but without any
obligation so to do, to procure and maintain such coverage. The defaulting
party shall reimburse the curing party on demand for any premiums the
latter so pays.
COMPLIANCE WITH LAW
11.1 COMPLIANCE WITH LAW. Cetus shall at its sole cost and expense
promptly comply with all laws, statutes, ordinances and governmental rules,
regulations or requirements now in force or which may hereafter be in force,
with the requirements of any board of fire underwriters or other similar body
now or hereafter constituted, with any direction or occupancy certificate
issued pursuant to any law by any public officer or officers, as well as the
provisions of all recorded documents affecting the Premises, insofar as they
relate to the condition, use or occupancy of the Premises, excluding
requirements of code compliance and or structural changes not related to
Cetus' acts.
-13-
<PAGE>
ASSIGNMENT AND SUBLETTING
12.1 USE CONSISTENT WITH ZONING. While Cetus may assign or sublease its
interest under the Lease, any such assignment or sublease shall be invalid
and shall constitute a breach of the Lease if the assignee or sublessee
uses the assigned or subleased premises in a manner which is inconsistent
with the then current zoning laws to which the Premises are subject. Any
transfer of this Lease by operation of law, whether resulting from death,
merger, consolidation or liquidation, shall constitute an assignment for
purposes of this Section.
12.2 SUBLETTING: NOTICE TO CHAPMAN. If at any time or from time to time
during the term of this Lease Cetus desires to sublet all or any part of the
Premises, Cetus shall give notice to Chapman setting forth the terms of the
proposed subletting and the space so proposed to be sublet. No sublease
shall be valid and no sublessee shall take possession of the Premises
subleased until an executed counterpart of such sublease has been delivered to
Chapman.
12.3 CHAPMAN'S RIGHT TO ENCUMBER. At any time during the term of this
Lease, Chapman, with Cetus' prior written consent and subject to Cetus'
rights under this Lease, may encumber the Premises with a deed of trust or
mortgage to secure a loan to Chapman. If Chapman exercises his right to
encumber the Premises in accordance with this Section 12.3, Cetus agrees to
subordinate to second position the Chapman Note (as defined
-14-
<PAGE>
below) and the deed of trust securing the Chapman Note to the new
encumbrance, pursuant to such subordination documentation as may be
reasonably acceptable to Cetus; provided, however, that if the prior
encumbrance is foreclosed or enforced, this Lease shall not be terminated
nor any of Cetus' rights hereunder disturbed, including without limitation
Cetus' rights to offset its payment obligations hereunder by the amount of
any delinquent payments under the Chapman Note.
ENTRY BY CHAPMAN
13.1 ENTRY BY CHAPMAN. Chapman may upon 48 hours prior written notice
enter the Premises at reasonable hours to (a) inspect the same, (b) exhibit
the same to prospective lenders, (c) determine whether Cetus is complying
with all its obligations hereunder, and (d) post notices of
nonresponsibility. Chapman shall further have the right, without notice to
Cetus, of ingress and egress over the easement (the "Dock Easement") depicted
in green and labeled Dock Easement on Exhibit A-1 hereto; provided, however,
that Chapman shall exercise such easement rights in a manner as will not
interfere with Cetus' use of the Dock Easement or the remainder of the
Premises.
-15-
<PAGE>
DEFAULT
14.1 CHAPMAN'S NOTE. Attached hereto as Exhibit C is a copy of Chapman's
promissory note ("Chapman's Note") dated December 5, 1980 in favor of Cetus
in the principal amount of $500,000.00. As of the Commencement Date
Chapman's Note has an outstanding principal balance of $447,788; interest
resuming on July 1, 1983. Cetus' payment obligations hereunder are
conditioned upon the payment by Chapman to Cetus of each installment under
the Chapman Note on or before its due date, and Cetus shall have the right
to offset against payments otherwise due hereunder the amount of any
delinquent payment of principal and/or interest under the Chapman Note.
14.2 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events ("events of default") shall constitute a substantial breach of this
Lease by Cetus:
a. FAILURE TO PAY RENT. Cetus fails to pay any rental in full
when the same becomes due, if such failure is not due to Cetus' exercise of
its offset rights pursuant to Section 14.1 above and if such failure
continues for more than 10 days after Cetus' receipt from Chapman of notice
of the amount due; or
b. FAILURE TO PAY OTHER SUM. Cetus fails to pay any other sum
when the same becomes due, if such failure is not due to Cetus' exercise of
its offset rights pursuant to
-16-
<PAGE>
Section 14.1 above and if such failure continues for more than 10 days
after Cetus' receipt from Chapman of notice of the amount due; or
c. FAILURE TO PERFORM. Cetus fails to perform or observe any of
Cetus' other obligations under this Lease, if such failure continues for more
than 30 days after notice from Chapman or from any governmental body with
jurisdiction over the Premises describing the delinquent obligation;
provided, however, that if by its nature the breach cannot be cured within 30
days but Cetus nevertheless has the capacity to cure the breach, Cetus may
have such longer period as is necessary upon the condition that Cetus
promptly commences the curing of the breach within the 30-day period and
thereafter diligently pursues the cure to completion; or
d. BANKRUPTCY. Cetus makes a general assignment for the benefit
of creditors, or admits in writing its inability to pay its debts as they
become due or files a petition in bankruptcy, or is adjudicated as bankrupt
or insolvent or files a petition in any proceeding seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, or files an answer admitting, or fails timely to contest, the
material allegations of a petition filed against it in any such proceeding,
or seeks or
-17-
<PAGE>
consents to or acquiesces in the appointment of any trustee, receiver or
liquidator of Cetus or any material part of its properties; or
e. REORGANIZATION. Any proceeding against Cetus seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation is not dismissed within 90 days after the commencement thereof, an
appointment is made without the consent or acquiescence of Cetus of a
trustee, receiver or liquidator of Cetus or of any material part of its
properties which is not vacated within 90 days thereafter; or
f. LEVY. This Lease or any estate of Cetus hereunder is levied
upon under any attachment or execution and such attachment on execution is
not vacated within 30 days thereafter.
14.2 CHAPMAN'S REMEDIES UPON AN EVENT OF DEFAULT
a. TERMINATION. If an event of default occurs, Chapman may give
a written termination notice to Cetus, and on the date specified in the
notice (which shall not be less than three days after the giving of such
notice) this Lease shall terminate, unless on or before such date all arrears
of rental and all other sums payable by Cetus under this Lease and all costs
and expenses incurred by or on behalf of Chapman have been paid by Cetus at
the time existing have been fully remedied to the reasonable satisfaction of
Chapman.
-18-
<PAGE>
b. CONTINUATION OF LEASE, Even though Cetus has breached this
Lease or abandoned the Premises, this Lease shall continue in effect for so
long as Chapman does not terminate this Lease, and Chapman may enforce all
rights and remedies including the right to recover the rental as it becomes
due. Acts of maintenance or preservation of or efforts to relet the Premises
or the appointment of a receiver upon initiative of Chapman to protect
Chapman's interest under this Lease shall not constitute a termination of
this Lease.
c. OTHER RELIEF. The remedies provided for in this Lease are in
addition to any other remedies available to Chapman at law or in equity by
statute.
ATTORNEYS' FEES
15.1 ATTORNEYS' FEES in the event of any action or proceeding brought by
either party against the other under this Lease, the prevailing party shall
be entitled to recover reasonable attorneys' fees.
DAMAGE OR DESTRUCTION
16.1 CETUS' OBLIGATION TO RESTORE. If there is damage to the Premises
caused by fire or any casualty which is covered by the policy of fire and All
Risks coverage insurance described in Section 10.1 above, and if the proceeds
to Cetus therefrom are sufficient to cover the full cost of the restoration,
Cetus shall forthwith repair the damage, subject to the provisions of
Sections 16.3 and 16.4 below, and this Lease shall remain in
-19-
<PAGE>
full force and effect. Rental hereunder shall abate while the repair work is
underway in proportion to the degree to which the Premises are rendered
unusable.
16.2 CETUS' OPTION TO RESTORE. If the damage results from a casualty
not covered by fire or All Risks coverage insurance or if the proceeds to
Cetus from such insurance are insufficient to cover the full cost of the
restoration, then Cetus may, at its option, upon written notice to Chapman,
within 30 days after the date of such fire or other casualty, restore the
damage, and this Lease shall remain in full force and effect, subject to the
abatement provision set forth in Section 16.1 above.
16.3 OPTION TO TERMINATE. If (a) Cetus does not elect to make repairs
pursuant to Section 16.2 above, or (b) either 20% of the floor area of the
Buildings or 20% of the parking lot area or such portion of the Premises as
otherwise interferes with Cetus' operations on the premises are damaged or
destroyed, or (c) the damage occurs during the last 9 months of the term of
this Lease, then Cetus may by written notice to Chapman, given within 30 days
after the date of the fire or other casualty, terminate this Lease as of the
date of the fire or other casualty; provided, however, that if Chapman
promptly makes available to Cetus alternate parking facilities which are
reasonably acceptable to Cetus with respect to quality, area and location,
then Cetus shall not terminate this Lease if the sole grounds for termination
would have been the destruction of 20%
-20-
<PAGE>
or more of the parking lot area. If Cetus elects to terminate under this
paragraph, then Chapman shall be entitled to receive a portion of the
insurance proceeds proportional to the fair market value of the Buildings as
set forth in the fair market value appraisal of the Improvements (Section
10.1).
16.4 TOTAL DESTRUCTION. A total destruction of the Premises shall
automatically terminate this Lease.
EMINENT DOMAIN
17.1 CONDEMNATION. If all or any part of the Premises are taken by
eminent domain, this Lease shall terminate as to the part so taken as of the
date of the taking. In the case of partial taking which exceeds 20% of the
floor area of the Buildings or 20% of the parking lot area or otherwise
materially interferes with Cetus' operations on the Premises, Cetus shall
have the right to terminate this Lease; provided, however, that if Chapman
promptly makes available to Cetus alternate parking facilities which are
reasonably acceptable to Cetus with respect to quality, area and location,
then Cetus shall not terminate this Lease if the sole grounds for termination
would have been the taking of 20% or more of the parking lot area.
17.2 AWARD TO CETUS. If all or any part of the Premises is taken by
eminent domain Cetus shall be entitled to any and all compensation, damages,
income, rents, awards, on any interest whatsoever which may be paid or made
in connection with the value of Cetus' leasehold or purchase interest, its
lease-
-21-
<PAGE>
hold improvements and fixtures, or with loss of or damage to Cetus' personal
property on the Premises or with moving expenses and other severance damages.
17.2 REDUCTION OF RENTAL. In the event of a partial taking of the
Premises which does not result in a termination of this Lease, the monthly
rental thereafter to be paid shall be reduced in proportion to the value of
the Premises taken.
SURRENDER
18.1 SURRENDER OF LEASE NOT MERGER. The voluntary or other surrender of
this Lease by Cetus, or a mutual cancellation thereof, shall not work a
merger, and shall at the option of Chapman, terminate all or any existing
subleases or subtenancies, or may, at the option of Chapman, operate as an
assignment to Chapman of any or all such subleases or subtenancies.
18.2 REDELIVERY OF PREMISES TO LESSOR. Upon termination of this Lease
for any reason other than acquisition of title to the Premises by Cetus,
Cetus shall surrender the Premises to Chapman in good order, condition and
repair, excepting only ordinary wear and tear, damage occasioned by the act
or omission of Chapman and damage thereto by fire, earthquake, the elements
or causes beyond Cetus' reasonable control.
-22-
<PAGE>
HOLDING OVER
19.1 HOLDING OVER. If, without objection by Chapman, Cetus holds
possession of the Premises after expiration of the term of this Lease, Cetus
shall become a tenant from month to month upon the same terms herein
specified. Each party shall give the other written notice at least one month
prior to the date of termination of such monthly tenancy of its intention to
terminate such tenancy.
SIGNS
20.1 SIGNS. Chapman shall permit Cetus to have sign identification on
and within the Buildings which is compatible with the aesthetics thereof.
BROKERS AND FINDERS
21. BROKERS AND FINDERS. Each party represents that it has not had
dealings with any real estate broker, finder, or other person with respect to
this Lease. Each party shall hold harmless the other party from all damages
resulting from any claims that may be asserted against the other party by any
broker, finder or other person, with whom the party has or had purportedly
dealt.
MISCELLANEOUS
22.1 WAIVER. The waiver by a party of any agreement, condition or
provision herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other agreement, condition or provision,
nor shall any custom or practice which may grow up between the parties in the
-23-
<PAGE>
administration of the terms hereof be construed to waive or to lessen the
rights of a party to insist upon the performance by the other party in strict
accordance with the terms of this Lease.
22.2 NOTICES. All notices and demands which may or are required to be
given by either party to the other hereunder shall be in writing and shall be
deemed to have been fully given when personally served (but upon an officer
of Cetus in the case of Cetus) or when deposited in the United States mail,
certified or registered, postage prepaid, and addressed as follows:
To Chapman at 1450 - 53rd Street
Emeryville, California 94608
To Cetus at 1400 53rd Street
Emeryville, California 94608
or such other place as a party may designate by notice to the other.
22.3 COMPLETE AGREEMENT. There are no oral agreements between Chapman
and Cetus affecting this Lease, and this Lease supersedes and cancels any and
all previous negotiations, arrangements, agreements and understandings, if
any, between Chapman and Cetus pertaining to the subject matter of this Lease
or the Buildings; provided, however, that until such time as Chapman's
covenants pursuant to Section 1.2 hereof are satisfied, then Cetus' rights
pursuant to that certain Optional Exchange Agreement, between Cetus and
Chapman, dated January 1,
-24-
<PAGE>
1982, shall survive. There are no representations, warranties or
inducements, express or implied, between Chapman and Cetus, except as stated
in this Lease.
22.4 CORPORATE AUTHORITY. If Cetus signs as a corporation, each of the
persons executing this Lease on behalf of Cetus does hereby covenant and
warrant that Cetus is a duly authorized and existing corporation, that Cetus
does and is qualified to do business in California, that the corporation has
full right and authority to enter into this Lease, and that each of the
persons signing on behalf of the corporation is authorized to do so.
22.5 TIME IS OF THE ESSENCE. Time is of the essence of this Lease and
each and all of its provisions.
22.6 HEIRS, ETC., BOUND BY AGREEMENT. Except as provided in Section 6.2
above, the agreements, conditions and provisions herein contained shall,
subject to the provisions as to assignment, apply to and bind the heirs,
executors, administrators, successors and assigns of the parties hereto.
22.7 SEVERABILITY. If any provision of this Lease in determined to be
illegal or unenforceable, such determination shall not affect any other
provision of this Lease and all such other provisions shall remain in full
force and effect.
22.8 GOVERNING LAW. This Lease shall be governed by and construed
pursuant to the laws of the State of California.
-25-
<PAGE>
22.9 CAPTIONS. The captions in this Lease are for convenience only, are
not a part of this Lease and do not in any way limit or amplify the
provisions hereof.
22.10 MEMORANDUM. Upon the request of a party, Chapman and Cetus
shall execute in recordable form a Memorandum of this Lease, which the
requesting party may record.
22.11 FURTHER INSTRUMENTS. From time to time prior to and after the
execution of this Lease, each party shall execute and deliver such
instruments and other documents as may be reasonably requested by the other
party or necessary to carry out the purposes and intent of this Lease.
EXHIBITS, ADDENDA
23.1 EXHIBITS, ADDENDA. The exhibits hereto and addenda, if any, are
made a part of this Lease.
Dated: June 23, 1983 \s\ Harold B. Chapman, Jr.
------------------------------
HAROLD B. CHAPMAN, JR.
Dated: June 23, 1983 CETUS CORPORATION
By: /s/ Signature Unreadable
-------------------------
Title: Vice President and
General Counsel
----------------------
-26-
<PAGE>
EXHIBIT A
BASIS OF BEARINGS
The northerly line of 53rd St. at Horton St. Taken as S72 degrees 28'W.
LEGAL DESCRIPTION
That parcel of land in the city of Emeryville, County of Alameda, State of
California, described as follows:
Parcel "B" of Parcel map No. 2108, filed June 17, 1977, map book 97, pages
40 and 41, Alameda County records, more particularly described as follows:
Beginning at the intersection of the north line of 53rd St. and the east
line of Horton Street thence following said east line of Horton Street
north 17 degrees 32' west 299.19 feet; thence leaving said east line of
Horton Street north 72 degrees 28' east 100.17 feet; thence north 17
degrees 32' west 43.00 feet; thence north 72 degrees 28' east 42.83 feet;
thence north 17 degrees 32' west 43.00 feet; thence north 72 degrees 28'
east 131.59 feet; thence south 17 degrees 32' east 385.19 feet to said
north line of 53rd Street; thence following said line south 72 degrees 18'
west 274.59 feet to the point of beginning.
<PAGE>
AMENDMENT TO LEASE
This AMENDMENT TO LEASE (the "Amendment") is made as of this 20th day of
March 1990, between Harold B. Chapman, Jr., an unmarried man ("Chapman"),
and Cetus Corporation, a Delaware corporation ("Cetus") (collectively the
"parties").
RECITALS
A. Chapman is the lessor and Cetus is the lessee under that
certain Lease, dated July 1, 1983 (the "Lease"), between Cetus and Chapman
concerning the premises commonly known as M&G Buildings, located at 1400
and 1450 53rd Street, Emeryville, California. Terms defined in the Lease
shall have the same meaning when used in this Amendment.
B. Pursuant to that certain Settlement Agreement and Release, of even
date herewith, the parties agree to amend the Lease as provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
the parties hereby agree as follows:
1. Paragraph 2.1 of the Lease entitled "TERM AND OPTIONS TO RENEW" is
amended in its entirety to read as follows:
2.1 TERM AND OPTIONS TO RENEW. The term of this lease shall be 7
years from July l, 1983 (the "Commencement Date"). Cetus shall,
however, have the option to extend this lease and all of its other
provisions for nine
<PAGE>
additional 2-year terms. The exercise of each of these 2-year options
shall be automatic unless Cetus gives at least 60 days notice of its
intent not to exercise each such option. However, if not more than
70 days prior to the expiration of the then current term Chapman
delivers to Cetus written notice that Chapman seeks notification as to
whether Cetus is exercising its option to extend, then Cetus must
deliver to Chapman within 10 days after Cetus receives such notice
from Chapman, Cetus' written notification as to whether Cetus
is exercising its option to extend. If Cetus does not deliver the
notices required of it pursuant to the preceding sentence, then
Chapman shall be under no obligation to further extend the lease.
2. Paragraph 3.1 of the Lease entitled "RENT" is amended in its
entirety to read as follows:
3.1 RENT. Rent for the premises shall be $57,362.50 per month.
Effective July 1, 1990, and each July 1st thereafter during the term
of the Lease, up to and including July 2003, the monthly rent for that
July and the succeeding 11 months for the premises as set forth in the
first sentence of this paragraph shall be two
-2-
<PAGE>
and one-half percent (2-1/2%) greater than the monthly rent payable
for the preceding 12 months. Effective July 1 of each lease year
beginning July 1, 2004 and each July 1st thereafter, the monthly rent
for that July and the succeeding 11 months shall increase from the
rent payable for the preceding 12 months by a percentage equal to the
net percentage of any increase by which the Consumer Price Index For
All Urban Consumers (1982-84 = 100) of the San Francisco-Oakland
Metropolitan Area, All Items,published by the Bureau of Labor
Statistics of the United States Department of Labor (the "Index"), as
of September of the prior year, has increased over the Index for the
September of the second prior year. If the Index is not published at
any time pertinent to this provision, the index used shall be based
upon the most closely comparable statistics on the purchasing power of
the consumer dollar as published by a governmental department or
agency.
-3-
<PAGE>
3. This Amendment is binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, executors, administrators,
successors in interest, and assigns. Except as expressly amended hereby,
the Lease shall remain unmodified and in full force and effect.
-4-
<PAGE>
In witness whereof, the parties hereto have executed this
Amendment as of the date first above written.
HAROLD B. CHAPMAN, JR.
/s/ H.B. Chapman, Jr.
----------------------------------
CETUS CORPORATION
By: /s/ Signature Unreadable
-------------------------------
Its: Sr. VP
-------------------------------
-5-
<PAGE>
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE ("Second Amendment") is made as of the
1st day of January, 1995, between HAROLD B. CHAPMAN, JR., an individual
("Chapman"), and CHIRON CORPORATION, a Delaware corporation ("Chiron").
THIS SECOND AMENDMENT IS ENTERED on the basis of the following facts,
intentions and understandings of the parties:
A. Chapman, as the lessor, and Cetus Corporation ("Cetus"), as the
lessee, entered a Lease ("Original Lease") dated as of July 1, 1983.
Chiron is the successor to Cetus.
B. The Original Lease relates to premises ("Premises") commonly
known as Building M and Building G located at 1400 and 1450 53rd Street in
Emeryville, California. The Premises are more particularly described in the
Original Lease.
C. Chapman and Cetus entered an Amendment to Lease ("First
Amendment") dated as of March 20, 1990. The Original Lease as amended by
the First Amendment is hereinafter referred to as the "Lease." Terms which
are capitalized in this Second Amendment and not defined herein shall have
the meanings set forth in the Lease.
D. Chapman and Chiron now desire to amend the Lease as provided in
this Second Amendment.
E. Also as of the date of this Second Amendment, Chapman and Chiron
are entering an Option Agreement pursuant to which Chapman is granting to
Chiron an option to purchase the Premises. The Option Agreement is not to
alter the Lease (as amended by this Second Amendment) in any way.
F. The Term of the Lease is seven (7) years, commencing on July 1,
1983. The Lease provides that Chiron has the option to extend the Lease
for nine (9) additional terms of two (2) years each. Chiron has already
exercised three (3) of the two (2) year extensions, with the Term of the
Lease, as extended prior to this Second Amendment, to expire on July 1,
1996.
G. Chiron desires by this Second Amendment to extend the Term of the
Lease by two (2) additional terms of two (2) years, such that (i) the Term
of the Lease after the extensions pursuant to this Second Amendment shall
expire on June 30, 2000, and (ii) Chiron will have the right, in accordance
with the terms of the Lease (as amended by this Second Amendment), to
extend the
1.
<PAGE>
Term of the Lease after June 30, 2000 by four (4) additional terms of two
(2) years each.
NOW THEREFORE, IN CONSIDERATION of the mutual covenants and promises
the parties, the parties agree as follows:
l. EXERCISE OF OPTIONS. By this Second Amendment, Chiron hereby
exercises two (2) options, to extend the Term of the Lease for two (2) years
each. The extensions pursuant to this exercise shall commence on July 1, 1996,
and extend through June 30, 2000.
2. REVISED SECTION 10.1. The first sentence of Section 10.1 shall
state in its entirety as follows: "Cetus at its own expense shall carry
throughout the term hereof property insurance on the Premises to replace the
Building in compliance with current building codes."
3. NO MODIFICATION OF LEASE. No terms of the Option Agreement shall
alter or modify in any way the terms of the Lease (as amended). For example,
the failure of Chiron to exercise the option, granted in the Option Agreement,
to purchase the Premises shall not affect Chiron's rights under the Lease
(as amended).
4. SUCCESSORS AND ASSIGNS. This Second Amendment shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors in interest and assigns.
5. REMAINDER OF LEASE UNAFFECTED. Except as expressly amended by
this Second Amendment, the Lease shall remain in full force and effect and
unamended.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment, on the date(s) set forth below, as of the day and year first
above written.
"Chapman"
_____________________________
Harold B. Chapman, Jr., an
individual
2
<PAGE>
"Chiron"
Chiron Corporation, a Delaware
corporation
By___________________________
Its__________________________
Date_________________________
3.
<PAGE>
EXHIBIT C
POTENTIAL CLAIMS BY
GOVERNMENTAL AGENCIES
Possible complaint by the County of Alameda which relates to
underground storage tanks on the Property (at the northeast corner of
"Building M").
EXHIBIT C
<PAGE>
EXHIBIT D
----------
TITLE EXCEPTIONS
[LOGO] CHICAGO TITLE COMPANY OF ALAMEDA COUNTY
- -------------------------------------------------------------------------------
Issuing Office: Escrow Location:
22320 Foothill Boulevard One Kaiser Plaza, Suite 1450
Hayward, CA 94541 Oakland, California 94612
Phone:(510)537-2200 Phone: (510) 451-8888
Fax: (510)537-6922 Fax: (510) 465-0738
Escrow No: 105494 KIO
Escrow Officer: Kris I. Owens
RE: CHIRON CORPORATION
Order No. 000105494 MEW
Reference:
Regarding: 1400 - 53rd Street
Emeryville, California
- --------------------------------------------------------------------------------
FIRST AMENDED
Dated as of January 12, 1995 at 5:00 P.M.
In response to the above referenced application for a policy of title
insurance,
CHICAGO TITLE COMPANY OF ALAMEDA COUNTY
hereby reports that it is prepared to issue, or cause to be issued, as of
the date hereof, a Policy or Policies of Title Insurance describing the
land and the estate or interest therein hereinafter set forth, insuring
against loss which may be sustained by reason of any defect, lien or
encumbrance not shown or referred to as an Exception in Schedule B or not
excluded from coverage pursuant to the printed Schedules, Conditions and
Stipulations of said Policy forms.
The printed Exceptions and Exclusions from the coverage of said Policy or
Policies are set forth in the attached list. Copies of the Policy forms
should be read. They are available from the office which issued the
report.
Please read the exceptions shown or referred to in Schedule B and the
exceptions and exclusions set forth in the attached list of this report
carefully. The exceptions and exclusions are meant to provide you with
notice of matters which are not covered under the terms of the title
insurance policy and should be carefully considered. It is important to
note that this preliminary report is not a written representation as to the
condition of title and may not list all liens, defects, and encumbrances
affecting title to the land.
THIS REPORT (AND ANY SUPPLEMENTS OR AMENDMENTS HERETO) IS ISSUED SOLELY FOR
THE PURPOSE OF FACILITATING THE ISSUANCE OF A POLICY OF TITLE INSURANCE AND
NO LIABILITY IS ASSUMED HEREBY. IF IT IS DESIRED THAT LIABILITY BE ASSUMED
PRIOR TO THE ISSUANCE OF A POLICY OF TITLE INSURANCE, A BINDER OR
COMMITMENT SHOULD BE REQUESTED.
The form of policy of title insurance contemplated by this report is:
California Land Title Association Standard Coverage Policy
/s/ Miles Williams
- ------------------------
Miles E. Williams
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE A
Order No. 105494 MEW Your Ref:
- --------------------------------------------------------------------------------
1. The estate or interest in the land hereinafter described or referred to
covered by this report is:
A FEE
2. Title to said estate or interest at the date hereof is vested in:
HAROLD B. CHAPMAN, JR., WHO ACQUIRED TITLE AS AN UNMARRIED MAN
3. The land referred to in this report is situated in the State of
California, County of Alameda and is described as follows:
CITY OF EMERYVILLE
PARCEL "B", PARCEL MAP NO. 2108, FILED JUNE 17, 1977, IN MAP BOOK 97, PAGE
40, ALAMEDA COUNTY RECORDS.
ASSESSOR'S PARCEL NO. 049-1041-049
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE B
Page 1
Order No: 105494 MEW Your Ref:
- --------------------------------------------------------------------------------
At the date hereof exceptions to coverage in addition to the printed
Exceptions and Exclusions in the policy form designated on the face page
of this Report would be as follows:
B 1. The Lien of Supplemental Taxes, if any, assessed pursuant to the
provisions of Chapter 3.5, Revenue and Taxation Code, Sections 75 et
seq.
Y 2. County and City taxes for the Fiscal Year 1994 - 1995
1st Installment : $14,502.81 PAID
2nd Installment : $14,502.81 NOT DUE
Land : $366,429.00
Improvements : $2,228,455.00
Personal Ppty. : NONE
Exemption : NONE
A.P. No. : 049-1041-049
Code Area : 14-003
C 3. The herein described property lies within the boundaries of
a proposed assessment for BAY ST./SHELLMOUND ST. EXTENSION A.D.
under Act of 1911 or 1915 or 1919, proposed Assessment No.
(PENDING), in the tentative amount of (AMOUNT PENDING).
K NOTICE OF ASSESSMENT, BAY STREET-SHELLMOUND STREET EXTENSION
ASSESSMENT DISTRICT, BY THE CITY OF EMERYVILLE, IN THE AMOUNT OF
$20,427.00, RECORDED JANUARY 7, 1994, SERIES NO. 94-008822,
OFFICIAL RECORDS.
D 4. NON-BUILDABLE AREA OVER THE NORTHWESTERLY 50 FEET OF THE
NORTHEASTERLY 131.59 FEET OF SAID LAND, AS SET FORTH ON THE
RECORDED PARCEL MAP.
E 5. EASEMENT FOR INGRESS, EGRESS AND PUBLIC UTILITY PURPOSES
OVER THE NORTHWESTERLY PORTION OF SAID LAND, AS SHOWN UPON THE
RECORDED PARCEL MAP AND AS CONVEYED TO EMERYVILLE ECONOMIC
DEVELOPMENT FUND, A NON-PROFIT CORPORATION, BY DEED RECORDED
AUGUST 25, 1977, REEL 5019, IMAGE 505, OFFICIAL RECORDS.
F 6. Easement, upon the terms, covenants and conditions thereof,
for the purposes stated herein and incidental purposes created in
that certain instrument
Recorded : DECEMBER 22, 1986, SERIES NO. 86-322148, OFFICIAL
RECORDS
Granted to : CETUS CORPORATION, A DELAWARE CORPORATION
Purpose : ACCESS, INGRESS AND EGRESS PURPOSES
Affects : A PORTION OF SAID PREMISES
G 7. Unrecorded lease upon the terms and conditions contained therein
Lessor : HAROLD B. CHAPMAN, JR.
Lessee : CETUS CORPORATION
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE B
Page 2 (continued)
Order No: 105494 MEW Your Ref:
- --------------------------------------------------------------------------------
Disclosed by : MEMORANDUM OF LEASE
Recorded : DECEMBER 1, 1987, SERIES NO. 87-320030, OFFICIAL
RECORDS
H Said Lease contains provisions for renewals.
I The present ownership of said leasehold and other matters affecting the
interest of the lessee are not shown herein.
J 8. A Deed of Trust to secure an indebtedness in the original amount shown
below
Amount : $3,000,000.00
Dated : JANUARY 19, 1988
Trustor : HAROLD B. CHAPMAN, JR., AN UNMARRIED MAN
Trustee : SERRANO RECONVEYANCE COMPANY, A CALIFORNIA
CORPORATION
Beneficiary : HOME SAVINGS OF AMERICA, F.A., A FEDERALLY
CHARTERED SAVINGS AND LOAN ASSOCIATION
Address : P.O. BOX 7075
PASADENA, CALIFORNIA 91109-7075
Loan No. : 849904-8
Recorded : FEBRUARY 8, 1988, SERIES NO. 88-033494, OFFICIAL
RECORDS
L 9. Financing Statement to secure an indebtedness of
Amount : NOT SHOWN
Debtor : CETUS CORPORATION
Secured Party : SECURITY PACIFIC EQUIPMENT LEASING, INC.
Dated : NOVEMBER 10, l988
Recorded : JANUARY 18, 1989, SERIES NO. 89-014007, OFFICIAL
RECORDS
(AFFECTS THE LEASEHOLD ESTATE)
M An amendment thereto was recorded OCTOBER 22, 1993, Series
No. 93-376002, Official Records, as to A CONTINUATION STATEMENT.
N 10. Unrecorded lease upon the terms and conditions contained therein
Lessor : HAROLD B. CHAPMAN, JR.
Lessee : CHIRON CORPORATION
Disclosed by : NOTICE OF NONRESPONSIBILITY BY OWNER
Recorded : DECEMBER 4, 1992, SERIES NO. 92-394886,
OFFICIAL RECORDS
O 11. Any and all unrecorded leases.
- -------------------------------------------------------------------------------
<PAGE>
SCHEDULE B
Page 3 (continued)
Order No: 105494 MEW Your Ref:
P 12. The possible community interest of the spouse of VESTEE, if
such person is married.
Q 13. If extended coverage title insurance will be requested, or
if this report has been issued to facilitate a request for
extended coverage title insurance, then the following would also
be exceptions to coverage:
R Any facts, rights, interests or claims which are not disclosed
by the public records but which could by ascertained by making
inquiry of the parties or persons in possession of the herein
described land.
S Any easements, liens (including but not limited to any Statutory
Liens for labor or materials arising from any on-going or
recently completed works of improvement), encumbrances, facts,
rights, interest or claims which are not shown by the public
records but which could be ascertained by an inspection of the
herein described land.
T Discrepancies, conflicts in boundary lines, shortages in area,
encroachments or any other facts which a correct survey of the
herein described land would disclose which are not shown by the
public records and the requirement that said survey meets with
the minimum standards for ALTA/ACSM land title surveys.
U INFORMATIONAL NOTE:
EFFECTIVE JULY 1, 1994, ALL DOCUMENTS TO BE RECORDED IN
CALIFORNIA MUST CONFORM TO THE FOLLOWING:
(A) A PAGE FOR THE PURPOSE OF RECORDING SHALL BE ONE
PRINTED SIDE OF A SINGLE PIECE OF PAPER WHICH IS 8-1/2
INCHES BY 11 INCHES.
(B) A SHEET SHALL BE ONE PRINTED SIDE OF A SINGLE PIECE OF
PAPER WHICH IS NOT EXACTLY 8-1/2 INCHES BY 11 INCHES
BUT NOT GREATER THAN 8-1/2 INCHES BY 14 INCHES.
(C) IF A PAGE OR SHEET DOES NOT CONFORM TO THE DIMENSIONS
OF 8-1/2 INCHES BY 11 INCHES, THE RECORDER SHALL CHARGE
$3.00 EXTRA PER PAGE OR SHEET OF THE DOCUMENT.
THESE CHANGES ARE PURSUANT TO GOVERNMENT CODE SECTIONS
27201, 27361 AND 27361.5 WHICH WERE ENACTED IN THE 1992
LEGISLATIVE SESSION, TO BE EFFECTIVE JULY 1, 1994.
(D) THE ALAMEDA COUNTY RECORDER INTERPRETS THE ABOVE
STATUTES TO EXCLUDE FROM RECORDING, AND THEREFORE WILL
NOT ACCEPT, ANY DOCUMENT CONTAINING ONE OR MORE SHEETS
OR PAGES GREATER THAN 8-1/2 INCHES BY 14 INCHES.
<PAGE>
SCHEDULE B
Page 4 (continued)
Order No: 105494 MEW Your Ref:
W NOTE:
According to the Public Records, no Deed conveying the property
described in this Report has been recorded within a period of two
years prior to the date of this Report, except as shown herein:
None
X MEW/lt
1/20/95
<PAGE>
NOTICE
SECTION 12413.1 OF THE CALIFORNIA INSURANCE CODE, EFFECTIVE JANUARY 1, 1990,
REQUIRES THAT ANY TITLE INSURANCE COMPANY, UNDERWRITTEN TITLE COMPANY, OR
CONTROLLED ESCROW COMPANY HANDLING FUNDS IN AN ESCROW OR SUB-ESCROW CAPACITY,
WAIT A SPECIFIED NUMBER OF DAYS AFTER DEPOSITING FUNDS, BEFORE RECORDING ANY
DOCUMENTS IN CONNECTION WITH THE TRANSACTION OR DISBURSING FUNDS. THIS
STATUTE ALLOWS FOR FUNDS DEPOSITED BY WIRE TRANSFER TO BE DISBURSED THE SAME
DAY AS DEPOSIT. IN THE CASE OF CASHIER'S CHECKS OR CERTIFIED CHECKS, FUNDS
MAY BE DISBURSED THE NEXT DAY AFTER DEPOSIT. IN ORDER TO AVOID UNNECESSARY
DELAYS OF THREE TO SEVEN DAYS, OR MORE, PLEASE USE WIRE TRANSFER, CASHIER'S
CHECKS, OR CERTIFIED CHECKS WHENEVER POSSIBLE.
IF YOU HAVE ANY QUESTIONS ABOUT THE EFFECT OF THIS NEW LAW, PLEASE CONTACT
YOUR LOCAL CHICAGO TITLE OFFICE FOR MORE DETAILS.
Chicago Title [LOGO]
<PAGE>
LIST OF PRINTED EXCEPTIONS AND EXCLUSIONS
CALIFORNIA LAND TITLE ASSOCIATION STANDARD COVERAGE POLICY - 1990
EXCLUSIONS FROM COVERAGE
The following matters are expressly excluded from the coverage of this
policy and the Company will not pay loss or damage, costs, attorneys' fees
or expenses which arise by reason of:
1. (a) Any law, ordinance or governmental regulation (including but
not limited to building and zoning laws, ordinances, or
regulations) restricting, regulating, prohibiting or relating to
(i) the occupancy, use, or enjoyment of the land; (ii) the
character, dimensions or location of any improvement now or
hereafter erected on the land; (iii) a separation in ownership or
a change in the dimensions or area of the land or any parcel of
which the land is or was a part; or (iv) environmental
protection, or the effect of any violation of these laws,
ordinances or governmental regulations, except to the extent that
a notice of the enforcement thereof or a notice of a defect, lien
or encumbrance resulting from a violation or alleged violation
affecting the land has been recorded in the public records at
Date of Policy.
(b) Any governmental police power not excluded by (a) above,
except to the extent that a notice of the exercise thereof or a
notice of a defect, lien or encumbrance resulting from a
violation or alleged violation affecting the land has been
recorded in the public records at Date of Policy.
2. Rights of eminent domain unless notice of the exercise
thereof has been recorded in the public records at Date of
Policy, but not excluding from coverage any taking which has
occurred prior to Date of Policy which would be binding on the
rights of a purchaser for value without knowledge.
3. Defects, liens, encumbrances, adverse claims or other matters:
(a) whether or not recorded in the public records at Date of
Policy, but created, suffered, assumed or agreed to by the
insured claimant;
(b) not known to the Company, not recorded in the public records
at Date of Policy, but known to the insured claimant and not
disclosed in writing to the Company by the insured claimant prior
to the date the insured claimant became an insured under this
policy;
(c) resulting in no loss or damage to the insured claimant;
(d) attaching or created subsequent to Date of Policy; or
(e) resulting in loss or damage which would not have been
sustained if the insured claimant had paid value for the insured
mortgage or the estate or interest insured by this policy.
4. Unenforceability of the lien of the insured mortgage because
of the inability or failure of the insured at Date of Policy, or
the inability or failure of any subsequent owner of the
indebtedness, to comply with applicable doing business laws of
the state in which the land is situated.
5. Invalidity or unenforceability of the lien of the insured
mortgage, or claim thereof, which arises out of the transaction
evidenced by the insured mortgage and is based upon usury or any
consumer credit protection or truth-in-lending law.
6. Any claim which arises out of the transaction vesting in the
insured the estate or interest insured by this policy or the
transaction creating the interest of the insured lender, by reason
of the operation of federal bankruptcy, state insolvency or
similar creditors' rights laws.
EXCEPTIONS FROM COVERAGE
This policy does not insure against loss or damage (and the Company will
not pay costs, attorneys' fees or expenses) which arise by reason of:
1. Taxes or assessments which are not shown as existing liens by the
records of any taxing authority that levies taxes or assessments on
real property or by the public records.
Proceedings by a public agency which may result in taxes or
assessments, or notices of such proceedings, whether or not shown by
the records of such agency or by the public records.
2. Any facts, rights, interests or claims which are not shown by the
public records but which could be ascertained by an inspection of the
land or which may be asserted by persons in possession thereof.
3. Easements, liens or encumbrances, or claims thereof, which are not
shown by the public records.
4. Discrepancies, conflicts in boundary lines, shortage in area,
encroachments, or any other facts which a correct survey would
disclose, and which are not shown by the public records.
5. (a) Unpatented mining claims; (b) reservations or exceptions in
patents or in Acts authorizing the issuance thereof; (c) water rights,
claims or title to water, whether or not the matters excepted under
(a), (b) or (c) are shown by the public records.
<PAGE>
AMERICAN LAND TITLE ASSOCIATION RESIDENTIAL TITLE INSURANCE POLICY (6-1-87)
EXCLUSIONS
In addition to the exceptions in Schedule B, you are not insured against
loss, costs, attorney's fees and expenses resulting from:
1. Governmental policy power, and the existence or violation of any
law or government regulation. This includes building and zoning
ordinances and also laws and regulations concerning:
- land use - land division
- improvements on the land - environmental protection
This exclusion does not apply to the violations or the enforcement of
these matters which appear in the public records at Policy Date. This
exclusion does not limit the zoning coverage described in Items 12 and 13
of Covered Title Risks.
2. The right to take the land by condemning it, unless:
- a notice of exercising the right appears in the public records
on the Policy Date
- the taking happened prior to the Policy Date and is binding on
you if you bought the land without knowing of the taking.
3. Title Risks:
- that are created, allowed, or agreed to by you
- that are known to you, but not to us, on the Policy Date - unless
they appeared in the public records
- that result in no loss to you
- that first affect your title after the Policy Date - this does not
limit the labor and material lien coverage in Item 8 of Covered
Title Risks
4. Failure to pay value for your title.
5. Lack of a right:
- to any land outside the area specifically described and referred
to in Item 3 of Schedule A, or
- in streets, alleys, or waterways that touch your land
This exclusion does not limit the access coverage in Item 5 of
Covered Title Risks.
EXCEPTIONS FROM COVERAGE
In addition to the Exclusions, you are not insured against loss, costs,
attorneys' fees and expenses resulting from:
1. Someone claiming an interest in your land by reason of:
A. Easements not shown in the public records
B. Boundary disputes not shown in the public records
C. Improvements owned by your neighbor placed on your land
2. If, in addition to a single family residence, your existing
structure consists of one or more Additional Dwelling Units, Item 12 of
Covered Title Risks does not insure you against loss, costs, attorneys'
fees, and expenses resulting from:
A. The forced removal of any Additional Dwelling Unit, or,
B. The forced conversion of any Additional Dwelling Unit back
to its original use.
If said Additional Dwelling Unit was either constructed or
converted to use as a dwelling unit in violation of any law or
government regulation.
<PAGE>
AMERICAN LAND TITLE ASSOCIATION LOAN POLICY (10-17-92)
WITH ALTA ENDORSEMENT - FORM 1 COVERAGE
and
AMERICAN LAND TITLE ASSOCIATION LEASEHOLD LOAN POLICY (10-17-92)
WITH ALTA ENDORSEMENT - FORM 1 COVERAGE
EXCLUSIONS FROM COVERAGE
The following matters are expressly excluded from the coverage of this
policy and the Company will not pay loss or damage, costs, attorneys' fees
or expenses which arise by reason of:
1. (a) Any law, ordinance or governmental regulation (including but not
limited to building and zoning laws, ordinances, or regulations)
restricting, regulating, prohibiting or relating to (i) the occupancy,
use, or enjoyment of the land; (ii) the character, dimensions or
location of any improvement now or hereafter erected on the land;
(iii) a separation in ownership or a change in the dimensions or area
of the land or any parcel of which the land is or was a part; or (iv)
environmental protection, or the effect of any violation of these laws,
ordinances or governmental regulations, except to the extent that a
notice of the enforcement thereof or a notice of a defect, lien or
encumbrance resulting from a violation or alleged violation affecting
the land has been recorded in the public records at Date of Policy.
(b) Any governmental police power not excluded by (a) above, except
to the extent that a notice of the exercise thereof or a notice of a
defect, lien or encumbrance resulting from a violation or alleged
violation affecting the land has been recorded in the public records
at Date of Policy.
2. Rights of eminent domain unless notice of the exercise thereof
has been recorded in the public records at Date of Policy, but not
excluding from coverage any taking which has occurred prior to Date of
Policy which would be binding on the rights of a purchaser for value
without knowledge.
3. Defects, liens, encumbrances, adverse claims or other matters:
(a) created, suffered, assumed or agreed to by the insured claimant;
(b) not known to the Company, not recorded in the public records
at Date of Policy, but known to the insured claimant and not
disclosed in writing to the Company by the insured claimant prior
to the date the insured claimant became an insured under this
policy;
(c) resulting in no loss or damage to the insured claimant;
(d) attaching or created subsequent to Date of Policy (except to
the extent that this policy insures the priority of the lien of
the insured mortgage over any statutory lien for services, labor
or material or to the extent insurance is afforded herein as to
assessments for street improvements under construction or
completed at Date of Policy); or
(e) resulting in loss or damage which would not have been
sustained if the insured claimant had paid value for the insured
mortgage.
4. Unenforceability of the lien of the insured mortgage because
of the inability or failure of the insured at Date of Policy, or
the inability or failure of any subsequent owner of the
indebtedness, to comply with applicable doing business laws of
the state in which the land is situated.
5. Invalidity or unenforceability of the lien of the insured
mortgage, or claim thereof, which arises out of the transaction
evidenced by the insured mortgage and is based upon usury or any
consumer credit protection or truth in lending law.
6. Any statutory lien for services, labor or materials (or the
claim or priority of any statutory lien for services, labor or
materials over the lien of the insured mortgage) arising from an
improvement or work related to the land which is contracted for
and commenced subsequent to Date of Policy and is not financed in
whole or in part by proceeds of the indebtedness secured by the
insured mortgage which at Date of Policy the insured has advanced
or is obligated to advance.
7. Any claim, which arises out of the transaction creating the
interest of the mortgagee insured by this policy, by reason of
the operation of federal bankruptcy, state insolvency, or similar
creditors' rights laws, that is based on:
(i) the transaction creating the interest of the insured
mortgagee being deemed a fraudulent conveyance or fraudulent
transfer; or
(ii) the subordination of the interest of the insured mortgagee
as a result of the application of the doctrine of equitable
subordination; or
(iii) the transaction creating the interest of the insured
mortgagee being deemed a preferential transfer except where the
preferential transfer results from the failure:
(a) to timely record the instrument of transfer; or
(b) of such recordation to impart notice to purchaser for
value or a judgment or lien creditor.
The above policy forms may be issued to afford either Standard Coverage or
Extended Coverage. In addition to the above Exclusions from Coverage, the
Exceptions from Coverage in a Standard Coverage policy will also include
the following General Exceptions:
EXCEPTIONS FROM COVERAGE
The policy does not insure against loss or damage (and the Company will not
pay costs, attorneys' fees or expenses) which arise by reason of:
1. Taxes or assessments which are not shown as existing liens by the
records of any taxing authority that levies taxes or assessments on real
property or by the public records.
Proceedings by a public agency which may result in taxes or
assessments, or notices of such proceedings, whether or not shown by the
records of such agency or by the public records.
2. Any facts, rights, interests or claims which are not shown by the
public records but which could be ascertained by an inspection of the land
or by making inquiry of persons in possession thereof.
3. Easements, liens or encumbrances, or claims thereof, which are not
shown by the public records.
4. Discrepancies, conflicts in boundary lines, shortage in area,
encroachments, or any other facts which a correct survey would disclose,
and which are not shown by the public records.
5. (a) Unpatented mining claims; (b) reservations or exceptions in
patents or in Acts authorizing the issuance thereof; (c) water rights,
claims or title to water, whether or not the matters excepted under (a),
(b) or (c) are shown by the public records.
<PAGE>
AMERICAN LAND TITLE ASSOCIATION OWNER'S POLICY (10-17-92)
and
AMERICAN LAND TITLE ASSOCIATION LEASEHOLD OWNER'S POLICY (10-17-92)
EXCLUSIONS FROM COVERAGE
The following matters are expressly excluded from the coverage of this
policy and the Company will not pay loss or damage, costs, attorneys' fees
or expenses which arise by reason of:
1. (a) Any law, ordinance or governmental regulation (including
but not limited to building and zoning laws, ordinances, or
regulations) restricting, regulating, prohibiting or relating to
(i) the occupancy, use, or enjoyment of the land; (ii) the
character, dimensions or location of any improvement now or
hereafter erected on the land; (iii) a separation in ownership or a
change in the dimensions or area of the land or any parcel of which
the land is or was a part; or (iv) environmental protection, or the
effect of any violation of these laws, ordinances or governmental
regulations, except to the extent that a notice of the enforcement
thereof or a notice of a defect, lien or encumbrance resulting from
a violation or alleged violation affecting the land has been
recorded in the public records at Date of Policy.
(b) Any governmental police power not excluded by (a) above, except to
the extent that a notice of the exercise thereof or a notice of a
defect, lien or encumbrance resulting from a violation or alleged
violation affecting the land has been recorded in the public records
at Date of Policy.
2. Rights of eminent domain unless notice of the exercise thereof has
been recorded in the public records at Date of Policy, but not
excluding from coverage any taking which has occurred prior to Date
of Policy which would be binding on the rights of a purchaser for
value without knowledge.
3. Defects, liens, encumbrances, adverse claims or other matters:
(a) created, suffered, assumed or agreed to by the insured claimant;
(b) not known to the Company, not recorded in the public records at Date
of Policy, but known to the insured claimant and not disclosed in
writing to the Company by the insured claimant prior to the date the
insured claimant became an insured under this policy;
(c) resulting in no loss or damage to the insured claimant;
(d) attaching or created subsequent to Date of Policy; or
(e) resulting in loss or damage which would not have been sustained if
the insured claimant had paid value for the estate or interest insured
by this policy.
4. Any claim, which arises out of the transaction vesting in the insured
the estate or interest insured by this policy, by reason of the
operation of federal bankruptcy, state insolvency, or similar
creditors' rights laws, that is based on:
(i) the transaction creating the estate or interest insured by this
policy being deemed a fraudulent conveyance or fraudulent
transfer; or
(ii) the transaction creating the estate or interest insured by this
policy being deemed a preferential transfer except where the
preferential transfer results from the failure.
(a) to timely record the instrument of transfer; or
(b) of such recordation to impart notice to a purchaser for
value or a judgment or lien creditor.
The above policy forms may be issued to afford either Standard Coverage or
Extended Coverage. In addition to the above Exclusions from Coverage, the
Exceptions from Coverage in a Standard Coverage policy will also include
the following General Exceptions:
EXCEPTIONS FROM COVERAGE
This policy does not insure against loss or damage (and the Company will
not pay costs, attorneys' fees or expenses) which arise by reason of:
1. Taxes or assessments which are not shown as existing liens by the
records of any taxing authority that levies taxes or assessments on real
property or by the public records.
Proceedings by a public agency which may result in taxes or
assessments, or notices of such proceedings, whether or not shown by the
records of such agency or by the public records.
2. Any facts, rights, interests or claims which are not shown by the
public records but which could be ascertained by an inspection of the land
or by making inquiry of persons in possession thereof.
3. Easements, liens or encumbrances, or claims thereof, which are not
shown by the public records.
4. Discrepancies, conflicts in boundary lines, shortage in area,
encroachments, or any other facts which a correct survey would disclose,
and which are not shown by the public records.
5. (a) Unpatented mining claims; (b) reservations or exceptions in
patents or in Acts authorizing the issuance thereof; (c) water rights,
claims or title to water, whether or not the matters excepted under (a),
(b) or (c) are shown by the public records.
