<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 26, 1996
REGISTRATION NO. 333-17657
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BIOSITE DIAGNOSTICS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3826 33-0288606
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
11030 ROSELLE STREET
SAN DIEGO, CALIFORNIA 92121
(619) 455-4808
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
KIM D. BLICKENSTAFF
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BIOSITE DIAGNOSTICS INCORPORATED
11030 ROSELLE STREET
SAN DIEGO, CALIFORNIA 92121
(619) 455-4808
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS)
------------------------
COPIES TO:
<TABLE>
<S> <C>
THOMAS E. SPARKS, JR., ESQ. ALAN C. MENDELSON, ESQ.
JOHN L. DONAHUE, ESQ. D. BRADLEY PECK, ESQ.
GEORGE A. GUCKER, ESQ. NANCY E. DENYES, ESQ.
PILLSBURY MADISON & SUTRO LLP COOLEY GODWARD LLP
P.O. BOX 7880 4365 EXECUTIVE DRIVE, SUITE 1100
SAN FRANCISCO, CA 94120-7880 SAN DIEGO, CA 92121-2128
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
[ ] If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
[ ] If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS (Subject to Completion)
Dated December 26, 1996
2,000,000 SHARES
LOGO
COMMON STOCK
------------------------
All of the 2,000,000 shares of Common Stock, $.01 par value per share (the
"Common Stock"), offered hereby are being sold by Biosite Diagnostics
Incorporated ("Biosite" or the "Company"). Prior to this offering, there has
been no public market for the Common Stock of the Company. It is estimated that
the initial public offering price will be between $11.00 and $13.00 per share.
See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. Application has been made to have
the Common Stock approved for quotation on the Nasdaq National Market under the
symbol "BSTE."
------------------------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
PRICE TO PROCEEDS TO
PUBLIC UNDERWRITING COMPANY(2)
DISCOUNTS AND
COMMISSIONS(1)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
Total (3)......................... $ $ $
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</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated to be $700,000.
(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase an aggregate of up to 300,000
additional shares at the Price to Public less Underwriting Discounts and
Commissions to cover over-allotments, if any. If all such additional shares
are purchased, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------------
The Common Stock is offered by the several Underwriters named herein when,
as and if received and accepted by them, subject to their right to reject orders
in whole or in part and subject to certain other conditions. It is expected that
delivery of certificates for the shares will be made at the offices of Cowen &
Company, New York, New York on or about , 1997.
------------------------
COWEN & COMPANY ALEX. BROWN & SONS
INCORPORATED
, 1997
<PAGE> 3
TRIAGE(R) PANEL
FOR DRUGS OF ABUSE
EMERGENCY ROOM SCREENING
TRIAGE(R) PLUS TCA
EMERGENCY ROOM SCREENING
TRIAGE(R) INTERVENTION
WORKPLACE SCREENING
MERCK TRIAGE(R)
INTERNATIONAL MARKETS
[PHOTOGRAPHS SHOWING TRIAGE DOA TEST DEVICE AND VARIOUS TRIAGE DOA PRODUCT
CONFIGURATIONS]
[ARTWORK]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Biosite(R) and Triage(R) are registered trademarks of the Company.
Immediate Response Diagnostics(TM), ExpressTest(SM), Triage CareLink(TM) and the
Company's logo are servicemarks or trademarks of the Company. This Prospectus
also includes trade names and trademarks of companies other than Biosite.
TRIAGE(R)
PANEL FOR
DRUGS OF ABUSE
<PAGE> 4
BIOSITE'S TRIAGE
PANELS AND TRIAGE CARELINK SYSTEM
PRODUCT ATTRIBUTES
TRIAGE(R)
PANEL FOR DRUGS OF ABUSE
IS USED IN A VARIETY OF
SETTINGS FOR RAPID DRUG SCREENING
RAPID RESULTS
EASE OF USE
HIGH ANALYTICAL ACCURACY
MULTIPLE ANALYTE DETECTION
RELIABILITY
COST EFFECTIVENESS
[PHOTOGRAPHS OF CERTAIN SETTINGS IN WHICH TRIAGE DOA IS USED (HOSPITAL
LABORATORIES, EMERGENCY ROOMS AND WORKPLACE SCREENING)]
<PAGE> 5
[PHOTOGRAPHS SHOWING THE COMPANY'S PRODUCTS UNDER DEVELOPMENT]
TRIAGE(R) PANELS
TRIAGE(R) O & P TRIAGE(R) C.DIFF TRIAGE(R) ENTERIC
(PARASITE SCREENING) (PATHOGEN DETECTION) (PATHOGEN SCREENING)
TRIAGE(R) CARELINK SYSTEM
TRIAGE(R) CARDIAC TRIAGE(R) TRANSPLANT
(ACUTE MYOCARDIAL (CYCLOSPORIN MONITORING)
INFARCTION DETECTION)
THE COMPANY'S PRODUCTS IN DEVELOPMENT ARE IN VARIOUS STAGES OF RESEARCH OR
DEVELOPMENT AND HAVE NOT BEEN APPROVED BY THE UNITED STATES FOOD AND DRUG
ADMINISTRATION FOR COMMERCIAL SALE. THERE CAN BE NO ASSURANCE THAT THE COMPANY'S
PRODUCTS IN DEVELOPMENT WILL BE SUCCESSFULLY DEVELOPED OR APPROVED BY REGULATORY
AUTHORITIES FOR COMMERCIAL SALE.
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes appearing elsewhere in this
Prospectus. Except as set forth in the financial statements and notes thereto or
otherwise as specified herein, all information in this Prospectus (i) assumes no
exercise of the Underwriters' over-allotment option, (ii) reflects the
conversion of all outstanding shares of Preferred Stock of the Company into
shares of Common Stock upon the closing of this offering and (iii) includes
92,222 shares which will be issued upon conversion of a $1.0 million debenture
into shares of Common Stock upon the closing of this offering, assuming an
initial public offering price of $12.00 per share and accrued interest on the
debenture through January 31, 1997. See "Description of Capital Stock,"
"Underwriting" and Notes 1, 6 and 7 of Notes to Financial Statements.
THE COMPANY
Biosite Diagnostics Incorporated ("Biosite" or the "Company") develops,
manufactures and markets rapid, accurate and cost-effective diagnostic products
that improve the quality of patient care and simplify the practice of laboratory
medicine. The Company believes that its Immediate Response Diagnostics can have
an important impact on medical decisions, patient care and the cost of medical
treatment. The Company's first product, Triage Panel for Drugs of Abuse ("Triage
DOA"), a small self-contained test capable of detecting a broad spectrum of
commonly overdosed prescription and illicit drugs in approximately 10 minutes,
is used by over 2,600 hospitals and emergency departments. Since its
introduction in 1992, over 4.2 million Triage DOA panels have been sold
worldwide for use in hospital emergency department screening and workplace
testing. The Company is developing several additional products for applications
where the Company believes its Immediate Response Diagnostics can play an
important role in improving patient care. Products under development include
tests that are intended to aid in the diagnosis of heart attacks, the dosing of
certain therapeutic drugs, the management of certain chronic diseases and the
detection of certain bacterial and parasitic infections.
In 1995, the worldwide market for immunoassay tests exceeded $5.1 billion.
Although early manual immunoassay tests provided high levels of sensitivity for
analyte detection, these tests suffered from short shelf lives, long reaction
times, a need for radioactive labels and inconsistent results. In response to
these limitations, automated immunoassay analyzers have been developed to
simplify the performance of antibody-based tests. However, these machines are
large and complex, have lengthy turnaround times and require high volumes of
sample throughput to justify the significant investment in equipment and
technical staff.
In recent years, there has been a continuing shift from the use of such
analyzers to more technologically advanced point-of-care tests that can be
performed in a matter of minutes. Although certain simple single analyte
diagnostic tests have been developed, such tests have remained incapable of
precise, multi-analyte detection or highly sensitive quantitative measurements.
As a result, medical tests that require multiple analytes or precise
quantitation of the target analyte have remained the domain of immunoassay
analyzers. The Company believes that there is significant market potential for
advanced point-of-care diagnostic products that provide quick and accurate
diagnosis during a patient visit, shortening the decision time to medical
intervention and minimizing the need for additional patient follow-up, thereby
reducing overall health care delivery costs.
Biosite's Immediate Response Diagnostics technology is based on proprietary
advances in several core scientific and engineering disciplines, including
antibody development and engineering, analyte cloning and synthesis, signaling
chemistry and micro capillary fluidics, which make possible the development and
manufacture of rapid, accurate and cost-effective point-of-care diagnostics. The
Company has utilized its core technologies to develop two distinct product
platforms: the Triage Panel for qualitative visual readings and the Triage
CareLink System for quantitative measurements. The Company's products are
designed to measure either a single analyte or multiple analytes simultaneously
and to allow for the qualitative or quantitative analysis of various samples,
including urine, serum, plasma, whole blood and stool. Both of the Company's
product platforms are designed to provide rapid results, ease of use, high
analytical accuracy and the capability of performing multiple analyses in a
reliable and cost-effective testing device.
3
<PAGE> 7
Triage DOA, based on the Company's Triage Panel platform, is a qualitative,
single sample urine screen that identifies eight commonly abused prescription
and illicit drugs or drug classes and provides results in approximately 10
minutes. Emergency physicians have estimated that drug abuse is implicated in
5-10% of the emergency department visits in the United States each year. The
Company believes that it is a leading provider of immunoassays for drug
screening in hospitals. In 1995, sales of Triage DOA product lines exceeded $25
million. The Company has additional Triage Panel products under development for
the qualitative detection of bacterial and parasitic infections.
The Triage CareLink System under development is designed to provide rapid,
quantitative results for immunoassay tests. The Triage CareLink System consists
of two parts: a small single-use test cartridge and a proprietary portable
fluorescent meter designed to read the sample at the point-of-care. The Company
currently is developing two applications using this technology: Triage Cardiac,
to quantify a panel of cardiac markers implicated in acute myocardial infarction
("AMI"), and Triage Transplant, to monitor the concentration of cyclosporine, an
immunosuppressant drug prescribed for organ transplant recipients to prevent
organ rejection.
The Company has entered into several strategic arrangements with major
pharmaceutical and diagnostic companies, including Sandoz Pharma Ltd. ("Sandoz")
for the development of Triage Transplant; LRE Relais + Electronik GmbH ("LRE")
for the development of the fluorescent meter used in the Triage CareLink System;
and Merck KGaA ("Merck") and ARKRAY KDK Corporation, formerly known as Kyoto
Dai-ichi Kagaku Co., Ltd. ("KDK"), for the development of Triage Cardiac. In
addition, the Company uses Curtin Matheson Scientific, Inc., a subsidiary of
Fisher International Inc. ("CMS"), to distribute Triage DOA to U.S.
hospital-based laboratories and emergency departments and has built a small
direct sales force to address the workplace testing segment of the market for
Triage DOA. Merck is the exclusive distributor of Triage DOA in certain
countries in Europe, Latin America, the Middle East and Africa and in Pakistan
and India.
The Company was incorporated in Delaware in 1988. The Company's executive
offices are located at 11030 Roselle Street, San Diego, California 92121, and
its telephone number is (619) 455-4808.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 2,000,000 shares
Common Stock to be outstanding after the
offering................................... 11,885,168 shares(1)
Use of proceeds.............................. For expansion of sales and marketing
activities, research and development,
expansion and development of manufacturing
capabilities, working capital and general
corporate purposes.
Proposed Nasdaq symbol....................... BSTE
</TABLE>
- ---------------
(1) Excludes 1,180,204 shares reserved for issuance upon exercise of stock
options outstanding at November 30, 1996. See "Capitalization,"
"Management -- Executive Compensation" and Note 7 of Notes to Financial
Statements.
4
<PAGE> 8
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales............................... $ -- $ 2,920 $ 9,866 $16,320 $25,147 $18,236 $20,225
Cost of sales........................... -- 1,612 3,268 4,416 5,649 3,781 4,318
------- ------- ------- ------- ------- ------- -------
Gross profit............................ -- 1,308 6,598 11,904 19,498 14,455 15,907
Research and development................ 2,793 2,593 2,796 3,836 6,553 4,602 6,515
Selling, general and administrative..... 1,771 3,622 4,841 5,960 7,134 5,203 6,116
------- ------- ------- ------- ------- ------- -------
Total operating expenses................ 4,564 6,215 7,637 9,796 13,687 9,805 12,631
Income (loss) from operations........... (4,564) (4,907) (1,039) 2,108 5,811 4,650 3,276
Interest and other income, net.......... 260 630 613 649 1,647 1,253 1,441
Settlement of patent matters............ -- -- -- (338) (1,217) (743) (2,368)
------- ------- ------- ------- ------- ------- -------
Income (loss) before benefit (provision)
for income taxes...................... (4,304) (4,277) (426) 2,419 6,241 5,160 2,349
Benefit (provision) for income taxes.... -- -- -- (63) 1,667 (132) 264
------- ------- ------- ------- ------- ------- -------
Net income (loss)....................... $(4,304) $(4,277) $ (426) $ 2,356 $ 7,908 $ 5,028 $ 2,613
======= ======= ======= ======= ======= ======= =======
Net income (loss) per share............. $ (0.61) $ (0.49) $ (0.04) $ 0.22 $ 0.74 $ 0.47 $ 0.24
======= ======= ======= ======= ======= ======= =======
Common and common equivalent shares used
in computing per share amounts(1)..... 7,058 8,754 10,098 10,553 10,766 10,721 10,832
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------
ACTUAL AS ADJUSTED(2)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments.............................. $10,169 $ 31,789
Working capital................................................................ 13,967 35,667
Total assets................................................................... 28,968 50,588
Notes payable and capital lease obligations, less current portion.............. 3,234 2,234
Stockholders' equity........................................................... 21,181 43,881
</TABLE>
- ---------------
(1) Computed on the basis described in Note 1 of Notes to Financial Statements.
(2) Adjusted to reflect the sale by the Company of 2,000,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $12.00
per share and the application of the estimated net proceeds therefrom. See
"Use of Proceeds" and "Capitalization."
5
<PAGE> 9
The discussion in this Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed here. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed in the
sections entitled "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business," as well as those
discussed elsewhere in this Prospectus.
RISK FACTORS
In evaluating the Company's business, prospective investors should consider
carefully the following risk factors in addition to the other information
presented in this Prospectus.
DEPENDENCE ON DEVELOPMENT AND INTRODUCTION OF NEW PRODUCTS
Except for Triage DOA, all of the Company's products are still under
development, and there can be no assurance that such products will be
successfully developed or commercialized on a timely basis, if at all. The
Company believes that its revenue growth and profitability will substantially
depend upon its ability to complete development of and successfully introduce
these new products. In addition, the successful development of some of these new
products will depend on the development of new technologies, including the
Triage CareLink System's fluorescent meter and assay devices. The Company will
be required to undertake time-consuming and costly development activities and
seek regulatory approval for these new products. There can be no assurance that
the Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of these new products, that
regulatory clearance or approval of any new products will be granted by the U.S.
Food and Drug Administration ("FDA") or foreign regulatory authorities on a
timely basis, if at all, or that the new products will be successfully
commercialized. The Company has limited resources to devote to the development
of all its products and consequently a delay in the development of one product
may delay the development of other products. In order to successfully
commercialize any new products, the Company will be required to establish and
maintain reliable, cost-efficient, high-volume manufacturing capacity for such
products. If the Company is unable, for technological or other reasons, to
complete the development, introduction or scale-up of manufacturing of any new
product or if any new product is not approved for marketing or does not achieve
a significant level of market acceptance, the Company's business, financial
condition and results of operations would be materially and adversely affected.
See "Business -- Products and Products Under Development," "-- Manufacturing"
and "-- Government Regulation."
FUTURE OPERATING RESULTS AND QUARTERLY FLUCTUATIONS
The Company first achieved profitability in fiscal 1994 and prior to that
time incurred significant operating losses. There can be no assurance that the
Company will remain profitable on a quarterly or annual basis in the future. The
Company believes that future operating results will be subject to quarterly
fluctuations due to a variety of factors, including whether and when new
products are successfully developed and introduced by the Company, market
acceptance of current or new products, regulatory delays, product recalls,
manufacturing delays, shipment problems, seasonal customer demand, the timing of
significant orders, changes in reimbursement policies, competitive pressures on
average selling prices, changes in the mix of products sold and patent
conflicts. Operating results would also be adversely affected by a downturn in
the market for the Company's current and future products, if any, order
cancelations or order rescheduling. Because the Company is continuing to
increase its operating expenses for personnel and new product development, the
Company's operating results would be adversely affected if its sales did not
correspondingly increase or if its product development efforts are unsuccessful
or subject to delays. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
NEAR-TERM DEPENDENCE ON TRIAGE DOA; RISK OF OBSOLESCENCE; CONCENTRATION OF
PRODUCT SALES
Sales of Triage DOA have to date accounted for all of the Company's sales.
The Company expects its revenue and profitability will substantially depend on
the sale of Triage DOA for the foreseeable future. A
6
<PAGE> 10
reduction in demand for Triage DOA would have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
believes that growth in sales of Triage DOA will slow as the available U.S.
market becomes saturated. Competitive pressures could also erode the Company's
profit margins for Triage DOA. The Company's continued growth will depend on its
ability to successfully develop and commercialize other products and to gain
additional acceptance of Triage DOA. There can be no assurance that the Company
will be able to successfully develop and commercialize new products or that the
Company will be able to maintain or expand its share of the drug testing market.
Technological change or the development of new or improved diagnostic
technologies could result in the Company's products becoming obsolete or
noncompetitive. See "Business -- Products and Products Under Development."
DEPENDENCE ON OTHERS
Biosite's strategy for the research, development, commercialization and
distribution of certain of its products entails entering into various
arrangements with corporate partners, licensors, licensees and others, and is
dependent upon the success of these parties in performing their
responsibilities. There can be no assurance that such parties will perform their
obligations as expected or that any revenue will be derived from such
arrangements.
The Company relies upon distributors and its own sales force to distribute
Triage DOA and may rely upon distributors to distribute products under
development. Triage DOA is currently marketed pursuant to exclusive distribution
agreements in the U.S. medical market by CMS (which accounted for 80% of product
sales in the first nine months of 1996) and in certain countries in Europe,
Latin America, the Middle East and Africa and in Pakistan and India by Merck.
The CMS distribution agreement has minimum quarterly sales milestones which, if
the milestones are not met, allows the Company to terminate the agreement,
obligates CMS to pay Biosite a penalty and allows the Company to appoint a new
distributor or to sell Triage DOA directly in the U.S. medical market. The
Company anticipates that it may enter into additional distribution agreements
with respect to its products currently under development and products that it
develops in the future, if any of such products receive the requisite regulatory
clearance or approvals. There can be no assurance that the Company will be able
to enter into such agreements on acceptable terms, if at all.
Biosite has also entered into agreements with, among others, Merck, Sandoz
and KDK for the development and marketing of products. The agreements are
subject to certain rights of termination, and there can be no assurance that any
such agreement will not be terminated. There also can be no assurance that the
Company's collaborators will abide by their contractual obligations or will not
discontinue or sell their current lines of business. As part of its decision to
refocus away from certain aspects of the human diagnostics business, Merck has
informed the Company that Merck is considering assigning its rights concerning
the marketing of Triage Cardiac either to a third party or back to the Company.
There also can be no assurance that any of the research for which the Company
receives or provides funding will lead to the development of products. The
Company intends to enter into additional development and marketing agreements.
However, there can be no assurance that the Company will be able to enter into
such agreements on acceptable terms, if at all.
If any of the Company's distribution or marketing agreements are terminated
and the Company is unable to enter into replacement agreements or if the Company
elects to distribute new products directly, the Company would have to invest in
additional sales and marketing resources, including additional field sales
personnel, which would significantly increase future sales and marketing
expenses. The Company currently has limited experience in direct sales,
marketing and distribution of its products. There can be no assurance that the
Company's direct sales, marketing and distribution efforts would be successful
or that revenue from such efforts would exceed expenses. Further, there can be
no assurance that Biosite would be able to enter into new distribution or
marketing agreements on satisfactory terms, if at all.
The Company is developing with LRE a hand-held point-of-care fluorescent
meter for use in Triage CareLink System products. The meter will be programmed
to run a specific test through the use of changeable proprietary software which
is also under development by LRE. There can be no assurance that LRE will
develop the hardware or software on schedule, if at all, or that new software
will be developed to permit the meter to be used for another Triage CareLink
System product. See "Business -- Strategic and Distribution Arrangements."
7
<PAGE> 11
INTENSELY COMPETITIVE INDUSTRY; RAPID TECHNOLOGICAL CHANGE
The market in which the Company competes is intensely competitive.
Biosite's competitors include health care companies that manufacture
laboratory-based tests and analyzers, as well as clinical and hospital-based
laboratories. Currently, the majority of diagnostic tests used by physicians and
other health care providers are performed by independent clinical and
hospital-based laboratories. The Company expects that these laboratories will
compete vigorously to maintain their dominance of the testing market. In order
to achieve market acceptance for its products, the Company will be required to
demonstrate that its products are an attractive alternative to testing performed
by clinical and hospital-based laboratories. This will require physicians to
change their established means of having such tests performed. There can be no
assurance that the Company's products will be able to compete with the testing
services provided by these laboratories. In addition, companies with a
significant presence in the diagnostic market, such as Abbott Laboratories,
Boehringer Mannheim GmbH ("Boehringer Mannheim"), Chiron Diagnostics, Clinical
Diagnostic Systems, a division of Johnson & Johnson, DADE International, and
Roche Biosciences, Inc., have developed or are developing diagnostic products
that do or will compete with the Company's products. These competitors have
substantially greater financial, technical, research and other resources and
larger, more established marketing, sales, distribution and service
organizations than the Company. Moreover, such competitors offer broader product
lines and have greater name recognition than the Company, and offer discounts as
a competitive tactic. In addition, several smaller companies are currently
making or developing products that compete with or will compete with those of
the Company. There can be no assurance that the Company's competitors will not
succeed in developing or marketing technologies or products that are more
effective or commercially attractive than the Company's current or future
products, or that would render the Company's technologies and products obsolete.
Moreover, there can be no assurance that the Company will have the financial
resources, technical expertise or marketing, distribution or support
capabilities to compete successfully in the future. In addition, there can be no
assurance that competitors, many of which have made substantial investments in
competing technologies that may be more effective than the Company's
technologies, will not prevent, limit or interfere with the Company's ability to
make, use or sell its products either in the United States or in international
markets. See "Business -- Products and Products Under Development,"
"-- Technology" and "-- Competition."
UNCERTAINTY OF PATENT AND PROPRIETARY TECHNOLOGY PROTECTION; LICENSE OF
TECHNOLOGY OF THIRD PARTIES
The Company's ability to compete effectively will depend in part on its
ability to develop and maintain proprietary aspects of its technology, and to
operate without infringing the proprietary rights of others or to obtain rights
to such proprietary rights. Biosite has U.S. and foreign issued patents and is
currently prosecuting patent applications in the United States and with certain
foreign patent offices. There can be no assurance that any of the Company's
pending patent applications will result in the issuance of any patents, that the
Company's patent applications will have priority over others' applications, or
that, if issued, any of the Company's patents will offer protection against
competitors with similar technologies. There can be no assurance that any
patents issued to the Company will not be challenged, invalidated or
circumvented in the future or that the rights created thereunder will provide a
competitive advantage.
Litigation may be necessary to enforce any patents issued to the Company,
to protect trade secrets or know-how owned by the Company or to determine the
enforceability, scope and validity of the proprietary rights of others. In March
1996, the Company settled a potential patent infringement claim by obtaining a
license to the contested patent in return for a one-time payment of $2.2
million. In September 1996, the Company settled a patent infringement lawsuit
filed by Abbott Laboratories and obtained a license to the contested patent in
return for the payment of $5.5 million and the agreement to pay certain
royalties. There can be no assurance that the Company will not in the future
become subject to patent infringement claims and litigation or interference
proceedings conducted in the U.S. Patent and Trademark Office ("USPTO") to
determine the priority of inventions. The defense and prosecution of
intellectual property suits, USPTO interference proceedings, and related legal
and administrative proceedings will result in substantial expense to the Company
and significant diversion of effort by the Company's technical and management
personnel. An adverse determination in litigation or interference proceedings to
which the Company may become a party
8
<PAGE> 12
could subject the Company to significant liabilities to third parties. Further,
either as the result of such litigation or proceedings or otherwise, the Company
may be required to seek licenses from third parties which may not be available
on commercially reasonable terms, if at all.
Triage DOA and products under development may incorporate technologies that
are the subject of patents issued to, and patent applications filed by, others.
The Company has obtained licenses for certain technologies. However, there can
be no assurance that the Company will be able to obtain licenses for technology
patented by others on commercially reasonable terms, if at all, that it will be
able to develop alternative approaches if unable to obtain licenses or that the
Company's current and future licenses will be adequate for the operation of
Biosite's business. The failure to obtain necessary licenses or to identify and
implement alternative approaches would prevent the Company from commercializing
certain of its products under development and would have a material adverse
effect on the Company's business, financial condition and results of operations.
Biosite is aware of a U.S. patent owned by Celltech Limited ("Celltech")
relating to the manufacture of antibodies, such as those developed or being
developed by Biosite for several products, including Triage Cardiac. Biosite is
also aware that this patent is the subject of an interference proceeding in the
USPTO which was initiated in February 1991 with a patent application filed by
Genentech, Inc. ("Genentech"). In June 1996, the European Patent Office ("EPO")
invalidated, following an opposition, certain claims under Celltech's
corresponding EPO-granted patent which are relevant to Biosite's products and
products under development. Celltech has indicated that it will appeal such
decision. If it is determined that aspects of the manufacturing of Biosite's
antibodies are covered by patent claims stemming from the interference or if
Celltech were to have such claims upheld on appeal, Biosite may be required to
obtain a license under such patents and corresponding patents in other
countries. There can be no assurance that a license would be made available to
Biosite on commercially reasonable terms, if at all. If such license is required
and not obtained the Company might be prevented from using certain of its
manufacturing technologies. The Company's failure to obtain any required
licenses could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company also relies upon trade secrets, technical know-how and
continuing invention to develop and maintain its competitive position. There can
be no assurance that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the Company's trade secrets or disclose such technology, that the Company can
meaningfully protect its right to its trade secrets, or that the Company will be
capable of protecting its rights to its trade secrets.
Others may have filed and in the future are likely to file patent
applications that are similar or identical to those of the Company. To determine
the priority of inventions, the Company may have to participate in interference
proceedings declared by the USPTO that could result in substantial cost to the
Company. No assurance can be given that any patent application of another will
not have priority over patent applications filed by the Company.
The commercial success of the Company also depends in part on the Company
neither infringing patents or proprietary rights of third parties nor breaching
any licenses that may relate to the Company's technologies and products. The
Company is aware of several third-party patents that relate to the Company's
technology. There can be no assurance that the Company does not or will not
infringe these patents, or other patents or proprietary rights of third parties.
In addition, the Company has received and may in the future receive notices
claiming infringement from third parties as well as invitations to take licenses
under third party patents. Any legal action against the Company or its
collaborative partners claiming damages and seeking to enjoin commercial
activities relating to the Company's products and processes affected by third
party rights, in addition to subjecting the Company to potential liability for
damages may require the Company or its collaborative partner to obtain a license
in order to continue to manufacture or market the affected products and
processes. There can be no assurance that the Company or its collaborative
partners would prevail in any such action or that any license (including
licenses proposed by third parties) required under any such patent would be made
available on commercially acceptable terms, if at all. There are a significant
number of U.S. and foreign patents and patent applications in the Company's
areas of interest, and the Company believes that
9
<PAGE> 13
there may be significant litigation in the industry regarding patent and other
intellectual property rights. If the Company becomes involved in such
litigation, it could consume a substantial portion of the Company's managerial
and financial resources, which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Proprietary Technology and Patents."
GOVERNMENT REGULATION
The testing, manufacture and sale of the Company's products are subject to
regulation by numerous governmental authorities, principally the FDA and
corresponding state and foreign regulatory agencies. Pursuant to the Federal
Food, Drug, and Cosmetic Act, and the regulations promulgated thereunder, the
FDA regulates the preclinical and clinical testing, manufacture, labeling,
distribution and promotion of medical devices. The Company will not be able to
commence marketing or commercial sales in the United States of new products
under development until it receives clearance or approval from the FDA, which
can be a lengthy, expensive and uncertain process. Noncompliance with applicable
requirements can result in, among other things, fines, injunctions, civil
penalties, recall or seizure of products, total or partial suspension of
production, failure of the government to grant premarket clearance or premarket
approval for devices, withdrawal of marketing clearances or approvals, and
criminal prosecution. The FDA also has the authority to request recall, repair,
replacement or refund of the cost of any device manufactured or distributed by
the Company.
Any devices manufactured or distributed by the Company pursuant to FDA
clearance or approvals are subject to pervasive and continuing regulation by the
FDA and certain state agencies. Before a new device can be introduced in the
market, the manufacturer must generally obtain FDA clearance of a 510(k)
notification or FDA approval of a pre-market approval ("PMA") application. The
PMA approval process is more expensive, uncertain and lengthy than the 510(k)
clearance process. The Company is uncertain of the regulatory path to market
that the FDA will ultimately apply to the Company's products currently in
development. Although Triage DOA received 510(k) clearance, a PMA may be
required for Triage Cardiac and Triage Transplant products now in development.
There can be no assurance that with respect to any of the Company's products in
development, the FDA will not determine that the Company must adhere to the more
costly, lengthy and uncertain PMA approval process. Modifications to a device
that is the subject of an approved PMA application, its labeling or
manufacturing process may require approval by the FDA of a PMA supplement or a
new PMA application. For any devices that are cleared through the 510(k)
process, modifications or enhancements that could significantly affect safety or
effectiveness, or constitute a major change in the intended use of the device,
will require new 510(k) submissions.
There can be no assurance that the Company will be able to obtain necessary
regulatory approvals or clearances for its products on a timely basis, if at
all, and delays in receipt of or failure to receive such approvals or
clearances, the loss of previously received approvals or clearances, limitations
on intended use imposed as a condition of such approvals or clearances, or
failure to comply with existing or future regulatory requirements would have a
material adverse effect on the Company's business, financial condition and
results of operations.
Before the manufacturer of a device can submit the device for FDA clearance
or approval, it generally must conduct a clinical investigation of the device.
Although clinical investigations of most devices are subject to the
investigational device exemption ("IDE") requirements, clinical investigations
of in vitro diagnostic ("IVD") tests, such as all of the Company's products and
products under development, are exempt from the IDE requirements, including the
need to obtain the FDA's prior approval, provided the testing is noninvasive,
does not require an invasive sampling procedure that presents a significant
risk, does not intentionally introduce energy into the subject, and is not used
as a diagnostic procedure without confirmation by another medically established
test or procedure. In addition, the IVD must be labeled for research use only
("RUO") or investigational use only ("IUO"), and distribution controls must be
established to assure that IVDs distributed for research or clinical
investigation are used only for those purposes.
The Company intends to conduct clinical investigations of its products
under development, which will entail distributing them in the United States on
an IUO basis. There can be no assurance that the FDA would agree that the
Company's IUO distribution of its IVD products under development will meet the
requirements
10
<PAGE> 14
for IDE exemption. Furthermore, failure by the Company or the recipients of its
products under development to maintain compliance with the IDE exemption
requirements could result in enforcement action by the FDA, including, among
other things, the loss of the IDE exemption or the imposition of other
restrictions on the Company's distribution of its products under development,
which would adversely affect the Company's ability to conduct the clinical
investigations necessary to support marketing clearance or approval.
Manufacturers of medical devices for marketing in the United States are
required to adhere to applicable regulations setting forth detailed current Good
Manufacturing Practices ("cGMP") requirements, which include testing, control
and documentation requirements. Manufacturers must also comply with Medical
Device Reporting ("MDR") requirements that a manufacturer report to the FDA any
incident in which its product may have caused or contributed to a death or
serious injury, or in which its product malfunctioned and would be likely to
cause or contribute to a death or serious injury upon recurrence. Labeling and
promotional activities are subject to scrutiny by the FDA and, in certain
circumstances, by the Federal Trade Commission. Current FDA enforcement policy
prohibits the marketing of approved medical devices for unapproved uses.
The Company is subject to routine inspection by the FDA and certain state
agencies for compliance with cGMP requirements, MDR requirements and other
applicable regulations. The FDA has recently finalized changes to the cGMP
requirements, including the addition of design controls, that will likely
increase the cost of compliance. There can be no assurance that the Company will
not incur significant costs to comply with laws and regulations in the future or
that such laws and regulations will not have a material adverse effect upon the
Company's business, financial condition and results of operation.
The use of Biosite's products is also affected by the Clinical Laboratory
Improvement Amendments of 1988 ("CLIA") and related federal and state
regulations which provide for regulation of laboratory testing. The scope of
these regulations includes quality control, proficiency testing, personnel
standards and federal inspections. CLIA categorizes tests as "waived,"
"moderately complex" or "highly complex," on the basis of specific criteria.
There can be no assurance that any future amendment of CLIA or the promulgation
of additional regulations impacting laboratory testing would not have a material
adverse effect on the Company's ability to market its products or on its
business, financial condition and results of operations.
DEPENDENCE ON SOLE-SOURCE SUPPLIERS
Certain key components and raw materials used in the manufacture of Triage
DOA are currently provided by single-source vendors. Although the Company
believes that alternative sources for such components and raw materials are
available, any supply interruption in a sole-sourced component of raw material
would have a material adverse effect on the Company's ability to manufacture
Triage DOA until a new source of supply is qualified and, as a result, would
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, an uncorrected impurity or supplier's
variation in a raw material, either unknown to the Company or incompatible with
the Company's Triage DOA manufacturing process, could have a material adverse
effect on the Company's ability to manufacture products. The Company currently
has under development products other than Triage DOA which, if developed, may
require that the Company enter into additional supplier arrangements. There can
be no assurance that the Company will be able to enter into additional supplier
arrangements on commercially reasonable terms, if at all. Failure to obtain a
supplier for the manufacture of its future products, if any, would have a
material adverse effect on the Company's business, financial condition and
results of operations.
If successfully developed, the Company expects to rely upon LRE for
production of the fluorescent meter to be used in connection with its Triage
CareLink System platform of products currently under development. The Company's
dependence upon LRE for the manufacture of such a meter may adversely affect the
Company's profit margins, its ability to develop and manufacture products on a
timely and competitive basis, the timing of market introductions and subsequent
sales of products incorporating the LRE meter. See "Business -- Strategic and
Distribution Arrangements."
11
<PAGE> 15
LIMITED MANUFACTURING EXPERIENCE; RISK OF MANUFACTURING SCALE-UP
To be successful, the Company must manufacture its current and future
products in compliance with regulatory requirements, in sufficient quantities
and on a timely basis, while maintaining product quality and acceptable
manufacturing costs. The Company has limited experience manufacturing products
other than Triage DOA. To achieve the level of production necessary for
commercialization of Biosite's products under development, the Company will need
to scale-up current manufacturing capabilities. Significant additional work will
be required for the scaling-up of each potential Biosite product prior to
commercialization, and there can be no assurance that such work can be completed
successfully. In addition, although the Company expects that certain of its
products under development will share certain production attributes with Triage
DOA, production of such products may require the development of new
manufacturing technologies and expertise. There can be no assurance that such
products can be manufactured by the Company or any other party at a cost or in
quantities to make such products commercially viable. If the Company is unable
to develop or contract for manufacturing capabilities on acceptable terms for
its products under development, the Company's ability to conduct preclinical and
clinical testing will be adversely affected, resulting in the delay of
submission of products for regulatory clearance or approval and initiation of
new development programs, which would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Manufacturing."
The Company anticipates making significant expenditures to develop high
volume manufacturing capabilities required for each of its products currently
under development, if such products are successfully developed. There can be no
assurance that manufacturing and quality control problems will not arise as the
Company attempts to scale-up its manufacturing or that such scale-up can be
achieved in a timely manner or at a commercially reasonable cost, if at all.
The Company's manufacturing facilities and those of its contract
manufacturers are or will be subject to periodic regulatory inspections by the
FDA and other federal and state regulatory agencies and such facilities are
subject to cGMP requirements of the FDA. There can be no assurance that the
Company or its contractors will satisfy such regulatory requirements, and any
failure to do so would have a material adverse effect on the Company's business,
financial condition and results of operations.
UNCERTAINTY RELATING TO THIRD PARTY REIMBURSEMENT AND POTENTIAL COST CONSTRAINTS
In the United States, health care providers that purchase Triage DOA and
other diagnostic products, such as hospitals and physicians, generally rely on
third party payors, principally private health insurance plans, federal Medicare
and state Medicaid, to reimburse all or part of the cost of the procedure. Such
third party payors can affect the pricing or the relative attractiveness of the
Company's products by regulating the maximum amount of reimbursement provided by
such payors for testing services. In addition, the tests performed by public
health departments, corporate wellness programs and other large volume users in
the drug screening market are generally not subject to reimbursement. Further,
certain health care providers are moving towards a managed care system in which
such providers contract to provide comprehensive health care for a fixed cost
per patient. The Company is unable to predict what changes will be made in the
reimbursement methods utilized by third party payors. The Company could be
adversely affected by changes in reimbursement policies of governmental or
private health care payors, particularly to the extent any such changes affect
reimbursement for procedures in which the Company's products are used. Third
party payors are increasingly scrutinizing and challenging the prices charged
for medical products and services. Decreases in reimbursement amounts for tests
performed using the Company's products may decrease amounts physicians and other
practitioners are able to charge patients, which in turn may adversely affect
the Company's ability to sell its products on a profitable basis. Failure by
physicians and other users to obtain reimbursement from third party payors, or
changes in government and private third party payors' policies toward
reimbursement of tests utilizing the Company's products could have a material
adverse effect on the Company's business, financial condition or results of
operation. Given the efforts to control and reduce health care costs in the
United States in recent years, there can be no assurance that currently
available levels of reimbursement will continue to be available in the future
for the Company's existing products or products under development.
12
<PAGE> 16
In addition, market acceptance of the Company's products in international
markets is dependent, in part, upon the availability of reimbursement within
prevailing health care payment systems. Reimbursement and health care payment
systems in international markets vary significantly by country, and include both
government sponsored health care and private insurance.
The Company believes that the overall escalating cost of medical products
and services has led to and will continue to lead to increased pressures on the
health care industry, both foreign and domestic, to reduce the cost of products
and services, including products offered by the Company. There can be no
assurance that third party reimbursement and coverage will be available or
adequate in either U.S. or foreign markets, that current reimbursement amounts
will not be decreased in the future or that future legislation, regulation or
reimbursement policies of third party payors will not otherwise adversely affect
the demand for the Company's products or its ability to sell its products on a
profitable basis.
POSSIBLE FUTURE CAPITAL REQUIREMENTS
While the Company believes that its available cash, cash from operations
and funds from existing credit arrangements, together with the proceeds of this
offering, will be sufficient to satisfy its funding needs for at least the next
24 months, there can be no assurance the Company will not require additional
capital. The Company's future liquidity and capital funding requirements will
depend on numerous factors, including the extent to which the Company's products
under development are successfully developed and gain market acceptance, the
timing of regulatory actions regarding the Company's potential products, the
costs and timing of expansion of sales, marketing and manufacturing activities,
procurement and enforcement of patents important to the Company's business,
results of clinical investigations and competition. There can be no assurance
that such additional capital, if needed, will be available on terms acceptable
to the Company, if at all. Certain funding arrangements may require the Company
to relinquish its rights to certain of its technologies, products or marketing
territories. Furthermore, any additional equity financing may be dilutive to
stockholders, and debt financing, if available, may include restrictive
covenants. The failure by the Company to raise capital on acceptable terms when
needed could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
MANAGEMENT OF GROWTH; DEPENDENCE ON KEY PERSONNEL
The Company anticipates increased growth in the number of its employees,
the scope of its operating and financial systems and the geographic area of its
operations as new products are developed and commercialized. This growth will
result in an increase in responsibilities for both existing and new management
personnel. The Company's ability to manage growth effectively will require it to
continue to implement and improve its operational, financial and management
information systems and to train, motivate and manage its employees. There can
be no assurance that the Company will be able to manage its expansion, and a
failure to do so could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company's future success depends in part on the continued service of
its key technical, sales, marketing and executive personnel, and its ability to
identify and hire additional qualified personnel. Competition for such personnel
is intense and there can be no assurance that the Company can retain existing
personnel or identify or hire additional personnel.
PRODUCT LIABILITY
The testing, manufacturing and marketing of medical diagnostic devices such
as Triage DOA, as well as the Company's products currently under development,
entail an inherent risk of product liability claims. To date, the Company has
not experienced any material product liability claims, but any such claims
arising in the future could have a material adverse effect on the Company's
business, financial condition and results of operations. Potential product
liability claims may exceed the amount of the Company's insurance coverage or
may be excluded from coverage under the terms of the policy. There can be no
assurance that the Company's
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<PAGE> 17
existing insurance can be renewed at a cost and level of coverage comparable to
that presently in effect, if at all. In the event that the Company is held
liable for a claim against which it is not indemnified or for damages exceeding
the limits of its insurance coverage, such claim could have a material adverse
effect on the Company's business, financial condition and result of operations.
LACK OF PRIOR PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock and there can be no assurance that an active public market for the Common
Stock will develop or be sustained after this offering. The initial public
offering price will be determined through negotiations between the Company and
the Underwriters. See "Underwriting." In addition, the securities markets have
from time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies. The market
prices of the common stock of many publicly held medical device companies have
in the past been, and can in the future be expected to be, especially volatile.
Announcements of technological innovations or new products by the Company or its
competitors, clinical investigation results, release of reports by securities
analysts, developments or disputes concerning patents or proprietary rights,
regulatory developments, changes in regulatory or medical reimbursement
policies, economic and other external factors, as well as period-to-period
fluctuations in the Company's financial results, may have a significant impact
on the market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of Common Stock by existing stockholders under Rules 144 and
701 of the Securities Act of 1933, as amended (the "Securities Act") or through
the exercise of outstanding registration rights or otherwise could have an
adverse effect on the price of the Common Stock. The 2,000,000 shares offered
hereby will be eligible for resale in the public market immediately following
this offering. Upon the commencement of this offering, an additional 418,030
shares will be eligible for resale in the public market, in reliance upon Rule
144(k) under the Securities Act. In addition, 225,525 shares of Common Stock
will be eligible for resale in the public market 90 days from the effective date
of the Registration Statement of which this Prospectus is a part (the "Effective
Date"), in reliance upon Rule 701 under the Securities Act. Additionally,
1,400,212 and 7,749,179 shares of Common Stock will be eligible for sale in the
public market 120 days and 180 days, respectively, from the Effective Date, upon
expiration of lockup agreements, in reliance on Rule 144 or Rule 701 under the
Securities Act. The Company intends to register approximately 2,215,960 shares
of Common Stock reserved for issuance under its stock plans as soon as
practicable following the date of this Prospectus. Stockholders who, after
consummation of this offering, will hold over 8,400,000 shares of Common Stock
have rights to require the Company to register their shares for future sale. See
"Description of Capital Stock -- Registration Rights" and "Shares Eligible for
Future Sale."
BROAD DISCRETION OF MANAGEMENT TO ALLOCATE OFFERING PROCEEDS
The Company anticipates that the proceeds of this offering will be used to
fund expansion of sales and marketing activities, to fund research and
development activities, to expand and develop manufacturing capabilities, and to
finance working capital and general corporate requirements. The amounts
identified for the foregoing uses under "Use of Proceeds" in this Prospectus are
estimates, and the amounts actually expended for each such purpose and the
timing of such expenditures may vary depending upon numerous factors. The
Company's management will have broad discretion in determining the amount and
timing of expenditures and in allocating the proceeds of this offering. Such
discretion will be particularly broad with respect to that portion of the
proceeds available for working capital and general corporate purposes. See "Use
of Proceeds."
CONTROL BY DIRECTORS, EXECUTIVE OFFICERS, PRINCIPAL STOCKHOLDERS AND AFFILIATED
ENTITIES
The Company's directors, executive officers, principal stockholders and
entities affiliated with them will, in the aggregate, beneficially own
approximately 63.0% of the Company's outstanding Common Stock following the
completion of this offering. These stockholders, if acting together, would be
able to control substantially all matters requiring approval by the stockholders
of the Company, including the election of
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<PAGE> 18
directors and the approval of mergers or other business combination
transactions. See "Principal Stockholders."
EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS AND DELAWARE LAW
Certain provisions of the Company's Certificate of Incorporation and Bylaws
may have the effect of making it more difficult for a third party to acquire, or
of discouraging a third party from attempting to acquire control of the Company.
Such provisions could limit the price that certain investors might be willing to
pay in the future for shares of the Company's Common Stock. Certain of these
provisions allow the Company to issue Preferred Stock without any vote or
further action by the stockholders, provide for a classified board of directors,
eliminate the right of stockholders to call special meetings of stockholders or
to act by written consent without a meeting. These provisions may make it more
difficult for stockholders to take certain corporate actions and could have the
effect of delaying or preventing a change in control of the Company. See
"Management" and "Description of Capital Stock."
DILUTION; ABSENCE OF DIVIDENDS
Purchasers of shares of Common Stock in this offering will incur immediate,
substantial dilution in net tangible book value per share. The Company has never
paid cash dividends on its capital stock and does not anticipate paying any cash
dividends in the foreseeable future. See "Dilution" and "Dividend Policy."
15
<PAGE> 19
USE OF PROCEEDS
The proceeds to the Company from the sale of the shares of Common Stock
offered by the Company hereby are estimated to be approximately $21,620,000
($24,968,000 if the Underwriters' over-allotment option is exercised in full),
at an assumed initial public offering price of $12.00 per share, and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses.
The Company anticipates that it will use approximately $7.0 million of the
net proceeds of this offering to expand sales and marketing activities (which
are expected to include the development of direct sales capabilities in selected
markets), approximately $2.0 million to fund the Company's research and
development efforts, and approximately $4.0 million for expansion and
development of manufacturing capabilities in connection with the launch of the
Company's products currently under development. The Company anticipates using
the remaining net proceeds for working capital and general corporate purposes.
The Company also may use a portion of the net proceeds to acquire businesses,
technologies or products complementary to the Company's business, although the
Company currently has no specific plans or commitments in this regard. The
amounts actually expended for each purpose may vary significantly depending upon
numerous factors, including the progress of the Company's research and
development, and the costs and timing of expansion of marketing, sales and
manufacturing activities, and hence the Company's management will retain broad
discretion in the allocation of a substantial portion of the net proceeds.
Pending such uses, the Company intends to invest the net proceeds of this
offering in interest-bearing, investment grade securities. The Company believes
that its available cash, cash from operations and funds from existing credit
arrangements, together with the proceeds of this offering, will be sufficient to
satisfy its funding needs for at least the next 24 months.
DIVIDEND POLICY
The Company has never declared or paid dividends on its capital stock and
does not anticipate paying any dividends in the foreseeable future. The Company
currently intends to retain its earnings, if any, for the operation of its
business.
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<PAGE> 20
CAPITALIZATION
The following table sets forth as of September 30, 1996 (i) the
capitalization of the Company, (ii) the pro forma capitalization of the Company,
after giving effect to the conversion of all series of Preferred Stock into
Common Stock and the conversion of a $1.0 million debenture and related interest
thereon through January 31, 1997 into 92,222 shares of Common Stock at the
assumed initial public offering price of $12.00 per share upon the closing of
this offering, and (iii) the pro forma capitalization of the Company, as
adjusted to give effect to the receipt of the net proceeds from the sale of the
2,000,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $12.00 per share and the application of the estimated net
proceeds therefrom.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Notes payable, less current portion(1)......................... $ 3,234 $ 2,234 $ 2,234
------- ------- -------
Stockholders' equity:
Preferred Stock, $.01 par value; 8,328,847 shares authorized
and 8,328,847 shares outstanding actual; 5,000,000 shares
authorized and no shares outstanding, pro forma and pro
forma as adjusted......................................... 83 -- --
Common Stock, $.01 par value; 12,000,000 shares authorized
and 1,460,093 outstanding actual; 25,000,000 shares
authorized and 9,881,162 shares outstanding pro forma;
25,000,000 shares authorized and 11,881,162 shares
outstanding pro forma as adjusted(2)...................... 15 99 119
Additional paid-in capital................................... 21,686 22,792 44,392
Unrealized net loss on marketable securities, net of related
tax....................................................... (10) (10) (10)
Deferred compensation........................................ (48) (48) (48)
Accumulated deficit.......................................... (545) (572) (572)
------- ------- -------
Total stockholders' equity........................... $21,181 $22,261 $43,881
------- ------- -------
Total capitalization................................. $24,415 $24,495 $46,115
======= ======= =======
</TABLE>
- ---------------
(1) See Note 6 of Notes to Financial Statements for a description of the
Company's long-term commitments.
(2) Excludes 1,180,204 shares of Common Stock reserved for issuance upon
exercise of stock options outstanding at November 30, 1996. See
"Management -- Executive Compensation" and Note 7 of Notes to Financial
Statements.
17
<PAGE> 21
DILUTION
The pro forma net tangible book value of the Company's Common Stock as of
September 30, 1996 was approximately $17,803,000, or $1.80 per share. Pro forma
net tangible book value per share represents the amount of the Company's total
tangible assets less total liabilities, divided by the number of shares of
Common Stock outstanding, after giving effect to the conversion of all series of
Preferred Stock into Common Stock and the conversion of a $1.0 million debenture
and related interest through January 31, 1997 into 92,222 shares of Common Stock
at the assumed initial public offering price of $12.00 per share upon the
closing of this offering. After giving effect to the sale of the 2,000,000
shares of Common Stock offered hereby by the Company at an assumed initial
public offering price of $12.00 per share and after deducting underwriting
discounts and commissions and estimated offering expenses payable by the
Company, the pro forma net tangible book value of the Company at September 30,
1996 would have been approximately $39,423,000 or $3.32 per share. This
represents an immediate increase in pro forma net tangible book value of $1.52
per share to existing stockholders and an immediate dilution of $8.68 per share
to new investors purchasing shares of Common Stock in this offering, as
illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $12.00
Pro forma net tangible book value per share at September 30,
1996............................................................ $ 1.80
Increase per share attributable to investors in the offering....... 1.52
-----
Pro forma net tangible book value per share after the offering....... 3.32
------
Dilution per share to new investors.................................. $ 8.68
======
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1996, the number of shares of Common Stock purchased from the Company, the total
consideration paid, and the average price per share by existing stockholders and
by purchasers of shares offered by the Company hereby, based upon an assumed
initial public offering price of $12.00 per share (before deducting the
estimated underwriting discounts and commissions and offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................ 9,881,162 83.2% $22,956,884 48.9% $ 2.32
New investors........................ 2,000,000 16.8 24,000,000 51.1 12.00
---------- ------ ---------- ------
Total.............................. 11,881,162 100.0% $46,956,884 100.0%
========== ====== ========== ======
</TABLE>
The foregoing calculations assume no exercise of outstanding options. As of
November 30, 1996, there were outstanding options to purchase an aggregate of
1,180,204 shares of Common Stock at a weighted average exercise price of $3.24
per share. To the extent such options are exercised, there will be further
dilution to investors in this offering. See "Management -- Executive
Compensation" and Note 7 of Notes to Financial Statements.
18
<PAGE> 22
SELECTED FINANCIAL DATA
The selected financial data set forth below with respect to the Company's
statement of income data for each of the three years in the period ended
December 31, 1995 and the nine months ended September 30, 1996 and the balance
sheet data at December 31, 1994 and 1995 and September 30, 1996 are derived from
the financial statements audited by Ernst & Young LLP, independent auditors,
which are included elsewhere in this Prospectus and are qualified by reference
to such financial statements. The selected financial data with respect to the
statement of income data for the two years ended December 31, 1992 and the
balance sheet data at December 31, 1991, 1992 and 1993 are derived from the
financial statements audited by Ernst & Young LLP which are not included in this
Prospectus. The selected financial data with respect to the statement of income
for the nine months ended September 30, 1995 are derived from unaudited
financial statements included elsewhere in this Prospectus. The unaudited
financial statements include all adjustments, consisting only of normal
recurring adjustments, that the Company considers necessary for a fair
presentation of the financial position and results of operations for these
periods. Operating results for the nine months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1996. The data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's financial statements and notes thereto included
elsewhere in this Prospectus.
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales........................................... $ -- $ 2,920 $ 9,866 $ 16,320 $ 25,147 $ 18,236 $ 20,225
Cost of sales....................................... -- 1,612 3,268 4,416 5,649 3,781 4,318
-------- -------- -------- --------- --------- --------- ---------
Gross profit........................................ -- 1,308 6,598 11,904 19,498 14,455 15,907
Research and development............................ 2,793 2,593 2,796 3,836 6,553 4,602 6,515
Selling, general and administrative................. 1,771 3,622 4,841 5,960 7,134 5,203 6,116
-------- -------- -------- --------- --------- --------- ---------
Total operating expenses............................ 4,564 6,215 7,637 9,796 13,687 9,805 12,631
Income (loss) from operations....................... (4,564) (4,907) (1,039) 2,108 5,811 4,650 3,276
Interest and other income, net...................... 260 630 613 649 1,647 1,253 1,441
Settlement of patent matters........................ -- -- -- (338) (1,217) (743) (2,368)
-------- -------- -------- --------- --------- --------- ---------
Income (loss) before benefit (provision) for income
taxes............................................. (4,304) (4,277) (426) 2,419 6,241 5,160 2,349
Benefit (provision) for income taxes................ -- -- -- (63) 1,667 (132) 264
-------- -------- -------- --------- --------- --------- ---------
Net income (loss)................................... $(4,304) $(4,277) $ (426) $ 2,356 $ 7,908 $ 5,028 $ 2,613
======== ======== ======== ========= ========= ========= =========
Net income (loss) per share......................... $ (0.61) $ (0.49) $ (0.04) $ 0.22 $ 0.74 $ 0.47 $ 0.24
======== ======== ======== ========= ========= ========= =========
Common and common equivalent shares used in
computing per share amounts(1).................... 7,058 8,754 10,098 10,553 10,766 10,721 10,832
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
------ ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities................. $4,869 $ 6,435 $ 5,129 $ 5,916 $13,979 $10,169
Working capital.................................................. 4,746 7,049 6,407 7,974 14,428 13,967
Total assets..................................................... 6,725 10,287 10,269 14,364 27,935 28,968
Long-term obligations............................................ 237 668 634 772 2,739 3,234
Stockholders' equity............................................. 5,887 8,573 8,155 10,512 18,526 21,181
</TABLE>
- ---------------
(1) Computed on the basis described in Note 1 of Notes to Financial Statements.
19
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion in this Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed here. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed in the
sections entitled "Risk Factors" and "Business," as well as those discussed
elsewhere in this Prospectus.
OVERVIEW
Since the Company's inception in 1988, the Company has been primarily
involved in the research, development, manufacturing and marketing of
point-of-care diagnostic tests. The Company began commercial sales of Triage DOA
in February 1992 and currently markets the product worldwide primarily through
distributors supported by a small direct sales force. The Company is engaged in
research and development of additional point-of-care diagnostic products in the
microbiology, cardiology and therapeutic drug monitoring fields. See "Business."
Funding for operations was provided primarily from equity financings from
the Company's inception through launch of Triage DOA in 1992. Additional funding
has come from corporate partners in the form of debt and equity financing,
license fees and other corporate funding. The Company has a limited history of
operations and first achieved profitability in fiscal 1994. All of the Company's
sales to date have been due to sales of the Triage DOA product line.
Triage DOA is currently marketed pursuant to exclusive distribution
agreements in the U.S. medical market by CMS (which accounted for 80% of product
sales in the first nine months of 1996) and in certain countries in Europe,
Latin America, the Middle East and Africa and in Pakistan and India by Merck.
The CMS distribution agreement has minimum quarterly sales milestones which, if
the milestones are not met, allows the Company to terminate the agreement,
obligates CMS to pay Biosite a penalty and allows the Company to appoint a new
distributor or to sell Triage DOA directly in the U.S. medical market. If the
Company chooses to terminate the CMS distribution agreement, the Company may
appoint a new distributor or it may have to invest in additional sales and
marketing resources including additional field sales personnel which could
significantly increase future sales and marketing expenses and may adversely
affect sales of Triage DOA.
Since the launch of Triage DOA in fiscal 1992, the Company has experienced
significant revenue growth primarily as a result of greater demand and more
recently, the introduction of Triage Plus TCA Panel for Drugs of Abuse ("Triage
DOA Plus TCA"). In order to support increased levels of sales in the future and
to augment its long-term competitive position, the Company anticipates that it
will be required to make significant additional expenditures in manufacturing,
research and development, sales and marketing and administration, both in
absolute dollars and as a percentage of sales. In addition, the Company
anticipates higher administrative expenses resulting from its obligations as a
public reporting company upon completion of this offering.
The Company anticipates that its results of operations may fluctuate for
the foreseeable future due to several factors, including whether and when new
products are successfully developed and introduced by the Company, market
acceptance of current or new products, regulatory delays, product recalls,
manufacturing delays, shipment problems, seasonal customer demand, the timing of
significant orders, changes in reimbursement policies, competitive pressures on
average selling prices, changes in the mix of products sold and patent
conflicts. Operating results would also be adversely affected by a downturn in
the market for the Company's current and future products, if any, order
cancelations or order rescheduling. Because the Company is continuing to
increase its operating expenses for personnel and new product development, the
Company's operating results would be adversely affected if its sales did not
correspondingly increase or if its product development efforts are unsuccessful
or are subject to delays. The Company's limited operating history makes accurate
prediction of future operating results difficult or impossible. Although the
Company has experienced growth in recent years, there can be no assurance that,
in the future, the Company will sustain revenue growth
20
<PAGE> 24
or remain profitable on a quarterly or annual basis or that its growth will be
consistent with predictions made by securities analysts.
The Company currently manufactures and ships product shortly after receipt
of orders and anticipates that it will do so in the future. Accordingly, the
Company has not developed a significant backlog and does not anticipate it will
develop a material backlog in the future.
RESULTS OF OPERATIONS
The following table sets forth certain operating data as a percentage of
net sales:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- ----------------------
1993 1994 1995 1995 1996
---- ---- ---- ----------- ----
<S> <C> <C> <C> <C> <C>
Net sales.............................. 100% 100% 100% 100% 100%
Cost of sales.......................... 33 27 22 21 21
---- ---- ---- ---- ----
Gross profit........................... 67 73 78 79 79
Operating expenses:
Research and development............... 28 24 26 25 32
Selling, general and administrative.... 49 37 29 29 30
---- ---- ---- ---- ----
Total operating expenses............... 77 61 55 54 62
Income (loss) from operations.......... (10) 12 23 25 17
Other income, net...................... 6 4 7 7 7
Settlement of patent matters........... -- (2) (5) (4) (12)
---- ---- ---- ---- ----
Income (loss) before benefit
(provision) for income taxes......... (4) 14 25 28 12
Benefit (provision) for income taxes... -- -- 7 -- 1
---- ---- ---- ---- ----
Net income (loss)...................... (4)% 14% 32% 28% 13%
==== ==== ==== ==== ====
</TABLE>
Nine months ended September 30, 1996 and 1995
Revenues. Revenues increased 11% to $20.2 million in the first nine months
of 1996 from $18.2 million in the first nine months of 1995. The increase was
primarily attributable to the Company's expansion of its Triage DOA product line
to include Triage DOA Plus TCA, which was launched in February 1995, and
continued growth of the Company's overall market share of abused drug testing
worldwide.
Gross Profit. Gross profit increased 10% to $15.9 million in the first
nine months of 1996 as a result of increased sales of the Triage DOA product
line. Gross margin was constant at 79% in the first nine months of 1996 and
1995.
Research and Development Expenses. Research and development expenses
increased 42% to $6.5 million in the first nine months of 1996 from $4.6 million
in the first nine months of 1995. This increase resulted from the expansion of
the Company's research and development and manufacturing scale-up efforts on its
microbiology, cardiac and therapeutic drug monitoring assays under development.
The Company expects its research and development expenses to increase
significantly in 1996 and 1997, reflecting increased expenditures primarily
related to hiring additional personnel.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 18% to $6.1 million in the first nine months
of 1996. This increase was a result of the cost of expanding the Company's
direct sales force and in-house marketing and administrative functions to
support the Company's expanded operations. The Company expects selling, general
and administrative costs to increase in absolute dollars as the Company's level
of sales and manufacturing operations increase and as the Company increases its
finance and administrative expenditures to meet its obligations as a public
reporting entity.
21
<PAGE> 25
Other Income. Contract revenues from a related party increased $469,000 in
the first nine months of 1996 as compared to the first nine months of 1995. This
increase was primarily due to higher expenditures relating to the Triage Cardiac
development program with Merck which resulted in higher revenues to the Company.
Contract revenues from an unrelated party decreased $300,000 in the first nine
months of 1996. The decrease was attributable to the timing of the achievement
of milestones under the Company's development agreement with KDK.
Settlement of Patent Matters. In September 1996, the Company reached a
settlement with Abbott Laboratories, with respect to all claims set forth in a
lawsuit filed by Abbott Laboratories in May 1994. The lawsuit alleged that
Triage DOA infringed a patent licensed to Abbott Laboratories. The Company
vigorously defended the lawsuit. However, to avoid protracted litigation, the
Company settled the patent matter in September 1996, paid $2.0 million as a
settlement of the litigation and, for an additional $3.5 million and the
agreement to pay certain royalties, obtained a license to certain technology.
Future amortization of the license fee will be charged to cost of sales over the
life of the license. The $2.0 million litigation settlement payment, as well as
the amortization related to prior fiscal years and related legal defense costs
were charged to Settlement of Patent Matters in the nine months ended September
30, 1996. Settlement of Patent Matters expenses for the first nine months of
1995 consisted solely of legal expenses associated with the defense of the
patent litigation.
Benefit (Provision) for Income Taxes. The Company's benefit for income
taxes increased to $264,000 for the nine months ended September 30, 1996 from a
provision for income taxes of $132,000 for the nine months ended September 30,
1995. The increase in the benefit for income taxes resulted primarily from a
reduction in the valuation allowance for deferred taxes of $1.1 million in the
nine months ended September 30, 1996, as the realization of such assets became
probable.
Years ended December 31, 1995 and 1994
Revenues. Revenues increased 54% to $25.1 million for the year ended
December 31, 1995 from $16.3 million in 1994. The increase was primarily
attributable to the Company's commercialization of Triage DOA Plus TCA which was
launched in February 1995, and continued acceptance and expansion of Triage DOA.
Gross Profit. Gross profit increased $7.6 million to $19.5 million for the
year ended December 31, 1995 as a result of increased sales of the Triage DOA
product line. Gross margin increased to 78% for the year ended December 31, 1995
from 73% in 1994. The Company increased its manufacturing efficiency during 1995
and, with increased manufacturing volumes, covered its fixed overhead expenses
more efficiently. The Company included in cost of sales $405,000 in license
amortization for 1995 relating to the technology license agreement signed in
March 1996.
Research and Development Expenses. Research and development expenses
increased 71% to $6.6 million for the year ended December 31, 1995 from $3.8
million in 1994. This increase resulted from the expansion of the Company's
research and development and manufacturing scale-up efforts on the microbiology,
cardiac and therapeutic drug monitoring assays.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 20% to $7.1 million for the year ended
December 31, 1995 from $6.0 million in 1994. During the year ended December 31,
1995, the Company expanded its direct sales force and its in-house marketing and
administrative functions to support the Company's higher level of operations as
compared to 1994.
Other Income. Contract revenues from related parties increased $217,000 as
a result of progress in the development of Triage Cardiac. Contract revenues
from unrelated parties increased by $300,000 for the year ended December 31,
1995 from 1994. The increase was attributable to the timing of the achievement
of milestones under the Company's development agreement with KDK which was
signed in February 1995. Interest income increased $366,000 as a result of
income received on increased cash balances in 1995.
Settlement of Patent Matters. Settlement of patent matters expenses
increased primarily due to increased legal defense costs related to the patent
litigation described above. Additionally, in December 1995,
22
<PAGE> 26
the Company accrued a one-time payment of $2.2 million for a worldwide license
to technology related to the Triage Panel products. Amortization of this license
payment related to fiscal years prior to 1995 of $440,000 was charged to
settlement of patent matters in 1995.
Benefit (Provision) for Income Taxes. The Company's benefit for income
taxes increased to $1.7 million for the year ended December 31, 1995 from a
provision for income taxes of $63,000 in 1994. The increase in the benefit for
income taxes resulted primarily from a reduction in the valuation allowance for
deferred tax assets in 1995 of $1.8 million. The Company utilized $2.2 million
in net operating loss carryforwards in fiscal 1995. As of December 31, 1995, the
Company had net operating loss carryforwards of approximately $3.1 million for
federal income tax purposes. The Company's ability to utilize its net operating
loss carryforwards and tax credit carryforwards in future years will be subject
to an annual limitation pursuant to the "change in ownership rules" under
Section 382 of the Internal Revenue Code of 1986, as amended. However, any
annual limitation is not expected to have a material adverse effect on the
Company's ability to utilize its net operating loss and tax credit
carryforwards.
Years ended December 31, 1994 and 1993
Revenues. Revenues increased 65% to $16.3 million for the year ended
December 31, 1994 from $9.9 million in 1993. The increase was primarily
attributable to the continued acceptance of the Company's Triage DOA product
line.
Gross Profit. Gross profit increased $5.3 million to $11.9 million for the
year ended December 31, 1994 from gross profit levels for the year ended
December 31, 1993 as a result of increased sales of Triage DOA. Gross margin
increased to 73% for the year ended December 31, 1994 from 67% in 1993. The
Company increased its manufacturing efficiency during 1994 and, with increased
manufacturing volumes, covered its fixed overhead expenses more efficiently.
Research and Development Expenses. Research and development expenses
increased 37% to $3.8 million for the year ended December 31, 1994 from $2.8
million in 1993. This increase resulted from the expansion of the Company's
research and development and manufacturing scale-up efforts on Triage DOA Plus
TCA and research and development on Triage Cardiac.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 23% to $6.0 million for the year ended
December 31, 1994 from $4.8 million in 1993. During the year ended December 31,
1994, the Company's expanded the direct sales force and the in-house marketing
and administrative functions to support the Company's higher level of operations
as compared to 1993.
Other Income. Contract revenues from related parties increased $344,000 in
1994 as compared to such revenues in 1993 as a result of entering into a
collaborative agreement in June 1994 with Merck, which is sharing in the
development expenses of Triage Cardiac. Decreases in licensing fee income in
1994 as compared to such income in 1993 resulted from the completion of a
license agreement with a third party during 1994.
Settlement of Patent Matters. Settlement of patent matters expense in 1994
consisted solely of legal defense costs related to the patent litigation
described above.
Benefit (Provision) for Income Taxes. The Company utilized $3.2 million in
net operating loss carryforwards in fiscal 1994 which reduced the provision for
income taxes to $63,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations through private
placements of equity securities, revenues from operations, debt and capital
lease financing and interest income earned on the net proceeds from the private
placements. Since its inception, the Company has raised over $21.7 million in
net cash proceeds from the private placement of equity securities and $1.0
million from the issuance of convertible debentures.
23
<PAGE> 27
During the nine months ended September 30, 1996, the Company generated $1.1
million in cash from operating activities. Cash generated from sales were offset
primarily by the payments totaling $6.2 million for licenses to certain
technologies. In addition, the Company paid $2.0 million to settle patent
litigation with Abbott Laboratories. During 1995 and 1994, the Company generated
$7.9 million and $1.9 million of cash from operating activities, respectively.
The Company financed through promissory notes and capital leases $2.3 million
and $900,000 in equipment purchases in 1995 and 1994, respectively. At September
30, 1996, the Company had cash and cash equivalents totaling $1.4 million,
marketable securities of $8.8 million and working capital of $14.0 million.
The Company believes that its available cash, cash from operations and
funds from existing credit arrangements, together with the proceeds of this
offering, will be sufficient to satisfy its funding needs for at least the next
24 months.
24
<PAGE> 28
BUSINESS
BACKGROUND
Biosite develops, manufactures and markets rapid, accurate and
cost-effective diagnostic products that improve the quality of patient care and
simplify the practice of laboratory medicine. The Company believes that its
Immediate Response Diagnostics can have an important impact on medical
decisions, patient care and the cost of medical treatment. The Company's first
product, Triage DOA, a small self-contained test capable of detecting a broad
spectrum of commonly overdosed prescription and illicit drugs in approximately
10 minutes, is used by over 2,600 hospitals and emergency departments. Since its
introduction in 1992, over 4.2 million Triage DOA panels have been sold
worldwide for use in hospital emergency department screening and workplace
testing. The Company is developing several additional products for applications
where the Company believes its Immediate Response Diagnostics can play an
important role in improving patient care. Products under development include
tests that are intended to aid in the diagnosis of heart attacks, the dosing of
certain therapeutic drugs, the management of certain chronic diseases and the
detection of certain bacterial and parasitic infections.
The Company has two product platforms that are designed to provide rapid
results through either qualitative visual readings or quantitative meter
readings. These platforms are based upon the Company's proprietary technologies
in the areas of reagent development, signaling chemistry and micro capillary
fluidics. The Company's testing formats are designed to measure single or
multiple analyte targets simultaneously, and to allow for the analysis of
various sample sources, including urine, serum, plasma, whole blood and stool.
The Company has entered into strategic arrangements with major pharmaceutical
and diagnostic companies, including Sandoz for the development of a product to
monitor the concentrations of the immunosuppressant drug, cyclosporine; Merck
and KDK for the development of a cardiac marker product used in the diagnosis of
heart attacks; and LRE for the development of a fluorescent meter. In addition,
the Company uses CMS to distribute Triage DOA to hospital-based laboratories and
emergency departments in the United States and Merck to distribute Triage DOA in
certain countries in Europe, Latin America, the Middle East and Africa and in
Pakistan and India.
INDUSTRY OVERVIEW
In 1995, the worldwide market for immunoassay tests exceeded $5.1 billion,
consisting primarily of testing related to infectious disease, endocrinology,
therapeutic drug monitoring, drugs of abuse testing, immunology/allergy, tumor
markers and blood typing. The global market for immunoassay tests continues to
expand as new disease states are identified, new therapies become available, and
worldwide standards of living and access to health care improve. Such tests are
performed primarily in hospital-based laboratories and commercial laboratories,
which account for approximately 80% of all diagnostic tests performed annually.
In recent years, diagnostic tests that can be performed nearer to the point of
patient care have emerged as an important tool in disease diagnosis and
management. It has been estimated that the market for point-of-care tests,
primarily hospitals and physician office/satellite facilities, will grow at
approximately 27% annually through the year 2000.
Immunoassay tests were first developed based on technology developed in the
1960s. Although early immunoassay tests offered unprecedented levels of
sensitivity for the detection of low concentration analytes, they suffered from
relatively short shelf-lives, long reaction times, a need for radioactive labels
to detect completed reactions and lack of consistent results among products from
different suppliers. Over time, technological advancements such as the
introduction of monoclonal antibodies, enzyme and fluorescent labels and various
solid phase mechanisms shortened immunoassay test reaction times, provided
higher specificity and allowed development of tests with longer shelf-lives and
greater consistency.
Such advancements also led to the development of immunoassay analyzers,
testing systems utilizing automated liquid handling mechanisms and
reagent-adding pipetting systems. Modern immunoassay analyzers are capable of
storing and selecting multiple reagents for a variety of analytes, including
drugs, hormones and cancer antigens. They also provide accurate and highly
sensitive test results and help to simplify the
25
<PAGE> 29
performance of antibody-based tests. However, immunoassay analyzers are large
and complex, have lengthy turnaround times and require high volumes of sample
throughput to justify the investment in equipment, training, staffing and the
costs required to operate and support the system.
In recent years, there has been a continuing shift from the use of such
conventional analyzer systems to more technologically advanced point-of-care
tests that can be performed in minutes by less highly trained personnel. Simple,
rapid immunoassay tests are capable of detecting a single analyte target with a
color change that can be visually interpreted. Formats such as dipsticks, test
tubes and wicking membrane test cartridges have been used to provide fast
non-instrument read results for conditions where a single analyte target is
present in high concentrations and where a simple yes/no non-numeric answer is
clinically relevant. Rapid color change test formats are widely available for
pregnancy, strep throat and ovulation prediction. Until recently, simple test
formats have remained incapable of precise, multi-analyte detection or highly
sensitive, quantitative measurements. As a result, medical conditions where the
detection of one or more analytes is required or where the precise quantitation
of the target analyte is required have remained the domain of immunoassay
analyzers.
The Company believes that there is significant market potential for
advanced point-of-care diagnostic products. Point-of-care testing helps to
reduce overall health care delivery costs and can improve patient outcomes by
providing diagnosis during the patient visit, thereby minimizing the time to
medical intervention and reducing the need for additional patient follow-up.
Patients undergoing emergency procedures can benefit from more timely and
accurate testing results, both to ensure correct decision making and to avoid
unnecessary use of costly inpatient care. Disease management programs such as
therapeutic drug monitoring programs can benefit from real-time, point-of-care
evaluations that enable care-givers to optimize drug dosing. Quicker diagnosis
of infectious agents can also permit earlier prescription of appropriate
medications, shortening the duration of illness.
TECHNOLOGY
Biosite's Immediate Response Diagnostics technology is based on several
proprietary advances in the biological and physical sciences that make practical
the development and manufacture of rapid, accurate and cost-effective
point-of-care diagnostics. The Company's products integrate its expertise in
several core scientific and engineering disciplines, including antibody
development and engineering, analyte cloning and synthesis, signaling chemistry
and micro capillary fluidics, each of which is described below. Biosite's
research and development program is supported by 60 full time professionals,
including 15 Ph.D.s with expertise in the Company's core technologies. By
combining research capabilities in each of these areas, Biosite is able to
create novel single and multi-analyte diagnostics which overcome the limitations
of traditional rapid diagnostic technologies and seek to address the significant
unmet need for effective point-of-care diagnostic information.
Antibody Development and Engineering
Biosite believes that its internal antibody development and engineering
capabilities allow rapid identification and development of antibodies with
optimal specificity, affinity and stability characteristics. The Company
initially utilized hybridoma technology for the selection and production of its
novel antibodies. Two disadvantages of hybridoma technology are the length of
time required to develop antibody candidates and the need to restart the
antibody development process when unwanted characteristics such as cross
reactivities are discovered. The Company has developed a proprietary process
that enables the selection and production of antibodies more rapidly and
efficiently than is possible using hybridoma technology. In addition, Biosite
has isolated the genes encoding the antibodies that permit the genetic
engineering of antibodies. As a result, Biosite can alter or add specific amino
acids or polypeptides in an antibody in order to improve the antibody's
specificity and to facilitate purification of the antibody. This technology
accelerates the antibody selection process by rapidly eliminating unwanted cross
reactivities discovered in product development.
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Analyte Cloning and Synthesis
The Company has molecular biology capabilities that include the cloning and
identification of specific proteins useful in the development of immunoassays.
Biosite has developed proprietary expression vectors that enable the production
and purification of these proteins for the development of antibodies and for use
as calibrators and controls in its immunoassay products. In addition, the
Company has considerable expertise in synthetic organic chemistry which allows
the synthesis of targets and useful derivatives. The Company develops products
for which the targeted analyte can be small (i.e., haptens, such as drugs) or
large (i.e., proteins, such as cardiac enzymes). The Company believes that the
ability to develop, stabilize and manufacture the target analyte or its
analogues is key to the development of highly accurate immunoassays.
Color/Photochemical Signaling
Immunoassays require the attachment of a detectable label to an antibody or
target analyte. The Company has developed a variety of labels for the
development of its products. For yes/no tests, a visual label that produces
color is attached to antibodies or analytes through either non-covalent or
covalent chemical methods. For its quantitative products, the Company has
developed novel fluorescent dyes which are attached to antibodies or analytes
using both noncovalent and covalent chemical means. Although fluorescence is a
potentially powerful label for use in immunoassays, its potential has been
limited by the lack of available dyes that are stable and have no sample
interference, and the requirement of a complex instrument for detection. The
Company's novel fluorescent dyes are stable and exhibit properties that permit
their use in complex biological samples such as serum, plasma and whole blood
without interference from the sample. Furthermore, these novel dyes absorb light
at wavelengths where a simple instrument can be used to excite and detect
fluorescence for quantitative measurements.
Micro Capillary Test Device Technology
Biosite has developed proprietary technology to design, develop and
manufacture devices containing micro capillaries to control the flow of fluids
in immunoassay processes. The qualitative device format uses micro capillaries
to draw fluids through a membrane that contains immobilized antibody zones for
the detection of specific substances. The quantitative device format uses
several different micro capillary designs to control the contact of sample with
reagents and to control the flow of fluid throughout the device. When sample is
added to the quantitative device, a filter contained within the device separates
blood cells from plasma which is further directed by capillary forces into a
chamber that contains dried immunoassay reagents. After an incubation time that
is determined by another micro capillary element of the device, the volume of
sample that contacted the reagents flows down a capillary path that brings it
into contact with immobilized antibody zones. The binding of fluorescent
reagents at these zones is detected by an instrument and is related to the
concentration of the substance being tested for in the sample. The Company has
also developed the engineering capability to design unique micro capillary
structures in plastic parts and to fabricate them in commercial scale quantities
using injection molding processes.
Sample Handling
The Company has developed proprietary technology relating to sample
handling and preparation, including technology that allows whole blood to be
passively separated into its plasma component or to be passively lysed to
release the target analyte. The Company has also developed technologies for the
handling of stool samples which concentrate and purify the target analytes or
organisms from solid stool materials. In addition, the Triage Panel platform can
be used to assay urine samples.
PRODUCT PLATFORMS
The Company has used its core technologies to develop two product
platforms: the Triage Panel and the Triage CareLink System. Both of the
Company's product platforms utilize the Company's expertise in antibody
engineering, analyte cloning, signaling chemistry, micro capillary fluidics and
sample handling technologies.
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Triage Panel
The Triage Panel platform is designed for rapid, qualitative screening of
multiple analytes in a small single-use hand-held device. The Triage Panel has a
visual (yes/no) display containing simultaneous tests for up to eight analytes
and two control standards, can be performed in a simple multi-step process, and
is capable of performing tests on both urine and stool. Triage DOA, the first
product developed on this platform, tests for up to eight drugs of abuse in
approximately 10 minutes. Triage Panel products under development include tests
for the detection of microorganisms which cause severe gastrointestinal disease.
Triage CareLink System
The Triage CareLink System platform is designed to provide rapid
quantitative results for immunoassay tests of whole blood, serum and plasma. The
Triage CareLink System consists of two parts: a small single-use disposable test
cartridge and a proprietary hand-held point-of-care fluorescent meter. After
blood is applied to the cartridge, the cartridge is inserted into the meter,
which is designed to automatically detect up to six analytes simultaneously and
display the results on a numerical electronic read-out. The meter incorporates
proprietary software in erasable programmable read-only memory ("EPROM") chips
which are intended to be plugged into each meter to perform multiple types of
tests and automatically determine which test is being run. In addition, the
EPROM chips are designed to automatically calibrate the meter on a lot specific
basis. The software may also provide important information regarding the analyte
measured, such as normal or abnormal levels of a marker which could then be used
to initiate therapy or manage patient disease. The Company believes that the
analyte measuring sensitivity of the Triage CareLink System products under
development will match or exceed the sensitivity levels of the conventional
immunoassay analyzers. The Company is currently developing two applications for
this platform, Triage Cardiac, a device for the quantification of three cardiac
markers associated with AMI, and Triage Transplant, a product for the monitoring
of the concentration of cyclosporine, an immunosuppressant drug prescribed for
organ transplant recipients to prevent transplant rejection.
PRODUCT ATTRIBUTES
Although the current products and products under development are based upon
the Triage Panel and Triage CareLink System platforms and utilize different
technologies, they share common attributes which the Company believes make them
superior to conventional immunoassay analyzers:
- RAPID RESULTS: Triage DOA and the Company's products under development
are designed to offer complete results in a STAT timeframe, and to have
room temperature stability, making them immediately available for use.
- EASE OF USE: Triage DOA and the Company's products under development are
designed to be simple to use. Triage DOA has only three steps while
Triage Cardiac and Triage Transplant are expected to require only one
step.
- HIGH ANALYTICAL ACCURACY: The Company develops and uses high quality
biological and chemical reagents to yield highly specific, accurate and
reproducible analytical results.
- CAPABILITY OF PERFORMING MULTIPLE ANALYSES: Triage DOA and the Company's
products under development are designed to measure one or more target
analytes simultaneously, including reagent controls, without sacrificing
the quality of the individual analysis. This simultaneous detection
capability can provide significant time and cost savings compared to
current technologies.
- RELIABILITY: Biosite's use of internal thresholds, built-in controls,
lockouts and other controlling mechanisms are intended to make its
current and future products extremely reliable in any hospital or
clinical laboratory setting.
- COST EFFECTIVENESS: Triage DOA and the Company's products under
development are designed to eliminate the need for highly trained
technicians and significant outlays for testing equipment acquisition and
maintenance, making them cost-effective alternatives to conventional
immunoassay analyzers.
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PRODUCTS AND PRODUCTS UNDER DEVELOPMENT
Triage DOA was introduced in 1992 and has been used by hospital emergency
departments to screen for up to eight commonly abused prescription and illicit
drugs or drug classes. The Company is developing five additional products which
apply the Company's Immediate Response Diagnostics technologies to a variety of
other medical testing needs. Triage DOA and the Company's five products under
development are described in the table below. The table also indicates the
Company's corporate partners with respect to Triage DOA and products under
development. The Company intends, where appropriate, to enter into additional
collaborative arrangements to develop and commercialize future products. There
can be no assurance that the Company will be able to negotiate collaborative
arrangements on favorable terms, if at all, in the future, or that its current
or future collaborative arrangements will be successful.
T
R
I
A
G
E
P
A
N
E
L
S
T
R
I
A
G
E
<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
STATUS/EXPECTED
U.S. REGULATORY CORPORATE
PRODUCTS APPLICATION ANALYTE TARGETS PATHWAY(1) PARTNER(2)
----------------------------------------------------------------------------------------------------------
Triage Panel Drug Screening Phencyclidine On the Market/ CMS, Merck
for Drugs of Benzodiazepines 510(k) cleared
Abuse Cocaine
(Triage DOA) Amphetamine
Tetrahydrocannabinol
Opiates
Barbiturates
Tricyclic
antidepressants
Methadone
----------------------------------------------------------------------------------------------------------
Triage Panel Parasite Giardia lamblia In Development/ --
for Parasitology Screening Entamoeba 510(k)
(Triage O&P) histolytica
Cryptosporidium
parvum
----------------------------------------------------------------------------------------------------------
Triage Panel for Pathogen C. difficile Antigen In Development/ --
Clostridium Detection C. difficile Toxin A 510(k)
difficile
(Triage C. diff)
----------------------------------------------------------------------------------------------------------
Triage Panel Pathogen Salmonella In Development/ --
for Enteric Screening Shigella 510(k)
Pathogens Campylobacter
(Triage Enteric) jejuni/coli
- ---------------------------------------------------------------------------------------------------------------------
Triage Acute CK-MB In Development/ Merck(3),
Cardiac Myocardial Troponin I 510(k) KDK, LRE
Infarction Myoglobin
Detection
----------------------------------------------------------------------------------------------------------
Triage Drug Monitoring Cyclosporine In Development/ Sandoz,
Transplant PMA LRE
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The FDA regulatory approval process requires many steps before a product can
be approved for marketing. The terms "510(k)" and "PMA" indicate the
regulatory approval pathway the Company believes will be applicable to a
product, although there can be no assurance that the FDA will agree that the
pathway noted is the appropriate pathway for the specific product. See "Risk
Factors -- Government Regulation." For a description of the terms 510(k) and
PMA see "-- Government Regulation."
(2) For a description of the Company's collaboration arrangements, see
"-- Strategic and Distribution Arrangements."
(3) As part of its decision to refocus away from certain aspects of the human
diagnostics business, Merck has informed the Company that Merck is
considering assigning its rights under its agreements with the Company
concerning the marketing of Triage Cardiac either to a third party or back
to the Company.
C S
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<PAGE> 33
Triage Panel for Drugs of Abuse
The Company believes the worldwide market for abused drug testing is
approximately $350 million annually, the majority of which is accounted for by
testing performed in the United States. The U.S. market can be divided into
three major categories:
- MEDICAL TESTING: The medical testing segment represents testing
typically performed in a hospital laboratory. Such tests have the highest
need for rapid turnaround of results, and generally have the highest cost
per result. The results are generally reported to emergency physicians
and psychiatrists.
- NON-MEDICAL TESTING: The non-medical testing market consists of testing
performed for industry, as well as in the criminal justice setting and
drug rehabilitation centers. Testing may be performed on-site but
generally samples are sent to independent reference laboratories.
Typically, the demands for a rapid result are not quite as great as in
the medical segment. Additionally, the cost per result is slightly
reduced.
- REFERENCE LABORATORY TESTING: The reference laboratory testing market
accounts for a sizable portion of the total drug testing market. The
majority of samples come from the non-medical testing market, although
some smaller hospitals in the medical testing market also send their
samples to reference laboratories. In general, results are not available
for at least 24 hours from the time the specimen is collected. Despite
relatively long turnaround times, the reference laboratory market has
remained substantial because of its ability to produce results on a low
cost per panel basis.
Emergency Department Screening
A 1988 Substance Abuse and Mental Health Services Administration ("SAMHSA")
survey concluded that over 14.5 million Americans had used an illicit drug at
least once in the prior month. Emergency physicians have indicated that drug
abuse plays a role in 5% to 10% of the emergency medicine cases occurring
annually in the United States, either as a primary cause such as an overdose, or
as a contributing factor such as in the case of an accident. A diagnostic
dilemma confronts physicians when a patient is presented with symptoms that
could either be drug related or non-drug related. A patient brought to a
hospital emergency department in a coma may be under the influence of narcotics
or sedatives, which may require one type of treatment or intervention.
Conversely, the same patient may have had a stroke or suffered some form of
trauma, requiring a completely different type of care. The ability to have a
differential diagnosis in a timely manner greatly aids the course of treatment.
Prior to the introduction of Triage DOA, drug or toxicology screening was
accomplished by several technologies, primarily Gas Chromatography/Mass
Spectroscopy ("GC/MS") and automated immunoassays. Although GC/MS is the most
specific identification method commercially available, it is time consuming
(requiring an average of approximately three hours per test), complex and
expensive, and is generally reserved for final confirmation of specimens that
have been screened positive by an immunoassay. Automated immunoassay tests,
although less expensive than those performed by GC/MS, also require significant
amounts of time (approximately one to two hours) because of the necessity of
performing analyses of several drugs sequentially on each patient specimen.
Additionally, in many cases the equipment required to perform an immunoassay is
not accessible on an immediate or STAT basis.
Triage DOA is a rapid qualitative urine screen that analyzes a single test
sample for up to eight different illicit and prescription drugs or drug classes
and provides results in approximately 10 minutes. Triage DOA is instrument
independent, contains built-in controls for accuracy and is capable of a high
degree of specificity. Illicit drugs tested for by Triage DOA include
Amphetamines/Methamphetamines (speed, crystal), Cocaine (crack), Opiates
(heroin), Phencyclidine (angel dust), Tetrahydrocannabinol (pot, marijuana),
while prescription drugs tested by Triage DOA include Barbiturates
(Phenobarbital), Benzodiazepines (Valium, Librium, Halcion), Tricyclic
Antidepressants (Elavil, Tofranil) and Methadone. Triage DOA can be configured
to test various combinations of the foregoing drugs. In February 1995, the
Company launched Triage DOA Plus TCA, a configuration which includes a test for
Tricyclic Antidepressants ("TCA") that otherwise requires a separate blood test.
Since its introduction in February 1992, the Company has sold over
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4.2 million Triage DOA panels worldwide, and over 2,600 hospitals and emergency
departments in the United States are users of the product. The graphic below
summarizes Triage DOA testing process:
LOGO
The Company distributes Triage DOA and Triage DOA Plus TCA to the U.S.
medical market through CMS. Merck is the exclusive distributor of Triage DOA and
Triage DOA Plus TCA in certain countries in Europe, Latin America, the Middle
East and Africa and in Pakistan and India.
Workplace Screening
It is estimated that in 1996 over 33% of new hires in the U.S. workforce
will be screened for drug usage as part of pre-employment physicals. The
majority of these test samples are sent to centralized reference laboratories
that can provide both the initial immunoassay screening result and the
confirmation of presumptive positive results by an alternate method, such as
GC/MS. Testing of government and certain government regulated employees and
contractors must be performed at SAMHSA certified reference laboratories.
Employers that are not government contractors send their drug screens to their
laboratory of choice or perform on-site testing. Non-SAMHSA testing is estimated
to account for over eight million tests performed annually.
The majority of employers with drug screening programs have chosen not to
implement "on-site" testing in their facilities due to costly personnel and
regulatory burdens on an employer's in-house testing laboratory. These
industrial testers, however, still have a need for rapid results since many
employment decisions hinge on an employee's ability to pass physical and other
examinations that include a test for illegal drugs. Despite this need for rapid
results, there is a 24 to 48 hour wait based on the sample transportation and
testing process used by all major reference laboratories. Additionally, it is
estimated that approximately 90% of all employee tests have negative results.
Therefore, an immunoassay test that provides rapid results, such as Triage DOA,
can get employees back to work quickly and save employers money.
In January 1996, the Company established the ExpressTest One-Hour Drug
Screen service, a marketing program in conjunction with regional suppliers of
occupational health services, as a means of expanding the market for Triage DOA.
The ExpressTest program incorporates the Company's "near-site" testing strategy
of providing the benefits of rapid drug test results using Triage Intervention
(a test for five illicit drugs or drug classes) without the burdens that would
be imposed on employers setting up an on-site laboratory. Participating
occupational health clinics provide rapid results to industrial clients that
send prospective employees to them for pre-employment physicals and drug
screens. Biosite's sales force actively supports these selected occupational
health clinics in their marketing of the ExpressTest program to potential
industrial
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<PAGE> 35
clients in their regional area. Biosite currently has six sales professionals
actively establishing select providers to be a part of the ExpressTest program.
