<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1997
REGISTRATION NO. 333-17657
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 5 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 AN 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 February 10, 1997
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>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- -------------------------------------------------------------------------------------------------
<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
LOGO
IMMEDIATE RESPONSE DIAGNOSTICS(TM)
TRIAGE(R) PANEL
FOR DRUGS OF ABUSE
EMERGENCY ROOM SCREENING
TRIAGE(R) PLUS TCA
TRIAGE(R) EMERGENCY ROOM SCREENING
PANEL FOR TRIAGE(R) INTERVENTION
DRUGS OF ABUSE WORKPLACE SCREENING
MERCK TRIAGE(R)
INTERNATIONAL MARKETS
[PHOTOGRAPHS SHOWING TRIAGE DOA TEST DEVICE AND VARIOUS TRIAGE DOA PRODUCT
CONFIGURATIONS]
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.
<PAGE> 4
IMMEDIATE RESPONSE DIAGNOSTICS(TM) 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
PRODUCTS UNDER DEVELOPMENT
TRIAGE(R) PANELS
TRIAGE(R) O & P
(PARASITE SCREENING)
TRIAGE(R) C.DIFF
(PATHOGEN DETECTION)
TRIAGE(R) ENTERIC
(PATHOGEN SCREENING)
TRIAGE(R) CARELINK SYSTEM
TRIAGE(R) CARDIAC
(ACUTE MYOCARDIAL
INFARCTION DETECTION)
TRIAGE(R) TRANSPLANT
(CYCLOSPORINE MONITORING)
[PHOTOGRAPHS SHOWING THE COMPANY'S PRODUCTS UNDER DEVELOPMENT]
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%
to 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
$25.1 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 Novartis Pharma Inc.
("Novartis," formerly Sandoz Pharma Ltd.) 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. The products covered by such
arrangements are currently under development and have not generated any revenue
for the Company. In addition, the Company uses the Curtin Matheson Scientific
division of Fisher Scientific Company ("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, Asia and Africa.
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................................... 11,894,642 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 1,280,180 shares reserved for issuance upon exercise of stock
options outstanding at December 31, 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
Settlement of patent matters............ -- -- -- 338 1,217 743 2,368
------- ------- ------- ------- ------- ------- -------
Total operating expenses................ 4,564 6,215 7,637 10,134 14,904 10,548 14,999
Income (loss) from operations........... (4,564) (4,907) (1,039) 1,770 4,594 3,907 908
Interest and other income, net.......... 260 630 613 649 1,647 1,253 1,441
------- ------- ------- ------- ------- ------- -------
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 FOR REVENUE GROWTH
AND PROFITABILITY
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."
LIMITED HISTORY OF PROFITABILITY; POTENTIAL QUARTERLY FLUCTUATIONS IN FUTURE
OPERATING RESULTS
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 OF THE COMPANY ON TRIAGE DOA
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 KEY DISTRIBUTORS; LIMITED DIRECT SALES EXPERIENCE
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, Asia and Africa by Merck. The loss or
termination of either of these distributors could have a material adverse effect
on the Company's sales unless suitable alternatives can be arranged. 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 portion of a penalty CMS incurred in 1996 and allows the
Company to appoint a new distributor or to sell Triage DOA directly in the U.S.
medical market.
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.
Biosite currently has an agreement with Merck regarding distribution of
Triage Cardiac in certain countries in Europe and Latin America and in South
Africa. 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 can be no assurance that a
suitable third party will be found or if the rights are returned to the Company,
that the Company can make successful alternative distribution arrangements. 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, or if the Company
elects to distribute new products directly that the Company's direct sales,
marketing and distribution efforts would be successful. See
"Business -- Strategic and Distribution Arrangements."
DEPENDENCE ON OTHERS FOR THE DEVELOPMENT OF NEW PRODUCTS
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.
Biosite has entered into agreements with, among others, Merck, Novartis 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
7
<PAGE> 11
collaborators will abide by their contractual obligations or will not
discontinue or sell their current lines of business. 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.
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."
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 -- Technology," " -- Products and Products Under
Development" and "-- Competition."
UNCERTAINTY OF PATENT AND PROPRIETARY TECHNOLOGY PROTECTION; POTENTIAL INABILITY
TO LICENSE TECHNOLOGY FROM 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
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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 Company recently received a letter from Becton Dickinson and Company
("B-D"), a major manufacturer of medical supplies, devices and diagnostic
systems, offering to license a U.S. patent held by B-D to the Company. B-D did
not propose any license terms in its letter. The Company has reviewed such
patent and believes that it has defenses to any infringement claim under such
patent. In addition, Biosite recently received a letter from Spectral
Diagnostics Incorporated ("Spectral"), a manufacturer of rapid-format
cardiac-diagnostic panels, informing the Company that Spectral holds a U.S.
patent covering a kit for diagnosing and distinguishing chest pain and that it
recently received a notice of allowance from the USPTO with respect to a second
patent application. This letter states that Spectral has not yet determined its
position with respect to the licensing of its technology. The Company is
currently reviewing the issued patent cited in this letter and the materials
provided by Spectral with respect to the allowed patent application and is
evaluating their potential impact on Triage Cardiac. There can be no assurance
that B-D or Spectral will not initiate litigation alleging that Triage DOA or
Triage Cardiac, respectively, infringe claims under such manufacturer's patents.
Such litigation, if initiated, could seek to recover damages as a result of any
sales of such products and to enjoin further such sales. The outcome of
litigation is inherently uncertain and there can be no assurance that a court
would not find such claims valid and that the Company had no successful defense
to such claims. An adverse outcome in litigation or the failure to obtain a
necessary license could subject the Company to significant liability and could
prevent Biosite from selling Triage DOA or Triage Cardiac which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
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 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
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Celltech's corresponding EPO-granted patent which may be relevant to Biosite's
products and products under development. Celltech has indicated that it will
appeal such decision. If Celltech does appeal, such claims can be reinstated, at
least until a final decision is rendered. 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,
or if patent infringement litigation is brought against the Company by either
Celltech or Genentech 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 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 may 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. See "Business -- Proprietary Technology and
Patents."