<PAGE>
EXHIBIT E
-----------
MEMORANDUM OF OPTION AGREEMENT
--------------------------------
RECORDING REQUESTED BY |
AND WHEN RECORDED MAIL TO: |
|
Brobeck, Phleger & Harrison |
One Market |
Spear Street Tower, 24th Floor |
San Francisco, California 94105 |
Attn: A. Bruce Gilmore, Esq. |
|
|THE AREA ABOVE IS RESERVED FOR RECORDER'S USE
- --------------------------------------------------------------------------------
MEMORANDUM OF OPTION AGREEMENT
- --------------------------------------------------------------------------------
THIS MEMORANDUM OF OPTION AGREEMENT ("Memorandum") is entered as of the
____ day of June, 1995, by and between HAROLD B. CHAPMAN, JR., an individual
("Chapman"), and CHIRON CORPORATION, a Delaware corporation ("Chiron").
THIS MEMORANDUM is entered on the basis of the following facts,
intentions and understandings of the parties:
A. Chapman is the owner of the real property described in EXHIBIT 1,
attached hereto.
B. Chapman, as optionor, and Chiron, as optionee, have entered an
Option Agreement dated as of January 1, 1995. Pursuant to the Option
Agreement, Chiron has the option ("Option") to purchase the Property from
Chapman.
C. Chapman and Chiron desire to execute and record this Memorandum to
give notice of the Option.
NOW, THEREFORE, in consideration of the mutual covenants and promises of
the parties, the parties agree as follows:
l. GRANT OF OPTION. Chapman hereby grants Chiron the Option to
purchase the Property, subject to and in accordance with the terms set forth
in the Option Agreement.
2. TERM. The term of the Option commenced as of January 1, 1995. If
not previously terminated, the term shall expire on December 31, 1999.
EXHIBIT E
---------
1.
<PAGE>
3. CONFLICT. In the event of any conflict between the terms of this
Memorandum and the terms of the Option Agreement, the terms of the Option
Agreement shall control.
4. NOTICE. The purpose of this Memorandum is to give notice of the
Option.
IN WITNESS WHEREOF, the parties have executed this Memorandum, on the
date(s) set forth below, as of the day and year first above written.
"Chapman"
-------------------------------------
Harold B. Chapman, Jr., an individual
Date:
-------------------------------
"Chiron"
CHIRON CORPORATION, a Delaware
corporation
By:
---------------------------------
Name:
----------------------------
Its:
-----------------------------
Date:
-------------------------------
EXHIBIT E
---------
2.
<PAGE>
EXHIBIT 1
PROPERTY DESCRIPTION
CITY OF EMERYVILLE
PARCEL "B", PARCEL MAP NO. 2108, FILED JUNE 17, 1977, IN MAP BOOK 97, PAGE
40, ALAMEDA COUNTY RECORDS.
ASSESSOR'S PARCEL NO. 049-1041-049
<PAGE>
[CHIRON LETTERHEAD]
February 28, 1996
[GRAPHIC]
VIA HAND DELIVERY
AND U.S. MAIL
Harold B. Chapman, Jr.
2900 Main Street
Alameda, California 94501
Re: Option Agreement for Real Property and Improvements
(Including Buildings "M" and "G") in Emeryville, California
-----------------------------------------------------------
Dear Mr. Chapman:
Chiron Corporation, as Buyer, and you, as Seller, entered into an Option
Agreement dated as of January 1, 1995. The Option Agreement relates to real
property ("Property") in Emeryville, California, which includes Buildings "M"
and "G." The Property is more particularly described in the Option Agreement.
The Option Agreement provides that Chiron has the option ("Option") to
purchase the Property by exercising the Option prior to January 1, 2000 by
delivering a written notice ("Exercise Notice") to you by registered mail or
personal delivery stating that Chiron desires to close escrow. This
letter constitutes the Exercise Notice under the Option Agreement.
Section 11.a of the Option Agreement provides that close of escrow
("Close of Escrow") is to occur on the date ("Closing Date") determined by
you; provided that (i) the Closing Date shall be not later than February 27,
1997 (one (1) year after the date of this Exercise Notice), (ii) the Closing
Date shall not be earlier than August 27, 1996 (six (6) months after the date
of this Exercise Notice) and (iii) you will give Chiron not less than
forty-five (45) days' prior written notice of the Closing Date.
You are not required to notify Chiron of the Closing Date at this time.
However, Chiron would appreciate your notifying me as soon as possible of the
date you desire to be the Closing Date.
CHIRON CORPORATION - 4560 Horton Street - Emeryville, CA - 94608-2916 -
510-655-8730 LAW DEPARTMENT - General Fax: 510-654-5360 - Intellectual
Property Fax: 510-655-3542
<PAGE>
Harold B. Chapman, Jr. February 28, 1996
Page 2
It is my understanding that the Option Agreement provides for
flexibility in establishing the Closing Date in order to allow you to effect
the transfer of the Property as an exchange in accordance with Section 1031
of the Internal Revenue Code. Under Section 1031, you may be entitled to
defer the taxes otherwise due upon the transfer of the Property, even if you
acquire "replacement property" after you transfer the Property to Chiron. It
is Chiron's hope that, based on the flexibility provided for transfers
pursuant to Section 1031 you will elect to have the Closing Date as soon as
possible after August 27, 1996.
I am also sending a copy of this letter to Eugene Schneider, your
counsel. If Mr. Schneider or you have any questions regarding this letter,
please contact Bruce Gilmore (415) 442-1444.
Thank you for your assistance in this matter. I look forward to working
with you as we conclude the transfer of the Property.
Very truly yours,
/s/ Ed Bailey
Ed Bailey
Director, Facilities Planning
cc: Mr. Thomas Peterson
A. Bruce Gilmore, Esq. (via Facsimile)
Eugene Schneider, Esq. (via U.S. Mail)
<PAGE>
EXHIBIT 10.56
[CONFIDENTIAL TREATMENT REQUESTED]
[Certain confidential information has been omitted from the Agreement and filed
separately with the Securities and Exchange Commission pursuant to a request by
Registrant for confidential treatment pursuant to Rule 24b-2. The omitted
confidential information has been identified by the following statement:
"CONFIDENTIAL TREATMENT REQUESTED".]
AMENDED AND RESTATED LICENSE AGREEMENT
This AMENDED AND RESTATED LICENSE AGREEMENT effective as of April 1, 1996
(this "Agreement") between CIBA CORNING DIAGNOSTICS CORP., a corporation
organized under the laws of the State of Delaware, U.S.A., that intends to
change its name to Chiron Diagnostics Corp. effective on or about November 1,
1996 (hereinafter "Chiron") and BIOANALYSIS LIMITED, a corporation organized
under the laws of the United Kingdom of Great Britain and Northern Ireland
(hereinafter "Bioanalysis").
WHEREAS, Chiron (as assignee of Corning Glass Works) and Bioanalysis are
parties to an agreement dated as of December 6, 1984 (the "Original Agreement")
relating to the sublicense to Chiron by Bioanalysis of certain technology
licensed by Bioanalysis from the University of Wales College of Medicine
(formerly known as the Welsh National School of Medicine and hereinafter
referred to as "UWCM"); and
WHEREAS, certain disputes have arisen between Chiron and Bioanalysis under
the Original Agreement, which disputes the parties wish to resolve pursuant to a
Settlement Agreement of even date herewith (the "Settlement Agreement"); and
WHEREAS, the terms of the Settlement Agreement provide for the amendment
and restatement of the Original Agreement as set forth herein;
NOW, THEREFORE, Chiron and Bioanalysis agree to amend and restate the
Original Agreement to read in its entirety as follows:
<PAGE>
1.DEFINITIONS
When used in this Agreement with initial capitals, the terms defined in
this Section 1 shall have the respective meanings set forth below:
a."ADDITIONAL ROYALTY ACCOUNT" shall have the meaning specified in Section
3(c).
b."AE" shall mean any chemiluminescent aryl acridinium esters.
c."AFFILIATE" of a party shall mean a corporation or any other business
entity, in whatever country organized, which, directly or indirectly, controls,
is controlled by or is under common control with such party. For this purpose,
control shall mean the ownership of more than 50% of the issued share capital or
the legal power to direct or cause the direction of the general management and
policies of the party in question. Notwithstanding the foregoing, in the case
of Chiron, "Affiliate" shall (i) include Ciba Corning Diagnostics de Mexico S.A.
(which intends to change its name on or about November 1, 1996 to Chiron S.A. de
C.V.), so long as Chiron continues to own at least 49% of the voting stock of
that corporation, and (ii) exclude Ciba-Geigy Limited, a Switzerland corporation
("Ciba"), and any subsidiaries of Ciba, unless and until such time as Ciba and
Chiron Corporation may mutually agree upon the terms and conditions upon which
Ciba may be deemed an Affiliate of Chiron for purposes of this Agreement.
d."BAYER AGREEMENT" means the Licensing Agreement dated as of December 18,
1986 between Bayer Corporation (formerly known as Miles Laboratories, Inc.) and
Chiron.
e."BAYER OFFSET ACCOUNT" shall have the meaning specified in Section 3(b).
f."BIOANALYSIS PRODUCTS" shall mean the products identified in Schedule A.
2
<PAGE>
g."CAMPBELL PATENTS" shall mean U.S. Patent No. 4,946,958, any foreign
counterpart patent of U.S. Patent No. 4,946,958 or any continuation, division,
re-issue or re-examination either the U.S. patent above named or its foreign
counterpart.
h."CLAIM" shall mean an issued 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 patent claim which has been disclaimed, canceled, or finally adjudicated to
be invalid.
i."CLOSING DATE" shall mean July 1, 1996.
j."IMMUNOASSAY" shall mean any assay wherein the analyte of interest is an
antibody or protein or is determined by the binding thereto of an antibody or
other specific binding protein.
k."LICENSED PATENTS" shall mean all patents relating to Immunoassays
employing AE labels now or hereafter legally or beneficially owned or controlled
by Bioanalysis ("Bioanalysis Patents") or UWCM ("UWCM Patents"), including all
of the Campbell Patents, provided that "Licensed Patents" shall not include any
patent arising out of an invention first conceived on or after, and with an
earliest claimed priority date on or after, April 1, 1996. The list of the
Licensed Patents and the pending applications which may result in the issuance
of Licensed Patents ("Licensed Patent Applications") is attached hereto as
Schedule B, provided that any omission from such list shall not affect the
status of a patent which would otherwise be a Licensed Patent hereunder.
l."LICENSED PRODUCTS" shall mean Immunoassays or components for
Immunoassays for use in (i) human healthcare and (ii) pre-clinical and
laboratory research whether or not directed to human healthcare, the
manufacture, use or sale of which would, in the absence of a license, infringe a
Claim of a Licensed Patent.
3
<PAGE>
m."NET SALES REVENUE" shall mean the amount billed by Chiron or its
Affiliates or sublicensees to third parties for the sale of Royalty Products or
performance of assays using Royalty Products, less discounts allowed; less
credits for customers' returns and allowances; less the value of the instrument
and service components of an operating or capital lease for which the charges
are included in the price of Royalty Products purchased by the lessee; less
charges for freight handling and transportation paid by Chiron; and less sales
and use taxes and other similar taxes incurred, all to the extent reasonable and
as determined in accordance with generally accepted accounting practices and
industry practices. Notwithstanding the foregoing, if Chiron or its Affiliates
or sublicensees bills a third party for performance of an assay using a Royalty
Product, the amount of Net Sales Revenue shall be equal to the average Net Sales
Revenue for sales of such Royalty Product in the country in which such assay is
performed during the quarter in which such assay is performed, or, if such
Royalty Product is not sold for commercial use in such country during such
quarter, the worldwide average Net Sales Revenue for sales of such Royalty
Product for such quarter, or, if such Royalty Product is not sold commercially
in any country, a reasonable apportionment shall be made of the gross amount
invoices for performance of the assay between the value of the assay and the
value of the laboratory services associated therewith, taking into account the
average selling prices of similar products, such apportionment to be negotiated
in good faith between the parties and arbitrated if they are unable to agree.
No royalty shall be due upon a sale of a Royalty Product by Chiron to an
Affiliate. Instead, royalty shall be due when such Royalty Product is re-sold
to or used to perform an assay for a third party, and Net Sales Revenue shall be
calculated based on the invoiced price to such party. Royalty shall accrue only
once as to any Royalty Product.
n."PRIME RATE" shall mean, as to each of Chiron's fiscal quarters, the
prime rate of interest as published on the last business day of such quarter in
the Wall Street Journal, provided that Chiron may substitute for the Wall Street
Journal any comparable print or electronic publication, provided that such
substitute publication is used generally by Chiron for such purposes in its
4
<PAGE>
accounting operations. Chiron agrees to notify Bioanalysis of any change in the
source it uses for the Prime Rate.
o."PROPRIETARY INFORMATION" - Information of any kind, including without
limitation, inventions, technology, disclosures, processes, systems, methods,
formulae, patent applications, machinery, materials, research activities and
plans, costs of production, contract forms, prices, volume of sales, promotional
methods, and lists of names or classes of customers, know-how and trade secrets,
owned or controlled by a party which such party regards as valuable and holds
confidentially other than information which (i) was known by the receiving party
prior to its disclosure by the disclosing party; (ii) is or becomes public
knowledge without fault of the receiving party; (iii) is obtained or derived by
the receiving party from a third party which, to the best knowledge of the
receiving party after appropriate inquiry, is lawfully in possession of such
information and has the right to disclose the information to the receiving party
on a non-confidential basis; or (iv) is developed or derived by the receiving
party, prior or subsequent to its disclosure by the disclosing party,
independently and without resort to the information which was disclosed by the
disclosing party.
p."ROYALTY ADVANCE" shall have the meaning specified in Section 3(a)(ii).
q."ROYALTY PRODUCTS" shall have the following meanings at the respective
times specified below:
i.Until the earlier of August 7, 2007 or depletion of the Bayer Offset
Account, "Royalty Products" shall mean (A) so long as at least one Claim of a
Campbell Patent remains in force anywhere in the world, Immunoassays or
components for Immunoassays that use an AE label, regardless of whether such
products constitute Licensed Products hereunder, except as to any product which
is an Independent Sublicensee Product referred to in clause (ii) of this
Paragraph 1(q); or (B) if no Claim of a Campbell Patent remains in force,
Immunoassays or components of Immunoassays, the manufacture, use or sale of
which would, in the absence of a license, infringe a
5
<PAGE>
Claim of a Licensed Patent in force in country in which such manufacture, use or
sale occurs, as determined by applicable principles of patent law.
ii.Thereafter, and at all times with respect to any products of a
sublicensee which are not designed for use on a Chiron instrument and are not
labelled with a Chiron trademark ("Independent Sublicensee Products"), "Royalty
Products" shall mean Immunoassays or components for Immunoassays the
manufacturer, use or sale of which would, in the absence of a license, infringe
a Claim of a Campbell Patent in force in a country in which such manufacture,
use or sale occurs, as determined by applicable principles of patent law.
r."UWCM LICENSE" shall mean the Agreement dated as of July 12, 1984 between
UWCM and Bioanalysis pursuant to which UWCM licensed the UWCM Patents to
Bioanalysis.
2.GRANT OF LICENSE; LIMITATIONS
a.GRANT. Bioanalysis hereby grants to Chiron a world-wide sublicense under
the UWCM Patents and a world-wide license under the Bioanalysis Patents to
develop, make, have made, import, use, offer to sell and sell Licensed Products.
Such sublicense and license (i) shall be exclusive as to Licensed Products for
use in human healthcare and pre-clinical and laboratory research directed to
human healthcare and non-exclusive as to Licensed Products for use in
pre-clinical and laboratory research not directed to human health care and (ii)
shall include the right to grant sublicenses in accordance with the terms of
Section 5 hereof; provided, however, that pre-clinical and laboratory research
conducted by Bioanalysis with application to human healthcare shall not infringe
Chiron's exclusive license so long as that research has potential application to
fields other than human healthcare.
b.RESERVATION OF RIGHTS IN GRANTOR. Notwithstanding the exclusive licenses
granted to Chiron hereunder, Bioanalysis reserves to itself the non-exclusive
right (with right of sublicense to
6
<PAGE>
third parties or Affiliates with whom Bioanalysis enters into collaborative
arrangements for the development, manufacture and marketing of Bioanalysis
Products) to make, have made, import, use, offer to sell and sell the
Bioanalysis Products.
c.RIGHTS LIMITED TO LICENSED PRODUCTS. Nothing herein grants to Chiron any
rights under the Licensed Patents with respect to the manufacture, use or sale
of any products other than Licensed Products. Without limiting the generality
of the foregoing, nothing herein shall be construed as a grant to Chiron of any
rights under the Licensed Patents to develop, make, have made, import, use,
offer to sell or sell nucleic acid hybridization assays or any other assays for
which rights are not specifically granted to Chiron herein.
d.NO LIMITATIONS EXCEPT UNDER PATENTS. As between the parties to this
Agreement, the field of use restrictions contained herein prohibit the
manufacture, use or sale of any product by either party only to the extent that
such manufacture, use or sale constitutes infringement of a Claim of a patent in
force in the jurisdiction in which such activity occurs.
e.PROPRIETARY INFORMATION. Bioanalysis and UWCM have provided Chiron with
information relating to the use of acridinium esters in immunoassays and binding
protein assays. To the extent that any information provided to Chiron by
Bioanalysis or UWCM constitutes Proprietary Information, Bioanalysis and UWCM
covenant not to assert any restriction on the use or communication of such
Proprietary Information, including publication, except at the direction of
Chiron. To the extent that any Proprietary Information provided to Chiron by
UWCM or Bioanalysis has entered the public domain, it has done so without the
fault of Chiron. Bioanalysis has not provided Chiron with Proprietary
Information useful in the field of nucleic acid hybridization assays.
f.OPTION. In the event that Bioanalysis obtains during the term of this
Agreement any patent rights either as owner or licensee, which relate to an AE
technology, Bioanalysis will grant to
7
<PAGE>
Chiron an option to receive a non-exclusive license at a reasonable royalty for
the Licensed Products (as defined to include such patent rights as Licensed
Patents). The terms of the license will include a most favored licensee clause
and rights to grant sublicenses to third parties with whom Chiron enters into
collaborative arrangements for the development, manufacture and marketing of the
Licensed Products, and will not include license fees or minimum royalties. The
royalty rate and other terms of the license not specified herein will be
negotiated in good faith and resolved in accordance with the dispute resolution
procedures set forth in Section 9(c) if the parties cannot agree. The option
will be exercisable no later than six months after Chiron's receipt of
Bioanalysis' written request to either exercise or waive its rights with respect
to a particular patent or patent application. Bioanalysis agrees that it will
not, without Chiron's written consent, waive its rights to a license under any
of the Patents as defined in the UWCM License.
3.LICENSE FEES AND ROYALTIES
a.RESTRUCTURING FEE AND ROYALTY ADVANCE. Chiron shall make the following
non-refundable payments to Bioanalysis on the Closing Date:
i.A license restructuring fee in the amount of [CONFIDENTIAL TREATMENT
REQUESTED], which shall not be creditable against royalties, and
ii.An advance upon future royalties in the amount of [CONFIDENTIAL
TREATMENT REQUESTED] (the "Royalty Advance").
Chiron shall not be required to make any further payments until the
Royalty Advance has been fully depleted by application to royalties earned under
Paragraph 3(d).
b.BAYER OFFSET ACCOUNT. An account (the "Bayer Offset Account") shall be
established as an accounting mechanism for the purpose of determining when
Chiron has been fully compensated for its royalty payments under the Bayer
Agreement, plus interest thereon, through reductions in the
8
<PAGE>
rate of royalty that would otherwise have been payable hereunder. The amount of
the Bayer Offset Account as of April 1, 1996 is agreed to be [CONFIDENTIAL
TREATMENT REQUESTED]. Effective as of the end of each of Chiron's fiscal
quarters, (i) there shall be added to the Bayer Offset Account (A) an amount
equal to the interest that would have accrued on the balance of the Bayer Offset
Account during such quarter if such balance earned interest at the Prime Rate
(provided that for the quarter ending June 30, 1996, such hypothetical interest
shall be deemed to accrue only from and after the Closing Date) and (B) the
amount of royalties paid by Chiron to Bayer under the Bayer Agreement for such
quarter, and (ii) there shall be subtracted from the Bayer Offset Account an
amount equal to the difference between the amount of royalties paid to
Bioanalysis for such quarter (including royalties paid by means of an
application of credit for the Royalty Advance) and the amount of royalties that
would have been payable at a royalty rate of [CONFIDENTIAL TREATMENT REQUESTED].
Nothing herein shall be construed to require Bioanalysis to make any actual
deposit or payment of funds to cover any amount of the Bayer Offset Account.
c.ADDITIONAL ROYALTY ACCOUNT. A second account (the "Additional Royalty
Account") shall be established for the purpose of determining the time at which
the rate of royalty payable hereunder shall be reduced to zero until Chiron has
been fully compensated for its royalty payments under the Bayer Agreement, plus
interest thereon. The amount of the Additional Royalty Account as of the
Closing Date shall be [CONFIDENTIAL TREATMENT REQUESTED]. Effective as
of the end of each of Chiron's fiscal quarters, (i) there shall be added to the
Additional Royalty Account an amount equal to the interest that would have
accrued on the balance of the Additional Royalty Account during such quarter if
such balance earned interest at the Prime Rate (provided that for the quarter
ending June 30, 1996, such interest shall be deemed to accrue only from and
after the Closing Date and provided further that no such interest shall accrue
after August 7, 2007) and (ii) there shall be subtracted from the Additional
Royalty Account an amount equal to the amount of royalties paid to Bioanalysis
for such quarter, other than royalties paid through application of the Royalty
Advance. The Additional Royalty Account is an accounting mechanism only, and
except
9
<PAGE>
as provided in Section 9(b), nothing herein shall require Chiron to make any
actual deposit of funds to cover the amount of the Additional Royalty Account.
d.ROYALTY RATES AND APPLICATION OF ADVANCE. Chiron shall pay Bioanalysis
royalties on its sales of Royalty Products at the rates of (i)[CONFIDENTIAL
TREATMENT REQUESTED]. All royalties shall first be credited against the Royalty
Advance and no additional cash payments in respect of royalties shall be payable
until the Royalty Advance has been fully depleted. Thereafter, royalties shall
be due and payable as provided in Paragraph 3(d), 3(e) and 4(b). Chiron will
not be liable to pay more than actual accrued royalties even if they do not
deplete the Additional Royalty Account during the term of this Agreement, and
Bioanalysis will not be responsible for any shortfall if Chiron does not recover
the amount of the Bayer Offset Account during the term hereof.
e.EFFECT OF INVALIDITY/UNENFORCEABILITY. Chiron will make all payments
provided for in this Agreement, notwithstanding that any of the Licensed Patents
may be held invalid and/or unenforceable in any proceeding at a later date, so
long as at least one Claim of a Licensed Patent remains in force and has not
been finally adjudicated to be invalid, provided, that (i) after the earlier of
August 7, 2007 or depletion of the Bayer Offset Account, royalties shall be
payable only with respect to Royalty Products as defined in Paragraph 1(q)(ii)
hereof, (ii) no royalties shall be payable after August 7, 2007 except to the
extent, if any, necessary to deplete the Additional Royalty Account; and (iii)
if no Claim of any Campbell Patent remains valid, royalties shall be payable
only with respect to Royalty Products as defined in Clause (B) of Paragraph
1(q)(i).
10
<PAGE>
4.RECORD KEEPING, PAYMENT AND REPORTS
a.RECORDS. Chiron shall maintain records of sales of Royalty Products in
sufficient detail to enable royalties payable hereunder to be determined and
shall cause its Affiliates and sublicensees to do likewise. Such records shall
be maintained for a period of at least five years after the end of quarter to
which they relate.
b.REPORTS AND PAYMENTS. Within sixty (60) days after the end of each
fiscal quarter (as Chiron may establish from time to time for its corporate
operations) Chiron shall provide Bioanalysis with a written statement of Net
Sales Revenue of Royalty Products by Chiron and its Affiliates and sublicensees,
a calculation of royalties owed, and a payment of the total amount then due.
Quarterly royalty reports will separately identify sales by Chiron and its
sublicensees and will also include a report on the value of the Royalty Advance,
the Additional Royalty Account and the Bayer Offset Account and a report of any
pending disputes under Section 6(b).
c.PRO-RATION WITHIN QUARTERS. With respect to changes in royalty rates
occurring other than at the end of a fiscal quarter, the amount of Net Sales
Revenue occurring prior to the change in rate shall be deemed to be equal to the
Net Sales Revenue for the entire quarter, times a fraction, the numerator of
which shall be the number of days from the first day of the quarter to the date
of the rate change and the denominator of which shall be the number of days in
the quarter.
d.CURRENCY. All payments hereunder shall be made in U.S. currency.
Non-US$ denominated sales will be converted into dollar sales in accordance with
the standard accounting procedure used by Chiron with respect to its sales
generally as of the Closing Date. In the event that Chiron changes its method
of converting foreign currency sales into U.S. dollars, Chiron will notify
Bioanalysis of the change. If during the first accounting period that such
change is in effect, the Net Sales Revenue determined using the new method of
currency conversion is at least 95% of the Net Sales Revenue determined using
the previous method of currency conversion, Bioanalysis'
11
<PAGE>
approval of the change in conversion method shall not be required. If the new
method of currency conversion results during such initial accounting period in a
reduction of Net Sales Revenue to less than 95% of Net Sales Revenue under the
previous method, Chiron shall continue to use its previous method of currency
conversion for purposes of this Agreement unless and until Chiron and
Bioanalysis agree on implementation of the new method. Notwithstanding the
foregoing, non-US dollar sales of sublicensees may be converted to U.S. dollars
in accordance with the method used by the sublicensee in question in its
financial statements generally.
e.TAXES. No taxes or deductions of any kind shall be made or taken from
the payments due under Section 3(a). All taxes which Chiron is required to
withhold from royalty payments shall be deducted from such payments and evidence
of actual payment to the relevant taxing authority shall be delivered to
Bioanalysis at the time the accounting for the payment is made to Bioanalysis.
The amounts deducted on account of such taxes shall be deemed to have been paid
to Bioanalysis for purposes of depleting the Additional Royalty Account.
f.AUDIT. Upon Bioanalysis' request (but not more than once per year) and on
reasonable notice, Chiron will, and will cause its Affiliates and sublicensees
to, permit, at the expense of Bioanalysis, independent certified public
accountants, reasonably acceptable to both parties, to have access during
reasonable business hours to inspect and make extracts from such records as may
be reasonably necessary to determine, in respect of any quarterly period, the
correctness of any royalty statements and payments under this Agreement,
provided that Chiron will bear any such reasonable audit expense if the review
or audit shows an underpayment of more than 10% for the applicable period,
unless the conclusions of such review or audit are determined to be incorrect by
agreement of the parties or pursuant to the dispute resolution procedures set
forth in Paragraph 9. The independent certified public accountants must sign
non-disclosure agreements prohibiting them from revealing any information to any
third party and allowing them to disclose to Bioanalysis only information
reasonably necessary to be communicated in order to carry out the purpose of the
audit.
12
<PAGE>
5.SUBLICENSES
a.RIGHT TO GRANT SUBLICENSES. Chiron shall have the right to grant
sublicenses under the rights granted in Paragraph 2(a) to Affiliates and to
third parties. Royalties shall be payable to Bioanalysis by Chiron with respect
to its sublicensees' Net Sales Revenue (determined in the same manner as Net
Sales Revenue of Chiron) for Royalty Products at the same rates and in the same
manner as provided in Paragraphs 3(d) and 4(b). If Chiron does not receive a
royalty report or payment from a sublicensee prior to the date when Chiron's
report and payment are due to Bioanalysis, Chiron shall make the royalty report
and payment to Bioanalysis based on its best estimate of the amount of royalty
due with respect to the sublicense and shall make an appropriate adjustment in
the next quarter's report and payment. If so agreed by Chiron with a
sublicensee, royalties with respect to a sublicense may be paid semi-annually
rather than quarterly and on the basis of the sublicensee's fiscal periods
rather than Chiron's fiscal periods.
b.Arrangements Not Sublicenses. As used herein, the term "sublicense"
shall not include (i) the right of [CONFIDENTIAL TREATMENT REQUESTED] or a
[CONFIDENTIAL TREATMENT REQUESTED] or (ii) any arrangement whereby a
[CONFIDENTIAL TREATMENT REQUESTED], whether or not such party also
[CONFIDENTIAL TREATMENT REQUESTED] or a combination of Chiron [CONFIDENTIAL]
TREATMENT REQUESTED]. Chiron's royalty payments to Bioanalysis with respect
to products [CONFIDENTIAL TREATMENT REQUESTED] who also
[CONFIDENTIAL TREATMENT REQUESTED] shall be based on the
[CONFIDENTIAL TREATMENT REQUESTED] by such [CONFIDENTIAL TREATMENT REQUESTED]
and not on [CONFIDENTIAL TREATMENT REQUESTED].
c.IN-KIND SUBLICENSES. In the event that Chiron receives any right
benefit, advantage, concession other than money (including, without limitation
any licenses to any patents of any Affiliate or third party or any business
discount from or any equity of any Affiliate or third party) in consideration
for a grant by Chiron of a sublicense under the licenses granted to it pursuant
to this Agreement, Chiron shall (i) nonetheless be obligated to pay Bioanalysis
royalties pursuant to
13
<PAGE>
this Agreement based on such third party's or Affiliate's sales or revenues in
connection with Royalty Products or (ii) if no such sales or revenues are to be
received from such third party or Affiliates, inform Bioanalysis of such event
and provide Bioanalysis with all reasonable documentation and information
necessary or appropriate for the parties to negotiate in good faith with respect
to the proper valuation of any such right, benefit, advantage or concession and
the corresponding amounts owing to Bioanalysis in connection therewith, which
shall be determined by allocating the total value received by Chiron between the
sublicense granted hereunder and all other items of value provided by Chiron and
dividing the value allocable to the sublicense granted hereunder equally between
Chiron and Bioanalysis. In the event that the parties do not agree on the
proper valuation or the amounts owing, such issues will be resolved in
accordance with the parties' dispute resolution procedures pursuant to Section
9.
6.PROSECUTION, MAINTENANCE AND ENFORCEMENT OF PATENTS
a.PROSECUTION AND MAINTENANCE. Bioanalysis shall pay for all expenses in
prosecuting the Licensed Patent Applications and maintaining the Licensed
Patents. Bioanalysis shall maintain the Licensed Patents listed in Schedule B.
Bioanalysis shall provide Chiron with copies of all pending Licensed Patent
Applications and inform Chiron concerning the progress of all relevant patent
prosecutions on a semi-annual basis.
b.ENFORCEMENT OF PATENTS BY CHIRON. Chiron shall have the sole,
unrestricted right to enforce the Licensed Patents against all infringers whose
products would constitute Licensed Products if sold by Chiron hereunder, without
regard to whether the infringing products compete with Chiron's products.
Chiron shall pay all costs and keep all recoveries with respect to such
enforcement. Bioanalysis shall assist Chiron as reasonably requested by Chiron,
including by making its officers and employees available as witnesses, and
providing full access to all relevant documents and records, provided that
Chiron shall reimburse all of Bioanalysis out-of-pocket costs
14
<PAGE>
in connection therewith. Bioanalysis shall join an enforcement action as party
plaintiff if required by law. Chiron will have no right to offset against any
payments otherwise due under this Agreement, any costs, expenses or damages
relating to such infringement or infringement litigation. Chiron agrees to
defend, indemnify and hold Bioanalysis and UWCM harmless from any liability
arising out of actions taken by Chiron pursuant to this sub-section, as well as
attorneys fees arising out of any failure to defend.
c.ENFORCEMENT BY BIOANALYSIS. Notwithstanding the provisions of Paragraph
6(b), if Bioanalysis notifies Chiron of activities which Bioanalysis believes
constitute infringement of the Licensed Patents within the scope of Chiron's
right to enforce as specified in Paragraph 6(b), and if Chiron does not within
12 months thereafter commence patent enforcement proceedings against the alleged
infringer or conclude licensing negotiations with the alleged infringer
(provided that such period shall be extended to the extent of any period during
which Chiron is engaged in proceedings against or negotiations with another
infringer), Bioanalysis shall thereafter have the right, but not the obligation,
to enforce the Licensed Patents against such alleged infringer at Bioanalysis'
own expense and with all recoveries of damages being for Bioanalysis' sole
benefit. Such right of Bioanalysis to enforce the Licensed Patents shall lapse
unless Bioanalysis institutes enforcement proceedings within six months of the
date Bioanalysis is first permitted to institute such proceedings in accordance
with this Paragraph. Except with respect to enforcement actions against
Ciba-Geigy or its subsidiaries, nothing herein shall be deemed to permit
Bioanalysis to grant any license under the Licensed Patents within the scope of
the exclusive license granted to Chiron hereunder.
15
<PAGE>
7.REPRESENTATIONS AND WARRANTIES.
a.Bioanalysis represents and warrants that:
i.OWNERSHIP. Bioanalysis is the sole owner of the UWCM License, a
true, complete and correct copy of which, including all amendments through the
date hereof, has been provided to Chiron, and is the sole owner or exclusive
licensee of each of the Licensed Patents and Licensed Patent Applications.
ii.THIRD PARTY RIGHTS. Bioanalysis has not granted any rights to any
third party that are inconsistent with the terms of this Agreement, no third
party has made any claim to have been granted such rights, and Bioanalysis is
not aware of any grounds for any such claim.
iii.COMPLETE LIST. To the best of Bioanalysis' knowledge after due
inquiry, Schedule B is a complete list of patents and patent applications
relating to Immunoassays using AE labels that is now or at any time since
December 6, 1984 has been legally or beneficially owned or controlled by
Bioanalysis or UWCM, except for Woodhead ET AL. EP 478,626, and the related
applications and counterparts thereof.
iv.Nothing in this Agreement shall be construed as a warranty or
representation by Bioanalysis as to the validity of any Licensed Patent.
Nothing in this Agreement shall be construed as a warranty or representation by
Bioanalysis that any product made, used, sold or imported under any Licensed
Patent is or will be free from infringement of patents not licensed hereunder or
patents of third parties. Nothing in this Agreement shall be construed as
conferring by implication, estoppel or otherwise any license or rights under any
patents belonging to Bioanalysis other than the Licensed Patents as defined in
this Agreement.
16
<PAGE>
b.Chiron represents and warrants that Net Sales Revenue for the period
January 1, 1995 - December 31, 1995 was not less than [CONFIDENTIAL TREATMENT
REQUESTED].
8.TERM AND TERMINATION
a.TERM. Except as provided in Paragraph 8(b), the licenses granted to
Chiron hereunder shall continue until the expiration of the last to expire of
the Licensed Patents. Notwithstanding the foregoing, Chiron's obligations to
pay royalties hereunder shall continue only so long as provided in accordance
with Paragraphs 3(d) and 3(e).
b.CHALLENGE TO VALIDITY. The initiation of any legal proceeding
challenging the validity of a Campbell Patent by Chiron or any party acting
under the direction and control of Chiron shall give Bioanalysis an immediate
right to terminate the license upon written notice to Chiron, such termination
to be effective thirty (30) days after notice of termination unless such
challenge to validity is dismissed with prejudice within the thirty day period.
Notwithstanding the foregoing, if the challenge to validity is asserted by a
party other than Chiron or an Affiliate and Chiron disputes whether such party
is under its direction and control, no termination shall occur unless a final
decision of an arbitral panel in a proceeding conducted in accordance with
Paragraph 9 hereof determines that such party is under the direction and control
of Chiron. If the arbitrators determine that the party challenging validity was
acting under the direction or control of Chiron, Chiron will have a period of
thirty (30) days to cause such challenge to be withdrawn and thereby avoid
termination, unless the arbitrators conclude that Chiron's contention as to
direction or control was made in bad faith, in which case the Agreement shall
terminate immediately upon such determination. Nothing herein shall prevent
Chiron from presenting evidence of prior art in connection with a dispute
regarding the proper interpretation of the scope of any Claim of any patent.
17
<PAGE>
9.DISPUTES AND REMEDIES FOR BREACH.
a.DAMAGES SOLE REMEDY. Except as provided in paragraphs 8(b) and 9(b),
Bioanalysis' sole remedy for breach of the license agreement by Chiron shall be
the recovery of an award of damages in an arbitration proceeding, which award
shall include interest at the Prime Rate compounded quarterly from the date the
damages were incurred. In any arbitration proceeding, the arbitrators shall
have authority to award attorneys' fees to the prevailing party. Nothing herein
is intended to limit Bioanalysis right to seek injunctive relief with respect to
infringement of the Licensed Patents by activities outside the scope of the
license and sublicense granted hereunder.
b.EXTRAORDINARY REMEDY. If Bioanalysis, after initiating and prevailing in
an arbitration with respect to non-payment of royalties in which the recovery
exceeds 10% of the amount of royalties due for the period with respect to which
the determination of royalties is in dispute (which period shall be a period of
at least two quarters), again initiates and prevails in such an arbitration and
recovers such an amount, and provided that Chiron has not theretofore been the
prevailing party in an arbitration between the parties, the unrecovered balance,
if any, of the Additional Royalty Account shall become immediately due and
payable as a non-refundable advance on future royalties.
c.RESOLUTION OF DISPUTES. Chiron and Bioanalysis agree that the following
procedure will govern the resolution of any dispute between or among them
arising out of or relating to this Agreement:
i.the parties will use all reasonable efforts for a period of at least
90 days to resolve the dispute through negotiation;
ii.if the dispute cannot be settled through negotiation, Chiron and
Bioanalysis agree to try in good faith to settle the dispute by mediation
administered by the American Arbitration Association under its Commercial
Mediation Rules; and
18
<PAGE>
iii.if the dispute cannot be resolved by mediation Chiron and
Bioanalysis agree that the dispute will be resolved by mandatory, binding
arbitration. The arbitration will take place in San Francisco, CA, at the
offices of the American Arbitration Association ("AAA"), pursuant to the AAA
International Commercial Rules. The dispute will be resolved by the majority
decision of three arbitrators of whom one will be nominated by the Claimant(s)
and one by Respondent(s), and a third nominated by the two party-appointed
arbitrators, unless Claimant(s) and Respondent(s) agree in any given dispute to
have it settled by a single arbitrator acceptable to both Claimant(s) and
Respondent(s). If a party fails to nominate its arbitrator to a three arbitrator
panel within 30 days after the other party has appointed its arbitrators and
served written notice of such appointment on the other party, or if within 30
days after both party-appointed arbitrators are appointed, the party appointed
arbitrators have not agreed upon the appointment of a third arbitrator, then the
missing arbitrator will be appointed by the AAA in accordance with the governing
rules. The decision of the arbitrators, or of the single arbitrator, as the
case may be, will be final and binding. Judgment on the award may be entered in
any Court of competent jurisdiction.
iv.The parties agree that, prior to the formation of the arbitral
panel, a party may apply to a state or federal court in California for
provisional or interim relief. After the arbitration panel is empaneled, it
shall have sole jurisdiction to hear such application, except that the parties
agree that any relief ordered by the arbitrators may be enforced by a California
state court.
v.If Chiron or Bioanalysis desire to join Gen-Probe as a party to an
arbitration commenced or to be commenced under this Section, then each of the
parties shall use their best efforts to convince Gen-Probe to join the
arbitration. If Gen-Probe will not agree to join the arbitration, then each of
Chiron and Bioanalysis agrees that, notwithstanding this Section, the
complaining party shall bring its dispute in federal court in California, or in
the event that the federal court does not have jurisdiction over the subject
matter of the dispute, in state court in California.
vi.Each of the parties submits to the jurisdiction of the federal
courts in California, or in the event that the federal court does not have
jurisdiction over the subject matter of the
19
<PAGE>
dispute, to the jurisdiction of the state courts in California, for purposes of
Section 9(c)(iv) and 9(c)(v) of this Agreement.
10.NOTICES.
Any notice or report required or permitted to be given under this Agreement
shall be in writing and shall be delivered by hand or overnight courier or
mailed postage prepaid by recorded, registered or certified mail return receipt
requested, addressed as set forth below unless changed by notice so given:
If to Chiron:
Ciba Corning Diagnostics Corp.
333 Coney Street
East Walpole, MA 02032
Attention: President
Copy to: General Counsel
If to Bioanalysis:
Bioanalysis Limited
Cardiff Business Technology Centre
Senghenydd Road
Cardiff CF2 4AY, United Kingdom
Attention: Managing Director
Any such notice or report shall be deemed delivered on the date received,
provided that no such notice or report shall be deemed delinquent if deposited
in the mails or delivered to a courier service on or before the date such notice
or report is required to be given.
20
<PAGE>
11.MISCELLANEOUS.
a.CONFIDENTIALITY. Bioanalysis agrees to hold in confidence all
information it may receive hereunder concerning royalty payments and sales by
Chiron and its Affiliates and sublicensees, except that Bioanalysis may disclose
such information (i) to the extent such information has previously been publicly
disclosed by Chiron, (ii) to the extent required to be disclosed by applicable
law and after using all reasonable efforts to obtain confidential treatment of
the required disclosure, (iii) to its legal counsel and accountants, or (iv) to
the arbitrators in any arbitral proceeding pursuant to Paragraph 9 hereof.
This obligation shall survive termination of this Agreement.
b.NO JOINT VENTURE. This Agreement does not constitute and shall not be
construed as an agency, joint venture or partnership between the parties.
c.BENEFIT AND ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the parties hereto, provided,
however, that neither party may assign or transfer its rights and obligations
without the written consent of the other party, which consent shall not be
unreasonably withheld, except that Chiron may assign its rights and obligations
without such consent to a purchaser or other transferee of Chiron's
immunodiagnostics business, and Bioanalysis may assign its rights and
obligations without such consent to UWCM and Affiliates of Bioanalysis.
d.ENTIRE AGREEMENT; AMENDMENT. This Agreement is the entire agreement
between the parties with respect to the matters set forth herein and supersedes
all other prior agreements or understandings, whether written or oral. No
representations, oral or otherwise, express or implied, other than those
expressly set forth herein or in the Settlement Agreement have been made by
either party to the other concerning the subject matter of this Agreement. This
Agreement may not be
21
<PAGE>
modified or amended other than in writing signed by the party whose rights or
obligations are modified or amended.
e.WAIVER. The failure of party to insist upon another party's strict
adherence to any term of this Agreement on any occasion will not be construed as
a waiver or deprive that party of the right to insist upon strict adherence to
that term or any other term of this Agreement.
f.GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of California, U.S.A., without giving
effect to that state's conflict of law rules.
g.SEVERABILITY. If any provision or sub-provision of this Agreement is
found invalid or unenforceable, the balance of the Agreement, and all provisions
thereof shall continue in full force and effect.
h.INTERPRETATION. References to any gender include the other gender and to
the singular number the plural number and vice versa. All headings throughout
this Agreement have been inserted for the purpose of ease of reference only and
do not define, limit or affect the meaning or interpretation of this Agreement
or of any instrument created pursuant hereto or in accordance herewith. Each
party has been provided with an opportunity to participate in the drafting and
preparation of this Agreement. Therefore, in any construction to be made of
this Agreement, the same shall not be construed against any party.
i.GEN-PROBE AGREEMENT - This Agreement does not diminish, alter, or affect
in any way, the rights of Gen-Probe under the Gen-Probe Agreement.
[REMAINDER OF THE PAGE LEFT INTENTIONALLY BLANK]
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused their duly authorized representatives to execute this Agreement as of the
date first above written.
CIBA CORNING DIAGNOSTICS CORP. BIOANALYSIS LIMITED
By: /s/ Kenneth J. Conway By: /s/ J.L.D. Bell
-------------------------- ----------------------------
Kenneth J. Conway Director
Senior Vice President,
Immuno/Chemistry
Date: 7/2/96 Date:
-------------------------
21
<PAGE>
SCHEDULE A
PAGE 1 OF 8
SCHEDULE A
BIOANALYSIS PRODUCTS
1. HIV 1/2 per attached description (and all reasonable improvements thereto
which do not substantially change the nature of the product).
2. Hepatitis B per attached description (and all reasonable improvements
thereto which do not substantially change the nature of the product).
3. Anti-Thyroglobulin per attached description (and all reasonable
improvements thereto which do not substantially change the nature of the
product).
4. Anti-Thyroid Peroxidase per attached description (and all reasonable
improvements thereto which do not substantially change the nature of the
product).
5. Thyrotrophin Receptor Antibodies per attached description (and all
reasonable improvements thereto which do not substantially change the nature of
the product).
6. Insulin (manual microtiter plate format).
7. Proinsulin (manual microtiter plate format).
Reasonable improvements do not include modifications to enable use on automated
instruments.
1
<PAGE>
SCHEDULE A
Page ____
IMMUNOASSAY FOR HIV 1/2 ANTIBODIES IN SERUM
BACKGROUND
HIV is regarded as the causative agent of AIDS. It is difficult to detect
circulating viral protein or cDNA/RNA by routine methods. Thus screening tests
for HIV rely on the detection of circulating (anti-HIV) antibodies.
Since the discovery of HIV, a number of such assays have been described.
There are three main HIV antigenic gene products: GAG (viral core proteins:
p55, p24, p17, p9, p7), POL (regulatory proteins including reverse
transcriptase p66 and p51, protease p10, integrase/endonuclease p31) and ENV
(envelope glycoproteins gp160, gp120 and gp41). Of these, the gene products
of ENV and GAG are of most interest with regard to the detection of anti-HIV
antibodies in serum. All these proteins and their fragments are capable of
generating a host immune response and will yield positive bands in western
blot and radioimmuno-precipitation detection systems. These two testing
methods offer high levels of specificity and sensitivity but are too labor
intensive and time consuming for routine laboratory use. They thus form a
body of confirmatory tests for samples screened positive for HIV antibodies
by ELISA.
Early tests used viral lysates as antigen though this invariably resulted in an
unacceptably high false positive rate. More recently developed tests have
involved the use of synthetic or recombinant proteins as antigen to minimize
unwanted cross-reactions.
This report describes a method for the detection of [Confidential Treatment
Requested] to HIV1 and HIV2 by the use of [Confidential Treatment Requested] and
[Confidential Treatment Requested] respectively.
METHOD
[Confidential Treatment Requested] are dissolved in [Confidential Treatment
Requested] buffer to give a concentration of [Confidential Treatment Requested]
and added to the wells of [Confidential Treatment Requested] or [Confidential
Treatment Requested]. Following [Confidential Treatment Requested] incubation,
wells are [Confidential Treatment Requested] by addition of [Confidential
Treatment Requested] in [Confidential Treatment Requested]. This is followed by
a further incubation for [Confidential Treatment Requested] at [Confidential
Treatment Requested]. Affinity purified [Confidential Treatment Requested] is
labeled with [Confidential Treatment Requested] by standard techniques and
diluted in [Confidential Treatment Requested] buffered [Confidential Treatment
Requested] containing [Confidential Treatment Requested] treated [Confidential
Treatment Requested] and [Confidential Treatment Requested]. [Confidential
Treatment Requested] of this solution yields approximately [Confidential
<PAGE>
Treatment Requested]. Pooled HIV1 positive serum was obtained from
[Confidential Treatment Requested]. HIV2 positive serum and HIV1 seroconversion
panels were obtained from [Confidential Treatment Requested]. Control samples
were obtained from the [Confidential Treatment Requested] and [Confidential
Treatment Requested].
Sample diluent is [Confidential Treatment Requested] containing [Confidential
Treatment Requested] and [Confidential Treatment Requested].
ASSAY PROTOCOL
1. Pipette [Confidential Treatment Requested] sample diluent into each well
2. Add [Confidential Treatment Requested] sample or control
3. Mix by addition of a further [Confidential Treatment Requested] sample
diluent
4. Incubate [Confidential Treatment Requested] at [Confidential Treatment
Requested] with [Confidential Treatment Requested]
5. Wash [Confidential Treatment Requested] in [Confidential Treatment
Requested]
6. Add [Confidential Treatment Requested] labeled antibody
7. Incubate [Confidential Treatment Requested] with [Confidential Treatment
Requested]
8. Wash [Confidential Treatment Requested] in [Confidential Treatment
Requested]
9. Read each well for [Confidential Treatment Requested] in plate luminometer
<PAGE>
SCREENING TEST FOR HEPATITIS B SURFACE ANTIGEN
INTRODUCTION
Hepatitis B represents a significant global health problem. Because of its
mode of transmission through biological fluids, it is of particular concern
to the blood transfusion services since the disease will invariably affect
those who receive infected blood.
The cause of infection is the hepatitis B virus (HBV) which, in its intact form
is known as a Dane particle. This particle is of 42 nm diameter, though
infected blood may contain large quantities of viral envelopes as 22 nm spheres
or as filaments. These particles incorporate the hepatitis B surface antigen
(HBSAg) which is a specific marker of HBV infection. HBSAg comprises a group
determinant and two sets of mutually exclusive sub-type determinants which
produce the sub-types adw, adr, ayw and ayr.
Detection of the presence of immunoreactive HBSAg in serum or plasma is
diagnostic of HBV infection.
METHOD
The method described below is a [Confidential Treatment Requested] assay in
which the solid-phase antibody comprises a mixture of [Confidential Treatment
Requested] and [Confidential Treatment Requested] antibodies [Confidential
Treatment Requested] to the wells of microtitre strips or plates and the labeled
reagent is a mixture of [Confidential Treatment Requested] incorporating a
[Confidential Treatment Requested]. The serum sample is incubated in a well
together with an aliquot of [Confidential Treatment Requested] and after
reaction, the wells are washed to remove unbound material. The plate carrying
the wells is transferred to a [Confidential Treatment Requested] to detect the
presence of bound immune complexes. Results are analyzed by comparison with
test wells containing samples of positive and negative controls.
DESCRIPTION
Microtitre plates or strips [Confidential Treatment Requested] are coated with a
mixture of [Confidential Treatment Requested] and [Confidential Treatment
Requested] antibody. Coating is carried out by [Confidential Treatment
Requested] by [Confidential Treatment Requested] reaction in [Confidential
Treatment Requested]. After washing with [Confidential Treatment Requested] the
plates are blocked with [Confidential Treatment Requested] for [Confidential
Treatment Requested] hours at [Confidential Treatment Requested]. The plates
are washed again and then vacuum dried prior to storage in sealed bags.
<PAGE>
Two [Confidential Treatment Requested] antibodies are labeled with [Confidential
Treatment Requested] by standard methods and are used in solution in
[Confidential Treatment Requested] supplemented with [Confidential Treatment
Requested] and [Confidential Treatment Requested]. Approximately [Confidential
Treatment Requested] are added to each well in a volume of [Confidential
Treatment Requested].
PROTOCOL
1. Dispense [Confidential Treatment Requested] test sample or control into
each well
2. Add [Confidential Treatment Requested] labeled antibody and cover plate
3. Incubate at [Confidential Treatment Requested] for [Confidential Treatment
Requested] with shaking
4. Wash plate [Confidential Treatment Requested] with [Confidential Treatment
Requested]
5. Transfer plate to [Confidential Treatment Requested] and read each well for
[Confidential Treatment Requested].