Triage Cardiac
In 1992, over 6.0 million people in the United States visited hospital
emergency departments exhibiting symptoms of a heart attack. Of those,
approximately 650,000 were diagnosed with AMI and approximately 800,000 were
diagnosed with unstable angina. In total, approximately 1.9 million of the
patients who presented with chest pain were admitted to coronary care units. Of
these, approximately 30,000 to 60,000 patients were misdiagnosed as not having
an AMI. Additionally, approximately 500,000 of these patients who had not had an
AMI were admitted to hospitals and ultimately released within two days. The
Company believes that rapid, quantitative results for multiple cardiac markers
provided at the point-of-care may have a positive impact on misdiagnosed AMI,
and may provide substantial benefits to patients and savings to the hospital.
AMI is generally caused by the blocking or "occlusion" of an artery
providing oxygen-carrying blood to the heart. Without oxygen, the heart muscle
is destroyed, and a prolonged occlusion results in additional muscle damage. The
destruction of such cells in the heart muscle results in the release of several
markers into the bloodstream, including creatinine kinase ("CK-MB"), Troponin I
and Myoglobin.
In general, for early diagnosis of AMI clinicians rely on
electrocardiograms and on the measurement, over time, of CK-MB. Troponin I and
Myoglobin are also emerging as useful adjuncts to CK-MB in the detection of
heart attacks. The Company believes that the concentrations of these three
markers typically peak and fall over different time periods and that the
simultaneous measurement of these markers is a more accurate diagnostic
technique for AMI than the measurement of any one single marker. Studies have
shown that serum concentrations of Myoglobin are elevated most quickly post-AMI.
Additionally, serial quantitative measurement of Myoglobin has demonstrated a
significantly higher sensitivity in diagnosing AMI than CK-MB in patients
presenting within 12 hours of AMI symptom onset. Troponin I has been shown to
maintain an elevated concentration for a longer period of time than CK-MB and
Myoglobin.
Several diagnostic tests have recently been developed to quantitatively
measure the blood levels of such markers. Unfortunately, the measurement of
multiple markers currently requires large, centralized immunoassay systems that
cannot directly analyze whole blood and are not always available on a STAT
basis. Additionally, these systems require multiple reagent packs, frequent
standardization and quality control. Since turnaround time for such test results
is critical, current immunoassay systems may not satisfy physician needs.
The Company believes that a point-of-care test capable of quantitatively
measuring multiple markers of an AMI would have a positive impact on patient
care. Accordingly, the Company's Triage Cardiac product under development is
being designed to quantitatively measure the level of CK-MB, Troponin I and
Myoglobin in a single test device from a sample consisting of two drops of whole
blood. The hand-held Triage CareLink meter under development is being designed
to provide quantitative results of such measurements at or near the
point-of-care. Triage Cardiac may aid in the detection of AMI by providing
point-of-care quantitative results in approximately 10 minutes, providing
physicians with the ability to make treatment decisions in a timely manner.
Triage Cardiac is in the late stages of development with clinical
investigations expected to begin in the first half of 1997. If successfully
developed and cleared for marketing, the Company anticipates selling Triage
Cardiac directly in the United States and through KDK in Japan. The Company
currently has an agreement with Merck regarding distribution of Triage Cardiac
in certain countries in Europe and Latin America and in South Africa. However,
as part of its decision to refocus away from certain aspects of the human
diagnostics business, Merck has informed the Company that Merck is considering
assigning its rights concerning the marketing of Triage Cardiac either to a
third party or back to the Company.
Triage C. diff
Clostridium difficile ("C. difficile") is an opportunistic pathogen of the
intestinal tract that may thrive as a result of broad spectrum antibiotic
treatment. The bacteria may be found in asymptomatic carriers or may
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<PAGE> 36
be spread among hospital patients that are immunocompromised or receiving
antibiotics. Cytotoxins produced by the bacteria mediate C. difficile-associated
disease ("CDAD"), which may include antibiotic-associated diarrhea and
antibiotic-associated pseudo-membranous colitis. Due to the contagiousness of
CDAD, patients identified as possibly having CDAD are usually placed in
isolation until the infection is controlled. Symptoms of CDAD include diarrhea
as well as fluid and weight loss. It has been estimated that in 1995,
approximately 3.0 million rapid tests for C. difficile were performed in the
United States. This number is expected to continue to rise due to the expected
increase in the number of patients who are immunocompromised.
Until recently, the use of a cytotoxic test, which takes 48 to 72 hours to
produce diagnostic results, was the only means to identify the toxin associated
with C. difficile. More recently, in response to the need for more rapid
identification of the C. difficile toxin, several manufacturers have developed
and marketed enzyme-linked immunosorbent assay ("ELISA") tests that can be
performed in one to two hours. These ELISA test formats are used by the majority
of the hospitals testing for the toxin.
Although the ELISA technology has been a great improvement over the
cytotoxic test, it still requires several precisely timed steps as well as
multiple standards every time the test is performed, making it unlikely the
testing will be done whenever an individual specimen is sent to the laboratory.
The multiple standards and quality controls required with each run make the
processing of individual specimens expensive. As a result, specimens are
generally only processed in "batch" mode, delaying the time to a diagnostic
result, and the time by which a physician receiving the information can take
therapeutic measures.
Triage C. diff is designed to simplify the laboratory procedure and improve
time to result to the physician by enabling laboratories to complete testing for
the bacteria and toxin in approximately 10 minutes. Because the test is being
designed with built-in controls and standards, the test may be able to be
performed individually or in batches, by any laboratory technician, without
compromising the quality of the result. Triage C. diff may thus reduce time to
initiate therapy and minimize time in isolation. Rapid, accurate diagnosis of
the bacteria and toxin should enable earlier treatment, which may reduce length
of stay in the hospital and reduce cost.
Triage C. diff is in the late stages of development with clinical
investigations expected to begin in the first half of 1997. If successfully
developed and cleared for marketing, the Company expects to market this product
directly in the United States.
Triage O&P
Parasitic infection is a common cause of gastrointestinal disease and
diarrhea. Some of the more common parasites responsible for such infection are
Giardia lamblia ("Giardia"), Cryptosporidium parvum ("C. parvum"), Entamoeba
histolytica and Microsporidia species. According to the U.S. Centers for Disease
Control and Prevention ("CDC"), more than 900,000 people in the United States
become ill each year from waterborne parasites. Additionally, with the increase
in world travel, it is probable that the number of cases diagnosed in the United
States will rise. Further, parasites frequently infect immunocompromised
patients, especially HIV infected patients, which has lead to an increase in the
incidence of infection by Microsporidia species.
The most commonly employed method of detecting parasites from stool samples
is by manual ova and parasite ("O&P") microscopic examination, typically of
three consecutive stool specimens from the patient. The preparation of the
sample by a laboratory technologist involves stool specimen dilution and the
preparation of multiple microscope slides. Each slide must then be observed via
microscope by a technologist trained in the identification of parasites. The
time to diagnose parasitic infection is prolonged due to the need for manual
microscopic examination of multiple stool specimens per patient. The prolonged
time to obtain results may delay the treatment of patients, and ultimately
increase the cost of health care for such patients.
It is estimated that in 1997 over six million O&P microscopic examinations
will be performed in the United States. Because of the cumbersome procedure and
limited test menu of the current ELISA test formats, these tests have had
limited success in hospitals that perform larger volumes of tests in batches.
Recently, several manufacturers have developed and marketed ELISA tests for the
more rapid identification
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of two of the more common parasites Giardia and C. parvum. Such tests are,
however, subject to numerous limitations, including the requirement of multiple
timed steps, two hour time to result, a need to run additional standards and
controls with patient specimen and availability of tests for two parasites only.
Triage O&P is designed to replace the standard O&P microscopic detection
method for three of the most commonly encountered parasites: Giardia, C. parvum
and Entamoeba histolytica in a single test device. Future versions of Triage O&P
may include a test for Microsporidia species. Because each test device includes
standards and controls, the product may be able to be used for any volume of
tests. If successfully developed and approved for marketing, Triage O&P may make
rapid results (approximately 10 minutes) available to hospitals of any size,
including facilities that previously sent such testing to a reference lab. The
Company expects that Triage O&P will have sensitivity comparable to the current
O&P microscopic examination, but will require only a single patient specimen.
This should greatly reduce the collection burden for the patient, and reduce the
amount of labor for the laboratory technician, thereby reducing costs.
Additionally, the length of time physicians wait for results may be reduced.
Triage O&P is in the late stages of preclinical development.
Triage Enteric
Gastroenteritis, commonly described as "food poisoning," often occurs among
individuals who have consumed contaminated foods or been exposed to stool
contaminated with microorganisms such as Salmonella, Campylobacter jejuni/coli,
Shigella and E. coli 0157. Eight to 24 hours after such exposure, individuals
may experience abdominal pain, nausea and diarrhea. It is estimated that in the
United States over 14 million stool cultures are performed annually for the
diagnosis of food poisoning. Microorganisms are often implicated in such cases.
According to the CDC, there are over six million cases of foodborne disease
annually in the United States.
Stool culture, currently the primary method of diagnosing food poisoning,
involves the inoculation of multiple culture plates with stool specimen. After
24 to 48 hours, culture plates that exhibit bacterial growth are subjected to
biochemical tests that typically take an additional 24 hours. As a result of
such a prolonged testing procedure, physicians generally wait 48 to 72 hours for
test results.
Triage Enteric is being developed for identification of three of the most
common enteric bacteria responsible for food poisoning, Salmonella,
Campylobacter jejuni/coli and Shigella. Future versions of Triage Enteric may
include a test for E. coli 0157. Triage Enteric would enable the laboratory
technician to rapidly detect from a stool specimen the presence of such enteric
bacteria. This should greatly reduce the amount of labor required of laboratory
technicians, thereby reducing costs. Additionally, the length of time by which
results can be returned to the physician would be improved.
Triage Enteric is in the development stage.
Triage Transplant
Transplants of human organs generally require suppression of the immune
system of the organ recipient. Cyclosporine is the most widely used
pharmaceutical for such purposes, with annual worldwide sales in excess of $1.0
billion. Sandoz is the developer and leading supplier of cyclosporine, and is
involved in several collaborations in the organ transplant field that include
health care management, xenotransplantation, and near-patient testing in an
effort to support the use of organ transplantation. Cyclosporine is chronically
administered to patients who have received an organ transplant. Over 18,000
patients undergo organ transplantation in the United States annually. In excess
of 200,000 organ recipients worldwide take immunosuppressant drugs on a daily
basis.
The blood level of cyclosporine must be monitored to ensure that a patient
receives the appropriate therapeutic dose while minimizing toxicity. Patients
receiving cyclosporine must maintain a minimum concentration of the drug for it
to be effective, yet maintain a level that is low enough not to be toxic. This
range is often referred to as the therapeutic window. Physicians primarily rely
on large, centralized laboratories to measure cyclosporine blood levels. The
physician typically does not receive test results for at least 24 to 48
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hours, requiring a call back to the patient if the dose of the drug needs to be
adjusted. A smaller share of cyclosporine testing is performed by high
performance liquid chromatography ("HPLC"). The current worldwide market for
cyclosporine testing by immunoassay is estimated to be over 4.0 million tests
per year. Patients are monitored frequently in the immediate post-transplant
time-frame with reduced but continued testing, an average of four times per
year, for the remainder of the patient's lifetime.
Triage Transplant is designed to utilize the Triage CareLink meter to
enable a physician to easily, rapidly and accurately measure cyclosporine
levels. Triage Transplant is being developed to provide physicians with a
cost-effective means of determining cyclosporine levels at the point-of-care
which provides the physician with the ability to optimize drug therapy during
the patient's visit. As part of its research and development collaboration with
Sandoz, Biosite has obtained licenses to certain technology that makes rapid
analysis of cyclosporine levels possible. See "-- Strategic and Distribution
Arrangements."
Triage Transplant is in the preclinical development stage. If successfully
developed and approved for marketing, the Company expects Sandoz to support the
promotion of Triage Transplant worldwide.
RESEARCH AND DEVELOPMENT
As of November 30, 1996, the Company had 60 employees in research and
development, of which 15 have Ph.D.s. The Company's research and development
organization is dedicated to the discovery and development of new technologies
which can be applied to future products and the development of new products in
its existing platform technologies.
The Company has research staff dedicated to the development and production
of antibodies through a variety of techniques. Recombinant techniques are used
to express proteins for use as diagnostic targets. The Company's staff of
chemists and biochemists synthesize drug targets and compounds for use as
diagnostic labels as well as seek to perfect techniques for coupling these
compounds to biological reagents such as antibodies. The Company's development
engineering staff is involved in the design and development of new diagnostic
device technologies as well as processes for their fabrication and interface
with biological and chemical reagents. The Company's product development group
completes final optimization of assays and the Company's regulatory affairs
group controls all in-house and external clinical trials of the Company's
products and prepares applications to the FDA for pre-market clearance or
approval.
MANUFACTURING
As of November 30, 1996, the Company had 42 employees in manufacturing
involved in reagent production, device assembly, engineering, quality
assurance/quality control and materials management.
Biosite maintains worldwide manufacturing rights to all current and future
products. A key strategy of the Company is to provide high quality analytical
results in an efficient manner. To this end, the Company invests in the design
and development of manufacturing systems and technologies that can produce a
high quality product using controlled, cost-effective manufacturing processes
and equipment. Triage C. diff, Triage O&P, and Triage Enteric are being
developed to utilize the same or similar processes and equipment as Triage DOA.
The Company believes that the experience it has acquired in manufacturing Triage
DOA will provide benefits in product quality and cost in manufacturing for its
products under development. The Company expects its manufacturing capacities
will allow such potential products and Triage DOA to be manufactured
concurrently in the same facility.
All raw materials required to manufacture Triage DOA are obtained from
outside suppliers. All antibodies used in the manufacture of Triage DOA were
developed by Biosite and the cell lines are owned by Biosite. Production
quantities of most of the antibodies are produced by two vendors. In addition,
Biosite maintains its own in-house antibody production capability.
The Company manufactures Triage DOA at its facility in San Diego,
California. The facility has received its registration as a diagnostic product
manufacturer from the FDA and from the California Department of Health Services.
The Company has also been licensed and certified to manufacture products using
controlled substances by the U.S. Drug Enforcement Agency. There can be no
assurance that the Company can continue
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to comply with all government requirements and regulations which may lead to the
suspension or revocation of its right to manufacture. See "Risk
Factors -- Government Regulation" and "-- Government Regulation."
The Company is also developing novel and sophisticated processes and
equipment for the future production of its Triage Cardiac and Triage Transplant
products. LRE will manufacture and supply the meter used in conjunction with the
Company's Triage CareLink System platform products. The Company is increasing
its manufacturing space at its San Diego facility to accommodate production of
Triage Cardiac.
SALES AND MARKETING
As of November 30, 1996, the Company has 31 employees in various sales and
marketing functions. The Company markets its Triage DOA to hospital laboratories
and emergency departments in the United States through CMS, a laboratory
products distributor, and in certain countries in Europe, Latin America, the
Middle East and Africa through Merck. The Company anticipates it may directly
market in the United States its cardiac, microbiology and therapeutic drug
monitoring products under development. In geographic markets outside the United
States, the Company intends to establish relationships with marketing partners,
where appropriate, for these potential products. The Company believes it has the
management resources necessary to significantly expand its sales force for the
promotion of its potential products. There can be no assurance that any of the
Company's products under development will be successfully developed and approved
for marketing.
STRATEGIC AND DISTRIBUTION ARRANGEMENTS
Biosite's strategy for the research, development, commercialization and
distribution of certain of its products entails entering into various
arrangements with corporate partners, licensors, licensees and others, and is
dependent upon the success of these parties in performing their
responsibilities. There can be no assurance that such parties will perform their
obligations as expected or that any revenue will be derived from such
arrangements.
Curtin Matheson Scientific, Inc.
In November 1991, the Company entered into a distribution agreement (the
"CMS Agreement") with CMS pursuant to which the Company granted to CMS an
exclusive right to distribute Triage DOA to hospitals, non-industrial
laboratories and certain other health and medical organizations within the
United States. In March 1996, the parties executed an amendment to the CMS
Agreement, setting forth certain purchase and cumulative sales targets which if
not met gives Biosite the option to terminate the CMS Agreement and further
obligates CMS to pay to Biosite a penalty if it fails to meet such purchase and
cumulative sales targets for 1996. Since the amendment of the CMS Agreement, CMS
has missed certain of these purchase and cumulative sales targets. In August
1996, Biosite agreed to forgive a portion of the penalty each year that CMS
meets additional sales milestones through 1999. There can be no assurance that
the additional targets will be met. The CMS Agreement provides for a six-month
transition period in the event of termination. If Biosite elects to terminate
the CMS Agreement, it may appoint a new distributor or expand its own sales
force to sell Triage DOA directly in the United States.
Merck KGaA
In July 1992, the Company entered into a distribution agreement with Merck,
pursuant to which the Company granted to Merck an exclusive right to market and
distribute Triage DOA in certain countries in Europe, Latin America, the Middle
East and Africa and in Pakistan and India. In June 1994, the Company entered
into two additional agreements with Merck, a collaborative development agreement
and a supply and distribution agreement, in connection with the Company's
development of Triage Cardiac. Under the terms of such agreements, the Company
and Merck agreed to jointly develop, perform clinical testing of, and obtain
regulatory approval for Triage Cardiac. The agreement further provides that the
Company is to be responsible for the design, development and manufacturing
scale-up of Triage Cardiac and the reagents used in connection therewith, and
for the clinical trials and regulatory approval of Triage Cardiac for use in the
AMI diagnosis field in Japan and the United States. Merck is obligated to
perform clinical trials and obtain regulatory approval for the product for use
in the AMI diagnosis field in certain countries in Europe and Latin America and
in South Africa. Additionally, Biosite is obligated to fund 60% and Merck is
obligated to fund the remaining 40% of the costs incurred by both parties in
developing, manufacturing and obtaining regulatory approval for the product,
subject to certain maximum aggregate expenditure limitations and subject further
to
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<PAGE> 40
a reduction in Merck's funding obligations of 40% of payments which Biosite
receives from KDK in connection with the development and commercialization of
Triage Cardiac in Japan. The agreements further specify that Merck is to be the
exclusive distributor of Triage Cardiac for use in the AMI diagnosis field in
certain countries in Europe and Latin America and in South Africa, while the
Company is to retain distribution rights to the product in the remainder of the
world and for uses other than the diagnosis of AMI. As part of its decision to
refocus away from certain aspects of the human diagnostics business, Merck has
informed the Company that Merck is considering assigning its rights under its
agreements with the Company concerning the marketing of Triage Cardiac either to
a third party or back to the Company.
LRE Relais + Elektronik GmbH
In September 1994, the Company entered into an agreement with LRE (the "LRE
Agreement") for the development of a hand-held meter to be used in all Triage
CareLink System products currently under development, including Triage Cardiac
and Triage Transplant. Under the terms of the LRE Agreement, LRE is obligated to
develop and produce the fluorescent meter according to specifications provided
by Biosite. In return, the Company agreed to compensate LRE for certain
development and tooling expenses incurred in connection therewith, based upon
LRE's successful completion of certain feasibility, prototype and preproduction
milestones. In addition, the agreement specifies that LRE is to be the Company's
exclusive supplier of the Triage CareLink meter during the term of the LRE
Agreement, unless LRE is incapable of satisfying Biosite's needs or is
prohibited from producing such meters for a specific immunoassay application.
ARKRAY KDK Corporation
In February 1995, the Company entered into a development, supply and
distribution agreement with KDK, pursuant to which the parties agreed to
collaborate in the development and marketing of Triage Cardiac. Under the terms
of the agreement, KDK is obligated to provide certain funding of up to $2.0
million for the Company's development of Triage Cardiac, $500,000 of which has
been paid and the remainder of which is to be paid based upon the Company's
achievement of certain milestones. In exchange for this funding, the Company has
granted KDK the exclusive right to distribute Triage Cardiac in Japan and in
certain countries of Asia, the Middle East and Pacific Island countries. The
Company is responsible for costs associated with performing clinical trials on
and obtaining regulatory approval of Triage Cardiac in the United States, while
KDK is responsible for such costs in Japan and in certain countries of Asia, the
Middle East and Pacific Island countries. KDK can terminate this agreement at
any time.
Sandoz Pharma Ltd.
In September 1995, the Company entered into two license agreements with
Sandoz relating to the Company's development of Triage Transplant. The first
license is for cyclosporine antibodies and the second license is for certain
antibody-based assays. Under the terms of the agreements, and upon the Company's
successful completion of certain feasibility requirements, the Company has the
right to make, have made, use and sell Triage Transplant using the licensed
Sandoz antibodies and related technologies. Upon entering into the two licenses,
the Company made certain initial payments to Sandoz and is obligated to make
payments to Sandoz based upon the achievement of certain product development
milestones, and to pay royalties on sales of products developed by the Company
using such antibodies or related technologies. In connection with the agreement,
Sandoz purchased $1.0 million of five-year 8% convertible debentures which
convert into 92,222 shares of Common Stock of the Company upon the closing of
this offering (based upon interest through January 31, 1997 and an assumed
initial public offering price of $12.00 per share). The Company is obligated to
sell to Sandoz up to $1.0 million additional five-year 8% convertible debentures
upon the attainment of certain milestones. The debentures will be convertible,
at the sole option of the Company, into shares of Biosite Common Stock at the
initial offering price.
PROPRIETARY TECHNOLOGY AND PATENTS
The Company's ability to compete effectively will depend in part on its
ability to develop and maintain proprietary aspects of its technology, and to
operate without infringing the proprietary rights of others or to obtain rights
to such proprietary rights. Biosite has U.S. and foreign issued patents and is
currently prosecuting
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<PAGE> 41
patent applications in the United States and with certain foreign patent
offices. There can be no assurance that any of the Company's pending patent
applications will result in the issuance of any patents, that the Company's
patent applications will have priority over others' applications, or that, if
issued, any of the Company's patents will offer protection against competitors
with similar technology. There can be no assurance that any patents issued to
the Company will not be challenged, invalidated or circumvented in the future or
that the rights created thereunder will provide a competitive advantage.
Litigation may be necessary to enforce any patents issued to the Company,
to protect trade secrets or know-how owned by the Company or to determine the
enforceability, scope and validity of the proprietary rights of others. In March
1996, the Company settled a potential patent infringement claim by obtaining a
license to the contested patent in return for a one-time payment of $2.2
million. In September 1996, the Company settled a patent infringement lawsuit
filed by Abbott Laboratories and obtained a license to the contested patent in
return for the payment of $5.5 million and the agreement to pay certain
royalties. There can be no assurance that the Company will not in the future
become subject to patent infringement claims and litigation or interference
proceedings conducted in the USPTO to determine the priority of inventions. The
defense and prosecution of intellectual property suits, USPTO interference
proceedings, and related legal and administrative proceedings will result in
substantial expense to the Company and significant diversion of effort by the
Company's technical and management personnel. An adverse determination in
litigation or interference proceedings to which the Company may become a party
could subject the Company to significant liabilities to third parties. Further,
either as the result of such litigation or proceedings or otherwise, the Company
may be required to seek licenses from third parties which may not be available
on commercially reasonable terms, if at all.
Triage DOA and products under development may incorporate technologies that
are the subject of patents issued to, and patent applications filed by, others.
The Company has obtained licenses for certain technologies. However, there can
be no assurance that the Company will be able to obtain licenses for technology
patented by others on commercially reasonable terms, if at all, that it will be
able to develop alternative approaches if unable to obtain licenses or that the
Company's current and future licenses will be adequate for the operation of
Biosite's business. The failure to obtain necessary licenses or to identify and
implement alternative approaches would prevent the Company from commercializing
certain of its products under development and would have a material adverse
effect on the Company's business, financial condition and results of operations.
Biosite is aware of a U.S. patent owned by Celltech relating to the
manufacture of antibodies, such as those developed or being developed by Biosite
for Triage Cardiac, Triage O&P, Triage C. diff and Triage Enteric. Biosite is
also aware that this patent is the subject of an interference proceeding in the
USPTO which was initiated in February 1991 with a patent application filed by
Genentech. In June 1996, the EPO invalidated, following an opposition, certain
claims under Celltech's corresponding EPO-granted patent which are relevant to
Biosite's products and products under development. Celltech has indicated that
it will appeal such decision. If it is determined that aspects of the
manufacturing of Biosite's antibodies are covered by patent claims stemming from
the interference or if Celltech were to have such claims upheld on appeal,
Biosite may be required to obtain a license under such patents and corresponding
patents in other countries. There can be no assurance that a license would be
made available to Biosite on commercially reasonable terms, if at all. If such
license is required and not obtained the Company might be prevented from using
certain of its manufacturing technologies. The Company's failure to obtain any
required licenses could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company also relies upon trade secrets, technical know-how and
continuing invention to develop and maintain its competitive position. There can
be no assurance that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the Company's trade secrets or disclose such technology, or that the Company can
meaningfully protect its right to its trade secrets, or that the Company will be
capable of protecting its rights to its trade secrets.
Others may have filed and in the future are likely to file patent
applications that are similar or identical to those of the Company. To determine
the priority of inventions, the Company may have to participate in interference
proceedings declared by the USPTO that could result in substantial cost to the
Company. No assurance can be given that any patent application of another will
not have priority over patent applications filed by the Company.
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The commercial success of the Company also depends in part on the Company
neither infringing patents or proprietary rights of third parties nor breaching
any licenses that may relate to the Company's technologies and products. The
Company is aware of several third-party patents that relate to the Company's
technology. There can be no assurance that the Company does not or will not
infringe these patents, or other patents or proprietary rights of third parties.
In addition, the Company has received and may in the future receive notices
claiming infringement from third parties as well as invitations to take licenses
under third party patents. Any legal action against the Company or its
collaborative partners claiming damages and seeking to enjoin commercial
activities relating to the Company's products and processes affected by third
party rights, in addition to subjecting the Company to potential liability for
damages, may require the Company or its collaborative partner to obtain a
license in order to continue to manufacture or market the affected products and
processes. There can be no assurance that the Company or its collaborative
partners would prevail in any such action or that any license (including
licenses proposed by third parties) required under any such patent would be made
available on commercially acceptable terms, if at all. There are a significant
number of U.S. and foreign patents and patent applications in the Company's
areas of interest, and the Company believes that there may be significant
litigation in the industry regarding patent and other intellectual property
rights. If the Company becomes involved in such litigation, it could consume a
substantial portion of the Company's managerial and financial resources, which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
COMPETITION
The market in which the Company competes is intensely competitive.
Biosite's competitors include health care companies that manufacture
laboratory-based tests and analyzers, as well as clinical and hospital-based
laboratories. Currently, the majority of diagnostic tests used by physicians and
other health care providers are performed by independent clinical and
hospital-based laboratories. The Company expects that these laboratories will
compete vigorously to maintain their dominance of the testing market. In order
to achieve market acceptance for its products, the Company will be required to
demonstrate that its products are an attractive alternative to testing performed
by clinical and hospital-based laboratories. This will require physicians to
change their established means of having such tests performed. There can be no
assurance that the Company's products will be able to compete with the testing
services provided by these laboratories. In addition, companies with a
significant presence in the diagnostic market, such as Abbott Laboratories,
Boehringer Mannheim, Chiron Diagnostics, Clinical Diagnostic Systems, a division
of Johnson & Johnson, DADE International, and Roche Biosciences, Inc., have
developed or are developing diagnostic products that do or will compete with the
Company's products. These competitors have substantially greater financial,
technical, research and other resources and larger, more established marketing,
sales, distribution and service organizations than the Company. Moreover, such
competitors offer broader product lines and have greater name recognition than
the Company, and offer discounts as a competitive tactic. In addition, several
smaller companies are currently making or developing products that compete with
or will compete with those of the Company. There can be no assurance that the
Company's competitors will not succeed in developing or marketing technologies
or products that are more effective or commercially attractive than the
Company's current or future products, or that would render the Company's
technologies and products obsolete. Moreover, there can be no assurance that the
Company will have the financial resources, technical expertise or marketing,
distribution or support capabilities to compete successfully in the future. In
addition, there can be no assurance that competitors, many of which have made
substantial investments in competing technologies that may be more effective
than the Company's technologies will not prevent, limit or interfere with the
Company's ability to make, use or sell its products either in the United States
or in international markets. See "-- Products and Products under Development"
and "-- Technology."
GOVERNMENT REGULATION
The testing, manufacture and sale of the Company's products are subject to
regulation by numerous governmental authorities, principally the FDA and
corresponding state and foreign regulatory agencies. Pursuant to the Federal
Food, Drug, and Cosmetic Act, and the regulations promulgated thereunder, the
FDA regulates the preclinical and clinical testing, manufacture, labeling,
distribution and promotion of medical devices. The Company will not be able to
commence marketing or commercial sales in the United States of
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new products under development until it receives clearance or approval from the
FDA, which can be a lengthy, expensive and uncertain process. Noncompliance with
applicable requirements can result in, among other things, fines, injunctions,
civil penalties, recall or seizure of products, total or partial suspension of
production, failure of the government to grant premarket clearance or premarket
approval for devices, withdrawal of marketing clearances or approvals and
criminal prosecution. The FDA also has the authority to request recall, repair,
replacement or refund of the cost of any device manufactured or distributed by
the Company.
In the United States, medical devices are classified into one of three
classes (i.e., Class I, II or III) on the basis of the controls deemed necessary
by the FDA to reasonably ensure their safety and effectiveness. Class I devices
are subject to general controls (e.g., labeling, premarket notification and
adherence to cGMP) and Class II devices are subject to general and special
controls (e.g., performance standards, postmarket surveillance, patient
registries and FDA guidelines). Generally, Class III devices are those which
must receive premarket approval by the FDA to ensure their safety and
effectiveness (e.g., life-sustaining, life-supporting and implantable devices or
new devices which have been found not to be substantially equivalent to legally
marketed devices).
Before a new device can be introduced in the market, the manufacturer must
generally obtain FDA clearance or approval through either clearance of a 510(k)
notification or approval of a PMA application. A PMA application must be filed
if a proposed device is a new device not substantially equivalent to a legally
marketed Class I or Class II device, or if it is a preamendment Class III device
for which the FDA has called for PMAs. A PMA application must be supported by
valid scientific evidence to demonstrate the safety and effectiveness of the
device, typically including the results of clinical investigations, bench tests,
laboratory and animal studies. The PMA application must also contain a complete
description of the device and its components and a detailed description of the
methods, facilities and controls used to manufacture the device. In addition,
the submission must include the proposed labeling, advertising literature and
any training materials. The PMA approval process can be expensive, uncertain and
lengthy, and a number of devices for which FDA approval has been sought by other
companies have never been approved for marketing.
Upon receipt of a PMA application, the FDA makes a threshold determination
as to whether the application is sufficiently complete to permit a substantive
review. If the FDA determines that the PMA application is complete, the FDA will
accept the application for filing. Once the submission is accepted, the FDA
begins an in-depth review of the PMA. The FDA review of a PMA application
generally takes one to three years from the date the application is accepted,
but may take significantly longer. The review time is often significantly
extended by the FDA asking for more information or clarification of information
already provided in the submission. During the review period, an advisory
committee, typically a panel of clinicians, will likely be convened to review
and evaluate the application and provide recommendations to the FDA as to
whether the device should be approved. The FDA is not bound by the
recommendation of the advisory panel. Toward the end of the PMA review process,
the FDA generally will conduct an inspection of the manufacturer's facilities to
ensure that the facilities are in compliance with applicable cGMP requirements.
If FDA evaluations of both the PMA application and the manufacturing facilities
are favorable, the FDA may issue either an approval letter or an approvable
letter, which usually contains a number of conditions that must be met in order
to secure final approval of the PMA. When and if those conditions have been
fulfilled to the satisfaction of the FDA, the agency will issue a PMA approval
letter, authorizing commercial marketing of the device for certain indications.
If the FDA's evaluation of the PMA application or manufacturing facilities is
not favorable, the FDA will deny approval of the PMA application or issue a
non-approvable letter. The FDA may determine that additional clinical
investigations are necessary, in which case the PMA may be delayed for one or
more years while additional clinical investigations are conducted and submitted
in an amendment to the PMA. Modifications to a device that is the subject of an
approved PMA, its labeling or manufacturing process may require approval by the
FDA of PMA supplements or new PMAs. Supplements to an approved PMA often require
the submission of the same type of information required for an initial PMA,
except that the supplement is generally limited to that information needed to
support the proposed change from the product covered by the original PMA.
A 510(k) clearance will be granted if the submitted information establishes
that the proposed device is "substantially equivalent" to a legally marketed
Class I or Class II medical device or a preamendment Class
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III medical device for which the FDA has not called for PMAs. The FDA recently
has been requiring more rigorous demonstration of substantial equivalence than
in the past, including in some cases requiring submission of clinical data. It
generally takes from four to 12 months from submission to obtain 510(k)
premarket clearance but may take longer. The FDA may determine that a proposed
device is not substantially equivalent to a legally marketed device or that
additional information is needed before a substantial equivalence determination
can be made. A "not substantially equivalent" determination, or a request for
additional information, could prevent or delay the market introduction of new
products that fall into this category. For any devices that are cleared through
the 510(k) process, modifications or enhancements that could significantly
affect safety or effectiveness, or constitute a major change in the intended use
of the device, will require new 510(k) submissions.
The Company has made modifications to Triage DOA since receipt of initial
510(k) clearance. With respect to several of these modifications, the Company
has filed new 510(k) notices describing the modifications, and has received FDA
clearance of those 510(k) notices. The Company has made other modifications to
Triage DOA which the Company believes do not require the submission of new
510(k) notices. There can be no assurance, however, that the FDA would agree
with any of the Company's determinations not to submit a new 510(k) notice for
any of these modifications, or would not require the Company to submit a new
510(k) notice for any of these modifications made to Triage DOA. If the FDA
requires the Company to submit a new 510(k) notice for any device modification,
the Company may be prohibited from marketing the modified Triage DOA until the
510(k) notice is cleared by the FDA.
The Company is uncertain of the regulatory path to market that the FDA will
ultimately apply to the Company's products currently in development. Although
Triage DOA received 510(k) clearance, a PMA may be required for Triage
Transplant or other products now in development. There can be no assurance that
the FDA will not determine that the Company must adhere to the more costly,
lengthy and uncertain PMA approval process for any of the Company's products in
development.
There can be no assurance that the Company will be able to obtain necessary
regulatory approvals or clearances for its products on a timely basis, if at
all, and delays in receipt of or failure to receive such approvals or
clearances, the loss of previously received approvals or clearances, limitations
on intended use imposed as a condition of such approvals or clearances, or
failure to comply with existing or future regulatory requirements would have a
material adverse effect on the Company's business, financial condition and
results of operations.
Before the manufacturer of a device can submit the device for FDA approval
or clearance, it generally must conduct a clinical investigation of the device.
Although clinical investigations of most devices are subject to the IDE
requirements, clinical investigations of IVD tests, such as all of the Company's
products and products under development, are exempt from the IDE requirements,
including the need to obtain the FDA's prior approval, provided the testing is
noninvasive, does not require an invasive sampling procedure that presents a
significant risk, does not intentionally introduce energy into the subject, and
is not used as a diagnostic procedure without confirmation by another medically
established test or procedure. In addition, the IVD must be labeled for RUO or
IUO, and distribution controls must be established to assure that IVDs
distributed for research or clinical investigation are used only for those
purposes.
The Company intends to conduct clinical investigations of its products
under development, which will entail distributing them in the United States on
an IUO basis. There can be no assurance that the FDA would agree that the
Company's IUO distribution of its IVD products under development will meet the
requirements for IDE exemption. Furthermore, failure by the Company or the
recipients of its products under development to maintain compliance with the IDE
exemption requirements could result in enforcement action by the FDA, including,
among other things, the loss of the IDE exemption or the imposition of other
restrictions on the Company's distribution of its products under development,
which would adversely affect the Company's ability to conduct the clinical
investigations necessary to support marketing clearance or approval.
Any devices manufactured or distributed by the Company pursuant to FDA
clearance or approvals are subject to pervasive and continuing regulation by FDA
and certain state agencies. Manufacturers of medical devices for marketing in
the United States are required to adhere to applicable regulations setting forth
detailed cGMP requirements, which include testing, control and documentation
requirements. Manufacturers
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must also comply with MDR requirements that a manufacturer report to the FDA any
incident in which its product may have caused or contributed to a death or
serious injury, or in which its product malfunctioned and, if the malfunction
were to recur, it would be likely to cause or contribute to a death or serious
injury. Labeling and promotional activities are subject to scrutiny by the FDA
and, in certain circumstances, by the Federal Trade Commission. Current FDA
enforcement policy prohibits the marketing of approved medical devices for
unapproved uses.
The Company is subject to routine inspection by the FDA and certain state
agencies for compliance with cGMP requirements, MDR requirements and other
applicable regulations. The FDA has recently finalized changes to the cGMP
requirements, including the addition of design controls that will likely
increase the cost of compliance. Changes in existing requirements or adoption of
new requirements could have a material adverse effect on the Company's business,
financial condition and results of operation. There can be no assurance that the
Company will not incur significant costs to comply with laws and regulations in
the future or that laws and regulations will not have a material adverse effect
upon the Company's business, financial condition and results of operations.
The Company also is subject to numerous federal, state and local laws
relating to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control and disposal of hazardous or
potentially hazardous substances. There can be no assurance that the Company
will not incur significant costs to comply with laws and regulations in the
future or that such laws or regulations will not have a material adverse effect
upon the Company's business, financial condition and results of operations.
The use of Biosite's products is also affected by CLIA and related federal
and state regulations which provide for regulation of laboratory testing. The
scope of these regulations includes quality control, proficiency testing,
personnel standards and federal inspections. CLIA categorizes tests as "waived,"
"moderately complex" or "highly complex," on the basis of specific criteria.
There can be no assurance that any future amendment of CLIA or the promulgation
of additional regulations impacting laboratory testing will not have a material
adverse effect on the Company's ability to market its products or on its
business, financial condition or results of operations.
EMPLOYEES
As of November 30, 1996, Biosite employed 162 individuals. Of these, 17
hold Ph.D.s and 13 hold other advanced degrees. None of the Company's employees
is covered by collective bargaining agreement. The Company believes that it
maintains good relations with its employees.
FACILITIES
The Company currently leases approximately 83,000 square feet of space in
five buildings in the Sorrento Valley area in San Diego under leases that expire
from September 1997 through September 1998 with renewal options through 2001.
The Company believes these facilities are adequate for its current needs and
that suitable additional or alternative space will be available in the future on
commercially reasonable terms as needed. The Company's current facilities are
used for its administrative offices, research and development facilities and
manufacturing operations.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their positions with
the Company and ages as of September 30, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------
<S> <C> <C>
Kim D. Blickenstaff................. 44 President, Chief Executive Officer, Treasurer, Secretary
and Director
Gunars E. Valkirs, Ph.D. ........... 44 Vice President, Research and Development, Chief
Technical Officer and Director
Thomas M. Watlington................ 41 Senior Vice President
Charles W. Patrick.................. 42 Vice President, Sales and Marketing
Christopher J. Twomey............... 37 Vice President, Finance and Chief Financial Officer
S. Nicholas Stiso, Ph.D. ........... 52 Vice President, Operations
Kenneth F. Buechler, Ph.D. ......... 42 Vice President, Research
Timothy J. Wollaeger(1)(2).......... 53 Chairman of the Board
Thomas H. Adams, Ph.D. ............. 53 Director
Frederick J. Dotzler(1)(2).......... 51 Director
Howard E. Greene, Jr. .............. 53 Director
Stephen K. Reidy.................... 46 Director
Jesse I. Treu, Ph.D. ............... 49 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
KIM D. BLICKENSTAFF, a founder of the Company, has been a director and the
Company's President, Chief Executive Officer, Treasurer and Secretary since
April 1988. He previously held various positions in finance, operations,
research management, sales management, strategic planning, and marketing with
Baxter Travenol, National Health Laboratories, and Hybritech Incorporated
("Hybritech"). Mr. Blickenstaff holds an M.B.A. from the Graduate School of
Business, Loyola University, Chicago.
GUNARS E. VALKIRS, PH.D., a founder of Biosite and a co-inventor of certain
of its proprietary technology has been a director since April 1988 and Vice
President, Research and Development and Chief Technical Officer since 1988.
Prior to forming Biosite, he was a Scientific Investigator with the Diagnostics
Research & Development Group at Hybritech, where he was the primary inventor of
Hybritech's patented ICON technology. Dr. Valkirs holds a Ph.D. in Physics from
the University of California at San Diego.
THOMAS M. WATLINGTON joined the Company as Senior Vice President in
December 1996. He was formerly Vice President, Marketing for the Diabetes Care
Division for Boehringer Mannheim. From 1982 to December 1996, Mr. Watlington
held various positions in marketing, strategic analysis and product development
with Boehringer Mannheim. Mr. Watlington holds a B.S. degree from the University
of Maryland.
CHARLES W. PATRICK joined the Company in August 1990 as Vice President,
Sales and Marketing. From 1978 to August 1990, Mr. Patrick held various
positions in sales, sales management and product and marketing management with
Abbott. From 1987 to August 1990, he was Group Marketing Manager for the Abused
Drug Business Unit of Abbott where he managed the worldwide product launch of
Abbott's TDx and ADx bench top testing systems. Mr. Patrick holds a B.A. from
the University of Central Florida.
CHRISTOPHER J. TWOMEY joined the Company as Director of Finance in March
1990 and was promoted to Vice President of Finance and Chief Financial Officer
in 1993. From 1981 to March 1990, Mr. Twomey was employed by Ernst & Young LLP,
where from October 1985 to March 1990, he served as Audit Manager.
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<PAGE> 47
Mr. Twomey holds a B.A. in Business Economics from the University of California
at Santa Barbara.
S. NICHOLAS STISO, PH.D. joined the Company as Vice President, Operations
in November 1989. Prior to joining Biosite, he was with Syntex Medical
Diagnostics, a division of SYVA Co., where from April 1980 to April 1989, he was
Manufacturing Director for the AccuLevel line of quantitative, non-instrumented,
therapeutic drug assays. Dr. Stiso holds a Ph.D. in Physical Chemistry from
Michigan State University in East Lansing, Michigan.
KENNETH F. BUECHLER, PH.D., a founder of Biosite and a co-inventor of
certain of Biosite's proprietary technology, has been Vice President, Research
since January 1994. From April 1988 to January 1994, he was Director of
Chemistry. Prior to forming Biosite, he was a Senior Scientist in the
Diagnostics Research and Development Group at Hybritech. Dr. Buechler holds a
Ph.D. in Biochemistry from Indiana University.
TIMOTHY J. WOLLAEGER has served as Chairman of the Board of Directors since
the Company's inception. He is the general partner of Kingsbury Associates,
L.P., a venture capital firm he founded in December 1993. From May 1990 until
December 1993, he was Senior Vice President and a director of Columbia Hospital
Corporation (now Columbia/HCA Healthcare Corporation). From October 1986 until
July 1993, he was a general partner of the general partner of Biovest Partners,
A California Limited Partnership ("Biovest"), a seed venture capital firm. From
1983 to 1986, Mr. Wollaeger served as Senior Vice President and Chief Financial
Officer of Hybritech. He is a director of Amylin Pharmaceuticals, Inc.
("Amylin") and Phamis, Inc., and a founder and director of several privately
held medical products companies. He received an M.B.A. from Stanford University.
THOMAS H. ADAMS, PH.D. joined the Board of Directors in September 1988. Dr.
Adams was a founder of Genta Incorporated, a biotechnology company, and has been
Chairman of the Board and Chief Executive Officer of Genta since February 1989.
He previously served as Chairman of the Board and Chief Executive Officer of
Gen-Probe Incorporated ("Gen-Probe"), which he co-founded in 1984. Prior to
joining Gen-Probe, he held the positions of Senior Vice President of Research &
Development and Chief Technical Officer at Hybritech. He had previously held
senior scientific management positions with Technicon Instruments Corp., the
Hyland Laboratories Division of Baxter Travenol, and DuPont. Dr. Adams is a
director of Genta Incorporated, Life Technologies, Inc., La Jolla Pharmaceutical
Company and two private biotechnology companies. He received his Ph.D. in
Biochemistry from the University of California at Riverside.
FREDERICK J. DOTZLER joined the Board of Directors in July 1989. Mr.
Dotzler is General Partner of Medicus Venture Partners, a venture capital firm
he founded in 1989. Prior to founding Medicus, Mr. Dotzler was a general partner
of Crosspoint Venture Partners. Previously he held management positions with
Millipore Corporation, G.D. Searle & Co., and IBM. He is a director of several
privately held companies. Mr. Dotzler received a B.S. in Industrial Engineering
from Iowa State University, an M.B.A. from the University of Chicago, and a
degree in Economics from the University of Louvain, Belgium.
HOWARD E. GREENE, JR. joined the Board of Directors in June 1989. Mr.
Greene is a founder and Chairman of the Board of Amylin, a biotechnology company
in late stage development of a drug candidate for diabetes, and he was Chief
Executive Officer of Amylin from inception in September 1987 to July 1996. From
October 1986 until July 1993, Mr. Greene was a general partner of the general
partner of Biovest. From March 1979 to March 1986, he was Chief Executive
Officer of Hybritech, and he was a co-inventor of Hybritech's monoclonal
antibody assay technology. Prior to joining Hybritech, he was an executive with
the medical diagnostics division of Baxter Healthcare Corporation from 1974 to
1979 and a consultant with McKinsey & Company from 1967 to 1974. He is Chairman
of the Board of Cytel Corporation, a director of Allergan, Inc., Neurex
Corporation and The International Biotechnology Trust plc, a foreign
biotechnology investment company. Mr. Greene received an M.B.A. from Harvard
University.
STEPHEN K. REIDY joined the Board of Directors in July 1989. Since 1987,
Mr. Reidy has been affiliated with Euclid Partners Corporation, a company
engaged in venture capital investments in the health care and information
technology industries. Mr. Reidy is a general partner of the General Partner of
Euclid Partners III, L.P. and Euclid Partners IV, L.P. He is a director of
Zynaxis, Inc., a drug delivery company,
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<PAGE> 48
Chairman of the Board of a privately held neurological company and a director of
a privately-held hospital software company. Mr. Reidy has an M.B.A. from
Columbia University.
JESSE I. TREU, PH.D. joined the Board of Directors in June 1990. He has
been a general partner of Domain Associates, a venture capital firm specializing
in life sciences since 1986. Before joining Domain Associates in 1986, he was a
principal of Channing, Weinberg and Company, Inc., and its venture capital
spin-off CW Ventures, and was a director of Technicon Corporation responsible
for marketing strategy and new product development in immunology and
histopathology and previously held research and development, management and
corporate staff positions at General Electric Company. Dr. Treu is a director of
DNX Corporation, a pharmaceutical testing company, Geltex Pharmaceuticals, Inc.,
a developer of polymer based pharmaceuticals, and Lumisys, Inc., an
electro-optical systems company. Dr. Treu received a Ph.D. in Physics from
Princeton University.
The Company currently has authorized eight directors. Upon the closing of
this offering, the Company will have three classes of directors serving
staggered three-year terms. All directors are elected to hold office until the
next annual meeting of stockholders of the Company in which their three-year
term expires and until their successors have been elected. The Company's
officers are appointed by the directors and serve at the discretion of the Board
of Directors. There are no family relationships among any of the directors or
executive officers of the Company.
BOARD COMMITTEES
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee, which consists of Mr. Dotzler and
Mr. Wollaeger, reviews the results and scope of the annual audit and the
services provided by the Company's independent accountants. The Compensation
Committee, which consists of Mr. Dotzler and Mr. Wollaeger, makes
recommendations to the Board of Directors with respect to general and specific
compensation policies and practices of the Company and administers the Amended
and Restated 1989 Stock Plan of Biosite (the "1989 Stock Plan"), the 1996 Stock
Incentive Plan of Biosite (the "1996 Stock Plan") and the Biosite Employee Stock
Purchase Plan (the "ESPP").
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee during 1995 were Mr.
Dotzler and Mr. Wollaeger. There were no interlocks or other relationships among
the Company's executive officers and directors that are required to be disclosed
under applicable executive compensation disclosure regulations.
COMPENSATION OF DIRECTORS
Directors do not receive any fees for service on the Board of Directors.
Directors are reimbursed for their expenses for each meeting attended. Directors
are eligible to participate in the 1996 Stock Plan described below, although as
of the date of this Prospectus, no options have been granted to non-employee
directors.
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<PAGE> 49
EXECUTIVE COMPENSATION
The following table sets forth compensation paid or awarded by the Company
during the fiscal year ended December 31, 1995 to the Company's Chief Executive
Officer and the Company's four most highly compensated executive officers other
than the Chief Executive Officer whose salary and bonus exceeded $100,000 during
the fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------- SECURITIES
OTHER UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($) COMPENSATION ($) OPTIONS
- --------------------------------------- ---- ------------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Kim D. Blickenstaff.................... 1995 $ 169,633 $78,462 $ 900 40,000
President and Chief Executive Officer
Charles W. Patrick..................... 1995 151,000 27,002 59,290(2) 5,000
Vice President, Sales and Marketing
Gunars E. Valkirs...................... 1995 139,208 36,244 793 25,000
Vice President, Research and
Development
Kenneth F. Buechler.................... 1995 125,823 36,244 709 25,000
Vice President, Research
S. Nicholas Stiso...................... 1995 134,554 27,002 1,787 20,000
Vice President, Operations
</TABLE>
- ---------------
(1) Includes amounts deferred by each individual under the Company's 401(k) plan
for the years in which earned.
(2) Includes forgiveness of a $36,000 relocation loan made in August 1990 which
was forgiven in August 1995 and $22,776 related to income taxes associated
with the forgiveness of the loan.
The following tables set forth certain information as of December 31, 1995
and for the fiscal year then ended with respect to stock options granted to and
exercised by the individuals named in the Summary Compensation Table above.
OPTION GRANTS IN FISCAL YEAR 1995
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
PERCENTAGE OF OF STOCK PRICE
TOTAL OPTIONS APPRECIATION
GRANTED TO EXERCISE OR FOR OPTION TERM(3)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------------
NAME GRANTED (1) FISCAL YEAR ($/SH)(2) DATE 5% ($) 10% ($)
- -------------------------------- ----------- ------------- ----------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Kim D. Blickenstaff............. 40,000 13.3% $3.00 4/19/05 $10,312 $ 87,499
Charles W. Patrick.............. 5,000 1.7 3.00 4/19/05 1,289 10,937
Gunars E. Valkirs............... 25,000 8.3 3.00 4/19/05 6,445 54,687
Kenneth F. Buechler............. 25,000 8.3 3.00 4/19/05 6,445 54,687
S. Nicholas Stiso............... 20,000 6.7 3.00 4/19/05 5,156 43,750
</TABLE>
- ---------------
(1) These options vest daily over a four-year period commencing on the date of
grant, except that no options are exercisable for the first six months after
grant.
(2) The exercise price of each option was equal to 150% of the fair market value
of the Common Stock on the date of grant, as determined by the Compensation
Committee of the Board of Directors.
(3) The potential realizable value of each grant of options has been calculated,
pursuant to the regulations promulgated by the Securities and Exchange
Commission, assuming that the market price of the Common Stock appreciates
in value from the date of grant to the end of the option term at the
annualized rates of 5% and 10%, respectively. These values do not represent
the Company's estimate or projection of future Common Stock value. There can
be no assurance that any of the value reflected in the table will be
achieved.
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<PAGE> 50
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1995
AND OPTION VALUES AT END OF FISCAL 1995
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT FISCAL
FISCAL YEAR-END(#) YEAR-END($)
------------------ ----------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------ --------------- ----------- ------------------ ----------------
<S> <C> <C> <C> <C>
Kim D. Blickenstaff................. -- $ -- 60,755/42,445 $135,580/$30,620
Charles W. Patrick.................. 25,000 44,000 39,412/ 7,988 105,803/ 9,847
Gunars E. Valkirs................... 10,000 27,000 47,946/30,254 105,378/ 25,572
Kenneth F. Buechler................. 4,000 11,800 47,977/36,223 99,819/ 30,431
S. Nicholas Stiso................... 11,838 11,838 5,383/20,179 4,620/ 12,895
</TABLE>
- ---------------
(1) Calculated on the basis of the fair market value of the underlying
securities at December 31, 1995, the fiscal year-end, minus the exercise
price.
Amended and Restated 1989 Stock Plan
In July 1989, the Company's Board of Directors adopted the 1989 Stock Plan.
The 1989 Stock Plan was amended at various times from its adoption to the date
of this Prospectus to increase the number of shares available under the 1989
Stock Plan. A total of 1,692,000 shares of Common Stock is currently reserved
for issuance under the 1989 Stock Plan pursuant to the direct award or sale of
shares or the exercise of options granted under the 1989 Stock Plan. If any
option granted under the 1989 Stock Plan expires or terminates for any reason
without having been exercised in full, then the unpurchased shares subject to
that option will once again be available for additional option grants.
Unpurchased shares pursuant to options that expire or terminate under the 1989
Stock Plan shall be available for awards under the 1996 Stock Plan.
Under the 1989 Stock Plan, all employees (including officers) and directors
of the Company or any subsidiary and any independent contractor or advisor who
performs services for the Company or a subsidiary are eligible to purchase
shares of Common Stock and to receive awards of shares or grants of nonstatutory
options. Employees are also eligible to receive grants of incentive stock
options ("ISOs") intended to qualify under Section 422 of the Internal Revenue
Code. The 1989 Stock Plan is administered by a committee of the Board of
Directors of the Company, which selects the persons to whom shares will be sold
or awarded or options will be granted, determines the number of shares to be
made subject to each sale, award or grant, and prescribes other terms and
conditions, including the type of consideration to be paid to the Company upon
sale or exercise and vesting schedules, in connection with each sale, award or
grant.
The exercise price under the nonstatutory options generally must be at
least 85% of the fair market value of the Common Stock on the date of grant. The
exercise price under ISOs cannot be lower than 100% of the fair market value of
the Common Stock on the date of grant and, in the case of ISOs granted to
holders of more than 10% of the voting power of the Company, not less than 110%
of such fair market value. The term of an option cannot exceed 10 years, and the
term of an ISO granted to a holder of more than 10% of the voting power of the
Company cannot exceed five years. Options generally expire not later than 90
days following a termination of employment or six months following the
optionee's death or permanent disability. The purchase price of shares sold
under the 1989 Stock Plan generally must be at least 85% of the fair market
value of the Common Stock and, in the case of a holder of more than 10% of the
voting power of the Company, not less than 110% of such fair market value. Under
the 1989 Stock Plan, options granted pursuant to the 1989 Stock Plan will
generally vest ratably over a period of four years.
As of November 30, 1996, the Company had outstanding options to purchase an
aggregate of 1,180,204 shares of Common Stock at exercise prices ranging from
$0.24 to $8.25 per share, or a weighted average per share exercise price of
$3.24. At November 30, 1996, a total of 35,756 shares of Common Stock was
available for future issuance under the 1989 Stock Plan.
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<PAGE> 51
1996 Stock Incentive Plan
The 1996 Stock Plan was adopted by the Board of Directors on December 5,
1996, to be effective December 1, 1996, and was approved by the stockholders in
December 1996. The 1996 Stock Plan replaces the Company's 1989 Stock Plan.
Although all future awards will be made under the 1996 Stock Plan, awards made
under the 1989 Stock Plan will continue to be administered in accordance with
the 1989 Stock Plan. However, except as otherwise noted, the outstanding options
under the 1989 Plan contain substantially the same terms and conditions
specified below for option grants under the 1996 Stock Plan.
The 1996 Stock Plan is administered by the Board of Directors or its
delegate. The Board, or its delegate, selects the employees of the Company who
will receive awards, determines the size of any award and establishes any
vesting or other conditions. Employees, directors, consultants and advisors of
the Company (or any subsidiary of the Company) are eligible to participate in
the 1996 Stock Plan, although incentive stock options may be granted only to
employees. No individual may receive options or stock appreciation rights
("SARs") covering more than 250,000 shares in any calendar year. The
participation of the outside directors of the Company is limited to 20% of
shares available under the 1996 Stock Plan.
The 1996 Stock Plan provides for awards in the form of restricted shares,
stock units, options or SARs, or any combination thereof. No payment is required
upon receipt of an award, except that a recipient of newly issued restricted
shares must pay the par value of such restricted shares to the Company.
Restricted shares are shares of Common Stock that are subject to repurchase
by the Company at the employee's purchase price in the event that the applicable
vesting conditions are not satisfied, and they are nontransferable prior to
vesting (except for certain transfers to a trustee). Restricted shares have the
same voting and dividend rights as other shares of Common Stock.
A stock unit is an unfunded bookkeeping entry representing the equivalent
of one share of Common Stock, and is nontransferable prior to the holder's
death. A holder of a stock unit has no voting rights or other privileges as a
stockholder but may be entitled to receive dividend equivalents equal to the
amount of dividends paid on the same number of shares of Common Stock. Dividend
equivalents may be converted into additional stock units or settled in the form
of cash, Common Stock or a combination of both. Stock units, when vested, may be
settled by distributing shares of Common Stock or by a cash payment
corresponding to the fair market value of an equivalent number of shares of
Common Stock, or a combination of both. Vested stock units will be settled at
the time determined by the Compensation Committee. If the time of settlement is
deferred, interest or additional dividend equivalents may be credited on the
deferred payment.
The recipient of restricted shares or stock units may pay all projected
withholding taxes relating to the award with Common Stock rather than cash.
Options may include nonstatutory stock options ("NSOs") as well as ISOs
intended to qualify for special tax treatment. The term of an ISO cannot exceed
10 years (five years for 10% stockholders), and the exercise price of an ISO
must be equal to or greater than the fair market value of the Common Stock on
the date of grant (or 110% of fair market value at the date of grant for 10%
stockholders). The exercise price of an NSO must be equal to or greater than the
par value of the Common Stock on the date of grant.
The exercise price of an option may be paid in any lawful form permitted by
the Compensation Committee, including (without limitation) the surrender of
shares of Common Stock or restricted shares already owned by the optionee. The
Compensation Committee may likewise permit optionees to satisfy their
withholding tax obligation upon exercise of an NSO by surrendering a portion of
their option shares to the Company. The 1996 Stock Plan also allows the optionee
to pay the exercise price of an option by giving "exercise/sale" or
"exercise/pledge" directions. If exercise/sale directions are given, a number of
option shares sufficient to pay the exercise price and any withholding taxes is
issued directly to a securities broker selected by the Company who, in turn,
sells these shares in the open market. The broker remits to the Company the
proceeds from the sale of these shares, and the optionee receives the remaining
option shares. If exercise/ pledge directions are given, the option shares are
issued directly to a securities broker or other lender selected by the Company.
The broker or other lender will hold the shares as security and will extend
credit for up to 50% of their market value. The loan proceeds will be paid to
the Company to the extent necessary to pay
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<PAGE> 52
the exercise price and any withholding taxes. Any excess loan proceeds may be
paid to the optionee. If the loan proceeds are insufficient to cover the
exercise price and withholding taxes, the optionee will be required to pay the
deficiency to the Company at the time of exercise.
An SAR permits the participant to elect to receive any appreciation in the
value of the underlying stock from the Company, either in shares of Common Stock
or in cash or a combination of the two, with the Compensation Committee having
the discretion to determine the form in which such payment will be made. The
amount payable on exercise of an SAR is measured by the difference between the
market value of the underlying stock at exercise and the exercise price. SARs
may, but need not, be granted in conjunction with options. Upon exercise of an
SAR granted in tandem with an option, the corresponding portion of the related
option must be surrendered and cannot thereafter be exercised. Conversely, upon
exercise of an option to which an SAR is attached, the SAR may no longer be
exercised to the extent that the corresponding option has been exercised. All
options and SARs are nontransferable prior to the optionee's death.
As noted above, the Compensation Committee determines the number of
restricted shares, stock units, options or SARs to be included in the award as
well as the vesting and other conditions. The vesting conditions may be based on
the employee's service, his or her individual performance, the Company's
performance or other appropriate criteria. In general, the vesting conditions
will be based on the employee's service after the date of grant. Vesting may be
accelerated in the event of the employee's death, disability or retirement or in
the event of a change in control with respect to the Company.
For purposes of the 1996 Stock Plan, the term "change in control" does not
include this Offering or the consequences of this Offering but thereafter means
that (i) any person is or becomes the beneficial owner, directly or indirectly,
of at least 50% of the combined voting power of the Company's outstanding
securities ordinarily having the right to vote at elections of directors (ii)
approval by the stockholders of the Company of a merger or consolidation of the
Company with or into another corporation or entity or any other corporate
reorganization in which over 50% of the combined voting power of the continuing
or surviving entity immediately after the merger, consolidation or
reorganization is owned by persons who were not stockholders of the Company
immediately prior to the merger, consolidation or reorganization; or (iii) a
change in the composition of the Board of Directors in which fewer than half of
the incumbent Directors had been Directors 24 months prior to the change or were
elected or nominated with the affirmative votes of Directors 24 months prior to
the change.
Awards under the 1996 Stock Plan may provide that if any payment (or
transfer) by the Company to a recipient would be nondeductible by the Company
for federal income tax purposes, then the aggregate present value of all such
payments (or transfers) will be reduced to an amount which maximizes such value
without causing any such payment (or transfer) to be nondeductible.
The Board is authorized, within the provisions of the 1996 Stock Plan, to
amend the terms of outstanding restricted shares or stock units, to modify or
extend outstanding options or SARs or to exchange new options for outstanding
options, including outstanding options with a higher exercise price than the new
options.
Members of the Company's Board of Directors who are not employees of the
Company are eligible for awards under the 1996 Stock Plan. However, such outside
directors are not eligible for ISO grants. Total shares available to outside
directors is limited to 20% of total shares available under the 1997 Stock Plan.
As of December 1, 1996, no awards had been made under the 1996 Stock Plan.
The total number of restricted shares, stock units, options and SARs available
for grant under the 1996 Stock Plan is 900,000 (subject to anti-dilution
provisions), increased by the amount of all remaining shares available for grant
under the 1989 Stock Plan as of December 1, 1996. If any restricted shares,
stock units, options or SARs are forfeited, or if options or SARs terminate for
any other reason prior to exercise (other than the exercise of a related SAR or
option, and including any forfeiture or termination under the 1989 Stock Plan),
then they again become available for awards under the 1996 Stock Plan.
49
<PAGE> 53
Employee Stock Purchase Plan
The ESPP was adopted by the Board of Directors on December 5, 1996,
effective upon the completion of this Offering. The ESPP provides employees of
the Company with an opportunity to purchase Common Stock at a discount and pay
for their purchases through payroll deductions. All expenses incurred in
connection with the implementation and administration of the ESPP will be paid
by the Company. A pool of 100,000 shares of Common Stock has been reserved for
issuance under the ESPP (subject to anti-dilution provisions). Each regular
full-time and part-time employee who works an average of over 20 hours per week
will be eligible to participate in the ESPP at the beginning of the first
participation period after the employee's date of hire.
Eligible employees may elect to contribute up to 10% of their cash
compensation under the ESPP. Each calendar year is divided into two six-month
"purchase periods," except that the entire period from the date of this offering
to June 30, 1997, will be a single purchase period. At the end of each purchase
period, the Company will apply the amount contributed by the participant during
that period to purchase shares of Common Stock for him or her. The purchase
price will be equal to 85% of the lower of (a) the market price of Common Stock
immediately before the beginning of the applicable "offering period" or (b) the
market price of Common Stock on the last business day of the purchase period. In
general each offering period is 24 months long, but a new offering period begins
every six months. Thus up to four overlapping periods may be in effect at the
same time. If the market price of Common Stock is lower when a subsequent
offering period begins, the subsequent offering period automatically becomes the
applicable offering period. No participant may purchase more than 2,500 shares
per purchase period, and the value of the Common Stock purchased each year
(measured at the beginning of the purchase periods) may not exceed $25,000 per
participant. Participants may withdraw their contributions at any time before
the close of the purchase period.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company has adopted provisions in its Certificate of Incorporation that
limit the liability of its directors for monetary damages for breach of their
fiduciary duty as directors, except for liability that cannot be eliminated
under the Delaware General Corporation Law (the "Delaware Law"). The Delaware
Law provides that directors of a company will not be personally liable for
monetary damages for breach of their fiduciary duty as directors, except for
liability (i) for any breach of their duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful payment
of dividend or unlawful stock repurchase or redemption, as provided in Section
174 of the Delaware Law, or (iv) for any transaction from which the director
derived an improper personal benefit. Any amendment or repeal of these
provisions requires the approval of the holders of shares representing at least
66-2/3% of the shares of the Company entitled to vote in the election of
directors, voting as one class.
The Company's Certificate of Incorporation and By-Laws also provide that
the Company shall indemnify its directors and officers to the fullest extent
permitted by the Delaware Law. The Company has entered into separate
indemnification agreements with its directors and officers that could require
the Company, among other things, to indemnify them against certain liabilities
that may arise by reason of their status or service as directors and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified. The Company believes that the limitation of liability
provision in its Restated Certificate of Incorporation and the indemnification
agreements will facilitate the Company's ability to continue to attract and
retain qualified individuals to serve as directors and officers of the Company.
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<PAGE> 54
CERTAIN TRANSACTIONS
In June 1994, the Company entered into two agreements with Merck, a
collaborative development agreement and a supply and distribution agreement, in
connection with the Company's development of Triage Cardiac. Merck beneficially
owns more than 5% of the Company's Common Stock and distributes the Triage DOA
in certain counties in Europe, Latin America, the Middle East and Africa and in
Pakistan and India. See "Business -- Strategic and Distribution Arrangements"
and Note 1 and 3 of Notes to Financial Statements.
The Company believes that the foregoing transaction was in its best
interests. As a matter of policy this transaction was, and all future
transactions between the Company and its officers, directors or principal
shareholders will be, approved by a majority of the independent and
disinterested members of the Board of Directors, on terms no less favorable to
the Company than could be obtained from unaffiliated third parties and in
connection with bona fide business purposes of the Company.
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<PAGE> 55
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 1, 1996 and as adjusted
to reflect the sale by the Company of the shares offered hereby, by: (i) each
person who is known by the Company to beneficially own more than 5% of the
Company's Common Stock, (ii) each of the Company's directors, (iii) each of the
Company's officers named under "Management -- Summary Compensation Table," and
(iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED(1)
SHARES -----------------------
NAME AND ADDRESS BENEFICIALLY BEFORE AFTER
OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ---------------------------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
Medicus Venture Partners(2)............................... 1,662,559 16.8% 14.0%
2180 Sand Hill Road
Suite 400
Menlo Park, CA 94025
Kleiner, Perkins, Caufield & Byers V(3)................... 1,485,476 15.0 12.3
2750 Sand Hill Road
Menlo Park, CA 94025
Merck KGaA................................................ 1,041,667 10.5 8.8
Frankfurter Strasse 250
D-6100 Darmstadt 1
Federal Republic of Germany
Euclid Partners III, L.P. ................................ 1,005,869 10.2 8.5
50 Rockefeller Plaza
New York, NY 10020
Kingsbury Capital Partners, L.P. ......................... 635,417 6.4 5.4
3655 Nobel Drive, Suite 490
San Diego, CA 92122
Frederick J. Dotzler(2)................................... 1,662,559 16.8 14.0
Stephen K. Reidy(4)....................................... 1,005,869 10.2 8.5
Timothy J. Wollaeger(5)................................... 707,015 7.2 6.0
Jesse I. Treu, Ph.D.(6)................................... 329,167 3.3 2.8
Howard E. Greene, Jr.(7).................................. 297,927 3.0 2.5
Thomas H. Adams, Ph.D. ................................... 53,833 * *
Gunars E. Valkirs(8)(9)................................... 290,512 2.9 2.4
Kim D. Blickenstaff(8).................................... 288,232 2.9 2.4
Kenneth F. Buechler(8).................................... 280,478 2.8 2.4
S. Nicholas Stiso(8)...................................... 81,582 * *
Charles W. Patrick(8)..................................... 73,030 * *
All directors and executive officers as a group (12
persons)(8)(10)......................................... 5,120,557 50.5% 42.2%
</TABLE>
- ---------------
* Less than 1%.
(1) To the Company's knowledge, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes to this table.
(2) Includes (i) 704,225 shares held by Medicus Venture Partners 1989, (ii)
520,833 shares held by Medicus Venture Partners 1990, (iii) 333,334 shares
held by Medicus Venture Partners 1991 and
52
<PAGE> 56
(iv) 104,167 shares held by Medicus Venture Partners 1992 (collectively,
the "Medicus Entities"). A limited partnership affiliated with The Hillman
Company and a limited partnership with general partners Frederick J.
Dotzler and John Reher are each general partners of each of the Medicus
Entities, and therefore may be deemed to be the beneficial owner of these
shares because they share the power to vote and dispose of these shares.
The Hillman Company is controlled by Henry L. Hillman, Elsie Hilliard
Hillman and C.G. Grefenstette, trustees (the "HLH Trustees") of the Henry
L. Hillman Trust U/A dated November 18, 1985 (the "HLH Trust"), which three
trustees share the power to vote and dispose of shares representing a
majority of the voting shares of The Hillman Company. Does not include
50,409 shares held directly by the HLH Trust or 134,423 shares held
directly by Wilmington Interstate Corporation, an indirect, wholly-owned
subsidiary of The Hillman Company. Also does not include an aggregate of
20,164 shares held by four irrevocable trusts for the benefit of members of
the Hillman family (the "Family Trusts"), as to which shares the HLH
Trustees (other than Mr. Grefenstette) disclaim beneficial ownership. C.G.
Grefenstette and Thomas G. Bigley are trustees of the Family Trusts and
share voting and dispositive power over the assets of the Family Trusts.
(3) Includes 56,044 shares held by KPCB Zaibatsu Fund I.
(4) Includes 1,005,869 shares held by Euclid Partners III, L.P. Mr. Reidy is a
general partner of the general partner of Euclid Partners III, L.P., and as
such, may be deemed to share voting and investment power with respect to
such shares. Mr. Reidy disclaims beneficial ownership of such shares except
to the extent of his pecuniary interest in such partnership.
(5) Includes 635,417 shares held by Kingsbury Capital Partners I, L.P. Mr.
Wollaeger is a general partner of the general partner of Kingsbury Capital
Partners I, L.P., and as such, may be deemed to share voting and investment
power with respect the shares held by the partnership. Mr. Wollaeger
disclaims beneficial ownership of such shares, except to the extent of his
pecuniary interest in such partnership. Includes 6,722 shares held in a
trust for the benefit of Mr. Wollaeger's family as to which Mr. Wollaeger
has shared voting and investment power.
(6) Includes 329,167 shares held by Domain Partners, L.P. Dr. Treu is a general
partner of the general partner of Domain Partners, L.P., and as such, may
be deemed to share voting and investment power with respect to such shares.
Dr. Treu disclaims beneficial ownership except to the extent of his
pecuniary interest in such partnership. Excludes 429,167 shares
beneficially held by Biotechnology Investments Ltd. ("BIL"). Dr. Treu is a
general partner of Domain Associates, the United States venture capital
advisor to BIL pursuant to a contractual arrangement. Domain Associates has
no voting or investment power over BIL. Dr. Treu disclaims beneficial
ownership of the shares held by BIL.
(7) Includes 297,927 shares held in a trust for the benefit of Mr. Greene's
family as to which Mr. Greene has shared voting and investment power.
(8) Includes shares which may be acquired pursuant to the exercise of options
within 60 days of December 1, 1996 as follows: Mr. Blickenstaff, 61,565,
Dr. Valkirs, 54,678, Dr. Buechler, 65,644, Dr. Stiso, 14,744, Mr. Patrick,
44,696 and all directors and executive officers as a group (12 persons),
263,105.
(9) Includes 235,834 shares held of record by the Valkirs Family Trust.
(10) Includes shares held by entities referenced in footnotes 2, 3, 5, 6, 7 and
8 which are affiliated with certain directors, except for shares excluded
in footnote 6.
53
<PAGE> 57
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of the
Company, after giving effect to the conversion of all outstanding Preferred
Stock into Common Stock, and the amendment of the Company's Certificate of
Incorporation, will consist of 25,000,000 shares of Common Stock, $.01 par
value, and 5,000,000 shares of Preferred Stock, $.01 par value.
COMMON STOCK
As of November 30, 1996 there were 9,885,168 shares of Common Stock
outstanding held by approximately 165 stockholders of record. Such figures
assume the conversion of each outstanding share of Preferred Stock and the
conversion of convertible debt issued to Sandoz (at the assumed offering price
of $12.00 per share) upon the closing of this offering.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any then outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, holders of the Common Stock and the Preferred Stock
are entitled to share ratably on an as-converted basis in all assets remaining
after payment of liabilities and the liquidation preference of any then
outstanding Preferred Stock. The Common Stock has no preemptive or conversion
rights or other subscription rights and there are no redemptive or sinking funds
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and the Common Stock to be outstanding upon completion of this
offering will be, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of Preferred
Stock will be converted into Common Stock. See Note 7 of Notes to Financial
Statements for a description of the currently outstanding Preferred Stock.
Following the conversion, the Company's Certificate of Incorporation will be
restated to delete all references to the prior series of Preferred Stock, and
5,000,000 shares of undesignated Preferred Stock will be authorized. The Board
of Directors has the authority, without further action by the stockholders, to
issue from time to time the Preferred Stock in one or more series and to fix the
number of shares, designations, preferences, powers, and relative,
participating, optional or other special rights and the qualifications or
restrictions thereof. The preferences, powers, rights and restrictions of
different series of Preferred Stock may differ with respect to dividend rates,
amounts payable on liquidation, voting rights, conversion rights, redemption
provisions, sinking fund provisions, and purchase funds and other matters. The
issuance of Preferred Stock could decrease the amount of earnings and assets
available for distribution to holders of Common Stock or affect adversely the
rights and powers, including voting rights, of the holders of Common Stock, and
may have the effect of delaying, deferring or preventing a change in control of
the Company. The Company has no present plan to issue any shares of Preferred
Stock.
REGISTRATION RIGHTS
After this offering, the holders of 6,870,513 shares of Common Stock issued
upon conversion of the Company's Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock (collectively,
"Registrable Shares") or their permitted transferees, are entitled to certain
rights with respect to the registration of such shares under the Securities Act
of 1933, as amended (the "Securities Act"). If the Company proposes to register
any of its securities under the Securities Act, either for its own account or
for the account of other security holders, holders of Registrable Shares are
entitled to notice of such registration and are entitled to include Registrable
Shares therein, provided, among other conditions, that the underwriters of any
such offering have the right to limit the number of shares included in such
registration. Holders of the 1,458,334 shares of Common Stock issued upon
conversion of the Company's Series E Preferred Stock and holders of shares of
Common Stock issued upon conversion of the convertible debt issued to Sandoz are
entitled to similar "piggyback" rights, on no more than two occasions,
commencing
54
<PAGE> 58
two years after the effective date of this offering. In addition, commencing 180
days after the effective date of this offering, holders of at least 30% of the
Registrable Shares may require the Company to prepare and file a registration
statement under the Securities Act, at the Company's expense covering at least
30% of the shares entitled to registration rights and with an offering price
(net of underwriting discounts and commissions) of more than $7,500,000, and the
Company is required to use its best efforts to effect such registration, subject
to certain conditions and limitations. The Company is not obligated to effect
more than two of these stockholder-initiated registrations. Further, holders of
Registrable Shares may require the Company to file additional registration
statements on Form S-3, subject to certain conditions and limitations.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
Law, an anti-takeover law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a business combination with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes a merger, asset sale or other transaction resulting in financial
benefit to the stockholder. An "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years prior, did
own) 15% or more of the corporation's voting stock.
Upon the closing of this offering, the Company's Restated Certification of
Incorporation will be amended to require that any action permitted to be taken
by stockholders of the Company must be effected at a duly-called annual or
special meeting of stockholders and will not be able to be effected by a consent
in writing. The Board of Directors will be composed of a classified board where
only one-third of the directors are eligible for election in any given year. The
Company's Restated Certificate of Incorporation will also be amended to require
the approval of at least two-thirds of the total number of authorized directors
in order to adopt, amend or repeal the Company's Bylaws. In addition, the
Company's Restated Certificate of Incorporation will similarly be amended to
permit the stockholders to adopt, amend or repeal the Company's Bylaws only upon
the affirmative vote of the holders of at least two-thirds of the voting power
of all then outstanding shares of stock entitled to vote. Lastly, the foregoing
provisions of the Restated Certificate of Incorporation and certain other
provisions pertaining to the limitation of liability and indemnification of
directors will be able to be amended or repealed only with the affirmative vote
of the holders of at least two-thirds of the voting power of all then
outstanding shares of stock entitled to vote. These provisions may have the
effect to deterring hostile takeovers or delaying changes in control or
management of the Company.
Upon the closing of this offering, the Company's Bylaws will also be
amended to contain certain of the above provisions found in the Company's
Restated Certificate of Incorporation. The Company's Bylaws, as amended (the
"Restated Bylaws"), will not permit stockholders to call a special meeting. In
addition, the Company's Restated Bylaws will establish an advance notice
procedure with regard to the nomination, other than by or at the direction of
the Board of Directors, of candidates for election as directors and with regard
to certain matters to be brought before an annual meeting of stockholders of the
Company. Also, a director will be removable only for cause. In addition, the
Restated Bylaws will provide that the business permitted to be conducted in any
annual meeting or special meeting of stockholders will be limited to business
properly brought before the meeting.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is .
55
<PAGE> 59
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for the Common Stock
of the Company, and no predictions can be made regarding the effect, if any,
that market sales of shares or the availability of shares for sale will have on
the market price prevailing from time to time. As described below, a limited
number of shares will be available for sale shortly after this offering due to
certain contractual and legal restrictions on resale. Nevertheless, sales of
substantial amounts of Common Stock of the Company in the public market after
the restrictions lapse could adversely affect the prevailing market price.
Upon completion of this offering, the Company will have outstanding
11,885,168 shares of Common Stock. The 2,000,000 shares of Common Stock being
sold hereby will be freely tradable (other than by an "affiliate" of the Company
as such term is defined in the Securities Act) without restriction or
registration under the Securities Act. All remaining shares were issued and sold
by the Company in private transactions ("Restricted Shares") and are eligible
for public sale if registered under the Securities Act or sold in accordance
with Rule 144 or Rule 701 thereunder.
Upon the commencement of this offering, an additional 418,030 shares will
be eligible for immediate sale without restriction under Rule 144(k). In
addition, approximately 225,525 shares will be eligible for resale under Rule
701, beginning 90 days from the Effective Date. Certain stockholders, who
collectively hold an aggregate of 1,400,212 shares of Common Stock, have agreed
pursuant to certain agreements with the Company that they will not sell such
Common Stock for a period of 120 days from the Effective Date. Following the
expiration of such 120-day lockup period, all such shares will be available for
resale without restriction under Rule 144(k). The Company's directors, executive
officers and certain other stockholders, who collectively hold an aggregate of
7,749,179 shares of Common Stock, have agreed pursuant to certain agreements
that they will not sell any Common Stock owned by them without the prior written
consent of the Representatives of the Underwriters for a period of 180 days from
the Effective Date. Following the expiration of such lockup period, all such
shares will be available for sale in the public market subject to compliance
with Rule 144 or Rule 701, including approximately 2,891,727 shares eligible for
the sale under Rule 144(k). See "Underwriting."
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, an affiliate of the Company, or a holder of
Restricted Shares who owns beneficially shares that were not acquired from the
Company or an affiliate of the Company within the previous two years, would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares of Common Stock
(approximately 118,851 shares immediately after this offering, assuming no
exercise of the Underwriters' over-allotment option) or the average weekly
trading volume of the Common Stock during the four calendar weeks preceding the
date on which notice of the sale is filed with the Securities and Exchange
Commission (the "Commission"). Sales under Rule 144 are subject to certain
requirements relating to manner of sale, notice and availability of current
public information about the Company. However, a person (or persons whose shares
are aggregated) who is not deemed to have been an affiliate of the Company at
any time during the 90 days immediately preceding the sale and who owns
beneficially Restricted Shares is entitled to sell such shares under Rule 144(k)
without regard to the limitations described above; provided that at least three
years have elapsed since the later of the date the shares were acquired from the
Company or from an affiliate of the Company. The foregoing is a summary of Rule
144 and is not intended to be a complete description of it.
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from the Company by its employees,
directors, officers, consultants or advisers prior to the closing of this
offering, pursuant to written compensatory benefit plans or written contracts
relating to the compensation of such persons. In addition, the Commission has
indicated that Rule 701 will apply to stock options granted by the Company
before this offering, along with the shares acquired upon exercise of such
options. Securities issued in reliance on Rule 701 are deemed to be Restricted
Shares and, beginning 90 days after the Effective Date (unless subject to the
contractual restrictions described above), may be sold by persons other than
affiliates subject only to the
56
<PAGE> 60
manner of sale provisions of Rule 144 and by affiliates under Rule 144 without
compliance with its two-year minimum holding period requirements.
The Company intends to file a registration statement under the Securities
Act covering approximately 2,215,960 shares of Common Stock reserved for
issuance under the stock plans. Such registration statement is expected to be
filed soon after the date of this Prospectus and will automatically become
effective upon filing. Accordingly, shares registered under such registration
statement will be available for sale in the open market, unless such shares are
subject to vesting restrictions with the Company or the contractual restrictions
described above.
In addition, after this offering, the holders of approximately 6,870,513
shares of Common Stock will be entitled to certain rights to demand that the
Company to register the sale of such shares under the Securities Act. Such
holders and holders of 1,458,334 shares of Common Stock and 92,222 shares issued
upon conversion of convertible debt issued to Sandoz (at the assumed offering
price of $12.00 per share) are also entitled to be included in certain Company
registrations. 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 of the Company) immediately upon
the effectiveness of such registration. See "Description of Capital
Stock -- Registration Rights."
57
<PAGE> 61
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Underwriters named below (the "Underwriters"), through their
representatives, Cowen & Company and Alex. Brown & Sons Incorporated, have
severally agreed to purchase from the Company the following respective number of
shares at the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
------------------------------------------------------------------ ---------
<S> <C>
Cowen & Company...................................................
Alex. Brown & Sons Incorporated...................................
--------
Total................................................... 2,000,000
========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
re-allow a concession not in excess of $ per share to certain other
dealers. The Underwriters have informed the Company that they do not intend to
confirm sales to any accounts over which they exercise discretionary authority.
After the initial public offering of the shares, the offering price and other
selling terms may from time to time be varied by the Underwriters.
The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the Effective Date, to purchase up to 300,000 additional
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, to cover over-allotments, if any. If the Underwriters exercise such
over-allotment option, the Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of shares of Common Stock to be purchased by each of them shown in
the foregoing table bears to the total number of shares of Common Stock offered
hereby. The Underwriters may exercise such option only to cover over-allotments
made in connection with the sale of shares of Common Stock offered hereby.
The Company's officers and directors and certain other stockholders of the
Company holding in the aggregate approximately 7,749,179 shares of Common Stock
have agreed that they will not, without the prior written consent of Cowen &
Company, offer, sell or otherwise dispose of any shares of Common Stock,
options, rights or warrants to acquire shares of Common Stock, or securities
exchangeable for or convertible into shares of Common Stock owned by them during
the 180-day period commencing on the Effective Date. Other stockholders of the
Company holding in the aggregate approximately 1,400,212 shares of Common Stock
have agreed that they will not sell or otherwise transfer or dispose of any such
shares of Common Stock owned by them during the 120-day period commencing on the
Effective Date. In addition, the Company has agreed that it will not, without
the prior written consent of Cowen & Company, offer, sell or otherwise dispose
of any shares of Common Stock options, rights or warrants to acquire shares of
Common Stock, or securities exchangeable for or convertible into shares of
Common Stock during such 180-day period except in certain limited circumstances.
58
<PAGE> 62
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors
considered in determining the initial public offering price will be prevailing
market and economic conditions, market valuations of other companies engaged in
activities similar to the Company, estimates of the business potential and
prospects of the Company, the present state of the Company's business
operations, the Company's management and other factors deemed relevant. The
estimated initial public offering price range set forth on the cover of this
Prospectus is subject to change as a result of market conditions and other
factors.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Pillsbury Madison & Sutro
LLP, San Francisco, California. A member of Pillsbury Madison & Sutro LLP owns
18,360 shares of Common Stock. Cooley Godward LLP, San Diego, California, is
acting as counsel for the Underwriters in connection with certain legal matters
relating to the sale of the Common Stock offered hereby.
EXPERTS
The financial statements of Biosite at December 31, 1994 and 1995, and
September 30, 1996 and for each of the three years in the period ended December
31, 1995 and the nine months ending September 30, 1996, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement under
the Securities Act with respect to the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock offered hereby, reference is hereby
made to such Registration Statement, exhibits and schedules. Statements
contained in this Prospectus regarding the contents of any contract or other
document are not necessarily complete; with respect to each such contract or
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference. A
copy of the Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge at the principal office of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such
material may be obtained from such office upon payment of the fees prescribed by
the Commission. In addition, the Commission maintains a World Wide Web site on
the Internet at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent certified public
accountants and quarterly reports containing unaudited financial information for
the first three quarters of each fiscal year.