GOVERNMENT REGULATION; NO ASSURANCE OF OBTAINING REGULATORY APPROVALS
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
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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 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
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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.
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 62.9% 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 directors and the approval of mergers
or other business combination transactions. See "Principal Stockholders."
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."
LIMITED MANUFACTURING EXPERIENCE; POTENTIAL INABILITY TO SCALE-UP MANUFACTURING
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,
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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.
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
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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; UNCERTAINTY OF ADDITIONAL FUNDING
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."
POTENTIAL INABILITY TO MANAGE 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 EXPOSURE; INADEQUACY OR UNAVAILABILITY OF INSURANCE COVERAGE
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 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.
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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; POTENTIAL ADVERSE EFFECT ON STOCK PRICE
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 257,661
shares will be eligible for resale in the public market, in reliance upon Rule
144(k) under the Securities Act. In addition, 236,130 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 144 or Rule 701 under the Securities Act.
Additionally, 1,399,274 and 7,909,355 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
2,206,486 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."
POTENTIAL ANTI-TAKEOVER EFFECTS 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."
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ABSENCE OF DIVIDENDS; IMMEDIATE AND SUBSTANTIAL DILUTION
The Company has never paid cash dividends on its capital stock and does not
anticipate paying any cash dividends in the foreseeable future. The initial
public offering price will be substantially higher than the net tangible book
value per share of Common Stock. Purchasers of shares of Common Stock in this
offering will incur immediate and substantial dilution of $8.68 per share
assuming an initial public offering price of $12.00 per share. See "Dividend
Policy" and "Dilution."
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 of approximately $8.6 million 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. In addition, the Company's management may need to change the
allocation of net proceeds (i) to further expand direct sales capabilities, in
the event of termination of any distribution agreement, or (ii) to obtain
licenses to third party intellectual property, if the Company believes such
licenses are in the Company's best interest. 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.
16
<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 1,280,180 shares of Common Stock reserved for issuance upon
exercise of stock options outstanding at December 31, 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
December 31, 1996, there were outstanding options to purchase an aggregate of
1,280,180 shares of Common Stock at a weighted average exercise price of $3.45
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
Settlement of patent matters........................ -- -- -- 338 1,217 743 2,368
-------- -------- -------- --------- --------- --------- ---------
Total operating expenses............................ 4,564 6,215 7,637 10,134 14,904 10,548 14,999
Income (loss) from operations....................... (4,564) (4,907) (1,039) 1,770 4,594 3,907 908
Interest and other income, net...................... 260 630 613 649 1,647 1,253 1,441
-------- -------- -------- --------- --------- --------- ---------
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, Asia and Africa 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
Settlement of patent matters........... -- 2 5 4 12
---- ---- ---- ---- ----
Total operating expenses............... 77 63 60 58 74
Income (loss) from operations.......... (10) 10 18 21 5
Other income, net...................... 6 4 7 7 7
---- ---- ---- ---- ----
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 is
primarily attributable to the Company's expansion of the Triage DOA product line
to include the higher-priced Triage DOA Plus TCA product, which was launched in
February 1995. Sales of Triage DOA Plus TCA increased 48% to $9.4 million in the
first nine months of 1996 from $6.3 million in the first nine months of 1995. As
a result of the market acceptance of the Triage DOA Plus TCA, a shift in sales
from other Triage DOA products occurred as customers converted their orders to
the Triage DOA Plus TCA product.
Gross Profit. Gross profit increased 10% to $15.9 million in the first
nine months of 1996 as a result of increased sales for the Triage DOA product
line. Gross margins were constant at 79% in the first nine months of 1996 and
1995. Included in cost of sales for the nine months ended September 30, 1996 is
amortization related to technology license agreements entered into in 1996,
totaling $470,000. This increase in the cost of sales was offset by continued
improvements in the Company's manufacturing efficiency.
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.
21
<PAGE> 25
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.
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.
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.
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. This increase is primarily
attributable to the Company's continued acceptance and the introduction of
Triage DOA Plus TCA, which was launched in February 1995. Sales of Triage DOA
Plus TCA totaled approximately $9.6 million in 1995.
Gross Profit. Gross profit increased $7.6 million to $19.5 million for the
year ended December 31, 1995 primarily as a result of the introduction of the
higher priced Triage DOA Plus TCA. Gross margin increased to 78% for the year
ended December 31, 1995 from 73% in 1994. The Company increased its
manufacturing efficiency during 1995 resulting in a reduction of per unit cost
of sales. This reduction was partially offset by an increase in cost of sales of
$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.
22
<PAGE> 26
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, 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.
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.
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 $11.6 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.
Settlement of Patent Matters. Settlement of patent matters expense in 1994
consisted solely of legal defense costs related to the patent litigation
described above.
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.
Benefit (Provision) for Income Taxes. The Company utilized $5.4 million in
net operating loss carryforwards in fiscal 1994 which reduced the provision for
income taxes to $63,000.
23
<PAGE> 27
UNAUDITED RECENT FINANCIAL RESULTS
The Company's revenue, income before provision for income taxes and net
income for the three months ended December 31, 1996 were $8.0 million, $1.5
million and $936,000, respectively, which constituted a $1.1 million increase in
revenue, a $379,000 increase in pre-tax income and a $1.9 million decrease in
net income from the three months ended December 31, 1995.