<PAGE>
IMMUNOCHEMILUMINOMETRIC ASSAY FOR
THYROGLOBULN ANTIBODIES
INTRODUCTION
Autoimmune thyroid disease is characterized by the production of antibodies to
various thyroid proteins. Thyroglobulin (Tg) is one such protein and the
detection of circulating antibodies to Tg is indicative of autoimmunity.
METHOD
The present assay for Tg antibodies involves [Confidential Treatment Requested]
of Tg onto [Confidential Treatment Requested] tubes to which the serum sample is
added. Following [Confidential Treatment Requested] and washing, anti-Tg
antibodies, if present, are detected using [Confidential Treatment Requested]
labeled [Confidential Treatment Requested] which binds to the human
Immunoglobulin.
DESCRIPTION
[Confidential Treatment Requested] tubes are coated with [Confidential Treatment
Requested] using standard conditions. [Confidential Treatment Requested] is
labeled with [Confidential Treatment Requested] in the usual manner.
Purified Tg is labeled with [Confidential Treatment Requested] Co.) according to
the Manufacturer's instructions.
The test is designed to be used with a [Confidential Treatment Requested] serum
sample.
PROTOCOL
1. Dispense [Confidential Treatment Requested] of sample into
[Confidential Treatment Requested] coated tube
2. Add [Confidential Treatment Requested] solution and vortex
3. Incubate for [Confidential Treatment Requested]
4. Aspirate and wash [Confidential Treatment Requested] with wash
solution
5. Add [Confidential Treatment Requested] of [Confidential Treatment
Requested] solution
6. Incubate for [Confidential Treatment Requested]
7. Aspirate and wash [Confidential Treatment Requested]
8. Measure tubes for [Confidential Treatment Requested] in [Confidential
Treatment Requested]
<PAGE>
PERFORMANCE
Limit of detection: [Confidential Treatment Requested] TgAb activity
Precision: [Confidential Treatment Requested] CV intra-assay over range
Range: [Confidential Treatment Requested] U/ml
IMMUNOCHEMILUMINOMETRIC ASSAY FOR
THYROID PEROXIDASE ANTIBODIES
INTRODUCTION
Autoimmune thyroid disease is characterized by the production of antibodies to
various thyroid proteins. Thyroid peroxidase (TPO) is one such protein and the
detection of circulating antibodies to TPO is indicative of thyroid
autoimmunity.
METHOD
The present assay for TPO antibodies involves indirect [Confidential Treatment
Requested] of TPO onto [Confidential Treatment Requested] tubes to which the
serum sample is added. Following aspiration and washing, anti-TPO antibodies,
if present, are detected using [Confidential Treatment Requested] labelled
[Confidential Treatment Requested] which binds to the human immunoglobulin.
DESCRIPTION
[Confidential Treatment Requested] tubes are coated with [Confidential Treatment
Requested] using standard conditions. [Confidential Treatment Requested] is
labeled with [Confidential Treatment Requested] in the usual manner.
Purified TPO is labeled with [Confidential Treatment Requested] Co.) according
to the Manufacturer's instructions.
The test is designed to be used with a [Confidential Treatment Requested] serum
sample.
<PAGE>
PROTOCOL
1. Dispense [Confidential Treatment Requested] of sample into
[Confidential Treatment Requested] coated tube
2. Add [Confidential Treatment Requested] of [Confidential Treatment
Requested] solution and vortex
3. Incubate for [Confidential Treatment Requested] at [Confidential
Treatment Requested]
4. Aspirate and wash [Confidential Treatment Requested] with wash
solution
5. Add [Confidential Treatment Requested] of [Confidential Treatment
Requested] solution
6. Incubate for [Confidential Treatment Requested] at [Confidential
Treatment Requested]
7. Aspirate and wash [Confidential Treatment Requested] times
8. Measure tubes for [Confidential Treatment Requested] in [Confidential
Treatment Requested]
PERFORMANCE
Limit of detection: [Confidential Treatment Requested]
Precision: [Confidential Treatment Requested] CV intra-assay over range
Range: [Confidential Treatment Requested] U/ml
CHEMILUMINESCENT RECEPTOR ASSAY FOR
THYROTROPHIN RECEPTOR ANTIBODIES
INTRODUCTION
Autoimmune thyroid disease is characterized by the production of antibodies to
various thyroid proteins. Thyrotrophin receptor (TR) is one such protein and
the detection of circulating antibodies to TR is important in the diagnosis and
management of autoimmune hyperthyroidism (Graves' Disease).
METHOD
The present assay for TR antibodies (TRAb) involves incubation of the serum
sample with a [Confidential Treatment Requested] preparation in the presence of
[Confidential Treatment Requested] labeled[Confidential Treatment Requested].
The presence of TRAb prevents binding of the labeled [Confidential Treatment
Requested] to the
<PAGE>
receptor. Receptor-bound [Confidential Treatment Requested]activity is thus
[Confidential Treatment Requested] to TRAb activity. Receptor-bound
complexes are separated by [Confidential Treatment Requested]precipitation.
DESCRIPTION
[Confidential Treatment Requested] tubes are used as reaction tubes.
[Confidential Treatment Requested] is labeled with [Confidential Treatment
Requested] using established methods.
[Confidential Treatment Requested] receptors are isolated from [Confidential
Treatment Requested] using published methods.
The test is designed to be used with a [Confidential Treatment Requested] serum
sample.
PROTOCOL
1) Dispense [Confidential Treatment Requested] of serum sample into tube
2) Add [Confidential Treatment Requested] of receptor solution
3) Incubate [Confidential Treatment Requested] at [Confidential Treatment
Requested]
4) Add [Confidential Treatment Requested] of [Confidential Treatment
Requested] labeled [Confidential Treatment Requested] solution
5) Incubate [Confidential Treatment Requested]
6) Add [Confidential Treatment Requested] solution, vortex
7) Centrifuge for [Confidential Treatment Requested] at [Confidential
Treatment Requested]
8). Aspirate supernatant
9) Resuspend pellet in [Confidential Treatment Requested] deionized water
10) Measure tubes for [Confidential Treatment Requested] in [Confidential
Treatment Requested]
PERFORMANCE
Limit of detection: [Confidential Treatment Requested] TRAb activity
Precision: [Confidential Treatment Requested] intra-assay over range
Range: [Confidential Treatment Requested] U/ml
<PAGE>
SCHEDULE B
Page ___
SCHEDULE B
UWCM PATENTS
CASE WCM 3: LUMINESCENT PROTEIN LABELING
COUNTRY PATENT # FILED PRIORITY EXPIRY
- ------- -------- ----- -------- ------
GB 2008247B 14/11/78 17/11/77 14/11/98
Canada 1113392 16/11/78 17/11/77 01/12/98
Germany 2849708 16/11/78 17/11/77 Lapsed
Switzerland 640061 13/11/78 17/11/77 13/11/98
France 7832459 17/11/78 17/11/77 17/11/98
USA 4478817 14/11/78 17/11/77 23/10/01
CASE WCM 3 (DIVISIONAL) HOMOGENEOUS ASSAY
COUNTRY PATENT # FILED PRIORITY EXPIRY
- ------- -------- ----- -------- ------
GB 2095830B 01/11/81 17/11/77 14/11/98
Germany 2858792 07/06/89 17/11/77 17/11/98
Switzerland 645725 13/12/83 17/11/77 13/11/98
Canada 1116079 27/3/81 17/11/77 12/01/99
CASE WCM 13: ACRIDINIUM LABELS
COUNTRY PATENT # FILED PRIORITY EXPIRY
- ------- -------- ----- -------- ------
GB 2112779B 08/12/82 11/12/81 08/12/02
Europe* 0082636 08/12/82 11/12/81 08/12/02
USA# 4946958 26/09/88 11/12/81 07/08/07
CASE WCM 16: MASS PHOTON IMMUNOASSAY
COUNTRY PATENT # FILED PRIORITY EXPIRY
- ------- -------- ----- -------- ------
GB 2129553B 09/09/83 10/09/82 09/09/03
Europe** 0103469 09/09/83 10/09/82 09/09/03
<PAGE>
USA 4761382 05/02/87 10/09/82 02/08/05
Japan Pending 29/12/83 10/09/82 29/12/03
*France, Germany, Holland, Switzerland
**Belgium, France, Germany, Italy, Holland, Switzerland
UWCM PATENT APPLICATIONS
#US Continuation Applications 08/328563 filed 24/10/94 and 08/455414 filed
31/05/95 are still pending.
BIOANALYSIS PATENTS
None
BIOANALYSIS PATENT APPLICATIONS
None
<PAGE>
C H I R O N
May 6, 1996 CONFIDENTIAL
------------
Magnus Lundberg
Gullvivivevagen #5
75655 Uppsala, Sweden
Dear Magnus:
We are pleased to confirm our offer of employment as Vice President, Chiron
Corporation, reporting to me. Your starting salary will be paid at a monthly
rate of $14,583 ($175,000 annually) as an exempt employee. The details of
your Employment Contract will be outlined at a later date.
You will be eligible to participate in our Stock Option Program. Subject to
the approval of the Board of Directors, you will be awarded a stock option
grant of 7,500 shares. We expect that the grant will be approved and
effective within 90 days of your employment date. The exercise price of the
option will be set at the actual market price of a share of stock on the date
the grant is approved. Under the option program as it is currently
administered, you will be eligible for additional annual stock option grants
based on your performance.
You will be eligible to participate in Chiron's Executive Variable
Compensation Plan, which as structured, is paid out in the first quarter of
each calendar year based upon company and individual performance in the
preceding year. Your first payout will be made in the first quarter of 1997.
The payout potential for your position under the current program will be a
maximum of 60% of your annual salary. You will be guaranteed a minimum of
30% for the first two years of employment. Additionally, you will be
provided a company car of a value up to $33,000 for your use during your stay
in the Bay Area.
The following are highlights of your Chiron benefits. Some are effective
immediately upon your employment, while there are established enrollment
periods for others. Your group medical insurance benefits start on the first
day of the month following your date of hire.
1. A choice of medical and dental coverage for you and your eligible
dependents.
2. Three weeks paid vacation per year.
CHIRON CORPORATION - 4560 Horton Street - Emeryville, CA - 94608-2916 -
510-655-8730
<PAGE>
Magnus Lundberg
May 6,1996
Page 2
3. Eight scheduled and two floating paid holidays per year.
4. Eligible employees (20 hours or more per week) accrue 10 days of
sick leave per calendar year.
5. 401(k) tax-deferred investment plan.
6. Employee stock purchase plan.
7. Tuition reimbursement program.
8. Disability salary continuation plan.
9. Life and accidental death/dismemberment insurance.
A member of the Human Resources Department staff will assist you with all
aspects of your temporary relocation to the San Francisco Bay Area. Chiron
provides a relocation package for you which will cover the following items:
* One house-hunting trip to the San Francisco Bay Area for you and
your family. Travel arrangements and tickets must be secured through
the Chiron Travel Department.
* Relocation counseling assistance.
* Movement of your household goods to the San Francisco Bay Area.
* Storage of household goods for up to 120 days.
* A housing allowance for your stay in the San Francisco Bay Area.
* Travel to the San Francisco Bay Area for you and your family so
that you may start work on a date that is yet to be determined.
Travel arrangements and tickets must be secured through the Chiron
Travel Department.
As part of Chiron's medical surveillance program, you will be required to
provide a baseline blood draw.
This offer is contingent upon your ability as required by federal law, to
establish your employment eligibility as a U.S. citizen, a U.S. lawful
permanent resident, or an individual specifically authorized for employment
in the U.S. by the Immigration and Naturalization Service. Please read the
enclosed notice specifying the documentation required in this
<PAGE>
Magnus Lundberg
May 6, 1996
Page 3
regard. If you have an employment authorization document (EAD) issued by the
Immigration & Naturalization Service, please contact Rick Ross at
(510) 601-2511. This allows us to ensure that your authorized employment will
not lapse during your period of employment with Chiron. If possible, we request
that you present your Social Security card to Human Resources for the purpose
of verifying that your payroll records are accurately recorded.
Magnus, we hope the terms of this offer are satisfactory and we look forward to
a favorable response. If you have questions in the meantime, feel free to
call me.
Sincerely,
CHIRON CORPORATION
/s/ Edward E. Penhoet
Edward E. Penhoet, Ph.D.
President and Chief Executive Officer
Enclosure
cc: Human Resources
<PAGE>
May 25, 1996
Magnus Lundberg
Gullvivivevagen #5
75655 Uppsala, Sweden
Dear Magnus:
This letter confirms the exchange of correspondance and conversations
we've had regarding the terms of your employment.
We reaffirm our commitment to pay reasonable costs for moving you and
your immediate family, along with your household goods, to the San Francisco
Bay Area at a specific date this fall. Further, Chiron will absorb all
reasonable costs associated with moving your family and household goods back
to Sweden approximately one year later.
Your offer of employment is contingent upon your ability to establish
employment eligibility in the United States. In that regard, Chiron's Legal
and Human Resources departments will be at your disposal in handling these
matters.
I confirm that you will receive four weeks' vacation per calendar year.
With respect to notice of termination, either you or Chiron can give
notice of termination. Said termination would take place six months from the
written notification. Your employment and salary would continue up to that
termination date. You would be entitled to severance pay equivalent to one
year's salary and benefits, including the six month notice period.
We will provide you with financial assistance in the renting of a home
in the San Francisco area in the form of a monthly contribution not to exceed
$2,000.
Sincerely,
Edward E. Penhoet
President and Chief Executive Officer
<PAGE>
Exhibit 10.86
[CONFIDENTIAL TREATMENT REQUESTED]
[Certain confidential information has been omitted from the Agreement and filed
separately with the Securities and Exchange Commission pursuant to a request by
Registrant for confidential treatment pursuant to Rule 24b-2. The omitted
confidential information has been identified by the following statement:
"CONFIDENTIAL TREATMENT REQUESTED".]
Notarial Deed A. Prot. 1996/20
dated 17 February 1996 of the
Notary Public Dr. Werner Wenger, Basle
NOTARIAL DEED
-------------------------------------
PURCHASE AND ASSIGNMENT AGREEMENT
Negotiated in Basle, Switzerland on the 17th day of February 1996.
Before the notary public Dr. Werner Wenger with place of office in Basle
appeared today:
1. MR. BERND CROMME, born 8 August 1939, attorney-at-law, of German
nationality, domiciled at D-65812 Bad Soden,
2. DR. HANS KUPPER, born 17 July 1944, bio-chemist, of German nationality,
domiciled at D-35039 Marburg,
both acting not for themselves, but with a power of attorney for
BEHRINGWERKE AG, with an office at Marburg (Lahn), registered at the
commercial register of Marburg (Lahn) under HR B 1055, with notarial
confirmation of representation, an authenticated copy of which constitutes
APPENDIX A to this document;
3. DR. EKKEHARD MOESER, born 20 July 1947, attorney-at-law, domiciled at
D-60389 Frankfurt am Main, not acting for himself but
a) with a power of attorney for 31, CORSA VERWALTUNGSGESELLSCHAFT MBH,
with an office at Frankfurt am Main, with notarial confirmation of
representation, the original of which constitutes APPENDIX B to this
document;
<PAGE>
2
b) with a power of attorney for CHIRON CORPORATION, with an office at
California, with notarial confirmation of representation, the original
of which constitutes APPENDIX C to this document.
The foregoing persons identified themselves to the notary public by presenting
valid official national identity cards or passports.
Such persons and the notary public declared that they all have sufficient
knowledge of the English language to follow the notarization, which, at the
request of all the parties, will be conducted in English.
Such persons confirmed that they do not wish this document to be translated into
the German language nor do they wish that a German translation of this document
be added as an annex to this document.
From a conversation with such persons, the notary public took evidence that each
of them has sufficient command of the English language to follow and to
understand the document here notarized.
The foregoing persons request that the notary public notarize the following:
<PAGE>
3
PURCHASE AND ASSIGNMENT AGREEMENT
between
Behringwerke Aktiengesellschaft,
(hereinafter "Behringwerke")
- ON THE ONE SIDE -
AND
(1) 31. CORSA Verwaltungsgesellschaft mbH,
(to be renamed "Chiron Biocine GmbH")
(hereinafter "Buyer")
(2) Chiron Corporation,
(hereinafter "Guarantor")
- ON THE OTHER SIDE -.
(Behringwerke and Buyer are collectively hereinafter referred to as the
"Parties" or individually as the "Party", as the context requires.)
<PAGE>
4
TABLE OF CONTENTS
Directory of Annexes 5
Preamble 6
1. Facts; Covenants 6
2. Sale and Assignment 7
3. Put and Call; Shareholders' Agreement 8
4. Purchase Price 9
5. Condition Precedent 12
6. Operating Lease Agreement 13
7. Behringwerke's Representation and Warranties 14
8. Use of Name 20
9. Buyer's Representation and Warranties 21
10. Cooperation after the Closing Date 22
11. Non-Competition 22
12. Confidentiality 23
13. Merger Control 23
14. Indemnification; Guarantee 24
15. Miscellaneous 24
<PAGE>
5
DIRECTORY OF ANNEXES
Annex 1.4 (a) - Contribution Agreement
Annex 1.4 (b) - Partnership Agreement
Annex 3.4 - Shareholders' Agreement
Annex 4.6 - Investment Plan for 1996
Annex 4.7 - Terms and Conditions for Commission
Annex 7.1.16 - Third Party Consents Agreements
Annex 7.1.18 - Liens, Pledges, Usufructs and other Encumbrances
Annex 7.1.19 - Financial Statements
Annex 8 - Use of Name and Logo
Annex 11 - Hoechst Letter
<PAGE>
6
PREAMBLE
A. Object of Behringwerke, a stock company (AKTIENGESELLSCHAFT) incorporated
under the laws of Germany, is, inter alia, the production and distribution
of pharmaceutical products for human and animal use.
B. Object of Buyer, a GmbH organized under the laws of Germany, is the
distribution of pharmaceutical products for human use.
C. The Parties propose to enter into a joint venture in the field of human
vaccines, pursuant to which Behringwerke will contribute its human vaccine
business (hereinafter the "Business") to a newly organized limited
partnership (hereinafter "VuCo GmbH & Co."). Buyer will purchase a 49%
interest in the limited partnership and Buyer will have an option to
purchase, and Behringwerke will have an option to require Buyer to
purchase, the remaining 51% interest.
NOW, THEREFORE, the Parties hereto agree as follows:
1. FACTS; COVENTANTS
1.1 Behringwerke is the sole shareholder of 32. CORSA Verwaltungsgesellschaft
mbH (hereinafter "VuCo GmbH") and is holding two shares with a nominal
value of DM 25,000 and DM 25,000 representing 100% of the stated capital
of VuCo GmbH (hereinafter the "Shares"). VuCo GmbH is registered at the
commercial register of Amtsgericht Frankfurt a.M. under HR B 40994.
1.2 Behringwerke is the sole limited partner (KOMMANDITISTIN) of VuCo GmbH &
Co.; application has been filed for registration at the commercial register
of Amtsgericht Marburg. Behringwerke's limited partnership interest will be
fully contributed pursuant to the Contribution Agreement as defined in
clause 1.4; an application has been filed to have registered as liability
amount of Behringwerke at the commercial register an amount of DM 70,000
(in words: Deutsche Mark seventy thousand) (VOLL GELEISTETE
KOMMANDITEINLAGE UND REGISTRIERTE HAFTEINLAGE).
<PAGE>
7
1.3 Behringwerke is also the sole owner of Institut fur Produkttest und
Verbrauchsforschung GmbH. ("IPV").
1.4 Presently "IPV" is the sole general partner of VuCo GmbH & Co. Behringwerke
shall immediately after the date hereof cause VuCo GmbH to replace IPV as
general partner of VuCo GmbH & Co. and immediately after such replacement
Behringwerke shall execute, and shall cause VuCo GmbH & Co. to execute, the
Contribution Agreement attached as ANNEX 1.4 (a) ("the Contribution
Agreement") and the limited partnership agreement attached as ANNEX 1.4 (b)
(the "Partnership Agreement"), the latter with effect as of the Closing
Date and also to be entered into by Buyer.
2. SALE AND ASSIGNMENT
2.1 Behringwerke hereby sells to Buyer and Buyer hereby purchases from
Behringwerke from its share in VuCo GmbH with a nominal value of DM 25,000
(in words: Deutsche Mark twenty-five thousand) a partial share with a
nominal value of DM 24,500 (in words: Deutsche Mark twenty four thousand
five hundred) after split of such share in two shares with nominal values
of DM 500 (in words: Deutsche Mark five hundred) and DM 24,500 (in words:
Deutsche Mark twenty-four thousand five hundred). The transfer of the
purchased share shall have effect as of the Closing Date, subject to the
occurrence of all of the conditions at the Closing Date as defined in
clause 5.1. (The sold share in VuCo GmbH is hereinafter referred to as the
"GmbH Share".) From the Closing Date, Buyer shall be entitled to all
dividend rights and all other secondary rights of the GmbH Share.
2.2 Behringwerke hereby sells to Buyer and Buyer hereby purchases from
Behringwerke 49% of its limited partnership interests in VuCo GmbH & Co.
including 49% of all capital accounts and of any other rights Behringwerke
may have in VuCo GmbH & Co. (the "Limited Partnership Interest") with
economical effect as of the Closing Date subject to the occurrence of all
of the conditions at the Closing Date. Buyer shall be entitled to all
dividend rights and all other secondary rights of a limited partner of VuCo
GmbH & Co. with respect to the Limited Partnership Interest.
<PAGE>
8
2.3 Behringwerke hereby assigns to Buyer with effect in rem as of the Closing
Date the GmbH Share and the Limited Partnership Interest, and Buyer accepts
such assignment from Behringwerke.
The effectiveness in rem of the assignment of the GmbH Share and the
Limited Partnership Interest shall in any case be subject to the condition
precedent of payment of the Fixed Cash Purchase Price and of the Lease
Compensation payable to Behringwerke pursuant to clauses 4.1 and 4.2 and
the other conditions of clause 5.1.
2.4 Behringwerke shall cause VuCo GmbH to consent to the split of the DM 25,000
share and to the transfer of the Limited Partnership Interest.
3. PUT AND CALL; SHAREHOLDERS' AGREEMENT
3.1 Behringwerke herewith grants to Buyer the option (the "Chiron Call Option")
to require Behringwerke to sell to Buyer all of the remaining shares of
Behringwerke in VuCo GmbH and all of the remaining limited partnership
interests in VuCo GmbH & Co. (the "Option Interests"). Buyer may exercise
the Chiron Call Option within each of the following periods: March 1998,
March 1999, March 2000, March 2001 (the "Call Option Periods"). For the
purpose of executing the Chiron Call Option Behringwerke hereby irrevocably
offers to the Buyer to sell the Option Interests within any of the Call
Option Periods on the terms and conditions set forth herein. Buyer may
exercise the Chiron Call Option by accepting the offer of Behringwerke by
notarial deed within each of the Call Option Periods, PROVIDED THAT, Buyer
gives a notice to Behringwerke 30 days before accepting the offer.
3.2 Buyer herewith grants to Behringwerke the option to require Buyer to buy
from Behringwerke the Option Interests (the "Behring Put Option").
Behringwerke may exercise the Behring Put Option within March 2001 (the
"Put Option Period"). For the purpose of executing the Behring Put Option
Buyer hereby irrevocably offers to Behringwerke to buy the Option Interests
within the Put Option Period on the terms and conditions set forth herein.
Behringwerke may exercise the Behring Put Option by accepting the offer of
Buyer by notarial deed within the Put Option Period, PROVIDED THAT,
Behringwerke gives a notice to Buyer 30 days before accepting the offer.
<PAGE>
9
In case a bankruptcy proceeding or composition proceeding is commenced with
regard to the assets of VuCo GmbH or VuCo GmbH & Co., or the commencement
of such proceedings is rejected due to lack of assets, Behringwerke is
entitled to immediately exercise the Behring Put Option with a notice
period of thirty days, PROVIDED THAT such notice shall not become effective
if Buyer arranges that the continuation of VuCo GmbH and VuCo GmbH & Co. as
a going concern is secured within such notice period.
3.3 Subject to the condition that either the Chiron Call Option or the Behring
Put Option is exercised pursuant to clauses 3.1 or 3.2 above and subject to
the further condition that the payment of the Option Purchase Price
pursuant to clause 4.3 is made, Behringwerke hereby assigns to the Buyer
the Option Interests and the Buyer accepts such assignment. Behringwerke
represents and warrants that as of the effective date of such assignment,
it is the sole owner of such Option Interests and that the Option Interests
are fully paid, not repaid and free and clear of any encumbrances and not
subject to any restrictions on disposition, any preemptive rights, option
rights, rights of first refusal or similar rights, all with respect to
rights of third parties.
3.4 Buyer and Behringwerke herewith enter into the Shareholders' Agreement
attached as ANNEX 3.4 which governs the Parties' shareholder rights in VuCo
GmbH and VuCo GmbH & Co. for the time period until the exercise of the
Chiron Call Option or the Behring Put Option.
4. PURCHASE PRICE
4.1 The purchase price owed by Buyer for the GmbH Share and the Limited
Partnership Interest is DM 171,500,000 (in words: Deutsche Mark one hundred
and seventy-one million and five hundred thousand) (hereinafter the "Fixed
Cash Purchase Price"). The payment of the Fixed Cash Purchase Price is due
and payable on the Closing Date.
4.2 In addition to the Fixed Cash Purchase Price, Buyer shall pay to
Behringwerke on the Closing Date 49% of the amount VuCo GmbH & Co. actually
receives as rent under section 3.1 of the Operating Lease Agreement (the
"Lease Compensation") entered into pursuant to the Contribution Agreement.
4.3 The purchase price owed by Buyer for the Option Interests is DM 178,500,000
(in words: Deutsche Mark one hundred seventy-eight million and five hundred
thousand)
<PAGE>
10
plus an amount equal to 51% of the Lease Compensation and plus an option
fee calculated on such amounts at a rate of 5.125 % p.a. (in words: five
and one eighth percent) compounded annually for the time period between the
Closing Date and the due date under this clause 4.3 (the "Option Purchase
Price"). Any dividends (ENTNAHMEN) received by Behringwerke from VuCo GmbH
or VuCo GmbH & Co., plus interest, if and to the extent appropriate, on
such amounts at a rate of 5.125 % p.a. (in words: five and one eighth
percent) compounded annually for the time period between receipt of such
dividend and receipt of payment under this clause 4.3 shall be credited to
the Option Purchase Price, if due.
The Option Purchase Price shall be due and payable within five days of the
date of the notarization of the acceptance of the Chiron Call Option or the
Behring Put Option, as the case may be.
4.4 Buyer shall make any payments owed under this clause 4 by wire transfer
free of cost until 11:00 h at the respective due date to the following
account of Behringwerke:
Commerzbank AG Marburg
A/C No. 391 0023 (BLZ/Bank ID-No 533 400 24)
or any other account as designated by Behringwerke.
4.5 If the Closing Date is deferred for the sole reason that Buyer did not pay
the full amount of the Fixed Cash Purchase Price and 49 % of the Lease
Compensation or if Buyer does not pay the Option Purchase Price when due,
then starting from such date at which the Closing Date otherwise would have
occurred or the Option Purchase Price was due, the respective amount owed
by Buyer shall bear interest until receipt of payment at a rate of 3-month
FIBOR plus 10 basis points p.a.
4.6 The Fixed Cash Purchase Price and the Option Purchase Price include an
amount of DM 35,000,000 (in words: Deutsche Mark thirty-five million) as
consideration for the contribution of Stock in VuCo GmbH & Co. by
Behringwerke pursuant to the Contribution Agreement or the Operating Lease
Agreement and for investments in the Business which may be activated and
which are implemented by Behringwerke since 1 January 1996 (the "New
Investments"). The investments for 1996, as currently planned, approximate
DM 6,700,000 (in words: Deutsche Mark six million seven hundred thousand)
and are shown in the investment plan attached as ANNEX 4.6 which
Behringwerke may alter at its discretion subject to this Agreement and
the Contribution Agreement at any given time. Behringwerke will consult
with Buyer from time to time regarding the implementation of
<PAGE>
11
such plan and any amendments thereto. The Parties shall make an inventory
close to the Closing Date with respect to such Stock and the New
Investments. The Parties shall evaluate the Stock and the New Investments
considering generally accepted accounting principles in Germany and the
principle of balance sheet consistency. If the value of the Stock and the
New Investments as determined in accordance with the foregoing provisions,
exceeds DM 35,000,000, an amount of 49% of such excess amount shall be
paid by Buyer to Behringwerke within 4 weeks after the Closing Date. If the
value of the Stock and the New Investments as determined in accordance with
the foregoing provisions is lower than DM 35,000,000, an amount of 49% of
such shortfall shall be paid by Behringwerke to Buyer within 4 weeks after
the Closing Date. As from the Closing Date any such payment owed by Buyer
to Behringwerke, or by Behringwerke to Buyer, as the case may be, shall
bear interest at a rate of 3-month FIBOR p.a. compounded annually. The
remaining 51% of the balance shall be due and payable by Buyer to
Behringwerke, or vice versa, as the case may be, at the date of the payment
under clause 4.3, plus interest at a rate of 5.125% (in words: five and one
eighth percent) compounded annually for the time period between Closing
Date and receipt of such balance payment.
4.7 In addition to any purchase price payments hereunder, Buyer agrees to pay
or to cause VuCo GmbH & Co. to pay to Behringwerke a yearly commission
("Commission") on the sales of Buyer's vaccine products listed in ANNEX 4.7
in Germany calculated as [CONFIDENTIAL TREATMENT REQUESTED] of the excess
of sales as forecast in ANNEX 4.7. Any such Commission shall be payable
for each of the years through 2001, regardless of the date of exercise
of the Chiron Call Option or the Behringwerke Put Option, all further
regulated in ANNEX 4.7. To be clear: any such Commission received by
Behringwerke will not reduce the Fixed Cash Purchase Price and/or the
Option Purchase Price, if any.
4.8 Buyer cannot set off any claims including claims pursuant to clause 7 of
this Agreement, it may have against any payments under this clause 4 unless
the counterclaim is undisputed or non-appealable. The exercise of rights of
retention of Buyer, if any, is also excluded. The same applies to payment
obligations of Behringwerke pursuant to clause 4.6.
5. CONDITION PRECEDENT
5.1 The date of perfection (VOLLZUG) of the transactions contemplated in this
Agreement (the "Closing Date") is subject to the occurrence of each of the
following conditions:
<PAGE>
12
5.1.1 VuCo GmbH & Co. is holding all official approvals for the
operation of the Business as currently conducted pursuant to the
ARZNEIMITTELGESETZ, GENTECHNIKGESETZ, TIERSCHUTZGESETZ and
BUNDESSEUCHENGESETZ;
5.1.2 the Operating Lease Agreement (cf. clause 6) has been terminated
with effect as of the Closing Date;
5.1.3 the Contribution Date pursuant to the Contribution Agreement has
already occurred;
5.1.4 the approval contemplated in Art. 7 of the Contribution Agreement
shall have been obtained and the respective other contracting
party referred to therein shall have consented to an assignment
of the contract described in ANNEX 7 of the Contribution
Agreement to VuCo GmbH & Co. (as VuCo GmbH & Co. will exist upon
purchase of the GmbH Share and the Limited Partnership Interest
by Buyer contemplated hereby); and
5.1.5 the necessary merger control approvals pursuant to clause 13 have
either been granted, regardless of whether subject to any
conditions, or the implementation of this Agreement cannot be
prohibited by the merger control authorities due to lapse of
time.
5.2 The Parties shall use their best efforts that the events stated in clause
5.1 will be fulfilled as soon as possible and they will promptly inform
each other of the occurrence of any event stated in clause 5.1. All
conditions shall be deemed to have occurred as soon as the Parties informed
each other in writing of such occurrence.
5.3 Until Behringwerke shall have obtained the necessary approval referred
to in clause 5.1.4, either party may initiate the following procedure by
written notice, which may not be given earlier than 60 (sixty) days after
the date hereof. If the condition precedent stated in clause 5.1.4 has not
been fulfilled within such 60 (sixty) days period, each Party shall be
entitled to terminate this Agreement, effective on five (5) days written
notice to the other Party, without any Party being obliged to pay or
entitled to receive any compensation by reason of such termination to or
from the other Party. Neither Party is entitled to terminate this Agreement
if Behringwerke agrees at its own discretion within such period to effect
a partial universal reorganization or other ways to reorganize in order to
satisfy such condition and to indemnify Buyer against the cost and expense
of any challenge regarding the effectiveness of such reorganization to
cause the succession of VuCo
<PAGE>
13
GmbH & Co. to the contract described in Annex 7 of the Contribution
Agreement without the consent of the respective other contracting party.
5.4 This Agreement shall be terminated if Closing Date has not occurred by
October 31, 1996, unless mutually extended by the Parties.
5.5 On the Closing Date Behringwerke shall cause the managing director(s)
(GESCHAFTSFUHRER) of VuCo GmbH to resign from office and Buyer and
Behringwerke shall nominate a new managing director pursuant to the
Shareholders' Agreement. Buyer shall also render a declaration that it
waives all claims it or VuCo GmbH or VuCo GmbH & Co. may have against the
resigning managing director.
5.6 On the Closing Date, Behringwerke shall deliver to Buyer a receipt for the
purchase price received.
6. OPERATING LEASE AGREEMENT
The Operating Lease Agreement as provided for in the Contribution Agreement
shall in any case become effective and shall run until the Closing Date.
Behringwerke shall cause VuCo GmbH & Co. to agree to such effectiveness of
the Operating Lease Agreement.
7. BEHRINGWERKE'S REPRESENTATION AND WARRANTIES
7.1 Behringwerke represents and warrants in form of an independent guarantee
(SELBSTANDIGES GARANTIEVERSPRECHEN) as of the date of this Agreement and
the Closing Date, unless, otherwise stipulated and, excluding any further
claims, that:
7.1.1 it has all corporate-legal authorities to conclude and execute
this Agreement and the execution and implementation of this
Agreement have duly been authorized by all necessary corporate
actions, in particular by its supervisory and managing bodies;
7.1.2 assuming the necessary approvals referred to in clause 13 below
will be granted and, except for circumstances exclusively within
the sphere of Buyer, the execution, delivery and performance of
this Agreement by Behringwerke do not and will not
<PAGE>
14
7.1.2.1 violate, conflict with or result in the breach of any provision
of the Articles of Association or GESCHAFTSORDNUNG of
Behringwerke,
7.1.2.2 conflict with or violate any law, regulations, order, judgment,
award, injunction, writ, decree or government order applicable to
Behringwerke, nor
7.1.2.3 require the consent of any third party including public
authorities other than the approvals referred to in clauses 5.1.1
and 5.1.4;
7.1.3 it is the sole owner of the fully paid in GmbH Share and of the
Limited Partnership Interest (hereinafter collectively the "VuCo
Interests") and is entitled to sell and transfer to Buyer the full
legal and beneficial ownership of the VuCo Interests, and Buyer will
own such interests
free and clear from any encumbrances and will thereby become the sole
owner of the VuCo Interests;
VuCo GmbH has a net equity (BILANZIELLES REINVERMOGEN - Section 266
III A HGB) in the amount of at least DM 50,000;
7.1.4 the VuCo Interests are not subject to any restrictions on disposition,
any preemptive rights, option rights, rights of first refusal or
similar rights of third parties;
7.1.5 the facts stated in clause 1 are true and correct;
7.1.6 no additional contribution obligations in cash or in kind
(NACHSCHUBPFLICHTEN) exist with respect to VuCo GmbH and/or VuCo GmbH
& Co.;
7.1.7 there are no voting trusts, stockholder agreements, proxies or other
agreements or understandings in effect with respect to the voting or
transfer of the VuCo Interests except as provided for in the articles
of incorporation of VuCo GmbH and the Partnership Agreement;
7.1.8 the VuCo Interests do not constitute the entire property of
Behringwerke within the meaning of sect. 419 of the Civil Code
(BURGERLICHES GESETZBUCH);
7.1.9 The articles of incorporation (GESELLSCHAFTSVERTRAG) of VuCo GmbH are
known to the Parties and will only be changed upon mutual consent;
<PAGE>
15
7.1.10 ANNEX 1.4 (b) contains a true and correct copy of the Partnership
Agreement to be effective on or before the Closing Date;
7.1.11 VuCo GmbH has not conducted any business activities other than
administration as otherwise expressly contemplateed by this Agreement
and is not subject to rights or obligations stemming from other
business activities;
7.1.12 except for the JAHRESPRAMIENORDNUNG; ERFOLGSBETEILIGUNG, neither VuCo
GmbH nor VuCo GmbH & Co. is bound by any control, profit transfer or
other agreements of the type referred to in sect. 291, 292 ET SEQ. of
the Stock Corporation Act (AKTIENGESETZ), and no silent participations
(STILLE BETEILIGUNGEN), profit participating loans (PARTIARISCHE
DARLEHEN), profit participations of management or employees or other
similar obligations exist with respect to the profits of VuCo GmbH
and/or of VuCo GmbH & Co. except for the Operating Lease Agreement
(cf. clause 6);
7.1.13 sufficient insurance policies have been concluded and maintained to
secure against risk arising in connection with the business of VuCo
GmbH & Co. until the Closing Date; such insurance shall be continued
for the period of joint ownership, while Hoechst is holding indirectly
the majority in VuCo GmbH and VuCo GmbH & Co., unless VuCo GmbH & Co.
and/or VuCo GmbH decides otherwise;
7.1.14 all warranties and representations granted by Behringwerke under the
Contribution Agreement are true and correct, and Buyer is entitled to
claim those warranties on behalf of VuCo GmbH & Co.;
7.1.15 between the date of this Agreement and the Closing Date, the
Contribution Agreement will not be amended, the Business will be
conducted in the ordinary course and consistent with past practice,
and Behringwerke shall cause VuCo GmbH and VuCo GmbH & Co. not to
enter into any transaction outside the ordinary course of business
without the prior consent of Buyer. As amplification and not
limitation of the foregoing, VuCo GmbH and/or VuCo GmbH & Co. will
not:
7.1.15.1 make any loan to, guarantee any indebtedness of or otherwise incur any
indebtedness on behalf of Behringwerke or any third party or assume
any other unusual obligations;
<PAGE>
16
7.1.15.2 redeem any of the capital or declare, make or pay any profit
distributions (whether in cash, securities or other property);
7.1.15.3 enter into any arrangement under or similar to the Transformation Law
(UMWANDLUNGSGESETZ);
7.1.15.4 purchase any assets or make any investments in excess of DM 50,000 (in
words: Deutsche Mark fifty thousand), except as described in the
capital investment plan, without the prior written consent of Buyer;
Behringwerke will not hire new employees attributable to the Business without
the prior consent of Buyer; in case of replacement of leaving employees, such
consent of Buyer shall not be unreasonably withheld;
7.1.16 neither the execution, delivery and performance of this Agreement by
Behringwerke, the execution, delivery and performance of the
Contribution Agreement by Behringwerke, VuCo GmbH and VuCo GmbH & Co.,
nor the consummation of the transactions contemplated hereby and
thereby, will (i) violate or conflict with Articles of Incorporation
of Behringwerke or VuCo GmbH or the present partnership agreement of
VuCo GmbH & Co., (ii) subject to clause 13 violate or conflict with
any law, regulations, order, judgment, award, injunction, writ or
decree applicable to Behringwerke, VuCo GmbH or VuCo GmbH & Co., (iii)
subject to obtaining the third party consents with respect to the
contracts listed in ANNEX 7.1.16 (the "Third Party Consents"), violate
or conflict with, result in a breach of, or result in or permit the
acceleration or termination of or constitute a default under (whether
with notice or lapse of time or both) any agreement, instrument,
indenture, mortgage, lien, lease or other contract to which
Behringwerke, VuCo GmbH or VuCo GmbH & Co. is a party or by which any
of them or their property or assets is bound, provided such violation,
conflict, acceleration, termination of default individually or in the
aggregate would have a material adverse effect on the Business; (iv)
result in the creation of any lien, charge, or encumbrance on any of
the property or assets of the Business which individually or in the
aggregate would have a material adverse effect on the Business;
7.1.17 The Contribution Agreement completely and correctly identifies all
contracts with licensors, contracts with licensees, leases, employment
and labor agreements and other contracts relating to the Business
(other than contracts with an
<PAGE>
17
annual payment obligation of no more than DM 50,000 and a term of less
than one year). Except as disclosed in such Annexes, neither VuCo GmbH
nor VuCo GmbH & Co. is a party or otherwise subject to (i) any
contract, agreement or instrument evidencing or relating to any
material amount of indebtedness for borrowed money or the deferred
purchase price of property, or any direct or indirect guarantee of any
such indebtedness or deferred purchase price, or (ii) any secrecy or
other agreement or any injunction, judgment, order or award that (x)
restricts the right of VuCo GmbH or VuCo GmbH & Co. to engage in any
place in any line of business or (y) would restrict the right of VuCo
GmbH or VuCo GmbH & Co. to engage in any place in any line of business
after the Closing Date;
7.1.18 VuCo GmbH & Co. will receive good and marketable title to the
intellectual property rights contributed pursuant to clause 3.1.1.1 of
the Contribution Agreement and to the inventory and other stock
contributed pursuant to clause 3.1.2 of the Contribution Agreement,
and will also have good and marketable title to, or a valid leasehold
interest in, the machinery, equipment and other fixed assets
contributed pursuant to clause 3.1.1.2 of the Contribution Agreement,
and except as expressly set forth in the Annexes to such clause or in
ANNEX 7.1.18, all such assets are free and clear of any liens,
pledges, usufruct, and other encumbrances;
7.1.19 to the best knowledge and belief of the management board (VORSTAND) of
Behringwerke and officers (PROKURISTEN) of Behringwerke attributable
to the Business, the financial statements contained in ANNEX 7.1.19
fairly present the financial position and results of operation of the
Business at the respective dates and for the respective periods to
which they apply;
7.1.20 Behringwerke has disclosed all facts and circumstances which are or
which can reasonably be expected to be material to Buyer;
7.1.21 Behringwerke, VuCo GmbH and VuCo GmbH & Co. each is in compliance in
all material respects with all laws, regulations, orders, judgments
and decrees of any court or governmental or administrative authority
applicable to the Business so that there will be no material
detrimental impact for the Business in future;
7.1.22 Since June 30, 1995, there has not been (a) any material adverse
change in financial condition, operations, business prospects or
properties of the Business; (b)
<PAGE>
18
any acquisition or disposition of any of assets of the Business which
may have a material and adverse effect on the ability of VuCo GmbH &
Co. to conduct the Business as heretofore conducted; (c) any damage,
destruction or loss to any properties or assets of the Business which
may materially and adversely affect or impair VuCo GmbH & Co.'s
ability to conduct the Business in the manner heretofore conducted; or
(d) any other act or event outside of the ordinary course of business
which may materially and adversely affect or impair the ability of
VuCo GmbH & Co. to conduct the Business in the manner heretofore
conducted;
7.2 In case of a breach of any of the representations and warranties under
clause 7.1 the following applies:
7.2.1 Behringwerke is entitled, with respect to the warranted items, to
cure the breach. If Behringwerke fails to cure the breach within
a reasonable period of time, such period not to exceed three
months after Buyer has notified Behringwerke of the breach, or if
immediate action is necessary (GEFAHR IM VERZUG), Behringwerke
shall refund to Buyer the necessary amount spent by Buyer to
establish the warranted status and this shall be Buyer's sole
remedy.
7.2.2 Buyer may only ask for recovery based on a warranty claim or
on other claims connected therewith if the individual claim
exceeds [CONFIDENTIAL TREATMENT REQUESTED] (in words:
[CONFIDENTIAL TREATMENT REQUESTED]) and to the extent the
aggregate of all such individual claims exceeds [CONFIDENTIAL
TREATMENT REQUESTED] (in words: [CONFIDENTIAL TREATMENT
REQUESTED]). The total amount of the claims here mentioned may
not exceed [CONFIDENTIAL TREATMENT REQUESTED] (in words:
[CONFIDENTIAL TREATMENT REQUESTED]) (the "Warranty Cap"),
whereby any warranty claims of VuCo GmbH & Co. pursuant to the
Contribution Agreement must be included in calculating the
Warranty Cap and the corresponding deductible amounts. This
clause 7.2.2 shall not apply with regard to clauses 7.1.1,
7.1.2 and with regard to the net equity guarantee pursuant to
clause 7.1.3 second paragraph.
7.3 To the extent that Buyer can raise a warranty claim for the same reason
for which VuCo GmbH & Co. has raised and has got settled a warranty claim
under the Contribution Agreement, Buyer is excluded to raise its warranty
claim, notwithstanding that Buyer is entitled to claim those warranties on
behalf of VuCo GmbH & Co.
7.4 Any claims regarding cancellation (WANDLUNG), rescission (RUCKTRITT) or
challenge (ANFECHTUNG) of this Agreement or any other release from this
Agreement, including any
<PAGE>
19
claim resulting from a liability due to breach of duty prior to contract
(CULPA IN CONTRAHENDO), are excluded unless Buyer cannot reasonably be
expected to adhere to this Agreement as a result of the breach of the
guarantee pursuant to clause 7.1.22. A breach of clause 7.1.22 by way of
example and not limitation is considered as occurred if VuCo GmbH & Co's
business or plant is subject to dislocation or massive destruction of
production facilities which after insurance proceeds would result in a
decline in value in excess of DM 52,500,000 (in words: Deutsche Mark
fifty-two million five hundred thousand). Such extraordinary right of
rescission has to be exercised within two weeks after the Closing Date.
Any further claims for damages because of a breach of one or more of the
guarantees or representations and warranties made pursuant to clause 7 or
any other liability of Behringwerke as well as claims based on breach of
duty prior to contract (CULPA IN CONTRAHENDO) shall be excluded.
7.5 Claims of Buyer pursuant to this clause 7 shall become time-barred fifteen
(15) months after the Closing Date with the exception of the warranty
granted under clause 7.1.14 which shall become time-barred as soon as the
respective warranty claims of VuCo GmbH & Co under the Contribution
Agreement become time-barred. The limitation period stops running if
claims are asserted in writing by Buyer against Behringwerke and if the
reasons on which such claim is based are reasonably identified. If
Behringwerke does not accept the claim within one month, Buyer must raise
the claim before court within a further period of three months pursuant to
clause 15.5 or it becomes time-barred.
8. USE OF NAME
Buyer has the royalty free, worldwide exclusive right to use in
perpetuity the name "Behring" as part of the firm of Buyer, VuCo GmbH
and VuCo GmbH & Co. and to use such name and the logo "E. v. Behring"
as described in ANNEX 8, provided, however, that the name and logo may
only be used in connection with human vaccine products against
infectious diseases and only in connection with a clear indication of
the name of Chiron, all as also described in ANNEX 8. Such right to
use the name Behring and the logo shall be subject to the
non-exclusive right of Hoechst in India, Sri Lanka and Bangladesh and
subject to any third parties' rights including not fully controlled
affiliates.
<PAGE>
20
The parties will rename VuCo GmbH and VuCo GmbH & Co. within 6 (six)
months after the Closing Date accordingly.
Behringwerke is prepared to discuss with Buyer on a case by case basis the
use of the name Behring in connection with the name Chiron outside of the
vaccine field for human health care products based on modern biological
technology (excluding Diagnostics) in as far as this is not in conflict
with legal aspects and own interests of Behringwerke AG, Hoechst AG, and
Centeon. All parties will guarantee that all uses will not damage the
reputation of the name Behring. All discussions hereto will be conducted
in good faith.
All uses of the name by either Party will be of high quality and
consistent with the preservation of the reputation and goodwill associated
with the name.
For the avoidance of doubt: Behringwerke shall remain the sole owner of
the trade name and trademark "Behring" and of the logo "E. v. Behring",
and all use of such trade name, trademark and logo in accordance with the
aforesaid shall be governed by a "Trade Name and Trademark License
Agreement" to be entered into by the relevant parties.
9. BUYER'S REPRESENTATION AND WARRANTIES
9.1 Buyer represents and warrants in form of an independent guarantee
(SELBSTANDIGE ERFULLUNGSGARANTIE) excluding any further warranty claims
that:
9.1.1 it has all corporate-legal authorities to conclude and execute
this Agreement and the execution and implementation of this
Agreement have duly been authorized by all necessary corporate
actions, in particular by its supervisory and managing bodies;
9.1.2 assuming the necessary approvals referred to in clause 13 below
will be granted and except for circumstances exclusively within
the sphere of Behringwerke, the execution, delivery and
performance of this Agreement by Buyer do not and will not
9.1.2.1 violate, conflict with or result in the breach of any
provision of the Articles of Association or
GESCHAFTSORDNUNG of Buyer,
<PAGE>
21
9.1.2.2 conflict with or violate any law regulations, order,
judgment, award, injunction, writ, decree or government
order applicable to Buyer, nor
9.1.2.3 require the consent of any third party including public
authorities.
9.2 In the event that any of the representations and warranties made in clause
9.1 is incorrect, Buyer shall indemnify Behringwerke for such damage
Behringwerke may suffer as a result thereof.
10. COOPERATION AFTER THE CLOSING DATE
10.1 Behringwerke and Buyer agree to cooperate after the Closing Date to achieve
a smooth and efficient transfer of the VuCo Interests to Buyer.
Behringwerke and Buyer shall initiate all acts necessary, or cause to be
initiated such acts, respectively, to implement this Agreement.
10.2 Behringwerke and Buyer shall, without undue delay, pass to each other any
payment, notice, correspondence, information or inquiry relating to the
Business which may be received by either of them after the Closing Date
and which the other is entitled to or is of concern to the other, taking
into account the terms and conditions of this Agreement. Clause 12 is
applicable to both Parties in this respect.
11. NON-COMPETITION
For a period of five years from the Closing Date, Behringwerke and
affiliated companies except for VuCo GmbH or VuCo GmbH & Co. shall refrain
from developing, producing, marketing, selling or otherwise distributing
human vaccine products in the world; for such purposes an affiliated
company of Behringwerke is a company in which Behringwerke either holds a
majority interest or which is controlled by Behringwerke. In the letter
attached hereto as ANNEX 11 Hoechst AG is undertaking a separate
non-compete covenant and other covenants with respect to this Agreement
(the "Hoechst Letter").
<PAGE>
22
12. CONFIDENTIALITY
Except as otherwise provided in this Agreement, after the date of this
Agreement Behringwerke shall not use or disclose to third Parties any
information disclosed, transferred, assigned, licensed or otherwise made
available by or to Buyer hereunder and relating to the transfer of the
Business, unless (i) such information is needed by Behringwerke to
continue its commercial activities, (ii) is or becomes public knowledge
through no fault of Behringwerke, (iii) is passed to Behringwerke after
the Closing Date by a third party which is not under an obligation of
confidentiality, or (iv) has to be disclosed by Behringwerke pursuant to
law, judicial, or official order; in such case Behringwerke shall notify
Buyer in advance about the impending disclosure.