59
<PAGE> 63
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors..................................... F-2
Balance Sheets at December 31, 1994 and 1995 and September 30, 1996................... F-3
Statements of Income for each of the three years in the period ended December 31, 1995
and the nine months ended September 30, 1995 (unaudited) and 1996................... F-4
Statements of Stockholders' Equity for each of the three years in the period ended
December 31, 1995 and the nine months ended September 30, 1996...................... F-5
Statements of Cash Flows for each of the three years in the period ended December 31,
1995 and the nine months ended September 30, 1995 (unaudited) and 1996.............. F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE> 64
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Biosite Diagnostics Incorporated
We have audited the accompanying balance sheets of Biosite Diagnostics
Incorporated as of December 31, 1994 and 1995 and September 30, 1996, and the
related statements of income, stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1995 and the nine months ended
September 30, 1996. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Biosite Diagnostics
Incorporated at December 31, 1994 and 1995 and September 30, 1996, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995 and the nine months ended September 30, 1996 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
November 12, 1996, except for Note 7,
as to which the date is December 5, 1996
F-2
<PAGE> 65
BIOSITE DIAGNOSTICS INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, LIABILITIES AND
-------------------------- SEPTEMBER 30, STOCKHOLDERS'
1994 1995 1996 EQUITY AT
------------ ----------- ------------------ SEPTEMBER 30,
1996
------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 392,433 $ 2,276,403 $ 1,410,620
Marketable securities, available-for-sale......... 5,523,160 11,702,607 8,758,654
Accounts receivable............................... 3,175,899 3,801,755 4,153,326
Receivable from stockholder....................... 471,000 141,000 620,000
Inventory......................................... 1,137,830 1,689,124 1,709,016
Deferred income taxes............................. -- 1,073,000 1,279,000
Prepaid expenses and other current assets......... 353,302 413,917 589,675
------------ ----------- -----------
Total current assets........................ 11,053,624 21,097,806 18,520,291
Property, equipment and leasehold improvements,
net............................................... 1,859,573 3,599,969 3,941,520
Deferred income taxes............................... -- 754,000 884,000
Patents and license rights, net..................... 472,060 1,759,809 4,458,074
Deposits and other assets........................... 978,347 723,349 1,164,199
------------ ----------- -----------
$ 14,363,604 $27,934,933 $ 28,968,084
============ =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 608,085 $ 776,393 $ 1,345,799 $ 1,345,799
Accrued salaries and other........................ 591,393 912,259 898,320 818,320
Accrued contract payable.......................... 423,807 1,053,052 1,281,276 1,281,276
Accrued settlement of patent matters.............. -- 2,200,000 -- --
Contract advance.................................. 500,000 -- -- --
Deferred revenue from stockholder................. 316,330 615,282 -- --
Current portion of long-term obligations.......... 640,453 1,112,712 1,027,579 1,027,579
------------ ----------- ----------- -----------
Total current liabilities................... 3,080,068 6,669,698 4,552,974 4,472,974
Long-term obligations............................... 771,563 2,739,473 3,233,643 2,233,643
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $.01 par value,
8,328,847 shares authorized (5,000,000 pro
forma); 8,328,847 shares issued and outstanding
(no shares pro forma), liquidation value,
$21,662,030..................................... 83,288 83,288 83,288 --
Common stock, $.01 par value, 12,000,000 shares
authorized (25,000,000 shares pro forma);
1,154,066, 1,369,595, and 1,460,093 shares
issued and outstanding at December 31, 1994,
1995, and September 30, 1996, respectively
(9,881,162 shares pro forma).................... 11,541 13,696 14,601 98,812
Additional paid-in capital........................ 21,483,800 21,570,516 21,686,698 22,792,442
Unrealized net gain (loss) on marketable
securities, net of related tax effect of $11,058
and $(6,754) at December 31, 1995 and September
30, 1996, respectively.......................... -- 16,588 (10,131) (10,131)
Deferred compensation............................. -- -- (48,023) (48,023)
Accumulated deficit............................... (11,066,656) (3,158,326) (544,966) (571,633)
------------ ----------- ----------- -----------
Total stockholders' equity.................. 10,511,973 18,525,762 21,181,467 22,261,467
------------ ----------- ----------- -----------
$ 14,363,604 $27,934,933 $ 28,968,084 $ 28,968,084
============ =========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 66
BIOSITE DIAGNOSTICS INCORPORATED
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1993 1994 1995 1996
----------- ----------- ----------- 1995 -----------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales....................... $ 9,866,297 $16,319,752 $25,146,540 $18,235,729 $20,224,976
Cost of sales................... 3,268,030 4,415,344 5,648,786 3,781,316 4,317,648
----------- ----------- ----------- ----------- -----------
Gross profit.................... 6,598,267 11,904,408 19,497,754 14,454,413 15,907,328
Operating expenses:
Research and development...... 2,796,248 3,835,649 6,553,454 4,601,467 6,515,097
Sales and marketing........... 3,390,201 3,851,933 4,943,392 3,625,541 3,894,885
General and administrative.... 1,450,755 2,109,150 2,190,246 1,577,951 2,221,599
----------- ----------- ----------- ----------- -----------
7,637,204 9,796,732 13,687,092 9,804,959 12,631,581
----------- ----------- ----------- ----------- -----------
Operating income (loss)......... (1,038,937) 2,107,676 5,810,662 4,649,454 3,275,747
Other income (expense):
Interest income............... 217,610 238,990 605,002 380,851 579,073
Contract revenue-related
party...................... -- 343,678 561,048 388,261 856,880
Contract revenue.............. -- -- 300,000 300,000 --
Licensing and other income.... 395,201 66,207 181,683 184,057 5,942
Settlement of patent
matters.................... -- (338,004) (1,217,065) (743,173) (2,368,282)
----------- ----------- ----------- ----------- -----------
612,811 310,871 430,668 509,996 (926,387)
Income (loss) before benefit
(provision) for income
taxes......................... (426,126) 2,418,547 6,241,330 5,159,450 2,349,360
Benefit (provision) for income
taxes......................... -- (63,000) 1,667,000 (132,000) 264,000
----------- ----------- ----------- ----------- -----------
Net income (loss)............... $ (426,126) $ 2,355,547 $ 7,908,330 $ 5,027,450 $ 2,613,360
=========== =========== =========== =========== ===========
Net income (loss) per share..... $ (.04) $ .22 $ .74 $ .47 $ .24
=========== =========== =========== =========== ===========
Shares used in calculating per
share amounts................. 10,098,000 10,553,000 10,766,000 10,721,000 10,832,000
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 67
BIOSITE DIAGNOSTICS INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
PREFERRED STOCK COMMON STOCK ADDITIONAL NET GAIN (LOSS)
------------------- --------------------- PAID-IN ON MARKETABLE
SHARES AMOUNT SHARES AMOUNT CAPITAL SECURITIES
--------- ------- --------- ------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993....... 8,328,847 $83,288 1,138,069 $11,381 $21,474,142 $ --
Issuance of common stock........ -- -- 14,298 143 8,146 --
Net loss........................ -- -- -- -- -- --
---------- ------- ---------- ------- ----------- ---------
Balance at December 31, 1993...... 8,328,847 83,288 1,152,367 11,524 21,482,288 --
Issuance of common stock........ -- -- 1,699 17 1,512 --
Net income...................... -- -- -- -- -- --
---------- ------- ---------- ------- ----------- ---------
Balance at December 31, 1994..... 8,328,847 83,288 1,154,066 11,541 21,483,800 --
Issuance of common stock........ -- -- 215,529 2,155 86,716 --
Change in unrealized net gain
(loss) on marketable
securities, net of income
taxes of $11,058.............. -- -- -- -- -- 16,588
Net income...................... -- -- -- -- -- --
---------- ------- ---------- ------- ----------- ---------
Balance at December 31, 1995...... 8,328,847 83,288 1,369,595 13,696 21,570,516 16,588
Issuance of common stock........ -- -- 90,498 905 67,397 --
Change in unrealized net gain
(loss) on marketable
securities, net of income
taxes of $6,754............... -- -- -- -- -- (26,719)
Deferred compensation related
to issuance of stock options.. -- -- -- -- 48,785 --
Amortization of deferred
compensation.................. -- -- -- -- -- --
Net income...................... -- -- -- -- -- --
---------- ------- ---------- ------- ----------- ---------
Balance at September 30, 1996..... 8,328,847 $83,288 1,460,093 $14,601 $21,686,698 $ (10,131)
========== ======= ========== ======= =========== =========
<CAPTION>
TOTAL
DEFERRED ACCUMULATED STOCKHOLDERS'
COMPENSATION DEFICIT EQUITY
------------ ------------ -------------
<S> <C> <C> <C>
Balance at January 1, 1993....... $ -- $(12,996,077) $ 8,572,734
Issuance of common stock........ -- -- 8,289
Net loss........................ -- (426,126 ) (426,126)
---------- ------------- -----------
Balance at December 31, 1993...... -- (13,422,203 ) 8,154,897
Issuance of common stock........ -- -- 1,529
Net income...................... -- 2,355,547 2,355,547
---------- ------------- -----------
Balance at December 31, 1994..... -- (11,066,656 ) 10,511,973
Issuance of common stock........ -- -- 88,871
Change in unrealized net gain
(loss) on marketable
securities, net of income
taxes of $11,058.............. -- -- 16,588
Net income...................... -- 7,908,330 7,908,330
---------- ------------- -----------
Balance at December 31, 1995...... -- (3,158,326 ) 18,525,762
Issuance of common stock........ -- -- 68,302
Change in unrealized net gain
(loss) on marketable
securities, net of income
taxes of $6,754............... -- -- (26,719)
Deferred compensation related
to issuance of stock options.. (48,785) -- --
Amortization of deferred
compensation.................. 762 -- 762
Net income...................... -- 2,613,360 2,613,360
---------- ------------- -----------
Balance at September 30, 1996..... $ (48,023) $ (544,966 ) $21,181,467
========== ============= ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 68
BIOSITE DIAGNOSTICS INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................ $ (426,126) $ 2,355,547 $ 7,908,330 $ 5,027,450 $ 2,613,360
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization.............. 524,984 544,332 1,787,386 658,468 1,861,614
Amortization of deferred compensation...... -- -- -- -- 762
Deferred income taxes...................... -- -- (1,827,000) -- (336,000)
Changes in operating assets and
liabilities:
Accounts receivable...................... (535,453) (1,712,708) (625,856) (644,571) (351,571)
Receivable from stockholder.............. (59,000) (412,000) 330,000 211,660 (479,000)
Inventory................................ (161,701) (402,193) (551,294) (526,981) (19,892)
Prepaid expenses and other current
assets................................. (340,948) 147,309 (71,673) (19,764) (157,946)
Accounts payable......................... 216,486 50,979 168,308 (31,849) 569,406
Accrued liabilities...................... 282,026 487,385 950,111 853,692 (1,985,715)
Contract advance......................... -- 500,000 (500,000) (500,000) --
Deferred revenue from a stockholder...... -- 316,330 298,952 471,739 (615,282)
----------- ----------- ----------- ----------- ------------
Net cash provided by (used in) operating
activities................................. (499,732) 1,874,981 7,867,264 5,499,844 1,099,736
INVESTING ACTIVITIES
Proceeds from sales and maturities of
marketable securities...................... 4,373,730 4,531,676 8,189,035 6,041,413 11,605,384
Purchase of marketable securities............ (7,731,313) (5,712,424) (14,340,836) (8,968,435) (8,705,962)
Purchase of property, equipment and leasehold
improvements............................... (142,972) (1,063,418) (2,682,315) (2,061,707) (1,378,923)
Patents, license rights, deposits and other
assets..................................... (155,232) (409,423) 321,782 254,752 (3,963,357)
----------- ----------- ----------- ----------- ------------
Net cash used in investing activities........ (3,655,787) (2,653,589) (8,512,334) (4,733,977) (2,442,858)
FINANCING ACTIVITIES
Proceeds from issuance of convertible
debentures................................. -- -- 1,000,000 1,000,000 --
Proceeds from issuance of equipment loans
payable.................................... -- 919,988 2,290,561 1,832,653 1,364,137
Principal payments under long-term
obligations................................ (516,684) (536,769) (850,392) (596,714) (955,100)
Proceeds from issuance of stock, net......... 8,289 1,529 88,871 69,170 68,302
----------- ----------- ----------- ----------- ------------
Net cash provided by (used in) financing
activities................................. (508,395) 384,748 2,529,040 2,305,109 477,339
----------- ----------- ----------- ----------- ------------
Increase (decrease) in cash and cash
equivalents................................ (4,663,914) (393,860) 1,883,970 3,070,976 (865,783)
Cash and cash equivalents at beginning of
period..................................... 5,450,207 786,293 392,433 392,433 2,276,403
----------- ----------- ----------- ----------- ------------
Cash and cash equivalents at end of period... $ 786,293 $ 392,433 $ 2,276,403 $ 3,463,409 $ 1,410,620
========== ========== ========== ========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid.............................. $ 139,022 $ 172,512 $ 208,623 $ 145,593 $ 212,329
========== ========== ========== ========== ===========
Income taxes paid.......................... $ 987 $ 38,800 $ 171,243 $ 176,412 $ 103,874
========== ========== ========== ========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Accrued liability for license rights
acquired................................. $ -- $ -- $ 2,200,000 $ -- $ --
========== ========== ========== ========== ===========
Capital lease obligations entered into for
equipment................................ $ 417,260 $ -- $ -- $ -- $ --
========== ========== ========== ========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 69
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES
ORGANIZATION AND BUSINESS ACTIVITY
Biosite Diagnostics Incorporated (the "Company") was established in 1988.
The Company has been primarily involved in the research, development,
manufacturing and marketing of point-of-care assays. The Company's first product
is Triage DOA, a urine test for the rapid detection of common drugs of abuse.
The Company began commercial sales of Triage DOA in February 1992 and currently
markets the product worldwide primarily through distributors supported by a
small direct sales force. The principal markets of the Company are hospital
laboratories and emergency departments. The Company is also engaged in research
and development of several additional point-of-care diagnostic products in the
microbiology, cardiology and therapeutic drug monitoring fields.
REVENUE RECOGNITION AND SIGNIFICANT CUSTOMERS
The Company recognizes sales upon shipment. The Company's U.S. distributor
accounted for 87%, 85% and 88% of the product sales in 1993, 1994 and 1995,
respectively, and 88% and 80% for the nine months ended September 30, 1995 and
1996, respectively.
The Company's agreement with its U.S. distributor contains sales milestones
based on the U.S. distributor's sales performance that allows the Company, if
the milestones are not met by the U.S. distributor, to terminate the agreement,
collect a penalty payment based on sales levels actually achieved in 1996, and
appoint a new distributor or sell the product directly in the U.S. medical
market.
Export sales to international customers amounted to $943,000, $1,457,000
and $1,944,000 in 1993, 1994 and 1995, respectively, and $1,362,000 and
$2,248,000 for the nine months ended September 30, 1995 and 1996, respectively.
Sales to a stockholder amounted to approximately $838,000, $1,242,000 and
$1,345,000 in 1993, 1994 and 1995, respectively, and $978,000 and $1,652,000 for
the nine months ended September 30, 1995 and 1996, respectively. Accounts
receivable from a stockholder were approximately $471,000, $141,000, and
$378,000 at December 31, 1994 and 1995, and September 30, 1996, respectively.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid debt
investments with maturities of 90 days or less when purchased.
MARKETABLE SECURITIES
Effective January 1, 1994 the Company adopted Financial Accounting
Standards Board ("FASB") Statement No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", which requires that investments in equity
securities that have readily determinable fair values and investments in debt
securities be classified in three categories: held-to-maturity, trading and
available-for-sale. Based on the nature of the assets held by the Company and
management's investment strategy, the Company's investments have been classified
as available-for-sale. Management determines the appropriate classification of
debt securities at the time of purchase and reevaluates such designation as of
each balance sheet date.
Securities classified as available-for-sale are carried at estimated fair
value, as determined by quoted market prices, with unrealized gains and losses,
net of tax, reported in a separate component of stockholders' equity. At
September 30, 1996, the Company had no investments that were classified as
trading or held-to-maturity as defined by the Statement.
The amortized cost of debt securities classified as available-for-sale is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in interest income. Realized
F-7
<PAGE> 70
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
gains and losses are included in interest income. The cost of securities sold is
based on the specific identification method. Interest on securities classified
as available-for-sale is included in interest income.
INVENTORY
Inventories are carried at the lower of cost (first-in, first-out) or
market.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements are stated at cost.
DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment is computed using the straight-line
method over five years. Amortization of leased equipment is computed using the
straight-line method over the estimated useful lives of the assets or the lease
term. Amortization of leasehold improvements is computed using the straight-line
method over the shorter of the estimated useful lives of the assets or the
remaining lease term.
PATENTS AND LICENSE RIGHTS
The Company has been issued patents covering its threshold immunoassay and
other related technologies. Capitalized patent costs associated with issued
patents are amortized over five to seventeen years. License rights related to
products for sale are amortized to cost of sales over the life of the license
using a systematic method based on the estimated revenues generated from
products during such license period.
STOCK OPTIONS
In October 1995, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," effective
for fiscal years beginning after December 15, 1995. SFAS No. 123 establishes the
fair value-based method of accounting for stock-based compensation arrangements,
under which compensation is determined using the fair value of the stock option
at the grant date and the number of options vested, and is recognized over the
periods in which the related services are rendered. The Company has made the
decision to continue with the current intrinsic value-based method, as allowed
by SFAS No. 123, and will be required to disclose the pro forma effect of
adopting the fair value-based method in future fiscal years beginning with the
fiscal year ending December 31, 1996.
CONCENTRATION OF CREDIT RISK
The Company sells its products primarily to its U.S. distributor. Credit is
extended based on an evaluation of the customer's financial condition, and
generally collateral is not required. Credit losses have been minimal and within
management's expectations.
The Company invests its excess cash in debt instruments of financial
institutions and corporations with strong credit ratings. The Company has
established guidelines relative to diversification and maturities that maintain
safety and liquidity. These guidelines are periodically reviewed and modified to
take advantage of trends in yields and interest rates. The Company has not
experienced any realized losses on its marketable securities.
ASSET IMPAIRMENT
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
requires impairment losses to be recorded on long-lived
F-8
<PAGE> 71
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
assets used in operations when indicators of impairment are present and the
estimated undiscounted cash flows to be generated by those assets are less than
the assets' carrying amount. SFAS No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company adopted the
provisions of SFAS No. 121 effective January 1, 1996. There was no effect of
such adoption on the Company's financial position or results of operations.
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 the
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.
RECLASSIFICATION
Certain amounts in the 1993, 1994 and 1995 financial statements have been
reclassified to conform to the September 30, 1996 presentation.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number
of common shares and common equivalent shares outstanding during each period.
Common equivalent shares are computed using the treasury stock method and
consist of common stock which may be issuable upon exercise of outstanding
common stock options, when dilutive. Pursuant to the requirements of the
Securities and Exchange Commission, common stock issued by the Company during
the twelve months immediately preceding the initial public offering, plus the
number of common equivalent shares which became issuable during the same period
pursuant to the grant of stock options, have been included in the calculation of
the shares used in computing net income (loss) per share as if these shares were
outstanding for all periods presented using the treasury stock method. In
addition, the calculation of the shares used in computing net income (loss) per
share also includes the convertible preferred stock which will convert into
8,328,847 shares of common stock and an outstanding $1.0 million convertible
debenture and related accrued interest through January 31, 1997 which will
convert into 92,222 common shares (based on the assumed initial public offering
price of $12.00 per share) upon the completion of the initial public offering
contemplated by this Prospectus, as if they were converted into common stock as
of the original dates of issuance.
INTERIM FINANCIAL INFORMATION
The accompanying financial statements for the nine months ended September
30, 1995 are unaudited but include all adjustments (consisting only of normal
recurring adjustments) which the Company considers necessary for a fair
statement of the financial position at such dates and the operating results and
cash flows for those periods. Results for the interim periods are not
necessarily indicative of results for the entire year or future periods.
PRO FORMA LIABILITIES AND STOCKHOLDERS' EQUITY
In December 1996, the Board of Directors authorized management of the
Company to file a Registration Statement with the Securities and Exchange
Commission for the Company to sell shares of its common stock in an initial
public offering. If the initial public offering contemplated by this Prospectus
is consummated under the terms presently anticipated, all outstanding shares of
convertible preferred stock at September 30, 1996 will automatically convert
into 8,328,847 common shares and an outstanding $1.0 million convertible
F-9
<PAGE> 72
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
debenture and related interest through January 31, 1997 will convert into 92,222
common shares. Unaudited pro forma stockholders' equity as of September 30,
1996, as adjusted for the assumed conversion of the preferred stock and the
convertible debenture, is disclosed in the accompanying balance sheet.
2. LICENSING AGREEMENTS
The Company has entered into licensing agreements to utilize certain
antibodies and/or technologies in exchange for up-front, annual milestone, or
royalty payments or a combination thereof. Certain of the upfront and annual
payments are creditable towards future royalties payable. Royalties may be
payable at rates up to 5% of product sales derived from the licensed
technologies.
The Company purchased license rights for technologies utilized in products
for sale of $2.2 million and $3.5 million during the year ended December 31,
1995 and the nine months ended September 30, 1996, respectively. Accumulated
amortization of license rights at December 31, 1995, and September 30, 1996, was
$845,467 and $1,666,488 respectively.
3. COLLABORATIVE AGREEMENTS
In September 1994, the Company entered into a collaborative development and
distribution agreement with a preferred stockholder for the development and
marketing of a new diagnostic product (the "European development and
distribution agreement"). In exchange for distribution rights to the product in
Europe, the stockholder has agreed to fund 40% of the Company's product
development costs, subject to certain maximum limits, plus certain clinical
trial costs. The total cost of the project is estimated to be approximately
$10.0 million. The stockholder's obligation to fund its share of the development
costs of the product is reduced by 40% of the consideration received from other
parties for the development of the new product and marketing rights in Japan.
The stockholder paid $660,000 in 1994 and paid an additional $660,000 in 1995.
At September 30, 1996, the Company has a receivable from the stockholder of
$242,000 under the agreement. Additionally, the stockholder will directly incur
certain of the clinical trial costs. The Company recognizes revenue under this
agreement on the percentage of completion basis as costs are incurred. For the
years ended December 31, 1994 and 1995, the Company incurred $962,000 and
$2,453,000, respectively, in expenses under this agreement and recognized
$344,000 and $561,000, respectively, as contract revenue. For the nine months
ended September 30, 1995 and 1996, the Company incurred $1,781,000 and
$1,940,000, respectively, in expenses under the agreement and recognized
$388,000 and $857,000, respectively, as contract revenue.
In February 1995, the Company entered into a collaborative development and
distribution agreement that included the Asian marketing rights to a new
diagnostic product being developed. Under this agreement, the Company will
receive up to $2,000,000 upon the completion of certain milestones. Recognition
of revenue under this agreement will occur as the milestones are attained. As of
September 30 1996, the Company has received $500,000, of which $300,000 was
recognized as contract revenue in 1995 and in accordance with the European
development and distribution agreement, the remaining $200,000 was applied
against the stockholder's obligation to fund its share of the development costs.
F-10
<PAGE> 73
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
4. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
The following is a summary of cash, cash equivalents and available-for-sale
securities by balance sheet classification at December 31, 1994:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents:
Cash..................................... $ 119,646 $ -- $ -- $ 119,646
Money market fund........................ 22,729 -- -- 22,729
Corporate debt securities................ 250,058 -- -- 250,058
----------- ------- -------- -----------
392,433 -- -- 392,433
Marketable securities:
Commercial paper......................... 493,669 -- -- 493,669
Corporate debt securities................ 5,029,491 -- -- 5,029,491
----------- ------- -------- -----------
5,523,160 -- -- 5,523,160
----------- ------- -------- -----------
Total cash, cash equivalents and
marketable securities.......... $ 5,915,593 $ -- $ -- $ 5,915,593
=========== ======= ======== ===========
</TABLE>
The following is a summary of cash, cash equivalents and available-for-sale
securities by balance sheet classification at December 31, 1995:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents:
Cash..................................... $ 964,854 $ -- $ -- $ 964,854
Money market fund........................ 915,359 -- -- 915,359
Commercial paper......................... 396,190 -- -- 396,190
----------- ------- -------- -----------
2,276,403 -- -- 2,276,403
Marketable securities:
Commercial paper......................... 1,662,383 -- (1,337) 1,661,046
Corporate debt securities................ 10,012,578 52,109 (23,126) 10,041,561
----------- ------- -------- -----------
11,674,961 52,109 (24,463) 11,702,607
----------- ------- -------- -----------
Total cash, cash equivalents and
marketable securities.......... $13,951,364 $ 52,109 $ (24,463) $13,979,010
=========== ======= ======== ===========
</TABLE>
F-11
<PAGE> 74
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
The following is a summary of cash, cash equivalents and available-for-sale
securities by balance sheet classification at September 30, 1996:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents:
Cash..................................... $ 341,948 $ -- $ -- $ 341,948
Money market fund........................ 1,068,672 -- -- 1,068,672
----------- ------ -------- -----------
1,410,620 -- -- 1,410,620
Marketable securities:
Certificates of deposit.................. 898,503 1,497 -- 900,000
Commercial paper......................... 386,683 -- (1,603) 385,080
Corporate debt securities................ 7,490,353 -- (16,779) 7,473,574
----------- ------ -------- -----------
8,775,539 1,497 (18,382) 8,758,654
----------- ------ -------- -----------
Total cash, cash equivalents and marketable
securities............................... $10,186,159 $1,497 $ (18,382) $10,169,274
=========== ====== ======== ===========
</TABLE>
The amortized cost and estimated fair value of available-for-sale
securities at September 30, 1996, by contractual maturity, are as follows:
<TABLE>
<CAPTION>
ESTIMATED
COST FAIR VALUE
---------- ----------
<S> <C> <C>
Marketable securities:
Due in one year or less................................... $7,581,858 $7,569,462
Due after one year through two years...................... 1,193,681 1,189,192
---------- ----------
$8,775,539 $8,758,654
========== ==========
</TABLE>
5. BALANCE SHEET INFORMATION
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1994 1995 1996
---------- ---------- -------------
<S> <C> <C> <C>
Raw materials................................. $ 521,889 $ 645,097 $ 417,302
Work in process............................... 526,787 965,925 1,102,610
Finished goods................................ 89,154 78,102 189,104
---------- ---------- ----------
$1,137,830 $1,689,124 $ 1,709,016
========== ========== ==========
</TABLE>
F-12
<PAGE> 75
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
Property, equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
--------------------------- 30,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Machinery and equipment..................... $ 3,623,954 $ 5,666,978 $ 6,868,726
Furniture and fixtures...................... 376,084 548,824 631,570
Leasehold improvements...................... 185,784 652,335 746,764
----------- ----------- -----------
4,185,822 6,868,137 8,247,060
Less accumulated depreciation and
amortization.............................. (2,326,249) (3,268,168) (4,305,540)
----------- ----------- -----------
$ 1,859,573 $ 3,599,969 $ 3,941,520
=========== =========== ===========
</TABLE>
6. DEBT AND LEASE COMMITMENTS
Debt and capital lease obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
------------------------- 30,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Convertible debenture, payable on September 29,
2000, including interest at 8% per annum..... $ -- $1,000,000 $1,000,000
Equipment financing notes, payable $122,687
monthly including interest at 8.1% to 11.8%,
due October 1996 to November 2001 secured by
equipment.................................... 963,538 2,648,272 3,261,222
Capital lease obligations...................... 448,478 203,913 --
---------- ---------- ----------
1,412,016 3,852,185 4,261,222
Less current portion........................... 640,453 1,112,712 1,027,579
---------- ---------- ----------
$ 771,563 $2,739,473 $3,233,643
========== ========== ==========
</TABLE>
At the sole option of the Company, the debenture is convertible into shares
of common stock of the Company upon consummation of a public offering of common
stock with aggregate proceeds in excess of $7,500,000 and at a price of not less
than $9.00 per share. The debenture is convertible at the public offering price.
In the event a public offering is not consummated on or before December 31,
1996, the debenture is convertible, at the sole option of the Company, into
shares of the Company's preferred stock, at the initial issue price for such
shares in connection with a private placement of the Company's preferred stock.
Under a licensing agreement, the Company is obligated to issue up to a maximum
of $1,000,000 of additional convertible debentures with five-year terms upon the
attainment of certain milestones. The debentures are convertible, at the option
of the Company, into shares of common stock at the initial public offering
price.
As of September 30, 1996, approximate future principal payments of the
equipment financing notes are due as follows: 1996 - $275,000; 1997 - $957,000;
1998 - $740,000; 1999 - $635,000; 2000 - $506,000 and 2001 - $148,000.
The Company leases its office and research facilities and certain equipment
under operating and capital leases. The minimum annual rent on the facilities is
subject to increases based on changes in the Consumer Price Index, taxes,
insurance and operating costs, subject to certain minimum and maximum annual
increases. The Company has options to renew certain of the facilities leases for
a period of two years. Included in deposits and other assets in the accompanying
balance sheets is approximately $728,000, $367,000 and $271,000 of security
deposits in conjunction with operating lease and equipment financing agreements
at December 31, 1994, 1995 and September 30, 1996, respectively.
F-13
<PAGE> 76
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
Approximate annual future minimum lease payments as of September 30, 1996
are as follows:
<TABLE>
<CAPTION>
OPERATING
YEAR LEASES
---- ----------
<S> <C>
1996............................................................. $ 247,000
1997............................................................. 949,000
1998............................................................. 105,000
----------
Total minimum lease payments........................... $1,301,000
==========
</TABLE>
Rent expense for the years ended December 31, 1993, 1994 and 1995 was
approximately $392,000, $550,000 and $734,000, respectively. Rent expense for
the nine months ended September 30, 1995 and 1996 was $527,000 and $628,000,
respectively. Equipment under equipment financing notes and capital leases was
approximately $2,443,000, $4,407,000 and $4,832,000 at December 31, 1994 and
1995, and September 30, 1996, respectively. Accumulated depreciation of
equipment under equipment loans and capital leases at December 31, 1994 and 1995
and September 30, 1996 was approximately $945,000, $1,465,000 and $1,643,000,
respectively.
7. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
A summary of the convertible preferred stock issued and outstanding is as
follows:
<TABLE>
<CAPTION>
SHARES PREFERENCE
ISSUED AND IN
OUTSTANDING PAR VALUE LIQUIDATION
---------- --------- -----------
<S> <C> <C> <C>
Series A......................................... 610,000 $ 6,100 $ 610,000
Series B......................................... 2,156,336 21,563 3,061,997
Series C......................................... 2,204,167 22,042 5,290,000
Series D......................................... 1,900,010 19,000 5,700,030
Series E......................................... 1,458,334 14,583 7,000,003
--------- ------- ------------
8,328,847 $ 83,288 $21,662,030
========= ======= ============
</TABLE>
The Series A, Series B, Series C, Series D and Series E preferred stock is
convertible on a one to one basis into a total of 8,328,847 shares of the
Company's common stock, respectively, subject to certain antidilution
adjustments. Additionally, outstanding preferred stock will automatically
convert into common stock immediately upon the closing of an underwritten public
offering of the common stock of the Company at an offering price of at least
$9.00 per share and having an aggregate offering price to the public of at least
$7.5 million. The holder of each share of preferred stock is entitled to one
vote for each share of common stock into which it would convert.
On or after September 7, 1997, upon consent of at least two thirds of the
existing Series A, Series B, Series C, Series D and Series E preferred
stockholders, the preferred stock may be redeemed, at the option of the Board of
Directors, for $1.10, $1.56, $2.64, $3.30 and $5.28 per share for the Series A,
Series B, Series C, Series D and Series E preferred stock, respectively, plus
any accrued and unpaid dividends.
Annual dividends of $.08, $.1278, $.216, $.27 and $.432 per share of Series
A, Series B, Series C, Series D and Series E preferred stock, respectively, are
payable whenever funds are legally available when and as declared by the Board
of Directors. No dividends have been declared to date.
F-14
<PAGE> 77
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
COMMON STOCK
1989 Stock Plan
The Company has adopted a stock plan which provides for both the direct
sale of common stock and for the grant of options to purchase common stock to
employees, directors, consultants and advisors of the Company. A total of
1,692,000 shares have been reserved for issuance under the plan. As of September
30, 1996, 144,476 shares have been sold directly under the plan.
Information with respect to the Company's option activity is as follows:
<TABLE>
<CAPTION>
SHARES PRICE
--------- -------------
<S> <C> <C>
Balance at December 31, 1992............................. 413,300 $0.24 -- 1.00
Granted................................................ 252,800 $1.00 -- 2.00
Exercised.............................................. (15,514) $0.24 -- 1.00
Cancelled.............................................. (37,686) $0.24 -- 1.00
--------- ------------
Balance at December 31, 1993............................. 612,900 $0.24 -- 2.00
Granted................................................ 109,150 $2.00
Exercised.............................................. (1,699) $0.50 -- 2.00
Cancelled.............................................. (5,701) $0.50 -- 2.00
--------- ------------
Balance at December 31, 1994............................. 714,650 $0.24 -- 2.00
Granted................................................ 300,750 $2.00 -- 3.25
Exercised.............................................. (215,529) $0.07 -- 2.00
Cancelled.............................................. (11,616) $0.24 -- 2.00
--------- ------------
Balance at December 31, 1995............................. 788,255 $0.24 -- 3.25
Granted................................................ 819,700 $3.25 -- 9.00
Exercised.............................................. (90,498) $0.24 -- 3.25
Cancelled.............................................. (353,590) $0.50 -- 9.00
--------- ------------
Balance at September 30, 1996............................ 1,163,867 $0.24 -- 8.25
========= ============
</TABLE>
The options are generally subject to four year vesting and expire ten years
from the date of grant. At September 30, 1996, 454,411 shares were exercisable
and 56,099 shares were available for future issuance of common stock or grant of
options to purchase common stock under the 1989 Stock Plan.
During the period of May 17, 1996 to September 6, 1996, the Company granted
options to purchase 331,950 shares of common stock at $8.25 to $9.00 per share.
On September 6, 1996, these stock options were repriced to $5.50 per share.
1996 Stock Incentive Plan
In December 1996, the Company adopted the 1996 Stock Incentive Plan (the
"1996 Stock Plan") effective as of December 1, 1996. The 1996 Stock Plan
replaces the Company's 1989 Stock Plan. Although all future awards will be made
under the 1996 Stock Plan, awards made under the 1989 Stock Plan will continue
to be administered in accordance with the 1989 Stock Plan. The 1996 Stock Plan
provides for awards in the form of restricted shares, stock units, options or
stock appreciation rights or any combination thereof. A pool of 900,000 shares,
increased by the amount of all unpurchased shares of common stock pursuant to
expired or terminated options, as of November 30, 1996, under the 1989 Stock
Plan, has been reserved for issuance under the 1996 Stock Plan.
F-15
<PAGE> 78
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
Deferred Compensation
The Company records and amortizes over the related vesting periods deferred
compensation representing the excess of the deemed value for accounting purposes
of the options granted over their aggregate exercise price.
In October, November and December 1996, the Company granted additional
options to purchase 128,350 shares of Common Stock at the exercise price of
$5.50 per share. The Company will record compensation expense of approximately
$390,225 over the vesting period of these options.
Employee Stock Purchase Plan
In December 1996, the Company adopted an Employee Stock Purchase Plan
("ESPP") which provides employees the opportunity to purchase common stock at a
discount and pay for such purchases through payroll deductions. A pool of
100,000 shares of common stock has been reserved for issuance under the ESPP
(subject to anti-dilution provisions).
8. INCOME TAXES
Significant components of the income tax benefit (provision) are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------ NINE MONTHS ENDED
1993 1994 1995 SEPTEMBER 30, 1996
-------- -------- ---------- ------------------
<S> <C> <C> <C> <C>
Current:
Federal....................... $ -- $(63,000) $ (150,000) $ (69,000)
State......................... -- -- (10,000) (3,000)
-------- -------- ---------- ---------
-- (63,000) (160,000) (72,000)
Deferred:
Federal....................... -- -- 1,668,000 454,000
State......................... -- -- 159,000 (118,000)
-------- -------- ---------- ---------
-- -- 1,827,000 336,000
-------- -------- ---------- ---------
$ -- $(63,000) $1,667,000 $ 264,000
======== ======== ========== =========
</TABLE>
The provision for income taxes for the nine months ended September 30, 1996
was determined utilizing an effective tax rate based on the estimated operating
results for 1996, expected utilization of net operating loss carryforwards and
other tax credits and changes in deferred tax assets including a reduction of
the valuation allowance for deferred tax assets of $1,119,000.
As of December 31, 1995, the Company had a federal net operating loss
carryforward of approximately $3,058,000 and no tax loss carryforward for
California. The Company also had federal and California research and development
credit carryforwards of approximately $906,000 and $92,000, respectively. The
difference between the federal and California tax loss carryforwards is
primarily attributable to the capitalization of research and development
expenses for California tax purposes and the fifty percent limitation on
California loss carryforwards. The federal tax loss and research credit
carryforwards will begin expiring in 2003 unless previously utilized. In 1995,
the Company utilized federal and state net operating loss carryforwards of
approximately $7,108,000 and $4,473,000, respectively, to offset taxable income.
F-16
<PAGE> 79
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
Significant components of the Company's deferred tax assets as of December
31, 1994 and 1995 are shown below. For the year ended December 31, 1995, and the
nine months ended September 30, 1996, the Company decreased the valuation
allowance for deferred tax assets $1,827,000 and $1,119,000, respectively, as
the realization of such assets became probable.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Capitalized research expenses........................... $ 247,000 $ 154,000
Net operating loss carryforwards........................ 3,275,000 1,070,000
Research and development credits........................ 1,258,000 998,000
Other................................................... 338,000 854,000
---------- ----------
Total deferred tax assets....................... 5,118,000 3,076,000
Deferred tax liability:
Tax over book depreciation.............................. (80,000) (130,000)
---------- ----------
5,038,000 2,946,000
Valuation allowance for deferred tax assets............... (5,038,000) (1,119,000)
---------- ----------
Net deferred tax assets................................... $ -- $ 1,827,000
========== ==========
</TABLE>
The reconciliation of income tax computed at the federal statutory tax rate
to the (provision) benefit for income taxes is as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1993 1994 1995 1996
---- ---- ---- -------------
<S> <C> <C> <C> <C>
Tax at federal statutory rate..................... (35 )% 35 % 35 % 35%
Permanent tax differences......................... -- 5 1 1
Increase (decrease) of the valuation
allowance for deferred tax assets............... 35 % (36 ) (63 ) (25)
Other............................................. -- (1 ) -- --
---- ---- ---- ---
Effective rate.................................... -- 3 % (27 )% 11%
==== ==== ==== ==========
</TABLE>
Pursuant to Internal Revenue Code Section 382, use of the Company's net
operating loss and tax credit carryforwards may be limited if a cumulative
change in ownership of more than 50% occurs within any three year period.
However, any annual limitation is not expected to have a material adverse effect
on the Company's ability to utilize its net operating loss and tax credit
carryforwards.
9. EMPLOYEE SAVINGS PLAN
In 1991, the Company implemented a 401(k) program which allows all
qualifying employees to contribute up to a maximum of 20% of their annual
salary, subject to annual limits. The Board of Directors may, at its sole
discretion, approve Company contributions. No such contributions have been
approved or made.
10. SETTLEMENT OF PATENT MATTERS
In September 1996, the Company reached a settlement with a competitor with
respect to all claims in a lawsuit filed by the competitor in May 1994. The
complaint alleged that the Company's Triage Panel for
F-17
<PAGE> 80
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
Drugs of Abuse product infringed a patent licensed to the competitor. The
Company vigorously defended the lawsuit. However, to avoid protracted
litigation, the Company settled the patent matter in September 1996, and paid $2
million as a settlement of the litigation and, for an additional $3.5 million
and the agreement to pay certain royalties, obtained a license to certain
technology.
The Company has charged to settlement of patent matters in the accompanying
statements of income the $2 million litigation settlement, applicable license
costs related to prior years and the related legal defense costs. Legal defense
costs totaled $338,004 and $777,070 for the years ended December 31, 1994 and
1995, respectively, and $743,173 and $17,119 for the nine months ended September
30, 1995 and 1996, respectively.
Additionally, in December 1995, the Company was notified that it should
evaluate whether its current products infringe upon certain patent claims held
by another company. In March 1996, the Company settled this matter by obtaining
a world-wide license to the technology. The Company accrued the one-time license
fee of $2.2 million in December 1995. Amortization of this license related to
fiscal years prior to 1995 was charged to Settlement of Patent Matters in 1995.
F-18
<PAGE> 81
[PHOTOGRAPHS SHOWING TRIAGE DOA AND PERSONS PERFORMING TRIAGE DOA
TESTING PROCEDURE]
BIOSITE(R)
DIAGNOSTICS
DEVELOPS,
MANUFACTURES
AND
MARKETS
IMMEDIATE
RESPONSE
DIAGNOSTICS(TM)
<PAGE> 82
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS OR BY ANY OTHER
PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY A SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY, TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 6
Use of Proceeds........................ 15
Dividend Policy........................ 15
Capitalization......................... 16
Dilution............................... 17
Selected Financial Data................ 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 19
Business............................... 24
Management............................. 42
Certain Transactions................... 50
Principal Stockholders................. 51
Description of Capital Stock........... 53
Shares Eligible for Future Sale........ 55
Underwriting........................... 57
Legal Matters.......................... 58
Experts................................ 58
Additional Information................. 58
Index to Financial Statements.......... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
2,000,000 SHARES
LOGO
COMMON STOCK
------------------------
PROSPECTUS
------------------------
COWEN & COMPANY
ALEX. BROWN & SONS
INCORPORATED
, 1997
======================================================
<PAGE> 83
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses expected to be incurred
by the Registrant in connection with the sale and distribution of the securities
being registered hereby, other than underwriting discounts and commissions. All
amounts are estimated except the Securities and Exchange Commission registration
fee, the Nasdaq listing fee and the National Association of Securities Dealers,
Inc. ("NASD") filing fee.
<TABLE>
<S> <C>
SEC registration fee...................................................... $ 9,061
NASD filing fee........................................................... 3,490
Nasdaq listing fee........................................................ 47,963
NASD expenses............................................................. 2,000
Accounting fees and expenses.............................................. 150,000
Legal fees and expenses................................................... 250,000
Printing and engraving expenses........................................... 150,000
Registrar and Transfer Agent's fees....................................... 25,000
Miscellaneous fees and expenses........................................... 62,486
--------
Total........................................................... $700,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). Article VII of the Registrant's
Restated Certificate of Incorporation (Exhibit 3.(i)3 hereto) and Article V of
the Registrant's Bylaws (Exhibit 3.(ii)2 hereto) provide for indemnification of
the Registrant's directors, officers, employees and other agents to the extent
and under the circumstances permitted by the Delaware General Corporation Law.
The Registrant has also entered into agreements with its directors and officers
that will require the Registrant, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as
directors or officers to the fullest extent not prohibited by law.
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by
the Underwriters of the Registrant, its directors and officers, and by the
Registrant of the Underwriters, for certain liabilities, including liabilities
arising under the Act, and affords certain rights of contribution with respect
thereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since December 1, 1993, the Registrant has sold and issued the following
unregistered securities:
(a) On various dates through December 1, 1996, the Registrant issued
323,240 shares of its Common Stock to employees pursuant to the exercise of
options granted under its 1989 Stock Plan. The exercise prices per share
ranged from $0.24 to $3.25, for an aggregate consideration of $167,076. The
Registrant relied on the exemption provided by Rule 701 under the Act.
(b) In September 1995, the Company issued a $1,000,000 convertible
debenture to Sandoz Pharma Ltd. relying on the exemption provided by
Section 4(2) under the Act.
The recipients of the above-described securities represented their
intention to acquire the securities for investment only and not with a view to
distribution thereof. Appropriate legends were affixed to the stock certificates
and debenture issued in such transactions. All recipients had adequate access,
through employment or other relationships, to information about the Registrant.
II-1
<PAGE> 84
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------- ----------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.(i)1* Restated Certificate of Incorporation.
3.(i)2* Form of Certificate of Amendment of Restated Certificate of Incorporation to be
filed prior to the effective date of this Registration Statement.
3.(i)3* Form of Restated Certificate of Incorporation, to be filed upon closing of the
offering to which this Registration Statement relates.
3.(ii)1* Bylaws of the Registrant, as amended.
3.(ii)2* Proposed Amended and Restated Bylaws of the Registrant.
4.1** Form of Common Stock Certificate.
5.1* Legal opinion of Pillsbury Madison & Sutro LLP.
10.1* Amended and Restated 1989 Stock Plan of Biosite Diagnostics Incorporated.
10.2* 1996 Stock Incentive Plan of Biosite Diagnostics Incorporated ("1996 Stock Plan").
10.3* Form of Incentive Stock Option Agreement under the 1996 Stock Plan.
10.4* Form of Nonstatutory Stock Option Agreement under the 1996 Stock Plan.
10.5* Biosite Diagnostics Incorporated Employee Stock Purchase Plan.
10.6* Form of Indemnity Agreement between the Registrant and its officers and directors.
10.7** Sublease Agreement between the Registrant and General Atomics, dated February 17,
1992, as amended on August 10, 1992, January 21, 1993, October 29, 1993, March 1,
1995 and October 1, 1996.
10.8(+) Antibody License Agreement between the Registrant and Sandoz Pharma Ltd., dated
September 22, 1995, as amended on July 26, 1996.
10.9(+) Easy Assay License Agreement between the Registrant and Sandoz Pharma Ltd., dated
September 22, 1995.
10.10(+) Distribution Agreement between the Registrant and Curtin Matheson Scientific,
Inc., dated November 11, 1991, as amended on March 7, 1994, March 12, 1996 and
August 9, 1996.
10.11(+) Development, Supply and Distribution Agreement between the Registrant and Kyoto
Dai-Ichi Kagaku Co., Ltd., dated as of February 14, 1995.
10.12(+) Development and Supply Agreement between the Registrant and LRE Relais +
Elektronik GmbH -- Medical Technology, dated September 23, 1994.
10.13(+) Distributorship Agreement between the Registrant and E. Merck KGaA, dated July 27,
1992, as amended on November 10, 1993, January 13, 1994 and December 11, 1995.
10.14(+) Collaborative Development Agreement between the Registrant and Merck KGaA, dated
July 1, 1994.
10.15(+) Supply and Distribution Agreement between the Registrant and E. Merck KGaA, dated
as of June 28, 1994.
10.16(+) Research and Development Agreement between the Registrant and Ixsys, Inc., dated
July 1, 1992.
10.17* Stock Purchase Agreement dated as of October 30, 1991 between the Registrant and
certain purchasers of Series D Preferred Stock.
10.18* Stock Purchase Agreement dated as of November 25, 1992 between the Registrant and
Merck KGaA concerning Series E Preferred Stock.
10.19(+) Debenture Purchase Agreement between the Registrant and Sandoz Pharma Ltd., dated
as of September 22, 1995.
10.20(+)** Settlement and License Agreement & Agreement of Dismissal with Prejudice, dated as
of September 6, 1996, by and between the Registrant and Abbott Laboratories.
10.21 Lease Agreement between the Registrant and TCEP II Properties Limited Partnership
dated July 26, 1996.
11.1 Statement of computation of earnings per share.
</TABLE>
II-2
<PAGE> 85
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------- ----------------------------------------------------------------------------------
<C> <S>
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2* Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1).
24.1* Power of Attorney.
27.1* Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
(+) Confidential treatment requested.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules other than those referred to above have been omitted because they
are not applicable or not required or because the information is included
elsewhere in the Financial Statements or the notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the 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.
(3) It will provide to the underwriters at the closing(s) specified in
the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
II-3
<PAGE> 86
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San Diego,
State of California, on the 23rd day of December, 1996.
BIOSITE DIAGNOSTICS INCORPORATED
By /s/ KIM D. BLICKENSTAFF
------------------------------------
Kim D. Blickenstaff
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ ------------------------------ ------------------
<C> <S> <C>
/s/ KIM D. President, Chief Executive December 23, 1996
BLICKENSTAFF Officer (Principal Executive
- ------------------------------------------ Officer) and Director
Kim D. Blickenstaff
/s/ CHRISTOPHER J. TWOMEY Vice President and Chief December 23, 1996
- ------------------------------------------ Financial Officer (Principal
Christopher J. Twomey Financial Officer and
Accounting Officer)
* Chairman of the Board December 23, 1996
- ------------------------------------------
Timothy J. Wollaeger
* Director December 23, 1996
- ------------------------------------------
Gunars E. Valkirs, Ph.D.
* Director December 23, 1996
- ------------------------------------------
Thomas H. Adams, Ph.D.
* Director December 23, 1996
- ------------------------------------------
Howard E. Greene, Jr.
* Director December 23, 1996
- ------------------------------------------
Frederick J. Dotzler
* Director December 23, 1996
- ------------------------------------------
Stephen K. Reidy
* Director December 23, 1996
- ------------------------------------------
Jesse I. Treu, Ph.D.
*By /s/ KIM D. BLICKENSTAFF
Kim D. Blickenstaff
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 87
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- -------- --------------------------------------------------------------------------------------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
3.(i)1* Restated Certificate of Incorporation.
3.(i)2* Form of Certificate of Amendment of Restated Certificate of Incorporation
to be filed prior to the effective date of this Registration Statement.
3.(i)3* Form of Restated Certificate of Incorporation, to be filed upon closing of
the offering to which this Registration Statement relates.
3.(ii)1* Bylaws of the Registrant, as amended.
3.(ii)2* Proposed Amended and Restated Bylaws of the Registrant.
4.1** Form of Common Stock Certificate.
5.1* Legal opinion of Pillsbury Madison & Sutro LLP.
10.1* Amended and Restated 1989 Stock Plan of Biosite Diagnostics Incorporated.
10.2* 1996 Stock Incentive Plan of Biosite Diagnostics Incorporated ("1996 Stock
Plan").
10.3* Form of Incentive Stock Option Agreement under the 1996 Stock Plan.
10.4* Form of Nonstatutory Stock Option Agreement under the 1996 Stock Plan.
10.5* Biosite Diagnostics Incorporated Employee Stock Purchase Plan.
10.6* Form of Indemnity Agreement between the Registrant and its officers and
directors.
10.7** Sublease Agreement between the Registrant and General Atomics, dated
February 17, 1992 as amended on August 10, 1992, January 21, 1993, October
29, 1993, March 1, 1995 and October 1, 1996.
10.8(+) Antibody License Agreement between the Registrant and Sandoz Pharma Ltd.,
dated September 22, 1995, as amended on July 26, 1996.
10.9(+) Easy Assay License Agreement between the Registrant and Sandoz Pharma
Ltd., dated September 22, 1995.
10.10(+) Distribution Agreement between the Registrant and Curtin Matheson
Scientific, Inc., dated November 11, 1991, as amended on March 7, 1994,
March 12, 1996 and August 9, 1996.
10.11(+) Development, Supply and Distribution Agreement between the Registrant and
Kyoto Dai-Ichi Kagaku Co., Ltd., dated as of February 14, 1995.
10.12(+) Development and Supply Agreement between the Registrant and LRE Relais +
Elektronik GmbH -- Medical Technology, dated September 23, 1994.
10.13(+) Distributorship Agreement between the Registrant and E. Merck KGaA, dated
July 27, 1992, as amended on November 10, 1993, January 13, 1994 and
December 11, 1995.
10.14(+) Collaborative Development Agreement between the Registrant and E. Merck
KGaA, dated as of June 28, 1994.
10.15(+) Supply and Distribution Agreement between the Registrant and E. Merck
KGaA, dated as of June 28, 1994.
10.16(+) Research and Development Agreement between the Registrant and Ixsys, Inc.,
dated July 1, 1992.
10.17* Stock Purchase Agreement dated as of October 30, 1991 between the
Registrant and certain purchasers of Series D Preferred Stock.
10.18* Stock Purchase Agreement dated as of November 25, 1992 between the
Registrant and Merck KGaA concerning Series E Preferred Stock.
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- -------- --------------------------------------------------------------------------------------
<C> <S> <C>
10.19(+) Debenture Purchase Agreement between the Registrant and Sandoz Pharma
Ltd., dated as of September 22, 1995.
10.20(+)** Settlement and License Agreement & Agreement of Dismissal with Prejudice,
dated as of September 6, 1996, by and between the Registrant and Abbott
Laboratories.
10.21 Lease Agreement between the Registrant and TCEP II Properties Limited
Partnership dated July 26, 1996.
11.1 Statement of computation of earnings per share.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2* Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1).
24.1* Power of Attorney.
27.1* Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
(+) Confidential treatment requested.
<PAGE> 1
EXHIBIT 10.8
[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION]
ANTIBODY LICENSE AGREEMENT
THIS AGREEMENT, dated September 22, 1995, is entered into by and
between SANDOZ PHARMA LTD., a Swiss Corporation with offices at Lichtstrasse 35,
CH4002 Basle/Switzerland ("Sandoz"), and BIOSITE DIAGNOSTICS INCORPORATED, a
Delaware corporation with offices at 11030 Roselle Street, San Diego, CA
92121/USA ("Licensee").
W I T N E S S E T H:
WHEREAS, Sandoz owns patents, patent applications, technical
information, data and know-how relating to cyclosporine, an immnunosuppressive
drug marketed under the trademarks Sandimmun(R) or Sandimmune(R) (or Neoral(R)
or Optoral(R) for Sandoz's patented microemulsion preconcentrate formulation of
cyclosporine), and to monoclonal antibodies capable of distinguishing between
cyclosporine and metabolites thereof which are suitable for use in diagnostic
assay kits and systems, and to assay kits or systems comprising such monoclonal
antibodies;
WHEREAS, Licensee has extensive know-how relating to the development
and marketing of diagnostic assays for the monitoring of drugs and other small
molecules;
WHEREAS, Sandoz, in order to foster the safety of patients all over the
world receiving cyclosporine, is interested that both in whole blood and plasma
analogous therapeutic windows are determined whatever assay system is used, and
is therefore interested to grant licenses on its patents, patent applications,
technical information, data and know-how to develop and commercialize such assay
systems and to supply companies manufacturing such assay kits with monoclonal
antibodies, cyclosporine and certain cyclosporine metabolites for cyclosporine
assays;
NOW, THEREFORE, Sandoz and Licensee agree as follows:
1. DEFINITIONS.
The following definitions shall control the construction of each of the
following terms wherever they appear in this Agreement:
1.1 "Affiliate" of a part shall mean a corporation or other business
entity controlled by, controlling or under common control with such party. For
this purpose, control of a corporation or other business entity shall mean
direct or indirect beneficial ownership of at least fifty percent (50%) of the
voting interest in, or a greater than fifty percent (50%)
-1-
<PAGE> 2
interest in the equity of, such corporation or other business entity.
1.2 "CyA" shall mean the immunosuppressive drug cyclosporine.
1.3 "Monoclonal Antibody(ies)" shall mean antibody(ies) to CyA, its
analogues, and/or to metabolites thereof whether or not derived from a Sandoz
cell line, and useful in measuring amounts of CyA, its analogues and/or
metabolites thereof.
1.4 "CyA Assay(s) (or Products or Kits)" shall mean those certain
testing devices, which are used with a testing device reader, which utilize in
vitro diagnostic assay(s) based on Monoclonal Antibodies and which are useful
for therapeutic drug level monitoring in patients treated with CyA; provided,
however, that the CyA Assay(s) (or Products or Kits) shall not include the
testing device reader.
1.5 "Sandoz Know-How" shall mean all biological, chemical, and
immunological materials, methods and other technical information, presently or
hereafter during the term of this Agreement in the possession or control or
Sandoz which relate to Monoclonal Antibodies or to CyA Assays conveyed to
Licensee in writing, orally or through other tangible materials.
1.6 "Sandoz Patent Rights" shall mean all patent applications
world-wide and patents granted thereon, and all extensions and supplemental
protection certificates based on such patents, now or hereafter during the term
of this Agreement owned or controlled by Sandoz, which incorporate a Valid Claim
covering Monoclonal Antibodies or CyA Assays; a listing of such subsisting
Sandoz Patent Rights being provided in the attached Schedule A, which will be
updated from time to time as appropriate.
1.7 "Effective Date" shall mean the date first written hereinabove.
1.8 "Non-exclusive License" shall mean a license under which Sandoz is
free to grant other licenses in the same field to other parties than Licensee.
1.9 "Net Sales" shall mean the gross sales of CyA Assays by Licensee,
its Affiliates and its sublicensees (if any) billed to customers, less the
amount actually allowed to customers for (1) adjustments granted to customers,
including without limitation credits and allowances or on account of the
rejection or return of CyA Assays previously sold, (2) trade and cash discounts,
rebates and distributor fees, (3) transportation, insurance and handling charges
and (4) sales, excise, turnover and similar taxes and any duties and other
governmental charges imposed upon the production, importation, use or sale of
CyA Assays. Where the price of a CyA Assay includes the price of
-2-
<PAGE> 3
the device reader or the price of an assay for a compound other than CyA, Net
Sales shall be determined by a formula (to be agreed upon by the parties before
sales at such price are made) calculated to exclude that portion of sales of CyA
Assays reasonably attributable to such prices of the device reader and/or the
assay for a compound other than CyA.
1.10 "Valid Claim" shall mean one or more claims within Sandoz Patent
Rights which has not been declared to be invalid or unenforceable by the final
judgment of a court of competent jurisdiction from which no appeal can be or has
been taken.
1.11 "Patent Countries" shall mean countries in which Sandoz Patent
Rights subsist.
1.12 "First Commercial Sale" shall mean the first sale of CyA Assay
under this Agreement by Licensee or its Affiliates to a non-affiliated third
party, following approval of its marketing by the appropriate governmental
agency for the country in which the sale is to be made or, when governmental
approval is not required, the first sale in a country.
1.13 "1992-SFr" shall indicate a quoted price which may, at the option
of Sandoz, be adjusted yearly as of January 1 of each year to correspond to
changes in the Swiss Consumer Price Index of the Swiss Bundesamt fur Statistik
since December 31, 1992.
2. FEASIBILITY STUDY.
2.1(a) Within fifteen (15) working days after the Effective Date of
this Agreement, Sandoz will supply to Licensee [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] as reference compound and starting
material for [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION], respectively. Import regulations will be handled by Sandoz upon
receipt of the permit applied for by Licensee at the U.S. Department of
Agriculture, Hyattsville, Maryland 20782. The permit forwarded by Licensee to
Sandoz will accompany the shipment of [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] to facilitate port of entry clearance by USDA
inspectors. During the Feasibility Period as set forth in Sections 2.2 and 2.3,
Sandoz warrants that it will satisfy all applicable U.S. governmental import
regulations regarding all materials required by Licensee and supplied by Sandoz
such evaluation.
To demonstrate feasibility using quality control samples of Cyclosporin
A in [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION],
Licensee's test will be required to have accuracy, precision and reproducibility
at least equivalent to [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION].
-3-
<PAGE> 4
(b) If Licensee demonstrates the above results to Sandoz, Licensee
shall have the right to enter the next stage of cooperation. Sandoz shall then
supply Licensee with [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION]. For testing cross reactivity with the preliminary assay system,
Licensee will receive small quantities [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] and, in addition to that, Licensee shall analyze
several [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] samples from various transplant patients from local hospitals with
both the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] and the experimental test design of Licensee. The performance
requirements as set forth in 2.1(a) will apply equally.
(c) Licensee will not use any materials supplied by Sandoz for any
other purpose than performing the feasibility phase investigations under this
Agreement and will not divulge the nature of or provide any such materials to
any third party.
(d) Prior to or during the investigations of Section 2.1, Sandoz shall
provide its Know-how to Licensee only as each portion is requested by Licensee.
2.2 Sandoz hereby grants Licensee the non-exclusive right to perform
feasibility investigations during a Feasibility Period of [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] starting with the Effective
Date of this Agreement. Licensee shall inform Sandoz in quarterly reports on
progress and status of these investigations. At the end of the Feasibility
Period, if successful, Licensee shall provide a demonstration of meeting the
performance criteria set out in Section 2.1 with [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION]. Each such report, and the information
and data contained in each such report, shall constitute Confidential
Information of Licensee under Section 8 below.
2.3 Licensee may elect to extend the duration of the Feasibility Period
for an additional period of time mutually to be agreed upon, [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
2.4 Upon receipt by Sandoz of written notification from Licensee prior
to expiry of the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] period referred to in Section 2.2 above or any extended period
agreed in accordance with Section 2.3 above, that Licensee has successfully
performed the feasibility investigations in [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] and wishes to enter into a Nonexclusive
License under Sandoz Patent Rights and Sandoz Know-How to make, have made, use
and sell CyA Assays,
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<PAGE> 5
Sandoz will in writing confirm the feasibility or object to it within thirty
(30) days. Upon confirmation, Section 3 through 16 of this Agreement shall
immediately become effective without further documentation between the parties.
2.5 In the absence of any notification by Licensee in accordance with
Section 2.4 above or in the event that Licensee notifies Sandoz during the
Feasibility Period pursuant to Sections 2.2 and 2.3 that it does not wish to
enter into a Nonexclusive License according to Section 2.4, this Agreement shall
terminate and the parties shall have no further liability or obligations to each
other concerning CyA Assays or Monoclonal Antibodies under this Agreement,
provided, however, that the materials and Sandoz Know-How provided to Licensee
pursuant to Section 2.1 hereof shall continue to be governed by the
Confidentiality Provision set out in Section 8. In such event, Licensee shall
immediately return to Sandoz all unused portions of Monoclonal Antibodies and
any other materials provided by Sandoz remaining in Licensee's possession and
any copies of tangible materials embodying Sandoz Know-How, except for one copy
which may be retained in Licensee's confidential legal files for use solely by
Licensee's counsel.
3. LICENSE.
Upon receipt of the notification referred to in Section 2.4, Sandoz
undertakes to grant to Licensee a Non-exclusive License with the right to
sublicense Affiliates under the Sandoz Patent Rights and Sandoz Know-How to
make, have made, use and sell CyA Assays worldwide.
4. SUPPLIES.
4.1 Cell Line Transfer and License.
(a) Sandoz grants Licensee a Non-exclusive License under Sandoz Patent
Rights and Sandoz Know-How to manufacture Monoclonal Antibodies and
shall--subject to the payment referred to in Section 5.2 below--make available
the Sandoz cell-lines and the necessary Know-How to Licensee within
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after
the grant of the Non-exclusive License in accordance with Section 3 of this
Agreement.
(b) The cell-lines shall remain the property of Sandoz. No further
transmission and no alternations or special manipulations by Licensee shall be
permitted.
Sandoz, at its discretion and its own costs, shall have the possibility
to test the integrity of the cell lines in order to assure presence of the
essential chromosomes to produce antibody of proper specificity.
-5-
<PAGE> 6
(c) Licensee agrees to supply Sandoz upon Sandoz Pharma's request, and
solely for Sandoz internal use, with Monoclonal Antibodies in accordance with
reasonable price, ordering and supply terms to be agreed upon.
4.2 CyA and CyA Metabolites.
(a) Sandoz shall supply Licensee and Licensee shall purchase from
Sandoz all requirements of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] reasonably and justifiably needed for the purpose of
development after the work contemplated in Section 2 and production of CyA
Assays and available to Sandoz, in accordance with the provisions of this
Section 4. During the term of this Agreement, Sandoz shall continue to provide
such materials to Licensee pursuant to Section 4.2, even if the license is paid
up and royalties are no longer due under this Agreement.
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
(b) At the latest three months before the beginning of any calendar
quarter Licensee shall place a firm order with Sandoz in writing for the first
quarter and indicate to Sandoz its estimated requirement for each of the
following three quarters and the subsequent 12 months. Sandoz has no commitment
to supply any quantities of Licensee's requirements exceeding by [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] the last estimate
given for such quarter. In the event that Sandoz is unwilling or unable to
supply any quantities of Licensee's requirements exceeding by [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] the last estimate
given for such quarter, then Licensee shall have the right to purchase the
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] or CyA
elsewhere or to prepare these compounds internally.
(c) Freight, duty and associated taxes shall be paid by [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] with each element
shown separately in invoices. Title shall pass to Licensee upon transfer to the
carrier by Sandoz for final shipment to Licensee. Delivery shall be made to
Licensee within [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] working days of the date of Licensee's order therefor.
4.3 The supply price for [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION], pursuant to Section 4.2, shall be [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] FCA Basel. The
supply price for [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION], pursuant to 4.2 shall be [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per gram FCA Basel for [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY
-6-
<PAGE> 7
WITH THE COMMISSION] FCA Basle. Licensee may purchase less than one gram of such
materials at pro rata cost.
5. FEES AND ROYALTIES.
5.1 Upon execution of this Agreement, Licensee shall pay a
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] lump
sum payment of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] Sandoz. [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION]
5.2 Upon transfer of the Monoclonal Antibody-producing cell-line to
Licensee pursuant to Section 4.1(a), Licensee shall pay a further, [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] to Sandoz.
5.3 Licensee will pay a royalty of [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] in Patent Countries and [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] in all other
countries upon the Net Sales.
In Patent Countries, the period for payment of royalties in a given
country shall be extended so long as a Valid Claim of Sandoz Patent Rights
covers the sale by Licensee of CyA Assays in said country.
With respect to sale of CyA Assays in any Patent Country, the
obligation of Licensee to pay royalties as provided above shall be reduced by
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] in the
event and for the period that an unlicensed third party or parties sell any
quantity of CyA Assays in excess of [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of the total CyA Assay market in such Patent
Country, said market share percentage to be determined by an independent market
survey organization mutually agreed to by Sandoz and Licensee.
5.4 To ensure Sandoz' royalty income from the sale of CyA Assays,
absent prior written consent of Sandoz, Licensee shall not sell to any third
party any CyA Assays for a consideration other than that upon which Net Sales
can be determined for the purpose of payment of royalty to Sandoz.
5.5 There shall be no obligation to pay Sandoz under this Section 5 on
sales of CyA Assays between Licensee and its sublicenses (if any), but in such
instances the obligation to pay royalties shall arise upon the sale by Licensee
or its sublicensees to unrelated third parties. It is understood and agreed that
any payment under this Section 5 may be made on behalf of Licensee by any
sublicensee of Licensee, provided, however, that Licensee shall remain primarily
responsible therefor. Payments due under this Section 5 shall be deemed to
accrue when CyA Assays are sold to such unrelated third party.
-7-
<PAGE> 8
5.6 For purposes of this Agreement, a sale of a CyA Assay to an
unrelated third party shall be deemed to take place in the country of actual
sale to the final user.
5.7 Payments of royalties by Licensee to Sandoz shall occur
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] to
Sandoz' designated account within sixty (60) days after the end of the
respective calendar half-year.
5.8 Each payment paid hereunder shall be accompanied by a statement
which shall set forth, for sales subject to royalty under this Agreement, the
Net Sales of CyA Assays, the quantity of units of CyA Assays sold and the
royalty due thereon.
5.9 All amounts payable to Sandoz under this Agreement shall be made in
Swiss Francs, and shall be calculated in the currency of the sale and then
converted into Swiss Francs using the applicable exchange rate published in the
United States in "The Wall Street Journal" under the caption "Money Rates" (or
in the event "The Wall Street Journal" does not report the local currency, then
another reliable source which is mutually agreeable to Licensee and Sandoz)
using an average quarterly exchange rate determined as the average of the
exchange rates set forth in the first and last issue of The Wall Street Journal
published during (or average of the first and last business days of) the
applicable reporting calendar [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION].
5.10 The obligation to pay royalties to Sandoz under this Agreement is
imposed only once with respect to the same unit of CyA Assay regardless of the
number of claims of Sandoz Patent Rights or the amount of Sandoz Know-How
embodies in such CyA Assay.
5.11 [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
5.12 Licensee shall be entitled to deduct from royalty payments to
Sandoz hereunder the amount of any [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] which Licensee, its Affiliates or sublicensees
are required by applicable law to withhold from such royalty payments, to the
extent that Licensee, its Affiliates or sublicensees pay to the appropriate
governmental authority on behalf of Sandoz such [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION]. Licensee shall use reasonable efforts
to minimize any [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] required to be withheld on behalf of Sandoz by Licensee, its
Affiliates or sublicensees. Licensee shall promptly deliver to Sandoz proof of
payment of all [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION], together with copies of all communications from or with such
governmental authority with respect thereto.
-8-
<PAGE> 9
6. VERIFICATION.
6.1 For a period of [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] from the date when each royalty statement is due
hereunder, Licensee agrees to keep records in sufficient detail and to allow an
independent certified public accounting firm of internationally recognized
standing appointed by Sandoz, and reasonably acceptable to Licensee, to examine
its books and records, at Sandoz' sole expense, upon reasonable notice during
business hours but not more than [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION], in order to verify the payments due under this
Agreement; provided, however, that such certified public accounting firm shall
not disclose any information to Sandoz except that information which should
properly have been contained in such royalty statement.
7. GOVERNMENT APPROVALS.
7.1 Licensee shall be solely responsible, at its expense, for all
required filings and all other proper action required to obtain all necessary
approvals to develop, promote, market and sell CyA Assays.
8. CONFIDENTIAL INFORMATION.
8.1 Any information which shall have been communicated in confidence
under this Agreement, whether in writing or orally and subsequently confirmed in
writing or in other tangible form, designated by the disclosing party to be
confidential (the "Confidential Information") shall be governed by the
provisions of this Article:
(a) Recipient shall not use the Confidential Information disclosed to
it for its own benefit except for the purpose of performing its obligations
under this Agreement.
(b) Recipient shall not disclose the Confidential Information disclosed
to it to any third party or to use such Confidential Information of the benefit
of any third party without the express written permission of the disclosing
party, except that the recipient shall not be prevented from using or disclosing
information disclosed to it hereunder:
(i) which recipient can demonstrate by written records was
known to the recipient prior to the date of disclosure by the
disclosing party, provided such information was not obtained by the
recipient through disclosure by a third party receiving such
information in confidence from the disclosing party;
(ii) which is now public knowledge, or becomes public
knowledge in the future other than by breach of this Agreement by the
recipient;
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<PAGE> 10
(iii) which is independently developed by or for the recipient
without benefit of Confidential Information received from the
disclosing party;
(iv) which is disclosed to recipient, after the date of
disclosure by the disclosing party, by a third party having a right to
make such disclosure; or
(v) which is included in any filing or action taken by
Licensee to obtain governmental approval to develop, promote, market
and sell CyA Assays, provided, however, that when permitted by the
provisions of local law, Licensee will take reasonable steps to protect
the confidentiality of Confidential Information submitted to
governmental agencies or authorities pursuant to Section 7 hereof.
Each party shall use the same degree of care it uses to protect its own
confidential and proprietary technical information to prevent the unauthorized
disclosure to any third party of the Confidential Information.
(c) Each party agrees that the Confidential Information disclosed to it
will only be disclosed to such employees, officers, directors or consultants of
the recipient who reasonably require such disclosure for purposes of performing
the recipient's obligations under this Agreement. Such party shall cause each
such person to agree to keep confidential and not use the Confidential
Information disclosed to it to the same extent as such party is so obligated
under this Section 8.
Each party may disclose Confidential Information of the other party to
the extent that such disclosure is required by applicable law, regulation or
court order, provided that such party shall provide written notice to the other
party and sufficient opportunity to object to such disclosure or to request
confidential treatment thereof.
(d) Upon termination of this Agreement, each party shall return to the
other or destroy any tangible physical copies of any Confidential Information
provided to it hereunder and any notes taken or copies made by employees,
officers, directors or consultants of such party regarding Confidential
Information disclosed to it, provided, however, that each party may retain one
(1) copy of Confidential Information disclosed to it in its confidential legal
files for use solely by such party's counsel.
(e) The confidentiality obligations under the terms of this Agreement
shall remain in effect with respect to each portion of the Confidential
Information for a period of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] after expiry of this Agreement but at least [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] from the Effective
Date of this Agreement.
-10-
<PAGE> 11
8.2 Materials provided to or produced by Licensee under this Agreement,
including [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION], shall be used only for the purposes contemplated by this Agreement
and no other purposes. Upon termination of this Agreement, all such materials in
Licensee's possession shall be returned to Sandoz.
9. PATENTS.
9.1 Sandoz warrants that at the time of execution of this Agreement it
knows of no third party patent rights which would impinge upon Licensee's
freedom to manufacture, use or sell CyA Assays in any country.
Should the existence of such third party patent rights become known to
either party subsequent to the execution of this Agreement, the parties shall
work together to ensure the continued exercise of the provisions of this
Agreement.
Should Licensee be required or if it is determined by mutual agreement
not to be withheld unreasonably that it needs to acquire a license under such
third party patent rights, Licensee shall be permitted to offset the cost of
such rights against royalties payable to Sandoz, such offset, however, shall not
exceed [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
of the royalties due and payable to Sandoz in any calendar [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
10. TERM AND TERMINATION.
10.1 Unless earlier terminated in accordance with the terms hereof,
this Agreement shall remain in force until the later of the following dates: (i)
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]; or
(ii) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
Upon termination of this Agreement pursuant to this Section 10.1, Licensee shall
have a fully-paid, worldwide, Non-exclusive License under the Sandoz Know-how to
make, have made, use and sell CyA Assays worldwide.
The parties will meet approximately [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] before the latest such date to determine
whether and how Sandoz' supply to Licensee of [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] under Section 4.2 hereof may be
continued.
10.2 Licensee may terminate this Agreement at any time upon one year's
previous written notice.
10.3 If, at any time, Sandoz discovers that the performance of the CyA
Assay (or Product or Kit) of Licensee is no longer within the performance
criteria set out in Section 2.1 above, Sandoz shall notify Licensee accordingly.
Licensee shall
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<PAGE> 12
have [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
to rectify this deficiency, or if such deficiency is one which requires more
than [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
to remedy, Licensee shall commence promptly and thereafter diligently pursue to
remedy such deficiency, failing which Sandoz shall have the right to terminate
the Agreement at any time upon the end of any calendar-quarter by written
notice.
10.4 Either party shall have the right to terminate this Agreement and
the license hereunder forthwith by notice in writing to the other party if the
other party fails to perform or observe any of the material terms hereof on its
part to be performed and observed, and fails to remedy such breach within
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of a
notice to remedy the same (such notice giving adequate particulars of the
alleged default and of the intention of the party serving the notice to
terminate this Agreement under this Section), or, if the breach is one which
requires more than [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] to remedy, the remedying was not commenced promptly and thereafter
diligently pursued.
10.5 Any termination of this Agreement prior to the expiration of term
pursuant to Paragraph 10.1: (a) shall automatically cancel the license granted
to Licensee hereunder; (b) shall be without prejudice to the rights of either
party against the other party which may have accrued up to the date of such
termination (including Sandoz' right to be paid any amounts due and payable
hereunder); and (c) shall be without prejudice to the rights of Licensee to
dispose of quantities of CyA Assays in its possession, subject to the payment of
any amounts due thereon to Sandoz as provided herein.
11. GOVERNING LAW AND JURISDICTION.
11.1 This Agreement shall be governed by, interpreted and enforced in
accordance with the substantive laws of Switzerland.
11.2 All disputes arising out of this Agreement shall be finally
decided under the Rules of Conciliation and Arbitration of the International
Chamber of Commerce in Paris. The arbitration shall take place in Basle,
Switzerland if brought by Licensee or in San Diego, USA if brought by Sandoz.
12. NOTICES.
12.1 Any notice required or permitted to be given hereunder shall be in
writing and shall be deemed sufficient if sent by registered or certified mail,
telefax or air express or delivered by hand to the respective party at the
address stated below:
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<PAGE> 13
If to Sandoz: Sandoz Pharma Ltd.
P.O. Box
CH-4002 Basel, Switzerland
Attention: Legal Department
Fax: +41 61 324-7399
If to Licensee: Biosite Diagnostics, Incorporated
11030 Roselle Street
San Diego, CA 92121
Attention: President
Fax: +1 619 597-4090
Any such notice mailed by registered or certified mail, telefax or air
express shall be deemed to have been given when mailed, as evidenced by the date
on the receipt retained by the sender. Either party may change the address to
which notice to it is to be given by notice as provided herein.
13. ASSIGNABILITY.
13.1 This Agreement shall not be assignable [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]. All reference to a party in
this Agreement shall, to the extent reasonably necessary to carry out the
purpose of this Section 14 be considered references to each permitted transferee
or assignee of such party.
13.2 This Agreement shall be binding upon and inure to the benefit of
the successor or permitted assigns of Licensee and Sandoz, respectively.
14. EXCUSED NON-PERFORMANCE.
14.1 Each of the parties hereto shall be excused from the performance
of its obligations hereunder in the event such performance is prevented by a
cause beyond the reasonable control of such party, including, without
limitation, any act, regulation or law of any government, war, civil commotion,
destruction of production facilities or materials by fire, earthquake or storm
and failure of public utilities.
15. SEVERABILITY.
15.1 Should any part of this Agreement be held unenforceable or in
conflict with the applicable laws or regulations of any applicable jurisdiction,
the invalid or unenforceable part or provision shall be replaced with a
provision which accomplishes, to the extent possible, the original business
purpose of the invalid or unenforceable part or provision in a valid and
enforceable manner, and the remainder of this Agreement shall remain binding
upon the parties hereto.
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<PAGE> 14
16. PUBLICITY AND PROMOTIONAL ACTIVITIES.
16.1 Neither Sandoz nor Licensee will issue any news releases or make
any public statements regarding this Agreement without the prior written
consultation at least 14 days in advance of the other party, giving such other
party reasonable opportunity of prior comment.
16.2 Licensee is entitled to use in its promotion a mention of "In
cooperation with Sandoz Pharma LTD., the producer of Sandimmun(R) [or
Sandimmune(R); or if referring to Sandoz's microemulsion preconcentrate
formulation of cyclosporine, then Sandimmun(e) Neoral(R), Neoral(R), or
Optoral(R)] (Cyclosporine)" after having submitted the relevant promotion
material to Sandoz for approval and not having received Sandoz's objection
within one month after such submission.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first written
above.
SANDOZ PHARMA LTD. BIOSITE DIAGNOSTICS,
INCORPORATED
By /s/ D. Vasella By /s/ Kim D. Blickenstaff
-------------------------------- ------------------------------
/s/ C.S. Morris Names: Kim D. Blickenstaff
-------------------------------- ---------------------------
Title: President & CEO
Names: D. Vasella
-----------------------------
C.S. Morris
-----------------------------
Title: CEO V.P.
-----------------------------
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<PAGE> 15
Schedule A
Listing of SANDOZ Patent Rights
As of 15 September 1995, SANDOZ has been granted the following patents covering
monoclonal antibodies to Cyclosporin A.
==========================================================================
Country Patent Numbers* Expiry date**
- --------------------------------------------------------------------------
Australia 589917 27/09/01
- --------------------------------------------------------------------------
Austria 0198026, 0290762 27/09/05
- --------------------------------------------------------------------------
Belgium 0198026, 0290762 27/09/05
- --------------------------------------------------------------------------
Canada 1309671 03/11/09
- --------------------------------------------------------------------------
Denmark 2613/86*** 27/09/05
- --------------------------------------------------------------------------
England 0198026, 0290762 27/09/05
- --------------------------------------------------------------------------
Finland 93965 27/09/05
- --------------------------------------------------------------------------
France 0198026, 0290762 27/09/05
- --------------------------------------------------------------------------
Germany P3587505.4, 27/09/05
P3587342.6
- --------------------------------------------------------------------------
Holland 0198026, 0290762 27/09/05
- --------------------------------------------------------------------------
Italy 0198026, 0290762 27/09/05
- --------------------------------------------------------------------------
Luxembourg 0198026, 0290762 27/09/05
- --------------------------------------------------------------------------
New Zealand 213680 02/10/01
- --------------------------------------------------------------------------
Norway 173557 27/09/05
- --------------------------------------------------------------------------
Japan 504679/85**** 27/09/05
- --------------------------------------------------------------------------
South Africa 85/7684 04/10/05
- --------------------------------------------------------------------------
South Korea 045374 27/09/00
- --------------------------------------------------------------------------
Spain 547495-7 19/11/06
- --------------------------------------------------------------------------
Sweden 0198026, 0290762 27/09/05
- --------------------------------------------------------------------------
Switzerland 0198026, 0290762 27/09/05
- --------------------------------------------------------------------------
United States 5169773 08/12/09
==========================================================================
* Where more than one patent number appears for a country, this reflects
divisional applications.
** The expiry date is calculated without considering the possibility of
patent term extension, which may be available in some cases.
*** Danish application pending; not yet granted.
**** Japanese application granted, but grant number not yet available.
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<PAGE> 16
[LETTERHEAD OF SANDOZ]
CORPORATE DEVELOPMENT
PROJECT MANAGEMENT
A. ROBERTS
TEL: 364-6872
TELEFAX: 324-9145
Dr. Ken Buechler
BIOSITE DIAGNOSTICS
11030 Roselle Street
SAN DIEGO, CA 92121
U.S.A.
Basle, July 26, 1996
Dear Ken,
Following discussion with yourself, I would like to acknowledge the need to
extend the Feasibility Period (detailed in sect. 2.3. of the Sandoz/Biosite
Antibody Agreement) due mainly to the additional requests made by Sandoz in late
1996, and confirm the new mutually agreeable expiry date of [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] (extended from
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]).
Best wishes
/s/ Andrew
Andrew Roberts, Ph.D.
International Project Manager for Neoral
cc: Messrs. B. Glass, T. Hoxie, S. Strub
<PAGE> 17
[LETTERHEAD OF SANDOZ]
CORPORATE DEVELOPMENT
PROJECT MANAGEMENT
A. ROBERTS
TEL: +41 61 324-6872
TELEFAX: +41 61 324-9145
Dr. Ken Buechler
BIOSITE DIAGNOSTICS
11030 Roselle Street
SAN DIEGO, CA 92121
U.S.A.
Basle, December 3, 1996
RE: BIOSITE PROJECT - EXTENSION TO FEASIBILITY PERIOD
Dear Ken,
Thank you for your fax messages of November 27 and December 2, 1996.
Following discussion with yourself, I would like to acknowledge the need to
further extend the Feasibility Period (detailed in sect. 2.3, of the
Sandoz/Biosite Antibody Agreement) and confirm the new mutually agreeable expiry
date of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] (extended from [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]).
Best wishes
/s/ Andrew Roberts
Andrew Roberts, Ph.D.
cc: Messrs. G. Feutren, F. Legay, S. Strub
<PAGE> 1
EXHIBIT 10.9
[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.]
EASY ASSAY LICENSE AGREEMENT
THIS AGREEMENT, dated September 22, 1995, is entered into by and
between SANDOZ PHARMA LTD., a Swiss Corporation with offices at Lichtstrasse 35,
CH-4002 Basle/Switzerland ("SANDOZ") and BIOSITE DIAGNOSTICS INCORPORATED, a
Delaware corporation with offices at 11030 Roselle Street, San Diego, CA
921211/USA ("LICENSEE").
W I T N E S S E T H:
WHEREAS, SANDOZ and LICENSEE have entered into an ANTIBODY LICENSE
AGREEMENT of even date herewith, pertaining to diagnostic assays utilizing
monoclonal antibodies for measuring levels of the immunosuppressant cyclosporine
in blood and plasma;
WHEREAS, SANDOZ has developed an improved monoclonal antibody based
assay for measuring cyclosporine levels in blood and plasma, which improved
assay further comprises compound capable of [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION], for which improved assay SANDOZ owns
patents, patent applications, technical information, data, and know-how, and
which improved assay, because it can be conducted in a short period of time
without the need for laboratory equipment or special skills, is particularly
well suited for use in connection with small portable fluorometers;
WHEREAS, LICENSEE has particular expertise in the development and
marketing of assays for use in connection with small portable fluorometers;
WHEREAS, SANDOZ and LICENSEE desire that LICENSEE should develop and
market a hand-held, rapid monoclonal antibody-based cyclosporine assay utilizing
SANDOZ's improved assay technology and capable of being read by LICENSEE's
portable fluorometer, [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION];
IT IS NOW, THEREFORE, for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, agreed as follows:
1. PROVISIONS INCORPORATED FROM ANTIBODY LICENSE
AGREEMENT.
The provisions of Articles 1 (Definitions), 6 (Verification), 7
(Government Approvals), 8 (Confidential Information), 9 (Patents), 11 (Governing
Law and Jurisdiction), 12 (Notices), 14 (Excused Non-Performance), 15
(Severability), and
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<PAGE> 2
16 (Publicity and Promotional Activities) of the ANTIBODY LICENSE AGREEMENT
between the parties of even date herewith, and such other provisions of the
ANTIBODY LICENSE AGREEMENT as are specifically referenced below shall also be
applicable to this Agreement, mutatis mutandis, and are incorporated herein by
reference. A copy of the ANTIBODY LICENSE AGREEMENT is attached hereto and made
a part of this Agreement.
2. ADDITIONAL DEFINITIONS.
In addition to the definitions in the ANTIBODY LICENSE AGREEMENT, the
following definitions will apply to this Agreement:
2.1 [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
2.2 "CyA EASY Assays" shall refer [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION]
2.3 "SANDOZ EASY Know-How" shall mean all biological, chemical, and
immunological materials, methods and other technical information, presently or
hereafter during the term of this Agreement in the possession or control of
SANDOZ which relate to [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] or to CyA EASY Assays, and which is conveyed to LICENSEE in
writing, orally or through other tangible materials.
2.4 "SANDOZ EASY Patent Rights" shall mean all patent applications
worldwide and patents granted thereon, and all extensions and supplemental
protection certificates based on such patents, now or hereafter during the term
of this Agreement owned or controlled by SANDOZ, which incorporate one or more
claims covering [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] or CyA EASY Assays which has not been declared to be invalid or
unenforceable by the final judgment of a court of competent jurisdiction from
which no appeal can be or has been taken; a listing of such subsisting SANDOZ
EASY Patent Rights being provided in the attached SCHEDULE B, which will be
updated from time to time as appropriate.
2.5 "EASY Patent Countries" shall mean countries in which SANDOZ EASY
Patent Rights subsist.
2.6 "Net EASY Sales" shall mean the gross sales of CyA EASY Assays by
LICENSEE, its Affiliates and its sublicensees (if any) billed to customers, less
the amount actually allowed to customers for (1) adjustments granted to
customers, including without limitation credits and allowances or on account of
the rejection or return of CyA EASY Assays previously sold, (2) trade and cash
discounts, rebates and distributor fees, (3) transportation, insurance and
handling charges and (4) sales, excise, turnover and similar taxes and any
duties and
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<PAGE> 3
other governmental charges imposed upon the production, importation, use or sale
of CyA EASY Assays. Where the price of a CyA EASY Assay includes the price of
the device reader or the price of an assay for a compound other than CyA, Net
EASY Sales shall be determined by a formula (to be agreed upon by the parties
before sales at such price are made) calculated to exclude that portion of sales
of CyA EASY Assays reasonably attributable to such prices of the device reader
and/or the assay for a compound other than CyA.
2.7 "SANDOZ Trademarks" shall mean the trademarks listed on the
attached SCHEDULE C.
3. FEASIBILITY.
3.1 To demonstrate feasibility, a CyA EASY Assay developed by LICENSEE
(i) must meet the feasibility criteria for a CyA Assay as set forth in section 2
of the ANTIBODY LICENSE AGREEMENT, the provisions of which shall apply, mutatis
mutandis, to this Agreement; [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION].
3.2 In addition to providing [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] as provided in section 2 of the ANTIBODY LICENSE
AGREEMENT, SANDOZ will also provide [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION].
4. LICENSES.
4.1 Upon proof of feasibility of the CyA EASY Assay pursuant to Article
3.1 of this Agreement and receipt of the notification referred to in Article 2.4
of the Antibody Assay Agreement, SANDOZ undertakes to grant to LICENSEE a
License under SANDOZ EASY Patent Rights and SANDOZ EASY Know-How to make, have
made, use and sell CyA EASY Assays worldwide. For CyA EASY Assays intended to be
read by [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] License shall be exclusive. For CyA EASY Assays intended to be read
by [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] (in
particular by [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION], this License shall be non-exclusive.
4.2 Simultaneously with the grant of the License under Article 4.1 of
this Agreement, SANDOZ further undertakes to grant LICENSEE a Non-exclusive
License [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].
4.3 All CyA EASY Assays sold by LICENSEE pursuant to this Agreement
shall be marked [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION], as provided in Article 11 of this Agreement.
-3-
<PAGE> 4
4.4 Sublicense of any License granted under this Agreement other than
to Affiliates of LICENSEE shall require the express written consent of SANDOZ.
In the event of any sublicense, LICENSEE shall undertake to ensure that the
performance of such sublicensee complies with all terms and conditions of this
Agreement to the same extent as if performed by LICENSEE directly.
5. SUPPLIES OF [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION].
5.1 In order to ensure the good and consistent quality of the CyA EASY
Assays, SANDOZ shall supply LICENSEE and LICENSEE shall purchase from SANDOZ all
requirements of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] reasonably and justifiably needed for the purpose of development and
production of CyA EASY Assays following proof of feasibility, in accordance with
the provisions of this Article 5.
SANDOZ, however, may terminate [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION].
5.2 At the latest three months before the beginning of any calendar
quarter LICENSEE shall place a firm order with SANDOZ in writing for the first
quarter and indicate to SANDOZ its estimated requirement for each of the
following three quarters and the subsequent 12 months. SANDOZ has no commitment
to supply any quantities of LICENSEE's requirements exceeding by [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] the last estimate
given for such quarter. In the event that SANDOZ is unwilling or unable to
supply any quantities of LICENSEE's requirements exceeding by [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] the last estimate
given for such quarter, then LICENSEE shall have the right to purchase the
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
elsewhere or to prepare this compound internally.
Freight, duty and associated taxes shall be paid by [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] with each element
shown separately in invoices. Title shall pass to LICENSEE upon transfer to the
carrier by SANDOZ for final shipment to LICENSEE. Delivery shall be made to
LICENSEE within [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] working days of the date of LICENSEE's order therefor.
5.3 The supply price for [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] shall be [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] per gram FCA Basel (1992-SFr). In the
event that the contribution of the cost [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] at this supply price to the total
production cost of the CyA EASY Assay exceeds [CONFIDENTIAL
-4-
<PAGE> 5
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION], this supply price
may be renegotiated. LICENSEE may purchase less than one gram of such materials
at pro rata cost.
6. FEES AND ROYALTIES.
6.1 In addition to the fees payable under the ANTIBODY LICENSE
AGREEMENT, LICENSEE shall pay to SANDOZ a [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] payment of [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] as follows: (a) upon execution of this
Agreement, LICENSEE shall pay to SANDOZ the amount of [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]; and (b) upon the date of
first commercial sale of the CyA EASY Assays, LICENSEE shall pay SANDOZ the
amount of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]. Of this payment, [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION].
6.2 In addition to the royalties payable under the ANTIBODY LICENSE
AGREEMENT, LICENSEE shall pay to SANDOZ the following royalties:
a. For sales in each EASY Patent Country, LICENSEE shall pay a royalty
of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of
Net EASY Sales in such county for such time as one or more of SANDOZ EASY Patent
Rights covers the sale by LICENSEE of CyA EASY Assays in such country, following
which the royalty shall be reduced to [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of Net EASY Sales.
b. For sales in all other countries, LICENSEE shall pay a royalty of
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] on all
Net EASY Sales.
c. With respect to sale of CyA EASY Assays in any EASY Patent Country,
the obligation of LICENSEE to pay royalties as provided above shall be reduced
by [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] in
the event and for the period that an unlicensed third party or parties sell any
quantity of CyA EASY Assays in excess of [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] of the total market in such EASY Patent
Country for CyA EASY Assays, said market share percentage to be determined by an
independent market survey organization mutually agreed to by SANDOZ and
LICENSEE.
6.3 Articles 5.4 through 5.12 of the ANTIBODY LICENSE AGREEMENT,
concerning calculation and payment of royalties for CyA Assays shall apply,
mutatis mutandis, to calculation and payment of royalties for CyA EASY Assays.
-5-
<PAGE> 6
6.4 [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
7. QUALITY CONTROL.
7.1 As soon as reasonably practicable after completion of the
feasibility study under Article 3 of this Agreement, LICENSEE shall establish
and submit to SANDOZ for approval, which shall not be unreasonably withheld or
delayed, initial quality control standards, which shall include objective
standards for assay sensitivity, specificity, range, stability and failure
profile of readers. LICENSEE shall manufacture, or cause to be manufactured, the
CyA EASY Assays according to such standards.
LICENSEE shall comply with all applicable Good Manufacturing Practices
and with all standards and requirements of regulatory authorities in the
countries in which LICENSEE sells or supplies CyA EASY Assays.
These quality control standards will apply regardless of whether
failure to meet such standards is due to a defect in the CyA EASY Assay itself
or a defect in the fluorometer supplied by the LICENSEE. LICENSEE shall monitor
quality to ensure that these standards are maintained. LICENSEE shall provide
SANDOZ with periodic certificates to ensure that these quality control standards
are maintained, and upon [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] advance notice, SANDOZ (or such independent consultants as
SANDOZ may designate) shall have the right at its sole expense to visit
LICENSEE's facilities to inspect the manufacturing, packaging, and storage of
the CyA EASY Assays by LICENSEE.
7.2 LICENSEE shall develop and submit to SANDOZ for approval, which
approval shall not be unreasonably withheld or delayed, supply standards which
shall set forth inventory control procedures, targets for delivery times and
procedures for informing sales personnel of supply constraints, and LICENSEE
shall use commercially reasonable efforts to ensure that CyA EASY Assays, or
fluorometers for reading such CyA EASY Assays, sold or supplied by LICENSEE in
any country shall be delivered to the customer within a reasonable time and not
later than the time promised to the customer. LICENSEE shall monitor orders,
supplies, and the time required to fill orders and shall ensure that sales
representatives are aware of supply constraints.
7.3 LICENSEE shall promptly advise SANDOZ of serious problems or
alleged problems with supply and/or quality of the CyA EASY Assays, e.g., as
reflected by customer complaints, letters from regulatory authorities, lawsuits,
regulatory actions, internal reports and data, and any other information
alleging, suggesting, stating or evidencing serious problems exist with the
quality or reliable supply of the CyA EASY
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<PAGE> 7
Assays. LICENSEE shall take immediate steps to investigate and use commercially
reasonable efforts to resolve such problems.
8. COMMERCIALLY REASONABLE EFFORTS.
8.1 LICENSEE shall use commercially reasonable efforts to develop and
obtain FDA approval to manufacture and sell a CyA EASY Assay which meets the
feasibility requirements of Article 3 of this Agreement, and shall thereafter
diligently develop, manufacture, market and sell such CyA EASY Assays in
accordance with this Agreement for the duration of this Agreement.
9. PRODUCTS LIABILITY.
9.1 LICENSEE shall indemnify and hold harmless SANDOZ and its
Affiliates and their respective directors, officers, employees and consultants
from all losses, liabilities, damages and expenses (including reasonable
attorneys' fees and costs) that they may suffer as a result of any claims,
demands, actions or other proceedings made or instituted by any third party
against any of them and which arise or result from defects or alleged defects in
any CyA EASY Assays or fluorometers manufactured, distributed or sold pursuant
to this Agreement, except for claims made or suits brought which arise or result
from defects in [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] supplied by SANDOZ or its Affiliates which materials have been
handled, used and stored by LICENSEE (or those under LICENSEE's direction or
control) in accordance with SANDOZ's instructions.
9.2 SANDOZ shall indemnify and hold harmless LICENSEE and its
respective directors, officers, employees and consultants from all losses,
liabilities, damages and expenses (including reasonable attorneys' fees and
costs) that they may suffer as a result of any claims, demands, actions or other
proceedings made or instituted by any third party against any of them and which
arise or result from defects or alleged defects in [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] supplied by SANDOZ or its
Affiliates, which materials have been handled, used and stored by LICENSEE (or
those under LICENSEE's direction or control) in accordance with SANDOZ's
instructions.