The increase in revenue and gross margins during this period was primarily
attributable to the continued market acceptance of the Company's products and a
shift in sales from other Triage DOA products to the Triage DOA Plus TCA
product. Included in cost of sales for the fourth quarter of 1995 was $405,000
of amortization for the year ended December 31, 1995 related to a license right
obtained in December 1995. Operating expenses for the three months ended
December 31, 1996 increased $903,000 as compared to the three months ended
December 31, 1995. Sales and marketing expenses increased $430,000 as a result
of the expansion of sales efforts and marketing programs. Research and
development expenses increased approximately $801,000 primarily as a result of
the acquisition of licenses to certain in-process technology. The increase in
operating expenses was partially offset by a decrease in settlement of patent
matters expenses of $474,000. The decrease in net income during the three months
ended December 31, 1996 over the comparable period in the prior year resulted
primarily from the reduction of the valuation allowance for deferred tax assets
of $1.8 million during the fourth quarter of 1995 as the realization of such
assets became probable.
The Company has experienced, and expects to continue to experience,
significant fluctuations in its quarterly results. 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.
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.
During the nine months ended September 30, 1996, the Company generated $1.1
million in cash from operating activities. Cash generated from net sales was
reduced primarily by the payment of $2.2 million for a license right accrued as
of December 31, 1995 and the payment of $2.0 million to settle patent litigation
with Abbott Laboratories. Cash generated from operating activities was offset by
cash used in investing activities, primarily the acquisition of license rights
from Abbott Laboratories for $3.5 million. Additionally, other significant
business activities affecting cash included the generation of $2.9 million in
cash as a result of maturing marketable securities which were not reinvested,
the expenditure of $1.4 million for capital equipment and leasehold improvements
and the receipt of $1.4 million in proceeds from equipment financing.
During 1995 and 1994, the Company generated $7.9 million and $1.9 million
of cash from operating activities, respectively. In 1995, the Company used $8.5
million in cash for investing activities, which primarily consisted of increased
investment in marketable securities of $6.2 million and the purchase of capital
equipment for $2.7 million. Additionally, the Company generated $2.5 million in
cash from financing activities which consisted primarily of proceeds from the
issuance of a $1.0 million convertible debenture and proceeds of capital
equipment financing of $2.3 million.
The Company's primary short-term needs for capital, which are subject to
change, are for expansion of its manufacturing capacity to adequately deliver
new products, expansion of its direct sales force and marketing programs related
to new products and the continued advancement of research and development
efforts. The Company currently plans to expend approximately $4.0 million for
the expansion and development of its
24
<PAGE> 28
manufacturing capabilities in connection with the anticipated launch of the
Company's products currently under development. The Company utilizes credit
arrangements with financing companies and leasing companies for financing the
purchase of capital equipment. As of December 31, 1996, the Company had a $2.5
million equipment financing arrangement with a financial institution, of which
approximately $2,223,000 was available for future borrowing. The line of credit
expires on December 31, 1997. Additionally, the Company utilizes cash generated
from operating activities to meet its capital requirements.
The Company expects its capital requirements to increase over the next
several years as it expands its research and development efforts, sales and
administration infrastructure, manufacturing capabilities and facilities. 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.
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. Thereafter, if cash generated from operations is insufficient to
satisfy the Company's working capital and capital expenditure requirements, the
Company may be required to sell additional equity or debt securities or obtain
additional credit facilities. There can be no assurance that such financing, if
required, will be available on satisfactory terms, if at all.
25
<PAGE> 29
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 Novartis 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. The products
covered by such arrangements are currently under development and have not
generated any revenue for the Company. 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, Asia and Africa.
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
26
<PAGE> 30
and cancer antigens. They also provide accurate and highly sensitive test
results and help to simplify the 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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<PAGE> 31
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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<PAGE> 32
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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<PAGE> 33
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.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
STATUS/EXPECTED
U.S. REGULATORY CORPORATE
PRODUCTS APPLICATION ANALYTE TARGETS PATHWAY(1) PARTNER(2)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TRIAGE Triage Panel Drug Screening Phencyclidine On the Market/ CMS, Merck
PANELS 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),
TRIAGE Cardiac Myocardial Troponin I 510(k) KDK, LRE
CARELINK Infarction Myoglobin
SYSTEMS Detection
----------------------------------------------------------------------------------------------------------
Triage Drug Monitoring Cyclosporine In Development/ Novartis,
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.
<PAGE> 34
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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<PAGE> 35
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:
[GRAPHIC]
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, Asia and Africa.
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> 36
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> 37
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 1995 over four million O&P microscopic examinations
were 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. Novartis 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
Novartis, 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 Novartis 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, Asia 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. Under the provisions of Biosite's existing arrangements, Biosite
is not obligated to make any material capital expenditures. Biosite does
currently plan to expend approximately $4.0 million for the expansion and
development of its manufacturing capabilities in connection with the anticipated
launch of the Company's products currently under development. If products are
successfully developed under certain of the Company's existing arrangements,
royalties will be payable by the Company at rates up to 8% of sales of products
which incorporate licensed technology.
Curtin Matheson Scientific division of Fisher Scientific Company
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. Under certain circumstances, the Company is obligated to make a
one-time payment to CMS in the event that the Company elects to terminate the
CMS Agreement without cause or to engage in a merger, reorganization or transfer
or sale of substantially all of its stock or assets to which the CMS Agreement
relates, provided that CMS gives timely notice of objection to such merger,
reorganization or transfer or sale of stock or assets. CMS purchases Triage DOA
on a monthly basis through firm purchase orders on a per device fixed price
basis. CMS accounted for 88%, and 80% of Biosite's product sales for the year
ended December 31, 1995 and the nine months ended September 30, 1996,
respectively. In March 1996, the parties executed an amendment to the CMS
Agreement, setting forth certain purchase and cumulative sales targets for the
first half of 1996 and third and fourth quarters of 1996 which if not met gave
Biosite the option to terminate the CMS Agreement and further obligated CMS to
pay to Biosite a penalty if it failed to meet such purchase and cumulative sales
targets for 1996. CMS missed the first half of 1996 purchase and cumulative
sales targets by 18% and consequently incurred a penalty. In August 1996,
Biosite agreed to continue the distribution agreement and to forgive a portion
of the penalty each year that CMS meets additional sales milestones commencing
with the fourth quarter of 1996 and continuing through 1999. The August 1996
agreement eliminated the 1996 third quarter purchase and cumulative sales
targets, and the 1996 fourth quarter purchase and cumulative sales targets were
replaced by revised milestones. The revised milestones are based upon quarterly
average monthly kit sales of Triage DOA (each kit consisting of 25 Triage DOA
devices). CMS achieved the initial sales target for the fourth quarter of 1996
and consequently a portion of the penalty has been forgiven. There can be no
assurance that the additional targets will be met. The CMS Agreement provides
for a six-month transition period in the
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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, Asia and Africa. Merck purchases Triage DOA in U.S. dollars on a quarterly
basis through firm purchase orders on a per device fixed price basis. The
distribution agreement provides for minimum annual purchase quantities. Merck
accounted for $1,345,000 and $1,652,000 of Biosite's product sales for the year
ended December 31, 1995 and the nine months ended September 30, 1996,
respectively.