13. MERGER CONTROL
13.1 Immediately after the date hereof, the Parties' respective counsel shall
determine whether this Agreement is subject to the merger control by the
Commission of the European Union (hereinafter "Commission") pursuant to
the Regulation (EEC) No. 4064/89 of the Council of the European
Communities of December 21, 1989 on the Control of Mergers between
Undertakings. If so, they will notify the Commission on the merger
contemplated in this Agreement promptly, but not later than one week after
the date of notarization. Each party is obligated to provide all
information and addresses necessary and useful in connection herewith in a
timely, complete and correct manner and to take all steps necessary and
useful to achieve a positive outcome of the merger control proceeding.
13.2 All legal acts relating to the consummation of this Agreement are subject
to the condition precedent that either the Commission has found this
Agreement to be compatible with the common market or that after the
notification the prohibition of consummation shall be suspended for
whatever reason.
Both Parties shall only be released from the obligation resulting from
this Agreement in the event that the Commission should deny its approval
with respect to a transfer of the Business in total. In this context,
Buyer shall conduct all negotiations with the Commission within due course
and shall render to the Commission all additional details which shall
enable the Commission to approve this Agreement, even if under conditions;
furthermore, Buyer shall offer to the Commission or accept, respectively,
to implement all acts the Commission deems necessary and shall then
implement such acts accordingly.
<PAGE>
23
13.3 In case that the Commission forbids the implementation of this Agreement
in its entirety, the Parties shall regard such decision as final unless
they agree otherwise until the decision becomes non-appealable.
13.4 In case the German Federal Cartel Office is in charge, clause 13.1 to 13.3
shall apply respectively.
14. INDEMNIFICATION; GUARANTEE
14.1 Buyer shall assume responsibility (SELBSTANDIGE ERFULLUNGSGARANTIE) by way
of fulfillment of all obligations of VuCo GmbH & Co. stemming from the
Contribution Agreement arising after the Closing Date.
Buyer shall furthermore indemnify Behringwerke against any liability of
Behringwerke as (former) limited partner after exercise of the Chiron Call
Option or the Behring Put Option stemming from any repayment of the
registered liability amount (HAFTEINLAGE) after the Closing Date.
14.2 The Guarantor shall assume responsibility (SELBSTANDIGEERFULLUNGSGARANTIE)
by way of fulfillment of all obligations of Buyer stemming from this
Agreement and its Annexes.
14.3 With respect to the Guarantor's obligation under clause 14.2 , it is
agreed that the Guarantor shall enter into such reasonable and appropriate
facilities as the Guarantor, Buyer and Behringwerke may from time to time
agree.
15. MISCELLANEOUS
15.1 This Agreement including the Annexes contains the entire understanding of
the Parties hereto in respect of the subject matter contained herein. No
agreements other than those expressly set forth herein exist between the
Parties.
15.2 Any modifications or amendments of this Agreement including this clause
15.2. shall be effective only if made in writing, unless the law provides
for a stricter form.
15.3 Each party shall pay its own costs and expenses (including costs and
expenses of its advisors) incurred in connection with this Agreement and
the execution of the transac-
<PAGE>
24
tions contemplated hereby, except for the cost of notarization of this
Agreement, which shall be borne by Buyer. The expenses for the
cancellation of encumbrances not assumed by Buyer shall be borne by
Behringwerke. Any taxes or court expenses and cost in connection with the
merger control clearance which may arise from implementing this Agreement
shall be borne by Buyer excluding any taxes based on income or capital
gain which may arise upon the sale or transfer of the GmbH Share or the
Limited Partnership Interest from Behringwerke to Buyer, which taxes shall
remain the obligation of Behringwerke.
15.4 This Agreement shall be governed by and construed in accordance with the
law of the Federal Republic of Germany (without rules of conflict of
laws), unless the application of foreign law is compulsory.
15.5 Any disputes arising from, and in connection with, this Agreement shall be
finally decided by an arbitration court consisting of three arbitrators
following the rules of arbitration proceedings of the International
Chamber of Commerce (ICC). The arbitration court shall meet in Frankfurt
am Main. The language of the proceedings shall be German. The jurisdiction
of the ordinary courts shall be excluded except for summary judgment
(EINSTWEILIGER RECHTSSCHUTZ) and writs of execution. The arbitration court
may also decide about the validity of this document if necessary. The
costs of any arbitration shall be borne by the Parties pursuant to sect.
91 et seq. of the Civil Procedure Code (ZIVILPROZEBORDNUNG).
15.6 To the extent possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under the
applicable law. If any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions
of this Agreement. To the extent that a provision is ineffective or
invalid, it shall be replaced by an effective and valid provision which
comes as close as possible to the economic purpose of the ineffective or
invalid provision.
15.7 All notices and other communications under this Agreement shall be in
writing and shall be given or made to the following addresses, unless
specified otherwise in this contract:
<PAGE>
25
To Behringwerke:
Behringwerke AG
attn. Vorstand
Postfach 1140
D-35001 Marburg
Fax: (49-6421) 39-4880
To Buyer/Guarantor:
Chiron Corporation
attn. President, Chiron Biocine
4560 Horton Street
Emeryville, CA 94608-2916
U.S.A.
Fax: (1-510) 654-5360
with a copy to General Counsel of Chiron Corporation, same address
15.8 It is agreed that Behringwerke shall cause the Behring/Armour joint
venture to continue to have distributed in Germany by VuCo GmbH & Co. the
products currently distributed by Behringwerke on behalf of such joint
venture on existing terms for so long as VuCo GmbH & Co. is jointly owned.
Further, it is agreed that the Parties shall cause VuCo
GmbH & Co. to continue the existing arrangements between Behringwerke
and Hoechst with respect to the distribution of human vaccine products
outside Germany at arm's length terms to be agreed upon for not less
than three years.
15.9 With respect to the Master Service Agreement as attached to the
Contribution Agreement the following is agreed:
As contemplated by sections 1.3 and 8.4 of the Master Service
Agreement, the Services are to be defined in the Annexes and are to be
divided into categories based upon the length of notice required to be
given to terminate any such service. Neither the Annexes nor the
division of the services into categories are complete as of the date
hereof. The parties agree to complete the Annexes and the
determination of which Services fall into which categories within six
months of the Closing Date. Notwithstanding the foregoing the Parties
agree that the Services will continue uninterrupted after the Closing
Date. Buyer agrees that Category I will in particular include Services
such as filling and packaging, production, logistics, materials
management, engineering, safety and environment.
15.10After signature of this Agreement, the Parties shall jointly issue a press
release. Neither party shall, without the prior consultation of the other,
issue any oral or written statement
<PAGE>
26
to the press or the public regarding this Agreement, except as required by
law. This, in particular, applies with respect to the Purchase Price.
The present document with the annexes attached hereto was read aloud in the
presence of the appeared persons and signed by their own hands in my
presence as follows:
Basle, this 17th (seventeenth) day of February 1996 (nineteenhundred-
ninetysix).
<PAGE>
ANNEX 1.4 (a)
to the Purchase Agreement
AGREEMENT
ON CONTRIBUTION TO CAPITAL
between
Behringwerke Aktiengesellschaft
Emil-von-Behring-Strasse 76
35041 Marburg
- - HEREINAFTER "BEHRINGWERKE" -
a n d
Behring Vakzine GmbH & Co.
Emil-von-Behring-Strasse 76
35041 Marburg
represented by 32. CORSA Verwaltungsgesellschaft mbH in its capacity as general
partner of VuCo GmbH & Co., with same place of business
- - HEREINAFTER "VUCO GMBH & CO." -
(Behringwerke and VuCo GmbH & Co. are hereinafter collectively referred to as
the "Parties" or individually as the "Party", as the context requires.)
<PAGE>
2
TABLE OF CONTENTS
Directory of Annexes . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Article 1 - Contribution . . . . . . . . . . . . . . . . . . . . . . . . 4
Article 2 - Consideration. . . . . . . . . . . . . . . . . . . . . . . . 4
Article 3 - Assets and Contracts to be Contributed . . . . . . . . . . . 5
Article 4 - Transfer of Ownership; Implementation of the Contribution. . 8
Article 5 - Takeover of Business; Periodical Delimitation. . . . . . . .10
Article 6 - Warranties . . . . . . . . . . . . . . . . . . . . . . . . .15
Article 7 - Contracts to be Contributed at a Later Date. . . . . . . . .18
Article 8 - Use of Name. . . . . . . . . . . . . . . . . . . . . . . . .18
Article 9 - Transition Period. . . . . . . . . . . . . . . . . . . . . .18
Article 10 - Operating Lease Agreement . . . . . . . . . . . . . . . . .19
Article 11 - Contracts to be Concluded . . . . . . . . . . . . . . . . .19
Article 12 - Tax Law . . . . . . . . . . . . . . . . . . . . . . . . . .19
Article 13 - Confidentiality . . . . . . . . . . . . . . . . . . . . . .19
Article 14 - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . .20
<PAGE>
3
DIRECTORY OF ANNEXES
Annex 3.1.1.1 (a) - Contributed intellectual property
Annex 3.1.1.1 (b) - Licensed intellectual property
Annex 3.1.1.1 (c) - License Agreement (in favor of VuCo GmbH & Co.)
Annex 3.1.1.1 (d) - License Agreement (in favor of Behringwerke)
Annex 3.1.1.2 - Fixed assets
Annex 3.1.3.1 - Contracts with licensors
Annex 3.1.3.2 - Contracts with licensees
Annex 3.1.3.3 - Other contracts with third parties
Annex 5.1.1 - Transferred employees
Annex 6.1.6 - Shop agreements
Annex 6.1.7 - Employment contracts with an annual remuneration
exceeding DM 300,000
Annex 7 - Contracts to be contributed at a later time
Annex 10 - Operating Lease Agreement
Annex 11.1 - Master Service Agreement
Annex 11.2 - Lease Agreement
<PAGE>
4
PREAMBLE
Behringwerke and 32. CORSA Verwaltungsgesellschaft have formed VuCo GmbH & Co.
Pursuant to the Purchase and Assignment Agreement between Behringwerke and 31.
CORSA Verwaltungsgesellschaft mbH (to be renamed "Chiron Biocine GmbH") (the
"Purchase Agreement"), Behringwerke undertook the obligation to transfer its
human vaccine unit (the "Business") to VuCo GmbH & Co. as investment in kind.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1 - CONTRIBUTION
1.1 As fulfillment of Behringwerke's obligation stemming from the Purchase
Agreement described in the Preamble, Behringwerke contributes to the
capital of VuCo GmbH & Co. the Business subject to the terms and conditions
stated hereinafter and consisting of the assets and contracts described in
Art. 3 with effect as of 1 April 1996, 00:00 h (the "Contribution Date").
1.2 VuCo GmbH & Co. accepts such contribution.
1.3 The value of the contribution of assets shall be determined pursuant to a
balance sheet per the Contribution Date (the "Contribution Balance Sheet"),
which shall include all assets and liabilities, if any, contributed hereby
and assessed at their respective book values of Behringwerke. The
Contribution Balance Sheet shall be prepared on a basis consistent with
that adopted for previous fiscal time periods and in any case in accordance
with the German generally accepted accounting principles ("GRUNDSATZE
ORDNUNGSGEMASSER BUCHFUHRUNG UND BILANZIERUNG / GOB"). The Contribution
Balance Sheet shall be testified by C&L Treuarbeit and the costs shall be
borne by Behringwerke.
ARTICLE 2 - CONSIDERATION
2.1 Behringwerke shall receive as consideration a fixed capital interest in the
capital account I kept by VuCo GmbH & Co. in the amount of DM 5,000,000 (in
words:
<PAGE>
5
Deutsche Mark five million) as per the Contribution Date (the Kapitalkonto
I - HAFTEINLAGE "Fixed Capital Interest").
2.2 To the extent that the Contribution Balance Sheet reflects a higher net
equity value than the Fixed Capital Interest, VuCo GmbH & Co. shall credit
the surplus in the capital account II of Behringwerke. The same shall apply
for any subsequent contribution of Stock at the termination date of the
Operating Lease Agreement (cf. Art. 3.1.2).
ARTICLE 3 - ASSETS AND CONTRACTS TO BE CONTRIBUTED
3.1 The assets and contracts to be contributed (hereinafter collectively
referred to as the "Vaccine Assets") consist of the following:
3.1.1 INTANGIBLE/TANGIBLE FIXED ASSETS
3.1.1.1 All copyrights, patents, trademarks, drug licenses and other
intellectual property rights and registrations and
applications for registration with respect to any of the
foregoing, trade and operational secrets, know-how,
procedures, formulas and other intangible assets which are
not covered by the aforementioned intellectual property
rights, incorporation of such assets and ancillary
documents, such as application documents for drug licenses,
descriptions, product specifications, production
documentation and examination certificates, as well as all
sales literature, customers- and suppliers-lists,
transferable operational permits and approvals, all of the
aforesaid predominantly relating to the Business. The
registered intellectual property rights and trademarks are
listed in ANNEX 3.1.1.1 (a), which is to be updated as of
the Contribution Date and thereafter as provided for in
Article 3.2, 3.3 and 3.4;
Not part of the intangible assets contributed hereunder are
the rights listed in ANNEX 3.1.1.1 (b) which is to be
updated as of the Contribution Date and thereafter as
provided for in Article 3.2, 3.3 and 3.4. Behringwerke
grants to VuCo GmbH & Co. upon the terms and conditions of
the License Agreement attached as ANNEX 3.1.1.1 (c) and
concluded herewith a royalty-free license to make use of
such rights. In return VuCo GmbH & Co. grants to
Behringwerke upon the terms and conditions of the License
Agreement attached as ANNEX 3.1.1.1 (d) and concluded
herewith a royalty-free license to make use of the rights
listed in ANNEX 3.1.1.1 (a) except for the trademarks.
<PAGE>
6
3.1.1.2 All machinery, equipment, office equipment and other fixed
assets including software shown in the books of Behringwerke
as being in a cost center related to the Business as listed
in ANNEX 3.1.1.2 which is to be updated as of the
Contribution Date and thereafter as provided for in Article
3.2, 3.3 and 3.4.
3.1.2 STOCK
All inventories, finished and semifinished products, raw materials,
stocks, spare parts, information and promotional material and
supplies allocated to the Business as well as advance payments for
products previously sold but still held by Behringwerke, whereby
Behringwerke shall have the right to exclude such products from
inventory, all to be identified pursuant to a joint stocktaking close
to the Contribution Date (hereinafter "Stock"). Stock which is
produced under a license agreement is contributed and transferred
subject to the condition subsequent that the respective licensor
agrees to the transfer of the respective license agreement. In case
that the respective licensor does not agree to the transfer of the
respective license agreement, Behringwerke is free to sell such stock
to any third party. If the Operating Lease Agreement provided for in
Art. 10 becomes effective, no Stock shall be contributed by
Behringwerke to VuCo GmbH & Co. pursuant to this Art. 3.1.2.
3.1.3 CONTRACTS
The following contracts of Behringwerke as well as offers relating to
the Business:
3.1.3.1 contracts with licensors attached as ANNEX 3.1.3.1;
3.1.3.2 contracts with licensees attached as ANNEX 3.1.3.2;
3.1.3.3 other contracts with third Parties including, without
limitation, with Hoechst and its affiliates other than
contracts otherwise dealt with in this Contribution
Agreement and/or the Purchase Agreement, attached as ANNEX
3.1.3.3, such annex, however, is limited to contracts
covering annual payment obligations of more than DM 50,000
or having a term of more than one year and not containing
purchase orders in the ordinary course of business;
Behringwerke and VuCo GmbH & Co. shall use their best efforts to
obtain the consent of the respective contract partners for the
transfer to VuCo GmbH & Co. with-
<PAGE>
7
out undue delay after signature of this Agreement. Behringwerke
herewith grants to VuCo GmbH & Co. a power of attorney to exercise
all rights stemming from such contracts with respect to the time
period between the Contribution Date and the date that such consent
has been granted. As from the Contribution Date, VuCo GmbH & Co.
shall hold Behringwerke free and harmless in respect of any
obligations stemming from such contracts.
3.1.4 All goodwill of and pertaining to the Business, including the right
to use the name "Behring" in accordance with the further provisions
of this Agreement.
3.2 As far as assets and contracts attributable to the Business are
inadvertently not mentioned or not included in the respective Annexes, the
Parties shall agree on a subsequent transfer or assumption in respect
thereof and the Parties shall accept such transfer or assumption without
consideration. Art. 7 remains unaffected.
3.3 As far as assets and contracts not attributable to the Business are
inadvertently included in the respective Annexes, the Parties shall agree
on a subsequent retransfer to or reassumption by Behringwerke thereof
without consideration.
3.4 The exact identity of such Vaccine Assets which are to be identified by
Annexes shall be governed exclusively by the Annexes updated as of the
Contribution Date. With respect to ANNEX 3.1.1.1(b) it is agreed that any
patent applications of Behringwerke filed with the relevant authorities
within a period of one year after the Closing Date as defined in the
Purchase Agreement shall be included in such annex and in the respective
annex of the License Agreement attached as ANNEX 3.1.1.1(c), all subject to
third parties' rights. With respect to ANNEX 3.1.1.1(a) it is agreed that
any patent applications of VuCo GmbH & Co. filed with the relevant
authorities within a period of one year after the Closing Date as defined
in the Purchase Agreement shall be included in such annex and in the
respective annex of the License Agreement attached as ANNEX 3.1.1.1(d).
3.5 The above provisions of Article 3.1.1.1 and 3.4 with respect to ANNEX
3.1.1.1(b) shall apply MUTATIS MUTANDIS to any patents and patent
applications of Hoechst AG arising out of an ongoing collaboration with
Behringwerke or relating to existing products of the Business, PROVIDED
THAT such right shall be granted on reasonable commercial terms, all
subject to third parties' rights and to the consent of Hoechst AG.
<PAGE>
8
ARTICLE 4 - TRANSFER OF OWNERSHIP; IMPLEMENTATION OF THE CONTRIBUTION
4.1 Behringwerke and VuCo GmbH & Co. are in agreement that the transfer of
ownership of the Vaccine Assets from Behringwerke to VuCo GmbH & Co. shall
be effected as of the Contribution Date. VuCo GmbH & Co. is entitled to
take possession of the movable assets contributed to it under Art. 3.1.1.2
and of the Stock, if contributed. As far as immediate possession is not
possible, Behringwerke will possess the items with VuCo GmbH & Co.'s
approval and according to its instructions (BESITZMITTLER). As far as the
movable assets contributed according to Art. 3.1.1.2 are in the possession
of a third party on the Contribution Date, Behringwerke hereby assigns its
respective rights and claims it may have against such third party with
respect to such assets to VuCo GmbH & Co. with effect as of the
Contribution Date.
4.2 If, due to the retention of title or other security interests of third
Parties, Behringwerke has rights vested but not yet fully effective
(ANWARTSCHAFTSRECHTE) with respect to the Vaccine Assets, Behringwerke
hereby transfers these rights to VuCo GmbH & Co.
4.3 If and to the extent the transfer of ownership or assignment of other
rights relating to the Vaccine Assets to be contributed requires additional
acts which are not provided for in this Agreement, the Parties shall
execute such acts promptly.
4.4 Behringwerke and VuCo GmbH & Co. shall take all action necessary for the
implementation of this Agreement, including obtaining the necessary
approvals of public authorities for the transfer of existing permits or
applying for new permits and soliciting for necessary approvals of contract
partners or other third parties.
4.5 If and to the extent an assignment of contractual rights and duties cannot
be effected in relation to third parties, other than provided for in Art.
7, Behringwerke shall be obliged to exercise the respective contractual
rights and fulfill obligations in the interest of VuCo GmbH & Co. to the
extent possible. The same shall apply to the extent necessary and possible
with respect to the use of public permits. Behringwerke shall internally
place VuCo GmbH & Co. in the same economic position as it would be in if
such assignments had been valid and if that is not practicable it shall
indemnify VuCo GmbH & Co. against all damages associated therewith. VuCo
GmbH & Co. shall indemnify and internally place Behringwerke in the same
economic position with respect to the performance by VuCo GmbH & Co.
directly or indirectly of obligations of Behringwerke under such contracts,
as though Behringwerke had been discharged from any further liabilities in
respect
<PAGE>
9
thereof, but not for any breach caused by the transfer to or assumption by
VuCo GmbH & Co. of such obligation.
4.6 As of the Contribution Date, all benefits and encumbrances (NUTZEN UND
LASTEN) related to the Business as well as the risk of accidental loss and
accidental deterioration of the Business shall pass to VuCo GmbH & Co.
4.7 If due, Behringwerke shall pay all public fees, charges and taxes relating
to the Business attributable to the time before the Contribution Date,
irrespective of whether such fees, charges and taxes have been levied at
the Contribution Date including taxes attributable to the portion of any
tax period which includes the Contribution Date from the beginning of the
tax period through the Contribution Date.
4.8 Behringwerke shall pay any and all taxes based on income or capital gain
imposed as a result of the contribution of assets to VuCo GmbH & Co.
pursuant to this Agreement.
ARTICLE 5 - TAKEOVER OF BUSINESS; PERIODICAL DELIMITATION
5.1 With respect to the assumption of employees, the following is agreed:
5.1.1 As of the Contribution Date, VuCo GmbH & Co. shall assume all rights
and obligations including pension entitlements, all pursuant to
Section 613a of the German Civil Code (BGB), arising from the
employment contracts of the employees of Behringwerke as listed in
Annex 5.1.1.
5.1.2 To the extent employees object to the transfer of their employment to
VuCo GmbH & Co., such employees shall work in the Business until the
earliest date at which such employments can be terminated, if
possible, and VuCo GmbH & Co. shall compensate Behringwerke for all
salaries and fringe payments and other costs related to continuing
employment. All costs, if any, in connection with the termination of
such employments shall be borne by Behringwerke. Behringwerke shall
give priority to investigate whether there are comparable employment
opportunities within Behringwerke, otherwise the employment of such
employees shall be terminated with effect as of the earliest date
possible.
<PAGE>
10
Behringwerke has the right to nominate employees replacing objecting
employees with comparable qualification and salary and reasonably
acceptable to VuCo GmbH & Co. VuCo GmbH & Co. may decline to accept
such nominees, whether or not reasonably acceptable, but if a
reasonably acceptable nominee is rejected, then VuCo GmbH & Co. shall
bear all costs connected with the termination of the employment of
the objecting employee to be replaced and shall hold Behringwerke
free and harmless in this respect, unless Behringwerke decides at its
sole discretion to employ such objecting employee elsewhere in its
business. If the nominee is accepted, the provisions of this Article
5 shall apply mutatis mutandis. Starting with the date at which VuCo
GmbH & Co. employs any replacement employee, Behringwerke shall bear
all costs connected with an employee who has been replaced because
she/he objected to the transfer of her/his employment.
5.1.3 To the extent that VuCo GmbH & Co. has assumed hereunder claims of
employees pursuant to Section 613a of the German Civil Code (BGB) and
such claims are attributable to the time prior to the Contribution
Date, in particular claims for salary (including Christmas and
vacation pay), vacation claims, bonus claims, settlements (including
payments for employee inventions), life insurance premiums, and other
payments to be made in addition to the regular salary, Behringwerke
shall hold VuCo GmbH & Co. free and harmless therefrom.
5.1.4 To the extent that VuCo GmbH & Co. has assumed hereunder pension
obligations for employees pursuant to Section 613 a of the German
Civil Code (BGB) attributable to the time prior to the Contribution
Date, Behringwerke shall pay to VuCo GmbH & Co. an amount which
approximates full cost of the pension liability. Full costs should be
calculated in accordance with the provisions of FAS 87 using the
biometric tables of Dr. Klaus Heubeck (amended as follows: mortality
100%; disability 50%) and applying an interest rate of 7%, future
salary rate increase of 4% and a fluctuation rate of 15% until age
30, 10% until age 40, 5% until age 50, and 0% for 50+. The amount
shall be calculated on the basis of an actuarial report
(versicherungsmathematisches Gutachten) as of the Closing Date of the
Purchase Agreement, to be prepared at Behringwerke's cost. Upon
determination of the amount, such amount shall be payable within ten
banking days to VuCo GmbH & Co. but in no case prior to the Closing
Date of the Purchase Agreement.
<PAGE>
11
5.1.5 Behringwerke shall hold VuCo GmbH & Co. free and harmless against any
taxes, social security contributions and contributions to workers'
social associations (Berufsgenossenschaften) to be paid for the
employees listed in Annex 5.1.1 or replacement employees transferred
to VuCo GmbH & Co. pursuant to the second paragraph of clause 5.1.2
attributable to the time period prior to the Contribution Date.
5.1.6 If any employees other than those listed in Annex 5.1.1 are
transferred to VuCo GmbH & Co. pursuant to Section 613a BGB,
Behringwerke shall indemnify VuCo GmbH & Co. against all liabilities
and expenses arising from such employments. VuCo GmbH & Co. shall
terminate such employments as soon as legally possible. VuCo GmbH &
Co. shall take all actions necessary or advisable to minimize any
such liabilities or expenses of Behringwerke, including, without
limitation, the use in any legal proceeding of all legal remedies
available to it and the filing of appeals, all after due consultation
with Behringwerke. VuCo GmbH & Co. may enter into settlements,
provided, however, that it shall notify Behringwerke in writing in
advance of such intention to settle and that Behringwerke does not
object to such settlement within a period of three weeks after receipt
of such written notification. The aforementioned provision shall not
be applicable for the first seven employees who are attributable to
the Business and have not been listed in Annex 5.1.1 as updated on the
Contribution Date if and to the extent Behringwerke does not exercise
its right to nominate replacement employees and VuCo GmbH & Co.
employs such replacement employees or bears the severance costs. For
such seven employees this Art. 5.1 shall apply mutatis mutandis.
5.2 Notwithstanding anything to the contrary contained in this Agreement, VuCo
GmbH & Co. shall not assume any costs, liabilities or expenses, whether or
not related to the Business, other than (a) the pension obligations
expressly assumed under clause 5.1.1, and (b) contractual obligations of
the Business which accrue after the Contribution Date and which (i) are
related to the contracts set forth in ANNEXES 3.1.3.1, 3.1.3.2, 3.1.3.3 AND
7 or (ii) involve expenditures of less than DM 50,000 annually under
contracts with a term of less than one year, or (iii) are related to
purchase orders in the ordinary course of Business, or (iv) involve
expenditures in connection with the License Agreements provided for in
clause 3.1.1 (the "Assumed Liabilities"). With the exception of the Assumed
Liabilities, VuCo GmbH & Co. shall not assume or otherwise be responsible
for any liability or obligation of any nature of Behringwerke, whether or
not related to the Business, or any claims of such liability or obligation,
whether matured or unmatured, liquidated or unliquidated, fixed or
contingent, known or unknown, whether arising out of occurrences prior to,
at or
<PAGE>
12
after the Contribution Date. Subject to the foregoing, VuCo GmbH & Co.
shall be responsible for any liabilities, obligations or damages incurred
or caused after the Contribution Date in connection with the operation of
the Business.
5.3 Notwithstanding anything to the contrary contained in this Agreement,
Behringwerke shall hold VuCo GmbH & Co. free and harmless from all taxes,
costs, liabilities and expenses related to the Business, in particular
those arising from the contracts contributed and transferred under Art.
3.1.3, attributable to the time prior to the Contribution Date. All costs,
liabilities and expenses related to the Business and which are attributable
to the time after the Contribution Date shall be borne by VuCo GmbH & Co.
For the avoidance of doubt: Any capital expenses with respect to
maintenance, repair and similar works incurred after the Contribution Date
are attributable to the period after the Contribution Date unless the
specific works causing the capital expense have been executed prior to the
Contribution Date; ongoing works shall be split up accordingly.
5.4 All rents, rates, gas, water, electricity, and telecommunication costs,
ancillary costs and other periodic expenditures relating to the Business
incurred before the Contribution Date shall be borne by Behringwerke unless
these are considered expenses related to a certain period after the
Contribution Date and would therefore be shown as appertainment of payments
pursuant to sec. 250 para. 1 Commercial Code (HGB) on the asset side. In
the latter case they shall be borne by VuCo GmbH & Co. On or around the
Contribution Date, the Parties will determine the uncharged consumption of
gas, water, electricity, heating and other charges as basis for the
apportionment of the expenses as stated above. To the extent that an exact
apportionment is not possible, these expenses will be estimated.
5.5 All incoming payments received before the Contribution Date relating to the
Business shall belong to Behringwerke except for incoming payments
attributable to the time after the Contribution Date which would be shown
as appertainment of payments pursuant to sec. 250 para. 1 Commercial Code
(HGB) on the liabilities side. All incoming payments received after the
Contribution Date relating to VuCo GmbH & Co. shall belong to VuCo GmbH &
Co. except for incoming payments if attributable to the time before the
Contribution Date. Receivables attributable to any period starting before
the Contribution Date and ending after the Contribution Date shall be split
between Behringwerke and VuCo GmbH & Co. pro rata.
5.6 Behringwerke and VuCo GmbH & Co. shall initiate all action necessary for
implementation of this Agreement and the takeover of the Business by VuCo
GmbH & Co.
<PAGE>
13
5.7 Behringwerke and VuCo GmbH & Co. agree to cooperate after the Contribution
Date to achieve a smooth and efficient transfer of the Business to VuCo
GmbH & Co.
5.8 Behringwerke and VuCo GmbH & Co. shall, without undue delay, pass to each
other any payment, notice, correspondence, information or inquiry relating
to the Business which is received by either of them after the Contribution
Date and which the other is entitled to or which is of concern to the
other, taking into account the terms and conditions of this Agreement; Art.
13 is applicable to both Parties in this respect.
5.9 On or shortly after the Contribution Date or the termination of the
Operating Lease Agreement, Behringwerke shall hand over to VuCo GmbH & Co.
all documents, files, books etc., including the personnel files of the
employees assumed by VuCo GmbH & Co. pursuant to Art. 5.1, except for such
documents which Behringwerke must keep in its hands for legal reasons.
Behringwerke hereby permits VuCo GmbH & Co. to review and to take copies of
all retained documents to the extent necessary to continue the operation of
the Business. Documents of the Business shall remain Behringwerke's
property, as far as these are required to exercise rights and meet duties
arising from the period prior to the Contribution Date, in particular if
matters of taxation are involved.
5.10 Tax returns relating to the fiscal years prior to the Contribution Date
are to be prepared by Behringwerke at its costs; with respect to the
ongoing fiscal year of the Contribution Date, tax returns shall be jointly
prepared by Behringwerke and VuCo GmbH & Co. and the costs shall be shared
pro rata temporis. Behringwerke is entitled to designate the accountants
for testifying the balance sheets and to file any legal remedies against
levies and/or inspections of the tax authorities and social insurance
institutions, relating to the time period until the Contribution Date.
To the extent only VuCo GmbH & Co. can initiate the relevant action, it
shall do so upon request and as directed by Behringwerke at Behringwerke's
cost.
5.11 In case the Operating Lease Agreement provided for in Art. 10 becomes
effective, this Art. 5 shall not be applicable as of the Contribution
Date but as of such date the termination of the Operating Lease Agreement
becomes effective, save that Art. 5.1.1 is applicable at both dates.
ARTICLE 6- WARRANTIES
6.1 Behringwerke hereby warrants and represents in form of an independent
guarantee (selbstandiges Garantieversprechen), excluding any further claims
that on the date of signature of this Agreement and as of the Contribution
Date
<PAGE>
14
6.1.1 the Vaccine Assets comprise all assets and contracts used in the
operation of the Business as currently conducted, other than (a) the
contract listed in Annex 7, which will be governed by the provisions
of Article 7, (b) certain patent rights which are also used in the
operation of Behringwerke's other business units, for which VuCo
GmbH & Co. will have a royalty-free license to use in accordance with
the provisions of clause 3.1.1.1, (c) certain machinery, equipment,
office equipment and other fixed assets which are also used in the
operation of Behringwerke's other business units; such fixed assets
will be operated on behalf of the Business by Behringwerke or its
sub-contractors in accordance with the provisions of the Master
Service Agreement, (d) certain real property, which will be leased to
VuCo GmbH & Co. pursuant to the terms of the Lease Agreement, and (e)
the contracts with Hoechst AG otherwise dealt with in this Agreement
and/or the Purchase Agreement. Except as expressly set forth in the
preceding sentence, upon contribution of the Vaccine Assets, VuCo
GmbH & Co. will have all assets and contracts required for the
continuation of the operation of the Business by VuCo GmbH & Co.,
other than public permits that are person-related;
6.1.2 it has full corporate power and authority to conclude and execute
this Contribution Agreement, and that the execution and
implementation of this Contribution Agreement have been duly
authorized by all necessary corporate actions, in particular by its
supervisory and managing bodies;
6.1.3 it is the sole owner of the respective intellectual property rights
sold and transferred under Art. 3.1.1.1, except as set forth
otherwise in the respective Annexes to Art. 3.1.1.1 or in Annex
7.1.18 of the Purchase Agreement and said rights are free and clear
of any liens, pledges, usufruct, and other encumbrances except as
stated in the respective Annexes to Art. 3.1.1.1 and all measures
necessary to maintain the protection of the intellectual property
rights have been taken and, to the best knowledge, it does not
infringe the rights of any other person;
6.1.4 it is entitled to contribute all assets as provided for under Art.
3.1.1.2 and that such assets are free and clear of all unusual liens,
pledges, usufruct, option and use rights or any other encumbrances or
rights of third parties, unless such encumbrances serve as security
for obligations assumed by VuCo GmbH & Co. or unless otherwise stated
in the respective Annexes;
<PAGE>
15
6.1.5 all public permits object-related, but not person-related, and
necessary for the operation of the Business have been issued and
there are no indications that such permits or licenses will be
limited, recalled or revoked or become subject to new conditions
(Auflagen), with the exception of those mentioned in the respective
annexes;
6.1.6 with respect to the Business no shop agreements
(Betriebsvereinbarungen) have been concluded with the exception of
those mentioned in Annex 6.1.6;
6.1.7 except for those mentioned in Annex 6.1.7, it has not concluded any
employment contracts attributable to the Business with an annual
remuneration of more than [CONFIDENTIAL TREATMENT REQUESTED];
6.1.8 there are no judicial or arbitration proceedings pending or to the
best of its knowledge threatened with an amount in dispute of more
than DM 300,000 in the aggregate and, to the best knowledge of the
Vorstand of Behringwerke, it is not subject to any tax proceedings,
all only to the extent that there are facts involved that could have
a material detrimental impact on the Business;
6.1.9 the Business between 30 June 1995 and the date hereof has been
conducted in the customary manner, in particular, with respect to
investments and maintenance of the assets and Stocks and no material
assets outside the ordinary business have been acquired, sold,
pledged or otherwise encumbered;
6.1.10 all pension arrangements for the employees listed in ANNEX 5.1.1
and transferred to VuCo GmbH & Co. pursuant to Section 613 a Civil
Code (BGB) and the handling and documentation of respective rights
including payments thereunder are in accordance with the present
German legislation; except for those pension plans, no other
commitments have been made nor additional pension claims exist.
6.2 In case of breach of warranty under Art. 6.1 the following applies:
6.2.1 With respect to the warranted items Behringwerke is entitled to
establish the warranted status. If Behringwerke fails to establish
the warranted status within a reasonable period of time, such
period not to exceed three months after VuCo GmbH & Co. has
notified Behringwerke of the breach, or if immediate action is
necessary (GEFAHR IM VERZUG), Behringwerke shall refund to VuCo
GmbH & Co. the necessary amount spent by VuCo GmbH & Co. to
establish the warranted status and this shall be VuCo GmbH & Co.'s
sole remedy
<PAGE>
16
6.2.2 VuCo GmbH & Co. may only ask for recovery based on a warranty claim
or on other claims connected therewith if the individual claim
exceeds [CONFIDENTIAL TREATMENT REQUESTED] (in words: [CONFIDENTIAL
TREATMENT REQUESTED]) and the aggregate of all such individual
claims exceeds [CONFIDENTIAL TREATMENT REQUESTED] (in words:
[CONFIDENTIAL TREATMENT REQUESTED]). The total amount of the claims
here mentioned may not exceed [CONFIDENTIAL TREATMENT REQUESTED] (in
words: [CONFIDENTIAL TREATMENT REQUESTED]) (the "Warranty Cap)",
whereby any warranty claims of Buyer pursuant to the Purchase
Agreement must be included in calculating the Warranty Cap and the
corresponding deductible amounts.
6.3 Beyond the remedies mentioned in this Art. 6, VuCo GmbH & Co. shall have no
further claims in connection with a breach of a warranty or corresponding
claims. In particular, to the extent legally possible, all claims of VuCo
GmbH & Co. going beyond the aforementioned remedies striving for additional
capital contribution, cancellation (WANDELUNG) or any other form of
rescission as well as a liability of Behringwerke based on breach of duty
prior to contract (CULPA IN CONTRAHENDO) are excluded to the extent legally
possible.
6.4 Claims of VuCo GmbH & Co. under this Art. 6 shall become time-barred
fifteen (15) months after the Closing Date of the Purchase Agreement. The
statute of limitation shall be interrupted if claims are asserted in
writing by VuCo GmbH & Co. against Behringwerke and if the reason on which
any such claim is based are reasonably identified. If Behringwerke does not
accept the claim within one month, VuCo GmbH & Co. must raise the claim
before court within a further period of three months; otherwise it becomes
time-barred.
ARTICLE 7- CONTRACTS TO BE CONTRIBUTED AT A LATER DATE
VuCo GmbH & Co. acknowledges that the assignment of rights and duties under the
contracts listed in ANNEX 7 requires the approval of the respective contracting
partner. Behringwerke shall seek to retain the approval for an assumption of
such contracts by VuCo GmbH & Co. If Behringwerke succeeds to obtain the
respective approvals, Behringwerke shall assign all rights and duties under such
contracts listed in ANNEX 7 to VuCo GmbH & Co. and the terms of this
Contribution Agreement shall be applicable to such contracts. If Behringwerke
cannot obtain the approvals, VuCo GmbH & Co shall not be entitled to any
compensation claims.
VuCo GmbH & Co. cannot assert any claims against Behringwerke based on this Art.
7.
ARTICLE 8- USE OF NAME
Use of the name "Behring" and the logo "E. v. Behring" is governed by clause 8
of the Purchase Agreement.
<PAGE>
17
ARTICLE 9- TRANSITION PERIOD
Between the date of signature of this Agreement and the Contribution Date
(hereinafter "Transition Period"), Behringwerke shall continue to operate the
Business in the ordinary course, consistent with prior practice and maintain it
as an active operation and shall notify VuCo GmbH & Co. without undue delay upon
becoming aware of any circumstances which (would) lead to a breach of the
warranties set forth in Art. 6. During the Transition Period Behringwerke shall
not employ additional employees attributable to the Business other than such
necessary to replace leaving employees without the prior consent of VuCo GmbH &
Co.
ARTICLE 10- OPERATING LEASE AGREEMENT
In the event that VuCo GmbH & Co. does not receive the necessary permits prior
to or on the Contribution Date and will thus not be able to continue the
operation of the Business, the Parties enter simultaneously herewith into the
Operating Lease Agreement attached as ANNEX 10.
ARTICLE 11- CONTRACTS TO BE CONCLUDED
11.1 Behringwerke and VuCo GmbH & Co. enter simultaneously herewith into
the Master Service Agreement attached as Annex 11.1.
11.2 Behringwerke and VuCo GmbH & Co. enter simultaneously herewith into
the Lease Agreement attached as Annex 11.2.
ARTICLE 12- TAX LAW
VuCo GmbH & Co. shall continue the valuation of assets as shown in the tax
balance sheet (STEUERBILANZ) of Behringwerke as of the Contribution Date.
Accordingly, no hidden reserves shall be disclosed and any goodwill shall not be
(newly) activated. The same applies for the commercial balance sheet
(HANDELSBILANZ) for which the book values of the VuCo Assets as determined in
the Contribution Balance Sheet are decisive.
<PAGE>
18
ARTICLE 13- CONFIDENTIALITY
Except as otherwise provided in this Agreement, after the date of this Agreement
Behringwerke shall not use or disclose to third Parties any information
disclosed, transferred, assigned, licensed or otherwise made available to VuCo
GmbH & Co. hereunder and relating to the transfer of the Business, unless (i)
such information is needed by Behringwerke to continue its commercial activities
or in connection with the Operating Lease Agreement, (ii) is or becomes public
knowledge through no fault of Behringwerke, (iii) is passed to Behringwerke
after the Contribution Date by a third party which is not under an obligation of
confidentiality, or (iv) has to be disclosed by Behringwerke pursuant to law,
judicial, or official compulsion; in such case Behringwerke shall notify VuCo
GmbH & Co. in advance about the impending disclosure.
ARTICLE 14- MISCELLANEOUS
14.1 This Agreement including the Annexes contains the entire understanding
of the Parties hereto in respect of the subject matter contained
herein. No agreements exist other than those expressly set forth
herein.
14.2 Any modifications or amendments of this Agreement or of any provision
of this Agreement including this Art. 14.2 shall be effective only if
made in writing, unless the law provides for a stricter form.
14.3 All expenses incurred in connection with this Agreement and the
execution of the transactions contemplated hereby shall be borne by
Behringwerke.
14.4 This Agreement shall be governed by and construed in accordance with
the law of the Federal Republic of Germany, unless the application of
foreign law is compulsory.
14.5 To the extent possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under the
applicable law. If any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Agreement. To the extent that a provision is
ineffective or invalid, it shall be replaced by an effective and valid
provision which comes as close as possible to the economic purpose of
the ineffective or invalid provision.
<PAGE>
19
Marburg, ______________ 1996
Behringwerke Aktiengesellschaft
by:
- ---------------------------- ------------------------------
VuCo GmbH & Co.
by:
- ---------------------------- ------------------------------
<PAGE>
Annex 3.1.1.1(a)
to Contribution Agreement
[CONFIDENTIAL TREATMENT REQUESTED]
(5 Pages)
<PAGE>
Annex 3.1.1.1(b)
to Contribution Agreement
[CONFIDENTIAL TREATMENT REQUESTED]
(5 Pages)
<PAGE>
ANNEX 3.1.1.1 (c)
to the Contribution Agreement
LICENSE AGREEMENT
between
Behringwerke Aktiengesellschaft
Postfach 1140
D-35001 Marburg
(hereinafter "Behringwerke")
and
Behring Vaccine GmbH & Co.
(hereinafter "VuCo GmbH & Co.")
<PAGE>
2
Content
- -------
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1. Granting of License. . . . . . . . . . . . . . . . . . . . . . . 3
2. Royalty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Approval by Contract Partners. . . . . . . . . . . . . . . . . . 5
5. Covenants by VuCo GmbH & Co. . . . . . . . . . . . . . . . . . . 5
6. Maintenance of Protected Rights. . . . . . . . . . . . . . . . . 5
7. Warranties by Behringwerke . . . . . . . . . . . . . . . . . . . 6
8. Further Developments . . . . . . . . . . . . . . . . . . . . . . 7
9. Assignment; Sub-Licensing. . . . . . . . . . . . . . . . . . . . 7
10. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
3
PREAMBLE
Pursuant to the "Contribution Agreement" to which this License Agreement is an
annex, Behringwerke is contributing its human vaccine unit (the "Business") to
VuCo GmbH & Co. Some patents of, and actually used by, Behringwerke cannot be
transferred to VuCo GmbH & Co. as its property without restrictions because
these industrial property rights are also used by other units of Behringwerke.
In consideration hereof the parties agree as follows:
1. GRANTING OF LICENSE
1.1. Behringwerke is the holder of the patents and applications for
registration of patents listed in APPENDIX 1.1 (A) UNDER NO. 1, and
respective know-how (hereinafter the "Patents"). The term Patent
shall include continuations, divisionals, continuations-in-part,
reissues, priority applications, and corresponding foreign
counterparts. Furthermore, Behringwerke is co-owner of the patents
and applications for registration of patents listed in APPENDIX 1.1
(A) UNDER NO. 2 (hereinafter the "Co-owned/Acquired Patents and Co-
owned/Acquired Patents hereinafter collectively referred to as the
"Protected Rights").
1.2 Behringwerke hereby grants to VuCo GmbH & Co. subject to the terms
and conditions set forth hereinafter a license or sublicense, as the
case may be, under the Protected Rights to develop, manufacture, use
and sell human vaccine products. As to the Patents, such license
shall be worldwide and exclusive. As to the Co-owned/Acquired
Patents, the territory and degree of exclusivity shall be as
provided in the relevant agreement, if any, provided that if there
is no such agreement the license will be worldwide and exclusive,
all with respect to human vaccine products.
2. ROYALTY
The license under the Patents shall be royalty free. Royalty obligations
in respect of the development, manufacture, use or sale of human vaccine
products under
<PAGE>
4
the Co-owned/Acquired Patents shall flow through directly to VuCo GmbH &
Co. in the amount specified in the relevant agreement, if any, with no
addition by Behringwerke. Payments shall be made directly to the relevant
licensor or co-owner. Fixed sum royalties, if any, shall be shared between
the parties in proportion to their respective use of such Protected Rights
as measured by net sales of covered products.
3. TERM
3.1 This License Agreement becomes effective at the Contribution Date or,
in case the Operating Lease Agreement becomes effective, upon
termination of the Operating Lease Agreement.
3.2 The licenses to the patents included in the Protected Rights shall
expire on a country-by-country basis with the last to expire Protected
Right. The licenses to know-how included in the Protected Rights
shall continue in perpetuity. The licenses to Co-owned/Acquired
Patents shall expire in accordance with the provisions of the relevant
license agreement.
3.3 VuCo GmbH & Co. may at any time terminate this License Agreement in
its entirety or for single Protected Rights with a termination period
of six months.
3.4 Behringwerke may also terminate this License Agreement in its entirety
or for single Protected Rights at any time with a termination period
of six months, PROVIDED THAT Behringwerke offers to VuCo GmbH & Co. to
transfer to VuCo GmbH & Co. without consideration all its rights and
obligations with respect to such Protected Rights to be terminated.
If VuCo GmbH & Co. accepts such an offer of transfer. VuCo GmbH & Co.
shall bear all costs incurred by the transfer. Furthermore,
Behringwerke may terminate this License Agreement as to the Protected
Right in question after respective warning and fruitless expiration of
a period of 30 days after the warning without observing any notice
period and without an offer to transfer any Protected Rights if VuCo
GmbH & Co. is in breach of any material clause hereunder and such
breach makes it unac-
<PAGE>
5
ceptable for Behringwerke to continue this License Agreement.
Possible claims for damages by Behringwerke shall not be affected
hereby.
4. APPROVAL BY CONTRACT PARTNERS
To the extent the consummation of this License Agreement requires
approvals of third parties under the terms of the agreements for the
Co-owned/Acquired Patents, Behringwerke shall make every effort to
receive such approvals without delay after the date hereof. The
provisions of Article 4.5 of the Contribution Agreement shall apply
MUTATIS MUTANDIS to this License Agreement.
5. COVENANTS BY VUCO GMBH & CO.
Within the limits of statutory liability VuCo GmbH & Co. shall
indemnify and hold Behringwerke free and harmless against any claim
(other than claims which would be covered by Article 6.1.3 of the
Contribution Agreement, regardless of when such claims arise) which
may be brought against Behringwerke by any third parties arising out
of any use of the Protected Rights by VuCo GmbH & Co., except if such
damages are caused by willful acts of Behringwerke or its personnel or
any, licensee or its personnel.
6. MAINTENANCE OF PROTECTED RIGHTS
6.1 For the term of this License Agreement Behringwerke is obligated
to file, prosecute and maintain the Protected Rights, including
all interferences and oppositions thereto, at its own cost. In
case Behringwerke intends to abandon a Protected Right it shall
first make an offer of transfer to VuCo GmbH & Co. If the offer
will not be accepted within 30 days, it shall be deemed to be
rejected. In case of acception VuCo GmbH & Co. shall bear all
further costs. In case of rejection Behringwerke may abandon the
Protected Right. Behringwerke shall make every reasonable effort
to find a similar solution with respect to the Co-owned/Acquired
Patents.
<PAGE>
6
6.2 In the event a third party infringes or may be infringing any of
the Protected Rights in the field of human vaccines, the parties
shall confer and consider whether any infringement proceedings
should be filed against such third party. Factors to be
considered include, without limitation, the extent of such
infringement, the identity of the infringer, the territory in
question, the strength of the patent in that territory, the
status of the patent in other territories, the likelihood of
success, cost and resource allocation, and other possible methods
of resolution. The parties will make every effort to mutually
agree whether to file any action, including if necessary
conferring with an independent third party, although in the event
the parties are unable to agree, the final decision will be made
by the owner of the patent at issue. If the parties decide to
proceed, VuCo GmbH & Co. shall control and bear the costs of such
proceeding, and shall retain any recovery. Behringwerke shall
reasonably cooperate with and assist VuCo GmbH in connection
therewith.
6.3 To the extent the use of a Co-owned/Acquired Patent is linked to
the exercise of an option, Behringwerke hereby authorizes VuCo
GmbH & Co.to exercise such option in its own name or in the name
of Behringwerke in order to enable VuCo GmbH & Co. to use the
respective Protective Rights in accordance with this License
Agreement. Furthermore, Behringwerke undertakes to make all
necessary further declarations in order to enable VuCo GmbH & Co.
to exercise the rights under the respective options. VuCo GmbH &
Co. shall bear all costs incurred in connection with such
exercise of options, including any royalty, as long as
Behringwerke does not use the respective Protected Right. Art. 2
of this License Agreement shall be applicable.
7. WARRANTIES BY BEHRINGWERKE
Except as expressly set forth in the Contribution Agreement or the
Purchase Agreement, any warranties and representations of Behringwerke
are disclaimed.
<PAGE>
7
8. FURTHER DEVELOPMENTS
Except as expressly set forth in clause 3.4 of the Contribution
Agreement, any new developments/improvements developed by Behringwerke
or VuCo GmbH & Co. in connection with the Protected Rights remain the
exclusive intellectual property of the respective party and are not
subject to any disclosure obligation. Each party is entitled to
register such new developments/improvements and to make exclusive use
of them for its own benefit.
9. ASSIGNMENT; SUB-LICENSING
9.1 VuCo GmbH & Co. may assign or otherwise transfer the rights and
obligations hereunder in whole or in part to a third party,
PROVIDED THAT such third party is to be bound by the terms and
conditions hereof and related hereto.
9.2 VuCo GmbH & Co. is entitled to grant sub-licenses but restricted
to the field of human vaccines.
9.3 Behringwerke is free to assign any or all of its rights and
obligations hereunder (i) in connection with a corporate
restructuring, (ii) to Hoechst AG or companies affiliated with
Hoechst AG or (iii) to an acquiror of the know-how and/or the
Patents and Co-owned/Acquired Patents.
9.4 Any assignment, sub-licensing and transfer of the Protected
Rights is only admissible if the respective recipient undertakes
to comply with the provisions of this License Agreement.
10. MISCELLANEOUS
10.1 Unless otherwise defined herein, all terms used herein shall have
the same meanings and definitions as in the Contribution
Agreement.
10.2 Unless otherwise specifically amended hereby all other terms of
the Contribution Agreement shall remain in full force and
effect.