9.3 The indemnity obligations under this Article 9 shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or action if
such settlement is effected without the consent of the indemnitor, which consent
shall not be withheld unreasonably. The indemnitor may not settle the action or
otherwise consent to an adverse judgment in such action that diminishes the
rights or interests of the indemnitee without the express written consent of the
indemnitee. The indemnitee, its employees and agents, shall cooperate fully with
the indemnitor and its legal representatives in the investigation of any action,
claim or liability covered by this indemnification.
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<PAGE> 8
9.4 Both parties shall undertake to ensure that they maintain
reasonably adequate insurance or liquid reserves to cover potential claims under
this Article 9.
10. EASY ASSAY DEVELOPMENT AND MANUFACTURE.
10.1 LICENSEE shall conduct the research, development and
commercialization of the CyA EASY Assays, of the fluorometers necessary to read
such assays, and of such operating software (including EPROMs and the like) as
may be required to operate the fluorometers.
10.2 LICENSEE, in consultation with SANDOZ, will endeavor to develop
operating software that will calculate patient exposure to CyA following
administration of a microemulsion preconcentrate formulation of CyA, based on
the level of CyA in the test sample, the dosage of CyA received by the patient,
and the time of administration.
11. MARKETING, SALES, DISTRIBUTION, AND USE OF TRADEMARKS.
11.1 The parties will each nominate three members to a Steering
Committee, which will meet periodically to discuss any issues which might arise
concerning the accuracy, ease of use, reliability, manufacturing and
distribution capacity, and other issues relating to the performance and
availability of the assays. Each party will appoint one Steering Committee
member to be the primary contact person.
11.2 The exact manner and style of marking and labeling the CyA EASY
Assays produced or sold by LICENSEE will be discussed and agreed between the
parties; however:
i. all CyA EASY Assays sold pursuant to this Agreement, and at the
option of SANDOZ, such of LICENSEE's fluorometers as would only be suitable for
use in connection with such CyA EASY Assays, [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION];
ii. no SANDOZ trademark shall be used in combination with another
trademark in a manner which may suggest that it is owned by LICENSEE or another
party, and with each public use of a SANDOZ Trademark, whether on a label,
promotional item, package, or other presentation to the public, LICENSEE shall
expressly acknowledge SANDOZ's ownership of the SANDOZ Trademark, e.g., with a
legend stating "[SANDOZ Trademark] is a registered trademark of SANDOZ LTD" or
words to that effect;
iii. registration and maintenance of the SANDOZ Trademarks shall be the
responsibility of SANDOZ; [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION];
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<PAGE> 9
iv. each party shall have the right to require that its company name
and trademarks appear on the labeling or packaging for the CyA EASY Assays; and
v. each party shall use commercially reasonable efforts to ensure that
the labeling and packaging of the CyA EASY Assays complies with all applicable
laws and regulations.
11.3 Any and all labels, logos, promotional materials, packaging or
other presentation to the public which contains or depicts a SANDOZ Trademark
must be approved by SANDOZ before use or distribution. All public statements by
LICENSEE concerning the properties, activities, bioavailability or other
characteristics of any cyclosporine formulations, including statements in
promotional materials, package inserts, articles, or other public disclosures,
must be approved in advance by SANDOZ.
11.4 In all countries where the CyA EASY Assays are sold by LICENSEE,
including the United States, SANDOZ shall have the option to co-promote
LICENSEE's CyA EASY Assays. In the event of co-promotion, each party agrees to
use its commercially reasonable efforts for the cooperative and coordinated
marketing, sale, and distribution of CyA EASY Assays. Coordinated marketing
efforts may include the following activities, which will be reviewed and agreed
to by a joint marketing team:
a. Co-promotion of test kits to the transplant community via trade
shows, trade communications, advertising, etc.;
b. Joint sales presentations by LICENSEE's sales representatives and
SANDOZ sales representatives to transplant professionals in an effort to provide
complete, accurate, and consistent information regarding CyA EASY Assays,
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION];
c. [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].
In the event of co-promotion, both parties agree to use their
commercially reasonable efforts to co-promote CyA EASY Assays of LICENSEE
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]. Sales
of LICENSEE's CyA EASY Assays as a result of co-promotion under this Article
11.4 shall be made by LICENSEE, and no compensation would be due to SANDOZ with
respect to such sales other than as provided under Article 6 hereof. Should the
parties decide that it would be appropriate for SANDOZ to sell directly in some
cases, however, such sales would be governed by Article 11.6 hereof.
11.5 [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]. All sales and distribution shall be by LICENSEE or its Affiliate(s)
unless otherwise agreed, except as provided in Article 11.4 hereof. SANDOZ
reserves the right to approve all distribution via third parties in the
[CONFIDENTIAL
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<PAGE> 10
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION], provided that
SANDOZ must raise any objections to any proposal by LICENSEE for distribution by
third parties within sixty (60) days of receipt of such proposal in writing from
LICENSEE. In the event of any distribution by third parties, LICENSEE shall
undertake to ensure that such distribution complies with all terms and
conditions of this Agreement to the same extent as if performed by LICENSEE
directly.
11.6 In some countries, SANDOZ and LICENSEE may enter into arrangements
wherein SANDOZ sales representatives in a particular country would undertake to
sell CyA EASY Assays manufactured by LICENSEE. In such a case, it is foreseen
that such sales by SANDOZ sales representatives would be booked by LICENSEE and
SANDOZ would receive a commission in the amount of [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] (or such other amount as may
be agreed on by the parties) on Net EASY Sales of LICENSEE's CyA EASY Assays
attributable to SANDOZ sales representatives in such countries. Any royalties
due to SANDOZ on such sales pursuant to this Agreement and/or the ANTIBODY
LICENSE AGREEMENT would be creditable against such commissions.
12. TERM AND TERMINATION.
12.1 [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
12.2 LICENSEE shall have the right to terminate this Agreement
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
12.3 If the ANTIBODY LICENSE AGREEMENT is terminated before the later
of the following dates (i) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]; or (ii) [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION].
12.4 Either party shall have the right to terminate this Agreement and
the licenses granted hereunder forthwith by notice in writing to the other party
if the other party fails to perform or observe any of the material terms hereof
on its part to be performed and observed, and fails to remedy such breach within
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of a
notice to remedy the same (such notice giving adequate particulars of the
alleged default and of the intention of the party serving the notice to
terminate this Agreement under this Article) or, if the breach is one which
requires more than [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] to remedy, the remedying was not commenced promptly and thereafter
diligently pursued.
12.5 SANDOZ shall have the right to terminate the Non-exclusive License
to use the SANDOZ Trademarks granted under
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<PAGE> 11
Article 4.2 of this Agreement forthwith in the event that another entity
acquires direct or indirect beneficial ownership of at least [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the voting
interest in, or a greater than [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] interest in the equity of LICENSEE, or that
LICENSEE is merged with another company, transfers substantially all of its
assets to another company, declares bankruptcy, or is adjudged insolvent. In the
event that SANDOZ exercises this right, the License granted under Article 4.1 of
this Agreement will become non-exclusive, and the royalties falling due under
this Agreement from and after such time as SANDOZ exercises this right will be
reduced by [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] and will be payable in each country only until the later of the
following dates: [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].
12.6 Upon the later of the following dates: [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]. In the event that LICENSEE
exercises this right, the License granted under Article 4.1 of this Agreement
will become non-exclusive, and LICENSEE shall have a paid up license to make,
have made, use and sell CyA EASY assays, but shall have a right to use the
SANDOZ Trademarks.
12.7 In the event that LICENSEE discovers that quality control or
supply standards under Article 7 of this Agreement have not been met, LICENSEE
(i) shall notify SANDOZ immediately and (ii) shall have [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] from such discovery to cure
such deficiencies, or if any such deficiency is one which requires more than
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] to
cure, LICENSEE shall commence promptly and thereafter diligently pursue cure of
such deficiency, failing which cure, SANDOZ shall have the right to terminate
this Agreement forthwith.
12.8 Any termination of this Agreement (a) shall automatically cancel
the licenses granted to LICENSEE hereunder; (b) shall be without prejudice to
the rights of either party against the other party which may have accrued up to
the date of such termination (including SANDOZ' right to be paid any amounts due
and payable hereunder); and (c) shall be without prejudice to the rights of
LICENSEE to dispose of quantities of CyA EASY Assays in its possession, subject
to the payment of any amounts due thereon to SANDOZ as provided herein.
12.9 In the event of any termination of this Agreement other than as a
result of mutual agreement of the parties or breach by SANDOZ of this Agreement,
the ANTIBODY LICENSE AGREEMENT, or the Debenture Purchase Agreement, LICENSEE
shall [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
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<PAGE> 12
13. ENTIRE AGREEMENT.
13.1 This Agreement, the ANTIBODY LICENSE AGREEMENT and the Debenture
Purchase Agreement, all by and between SANDOZ and LICENSEE and all of even date,
constitute the entire understanding and agreement of the parties with respect to
the subject matter of such agreements and supersede all previous negotiations,
representations, and writings. No variation or modification of any of these
agreements or waiver of any terms or provisions thereof shall be valid unless in
writing and signed by the appropriate parties thereto. Breach of any of these
three agreements shall be considered a breach of all three agreements.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first written
above.
SANDOZ PHARMA LTD.
By /s/ D. Vasella
--------------------------
Name: D. Vasella
-----------------------
Title: CEO
-----------------------
By /s/ C.S. Morris
--------------------------
Name: C.S. Morris
-----------------------
Title: V.P.
-----------------------
BIOSITE DIAGNOSTICS, INCORPORATED
By /s/ Kim D. Blickenstaff
--------------------------
Name: Kim D. Blickenstaff
-----------------------
Title: President & CEO
-----------------------
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<PAGE> 13
Schedule B
Listing of SANDOZ EASY Patent Rights
As of 15 September 1995, SANDOZ has been granted the following patents covering
[CONFIDENTIAL MATERIALS REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].[CONFIDENTIAL MATERIALS REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] (entire table).
===============================================================================
Country Patent Numbers Expiry date*
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* The expiry date is calculated without considering the possibility of
patent term extension, which may be available in some cases.
** Application allowed; patent number not yet known.
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<PAGE> 14
*** Application pending; not yet granted.
SANDOZ additionally owns PCT application [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] which claims the EASY assay and related
assay systems for [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]. Patents resulting from this application will expire in
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] most
countries, not counting possible extensions.
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<PAGE> 15
SCHEDULE C
SANDOZ owns several trademarks relating to its [CONFIDENTIAL MATERIALS
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]:
[CONFIDENTIAL MATERIALS REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
[CONFIDENTIAL MATERIALS REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
[CONFIDENTIAL MATERIALS REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
[CONFIDENTIAL MATERIALS REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
[CONFIDENTIAL MATERIALS REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
[CONFIDENTIAL MATERIALS REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
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<PAGE> 1
EXHIBIT 10.10
[CONFIDENTIAL INFORMATION REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION]
DISTRIBUTION AGREEMENT
THIS AGREEMENT, made and entered into on this 11th day of
November 1991, by and between BIOSITE DIAGNOSTICS INCORPORATED, 11030 Roselle
Street, Suite D, San Diego, CA 92121, a corporation organized under the laws of
the State of Delaware (hereinafter referred to as "Supplier"), and CURTIN
MATHESON SCIENTIFIC, INC., 9999 Veterans Memorial Drive, Houston, Texas 77038, a
corporation organized under the laws of the State of Delaware (hereinafter
referred to as "CMS"),
W I T N E S S E T H:
Whereas Supplier desires to sell and market its Product (as
defined below), and CMS desires to purchase Supplier's Product for resale to
customers; and
Whereas the parties desire to enter into a distributorship
agreement governing the terms of their relationship:
N o w, T h e r e f o r e, in consideration of the respective
covenants of the parties herein set forth, the parties hereto agree as follows:
1. Products.
(a) The product covered by this Agreement is the TRIAGE(TM) 7
Panel for Abused Drugs manufactured by or for Supplier (the "Product"), which
includes tests for the following drugs: PCP (Phencyclidine); THC (Marijuana);
Cocaine; Amphetamines/methamphetamines; Opiates; Benzodiazepenes; and
Barbiturates.
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<PAGE> 2
(b) During the term of this Agreement, Supplier shall make
available to CMS any improved or updated versions of the Product under the same
terms and conditions (other than price) as set forth herein.
(c) Supplier intends to bring to market during the term of
this Agreement additional manual, visual, rapid diagnostic methods for drug of
abuse testing which are similar or related to the Product, including, but not
limited to, proposed tests for the following abused drugs: [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] (hereinafter
referred to as the "Related Products"). The Related Products may be separate
tests or combinations thereof. Supplier shall offer to CMS in writing the right
to distribute in the Territory (as hereinafter defined) for the remainder of the
term of this Agreement any Related Products developed by Supplier during the
term of this Agreement on terms and conditions (other than price, dollar figures
and quantities) substantially similar to those set forth herein, provided that
CMS has met the minimum sales requirements, if any, with respect to the Product
set forth in Section 6(c) hereof for the six-month period prior to Supplier's
announcement of any such Related Product (such minimums shall be calculated on a
pro rata basis if the six-month period prior to the availability of such Related
Product overlaps two six-month periods set forth in Section 6(c) hereof and
shall be adjusted downward on a unit per unit basis if CMS's minimum sales
requirements, if any, are reduced in accordance with Section 5(a) and/or 6(e)
hereof).
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<PAGE> 3
Supplier shall include the specific terms and conditions (including the proposed
price, dollar figures and quantities) with respect to the Related Products in
its written offer to CMS. CMS shall accept distribution rights with respect to
Related Products, if at all, in writing, within sixty (60) days of receipt of
Supplier's offer; during this sixty (60) day period, both parties shall act in
good faith to attempt to reach an agreement. In the event CMS elects not to
exercise such right within such period, Supplier may not grant exclusive
distribution rights for such Related Products to third parties on terms more
favorable, when considered in their entirety, than those made available by
Supplier to CMS. Nothing contained herein shall be construed as obligating
Supplier to bring to market any Related Products, during the term of this
Agreement or otherwise.
(d) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION]
(e) During the first twelve (12) months following the date of
first Product shipment, Supplier shall promptly credit against the purchase
price of future orders by CMS (or, in the event of termination of this Agreement
during such period, refund to CMS within thirty (30) days of the termination
date) the percentage of the purchase price set forth below of any Product Kit
(as hereinafter defined) purchased by CMS whose shelf life expires prior to sale
by CMS within the time period set forth below, calculated from the date of
completion of the Kit, which is the date the Kit's expiration date is stamped on
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<PAGE> 4
the outside of each completed Kit (the "Completion Date"), provided that CMS has
promptly returned such Product Kits to Supplier, freight prepaid:
Credit Due to CMS
Product Shelf Life from Supplier
------------------ -----------------
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
For purposes of the foregoing table, the product shelf life of a Kit shall be
deemed to be reduced one day for each day beyond 5 days from the Completion Date
that the Kit is first made ready for shipment by Supplier. Supplier shall give
CMS written notification of when Kits are available for shipment. Beginning in
month 13 following the date of first Product shipment Supplier shall promptly
credit against the purchase price of future orders by CMS (or, in the event of
termination of this Agreement during such period, refund to CMS within thirty
(30) days of the termination date), the percentage of the purchase price set
forth below of any Product Kits purchased by CMS whose shelf life expires prior
to sale by CMS within the time period set forth below, calculated from the
Completion Date of the Kit, provided that CMS has promptly returned such Product
Kits to Supplier, freight prepaid:
Credit Due to CMS
Product Shelf Life from Supplier
------------------ -----------------
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
For purposes of the foregoing table, the product shelf life of a Kit shall be
deemed to be reduced one day for each day beyond 5 days from the Completion Date
that the Kit is first made ready
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<PAGE> 5
for shipment by Supplier. Supplier shall give CMS written notification of when
Kits are available for shipment. Supplier shall keep accurate records of the
Completion Dates of Kits by lot number and expiration date, and shall provide
such information to CMS upon written request.
(f) Supplier's obligation to provide credit for any Product
Kits described in Section 1(e) shall be limited as follows: (i) during the first
12 months following the date of first Product shipment, [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]; (ii) during the second year
following the date of first product shipment, [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION]; and (iii) during the third year
following the date of first Product shipment and each year thereafter,
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]. CMS
agrees to use good faith commercial efforts appropriate for the handling of a
perishable product on a first-in-first-out basis in its handling of Product
inventories in each location where Product is inventoried.
(g) Supplier agrees to and shall provide required Material
Safety Data Sheets for any Product containing hazardous chemicals as required by
federal, state or local law.
2. Grant of Distributorship.
(a) Upon the terms and subject to the conditions hereinafter
set forth, Supplier hereby appoints CMS, and CMS accepts appointment, as the
exclusive distributor of the Product in the Territory during the term of this
Agreement. Supplier
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<PAGE> 6
reserves no right to sell and distribute the Product in the Territory; however,
Supplier does reserve the right to sell and distribute the Product outside of
the Territory, as set forth below.
(b) The territory in which CMS has the rights described in
Section 2(a) hereof to distribute the Product (the "Territory") shall be limited
to the "Medical Segment" in the United States and its territories. The "Medical
Segment" is defined as and limited to: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]. Nothing herein shall be deemed to prohibit
Supplier from distributing (but not selling) the Product within the Territory
only for purposes of pre-market clinical testing or evaluation of the Product or
testing of Product improvements or enhancements prior to market introduction.
(c) The Territory shall not include, and CMS shall not be
permitted to sell the Product in, any areas or to any market segment not
described in Section 2(b) above without the prior written consent of Supplier,
which consent may be withheld at Supplier's sole discretion. CMS shall take
reasonable steps to limit the likelihood that CMS's customers in the Territory
do not purchase Product for resale in the Reserved Market Segment (as
hereinafter defined). All areas and market segments not included in the
definition of the Territory shall be hereinafter referred to as the "Reserved
Market Segments." Supplier shall retain all rights to sell (either directly or
through others) the Product in the Reserved Market Segments. Supplier shall not
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<PAGE> 7
be permitted to sell the Product in the Medical Segment and shall take
reasonable steps to limit the likelihood that Supplier's customers in the
Reserved Market Segments do not purchase Product for resale into the Territory.
Specifically included in the Reserved Market Segments, and specifically excluded
from the Territory, are all market segments in countries outside of the United
States and its territories and the following customer groups in the United
States and its territories: [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]. The customer groups listed for the Reserved Market
Segments are for reference only and shall not be considered exhaustive.
3. Conduct of CMS.
(a) CMS shall use its good faith commercial efforts and
facilities to promote, market, distribute and sell the Product and to take no
action which would interfere with Supplier's efforts to develop and maintain the
reputation of and goodwill with respect to the Product within the Territory
during the term of this Agreement. CMS shall provide full-page advertising in
its primary product catalogue(s), excluding the 1992/1993 edition, and CMS shall
permit Supplier access to its sales representatives for the purpose of providing
training of CMS's sales representatives in the demonstration and use of the
Product on such dates and in such locations as may be mutually acceptable to the
parties. CMS shall provide Supplier with samples of any Product advertising and
sales literature prior to printing and distribution, and Supplier shall have the
right to
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<PAGE> 8
approve the Product advertisement(s), which approval shall not be unreasonably
withheld or delayed. CMS shall use its good faith commercial efforts to inform
customers and potential customers of the availability and desirability of the
Product; to handle promptly all inquiries, quotations, correspondence and
orders; and to assist customers in the proper use of the Product and the
referral of customers to Supplier for the solution of technical application
problems.
(b) CMS shall not market, advertise, distribute or sell any
products that are directly competitive with any of Supplier's products as to
which CMS enjoys exclusive distribution rights, except that CMS shall have the
right to continue to deal in competitive products which CMS markets, advertises
or sells as of the date any product of Supplier to which CMS will enjoy
exclusive distribution rights shall become subject to the terms and conditions
of this Agreement. For purposes of this Agreement, "directly competitive"
products shall be defined as manual, visual, rapid methods for drugs of abuse
testing.
(c) CMS shall make purchases of the Product hereunder by
submitting firm purchase orders to Supplier. Notwithstanding anything to the
contrary contained herein, CMS's first order shall be made in the following
manner: CMS's first order for the Product shall be submitted to Supplier
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
purchase order shall be for [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] Product units. This order
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<PAGE> 9
shall be paid in full by CMS at the time Supplier ships and invoices the first
mutually agreed allotment of Product ordered by CMS under such order which
shipment shall not occur unless and until FDA marketing clearance has been
obtained. If FDA marketing clearance for the Product is not obtained or
Supplier's pre-market clinical testing of the Product, as described in Section
2(b), above, is not satisfactorily completed within one hundred twenty (120)
days after the execution of this Agreement, the parties agree to renegotiate in
good faith CMS's first order, pricing and minimums, if any. If the parties are
unable to agree on such terms within thirty (30) days following the 120th day,
this Agreement shall terminate without liability to either party. CMS's first
purchase order shall be deemed null and void and of no force or effect if FDA
marketing clearance or Supplier's pre-market clinical testing of the Product, as
described in Section 2(b), above, is not satisfactorily completed within one
hundred twenty (120) days after the execution of this Agreement.
(d) CMS shall provide Supplier, on a monthly basis, with a
written forecast of CMS's estimated purchase requirements for each month in the
ensuing six-month period. In the first twelve (12) months following the date of
first Product shipment, such forecasts shall be non-binding estimates.
Thereafter, forecast quantities for the first and second month of each forecast
period shall be binding, subject however to a variance of plus or minus ten
percent (10%). Supplier shall use its good faith commercial efforts to sell such
quantities to CMS.
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<PAGE> 10
(e) CMS may return, for full credit or replacement, any
Product for which CMS is required to give a customer credit or replacement
Product due to a defect or deficiency in the Product, provided that CMS first
obtains from Supplier a returned goods authorization which shall not be
unreasonably withheld or delayed by Supplier.
(f) Supplier shall review and advise CMS on compliance with
all FDA requirements regarding the Product contained in CMS's advertising and
sales literature.
(g) CMS hereby represents and warrants that neither CMS nor
its agents or employees will make any representations or claims with respect to
the Product which are not authorized in writing by Supplier. Subject to the
provisions of Section 6(h) hereof, CMS agrees to and shall indemnify Supplier
against, and hold Supplier harmless from, all claims, actions, costs, expenses
and damages (including without limitation reasonable attorneys' fees and
expenses) arising out of: (i) representations or claims by CMS with respect to
the Product which are not authorized by Supplier; (ii) CMS's negligent or wilful
act or omission in connection with the sale, marketing, promotion or
distribution of the Product; or (iii) any claim or failure by CMS to comply with
governmental regulatory requirements relating to the Product which are
applicable to distributors of products; provided, that in each case Supplier
gives CMS prompt notice of any such claim, permits CMS to assume sole control of
the defense thereof and provides all reasonable assistance in connection with
the defense of such claim. Supplier shall have
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<PAGE> 11
the right to retain its own counsel and to participate in such defense, with the
fees and expenses to be paid by CMS, if representation of Supplier by counsel
retained by CMS would be inappropriate due to actual differing interests between
Supplier and CMS or any other party represented by such counsel in such
proceeding. The provisions of this Section shall survive termination of this
Agreement.
(h) Each shipment from Supplier shall contain numbers
identifying the manufacturing lot or lots for control purposes. CMS shall keep
accurate records that will enable CMS to determine the Product lots received by
specific customers of the Product. CMS shall make such information available to
Supplier in the event of a Product recall or Product corrective action requested
by Supplier or required by any governmental agency. CMS shall provide Supplier
with sales information (including, but not limited to, customer reports
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH COMMISSION], or any
equivalent reports) free of charge by the thirtieth (30th) of each month during
the term of this Agreement for the prior month's sales. Any and all such
information referred to in this Section 3(h) may be used by Supplier for market
analysis and in the course of its performance under this Agreement and for no
other purpose, subject to the provisions of Section 9 of this Agreement.
(i) CMS shall comply with Supplier's instructions regarding
the storage and handling of the Product, and except as
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<PAGE> 12
otherwise provided in this Agreement, CMS shall be solely responsible for the
cost thereof.
(j) At Supplier's request, CMS shall submit to Supplier such
other reports, [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION], as are customarily provided by CMS to suppliers similarly situated
with Supplier.
(k) Both parties shall keep accurate records sufficient to
permit verification of sales data for the Product. Upon written request and upon
reasonable notice during regular business hours, each party shall permit an
independent certified public accountant or other acceptable representative of
the requesting party to inspect such records in order to verify any sales or
recall information reasonably required by the provisions of this Agreement,
provided that only one such inspection annually shall be permitted and the
parties shall not be required to keep such records for longer than five (5)
years.
(l) CMS shall obtain and maintain in effect during the term of
this Agreement product liability insurance with policy limits of not less than
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
covering the products sold by CMS, including, but not necessarily limited to,
the Product. CMS shall provide Supplier with a Certificate of Insurance (and all
renewals or replacements thereof) with respect to such insurance promptly
following Supplier's written request therefor.
(m) In entering into this Agreement, Supplier has relied upon
CMS's representations as to its present organization
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<PAGE> 13
and personnel. CMS shall promptly advise Supplier of any changes in CMS's
organization or personnel which may materially, adversely affect CMS's ability
to perform under this Agreement, as well as any material changes affecting
ownership or control of CMS; provided, however, that nothing contained in this
Section 3(m) shall obligate CMS to maintain its organization, personnel,
ownership or control as presently constituted and that such disclosure shall not
be required for a period not to exceed one month where to do so would violate
any obligation of confidentiality to which CMS may be subject.
4. Conduct of Supplier.
(a) Supplier shall ship promptly, but in any event not later
than sixty (60) days from receipt of order, CMS's orders for the Product, f.o.b.
Supplier's facility in San Diego, California (at which point title and risk of
loss shall pass from Supplier to CMS), freight and insurance prepaid, to CMS's
warehouse or to such other CMS location(s) as CMS may designate, subject to the
provisions of Section 11 hereof. Supplier shall cooperate with CMS in arranging
drop shipments of Product to customers on a case by case basis. Delivery dates
for the first purchase order under this Agreement shall be staggered during a
six-month period following such order as reasonably agreed upon in advance in
writing by the parties.
(b) Subject to the provisions of Section 5(a) hereof, Supplier
shall give at least sixty (60) days' prior written notice of any increase in
price of Products and will honor CMS's
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<PAGE> 14
existing purchase orders at the prices in effect immediately prior to the
effective date of each price increase.
(c) Supplier shall notify CMS immediately in writing should
Supplier become aware of any defect or condition which may render the Product in
violation of any statute or regulation, or which in any way materially alters
the specifications or quality of the Product.
(d) Supplier shall provide to CMS's sales personnel, at CMS's
premises or such other location as the parties may agree, such training in the
demonstration and use of the Product as may be reasonably requested by CMS, and
for such training purposes shall make available at Supplier's expense, all
necessary instructors, training material and the Product for demonstration. CMS
shall provide transportation and lodging expenses for CMS personnel for the
training of CMS representatives by Supplier.
(e) Supplier shall provide technical support to CMS's sales
personnel and customers and promptly provide to CMS such additional technical
information developed or acquired by Supplier from time to time as may
reasonably be expected to be of assistance to CMS in fulfilling its obligations
hereunder. Supplier will provide, at its own expense, a toll free long distance
telephone service for technical support for CMS customers and sales
representatives.
(f) Supplier shall provide, at its expense, reasonable
quantities of such instruction manuals and point of sale literature as may from
time to time be requested by CMS for
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<PAGE> 15
use in connection with the distribution of the Product. Subject to CMS's and
Supplier's prior written approval, the CMS name will be incorporated in
Supplier's advertising and literature intended for distribution in the Territory
by CMS sales representatives. If requested to do so by CMS, Supplier shall
furnish CMS with suitable copy and photographs for use by CMS in cataloging the
Product.
(g) During the period that CMS has the exclusive right to
distribute the Product in the Territory under this Agreement, Supplier shall
provide CMS upon request with a specified number of Product Kits (as hereinafter
defined) to be used in connection with the promotion, marketing, distribution
and sale of the Product. A "Kit" consists of twenty-five (25) Product units. For
months 1 through 12 of this Agreement, CMS may purchase the number of evaluation
Kits specified below for a charge of [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per Kit. Such amounts paid for evaluation Kits
will be credited by Supplier for purchases by CMS in months 25 through 36 of
this Agreement, pro rata on a monthly basis. Supplier will provide the specified
number of evaluation Kits in months 13 through 36 of this Agreement and
thereafter, at no charge to CMS.
Maximum
Aggregate Kits
Month Kits Per Month
----- --------- ---------
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
Such evaluation Kits may not be sold by CMS and shall be marked by Supplier with
the following legend: "FOR EVALUATION PURPOSES
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<PAGE> 16
ONLY - NOT FOR RESALE." Upon termination or nonrenewal of this Agreement, CMS
shall return all or any part of such unused demonstration Product to Supplier in
substantially the same condition as received and Supplier shall, within thirty
(30) days of termination or non-renewal, refund to CMS the cost of same and
additionally pay CMS the return freight therefor. Supplier shall not be required
to provide credit under Section 1(e) hereof for expired evaluation Kits.
(h) Any Products owned by CMS and rendered unsalable, in CMS's
reasonable commercial judgment, due to a change in any Product specification,
discontinuation or elimination by Supplier of any Product from its product
offering, release by Supplier of any materially improved or updated version of
any Product, or any other material change in the Product outside of CMS's
control shall be repurchased from CMS by Supplier within thirty (30) days
following CMS's request therefor at the price paid for such Product(s) by CMS.
Supplier shall additionally pay for return freight and related transportation
and insurance charges for all such Products. Supplier's release of a Product
which has a longer shelf life shall not be deemed a material improvement under
this Section 4(h).
(i) Supplier shall promptly provide CMS with leads concerning
prospective purchasers of the Product within the Territory in a format to be
mutually agreed upon between the parties.
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<PAGE> 17
5. Price and Payment Terms.
(a) Supplier shall charge CMS [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] for each Product unit ordered by CMS
during the twelve (12) months from the date of first shipment of Product by
Supplier to CMS pursuant to Section 3(c) hereof. After the first anniversary of
Supplier's first shipment of the Product to CMS, such price(s) shall be subject
to change on sixty (60) days' prior written notice; provided, however, that for
each price increase, the minimum number of Product units CMS is required to
purchase, if any, under Section 6(c) for the balance of the six-month period in
which the price increase occurs and all remaining six-month periods shall be
decreased by the same percentage as the percentage by which the increased price
exceeds the prior price. Supplier shall establish a manufacturer's suggested
list price for each Product in the Territory and CMS's discount off the
manufacturer's suggested list price for the Products in the Territory shall in
no event [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].
(b) Other than with respect to CMS's first order, which is to
be paid for in full upon initial shipment, payments by CMS to Supplier for the
Product purchased shall be due as follows: months 1 through 9 - within
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of
invoice by Supplier; months 10 through 24 - within [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of invoice by
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<PAGE> 18
Supplier; after month 24 - within [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of invoice.
(c) Except as otherwise provided in this Agreement, CMS shall
be entitled to resell the Product on such terms as it may, in its sole
discretion, determine, including, without limitation, price, returns, credit and
discounts.
(d) Supplier represents and warrants that the price and terms
pursuant to which the Products are and will be sold to CMS pursuant to this
Agreement shall be no less favorable than those made available to the Supplier's
most favored distributors in the United States for comparable product
quantities.
6. Term and Termination.
(a) The term of this Agreement shall be for a period of
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] from
the date of first shipment to CMS by Supplier of the Product, pursuant to
Section 3(c) hereof, unless terminated sooner as provided herein or extended as
provided below. Notwithstanding the foregoing, the term of this Agreement shall
not [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
from the date of first shipment of Product to CMS by Supplier unless agreed to
in writing by the parties, or as otherwise provided in Section 17(c) hereof.
(b) The Agreement term may be extended at the option of CMS:
(i) for [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] if at the end of the original three-year term CMS has purchased an
aggregate of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]or
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<PAGE> 19
more Product units, net of any credits for expired products under Section 1(e)
(calculated on an equivalent-unit basis); and (ii) for [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] if CMS purchases
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] or
more Product units, net of any credits under Section 1(e) (calculated on an
equivalent units basis), during the first [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] extension of this Agreement; provided,
however, that the number of Product units CMS must purchase to extend the term
of this Agreement shall be reduced on a unit per unit basis if CMS's minimum
purchase requirements, if any, are reduced in accordance with Section 6(e)
hereof and/or in accordance with Section 5(a) hereof.
(c) This Agreement shall terminate for cause, without
liability to either party, immediately if either party (i) files a voluntary
petition in bankruptcy or is adjudged a bankrupt in any involuntary proceeding,
(ii) is generally unable to pay its debts as they become due, (iii) has a
receiver or judicial trustee or custodian appointed for it, or (iv) fails to
cure any material breach in the provisions of this Agreement within thirty (30)
days after receipt of written notice of such breach. Supplier may also terminate
this Agreement for cause if CMS has not paid any invoice of Supplier outstanding
for more than sixty (60) days, other than an invoice which has been reasonably
disputed in good faith and provided that the undisputed portion of such invoice
has been paid. Furthermore, this Agreement may
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<PAGE> 20
be terminated for cause by Supplier if CMS fails to purchase the following
minimum Product units (excluding evaluation Kits) in each of the six-month
periods indicated, net of any credits under Section 1(e) (calculated on an
equivalent units basis) for such periods:
Year of Six-Month
Agreement* Period Units
---------- --------- -----
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
In the event CMS fails to purchase the specified minimum Product units in any
six-month period, Supplier may give CMS written notice of its intent to
terminate this Agreement within sixty (60) days' after the end of such six-month
period, and, thereafter, Supplier may terminate this Agreement on sixty (60)
days' written notice. In lieu of termination for cause, Supplier may, at its
option, do one or more of the following: (i) offer to make CMS a nonexclusive
distributor of the Product; (ii) offer to modify the geographical description of
the Territory; or (iii) offer to modify the definition of the Medical Segment.
Supplier shall give CMS notice of Supplier's desire to exercise one or more of
such options within sixty (60) days after the end of the relevant six-month
period, with such proposed modification to become effective, if accepted by CMS,
sixty (60) days after the notice is delivered or mailed in accordance with
Section 12 of this Agreement. The remedies provided for in this section shall be
Supplier's sole and
- --------
* From date of first Product shipment, written notice of which shall promptly be
provided to CMS by Supplier.
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<PAGE> 21
exclusive remedies for CMS's failure to purchase the required minimum number of
Product units. Notwithstanding the foregoing, if CMS is unable to purchase the
required minimum number of Product units, if any, during any specific six-month
period due solely to an act or omission of Supplier, such failure shall not
constitute grounds for termination with cause pursuant to this Section with
respect to such six-month period. For the purposes of this Section 6(c), Product
shall be deemed purchased when a firm purchase order has been received by
Supplier for delivery of Product within sixty (60) days (six (6) months in the
case of CMS's first order).
(d) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION]
(e) In the event that CMS is unable to meet its minimum purchase
requirements for any six-month period due to the failure of Supplier to deliver
the quantities of the Product required to meet such minimum levels, CMS's
obligation to meet such minimum will be deemed to have been met. In the event
that CMS is unable to meet its minimum purchase requirements for two consecutive
six-month periods due to Supplier's failure to deliver the quantities of Product
units required to meet such minimums, Supplier agrees to enter good faith
negotiations to establish new minimum purchase requirements that Supplier has
the ability to supply. In the event Supplier and CMS are unable to agree on new
minimum purchase requirements, the new levels will be the lower of that stated
in Section 6(c) above or the number of Product units Supplier is actually able
to supply for
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<PAGE> 22
each period. Supplier's inability to meet minimum sales requirements in the
exercise of good faith commercial efforts or due to an event of force majeure
shall not be deemed to be a breach of this Agreement. In the event that Supplier
fails to deliver the quantities of Product units required by CMS to meet the
minimum purchase requirements for three consecutive six month periods for
whatever reason(s), then CMS may terminate this Agreement by giving Supplier
written notice of such termination, effective 60 days after the date notice is
delivered or mailed in accordance with Section 12. Such termination shall be
without liability to either party, except as provided in Sections 1(e), 4(g) and
6(f) hereof.
(f) Upon termination without cause by Supplier under Section 6(d) hereof
or non-renewal by Supplier or upon termination by CMS with cause or pursuant to
Section 6(e) hereof, Supplier shall repurchase, and CMS agrees to sell Supplier
at CMS's cost, CMS's unsold inventory of Products and remaining samples of
Products, the latter being repurchased pursuant to the provisions of Section
4(g), F.O.B. CMS's warehouse(s); provided, however, that Supplier shall not be
obligated to repurchase expired Product, unless otherwise required pursuant to
the provisions of Section 1(e) and 1(f) hereof. Upon termination by Supplier
with cause, Supplier may, at its option, repurchase, and CMS agrees to sell at
CMS's cost, CMS's salable inventory of the Product and any remaining Product
samples.
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<PAGE> 23
(g) The rights and duties of each party under Sections 1(e), 3(e),
3(g), 4(g), 6(f), 7, 8, 9, 10, 14, 15 and 19 of this Agreement and Supplier's
obligations under the Continuing Guaranty as referred to in Section 10(a)
hereof, shall survive and be enforceable in accordance with their terms.
(h) IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
CONTINGENT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF THE OTHER PARTY, OR ANY LOSS
OF PROFITS OR REVENUE OF THE OTHER PARTY, WHETHER ARISING IN CONTRACT, TORT
(INCLUDING NEGLIGENCE), WARRANTY, STRICT LIABILITY OR OTHERWISE.
7. Trademarks.
(a) All Product units sold by Supplier to CMS will bear one or
more of the trademarks or trade names (including, but not limited to, the name
Triage(TM)) relating to the Product (collectively, the "Supplier Marks"), and
CMS shall not alter, remove or modify the Supplier Marks, nor affix any other
trademark to the Product, without the prior written consent of Supplier. CMS
shall not utilize any of the Supplier Marks in connection with any promotional
brochures or advertising materials relating to the Product without the prior
written consent of Supplier. Supplier's consent to the use of the Supplier Marks
shall be conditioned upon such brochure or advertising materials clearly
indicating Supplier's ownership of the Supplier Marks.
(b) All Product units purchased by CMS hereunder shall be
marketed by it in the original packages under the original labels provided by
Supplier, and CMS shall make no
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<PAGE> 24
modifications, or alterations to such Product units or labels; provided,
however, that CMS may affix labels or other indices which serve to identify CMS
as a distributor of the Product, so long as they do not cover and are not
inconsistent with any of Supplier's Product labels or markings.
(c) Nothing in this Agreement shall be construed as granting
CMS any license or interest in the Supplier Marks, and CMS acknowledges that it
has been advised by Supplier of Supplier's claim of ownership of the Supplier
Marks. CMS agrees that it will do nothing inconsistent with such ownership and
that all use of the Supplier Marks will inure to the benefit of and be on behalf
of Supplier. Specifically, CMS agrees that: it will not challenge the validity
of, or Supplier's ownership of, any of the Supplier Marks; it will not take any
action that is inconsistent with, or may impair, Supplier's right, title and
interest to the Supplier Marks; it will not represent to any third party that it
has any ownership interest in the Supplier Marks; it will not adopt any
trademarks that are confusingly or deceptively similar to the Supplier Marks;
and it will, at Supplier's sole cost and expense, execute and deliver to
Supplier any and all documents which Supplier may request to confirm in Supplier
all right, title and interest in the Supplier Marks.
(d) CMS shall make no statement to the press relating or
referring to the Product without the prior written approval of Supplier.
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<PAGE> 25
(e) CMS shall promptly notify Supplier in writing of any
challenges to the validity, infringement on or unauthorized use of any of the
Supplier Marks, actual or threatened, that may come to CMS's attention. CMS
shall, at Supplier's request, provide Supplier with all reasonable assistance in
initiating and prosecuting any legal action against any infringer of any of the
Supplier Marks, it being understood that Supplier will assume all expenses in
connection with such protection.
(f) Supplier recognizes that CMS is the owner of the
trademarks and trade names denoting CMS or CMS products, which it may elect to
use in the promotion and sale of the Product, and that Supplier has no right or
interest in such trademarks or trade names; provided, however, that except as
otherwise set forth in Section 7(b) hereof, no CMS labels, package inserts or
other material shall accompany the Product without the approval of Supplier.
(g) Upon termination of this Agreement, CMS shall continue to
be entitled to utilize the Supplier Marks on the terms agreed to previously by
the parties in connection with CMS's promotion, marketing, distribution and sale
of Product units remaining in CMS's inventory and not repurchased by Supplier.
Thereafter, CMS shall terminate all use of Supplier Marks, and shall at
Supplier's request and at Supplier's expense, destroy or return to Supplier all
literature and other advertising and promotional materials bearing the Supplier
Marks. In the event of termination or expiration of this Agreement, CMS agrees
to cooperate with Supplier and to execute
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<PAGE> 26
any and all documents requested by Supplier for the purpose of cancelling any
registered user or other rights with respect to Supplier's name and the Supplier
Marks that CMS may have acquired in operating hereunder, or, at Supplier's
election, in transferring such rights to Supplier or its designee. CMS also
agrees to cooperate with Supplier in transferring any appropriate rights in
connection with the Supplier Marks to Supplier and/or Supplier's designee, at
Supplier's sole cost and expense, if Supplier desires to sell or have sold
products in the Territory (other than the Products), other than by CMS.
8. Copyrights.
(a) CMS hereby acknowledges that Supplier may claim copyright
protection with respect to its package inserts and other supporting materials
which it includes with each of the Product units, and CMS further acknowledges
the validity of Supplier's right to claim the copyright protection to such
materials. CMS further acknowledges that Supplier has advised CMS that it has
the sole and exclusive right to claim the copyright protection with respect to
all of its package inserts and other supporting materials included with the
Product, and CMS shall take no action which is in any way inconsistent with
Supplier's claim of copyright protection that it expects to make with respect to
such materials.
(b) In order to protect against infringement of Supplier's
copyright through unauthorized reproduction or duplication of its copyrighted
materials, such materials included with the Product units sold by Supplier to
CMS shall
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<PAGE> 27
bear appropriate copyright markings. Nothing contained in this Section 8 shall
prohibit CMS from copying and distributing to its sales representatives Product
advertising, literature and other materials prepared by or on behalf of Supplier
for the purpose of fulfilling CMS's obligations under this Agreement.
(c) CMS shall immediately notify Supplier in writing of any
infringements, whether within or without the Territory, of any of Supplier's
copyrights which come to the attention of CMS. CMS shall, at Supplier's request,
provide Supplier with all reasonable assistance in initiating and prosecuting
any legal action against any infringer of Supplier's copyrights within the
Territory; provided, however, that all costs incurred in connection with any
such copyright infringement action shall be borne solely by Supplier.
9. Trade Secrets and Confidential Information.
(a) CMS may receive various trade secrets of Supplier and
information of a confidential nature, including but not limited to specific
technical information concerning the Product. CMS agrees that it will not
disclose to anyone, directly or indirectly, any of such trade secrets or other
confidential information (including but not limited to marketing plans and
programs, market research information and sales data) or use such information
other than as reasonably required in the course of its performance under this
Agreement, or as required by law, provided that CMS shall give Supplier
reasonable notice of any such required disclosure and shall give Supplier an
opportunity to object to any such disclosure. CMS shall, at
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<PAGE> 28
Supplier's option, return such information to Supplier or destroy all such data
having physical form and all copies thereof. The obligations set forth in this
Section 9(a) shall survive any termination of this Agreement for a period of
three (3) years.
(b) Supplier may receive various trade secrets of CMS and
information of a confidential nature, including, but not limited to the names of
CMS's customers and sales data. Supplier agrees that it will not disclose to
anyone, directly or indirectly, any of such trade secrets or other confidential
information or use such information other than as reasonably required in the
course of its performance under this Agreement, or as required by law, provided
that Supplier shall give CMS reasonable notice of any such required disclosure
and shall give CMS an opportunity to object to any such disclosure. Supplier
shall, at CMS's option, return such information to CMS or destroy all such data
having physical form and all copies thereof. The obligations set forth in this
Section 9(b) shall survive any termination of this Agreement for a period of
three (3) years.
(c) Notwithstanding any provision set forth in this Section 9
to the contrary, the parties' obligations regarding confidential information as
set forth herein shall not apply to the extent that: (i) the confidential
information, or any relevant part of it, can be shown to be in the public domain
prior to the date of this Agreement; (ii) the confidential information, or any
relevant part of it, becomes part of the
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<PAGE> 29
public domain, other than by some unauthorized act or omission, after the date
hereof; (iii) the confidential information, or any relevant part of it, is
disclosed to such party by a third party who has the right to make such
disclosure; (iv) permission to disclose the confidential information, or any
relevant part of it, or to make use of same, is obtained from the non-
disclosing party by the disclosing party; or (v) the information is developed
independently of the confidential information by the other party based on
written records maintained in the ordinary course.
10. Supplier's Warranties; Disclaimer of Warranties.
(a) Supplier agrees that it shall execute and warrants that it
shall abide by the terms of CMS's Continuing Guaranty, a copy of which is
attached hereto as Schedule A and which guaranty is incorporated herein by
reference. The terms and provisions of the Continuing Guaranty shall survive the
termination of this Agreement. Prior to the first shipment of Product to CMS
Supplier shall provide CMS with certificates of insurance which meet the
requirements of paragraph D of the Continuing Guaranty. Supplier's insurance
carriers shall at all times during the term of this Agreement be rated by Best's
as B+ or superior. Supplier is not aware after due inquiry of any circumstance
which would prevent the issuance of such policy.
(b) In addition to the warranties of Supplier set forth in
this Agreement and in the Continuing Guaranty, Supplier warrants that each of
the Products will conform to the specifications set forth in Product literature
prepared by or on
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<PAGE> 30
behalf of Supplier and that the Products will comply and be manufactured,
packaged, sterilized (if applicable), labeled and shipped in compliance with all
applicable federal, state and local laws, order, regulations and standards.
(c) Supplier and CMS shall extend to customers only the
Product Warranty embodied in Exhibit B hereto; provided that Supplier may modify
such Product Warranty with CMS's consent, which consent shall not be
unreasonably withheld. Supplier shall not modify or amend the warranty during
the term of this Agreement without providing CMS with sixty (60) days' prior
written notice. Supplier warrants and represents that the Products will perform
in accordance with Supplier's warranty.
(d) Except for the Product warranty which is described in
Section 10(c) hereof, SUPPLIER MAKES NO WARRANTIES TO CUSTOMERS AND CMS SHALL
NOT MAKE ANY OTHER WARRANTIES TO CUSTOMERS AS TO THE MERCHANTABILITY OR FITNESS
OF THE PRODUCT FOR A PARTICULAR USE.
11. Force Majeure. The obligations of either party to perform
under this Agreement shall be excused during each period of delay caused by such
matters as strikes, shortages of power or raw material, government orders or
acts of God, which are reasonably beyond the control of the party obligated to
perform. The affected party shall make best efforts to remedy the effects of
such force majeure. Any force majeure event shall not excuse performance by the
party but shall delay performance, unless such force majeure continues for a
period in excess of ninety
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(90) days. In such event, the party seeking performance may cancel its
obligations hereunder.
12. Notices. Any notice required by this Agreement shall be
deemed to have been duly given when delivered personally or by messenger, or
when mailed by registered or certified mail, return receipt requested, postage
prepaid, or when received via telecopy, telex or other electronic transmission,
with confirmation of receipt, in all cases addressed to the party for whom
intended at its address set forth below:
If to
Supplier: Biosite Diagnostics Incorporated
11030 Roselle Street, Suite D
San Diego, California 92121
Telecopy: (619) 455-4815
Attn: Mr. Kim Blickenstaff
with a
copy to: Pillsbury Madison & Sutro
235 Montgomery Street
15th Floor
San Francisco, CA 94104
Telecopy: (415) 983-7396
Attn: Thomas E. Sparks, Jr., Esq.
If to CMS: Curtin Matheson Scientific, Inc.
9999 Veterans Memorial Drive
Houston, Texas 77038
Telecopy: (713) 878-2211
Attn: Mr. Jack Daniels
with a
copy to: Linda R. Hansen, Esq.*
9999 Veterans Memorial Drive
Houston, TX 77038
Telecopy: (713) 878-2211
or such other address as provided in writing in the manner provided by this
Section.
- --------
* Notification of Completion Dates under Section 1(e) shall
not be required to be made to Linda R. Hansen.
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<PAGE> 32
13. Entire Agreement. This Agreement, including Schedules,
constitutes the entire Agreement between the parties relating to the subject
matter hereof and supersedes all prior agreements and understandings, whether
written or oral, between the parties with respect to such subject matter. In
ordering and delivery of the Product, the parties may employ their standard
forms, but nothing in those forms shall be construed to modify or amend the
terms of this Agreement.
14. Attorneys' Fees. In the event any claim or counterclaim is
asserted or any action is commenced to enforce any of the rights or obligations
of the parties under this Agreement, the prevailing party shall be entitled to
collect from the other party, as part of the judgment rendered with respect to
such claim or action, reasonable attorneys' fees, expenses and court costs.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD
TO CALIFORNIA CHOICE OF LAW PROVISIONS.
16. Compliance With Applicable Laws. In connection with the
sale of the Product hereunder, Supplier and CMS shall comply with all applicable
laws, regulations and orders of governmental bodies having jurisdiction in
respect of activities contemplated by or covered under this Agreement, including
without limitation, obtaining all necessary permits, licenses and regulations.
CMS shall cooperate fully with Supplier, at Supplier's sole cost and expense, in
connection with securing
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<PAGE> 33
and maintaining any governmental registration or other governmental permits
required with respect to marketing the Product in the Territory and CMS will
notify Supplier of any local laws affecting the Product which may come to its
attention.
17. Assignments.
(a) Subject to section 17(b) below, neither party shall assign
or transfer this Agreement, by operation of law or otherwise, in whole or in
part without the prior written consent of the other party in each and every
instance, which consent may not be unreasonably withheld. If either party wishes
to assign or otherwise transfer this Agreement, as aforesaid, in each instance
the party seeking to assign or otherwise transfer this Agreement shall submit to
the other party for such party's review and approval as soon as practicable such
information as the other party may reasonably request concerning the assignee or
transferee and the party from which consent is sought shall have thirty (30)
days following receipt of the fully responsive materials in which to review the
same and approve or reject the assignment or transfer. In any event in which the
party from which consent is sought reasonably rejects the assignment or
transfer, this Agreement shall terminate one hundred eighty (180) days following
the date on which the rejection is received by the party seeking to assign or
transfer. The parties shall make best efforts to promptly and amicably wind up
all outstanding matters concerning the subject matter of this Agreement.
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<PAGE> 34
(b) Notwithstanding (a) above, a merger, reorganization, or
the sale or transfer of all or substantially all of the stock of Supplier or the
assets of Supplier to which this Agreement relates (an "Acquisition") shall not
be deemed an assignment or transfer of this Agreement to the successor to
Biosite Diagnostics Incorporated under this Agreement by virtue of such
Acquisition (the "Successor") requiring CMS's consent; provided that Supplier
shall provide CMS with prompt notice of any such Acquisition and CMS may object
to such Acquisition within 30 days of receipt of such notice on the basis that:
(i) if the Acquisition is a sale of assets, the Successor does not expressly and
unconditionally assume Supplier's obligations under this Agreement, or if the
Acquisition is by sale of stock or by merger and Supplier or other Successor, as
the case may be, expressly repudiates this Agreement or if CMS does not receive,
within thirty days of CMS's prompt request under this Section 17(b), an express
and unconditional continuance or assumption of this Agreement by Supplier or
other Successor, as the case may be; (ii) the Successor shall have a
consolidated net worth, determined in accordance with generally accepted
accounting principles applied on a basis consistent with the most recent
financial statements of the Successor of less than the consolidated net worth of
the Supplier immediately prior to the effectiveness of such transaction,
satisfaction of this requirement to be set forth in reasonable detail in an
officers' certificate delivered to CMS at the time that Supplier gives notice of
such assignment or transfer; (iii) immediately after
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<PAGE> 35
giving effect to such transaction a condition or event shall exist which
constitutes a breach of the Agreement, and such condition or event continues
thirty days after the Successor has received notice of such breach from CMS;
(iv) the Successor is [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION], or any of their respective subsidiaries, divisions or
affiliates; or (v) the Successor is [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] or any of its subsidiaries, divisions or
affiliates. In the event CMS gives Supplier such notice of objection in writing,
the provisions of subparagraphs (c)and (d) hereof shall apply, as applicable.
(c) If CMS gives notice of its objection to an Acquisition on
the basis of (b)(iv) above: (i) this Agreement shall automatically be extended
for a term of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] from the date of first shipment of Product to CMS; and (ii) the
provisions of paragraph 6(c) which cover and relate to CMS's obligation to
purchase any minimum number of Product units during any year of this Agreement,
or portion thereof, shall no longer apply. In the event of any such
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
extension, all other provisions of this Agreement will remain in full force and
effect.
(d) Notwithstanding the foregoing, in the event that CMS
provides notice of its objection to an Acquisition on the basis of (b)(i), (ii),
(iii) or (v) above, the Agreement will continue in full force and effect,
provided that CMS shall have
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<PAGE> 36
the right terminate this Agreement by giving notice of termination [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] Supplier (or Biosite
Diagnostics Incorporated in any Aquisition in which Biosite is not the
Successor) shall be obligated to pay CMS the applicable Buy-out Amount under
Section 6(d) hereof; provided that if CMS provides notice of its objection to an
Acquisition on the basis of (b)(v) hereof and the Acquisition occurs during the
first three years following the first shipment of the Products to CMS under this
Agreement, the Buy-out Amount shall be the lesser of [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] (ii) the amount computed
under Section 6(d) hereof.
18. Amendments. No amendment or modification of the terms of
this Agreement shall be binding on either party unless reduced to writing and
signed by an authorized officer of the party to be bound.
19. Existing Obligations. Supplier represents and warrants
that the terms of this Agreement do not violate any existing obligations or
contracts of Supplier. Supplier shall defend, indemnify and hold harmless CMS
from and against any and all claims, demands, liabilities and causes of action
that are hereafter made or brought against CMS that allege any such violation.
20. Relationship of the Parties.
(a) For the purposes of this Agreement, CMS and Supplier are
deemed to be independent contractors and not the agent or employee of the other.
Neither CMS nor Supplier shall
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<PAGE> 37
have the authority to make any statements, representations or commitments of any
kind, or take any action, which shall be binding on the other, except as
provided for herein or authorized in writing by the party to be bound.
(b) This Agreement does not grant any license from Supplier to
CMS or from CMS to Supplier except as expressly provided herein.
21. Successors and Permitted Assigns. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns.
22. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original for all purposes.
23. Approvals and Consents. Each of the parties represents to
the other that all necessary approvals of any third persons, the granting of
which are necessary for the consummation of the transactions contemplated
hereby, or for preventing the termination of any right, privilege, license or
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<PAGE> 38
agreement or any right granted hereunder have been received by both parties to
this Agreement.
24. Miscellaneous. Any payment obligation under this Agreement
which shall be due from Supplier to CMS and for which no date of payment is
specified in this Agreement shall be payable on the thirtieth (30th) day
following the day on which the event occurs which triggers Supplier's obligation
to make any such payment.
IN WITNESS WHEREOF, the parties have, by their duly authorized
officers, executed this Agreement on the date first set forth above.
BIOSITE DIAGNOSTICS INCORPORATED
By /s/ Kim D. Blickenstaff
----------------------------
Title President
-------------------------
Date November 11, 1991
--------------------------
CURTIN MATHESON SCIENTIFIC, INC.
By /s/ Cecil Kost
----------------------------
Title Senior Vice President,
-------------------------
Sales and Marketing
-------------------------
Date November 8, 1991
--------------------------
-38-
<PAGE> 39
EXHIBIT A
CONTINUING GUARANTEE
-39-
<PAGE> 40
EXHIBIT B
Biosite's express and implied warranties (including implied warranties of
merchantability and fitness) are conditioned upon observance of Biosite's
published directions with respect to the use of Biosite's diagnostic products.
Remedies against Biosite for breach of warranty or other duty are limited solely
to replacement or return of the purchase price of the affected products. Any
such claim against Biosite must be made in writing and promptly pursued within
one year from the date of delivery of the goods. UNDER NO CIRCUMSTANCES
WHATSOEVER SHALL BIOSITE BE LIABLE FOR ANY INDIRECT OR CONSEQUENTIAL DAMAGES.
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<PAGE> 41
AMENDMENT
TO
DISTRIBUTION AGREEMENT
Date: March 7, 1994
Parties: Biosite Diagnostics Incorporated
a Delaware corporation
11030 Roselle Street, Suite D
San Diego, California 92121 ("Biosite")
Curtin Matheson Scientific, Inc.
a Delaware corporation
9999 Veterans Memorial Drive
Houston, TX 77038-2499 ("CMS")
RECITALS:
A. Biosite and CMS are parties to that certain Distribution Agreement,
dated November 11, 1991 ("Distribution Agreement ).
B. CMS and Biosite each desire to amend the Distribution Agreement, as
provided in this Amendment.
AGREEMENTS:
IN CONSIDERATION of the premises and the covenants contained herein,
and for other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Amendment of Section 1.(a). Section 1.(a) shall be modified to add
the Triage Plus TCA product manufactured by or for Supplier, which includes
tests for PCP (Phencyclidine); THC (Marijuana); Cocaine;
Amphetamines/methamphetamines; Opiates; Benzodiazepenes; Barbiturates; and
Tricyclic Antidepressants, to the definition of "Product" set forth in the
Distribution Agreement.
2. Amendment of Sections 1.(e) and 4.(g). Sections 1(e) and 4.(g) shall
be modified to add the Triage Plus TCA Product to the definition of "Product
Kits" and, further, to provide that CMS may purchase evaluation Kits of Triage
Plus TCA Product for a charge of [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per evaluation Kit. There shall be no limitation
on the number of Triage Plus TCA evaluation Kits that CMS may purchase.
3. Amendment of Section 5(a). Section 5.(a) shall be modified to
reflect that Supplier shall charge [CONFIDENTIAL
<PAGE> 42
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] for each Triage Plus
TCA Product unit ordered by CMS during the twelve (12) months from the date of
first shipment of Triage Plus TCA Product to CMS.
Section 5.(a) shall be further modified to reflect that CMS's discount
off the manufacturer's suggested list price for the Triage Plus TCA Product in
the Territory shall be [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION].
4. Amendment of Section 5.(b). Section 5.(b) shall be modified to
reflect that CMS's payments to Supplier for the Triage Plus TCA Product shall be
due within [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] of invoice by Supplier until the first to occur of January 1, 1995
or the date that Supplier shall effect a registration of any of its securities
under the Securities Act of 1933, as amended, or shall otherwise have any
securities registered under Section 12 of the Securities Exchange Act of 1934,
as amended. Thereafter, CMS's payments to Supplier for the Triage Plus TCA
Product shall be due within [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] of invoice by Supplier.
5. Amendment of Sections 6.(b), (c) and (d). Sections 6.(b), (c) and
(d) shall be modified to reflect the Triage Plus TCA Product shall be included
in the definition of "Product unit" as used in these Sections or otherwise in
the Distribution Agreement.
6. No Other Modification. Except as expressly modified by this
Amendment, all other terms of the Distribution Agreement shall remain unchanged
and in full force and effect.
THE PARTIES HAVE EXECUTED this Amendment in the manner appropriate to
each as of the day and year first above written.
BIOSITE DIAGNOSTICS INCORPORATED
By: /s/ Kim D. Blickenstaff
-------------------------------
Its: President
-------------------------------
CURTIN MATHESON SCIENTIFIC, INC.
By: /s/ Jack W. Daniels
-------------------------------
Its: Vice President, Marketing,
-------------------------------
Clinical
-------------------------------
<PAGE> 43
AMENDMENT TO DISTRIBUTION AGREEMENT
THE DISTRIBUTION AGREEMENT between BIOSITE DIAGNOSTICS INCORPORATED
("Supplier") and CURTIN MATHESON SCIENTIFIC, INC. ("CMS") dated as of November
11, 1991, as amended, (the "Agreement") is hereby amended as follows:
1. Section 1(d) of the Agreement is hereby deleted.
2. The definition of the term "Medical Segment" contained in section
2(b) of the Agreement is hereby amended by the addition of the following as a
new second sentence:
Notwithstanding the foregoing, hospital-based occupational health
clinics are specifically excluded from the Medical Segment.
3. Sections 6(a) and (b) are hereby amended to read in their entirety
as follows:
(a) The initial term of this Agreement shall be through June 30, 1996
and will be automatically extended on a quarter- by-quarter basis through
December 31, 1996, if CMS achieves the purchase and cumulative sale targets for
the most recently concluded measurement period (each, a "Measurement Period")
set forth below:
Dollar Purchases Cumulative YTD Dollar
Measurement Period From Supplier Sales At Cost
------------------ ---------------- ---------------------
January 1 -
June 30, 1996 [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION]
July 1 -
September 30, 1996 [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION]
October 1 -
December 31, 1996 [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION]
If CMS does not meet both the purchase and cumulative sales targets,
described above, at the end of any Measurement Period, the Agreement will
terminate automatically at the end of the following Measurement Period. Unless
terminated earlier, as set forth in the preceding sentence, the Agreement will
terminate in any event on December 31, 1996.
(b) If CMS does not meet both the purchase and cumulative sales targets
set forth in paragraph (a) above for calendar year 1996, CMS will pay Supplier
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of
CMS' Purchases (at Cost of Goods) of Products in calendar year 1996. In the
event that
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<PAGE> 44
CMS's Sales at Cost of Products exceed the cumulative sales target of
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] set
forth in paragraph (a) above in calendar year 1996, Supplier will rebate to CMS
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the
purchase price from Supplier of all Products sold by CMS in calendar year 1996
in excess of such sales target. Payment shall be made sixty (60) days following
the termination of the Agreement.
Supplier further authorizes CMS to use its standard form contract, in
the form attached hereto as Exhibit A, for its Preferred Customer Program in
connection with the sale by CMS of Products; provided, however, that (a) such
contracts will relate only to Products covered by the Agreement, and (b) upon
the termination of the Agreement, CMS shall assign to Supplier (i) such
contracts and (ii) all right, title and interest to all equipment provided to
CMS' customers pursuant to such contracts. Nothing in this Agreement shall
prevent CMS from using its standard contracts for transactions with CMS
customers unrelated to the Products; provided that Supplier shall have no
obligation and shall derive no benefit with respect thereto.
Supplier shall reimburse CMS for [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] of CMS's cost of any such equipment
provided to CMS' customers pursuant to such contracts, during calendar year
1996. CMS shall deduct from payments otherwise due to Supplier [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] the cost of any such
equipment provided to CMS' customers pursuant to such contracts during the
preceding month, together with fully-executed copies of each such contract
entered into with any CMS customer.
In the event that any CMS customer purchases from CMS the equipment
provided by CMS under its Preferred Customer Program in connection with the sale
by CMS of Products, CMS shall give prompt written notice to Supplier of such
purchase, shall give written evidence to Supplier of the price paid by such
customer therefor, and shall promptly remit to Supplier [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] the amount of the price paid
by such customer therefor provided such amount shall in no event exceed
Supplier's [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] share of the cost therefor. In the event that CMS terminates any
such contract with a CMS customer under its Preferred Customer Program in
connection with the sale by CMS of Products and retakes possession of the
equipment provided to such customer, CMS shall give prompt written notice to
Supplier of such termination and repossession, shall give written evidence to
Supplier of the fair market value of the repossessed equipment, shall promptly
remit to Supplier [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] the amount of the fair market value of the repossessed equipment.
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<PAGE> 45
4. Section 6(c) of the Agreement is hereby deleted, except for the
final sentence which is hereby modified to read as follows:
"Products shall be deemed purchased when a firm purchase order
has been received by Supplier for delivery of Products within
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]."
5. Section 6(d) of the Agreement is hereby deleted in its entirety.
6. Section 6(e) of the Agreement is hereby deleted, except for the
first sentence which is hereby modified to read as follows:
"In the event that CMS is unable to meet the purchase target
set forth in paragraph 3(a) of this Amendment for any Measurement
Period due to the failure of Supplier to deliver the quantities of the
Products required to meet such purchase target, CMS's obligation to
meet such target will bc deemed to have been met."
7. Section 17(a) of the Agreement is hereby modified to the extent that
Supplier agrees that its acknowledgement dated October 6, 1995 shall
additionally cover and apply to any merger of CMS into Fisher Scientific Company
which may occur during 1996.
8. A new Section 25 shall be added to the Agreement and shall read in
its entirety:
Further Assurances. Supplier and CMS agree to perform any
further acts and execute and deliver any and all further documents
and/or instruments that may be reasonably necessary to carry out the
provisions of this Agreement.
9. Notwithstanding any provisions set forth in the Agreement to the
contrary, Supplier shall not, during 1996, increase the price of any Product to
CMS or, except as set forth in paragraph 3(b) of this Amendment, change any
discount applicable thereto as of December 26, 1995.
10. For purposes of this Amendment:
(a) "Cost" shall mean the price paid by CMS to Biosite for any Product
(as defined in this Amendment), exclusive of freight, handling, taxes and other
invoice charges.
(b) "Sales" to CMS customers shall be deemed to have occurred as of the
dates of CMS's respective invoices therefor.
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<PAGE> 46
(c) "Sales at Cost" shall mean the Cost of any Product sold by CMS, net
of returns. For purposes of paragraph 3(a) hereof, Sales at Cost shall be
calculated by multiplying the quantity of Products sold during the relevant
Measurement Period (as reflected on CMS's SAO50AD report or any successor or
replacement therefor) by the applicable Cost.
(d) "Products" shall mean such products as were available for purchase
by CMS from Biosite as of December 26, 1995.
(e) CMS's purchases from Supplier of Evaluation Kits, shall be taken
into account for purposes of the calculation of "Dollar Purchases From Supplier"
and shall not be taken into account for purposes of calculation of the
"Cumulative YTD Dollar Sales at Cost," as set forth in paragraph 3(a) of this
Amendment.
11. Except as set forth herein, the Agreement as originally executed by
the parties hereto shall remain in full force and effect. In the event of a
conflict, the terms of this Amendment shall control.
12. As a condition precedent to the effectiveness of this amendment,
simultaneous with the execution of this Amendment to Distribution Agreement,
Supplier and CMS agree, and CMS agrees to cause Fisher, to execute a Mutual
Release of Claims, in the form attached hereto as Exhibit B, relating to any
dispute arising out of the December 26, 1995 letter from Supplier purporting to
terminate the Agreement, and CMS' response thereto. The execution of this
Amendment and the Mutual Release of Claims shall supersede such purported
termination and render it null and void, and shall supersede to the extent of
any conflict any other agreement or understanding between the parties in
connection with the subject matter hereof including the January 23, 1996
CMS/Biosite contract amendment proposal.
The parties hereto have executed this Amendment to Distribution
Agreement as of March 12, 1996.
BIOSITE DIAGNOSTICS INCORPORATED
By: /s/ Kim D. Blickenstaff
-----------------------------
Title: President
--------------------------
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<PAGE> 47
CURTIN MATHESON SCIENTIFIC, INC.
By: /s/ Jack W. Daniels
--------------------------
Title: Vice President
-----------------------
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<PAGE> 48
[LETTERHEAD OF BIOSITE DIAGNOSTICS INCORPORATED]
August 9, 1996
Mr. Jack Daniels
Vice President, Clinical Marketing
Curtin Matheson Scientific
9999 Veterans Memorial Drive
Houston, TX 77038-2499
Dear Jack:
As a result of our discussions last week in Chicago, I would like to outline our
latest amendment of CMS's Exclusive Distribution Agreement for the Biosite
Triage(R) products, dated November 11, 1991.
As you are aware, CMS was unable to achieve the sales targets outlined in the
March 12, 1996 Amendment to the Distribution Agreement. As outlined in paragraph
6(b), CMS is required to pay Biosite [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of CMS' purchases for 1996 as a rebate penalty
(estimated to be [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]).
In order to invest in the future of our relationship, we have agreed to forgive
the rebate penalty over a four year period, subject to the following terms and
conditions.
1996 REVISED TARGETS
- - If CMS achieves a running rate of [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] kits or greater per month for Q4
1996, then Biosite will renew the contract for 1997, 1998 and 1999.
Biosite will also forgive [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of the [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] rebate penalty associated
with not making the original Triage milestone by June, 1996.
- - If CMS achieves a running rate of between [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] and [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] kits per
month for Q4 1996, then Biosite will renew the contract through 1997
only and CMS
<PAGE> 49
Mr. Jack Daniels
August 9, 1996
Page 2
will pay Biosite [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] of the [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] rebate penalty associated with the
original June, 1996 Triage goal.
- - The above rebate penalties to Biosite will be considered due in January
of 1997. Additionally, a "running rate" target will be considered met
based on the following definition: The average end user shipments in
the three months of a quarter must equal or exceed the target set
forth.
- i.e. the Q4 1996 target of [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] kits per month will be
considered made, if the monthly end user shipments for
October, November and December average [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] kits or
more.
- - 1996 Non-Performance: If CMS achieves a running rate of less than
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] kits per month for Q4 1996, then CMS will pay Biosite
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] of the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] rebate penalty associated with the original June,
1996 Triage goal and Biosite shall have the option to exercise the
termination clause as of December 31, 1996 with the effective date of
June 30, 1997 without paying a buyout. CMS shall pay Biosite the
remaining balance on the rebate associated with the original June, 1996
Triage milestone in January of 1997.
1997, 1998 AND 1999 TARGETS
- - If CMS achieves the following minimum sales targets, then Biosite will
forgive [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] of the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] rebate penalty associated with not making the
original Triage milestone by June, 1996 in each year the target is met.
<PAGE> 50
Mr. Jack Daniels
August 9, 1996
Page 3
Aggregate
Q3 and Q4
Avg. Monthly
Year Kit Sales
---- ---------
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
If CMS does not achieve the above aggregate Q3 and Q4 average monthly kit sales,
then CMS will pay Biosite [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] of the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] rebate penalty associated with the original June, 1996
Triage goal in each year the minimum sales levels are not met. Any penalty
payments will be due in January of the subsequent year in which minimum sales
are not achieved.
MINIMUM SALES TARGETS
- - Assuming that CMS achieves the [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] kits per month run rate for Q4
1996, Biosite will expect that CMS meet the following minimums in 1997
in order to maintain the Triage exclusive distribution rights in 1998
and 1999.
- Q1 minimum: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per month run rate
average for the quarter
- Q2 minimum: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per month run rate
average for the quarter
- Q3 minimum: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per month run rate
average for the quarter
- Q4 minimum: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per month run rate
average for the quarter
- - In the event CMS does not achieve these minimums, then CMS will lose
the 1998 Triage distribution rights, with an effective date six months
after missing any two quarter minimums in the calendar year and without
Biosite's payment of a buyout.
- - Assuming that CMS achieves the 1997 minimum sales target levels,
Biosite will expect that CMS meet the following
<PAGE> 51
Mr. Jack Daniels
August 9, 1996
Page 4
minimums in 1998 in order to maintain the Triage business
in 1999.
- Q1 minimum: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per month run rate
average for the quarter
- Q2 minimum: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per month run rate
average for the quarter
- Q3 minimum: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]per month run rate
average for the quarter
- Q4 minimum: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per month run rate
average for the quarter
- - In the event CMS does not achieve these minimums, then CMS will lose
the 1999 Triage distribution rights, with an effective date six months
after missing any two quarter minimums in the calendar year and without
payment of a buyout.
- - Assuming that CMS achieves the 1998 minimum sales target levels,
Biosite will expect that CMS meet the following minimums in 1999.
- Q1 minimum: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per month run rate
average for the quarter
- Q2 minimum: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per month run rate
average for the quarter
- Q3 minimum: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per month run rate
average for the quarter
- Q4 minimum: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per month run rate
average for the quarter
- - 1997, 1998 and 1999 Non-Performance: In the event CMS does not achieve
these minimum sales targets, CMS shall pay Biosite any remaining
balance on the rebate associated with the original June, 1996 Triage
milestone. Any remaining
<PAGE> 52
Mr. Jack Daniels
August 9, 1996
Page 5
balance(s) shall be due and payable in January of the subsequent year
following non-performance.
ADDITIONAL TERMS
- - Assuming that CMS achieves the 1997 and 1998 minimum sales target
levels outlined above, Biosite agrees to negotiate in good faith an
extension of the exclusive Distribution Agreement, with similar terms
and conditions, for [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] beyond 1999 ([CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]).
- - The termination and buy out provisions from the original Distribution
Agreement shall remain in place and be calculated as applicable for all
future years as outlined in the original Distribution Agreement for
years 4 and 5.
- - Minimum inventory levels for Triage products will be maintained at no
less than [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].
- - During 1996 (only if CMS achieves its sales targets) and thereafter,
CMS agrees to maintain the Triage products in the most favorable
commission rate for sales reps and to treat them as "focus products"
during the period of CMS's exclusivity.
- - Pricing to CMS for the Triage products shall remain firm [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] or
termination of the Distribution agreement, whichever is last to occur.
Please evidence your agreement by signing below. Except as modified in this
letter agreement and the Amendment to Distribution Agreement dated March 12,
1996, the Distribution Agreement dated November 11, 1991, shall remain in full
force and effect. In the event of any conflict among the terms and
<PAGE> 53
Mr. Jack Daniels
August 9, 1996
Page 6
provisions of the agreements, the applicable term or provision of the document
later in time shall control.
Sincerely,
/s/ Chuck Patrick
Chuck Patrick
Vice President,
Sales and Marketing
Acknowledged and agreed by:
Fisher Scientific Company as
successor by merger to Curtin
Matheson Scientific, Inc.
By: /s/ JW Daniels
------------------------------
Title: V.P. Marketing
---------------------------
Date: 8/9/96
----------------------------
<PAGE> 1
EXHIBIT 10.11
[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS
DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH
THE COMMISSION]
DEVELOPMENT, SUPPLY AND DISTRIBUTION AGREEMENT
THIS DEVELOPMENT, SUPPLY AND DISTRIBUTION AGREEMENT dated as of
February 14, 1995 (the "Agreement"), is entered into between BIOSITE DIAGNOSTICS
INCORPORATED, a Delaware corporation ("Biosite"), having a place of business
located at 11030 Roselle Street, Suite D, San Diego, California 92121, United
States of America, and KYOTO DAI-ICHI KAGAKU CO., LTD., a Japanese corporation
("KDK"), having a place of business located at 57 Nishi Aketa-Cho, Higashi-Kujo,
Minami-ku, Kyoto 601, Japan.
W I T N E S S E T H:
WHEREAS, Biosite owns or has rights to certain significant technology
which may be used in the development of reagents and a test device for use with
a test device reader to form a system to quantitatively measure analytes in the
immunoassay field; and
WHEREAS, Biosite and KDK desire to collaborate in the development of a
hand held rapid in vitro immunoassay system, consisting of reagents, a testing
device and a reader, designed to quantitatively measure multiple cardiac
analytes released from damaged cardiac tissue for use in the diagnosis and
monitoring of myocardial infarction, on the terms and subject to the conditions
set forth below; and
WHEREAS, in consideration of KDK's paying the development fund referred
to in Article 3.2 of the Agreement, KDK wishes to obtain from Biosite the
exclusive rights to market, and distribute such a hand held rapid in vitro
immunoassay system in Japan, Asia, the Middle East and the Pacific Island
Countries, for use in the diagnosis and monitoring of myocardial infarction, on
the terms and subject to the conditions set forth below:
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of the Agreement, the terms defined in this Article 1
shall have the respective meaning set forth below:
1.1 "Affiliate" shall mean, with respect to any Person,
any other Person which directly or indirectly controls, is
-1-
<PAGE> 2
controlled by, or is under common control with, such Person. A Person shall be
regarded as in control of another Person if it owns, or directly or indirectly
controls, at least fifty percent (50%) of the voting stock or other ownership
interest of the other Person, or if it directly or indirectly possesses the
power to direct or cause the direction of the management and policies of the
other Person by any means whatsoever.
1.2 "Agencies" shall mean, collectively, all sole agents, subsidiaries,
partnerships and other entities directly or indirectly controlled by KDK, and
all independent distributors of KDK diagnostic products, located in the
Territory.
1.3 "Asia" shall mean, collectively, [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION].
1.4 "Biosite Marks" shall mean those certain trademarks, trade names,
designs and marking owned by or licensed to Biosite and designated from time to
time in writing by Biosite for use by KDK under the Agreement in connection with
the promotion, marketing, sale and distribution of the Testing Device and the
Reader in the Territory for use in the Field.
1.5 "Development Program" shall mean the program to develop, conduct
clinical testing and apply for regulatory approval to market the Product in the
United States of America and the Territory for use in the Field, conducted by or
on behalf of Biosite and KDK pursuant to the Agreement.
1.6 "Field" shall mean the simultaneous and quantitative measurement of
multiple cardiac analytes released from damaged cardiac tissue, including CKMB,
Troponin I and Myoglobin, for use in the diagnosis and monitoring of myocardial
infarction.
1.7 "First Commercial Sale" shall mean the date of the first sale of
the Testing Device or the Reader in the Territory for use by the general public
in the field.
1.8 "Know-How" shall mean all information and data, which is not
generally known, including formulae, procedures, protocols, techniques and
results of experimentation and testing, which are necessary or useful to make,
use, develop, sell or seek regulatory approval in any country to market the
Product for use in the Field, in which Biosite or KDK has an ownership interest
and which is in the possession of Biosite or KDK on the date of the Agreement or
thereafter during the term of the Agreement.
1.9 "Middle East" shall mean, collectively, [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
1.10 "Pacific Island Countries" shall mean, collectively,
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].
-2-
<PAGE> 3
1.11 "Patent Rights" shall mean (a) all patent applications heretofore
or hereafter filed or having legal force in any country owned by or licensed to
Biosite or to which Biosite otherwise acquires rights, which claim the Product,
any Product Component, or the process of manufacture or use of the Product or
any Product Component for use in the Field, together with any and all patents
that have issued or in the future issue therefrom, including utility model and
design patents and certificates of invention; and (b) all divisionals,
continuations, continuations-in-part, reissues, renewals, extensions or
additions, to any such patents and patent applications; all to the extent and
only to the extent that Biosite now has or hereafter will have the right to
grant licenses, immunities or other rights thereunder.
1.12 "Person" shall mean an individual, corporation, partnership,
trust, business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity specifically listed herein.
1.13 "Product" shall mean the hand held rapid in vitro immunoassay
system, consisting of reagents, a testing device and a reader, developed by or
on behalf of Biosite for use in the Territory for use in the Field, together
with all improvements thereto (including future generations thereof) developed
by or on behalf of Biosite for use in the Territory for use in the Field, and
all modifications thereto developed by or on behalf of Biosite for use or sale
in the Territory for use in the Field.
1.14 "Product Components" shall mean, collectively, the Reader, the
Reagents and the Testing Device as defined below:
1.14.1 "Reader" shall mean that certain testing device reader
which Biosite shall develop or cause to be developed or cause its
subcontractor(s) to develop under the Development Program, constituting a
component of the Product.
1.14.2 "Reagents" shall mean those certain reagents which
Biosite shall develop or cause to be developed under the Development Program,
constituting a component of the Product.
1.14.3 "Testing Device" shall mean that certain testing device
which Biosite shall develop or cause to be developed under the Development
Program, containing the Reagents and constituting a component of the Product.
1.15 "Specifications" shall mean the specifications for the Product
Components established by Biosite and agreed to by KDK for use in the Field in
the Territory which are attached hereto as Exhibit A as such may be revised from
time to time pursuant to the provisions of Section 3.3 below.
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<PAGE> 4
1.16 "Quality Inspection Criteria" shall mean quality inspection
criteria for the Product Components established by mutual agreement of Biosite
and KDK which will be attached hereto as Exhibit __ within eighteen (18) months
from the effective date of the Agreement.
1.17 "Territory" shall mean, collectively, Japan, Asia, the Middle East
and the Pacific Island Countries.
1.18 "Third Party" shall mean any Person other than Biosite, KDK and
their respective Affiliates.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants to the other party as
follows:
2.1 Corporate Existence and Power. Such party (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated; (b) has the corporate power and
authority and the legal right to own and operate its property and assets, to
lease the property and assets it operates under lease, and to carry on its
business as it is now being conducted and (c) is in compliance with all
requirements of applicable law, except to the extent that any noncompliance
would not have a material adverse effect on the properties, business, financial
or other condition of such party and would not materially adversely affect such
party's ability to perform its obligations under the Agreement.
2.2 Authorization and Enforcement Obligations. Such party (a) has the
corporate power and authority and the legal right to enter into the Agreement
and to perform its obligations hereunder and (b) has taken all necessary
corporate action on its part to authorize the execution and delivery of the
Agreement and the performance of its obligations hereunder. The Agreement has
been duly executed and delivered on behalf of such party, and constitutes a
legal, valid, binding obligation, enforceable against such party in accordance
with its terms.
2.3 Consents. All necessary consents, approvals and authorizations of
all governmental authorities and other Persons required to be obtained by such
party in connection with execution of the Agreement have been obtained.
-4-
<PAGE> 5
ARTICLE 3
DEVELOPMENT PROGRAM
3.1 Development Activities. Biosite and KDK shall conduct, or cause to
be conducted, the Development Program to develop, conduct all clinical testing
and apply for regulatory approval to market the Product in the Territory.
3.1.1 Development Responsibilities. Biosite shall be
responsible to conduct or cause the design, development and manufacturing
scale-up of the Product. Biosite shall be responsible for the clinical trials
and regulatory approval of the Product in the United States of America. KDK
shall be responsible for the clinical trials and regulatory approval of the
Product in the Territory for use in the Field.
3.2 Development Program Funding.
3.2.1 Development Costs. To support Biosite's Development
Program, KDK shall pay Biosite the following nonrefundable amounts upon
achievement of the applicable milestones set forth below. Biosite shall apply
the funding received from KDK under the Agreement only for the specific purpose
of carrying out its obligations under the Development Program and accomplishing
the objectives thereof.
a. Milestone 1. Prior to the date of the Agreement, KDK has
paid Biosite the sum of US$500,000 the receipt of which is hereby acknowledged.
b. Milestone 2. KDK shall pay Biosite the sum of [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] upon [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
c. Milestone 3. KDK shall pay Biosite the sum of [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] upon [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
d. Milestone 4. KDK shall pay Biosite the sum of [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] upon [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
e. Milestone 5. KDK shall pay Biosite the sum of [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
3.2.2 Milestone Timetable. Biosite shall be responsible for
developing the Product according to the Milestone Timetable set forth below.
-5-
<PAGE> 6
Milestone 2 [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION]
Milestone 3 [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION]
Milestone 4 [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION]
3.2.3 Clinical and Regulatory Costs. Biosite shall be solely
responsible for funding the costs of clinical trials and regulatory approval of
the Product in the United States of America. KDK shall be solely responsible for
funding the costs of clinical trials and regulatory approval of the Product in
the Territory.
3.3 Specifications and Quality Inspection Criteria. Biosite and KDK
shall agree upon specifications for the Product Components which are to be set
forth in writing and to be attached as final specifications to the Agreement.
The parties shall also agree upon the Quality Inspection Criteria within
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] from
the effective date of the Agreement which will be attached hereto as Exhibit.
Any modifications to the Specifications and the Quality Inspection Criteria for
the Testing Device and the Reader in the Territory shall require the prior
mutual agreement of Biosite and KDK.
ARTICLE 4
DISTRIBUTION RIGHT
4.1 Distribution Right. In consideration of KDK's paying the
development funding referred to in Article 3.2 of the Agreement, Biosite hereby
grants KDK the exclusive right to promote, market, service, sell and distribute
the Product in the Territory and hereby acknowledges that KDK has such exclusive
distribution right. KDK shall use its best efforts to promote, market,
distribute and sell the Product in the Territory and to meet the reasonably
foreseeable market demand therefor. KDK shall not sell or export the Product,
directly or indirectly, nor cause any Third Party to promote, market, sell,
export, distribute or otherwise deal in the Product, directly or indirectly,
outside the Territory. KDK shall have the right to appoint one or more Third
Parties as subdistributors in the Territory. Biosite shall not sell the Product,
directly or indirectly, nor cause any Third Party (including without limitation
LRE Reais+Elektronik GmbH) to promote, market, sell, export, distribute or
otherwise deal in the Product, directly or indirectly, in the Territory.
4.2 Noncompetition. Except as otherwise provided in the Agreement,
during the term of the Agreement, neither Biosite nor KDK shall, for itself or
with any Affiliate or Third Party, market, promote, sell or distribute
[CONFIDENTIAL MATERIAL
-6-
<PAGE> 7
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] in the Territory for use in
the Field without the prior express written consent of the other party.
Notwithstanding the foregoing, KDK shall have the right, without any prior
written consent of Biosite, to market, promote, sell or distribute the
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
including future modifications and improvements (currently marketed under the
name [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
4.3 Independent Purchaser Status. KDK shall be an independent purchaser
and seller of the Testing Device and the Reader. KDK shall not act as an agent
or legal representative of Biosite, nor shall KDK have any right or power to act
for or bind Biosite in any respect or to pledge its credit.
4.4 New Reader Applications. Biosite shall inform KDK first of
Biosite's intention to market new reader application products in the Territory.
Biosite shall initiate, upon request by KDK, a meeting with KDK to discuss the
right to distribute, sell or market such new reader application products in the
Territory. In the event that Biosite elects to appoint new distributor(s) for
such new application products in the Territory, Biosite shall modify or change
the color, product name and software of the Reader in the new application so
that the Readers under this Agreement may be sufficiently differentiated from
the Readers under new reader applications, and [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION].
ARTICLE 5
TERMS AND CONDITIONS OF SUPPLY
Biosite shall sell and deliver, and KDK shall purchase from Biosite,
such Testing Devices and Readers as KDK requires for sale in the Territory or
use in the Field on the terms and subject to the conditions set forth below:
5.1 Price.
5.1.1 Testing Device. The sales price for each Testing Device
(which shall contain the Reagents and shall be in finished product packages
including package insert, retail cartons, and language on such package and
insert should be English and/or Japanese) purchased by KDK for commercial sale
hereunder shall be equal to [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] (FCA San Diego Facilities Incoterms 1990) per Testing
Device for orders received by Biosite prior to the [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the First Commercial Sale
of the Testing Device. The sales price for each Testing Device for
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<PAGE> 8
orders received on or after such [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] shall be determined from time to time by the
mutual agreement of the parties.
5.1.2 Reader. The sales price for each Reader (which shall be
contained in finished product packages which include operator's manual, retail
cartons, carton packing material, languages on packages should be English and/or
Japanese) purchased by KDK for commercial sale hereunder shall be equal to (a)
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] (FOB
Munich Airport, Frankfurt Airport or Hamburg Seaport Incoterms 1990) per Reader
for orders received by Biosite prior to the [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] of the First Commercial Sale of the
Reader, and (b) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] (FOB Munich Airport, Frankfurt Airport or Hamburg Seaport Incoterms
1990) per Reader for orders received by Biosite on or after the [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] and prior to the
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the
First Commercial Sale of the Reader. The sales price for each Reader for orders
received on or after such [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] shall be determined from time to time by the mutual
agreement of the parties.
5.1.3 Revised Prices. Notwithstanding the foregoing, if either
party in good faith determines that, due to material changes in manufacturing or
marketing circumstances, it is not commercially feasible to purchase or sell the
Testing Device or the Readers hereunder for commercial sale in any country in
the Territory for use in the Field, the parties shall meet and negotiate in good
faith, and if the parties mutually agree, revise the sales price for the Testing
Device or the Reader under this Section 5.1.
5.2 Demonstration Products.
5.2.1 Testing Device. Prior to, and during the period of
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
following, the date of the First Commercial Sale of the Testing Device in the
Territory, Biosite shall sell and deliver to KDK such quantity of Testing
Devices, not to exceed [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION], as KDK requests solely for demonstration purposes in connection
with the promotion, marketing, distribution and sale of the Testing Device, but
not for commercial sale hereunder, at a price equal to [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] (FCA San Diego Facilities
Incoterms 1990) per Testing Device. During the term of the Agreement, KDK may
request from time to time any additional Testing Devices for demonstration
purposes and upon such request the parties shall negotiate in good faith terms
and conditions (including quantity and price terms).
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<PAGE> 9
5.2.2 Reader. Prior to, and during the period [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] following, the date
the First Commercial Sale of the Reader in the Territory, Biosite shall sell and
deliver to KDK such quantity of Readers, not to exceed [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION], as KDK requests solely for
demonstration purposes in connection with the promotion, marketing, distribution
and sale of the Reader, but not for commercial sale hereunder, at a price equal
to [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
(FOB Munich Airport, Frankfurt Airport or Hamburg Seaport Incoterms 1990) per
Reader. During the term of the Agreement, KDK may request from time to time any
additional Readers for demonstration purposes and upon such request, the parties
shall negotiate in good faith terms and conditions (including quantity and price
terms).
5.3 Order and Shipment. KDK shall make all purchases of Product by
placing firm orders with Biosite. Such purchase orders shall be in writing and
in a form reasonably acceptable to Biosite. Purchase orders shall not be binding
upon Biosite unless and until accepted by Biosite. Biosite shall notify KDK in
writing of its acceptance of purchase orders and of the scheduled deliver
therefor within [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] after receipt of firm orders. Biosite shall use commercially
reasonable efforts to deliver the Product within [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] after receipt of firm orders. The
Product shall be packed in such manner as to ensure safe and undamaged delivery.
The Testing Device shall be delivered FCA San Diego Facilities
Incoterms 1990. The Reader shall be delivered FOB Munich Airport, Frankfurt
Airport or Hamburg Seaport Incoterms 1990. The Product shall be shipped to KDK's
facility located at Kyoto, Japan or such other location as designated in advance
in writing by KDK. Biosite shall make its best effort to accept any reasonable
orders for the Product placed by KDK. [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
5.4 Payments. KDK shall pay Biosite within [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] days from date of the
applicable bill of lading or airway bill for all Product purchased hereunder.
KDK shall make all payments under the Agreement to Biosite in United States
dollars to Biosite's account in a financial institution located in the United
States.
5.5 Forecasts. Not less than [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] prior to the
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<PAGE> 10
reasonably anticipated date of the First Commercial Sale, KDK shall provide an
initial non-binding forecast to be updated quarterly.