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 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. The total cost of the development of
Triage Cardiac is estimated to be approximately $10.0 million. If Triage Cardiac
is approved for commercial sale, Merck will purchase the Triage Cardiac test
cartridges from Biosite in U.S. dollars on a quarterly basis through firm
purchase orders on a per device formula price basis. Merck will purchase the
Triage CareLink meter directly from LRE. Under certain circumstances, if the
Company is unable to supply forecasted quantities of Triage Cardiac to Merck,
Merck can obtain a license to manufacture Triage Cardiac for its requirements in
return for a royalty payable to Biosite. 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. Under the terms of the LRE Agreement, the Company's obligations for
development expenses and costs are not to exceed approximately $1.9 million, of
which approximately $470,000 is for prototype and preproduction tooling costs.
As of September 30, 1996, the Company had paid or accrued expenses and costs
under the LRE Agreement of approximately $1.77 million. 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. Biosite will purchase the Triage
CareLink meter from LRE in Deutsche Marks on a quarterly basis through firm
purchase orders on a per device price basis which varies according to sales
volume. Biosite has the right to designate third parties, including Merck, who
can purchase Triangle CareLink meters directly from LRE.
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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. If Triage Cardiac is approved for
commercial sale, KDK will purchase Triage Cardiac test cartridges from Biosite
in U.S. dollars on a quarterly basis through firm purchase orders on a per
device fixed price basis. KDK will also purchase the Triage CareLink meter from
the Company on a per device fixed price basis. The distribution agreement
provides for minimum annual purchase quantities. KDK can terminate this
agreement at any time.
Novartis Pharma Inc.
In September 1995, the Company entered into two license agreements with
Novartis 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
Novartis antibodies and related technologies. The agreements contemplate that
the Company is to be responsible for all costs associated with the development
of Triage Transplant. Additionally, upon entering into the two licenses, the
Company made certain initial payments (aggregating approximately $325,000) to
Novartis and is obligated to make additional payments of up to approximately
$225,000 to Novartis 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,
Novartis 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 Novartis up to $1.0 million in 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 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.
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The Company recently received a letter from B-D, a major manufacturer of
medical supplies, devices and diagnostic systems, offering to license a U.S.
patent held by B-D to the Company. B-D did not propose any license terms in its
letter. The Company has reviewed such patent and believes that it has defenses
to any infringement claim under such patent. In addition, Biosite recently
received a letter from Spectral, a manufacturer of rapid-format
cardiac-diagnostic panels, informing the Company that Spectral holds a U.S.
patent covering a kit for diagnosing and distinguishing chest pain and that it
recently received a notice of allowance from the USPTO with respect to a second
patent application. This letter states that Spectral has not yet determined its
position with respect to the licensing of its technology. The Company is
currently reviewing the issued patent cited in this letter and the materials
provided by Spectral with respect to the allowed patent application and is
evaluating their potential impact on Triage Cardiac. There can be no assurance
that B-D or Spectral will not initiate litigation alleging that Triage DOA or
Triage Cardiac, respectively, infringe claims under such manufacturer's patents.
Such litigation, if initiated, could seek to recover damages as a result of any
sales of such products and to enjoin further such sales. The outcome of
litigation is inherently uncertain and there can be no assurance that a court
would not find such claims valid and that the Company had no successful defense
to such claims. An adverse outcome in litigation or the failure to obtain a
necessary license could subject the Company to significant liability and could
prevent Biosite from selling Triage DOA or Triage Cardiac which could have a
material adverse effect on the company's business, financial condition and
results of operations.
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 may be relevant
to Biosite's products and products under development. Celltech has indicated
that it will appeal such decision. If Celltech does appeal, such claims can be
reinstated, at least until a final decision is rendered. 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, or if patent infringement litigation is brought against the
Company by either Celltech or Genentech, 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
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trade secrets or disclose such technology, or that the Company can meaningfully
protect 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 may 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
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<PAGE> 45
Company's ability to make, use or sell its products either in the United States
or in international markets. See " -- Technology and "-- Products and Products
under Development."
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.
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
42
<PAGE> 46
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 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
43
<PAGE> 47
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 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.
44
<PAGE> 48
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their positions with
the Company and ages as of December 31, 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. ......... 43 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. Mr. Twomey
holds a B.A. in Business Economics from the University of California at Santa
Barbara.
45
<PAGE> 49
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, 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.
46
<PAGE> 50
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.