<PAGE>
8
10.3 To the extent possible, each provision of this License Agreement
will be interpreted in such manner as to be effective and valid
under the applicable law. If any provision of this License
Agreement is held to be prohibited by or invalid under applicable
law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this
License Agreement. To the extent that a provision is ineffective
or invalid, it shall be replaced by an effective and valid
provision which comes as close as possible to the economic
purpose of the ineffective or invalid provision.
10.4 Any modifications or amendments of this License Agreement or of
any provision of this License Agreement shall be effective only
if made in writing, unless the law provides for a stricter form.
10.5 This License Agreement is governed by the laws of the Federal
Republic of Germany.
10.6 The exclusive place of jurisdiction shall be Marburg.
Marburg, the_______________
Behringwerke AG by:
____________________________________ ______________________________________
VuCo GmbH & Co. by:
____________________________________ ______________________________________
<PAGE>
APPENDIX 1. 1 (a)
to License Agreement in favor of VuCo GmbH
[CONFIDENTIAL TREATMENT REQUESTED]
(5 Pages)
<PAGE>
ANNEX 3.1.1.1 (d)
to the Contribution Agreement
LICENSE AGREEMENT
between
Behringwerke Aktiengesellschaft
Postfach 1140
D-35001 Marburg
(hereinafter "Behringwerke")
and
Behring Vaccine GmbH & Co.
(hereinafter "VuCo GmbH & Co.")
<PAGE>
2
CONTENT
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1. Granting of License. . . . . . . . . . . . . . . . . . . . . . .3
2. Royalty. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
3. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
4. Approval by Contract Partners. . . . . . . . . . . . . . . . . .5
5. Covenants by Behringwerke. . . . . . . . . . . . . . . . . . . .5
6. Maintenance of Protected Rights; Exercise of Options . . . . . .5
7. Warranties by VuCo GmbH & Co . . . . . . . . . . . . . . . . . .6
8. Further Development. . . . . . . . . . . . . . . . . . . . . . .7
9. Assignment; Sub-Licensing. . . . . . . . . . . . . . . . . . . .7
10. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . .8
<PAGE>
3
PREAMBLE
Pursuant to the "Contribution Agreement" to which this License Agreement is an
annex, Behringwerke is contributing its human vaccine unit (the "Business") to
VuCo GmbH & Co. Parts of the assets transferred to VuCo GmbH & Co. are also
patents which Behringwerke or affiliated companies intend to (further) use for
activities outside the Business.
In consideration hereof the parties agree as follows:
1. GRANTING OF LICENSE
1.1 Pursuant to the Contribution Agreement Vuco GmbH & Co. will become
owner of the patents and applications for registration of patents
listed in APPENDIX 1.1. (a) UNDER NO.1 (the "Patents") and
respective know-how and a coowner of the patents and applications
for registration of patents listed in APPENDIX 1.1.(a) UNDER NO. 2
(hereinafter the "Co-owned/Acquired Patents"). The term Patent
shall include continuations, divisionals, continuations-in-part,
reissues, priority applications, and corresponding foreign
counterparts. Furthermore, Behringwerke transferred to Vuco GmbH &
Co. rights and obligations relating to the license and option
agreements listed in APPENDIX 1.1 (b) (hereinafter the "Licensed
Patents"). (Patents, Co-owned/Acquired Patents and Licensed Patents
hereinafter collectively referred to as "Protected Rights").
1.2 VuCo GmbH & Co. hereby grants to Behringwerke subject to the terms
and conditions set forth hereinafter a license or sublicense, as the
case may be, under the Protected Rights to develop, manufacture,
use, and sell any product other than human vaccine products. As to
the Patents, such license shall be worldwide and exclusive. As to
the Licensed Patents and the Co-owned/Acquired Patents, the
territory and the degree of exclusivity shall be as provided in the
relevant agreement, if any, provided tha that if there is no such
agreement, the license will be worldwide and exclusive, all with
respect to any products other than human vaccine products.
VuCo GmbH & Co. shall have an option to obtain a non-exclusive
sublicense back from Behringwerke to such Protected Rights on
commercially
<PAGE>
4
reasonable terms for uses outside the field of human vaccines, but
not for diagnostics.
2. ROYALTY
The license under the Patents shall be royalty free. Royalty
obligations in respect of the development, manufacture, use or sale of
products under the Licensed Patents and the Coowned/Acquired Patents
shall flow through directly to Behringwerke in the amount specified in
the relevant agreement, with no addition by VuCo GmbH & Co. Payments
shall be made directly to the relevant licensor. Fixed sum royalties,
if any, shall be shared between the parties in proportion to their
respective use of such protected rights as measured by net sales of
covered products.
3. TERM
3.1 This License Agreement becomes effective at the Contribution Date
or, in case the Operating Lease Agreement becomes effective, upon
termination of the Operating Lease Agreement.
3.2 The licenses to patents included in the Protected Rights shall
expire on a country-by-country basis with the last to expire
Protected Right. The licenses to know-how included in the
Protected Rights shall continue in perpetuity. The licenses to
Licensed Patents shall expire in accordance with the provisions
of the relevant license agreement.
3.3 Behringwerke may at any time terminate this License Agreement in
its entirety or for single Protected Rights with a termination
period of six months.
3.4 VuCo GmbH & Co. may also terminate this License Agreement in its
entirety or for single Protected Rights at any time with a
termination period of six months, PROVIDED THAT VuCo GmbH & Co.
offers to Behringwerke to transfer to Behringwerke without
consideration all its rights and obligations with respect to such
Protected Rights to be terminated. If Behringwerke accept such
an offer of transfer, Behringwerke shall
<PAGE>
5
bear all costs incurred by the transfer. Furthermore, VuCo GmbH
& Co. may terminate this License Agreement as to the Protected
Right in question after respective warning and fruitless
expiration of a period of 30 days after the warning without
observing any notice period and without an offer to transfer the
Protected Rights, if Behringwerke is in breach of any material
clause hereunder and such breach makes it unacceptable for VuCo
GmbH & Co. to continue this License Agreement. Possible claims
for damages by VuCo GmbH & Co. shall not be affected hereby.
4. APPROVAL BY CONTRACT PARTNERS
To the extent the consummation of this License Ageement requires
approvals of third parties under the terms of the agreements for
Protected Rights, the parties shall make any effort to receive such
approvals without delay after the date hereof. If any required
approvals are not granted, the parties will make every effort to agree
on an alternative solution with equal economic results; VuCo GmbH & Co.
shall not be obligated to bear any costs thereby incurred.
5. COVENANTS BY BEHRINGWERKE
Within the limits of statutory liability Behringwerke shall indemnify
and hold VuCo GmbH & Co. free and harmless against any claim which
may be brought against VuCo GmbH & Co. by any third parties arising
out of any use of the Protected Rights by Behringwerke, except if
such damages are caused by willful acts of VuCo GmbH & Co. or its
personnel or any licensee or its personnel.
6. MAINTENANCE OF PROTECTED RIGHTS; EXERCISE OF OPTIONS
6.1 For the term of this License Agreement VuCo GmbH & co. is
obligated to file, prosecute and maintain the Patents and the Co-
owned/Acquired Patents, including all interferences and
oppositions thereto, at its own cost. In case VuCo GmbH & Co.
intends to abandon a Patent or a Co-owned/Acquired Patent it
shall first make an offer of transfer to Behringwerke. If the
offer will not be accepted within 30 days, it is deemed to be
rejected. In case of acception Behringwerke shall bear all
further costs. In case of rejection VuCo GmbH & Co. may abandon
the Protected Right. VuCo GmbH & Co. shall make any reasonable
effort to find a similar solution with respect to the Licensed
Patents.
<PAGE>
6
6.2 To the extent the use of a Licensed Patent is linked to the
exercise of an option, Vuco GmbH & Co. hereby authorizes
Behringwerke to exercise such option in its own name or in the
name of VuCo GmbH & Co. in order to enable Behringwerke to use
the respective Protected Rights in accordance with this License
Agreement. Furthermore, VuCo GmbH & Co. undertakes to make all
necessary further declarations in order to enable Behringwerke to
exercise the rights under the respective options. Behringwerke
shall bear all costs, incurred in connection with such exercise
of options, including any royalty as long as VuCo GmbH & Co. does
not use the respective Protected Right. Art. 2 of this License
Agreement shall be applicable.
6.3 In the event a third party infringes or may be infringing any of
the Protected Rights other than in the field of human vaccines,
the parties shall confer and consider whether any infringement
proceedings should be filed against such third party. Factors to
be considered include, without limitation, the extent of such
infringement, the identity of the infringer, the territory in
question, the strength of the patent in that territory, the
status of the patent in other territories, the likelihood of
success, cost and resource allocation, and other possible methods
of resolution. The parties will make every effort to mutually
agree whether to file any action, including if necessary
conferring with an independent third party, although in the event
the parties are unable to agree, the final decision will be made
by the owner of the patent at issue. If the parties decide to
proceed, Behringwerke shall control and bear the costs of such
proceeding, and shall retain any recovery. VuCo GmbH & Co. shall
reasonably cooperate with and assist Behringwerke in connection
therewith.
7. WARRANTIES BY VUCO GMBH & CO.
Any warranties and representations of VuCo GmbH & Co. are disclaimed.
<PAGE>
7
8. FURTHER DEVELOPMENT
Except as expressly provided in Art. 3.4 of the Contribution Agreement,
any new developments/improvements developed by Behringwerke or VuCo GmbH
& Co. in connection with the Protected Rights remain the exclusive
intellectual property of the respective party and are not subject to any
disclosure obligation. Each party is entitled to register such new
developments/improvements and to make exclusive use of them for its own
benefit.
9. ASSIGNMENT; SUB-LICENSING
9.1 Behringwerke shall not assign or otherwise transfer the rights
and obligations hereunder to a third party without the prior
approval of VuCo GmbH & Co. In case Behringwerke sells its
business operations or part thereof for which the Patents and
Licensed Patents are needed, VuCo GmbH & Co. shall not withhold
such approval, unless for good reason. In any case, Behringwerke
may transfer all its rights and obligations under this License
Agreement to Hoechst AG or any company affiliated with Hoechst AG
pursuant to Sec. 15 et seq. stock corporation act (AKTIENGESETZ)
without the approval by VuCo GmbH & Co.
9.2 Behringwerke is entitled to grant sub-licenses, with the
exception of the production of human vaccines.
9.3 VuCo GmbH & Co. is free to assign any or all of its rights and
obligations hereunder (i) in connection with a corporate
restructuring, (ii) to Chiron Corporation or companies affiliated
with Chiron Corporation or (iii) to an acquiror of the know-how
and/or Protected Rights.
9.4 Any assignment, sub-licensing and transfer of the Protected
Rights is only admissible if the respective recipient undertakes
to comply with the provisions of this License Agreement.
<PAGE>
8
10. MISCELLANEOUS
10.1 Unless otherwise defined herein, all terms used herein shall have
the same meanings and definitions as in the Contribution
Agreement.
10.2 Unless otherwise specifically amended hereby, all other terms of
the Contribution Agreement shall remain in full force and effect.
10.3 To the extent possible, each provision of this License Agreement
will be interpreted in such manner as to be effective and valid
under the applicable law. If any provision of this License
Agreement is held to be prohibited by or invalid under applicable
law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this
License Agreement. To the extent that a provision is ineffective
or invalid, it shall be replaced by an effective and valid
provision which comes as close as possible to the economic
purpose of the ineffective or invalid provision.
10.4 Any modifications or amendments of this License Agreement or of
any provision of this License Agreement shall be effective only
if made in writing, unless the law provides for a stricter form.
10.5 This License Agreement is governed by the laws of the Federal
Republic of Germany.
10.6 The exclusive place of jurisdiction shall be Marburg.
<PAGE>
9
Marburg, this _____th day of _______________________________ 1996
Behringwerke AG
by:
- ---------------------------------- --------------------------------------
VuCo GmbH & Co.
by:
- ---------------------------------- --------------------------------------
<PAGE>
Appendix 1.1(a)
to License Agreement in favor of Behringwerke
[CONFIDENTIAL TREATMENT REQUESTED]
(4 Pages)
<PAGE>
Appendix 1.1(b)
to License Agreement in favor of Behringwerke
[CONFIDENTIAL TREATMENT REQUESTED]
(1 Page)
<PAGE>
Annex 3.1.1.2
to Contribution Agreement
This annex 3.1.1.2 is to be prepared by Behringwerke at the time of the
execution of the Contribution Agreement.
<PAGE>
Annex 3.1.3.1
to Contribution Agreement
[CONFIDENTIAL TREATMENT REQUESTED]
(1 Page)
<PAGE>
Annex 3.1.3.2
to Contribution Agreement
[CONFIDENTIAL TREATMENT REQUESTED]
(1 Page)
<PAGE>
Annex 3.1.3.3
to Contribution Agreement
[CONFIDENTIAL TREATMENT REQUESTED]
(3 Pages)
<PAGE>
Appendix 1
to Annex 3.1.3.3
to Contribution Agreement
[CONFIDENTIAL TREATMENT REQUESTED]
(3 Pages)
<PAGE>
Annex 5.1.1
to Contribution Agreement
[CONFIDENTIAL TREATMENT REQUESTED]
(27 Pages)
<PAGE>
ANNEX 6.1.6
BETRIEBSVEREINBARUNGEN
GRUNDSATZE/RICHTLINIEN
UBERSICHT/SEITE I
Nr Regelungsgageastand:
1. Einheitliches Entgeltsystem mit Protokollnotizen und Einstufungs -,
Einarbeitungs - und Durchlaufzeitenregelung
2. Entgeltfortzahlung im Todesfall
3. Jahrespramienordnung: Erfolgsheteiligung
4. Erschwerniszdlagen
5. Vermogenswirksame Leistungen
6. Zuwendungen bei Dienstjubilaen; Offizielle Feierstundo
7. Gebuhrenerfassung u. abrechnung der Telefonanlage
8. Werksbusfahrpreis: SoBe Beschlub zum Werksbusfahrpreis
9. Altersversorgung, Ende des Arbeitsverhaltnissen
10. Firmenrente; Witwenrente
11. Anderung der Beitragssatze in der Pensionskasse
12. Urlaubsgewahrung, Merkblatt zum aT Urlaubszuschull
13. Zushussee zur beruflichen Weiterbildung
14. Pensionierungsurlaub
15. Freizeitgewahrung fur Umzug
16. Altersfreizeit
17. Grundsatze zur Gewahrung bezahlter and unbezahlter Freistellung,
Freistellung fur Prufungen
18. Arbeitsunfahigkeitbescheinigungen
<PAGE>
ANNEX 6.1.6
BETRIEBSVEREINBARUNGEN
GRUNDSATZE/RICHTLINIEN
UBERSICHT/SEITE 2
Nr Regelungsgageastand:
19. Arbeitsordnung und Erganzungen zur Arbeitsordnung
20. Mitarbeitergesprach
21. Verarbeitung personenbezogener Mitarbeiterdaten
22. Durchfuhrung von Abteilungsfeicrn
23. Positive Zeiterfassung u. glcitende Arbeitszeit, Arbeitszcitverkurzungen
24. Grundsatze fur Bildschirmtatigkeit
25. Familie, Beruf, Teilzeit
26. Wahl von Ausbildungsgruppenspreeher
27. Mandatstragerregelung
28. Betriebliche Vertrauensleute
29. Betriebliches Vorschlagswesen
30. Alkohol im Betrieb Liste der Suchthelfer
31. Arbeitssicherhcit und Gesundheitsschutz
32. Ausweisregelung
33. Vorzeitige Pensionierung und Regelungsabrede
34. Neue Techniken
35. StraBenverkchrsordnung; Parkordnung
36. Grundsatze der Mietgentaltung
<PAGE>
ANNEX 6.1.6
BETRIEBSVEREINBARUNGEN
GRUNDSATZE/RICHTLINIEN
UBERSICHT/SEITE 3
Nr Regelungsgageastand:
37. Direktversicherung
Verhutung-von Hepatiris-Infektionen; Grundsatze zur HIV-Infektion
38. und zur Krannkheit AIDS; Richtlinien zur Verhutung von Infektionen
39. Verwcndung von Kreditkarten bei Dienstreisen
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
<PAGE>
Annex 6.1.7
to Contribution Agreement
negative report
<PAGE>
Annex 7
to Contribution Agreement
[CONFIDENTIAL TREATMENT REQUESTED]
(1 Page)
<PAGE>
ANNEX 10
to the Contribution Agreement
OPERATING LEASE AGREEMENT
between
Behringwerke Aktiengesellschaft
Postfach 1140
D-35001 Marburg
(hereinafter "Behringwerke")
and
Behring Vakzine GmbH & Co.
(hereinafter "VuCo GmbH & Co.).
PREAMBLE
Pursuant to the (Contribution Agreement, of which this Operating Lease Agreement
is an annex, Behringwerke transfers its human vaccines unit (hereinafter the
"Business") to VuCo GmbH & Co. Since VuCo GmbH & Co. needs various permissions
to continue the Business, which it presently does not possess, the parties agree
that Behringwerke shall continue to operate the Business for a transfer period
on the basis of an operating lease agreement.
In consideration hereof, the parties hereto agree as follows:
<PAGE>
2
1. SUBJECT OF AGREEMENT
Subject of this Operating Lease Agreement is the Business containing all of
the Vaccine Assets operating property with the exception of the Stock which
is owned by Behringwerke.
2. BEGINNING AND DURATION OF THE AGREEMENT
2.1 The lease shall come into force on the Contribution Date.
2.2 The lease runs for an indefinite period.
2.3 This Agreement is deemed to be terminated if all other
conditions necessary for the occurrence of the Closing Date as defined
in the Purchase Agreement are satisfied or waived.
2.4 The right of the Parties to terminate the agreement without
notice for good cause remains unaffected.
3. RENT
3.1 Behringwerke shall have the right to determine the
amount of the rent as it deems appropriate. It shall be paid at the
end of each calendar month.
3.2 Upon request of Behringwerke, VuCo GmbH & Co. shall submit an invoice
separately showing the v.a.t.
4. OPERATION OF BUSINESS
4.1 As of the Contribution Date. Behringwerke shall operate the Business
on its own account.
4.2 Behringwerke is obliged to operate the Business in accordance with
Art. 9 of the Contribution Agreement. A sublet is not permitted.
Behringwerke is not entitled to dispose any of the fixed assets of the
Business.
<PAGE>
3
4.3 Behringwerke shall observe the regulations of the Industrial Act
(Gewerbeordnung), the security regulations and all other regulations
under public law.
4.4 By the end of this Agreement, Behringwerke shall transfer all new
investments to VuCo GmbH & Co. pursuant to Article 7 para. 2 of this
Agreement.
4.5 Behringwerke shall be fully liable for all damages caused in
connection with the Business and shall hold VuCo GmbH free and
harmless from all claims in that respect.
4.6 Behringwerke shall insure the assets in the previous extent.
5. ASSIGNMENT OF EMPLOYMENT CONTRACTS
Behringwerke assumes pursuant to sect. 613 a BGB (Civil Code) for the
duration of this Agreement the entire workforce of the Business and the
rights and obligations as of the Contribution Date stemming from the
employment contracts and pension liabilities relating to employees still
active.
6. WARRANTY
Any warranties and representations by VuCo GmbH & Co. are excluded.
7. TERMINATION OF THE OPERATING LEASE AGREEMENT
7.1 Upon the termination of this Agreement, the transfer of the Business
is governed by Articles 4 and 5 of the Contribution Agreement and by
the regulations set forth hereinafter.
7.2 At the date of the end of this Agreement, Behringwerke shall transfer
to VuCo GmbH & Co. the Stock which belongs to the Business and the new
investments according Article 4 para. 4 of this Agreement. For this
purpose, VuCo GmbH & Co. and Behringwerke shall conduct a stock-taking
of the Stock and of the new investments (hereinafter "Stock-Taking")
close to the
<PAGE>
4
day of the termination of this Agreement. The book value of the
aforementioned objects shall be credited to capital accounts I and II
as provided in Art. 2 of the Contribution Agreement.
7.3 To the extent meaningful, the regulations of the Contribution
Agreement shall be applicable, mutatis mutandis, with respect to the
retransfer of the Business to VuCo GmbH & Co.
8. MISCELLANEOUS
8.1 Unless otherwise defined herein, all terms shall have the same
meanings and definitions as in the Contribution Agreement.
8.2 Unless otherwise specifically amended hereby, all other terms of the
Contribution Agreement shall remain in full force and effect.
8.3 To the extent possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under the
applicable law. If any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Agreement. To the extent that a provision is
ineffective or invalid, it shall be replaced by an effective and valid
provision which comes as close as possible to the economic purpose of
the ineffective or invalid provision.
8.4 Any modifications or amendments of this Agreement or of any provision
of this Agreement including this Art. 8.4 shall be effective only if
made in writing, unless the law provides for a stricter form.
8.5 This Agreement is governed by the laws of the Federal Republic of
Germany.
8.6 The exclusive place of jurisdiction shall be Marburg.
<PAGE>
Annex 11.1
to the Contribution Agreement
MASTER SERVICE AGREEMENT
between
Behringwerke AG
35001 Marburg
- - hereinafter "Behringwerke" -
and
Behring Vakzine GmbH & Co.
hereinafter "VuCo GmbH & Co." -
<PAGE>
2
PREAMBLE
A. Pursuant to the Contribution Agreement to which this Agreement is an Annex
and to the Purchase and Assignment Agreement entered into by Behringwerke
and 31. CORSA Verwaltungsgesellschaft mbH (the "Purchase Agreement"),
Behringwerke is contributing its human vaccine unit (the "Business") to
VuCo GmbH & Co. VuCo GmbH & Co. will, for the foreseeable future,
continue to conduct the Business within the premises of Behringwerke on a
lease basis. Therefore, and due to the numerous operational and
technological interdependencies between the business operations of
Behringwerke and VuCo GmbH & Co., the Parties agree that both will
require supply of certain goods and services from the respective other
Party.
B. In this Agreement, the Parties wish to stipulate the terms and conditions
applicable to such supply of goods and services.
C. In order to facilitate the efficient supply of goods and services by
Behringwerke to VuCo GmbH & Co. and vice versa and to ensure that each
Party may plan ahead to remain cost-effective and within the terms and
conditions set forth herein, it is important that the Parties advise each
other on a cooperative basis of their requirements and timetables.
Article I - Services Supplied under this Agreement
1.1 Subject to the terms and conditions set forth herein, Behringwerke will
supply VuCo GmbH & Co. with goods and services listed in ANNEXES (the
"Behringwerke Services"), VuCo GmbH & Co. will receive and accept such
Behringwerke Services from Behringwerke.
Behringwerke may use Hoechst or Centeon Pharma GmbH or affiliates residing
on Behringwerke's premises or other third parties, the latter only to the
extent the services do not require the trust of VuCo GmbH & Co. such as
painting (hereinafter collectively "Internal Partners") as a sub-contractor
in order to meet its obligations under this Agreement with respect to such
Behringwerke Service. and nothing in this Agreement shall limit such right
of sub-contracting.
<PAGE>
3
1.2 Subject to the terms and conditions set forth herein, VuCo GmbH & Co. will
supply Behringwerke with goods and services listed in ANNEXES - (the `VuCo
Services"; Behringwerke Services and VuCo Services are hereinafter
collectively referred to as the "Services"). Behringwerke will receive and
accept such Services from VuCo GmbH & Co. It is further understood that
Behringwerke may pass on and transfer any VuCo GmbH & Co. Services to
Internal Partners.
1.3 The Services are individually defined as to their nature in Annexes. All
Services will be provided in the same amount as provided in 1995, adjusted
to reflect Behringwerke's projections for 1996: provided, that either Party
may request an additional amount of any Service, and the provider of such
Service shall use reasonable commercial efforts to provide such additional
amount.
1.4 Due to the Business being located within the Behringwerke premises and the
said technological interdependence, it is mandatory that Behringwerke
supplies and VuCo GmbH & Co. receives the Behringwerke Services listed in
ANNEXES - (such as utilities and fire brigades). VuCo GmbH & Co. will
receive such Behringwerke Services exclusively from Behringwerke. For the
same reasons, it is mandatory that VuCo GmbH & Co. supplies and
Behringwerke receives the VuCo GmbH & Co. Services listed in ANNEXES - .
These Services cannot be terminated during the term of the Lease Agreement.
1.5 Services other than those defined in the Annexes hereto are not part of
this Agreement and may be agreed upon separately in each single case
pursuant to Art. 1.8. In particular, the Parties will enter into a separate
lease agreement regarding the use by VuCo GmbH & Co. of parts of
Behringwerke's premises.
1.6 Whenever one of the Parties and/or any of the Internal Partners needs goods
and services in addition to those listed in ANNEXES - and the other Party
could also be considered as a supplier of such additional goods and
services, the other Party shall be requested to tender them. If such goods
and services are nevertheless obtained from an outside supplier, the other
Party is to be advised of the reasons for such decision. At equal cost-
effectiveness and comparable other terms and conditions, the respective
other Party shall be preferred to any outside supplier.
<PAGE>
4
1.7 If VuCo GmbH & Co. in addition requires special goods and services which
are not available or are not available in the desired quality or quantity
or at the desired time(s), Behringwerke will make every reasonable effort
to supply these additional goods and services, too, without, however, being
obliged to do so. Any additional costs resulting from the supply of these
additional goods and services will be borne by VuCo GmbH & Co. at a price
to be negotiated between the Parties. If the additional goods and services
are also used by other internal customers of Behringwerke, the additional
costs will be shared proportionately, based on use, between Behringwerke
and VuCo GmbH & Co.
1.8 If and when such additional goods and services referred to in Art. 1.6 or
1.7, above, are purchased from the respective other Party, the respective
Services shall be listed in new Annexes in the form of ANNEXES - setting
forth all information necessary and signed on behalf of each Party by a
duly authorized signatory (the supply of such goods and services shall be
considered "Behringwerke Services" or "Vu-Co Services", as the case may be,
and "Services" in each case) and the provisions of this Agreement shall be
applicable to such goods and services.
Article 2 - Principles Governing the Supply of Services
2.1 The Parties shall supply the Services in the same kind and quality as if it
were for captive use (SORGFALT IN EIGENEN ANGELEGENHEITEN). They will
allocate qualified staff to the supply of the Services. Employees
transferred to VuCo GmbH & Co pursuant to the Contribution Agreement shall
be deemed qualified for the position held as of the Closing Date.
2.2 Each Party shall observe that the Services supplied by it are supplied, and
that its operations for which the other Party supplies such Services are
conducted, in accordance with the applicable legislation.
The Parties shall observe in particular the technical regulations in
respect of pharmaceutical products for human use and the products comprised
in the business of the respective other Party, as well as applicable law,
ordinances or orders of public authorities. In addition, the Parties shall
comply with any health and safety regulations or requirements protecting
employees and third parties in the sites and buildings or parts thereof
occupied by the Parties.
<PAGE>
5
2.3 When supplying Services under this Agreement, each Party shall comply with
the respective other Party's requests as to the specific circumstances of
such supply to the extent reasonable and possible. Neither Party is,
however, obliged to comply with such requests if there are reasons to
assume that compliance would breach any legislation in force, lead to
damages to its installations or its property or property of third parties
or could be associated with exposure to danger of persons. In such case,
the respective Party shall promptly inform the other Party of the reasons
of its concern and discuss appropriate actions with the other Party to
avoid disadvantages to such other Party as far as reasonably possible.
2.4 If either Party needs official authorization for its supply of Services
hereunder such Party will prepare the appropriate applications together
with, and in consultation with, the Party receiving the Services and submit
them to the authorities. Behringwerke and VuCo GmbH & Co. will keep each
other regularly informed on the progress made in such matter and on their
respective negotiations with the authorities and will discuss in advance
any necessary measures.
Behringwerke and VuCo GmbH & Co. shall, in particular, promptly inform each
other if official action is likely to be initiated which could result in
the withdrawal or revocation of any authorization for those operations of
VuCo GmbH & Co. and of Behringwerke which relate to the Services under this
Agreement.
2.5 Behringwerke and VuCo GmbH & Co. will regularly discuss questions of common
interest regarding the supply of Services hereunder and regarding those
units supplying such Services. Should one of the Parties intend to modify
its operations in a way which would have significant effects on its future
need for Services supplied by the other Party, it will inform the other
Party without delay in order to allow for a joint examination and
discussion of the effects of such modification on the mutual service
relationships and to enable the respective other Party to provide an
initial assessment of the resulting cost increases or reductions to serve
as a basis for such discussions. In such case, the Parties will make every
reasonable effort to supply each other with additional amounts of Services
in the most economical way.
<PAGE>
6
Article 3 - Quantity and Measurement of Services
3.1 Unless otherwise provided for in ANNEXES - , the amount of any Services
continuously supplied in accordance with such Annexes shall be reviewed by
the Parties on or before September 30 of each year for the following year.
To the extent the Parties are unable to reach an agreement on the amount of
any
Services to be supplied during the following year, the following applies:
3.1.1 in case of increased demand, the supplying Party will endeavor to
meet such demand, but will only be obliged to supply such
Services in the amount agreed upon for the current year;
3.1.2 in case of reduced demand, the supplying Party will supply only
the requested amount of such Services; however, if the supplying
Party proves that it incurred any residual costs due to such
reduction, it shall be indemnified by the receiving Party, unless
otherwise provided for herein.
3.2 Subject to Art. 1.3, the methods, places and other particulars of
measurement of any measurable Services (e.g., in time, quantities of
energy, etc.), and the allocation method with regard to any non-measurable
Services (e.g., security, fire brigade) or for which metering devices are
not available, are provided for in the respective Annexes. The Parties
shall review such provisions as part of the annual review pursuant to Art.
3.1.
Article 4 - Remuneration
4.1 Services shall be provided at Cost as defined in Art. 4.2.
4.2 "Cost" means the fully burdened, fairly allocated cost of providing the
relevant Services, which shall include a reasonable return on employed
capital and reasonable depreciation and amortization of employed assets
over their useful lives, and a fairly allocated charge for underutilized
plant and equipment, provided that each Party uses its best efforts to
employ such plant and equipment otherwise. Cost shall be determined
pursuant to reasonable and customary allocation and calculation
methodologies as consistently applied by Hoechst AG and Guarantor and which
are consistent with German GAAP; provided that neither Parties' method-
<PAGE>
7
ologies will be applied in a manner that would cause the Costs charged to
the other Party to exceed the costs as would be calculated in accordance
with the methodologies reflected in the financial statements as attached in
Annex 7.1.19 of the Purchase Agreement. The Parties will meet and confer
within three months of the Closing Date, as defined in the Purchase
Agreement, regarding their respective methodologies.
4.3 Each Party has the right to audit the other Party's books and records by an
independent Wirtschaftsprufer, at reasonable times and upon reasonable
notice, solely for the purpose of confirmation of such Party's calculation
of Costs. Auditing shall be no more frequent than once a year.
4.4 If either Party believes that the costs of Services provided to it
hereunder are substantially higher than the costs at which such Services
generally are available, the Parties shall meet and confer to consider
appropriate action.
Article 5 - Invoicing and Payment
The Parties' respective financial departments will negotiate reasonable and
appropriate
invoicing and payment terms including compensation for the time value of money.
Article 6 - Liability
6.1 Each Party shall monitor continuously whether the other Party is supplying
Services in the agreed amount and quality. Unless otherwise provided in
the Annexes the following applies: Any incorrect amount and any obvious
defect shall be notified in writing to the other Party promptly after
detection. however no later than 30 (thirty) working days after the date on
which the respective Service was rendered. Other defects shall be notified
in writing to the other Party promptly after detection,, however no later
than 6 (six) months after the date on which the respective Service was
rendered. No Party is obliged to accept late notification of complaints.
6.2 The Parties shall only be liable for lack of diligence as applied in their
own business (SORGFALT IN EIGENEN ANGELEGENHEITEN), Liability for
consequential damages is hereby excluded.
<PAGE>
8
6.3 In any case, liability of each Party for damages due to, or in connection
with, Services supplied under this Agreement which are not in accordance
with the requirements stipulated herein is limited to an amount of
[CONFIDENTIAL TREATMENT REQUESTED] (in words: [CONFIDENTIAL TREATMENT
REQUESTED]) per damaging event and to a total of [CONFIDENTIAL TREATMENT
REQUESTED] (in words: [CONFIDENTIAL TREATMENT REQUESTED]) per calendar year,
all to the extent legally possible. Such limits are not applicable to the
extent the damaging Party can recover compensation for such damages from
third parties including insurance companies.
6.4 Damages which amount with respect to a single damaging event to less than
DM 5,000 (in words: Deutsche Mark five thousand) shall not be recoverable,
provided that the aggregate amount of such small damages during one
calendar year is not exceeding DM 25,000 (in words: Deutsche Mark
twenty-five thousand).
Article 7 - Force Majeure
7.1 Unexpected interruptions in the operations of suppliers, unexpected delays
in delivery or failure to make deliveries on the part of suppliers,
strikes, lock outs, official restrictions and other eventualities which
cannot reasonably be controlled or avoided by the respective Party ("Force
Majeure") shall relieve such Party to the extent and for the duration of
such event from its obligations under this Agreement and will not justify a
claim for damages for any losses suffered by the other Party.
7.2 If a Party is forced to interrupt the supply of Services in whole or in
part due to Force Majeure and if such situation is foreseeable, such Party
shall inform the respective other Party promptly of the reasons for, and
the expected extent and duration of, such interruption. The Parties will
make every reasonable effort to keep the negative effects of such an event
as small as possible.
7.3 After an event of Force Majeure, the Parties shall agree amicably on how
and to what extent Services not supplied are to be made up.
7.4 If the supply of Services is reduced owing to an event of Force Majeure,
the respective Party will share the capacity it has available among its
internal customers, the respective other Party and any other outside
customers with respect to
<PAGE>
9
whom it has undertaken obligations, in accordance with the proportion
of its Services previously accounted for by them.
Article 8 - Duration and Termination
8.1 This Agreement shall commence on the Contribution Date or in case the
Operating Lease Agreement becomes effective upon the termination of the
Operating Lease Agreement and shall run indefinitely, unless otherwise
provided for in this Agreement.
8.2 Either Party may terminate this Agreement with immediate effect with regard
to the relevant Service(s) if the other Party fails to observe significant
obligations under this Agreement and does not, within a period of 60
(sixty) days after having been warned by the other Party in writing to do
so, return to a course of action which is in line with this Agreement and,
as far as possible, remedy the infringement of this Agreement.
8.3 Either Party may terminate this Agreement with immediate effect if the
other Party becomes insolvent or, in particular, if composition or
insolvency proceedings are instituted with regard to its assets or if such
procedures have been denied due to lack of assets.
8.4 Furthermore, each Party is entitled to terminate this Agreement, on a
Service by Service basis, with respect to Services received by it by giving
prior written notice of termination; provided that no such notice may be
given before two years in case of category I Services or six months for any
other Services, all after Closing Date as defined in the Purchase
Agreement.
Category I Services: two years prior written notice
Category II Services: one year prior written notice
Category III Services: six months prior written notice
8.5 In the event VuCo GmbH & Co. terminates in accordance with Art. 8.4 filling
and packaging Services less than five years after the Closing Date as
defined in the Purchase Agreement, and Behringwerke proves that it incurs,
in connection with such termination, costs which cannot be eliminated even
though Behringwerke uses its best efforts to reduce or eliminate such costs
("Residual
<PAGE>
10
Costs"), VuCo GmbH & Co. shall compensate Behringwerke for (i) in the first
year after such termination becomes effective: 50% of such Residual Costs,
(ii) in the second year: 25%, and (iii) in the third year: 12.5% of such
Residual Costs.
8.6 In case a Party has - upon specific request of the other Party terminating
this Agreement partially or entirely - made investments with regard to
operations rendering Services to the other Party which it would not have
made without such request, such other Party shall bear 100% of any Residual
Costs after termination, until such Residual Costs have been completely
reimbursed.
8.7 The Party claiming Residual Costs shall submit to the other Party a
detailed record of such Residual Costs by the end of each calendar quarter.
8.8 The Residual Costs shall be invoiced separately for each month and shall
become due and payable on the 15th day of the month following the date on
which the respective other Party receives such invoice. Art. 4.3 shall
apply MUTATIS MUTANDIS.
8.9 Any notice of termination of this Agreement, in its entirety or in part,
shall only be valid if given in writing.
8.10 In case that either Party terminating Services wishes to establish its
own functions with regard to such Services, it shall give priority to
employees of the existing functions of the respective other Party.
8.11 Upon notice of termination of any Services hereunder, the Parties shall
meet and confer regarding reasonable and appropriate steps to minimize
the impact of such termination on remaining operations, in particular
the possibility of gradually phasing out such Services over the course
of the termination period.
Article 9 - Confidentiality
9.1 Any information whether written, oral or otherwise provided by a Party or a
Party's sub-contractor to the other Party and any information obtained by a
Party in connection with this Agreement, including the terms and conditions
of this Agreement, shall be treated as confidential by the Party, receiving
such information, shall only be used for purposes consistent with this
Agreement and shall not
<PAGE>
11
be disclosed to any third party unless the Party or sub-contractor who
provided such information has given its prior written consent to such other
use or disclosure; provided, however, that each Party may disclose such
information for purposes consistent with this Agreement to its employees,
agents and sub-contractors, if any such employee, agent or sub-contractor
agrees to keep such information confidential as if it were a party hereto.
9.2 The obligations of confidentiality, including the obligations of restricted
use, shall continue for a period of ten years after the termination of this
Agreement.
9.3 Excluded from the restrictions provided for in Art. 9.1 and 9.2 above is
all information that has been disclosed by one Party or a sub-contractor to
the other Party and which is:
9.3.1 information that such other Party possessed in its own right
before disclosure by the first Party or the sub-contractor;
9.3.2 information that is in the public domain at the time of
disclosure by a Party or a sub-contractor or has become part of
the public domain through no fault of the other Party having
received such information;
9.3.3 information that such other Party has received, without
restriction on its disclosure, legitimately from a third party
not deriving the same from the Party or sub-contractor who made
the original disclosure.
9.4 Information which is necessary for the enforcement of this Agreement or for
compliance with applicable law, ordinances or orders of public authorities
may be disclosed accordingly, provided that all reasonable steps are taken
to preserve the confidentiality and the restricted use of such information.
9.5 All drawings, plans and other documents produced or commissioned by a Party
or sub-contractor regarding any Service to be rendered shall remain the
property of such Party or sub-contractor, unless agreement to the contrary
has been reached. Subject to Art. 9.3, such documents and any other
confidential information received and any copies thereof shall be destroyed
or returned upon request of the disclosing Party or sub-contractor or in
the event of termination or rescission of this Agreement in total or in
part.
<PAGE>
12
Article 10 - Governing Law; Arbitration
10.1 This Agreement shall be governed by, and construed in accordance with,
the law of the Federal Republic of Germany.
10.2 In case of any question or difference which may arise concerning the
validity, construction, meaning or effect of this Agreement or
concerning the rights and liabilities of the Parties hereunder or any
matter arising out of, or in connection with, this Agreement cannot be
amicably resolved, such question or difference shall be referred to,
and determined by, an ad hoc arbitration tribunal of three arbitrators
(the "Tribunal").
10.3 The arbitrators shall be appointed as follows:
10.3.1 each party shall appoint one arbitrator, and the two arbitrators
so appointed shall appoint a third arbitrator who shall be
qualified to sit as a judge (Befahigung zum Richteramt) and who
shall act as president of the Tribunal;
10.3.2 if either Party fails to appoint its own arbitrator within
twenty-one days of receipt of a written request by the other
Party or if the two arbitrators are unable to jointly select a
president within twenty-one days from the last appointment, such
arbitrator or president shall be appointed by the President of
the Court of Appeal of Frankfurt am Main (Prasident des
Oberlandesgerichts) at the request of either Party.
10.4 The venue of such arbitration shall be Frankfurt am Main and the
language shall be German.
10.5 The award of the Tribunal, which shall state the reasons for the
decision, shall be final and binding upon the Parties. The
arbitrators shall have power to direct any interim measures.
10.6 With respect to aspects not expressly stipulated in this Art. 10, the
arbitration shall be in accordance with the rules
(Schiedsgerichtsordnung) of the Deutsche Institute for
Schiedsgerichtswesen e.V.
<PAGE>
13
Article 11 - Access to Behringwerke-Premises
11.1 With regard to the access to the Behringwerke-premises by employees of VuCo
GmbH & Co. and/or third parties doing business with VuCo GmbH & Co. the
following applies:
11.1.1 At the entrance to the premises controls will be held in
accordance with the Behringwerke-guidelines as amended from time
to time. To the extent technical appliances are required (e.g.,
code cards), the specifications of which have to be agreed upon
with Behringwerke, VuCo GmbH & Co. shall obtain such appliances
at its own cost, to the extent possible by law. It is VuCo GmbH
& Co.'s responsibility that any orders of Behringwerke control
personnel are followed and that the specific identification
requirements imposed by Behringwerke under its guidelines are
met.
11.1.2 In order to meet the obligations hereunder, buildings, plants and
parts of the Behringwerke-premises not expressly designated for
such purpose may only be entered with the consent of
Behringwerke.
11.2 VuCo GmbH & Co. undertakes to comply with the Behringwerke-guidelines, as
applicable at any given time, to the use of its premises, in particular
those regarding fire prevention, security or traffic in non-public areas.
Such obligation is applicable also to VuCo GmbH & Co. personnel and to
third parties doing business with VuCo GmbH & Co.; and VuCo GmbH & Co.
shall inform such third parties of said obligations and guidelines.
Article 12 - Final Provisions
12.1 Unless otherwise defined herein, all terms shall have the same meanings and
definitions as those in the Contribution Agreement.
12.2 Unless otherwise specifically amended hereby, all other terms of the
Contribution Agreement shall remain in full force and effect.
12.3 Any rights of set-off (Aufrechnung) and/or retention (Zuruckbehaltung)
based on claims for damages under this Agreement shall be excluded unless
such claims
<PAGE>
14
are undisputed between the Parties or confirmed by a non-appealable
court/arbitration decision.
12.4 Each Party may only assign this Agreement to a fully controlled affiliate
which has the means to fulfill the obligations under this Agreement.
12.5 From time to time after the date hereof, at the request of either Party,
the Parties shall execute and deliver to such requesting Party such
documents and take such other action as such requesting Party may
reasonably need in order to consummate more effectively the transactions
contemplated hereby and to satisfy any legal requirements.
12.6 Any notification or amendment to this Agreement, including this Art. 12.6,
must be in writing in order to be valid, unless more stringent requirements
as to the form are stipulated by applicable law.
12.7 The Annexes hereto will become integral parts of this Agreement, and all
references herein to this "Agreement" shall also include the Annexes.
12.8 To the extent possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under the
applicable law. If any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions
of this Agreement. To the extent that a provision is ineffective or
invalid, it shall be replaced by an effective and valid provision which
comes as close as possible to the economic purpose of the ineffective or
invalid provision.
________________,this ___ day of _______,1996.
BEHRINGWERKE AG [VuCo GmbH & Co.]
- ----------------------------------- ---------------------------------
By: By:
Title: Title:
<PAGE>
ANNEX 11.2
to the Contribution Agreement
LEASE AGREEMENT
between
Behringwerke AG
35001 Marburg
- - hereinafter "Behringwerke" -
and
- ------------------------
- ------------------------
- - hereinafter "VuCo GmbH & Co." -
<PAGE>
2
TABLE OF CONTENTS
Preamble 4
Article 1 - Object of Lease 4
Article 2 - Term of Lease 5
Article 3 - Rent 5
Article 4 - Ancillary Costs 6
Article 5 - Value Added Tax 8
Article 6 - Condition of the Premises 8
Article 7 - Liability, Encumbrances, Responsibility 8
Article 8 - Insurance 9
Article 9 - Use of Premises 10
Article 10 - Maintenance and Repairs 12
Article 11 - Destruction of Premises 12
Article 12 - Structural Changes by Behringwerke 13
Article 13 - Assignment and Subletting 13
Article 14 - Change of legal entity, Sale of Business 14
Article 15 - Signs 14
Article 16 - Indemnification 14
Article 17 - Default, Termination 15
Article 18 - Hazardous Materials 17
Article 19 - Force Majeure 18
Article 20 - Confidentiality 18
<PAGE>
3
Article 21 - Arbitration 19
Article 22 - Final Provisions 20
<PAGE>
4
PREAMBLE
Pursuant to the Contribution Agreement to which this Lease Agreement is an
annex, Behringwerke is contributing its human vaccine unit (the "Business") to
VuCo GmbH & Co. VuCo GmbH & Co. intends, for the foreseeable future, to conduct
the Business within the premises of Behringwerke on a lease basis.
Therefore, the parties hereto agree as follows:
ARTICLE 1 - OBJECT OF LEASE
1.1 Behringwerke hereby leases to VuCo GmbH & Co. and VuCo GmbH & Co. hereby
leases from Behringwerke certain parcels rentable land offices space,
production facilities including fixtures and integral parts (WESENTLICHE
BESTANDTEILE) within Behringwerke's Marburg sites which are particularly
described and fully enumerated in ANNEX 1.1, (a) and marked in black in
ANNEX 1.1, (b) (the "Premises"). Under this lease, VuCo GmbH & Co. is also
entitled to enter and use common areas (GEMEINFLACHEN), designated access
and delivery areas, if any, waste disposal facilities and access to ingress
and egress of the site, to parking spaces, and to the cafeteria, subject to
Behringwerke-guidelines which shall be exercised by Behringwerke in
accordance with sect. 315 et seq. Civil Code (BGB).
1.2 The Premises shall be occupied and used by VuCo GmbH & Co. for the business
of human health care and shall not be used for any other purpose whatsoever
without the prior written consent of Behringwerke, which shall not be
unreasonably withheld.
Any consent by Behringwerke, even if not explicitly stated, shall always be
granted subject to all official authorizations as may be required for the
envisaged change of the use of the Premises. Upon request, VuCo GmbH & Co.
shall provide Behringwerke with proof that all necessary official
authorizations have been duly granted.
1.3 The supply of utilities and services such as electricity, water etc. by
Behringwerke and VuCo GmbH & Co.'s obligation to receive, and pay for, any
such utilities and services are specifically settled in the Master Service
Agreement.
ARTICLE 2 - TERM OF LEASE
2.1 The Lease shall commence on the Contribution Date or, in case the Operating
Lease Agreement (BETRIEBSPACHTVERTRAG) becomes effective, upon termination
of the Operating
<PAGE>
5
Lease Agreement (the "Closing Date"). The initial term of the lease shall
be five years (the "Initial Term"). VuCo GmbH & Co. shall have the right in
its discretion to extend the lease for an additional five years (the
"Extension Period") by providing written notice to Behringwerke no later
than March 31, 2001.
During the Extension Period, VuCo GmbH & Co. shall have the right to
terminate the lease in whole or in certain parts of the Premises upon six
months' prior written notice to Behringwerke. During the Initial Term, VuCo
GmbH & Co. shall have the right to terminate the lease in part (but not in
whole) upon six months' prior written notice to Behringwerke, PROVIDED THAT
such right of early termination shall not apply to Premises used for
manufacturing including quality control.
In case Behringwerke undertook capital investments related to the Premises
in the Extension Period on specific written request of VuCo GmbH & Co. and
VuCo GmbH & Co. terminates this Agreement under the foregoing sentence,
VuCo GmbH & Co. shall reasonably compensate Behringwerke therefore.
2.2 Section 568 German Civil Code (Section 568 BGB) shall not apply upon expiry
of the term of the Lease.
ARTICLE 3 - RENT
3.1 As of the Closing Date VuCo GmbH & Co. shall pay to Behringwerke as annual
rent an amount to be calculated on the basis of present lease agreement
agreed between Behringwerke and Hoechst but in no case more than fair
market value. For this purpose VuCo GmbH & Co. has the right to audit
Behringwerke books and records of an independent Wirtschaftsprufer
acceptable for Behringwerke at reasonable times and upon reasonable notice
solely for the purpose of confirmation of such Party's calculation of
costs. Auditing shall be no more frequent than once a year.
In case the Parties cannot agree on the fair market rent either Party is
entitled to request the President of the chamber of commerce of Frankfurt
to nominate an expert who shall resolve such matter to be binding upon the
Parties. The costs shall be borne pursuant to sec. 91 et seq. Civil
Procedure Code (ZPO).
3.2 The Rent shall be due and payable in equal quarterly installments in
arrears on January 10, April 10, July 10 and October 10 of each year
(the"Rent Payment Dates").
<PAGE>
6
3.3 Payments are to be made to a bank account named by Behringwerke in time to
be received at the respective Rent Payment Date. Late payment shall bear
interest at a rate of three percentage points above the relevant discount
rate of the German Federal Bundesbank.
ARTICLE 4 - ANCILLARY COSTS
4.1 In addition to the Rent VuCo GmbH & Co. shall bear certain ancillary costs.
Behringwerke AG shall use it best efforts to attribute the ancillary costs
as to the various buildings and to the various tenants. Only insofar as the
ancillary costs can not be attributed to specific buildings and/or specific
tenants the ancillary costs shall be allocated to all tenants, where
appropriate, on the basis of squarmeters rented, or on such other criteria
which is reasonable for the allocation of those costs among the various
users. Costs having been considered in calculating any fee under the Master
Service Agreement shall not be escalated to VuCo GmbH & Co. Ancillary costs
are:
4.1.1 expenses of cleaning, lightning, repairing, renewing, decorating,
maintaining and rebuilding any walls, fences, gutters, drains,
road ways, pavements, access ways, service areas and any other
common areas of the Premises which are or may be used or enjoyed
by VuCo GmbH & Co. in common with any other person or persons;
4.1.2 any insurance premiums payable by Behringwerke for insuring the
Premises or any part thereof;
4.1.3 all running expenses as defined in Appendix 3 to Section 27,
subsection 1, of the second computation order (Anlage 3 zu
Section 27 Abs. 1 der zweiten Berechnungsverordnung).
4.2 To the extent it is not possible for legal or factual reasons that VuCo
GmbH & Co. pay such costs and expenses directly and in its own name, VuCo
GmbH & Co. will reimburse to Behringwerke such costs at the respective due
date.
4.3 The costs referred to in Art. 4.1 shall be invoiced by the end of February
of each year, at the latest, for the respective preceding year.
VuCo GmbH & Co. shall make quarterly down-payments regarding the costs
referred to in Art. 4.1 amounting to one quarter of the budgeted ancillary
costs for this year. Any difference between the down-payments for a
calendar year and the respective invoice shall
<PAGE>
7
be settled between the parties by a single payment payable one month after
receipt of the annual invoice pursuant to this Art. 4.3.
4.4 Behringwerke shall adjust the quarterly down-payment in its reasonable
discretion in accordance with Section 315 BGB if circumstances affecting
such payments should change. This adjusted down-payment shall become
payable as of the Rent Payment Date following receipt of the relevant
written notice.
ARTICLE 5 - VALUE ADDED TAX
All amounts owed hereunder are net, i.e. without Value Added Tax (VAT;
UMSATZSTEUER). If a payment is subject to VAT, such tax shall be paid in
addition against presentation of an invoice in accordance with the requirements
pursuant to Section 14 VAT Act (Section 14 UMSATZSTEUERGESETZ).
