<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 1999
REGISTRATION NO. 333-72607
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
CLONTECH LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2836 77-0035190
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or Classification Code Number) Identification
organization) No.)
</TABLE>
1020 EAST MEADOW CIRCLE
PALO ALTO, CALIFORNIA 94303
(650) 424-8222
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------
KENNETH S. FONG, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CLONTECH LABORATORIES, INC.
1020 EAST MEADOW CIRCLE
PALO ALTO, CALIFORNIA 94303
(650) 424-8222
(Name, address and telephone number of agent for service)
------------------
COPIES TO:
MATTHEW B. HEMINGTON PATRICK T. SEAVER
MICHAEL L. WEINER CHARLES K. RUCK
COOLEY GODWARD LLP LATHAM & WATKINS
FIVE PALO ALTO SQUARE 650 TOWN CENTER DRIVE, 20(TH) FLOOR
3000 EL CAMINO REAL COSTA MESA, CALIFORNIA 92626
PALO ALTO, CALIFORNIA 94306 (714) 540-1235
(650) 843-5000
------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------
If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE REGISTRATION FEE
TO BE REGISTERED REGISTERED (1) SHARE (2) OFFERING PRICE (2) (3)
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value 4,312,500 $15.00 $64,687,500 $17,983
</TABLE>
(1) Includes 562,500 shares of Common Stock issuable upon exercise of the
Underwriter's over-allotment option.
(2) Estimated solely for the purpose of computing the amount of the registration
fee in accordance with Rule 457 under the Securities Act of 1933.
(3) The Company paid a registration fee of $20,461 in connection with the filing
of the original Form S-1 on February 19, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION
MARCH , 1999
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<PAGE>
3,750,000 Shares
[LOGO]
Common Stock
---------
This is the initial public offering of Clontech Laboratories, Inc. and we are
offering 3,250,000 shares of our common stock. The selling stockholders
identified in this prospectus are offering an additional 500,000 shares of
common stock. We will not receive any of the proceeds from the sale of shares by
the selling stockholders.
We have applied to list our common stock on the Nasdaq National Market under the
symbol "CLON." No public market currently exists for our shares. We anticipate
that the initial public offering price will be between $14.00 and $16.00 per
share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 6.
<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- --------------
<S> <C> <C>
Public offering price............................................... $ $
Underwriting discounts and commissions.............................. $ $
Proceeds, before expenses, to Clontech.............................. $ $
Proceeds to the selling stockholders................................ $ $
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Clontech and the selling stockholders have granted the underwriters the right to
purchase up to 562,500 additional shares at the public offering price to cover
any over-allotments.
BT ALEX. BROWN
HAMBRECHT & QUIST
LEHMAN BROTHERS
, 1999
<PAGE>
DESCRIPTION OF PICTURES APPEARING ON FRONT INSIDE COVER PAGE:
Scientist performing an assay using Clontech's ATLAS cDNA array membranes.
Above the picture is a header that reads: "CLONTECH Laboratories, Inc.,
Innovative Tools To Accelerate Discovery"
DESCRIPTION OF PICTURE APPEARING ON THE FRONT GATEFOLD:
The picture is a horizontal diagram containing four circular text boxes
describing Clontech's product categories and a long rectangular box defining the
broad research spectrum (basic research to drug discovery) for which these
product categories are applicable. The product categories read: "(1) Gene
Identification, (2) Gene Expression, (3) Functional Analysis, and (4) Target
Validation." Each product category contains at least one example illustration,
with a header which branches off the text box. The examples for Gene
Identification include: (1) (above) Marathon RACE Technology, which is
illustrated by a DNA gel; and (2) (below) SMART cDNA Technology, which is
illustrated by a table containing mRNA size data for full-length cloned genes.
Beside the DNA gel is a caption that reads: "A high efficiency RACE technique
for generating full-length cDNA clones." Below the data table is a caption that
reads: "A breakthrough cDNA cloning technology that enables the generation of
full-length clones from very small amounts of source material." The three
examples for Gene Expression include: (1) (above) Atlas cDNA Arrays, which are
illustrated by two phosphorimages of cDNA arrays showing gene expression
profiling; (2) (below to the left) PCR-Select cDNA Subtraction, which is
illustrated by five Northern Blots; and (3) (below to the right) MTN Blots,
which are illustrated by a Northern Blot for a positive control assay. Below the
Atlas cDNA Arrays, the caption reads: "Differential gene expression profiling
hundreds of genes at a time for quickly determining the status of biochemical
pathways and monitoring cellular responses to therapeutic compounds." Below the
PCR-Select cDNA Subtraction is a caption that reads: "Based on patented
technology, PCR-Select provides a novel, efficient, and quick method for
isolating and identifying differently expressed genes." The caption to the right
of the MTN Blot reads: "High quality, premade blots for a variety of gene
expression analysis applications. Data generated using MTN Blots has become a
benchmark element in gene expression research." The examples for Functional
Analysis are the Tet-On & Tet-Off Expression Systems, which are illustrated by
microscope images showing controllable gene expression in two tissue types. The
caption to the right of the picture reads: "An innovative gene expression system
that provides precise control and is ideal for applications such as transgenic
studies." The MATCHMAKER Two-Hybrid Systems are positioned between Functional
Analysis and Target Validation as the systems are applicable for lab research in
both of these areas. The systems are illustrated by a diagram illustrating the
use of the system to determine transmembrane and cytoplasmic protein-protein
interactions. The caption beside the diagram reads: "A highly useful system for
detecting protein interactions. Adaptable for high-throughput screening and
ideal for defining biochemical pathways." Target Validation is also exemplified
by the ApoAlert Apotosis Detection Systems, which are illustrated by a
fluorescence picture sharing cells in a stage of the apotosis pathway. The
caption, located to the right of the picture, reads: "Convenient, state-of-the-
art assays for detecting apotosis (programmed cell death)."
Below the picture is a caption that reads as follows: "Products & Enabling
Technologies for Life Science Research"
ATLAS, CLONTECH, CLONTECH PCR-SELECT, CLONTECHNIQUES, DELTA, MARATHON,
MARATHON-READY, RETRO-X, SMART and TET-OFF, and our logo are our trademarks.
ADVANTAGE, APOALERT, TET-ON, MTN and LIVING COLORS are registered trademarks of
Clontech.
Information on our web site is not a part of this prospectus. This
prospectus also contains trademarks owned by other companies.
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES APPEARING
ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS. THE OUTCOME OF THE EVENTS DESCRIBED IN THESE FORWARD-LOOKING
STATEMENTS IS SUBJECT TO RISKS AND ACTUAL RESULTS COULD DIFFER MATERIALLY. THE
SECTIONS ENTITLED "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" CONTAIN A
DISCUSSION OF SOME OF THE FACTORS THAT COULD CONTRIBUTE TO THESE DIFFERENCES.
CLONTECH LABORATORIES, INC.
We develop, manufacture and market products for life science research. Our
products enable scientists to identify genes, study how cells are regulated by
genes and search for drugs that can treat diseases. We provide a portfolio of
over 1,500 products that allow scientists to perform academic research and drug
discovery more rapidly and effectively. We sell our products primarily to
scientists within government entities, academic institutions and pharmaceutical
and biotechnology companies. In 1998, our total sales were $47.8 million, and,
since 1994, our sales have grown at a 33% compounded annual rate.
Over the past two decades, life science research has experienced significant
technical advances and growth in resources. Industry analysts estimate that
there are over 300,000 scientists worldwide engaged in life science research.
Based on industry estimates, in 1997, the United States market for bioreagents
approached $1.4 billion. We believe that the market for life science research
products will continue to expand due to several factors, including:
- increasing levels of government and commercial funding for life science
research;
- a growing need to identify genes and to analyze their functions based on
new information generated by genome sequencing projects;
- the proliferation of new research initiatives made possible by rapidly
changing molecular biology research techniques; and
- intensifying competition to discover new drug targets and drugs in the
pharmaceutical and biotechnology industries.
We believe that we have assembled one of the broadest portfolios of
molecular biology research tools in our industry. Our products include enabling
technologies, which allow scientists to conduct experiments which would not
otherwise be possible, and innovative research tools, which permit scientists to
achieve results in a more rapid, efficient and reproducible manner. We offer
products that enable scientists to conduct research in the areas of gene
identification, gene expression analysis, functional analysis and target
validation. For example, in the area of gene identification, we offer products
that allow the rapid identification of full-length gene sequences using
extremely small tissue samples. In the area of gene expression analysis, we have
introduced easy-to-use cDNA arrays for obtaining expression patterns for
hundreds of known genes in a single experiment.
3
<PAGE>
We believe that the breadth and quality of our products have allowed us to
establish a leadership position in our industry. We intend to pursue the
following strategies to maintain and expand our leadership position:
- pioneer the commercialization of enabling technologies through:
-- internal research and development,
-- identification and acquisition of new technologies from third parties,
-- conversion of novel technologies into commercially viable research
tools;
- rapidly introduce new technologies and products in an effort to be first
to market;
- enhance and extend our existing product lines;
- offer a broad range of products and technologies to provide our customers
with integrated research solutions;
- provide a high level of technical support and service; and
- recruit, develop and retain outstanding scientists.
Our product portfolio includes many products in which we have a proprietary
interest. As of January 31, 1999, we had six issued United States patents, 42
pending United States patent applications and nine pending foreign patent
applications. Additionally, we have entered into over 50 agreements with
academic, government and commercial entities, which provide us with access to
additional technologies.
We market our products in more than 30 countries through our annual catalog
and CLONTECHNIQUES quarterly newsletter. We employ a domestic sales force of 13
individuals, have three foreign sales and service subsidiaries and utilize a
network of 25 independent foreign distributors. In addition, we maintain a web
site with detailed information about our products, which during the last quarter
of 1998 was visited an average of 32,779 times per month.
Clontech was incorporated in California in March 1984 and reincorporated in
Delaware in October 1998. Our principal offices are located at 1020 East Meadow
Circle, Palo Alto, California 94303. Our telephone number is (650) 424-8222. Our
web site address is www.clontech.com.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by Clontech.................. 3,250,000 shares
Common stock offered by the selling
stockholders.................................... 500,000 shares
Common stock to be outstanding after the
offering........................................ 15,453,683 shares(1)
Use of proceeds................................... For retirement of debt, expansion of
manufacturing capacity, expansion of
sales and marketing infrastructure,
working capital and general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market symbol............ CLON
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following tables summarize the financial data for our business. The
consolidated balance sheet data are presented as of December 31, 1998, and have
been adjusted to reflect the sale of the 3,250,000 shares of common stock we are
offering at an assumed public offering price of $15.00 per share (after
deducting estimated underwriting discounts and commissions and estimated
offering expenses) and the application of the estimated net proceeds. See
consolidated financial statements and related notes appearing elsewhere in this
prospectus, "Use of Proceeds" and "Capitalization."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues............................................... $ 15,316 $ 17,351 $ 27,164 $ 36,802 $ 47,811
Gross profit........................................... 12,577 12,404 19,878 25,050 32,866
Operating income....................................... 2,066 1,511 5,372 6,201 6,891
Net income............................................. 1,306 871 3,441 3,673 4,046
Earnings per share(2)..................................
Basic................................................ $ 0.11 $ 0.07 $ 0.29 $ 0.31 $ 0.34
Diluted.............................................. $ 0.11 $ 0.07 $ 0.29 $ 0.30 $ 0.32
Shares used in computing earnings per share
Basic................................................ 12,000 12,000 12,000 12,000 12,000
Diluted.............................................. 12,000 12,000 12,000 12,088 12,543
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
--------- --------------
<CAPTION>
CONSOLIDATED BALANCE SHEET DATA: (IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents, short-term investments and marketable securities.............. $ 15,534 $ 49,483
Working capital....................................................................... 18,717 53,389
Total assets.......................................................................... 40,063 74,012
Long-term debt and notes payable to stockholders...................................... 9,418 122
Total stockholders' equity............................................................ 17,263 61,551
</TABLE>
- --------------------------
(1) Based on the number of shares outstanding on January 31, 1999. Includes the
3,250,000 shares sold by Clontech in this offering and 202,776 shares sold
by selling stockholders that are issuable upon the exercise of outstanding
warrants, assuming the net exercise of such warrants at the closing of this
offering. Excludes (i) 846,261 shares issuable upon exercise of outstanding
options at a weighted average price of $7.61 per share under the 1997 Equity
Incentive Plan and (ii) 1,517,118 shares reserved for future grants or
purchases pursuant to our 1997 Equity Incentive Plan, 1998 Employee Stock
Purchase Plan and 1998 Non-Employee Directors' Stock Purchase Plan. See
"Management--Employee Benefit Plans."
(2) See Note 2 of notes to consolidated financial statements for a description
of the computation of earnings per share and the number of shares used in
computing earnings per share.
--------------------------
UNLESS OTHERWISE SPECIFICALLY STATED, INFORMATION THROUGHOUT THIS PROSPECTUS
(I) DOES NOT TAKE INTO ACCOUNT THE EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT
OPTION, (II) GIVES EFFECT TO A TWO-FOR-THREE REVERSE STOCK SPLIT AND (III) GIVES
EFFECT TO THE AMENDMENT OF OUR CERTIFICATE OF INCORPORATION TO AUTHORIZE THE
ISSUANCE OF 10 MILLION SHARES OF PREFERRED STOCK. SEE "DESCRIPTION OF CAPITAL
STOCK."
5
<PAGE>
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER
THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS
PROSPECTUS BEFORE DECIDING WHETHER TO INVEST IN SHARES OF OUR COMMON STOCK. IF
ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR
OPERATING RESULTS COULD BE MATERIALLY ADVERSELY AFFECTED. THIS COULD CAUSE THE
TRADING PRICE OF OUR COMMON STOCK TO DECLINE, AND YOU MAY LOSE PART OR ALL OF
YOUR INVESTMENT.
OUR OPERATING RESULTS MAY FLUCTUATE
Our operating results may vary significantly from quarter to quarter and
from year to year as a result of a variety of factors. These factors include:
- level of demand for our products;
- timing of acquisitions and investments in infrastructure;
- timing of our development and introduction of new products;
- competitive conditions;
- timing and extent of intellectual property litigation;
- exchange rate fluctuations; and
- general economic conditions.
We believe that quarterly comparisons of our financial results may not
necessarily be meaningful and should not be relied upon as an indication of
future performance. Additionally, if our operating results in one or more
quarters do not meet the expectations of securities analysts or others, the
price of our common stock could be materially adversely affected.
Our continued investments in product development and sales and marketing are
significant ongoing expenses. If revenue in a particular period falls short of
expectations, we may not be able to reduce significantly our expenditures for
that period, which would materially adversely affect our operating results for
that period.
Our product development activities often focus on unproven technologies and
undeveloped markets. As a result, we may experience difficulty in forecasting
operating expenditures, and we cannot know when or whether our efforts will
result in commercially successful products. The expenses or losses associated
with these product development activities could materially adversely affect our
operating results.
WE DEPEND ON NEW PRODUCTS FOR GROWTH
Our future success depends on our ability to develop and introduce, on a
timely basis, products that address the evolving needs of scientists. We have
experienced delays in the development, introduction and marketing of products,
and we may experience delays in the future. We cannot assure you that our new
products will meet the requirements of scientists or achieve market acceptance.
If our products fail to achieve market acceptance, we may endure periods of
slower growth. Factors affecting product acceptance include:
- perceived utility by scientists;
- availability and price of competitive products;
- technological changes;
- citations of the product in published research; and
- general trends in life science research.
6
<PAGE>
We believe that customers in our markets display a significant amount of
loyalty to their initial supplier of a particular product. Therefore, it may be
difficult to generate sales to customers who have historically purchased
products from competitors. Further, we believe that there is a significant
competitive advantage in being the first to introduce a new product to market.
Accordingly, we believe that to compete effectively, we consistently need to be
the first to market with important new research products. If we are not the
first to develop and supply new products, our competitive position may suffer.
If we are unable to develop and introduce products in a timely manner, or if our
products do not obtain market acceptance, our business, financial condition and
results of operations could be materially adversely affected.
WE NEED TO EXPAND OUR OPERATIONS AND MANAGE OUR GROWTH
We have recently experienced, and continue to experience, significant growth
in the number of employees and the scope of our operations. This growth places a
significant strain on our management and operations. Our ability to manage
growth effectively will depend upon our ability to:
- attract, hire and retain skilled scientists, managers and other employees;
- increase our international presence and our North American sales force;
- implement and improve our operational, information and financial control
systems;
- expand our manufacturing capabilities; and
- grow our customer service and technical service resources.
Such expansion could result in significant burdens on our systems and
resources. Additionally, because of the lack of available and affordable
facilities, we believe that we may have difficulty expanding our operations in
the Palo Alto area. If we are unable to manage our growth effectively, our
business, financial condition and results of operations could be materially
adversely affected.
WE DEPEND ON PATENTS AND PROPRIETARY TECHNOLOGY
Patent protection for compositions of matter, processes and methods is
prevalent in the life science industry and continues to expand. As more patents
are issued to third parties, we expect that more of these third party patents
will cover aspects of our products. From time to time, we expect to receive
invitations to license patented technology from these parties or be sued for
patent infringement. For example, we are aware of patents and pending
applications held by third parties that may relate to our array technology. We
cannot assure you that we will not infringe these patents or other proprietary
rights belonging to other parties. We may not be able to license certain
technology on acceptable terms, or at all, and, as a result, we may need to
discontinue the sale of certain products or engage in patent litigation. We
currently market products containing several variants of a green fluorescent
protein ("GFP"), which, during 1998, accounted for less than 3% of revenue.
Aurora Biosciences Corporation owns the exclusive rights to patents for certain
aspects of GFP. Our current position with respect to these patents is unclear.
We may find it necessary to discontinue selling our GFP products, license
certain of Aurora's patent rights or participate in patent litigation.
We rely upon a combination of patents and trade secrets to establish and
protect our own proprietary rights to our technologies. As of January 31, 1999,
we owned six issued patents in the United States, had 42 pending patent
applications in the United States and had nine pending foreign patent
applications. We believe that the success of our business, in part, depends on
our ability to obtain and maintain patent protection for our technology.
However, our patent position is generally uncertain. Any patent issued or
licensed to us may not provide protection that has
7
<PAGE>
commercial significance. Our competitors may independently develop technologies
similar to ours, duplicate the technology owned or licensed to us, or design
around patented aspects of our technology. In addition, it may be necessary to
engage in litigation to protect our intellectual property position.
Intellectual property litigation generally is expensive, involves complex
legal and factual questions and requires a significant commitment of
management's time. If we are forced to participate in patent litigation, our
business, financial condition and results of operations could be materially
adversely affected.
In December 1996, we were sued by Life Technologies, Inc. ("LTI") in the
Federal District Court of the Southern District of Maryland. LTI alleges that we
have infringed their patents, induced third parties to infringe their patents,
and violated the terms of a label license. In addition, in December 1998, we
sued LTI in the Federal District Court of the District of Delaware alleging
violation of the patent marking statute and violations of the Delaware Deceptive
Trade Practices Act. We believe that LTI's allegations are without merit. We are
defending ourselves against each allegation and we intend to pursue our suit
against LTI vigorously. However, we cannot predict the outcome of either case,
and, if LTI succeeds in its lawsuit against us, our business may be materially
adversely affected.
We rely upon trade secrets in the development and manufacture of many of our
principal products. We attempt to protect our trade secrets by entering into
confidentiality agreements with all of our employees, consultants and advisors.
However, these agreements cannot prevent the unauthorized use or disclosure of
such trade secrets or know-how. In addition, others may obtain access to or
independently develop similar or equivalent trade secrets or know-how.
WE DEPEND ON LICENSES FROM THIRD PARTIES
We develop many of our products from platform technologies that are licensed
from third parties such as academic institutions, private and public
foundations, and biotechnology companies. We depend, in part, on the patent
rights licensed from third parties with respect to our PCR, array, fluorescence,
gene expression systems and enzyme technologies. Under these license agreements,
we generally pay the licensors up-front fees and royalties. If we fail to
maintain these and other licenses, our rights to such technology and our
business could be materially adversely affected. Our future success depends, in
part, on our ability to license new technologies on a timely basis. We may not
be able to successfully identify new technologies developed by others. In
addition, in order to avoid patent infringement litigation, we may be required
to license certain technology rights. We may not be able to negotiate license
agreements on favorable terms.
OUR INDUSTRY IS HIGHLY COMPETITIVE AND IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE
The market for our products is highly competitive, and we expect competition
to increase. We compete with many other life science research product suppliers.
We have significantly fewer research and development, marketing, financial and
other resources than many of our competitors. These competitors may have
developed or could in the future develop new technologies that compete with our
products or render our products obsolete. The principal competitive factors in
our market include the following:
- product performance, features and reliability;
- price;
- timing of product introduction;
- sales and distribution capability;
8
<PAGE>
- technical support and service; and
- breadth of product line.
There are few barriers to entry into our market, and new competitors
frequently enter our market. In particular, we are likely to encounter increased
competition as we introduce products into the target validation market. We
currently benefit from sales in emerging niche research markets, which, as they
expand, may also attract the attention of our competitors. We cannot accurately
predict how competitive pressures will affect our business.
Certain of our academic and commercial customers have developed purchasing
initiatives to reduce their number of vendors in order to lower their supply
costs. In some cases, these accounts have established preferred purchase
agreements with large distributors, which include discounts. Some of our
competitors have in the past and may in the future compete by lowering prices on
certain products. In certain cases, we may respond by lowering our prices. In
addition, if we fail to anticipate, recognize and implement new marketing and
distribution strategies based upon the Internet or other marketing trends, our
business may be materially adversely affected.
THERE ARE MANY RISKS RELATING TO INTERNATIONAL SALES AND OPERATIONS
During 1998, sales to customers outside North America accounted for
approximately 36% of our revenue, the majority of which was to customers in
Europe and Asia. We expect that international sales will continue to account for
a significant and increasing percentage of our revenues for the foreseeable
future, in part because we intend to expand our international operations.
However, foreign markets for our products may develop more slowly than we
currently anticipate. Our international sales are subject to a number of risks,
including the following:
- foreign currency devaluation and fluctuation in exchange rates;
- difficulties and costs associated with staffing and managing foreign
operations;
- unexpected changes or difficulties in compliance with legislative or
regulatory requirements;
- delays resulting from difficulty in obtaining export and import licenses
for certain technology;
- delays in collecting accounts receivable;
- tariffs, quotas and other trade restrictions;
- limited protection for intellectual property rights in some countries;
- potential increased costs associated with overlapping tax structures; and
- general economic and political conditions.
We have established international subsidiaries to replace distributor
relationships in Japan, Germany and the United Kingdom. As we opened such
subsidiaries, we incurred significant start-up costs. Future openings of new
international offices, if any, and the accompanying increase in our sales force
would result in additional expenses and burdens on our systems and resources.
Our international direct sales force may not be able to compete successfully
against local competitors or established international distributors that
represent the products of competing companies.
WE RELY ON RESEARCH AND DEVELOPMENT BUDGETS AND GOVERNMENT RESEARCH FUNDING
Our customers include scientists at pharmaceutical and biotechnology
companies, academic institutions and government laboratories. Fluctuations in
the research and development budgets of these companies and institutions may
have a significant effect on the demand for our products. Research and
development budgets fluctuate due to changes in available resources, spending
9
<PAGE>
priorities, institutional budgetary policies and other factors outside of our
control. The funding associated with grants from government agencies, including
the United States National Institutes of Health, generally becomes available at
particular times of the year, the timing of which may result in fluctuations in
our operating results. In the past, grants have been frozen for extended periods
or have otherwise become unavailable to various institutions, sometimes without
advance notice. Any decrease in life science research and development
expenditures or availability of government funding could materially adversely
affect our business.
WE DEPEND ON KEY PERSONNEL AND NEED ADDITIONAL PERSONNEL
We are highly dependent upon our ability to attract and retain certain key
managerial, scientific, and technical personnel. We compete for such personnel
with academic institutions, pharmaceutical companies and our competitors, among
others. In addition, our success depends on our ability to hire qualified
marketing and sales personnel. We intend to increase our North American sales
force to over 25 individuals by mid-2000. The loss of key personnel or the
inability to hire and retain qualified personnel could materially adversely
affect our product development efforts and our business.
WE DEPEND ON KEY SUPPLIERS
We purchase certain key raw materials, including RNA, from a limited number
of suppliers, some of whom are located overseas. We believe there are relatively
few alternative sources of supply for certain of these raw materials. Although
we maintain significant inventories, if our current suppliers become unable or
unwilling to supply raw materials when needed and we are unable to obtain
alternative suppliers, we may be unable to manufacture and market certain
products. Resulting delays or reductions in product shipments could damage
relationships with our customers. Further, a significant increase in the price
of one or more of these raw materials by our suppliers could materially
adversely affect our gross margin or operating results.
WE ARE CONTROLLED BY CERTAIN STOCKHOLDERS AND MANAGEMENT
Following this offering, our founders, directors and executive officers and
their affiliates will beneficially own approximately 75.7% of the outstanding
shares of common stock (73.1% if the underwriters' over-allotment option is
exercised in full) and Kenneth S. Fong, Ph.D. and Pamela P. Fong, O.D. will
beneficially own approximately 56.3% of the outstanding shares of common stock
(54.4% if the underwriters' over-allotment option is exercised). These
stockholders, if acting together, will be able to significantly influence all
matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or other business combination
transactions. Such control could have the effect of delaying or preventing a
change in control and may make some transactions difficult or impossible without
the support of these stockholders.
WE ARE NOT YET YEAR 2000 COMPLIANT
Many currently installed computer systems are not capable of distinguishing
21(st) century dates from 20(th) century dates. As a result, in less than one
year, computer systems and software used by many companies will experience
operating difficulties unless they are modified or upgraded to adequately
process information involving the century change.
We are heavily dependent upon the proper functioning of our own computer and
data-dependent systems. This includes, but is not limited to, systems used by
our finance, operations, manufacturing and service departments. In addition, we
are dependent on our vendors and suppliers, who utilize computer systems and
software in their operations. Any failure or
10
<PAGE>
malfunctioning on the part of these or other systems could materially adversely
affect our business in ways we cannot anticipate.
We cannot assure you that we will successfully identify and address all Year
2000 issues. Even if we act in a timely manner to complete all of our
assessments, identify, develop and implement remediation plans believed to be
adequate, some problems may not be identified or corrected in time to prevent
material adverse consequences to our business.
OUR STOCK PRICE MAY FLUCTUATE AND THE MARKET FOR OUR STOCK MAY BE VOLATILE
We cannot predict whether an active trading market will develop for our
common stock. The initial public offering price for the shares was determined by
negotiations between Clontech and the representatives of the underwriters and
may not be indicative of prices that will prevail in the trading market. The
stock market has experienced significant price and volume fluctuations, and the
market prices of securities of life science and biotechnology companies have
been highly volatile. Investors may not be able to resell their shares at or
above the initial public offering price. See "Underwriting."
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against such a company. Such litigation could result in substantial
costs and a diversion of our management's attention and resources.
OUR BUSINESS USES HAZARDOUS MATERIALS AND SUBJECTS US TO ENVIRONMENTAL LAWS AND
REGULATIONS
Our research and development activities involve the controlled use of
hazardous materials, chemicals and radioactive compounds. We believe that we are
in compliance in all material respects with applicable federal, state and local
laws and regulations governing the storage, use, and disposal of such materials
and certain waste products. However, our safety procedures for handling and
disposing of hazardous materials may not fully comply with these standards. In
the future, regulators may require us to incur significant costs to comply with
environmental laws and regulations. In addition, our employees may be
accidentally contaminated or injured from these materials. In the event of such
an accident, we could be held liable for any damages that result.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY MAKE IT
MORE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US
Certain provisions of our certificate of incorporation and bylaws may make
it more difficult for a third party to acquire us, even if a change of control
would be beneficial to our stockholders. These provisions include the inability
of stockholders to act by written consent without a meeting, limits on the
ability to remove directors and certain procedures required for director
nominations and stockholder proposals. In addition, certain provisions of
Delaware law may also delay or make more difficult a merger, tender offer or
proxy contest. The Board of Directors is authorized to issue up to 10,000,000
shares of preferred stock and to determine the preferences, rights and
privileges of those shares without any further votes or actions by the
stockholders. The rights of the holders of common stock may be materially
adversely affected by the rights of the holders of any preferred stock that may
be issued. As a result, the issuance of preferred stock could decrease the
market value of our common stock.
FUTURE SALES OF SHARES MAY AFFECT THE MARKET PRICE OF OUR COMMON STOCK
The market price of our common stock could drop as a result of sales of a
large number of shares in the market after this offering or in response to the
perception that such sales could occur. All of the 3,750,000 shares sold in this
offering will be freely tradable, while the 11,703,683 other
11
<PAGE>
shares outstanding after this offering will be "restricted securities" as
defined in Rule 144 ("Rule 144") of the Securities Act of 1933, as amended (the
"Securities Act"). All of these restricted securities will be subject to 180-day
lock-up agreements. After expiration of the lock-up period, all of such shares
will be eligible for immediate sale, and in certain instances subject to the
volume limitations of Rule 144. BT Alex. Brown can release shares from one or
more of the lock-up agreements without our approval. After the lock-up
agreements expire, the holders of 3,017,142 shares of common stock have the
right to request that we register those shares for sale in the public market. In
addition, we intend to file a registration statement on Form S-8 with respect to
an aggregate of 1,913,379 shares of common stock issuable upon exercise of
options under our option plans and 450,000 shares reserved for purchase under
our 1998 Employee Stock Purchase Plan.
MANAGEMENT HAS BROAD DISCRETION OVER THE NET PROCEEDS OF THE OFFERING
Assuming an offering price of $15.00 per share, we estimate that we will
receive net proceeds of approximately $44.3 million from the sale of the shares
of common stock we are offering. We expect to use approximately $10.4 million
for the retirement of debt, approximately $5.0 million for the expansion of
manufacturing capacity, and approximately $4.0 million for the expansion of
marketing and sales infrastructure. Although we have allocated the proceeds of
the offering to specific uses, our management and Board of Directors have the
discretion to change these allocations. The balance of the proceeds will be used
for working capital and general corporate purposes. We currently have no
specific plans for this balance. We may not be able to yield a significant
return on any investment of the proceeds.
YOU WILL EXPERIENCE IMMEDIATE DILUTION IN THE NET TANGIBLE BOOK VALUE OF THE
COMMON STOCK YOU PURCHASE
Purchasers of our common stock will incur immediate dilution of $11.02 per
share in the net tangible book value of our common stock from the assumed
initial public offering price of $15.00 a share. Additional dilution will occur
upon the exercise of options and warrants.
12
<PAGE>
USE OF PROCEEDS
We estimate that net proceeds from the sale of 3,250,000 shares of common
stock that we are offering will be $44.3 million. If the underwriters'
over-allotment option is exercised in full, we estimate that the net proceeds
will be approximately $52.1 million. We have assumed an initial public offering
price of $15.00 per share after deducting estimated underwriters' discounts and
commissions and estimated offering expenses.
We anticipate using approximately $6.5 million of the net proceeds from this
offering to retire our 12% Subordinated Notes held by stockholders,
approximately $5.0 million for expansion of manufacturing capacity,
approximately $4.0 million for expansion of marketing and sales infrastructure
and approximately $3.9 million to retire other long-term indebtedness. However,
these allocations are estimates and we will retain broad discretion over the use
of the net proceeds of this offering. We intend to use the balance of the net
proceeds for working capital and general corporate purposes. The amounts and
timing of the expenditures for these purposes may vary significantly depending
on numerous factors, such as the progress of our research and development
efforts, technological advances and the competitive environment for our
products. We may also use a portion of the net proceeds to acquire or invest in
complementary businesses, products and technologies. We are not currently
planning any acquisition and no portion of the net proceeds have been allocated
for any specific acquisition.
We believe that our available cash, together with the net proceeds of this
offering, will be sufficient to meet our capital requirements for the
foreseeable future. Pending use of the net proceeds, we intend to invest the net
proceeds in short-term, interest bearing, investment grade securities.
DIVIDEND POLICY
We have never paid cash dividends on our capital stock. We intend to retain
earnings for use in the operation and expansion of our business, and therefore
do not anticipate paying any cash dividends in the foreseeable future.
13
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998,
(i) on an actual basis and (ii) as adjusted to give effect to the sale of
3,250,000 shares of common stock we are offering at an assumed initial public
offering price of $15.00 per share (after deducting estimated underwriting
discounts and commissions and our estimated offering expenses) and the
application of the estimated net proceeds. See "Use of Proceeds."
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt and notes payable to stockholders........................................ $ 9,418 $ 122
Stockholders' equity
Preferred stock, $0.001 par value; no shares authorized, no shares issued and
outstanding actual; 10,000,000 shares authorized, no shares issued and outstanding
as adjusted......................................................................... -- --
Common stock, $0.001 par value; 50,000,000 shares authorized, 12,000,000 shares issued
and outstanding actual; 50,000,000 shares authorized, 15,452,776 shares issued and
outstanding as adjusted(1).......................................................... 1 4
Additional paid-in capital............................................................ 959 45,244
Accumulated other comprehensive income................................................ 28 28
Deferred stock compensation........................................................... (413) (413)
Retained earnings..................................................................... 16,688 16,688
--------- ------------
Total stockholders' equity........................................................ 17,263 61,551
--------- ------------
Total capitalization........................................................... $ 26,681 $ 61,673
--------- ------------
--------- ------------
</TABLE>
------------------------
- ------------------------
(1) Based on the number of shares outstanding on December 31, 1998. Includes the
3,250,000 shares sold by Clontech in this offering and 202,776 shares sold
by selling stockholders that are issuable upon the exercise of outstanding
warrants, assuming the net exercise of such warrants at the closing of this
offering. Excludes (i) 847,168 shares issuable upon exercise of outstanding
options at a weighted average price of $7.61 per share under the 1997 Equity
Incentive Plan and (ii) 1,517,118 shares reserved for future grants or
purchases pursuant to our 1997 Equity Incentive Plan, 1998 Employee Stock
Purchase Plan and 1998 Non-Employee Directors' Stock Purchase Plan. See
"Management--Employee Benefit Plans."
14
<PAGE>
DILUTION
The net tangible book value of Clontech, as of December 31, 1998, was $17.3
million, or $1.44 per share of common stock. Net tangible book value per share
represents the amount of total tangible assets less total liabilities divided by
the number of shares of common stock outstanding at that date. After giving
effect to the sale by Clontech of the 3,250,000 shares of common stock being
offered hereby at an assumed initial public offering price of $15.00 per share
and the sale by existing stockholders of 202,776 shares that will be issued upon
the net exercise of outstanding warrants at the closing of this Offering, and
after deducting estimated underwriting discounts and commissions and estimated
offering expenses, our pro forma net tangible book value as of December 31,
1998, would have been $61.6 million or $3.98 per share. This represents an
immediate increase in pro forma net tangible book value of $2.54 per share to
existing stockholders and an immediate dilution of $11.02 per share to new
investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................ $ 15.00
Net tangible book value per share at December 31, 1998................... $ 1.44
Increase per share attributable to new investors......................... 2.54
---------
Pro forma net tangible book value per share after this offering............ 3.98
-----------
Dilution per share to new investors........................................ $ 11.02
-----------
-----------
</TABLE>
The following table summarizes, on a pro forma basis, as of December 31,
1998, and assuming the issuance of 202,776 shares upon the net exercise of
warrants at the closing of this offering, the differences between the number of
shares of common stock purchased from Clontech, the total consideration paid and
the average price per share paid by existing stockholders and by the new
investors purchasing shares in this offering (at an assumed initial public
offering price of $15.00 per share and before deducting estimated underwriting
discounts and commissions and estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------ PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).......... 12,202,776 79% $ 1,000 0% $ 0.0001
New investors..................... 3,250,000 21 48,750,000 100.0 $ 15.00
---------- ----- ----------- -----
Total......................... 15,452,776 100.0% $48,751,000 100.0%
---------- ----- ----------- -----
---------- ----- ----------- -----
</TABLE>
- ------------------------
(1) Sales by the selling stockholders in this offering will reduce the number of
shares of common stock held by existing stockholders to 11,702,776 shares,
or 76% of the shares of common stock outstanding, and will increase the
number of shares to be purchased by new investors to 3,750,000, or
approximately 24% of the total number of shares of common stock outstanding
after this offering (approximately 27% if the underwriters' over-allotment
option is exercised in full). See "Principal and Selling Stockholders."
The foregoing discussion and tables assume no exercise of any outstanding
stock options or warrants. As of December 31, 1998, there were outstanding (i)
options to purchase 847,168 shares of common stock, at a weighted average
exercise price of $7.61 per share and (ii) warrants to purchase 549,824 shares
of common stock at an exercise price of $9.09 per share. In addition, as of
December 31, 1998, there were an aggregate of 1,517,118 shares reserved for
future grants or purchases pursuant to our 1997 Equity Incentive Plan, 1998
Employee Stock Purchase Plan and 1998 Non-Employee Directors' Stock Option Plan.
To the extent that any shares reserved for issuance under our stock plans or the
warrants are issued, there will be further dilution to new investors. See
"Capitalization," "Management--Employee Benefit Plans" and Note 12 of notes to
consolidated financial statements.
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with Clontech's consolidated financial statements and related notes
included elsewhere in this prospectus and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere herein. The
consolidated statement of operations data for the years ended December 31, 1996,
1997 and 1998, and the consolidated balance sheet data as of December 31, 1997
and 1998, are derived from the audited consolidated financial statements
included elsewhere in this prospectus. The consolidated balance sheet data as of
December 31, 1995 and 1996, and the consolidated statement of operations data
for the year ended December 31, 1995, are derived from audited consolidated
financial statements not included herein. The consolidated statement of
operations data and consolidated balance sheet data as of and for the year ended
December 31, 1994, is derived from audited consolidated financial statements not
included herein. The 1994 audited consolidated financial statements were audited
by a predecessor auditor whose report contains a qualification concerning the
fact that it did not observe the physical inventory at December 31, 1994. The
historical results are not necessarily indicative of results to be expected for
future periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 15,316 $ 17,351 $ 27,164 $ 36,802 $ 47,811
Cost of revenues............................................ 2,739 4,947 7,286 11,752 14,945
--------- --------- --------- --------- ---------
Gross profit.............................................. 12,577 12,404 19,878 25,050 32,866
--------- --------- --------- --------- ---------
Operating expenses
Research and development.................................. 1,416 4,483 3,684 5,085 7,014
Selling, general and administrative....................... 9,095 6,410 10,822 13,764 18,961
--------- --------- --------- --------- ---------
Total operating expenses.................................... 10,511 10,893 14,506 18,849 25,975
--------- --------- --------- --------- ---------
Operating income............................................ 2,066 1,511 5,372 6,201 6,891
Interest and other income (expense), net.................. 19 (19) 171 (162) (261)
--------- --------- --------- --------- ---------
Income before provision for income taxes.................... 2,085 1,492 5,543 6,039 6,630
Provision for income taxes.................................. 779 621 2,102 2,366 2,584
--------- --------- --------- --------- ---------
Net income.................................................. $ 1,306 $ 871 $ 3,441 $ 3,673 $ 4,046
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings per share(1)
Basic..................................................... $ 0.11 $ 0.07 $ 0.29 $ 0.31 $ 0.34
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Diluted................................................... $ 0.11 $ 0.07 $ 0.29 $ 0.30 $ 0.32
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Shares used in computing earnings per share
Basic..................................................... 12,000 12,000 12,000 12,000 12,000
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Diluted................................................... 12,000 12,000 12,000 12,088 12,543
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents, short-term investments and marketable
securities.................................................. $ 1,746 $ 3,088 $ 5,147 $ 11,859 $ 15,534
Working capital............................................... 3,315 4,512 6,761 13,341 18,717
Total assets.................................................. 7,101 10,699 16,580 31,038 40,063
Long-term debt and notes payable to stockholders.............. 286 2,324 1,920 8,067 9,418
Total stockholders' equity.................................... 4,616 5,529 8,949 13,111 17,263
</TABLE>
- --------------------------
(1) See Note 2 of notes to consolidated financial statements for a description
of the computation of earnings per share and the number of shares used in
computing earnings per share.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS. THE
FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS, THAT REFLECT OUR PLANS
AND ESTIMATED BELIEFS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES, INCLUDE THOSE DISCUSSED BELOW AND ELSEWHERE IN
THIS PROSPECTUS, PARTICULARLY IN "RISK FACTORS."
OVERVIEW
We develop, manufacture and market products that allow scientists to conduct
gene-based drug discovery and other essential molecular biology research
efficiently and reliably. Since Clontech's inception in 1984, we have grown
rapidly and have assembled a portfolio of approximately 1,500 products. Since
1994, our revenues have grown at a compounded annual rate of 33%. We rely on new
product introductions for a significant portion of our growth. In 1998, new
products introduced in that year generated $4.7 million, or 9.8%, of revenues.
In 1997, new products introduced in that year generated $2.8 million, or 7.6%,
of revenues.
We manufacture the majority of our products at our facility in Mountain
View, California. The vast majority of our products are shipped the same day
that orders are received. In order to meet the same day shipment policy, we
maintain relatively high levels of inventory. We have never had and do not
anticipate having a significant backlog.
International revenues accounted for 36% of consolidated revenues in 1998,
and we expect international revenues to grow at a higher rate than our North
American revenues in the next several years. Our international customers are
serviced through a combination of our subsidiaries in Japan, Germany and the
United Kingdom, our 25 distributors and direct shipments from the United States.
As we have opened our foreign sales, service and distribution subsidiaries, we
have incurred significant start-up costs. In the future, where appropriate, we
may shift from third party distribution to direct sales on a country-by-country
basis.
The markets for our products are characterized by rapid technological change
and frequent new product introductions. Our continued investment in product
development is a significant ongoing expense, and we often focus on unproven
technologies and undeveloped markets. As a result, we may experience difficulty
in forecasting operating expenditures, and we cannot know whether such efforts
will result in commercially successful products. We expect that our research and
development spending in absolute terms and as a percentage of revenue will
continue to increase as the number of new products under development increases
and our product development cycles lengthen.
Patent litigation is prevalent in the life science industry, and, as more
patents are issued, we expect that we may be sued by third parties alleging
infringement of their patents. Such litigation will result in the diversion of
management's time and effort and will result in increased legal expenses. For
example, in December 1996, we were sued by Life Technologies, Inc. ("LTI").
Expenses related to the LTI litigation have fluctuated significantly over the
periods presented, depending on the level of activity in pursuing the
litigation. See "Business--Legal Proceedings."
To support our historical and future growth, we have made and expect to
continue to make investments in research and development, North American and
international sales and service infrastructure and additional manufacturing
capability. The expenses associated with these investments may reduce future
operating results. We anticipate that results of operations may fluctuate due to
several factors, including changes in research budgets and demand for our
products, our ability to introduce new products successfully, competitive
product introductions,
17
<PAGE>
continued market acceptance of existing products, our ability to manufacture our
products efficiently and our ability to control or adjust operating expenses in
response to changes in revenues. In addition, results of operations could be
affected by the timing of orders from distributors and the mix of sales among
distributors and our direct sales force and between North American and
international customers. In addition, our quarterly revenue may vary depending
upon the level of activity under, and the completion of, contract research and
development agreements. In the past, we have incurred significant expenses
related to defending and enforcing our proprietary intellectual property
positions, and we expect to continue to incur such expenses in the future.
Although we have experienced growth in recent years, we cannot assure you that,
in the future, we will sustain revenue growth or remain profitable on a
quarterly or annual basis or that growth will be consistent with predictions
made by securities analysts.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
REVENUES. Our revenues were $47.8 million for the year ended December 31,
1998, an increase of 30% over revenues of $36.8 million for the year ended
December 31, 1997. This increase in revenues was attributable in part to
revenues from new products introduced in 1998, which generated $4.7 million in
sales. In addition, in 1998, we increased the size of our North American direct
sales force, which further increased our sales. In the first half of 1998, we
established subsidiaries in Japan and the United Kingdom, two of our largest
international markets, to replace exclusive distributors in these markets. Our
revenues in Japan and the United Kingdom increased due to higher average selling
prices as well as more focused sales efforts in those countries. We expect that
future revenues will depend on our ability to successfully introduce new
products, the availability of new technologies to license, our ability to expand
our customer base, the continued funding of academic, government and corporate
life science research budgets and competitive conditions in the marketplace.
COST OF REVENUES. Our cost of revenues was $14.9 million for the year ended
December 31, 1998, an increase of 27% over cost of revenues of $11.8 million for
the year ended December 31, 1997. Our gross margin was 69% for the year ended
December 31, 1998, and 68% for the year ended December 31, 1997. This increase
in gross margin was primarily due to the change to direct sales in Japan and the
United Kingdom, where our products have higher average selling prices. This
increase was partially offset by an increase in overhead costs related to the
expansion of our manufacturing facilities at the end of 1997. We intend to
increase our licensing of new technologies in future periods, which would result
in higher royalty payments and could lower gross margins. Other factors most
likely to affect our gross margins in future periods include the North American
and international sales mix, competitive conditions and foreign exchange rates.
RESEARCH AND DEVELOPMENT. Our research and development expenses were $7.0
million for the year ended December 31, 1998, an increase of 38% over research
and development expenses of $5.1 million for the year ended December 31, 1997.
These expenses were 15% of revenues for the year ended December 31, 1998, and
14% of revenues for the year ended December 31, 1997. This increase in research
and development spending in absolute terms and as a percentage of revenue was
due to an increase in the number of new products under development. In addition,
in 1998, we focused on technologies that have a longer product development
cycle. Research and development spending consists primarily of personnel
expenses, material costs and licensing. We expect to increase our licensing of
new technologies in the future, which may result in higher research and
development spending related to up-front license fees and the commercialization
of these technologies.
18
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE. Our selling, general and
administrative expenses were $19.0 million for the year ended December 31, 1998,
an increase of 38% over selling, general and administrative expenses of $13.8
million for the year ended December 31, 1997. These expenses were 40% of
revenues for the year ended December 31, 1998, and 37% of revenues for the year
ended December 31, 1997. This increase is due primarily to the increased costs
of defending the patent infringement dispute with LTI. In the first half of
1998, establishment of our subsidiaries in Japan and the United Kingdom
increased selling and administrative costs in these countries. Additionally, in
1998, the expansion of our North American direct sales force increased selling
and administrative costs. We expect that general and administrative costs in
future periods will increase in absolute terms due in part to the additional
expenses related to being a public company.
INTEREST AND OTHER INCOME (EXPENSE), NET. Net interest and other expense
was $261,000 for the year ended December 31, 1998, and $162,000 for the year
ended December 31, 1997. In 1998, interest expense was $1.1 million, comprised
primarily of interest relating to the issuance of 12% Subordinated Notes to
stockholders in late 1997. This interest expense was partially offset by
interest income on cash and cash equivalent balances and foreign exchange gains.
In 1997, interest expense was $455,000, comprised primarily of interest relating
to term loans used to finance leasehold improvements. This interest expense was
partially offset by $315,000 in interest income on cash and cash equivalent
balances.
YEARS ENDED DECEMBER 31, 1997 AND 1996
REVENUES. Our revenues were $36.8 million for the year ended December 31,
1997, an increase of 35% over revenues of $27.2 million for the year ended
December 31, 1996. This increase in revenue related primarily to an increase in
the size of the North American sales force and introduction of new products in
1997, which generated $2.8 million in sales.
COST OF REVENUES. Our cost of revenues was $11.8 million for the year ended
December 31, 1997, an increase of 61% over the cost of revenues of $7.3 million
for the year ended December 31, 1996. Gross margin was 68% for the year ended
December 31, 1997, and 73% for the year ended December 31, 1996. Gross margin
decreased in part because our product mix shifted towards products with higher
royalty rates. Additionally, in 1997, we added a new manufacturing facility and
incurred related personnel, equipment and moving expenses.
RESEARCH AND DEVELOPMENT. Our research and development expenses were $5.1
million for the year ended December 31, 1997, an increase of 38% over research
and development expenses of $3.7 million for the year ended December 31, 1996.
These expenses were relatively constant at 14% of revenues for the years ended
December 31, 1997 and 1996. This increase in absolute terms was primarily due to
an increase in personnel to support new research and development initiatives.
SELLING, GENERAL AND ADMINISTRATIVE. Our selling, general and
administrative expenses were $13.8 million for the year ended December 31, 1997,
an increase of 27% over selling, general and administrative expenses of $10.8
million for the year ended December 31, 1996. These expenses were 37% of
revenues for the year ended December 31, 1997, and 40% for the year ended
December 31, 1996. This increase in absolute terms was primarily due to
increased spending in marketing and sales to support existing and new product
sales growth. Also, expenses associated with establishing operations in the
United Kingdom were incurred in late 1997. The costs of defending the LTI
lawsuit increased in 1997 compared to 1996.
INTEREST AND OTHER INCOME (EXPENSE), NET. Net interest and other expense
was $162,000 for the year ended December 31, 1997, compared to net interest and
other income of $171,000 for the year ended December 31, 1996. In 1997, interest
expense was $455,000, comprised primarily of interest relating to term loans
used to finance leasehold improvements. This interest expense was
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partially offset by $315,000 in interest income on cash and cash equivalent
balances. In 1996, interest and other income was $390,000, consisting of
interest income on cash and cash equivalent balances and other income. This
interest income was partially offset by $219,000 in interest expense relating to
term loans used to finance leasehold improvements.
QUARTERLY RESULTS OF OPERATIONS
The following table represents quarterly operating results for each of the
last eight quarters. This information has been derived from unaudited financial
statements and has been prepared on the same basis as our audited financial
statements, which appear elsewhere in this prospectus. In our opinion, this
information reflects all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such information in accordance
with generally accepted accounting principles. The operating results for any
quarter are not necessarily indicative of the results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
----------- ----------- ----------- ----------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........................... $ 8,283 $ 9,147 $ 9,803 $ 9,569 $ 11,505 $ 10,635 $ 12,890 $ 12,781
Cost of revenues................... 2,765 2,816 3,125 3,046 3,807 3,444 3,922 3,772
----------- ----------- ----------- ----------- --------- --------- --------- ---------
Gross profit..................... 5,518 6,331 6,678 6,523 7,698 7,191 8,968 9,009
----------- ----------- ----------- ----------- --------- --------- --------- ---------
Operating expenses:
Research and development......... 1,131 1,233 1,349 1,372 1,280 1,633 1,934 2,167
Selling, general and
administrative................. 3,062 3,358 3,414 3,930 4,360 4,310 4,875 5,416
----------- ----------- ----------- ----------- --------- --------- --------- ---------
Total operating expenses........... 4,193 4,591 4,763 5,302 5,640 5,943 6,809 7,583
----------- ----------- ----------- ----------- --------- --------- --------- ---------
Operating income................... 1,325 1,740 1,915 1,221 2,058 1,248 2,159 1,426
Interest and other income
(expense), net................... 2 25 (73) (116) (101) (139) (155) 134
----------- ----------- ----------- ----------- --------- --------- --------- ---------
Income before provision for income
taxes............................ 1,327 1,765 1,842 1,105 1,957 1,109 2,004 1,560
Provision for income taxes......... 522 695 719 430 746 438 787 613
----------- ----------- ----------- ----------- --------- --------- --------- ---------
Net income......................... $ 805 $ 1,070 $ 1,123 $ 675 $ 1,211 $ 671 $ 1,217 $ 947
----------- ----------- ----------- ----------- --------- --------- --------- ---------
----------- ----------- ----------- ----------- --------- --------- --------- ---------
</TABLE>
REVENUES. Our revenues have generally increased from quarter to quarter
over the periods presented. These increases have resulted primarily from growth
in the North American sales force, the introduction of new products and
switching in certain markets from distributorships to direct sales and service
subsidiaries. As a result of a change in our Japanese distributor agreement,
which became effective April 1, 1998, we discontinued our practice of
recognizing revenue upon the shipment of product by our subsidiary to our
distributor and began to recognize revenue only after our distributor shipped
product to its customers. Our revenues were lower in the quarter ended June 30,
1998, as our distributor sold through its inventory of products upon which we
had previously recorded revenue. Additionally, our business generally
experiences a pattern of seasonality with somewhat lower revenues in the fourth
quarter of each year compared to prior quarters due to reduced selling days in
November and December.
COST OF REVENUES. Our cost of revenues has fluctuated with sales over the
periods presented. Gross margins have increased from 67% in the first quarter of
1997 to 70% in the fourth quarter of 1998. This increase was due primarily to a
change to direct sales in Japan and the United Kingdom and was partially offset
by an increase in overhead costs related to expansion of our manufacturing
facilities at the end of 1997.
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RESEARCH AND DEVELOPMENT. Our research and development expenses have
generally increased over the periods presented. This increase is primarily a
result of an increased number of new research and development personnel to
support products under development, as well as an increase in the length of
product development cycles.
SELLING, GENERAL AND ADMINISTRATIVE. Our selling, general and
administrative expenses have increased in absolute terms over the periods
presented as our infrastructure has expanded to support our higher levels of
sales. As a percentage of revenues, our selling, general and administrative
expenses have fluctuated on a quarterly basis. In the quarters ended December
31, 1997, and March 31, 1998, we incurred start-up costs related to the
establishment of new subsidiaries in Japan and the United Kingdom. Additionally,
expenses related to the LTI litigation have fluctuated significantly over the
periods presented depending on the level of activity in pursuing the litigation.
INTEREST AND OTHER INCOME (EXPENSE), NET. Interest and other income
(expense), net has fluctuated over the periods presented primarily due to the
timing and magnitude of borrowings, offset by changes in our balance of cash and
cash equivalents. In September 1997, we issued $6.0 million of 12% Subordinated
Notes, which resulted in an increase in interest expense. We periodically
experience foreign currency gains and losses.
INCOME TAXES
In 1998, 1997 and 1996, our effective tax rates were 39%, 39% and 38%,
respectively, and were below the combined federal and state statutory rate of
40% primarily due to research and development tax credits and foreign sales
corporation benefits. These tax credits have been authorized by the United
States Congress on a year-by-year basis, and we have no assurance they will be
available in future years.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations primarily through cash
generated from operations. As of December 31, 1998, we had raised $6.0 million,
net of issuance costs, from the private sale of debt and equity securities. At
December 31, 1998, we had $13.3 million in cash and cash equivalents, and an
aggregate of $6.6 million available under three lines of credit. Through
December 31, 1998, there had been no borrowings under these lines of credit. Two
lines of credit with aggregate available borrowings of $6.0 million expire on
May 31, 1999 (the "Domestic Lines"). The third line of credit is a 65.0 million
yen revolving loan (approximately $573,000 at December 31, 1998) and expires on
July 31, 1999. The Domestic Lines are secured by substantially all of our assets
and contain covenants and restrictions including certain financial ratios,
restrictions on dividend payments and maintainence of a minimum cash balance on
hand of $3.0 million. As of December 31, 1998, we were in compliance with all
such covenants and restrictions.
We have two term loans in place, the proceeds of which were used to finance
leasehold improvements. A loan for our headquarters in Palo Alto for $2.5
million was obtained in December 1995. The loan matures in December 2002, and
bears interest at the bank's Adjusted Treasuries Rate plus 2.25%. At December
31, 1998, the loan balance was $1.5 million and bore interest at a rate of 7.47%
per annum. A loan for our manufacturing facility in Mountain View was obtained
in two increments. An initial amount of $1.0 million was obtained in December
1997, and a $1.5 million increment was obtained in June 1998. This loan matures
in June 2005, and bears interest at LIBOR plus 2.25%. At December 31, 1998, the
loan balance was $2.4 million and bore interest at 7.75% per annum.
During the year ended December 31, 1998, net cash provided by operating
activities was $3.8 million, which resulted primarily from net income of $4.0
million and depreciation and amortization
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of $1.7 million. Net cash used in investing activities was $364,000, which
resulted primarily from the purchase of property and equipment and short-term
investments. Net cash provided by financing activities was $1.2 million.
During 1999, we intend to change our relationships with our distributor and
subdealers in Japan. As a result, credit terms to customers in Japan will be
extended. This will result in increased days sales outstanding beginning in the
second quarter of 1999. In addition, we expect to carry higher inventory
balances in 1999 for some of our key raw materials.
We believe that the net proceeds from this offering, together with available
funds, will be sufficient to meet our capital requirements for the foreseeable
future. We may also utilize cash to acquire or invest in complementary
businesses and technologies, although we do not have any plans, arrangements or
understandings with respect to any future acquisitions at this time. We may sell
additional equity or debt securities or obtain additional credit facilities. The
sale of additional equity securities would result in additional dilution to our
stockholders, and the incurrence of additional debt would result in additional
interest expense.
YEAR 2000 COMPLIANCE
We recently formed an internal task force consisting of senior management
and representatives from all of our functional areas to evaluate those areas of
our business that may be affected by the Year 2000 issue. The task force is
focusing primarily on three areas of potential impact: internal information
systems, internal support systems, and the readiness of significant third
parties with whom we have material business relationships. Our products do not
use or contain any parts which are susceptible to Year 2000 issues.
INTERNAL INFORMATION SYSTEMS. We are in the process of upgrading our
current domestic manufacturing, financial and accounting systems to be Year 2000
compliant, meaning that they are capable of distinguishing 21(st) century dates
from 20(th) century dates. We are in the final stages of testing and training
related to this upgrade. Total cost of the upgrade is expected to be less than
$250,000, the majority of which has already been incurred. Implementation of the
new system is expected to be complete by April 30, 1999. Our overseas
subsidiaries already operate on Year 2000 compliant accounting and distribution
systems. The internal task force has completed its inventory of other upgrades
and modifications required to be Year 2000 compliant. The cost of completing
these upgrades and modifications is not expected to be material.
INTERNAL SUPPORT SYSTEMS. Our telephone, voicemail and other systems such
as our product storage systems have been inventoried by the task force. We are
in the process of contacting the manufactures of these systems to ensure they
are Year 2000 compliant. The task force has not yet identified any internal
support system that would require significant upgrade or replacement to be Year
2000 compliant.
THIRD PARTIES. We are in the process of contacting all major suppliers to
ensure they are Year 2000 compliant.
CONTINGENCY PLANS. We are currently purchasing additional quantities of
materials from selected suppliers and expect to do so throughout 1999.