47
<PAGE> 51
EXECUTIVE COMPENSATION
The following table sets forth compensation paid or awarded by the Company
during the fiscal years ended December 31, 1995 and 1996 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
$100,000 during 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------------- SECURITIES
OTHER UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($) COMPENSATION ($)(2) OPTIONS
- ------------------------------------- ---- ------------- --------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Kim D. Blickenstaff.................. 1996 $ 189,242 $92,991 $ 980 100,000(4)
President and Chief Executive 1995 169,633 78,462 900 40,000
Officer
Charles W. Patrick................... 1996 157,409 29,086 540 50,000(4)
Vice President, Sales and Marketing 1995 151,000 27,002 59,290(3) 5,000
Gunars E. Valkirs.................... 1996 151,545 60,450 844 50,000(4)
Vice President, Research and 1995 139,208 36,244 793 25,000
Development
Kenneth F. Buechler.................. 1996 140,466 60,450 768 50,000(4)
Vice President, Research 1995 125,823 36,244 709 25,000
S. Nicholas Stiso.................... 1996 146,033 26,042 1,980 50,000(4)
Vice President, Operations 1995 134,554 27,002 1,787 20,000
</TABLE>
- ---------------
(1) Includes amounts deferred by each individual under the Company's 401(k)
Plan.
(2) Except where noted amounts represent payments on behalf of each individual
for group term life insurance and separate term life insurance.
(3) Amount also includes forgiveness of a $36,000 relocation loan made in August
1990 which was forgiven in August 1995 and $22,776 related to income taxes
associated with the forgiveness of the loan.
(4) On September 6, 1996, one half of these options were cancelled.
The following tables set forth certain information as of December 31, 1996
and for the fiscal year then ended with respect to stock options granted to and
exercised by the individuals named in the Summary Compensation Table above.
OPTION GRANTS IN FISCAL YEAR 1996
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL RATE
PERCENTAGE OF OF STOCK PRICE
TOTAL OPTIONS APPRECIATION
GRANTED TO EXERCISE OR FOR OPTION TERM(5)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED (1) FISCAL YEAR ($/SH)(4) DATE 5% ($) 10% ($)
- ---------------------------------- ----------- ------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Kim D. Blickenstaff............... 50,000(2) 5.2319% $8.25 5/17/06 $259,419 $657,419
50,000(3) 5.2319% $5.50 9/6/06 $172,946 $438,279
Charles W. Patrick................ 25,000(2) 2.6111% $8.25 5/17/06 $129,710 $328,709
25,000(3) 2.6111% $5.50 9/6/06 $ 86,473 $219,140
Gunars E. Valkirs................. 25,000(2) 2.6111% $8.25 5/17/06 $129,710 $328,709
25,000(3) 2.6111% $5.50 9/6/06 $ 86,473 $219,140
Kenneth F. Buechler............... 25,000(2) 2.6111% $8.25 5/17/06 $129,710 $328,709
25,000(3) 2.6111% $5.50 9/6/06 $ 86,473 $219,140
S. Nicholas Stiso................. 25,000(2) 2.6111% $8.25 5/17/06 $129,710 $328,709
25,000(3) 2.6111% $5.50 9/6/06 $ 86,473 $219,140
</TABLE>
- ---------------
(1) These options vest daily over a four-year period commencing on the date of
grant, except that no options are exercisable for the first six months after
the date of grant. The number of shares which have vested under an option
grant is determined by ascertaining the number of days subsequent to the
date of the option grant, multiplying that number of days by the number of
shares subject to the option grant, and in turn multiplying that product by
0.000684931 (one divided by the product of 365 days and four years).
48
<PAGE> 52
(2) These options were granted on May 17, 1996 and would have become exercisable
commencing November 17, 1996, but they were cancelled on September 6, 1996
prior to becoming exercisable.
(3) These options were granted on September 6, 1996, vest daily through
September 6, 2000 and vested options are exercisable from March 6, 1997 to
September 6, 2006.
(4) The exercise price of each option was equal to 100% of the fair market value
of the Common Stock on the date of grant, as determined by the Compensation
Committee of the Board of Directors.
(5) The potential realizable value of each grant of options has been calculated,
pursuant to the regulations promulgated by the Securities and Exchange
Commission, assuming that the market price of the Common Stock appreciates
in value from the date of grant to the end of the option term at the
annualized rates of 5% and 10%, respectively. These values do not represent
the Company's estimate or projection of future Common Stock value. There can
be no assurance that any of the value reflected in the table will be
achieved.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND OPTION VALUES AT END OF FISCAL 1996
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT FISCAL
FISCAL YEAR-END(#) YEAR-END($)
------------------ -----------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------- --------------- ----------- ------------------ -----------------
<S> <C> <C> <C> <C>
Kim D. Blickenstaff................ 20,000 $59,000 60,716/72,484 $298,906/$128,694
Charles W. Patrick................. -- -- 44,589/27,811 259,862/ 34,839
Gunars E. Valkirs.................. 10,000 29,500 54,147/39,053 275,915/ 74,186
Kenneth F. Buechler................ 2,000 12,400 62,680/44,520 317,713/ 98,787
S. Nicholas Stiso.................. -- -- 14,320/36,242 61,244/ 64,347
</TABLE>
- ---------------
(1) Calculated on the basis of the fair market value of the underlying
securities at December 31, 1996, 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
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<PAGE> 53
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 December 31, 1996, the Company had outstanding options to purchase an
aggregate of 1,170,730 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
$3.26. At December 1, 1996, a total of 35,756 shares of Common Stock was
available for future issuance under the 1989 Stock Plan and became available for
grant under the 1996 Stock Plan.
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.
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<PAGE> 54
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 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 1996 Stock Plan.
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<PAGE> 55
As of December 31, 1996, the Company had outstanding options to purchase
109,450 shares of Common Stock at exercise prices of $5.50 and $6.50 per share,
or a weighted average per share exercise price of $5.54 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.
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 15% of their cash
compensation under the ESPP. Each calendar year is divided into two six-month
"accumulation 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
accumulation 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 accumulation 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 accumulation period, and the
value of the Common Stock purchased each year (measured at the beginning of the
offering periods) may not exceed $25,000 per participant. Participants may
withdraw their contributions at any time before the close of the accumulation
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.