5.6 Warranties.
5.6.1 Testing Devices and Readers. Biosite warrants that it
will manufacture all Testing Devices and shall cause the Readers to be
manufactured in conformity with the final and latest Specifications and that
every Testing Device and Reader shipped by or on behalf of Biosite will be free
from defects in material and workmanship. With respect to the Readers, KDK will
provide to its end users a [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] warranty commencing on the date of delivery to end users.
In order to support such warranty, Biosite agrees that the warranty period for
each Reader shall be [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] from the date of shipment to KDK. If during the above warranty
period any Readers are found to be defective or not in conformity with the
Specifications, KDK shall so notify Biosite and Biosite shall repair or replace
such defective Readers promptly at its full expense (including expense for
return by KDK of the defective Readers or parts to Biosite and shipment by
Biosite of the correct and new Readers or parts to KDK). With respect to the
Testing Devices, any Testing Devices which are found to be defective or not in
conformity with the Specifications during their dated shelf life shall promptly
be replaced by Biosite at its full and sole expense including shipping expense.
If any Testing Device or Reader does not conform to the Specifications,
and fails to pass KDK's quality control conducted following the agreed Quality
Inspection Criteria in Kyoto or such other locations as designated by KDK, KDK
shall be entitled to reject such products, or in its sole discretion, reject the
entire lot from which such nonconforming products were manufactured. KDK shall
exercise its rejection by promptly shipping back to Biosite all such rejected
products or lots at no cost to KDK. In the event of any rejection, Biosite shall
promptly replace the nonconforming or rejected products or lots as soon as
possible but no later than [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]. Biosite shall not alter or depart from these procedures in
the manufacture or testing of the Product so as to affect its performance
without KDK's prior written consent, which consent shall not be unreasonably
withheld. Any other changes made by Biosite in manufacture or testing that
affect production or testing documentation, or service or operating manuals, or
Exhibits to the Agreement, shall require written notice to KDK. Biosite, upon
prior written reasonable notice, shall grant KDK periodic inspection and
visitation rights and access to Biosite's and its designee's manufacturing
facilities and data.
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<PAGE> 11
5.6.2 Patents. Biosite warrants that the patents listed on
Exhibit B hereto have issued, that it is the owner of such patents and that it
has received no notice from any Third Party of any lawsuits alleging the
invalidity of such patents. Biosite warrants, to its current actual knowledge,
that the form of the Testing Device contemplated by Biosite as of the date of
the Agreement does not infringe the issued patents of any Third Party in the
Territory. If the Testing Device is determined to infringe any issued patent in
the Territory, Biosite shall use its best efforts to obtain all appropriate
licenses and other rights so that KDK is able to continue its distribution of
the Product in the Territory lawfully.
5.6.3 Labels, Warnings and Instructions. KDK shall distribute
the Testing Devices and Readers as labeled by or on behalf of Biosite in the
Territory so as to include all warnings and instructions necessary for the
proper use of the Testing Devices and Readers; provided, however, Biosite and
KDK shall agree about the position and form of such labels, lest such labels
should violate any local laws or regulations in the Territory.
ARTICLE 6
OBLIGATIONS OF KDK REGARDING DISTRIBUTION
6.1 Sales Promotion. KDK shall use its best efforts to promote the sale
and use of the Testing Devices and the Reader in the Territory for use in the
Field. KDK shall provide necessary training of KDK's or subdistributors sales
representatives in the use of the Testing Device and the Reader.
6.2 Promotional Materials; Package Inserts. KDK shall use reasonable
efforts to ensure that all advertising, promotional literature, packaging and
package inserts comply with applicable laws and regulations in the Territory.
KDK shall prepare necessary translations of Biosite's sales literature, package
inserts and labeling.
6.3 Import Licenses and Other Governmental Approvals, Compliance.
6.3.1 KDK shall, at its own expense, obtain any registration,
license, permit or governmental approval (collectively, any "Registration") that
may be necessary to permit the purchase, distribution and resale by KDK of the
Testing Device and the Reader in each country in the Territory.
6.3.2 All registrations in the Territory of the Testing Device
and the Reader shall be made in the name of KDK and shall [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
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<PAGE> 12
6.4 Quarterly Reports. KDK shall prepare and provide Biosite with
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
written sales reports within [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of the end of each calendar [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION], commencing with the
first calendar [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] after the First Commercial Sale. The [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] reports shall summarize sales (sales
figures only) of the Testing Device and the Reader by KDK and its
subdistributors during the preceding [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] for Japan.
ARTICLE 7
OBLIGATIONS OF BIOSITE REGARDING DISTRIBUTION
7.1 Support. Biosite regularly shall provide KDK with literature on the
Testing Device and technical information relating to the Testing Device, the
Reader and their proper use. Biosite shall further furnish free of charge to KDK
reasonable quantities of sales manuals, brochures, and other sales promotional
documents in English. Upon KDK's request, Biosite shall furnish free of charge
to KDK reasonable quantities of available photographs, negative/positive films,
camera ready artwork, posters and panels relating to the Product, such items
shall be for use by KDK in its marketing and public relations activities.
7.2 Assistance. Biosite shall provide KDK with all data and other
information available to Biosite, and shall execute or cause to be executed such
certificates and other documents, as reasonably necessary to assist KDK in
obtaining all necessary product registration in the Territory for the Testing
Devices and the Reader. Biosite shall provide KDK with reasonable access to and
assistance of its technical, sales, and service personnel in San Diego,
California as Biosite deems appropriate. Such assistance under this section
shall be without charge to KDK except as may be otherwise mutually agreed.
7.3 Support for Product Registration. Biosite shall provide KDK with
any necessary, sufficient and reasonable backup in support of KDK's obtaining
necessary product registration. Upon KDK's request, the parties shall negotiate
the supply of the Product for clinical trials at [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] prices.
7.4 Certain Training. Where training (i.e., technical training,
application training etc.) is required Biosite shall provide the necessary
training to KDK. Biosite shall provide to KDK the particular custom tools and
other materials at cost which are prepared for proper maintenance or repair of
the Product for out of warranty service. During the term of the Agreement,
Biosite shall send its personnel (scientific,
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<PAGE> 13
technical or marketing staffers), as agreed upon on a case by case basis, to
work with KDK in the Territory.
7.5 Reports. Biosite shall make periodic reports to KDK on development
and modifications of the Product, United States and European market trends
regarding the Product and important industrial news every [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION], commencing with the first
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]after
the effective date of the Agreement. Biosite shall send KDK, on a [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION], reports on the
status and progress of the Development Program for which Biosite is responsible,
commencing with the first [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] after the effective date of the Agreement.
ARTICLE 8
CONFIDENTIALITY AND PUBLICATION
8.1 Confidential Information. During the term of the Agreement, and for
a period of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] following the expiration or earlier termination hereof, each party
shall maintain in confidence all information (including samples) disclosed by
the other party and identified as, or acknowledged to be, confidential (the
"Confidential Information" to be stamped as confidential), and shall not use,
disclose or grant the use of the Confidential Information except on a need-to
know basis to those directors, officers, employees, consultants, clinical
investigators, contractors, permitted sublicensees or permitted assignees,
customers, end users, dealers, researchers, collaborators, subdistributors,
clinicians, medical technologists, laboratory technicians, medical doctors,
nurses, to the extent such disclosure is reasonably necessary in connection with
such party's activities as expressly authorized by the Agreement. To the extent
that disclosure is authorized by the Agreement, prior to disclosure, each party
hereto shall obtain agreement of any such person or entity to hold in confidence
and not make use of the Confidential Information for any purpose other than
those permitted by the Agreement. Each party shall notify the other promptly
upon discovery of any unauthorized use or disclosure of the other party's
Confidential Information.
8.2 Permitted Disclosures. The confidentiality obligations contained in
Section 8.1 above shall not apply to the extent that (a) any receiving party
(the "Recipient") is required (i) to disclose information by law, order or
regulation of a governmental agency or a court of competent jurisdiction, or
(ii) to disclose information to any governmental agency for purposes of
obtaining approval to test or market a product or (b) the Recipient can
demonstrate that (i) the disclosed
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<PAGE> 14
information was public knowledge at the time of such disclosure by the other
party hereunder, or thereafter became public knowledge, other than as a result
of actions of the Recipient, its directors, officers, employees, consultants,
clinical investigators, contractors, permitted sublicensees and permitted
assignees, customers, end users, dealers, researchers, collaborators,
subdistributors, clinicians, medical technologists, laboratory technicians,
medical doctors, nurses in violation hereof; (ii) the disclosed information was
rightfully known by the Recipient or its affiliates (as shown by its written
records) prior to the date of disclosure to the Recipient by the other party
hereunder; or (iii) the disclosed information was disclosed to the Recipient or
its affiliates on an unrestricted basis from a source unrelated to any party to
the Agreement and not under a duty of confidentiality to the other party.
Notwithstanding any other provision of the Agreement, each party may disclose
Confidential Information of KDK or Biosite relating to information developed
pursuant to the Agreement to any person or entity with whom Biosite has, or is
proposing to enter into, a business relationship, as long as such person or
entity has entered into a confidentiality agreement with Biosite. Subject to the
confidentiality provisions contained in this Article 8, KDK shall have the
right, at its discretion, to issue press releases or public announcements
concerning KDK's distribution, sale/marketing of the Products, or any other
activities hereunder in the Territory. KDK shall give Biosite written notice of
any such press releases or public announcements.
8.3 Terms of the Agreement. Neither Biosite nor KDK shall disclose any
terms or conditions of the Agreement to any Third Party without the prior
consent of the other party, except as required by applicable law or to Persons
with whom KDK or Biosite has entered into or proposes to enter into a business
relationship provided that such Persons shall enter into the required
confidentiality agreement. Notwithstanding the foregoing, within sixty (60) days
of execution of the Agreement, KDK and Biosite shall agree upon the substance of
information that can be used to describe the terms of this transaction in
publicity with respect to the Agreement or otherwise, and KDK and Biosite may
disclose such information, as modified by mutual agreement from time to time.
8.4 Use of Name. Except as required by applicable law, neither party
shall use the name of the other party or the other party's employees in any
advertisement or press release, without prior written approval of the other
party, which approval shall not be unreasonably withheld. If, however, a party
has approved an advertisement or press release that contains the same or
substantially the same text, shall not be required to be submitted for approval
to the other party.
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<PAGE> 15
ARTICLE 9
PATENT RIGHTS
9.1 Ownership. Biosite shall be the exclusive owner of any Patent
Rights, Know-How or other intellectual rights of the Product, the Product
Components and the process of the manufacture or use thereof, whether or not
patentable.
9.2 Prosecution, Maintenance and Enforcement. Biosite, at
its sole expense, shall be responsible for and shall control the
preparation, filing, prosecution, maintenance and enforcement of
the Patent Rights.
9.3 Third Party Infringement Actions. If KDK, its subdistributors or
their respective customers is sued by a Third Party for infringement of a patent
because of the sale of a Testing Device or Reader in the Territory, KDK promptly
shall notify Biosite in writing of the institution of such suit. Biosite and KDK
agree to use their best efforts to mutually settle any litigation relating to
the infringement of any issued patents. Biosite shall have the right, in its
sole discretion, to control the defense of such suit at its own expense, in
which event KDK shall have the right to be represented by advisory counsel of
its own selection, at its own expense, and shall, at Biosite's expense,
cooperate fully in the defense of such suit and furnish to Biosite all evidence
and assistance in its control.
9.4 No Other Technology Rights. Except as otherwise provided in the
Agreement, under no circumstances shall a party, as a result of the Agreement,
obtain any ownership interest or other right in any technology, Know-How,
patents, pending patent applications, products, vaccines, antibodies, cell lines
or cultures, or animals of the other party, including items owned, controlled or
developed by the other, or transferred by the other to such party at any time
pursuant to the Agreement. It is understood and agreed by the parties that the
Agreement does not grant to either party any license or other right in basic
technology of the other party except to the extent necessary to enable the
parties to carry out their part of the Development program or the development
and marketing of the Product.
ARTICLE 10
BIOSITE MARKS
The trade marks or trade names of the Testing Device and the Reader for
sale in the Territory shall be chosen by KDK and registered in the name of KDK
in the Territory at its expense, provided, however, that KDK shall consult with
Biosite in sincere manner in the choice of such trademarks or trade names and
respect Biosite's recommendation. KDK shall not use any
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<PAGE> 16
Biosite Marks, or any word, title, expression, trademark, design or marking that
is confusingly similar thereto, as part of its corporate or business name, its
products or in any other manner. Notwithstanding the foregoing, (a) KDK may
identify itself as an authorized distributor of Biosite, and (b) KDK may use the
Biosite Marks for display purposes in connection with solicitation of orders for
the Testing Device and the Reader. KDK shall not alter, remove or modify any
Biosite Marks, nor affix any other trademarks, labels or markings to the Testing
Device and the Reader without Biosite's consent; provided, however, that KDK may
affix labels or other indices on the Testing Devices and the Readers it
distributes to identify it as the distributor of the Testing Device and the
Reader so long as such labels do not cover and are not inconsistent with the
Biosite Marks, labels or markings. All registrations of the Biosite Marks shall
be paid by Biosite. Biosite hereby grants to KDK the royalty-free exclusive
right to use Biosite Marks on the Product during the term of this Agreement and
the period of the Product being distributed by KDK. No other KDK labels, package
inserts or other material shall accompany the Testing Device and the Reader
without the prior written approval of Biosite; provided, however, that once
Biosite has so approved the use of any such KDK labels, package inserts or other
material, then any other KDK labels, package inserts or materials that contain
the same or substantially the same text shall not be required to be submitted to
Biosite for approval.
ARTICLE 11
COPYRIGHTS
KDK hereby acknowledges that Biosite may claim copyright protection
with respect to certain parts of the Testing Device and the Reader and the
labels, inserts and other materials regarding the Testing Device and the Reader.
KDK further acknowledges that Biosite has advised KDK that it has the sole and
exclusive right to claim the copyright protection with respect to all such
items. Nothing contained in this Article 11 shall prohibit KDK from copying and
distributing to its sales representatives Testing Device and Reader advertising,
literature and other materials prepared by or on behalf of Biosite for the
purpose of fulfilling KDK's obligations and rights under the Agreement. KDK
shall cooperate with Biosite, take such actions and execute such documents, as
reasonably requested by Biosite and at Biosite's expense, to assist Biosite in
the protection of copyrights owned by or licensed to Biosite. KDK shall inform
Biosite immediately of any infringements or other improper action with respect
to any such copyrights that come to the actual attention of KDK.
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<PAGE> 17
ARTICLE 12
TERM AND TERMINATION
12.1 Term. Unless terminated earlier pursuant to Section 12.2 below,
the Agreement shall continue in full force and effect for an initial term
expiring [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] after the date of receipt of the required marketing approval, and
pricing approval (if any), from the governing health authority in any country in
the Territory to market the Product in such country for use in the Field;
provided, however, that [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
12.2 Termination. Either party may terminate the Agreement (a) except
as otherwise provided in Section 14.2 below, upon or after the breach of any
material provision of the Agreement by the other party if the other party has
not cured such breach within [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] after notice thereof from they non-breaching
party, or (b) at any time after the expiration of the initial [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] year term and the
first [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
year extension (total [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] years) if extended of the Agreement, upon not less than
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] prior
written notice to the other party for any reason whatsoever. KDK shall have the
right to terminate the Agreement if Biosite elects to cancel, stop or suspend
the development program or any each of the Milestone Timetable is delayed by
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] or
more.
12.3 Effect of Expiration and Termination. Upon termination or
expiration of the Agreement, KDK shall have the right either to ship back the
KDK's inventory of the Product at KDK's acquisition cost which includes
air/ocean freight, insurance and duties or to continue to sell the remaining
stock of the Product. After termination or expiration of the Agreement for
whatever reasons Biosite shall continue to supply KDK for a period of
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] from
the date of termination of the Agreement with Testing Devices, reagents and
spare-parts necessary for the customers of KDK which have acquired the Readers,
and KDK shall have the right to distribute such products during the same period.
Expiration or termination of the Agreement shall not relieve the parties of any
obligation accruing prior to such expiration or termination. The provisions of
Articles 8, 9 and 13 shall survive the expiration or termination of the
Agreement.
ARTICLE 13
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<PAGE> 18
INDEMNITY
13.1 Indemnity. Biosite shall defend, indemnify and hold KDK, its
Affiliates and/or its Agencies harmless from all costs, damages and expenses
(including reasonable attorneys' fees) that KDK may suffer as a result of any
claims or judgments in favor of any Third Party for bodily injury, property
damage, or any other damage or injury caused or alleged to have been caused by
the defective Product (including without limitation design defects,
manufacturing defects and warning defects) except to the extent that any such
damage is attributable to the gross negligence or willful misconduct of KDK.
Each party shall indemnify, defend and hold harmless the other party, its
directors, officers, employees and agents from all losses, liabilities, damages
and expenses (including reasonable attorney's fees and cost) that they may
suffer as a result of any claims, demands, actions or other proceedings made or
instituted by any Third Party against any of them and arising out of or relating
to (a) any breach of the Agreement by the indemnifying party, (b) any negligence
or intentional act or omission by or on behalf of the indemnifying party in the
performance of its activities contemplated by the Agreement, (c) any
misrepresentation or misstatements by KDK or Biosite, in each case other than
those certain losses, liabilities, damages and expenses arising out of the gross
negligence or willful misconduct of the indemnified party.
13.2 Procedure. A party (the "Indemnitee") that intends to claim
indemnification under this Article 13 shall promptly notify the other party (the
"Indemnitor") of any claim, demand, action or other proceeding with respect to
which the Indemnitee intends to claim such indemnification. The Indemnitor shall
have the right to participate in, and, to the extent the Indemnitor so desires,
jointly with any other Indemnitor similarly notices, to assume the defense
thereof with counsel selected by the Indemnitor; provided, however, that an
Indemnitee shall have the right to retain its own counsel, with the fees and
expenses to be paid by the Indemnitor, if representation of the Indemnitee by
the counsel retained by the Indemnitor would be inappropriate due to actual or
potential differing interests between such Indemnitee and any other party
represented by such counsel in such proceedings. The indemnity obligations under
this Article 13 shall not apply to amounts paid in settlement of any loss,
liability, damage or other expense if such settlement is effected without the
consent of the Indemnitor, which consent shall not be withheld unreasonably. The
failure to deliver notice to the Indemnitor within a reasonable time at the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such Indemnitor of any liability to the Indemnitee under
this Article 13, but the omission so to deliver notice to the Indemnitor will
not relieve it of any liability that it may have to any Indemnitee otherwise
than under this Article 13. The Indemnitor may not settle the action or
otherwise consent to an
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<PAGE> 19
adverse judgment in such action that diminishes the rights or interests of the
Indemnitee without the express written consent of the Indemnitee. The
Indemnitee, its employees and agents, shall cooperate fully with the Indemnitor
and its legal representatives in the investigation of any action, claim or
liability covered by this indemnification.
13.3 Insurance. Biosite shall maintain, through self-insurance or
otherwise, such insurance and products liability insurance against claims
regarding the development and manufacture of the Testing Device by Biosite under
the Agreement, in such amounts as it customarily maintains for similar
activities. Biosite shall maintain such insurance during the term of the
Agreement and thereafter for so long as it maintains insurance for itself
covering similar activities.
ARTICLE 14
MISCELLANEOUS
14.1 Notices. Any consent, notice or report required or permitted to be
given or made under the Agreement by one of the parties to the other shall be in
writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery, air mail, internationally-recognized delivery service or
courier), air mail, internally-recognized delivery service or courier, postage
prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and (except as otherwise provided in the
Agreement) shall be effective upon receipt by the addressee.
If to Biosite:
Biosite Diagnostics Incorporated
11030 Roselle Street, Suite D
San Diego, California 92121, U.S.A.
Attention: Kim D. Blickenstaff
President
If to KDK:
Kyoto Dai-Ichi Kagaku Co., Ltd.
57 Nishi Aketa-Cho,
Higashi-Kujo,
Minami-Ku,
Kyoto 601, Japan
Attention: Shigeru Doi
President
14.2 Force Majeure. Neither party shall be held liable or responsible
to the other party nor be deemed to have defaulted under or breached the
Agreement for failure or delay in
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<PAGE> 20
fulfilling or performing any term of the Agreement to the extent, and for so
long as, such failure or delay is caused by or results from causes beyond the
reasonable control of the affected party including fire, floods, embargoes, war,
acts of war (whether war be declared or not), insurrections, riots, civil
commotions, strikes, lockouts or other labor disturbances, acts of God or acts,
omissions or delays in acting by any governmental authority.
14.3 Assignment. Except as expressly provided hereunder, the Agreement
may not be assigned or otherwise transferred, nor may any right or obligations
hereunder be assigned or transferred by either party [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]. Any permitted assignee shall
assume all obligations of its assignor under the Agreement.
14.4 Severability. Each party hereby acknowledges that it does not
intend to violate any public policy, statutory or common laws, rules,
regulations, treaty or decision of any government agency or executive body
thereof of any country or community or association of countries. Should one or
more provisions of the Agreement be or become invalid, the parties shall
substitute, by mutual consent, valid provisions for such invalid provisions
which valid provisions in their economic effect are sufficiently similar to the
invalid provisions that it can be reasonably assumed that the parties would have
entered into the Agreement with such provisions. In case such provisions cannot
be agreed upon, the invalidity of one or several provisions of the Agreement
shall not affect the validity of the Agreement as a whole, unless the invalid
provisions are of such essential importance to the Agreement that it is to be
reasonably assumed that the parties would not have entered into the Agreement
without the invalid provisions.
14.5 Governing Law. The Agreement shall be governed by and construed in
accordance with the laws of the State of California, U.S.A., without regard to
the conflicts of law principles thereof, and shall not be governed by the United
Nations Convention on Contracts for the International Sale of Goods.
14.6 Arbitration. Any dispute, controversy or claim originally
initiated by either party relating to, arising out of or resulting from the
Agreement, or the performance by either party of its obligations hereunder,
whether before or after termination of the Agreement, shall be finally resolved
by binding arbitration pursuant to the Japan-American Trade Arbitration
Agreement of September 16, 1952. Whenever a party shall decide to institute
arbitration proceedings, it shall give written notice to that effect to the
other party. If initiated by Biosite, such arbitration hereunder shall be
conducted under the Commercial Arbitration Rules of the Japan Commercial
Arbitration Association, and any applicable procedural laws of Japan, and shall
be held in Osaka, Japan. If initiated by KDK,
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<PAGE> 21
such arbitration shall be conducted under the Commercial Arbitration Rules of
the American Arbitration Association and any applicable procedural laws of the
State of California, and shall be held in Los Angeles, California. The award
shall be
final and binding upon the parties.
14.7 U.S. Export Laws and Regulations. Each party hereby acknowledges
that the marketing rights and information disclosure requirements of the
Agreement are subject to the laws and regulations of the United States relating
to the export of products and technical information. Without limitation, each
party shall comply with all such laws and regulations.
14.8 Entire Agreement. The Agreement contains the entire understanding
of the parties with respect to the subject matter hereof. All express or implied
agreements and understandings, either oral or written, heretofore made are
expressly superseded by the Agreement. The Agreement may be amended, or any term
hereof modified, only by a written instrument duly executed by both parties.
14.9 Headings. The captions to the several Articles and Sections hereof
are not a part of the Agreement, but are merely guides or labels to assist in
locating and reading the several Articles and Sections hereof.
14.10 Independent Contractors. It is expressly agreed that Biosite and
KDK shall be independent contractors and that the relationship between the two
parties shall not constitute a partnership, joint venture or agency. Neither
Biosite nor KDK shall have the authority to make any statements, representations
or commitments of any kind, or to take any action, which shall be binding on the
other, without the prior consent of the party to do so.
14.11 Language. The English language version of the Agreement shall
govern and control any translations of the Agreement into any other language.
14.12 Waiver. The waiver by either party of any right hereunder or the
failure to perform or of a breach by the other party shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.
14.13 Counterparts. The Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed the Agreement as of the
date first set forth above.
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<PAGE> 22
BIOSITE DIAGNOSTICS KYOTO DAI-ICHI KAGAKU CO. LTD.
INCORPORATED
By: /s/ Shigeru Doi
By: /s/ Kim D. Blickenstaff ---------------------------
--------------------------- Title: President
Title: President ------------------------
------------------------ Date: 2/14/95
Date: 2/14/95 ------------------------
------------------------
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<PAGE> 23
Exhibit A: Product Specification
System Design Specifications
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
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<PAGE> 24
Exhibit B
Patents
Patent Number 07/887,526 - Diagnostic device and apparatus for the controlled
movement of reagents without membranes.
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<PAGE> 1
EXHIBIT 10.12
[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS
DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH
THE COMMISSION]
DEVELOPMENT AND SUPPLY AGREEMENT
F1-METER
Between:
LRE Relais + Elektronik GmbH
- Medial Technology -
Linprunstra(beta)e 16
80335 Munchen
Germany
(hereinafter referred to as LRE)
and
BIOSITE
Diagnostics Incorporated
11030 Roselle Street
San Diego, CA 92121 U.S.A.
(hereinafter referred to as BIOSITE)
<PAGE> 2
ARTICLE I
Purpose of this Agreement
Subject matter of this agreement is the development, subsequent serial
production and supply of a portable, fluorescence remission photometer which is
defined in the specifications attached to this agreement as Attachment A
(hereinafter referred to as Fl-Meter).
The development and subsequent serial production of the Fl-Meter will
be done by LRE exclusively for BIOSITE in accordance with the objectives and
performance requirements as set out in the specifications and in conformity with
the Project Plan attached to this agreement (Attachment B).
Specifications (Attachment A) and Project Plan (Attachment B) can be
changed and/or extended only by written approval of both parties.
ARTICLE II
Development
LRE shall develop for BIOSITE a Fl-Meter in accordance with the below
paragraphs 2.1 to 2.4. For this development, BIOSITE shall bear all internal and
external cost which arise at LRE, shall reimburse these costs to LRE pursuant to
paragraphs 2.1 to 2.4.
2.1 Feasibility Study.
The feasibility study has been started November 1993. With the
completion of the feasibility study LRE will deliver the draft specifications
including the draft industrial design, the
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<PAGE> 3
Project Plan and a breadboard reader to evaluate fluorescence remission signals
by a PC.
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
2.2 Functional Fluorescence Reader.
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
2.3 Prototype Meter.
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION]
2.4 Preproduction Meter.
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION]
2.5 Termination of Development.
(a) By BIOSITE.
During the development phase BIOSITE may terminate the agreement
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
If BIOSITE terminates the agreement during the development phase under
paragraph 10.3, then BIOSITE shall have the exclusive right to use and disclose
all inventions, discoveries, improvements, information, data and other
technology, whether patentable or not, (i) conceived solely by employees or
others on behalf of LRE during the term of the feasibility study or the balance
of the development program directly or indirectly with the use of funding,
materials or information provided by BIOSITE, or (ii) conceived jointly by
employees or others on
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<PAGE> 4
behalf of LRE and by employees or others on behalf of BIOSITE under the
feasibility study or the balance of the development program, together with all
patent and other intellectual property rights thereto (collectively, the "Joint
Technology").
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION]
(b) By LRE.
During the development phase LRE may terminate the agreement
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
If LRE terminates the agreement in the development phase, under
paragraph 10.3, BIOSITE shall have no rights or license to use or disclose the
Joint Technology. If LRE terminates the agreement during the development phase
under paragraph 2.5(b)(ii), then BIOSITE shall have the exclusive right to use
and disclose the Joint Technology.
(c) Costs of Development.
In case of termination by either party during the development phase,
LRE shall use Is best efforts to limit or cancel any outstanding commitments in
connection with the development. Subject to paragraphs 2.1 to 2.5(b), BIOSITE
shall bear all costs incurred by LRE for all development work performed through
the effective termination date, and for all outstanding obligations which were
incurred by LRE in good faith in advance and which cannot be canceled.
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<PAGE> 5
2.6 Cooperation.
LRE and BIOSITE will designate project leaders who shall be the main
contact persons during the development phase.
LRE shall keep BIOSITE reasonably informed throughout each stage of the
development phase of the status of Ks research and development efforts, of its
actual expenses incurred in relation to the budgeted expenses.
BIOSITE shall have the right to visit LRE's facilities on reasonable
request to inspect the research, development and manufacturing conducted by LRE,
to make copies of all applicable records and to discuss the same with employees
of LRE.
At least once every six (6) months during the development phase, LRE
and BIOSITE shall meet, alternating between Munchen and San Diego, to discuss
the status of the development phase and the plans therefor. Such meeting shall
include the project leaders and such others as the parties determine reasonably
necessary or appropriate.
ARTICLE III
Tooling
3.1 Type of Tooling
The majority of tools will be molds for plastic housing parts.
3.2 Prototype Meter Tooling.
The total cost of the additional tooling necessary to efficiently
produce the estimated quantity of Prototype Meters
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<PAGE> 6
is estimated to be [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].
The tooling has to be ordered two-three (2-3) months prior to the build
of Prototype Meters. LRE will inform BIOSITE appropriately about delivery times,
conditions and actual costs. The tooling will be ordered by LRE after the
receipt of a written approval from BIOSITE to order the tooling. Payment of
tooling cost by BIOSITE are due
- [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
- [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
- [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
3.3 Preproduction Meter Tooling.
The total cost of tooling for the Preproduction Meters is estimated to
be [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
The tooling has to be ordered [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] prior to the build of Preproduction Meters. LRE
will inform BIOSITE appropriately about delivery times, conditions and actual
costs.
The tooling will be ordered by LRE after the receipt of a written
approval from BIOSITE to order the tooling. Payment of tooling cost by BIOSITE
are due
- [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION]
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<PAGE> 7
- [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
- [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] production of the FI-
Meters by LRE.
3.4 Minimize Cost.
Both parties will properly cooperate to minimize risk and cost of
tooling.
ARTICLE IV
Development Results/Industrial Proprietary Rights
4.1 Tooling.
BIOSITE shall be the sole owner of all tooling including molds. Upon
expiration or termination of this agreement, LRE shall transfer to BIOSITE all
applicable tooling, including molds. LRE shall provide such technical assistance
to BIOSITE
4.2 Development Rights.
(a) LRE shall be the sole owner of all inventions, discoveries,
improvements, information, data and other technology, whether patentable or not,
(i) owned by LRE prior to beginning the feasibility study, (ii) licensed to LRE
prior to or during the term of this agreement, or (iii) conceived solely by
employees or others on behalf of LRE during the term of the feasibility study or
the balance of the development program without the use directly or indirectly of
funding, materials or information provided by BIOSITE, together with all patent
and other intellectual property rights thereto (collectively, the
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<PAGE> 8
"LRE-Technology"). BIOSITE shall have the right to use, and subject to the
provisions of Article 9 Confidentiality to disclose, the LRE Technology
disclosed by LRE under this agreement solely for the purpose of performing its
obligations under this agreement.
(b) LRE and BIOSITE jointly shall own all Joint Technology. LRE shall
have the right to use, and subject to the provisions of Article 9
Confidentiality, to disclose, the Joint Technology (i) during the term of this
agreement and for a period of [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] after the expiration or termination of this
agreement, only for purposes to which BiOSITE gives its prior express written
consent, which shall not be unreasonably withheld, and (ii) thereafter, for any
purpose whatsoever without the prior written consent of BIOSITE; provided,
however, if this agreement is terminated (A) by BIOSITE under paragraph 10.3 or
(B) by LRE under paragraph 2.5(b)(ii). BIOSITE shall have the exclusive right to
use, and subject to the provisions of Article 9 Confidentiality, to disclose,
the Joint Technology for any purpose subject to the provisions of paragraph
4.3.(a). BIOSITE's right to use and disclose the Joint Technology after
termination or expiration of this agreement for whatever purpose shall survive
the termination or expiration of this agreement, except if LRE has terminated
the agreement pursuant to paragraph 10.3 or BIOSITE has terminated the agreement
during the development phase pursuant to paragraph 2.5(a).
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<PAGE> 9
(c) BIOSITE shall be the sole owner of all inventions, discoveries,
improvements, information, data and other technology, whether patentable or nor,
(i) owned by BIOSITE prior to beginning the feasibility study, (ii) licensed to
BIOSITE prior to or during the term of this agreement, or (iii) conceived solely
by employees or others on behalf of BIOSITE during the term of the feasibility
study or the balance of the development program, together with all patent and
other intellectual property rights thereto (collectively, the "BIOSITE
Technology"). LRE shall have the right to use, and subject to the provisions of
Article 9 Confidentiality to disclose, the BIOSITE Technology disclosed by
BIOSITE under this agreement solely for the purpose of performing its
obligations under this agreement.
(d) LRE at its sole expense shall have the right to control the
preparation, filing, prosecution, maintenance and enforcement of all patent
applications and patents regarding the LRE Technology. BIOSITE at its sole
expense shall have the right to control the preparation, filing, prosecution,
maintenance and enforcement of all patent applications and patents regarding
BIOSITE Technology. Each party shall have the right to control the preparation,
filing, prosecution, maintenance and enforcement of all patent applications and
patents regarding Joint Technology, provided, however, if both parties wish to
control the patent rights with respect to any of the Joint Technology, then LRE
and BIOSITE shall meet and determine by mutual agreement which party shall have
the right
-8-
<PAGE> 10
to control the patent right with respect to such Joint Technology. The party
that controls the patent rights with respect to any Joint Technology shall bear
the costs therefor, including the accruing costs for the remuneration of
employees' inventions according to the Law on Employees' inventions (Gesetz uber
Arbeitnehmererfindungen), unless the parties otherwise agree in writing.
(e) If LRE directly or indirectly uses any Joint Technology for the
benefit of any third party or transfers any Joint Technology to any third party,
LRE shall pay to BIOSITE an amount equal to the cost paid to LRE by BIOSITE to
develop such technology.
4.3 Exclusivity.
(a) During the term of this agreement, BIOSITE shall be obligated to
purchase the Fl-Meter exclusively from LRE and not to commission any third party
to produce the Fl-Meters, except (i) if LRE is not capable to produce sufficient
quantity of Fl-Meters to satisfy BIOSITE's needs, or (ii) with respect to any
specific immunoassay application which BIOSITE requests, if LRE is prohibited
from producing Fl-Meters for BIOSITE for such immunoassay application. In
particular, BIOSITE shall not change the Fl-Meter on its own authority, and
shall not pass on to third parties any know-how relating to the individual
development phases and to the finished product Fl-Meter except to the extent
reasonably necessary to sell or use the Fl-Meter in the immunoassay field.
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<PAGE> 11
(b) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] Upon full payment of all development cost pursuant to Article 2
hereof, BIOSITE shall be entitled to purchase and sell the F1-Meter exclusively.
Notwithstanding the foregoing, the exclusivity rights and obligations under this
paragraph 4.3(b), [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] shall survive such expiration or termination for a period of
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after
such expiration or termination, except (1) if this agreement is terminated by
LRE under paragraph 10.2(b) or 10.3, or (2) if this agreement is terminated by
BIOSITE under paragraph 2.5(a), other than for grounds specified under paragraph
10.3.
4.4 Technical Information.
BIOSITE will have access to all technical documentation such as
drawings, circuit diagrams, software listings, etc. produced under this
agreement exclusively for the Fl-Meter. The corresponding documents shall be
provided by LRE on the demand
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<PAGE> 12
by BIOSITE after the receipt of payment for the actual development phase.
4.5 [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
ARTICLE V
Serial Production
5.1 For the term hereof, BIOSITE shall purchase all Fl-Meters it
requires exclusively from LRE, and LRE shall have the exclusive right and
obligation to produce all Fl-Meters required by BIOSITE, except (i) if LRE is
not capable to produce sufficient quantity of Fl-Meters to satisfy BIOSITE's
needs, or (ii) with respect to any specific immunoassay application which
BIOSITE requests, if LRE is prohibited from producing Fl-Meters for BIOSITE for
such immunoassay application.
5.2 Each Fl-Meter shall be manufactured in accordance with the
Specifications. The Specifications may be modified from time to time only by
written approval of both parties.
5.3 In order to appropriately prepare for the necessary production
volumes LRE needs firm orders for the [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] prior to the beginning of the first
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of
production and an update each subsequent quarter (revolving forecast) for the
following [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].
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<PAGE> 13
The shipments will commence about [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after receipt
of the corresponding orders.
BIOSITE shall place its orders and forecasts, and shall purchase
Fl-Meters, as follows:
BIOSITE shall purchase a specified quantity of Fl-Meters specified in
each order and forecast as follows: BIOSITE shall purchase in the [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] all Fl-Meters firmly
ordered for the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] according to BIOSITE's binding order. BIOSITE shall purchase in the
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] at
least [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
of the quantity ordered for the [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]. The remaining [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] of the quantity firmly ordered for the
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] may be
accepted by BIOSITE alteratively in the [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] following the order and forecast. The
forecast for the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] following the order and forecast shall not be binding on BIOSITE.
BIOSITE shall be obligated to reimburse LRE for the costs of materials purchased
for that quantity of Fl-Meters forecast for the [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] and not purchased in the
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<PAGE> 14
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
following the order and forecast, which costs were incurred by LRE in good faith
in advance and which cannot be canceled; provided, however, that BIOSITE shall
be entitled to credit such reimbursed costs ratably against the purchase price
of a like quantity of Fl-Meters purchased thereafter. BIOSITE shall have this
right to credit for a period of at least one (1) year after BIOSITE has
reimbursed LRE for such cost of materials. The forecast for the [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] following the order
and forecast shall not be binding on BIOSITE and shall be used for orientation.
Each firm purchase order shall provide delivery dates and delivery
information requirements.
5.4 If serial production is not possible for whatever reason--unless
BIOSITE terminated this agreement under paragraph 10.2 (c) or 10.3--or if
BIOSITE fails to order and purchase [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] F1-Meters during the first twelve (12) months of
production, BIOSITE shall reimburse LRE for that portion of the cost for the
specific tooling purchased by LRE for the Fl-Meter specific production equipment
that was not reimbursed through the pricing structure for the first twelve (12)
months of production.
5.5 Delivery by LRE shall be made at least quarterly. LRE shall deliver
a minimum quantity of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] F1-Meters in
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<PAGE> 15
each delivery. LRE shall deliver a quantity in excess of the minimum quantity as
soon as it is able to do so. After BIOSITE has informed LRE of the needed
quantity and has placed the respective orders, LRE shall use its commercially
reasonable efforts to meet BIOSITE's requested delivery dates, although the
quantities to be delivered and the dates of delivery may vary in accordance with
LRE's capacity. BIOSITE's order shall be delivered in the quarter following the
order. Within a quarter LRE may deliver the whole quantity at once or may,
alteratively, make up to six (6) partial deliveries the quantities of which to
be determined by LRE, unless still provided otherwise by the contract parties.
5.6 If BIOSITE discontinues its orders for a period of [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION], (a) in the event
that the material necessary for BIOSITE's next order is already available at LRE
or will be promptly available somewhere else, delivery by LRE shall commence not
later than [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] after receipt of BIOSITE's next order, or (b) otherwise, delivery by
LRE shall commence not later than [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] after receipt of BIOSITE's next order.
5.7 If a shipment of Fl-Meter or any portion thereof is damaged or
defective, then BIOSITE shall have the right to reject such shipment or the
portion thereof that fails to conform. BIOSITE in good faith shall consult with
LRE, and if applicable the carrier, in making any determination that any
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<PAGE> 16
shipment or portion is defective. BIOSITE shall give written notice to LRE of
its rejection hereunder, specifying the grounds for such rejection. BIOSITE
shall hold the defective shipment or portion for up to [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION], for return to LRE or
disposition at LRE's option and at LRE's expense, if found to be not in
conformance with the Specifications. LRE shall use its commercially reasonable
efforts to cure such rejection or replace such spoiled, damaged or defective
shipment of Fl-Meter within ninety (90) days after receipt of notice of
rejection thereof. If no notice of rejection is given by BIOSITE within thirty
(30) days after receipt of any shipment of Fl-Meters, the shipment of the
Fl-Meters shall be deemed to have been accepted.
5.8 BIOSITE shall have the right to designate one or more third
parties, including E. Merck, to purchase Fl-Meters under this agreement for sale
and use on such terms and conditions as agreed by BIOSITE and E. Merck or such
other third party. Each such third party shall have the right to purchase
Fl-Meters directly from LRE, and shall be obligated to make forecasts, place
orders and pay the transfer price therefor directly to LRE, on the terms and
conditions of this agreement. BIOSITE shall give written notice to LRE of any
third party so designated.
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<PAGE> 17
ARTICLE VI
Supply Price and Volume
6.1 Prices are fixed for the [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of production and depend on the total quantity
of Fl-Meters ordered during such period. The transfer prices are:
- [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
- [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
- [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
After the [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of production, the transfer
prices will be reduced as follows:
- [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
- [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
- [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
The transfer price for the Fl-Meters for each order shall be calculated
based on the forecasted orders for Fl-Meters for such year. After the actual
quantity of Fl-Meters ordered in any year are calculated after the end of such
year, the transfer price for all Fl-Meters ordered during such year shall be
adjusted, and the parties shall promptly settle any amounts underpaid or
overpaid during such year in a manner mutually acceptable to both parties.
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<PAGE> 18
6.2 Prices are free on board Munich airport or Frankfurt airport for
Fl-Meters in adequate bulk packing for overseas shipments. If BIOSITE desires
single packing which is fit for final sale, LRE will offer packing as specified
by BIOSITE at additional cost.
Prices do not include the German value added tax or any US taxes.
6.3 For each delivery accepted pursuant to paragraph 5.7, BIOSITE shall
make payment within 30 days from receipt of such delivery and the corresponding
invoice.
ARTICLE VII
Quality Control
LRE will perform regular in-process controls and a final test for each
Fl-Meter shipped in accordance with the specifications, keeping complete records
of the results of each test.The testing procedures and the permissible
variations and tolerances will be agreed upon between LRE and BIOSITE and laid
down in the final specifications.
The test reports of each Fl-Meter delivered can be provided to BIOSITE
if desired.
LRE shall not make any changes to the final specification without
BIOSITE's prior written approval.
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<PAGE> 19
ARTICLE VIII
Warranty
The warranty period for each Fl-Meter produced under this agreement
will be twenty-four (24) months from the date of shipment. It will cover defects
in material, workmanship, design and performance as per specifications and
intended use of the Fl-Meter. Warranty does not cover any battery-related
defects.
LRE will repair or replace any defective Fl-Meter during the
warranty-period at its own expense. Upon request, BIOSITE shall return all
defective Fl-Meters to LRE at LRE's expense.
ARTICLE IX
Confidentiality
9.1 During the term of this agreement and for a period of [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after, each party
will hold in strict confidence and not disclose to third parties, not use except
for the purposes of this agreement, and restrict access to those persons
(including consultants) carrying out activities under this agreement, any and
all information disclosed by the other party under this agreement and treated as
confidential by such party. Notwithstanding the foregoing, LRE and BIOSITE each
shall have the right to disclose Joint Technology to any third party with whom
it has or proposes to enter into a business relationship, provided that such
third party has executed a written agreement
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<PAGE> 20
with it to maintain in confidence and not use such confidential information
except as otherwise authorized by this agreement.
Excepted from this only shall be the information which
(a) is in public domain at the time of disclosure,
(b) becomes otherwise part of public domain through no
fault of the receiving party,
(c) was in the possession of the receiving party at the time of
disclosure by the other party as shown by the receiving party's written records,
or thereafter becomes available from a third party who has the right to disclose
it. Companies which LRE or BIOSITE control or are under common control with LRE
or BIOSITE are not regarded as third parties. These companies and persons
(including consultants) carrying out activities under this agreement may be
given such information only if they have accepted the confidentiality terms of
this agreement as binding them.
9.2 For purposes of the Article 9, Joint Technology shall constitute
confidential information with respect to both parties.
9.3 The obligations of confidentiality and non-use contained in Article
9 shall not apply to the extent that the receiving party is required to disclose
information by applicable law, regulation or court order.
9.4 Neither party shall disclose any terms or conditions of this
agreement to any third party without the prior consent of the other party.
Notwithstanding the foregoing, the parties shall agree upon the substance of
information that can be used
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<PAGE> 21
to describe the terms of this transaction without the other
party's prior consent.
ARTICLE X
Term
10.1 During the Development Phase.
This agreement may be terminated by either party during the development
phase only as provided in paragraph 2.5.
10.2 During Serial Production.
(a) This agreement can be terminated by either party by giving
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] prior
written notice, [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].
(b) LRE can terminate the agreement earlier [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
(c) BIOSITE can terminate this agreement earlier ff LRE fails to supply
BIOSITE with its firmly ordered quantities of Fl-Meters for [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
10.3 At Any Time.
Either party has the right to terminate this agreement at
any time, without previous notice for cause, if
(a) the other party commits a material breach of any of the covenants
and terms herein contained and has not, [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] after having been required in writing to
do so, remedied such breach; provided, however, that there shall not
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<PAGE> 22
exist a material breach within the meaning of this paragraph 10.3(a) ff the
parties mutually determine under paragraph 2.5(b)(ii) that the intended result
of the development cannot be achieved or, for reasons beyond the reasonable
control of LRE, can only be achieved at expenditure by LRE, significantly in
excess of the costs described in paragraphs 2.1 to 2.4, for which BIOSITE is
unwilling to reimburse LRE after notice thereof; or
(b) a petition is filed by or against the other party under any
bankruptcy or insolvency laws; provided that if the other party gives adequate
assurance of contesting any such petitions and such petitions are dismissed
within one hundred eighty (180) days of filing, such filing shall not constitute
a cause of termination.
10.4 Notice.
Notice of termination shall be effective upon receipt.
10.5 Effect.
Expiration or termination of this agreement shall not
relieve the parties of any obligation accruing prior to such expiration or
termination. The provisions of Articles 4.9 and 11 shall survive the expiration
or earlier termination of this agreement.
10.6 Force Majeure.
Neither party shall be held liable or responsible to the other party
nor be deemed to have defaulted under or breached this agreement for failure or
delay in fulfilling or performing any term of this agreement to the extent, and
for so long as,
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<PAGE> 23
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected party including fire, floods, embargoes, war, acts of
war (whether war be declared or not), insurrections, riots, civil commotions,
strikes, lockouts or other labor disturbances, act of God or acts, omissions or
delays in acting by any governmental authority or the other party.
ARTICLE XI
Indemnification and Insurance
11.1 Regarding LRE's liability, the provisions of German law relating
to damages and product liability shall apply.
11.2 LRE shall maintain products liability insurance against claims
regarding the manufacture of the Fl-meters by LRE in such amounts as it
customarily maintains for its manufacture of similar products in Germany. LRE
shall maintain such insurance during the term of this agreement and thereafter
for so long as it maintains insurance for such covering such activities.
ARTICLE XII
Conciliation
BIOSITE and LRE shall exercise their commercially reasonable efforts to
settle between themselves in an amicable way any dispute, controversy or claim
which may arise out of or relating to this agreement within thirty (30) days
after one
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<PAGE> 24
party receives notice from the other party of such dispute, controversy or
claim.
ARTICLE XIII
Final Provisions
13.1 This agreement and the transactions contemplated thereby are
governed exclusively by the substantive laws of the Federal Republic of Germany
exclusive of the German international law and any supranational or international
bodies of law. This shall not apply to the provisions regarding the confidential
information of BIOSITE, pursuant to Article 9 Confidentiality, which shall be
construed and interpreted in all respects in accordance with the laws of the
State of California.
13.2 Any dispute arising out of or in relation to this agreement
including disputes regarding its validity shall be resolved by binding
arbitration conducted under the International Chamber of Commerce Arbitration
Rules. The procedural rules shall follow the German rules of Civil Procedure,
unless the rules of the International Chamber of Commerce provide for different
rules. Any such arbitrations shall be conducted in English language with such
rules, and shall be held in Munchen, Germany. One judge shall be named by the
party bringing the action, one judge shall be named by the party defending such
action and the presiding judge shall be named by the two judges appointed. At
least one of the judges shall have command of the German language. The
arbitrators shall have the authority to grant specific performance, and to
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<PAGE> 25
allocate between the parties the costs of arbitration in such equitable manner
as they determine. Judgment upon the award so rendered may be entered in any
court having jurisdiction or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be.
13.3 This agreement and its Attachments embody the entire and standing
agreement among the parties and supersede all previous written or oral
agreements with respect to the development and sale of the Fl-Meter.
13.4 Modifications of and amendments to this agreement as well as the
suspension of its provisions shall become effective only when approved by both
parties in writing.
13.5 Subject to the choice of law provisions of paragraph 13.1, LRE and
BIOSITE shall comply in all material respects with all applicable laws and
regulations in the performance of their respective obligations under this
agreement.
13.6 Any consent, notice or report required or permitted to be given or
made under this agreement by one of the parties to the other shall be in
writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery, air mail, internationally-recognized delivery service or
courier), air mail, internationally-recognized delivery service or courier,
postage prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addresses shall have last
furnished in writing to the addressor and (except as otherwise provided in this
agreement) shall be effective upon receipt by the addresses.
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<PAGE> 26
If to BIOSITE: BIOSITE Diagnostics Incorporated
11030 Roselle Street
San Diego, California 92121, U.S.A.
Attention: Kim D. Blickenstaff
President
with a copy to: Pillsbury Madison & Sutro
235 Montgomery Street, 15th Floor
San Francisco, California 94104, U.S.A.
Attention: Thomas E. Sparks, Jr.
If to LRE: LRE Relais + Elektronik GmbH
Linprunstra(beta)e 16
80335 Munchen
Federal Republic of Germany
Attention: Reinhold Hartwich
President
13.7 BIOSITE and LRE each acknowledge that the development and
commercialization rights and information disclosure requirements of this
agreement are subject to certain laws and regulations of the Federal Republic of
Germany and the United States of America relating to the export of products and
technical information. without limiting the application of paragraph 13.1,
BIOSITE and LRE each shall comply with all applicable laws and regulations.
13.8 It is expressly agreed that BIOSITE and LRE shall be independent
contractors and that the relationship between the two parties shall not
constitute a partnership, joint venture or agency. Neither BIOSITE nor LRE shall
have the authority to make any statements, representation or commitments of any
kind, or to take any action, which shall be binding on the other, without the
prior consent of the party to do so.
13.9 The English language version of this agreement shall govern and
control any translations of this agreement into any other language.
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<PAGE> 27
13.10 In the event of one or more provisions of this agreement becoming
void, the remaining provisions contained herein shall remain in full force and
effect. The parties agree to have provisions having become void shall be deemed
as severable and be replaced by valid provisions which maintain the intentions
of the invalid provisions as far as possible.
Munchen/Nordlingen, San Diego,
September 23, 1994 September 23, 1994
LRE Relais + Elektronik GmbH BIOSITE Diagnostics
Incorporated
/s/ Reinhold Hartwich /s/ Kim D. Blickenstaff
- ---------------------------- -------------------------
Reinhold Hartwich Kim D. Blickenstaff
President President
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<PAGE> 28
EXHIBIT A
[34 PAGES OF ENGINEERING SPECIFICATIONS AND OTHER CONFIDENTIAL MATERIALS
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
<PAGE> 1
EXHIBIT 10.13
[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION]
DISTRIBUTORSHIP AGREEMENT
BETWEEN
E. Merck
Frankfurter Strasse 250
D-6100 Darmstadt 1
Federal Republic of Germany
AND
BIOSITE DIAGNOSTICS INCORPORATED
11030 Roselle Street, Suite D
San Diego, CA 92121
July 27, 1992
<PAGE> 2
Table of Contents
<TABLE>
<S> <C>
Page
1. DEFINITIONS.......................................................................................... 1
1.1 Agreement................................................................................... 1
1.2 Confidential Information.................................................................... 1
1.3 Customer.................................................................................... 1
1.4 Market Segmentation......................................................................... 2
1.5 Product..................................................................................... 2
1.6 Territory................................................................................... 2
1.7 Agencies.................................................................................... 2
2. APPOINTMENT AND SCOPE................................................................................ 2
2.1 Appointment................................................................................. 2
2.2 Exclusivity................................................................................. 2
2.3 Noncompetition.............................................................................. 2
2.4 Independent Purchaser Status................................................................ 3
2.5 Perishable Products......................................................................... 3
3. TERMS AND CONDITIONS OF SALE......................................................................... 3
3.1 Price....................................................................................... 3
3.2 Terms of Sales.............................................................................. 3
3.3 Payments.................................................................................... 4
3.4 Orders...................................................................................... 4
3.5 Returned Goods.............................................................................. 4
3.6 Warranty.................................................................................... 4
4. COVENANTS OF MERCK................................................................................... 5
4.1 Sales Promotion............................................................................. 5
4.2 Expenses.................................................................................... 5
4.3 Promotional Materials; Package Inserts...................................................... 5
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
4.4 Import Licenses, Exchange Controls, and Other Governmental Approvals,
Compliance.................................................................................. 6
4.5 Local Laws and Regulations.................................................................. 7
4.6 Product Control............................................................................. 7
4.7 [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] Reports................................................................ 7
4.8 Indemnification............................................................................. 7
4.9 Products Liability Insurance................................................................ 8
5. OBLIGATIONS OF BIOSITE............................................................................... 8
5.1 Sales Support............................................................................... 8
5.2 Notification of Changes..................................................................... 8
5.3 Assistance.................................................................................. 8
6. CONFIDENTIALITY AND PROPRIETARY RIGHTS............................................................... 8
6.1 Confidentiality of Sales and Product Data................................................... 8
6.2 Use of Patents.............................................................................. 9
6.3 Trademarks and Trade Names.................................................................. 9
6.4 Protection of Proprietary Rights............................................................ 10
7. TERM AND TERMINATION................................................................................. 10
7.1 Term........................................................................................ 10
7.2 Termination................................................................................. 10
7.3 Rights of Parties on Termination............................................................ 11
8. CONCILIATION AND ARBITRATION......................................................................... 12
8.1 Conciliation................................................................................ 12
8.2 Arbitration................................................................................. 13
9. GENERAL PROVISIONS................................................................................... 14
9.1 Entire Agreement............................................................................ 14
9.2 Authorization............................................................................... 14
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
9.3 Compliance of AGENCIES and Subsidiaries..................................................... 15
9.4 Notices..................................................................................... 15
9.5 Expenses of Arbitration and/or Litigation................................................... 16
9.6 Force Majeure............................................................................... 16
9.7 Titles and Headings......................................................................... 16
9.8 Assignments................................................................................. 16
9.9 Successors and Assigns...................................................................... 17
9.10 Severability................................................................................ 17
9.11 Language.................................................................................... 17
9.12 Applicable Law.............................................................................. 17
9.13 Waiver...................................................................................... 17
10. EXHIBITS
</TABLE>
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<PAGE> 5
DISTRIBUTORSHIP AGREEMENT
THIS DISTRIBUTION AGREEMENT is made as of this 27th day of July 1992, by and
between BIOSITE DIAGNOSTICS INCORPORATED, a corporation organized and existing
under the laws of the State of Delaware and with its principal offices at 11030
Roselle Street, Suite D, San Diego, California 92121, U.S.A. (BIOSITE) and E.
Merck, a general partnership organized and existing under the laws of The
Federal Republic of Germany and with its principal offices at Frankfurter
Strasse 250, D-6100 Darmstadt 1, Federal Republic of Germany (MERCK).
RECITALS
BIOSITE owns or controls the right to manufacture, sell and distribute its
products described in Section 1.5 and desires assistance from MERCK in the
promotion, sale and distribution of such products, and the parties desire to
enter into this Agreement for the promotion, sale and distribution of such
products upon the following terms and conditions.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of their mutual covenants and agreements
contained herein, and the mutual benefits to be derived therefrom, it is agreed
by the parties as follows.
1. DEFINITIONS
1.1 AGREEMENT. The term "AGREEMENT" when used herein means this document
and any exhibit or amendment thereto.
1.2 CONFIDENTIAL INFORMATION. The term "CONFIDENTIAL INFORMATION" when used
herein shall mean technical and business information relating to the
PRODUCTS and BIOSITE's business, including, where appropriate and
without limitation, any information, patent disclosures, patent
applications, structures, models, techniques, processes, compositions,
compounds and apparatus relating to the same disclosed by BIOSITE to
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<PAGE> 6
MERCK or obtained by MERCK through observation or examination of
BIOSITE's information or developments, but only to the extent that such
information is maintained as confidential by BIOSITE.
1.3 CUSTOMER. The term "CUSTOMER(S)" when used herein means any purchaser
of PRODUCTS.
1.4 MARKET SEGMENTATION. The definitions of the MEDICAL SEGMENT and the
INTERVENTION SEGMENT are included in EXHIBIT I.
1.5 PRODUCT. The term "PRODUCT(S)" when used herein means the products as
described in EXHIBIT II.
1.6 TERRITORY. Subject to the provisions of EXHIBIT I, the term "TERRITORY"
when used herein means the countries listed in EXHIBIT III.
1.7 AGENCIES. For the purpose of this AGREEMENT the term "AGENCIES" means
all sole agents, either subsidiaries, partnerships and other entities
directly or indirectly controlled by MERCK or independent distributors
of Merck diagnostic products, located in the TERRITORY.
2. APPOINTMENT AND SCOPE
2.1 APPOINTMENT. Subject to the terms and conditions and for the term of
this AGREEMENT, BIOSITE hereby appoints MERCK as an independent
distributor of BIOSITE's PRODUCT(S) in the TERRITORY. MERCK shall be
the exclusive distributor of BIOSITE's PRODUCT(S) in the TERRITORY.
MERCK hereby accepts such appointment and agrees to use its best
efforts to promote, market, distribute and sell BIOSITE's PRODUCTS in
the TERRITORY. MERCK and its subsidiaries will refrain from seeking
customers, from establishing any branch and from maintaining any
distribution depot or network for the sale of the
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<PAGE> 7
PRODUCTS outside of the TERRITORY. MERCK will make reasonable efforts
to see that its AGENCIES do not actively sell PRODUCT(S) outside of the
TERRITORY.
2.2 EXCLUSIVITY. For purposes of Section 2.1 above, the term "exclusive"
means that, subject to the terms and conditions of this AGREEMENT and
as long as MERCK is in full compliance with its obligations hereunder,
BIOSITE shall not appoint any other agents, representatives or
distributors in the TERRITORY to promote or sell PRODUCTS to CUSTOMERS
in the TERRITORY.
2.3 NONCOMPETITION. Unless specifically authorized in writing by BIOSITE,
MERCK shall not start selling or offering for sale, or act as sales
agent for the solicitation of orders for any products that are directly
competitive with any of the PRODUCTS except for instrument-based
reagents sold by MERCK in the TERRITORY, as of the date hereof. MERCK
will make reasonable efforts to see that its AGENCIES and subsidiaries
will comply with the provisions of this Section 2.3.
2.4 INDEPENDENT PURCHASER STATUS. MERCK is an independent purchaser and
seller of the PRODUCTS. MERCK shall not act as an agent or legal
representative of BIOSITE, nor shall MERCK have any right or power to
act for or bind BIOSITE in any respect or to pledge its credit. MERCK
shall be free to resell PRODUCTS in the TERRITORY on such terms as it
may, in its sole discretion, determine, including, without limitation,
price, returns, credits and discounts. The detailed operations of MERCK
under this AGREEMENT are subject to the sole control and management of
MERCK.
2.5 PERISHABLE PRODUCTS. MERCK acknowledges that the PRODUCTS are
perishable, and will manage its inventory such that products are
shipped throughout the TERRITORY to the extent reasonably practicable,
on a first-in-first-out basis.
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<PAGE> 8
3. TERMS AND CONDITIONS OF SALE
3.1 PRICE
BIOSITE will initially charge MERCK a price as specified in EXHIBIT IV
for each TRIAGE 7 Panel or TRIAGE 8 Panel kit, which shall consist of
25 PRODUCT units. Prices shall be subject to change by BIOSITE on
1-year's notice to MERCK.
MERCK will pay BIOSITE for purchases within 30 days from date of
invoice by BIOSITE to MERCK. All payments will be in US $. The exchange
rate for Deutsche Marks is 1.65 Deutsche Marks for one US $.
Currency fluctuations of greater than [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] % from this exchange rate
will be evaluated for stabilization within 90 days of the event. If
stabilization does not occur, both parties agree to discuss an
adjustment of price of PRODUCTS under this Section 3.1.
3.2 TERMS OF SALES. PRODUCTS will be shipped fca airport San Diego
(Incoterms 1990) (=free carrier arrival) freight and insurance paid by
MERCK. BIOSITE will notify MERCK of scheduled delivery dates by written
acknowledgment of MERCK's order. BIOSITE will use its reasonable
commercial efforts to meet quoted delivery dates. The lead time for
shipping of PRODUCTS shall be [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] after receipt of MERCK's order by
BIOSITE. In the event BIOSITE is able to fill orders by MERCK in less
than [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION], BIOSITE and MERCK shall agree upon a delivery of PRODUCTS
in advance. MERCK will arrange for shipping and procure insurance at
MERCK's expense and will ship all PRODUCTS from BIOSITE's facility in
San Diego, California to MERCK's warehouse in Darmstadt, Federal
Republic of Germany, or any other location determined by MERCK.
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] will pay all taxes and charges,
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<PAGE> 9
including without limitation all inspection fees and duties, applicable
to the sale and transport of the PRODUCTS by MERCK in the TERRITORY.
3.3 PAYMENTS. All payments under this Agreement are to be made by MERCK to
BIOSITE in US $ to BIOSITE's account in a financial institution located
in the United States.
3.4 ORDERS. Prior to the AGREEMENT term and on the first day of each
quarter during the AGREEMENT term MERCK will provide BIOSITE with a
written forecast of MERCK's estimated purchase requirements for each
quarter in the ensuing [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] month period. MERCK will be bound to
purchase the forecast quantities for the first quarter of each such
forecast to the end of the AGREEMENT term. In the event MERCK's orders
exceed the previous forecast quantities by more than [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION], BIOSITE
may reject to deliver those quantities in excess.
3.5 RETURNED GOODS. If PRODUCTS are not in accordance with the
specifications stated in EXHIBIT II and fail to pass MERCK's quality
control following the procedures as provided by BIOSITE upon arrival in
Darmstadt, MERCK may either return complained PRODUCT(S) to BIOSITE or
on BIOSITE's request dispose locally. In both cases all costs are to be
borne by [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].
Notwithstanding the foregoing, BIOSITE shall not be responsible for any
PRODUCTS which fail to pass MERCK's quality control as a result of
improper storage and handling during or after shipment to MERCK.
3.6 WARRANTY.
a) Subject to Section 3.6 (b) below, BIOSITE warrants that the
PRODUCTS will perform as stated in BIOSITE's PRODUCT(S)
specifications and current PRODUCT insert (Revised January 3,
1992), included in EXHIBIT II hereof. BIOSITE's PRODUCT
specifications are subject to change upon 30 days' notice to
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<PAGE> 10
MERCK, during which period BIOSITE shall consult with MERCK on
such changes and will consider any comments MERCK has with
regard to such changes, provided, however, that BIOSITE's
PRODUCT will perform substantially as described in the
specifications and PRODUCT insert included in EXHIBIT II.
b) Other than as set forth in Section 3.6 (a) above, BIOSITE
makes no express or implied warranty of merchantability,
fitness for a particular purpose, against infringement of any
trademarks, copyrights or other proprietary rights now or
hereafter existing.
c) BIOSITE warrants that to the best of its knowledge that there
is no third party's patent right which could hinder MERCK
exercising its rights under this agreement, in particular by
distributing and selling the PRODUCTS in the Territory.
BIOSITE warrants to defend and save harmless MERCK against any
suit, damage claim or demand based on actual or alleged
infringement of any patent of any third party in any country
resulting from the breach of the warranty set forth in the
preceding sentence and relating to the purchase of PRODUCT(S)
from BIOSITE and/or from the sale of PRODUCT(S) by MERCK.
d) MERCK will distribute PRODUCT(S) labeled by BIOSITE in the
TERRITORY so as to include all warnings and instructions
necessary for the proper use of the PRODUCT(S) and will not
extend any other product warranty, express or implied, other
than the warranty included in Sections 3.6 (a) to (c) above.
4. COVENANTS OF MERCK
4.1 SALES PROMOTION. MERCK shall use its best efforts to promote the sale
and use of the PRODUCTS by all existing and potential CUSTOMERS in the
TERRITORY. MERCK will agree to provide complete training of MERCK's or
AGENCIES' sales representatives in the use of the PRODUCTS.
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<PAGE> 11
4.2 EXPENSES. MERCK shall be responsible for all of its own expenses and
employees. MERCK agrees that it shall incur no expense chargeable to
BIOSITE, except as may be specifically authorized in advance in writing
in each case by BIOSITE.
4.3 PROMOTIONAL MATERIALS; PACKAGE INSERTS. MERCK shall ensure that all
advertising, promotional literature, packaging and package inserts
comply with applicable laws and regulations. MERCK shall not use any
advertising or promotional materials to promote the PRODUCTS or any
packaging or package inserts that have not been approved by BIOSITE,
which approval shall not be unreasonably withheld. MERCK shall prepare
necessary translations of BIOSITE's sales literature, package inserts
and labeling.
4.4 IMPORT LICENSES, EXCHANGE CONTROLS, AND OTHER GOVERNMENTAL
APPROVALS, COMPLIANCE.
a) MERCK shall, at its own expense: (i) obtain any registration,
license, permit, governmental approval (collectively,
"registration") that may be necessary to permit the purchase,
distribution and resale by MERCK of PRODUCTS in each country
in the TERRITORY; (ii) comply with all registration
requirements for each country in the TERRITORY; (iii) comply
with any and all governmental laws, regulations, and orders
that may be applicable to MERCK by reason of its execution of
this AGREEMENT including without limitation any requirement to
be registered as BIOSITE's independent distributor with any
governmental authority, and including any and all laws,
regulations, or orders that govern or affect the ordering,
export, shipment, import, sale (including government
procurement), delivery, or redelivery of PRODUCTS in the
TERRITORY. MERCK agrees that it shall not engage in any course
of conduct that, in BIOSITE's reasonable belief, would cause
BIOSITE to be in violation of the laws of any jurisdiction.
b) BIOSITE shall perform all necessary measurements and provide
every delivered pipette with a certificate of conformity in
accordance with German governmental regulations (MEASURING LAW
= EICHGESETZ). Subject to latter regulations, BIOSITE shall
furnish the pipette with a stylized "H". (conformatory mark)
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<PAGE> 12
c) All registrations will be made in the name of MERCK and shall
remain the property of MERCK during the term of this
AGREEMENT. BIOSITE shall be provided with a copy of all
registrations and applications.
d) In case of termination of this AGREEMENT BIOSITE may, at its
option, take over the above mentioned registrations or, where
necessary, obtain registration under BIOSITE's name at its own
cost.
In the event of any such termination of this AGREEMENT, MERCK agrees to
continue distribution of PRODUCT(S) on the same terms and conditions in
effect on the date of termination until BIOSITE (or BIOSITE's agent) is
able to obtain any required registration for distribution of the
PRODUCT(S) in the TERRITORY; provided, however, that the
indemnification provisions set forth in Section 4.8 below will continue
during such period. Upon any such termination, MERCK shall assign to
BIOSITE and will use its best efforts to assist BIOSITE in the transfer
to or obtaining of any such registration documents in the name of
BIOSITE (or BIOSITE's agent) in a quick and efficient manner.
4.5 LOCAL LAWS AND REGULATIONS. MERCK shall notify BIOSITE of the existence
and content of any mandatory provision of law in each country in the
TERRITORY or any other applicable law that conflicts with any provision
of this AGREEMENT at the time of its execution or thereafter. MERCK
agrees to advise BIOSITE fully with respect to all regulations,
labeling laws, standards, specifications and other requirements imposed
by law, regulation or order in any country in the TERRITORY and
applicable to the PRODUCTS. MERCK agrees to promptly inform BIOSITE
should, in its opinion, any amendment or additional agreement be
required or be advisable in order to comply with the laws of any
country in the TERRITORY, or any subdivision thereof.
4.6 PRODUCT CONTROL. Each PRODUCT shipped by BIOSITE will contain numbers
identifying manufacturing lot, expiry date for control purposes, and
lot-specific quality control report.
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<PAGE> 13
4.7 [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] REPORTS. MERCK WILL PROVIDE BIOSITE WITH [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] REPORTS
WITHIN [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] OF THE END OF EACH [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION]. THE [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] REPORTS SHALL
SUMMARIZE PRODUCT SALES DURING THE PRECEDING [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] FOR THE COUNTRIES IN
THE TERRITORY.
4.8 INDEMNIFICATION. BIOSITE and MERCK mutually agree to indemnify each
other and mutually hold the other party and its officers, directors and
agents harmless against all losses, damages, or expenses of any form or
nature, including attorneys' fees and other costs of legal defense that
they, or any of them, may incur as a result of any acts or omissions of
the other party or any of its employees or agents, including but not
limited to:
a) breach of any of the provisions of this AGREEMENT
b) negligence or other tortious conduct;
c) representations or statements not specifically authorized by
BIOSITE or MERCK herein or otherwise in writing; or
d) violation by BIOSITE or MERCK (or any of their employees or
agents) of, or failure to adhere to, any applicable law,
regulation or order in any country in the TERRITORY or of the
United States.
The provisions of this Section 4.8 shall survive the
termination of this AGREEMENT.
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4.9 PRODUCTS LIABILITY INSURANCE
BIOSITE and MERCK shall maintain products liability insurance for the
PRODUCTS covering products liability which might arise from the
development and manufacture of the PRODUCTS and the distribution, sale
or use of the PRODUCTS in the TERRITORY.
5. OBLIGATIONS OF BIOSITE
5.1 SALES SUPPORT. BIOSITE shall provide MERCK regularly with literature on
PRODUCTS and technical information relating to the PRODUCTS and their
proper use. Unless otherwise expressly agreed by BIOSITE, all such
information and materials will be furnished in the English language and
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] for MERCK.
5.2 NOTIFICATION OF CHANGES. BIOSITE shall notify MERCK of any changes in
or affecting the PRODUCTS or prices, terms and conditions of sale,
sales policies, projected delivery dates, and other matters that
BIOSITE determines may affect the business of MERCK.
5.3 ASSISTANCE. BIOSITE shall provide MERCK with reasonable access to and
assistance of its technical, sales, and service personnel in San Diego,
California as BIOSITE deems appropriate. Such assistance shall be
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] to MERCK except as may be otherwise mutually agreed.
6. CONFIDENTIALITY AND PROPRIETARY RIGHTS
6.1 CONFIDENTIALITY OF SALES AND PRODUCT DATA. MERCK shall hold in strict
confidence all CONFIDENTIAL INFORMATION relating to the PRODUCTS
received from BIOSITE or its agents and shall not divulge the same to
any other person, firm, or corporation or use such CONFIDENTIAL
INFORMATION for any purpose without the prior written permission of
BIOSITE, except as reasonably required to perform its
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<PAGE> 15
obligations under this AGREEMENT; provided, however, MERCK shall have
no liability to BIOSITE with respect to use, or disclosure to others
not parties to this AGREEMENT, of such information as MERCK can
establish by written documentation to:
a) Have been publicly known prior to the disclosure of such
information to MERCK;
b) Have become publicly known, without fault on the part of
MERCK, subsequent to disclosure by BIOSITE of such information
to MERCK;
c) Have been otherwise known by MERCK prior to communication by
BIOSITE to MERCK of such information; or
d) Have been received by MERCK at any time from a source other
than BIOSITE lawfully having the right to disclose such
information.
MERCK agrees that any disclosure of the CONFIDENTIAL INFORMATION within
MERCK will only be such as is reasonably necessary and will only be to
employees of MERCK who are bound by written agreements with MERCK to
maintain the CONFIDENTIAL INFORMATION in confidence. The obligation of
MERCK under this Section 6.1 shall survive termination of this
AGREEMENT for any reason for a period of [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] years.
6.2 USE OF PATENTS. BIOSITE does not, either expressly or impliedly, grant
any licenses to MERCK under any patents owned or controlled by BIOSITE
or under which BIOSITE has any rights, except the right to sell and use
the PRODUCTS. BIOSITE does not grant any rights to manufacture under
this AGREEMENT.
6.3 TRADEMARKS AND TRADE NAMES. MERCK shall not use any of BIOSITE's
trademarks, or any mark or name confusingly similar thereto, as part of
its corporate or business name or in any manner, except that
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<PAGE> 16
a) MERCK may identify itself as an authorized distributor of
BIOSITE and
b) MERCK may use BIOSITE's trademarks relating to the PRODUCTS
for display purpose in connection with solicitation of orders
for PRODUCTS. MERCK will not alter, remove or modify any
BIOSITE trademarks, labels or markings, nor affix any other
trademarks, labels or markings to the PRODUCTS without
BIOSITE's consent; provided that MERCK may affix labels or
other indices on PRODUCTS it distributes to identify it as the
distributor of PRODUCTS so long as such labels do not cover
and are not inconsistent with BIOSITE's trademarks, labels or
markings. BIOSITE shall register its trademark "TRIAGE" in
major countries of the TERRITORY as determined by BIOSITE. All
trademark registrations will be paid by BIOSITE. No other
MERCK labels, package inserts or other material shall
accompany the PRODUCTS without the approval of BIOSITE.
6.4 PROTECTION OF PROPRIETARY RIGHTS. MERCK agrees to cooperate with and
assist BIOSITE, at BIOSITE's expense, in the protection of trademarks,
patents, or copyrights owned by or licensed to BIOSITE and shall inform
BIOSITE immediately of any infringements or other improper action with
respect to such trademarks, patents, or copyrights that come to the
attention of MERCK.
7. TERM AND TERMINATION
7.1 TERM. Unless terminated as provided in Section 7.2 below or by mutual
written consent, this AGREEMENT shall continue in full force and effect
for an initial term expiring [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] after the date hereof and thereafter
shall be automatically renewed for successive [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] terms, unless
terminated by either party by written notice to the other at least
[CONFIDENTIAL MATERIAL REDACTED AND FILED
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<PAGE> 17
SEPARATELY WITH THE COMMISSION] prior to the expiration of the initial
or any renewal term thereof.
It is understood and agreed that after the expiration of the initial or
any renewal term, both BIOSITE and MERCK shall have no obligation,
express or implied, to renew this AGREEMENT.
7.2 TERMINATION. This AGREEMENT may be terminated prior to expiration of
the initial or any renewal term, as provided in Section 7.1 above as
follows:
a) By either party, in the event the other party should fail to
perform any of its obligations hereunder and should fail to
remedy such non-performance within [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after
receiving written demand therefor;
b) By either party, [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION], if the other party should
become the subject of any voluntary or involuntary bankruptcy,
receivership, or other insolvency proceedings or make an
assignment of all or substantially all of its assets for the
benefit of its creditors, or if such other party should be
nationalized or have any of its material assets expropriated;
c) By BIOSITE, effective immediately, with respect to any country
if any law or regulation should be adopted or in effect that
would restrict BIOSITE's termination rights, prohibit
performance of any obligations of BIOSITE hereunder or
otherwise invalidate any provisions hereof.
d) By BIOSITE, if MERCK fails to meet the minimum annual purchase
quantities as specified in EXHIBIT V during each of the
calendar years indicated.
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<PAGE> 18
7.3 RIGHTS OF PARTIES ON TERMINATION. The following provisions shall apply
on the termination or expiration of this AGREEMENT.
a) MERCK shall cease all sales and other activities on behalf of
BIOSITE and shall return to BIOSITE and immediately cease all
use of any CONFIDENTIAL INFORMATION of BIOSITE then in MERCK's
possession; provided however, that MERCK may continue to use
any CONFIDENTIAL INFORMATION that falls within the proviso of
Section 6.1 (a) - (c).
b) Upon termination by BIOSITE after the initial term pursuant to
Section 7.1 above, BIOSITE will repurchase and MERCK agrees to
sell BIOSITE MERCK's inventory of BIOSITE's PRODUCTS at
MERCK's purchase price as defined in Section 3.1 plus
reasonable freight, insurance and duties. Upon termination by
BIOSITE or MERCK pursuant to Section 7.2 above, BIOSITE may,
at its option, repurchase and MERCK agrees to sell MERCK's
inventory of BIOSITE's PRODUCTS at MERCK's purchase price as
defined in Section 3.1 plus reasonable freight, insurance and
duties. In case BIOSITE is not willing to repurchase MERCK's
inventory, MERCK is allowed to sell off the remaining stock of
PRODUCTS.
c) MERCK shall remove from its property and immediately
discontinue all use, directly or indirectly, of trademarks,
designs, and markings owned or licensed exclusively by
BIOSITE, or any word, title, expression, trademark, design, or
marking that is confusingly similar thereto.
d) Notwithstanding Section 7.3 (c), in case of termination of
this AGREEMENT, MERCK and BIOSITE will negotiate in good faith
the continuation of the delivery of PRODUCTS due to still
effective long-term contracts with CUSTOMERS in the TERRITORY.
In case of termination of this AGREEMENT, BIOSITE warrants
either to
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<PAGE> 19
- continue to sell PRODUCT(S) to such CUSTOMERS
directly, or to
- enable MERCK to continue the purchase of PRODUCTS for
CUSTOMERS holding such long term contracts, on the
terms and conditions provided for under this
AGREEMENT.
e) In accordance with Section 4.4 (d), MERCK will assist BIOSITE
in obtaining any registrations necessary for BIOSITE (or
BIOSITE's agent) to continue selling PRODUCTS in the
TERRITORY.
7.4 SOLE REMEDY. BIOSITE's repurchase of MERCK's inventory of PRODUCTS
pursuant to Section 7.3 (b), or MERCK's right to sell such inventory if
not so repurchased by BIOSITE, shall constitute MERCK's sole remedy for
the termination or nonrenewal of this AGREEMENT. Under no circumstances
shall BIOSITE be liable to MERCK by reason of termination or nonrenewal
of this AGREEMENT for compensation, reimbursement, or damages for:
a) loss of prospective compensation;
b) goodwill or loss thereof; or
c) expenditures, investments, leases, or any type of commitment
made in connection with the business of such party or in
reliance on the existence of this AGREEMENT.
8. CONCILIATION AND ARBITRATION
8.1 CONCILIATION. The parties shall exercise their best efforts to settle
between themselves in an amicable way any dispute, controversy or claim
which may arise out of or in connection with this AGREEMENT within
thirty days of notice of a dispute from the other party.
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<PAGE> 20
8.2 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this AGREEMENT, its negotiations, execution,
interpretation, performance or termination, shall if not settled by the
parties in accordance with Section 8.1 be referred to and resolved by
arbitration.
The arbitration shall be conducted in accordance with the American
Arbitration Association Commercial Arbitration Rules in New York, NY,
according to the laws of the State of New York, and as follows:
a) The arbitral tribunal shall be composed of three persons each
of whom shall be neutral, independent and impartial. Each
party shall nominate an arbitrator, and the two arbitrators so
appointed shall appoint a third, who shall act as president of
the arbitral tribunal. If either party fails to nominate an
arbitrator within 30 days of receiving notice of the
nomination of an arbitrator by the other party, such (second)
arbitrator shall be appointed at the request of the first
party by the American Arbitration Association. If the two
arbitrators selected by the parties fail to select a third,
presiding arbitrator within 20 days of the appointment of the
second arbitrator, the third arbitrator shall be appointed at
the request of the first party by the American Arbitration
Association.
b) The arbitrators shall hold a preliminary meeting with the
parties within 30 days of the appointment of the third or
presiding arbitrator for the purpose of determining the issues
to be decided in the arbitration, the specific procedures to
be followed and the schedule for briefing and/or hearings. The
arbitrators shall hold a hearing which, unless the parties
otherwise agree, should be recorded by stenographic or other
means. Within 120 days of the preliminary meeting (except in
extraordinary cases), the arbitrators shall issue an award in
writing which shall state the reasons for the award and which,
except as set forth in the following sentence, shall be final
and binding between the parties. Judgment upon the award
rendered by the arbitrators may be entered in any court having
jurisdiction.
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<PAGE> 21
c) The parties agree that the award of the arbitrators shall be
the sole and exclusive remedy between them regarding any
claims, counterclaims, issues or accountings presented or pled
to the arbitrators; that it shall be made and shall promptly
by payable in U.S. dollars free of any tax, deduction or
offset; and that any costs, fees or taxes incident to
enforcing the award shall, to the maximum extent permitted by
law, be charged against the party resisting such enforcement.
d) The arbitrators shall render their decision in accordance
with, the substantive laws of the State of New York, without
regard to its choice of law rules.
Notwithstanding the foregoing sentence, questions concerning
arbitrability under this dispute resolution clause shall be
governed exclusively by the United States Arbitration Act. The
arbitrators shall be empowered to consider and decide claims
or issues arising under or relating to state and Federal
statutes governing business practices, but shall not be
empowered to nor shall they award punitive damages.
e) As part of any arbitral award rendered pursuant to this
paragraph, the arbitrators shall make an award of arbitral
costs and reasonable attorneys' fees to the prevailing party.
9. GENERAL PROVISIONS.
9.1 ENTIRE AGREEMENT. This AGREEMENT represents the entire AGREEMENT
between the parties on the subject matter hereof and supersedes all
prior discussions, agreements, and understandings of every kind and
nature between them. No modification of this AGREEMENT will be
effective unless in writing and signed by both parties.
-17-
<PAGE> 22
9.2 AUTHORIZATION. BIOSITE and MERCK each represent and warrant to the
other that:
a) all corporate action on the part of BIOSITE or MERCK, as the
case may be, and their officers and directors, necessary for
the authorization, execution and delivery of this AGREEMENT
and the performance of all of their obligations hereunder, has
been taken prior to the date hereof;
b) that the officer signing this AGREEMENT below is the duly
authorized representative of BIOSITE and MERCK, as the case
may be; and
c) that this AGREEMENT constitutes a valid and legally binding
obligation of BIOSITE or MERCK, as the case may be,
enforceable in accordance with its terms, except as affected
by
(i) bankruptcy or insolvency laws, or
(ii) equitable principles.
9.3 COMPLIANCE OF AGENCIES AND SUBSIDIARIES
MERCK will make reasonable effort to have its AGENCIES comply with the
provisions of this AGREEMENT.
9.4 NOTICES. All notices under this AGREEMENT shall be in English and shall
be in writing and given by air mail or facsimile addressed to the
parties at the following addresses:
-18-
<PAGE> 23
If to BIOSITE
BIOSITE Diagnostics Incorporated
11030 Roselle Street, Suite D
San Diego, California 92121
United States of America
Attn: Kim D. Blickenstaff, President
With copy to:
Thomas E. Sparks, Jr.
Pillsbury Madison & Sutro
235 Montgomery St--P. O. Box 78 80
San Francisco, California 94120
United States of America
-19-
<PAGE> 24
If to MERCK:
E. Merck
Frankfurter Strasse 250
D - 6100 Darmstadt 1
Federal Republic of Germany
Attn: Dr. Walter Bardorff, General Manager Marketing and Sales
Diagnostics Division.
or to such other address of which either party may advise the other in
writing. Notices will be deemed given when sent.
9.5 EXPENSES OF ARBITRATION AND/OR LITIGATION. Should any party institute
any action or proceeding to enforce this AGREEMENT or any provision
hereof, or for damages by reason of any alleged breach of this
AGREEMENT or of any provision hereof, or for a declaration of rights
hereunder, the prevailing party in any such action or proceeding shall
be entitled to receive from the other party all costs and expenses,
including reasonable attorneys' fees, incurred by the prevailing party
in connection with such action or proceeding.
9.6 FORCE MAJEURE. Each party shall be excused from any delay or failure in
performance caused by reason of any occurrence or contingency beyond
its reasonable control, including, but not limited to an act of God,
earthquake, labor disputes, riots, government requirements, regulatory
and environmental requirements, inability to secure materials and
transportation difficulties. The obligations and rights of the party so
excused shall be extended on a day-to-day basis for the time period
equal to the period of such excusable delay.
-20-
<PAGE> 25
9.7 TITLES AND HEADINGS. Titles and headings of sections of this AGREEMENT
are for convenience of reference only and shall not affect the
construction of any provision of this AGREEMENT.
9.8 ASSIGNMENTS. This AGREEMENT and the rights, duties and obligations
hereunder may not be assigned by any party [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
9.9 SUCCESSORS AND ASSIGNS. This AGREEMENT and the provisions hereof shall
be binding upon and inure to the benefit of each of the parties and
their respective heirs, executors, administrators, successors, and
permitted assigns.
9.10 SEVERABILITY. The illegality or unenforceability of any provision of
this AGREEMENT shall not effect the validity and enforceability of any
legal and enforceable provisions hereof.
9.11 LANGUAGE. The English language version of this AGREEMENT shall govern
and control any translations of this AGREEMENT into any other language.
9.12 APPLICABLE LAW. This AGREEMENT shall be construed and enforced in
accordance with the laws of the State of New York without regard to New
York choice of law rules.
9.13 WAIVER. MERCK agrees that the failure of BIOSITE at any time to require
performance by MERCK of any of the provisions herein shall not operate
as a waiver of the right of BIOSITE to request strict performance of
the same or like provisions or any other provisions hereof, at a later
time.
IN WITNESS WHEREOF, BIOSITE and MERCK have caused this AGREEMENT to be
executed by their duly authorized employees, as of the day and year
first above written.
BIOSITE DIAGNOSTICS E. MERCK
INCORPORATED
-21-
<PAGE> 26
<TABLE>
<CAPTION>
by ppa i.V.
<S> <C> <C>
/s/ Kim D. Blickenstaff /s/ Dr. Walter Bardorff /s/ Dr. Roland Zeiger
----------------------- ----------------------- ---------------------
Kim D. Blickenstaff Dr. Walter Bardorff Dr. Roland Zeiger
President General Manager Head of Department
Marketing and Sales Marketing and Sales
Diagnostics Division Clinical Chemistry and Systems
Diagnostics Division
(Title) (Title) (Title)
</TABLE>
-22-
<PAGE> 27
EXHIBIT I
Notwithstanding the other provisions of this AGREEMENT, MERCK and BIOSITE agree
that BIOSITE may, in consultation with MERCK, promote, market and sell
PRODUCT(S) in the INTERVENTION SEGMENT in Germany directly using sales personnel
of BIOSITE or any subsidiary of BIOSITE. BIOSITE shall take orders from such
CUSTOMERS in the INTERVENTION SEGMENT in Germany, and shall negotiate the terms
of sale for such CUSTOMERS including, without limitation, the quantity of
PRODUCT(S) sold.
BIOSITE will inform MERCK by fax of every order received, including: (i)
customer; (ii) quantity of kits; and (iii) selling price.
MERCK agrees to fill BIOSITE's orders for PRODUCT(S) in the INTERVENTION SEGMENT
in Germany. MERCK will invoice the CUSTOMER and transfer the gross proceeds from
such sales in the INTERVENTION SEGMENT less [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] per kit ( 25 devices) to BIOSITE on a
monthly basis in U.S. dollars in accordance with the rate of exchange set forth
in Section 3.1, as adjusted by agreement of MERCK and BIOSITE. MERCK and BIOSITE
agree that BIOSITE shall not sell in the MEDICAL SEGMENT and that MERCK shall
not sell in the INTERVENTION SEGMENT in Germany.
MERCK and BIOSITE mutually agree, that Igoda S.A. (Spain) and Merck Clevenot
S.A. (France) will use their best efforts to build the market and to meet the
success criteria as follows:
Igoda S.A. (Spain) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] (25 test devices each) minimum
within the first 12 months
Merck Clevenot (France) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATLEY
WITH THE COMMISSION] (25 test devices each) minimum
within the first 12 months
In case these criteria are not met, the parties will negotiate an approach along
the lines of the German model.
The INTERVENTION SEGMENT comprises:
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
<PAGE> 28
EXHIBIT I continued
The MEDICAL SEGMENT comprises:
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
<PAGE> 29
EXHIBIT II
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
<PAGE> 30
EXHIBIT III
(Territory)
COUNTRIES:
Europe: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
East Europe: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
Middle East: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
North Africa: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
Republic of South Africa
Pakistan, India
<PAGE> 31
EXHIBIT IV
(Price)
BIOSITE and MERCK agree to following transfer prices for the PRODUCTS as defined
in EXHIBIT II fca airport San Diego, CA.
These prices are valid from the date of signature of this AGREEMENT, subject to
Section 3.1.
TRIAGE(R) 7: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]per test kit (25 test
devices) including packaging and labeling.
TRIAGE(R) 8: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per test kit (25
test devices) including packaging and labeling.
<PAGE> 32
EXHIBIT V
BIOSITE and MERCK mutually agree on the following minimum quantities of test
devices to be purchased by MERCK from BIOSITE in the calendar year indicated
including those being sold directly by BIOSITE to CUSTOMERS in the TERRITORY, as
defined in EXHIBIT I.
1. Calendar year 1993: [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
2. Calendar year 1994: [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
3. Calendar year 1995: [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
4. Calendar year 1996: [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
5. Calendar year 1997: [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
Calendar year 1996 and 1997 quantities are non-binding forecasts and will be
renegotiated at the end of calendar year 1995 but in any case the quantities for
1996 and 1997 should be no less than [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of the actual purchases of the previous calendar
year.
<PAGE> 33
FIRST AMENDMENT
TO THE DISTRIBUTORSHIP AGREEMENT
between
E. Merck, Frankfurter Strasse 250, 6100 Darmstadt, Federal Republic of Germany -
hereinafter called MERCK - and BIOSITE DIAGNOSTICS INCORPORATED, 11030 Roselle
Street, Suite D, San Diego, CA 92121, United States of America - hereinafter
called
BIOSITE -
PREAMBLE
WHEREAS, both parties have concluded a Distributorship Agreement
on July 27, 1992;
WHEREAS, due to a change in the distribution policy of BIOSITE, MERCK shall also
be the exclusive distributor of BIOSITE in the Federal Republic of Germany and
Latin America;
NOW, THEREFORE, in consideration of the premises and of the mutual promises of
the parties hereinafter set forth, the parties agree to the following changes of
the Distributorship Agreement:
Section 1
Section 1.4 will be deleted.
Section 2
Section 1.6 will read:
The term "TERRITORY" when used herein means the countries listed in Exhibit III.
Section 3
EXHIBIT I will be deleted.