Our estimated completion dates, costs, risks and other forward-looking
statements regarding Year 2000 issues are based on our best estimates given
information that is currently available and are subject to change. As we
continue to progress with our Year 2000 initiatives, we may discover that it is
more costly, time consuming or difficult to prepare for the Year 2000. We cannot
assure you that we will be successful in our efforts to identify and address all
Year 2000 issues. Even if we act in a timely manner to complete all of our
assessments, and identify, develop and implement our
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remediation plans, some problems may not be identified or corrected in time to
prevent material adverse consequences to our business.
FOREIGN CURRENCY HEDGING
Sales made directly from the United States to our international customers
and distributors are denominated in United States dollars. However, in Japan,
Germany and the United Kingdom, we sell through subsidiaries to customers in
their local currencies. These countries accounted for 23% of our revenue in
1998. As we commence and expand our international operations, our customers may
pay us in foreign currencies, and our exposure to losses in foreign currency
transactions may increase. We have previously limited and may continue to limit
our exposure by the purchase of forward exchange contracts or through similar
hedging strategies. However, no currency hedging strategy can fully protect us
against exchange-related losses.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
changes the previous accounting definition of derivative--which focused on
freestanding contracts such as options and forwards (including futures and
swaps)--expanding it to include embedded derivatives and many commodity
contracts. Under this statement, every derivative is recorded on the balance
sheet as either an asset or liability measured at its fair value. The statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. This statement is
effective for fiscal years beginning after June 15, 1999. Earlier application is
allowed as of the beginning of any quarter beginning after issuance. We do not
anticipate that the adoption of this statement will have a material impact on
our financial position or results of operations.
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BUSINESS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS
DISCUSSED IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH A
DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS."
THE COMPANY
We develop, manufacture and market products for life science research. Our
products enable scientists to identify genes, study how cells are regulated by
genes and search for drugs that can treat diseases. We provide a portfolio of
over 1,500 products that allow scientists to perform academic research and drug
discovery more rapidly and effectively. We sell our products primarily to
scientists within government entities, academic institutions and pharmaceutical
and biotechnology companies. In 1998, our total sales were $47.8 million, and,
since 1994, our sales have grown at a 33% compounded annual rate.
INDUSTRY OVERVIEW
Life science research is conducted in biotechnology and pharmaceutical
companies as well as in academic and government laboratories. Industry analysts
estimate that there are over 300,000 scientists worldwide engaged in life
science research. Based on industry estimates, in 1997, the United States market
for bioreagents approached $1.4 billion. We believe that the life science
research market will continue to expand due to several factors, including: (i)
increasing levels of government and commercial funding for life science
research, (ii) a growing need to identify genes and to analyze their functions
based on new information generated by the Human Genome Project, a federally
funded effort to identify all human genes, and other genome sequencing projects,
(iii) the proliferation of new research initiatives made possible by rapidly
changing molecular biology research techniques, and (iv) intensifying
competition to discover new drug targets and drugs in the pharmaceutical and
biotechnology industries.
Over the past two decades, life science research has experienced substantial
advances, particularly in the field of molecular biology. Molecular biologists
have greatly furthered our understanding of DNA and RNA, the transcription of
DNA to RNA, the translation of RNA to proteins, and the role of proteins in the
regulation of biological processes. This has facilitated a better understanding
of the fundamental role of genes in cellular and molecular biological processes
and in the origin of diseases. It now is recognized that many diseases are
caused by genetic defects, by improper regulation of disease-related genes or by
the disruption of cellular pathways.
In recent years, a vast amount of new DNA sequence data has been generated
by the Human Genome Project and privately funded genomics initiatives. The
usefulness of these genomic data in drug target discovery depends in large part
on the ability of researchers to rapidly and reliably identify genes and their
function in order to develop drug target candidates for therapeutic
intervention. Drug target discovery research utilizing genomic information is
frequently conducted in the following phases:
GENE IDENTIFICATION. Genes are sequences of DNA that contain instructions
to produce a particular protein. Scientists estimate that there are
approximately 80,000 human genes, a substantial number of which have yet to be
identified. Genes are identified using a variety of techniques, including
sequencing and mapping DNA and screening cDNA libraries. cDNA libraries, which
are derived from RNA, are important tools in identifying novel genes.
GENE EXPRESSION ANALYSIS. Gene expression analysis involves determining
which genes have been activated or inactivated within a particular tissue or in
a particular disease state. Differential gene expression analysis compares gene
expression patterns of different tissues, such as diseased
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tissues versus normal tissues. Gene expression analysis is important in linking
specific genes to disease.
FUNCTIONAL ANALYSIS. Functional analysis involves determining the role of a
protein that is encoded by a specific gene. This process is critical to
understanding cellular pathways and to identifying drug targets. Cellular
pathways dictate the interactions of proteins and other components within a cell
and are essential for the proper functioning of a cell.
TARGET VALIDATION. Advances in gene identification, gene expression
analysis and functional analysis have vastly expanded the set of novel
gene-based drug targets. Target validation involves the identification of the
most promising of these drug target candidates for further development. This
includes the identification of specific proteins and the determination of their
role in biological pathways, their toxicity and their correlation to particular
disease states. Cell-based assays represent one of the most effective ways to
conduct target validation.
In both academic research and drug target discovery research, scientists are
constantly in search of tools that will enhance the quality and productivity of
their research efforts. The challenge for companies marketing life science
research products is to bring innovative products to market in order to address
the evolving needs of scientists. For example, in the area of gene
identification, we believe that there is a pressing need for technologies that
can identify full-length gene sequences, work with extremely small tissue
samples and identify gene sequences at higher levels of throughput. In the area
of gene expression analysis, we believe that research is hindered by low-
throughput methods and by difficulties in consistently reproducing and
effectively analyzing data. In the area of functional analysis, we believe that
the available tools are limited. Finally, in the area of target validation, we
believe that gene-based drug discovery has increased the need for more
informative assays.
CLONTECH APPROACH
To address these challenges, we have developed and continue to expand our
portfolio of technologies and innovative tools that enable scientists to conduct
gene-based drug target discovery and other essential molecular biology research
rapidly, effectively and reliably. We offer over 1,500 products within
approximately 130 product lines that enable scientists to conduct research in
the areas of gene identification, gene expression analysis, functional analysis
and target validation.
In the area of gene identification, we offer products that allow for the
rapid identification of full-length gene sequences in a high-throughput manner
while allowing researchers to work with extremely small quantities of tissue
samples. These products include our proprietary PCR-based full-length cloning
systems and technologies.
In the area of gene expression analysis, our patented method for cDNA
library subtraction allows researchers to look with high levels of sensitivity
at differential expression of rare genes. Rare genes, which are expressed in low
abundance, are often the most important in the study of disease pathways.
Additionally, our proprietary cDNA arrays represent a cost-effective and highly
sensitive approach to high-throughput gene expression analysis that does not
require special instrumentation.
In the area of functional analysis, the ability to control and monitor the
protein expression of identified genes and to identify and analyze
protein-protein interactions is essential in determining gene function. We
believe that we offer one of the most tightly controllable protein expression
systems available. Additionally, we believe that our two-hybrid system is a
leading technology, which enables scientists to study protein-protein
interactions IN VIVO.
In the area of target validation, our signal transduction technology allows
scientists to monitor effectively the effect of specific stimuli on cellular
pathways. We believe that our signal transduction system was one of the first
commercially available products to allow scientists to monitor multiple pathways
simultaneously and with a high level of sensitivity. Additionally, we believe
that our
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retroviral gene transfer technology is one of the leading commercial products
for the rapid and efficient construction of cell lines used in target
validation.
CLONTECH STRATEGY
We believe that we are a leading provider of innovative tools and enabling
technologies for life science research. We employ the following strategies to
maintain and expand our leadership position:
PIONEER THE COMMERCIALIZATION OF ENABLING TECHNOLOGIES. We anticipate and
quickly respond to the evolving needs of life science researchers. We have a
proven record of developing fundamental enabling technologies through our
internal research and development efforts, identifying and acquiring
technologies from third parties, and converting novel technologies into
commercially viable research tools. For example, we identified the two-hybrid
technology as a technology that would enable researchers to identify
protein-protein interactions, and we commercialized our MATCHMAKER product
approximately two years before any significant competitive product entered the
market.
RAPIDLY DEVELOP NEW TECHNOLOGIES AND INNOVATIVE TOOLS. Once we have
identified a market opportunity, we attempt to rapidly bring new enabling
technologies and innovative tools to market. We believe that being the first to
introduce innovative tools is instrumental to establishing our products as the
technology standard. Our research and development, sales and marketing and
manufacturing personnel collaborate closely to facilitate the rapid development
and commercialization of new products. For example, within one year of
identifying a need for a low-cost, high-throughput method for differential gene
expression analysis, we developed and launched our line of cDNA arrays.
MAINTAIN TECHNOLOGICAL LEADERSHIP. We continuously enhance and extend our
product lines to protect our technology leadership position. We believe that
being a technology leader is imperative to establishing and maintaining market
share. For example, we believe that we are one of the leading suppliers of
PCR-based cloning products due, in large part, to our innovative and
well-received new product introductions, such as cDNA subtraction and
full-length cloning systems.
PROVIDE A BROAD PORTFOLIO OF PRODUCTS. We provide a range of innovative
tools and enabling technologies that address research questions across all
phases of molecular biology research. We believe that our product portfolio
offers customers integrated research solutions for a variety of their research
needs. This broad portfolio of products reduces our reliance on any single
product line or market area.
LEVERAGE TECHNICAL SALES AND SERVICE CAPABILITIES. We provide a high level
of technical sales and service to enable our customers to easily select and use
the appropriate products for their needs. We employ a staff of 14 highly trained
technical service support specialists (six of whom hold Ph.D.s) to consult with
research scientists concerning the use of our products and research protocols.
Additionally, this technical communication with our customers allows us to
identify and respond to evolving market demands for new products.
RECRUIT, DEVELOP AND RETAIN OUTSTANDING SCIENTISTS. We have established a
working environment that provides our scientists with substantial latitude to
develop products and technologies. We believe that this environment increases
our commercial success and our ability to recruit, develop and retain
outstanding scientists.
CLONTECH PRODUCTS
We offer over 1,500 products within approximately 130 product lines that
address customer needs in the areas of gene identification, gene expression
analysis, functional analysis and target
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validation. These products include enabling technologies, which allow our
customers to conduct experiments that would not otherwise be possible, and
innovative research tools, which permit researchers to achieve results in a more
rapid, efficient and reproducible manner.
Our products are packaged in a variety of formats, but most typically as
kits or systems, and are designed to be compatible with each other to provide an
integrated approach to molecular biology research. We believe that scientists
select products and make purchasing decisions based on product performance,
quality, reputation, time savings, ease of use, service and availability.
GENE IDENTIFICATION
We offer a broad range of proprietary products for gene identification,
including cDNA and genomic libraries, ADVANTAGE PCR enzyme systems, SMART PCR
cDNA library construction kits, MARATHON cDNA products and nucleic acid
purification products.
Our cDNA and genomic libraries are used to isolate, identify and sequence
novel genes. We have optimized library construction technology to maximize the
number of full-length genes contained in each library and to increase the
likelihood of identifying a novel gene. Our library products have been cited
extensively in peer-reviewed scientific journals, and many important
disease-related genes have been identified using these products, including the
gene causing cystic fibrosis; BRCA2, the early-onset breast indicator gene; and
the N-MYC oncogene.
Polymerase chain reaction ("PCR") is a nucleic acid amplification technology
that is now basic to most molecular biology research and gene-based drug target
discovery. Soon after the introduction of PCR technology, we launched our first
PCR products and subsequently employed PCR as a technology platform underlying
several of our proprietary gene identification product lines. Historically, a
limitation of PCR was that only relatively short sequences could be reliably
amplified without error because of the enzyme commonly utilized in the
amplification process. In 1995, we introduced the ADVANTAGE PCR enzyme systems
(the "ADVANTAGE" systems), which offer the reliable amplification of longer DNA
sequences and a number of other research advantages. The ADVANTAGE systems
complement many of our products to provide a system to isolate and identify
target genes.
Identifying novel, disease-related genes often requires working with
clinical samples, such as tumor biopsies, which generally yield very small
amounts of RNA, the material used to create cDNA libraries. In 1996, we
introduced our proprietary SMART PCR cDNA library construction kit (the "SMART "
kit). We believe that the SMART kit is the only commercially available product
that allows researchers to construct their own full-length cDNA libraries from
as little as 25-50 nanograms of RNA. This SMART method is rapid and reproducible
and is compatible with our MARATHON kit and PCR-SELECT cDNA subtraction kit.
Obtaining full-length gene sequences is critical to understanding gene
expression and protein function, both of which are essential to gene-based drug
target discovery. Our proprietary MARATHON cDNA amplification kit (the
"MARATHON" kit) allows the determination of a target gene's full-length cDNA
sequence and the rapid analysis of several genes in one experiment. We also
offer time-saving, MARATHON-READY cDNAs, which eliminate the need to acquire
difficult-to-obtain human tissues. The MARATHON kit and MARATHON-READY cDNAs are
optimized for use with our ADVANTAGE systems.
The quality of DNA and RNA sample preparation, isolation and purification is
critical to the success of any gene identification and expression project. In
order to address a large market opportunity and to integrate sample preparation
technology into our product line, we offer the NUCLEOBOND, NUCLEOSPIN and
NUCLEOTRAP family of nucleic acid purification products through a distribution
agreement with Macherey-Nagel GmbH & Co. KG ("Macherey-Nagel"), a German
specialty chemical and laboratory products company. These products decrease the
time necessary for nucleic acid purification and can be used in the most
demanding molecular biology applications,
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including mammalian transfection and automated sequencing. We sell our
purification products both separately and as components in certain of our kits.
GENE EXPRESSION ANALYSIS
We offer a variety of products for investigating differential gene
expression analysis including ATLAS cDNA arrays, the PCR-SELECT cDNA subtraction
kit, the DELTA differential display kit, MULTIPLE TISSUE NORTHERN blots,
MULTIPLE TISSUE EXPRESSION arrays and our extensive RNA bank.
cDNA arrays represent an emerging technology used to analyze gene expression
patterns in a high-throughput manner. Until recently, few array products were
commercially available and affordable to the general research community. In
response, we introduced the easy-to-use ATLAS cDNA expression arrays (the
"ATLAS" arrays), which allow scientists to obtain expression patterns for
hundreds of genes in a single experiment without specialized instrumentation.
ATLAS arrays are designed to allow researchers to study specific disease areas
and gene categories and can accommodate over 500 PCR-amplified cDNA fragments.
We utilize a network of scientific consultants to assist us in the selection of
the genes to include on our arrays. Once we determine which genes to include on
our arrays, we use proprietary software to select fragments that will provide
the most sensitive and reproducible results. The ATLAS array technology has been
used, for example, in research studies to assess changing gene expression
patterns of breast tumors in response to chemotherapy and radiation therapy.
Since only a fraction of all human genes have been identified, there is
substantial interest in identifying new genes, particularly rarely expressed
genes that are often implicated in the occurrence of disease. Our patented
PCR-SELECT cDNA subtraction kit (the "SELECT" kit) is used to search for
differentially expressed genes and is optimized to capture rarely expressed
genes. The SELECT kit allows researchers to quickly analyze many potentially
differentially expressed genes in one experiment and is compatible with SMART
technology, thereby increasing its power to identify important disease-related
genes from small amounts of tissue samples. The SELECT kit has been used to
identify differentially expressed genes in breast cancer cell lines and
apoptosis (programmed cell death), among others.
Differential display is another powerful technique used to analyze
differential gene expression patterns. Differential display is most useful for
investigating genes expressed in high abundance and is one of the fastest
methods available for performing such analysis. Our DELTA differential display
kit provides a rapid and robust PCR-based method for obtaining highly
reproducible results. This technology complements the array and subtraction
technologies described above.
Determining tissue-specific expression is important in the characterization
of any gene. Tissue expression patterns are critical early indicators of gene
function and of the suitability of gene-based drug discovery targets. However,
tissue-specific expression experiments can be challenging due to the difficulty
of obtaining a wide variety of human tissues for analysis. We believe that our
pre-made MULTIPLE TISSUE NORTHERN ("MTN") blots are one of the most commonly
used commercially available means of tissue-specific expression analysis and
incorporate one of the most extensive selections of tissues. The MTN blots
product line has been extensively cited in peer-reviewed scientific journals.
For example, MTN blots can be used to compare gene sequences across various
tissues and to confirm differential expression of cDNAs yielded by our SELECT
kit. We also offer MULTIPLE TISSUE EXPRESSION arrays, which enable
high-throughput analysis of tissue-specific expression, and an extensive variety
of RNAs, which can be used by scientists as components in several applications,
including library construction.
FUNCTIONAL ANALYSIS
The ability to identify and analyze protein-protein interactions and to
control and monitor protein expression of identified genes is important in
determining gene function. We offer a variety
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of products for functional analysis including the MATCHMAKER two-hybrid systems
and the TET-OFF/ ON gene expression systems.
Two-hybrid technology enables the identification and detection of
protein-protein interactions, many of which were previously undetectable IN
VIVO. We were the first to commercialize this technology with the introduction
of our MATCHMAKER two-hybrid systems (the "MATCHMAKER" systems), and we have
continued to expand this product line. MATCHMAKER systems enable researchers not
only to identify protein-protein interactions, but also to rapidly obtain the
gene sequences for these proteins. In addition, MATCHMAKER systems are
sufficiently sensitive to detect even weak and transient interactions.
MATCHMAKER systems have been cited in scientific journals and used in the
identification of the well-studied oncogenes RAF and RAS.
In order to determine gene function, researchers frequently assess the
impact on a cell of suppressing or stimulating expression of that gene. Our
TET-OFF/ON gene expression systems (the "TET" systems), exclusively licensed
from BASF Bioresearch Corporation, regulate the expression of single genes in a
precisely controlled, reversible and quantitative manner. As a result, the TET
systems are employed extensively in the pharmaceutical industry for the creation
of human disease models to aid in the drug discovery process.
TARGET VALIDATION
Increasing use of genetic information by pharmaceutical companies to develop
targets for screening potential drug candidates has increased the need for more
informative cell-based assays. We have introduced several products to address
this emerging market, such as the MERCURY pathway profiling systems, the RETRO-X
retroviral expression systems, the APOALERT detection systems and the LIVING
COLORS family of fluorescent proteins.
Our recently introduced MERCURY pathway profiling systems allow researchers
to rapidly and simultaneously analyze transcriptional responses to key signal
transduction pathways. Identifying signal transduction pathways that are
activated by extracellular stimuli can provide fundamental information about
disease processes, which may be essential for validating drug candidates.
Our RETRO-X retroviral expression systems enable scientists to introduce
genes of interest into mammalian cells IN VITRO or IN VIVO. Cell line
construction is often a bottleneck in target validation, functional assays, and
drug candidate screening. Retroviral technology can be used for rapid and highly
efficient gene transfer and cell line construction.
Our APOALERT detection systems allow researchers to monitor the normal,
genetically-controlled process of programmed cell death, or apoptosis.
Disruption of the apoptotic process is implicated in a number of diseases,
including cancer, AIDS and Alzheimer's. APOALERT systems are designed to be both
rapid and sensitive, and these products can be easily modified for
high-throughput applications in mammalian cell lines.
Our fluorescent protein technology enables IN VIVO, real-time detection of
gene expression and protein localization. This technology has been broadly
applied across molecular biology research and has increased the utility of
cell-based drug screening assays, particularly for use in functional analysis.
NEW PRODUCT DEVELOPMENT
We believe that our focus on technological innovation, rapid product
development and short product launch cycle provide us with a competitive
advantage. Our frequent introduction of new products accounts for a significant
portion of our revenue growth. In 1998, we obtained approximately 9.8% of our
total revenue from products and product extensions launched in that year. In
1997, we obtained approximately 7.6% of our total revenue from products and
product extensions launched in that year.
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Our scientists develop new products and enhance existing products based on
internally developed or licensed platform technologies. We provide our
scientists with substantial latitude to develop products and technologies. We
conduct our research and development at our technology center in Palo Alto,
California. Our research and development department is composed of five main
business units and employs 71 people, 37 of whom hold a Ph.D.
We identify potential new products from a variety of sources, including
customer input, consultations with scientific advisors at research institutes
and universities, review of research journals and participation in industry
symposia. We seek to license technology when we believe that such technology can
provide the basis for a commercially viable product. Some licensed technologies
serve as platforms for additional product innovation and follow-on products. For
example, we were an early licensee of the basic PCR technology and not only
utilized this platform to develop our basic PCR products, but also incorporated
PCR into many of our other products, such as our gene identification products
and cDNA arrays.
In order to access new technology, we have entered and may continue to enter
into joint product development agreements. For example, in September of 1998, we
agreed with Molecular Dynamics, Inc., a subsidiary of Amersham Pharmacia
Biotech, Inc. to jointly develop and market microarrays of cDNAs. Each party
granted to the other licenses for usage of their patents and other proprietary
information with respect to microarrays. The revenues generated are partitioned
between the parties. Jointly developed inventions are jointly owned and
inventions developed by a single party are owned by that party. The agreement
has a two year term and automatically renews for successive one-year terms
unless either party gives notice of its intent to terminate the relationship.
Part of Molecular Dynamics' technology is licensed from Affymetrix, Inc. through
a separate licensing agreement. The agreement between Molecular Dynamics and
Affymetrix expires on the earlier of January 1, 2008 or upon 60 days termination
notice by Molecular Dynamics to Affymetrix.
In addition, in December of 1998, we entered into an alliance with Phase-1
Molecular Toxicology, Inc. to develop and use our product expertise in cell and
molecular biology, gene arrays and expression vectors and to develop and use
Phase-1's expertise in the field of molecular toxicology. We entered into this
agreement to address the rapidly expanding market for tools that allow faster
and more effective toxicology testing of drug candidates. We agreed to pay a fee
upon execution of the contract and an additional fee upon achievement of a
milestone. Jointly developed inventions are jointly owned and inventions
developed by a single party are owned by that party. Furthermore, we agreed to
share revenues from the sale of products developed under this agreement. The
term of this agreement is three years unless extended by mutual consent of the
parties.
We also have a number of informal scientific collaborations with a variety
of scientists and companies under which we share and receive pertinent technical
information in order to test and validate our technologies, increase the
adoption of our technologies and increase the number of our scientific
publications.
Our research scientists receive input from, and work closely with, our
product specialists and managers as well as marketing and manufacturing
personnel and patent counsel to accelerate and focus the new product development
process. This highly developed internal process expedites the transfer of
products from research and development to manufacturing and commercialization
and allows us to be highly responsive to the needs of our customers.
We spent $7.0 million on research and development activities during the year
ended December 31, 1998, and $5.1 million on research development activities
during the year ended December 31, 1997. No material portion of this investment
in research and development was sponsored by customers.
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From time to time, we perform research and development on behalf of third
parties pursuant to contractual arrangements. We do not anticipate that these
activities will utilize significant resources of our research and development
department or will be a significant source of revenue.
MARKETING
Our marketing strategy is focused on maintaining and enhancing our
reputation as a leading provider of innovative, high quality life science
research tools and enabling technologies. We market our products in more than 30
countries throughout the world.
Our marketing department distributes an annual catalog, the CLONTECHNIQUES
quarterly newsletter, advertisements, brochures, flyers and other sales and
supporting publications. We devote significant resources to create and design a
catalog with a high degree of scientific and technical content. The catalog is
extensively indexed and cross-referenced by application, product category and
individual product, and it contains a variety of color-coded reference aids that
are designed to facilitate product selection. We communicate the launch of our
new products principally through our CLONTECHNIQUES quarterly newsletter.
We maintain a proprietary database that is linked to our order entry system,
allowing for customer profiling based on purchasing behavior. Customer
information is added or updated based on data obtained from various sources,
including trade shows, our sales representatives, calls received in technical
and customer support and our Internet web site. Our subsidiaries in Japan,
Germany and the United Kingdom maintain similar customer databases.
We recently established a market development group to improve our
responsiveness to our customer needs and to enhance our market penetration. The
group focuses on market research, customer interaction, promotional activity and
sales force and distributor training. We expect to expand this group in 1999.
We maintain a web site with information regarding our products,
publications, technical service and ordering information. During the last
quarter of 1998, our web site was visited an average of 32,779 times each month.
We believe that the Internet will become an increasingly important channel of
customer communication and product distribution, and we intend to further
develop our Internet presence.
SALES, CUSTOMER SERVICE AND DISTRIBUTION
During 1998, we sold products to more than 1,800 accounts in North America.
Our accounts are comprised of academic institutions, government entities and
pharmaceutical and biotechnology companies that generally employ multiple
scientists who are the end users of our products. We market our products to the
individual scientists who make purchasing decisions. No single account
represented more than 10% of our total sales for the year ended December 31,
1998.
In certain circumstances, we may consider distributing products produced by
third parties that are complementary to our products. For example, in an
agreement executed in November of 1998, Macherey-Nagel granted us the exclusive
right to act as a distributor of certain Macherey-Nagel products related to
nucleic acid purification in the United States, Canada and Japan. We also have
the co-exclusive right to distribute such products in certain additional
territories. Certain of the Macherey-Nagel products are important in sample
preparation and may be integrated directly with many of our products. Under the
agreement, we agreed to minimum purchase commitments in the years 1999 and 2000.
We have the right to return a certain amount of products to Macherey-Nagel if
the products remain in inventory for longer than a certain amount of time.
Macherey-Nagel agreed to provide financial support for part of our marketing
activities with respect to these products. The agreement expires December 31,
1999, automatically renews for one year, unless either party gives notices of
its intent to terminate the relationship and then automatically renews until
June 30, 2001, unless either party gives notices of its intent to terminate the
relationship.
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We employ a direct sales force of 13 individuals in North America and six
individuals internationally and have a network of 25 independent foreign
distributors. We have established sales, service and distribution subsidiaries
in Japan, Germany, and the United Kingdom.
Our Japanese sales, service and distribution subsidiary began operations in
April 1998. Prior to that time, we informed our exclusive Japanese distributor
that we would be terminating our relationship effective March 31, 1999. Since
April 1998, we have been marketing our products directly to end-users and, after
the termination of our distributor, we intend to continue to sell our products
through the subdealers with whom our distributor had relationships. As a result,
we do not expect the termination of our distributor to have a material impact on
sales. However, as a result of billing directly to the subdealers, we expect
that credit terms will be extended and that we will have increased days sales
outstanding.
Our North American sales efforts are supported by eight customer service
representatives who receive and process telephone orders directly from
customers, utilizing a computerized system with immediate access to detailed
information about the customer, as well as the product, its price and
availability. Additionally, we employ a staff of 14 highly trained technical
service support specialists (six of whom have Ph.D.s) to consult with research
scientists concerning the use of our products and research protocols. Technical
support is also provided by our foreign distributors and subsidiaries.
Life science research frequently requires the rapid delivery of our products
on short notice; the speed and accuracy with which such products are delivered
can affect the success or failure of the researcher's work. We generally ship
our products for next-day or second-day delivery. Based on our monthly domestic
shipping statistics during the final quarter of 1998, over 99% of customer
orders received by 4:00 p.m. Pacific time were shipped on the same day. Our
foreign subsidiaries maintain an inventory of the most commonly ordered items in
order to provide a similar level of service to their customers.
MANUFACTURING AND QUALITY ASSURANCE
Our internally manufactured products accounted for over 87% of product
revenue for the year ended December 31, 1998. We lease a 42,500 square-foot
manufacturing facility in Mountain View, California. Many of our products
require several days or weeks to be made and tested. Therefore, we employ a
make-to-stock strategy to meet the customer requirements of same-day shipping.
Except for our cDNA array products, our ability to automate manufacturing
processes other than labeling and filling has been limited. We employ highly
educated manufacturing workers, who are trained to manufacture several different
products to allow for changes in demand.
We outsource a small portion of our manufacturing in order to maintain
production flexibility. These relationships are pursuant to non-exclusive
purchase orders and standard supply agreements. In the event that these
relationships are terminated, we believe that we could use alternate suppliers
or manufacture such products in-house. Macherey-Nagel manufactures all products
that we currently sell under our distribution agreement with Macherey-Nagel.
Quality control testing is performed on all products we distribute, whether
they are internally manufactured or externally sourced. Our production personnel
perform in-process quality control at various stages of the manufacturing
process. Our quality control specialists perform final batch testing on all
finished goods we manufacture. We are in the process of applying for ISO 9001
certification of our manufacturing policies and procedures utilized in the
procurement, manufacturing and distribution of our products.
COMPETITION
The market for our products is highly competitive, and we expect competition
to increase. We compete with many other life science research product suppliers.
We have significantly fewer
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research and development, marketing, financial and other resources than many of
our competitors. These competitors may have developed or could in the future
develop new technologies that compete with our products or render our products
obsolete. There are few barriers to entry into our markets, and new competitors
frequently enter the market with competitive products. We are also likely to
encounter increased competition as we enter new markets. We currently benefit
from sales in emerging niche research markets, which, as they expand, may
attract the attention of our competitors. Some of our competitors have in the
past and may in the future compete by lowering prices on certain products. In
certain cases, we may respond by lowering our prices, exiting the market or
transitioning the market to next generation technologies.
Competitors offer a broad range of equipment, laboratory supplies and other
products, including research products that compete with our products. We believe
that customers in our markets display a significant amount of loyalty to their
initial supplier of a particular product. Therefore, we may experience
difficulties in generating sales from customers, who initially purchased
products from competitors. Similarly, we believe that there is a significant
competitive advantage in being the first to introduce a new product to market.
Accordingly, we believe that to compete effectively, we will need to
consistently be first to market with important new research products and
services. To the extent that we are unable to be the first to develop and supply
new products, our competitive position will suffer.
GOVERNMENT REGULATION
Our products are generally sold for research purposes and do not subject us
to the regulatory requirements of the United States Food and Drug
Administration.
Because of the nature of our operations and the use of hazardous substances
in our ongoing manufacturing and research and development activities, we
maintain strict internal controls and we are subject to stringent federal, state
and local laws, rules, regulations and policies governing the use, generation,
manufacturing, storage, air emission, effluent discharge, handling and disposal
of certain materials and wastes. We do not expect that compliance with the
government regulations to which we are subject will materially adversely affect
our capital expenditures, earnings or competitive position. We utilize third
parties to dispose of hazardous materials and waste. Although we believe that we
are in material compliance with all applicable government and environmental
laws, rules, regulations and policies, there can be no assurance that our
business, financial condition and results of operations will not be materially
adversely affected by current or future environmental laws, rules, regulations
and policies or by liability arising from any past or future releases or
discharges of materials that could be hazardous.
TECHNOLOGY LICENSING
We are dependent, in part, on the patent rights to platform technologies
licensed on non-exclusive and exclusive bases from academic institutions,
private and public foundations, biotechnology companies and others. These
licenses cover certain of our technologies, including PCR, fluorescence, arrays,
gene expression systems, and enzymes.
We entered into a Patent License Agreement with Roche Molecular Systems,
Inc. and F. Hoffman-La Roche Ltd. in October, 1996. We received a non-exclusive
license under certain Roche thermostable enzyme patents to manufacture, use and
sell certain research products. We are also able to provide our customers with
research rights related to Roche's patented polymerase chain reaction
technology. For these rights, we paid Roche an upfront licensing fee and agreed
to pay a quarterly royalty based on product sales. The agreement terminates upon
the expiration of the last to expire of the licensed patents.
In May, 1996, we entered into a License Agreement with BASF Bioresearch
Corporation under which we received exclusive and semi-exclusive rights with
respect to certain of BASF's patents
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relating to its TET-System. This agreement provides us with the right to develop
and sell research reagents related to the TET-System for regulation of gene
expression. For these rights, we paid a license fee and royalties based on
product sales. In the event that BASF develops other research reagents related
to the same product line, these research reagents may be included in our licence
and the royalty percentage will be adjusted. This agreement terminates upon the
earlier of May 20, 2006, or the expiration of the last to expire of the licensed
patents. We have the ability to terminate this agreement upon 60 days written
notice to BASF.
We have licensed certain rights to make, use and sell certain products used
in our Advantage PCR Products from Takara Shuzo Co., Ltd. (as an assignee of
Wayne M. Barnes, Ph.D.) pursuant to a non-exclusive License Agreement entered
into in December of 1995. We agreed to pay an advance royalty fee and royalty
payments, based on product sales. We are obligated to pay certain minimum yearly
royalties. The agreement terminates upon the expiration of the last to expire of
the licensed patents. We may terminate the agreement at any time upon 60 days
notice.
Under these license agreements, we typically pay the licensors up-front fees
and royalties based upon the sales of products that incorporate the licensed
technologies. These license agreements are generally terminable only upon
material breach by one of the parties. Our failure to maintain these licenses
and the rights to such technology could have a material adverse effect on our
business, financial condition and results of operations. We intend to continue
our current practice of licensing platform technologies to enable our own
internally developed innovations. In addition, in order to avoid patent
infringement litigation, we may be required to license certain technology
rights. There can be no assurance that we will be able to obtain such licenses
on acceptable terms, if at all.
INTELLECTUAL PROPERTY
We rely on a combination of patents, licenses and trademarks to establish
and to protect our proprietary rights in our technologies and products. As of
January 31, 1999, we had six issued patents in the United States and had 42
pending patent applications in the United States. In addition, we had nine
pending foreign applications. These patents and patent applications relate to
cloning, PCR, arrays, enzymes, fluorescent proteins, reporter assays and other
technologies. Our policy is to file patents on platform technologies in Europe,
the United States and Japan. We intend to aggressively prosecute and enforce our
patents and otherwise protect our proprietary technologies. United States
patents issued from applications submitted prior to June 8, 1995, have a term of
17 years from the date of issue. United States patents issued from applications
submitted on or after June 8, 1995, have a term of 20 years from the date of
filing of the application. Patents in most other countries have a term of 20
years from the date of filing of the patent application.
The patent positions of life sciences companies, including Clontech, are
generally uncertain and involve complex legal and factual questions. There can
be no assurance that patent applications filed by us or our licensors will
result in patents being issued, that the claims of such patents will offer
significant protection for our technology, or that any patents issued to or
licensed by us will not be challenged, narrowed, invalidated or circumvented.
Further, there can be no assurance that others will not independently develop
similar technologies or duplicate the technology owned by or licensed to us or
design around the patented aspects of such technology.
We rely upon and expect to continue to rely upon unpatented proprietary
know-how and continuing technological innovation in the development and
manufacture of many of our principal products. Our policy is to require all of
our employees, consultants and advisors to enter into confidentiality agreements
with us. There can be no assurance, however, that these agreements will provide
meaningful protection for our trade secrets or proprietary know-how in the event
of any unauthorized use or disclosure of such know-how. In addition, we cannot
assure you that others will not obtain access to or develop independently
similar or equivalent trade secrets or know-how.
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Patent protection of compositions of matter, including DNA and proteins,
along with methods and processes, is prevalent in the life science industry. As
more patents are issued, we expect that more patents owned by third parties will
cover aspects of our products. As we deem appropriate, we conduct searches to
determine whether our products infringe upon any existing patents. Further, our
policy is to seek "freedom to operate" assessments in fields where the art is
crowded or in fields of rapid innovation and development. Such assessments,
however, become outdated quickly, and there can be no assurance that the
products and technologies we currently market, or may seek to market in the
future, will not infringe patents or other rights owned by others. We have
received and expect to receive invitations to license patented technology from
third parties. There can be no assurance, however, that we will be able to
obtain any licenses on acceptable terms, if at all.
For example, we market products containing several variants of AEQUOREA
VICTORIA green fluorescent protein ("GFP"), which, during 1998, accounted for
less than 3% of our revenue. Aurora Biosciences Corporation owns the exclusive
rights to patents for certain aspects of GFP. Our current position with respect
to these patents is unclear. We may find it necessary to discontinue selling our
GFP products, license certain of Aurora's patent rights or participate in patent
litigation.
The life science industry has a history of patent litigation and will likely
continue to experience patent litigation concerning drug discovery technologies.
We may be subject to legal proceedings in order to enforce our proprietary
rights or defend ourselves against claims of infringement. The cost of
litigation to uphold the validity and prevent infringement of patents can be
substantial and require a significant commitment of management's time. We may
also be involved in interferences with respect to patent applications. Our
inability to obtain or maintain patent protection or necessary licenses could
have a material adverse effect on our business, financial condition and results
of operations.
We are aware of patents and pending applications held by third parties that
may relate to our array technology. These patents and pending applications
address various aspects of array technology, including DNA sequences, signal
detection methods, attachment chemistry and density. We have received, and may
receive in the future, notices claiming infringement of proprietary DNA
sequences. We cannot assure you that we will not infringe these patents or
patents belonging to other parties, or that we would be able to obtain licenses
to such patents on commercially acceptable terms, if at all.
See "Risk Factors--We Depend on Patents and Proprietary Technology" and
"--We Depend on Licenses from Third Parties."
HUMAN RESOURCES
As of January 31, 1999, we employed 312 persons, on a full-time or part-time
basis, including 60 employees who hold Ph.D.s. Of our employees, 71 work in
research and development, 47 work in sales, 96 work in
operations/production/shipping, 26 work in marketing, 35 work in administration
and 37 in our foreign subsidiaries. None of our employees are covered by a
collective bargaining agreement, and we consider relations with our employees to
be good.
FACILITIES
We lease approximately 37,000 square feet of space in Palo Alto, California,
for use as our corporate headquarters and laboratory space. This lease expires
in May 2005 and may be renewed for a five-year term at our option. We also
occupy approximately 10,800 square feet of additional laboratory space in Palo
Alto under a five-year lease that expires in March 1999. We are currently
negotiating an extension to the lease. We also occupy approximately 9,600 square
feet of additional laboratory space in Palo Alto under a lease that expires in
April 2003.
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We also lease approximately 42,500 square feet of space in Mountain View,
California, for use as a customer support, manufacturing, warehouse and shipping
facility. This lease expires in September 2007 and may be renewed for two
five-year terms at our option.
We occupy approximately 5,100 square feet of space for use as a sales,
distribution and warehousing facility in Japan under a lease that expires in
January 2001. We occupy approximately 3,800 square feet of space for use as a
sales, distribution and warehousing facility in Germany under a lease that
expires in February 2000. We also occupy approximately 2,300 square feet of
space in the United Kingdom for use as a sales, distribution and warehousing
facility under a lease that expires in September 2002.
We believe that our California properties are suitable and adequate to carry
on our business through 1999. We have approximately 10,000 square feet of space
for expansion of our research and development activities. We intend to expand
our manufacturing and office facilities and are investigating sites near our
existing facilities.
LEGAL PROCEEDINGS
On December 31, 1996, we were served with a complaint filed by LTI in the
Federal District Court for the District of Maryland, captioned Life
Technologies, Inc. v. Clontech Laboratories, Inc., No. AW 96-4080. We are the
only defendant named in the complaint. The complaint alleges three causes of
action related to past sales of products: direct patent infringement, inducement
of third parties to infringe LTI's patents by third parties and breach of a
label license. We believe that the allegations in the LTI complaint are without
merit and we intend to defend ourselves vigorously against each action. As of
January 31, 1999, the case had not been scheduled for trial. In addition, on
December 24, 1998, we filed suit against LTI in the Federal District Court in
the district of Delaware, captioned Clontech Laboratories, Inc. v. Life
Technologies, Inc. No. 98-691-GMS, alleging false patent marking and violations
of the Delaware Deceptive Trade Practices Act.
From time to time, we may be subject to business litigation. We do not
anticipate that such litigation would result in a material adverse effect on our
business.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of Clontech as of January 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Kenneth S. Fong, Ph.D..................... 52 President, Chief Executive Officer and Director
William W. Sims........................... 53 Senior Vice President and Chief Financial Officer
Paul H. Kao............................... 45 Senior Vice President
Joseph A. Grippo.......................... 59 Vice President, Administration
Carol Casals Lou.......................... 37 Vice President, Sales and Marketing
Paul D. Siebert, Ph.D..................... 44 Scientific Director
Anne M. Scholz............................ 33 Vice President, Product and Business Development
Sarah J. Brashears........................ 40 Director of Intellectual Property
Gregory M. Avis(1)........................ 40 Director
David S. Lee(1)........................... 61 Director
Steven Goldby(1).......................... 58 Director
</TABLE>
- ------------------------
(1) Member of the Compensation Committee and the Audit Committee.
KENNETH S. FONG, PH.D. is a founder of Clontech and has served as President,
Chief Executive Officer and Director of Clontech since its inception in March
1984. Dr. Fong received a B.S. in Biological Sciences from San Francisco State
University and a Ph.D. in Molecular Biology and Microbiology from Indiana
University. Dr. Fong completed his post-doctoral studies at the Molecular
Biology Institute at the University of California, Los Angeles, and the City of
Hope Medical Center. Dr. Fong was a Senior Staff Fellow at the National
Institute of Environmental Health Sciences and the University of North Carolina,
Chapel Hill from 1981 to 1984.
WILLIAM W. SIMS has served as Senior Vice President and Chief Financial
Officer of Clontech since July 1998. From May 1994 to June 1998, Mr. Sims served
as Vice President, Finance and Chief Financial Officer of the Palo Alto Medical
Foundation. From February 1991 to April 1994, Mr. Sims served as Senior Vice
President, Finance, Operations and Quality Assurance at Syntex Laboratories,
Inc., the domestic subsidiary of Syntex Corporation, a pharmaceutical company.
Mr. Sims joined Syntex Corporation in 1981. Mr. Sims received a B.S. in
Accounting from Oregon State University and an M.B.A. from Stanford University.
PAUL H. KAO has served as Senior Vice President of Clontech since June 1996.
From January 1990 to May 1996, Mr. Kao served as Vice President of Marketing and
Operations of Clontech and from November 1987 to January 1990, Mr. Kao served as
International Sales Manager of Clontech. Mr. Kao received a B.S. in Chemistry
from Tamkang University, Taiwan, and an M.B.A. from Santa Clara University.
JOSEPH A. GRIPPO has served as Vice President, Administration of Clontech
since July 1998 and served as Chief Financial Officer of Clontech from January
1993 to July 1998. Mr. Grippo received a B.S. in Economics from the University
of California, Berkeley, a B.A. in Psychology from Pomona College and an M.B.A.
from Santa Clara University.
CAROL CASALS LOU has served as Vice President, Sales and Marketing of
Clontech since July 1998. Ms. Lou served as Vice President of Sales and
Operations of Clontech from February 1996 to July 1998. From February 1994 to
February 1996, Ms. Lou served as Director, Sales and Marketing of Clontech and
from November 1990 to February 1994, Ms. Lou served as Marketing Manager of
Clontech. Ms. Lou received a B.S. in Biological Sciences from University of
California, Irvine.
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PAUL D. SIEBERT, PH.D. has served as Scientific Director of Clontech since
July 1993. Dr. Siebert served as Director of Research of Clontech from May 1988
to June 1993 and served as a Staff Scientist of Clontech from October 1987 to
April 1988. Dr. Siebert received a B.S. in Cellular & Molecular Biology from the
University of Washington, Seattle and a Ph.D. in Biochemistry from the
University of California, Riverside. Dr. Siebert completed his post-doctoral
studies at the La Jolla Cancer Research Foundation and the University of
California, San Diego.
ANNE M. SCHOLZ has served as Vice President, Product and Business
Development since March 1999. From July 1998 to March 1999, Ms. Scholz served as
Director of Product and Business Development of Clontech. From February 1996 to
July 1998, Ms. Scholz served as Director of Marketing of Clontech. From February
1995 to January 1996, Ms. Scholz served as Associate Director of Marketing of
Clontech and from September 1993 to January 1995 as Product Manager of Clontech.
Ms. Scholz received a B.S. in Chemistry and Biochemistry from California State
University, San Jose, and an M.B.A. from Santa Clara University.
SARAH J. BRASHEARS has served as Director of Intellectual Property of
Clontech since February 1998. From July 1996 to December 1997, Ms. Brashears was
an associate with McGregor & Adler, PC. From August 1993 to July 1996, Ms.
Brashears was an associate with Fulbright & Jaworski, LLP. Ms. Brashears served
as a research biologist from 1986 to 1990 at the Baylor College of Medicine and
the University of Texas M.D. Anderson Cancer Center, Houston. Ms. Brashears
received a B.S. from Missouri Western State College and a J.D. from the
University of Nebraska College of Law.
GREGORY M. AVIS has served as a Director of Clontech since September 1997.
Mr. Avis joined Summit Partners, a venture capital fund, in 1984 and has served
as its Managing Partner since 1990. Mr. Avis is also a director of Digital Link
Corp., PowerWave Technologies, Extended Systems, Inc., and Splash Technology,
Inc. Mr. Avis received a B.A. from Williams College and an M.B.A. from Harvard
Business School.
DAVID S. LEE has served as a Director of Clontech since April 1998. Mr. Lee
is a Regent of the University of California and is also the Chairman of the
Board of CMC Industries, Inc. and DTC Data Technology Corp. Mr. Lee is a
director of Linear Technology Corporation and Centigram Communications Corp. Mr.
Lee was the founder of Diablo Systems, Inc. and Qume Corporation. Mr. Lee
received an Honorary Doctorate of Engineering and a B.S. degree in Mechanical
Engineering from Montana State University and an M.S. in Mechanical Engineering
from North Dakota State University.
STEVEN GOLDBY has served as a Director of Clontech since April 1998. Mr.
Goldby has been Chairman and Chief Executive Officer of Symyx Technologies,
Inc., a material science company, since July 1998. From January 1982 until July
1998, Mr. Goldby was employed by MDL Information Systems, Inc., an enterprise
software developer, in various capacities and most recently as Chief Executive
Officer. Mr. Goldby is also a director of Aspect Development, Inc. Mr. Goldby
received a B.A. from the University of North Carolina and a J.D. from Georgetown
University Law Center.
Currently our Board of Directors is comprised of four directors. Directors
are elected by the stockholders at each annual meeting of stockholders to serve
until the next annual meeting of stockholders or until their successors are duly
elected and qualified. Executive officers are elected by, and serve at the
discretion of, the Board. Our amended and restated certificate of incorporation
and amended and restated bylaws, which will become effective upon the closing of
this offering, authorize a Board of one or more directors, and the number of
directors may thereafter be changed by the Board without stockholder approval.
In addition, stockholders may, in certain circumstances, be entitled to exercise
cumulative voting rights with respect to the election of directors. See
"Description of Capital Stock."
38
<PAGE>
BOARD COMMITTEES
In July 1998, Clontech's Board of Directors formed the Compensation
Committee to review and approve the compensation and benefits for our key
executive officers, administer our stock purchase and stock option plans and
make recommendations to the Board regarding such matters. The Compensation
Committee is currently composed of Gregory M. Avis, Steven Goldby and David S.
Lee. In July 1998, Clontech's Board of Directors formed the Audit Committee to
review our internal accounting procedures and to consult with and review the
services provided by our independent accountants. The Audit Committee is
currently composed of Gregory M. Avis, Steven Goldby and David S. Lee.
DIRECTOR COMPENSATION
Directors currently receive no cash compensation from Clontech for their
services as members of the Board of Directors. They may be reimbursed for
certain expenses in connection with attendance at Board and Committee meetings.
All of our non-employee directors are entitled to receive non-discretionary
stock option grants under Clontech's 1998 Non-Employee Directors' Stock Option
Plan.
In April 1998, David S. Lee, Director, received an option for 13,333 shares
at an exercise price of $7.13. In July 1998, Mr. Lee received another option for
13,333 shares at an exercise price of $9.00. In April 1998, Steven Goldby,
Director, received an option for 13,333 shares at an exercise price of $7.13. In
July 1998, Mr. Goldby received another option for 13,333 shares at an exercise
price of $9.00. Each option granted has a four year vesting schedule. Each of
the above options was granted under the 1997 Equity Incentive Plan and vests
over four years. See "--Employee Benefit Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From Clontech's inception through June 1998, the Board of Directors made all
determinations with respect to executive officer compensation. Since July 1998,
the Compensation Committee has made all determinations relating to executive
officer compensation.
39
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation awarded to or earned by our Chief Executive Officer and four most
highly compensated executive officers during the year ended December 31, 1998
(the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
--------------------------------------------- AWARDS
SECURITIES -----------------
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(2) OPTIONS(#) COMPENSATION(3)
- ----------------------------------------- ----------- --------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Kenneth S. Fong, Ph.D. .................. $ 175,500 $ 12,000 $ 40,000 -- $ 10,558
President and Chief Executive Officer
Paul H. Kao ............................. 140,231 42,000 20,000 60,472 5,958
Senior Vice President
Carol Casals Lou ........................ 116,538 38,000 -- 38,666 6,186
Vice President, Sales and Marketing
Paul D. Siebert, Ph.D. .................. 105,808 28,367(4) 20,000 38,666 6,678
Scientific Director
Anne M. Scholz .......................... 104,934 36,066(5) -- 36,000 6,985
Vice President, Product and Business
Development
</TABLE>
- ------------------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other annual compensation in the form of perquisites and other personal
benefits has been omitted where the aggregate amount of such perquisites and
other personal benefits constitutes less than the lesser of $50,000 or 10%
of the total annual salary and bonus for the Named Executive Officer for the
fiscal year.
(2) Represents deferred compensation earned during the year ended December 31,
1998.
(3) Includes insurance premiums and 401(k) matching contributions by Clontech.
(4) Includes a $4,175 bonus for publication.
(5) Includes a $1,000 bonus for five years of service.
40
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The following tables show for the year ended December 31, 1998, certain
information regarding options granted to, and held at year end by, the Named
Executive Officers:
OPTION GRANTS IN FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
---------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED(#) FISCAL YEAR(%)(2) PER SHARE(3) DATE 5% 10%
- --------------------------------- ----------- --------------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth S. Fong, Ph.D............ -- -- -- -- -- --
Paul H. Kao...................... 33,806 3.8% $ 6.00 1/2008 $ 583,827 $ 992,856
26,666 3.0 9.00 7/2008 460,520 783,159
Carol Casals Lou................. 18,666 2.1 6.00 1/2008 322,360 548,206
20,000 2.3 9.00 7/2008 345,398 587,384
Paul D. Siebert, Ph.D............ 18,666 2.1 6.00 1/2008 322,360 548,206
20,000 2.3 9.00 7/2008 345,398 587,384
Anne M. Scholz................... 16,000 1.8 6.00 1/2008 276,319 469,907
20,000 2.3 9.00 7/2008 345,398 587,384
</TABLE>
- ------------------------
(1) The options listed in the table were granted under the 1997 Equity Incentive
Plan and vest over four years. See "--Employee Benefit Plans" for a
description of the material terms of these options.
(2) Based on an aggregate of 884,402 options granted to employees, consultants
and directors of Clontech in fiscal 1998, including the Named Executive
Officers set forth in the "Summary Compensation Table" above and directors
set forth in "Director Compensation" above.
(3) The exercise price is equal to 100% of the fair market value of the common
stock on the date of grant, as determined by the Board of Directors.
(4) Potential realizable value is based on the assumption that the common stock
of Clontech appreciates at the annual rate shown, compounded annually, from
the date of this prospectus until the expiration of the option. Stock price
appreciation of five percent and ten percent is assumed pursuant to rules
promulgated by the Securities and Exchange Commission and does not represent
our prediction of our stock price performance. The potential realizable
value is calculated by:
- multiplying the number of shares of common stock subject to a given option
by the assumed initial public offering price per share of $15.00;
- assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table until the
expiration of the option; and
- subtracting from that result the aggregate option exercise price.
41
<PAGE>
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 (#)(1) DECEMBER 31, 1998 (2)
-------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------------------------------------- -------------------------- -------------------------
<S> <C> <C>
Kenneth S. Fong, Ph.D......................................... --/-- --/--
Paul H. Kao................................................... 0/60,472 $ 0/$464,250
Carol Casals Lou.............................................. 0/38,666 0/287,994
Paul D. Siebert, Ph.D......................................... 0/38,666 0/287,994
Anne M. Scholz................................................ 0/36,000 0/264,000
</TABLE>
- ------------------------
(1) The options listed in the table were granted under the 1997 Equity Incentive
Plan and vest over four years. See "--Employee Benefit Plans" for a
description of the material terms of these options.
(2) Based on the assumed initial public offering price of $15.00, less the
exercise price, without taking into account any taxes that may be payable in
connection with the transaction, multiplied by the number of shares
underlying the option.
No options were exercised during the year ended December 31, 1998, by the
Named Executive Officers.
EMPLOYEE BENEFIT PLANS
AMENDED AND RESTATED EQUITY INCENTIVE PLAN. In September 1997, the Board
adopted, and the stockholders approved, the 1997 Equity Incentive Plan (the
"Incentive Plan"). In July 1998, the Board and stockholders amended and restated
the Incentive Plan. We have reserved a total of 1,714,286 shares for issuance
under the Incentive Plan. The number of shares granted pursuant to stock bonuses
under the Incentive Plan shall at no time exceed 10% of the then current share
reserve. The Incentive Plan provides for grants of incentive stock options that
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), to our employees (including officers and employee directors) or the
employees of any affiliate. Nonstatutory stock options, rights to acquire
restricted stock purchase awards, stock bonuses and stock appreciation rights
may be granted to employees (including officers), directors of and consultants
to Clontech or any affiliate. The Incentive Plan shall be administered by the
Board or a committee appointed by the Board; references herein to the Board
shall include any such committee. It is intended that the Incentive Plan will be
administered by the Compensation Committee, currently consisting of Gregory M.
Avis, Steven Goldby and David S. Lee, all of whom are "nonemployee directors"
under applicable securities laws and "outside directors," as defined under the
Code. The Board has the authority to determine to whom awards are granted, the
terms of such awards, including the type of award to be granted, the exercise
price, the number of shares subject to the award and the exercisability.
The term of a stock option granted under the Incentive Plan generally may
not exceed 10 years. The exercise price of options granted under the Incentive
Plan is determined by the Board, but, in the case of an incentive stock option,
cannot be less than 100% of the fair market value of the common stock on the
date of grant. Options granted under the Incentive Plan vest at the rate
specified in the option agreement. Except as expressly provided by the terms of
a nonstatutory stock option agreement, no option may be transferred by the
optionee other than by will or the laws of descent or distribution or, in
certain limited instances, pursuant to a qualified domestic relations order,
provided that an optionee may designate a beneficiary who may exercise the
option following
42
<PAGE>
the optionee's death. An optionee whose relationship with Clontech or any
affiliate ceases for any reason (other than due to death or permanent and total
disability) may generally exercise vested options in the three month period
following such cessation (unless such options terminate or expire sooner by
their terms) or in such longer or shorter period as may be determined by the
Board and set forth in the option agreement. Vested options may be exercised
during the twelve month period after an optionee's relationship with Clontech or
its affiliates ceases due to disability and for up to eighteen months after such
relationship with Clontech or its affiliates ceases due to death.
No incentive stock option may be granted to any person who, at the time of
the grant, owns (or is deemed to own) stock possessing more than 10% of the
total combined voting power of Clontech or its affiliates, unless the option
exercise price is at least 110% of the fair market value of the stock subject to
the option on the date of grant and the term of the option does not exceed five
years from the date of grant. In addition, the aggregate fair market value,
determined at the time of grant, of the shares of common stock with respect to
options which become exercisable by an optionee during any calendar year, may
not exceed $100,000. Any options, or portions thereof, which exceed this limit
are treated as nonstatutory options.
If Clontech becomes subject to Section 162(m) of the Code (which denies a
deduction to publicly held corporations for certain compensation paid to
specific employees in a taxable year to the extent that the compensation exceeds
$1,000,000), no person may be granted options under the Incentive Plan covering
more than 666,666 shares of common stock in any calendar year.
Shares subject to stock awards that have lapsed or terminated, without
having been exercised in full, and any shares repurchased by Clontech pursuant
to a repurchase option provided under the Incentive Plan may again become
available for the grant of awards under the Incentive Plan. Shares subject to
stock rights exercised in accordance with the Incentive Plan will not again
become available for the grant of awards under the Incentive Plan. In the event
of a decline in the value of our common stock, the Board of Directors has the
authority to offer optionees the opportunity to replace outstanding options with
new options for the same or a different number of shares. Both the original and
the new option will count towards Section 162(m), the per-person, calendar year
limitation set forth above.
Rights to acquire restricted stock granted under the Incentive Plan may be
granted subject to a repurchase option in favor of Clontech that will expire
pursuant to a vesting schedule. The purchase price of such awards will be at
least 85% of the fair market value of the common stock on the date of grant.
Stock bonuses may be awarded in consideration for past services without the
payment of a purchase price. Rights under a stock bonus or restricted stock
bonus agreement may not be transferred other than by will, the laws of descent
and distribution or a qualified domestic relations order while the stock awarded
pursuant to such an agreement remains subject to the agreement, provided that a
holder of such rights may designate a beneficiary who may exercise the right
following the holder's death. Stock appreciation rights authorized for issuance
under the Incentive Plan may be tandem stock appreciation rights, concurrent
stock appreciation rights or independent stock appreciation rights.
Upon certain changes in control of Clontech, all outstanding stock awards
under the Incentive Plan may be assumed by the surviving entity or replaced with
similar stock awards granted by the surviving entity. If the surviving entity
does not assume such awards or provide substitute awards, then with respect to
persons whose service with Clontech or an affiliate has not terminated prior to
such change in control, the awards shall become fully vested and any Clontech
repurchase option or reacquisition right with respect to such persons shall
lapse along with any awards not exercised prior to such change in control.
As of February 9, 1999, 907 shares had been issued upon the exercise of
options granted under the Incentive Plan and options to purchase 846,261 shares
were outstanding with 867,118 shares reserved
43
<PAGE>
for future grants or purchases under the Incentive Plan. The Incentive Plan will
terminate in September 2007, unless terminated sooner by the Board. See Note 12
of notes to consolidated financial statements.
1998 EMPLOYEE STOCK PURCHASE PLAN. In July 1998, the Board adopted, and the
stockholders approved, the 1998 Employee Stock Purchase Plan (the "Purchase
Plan") covering an aggregate of 450,000 shares of common stock. The Purchase
Plan is intended to qualify as an employee stock purchase plan within the
meaning of Section 423 of the Code. Under the Purchase Plan, the Board may
authorize participation by eligible employees, including officers, in periodic
offerings following the adoption of the Purchase Plan. No offering period will
last more than 27 months.