The Company's Bylaws also provide that the Company shall indemnify its
directors and officers to the fullest extent permitted by the Delaware Law. The
Company intends to enter 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 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> 56
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, Asia and Africa.
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> 57
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 31, 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 12.5
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 5.3
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 5.9
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)................................... 291,008 2.9 2.4
Kim D. Blickenstaff(8).................................... 289,026 2.9 2.4
Kenneth F. Buechler(8).................................... 283,378 2.9 2.4
S. Nicholas Stiso(8)...................................... 81,979 * *
Charles W. Patrick(8)..................................... 72,129 * *
Thomas M. Watlington(8)................................... -- * *
All directors and executive officers as a group (13
persons)(8)(10)......................................... 5,124,739 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.
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<PAGE> 58
(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 (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 31, 1996 as follows: Dr. Valkirs, 55,174, Mr.
Blickenstaff, 62,359, Dr. Buechler, 64,544, Dr. Stiso, 15,141, Mr. Patrick,
44,795, Mr. Watlington, none and all directors and executive officers as a
group (13 persons), 264,287.
(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.
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<PAGE> 59
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 December 31, 1996 there were 9,894,642 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 Novartis (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 Novartis
are entitled to similar "piggyback" rights, on no more than two occasions,
commencing
56
<PAGE> 60
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 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 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
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 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
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 The First National
Bank of Boston.
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<PAGE> 61
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
11,894,642 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 257,661 shares will
be eligible for immediate sale without restriction under Rule 144(k). In
addition, approximately 236,130 shares will be eligible for resale under Rule
144 or Rule 701, beginning 90 days from the Effective Date. Certain
stockholders, who collectively hold an aggregate of 1,399,274 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 7,909,355 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 3,038,603 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 118,946 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
58
<PAGE> 62
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 2,206,486 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 Novartis (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."
59
<PAGE> 63
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 7,909,355 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 1,399,274 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.
60
<PAGE> 64
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. An investment
partnership affiliated with Cooley Godward LLP owns 6,722 shares of Common
Stock.
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.
61
<PAGE> 65
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> 66
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> 67
BIOSITE DIAGNOSTICS INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
LIABILITIES AND
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
-------------------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 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> 68
BIOSITE DIAGNOSTICS INCORPORATED
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(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
Settlement of patent
matters.................... -- 338,004 1,217,065 743,173 2,368,282
----------- ----------- ----------- ----------- -----------
7,637,204 10,134,736 14,904,157 10,548,132 14,999,863
----------- ----------- ----------- ----------- -----------
Operating income (loss)......... (1,038,937) 1,769,672 4,593,597 3,906,281 907,465
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
----------- ----------- ----------- ----------- -----------
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> 69
BIOSITE DIAGNOSTICS INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
PREFERRED STOCK COMMON STOCK ADDITIONAL NET GAIN (LOSS) TOTAL
------------------ ------------------ PAID-IN ON MARKETABLE DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL SECURITIES COMPENSATION DEFICIT EQUITY
--------- ------- --------- ------- ---------- -------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1,
1993... 8,328,847 $83,288 1,138,069 $11,381 $21,474,142 $ -- $ -- $(12,996,077) $ 8,572,734
Issuance of
common stock.. -- -- 14,298 143 8,146 -- -- -- 8,289
Net loss....... -- -- -- -- -- -- -- (426,126) (426,126)
---------- ------- --------- ------- ----------- --------- --------- ------------ -----------
Balance at
December 31,
1993........... 8,328,847 83,288 1,152,367 11,524 21,482,288 -- -- (13,422,203) 8,154,897
Issuance of
common stock.. -- -- 1,699 17 1,512 -- -- -- 1,529
Net income.... -- -- -- -- -- -- -- 2,355,547 2,355,547
---------- ------- --------- ------- ----------- --------- ---------- ------------- -----------
Balance at
December 31,
1994........... 8,328,847 83,288 1,154,066 11,541 21,483,800 -- -- (11,066,656) 10,511,973
Issuance of
common stock.. -- -- 215,529 2,155 86,716 -- -- -- 88,871
Change in
unrealized net
gain (loss) on
marketable
securities,
net ofincome
taxes of
$11,058....... -- -- -- -- -- 16,588 -- -- 16,588
Net income..... -- -- -- -- -- -- -- 7,908,330 7,908,330
---------- ------- --------- ------- ---------- --------- ---------- ------------ -----------
Balance at
December 31,
1995........... 8,328,847 83,288 1,369,595 13,696 21,570,516 16,588 -- (3,158,326) 18,525,762
Issuance of
common stock.. -- -- 90,498 905 67,397 -- -- -- 68,302
Change in
unrealized net
gain (loss) on
marketable
securities,
net of income
taxes of
$6,754........ -- -- -- -- -- (26,719) -- -- (26,719)
Deferred
compensation
related to
issuance of
stock options. -- -- -- -- 48,785 -- (48,785) -- --
Amortization of
deferred
compensation.. -- -- -- -- -- -- 762 -- 762
Net income..... -- -- -- -- -- -- -- 2,613,360 2,613,360
---------- ------- --------- ------- ----------- --------- ---------- ------------ -----------
Balance at
September 30,
1996........... 8,328,847 $83,288 1,460,093 $14,601 $21,686,698 $ (10,131) $ (48,023) $ (544,966) $21,181,467
========== ======= ========= ======= =========== ========= ========== ============ ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 70
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> 71
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> 72
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,
ranging from four to twelve years, 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.
F-8
<PAGE> 73
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
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 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.
F-9
<PAGE> 74
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
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
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 8% 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 June 1994, the Company entered into a collaborative development
agreement and a 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> 75
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> 76
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> 77
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.
Interest charged to expense to arrive at operating income was approximately
$139,000, $173,000, and $228,000 for the years ended December 31, 1993, 1994,
and 1995, respectively and was approximately $146,000 and $272,000 for the nine
month period ended September 30, 1995 and 1996, respectively.