Section 4
The following additional countries will be added to Exhibit III
Latin America: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
-1-
<PAGE> 34
Section 5
Exhibit IV (Price) will be amended the following way:
BIOSITE and MERCK agree to the following transfer prices for the PRODUCTS
purchased and distributed in Latin America by Latin American affiliates of
MERCK:
Triage(R) 7: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] for each 25
cassette kit and [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] for
each 10 cassette kit
Triage(R) 8: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] for each 25
cassette kit and [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] for
each 10 cassette kit
BIOSITE will be responsible for remitting a commission to MERCK (Darmstadt) of
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] per 25
cassette kit and [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] per 10 cassette kit purchased by Latin American affiliates of MERCK
by August 15 for purchases during the period January 1 through June 30 and by
February 15 for purchases during the period July 1 through December 31 during
the term of this agreement. Payment of the commission may be in the form of
cash, credit note, or no-charge kits shipped to MERCK (Darmstadt), at the
discretion of BIOSITE.
Section 6
EXHIBIT V will be changed and amended the following way:
1. BIOSITE and MERCK mutually agree on the following minimum quantities of
test devices to be purchased by MERCK from BIOSITE in the calendar year
indicated:
1. Calendar year 1993: [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
2. Calendar year 1994: [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
3. Calendar year 1995: [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
4. Calendar year 1996: [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
5. Calendar year 1997: [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
Calendar year 1996 and 1997 quantities are non-binding forecasts and
will be renegotiated at the end of calendar year 1995 but in any case
the quantities for 1996 and 1997
-2-
<PAGE> 35
should be no less than [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of the actual purchases of the previous
calendar year.
2. MERCK and BIOSITE mutually agree that Igoda S.A. (Spain)
and Merck Clevenot S.A. (France) will use their best
efforts to build the market and to meet the success
criteria as follows:
Igoda S.A. (Spain) [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] test kits
(25 test devices each) minimum within the
first 12 months
Merck Clevenot (France) [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] test kits
(25 test devices each) minimum within the
first 12 months
If MERCK fails to meet said success criteria for Igoda S.A. (Spain) and
Merck Clevenot S.A. (France) the parties will negotiate an amendment to
the Distributorship Agreement.
Darmstadt, 10 November San Diego, /s/ Kim Blickenstaff
---------------------
MERCK Biosite Diagnostics
Incorporated
ppa i.V.
/s/ Dr. Bardorff /s/ Dr. Reckman
---------------- ---------------
Dr. Bardorff Dr. Reckmann Mr. Blickenstaff
-3-
<PAGE> 36
SECOND AMENDMENT
TO THE DISTRIBUTORSHIP AGREEMENT
between
E. Merck, Frankfurter Strasse 250, 64271 Darmstadt, Federal Republic of Germany
- - hereinafter called MERCK - and BIOSITE DIAGNOSTICS INCORPORATED, 11030 Roselle
Street, Suite D, San Diego, CA 92121, United States of America - hereinafter
called BIOSITE
PREAMBLE
WHEREAS, both parties have concluded a Distributorship Agreement
on July 27, 1992;
WHEREAS, BIOSITE and MERCK have agreed to a reduction of the
transfer prices for the PRODUCTS as defined in EXHIBIT II;
NOW, THEREFORE, in consideration of the premises and of the mutual promises of
the parties hereinafter set forth, the parties agree to the following changes of
the Distributorship Agreement:
Section 1
EXHIBIT IV (Price) will be amended the following way:
BIOSITE and MERCK agree to the following transfer prices for the PRODUCTS as
defined in EXHIBIT II fca airport San Diego, CA.
These prices are valid from January 1, 1994 for [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION].
Triage(R) 6: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] US$ per 25-test kit
and [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] US$ per 10-test kit
including packaging and labeling.
Triage(R) 7: [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] US$ per 25-test kit
and [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] US$ per 10-test kit
including packaging and labeling.
Section 2
EXHIBIT V will be amended the following way:
-1-
<PAGE> 37
The 1994 minimum quantity of test cassettes to be purchased by MERCK and its
affiliates will be [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] cassettes.
The transfer price and the minimum purchase quantities for 1995 through 1997
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
Darmstadt, 12 January 1994
MERCK Biosite Diagnostics
ppa i.V. Incorporated
/s/ Dr. Bardorff /s/ Dr. Reckman /s/ Kim D. Blickenstaff
---------------- --------------- -----------------------
Dr. Bardorff Dr. Reckmann Mr. Blickenstaff
-2-
<PAGE> 1
EXHIBIT 10.14
[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION]
COLLABORATIVE DEVELOPMENT AGREEMENT
THIS COLLABORATIVE DEVELOPMENT AGREEMENT dated as of June 28, 1994 (the
"Agreement"), is entered into between BIOSITE DIAGNOSTICS INCORPORATED, a
Delaware corporation ("Biosite"), having a place of business located at 11030
Roselle Street, Suite D, San Diego, California 92121, U.S.A., and E. MERCK, a
German general partnership ("Merck"), having a place of business located at
Frankfurter Strasse 250, D-64293 Darmstadt, Germany.
W I T N E S S E T H :
WHEREAS, Biosite owns or has rights to certain significant technology
which may be used in the development of reagents and a test device for use with
a test device reader to form a system to quantitatively measure analytes in the
immunoassay field.
WHEREAS, Merck owns or has valuable knowledge relating to certain
significant technology which may be used in the development of reagents and a
test device for use with a test device reader to form a system to quantitatively
measure analytes in the immunoassay field.
WHEREAS, Biosite and Merck desire to collaborate in the development of
a hand held rapid in vitro immunoassay system, consisting of reagents, a testing
device and a reader, designed to quantitatively measure multiple cardiac
analytes released from damaged cardiac tissue for use in the diagnosis and
monitoring of myocardial infarction in humans, and if the parties mutually
agree, to quantitatively measure certain other analytes for use in certain other
fields.
WHEREAS, Biosite desires to manufacture the reagents and test devices,
and to engage a third party to develop and supply the test device reader, for
use in connection with such immunoassay system.
WHEREAS, Biosite desires to market and distribute such immunoassay
system in the United States of America and Canada, to appoint Merck as its
exclusive distributor in Europe, Latin America and South Africa, and to retain
the exclusive distribution rights in Japan and the rest of the world.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of the Agreement, the terms defined in this Article 1
shall have the respective meanings set forth below:
1.1 "Affiliate" shall mean, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by, or is under
common control with, such Person. A Person shall be regarded as in control of
another Person if it owns, or directly or indirectly controls, at least forty
percent (40%) of the voting stock or other ownership interest of the other
Person, or if it directly or indirectly possesses the power to direct or cause
the direction of the management and policies of the other Person by any means
whatsoever.
1.2 "Commencement Date" shall mean July 1, 1994.
1.3 "Development Program" shall mean the development program, described
generally in the summary work plan set forth in Exhibit A, as revised from time
to time as provided in the Agreement.
1.4 "Europe" shall mean, collectively, [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION].
1.5 "Field" shall mean the quantitative measurement of multiple cardiac
analytes released from damaged cardiac tissue, including CKMB, Troponin I and
Myoglobin, for use in the diagnosis and monitoring of myocardial infarction in
humans.
1.6 "Know-How" shall mean all information and data, which is not
generally known, including formulae, procedures, protocols, techniques and
results of experimentation and testing, which are necessary or useful to make,
use, develop, sell or seek regulatory approval in any country to market the
Product for use in the Field, in which Biosite or Merck has an ownership
interest and which is in the possession of Biosite or Merck on the date of the
Agreement or thereafter during the term of the Agreement.
1.7 "Latin America" shall mean, collectively, [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
1.8 "LRE" shall mean LRE Relais+Elektronik GmbH, a German limited
liability company.
1.9 "Patent Rights" shall mean (a) all patent applications heretofore
or hereafter filed or having legal force in any country
-2-
<PAGE> 3
owned by or licensed to Biosite or Merck or to which Biosite or Merck otherwise
acquires rights, which claim the Product, any Product Component, or the process
of manufacture or use of the Product or any Product Component for use in the
Field, together with any and all patents that have issued or in the future issue
therefrom, including utility model and design patents and certificates of
invention; and (b) all divisionals, continuations, continuations-in-part,
reissues, renewals, extensions or additions to any such patents and patent
applications; all to the extent and only to the extent that Biosite or Merck now
has or hereafter will have the right to grant licenses, immunities or other
rights thereunder.
1.10 "Person" shall mean an individual, corporation, partnership,
trust, business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
1.11 "Product" shall mean the hand held rapid in vitro immunoassay
system, consisting of reagents, a testing device and a reader, developed under
the Development Program.
1.12 "Product Components" shall mean, collectively, the Reader, the
Reagents and the Testing Device as defined below:
1.12.1 "Reader" shall mean that certain testing device reader,
developed under the Reader Development and Supply Agreement, constituting a
component of the Product.
1.12.2 "Reagents" shall mean those certain reagents, developed
under the Development Program, constituting a component of the Product.
1.12.3 "Testing Device" shall mean that certain testing device,
developed under the Development Program, containing the Reagents and
constituting a component of the Product.
1.13 "Reader Development and Supply Agreement" shall mean that certain
Development and Supply Agreement regarding the development of the Reader to be
entered into between Biosite and LRE, as amended, supplemented or restated from
time to time.
1.14 "South Africa" shall mean the Republic of South Africa.
1.15 "Steering Committee" shall mean the joint development committee
composed of representatives of Biosite and Merck described in Section 4.1 below.
1.16 "Supply and Distribution Agreement" shall mean that certain Supply
and Distribution Agreement dated as of even date, between Biosite and Merck, in
the form attached hereto as Exhibit B, as amended, supplemented or restated from
time to time.
-3-
<PAGE> 4
1.17 "Third Party" shall mean any Person other than Biosite, Merck and
their respective Affiliates.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants to the other party as
follows:
2.1 Existence and Power. Such party (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized; (b) has the requisite power and authority and the legal right to own
and operate its property and assets, to lease the property and assets it
operates under lease, and to carry on its business as it is now being conducted
and (c) is in compliance with all requirements of applicable law, except to the
extent that any noncompliance would not have a material adverse effect on the
properties, business, financial or other condition of such party and would not
materially adversely affect such party's ability to perform its obligations
under the Agreement.
2.2 Authorization and Enforcement of Obligations. Such party (a) has
the requisite power and authority and the legal right to enter into the
Agreement and to perform its obligations hereunder and (b) has taken all
necessary corporate action on its part to authorize the execution and delivery
of the Agreement and the performance of its obligations hereunder. The Agreement
has been duly executed and delivered on behalf of such party, and constitutes a
legal, valid, binding obligation, enforceable against such party in accordance
with its terms.
2.3 Consents. All necessary consents, approvals and authorizations of
all governmental authorities and other Persons required to be obtained by such
party in connection with the Agreement have been obtained.
2.4 No Conflict. The execution and delivery of the Agreement and the
performance of such party's obligations hereunder do not conflict with or
violate any requirement of applicable laws or regulations.
2.5 DISCLAIMER OF WARRANTIES. NOTHING IN THE AGREEMENT SHALL BE
CONSTRUED AS A REPRESENTATION MADE, OR WARRANTY GIVEN, BY EITHER PARTY THAT ANY
PATENT WILL ISSUE BASED UPON ANY PENDING PATENT APPLICATION WITHIN THE PATENT
RIGHTS, THAT ANY PATENT WITHIN THE PATENT RIGHTS WHICH ISSUES WILL BE VALID, OR
THAT THE USE OF ANY LICENSE GRANTED HEREUNDER OR THAT THE USE OF ANY PATENT
RIGHTS WILL NOT INFRINGE THE PATENT OR PROPRIETARY RIGHTS OF ANY OTHER PERSON.
FURTHERMORE, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, WITH RESPECT TO THE PATENT RIGHTS, THE PRODUCT OR THE PRODUCT
COMPONENTS,
-4-
<PAGE> 5
INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 3
DEVELOPMENT PROGRAM
3.1 Development Activities.
3.1.1 Scope of Development Program. Biosite and Merck shall
conduct the Development Program to develop, conduct all clinical testing and
apply for regulatory approval to market the Product for use in the Field in the
United States of America, Canada, Europe, Latin America and South Africa.
Biosite shall have the exclusive right to develop and commercialize the Product
for use in the Field in Japan and the rest of the world and to develop and
commercialize the Product for use outside the Field. Notwithstanding the
foregoing, if the parties mutually agree during the term of the Development
Program, they shall negotiate in good faith mutually acceptable agreements, on
terms and conditions substantially similar to those of the Agreement and the
Supply and Distribution Agreement, to develop and commercialize a disposable in
vitro immunoassay test device in combination with a hand held reader, for use in
either or both of the following fields: [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION].
3.1.2 Development Responsibilities. Biosite and Merck shall
conduct the Development Program under the direction of the Steering Committee.
Biosite shall be responsible for the design, development and manufacturing
scale-up of the Reagents and the Testing Device, the clinical trials and
regulatory approval of the Product for use in the Field in the United States of
America and Canada. Merck shall be responsible for the clinical trials and
regulatory approval of the Product for use in the Field in the countries of
Europe and Latin America and in South Africa. Biosite shall be responsible for
the clinical trials and regulatory approval of the Product for use in the Field
in Japan and the rest of the world. Pursuant to the Reader Development and
Supply Agreement, LRE shall be responsible for the design and development of the
Reader. Biosite and Merck shall cooperate with LRE in the design and development
of the Reader.
3.1.3 Conduct of Development. Biosite and Merck each shall conduct
the Development Program in good scientific manner, and in compliance in all
material respects with all requirements of applicable laws and regulations and
all applicable good laboratory, clinical and manufacturing practices to attempt
to achieve its objectives efficiently and expeditiously. Biosite and Merck each
shall proceed diligently with the work set out in the Development Program by
using their respective good faith efforts to provide, among others, the
following resources:
-5-
<PAGE> 6
(a) allocation of sufficient time, effort, equipment and
facilities to the Development Program to carry out its obligations under the
Development Program and to accomplish the objectives thereof; and
(b) use of personnel with sufficient skills and experience as
are required to carry out its obligations under the Development Program and to
accomplish the objectives thereof.
3.1.4 Subcontracts. Biosite and Merck each may subcontract
portions of the Development Program to be performed by it in the normal course
of its business without the prior consent of the other; provided, however, that
(a) such subcontracting shall not involve the transfer of Know-How of the other
party to Third Parties; (b) the subcontracted party shall enter into a
confidentiality agreement with the subcontracting party in accordance with
Article 7 below; (c) the subcontracting party shall supervise such subcontract
work; and (d) the subcontracted party shall be in compliance in all material
respects with all requirements of applicable laws and regulations, together with
all applicable good laboratory, clinical and manufacturing practices.
3.2 Development Funding.
3.2.1 Jointly Funded Development Costs.
(a) The Jointly Funded Development Costs, as defined below,
shall be shared sixty percent (60%) by Biosite and forty percent (40%) by Merck.
The "Jointly Funded Development Costs" shall mean (i) [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of those costs incurred by
Biosite or Merck under the Development Program for the design, development and
manufacturing scale-up of the Reagents, the design, development and
manufacturing scale-up of the Testing Device; (ii) [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the costs, not to exceed
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION],
incurred by Biosite for the clinical trials and regulatory approval of the
Product for use in the Field in the United States of America; (iii)
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the
costs, not to exceed [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] in the aggregate, incurred by Merck for the clinical trials and
regulatory approval of the Product for use in the Field in Europe, Latin America
and South Africa; and (iv) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] of those costs paid by Biosite to LRE to fund the
development of the Reader under the Reader Development and Supply Agreement. The
parties currently estimate that the Jointly Funded Development Costs shall be
approximately [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].
(b) Merck shall fund its share of the Jointly Funded Development
Costs (i) by paying Biosite the sum of US$660,000 on
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or before June 30, 1994, and the additional sum of US$660,000 on or before June
30, 1995, and (ii) by directly funding those certain costs of the clinical
trials and regulatory approval of the Product for use in the Field in Europe,
Latin America and South Africa as set forth in Section 3.2.1(a)(iii) above.
(c) Biosite shall fund its share of the Jointly Funded Development
Costs, and shall apply the funding received from Merck under the Agreement, for
the principal purpose of carrying out its obligations under the Development
Program and accomplishing the objectives thereof.
(d) If, during the term of the Development Program, Biosite enters
into an agreement with one or more Third Parties to develop and commercialize
the Product for use in the Field in Japan, Merck's obligation to fund its share
of the Jointly Funded Development Costs shall be reduced by an amount equal to
the following percentage of the following payments, if any, received by Biosite
from such one or more Third Parties in consideration for the rights to develop
and commercialize the Product for use in the Field in Japan: (i) forty percent
(40%) of any up-front licensing or marketing rights fees, (ii) forty percent
(40%) of any funding for the development of the Reagents and the Test Device,
and (iii) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] of any funding for the development of the Reader.
(e) Each party shall maintain complete and accurate records of the
Jointly Funded Development Costs which it incurs. Within [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] and [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] during the term of the
Development Program, and within [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] after the termination or expiration of the
Development Program, Biosite and Merck each shall prepare and provide the other
party with a written report, in reasonably specific detail, showing the Jointly
Funded Development Costs which it incurred during the applicable reporting
period and during the Development Program through the end of such period. Upon
the written request of a party (the "Requesting Party"), and not more than once
in each calendar year, the other party shall permit an independent certified
public accounting firm of internationally recognized standing, selected by the
Requesting Party and reasonably acceptable to the other party, at the Requesting
Party's expense, to have access during normal business hours to such of the
records of the other party as may be reasonably necessary to verify the accuracy
of such reports hereunder for any year ending not more than twenty four (24)
months prior to the date of such request. The accounting firm shall disclose to
the Requesting Party only whether the records are correct or not and the
specific details concerning any discrepancies. No other information shall be
shared. The Requesting Party shall treat all financial information subject to
review
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under this Section 3.2.1(e) as confidential, and shall cause its accounting firm
to retain all such financial information in confidence.
(f) From time to time during the Development Program, if
necessary, Biosite and Merck each shall prepare and provide the Steering
Committee and the other party with a revised budget of the Jointly Funded
Development Costs incurred or to be incurred by such party. The Steering
Committee shall consider in good faith, and shall approve, such revised budget
and schedule of funding by Biosite and Merck consistent with the provisions of
this Section 3.2.1 and as reasonably necessary to fund the anticipated Jointly
Funded Development Costs as they are incurred.
(g) Within [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] after the expiration or termination of the Development
Program, Biosite and Merck shall meet and make a final adjustment of the Jointly
Funded Development Costs paid by each party consistent with the provisions of
this Section 3.2.1.
3.2.2 Independently Funded Development Costs. Merck shall be
solely responsible for funding [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of the costs, in excess of [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] in the aggregate, of
clinical trials and regulatory approval of the Product for use in the Field in
Europe, Latin America and South Africa. Biosite shall be solely responsible for
funding (a) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] of those costs paid by Biosite to LRE to fund the development of the
Reader under the Reader Development and Supply Agreement, (b) [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the costs, in
excess of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] in the aggregate, of the clinical trials and regulatory approval of
the Product for use in the Field in the United States, and (c) [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the costs of the
clinical trials and regulatory approval of the Product for use in the Field in
the rest of the world other than the United States, Europe, Latin America and
South Africa.
3.2.3 Third Party License Fees. If Biosite or Merck is obligated
to pay any amounts to one or more Third Parties in consideration for the license
or other rights to any Third Party Patent Rights or Know-How, other than amounts
calculated on the basis of sales of Products, such amounts shall be shared
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] by
Biosite and [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] by Merck.
3.3 Development Records and Reports.
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3.3.1 Records. Biosite and Merck each shall maintain records, in
sufficient detail and in good scientific manner appropriate for patent purposes,
which shall be complete and accurate and shall fully and properly reflect all
work done and results achieved in the performance of the Development Program
(including all data in the form required under all applicable laws and
regulations).
3.3.2 Inspection of Records. Biosite and Merck each shall have the
right, during normal business hours and upon reasonable notice, to inspect and
copy all such records of the other party to the extent reasonably required for
the performance of its obligations under the Agreement (with the party owning
the records determining what is reasonably required). Each party shall maintain
such records and the information of the other party contained therein in
confidence in accordance with Section 7.1 below and shall not use such records
or information except to the extent otherwise permitted by the Agreement.
3.3.3 Development Reports. Biosite and Merck each shall keep the
other informed of the progress of such party under the Development Program.
Within thirty (30) days following the end of each calendar quarter during the
term of the Development Program and within thirty (30) days following the
expiration or termination of the Development Program, Biosite and Merck each
shall prepare, and provide to each member of the Steering Committee and the
other party, a reasonably detailed written summary report which shall describe
the work performed by such party to date under the Development Program.
3.4 Term of Development Program. Except as provided herein, the term
of the Development Program shall commence on the Commencement Date and continue
for a period of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] thereafter.
3.5 Project Leaders. Biosite and Merck each shall appoint a person (a
"Project Leader") to coordinate its part of the Development Program. The Project
Leaders shall be the primary contacts between the parties with respect to the
Development Program. Each party shall notify the other within thirty (30) days
after the date of the Agreement of the appointment of its Project Leader and
shall notify the other party as soon practicable upon changing this appointment.
3.6 Availability of Employees. Each party shall make its employees and
relevant reports of non-employee consultants available, upon reasonable notice
during normal business hours, at their respective places of employment to
consult with the other party on issues arising during the Development Program
and in connection with any request from any regulatory agency, including
regulatory, scientific, technical and clinical testing issues.
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<PAGE> 10
3.7 Visit of Facilities. Representatives of Biosite and Merck may,
upon reasonable notice during normal business hours, (a) visit the facilities
where the Development Program is being conducted and the facilities where the
other party manufactures the Product or Product Components, and (b) consult
informally, during such visits and by telephone, with personnel of the other
party performing work on the Development Program. On such visits an employee of
the party conducting the development shall accompany the employee(s) of the
visiting party. If requested by the other party, Biosite and Merck shall cause
appropriate individuals working on the Development Program to be available for
meetings at the location of the facilities where such individuals are employed
at times reasonably convenient to the party responding to such request.
3.8 Exclusivity. During the term of the Development Program, neither
Biosite nor Merck shall perform, for itself or with any Affiliate or Third
Party, any research, development or commercialization activities regarding a
disposable in vitro immunoassay test device and a hand held reader for use in
the Field without the prior written consent of the other party, unless
specifically permitted under the Agreement.
ARTICLE 4
MANAGEMENT OF THE DEVELOPMENT PROGRAM
4.1 Steering Committee.
4.1.1 Composition. The Development Program shall be conducted
under the direction of the Steering Committee comprised of two (2) named
representatives of Biosite and two (2) named representatives of Merck. Each
party shall appoint its respective representatives to the Steering Committee
from time to time, and may substitute one or more of its representatives, in its
sole discretion, effective upon notice to the other party of such change.
4.1.2 Responsibilities. The Steering Committee shall be
responsible for directing the conduct of the Development Program, including the
design, development, clinical testing and application for regulatory approval in
the United States of America, Canada, Europe, Latin America and South Africa.
The Steering Committee (a) shall review the respective activities of the parties
under the Development Program in relation to the objectives thereof, set
priorities therefor and allocate responsibilities thereunder, (b) shall oversee
any anticipated and actual regulatory filings regarding the Product for use in
the Field, (c) shall consider and approve modifications to the Development
Program and the budget therefor, and (d) consider whether to terminate the
Development Program and, if necessary, make recommendations to the parties
regarding termination.
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<PAGE> 11
4.1.3 Meetings. The Steering Committee shall meet not less than
once every six (6) months during the term of the Development Program, on such
dates and at such times and places as agreed to by Biosite and Merck,
alternating between San Diego and Darmstadt, or such other locations as the
parties shall agree. Each party shall be responsible for its own costs of
attending such meetings.
4.1.4 Committee Actions. Any approval, determination or other
action agreed to by all of the members of the Steering Committee or their
deputies present at the relevant Steering Committee meeting shall be the
approval, determination or other action of the Steering Committee; provided,
however, that both representatives of each party are present at such meeting.
4.2 Disagreements. All disagreements within the Steering Committee
shall be resolved in the following manner:
4.2.1 The representatives of the Steering Committee promptly shall
present the disagreement to the executive of each of Biosite and Merck who has
the principal responsibility for such party's work under the Agreement.
4.2.2 Such executives shall meet to discuss each party's view and
to explain the basis for their respective positions of such disagreement, and in
good faith shall attempt to resolve such disagreement among themselves.
4.2.3 If such executives cannot promptly resolve such
disagreement, then such executives shall establish a mechanism to resolve such
agreement promptly; provided, however, that the parties do not waive any rights
which they may have under the Agreement or otherwise as a result of one party's
settlement of a disagreement under this Section 4.2.3.
4.3 Steering Committee Reports. Within thirty (30) days following each
Steering Committee meeting during the term of the Agreement, the Steering
Committee shall prepare and provide to each party a reasonably detailed written
summary report which shall (a) describe the work performed to date under the
Development Program, (b) evaluate the work performed in relation to the
objectives of the Development Program, and (c) state any recommendations or
determinations of the Steering Committee regarding the Development Program.
ARTICLE 5
SUPPLY AND DISTRIBUTION
Biosite shall have the exclusive right to distribute the Product for
use in the Field in the United States of America and Canada. On the terms and
subject to the conditions of the Supply and Distribution Agreement and the
Reader Development and Supply
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Agreement, Biosite shall appoint Merck as its exclusive distributor of the
Product for use in the Field in Europe, Latin America and South Africa. Biosite
shall have the exclusive right to distribute the Product for use in the Field in
Japan and the rest of the world.
ARTICLE 6
LICENSES
6.1 Biosite Technology. On the terms and subject to the conditions of
the Agreement, Biosite hereby grants to Merck an exclusive license (or in the
case of licensed Third Party Patent Rights and Know-How, when permissible, an
exclusive sublicense) under Biosite's Patent Rights and Biosite's Know-How, to
perform its obligations under the Development Program. Merck may not grant
sublicenses under such license to any Affiliate or Third Party without the prior
written consent of Biosite.
6.2 Merck Technology. On the terms and subject to the conditions of
the Agreement, Merck hereby grants to Biosite an exclusive license (or in the
case of licensed Third Party Patent Rights and Know-How, when permissible, an
exclusive sublicense) under Merck's Patent Rights and Merck's Know-How, to
perform its obligations under the Development Program, and to make, have made,
use and sell the Product. Biosite may not grant sublicenses under such license
to any Affiliate or Third Party without the prior written consent of Merck.
ARTICLE 7
CONFIDENTIALITY AND PUBLICATION
7.1 Confidential Information. During the term of the Agreement, and
for a period of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] following the expiration or earlier termination hereof, each party
shall maintain in confidence all information (including samples) disclosed by
the other party and identified as, or acknowledged to be, confidential (the
"Confidential Information"), and shall not use, disclose or grant the use of the
Confidential Information except on a need-to- know basis to those directors,
officers, employees, consultants, clinical investigators, contractors, permitted
sublicensees or permitted assignees, to the extent such disclosure is reasonably
necessary in connection with such party's activities as expressly authorized by
the Agreement. To the extent that disclosure is authorized by the Agreement,
prior to disclosure, each party hereto shall obtain agreement of any such person
or entity to hold in confidence and not make use of the Confidential Information
for any purpose other than those permitted by the Agreement. Each party shall
notify the other promptly upon discovery of any
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unauthorized use or disclosure of the other party's Confidential Information.
7.2 Permitted Disclosures. The confidentiality obligations contained
in Section 7.1 above shall not apply to the extent that (a) any receiving party
(the "Recipient") is required (i) to disclose information by law, order or
regulation of a governmental agency or a court of competent jurisdiction, or
(ii) to disclose information to any governmental agency for purposes of
obtaining approval to test or market a product, provided in either case that the
Recipient shall provide written notice thereof to the other party and sufficient
opportunity to object to any such disclosure or to request confidential
treatment thereof; or (b) the Recipient can demonstrate that (i) the disclosed
information was public knowledge at the time of such disclosure by the other
party hereunder, or thereafter became public knowledge, other than as a result
of actions of the Recipient, its directors, officers, employees, consultants,
clinical investigators, contractors, permitted sublicensees and permitted
assignees in violation hereof; (ii) the disclosed information was rightfully
known by the Recipient or its affiliates (as shown by its written records) prior
to the date of disclosure to the Recipient by the other party hereunder; or
(iii) the disclosed information was disclosed to the Recipient or its affiliates
on an unrestricted basis from a source unrelated to any party to the Agreement
and not under a duty of confidentiality to the other party. Notwithstanding any
other provision of the Agreement, Biosite may disclose Confidential Information
of Merck relating to information developed pursuant to the Agreement to any
person or entity with whom Biosite has, or is proposing to enter into, a
business relationship, as long as such person or entity has entered into a
confidentiality agreement with Biosite.
7.3 Publication. Subject to the provisions of Sections 7.1 and 7.2
above, Biosite and Merck each shall have the right to publish the results of its
work performed under the Agreement; provided, however, that such party shall
provide the other party the opportunity to review any proposed manuscripts or
any other proposed disclosure describing said work sixty (60) days prior to
their submission for publication or other proposed disclosure. If the other
party believes patentable subject matter is disclosed in the manuscript or other
disclosure and so notifies the first party, or if such submission for
publication or other disclosure would cause the loss of significant foreign
patent rights, said publication will be withheld for a reasonable period of time
until United States patent filings are completed in accordance with Article 8
below.
7.4 Terms of the Agreement. Biosite and Merck shall not disclose any
terms or conditions of the Agreement to any Third Party without the prior
consent of the other party, except as required by applicable law or to Persons
with whom Merck or Biosite has entered into or proposes to enter into a business
relationship, provided that such Persons shall enter into the
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required confidentiality agreement. Notwithstanding the foregoing, prior to
execution of the Agreement, Merck and Biosite shall agree upon the substance of
information that can be used to describe the terms of this transaction, and
Merck and Biosite may disclose such information, as modified by mutual agreement
from time to time, without the other party's consent.
7.5 Use of Name. Except as required by applicable law, neither party
shall use the name of the other party or the other party's employees in any
advertisement, press release or publicity with reference to the Agreement,
without prior written approval of the other party, which approval shall not be
unreasonably withheld.
ARTICLE 8
INVENTIONS AND PATENT RIGHTS
8.1 Ownership. The entire right and title in all inventions,
discoveries, improvements or other technology directed to the Product, the
Product Components or the process of the manufacture or use thereto, whether or
not patentable, and any patent applications or patents based thereon, conceived
during and as a result of the Development Program (collectively, the
"Inventions") (a) by employees or others acting solely on behalf of Biosite, or
its affiliates shall be owned solely by Biosite (the "Biosite Inventions"), (b)
by employees or others acting solely on behalf of Merck or its Affiliates shall
be owned solely by Merck (the "Merck Inventions"), and (c) by employees or
others acting jointly on behalf of Biosite and Merck, or their respective
Affiliates, shall be owned jointly by Biosite and Merck (the "Joint
Inventions"). Each party promptly shall disclose to the other party the making,
conception or reduction to practice of Inventions by employees or others acting
on behalf of such party. Biosite and Merck each hereby represents that all
employees and other Persons acting on its behalf in performing its obligations
under the Agreement shall be obligated under a binding written agreement to
assign to it, or as it shall direct, all Inventions made or developed by such
employees or other Persons.
8.2 Patent Prosecution and Maintenance. The party owing an Invention,
and Biosite in the case of a Joint Invention, shall be responsible for and shall
control the preparation, filing, prosecution and maintenance of all patents and
patent applications related to such Invention. However, the list of countries in
which patent applications shall be filed in the case of a Joint Invention must
be approved by Merck beforehand, which approval may not be unreasonably withheld
or delayed. The party controlling the patents and patent applications with
respect to an Invention shall pay all costs incurred in connection therewith;
provided, however, Biosite and Merck shall equally share all such costs with
respect to Joint Inventions. Biosite shall use its good faith efforts to provide
Merck with an opportunity to review and comment
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on the text of each patent application with respect to a Joint Invention before
filing, and shall supply Merck with a copy of such patent application as filed,
together with notice of its filing date and serial number. Biosite and Merck
each shall cooperate with the other party, execute all lawful papers and
instruments and make all rightful oaths and declarations as may be necessary in
the preparation, prosecution and maintenance of all patents and other filings
referred to in this Section 8.2.
8.3 Notification of Infringement. Each party shall notify the other
party of any infringement known to such party of any Patent Rights of the other
party and shall provide the other party with the available evidence, if any, of
such infringement.
8.4 Enforcement of Patent Rights. The party owning any Patent Rights,
and Biosite in the case of Patent Rights claiming a Joint Invention, at its sole
expense, shall have the right to determine the appropriate course of action to
enforce such Patent Rights or otherwise abate the infringement thereof, to take
(or refrain from taking) appropriate action to enforce such Patent Rights, to
control any litigation or other enforcement action and to enter into, or permit,
the settlement of any such litigation or other enforcement action with respect
to such Patent Rights, and shall consider, in good faith, the interests of the
other party in so doing. If Biosite does not, within one hundred twenty (120)
days of receipt of notice from Merck, abate the infringement or file suit to
enforce Patent Rights claiming a Joint Invention against at least one infringing
party, Merck shall have the right to take whatever action it deems appropriate
to enforce such Patent Rights; provided, however, that, within thirty (30) days
after receipt of notice of Merck's intent to file such suit, Biosite shall have
the right to jointly prosecute such suit and to fund up to [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] the costs of such
suit. The party controlling any such enforcement action shall not settle the
action or otherwise consent to an adverse judgment in such action that
diminishes the rights or interests of the non-controlling party without the
prior written consent of the other party. All monies recovered upon the final
judgment or settlement of any such suit to enforce the Patent Rights shall be
shared, after reimbursement of expenses, by Biosite and Merck as follows: (a)
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] shall
be retained by the party that has the right under the Supply and Distribution
Agreement to distribute the Product in the country of such infringement, and (b)
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] shall
be shared by the parties pro rata according to the respective percentages of
costs borne by each in such suit. Notwithstanding the foregoing, Biosite and
Merck each shall fully cooperate with the other party in the planning and
execution of any action to enforce the Patent Rights.
8.5 No Other Technology Rights. Except as otherwise provided in the
Agreement, under no circumstances shall a party,
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as a result of the Agreement, obtain any ownership interest or other right in
any technology, know-how, patents, pending patent applications, products,
vaccines, antibodies, cell lines or cultures, or animals of the other party,
including items owned, controlled or developed by the other, or transferred by
the other to such party at any time pursuant to the Agreement. It is understood
and agreed by the parties that the Agreement does not grant to either party any
license or other right in basic technology of the other party except to the
extent necessary to enable the parties to carry out their part of the
Development Program or the development and marketing of the Product.
ARTICLE 9
TERM AND TERMINATION
9.1 Expiration. Unless terminated earlier pursuant to Sections 9.2 or
9.3 below, the Agreement shall expire on the date [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after expiration or
termination of the Development Program.
9.2 Termination by Mutual Agreement. The parties may terminate the
Development Program at any time upon the express written agreement of both
parties, in which case the Agreement shall terminate on the date [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after termination of
the Development Program.
9.3 Termination for Cause. Except as otherwise provided in Section 12.2
below, either party may terminate the Agreement upon or after the breach of any
material provision of the Agreement by the other party if the other party has
not cured such breach within ninety (90) days after notice thereof from the non-
breaching party.
9.4 Effect of Expiration and Termination. Expiration or termination of
the Agreement shall not relieve the parties of any obligation accruing prior to
such expiration or termination. The provisions of Articles 5 and 6 shall survive
expiration of the Agreement, and the provisions of Articles 7 and 10 shall
survive the expiration or termination of the Agreement.
ARTICLE 10
INDEMNITY
10.1 Indemnity. Each party shall indemnify, defend and hold harmless
the other party, its directors, officers, employees and agents from all losses,
liabilities, damages and expenses (including reasonable attorneys' fees and
costs) that they may suffer as a result of any claims, demands, actions or other
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<PAGE> 17
proceedings made or instituted by any third party against any of them and
arising out of or relating to any breach of the Agreement by the indemnifying
party, or any recklessness or intentional act or omission by or on behalf of the
indemnifying party in the performance of its activities contemplated by the
Agreement, other than those certain losses, liabilities, damages and expenses
arising out of the gross negligence or willful misconduct of the indemnified
party.
10.2 Procedure. A party (the "Indemnitee") that intends to claim
indemnification under this Article 10 shall promptly notify the other party (the
"Indemnitor") of any such loss, liability, damage or expense, or any claim,
demand, action or other proceeding with respect to which the Indemnitee intends
to claim such indemnification. The Indemnitor shall have the right to
participate in, and, to the extent the Indemnitor so desires, jointly with any
other indemnitor similarly noticed, to assume the defense thereof with counsel
selected by the Indemnitor; provided, however, that an Indemnitee shall have the
right to retain its own counsel, with the fees and expenses to be paid by the
Indemnitor, if representation of the Indemnitee by the counsel retained by the
Indemnitor would be inappropriate due to actual or potential differing interests
between such Indemnitee and any other party represented by such counsel in such
proceedings. The indemnity obligations under this Article 10 shall not apply to
amounts paid in settlement of any loss, liability, damage or other expense if
such settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld unreasonably. The failure to deliver notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve such
Indemnitor of any liability to the Indemnitee under this Article 10, but the
omission so to deliver notice to the Indemnitor will not relieve it of any
liability that it may have to any Indemnitee otherwise than under this Article
10. The Indemnitor may not settle the action or otherwise consent to an adverse
judgment in such action that diminishes the rights or interests of the
Indemnitee without the express written consent of the Indemnitee. The
Indemnitee, its employees and agents, shall cooperate fully with the Indemnitor
and its legal representatives in the investigation of any action, claim or
liability covered by this indemnification.
10.3 Insurance. Merck and Biosite each shall maintain, through self
insurance or otherwise, comprehensive general liability insurance, including
contractual liability insurance, against claims for bodily injury or property
damage arising from its activities contemplated by the Agreement, in such
amounts as it customarily maintains for similar activities. Biosite and Merck
each shall maintain such insurance during the term of the Agreement and
thereafter for so long as it maintains insurance for itself covering such
activities.
ARTICLE 11
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CONCILIATION AND ARBITRATION
11.1 Conciliation. Biosite and Merck shall exercise their commercially
reasonable efforts to settle between themselves in an amicable way any dispute,
controversy or claim which may arise out of or relating to the Agreement within
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after
one party receives notice from the other party of such dispute, controversy or
claim.
11.2 Arbitration. If not settled by the parties in accordance with
Section 11.1 above, any dispute, controversy or claim originally initiated by
either party and arising out of or relating to the Agreement shall be referred
to and resolved by binding arbitration, held in New York, New York, United
States of America, and conducted in accordance with the American Arbitration
Association ("AAA") Commercial Arbitration Rules, and the following provisions:
11.2.1 The arbitral tribunal shall be composed of three (3)
persons each of whom shall be neutral, independent and impartial. Each party
shall nominate an arbitrator, and the two (2) arbitrators so appointed shall
appoint a third, who shall act as president of the arbitral tribunal. If either
party fails to nominate an arbitrator within thirty (30) days of receiving
notice of the nomination of an arbitrator by the other party, such (second)
arbitrator shall be appointed at the request of the first party by the AAA. If
the two arbitrators selected by the parties fail to select a third, presiding
arbitrator within twenty (20) days of the appointment of the second arbitrator,
the third arbitrator shall be appointed at the request of the first party by the
AAA.
11.2.2 The arbitrators shall hold a preliminary meeting with the
parties within thirty (30) days of the appointment of the third or presiding
arbitrator for the purpose of determining the issues to be decided in the
arbitration, the specific procedures to be followed and the schedule for
briefing and/or hearings. The arbitrators shall hold a hearing which, unless the
parties otherwise agree, should be recorded by stenographic or other means.
Within one hundred twenty (120) days of the preliminary meeting (except in
extraordinary cases), the arbitrators shall issue an award in writing which
shall state the reasons for the award and which, except as set forth in the
following sentence, shall be final and binding between the parties. Judgment
upon the award rendered by the arbitrators may be entered in any court of
competent jurisdiction.
11.2.3 The parties agree that the award of the arbitrators shall
be the sole and exclusive remedy between them regarding any claims,
counterclaims, issues or accountings presented or pled to the arbitrators; that
it shall be made and shall promptly by payable in United States dollars free of
any tax, deduction or offset; and that any costs, fees or taxes
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<PAGE> 19
incident to enforcing the award shall, to the maximum extent permitted by law,
be charged against the party resisting such enforcement.
11.2.4 Questions concerning arbitrability under this dispute
resolution clause shall be governed exclusively by the United States Arbitration
Act. The arbitrators shall be empowered to consider and decide claims or issues
arising under or relating to state and federal statutes governing business
practices, but shall not be empowered to nor shall they award punitive damages.
11.2.5 As part of any arbitral award rendered pursuant to this
Section 11.2, the arbitrators shall make an award of arbitral costs and
reasonable attorneys' fees to the prevailing party.
11.2.6 The Agreement shall be governed by and construed in
accordance with the laws of the State of New York and shall not be governed by
the United Nations Convention on Contracts for the Internationsl Sale of Goods.
ARTICLE 12
MISCELLANEOUS
12.1 Notices. Any consent, notice or report required or permitted to be
given or made under the Agreement by one of the parties to the other shall be in
writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery, air mail, internationally-recognized delivery service or
courier), air mail, internationally-recognized delivery service or courier,
postage prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and (except as otherwise provided in the
Agreement) shall be effective upon receipt by the addressee.
If to Biosite: Biosite Diagnostics Incorporated
11030 Roselle Street, Suite D
San Diego, California 92121, U.S.A.
Attention: Kim D. Blickenstaff
President
with a copy to: Pillsbury Madison & Sutro
235 Montgomery Street, 15th Floor
San Francisco, California 94104, U.S.A.
Attention: Thomas E. Sparks, Jr.
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<PAGE> 20
If to Merck: E. Merck
Frankfurter Strasse 250
D-64293 Darmstadt
Germany
Attention: Dr. Bernd Reckmann
with a copy to: E. Merck
Frankfurter Strasse 250
D-64293 Darmstadt
Germany
Attention: LEW/Licensing
12.2 Force Majeure. Neither party shall be held liable or responsible
to the other party nor be deemed to have defaulted under or breached the
Agreement for failure or delay in fulfilling or performing any term of the
Agreement to the extent, and for so long as, such failure or delay is caused by
or results from causes beyond the reasonable control of the affected party
including fire, floods, embargoes, war, acts of war (whether war be declared or
not), insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other party.
12.3 Assignment. The Agreement may not be assigned or otherwise
transferred, nor, except as expressly provided hereunder, may any right or
obligations hereunder be assigned or transferred by either party [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]. Any permitted
assignee shall assume all obligations of its assignor under the Agreement.
12.4 Severability. Each party hereby acknowledges that it does not
intend to violate any public policy, statutory or common laws, rules,
regulations, treaty or decision of any government agency or executive body
thereof of any country or community or association of countries. Should one or
more provisions of the Agreement be or become invalid, the parties shall
substitute, by mutual consent, valid provisions for such invalid provisions
which valid provisions in their economic effect are sufficiently similar to the
invalid provisions that it can be reasonably assumed that the parties would have
entered into the Agreement with such provisions. In case such provisions cannot
be agreed upon, the invalidity of one or several provisions of the Agreement
shall not affect the validity of the Agreement as a whole, unless the invalid
provisions are of such essential importance to the Agreement that it is to be
reasonably assumed that the parties would not have entered into the Agreement
without the invalid provisions.
12.5 U.S. Export Laws and Regulations. Biosite and Merck each
acknowledge that the development and commercialization rights and information
disclosure requirements of the Agreement are subject to the laws and regulations
of the United States of America relating to the export of products and technical
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<PAGE> 21
information. Without limitation, Biosite and Merck each shall comply with all
such laws and regulations.
12.6 Entire Agreement. The Agreement contains the entire understanding
of the parties with respect to the subject matter hereof. All express or implied
agreements and understandings, either oral or written, heretofore made are
expressly superseded by the Agreement. The Agreement may be amended, or any term
hereof modified, only by a written instrument duly executed by both parties.
12.7 Headings. The captions to the several Articles and Sections
hereof are not a part of the Agreement, but are merely guides or labels to
assist in locating and reading the several Articles and Sections hereof.
12.8 Independent Contractors. It is expressly agreed that Biosite and
Merck shall be independent contractors and that the relationship between the two
parties shall not constitute a partnership, joint venture or agency. Neither
Biosite nor Merck shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior consent of the party to do so.
12.9 Language. The English language version of the Agreement shall
govern and control any translations of the Agreement into any other language.
12.10 Waiver. The waiver by either party of any right hereunder or the
failure to perform or of a breach by the other party shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.
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<PAGE> 22
12.11 Counterparts. The Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed the Agreement as of the
date first set forth above.
BIOSITE DIAGNOSTICS INCORPORATED
By /s/ Kim D. Blickenstaff
---------------------------------
Title: President
E. MERCK
By /s/ Dr. Walter Bardorff
---------------------------------
Title: General Manager
Diagnostics Division
By /s/ Dr. Bernd Reckman
---------------------------------
Title: Head of Department
Marketing and Sales
Diagnostics Division
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<PAGE> 23
EXHIBIT A
WORK PLAN
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
<PAGE> 24
EXHIBIT B
SUPPLY AND DISTRIBUTION AGREEMENT
[SEE EXHIBIT 10.15]
<PAGE> 1
EXHIBIT 10.15
[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.]
SUPPLY AND DISTRIBUTION AGREEMENT
THIS SUPPLY AND DISTRIBUTION AGREEMENT dated as of June 28, 1994 (the
"Agreement"), is entered into between BIOSITE DIAGNOSTICS INCORPORATED, a
Delaware corporation ("Biosite"), having a place of business located at 11030
Roselle Street, Suite D, San Diego, California 92121, United States of America,
and E. MERCK, a German general partnership ("Merck"), having a place of business
located at Frankfurter Strasse 250, D-64293 Darmstadt, Germany.
W I T N E S S E T H :
WHEREAS, Biosite owns or has rights to certain significant technology
which may be used in the development of reagents and a test device for use with
a test device reader to form a system to quantitatively measure analytes in the
immunoassay field.
WHEREAS, Biosite and Merck have entered into a Collaborative
Development Agreement pursuant to which the parties agreed to collaborate in the
development of a hand held rapid in vitro immunoassay system, consisting of
reagents, a testing device and a reader, designed to quantitatively measure
multiple cardiac analytes released from damaged cardiac tissue for use in the
diagnosis and monitoring of myocardial infarction in humans, and if the parties
mutually agree, to quantitatively measure certain other analytes for use in
certain other fields.
WHEREAS, Biosite desires to distribute such immunoassay system under
such Collaborative Development Agreement in the United States of America and
Canada, to appoint Merck as its exclusive distributor in Europe, Latin America
and South Africa, and to retain the exclusive distribution rights in Japan and
the rest of the world.
WHEREAS, Biosite and Merck desire to enter into the Agreement whereby
Biosite appoints Merck as the exclusive distributor of such immunoassay system
in Europe, Latin America and South Africa, on the terms and subject to the
conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties hereby agree as follows:
<PAGE> 2
ARTICLE 1
DEFINITIONS
For purposes of the Agreement, the terms defined in this Article 1
shall have the respective meanings set forth below:
1.1 "Affiliate" shall mean, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by, or is under
common control with, such Person. A Person shall be regarded as in control of
another Person if it owns, or directly or indirectly controls, at least forty
percent (40%) of the voting stock or other ownership interest of the other
Person, or if it directly or indirectly possesses the power to direct or cause
the direction of the management and policies of the other Person by any means
whatsoever.
1.2 "Agencies" shall mean, collectively, all sole agents, subsidiaries,
partnerships and other entities directly or indirectly controlled by Merck, and
all independent distributors of Merck diagnostic products, located in the
Territory.
1.3 "Biosite Marks" shall mean those certain trademarks, tradenames,
designs and markings owned or licensed by Biosite and designated from time to
time in writing by Biosite for use by Merck under the Agreement in connection
with the promotion, marketing, sale and distribution of the Testing Device and
the Reader in the Territory for use in the Field.
1.4 "Collaborative Development Agreement" shall mean that certain
Collaborative Development Agreement dated as of even date, between Biosite and
Merck, as amended, supplemented or restated from time to time.
1.5 "Development Program" shall mean the development program, described
generally in the work plan set forth in Exhibit A to the Collaborative
Development Agreement, as revised from time to time as provided in the
Collaborative Development Agreement.
1.6 "Europe" shall mean, collectively, [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION].
1.7 "Field" shall mean the simultaneous and quantitative measurement of
multiple cardiac analytes released from damaged cardiac tissue, including CKMB,
Troponin I and Myoglobin, for use in the diagnosis and monitoring of myocardial
infarction in humans.
1.8 "First Commercial Sale" shall mean the date of the first sale of
the Testing Device or the Reader in the Territory for use by the general public
in the Field.
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<PAGE> 3
1.9 "Latin America" shall mean, collectively, [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
1.10 "LRE" shall mean LRE Relais+Elektronik GmbH, a German
limited liability company.
1.11 "Person" shall mean an individual, corporation, partnership,
trust, business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
1.12 "Product" shall mean the hand held rapid in vitro immunoassay
system, consisting of reagents, a testing device and a reader, developed under
the Development Program.
1.13 "Product Components" shall mean, collectively, the Reader, the
Reagents and the Testing Device as defined below:
1.13.1 "Reader" shall mean that certain testing device reader,
developed under the Reader Development and Supply Agreement, constituting a
component of the Product.
1.13.2 "Reagents" shall mean those certain reagents, developed
under the Development Program, constituting a component of the Product.
1.13.3 "Testing Device" shall mean that certain testing
device, developed under the Development Program, containing the Reagents and
constituting a component of the Product.
1.14 "Reader Development and Supply Agreement" shall mean that certain
Reader Development and Supply Agreement dated as of even date, between Biosite
and LRE, as amended, supplemented or restated from time to time.
1.15 "South Africa" shall mean the Republic of South Africa.
1.16 "Specifications" shall mean the product specifications for the
Testing Device established by Biosite, as revised from time to time pursuant to
the provisions of Section 4.9.1 below.
1.17 "Steering Committee" shall mean the joint development committee
composed of representatives of Biosite and Merck as described in Section 4.1 of
the Collaborative Development Agreement.
1.18 "Territory" shall mean, collectively, Europe, Latin America and
South Africa.
1.19 "Third Party" shall mean any Person other than Biosite, Merck and
their respective Affiliates.
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<PAGE> 4
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants to the other party as
follows:
2.1 Existence and Power. Such party (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized; (b) has the requisite power and authority and the legal right to own
and operate its property and assets, to lease the property and assets it
operates under lease, and to carry on its business as it is now being conducted
and (c) is in compliance with all requirements of applicable law, except to the
extent that any noncompliance would not have a material adverse effect on the
properties, business, financial or other condition of such party and would not
materially adversely affect such party's ability to perform its obligations
under the Agreement.
2.2 Authorization and Enforcement of Obligations. Such party (a) has
the requisite power and authority and the legal right to enter into the
Agreement and to perform its obligations hereunder and (b) has taken all
necessary corporate action on its part to authorize the execution and delivery
of the Agreement and the performance of its obligations hereunder. The Agreement
has been duly executed and delivered on behalf of such party, and constitutes a
legal, valid, binding obligation, enforceable against such party in accordance
with its terms.
2.3 Consents. All necessary consents, approvals and authorizations of
all governmental authorities and other Persons required to be obtained by such
party in connection with the Agreement have been obtained.
2.4 No Conflict. The execution and delivery of the Agreement and the
performance of such party's obligations hereunder do not conflict with or
violate any requirement of applicable laws or regulations.
ARTICLE 3
APPOINTMENT AND SCOPE
3.1 Appointment. Subject to the terms and conditions and for the term
of the Agreement, Biosite hereby appoints Merck as an independent distributor of
the Testing Device and the Reader in the Territory for use in the Field. Merck
shall be the exclusive distributor of the Testing Device and the Reader in the
Territory for use in the Field. Merck hereby accepts such appointment and shall
use its best efforts to promote, market, distribute and sell the Testing Device
and the Reader in the Territory for use in the Field and to meet the reasonably
foreseeable market demand
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<PAGE> 5
therefor. Merck shall refrain from actively promoting, marketing, selling,
distributing, seeking customers, establishing any branch and maintaining any
distribution depot or network for the sale of the Testing Device or the Reader
outside the Territory and outside the Field.
3.2 Subdistributorships. Merck shall have the right to appoint one or
more Agencies as subdistributors under the Agreement. Such subdistributorships
shall be subject to the terms and conditions of the Agreement. Merck shall make
reasonable efforts to cause its subdistributors to comply with the provisions of
the Agreement.
3.3 Exclusivity. For purposes of Section 3.1 above, the term
"exclusive" shall mean that, subject to the terms and conditions of the
Agreement and as long as Merck is in full compliance with its obligations
hereunder, Biosite shall not appoint any other agents, representatives or
distributors to promote, market, sell or distribute the Testing Device or the
Reader in the Territory for use in the Field.
3.4 [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
3.5 Independent Purchaser Status. Merck shall be an independent
purchaser and seller of the Testing Device and the Reader. Merck shall not act
as an agent or legal representative of Biosite, nor shall Merck have any right
or power to act for or bind Biosite in any respect or to pledge its credit.
Merck shall be free to resell the Testing Device and the Reader in the Territory
for use in the Field on such terms as it may, in its sole discretion, determine,
including price, returns, credits and discounts. The detailed operations of
Merck under the Agreement are subject to the sole control and management of
Merck.
3.6 Perishable Products. Merck acknowledges that the Testing Devices
are perishable.
ARTICLE 4
TERMS AND CONDITIONS
OF SUPPLY OF TESTING DEVICES
Biosite shall manufacture, sell and deliver, and Merck shall purchase
from Biosite, such Testing Devices as Merck and its subdistributors require for
sale to customers in the Territory for use in the Field on the terms and subject
to the conditions set forth below:
4.1 Price.
4.1.1 For the period through the [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the First
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<PAGE> 6
Commercial Sale, the sales price for each Testing Device purchased by Merck
hereunder (the "Sales Price") shall equal [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION], both as defined below, calculated as of a
mutually acceptable date not more than sixty (60) days before the reasonably
anticipated date of the First Commercial Sale.
a. The "Manufacturing Cost" shall equal [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
b. The "Average Market Price" shall equal [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
4.1.2 The Sales Price shall be revised by the mutual agreement
of the parties from time to time on or after the [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] of the First Commercial Sale. At such
times after such [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] as the parties mutually agree, the parties shall meet and in good
faith discuss any necessary or appropriate adjustments to the Sales Price. The
parties shall consider such factors as the Manufacturing Cost, Biosite's actual
gross margins, the Average Market Price and Merck's actual distribution margins
during the period since the Sales Price was last set and any reasonably
foreseeable future changes in such factors.
4.2 Orders. Merck shall make all purchases of Testing Devices hereunder
by submitting firm purchase orders to Biosite. Such purchase orders shall be in
writing and in a form reasonably acceptable to Biosite. In the event of an
inconsistency between the terms and conditions of any purchase order and the
Agreement, the terms and conditions of the Agreement shall prevail. Purchase
orders shall not be binding upon Biosite unless and until accepted by Biosite.
Biosite shall notify Merck in writing of its acceptance of purchase orders and
of the scheduled delivery dates therefor.
4.3 Terms of Sales. Biosite shall ship all Testing Devices fca airport
San Diego (Incoterms 1990) (=free carrier arrival) freight and insurance paid by
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
Biosite shall use its commercially reasonable efforts to meet scheduled delivery
dates. The lead time for shipping of ordered Testing Devices shall be
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after
receipt by Biosite of each order from Merck. In the event Biosite is able to
fill orders by Merck in less than [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION], Biosite and Merck shall agree upon a delivery
in advance. Merck shall arrange for shipping and procurement insurance at
Merck's expense and shall ship all Testing Devices from Biosite's facility in
San Diego, California to Merck's warehouse in Darmstadt, Federal Republic of
Germany, or any other location determined by Merck. [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] shall pay all taxes and
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<PAGE> 7
charges, including all inspection fees and duties, applicable to the sale and
transport of the Testing Devices by Merck in the Territory.
4.4 Deferral of Shipment. Notwithstanding the foregoing, Biosite may
defer shipment of Test Devices if and while Merck is in default of any of its
obligations under the Collaborative Development Agreement, including its
obligations to pay any amounts when due.
4.5 Payments. Merck shall pay Biosite within [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] from date of the applicable
invoice by Biosite to Merck for all Test Devices purchased hereunder for sale in
Europe. Merck shall pay or shall cause its Affiliates, Agencies and other
subdistributors to pay Biosite within [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] from date of the applicable invoice by Biosite
for all Test Devices purchased hereunder for sale in Latin America and South
Africa. Merck shall make all payments under the Agreement to Biosite in United
States dollars to Biosite's account in a financial institution located in the
United States.
4.6 Currency Exchange. The exchange rate for Deutsche Marks is 1.65
Deutsche Marks for one United States dollar. Currency fluctuations of greater
than [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
from this exchange rate will be evaluated for stabilization within ninety (90)
days of the event. If stabilization does not occur, both parties agree to
discuss an adjustment of Sales Price.
4.7 Forecasts. Not less than [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] prior to the reasonably anticipated date of the
First Commercial Sale, and prior to the first day of each quarter thereafter,
Merck shall prepare and provide Biosite with a written forecast of the estimated
requirements of Merck and its subdistributors for each quarter in the
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]. Merck
shall be required to purchase [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of the quantity forecasted for the first
quarterly period of each forecast. Merck shall not increase or decrease the
quantity estimated for the first quarterly period of each forecast by more than
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the
quantity estimated for the first quarterly period of the previous forecast,
without the prior express written consent of Biosite. In the event Merck's
orders for any quarter exceed [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] of the quantities forecasted in the most recent
forecast for such quarter, Biosite in its sole discretion shall have the right
to reject any orders for quantities in excess of such amounts.
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<PAGE> 8
4.8 Returned Goods. If any Testing Device does not conform to the
Specifications, and fails to pass Merck's quality control [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION], Merck shall return the
nonconforming Testing Device to Biosite in accordance with the reasonable
instructions of Biosite or, on Biosite's request, dispose locally of such
nonconforming Testing Device. In both cases all costs shall be borne by Biosite.
Should any Test Devices be returned as provided above, Biosite shall replace the
returned Test Devices as soon as reasonably practicable. Such replacement Test
Devices shall be at no additional cost to Merck if Merck had previously paid
Biosite for the returned Test Devices. Notwithstanding the foregoing, Biosite
shall not be responsible for any Testing Device which fails to pass Merck's
quality control as a result of improper storage and handling during or after
shipment to Merck.
4.9 Warranty.
4.9.1 The Specifications shall be attached as an exhibit to
the Agreement once initially established by Biosite and, with respect to the
Specifications for the Testing Device in the Territory, shall be mutually agreed
by Biosite ad Merck. Subject to the provisions of Section 4.9.2 below, Biosite
warrants that each Testing Device shall perform as stated in the Specifications
and shall be manufactured in accordance with applicable good manufacturing
practices ("GMP") as prescribed by the United States Food and Drug
Administration. The Specifications are subject to change by Biosite upon thirty
(30) days' prior written notice to Merck, during which period Biosite shall
consult with Merck on such changes and consider any comments Merck has with
regard to such changes. Notwithstanding any such changes, each Testing Device
shall perform substantially as described in the Specifications originally
established by Biosite.
4.9.2 Other than as set forth in Section 4.9.1 above or in
this Section 4.9.2, Biosite makes no representations or warranties, express or
implied, regarding the Testing Device, including any warranty of
merchantability, of fitness for a particular purpose, or against infringement of
any trademarks, copyrights or other proprietary rights now or hereafter
existing. [Except as Biosite has otherwise advised Merck prior to the date of
the Agreement, Biosite warrants, to its current actual knowledge, that the form
of the Testing Device contemplated by Biosite as of the date of the Agreement
does not infringe the issued patents of any third party. If the Testing Device
is determined to infringe any issued patent, Biosite will make its commercially
reasonable efforts to obtain all appropriate licenses and other rights.
4.9.3 Merck shall distribute the Testing Devices labeled by
Biosite in the Territory for use in the Field so as to include all warnings and
instructions necessary for the proper use of the Testing Devices and shall not
extend any other product
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<PAGE> 9
warranty, express or implied, other than the warranty included in Section 4.9.1
above.
4.10 Product Control. Each Testing Device shipped by Biosite shall
contain numbers identifying manufacturing lot, expiry date for control purposes,
and lot-specific quality control report.
4.11 Merck's Contingent Manufacturing Rights. If Biosite fails to
supply, or to cause an Affiliate or Third Party to supply, Merck and its
subdistributors with the reasonably forecasted quantities of Testing Devices for
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] in
accordance with the provisions of this Article 4, if Merck requests in writing
within [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
after the end of such [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION], Biosite shall grant Merck a license [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] to manufacture supply and
distribute the requirements of Merck and its subdistributors for the Testing
Device in the Territory for use in the Field. As soon as reasonably practicable
after such request, the parties shall negotiate in good faith the terms and
conditions of a mutually acceptable license agreement, which would include the
following terms and conditions:
4.11.1 Biosite would transfer to Merck all applicable
technology, including all applicable patent rights, know-how, data, information
and organisms (all to the extent Biosite has the right to grant licenses or
other rights thereunder), to enable Merck to manufacture and supply the Testing
Device. Except as Biosite has otherwise advised Merck prior to the date of the
Agreement, Biosite has no current actual knowledge of any prohibition on
Biosite's right to transfer to Merck for such purpose any such technology
licensed to Biosite as of the date of the Agreement.
4.11.2 Biosite would provide such technical assistance to
Merck as reasonably requested by Merck, and Merck would reimburse Biosite for
the reasonable cost of such services.
4.11.3 In consideration for the grant of such license rights,
Merck would pay Biosite a royalty, without deduction, equal to [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the net sales of
all Testing Devices manufactured by Merck, and Merck would pay all royalties
owing to any Third Parties on such sales of Testing Devices.
ARTICLE 5
TERMS AND CONDITIONS
OF SUPPLY OF READERS
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<PAGE> 10
The Readers to be sold and distributed by Merck in the Territory for
use in the Field under the Agreement shall be manufactured and supplied by LRE
on the terms and subject to the conditions of the Reader Development and Supply
Agreement. During the term and subject to the provisions of the Agreement,
Biosite shall appoint Merck under the Reader Development and Supply Agreement as
Biosite's exclusive distributor of the Reader in the Territory for use in the
Field. Subject to the provisions of the Agreement and the Reader Development and
Supply Agreement, Merck shall enter into a separate agreement with LRE pursuant
to which LRE shall manufacture and supply Readers for sale and distribution by
Merck in the Territory for use in the Field. Biosite makes no representations or
warranties, express or implied, regarding the Reader, including any warranty of
merchantability, of fitness for a particular purpose, or against infringement of
any trademarks, copyrights or other proprietary rights now or hereafter
existing. Biosite shall have no liability to Merck, its subdistributors or their
respective customers arising out of or relating to (a) any negligence,
recklessness or intentional act or omission by or on behalf of LRE, (b) any
breach by LRE of its obligations under the Reader Development and Supply
Agreement, (c) any misrepresentation or breach of warranty by LRE, or (d) any
damage to personal property, personal injury or death resulting from the
manufacture or use of the Reader.
ARTICLE 6
COVENANTS OF MERCK
6.1 Sales Promotion. Merck shall use its best efforts to promote the
sale and use of the Testing Device and the Reader in the Territory for use in
the Field. Merck shall provide complete training of Merck's or subdistributors'
sales representatives in the use of the Testing Device and the Reader.
6.2 Expenses. Merck shall be responsible for all of its own expenses
and employees in connection with its activities contemplated by the Agreement.
Merck shall incur no expense chargeable to Biosite, except as may be
specifically authorized in advance in writing in each case by Biosite.
6.3 Promotional Materials; Package Inserts. Merck shall ensure that all
advertising, promotional literature, packaging and package inserts comply with
applicable laws and regulations. Merck shall not use any advertising or
promotional materials to promote the Testing Device or the Reader or any
packaging or package inserts that have not been mutually agreed by Biosite and
Merck. Merck shall prepare necessary translations of Biosite's sales literature,
package inserts and labeling.
6.4 Import Licenses, Exchange Controls, and Other Governmental
Approvals, Compliance.
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6.4.1 Merck shall, at its own expense: (a) obtain any
registration, license, permit, governmental approval (collectively, any
"registration") that may be necessary to permit the purchase, distribution and
resale by Merck of the Testing Device and the Reader in each country in the
Territory; (b) comply with all registration requirements for each country in the
Territory; and (c) comply with any and all laws, regulations and orders that may
be applicable to Merck by reason of its execution of the Agreement, including
any requirement to be registered as Biosite's independent distributor with any
governmental authority, and including any and all laws, regulations or orders
that govern or affect the ordering, export, shipment, import, sale (including
government procurement), delivery, or redelivery of the Testing Device and the
Reader in the Territory. Merck shall not engage in any course of conduct that,
in Biosite's reasonable belief, would cause Biosite to be in violation of the
laws of any jurisdiction.
6.4.2 All registrations in the Territory of the Testing Device
and the Reader shall be made in the name of Merck and shall remain the property
of Merck during the term of the Agreement. Merck shall provide Biosite a copy of
each such registrations and application therefor.
6.4.3 Upon the expiration or earlier termination of the
Agreement, Biosite shall have the right, at its option, to take over the
above-described registrations or, where necessary, to obtain registration under
Biosite's name at its own cost. Merck shall use its best efforts to assist
Biosite in the transfer to, or obtaining of any such registrations in the name
of, Biosite (or Biosite's agent) in a quick and efficient manner.
6.4.4 Upon the expiration or earlier termination of the
Agreement, if the parties mutually agree, Merck shall continue distribution of
the Testing Device and the Reader in each country in the Territory on the same
terms and conditions in effect as of the date of expiration or termination until
Biosite (or Biosite's agent) is able to obtain any required registration for
distribution of the Testing Devices and the Readers in such country; provided,
however, that the indemnification provisions set forth in Article 8 below shall
continue during such period.
6.5 Local Laws and Regulations. Merck shall notify Biosite of the
existence and content of any mandatory provision of law in each country in the
Territory or any other applicable law that conflicts with any provision of the
Agreement at the time of its execution or thereafter. Merck shall advise Biosite
fully with respect to all regulations, labeling laws, standards, specifications
and other requirements imposed by law, regulation or order in any country in the
Territory and applicable to the Testing Device and the Reader. Merck promptly
shall inform Biosite should, in its opinion, any amendment to the Agreement or
any additional agreement be required or be advisable in order to comply with the
laws of any country in the Territory, or any subdivision thereof.
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<PAGE> 12
6.6 [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] Reports. Merck shall prepare and provide Biosite with [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] written sales
reports within 30 days of the end of each [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION], commencing with the first [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after the First
Commercial Sale. The [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] reports shall summarize sales of the Testing Device and the
Reader by Merck and its subdistributors during the preceding [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] for each country in
the Territory.
ARTICLE 7
OBLIGATIONS OF BIOSITE
7.1 Sales Support. Biosite regularly shall provide Merck with
literature on the Testing Device and technical information relating to the
Testing Device and its proper use. Unless otherwise expressly agreed by Biosite,
all such information and materials will be furnished in the English language and
at no extra costs for Merck.
7.2 Assistance. Biosite shall provide Merck with all data and other
information available to Biosite, and shall execute such certificates and other
instruments, as reasonably necessary to assist Merck in obtaining all necessary
product registrations in the Territory for the Testing Device. Biosite shall
cause LRE to provide Merck with all data and other information available to LRE,
and shall execute such certificates and other instruments, as reasonably
necessary to assist Merck in obtaining all necessary product registrations in
the Territory for the Reader. Biosite shall provide Merck with reasonable access
to and assistance of its technical, sales, and service personnel in San Diego,
California as Biosite deems appropriate. Such assistance under this Section 7.2
shall be without charge to Merck except as may be otherwise mutually agreed.
ARTICLE 8
INDEMNITY
8.1 Indemnity. Each party shall indemnify, defend and hold harmless the
other party, its directors, officers, employees and agents from all losses,
liabilities, damages and expenses (including reasonable attorneys' fees and
costs) that they may suffer as a result of any claims, demands, actions or other
proceedings made or instituted by any third party against any of them and
arising out of or relating to (a) any breach of the Agreement by the
indemnifying party, (b) any recklessness or intentional act or omission by or on
behalf of the indemnifying
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<PAGE> 13
party in the performance of its activities contemplated by the Agreement, (c)
any representations or statements not specifically authorized by the indemnified
party herein or otherwise in writing, or (d) any violation by the indemnifying
party (or any of their employees or agents) of, or failure to adhere to, any
applicable law, regulation or order in any country in the Territory or of the
United States, in each case other than those certain losses, liabilities,
damages and expenses arising out of the gross negligence or willful misconduct
of the indemnified party.
8.2 Procedure. A party (the "Indemnitee") that intends to claim
indemnification under this Article 8 shall promptly notify the other party (the
"Indemnitor") of any such loss, liability, damage or expense, or any claim,
demand, action or other proceeding with respect to which the Indemnitee intends
to claim such indemnification. The Indemnitor shall have the right to
participate in, and, to the extent the Indemnitor so desires, jointly with any
other indemnitor similarly noticed, to assume the defense thereof with counsel
selected by the Indemnitor; provided, however, that an Indemnitee shall have the
right to retain its own counsel, with the fees and expenses to be paid by the
Indemnitor, if representation of the Indemnitee by the counsel retained by the
Indemnitor would be inappropriate due to actual or potential differing interests
between such Indemnitee and any other party represented by such counsel in such
proceedings. The indemnity obligations under this Article 8 shall not apply to
amounts paid in settlement of any loss, liability, damage or other expense if
such settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld unreasonably. The failure to deliver notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve such
Indemnitor of any liability to the Indemnitee under this Article 8, but the
omission so to deliver notice to the Indemnitor will not relieve it of any
liability that it may have to any Indemnitee otherwise than under this Article
8. The Indemnitor may not settle the action or otherwise consent to an adverse
judgment in such action that diminishes the rights or interests of the
Indemnitee without the express written consent of the Indemnitee. The
Indemnitee, its employees and agents, shall cooperate fully with the Indemnitor
and its legal representatives in the investigation of any action, claim or
liability covered by this indemnification.
8.3 Insurance. Merck and Biosite each shall maintain, through
self-insurance or otherwise, products liability insurance against claims
regarding the manufacture, sale, distribution or use of the Testing Device and
the Reader in the Territory under the Agreement, in such amounts as it
customarily maintains for similar activities. Biosite and Merck each shall
maintain such insurance during the term of the Agreement and thereafter for so
long as it maintains insurance for itself covering such activities.
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<PAGE> 14
ARTICLE 9
CONFIDENTIALITY AND PROPRIETARY RIGHTS
9.1 Confidentiality.
9.1.1 During the term of the Agreement, and for a period of
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] years
following the expiration or earlier termination hereof, each party shall
maintain in confidence all information (including samples) disclosed by the
other party and identified as, or acknowledged to be, confidential (the
"Confidential Information"), and shall not use, disclose or grant the use of the
Confidential Information except on a need-to-know basis to those directors,
officers, employees, consultants, clinical investigators, contractors, permitted
sublicensees or permitted assignees, to the extent such disclosure is reasonably
necessary in connection with such party's activities as expressly authorized by
the Agreement. To the extent that disclosure is authorized by the Agreement,
prior to disclosure, each party hereto shall obtain agreement of any such person
or entity to hold in confidence and not make use of the Confidential Information
for any purpose other than those permitted by the Agreement. Each party shall
notify the other promptly upon discovery of any unauthorized use or disclosure
of the other party's Confidential Information.
9.1.2 The confidentiality obligations contained in Section
9.1.1 above shall not apply to the extent that (a) any receiving party (the
"Recipient") is required (i) to disclose information by law, order or regulation
of a governmental agency or a court of competent jurisdiction, or (ii) to
disclose information to any governmental agency for purposes of obtaining
approval to test or market a product, provided in either case that the Recipient
shall provide written notice thereof to the other party and sufficient
opportunity to object to any such disclosure or to request confidential
treatment thereof; or (b) the Recipient can demonstrate that (i) the disclosed
information was public knowledge at the time of such disclosure by the other
party hereunder, or thereafter became public knowledge, other than as a result
of actions of the Recipient, its directors, officers, employees, consultants,
clinical investigators, contractors, permitted sublicensees and permitted
assignees in violation hereof; (ii) the disclosed information was rightfully
known by the Recipient or its affiliates (as shown by its written records) prior
to the date of disclosure to the Recipient by the other party hereunder; or
(iii) the disclosed information was disclosed to the Recipient or its affiliates
on an unrestricted basis from a source unrelated to any party to the Agreement
and not under a duty of confidentiality to the other party. Notwithstanding any
other provision of the Agreement, Biosite may disclose Confidential Information
of Merck relating to information developed pursuant to the Agreement to any
person or entity with whom Biosite has, or is proposing to enter into, a
business
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<PAGE> 15
relationship, as long as such person or entity has entered into a
confidentiality agreement with Biosite.
9.1.3 Biosite and Merck shall not disclose any terms or
conditions of the Agreement to any Third Party without the prior consent of the
other party, except as required by applicable law or to Persons with whom Merck
or Biosite has entered into or proposes to enter into a business relationship,
provided that such Persons shall enter into the required confidentiality
agreement. Notwithstanding the foregoing, prior to execution of the Agreement,
Merck and Biosite shall agree upon the substance of information that can be used
to describe the terms of this transaction, and Merck and Biosite may disclose
such information, as modified by mutual agreement from time to time, without the
other party's consent.
9.2 Patent Rights. Biosite does not, either expressly or impliedly,
grant any licenses to Merck under any patents owned or controlled by Biosite or
under which Biosite has any rights, except the right to sell and use the Testing
Device and the Reader on the terms and subject to the conditions of the
Agreement. Subject to the provisions of Section 4.11 above, Biosite does not
grant any rights to manufacture under the Agreement.
9.3 Biosite Marks. The trademarks or tradenames in the Territory for
the Testing Device and the Reader shall be mutually acceptable to Biosite and
Merck. Merck shall not use any Biosite Marks, or any word, title, expression,
trademark, design or marking that is confusingly similar thereto, as part of its
corporate or business name or in any other manner. Notwithstanding the
foregoing, (a) Merck may identify itself as an authorized distributor of
Biosite, and (b) Merck may use the Biosite Marks for display purposes in
connection with solicitation of orders for the Testing Device and the Reader.
Merck shall not alter, remove or modify any Biosite Marks, nor affix any other
trademarks, labels or markings to the Testing Device and the Reader without
Biosite's consent; provided, however, that Merck may affix labels or other
indices on the Testing Devices and the Readers it distributes to identify it as
the distributor of the Testing Device and the Reader so long as such labels do
not cover and are not inconsistent with the Biosite Marks, labels or markings.
All registrations of the Biosite Marks shall be paid by Biosite. No other Merck
labels, package inserts or other material shall accompany the Testing Device and
the Reader without the prior written consent of Biosite.
9.4 Copyrights.
9.4.1 Merck hereby acknowledges that Biosite has claimed, or
may claim, copyright protection with respect to certain parts of the Testing
Device and the Reader and the labels, inserts and other materials regarding the
Testing Device and the Reader. Merck further acknowledges the validity of
Biosite's right to claim copyright protection with respect to such items.
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<PAGE> 16
Merck further acknowledges that Biosite has advised Merck that it has the sole
and exclusive right to claim the copyright protection with respect to all such
items. Merck shall take no action or make no omission which is in any way
inconsistent with Biosite's claim of copyright protection with respect to such
items.
9.4.2 Nothing contained in this Section 9.4 shall prohibit
Merck from copying and distributing to its sales representatives Testing Device
and Reader advertising, literature and other materials prepared by or on behalf
of Biosite for the purpose of fulfilling Merck's obligations under the
Agreement. In order to protect against infringement of Biosite's copyrights
through unauthorized reproduction or duplication of its copyrighted materials,
all such materials included with or relating to the Testing Device and the
Reader, and used by Merck in conducting its activities contemplated by the
Agreement, shall bear appropriate copyright markings.
9.5 Protection of Proprietary Rights. Merck shall cooperate with
Biosite, take such actions and execute such documents, as reasonably requested
by Biosite and at Biosite's expense, to assist Biosite in the protection of
confidential information, patents, trademarks or copyrights owned by or licensed
to Biosite. Merck shall inform Biosite immediately of any infringements or other
improper action with respect to any such confidential information, patents,
trademarks or copyrights that come to the attention of Merck.
ARTICLE 10
TERM AND TERMINATION
10.1 Term. Unless terminated earlier pursuant to Section 10.2 or 10.3
below, the Agreement shall continue in full force and effect for a term expiring
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after
the date of the First Commercial Sale. Thereafter, the Agreement automatically
shall be renewed for successive periods of [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] each, unless terminated by either party
upon [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
prior written notice to the other party.
10.2 Termination by Mutual Agreement. The parties may terminate the
Agreement at any time upon the express written agreement of both parties.
10.3 Termination for Cause. Except as otherwise provided in Section
12.2 below, either party may terminate the Agreement upon or after the breach of
any material provision of the Agreement by the other party if the other party
has not cured such breach within [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] after notice thereof from the non-breaching
party.
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<PAGE> 17
10.4 Effect of Expiration and Termination. Expiration or termination of
the Agreement shall not relieve the parties of any obligation accruing prior to
such expiration or termination. The provisions of Articles 8 and 9 shall survive
the expiration or termination of the Agreement. Additionally, the following
provisions shall apply on the termination or expiration of the Agreement:
10.4.1 Merck shall cease all sales of the Testing Device and
the Reader and all other activities on behalf of Biosite and shall return to
Biosite and immediately cease all use of any Confidential Information then in
Merck's possession; provided, however, that Merck may continue to use any
information that falls within the descriptions of clause (b) of Section 9.1.2
above.
10.4.2 Merck shall remove from its property and immediately
discontinue all use, directly or indirectly, of the Biosite Marks and any word,
title, expression, trademark, design, or marking that is confusingly similar
thereto.
10.4.3 Upon termination by Biosite, Biosite shall have the
right, at its option, to repurchase Merck's inventory of Testing Devices and
Readers at Merck's purchase price plus reasonable freight, insurance and duties.
In all other cases, Merck shall have the right to sell the remaining stock of
Testing Devices and Readers. Notwithstanding the foregoing, in case of
termination of the Agreement, Merck and Biosite shall negotiate in good faith
the continuation of the delivery of Testing Devices due to still effective
long-term contracts with customers in the Territory. In case of termination of
the Agreement, Biosite either (a) shall continue to sell Testing Devices
directly to such customers, or at Biosite's option, (b) enable Merck to continue
to purchase Testing Devices and to resell the same only to customers holding
such long term contracts, on the terms and conditions provided for under the
Agreement.
10.4.4 In accordance with the provisions of Section 6.4.4
above, Merck shall take all such actions and execute such documents as Biosite
reasonably requests to assist Biosite in obtaining any registrations necessary
for Biosite (or Biosite's agent) to continue selling the Testing Device and the
Reader in the Territory.
10.5 Sole Remedy. Biosite's repurchase of Merck's inventory of the
Testing Device and the Reader or Merck's right to sell such inventory if not so
repurchased by Biosite, pursuant to Section 10.4.3 above, shall constitute
Merck's sole remedy upon the termination or expiration of the Agreement. Under
no circumstances shall Biosite be liable to Merck by reason of termination or
expiration of the Agreement for compensation, reimbursement, or damages for (a)
loss of prospective compensation, (b) goodwill or loss thereof, or (c)
expenditures, investments, leases or any type of commitment made in connection
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<PAGE> 18
with the Merck's business or in reliance on the existence of the Agreement.
ARTICLE 11
CONCILIATION AND ARBITRATION
11.1 Conciliation. Biosite and Merck shall exercise their commercially
reasonable efforts to settle between themselves in an amicable way any dispute,
controversy or claim which may arise out of or relating to the Agreement within
thirty (30) days after one party receives notice from the other party of such
dispute, controversy or claim.
11.2 Arbitration. If not settled by the parties in accordance with
Section 11.1 above, any dispute, controversy or claim originally initiated by
either party and arising out of or relating to the Agreement shall be referred
to and resolved by binding arbitration, held in New York, New York, United
States of America, and conducted in accordance with the American Arbitration
Association ("AAA") Commercial Arbitration Rules, and the following provisions:
11.2.1 The arbitral tribunal shall be composed of three (3)
persons each of whom shall be neutral, independent and impartial. Each party
shall nominate an arbitrator, and the two (2) arbitrators so appointed shall
appoint a third, who shall act as president of the arbitral tribunal. If either
party fails to nominate an arbitrator within thirty (30) days of receiving
notice of the nomination of an arbitrator by the other party, such (second)
arbitrator shall be appointed at the request of the first party by the AAA. If
the two arbitrators selected by the parties fail to select a third, presiding
arbitrator within twenty (20) days of the appointment of the second arbitrator,
the third arbitrator shall be appointed at the request of the first party by the
AAA.
11.2.2 The arbitrators shall hold a preliminary meeting with
the parties within thirty (30) days of the appointment of the third or presiding
arbitrator for the purpose of determining the issues to be decided in the
arbitration, the specific procedures to be followed and the schedule for
briefing and/or hearings. The arbitrators shall hold a hearing which, unless the
parties otherwise agree, should be recorded by stenographic or other means.
Within one hundred twenty (120) days of the preliminary meeting (except in
extraordinary cases), the arbitrators shall issue an award in writing which
shall state the reasons for the award and which, except as set forth in the
following sentence, shall be final and binding between the parties. Judgment
upon the award rendered by the arbitrators may be entered in any court of
competent jurisdiction.
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11.2.3 The parties agree that the award of the arbitrators
shall be the sole and exclusive remedy between them regarding any claims,
counterclaims, issues or accountings presented or pled to the arbitrators; that
it shall be made and shall promptly by payable in United States dollars free of
any tax, deduction or offset; and that any costs, fees or taxes incident to
enforcing the award shall, to the maximum extent permitted by law, be charged
against the party resisting such enforcement.
11.2.4 Questions concerning arbitrability under this dispute
resolution clause shall be governed exclusively by the United States Arbitration
Act. The arbitrators shall be empowered to consider and decide claims or issues
arising under or relating to state and federal statutes governing business
practices, but shall not be empowered to nor shall they award punitive damages.
11.2.5 As part of any arbitral award rendered pursuant to this
Section 11.2, the arbitrators shall make an award of arbitral costs and
reasonable attorneys' fees to the prevailing party.
11.2.6 The Agreement shall be governed by and construed in
accordance with the laws of the State of New York and shall not be governed by
the United Nations Convention on Contracts for the International Sale of Goods.
ARTICLE 12
MISCELLANEOUS
12.1 Notices. Any consent, notice or report required or permitted to be
given or made under the Agreement by one of the parties to the other shall be in
writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery, air mail, internationally-recognized delivery service or
courier), air mail, internationally-recognized delivery service or courier,
postage prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and (except as otherwise provided in the
Agreement) shall be effective upon receipt by the addressee.
If to Biosite: Biosite Diagnostics Incorporated
11030 Roselle Street, Suite D
San Diego, California 92121, U.S.A.
Attention: Kim D. Blickenstaff
President
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<PAGE> 20
with a copy to: Pillsbury Madison & Sutro
235 Montgomery Street, 15th Floor
San Francisco, California 94104, U.S.A.
Attention: Thomas E. Sparks, Jr.
If to Merck: E. Merck
Frankfurter Strasse 250
D-64293 Darmstadt
Germany
Attention: Dr. Bernd Reckmann
with a copy to: E. Merck
Frankfurter Strasse 250
D-64293 Darmstadt
Germany
Attention: LEW/Licensing
12.2 Force Majeure. Neither party shall be held liable or responsible
to the other party nor be deemed to have defaulted under or breached the
Agreement for failure or delay in fulfilling or performing any term of the
Agreement to the extent, and for so long as, such failure or delay is caused by
or results from causes beyond the reasonable control of the affected party
including fire, floods, embargoes, war, acts of war (whether war be declared or
not), insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other party.
12.3 Assignment. The Agreement may not be assigned or otherwise
transferred, nor, except as expressly provided hereunder, may any right or
obligations hereunder be assigned or transferred by either party [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]. Any permitted
assignee shall assume all obligations of its assignor under the Agreement.
12.4 Severability. Each party hereby acknowledges that it does not
intend to violate any public policy, statutory or common laws, rules,
regulations, treaty or decision of any government agency or executive body
thereof of any country or community or association of countries. Should one or
more provisions of the Agreement be or become invalid, the parties shall
substitute, by mutual consent, valid provisions for such invalid provisions
which valid provisions in their economic effect are sufficiently similar to the
invalid provisions that it can be reasonably assumed that the parties would have
entered into the Agreement with such provisions. In case such provisions cannot
be agreed upon, the invalidity of one or several provisions of the Agreement
shall not affect the validity of the Agreement as a whole, unless the invalid
provisions are of such essential importance to the Agreement that it is to be
reasonably assumed that the parties would not have entered into the Agreement
without the invalid provisions.
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12.5 U.S. Export Laws and Regulations. Biosite and Merck each
acknowledge that the development and commercialization rights and information
disclosure requirements of the Agreement are subject to the laws and regulations
of the United States of America relating to the export of products and technical
information. Without limitation, Biosite and Merck each shall comply with all
such laws and regulations.
12.6 Entire Agreement. The Agreement contains the entire understanding
of the parties with respect to the subject matter hereof. All express or implied
agreements and understandings, either oral or written, heretofore made are
expressly superseded by the Agreement. The Agreement may be amended, or any term
hereof modified, only by a written instrument duly executed by both parties.
12.7 Headings. The captions to the several Articles and Sections hereof
are not a part of the Agreement, but are merely guides or labels to assist in
locating and reading the several Articles and Sections hereof.
12.8 Independent Contractors. It is expressly agreed that Biosite and
Merck shall be independent contractors and that the relationship between the two
parties shall not constitute a partnership, joint venture or agency. Neither
Biosite nor Merck shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior consent of the party to do so.
12.9 Language. The English language version of the Agreement shall
govern and control any translations of the Agreement into any other language.
12.10 Waiver. The waiver by either party of any right hereunder or the
failure to perform or of a breach by the other party shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.
12.11 Counterparts. The Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed the Agreement as of the
date first set forth above.
BIOSITE DIAGNOSTICS INCORPORATED
By /s/ Kim D. Blickenstaff
-----------------------------------
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<PAGE> 22
Title President
E. MERCK
By /s/ Dr. Walter Bardorff
-----------------------------------
Dr. Walter Bardorff
Title General Manager,
Diagnostics Division
By /s/ Dr. Bernd Reckmann
-----------------------------------
Dr. Bernd Reckmann
Title Head of Marketing and
Sales Diagnostic Division
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<PAGE> 1
EXHIBIT 10.16
[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN FILED SEPARATELY WITH THE COMMISSION]
RESEARCH AND DEVELOPMENT AGREEMENT
THIS RESEARCH AND DEVELOPMENT AGREEMENT dated July 1, 1992 (the
"Agreement"), is made by and between BIOSITE DIAGNOSTICS INCORPORATED, a
Delaware corporation, with principal offices at 11030 Roselle Street, Suite D,
San Diego, California 92121 ("Biosite"), and IXSYS, INC., a Delaware
corporation, with principal offices at 3550 General Atomics Court, Suite L-103,
San Diego, California 92121 ("Ixsys").
BACKGROUND
Biosite has expertise and proprietary rights in technology relating to
immunochemistry and, more particularly, to biochemical techniques for antibody
screening and immunoassay procedures. Biosite also has expertise relating to
chemical techniques for the development of immunogens and conjugates useful as
antibody targets for the production of, e.g., monoclonal antibodies. Ixsys has
complementary technology and expertise for the production of antibodies. Both
parties wish to share their respective antibody technologies for their mutual
benefit.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the foregoing premises, and the
mutual covenants set forth below, the parties hereby agree as follows:
1. Definitions
1.1 "Biosite Antibodies" means collectively those
immunoglobulin-based molecules developed and produced by or on behalf of
Biosite, without the use of Ixsys Technology or Ixsys Improvements other than
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION], such
immunoglobulin-based molecules including, but not limited to, [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
1.2 "Biosite Improvement(s)" is any technology developed by
either or both parties on or before the fifth anniversary of the Effective Date
and that represents an improvement of Biosite Technology.
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<PAGE> 2
1.3 The "Biosite Project Manager" is Dr. Gunars Valkirs, the
Biosite scientist assigned to the Collaborative Project. The Biosite Project
Manager may be changed from time to time by designation of the President of
Biosite, which change shall be communicated in writing to Ixsys.
1.4 "Biosite Technology" means all technology, and patent
rights thereto, reduced to practice and owned by Biosite or to which Biosite has
rights, now or in the future before the [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] of the Effective Date, relating
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
1.5 "Collaborative Biosite Antibodies" means, collectively,
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
1.6 "Collaborative Project" means the project to clone and
express Collaborative Biosite Antibodies as described generally on Schedule 1.6.
1.7 "Collaborative Project Period" means the period commencing
on the Effective Date and continuing until the second anniversary thereof,
unless earlier terminated as provided in the Agreement.
1.8 "Effective Date" means July 1, 1992.
1.9 "Immunoassay Field" means the manufacture or use of
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
1.10 "Ixsys Improvements(s)" is any technology and patents
thereto for use in the Immunoassay Field, developed by either or both parties on
or before the fifth anniversary of the Effective Date and that represents an
improvement of Ixsys Technology.
1.11 The "Ixsys Project Manager" is William D. Huse, the Ixsys
scientist assigned to the Collaborative Project. The Ixsys Project manager may
be changed from time to time by designation of the President of Ixsys, which
change shall be communicated in writing to Biosite.
1.12 "Ixsys Technology" means all technology, and patent
rights thereto, reduced to practice and owned by Ixsys or to which Ixsys has
rights, now or in the future before the [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] of the Effective Date, that relates to
methods, techniques, materials or compositions [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION].
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1.13 "Libraries" means [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] libraries, including DNA constructs,
created (a) solely by Ixsys under the Collaborative Project, (b) jointly by
Ixsys and Biosite under the Collaborative Project or (c) solely by Biosite after
the term of the Collaborative Project.