ARTICLE 6 - LIABILITY, ENCUMBRANCES, RESPONSIBILITY
From the Closing Date VuCo GmbH & Co. shall be responsible for the safe
condition of the Premises including VuCo GmbH & Co.'s equipment and attachments,
whether internal or external, and for the safe operation of the Business.
Furthermore, VuCo GmbH & Co. shall fully comply with all applicable laws,
regulations, rules, ordinances and requirements, including environmental laws,
of any governmental authority having jurisdiction over the Premises or the
Business.
ARTICLE 7 - INSURANCE
7.1 Notwithstanding any other provision of this Agreement, insurance with
respect to the Premises shall be maintained to the extent reasonable as
follows:
7.1.1 Behringwerke agrees to purchase, maintain and keep in force
during the term of this Agreement, insurance against damage or
destruction as result of risks as are for the time being
reasonably required to be covered such as fire, lightning,
explosion, riot, civil commotion, acts of terrorism, aircraft and
other aerial devices or articles dropped therefrom (other than
war risks), storm, flood and burst pipes in a sum equal to the
full reinstatement costs of the Premises and fixtures, equipment
and personal property contained therein, including the costs of
demolition, shoring up and site clearance and all architect's,
surveyor's and other professional fees and incidental expenses in
connection with reinstatement and business interruption insurance
covering the Premises. Such policies shall (i) name VuCo GmbH &
Co. as an additional insured and, with respect to business
interruption insurance, as a loss
<PAGE>
8
payee, and (ii) provide that said insurances shall not be
cancelled unless 30 (thirty) day's prior written notice shall
have been given to VuCo GmbH & Co.
7.1.2 VuCo GmbH & Co. agrees to purchase, maintain and keep in force
during the term of this Agreement, a comprehensive general
liability insurance policy and such further insurance or
insurances which are necessary in respect of the Business. Such
policies shall (i) name Behringwerke as an additional insured,
and (ii) provide that said insurances shall not be cancelled
unless thirty (30) days' prior written notice shall have been
given to Behringwerke. For purposes of any general liability
claims made in respect of the Premises, VuCo GmbH & Co.'s
comprehensive general liability policy will be primary, and
Behringwerke's will be secondary.
7.2 Upon request, each party shall deliver to the other certificates evidencing
insurance coverage upon the Closing Date and upon each renewal of said
insurances.
7.3 VuCo GmbH & Co. and Behringwerke each agree that to the extent reasonably
possible the respective insurance carried by it against loss or damage by
fire or other casualty shall contain a clause whereby the insurer waives
its rights of recourse against the other party.
Pursuant to the foregoing, Behringwerke and VuCo GmbH & Co. hereby waive
all claims for recovery from the other party for any loss or damage to any
of its property insured under valid and collectible insurance policies to
the extent of any recovery collectible under such insurance. The foregoing
waiver shall be in force only if such VuCo GmbH & Co.'s and Behringwerke's
insurance policies contain a clause providing that such waiver shall not
invalidate the insurance.
7.4 If either Party fails to comply with its obligation to insure then, without
prejudice to its other remedies, the other party may effect and maintain
the relevant insurance and the premium and other costs of so doing
(including without limitation the cost of obtaining any insurance
valuations) shall be paid by the party failing to take such insurance.
ARTICLE 8 - USE OF PREMISES
8.1 VuCo GmbH & Co. shall only use the Premises or any part thereof in
accordance with the terms of this Agreement and like a diligent businessman
in the pharmaceutical business and shall comply with all legal requirements
and authorizations and security guidelines of Behringwerke.
8.2 VuCo GmbH & Co. shall not do anything that would unreasonably impair or
interfere with or tend to impair or interfere with any activities of
Behringwerke or any other party on the Marburg sites. VuCo GmbH & Co. shall
install at VuCo GmbH & Co.'s expense all equipment, safety
<PAGE>
9
device, pollution control systems or other installations required at any
time with regard to the Business. The foregoing shall apply MUTATIS
MUTANDIS to Berhingwerke. Further Behringwerke shall use its best efforts
that no unreasonable impairment of or interference with the Business is
caused by other tenants of the Behringwerke site in Marburg.
8.3 Behringwerke warrants that as of the date hereof applicable zoning and land
use law permits the use of the Premises as described in Art. 1.2. VuCo
GmbH & Co. is responsible to maintain in place all permits required by law,
regulation, ordinance or other requirement of any governmental authority
with respect to the operation of the Business, except to the extent that
only Behringwerke may obtain such permits or to the extent that such
permits are required for common areas or entire buildings in which VuCo
GmbH & Co.'s portion of the Premises is less than 100%, in which event
Behringwerke must obtain such permits. The costs for such permits shall be
apportioned between the users of these buildings equal to their portion of
the area (FLACHENANTEIL) of the buildings.
8.4 VuCo GmbH & Co. shall not make any material alterations, improvements, or
additions of or to the Premises (collectively the "Alteration") without
first submitting to Behringwerke plans and specifications therefor and
obtain Behringwerke's prior written consent in each and every instance,
which consent shall not be unreasonably withheld or delayed. All
alterations made by VuCo GmbH & Co. shall be at the expense and the sole
risk of VuCo GmbH & Co.
8.5 Before installing any heavy objects, VuCo GmbH & Co. shall ascertain from
Behringwerke the bearing capacity of the floors. The authorized bearing
capacity (in absolute terms and per square meter) may not be exceeded,
otherwise VuCo GmbH & Co. shall be liable for all damage caused thereby and
shall reimburse Behringwerke in respect of any claims resulting therefrom.
8.6 Appliances and installations may only be connected to the existing mains,
and operated, in accordance with the mains' capacity. No interferences must
be caused by such appliances and installations. VuCo GmbH & Co. shall
inform itself about the capacity not be exceeded. VuCo GmbH & Co. shall
bear the cost of any alterations or new installations of the mains or other
supply or disposal pipes necessary due to VuCo GmbH & Co.'s operations.
Behringwerke, however, assures to its best knowledge that the mains in
place are sufficient for the Business as currently conducted.
<PAGE>
10
ARTICLE 9 - MAINTENANCE AND REPAIRS
9.1 VuCo GmbH & Co. is responsible for proper servicing, maintenance and repair
of the Premises and shall maintain the Premises in good order and repair,
as required by law, necessary to ensure the safety and health of all
persons on the Premises.
9.2 Behringwerke is responsible for repairs of all common areas and of such
parts of buildings which, while not being part of the Premises, are
necessary for the Premises being used in accordance with the terms of this
Agreement. Further all necessary works and repairs which have to be
capitalized shall be performed by Behringwerke.
9.3 VuCo GmbH & Co. shall only be excused of its obligation to pay rent if
Behringwerke, having been requested by VuCo GmbH & Co. in writing with
reasonable notice to do so, has not met its obligation under Art. 9.2 and
such failure renders the affected portion of the Premises unusable for 5
(five) consecutive days. After such 5 (five) day period VuCo GmbH & Co.
will not be obligated to pay rent for such portion until such time as such
portion is repaired and returned to usable condition in compliance with all
relevant laws, regulations and administrative orders.
ARTCLE 10 - DESTRUCTION OF PREMISES
10.1 If the Premises or any part thereof are severely damaged or destroyed to an
extent that repair is likely to create costs in excess of 40 % of its
current partial value (TEILWERT) ("Damaged Property"), VuCo GmbH & Co.
shall give immediate notice thereof to Behringwerke and shall enable
Behringwerke to immediately assess the damages.
10.2 If Behringwerke determines, following its assessment of the damage which
has occurred, that the Damaged Property cannot be repaired or
reconstructed, as the case may be, within a reasonable period or with
reasonable efforts and expenses (in either circumstance, the "Loss Event")
the parties shall use their best efforts to agree on an adequate solution
acceptable to both parties. If the parties fail to agree within two months
of the Loss Event Behringwerke may elect not to repair or reconstruct the
Damaged Property and may thereupon terminate this Agreement with regard to
the respective part of the Premises delivering to VuCo GmbH & Co. notice
of such election. In such event, the rent shall be reduced
proportionately. VuCo GmbH & Co. can terminate the lease if the remaining
Premises are insufficient for the Business and Behringwerke cannot provide
for a reasonable alternative. In case the Damaged Property is not repaired
or reconstructed, Behringwerke shall be entitled to all payments made by
insurers with respect to the Damaged Property.
<PAGE>
11
ARTICLE 11 - STRUCTURAL CHANGES BY BEHRINGWERKE
11.1 Behringwerke may, even without VuCo GmbH & Co.'s consent, carry out any
improvements or structural changes necessary or expedient to maintain,
preserve, modernize or expand the Premises, to eliminate imminent danger,
or to repair defects. In such case, Behringwerke shall reasonably take into
account the interests of VuCo GmbH & Co. VuCo GmbH & Co. shall allow
Behringwerke reasonable access to the Premises at reasonable times and
shall not obstruct or delay the execution of the work.
11.2 VuCo GmbH & Co. shall only be entitled to make claims against Behringwerke
because of any work carried out pursuant to Art. 11.1 if VuCo GmbH & Co.'s
activities have been considerably impaired thereby for more than 5 (five)
consecutive days.
ARTICLE 12 - ASSIGNMENT AND SUBLETTING
12.1 VuCo GmbH & Co. is only entitled to assign or transfer all or any of its
rights, benefits and obligations under this Agreement to affiliates (as
defined in sec. 15 et seq. Stock Corporation Act - AKTIENGESETZ) of Chiron
Corporation. Any other assignment or sublet needs the prior written consent
of Behringwerke which consent shall not be unreasonably withheld.
Behringwerke is only entitled to assign all or any of its rights, benefits
and obligations under this Agreement to affiliates (as defined in Sec. 15
et.seq. Stock Corporation Act - AKTIENGESETZ) of Hoechst AG. Any other
assignment by Behringwerke needs the prior written consent of VuCo GmbH &
Co. which consent shall not be unreasonably withheld.
12.2 In the event of subtenancy, VuCo GmbH & Co. shall be absolutely liable for
all acts and omissions of the sub-tenant.
12.3 In the event of subtenancy, VuCo GmbH & Co. hereby and as of now assigns to
Behringwerke as security all claims, including any accompanying liens which
it may have against the sub-tenant.
ARTICLE 13 - CHANGE OF LEGAL ENTITY, SALE OF BUSINESS
13.1 VuCo GmbH & Co. must notify Behringwerke immediately of any change in
control of VuCo GmbH & Co. or of its intention to sell or close the
Business or any material part thereof.
13.2 In case of the sale of VuCo GmbH & Co.'s business or a part thereof, buyer
has no claim to have this Agreement assigned to him.
<PAGE>
12
ARTICLE 14 - SIGNS
Subject to all applicable zoning or regulatory requirements, VuCo GmbH &
Co. may install at its own expense and after obtaining any necessary
permits and Behringwerke's approval (which shall not be unreasonably
withheld) appropriate monument signs at the entrance to the Premises which
in any event may be comparable in number, size and overall impact to the
monuments of Behringwerke in the same or similar locations and appropriate
additional exterior signs on the buildings; provided, however, that upon
termination of this Agreement VuCo GmbH & Co. shall remove said sign(s) and
repair damages caused thereby.
ARTICLE 15 - INDEMNIFICATION
15.1 VuCo GmbH & Co. will indemnify, defend and hold Behringwerke and its
shareholders, subsidiaries, affiliates, officers, directors, agents and
employees harmless from and against any claims, costs, liabilities, fines,
damages or expenses (including reasonable attorney's fees) arising from or
alleged to arise from or out of VuCo GmbH & Co.'s operations or from or out
of an act, omission, fault, negligence or other misconduct of VuCo GmbH &
Co., its agents, ser-vants, employees, visitors or contractors with or at
the areas of the Premises over which VuCo GmbH & Co. has control occurring
after the Closing Date, except arising out of Behringwerke's gross
negligence.
15.2 Behringwerke will indemnify, defend and hold VuCo GmbH & Co. and its
general and limited partners, subsidiaries, affiliates, officers,
directors, agents and employees harmless from and against any claims,
costs, liabilities, fines, damages or expenses (including reasonable
attorney's fees) arising from or alleged to arise from or out of
Behringwerke's operations or from or out of an act, omission, fault,
negligence or other misconduct of Behringwerke, its agents, servants,
employees, visitors or contractors on the Premises or the Marburg sites,
except arising out of VuCo GmbH & Co.'s gross negligence.
15.3 To the extent the mutual obligations pursuant to Art. 15.1 and 15.2 exceed
the statutory liability, such obligations shall apply only if approved by
the respective insurance companies.
15.4 Neither Party shall be responsible for consequential damage hereunder.
ARTICLE 16 - DEFAULT, TERMINATION
16.1 The statutory provisions, except Section 554 German Civil Code (Section 554
BGB), shall apply for the termination of the Lease for serious cause.
<PAGE>
13
16.2 Behringwerke may terminate the Lease without notice in particular if one or
more of the following events of default occur during the term of this
Agreement:
16.2.1 VuCo GmbH & Co. fails to pay any regular instalment of Rent
and/or ancillary costs when due and such default continues for 15
(fifteen) days upon receipt of a written notice from
Behringwerke, provided Behringwerke needs not furnish more than 2
(two) such notices in any calendar year; or
16.2.2 VuCo GmbH & Co. defaults in the performance of any other
requirement, obligation or covenant of this Agreement and any
such failure continues for 30 (thirty) days after notice thereof
from Behringwerke (excepting, however, any default which is not
reasonably susceptible of cure within said period of 30 (thirty)
days and which VuCo GmbH & Co. shall in good faith and with due
diligence be proceeding to cure); or
16.2.3 bankruptcy or composition proceedings are instituted against VuCo
GmbH & Co. or if a petition in bankruptcy filed by VuCo GmbH &
Co. is dismissed for lack of assets; or
16.2.4 the interest of VuCo GmbH & Co. in the Premises is taken upon
execution or by other process of law directed against VuCo GmbH &
Co., or taken upon or subjected to any attachment by any creditor
of VuCo GmbH & Co. or claimant against VuCo GmbH & Co., and such
attachment is not discharged within 15 (fifteen) days.
16.3 VuCo GmbH & Co. may also terminate the Lease if the Business cannot be
operated on the Premises due to public law; provided that VuCo GmbH & Co.
shall use reasonable efforts to avoid the applicability of such law,
including obtaining a waiver.
16.4 VuCo GmbH & Co. hereby grants to Behringwerke full and free right to enter
into and upon the Premises in such event as permitted by law, to repossess
the Premises and to remove objects belonging to VuCo GmbH & Co.
16.5 Any and all objects in the possession of VuCo GmbH & Co. at termination of
the lease (irrespective of ownership) or to which VuCo GmbH & Co. has a
claim, may be removed and/or stored at the discretion of Behringwerke at
the risk, cost and expense of VuCo GmbH & Co. VuCo GmbH & Co. shall pay to
Behringwerke, upon demand any and all expenses incurred in such removal and
all storage charged against such property so long as the same shall be in
Behringwerke's possession or control. Any such objects not retaken by VuCo
GmbH & Co. from storage within 40 (forty) days after removal from the
Premises may be sold (VERWERTET) by
<PAGE>
14
Behringwerke without restrictions. The proceeds less any and all costs and
claims by Behringwerke shall be paid to VuCo GmbH & Co.
16.6 On termination of the Lease, whether in accordance with this Art. 16 or
Art. 2 of this Agreement, VuCo GmbH & Co. shall immediately surrender the
Premises, and deliver possession thereof to Behringwerke, properly
renovated and repaired. This shall include: all repairs pursuant to
Art. 10.1, renewal of the floor coverings and wall paper, painting of
radiators and heating pipes, as well as of doors, window frames and door
frames, all at least to the standard as of the Closing Date. Should VuCo
GmbH & Co. surrender the Premises without having carried out the work
described above, Behringwerke may carry out all necessary work at VuCo
GmbH & Co.'s expense. Behringwerke's claim in respect of the costs thereby
incurred shall also subsist if these works are carried out by the
subsequent tenant.
ARTICLE 17 - HAZARDOUS MATERIALS
17.1 Hazardous materials or material to be monitored (UBERWACHUNGSBEDURFTIG) or
waste as defined by the applicable laws, regulations and administrative
orders relating to chemicals, hazardous materials and waste (CHEMIKALIEN-,
GEFAHRSTOFF- UND ABFALLRECHT) may only be stored, handled, treated,
disposed of, discharged, produced, processed or used by VuCo GmbH & Co.
anywhere in or on the Premises or the common areas with the prior written
consent of Behringwerke and in full compliance with all applicable laws,
regulations and administrative orders. Such consent shall not unreasonably
be withheld. Such consent of Behringwerke is not required for the use of
such hazardous materials or material to be monitored or waste as are
currently in use or being created on the Premises. VuCo GmbH & Co. shall
keep and maintain updated material safety data sheets (or similar documents
required by law) and shall make them available for Behringwerke's
inspection upon request.
17.2 Each of Behringwerke and VuCo GmbH & Co. shall (i) promptly notify the
other of any complaints, notice or other correspondence received from any
third party concerning any actual or alleged violation of any applicable
law, regulation or administrative order regarding hazardous materials,
material to be monitored or waste; (ii) promptly notify the appropriate
public body in case of any emission, release, leakage or emergency of any
kind (STORFALL).
17.3 VuCo GmbH & Co.'s responsibilities, covenants and liabilities under this
Art. 17 shall survive the expiration or earlier termination of this
Agreement. Any events arising from acts or omissions occurring prior to the
Closing Date are the responsibility of Behringwerke.
<PAGE>
15
ARTICLE 18 - FORCE MAJEURE
Neither party shall be responsible for delays or inability to perform its
obligations hereunder due to force majeure or for other causes beyond the
reasonable control of such party including acts of other tenants,
governmental restriction, regulation or control, labor dispute, accident,
mechanical breakdown, shortages or inability to obtain labor, fuel, steam,
water, electricity or materials, acts of God, enemy action, civil commotion
or fire or other casualties.
ARTICLE 19 - CONFIDENTIALITY
19.1 Any information whether written, oral or otherwise provided by a party to
the other party and any information obtained by a party in connection with
this Agreement, including the terms and conditions of this Agreement, shall
be treated as confidential by the party receiving such information, shall
only be used for purposes consistent with this Agreement and shall not be
disclosed to any third party unless the party who provided such information
has given its prior written consent to such other use or disclosure;
provided, however, that each party may disclose such information for
purposes consistent with this Agreement to its employees, agents and sub-
contractors, if such employee, agent or sub-contractor agrees to keep such
information confidential as if it were a party hereto.
19.2 The obligations of confidentiality, including the obligations of restricted
use, shall continue for a period of ten years after the termination of this
Agreement.
19.3 Excluded from the restrictions provided in Art. 19.1 and 19.2 above is all
information that has been disclosed by one party to the other party and
which is:
19.3.1 information that such other party possessed in its own right
before disclosure by the first party;
19.3.2 information that is in the public domain at the time of
disclosure by a party or has become part of the public domain
through no fault of the other party having received such
information;
19.3.3 information that such other party has received, without
restriction on its disclosure, legitimately from a third party
not deriving the same from the party who made the original
disclosure.
19.4 Information which must be disclosed in order to comply with any laws,
regulations or administrative or court orders may only be disclosed to the
entities named in such laws,
<PAGE>
16
regulations or orders. Prior to such disclosure, the other party must be
informed about the nature, extent and contents of the information to be
disclosed.
ARTICLE 20 - LAW; VENUE
This Agreement shall be governed by, and construed in accordance with, the law
of the Federal Republic of Germany. The arbitration clause in the Contribution
Agreement shall not be applied.
ARTICLE 21 - FINAL PROVISIONS
21.1 Behringwerke, his agents or representatives shall, upon giving prior
notice, be entitled to inspect the Premises during VuCo GmbH & Co.'s normal
business hours and at reasonable intervals. In the event of a release or
other environmental emergency or any other emergency at the Premises
Behringwerke shall have the right to enter the Premises for purposes of
responding to such release or emergency at any time without giving VuCo
GmbH & Co. notice in advance.
21.2 The access to the Premises shall be governed by Art. 11 of the Master
Service Agreement.
21.3 VuCo GmbH & Co. may only set-off (AUFRECHNUNG), and exercise rights of
retention (ZURUCKBEHALTUNG), regarding claims against the rent or ancillary
costs if these claims are undisputed between the parties or acknowledged by
Behringwerke or confirmed by a non-appealable decision.
21.4 Any amendment, cancellation or supplement of a provision of this Agreement,
including this Art. 21.4 and any notification under this Agreement must be
in writing in order to be valid, unless more stringent requirements as to
the form are stipulated by the applicable law.
21.5 This Agreement embodies the entire agreement between the parties hereto
with regard to the subject matter hereof and there have been no agreements,
representations or warranties between the parties with regard to the
subject matter hereof other than those set forth or provided for herein.
21.6 The Annexes hereto are integral parts of this Agreement, and all references
herein to this "Agreement" shall also include the Annexes.
21.7 If any provision of this Agreement is held to be prohibited by or invalid,
such provision will be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement. To the extent that a provision is
<PAGE>
17
ineffective or invalid, it shall be replaced by an effective and valid
provision which comes as close as possible to the economic purpose of the
ineffective or invalid provision.
__________, this ___ day of __________, 1996
BEHRINGWERKE AG [VuCo GmbH & Co.]
______________________________ ______________________________
By: By:
Title: Title:
<PAGE>
Annex 1.1.(a) to Lease Agreement
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Usage by Vaccine Unit
-------------------------------------------
2
Building % m
- ------------------------------------------------------------------------------
<S> <C> <C>
H 6 19,5 663
- ------------------------------------------------------------------------------
H 10 30,0 1058
- ------------------------------------------------------------------------------
H 12 61,0 2312
- ------------------------------------------------------------------------------
H 15 51,0 ?
- ------------------------------------------------------------------------------
Z 20 6,0 33
- ------------------------------------------------------------------------------
Z 21 40,0 690
- ------------------------------------------------------------------------------
Z 25 6,2 404
- ------------------------------------------------------------------------------
Z 26/30 19,9 1287
- ------------------------------------------------------------------------------
H 33 49,9 1205
- ------------------------------------------------------------------------------
H 38 25,8 66
- ------------------------------------------------------------------------------
M 544 10,0 49
- ------------------------------------------------------------------------------
H 70 0,3 ?
- ------------------------------------------------------------------------------
H 11 75,0 1734
- ------------------------------------------------------------------------------
H 21 50,0 2727
- ------------------------------------------------------------------------------
H 26 100,0 1565
- ------------------------------------------------------------------------------
H 28 75,0 5400
- ------------------------------------------------------------------------------
H 32 66,0 515
- ------------------------------------------------------------------------------
H 34 80,0 317
- ------------------------------------------------------------------------------
M 218 40,0 592
- ------------------------------------------------------------------------------
M 537 100,0 1440
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
ANNEX 1.4 (b)
TO THE PURCHASE AGREEMENT
PARTNERSHIP AGREEMENT
OF
CHIRON BEHRING BIOCINE GmbH & CO. KG
(FORMER: BEHRING VAKZINE GmbH & CO. KG)
BETWEEN
BEHRINGWERKE AG
AND
32. CORSA VERWALTUNGSGESELLSCHAFT mbH ("32.CORSA GmbH")
AND
31. CORSA VERWALTUNGSGESELLSCHAFT mbH ("31.CORSA GmbH")
In consideration of the Purchase and Assignment Agreement between
Behringwerke AG and 31. Corsa GmbH (the "Purchase Agreement"), the
Contribution Agreement between Behring Vakzine GmbH & Co KG and Behringwerke
AG and the Shareholders' Agreement between Behringwerke and 3 1. Corsa GmbH.
the Parties to this Agreement agree to the following terms of their
partnership:
1. NAME, REGISTERED OFFICE
1.1 The name of the Partnership shall be
CHIRON BEHRING BIOCINE GmbH & CO. KG
1.2 The Partnership has its registered office in Marburg.
2. PURPOSE OF THE PARTNERSHIP
2.1 The purpose of the Partnership is the development, production and
distribution of pharmaceutical products, in particular human
vaccines.
<PAGE>
2
2.2 The Partnership is entitled to take all actions which are necessary
or appropriate to further the purpose of the Partnership directly or
indirectly.
2.3 The Partnership is entitled to establish other enterprises and
branches within Germany and other countries or to acquire other
business enterprises, including partnerships, thereon.
3. PARTNERS; PARTNERSHIP CAPITAL
3.1 The General Partner is 32.Corsa GmbH. The General Partner does not
make a capital contribution and does not participate in the capital
of the Partnership.
3.2 The Limited Partners of the partnership are
3.2.1 Behringwerke AG with a partnership interest of 51%
3.2.2 31. Corsa GmbH with a partnership interest of 49%.
3.3 The capital of the Partnership has been or will be contributed in
kind by Behringwerke AG pursuant to be Contribution
Agreement prior to the transfer of the 49% interest in the
Partnership pursuant to the Purchase Agreement. The capital
contribution of Behringwerke under the Contribution Agreement is
fixed and may not be withdrawn.
3.4 The capital contribution of the Limited Partners to be registered in
the commercial register (Hafteinlage) shall be:
3.4.1 Behringwerke AG DM 2,550,000 (in words: Deutsche
Mark two million five hundred fifty thousand)
3.4.2 31. Corsa GmbH DM 2,450,000 (in words: Deutsche
Mark two million four hundred fifty thousand)
<PAGE>
3
3.5 The capital accounts I and II determine the interest of each of the
Partners in the Partnership ("Partnership Interest").
4. PARTNER ACCOUNTS
4.1 For each partner,a capital account I, a capital account II, a
reserve account, a loss carry forward account and a transaction
account shall be maintained.
4.2 The contribution to be registered in the commercial register
shall be booked into the capital account I of each of the Limited
Partners. This capital account is fixed. Pursuant to the
Contribution Agreement Behringwerke has contributed DM 5,000,000
(in words: Deutsche Mark five million) in kind to the capital
account I of Behringwerke, of which 49 % will be transferred to
the capital account I of 31. Corsa GmbH.
4.3 The remainder of the capital contribution of Behringwerke in
accordance with the Contribution Agreement shall be booked into
the capital account II of Behringwerke.
4.3.1 49 % of such capital is transferred according to the
Purchase Agreement to the capital account II of 31.
Corsa GmbH.
4.3.2 Any future contribution of Behringwerke to the
Partnership pursuant to the Contribution Agreement will
be booked at 51% into the capital account II of
Behringwerke and at 49% into the capital account II of
31. Corsa GmbH.
4.3.3 The contributions to the capital accounts II are fixed
and may not be withdrawn by either Partner.
4.4 Profits of the Partnership which are not distributed are booked
into the reserve account of each Partner in proportion to their
Partnership Interest.
4.5 Losses attributable to each Partner shall be booked into the
loss-carry-forward account of each Partner in proportion to their
Partnership Interest.
<PAGE>
4
4.6 Distributable profit shares, withdrawals, compensation for
services rendered, commissions, other than commissions pursuant
to clause 4.7 of the Purchase Agreement, which shall be paid to
Behringwerke in accordance with the Purchase Agreement,
reimbursement of expenses, interest and all other payments
between the Partnership and the Partners shall be booked into the
respective transaction accounts.
4.7 In addition, separate loan accounts shall be kept to the extent
Partners grant loans to the Partnership.
4.8 The capital accounts I and II, the reserve accounts and the
transaction account shall not bear interest. Debit and credit
balances of loan accounts, if any, shall bear interest at the rate
specified in the relevant loan agreement, if any, or at due year
FIBOR.
5. FISCAL YEAR, ANNUAL FINANCIAL STATEMENTS; INDEMNIFICATION
5.1 The fiscal year runs from January 1 of each year to December 31.
5.2 Within two months after the end of each fiscal year,the General
Partner shall prepare the annual financial statements (annual
balance sheet and profit and loss statements) for the preceding
fiscal year and shall promptly submit and explain the annual
financial statements to the Advisory Board members and to the
appointed auditors for the purpose of examination.
5.3 With respect to the structure (Gliederung) and evaluation
(Bewertung), the financial statements shall comply with such
applicable for corporations (Kapitalgesellschaften) pursuant to
German generally accepted accounting principles ("GAAP"), a
supplement (Anhang) and situation report (Lagebericht) are not
necessary. As a matter of principle, the financial statements
must comply with the applicable provisions of profit
determination pursuant to German Income Tax Law
(einkommensteuerliche Gewinnermittlung), unless compulsory
commercial law provisions, this Partnership Agreement, or
partnership resolutions provide otherwise.
To the extent that assessments by the tax authorities require a
revision of the financial statements, only such revised financial
statements shall govern rights
<PAGE>
5
5.4 To the extent that assessments by the tax authorities require a
revision of the financial statements, only such revised financial
statements shall govern rights and duties of the parties
hereunder. To the extent that such tax assessment requires a
revision of the financial statements for several years, it is for
internal purposes sufficient to amend the last financial
statement. The distribution of profits pursuant to clause 6.2
shall be adapted for all financial statements subject to such
revision.
5.5 The financial statements shall be audited. Auditor may only be
an internationally recognized Wirtschaftsprufungsgesellschaft
acceptable to all parties hereof.
5.6 Upon approval of the financial statements by the Advisory Board
and the Partners' Meeting, they shall be signed by the
Geschaftsfuhrer of the General Partner.
5.7 The annual financial statements shall also be prepared in
accordance with U.S. GAAP.
5.8 Each Limited Partner may also, without approval of the General
Partner, exercise information rights and controlling rights
pursuant to sects. 118, 166 Commercial Law (HGB) whereby
each Limited Partner can exercise such rights through a third
person who is bound by a professional confidentiality
obligation.
6. Distribution of Profits and Losses
6.1 The Partners shall share in the profits and losses as calculated
after deduction of the expenses of the General Partner and of any
compensation otherwise due to the Partners in the ratio of their
Partnership Interests. Regardless of the consummation of any
transfer of the 51% Partnership Interest from Behringwerke AG to
31. Corsa GmbH pursuant to the Purchase Agreement (i.e.,
exercise of Chiron Call Option or Behring Put Option), 31. Corsa
GmbH shall at any time indemnify Behringwerke AG for any tax
obligations relating to tax periods after the Closing Date of
Behringwerke AG stemming from its Partnership Interest unless
covered by clause 6.2; the indemnification
<PAGE>
6
is limited to tax claims relating to trade tax and value added
tax but shall in no way include capital gain tax.
6.2 Profit shares necessary to balance withdrawals of Partners for
tax payments shall be booked on the transaction account. The
remainder of the profits shall be booked into the reserve
accounts or the loss carry forward accounts as appropriate,
unless the Partners unanimously provide otherwise.
6.3 As long as a loss carry forward exists in the loss carry forward
accounts, it shall be compensated by subsequent profits. Only
thereafter may any profit shares be booked into the transaction
account or the reserve accounts.
7. WITHDRAWALS
7.1 Each Partner may request withdrawals only from credit balances on
its transaction account.
7.2 Any withdrawals in excess thereof shall require a resolution by
the Partners.
8. MANAGEMENT, REPRESENTATION
8.1 The General Partner shall solely be entitled and shall have the
sole responsibility to manage and represent the Partnership.
The General Partner shall obtain the Advisory Board's approval
for all business decisions which are of material importance to
the Partnership, including, but not limited to, approval of the
annual budget and the following matters:
8.1.1 sale or acquisition of a company, parts of a company,
business (Betriebe) or parts of a business
(Betriebsteile) or entering into, or termination of
company lease agreements (Betriebspachtvertrage):
8.1.2 sale, acquisition or encumbrance of controlling
interests in any other company or business:
<PAGE>
7
8.1.3 taking up new area of business and activities or
cessation of existing areas of business and activities;
8.1.4 entering into, amendment and termination of enterprise
contracts (Unternehmensvertrage);
8.1.5 acquisition, sale and transfer, encumbrance and pledge
of fixed assets, including real property, buildings and
rights of real property nature (if the transaction
value in each individual case is in excess of DM
500,000 (in words: Deutsche Mark five hundred
thousand);
8.1.6 entering into or amending any contract with a value of
more than DM 500,000 (in words: Deutsche Mark five
hundred thousand);
8.1.7 taking up and granting of loans and credits,
assumptions of guarantees, strict guarantees and other
liabilities of similar nature if the transaction value
in each case is in excess of DM 500,000 (in words:
Deutsche Mark five hundred thousand);
8.2 The approval of the Advisory Board to be obtained pursuant to the
foregoing may also be made in form of a general authorization for
particular types of the aforementioned transactions and matters.
Any such general authorization must precisely describe the
transactions and matters in question as well as the purpose and
the time frame in which they must be completed.
9. ADVISORY BOARD
9.1 The Partnership shall have an Advisory Board. The Advisory Board
shall be composed of four (4) members. Each Limited Partner
shall appoint two members (including one senior member).
9.2 The Advisory Board shall advise the management and shall consider
for approval the consents required according to clause 8.
<PAGE>
8
9.3 The Advisory Board shall resolve its decision with a simple
majority of its votes. In the event that a majority decision
cannot be reached, the following special procedures shall be used
to break a deadlock:
9.3.1 the senior Advisory Board member appointed by
Behringwerke, following reasonable consultation with the
senior member appointed by the other party, shall have
the decisive vote in matters relating to the following
agreements:
[CONFIDENTIAL TREATMENT REQUESTED]
9.3.2 The senior Advisory Board member appointed by Chiron,
following reasonable consultation with the senior member
appointed by the other party, shall have the decisive
vote in all other matters referred to the Advisory Board.
9.4 The Advisory Board shall meet at least every 14 months or whenever
requested by the CEO or by any of the senior members of the Advisory
Board. The meetings can be held by telephone or video conference.
Meetings shall convene with a notice period of seven (7) days if
not otherwise unanimously agreed. Action can be taken by unanimous
written consent. The Advisory
<PAGE>
9
Board may adopt its own internal rules of procedure to be adapted
from time to time.
10. Partners' Resolutions, Partners' Meeting
10.1 The decisions reserved to the Partners by law or by the
Partnership Agreement regarding the affairs of the Partnership
shall be made by resolutions of the Partners.
10.2 Partners' resolutions shall be adopted in partners' meetings
unless the General Partner requests that a resolution is adopted
in writing, by telex, by telefax and no objection is raised by a
Limited Partner.
10.3 The partners' meeting shall be called by the General Partner in
its own right or upon request of any Limited Partner. The
General Partner may join the partners' meetings unless the
partners request otherwise.
10.4 The partners' meeting shall have a quorum when at least 75% of
the Limited Partnership Interest is represented. If a properly
convened meeting has no quorum within one (1) hour of the time
for which it was convened, the meeting shall automatically be
adjourned and reconvened for the same time at the same place five
business days later. Such reconvened meeting shall have a quorum
if at least one Limited Partner is present. All resolutions of
the partners' meeting require a simple majority of the votes
present or represented at the meeting unless a higher majority is
required by law.
10.5 Each DM 1,000 of the Limited Partnership is equivalent to one
vote.
10.6 Except as otherwise provided in this Partnership Agreement, the
Partners may also vote in matters of their own.
10.7 Resolutions of the Partners shall be recorded in the minutes of
the Partners' meeting or, in case of resolutions adopted outside
of such meetings, in separate minutes to be drawn up and to be
signed by the General Partner.The
Partners shall in each case receive copies of such minutes without
delay.
10
10.8 Partners may only challenge the validity of Partners' resolutions
within a period of one month following adoption in a Partners'
meeting in which they have participated, or following receipt of
the minutes recording the Partners' resolution by filing suit.
After expiration of the above period, any defect of a Partners'
resolution shall be deemed cured.
11. TRANSFER OF PARTNERSHIP INTERESTS
The Partners agree that any transfer, assignment or encumbrance of the
Partnership Interest or parts thereof requires the prior written
consent of the other Partner, which shall not be unreasonably withheld,
provide that, (i) no consent shall be required if the Limited
Partnership interests are transferred, assigned or encumbered to, or
for the benefit of, a wholly owned subsidiary of the respective Partner
and which will remain such a wholly owned subsidiary of a Partner, and
(ii) such Partner has proven to the other Partner by submission of a
written agreement that such subsidiary has agreed to be bound by be
terms of this Agreement and the Purchase Agreement. For the avoidance
of doubt: no such transfer or assignment by 31. Corsa GmbH may in any
respect impair Behringwerke AG's rights under the Purchase Agreement in
particular, its rights against the Guarantor for payment of the Option
Purchase Price in case the Chiron Call Option or the Behring Put Option
is exercised.
12. Bankruptcy
In the event a bankruptcy or judicial composition proceeding is opened
with respect to the assets of a Partner, the membership of such Partner
shall terminate as soon as the underlying court order becomes final.
13. TERM OF THE PARTNERSHIP
13.1 The partnership shall commence upon its being established.
<PAGE>
11
13.2 The partnership is established for an indefinite period of time;
the partnership may be terminated for the first time with a
written notice of 6 months to December 31, 2001.
If any of the Partners ceases to be a member of the partnership
and his Partnership Interest is not transferred to a successor,
the other Partner may take over the Partnership Interest in whole
or in part.
13.3 In case of dissolution of the partnership, the liquidation shall
be effected in accordance with the statutory rules by
liquidators. Each Limited Partner participates in the
liquidation surplus in the ratio of his Limited Partnership
Interest.
13.4 Effective as of January 1, 2002, this Partnership Agreement shall
be adjusted to reflect the German Commercial Code (HGB).
14. WITHDRAWAL COMPENSATION
In the event a Partner withdraws from the partnership or the
membership of this Partner is terminated due to Sect. 12, such Partner
shall receive a withdrawal compensation . The withdrawal compensation
shall be the nominal amount of the Partnership Interest of the
withdrawing partner plus the balance in his transaction account. The
withdrawal compensation is payable in equal installments over a period
of five years.
15. Compensation of General Partner
15.1 To the extent the General Partner's business activities are
exclusively activities in connection with or on behalf of the
Partnership, the Partnership shall reimburse the General Partner
for all expenses incurred therewith.
15.2 In addition to clause 15. 1, the General Partner shall receive at
the end of each fiscal year of the Partnership a compensation in
the amount of 2 % of the General Partner's net equity value as of
the beginning of such financial year.
15.3 Any compensation paid to the General Partner shall be booked as
cost in the profit and loss statements of the Partnership.
<PAGE>
12
16. CAPITAL INJECTION; SHAREHOLDER LOANS
16.1 Under no circumstances Behringwerke AG is obliged to inject any
capital into the partnership or to grant any shareholder loans.
16.2 31. Corsa GmbH undertakes the responsibility to ensure that the
Partnership shall have sufficient cash to meet all its
obligations for at least a period of 6 (six) months after the
Closing Date as defined in the Purchase Agreement.
17. CONCLUDING PROVISIONS
17.1 The Partners shall keep all confidential information received
from the partnership or from the other Partners in strict
confidence without limitation in time, even after their
withdrawal from the partnership.
17.2 In case individual provisions of the Partnership Agreement are or
become invalid in whole or in part, the validity of the remaining
provisions shall remain unaffected thereby. The parties shall
instead of the invalid provision agree on an appropriate valid
provision which approximates best the intent and purpose of the
invalid provision.
17.3 This Partnership Agreement and its interpretation shall be
governed by the laws of the Federal Republic of Germany. Court
venue shall be Marburg for all disputes among the Partners.
17.4 31. Corsa GmbH shall hold Behringwerke free and harmless from any
damages and shall actually conduct all relevant negotiations and
court proceedings on behalf of Behringwerke, as a consequence of
any withdrawals from the capital account I caused or otherwise
initiated by 31. Corsa GmbH, including withdrawals after exercise
of the Chiron Call Option or the Behring Put Option and shall
hold Behringwerke free and harmless; this also applies in case of
withdrawals necessary for the satisfaction of clause 4.7 of the
Purchase Agreement.
<PAGE>
ANNEX 3.4
to the Purchase Agreement
SHAREHOLDERS' AGREEMENT
For VuCo GmbH and VuCo GmbH & Co.
---------------------------------
BETWEEN
Behringwerke AG
("Behringwerke")
AND
31. CORSA Verwaltungsgesellschaft mbH
("Buyer")
(Behringwerke and the Buyer each also referred to as "Shareholder" or
"Party")
<PAGE>
2
INTRODUCTION
A. Pursuant to the purchase and assignment agreement, of which this Agreement
forms an annex (the "Purchase Agreement"), Behringwerke has sold to Buyer a
49% interest in VuCo GmbH and VuCo GmbH & Co. (hereinafter collectively the
"Companies").
B. With regard to the exercise of Behringwerke's and the Buyer's rights as
shareholders and partners of the Companies, the Parties wish to enter into
this Shareholders' Agreement in order to coordinate their cooperation with
regard to the management of the Companies.
C. All terms defined in the Purchase Agreement shall have the same meaning in
this Shareholders' Agreement.
In consideration hereof the parties agree as follows:
1. STRUCTURE OF THE COMPANIES
1.1 VuCo GmbH & Co. is organized as a limited partnership with VuCo GmbH
as its sole general partner. VuCo GmbH & Co. will be exclusively
managed and represented by VuCo GmbH.
1.2 VuCo GmbH will be managed by a Chief Executive Officer
(GESCHAFTSFUHRER). The Chief Executive Officer shall not be bound by
fiduciary obligations vis-a-vis any particular Shareholder other than
those applicable vis-a-vis all Shareholders pursuant to law, the
Articles of Association of VuCo GmbH (the "Articles"), the Partnership
Agreement of VuCo GmbH & Co. (the "Partnership Agreement") and this
Shareholders' Agreement.
1.3 VuCo GmbH & Co. shall have an Advisory Board (BEIRAT).
1.4 To the extent the Companies will be required to establish an
AUFSICHTSRAT by matter of law, the parties hereto will pursue the
intent of this Agreement regardless of such AUFSICHTSRAT.
<PAGE>
3
2. RULES GOVERNING THE SHAREHOLDERS' MEETINGS AND PARTNERS' MEETINGS
2.1 The shareholders' meetings of VuCo GmbH shall be convened at regular
intervals not exceeding 14 months and upon no less than seven (7)
business days notice in writing, such notice to include an agenda
specifying the matters to be resolved.
2.2 The shareholders' meetings of VuCo GmbH shall be called in by the
Chief Executive Officer of VuCo GmbH in its own right or upon request
of any Shareholder. The Chief Executive Officer may join the
shareholders' meetings, unless any Shareholder requests otherwise.
2.3 The shareholders' meeting shall have a quorum when at least 75 % of
the stated capital of VuCo GmbH are represented. If a properly
convened meeting has no quorum within 1 (one) hour of the time for
which it was convened, the meeting shall automatically be adjourned
and reconvened for the same time at the same place five business days
later. Such reconvened meeting shall have a quorum if at least one
Shareholder is present. All resolutions of the shareholders' meeting
require a simple majority of the votes, present or represented at the
meeting, unless a higher majority is required by law.
2.4 For the partners' meetings of VuCo GmbH & Co., the foregoing
provisions shall apply MUTATIS MUTANDIS.
3. PRINCIPLES OF MANAGEMENT
3.1 The management of VuCo GmbH shall obtain the Advisory Board's approval
for all business decisions which are of material importance to VuCo
GmbH or VuCo GmbH & Co., including, but not limited to, approval of
the annual budget and plan, and the following matters:
(a) sale or acquisition of a company, parts of a company, business
(BETRIEBE) or parts of a business (BETRIEBSTEILE) or entering
into, or termination of company lease agreements
(BETRIEBSPACHTVERTRAGE);
<PAGE>
4
(b) sale, acquisition or encumbrance of controlling interests in any
other company or business;
(c) taking up new area of business and activities or cessation of
existing areas of business and activities;
(d) entering into, amendment and termination of enterprise contracts
(UNTERNEHMENSVERTRAGE);
(e) acquisition, sale and transfer, encumbrance and pledge of fixed
assets, including real property, buildings and rights of a real
property nature, if the transaction value in each individual case
is in EXCESS of DM 500,000 (in words: Deutsche Mark five hundred
thousand);
(f) entering into or amending any contract with a value of more than
DM 500,000 (in words: Deutsche Mark five hundred thousand);
(g) taking up and granting of loans and credits, assumption of
guarantees, strict guarantees and other liabilities of the
similar nature if the transaction value in each case is in excess
of DM 500,000 (in words: Deutsche Mark five hundred thousand);
(h) any of the transactions and matters listed and referred to under
sub-para. (a) through (g) above carried out by VuCo in its
capacity as general partner of VuCo GmbH & Co. for and on behalf
of VuCo GmbH & Co.
3.2 The approval of the Advisory Board to be obtained pursuant to para. 3.1
above may also be made in form of a general authorization for particular
types of the aforementioned transactions and matters. Any such general
authorization must precisely describe the transactions and matters in
question as well as the purpose and the time frame in which they must be
completed.
<PAGE>
5
4. ADVISORY BOARD
4.1 The Advisory Board shall be composed of 4 (four) members. Each Party
shall appoint two members (including one senior member).
4.2 The Advisory Board shall advise the management and shall consider for
approval the consents required according to Sect. 3.1. The Chief
Executive Officer of VuCo GmbH shall be nominated by the Advisory
Board to the Shareholders for appointment. The Advisory Board shall
negotiate and determine the employment contract with the Chief
Executive Officer.
4.3 The Advisory Board shall resolve its decisions with a simple majority
of its votes, In the event that a majority decision cannot be reached,
the following special procedures shall be used to break the deadlock:
(a) the Senior Advisory Board Member appointed by Behringwerke,
following reasonable consultation with the Senior Member
appointed by the other party. shall have the decisive vote in
matters relating to the following agreements:
[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
6
(b) the Senior Advisory Board Member appointed by Buyer, following
reasonable consultation with the Senior Member appointed by the
other party, shall have the decisive vote in all other matters.
4. The Advisory Board shall meet at least every 14 months or whenever
requested by the Chief Executive Officer or by any of the senior
members of the Advisory Board. The meetings can be held by telephone
or video conference. Meetings shall convene with a notice period of 7
(seven) days if not otherwise unanimously agreed. Action can be taken
by unanimous written consent. The Advisory Board may adopt its own
internal rules of procedure to be adapted from time to time.
5. EXERCISE OF VOTING RIGHTS
5.1 Shareholders' resolutions or partners' resolutions in shareholders'
meetings, as the case may be, regarding the following matters shall
require a unanimous vote of the shareholders or the partners:
(a) matters concerning capital increases and capital decreases.
(b) appointment of the Chief Executive Officer.
(c) appointment of the Companies' auditors, determination
(FESTSTELLUNG) of the annual financial statements and profit
distributions including distributions of reserves (RUCKLAGEN):
(d) exoneration (ENTLASTUNG) of the managing directors.
(e) amendments of the Articles or the Partnership Agreement to the
extent that such amendments relate to, or have an impact on, any
of the matters stipulated, mentioned or referred to in this
Shareholders' Agreement:
(f) transformation (UMWANDLUNG) of the Companies as defined in Sec. 1
Umwandlungsgesetz or dissolution of the Companies:
<PAGE>
7
(g) entering into, amendment and termination of enterprise contracts
(UNTERNEHMENSVERTRAGE);
(h) transfer of any decision powers of shareholders' meeting of VuCo
GmbH or the partners"meeting of VuCo GmbH & Co. to any
committees;
(i) the sale or acquisition of assets having a value in excess of DM
50 million;
(j) debt financing in excess of DM 50 million, other than financing
of accounts receivable;
(k) matters relating to the Overview Agreement after the consent and
approval contemplated by section 5.1.4 of the Purchase Agreement
has been obtained;
(1) matters relating to the Sales Promotion and Consignment Agreement
between Behringwerke and Centeon Pharma dated September 28, 1995
and effective as of July 1, 1995.
5.2 If Behringwerke and Buyer are unable in two consecutive shareholders'
meetings or partners' meetings, as the case may be, to reach an
unanimous decision on matters requiring their unanimous vote and if
they have not been able to resolve the matter within 30 days after the
date of the second shareholders' meeting or partners' meeting, then
Behringwerke and the Buyer can submit this matter to the respective
member of the management board (VORSTAND) of Hoechst AG in charge of
the business activities conducted by Behringwerke and of Guarantor for
resolution. They shall meet as necessary in order to discuss and
resolve the matter by mutual agreement considering, if feasible, the
use of expert advisors.
5.3 With regard to matters other than those listed and referred to in
para. 4.3.a and 5.1 above, Behringwerke shall exercise its voting
rights in shareholders' meeting of VuCo GmbH and partners' meetings of
VuCo GmbH & Co. consistent with the manner in which the Buyer
exercises its voting rights it being under-
<PAGE>
8
stood that with regard to the matters listed and referred to in para
5.1 above, Behringwerke may exercise its voting rights at its free
discretion.
6. TRANSFER, ASSIGNMENT OR ENCUMBRANCE OF SHARES OR INTERESTS
The Parties agree that any transfer, assignment or encumbrances of shares
or interests in VuCo GmbH or VuCo GmbH & Co. or parts thereof requires the
prior written consent of the other shareholder or partner not to be
unreasonably withheld, PROVIDED THAT no consent shall be required if (i)
the shares or interests are transferred, assigned or encumbered to, or for
the benefit of a wholly-owned subsidiary of the respective
shareholder/partner and (ii) such shareholder/partner has proven to the
other shareholder/partner by submission of a written agreement that such
subsidiary has agreed to be bound by the terms of this Agreement pursuant
to Sect. 11.
7. AMENDMENTS OF ARTICLES OF ASSOCIATION AND PARTNERSHIP AGREEMENT
Insofar as amendments of the Articles and the Partnership Agreement or any
other resolutions are necessary or expedient for the execution and
implementation of the provisions of this Shareholders' Agreement,
Behringwerke and the Buyer shall procure that the appropriate resolutions
are passed and all other necessary actions are taken promptly after the
Closing Date.
8. Financials; Information
8.1 The financial statements of VuCo GmbH and VuCo GmbH & Co. shall be
audited by an auditor (WIRTSCHAFTSPRUFER) nominated by the
shareholders' meeting.
8.2. Each Shareholder shall have the right to inspect (either itself or by
advisors subject to a professional obligation of secrecy) during
normal business hours (and at other times by agreement) all books,
records and other information maintained for or by the Companies and
(to the extent legally permissible) those maintained for or by its
associated undertakings. The right to inspect shall include the right
to take copies. Each Shareholder shall also have the right of
<PAGE>
9
access to the Companies' premises (either itself or by advisors
subject to a professional obligation of secrecy) during normal
business hours (and otherwise by agreement) for the above purpose and
to inspect and review the premises.
9. Duration
This Agreement shall take effect as of the Closing Date and shall expire
(a) as of the date of notarization of the acceptance of the Behring Put
Option or the Chiron Call Option, as the case may be, pursuant to Art.
3 of the Purchase Agreement, or
(b) as of the date at which the right of Behringwerke to exercise the
Behringwerke Put Option and the right of the Buyer to exercise the
Chiron Call Option pursuant to Art. 3 of the Purchase Agreement has
expired, or
(c) at such other date on which the Parties have mutually agreed.