Employees are eligible to participate in the Purchase Plan if they are
employed by Clontech or its affiliates, for at least 20 hours per week, and for
at least five months per calendar year. Employees who own stock possessing five
percent of the total combined voting power or value of all classes of stock of
Clontech or any of its affiliates, or who would own such amount after rights to
purchase stock were granted under the Purchase Plan, are not eligible to
participate in the Purchase Plan. Employees who participate in an offering can
have up to 10% of their earnings withheld pursuant to the Purchase Plan but may
not purchase stock with an aggregate fair market value of more than $25,000
(measured on the commencement date of the offering) in any calendar year. The
amount withheld will then be used to purchase shares of the common stock on
specified dates determined by the Board. The price of common stock purchased
under the Purchase Plan will be equal to 85% of the lower of the fair market
value of the common stock on (i) the commencement date of each offering period
or (ii) on the specified purchase date. Employees may end their participation in
the offering at any time during the offering period. Participation ends
automatically on termination of employment with Clontech.
In the event of certain changes of control of Clontech, the Board has
discretion to provide that each right to purchase common stock will be assumed
or an equivalent right substituted by the successor corporation, or the Board
may shorten the offering period and provide for all sums collected by payroll
deductions to be applied to purchase stock immediately prior to the change in
control. The Board has the authority to amend or terminate the Purchase Plan, at
its discretion, subject to the limitation that no such action may adversely
affect any outstanding rights to purchase common stock under the Purchase Plan.
See Note 12 of notes to consolidated financial statements.
As of January 31, 1999, no shares of common stock had been purchased under
the Purchase Plan.
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN. In July 1998, the Board
adopted, and the stockholders approved, the 1998 Non-Employee Directors' Stock
Option Plan (the "Directors' Plan") to provide for the automatic grant of
options to purchase shares of common stock to non-employee directors of
Clontech. The Directors' Plan is administered by the Board, unless the Board
delegates administration to a committee comprised of members of the Board.
The aggregate number of shares of common stock that may be issued pursuant
to options granted under the Directors' Plan is 200,000. Pursuant to the terms
of the Directors' Plan, each director of Clontech, who is not an employee of
Clontech (a "Non-Employee Director") upon the closing of this offering or who is
elected or appointed to be a Non-Employee Director after the closing of this
offering, shall automatically be granted an option to purchase 13,333 shares of
common stock upon the date of such closing or of such election or appointment
(an "Initial Grant"). In addition, each Non-Employee Director who continues to
serve as a Non-Employee Director of Clontech will automatically be granted an
option to purchase 6,666 shares of common stock on each anniversary of the
closing date of this offering (an "Annual Grant"), which amount shall be
pro-rated for any Non-Employee Director who has not continuously served as a
director for the 12 month period prior to such anniversary date. Each Initial
Grant and Annual Grant shall vest over a four year period measured from the
grant date.
44
<PAGE>
No option granted under the Directors' Plan may be exercised after the
expiration of ten years from the date on which it was granted. The exercise
price of options under the Directors' Plan will equal the fair market value of
the common stock on the date of grant. A Non-Employee Director whose service as
a Non-Employee Director or employee of or consultant to Clontech or any
affiliate ceases for any reason other than due to death or permanent and total
disability may generally exercise vested options in the three month period
following such cessation (unless such options terminate or expire sooner by
their terms). Vested options may be exercised during the 12 month period after a
Non-Employee Director's service ceases due to disability and during the 18 month
period after such service ceases due to death. The Directors' Plan will
terminate in July 2008, unless earlier terminated by the Board. See Note 12 of
notes to consolidated financial statements.
As of January 31, 1999, no options to purchase common stock had been granted
pursuant to the Directors' Plan.
45
<PAGE>
CERTAIN TRANSACTIONS
SUMMIT SECURITIES PURCHASE AGREEMENT. Entities affiliated with Summit
Partners (collectively, "Summit Partners") and Clontech entered into a
Securities Purchase Agreement, dated September 9, 1997 (the "Summit Securities
Purchase Agreement"). Pursuant to this agreement, Clontech issued warrants to
Summit Partners to purchase 601,253 shares of common stock at an exercise price
of $8.32 per share. The shares exercisable under the warrants decrease each
month by 1/48(th) of 1.2% of the number of fully diluted shares of Clontech
common stock. The aggregate proceeds to Clontech upon the exercise of the
warrants is fixed; therefore, as the number of shares decreases with time, the
exercise price per share increases. As of February 9, 1999, the total number of
shares exercisable under these warrants had decreased to 542,967 with a
corresponding increase in the exercise price to $9.21 per share. In connection
with the Summit Securities Purchase Agreement, Clontech issued $6,000,000 in 12%
Subordinated Notes due September 9, 2004, to Summit Partners (the "Notes").
According to the terms of the Notes, on September 9th of each year, 50% of the
accrued interest as of such date is paid to Summit Partners and the remaining
50% is added to the principal.
SUMMIT STOCK PURCHASE AGREEMENT. Concurrent with the Summit Securities
Purchase Agreement, Kenneth S. Fong, Ph.D. sold 3,017,142 shares of common stock
at a price of $5.27 per share to Summit Partners.
INVESTOR RIGHTS AGREEMENT. Concurrent with the Summit Securities Purchase
Agreement, Clontech entered into an Investor Rights Agreement with Summit
Partners, pursuant to which Summit Partners has certain registration rights with
respect to its shares of Clontech common stock. See "Description of Capital
Stock--Registration Rights." In addition, pursuant to this agreement, Summit
Partners has the right to sell any and all shares of Clontech common stock owned
by Summit Partners to Clontech (the "Put Right"). The Put Right is triggered by
a merger, acquisition, dissolution, material default on the Notes, or the
initial public offering of Clontech's common stock. The Put Right expires on the
second anniversary of the closing of this offering. The Put Right may be
exercised by Summit Partners at a price per share equal to the product of the
market value of Clontech multiplied by the percentage of outstanding Clontech
common stock owned by Summit Partners. However, the price per share cannot be
lower than $5.27 plus 8% compounded annually. This offering will trigger the Put
Right; however, in connection with the offering Summit Partners has waived the
Put Right.
RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT. Concurrent with the Summit
Securities Purchase Agreement, Clontech and Dr. Fong entered into a Right of
First Refusal and Co-Sale Agreement with Summit Partners. Pursuant to this
agreement, if Dr. Fong proposes to transfer or sell any of his shares of
Clontech common stock to a third party, Summit Partners will first have the
right to purchase the shares Dr. Fong proposes to transfer or sell, subject to
certain exceptions. If Summit Partners does not exercise its right to purchase
the shares offered by Dr. Fong, Summit Partners may participate on a pro rata
basis in such transfer or sale to the third party. These rights will not apply
to this offering, and this agreement will terminate upon the closing of this
offering.
SHAREHOLDERS AGREEMENT. Concurrent with the Summit Securities Purchase
Agreement, Clontech and Dr. Fong entered into a Shareholders Agreement with
Summit Partners. During the term of this agreement, Dr. Fong shall vote his
shares of Clontech common stock in favor of the election of two individuals
nominated by Summit Partners to serve as members of Clontech's Board of
Directors. In addition, pursuant to this agreement, Dr. Fong granted Summit
Partners the right to sell any and all shares of Clontech common stock owned by
Summit Partners to Dr. Fong on the same terms and conditions as the Put Right.
This agreement and Summit Partners' right to sell its Clontech common stock
under this agreement will terminate upon the closing of this offering. In
46
<PAGE>
addition, pursuant to a Stock Pledge Agreement dated September 9, 1997, Dr. Fong
personally guaranteed the put he granted to Summit Partners by securing, as
collateral for its performance, all of his Clontech common stock. Upon the
expiration of this put, Dr. Fong's Clontech common stock will be released from
the pledge.
STOCK OPTION GRANTS. In July 1998, William W. Sims, Senior Vice President
and Chief Financial Officer, received an option to purchase 100,000 shares at an
exercise price of $9.00 per share with a five year vesting schedule. In April
and July 1998, Sarah J. Brashears, Director of Intellectual Property, received
options to purchase 6,000 shares and 7,333 shares at exercise prices of $7.13
and $9.00 per share, respectively, each with a four year vesting schedule. In
January 1998, Pamela P. Fong, an affiliate of Clontech, received an option to
purchase 30,400 shares at an exercise price of $6.60 with a four year vesting
schedule.
ASSET SALE. In February 1992, in connection with the sublease of certain
property by Clontech to IgX, Inc., Clontech sold certain leasehold improvements
and fixtures to Dr. Fong, in consideration for a promissory note in the
principal amount of $113,000 from Dr. Fong. Dr. Fong later sold these leasehold
improvements and fixtures to IgX, Inc., and, in August 1997, repaid the entire
promissory note.
47
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of February 9, 1999, and as adjusted
to reflect the sale of the shares of common stock offered hereby by (i) each
person who we know owns more than 5% of our common stock, (ii) each of our
directors, (iii) each of our Named Executive Officers, and (iv) all of our
directors and executive officers as a group. Except as otherwise noted below,
the address of each person listed below is our address.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING (1) FOLLOWING OFFERING (1)
-------------------------- --------------------------
NUMBER PERCENT NUMBER OF NUMBER PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF SHARES OF TOTAL SHARES OFFERED OF SHARES OF TOTAL
- ---------------------------------------------- ------------- ----------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Kenneth S. Fong, Ph.D. (2).................... 9,013,889 73.8% 297,224 8,716,413 56.3%
Entities affiliated with Summit Partners
(3)......................................... 3,219,918 26.4% 202,776 3,017,142 19.5%
Gregory M. Avis (3)(4)........................ 3,219,918 26.4% 202,776 3,017,142 19.5%
Steven Goldby................................. 0 * 0 0 *
David S. Lee.................................. 0 * 0 0 *
Paul H. Kao (5)............................... 9,860 * 0 9,860 *
Carol Casals Lou (6).......................... 5,444 * 0 5,444 *
Paul D. Siebert, Ph.D. (7).................... 5,444 * 0 5,444 *
Anne M. Scholz (8)............................ 4,666 * 0 4,666 *
All directors and executive officers as a
group (11 persons) (9)...................... 12,240,264 100% 500,000 11,740,264 75.8%
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Beneficial ownership also
includes shares of stock subject to options and warrants currently
exercisable or convertible, or exercisable or convertible within 60 days of
February 9, 1999. Percentage of beneficial ownership is based on 12,203,683
shares of common stock outstanding as of February 9, 1999, and 15,453,683
shares of common stock outstanding after completion of this offering,
assuming the net exercise of warrants to purchase common stock upon
completion of this offering. Unless otherwise indicated below, to our
knowledge, all persons listed above have sole voting and investment power
with respect to their shares of common stock, except to the extent authority
is shared by spouses under applicable law.
(2) Includes 80,000 shares held in trust for the benefit of John Calvin Fong,
Dr. Fong's minor son. Dr. Fong disclaims beneficial ownership of these
shares. Also includes 8,866 shares of common stock issuable upon exercise of
stock options within 60 days granted to Pamela P. Fong, O.D., Dr. Fong's
spouse.
(3) Represents 2,948,537 shares held by Summit Ventures IV, L.P., 92,071 shares
held by Summit Investors III, L.P., 179,310 shares held by Summit
Subordinated Debt Fund II, L.P., including an aggregate of 202,776 shares to
be received at the completion of this offering upon the net exercise of
warrants to purchase common stock. The address for the entities affiliated
with Summit Partners is 499 Hamilton Avenue, Suite 200, Palo Alto, CA 94301.
48
<PAGE>
(4) Mr. Avis, a Director of Clontech, is a general partner of Summit Partners.
Mr. Avis disclaims beneficial ownership of shares held by the entities
affiliated with Summit Partners except to the extent of his proportionate
partnership interest therein.
(5) Represents 9,860 shares of common stock issuable upon exercise of stock
options within 60 days.
(6) Represents 5,444 shares of common stock issuable upon exercise of stock
options within 60 days.
(7) Represents 5,444 shares of common stock issuable upon exercise of stock
options within 60 days.
(8) Represents 4,666 shares of common stock issuable upon exercise of stock
options within 60 days.
(9) Includes 37,488 shares of common stock issuable upon exercise of stock
options within 60 days.
49
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, our authorized capital stock will consist
of 50 million shares of common stock, par value $0.001, and 10 million shares of
preferred stock, par value $0.001.
We are currently subject to Section 2115 of the California Corporations Code
("Section 2115"). Section 2115 provides that, regardless of a company's legal
domicile, certain provisions of California corporate law will apply to that
company if the company meets certain requirements relating to its property,
payroll and sales in California, and if more than 50% of its outstanding voting
securities are held of record by persons having addresses in California. Among
other things, Section 2115 may limit our ability to elect a classified Board of
Directors. We will not be subject to Section 2115 if:
- we are qualified for trading as a national market security on the Nasdaq
National Market, and we have at least 800 stockholders as of the record
date of our most recent annual meeting, or
- during any income year less than 50% of our outstanding voting securities
are held of record by persons having addresses in California, or
- one of the other tests of Section 2115 is not met.
COMMON STOCK
Upon the closing of this offering, there will be 15,453,683 shares of common
stock outstanding. The holders of common stock are entitled to one vote for each
share held of record on all matters submitted to a vote of our stockholders. As
long as we are subject to Section 2115, the holders of common stock are entitled
to cumulative voting rights with respect to the election of directors. At such
time or times as we are no longer subject to Section 2115, the holders of common
stock will not be entitled to cumulate voting rights with respect to the
election of directors, and as a consequence, minority stockholders will not be
able to elect directors on the basis of their votes alone.
Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the Board of Directors may from time to time
determine. See "Dividend Policy." Upon liquidation, dissolution or winding up of
Clontech, holders of the common stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation preference of
any then outstanding shares of preferred stock. Holders of common stock have no
preemptive rights and no right to convert their common stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are, and all shares of
common stock to be outstanding upon completion of this offering will be, fully
paid and nonassessable.
PREFERRED STOCK
Pursuant to our amended and restated certificate of incorporation, the Board
of Directors will have the authority, without further action by the
stockholders, to issue up to 10 million shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by the stockholders. The issuance of preferred stock could
adversely affect the voting power of holders of common stock, and the likelihood
that such holders will receive dividend payments and payments upon liquidation
may have the effect of delaying, deferring or preventing a change in control of
Clontech, which could have a depressive effect on the market price of our common
stock. We have no present plan to issue any shares of preferred stock.
50
<PAGE>
REGISTRATION RIGHTS
Upon completion of this offering, of 3,017,142 shares of common stock will
be entitled to certain rights with respect to the registration of such shares
under the Securities Act. If we propose to register any of our securities under
the Securities Act, either for our own account or for the account of other
security holders, the Holders will be entitled to notice of the registration and
will be entitled to include, at our expense, such shares therein. In addition,
certain of the Holders may require us, at our expense and on not more than two
occasions at any time beginning approximately six months from the date of the
closing of this offering, to file a registration statement under the Securities
Act, with respect to their shares of common stock, and we will be required to
use our best efforts to effect the registration, subject to certain conditions
and limitations. Further, the Holders may require us at our expense to register
their shares on Form S-3 when such form becomes available to us, subject to
certain conditions and limitations. Such rights shall terminate on the earlier
of September 9, 2004, or at such time as a Holder is able to sell all its shares
pursuant to Rule 144 in any 90 day period.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
We are subject to Section 203 of the Delaware General Corporation Law
("Section 203") regulating corporate takeovers. Section 203, subject to certain
exceptions, prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years
following the date that such stockholder became an interested stockholder
unless:
- prior to such date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who are
directors and also officers, and employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
- on or subsequent to such date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines "business combination" to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation to
the interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an "interested stockholder" as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person. See "Risk Factors--Anti-Takeover
51
<PAGE>
Provisions in Our Charter Documents and Delaware Law May Make it More Difficult
for a Third Party to Acquire Us."
Our amended and restated bylaws provide that candidates for director may be
nominated only by the Board of Directors or by a stockholder who gives written
notice to us no later than 60 days prior nor earlier than 90 days prior to the
first anniversary of the last annual meeting of stockholders. The Board may
consist of one or more members to be determined from time to time by resolution
of the Board. The Board currently consists of four members. Between stockholder
meetings, the Board may appoint new directors to fill vacancies or newly created
directorships. Our amended and restated certificate of incorporation provides
that at such time as we are no longer subject to Section 2115, our amended and
restated certificate of incorporation will not allow cumulative voting at
stockholder meetings for election of directors. As a result, stockholders
controlling more than 50% of the outstanding common stock will be able to elect
the entire Board of Directors, while stockholders controlling less than 50% of
the outstanding common stock may not be able to elect any directors. Our amended
and restated certificate of incorporation also provides that during such time as
we are subject to Section 2115, a director may be removed with or without cause
by the affirmative vote of the holders of at least a majority of the then
outstanding shares of voting stock. At such time that we are no longer subject
to Section 2115, our amended and restated certificate of incorporation provides
that a director may be removed from office for cause by the affirmative vote of
a majority of the combined voting power of the then outstanding shares of stock
entitled to vote generally in the election of directors.
Our amended and restated certificate of incorporation requires that upon
completion of the offering, any action required or permitted to be taken by our
stockholders must be effected at a duly called annual or special meeting of
stockholders and may not be effected by a consent in writing. Our amended and
restated certificate of incorporation also provides that the authorized number
of directors may be changed only by resolution of the Board of Directors. See
"Management--Executive Officers and Directors." Delaware law and these charter
provisions may have the effect of deterring hostile takeovers or delaying
changes in control or our management, which could have a depressive effect on
the market price of our common stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our amended and restated certificate of incorporation and amended and
restated bylaws contain certain provisions permitted under Delaware law relating
to the liability of directors. These provisions eliminate a director's personal
liability for monetary damages resulting from a breach of fiduciary duty, except
in certain circumstances involving certain wrongful acts, such as:
- for any breach of the director's duty of loyalty to Clontech or our
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for any acts under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derives an improper personal
benefit.
These provisions do not limit or eliminate our rights or any stockholder's
rights to seek non-monetary relief, such as an injunction or rescission, in the
event of a breach of director's fiduciary duty. These provisions will not alter
a director's liability under federal securities laws. In addition, we intend to
enter into separate indemnification agreements with our directors and executive
officers that provide such person indemnification protection in the event the
amended and restated certificate of incorporation and amended and restated
bylaws are subsequently amended. We believe that these provisions and agreements
will assist us in attracting and retaining qualified individuals to serve as
directors and officers.
TRANSFER AGENT
The transfer agent and registrar for our common stock is Equiserve Limited
Partnership.
LISTING
We have applied to have our common stock quoted on the Nasdaq National
Market under the symbol "CLON."
52
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices. Furthermore, since no
shares will be available for sale shortly after this offering because of certain
contractual and legal restrictions on resale as described below, sales of
substantial amounts of our common stock in the public market after these
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
15,453,683 shares of common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options and warrants. Of
these shares, all of the shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, unless
such shares are purchased by "affiliates" as that term is defined in Rule 144
under the Securities Act (an "Affiliate"). The remaining 11,703,683 shares of
common stock held by existing stockholders are "restricted securities" as that
term is defined in Rule 144 under the Securities Act ("Restricted Shares").
Restricted Shares may be sold in the public market only if registered or if they
qualify for an exemption from registration described below under Rules 144,
144(k) or 701 promulgated under the Securities Act.
As a result of the contractual restrictions described below and the
provisions of Rules 144, 144(k) and 701, the Restricted Shares will be available
for sale in the public market as follows:
- no shares will be eligible for immediate sale on the date the registration
statement of which this prospectus is a part is declared effective;
- no shares will be eligible for sale prior to 90 days from the date the
registration statement of which this prospectus is a part is declared
effective; and
- 11,703,683 shares will be eligible for sale upon the expiration of the
lock-up agreements described below, 180 days after the date the
registration statement of which this prospectus is a part is declared
effective.
LOCK-UP AGREEMENTS. All of our officers, directors, stockholders and option
holders have agreed not to transfer or dispose of, directly or indirectly, any
shares of our common stock or any securities convertible into or exercisable or
exchangeable for shares of our common stock, for a period of 180 days after the
date the registration statement of which this prospectus is a part is declared
effective. Transfers or dispositions can be made sooner with the prior written
consent of BT Alex. Brown Incorporated.
RULE 144. In general, under Rule 144 as currently in effect, beginning 90
days after the date the registration statement of which this prospectus is a
part is declared effective, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least one year (including
the holding period of any prior owner except an Affiliate) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of:
- 1% of the number of shares of our common stock then outstanding (which
will equal approximately 11,703,683 shares immediately after this
offering); or
- the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions and
notice requirements and to the availability of current public information about
Clontech.
53
<PAGE>
RULE 144(k). Under Rule 144(k), a person who is not deemed to have been one
of our Affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except an Affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. No shares will
qualify as "144(k) shares" on the registrant statement of which this prospectus
is a part.
RULE 701. In general, under Rule 701 of the Securities Act as currently in
effect, any of our employees, consultants or advisors, other than Affiliates,
who purchases or receives shares from us in connection with a compensatory stock
purchase plan or option plan or other written agreement will be eligible to
resell such shares beginning 90 days after the effective date of the
registration statement of which this prospectus is a part, subject only to the
manner of sale provisions of Rule 144, and by Affiliates under Rule 144 without
compliance with its holding period requirements.
REGISTRATION RIGHTS. Upon completion of this offering, the holders of
3,017,142 shares of our common stock, or their transferees, will be entitled to
certain rights with respect to the registration of such shares under the
Securities Act. See "Description of Capital Stock--Registration Rights."
Registration of such shares under the Securities Act would result in such shares
becoming freely tradable without restriction under the Securities Act (except
for shares purchased by Affiliates) immediately upon the effectiveness of such
registration.
STOCK OPTIONS. Immediately after this offering, we intend to file a
registration statement under the Securities Act covering 2,363,379 shares of
common stock reserved for issuance under the Incentive Plan, the Purchase Plan
and the Directors' Plan. See "Management--Employee Benefit Plans." Such
registration statement is expected to be filed and become effective as soon as
practicable after the closing of this offering. Accordingly, shares registered
under such registration statements will, subject to Rule 144 volume limitations
applicable to Affiliates, be available for sale in the open market, beginning
180 days after the effective date of the registrant statement of which this
prospectus is a part.
54
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives, BT Alex. Brown
Incorporated, Hambrecht & Quist LLC and Lehman Brothers Inc., have severally
agreed to purchase from us and the selling stockholders the following respective
numbers of shares of common stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------------------------------------------------------------------------- -----------
<S> <C>
BT Alex. Brown Incorporated..........................................................................
Hambrecht & Quist LLC................................................................................
Lehman Brothers Inc..................................................................................
-----------
Total............................................................................................ 3,750,000
-----------
-----------
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions. The underwriters are obligated to purchase all of the
shares of common stock offered hereby, other than those covered by the
overallotment option described below, if any of such shares are purchased.
The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover page of this prospectus and
to certain dealers at a price that represents a concession not in excess of $
per share under the public offering price. The underwriters may allow, and such
dealers may re-allow, a concession not in excess of $ per share to certain
other dealers. After the initial public offering, the offering price and other
selling terms may be changed by the representatives of the underwriters.
We have granted to the underwriters an option, exercisable not later than 30
days after the effective date of the registration statement of which this
prospectus is a part, to purchase up to 562,500 additional shares of our common
stock at the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this prospectus. The underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of the common stock offered hereby. To the extent that the underwriters
exercise such option, each of the underwriters will become obligated, subject to
certain conditions, to purchase approximately the same percentage of additional
shares of common stock as the number of shares of our common stock to be
purchased by it in the above table bears to 3,750,000, and we will be obligated,
pursuant to the option, to sell such shares to the underwriters to the extent
the option is exercised. If any additional shares of common stock are purchased,
the underwriters will offer additional shares on the same terms as those on
which the 3,750,000 shares are being offered.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
55
<PAGE>
Each of Clontech's officers, directors and stockholders, has agreed not to
offer, sell, contract to sell or otherwise dispose of or enter into any
transaction which is designed to, or could be expected to, result in the
disposition of any portion of any of our common stock for period of 180 days
after the effective date of the registration statement of which this prospectus
is a part without the prior written consent of BT Alex. Brown Incorporated. Such
consent may be given at any time without public notice. We have entered into a
similar agreement, except that we may issue, and grant options or warrants to
purchase, shares of common stock or any securities convertible into, exercisable
for or exchangeable for shares of common stock, pursuant to the exercise of
outstanding options and warrants and our issuance of options and stock granted
under the existing stock option and stock purchase plans. See "Shares Eligible
for Future Sale."
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with the offering, creating a short
position in our common stock for their own account. Additionally, to cover such
over-allotments or to stabilize the market price of our common stock, the
underwriters may bid for, and purchase, shares of our common stock in the open
market. Finally, the representatives, on behalf of the underwriters may also
reclaim selling concessions allowed to an underwriter or a dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
The underwriters are not required to engage in these activities, and if
commenced, may end any of these activities at any time.
PRICING OF THIS OFFERING
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock will
be determined by negotiation among the representatives of the underwriters and
Clontech. Among the factors to be considered in determining the public offering
price will be:
- our results of operations in recent periods;
- our present stage of development;
- the market capitalizations and stages of development of other companies
which we and the representatives of the underwriters believe to be
comparable to us;
- estimates of our business potential; and
- prevailing market conditions.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Cooley Godward LLP, Palo Alto, California. Certain legal matters
in connection with this offering will be passed upon for the underwriters by
Latham & Watkins, Costa Mesa, California.
56
<PAGE>
EXPERTS
The consolidated balance sheets of Clontech Laboratories, Inc. as of
December 31, 1997 and 1998, and the consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998, included in this prospectus, have been included herein
in reliance upon the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act with respect to the shares of common stock offered
hereby. This prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedule filed therewith. Certain
items are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to Clontech and the common
stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedule filed therewith. Statements contained in this prospectus
as to the contents of any contract or any other document referred to are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement, and the exhibits and schedule
filed therewith, may be inspected without charge at the public reference
facilities maintained by the Commission in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and the Commission's regional offices located at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago
Illinois 60661 and Seven World Trade Center, 13(th) Floor, New York, New York
10048, and copies of all or any part of the Registration Statement may be
obtained from such offices upon the payment of the fees prescribed by the
Commission. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
site is http://www.sec.gov. The Registration Statement, including all exhibits
thereto and amendments thereof, has been filed with the Commission through
EDGAR.
57
<PAGE>
CLONTECH LABORATORIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of PricewaterhouseCoopers LLP, Independent Accountants......................... F-2
Consolidated Balance Sheets........................................................... F-3
Consolidated Statements of Operations................................................. F-4
Consolidated Statements of Stockholders' Equity....................................... F-5
Consolidated Statements of Cash Flows................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Clontech Laboratories, Inc.
The stock split and authorization of preferred stock described in Note 16 to
the consolidated financial statements has not been consummated at February 18,
1999. When it has been consummated, we will be in a postition to furnish the
following report:
"In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholders' equity and cash
flows present fairly, in all material respects, the financial position of
Clontech Laboratories, Inc. and its subsidiaries (the "Company") at December 31,
1997 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above."
PricewaterhouseCoopers LLP
San Jose, California
February 12, 1999, except for
Note 16, for which the
date is , 1999
F-2
<PAGE>
CLONTECH LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................................ $ 8,612 $ 13,280
Short-term investments................................................................... 246 254
Marketable securities.................................................................... 3,001 2,000
Accounts receivable, net of allowance for doubtful accounts of $93 and $284 at December
31, 1997 and 1998, respectively........................................................ 3,966 5,425
Inventories.............................................................................. 4,854 7,056
Prepaids and other current assets........................................................ 403 878
Deferred income taxes.................................................................... 1,063 1,909
--------- ---------
Total current assets................................................................. 22,145 30,802
Property and equipment, net................................................................ 7,349 7,054
Other assets............................................................................... 1,288 1,630
Deferred income taxes...................................................................... 256 577
--------- ---------
Total assets......................................................................... $ 31,038 $ 40,063
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt........................................................ $ 508 $ 831
Accounts payable......................................................................... 4,836 3,853
Accrued expenses......................................................................... 2,011 4,184
Income taxes payable..................................................................... 851 1,289
Deferred revenue......................................................................... 598 1,928
--------- ---------
Total current liabilities............................................................ 8,804 12,085
Notes payable to stockholders.............................................................. 5,673 6,153
Long-term debt, net of current portion..................................................... 2,394 3,265
Other long-term liabilities................................................................ 1,056 1,297
--------- ---------
Total liabilities.................................................................... 17,927 22,800
--------- ---------
Commitments and contingencies (Notes 10 and 15)
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value
Authorized: 50,000 shares at December 31, 1997 and 1998; issued and outstanding: 12,000
shares at December 31, 1997 and 1998................................................. 1 1
Additional paid-in capital............................................................... 479 959
Accumulated other comprehensive income (loss)............................................ (11) 28
Deferred stock compensation.............................................................. -- (413)
Retained earnings........................................................................ 12,642 16,688
--------- ---------
Total stockholders' equity........................................................... 13,111 17,263
--------- ---------
Total liabilities and stockholders' equity......................................... $ 31,038 $ 40,063
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
CLONTECH LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Trade sales.................................................................. $ 26,390 $ 35,409 $ 46,814
Contract research and development............................................ 774 1,393 997
--------- --------- ---------
27,164 36,802 47,811
--------- --------- ---------
COST OF REVENUES:
Cost of trade sales.......................................................... 6,512 10,647 14,186
Cost of contract research and development.................................... 774 1,105 759
--------- --------- ---------
7,286 11,752 14,945
--------- --------- ---------
Gross profit............................................................... 19,878 25,050 32,866
--------- --------- ---------
OPERATING EXPENSES:
Research and development..................................................... 3,684 5,085 7,014
Selling, general and administrative.......................................... 10,822 13,764 18,961
--------- --------- ---------
Total operating expenses................................................... 14,506 18,849 25,975
--------- --------- ---------
Operating income........................................................... 5,372 6,201 6,891
Interest income................................................................ 161 315 579
Interest expense............................................................... (219) (455) (1,145)
Other income (expense), net.................................................... 229 (22) 305
--------- --------- ---------
Income before provision for income taxes....................................... 5,543 6,039 6,630
Provision for income taxes..................................................... 2,102 2,366 2,584
--------- --------- ---------
Net income..................................................................... $ 3,441 $ 3,673 $ 4,046
--------- --------- ---------
--------- --------- ---------
Earnings per share:
Basic........................................................................ $ 0.29 $ 0.31 $ 0.34
--------- --------- ---------
--------- --------- ---------
Diluted...................................................................... $ 0.29 $ 0.30 $ 0.32
--------- --------- ---------
--------- --------- ---------
Shares used in computing earnings per share calculations:
Basic........................................................................ 12,000 12,000 12,000
--------- --------- ---------
--------- --------- ---------
Diluted...................................................................... 12,000 12,088 12,543
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
CLONTECH LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER DEFERRED
-------------- PAID IN COMPREHENSIVE STOCK RETAINED
SHARES AMOUNT CAPITAL INCOME (LOSS) COMPENSATION EARNINGS TOTAL
------ ------ ---------- ------------- ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996........................ 12,000 $1 $-- -$- -- $ 5,528 $ 5,529
Translation adjustments........................... -- -- -- (21) -- -- (21)
Net income........................................ -- -- -- -- -- 3,441 3,441
------ ------ ----- ----- ------ -------- -------
Balance at December 31, 1996...................... 12,000 1 -- (21) -- 8,969 8,949
Issuance of warrants.............................. -- 479 -- -- -- 479
Translation adjustments........................... -- -- -- 19 -- -- 19
Change in unrealized loss on marketable
securities...................................... -- -- -- (9) -- -- (9)
Net income........................................ -- -- -- -- -- 3,673 3,673
------ ------ ----- ----- ------ -------- -------
Balance at December 31, 1997...................... 12,000 1 479 (11) -- 12,642 13,111
Deferred stock compensation....................... -- -- 480 -- $(480) -- --
Amortization of deferred stock compensation....... -- -- -- -- 67 67
Translation adjustments........................... -- -- -- 30 -- 30
Change in unrealized gain on marketable
securities...................................... -- -- -- 9 -- 9
Net income........................................ -- -- -- -- 4,046 4,046
------ ------ ----- ----- ------ -------- -------
Balance at December 31, 1998...................... 12,000 $1 $ 959 $ 28 $(413) $ 16,688 $17,263
------ ------ ----- ----- ------ -------- -------
------ ------ ----- ----- ------ -------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
CLONTECH LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................ $ 3,441 $ 3,673 $ 4,046
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization..................................... 1,017 1,248 1,652
Accretion of warrants............................................. -- 40 120
Amortization of deferred stock compensation....................... -- -- 67
Write-off of investments and intangibles.......................... -- 272 --
Provision for doubtful accounts................................... 7 (14) 191
Provision for excess and obsolete inventory....................... 218 222 953
Deferred taxes.................................................... (256) (851) (1,167)
Changes in operating assets and liabilities:
Accounts receivable............................................. (1,212) (879) (1,650)
Inventories..................................................... (2,292) (1,358) (3,155)
Prepaids and other assets....................................... 19 (1,027) (817)
Accounts payable................................................ 1,186 2,330 (983)
Accrued expenses and other long-term liabilities................ 1,136 1,132 2,774
Income taxes payable............................................ 400 451 438
Deferred revenue................................................ 320 278 1,330
Other........................................................... (17) 11 38
--------- --------- ---------
Net cash provided by operating activities....................... 3,967 5,528 3,837
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.................................... (965) (5,359) (1,357)
Purchases of marketable securities.................................... (3,009) (3,000)
Maturities of marketable securities................................... 4,001
Maturities (purchase) of short-term investments....................... (238) -- (8)
Purchase of Clontech Laboratories GmbH................................ (220) -- --
--------- --------- ---------
Net cash used in investing activities........................... (1,423) (8,368) (364)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of subordinated debt........................... -- 6,000 --
Proceeds from issuance of notes payable............................... -- 1,000 1,500
Repayment of notes payable............................................ (581) (457) (305)
--------- --------- ---------
Net cash provided by (used in) financing activities............. (581) 6,543 1,195
--------- --------- ---------
Increase in cash and cash equivalents................................... 1,963 3,703 4,668
Cash and cash equivalents at beginning of year.......................... 2,946 4,909 8,612
--------- --------- ---------
Cash and cash equivalents at end of year................................ $ 4,909 $ 8,612 $ 13,280
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the year......................................... $ 230 $ 179 $ 897
--------- --------- ---------
--------- --------- ---------
Income taxes paid during the year..................................... $ 2,097 $ 2,144 $ 3,191
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Valuation of warrants issued.......................................... $ 479
---------
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FORMATION AND BUSINESS OF THE COMPANY
Clontech Laboratories, Inc. ("Clontech" or the "Company") was incorporated
in California in March 1984 and reincorporated in Delaware in October 1998. The
Company develops, manufactures and markets products for life science research.
The products allow scientists to perform academic research and drug discovery
more rapidly and effectively. The Company sells its products primarily to
scientists within government and academic entities and pharmaceutical and
biotechnolgy companies. The Company also provides contract research and
development services to certain pharmaceutical companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All intercompany transactions and
balances have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the 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 from those estimates.
CASH AND CASH EQUIVALENTS
All highly liquid investments with a remaining maturity of ninety days or
less from the date of purchase are considered to be cash equivalents.
SHORT-TERM INVESTMENTS
Short-term investments consist of certificates of deposit with remaining
maturities between three months and less than one year. These investments are
stated at fair market value.
MARKETABLE SECURITIES
The Company's marketable securities are categorized as available-for-sale
securities, as defined by the Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
Unrealized holding gains and losses are reflected as a net amount in a separate
component of stockholders equity until realized. For the purpose of computing
realized gains and losses, cost is identified on a specific identification
basis.
Available-for-sale securities consist of government bonds with maturities of
less than one year. Unrealized loss for the years ended December 31, 1997 and
1998, was $9,000 and $0, respectively.
INVENTORY
Inventories are stated at the lower of cost, using the average cost method,
or market.
F-7
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company purchases certain key components, including RNA and other
biological supplies, from a limited number of suppliers. For some of these
components, there are relatively few alternative sources of supply. Since the
Company may not be able to quickly establish additional or replacement suppliers
for many of the numerous components used in its products, the Company maintains
significant inventories.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation of property and equipment is computed using the
straight-line method over the estimated useful lives of the respective assets as
follows:
<TABLE>
<CAPTION>
<S> <C>
Machinery and equipment....................................................... 3 to 5 years
Furniture, fixtures and office equipment...................................... 3 to 5 years
Motor vehicles................................................................ 5 years
</TABLE>
Amortization of leasehold improvements is computed using the shorter of the
remaining term of the Company's facilities lease or the estimated useful lives
of the improvements. Maintenance and repairs are charged to operations as
incurred.
REVENUE RECOGNITION
Revenue is recognized upon shipment of product to the customer, net of
allowances for discounts and estimated returns which are also provided at the
time of shipment. Recognition of revenue on sales made to certain distributors,
under agreements allowing right of return, is deferred until products are sold
by the distributors.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations as incurred.
ADVERTISING COSTS
Advertising costs are charged to operations as incurred. Advertising costs
were $1,382,000, $1,805,000 and $2,237,000 in 1996, 1997 and 1998, respectively.
INCOME TAXES
Income taxes are recorded under the liability method. Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using enacted tax rates in effect for the year in which the differences are
expected to reverse.
COMPUTATION OF EARNINGS PER SHARE
Basic earnings per share ("EPS") is computed on net income divided by the
weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur from common shares issuable
through stock options, warrants and other convertible securities. The following
is a reconciliation of the numerator (net income) and the
F-8
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
denominator (number of shares) used in the basic and diluted EPS calculations
(in thousands, except per share amounts).
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Basic:
Net income................................................................... $ 3,441 $ 3,673 $ 4,046
--------- --------- ---------
Weighted average shares outstanding for the period........................... 12,000 12,000 12,000
--------- --------- ---------
Earnings per share........................................................... $ 0.29 $ 0.31 $ 0.34
--------- --------- ---------
--------- --------- ---------
Diluted:
Net income................................................................... $ 3,441 $ 3,673 $ 4,046
--------- --------- ---------
Weighted average shares outstanding for the period........................... 12,000 12,000 12,000
Common stock equivalents:
Stock options................................................................ -- -- 308
Warrants..................................................................... -- 88 235
--------- --------- ---------
Total common and common stock equivalent shares.............................. 12,000 12,088 12,543
--------- --------- ---------
Earnings per share............................................................. $ 0.29 $ 0.30 $ 0.32
--------- --------- ---------
--------- --------- ---------
</TABLE>
COMPREHENSIVE INCOME
The Company has adopted the provisions of Statement of Financial Accounting
No. 130, "Reporting Comprehensive Income." The statement requires the disclosure
of comprehensive income and its components in a full set of general purpose
financial statements or on the statement of operations. Comprehensive income is
defined as net income plus revenues, expenses, gains and losses that, under
generally accepted accounting principles, are excluded from net income.
Comprehensive income is summarized as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Net income......................................................................... $ 3,441 $ 3,673 $ 4,046
Change in unrealized gain or loss on marketable securities....................... -- (9) 9
Foreign currency translation adjustments......................................... (21) 19 30
--------- --------- ---------
Comprehensive income............................................................... $ 3,420 $ 3,683 $ 4,085
--------- --------- ---------
--------- --------- ---------
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts of certain of the Company's financial instruments including
cash, cash equivalents, accounts receivable, accounts payable and other accrued
liabilities approximate fair value due to their short maturities. Based on
borrowing rates currently available to the Company for loans with similar terms,
the carrying value of debt obligations approximates fair market value.
F-9
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, cash equivalents and
short-term investments, accounts receivable and operations in one industry
segment. Substantially all cash, cash equivalents, short-term investments are
maintained with several financial institutions in the United States. Deposits in
these banks may exceed the amount of insurance provided on such deposits.
Generally, these investments may be redeemed upon demand and, therefore, bear
minimal risk. The Company has not experienced any losses on its deposits of
cash, cash equivalents and short-term deposits.
The Company sells its products through its direct sales force in North
America and through distributors in Europe and Asia. The Company performs
ongoing credit evaluations of its customers and maintains an allowance for
potential credit losses. The allowance for noncollection of accounts receivables
is based upon the estimated collectibility of individual accounts. The Company
has not experienced significant losses to date.
FOREIGN CURRENCY ACCOUNTING
Exchange adjustments resulting from foreign currency transactions are
generally recognized in operations, whereas adjustments resulting from the
translation of financial statements are reflected as a separate component of
stockholders equity.
RECLASSIFICATIONS
Certain amounts in the financial statements have been reclassified to
conform with the current years presentation. These reclassifications had no
impact on previously reported total assets, liabilities, stockholders' equity,
operating income or net income.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes new standards of accounting and reporting
for derivative instruments and hedging activities. SFAS No. 133 requires that
all derivatives be recognized at fair value in the statement of financial
position and that the corresponding gains or losses be reported either in the
statement of operations or as a component of comprehensive income, depending on
the type of hedging relationship that exists. SFAS No. 133 is effective for
fiscal years beginning after June 15, 1999. Earlier application is allowed as of
the beginning of any quarter beginning after issuance. The Company does not
anticipate that the adoption of SFAS 133 will have a material impact on its
financial position or results of operations.
F-10
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVENTORIES
Inventories comprise (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Raw materials............................................................ $ 1,916 $ 2,862
Work-in-progress......................................................... 1,377 2,388
Finished goods........................................................... 1,561 1,806
--------- ---------
$ 4,854 $ 7,056
--------- ---------
--------- ---------
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment comprise (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Furniture, fixtures and office equipment................................ $ 2,726 $ 3,475
Motor vehicles.......................................................... 65 62
Machinery and equipment................................................. 4,177 4,896
Leasehold improvements.................................................. 4,975 4,747
--------- ---------
11,943 13,180
Less: Accumulated depreciation and amortization......................... (4,594) (6,126)
--------- ---------
$ 7,349 $ 7,054
--------- ---------
--------- ---------
</TABLE>
5. OTHER ASSETS
Other assets comprise (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Deferred compensation investments.......................... $ 906 $ 1,297
Long-term deposits......................................... 247 197
Investments................................................ 100 100
Other...................................................... 35 36
--------- ---------
$ 1,288 $ 1,630
--------- ---------
--------- ---------
</TABLE>
The Company assesses the recoverability of its long-lived assets by
determining whether the amortization of the assets' net book value over their
remaining lives can be recovered through projected undiscounted future cash
flows. The Company wrote-off $157,000 of goodwill in 1997, related to the
acquisition of its German subsidiary in 1996, as the anticipated cash flows
indicated that the recoverability of the goodwill was not reasonably assured.
The Company also wrote-off $120,000 of investments in 1997 to reflect a decrease
in the carrying value of the assets.
F-11
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. ACCRUED EXPENSES:
Accrued expenses comprise (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Accrued payroll and related benefits..................................... $ 1,297 $ 1,579
Taxes payable............................................................ 208 369
Other accrued liabilities................................................ 506 2,236
--------- ---------
$ 2,011 $ 4,184
--------- ---------
--------- ---------
</TABLE>
7. NOTES PAYABLE TO STOCKHOLDERS
At December 31, 1998, the Company had notes payable to a shareholder of
$6,472,000 under 12% subordinated notes due September 2004. Under this
arrangement, the Company will pay one half of the annual accrued interest at the
end of each annual accrual period. The remaining one half of the accrued
interest for each period shall be treated as part of the principal amount of the
note. The outstanding principal will be repaid in September 2004 or earlier upon
a merger, acquisition, liquidation or sale of the Company's common stock in a
public offering pursuant to a registration statement under the Securities Act of
1933, as amended.
Notes payable to shareholders at December 31, 1998, consist of (in
thousands):
<TABLE>
<S> <C>
Subordinated notes bearing interest at 12% and payable in 2004...... $ 6,472
Discount on subordinated promissory notes related to warrants (Note
12)............................................................... (319)
---------
$ 6,153
---------
---------
</TABLE>
8. LINES OF CREDIT
In September 1998, the Company entered into a credit facility providing a $4
million revolving loan expiring in June 1999. At the option of the Company,
borrowings under the revolving loan bear interest at either LIBOR plus a margin
or the Adjusted Treasuries Rate plus a margin.
The Company may issue standby letters of credit or unsecured letters of
recommendation up to an aggregate of $2.5 million with the Bank of
Tokyo-Mitsubishi and its affiliates. The aggregate amount available to be drawn
under all outstanding letters of credit and unsecured letters of recommendation
and the aggregate amount of unpaid reimbursement obligations under drawn letters
of credit shall reduce, dollar for dollar, the maximum amount available under
the $4 million revolving loan.
The Company also has a revolver-to-term loan that provides a $2 million
revolving credit line. The revolver-to-term loan must be made before June 30,
1999, at which time all unpaid principal under the revolver-to-term loan shall
be converted to a term loan of sixty (60) months with a final maturity date of
June 30, 2004. At the option of the Company, borrowings under the revolver-to-
term loan bear interest at either LIBOR plus a margin or the Adjusted Treasuries
Rate plus a margin.
The credit facility requires the Company to maintain certain financial
ratios and covenants including the restriction of dividend payments and the
maintenance of a minimum cash balance on
F-12
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LINES OF CREDIT (CONTINUED)
hand of $3.0 million. At December 31, 1998, the Company was in compliance with
all covenants. No borrowings were outstanding under the credit facility at
December 31, 1998.
In April 1998, the Company's subsidiary in Japan entered into a credit
facility providing for a 65 million yen revolving loan ($573,000 at December 31,
1998) expiring in July 1999 with the Bank of Toyko-Mitsubishi. Borrowings under
the revolving loan bear interest at rates determined by the bank. The Company
had no outstanding borrowings at December 31, 1998.
9. LONG-TERM DEBT
Long-debt at December 31, 1998 consists of (in thousands):
<TABLE>
<S> <C>
Notes payable to bank bearing interest at bank's Adjusted Treasuries Rate plus
2.25% (7.47% at December 31, 1998), payable through December 2002................ $ 1,458
Notes payable to bank bearing interest at LIBOR plus 2.25% (7.75% at December 31,
1998), payable through June 2005................................................. 2,409
Loan payable to bank bearing interest at 5.5%, payable through February 2001....... 133
Capital lease obligations through 2003............................................. 96
---------
4,096
Less: Amounts due in one year...................................................... (831)
---------
$ 3,265
---------
---------
</TABLE>
Borrowings under both notes payable are collateralized by all of the
Company's accounts receivable, property, plant and equipment and inventories.
Notes payable are required to be repaid in monthly installments over 52 and 82
months.
The notes payable require the Company to maintain certain financial ratios
and covenants including maintenance of minimum working capital, limitations on
changes in capital structure and the restriction of dividend payments. At
December 31, 1998, the Company was in compliance with all covenants.
The Company also finances the purchase of certain fixed assets under capital
leases. The total principal outstanding at December 31, 1998, relating to assets
held under capital leases was $96,000.
At December 31, 1998, principal payments due under long-term debt are as
follows (in thousands):
<TABLE>
<S> <C>
1999....................................................... $ 831
2000....................................................... 816
2001....................................................... 748
2002....................................................... 757
2003....................................................... 366
Thereafter................................................. 578
---------
$ 4,096
---------
---------
</TABLE>
F-13
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS
LEASE COMMITMENT
The Company leases office facilities and office furniture and equipment
under operating leases expiring in various years through 2006.
The minimum future annual rental payments as of December 31, 1998, under the
leases are as follows (in thousands):
<TABLE>
<S> <C>
1999............................................................... $ 1,507
2000............................................................... 1,490
2001............................................................... 1,318
2002............................................................... 1,258
2003............................................................... 1,174
Thereafter......................................................... 2,493
---------
Total minimum lease payments..................................... $ 9,240
---------
---------
</TABLE>
Rent expense was $723,000, $679,000 and $1,332,000 for the years ended
December 31, 1996, 1997 and 1998, respectively.
11. INCOME TAXES
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Federal
Current payable.............................................. $ 1,702 $ 2,588 $ 3,031
Deferred..................................................... (215) (735) (978)
State
Current payable.............................................. 502 622 617
Deferred..................................................... (40) (117) (102)
Foreign
Current payable.............................................. 153 8 103
Deferred..................................................... -- -- (87)
--------- --------- ---------
$ 2,102 $ 2,366 $ 2,584
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-14
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. INCOME TAXES (CONTINUED)
The Company's effective tax rate differs from the statutory income tax rate
as shown in the following schedule:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Tax provision at federal statutory rate............................... 34.0% 34.0% 34.0%
State income taxes, net of federal benefits........................... 5.7 5.4 5.4
Research and development tax credit................................... (0.8) (3.2) (2.4)
Nondeductible expenses................................................ 2.0 1.5 2.0
Foreign sales corporation benefit..................................... (1.0) (4.1) (3.0)
Foreign taxes......................................................... -- 2.1 1.4
Other................................................................. (2.0) 3.5 1.6
--- --- ---
Effective tax rate.................................................. 37.9% 39.2% 39.0%
--- --- ---
--- --- ---
</TABLE>
The components of the net deferred tax asset are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Deferred tax assets:
Depreciation expense................................................... $ 264 $ 369
Inventory reserves..................................................... 470 740
Deferred compensation.................................................. 420 419
Accrued vacation and bonus............................................. 285 199
Accrued legal.......................................................... 245 647
Accrued interest....................................................... -- 201
Other.................................................................. 99 249
--------- ---------
1,783 2,824
Deferred tax liabilities:
Inventory capitalization............................................... (464) (338)
--------- ---------
Net deferred tax assets.............................................. $ 1,319 $ 2,486
--------- ---------
--------- ---------
</TABLE>
Management has determined that no valuation allowance is required because
the Company has sufficient taxable income in carryback years to absorb items
deductible in the future for federal tax purposes and anticipates that its
estimated future taxable income will allow the deferred tax asset for state tax
purposes to be fully realizable in future years. The amount of the deferred tax
asset that is realizable could be reduced in the near term if actual results
differ significantly from estimates of future taxable income.
F-15
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCKHOLDERS' EQUITY
EQUITY INCENTIVE PLAN
In September 1997, the stockholders approved the 1997 Equity Incentive Plan
(the "Incentive Plan"), thereby superseding the 1986 Incentive Stock Option Plan
and the 1991 Equity Incentive Plan. The Incentive Plan provides for grants of
incentive stock options to employees, and non-statutory stock options to
employees and consultants. Terms for exercising options are determined by the
Board of Directors, and options expire at the earlier of the term provided in
the Notice of Grant or upon termination of employment or consulting
relationship.
A total of 1,714,000 shares of the Company's common stock were reserved for
issuance under the Incentive Plan. Options granted under the Plan are granted at
the fair market value of the Company's common stock on the date of grant and
expire 10 years from the date of grant or at termination of service, whichever
occurs first. The options generally are exercisable beginning one year from the
date of grant and generally vest over a four or five year period.
A summary of the Company's option activity is set forth below (in thousands,
except per share data):
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
--------------------------------------------------------
<S> <C> <C> <C> <C>
SHARES AVAILABLE NUMBER OF PRICE PER WEIGHTED AVERAGE
FOR GRANT SHARES SHARE EXERCISE PRICE
----------------- --------------- ------------------ -------------------
Balance, December 31, 1997................ -- --
Options authorized...................... 1,714
Options granted......................... (884) 884 $ 6.00 - $11.25 $ 7.57
Options canceled........................ 37 (37) $ 6.00 - $11.25 6.55
----- --- ------------------ -----
Balance, December 31, 1998................ 867 847 $ 6.00 - $11.25 $ 7.61
----- --- ------------------ -----
----- --- ------------------ -----
</TABLE>
The weighted average fair value of options granted during fiscal 1998 was
$1.43 per share.
The difference between the exercise price and fair market value of the
Company's stock options, totaling $480,000, has been recorded as deferred
compensation and a component of stockholders' equity. Of this amount, $67,000 of
compensation expense has been recognized through December 31, 1998. The
remaining $413,000 will be recognized as an expense as the options vest over a
period of four to five years.
F-16
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCKHOLDERS' EQUITY (CONTINUED)
The options outstanding and currently exercisable by exercise price under
the Option Plan at December 31, 1998, are as follows (in thousands, except per
share data):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------------
WEIGHTED
AVERAGE OPTIONS EXERCISABLE
RANGE OF REMAINING WEIGHTED --------------------------------
EXERCISE NUMBER CONTRACTUAL AVERAGE NUMBER WEIGHTED AVERAGE
PRICE OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ----------- --------------- -------------- --------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
$6.00-6.60 385 9.08 years $ 6.05 -- $ --
$7.13 83 9.32 years 7.13 - -
$9.00 322 9.54 years 9.00 - -
$9.75-10.50 13 9.64 years 10.10 - -
$11.25 44 9.83 years 11.25 - -
--- -------------- -------
847 9.33 years $ 7.61
</TABLE>
STOCK COMPENSATION
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123. Accordingly, no compensation cost has
been recognized for the Incentive Plan. Had compensation cost for the Incentive
Plan been determined based on the fair value at the grant date for the awards
consistent with the provisions of SFAS 123, the Company's net income and net
income per share for the years ended December 31, 1996, 1997 and 1998, would
have been reduced to the pro forma amounts indicated below (in thousands, except
per share data):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Net income:
As reported.................................................. $ 3,441 $ 3,673 $ 4,046
Pro forma.................................................... $ 3,441 $ 3,673 $ 3,855
Basic earnings per share:
As reported.................................................. $ .29 $ .31 $ .34
Pro forma.................................................... $ .29 $ .31 $ .32
Diluted earnings per share:
As reported.................................................. $ .29 $ .30 $ .32
Pro forma.................................................... $ .29 $ .30 $ .31
</TABLE>
The fair value of each option grant for the Incentive Plan is estimated on
the date of grant using the Black-Scholes multiple options pricing model with
the following weighted average assumptions by year:
<TABLE>
<CAPTION>
1998
---------
<S> <C>
Risk-free interest rate............................................................. 5.21%
Expected term of option from vest date.............................................. 4 years
Expected volatility................................................................. 0.00%
Expected dividend yield............................................................. $ 0.00
</TABLE>
F-17
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCKHOLDERS' EQUITY (CONTINUED)
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In July 1998, the 1998 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan") was adopted by the Board of Directors. The Directors' Plan
provides for the automatic grant of options to purchase the Company's common
stock to the directors who are not employees of the Company. A total of 200,000
shares of common stock have been authorized for issuance under the Directors'
Plan. Each non-employee director who joins the board after the initial public
offering of the Company will automatically receive an option to purchase 13,333
shares of the Company's common stock. In addition, upon each anniversary of the
closing of the Company's initial public offering, each non-employee director
will be granted an option to purchase 6,666 shares of the Company's common
stock. The exercise price of options under the Directors' Plan will equal the
fair market value of the common stock of the Company on the date of grant. All
grants of stock options under the Directors' Plan shall vest over 48 months and
expire ten years from the date of grant. The Directors' Plan will terminate in
July 2008, unless earlier terminated by the board. As of December 31, 1998, no
options to purchase common stock have been granted pursuant to the Directors'
Plan.
EMPLOYEE STOCK PURCHASE PLAN
In July 1998, the Board adopted the Employee Stock Purchase Plan (the
"Purchase Plan"). A total of 450,000 shares of common stock have been reserved
for issuance under the Purchase Plan. The Purchase Plan provides for eligible
employees to have up to 10% of their earnings withheld pursuant to the Purchase
Plan. The amounts withheld will be used to purchase shares of the Company's
common stock at a price equal to 85% of the fair market value at certain
specified dates. Participation in the Purchase Plan automatically ends on
termination of employment with the Company. No shares have been issued under the
Purchase Plan.
WARRANTS
In connection with the notes payable to shareholder, the Company issued
warrants to purchase 601,000 shares of common stock. The shares under the
warrants decrease each month by 1/48(th) of 1.2% of the number of outstanding
shares of common stock on a fully diluted basis each month. As of December 31,
1998, the total number of shares exercisable under these warrants was 550,000.
The exercise price of the warrants increases month to month such that at any
time the warrant holders can exercise the unexpired warrants for a consideration
of $5,000,000 less any amounts already paid on previous warrant exercises. In
lieu of exercising the warrants by payment of cash, the warrantholder may elect
to receive shares of common stock computed under a formula defined in the
warrant agreement. The warrants expire in September 2001.
The fair value of these warrants of $479,000 was calculated based on the
Black-Scholes valuation model. The fair value has been reflected as additional
consideration for the subordinated debt, recorded as a discount on the debt and
accreted as interest expense to be amortized over the term of the subordinated
debt.
F-18
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. RETIREMENT PLAN
The Company has a 401(k) profit plan (the "Plan") under which eligible
employees become participants of the Plan at the first entry date following 6
months of employment. The Company has the discretion to make contributions to
the Plan. For 1997 and 1998, the Company matched 10% and 50% of the
contributions made by their employees, respectively, up to a maximum of 3% of
the employee's total salary. The total contribution was $52,000 and $162,000
during the year ended December 31, 1997 and 1998, respectively.
The Company also has a nonqualified deferred compensation pension plan for
selected employees. The Company has recorded a liability in other long-term
liabilities of $1,297,000 at December 31, 1998, and has recorded compensation
expense of $275,000, $150,000 and $120,000 for the years ended December 31,
1996, 1997 and 1998, respectively.
14. SEGMENT INFORMATION
The Company operates in one industry segment. One customer accounted for 10%
of net revenues in 1996, 1997 and 1998. The revenue to the customer in 1996 and
1997 was recognized in the United States segment (export sales from the United
States). The revenue to the customer in 1998 was recognized in the Japan
segment. International revenues, including export sales from the United States
and sales from foreign subsidiaries, accounted for approximately 30%, 33% and
36% of consolidated revenues for the years ended December 31, 1996, 1997 and
1998, respectively.