1.14 "Net Sales" means, with respect to any Product, the
invoiced sales price of such Product billed to independent third party
customers, less (a) to the extent such amounts are included in the invoiced
sales price, actual credit allowance to such customers for spoiled, damaged,
out-dated and returned Product; (b) actual freight and insurance costs incurred
in transporting such Product to such customers; (c) quantity and other trade
discounts actually allowed and taken; (d) sales, value-added and other direct
taxes incurred; (e) customs duties and surcharges and other governmental charges
incurred in connection with the exportation or importation of such product in
final form and (f) legally mandated rebates.
1.15 "Novel Product" means those Products which are within the
scope of one or more claims under Patent Rights, which claims cover (a) a
diagnostic assay having a format that would not be feasible at the time the
format was identified or reduced to practice with then-existing technology -
other than Ixsys Technology or Ixsys Improvements ("Novel Assay Products"), or
(b) a Collaborative Biosite Antibody actually identified using Ixsys Technology
or Ixsys Improvements for a target [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] which is not being assayed at the time such
Collaborative Biosite Antibody is first identified ("Novel Target Products").
Any disagreements concerning whether a Product constitutes a Novel Product shall
be subject to the arbitration provisions of Section 15.7 below.
1.16 "Patent Rights" shall mean (a) all patents and patent
applications heretofore or hereafter filed or having legal force in any country,
owned by or licensed to a party or to which such party otherwise acquires
rights, having one or more claims covering Ixsys Technology or Ixsys
Improvements, on the one hand, or Biosite Technology or Biosite Improvements, on
the other hand as the case may be, and (b) all divisionals, continuations,
continuations-in-part, reissues, renewals, extensions or additions to any such
patents and patent applications.
1.17 "Future Ixsys Patent Rights" shall mean (a) all patents
and patent applications hereafter filed or having legal force in any country,
owned by or licensed to Ixsys or to which Ixsys otherwise acquires rights,
having one or more claims covering technology for use in the Immunoassay Field,
developed from the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] of the Effective Date to the
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expiration or earlier termination of the Agreement that represents an
improvement of either Ixsys Technology or Ixsys Improvements, and (b) all
divisionals, continuations, continuations-in-part, reissues, renewals,
extensions or additions to any such patents and patent applications.
1.18 "Product" means (a) all Collaborative Biosite Antibodies
and all Assignee Antibodies, (b) all assays, assay kits, other diagnostic kits
or test configurations, the manufacture, sale or use of which utilizes or
contains one or more Collaborative Biosite Antibodies and/or Assignee Antibodies
and (c) all Novel Products.
1.19 "Royalty Period" means the period commencing on the
Effective Date and continuing until the [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] anniversary of the Effective Date;
provided, however, that in the event of a Biosite Assignment, the period shall
continue until [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].
1.20 "Assignee Antibodies" means those Collaborative Biosite
Antibodies and those Biosite Antibodies developed or made by Biosite or
Biosite's assignee using Ixsys [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION], wherein at the date of a Biosite Assignment,
such antibodies have not been sold previously by Biosite hereunder and/or have
not been disclosed in a Biosite FDA submission in the Immunoassay Field.
1.21 "Biosite Assignment" means the consummated assignment of
this Agreement by Biosite to a third party assignee, directly or indirectly, and
in accordance with Section 15.3 below.
2. Collaborative Project
2.1 Research and Development. Ixsys and Biosite each shall
conduct their respective duties under the Collaborative Project in good
scientific manner, and in compliance in all material respects with all
requirements of applicable laws and regulations and all applicable good
laboratory practices to attempt to achieve the objectives of the Collaborative
Project efficiently and expeditiously. Ixsys and Biosite each shall proceed
diligently with their respective duties under the Collaborative Project by using
their respective good faith efforts to provide sufficient time, effort,
equipment and facilities to carry out the Collaborative Project, and use of
personnel with sufficient skills and experience as are required to accomplish
the objectives of the Collaborative Project.
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2.2 Collaborative Objectives.
2.2.1 Collaborative Biosite Antibodies.
Biosite shall use its commercially reasonable efforts to develop and
commercialize Collaborative Biosite Antibodies.
2.2.2 Biosite Research and Development Duties.
Biosite shall be primarily responsible for performing the work associated with
achieving Objectives 1-3 on Schedule 1.6, together with the assistance of such
Ixsys personnel as designated by the Ixsys Project Manager and reasonably
requested by Biosite.
2.2.3 Ixsys Research and Development Duties.
Ixsys shall be primarily responsible for performing the work associated with
achieving Objectives 4-6 on Schedule 1.6 together with the assistance of such
Biosite personnel as designated by the Biosite Project Manager and reasonably
requested by Ixsys.
2.2.4 Reimbursement for Certain Biosite
Expenses. Biosite shall reimburse Ixsys for the cost of all disposable and
reagent materials used by Biosite personnel while working at Ixsys. Such
reimbursement shall be quarterly and based on reasonable acceptable business
records made available to Biosite upon request, which records shall include,
among other things, invoices for the disposable and reagent materials. All
reimbursements shall be paid by Biosite within thirty (30) days of receipt of a
quarterly invoice from Ixsys, which invoice must be mailed to Biosite within
sixty (60) days of the end of each calendar quarter to avoid forfeiture of the
reimbursements for that quarter.
2.2.5 Reimbursement for Certain Ixsys
Expenses. Ixsys shall reimburse Biosite for the cost of all disposable and
reagent materials used by Ixsys personnel while working at Biosite. Such
reimbursement shall be quarterly and based on reasonable acceptable business
records made available to Ixsys upon request, which records shall include, among
other things, invoices for the disposable and reagent materials. All
reimbursements shall be paid by Ixsys within thirty (30) days of receipt of a
quarterly invoice from Biosite, which invoice must be mailed to Ixsys within
sixty (60) days of the end of each calendar quarter to avoid forfeiture of the
reimbursement for that quarter.
2.2.6 Compensation of Personnel. Each of
Ixsys and Biosite shall be solely responsible for the payment of all salary and
other compensation of their respective personnel.
2.3 Insurance. Biosite shall maintain product liability
insurance with respect to the development, manufacture
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<PAGE> 6
and sales of Products by Biosite in such amount as is customary in the industry
for other companies engaged in similar activities. Ixsys shall be named as an
additional insured on any such insurance policies. Biosite shall maintain such
insurance for so long as it continues to develop, manufacture or sell any
Products, and thereafter for so long as Biosite maintains insurance for itself
covering such development, manufacture or sales.
2.4 Records and Reports
2.4.1 Records. Each party shall maintain complete
records, in sufficient detail and manner as the Ixsys Project Manager and the
Biosite Project Manager mutually shall determine, and in good scientific manner
for patent purposes, which shall be complete and accurate and shall fully and
properly reflect all work done by such party and results achieved in the
performance of the Collaborative Project (including all data in the form
required under all applicable laws and regulations).
2.4.2 Inspection of Records. Each party shall have
the right, during normal business hours and upon reasonable notice, to inspect
and copy all such records of the other party regarding work performed under the
Collaborative Project. Each party shall maintain such records and the
information of the other party contained therein in confidence in accordance
with Section 9 below, and shall not use such records or information except to
the extent otherwise permitted by the Agreement.
2.4.3 Quarterly Development Reports. Within thirty
(30) days following the end of each calendar quarter during the Collaborative
Project Period, Biosite shall prepare and deliver to Ixsys a reasonably detailed
written summary report which shall (a) describe the work performed to date under
the Collaborative Project, (b) evaluate the work performed in relation to the
objectives of the Collaborative Project and (c) state any determinations of
Biosite regarding the nature and extent of future research and development
activities under the Collaborative Project.
2.5 Term of Collaborative Project. The
Collaborative Project shall continue for the duration of the Collaborative
Project Period unless terminated earlier as
provided below.
3. Exchange of Information
3.1 Ixsys Technology. During the Collaborative Project Period,
Ixsys shall provide to Biosite, on a continuing basis as it becomes available,
such information, training and technical assistance regarding Ixsys Technology
and Ixsys
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Improvements as reasonably necessary to enable Biosite to perform its duties
under the Collaborative Project, to achieve the objectives of the Collaborative
Project and to manufacture, use and sell Products and Biosite Antibodies.
3.2 Biosite Technology. During the Collaborative Project
Period, Biosite shall provide to Ixsys, on a continuing basis as it becomes
available, hybridomas producing Biosite Antibodies, and such information,
training and technical assistance regarding Biosite Technology and Biosite
Improvements as reasonably necessary to enable Ixsys to perform its duties under
the Collaborative Project, to achieve the objectives of the Collaborative
Project, as reasonably necessary for the use of such Biosite Antibodies or as
useful for the practice of Ixsys Technology.
3.3 Improvements. From the Effective Date to the [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] thereof, Ixsys and
Biosite, as applicable, shall provide to the other party all information
regarding Biosite Improvements developed by Ixsys and Ixsys Improvements
developed by Biosite.
3.4 Availability of Employees. During the Collaborative
Project Period, each party shall make its employees (designated by the Ixsys
Project Manager or the Biosite Project Manager, as the case may be) and relevant
reports of nonemployee consultants available, at no cost to the other party,
upon reasonable notice during normal business hours, at their respective places
of employment to consult with the other party, regarding use of the Ixsys
Technology or Ixsys Improvements, or the Biosite Technology or Biosite
Improvements, as the case may be, on issues arising during the Collaborative
Project, and in connection with any request from any regulatory agency
(including regulatory, scientific, technical and clinical testing issues).
4. Ownership of Technology and Improvements
4.1 Ixsys Technology. Ixsys is, and at all times hereafter
shall be, the sole and exclusive owner or licensee of all Ixsys Technology and
all Ixsys Improvements, whether conceived or developed solely by Ixsys
personnel, solely by Biosite personnel or jointly by Ixsys and Biosite
personnel. Biosite shall assign to Ixsys any rights which it has or obtains in
all Ixsys Technology and Ixsys Improvements.
4.2 Biosite Technology. Biosite is, and at all times hereafter
shall be, the sole and exclusive owner or licensee of all Biosite Technology and
all Biosite Improvements, whether conceived or developed solely by Biosite
personnel, solely by Ixsys personnel or jointly by Biosite and Ixsys
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<PAGE> 8
personnel. Ixsys shall assign to Biosite any rights which it has or obtains in
all Biosite Technology and Biosite Improvements.
4.3 Biosite Antibodies and Libraries. Subject to the ownership
rights set forth in Sections 4.1 and 4.2 above, Biosite is, and at all times
hereafter shall be, the sole and exclusive owner of all Biosite Antibodies,
Collaborative Biosite Antibodies and all Libraries. Ixsys is not granted any
right to use or sell Biosite Antibodies, Collaborative Biosite Antibodies or
Libraries, unless expressly provided under the Agreement.
5. Patents
5.1 Patents. The decision as to whether to seek patent
protection, including the decision as to whether to file applications for patent
term extension, and the decision as to where to seek and maintain such
protection shall be in the sole discretion of (a) Ixsys with respect to Ixsys
Technology, Ixsys Improvements and Future Ixsys Patent Rights, and (b) Biosite
with respect to Biosite Technology, Biosite Improvements, Biosite Antibodies,
Collaborative Biosite Antibodies and Libraries. Except as expressly set forth in
this Section 5.1, each party shall manage the filing, prosecution and
maintenance of, and shall bear all costs incurred in connection with, the
filing, prosecution and maintenance of its own patent applications and patents.
Each party shall cause its employees and agents to take all actions and to
execute, acknowledge and deliver all instruments or agreements reasonably
requested by the other party, and necessary for the perfection, maintenance or
enforcement of the other party's rights as set forth above.
5.2 Notification of Infringement. Each party shall notify the
other party of any infringement known to such party of any Patent Rights of the
other party and shall provide the other party with the available evidence, if
any, of such infringement.
5.3 Enforcement of Patent Rights. If Ixsys or Biosite has
actual notice of infringement of Patent Rights in the Immunoassay Field, the
respective officers of Ixsys and Biosite shall confer to determine in good faith
an appropriate course of action to enforce such Patent Rights or otherwise abate
the infringement thereof. Ixsys, at its sole expense, shall have the right to
determine the appropriate course of action to enforce Ixsys Patent Rights or
otherwise abate the infringement thereof, to take (or refrain from taking)
appropriate action to enforce Ixsys Patent Right, to control any litigation or
other enforcement action and to enter into, or permit, the settlement of any
such litigation or other enforcement action with respect to Ixsys Patent Rights,
and shall consider, in good faith, the interests of Biosite in so
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<PAGE> 9
doing. All monies recovered upon the final judgment or settlement of any action
undertaken by Ixsys to enforce Ixsys Patent Rights shall be retained by Ixsys.
Biosite, at its sole expense, shall have the right to determine the appropriate
course of action to enforce Biosite Patent Rights or otherwise abate the
infringement thereof, to take (or refrain from taking) appropriate action to
enforce Biosite Patent Rights, to control any litigation or other enforcement
action and to enter into, or permit, the settlement of any such litigation or
other enforcement action with respect to Biosite Patent Rights, and shall
consider, in good faith, the interests of Ixsys is doing so. All monies
recovered upon the final judgment or settlement of any action undertaken by
Biosite to enforce Biosite Patent Rights shall be retained by Biosite; provided,
however, that in the event of a Biosite Assignment, after reimbursement of costs
from the litigation Biosite's assignee shall pay to Ixsys royalties under
Sections 7.1 and 7.2 below on all monies representing royalty-bearing sales of
Products or Biosite Antibodies recorded after the assignment, or royalties or
other fees from third parties on sales of Biosite Antibodies developed or made
using Ixsys cloning or expression vectors and Collaborative Biosite Antibodies
in accordance with Section 6.3 below. Notwithstanding the foregoing, Ixsys and
Biosite shall fully cooperate with each other in the planning and execution of
any action to enforce the other party's Patent Rights.
6. Licenses
6.1 License Grant to Ixsys. Biosite grants a worldwide
nonexclusive license to Ixsys (a) to make, have made, use and sell those Biosite
Antibodies and Collaborative Biosite Antibodies identified prior to the
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the
Effective Date and which may be useful in the practice of Ixsys Technology and
Ixsys Improvements, but specifically excluding antibodies directed to the
targets identified in Schedule 1.4B, and (b) to use Biosite Technology and
Biosite Improvements, including the right to grant sublicenses (on the terms and
subject to the conditions of the Agreement) to the extent it may be useful in
the practice of Ixsys Technology and Ixsys Improvements. This license to Ixsys
shall not permit the use of Biosite Antibodies, Collaborative Antibodies,
Biosite Technology or Biosite Improvements by Ixsys or its sublicensees in
commercial in vitro diagnostic products or their manufacture.
6.2 License Grant to Biosite. Ixsys grants to Biosite a
worldwide nonexclusive license under the Ixsys Technology and the Ixsys
Improvements, [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION], (a) to make, use or sell Products in the Immunoassay Field and (b)
to make Biosite Antibodies solely for use in the Immunoassay Field.
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6.3 [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
6.4 Third Party Licenses. If, on or before the [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the Effective
Date, [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
any rights in the Immunoassay Field which constitute Ixsys Technology or Ixsys
Improvements, or grants or assigns to Biosite [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION], then Ixsys or Biosite, as the case
may be, [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] at the option of the other party, to the extent that Ixsys or
Biosite, as the case may be, has a right under, and on such terms and conditions
as provided by, such third party agreement to grant such sublicense. For
example, Ixsys hereby sublicenses Biosite under the agreement between Ixsys and
Stratacyte Corporation effective November 7, 1991, a copy of which is attached
hereto as Appendix A.
6.5 Biosite License Options.
6.5.1 If Ixsys elects in its sole discretion to
broadly license (in terms of number of intended licensees) a Future Ixsys Patent
Right, Biosite shall have the option to obtain a [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] license from Ixsys under such Future
Patent Rights, [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION], (a) to make, use, or sell Products in the Immunoassay Field and (b)
to make Biosite Antibodies for use solely in the Immunoassay Field, on such
terms and conditions as the parties mutually shall agree. [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
6.5.2 If the parties mutually agree, Ixsys shall
produce, for use by Biosite solely in the Immunoassay Field, such [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] libraries on such
terms and conditions as the parties mutually shall agree.
6.6 Ixsys License Options. The parties hereby agree
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<PAGE> 11
to negotiate in good faith a separate license agreement covering the making,
using or selling by Ixsys of Collaborative Biosite Antibodies for therapeutic
indications on reasonable royalty rates and other terms and conditions.
7. Royalties
7.1 Royalty Rate. In consideration for the license granted to
Biosite herein, during the Royalty Period, Biosite shall pay to Ixsys a single
royalty on any Product equal to (a) with respect to all Products, the lesser of
(i) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
per each different Collaborative Biosite Antibody in a Product sold by Biosite
to third parties, or (ii) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] per each different target to which more than one
Collaborative Biosite Antibody is directed in each assay in a Product sold by
Biosite to third parties; or (b) if greater in any calendar year with respect to
Novel Products only, [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION]of Net Sales of Novel Target Products or with respect to Novel
Assay Products: (i) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] of Net Sales of Novel Assay Products up to [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] in any calendar
year, (ii) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] of Net Sales of Novel Assay Products in excess of [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] and up to
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] in any
calendar year, (iii) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] of Net Sales of Novel Assay Products in excess of [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] and up to
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] in any
calendar year, and (iv) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] of Net Sales of Novel Assay Products in excess of
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] in any
calendar year. Notwithstanding anything to the contrary in this Section 7.1,
Biosite shall pay to Ixsys [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] of that portion of royalties and other fees actually
received by Biosite and specifically attributable to the use or sale by a third
party, in accordance with Section 6.3, of Collaborative Biosite Antibodies or
those Biosite Antibodies developed or made by Biosite using Ixsys [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]. The determination
of the attributable portion of royalties and fees in a third party agreement
shall be made in accordance with generally accepted accounting principles. No
royalty shall accrue to Ixsys hereunder with respect to Biosite's or a third
party's manufacture, use or sale of Biosite Antibodies produced from
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<PAGE> 12
hybridomas or otherwise without use of Ixsys Technology and Ixsys Improvements.
7.2 Assignee Royalty Rate. In the event of a Biosite
Assignment, Biosite's assignee shall pay to Ixsys on Assignee Antibodies during
the Royalty Period and instead of the royalty specified in Section 7.1(a) above,
but subject to the provisions of Section 7.1(b) above, a single royalty equal
to: the greater of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] of Net Sales of Products containing Assignee Antibodies or (ii)
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the
Net Sales, wherein Net Sales for combination Products containing more than one
different antibody shall be calculated by applying to the Net Sales (as defined
in Section 1.14) of the combination Products a fractional multiplier having as
its numerator [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] and as its denominator [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]. All other provisions of Section 7.1
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] and
effect.
7.3 Royalty Reports. For each [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] during the Royalty Period, Biosite
shall furnish to Ixsys a [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] showing in reasonably specific detail (a) the gross sales
of all Products sold by Biosite and its sublicensees during the reporting
period, (b) the number and composition of Collaborative Biosite Antibodies in
the Products, (c) the calculation of Net Sales from gross sales (if applicable),
and (d) the calculation of royalties payable to Ixsys which shall have accrued
hereunder based upon sales of Products, (e) the gross sales of Biosite
Antibodies developed or made using Ixsys [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] and Collaborative Biosite Antibodies by
third parties in accordance with Section 6.3, (f) the calculation of royalties
and other fees actually received by Biosite in connection with the use or sale
thereof by third parties, and (g) the calculation of royalties to Ixsys which
shall have accrued hereunder based upon the use or sale thereof by third
parties. Such royalty reports shall be due on the [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] following the close of
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION].
Biosite shall keep complete and accurate records in sufficient detail to
properly reflect all gross sales and Net Sales and to enable the royalties
payable hereunder to be determined.
7.4 Payment Terms. All royalties shown to have accrued by each
royalty report provided for under Section 7.3 above shall be due and payable on
the date such royalty report
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is due. Payment of royalties in whole or in part may be made in advance of such
due date.
7.5 Minimum Royalties.
7.5.1 On the Effective Date and on the first day of
each January thereafter, Biosite shall pay to Ixsys minimum annual royalties for
each calendar year equal to [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] in connection with the [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] constituting part of the Ixsys Technology,
and [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] in
connection with the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] constituting part of the Ixsys Technology; provided, however,
that (i) the initial minimum annual royalty payments under this section will be
prorated from the Effective Date until December 31, 1992; and (ii) the minimum
annual royalty payments due after the initial payment on the [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] or the [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] shall accrue but
shall not be due, with respect to each part of the technology, until the date
such part of the technology has been actually reduced to practice. For purposes
of this Section 7.5.1. "reduced to practice" shall mean the achievement of (a)
objective 1 or 2 on Schedule 1.6 with respect to the [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION], and (b) objective 3 on
Schedule 1.6 with respect to the [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]. If at the end of the Collaborative Project
Period either the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] or the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] has not been actually reduced to practice by Biosite, Ixsys shall
reimburse Biosite for that portion of the initial minimum annual royalty
payments made under this section which relates to any such technology not
actually reduced to practice.
7.5.2 Minimum royalties paid under Section 7.5.1.
shall be creditable against all royalties shown to have accrued by each royalty
report provided for under Section 7.3 above during such calendar year.
7.6 Duration of Royalty Obligations. Royalty obligations shall
continue during the Royalty Period, after which each party's license granted
hereunder shall become a fully paid-up, irrevocable license.
7.7 Audits. Upon the written request of Ixsys, Biosite shall
permit an accounting firm selected by Ixsys and reasonably acceptable to Biosite
to have access, up to twice per year, during normal business hours to such of
the records of
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<PAGE> 14
Biosite as may be reasonably necessary to verify the accuracy of the royalty
reports hereunder. If such audit concludes that additional royalties were owed
during such period, Biosite shall pay the additional royalties within
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of the
date Ixsys delivers to Biosite such accounting firm's written report. The fees
charged by such accounting firm shall be paid by Ixsys; provided, however, if
the audit discloses that the royalties payable by Biosite for the audited period
are more than [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] of the royalties actually paid for such period, then Biosite shall
pay the reasonable fees and expenses of such audit. Biosite shall include in
each sublicense granted pursuant to the Agreement a provision requiring the
sublicensee to make reports to Biosite, to keep and maintain records of sales
and to grant access to such records by Ixsys' accounting firm to the same extent
required of Biosite under the Agreement.
8. License Issue Fee Payments. In consideration for the licenses
granted to Biosite under the Agreement, Biosite shall pay to Ixsys, on or before
the Effective Date, license issue fees in the amount of [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] in connection with the
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
constituting part of the Ixsys Technology, and [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] in connection with the [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] constituting part of
the Ixsys Technology.
9. Confidentiality.
9.1 Confidential Information. During the term of the
Agreement, and for a period of [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] following the expiration or earlier termination
hereof, each party shall maintain in confidence all information (including
samples) disclosed by the other party hereto, and shall not use, disclose or
grant the use of such information except on a need-to-know basis to those
affiliates, employees, permitted licensees, permitted assignees and agents,
consultants, clinical investigators or contractors, to the extent such
disclosure is reasonably necessary in connection with such party's activities as
expressly authorized by the Agreement. To the extent that disclosure is
authorized by the Agreement, prior to disclosure, each party hereto shall obtain
agreement of any such person or entity to hold in confidence and not make use of
such information for any purpose other than those permitted by the Agreement.
Each party shall use at least the same standard of care customarily used by
companies engaged in the research, development and manufacture of
biopharmaceutical products to protect its own trade secrets or proprietary
information to ensure that its affiliates, employees, permitted licensees,
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<PAGE> 15
permitted assignees and agents, consultants, clinical investigators and
contractors do not disclose or make any unauthorized use of information of the
other party hereto except as permitted by the Agreement. Each party shall notify
the other promptly upon discovery of any unauthorized use or disclosure of the
other party's information.
9.2 Permitted Disclosures. The confidentiality obligations
contained in Section 9.1 above shall not apply to the extent that (a) any
receiving party (the "Recipient") is required to disclose information by law,
order or regulation of a governmental agency or a court of competent
jurisdiction, (b) the Recipient is required to disclose information to any
governmental agency for purposes of obtaining approval to test or market a
Product, or (c) the Recipient can demonstrate that (i) the disclosed information
was public knowledge at the time of such disclosure by the Recipient, or
thereafter became public knowledge, other than as a result of actions of the
Recipient, its affiliates, employees, permitted licensees, permitted assignees
and agents, consultants, clinical investigators or contractors in violation
hereof; (ii) the disclosed information was rightfully known by the Recipient,
its affiliates or permitted licensees (as shown by its written records) prior to
the date of disclosure to the Recipient by the other party hereunder; or (iii)
the disclosed information was received by the Recipient or its affiliates or
permitted licensees on an unrestricted basis from a source unrelated to any
party to the Agreement and not under a duty of confidentiality to the other
party.
10. Warranties and Representations.
10.1 By Ixsys. Ixsys warrants and represents to Biosite as
follows:
10.1.1 It is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation, has full corporate power and authority to own its assets and
carry on its business as presently conducted and to enter into and perform its
obligations under the Agreement, including the Schedules hereto.
10.1.2 The execution, delivery and performance by
it of the Agreement, including the Schedules attached hereto, have been duly
authorized by all necessary corporate action on its part, do not require further
approvals or consents of its stockholders or governing body, and will not
contravene any applicable law, government rule, regulation or order binding on
it, or contravene its charter, certificate of incorporation, bylaws, or other
constituent documents or contravene the provisions of, or constitute a default
under, violation of, or conflict with, or result in the creation of any lien
upon any of
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<PAGE> 16
its property under, any agreement or other instrument to which it is a party or
by which it or any of its properties is or may be bound or affected.
10.1.3 The Agreement, including the Schedules
attached hereto, constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws in effect from time to time that affect creditors' rights generally and by
principles of equity.
10.1.4 As of the date of the Agreement, Schedule
1.12 is a complete list of all United States and foreign patent applications and
issued patents relating to Ixsys Technology. This schedule will be updated as
necessary to reflect additional filings and issuances.
10.2 By Biosite. Biosite warrants and represents to Ixsys as
follows:
10.2.1 It is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation, has full corporate power and authority to own its assets and
carry on its business as presently conducted and to enter into and perform its
obligations under the Agreement, including the Schedules hereto.
10.2.2 The execution, delivery and performance
by it of the Agreement, including the Schedules attached hereto, have been duly
authorized by all necessary corporate action on its part, do not require further
approvals or consents of its stockholders or governing body, and will not
contravene any applicable law, government rule, regulation or order binding on
it, or contravene its charter, certificate of incorporation, bylaws, or other
constituent documents or contravene the provisions of, or constitute a default
under, violation of, or conflict with, or result in the creation of any lien
upon any of its property under, any agreement or other instrument to which it is
a party or by which it or any of its properties is or may be bound or affected.
10.2.3 The Agreement, including the Schedules
attached hereto, constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws in effect from time to time that affect creditors' rights generally and by
principles of equity.
10.3 DISCLAIMER OF WARRANTIES. NOTHING IN THE AGREEMENT SHALL
BE CONSTRUED AS A REPRESENTATION MADE, OR
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<PAGE> 17
WARRANTY GIVEN, BY EITHER IXSYS OR BIOSITE THAT ANY PATENT WILL ISSUE BASED UPON
ANY PENDING PATENT APPLICATION WITHIN THE PATENT RIGHTS, THAT ANY PATENT WITHIN
THE PATENT RIGHTS WHICH ISSUES WILL BE VALID, OR THAT THE USE OF ANY LICENSE
GRANTED HEREUNDER OR THAT THE USE OF ANY PATENT RIGHTS WILL NOT INFRINGE THE
PATENT OR PROPRIETARY RIGHTS OF ANY OTHER PERSON OR ENTITY. EACH OF IXSYS AND
BIOSITE DISCLAIMS ALL WARRANTIES WHATSOEVER WITH RESPECT TO THE OWNERSHIP OF THE
PROCESSES, TECHNIQUES, METHODS, MATERIALS OR TECHNOLOGY USED TO MAKE AND USE THE
BIOSITE ANTIBODIES OR COLLABORATIVE BIOSITE ANTIBODIES, EITHER EXPRESS OR
IMPLIED, AND ALL WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO THE
MERCHANTABILITY OR FITNESS OF THE ANTIBODIES FOR A PARTICULAR PURPOSE.
11. Term and Termination.
11.1 Expiration. Unless terminated earlier pursuant to Section
11.2 below, the Agreement shall expire on [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION].
11.2 Termination. The Agreement may be terminated by either
party upon or after the breach of any material provision of the Agreement by the
other party, if the breaching party has not cured such breach within
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after
notice thereof by the other party.
11.3 Effect of Termination. Expiration or termination of the
Agreement shall not relieve the parties of any obligation accruing prior to such
expiration or termination. The provisions of Section 6 shall survive the
expiration of the Agreement. The provisions of Sections 4, 9, 12 and 15.7, as
well as any rights of Ixsys or Biosite arising out of a breach by the other of
any obligations hereunder, shall survive the expiration or earlier termination
of the Agreement.
12. Indemnification. Each party shall indemnify, defend and hold the
other party, its affiliates and sublicensees harmless, and hereby forever
releases and discharges the other party, its affiliates and sublicensees, from
and against all claims, demands, liabilities, damages and expenses, including
attorneys' fees and costs arising out of the negligence, recklessness or
intentional acts or omissions of the indemnifying party, its affiliates or
sublicensees in connection with the work performed by such party during the
Collaborative Project or the development, manufacture, sale or use of Biosite
Antibodies or Products by such party.
13. Notices. Any consent, notice or report required or permitted to be
given or made under the Agreement by one of the parties hereto to the other
shall be in writing, delivered
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<PAGE> 18
personally or by facsimile (and promptly confirmed by personal delivery, U.S.
first class mail or courier), U.S. first class mail or courier, postage prepaid
(where applicable), addressed to such other party at its address indicated
below, or to such other address as the addressee shall have last furnished in
writing to the addressor and (except as otherwise provided in the Agreement)
shall be effective upon receipt by the addressee.
Biosite: Biosite Diagnostics Incorporated
11030 Roselle Street, Suite D
San Diego, CA 92121
Attention: Kim D. Blickenstaff
Ixsys: Ixsys, Inc.
3550 General Atomics Court, Suite L-103
San Diego, CA 92121
Attention: Michael J. Hanifin
With a copy to:
Pillsbury Madison & Sutro
235 Montgomery Street, 15th Floor
San Francisco, CA 94104
Attention: Thomas E. Sparks, Jr.
14. Bankruptcy. All rights and licenses granted under or pursuant to
the Agreement are, and shall otherwise be deemed to be, for purposes of Section
365(n) of the Bankruptcy Code, licenses of rights to "intellectual property" as
defined under Section 101(52) of the Bankruptcy Code. Each of the parties, as a
licensee of certain rights under the Agreement, shall retain and may fully
exercise all of its rights and elections under the Bankruptcy Code.
15. Miscellaneous.
15.1 Limited License. Nothing herein shall be construed as a
license to a party of any patents or patent applications held by the other party
unless otherwise specifically set forth herein.
15.2 Governing Law. The Agreement shall be governed by and
construed in accordance with the laws of the State of California.
15.3 Assignment. Neither Biosite nor Ixsys shall assign its
rights or obligations under the Agreement [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION]. Any permitted assignee shall assume all
obligations of its assignor under the Agreement.
15.4 Waivers and Amendments. No change,
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<PAGE> 19
modification, extension, termination or waiver of the Agreement, or any of the
provisions herein contained, shall be valid unless made in writing and signed by
duly authorized representatives of the parties hereto.
15.5 Entire Agreement. The Agreement embodies the entire
understanding between the parties and supersedes any prior understanding and
agreements between and among them respecting the subject matter hereof. There
are no representations, agreements, arrangements or understandings, oral or
written, between the parties hereto relating to the subject matter of the
Agreement which are not fully expressed herein.
15.6 Force Majeure. In the event of a delay caused by
inclement weather, fire, flood, strike or other labor dispute, act of God, act
of governmental officials or agencies, or any other cause beyond the control of
Ixsys or Biosite, Ixsys or Biosite, as the case may be, shall be excused from
performance hereunder for the period of time attributable to such delay, which
may extend beyond the time lost due to one or more of the causes mentioned
above.
15.7 Arbitration. Any disputes arising between the parties
relating to, arising out of or in any way connected with the Agreement or any
term or condition hereof, or the performance by either party of its obligations
hereunder, whether before or after termination of the Agreement, shall be
finally resolved by binding arbitration. Whenever a party shall decide to
institute arbitration proceedings, it shall give written notice to that effect
to the other party. The party giving such notice shall refrain from instituting
the arbitration proceedings for a period of sixty (60) days following such
notice. Any arbitration hereunder shall be conducted under the rules of the
American Arbitration Association. Each such arbitration shall be conducted by a
panel of three arbitrators appointed in accordance with such rules. Any such
arbitration shall be held in San Diego, California. The arbitrators shall have
the authority to grant specific performance, and to allocate between the parties
the costs of arbitration in such equitable manner as they determine. Judgment
upon the award so rendered may be entered in any court having jurisdiction or
application may be made to such court for judicial acceptance of any award and
an order of enforcement, as the case may be. In no event shall a 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.
15.8 Counterparts. The Agreement may be executed in two or
more counterparts, each of which shall be deemed an
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<PAGE> 20
original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused the Agreement to be duly
executed as of the day and year written below.
BIOSITE DIAGNOSTICS IXSYS, INC.
INCORPORATED
By /s/ Gunars E. Valkirs By /s/ Michael J. Hanifen
----------------------------- ------------------------
Title V.P. Research and Title V.P. Business
----------------- --------------
Development 7/1/92 Development 7/1/92
------------------ ------------------
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<PAGE> 21
Schedule 1.4A
Biosite Technology
1. Threshold immunoassay methods described in U.S. Patent
No. 5,028,535 and related Continuations in Part.
2. [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
3. [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
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<PAGE> 22
Schedule 1.4B
Specific Chemical Modifications Excluded
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
Specific derivatives and conjugates as disclosed in the following patent
applications:
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<PAGE> 23
Schedule 1.4B (cont.)
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
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<PAGE> 24
Schedule 1.6
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
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<PAGE> 25
Schedule 1.12
DOCKET SERIAL NO. DATE FILED
NUMBER TITLE INVENTOR (PATENT NO.) (ISSUED)
-------- ------- ---------- -------------- ------------
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
P31 8699 METHODS OF HUSE 573,648 8/24/90
SYNTHESIZING
OLIGONUCLEOTIDES
WITH RANDOM
CONDONS
_______
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
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<PAGE> 1
EXHIBIT 10.19
[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS
DOCUMENT HAVE BEEN REDACTED AND HAVE BEEN FILED SEPARATELY WITH
THE COMMISSION]
DEBENTURE PURCHASE AGREEMENT
THIS DEBENTURE PURCHASE AGREEMENT (the "Agreement") is made as of the
22nd day of September, 1995 by and between BIOSITE DIAGNOSTICS INCORPORATED, a
Delaware corporation (the "Company"), on the one hand, and SANDOZ PHARMA LTD.
("Sandoz"), on the other hand. Sandoz is sometimes herein referred to as an
"Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Debentures.
1.1 Sale and Issuance of Debentures.
(a) Subject to the terms and conditions of this
Agreement, Investor agrees to purchase at each of the Initial Closing, the
Second Closing and the Third Closing (each of which Closings is defined in
Section 1.2 below) and the Company agrees to sell and issue to Investor at the
Initial Closing, the Second Closing and the Third Closing the Company's
Convertible Debentures in the form attached hereto as Exhibit A (the
"Debentures") in the face amount set forth opposite Investor's name on Schedule
A hereto for a purchase price equal to the face amount thereof. The Debentures
to be purchased at the Initial Closing are referred to as the "Initial Closing
Debentures"; the Debentures to be purchased at the Second Closing are referred
to as the "Second Closing Debentures"; and the Debentures to be purchased at the
Third Closing are referred to as the "Third Closing Debentures".
1.2 Closings. The purchase and sale of the Debentures shall
take place at the offices of Pillsbury Madison & Sutro, 101 W. Broadway, Suite
1800, San Diego, California, or at such other place as the Company and Investor
acquiring the Debentures sold at such time and place pursuant hereto mutually
agree upon (verbally or in writing). The purchase and sale of the Initial
Closing Debentures shall take place on September 29, 1995 (the "Initial
Closing"). The purchase and sale of the Second Closing Debentures shall take
place within [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] (the "Second Closing"). The purchase and sale of the Third Closing
Debentures shall take place within [CONFIDENTIAL MATERIAL REDACTED and FILED
SEPARATELY WITH THE COMMISSION] (the "Third Closing"). At each of the Initial
Closing, the Second Closing and the Third Closing, the Company shall deliver to
Investor the Debentures which Investor is purchasing against delivery to the
Company of a bank check, bank wire or personal check in the amount of the
purchase price therefor payable to the Company's order. The Initial Closing, the
<PAGE> 2
Second Closing and the Third Closing are referred to collectively as the
"Closings."
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to Investor that, except as set forth on the Schedule of
Exceptions furnished to Investor and specifically identifying the relevant
subparagraph hereof, which exceptions shall be deemed to be representations and
warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on its business or properties.
2.2 Capitalization. The authorized capital of the Company
consists, or will consist prior to the Closing, of:
(i) Preferred Stock. 8,328,847 shares of preferred
stock (the "Preferred Stock"), 610,000 shares of which have been
designated Series A Preferred Stock, par value $.01 per share (the
"Series A Preferred Stock"), 2,156,336 shares of which have been
designated Series B Preferred Stock, par value $.01 per share (the
"Series B Preferred Stock"), 2,204,167 shares of which have been
designated Series C Preferred Stock, par value $.01 per share (the
"Series C Preferred Stock"), 1,900,010 shares of which have been
designated Series D Preferred Stock, par value $.01 per share (the
"Series D Preferred Stock") and 1,458,334 shares of which have been
designated Series E Preferred Stock, par value $.01 per share (the
"Series E Preferred Stock"). There are 610,000 shares of Series A
Preferred Stock, 2,156,336 shares of Series B Preferred Stock, 2,204,167
shares of Series C Preferred Stock, 1,900,010 shares of Series D
Preferred Stock and 1,458,334 shares of Series E Preferred Stock issued
and outstanding and, based upon the Company's records, such outstanding
shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
are owned by the persons and in the numbers specified in the stockholder
list made available supplementally to Investor upon request. The rights,
preferences and privileges of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock are as stated in the Company's Restated
Certificate of Incorporation ("Restated Certificate").
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<PAGE> 3
(ii) Common Stock. 12,000,000 shares of common stock
(the "Common Stock"), of which 1,316,599 shares are issued and
outstanding and, based upon the Company's records, are owned by the
persons, and in the numbers specified in the stockholder list provided
supplementally to Investor.
(iii) Agreements for Purchase of Shares. Except for
(a) the conversion privileges of the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock, the Series D
Preferred Stock and the Series E Preferred Stock, (b) the right of first
offer of Investor provided in Section 8.4 hereof, (c) the right of first
offer provided for in Section 8.4 of the Series A Preferred Stock
Purchase Agreement dated as of May 5, 1988 between the Company and the
investors listed therein (the "Series A Agreement"), (d) the right of
first offer provided for in Section 8.4 of the Series B Preferred Stock
Purchase Agreement dated as of July 24, 1989 between the Company and the
investors listed therein (the "Series B Agreement"), (e) the right of
first offer provided for in Section 8.4 of the Series C Preferred Stock
Purchase Agreement dated as of June 7, 1990 between the Company and the
investors listed therein (the "Series C Agreement"), (f) the right of
first offer provided for in Section 8.4 of the Series D Preferred Stock
Purchase Agreement, dated as of October 30, 1991 between the Company and
the investors listed therein (and the supplemental signature pages
thereto)(the "Series D Agreement"), (g) the right of first offer
provided for in Section 8.4 of the Series E Preferred Stock Purchase
Agreement, dated as of November 25, 1992 between the Company and the
investors listed therein (and the supplemental signature pages thereto)
(the "Series E Agreement") and (h) options to purchase an aggregate of
795,924 shares of Common Stock granted pursuant to the Amended and
Restated 1989 Stock Plan of the Company (the "Plan"), there are no
outstanding options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from
the Company of any shares of its capital stock.
2.3 Subsidiaries. Except for Biosite Diagnostics GmbH, its
wholly owned subsidiary, the Company does not presently own or control, directly
or indirectly, any interest in any other corporation, association, partnership
or other business entity.
2.4 Authorization. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and the authorization, issuance (or
reservation for issuance) and delivery of the Debentures being sold hereunder
and the Common
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<PAGE> 4
Stock issuable upon conversion of the Debentures, to the extent that the
foregoing requires performance on or prior to each of the Closings, has been
taken or will be taken on or prior to each of the Closings, and this Agreement
constitutes a valid and legally binding obligation of the Company enforceable in
accordance with its terms.
2.5 Valid Issuance of Preferred and Common Stock.
(a) The Common Stock issuable upon conversion of
the Debentures purchased under this Agreement has been or will be on or prior to
the Initial Closing, duly and validly reserved for issuance and, upon issuance,
will be duly and validly issued, fully paid and nonassessable.
(b) The outstanding shares of Common Stock,
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock are duly and validly
authorized and issued, fully paid and nonassessable, and were issued in
compliance with federal and state securities laws.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for the filing pursuant to
section 25102(f) of the California Corporate Securities Law of 1968, as amended,
and the rules thereunder, and any other post-sale filings pursuant to
applicable state securities laws, which filings will be effected prior to any
applicable deadlines.
2.7 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement or the right of the Company to enter
into it, or to consummate the transactions contemplated hereby, or which might
result, either individually or in the aggregate, in any material adverse change
in the assets, condition, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for the foregoing. The foregoing
includes, without limitation, actions pending or threatened (or any basis
therefor known to the Company) involving the prior employment of any of the
Company's employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
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<PAGE> 5
2.8 Invention and Secrecy and Common Stock Purchase
Agreements. Each key employee of the Company has executed an Employee's
Invention and Proprietary Information Agreement in substantially the form made
available to Investor upon request. The Company, after reasonable investigation,
is not aware that any of its key employees are in violation thereof, and the
Company will use its best efforts to prevent any such violation. Each holder of
Common Stock of the Company has entered into a Common Stock Purchase Agreement
in substantially the form made available to Investor upon request.
2.9 Patents and Trademarks. The Company has sufficient title
and ownership of all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted
without any conflict with or infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes of any other person or entity. The Company has not received
any communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his
best efforts to promote the interests of the Company or that would conflict with
the Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, after due inquiry, conflict with or result in
a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such employees is
now obligated, which conflict, breach or default would be materially adverse to
the Company. It is not and it will not be necessary for the Company to utilize
any inventions of any of its employees (or people it currently intends to hire)
made prior to their employment by the Company.
2.10 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Certificate of Incorporation or
Bylaws, as amended, or of any instrument, judgment, order, writ, decree or
contract to which it is a party or by which it is bound or, to its knowledge, of
any provision of federal or state statute, rule or regulation applicable to the
Company, which violation or default would be materially adverse to the Company.
The execution, delivery and performance of this
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<PAGE> 6
Agreement and the consummation of the transactions contemplated hereby will not
result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a material default
under any such provision, instrument, judgment, order, writ, decree or contract
or an event which results in the creation of any lien, charge or encumbrance
upon any assets of the Company, which violation, default, conflict or event
would be materially adverse to the Company.
2.11 Agreements; Action.
(a) Except for the agreements explicitly contem-
plated hereby, there are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, affiliates or any
affiliate thereof.
(b) There are no agreements, understandings,
instruments, contracts or proposed transactions to which the Company is a party
or by which it is bound which involve (i) obligations of, or payments to the
Company in excess of, $100,000, other than liabilities or obligations of the
Company for compensation under employment agreements, (ii) the license of any
patent, copyright, trade secret or other proprietary right of the Company or
(iii) joint venture, partnership or other contract or arrangement involving the
sharing of profits or proprietary information or know how (other than
nondisclosure agreements), (iv) any contract or agreement limiting the Company's
right to engage in any business activity or compete with any person or entity,
or (v) any other material agreement.
(c) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or incurred any other liabilities individually in excess of $100,000 or
in excess of $200,000 in the aggregate, other than liabilities or obligations of
the Company for compensation under employment agreements, (iii) made any loans
or advances to any person, other than ordinary advances for travel expenses or
(iv) sold, exchanged or otherwise disposed of any of its assets or rights, other
than the sale of its inventory in the ordinary course of business.
(d) The Company is not a party to and is not bound by
any contract, agreement or instrument, or subject to any restriction under its
Restated Certificate of Incorporation or Bylaws, which adversely affects in any
material respect its business as now conducted or as proposed to be conducted,
its properties or its financial condition.
(e) The Company has not engaged in the past three
months in any discussion (i) with any representative of any corporation or
corporations regarding the consolidation or merger of the Company with or into
any such corporation or corporations, (ii) with any corporation, partnership,
association or other
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<PAGE> 7
business entity or any individual regarding the sale, conveyance or disposition
of all or substantially all of the assets of the Company or a transaction or
series of related transactions in which more than 50 percent of the voting power
of the Company is disposed of, or (iii) regarding any other form of liquidation,
dissolution or winding up of the Company.
2.12 Disclosure. The Company believes it has fully provided
Investor with all the information which Investor has requested for deciding
whether to purchase the Debentures, and all information reasonably necessary to
enable Investor to make such decision. Neither this Agreement nor any other
statement or certificate made or delivered in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading.
2.13 Registration Rights. Except as provided in Section 7 of
this Agreement, Section 7 of the Series A Agreement, Section 7 of the Series B
Agreement, Section 7 of the Series C Agreement, Section 7 of the Series D
Agreement and Section 7 of the Series E Agreement, the Company has not granted
or agreed to grant any registration rights, including piggy-back rights, to any
person or entity.
2.14 Corporate Documents. The Restated Certificate of
Incorporation and Bylaws of the Company are in the form previously made
available to Investor upon request.
2.15 Title to Property and Assets. The Company owns its
property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to the best of its knowledge,
holds a valid leasehold interest free of any material liens, claims or
encumbrances. All the Company's personal properties, whether owned or leased,
are in good operating condition, normal wear and tear excepted, and are adequate
and suitable for the purposes for which they are currently being used.
2.16 Employee Benefit Plans. The Company does not have any
Employee Benefit Plan as described in section 3(2)(A) or section 3(2)(B) of the
Employee Retirement Income Security Act of 1974.
2.17 Tax Returns and Payments. The Company has filed all tax
returns and reports as required by law in a timely fashion. These returns and
reports are true and correct in all material respects. The Company has paid all
taxes and other assessments due prior to the time penalties would accrue
thereon. The provision for taxes of the Company is adequate for taxes due or
accrued as of the date thereof.
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2.18 Insurance. The Company has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
2.19 Minute Books. The minute books of the Company made
available to Investor upon request contain a complete summary of all meetings of
directors and stockholders since the time of incorporation and reflect all
transactions referred to in such minutes accurately in all material respects.
2.20 Labor Agreements and Actions. The Company is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, nor is the
Company aware of any labor organization activity involving its employees. The
Company is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing.
2.21 Real Property Holding Company. The Company is not a
"United States real property holding corporation" (as that term is defined in
Treasury Regulation section 1.897-2(b)). Within 45 days after receipt of a
request from a foreign investor, the Company shall prepare and deliver to such
foreign investor the statement required under Treasury Regulation section
1.897-2(h)(1)(i) and either or both of the following documents: (i) an affidavit
in conformance with the requirements of Internal Revenue Code of 1986, as
amended ("IRC") section 1445(b)(3) or (ii) a notarized statement, executed by an
officer having actual knowledge of the facts, that the shares of Company stock
held by such foreign investor are of a class that is regularly traded on an
established securities market, within the meaning of IRC section 1445(b)(6). If
the Company is unable to provide either document described in (i) or (ii) above,
if requested, it shall promptly notify such foreign investor in writing of the
reasons for such inability. Finally, upon the request of a foreign investor and
without regard to whether either document described in (i) or (ii) above has
been requested, the Company shall cooperate fully with the efforts of such
foreign investor to obtain a "qualifying statement," within the meaning of IRC
section 1445(b)(4), or such other documents as would excuse a transferee of a
foreign investor's interest from withholding of income tax imposed pursuant to
IRC section 897(a).
2.22 Financial Statements. The Company has delivered to
Investor its audited financial statements (balance sheet and
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profit and loss statement) at and for the period from inception through December
31, 1994, and its unaudited interim financial statements at and for the period
from January 1, 1995 through March 31, 1995 (the "Financial Statements"). The
Financial Statements are complete and correct in all material respects and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the period indicated and are consistent
with each other. The Financial Statements accurately set out and describe the
financial condition and operating results of the Company as of the date, and for
the period, indicated therein. Except as set forth in the Financial Statements,
the Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to March 31,
1995, and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company. The Company maintains and will continue to maintain a
standard system of accounting established and administered in accordance with
generally accepted accounting principles.
2.23 Voting Arrangements. Except as may be provided in Section
5.6 hereof, to the Company's knowledge there are no outstanding stockholder
agreements, voting trusts, proxies or other arrangements or understandings among
the stockholders of the Company relating to the voting of their respective
shares.
3. Representations, Warranties, Covenants and Agreements of Investor.
Investor hereby represents, warrants, covenants and agrees that:
3.1 Authorization. This Agreement constitutes its
valid and legally binding obligation.
3.2 Purchase Entirely for Own Account. This Agreement is made
with Investor in reliance upon Investor's representation to the Company, which
by Investor's execution of this Agreement Investor hereby confirms, that the
Debentures to be received by Investor and the Common Stock issuable upon
conversion thereof (the Debentures and the Common Stock issued upon conversion
thereof are referred to, collectively, as the "Securities") will be acquired for
investment for Investor's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, Investor further represents
that Investor does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or to
any third person, with respect to any of the Securities. Investor represents
that it has full power and authority to enter into this Agreement.
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<PAGE> 10
3.3 Disclosure of Information. Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Securities. Investor further represents that it has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Securities. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 2 of this Agreement.
3.4 Investment Experience. Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities.
If other than an individual, Investor also represents it has not been organized
solely for the purpose of acquiring the Securities.
3.5 Restricted Securities. Investor understands that the
Securities it is or will be purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
only in certain limited circumstances without registration under the Securities
Act of 1933, as amended (the "Securities Act"). In this connection Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
3.6 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, Investor further agrees not to
make any disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a Registration Statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such Registration Statement; or
(b) (i) Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, Investor shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act. It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144, as currently in existence, except in
unusual circumstances.
(c) Notwithstanding the provisions of subsections (a)
and (b) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor which is
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<PAGE> 11
a partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or the transfer by gift, will or intestate succession
of any partner to his spouse or lineal descendants or ancestors, if the
transferee agrees in writing to be subject to the terms of this Agreement to the
same extent as if he were an original Investor hereunder; provided, however,
that the provisions of Section 3.6(b) above shall apply if the Company or its
counsel are unable to determine if such transfer may be made in compliance with
federal and applicable state securities laws.
3.7 Legends. It is understood that the Securities may bear one
or all of the following legends:
(a) "The securities represented hereby have not been
registered under the United States Securities Act of 1933, and may not be sold,
transferred, assigned, pledged or hypothecated absent an effective registration
thereof under such act or compliance with Rule 144 promulgated under such act,
or unless the Company has received an opinion of counsel, satisfactory to the
Company and its counsel, that such registration is not required."
(b) Any legend required by the laws of the State of
California or other jurisdiction, including any legend required by the
California Department of Corporations.
3.8 Accredited or Foreign Investor. Except as disclosed to the
Company in writing, Investor either (i) is an accredited investor as defined in
Rule 501(a) of Regulation D, as amended, of the SEC under the Securities Act, or
(ii) is neither (x) a national or resident of the United States, its
territories, possessions or any area subject to its jurisdiction, nor (y) a
corporation, partnership, trust or other entity created or organized in the
United States, its territories, possessions or any area subject to its
jurisdiction, nor (z) a corporation, partnership, trust or other entity, any of
the equity owners of which is described in clause (x) or (y) above and agrees
not to sell, hypothecate, pledge or otherwise dispose of any interest in the
Securities in the United States, its territories, possessions or any area
subject to its jurisdiction, or to any person who is a national thereof or
resident therein (including any estate of such person), or any corporation,
partnership or other entity created or organized therein, unless such securities
have been either registered under the Securities Act, or are exempt from the
registration requirements of the Securities Act, in the opinion of the Company's
counsel, and Investor has complied with any restrictions on transfer contained
in this Agreement.
3.9 Confidentiality. Investor hereby represents, warrants and
covenants that it shall maintain in confidence, and shall not use (except to
evaluate its investment in the Company) or disclose without the prior written
consent of the Company, any
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<PAGE> 12
confidential information that is furnished to it by the Company in connection
with this Agreement, including (without limitation) all financial statements,
budgets and other information delivered or provided to Investor pursuant to
Section 8 hereof. This obligation of confidentiality shall not apply, however,
to any information (a) in the public domain through no unauthorized act or
failure to act by Investor, (b) lawfully disclosed to Investor by a third party
who possessed such information without any obligation of confidentiality or (c)
lawfully developed by Investor independent of any disclosure by the Company.
Investor further covenants that it shall return to the Company all tangible
materials containing such information upon reasonable request by the Company if
Investor is no longer a holder of shares of capital stock of the Company.
3.10 Removal of Legends; Further Covenants.
(a) Any legend endorsed on the Securities pursuant to
Section 3.7(a) hereof shall be removed (i) if the Securities issued upon
conversion thereof represented by such certificate shall have been effectively
registered under the Securities Act or otherwise lawfully sold in a public
transaction or in accordance with Rule 144, (ii) if such Securities may be
transferred in compliance with Rule 144(k) promulgated under the Securities Act,
or (iii) if the holder of such Securities shall have provided the Company with
an opinion of counsel, in form and substance acceptable to the Company and its
counsel and from attorneys reasonably acceptable to the Company and its counsel,
stating that a public sale, transfer or assignment of such Securities may be
made without registration.
(b) Any legend endorsed on the Securities pursuant to
Section 3.7(b) hereof shall be removed if the Company receives an order of the
appropriate state authority authorizing such removal or if the holder of the
Securities provides the Company with an opinion of counsel, in form and
substance acceptable to the Company and its counsel and from attorneys
reasonably acceptable to the Company and its counsel, stating that such state
legend may be removed.
(c) Investor further covenants that Investor will not
transfer the Securities or any securities received in exchange therefor or on
conversion thereof, in violation of the Securities Act, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or the rules of the Commission
promulgated thereunder, including rule 144 under the Securities Act. Further,
Investor agrees that, prior to the closing of the corporation's Initial Public
Offering (defined in Section 7.13 hereof), Investor will not transfer any of
such securities in a public offering without the Company's prior consent, even
if he is otherwise permitted to transfer them pursuant to Rule 144(k); provided
that the foregoing shall not affect Investor's rights under Section 7.
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<PAGE> 13
4. California Commissioner of Corporations.
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTIONS 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
5. Conditions of Investor's Obligations at Initial Closing and
Subsequent Closings. The obligations of Investor under Section 1.1 of this
Agreement are subject to the fulfillment on or before each of the Closings of
each of the following conditions, the waiver of which shall not be effective
against Investor if it does not consent in writing thereto. Notwithstanding
anything in the foregoing to the contrary, in the event the Second Closing or
Third Closing occurs subsequent to the Company's Initial Public Offering, then
the obligations of Investor under Section 1.1 of this Agreement are subject to
the fulfillment on or before the Second Closing or Third Closing, as the case
may be, of the conditions set forth in Sections 5.1, 5.2, 5.3, 5.4, 5.5 and
5.10, the waiver of which shall not be effective against Investor who does not
consent in writing thereto.
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of each
of the Closings with the same effect as though such representations and
warranties had been made on and as of the date of each of the Closings.
5.2 Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before each of the
Closings; provided that the obligations of Investor shall not be conditional
upon the issuance by the Company of the Debentures to the persons or entities
listed on Schedule A who have not performed or tendered the performance of their
obligations under this Agreement required to be performed on or prior to each of
the Closings except as provided in Section 5.7 hereof.
5.3 Compliance Certificate. The President of the Company shall
deliver to Investor at each of the Closings a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating
that there has been no material adverse change in the business, affairs,
prospects, operations, properties, assets or condition of the Company since,
with respect to the Initial Closing the date of the Agreement, and with respect
to the Second Closing and Third Closing, since the date of the immediately
preceding closing.
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<PAGE> 14
5.4 Qualifications. The Commissioner of Corporations of the
State of California shall have issued a permit qualifying the offer and sale of
the Debentures and the underlying Common Stock to Investor pursuant to this
Agreement, or such offer and sale shall be exempt from such qualification under
the California Corporate Securities Law of 1968, as amended.
5.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at each of the
Closings and all documents incident thereto shall be reasonably satisfactory in
form and substance to Investor, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
5.6 Board of Directors. The Board of Directors at the Initial
Closing shall consist of eight duly elected members: Thomas H. Adams, Kim D.
Blickenstaff, Frederick J. Dotzler, Howard E. Greene, Stephen K. Reidy, Jesse I.
Treu, Gunars E. Valkirs and Timothy J. Wollaeger.
5.7 Minimum Investment. Investor shall have purchased the
Initial Closing Debentures at the Initial Closing.
5.8 Opinion of Company Counsel. Investor shall have received
from Pillsbury Madison & Sutro, counsel for the Company, an opinion, dated as of
the Initial Closing, in form and substance satisfactory to Investor, to the
effect that:
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and the Company has the requisite corporate power and authority to own its
properties and to conduct its business in the manner presently conducted.
(b) The Company is qualified to do business as a
foreign corporation in the State of California.
(c) The Company has the requisite corporate power and
authority to execute, deliver and perform the Agreement. The Agreement has been
duly and validly authorized by the Company, duly executed and delivered by an
authorized officer of the Company and constitutes a legal, valid and binding
obligation of the Company.
(d) The capitalization of the Company is as follows:
(i) Preferred Stock. There are authorized
8,328,847 shares of Preferred Stock, $.01 par value per share, 610,000
shares of which have been designated Series A Preferred Stock, 2,156,336
shares of which have been designated Series B Preferred Stock, 2,204,167
shares of which have been designated Series C
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Preferred Stock, 1,900,010 shares of which have been designated Series
D Preferred Stock and 1,458,334 shares of which have been designated
Series E Preferred Stock. 610,000 shares of Series A Preferred Stock,
2,156,336 shares of Series B Preferred Stock, 2,204,167 shares of
Series C Preferred Stock, 1,900,010 shares of Series D Preferred Stock
and 1,458,334 shares of Series E Preferred Stock have been duly issued
and delivered, are validly outstanding, fully paid and nonassessable,
and have been approved by all requisite corporate action and, based in
part on the representations and warranties of the investors in such
securities, were issued in compliance with all applicable federal and
California securities laws. The rights, privileges and preferences of
the Series A Preferred Stock, the Series B Preferred Stock, the Series
C Preferred Stock, the Series D Preferred Stock, the Series E Preferred
Stock are as stated in the Company's Restated Certificate. The shares
of Common Stock issuable upon the conversion of the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stock and the Series E Preferred Stock have been
duly and validly reserved for issuance and, when issued in accordance
with the Company's Restated Certificate, will be validly issued, fully
paid and nonassessable.
(ii) Common Stock. There are authorized
12,000,000 shares of Common Stock, of which 1,316,599 shares have been
duly issued and delivered and are validly outstanding, fully paid and
nonassessable.
(iii) Except for (A) the conversion privileges
of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock,
(B) the right of first offer of Investor provided for in Section 8.4 of
this Agreement, (C) the right of first offer provided for in Section
8.4 of the Series A Agreement, (D) the right of first offer provided in
Section 8.4 of the Series B Agreement, (E) the right of first offer
provided for in Section 8.4 of the Series C Agreement, (F) the right of
first offer provided for in Section 8.4 of the Series D Agreement, (G)
the right of first offer provided for in Section 8.4 of the Series E
Agreement and (H) options to purchase Common Stock of the Company
issued under the 1989 Stock Plan of the Company, there are no
preemptive rights or similar rights or, to the best of counsel's
knowledge, options, warrants, conversion privileges or other rights (or
agreements for any such rights) outstanding to purchase from or
otherwise obtain from the Company any shares of its capital stock.
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<PAGE> 16
(e) The execution, delivery, performance and com-
pliance with the terms of this Agreement do not violate any provision of any
applicable federal, state law, rule or regulation or any provision of the
Company's Restated Certificate or Bylaws and do not conflict with or constitute
a material default under the provision of any judgment, writ, decree, order or
material agreement known by counsel by which the Company is a party or by which
it is bound, which violation, conflict or default would be materially adverse to
the Company.
(f) All consents, approvals, orders or authoriza-
tions of, and all qualifications, registrations, designations, declarations or
filings with, any federal or state governmental authority on the part of the
Company (other than by federal or state securities laws which are covered in
paragraph (h) below) required to be made prior to the Initial Closing in
connection with the consummation of the transactions contemplated by this
Agreement have been obtained, and are effective, as of the Initial Closing and
such counsel is not aware of any proceedings, or threat thereof, which question
the validity thereof.
(g) Based in part upon the representations of
Investor, the offer and sale of the Debentures pursuant to the terms of this
Agreement are exempt from the registration requirements of section 5 of the
Securities Act of 1933, as amended, by virtue of section 4(2) thereof and from
the qualification requirements of the California Corporate Securities Law of
1968, as amended, by virtue of section 25102(f) thereof. No opinion need be
expressed as to compliance with applicable antifraud statutes, rules and
regulations of any applicable law governing the issuance of securities.
(h) Such counsel is not aware, after making in- quiry
of the Company's chief executive officer (but without any other investigation),
that there is any action, proceeding or investigation pending against the
Company or any of its officers, directors or employees, or that any of the
foregoing has received any threat thereof, which questions the validity of the
Agreement, or which might result, either individually or in the aggregate, in
any material adverse change in the assets, condition, affairs or prospects of
the Company.
The opinion of counsel for the Company under this
Section 5.8 shall be subject to such matters as are set forth in the Schedule of
Exceptions to this Agreement.
5.9 Lawful Issuance. At each of the Closings, the purchase of
the Debentures by Investor shall be legally permitted by all laws and
regulations to which Investor and the Company are subject.
6. Conditions of the Company's Obligations at the Closing. The
obligations of the Company to Investor under this Agreement
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are subject to the fulfillment on or before each of the Closings
of each of the following conditions by Investor:
6.1 Representations and Warranties. The representations and
warranties of Investor contained in Section 3 hereof shall be true on and as of
each of the Closings with the same effect as though such representations and
warranties had been made on and as of each of the Closings.
6.2 Payment of Purchase Price. Investor shall have delivered
the purchase price specified in Section 1.3 at each of the Closings and Investor
shall collectively have acquired and paid for the Debentures at the Initial
Closing.
6.3 California Qualification. The Commissioner of Corporations
of the State of California shall have issued a permit qualifying the offer and
sale to Investor of the Debentures and Common Stock issuable upon the conversion
thereof or such offer and sale shall be exempt from such qualification under the
California Corporate Securities Law of 1968, as amended.
7. Registration Rights. The Company covenants and agrees as follows:
7.1 Definitions. For purposes of this Section 7:
(a) The terms "register," "registered" and "regis-
tration" refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement or
document;
(b) The term "Registrable Securities" means (i) the
Common Stock issuable or issued upon conversion of the Debentures and (ii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such Debentures, or Common Stock, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which such person's
registration rights under this Section 7 are not assigned;
(c) The number of shares of "Registrable Securities
then outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are exercisable or
convertible into, Registrable Securities; and
(d) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 7.10 hereof.
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7.2 Company Registration.
(a) Commencing two years after the effective date of
the Company's first registered public offering of stock, if (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company for stockholders other than the
Holders) any of its stock or other securities under the Securities Act in
connection with the public offering of such securities solely for cash (other
than a registration relating solely to the sale of securities to participants in
a Company stock plan, or a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities), the
Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within 20 days after
mailing of such notice by the Company in accordance with Section 9.6, the
Company shall, subject to the provisions of Section 7.6, cause to be registered
under the Securities Act all of the Registrable Securities that each such Holder
has requested to be registered.
(b) The Company is obligated to effect only two such
registrations pursuant to this Section 7.2 on behalf of the Holders of the
Debentures.
7.3 Obligations of the Company. Whenever required under
this Section 7 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to 120 days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall
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<PAGE> 19
be reasonably requested by the Holders, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(e) In the event of any underwritten public offer-
ing, enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.
(g) Furnish, at the request of any Holder request-
ing registration of Registrable Securities pursuant to this Section 7, on the
date that such Registrable Securities are delivered to the underwriters for sale
in connection with a registration pursuant to this Section 7, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
7.4 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 7
that the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to effect the registration
of the Registrable Securities.
7.5 Expenses of Company Registration. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 7.2 for each
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<PAGE> 20
Holder (which right may be assigned as provided in Section 7.10), including
(without limitation) all registration, filing and qualification fees, printer's
and accounting fees relating or apportionable thereto, but excluding
underwriting discounts and commissions relating to Registrable Securities and
the fees and disbursements of counsel for the selling Holders.
7.6 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 7.2 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters reasonably believe compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be included therein
owned by each selling stockholder or in such other proportions as shall mutually
be agreed to by such selling stockholders) but in no event shall the amount of
securities of the selling Holders, together with all other securities to be
registered pursuant to the exercise of registration rights, included in the
offering be reduced below 30% of the total amount of securities included in such
offering.
7.7 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 7.
7.8 Indemnification. In the event any Registrable Securities
are included in a registration statement under this
Section 7:
(a) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, the officers and directors of each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
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<PAGE> 21
of the following statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse each such Holder, officer
or director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 7.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, officer, director, underwriter or
controlling person.
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities in such registration
statement or any of its directors or officers or any person who controls such
Holder, against any losses, claims, damages or liabilities (joint or several) to
which the Company or any such director, officer, controlling person, or
underwriter or controlling person, or other such Holder or director, officer or
controlling person may become subject, under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling person,
underwriter or controlling person, other Holder, officer, director, or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 7.8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
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<PAGE> 22
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this subsection 7.8(b) exceed the gross proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party
under this Section 7.8 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 7.8,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 7.8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 7.8.
(d) The obligations of the Company and Holders under
this Section 7.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 7, and otherwise.
7.9 Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Securities Act and any other rule or regulation of the SEC that may at any
time permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times after 90
days after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under section 12 of the Exchange Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the
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<PAGE> 23
offering of its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and
(d) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company), the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation of the
SEC which permits the selling of any such securities without registration or
pursuant to such form.
7.10 Assignment of Registration Rights. The rights to cause
the Company to register Registrable Securities pursuant to this Section 7 may be
assigned by a purchaser of Registrable Securities under this Agreement to a
transferee or assignee of an amount of such securities representing at least 50%
of the aggregate number of shares of Registrable Securities of such purchaser or
to a partner or retired partner of such purchaser; provided, that such
transferee or assignee is approved by the Board of Directors of the Company,
which approval shall not be unreasonably withheld, and that the Company is,
within a reasonable time after such approved transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by the approved
transferee or assignee is restricted under the Securities Act.
7.11 "Market Stand-Off" Agreement. Investor hereby agrees that
it shall not, to the extent requested by the Company and an underwriter of
Common Stock (or other securities) of the Company, sell or otherwise transfer or
dispose (other than to donees who agree to be similarly bound) of any
Registrable Securities during a reasonable and customary period of time as
agreed to by the Company and the underwriters (not to exceed 180 days) following
the effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that:
(a) such agreement shall be applicable only to the
first such registration statement of the Company which covers
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<PAGE> 24
shares (or securities) to be sold on its behalf to the public in an underwritten
offering; and
(b) all officers and directors of the Company and all
other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the Registrable
Securities of Investor (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such reasonable and
customary period.
7.12 Amendment of Registration Rights. Any provision of this
Section 7 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible), each future holder of
all such securities, and the Company.
7.13 Termination of Registration Rights. The Company's
obligations pursuant to this Section 7 shall terminate seven years from the date
of consummation of the Company's sale of its common stock in a bona fide, firm
commitment underwriting (the "Initial Public Offering") pursuant to a
registration statement on Form S-1 under the Securities Act which results in
gross offering proceeds to the Company of more than $7,500,000, the public
offering price of which was not less than $9.00 per share (adjusted to reflect
stock dividends, stock splits or recapitalizations).
8. Covenants.
8.1 Delivery of Financial Statements. The Company shall
deliver to (i) an Investor who acquires at least $1,000,000 of the Debentures
("Major Investor") and (ii) each assignee of any Major Investor who acquires 50%
of such Major Investor's Debentures purchased hereunder:
(a) as soon as practicable, but in any event within
90 days after the end of each fiscal year of the Company, an income statement
for such fiscal year, a balance sheet of the Company as of the end of such year,
and a statement of cash flows for such year, such year-end financial reports to
be in reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP"), and audited and certified by independent public
accountants of nationally recognized standing selected by the Company (the
Company will include, upon request, the Company's management letter for such
audited reports); and
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<PAGE> 25
(b) (i) within 30 days of the end of each month, an
unaudited statement of operations, statement of cash flows and balance
sheet for and as of the end of such month, in reasonable detail; such
monthly statements shall also contain the foregoing information on a
year-to-date basis and shall also compare actual performance to budget;
and
(ii) At least annually, a comprehensive
operating budget for the next fiscal year forecasting the Company's
revenues, expenses and cash position, prepared on a monthly basis,
including balance sheets and sources and applications of funds
statements for such months and, as soon as prepared, any other budgets
or revised budgets prepared by the Company; and
(iii) such other information relating to the
financial condition, business, research, prospects or corporate affairs
of the Company as Investor or any such assignee of Investor may from
time to time request, provided, however, that the Company shall not be
obligated to provide information which it deems in good faith to be
proprietary; and
(c) with respect to the financial statements called
for in subsection (b)(i) of this Section 8.1, an instrument executed by the
Treasurer or the President of the Company and certifying that such financials
were prepared in accordance with internally consistent accounting methods
consistently applied with prior practice for earlier periods and fairly present
the financial condition of the Company and its results of operation for the
period specified, subject to year-end audit adjustment. For purposes of this
Section 8, a Major Investor includes affiliated investing entities of Investor.
8.2 Inspection. The Company shall permit Investor, at
Investor's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by Investor; provided, however, that the Company shall not be obligated pursuant
to this Section 8.2 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential or proprietary
information.
8.3 Termination of Covenants. The covenants set forth in
Sections 8.1, 8.2 and 8.5 shall terminate and be of no further force or effect
when the sale of securities pursuant to a registration statement filed by the
Company under the Securities Act in connection with the firm commitment
underwritten offering of its securities to the general public is consummated or
when the Company first becomes subject to the periodic reporting requirements of
Section 13(a) or 15(d) of the Exchange Act, whichever event shall first occur;
provided that the Company shall
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<PAGE> 26
furnish for a period of five years from the termination of such covenants to
each Major Investor copies of its reports on Forms 10-K and 10-Q within 10 days
after filing with the SEC.
8.4 Right of First Offer. Subject to the terms and conditions
specified in this Section 8.4, the Company hereby grants to Investor a right of
first offer with respect to future sales by the Company of its Shares (as
hereinafter defined). Investor shall be entitled to apportion the right of first
offer hereby granted it among itself and its partners and affiliates in such
proportions as it deems appropriate.
Each time the Company proposes to offer any shares
of, or securities convertible into or exercisable for, any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified
mail ("Notice") to Investor stating (i) its bona fide intention to offer or
issue such Shares, (ii) the number of such Shares to be offered, and (iii) the
price, if any, for which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the
Notice, Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Common Stock issuable (or issued and
held) upon conversion of the Debentures, then held, by Investor bears to the
total number of shares of outstanding Common Stock and Common Stock issuable
upon conversion of the Preferred Stock and the Debentures then outstanding.
(c) If all such Shares referred to in the Notice are
not elected to be obtained as provided in subsection 8.4(b) hereof, the Company
may, during the 60 day period following the expiration of the period provided in
subsection 8.4(b) hereof, offer the remaining unsubscribed Shares to any person
or persons at a price not less than that, and upon terms no more favorable to
the offeree than those, specified in the Notice. If the Company does not enter
into an agreement for the sale of the Shares within such period, or if such
agreement is not consummated within 60 days of the execution thereof, the right
provided hereunder shall be deemed to be revived and such Shares shall not be
offered unless first reoffered to Investor in accordance herewith.
(d) The right of first offer granted in this Section
8.4 shall not be applicable (i) to the issuance or sale of shares of Common
Stock (or options therefor), to employees, directors, consultants or advisors of
the Company, provided each such person executes an agreement, in substantially
the form as approved by the Company's Board of Directors, (ii) shares offered in
the acquisition of another company, to strategic partners of
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<PAGE> 27
the Company or to companies with business relationships with the Company or in
connection with research and development partnerships sponsored by the Company,
(iii) to or after consummation of a bona fide, firmly underwritten public
offering of shares of the Company's Common Stock registered under the Securities
Act pursuant to a registration statement on Form S-1, which results in gross
proceeds to the Company of more than $7,500,000 at a price per share of at least
$9.00 (adjusted for any stock splits, stock dividends or other
recapitalizations), or (iv) in the event of an offering of Shares by the Company
to which the holders of a majority of the then outstanding Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock have waived their respective rights of first
offer provided for in Section 8.4 of the Series A Agreement, the Series B
Agreement, the Series C Agreement, the Series D Agreement and the Series E
Agreement, as the case may be.
9. Miscellaneous.
9.1 Survival of Warranties. The warranties, representations
and covenants of the Company contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closings and
shall in no way be affected by any investigation of the subject matter thereof
made by or on behalf of Investor.
9.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
9.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California except as it
regards choice of law.
9.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
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<PAGE> 28
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by 10 days' advance written notice to the other
parties.
9.7 Finder's Fee. Each party represents that it neither is nor
will be obligated for any finder's fee or commission in connection with this
transaction. Investor agrees to indemnify and hold harmless the Company from any
liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which Investor or any of its officers, partners, employees or
representatives is responsible.
The Company agrees to indemnify and hold harmless
Investor from any liability for any commission or compensation in the nature of
a finder's fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Company or any of its officers, employees
or representatives is responsible.
9.8 Expenses. Irrespective of whether the Initial Closing is
effected, the Company shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement or the Restated Certificate, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
9.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock issued or issuable upon conversion of the
Debentures purchased by Investor pursuant to this Agreement, except as specified
in Section 7.12 and Section 8.4(d), and any material amendment or waiver which
does not apply equally to all Major Investors shall not be effective unless it
has been consented to or approved in writing by a majority of the inequitably
affected Major Investors. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each holder of any securities purchased
under this Agreement at the time outstanding (including securities into which
such securities are convertible), each future holder of all such securities, and
the Company; provided, however, that no condition set forth in Section 5 hereof
may be waived with respect to any Investor who does not consent thereto.
9.10 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the balance of
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<PAGE> 29
this Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
BIOSITE DIAGNOSTICS INCORPORATED
By /s/ Kim D. Blickenstaff
------------------------------------
Title
------------------------------------
Address: 11030 Roselle Street, Suite D
San Diego, CA 92121
INVESTOR:
SANDOZ PHARMA LTD.
By /s/ D. Vasella /s/ C.S. Morris
------------------------------------
Title D. Vasella CEO
------------------------------------
C.S. Morris V.P.
------------------------------------
Address: Patents and Trademark Division
CH-4002
Basel, Switzerland
Attn: Thomas Hoxie
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<PAGE> 30
SCHEDULE A
BIOSITE DIAGNOSTICS INCORPORATED
CONVERTIBLE DEBENTURES
<TABLE>
<CAPTION>
Principal Amount
of Convertible
Investors Debentures
<S> <C>
First Closing:
Sandoz Pharma Ltd. $1,000,000
Second Closing:
Sandoz Pharma Ltd. [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE
COMMISSION]
Third Closing:
Sandoz Pharma Ltd. [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE
COMMISSION]
TOTAL $2,000,000
</TABLE>
A-1
<PAGE> 31
Exhibit A
THIS DEBENTURE AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THIS DEBENTURE AND THE SECURITIES ISSUABLE UPON THE
CONVERSION HEREOF MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE DEBENTURE OR THE SECURITIES UNDER THE SECURITIES ACT, OR AN OPINION OF
COUNSEL, WHICH OPINION IS SATISFACTORY IN FORM AND SUBSTANCE TO THE CORPORATION,
TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR
SUCH TRANSACTION COMPLIES WITH RULES PROMULGATED BY THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH
ACT.
BIOSITE DIAGNOSTICS INCORPORATED
CONVERTIBLE DEBENTURE
$1,000,000 San Diego, California
September 29, 1995
BIOSITE DIAGNOSTICS INCORPORATED, a Delaware corporation (the
"Company"), the principal office of which is located at 11030 Roselle Street,
San Diego, California, for value received hereby promises to pay to SANDOZ
PHARMA LTD., or its registered assigns, the sum of One Million Dollars
($1,000,000), or such lesser amount as shall then equal the outstanding
principal amount hereof on the terms and conditions set forth hereinafter. The
principal hereof and any unpaid accrued interest hereon, as set forth below,
shall be due and payable on the fifth anniversary of the date hereof (the
"Maturity Date") unless the Debenture shall be earlier redeemed or converted in
accordance with its terms.
The following is a statement of the rights of the Holder of this
Debenture and the conditions to which this Debenture is subject, and to which
the Holder hereof, by the acceptance of this Debenture, agrees:
1. Debenture Purchase Agreement. This Debenture is issued pursuant to
the terms and conditions of the Debenture Purchase Agreement dated as of
September 22, 1995 between the Company and the investors listed in Schedule A
thereto (the "Agreement"). The Holder of this Debenture is subject to certain
restrictions set forth in the Agreement and shall be entitled to certain rights
and privileges set forth in the Agreement. This Debenture is the Debenture
referred to in the Agreement.
<PAGE> 32
2. Definitions. As used in this Debenture, the following terms, unless
the context otherwise requires, have the following meanings:
2.1 "Company" includes any corporation which shall succeed to
or assume the obligations of the Company under this Debenture,
2.2 "Holder, n when the context refers to a holder of this
Debenture shall mean any person who shall at the time be the registered
holder of this Debenture,
2.3 "Issue Date," shall mean the date hereof. Terms not
otherwise defined herein shall have the meanings given to them in the Agreement.
3. Interest. Commencing on the Issue Date until all outstanding
principal and interest on this Debenture shall have been paid in full, redeemed
or converted in accordance with its terms, interest shall accrue at a rate equal
to the lesser of (i) 8% per annum or (ii) the highest rate permitted by law,
compounded annually, on the outstanding principal amount of this Debenture.
4. Prepayment. Upon 30 days' prior written notice to the Holder, the
Company may at any time prepay in whole or in part the principal amount, plus
accrued interest to date of payment, of this Debenture. Payments shall be
credited first to interest due, then to principal.
5. Payment. Subject to Sections 6 and 7 hereof, the entire amount of
principal and interest due hereunder shall be due and payable on the Maturity
Date. Payments of both principal and interest shall be made in readily available
U.S. funds and shall be made by first class mail, postage prepaid, to the
registered address of the Holder.
6. Conversion.
6.1 Automatic Conversion. The entire outstanding principal
amount of this Debenture and all accrued interest thereon to the date of
conversion shall be automatically converted (i) at the sole option of the
Company, into shares of Common Stock of the Company, at the public offering
price for such shares of Common Stock, upon the consummation of a firmly
underwritten public offering (the "Public Offering") pursuant to a registration
statement filed by the Company under the Securities Act of 1933, as amended (the
"Act"), with aggregate gross proceeds in excess of $7,500,000 and at a price of
not less than $9.00 per share of Common Stock (as adjusted to reflect subsequent
stock splits, stock dividends, combinations or similar events), or (ii) in the
event the Public Offering is not consummated on or before
-2-
<PAGE> 33
December 31, 1996, at the sole option of the Company, into shares of a series of
the Company's Preferred Stock, at the initial issue price for such series, upon
the closing of the sale by the Company of shares of a series of Preferred Stock
to at least one institutional investor, venture capital fund or other
professional investor in a bona fide equity financing with no firm commercial,
marketing or research and development rights granted in connection with such
financing (the "Equity Financing").
6.2 Conversion Procedure.
a. Notice of Conversion Pursuant to Section 6.1. If
this Debenture is automatically converted, written notice shall be delivered to
the Holder of this Debenture at the address last shown on the records of the
Company for the Holder or given by the Holder to the Company for the purpose of
notice, or, if no such address as appears or is given, at the place where the
principal office of the Company is located, notifying the Holder of the
conversion to be effected, specifying that the conversion is pursuant to clause
(i) or clause (ii), as the case may be, of Section 6 and the applicable
conversion price, the principal amount of the Debenture to be converted, the
amount of accrued interest to be converted, the date on which such conversion
will occur and calling upon such Holder to surrender to the Company, in the
manner and at the place designated, the Debenture.
b. Mechanics and Effect of Conversion. No fractional
shares of Common Stock or Preferred Stock, as the case may be, shall be issued
upon conversion of this Debenture. In lieu of the Company issuing any fractional
shares to the Holder upon the conversion of this Debenture, the Company shall
pay to the Holder the amount of outstanding principal and any accrued interest
that is not so converted, such payment to be in the form as provided below. In
the event of any conversion of the Debenture pursuant to clause (i) of Section
6.1 above, such conversion shall be deemed to have been made immediately prior
to the consummation of such Public Offering and on and after such date the
Holder of this Debenture entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder of
such shares. In the event of any conversion of this Debenture pursuant to clause
(ii) of Section 6.1 above, such conversion shall be deemed to have been made
immediately prior to the closing of the Equity Financing and on and after such
date the Holder of this Debenture entitled to receive the shares of such series
of Preferred Stock issuable upon such conversion shall be treated for all
purposes as the record Holder of such shares and a purchaser of such shares
under the stock purchase agreement between the Company and the investors in such
series of Preferred Stock and shall be bound by the terms of such stock purchase
agreement. Upon conversion of this Debenture, the Company shall be forever
released from all its obligations and liabilities under this Debenture, except
that the Company shall be obligated to pay the Holder, within 10 days after the
date of such conversion, any interest accrued and unpaid or
-3-
<PAGE> 34
unconverted to and including the date of such conversion, and no more.
c. Delivery of Stock Certificates. As promptly as practicable
after the conversion of this Debenture, the Company st its expense will issue
and deliver to the Holder of this Debenture a certificate or certificates for
the number of full shares of Common Stock or Preferred Stock, as the case may
be, issuable upon such conversion (bearing such legends as are required by the
Agreement and applicable state and federal securities laws in the opinion of
counsel to the Company), together with any other securities and property to
which the Holder is entitled upon such conversion under the terms of this
Debenture, including a check payable to the Holder for any cash amounts payable
for any fractional shares as described above.
7. Redemption.
7.1 Merger or Liquidation of the Company. In the event of any
consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization in which the
Company shall not be the continuing or surviving entity of such consolidation,
merger or reorganization or any transaction or series of related transactions by
the Company in which in excess of 50% of the Company's voting power is
transferred, or a sale of all or substantially all of the assets of the Company,
or any liquidation, dissolution or winding up of the Company, the Company shall,
at the option of the Holder, redeem the Debenture held by such Holder by paying
in cash therefor to such Holder a sum equal to the outstanding principal amount
(excluding any accrued interest added to such principal amount) of such
Debenture, together with any accrued and unpaid interest on such Debenture (the
"Redemption Price").
7.2 Notice of Merger. The Company shall give each Holder of
record of this Debenture written notice of any impending transaction described
in Section 7.1 above not later than 20 days prior to the closing of such
transaction. The notice shall describe the material terms and conditions of the
impending transaction and the provisions of this Section 7, and the Company
shall thereafter give such Holders prompt notice of any material changes. The
transaction shall in no event take place earlier than 20 days after the Company
has given the notice provided for herein or earlier than 10 days after the
Company has given notice of any material changes provided for herein; provided,
however, that such periods may be shortened upon the written consent of the
Holders of at least one-half of the then outstanding principal amount of the
Debenture issued under the Agreement.
7.3 Redemption Procedures. Each Holder electing to redeem such
Holder's Debenture pursuant to this Section 7 shall surrender such Debenture to
the Company, at its principal office, and on the consummation of the transaction
described in Section
-4-
<PAGE> 35
7.1 the Redemption Price of such Debentures shall be payable in readily
available funds to the order of the Holder of record of such Debenture and each
surrendered Debenture shall be canceled.
8. Acceleration. If the Company (i) becomes insolvent, commences an act
of bankruptcy, commences or becomes subject to any proceeding under the Federal
Bankruptcy Act or any other insolvency or debtor's relief law, or (ii) initiates
any liquidation, dissolution or winding up proceedings or (iii) shall be in
default, for a period of st least 30 days, with respect to one or more
obligations of the Company, which obligations provide for aggregate payments in
excess of $1,000,000, then the entire indebtedness evidenced hereby shall, at
the option of the Holders of at least one-half of the outstanding principal
amount of the Debenture issued under the Agreement, become due and payable
immediately.
9. Miscellaneous.
9.1 Assignment. Subject to the restrictions on transfer set
forth in the Agreement, the rights and obligations of the Company and the Holder
of this Debenture shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
9.2 Waiver and Amendment. Any provision of this Debenture may
be amended, waived or modified upon the written consent of the Company and
Holders of at least one-half the outstanding face amount of the Debenture issued
under the Agreement.
9.3 Transfer of this Debenture or Securities Issuable on
Conversion Hereof. This Debenture and the securities issued on conversion hereof
are subject to restrictions on transfer set forth in the Agreement. Transfer of
this Debenture may be effected only by its surrender to the Company and either
its reissuance, or the issuance of a new Debenture, by the Company to the
transferee.
9.4 Treatment of Debenture. To the extent permitted by
generally accepted accounting principles, the Company will treat, account and
report the Debenture as debt and not equity for accounting purposes and with
respect to any returns filed with federal, state or local tax authorities.
9.5 Notices. Unless otherwise provided, any notice required or
permitted under this Debenture shall be given ln writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail, or
with an air courier, postage prepaid and addressed to the party to be notified
at the address indicated for such party on the signature page hereof, or at such
other address as such party may designate by 10 days' advance written notice to
the other parties.
-5-
<PAGE> 36
9.6 No Stockholder Rights. Nothing contained in this Debenture
shall be construed as conferring upon the Holder or any other person the right
to vote or to consent or to receive notice as a stockholder in respect of
meetings of stockholders for the election of directors of the Company or any
other matters or any rights whatsoever as a stockholder of the Company.
9.7 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of California, irrespective
of its choice of law principles.
9.8 Headings. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Debenture.
9.9 Register. The Company shall cause to be kept st its
principal business office as maintained from time to time at San Diego (or at
the location within the United States of America at which Company shall from
time to time maintain a business office) a register. The register so maintained
by Company is referred to herein as the "Register" in which, pursuant to such
reasonable regulations as Company may from time to time prescribe, Company shall
provide for the registration of Debentures and for the transfer of registered
Debentures. Upon surrender for registration of transfer of the Debenture at the
principal office of the Company, the Company shall execute and deliver, in the
name of the designated transferee or transferees, one or more registered
Debentures of any authorized denomination and of like aggregate principal
amount. Authorized denominations shall comprise U.S.$1,000 or any multiple
thereof. At the option of the Holder, registered Debentures may be exchanged for
other registered Debentures of any authorized denominations and of a like
aggregate principal amount, upon surrender of the Debentures to be exchanged at
the principal business office of the Company. All Debentures issued upon any
registration of transfer or exchange of Debentures shall be valid obligations of
the Company, evidencing the same debt, and entitled to the same benefits, as the
Debentures surrendered upon such registration of transfer or exchange. Every
Debenture presented or surrendered for registration of transfer or for exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer in
form satisfactory to the Company duly executed by the Holder thereof or his
attorney duly authorized in writing. No service charge shall be made for any
registration of transfer or exchange of the Debentures, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of the Debenture. The Company shall not be required (i) to register the
transfer of or exchange Debentures for a period of 15 days immediately preceding
the date notice is given identifying the Debentures called for redemption, or
(ii) to register the transfer of or exchange of any registered Debenture, or
portion
-6-
<PAGE> 37
thereof, called for redemption. The registered Holder of a Debenture shall be
treated as its owner for all purposes.
IN WITNESS WHEREOF, Biosite Diagnostics Incorporated, has caused this
Debenture to be issued this _____ day of September, 1995.
BIOSITE DIAGNOSTICS INCORPORATED
By /s/ Kim D. Blickenstaff
----------------------------------
Name of Holder: SANDOZ PHARMA LTD.
------------------------
Address: Patents and Trademark Division
CH-4002
Basel, Switzerland
Attn: Thomas Hoxie
-7-
<PAGE> 38
NOTICE OF CONVERSION
(To Be Signed Only Upon Conversion of Debenture)
TO ___________________________:
The undersigned, the holder of the foregoing Debenture, hereby
surrenders such Debenture for conversion into shares of ________ [Preferred
Stock] or [Common Stock] of Biosite Diagnostics Incorporated to the extent of
$__________ unpaid principal amount of, and $__________ of accrued but unpaid
interest on, such Debenture, and requests that the certificates for such shares
be issued in the name of, and delivered to,___________________________________ ,
whose address is ___________________________________________ .
Dated:_______________
_______________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Debenture)
________________________________
(Address)
-8-
<PAGE> 39
Exhibit A
THIS DEBENTURE AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THIS DEBENTURE AND THE SECURITIES ISSUABLE UPON THE
CONVERSION HEREOF MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE DEBENTURE OR THE SECURITIES UNDER THE SECURITIES ACT, OR AN OPINION OF
COUNSEL, WHICH OPINION IS SATISFACTORY IN FORM AND SUBSTANCE TO THE CORPORATION,
TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR
SUCH TRANSACTION COMPLIES WITH RULES PROMULGATED BY THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH
ACT.
BIOSITE DIAGNOSTICS INCORPORATED
CONVERTIBLE DEBENTURE
[CONFIDENTIAL MATERIAL REDACTED AND San Diego, California
FILED SEPARATELY WITH THE COMMISSION] _________, 199_
BIOSITE DIAGNOSTICS INCORPORATED, a Delaware corporation (the
"Company"), the principal office of which is located at 11030 Roselle Street,
San Diego, California, for value received hereby promises to pay to SANDOZ
PHARMA LTD., or its registered assigns, the sum of [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION], or such lesser amount as
shall then equal the outstanding principal amount hereof on the terms and
conditions set forth hereinafter. The principal hereof and any unpaid accrued
interest hereon, as set forth below, shall be due and payable on the fifth
anniversary of the date hereof (the "Maturity Date") unless the Debenture shall
be earlier redeemed or converted in accordance with its terms.