10. NO PARTNERSHIP
None of the provisions of this Agreement shall be deemed to constitute a
partnership between the Shareholders and neither of them shall have any
authority to bind the other in any way.
11. SUCCESSORS AND ASSIGNMENTS
This Agreement shall enure for the benefit of and be binding on the
respective successors in title and permitted assignees of each Shareholder
which shall procure prior to the transfer of any of its Shares that each
such transferee shall enter into a written agreement with the other
Shareholders by which the transferee agrees to be bound by terms identical,
mutatis mutandis, to the terms of this Agreement (including the terms of
this clause as regards any subsequent transfer of the Shares).
<PAGE>
Annex 4.6 to the
Purchase Agreement
[CONFIDENTIAL TREATMENT REQUESTED]
(1 Page)
<PAGE>
Annex 4.7 to the
to the Purchase and Assignment Agreement
TERMS AND CONDITIONS FOR COMMISSION
1. Under Art. 4.7 of the Purchase and Assignment Agreement, Buyer agrees to
pay Behringwerke, in addition to the Fixed Cash Purchase Price and the
Option Purchase Price, a yearly Commission on the sales of Guarantor's
and its affiliates' vaccine products listed on ANNEX 1 hereto for use in
Germany during the years 1997 through 2001, calculated as [CONFIDENTIAL
TREATMENT REQUESTED] of the excess of net sales over the following
forecast:
- 1997: DM [CONFIDENTIAL TREATMENT REQUESTED]
- 1998: DM [CONFIDENTIAL TREATMENT REQUESTED]
- 1999: DM [CONFIDENTIAL TREATMENT REQUESTED]
- 2000: DM [CONFIDENTIAL TREATMENT REQUESTED]
- 2001: DM [CONFIDENTIAL TREATMENT REQUESTED]
Such figures shall be adjusted for actual inflation on the basis of a
consumer price index (four-person-households average income) from
Closing Date to December 31 of each of the above-mentioned years.
2. Buyer shall submit to Behringwerke by March 31 of the years 1997 through
2002 an auditable calculation and documentation of the total sales of
Buyer's vaccine products in Germany.
3. The Commission shall be due and payable on March 31 of each respective
year. Payment shall be made in Deutsche Mark by wire transfer free of
cost to the account of Behringwerke listed in clause 4.4 of the Purchase
and Assignment Agreement in time to be received on the respective due
date. Late payments shall bear interest at discount rate plus three
basis points.
4. Behringwerke's experts (as designated by Behringwerke and reasonably
acceptable to Buyer) shall be entitled to audit, together with the
respective department of
<PAGE>
2
Buyer, any such calculations presented by Buyer, shall have reasonable
access to the business sites of Behring Vakzine GmbH & Co. or any
successor and to all books, records and other documents relating to such
calculation, and shall obtain from Buyer all information reasonably
requested. The persons performing such audit on Behringwerke's behalf
shall treat confidential any information that they had access to, shall
use such information solely for the purpose of confirming the amounts due
hereunder, and shall report to Behringwerke's management exclusively.
5. To the extent an audit pursuant to clause 3 above reveals any differences
from the calculation presented by Buyer, the balance shall be settled in
accordance with clause 3 within four weeks after the parties agreed on
such difference.
6. As used herein, "net sales" means the amount invoiced for sales to
unaffiliated third parties of Guarantor, less (i) discounts, rebates,
chargebacks and allowances, (ii) returns, credits, recalls and
withdrawals, (iii) freight, insurance and packaging, (iv) V.A.T. and
other excise taxes, duties and other governmental charges, all to the
extent any of these are applicable to such sales.
<PAGE>
Annex 1 of
Annex 4.7 of the Purchase Agreement
[CONFIDENTIAL TREATMENT REQUESTED]
(1 page)
<PAGE>
Annex 7.1.16
to the Purchase Agreement
[CONFIDENTIAL TREATMENT REQUESTED]
(1 page)
<PAGE>
Annex 7.1.18
to Purchase Agreement
[CONFIDENTIAL TREATMENT REQUESTED]
(1 page)
<PAGE>
Annex 7.1.19
to the Purchase Agreement
[CONFIDENTIAL TREATMENT REQUESTED]
(2 pages)
<PAGE>
ANNEX 8
to Purchase Agreement
Use of name:
- - Chiron Behring Biocine GmbH
- - Chiron Behring Biocine GmbH & Co. KG
Use of logo:
BEHRING
<PAGE>
ANNEX 11
to Purchase Agreement
HOECHST AKTIENGESELLSCHAFT
Chiron Corporation
4560 Horton Street
Emeryville, CA 94608-2916
USA February 6, 1996
Ladies and Gentlemen:
Referring to the Purchase and Assignment Agreement to be entered between Chiron
GmbH and Behringwerke Aktiengesellschaft relating to the human vaccine business
of Behringwerke Aktiengesellschaft we confirm the following:
1. For a period of five (5) years from the Closing Date of the aforementioned
Purchase and Assignment Agreement (the "Protected Period") Hoechst and
affiliated companies within the meaning of Section 18 of the German Stock
Corporation Law (Aktiengesetz) will refrain from developing, marketing,
producing, selling or otherwise distributing human prophylactic vaccines
against infectious diseases.
2. This obligation of non-competition shall be applicable worldwide, but for
the following:
Hoechst Ag owns a [Confidential Treatment Requested]. In addition, certain
Hoechst AG affiliates manufacturer and sell human vaccine products
[Confidential Treatment Requested]. Hoechst commits that none of these
aforementioned affiliates will [Confidential Treatment Requested].
3. Hoechst AG shall continue with VuCo GmbH & Co. the existing arrangements
between Behringwerke and Hoechst AG with respect to the distribution of
human vaccine products outside Germany at arm's length terms to be agreed
upon, for not less than [Confidential Treatment Requested].
<PAGE>
ANNEX 11
4. In the event that, within 5 years from the Closing Date, VuCo proposes to
have developed a human vaccine that is covered by an existing Hoechst AG
patent, VuCo shall have the right to obtain a license under such patent for
such product on commercially reasonable terms.
5. Hoechst hereby consents to clause 3.5 of the Contribution Agreement as it
relates to Hoechst patents.
Yours Sincerely,
HOECHST AKTIENGESELLSCHAFT
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED]
[Certain confidential information has been omitted from the Agreement and filed
separately with the Securities and Exchange Commission pursuant to a request by
Registrant for confidential treatment pursuant to Rule 24b-2. The omitted
confidential information has been identified by the following statement:
"CONFIDENTIAL TREATMENT REQUESTED".]
CLOSING AGREEMENT
by and among
Behringwerke Aktiengesellschaft
D-30501 Marburg
represented by its members of the Management Board,
Prof Dr. Dr. Uwe Bicker and Dr. Bernd Neuefeind
(hereinafter "Behringwerke")
- on the one side -
and
Chiron Corporation
4560 Horton Street, Emeryville, CA 94608-2916, U.S.A.
represented by its Chairman of the Board,
Dr. William J. Rutter
(hereinafter "Chiron")
and
31. CORSA Verwaltungsgesellschaft mbH
represented by power of attorney by
Dr. Dino Dina,
(hereinafter "31. CORSA")
- on the other side -
(Behringwerke, Chiron and 31. CORSA are hereinafter collectively referred to as
the "Parties" or, individually, as the "Party", as the context requires.)
<PAGE>
PREAMBLE
A. On February 17, 1996, the Parties entered into a Purchase and
Assignment Agreement (Notarized Deed A. Prot. 1996/20 of the notary public
Dr. Werner Wenger in Basle - hereinafter the "Purchase Agreement") with
respect to the transfer 49% of the interests in a newly organized limited
partnership which will continue to operate the human vaccine business of
Behringwerke under the name Chiron Behring GmbH & Co (presently registered
under the name Behring Vakzine GmbH & Co) and the transfer of a share in
the nominal value of DM 24,500 in Chiron Behring Biocine GmbH
Verwaltungsgesellschaft (which will be renamed into and referred to
herein- after as "Chiron Behring GmbH") being the general partner of Chiron
Behring GmbH & Co (hereinafter collectively the "Interests").
B. Under the Purchase Agreement, the effectiveness of the transfer of
the Interests requires the fulfillment of certain conditions. The Parties
now wish to clarify the status of and to modify such conditions.
C. The Parties also wish to amicably settle certain issues which have come
to their attention since the execution of the Purchase Agreement.
NOW, THEREFORE, the Parties agree as follows:
1. FULFILLMENT OF CONDITION
1.1 Behringwerke hereby declares that
(i) Chiron Behring GmbH & Co is holding all official
approvals for the operation of the Business (as defined in
the Purchase Agreement) as currently conducted pursuant to
the ARZNEIMITTELGESTZ, GENTECHNIKGESETZ, TIERSCHUTZGESETZ
and BUNDESSEUCHENGESETZ;
(ii) the Operating Lease Agreement between Behringwerke
and Chiron Behring GmbH & Co will terminate with effect as
of the Closing Date (as defined hereinafter);
(iii)the Contribution Date pursuant to the Contribution Agreement
(all as defined in the Purchase Agreement) has occurred on
April 1, 1996;
(iv) Behring Vakzine GmbH (formerly the Institut fur
Produkttest und Verbrauchsforschung GmbH) is no longer a
general partner of Chiron Behring GmbH & Co and Chiron
Behring GmbH is now the sole general partner;
<PAGE>
(vi) the management of Chiron Behring GmbH has agreed to
the split of one of the shares of Behringwerke in Chiron
Behring GmbH with a nominal value of DM 25,000 into two
shares with nominal values of DM 24,500 and DM 500,
respectively, and to the transfer of the DM 24,500 share to
31. CORSA.
1.2 Chiron hereby declares that the necessary merger control
approval for the implementation of the Purchase Agreement has
been granted.
1.3 Subject to the provisions of clause 6, the Parties
mutually waive the condition stated in clause 5.1.4 of the
Purchase Agreement, i.e., [CONFIDENTIAL TREATMENT REQUESTED]
During the interim period until the assignment of [CONFIDENTIAL
TREATMENT REQUESTED] is effected with or without amendments,
Behringwerke shall internally place Chiron Behring GmbH & Co as
it would be if such assignment had been effected as of the Closing
Date (as defined hereinafter).
2. PAYMENT OF THE PURCHASE PRICE
2.1 The Parties are in agreement that 31. CORSA shall pay the
purchase price for the Interests in the amount as agreed in
clause 4 of the Purchase Agreement (i.e., DM 171,813,430.40, of
which DM 313,430.40 represents 49% of the rent under the
Operating Lease Agreement) on July 1, 1996 to be received by,
Behringwerke by 11:00 h on such date on the following bank
account:
COMMERZBANK AG, FRANKFURT A.M.-HOCHST
ACCOUNT NO.: 251 57 57
BANK SORT CODE (BLZ): 500 400 00
Behringwerke hereby warrants that Chiron Behring GmbH & Co has
received prior to July 1, 1996 a rent under the Operating Lease
Agreement (as defined in the Purchase Agreement) for the months
of April through June in an amount of DM 639,653.88 (plus V.A.T.
if applicable). Behringwerke shall promptly deliver to 31 CORSA,
with a copy to Chiron, written evidence (bank statement) of such
receipt.
2.2 Upon receipt of the purchase price, Behringwerke shall
immediately deliver to 31 CORSA a receipt of the purchase price
received. Such receipt shall be forwarded first by telecopy and
then by overnight courier to the attention of Ms. Jessica Hoover
at Chiron, Emeryville.
<PAGE>
3. CLOSING DATE
Under the condition that Behringwerke has received the purchase price for
the Interests as agreed in clause 2 above, the transfer of the Interests
shall be effective as of July 1, 1996, 0:01 h (the "Closing Date").
4. GUARANTEE
In accordance with clause 14.3 of the Purchase Agreement Chiron agrees to
the following:
In the event that Chiron does not exercise the Chiron Call Option by March
31, 1998, and if at that time or any time thereafter the long term credit
rating of Chiron's senior debt securities falls below grade "A" of Standard
& Poor's rating or Moody's comparable rating, Chiron will provide a letter
of credit from a commercial bank, acceptable to Behringwerke, or other
credit support fully satisfactory to Behringwerke, in an amount sufficient
to satisfy 31. CORSA's obligation to pay the Option Purchase Price
(assuming Behringwerke exercise the Behring Put Option in March 2001).
The foregoing is deemed to satisfy in full Chiron's obligations under
clause 14.3 of the Purchase Agreement.
[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED]
6. PARTNERSHIP AGREEMENT
The Parties are in agreement that promptly hereinafter and with effect as
of the Closing Date, Behringwerke, 31. CORSA and Chiron Behring GmbH shall
enter into the Partnership Agreement as agreed in the Purchase Agreement.
The Parties shall promptly procure the necessary filings at the competent
commercial register with respect to the registration of 31. CORSA as a new
limited partner (Kommanditist) in Chiron Behring GmbH & Co.
7. CASH MANAGEMENT
Behringwerke hereby informs Chiron that Hoechst AG has agreed in the time
being and until further notice (which will not be given prior to September
30, 1996) to finance any negative cash flow of Chiron Behring GmbH & Co up
to an aggregate outstanding amount of DM 20,000,000. at an interest rate of
DM LIBOR plus 0. 125 % p.a. for credits with a mutually fixed term not
exceeding six months, and an interest rate equivalent to the then
applicable call money rate plus 0.125% p.a. for call money credits.
Details will be agreed upon for each individual credit in compliance with
the then applicable rules of "Konzeminterner Finanzausgleich" (Group
internal Borrowing and Lending) and/or "Tagesgeld-Aufnahme und Anlage"
(Group internal Call Money Arrangements) of Hoechst AG. Chiron hereby
unconditionally guarantees repayment of any such credit by Chiron Behring
GmbH & Co when due.
8. MISCELLANEOUS
8.1 Unless otherwise expressly stated herein, all terms of the
Purchase Agreement shall remain in force.
[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
IN WITNESS HEREOF, the Parties have executed this Closing Agreement in triple
originals by their respective, duly authorized Board Members.
BEHRINGWERKE AKTIENGESELLSCHAFT
Date: June 29, 1996
By:
/s/ Dr. Uwe Bicker
- -------------------------------------------------
(Prof. Dr. Dr. Uwe Bicker)
/s/ Bernd Neuefiend
- -------------------------------------------------
(Dr. Bernd Neuefeind)
CHIRON CORPORATION
Date: June 29, 1996
By:
/s/ Dr. William J. Rutter
- -------------------------------------------------
(Dr. William J. Rutter)
31. CORSA VERWALTUNGSGESELLSCHAFT MBH
Date: June 29, 1996
By:
/s/ Dr. Dino Dina
- -------------------------------------------------
(Dr. Dino Dina)
<PAGE>
June 29, 1996
[CONFIDENTIAL TREATMENT REQUESTED]
[Certain confidential information has been omitted from the Agreement and filed
separately with the Securities and Exchange Commission pursuant to a request by
Registrant for confidential treatment pursuant to Rule 24b-2. The omitted
confidential information has been identified by the following statement:
"CONFIDENTIAL TREATMENT REQUESTED".]
Behringwerke Aktiengesellschaft
D-30501 Marburg
Germany
Re: Closing Agreement dated June 29, 1996 between Chiron Corporation, 31 CORSA
and Behringwerke AG
Gentlemen:
As set forth in clause 1.3 of the Closing Agreement, Chiron Corporation and 31
CORSA have agreed to waive the condition stated in clause 5.1.4 of the Purchase
Agreement. Such waiver is conditioned upon the following agreement:
(a) Subject to paragraph (b) below, in the event that [CONFIDENTIAL TREATMENT
REQUESTED] Behringwerke shall fully indemnify Chiron Behring GmbH & Co for
any damage suffered. This damage shall be calculated on the basis of the
time period of [CONFIDENTIAL TREATMENT REQUESTED]
(b) The obligation of Behringwerke to indemnify Chiron Behring GmbH & Co under
paragraph (a) is limited to an amount equal to [CONFIDENTIAL TREATMENT
REQUESTED]
(c) In the event that the [CONFIDENTIAL TREATMENT REQUESTED] are not assigned to
Chiron Behring GmbH & Co by November 30, 1996 each party shall be entitled
to rescind the Closing, in which case Behringwerke shall pay back to 31.
CORSA any purchase price paid plus an interest of 5.125% p.a. and 31. CORSA
shall retransfer to Behringwerke the Interests. Any additional damages by
either party is excluded, other than for damages incurred as a result of a
breach by either party of their obligation under clause d.
<PAGE>
June 29, 1996
Behringwerke Aktiengesellschaft
(d) Subject to the foregoing, the Parties will use their best efforts to ensure
that the assignment [CONFIDENTIAL TREATMENT REQUESTED] occurs as soon as
possible and [CONFIDENTIAL TREATMENT REQUESTED].
If the foregoing accurately reflects your understanding of our agreement, please
sign a copy of this letter for our records.
Very truly yours,
CHIRON CORPORATION
By: /s/ William J. Rutter
--------------------------
William J. Rutter
Chairman
31. CORSA Verwaltungsgesellschaft mbH
By: /s/ Dino Dina
--------------------------
Dino Dina, pursuant to a power of attorney
Agreed and Accepted:
BEHRINGWERKE AKTIENGESELLSCHAFT
By: /s/ Dr. Dr. Uwe Bicker
--------------------------
Prof. Dr. Dr. Uwe Bicker
By: /s/ Dr. Bernd Neuefeind
--------------------------
Dr. Bernd Neuefeind
<PAGE>
Exhibit 10.87
[CONFIDENTIAL TREATMENT REQUESTED]
[Certain confidential information has been omitted from the Agreement and filed
separately with the Securities and Exchange Commission pursuant to a request by
Registrant for confidential treatment pursuant to Rule 24b-2. The omitted
confidential information has been identified by the following statement:
"CONFIDENTIAL TREATMENT REQUESTED".]
ROYALTY PROJECTS AGREEMENT
This Agreement is entered into as of January 4, 1995 by and between CIBA CORNING
DIAGNOSTICS CORP., a Delaware corporation having its principal place of business
at 63 North Street, Medfield, MA 02052 U.S.A. (hereinafter "CCD"), and CIBA-
GEIGY Limited, a Swiss corporation having its principal place of business at
Klybeckstrasse 141, CH-4002 Basel, Switzerland (hereinafter Ciba).
WHEREAS, Ciba's Corporate Research Units ("CRU") conduct research projects
determined to have strategic benefit to Ciba;
WHEREAS, CCD wishes to evaluate such projects in order to identify whether they
have strategic potential for its own business in Diagnostics (as such term is
defined in Article 1.3 of this Agreement) and to obtain rights to exploit
results of such projects against compensation to Ciba in the form of royalties
and/or fees;
WHEREAS, Ciba is willing to make available results of certain projects for
exploitation in the field of Diagnostics by CCD against compensation in the form
of royalties and/or fees, under certain general conditions and project-specific
agreements, such projects being referred to herein as "Royalty Projects";
NOW, THEREFORE, in consideration of the premises and covenants, terms and
conditions set forth herein, Ciba and CCD agree as follows:
1. SCOPE OF THE AGREEMENT; DEFINITIONS
1.1 This Agreement governs the general procedures and terms to be applied
for Royalty Projects to be conducted by CRU for use by CCD in
Diagnostics upon mutual agreement by the two parties from time to time.
1.2 Projects started prior to January 4, 1995 and agreed by the parties
during the Steering Committee Meeting of April 27, 1995 to be continued
shall be considered Royalty Projects. These projects and their
agreed-upon specific terms are described in Attachments A and B to this
<PAGE>
Agreement. Costs incurred by Ciba for such Royalty Projects prior to
January 4, 1995 shall be considered as having been remunerated by the
acquisition of CCD by Chiron Corporation.
1.3 As used in this Agreement
(a) "Affiliate(s)" shall mean a corporation or any other business
entity, in whatever country organized, which, directly or
indirectly, controls, is controlled by or is under common control
with Ciba or CCD, as the case may be. For this purpose, control
shall mean the ownership of 50% or more of the issued share
capital or the legal power to direct or cause the direction of the
general management and policies of the party in question. In the
case of CCD, "Affiliates" shall also include Ciba Corning
Diagnostics de Mexico S.A., so long as CCD continues to own at
least 49% of the voting stock of that corporation.
(b) "CCD License Option" shall have the meaning specified in Article
4.4 hereof.
(c) "Designated Country" means Germany, France, Italy, the United
Kingdom of Great Britain and Northern Ireland, Japan or the
United States of America.
(d) "Diagnostics" shall mean the development, manufacture, use and
sale of processes, materials, supplies and equipment for the
diagnosis of human and veterinary health.
(e) "License Maintenance Fee" means the fee payable by CCD in
accordance with Article 5.6.
(f) "Licensed Patents" means any and all letters patent, by whatever
country issued, now or hereafter issued to Ciba and licensed to
CCD in accordance with the provisions of this Agreement.
2
<PAGE>
(g) "Net Sales" shall mean the gross sales of Royalty Products by
CCD, its Affiliates or sublicensees to third parties, less
trade, cash or volume discounts, returns and allowances,
charges for freight handling and transportation, sales and use
taxes and other similar taxes incurred, and royalties payable
by CCD or such Affiliate or sublicensee to third parties with
respect to such products, as determined in accordance with
CCD's standard accounting methods and recognized accounting
principles. Where a Royalty Product is sold in combination
with a product which is not a Royalty Product, Net Sales shall
include only the revenues allocable to the Royalty Product as
determined in accordance with CCD's standard accounting
methods and recognized accounting principles. Where a product
consists of a combination of different groups of components,
each used for the measurement of a different analyte, the
components for measurement of each particular analyte shall be
considered as a separate product in determining whether such
components constitute a Royalty Product, and the revenue
attributable to such a group of components shall be determined
by dividing the revenue for the entire product by the number
of different analytes which can be measured thereby. Where a
Royalty Product is used by CCD or one of its Affiliates or
sublicensees to provide a service to a third party, the Net
Sales attributable to such Royalty Product shall be determined
based on the amount that would have been charged for sale of a
similar volume of such Royalty Product to a non-affiliated
third party in an arms'-length transaction.
(h) "Royalty Product" shall mean either a "Patent-Protected Royalty
Product" or an "Unprotected Royalty Product."
"Patent-Protected Royalty Product" shall mean a product the
sale or use of which is covered by a valid claim of an
unexpired Licensed Patent. "Unprotected Royalty Product"
means a product the sale or use of which would be covered by a
valid claim of an
3
<PAGE>
unexpired Licensed Patent if such product were sold or used in a
Designated Country, but which is not covered by a valid
claim of a Licensed Patent in the country in which such
product is actually sold or in the country in which such
product is actually used.
(i) "Strategic Exit Fee" shall mean, as to any Royalty Project, the
amount specified in Attachment B hereto as the fee to be paid
to Ciba by CCD if CCD, after exercising the CCD License Option
with respect to such Royalty Project, abandons development of
the technology resulting from such Royalty Project prior to
commercial launch of a product incorporating such technology,
for reasons other than lack of technical success.
(j) "Technical Exit Fee" shall mean, as to any Royalty Project, the
amount specified in Attachment B hereto as the fee to be
paid to Ciba by CCD if CCD, after exercising the CCD License
Option with respect to such Royalty Project, abandons
development of the technology resulting from such Royalty
Project prior to commercial launch of a product incorporating
such technology, due to lack of technical success in such
development.
(k) "Technology Delivery Date" shall have the meaning specified in
Article 5.1 hereof.
(l) "Technology Transfer Criteria" shall mean, as to any Royalty
Project, the technical criteria specified in Attachment A
hereto to be satisfied through Ciba's research program prior
to transfer of the technology resulting from such Royalty
Project to CCD for further development into commercial
products.
(m) "Technology Transfer Date" shall mean, as to any Royalty
Project, the date established as such pursuant to Article 5.2
hereof.
4
<PAGE>
2. IDENTIFICATION OF ROYALTY PROJECTS
2.1 Ciba shall inform CCD periodically (at least once a year) in the form
of an overview (in writing) about CRU projects and technology possibly
of strategic interest to CCD.
2.2 CCD likewise shall inform Ciba periodically (at least once a year,
preferably during the project management meetings provided for in
Article 3.2 hereof) in the form of an overview (in writing) about its
projects, technology, and technical problems which CCD considers
possibly relevant for CRU projects and of interest to Ciba.
2.3 In order to understand each other's positions, the parties shall meet
to discuss the projects contained in the overviews and to exchange
opinions on technology of mutual interest. In preparation for such
meetings, documentation and data in sufficient detail shall be
exchanged at least three weeks before the meetings. Minutes,
including recommendations regarding Royalty Projects, shall be written
and approved by the parties within three weeks after the meetings.
2.4 If a CRU project is of interest to CCD and Ciba is willing to consider
CCD's objectives to be included into the framework of such project,
the parties shall negotiate in good faith with respect to the terms on
which such project could become a Royalty Project under this
Agreement. In such cases, the parties shall endeavor to agree within
three months on the specific details for such project to be included
in Attachments A and B. The specific details shall include: research
objectives, scope of applications, expected Technology Transfer Date,
present status and technical milestones, project management structure,
Technology Transfer Criteria, intellectual property of each party to
be made available for use in the Royalty Project and third party
intellectual property to be acquired (to the extent need for such
intellectual property is known to either part), amounts of the
Strategic Exit Fee and the Technical Exit Fee and the royalty rates
applicable to products resulting from such Royalty Project.
5
<PAGE>
2.5 In case Ciba is not willing to consider a project to become a Royalty
Project, CCD may propose such project to become a Project under the
CRU Research-Funding Agreement of even date herewith.
2.6 Both parties shall inform each other in writing, as promptly as may be
reasonably practicable, on projects and technologies of potential
mutual interest outside of the periodic information procedure provided
for in Articles 2.1 through 2.3, in order not to lose time for the
exploitation of the potential of such projects and technologies.
3. PROJECT MANAGEMENT
3.1 Ciba shall perform its research work for Royalty Projects in such a
manner as to give due consideration to CCD's interests.
3.2 Ciba shall inform CCD periodically (at least twice a year) during
project management meetings on the progress and status of the Royalty
Projects. Ciba shall also inform CCD in writing, without delay, about
changes needed in Royalty Projects which may be necessary due to
scientific reasons or other unexpected circumstances. The parties
shall discuss and agree on any changes needed in Attachment A during
the course of the Royalty Projects.
3.3 Ciba shall inform CCD in writing as promptly as is practicable about
contemplated strategic redirection of Ciba's interest in such projects
which may have an impact on CCD's interest in having a project remain
a Royalty Project as well as about the contemplated termination of a
Royalty Project. Work for CCD's purposes under a Royalty Project
shall continue, however, for at least six (6) months after Ciba has
decided and informed CCD in writing of such decision to redirect or
terminate such project.
3.4 In cases where a Royalty Project has been redirected by Ciba, CCD
shall have the option either to terminate such a project as a Royalty
Project or to propose amendments to Attachments A and B for such
6
<PAGE>
redirected project to continue as a Royalty Project. The parties
shall negotiate in good faith with respect to any such proposed
amendments and shall endeavor to reach agreement thereon within three
(3) months. If the parties are unable to reach agreement on such
amendments, such project shall terminate as a Royalty Project at the
end of the six-month period specified in Article 3.3.
3.5 CCD shall inform Ciba in writing as promptly as is practicable if CCD
wishes at any time to terminate a Royalty Project.
3.6 CCD may request a re-direction of a Royalty Project. In such cases
the parties will negotiate in good faith revised Attachments A and B
with respect to such Royalty Project. Unless new terms shall be
negotiated within three (3) months, the Royalty Project in question
shall be terminated.
3.7 In case Ciba's work on a Royalty Project is terminated before the
Technology Transfer Date, CCD - at its option - may request to acquire
rights to the technology and know-how so far developed by Ciba for use
in Diagnostics. In such a case the parties will negotiate in good
faith the terms for such grant of rights, taking into account (a) the
original terms of this Agreement applicable to such Royalty Project
upon completion by Ciba of all work necessary to satisfy the
Technology Transfer Criteria and (b) an appropriate reduction of CCD's
cost to take into account the stage of completion of such Royalty
Project at the time of termination of Ciba's work and the work
remaining to satisfy the Technology Transfer Criteria. CCD may
thereafter complete the project by itself or propose a project under
the CRU Research Funding Agreement. Ciba shall not unreasonably refuse
to continue technical support for a terminated Royalty Project on a
funded basis under the CRU Research Funding Agreement for such period
as may be reasonably necessary for CCD to develop internal resources
to take over such work.
7
<PAGE>
4. TREATMENT OF INTELLECTUAL PROPERTY RIGHTS
4.1 Any and all intellectual property, including, but not limited to,
patents, trade secrets and copyrights, that has been, is or will be
generated, developed or created by Ciba within the scope of Royalty
Projects shall be the property of Ciba, provided that any invention
made jointly by one or more employees of Ciba and one or more
employees of CCD shall be the joint property of Ciba and CCD.
4.2 Subject to any licenses granted under Article 3.7 or Article 4.4, Ciba
shall be free to exploit any and all intellectual property as
described under Article 4.1 for its own businesses.
4.3 Intellectual property rights, whether protected by patent or not, that
are now or hereafter jointly owned by CCD and Ciba shall be freely
used by either co-owner, unless the parties hereafter agree that one
party's rights to a specified invention shall be exclusive in a
specified field or fields. Royalties and license fees received by
either party from the licensing of jointly-owned patents to third
parties shall be shared equally between the parties.
4.4 Ciba grants CCD an option for a license (the "CCD License Option") to
all Ciba intellectual property, whether patented or not, which shall
be granted for exclusive worldwide use (unless a non-exclusive license
is agreed to at the start of such Royalty Project), with the right to
grant sublicenses, in Diagnostics, within the scope of each Royalty
Project set forth in Attachment A, including without limitation the
patents and patent applications described in Attachment A. For each
Royalty Project the terms of such license shall be as set, forth in
Attachment B and the other provisions of this Agreement. The CCD
License Option for each Royalty Project shall remain valid for twelve
(12) months after the Technology Transfer Date for such Royalty
Project.
4.5 If CCD intends to distribute a Royalty Product for veterinary health
through a third party, Ciba shall have the right of first negotiation
to
8
<PAGE>
distribute such product, for a period of six months after receipt of
notice from CCD of CCD's wish to negotiate a distribution agreement
for such product.
4.6 In case CCD does not exercise the CCD License Option with respect to a
Royalty Project, Ciba shall be free to exploit its intellectual
property resulting from such Royalty Project for commercialization in
Diagnostics. In such a case Ciba will remunerate CCD out of income
from the commercialization of the Royalty Project in Diagnostics for
relevant contributions made by CCD in guiding the direction of Ciba's
research for the Royalty Project. The parties will negotiate in good
faith such remuneration prior to commercialization by Ciba or their
sublicensees. In addition, if after the Technology Delivery Date with
respect to a Royalty Project, CCD invents any improvements to the Ciba
technology resulting from such Royalty Project, upon CCD's failure to
exercise the CCD License Option CCD shall grant Ciba a non-exclusive
license to practice such CCD inventions, with the right to grant
sublicenses in connection with commercialization of the Ciba
technology by a third party. If Ciba or an affiliate commercializes
the technology resulting from such Royalty Project and makes use of
the CCD inventions, CCD shall be paid a reasonable royalty to be
negotiated by the parties in good faith. If Ciba licenses its
technology resulting from such Royalty Project together with CCD
inventions to a third party upon terms more favorable to Ciba than the
terms set forth in Attachment B with respect to such Royalty Project,
Ciba's revenue resulting from the difference between such improved
terms and the terms as set forth in Attachment B shall be shared
equally between Ciba and CCD. Except as expressly provided in this
Article 4.6, nothing herein shall require CCD to grant to Ciba a
license under any CCD intellectual property in the field of
Diagnostics.
4.7 Ciba shall have the exclusive right and obligation:
(a) to file at its cost and expense applications for letters patent
on any patentable inventions made by Ciba in carrying out Royalty
9
<PAGE>
Projects, including their use in Diagnostics, in the United
States of America and in each other PCT country in which CCD has
an Affiliate, distributor or sales representative. Ciba shall
consult with CCD regarding additional countries in which such
patent applications should be filed. Should CCD wish to include
additional countries where Ciba does not intend to file, CCD
shall have the option to have assigned the patent rights in such
countries and to file at its cost and expense patent applications
in such countries.
(b) to prosecute its pending and new patent applications and to
respond to oppositions filed by third parties against the grant
of letters patent for such applications.
(c) to maintain in force its letters patent by duly filing all
necessary papers and paying the fees required by the patent
laws of the particular country in which such letters patent
were granted.
Ciba shall notify CCD in a timely manner of any decision to abandon a
pending patent application or an issued patent licensed to CCD
hereunder or for which CCD has an option for a license hereunder.
Thereafter, CCD shall have the option to have assigned the respective
patent rights and, at its cost and expense, to continue to prosecute
patent applications or to keep the issued patents in force. Ciba
shall have a non-exclusive, royalty-free license, with sublicensing
rights, in fields of use other than Diagnostics, under all patents
filed by or assigned to CCD hereunder.
4.8 In cases where Ciba's intellectual property within the scope of a
Royalty Project is licensed from a third party, Ciba shall undertake
commercially reasonable efforts - as within its usual conduct of
business - to secure sublicensing rights to CCD for use of such
intellectual property in Diagnostics or to assist CCD in obtaining a
direct license to such intellectual property for use in Diagnostics.
10
<PAGE>
4.9 It is understood that within the scope of a Royalty Project, Ciba
shall make available to CCD for use in Diagnostics intellectual
property, whether patented or not, which was generated or acquired by
Ciba's CRU whether before or after the start of this Agreement or of
any Royalty Project, provided that if Ciba is prohibited from making
any such intellectual property available to CCD by any agreement with
a third party entered into before the identification of such
intellectual property as being needed by CCD hereunder, Ciba shall be
required only to use commercially reasonable efforts to obtain the
consent of such third party to the grant of a license to CCD.
Intellectual property developed or acquired by a division or
functional unit of Ciba independently of Ciba's CRU and without use of
the results of any Royalty Project ("Ciba Non-CRU Intellectual
Property") after January 4, 1995 may not be available for use by CCD
hereunder if the management of the division or functional unit which
developed or acquired such intellectual property determines that the
financial or strategic business interests of such division or
functional unit will be materially harmed by the inclusion of such
intellectual property in the license hereunder. Ciba represents that
the management of CRU is not aware at the date hereof of any Ciba
Non-CRU Intellectual Property which is likely to be needed by CCD in
connection with a Royalty Project, and Ciba agrees to notify CCD
within thirty (30) days of the management of CRU becoming aware of any
Ciba Non-CRU Intellectual Property that is relevant to the
commercialization in Diagnostics of the results of a Royalty Project.
The royalties specified in Attachment B hereto shall be the sole
compensation to Ciba for the use by CCD of any and all Ciba
intellectual property in connection with products resulting from a
Royalty Project and shall be in lieu of, and not in addition to, any
royalties payable under the 1985 Research Agreement.
4.10 CCD shall grant Ciba a first right of negotiation, prior to CCD
negotiating a license with any third party other than an Affiliate, to
obtain a worldwide non-exclusive license, with no right to sublicense,
for use outside Diagnostics of patented and non-patented intellectual
11
<PAGE>
property related to Royalty Projects contributed or generated by CCD
prior to or during the time that Ciba is actively involved in a
Royalty Project and needed by Ciba in order to develop, make, have
made, use and sell non-Diagnostics products incorporating Ciba's
technology resulting from such Royalty Project, against an adequate
royalty rate to be negotiated in good faith, provided that if CCD is
prohibited from making any such intellectual property available to
Ciba by any agreement with a third party entered into before the
identification of such intellectual property as being needed by Ciba
hereunder, CCD shall be required only to use commercially reasonable
efforts to obtain the consent of such third party to the grant of a
license to Ciba.
4.11 In cases where CCD's intellectual property needed by Ciba for use in
commercializing non-Diagnostics products resulting from Royalty
Projects is licensed from a third party, CCD shall undertake
commercially reasonable efforts - as within its usual conduct of
business - to secure sublicensing rights to Ciba for use of such
intellectual property outside Diagnostics or to assist Ciba in
obtaining a direct license to such intellectual property for use
outside Diagnostics.
5. TECHNOLOGY TRANSFER AND COMMERCIALIZATION OF THE TECHNOLOGY
5.1 When Ciba believes that the Technology Transfer Criteria have been met
for any Royalty Project, Ciba shall so advise CCD in writing, and
shall deliver to CCD with such notice all relevant documentation
giving evidence of such fact, together with all information and
materials resulting from such Royalty Project which are necessary for
CCD to evaluate and further develop the technology resulting from such
Royalty Project, the date of such delivery being referred to herein as
the Technology Delivery Date.
5.2 At the latest within two (2) months after the Technology Delivery
Date, CCD shall notify Ciba in writing whether or not CCD agrees that
the Technology Transfer Criteria are met. In case CCD is of the
opinion that the Technology Transfer Criteria are not met, such notice
shall be
12
<PAGE>
accompanied by CCD's statement in writing on the rationale for its
opinion and its position regarding whether the Royalty Project should
be continued or terminated. If CCD agrees that the Technology
Transfer Criteria have been met, the date of CCD's notice shall be the
Technology Transfer Date.
5.3 If CCD is of the opinion that the Technology Transfer Criteria with
respect to a Royalty Project have not been met, Ciba at its option may
either agree to continue the research phase (in which case the parties
shall agree on the scope of the additional research work needed and
the provisions of Articles 5.1 and 5.2 shall be applicable upon
completion thereof) or inform CCD in writing that Ciba will terminate
the Royalty Project (in which case Article 3.7 shall be applicable).
5.4 Within one year from the Technology Transfer Date with respect to a
Royalty Project, CCD shall exercise the CCD License Option by written
notice to Ciba. If CCD does not so exercise the CCD License Option
for a Royalty Project within such period, CCD shall have no further
rights under this Agreement with respect to the Ciba intellectual
property developed in the course of such Royalty Project.
5.5 From and after the exercise of the CCD License Option with respect to
a Royalty Project, CCD shall report yearly to Ciba on the progress of
CCD's development program with respect to the technology resulting
from such Royalty Project. At the time of exercise of the CCD License
Option, CCD shall notify Ciba of the planned date for commercial
launch of the product or products to be developed. At the conclusion
of Stage II of the development plan, as defined in CCD's internal
procedure designated the "Innovation Process" as in effect on the date
hereof and which typically should occur within twenty-four months
after the Technology Transfer Date, CCD shall notify Ciba in writing
of any change in the planned commercial launch date. Thereafter, the
planned commercial launch date may be revised as reasonably necessary
due to technical difficulty in the development program.
13
<PAGE>
5.6 If CCD fails to launch a commercial product using technology resulting
from a Royalty Project by the planned launch date notified to Ciba at
the end of Stage II of CCD's, development plan, as revised in
accordance with the provisions of Article 5.5, CCD shall pay to Ciba,
on each anniversary of such planned launch date until the actual
commercial launch, the License Maintenance Fee specified in Attachment
B with respect to such Royalty Project. Such License Maintenance Fee
shall be fully creditable against royalties thereafter becoming due
with respect to Royalty Products resulting from such Royalty Project,
provided that such credit shall not be applied to more than fifty
percent (50%) of any installment of such royalties.
5.7 If, after CCD has exercised the CCD License Option with respect to a
Royalty Project, CCD ceases to pursue development of a commercial
product using the technology resulting from such Royalty Project, CCD
shall pay to Ciba (a) if such cessation is the result of a lack of
technical success in development, the Technical Exit Fee specified in
Attachment B for such Royalty Project, or (b) if such cessation is for
any other reason, the Strategic Exit Fee specified in Attachment B for
such Royalty Project, and in either case CCD's license with respect to
the technology resulting from such Royalty Project shall continue. If
at any time CCD or a CCD Affiliate or sublicensee launches a
commercial product using technology resulting from a Royalty Project
with respect to which a Strategic Exit Fee or Technical Exit Fee has
been paid, such fee shall be refunded.
5.8 Notwithstanding the provisions of Article 5.7, if in connection with
any Royalty Project, Ciba has not obtained patent protection in a
Designated Country for the products under development by CCD, or if
CCD has been unable to obtain a license to necessary third party
technology on commercially reasonable terms, or if Ciba has been
unable to obtain a consent of a third party required to license
necessary Ciba technology to CCD or a consent of a Ciba division's or
functional unit's management to license Ciba Non-CRU Intellectual
Property to
14
<PAGE>
CCD, no Strategic Exit Fee or Technical Exit Fee shall be payable by
CCD in the event of cessation of its development program.
6. PAYMENT OF ROYALTIES
6.1 CCD shall pay to Ciba a royalty on the Net Sales of Royalty Products
sold to third parties by CCD and its Affiliates and sublicensees or
used by CCD and its Affiliates and sublicensees in providing services
to third parties. The royalty rate shall be agreed upon by the
parties for each specific Royalty Project before its initiation in
accordance with Article 2.4 and shall for Unprotected Royalty Products
be fifty percent (50%) of the rate agreed upon for Patent-Protected
Royalty Products. If so agreed by the parties at the start of a
Royalty Project, for specific Royalty Projects, CCD shall have a
non-exclusive license, with the right to grant sublicenses, at a lower
royalty rate than would apply to an exclusive license, such lower rate
to be specified in the relevant Attachment B.
6.2 The royalties agreed upon under this Agreement for each Royalty
Project shall be payable in each country as follows:
(a) with respect to sales in each country with patent protection, for
the duration of the relevant patent(s), and
(b) with respect to sales in any country of the world without patent
protection, for a duration of seven (7) years from the day of the
first commercial introduction of any Unprotected Royalty Product
resulting from such Royalty Project.
6.3 After the first commercial sale of a Royalty Product resulting from a
Royalty Project, CCD shall deliver to Ciba, within sixty (60) days
after the end of each of CCD's fiscal half-years, a written statement
of the amount of royalties due hereunder for such period, by product,
and shall make payment of such royalties in United States Dollars. If
any amount used in the calculation of royalties is denominated in a
currency
15
<PAGE>
other than United States Dollars, such amount shall be translated into
United States Dollars in accordance with a method generally recognized
and consistently used by CCD in the preparation of its audited
financial statements. If governmental regulations prevent remittance
from a foreign country with respect to sales made in that country, the
obligation under this Agreement to pay royalties in respect of sales
in that country shall be suspended (but royalties shall continue to
accrue) until such remittances are possible, and Ciba shall have the
right, upon giving notice to CCD, to receive payment in that country
in the local currency.
6.4 Ciba shall have the right to have an independent certified public
accountant, to which CCD has no reasonable objection, inspect during
ordinary business hours relevant books and records of account of CCD,
its Affiliates and sublicensees to determine whether appropriate
accounting and payment have been made to Ciba, such inspection to be
made within one year after the end of the fiscal year to which such
books and records relate. Said independent certified public
accountant shall treat as confidential all information received in
connection with such inspection, and shall disclose to Ciba only
whether there has been a royalty underpayment and, if so, the amount
thereof. The fees and expenses of such accountant performing such
verification shall be borne by Ciba, unless such audit shows an
underpayment of seven and one-half percent (7 1/2%) or more. In the
case of any sublicense by CCD to any of its Affiliates or third
parties, CCD shall be responsible to Ciba for the adherence by such
Affiliates and sublicensees to the same obligations as those that
apply to CCD under this Agreement. CCD shall keep Ciba informed as to
the identity of each Affiliate and third party so sublicensed.
6.5 In case new applications in Diagnostics of the technology arising from
a Royalty Project become possible, which applications could not be
identified at the initiation of such Royalty Projects, the parties
will agree in good faith on the royalty rates for such applications.
16
<PAGE>
7. LIABILITY
CCD shall hold Ciba and its Affiliates and their officers and employees
harmless from and against any and all liability, costs, assessments, fines,
claims, actions, damages and expenses (including attorney's fees and costs
of investigation), including without limitation all product liability
claims and damages, arising in relation to the development, manufacture,
sublicense, use or sale by CCD of products incorporating the technology
resulting from a Royalty Project for use in Diagnostics, provided that
nothing herein shall require CCD to indemnify any party against such
liability, claims, etc., arising out of the gross negligence or willful
misconduct of such party, and provided, further, that any party seeking
indemnification hereunder shall promptly notify CCD of any claim for which
indemnification may be sought, shall permit CCD to assume the defense of
such claim with counsel of CCD's choice and shall cooperate as reasonably
requested by CCD in such defense.
8. INFRINGEMENT OF PATENT RIGHTS OF THIRD PARTIES
8.1 Ciba makes no representation or warranty that the practice of the
technology or manufacture, sale or use of the products resulting from
the Royalty Projects in Diagnostics, whether patented or not, does not
or will not infringe the rights of any third party.
8.2 In the event that a third party shall assert that the practice of any
of the technology or sale or use of any of the products resulting from
a Royalty Project for use in Diagnostics infringes any right of such
third party, the party having the knowledge thereof shall forthwith
give notice to the other. CCD shall have the exclusive right to
defend or otherwise dispose of such claim, provided that CCD shall
consult with Ciba regarding such defense or disposition. CCD shall be
entitled to offset fifty (50) percent of all reasonable defense costs
and all reasonable amounts paid in settlement of such claim, including
license fees and royalties under an appropriate license agreement
entered into with the third party in connection with such settlement,
or paid as damages
17
<PAGE>
for which CCD is held liable, against future royalties payable to Ciba
under this Agreement.
8.3 The License Maintenance Fees provided for in Article 5.6 hereof shall
not be payable with respect to any Royalty Project during any period
when CCD is prevented from practicing the technology arising from such
Royalty Project by reason of a claimed infringement of the rights of a
third party, and the due date of the first License Maintenance Fee
with respect to any Royalty Project shall be deferred to the extent of
any delay in CCD's product development plans arising from such claimed
infringement. If a claim of infringement affects only some of the
applications of such technology, the parties hereto shall negotiate in
good faith with respect to an appropriate reduction in the amount of
the License Maintenance Fee. If CCD abandons the development of the
technology arising out of a Royalty Project because of inability to
obtain a license under third party rights necessary to the success of
such development, no Strategic Exit Fee or Technical Exit Fee shall be
payable to Ciba as a result of such abandonment.
9. INFRINGEMENT OF PATENT RIGHTS BY THIRD PARTIES
In the event either party becomes aware that a third party is infringing
any patented intellectual property related to technology or products
resulting from a Royalty Project for use in Diagnostics, the parties shall
confer as to the manner in which they will proceed with respect to such
infringement. Ciba shall have the exclusive right to commence and
prosecute an action for patent infringement against such infringing party
(provided that Ciba shall consult with CCD with respect to such
commencement and prosecution), except that CCD shall have the right to
commence and prosecute a counterclaim in any suit defended by CCD pursuant
to Article 8 hereof (provided that CCD shall consult with Ciba with respect
to such commencement and prosecution). If Ciba undertakes such action or
CCD asserts such counterclaim, any damages recovered first shall be applied
to reimburse such party all expenses of such action not otherwise
reimbursed and next shall be paid to Ciba and CCD in proportion to
18
<PAGE>
their actual damages upon which such recovery was based. If Ciba fails to
commence action to prevent such infringement within ninety (90) days after
learning of the facts constituting such infringement, or if Ciba agrees to
settle any such action on a basis which would allow such infringement to
continue, then CCD shall cease to be obligated to pay royalties in respect
of any product or service incorporating technology or products resulting
from a Royalty Project until such infringement shall have ceased.
10. CONFIDENTIALITY
10.1 Ciba and CCD agree that they will each treat as strictly confidential
any and all proprietary information and data disclosed by the other
party in connection with the subject matter of this Agreement or
resulting from their activities hereunder (the "Information") and they
will not use such Information or disclose such Information to any
third party without the prior written consent of the other party,
except as may be required or permitted in the performance of this
Agreement or by applicable law.
10.2 Each party agrees that it will take all reasonable precautions to
ensure that it or any of its employees receiving such Information
disclosed pursuant to this Agreement will maintain the confidentiality
thereof.
10.3 Both parties agree that Information may be disclosed either orally or
in writing. When disclosed in writing, Information will be
identified, labelled and stamped as confidential. When disclosed
orally, such Information will first be identified as confidential at
the time of oral disclosure, with subsequent confirmation in writing
within thirty (30) days after such disclosure.
10.4 It is agreed, however, that such Information:
(a) which at the time of disclosure is published by a third party or
is otherwise in the public domain;
19
<PAGE>
(b) which after disclosure becomes part of the public domain
otherwise than through a breach of this Agreement by the receiving
party;
(c) which was known to the receiving party prior to receipt from the
disclosing party, provided that such prior knowledge can be
adequately substantiated by documentary evidence antedating the
disclosure by the other party;
(d) which is disclosed to the receiving party by a third party (other
than employees or agents of either party) who, in making such
Information available to the receiving party, is not in violation
of any obligation of confidentiality to the disclosing party
under this Agreement;
(e) which is shown by competent written evidence to be independently
developed by the receiving party; or
(f) which the receiving party is required to divulge either by a
court of law or in order to comply with any applicable law or
regulation (after providing the disclosing party with reasonable
notice of such requirement to divulge and with an opportunity to
obtain a protective order),
shall not be subject to the provisions of this Agreement.
10.5 Ciba recognizes the legitimate interest of CCD to publish its
Information in the field of Diagnostics. On the other hand, CCD
recognizes Ciba's interest that publications be made and lectures be
given only to the extent that it has reasonably safeguarded the
Information proprietary to Ciba through patent protection or otherwise
so that third parties cannot make commercial and/or industrial use of
Ciba's findings. For this purpose, CCD shall ensure that Ciba shall
have the opportunity to comment in advance on any publication or oral
presentation in public including disclosure of any Information of Ciba
relating to technology/products resulting from a Royalty Project and
20
<PAGE>
that no such publication or presentation shall be made by CCD without
Ciba's prior written consent. Ciba shall not unreasonably withhold or
delay its consent to such publication or presentation. CCD shall
submit to Ciba sixty (60) days in advance its request for such
publication or presentation.
11. MATERIAL TRANSFER
From time to time in connection with the activities contemplated by this
Agreement, each party may transfer to the other samples of proprietary
materials developed by the providing party. Except as otherwise expressly
provided herein or in any applicable license or supply agreement between
the parties, such materials and any materials derived therefrom a) shall
remain the property of the providing party, b) shall be used only for
purposes specified at the time such materials are provided, c) shall not be
transferred to any third party without the consent of the party by whom
such materials were provided, and d) shall be destroyed or returned to the
providing party upon request by the providing party. Unless otherwise
agreed in writing with respect to particular materials, the providing party
shall have a non-exclusive, royalty-free license to any inventions made by
the other party through use of the providing party's proprietary materials,
subject to the provisions of this Agreement.
12. TERM OF AGREEMENT
12.1 Subject to the provisions of Article 3, each party shall have the
right to terminate this Agreement upon six (6) months prior written
notice.
12.2 In the event of a termination of this Agreement, all licenses, options
and rights of negotiation granted hereunder with respect to Royalty
Projects agreed upon during the term hereof shall continue upon and
subject to the terms of this Agreement.