The following is a summary of the Company's geographic operations (in
thousands)(1):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Sales and other revenue:
United States..................................................... $ 24,787 $ 33,604 $ 36,661
Europe............................................................ 2,377 3,198 7,564
Japan............................................................. -- -- 3,586
--------- --------- ---------
Total revenues.................................................. $ 27,164 $ 36,802 $ 47,811
--------- --------- ---------
--------- --------- ---------
Export sales from the United States
(other than intercompany)......................................... $ 5,637 $ 8,906 $ 6,019
--------- --------- ---------
--------- --------- ---------
Operating income:
United States..................................................... $ 4,925 $ 6,681 $ 7,438
Europe............................................................ 447 (305) 856
Japan............................................................. -- (22) 239
Elimination....................................................... -- (153) (1,642)
--------- --------- ---------
Consolidated operating income................................... $ 5,372 $ 6,201 $ 6,891
--------- --------- ---------
--------- --------- ---------
Identifiable assets:
United States..................................................... $ 31,039 $ 39,599
Europe............................................................ 1,245 1,949
Japan............................................................. 188 1,656
Elimination....................................................... (1,434) (3,141)
--------- ---------
Consolidated identifiable assets................................ $ 31,038 $ 40,063
--------- ---------
--------- ---------
Long-lived assets:
United States..................................................... 8,683 9,225
Europe............................................................ 439 368
Japan............................................................. 106 26
Elimination....................................................... (335) (358)
--------- ---------
Consolidated........................................................ $ 8,893 $ 9,261
--------- ---------
--------- ---------
</TABLE>
- ------------------------------
(1) Information relating to Europe and Japan relates to the Company's
subsidiaries in those territories and information relating to the United
States includes exports to foreign distributors.
F-19
<PAGE>
CLONTECH LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONTINGENCIES
On December 31, 1996, the Company was served with a complaint filed by Life
Technologies, Inc. ("LTI") in the Federal District Court for the District of
Maryland. The complaint alleges three causes of action related to past sales of
products: direct patent infringement, inducement of third parties to infringe
LTI's patents by third parties and breach of a label license. The Company
believes that the allegations in the LTI complaint are without merit, and intend
to defend itself vigorously against each action. In addition, the Company filed
suit against LTI in the Federal District Court in the District of Delaware,
alleging false patent marking and violations of the Delaware Deceptive Trade
Practices Act. The Company cannot predict the outcome of either case. If LTI
succeeds in its lawsuit against the Company, the Company's business may be
adversely affected.
In the ordinary course of conducting business, the Company may be subjected
to loss contingencies arising from lawsuits. Management believes that the
outcome of such matters, if any, will not have a material impact on the
Company's financial position.
16. SUBSEQUENT EVENTS
In February 1999, the Company's Board of Directors authorized a
two-for-three reverse split of its common stock to be effective immediately
prior to the effectiveness of this offering. All share and per share data in the
accompanying consolidated financial statements have been retroactively restated
to reflect the stock split.
In July 1998, the Company's Board of Directors authorized the Company to
amend and restate its articles of incorporation in Delaware immediately prior to
the effectiveness of this offering. The amended articles of incorporation
authorize for issuance 10 million shares of Preferred Stock with a $0.001 par
value.
F-20
<PAGE>
DESCRIPTION OF ARTWORK APPEARING ON BACK INSIDE COVER:
Five boxes containing pictures of Clontech's kits, reagents, enzymes, and
membrane-based cDNA arrays. Above the picture boxes is a caption that reads:
"Over 1500 products that support life science research" Below the picture boxes
in the lower right corner is our name: CLONTECH
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR SALE OF COMMON
STOCK MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE
DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH
THE OFFER OR SOLICITATION IS UNLAWFUL.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
Use of Proceeds................................ 13
Dividend Policy................................ 13
Capitalization................................. 14
Dilution....................................... 15
Selected Consolidated Financial Data........... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 17
Business....................................... 24
Management..................................... 37
Certain Transactions........................... 46
Principal and Selling Stockholders............. 48
Description of Capital Stock................... 50
Shares Eligible for Future Sale................ 53
Underwriting................................... 55
Legal Matters.................................. 56
Experts........................................ 57
Additional Information......................... 57
Index to Financial Statements.................. F-1
</TABLE>
--------------
DEALER PROSPECTUS DELIVERY OBLIGATION:
Until , 1999 (25 days after the date of this prospectus), all
dealers that buy, sell or trade these shares of common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
3,750,000 SHARES
[LOGO]
COMMON STOCK
-----------------
P R O S P E C T U S
-----------------
BT ALEX. BROWN
HAMBRECHT & QUIST
LEHMAN BROTHERS
, 1999
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the common stock being registered. All the amounts are estimates except for
the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee............................................ $ 17,983
Nasdaq National Market listing fee.......................... 55,000
NASD filing fee............................................. 6,969
Blue sky qualification fees and expenses.................... 15,000
Printing and engraving expenses............................. 150,000
Legal fees and expenses..................................... 350,000
Accounting fees and expenses................................ 200,000
Transfer agent and registrar fees........................... 15,000
Directors' and Officers' Insurance.......................... 175,000
Miscellaneous............................................... 120,048
----------
Total..................................................... $1,050,000
----------
----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Delaware law, the Registrant's Amended and Restated
Certificate of Incorporation provides that no director of the Registrant will be
personally liable to the Registrant or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of duty of loyalty to the Company or to its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
The Registrant's Amended and Restated Certificate of Incorporation further
provides that the Registrant must indemnify its directors and executive officers
and may indemnify its other officers and employees and agents to the fullest
extent permitted by Delaware law. The Registrant believes that indemnification
under its Amended and Restated Certificate of Incorporation covers negligence
and gross negligence on the part of indemnified parties.
The Registrant has entered into indemnification agreements with each of its
directors and officers. These agreements, among other things, require the
Registrant to indemnify such directors and officers for certain expenses
(including attorneys' fees), judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, including any action by or in the
right of the Registrant, arising out of such person's services as a director or
officer of the Registrant, any subsidiary of the Registrant or any other company
or enterprise to which the person provides services at the request of the
Registrant.
The Underwriting Agreement (Exhibit 1.1) will provide for indemnification by
the underwriters of the Registrant, its directors, its officers who sign the
Registration Statement, and the Registrant's controlling persons for certain
liabilities, including liabilities arising under the Securities Act.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since February 18, 1996, the Registrant has sold and issued the following
unregistered securities:
(1) The Registrant has granted stock options to purchase 884,402 shares of
the Common Stock to employees, consultants and directors pursuant to its 1997
Equity Incentive Plan. Of these options, options to purchase 907 shares have
been exercised, 37,234 have been canceled and the remainder are outstanding.
(2) In September 1997, the Registrant issued warrants to purchase an
aggregate of 601,253 shares of the Common Stock of the Registrant to entities
affiliated with Summit Partners, for a weighted average exercise price of $8.32
per share, issuable upon exercise of the warrants. The shares exercisable under
the warrants decrease each month by 1/48th of 1.2% of the number of fully
diluted shares of Clontech common stock. The aggregate proceeds to Clontech upon
the exercise of the warrants is fixed; therefore, as the number of shares
decreases with time, the exercise price per share increases.
The sales and issuances of securities described in paragraph (1) above were
deemed to be exempt from registration under the Securities Act by virtue of Rule
701 of the Securities Act in that they were offered and sold either pursuant to
a written compensatory benefit plan or pursuant to a written contract relating
to compensation, as provided by Rule 701. The sales and issuances of securities
described in paragraph (2) above were deemed to be exempt from registration
under the Securities Act by virtue of Rule 4(2), Regulation D or Regulation S
promulgated thereunder.
Appropriate legends are affixed to the stock certificates issued in the
aforementioned transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. All recipients either received adequate
information about the Registrant or had access, through employment or other
relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) THE FOLLOWING IS A LIST OF EXHIBITS FILED AS A PART OF THIS REGISTRATION
STATEMENT:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant.
3.2 Form of Restated Certificate of Incorporation of the Registrant to be effective upon the completion
of the offering.
3.3 Bylaws of the Registrant.
3.4 Form of Amended and Restated Bylaws of the Registrant to be effective upon the completion of the
offering.
4.1 Reference is made to Exhibits 3.1 through 3.4.
4.2* Specimen Stock Certificate.
4.3 Investor Rights Agreement, dated September 9, 1997.
4.4 Warrants to purchase Common Stock of the Registrant issued to Summit Partners.
4.5 Shareholders Agreement, dated September 9, 1997, by and between Summit Partners and Kenneth S. Fong.
4.6 Right of First Refusal and Co-Sale Agreement, dated September 9, 1997, by and between Summit Partners
and Kenneth S. Fong.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
4.7 Stock Pledge Agreement, dated September 9, 1997, by and between Summit Partners and Kenneth S. Fong.
5.1* Opinion of Cooley Godward LLP.
10.1 Form Indemnity Agreement.
10.2 Amended and Restated 1997 Equity Incentive Plan.
10.3 Amended and Restated 1998 Non-Employee Directors' Stock Option Plan.
10.4 1998 Employee Stock Purchase Plan.
10.5 Securities Purchase Agreement, dated September 9, 1997, by and between Summit Partners and
Registrant.
10.6 Promissory notes, dated September 9, 1997, by and between Summit Partners and Registrant.
10.7 Loan Agreement, dated September 1, 1998, by and between Union Bank of California, N.A. and
Registrant, including four promissory notes dated September 4, 1998.
10.8 Lease, dated September 15, 1994, between Registrant and California Pacific Commercial Corporation.
10.9 Lease, dated March 16, 1994, between Registrant and L. J. Valente.
10.10 Lease, dated May 1, 1998, between Registrant and L. J. Valente.
10.11 Lease, dated April 28, 1997, between Registrant and Teledyne Industries, Inc.
10.12+ License Agreement, dated May 20, 1996, by and between BASF Bioresearch Corporation and Registrant.
10.13+ Patent License Agreement, dated October 1, 1996, by and between F. Hoffman-La Roche Ltd., Roche
Molecular Systems, Inc. and Registrant.
10.14+ Research, Development and Commercialization Agreement, dated September 11, 1998, by and between
Molecular Dynamics, Inc., a subsidiary of Amersham Pharmacia Biotech, Inc. and Registrant.
10.15+ Distribution Agreement, dated November 13, 1998, by and between Macherey-Nagel GmbH & Co. KG and
Registrant.
10.16+ Agreement, dated December 31, 1998, by and between Phase-1 Molecular Toxicology, Inc. and Registrant.
10.17+ License Agreement, dated January 2, 1996, by and between Wayne M. Barnes, Ph.D and Registrant,
assigned by Dr. Barnes to Takara Shuzo Co., Ltd., April 25, 1996.
10.18+ Manufacturing Agreement, dated May 7, 1998, by and between F. Hoffman-
La Roche Ltd., Roche Molecular Systems, Inc. and Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. See Signature Page.
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
+ Confidential Treatment Requested.
II-3
<PAGE>
(B) THE FOLLOWING FINANCIAL STATEMENT SCHEDULE IS INCLUDED HEREIN: SCHEDULE
II--VALUATION AND QUALIFYING ACCOUNTS
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide the underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will governed by the final adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act, the information omitted from the form of
prospectus filed as part of the registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared effective, and
(2) for the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment to the Registration Statement on Form
S-1 to be signed on its behalf by the undersigned, in the City of Palo Alto,
County of Santa Clara, State of California, on the 2nd day of March, 1999.
<TABLE>
<S> <C> <C>
CLONTECH LABORATORIES, INC.
By: /s/ WILLIAM W. SIMS
-----------------------------------------
William W. Sims
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
</TABLE>
In accordance with the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement was signed below by the following person
in the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------- --------------------------------------------- ---------------------------
<C> <S> <C>
KENNETH S. FONG* President and Chief Executive Officer March 2, 1999
------------------------------ (Principal Executive Officer)
Kenneth S. Fong
/s/ WILLIAM W. SIMS Senior Vice President and Chief Financial March 2, 1999
------------------------------ Officer
William W. Sims (Principal Financial and Accounting
Officer)
GREGORY M. AVIS* Director March 2, 1999
------------------------------
Gregory M. Avis
DAVID S. LEE* Director March 2, 1999
------------------------------
David S. Lee
STEVEN GOLDBY* Director March 2, 1999
------------------------------
Steven Goldby
</TABLE>
*By: /s/ WILLIAM W. SIMS
-------------------------
William W. Sims
ATTORNEY-IN-FACT
II-5
<PAGE>
CLONTECH LABORATORIES, INC.
SCHEDULE II--VALUATION & QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT END
ACCOUNT DESCRIPTION PERIOD EXPENSES DEDUCTIONS OF PERIOD
- ---------------------------------------------------------- ------------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1996.............................. $ 100 $ 14 $ (7) $ 107
Year ended December 31, 1997.............................. 107 2 (16) 93
Year ended December 31, 1998.............................. 93 199 (8) 284
Reserve for excess & obsolete inventory:
Year ended December 31, 1996.............................. 174 390 (172) 392
Year ended December 31, 1997.............................. 392 387 (165) 614
Year ended December 31, 1998.............................. $ 614 $ 1037 $ (84) $ 1,567
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant.
3.2 Form of Restated Certificate of Incorporation of the Registrant to be effective upon the completion
of the offering.
3.3 Bylaws of the Registrant.
3.4 Form of Amended and Restated Bylaws of the Registrant to be effective upon the completion of the
offering.
4.1 Reference is made to Exhibits 3.1 through 3.4.
4.2* Specimen Stock Certificate.
4.3 Investor Rights Agreement, dated September 9, 1997.
4.4 Warrants to purchase Common Stock of the Registrant issued to Summit Partners.
4.5 Shareholders Agreement, dated September 9, 1997, by and between Summit Partners and Kenneth S. Fong.
4.6 Right of First Refusal and Co-Sale Agreement, dated September 9, 1997, by and between Summit Partners
and Kenneth S. Fong.
4.7 Stock Pledge Agreement, dated September 9, 1997, by and between Summit Partners and Kenneth S. Fong.
5.1* Opinion of Cooley Godward LLP.
10.1 Form Indemnity Agreement.
10.2 Amended and Restated 1997 Equity Incentive Plan.
10.3 Amended and Restated 1998 Non-Employee Directors' Stock Option Plan.
10.4 1998 Employee Stock Purchase Plan.
10.5 Securities Purchase Agreement, dated September 9, 1997, by and between Summit Partners and
Registrant.
10.6 Promissory notes, dated September 9, 1997, by and between Summit Partners and Registrant.
10.7 Loan Agreement, dated September 1, 1998, by and between Union Bank of California, N.A. and
Registrant, including four promissory notes dated September 4, 1998.
10.8 Lease, dated September 15, 1994, between Registrant and California Pacific Commercial Corporation.
10.9 Lease, dated March 16, 1994, between Registrant and L. J. Valente.
10.10 Lease, dated May 1, 1998, between Registrant and L. J. Valente.
10.11 Lease, dated April 28, 1997, between Registrant and Teledyne Industries, Inc.
10.12+ License Agreement, dated May 20, 1996, by and between BASF Bioresearch Corporation and Registrant.
10.13+ Patent License Agreement, dated October 1, 1996, by and between F. Hoffman-La Roche Ltd., Roche
Molecular Systems, Inc. and Registrant.
10.14+ Research, Development and Commercialization Agreement, dated September 11, 1998, by and between
Molecular Dynamics, Inc., a subsidiary of Amersham Pharmacia Biotech, Inc. and Registrant.
10.15+ Distribution Agreement, dated November 13, 1998, by and between Macherey-Nagel GmbH & Co. KG and
Registrant.
10.16+ Agreement, dated December 31, 1998, by and between Phase-1 Molecular Toxicology, Inc. and Registrant.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.17+ License Agreement, dated January 2, 1996, by and between Wayne M. Barnes, Ph.D and Registrant,
assigned by Dr. Barnes to Takara Shuzo Co., Ltd., April 25, 1996.
10.18+ Manufacturing Agreement, dated May 7, 1998, by and between F. Hoffman-LaRoche Ltd., Roche Molecular
Systems, Inc. and Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. See Signature Page.
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
+ Confidential Treatment Requested
<PAGE>
EXHIBIT 10.12
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
LICENSE AGREEMENT
THIS AGREEMENT, dated May 20, 1996 (the "Effective Date"), is between
BASF BIORESEARCH CORPORATION, a corporation organized under the laws of the
Delaware, and having a place of business at 100 Research Drive, Worcester, MA
01605-4314 ("BASF") and CLONTECH LABORATORIES, INC., a California corporation
having a place of business at 1020 East Meadow Circle, Palo Alto, California
94303-4230 ("Clontech").
BASF and Clontech agree as follows:
ARTICLE 1
DEFINITIONS
1.00 As used throughout this Agreement, the following capitalized terms
shall have the meanings ascribed to them below in paragraphs 1.01 through
1.14.
1.01 "AFFILIATE" shall mean any corporation, association or other
business entity which directly or indirectly controls, is controlled by, or
is under common control with the party in question. As used herein, the term
"control" means ownership, directly or indirectly, of shares of stock having
more than 50% of the voting power entitled to vote for the election of
directors in the case of a corporation, and more than 50% of the interest in
profits in the case of a business entity other than a corporation.
1.02 "EXCLUSIVE" shall mean that no other licenses will be granted by
BASF in the Exclusive Field within the Territory under the Licensed Patents,
subject to Paragraphs 2.03 and 2.04 (b) hereof.
1.03 "EXCLUSIVE FIELD" shall mean the development, manufacture and sale
of the research reagents listed in Appendix B as of the Effective Date, as
well as the following research reagents which Clontech may elect to add to
Appendix B, subject to Paragraph 2.04 hereof:
(i) any [ * ] developed by Clontech, BASF or third parties which
are claimed in the Licensed Patents and/or incorporate the TET-System;
(ii) any [ * ] research reagents other than [ * ] developed or
acquired by Clontech and not described in the Licensed Patents, where the
term "[ * ]" shall mean that no [ * ] description of the reagent,
including the reagent itself, has made public prior to its listing on
Appendix B; and
(iii) any research reagent(s) acquired exclusively by Clontech.
1.04 "LICENSED FIELDS OF USE" shall mean the Exclusive Field and the
Semi-Exclusive Field, and specifically excludes the development, manufacture
or sale of [ * ] and any reagent intended for [ * ] or the preparation of
substances intended for [ * ].
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
1.
<PAGE>
1.05 "LICENSED PATENT(S)" shall mean the patent(s) and patent
applications listed in Appendix A and attached hereto, including any
division, continuation, continuation-in-part, substitute, renewal, reissue,
extension, confirmation, reexamination or registration thereof and any patent
issuing thereon, including any substitute, renewal, reissue, extension,
confirmation, reexamination, registration or foreign counterpart thereof.
1.06 "LICENSED PRODUCT" shall mean any research reagent (i) the
manufacture, use, or sale of which is covered by a Valid Claim of a Licensed
Patent and (ii) an essentially identical reagent when offered for sale in a
country or territory where no Licensed Patent exists.
1.07 "LICENSEE NUMBER" shall mean the number assigned by BASF to
for-profit Qualified Buyers, which number shall entitle such Qualified Buyers
to purchase Licensed Products.
1.08 "NET SALES" shall mean all fees or other payments charged by
Clontech and Affiliate(s), less returns and customer trade discounts actually
taken, outbound freight, value added, sales or use taxes, and custom duties.
1.09 "SEMI-EXCLUSIVE" shall mean that only one license other than this
license to Clontech will be granted by BASF in the Semi-Exclusive Field in
any country within the Territory under the Licensed Patents, subject to
Paragraphs 2.03 and 2.04 (b) hereof.
1.10 "SEMI-EXCLUSIVE FIELD" shall mean the development, manufacture and
sale of the research reagents listed in Appendix C as of the Effective Date,
as well as the following research reagents which Clontech elects to add to
Appendix C, subject to Paragraph 2.04 hereof:
(i) research reagents other than [ * ] which are described in the
Licensed Patents, or for which an [ * ] description of the reagent, including
the reagent itself, has made public prior to its listing on Appendix C.
1.11 "QUALIFIED BUYERS" shall mean (i) researchers in academic and
non-profit research institutions, where the commercial and/or intellectual
property rights of said academic or non-profit research institution are not
owned by or obligated to a single for-profit corporation or business entity;
and (ii) for-profit corporations or other business entities which have been
granted a license under the Licensed Patents by BASF, as evidenced by their
having been assigned a Licensee Number.
1.12 "TERRITORY" shall mean any country or territory in the world,
independent of whether or not Licensed Patent(s) have been applied for or
issued in that country or territory.
1.13 "TET-SYSTEM" shall mean the tetracycline-inducible gene expression
technology, including the overall system as well as its individual
components, claimed in the Licensed Patents.
1.14 "VALID CLAIM" shall mean an unexpired claim of a Licensed Patent,
whether or not issued or granted in any country, which has not been revoked
or held unenforceable, unpatentable or invalid by a decision of a court or
other governmental agency of competent jurisdiction, unappealable or
unappealed within the time allowed for appeal, and which has not
2.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
been rendered unenforceable through disclaimer or otherwise, and which has
not been lost through an interference proceeding.
ARTICLE 2
LICENSE GRANT
2.01 GRANT: BASF hereby grants to Clontech, upon and subject to all the
terms and conditions of this Agreement, a license in the Territory under the
Licensed Patents, to manufacture, use, and/or sell to Qualified Buyers,
Licensed Products solely in the Licensed Fields of Use. No license or right
is granted hereunder to sell or otherwise transfer Licensed Products or
materials and methods claimed in the Licensed Patents to non-Qualified Buyers.
2.02 EXCLUSIVITY: The license granted hereunder shall be Exclusive in
the Exclusive Field and Semi-Exclusive in the Semi-Exclusive Field, unless
later modified under Paragraphs 2.03 and 2.04(b) below.
2.03 LOSS OF EXCLUSIVITY: If BASF determines there to be a lack of
sales of any individual Licensed Product or group of Licensed Products or if
BASF receives consistent complaints from Qualified Buyers relating to the
quality, availability, timeliness of service, reasonability of pricing, or
other issues related to the purchase of a particular Licensed Product, the
parties shall discuss the source of the problem and attempt to reach a
solution. If BASF and Clontech cannot reach a solution on how to resolve the
stated concerns, BASF may convert the rights granted hereunder to
non-exclusive rights, but only as they pertain to the particular Licensed
Product(s) in question.
2.04 REAGENT LISTS:
(a) Appendix B and Appendix C may be amended on an as-needed basis
in order to expand or diminish the research reagents offered for sale to
Qualified Buyers as Licensed Products hereunder, provided, however that any
expansion is subject to third party rights which may exist at the time of the
proposed amendment.
(b) BASF may, at its own discretion, propose to Clontech that a
particular TET-System research reagent be added to Appendix B, or Appendix C
if Semi-Exclusivity is appropriate under the parameters described in
Paragraph 1.10 hereof, as a Licensed Product hereunder. If Clontech has not
elected to add said research reagent to the appropriate Appendix within
[ * ] days after BASF's proposal, then BASF may, at its own discretion,
select a third party for development, manufacture and sale of that particular
TET-System research reagent, on any level of exclusivity which BASF may deem
appropriate.
2.05 SUBLICENSING: Clontech shall not have any right to sublicense the
rights granted hereunder. As used herein, "sublicense" refers to the sale or
rental of Licensed Products to an individual or entity for the purpose of
resale or rental to additional parties. Notwithstanding the foregoing,
Clontech may sell Licensed Products to the international research reagent
market in the Licensed Fields of Use through its international agents or
distributors.
3.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
2.06 GRANT BACK: Clontech shall, free of charge, provide BASF and the
laboratory of Professor Hermann Bujard with (i) a non-exclusive license under
its improvements to the TET-System, and (ii) samples of Licensed Products
upon request.
2.07 EXCLUDED USES: Clontech agrees that it shall not manufacture, use,
sell or otherwise transfer the Licensed Patents or Licensed Products for (i)
administration to, or use in, humans, or (ii) the preparation of materials
for use in humans. Clontech further agrees that it shall not manufacture,
use, sell or otherwise transfer the Licensed Patents or Licensed Products for
any purpose other than as expressly permitted under this Agreement.
ARTICLE 3
ROYALTIES AND PAYMENTS
3.01 UPFRONT PAYMENT: In consideration of the license granted under
Article 2 of this Agreement, Clontech shall pay to BASF a non-refundable fee
of [ * ] Dollars ($[ * ]) within 30 days after the Effective Date.
3.02 RUNNING ROYALTY. In further consideration of the license granted
hereunder, Clontech shall pay to BASF a royalty of [ * ] percent ([ * ]%) on
Net Sales of all Licensed Products, provided, however, that if BASF develops
a novel TET-System research reagent and provides it to Clontech for inclusion
as a Licensed Product on Appendix B hereto, then the royalty on Net Sales of
that particular Licensed Product shall be [ * ] percent ([ * ]%).
3.03 MINIMUM ROYALTY. Commencing in 1996 and continuing for as long as
the license granted hereunder remains Exclusive or Semi-Exclusive, Clontech
shall have a minimum royalty obligation to BASF. If the cumulative total of
royalties paid to BASF by Clontech under 3.02 above in any given calendar
year is less than [ * ] Dollars ($[ * ]), Clontech shall, with the final
royalty payment due for that calendar year, pay to BASF the amount necessary
to bring the total royalty payment to BASF up to [ * ] Dollars ($[ * ]).
ARTICLE 4
REPORTS AND PAYMENTS
4.01 PAYMENT REPORT. On or before the last business day of January and
July of each year of this Agreement, Clontech shall submit to BASF a written
report with respect to the preceding two calendar quarters (the "Payment
Report") stating:
(i) Net Sales made by Clontech and any Affiliate during such period
for Licensed Products;
(ii) A calculation under Section 3.02 and 3.03 of the amounts due
to BASF; and
(iii) A list of Qualified Buyers to whom the Licensed Products have
been sold during such period.
4.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
4.02 PAYMENT. Simultaneously with the submission of each Payment
Report, Clontech shall make payments in U.S. dollars to BASF of the amounts
due for the six month period covered by said Payment Report. For sales
outside the United States, the buying rates of exchange shall be determined
by quoting CitiBank (or its successors of interest) in New York, New York at
the close of business on the last business day of the quarterly period in
which the sales were made.
4.03 LATE PAYMENTS. Late payments shall incur interest at an annual
rate of [ * ] percent ([ * ]%) compounded daily.
4.04 RECORD KEEPING. Clontech shall maintain at its principal office
usual books of account and records showing its actions under this Agreement.
Upon reasonable notice, such books and records shall be open to inspection
and copying, during usual business hours, by an independent certified public
accountant to whom Clontech has no reasonable objection, for three (3) years
after the calendar period to which such books and records pertain, for
purposes of verifying the accuracy of the amounts paid to BASF under this
Agreement.
4.05 QUALIFIED BUYERS LIST. BASF shall provide Clontech with the names
and Licensee Numbers of all Qualified Buyers for whom a license from BASF is
required in order to purchase Licensed Products from Clontech.
ARTICLE 5
MARKING AND USE OF NAMES
5.01 LIMITED LICENSE. Clontech shall include with all Licensed Products
a Limited License Notice, as set forth in Appendix D hereto.
5.02 PATENT NUMBERS. Clontech shall mark each Licensed Product or its
product insert with the number(s) of the issued patent(s) covering said
product, or, where appropriate, the words "Patent Pending" where no issued
patent exists.
5.03 NON-USE OF NAMES. Neither party shall use the name of the other in
any publicity, news release, or other public announcement or comment, whether
written, electronic, or oral, without the prior consent of the other party,
except as required by law. The party making any announcement which is
required by law will give the other party an opportunity to review the form
and content of any such announcement and comment upon it before it is made.
ARTICLE 6
BREACH AND CURE
6.01 Either party shall have the right to cure a breach of this
Agreement. The cure shall be effected within a reasonable period of time but
in no event later that thirty (30) days after notice of any breach given by
the non-breaching party.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
5.
<PAGE>
ARTICLE 7
TERM OF AGREEMENT
7.01 This Agreement shall be effective as of the Effective Date and
shall continue in full force and effect until the earlier of (i) the last to
expire of the Licensed Patents, or (ii) ten (10) years following the
Effective Date, unless sooner terminated under this Article 7.
7.02 The license granted under this Agreement may be terminated by BASF
(i) upon thirty days written notice to Clontech for Clontech's breach of the
Agreement and Clontech's failure to cure such breach in accordance with
Section 6, or (ii) Clontech, become insolvent, files a petition under any
bankruptcy or insolvency act, or has any such petition filed against it.
7.03 The license granted under this agreement may be terminated by
Clontech upon sixty (60) days written notice to BASF. Clontech shall use all
reasonable efforts to make Licensed Products available to Qualified Buyers
during said sixty day notice period, and shall thereafter discontinue all
sales of products covered by the license agreement.
ARTICLE 8
NOTICES
Any notice required or permitted to be given under this Agreement shall
be sufficient if sent by certified mail, postage, pre-paid,
if to BASF, to: Amy L. Porter
Director of Business Development
BASF Bioresearch Corporation
100 Research Drive
Worcester, MA 01605-4314
with copy to: Mr. Robert Shaw, Esq.
Vice President, Intellectual Property
BASF Corporation
3000 Continental Drive -- North
Mount Olive, New Jersey 07828-1234
if to Clontech, to: Dr. Kenneth Fong
President
Clontech Laboratories
1020 East Meadow Circle
Palo Alto, CA 94303-4230
with copy to: Ms. Anne Scholz
Director, Marketing
Clontech Laboratories
1020 East Meadow Circle
Palo Alto, CA 94303-4230
6.
<PAGE>
or to other such address as a party may specify by notice hereunder.
ARTICLE 9
ASSIGNMENT
This Agreement and the obligations and rights hereunder may not be
assigned without the written consent of the other party. Any attempt to do
so without consent shall be void.
ARTICLE 10
COMPLIANCE WITH GOVERNMENTAL OBLIGATIONS
Clontech shall comply upon reasonable notice from BASF with all
governmental requests directed to either BASF or Clontech and provide all
information and assistance necessary to comply with the governmental
requests. Clontech shall insure that the research, development and marketing
under this Agreement will comply with all governmental regulation in force
and effect.
ARTICLE 11
NO WARRANTY
11.01 DISCLAIMER OF WARRANTIES. Nothing in this Agreement is or shall
be construed as:
(a) A warranty or representation as to the validity or scope of the
Licensed Patent(s);
(b) A warranty or representation that anything made, used, sold, or
otherwise disposed of under any license granted in this Agreement is or will
be free from infringement of patents, copyrights, and other rights of third
parties;
(c) An obligation to bring or prosecute actions or suits against
third parties for infringement of the Licensed Patent(s); or
(d) Granting by implication, estoppel, or otherwise any licenses or
rights under patents or other rights of BASF AG, BASF Corporation, Knoll AG,
Knoll Pharmaceuticals Corporation, BASF Bioresearch Corporation, their
Affiliates, or third parties other than expressly provided herein, regardless
of whether such patents or other rights are dominant or subordinate to any
Licensed Patent(s) or Licensed Product(s).
11.02 NO OTHER WARRANTY. Clontech acknowledges that the Licensed
Patent(s) claim materials and methods which are experimental in nature. BASF
makes no warranties express or implied of any kind, and hereby expressly
disclaims any warranties, representations or guarantees of any kind as to the
Licensed Patents or Licensed Products. No biological materials are being
provided to Clontech under this Agreement.
7.
<PAGE>
ARTICLE 12
GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, U.S.A. without having any regard
to the conflicts of law provisions thereof.
IN WITNESS THEREOF, BASF and Clontech have caused this Agreement to be
executed by their duly authorized representatives as of the day and year
first written above.
BASF BIORESEARCH CORPORATION
By: /s/ Robert Kamir
--------------------------------------
Title: President
Date: 6/24/96
------------------------------------
CLONTECH LABORATORIES, INC.
By: /s/ Ken Fong
--------------------------------------
Title: President
Date: 7/8/96
------------------------------------
8.
<PAGE>
APPENDIX A
SUMMARY OF BASF-OWNED PATENTS AND
PATENT APPLICATIONS CLAIMING THE TET-SYSTEM
FORWARD SYSTEM (REPRESSOR SYSTEM):
1. US Patent # 5,464,758. Issued November 7, 1995.
TIGHT CONTROL OF GENE EXPRESSION IN EUKARYOTIC CELLS BY TETRACYCLINE
RESPONSIVE PROMOTERS, by Bujard and Gossen.
2. June 14, 1993. Pending U.S. Patent Application.
TIGHT CONTROL OF GENE EXPRESSION IN EUKARYOTIC CELLS BY TETRACYCLINE
RESPONSIVE PROMOTERS, by Bujard, Gossen, Salfeld and Voss. BBI-013;
BBC-003.
3. June 14, 1994. Pending U.S. Patent Application.
TIGHT CONTROL OF GENE EXPRESSION IN EUKARYOTIC CELLS BY TETRACYCLINE
RESPONSIVE PROMOTERS, by Bujard, Gossen, Salfeld and Voss. BBI-013CP;
BBC-003A.
4. June 14, 1994. Pending PCT Patent Application.
TIGHT CONTROL OF GENE EXPRESSION IN EUKARYOTIC CELLS BY TETRACYCLINE
RESPONSIVE PROMOTERS, by Bujard, Gossen, Salfeld and Voss. BBI-013CPPC;
BBC-003B.
5. June 14, 1994. Pending Mexican Patent Application.
TIGHT CONTROL OF GENE EXPRESSION IN EUKARYOTIC CELLS BY TETRACYCLINE
RESPONSIVE PROMOTERS, by Bujard, Gossen, Salfeld and Voss. BBI-013CPMX;
BBC-003C.
6. June 7, 1995. Pending U.S. Patent Application.
ANIMALS TRANSGENIC FOR A TETRACYCLINE-CONTROLLED TRANSCRIPTIONAL
ACTIVATOR, by Bujard, Gossen, Salfeld and Voss. BBI-013CP2; BBC-003D.
7. June 7, 1995. Pending U.S. Patent Application.
METHODS FOR REGULATING GENE EXPRESSION, by Bujard, Gossen, Salfeld and
Voss. BBI-013CP3; BBC-003E.
REVERSE SYSTEM (INDUCER SYSTEM):
8. July 1, 1994. Pending U.S. Patent Application.
TETRACYCLINE INDUCIBLE TRANSCRIPTIONAL ACTIVATOR AND TETRACYCLINE
REGULATED TRANSCRIPTION UNITS, by Bujard and Gossen. BBI-009; BBC-009.
9. July 15, 1994. Pending U.S. Patent Application.
TETRACYCLINE INDUCIBLE TRANSCRIPTIONAL ACTIVATOR AND TETRACYCLINE
REGULATED TRANSCRIPTIONAL UNITS, by Bujard and Gossen. BBI-009CP;
BBC-009A.
1.
<PAGE>
10. February 3, 1995. Pending U.S. Patent Application.
TETRACYCLINE REGULATED TRANSCRIPTIONAL INHIBITORS, by Bujard and Gossen.
BBI-009CP2; BBC-009B.
11. June 7, 1995. Pending U.S. Patent Application.
ANIMALS TRANSGENIC FOR A TETRACYCLINE-INDUCIBLE TRANSCRIPTIONAL
ACTIVATOR, by Bujard and Gossen. BBI-009CP3; BBC-009C.
12. June 7, 1995. Pending U.S. Patent Application.
ANIMALS TRANSGENIC FOR A TETRACYCLINE-REGULATED TRANSCRIPTIONAL
INHIBITOR, by Bujard and Gossen. BBI-009CP4; BBC-009D.
13. June 7, 1995. Pending U.S. Patent Application.
METHODS FOR REGULATING GENE EXPRESSION, by Bujard and Gossen.
BBI-009CP5; BBC-009E.
14. June 7, 1995. Pending U.S. Patent Application.
METHODS FOR REGULATING GENE EXPRESSION, by Bujard and Gossen.
BBI-009CP6; BBC-009F.
15. June 7, 1995. Pending U.S. Patent Application.
TETRACYCLINE REGULATED TRAN-SCRIPTIONAL MODULATORS WITH ALTERED DNA
BINDING SPECIFICITIES, by Bujard, Gossen, Hillen, Helbl and
Schnappinger. BBI-009CP7; BBC-009G.
16. June 29, 1995. Pending PCT Application.
TETRACYCLINE-REGULATED TRANSCRIPTIONAL MODULATORS, by Bujard and Gossen.
BBI-009C2PC; BBC-009H.
2.
<PAGE>
APPENDIX B
LICENSED PRODUCTS IN THE EXCLUSIVE FIELD OF USE:
[ * ]
[ * ]
[ * ]
1.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
APPENDIX C
LICENSED PRODUCTS IN THE SEMI-EXCLUSIVE FIELD OF USE
[ * ]
[ * ]
1.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
APPENDIX D
Product Marking
"Research Use only"
"Use of the Tetracycline controllable expression systems (the "Tet system")
is covered under U.S. patent #5,464,758, which has been assigned to BASF
Aktiengesellschaft. Not-for-profit and academic research institutions are
granted an automatic license to use the Tet system only for internal,
academic research purposes with the purchase of this product, which license
specifically excludes the right to sell, or otherwise transfer, the tet
system or its component parts to third parties. In accepting this license,
all users acknowledge that the Tet system is experimental in nature. BASF
makes no warranties, express or implied of any kind, and hereby disclaims any
warranties, representations or guarantees of any kind as to the tet system,
patents or products.
For profit entities are required to obtain a license from BASF prior to
purchasing these reagents or using them for any purpose. Clontech is
required by its licensing agreement to submit a report of all purchasers of
the Tet controllable expression systems to BASF Bioresearch Corporation. For
license information contact: Director of Business Development, BASF
Bioresearch Corporation, 100 Research Drive, Worcester, MA 01605-4314. FAX:
(508) 755-8506."
This Appendix D may be amended from time to time as may be deemed necessary
by BASF.
1.
<PAGE>
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2. GRANT TO CLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3. GRANT TO ROCHE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4. ROYALTIES, RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . 14
5. LICENSE IN ADDITIONAL FIELDS . . . . . . . . . . . . . . . . . . . . . . . . 17
6. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7. ENFORCEMENT OF PATENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8. CONFIDENTIALITY-PUBLICITY. . . . . . . . . . . . . . . . . . . . . . . . . . 20
9. ASSIGNMENT/TRANSFERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 21
10. NEGATION OF WARRANTIES AND INDEMNITY . . . . . . . . . . . . . . . . . . . . 22
11. INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12. MOST FAVORED LICENSEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SCHEDULE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SCHEDULE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
APPENDIX A APPLICATIONS FIELDS. . . . . . . . . . . . . . . . . . . . . . . . . . 29
APPENDIX B ASSAY TO DETERMINE UNITS OF ENZYME . . . . . . . . . . . . . . . . . . 31
APPENDIX C NOTICES TO PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
i.
<PAGE>
PATENT LICENSE AGREEMENT
This is a patent license agreement ("Agreement"), and effective as of October 1,
1996.
by and among
F. Hoffmann-La Roche Ltd, a Swiss corporation with offices at Grenzacherstrasse
124, CH-4070 Basel, Switzerland
and
Roche Molecular Systems, Inc. ("RMS"), a Delaware corporation having an office
at 1080 U.S. Highway 202, Branchburg Township, Somerville, New Jersey 08876-1760
(BOTH OF WHICH ARE REFERRED TO HEREIN AS "ROCHE"),
and
Clontech Laboratories, Inc., a California corporation with offices at 1020 East
Meadow Circle, Palo Alto, California 94303-4230
(HEREINAFTER REFERRED TO AS "CLI")
***************
BACKGROUND
A. ROCHE and its AFFILIATES own United States Patents Nos. 4,683,195,
4,683,202 and 4,965,188 and the corresponding foreign counterpart patents and
patent applications, describing and claiming nucleic acid amplification
processes including, inter alia, a process known as the polymerase chain
reaction ("PCR") process.
B. ROCHE and its AFFILIATES also own certain patents and patent applications,
filed worldwide, relating to purified natural, as well as recombinant,
thermostable DNA polymerases, as well as compositions including said
polymerases, including for example, DNA polymerases isolated from Thermus
species and fragments and mutants thereof.
C. ROCHE and its AFFILIATES also own United States Patent No. 5,075,216 and
the corresponding foreign counterpart patents and patent applications relating
to sequencing with Taq DNA polymerase.
D. ROCHE and its AFFILIATES also own United States Patent Nos. 5,407,800,
5,322,770 and 5,310,652 and the corresponding foreign counterpart patents and
patent applications relating, inter alia, to reverse transcription using a
thermostable polymerase.
E. The Perkin-Elmer Corporation ("P-E") has exclusive rights in certain
fields, including the field of research, pursuant to an agreement dated
December 11, 1991 with ROCHE and has
1.
<PAGE>
certain rights to grant sublicenses in said fields. Under separate agreements
between ROCHE and P-E and in consideration of a share of royalties due
hereunder, P-E has released ROCHE from so much of P-E's rights in the
aforementioned fields as is necessary for ROCHE to convey to CLI the rights
specified in this Agreement.
F. On June 1, 1995, ROCHE entered into a "Patent License Agreement" ("the 1995
Agreement") with CLI, granting CLI, INTER ALIA, rights to manufacture, use and
sell full length native and recombinant DNA polymerase isolated from THERMUS
AQUATICUS for use in the PCR PROCESS as well as in sequencing.
G. Subsequent to the Effective Date of the 1995 Agreement, ROCHE decided it
would make available to existing licensees under ROCHE's Taq patents a new
agreement granting additional patent rights not included in the 1995 Agreement.
CLI chooses to accept the terms of said new Agreement. Thus, CLI and ROCHE wish
to terminate the 1995 Agreement and to replace it with the current Agreement.
H. In structuring the present Agreement, the Parties have considered the
possibility that novel polymerases may be developed by CLI (and others) that are
useful in, and that without a license from ROCHE, CLI may not pass on to its
customers the right to use said polymerases in the PCR PROCESS, or in processes
covered by RT or RT-PCR PATENT RIGHTS. It is CLI's desire to promote and sell
such internally developed, or licensed or purchased polymerases for use in the
PCR PROCESS, or in processes covered by RT and/or RT-PCR PATENT RIGHTS and to
pass on to the purchaser such a license and ROCHE is willing to permit CLI to do
so.
I. In addition, the parties take note that CLI may market the products
licensed hereunder in conjunction with other products, components or materials,
both separately or together, and in various package arrangements, which may be
useful in the PCR PROCESS, and/or processes covered by RT and RT-PCR PATENT
RIGHTS. Taking this into consideration, for the mutual convenience of the
parties, the products on which CLI will pay a royalty, that is the royalty base,
will include those products as specifically described below that are adapted
for, promoted or supported for use with the patent rights licensed herein.
Furthermore, in an effort to minimize customer confusion as to which CLI
products in fact permit the customer to practice the PCR PROCESS, and/or
processes covered by RT and RT-PCR PATENT RIGHTS without additional licenses,
CLI agrees, as is further described below, to give special consideration to the
manner in which it promotes and sells its other products which may be useful in
the PCR PROCESS and/or processes covered by RT and RT-PCR PATENT RIGHTS but
which are not specifically licensed by ROCHE for that purpose.
NOW THEREFORE, for and in consideration of the mutual covenants contained
herein, ROCHE and CLI ("the Parties'") agree as follows:
1. DEFINITIONS.
For the purpose of this Agreement, and solely for that purpose, the terms set
forth hereinafter shall be defined as follows:
2.
<PAGE>
1.1 The term "AFFILIATE" of a designated party to this Agreement shall
mean:
(a) an organization of which fifty percent (50%) or more of the
voting stock is controlled or owned directly or indirectly by either party to
this Agreement;
(b) an organization which directly or indirectly owns or controls
fifty percent (50%) or more of the voting stock of either party to this
Agreement;
(c) an organization, the majority ownership of which is directly or
indirectly common to the majority ownership of either party to this Agreement;
and
(d) an organization under (a), (b), or (c) above in which the amount
of said ownership is less than fifty percent (50%) and that amount is the
maximum amount permitted pursuant to the law governing the ownership of said
organization.
It is understood and agreed, however, that the term "AFFILIATE" shall
not include Genentech Inc., a Delaware corporation.
1.2 "AMPLIFICATION PATENT RIGHTS" shall mean the nucleic acid
amplification processes covered by United States Patent Nos. 4,683,195,
4,683,202 and 4,965,188, and those claims in foreign patents and patent
applications which correspond to issued claims in the above patents and which
foreign patents and patent applications claim priority from patent applications
on which the above patents are based, and access to which patents and patent
applications are necessary for CLI to manufacture, use and sell products which
include a label license under AMPLIFICATION PATENT RIGHTS, in accordance with
the rights granted in Sections 2.3 - 2.4 hereto.
1.3 "APPLICATION FIELDS" shall mean those fields listed in Appendix A.
1.4 "Applications Kit" shall mean a LICENSED PRODUCT in combination with
all such other reagents, enzymes or other materials as are necessary to perform
a PCR-based assay or nucleic acid sequencing in the Application Field for which
it is sold.
1.5 "AUTHORIZED THERMAL CYCLER" shall mean a thermal cycler or temperature
cycling instrument whose use in automated performance of the PCR PROCESS in the
RESEARCH FIELD and APPLICATION FIELDS is covered by the up-front fee component
of a PCR PROCESS license. The up-front component of that license may be
purchased from P-E. Alternatively, the up-front component of that license may
be obtained through the purchase of thermal cycler(s) or temperature cycling
instrument(s) bearing a valid label conveying the up-front PCR PROCESS license
component.
1.6 "CLI ENZYME" shall mean any thermostable polymerase that is not a
ROCHE PATENTED ENZYME, is not within POLYMERASE PATENT RIGHTS, and is developed
by CLI or is purchased or licensed by CLI from a third party, which enzyme may
be used in or with the PCR PROCESS and/or processes covered by RT and RT-PCR
PATENT RIGHTS. An enzyme shall not be included in this definition if CLI
demonstrates to ROCHE's satisfaction that said enzyme is in fact used
predominantly for other than the PCR PROCESS and/or processes covered by RT and
RT-PCR PATENT RIGHTS. Unless excluded as provided herein, all sales of said CLI
ENZYMES
3.
<PAGE>
are assumed to be for use in the PCR PROCESS and/or processes covered by RT and
RT-PCR PATENT RIGHTS.
1.7 "LICENSED APPLICATION PRODUCT" shall mean (a) an APPLICATIONS KIT for
a LICENSED APPLICATION FIELD or (b) reagents, components or other materials
which are sold in connection with the sale of an APPLICATIONS KIT for a LICENSED
APPLICATION FIELD by CLI and which are adapted for or promoted or supported for
use by customers in PCR TESTING or nucleic acid sequencing, or RT and RT-PCR in
APPLICATION FIELDS. As used herein, "PCR Testing" shall include all steps in
the analysis of a sample for the presence or absence of amplifiable nucleic acid
from preparation of the sample to detection and/or analysis of any amplified
product.
1.8 "LICENSED FIELDS" shall mean the RESEARCH FIELD and those APPLICATION
FIELDS that are elected or added pursuant to Section 5 of this Agreement
("LICENSED APPLICATION FIELDS").
1.9 "LICENSED PRODUCT" shall mean:
(a) a ROCHE PATENTED ENZYME or a CLI ENZYME used or sold in a country
where the use or sale of such ROCHE PATENTED ENZYME or CLI ENZYME would infringe
at least one VALID CLAIM of a patent or patent application within AMPLIFICATION
PATENT RIGHTS, SEQUENCING PATENT RIGHTS or RT and RT-PCR PATENT RIGHTS; and/or
(b) a ROCHE PATENTED ENZYME made, used or sold in a country where the
manufacture, use or sale thereof would infringe a VALID CLAIM of a patent or
patent application within POLYMERASE PATENT RIGHTS.
1.10 "LICENSED RESEARCH PRODUCTS" shall mean any product, including but not
limited to kits, which products consist of or contain a LICENSED PRODUCT and may
include all or some of the following components: buffers, nucleotides, enzymes,
or other reagents or materials. Notwithstanding the foregoing, it is understood
and agreed that such LICENSED RESEARCH PRODUCT shall not contain, without
ROCHE's specific approval, which approval shall be strictly discretionary with
ROCHE, nucleic acid sequences homologous to the nucleic acid sequences of any
human infectious agent or pathogen.
1.11 "NET SALES" shall mean gross invoice amount less
(a) discounts allowed and taken, in amounts customary in the trade,
and
(b) sales and/or use taxes and/or duties for particular sales.
No allowance or deduction shall be made for commissions or fees for
collection, by whatever name known.
NET SALES shall be calculated on the basis of sales or transfers to
end users by CLI or an AFFILIATE or distributor. In the event CLI is unable
to account for sales to third-party end users by its distributors, the NET
SALES shall be calculated as the sales price to such distributors multiplied
by [ * ], which factor represents a [ * ]% margin allowed to the distributor.
Sales to a
4.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
third party controlling, controlled by, or under common control with CLI, or
enjoying a special course of dealing with CLI, shall be determined by
reference to the listed or published price for the product sold or
transferred which would be applicable in an arm's length transaction, with an
unrelated third party. In Japan, if CLI does not use a distributor, but
instead, sales are made to end users through a WHOLESALER, and CLI is unable
to account for sales to third-party end users by said WHOLESALER in Japan,
the Net Sales shall be calculated as the sale price to such WHOLESALER
multiplied by [ * ], which factor represents a [ * ]% margin allowed to the
WHOLESALER in Japan. CLI and ROCHE agree that ROCHE may amend this factor in
the event that market conditions change such that the prevailing margin to
WHOLESALERS differs from [ * ]% by [ * ]% or more.
1.12 "PCR PROCESS" shall mean the polymerase chain reaction (PCR) process,
which is one of the amplification processes covered by AMPLIFICATION PATENT
RIGHTS.
1.13 "POLYMERASE PATENT RIGHTS" shall mean
(a) TAQ PATENT RIGHTS; and
(b) those claims of those United States patents and patent
applications listed in Schedule 1 hereto, and those claims in non-US patents and
patent applications which claim priority from the patents and patent
applications on which the patents and patent applications in Schedule 1 are
based, and access to which patents and patent applications are necessary for CLI
to manufacture, use and sell ROCHE PATENTED ENZYMES, other than a TAQ REAGENT,
in accordance with the rights granted in Section 2.2 hereto.
1.14 "RESEARCH FIELD" shall mean the internal use by an end user of a
product solely in applications of the end user (or in applications of the end
user's customer, if the end user is performing contract research) in scientific
research and development; and by way of example but not by way of limitation,
expressly excludes:
(a) reportable results generated from clinical applications in humans
or animals such as the detection or measurement, treatment, prevention or
mitigation of disease or other health-related condition; the detection of
pathogens, detection of genetic disease or genetic predisposition to disease;
tissue transplantation typing; and parentage testing;
(b) the use of PCR to manufacture any products for sale;
(c) the commercial application of Taggants, which shall be defined
herein to be the application of the PCR PROCESS to identify any synthetic
nucleotide sequence which has been inserted, dispersed or applied into a
product, substance or organism in order to identify such product, substance or
organism or to convey other specific information;
(d) Forensic Applications (as defined in Appendix A);
(e) Human identification testing, and parentage determination;
(f) Plant Diagnostics (as defined in Appendix A);
5.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
(g) Animal Diagnostics, Animal Identity Testing and Positive Trait
Breeding (as defined in Appendix A);
(h) quality assurance and quality control, including without
limitation, conformance with specifications, purity, batch to batch consistency
whether performed internally or for third parties on a commercial basis; and
(i) Environmental Testing (as defined in Appendix A).
1.15 "ROCHE PATENTED ENZYME" shall mean
(a) a TAQ REAGENT; or
(b) an enzyme the manufacture, use or sale of which would be covered
by at least one VALID CLAIM within paragraph (b) of POLYMERASE PATENT RIGHTS and
which Roche has agreed to include in Schedule 2 hereto. Notwithstanding the
foregoing, the Parties understand and agree that Roche shall not be obligated in
any way to include any additional patents rights to those currently listed in
Schedule 1.
1.16 "ROYALTY UNIT" shall mean:
(a) for a TAQ REAGENT, the equivalence to a unit of
AmpliTaq-Registered Trademark- DNA polymerase as described in Appendix B,
Section I;
(b) for a ROCHE PATENTED ENZYME other than a TAQ REAGENT, and for an
CLI ENZYME, a unit of enzyme (as unit is defined in CLI's product specification)
multiplied by the PCR EFFECTIVENESS RATIO as provided in Appendix B, Section II.
1.17 "RT" shall mean reverse transcription.
1.18 "RT and RT-PCR PATENT RIGHTS" shall mean those claims of United States
Patent Nos. 5,407,800, 5,322,770, and 5,310,652 and any reissues thereof and
those claims in foreign patents and patent applications which correspond to
issued claims in the above patents and which foreign patents and patent
applications claim priority from the patent application(s) on which the '800,
'770 and '652 patents are based, and access to which patents and patent
applications are necessary for CLI to manufacture, use and sell ROCHE PATENTED
ENZYMES and CLI ENZYMES in accordance with the rights granted in Section 2.6
hereto.
1.19 "SEQUENCING PATENT RIGHTS" shall mean the claims of United States
Patent No. 5,075,216 and any reissue thereof and those claims in foreign patents
and patent applications which correspond to issued claims in the above patent
and which foreign patents and patent applications claim priority from the patent
application(s) on which the '216 patent is based, and access to which patents
and patent applications are necessary for CLI to manufacture, use and sell
products pursuant to Section 2.5 hereto.
1.20 "TAQ PATENT RIGHTS" shall mean those claims of United States Patent
Nos. 4,889,818 and 5,079,352, and any reissues and continuations thereof, but
not continuations in part of the above patents and patent applications, and
those claims in foreign patents and patent
6.
<PAGE>
applications claiming priority from a patent application which is a basis for
any of the above US patents or patent applications, which include within their
scope a polymerase encoded by THERMUS AQUATICUS DNA, but only to the extent that
such claims are necessary for CLI to manufacture, use and sell a polymerase
encoded by THERMUS AQUATICUS pursuant to Section 2.2 hereto, except that these
rights specifically exclude the "Stoffel Fragment" (Lawyer, et. al. (1993) PCR
Methods and Applications 2: 275-287) and the "Abramson Mutant" (described in and
additionally covered by US Patent No. 5,466,591).
1.21 "TAQ REAGENT" shall mean an enzyme the manufacture, use or sale of
which is covered by at least one VALID CLAIM within TAQ PATENT RIGHTS.
1.22 "TERRITORY" shall mean worldwide.
1.23 "VALID CLAIM" shall mean the claim of a patent or pending patent
application which has not been held invalid or otherwise unenforceable by a
court from which no appeal has or can be taken, or has not otherwise finally
been held unpatentable by the appropriate administrative agency.
1.24 "WHOLESALER" shall mean an agent who takes orders from end-user
customers for CLI products, purchases said products from CLI, delivers the
products to said customers and collects payment from the end-user customers.
The WHOLESALER does not perform other functions of a distributor, such as, by
way of example but not by way of exclusion, marketing activities such as
participating in trade shows, creating product advertising, and presenting
technical seminars, or pre- and post-sale technical support of the products.
ROCHE and CLI agree that this definition is applicable only to the Japanese
market.
2. GRANT TO CLI
2.1 TERMINATION OF THE ROCHE/CLI 1994 AGREEMENT
In consideration of the rights herein granted to CLI by ROCHE and
CLI's obligation to pay royalties, CLI and ROCHE hereby agree that their
respective rights in and obligations under the 1994 Agreement between CLI and
ROCHE are hereby terminated, and the terms thereof superseded by the present
Agreement as of October 1, 1996 except that CLI shall report and pay all
royalties due under the 1994 Agreement as of October 1, 1996 in accordance with
the terms and schedule of the 1994 Agreement.
2.2 LICENSES UNDER POLYMERASE PATENT RIGHTS
Upon the terms and subject to the conditions of this Agreement, ROCHE
hereby grants to CLI and CLI hereby accepts from ROCHE a royalty bearing
nonexclusive license in the TERRITORY, without the right to sublicense except to
its current AFFILIATES as specifically provided in Section 2.7, as follows:
(a) under TAQ PATENT RIGHTS, to manufacture, but not to have
manufactured, to use and to sell, strictly under CLI's or its Affiliates' own
Trademarks, Tradenames and/or label(s), TAQ REAGENTS; and
7.
<PAGE>
(b) under POLYMERASE PATENT RIGHTS, to manufacture, but not to have
manufactured, to use and to sell, strictly under CLI's or its Affiliates' own
Trademarks, Tradenames and/or label(s), ROCHE PATENTED ENZYMES other than TAQ
REAGENTS.
No rights are granted expressly, by implication or by estoppel under
AMPLIFICATION PATENT RIGHTS, SEQUENCING PATENT RIGHTS, RT- and RT-PCR PATENT
RIGHTS or any other ROCHE patent rights by the grant of this Section.
2.3 LICENSE IN THE RESEARCH FIELD TO CONVEY A LABEL LICENSE AND TO PROMOTE
FOR USE IN PCR
A license under the AMPLIFICATION PATENT RIGHTS for automated
performance of the PCR PROCESS in the RESEARCH FIELD has an up-front fee
component based on the capacity of thermal cyclers used, and a running-royalty
component for each use of the process. In consideration of CLI's payment of the
license issuance fee and of royalties on sales of LICENSED RESEARCH PRODUCTS,
ROCHE hereby grants to CLI and CLI accepts from ROCHE, in the TERRITORY,
limited, nonexclusive rights, without the right to sublicense except to its
current AFFILIATES as specifically provided in Section 2.7, as follows:
(a) CLI is hereby authorized to sell, strictly under CLI's or its
Affiliates' own Trademarks, Tradenames and/or label(s), LICENSED RESEARCH
PRODUCTS with a label conveying to end-user purchasers the running-royalty
component of a license under the AMPLIFICATION PATENT RIGHTS to use such
LICENSED RESEARCH PRODUCTS in or with the PCR PROCESS strictly for such
purchasers' own internal use in the RESEARCH FIELD in conjunction with a thermal
cycler whose use is covered by the up-front fee component, either by payment to
P-E or as purchased, and
(b) CLI may promote LICENSED RESEARCH PRODUCTS for such use in or
with the PCR PROCESS in the RESEARCH FIELD. The up-front component of the PCR
license for research must be obtained by the end user in order to have a
complete license for the automated performance of the PCR PROCESS. The up-front
component may be purchased from P-E. Alternatively, it may be obtained through
the purchase of thermal cycler(s) or temperature cycling instrument(s) bearing a
valid label conveying to purchasers the up-front component of the license, that
is, an "AUTHORIZED THERMAL CYCLER."
CLI may use LICENSED RESEARCH PRODUCTS, on which it pays
royalties hereunder, in accordance with the terms of the label authorized in
part (a) above.