The following is a statement of the rights of the Holder of this
Debenture and the conditions to which this Debenture is subject, and to which
the Holder hereof, by the acceptance of this Debenture, agrees:
1. Debenture Purchase Agreement. This Debenture is issued pursuant to
the terms and conditions of the Debenture Purchase Agreement dated as of
September 22, 1995 between the Company and the investors listed in Schedule A
thereto (the "Agreement"). The Holder of this Debenture is subject to certain
restrictions set forth in the Agreement and shall be entitled to certain rights
and privileges set forth in the Agreement. This Debenture is the Debenture
referred to in the Agreement.
<PAGE> 40
2. Definitions. As used in this Debenture, the following terms, unless
the context otherwise requires, have the following meanings:
2.1 "Company" includes any corporation which shall succeed to
or assume the obligations of the Company under this Debenture,
2.2 "Holder, n when the context refers to a holder of this
Debenture shall mean any person who shall at the time be the registered
holder of this Debenture,
2.3 "Issue Date," shall mean the date hereof.
Terms not otherwise defined herein shall have the meanings given to them in the
Agreement.
3. Interest. Commencing on the Issue Date until all outstanding
principal and interest on this Debenture shall have been paid in full, redeemed
or converted in accordance with its terms, interest shall accrue at a rate equal
to the lesser of (i) 8% per annum or (ii) the highest rate permitted by law,
compounded annually, on the outstanding principal amount of this Debenture.
4. Prepayment. Upon 30 days' prior written notice to the Holder, the
Company may at any time prepay in whole or in part the principal amount, plus
accrued interest to date of payment, of this Debenture. Payments shall be
credited first to interest due, then to principal.
5. Payment. Subject to Sections 6 and 7 hereof, the entire amount of
principal and interest due hereunder shall be due and payable on the Maturity
Date. Payments of both principal and interest shall be made in readily available
U.S. funds and shall be made by first class mail, postage prepaid, to the
registered address of the Holder.
6. Conversion.
6.1 Automatic Conversion. The entire outstanding principal
amount of this Debenture and all accrued interest thereon to the date of
conversion shall be automatically converted (i) at the sole option of the
Company, into shares of Common Stock of the Company, at the public offering
price for such shares of Common Stock, or (ii) in the event the shares of Common
Stock of the Company are not publicly traded on or before December 31, 1996, at
the sole option of the Company, into shares of a series of the Company's
Preferred Stock, at the initial issue price for such series, upon the closing of
the sale by the Company of shares of a series of Preferred Stock to at least one
institutional investor, venture capital fund or other professional investor in a
bona fide equity financing with no firm commercial, marketing or
-2-
<PAGE> 41
research and development rights granted in connection with such financing (the
"Equity Financing").
6.2 Conversion Procedure.
a. Notice of Conversion Pursuant to Section 6.1. If
this Debenture is automatically converted, written notice shall be delivered to
the Holder of this Debenture at the address last shown on the records of the
Company for the Holder or given by the Holder to the Company for the purpose of
notice, or, if no such address as appears or is given, at the place where the
principal office of the Company is located, notifying the Holder of the
conversion to be effected, specifying that the conversion is pursuant to clause
(i) or clause (ii), as the case may be, of Section 6 and the applicable
conversion price, the principal amount of the Debenture to be converted, the
amount of accrued interest to be converted, the date on which such conversion
will occur and calling upon such Holder to surrender to the Company, in the
manner and at the place designated, the Debenture.
b. Mechanics and Effect of Conversion. No fractional
shares of Common Stock or Preferred Stock, as the case may be, shall be issued
upon conversion of this Debenture. In lieu of the Company issuing any fractional
shares to the Holder upon the conversion of this Debenture, the Company shall
pay to the Holder the amount of outstanding principal and any accrued interest
that is not so converted, such payment to be in the form as provided below. In
the event of any conversion of this Debenture pursuant to clause (ii) of Section
6.1 above, such conversion shall be deemed to have been made immediately prior
to the closing of the Equity Financing and on and after such date the Holder of
this Debenture entitled to receive the shares of such series of Preferred Stock
issuable upon such conversion shall be treated for all purposes as the record
Holder of such shares and a purchaser of such shares under the stock purchase
agreement between the Company and the investors in such series of Preferred
Stock and shall be bound by the terms of such stock purchase agreement. Upon
conversion of this Debenture, the Company shall be forever released from all its
obligations and liabilities under this Debenture, except that the Company shall
be obligated to pay the Holder, within 10 days after the date of such
conversion, any interest accrued and unpaid or unconverted to and including the
date of such conversion, and no more.
c. Delivery of Stock Certificates. As promptly as practicable
after the conversion of this Debenture, the Company st its expense will issue
and deliver to the Holder of this Debenture a certificate or certificates for
the number of full shares of Common Stock or Preferred Stock, as the case may
be, issuable upon such conversion (bearing such legends as are required by the
Agreement and applicable state and federal securities laws in the opinion of
counsel to the Company), together with any other securities and property to
which the Holder is entitled upon such conversion under the terms of this
Debenture, including a check
-3-
<PAGE> 42
payable to the Holder for any cash amounts payable for any fractional shares as
described above.
7. Redemption.
7.1 Merger or Liquidation of the Company. In the event of any
consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization in which the
Company shall not be the continuing or surviving entity of such consolidation,
merger or reorganization or any transaction or series of related transactions by
the Company in which in excess of 50% of the Company's voting power is
transferred, or a sale of all or substantially all of the assets of the Company,
or any liquidation, dissolution or winding up of the Company, the Company shall,
at the option of the Holder, redeem the Debenture held by such Holder by paying
in cash therefor to such Holder a sum equal to the outstanding principal amount
(excluding any accrued interest added to such principal amount) of such
Debenture, together with any accrued and unpaid interest on such Debenture (the
"Redemption Price").
7.2 Notice of Merger. The Company shall give each Holder of
record of this Debenture written notice of any impending transaction described
in Section 7.1 above not later than 20 days prior to the closing of such
transaction. The notice shall describe the material terms and conditions of the
impending transaction and the provisions of this Section 7, and the Company
shall thereafter give such Holders prompt notice of any material changes. The
transaction shall in no event take place earlier than 20 days after the Company
has given the notice provided for herein or earlier than 10 days after the
Company has given notice of any material changes provided for herein; provided,
however, that such periods may be shortened upon the written consent of the
Holders of at least one-half of the then outstanding principal amount of the
Debenture issued under the Agreement.
7.3 Redemption Procedures. Each Holder electing to redeem such
Holder's Debenture pursuant to this Section 7 shall surrender such Debenture to
the Company, at its principal office, and on the consummation of the transaction
described in Section 7.1 the Redemption Price of such Debentures shall be
payable in readily available funds to the order of the Holder of record of such
Debenture and each surrendered Debenture shall be canceled.
8. Acceleration. If the Company (i) becomes insolvent, commences an act
of bankruptcy, commences or becomes subject to any proceeding under the Federal
Bankruptcy Act or any other insolvency or debtor's relief law, or (ii) initiates
any liquidation, dissolution or winding up proceedings or (iii) shall be in
default, for a period of st least 30 days, with respect to one or more
obligations of the Company, which obligations provide for aggregate payments in
excess of $1,000,000, then the entire indebtedness evidenced hereby shall, at
the option of the Holders
-4-
<PAGE> 43
of at least one-half of the outstanding principal amount of the Debenture issued
under the Agreement, become due and payable immediately.
9. Miscellaneous.
9.1 Assignment. Subject to the restrictions on transfer set
forth in the Agreement, the rights and obligations of the Company and the Holder
of this Debenture shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
9.2 Waiver and Amendment. Any provision of this Debenture may
be amended, waived or modified upon the written consent of the Company and
Holders of at least one-half the outstanding face amount of the Debenture issued
under the Agreement.
9.3 Transfer of this Debenture or Securities Issuable on
Conversion Hereof. This Debenture and the securities issued on conversion hereof
are subject to restrictions on transfer set forth in the Agreement. Transfer of
this Debenture may be effected only by its surrender to the Company and either
its reissuance, or the issuance of a new Debenture, by the Company to the
transferee.
9.4 Treatment of Debenture. To the extent permitted by
generally accepted accounting principles, the Company will treat, account and
report the Debenture as debt and not equity for accounting purposes and with
respect to any returns filed with federal, state or local tax authorities.
9.5 Notices. Unless otherwise provided, any notice required or
permitted under this Debenture shall be given ln writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail, or
with an air courier, postage prepaid and addressed to the party to be notified
at the address indicated for such party on the signature page hereof, or at such
other address as such party may designate by 10 days' advance written notice to
the other parties.
9.6 No Stockholder Rights. Nothing contained in this Debenture
shall be construed as conferring upon the Holder or any other person the right
to vote or to consent or to receive notice as a stockholder in respect of
meetings of stockholders for the election of directors of the Company or any
other matters or any rights whatsoever as a stockholder of the Company.
9.7 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of California, irrespective
of its choice of law principles.
-5-
<PAGE> 44
9.8 Headings. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Debenture.
9.9 Register. The Company shall cause to be kept st its
principal business office as maintained from time to time at San Diego (or at
the location within the United States of America at which Company shall from
time to time maintain a business office) a register. The register so maintained
by Company is referred to herein as the "Register" in which, pursuant to such
reasonable regulations as Company may from time to time prescribe, Company shall
provide for the registration of Debentures and for the transfer of registered
Debentures. Upon surrender for registration of transfer of the Debenture at the
principal office of the Company, the Company shall execute and deliver, in the
name of the designated transferee or transferees, one or more registered
Debentures of any authorized denomination and of like aggregate principal
amount. Authorized denominations shall comprise U.S.$1,000 or any multiple
thereof. At the option of the Holder, registered Debentures may be exchanged for
other registered Debentures of any authorized denominations and of a like
aggregate principal amount, upon surrender of the Debentures to be exchanged at
the principal business office of the Company. All Debentures issued upon any
registration of transfer or exchange of Debentures shall be valid obligations of
the Company, evidencing the same debt, and entitled to the same benefits, as the
Debentures surrendered upon such registration of transfer or exchange. Every
Debenture presented or surrendered for registration of transfer or for exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer in
form satisfactory to the Company duly executed by the Holder thereof or his
attorney duly authorized in writing. No service charge shall be made for any
registration of transfer or exchange of the Debentures, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of the Debenture. The Company shall not be required (i) to register the
transfer of or exchange Debentures for a period of 15 days immediately preceding
the date notice is given identifying the Debentures called for redemption, or
(ii) to register the transfer of or exchange of any registered Debenture, or
portion
-6-
<PAGE> 45
thereof, called for redemption. The registered Holder of a Debenture shall be
treated as its owner for all purposes.
IN WITNESS WHEREOF, Biosite Diagnostics Incorporated, has caused this
Debenture to be issued this day of , 19 .
----- -------- --
BIOSITE DIAGNOSTICS INCORPORATED
By
--------------------------------
Name of Holder: SANDOZ PHARMA LTD.
------------------------------------------
Address: Patents and Trademark Division
CH-4002
Basel, Switzerland
Attn: Thomas Hoxie
-7-
<PAGE> 46
NOTICE OF CONVERSION
(To Be Signed Only Upon Conversion of Debenture)
TO ___________________________:
The undersigned, the holder of the foregoing Debenture, hereby
surrenders such Debenture for conversion into shares of ________ [Preferred
Stock] or [Common Stock] of Biosite Diagnostics Incorporated to the extent of
$__________ unpaid principal amount of, and $__________ of accrued but unpaid
interest on, such Debenture, and requests that the certificates for such shares
be issued in the name of, and delivered to, __________________________________,
whose address is ___________________________________________.
Dated:_______________
__________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Debenture)
__________________________________
(Address)
-8-
<PAGE> 1
EXHIBIT 10.21
INDUSTRIAL REAL ESTATE LEASE
(Multi-Tenant Facility)
ARTICLE ONE: BASIC TERM
This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic Terms and are
to be read in conjunction with the Basic Terms.
Section 1.01. DATE OF LEASE: July 26, 1996
---------------------------------
Section 1.02. LANDLORD (INCLUDE LEGAL ENTITY): TCEP II Properties
Limited Partnership, a Texas limited partnership ----------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
ADDRESS OF LANDLORD: c/o Trammell Crow Company, 3570 Camino del
Rio North, Suite 100, San Diego, California 92108
Section 1.03. TENANT (INCLUDE LEGAL ENTITY): Biosite Diagnostics, Inc.,
a California Corporation
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
ADDRESS OF TENANT: 11030 Roselle Street, San Diego, California 92121
Section 1.04. PROPERTY: The Property is part of Landlord's multi-tenant
real property development known as Sorrento West Industrial Park and described
or depicted in Exhibit "A" (the "Project"). The Project includes the land, the
buildings and all other improvements located on the land, and the common areas
described in Paragraph 4.05(a). The Property is (include street address,
approximate square footage and description):
Suites A-E at that certain building located at 11080 Roselle Street, San Diego,
California, containing approximately 17,471
square feet.
Section 1.05. LEASE TERM: Two (2) years 0 months beginning on October
1, 1996 or such other date as is specified in this Lease, and ending on
September 30, 1998.
1988 Southern California Chapter Initials ________
of the Society of Industrial
and Office Realtors, Inc.
(Multi-Tenant Gross Form)
-1-
<PAGE> 2
Section 1.06. PERMITTED USES: (See Article Five) General administrative
offices, warehousing and ancillary functions.
Section 1.07. TENANT'S GUARANTOR: (If none, so state) None.
Section 1.08. BLANK
Section 1.09. BASE YEAR: The calendar year of 1997
Section 1.10. INITIAL SECURITY DEPOSIT: (See Section 3.03) $11,356.15
Section 1.11. VEHICLE PARKING SPACES ALLOCATED TO TENANT: (See Section
4.05) Thirty-two (32)
Section 1.12. RENT AND OTHER CHARGES PAYABLE BY TENANT:
(a) BASE RENT: Eleven Thousand Three Hundred Fifty-six and
15/100******************* Dollars ($11,356.15) per month for the first Twelve
(12) months, as provided in Section 3.01. and shall be increased on the first
day of the thirteenth (13th) month(s) after the Commencement Date, to Eleven
Thousand Seven Hundred Five and 57/100 ($11,705.57) per month for the next
twelve (12) months.
(b) OTHER PERIODIC PAYMENTS (i) Real Property Taxes above the "Base
Real Property Taxes" (See Section 4.02); (ii) Utilities (See Section 4.03);
(iii) increased Insurance Premiums above "Base Premiums" (See Section 4.04);
(iv) Tenant's Initial Pro Rata Share of Common Area Expenses 10.75 % (See
Section 4.05); (v) Impounds for Tenant's Share of Insurance Premiums and
Property Taxes (See Section 4.08); (vi) Maintenance Repairs and Alterations (See
Article Six).
Section 1.13. COSTS AND CHARGES PAYABLE BY LANDLORD: (a) Base Real
Property Taxes (See Section 4.02); (b) Base Insurance Premiums (See Section
4.04(c)); (c) Common Area costs during the Base Year (Section 4.05); (d)
Maintenance and Repair (See Article Six).
Section 1.14. LANDLORD'S SHARE OF PROFIT ON ASSIGNMENT OR SUBLEASE:
(See Section 9.05) One Hundred percent ( 100 %) of the Profit (the "Landlord's
Share").
Section 1.15. RIDERS: The following Riders are attached to and made a
part of this Lease: (If none, so state)_______________________________________
______________________________________________________________________________
______________________________________________________________________________
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ARTICLE TWO. LEASE TERM
Section 2.01. LEASE OF PROPERTY FOR LEASE TERM. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.05 above and shall
begin and end the date specified in Section 1.05 above, unless the beginning or
end of the Lease Term is changed under any provisions of this Lease. The
"Commencement Date" shall be the date specified in Section 1.05 above for the
beginning of the Lease Term unless advanced or delayed under any provision of
this Lease.
Section 2.02. DELAY IN COMMENCEMENT. Landlord shall not be liable to
Tenant if Landlord does not deliver possession of the Property to Tenant on the
Commencement Date. Landlord's non-delivery of the Property to Tenant on that
date shall not affect this Lease or the obligations of Tenant under this Lease
except that the Commencement Date shall be delayed unless Landlord delivers
possession of the Property to Tenant and the Lease Term shall be extended for a
period equal to the delay in delivery of possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a
month. If Landlord does not deliver possession of the Property to Tenant within
sixty (60) days after the Commencement Date, Tenant may elect to cancel this
Lease by giving written notice to Landlord within ten (10) days after the sixty
(60) day period ends. If Tenant gives such notice, the Lease shall be cancelled
and neither Landlord nor Tenant shall have any further obligations to the other.
If Tenant does not give such notice, Tenant's right to cancel the Lease shall
expire and the Lease Term shall commence upon the delivery of possession of the
Property to Tenant. If delivery of possession of the Property to Tenant is
delayed, Landlord and Tenant shall, upon such delivery, execute an amendment to
this Lease setting forth the actual Commencement Date and expiration date of the
Lease. Failure to execute such amendment shall not affect the actual
Commencement Date and expiration date of the Lease.
Section 2.03. EARLY OCCUPANCY. If Tenant occupies the Property prior to
the Commencement Date, Tenant's occupancy of the Property shall be subject to
all of the provisions of this Lease. Early occupancy of the Property shall not
advance the expiration date of this Lease. Tenant shall pay Base Rent and all
other charges specified in this Lease for the early occupancy period.
Section 2.04. HOLDING OVER. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and indemnify
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Landlord against all damages which Landlord incurs from Tenant's delay in
vacating the Property. If Tenant does not vacate the Property upon the
expiration or earlier termination of the Lease and Landlord thereafter accepts
rent from Tenant, Tenant's occupancy of the Property shall be a "month-to-month"
tenancy, subject to all of the terms of this Lease applicable to a
month-to-month tenancy, except that the Base Rent then in effect shall be
increased by twenty-five percent (25%).
ARTICLE THREE: BASE RENT
Section 3.01. TIME AND MANNER OF PAYMENT. Upon execution of this Lease,
Tenant shall pay Landlord the Base Rent in the amount stated in Paragraph
1.12(a) above for the first month of the Lease Term. On the first day of the
second month of the Lease Term and each month thereafter, Tenant shall pay
Landlord the Base Rent, in advance, without offset, deduction or prior demand.
The Base Rent shall the Payable at Landlord's address or at such other place as
Landlord may designate in writing.
Section 3.02
Section 3.03. SECURITY DEPOSIT:
(a) Upon the execution of this Lease, Tenant shall deposit with
Landlord a cash Security Deposit in the amount set forth in Section 1.10 above.
Landlord may apply all or part of the Security Deposit to any unpaid rent or
other charges dues from Tenant or to cure any other defaults of Tenant. If
Landlord uses any part of the Security Deposit, Tenant shall restore the
Security Deposit to its full amount within ten (10) days after Landlord's
written request. Tenant's failure to do so shall be a material default under
this Lease. No interest shall be paid on the Security Deposit. Landlord shall
not be required to keep the Security Deposit separate from its other accounts
and no trust relationship is created with respect to the Security Deposit.
Section 3.04. TERMINATION: ADVANCE PAYMENTS. Upon termination of this
Lease under Article Seven (Damages or Destruction), Article Eight (Condemnation)
or any other termination not resulting from Tenant's default, and after Tenant
has vacated the Property in the manner required by this Lease, Landlord shall
refund or credit to Tenant (or Tenant's successor) the unused portion of the
Security Deposit, any advance rent or other advance payments made by Tenant to
Landlord, and any amounts paid for real property taxes and other reserves which
apply to any time periods after termination of the Lease.
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ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01. ADDITIONAL RENT. All charges payable by Tenant other than
Base Rent are called "Additional Rent." Unless this Lease provides otherwise,
Tenant shall pay all Additional Rent then due with the next monthly installment
of Base Rent. The term Rent shall mean Base Rent and Additional Rent.
Section 4.02. PROPERTY TAXES.
(a) REAL PROPERTY TAXES. Landlord shall pay the "Base Real Property
Taxes" on the Property during the Lease Term. Base Real Property Taxes are real
property taxes applicable to the Property as shown on the tax bill for the Base
Year. Tenant shall pay Landlord the amount, if any, by which the real property
taxes during the Lease Term exceed the Base Real Property Taxes. Subject to
Paragraph 4.02(c), Tenant shall make such payments within fifteen (15) days
after receipt of Landlord's statement showing the amount and computation of such
increase. Landlord shall reimburse Tenant for any real property taxes paid by
Tenant covering any period of time prior to or after the Lease Term.
(b) DEFINITION OF "REAL PROPERTY TAX." "Real property tax" means: (i)
any fee, license fee, license tax, business license fee, commercial rental tax,
levy, charge, assessment, penalty or tax imposed by any taxing authority against
the Property; (ii) any tax on the Landlord's right to receive, or the receipt
of, rent or income from the Property or against Landlord's business of leasing
the Property; (iii) any tax or charge for fire protection, streets, sidewalks,
road maintenance, refuse or other services provided to the Property by any
governmental agency; (iv) any tax imposed upon this transaction or based upon a
re-assessment of the Property due to a change of ownership, as defined by
applicable law, or other transfer of all or part of Landlord's interest in the
Property; and (v) any charge or fee replacing any tax previously included within
the definition of real property tax. "Real property tax" does not, however,
include Landlord's federal or state income, franchise, inheritance or estate
taxes.
(c) JOINT ASSESSMENT. If the Property is not separately assessed,
Landlord shall reasonably determine Tenant's share of the real property tax
payable by Tenant under Paragraph 4.02(a) from the assessor's worksheets or
other reasonably available information. Tenant shall pay such share to Landlord
within fifteen (15) days after receipt of Landlord's written statement.
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(d) PERSONAL PROPERTY TAXES.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxed separately from the Property.
(ii) If any of Tenant's personal property is taxed with the Property,
Tenant shall pay Landlord the taxes for the personal property within fifteen
(15) days after Tenant receives a written statement from Landlord for such
personal property taxes.
Section 4.03. UTILITIES. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, telephone and other
utilities and services supplied to the Property. However, if any services or
utilities are jointly metered with other property, Landlord shall make a
reasonable determination of Tenant's proportionate share of the cost of such
utilities and services and Tenant shall pay such share to Landlord within
fifteen (15) days after receipt of Landlord's written statement.
Section 4.04. INSURANCE POLICIES.
(a) LIABILITY INSURANCE. During the Lease Term Tenant shall maintain a
policy of commercial general liability insurance sometimes known as broad form
comprehensive general liability insurance insuring Tenant against liability for
bodily injury, property damage (including loss of use of property) and personal
injury arising out of the operation, use or occupancy of the Property. Tenant
shall name Landlord as an additional insured under such policy. The initial
amount of such insurance shall be One Million Dollars ($1,000,000) per
occurrence and shall be subject to periodic increase based upon inflation,
increased liability awards, recommendation of Landlord's professional insurance
advisers and other relevant factors. The liability insurance obtained by Tenant
under this Paragraph 4.04(a) shall (i) be primary and noncontributing; (ii)
contain cross-liability endorsements; and (iii) insure Landlord against Tenant's
performance under Section 5.05, if the matters giving rise to the indemnity
under Section 5.05 result from the negligence of Tenant. The amount and coverage
of such insurance shall not limit Tenant's liability nor relieve Tenant of any
other obligation under this Lease. Landlord may also obtain comprehensive public
liability insurance in an amount and with coverage determined by Landlord
insuring Landlord against liability arising out of ownership, operation, use or
occupancy of the Property. The policy obtained by Landlord shall not be
contributory and shall not provide primary insurance. Owner and Trammell Crow
Company and related interests shall be named as additional insureds.
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(b) PROPERTY AND RENTAL INCOME INSURANCE. During the Lease Term,
Landlord shall maintain policies of insurance covering loss of or damage to the
Property in the full amount of its replacement value. Such policy shall contain
an Inflation Guard Endorsement and shall provide protection against all perils
included within the classification of fire, extended coverage, vandalism,
malicious mischief, special extended perils (all risk), sprinkler leakage and
any other perils which Landlord deems reasonably necessary. Landlord shall have
the right to obtain flood and earthquake insurance if required by any lender
holding a security interest in the Property. Landlord shall not obtain insurance
for Tenant's fixtures or equipment or building improvements installed by Tenant
on the Property. During the Lease Term, Landlord shall also maintain a rental
income insurance policy, with loss payable to Landlord, in an amount equal to
one year's Base Rent, plus estimated real property taxes and insurance premiums.
Tenant shall be liable for the payment of any deductible amount under Landlord's
or Tenant's insurance policies maintained pursuant to this Section 4.04, in an
amount not to exceed Ten Thousand Dollars ($10,000). Tenant shall not do or
permit anything to be done which invalidates any such insurance policies. Owner
and Trammell Crow Company and related interests shall be named as additional
insureds.
(c) PAYMENT OF PREMIUMS.
(i) Landlord shall pay the "Base Premiums" for the insurance policies
maintained by Landlord under Paragraph 4.04(b). If the Property has been
previously fully occupied, the "Base Premiums" are the insurance premiums paid
during or applicable to the Base Year. If the Property has not been previously
fully occupied or has been occupied for less than twelve (12) months, the Base
Premiums are the lowest annual premiums reasonably obtainable for the required
insurance for the Property during the Base Year.
(ii) Tenant shall pay Landlord the amount, if any, by which the
insurance premiums for all policies maintained by Landlord under Paragraph
4.04(b) have increased over the Base Premiums, whether such increases result
from the nature of Tenant's occupancy, any act or omission of Tenant, the
requirement of any lender referred to in Article Eleven (Protection of Lenders),
the increased value of the Property or general rate increases. However, if
Landlord substantially increases the amount of insurance carried or the
percentage of insured value after the period during which the Base Premiums were
calculated, Tenant shall pay Landlord the amount of increased premiums which
would have been charged by the insurance carrier if the amount of insurance or
percentage of insured value had not been substantially increased by Landlord.
This adjustment in the amount due from Tenant shall be made only once during the
Lease Term.
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Thereafter, Tenant shall be obligated to pay the full amount of any additional
increases in the insurance premiums, including increases resulting from any
further increases in the amount of insurance or percentage of insured value.
Subject to Section 4.05, Tenant shall pay Landlord the increases over the Base
Premiums within fifteen (15) days after receipt by Tenant of a copy of the
premium statement or other evidence of the amount due. If the insurance policies
maintained by Landlord cover improvements or real property other than the
Property, Landlord shall also deliver to Tenant a statement of the amount of the
premiums applicable to the Property showing, in reasonable detail, how such
amount was computed. If the Lease Term expires before the expiration of the
insurance period, Tenant's liability shall be pro rated on an annual basis.
(d) GENERAL INSURANCE PROVISIONS.
(i) Any insurance which Tenant is required to maintain under this Lease
shall include a provision which requires the insurance carrier to give Landlord
not less than thirty (30) days' written notice prior to any cancellation or
modification of such coverage.
(ii) If Tenant fails to deliver any policy, certificate or renewal to
Landlord required under this Lease within the prescribed time period or if any
such policy is cancelled or modified during the Lease Term without Landlord's
consent, Landlord may obtain such insurance, in which case Tenant shall
reimburse Landlord for the cost of such insurance within fifteen (15) days after
receipt of a statement that indicates the cost of such insurance.
(iii) Tenant shall maintain all insurance required under this Lease
with companies holding a "General Policy Rating" of A-12 or better, as set forth
in the most current issue of "Best Key Rating Guide." Landlord and Tenant
acknowledge the insurance markets are rapidly changing and that insurance in the
form and amounts described in this Section 4.04 may not be available in the
future. Tenant acknowledges that the insurance described in this Section 4.04 is
for the primary benefit of Landlord. If at any time during the Lease Term,
Tenant is unable to maintain the insurance required under the Lease, Tenant
shall nevertheless maintain insurance coverage which is customary and
commercially reasonable in the insurance industry for Tenant's type of business,
as that coverage may change from time to time. Landlord makes no representation
as to the adequacy of such insurance to protect Landlord's or Tenant's
interests. Therefore, Tenant shall obtain any such additional property or
liability insurance which Tenant deems necessary to protect Landlord and Tenant.
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(iv) Unless prohibited under any applicable insurance policies
maintained, Landlord and Tenant each hereby waive any and all rights of recovery
against the other, or against the officers, employees, agents or representatives
of the other, for loss or damage to its property or the property of others under
its control, if such loss or damage is covered by any insurance policy in force
(whether or not described in this Lease) at the time of such loss or damage.
Upon obtaining the required policies of insurance, Landlord and Tenant shall
give notice to the insurance carriers of this mutual waiver of subrogation.
Section 4.05. COMMON AREAS: USE, MAINTENANCE AND COSTS.
(a) COMMON AREAS. As used in this Lease, "Common Areas" shall mean all
areas within the Project which are available for the common use of tenants of
the Project and which are not leased or held for the exclusive use of Tenant or
other tenants, including, but not limited to, parking areas, driveways,
sidewalks, loading areas, access roads, corridors, landscaping and tenanted
areas. Landlord, from time to time, may change the size, location, nature and
use of any of the Common Areas, convert Common Areas into leasable areas,
construct additional parking facilities (including parking structures) in the
Common Areas, to increase or decrease Common Area land and/or facilities. Tenant
acknowledges that such activities may result in convenience to Tenant. Such
activities and changes are permitted if they do not materially affect Tenant's
use of the Property.
(b) USE OF COMMON AREAS. Tenant shall have the nonexclusive right (in
common with other tenants and all others to whom Landlord has granted or may
grant such rights) to use the Common Areas for the purposes intended, subject to
such reasonable rules and regulations as Landlord may establish from time to
time. Tenant shall abide by such rules and regulations and shall use its best
effort to cause others who use the Common Areas with Tenant's express or implied
permission to abide by Landlord's rules and regulations. At any time, Landlord
may close any Common Areas to perform any acts in the Common Areas as, in
Landlord's judgment, are desirable to improve the Project. Tenant shall not
interfere with the rights of Landlord, Tenants or any other person entitled to
use the Common Areas.
(c) SPECIFIC PROVISION RE: VEHICLE PARKING. Tenant shall be entitled to
use the number of vehicle parking spaces in the Project allocated to Tenant in
Section 1.11 of the Lease without paying any additional rent. Tenant's parking
shall not be reserved and shall be limited to vehicles no larger than standard
size automobiles or pickup utility vehicles. Tenant shall not cause large trucks
or other large vehicles to be
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parked within the Project or on the adjacent public streets.(1) Temporary
parking of large delivery vehicles in the Project may be permitted by the rules
and regulations established by Landlord. Vehicles shall be parked only in
striped parking spaces and not in driveways, loading areas or other locations
not specifically designated parking. Handicapped spaces shall only be used by
those legally permitted to use them. If Tenant parks more vehicles in
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this Lease, such conduct shall be a material breach of this Lease in addition to
Landlord's other remedies under the Lease. Tenant shall pay a daily charge
determined by Landlord for each such additional vehicle.
(d) MAINTENANCE OF COMMON AREAS. Landlord shall maintain the Common
Areas in good order, condition and repair and shall operate the Project, in
Landlord's sole discretion, as a first-class industrial/commercial real property
development. Common Area costs include, but are not limited to, costs and
expenses for the following: gardening and landscaping; utilities; water and
sewage charges; maintenance of signs (other than tenants' signs); premiums for
liability, property damage, fire and other types of casualty insurance on the
Common Areas and worker's compensation insurance, all property taxes and
assessments levied on or attributable to the Common Areas and all Common Area
improvements; all personal property taxes levied on or attributable to personal
property used in connection with the Common Areas; straight-line depreciation or
personal property owned by Landlord which is consumed in the operation or
maintenance of the Common Areas; rental or lease payments paid by Landlord for
rented or leased personal property used in the operation or maintenance of the
Common Areas; fees for required licenses and permits; repairing, resurfacing,
repaving, maintaining, painting, lighting, cleaning, refuse removal, security
and similar terms; reserves for roof replacement and exterior painting and other
appropriate reserves; and a reasonable allowance to Landlord for Landlord's
supervision of the Common Areas (not to exceed five percent (5%) of the gross
rents of the Project for the calendar year). Landlord may cause any or all of
such services to be provided to third parties and the cost of such services
shall be included in Common Area costs. Common Area costs shall not include
depreciation of real property which forms part of the Common Areas.
(e) TENANT'S SHARE AND PAYMENT. See Addendum "A."
(1) Tenant shall be permitted to park a Biosite delivery truck
in the parking area behind the building.
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Section 4.06. LATE CHARGES. Tenant's failure to pay rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay Landlord a late charge equal to
ten percent (10%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reach of such late payment.
Section 4.07. INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by
Tenant to Landlord which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date of such amount. However,
interest shall not be payable on late charges to be paid by Tenant under this
Lease. The payment of interest on such amounts shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this Lease
is higher than the rate permitted by law, the interest rate is hereby decreased
to the maximum legal interest rate permitted by law.
Section 4.08.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01. PERMITTED USES. Tenant may use the Property
only for the Permitted Uses set forth in Section 1.06 above.
Section 5.02. MANNER OF USE. Tenant shall not cause or permit the
Property to be used in any way which constitutes a violation of any law,
ordinance, or governmental regulation or order, which annoys or interferes with
the rights of tenants of the Project, or which constitutes a nuisance or waste.
Tenant shall obtain and pay for all permits, including a Certificate of
Occupancy, required for Tenant's occupancy of the Property and shall promptly
take all actions necessary to comply with all applicable statutes, ordinances,
rules, regulations, orders and requirements regulating the use by Tenant of the
Property including the Occupational Safety and Health Act.
Section 5.03. HAZARDOUS MATERIALS. See Addendum "A"
Section 5.04. SIGNS. Tenant shall not place any signs on the Property
without Landlord's prior written consent, subject to Exhibit "B" Sign Criteria.
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Section 5.05. INDEMNITY. Tenant shall indemnify Landlord against and
hold Landlord harmless from any and all costs, claims or liability arising from:
(a) Tenant's use of the Property; (b) the conduct of Tenant's business or
anything else done or permitted by Tenant to be done in or about the Property,
including any contamination of the Property or any other property resulting from
the presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant. Tenant shall defend Landlord against any
such cost, claim or liability at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in connection with any
such claim. As a material part of the consideration to Landlord, Tenant assumes
all risk of damage to property or injury to persons in or about the Property
arising from any cause, and Tenant hereby waives all claims in respect thereof
against Landlord, except for any claim arising out of Landlord's gross
negligence or willful misconduct. As used in this Section , the term "Tenant"
shall include Tenant's employees, agents, contractors and invitees, if
applicable.
Section 5.06. LANDLORD'S ACCESS. Landlord or its agent may enter the
Property at all reasonable times to show the Property to potential buyers,
investors or tenants or other parties; to do any other act or to inspect and
conduct tests in order to monitor Tenant's compliance with all applicable
environmental laws and all laws governing the presence and use of Hazardous
Material; or for any other purpose Landlord deems necessary. Landlord shall give
Tenant prior notice of such entry, except in the case of an emergency. Landlord
may place customer "For Sale" or "For Lease" signs on the Property.
Section 5.07. QUIET POSSESSION. If Tenant pays the rent and complies
with all other terms of this Lease, Tenant may occupy and enjoy the Property for
the full Lease Term, subject to the provisions of this Lease.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND
ALTERATIONS
Section 6.01. EXISTING CONDITIONS. Tenant accepts the Property in its
condition as of the execution of the Lease, subject to all recorded matters,
laws, ordinances, and governmental regulations and orders. Except as provided
herein, Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation as to the condition of the Property or the suitability
of the Property for Tenant's intended use. Tenant represents and warrants that
Tenant has
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made its own inspection of and inquiry regarding the condition of the Property
and is not relying on any representations of Landlord or any Broker with respect
thereto. If Landlord or Landlord's Broker has provided a Property Information
Sheet or other Disclosure Statement regarding the Property, a copy is attached
as an exhibit to the Lease.
Section 6.02. EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall not
be liable for any damage or injury to the person, business (or any loss of
income therefrom), goods, wares, merchandise or other property of Tenant,
Tenant's employees, invitees, customers or any other person in or about the
property, whether such damage or injury is caused by or results from: (a) fire,
steam, electricity, water, gas or rain; (b) the breakage, leakage, obstruction
or other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures or any other cause; (c) conditions arising in
or about the Property or upon other portions of the Project, or from other
sources of places; or (d) any act or omission of any other tenant of the
Project. Landlord shall not be liable for any such damage or injury even though
the cause of or the means of repairing such damage or injury are not accessible
to Tenant. The provisions of this Section 6.02 shall not, however, exempt
Landlord from liability for Landlord's gross negligence or willful misconduct.
Section 6.03. LANDLORD'S OBLIGATIONS. Subject to the provisions of
Article Seven (Damage or Destruction) and Article Eight (Condemnation),and
except for damage caused by any act or omission of Tenant, or Tenant's
employees, agents, contractors or invitees, Landlord shall keep the foundation,
roof and structural portions of exterior walls of the improvements on the
Property in good order, condition and repair. However, Landlord shall not be
obligated to maintain or repair windows, doors, plate glass or the surfaces of
walls. Landlord shall not be obligated to make any repairs under this Section
6.03 until a reasonable time after receipt of a written notice from Tenant of
the need for such repairs.(2) Tenant waives the benefit of any present or future
law which might give Tenant the right to repair the Property at Landlord's
expense or to terminate the lease because of the condition of the Property.
Section 6.04. TENANT'S OBLIGATIONS.
(a) Except as provided in Section 6.03, Article Seven (Damage or
Destruction) and Article Eight (Condemnation), Tenant shall keep all portions of
the Property (including structural, nonstructural, interior, systems and
equipment) in good order, condition and repair (including interior repainting
and
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(2) Including flood prevention measures.
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refinishing, as needed). If any portion of the Property or any system or
equipment in the Property which Tenant is obligated to repair cannot be fully
repaired or restored, Tenant shall promptly replace such portion of the Property
or system or equipment in the Property, regardless of whether the benefit of
such replacement extends beyond the Lease Term; but if the benefit or useful
life of such replacement extends beyond the Lease Term (as such term may be
extended by exercise of any options), the useful life of such replacement shall
be prorated over the remaining portion of the Lease Term (as extended), and
Tenant shall be liable only for that portion of the cost which is applicable to
the Lease Term (as extended). Tenant shall maintain a preventive maintenance
contract providing for the regular inspection and maintenance of the heating and
air conditioning system by a licensed heating and air conditioning contractor.
Landlord shall have the right, upon written notice to Tenant, to undertake the
responsibility for preventive maintenance of the heating and air conditioning
system at Tenant's expense. In addition, Tenant shall, at Tenant's expense,
repair any damage to the roof, foundation or structural portions of walls caused
by Tenant's acts or omissions. It is the intention of Landlord and Tenant that,
at all times during the Lease Term, Tenant shall maintain the Property in an
attractive, first-class and fully operative condition.
(b) Tenant shall fulfill all of Tenant's obligations under this Section
6.04 at Tenant's sole expense. If Tenant fails to maintain, repair or replace
the Property as required by this Section 6.04, Landlord may, upon ten (10) days'
prior notice to Tenant (except that no notice shall be required in the case of
an emergency), enter the Property and perform such maintenance or repair
(including replacement, as needed) on behalf of Tenant. In such case, Tenant
shall reimburse Landlord for all costs incurred in performing such maintenance
or repair immediately upon demand.
Section 6.05. ALTERATIONS, ADDITIONS AND IMPROVEMENTS.
(a) Tenant shall not make any alterations, additions, or improvements
to the Property without Landlord's prior written consent,(3) except for
nonstructural alterations which do not exceed Ten Thousand Dollars ($10,000) in
cost cumulatively over the Lease Term and which are not visible from the outside
of any building of which the Property is part. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, or improvements constructed in violation of this Paragraph 6.05(a)
upon Landlord's written
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(3) Which consent shall not be unreasonably withheld or delayed.
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request. All alterations, additions, and improvements shall be done in a good
and workmanlike manner, in conformity with all applicable laws and regulations,
and by a contractor approved by Landlord. Upon completion of any such work,
Tenant shall provide Landlord with "as built" plans, copies of all construction
contracts, and proof of payment for all labor and materials.
(b) Tenant shall pay when due all claims for labor and material
furnished to the Property. Tenant shall give Landlord at least twenty (20) days'
prior written notice of the commencement of any work on the Property, regardless
of whether Landlord's consent to such work is required. Landlord may elect to
record and post notices of nonresponsibility on the Property.
Section 6.06. CONDITION UPON TERMINATION. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be obligated to repair any damage which Landlord is required to
repair under Article Seven (Damage or Destruction). In addition, Landlord may
require Tenant to remove any alterations, additions or improvements (whether or
not made with Landlord's consent) prior to the expiration of the Lease and to
restore the Property to its prior condition, all at Tenant's expense. All
alterations, additions and improvements which Landlord has not required Tenant
to remove shall become Landlord's property and shall be surrendered to Landlord
upon the expiration or earlier termination of the Lease, except that Tenant may
remove any of Tenant's machinery or equipment which can be removed without
material damage to the Property. Tenant shall repair, at Tenant's expense, any
damage to the property caused by the removal of any such machinery or equipment.
In no event, however, shall Tenant remove any of the following materials or
equipment (which shall be deemed Landlord's property) without Landlord's prior
written consent; any power wiring or power panels; lighting or lighting
fixtures; wall coverings; drapes, blinds or other window coverings; carpets or
other floor coverings; heaters; air conditioners or any other heating or air
conditioning equipment; fencing or security gates; or other similar building
operating equipment and decorations.
Notwithstanding the provisions outlined in Section (s) 6.05 and 6.06, Landlord
shall notice Tenant at the time they provide consent which alterations and
improvements Tenant must remove from the Premises at Lease Termination.
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ARTICLE SEVEN: DAMAGE OR DESTRUCTION
If the Premises are destroyed in whole or in part from any cause,
Landlord may elect either to restore the Premise or to terminate this Lease.
Landlord shall notify Tenant of its election within sixty (60) days after the
casualty.
(a) RESTORATION. If Landlord elects to restore, Landlord shall promptly
restore the Premises to their prior condition provided that such restoration can
be completed within one hundred eighty (180) days (which period shall be
extended one day for each day of delay resulting from causes beyond Landlord's
control) after Landlord's notice of election of tenant. Tenant hereby expressly
waives the provisions of Subdivision 2 of Section 1932 and Subdivision 4 of
Section 1933 of the California Civil Code. Rent shall abate from the date of
casualty in the proportion that Tenant is actually deprived of use of the
Premises.
(b) TERMINATION. If Landlord elects to terminate, rent shall terminate
as of the date of the casualty, and from the date of the notice of election the
parties shall have no further obligation under this Lease except for obligation
which arose prior to the casualty.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of
eminent domain or sold under the threat of that power [all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever comes first.
If more than twenty percent (20%) of the floor area of the building in which the
Property is located, or which is located on the Property, is taken, either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes title or possession). If neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Property not
taken, except that the Base Rent and Additional Rent shall be reduced in
proportion to the reduction in the floor area of the Property. Any Condemnation
award or payment shall be distributed in the following order: (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust encumbering the
Property, the amount of its interest in the Property; (b) second, to Tenant,
only the amount of any award specifically designated of such award, whether as
compensation for reduction in the value of the leasehold, the taking of the fee,
or otherwise. If this Lease is not terminated, Landlord
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shall repair any damage to the Property caused by the Condemnation, except that
Landlord shall not be obligated to repair any damage for which Tenant has been
reimbursed by the condemning authority. If the severance damages received by
Landlord are not sufficient to pay for such repair, Landlord shall have the
right to either terminate this Lease or make such repair at Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. LANDLORD'S CONSENT REQUIRED. No portion of the Property
or of Tenant's interest in this Lease may be acquired by any other person or
entity, whether by sale, assignment, mortgage, sublease, transfer, operation of
law, or act of Tenant, without Landlord's prior written consent, except as
provided in Section 9.02 below. Landlord has the right to grant or withhold its
consent as provided in Section 9.05 below. Any attempted transfer without
consent shall be void and shall constitute a non-curable breach of this Lease.
If Tenant is a partnership, any cumulative transfer of more than twenty percent
(20%) of the partnership interests shall require Landlord's consent.
Section 9.02. TENANT AFFILIATE. Tenant may assign this Lease or
sublease the Property, without Landlord's consent, to any corporation which
controls, is controlled by or is under common control with Tenant, or to any
corporation resulting from the merger of or consolidation with Tenant ("Tenant's
Affiliate"). In such case, any Tenant's Affiliate shall assume in writing all of
Tenant's obligations under this Lease.
Section 9.03. NO RELEASE OF TENANT. No transfer permitted by this
Article Nine, whether with or without Landlord's consent, shall release Tenant
or change Tenant's primary liability to pay the rent and to perform all other
obligations of Tenant under this Lease. Landlord's acceptance of rent from any
other person is not a waiver of any provision of this Article Nine. Consent to
one transfer is not a consent to any subsequent transfer. If Tenant's transferee
defaults under this Lease, Landlord may proceed directly against Tenant without
pursuing remedies against the transferee. Landlord may consent to subsequent
assignments or modifications of this Lease by Tenant's transferee, without
notifying Tenant or obtaining its consent. Such action shall not relieve
Tenant's liability under this Lease.
Section 9.04. OFFER TO TERMINATE. If Tenant desires to assign the Lease
or sublease the Property, Tenant shall have the right to offer, in writing, to
terminate the Lease as of a date specified in the offer. If Landlord does not so
elect, the Lease shall continue in effect until otherwise terminated and
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the provisions of Section 9.05 with respect to any proposed transfer shall
continue to apply.
Section 9.05. LANDLORD'S CONSENT.
(a) Tenant's request for consent to any transfer described in Section
9.01 shall set forth in writing the details of the proposed transfer, including
the name, business and financial condition of the prospective transferee,
financial details of the proposed transfer (e.g., the term of and the rent and
security and deposit payable under any proposed assignment or sublease), and any
other information Landlord deems relevant. Landlord shall have the right to
withhold consent, if reasonable, or to grant consent, based on the following
factors: (i) the business of the proposed assignee or subtenant and the proposed
use of the Property; (ii) the net worth and financial reputation of the proposed
assignee or subtenant; (iii) Tenant's compliance with all of its obligations
under the Lease; and (iv) such other factors as Landlord may reasonably deem
relevant. If Landlord objects to a proposed assignment solely because of the net
worth and/or financial reputation of the proposed assignee, Tenant may
nonetheless sublease (but not assign), all or a portion of the Property to the
proposed transferee, but only on the other terms of the proposed transfer.
(b) If Tenant assigns or subleases, the following shall apply:
(i) Tenant shall pay to Landlord as Additional Rent under the
Lease the Landlord's Share (stated in Section 1.14) of the Profit
(defined below) on such transaction as and when received by Tenant,
unless Landlord gives written notice to Tenant and the assignee or
subtenant that Landlord's Share shall be paid by the assignee or
subtenant to Landlord directly. The "Profit" means (A) all amounts paid
to Tenant for such assignment or sublease, including "key" money,
monthly rent in excess of the monthly rent payable under the Lease, and
all fees and other consideration paid for the assignment sublease,
including fees under any collateral agreements, less (B) costs and
expenses directly incurred by Tenant in connection with the execution
and performance of such assignment or sublease for real estate broker's
commissions and costs of renovation or construction of tenant
improvements required under such assignment or sublease. Tenant is
entitled to recover such costs and expenses before Tenant is obligated
to pay the Landlord's Share to Landlord. The Profit in the case of a
sublease of less than all the Property is the rent allocable to the
subleased space as a percentage on a square footage basis.
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(ii) Tenant shall provide Landlord a written statement
certifying all amounts to be paid from any assignment of sublease of
the Property within thirty (30) days after the transaction
documentation is signed, and Landlord may inspect Tenant's books and
records to verify the accuracy of such statement. On written request,
Tenant shall promptly furnish to Landlord copies of all the transaction
documentation, all of which shall be certified by Tenant to be
complete, true and correct. Landlord's receipt of Landlord's Share
shall not be a consent to any further assignment or subletting. The
breach of Tenant's obligation under this Paragraph 9.05(b) shall be a
material default to the Lease.
Section 9.06. NO MERGER. No merger shall result from Tenant's sublease
of the Property under this Article Nine, Tenant's surrender of this Lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. COVENANTS AND CONDITIONS. Tenant's performance of each
of Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants and
conditions.
Section 10.02. DEFAULTS. Tenant shall be in material
default under this Lease:
(a) If Tenant abandons the Property and if Tenant's
vacation of the Property results in the cancellation of any
insurance described in Section 4.04;
(b) If Tenant fails to pay rent or any other charge when
due;
(c) If Tenant fails to perform any of Tenant's non-monetary obligations
under this Lease for a period of thirty (30) days after written notice from
Landlord; provided that if more than thirty (30) days are required to complete
such performance, Tenant shall not be in default if Tenant commences such
performance within the thirty (30) day period and thereafter diligently pursues
its completion. However, Landlord shall not be required to give such notice if
Tenant's failure to perform constitutes a non-curable breach of this Lease. The
notice required by this Paragraph is intended to satisfy any and all notice
requirements imposed by law on Landlord and is not in addition to any such
requirement.
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(d) (i) If Tenant makes a general assignment or general arrangement for
the benefit of creditors; (ii) if a petition for adjudication of bankruptcy or
for reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant's assets located at the
Property or of Tenant's interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially all of Tenant's assets
located at the Property or of Tenant's interest in this Lease is subjected to
attachment, execution or other judicial seizure which is not discharged within
thirty (30) days. If a court of competent jurisdiction determines that any of
the acts described in this subparagraph (d) is not a default under this Lease,
and a trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers Tenant's interest hereunder,
then Landlord shall receive, as Additional Rent, the excess, if any, of the rent
(or any other consideration) paid in connection with such assignment or sublease
over the rent payable by Tenant under this Lease.
(e) If any guarantor of the Lease revokes or otherwise terminates, or
purports to revoke or otherwise terminate, any guaranty of all or any portion of
Tenant's obligations under the Lease. Unless otherwise expressly provided, no
guaranty of the Lease is revocable.
Section 10.03. REMEDIES. On the occurrence of any material default by
Tenant, Landlord may, at any time thereafter with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:
(a) Terminate Tenant's right to possession of the Property by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Property to Landlord. In such event,
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default, including (i) the worth at the time of
the award of the unpaid Base Rent, Additional Rent and other charges which
Landlord has earned at the time of the termination; (ii) the worth at the time
of the award of the amount by which the unpaid Base Rent, Additional Rent and
other charges which Landlord would have earned after termination until the time
of the award exceeds the amount of such rental loss that Tenant proves Landlord
could have reasonably avoided; (iii) the worth at the time of the award of the
amount by which the unpaid Base Rent, Additional Rent and other charges which
Tenant would have paid for the balance of the Lease Term after the time of award
exceeds the amount of such rental loss that Tenant proves Landlord could have
reasonably avoided; and (iv) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform its
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obligations under the Lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to, any cost or expenses
Landlord incurs in maintaining or preserving the Property after such default,
the cost of recovering possession of the Property, expenses of reletting,
including necessary renovation or alteration of the Property, Landlord's
reasonable attorneys' fees incurred in connection therewith, and any real estate
commission paid or payable. As used in subparts (i) and (ii) above, the "worth
at the time of the award" is computed by allowing interest on unpaid amounts at
the rate of fifteen percent (15%) per annum, or such lesser amount as may then
be the maximum lawful rate. As used in subpart (iii) above, the worth at the
time of the award is computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award, plus one
percent (1%). If Tenant has abandoned the Property, Landlord shall have the
option of (i) retaking possession of the Property and recovering from Tenant the
amount specified in this Paragraph 10.03(a), or (ii) proceeding under Paragraph
10.03(b);
(b) Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant has abandoned the Property. In
such event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due.
(c) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state in which the Property is
located.
Section 10.04. REPAYMENT OF "FREE" RENT. If this Lease provides for a
postponement of any monthly rental payments, a period of "free" rent or other
rent concession, such postponed rent or "free" rent is called the "Abated Rent."
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully and punctually
performed all of Tenant's obligations hereunder, including the payment of all
rent (other than the Abated Rent) and all other monetary obligations and the
surrender of the Property in the physical condition required by this Lease.
Tenant acknowledges that its right to receive credit for the Abated Rent is
absolutely conditioned upon Tenant's full, faithful and punctual performance of
its obligations under this Lease. If Tenant defaults and does not cure within
any applicable grace period, the Abated Rent shall immediately become due and
payable in full and this Lease shall be enforced as if there were no such rent
abatement or other rent concession. In such case Abated Rent shall be calculated
based on the full initial rent payable under this Lease.
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Section 10.05. AUTOMATIC TERMINATION. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence of
any act which affirms the Landlord's intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant. On such termination, Landlord's damages for default shall
include all cost and fees, including reasonable attorneys' fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord's right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.
Section 10.06. CUMULATIVE REMEDIES. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.01. SUBORDINATION. Landlord shall have the right to
subordinate this Lease to any ground lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof and any
renewals, modifications, consolidations, replacements or extensions thereof,
whenever made or recorded. Tenant shall cooperate with Landlord and any lender
which is acquiring a security interest in the Property or the Lease. Tenant
shall execute such further documents and assurances as such lender may require,
provided that Tenant's obligations under this Lease shall not be increased in
any material way (the performance of ministerial acts shall not be deemed
material), and Tenant shall not be deprived of its rights under this Lease.
Tenant's right to quiet possession of the Property during the Lease Term shall
not be disturbed if Tenant pays the rent and performs all of Tenant's
obligations under this Lease and is not otherwise in default. If any ground
lessor, beneficiary or mortgagee elects to have this Lease prior to the lien of
its ground lease, deed of trust or mortgage and gives written notice thereof to
Tenant, this Lease shall be deemed prior to such ground lease, deed of trust or
mortgage whether this Lease is dated prior or subsequent to the date of said
ground lease, deed of trust or mortgage or the date of recording thereof.
Section 11.02. ATTORNMENT. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee or
purchase at a foreclosure sale,
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Tenant shall attorn to the transferee of or successor to Landlord's interest in
the Property and recognize such transferee or successor as Landlord under this
Lease. Tenant waives the protection of any statute or rule of law which gives or
purports to give Tenant any right to terminate this Lease or surrender
possession of the Property upon the transfer of Landlord's interest.
Section 11.03. SIGNING OF DOCUMENTS. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten (10)
days after written request, Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
Section 11.04. ESTOPPEL CERTIFICATES.
(a) Upon Landlord's written request, Tenant shall execute, acknowledge
and deliver to Landlord a written statement certifying: (i) that none of the
terms or provisions of this Lease has been changed (or if they have been
changed, stating how they have been changed); (ii) that this Lease has not been
cancelled or terminated, (iii) the last date of payment of the Base Rent and
other charges and the time period covered by such payment; (iv) that Landlord is
not in default under this Lease (or if Landlord is claimed to be in default,
stating why); and (v) such other representations or information with respect to
Tenant or the Lease as Landlord may reasonably request or which any prospective
purchaser or encumbrancer of the Property may require. Tenant shall deliver such
statement to Landlord within ten (10) days after Landlord's request. Landlord
may give any such statement by Tenant to any prospective purchaser or
encumbrancer of the Property. Such purchaser or encumbrancer may rely
conclusively upon such statement as true and correct.
(b) If Tenant does not deliver such statement to Landlord within such
ten (10) day period, Landlord, and any prospective purchaser or encumbrancer,
may conclusively presume and rely upon the following facts: (i) that the terms
and provisions of this Lease have not been changed except as otherwise
represented by Landlord; (ii) that this Lease has not been cancelled or
terminated except as otherwise represented by Landlord; (iii) that not more than
one month's Base Rent or other charges have been paid in advance; and (iv) that
Landlord is not in default under the Lease. In such event Tenant shall be
estopped from denying the truth of such facts.
Section 11.05. TENANT'S FINANCIAL CONDITION. Within ten
(10) says after written request from Landlord, Tenant shall
deliver to Landlord such financial statements as Landlord
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reasonably requires to verify the net worth of Tenant or any assignee subtenant,
or guarantor of Tenant. In addition, Tenant shall deliver to any lender
designated by Landlord any financial statements required by such lender to
facilitate the financing or refinancing of the Property. Tenant represents and
warrants to Landlord that each such financial statement is a true and accurate
statement as of the date of such statement. All financial statements shall be
confidential and shall be used only for the purposes set forth in this Lease.
ARTICLE TWELVE. LEGAL COSTS
Section 12.01. LEGAL PROCEEDINGS. If Tenant or Landlord shall be in
breach or default under this Lease, such party (the "Defaulting Party") shall
reimburse the other party (the "Nondefaulting Party") upon demand for any costs
or expenses that the Nondefaulting Party incurs in connection with any breach or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys' fees and
costs. The losing party in such action shall pay such attorneys' fees and costs.
Tenant shall also indemnify Landlord against and hold Landlord harmless from all
costs, expenses, demands and liability Landlord may incur if Landlord becomes or
is made a party to any claim or action (a) instituted by Tenant against any
third party, or by any third party against Tenant, or by or against any person
holding any interest under or using the Property by license of or agreement with
Tenant; (b) for foreclosure of any lien for labor or material furnished to or
for Tenant or such other person; (c) otherwise arising out of or resulting from
any act or transaction of Tenant or such other person; or (d) necessary to
protect Landlord's interest under this Lease in a bankruptcy proceeding, or
other proceeding under Title 11 of the United States Code, as amended. Tenant
shall defend Landlord against any such claim or action at Tenant's expense with
counsel reasonably acceptable to Landlord or, at Landlord's election, Tenant
shall reimburse Landlord for any legal fees or costs Landlord incurs in any such
claim or action.
Section 12.02. LANDLORD'S CONSENT. Tenant shall pay Landlord's
reasonable attorneys' fees incurred in connection with Tenant's request for
Landlord's consent under Article Nine (Assignment and Subletting), or in
connection with any other act which Tenant proposes to do and which required
Landlord's consent.
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ARTICLE THIRTEEN. MISCELLANEOUS PROVISIONS.
Section 13.01. NON-DISCRIMINATION. Tenant promises, and it is a
condition to the continuance of this Lease, that there will be no discrimination
against, or segregation of, any person or group of persons on the basis of race,
color, sex, creed, national origin or ancestry in the leasing, transferring,
occupancy, tenure or use of the Property or any portion thereof.
Section 13.02. LANDLORD'S LIABILITY; CERTAIN DUTIES.
(a) As used in this Lease, the term "Landlord" means only the current
owner or owners of the fee title to the Property or Project or the leasehold
estate under a ground lease of the Property or Project at the time in question.
Each Landlord is obligated to perform the obligations of Landlord under this
Lease only during the time such Landlord owns such interest or title. Any
Landlord who transfers its title or interest is relieved of all liability with
respect to the obligations of Landlord under this Lease to be performed on or
after the date of transfer. However, each Landlord shall deliver to its
transferee all funds that Tenant previously paid if such funds have not yet been
applied under the terms of this Lease.
(b) Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord and to any ground
lessor, mortgagee or beneficiary under any deed of trust encumbering the
property whose name and address have been furnished to Tenant in writing.
Landlord shall not be in default under this Lease unless Landlord (or such
ground lessor, mortgagee or beneficiary) fails to cure such nonperformance
within thirty (30) days after receipt of Tenant's notice. However, if such
nonperformance reasonably requires more than thirty (30) days to cure, Landlord
shall not be in default if such cure is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
(c) Notwithstanding any term or provision herein to the contrary, the
liability of Landlord for the performance of its duties and obligations under
this Lease is limited to Landlord's interest in the Property and the Project,
and neither the Landlord nor its partners, shareholders, officers or other
principals shall have any personal liability under this Lease.
Section 13.03. SEVERABILITY. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision of
this Lease, which shall remain in full force and effect.
Section 13.04. INTERPRETATION. The captions of the
Articles or Sections of this Lease are to assist the parties in
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reading this Lease and are not a part of the terms or provisions of this Lease.
Whenever required by the context of this Lease, the singular shall include the
plural and the plural shall include the singular. The masculine, feminine and
neuter genders shall each include the other. In any provisions relating to the
conduct, acts or omissions of Tenant, the term "Tenant" shall include Tenant's
agents, employees, contractors, invitees, successors or others using the
Property with Tenant's expressed or implied permission.
Section 13.05. INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This
Lease is the only agreement between the parties pertaining to the lease of the
Property and no other agreements are effective. All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.
Section 13.06. NOTICES. All notices required or permitted under this
Lease shall be in writing and shall be personally delivered or sent by certified
mail, return receipt requested, postage prepaid. Notices to Tenant shall be
delivered to the address specified in Section 1.03 above, except that upon
Tenant's taking possession of the property, the Property shall be Tenant's
address for notice purposes. Notices to Landlord shall be delivered to the
address specified in Section 1.02 above. All notices shall be effective upon
delivery. Either party may change its notice address upon written notice to the
other party.
Section 13.07. WAIVERS. All waivers must be in writing and signed by
the waiving party. Landlord's failure to enforce any provision of this Lease or
its acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.
Section 13.08. NO RECORDATION. Tenant shall not record this Lease
without prior written consent from Landlord. However, either Landlord or Tenant
may require that a "Short Form" memorandum of this Lease executed by both
parties be recorded. The party requiring such recording shall pay all transfer
taxes and recording fees.
Section 13.09. BINDING EFFECT: CHOICE OF LAW. This Lease
binds any party who legally acquires any rights or interest in
this Lease from Landlord or Tenant. However, Landlord shall
have no obligation to Tenant's successor unless the rights or
interest of Tenant's successor are acquired in accordance with
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the terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease.
Section 13.10. CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY. If Tenant is
a corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person or entity signing this Lease for Tenant represents and warrants that he
or it is a general partner of the partnership, that he or it has full authority
to sign for the partnership and that this Lease binds the partnership and all
general partners of the partnership. Tenant shall give written notice to
Landlord of any general partner's withdrawal or addition. Within thirty (30)
days after this Lease is signed, Tenant shall deliver to Landlord a copy of
Tenant's recorded statement of partnership or certificate of limited
partnership.
Section 13.11. JOINT AND SEVERAL LIABILITY. All parties signing this
Lease as Tenant shall be jointly and severally liable for all obligations of
Tenant.
Section 13.12. FORCE MAJEURE. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of God, war, civil commotion, labor disputes, strikes, fire,
floor or other casualty, shortages of labor or material, government regulation
or restriction and weather conditions.
Section 13.13. EXECUTION OF LEASE. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed to be an offer to lease and shall not be binding
upon either party until executed and delivered by both parties.
Section 13.14. SURVIVAL. All representations and warranties of Landlord
and Tenant shall survive the termination of this Lease.
Landlord and Tenant have signed this Lease at the place and on the
dates specified adjacent to their signatures below and have initialled all
Riders which are attached to or incorporated by reference in this Lease.
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"TENANT"
BIOSITE DIAGNOSTICS, INC.
a California corporation
By: /s/ Kim Blickenstaf
___________________
Kim Blickenstaf
Title: President
-------------------------
Date: _________________________
"LANDLORD"
TCEP II PROPERTIES LIMITED PARTNERSHIP, a Texas limited
partnership
By: TCEP II Holdings, L.L.C., a Texas liability company, its
General Partner
By: Trammell Crow Equity Partners II, Ltd., a Texas
limited partnership, a Member
By: Trammell Crow Ventures #2, Ltd., a Texas limited
partnership, its General Partner
By: Trammell Crow Ventures #3, Ltd., a Texas limited
partnership, its General Partner
By: Trammell Crow Ventures Management Company,
I Inc., a Texas corporation, its General
Partner
By: /s/ Jeffrey C. ?
_______________________________
Title: Vice President
_______________________________
Date: 8/12/96
_______________________________
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Biosite Diagnostics
Addendum A
Page 1
ADDENDUM "A"
This Addendum is to that certain Lease dated July 26, 1996, by and
between Biosite Diagnostics, Inc., a California Corporation ("Tenant") and TCEP
II Properties Limited Partnership, A Texas Limited Partnership ("Landlord").
The printed portion of the Lease is hereby modified and supplemented as
follows. Wherever there is any conflict between this Addendum and the printed
portion of the Lease, the provisions of the Addendum are paramount and the Lease
shall be construed accordingly.
1. Insert the following as Section 4.05 (e) of the Lease:
Section 4.05(e) "TENANT'S SHARE AND PAYMENT.
In order that the Rent payable during the Term reflect any increase in
Common Area Costs, Tenant agrees to pay to Landlord as Rent, Tenant's
Proportionate Share of all increases in costs, expenses and obligations
attributable to the Project and its operation, all as provided below.
If, during any calendar year during the Term, Common Area Costs exceed
the Common Area Costs for the Base Year, Tenant shall pay to Landlord, in
addition to the Base Rent and all other payments due under this Lease, an amount
equal to Tenant's Proportionate Share of such excess Common Area Costs in
accordance with the provisions of this Section 4.05(e).
Tenant's Proportionate Share of Common Area Costs shall be payable by Tenant to
Landlord as follows:
(a) Beginning with the calendar year following the Base Year and for
each calendar year thereafter ("Comparison Year"), Tenant shall pay Landlord an
amount equal to Tenant's Proportionate Share of the Common Area Costs incurred
by Landlord in the Comparison Year which exceeds the total amount of Common Area
Costs payable by Landlord for the Base Year. This excess is referred to as the
"Excess Expense."
(b) To provide for current payments of Excess Expenses, Tenant shall,
at Landlord's request, pay as additional rent during each Comparison Year, an
amount equal to Tenant's Proportionate Share of the Excess Expense payable
during such Comparison Year, as estimated by Landlord from time to time.
Tenant's pro rata share shall be calculated by dividing the square foot area of
the Property, as set forth in Section 1.04
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Biosite Diagnostics
Addendum A
Page 2
of the Lease, by the aggregated square foot area of the Project which is leased
or held for lease by tenants, as of the date on which the computation is made.
Tenant's initial pro rata share is set out in Paragraph 1.12(b). Any changes in
the Common Area costs and/or the aggregate area of the Project leased or held
for lease during the Lease Term shall be effective on the first day of the month
after such charge occurs. Landlord may, at Landlord's election, estimate in
advance and charge to Tenant as Common Area costs, all real property taxes for
which Tenant is liable under Section 4.02 of the Lease, all insurance premiums
for which Tenant is liable under Section 4.04 of the Lease, all maintenance and
repair costs for which Tenant is liable under Section 6.04 of the Lease, and all
other Common Area costs payable by Tenant hereunder. Such payments shall be made
in monthly installments, commencing on the first day of the month following the
month in which Landlord notifies Tenant of the amount it is to pay hereunder and
continuing until the first day of the month following the month in which
Landlord gives Tenant a new notice of estimated Excess Expenses. It is the
intention hereunder to estimate from time to time the amount of the Excess
Expenses for each Comparison Year and Tenant's Proportionate Share thereof, and
then to make an adjustment in the following year based on the actual Excess
Expenses incurred for that Comparison Year.
(c) On or before April 1 of each Comparison Year after the first
Comparison Year (or as soon thereafter as is practical), Landlord shall deliver
to Tenant a statement setting forth Tenant's Proportionate Share of the Excess
Expenses for the preceding Comparison Year. If Tenant's Proportionate Share of
the actual Excess Expenses for the previous Comparison Year exceeds the total of
the estimated monthly payments made by Tenant for such year, Tenant shall pay
Landlord the amount of the deficiency within ten (10) days of the receipt of the
statement. If such total exceeds Tenant's Proportionate Share of the actual
Excess Expenses for such Comparison Year, then Landlord shall credit against
Tenant's next ensuing monthly installment(s) of additional rent an amount equal
to the difference until the credit is exhausted. If a credit is due from
Landlord on the Expiration Date, Landlord shall pay Tenant the amount of the
credit. The obligations of Tenant and Landlord to make payments required under
this Section 4.05(e) shall survive the Expiration Date.
(d) Tenant's Proportionate Share of Excess Expenses in any Comparison
Year having less than 365 days shall be appropriately prorated.
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Biosite Diagnostics
Addendum A
Page 3
(e) If any dispute arises as to the amount of any additional rent due
hereunder, Tenant shall have the right after reasonable notice and at reasonable
times to inspect Landlord's accounting records at Landlord's accounting office
and, if after such inspection Tenant still disputes the amount of additional
rent owed, a certification as to the proper amount shall be made by Landlord's
certified public accountant, which certification shall be final and conclusive.
Tenant agrees to pay the cost of such certification unless it is determined that
Landlord's original statement overstated Common Area Costs by more than five
percent (5%).
2. Insert the following language as Section S.03 (a) of the Lease:
Section 5.03(a) "HAZARDOUS MATERIALS
With respect to any release of toxic or hazardous substances or wastes
of the premises occurring on or after the date of this Lease and caused by or
resulting from the negligent acts or omissions or willful misconduct of Tenant,
its employees, authorized agents, or contractors, and which release or other
condition violates the provisions of, or necessitates any removal, treatment, or
other remedial action under, any past, present, or future federal, state or
local statute or ordinance or any regulation, directive, or requirement of any
governmental authority with jurisdiction relating to protection of the
environment, Tenant agrees to defend, indemnify, and hold harmless Landlord, its
partners. employees, from and against any and all losses, claims, liabilities,
damages, demands, fines, costs and expenses (including reasonable attorney's
fees and legal expenses) arising out of or resulting therefrom. The provisions
of this Paragraph shall survive the termination or expiration of this Lease and
the surrender of the premises by Tenant, with respect to releases, events, or
conditions occurring prior to such termination, expiration, or surrender. With
respect to any release of toxic or hazardous substances or wastes or other
condition of the premises occurring prior to or after the date of this Lease and
caused by or resulting from the negligent acts or omissions or willful
misconduct of Landlord, its employees, authorized agents, or contractors, and
which release or other condition violates the provisions of, or necessitates any
removal, treatment, or other remedial action under, any past present, or future
federal, state or local statute or ordinance or any regulation, directive, or
requirement of any governmental authority with jurisdiction relating to
protection of the environment, Landlord agrees to defend, indemnify, and hold
harmless Tenant and its employees from and
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Biosite Diagnostics
Addendum A
Page 4
against any and all losses, claims, liabilities, damages, demands, fines, costs
and expenses (including reasonable attorneys' fees and legal expenses) arising
out of or resulting therefrom.
3. Insert the following language as Section 5.03 (b) of the Lease:
Section 5.03 (b) "RELEASE REPORTING REQUIREMENTS
This is to inform you of your obligations to properly report unauthorized
releases of hazardous substances to appropriate authorities. If you do not
report such releases, a recently enacted law imposes an independent obligation
on property owner's to report these releases to the proper authorities. Because
of this new law, the owners of the property from whom you lease space have asked
that all tenants be notified of this reporting obligation. This is not intended
to, nor does it imply, that a release of hazardous substances has recently
occurred in, on, under or about your leased premises.
Federal and California law require that an unauthorized release of hazardous
substances be reported to federal and state agencies within twenty four (24)
hours of the occurrence. Historically, this reporting obligation has been
limited to the party responsible for causing the release. Recently, California
enacted legislation which strengthens this reporting obligation (California
Health & Safety Code Section 25359.4). Under Section 25359.4, among other
things, new reporting requirements are imposed upon the owners of property on
which the release occurred. Thus the owners of the property can be held
responsible for not reporting a release, even though the owners did not cause
the release. Penalties for not reporting a release can be as high as $25,000 per
day per violation {Health & Safety Code Section 2539.4(d).} These penalties can
be assessed against the party responsible for the release or the property owner.
Your lease requires that you operate your business in accordance with applicable
laws. Accordingly, you are responsible for determining your reporting
obligations if an unauthorized release of hazardous substances occurs in, on,
under or about your leaved premises. Should you be required to report such a
release to a government agency, you should also immediately notify your Property
Manager. If Trammell Crow, as manager of the property, becomes aware of an
unauthorized release and, in its sole judgment, determines that a reporting
obligation has been triggered, and if after consultation with you, or efforts
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Biosite Diagnostics
Addendum A
Page 5
to consult with you, it is determined that no report has been made by you,
Trammell Crow will report the release on behalf of the property owners warning
you as the sole responsible party. In addition to the foregoing, and as required
by your lease, any unauthorized release of a hazardous substance in, on, under
or about the property must be disclosed to Trammell Crow, whether or not this
release must be reported to an outside government agency.
In any situation where a hazardous substance release may have impacted the soil
beneath or around your leased space, or may have impacted the interior of your
leased space, the following additional steps should be undertaken. These steps
are:
Contact one or more qualified environmental consultants and request a
COST PROPOSAL to assess the extent of the impact. A copy of this
proposal should be forwarded to Trammell Crow for our review and
comments. New work will be authorized without our prior review and
approval. Once a consultant has been retained, a WORKPLAN should be
prepared detailing the actions to be taken to assess the extent of the
impact or the remediation method, as appropriate. A copy of this
WORKPLAN should be forwarded to Trammell Crow for our review and
comments. No work, in particular no soil testing or other intrusive
work, will be authorized without our prior review and approval.
Notify Trammell Crow when the work is scheduled to begin. A consultant
may be retained by the owners to oversee the work being conducted by
your consultant.
Conduct the work and provide to Trammell Crow a copy of a DRAFT report
documenting the problem, the extent of the impact, the procedures used
to address the release, and a conclusion by the consultant on the
adequacy of the remediable action taken. Since the report will become a
component of the permanent records of the property, Trammell Crow's
comments and approval are an integral part of this process.
Provide to Trammell Crow a copy of the FINAL report
We appreciate your attention to the contents in this Section 5.3. Trammell Crow,
as Property Manager, will be pleased to answer any questions you may have, or to
assist you in any way we can in your efforts to comply with these requirements.
The obligation to comply, however, is yours. If you have any questions, please
contact J. Kenneth Doole at (213) 724-2246.
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and Office Realtors, Inc.
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Biosite Diagnostics
Addendum A
Page 6
Mr. Doole will be glad to discuss the contents of this Section
with you.
4. Insert the following language as Section 6.01(a) of the Lease:
Section 6.01(a). "EXISTING CONDITIONS.
Landlord shall warrant that the HVAC is in good working condition for
the first twelve (12) months of the Lease Term.
5. Insert the following language as Section 14 of the Lease:
Section 14. "OPTION TO RENEW.
Subject to Tenant's compliance and performance of its Lease
obligations, Tenant shall be granted two (2) one (1) year Option(s) to Renew.
Tenant shall notify Landlord in writing of its intent to exercise said Option(s)
at least one hundred twenty (120) days prior to the expiration of the initial
Lease Term or the first Option to Renew. All Terms and Conditions shall remain
the same with the exception of Base Rent which shall be as follows:
October 1, 1998 - September 30, 1999 (First one-year option) - $12,229.70 per
month. October 1, 1999 - September 30, 2000 (Second one-year option) -
$12,753.83 per month
6. Insert the following language as Section 15 of the Lease:
Section 15. "CONSTRUCTION OF LEASED PREMISES
A. Tenant Improvement Allowance. Landlord shall provide Tenant an
allowance (The 'Tenant Improvement Allowance') which shall be applied to the
cost of the construction of Tenant Improvements (the 'Tenant Improvements') in
the Premises (excluding Tenant's trade fixtures) and which shall be in an amount
of Thirty-Four Thousand Nine Hundred Forty-Two Dollars ($34,942) which is based
on 17,471 rentable square feet multiplied by $2.00 per rentable square foot.
Tenant shall be responsible for the cost of all Tenant Improvements in excess of
the Tenant Improvement Allowance. As used herein, the phrase 'cost of the
construction of Tenant Improvements' shall mean and refer to all costs expended
by Tenant relative to the construction of Tenant Improvements, which shall
include, but shall not be limited to, costs of equipment, material and labor;
contractor's field overhead and fees; cost of preparation of
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Biosite Diagnostics
Addendum A
Page 7
preliminary space plans and specifications and working drawings; governmental
agency fees relating to said construction; costs of any requirements regarding
construction which are imposed by any federal, state or local governmental
entity or agency which are not reflected in the approved Plans and
Specifications for the Tenant Improvements; sales and use taxes (but not real
property taxes); permits; plan check fees; bonds; demolition; and other costs
directly related to the construction of the Tenant Improvements. Upon completion
of the Tenant Improvements, Tenant shall provide for Landlord a certification by
Tenant of the cost of such construction and a copy of the final unconditional
certificate of occupancy for the Premises issued by the city of San Diego and a
certification by Tenant's general contractor that the Tenant Improvements have
been constructed in a good and workmanlike manner in accordance with the Plans
and Specifications as defined in subparagraph B, below, and that all sums owing
to subcontractors, materialmen, laborers and other persons having mechanics'
lien rights have been paid (or, if any payment is in good faith disputed, have
been adequately bonded). Landlord shall reimburse Tenant the amount of the
construction costs, up to $34,942, within twenty (20) days of receipt and
approval of the items listed above. Landlord may withhold up to fifteen percent
(15%) of the Tenant Improvement Allowance until thirty-five (35) days after the
recordation of a notice of completion to help ensure that all mechanic's lien
claims have been paid or provided for. No part of the Tenant Improvement
Allowance may be expended for costs other than the costs of the construction of
Tenant Improvements which shall be deemed Leasehold Improvements. Tenant shall
be permitted to remove all trade fixtures that they install into the Premises.
B. Construction of Tenant Improvements. Subject to Section 6.01(a),
Tenant accepts the Premises in their present condition and shall be solely
responsible for the construction of the Tenant Improvements. Tenant shall
improve the Premises in accordance with the Plans and Specifications and such
requirements and upon such conditions as Landlord may impose in accordance with
normal standards currently in use by Landlord (the 'Work'). Tenant shall prepare
a preliminary layout with Landlord's cooperation and for Landlord's approval,
which approval shall not be unreasonably withheld or delayed. Landlord shall use
its best efforts to notify Tenant of Landlord's approval or disapproval of the
layout within five (5) days of Landlord's receipt. Upon approval of the layout,
Tenant shall prepare working drawings adequate in detail to perform the Work and
shall have necessary mechanical (sprinkler, air conditioning, heating,
electrical and plumbing) drawings prepared in consultation with a mechanical
engineer covering mechanical
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Biosite Diagnostics
Addendum A
Page 8
elements of the Work. The drawings, together with the preliminary layout, are
referred to as the 'Plans and Specifications.' All costs of preparing the Plans
and Specifications and performing the Work in excess of the Tenant Improvement
Allowance shall be at Tenant's sole cost and expense. Any review or approval by
Landlord of the Plans and Specifications shall be done without any
representation or warranty whatsoever to Tenant with respect to the adequacy,
correctness or efficiency thereof or otherwise. The Work shall be performed
pursuant to a general contract with a reputable licensed contractor with
experience in constructing tenant improvements in similar buildings in San Diego
County. Tenant shall select the contractor subject to Landlord's approval, which
shall not be unreasonably withheld or delayed. Landlord shall have no liability
for any defects or deficiencies in the Work.
C. Entry To Perform Work. Landlord shall permit Tenant and Tenant's
agents to enter the Premises prior to the Commencement Date in order that Tenant
may do the Work. Tenant agrees that any such entry into and occupation of the
Premises shall be deemed to be under all of the terms, covenants, conditions and
provisions of this Lease except as to the covenant to pay the Rent, and further
agrees that Landlord shall not be liable in any way for any injury, loss or
damage which may occur to any of the Work and installations made in the Premises
or to any property placed therein prior to the Commencement of the Term, the
same being at Tenant's sole risk. During construction of Tenant's Work, Tenant
shall obtain and maintain standard 'course of construction' insurance in form
and content reasonably acceptable to Landlord naming Landlord (and, at
Landlord's request, any mortgagee of the Land and/or Building) as additional
insured.
D. Representatives. Landlord appoints Landlord's Representative to act
for Landlord and Tenant appoints Tenant's Representative to act for Tenant in
all matters covered by this Section 15. All inquiries, requests, instructions,
authorizations and other communications with respect to the matters covered by
this Section will be made to Landlord's Representative or Tenant's
Representative, as the case may be. Either party may change its Representative
at any time with three (3) days' prior written notice to the other party.
Tenant's Representative: Michael Dunbar
Landlord's Representative: Shelly Bruce
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Biosite Diagnostics
Addendum A
Page 9
E. Landlord's Approval. The Plans and Specifications (including any
revisions requested by Tenant) shall be subject to Landlord's approval, which
shall not be unreasonably withheld and shall be given (or denied, with the
reasons therefor specified) within five (5) days after receipt of Tenant's
request therefor. Without limiting the foregoing, it shall not be unreasonable
for Landlord to disapprove the Plans and Specifications if they require work
which:
(a) exceeds or affects the structural integrity of the Building, or any
part of the heating, ventilating, air conditioning, plumbing, mechanical,
electrical, communication or other systems of the Building;
(b) is not approved by the holder of any mort&age or deed of trust
encumbering the Building at the time the work is proposed;
(c) would not be approved by a prudent owner of property similar to the
Building;
(d) violates any agreement which affects the Building or binds
Landlord;
(e) Landlord reasonably believes will increase the cost of operation or
maintenance of any of the systems of the Building;
(f) Landlord reasonably believes will reduce the market value of the
Premises or the Building at the end of the Term;
(g) does not conform to applicable building code or is not approved by
any governmental authority with jurisdiction over the Premises; or
(h) does not conform to a quality consistent with other tenant
improvements constructed using Building Standard materials within the Building.
G. Completion Of Improvements; Commencement Date. The Term shall
commence on the specified Commencement Date or such earlier date as the work has
been substantially completed and Tenant has occupied the Premises. (If the Term
commences before the specified Commencement Date, the Termination Date shall be
twenty-four (24) months following the actual Commencement Date and the parties
shall prepare and sign a memorandum setting forth such dates.)
1988 Southern California Chapter Initials ________
of the Society of Industrial
and Office Realtors, Inc.
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Biosite Diagnostics
Addendum A
Page 10
F. Compliance with ADA. Landlord and Tenant are aware that a new
federal law, commonly known as the Americans With Disabilities Act ("ADA"), has
recently become effective. The parties agree that Landlord shall be responsible
for making any modifications to the Land and/or Building which are necessary to
comply with the ADA, and Tenant shall be responsible for ensuring that Tenant's
Work (and any alterations thereto made by Tenant) complies with the ADA. Each
party agrees to cooperate with the other in a reasonable manner to comply with
the ADA.
BIOSITE Diagnostics, Inc. a California corporation
By: /s/ Kim D. Blickenstaff
__________________________
Kim D. Blickenstaff
Title: President
Date: ___________________________
TCEP II PROPERTIES LIMITED PARTNERSHIP, a Texas limited
partnership
By: TCEP II Holdings, L.L.C., a Texas liability company, its
General Partner
By: Trammell Crow Equity Partners II, Ltd., a Texas
limited partnership, a Member
By: Trammell Crow Ventures #2, Ltd., a Texas limited
partnership, its General Partner
By: Trammell Crow Ventures #3, Ltd., a Texas limited
partnership, its General Partner
By: Trammell Crow Ventures Management Company,
Inc., a Texas corporation, its General
Partner
By: /s/ Jeffrey Chavez
____________________________
Title: Vice President
____________________________
Date: 8/12/96
____________________________
1988 Southern California Chapter Initials ________
of the Society of Industrial
and Office Realtors, Inc.
(Multi-Tenant Gross Form)
-10-
<PAGE> 39
Biosite Diagnostics
Addendum A
Page 11
EXHIBIT "A"
GRAPHICS OMITTED
1988 Southern California Chapter Initials ________
of the Society of Industrial
and Office Realtors, Inc.
(Multi-Tenant Gross Form)
-11-
<PAGE> 40
Biosite Diagnostics
Addendum A
Page 12
EXHIBIT "B"
SIGN CRITERIA
Sign Criteria establishes the uniform policies for all lessee sign
identification. These criteria have been established for the purpose of
maintaining the overall appearance of the project. Conformance will be strictly
enforced. Any sign installed that does not conform to the sign criteria will be
brought into conformity at the expense of the Lessee.
A. GENERAL REQUIREMENTS
1. A drawing of all proposed Lessee's signs indicating copy,
sizes, color, and locations shall be submitted to the Trammell
Crow Company, prior to fabrication of any sign.
2. Trammell Crow Company shall approve all copy and/or logo
design and color prior to the fabrication of the sign, which
approval shall occur in a timely manner and shall not be
unreasonably withheld.
3. Trammell Crow Company shall direct the placement of
all Lessee's signs and the method of attachment to the
building.
4. Lessee shall be responsible for the fulfillment of
requirements for this criteria.
5. Sign fabrication and installation shall be paid for by
the Lessee.
B. GENERAL SPECIFICATIONS
1. Lessee shall be allowed one (1) corporate name and
logo sign per building regardless of size of
occupancy.
2. Lessee shall be allowed to install signs identifying
non-reserved parking, shipping, receiving, and other areas of
the Premises which require proper identification for third
parties conducting business with Lessee, as well as other
signs that are required pursuant to Federal, State or Local
Municipal Laws and Regulations.
1988 Southern California Chapter Initials ________
of the Society of Industrial
and Office Realtors, Inc.
(Multi-Tenant Gross Form)
-12-
<PAGE> 41
Biosite Diagnostics
Addendum A
Page 13
3. All signs to be of individual letters and logos
consistent with the style, color and size of all
others in the Industrial Park. No cans, frames or
panels are permitted.
4. No electrical or audible signs will be allowed.
5. Upon the removal of any sign, any damage to the building will
be prepared by the Lessee, except for any damage resulting
from negligent or otherwise improper removal of a sign by a
party acting under the direction of Lessor.
6. Except as provided herein, no advertising placards, banners,
pennants, names, insignia, trademarks, or other descriptive
material shall be affixed or maintained upon any external
automated machine, glass panes of the building, landscaped
areas, streets or parking areas, except for signs indicating
the Premises are protected by security services.
Please contact Trammell Crow Company for approvals of your signs.
1988 Southern California Chapter Initials ________
of the Society of Industrial
and Office Realtors, Inc.
(Multi-Tenant Gross Form)
-13-
<PAGE> 42
Biosite Diagnostics
Addendum A
Page 14
EXHIBIT "C"
ASBESTOS NOTIFICATION FOR
SORRENTO WEST INDUSTRIAL PARK
California law requires landlords to notify tenants regarding the presence of
construction materials containing asbestos in their workplace. This letter is to
inform you about asbestos-containing construction materials ("ACCM"), at
Sorrento West Industrial Park, located at 11180 Roselle Street in the City of
San Diego, California 92121.
A survey of the building was conducted by an environmental consultant, H+GCL,
during August and September 1993 in order to determine whether
asbestos-containing construction materials were present. H+GCL took bulk samples
of all suspected ACCM in the building, which then were analyzed by the polarized
light microscopy method recommended by the U.S. Environmental Protection Agency.
The survey report indicated that in various areas throughout Sorrento West
Industrial Park, the following building materials were identified to contain
five to thirty percent chyrsotile asbestos: drywall mud/tape compound, floor
tile and mastic, linoleum sheeting, and mastic on the underside of sinks.
H+GCL's final assessment of the building indicated that the ACCM is non-friable
and in good condition. The portions of the survey report that deal with ACCM in
Sorrento West Industrial Park, including laboratory results with respect to bulk
samples of suspected ACCM, are available for your review from Dr. Ken Doole,
Environmental Project Manager at Environmental Asset Services, Inc, 5801 S.
Eastern Avenue, Suite 100, Commerce, California 90040 from 8:00 to 5:00 p.m.
each business day.
EPA has found that as long as asbestos-containing construction materials remain
undisturbed, exposure is unlikely and building occupants are unlikely to be
subject to health hazards from these materials. Your assistance in avoiding any
disturbance of the ACCM in the building is requested. Ken Doole must authorize
any repair or renovation work in areas containing ACCM. Additionally, Ken Doole
has to authorize all work that may disturb or damage floor tile, sheeting,
drywall or sinks in the building. During any period when work is being done in
areas containing ACCM, the areas will be closed to all but those workers
involved in the project. Warning signs will be posted, and building occupants
and other users must comply with instructions regarding access to the area.
1988 Southern California Chapter Initials ________
of the Society of Industrial
and Office Realtors, Inc.
(Multi-Tenant Gross Form)
-14-
<PAGE> 43
Biosite Diagnostics
Addendum A
Page 15
EXHIBIT "D"
DISCLOSURE NOTICE TO TENANTS
REGARDING SORRENTO WEST INDUSTRIAL PARK
In January of 1995, portions of the Sorrento West Industrial Park were flooded
as a result of inordinately heavy rains during that month. Any damage which may
have occurred to the property has since been repaired or is under repair. The
owner is currently working in conjunction with other property owners in the area
to finance and obtain approval for flood control improvements which will prevent
future flooding in the event of another series of heavy rains.
1988 Southern California Chapter Initials ________
of the Society of Industrial
and Office Realtors, Inc.
(Multi-Tenant Gross Form)
-15-
<PAGE> 1
EXHIBIT 11.1
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -----------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income (loss)............................. $ (426) $2,356 $7,908 $5,028 $2,613
====== ====== ====== ====== ======
Weighted average common shares outstanding.... 1,144 1,153 1,225 1,184 1,420
Net effect of dilutive common share
equivalents (stock options) using the
treasury stock method....................... -- 446 564 583 366
Effect of assumed conversion of preferred
shares...................................... 8,329 8,329 8,329 8,329 8,329
Effect of assumed conversion of convertible
debenture................................... -- -- 23 -- 92
Adjustments to reflect requirements of the
Securities and Exchange Commission (Effect
of SAB 83).................................. 625 625 625 625 625
------ ------ ------ ------ ------
Adjusted shares outstanding................. 10,098 10,553 10,766 10,721 10,832
====== ====== ====== ====== ======
Pro forma net income (loss) per share......... $(0.04) $ 0.22 $ 0.74 $ 0.47 $ 0.24
====== ====== ====== ====== ======
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Financial Data" and to the use of our report dated November 12, 1996,
except for Note 7, as to which the date is December 5, 1996, in Amendment No.1
to the Registration Statement (Form S-1 No. 333-17657) and related Prospectus of
Biosite Diagnostics Incorporated for the registration of 2,300,000 shares of its
common stock.
/s/ ERNST & YOUNG LLP
San Diego, California
December 19, 1996