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
F-13
<PAGE> 78
BIOSITE DIAGNOSTICS INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
$271,000 of security deposits in conjunction with operating lease and equipment
financing agreements at December 31, 1994, 1995 and September 30, 1996,
respectively.
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> 79
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> 80
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> 81
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> 82
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> 83
IMMEDIATE RESPONSE DIAGNOSTICS(TM)
BIOSITE(R)
DIAGNOSTICS
DEVELOPS,
MANUFACTURES
AND
MARKETS
IMMEDIATE
RESPONSE
DIAGNOSTICS(TM).
[PHOTOGRAPHS SHOWING TRIAGE DOA AND PERSONS PERFORMING TRIAGE DOA TESTING
PROCEDURE]
<PAGE> 84
- ------------------------------------------------------
- ------------------------------------------------------
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........................ 16
Dividend Policy........................ 16
Capitalization......................... 17
Dilution............................... 18
Selected Financial Data................ 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 20
Business............................... 26
Management............................. 45
Certain Transactions................... 53
Principal Stockholders................. 54
Description of Capital Stock........... 56
Shares Eligible for Future Sale........ 58
Underwriting........................... 60
Legal Matters.......................... 61
Experts................................ 61
Additional Information................. 61
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> 85
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 intends to enter 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 31, 1993, the Registrant has sold and issued the following
unregistered securities:
(a) On various dates through December 31, 1996, the Registrant issued
225,868 shares of its Common Stock to 63 non-officer employees pursuant to
the exercise of options granted under its 1989 Stock Plan between June 1990
and April 1996. The exercise prices per share ranged from $0.24 to $3.25,
for an aggregate consideration of $132,487. The Registrant relied on the
exemption provided by Rule 701 under the Act.
(b) On various dates through December 31, 1996, the Registrant issued
95,338 shares of its Common Stock to 5 officers pursuant to the exercise of
options granted under its 1989 Stock Plan between August 1990 and March
1993. The exercise prices per share ranged from $0.24 to $1.00, for an
aggregate consideration of $44,138. The Registrant relied on the exemption
provided by Rule 701 under the Act.
II-1
<PAGE> 86
(c) In September 1995, the Company issued a $1,000,000 convertible
debenture to Sandoz Pharma Ltd. (currently known as Novartis Pharma Inc.)
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.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------- ----------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.(i)1* Restated Certificate of Incorporation as filed with the Delaware Secretary of
State on November 25, 1992.
3.(i)2 Certificate of Amendment of Restated Certificate of Incorporation as filed with
the Delaware Secretary of State on February 5, 1997.
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.
(currently known as Novartis Pharma Inc.), dated September 22, 1995, as amended on
July 26, 1996.
10.9(+) Easy Assay License Agreement between the Registrant and Sandoz Pharma Ltd.
(currently known as Novartis Pharma Inc.), 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
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.
</TABLE>
II-2
<PAGE> 87
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------- ----------------------------------------------------------------------------------
<S> <C>
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.
(currently known as Novartis Pharma Inc.), 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.
10.22* Lease Agreement between the Registrant and Sorrento West Limited dated September
21, 1994.
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.
(+) Confidential treatment requested for certain portions of these exhibits.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules 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> 88
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 7th day of February, 1997.
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. BLICKENSTAFF President, Chief Executive February 7, 1997
Officer (Principal Executive
- ------------------------------------------ Officer) and Director
Kim D. Blickenstaff
/s/ CHRISTOPHER J. TWOMEY Vice President and Chief February 7, 1997
- ------------------------------------------ Financial Officer (Principal
Christopher J. Twomey Financial Officer and Accounting
Officer)
* Chairman of the Board February 7, 1997
- ------------------------------------------
Timothy J. Wollaeger
/s/ GUNARS E. VALKIRS, PH.D. Director February 7, 1997
- ------------------------------------------
Gunars E. Valkirs, Ph.D.
* Director February 7, 1997
- ------------------------------------------
Thomas H. Adams, Ph.D.
* Director February 7, 1997
- ------------------------------------------
Howard E. Greene, Jr.
* Director February 7, 1997
- ------------------------------------------
Frederick J. Dotzler
* Director February 7, 1997
- ------------------------------------------
Stephen K. Reidy
* Director February 7, 1997
- ------------------------------------------
Jesse I. Treu, Ph.D.
*By /s/ KIM D. BLICKENSTAFF
----------------------------------
Kim D. Blickenstaff
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 89
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- -------- ------------------------------------------------------------------------ ------------
<S> <C> <C>
1.1* Form of Underwriting Agreement.
3.(i)1* Restated Certificate of Incorporation as filed with the Delaware Secretary
of State on November 25, 1992.
3.(i)2 Certificate of Amendment of Restated Certificate of Incorporation as filed
with the Delaware Secretary of State on February 5, 1997.
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.
(currently known as Novartis Pharma Inc.), dated September 22, 1995, as
amended on July 26, 1996.
10.9(+) Easy Assay License Agreement between the Registrant and Sandoz Pharma Ltd.
(currently known as Novartis Pharma Inc.), 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.
</TABLE>
<PAGE> 90
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- -------- -------------------------------------------------------------------------- ------------
<S> <C> <C>
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.
(currently known as Novartis Pharma Inc.), 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.
10.22* Lease Agreement between the Registrant and Sorrento West Limited dated
September 21, 1994.
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.
(+) Confidential treatment requested for certain portions of these exhibits.