2.4 LICENSE IN APPLICATION FIELDS TO CONVEY A LABEL LICENSE AND TO PROMOTE
FOR PCR
A license under the AMPLIFICATION PATENT RIGHTS for automated
performance of the PCR PROCESS in all or some of the APPLICATION FIELDS includes
an up-front fee component as described in Section 2.3 and a running-royalty
component. In further consideration of CLI's payment of license issuance fees
and royalties on sales of LICENSED APPLICATION PRODUCTS, ROCHE hereby grants to
CLI and CLI accepts from ROCHE in the TERRITORY, limited,
8.
<PAGE>
nonexclusive rights, without the right to sublicense except to its current
AFFILIATES as specifically provided in Section 2.7 as follows:
(a) CLI is hereby authorized to sell, strictly under CLI's or its
Affiliates' own Trademarks, Tradenames and/or label(s), APPLICATIONS KITS with a
label conveying to end-user purchasers the running-royalty component of a
license under the AMPLIFICATION PATENT RIGHTS to use such APPLICATIONS KITS in
or with the PCR PROCESS strictly for such purchasers' own internal use in the
LICENSED APPLICATION FIELDS in conjunction with a thermal cycler whose use is
covered by the up-front fee component, either by payment to P-E or as purchased;
and
(b) CLI may promote LICENSED APPLICATION PRODUCTS for such use in or
with the PCR PROCESS in the LICENSED APPLICATION FIELDS. The up-front component
of the PCR license for APPLICATION FIELDS must be obtained by the end user in
order to have a complete license for the automated performance of the PCR
PROCESS. The up-front component may be purchased from P-E. Alternatively, it
may be obtained through the purchase of thermal cycler(s) or temperature cycling
instrument(s) bearing a valid label conveying to purchasers the up-front
component of the license, that is, an "Authorized Thermal Cycler."
CLI may use APPLICATIONS KITS, on which it pays royalties hereunder, in
accordance with the terms of the label authorized in part (a) above.
2.5 LICENSE IN THE RESEARCH FIELD AND LICENSED APPLICATION FIELDS TO
CONVEY A LABEL LICENSE AND TO PROMOTE FOR USE IN SEQUENCING
In further consideration of CLI's payment of license issuance fees and
royalties on sales of LICENSED RESEARCH PRODUCTS and LICENSED APPLICATION
PRODUCTS, ROCHE hereby grants to CLI and CLI accepts from ROCHE in the
TERRITORY, limited nonexclusive rights, without the right to sublicense except
to its current AFFILIATES as specifically provided in Section 2.7, as follows:
(a) CLI is authorized to sell, strictly under CLI's or its
Affiliates' own Trademarks, Tradenames and/or label(s), LICENSED RESEARCH
PRODUCTS in the RESEARCH FIELD and APPLICATIONS KITS in the LICENSED APPLICATION
FIELDS with a label conveying to end-user purchasers a license under the
SEQUENCING PATENT RIGHTS to use such LICENSED RESEARCH PRODUCTS and APPLICATIONS
KITS for such purchasers' own internal use in sequencing without any rights
under the AMPLIFICATION PATENT RIGHTS in the RESEARCH FIELD or the LICENSED
APPLICATION FIELDS for which the APPLICATIONS KITS are sold; and
(b) CLI may promote LICENSED RESEARCH PRODUCTS for use in the
RESEARCH FIELD and APPLICATIONS KITS for use in the LICENSED APPLICATION FIELDS
for which the APPLICATIONS KITS are sold in processes within the SEQUENCING
PATENT RIGHTS.
CLI may use LICENSED RESEARCH PRODUCTS and APPLICATIONS KITS, on
which it pays royalties hereunder, in accordance with the terms of the label
authorized in part (a) above.
9.
<PAGE>
2.6 LICENSE IN THE RESEARCH FIELD AND LICENSED APPLICATION FIELDS TO
CONVEY RIGHTS TO PERFORM AND TO PROMOTE FOR USE IN RT AND RT-PCR
In further consideration of CLI's payment of license issuance fees and
royalties on sales of LICENSED RESEARCH PRODUCTS and LICENSED APPLICATION
PRODUCTS, ROCHE hereby grants to CLI and CLI accepts from ROCHE in the
TERRITORY, limited nonexclusive rights, without the right to sublicense except
to its current AFFILIATES as specifically provided in Section 2.7, as follows:
(a) CLI is authorized to sell, strictly under CLI's or its
Affiliates' own Trademarks, Tradenames and/or label(s), LICENSED RESEARCH
PRODUCTS in the RESEARCH FIELD and APPLICATIONS KITS in the LICENSED APPLICATION
FIELDS which convey to the end-user purchasers a license under RT and RT-PCR
PATENT RIGHTS to use such LICENSED RESEARCH PRODUCTS and APPLICATIONS KITS for
such purchasers' own internal use in reverse transcription and reverse
transcription coupled with PCR amplification; and
(b) CLI may promote Licensed Research Products for use in the
Research Field and Applications Kits for use in the Licensed Application Fields
in processes within RT and RT-PCR PATENT RIGHTS.
CLI may use LICENSED RESEARCH PRODUCTS and APPLICATIONS KITS on
which it pays royalties hereunder, in accordance with the terms defined in
part (a) above.
2.7 LIMITED RIGHT TO GRANT SUBLICENSES
(a) CLI expressly acknowledges and agrees that the license pursuant
to this Agreement is personal to CLI alone, and CLI shall have no right to
sublicense, assign or otherwise transfer or share its right, under this license.
Notwithstanding the foregoing, Roche hereby grants to CLI the right to
sublicense current CLI AFFILIATES, that is AFFILIATES of CLI on the Effective
Date of this Agreement. CLI hereby accepts that right, and grants to all of its
current AFFILIATES, and on their behalf accepts, sublicenses as provided herein.
CLI's AFFILIATES shall not have the right to grant further sublicenses to any
other AFFILIATE or Third Party.
(b) CLI shall provide prior written notice to RMS of AFFILIATES
operating under its sublicense. Sublicenses to AFFILIATES of CLI shall accord
with all requirements of this Agreement and shall include the following terms
and conditions:
(i) That the sublicense is co-terminus with this Agreement as
to term and TERRITORY, except as provided below;
(ii) To provide CLI with such complete and accurate information
as is necessary to calculate the NET SALES of each sublicensed product sold or
otherwise transferred by such AFFILIATE;
(iii) To grant to ROCHE the right to inspect under the terms and
conditions in Section 4.3; and
10.
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(iv) To be bound by all terms and conditions of this Agreement,
including without limitation, the indemnity provisions of Section 11.
Notwithstanding the foregoing, CLI shall remain primarily
responsible both for its and its sublicensed AFFILIATES' performance under this
Agreement.
(c) Unless terminated sooner pursuant to Section 6 herein, any
sublicense to an AFFILIATE shall terminate immediately without any notice or
action on the part of CLI if:
(i) Such sublicensee no longer meets the definition of an
AFFILIATE set forth in Section 1.1 hereof; or
(ii) CLI sells its business in LICENSED PRODUCTS to another
person.
In the event of termination on either of the bases set forth
in Section 2.7 c (i) or (ii) above, then all rights granted to and obligations
undertaken by the sublicensee and CLI under such sublicense shall terminate
immediately without any action on the part of CLI, the AFFILIATE or ROCHE,
except for the rights and obligations surviving termination set forth in
Sections 6.7 and 6.8 herein, and CLI shall provide written notice to ROCHE of
such termination.
(d) No sublicensed AFFILIATE shall have the right to assign or
otherwise transfer its sublicense in whole or in part to any other Affiliate or
Third Party, whether by written instrument or by operation of law. An
assignment of a sublicense in violation of the foregoing sentence shall include,
but is not limited to, either of the following occurrences:
(i) The sale, directly or indirectly, to any Third Party of a
beneficial interest in fifty percent (50%) or more of the outstanding voting
securities of such AFFILIATE; or
(ii) The issuance or sale to any Third Party of a class of
securities of CLI, the interest dividend or other distribution on which is
measured in substantial part by the performance of such AFFILIATE such that such
Third Party, acting alone or in concert with other Third Parties, become the
beneficial owner of fifty percent (50%) or more of such class of CLI securities.
(e) Nothing herein shall prohibit CLI from distributing LICENSED
PRODUCTS on behalf of any sublicensed AFFILIATE.
2.8 Except as is specifically provided herein, this Agreement shall not
limit the rights of ROCHE in any way. It is specifically understood that as
between the Parties to this Agreement, ROCHE reserves the right itself or
through its AFFILIATES to practice under POLYMERASE PATENT RIGHTS, SEQUENCING
PATENT RIGHTS, RT and RT-PCR PATENT RIGHTS and AMPLIFICATION PATENT RIGHTS,
including the PCR PROCESS itself, and to sublicense, assign or otherwise
transfer such rights to others for any purpose whatsoever.
2.9 CLI shall affix to each particular LICENSED RESEARCH PRODUCT or
LICENSED APPLICATIONS PRODUCT licensed hereunder, either on a product insert
accompanying the product or on the product itself, one of the labels described
in Appendix C, as ROCHE shall direct, or
11.
<PAGE>
such other label as ROCHE may direct from time to time. Such changes in
labeling shall be subject to the approval of CLI, which shall not be
unreasonably withheld. As to the labels set forth in Appendix C, CLI
understands and agrees that the notices numbered 1 through 5 reflect ROCHE's
present label licensing policy and shall be used on the labels for CLI products
as appropriate. In regard to any changes in labels directed by ROCHE, CLI shall
have a reasonable time period over which to change its labels.
2.10 (a) CLI hereby covenants that it shall sell, market and otherwise
promote products licensed hereunder in accordance with the terms of this
Agreement and it shall use its best efforts, as described herein, and shall
contractually require all of its distributors to also use their best efforts, as
described herein, to ensure that these products are sold in compliance with the
letter and intent of this Agreement. To that end, CLI and its distributors
shall prominently display in catalogues and brochures describing LICENSED
RESEARCH PRODUCTS and/or LICENSED APPLICATION PRODUCTS, the label license
statements as described in Section 2.9 and Appendix C. Furthermore, in
advertisements or any other materials intended for distribution to third parties
and referring in any way to products licensed hereunder and the use of said
products in the PCR PROCESS, but in which it is not practical to include the
complete label license statements, CLI will include a comparable restriction on
use as follows:
"Purchase of this product [or product name] is accompanied by a
limited license to use it in the Polymerase Chain Reaction (PCR) process [and RT
or other as appropriate] for ["field"] in conjunction with a thermal cycler
whose use in the automated performance of the PCR process is covered by the
up-front license fee, either by payment to Perkin-Elmer or as purchased, i.e.,
an authorized thermal cycler."
or other statement approved in writing by ROCHE.
(b) CLI agrees that once it is notified by ROCHE or once it
independently becomes aware that a particular purchaser is using or intends to
use any product licensed herein in violation of AMPLIFICATION PATENT RIGHTS,
SEQUENCING PATENT RIGHTS, or RT and RT-PCR PATENT RIGHTS, CLI shall immediately
notify said purchaser in writing that such use is unlicensed and that a license
for said use must be obtained from ROCHE or P-E. CLI shall also require
sublicensed AFFILIATES and distributors to report to CLI any unlicensed
activities of which they become aware. CLI further agrees that continued or
resumed sales by CLI, a sublicensed AFFILIATE or a distributor, to a particular
purchaser of which CLI was previously notified or is otherwise aware is
distributing/using any licensed product in violation of AMPLIFICATION PATENT
RIGHTS, RT and RT-PCR PATENT RIGHTS or SEQUENCING PATENT RIGHTS, shall
constitute a breach of this Agreement under Section 6.5 of the Agreement. A
written certification by a distributor or purchaser which is executed by an
officer of said distributor or purchaser which officer may legally bind the
company, that it has ceased infringing the AMPLIFICATION PATENT RIGHTS, RT and
RT-PCR PATENT RIGHTS and/or SEQUENCING PATENT RIGHTS or, alternatively, that it
does not infringe said patent rights, or a written certification by CLI which is
executed by an officer of CLI which officer may legally bind CLI that sales to
such distributor or purchaser have ceased, shall be a cure under Section 6.5.
(c) Pursuant to the foregoing general requirements, CLI shall, when
it receives an order for a LICENSED RESEARCH PRODUCT from any customer, which
CLI recognizes
12.
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as significantly exceeding that customer's typical usage requirements, contact
the customer and specifically inform the customer that the AMPLIFICATION PATENT
RIGHTS, RT and RT-PCR PATENT RIGHTS and/or SEQUENCING PATENT RIGHTS conveyed to
customer with the sale of such LICENSED RESEARCH PRODUCT are limited for use by
the customer for internal research only and that no other rights under the
AMPLIFICATION PATENT RIGHTS, RT and RT-PCR PATENT RIGHTS and/or SEQUENCING
PATENT RIGHTS outside the LICENSED FIELD are conveyed. Said customers shall be
required to furnish a written certification that customer intends to use said
LICENSED RESEARCH PRODUCT without violating the AMPLIFICATION PATENT RIGHTS, RT
and RT-PCR PATENT RIGHTS or the SEQUENCING PATENT RIGHTS.
(d) CLI agrees that it shall provide to ROCHE a copy of each of its
notices to purchasers/distributors (as well as a copy of each
purchaser/distributor's certification of compliance) pursuant to this
Section 2.10.
(e) The Parties understand and hereby agree that CLI shall have no
obligation to monitor or police its customers' payment of the up-front fee
component of a PCR license for research or the thermal cycler "authorization"
fee described in Section 1.5. CLI's obligations hereunder in regard to
AUTHORIZED THERMAL CYCLERS shall be limited to providing the label license as
specified in Section 2.8 and Appendix C. However, CLI agrees not to knowingly
promote, directly or through its distributors, the unlicensed use of PCR with
the ROCHE PATENTED ENZYMES or CLI ENZYMES in the RESEARCH FIELD or APPLICATION
FIELDS in thermal cyclers for which the up-front license fee has not been paid
(not authorized).
CLI and ROCHE agree that ROCHE will enforce its rights and will
use its best efforts to cause P-E to enforce its rights with regard to customers
of CLI using thermal cyclers that are not "authorized" in the same manner ROCHE
and P-E treat their own customers in the same circumstances.
2.11 Roche hereby grants to CLI the right and CLI accepts and agrees to
credit ROCHE as the source of patent rights in CLI's promotional materials,
including for example advertisements, product inserts and data sheets, intended
for distribution to third parties as follows:
"This product is sold under licensing arrangements with
F. Hoffmann-La Roche Ltd, Roche Molecular Systems, Inc. and
The Perkin-Elmer Corporation."
Such reference will be reasonably prominent and in materials (for
example catalogues) containing multiple product descriptions, will be directly
associated with information on each specific product covered by this Agreement.
2.12 In accordance with Section 2.7 b (iv), sublicenses granted by CLI
shall specifically require the sublicensee to comply with CLI's obligations
under Sections 2.8-2.11.
13.
<PAGE>
3. GRANT TO ROCHE
3.1 If CLI elects to market a CLI ENZYME or elects to license third
parties to make, use or sell a CLI ENZYME, ROCHE shall have an option to
negotiate a nonexclusive license to manufacture and sell directly or through
distributors such CLI ENZYME. CLI shall notify ROCHE of its election to
market or to license third parties to market CLI ENZYMES within thirty (30)
days of CLI making such an election. ROCHE may exercise the said option
within three (3) years after the receipt of CLI's notice. The terms of said
licenses shall be negotiated in good faith by the parties, taking into
consideration the relevant market factors typically considered in such
agreements, but any negotiated royalty shall not exceed [ * ]% of the Net
Selling Price of ROCHE to its customers or distributors. The duration of
said license shall be commensurate with the term of the last to expire of any
patent covering ROCHE's customers' use of such enzyme without further payment
of any kind from end user customers to CLI or its licensor, if there is one.
If ROCHE does not exercise the option hereunder, ROCHE shall nonetheless be
entitled to a license to make, use or sell said CLI ENZYME under the same
terms and conditions as the most favorable nonexclusive license granted by
CLI.
3.2 Sublicenses granted by CLI are conditioned on the sublicensee's making
a grant equivalent to Section 3.1 to ROCHE.
4. ROYALTIES, RECORDS AND REPORTS
4.1 LICENSE ISSUANCE FEE
For the rights and privileges granted hereunder, CLI will pay to
P-E a nonrefundable, noncreditable License Issuance fee of US$[ * ]. License
issuance payments made under the 1995 agreement shall be applicable against
this sum.
4.2 ROYALTIES
For the rights and privileges granted under this Agreement, CLI shall
pay royalties on products licensed hereunder used by CLI or its AFFILIATES or
sold, distributed, or otherwise transferred by CLI or its sublicensed AFFILIATES
(with or without payment), as follows below, except as otherwise specifically
modified by Section 5.2 and Appendix A:
(a) for a ROCHE PATENTED ENZYME or an CLI ENZYME, [ * ] for each
such enzyme;
(b) for LICENSED RESEARCH PRODUCTS and LICENSED APPLICATION
PRODUCTS that include ROCHE PATENTED ENZYMES and/or CLI ENZYME, [ * ];
(c) for LICENSED APPLICATION PRODUCTS which contain neither ROCHE
PATENTED ENZYMES nor CLI ENZYMES, [ * ].
Furthermore, the Parties further understand and agree that the
royalty rates provided in subsections (a) through (c) above shall apply only for
so long as [ * ]
14.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
[ * ] shall be in force. Thereafter, the Parties shall negotiate in good
faith a reduced royalty rate for products licensed hereunder.
4.3 CLI shall keep full, true and accurate books of account containing all
particulars which may be necessary for the purpose of showing the amount payable
by way of royalty or by way of any other provision under this Agreement for
itself and its sublicensed AFFILIATES. Such books and the supporting data shall
be open at all reasonable times, for three (3) years following the end of the
calendar year to which they pertain (and access shall not be denied thereafter,
if reasonably available), to the inspection of an independent certified public
accountant retained by ROCHE for the purpose of verifying CLI's royalty
statements or CLI's compliance in other respects with this Agreement. If in
dispute, such records shall be kept until the dispute is settled. The
inspection of records shall be at ROCHE's sole cost unless the inspector
concludes that royalties reported by CLI for the period being audited are
understated by five percent (5%) or more from actual royalties, in which case
the costs and expenses of such inspection shall be paid by CLI.
4.4 CLI shall within thirty (30) days after the first day of January,
April, July and October of each year deliver to the addresses provided below a
true and accurate royalty report. This report shall be in accordance with the
royalty report form attached hereto as Appendix D. This report shall be on a
U.S./ex-U.S. basis and shall give such particulars of the business conducted by
CLI in the United States and in territories other than the United States during
the preceding three (3) calendar months as are pertinent to an accounting for
royalty under this Agreement and shall include at least the following:
(a) separately itemized quantities of products licensed hereunder
that are used, sold or otherwise transferred by CLI during those three (3)
months;
(b) the ROYALTY UNITS of ROCHE PATENTED ENZYME(S) and/or CLI
ENZYME(S) in each product licensed hereunder and, for each product, the
calculation of ROYALTY UNITS if different from "activity units" for said enzyme
as advertised, marketed or sold by CLI;
(c) the NET SALES of each LICENSED RESEARCH PRODUCT and LICENSED
APPLICATION PRODUCT;
(d) the calculation of net royalties based on a royalty rate as
defined in Section 4.2;
(e) the net royalties due. If no royalties are due, it shall be so
reported.
The correctness and completeness of each such report shall be
attested to in writing by the responsible financial officer of CLI's
organization or by CLI's external auditor or by the chairman or other head of
CLI's internal audit committee. With respect to royalties due from sublicenses,
attestation by CLI may be that it has obtained from sublicensed AFFILIATES
attestations complying with the preceding sentence.
Simultaneously with the delivery of each such royalty report, CLI
shall pay to P-E the royalty and any other payments due under this Agreement for
the period covered
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
15.
<PAGE>
by such report. All amounts payable hereunder by CLI shall be payable in United
States currency and sent by the due date, together with the royalty report, to
the following address:
Applied Biosystems Division
The Perkin-Elmer Corporation
850 Lincoln Centre Drive
Foster City, CA. 94404
U.S.A.
Attn: Licensing Manager
or to such other address as P-E may designate. A copy of the royalty report
shall also be sent to:
Roche Molecular Systems, Inc.
1145 Atlantic Avenue, Suite 100
Alameda, California 94501
U.S.A.
Attn: Licensing Manager
or to such other address as ROCHE may designate.
4.5 Royalties accruing on account of sales in countries other than the
United States shall be payable in United States dollars in amounts based on the
New York rate of exchange as quoted in The Wall Street Journal (WSJ) for the
last business day of each quarter. If the WSJ does not publish any such rate, a
comparable publication shall be agreed upon from time to time by the parties,
and with respect to each country for which such rate is not published in the WSJ
or in a comparable publication, the parties shall use the applicable rate for
such date by the appropriate governmental agency in such country.
4.6 (a) The Parties agree that the royalty rates and unit fees set forth
in Section 4.2 are reasonable in view of the proprietary rights associated with
the products licensed hereunder and the consequent relative importance of these
products in the marketplace. The Parties also recognize, however, that a
substantive change might occur in the marketplace, including, for example, a
change in ROCHE's proprietary position, or in the status of technological
alternatives that are non-proprietary to ROCHE, which change in the marketplace
might significantly detract from the value added of the products licensed
hereunder and thereby, in light of the royalty schedule of Section 4.2,
potentially makes CLI's marketing position correspondingly less competitive.
Should such changes occur in the marketplace, the parties agree to discuss
whether adjustments to the financial terms herein would be appropriate and
otherwise acceptable to ROCHE.
(b) In an effort to assist CLI in remaining competitive in light
of such changes in the marketplace, the parties have specifically agreed that
the following mechanism shall be available to provide CLI royalty relief:
[ * ]
16.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
Except as is specifically provided by the mechanism to provide
royalty relief described in Section (b) above, ROCHE shall be under no
obligation to change or renegotiate any sections, provisions or terms of this
Agreement.
4.7 Withholding tax, if any, levied on any royalty and/or on any other
payments to be paid hereunder, will be paid by CLI to the proper taxing
authority and proof of payment will be sent to P-E. Any such withholding tax
paid by CLI, will be fully credited against the royalty due to P-E.
4.8 Any amount not being paid by CLI when due will bear interest of
[ * ] from the due date until paid.
5. LICENSE IN ADDITIONAL FIELDS
5.1 CLI may elect at the time of execution of this Agreement, or shall
maintain an option, exercisable for five years from the signature date of this
Agreement, to add APPLICATION FIELDS to the LICENSED FIELDS.
5.2 Appendix A specifies for each field to which this election and option
applies a license issuance fee, where applicable, and the applicable royalty
rate if such rate is different from that specified in Section 4.2, for each such
field. Roche shall have the right to change said license issuance fees and
royalty rate after two years from the signature of this Agreement for any field
which has not become a Licensed Field pursuant to Section 5.3.
17.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
5.3 Each individual field in addition to RESEARCH FIELD will become a
LICENSED FIELD when the respective election and option has been exercised and
the specified license issuance fee for that field has been paid.
6. TERM AND TERMINATION
6.1 This license is granted to CLI as of October 1, 1996 and will expire
on the expiration of the last to expire of the patents within AMPLIFICATION
PATENT RIGHTS, SEQUENCING PATENT RIGHTS, POLYMERASE PATENT RIGHTS, RT and RT-PCR
PATENT RIGHTS to the extent a license of rights under any of the foregoing
surviving Patent Rights is being exercised pursuant to Sections 2.2-2.6 hereto.
6.2 Notwithstanding any other Section of this Agreement, CLI may terminate
this Agreement for any reason on ninety (90) days' written notice to ROCHE. If
CLI elects to terminate this Agreement pursuant to this section, it shall within
thirty (30) days of said notice to ROCHE, also notify each of its customers that
CLI is no longer licensed under AMPLIFICATION PATENT RIGHTS, POLYMERASE PATENT
RIGHTS, SEQUENCING PATENT RIGHTS or RT and RT-PCR PATENT RIGHTS.
6.3 Notwithstanding any other section of this Agreement, ROCHE may
terminate this Agreement, effective immediately upon notice of termination to
CLI, in the event that a third party which is licensed by ROCHE to manufacture
products for use in PCR-based human diagnostic testing acquires any interest,
including but not limited to an ownership interest, directly or indirectly, in
CLI of 50% or more.
6.4 The license granted hereunder to CLI and all sublicenses granted by
CLI to its AFFILIATES shall automatically terminate upon (i) an adjudication of
CLI as bankrupt or insolvent, or CLI's admission in writing of its inability to
pay its obligations as they mature; or (ii) an assignment by CLI for the benefit
of creditors; or (iii) CLI's applying for or consenting to the appointment of a
receiver, trustee or similar officer for any substantial part of its property or
such receiver, trustee or similar officer's appointment without the application
or consent of CLI, if such appointment shall continue undischarged for a period
of ninety (90) days; or (iv) CLI's instituting (by petition, application,
answer, consent or otherwise) any bankruptcy, insolvency arrangement, or similar
proceeding relating to CLI under the laws of any jurisdiction; or (v) the
institution of any such proceeding (by petition, application or otherwise)
against CLI, if such proceeding shall remain undismissed for a period of
ninety (90) days or the issuance or levy of any judgment, writ, warrant of
attachment or execution or similar process against a substantial part of the
property of CLI, if such judgment, writ, or similar process shall not be
released, vacated or fully bonded within ninety (90) days after its issue or
levy.
6.5 Upon any breach or default of a material term under this Agreement by
CLI or an AFFILIATE sublicensed by CLI, including failure to pay monies owed
under the 1994 agreement as specified in Section 2.1 hereof, this Agreement may
be terminated upon ninety (90) days, written notice to CLI. Said notice shall
become effective at the end of the ninety-day period, unless during said period
CLI fully cures such breach or default and notifies ROCHE of such cure. Such
90-day cure period shall not apply to any uncontested royalty payments due,
which uncontested payments must be made in accordance with the terms of this
Agreement.
18.
<PAGE>
6.6 Upon termination of this Agreement as provided herein, CLI shall
immediately stop selling products licensed hereunder and all rights and licenses
granted to CLI by ROCHE hereunder and all sublicenses granted by CLI shall
automatically revert to or be retained by ROCHE.
6.7 CLI's obligations to report to ROCHE and to pay royalties as to the
sale of products licensed and sublicensed hereunder pursuant to the Agreement
prior to termination or expiration of the Agreement shall survive such
termination or expiration.
6.8 Upon termination of this Agreement for any reason, CLI shall destroy
its inventory of all products licensed hereunder and confirm such destruction in
writing within ten days of the termination of the Agreement.
7. ENFORCEMENT OF PATENTS
7.1 CLI shall advise ROCHE promptly, and shall furnish documentary proof
which is reasonably acceptable to ROCHE, upon its becoming aware of substantial
infringement by a third party or parties of an enforceable patent right
(1) within POLYMERASE PATENT RIGHTS by the sale of "Significant Quantities" of
unlicensed stand-alone enzymes in any country in the Territory, or (2) within
AMPLIFICATION PATENT RIGHTS by the sale of "Significant Quantities" of enzymes
not within POLYMERASE PATENT RIGHTS but which enzymes are actively promoted by
said third party or parties or their AFFILIATES or distributors for use in
AMPLIFICATION PATENT RIGHTS in any country in the TERRITORY. Upon receipt of
said written information, ROCHE agrees it shall, within its reasonable business
judgment, take such action as is required to restrain such infringement.
ROCHE shall be in full compliance with its obligations under this
Section 7.1 if, within six (6) months of ROCHE having received said written
information from CLI about any one infringing party in a particular country,
(1) ROCHE notifies each third party identified by such acceptable documentary
proof of ROCHE's enforceable proprietary position in the country where
infringement is occurring and receives from such third parties written
assurances, which shall be executed by an officer of each said third party
capable of legally binding that party, that it is not infringing ROCHE's rights,
or (2) said infringement has stopped, or (3) ROCHE has entered into good faith
license negotiations with such third parties, or (4) ROCHE has instituted or is
prosecuting an action for patent infringement against at least one infringing
third party seller which is active in said country. The above six-month period
may be extended with the consent of CLI.
It is agreed and understood that nothing in this Section 7.1 or this
Agreement shall require ROCHE to sue more than one party at a time or to sue in
more than one country at any one time.
For the purposes of the foregoing clauses, "Significant Quantities" of
unlicensed stand-alone enzymes shall mean (1) in the case of a single
third-party infringer in a particular country, at least 20%, or (2) in the case
of more than one third party seller in a particular country, at least 40%, of
total ROYALTY UNIT turnover, respectively, of all stand-alone enzyme(s) within
POLYMERASE PATENT RIGHTS or thermostable enzymes not within POLYMERASE PATENT
RIGHTS but
19.
<PAGE>
which are "Actively Promoted" for use in AMPLIFICATION PATENT RIGHTS, in each
country. For purposes of this Section 7.1, both Parties must agree as to the
accuracy of said 20% or 40% figures before ROCHE is obligated under this
Section 7.1 to pursue any remedial course of action vis a vis any third party
with respect to sales of unlicensed stand-alone enzymes. Also, for purposes of
this particular paragraph, "Actively Promoted" shall mean advertised or
technically supported for use in AMPLIFICATION PATENT RIGHTS.
If ROCHE is provided with the documentary proof of ongoing infringing
sales as above described and ROCHE does not within the six-month period pursue
one of the above options, CLI shall have the right at the expiration of the
six-month period, or such other period as the parties have agreed, to reduce its
royalty rate for royalties owed on stand-alone ROCHE PATENTED ENZYMES and/or
stand-alone CLI ENZYMES in said country by 20%. It is understood and agreed
that any royalty reduction afforded CLI pursuant to this Section 7 applies only
to sold as stand-alone enzymes and not to kits containing said enzymes.
CLI's right to reduce its royalties shall terminate and CLI shall
resume paying full royalties in each country, as of the time (1) all such
parties in such country have either delivered the written assurances described
above or engaged in good faith license negotiations with ROCHE, provided that if
said negotiations do not conclude within one year, CLI may again abate its
royalty by 20%, as the case may be, in the manner described above until the
conclusion of a license with said third party, or (2) the filing or prosecution
of an infringement suit against at least one such party in said country, or
(3) as a result of the written assurances received in accordance with the
foregoing or the conclusion of any licenses or litigations or otherwise,
infringement in fact ceases or is reduced to below "Significant Quantities".
Notwithstanding the provisions of this Section 7.1, ROCHE and CLI
understand and specifically agree that nothing in this Section shall reduce
CLI's royalty [ * ].
7.2 Section 7.1 shall apply to sublicensed AFFILIATES and to CLI's royalty
obligations for sales of sublicensed AFFILIATES as if the sublicensed AFFILIATES
were CLI.
8. CONFIDENTIALITY-PUBLICITY
8.1 To the extent that, in literature for distribution to third parties,
CLI refers to ROCHE, P-E or the terms of this Agreement, solely by specific
inclusion of the clause provided in Section 2.11, ROCHE hereby approves of such
usage and no further ROCHE review or approval shall be required for distribution
of said literature. If CLI varies from the agreed-to clause in Section 2.11,
then CLI agrees to obtain ROCHE's written approval prior to distributing any
written information including said modified reference to ROCHE, P-E or the terms
of this Agreement. ROCHE's approval shall not be unreasonably withheld or
delayed and, in any event, its decision shall be rendered within three (3) weeks
of receipt of the written information. Once approved, such materials, or
abstracts of such materials, which do not materially alter the context of the
material originally approved may be reprinted during the term of the Agreement
without further approval by ROCHE unless ROCHE has notified CLI in writing of
its decision to withdraw permission for such use. Sublicenses are conditioned
on the sublicensed AFFILIATES' specific agreement to be bound by CLI's
obligations under this Section.
20.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
8.2 Each party agrees that any financial, legal or business information or
any technical information disclosed to it (the "Receiving Party") by the other
(the "Disclosing Party") and identified in writing as confidential in connection
with this Agreement shall be considered confidential and proprietary and the
Receiving Party shall not disclose same to any third party and shall hold it in
confidence for a period of five (5) years following termination of this
Agreement and will not use it other than as permitted under this Agreement
provided, however, that any information, know-how or data which is orally
disclosed to the Receiving Party shall not be considered confidential and
proprietary unless such oral disclosure is reduced to writing and marked
confidential and given to the Receiving Party in written form within thirty (30)
days after oral disclosure thereof. Such confidential and proprietary
information shall include, without limitation, marketing and sales information,
commercialization plans and strategies, research and development work plans, and
technical information such as patent applications, inventions, trade secrets,
systems, methods, apparatus, designs, tangible material, organisms and products
and derivatives thereof. Notwithstanding the above, ROCHE shall have the right
to share royalty reports with P-E.
8.3 The above obligations of confidentiality shall not be applicable to
the extent that:
(a) such information is general public knowledge or, after disclosure
hereunder, becomes general or public knowledge through no fault of the Receiving
Party; or
(b) such information can be shown by the Receiving Party by its
written records to have been in its possession prior to receipt thereof
hereunder; or
(c) such information is received by the Receiving Party from any
third party for use or disclosure by the Receiving Party without any obligation
to the Disclosing Party provided, however, that information received by the
Receiving Party from any third party funded by the Disclosing Party (e.g.
consultants, subcontractors, etc.) shall not be released from confidentiality
under this exception; or
(d) the disclosure of such information is required or desirable to
comply with or fulfill governmental requirements, submissions to governmental
bodies, or the securing of regulatory approvals.
8.4 Each party shall, to the extent reasonably practicable, maintain the
confidentiality of the provisions of this Agreement and shall refrain from
making any public announcement or disclosure of this Agreement or its terms
without the prior consent of the other party, which consent shall not be
unreasonably withheld, except to the extent a party concludes in good faith that
such disclosure is required under applicable law or regulations, in which case
the other party shall be notified in advance.
9. ASSIGNMENT/TRANSFERABILITY
9.1 The rights and licenses granted by ROCHE to CLI in this Agreement are
personal to CLI and may not be assigned or otherwise transferred, including
without limitation any purported assignment or transfer that would arise from a
sale or transfer of CLI's business (or
21.
<PAGE>
any portion of said business). Any attempted assignment or transfer shall be
void and shall automatically terminate all rights of CLI under this Agreement.
9.2 ROCHE may assign all or any part of its rights and obligations under
this Agreement at any time without the consent of CLI. CLI agrees to execute
such further acknowledgments or other instruments as ROCHE may reasonably
request in connection with such assignment.
10. NEGATION OF WARRANTIES AND INDEMNITY
10.1 Nothing in this Agreement shall be construed as:
(a) a warranty or representation by ROCHE as to the validity or scope
of any patent included within POLYMERASE PATENT RIGHTS, AMPLIFICATION PATENT
RIGHTS, SEQUENCING PATENT RIGHTS or RT and RT-PCR PATENT RIGHTS;
(b) a warranty or representation that the practice of POLYMERASE
PATENT RIGHTS, AMPLIFICATION PATENT RIGHTS, SEQUENCING PATENT RIGHTS or RT and
RT-PCR PATENT RIGHTS is or will be free from infringement of patents of third
parties;
(c) an obligation to bring or prosecute actions or suits against
third parties for infringement, provided, however, that this clause shall not
alter CLI's rights and ROCHE's obligations under Section 7.1;
(d) except as expressly set forth herein, conferring the right to use
in advertising, publicity or otherwise any trademark, trade name, or names, or
any contraction, abbreviation, simulation or adaptation thereof, of ROCHE or
P-E;
(e) conferring by implication, estoppel or otherwise any licenses,
immunities or rights under any patents or patent applications of ROCHE other
than those specified in POLYMERASE PATENT RIGHTS, AMPLIFICATION PATENT RIGHTS,
SEQUENCING PATENT RIGHTS or RT and RT-PCR PATENT RIGHTS, regardless of whether
such other patents or patent applications are dominant or subordinate to those
in POLYMERASE PATENT RIGHTS, AMPLIFICATION PATENT RIGHTS, SEQUENCING PATENT
RIGHTS or RT and RT-PCR PATENT RIGHTS, or under any thermal cycler or other
instrument patent, or to perform PCR in a thermal cycler that is not an
AUTHORIZED THERMAL CYCLER, or to make or sell any thermal cycler or other
instrument for the automated performance of the PCR PROCESS;
(f) an obligation to furnish any know-how not provided in POLYMERASE
PATENT RIGHTS, AMPLIFICATION PATENT RIGHTS, SEQUENCING PATENT RIGHTS and RT and
RT-PCR PATENT RIGHTS; or
(g) creating any agency, partnership, joint venture or similar
relationship between ROCHE and/or P-E on the one hand, and CLI on the other
hand.
10.2 ROCHE MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
22.
<PAGE>
10.3 Notwithstanding the foregoing, ROCHE warrants and represents that it
has the right to grant the licenses provided in Sections 2 and 5.
10.4 The provisions of Section 10.1 and 10.2 regarding warranties and
representations by ROCHE shall be specifically included in any sublicense
granted by CLI.
11. INDEMNITY
CLI shall assume full responsibility for its use of POLYMERASE PATENT
RIGHTS and for its sale of ROCHE PATENTED ENZYMES and CLI ENZYMES and shall
defend, indemnify and hold ROCHE and P-E and their respective officers,
directors, agents, employees and stockholders, harmless from and against all
liability, demands, damages, expenses (including attorneys' and expert witness
fees and expenses) and losses for death, personal injury, illness or property
damage, or any other injury or damage arising out of the use by CLI of the
POLYMERASE PATENT RIGHTS or the preparation, use or sale of LICENSED PRODUCTS,
including but not limited to, use or reliance upon such LICENSED PRODUCTS by
customers of CLI.
12. MOST FAVORED LICENSEE
If after the signature of this Agreement, ROCHE grants to any unrelated
third party, other than [ * ], a license of substantially the same scope as
granted to CLI herein but under more favorable [ * ] than those given to CLI
under this Agreement, ROCHE shall promptly notify CLI of said more favorable
[ * ], and CLI shall have the [ * ] such more favorable [ * ] for the [ * ]
contained herein. In addition, if ROCHE grants a license to such an
unrelated third party in one or more [ * ]that is not of the same scope as
CLI's license hereunder (for example, because such license is limited to the
[ * ]) but is under more favorable [ * ] with respect to a [ * ] covered by
CLI's license hereunder, CLI shall have the [ * ] such more favorable [ * ]
with respect to the applicable [ * ] for the [ * ]contained herein with
respect to such [ * ], for a license limited to the same scope as said third
party grant. CLI's right to elect said more favorable [ * ] shall extend
only for so long as and shall be conditioned on CLI's acceptance of all the
[ * ], under which such more favorable [ * ] shall be available to such other
third party. Upon CLI's acceptance of all such terms of said third-party
agreement, the more favorable [ * ] shall be effective as to CLI on the
effective date of such other third party license agreement. Notwithstanding
the foregoing, in the event that ROCHE and/or P-E shall [ * ], for example,
such as [ * ], as a part of the consideration for its granting of such
license to a third party, then this Section 12 shall [ * ].
13. GENERAL
13.1 This Agreement constitutes the entire agreement between CLI and ROCHE
as to the subject matter hereof, and all prior negotiations, representations,
agreements and understandings are merged into, extinguished by and completely
expressed by it. This Agreement may be modified or amended only by a writing
executed by authorized officers of each of The Parties.
23.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
Any notice required or permitted to be given by this Agreement shall
be given by postpaid, first class, registered or certified mail, or by courier
or facsimile, properly addressed to the other party or parties at the respective
address as shown below.
If to ROCHE: F. Hoffmann-La Roche Ltd
Grenzacherstrasse 124
4070 Basel
Switzerland
Attn: Corporate Law Department
with a copy to: Roche Molecular Systems, Inc.
1145 Atlantic Avenue, Suite 100
Alameda, California 94501
U.S.A.
Attn: Licensing Manager
If to CLI: Clontech Laboratories, Inc.
1020 East Meadow Circle
Palo Alto, California 943034230
Attn: Alexi Miller, Senior Product Manager
Either party may change its address by providing notice to the other party.
Unless otherwise specified herein, any notice given in accordance with the
foregoing shall be deemed given within four (4) full business days after the day
of mailing, or one full day after the date of delivery to the courier, as the
case will be.
13.2 GOVERNING LAW
This Agreement and its effect are subject to and shall be construed
and enforced in accordance with the law of the State of New Jersey, U.S.A.,
except as to any issue which by the law of New Jersey depends upon the validity,
scope or enforceability of any patent within AMPLIFICATION PATENT RIGHTS,
POLYMERASE PATENT RIGHTS, SEQUENCING PATENT RIGHTS or RT and RT-PCR PATENT
RIGHTS which issue shall be determined in accordance with the applicable patent
laws of the United States or the relevant foreign jurisdiction.
The Parties agree that for any dispute or controversy arising from
this Agreement, the exclusive jurisdiction and venue for any such dispute or
controversy shall be in the United States District Court for the District of New
Jersey if federal jurisdiction exists, and if no federal jurisdiction exists,
then in the Superior Court of New Jersey.
13.3 ARBITRATION
Notwithstanding the provisions of Section 13.2 above, any dispute
concerning solely the determination of facts such as, but not limited to
(1) what constitutes a quantity significantly exceeding a CLI customer's typical
usage requirements pursuant to Section 2.10 b; (2) a determination of royalty
rate or payments owed pursuant to Section 4.2; and (3) the determination of the
unlicensed competition and concomitant royalty abatement pursuant to
24.
<PAGE>
Section 7, Patent Enforcement; and which dispute does not involve a question of
law, shall be settled by final and binding arbitration at a mutually convenient
location in the State of New Jersey pursuant to the commercial arbitration rules
of the American Arbitration Association in accordance with the following
procedural process:
(a) The arbitration tribunal shall consist of three arbitrators.
Each party shall nominate in the request for arbitration and the answer thereto
one arbitrator and the two arbitrators so named will then jointly appoint the
third arbitrator within sixty (60) days of the filing of the answer, said third
arbitrator being the chairman of the arbitration tribunal.
(b) The decision of the arbitration tribunal shall be final and
judgment upon such decision may be entered in any competent court for juridical
acceptance of such an award and order of enforcement.
Each party hereby submits itself to the jurisdiction of the
courts of the place of arbitration, but only for the entry of judgment with
respect to the decision of the arbitrators hereunder.
13.4 Nothing in this Agreement shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any provision of this Agreement or concerning the legal right of the
parties to enter into this Agreement and any statute, law, ordinance or treaty,
the latter shall prevail, but in such event the affected provisions of the
Agreement shall be curtailed and limited only to the extent necessary to bring
it within the applicable legal requirements.
13.5 If any provision of this Agreement is held to be unenforceable for any
reason, it shall be adjusted rather than voided, if possible, in order to
achieve the intent of the parties to the extent possible. In any event, all
other provisions of this Agreement shall be deemed valid and enforceable to the
full extent possible.
25.
<PAGE>
IN WITNESS WHEREOF, The Parties hereto have set their hands and seals and duly
executed this Agreement on the date(s) indicated below.
Basel, F. HOFFMANN-LA ROCHE, LTD.
By: /s/
------------------------------------------
Title: PCR Licensing Manager
---------------------------------------
Date: 11/25/96
----------------------------------------
Branchburg, ROCHE MOLECULAR SYSTEMS, INC.
By: /s/ Kathy Ordonez
------------------------------------------
Kathy Ordonez
Title: President
---------------------------------------
11/12/96
Date: 11/12/96
----------------------------------------
Palo Alto, CLONTECH LABORATORIES, INC.
By: /s/ Ken Fong
------------------------------------------
Kenneth Fong, Ph.D.
Title: President & Chief Executive Officer
---------------------------------------
Date: 11/17/96
----------------------------------------
26.
<PAGE>
SCHEDULE 1
POLYMERASE PATENT RIGHTS(1)
4,889,818
5,079,352
5,352,600
USSN 07/873,897
USSN 08/384,490
- --------------------
(1) And those Ex-US patents and patent applications which claim priority from
the above-referenced US Patents and patent applications and access to which
is necessary for CLI to manufacture, use and sell the ROCHE PATENTED
ENZYMES specifically listed in Schedule 2 hereto. For the convenience of
CLI, Roche shall provide to CLI, from time to time as appropriate, an
up-dated list of its worldwide patent portfolio directed to POLYMERASE
PATENT RIGHTS.
27.
<PAGE>
SCHEDULE 2
ROCHE PATENTED ENZYMES(1) licensed herein:
[ * ]
- --------------------
(1) To the extent that any of the enzymes listed above may be covered by third
party patent rights, no rights under such third party patent are hereby
granted or implied.
28.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
APPENDIX A
APPLICATIONS FIELDS
FORENSICS AND HUMAN IDENTIFY
1. "Forensic and Human Identity Applications" shall mean the forensic analysis
of human genetic material for use in, or in preparation for, legal
proceedings, but shall exclude paternity determination except in case of
death investigation. This field specifically excludes tissue typing.
2. [ * ]
ENVIRONMENTAL TESTING
1. "Environmental Testing Applications" shall mean testing and monitoring
environmental samples, including, without limitation, for the purpose of
detecting the presence or absence or amount of any organism or
microorganism (including, without limitation, viruses and bacteria),
whether living, dead or extinct, or their remains.
2. [ * ]
AGRICULTURAL PLANT APPLICATIONS
1. "Plant Diagnostics Applications" shall mean diagnostic applications in
plants, including, without limitation, the diagnosis of a disease or
condition, the diagnosis of susceptibility or resistance to a disease or
condition, or a choice of treatment of a disease or condition, the
determination of genetic traits for breeding purposes, or the
identification of a particular plant species.
2. [ * ]
ANIMAL DIAGNOSTICS
1. "Animal Diagnostics" shall mean detection of genetic disease, genetic
predisposition to disease, or other medical condition in animals. This
field shall include sex determination but shall specifically exclude
parentage determination.
29.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
2. [ * ]
3. [ * ]
ANIMAL IDENTITY TESTING AND POSITIVE TRAIT BREEDING
1. "Animal Identity Testing Applications" shall mean identity testing for
animals (other than humans) whether living, dead or extinct, or their
remains, including, without limitation, parentage testing. "Positive Trait
Breeding" shall mean the determination of genetic traits other than
disease-related traits for breeding purposes.
2. [ * ]
FOOD TESTING
1. "Food Testing Applications" shall mean the detection and/or analysis of
microorganisms in food or food/samples for quality assurance and quality
control purposes.
2. [ * ]
30.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
APPENDIX B
ASSAY TO DETERMINE UNITS OF ENZYME
I. TAQ DNA POLYMERASE(1)
Taq DNA polymerase manufactured by CLI ("CLI-Taq") shall be assayed under
the following conditions, in parallel with any assay of Roche Molecular Systems'
AmpliTaq-Registered Trademark- DNA polymerase (P-E catalogue numbers N-801-0060,
N-801-1012). The activity of CLI-Taq and AmpliTaq thus measured by CLI shall be
normalized to the concentration stated by RMS for the AmpliTaq.
Unit Definition: One unit of enzyme is defined as the amount that
will incorporate 10nmoles of dNTPs into acid
insoluble material per 30 minutes at 74DEG. C
under the analysis conditions below.
Analysis conditions: 25mM TAPS (tris-(hydroxymethyl)-methyl-amino-
propane-sulfonic acid, sodium salt), pH 9.3 (at
25DEG. C); 50mM KC1; 2mM MgC1(2); 1mM beta-
mercaptoethanol; 200muM each dATP, dGTP, dTTP;
100muM [alpha-(32)P]-dCTP (0.05 to 0.1 Ci/mmole);
activated salmon sperm DNA, mixed in a final
volume of 50mul and incubated at 74DEG. C for 10
minutes. The salmon sperm DNA is activated by a
modification of the methods in reference 1.
The assay mixture (without enzyme) is prepared fresh daily and 45mul
aliquots (0DEG. C) are mixed with 5mul of Taq DNA polymerase diluted in 25mM
Tris-HCl pH 8, 50mM KCl, 100mug/ml autoclaved gelatin, 1mM beta-mercaptoethanol,
0.5% (w/v) NP40 and 0.5% (w/v) Tween20.
Reactions are initiated with addition of enzyme and placed at 74DEG. C.
Reactions are quenched after 10 minutes with the addition of 10mul of 60mM EDTA
and placed at 0DEG. C. Aliquots (50mul) are diluted with 1ml of 2mM EDTA
containing 50mug/ml sheared salmon sperm DNA, and precipitated by the addition
of 1 ml 20% (w/v) trichloroacetic acid and 2% (w/v) sodium pyrophosphate, and
incubated at 0DEG. C for 15 minutes. Precipitated DNA is collected on GF/C
filter discs (2.4 cm) and washed extensively with 5% trichloroacetic acid and 2%
sodium pyrophosphate (7 x 5 ml), then 95% ethanol (5ml), dried and counted.
Activity concentration is determined from replicate assays (at least 3) of
replicate parallel, serial dilutions (at least 3) that yield 20-90 pMoles dCMP
incorporation in the assay.
Activated salmon sperm DNA is used at a concentration that provides linear
incorporation values with 20-100 mU of enzyme. This DNA concentration usually
represents 12.5-20mug/assay.
- --------------------
(1) Richardson, C.C. 1966. DNA Polymerase from Escherichi coli. In PROCEDURES
IN NUCLEIC ACID RESEARCH eds. Cantoni G.L. and Davies, D.R. Harper & Row,
New York, p. 264.
31.
<PAGE>
II. CLI ENZYMES AND ROCHE PATENTED ENZYMES OTHER THAN TAQ DNA POLYMERASE
CLI ENZYMES shall be assayed in reference to AmpliTaq DNA polymerase (or
another enzyme manufactured by ROCHE which is more comparable to the particular
CLI ENZYME) in a manner similar to that described above. The analysis
conditions shall be adapted to reflect the optimal activity conditions for each
such CLI ENZYME.
Further, the effectiveness of such enzyme in producing amplified DNA in the
PCR PROCESS shall be determined in comparison with AmpliTaq DNA polymerase under
the optimal conditions for each enzyme. This determination shall be performed
as follows:
TEMPLATE: Bacteriophage Lambda DNA
TARGET: The 500 basepair fragment of bacteriophage lambda DNA extending
from nucleotides 7131 to 7630 will be the target for amplification.
Note: The template and primers are available in the GeneAmp-Registered
Trademark- Lambda Control Reagents (Part No. N808-0008) from Perkin Elmer.
PRIMERS:
5'-GATGAGTTCGTGTCCGTACAACTGG-3' (complement of - strand: Nucleotides
7131-7155)
5'-CGTTATCGAAATCAGCCACAGCGCC-3' (complement of + strand: Nucleotides
7606-7630)
CONDITIONS:
200muM each dATP, dCTP, dGTP, dTTP, 1ng/100mul. template, 1muM each primer.
For AmpliTaq DNA polymerase other components are: 10mM Tris-HCl pH8.3,
1.5mM MgCl(2) and 50mM KCl.
For CLI Enzyme, buffer pH and concentration, and MgCl(2) and KCl
concentrations should be optimized for the CLI enzyme.
The PCR should be carried out for 25 cycles.
From the comparitive yield of specific 500 basepair fragment, a "PCR
Effectiveness Ratio" will be derived to be used in determining the Royalty Unit
specified in Section 1.16 c. The Parties agree that calculation of such a ratio
is complex and the data supporting the determination of the ratio must be
reviewed and approved by ROCHE on a case by case basis.
III. For purposes of calculating royalties owed on products, the concentration
of enzyme (units per volume) reported must be within +/- 10% of the actual
activity measured by the above assays. The volume of enzyme reported to be
in a product must be within +/- 10% of the actual measurable volume.
32.
<PAGE>
APPENDIX C
NOTICES TO PURCHASER
1. LICENSE STATEMENT FOR USE ON ROCHE PATENTED ENZYMES AND CLI ENZYMES
DESIGNED AND SOLD FOR USE IN AMPLIFICATION PATENT RIGHTS AND/OR SEQUENCING
PATENT RIGHTS
NOTICE TO PURCHASER: LIMITED LICENSE
A license under U.S. Patents 4,683,202, 4,683,195, 4,965,188, and 5,075,216
or their foreign counterparts, owned by Hoffmann-La Roche Inc. and
F. Hoffmann-La Roche Ltd. ("Roche"), has an up-front fee component and a
running-royalty component. The purchase price of this product includes limited,
nontransferable rights under the running-royalty component to use only this
amount of the product to practice the Polymerase Chain Reaction ("PCR") and
related processes described in said patents solely for the research and
development activities of the purchaser when this product is used in conjunction
with a thermal cycler whose use is covered by the up-front fee component.
Rights to the up-front fee component must be obtained by the end user in order
to have a complete license to use this product in the PCR process. These rights
under the up-front fee component may be purchased from Perkin-Elmer or obtained
by purchasing an Authorized Thermal Cycler. No right to perform or offer
commercial services of any kind using PCR, including without limitation
reporting the results of purchaser's activities for a fee or other commercial
consideration, is hereby granted by implication or estoppel. Further
information on purchasing licenses to practice the PCR Process may be obtained
by contacting the Director of Licensing at The Perkin-Elmer Corporation, 850
Lincoln Centre Drive, Foster City, California 94404 or at Roche Molecular
Systems, Inc., 1145 Atlantic Avenue, Alameda, California 94501.
2. LICENSED RESEARCH PRODUCTS DESIGNED AND SOLD FOR USE IN AMPLIFICATION
PATENT RIGHTS BUT NOT SUITABLE FOR USE IN SEQUENCING PATENT RIGHTS
NOTICE TO PURCHASER: LIMITED LICENSE
A license under U.S. Patents 4,683,202, 4,683,195 and 4,965,188 or their
foreign counterparts, owned by Hoffmann-La Roche Inc. and F. Hoffmann-La Roche
Ltd. ("Roche"), has an up-front fee component and a running-royalty component.
The purchase price of this product includes limited, nontransferable rights
under the running-royalty component to use only this amount of the product to
practice the Polymerase Chain Reaction ("PCR") and related processes described
in said patents solely for the research and development activities of the
purchaser when this product is used in conjunction with a thermal cycler whose
use is covered by the up-front fee component. Rights to the up-front fee
component must be obtained by the end user in order to have a complete license.
These rights under the up-front fee component may be purchased from Perkin-Elmer
or obtained by purchasing an Authorized Thermal Cycler. No right to perform or
offer commercial services of any kind using PCR, including without limitation
reporting the results of purchaser's activities for a fee or other commercial
consideration, is hereby granted by implication or estoppel. Further
information on purchasing licenses to practice the PCR Process may be obtained
by contacting the Director of Licensing at
33.
<PAGE>
the Perkin-Elmer Corporation, 850 Lincoln Centre Drive, Foster City, California
94404 or at Roche Molecular Systems, Inc., 1145 Atlantic Avenue, Alameda,
California 94501.
3. LICENSED RESEARCH PRODUCTS DESIGNED AND SOLD FOR USE IN SEQUENCING RIGHTS
NOTICE TO PURCHASER: LIMITED LICENSE
The purchase price of this product includes a limited, nontransferable
license under U.S. Patent 5,075,216 or its foreign counterparts, owned by
Hoffmann-La Roche Inc. and F. Hoffmann-La Roche Ltd. ("Roche"), to use only this
amount of the product for DNA Sequencing and related processes described in said
patent solely for the research and development activities of the purchaser. No
license under these patents to use the PCR process is conveyed expressly or by
implication to the purchaser by the purchase of this product. A license to use
the PCR Process for certain research and development activities accompanies the
purchase of certain reagents from licensed suppliers such as CLI when used in
conjunction with an Authorized Thermal Cycler, or is available from the
Perkin-Elmer Corporation. Further information on purchasing licenses to
practice the PCR Process may be obtained by contacting the Director of Licensing
at the Perkin-Elmer Corporation, 850 Lincoln Centre Drive, Foster City,
California 94404 or at Roche Molecular Systems, Inc., 1145 Atlantic Avenue,
Alameda, California 94501.
4. FOR USE ON RESEARCH PRODUCTS WHICH ARE NOT LICENSED RESEARCH PRODUCTS BUT
WHICH ARE SUPPORTED FOR USE IN PCR AND/OR WITH LICENSED RESEARCH PRODUCTS
NOTICE TO PURCHASER
This product is optimized for use in the Polymerase Chain Reaction ("PCR")
covered by patents owned by Hoffmann-La Roche Inc. and F. Hoffmann-La Roche
("Roche"). No license under these patents to use the PCR Process is conveyed
expressly or by implication to the purchaser by the purchase of this product. A
license to use the PCR Process for certain research and development activities
accompanies the purchase of certain reagents from licensed suppliers such as CLI
when used in conjunction with an authorized thermal cycler, or is available from
the Perkin-Elmer Corporation. Further information on purchasing licenses to
practice the PCR Process may be obtained by contacting the Director of Licensing
at the Perkin-Elmer Corporation, 850 Lincoln Centre Drive, Foster City,
California 94404 or at Roche Molecular Systems, Inc., 1145 Atlantic Avenue,
Alameda, California 94501.
5. Similar notices for use on products for RT and RT-PCR and for Licensed
Application Products will be provided as appropriate.
34.
<PAGE>
MOLECULAR DYNAMICS, INC.
AND
CLONTECH LABORATORIES, INC
RESEARCH, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT
SEPTEMBER 11, 1998
<PAGE>
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPERATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
RESEARCH, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT
THIS RESEARCH, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT ("Agreement"),
effective as of September 11, 1998 ("Effective Date") is made by and between
MOLECULAR DYNAMICS, INC., a Delaware corporation and CLONTECH LABORATORIES,
INC., a California corporation (each, respectively, a "Party" and collectively,
the "Parties").
BACKGROUND
A. MD owns, or has or is developing technology, chemistries,
instrumentation and software for the manufacture and scanning of microarrays of
biological materials including DNA.
B. CLONTECH owns, or has or is developing technologies relating to the
development, selection, manipulation and manufacture of DNA sequences that can
be included into microarrays, technologies relating to hybridization and probe
generation, chemistry and software.
C. CLONTECH and MD desire to jointly develop and manufacture microarrays
of [ * ] and market and sell such jointly developed [ * ] microarrays.
THEREFORE, the Parties agree as follows:
ARTICLE I
DEFINITIONS
"AFFILIATE" means an entity that controls, is controlled by or is under
common control with a Party. For purposes of this definition, "control" shall
mean the possession directly or indirectly, of a majority of the voting power of
such entity (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise); provided that such entity shall
be deemed an Affiliate only so long as such control continues.