21
<PAGE>
13. LIMITATION OF ASSIGNMENT
This Agreement is personal in nature and neither of the parties shall,
without the consent of the other, assign or transfer its rights or
obligations hereunder to another company or person, except as herein
expressly provided or permitted, except that (a) either party may transfer
all or any portion of its rights and obligations to any of its Affiliates
which shall agree to be bound by the provisions hereof relating to the
assigned rights or obligations, in which event the assigning party shall
continue to be responsible for the performance by such Affiliate of its
obligations hereunder, and (b) CCD's rights hereunder with respect to
Royalty Projects which have been terminated or for which Ciba has proposed
that the Technology Transfer Criteria have been satisfied shall be
assignable to a successor to substantially the whole of one of its lines of
business. In the event that Ciba wishes to transfer the responsibility for
conducting the research phase of a Royalty Project to one of its
Affiliates, Ciba will first consult with CCD regarding the possible impact
of such transfer on the timely completion of the Royalty Project. If CCD
believes that CCD itself would be better able to complete such Royalty
Project than the Ciba Affiliate to whom Ciba proposes to transfer the
Project, Ciba will permit CCD to take over completion of the Royalty
Project, and the parties will negotiate in good faith with respect to the
terms on which Ciba will transfer to CCD the rights in Diagnostics to the
work already completed by Ciba, in accordance with the provisions of
Article 3.7. Subject to the foregoing provisions of this Section, this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assignees.
14. ENTIRE AGREEMENT; MODIFICATION AND WAIVER
This Agreement is the entire agreement between the parties with respect to
the subject matter hereof and supersedes any prior negotiations and
agreements, provided that all licenses granted by either party to the other
under the 1985 Research Agreement remain in effect. This Agreement may not
be modified or amended in any way except by mutual written agreement of the
parties. The failure of either party to enforce any provision hereof, or
any right hereunder, shall not be construed as a waiver of such provision
or right.
22
<PAGE>
15. GOVERNING LAW; JURISDICTION
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware applicable to contracts executed and to be
fully performed in that State. All actions and proceedings arising out of
or relating to this Agreement shall be brought by the parties and heard and
determined only in a Delaware state court or a federal court sitting in
that State and the parties hereto consent to jurisdiction before and waive
any objections to the jurisdiction of any such court.
16. WAIVER OF JURY TRIAL
Each of the parties of this agreement hereby irrevocably waives all right
to trial by jury in any action, proceeding or counterclaim (whether based
on contract, tort, or otherwise) arising out of or relating to this
Agreement or the actions of any of them in the negotiation, administration,
performance and enforcement hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement or caused their
duly authorized representatives to execute this Agreement as of the date first
above written.
CIBA CORNING DIAGNOSTICS CIBA-GEIGY Limited
CORP.
By: /s/ Richard D. Falb By: /s/ D. Bellus
--------------------------------- --------------------
Richard D. Falb, Ph.D. Prof. D. Bellus
Senior Vice President, Research Head, CRU
& Development
and
By: /s/ A. Egloff
--------------------
Dr. A. Egloff
Legal Counsel, CRU
Attachment A Royalty Projects
Attachment B Financial Terms
23
<PAGE>
Royalty Projects to be included in Attachments A and B
1. [Confidential Treatment Requested] For [Confidential Treatment Requested]
2. [Confidential Treatment Requested] for [Confidential Treatment Requested]
3. [Confidential Treatment Requested] for [Confidential Treatment Requested]
4. [Confidential Treatment Requested] Systems for [Confidential Treatment
Requested]
<PAGE>
Attachment 1 Confidential
(Royalty Project Agreement) [Confidential Treatment Requested] for
[Confidential Treatment Requested]
Title: [Confidential Treatment Requested] Royalty Project for Ciba
for [Confidential Treatment Requested] Corning Diagnostics
[Confidential Treatment Requested]
(cf. Attachments A2 & A3 for other uses of
[Confidential Treatment Requested]
Status November 1995
Approved by:
Project Management:
__________________ ______________ CCD: [Confidential Treatment Requested]
SVP, R&D, CCD Head CRU, Ciba
30.11.95 30.11.95 Ciba: [Confidential Treatment Requested]
Working basis agreed upon: Exclusive
Objective
- - Develop expertise and demonstrate feasibility of concepts in the field of
analytical methods based on [Confidential Treatment Requested] recognition,
advanced [Confidential Treatment Requested] detection schemes and
[Confidential Treatment Requested] handling systems.
- - Develop and explore functional models of such systems with respect to human
diagnostics. Characterize performance range using [Confidential Treatment
Requested] representing the following criteria: Assay sensitivity, dynamic
range, suitability for low molecular weight analytes, assay format.
Expected Technology Transfer Date: [Confidential Treatment Requested]
Present Status
Patents:
- - Method for the detection of [Confidential Treatment Requested] in the
[Confidential Treatment Requested] field of a [Confidential Treatment
Requested] Application [Confidential Treatment Requested] contract)
- - Method for using an [Confidential Treatment Requested] for the detection
of [Confidential Treatment Requested] in the [Confidential Treatment
Requested] field of a [Confidential Treatment Requested] Priority:
[Confidential Treatment Requested] Application [Confidential Treatment
Requested] contract)
<PAGE>
- - Patent application filed for [Confidential Treatment Requested] comprising
one or more [Confidential Treatment Requested] used for [Confidential
Treatment Requested] contract)
- - Method for detection of [Confidential Treatment Requested] in the
[Confidential Treatment Requested] field using [Confidential Treatment
Requested] for the [Confidential Treatment Requested] detection of several
[Confidential Treatment Requested] Ciba)
- - [Confidential Treatment Requested] for [Confidential Treatment Requested] of
[Confidential Treatment Requested] substances [Confidential Treatment
Requested] Ciba)
- - [Confidential Treatment Requested] (Ciba; in preparation)
- - Principle design of [Confidential Treatment Requested] configuration for a
[Confidential Treatment Requested] system [Confidential Treatment Requested]
contract; in preparation by [Confidential Treatment Requested]
Present Status continued
Further know-how
- - A [Confidential Treatment Requested] system has been developed and applied
in showing advantages under realistic conditions compared to routinely used
[Confidential Treatment Requested] such as: [Confidential Treatment
Requested] information available, high precision and improved sample
handling. Without loss in performance, the same [Confidential Treatment
Requested] could be used for up to [Confidential Treatment Requested]
measurements.
- - [Confidential Treatment Requested] of [Confidential Treatment Requested]
has been demonstrated. The obtained [Confidential Treatment Requested]
performed exceptionally well and no loss of performance was observed even
after [Confidential Treatment Requested] measurement and regeneration
cycles.
- - The immobilization of [Confidential Treatment Requested] on [Confidential
Treatment Requested] demonstrated the possibility to [Confidential
Treatment Requested] on [Confidential Treatment Requested]. With model
systems, the [Confidential Treatment Requested] could be reduced remarkably
compared to conventional [Confidential Treatment Requested].
- - For model systems, a significant simplification of [Confidential Treatment
Requested] has been achieved using two approaches: a) [Confidential
Treatment Requested] systems comprising [Confidential Treatment Requested]
and [Confidential Treatment Requested] b) [Confidential Treatment
Requested] using [Confidential Treatment Requested] to generate
[Confidential Treatment Requested].
<PAGE>
- - Thorough theoretical and practical understanding of [Confidential Treatment
Requested] from the former project [Confidential Treatment Requested] has
been successfully transferred to [Confidential Treatment Requested] based
[Confidential Treatment Requested] detection schemes.
- - [Confidential Treatment Requested] Technology: A [Confidential Treatment
Requested] including [Confidential Treatment Requested] and [Confidential
Treatment Requested] techniques under clean room conditions as well as
[Confidential Treatment Requested] and [Confidential Treatment Requested]
characterization methods have been established and applied to thorough
characterization. First results are available in [Confidential Treatment
Requested] and [Confidential Treatment Requested] production.
- - Expertise in development of complex [Confidential Treatment Requested]
based on [Confidential Treatment Requested]
Milestones (to be updated twice a year)
Version agreed upon in Meeting of [Confidential Completion Responsible
Treatment Requested]
6 Months milestones
- - Finalize the set of selected [Confidential [Confidential [Confidential
Treatment Requested] Treatment Treatment
Requested] Requested]
- - Fix the relevant precision data for the [Confidential [Confidential
above assays for [Confidential Treatment Treatment Treatment
Requested] criteria Requested] Requested]
- - Provide SOP and source for [Confidential [Confidential [Confidential
Treatment Requested] materials for the Treatment Treatment
above assays Requested] Requested]
- - Reevaluate [Confidential Treatment [Confidential [Confidential
Requested] situation on [Confidential Treatment Treatment
Treatment Requested] and [Confidential Requested] Requested]
Treatment Requested]
- - Clarify relations to external partners [Confidential [Confidential
with respect to short-term [Confidential Treatment Treatment
Treatment Requested] supply and long term Requested] Requested]
contracts.
- - Develop system concepts regarding [Confidential [Confidential
[Confidential Treatment Requested] and Treatment Treatment
[Confidential Treatment Requested] and Requested] Requested]
[Confidential Treatment Requested]
- - Design first [Confidential Treatment [Confidential [Confidential
Requested] system Treatment Treatment
Requested] Requested]
- - Decide on [Confidential Treatment [Confidential [Confidential
Requested] for
<PAGE>
[Confidential Treatment Requested] Treatment Treatment
Requested] Requested]
- - Transfer of [Confidential Treatment [Confidential [Confidential
Requested] from CCD to Ciba completed Treatment Treatment
Requested] Requested]
- - [Confidential Treatment Requested] [Confidential [Confidential
on [Confidential Treatment Requested] Treatment Treatment
for [Confidential Treatment Requested] Requested] Requested]
Long term milestones
- - Develop the product concept [Confidential [Confidential
Treatment Treatment
Requested] Requested]
- - Decision on [Confidential [Confidential [Confidential
Treatment Requested] Treatment Treatment
material & [Confidential Requested] Requested]
Treatment Requested]
[Confidential Treatment
Requested] and
[Confidential Treatment
Requested] configuration
[Confidential Treatment
Requested]
- - Transfer of all [Confidential Treatment [Confidential [Confidential
Requested] from CCD to Ciba completed Treatment Treatment
Requested] Requested]
- - Decide on [Confidential Treatment [Confidential [Confidential
Requested] Treatment Treatment
Requested] Requested]
- - [Confidential Treatment Requested] & [Confidential [Confidential
[Confidential Treatment Requested] for Treatment Treatment
first [Confidential Treatment Requested] Requested] Requested]
available
- - Sample [Confidential Treatment [Confidential [Confidential
Requested] for [Confidential Treatment Treatment
Treatment Requested] available Requested] Requested]
- - Decision on [Confidential Treatment [Confidential [Confidential
Requested] Treatment Treatment
Requested] Requested]
- - [Confidential Treatment Requested] on [Confidential [Confidential
[Confidential Treatment Requested] Treatment Treatment
developed/compared with specs. Requested] Requested]
- - Design [Confidential Treatment Requested] [Confidential [Confidential
Treatment Treatment
<PAGE>
Requested] Requested]
- - Build [Confidential Treatment Requested] [Confidential [Confidential
Treatment Treatment
Requested] Requested]
- - Transfer of [Confidential Treatment [Confidential [Confidential
Requested] procedures Treatment Treatment
Requested] Requested]
- - [Confidential Treatment Requested] [Confidential [Confidential
developed and tested for specs on Treatment Treatment
[Confidential Treatment Requested] Requested] Requested]
Ciba: [Confidential Treatment Requested]
[Confidential Treatment Requested]
CCD [Confidential Treatment Requested]
Intellectual property from outside of the Royalty Project to be made available:
Ciba: [Confidential Treatment Requested]
CCD: [Confidential Treatment Requested]
Third party: [Confidential Treatment Requested]
Management
Project Management Meetings twice a year.
Technology Transfer Criteria (Article 5.1)
- - A [Confidential Treatment Requested] will have been set-up which is capable
of demonstrating assay performance under stable and reproducible
conditions. It will include the [Confidential Treatment Requested] and
[Confidential Treatment Requested] design, a [Confidential Treatment
Requested] system, the [Confidential Treatment Requested] system for
[Confidential Treatment Requested] and [Confidential Treatment Requested]
and [Confidential Treatment Requested]. It is understood, that the main
purpose of the [Confidential Treatment Requested] will be to demonstrate
functionality and the main purpose of the [Confidential Treatment
Requested] to demonstrate assay performance. Costly and voluminous
components, evidently not suitable for CCD's commercial use will not be
applied. single source materials and chemicals are to be identified.
- - Performance will be demonstrated using the assays and specifications listed
below. Multifactorial design experiments will be applied in order to
confirm the specs to be fulfilled.
- - Performance to specs will be shown for the [Confidential Treatment
Requested] jointly as part of the transfer process at least twice.
- - [Confidential Treatment Requested] are discussed in the biannual meetings
and [Confidential
<PAGE>
Treatment Requested] are included in the overhead slide collections.
- - Documentation will be prepared to allow a skilled CCD technician to
reproduce the system and its performance in-house or to run a [Confidential
Treatment Requested] system physically transferred to CCD. Documentation
will include the accumulated experience about common failure modes and
reliability problems encountered during the research phase as related to
[Confidential Treatment Requested] and [Confidential Treatment Requested].
SPECIFICATIONS
1. Calibration [Confidential Treatment Requested] i.e. to run
[Confidential Treatment Requested]
2. Sample size [Confidential Treatment Requested] per
[Confidential Treatment Requested]
3. Mode of operation [Confidential Treatment Requested] or
[Confidential Treatment Requested] to be
fixed by the fall meeting [Confidential
Treatment Requested]
4. Assays per chip [Confidential Treatment Requested]
5. Time to result [Confidential Treatment Requested] min.
preferred)
6. Samples [Confidential Treatment Requested] (will be
[Confidential Treatment Requested] for final
product at CCD).
7. Assay sensitivity [Confidential Treatment Requested]
demonstrated with [Confidential Treatment
Requested]
8. Dynamic range [Confidential Treatment Requested]
demonstrated with [Confidential Treatment
Requested]
9. Assay format [Confidential Treatment Requested] and
[Confidential Treatment Requested]
10. Low MW analyte Demonstrated with [Confidential Treatment
Requested]
11. Selectivity [Confidential Treatment Requested] to be
decided in [Confidential Treatment Requested]
12. Precision/Reproducibility To be defined by [Confidential Treatment
Requested] after consulting with [Confidential
Treatment Requested]
13. Experimental control [Confidential Treatment Requested] of all
software system components/Menu for complete assays
<PAGE>
* This spec must be feasibly reachable after development but need not be
demonstrated with the [Confidential Treatment Requested]
** Reference assays fulfilling requirements of enclosed assay performance
chart will be developed and provided by Chiron Diagnostics as agreed
(see milestones).
<PAGE>
Title: [Confidential Treatment Requested] Royalty Project for Ciba
for [Confidential Treatment Requested] Corning Diagnostics
[Confidential Treatment Requested]
(cf. Attachments A2 & A3 for other uses of
[Confidential Treatment Requested]
Status November 1995
Approved by:
Project Management:
. . . . . . . . . . . . . . . CCD: [Confidential Treatment Requested]
SVP, R&D, Chiron Head CRU, Ciba
15.12.95 15.12.95 Ciba: [Confidential Treatment Requested]
Working basis agreed upon: Exclusive
Objective
- - Based on expertise acquired under program A1, demonstrate feasibility of
concepts in the field of [Confidential Treatment Requested] of
[Confidential Treatment Requested] advanced [Confidential Treatment
Requested] schemes and [Confidential Treatment Requested] systems, with
special attention to [Confidential Treatment Requested] system
[Confidential Treatment Requested].
- - Investigate alternative [Confidential Treatment Requested] concepts based
on [Confidential Treatment Requested] interactions for clinical
diagnostics. Consider new achievements in [Confidential Treatment
Requested] diagnostics [Confidential Treatment Requested]
- - Develop and explore functional models of an [Confidential Treatment
Requested] for the simultaneous analysis of [Confidential Treatment
Requested] (Immuno). Potential usages include: [Confidential Treatment
Requested] Detection & [Confidential Treatment Requested] and [Confidential
Treatment Requested] Detection & [Confidential Treatment Requested].
Expected Technology Transfer Date: [Confidential Treatment Requested]
Present Status
Patents:
- - Method for the detection of [Confidential Treatment Requested] in the
[Confidential Treatment Requested] field of a [Confidential Treatment
Requested] Application [Confidential Treatment Requested] contract)
<PAGE>
Attachment A2 Confidential Page
(Royalty Project Agreement)
[Confidential Treatment Requested] for [Confidential Treatment Requested]
- - Method for using an [Confidential Treatment Requested] for the detection
of [Confidential Treatment Requested] in the [Confidential Treatment
Requested] field of a [Confidential Treatment Requested]; Priority
[Confidential Treatment Requested] Application [Confidential Treatment
Requested] contract)
- - Patent application filed for [Confidential Treatment Requested] comprising
one or more [Confidential Treatment Requested] used for [Confidential
Treatment Requested] contract)
- - Method for detection of [Confidential Treatment Requested] in the
[Confidential Treatment Requested] field using [Confidential Treatment
Requested] for the [Confidential Treatment Requested] detection of several
[Confidential Treatment Requested] Ciba)
Patents continued
[Confidential Treatment Requested] for [Confidential Treatment Requested] of
[Confidential Treatment Requested] substances [Confidential Treatment
Requested] Ciba)
- - [Confidential Treatment Requested] (Ciba; in preparation)
- - Principle design of [Confidential Treatment Requested] configuration for a
[Confidential Treatment Requested] system [Confidential Treatment Requested]
contract; in prepartion by [Confidential Treatment Requested]
Further know-how
- - A [Confidential Treatment Requested] system has been developed and applied,
showing advantages under realistic conditions compared to routinely used
[Confidential Treatment Requested] such as:[Confidential Treatment
Requested] information available, high precision and improved sample
handling. Without loss in performance, the same [Confidential Treatment
Requested] could be used for up to [Confidential Treatment Requested]
measurements.
- - A detection limit of [Confidential Treatment Requested] moles [Confidential
Treatment Requested] labeled [Confidential Treatment Requested] of
[Confidential Treatment Requested] binding to protein [Confidential
Treatment Requested] on a [Confidential Treatment Requested] has been
achieved.
- - The principle feasibility of simultaneous assays on [Confidential Treatment
Requested] areas [Confidential Treatment Requested] has been demonstrated in
model [Confidential Treatment Requested] assay for [Confidential Treatment
Requested].
- - A first [Confidential Treatment Requested] system will be developed in the
module [Confidential Treatment Requested] for [Confidential Treatment
Requested] of the Ciba/CCD royalty project (Appendix A-1).
<PAGE>
Attachment A2 Confidential Page
(Royalty Project Agreement)
[Confidential Treatment Requested] for [Confidential Treatment Requested]
- - For model systems, a significant simplification of [Confidential Treatment
Requested] has been achieved using two approaches: a) [Confidential
Treatment Requested] systems comprising [Confidential Treatment Requested]
and [Confidential Treatment Requested] b) [Confidential Treatment Requested]
using [Confidential Treatment Requested] to generate [Confidential Treatment
Requested].
- - [Confidential Treatment Requested] Technology: A [Confidential Treatment
Requested] including [Confidential Treatment Requested] and [Confidential
Treatment Requested] techniques under clean room conditions, as well as
[Confidential Treatment Requested] and [Confidential Treatment Requested]
characterization methods have been established and applied to thorough
characterization. First results are available in [Confidential Treatment
Requested] and [Confidential Treatment Requested] production
Milestones (to be updated end of 1997)
Proposed Completion Responsible
Milestones of Attachment A1 achieved [Confidential
Treatment
Requested]
Development and evaluation of novel [Confidential
[Confidential Treatment Requested] Treatment
concepts for [Confidential Treatment Requested]
Requested] and spacially [Confidential
Treatment Requested]
Minimum [Confidential Treatment Requested]
for model assay determined
Relation between [Confidential Treatment
Requested] and [Confidential Treatment
Requested] between individual [Confidential
Treatment Requested] investigated
Test of different assay formats for [Confidential
[Confidential Treatment Requested] Treatment
Requested]
Concept for selection of [Confidential
Treatment Requested] for a sample
[Confidential Treatment Requested] and
[Confidential Treatment Requested] or
different [Confidential Treatment
Requested] developed
Structured [Confidential Treatment Requested] [Confidential
<PAGE>
Attachment A2 Confidential Page
(Royalty Project Agreement)
[Confidential Treatment Requested] for [Confidential Treatment Requested]
optimized Treatment
Requested]
Transfer [Confidential Treatment Requested]
and [Confidential Treatment Requested]
developed and tested against [Confidential
Treatment Requested] on [Confidential
Treatment Requested] [Confidential Treatment
Requested]
Intellectual property from outside of the Royalty Project to be
made available:
Ciba: [Confidential Treatment Requested]
CCD: [Confidential Treatment Requested]
Third party: [Confidential Treatment Requested]
Management
Project Management Meetings twice a year.
Technology Transfer Criteria (Article 5.1)
Specifications will be re-examined at the end of [Confidential Treatment
Requested]. Significant changes to the specs will be accepted through
[Confidential Treatment Requested]. Only modest to small changes will be
accepted in [Confidential Treatment Requested].
- - A [Confidential Treatment Requested] will have been set-up which is capable
of demonstrating throughput and assay performance under stable and
reproducible conditions. It will include the [Confidential Treatment
Requested] and [Confidential Treatment Requested], a [Confidential Treatment
Requested] system, the [Confidential Treatment Requested] system for
[Confidential Treatment Requested] and detection and experimental control
[Confidential Treatment Requested]. It is understood, that the main purpose
of the [Confidential Treatment Requested] will be to demonstrate
functionality and the main purpose of the [Confidential Treatment Requested]
to demonstrate assay performance. Costly and voluminous components,
evidently not suitable for CCD's commercial use will not be applied.
- - Performance will be demonstrated using the assays and specifications listed
below.
Documentation will be prepared to allow a skilled CCD technician to reproduce
the system and its performance in-house or to run a [Confidential Treatment
Requested] physically transferred to CCD. Documentation will include the
accumulated experience about common failure modes and reliability problems
encountered during the research phase as related to instrumentation and
[Confidential Treatment Requested]
Prototypes/Boundary Assays [Confidential Treatment Requested] or
- -------------------------- [Confidential Treatment Requested]
Specifications
- --------------
<PAGE>
Attachment A2 Confidential Page
(Royalty Project Agreement)
[Confidential Treatment Requested] for [Confidential Treatment Requested]
1. Mode of operation [Confidential Treatment Requested] use
2. Multiplexity Up to [Confidential Treatment Requested]
per [Confidential Treatment Requested]
Processing of up to [Confidential
Treatment Requested]
3. Temperature [Confidential Treatment Requested]
temperature [Confidential Treatment
Requested]
4. Sample size/OED [Confidential Treatment Requested]
5. Time to first results [Confidential Treatment Requested]
6. Samples [Confidential Treatment Requested]
7. Assay sensitivity [Confidential Treatment Requested]
molecules/Analyte (Input) demonstrated
with [Confidential Treatment Requested]
8. Dynamic range [Confidential Treatment Requested]
detection up to [Confidential Treatment
Requested] required: [Confidential
Treatment Requested] with integrated
dilution (e.g. [Confidential Treatment
Requested] demonstrated with
[Confidential Treatment Requested]
9. Assay format [Confidential Treatment Requested]
10. Fluidics [Confidential Treatment Requested] sample
distribution
* This spec must be feasible reachable after development but need not be
demonstrated with the [Confidential Treatment Requested]
** Antibodies or antigens from prototype or marketed assays will be made
available by Chiron Diagnostics when ever possible in support of the
project milestones. In case of unavailability alternate assays will be
negotiated.
<PAGE>
Attachment A3 Confidential Page
(Royalty Project Agreement)
[Confidential Treatment Requested] for [Confidential Treatment Requested]
Title: [Confidential Treatment Requested] Royal Project for Ciba Corning
for [Confidential Treatment Requested] Diagnostics
(cf Attachments A1 & A2 for other uses of
[Confidential Treatment Requested]
Status December 1995
- --------------------------------------------------------------------------------
Approved by:
Project Management:
CCD: [Confidential Treatment Requested]
Ciba: [Confidential Treatment Requested]
___________________ ___________________
SVP, R&D, CC Head CRU, Ciba
3.1.96 3.1.96
Working basis agreed upon: EXCLUSIVE
OBJECTIVE
- - Develop expertise and demonstrate feasibility of concepts in the field of
[Confidential Treatment Requested] methods based on [Confidential Treatment
Requested] recognition, advanced [Confidential Treatment Requested]
detection schemes and [Confidential Treatment Requested] systems that are
adequate for achieving [Confidential Treatment Requested] limits.
- - To build a basis for very high [Confidential Treatment Requested] and
[Confidential Treatment Requested] for screening of [Confidential Treatment
Requested] panels to be delt with in a follow-up Royalty Project.
- - Develop and explore functional models of an [Confidential Treatment
Requested] for the simultaneous analysis of [Confidential Treatment
Requested]. Potential usages include: [Confidential Treatment Requested]
detection and [Confidential Treatment Requested] quantification for the
[Confidential Treatment Requested] and the [Confidential Treatment
Requested] panel.
EXPECTED TECHNOLOGY TRANSFER DATE: [Confidential Treatment Requested]
PRESENT STATUS
Patents:
- --------
- - Method for the detection of [Confidential Treatment Requested] in the
[Confidential Treatment Requested] field of a [Confidential Treatment
Requested]. Application
<PAGE>
Attachment A3 Confidential Page
(Royalty Project Agreement)
[Confidential Treatment Requested] for [Confidential Treatment Requested]
[Confidential Treatment Requested] contract).
Method for using an [Confidential Treatment Requested] for the detection of
[Confidential Treatment Requested] in the [Confidential Treatment Requested]
field of a [Confidential Treatment Requested]. Priority: Application
[Confidential Treatment Requested] contract).
- - Patent application filed for [Confidential Treatment Requested], comprising
one or more [Confidential Treatment Requested] used for [Confidential
Treatment Requested] contract).
- - Method for detection of [Confidential Treatment Requested] in the
[Confidential Treatment Requested] field using [Confidential Treatment
Requested] for the [Confidential Treatment Requested] detection of several
[Confidential Treatment Requested] Ciba.
- - [Confidential Treatment Requested] for [Confidential Treatment Requested] of
[Confidential Treatment Requested] substances [Confidential Treatment
Requested] Ciba).
Patents continued
- - [Confidential Treatment Requested] (Ciba; in preparation)
- - Principle design of [Confidential Treatment Requested] configuration for a
[Confidential Treatment Requested] system [Confidential Treatment Requested]
contract; in preparation by [Confidential Treatment Requested].
Further know-how:
- - The principle feasibility of [Confidential Treatment Requested] assays on
[Confidential Treatment Requested] areas [Confidential Treatment Requested]
has been demonstrated in model affinity [Confidential Treatment Requested]
and [Confidential Treatment Requested] assays [Confidential Treatment
Requested] of [Confidential Treatment Requested] with complementary,
[Confidential Treatment Requested] labeled strand).
- - A first [Confidential Treatment Requested] system will be developed in the
module [Confidential Treatment Requested] for [Confidential Treatment
Requested] of the Ciba/CCD royalty project (Appendix A1).
- - The [Confidential Treatment Requested] assay system was applied both on
[Confidential Treatment Requested] and on [Confidential Treatment
Requested]. From a [Confidential Treatment Requested] analysis of the
signals obtained at different concentrations, an
<PAGE>
Attachment A3 Confidential Page
(Royalty Project Agreement)
[Confidential Treatment Requested] for [Confidential Treatment Requested]
expected detection limit in the [Confidential Treatment Requested] range was
calculated.
- - A detection limit of [Confidential Treatment Requested] binding to
[Confidential Treatment Requested] on a [Confidential Treatment Requested]
has been achieved.
- - Immobilization of [Confidential Treatment Requested] acting as [Confidential
Treatment Requested] was performed by [Confidential Treatment Requested]
synthesis and using the [Confidential Treatment Requested] system, both on
[Confidential Treatment Requested] and on [Confidential Treatment Requested]
as [Confidential Treatment Requested]. With [Confidential Treatment
Requested] more than [Confidential Treatment Requested] cycles could be
performed on [Confidential Treatment Requested] without loss of performance.
- - For model systems, a significant simplification of [Confidential Treatment
Requested] handling has been achieved using two approaches: A) [Confidential
Treatment Requested] system comprising [Confidential Treatment Requested]
and [Confidential Treatment Requested] b) [Confidential Treatment
Requested] using [Confidential Treatment Requested] to generate
[Confidential Treatment Requested] as a [Confidential Treatment Requested].
- - [Confidential Treatment Requested] Technology: A [Confidential Treatment
Requested] including [Confidential Treatment Requested] and [Confidential
Treatment Requested] techniques under clean room conditions, as well as
[Confidential Treatment Requested] and [Confidential Treatment Requested]
characterization methods have been established and applied to thorough
characterization. First results are available in [Confidential Treatment
Requested] and [Confidential Treatment Requested] production.
Milestones (to be updated end of 1997)
Proposed Completion Responsible
Analysis and investigation of current [Confidential
[Confidential Treatment Requested] Treatment
quantification assays on compatibility Requested]
with [Confidential Treatment
Requested] technology
Design and adaption of [Confidential
Treatment Requested] model assays for
the recognition and quantification of
[Confidential Treatment Requested] on
[Confidential Treatment Requested].
Evaluation of sensitivity improvement
by combining [Confidential Treatment
Requested] and [Confidential Treatment
Requested] technology.
<PAGE>
Attachment A3 Confidential Page
(Royalty Project Agreement)
[Confidential Treatment Requested] for [Confidential Treatment Requested]
Development and evaluation of [Confidential [Confidential
Treatment Requested] concepts for high Treatment
throughput [Confidential Treatment Requested]
Requested]and [Confidential Treatment
Requested] and [Confidential Treatment
Requested] chemistry).
Minimum [Confidential Treatment Requested]
for model assay determined
Relation between [Confidential Treatment
Requested] and [Confidential Treatment
Requested] between individual
[Confidential Treatment Requested]
investigated.
Establish required technologies for spacially
[Confidential Treatment Requested].
Transfer [Confidential Treatment Requested]
Test of different assay formats for boundary assays.
Intellectual property from outside of the Royalty Project to be made available:
Ciba: [Confidential Treatment Requested]
CCD: [Confidential Treatment Requested]
Third party: [Confidential Treatment Requested] technology
(Chiron Corporation)
Above Amendment accepted:
April 15, 1996
____________ __________
MANAGEMENT
Project Management Meetings twice a year.
TECHNOLOGY TRANSFER CRITERIA (Article 5.1)
Specifications will be re-examined at the end of [Confidential Treatment
Requested]. Significant changes to the specs will be accepted through
[Confidential Treatment Requested]. Only modest to small changes will be
accepted in [Confidential Treatment Requested].
- - A [Confidential Treatment Requested] system will have been set-up which is
capable of demonstrating throughput and assay performance under stable and
reproducible
<PAGE>
Attachment A3 Confidential Page
(Royalty Project Agreement)
[Confidential Treatment Requested] for [Confidential Treatment Requested]
conditions. It will include the [Confidential Treatment Requested] and
[Confidential Treatment Requested], a [Confidential Treatment
Requested] delivery system, the [Confidential Treatment Requested] system
for [Confidential Treatment Requested] and detection and experimental
control [Confidential Treatment Requested]. It is understood, that the main
purpose of the [Confidential Treatment Requested] will be to demonstrate
functionality and the main purpose of the [Confidential Treatment Requested]
to demonstrate assay performance. Costly and voluminous components,
evidently not suitable for CCD's commercial use will not be applied.
- - Performance will be demonstrated using the assays and specification listed
below. [Confidential Treatment Requested] design experiments will be
applied in order to confirm the specs to be fulfilled.
- - Documentation will be prepared to allow a skilled CCD technician to
reproduce the system and its performance in-house or to run a
[Confidential Treatment Requested] system physically transferred to CCD.
Documentation will include the accumulated experience about common failure
modes and reliability problems encountered during the research phase as
related to instrumentation and sensor chemistry.
PROTOTYPES/BOUNDARY ASSAYS [Confidential Treatment Requested] Panel,
[Confidential Treatment Requested] for
[Confidential Treatment Requested] and
[Confidential TreatmentRequested]
Specifications
- --------------
1. Mode of operation [Confidential Treatment Requested] use
2. Multiplexity Up to [Confidential Treatment Requested]
per [Confidential Treatment Requested]
3. Temperature [Confidential Treatment Requested]
temperature incubations [Confidential
Treatment Requested] phases during total
incubation time)
4. Sample size/OED [Confidential Treatment Requested]
of extracted sample
5. Time to first results Up to [Confidential Treatment Requested]
(May require change)
6. Samples [Confidential Treatment Requested] or
[Confidential Treatment Requested]
7. Assay sensitivity [Confidential Treatment Requested]
Analyte (Input)
8. Dynamic range Direct detection of up to [Confidential
Treatment Requested]
9. Fluidics [Confidential Treatment Requested] sample
distribution
PROTOTYPES/BOUNDARY ASSAYS [CONFIDENTIAL TREATMENT REQUESTED] (HIGH
SENSITIVITY PROTOTYPE) *
<PAGE>
Attachment A3 Confidential Page
(Royalty Project Agreement) [Confidential Treatment Requested]
for[Confidential Treatment Requested]
PROTOTYPE)*
Specifications
- --------------
1. Mode of operation [Confidential Treatment Requested] use
2. Multiplexity [Confidential Treatment Requested] per[Confidential
Treatment Requested]
3. Temperature [Confidential Treatment Requested] temperature
incubations
4. Sample size/OED [Confidential Treatment Requested] serum/plasma
5. Time to first results [Confidential Treatment Requested]
6. Samples [Confidential Treatment Requested]
7. Assay sensitivity [Confidential Treatment Requested] molecules
8. Dynamic range [Confidential Treatment Requested] (with integrated
dilution)
9. Fluidics [Confidential Treatment Requested]
* [Confidential Treatment Requested] and [Confidential Treatment
Requested] from prototype or marketed assays will be made available by
Chiron Diagnostics whenever possible in support of the project milestones.
In case of unavailability alternate assays will be negotiated.
<PAGE>
Attachment A4 Confidential Page
(Royalty Project Agreement) [Confidential Treatment Requested]
for[Confidential Treatment Requested]
Title: [Confidential Treatment Royalty Project for Ciba
Requested] Systems for Corning Diagnostics
[Confidential Treatment Requested]
Status October 1995
- -------------------------------------------------------------------------------
Approved by: Project Management:
CCD:
__________________ _________________
SVP, R&D, CCD Head CRU, Ciba Ciba:
15.12.95 15.12.95
Working basis agreed upon: Exclusive
OBJECTIVE
- - Development of analytical systems for human diagnostics based on the
combination of novel [Confidential Treatment Requested] elements with
advanced [Confidential Treatment Requested] and [Confidential Treatment
Requested] systems.
- - Development of novel or modified functional components [Confidential
Treatment Requested] host [Confidential Treatment Requested] for
[Confidential Treatment Requested] and [Confidential Treatment Requested]
for improved and patent Protected [Confidential Treatment Requested]
systems for [Confidential Treatment Requested].
SCOPE OF APPLICATIONS/EXPECTED TECHNOLOGY TRANSFER DATES:
For [Confidential Treatment Requested] and [Confidential Treatment Requested]
[Confidential Treatment Requested] in [Confidential Treatment
Requested]
For [Confidential Treatment Requested] and [Confidential Treatment Requested]
[Confidential Treatment Requested]
[CONFIDENTIAL TREATMENT REQUESTED] MILESTONES
Refill [Confidential Treatment Requested] [Confidential Treatment Requested]
each for [Confidential Treatment Requested]
Medfield and Basel) and [Confidential [Confidential Treatment Requested]
Treatment Requested] for Basel [Confidential Treatment Requested]
Synthesize [Confidential Treatment [Confidential Treatment Requested]
Requested]
<PAGE>
Attachment A4 Confidential Page
(Royalty Project Agreement) [Confidential Treatment Requested]
for[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested] testing [Confidential Treatment Requested]
against specs [Confidential Treatment Requested]
[Confidential Treatment Requested] testing [Confidential Treatment Requested]
[Confidential Treatment Requested]
Evaluation of [Confidential Treatment [Confidential Treatment Requested]
Requested] completed [Confidential Treatment Requested]
List of [Confidential Treatment Requested] [Confidential Treatment Requested]
screened and documentation [Confidential Treatment Requested]
[Confidential Treatment Requested] [Confidential Treatment Requested]
inventory returned to [Confidential [Confidential Treatment Requested]
Treatment Requested]
[Confidential Treatment Requested] [Confidential Treatment Requested]
inventory shipped to [Confidential [Confidential Treatment Requested]
Treatment Requested]
Narrow approach from [Confidential [Confidential Treatment Requested]
Treatment Requested] [Confidential Treatment Requested]
Scale up of [Confidential Treatment [Confidential Treatment Requested]
Requested] for evaluations Treatment [Confidential Treatment Requested]
Requested]
Supply of [Confidential Treatment [Confidential Treatment Requested]
Requested] for evaluation [Confidential [Confidential Treatment Requested]
Treatment Requested]
Scale up for [Confidential Treatment [Confidential Treatment Requested]
Requested] and [Confidential Treatment [Confidential Treatment Requested]
Requested]
[CONFIDENTIAL TREATMENT REQUESTED] MILESTONES
Report on [Confidential Treatment [Confidential Treatment Requested]
Requested] study [Confidential Treatment Requested]
Report on study of [Confidential Treatment [Confidential Treatment Requested]
Requested] using [Confidential Treatment [Confidential Treatment Requested]
Requested]
Information and documentation for transfer [Confidential Treatment Requested]
identified [Confidential Treatment Requested]
<PAGE>
Attachment A4 Confidential Page
(Royalty Project Agreement) [Confidential Treatment Requested]
for[Confidential Treatment Requested]
[Confidential Treatment Requested] confirmed [Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested] study [Confidential Treatment Requested]
[Confidential Treatment Requested] [Confidential Treatment Requested]
wrapped up
[Confidential Treatment Requested] [Confidential Treatment Requested]
formulation optimized [Confidential Treatment Requested]
[Confidential Treatment Requested] [Confidential Treatment Requested]
disclosure [Confidential Treatment Requested]
Decision on continuation of [Confidential [Confidential Treatment Requested]
Treatment Requested] [Confidential Treatment Requested]
Deliver [Confidential Treatment Requested] [Confidential Treatment Requested]
with [Confidential Treatment Requested] [Confidential Treatment Requested]
Scale up of [Confidential Treatment [Confidential Treatment Requested]
Requested] and [Confidential Treatment [Confidential Treatment Requested]
Requested]
[CONFIDENTIAL TREATMENT REQUESTED] MILESTONES
Deliver [Confidential Treatment Requested] [Confidential Treatment Requested]
[Confidential Treatment Requested]
Deliver [Confidential Treatment Requested] [Confidential Treatment Requested]
[Confidential Treatment Requested]
Deliver [Confidential Treatment Requested] [Confidential Treatment Requested]
[Confidential Treatment Requested]
Refill [Confidential Treatment Requested] [Confidential Treatment Requested]
containing [Confidential Treatment [Confidential Treatment Requested]
Requested] for Basel
Refill [Confidential Treatment Requested] [Confidential Treatment Requested]
containing [Confidential Treatment [Confidential Treatment Requested]
Requested] for Medfield
Deliver [Confidential Treatment Requested] [Confidential Treatment Requested]
to Medfield for [Confidential Treatment [Confidential Treatment Requested]
Requested] testing
Extensive [Confidential Treatment [Confidential Treatment Requested]
Requested] testing in [Confidential [Confidential Treatment Requested]
Treatment Requested]
<PAGE>
Attachment A4 Confidential Page
(Royalty Project Agreement) [Confidential Treatment Requested]
for[Confidential Treatment Requested]
Report on [Confidential Treatment [Confidential Treatment Requested]
Requested] and [Confidential Treatment [Confidential Treatment Requested]
Requested]
Refill [Confidential Treatment [Confidential Treatment Requested]
Requested] with [Confidential Treatment [Confidential Treatment Requested]
Requested]
Comparative data on early response, [Confidential Treatment Requested]
[Confidential Treatment Requested] [Confidential Treatment Requested]
Decision on continuation of [Confidential [Confidential Treatment Requested]
Treatment Requested] [Confidential Treatment Requested]
Conclude [Confidential Treatment [Confidential Treatment Requested]
Requested] Support [Confidential Treatment Requested]
[Confidential Treatment Requested]
Milestones (Basel)
Deliver [Confidential Treatment [Confidential Treatment Requested]
Requested] for research [Confidential Treatment Requested]
Deliver [Confidential Treatment [Confidential Treatment Requested]
Requested] for research [Confidential Treatment Requested]
Deliver [Confidential Treatment [Confidential Treatment Requested]
Requested] with [Confidential Treatment [Confidential Treatment Requested]
Requested]
[Confidential Treatment Requested] [Confidential Treatment Requested]
(research quantity) [Confidential Treatment Requested]
Deliver [Confidential Treatment [Confidential Treatment Requested]
Requested] with [Confidential Treatment [Confidential Treatment Requested]
Requested]
[Confidential Treatment Requested] [Confidential Treatment Requested]
(research quantity) [Confidential Treatment Requested]
Report on [Confidential Treatment [Confidential Treatment Requested]
Requested] testing [Confidential Treatment Requested]
Deliver [Confidential Treatment [Confidential Treatment Requested]
Requested] with [Confidential Treatment [Confidential Treatment Requested]
Requested]
[Confidential Treatment Requested] [Confidential Treatment Requested]
(research quantity) [Confidential Treatment Requested]
<PAGE>
Attachment A4 Confidential Page
(Royalty Project Agreement) [Confidential Treatment Requested]
for[Confidential Treatment Requested]
Transfer [Confidential Treatment [Confidential Treatment Requested]
Requested] [Confidential Treatment Requested]
Report on [Confidential Treatment [Confidential Treatment Requested]
Requested] testing [Confidential Treatment Requested]
Transfer [Confidential Treatment [Confidential Treatment Requested]
Requested] [Confidential Treatment Requested]
Deliver [Confidential Treatment [Confidential Treatment Requested]
Requested] with [Confidential Treatment [Confidential Treatment Requested]
Requested]
[Confidential Treatment Requested] [Confidential Treatment Requested]
development [Confidential Treatment Requested]
Deliver [Confidential Treatment [Confidential Treatment Requested]
Requested] with [Confidential Treatment [Confidential Treatment Requested]
Requested]
[Confidential Treatment Requested] ab) [Confidential Treatment Requested]
[Confidential Treatment Requested]
Deliver [Confidential Treatment [Confidential Treatment Requested]
Requested] with [Confidential Treatment [Confidential Treatment Requested]
Requested]
[Confidential Treatment Requested] [Confidential Treatment Requested]
or [Confidential Treatment [Confidential Treatment Requested]
Requested] development
Deliver [Confidential Treatment [Confidential Treatment Requested]
Requested] with [Confidential Treatment [Confidential Treatment Requested]
Requested]
[Confidential Treatment Requested] kilo lab [Confidential Treatment Requested]
[Confidential Treatment Requested]
Deliver [Confidential Treatment [Confidential Treatment Requested]
Requested] with [Confidential Treatment [Confidential Treatment Requested]
Requested]
[Confidential Treatment Requested] [Confidential Treatment Requested]
or [Confidential Treatment Requested] [Confidential Treatment Requested]
kilo lab
[Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
<PAGE>
Attachment A4 Confidential Page
(Royalty Project Agreement) [Confidential Treatment Requested]
for[Confidential Treatment Requested]
Intellectual property from outside of the Royalty Project to be made available:
Ciba: (to be confirmed)
CCD: (to be confirmed)
Third party: (to be confirmed)
MANAGEMENT
PROJECT MANAGEMENT MEETINGS TWICE A YEAR.
TECHNOLOGY TRANSFER CRITERIA (ARTICLE 5.1)
1. SPECIFICATIONS
- ------------------
All analytes: According to [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] [Confidential Treatment Requested]
[Confidential Treatment Requested]
[Confidential Treatment Requested]
Response time: [Confidential Treatment Requested]
2. PROTOCOLS:
- --------------
[Confidential Treatment Requested] performance testing in Basel will be done on
[Confidential Treatment Requested] system or the [Confidential Treatment
Requested] system in a [Confidential Treatment Requested] mode with
[Confidential Treatment Requested] sample solutions, QC materials from the
[Confidential Treatment Requested], according to [Confidential Treatment
Requested] protocol provided by CCD. All tests to be performed at [Confidential
Treatment Requested] on equilibrated [Confidential Treatment Requested] samples
will be tested as a challenge but not to demonstrate the specifications. The
initial response of the [Confidential Treatment Requested] will be investigated
and documented.
<PAGE>
Attachment A4 Confidential Page
(Royalty Project Agreement) [Confidential Treatment Requested]
for[Confidential Treatment Requested]
3. DOCUMENTATION:
- ------------------
Performance will be demonstrated using the assays and specifications listed
above. Sufficient data will be compiled to allow an assessment of consistency.
Sufficient documentation will be prepared to allow a skilled CCD technician to
run the system and to reproduce the assays. Documentation will include the
accumulated experience about common failure modes and reliability problems
(including the stability of compounds, if tested) encountered during the
research phase as related to instrumentation and [Confidential Treatment
Requested] chemistry.
A materials list including the supplier, the purity and the available analysis
results will be provided for the critical materials of [Confidential Treatment
Requested] and [Confidential Treatment Requested] synthesis.
<PAGE>
Ciba-Geigy/Ciba Corning Royalty Projects 3. Jan. 96
Attachment B
EXIT FEES AND ROYALTIES
(All numbers in MM CHF)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PROJECT OR APPLICATION FEES ROYALTY RATE *
- ---------------------- ---- --------------
Refer to Strategic Technical License Exclusive
Attachment Failure Fee Failure Fee Maintenance License
[Confidential Treatment Requested] A4 [Confidential [Confidential [Confidential [Confidential
Systems for [Confidential Treatment Treatment Treatment Treatment Treatment
Requested] Requested] Requested] Requested] Requested]
[Confidential Treatment Requested] for A1 [Confidential [Confidential [Confidential [Confidential
Treatment Treatment Treatment Treatment
Requested] Requested] Requested] Requested]
[Confidential Treatment Requested] for A2 [Confidential [Confidential [Confidential [Confidential
Treatment Treatment Treatment Treatment
Requested] Requested] Requested] Requested]
[Confidential Treatment Requested] for A3 [Confidential [Confidential [Confidential [Confidential
Treatment Treatment Treatment Treatment
Requested] Requested] Requested] Requested]
* For products that are within the scope of a patent issued in any Designated
Country but that are sold in countries where patents are pending or are not
filed, the royalty rate shall be [Confidential Treatment Requested] of the
rate specified in the table.
Approved by:
______________________________ _______________________________
SVP, R&D, CCD Head CRU, Ciba
</TABLE>
<PAGE>
EXHIBIT 11
CHIRON CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Nine Months Ended Sept. 30, Three Months Ended Sept. 30,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE
Net income (loss) available for common
shares and common stock equivalent
shares deemed to have a dilutive effect $ 39,876,000 $(530,056,000) $ 11,778,000 $(145,107,000)
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
Primary earnings (loss) per share $ 0.22 $ (3.30) $ 0.07 $ (0.90)
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
Fully diluted earnings (loss) per share $ 0.22 $ (3.30) $ 0.07 $ (0.90)
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
Shares used in primary earnings (loss)
per share computation:
Weighted average common shares
outstanding 168,968,000 160,840,000 169,927,000 161,716,000
Weighted average dilutive incremental
common shares issuable from exercise
of warrants 324,000 -- 208,000 --
Weighted average dilutive incremental
common shares issuable under employee
stock option programs 8,000,000 -- 5,713,000 --
------------ ------------- ------------ -------------
Total common shares and common stock
equivalent shares deemed to have a
dilutive effect 177,292,000 160,840,000 175,848,000 161,716,000
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
Shares used in fully dilutive earnings
(loss) per share computation:
Weighted average common shares
outstanding 168,968,000 160,840,000 169,927,000 161,716,000
Weighted average dilutive incremental
common shares issuable from exercise
of warrants 326,000 -- 208,000 --
Weighted average dilutive incremental
common shares issuable under employee
stock option programs 8,000,000 -- 5,708,000 --
------------ ------------- ------------ -------------
Total common shares and common stock
equivalent shares deemed to have a
dilutive effect 177,294,000 160,840,000 175,843,000 161,716,000
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CHIRON
CORPORATION'S UNAUDITED CONSOLIDATED BALANCE SHEET DATED SEPTEMBER 30, 1996 AND
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 53,967
<SECURITIES> 75,832<F1>
<RECEIVABLES> 340,358
<ALLOWANCES> 0
<INVENTORY> 186,786
<CURRENT-ASSETS> 680,686
<PP&E> 744,358
<DEPRECIATION> 193,612
<TOTAL-ASSETS> 1,668,256
<CURRENT-LIABILITIES> 463,297
<BONDS> 420,044<F2>
0
0
<COMMON> 1,700
<OTHER-SE> 745,737<F3>
<TOTAL-LIABILITY-AND-EQUITY> 1,668,256
<SALES> 729,877
<TOTAL-REVENUES> 943,035
<CGS> 316,973
<TOTAL-COSTS> 316,973
<OTHER-EXPENSES> 562,392<F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 57,792<F5>
<INCOME-TAX> 17,916
<INCOME-CONTINUING> 39,876
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,876
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
<FN>
<F1>CONSISTS OF BOTH SHORT-TERM AND NON-CURRENT INVESTMENTS IN MARKETABLE DEBT
SECURITIES.
<F2>CONSISTS OF CONVERTIBLE SUBORDINATED DEBENTURES, CAPITAL LEASE OBLIGATIONS, AND
NOTES PAYABLE, NET OF CURRENT MATURITIES.
<F3>CONSISTS OF ADDITIONAL PAID-IN CAPITAL, ACCUMULATED DEFICIT, CUMULATIVE FOREIGN
CURRENCY TRANSLATION ADJUSTMENT AND UNREALIZED GAIN FROM INVESTMENTS.
<F4>CONSISTS OF RESEARCH AND DEVELOPMENT, SELLING, GENREAL AND ADMINISTRATIVE; AND
OTHER OPERATING EXPENSES.
<F5>INCLUDES A $12.2 MILLION GAIN FROM THE SALE OF A PARTNERSHIP INTEREST REFLECTED
IN OTHER EXPENSE, NET; AND $6.9 MILLION IN ROYALTIES RELATED TO PRIOR
PERIOD SALES RESULTING FROM A SETTLEMENT, REFLECTED IN EQUITY IN EARNINGS OF
UNCONSOLIDATED JOINT BUSINESSES.
</FN>
</TABLE>