"ARRAY SCANNER(s)" means an instrument as listed in Exhibit A hereto, as
developed by MD, and the associated software, specifically having the ability to
rapidly and accurately detect and quantify fluorescently-labeled probes
hybridized or bound to the DNA and/or other biological materials spotted by an
Array Spotter on a glass slide or other substrate.
"ARRAY SPOTTER(s)" means an instrument as listed in Exhibit A hereto, as
developed by MD, and the associated software, specifically having the ability to
spot DNA and other biological materials on a glass slide or other substrate.
"CLONTECH" means Clontech Laboratories, Inc. and its Affiliates.
"CLONTECH IP" means such Intellectual Property Rights and Information
which, during the Term of this Agreement: (i) are owned by CLONTECH or licensed
to CLONTECH as part of Third Party Licenses; (ii) would be infringed by the
development, manufacture, sale, use,
1.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
offer for sale or importation of the Microarrays by MD in accordance with this
Agreement; and (iii) CLONTECH may grant a license or sublicense to MD hereunder
without violating any agreement with a Third Party.
"CUSTOMER" means either: (i) a Third Party or (ii) an Affiliate of CLONTECH
or MD who is an end-user of Microarrays, who purchases Microarrays from CLONTECH
or MD in accordance with this Agreement for use in the Field and in the
Territory.
"DEVELOPMENT PLAN" means the development plan for the Microarrays which
sets forth, without limitation, development and commercialization timelines,
specifications, activities, tasks and other technical and marketing information
relating to the Microarrays and the Project, which plan shall be agreed to by
the Parties and attached hereto as Exhibit B within ninety (90) days of the
Effective Date. The Development Plan may be amended from time to time during
the Term of this Agreement upon written agreement of the Parties.
"FIELD" means the use of the Microarrays in accordance with the following:
(a) the Microarrays may only be used for [ * ] programs, including [ * ]
programs;
(b) the Microarrays may be used only in "[ * ]" studies (meaning
studies which measure the [ * ] of an [ * ] in cells); and
(c) the Microarrays are for [ * ] use only.
For clarification, the Microarrays may not be used for [ * ] for [ * ]
distribution, for [ * ] discovery; nor may the Microarrays be [ * ] to other
parties.
"INFORMATION" means techniques, inventions, practices, methods, knowledge,
know-how, skill, experience and analytical, quality control, marketing,
manufacturing and sales data, whether or not patentable.
"INTELLECTUAL PROPERTY RIGHTS" means trade secrets, patents, copyrights,
know-how and similar rights of any type under the law of any governmental
authority, domestic or foreign, including all applications and registrations
thereto.
"MD" means Molecular Dynamics, Inc. and its Affiliates.
"MD IP" means such Intellectual Property Rights and Information which,
during the Term of this Agreement: (i) are owned by MD or licensed to MD as part
of Third Party Licenses; (ii) would be infringed by the development,
manufacture, sale, use, offer for sale or importation of the Microarrays by
CLONTECH in accordance with this Agreement; and (iii) MD may grant a license or
sublicense to CLONTECH hereunder without violating any agreement with a Third
Party.
2.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
"MECHANICAL FABRICATION METHODS" means any method for the fabrication of
Nucleic Acid Arrays on a solid support by placement of fully synthesized nucleic
acids (clonal polynucleotides or other presynthesized polynucleotides) having
more than [ * ] bases each, solely through mechanically isolated deposition
of such fully synthesized nucleic acids at specific locations on the array.
Without limiting the above, it is understood that the synthesis of an array in
which regions of an array are activated or prepared for placement of materials
by means of controlled direction of electromagnetic energy at a portion of a
support is not a Mechanical Fabrication Method.
"MICROARRAY" means a Nucleic Acid Array jointly developed by CLONTECH and
MD under the Project pursuant to this Agreement, the specifications of which
("Specifications") are set forth in the Development Plan, as such Specifications
may be changed from time to time.
"NUCLEIC ACID ARRAY" means an array of diverse nucleic acids, each
having more than [ * ] bases, at defined locations on a solid support and
fabricated by Mechanical Fabrication Methods, provided that in no part of
such solid support may such diverse nucleic acids be arranged at a [ * ] of
more than [ * ], and all of the nucleic acids in any one Nucleic Acid Array
may represent no more than [ * ] genes.
"PROJECT" means the joint development project undertaken by the Parties
pursuant to this Agreement to develop the Microarrays.
"PROJECT TECHNOLOGY" means any and all inventions, know-how, trade secrets,
formulations, data, technology, processes and information, whether or not
patentable, developed or invented by either Party or by the Parties jointly
pursuant to, in connection with or in furtherance of the Project, and any and
all Intellectual Property Rights therein and thereto.
"TERRITORY" means the [ * ], provided that the Joint Steering Committee
(as defined in Article V) may add additional countries to the definition of
Territory.
"THIRD PARTY(ies)" means any person or entity other than MD or CLONTECH, or
an Affiliate of MD or CLONTECH.
"THIRD PARTY LICENSES" means any and all licenses to Third Party
Intellectual Property Rights which: (i) have been granted to a Party as of the
Effective Date or are thereafter granted to a Party during the Term of the
Agreement; and (ii) would be infringed by the unlicensed manufacture, use, sale,
offer for sale or importation of the Microarrays in the Territory.
ARTICLE II
LICENSES AND INTELLECTUAL PROPERTY RIGHTS
2.1 LICENSE TO CLONTECH. Subject to the terms and conditions of this
Agreement, during the Term, MD grants to CLONTECH a [ * ] (except as
specified below) license, [ * ] with MD, under the MD IP to: (i) develop the
Microarrays in accordance with the Development Plan; (ii) make (only if
permitted by that certain License Agreement dated [ * ] by and between MD and
[ * ] and any
3.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
amendments thereof ("[ * ] Agreement"), use, sell, have sold, offer for
sale and import the Microarrays in the Territory for use in the Field; and (iii)
grant sublicenses to Customers to use the Microarrays in the Territory in the
Field.
2.2 LICENSE TO MD. Subject to the terms and conditions of this
Agreement, during the Term, CLONTECH grants to MD a [ * ] (except as specified
below) license, [ * ] with CLONTECH, under the CLONTECH IP to: (i) develop
the Microarrays in accordance with the Development Plan; (ii) make, use,
sell, have sold, offer for sale and import the Microarrays in the Territory
for use in the Field; and (iii) grant sublicenses to Customers to use the
Microarrays in the Territory in the Field.
2.3 PROJECT TECHNOLOGY. The Parties agree that any Project Technology
shall be owned by the Party which employee(s) invents such Project
Technology, in accordance with United States patent laws with respect to
inventorship. Project Technology that is jointly invented by the employees of
both Parties shall be jointly owned by the Parties ("Joint Inventions").
Decisions regarding the procurement of patents on Joint Inventions shall be
jointly made by the Parties, and the expenses therefor shall be shared
equally by the Parties. Both Parties agree that no assignments, license
grants or any other grant of rights will be made on Joint Inventions without
the written permission of the other Party, said permission not to be withheld
unreasonably. In the case that a Party wishes to assign its ownership
interest in any Joint Invention, it shall notify the other Party in writing
thereof ("Notice") prior to entering into any discussion with a Third Party
concerning assignment of its interest in such Joint Invention. In the event
the other Party wishes to accept assignment of such Party's interest in such
Joint Invention, the Parties shall negotiate in good faith and attempt to
enter into a written agreement for the assignment of the ownership interest
of such Joint Invention for a period of no more than [ * ] days from the date
the Notice is received by the non-assigning Party. If the Parties have not
entered into a written agreement after the expiration of such [ * ] day
period, the Party desiring to assign its ownership interest shall have the
right to assign its ownership interest to a Third Party, provided that the
terms of such transfer to the Third Party may not be more favorable, taken as
a whole, than the terms last offered by the assigning Party to the other
Party.
2.4 THIRD PARTY TECHNOLOGY. Each Party acknowledges that the license
granted to it by the other Party may include rights under Third Party Licenses.
Each Party hereby agrees to abide by the terms and Conditions of such Third
Party Licenses pertinent to such Party as sublicensee of the other Party and
disclosed to such Party during the Term of this Agreement. Breach of the
foregoing covenant by a Party shall be deemed a material breach of this
Agreement by such Party.
2.5 RESERVATION OF RIGHTS. No right, title, or interest is granted,
whether expressly or by implication to any technology or Intellectual Property
Rights owned by either Party, except for the rights and licenses expressly
granted hereunder, and each Party hereby reserves all rights not expressly
granted hereunder. Nor shall anything in this Agreement be deemed to restrict
either Party from exploiting any of its rights not expressly granted to the
other Party hereunder.
2.6 ENFORCEMENT. Each Party agrees to promptly notify each other upon
knowledge of any infringement or misappropriation by a Third Party of the MD IP
or CLONTECH IP the Territory, including Customers who are using the Microarrays
outside the Field. The Parties
4.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
shall consult with each other and agree upon a course of action to abate such
infringement or misappropriation by the Third Party.
2.7 THIRD PARTY PATENT RIGHTS. If a claim, suit or other legal proceeding
is threatened or commenced against MD and/or CLONTECH by a Third Party alleging
that the making, use, selling, offer for sale or importing of the Microarrays
infringes an Intellectual Property Right of the Third Party ("Claim"), or if
either Party becomes aware of any Intellectual Property Rights of a Third Party
that may cover the making, use, selling, offer for sale or importing of the
Microarrays, then each Party will give prompt written notice thereof to the
other Party.
(a) MD shall have the right to defend against or settle any Claim
arising from or relating to the MD IP; provided that: (a) CLONTECH shall
cooperate fully with MD in any defense, settlement or compromise made by MD at
MD's expense; (b) CLONTECH shall not enter into any settlement agreement or
other voluntary resolution of any such Claim without obtaining MD's prior
written consent thereto; and (c) MD shall not enter into any settlement with
such Third Party which would incur any license fees to such Third Party for the
making, using, selling, offer for sale or importation of the Microarrays unless
approved by the Joint Steering Committee pursuant to Section 2.7(iv) below. If
CLONTECH has complied fully with the procedures set forth in this Section
2.7(i)(a)-(b), MD will indemnify and hold CLONTECH harmless from and against any
loss, cost, damage, or other expenses as a result of such Claim.
(b) CLONTECH shall have the right to defend against or settle any
Claim arising from or relating to the CLONTECH IP provided that: (a) MD shall
cooperate fully with CLONTECH in any defense, settlement or compromise made by
CLONTECH at CLONTECH's expense; (b) MD shall not enter into any settlement
agreement or other voluntary resolution of any such Claim without obtaining
CLONTECH's prior written consent thereto; and (c) CLONTECH shall not enter into
any settlement with such Third Party which would incur any license fees to such
Third Party for the making, using, selling, offer for sale or importation of the
Microarrays unless approved by the Joint Steering Committee pursuant to Section
2.7(iv). If MD has complied fully with the procedures set forth in this Section
2.7(ii)(a)-(b), CLONTECH will indemnify and hold MD harmless from and against
any loss, cost, damage, or other expenses as a result of such Claim.
(c) In the event the Parties shall disagree as to whether the Claim
arises from or relates to MD or CLONTECH IP, then the issue shall be decided by
a mutually acceptable independent patent counsel, and the costs incurred in this
regard shall be borne by the losing Party.
(d) If a final injunction is obtained against the making, using or
sale of the Microarrays as a result of a Claim by a Third Party or the Joint
Steering Committee reasonably believes that the Microarrays are likely to become
the subject of a successful claim of infringement, the Joint Steering Committee
shall have the right to direct that: (a) the Microarrays, part thereof, or
method of manufacture or use thereof be modified in such fashion as to avoid any
Third Party Intellectual Property Rights; and/or (b) have a Party or both
Parties enter into a Third Party License to obtain rights under such
Intellectual Property Rights held by such Third Party, in which event any
royalties and/or other payments necessary to obtain or
5.
<PAGE>
maintain such Third Party License, including, without limitation, attorneys'
fees and costs in negotiating such Third Party License, shall be included as
Royalty Costs in the Net Revenue calculations provided for in Section 4.5
hereof. In the event that the Joint Steering Committee believes that neither
(a) nor (b) above is a commercially feasible solution, then the Joint Steering
Committee shall notify each Party to cease the making, using, selling, offer for
sale and importation of the Microarrays, in which event this Agreement shall
terminate effective upon the date such notice is delivered.
ARTICLE III
DEVELOPMENT
3.1 OBLIGATIONS OF CLONTECH. CLONTECH hereby agrees to diligently
perform the duties relating to Project as set forth in the Development Plan,
including but not limited to contributing to the Project: (i) its [ * ] of
[ * ] used on CLONTECH's [ * ] as of the Effective Date; (ii) such other [ * ]
that are identified and developed by CLONTECH during the Term of this
Agreement that are useful for the development and manufacture of the
Microarrays; and (iii) other expertise and technology useful for the Project
including but not limited to [ * ] technology. CLONTECH shall commit such
equipment, facilities and scientific and other personnel as required to
perform its duties as set forth in the Development Plan.
3.2 OBLIGATIONS OF MD. MD hereby agrees to diligently perform the
duties relating to Project as set forth in the Development Plan, including
but not limited to contributing to the Project: (i) access to its Array
Spotters and Array Scanners (both [ * ]) at MD's Sunnyvale facilities; and
(ii) and such other technology and expertise useful for the Project,
including but not limited to that relating to [ * ] and [ * ]. MD shall
commit such equipment, facilities and scientific and other personnel as
required to perform its duties as set forth in the Development Plan. In
addition, commencing from the Effective Date and during the Term, at
CLONTECH's request: (a) MD shall [ * ] to CLONTECH [ * ] Array Scanners for
CLONTECH's internal uses at the then prevailing [ * ], or on terms and
conditions as agreed upon by the Parties; and (b) [ * ] to CLONTECH, [ * ],
such number of Array Spotters as shall be reasonably required by CLONTECH for
manufacture of the Microarrays pursuant to this Agreement, provided that: (A)
such Array Spotters may only be used by CLONTECH for the manufacture of the
Microarrays and may not be used by or transferred to Third Parties; (B) the
standard cost of goods of such Array Spotter may be depreciated over [ * ]
months and may be included in MD's [ * ] as defined in Section 4.5; (C)
CLONTECH agrees to abide by any terms and conditions as reasonably set by MD
with regard to the maintenance and use of the Array Spotters; and (D) upon
the expiration or termination of this Agreement for any reason, CLONTECH
shall immediately cease to use and return such Array Spotters to MD at
CLONTECH's expense.
3.3 COOPERATION. Each Party agrees that it will fully cooperate and
assist the other Party with respect to the Project. Each Party shall, at the
request of the other Party, promptly provide such results and data in its
possession relating to the Project or such information
6.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
regarding its activities and progress on the Project as shall be requested by
the other Party from time to time, provided that such information shall be kept
confidential under Article VII.
3.4 OTHER AREAS OF COLLABORATION. Each Party agrees to consider in good
faith such additional areas of collaboration as may be proposed by the other
Party, including but not limited to those areas set forth in Exhibit C hereto.
3.5 PUBLICATION OF DATA. Each Party may request the Joint Steering
Committee (as described in Article V hereto) to approve the publication of any
developments and data resulting from the Project. Unless authorized by the
Joint Development, the Parties agree to keep all data, results and information
relating to or resulting from the Project confidential in accordance with
Section 7.2.
ARTICLE IV
MANUFACTURE, MARKETING AND DISTRIBUTION
4.1 MANUFACTURE. The Parties shall each have certain responsibilities
relating to the manufacture of the Microarrays for sale and distribution
hereunder. CLONTECH shall be responsible for [ * ] of [ * ] of the
Microarrays for the Parties' use in the manufacture of the Microarrays, and
in order to fulfill such responsibilities; CLONTECH agrees to maintain in
effect and good standing during the Term that certain Manufacturing Agreement
dated [ * ] by and between [ * ] and CLONTECH. All other duties relating to
the manufacture of the Microarrays shall be equitably allocated between the
Parties by the Joint Steering Committee in accordance with the respective
expertise or interest of each Party and the activities that are permitted to
be undertaken by each Party in accordance with Third Party Licenses in
effect; provided, however, that MD shall use its commercially reasonable
efforts to extend the rights under the [ * ] Agreement to permit the
manufacture of the Microarrays by CLONTECH pursuant to this Agreement. It is
understood that both Parties will establish core competencies in the
development, optimization and manufacture of Microarrays, and therefore,
during the Term, the Parties will cooperate to equitably allocate
manufacturing responsibilities and further agree to exchange information
regarding manufacture of the Microarrays, including but not limited to
information relating to methods, processes, protocols and procedures
concerning the development, optimization, quality control, production and
manufacture of the Microarrays.
4.2 COMMERCIALIZATION. The Parties agree that commercialization of the
Microarrays shall be in two phases as set forth below:
(a) TEST PERIOD. To facilitate [ * ], product adjustments and
market evaluation, the Parties agree that for the period commencing from the
date Microarrays are first commercially available until [ * ] thereafter
("Test Period"), the Microarrays shall be offered [ * ] to the limited group
of Customers consisting of those [ * ]. During the Test Period, MD and
CLONTECH shall jointly promote, market and educate such Customers in
accordance with a scientifically-
7.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
oriented launch plan ("Launch Plan") devised by the Joint Steering Committee.
All sales made during the Test Period shall be recorded by [ * ], provided
that the revenues from such sales shall [ * ] in accordance with Section 4.5.
On a product-by-product basis, the Joint Steering Committee shall have the
discretion to shorten the Test Period from [ * ] as it deems desirable.
(b) COMMERCIAL SALE PERIOD. After the Test Period, MD and CLONTECH
may each promote, market, sell and distribute the Microarrays to Customers in
the Territory. Each Party shall solely be responsible for its own marketing,
sales and distribution programs relating to the Microarrays and may promote,
sell and distribute Microarrays through any channels selected by such Party,
provided that each Party shall follow any guidelines or rules set by the Joint
Steering Committee. The Parties may, on a case-by-case basis, agree to
co-market and/or co-distribute Microarrays on terms and conditions to be agreed
upon by the Parties in writing.
4.3 PRODUCT MARKINGS AND PACKAGING. The Joint Steering Committee shall
determine all packaging, labels, product literature and advertisements
("Product Materials") for the Microarrays. The Microarrays shall be sold
under a trademark to be agreed to by the Parties ("Combination Mark") prior
to first shipment of a Microarray to a Customer, and [ * ] shall [ * ] own
all right, title and interest to such Combination Mark and all goodwill
associated therewith. All decisions with respect to registration, use and
enforcement of such Combination Mark shall be [ * ] made by [ * ], and all
costs associated therewith shall be [ * ] by [ * ]. Upon expiration or
termination of this Agreement, the Parties shall negotiate and agree upon the
Parties' respective rights to such Combination Mark. In addition, the
Product Materials shall be marked with: (i) all patent and other Intellectual
Property Rights notices of MD and/or CLONTECH as applicable to the
Microarrays; (ii) such notices as required for compliance with Third Party
Licenses in the form as approved by the Joint Steering Committee; and (iii)
such MD and CLONTECH trademarks as listed on Exhibit D hereto as determined
by the Joint Steering Committee, provided that the Product Materials will
display, at a minimum, at least one trademark and/or logo of each Party.
Other than expressly permitted herein, no right or license is granted by
either Party to the other to use such Party's name, trademarks or tradenames
without the express written approval the other Party.
4.4 CUSTOMER SUPPORT. Each Party shall be primarily responsible for
providing customer service and support to its own Customers, provided that such
service and support shall conform to the requirements of the plan therefor
("Service and Support Plan") established by the Joint Steering Committee prior
to the first shipment of any Microarray to any Customer by either Party.
Further, each Party shall provide reasonable assistance and support to the other
Party and such other Party's Customers upon request by the other Party or its
Customers, in particular pertaining to the subject of such Party's area of
expertise. It is understood and agreed that each Party will make its reasonable
commercial efforts to provide the equivalent level and quality of customer
service and support to the other Party's Customers as such Party provides to its
own Customers.
4.5 REVENUE SHARING. Each Party shall record all revenue received from
the sale, lease or other transfer of Microarrays on its own income statements.
The Parties agree to
8.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
[ * ] all Net Revenue (whether as net gains or losses) as calculated in
accordance with this Section 4.5 and Generally Accepted Accounting Principles
("GAAP").
As used herein:
"NET REVENUE" means the total gross amounts received by the Parties and
their Affiliates from the sale, lease or other transfer of Microarrays to
Customers minus:
(a) Direct Manufacturing Costs
(b) Manufacturing Overhead Costs;
(c) Royalty Costs; and
(d) returns, packing costs, freight out, taxes or excise duties
imposed, and wholesaler and cash discounts customary in the trade.
"DIRECT MANUFACTURING COSTS" means the direct cost of procuring raw
materials that are identifiable as an integral part of the finished product and
the compensation paid to employees whose time and effort are directly traceable
to the finished product.
"MANUFACTURING OVERHEAD COSTS" means the costs for manufacturing the
finished product which are not included in Direct Manufacturing Costs, such as
maintenance, utilities, rent, capitalized research and development costs,
insurance, depreciation, and property taxes.
"ROYALTY COSTS" means the amount of royalties paid to Third Parties for the
making, using and selling of Microarrays hereunder as required by Third Party
Licenses, which royalties are assessed based on the number of units of
Microarrays sold and which do not include any upfront, lump sum or one time
license fees paid which are independent of the number of units of Microarrays
sold.
The methods for calculating and allocating the above sales and expenses
will be agreed in writing by the accounting departments of each Party for each
quarterly period.
4.6 SALES AND MARKETING COSTS. Unless otherwise agreed to by the Parties,
each Party shall bear its own sales and marketing costs.
4.7 ADJUSTMENT OF [ * ] SHARING. Commencing after the Test Period, a
Party may request that the terms and conditions with respect to [ * ] of the
[ * ] from the sale of Microarrays as set forth in this Agreement be adjusted
if such Party believes in good faith that such terms and conditions create
material [ * ] between the Parties; provided, however, the requesting Party
shall provide the other Party with such request in writing setting forth: (i)
the areas of positive contribution of each Party; (ii) the areas of
misaligned priorities of each Party; and (iii) the [ * ] of the present terms
and condition with supporting documents thereof; and (iv) a proposal of how
to cure the alleged inequities. Upon receipt of the written request by the
non-requesting Party, the Parties shall negotiate in good faith for a period
of no more than ninety (90) days to agree upon a new [ * ] plan; provided,
however,
9.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
in no event shall any new [ * ] plan result in a difference between the [ * ]
received by each party in excess of the ratio of [ * ].
4.8 INVOICE AND SALES REPORT. Each Party shall keep separate and complete
books of account containing records to substantiate the allocation of Net
Revenue between the Parties in accordance with Section 4.5. Each Party shall
within forty-five (45) days after the last day of each calendar quarter provide
the other Party with a written report ("Report") setting forth:
(a) the gross amounts received by such Party for the quarter for the
sale, lease or other transfer of Microarrays; and
(b) a calculation of the Net Revenues and the amount allocable
thereof to other Party in accordance with Section 4.5.
4.9 PAYMENT AND AUDIT. Each Party shall pay to the other Party its
allocated portion of the Net Revenues for each quarter on the same day as the
Report for such quarter is delivered. Each Party ("Auditing Party") shall have
the right, upon reasonable notice to the other Party ("Audited Party"), to have
an independent certified public accountant, selected by such Auditing Party
reasonably acceptable to the Audited Party, audit the Audited Party's records
during normal business hours to verify all records pertaining to the calculation
of the Net Revenues and the amount thereof allocable to the Auditing Party
hereunder; provided, however, that such audit shall not take place more
frequently than once a year and shall not cover records for more than the
preceding four (4) years. The Audited Party shall promptly pay to the Auditing
Party the amount of any underpayment determined in such audit. Any such audit
shall be at the expense of the Auditing Party unless such audit indicates
greater than ten percent (10%) error in payment based on the records and/or
calculations of the Audited Party, in which case such audit shall be at the
expense of the Audited Party and such payment shall bear interest from the date
due at [ * ] plus the prime rate established by the U.S. Federal
Reserve Bank. Each Party shall preserve and maintain all such records and
accounts required for audit for a period of [ * ] years after the calendar
quarter for which the record applies. All information resulting from such
audits conducted pursuant to this Section 4.9 shall be kept confidential
pursuant to Section 7.2.
4.10 MODIFICATIONS TO REPORTING AND PAYMENT SCHEDULE. The Joint Steering
Committee may, from time to time, modify the schedule for the reporting and
payment obligations pursuant to Sections 4.8 and 4.9, including, without
limitation, to require the Report and the payment to be made on a semi-annual
basis.
ARTICLE V
MANAGEMENT
5.1 JOINT STEERING COMMITTEE.
(a) FORMATION AND COMPOSITION. The collaboration and relationship
between the Parties pursuant to this Agreement shall be managed by a Joint
Steering Committee (the "Joint Steering Committee") on which both CLONTECH and
MD shall be equally represented by their respective appointees. The Joint
Steering Committee shall be responsible for providing overall direction,
monitoring progress, managing information exchange between
10.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
the Parties, deciding key strategies and solving problems with respect to
development (including but not limited to product design, development timelines
and allocation of tasks), marketing and sales (including but not limited to
product launch, marketing strategies, pricing, and positioning and promotion
strategies) of the Microarrays. To this end, the Joint Steering Committee may
establish, from time to time, guidelines which shall be followed by the Parties
with respect to the development, manufacture, marketing, and sales of the
Microarrays. The Joint Steering Committee will consist of six (6) members,
three (3) from CLONTECH and three (3) from MD or such greater or fewer number as
the parties may mutually agree upon from time to time, provided that each Party
has equal representation. Each party will inform the other party in writing of
its first appointed members to the Joint Steering Committee no later than thirty
(30) days from the Effective Date. Either Party may remove any of its
representatives and appoint new members to fill any vacancies among its
appointees.
(b) MEETINGS. The Joint Steering Committee shall meet at such
frequency as determined by the Joint Steering Committee, but no less frequently
than once per quarter. The venue shall alternate between the Parties' principle
places of business, unless otherwise agreed to by the Joint Steering Committee.
(c) REPORTS. For the duration of the Project, each Party shall
furnish to the Joint Steering Committee, on a quarterly basis, in confidence
under Article VII, a written report on its progress on the Project, along with
summaries of technical data and results obtained from the Project.
(d) GOVERNANCE. All decisions of the Joint Steering Committee shall
require a majority vote of its members. The Joint Steering Committee shall
strive to reach decisions on a consensus basis. In the event the Joint Steering
Committee is unable to reach a decision on any matter within thirty (30) days
after it is formally presented to the Joint Steering Committee for resolution,
either party may submit such conflict for resolution to the Chief Executive
Officers of CLONTECH and MD. In the event the Chief Executive Officers of
CLONTECH and MD are unable to resolve such conflict within thirty (30) days
after having such conflict submitted to them for resolution, such conflict shall
be submitted to arbitration in San Jose, California administered by the American
Arbitration Association ("AAA") in accordance with the then-current Commercial
Arbitration Rules of the AAA by one (1) impartial arbitrator appointed in
accordance with said rules ("Arbitrator"). The Arbitrator shall apply
California law, without reference to rules of conflict of laws or rules of
statutory arbitration, to the resolution of such conflict. The judgment of the
Arbitrator shall be final and binding on the Parties.
(e) PROJECT MANAGEMENT. It is anticipated that, from time to time,
the Joint Steering Committee will subdivide the Project into smaller
sub-projects ("Sub-projects") in order to facilitate management of the overall
Project. For each such Sub-project, each Party shall appoint one representative
as a co-chair of the Sub-project, who together with the other Party's co-chair,
shall be responsible for managing the Sub-project ("Co-chairs"). The Co-chairs
may be, but are not required to be, members of the Joint Steering Committee.
Each Party will inform the other party in writing of its Co-chair promptly upon
appointment thereof, and each Party shall have the right to replace its Co-chair
from time to time, provided that it promptly notifies the other Party thereof in
writing. The Co-chairs shall report to the Joint Steering Committee for the
duration of the Sub-project.
11.
<PAGE>
ARTICLE VI
WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES OF MD. MD hereby represents and
warrants to CLONTECH as follows:
(a) MD has the corporate power and authority to execute and deliver
this Agreement and to perform its obligations thereunder, and the execution,
delivery and performance of this Agreement have been validly authorized by MD.
(b) MD has the right to grant to CLONTECH the rights and licenses
under the MD IP herein granted.
(c) MD has the right to enter into this Agreement and perform its
obligations hereunder without violating the terms of any agreements with Third
Parties entered prior to the Effective Date.
(d) To the best of MD's knowledge, the MD IP does not infringe any
valid claims of any Third Party patents.
(e) There is no action or proceeding pending or insofar as MD knows,
threatened against MD before any court, administrative agency or other tribunal
which might have a material adverse effect on MD's performance of this
Agreement.
6.2 REPRESENTATIONS AND WARRANTIES OF CLONTECH. CLONTECH hereby
represents and warrants to MD as follows:
(a) CLONTECH has the corporate power and authority to execute and
deliver this Agreement and to perform its obligations thereunder, and the
execution, delivery and performance of the Agreement have been validly
authorized by CLONTECH.
(b) CLONTECH has the right to grant to MD the rights and licenses
under the CLONTECH IP herein granted.
(c) CLONTECH has the right to enter into this Agreement and perform
its obligations hereunder without violating the terms of any agreements with
Third Parties entered prior to the Effective Date.
(d) To the best of CLONTECH's knowledge, the CLONTECH IP does not
infringe any valid claims of any Third Party patents.
(e) There is no action or proceeding pending or insofar as CLONTECH
knows, threatened against CLONTECH before any court, administrative agency or
other tribunal which might have a material adverse effect on CLONTECH's
performance of this Agreement.
6.3 DISCLAIMER OF WARRANTIES. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
12.
<PAGE>
AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY TECHNOLOGY,
GOODS, SERVICES, RIGHTS, OR OTHER SUBJECT MATTER OF THIS AGREEMENT, AND EACH
PARTY HEREBY DISCLAIMS ALL IMPLIED WARRANTIES, CONDITIONS OR REPRESENTATIONS OF
ANY KIND, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF PERFORMANCE,
MERCHANTABILITY, SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.
6.4 LIMITATION OF LIABILITY. EXCEPT FOR ANY LOSS, LIABILITY, DAMAGE OR
OBLIGATION ARISING OUT OF OR RELATING TO THE DISCLOSURE OF CONFIDENTIAL
INFORMATION IN BREACH OF ARTICLE VII, THE INDEMNITY OBLIGATIONS SET FORTH IN
SECTION 2.7 OR AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, IN NO EVENT
SHALL EITHER PARTY HAVE ANY LIABILITY TO THE OTHER PARTY OR ANY OTHER THIRD
PARTY FOR ANY LOST OPPORTUNITY OR PROFITS, COSTS OF PROCUREMENT OF SUBSTITUTE
GOODS OR SERVICES, OR FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR
SPECIAL DAMAGES ARISING OUT OF THIS AGREEMENT, UNDER ANY CAUSE OF ACTION OR
THEORY OF LIABILITY (INCLUDING NEGLIGENCE), AND WHETHER OR NOT SUCH PARTY TO
THIS AGREEMENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THESE
LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY
LIMITED REMEDY.
ARTICLE VII
CONFIDENTIALITY AND PUBLICITY
7.1 PUBLIC RELATIONS AND ANNOUNCEMENTS. The Parties shall agree upon and
issue a press release upon the signing of this Agreement. Thereafter, no Party
shall issue any public announcements concerning the relationship created by this
Agreement without the prior written authorization of the other Party. No
representations shall be made by either Party concerning the other without the
prior consent of the other Party.
7.2 CONFIDENTIALITY. The Parties acknowledge that by reason of their
relationship to each other hereunder, each will have access to certain
information and materials concerning the other's business, plans, customers,
technology, and/or products that are confidential and of substantial value to
that Party, which value would be impaired if such information were disclosed to
Third Parties ("Confidential Information"). For the purposes of this Agreement,
information shall be deemed Confidential Information if such information is
identified as such in writing or with legends or other markings or if
communicated orally, designated as confidential at the time communicated or
within thirty (30) days thereafter. Upon request by either Party, the other
Party will advise whether or not it considers any particular information or
materials to be Confidential Information. Each Party agrees that it will not
use in any way other than expressly authorized or contemplated under this
Agreement, nor disclose to any Third Party, any such Confidential Information
revealed to it by the other Party and will take every reasonable precaution to
protect the confidentiality of such information and with no less restrictive
precautions than it takes to protect its own confidential information. If
Confidential Information is required to be disclosed in response to a valid
order by a court, regulatory authority or other
13.
<PAGE>
government body of competent jurisdiction, or if otherwise required to be
disclosed by law, or if necessary to establish the rights of either Party under
this Agreement, the receiving Party shall use commercially reasonable efforts to
provide the disclosing Party with advance notice of such required disclosure to
give the disclosing Party sufficient time to seek a protective order or other
protective measures, if any are available, for such Confidential Information.
Confidential Information does not include information, technical data or
know-how which: (i) is rightfully in the possession of the receiving Party at
the time of disclosure as shown by the receiving Party's files and records
immediately prior to the time of disclosure; (ii) prior or after the time of
disclosure becomes part of the public knowledge or literature, not as a result
of any inaction or action of the receiving Party; (iii) is independently
developed by a Party without the use of any Confidential Information of the
other Party; (iv) is obtained from any Third Party who is authorized to disclose
such data and information without obligation of confidentiality to the
disclosing Party; or (v) is approved for release by the disclosing Party.
7.3 REMEDY. If either Party breaches any of its obligations with respect
to this Article VII, or if such a breach is likely to occur, the other Party
shall be entitled to seek equitable relief, including specific performance or an
injunction, in addition to any other rights or remedies, including money
damages, provided by law.
7.4 AGREEMENT TERMS. Subject to Section 7.1 and the exclusions set forth
in Section 7.2 (i) to (v), the Parties shall treat the terms and conditions of
this Agreement as Confidential Information; provided, however, after written
notification to the other Party, each Party may disclose the existence of this
Agreement and the material terms and conditions hereof under circumstances that
reasonably ensure the confidentiality thereof to: (i) any government or
regulatory authorities, including without limitation the United States Security
and Exchange Commission pursuant to applicable law (excluding, to the extent
legally permitted, disclosure of financial terms in any publicly available
versions of information so-disclosed), (ii) its legal representatives and
advisors (and prospective investors upon approval by the other Party, which
approval shall not be unreasonably withheld), and (iii) to such disclosing
Party's Third Party licensors (excluding financial terms) to the extent required
for compliance with obligations under the Third Party Licenses.
ARTICLE VIII
TERM AND TERMINATION
8.1 TERM. Unless earlier terminated in accordance with this Agreement,
the term of this Agreement shall commence on the Effective Date and continue
in full force and effect for [ * ] years thereafter ("Initial Term").
Thereafter, this Agreement shall be renewed automatically for additional [ * ]
year periods (each a "Renewal Term") unless a Party shall notify the other
Party in writing of its intent to not renew the Agreement no later than
thirty (30) days before the commencement of any Renewal Term. The Initial
Term and any Renewal Terms shall collectively be referred to as the "Term".
8.2 TERMINATION FOR BREACH. The failure by either Party to comply with
any of the material obligations contained in this Agreement shall entitle the
other Party to give the Party in default notice specifying the nature of such
default and stating its intent to terminate this
14.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
Agreement if such default is not cured. If such default is not cured by the
defaulting Party within forty-five (45) days after the receipt of such notice,
the non-defaulting Party may terminate the Agreement upon written notice
thereof, effective upon receipt of such notice by the defaulting Party.
8.3 TERMINATION FOR INSOLVENCY. Either Party may terminate this Agreement
immediately upon delivery of written notice to the other Party (i) upon the
institution by or against the other Party of insolvency, receivership or
bankruptcy proceedings or any other proceedings for the settlement of the other
Party's debts, provided, with respect to involuntary proceedings, that such
proceedings are not dismissed within one hundred and twenty (120) days, (ii)
upon the other Party's making an assignment for the benefit of creditors, or
(iii) upon the other Party's dissolution or ceasing to do business.
8.4 EFFECT OF TERMINATION. Expiration or termination of this Agreement
pursuant to the terms and conditions set forth in this Agreement shall not
relieve the Parties of any right or obligation, including but not limited to any
payment obligations, accruing prior to or upon such expiration or termination.
Upon expiration or termination of this Agreement for any reason, each Party
shall immediately return to the other Party or destroy any Confidential
Information disclosed by the other Party. Except for the provisions of Sections
2.3, 2.7, 3.5, 4.3, 4.9, 6.3, 6.4 and 8.4 and Articles I, VII and IX which shall
survive such expiration or termination, all other rights and obligations of the
Parties shall cease upon expiration or termination of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 WITHHOLDING TAXES. Each Party shall be entitled to receive from the
other Party, in cash, the exact amount specified in Section 4.5 of this
Agreement free of any withholding or offsets, except that a Party has the right
to deduct from the payments due the other Party any taxes required to be
withheld on such income by applicable tax laws in the Territory; provided that
such Party shall provide the other Party with appropriate tax receipts for the
deducted amount which the other Party can present to its tax authority and
sufficient for the other Party to receive the corresponding credit to which it
is entitled.
9.2 CURRENCY OF PAYMENTS. All amounts payable to a Party pursuant to this
Agreement shall be made in U.S. Dollars and by wire transfer to the U.S. bank
account(s) specified by such Party from time to time. All sales shall be
computed in the currency in which the sale was made and then converted to U.S.
Dollars. The currency conversion rate shall be the average of the conversion
rates in effect on the last twenty (20) business days of the quarterly period
for which such payment is due, provided that the Parties may agree upon another
method of calculating the conversion rate. The conversion rates to be used in
this Agreement shall be the rates reported in the WALL STREET JOURNAL (Western
Edition). Failure by a Party to timely render payments when due shall be deemed
a material breach of this Agreement.
9.3 COMPLIANCE WITH LAWS. In performing this Agreement, each Party shall
comply with all applicable laws and government regulations at all times,
including but not limited to any
15.
<PAGE>
applicable laws and regulations of the U.S. regarding the export or re-export or
release of technology and technical data.
9.4 GOVERNING LAW AND JURISDICTION. All disputes and conflicts arising
from or relating to the subject matter of this Agreement shall be resolved
pursuant to the procedures set forth in this Section 9.4. The Parties shall
endeavor to resolve in good faith any disputes or conflicts arising from or
relating to the subject matter of this Agreement, failing which either Party
shall submit such conflict for resolution to the Chief Executive Officers of
CLONTECH and MD. In the event the Chief Executive Officers of CLONTECH and MD
are unable to resolve such conflict within thirty (30) days after having such
conflict submitted to them for resolution, either Party shall be free to seek
any remedy available under law or equity. This Agreement shall be governed,
controlled, interpreted and deemed by and under the laws of the state of
California and the United States without regard to that body of law known as
conflicts of law; provided that issues of law relating to patents shall be
governed by the laws of the jurisdiction that such patent is in effect. The
exclusive jurisdiction and venue for all actions shall be in the U.S. District
Court for the N. District of California or the State Courts of Santa Clara
County.
9.5 SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.6 NOTICES. Any notice required or permitted by this Agreement shall be
in writing and in English and shall be sent by prepaid registered or certified
mail, return receipt requested, internationally recognized courier or personal
delivery, addressed to the other Party at the address below or at such other
address for which such Party gives notice hereunder.
Molecular Dynamics, Inc.
Attn: Jay Flatley, President & CEO
928 East Arques Avenue
Sunnyvale, CA 94086
Clontech Laboratories, Inc.
Attn: Anne Scholz, Director, Marketing
Copy to: Sarah J. Brashears, Esq.,
1020 E. Meadow Circle
Palo Alto, CA 94303
Such notice shall be deemed to have been given when delivered or, if delivery is
not accomplished by some fault of the addressee, when tendered.
9.7 FORCE MAJEURE. Neither Party shall be considered in default of
performance of its obligations under this Agreement, except any obligation
hereunder to make payments when due, to the extent that performance of such
obligations is delayed by force majeure or contingencies or causes beyond the
reasonable control of such Party or its suppliers, including but not limited to
strike, fire, flood, earthquake, windstorm, governmental acts or orders or
restrictions, failure of suppliers, or any other reason to the extent that the
failure to perform is
16.
<PAGE>
beyond the reasonable control and not caused by the negligence or willful
misconduct of the nonperforming Party.
9.8 NONASSIGNABILITY AND BINDING EFFECT. Neither Party shall assign,
charge or encumber any portion of this Agreement without the prior written
approval of the other party, which approval shall not be unreasonably
withheld; provided that, where the assignment is proposed to be made as part
of the transfer of all or substantially all of the assets of the assigning
Party, whether by merger, sale or otherwise, the Parties agree that no
consent by CLONTECH shall be required for an assignment of this Agreement by
MD to [ * ]. Subject to the foregoing sentence, this Agreement shall be
binding upon and inure to, the benefit of the heirs, executors,
administrators, successors and permitted assigns of the Parties.
9.9 PARTIAL INVALIDITY. If any provision of this Agreement is held to be
invalid by a court of competent jurisdiction, then the remaining provisions
shall remain, nevertheless, in full force and effect. The Parties agree to
renegotiate in good faith any term held invalid and to be bound by the mutually
agreed substitute provision in order to give the most approximate effect
intended by the Parties.
9.10 NO WAIVER. No waiver of any term or condition of this Agreement shall
be valid or binding on either Party unless agreed in writing by the Party to be
charged. The failure of either Party to enforce at any time any of the
provisions of this Agreement, or the failure to require at any time performance
by the other Party of any of the provisions of this Agreement, shall in no way
be construed to be a present or future waiver of such provisions, nor in any way
affect the validity of either Party to enforce each and every such provision
thereafter.
9.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
9.12 ENTIRE AGREEMENT. This Agreement, including the Exhibits attached
hereto, constitutes the entire agreement of the Parties with respect to the
subject matter hereof, and supersedes all prior or contemporaneous
understandings or agreements, whether written or oral, between MD and CLONTECH
with respect to such subject matter. No amendment or modification hereof shall
be valid or binding upon the Parties unless made in writing and signed by the
duly authorized representatives of both Parties.
9.13 INDEPENDENT CONTRACTORS. The Parties to this Agreement are
independent contractors. There is no relationship of agency, partnership, joint
venture, employment or franchise between the Parties, and neither Party shall
have any authority to bind the other Party or incur any obligation on the other
Party's behalf.
[Signature Page To Follow]
17.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
The undersigned have executed this Agreement on behalf of CLONTECH and MD,
as applicable, effective as of the Effective Date.
MOLECULAR DYNAMICS, INC. CLONTECH LABORATORIES, INC.
("MD") ("CLONTECH")
By: /s/ Jay Flatley By: /s/ Kenneth Fong
---------------------------- --------------------------------
Name: Jay Flatley Name: Kenneth Fong
-------------------------- ------------------------------
Title: President/CEO Title: CEO
------------------------- -----------------------------
18.
<PAGE>
EXHIBIT A
LISTING OF ARRAY SPOTTERS AND ARRAY SCANNERS
[ * ]
1.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
EXHIBIT B
DEVELOPMENT PLAN
[ATTACHED]
[ * ]
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
EXHIBIT C
OTHER AREAS OF COLLABORATION
The parties agree to participate in negotiations not covered by this
Agreement, including terms and strategies for a CLONTECH [ * ] for the [ * ].
As used herein, the terms "[ * ]" includes the technology listed in
paragraphs 1 through 4 below, and possibly other technologies deemed
appropriate and agreed to by the parties. The CLONTECH technologies to be
included in the CLONTECH [ * ] shall be negotiated separately, and are
outside the scope of this Agreement.
[ * ]
1.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
EXHIBIT D
TRADEMARKS
MD Registered Trademarks: MegaBACE-Registered Trademark-, BioLumin,
FluorImager, ImageQuant, ImageSpace, Molecular Dynamics, the Molecular Dynamics
logo, Personal Densitometer, PhosphorImager, Storm, 3DbyMD, the 3DbyMD logo
Other MD Trademarks: CLSM, FluorSep, Fragment Analysis, MultiProbe, Sarastro,
Xperiment, MTAP, Avalanche, Blizzard, Volcano, ToxArray, FlexArray
CLONTECH Registered Trademarks: ADVANTAGE
Other CLONTECH Trademarks: CLONTECH, TALON, Taqstart, ApoAlert, MTN, SMART,
LIVING COLORS, TET-ON, TET-OFF, 5'-STRETCH, Delta, Atlas, MICRONORTHERN CHIP,
Atlas RNA Chip, PREMIUM RNA & Design, PCR Select, Atlas Vision, CLONCapture,
MARATHON
1.
<PAGE>
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPERATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (the "Agreement") is made and entered into
effective as of the date set forth below by and between the German company:
MACHEREY-NAGEL GMBH & CO. KG (hereinafter called "MN")
Valencienner Strasse 11
D-52355 Duren
Germany
Tel: 2421 969-0
Fax: 2421 969-199
and the distributor identified below:
CLONTECH LABORATORIES, INC. (hereinafter called "CLONTECH")
1020 East Meadow Circle
Palo Alto, California 94303-4230
USA
Tel: (650) 424-8222
Fax: (650) 424-8419
RECITALS
MN is the manufacturer, distributor and/or seller of certain products and
systems used for bioanalysis purposes and related accessories.
CLONTECH desires to act as the distributor of certain of MN's products on
the terms and conditions set forth herein.
In consideration of the mutual convenants and agreements set forth below,
the parties agree as follows:
1. DEFINITIONS
1.1 The term "the Products" means the Products which CLONTECH is
authorized to distribute and sell pursuant to this Agreement, which are
manufactured, distributed and made available for sale by MN, are set forth on
Schedule A hereto, which is a part of this Agreement.
1.2 The term "the Territory" means the area of which CLONTECH is
appointed as distributor, for the Products identified above, is set forth on
Schedule B, which is a part of this Agreement.
<PAGE>
2. APPOINTMENT OF CLONTECH
2.1 MN hereby appoints CLONTECH and CLONTECH hereby accepts such
appointment on the terms and conditions set forth herein, as MN's distributor
for the Products in the Territory, as listed in Schedules A and B, which is
part of this Agreement. During the course of this Agreement, new products
and improved existing products which are [*] of initial products listings
will be added to Schedule A by amendment. Exceptions of this agreement are
[*] from MN to [*] of instruments and [*] companies. MN reserves the right
to offer an [*] to these companies.
2.2 Common Product Development Projects. Every year (October 31st at
the latest) a list of actual common development projects are agreed on by both
parties. Only a written project with defined goals, job-definit9ions and time
courses will be set forth in this list. At all time both parties will have the
right to complete knowledge of this project. Both parties agree on full secrecy
on these projects. If possible products arise from such projects and will be
distributed by a third party, both parties of this agreement will benefit from
these sales. The effective provision has to be determined individually by
mutual agreement.
3. CLONTECH'S PERFORMANCE OBLIGATIONS
3.1 (a) CLONTECH shall use [*] efforts during the term of this
Agreement to establish, promote, service, maintain, and increase the sale of the
Products in the Territory by all usual ethical means, including advertising and
personal solicitation of customers and prospective customers, distribution of
promotional materials, and demonstrations or presentations of the Products to
show the desirability of the Products for customers' needs or concerns.
CLONTECH shall maintain a qualified and trained staff sufficient to support its
sales obligations under this Agreement and is responsible for [*] costs
associated with such sales staff. CLONTECH shall not be permitted to
subcontract its sales, marketing and distribution responsibility without the
prior written consent of MN.
(b) CLONTECH agrees to respond promptly to and investigate all
customer complaints with respect to the Products, to promptly inform MN as to
the nature of such complaints, and to use [*] efforts and to have
adequately trained personnel to resolve such complaints.
3.2 (a) CLONTECH agrees to purchase Products of the following value
from MN:
<TABLE>
<CAPTION>
1999 2000
------------ --------------
<S> <C> <C>
[*]
</TABLE>
In the event that the above goals of purchases will not be achieved,
MN may [*] the [*] right.
CLONTECH shall keep MN informed on a quarterly basis of its marketing
and sales activities.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
2.
<PAGE>
(b) Twice annually, by April 15th and October 15th, CLONTECH
shall provide MN with written projection estimates and goals for sale of the
Products for the subsequent two six-month periods beginning January 1 and July
1. Such goals will be based upon reasonable expectations.
3.3 During the term of this Agreement, CLONTECH shall not
manufacture, distribute, promote, market, sell or resell, certain other
products which [*] of MN as listed in Schedule A, except as agreed upon by
the Parties. All Products subject to this Agreement shall be listed in
Schedule A, which shall be updated as necessary. All products sold by
CLONTECH that are exceptions to this Section 3.3 shall be listed in Schedule
C which shall be updated as necessary.
3.4 CLONTECH shall be required to pay for, obtain and maintain any
import, export, and operating licenses necessary or advisable to distribute,
sell and service the Products in Territory.
3.5 CLONTECH shall keep, and shall procure that its agents, employees
and subcontractors shall keep, confidential all information identified by MN as
confidential and all information relating to pricing, sales and inventory
reports, financial information, customer lists, forecast and business
strategies, proprietary technology information and advice relating to the
Products, prepared by, furnished by or to CLONTECH under this Agreement and
CLONTECH shall not use or disclose any such confidential information or
information relating to the business and operations of MN to any other party,
and shall not use any such confidential information other than for the purposes
of this Agreement. This confidentiality and non-disclosure obligation shall
survive any termination or expiration of the Agreement.
4. MN'S OBLIGATIONS AND ASSISTANCE
4.1 MN agrees to assist CLONTECH in its marketing, promotion, and
advertising activities by furnishing to CLONTECH catalogues, specification
sheets, technical data, photos (including negative or color slides when so
requested) and other materials in reasonable quantities.
4.2 MN agrees that CLONTECH may return goods or Products to MN if the
following obligations are performed:
(a) Every [*] CLONTECH provides MN with an actual inventory
list;
(b) Products, showing a lack of quality can be returned to MN;
(c) CLONTECH is allowed to return products which are in
CLONTECH's inventory more than [*] at the following net purchase prices:
1999: up to [*] per annum
following years: [*]
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
3.
<PAGE>
4.3 MN reserves the right to make any change in the design,
capacity or specification of any of the Products, or to discontinue the
production, marketing and/or sale of any of the Products. MN agrees to use
[*] efforts to inform CLONTECH 60 days prior to such discontinuance or change.
4.4 MN supports CLONTECH's marketing expenses as follows:
MN's exact marketing expenses support to CLONTECH will be agreed
annually and will be limited to a maximum of [*] of CLONTECH's total
marketing expenses for the MN-products (quarterly marketing expenses report
as mentioned in the Letter of Intent).
The costs are defined for 1999:
Purchase volume in [*] = maximal MN-share of marketing
expenses: [*]
Purchase volume in [*] = maximal MN-share of marketing
expenses: [*]
The definition of the next year's contribution from MN to CLONTECH has
to be established at the latest October 31, 1999.
5. PRICES, ORDERS, SHIPMENTS AND PAYMENT
5.1 PRICES
(a) The prices at which NM shall sell the Products to
CLONTECH ("Sales Prices") shall be as set forth in Schedule A. Annually
during the term of this Agreement, MN may, upon [*] written notice to
CLONTECH, implement price changes for the Products in Schedule A, except,
however, in no case shall the transfer price of Products charged by MN to
CLONTECH [*]. Pricing for new or replacement items may be added to Schedule
A as needed. Annual date of price changes by MN is April 1. The price
changes will be effective for CLONTECH July 1.
(b) Any order accepted by MN prior to the effective date of any
price increase shall be invoiced at the price in effect at the time of order
acceptance by MN.
(c) CLONTECH will receive a [*] discount on the lowest
graduated price of the actual MN-price list. Exceptions of this regulation
are products, which are not manufactured by MN, e.g., vacuum manifolds or
other products, or upon written agreement of both Parties.
5.2 ORDERS
(a) MN shall make [*] efforts to ship in a timely fashion the
Products given in each order placed by CLONTECH, provided that, if [*] cause
beyond MN's reasonable control (such as acts of CLONTECH, acts of God, force
majeure as set forth in
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
4.
<PAGE>
Section 18 or delay in transportation, etc.) prevents MN from filling any
accepted order by the specified shipping date, MN shall be allowed to delay
shipment to the extent necessary under the circumstances. Orders may be placed
by fax. Each order submitted shall contain the following information: (i)
identification of each Product by model number, quantity and price; (ii)
shipping instructions and destination; and (iii) the requested delivery date and
such other information as MN may reasonably require.
(b) Purchase orders will be effective when accepted by an
authorized representative of MN. Failure of MN to notify CLONTECH within [*]
of receipt of a purchase order that the order has been rejected or not been
accepted shall be deemed acceptance by MN.
(c) MN reserves the right to refuse to accept any order for
[*] reason, and/or to delay shipment of any order if CLONTECH is delinquent
or fails to meet its [*] obligations under this Agreement. Refusal to accept
an order or delay in shipment shall not be construed as a termination or
breach by MN of this Agreement.
5.3 SHIPMENT
(a) All shipments of Products purchase by CLONTECH will be
made to CLONTECH [*] facility, with risk of loss or damage to pass to
CLONTECH upon delivery to [ * ] facility.
(b) [*] agrees to pay all costs and expenses including taxes,
all freight charges as well as applicable import duties and value added taxes
(V.A.T.) associated with a shipment.
5.4 PAYMENT
(a) Unless otherwise agreed to between the Parties, the
payment for any order placed by CLONTECH shall be made in US dollars by bank
transfer or cashiers check for the invoice amount in favor of MN's account at
the bank designated by MN. Payment in full is required and shall be made
within sixty (60) days of invoice date. Late payments may be subject to a
surcharge of [*] of invoice value per month.
(b) In the event CLONTECH is late in making any payments due to
MN under this Agreement, MN reserves the right to require payment [*] prior
to shipment of an order.
(c) If CLONTECH does not comply with these payment terms, MN
reserves the right to declare CLONTECH in default under this Agreement to refuse
shipment as provided in Section 5.2 above and/or to terminate this Agreement as
provided in Section 9(b) below.
6. COMPLIANCE WITH REGULATIONS
6.1 CLONTECH is responsible for insuring compliance with all
government requirements including compliance with all import, export or other
regulations for the import or
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
5.
<PAGE>
all shipments of Products into the Territory and for the performance of all its
obligations under this Agreement. CLONTECH agrees at all times to comply with
all laws or regulations of the Federal Republic of Germany, as they may exist
from time to time, regarding export licenses or the control or regulation or
exportation of Products sold or supplied to CLONTECH.
6.2 CLONTECH agrees to comply with all laws and regulations
applicable in the Territory. CLONTECH shall at its sole expense, obtain and
maintain all licenses and governmental approvals which may be necessary to
permit the importation of the Products and the sale by CLONTECH of the Products,
complying with all registration, banking, exchange control, and other
regulations or approvals as may be required.
7. OWNERSHIP OF PRODUCT NAMES AND PATENTS
CLONTECH recognizes the exclusive ownership and right of MN in and to all
names, copyrights, trademarks, model designations and patents associated with
any of the Products. All rights to such trademarks shall remain the sole and
exclusive property of MN. CLONTECH is permitted to and can sell and advertise
the Products under the trademarks, trade names and model designation regularly
applied thereto by MN.
8. TERM OF AGREEMENT
The initial term of this Agreement shall be for a period commencing as
of the Effective Date being the date of this Agreement and ending on December
31, 1999. Thereafter this Agreement may be automatically renewed for a one
(1) year period commencing on January 1 until maximal June 30, 2001; unless a
[*] before June 30, 2001. In the event that no serious obstacles arise, both
companies shall use [*] efforts to negotiate, execute and deliver the [*]
before June 30, 2001. In case when no [*] until June 30, 2001 both partners
(CLONTECH and MN) have the right to reconsider the cooperation.
9. TERMINATION OF AGREEMENT
Notwithstanding the provision of Article 8 hereof, this Agreement may be
terminated in any one of the following cases:
(a) In the case of a breach of any provision of the Agreement by
either party, by written notice by the non-breaching party specifying the
provision being violated. The breaching party will have thirty (30) days from
the date of notice in which to cure the breach. If the breach is not cured,
this Agreement will terminate at the expiration of said 30 days.
(b) In the event either party ceases to function as a going business,
becomes insolvent, proceedings are commenced under any bankruptcy insolvency or
debtor relief law, is adjudged a bankrupt, makes a general assignment for the
benefit of creditors, or if a receiver is appointed for all or substantially all
of its property, the other party may terminate this Agreement forthwith upon
notice given to such party.
(c) Upon any termination or the expiration of this Agreement, the
following provisions shall apply:
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
6.
<PAGE>
(i) The confidentiality and non-disclosure provisions and
obligations of Section 3.5 shall continue in full force and effect.
(ii) If no [*], CLONTECH agrees - upon termination or
expiration of this Agreement - to refrain from selling any Products, from
representing itself as a distributor of MN's Products, using any trademarks
or trade names in connection with the Products by MN and to remove from its
place of business all signs and other evidence that indicate that CLONTECH is
a distributor of the Products or has any relationship with MN. Immediately
upon termination of this Agreement, CLONTECH shall return to MN all sales
materials, literature, pictures, promotional materials, technical data,
brochures, and all other materials in its possession furnished by MN to
CLONTECH hereunder for the purpose of selling, marketing and distributing the
Products.
(d) Return of products in the event of termination of the Agreement:
(i) In the event of termination by CLONTECH:
CLONTECH will be given the right to sell their inventory,
MN does not accept return of products.
(ii) In the event of termination by MN:
If CLONTECH does not achieve the written minimal sales
volumes, CLONTECH will have the right to distribute
Products co-exclusive to a further [*]. In all other
cases MN agrees on a co-exclusive distribution for [*].
MN agrees to take back all Products not being sold by
CLONTECH at [*] refund (as [*]).
(iii) In the event of termination by mutual consent of MN and
CLONTECH and a [*]:
From the day the [*] CLONTECH's sales rights will
completely pass over into the [*] and CLONTECH will
continue to act as a distributor [*] under the
legal restrictions ([*]).
(e) In the event of termination by CLONTECH or termination by MN for
a breach of Agreement by CLONTECH, MN may decide on receiving all purchase
orders placed with CLONTECH within the first [*] after termination.
CLONTECH will receive a commission of [*] of the [*] price for this
forwarding. If MN requests the complete customer list, CLONTECH agrees on
[*] this list at a [*] price.
(f) In the event of termination by CLONTECH for a breach of Agreement
by MN, the requirement in Section 9(e) for a written report identifying all
customers is void.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
7.
<PAGE>
10. RELATIONSHIP
10.1 The Parties hereto are independent contractors and nothing
contained in this Agreement shall be deemed or construed to create the
relationship of partnership or joint venture or principal and agent or of any
association or relationship between the Parties other than that of vendor and
vendee. CLONTECH acknowledges that it does not have, and CLONTECH shall not
make any representation to any third party either directly or indirectly
indicating that CLONTECH has, in any way, authority to act for or on behalf of
MN or to obligate MN in any way whatsoever. CLONTECH is not authorized or
empowered to act as agent for MN for any purpose; and the rights and obligations
of the Parties hereto shall be only as expressly set forth herein. At all
times, MN and CLONTECH shall remain independent contractors.
11. ASSIGNMENT
CLONTECH may not assign or transfer its rights or obligations under this
Agreement in whole or in part to any individual, firm or corporation without the
prior consent of MN.
12. MODIFICATION
Any modification of this Agreement shall not be valid unless such
modification is made in writing and signed by duly authorized representatives of
both Parties hereto.
13. CONTINUATION
This Agreement supersedes and replaces all past and existing Agreements or
other contracts between MN and CLONTECH.
14. NOTICES
Notices will be sent to the addresses:
Macherey-Nagel GmbH & Co. KG
Valencienner Str. 11
52355 Duren
Deutschland
Tel: (2421) 969-0
Fax: (2421) 969-199
CLONTECH Laboratories, Inc.
1020 East Meadow Circle
Palo Alto, California 94303-4230
USA
Tel: (650) 424-8222
Fax: (650) 424-8419
8.
<PAGE>
15. APPLICABLE LAW
This Agreement shall be governed by German law and the German courts shall
have exclusive jurisdiction to deal with issues (whether contract, tort, or
otherwise) arising in this connection.
16. DISPUTE RESOLUTION
Both Parties intend and desire that all disputes, arising out of or in
connection with this Agreement be resolved in an amicable manner whenever and as
far as possible.
17. SEVERABILITY
If any provision of this Agreement will be proved to be invalid, the
validity of the hold Agreement will not be affected through this. In this event
the invalid provision has to be reinterpreted, so that the intended meaning and
purpose of the invalid provision will be achieved. The same should be done in
the event that a supplement required gap in this Agreement will become obvious
during the implementation of this Agreement.
18. FORCE MAJEURE
If the performance by either Party of their respective obligations or
undertakings under this Agreement is interrupted or delayed by any occurrence
not occasioned by the conduct of either Party to this Agreement, whether that
occurrence is caused by war, acts of civil or military authority, riot,
insurrection, national emergency, strike, energy crisis, embargo, storm,
earthquake, or other natural forces, or by the acts of anyone not a party to
this Agreement, or by the inability to secure materials or transportation, then
the party so affected shall be excused from any further performance for whatever
period of time after the occurrence as may be reasonably necessary to remedy the
effects of that occurrence.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed in duplicate as of the day and year first written below and each Party
retains a copy each.
Date: October 28, 1998 MACHEREY-NAGEL GMBH & CO. KG
/s/
----------------------------------
( )
CLONTECH LABORATORIES, INC.
/s/ Pam Fong
----------------------------------
(November 13, 1998)
9.
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CAT NO.
PRODUCT MACHEREY-NAGEL CAT. NO MN CLONTECH PRODUCT CLONETECH
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NUCLEOBOND AX 20 (20) 740511.204546 NucleoBond AX 20 Tip (20) 4001-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AX (100) BP 740511.100.204546 NucleoBond AX 20 Tip (100) 4001-2
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AX (500) BP 740511.500.204546 NucleoBond AX 20 Tip (500) 4001-3
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AX 100 (20) 740521.204546 NucleoBond AX 100 Tip (20) 4002-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AX 100 (100) BP 740521.100.204546 NucleoBond AX 100 Tip (100) 4002-2
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AX 100 (500) BP 740521.500.204546 NucleoBond AX 100 Tip (500) 4002-3
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AX 500 (10) 740531.204546 NucleoBond AX 500 Tip (20) 4003-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AX 500 (50) BP 740531.50.204546 NucleoBond AX 500 Tip (50) 4003-2
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AX 500 (100) BP 740531.100.204546 NucleoBond AX 500 Tip (100) 4003-3
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AX 2000 (10) 740525.204546 NucleoBond AX 2000 Tip (10) 4004-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AX 10000 (5) 740534.204546 NucleoBond AX 10000 Tip (5) 4005-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AX 100000 (1) Spezialanfertigung NucleoBond AX 100000 Tip (1) 4006-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC Combi 740575.204546 NucleoBond Plasmid Combi Kit K3000-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND Combi sample kits 740575Muster204546 NucleoBond Plasmid Combi Trial Kit K3000-x
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 20 (20) 740571.204546 NucleoBond Plasmid Mini Kit (20) K3001-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 20 (100) BP 740571.100.204546 NucleoBond Plasmid Mini Kit (100) K3001-2
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 20 (500) BP 740571.500.204546 NucleoBond Plasmid Mini Kit (500) K3001-3
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 20 sample kits 74057Muster204546 NucleoBond Plasmid Mini Trial Kit K3001-x
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 100 (20) 740573.204546 NucleoBond Plasmid Midi Kit (20) K3002-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 100 (100) BP 740573.100.204546 NucleoBond Plasmid Midi Kit (100) K3002-2
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 100 (500) BP 740573.500.204546 NucleoBond Plasmid Midi Kit (500) K3002-3
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 100 sample kits 740573Muster204546 NucleoBond Plasmid Midi Trial Kit K3002-x
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 500 (10) 740574.204546 NucleoBond Plasmid Maxi Kit (10) K3003-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 500 (50) BP 740574.50.204546 NucleoBond Plasmid Maxi Kit (50) K3003-2
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 500 (100) BP 740574.100.204546 NucleoBond Plasmid Maxi Kit (100) K3003-3
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 500 sample kits 740574Muster204546 NucleoBond Plasmid Maxi Trial Kit K3003-x
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 2000 (5) 740576.204546 NucleoBond Plasmid Mega Kit (5) K3004-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND PC 10000 (5) 740593.204546 NucleoBond Plasmid Giga Kit (5) K3005-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND RNA/DNA 80 (25) 740650.204546 NucleoBond RNA/DNA Mini Kit K3025-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND RNA/DNA 400 (10) 740651.204546 NucleoBond RNA/DNA Midi Kit K3026-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND RNA/DNA 2000 (10) 740652.204546 NucleoBond RNA/DNA Maxi Kit K3027-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND RNA/DNA combi sample 740653Muster204546 NucleoBond RNA/DNA Combi Trial Kit K3026-x
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND L-Combi 740557.204546 NucleoBond Lambda Combi Kit K3015-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND L-10 (20) 740558.204546 NucleoBond Lambda Mini Kit K3016-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND L-50 (20) 740554.204546 NucleoBond Lambda Midi Kit K3017-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND L-Combi sample kit 740557Muster204546 NucleoBond Lambda Combi Trial Kit K3015-x
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AXG 20 (20) 740544.204546. NucleoBond AX-G 20 Tip 4050-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AXG 100 (20) 740545.204546 NucleoBond AX-G 100 Tip 4051-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND AXG 500 (10) 740546.204546 NucleoBond AX-G 500 Tip 4052-1
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND CB 20 (20) 740507.204546 NucleoBond Blood & Cell Culture DNA K3035-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND CB 100 (20) 740508.204546 NucleoBond Blood & Cell Culture DNA K3036-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND CB 500 (10) 740509.204546 NucleoBond Blood & Cell Culture DNA K3037-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND CB sample kit 740572Muster204546 NucleoBond Blood & Cell Culture Combi K3038-x
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND BA-sample kit 740607Muster204546
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND T-sample kit 740608Muster204546
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1.
<PAGE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CAT NO.
PRODUCT MACHEREY-NAGEL CAT. NO MN CLONTECH PRODUCT CLONETECH
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Buffer Set 1 740601.204546 NucleoBond Buffer Set I 4040-1
- -----------------------------------------------------------------------------------------------------------------------------------
Buffer Set 2 740602.204546 NucleoBond Buffer Set II 4041-1
- -----------------------------------------------------------------------------------------------------------------------------------
Buffer Set 3 740603.204546 NucleoBond Buffer Set III 4042-1
- -----------------------------------------------------------------------------------------------------------------------------------
Buffer Set 4 740604.204546 NucleoBond Buffer Set IV 4043-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND rack small 740562.204546 NucleoBond Small rack 4060-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND rack large 740563.204546 NucleoBond Large rack 4061-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND folded filters 740561.204546 NucleoBond Folded Filters 4062-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND folded filters (Muster) 740561Muster204546 NucleoBond Folded Filters Trial 4062-x
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOBOND folded filters XL 740577.204546 NucleoBond Large Folded Filters 4063-1
- -----------------------------------------------------------------------------------------------------------------------------------
Buffer S1 740516.204546 NucleoBond Buffer S1 4020-1
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Buffer S2 740517.1.204546 NucleoBond Buffer S2 4021-1
- -----------------------------------------------------------------------------------------------------------------------------------
Buffer S3 740518.1.204546 NucleoBond Buffer S3 4022-1
- -----------------------------------------------------------------------------------------------------------------------------------
Buffer N2 740527.1.204546 NucleoBond Buffer N2 4023-1
- -----------------------------------------------------------------------------------------------------------------------------------
Buffer N3 740528.1.204546 NucleoBond Buffer N3 4024-1
- -----------------------------------------------------------------------------------------------------------------------------------
Buffer N5 740529.1.204546 NucleoBond Buffer N5 4025-1
- -----------------------------------------------------------------------------------------------------------------------------------
RNase A 740505.204546 RNase A 4030-1
- -----------------------------------------------------------------------------------------------------------------------------------
Proteinase K 740506.204546 Proteinase K 4031-1
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOTRAP (100) 740584.204546 NucleoTrap Gel Extraction Kit K3070-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOTRAP suspension (100) 740589.204546 NucleoTrap Suspension 40860-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOTRAP sample kit 740584Muster204546 NucleoTrap Gel Extraction Trial Kit K3070-x
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOTRAPCR (100) 740587.204546 NucleoTrap PCR Purification kit K3071-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOTRAPCR suspension (100) 740564.204546 NucleoTrap CR Suspension 4081-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOTRAPCR sample kit 740587Muster204546 NucleoTrap PCR Purification Trial kit K3071-x
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOTRAP buffer NT1 740596.204546 NucleoTrap NT1 4082-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOTRAP buffer NT2 740597.204546 NucleoTrap NT2 4083-1
- -----------------------------------------------------------------------------------------------------------------------------------
NUCLEOTRAP buffer NT3 740598.204546 NucleoTrap NT3 4084-1
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin (50) 740588.204546 NucleoSpin Miniprep Kit (50) K3050-1
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin big peek (250) 740588.250.204546 NucleoSpin Miniprep Kit (250) K3050-2
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin sample kit 740588Muster204546 NucleoSpin Miniprep Trial Kit (50) K3050-x
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Extract (50) 740590.204546 NucleoSpin Extraction Kit (50) K3051-1
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Extract big peek (250) 740590.250.204546 NucleoSpin Extraction Kit (250) K3051-2
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Extract sample kit 740590Muster204546 NucleoSpin Extraction Trial Kit K3051-x
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Blood (50) 740951.204546 NucleoSpin Blood Mini Kit (50) K3052-1
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Blood big peek (250) 740951.250.204546 NucleoSpin Blood Mini Kit (250) K3052-2
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Blood sample kit 740951Muster204546 NucleoSpin Blood Mini Trial Kit K3052-x
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Blood L (25) 740954.204546 NucleoSpin Blood Midi Kit (25) K3054-1
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Blood L sample kit 740954Muster204546 NucleoSpin Blood Midi Trial Kit K3054-x
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin C+T (50) 740952.204546 NucleoSpin Tissue Kit (50) K3053-1
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin C+T big peek (250) 740952.250.204546 NucleoSpin Tissue Kit (250) K3053-2
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin C+T sample kit 740952Muster204546 NucleoSpin Tissue Trial Kit K3053-x
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Plant (50) 740570.204546 NucleoSpin Plant Kit (50) K3060-1
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Plant big peek (250) 740570.250.204546 NucleoSpin Plant Kit (250) K3060-2
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Plant sample kit 740570Muster204546 NucleoSpin Plant Trial Kit K3060-x
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin RNA (50) 740955.204546 NucleoSpin RNA Purification kit K3056-1
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin RNA (250) 740955.250.204546 NucleoSpin RNA Purification kit K3056-2
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin RNA Muster 740955Muster204546 NucleoSpin RNA Purification Trial kit K3056-x
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Virus (50) 740956.204546 NucleoSpin Virus Purification Kit K3055-1
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Virus (250) 740956.250.204546 NucleoSpin Virus Purification Kit K3055-2
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Virus Sample kit 740956Muster204546 NucleoSpin Virus Purification Trial Kit K3055-x
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Virus L 740958 NucleoSpin Virus Midi
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoVac 740630.204546 NucleoSpin Vacuum Manifold 4071-1
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Multi 8 (96 preps) 740620.204546 NucleoSpin Multi 8 Plasmid Kit K3057-1
- -----------------------------------------------------------------------------------------------------------------------------------
2.
<PAGE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CAT NO.
PRODUCT MACHEREY-NAGEL CAT. NO MN CLONTECH PRODUCT CLONETECH
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NucleoSpin Multi 8 (5 x 96 preps) 740620.5.204546 NucleoSpin Multi 8 Plasmid Kit K3057-2
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Multi 8 plus (96 preps) 740621.204546 NucleoSpin Multi 8 Plus Plasmid Kit K3058-1
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Multi 8 plus (96 preps) 740621.5.204546 NucleoSpin Multi 8 Plus Plasmid Kit K3058-2
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Multi 8 Extract (96 preps) 740622.204546 NucleoSpin Multi 8 PCR Kit K-3059-1
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin Multi 8 Extract (5 x 96 preps) 740622.5.204546 NucleoSpin Multi 8 PCR Kit K3059-2
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin collecting tubes 740600.204546 NucleoSpin Collection Tubes 4070-1
- -----------------------------------------------------------------------------------------------------------------------------------
Bondex Starter kit 740701.204546 Bondex Starter kit K-3080-1
- -----------------------------------------------------------------------------------------------------------------------------------
Bondex 10 740702.204546 Bondex 10 4090-1
- -----------------------------------------------------------------------------------------------------------------------------------
Bondex 50 740703.204546 Bondex 50 4091-1
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin-Registered Trademark- buffer 740.953.204.546 NucleoSpin Buffer set 4044-1
set for the isolation of low copy plasmids
(A1,A2,A3, RNase A for 300 preparations)
for use with NucleoSpin-Registered Trademark-
spin columns
- -----------------------------------------------------------------------------------------------------------------------------------
NucleoSpin-Registered Trademark- Blood 740.957.204.546 NucleoSpin Blood Buffer set I for the ___ S1723
buffer set I G1, T1, B1, B2, Protainase K of 2-5 ml whole blood
(for 250 ml whole blood) for use with
NucleoSpin-Registered Trademark- Blood
and Blood L spin columns
- -----------------------------------------------------------------------------------------------------------------------------------
Resuspension buffer A1 for 740911.1.204546 NucleoSpin resuspension buffer A1 S1709
NucleoSpin-Registered Trademark- kits
(without RNase A)
- -----------------------------------------------------------------------------------------------------------------------------------
Lysis buffer A2 for 740912.1.204546 NucleoSpin lysis buffer A2 S1710
NucleoSpin-Registered Trademark- kits
- -----------------------------------------------------------------------------------------------------------------------------------
Neutralis Action buffer A3 for 740913.1.204546 NucleoSpin neutralisation buffer A3 S1711
NucleoSpin-Registered Trademark-
- -----------------------------------------------------------------------------------------------------------------------------------
Wash buffer A4 for 740.914.204.546 NucleoSpin wash buffer A4 S1712
NucleoSpin-Registered Trademark- kits
- -----------------------------------------------------------------------------------------------------------------------------------
Wash buffer A4 for 740914.1.204546 NucleoSpin wash buffer A4 S1713
NucleoSpin-Registered Trademark- kits
- -----------------------------------------------------------------------------------------------------------------------------------
Wash buffer AW for 740.916.204.546 NucleoSpin Wash buffer AW S1714
NucleoSpin-Registered Trademark- kits
- -----------------------------------------------------------------------------------------------------------------------------------
Wash buffer AW for 740916.1.204546 NucleoSpin Wash buffer AW S1715
NucleoSpin-Registered Trademark- kits
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Elution buffer AE for 740917.1.204546 NucleoSpin Elution buffer AE S1716
NucleoSpin-Registered Trademark- kits
- -----------------------------------------------------------------------------------------------------------------------------------
Lysis buffer B3 for 740.920.204.546 NucleoSpin lysis buffer B3 S1717
NucleoSpin-Registered Trademark- Blood kits
(= 80 ml B1 + 20 ml B2)
- -----------------------------------------------------------------------------------------------------------------------------------
Wash buffer B5 for 740.921.204.546 NucleoSpin Wash buffer B5 S1718
NucleoSpin-Registered Trademark- Blood kits
- -----------------------------------------------------------------------------------------------------------------------------------
Wash buffer SW for 740.922.204.546 NucleoSpin Wash buffer BW S1719
NucleoSpin-Registered Trademark- Blood kits
- -----------------------------------------------------------------------------------------------------------------------------------
Lysis buffer C1 for 740.930.204.546 NucleoSpin Lysis buffer C1 S1720
NucleoSpin-Registered Trademark- Plant kits
- -----------------------------------------------------------------------------------------------------------------------------------
Wash buffer CS for 740.931.204.546 NucleoSpin Wash buffer C5 S1721
NucleoSpin-Registered Trademark- Plant kits
- -----------------------------------------------------------------------------------------------------------------------------------
Wash buffer CW for 740.932.204.546 NucleoSpin Wash buffer CW S1722
NucleoSpin-Registered Trademark- Plant kits
- -----------------------------------------------------------------------------------------------------------------------------------
Lysis buffer T1 for 740940.25.204546 NucleoSpin T1 Lysis buffer 4026-1
NucleoSpin-Registered Trademark- C+T kits
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3.
<PAGE>
SCHEDULE B
CLONTECH shall receive the following distribution rights for MN's bioanalysis
products:
U.S.A., Canada, Japan Exclusive
[*]
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
1.
<PAGE>
SCHEDULE C
[*]
[*]
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
1.
<PAGE>
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
Exhibit 10.16
AGREEMENT BETWEEN
CLONTECH LABORATORIES, INC.
AND
PHASE-1 MOLECULAR TOXICOLOGY, INC.
THIS AGREEMENT is effective this 31st day of December, 1998, between
CLONTECH LABORATORIES, INC., 1020 East Meadow Circle, Palo Alto, CA. 94303-4280
("CLONTECH") and PHASE-1 MOLECULAR TOXICOLOGY, INC., 1217 Parkway Drive, Santa
Fe, NM 87505 ("PHASE-1") (collectively, "Parties"):
WHEREAS, CLONTECH has expertise in cell and molecular biology in general
and nucleic acid arrays and expression vectors in particular; and
WHEREAS, PHASE-1 has expertise in toxicology, including identification of
toxicologically-important genes, high throughput screening, and information
management and bioinformatics; and
WHEREAS, PHASE-1 and CLONTECH wish to enter into a [ * ] alliance to
develop and use CLONTECH's product expertise and PHASE-1's toxicology expertise
in the field of scientific research;
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
For the purposes of this Agreement, the following definitions shall apply:
1.1 "ATLAS-Tox Product" or "AT Product" as used herein shall mean
[ * ] nucleic acid arrays comprising toxicologically-important genes ("Tox
Genes").
1.2 "Contract Research Organization" or "CRO" as used herein shall
mean companies or other commercial entities that perform Fee for Service
contract [ * ].
1.3 "Fee for Service" or "Fee-for-Service Services" as used herein
shall mean performing a service for a third party entity, commercial or
otherwise, for fees or other remuneration.
1.4 "Glass Tox Products" as used herein shall mean [ * ] ("Tox
Genes").
1.5 "Net Revenues" shall mean gross revenues less direct
manufacturing costs, marketing costs, overhead and royalties paid to third
parties. GAAP shall be applied.
1.6 "Internal Database" shall mean a toxicology database that has
been developed by CLONTECH.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
1.7 "PHASE-1's Databases" shall mean the toxicology databases that
have been developed by PHASE-1.
1.8 "Product Software" shall mean a software program developed by
PHASE-1 and provided to CLONTECH for retail sale, the description of which is
in EXHIBIT A.
1.9 "Secondary Products" shall mean toxicology-related products
developed with input by both CLONTECH and PHASE-l, which are [ * ].
1.10 "Validation Study" shall mean determining the effectiveness of AT
Products, Glass Tax Products and Secondary Products by using them in
controlled experiments involving at least [ * ] well-characterized
toxicologically significant chemicals.
ARTICLE 2
TECHNOLOGY TRANSFER AND PRODUCT DEVELOPMENT
2.1 AT PRODUCT DEVELOPMENT: i) PHASE-1 AND CLONTECH shall, upon
mutual agreement, define a number of AT Products to be developed. Upon
execution of this Agreement, PHASE-1 shall supply a list of [ * ] ("Tox
Genes") in [ * ], including the formal names of the genes, GenBank Accession
Number and the relative importance of each gene to [ * ]. CLONTECH will use
the information on the list of Tox Genes provided by PHASE-1 to develop and
manufacture gene expression primers and the AT Product. It is expected that
PHASE-1 shall use its best efforts to collect and provide information
necessary for CLONTECH to generate AT Products, Glass Tox Products, and
Secondary Products including updating the list of Tox Genes as appropriate.
(b) It is anticipated that for some Tox Genes, CLONTECH will
have to search for and clone homologues of said Tox Genes from species where
the gene has not been identified. PHASE-1 shall provide cDNA from the
appropriate species for this purpose. CLONTECH shall provide PHASE-1 any Tox
Gene homologues so identified for PHASE-1's use in internal research and
development and in providing Fee for Service Services at [ * ] pricing.
2.2 GLASS TOX PRODUCT AND SECONDARY PRODUCT DEVELOPMENT: PHASE-1 and
CLONTECH shall meet regularly to discuss development of Glass Tox and
Secondary Products. PHASE-1 will use its expertise in toxicology to identify
Secondary Products of particular interest to the field of toxicology, and
which can be supported adequately by PHASE-1's bioinformatics. CLONTECH will
use its expertise in development, marketing, and manufacture of research
reagents to develop and market said Glass Tox and Secondary Products. The
Parties agree that a priority will be the development of [ * ].
2.3 PROTOCOL OPTIMIZATION AND VALIDATION. PHASE-1 shall optimize the
protocols for toxicological and high throughput applications of the AT Products,
Glass Tox Products and any Secondary Products, as well as conduct Validation
Studies.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
CLONTECH shall provide PHASE-1 with up to [ * ] AT Products and an
agreed-upon number of Glass Tox and Secondary Products for said optimization
and Validation studies at [ * ] to PHASE-1. PHASE-1 shall also provide all
necessary RNA, cells and other biologicals necessary for conducting
validation studies at CLONTECH. Data resulting from said optimization and
Validation studies may be used to support sales of the AT, Glass Tox
Products, and Secondary Products, to help obtain regulatory approval of said
AT, Glass Tox Products, and Secondary Products, for publication in peer
reviewed journals, or to support any application for Letters Patent.
2.4 SOFTWARE: (a) PHASE-1 shall provide Product Software to the
specifications described in Exhibit A so as to support the AT, Glass Tox and
Secondary Products.
(b) The Parties shall provide to each other any
toxicology-related Internal Databases used by the user Party for the non-user
Party's internal use only.
2.5 FREEDOM TO DEVELOP OTHER PRODUCTS: PHASE-1 and CLONTECH are
free to develop other products and perform other services alone or in
collaboration with third parties that are not subject to or contrary to the
terms of this Agreement.
2.6 BEST EFFORTS: CLONTECH shall have the obligation to use its
best efforts to develop, manufacture and supply AT, Glass Tox and Secondary
Products, as well as to promote sales of said AT, Glass Tox and Secondary
Products in the research market. PHASE-1 shall have the obligation to use
its best efforts to promote acceptance of the AT, Glass Tox and Secondary
Products in the pharmaceutical industry and the FDA.
ARTICLE 3
PAYMENTS AND REVENUES
3.1 UP-FRONT PAYMENT: CLONTECH shall pay PHASE-1 [ * ] upon
execution of this Agreement, and [ * ] upon the achievement of the first
milestone negotiated between and agreed to by the Parties within thirty (30)
days of the execution of this Agreement and described in Exhibit C.
3.2 REVENUE SHARING: (a) Net Revenue from sales of AT, Glass Tox
Products and Secondary Products shall be shared [ * ], between CLONTECH and
PHASE-1, respectively; (b) Net Revenue from sales of Product Software shall
be shared [ * ], between CLONTECH and PHASE-1, respectively; (c) Net Revenue
from Fees for Service performed by PHASE-1 shall be shared [ * ], between
CLONTECH and PHASE-1, respectively, however Net Revenues from such
Fee-For-Service Services shall be pro-rated if services other than those
involving the AT, Glass Tox Products or Secondary Products are provided; and
(d) Net Revenue derived from sales or licensing of PHASE-1's Databases
associated [ * ] with sales of the AT, Glass Tox or Secondary Products shall
be agreed upon by both Parties and memoralized in a written agreement between
the Parties.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
ARTICLE 4
MARKETING, SALES AND TRAINING
4.1 SALES OF AT, GLASS TOX AND SECONDARY PRODUCTS: CLONTECH shall
have [ * ] rights and responsibility for sales of all AT, Glass Tox and
Secondary Products, regardless of whether such sales are wholesale or retail
in nature; with the exception that PHASE-1 [ * ] sales, whether direct or
indirect, to Contract Research Organizations as defined herein. PHASE-1 shall
provide a list of existing Contract Research Organizations to which CLONTECH
shall [ * ] AT, Glass Tox or Secondary Products (attached hereto as Exhibit
F), and PHASE-1 and CLONTECH shall update and/or modify said list of Contract
Research Organizations from time to time after the execution of this
Agreement as necessary. Should market conditions change, the Parties shall
renegotiate in good faith regarding the list of Contract Research
Organizations subject to this Section 4.1.
4.2 FEE FOR SERVICE SERVICES: PHASE-1 and CLONTECH shall have [ * ]
rights and responsibility to provide Fee-for-Service Services using the AT
Products, Glass Tox Products, or Secondary Products.
4.3 PRODUCT SOFTWARE: CLONTECH shall have the [ * ] right to sell
Product Software to [ * ], and will obtain said Product Software on a
consignment basis and shall not keep an inventory of said Product Software.
4.4 SALES TRAINING: PHASE-1 shall use reasonable efforts to
provide training and background education for CLONTECH's sales, marketing and
technical service personnel in order to create and solid, effective campaign.
Within approximately 30 days of the anticipated launch of the first
AT-Product, CLONTECH will convene a meeting of the sales and marketing
personnel at CLONTECH's facilities. PHASE-1 shall send scientific and
marketing representatives to the pre-launch meeting to train CLONTECH's
salespersons in the use arid benefits of the AT-Product(s). PHASE-1 shall
provide CLONTECH with [ * ]. PHASE-1 shall use reasonable efforts to update
and expand the above list on a frequent basis. PHASE-1 shall also use
reasonable efforts to provide contact and introductions to key scientists and
management personnel within the pharmaceutical, biotechnological and Ag-chem
industries. PHASE-1 and CLONTECH shall participate in joint presentations
and/or joint user group meetings for AT, Glass Tox and Secondary Product
customers as provided in Exhibit E, said Exhibit E to be revised and amended
from time to time as agreed by the Parties.
4.5 PRODUCT NEEDS PROJECTIONS: PHASE-1 shall present [ * ] needs
projections for AT Products, Glass Tox Products, and Secondary Products for
the next business year [ * ] months prior to that business year.
4.6 PRICING: PHASE-1 shall enjoy [ * ] pricing for all AT
Products, Glass Tox Products, and Secondary Products purchased from CLONTECH
during the Term.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
4.7 PACKAGING: All AT, Glass Tox and Secondary Products shall be
sold with the CLONTECH label and with CLONTECH-designed packaging and
literature with reference to PHASE-1 on the packaging and in all literature,
Software contained in the AT, Glass Tox and Secondary Products developed
entirely or in part by PHASE-1 shall have both PHASE-1 and CLONTECH labels.
All Product Software will be sold with packaging which reflects PHASE-1 as
the developer of said Product Software and CLONTECH as a distributor of said
Product Software.
4.8 LABELING: As appropriate, AT, Glass Tox and Secondary Products
shall be labeled with a restriction that said Products are for internal
research use only by the customer end-user, that the Products may not be
re-sold or redistributed to third parties without the express, written
permission of CLONTECH, and, further, that CLONTECH, in its discretion,
reserves the right to refuse to sell or distribute said Products to CROs and
other commercial users.
ARTICLE 5
TECHNICAL AND CUSTOMER SUPPORT
5.1 CUSTOMER SUPPORT FOR AT, GLASS TOX AND SECONDARY PRODUCTS: Each
Party will provide customer and technical support for the AT Products, Glass
Tox Products, and Secondary Products for its own customers, with the
exception that PHASE-1 shall provide [ * ] training to CLONTECH customers who
purchase AT, Glass Tox, or Secondary Products. Such training by PHASE-1 for
CLONTECH customers shall be on an [ * ] basis, and shall take place at
PHASE-1 or CLONTECH facilities at PHASE-1's convenience.
5.2 CUSTOMER SUPPORT FOR PRODUCT SOFTWARE: PHASE-1 shall provide
customer and technical support for Product Software.
ARTICLE 6
TERM AND TERMINATION
6.1 TERM: The term of this Agreement is three (3) years from the
date of execution ("Term"). During the final quarter of the final year of
the Term, the Parties shall confer as to whether this Agreement shall be
extended by mutual consent, PHASE-1 shall retain [ * ] rights to provide Fee
for Service Services using AT, Glass Tox and Secondary Products until the
[ * ] of the launch of each such Product. At the end of the [ * ] period for
each Product, CLONTECH will be free to sell such Products to other CROs; with
the proviso that sales to other CROs shall not include a right for CLONTECH
[ * ] developed in whole or in part by PHASE-1.
6.2 TERMINATION: Either Party may terminate this Agreement upon
material breach by the other Party. The non-breaching party shall give the
breaching party written notice of said breach, and the breaching party shall
have sixty (60) days to cure said breach. In the event said breach is not
cured, the termination shall become effective ninety (90) days afar the date
of the receipt of the termination notice.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
6.3 COOPERATION: After termination of this Agreement, the Parties
agree to cooperate with each other so as to carry out an orderly conclusion
to their exclusive relations, and the relationship between the Parties shall
become a non-exclusive relationship for the provision, marketing and sales of
AT Products, Glass Tox Products, and Secondary Products under the terms for
manufacture, supply and the like as described herein or by a separate
document signed by both Parties. Termination of this Agreement shall not
affect either Party's right to revenues due pursuant to the terms of this
Agreement, neither shall it affect PHASE-1's access to the Products on a [ * ]
basis.
ARTICLE 7
INVENTIONS AND INTELLECTUAL PROPERTY
7.1 DEVELOPMENTS: The Parties may, from time to time, make or
assist each other in the discovery, development, and perfection of new
methods, processes, chemical entities or inventions relating to toxicology
arrays, expression vectors (including [ * ] vectors), cell lines
incorporating the expression vectors, and novel genes ("Developments"). Any
Developments first invented solely by either Party during the term of this
Agreement shall be exclusively owned by that Party. Inventorship shall be
determined commensurate with the patent laws of the United States, 35 U.S.C.
ET SEQ.
7.2 JOINT DEVELOPMENTS: Any Developments discovered jointly by both
Parties ("Joint Developments") during the term of this Agreement shall be
owned jointly by CLONTECH and PHASE-1, The Parties shall confer and agree to
any prosecution strategies for any and all patent applications on Joint
Developments, and shall share costs and fees for said prosecution. Both
Parties agree that no assignments, license grants or any other grant of
rights for Joint Developments shall be made without the express, written
permission of the other Party. In the case of assignments, the Parties agree
first to offer au assignment to the other Party before offering assignment to
any third party, and said assignment offer shall be under the same terms as
the Party would offer to any third party.
7.3 JOINT DEVELOPMENTS, TERRITORY: All rights in any Joint
Developments as conferred in Section 7.2 shall be [ * ]. The Parties
expressly agree to execute a separate written agreement relating to Joint
Developments within three (3) months of disclosure.
7.4 INFRINGEMENT OF A PARTY'S INTELLECTUAL PROPERTY: Either Party
may, from time to time, discover potential or actual infringers of the
intellectual property of the other Party, or of other proprietary information
which forms the basis of this Agreement. The Party discovering such
infringement promptly shall inform the other Party of such activity in
writing within 90 days of each discovery. The Party owning such intellectual
property or proprietary information shall take such steps as are, in such
Party's discretion, economically feasible in order to enforce its ownership
rights against the infringer.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
7.5 INFRINGEMENT INDEMNIFICATION: Each Party agrees to indemnify
the other Party against any claim of infringement from third parties with
respect to any intellectual property claimed to be owned by the owner Party
and used by the other Party in the performance of this Agreement, provided
that the using Party notifies the owner Party in writing within thirty (30)
days of any such claim of infringement. The owner Party shall have the
control of and be responsible for the defense against any such claim at its
own expense. The using Party may not enter into any agreement or compromise
regarding such a claim of infringement with said third party without consent
of the owner Party and will cooperate with the owner Party.
7.6 TRADEMARKS: Exhibit B lists the trademarks and service marks
that may be used in the manufacture, production or marketing of, or Fee for
Service use of, the AT Products, Glass Tox Products, and Secondary Products.
It is understood by the Parties that each Party owns its respective marks,
and that nothing in this Agreement shall he interpreted expressly or
impliedly as granting either Party the right to the other's marks. It is
possible that the Parties may develop combination trademarks (Combination
Marks), wherein each Party may have rights to certain portions of the
Combination Mark. Use of any Combination Mark and the ownership to any
portions thereof shall be agreed to and memorialized by a written agreement
signed by both Parties at the time of the creation of such Combination Marks.
Should this Agreement be terminated for any reason, the rights in all
Combination Marks that have not been apportioned or assigned prior to
termination shall be divided in an equitable manner, with each Party entitled
to its own portion of the Combination Mark.
ARTICLE 8
CONFIDENTIALITY
8.1 CONFIDENTIALITY: During the term of this Agreement, the Parties
may disclose to each other certain confidential or proprietary information
("Information") to further the development, marketing and sale and
Fee-for-Service use of AT Products, Glass Tox Products, and Secondary
Products, wherein the disclosure of such l-formation to third parties could
be commercially injurious to the owner of the Information It is agreed by
both Parties that neither Party will disclose to any third party, or utilize
for its own or another's benefit, the Information obtained from the other
Party. The term "Information" shall not include, and the Parties shall not
have any obligations of confidence or non-disclosure with respect to:
(a) information that is in the public domain at the time of
its transmittal or which subsequently comes into the public domain without
violation of any obligation of confidence assumed hereunder;
(b) information received from a third party without
violation of an obligation of confidence to the transmitting Party;
(c) information which the recipient Party can show to have
been in its possession at the time of transmittal;
<PAGE>
(d) information which the recipient Party can show to have
been. independently developed by employees of the recipient Party who have
not had access to proprietary information received hereunder; or
(e) information which the recipient Party is compelled to
disclose pursuant to judicial action or the legal and enforceable request of
a U.S. government agency, provided that the transmitting Party is notified at
the time such action or request is initiated, and further provided that the
recipient Party cooperates with the transmitting Party in the event that the
transmitting Party seeks a protective order or other appropriate remedy to
prevent disclosure of such information.
8.2 DISCLOSURE OF INFORMATION: If either Party believes it
necessary to disclose any Information to a third party, the Parties agree
that they will not do so without first advising the owner Party what
Information is to be disclosed and to whom and for what purpose the
Information is to be disclosed. The Party wishing to make disclosure must
obtain the owner Party's written permission to make said disclosure.
Further, the Party wishing to disclose Information also agrees to require the
third party recipient of the Information to acknowledge in writing in a
confidentiality agreement that such Information is confidential, that said
third party will hold the Information confidential, and that the owner Party
has the right to enforce the Agreement against the third party.
8.3 MARKING OF CONFIDENTIAL INFORMATION: All Information, where
possible, shall be transferred from each Party to the other in written form,
and shall bear a conspicuous mark designating such Information as
confidential. Additionally, any Information transferred from either Party to
the other in an oral or other non-permanent or non-readable form, such as in
a computer communication, shall be summarized in a brief memorandum which
shall also bear a conspicuous mark designating such Information to be
confidential. All Information transferred in tangible form shall be returned
to the disclosing Party upon request and/or at the termination of this
Agreement, except for one copy retained for legal records.
8.4 RIGHTS TO CONFIDENTIAL INFORMATION: It is understood that this
Agreement does not grant to either Party or any employees, partners or other
business associate thereof, any rights in the Information, or any protectable
interest stemming therefrom, except as specifically provided herein.
8.5 REMEDIES: Each Party agrees that if it or any of its
employees, partners or other business associates breaches any condition of
this Agreement relating to the protection of proprietary or confidential
rights or Information, the owner of such right or Information will be
entitled to, in addition to all other remedies available, an immediate
injunction prohibiting the Party in breach of its obligations, or its
employees, partners or other business associates, from committing any further
breach of this Agreement.
ARTICLE 9
WARRANTIES AND DISCLAIMERS
9.1 REPRESENTATION: Each Party represents and warrants to the other
Party that it has no pre-existing contractual or other obligations to any third
party which preclude it
<PAGE>
from entering into this Agreement and meeting its obligations hereunder, or
which conflict with any provision of this Agreement.
9.2 REPRESENTATION: Each Party represents and warrants to the
other Party that it shall use reasonable efforts to achieve the objectives of
the Agreement.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 CHOICE OF LAW: This Agreement shall be deemed executed in Palo
Alto, California.
10.2 SURVIVAL: All causes of action accruing to either Party under
this Agreement shall survive termination of this Agreement. In addition, to
the extent possible, all provisions of this Agreement shall survive
termination of this Agreement.
10.3 ENTIRE AGREEMENT: This Agreement constitutes the only and
entire understanding between the Parties concerning its subject matter and
all other prior negotiations, representations, agreements and understandings
are superseded. No agreements altering or supplementing the terms hereof may
be made except by means of a written document signed by duly-authorized
representatives of both Parties.
10.4 INDEPENDENT CONTRACTORS: Each Party shall have the status of an
independent contractor without the authority to bind the other to any
obligation.
10.5 ARBITRATION: All disputes which arise out of this Agreement
shall be settled by arbitration in Santa Clara County, California, in
accordance with the conciliation and arbitration rules and regulations of the
American Arbitration Association. The arbitrator shall have background and
expertise relating to the issue(s) involved. The arbitration shall be in
English. The arbitration hearing shall be held within sixty (60) days of an
arbitration demand. The arbitrator's decision shall be submitted within
thirty (30) days of the conclusion of the arbitration hearing. The
arbitrator's decision shall be binding, 6hal and non-appealable. The Parties
shall share equally the cost of such arbitration.
10.6 FORCE MAJEURE: If either Party is prevented from performing
any obligation hereunder by reason of fire, explosion, strike, labor dispute,
casualty, accident, lack or failure of transportation facilities, flood,
earthquake, war, civil commotion, acts of God, or any law, order or decree of
any government or subdivision thereof, then such Party shall be excused from
performance hereunder to the extent and for the duration of such prevention,
provided that such Party first notifies the other Party in writing of such
prevention.
10.7 PUBLICITY: Except as required by law or applicable stock
exchange rule, no public statements shall be made by either Party concerning
this Agreement, its subject matter or its existence without prior
consultation with and the approval of the other Party, which approval shall
not be unreasonably withheld.
<PAGE>
10.8 SEVERABILITY: In the event that any provision of this Agreement
shall be found to be illegal, invalid or unenforceable for any reason, such
finding shall not affect the validity of the remainder of this Agreement,
which shall be construed and interpreted as though such provision was not
present.
10.9 SUCCESSORS IN INTEREST: The benefits and obligations of this
agreement shall inure to the benefit of the assignees and successors of
interest of the Parties.
10.10 NOTICES: Notices may be given to an officer of a Party by: (i)
personal delivery; (ii) telex or telecopy; or (iii) certified or registered
mail addressed as follows:
If to CLONTECH:
Ms. Sailaja Kuchibhatla, Senior Product Manager
CLONTECH Laboratories
1020 East Meadow Circle
Palo Alto, CA 94303
with a copy to: Ms. Anne Scholz, Director of Business Development
If to PHASE-1:
Spencer Farr, Ph,D.
Chairman and CEO
PHASE-1 Molecular Toxicology, Inc.
1217 Parkway Drive
Santa Fe, NM 87505
10.11 ASSIGNABILITY: This Agreement shall inure to the benefit of
and be binding on each Party's successors in interest and assigns; however,
either Party may assign th, is Agreement without consent of the other Party
only in connection with the sale or disposition of the entire business of
such Party or that portion to which this Agreement pertains.
10.12 COOPERATION: Each of the Parties shall render its full
cooperation to the other in fulfilling and performing the terms of this
Agreement.
IN WITNESS WHEREOF this Agreement has been executed in multiple
counterparts, each of which shall constitute an original Agreement, on behalf
of the Parties by their authorized officers as of the date written above.
CLONTECH LABORATORIES PHASE-1 MOLECULAR TOXICOLOGY, INC.
By: /s/ Ken Fong By: /s/ Spencer Farr
----------------------------- -----------------------------
Title: CEO Title: CEO
-------------------------- --------------------------
Date: 1/8/99 Date: 1/6/99
--------------------------- ---------------------------
<PAGE>
EXHIBIT A
[ * ]
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
[ * ]
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
EXHIBIT B
Trademarks and Service Marks owned by the Parties:
CLONTECH Registered Trademarks: ADVANTAGE
Other CLONTECH Trademarks: CLONTECH, TALON, Taqstart, ApoAlert, MTN, SMART,
LIVING COLORS, TET-ON, TET-OFF, 5'-STRETCH, Delta, Atlas, MICRONORTHERN CHIP,
Atlas RNA Chip, PREMIUM RNA & Design, PCR Select, Atlas Vision, CLONCapture,
MARATHON
PHASE-1 Registered Trademarks: BIOGLYPHICS
Other PHASE-1 Trademarks: PROTOCOL, GENIE, CHEM-PROFILER, AT-PROTOCOL<PAGE>
<PAGE>
EXHIBIT C
[ * ]
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
EXHIBIT D
[ * ]
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
[ * ]
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
EXHIBIT E
JOINT USER MEETINGS
CLONTECH and PHASE-1 shall conduct customer user group meetings and/or
training at PHASE-1 headquarters in Santa Fe, CLONTECH headquarters in Palo
Alto, or at some other mutually-agreeable site in order to obtain customer
feedback, provide customer training, and to generally increase AT Product, Glass
Tox Product, or Secondary Product technology awareness.
JOINT PRESENTATIONS
CLONTECH and PHASE-1 agree to use their best efforts to cooperate in
presenting seminars, scientific talks at relevant scientific meetings,
universities and other customer sites.
<PAGE>
EXHIBIT F
[ * ]
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
AGREEMENT between WAYNE M. BARNES, PH.D., having an address at 223 Renaldo
Drive, Chesterfield, Missouri, 63017 (hereinafter referred to as "LICENSOR") and
CLONTECH LABORATORIES, INC., a company doing business in Palo Alto, California
(hereinafter referred to as "LICENSEE") (LICENSOR and LICENSEE hereinafter
sometimes being referred to as the "Parties" or each as a "Party").
WITNESSETH
WHEREAS, LICENSOR, a member of the faculty at Washington University, (the
"Institution"), is the named inventor on a patent application directed to
Klentaql and LA Technology, which invention is more fully described in the
Licensed Patent Rights and which is owned by the LICENSOR; and
WHEREAS, LICENSEE desires to obtain a non-exclusive license to make, have
made, use and sell Licensed Products under the Licensed Patent Rights; and
WHEREAS, under the policy of the Institution, all rights, title and
interest to this Invention made at the Institution belong to the LICENSOR; and
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and other good and valuable consideration:
IT IS AGREED:
ARTICLE 1
DEFINITIONS
(a) "LICENSED PATENT RIGHTS" shall mean the subject matter encompassed
by claims 6-16, inclusive, of U.S. Patent 5,436,149 entitled THERMOSTABLE DNA
POLYMERASE WITH ENHANCED THERMOSTABILITY AND ENHANCED LENGTH AND EFFICIENCY
OF PRIMER EXTENSION, which claims as issued are annexed hereto as "EXHIBIT
A", and those claims in foreign patents and patent applications claiming
priority from USSN patent application 08/021,623, which claims as applied for
are annexed hereto as "EXHIBIT B" and any patents issuing on USSN 08/021,623
or their foreign counterparts such as International Publication Number WO
94/26766 dated 24 November 1994, which include the same subject matter of the
claims listed above, including any extensions, methods claims, renewals,
divisions, continuations, continuations-in-part, patents of addition, and/or
reissues and re-exams thereof, and, for all of the above including new claims
as to DNA synthesis from RNA template (reverse transcription) and
non-thermostable DNA polymerases. No rights are included to the subject
matter of issued claims 1-5 (known variously as Klentaq-278, KIentfl-277,
and/or Klentaql) alone, that is, in the absence of one or more DNA
polymerases exhibiting 3'(editing)-exonuclease.
"EXHIBIT B" annexed hereto is a current list of claims in
continuation-in-part and foreign patent application filings corresponding to the
subject matter of USSN 08/021,623.
1.
<PAGE>
(b) "VALID CLAIM" shall mean an issued claim of a patent within the
Licensed Patent Rights which has not otherwise been held invalid or
unenforceable by a court from which no appeal has or can be taken, or has not
otherwise finally been held unpatentable by the appropriate administrative
agency, or a claim in a pending patent application within the Licensed Patent
Rights, the subject matter of which claims as well as the application containing
said claim, not having been pending for more than four years from the Effective
Date of this Agreement.
(c) "AFFILIATE" For the proposes of this Agreement, an "Affiliated
Company of LICENSEE" or "an Affiliate" shall mean: (i) a business entity which
owns, directly or indirectly, a controlling interest in LICENSEE, by stock
ownership or otherwise; or (ii) a business entity, the majority ownership of
which is directly or indirectly common to the majority ownership of LICENSEE.
(d) "LICENSED PRODUCT" shall mean any reagent product or kit with a
component part thereof whose manufacture, use or sale is covered by any Valid
Claim, including separate enzyme components sold with, or in connection with,
advice on how to mix them with sold or other enzyme components to arrive at an
enzyme mixture covered by a Valid Claim, (whether or not such product is made,
used, leased, sold or otherwise disposed of in a country that has issued a
patent with the Valid Claim.
(e) "LICENSED METHODS" shall mean any method, procedure or process whose
use is covered by a Valid Claim.
(f) "NET SALES" shall mean the actual gross invoice amounts including all
packaging, use licenses, instructional or other charges made to a purchaser, but
less the following Allowances: customary trade discounts and refunds or credits
allowed for shortages, returns, or defective articles and transportation or
shipping charges and/or taxes (sales, excise, custom fees or tariffs) billed by
LICENSEE to its end-user customers. At the option of LICENSEE, the amount of
these Allowances may be set to [*]% of the actual gross invoice amounts.
"NET SALES-II" shall mean Net Sales from which have been subtracted
the royalties due on Licensed Product under a license to a patent for PCR or for
a DNA polymerase, and paid on Licensed Product to LICENSOR and/or to a third
party such as Hoffmann-La Roche (or the current owner of the PCR patent, if
different), but these subtractions from Net Sales are limited so that Net
Sales-II shall not be reduced to less than 50% of Net Sales.
Kits with other biological or biochemical catalog components. In the event
a Licensed Product is sold as a combination product containing the Licensed
Product and one or more other biochemicals or biologically or enzymatically
active components, Net Sales shall be calculated proportionally, that is, by
multiplying the gross amount invoiced for the sale of the combination product by
the fraction A/(A+B) where A is the selling price for that amount of the
Licensed Product sold separately by the LICENSEE and B is the value of the other
biochemicals or biologically or biochemically active components of the
combination product, which value is measured by the net sales per unit of
material as that material is sold separately. The royalty paid on such
combination products cannot be reduced relative to the royalty paid on Licensed
Product sold separately by more than [*]% by application of this formula; that
is, B may not valued at more than [*]% of the sum (A+B).
2
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
Kits with other components not sold separately. In the event no such
separate sales are made of the other biological kit components, no special
allowance is to be made, and the entire kit is considered a Licensed Product
unless the parties agree otherwise on a case-by-case basis.
Kits not for long PCR: If Licensed Products are sold with, or as a
component of, other products not licensed hereunder and which combined
products(s) are designed principally for a purpose other than of attaining long
PCR products as defined and claimed in Licensed Patent Rights, Net Sales for the
purpose of determining royalties on Licensed Products shall be calculated either
as the separate Net Sales of the Licensed Product sold separately, or if
Licensed Products are not sold separately, Net Sales for the purposes of
determining royalties hereunder shall be reasonably determined by agreement of
Licensor and Licensee prior to the sale of the combined product. "Sold with"
does not refer to separate catalog items on the same purchase order.
In-house use by LICENSEE: No royalty is due for use of the Licensed
Product by LICENSEE for research and development purposes, such as gene
analysis and creation of recombinant DNA constructs. Royalty is due for use
of the Licensed Product to manufacture, such as by PCR, amplicon products
that are sold (such as amplified DNA ladder), or for use of the Licensed
Product in a service (such as a DNA sequencing, mapping, or other diagnostic
service). Licensed Product utilized for such manufacturing or service
purposes will be considered sold as Net Sales at the prevailing market price.
(g) "COMMERCIAL SALE" shall mean any transaction including sales by an
Affiliate or by a Distributor or by a Wholesaler which transfers to a purchaser
physical possession and title to each Licensed Product, after which transfer
seller has no right or power to determine purchaser's resale price, if any.
Transfer of possession and title to an Affiliate or a Distributor or a
Wholesaler shall not constitute a Commercial Sale. Licensee agrees that with
regard to sales of its products which are distributed by a Distributor or by a
Wholesaler, royalties are to be calculated based on the Distributor's or
Wholesaler's transfer price to end users.
Estimated mark-up factors. Since it is agreed that it is impractical for
LICENSEE to account for sale prices made by Distributors or by Wholesalers, the
parties agree on a factor by which the gross sales price to the Distributor or
Wholesaler shall be multiplied to determine Net Sales; this factor for
distribution by a Distributor shall be [*], and this factor for distribution by
a Wholesaler [see definition in section (i) below] shall be [*].
(h) "DISTRIBUTOR" is an entity with which LICENSEE has a business
arrangement for distribution and/or marketing of the Licensed Product.
(i) "WHOLESALER" shall mean an agent who takes orders from end users for
the Licensed Product, purchases the said product from LICENSEE, delivers the
said product to end users and collects payment from the end users. The
Wholesaler does not perform other functions of a distributor, such as, by way of
example but not by way of exclusion, marketing activities such as participating
in trade shows, creating product advertising, and presenting technical seminars,
or pre-and post-sale technical support of the products. LICENSOR and LICENSEE
agree that this definition, references to Wholesaler, and the estimated
Wholesaler mark-up factor of [*] are applicable only to distribution of
Licensed Product in the country of Japan. For other countries, there is no
difference between a Wholesaler and a Distributor.
3.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
(j) "EFFECTIVE DATE OF THIS AGREEMENT" shall be the date on which the last
signatory to this Agreement signs the Agreement. This Agreement shall be
effective only if Signed by both Parties within ten calendar days of each other.
(k) "KLENTAQLA" is Licensed Product that has, or includes, Klentaql as its
majority enzyme that lacks significant 3'-exonuclease activity.
(l) "THE INVENTOR" is Dr. Wayne M. Barnes.
ARTICLE 2
THE LICENSE
(a) LICENSOR hereby grants to LICENSEE a non-exclusive worldwide license,
without the right to sublicense to third parties but with the right to extend
the license to Affiliates of LICENSEE, under the Licensed Patent Rights:
(1) to make, have made, use and sell the Licensed Products; and
(2) to practice the Licensed Methods; and
(3) to pass on to customers with the purchase price of Licensed
Product, the right to use Licensed Methods.
ARTICLE 3
PAYMENTS UNDER THE LICENSE
(a) LICENSE ISSUE FEE. LICENSEE shall pay to LICENSOR a non-refundable
license issue fee of $[*] and an advance royalty of $[*]. Royalties do not
become further due until the end of a Calendar Quarter in which their total
exceeds this advance royalty amount.
(b) ROYALTY RATES. LICENSEE shall pay LICENSOR royalties according to the
following schedule. The royalty rates are in two phases depending on the
issuance of a patent, as described below. For each Licensed Product sold by
LICENSEE, its Affiliates, or its Distributor or its Wholesaler while this
Agreement is in force, LICENSEE shall pay, as a percentage of the Net Sales of
Licensed Product, a Phase II royalty in the U.S., and a Phase I royalty in the
rest of the world for a period at least up to February 1, 1999. The royalty
rate is now at the Phase 2 level in the U.S. because the Patent has issued, and
the royalty rate shall increase to a Phase 2 level on a country by country basis
immediately upon issuance in each said country of a patent containing a claim
that covers the manufacture, use or sale of a Licensed Product. The parties
understand and agree that from now until February 1, 1999, if a patent issues to
LICENSOR which does not cover a Licensed Product while LICENSOR still has
pending an application that contains claims covering a Licensed Product, then
LICENSEE shall continue to pay a Phase 1 level of royalty on sales of Licensed
Products until either said claim issues in a patent or until February 1, 1999,
whichever occurs first. If, by February 1, 1999 a patent has still not issued
in a country where Licensee is manufacturing, using or selling a Licensed
Product, LICENSEE shall have no obligation to pay royalties hereunder in that
country until or unless such a patent issues.
4.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
<TABLE>
<CAPTION>
ROYALTY SCHEDULE: PHASE 1 ROYALTY PHASE 2 ROYALTY
<S> <C> <C>
Licensed Product without Klentaql [*]% [*]%
Licensed Product with Klentaql
by a source designated by LICENSOR [*]% [*]%
Licensed Product with Klentaql
manufactured by LICENSEE [*]% [*]%
</TABLE>
(c) Optional subtraction of other royalties from Net Sales first. At
option of LICENSEE, if and only if Net Sales-II is possible for this LICENSEE,
Net Sales-II may substitute for Net Sales as the base.
(d) Reduction in royalty in return for guaranteed minimum royalty. If for
a period of five years from any point, LICENSEE agrees to pay LICENSOR a minimum
annual royalty of $[*], then the royalty rate is reduced to [*]% on sales
occurring after those sales resulting in an accrued annual royalty of $[*]
at the rates set out in Article III above. This minimum is payable, and the
5-year guarantee is renewable, at the beginning of each calendar year that this
minimum option is in force.
(e) MOST FAVORED LICENSEE. LICENSOR has already, and may in the future,
grant to one or more unrelated third parties a license of substantially the same
scope as granted to LICENSEE herein but under different terms and conditions
than those herein granted to LICENSEE. If such terms and conditions are
different and include, or include the possibility of, royalties that are at or
below [*]% of the royalties and/or royalty possibilities described in this
Agreement, then within 60 days of the Effective Date of this or any other
Agreement, whichever is later, and at other times at option of LICENSOR,
LICENSEE shall be notified of the grant of a license under said different terms
to a third party, which need not be identified. LICENSEE shall have the right
and option to elect a license under such different terms and conditions as have
been granted to said third party so long as LICENSEE also accepts ALL such other
different terms, conditions, requirements and restrictions as have been granted
or are granted to such other third party. LICENSEE's election hereunder must be
made within sixty (60) days of LICENSEE's receipt of notice of the grant of a
license under said different terms to a third party. Upon LICENSEE's election
of such different terms and conditions as are offered to a third party, this
Agreement shall be automatically amended to retroactively include such terms and
conditions of said license with said third party back to the time such terms and
conditions became available to said third party, or back to the Effective Date
of this Agreement, whichever is later. It is understood and agreed that
LICENSOR shall not, as a result of such retroactive amendment, be required to
return advance payments previously made by LICENSEE, however, to the extent said
payments were creditable against royalties, LICENSEE shall still be entitled to
such a credit. LICENSOR is not obligated to offer the same set of terms and
conditions more than once. LICENSEE's name and address shall be removed from
this document before it is shown to other licensees for this most-favored
licensee consideration. This section does not apply to the sourcing of Klentaq1
(Article XI).
5.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
(f) UNLICENSED COMPETITION. At any time after one and one half years
following the Effective Date of this Agreement, if LICENSEE provides to LICENSOR
reasonable proof that an unlicensed third party is selling "Significant
Quantities" of products covered by a Valid Claim, then LICENSOR shall within six
months of said notice from LICENSEE either (a) execute a non-exclusive license
with said third party, or (b) if a relevant patent has issued to LICENSOR, sue
said third party and actively pursue the litigation or (c) demonstrate to
LICENSEE that the third party has ceased the unlicensed activity. If LICENSOR
does not within the six-month period fulfill at least one of the above options
as to each unlicensed third party selling a significant quantity of unlicensed
products, then the royalty rate on any Licensed Product will be reduced to [*]%
of the royalty rate then applicable to each said Product, for such time as the
unlicensed activity continues in Significant Quantities. For the purposes of
the foregoing clauses, "Significant Quantities" shall mean, on a country by
country basis, at least 20% of the market for all products covered by Valid
Claims in monetary sales units. This entire section is to apply on a country by
country basis, meaning that there shall be no royalty reduction in countries
where unlicensed activity does not reach the level of Significant Quantity.
(g) START DATE FOR COMMERCIAL SALES. LICENSEE acknowledges that sales
subject to royalties began in July 1995, and that royalties and reports are due
on all sales of Licensed Product that occurred after July 1, 1995.
ARTICLE 4
REMITTANCE, RECORDS AND REPORTS UNDER THE LICENSES
(a) LICENSE ISSUE FEE. The License Issue Fee shall be paid in U.S.
dollars by check on a U.S. bank, or wired directly to the bank of LICENSOR upon
instructions from LICENSOR. Payment shall be within 15 (fifteen) days of the
Effective Date.
(b) ROYALTIES
(1) ACCRUAL. Royalties shall accrue when Licensed Products are first
sold or otherwise transferred by or for LICENSEE (other than to an Affiliate or
Distributor or a Wholesaler) and/or its Distributor or Wholesaler. Licensed
Products shall be considered sold when billed out or 30 days after shipment,
whichever is sooner.
(2) ACCRUED ROYALTIES. Payments of accrued royalties shall be made
within sixty (60) days following the first day of January, April, July and
October for the sale of all Licensed Products sold or otherwise transferred by
LICENSEE during the previous calendar quarter (three months). Such payment
shall be accompanied by a report statement certified to LICENSOR by an officer
or authorized employee of LICENSEE which shall give sufficient information from
which to calculate the amount of royalties due hereunder, including, but not
limited to, a report of the total quantity and Net Sales of each Licensed
Product for which royalty has accrued during the preceding quarter and the
aggregate royalties due. Statements shall also be submitted in the event no
sales of Licensed Products took place and/or no royalties are due.
There are two possible cases of slower payment of Accrued Royalties. One
of these may apply, but both alternatives may not be taken.
6.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
Should LICENSEE undertake that no mechanism within their corporate
structure or relationship with their distributors exists, such that quarterly
royalty payments/reports can be generated without undue effort, then the timing
may, upon notice to LICENSOR, be replaced with semiannually (every six months),
within 60 days of the first day of January and July.
Similarly and alternatively, but not additionally, if 60 days is not
long enough for existing internal accounting reports of LICENSEE, a maximum of
100 days may replace 60 days.
In either of the above cases, available ongoing estimates of sales are to
be supplied informally to LICENSOR upon request by LICENSOR, at a frequency not
to exceed quarterly. LICENSOR is to be kept apprised of the name and phone
number of a person at LICENSEE who can supply this information.
(3) CURRENCY. Payment hereunder shall be made in U.S. dollars in the
United States. If payment is by check, it must be a check drawn on a U.S. bank.
If payment is by wire, LICENSEE must comply with wiring instructions to be
provided by LICENSOR.
(c) FOREIGN ROYALTY PAYMENTS. With respect to sales in countries outside
the United States, royalties shall be payable in U.S. dollars at the rate of
exchange published in the Wall Street Journal on the last day of the calendar
quarter in which the royalty accrues. If the law or regulations of any country
require the withholding of taxes and said taxes are in fact paid or withheld for
or on account of the receipt, payment and remission of royalties provided for in
this Agreement, and proof of payment of said taxes is provided to LICENSOR, such
taxes shall be deducted by LICENSEE from the remittable royalties due from sales
of Licensed Products in such country.
(d) INSPECTION. LICENSEE shall keep records in sufficient detail to
permit the determination of royalties payable hereunder and, at the request and
expense of LICENSOR, will permit an independent Certified Public Accountant,
acceptable to both LICENSOR and LICENSEE, to examine, in confidence, during
ordinary business hours once in each calendar year records as may be necessary
to verify or determine royalties paid or payable under this Agreement. For the
purposes of this paragraph, LICENSEE shall be required to retain its records for
no more than three (3) years. The time between such inspections may be
decreased, and an inspection held at short notice, but not less notice than 14
days, under either of the following two circumstances:
(1) There is a Termination of the Agreement.
(2) Upon any decrease in royalties from the previous quarter by more
than 50%.
In the event that such inspection shows that there is a discrepancy between
the royalties shown to be due and the royalties actually paid by LICENSEE, then
the amount determined to be due by such inspection shall be controlling. Any
inspection shall be at LICENSOR'S expense, unless the inspection shows a
discrepancy of at least ten percent (10%) in LICENSOR'S favor, in which case the
LICENSEE shall bear the cost of the inspection.
7.
<PAGE>
ARTICLE 5
PATENT PROSECUTION
(a) PATENT FILING
(1) LICENSOR shall pay for and conduct, at his sole discretion, the
filing, continuations, prosecution and maintenance of any patent applications
and any patents which issue thereunder in the United States.
(2) LICENSOR shall pay for and conduct, at his sole discretion, the
filing, prosecution and maintenance of any counterpart foreign patent
applications and patents which issue thereunder which LICENSOR elects to
support.
ARTICLE 6
ENFORCEMENT OF LICENSED PATENTS
(a) ENFORCEMENT. In the event LICENSEE or LICENSOR becomes aware of any
actual or threatened infringement of any issued patent with the Licensed Patent
Rights anywhere in the world, that party shall promptly notify the other party
in writing. The parties are not required to take any particular active steps to
ferret out all possible infringement. LICENSOR shall have the first right to
bring, at its own expense, an infringement action against any third party. If
LICENSOR does not proceed with a particular patent infringement action within
ninety (90) days, LICENSEE, after notifying LICENSOR in writing of its election
hereunder, shall be entitled but not obligated to take proceedings against such
infringer at its own expense. LICENSEE is to invite other licensees to
cooperate. The party conducting such suit shall have full control over its
conduct. In any event, neither Party is obligated to assist the other. After
deduction of the cost of litigation from the total settlement amount, any
recovery as a result of any litigation or settlement shall be shared equally by
and only among the parties, including other licensees, that cooperate
extensively in the litigation, with no share obligated to a party or licensee
which does not cooperate extensively in the litigation or infringement action.
"Extensively" must include, for a LICENSEE, support of the costs of the
litigation in proportion to the market share of that LICENSEE in Licensed
Products for the part of the world under litigation. For LICENSOR, extensively
means technical advice and supplying of available but unpublished laboratory
data, upon reasonable request by the parties conducting the litigation or
infringement action.
(b) If any claim of a patent covering Licensed Patent Rights is held
invalid or unenforceable, LICENSEE may thereafter cease paying royalties on
sales of Licensed Products in the country in which such invalidity or
unenforceability has been finally adjudicated, provided that Licensed Products
or the use thereof are covered only by claims which have been held to be invalid
or unenforceable.
(c) If any claim of a patent covering Licensed Patent Rights is
subordinate to another patent, royalties and/or damages due to the holder of the
superordinate patent are to be paid by the LICENSEE. If the superordinate patent
is not held, owned or controlled by LICENSEE, or an
8.
<PAGE>
employee or an Affiliate of LICENSEE, such payments by LICENSEE will be deducted
from royalties owed and unpaid to LICENSOR, such deduction not to exceed 50% of
royalties owed and unpaid to LICENSOR. This clause does not apply to royalties
paid for PCR and/or DNA polymerase, which royalties are only to be treated under
the Net Sales-II option above.
ARTICLE 7
TERMINATION
(a) The term of this Agreement shall be from the Effective Date of this
Agreement until the expiration of the last to expire of any patent included in
the Licensed Patents.
(b) LICENSEE may terminate this Agreement:
(1) Upon sixty (60) days prior written notice to LICENSOR to that
effect, provided that LICENSEE shall thereafter terminate the manufacture, sale
and use of Licensed Products except for disposition of inventory on hand, for
which royalties shall be paid in accordance with Article III hereof.
Disposition of inventory shall be complete within one hundred twenty
(120) days of the aforementioned notice of intent to terminate.
(c) If LICENSEE shall at any time default in any obligation under this
Agreement, and such default shall not be cured within ninety (90) days after
written notice from LICENSOR to LICENSEE specifying the nature of the default,
then LICENSOR shall have the right to terminate the license granted to LICENSEE
hereunder and such termination shall become effective on the ninetieth (90th)
day after giving such notice of default.
(d) Any termination pursuant hereto shall not relieve the Parties hereto
of any obligation or liability accrued hereunder prior to such termination, nor
rescind or give rise to any right to rescind anything done or any payments made
or other consideration given hereunder prior to the time of such termination and
shall not affect in any manner any rights of either party arising out of this
Agreement prior to such termination.
ARTICLE 8
WARRANTY
LICENSOR represents that he is the sole owner of all rights, title and
interest to the Licensed Patent Rights and that he has the right to enter into
this Agreement and perform according to its terms. LICENSOR makes no other
representation or warranty, express or implied, except as herein provided, nor
does LICENSOR assume any liability in respect of any infringement of any patent
or other rights of third parties due to LICENSEE's operation under the rights
herein granted.
9.
<PAGE>
ARTICLE 9
COMMUNICATION
Any payment, notice or other communication required or permitted to be made
or given to either Party hereto pursuant to this Agreement shall be sufficiently
made or given on the date of mailing if sent to such Party by certified mail,
postage prepaid, addressed to it at its address set forth or to such other
address as it shall designate by written notice to the other Party as follows:
In the case of LICENSOR:
Dr. Wayne M. Barnes
223 Renaldo Drive
Chesterfield, MO 63017 USA
With a copy to:
Jennifer G. Low, Esq.
Gallop, Johnson & Neuman, L.C.
101 South Hanley, Suite 1600
St. Louis, Missouri 63105
Telefax No. (314) 862-1219
In the case of LICENSEE:
Attn: Licensing Officer
Clontech Laboratories, Inc.
1020 East Meadow Circle
Palo Alto, CA 94303-4230
With a copy to:
Alexi Miller, Sr. Product Manager
Clontech Laboratories, Inc.
1020 East Meadow Circle
Palo Alto, CA 94303-4230
Each party shall provide the other party with any change to the telephone
numbers set forth below.
In the case of LICENSOR:
(314) 434-7250 (H) and/or (314) 362-3351 (O)
Fax: (314) 576-9683 with note to "Please call Dr. Barnes." at one of
the above numbers.
10.
<PAGE>
In the case of LICENSEE:
(415) 424-8222 ext. 1147
Fax: . . . 1088 or 0579
ARTICLE 10
ASSIGNMENTS
Subject to the right of Licensee to extend its rights under this Agreement
to Affiliates, this Agreement shall not be assignable by LICENSEE without the
prior written consent of LICENSOR except to a successor in ownership of all or
substantially all of the PCR business assets of LICENSEE, and which successor
shall expressly assume in writing the performance of all the terms and
conditions of this Agreement to be performed by the assigning Party.
This Agreement shall be fully assignable by LICENSOR. All rights of
LICENSOR under this Agreement shall devolve immediately upon his family in the
event of his death or severe impairment.
ARTICLE 11
SOURCE OF KLENTAQ1
(a) INITIAL SOURCE OF KLENTAQL.
LICENSEE agrees that The Inventor is, except for the option below, to
designate the source of the Klentaql that is formulated into KlentaqLA by
LICENSEE ("the KT1 Supplier"). The Inventor and The KT1 Supplier are to be
kept apprised of six-month projections of anticipated need of Klentaql for
adequate inventory purposes by LICENSEE or The KT1 Supplier, recognizing that
these are projections only. The price of said Klentaql, when at or diluted
to a protein concentration of OD(280)= 0.8, shall not exceed US $[*] per ul
(microliter) resold or used internally, and said price shall include all
royalty due on Klentaql for the patent claims 1 - 5, but said price shall not
include the royalties for LA Technology set forth in the Royalty Schedule in
Section III(b). Microliters resold are subject to a 10% pipetting loss which
will be made up by a 10% overage to be shipped.
(b) POSSIBLE PRICE REDUCTIONS.
LICENSEE currently has on the market a Licensed Product formula "Advantage
Klentaq" which consists of Klentaql, Deep Vent, and anti-Taq antibody.
If LICENSEE brings and continues to market for PCR a formula "KlentaqLA"
(so labeled) which consists only of Klentaql and Deep Vent (or other
proofreading enzyme or enzymes that are believed by LICENSEE to be at least as
effective), that is, it is equivalent to Advantage Klentaq but without the
anti-Taq antibody, and if this product is priced accordingly less because of its
lack of antibody, then the price of said Klentaql in Section XI(a) will be
reduced to $[*] per ul.
11.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
If another licensee to LA Technology actually brings to market KlentaqLA
that is fully licensed for PCR and made with their own Klentaql, and that is
priced competitively with the KlentaqLA of this LICENSEE, LICENSEE is encouraged
to bring this matter to the attention of The Inventor, for possible good faith
consideration for a modification, at the sole option of the Inventor, to the
price and source of Klentaql to LICENSEE.
If LICENSEE observes or develops a problem with the quality of the Klentaql
supplied by The Klentaql Supplier, LICENSEE is encouraged to propose quality
improvements to The Inventor, who will work with LICENSEE in good faith, within
reason, to address the quality concerns.
(c) POSSIBLE MANUFACTURE OF KLENTAQL BY LICENSEE.
If The Inventor declines to, or is unable to, act as or identify The KT1
Supplier, then LICENSEE gains an option under this Agreement to a license to
manufacture LICENSEE's own Klentaql for use in formulating KlentaqLA. This would
not be a license to have the Klentaql made by another entity, unless that entity
is designated by The Inventor, whether or not he is still the LICENSOR. In order
to exercise this LICENSEE must, having paid for all Klentaql already received
from The KT1 Supplier(s), first then ("Advance Notice") notify KT1 Supplier that
the next 100 ml of Klentaql are the last to be supplied by The KT1 Supplier,
unless The KT1 Supplier is unwilling. The exclusion of the right to sell
Klentaql alone under this Agreement [(end of Section I(a)] still stands.
In addition to the ready availability of the Klentaql source strain from
the ATCC as deposit No. 69244, the strain and recipe for this manufacture now
known to LICENSOR will be provided by LICENSOR within 30 days of a request to do
so by LICENSEE. This request may be made at any time.
The above price reductions and manufacturing option depend strictly on the
performance of product KlentaqLA marketing described above, and the price of
Klentaq1 returns to $[*] per ul and/or the right to manufacture Klentaql ceases
if LICENSEE ceases to, or fails to, market the prescribed product KlentaqLA.
For the purpose of calculating Net Sales-II, the royalty on Klentaql from
The KT1 Supplier shall be taken as $[*] per ul, even with any price reduction
such as in (b) below. LICENSEE agrees that The Inventor may direct that the
payment for said Klentaql be split into separate payees for manufacture and
royalty.
Should LICENSEE become the manufacturer of the Klentaql in Licensed
Product, then the royalty on the Klentaql in Licensed Product is included (at
the Phase I rate of [*]% or Phase II rate of [*]%) within the royalty rate for
Licensed Product with Klentaql manufactured by LICENSEE, as can be seen by the
difference between the various royalties set in the royalty schedule above in
Article III(b).
Nothing in this section is meant to constrain or limit the marketing by
LICENSEE of innovative products that are more complex then KlentaqLA, as
separate items in addition to KlentaqLA.
12.
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
<PAGE>
ARTICLE 12
ARBITRATION
All claims or controversies under this Agreement, the enforcement or
interpretation hereof, or because of any alleged breach or default under the
provisions hereof, shall be settled by final and binding arbitration in St.
Louis, Missouri in accordance with the then-existing commercial arbitration
rules (the "Rules") of the American Arbitration Association ("AAA"), and
judgement upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof; PROVIDED, HOWEVER, that the law applicable to any
controversy shall be the law of the State of Missouri, regardless of its or any
other jurisdiction's choice of law principles. In any arbitration pursuant to
this Agreement, the award or decision shall be rendered by an arbitrator. In
the event of a failure of the Parties to agree within fifteen (15) days after
the commencement of the arbitration proceeding upon the appointment of the
arbitrator, the arbitrator shall be appointed by the AAA in accordance with the
Rules. The arbitration shall take place within forty-five (45) days of the
demand for arbitration by either party. The arbitrator shall render his or her
decision in writing to LICENSEE, LICENSOR and their respective counsel within
twenty (20) days of the completion of the arbitration. In no event shall the
demand for arbitration be made after the date when institution of a legal or
equitable proceeding based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. Advance payments for
arbitration service demanded by the arbitrator are to be made by the party which
demands arbitration, unless both parties agree to share these payments. The
ultimate bearer(s) of the cost of the arbitration is to be decided by the
arbitrator.
ARTICLE 13
MISCELLANEOUS
(a) COUNTERPARTS. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(b) CONSTRUCTION. This Agreement shall supersede all previous
communications, representations or undertakings, either verbal or written
between the Parties relating to the subject matter hereof.
(c) INDEMNIFICATION. LICENSEE agrees to indemnify and hold harmless
LICENSOR and Washington University, from and against any and all claims, damages
and liabilities arising from LICENSEE's sale of Licensed Products.
(d) USE OF NAMES AND TRADEMARKS. With the exception of "KlentaqLA", which
LICENSEE may, as a non-exclusive right, use to label KlentaqLA, the Parties
shall have no right to use the names, trademarks, or other designation of each
other, the Affiliates, or the Institution in any publication, advertisement or
announcement by LICENSEE or LICENSOR in connection with the advertising or
promotion of Licensed Products without the express written consent of the named
Party. The use of trademarks in refereed scientific publications is excepted.
13.
<PAGE>
If citations of any sort are included in promotional material or
publications or newsletters or catalogs of any sort, LICENSEE shall always
include attribution to the seminal paper describing the subject matter of the
licensed invention: Barnes, W.M. (1994) PCR amplification of up to 35 kb DNA
with high fidelity and high yield from lambda bacteriophage templates, PROC.
NATL. ACAD. SCI. 91, 2216-2220, or a shortened form thereof.
Customary and reasonable notices ("Restriction Notice") of patent
protection and scope of this license are to be included with the Licensed
Product when it is transferred and/or sold. By way of example, but not by
limitation, the level of detail and restrictions in these notices must, upon the
request of LICENSOR, at least match those used for the PCR patent. LICENSOR may
specify the wording of these notices, at his option. Upon request by LICENSOR,
the Restriction Notice must be included with any other DNA polymerase or
exonuclease. LICENSEE agrees to terminate supply of licensed product to any
entity that does not comply with such notices. Upon request by LICENSOR,
LICENSEE must begin to report to LICENSOR the identity of any entity for which
it obtains knowledge of use of Licensed Product beyond the scope of the
Restriction Notice.
By way of example, and for initial use, specific language for the
Restriction Notice is suggested below. Reasonable variations are allowed. For
LA Technology mixtures, or for exo+ (such as Pwo) DNA polymerase which is sold
with advice for mixing according to the Patent:
This product is licensed to claims 6 - 16 of U.S. Patent 5,436,149.
Foreign patents and methods claims are pending. No license to
practice these claims, i.e., mix DNA polymerases, is granted beyond
the use of the supplied amount of this product.
For exo + (such as Pwo) DNA polymerase itself, when sold without advice as to
how to use it to practice LA technology, and upon request by LICENSOR:
This product is not licensed for use in formulating DNA polymerase
mixtures under claims 6 - 16 of U.S. Patent 5,436,149 (counterpart
foreign patents and methods claims pending).
As additional patents issue, the relevant patent numbers and claim numbers must
be included in the Restriction Notices.
(e) SEVERABILITY. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(f) HEADINGS. The headings of the several sections are inserted for
convenience of reference only, and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
(g) FORCE MAJEURE. No delay, failure or omission by either party in the
performance of any of its obligations pursuant to this Agreement shall be deemed
a breach of this Agreement, nor create any liability to the other party, if such
delay, failure or omission arises from any cause or causes beyond the reasonable
control of the party seeking to invoke this section, including,
14.
<PAGE>
without limitation, the following: acts of God; fire; storm, flood, earthquake;
war, sabotage; civil disturbance; riot; quarantine restrictions; government
action; labor strike or freight embargo ("Force Majeure"). In the event of any
delay or inability to perform arising pursuant to Force Majeure, the performance
of the party seeking to invoke this section shall be postponed by such length of
time as may be reasonably necessary to compensate for said delay or inability to
perform.
(h) NO WAIVER. Failure by either Party to enforce any provision of this
Agreement or assert a claim on account of breach hereof shall not be deemed a
waiver of its right to enforce the same or any other provision hereof on the
occasion of a subsequent breach.
(i) REMEDIES. The remedies provided in this Agreement are not and shall
not be deemed to be exclusive and shall be in addition to any other remedies
which either Party may have at law or in equity.
(j) EXECUTION. This Agreement will not be binding upon the Parties until
it has been signed herein below, within the same ten-day period, by or on behalf
of each Party, in which event it shall be effective as of the date on which the
last signatory to this Agreement signs the Agreement. No amendment or
modification hereof shall be valid or binding upon the Parties unless made in
writing and signed as aforesaid.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the later date written below.
THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
LICENSEE:
By: /s/ Ken Fong WITNESS:
-----------------------
Date: 12/22/95
---------------------
Printed Name and Title: Kenneth Fong, CEO
LICENSOR:
By: /s/ Wayne Barnes WITNESS:
-----------------------
Date:
---------------------
WAYNE M. BARNES
15.
<PAGE>
EXHIBIT A
Issued Claims 6-16 of U.S. Patent 5,436,149
6. A formulation of thermostable DNA polymerases comprising at least one
thermostable DNA polymerase lacking 3'-exonuclease activity and at least one
thermostable DNA polymerase exhibiting 3'-exonuclease activity, wherein the DNA
polymerases are present in a ratio of from about 4 units to about 2000 units of
the DNA polymerase lacking 3'-exonuclease activity to 1 unit of the DNA
polymerase exhibiting 3'-exonuclease activity.
7. A formulation of thermostable DNA polymerases as set forth in claim 6
wherein the at least one thermostable DNA polymerase lacking 3'-exonuclease
activity is the DNA polymerase set forth in claim 1. [Claim 1 describes
Klentaql, an N-terminal deletion of Taq DNA polymerase.]
8. A formulation of thermostable DNA polymerases as set forth in claim 6
wherein the at least one thermostable DNA polymerase exhibiting 3'-exonuclease
activity is selected from the group consisting of Pfu polymerase from Pyrococcus
furiosus, the Vent DNA polymerase from Thermococcus litoralis, or a variant of
the Pfu DNA polymerase or the Vent DNA polymerase wherein the DNA polymerase
activity of said DNA polymerase has been diminished or inactivated.
9. A formulation of thermostable DNA polymerases as set forth in claim 7
wherein the majority component and minority component of the formulation are
present in a ratio of from about 10 units to about 2000 units of the majority
component to 1 unit of the minority component.
10. A formulation of thermostable DNA polymerases as set forth in claim 9
wherein the DNA polymerases are present in a ratio of about 640 units of the DNA
polymerase lacking 3'-exonuclease activity to 1 unit of the DNA polymerase
exhibiting 3'-exonuclease activity.
11. A formulation of DNA polymerases as set forth in claim 6 wherein the
DNA polymerases are present in a ratio of from about 10 units to about 2000
units of the DNA polymerase lacking 3'-exonuclease activity to 1 unit of the DNA
polymerase exhibiting 3'-exonuclease activity.
12. A formulation of DNA polymerases as set forth in claim 6 wherein the
DNA polymerases are present in a ratio of from about 80 units to about 1000
units of the DNA polymerase lacking 3'-exonuclease activity to 1 unit of the DNA
polymerase exhibiting 3'-exonuclease activity.
13. A formulation of DNA polymerases as set forth in claim 6 wherein the
DNA polymerases are present in a ratio of from about 640 units to about 1 unit
of the DNA polymerase lacking 3'-exonuclease activity to 1 unit of the DNA
polymerase exhibiting 3'-exonuclease activity.
1.
<PAGE>
14. A formulation of thermostable DNA polymerases as set forth in claim 6
wherein the at least one thermostable DNA polymerase lacking 3'-exonuclease
activity is the DNA polymerase set forth in claim 5.
15. A formulation of DNA polymerases as set forth in claim 14 wherein the
DNA polymerases are present in a ratio of from about 10 units to about 2000
units of the DNA polymerase lacking 3'-exonuclease activity to 1 unit of the DNA
polymerase exhibiting 3'-exonuclease activity.
2.
<PAGE>
EXHIBIT B
Pending Claims from PCT application.
Claims 1-5 are excluded from the Subject Matter of the License in the
Agreement.
1. A recombinant DNA sequence encoding a DNA polymerase having an
amino add sequence comprising substantially the same amino acid sequence as
Thermus aquaticus DNA polymerase, but lacking the N-terminal 280 amino acid
residues of said DNA polymerase.
2. A DNA polymerase having an amino acid sequence comprising
Substantially the same amino acid sequence as that of Thermus aquaticus DNA
polymerase, excluding the N-terminal 280 amino acid residues of Thermus
aquaticus DNA polymerase.
3. A DNA polymerase as set forth in claim 2, having the amino acid
sequence of SEQ ID NO: 6.
4. A DNA polymerase as set forth in claim 2 that is encoded by a DNA
sequence contained in plasmid pWB254b.
5. A DNA polymerase having an amino acid sequence comprised substantially
of amino acids 280-831 of the DNA polymerase of Thermus flavus.
6. A formulation of thermostable DNA polymerase comprising a majority
component comprised of at least one thermostable DNA polymerase lacking 3'-
exonuclease activity and a minority component comprised of at least one
thermostable DNA polymerase exhibiting 3'-exonuclease activity.
7. A formulation of thermostable DNA polymerase as set forth in claim 6
wherein the at least one thermostable DNA polymerase lacking 3'-exonuclease
activity is Klentaq-278.
8. A formulation of thermostable DNA polymerase as set forth in claim 7
wherein the at least one thermostable DNA polymerase exhibiting 3'-exonuclease
activity is selected from the group consisting of Pfu DNA polymerase from
Pyrococcus furiosus, the Tli DNA polymerase from Thermococcus litoralis, or a
variant of the Pfu DNA polymerase or the Tli DNA polymerase wherein the DNA
polymerase activity of said DNA polymerase has been diminished or inactivated.
9. A formulation of thermostable DNA polymerases as set forth in claim 6
wherein the majority component and minority component of the formulation are
present in a ratio of from about 10 units to about 2000 units of the majority
component to 1 unit of the minority component.
10. A formulation of thermostable DNA polymerase as set forth in claim 9
wherein the majority component and minority component of the formulation are
present in a ratio of from about 100 to about 600 units of the majority
component to 1 unit of the minority component.
1.
<PAGE>
11. A formulation of DNA polymerase comprising at least one DNA polymerase
which in wild-type form exhibits 3'-exonuclease activity and which is capable of
catalyzing a temperature cycle type polymerase chain reaction wherein said 3'-
exonuclease activity of said at least one DNA polymerase has been reduced to
between about 0.2% and about 7%, of the 3'-exonuclease activity of said at least
one DNA polymerase in its wild-type form.
12. A formulation of DNA polymerase comprising E1, wherein E1 is one or
more DNA polymerases which lack any significant 3'-exonuclease activity, and E2,
wherein E2 is one or more DNA polymerases which exhibit significant 3'-
exonuclease activity, and wherein the ratio of the amounts of E1 to E2 is at
least about 4:1 by DNA polymerase units or (b) at least about 4:1 by amounts of
protein by weight.
13. A formulation of DNA polymerase as set forth in claim 12 wherein E2 is
selected from the group consisting of DNA polymerase encoded by genes from
Pyrococcus furiosus, Thermococcus literalis, Thermococcus species GB-D, T7
coliphage, Thermotoga maritima or a combination thereof, and wherein E1 is
selected from the group consisting of a mutant, 3'-exonuclease negative form of
E2 or of DNA polymerases which, in unmutated form, do not exhibit significant
3'-exonuclease activity, such as DNA polymerase encoded by genes from Thermus
aquaticus, Thermus flavus, or Thermus thermophilus.
14. A formulation of DNA polymerase as set forth in claim 12 wherein E2
comprises Pfu DNA polymerase from Pyrococcus furiosus and the unit ratio of E1
to E2 is between about 150 to 170:1.
15. A formulation of DNA polymerases as set forth in claim 12 comprising a
unit ratio of from about 150 to about 170:1 of Klentaq-278 to Pyrococcus
furiosus DNA polymerase.
16. A formulation of DNA polymerases as set forth in claim 12 comprising a
unit ratio of from about 150 to about 170:1 of Klentaq-291 to Pyrococcus
furiosus DNA polymerase.
17. A formulation of DNA polymerases as set forth in claim 12 wherein E2
comprises the DNA polymerase from Pyrococcus species GB-D and the unit ratio of
E1 to E2 is between about 450 to 500.
18. A formulation of DNA polymerase as set forth in claim 12 comprising a
unit ratio of from about 10 to about 15:1 of wild-type or nearly full-length
Thermus aquaticus DNA polymerase to Pyrococcus furiosus DNA polymerase.
19. A formulation of DNA polymerase as set forth in claim 12 wherein E1
comprises a reverse transcriptase.
20. A formulation of DNA polymerase as set forth in claim 12 wherein E1
comprises a mutant or chemical modification of T7 or T3 DNA polymerase and E2
comprises a wild-type T7 or T3 DNA polymerase.
21. A formulation of DNA polymerase as set forth in claim 12 wherein E1
comprises Thermus flavus or Thermus thermophilus DNA polymerase.
2.
<PAGE>
22. A formulation of DNA polymerase as set forth in claim 12 wherein E1
comprises a Thermococcus literalis DNA polymerase variant lacking any
significant 3'-exonuclease activity and E2 comprises wild-type Thermococcus
literalis DNA polymerase.
23. In a method for amplifying nucleic acid sequences by polymerase chain
reaction, of the repeating cycle type wherein two complementary strands, for
each different specific sequence being amplified, are treated with a single, a
pair, or a mixture of pairs of oligonucleotide primers, and a DNA polymerase or
a mixture of DNA polymerases is used to catalyze synthesis of an extension
product of each primer which is complementary to each nucleic acid strand under
effective conditions for said synthesis, and wherein said primers are selected
so as to be sufficiently complementary to different strands of each specific
sequence to hybridize therewith such that the extension product synthesized from
one primer, when it is separated from its complement, can serve as a template
for synthesis of the complementary strand of the extension product by extending
the same or another included: primer, the primer extension products are
separated from the templates on which they were synthesized to produce single-
stranded molecules, and the single-stranded molecules thus generated are treated
with the primers and a DNA polymerase or a mixture of DNA polymerases is used to
catalyze synthesis of an extension product of each primer under effective
conditions for the synthesis of a primer extension product, wherein the
improvement comprises formulating the DNA polymerase as set forth in claim 6,
and catalyzing primer extension with said formulation of DNA polymerase.
24. In a method for amplifying nucleic acid sequences by polymerase chain
reaction, of the repeating cycle type wherein two complementary strands, for
each different specific sequence being amplified, are treated with a single, a
pair, or a mixture of pairs of oligonucleotide primers, and a DNA polymerase or
a mixture of DNA polymerases is used to catalyze synthesis of an extension
product of each primer which is complementary to each nucleic acid strand under
effective conditions for said synthesis, and wherein said primers are selected
so as to be sufficiently complementary to different strands of each specific
sequence to hybridize therewith such that the extension product synthesized from
one primer, when it is separated from its complement, can serve as a template
for synthesis of the complementary strand of the extension product by extending
the same or another included primer, the primer extension products are separated
from the templates on which they were synthesized to produce single-stranded
molecules, and the single-stranded molecules thus generated are treated with the
primers and a DNA polymerase or a mixture of DNA polymerases is used to catalyze
synthesis of an extension product of each primer under effective conditions for
the synthesis of a primer extension product, wherein the improvement comprises
formulating the DNA polymerase as set forth in claim 7, and catalyzing primer
extension with said formulation of DNA polymerase.
25. A method as set forth in claim 24 wherein one or more of the primers
utilized in any repeating cycle is itself a product of PCR amplification
26. A method as set forth in claim 24 further comprising a denaturation
step in each repeating cycle wherein the denaturation step has a duration of
less than about 20 seconds in the reaction mixture.
27. A method as set forth in claim 26 wherein the denaturation step has a
duration of less than about 5 seconds in the reaction mixture.
3.
<PAGE>
28. In a method for amplifying nucleic acid sequences by polymerase chain
reaction, of the repeating cycle type wherein two complementary strands, for
each different specific sequence being amplified, are treated with a single, a
pair, or a mixture of pairs of oligonucleotide primers, and a DNA polymerase or
a mixture of DNA polymerases is used to catalyze synthesis of an extension
product of each primer which is complementary to each nucleic acid strand under
effective conditions for said synthesis, and wherein said primers are selected
so as to be sufficiently complementary to different strands of each specific
sequence to hybridize therewith such that the extension product synthesized from
one primer, when it is separated from its complement, can serve as a template
for synthesis of the complementary strand of the extension product by extending
the same or another included primer, the primer extension products are separated
from the templates on which they were synthesized to produce single-stranded
molecules, and the single-stranded molecules thus generated are treated with the
primers and a DNA polymerase or a mixture of DNA polymerases is used to catalyze
synthesis of an extension product of each primer under effective conditions for
the synthesis of a primer extension product, wherein the improvement comprises
formulating a DNA polymerase comprising at least one DNA polymerase, which in
wild-type form exhibits 3'-exonuclease activity and which is capable of
catalyzing a temperature cycle type polymerase chain reaction, wherein said 3'-
exonuclease activity of said at least one DNA polymerase has been reduced to no
greater than about 7% of the 3'-exonuclease activity of said at least one DNA
polymerase in its wild-type form, but not eliminated, and catalyzing primer
extension with said formulation of DNA polymerase.
4.
<PAGE>
NOTICE TO LICENSEE
Re: US Patent 5,436,149 and corresponding applications worldwide.
Dear Licensee to LA Technology or Klentaq1:
We are pleased to announce that on the 25th of April, 1996, Takara
Shuzo Co., Ltd. completed a Patent Transfer Agreement with Dr. Wayne M.
Barnes and acquired all of Dr. Banres' right, title and interest in and to
the Patent relating to LA Technology and Klentaq1 and the Licensee Agreements
effective worldwide. Takara has duly become the Licensor in the existing
License Agreement Dr. Barnes granted to you.
Therefore, we would appreciate it very much if you could, for quarters
after June 30, 1996, provide directly to Takara the required reports of data
concerning Net Sales of Patented Products, payment of Royalties and any other
information required under the Licensee Agreements, and change the address
of recipient as directed below.
That is:
1. Net Sales Report and Royalty Payment for the quarter of April, May
and June of 1996 should be addressed to Dr. Barnes as usual. He will take
care of forwarding to Takara, as appropriate.
2. Thereafter, from July 1, 1996, both information and payment should be
addressed to Takara.
Junichi Mineno
Takara Shuzo Co., Ltd.
Biomedical Group
Seta 3-4-1
Otsu-shi, Shiga-ken
520-21 Japan
Telefax No. 81 775-43-2312
A memorandum for necessary amendments to be made in each Agreement will
be forwarded to each Licensee in due course.
TAKARA SHUZO CO., LTD.
/s/ Wayne M. Barnes /s/ Ikunoshin Kato
----------------------- -----------------------------
Wayne M. Barnes, Ph.D. Ikunoshin Kato, Ph.D.
President, Biomedical Group
<PAGE>
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
MANUFACTURING AGREEMENT
This Agreement is made by and between Roche Molecular Systems. Inc.
("RMS"). having an office at 1080 U.S. Highway 202, Branchburg Township,
Somerville, New Jersey 08876-3771, a Delaware corporation, F. Hoffmann-La Roche
Ltd. (FHLR), a Switzerland limited liability company (both of which are referred
to herein collectively as "ROCHE") and Clontech Laboratories, Inc. ("CLONTECH"),
Palo Alto, CA, a California corporation, hereafter collectively referred to as
"The Parties."
BACKGROUND
A. RMS owns and has the right to grant immunities from suit to practice
under United States Patent No. B1 4,683,202, which describes and claims, inter
alia, a nucleic acid amplification process known as the polymerase chain
reaction ("PCR") process. FHLR owns and has the right to grant immunities from
suit to practice under the foreign counterpart patents and patent applications
corresponding to and claiming priority from United States Patent No. B1
4,683,202.
B. CLONTECH produces and sells DNA molecules for use in various
biological applications and desires to obtain from ROCHE an immunity from suit
to practice the PCR process in the United States to make DNA molecules and to
sell said molecules worldwide.
C. ROCHE is willing to grant such an immunity from suit to CLONTECH to
practice the PCR process solely to manufacture in the United States and to sell
worldwide, specific, individual double-stranded DNA molecules on the terms and
subject to the conditions provided exclusively in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, ROCHE and CLONTECH agree as follows:
1. DEFINITIONS
For the purpose of this Agreement, and solely for that purpose, the
terms set forth hereinafter shall be defined as follows:
1.1 "EFFECTIVE DATE" shall mean the date on which the last signatory
to this Agreement executes the Agreement.
1.2 "LICENSED PRODUCTS" shall mean specific, individual DNA molecules
produced by means of any method that practices one or more claims of PCR
Technology, which claims have not expired or been held invalid by a court of
competent jurisdiction from which no appeal has been, or may be, taken.
1.3 "NET SALES REVENUE" shall mean gross invoice price of Licensed
Products to an end user customer less a [*] deduction of [*], which [*]
deduction shall be [*] deduction made from the gross invoice price for sales
of Licensed Products and is in lieu of all other deductions (such as, for
example, recalls, returns, taxes,
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
1.
<PAGE>
freight, transportation, insurance, packaging, custom duties, and discounts
granted later than at the time of invoicing).
The NET SALES REVENUE of the Licensed Products sold by CLONTECH to any
person, firm or corporation controlling, controlled by, or under common control
with CLONTECH, or enjoying a special course of dealing with CLONTECH, shall be
determined by reference to the Net Sales Revenue which would be applicable under
this Section 1.3 in an arm's length sale by CLONTECH to a third party other than
such person, firm or corporation. Without the prior written consent of ROCHE,
CLONTECH shall not accept any consideration for the sale of any Licensed
Products other than as will be accurately reflected in Net Sales Revenue.
If Licensed Products are sold in combination with, or as a component of,
other products not licensed hereunder ("Combined Product"), Net Sales Revenue
for the purpose of determining royalties on Licensed Products that are part of a
Combined Product shall be calculated by multiplying Net Sales Revenue for the
Combined Product by the fraction A/B, where A is the invoice price of Licensed
Products sold separately and B is the invoice price of the Combined Product. If
Licensed Products are not sold separately, Net Sales Value for the purpose of
calculating royalties hereunder shall be reasonably determined by agreement of
ROCHE and CLONTECH prior to the first commercial sale of the Combined Product.
1.4 "PCR TECHNOLOGY" shall mean the polymerase chain reaction process
which is one of the amplification processes described and claimed in United
States Patent No. B1 4,683,202 and any reissue or reexamination patents thereof,
and those claims in foreign patents and patent applications which correspond to
issued claims in the above '202 patent.
2. GRANT
2.1 GRANT. Upon the terms and subject to the conditions of this
Agreement, ROCHE hereby grants to CLONTECH, and CLONTECH hereby accepts from
ROCHE, a royalty-bearing, nonexclusive and nontransferable immunity from suit
for the term hereof to (i) practice PCR Technology solely in the United States
solely to make and sell Licensed Products in the United States, its territories
and possessions, and (ii) sell Licensed Products worldwide, directly or through
distributors. It is understood that the rights granted herein do not include
any right to have made the Licensed Products. The Parties understand and agree
that no rights are hereby granted, expressly or by implication, under the U.S.
Patent No. 4,965,188 (the '188 patent, covering the performance of nucleic acid
amplification using a thermostable polymerase). An immunity from suit under the
'188 patent may be obtained by purchase of ROCHE-manufactured polymerase or
polymerase licensed by ROCHE for use in PCR or by contacting the Director of
Licensing, Roche Molecular Systems, Inc.
2.2 LIMITATION ON USE. The PCR Technology may be practiced solely
for the foregoing purpose, and for no other purposes whatever, and no other
right, immunity, or license under the PCR Technology or any other patents or
patent applications of ROCHE is hereby granted expressly, impliedly or by
estoppel. CLONTECH understands and agrees that this Agreement is intended to
grant rights to produce specific, individual double-stranded DNA molecules only
and is not intended to grant CLONTECH or anyone purchasing the DNA
2.
<PAGE>
molecules from CLONTECH rights to use such DNA molecules in any activity that
practices the PCR process or any other proprietary process of ROCHE.
2.3 Except as specifically permitted in Section 6.4 hereto, CLONTECH
expressly acknowledges and agrees that the immunity from suit granted hereunder
is personal to CLONTECH alone and that CLONTECH shall have no right to
sublicense, assign or otherwise transfer any or all of its rights under the
foregoing immunity from suit. ROCHE reserves the right to practice the PCR
Technology itself, and to license, assign or otherwise transfer the PCR
Technology to others for any purposes whatsoever.
3. FEES, ROYALTIES, RECORDS AND REPORTS
3.1 ROYALTIES. For the rights and privileges granted under this
Agreement, CLONTECH shall pay to ROCHE the following:
(a) a non-refundable, non-creditable license issuance fee in the
amount of [*], to be paid upon execution of this Agreement;
(b) a non-refundable, fully creditable minimum annual royalty
payment of [*], first accrued on January 30 of the year immediately following
the Effective Date and each successive January 30 thereafter during the term of
this Agreement, which royalty is creditable against earned royalties accruing
under subsection (c) below for that calendar year; and
(c) (i) for direct sales to end users of Licensed Products,
earned royalties equal to [*] percent [*] of the Net Sales Revenue; and (ii)
for sales to distributors, earned royalties equal to [*] percent [*] of the Net
Sales Revenue.
3.2 RECORDS. CLONTECH shall keep full, true and accurate books of
accounts containing all particulars which may be necessary for the purpose of
showing the amounts payable to ROCHE by way of royalty or by way of any other
provision under this Agreement. Such books and the supporting data shall be
open at all reasonable times upon reasonable advance notice, for three (3) years
following the end of the calendar year to which they pertain (and access shall
not be denied thereafter, if reasonably available), to the inspection of ROCHE
or an independent certified public accountant retained by ROCHE for the purpose
of verifying CLONTECH's royalty statements or CLONTECH's compliance in other
respects with this Agreement. In the event that the audit reveals an
underpayment of the royalty by more than [*] percent [*] during any one period
being audited, the cost of the audit shall be paid by CLONTECH.
3.3 REPORTS. CLONTECH shall within thirty (30) days after the first
day of January, April, July and October of each year during the term of this
Agreement, deliver to ROCHE a true and accurate report. This report shall give
such particulars of the business conducted by CLONTECH during the preceding
three (3) calendar months as are pertinent to an accounting for royalty under
this Agreement and shall include at least the following:
(a) the quantities of Licensed Products sold during those three
(3) months, including a breakdown of total Licensed Products sold in the U.S.
and outside the U.S.;
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
3.
<PAGE>
(b) compilation of billings thereon, and the allowable
deductions therefrom; a determination of the Net Sales Revenue and the
calculation of total royalties thereon; and
(c) the calculation of net royalty payable to ROCHE. If no
royalties are due, it shall be so reported.
The correctness and completeness of each such report shall be attested to
in writing by the responsible financial officer of CLONTECH's organization or by
CLONTECH's external auditor or by the chairman or other head of CLONTECH's
internal audit committee.
Simultaneously with the delivery of each such report, CLONTECH shall pay to
ROCHE the royalty and any other payments due under this Agreement for the period
covered by such report. All payments due ROCHE hereunder shall be sent by the
due date, together with said royalty report, to the following address:
Roche Molecular Systems, Inc.
P.O. Box 18139
Newark, NJ 07191
or to any other address that ROCHE may advise in writing.
3.4 PAYMENTS. All amounts payable hereunder by CLONTECH to ROCHE
shall be payable in United States currency. If CLONTECH shall fail to pay any
amount specified under this Agreement after the due date, the amount owed shall
bear interest at the Citibank NA base lending rate ("prime rate") plus [*], from
the due date until paid, provided, however, that if this interest rate is held
to be unenforceable for any reason, the interest rate shall be the maximum rate
allowed by law at the time the payment is due.
4. PRODUCT PROMOTION AND LABELING
4.1 CLONTECH and its distributors may indicate in promotional and
marketing materials for Licensed Products, including advertising, catalogues and
product inserts, that Licensed Products have been produced using PCR Technology
owned by ROCHE but shall clearly disclaim in such materials that Licensed
Products convey any license to practice under any patents within said
Technology. CLONTECH shall provide ROCHE with copies of any promotional or
marketing material that refers to the PCR process or technology prior to
distribution and ROCHE shall have thirty (30) days to comment on said material.
5. TECHNOLOGY NOTIFICATION
5.1 With respect to any invention, improvement or discovery
(hereinafter referred to as "Discoveries" in this Article) of CLONTECH made
after entering into this Agreement, resulting from work conducted under this
Agreement and being applicable to PCR, if CLONTECH decides to license that
Discovery to third parties, then CLONTECH agrees to provide to ROCHE, unless not
possible due to CLONTECH's pre-existing commitments to third parties relating to
said Discoveries, a reasonable opportunity to negotiate a license to use said
Discoveries in PCR-based diagnostic products and services. Such Discoveries
include, but are
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
4.
<PAGE>
not limited to, improvements of the PCR process or in the performance
of PCR-based assays, modifications to or new methods of performing PCR-based
assays, and improvements facilitating automation of the PCR process.
5.2 Any agreement reached between The Parties as a result of
CLONTECH's notification to ROCHE of a Discovery pursuant to Section 5.1 hereto
shall be upon terms and conditions negotiated in good faith by The Parties.
5.3 SURVIVAL. The provisions of this Article 5 shall survive any
termination of this Agreement. Any license granted to ROCHE pursuant to Article
5 shall terminate according to its own terms.
6. TERM; TERMINATION
6.1 TERM. Unless terminated earlier as provided in this Agreement,
the term of this Agreement, and all rights and immunities granted by ROCHE to
CLONTECH hereunder, shall extend for a period of five (5) years from the
Effective Date. Thereafter, the Agreement is automatically extended for the
remainder of the term of the patents included in PCR Technology unless ROCHE
notifies CLONTECH in writing of its intent to terminate the Agreement. After
the expiration of the initial five-year term, RMS may terminate this Agreement
at any time and for any reason, upon giving CLONTECH one year's notice of such
termination.
6.2 AUTOMATIC TERMINATION. The licenses granted hereunder to
CLONTECH shall automatically terminate upon (i) an adjudication of CLONTECH as
bankrupt or insolvent, or CLONTECH's admission in writing of its inability to
pay its obligations as they mature; (ii) as assignment by CLONTECH for the
benefit of creditors; (iii) CLONTECH's applying for or consenting to the
appointment of a receiver, trustee or similar officer's appointment without the
application or consent of CLONTECH, if such appointment shall continue
undischarged for a period of ninety (90) days; (iv) CLONTECH's instituting (by
petition, application, answer, consent or otherwise) any bankruptcy, insolvency
arrangement, or similar proceeding relating to CLONTECH under the laws of any
jurisdiction; or (v) the institution of any such proceeding (by petition,
application or otherwise) against CLONTECH, if such proceeding shall remain
undismissed for a period of ninety (90) days, or the issuance or levy of any
judgment, writ, warrant of attachment or execution or similar process against a
substantial part of the property CLONTECH, if such judgment, writ, or similar
process shall not be released, vacated or fully bonded within ninety (90) days
after its issue or levy.
6.3 BREACH. Upon any breach of or default under a material term of
this Agreement by CLONTECH, ROCHE may terminate this Agreement upon sixty (60)
days' written notice to CLONTECH. Said notice shall become effective at the end
of said sixty-day period, unless during said period CLONTECH fully cures such
breach or default and notifies ROCHE of such cure.
6.4 CHANGE OF CONTROL. ROCHE shall have the right to terminate this
Agreement by written notice to CLONTECH upon any change in the ownership or
control of CLONTECH or of its assets. Termination under this Section shall be
effective immediately upon receipt by CLONTECH of ROCHE's notice of termination.
For such purposes, a "change
5.
<PAGE>
in ownership or control" shall mean that [*] or more of the voting stock of
CLONTECH become subject to the control of a person or entity, or any related
group of persons or entities acting in concert, which person(s) or entity(ies)
did not control such proportion of voting stock as of the Effective Date of the
Agreement. Analogously, ROCHE shall have the right to terminate this Agreement
upon any transfer or sale of [*] or more of the assets of CLONTECH to another
party.
6.5 NOTICE BY CLONTECH. CLONTECH may terminate this Agreement at any
time on thirty (30) days' written notice to ROCHE.
6.6 REVERSION OF LICENSES. Upon termination of this Agreement as
provided herein, for any reason, all rights and immunities granted by ROCHE to
CLONTECH hereunder shall revert to or be retained by ROCHE. To the extent ROCHE
has licensed technology or know-how of CLONTECH pursuant to Article 5 hereto,
those licenses shall remain in force according to the terms of those agreements.
6.7 At the date of any termination of this Agreement, CLONTECH shall
cease using PCR Technology to make Licensed Products; provided however, that if
termination is pursuant to Section 6.1 and 6.2, CLONTECH may sell Licensed
Products actually in possession of CLONTECH prior to termination, subject to
CLONTECH's duty of paying ROCHE royalties thereon pursuant to Article 3 and
otherwise complying with the terms of this Agreement.
6.8 SURVIVAL OF OBLIGATIONS. CLONTECH's obligations to report to
ROCHE and to pay royalties to. ROCHE in respect of the Licensed Products shall
survive the termination or expiration of this Agreement for any reason.
7. CONFIDENTIALITY-PUBLICITY
7.1 Except as otherwise specifically provided in Section 4.1,
CLONTECH agrees to obtain ROCHE's approval before distributing any written
information, including but not limited to promotional and sales materials, to
third parties which contains or refers to ROCHE or this Agreement. ROCHE's
approval shall not be unreasonably withheld or delayed and, in any event,
ROCHE's decision shall be rendered within three (3) weeks of receipt of the
written information. Once approved, such materials, or abstracts of such
materials, which do not materially alter the context of the material originally
approved may be reprinted during the term of the Agreement without further
approval by ROCHE unless ROCHE has notified CLONTECH in writing of its decision
to withdraw permission for such use.
7.2 Each Party agrees that any financial, legal or business
information or any technical information disclosed to it (the "Receiving Party")
by the other (the "Disclosing Party") in connection with this Agreement shall be
considered confidential and proprietary and the Receiving Party shall not
disclose same to any Third Party and shall hold it in confidence for a period of
five (5) years and will not use it other than as permitted under this Agreement
provided, however, that any information, know-how or data which is orally
disclosed to the Receiving Party shall not be considered confidential and
proprietary unless such oral disclosure is reduced to writing and given to the
Receiving Party in written form within thirty (30) days after oral disclosure
thereof. Such confidential and proprietary information shall include,
* Portions of this exhibit have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment under Rule 406.
6.
<PAGE>
without limitation, marketing and sales information, commercialization plans
and strategies, research and development work plans, and technical information
such as patent applications, inventions, trade secrets, systems, methods,
apparatus, designs, tangible material, organisms and products and derivatives
thereof.
7.3 The above obligations of confidentiality shall not be applicable
to the extent:
(a) such information is general public knowledge or, after
disclosure hereunder, becomes general or public knowledge through no fault of
the Receiving Party; or
(b) such information can be shown by the Receiving Party by its
written records to have been in its possession prior to receipt thereof
hereunder; or
(c) such information is received by the Receiving Party from any
Third Party for use or disclosure by the Receiving Party without any obligation
to the Disclosing Party provided, however, that information received by the
Receiving Party from any Third Party funded by the Disclosing Party (e.g.
consultants, subcontractors, etc.) shall not be released from confidentiality
under this exception; or
(d) the disclosure of such information is reasonably needed for
use in connection with performing, offering and selling Licensed Products; or
(e) the disclosure of such information is required or desirable
to comply with or fulfill governmental requirements, submissions to governmental
bodies, or the securing of regulatory approvals.
7.4 With the exception of Section 4.1, each party shall, to the
extent reasonably practicable, maintain the confidentiality of the provisions of
this Agreement and shall refrain from making any public announcement or
disclosure of the terms of this Agreement without the prior consent of the other
party, except to the extent a party concludes in good faith that such disclosure
is required under applicable law or regulations, in which case the other party
shall be notified in advance.
7.5 SURVIVAL OF OBLIGATIONS. The obligations of the parties pursuant
to this Article 7 shall survive the termination or expiration of this Agreement
for any reason.
8. COMPLIANCE
8.1 In exercising any and all rights and in performing its
obligations hereunder, CLONTECH shall comply fully with any and all applicable
laws, regulations and ordinances and shall obtain and keep in effect licenses,
permits and other governmental approvals, whether at the federal, state or local
levels, necessary or appropriate to carry on its activities hereunder. CLONTECH
further agrees to refrain from any activities that would have an adverse effect
on the business reputation of ROCHE. ROCHE will advise CLONTECH of any such
activities and CLONTECH will have thirty (30) days to correct such activity.
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9. ASSIGNMENT
9.1 This Agreement or any of the rights granted hereunder shall not
be assigned or transferred by CLONTECH (including without limitation any
purported assignment or transfer that would arise from a sale or transfer of
some or all of CLONTECH's business, whether by way of a sale of assets, merger
or other reorganization or business combination). ROCHE may assign all or any
part of its rights and obligations under this Agreement at any time without the
consent of CLONTECH. CLONTECH agrees to execute such further acknowledgments or
other instruments as ROCHE may reasonably request in connection with such
assignment.
10. NEGATION OF WARRANTIES AND INDEMNITY
10.1 CONSTRUCTION. Nothing in this Agreement shall be construed as:
(a) a warranty or representation by ROCHE as to the validity or
scope of any PCR Technology;
(b) a warranty or representation that the practice of the PCR
Technology for the purposes hereunder is or will be free from infringement of
patents of third parties;
(c) an obligation to bring or prosecute actions or suits against
third parties for infringement;
(d) except as expressly set forth herein, conferring the right
to use in advertising, publicity or otherwise any trademark, trade name, or
names, or any contraction, abbreviation, simulation or adaptation thereof, of
ROCHE;
(e) conferring by implication, estoppel or otherwise any
license, right or immunity under any patents, patent applications or other
rights of ROCHE other than those specified in PCR Technology, regardless of
whether such patents and patent applications are dominant or subordinate to
those in PCR Technology, including without limitation, any patents or patent
applications that claim an oligonucleotide which otherwise would be a Licensed
Product;
(f) an obligation to furnish any know-how not provided or
incorporated in PCR Technology; or
(g) creating any agency, partnership, joint venture or similar
relationship between ROCHE and CLONTECH.
10.2 MERCHANTABILITY OR FITNESS. ROCHE MAKES NO EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
10.3 INDEMNITY. CLONTECH acknowledges that PCR Technology is
experimental in nature and agrees to take all reasonable precautions to prevent
death, personal
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injury, illness and property damage from the use of such technology. CLONTECH
shall assume full responsibility for its use of the PCR Technology and shall
defend, indemnify and hold ROCHE harmless from and against all liability,
demands, damages, expenses (including attorneys' and expert witness fees and
expenses) and losses for death, personal injury, illness, property damage or any
other injury or damage, including any damages or expenses arising in connection
with state or federal regulatory action in view of the use by CLONTECH, its
officers, directors, agents and employees, of the PCR Technology and CLONTECH's
manufacture, use or sale of Licensed Products, including but not limited to use
by CLONTECH's customers, except that CLONTECH shall not be liable to ROCHE for
injury or damage arising solely because of ROCHE's negligence.
11. GENERAL
11.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties as to the subject matter hereof, and all prior
negotiations, representations, agreements and understandings are merged into,
extinguished by and completely superseded by it. This Agreement may be modified
or amended only by a writing executed by authorized officers of each of the
parties.
11.2 NOTICES. Any notice required or permitted to be given by this
Agreement shall be given by postpaid, first class, registered or certified mail,
or by courier, properly addressed to the other party at the respective address
as shown below:
If to ROCHE: Roche Molecular Systems, Inc.
340 Kingsland Street
Nutley, New Jersey 07110
Attn: Corporate Secretary
with a copy to: Roche Molecular Systems, Inc.
1145 Atlantic Avenue, Suite 100
Alameda, California 94501
Attn: Licensing Manager
If to CLONTECH:
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Attn:
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Either party may change its address by providing written notice to the other
party. Unless otherwise specified herein, any notice given in accordance with
the foregoing shall be deemed given within four (4) full business days after the
day of mailing, or one full day after the date of delivery to the courier, as
the case will be.
11.3 GOVERNING LAW AND VENUE. This Agreement and its effect are
subject to and shall be construed and enforced in accordance with the law of the
State of New Jersey, U.S.A., except as to any issue which by the law of New
Jersey depends upon the validity, scope or enforceability of any patent within
the PCR Technology, which issue shall be determined in accordance with the
applicable patent laws of the United States. The Parties agree that the
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exclusive jurisdiction and venue for any dispute or controversy arising from
this Agreement shall be in the United States District Court for the District of
New Jersey if federal jurisdiction exists, and if no federal jurisdiction
exists, then in the Superior Court of New Jersey.
11.4 SEVERABILITY. Nothing in this Agreement shall be construed so as
to require the commission of any act contrary to law, and wherever there is any
conflict between any provision of this Agreement or concerning the legal right
of The Parties to enter into this contract and any statute, law, ordinance or
treaty, the latter shall prevail, but in such event the affected provisions of
the Agreement shall be curtailed and limited only to the extent necessary to
bring it within the applicable legal requirements.
11.5 If any provision of this Agreement is held to be unenforceable
for any reason, it shall be adjusted rather than voided, if possible, in order
to achieve the intent of The Parties to the extent possible. In any event, all
other provisions of this Agreement shall be deemed valid and enforceable to the
full extent possible.
11.6 HEADINGS. The section headings used in this Agreement are
intended principally for convenience and shall not, by themselves, determine the
rights and obligations of The Parties to this Agreement.
IN WITNESS WHEREOF, The Parties hereto have set their hands and seals and
duly executed this Agreement on the date(s) indicated below, to be effective on
the Effective Date.
ROCHE MOLECULAR, INC. CLONTECH LABORATORIES, INC.
By: /s/ Thomas White By: /s/ Ken Fong
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Thomas White, Ph.D. Kenneth Fong, Ph.D
Title: Vice President, Research Title: President & Chief Executive
& Development Officer
Date: 3/28/98 Date: 5/7/98
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10.