<PAGE> 1
EXHIBIT 3.(i)2
CERTIFICATE OF AMENDMENT
OF RESTATED
CERTIFICATE OF INCORPORATION
OF
BIOSITE DIAGNOSTICS INCORPORATED
Biosite Diagnostics Incorporated, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That resolutions were duly adopted by the Board of
Directors of Biosite Diagnostics Incorporated, providing that the Restated
Certificate of Incorporation of the Corporation be amended by changing so much
of Section (A) of Article IV as now reads:
"ARTICLE IV
(A) Classes of Stock. The total number of shares of all classes of
capital stock which the corporation shall have authority to issue is Twenty
Million Three Hundred Twenty-Eight Thousand Eight Hundred Forty-Seven
(20,328,847) of which Twelve Million (12,000,000) shares of the par value of One
Cent ($.01) each shall be Common Stock (the "Common Stock") and Eight Million
Three Hundred Twenty-Eight Thousand Eight Hundred Forty-Seven (8,328,847)
shares of the par value of One Cent ($.01) each shall be Preferred Stock (the
"Preferred Stock").
The Preferred Stock shall be designated the "Series A Preferred Stock,"
the "Series B Preferred Stock," the "Series C Preferred Stock," the "Series D
Preferred Stock" and the Series E Preferred Stock, which series shall consist of
610,000 shares, 2,156,336 shares, 2,204,167 shares, 1,900,010 shares and
1,458,334 shares, respectively.
Subject to Section 6, the Preferred Stock may be issued from time to
time in one or more series. Except for the Series A Preferred Stock, the Series
B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock
and the Series E Preferred Stock, the Board of Directors is authorized to fix
the number of shares of any series of Preferred Stock and to determine the
designation of any such shares. The Board of Directors is also authorized to
determine or alter the rights (including, but not limited to, the voting
rights), preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock, and within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series, to increase or
decrease (but not below the number of shares of such series then outstanding)
the number of shares of any such series subsequent to the issue of shares of
that series by filing a certificate pursuant to the applicable law of the State
of Delaware."
to read as follows:
<PAGE> 2
"ARTICLE IV
(A) Classes of Stock. The total number of shares of all classes of
capital stock which the corporation shall have authority to issue is Thirty
Million (30,000,000) of which Twenty-One Million Six Hundred Seventy-One
Thousand One Hundred Fifty-Three (21,671,153) shares of the par value of One
Cent ($.01) each shall be Common Stock (the "Common Stock") and Eight Million
Three Hundred Twenty-Eight Thousand Eight Hundred Forty-Seven (8,328,847)
shares of the par value of One Cent ($.01) each shall be Preferred Stock (the
"Preferred Stock").
The Preferred Stock shall be designated 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, which series shall consist of
610,000 shares, 2,156,336 shares, 2,204,167 shares, 1,900,010 shares and
1,458,334 shares, respectively.
Subject to Section 6, the Preferred Stock may be issued from time to
time in one or more series. Except for 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, the Board of Directors is authorized to fix
the number of shares of any series of Preferred Stock and to determine the
designation of any such shares. The Board of Directors is also authorized to
determine or alter the rights (including, but not limited to, the voting
rights), preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock, and within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series, to increase or
decrease (but not below the number of shares of such series then outstanding)
the number of shares of any such series subsequent to the issue of shares of
that series by filing a certificate pursuant to the applicable law of the State
of Delaware."
-2-
<PAGE> 3
SECOND: That said amendment was duly adopted in accordance
with the provisions of section 242 of the General Corporation Law of the State
of Delaware. Written consent of the stockholders has been given with respect to
the foregoing amendment in accordance with section 228 of the General
Corporation Law of the State of Delaware, and written notice has been given as
provided in section 228.
IN WITNESS WHEREOF, said corporation has caused this
certificate to be signed by Kim D. Blickenstaff, its President, and attested by
Christopher J. Twomey, its Assistant Secretary, as of this 5th day of
February, 1997.
By /s/ KIM D. BLICKENSTAFF
--------------------------
Kim D. Blickenstaff
President
Attest:
/s/ CHRISTOPHER J. TWOMEY
- -----------------------------------
Christopher J. Twomey
Assistant Secretary
-3-
<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%)
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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
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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 tracer synthesis, 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 antibody 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 whole blood, Licensee's test will be required to have accuracy, precision
and reproducibility at least equivalent to (at a 95% confidence level) the
INCSTAR CycloTrac RIA assay for cyclosporine (or such other standard assay as is
acceptable to the US FDA as a reference for bioequivalence). INCSTAR CycloTrac
assays for comparison purposes are commercially distributed by INCSTAR Company,
Stillwater, Minnesota 55082.
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(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 blood samples from various transplant patients from local hospitals with
both the INCSTAR CycloTrac assay (or such other standard assay as is acceptable
to the US FDA as a reference for bioequivalence) 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 one year 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 whole blood. 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, if such extension
is deemed necessary by mutual agreement of SANDOZ and LICENSEE for the proper
performance and completion of the respective investigations. SANDOZ will not
unreasonably withhold agreement to any such extension which has been reasonably
requested by LICENSEE.
2.4 Upon receipt by Sandoz of written notification from Licensee prior
to expiry of the one year 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 whole blood and plasma
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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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
one month 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.
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(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.
SANDOZ, however, may terminate at its sole discretion by written
previous notice of one year, its obligation to provide such materials to
licensee, provided it makes available [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] or the know how to manufacture such
metabolites to LICENSEE within one (1) month after the date of such
notification. The Non-exclusive license granted to LICENSEE hereunder shall not
be affected thereby.
(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 twenty-five
percent (25%) 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 twenty-five percent (25%) 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 LICENSEE 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 forty five (45) 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 Swiss Francs
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] per
gram FCA Basel. The supply price for [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION], pursuant to 4.2 shall be Swiss Francs
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] per
gram FCA Basel for [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
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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
non-refundable lump sum payment of Swiss Francs 120,000. -- (one hundred twenty
thousand) to SANDOZ. [CONFIDENTIAL TREATMENT REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] of this lump sum payment shall be creditable against future
royalties according to Article 5.3.
5.2 Upon transfer of the Monoclonal Antibody-producing cell-line to
Licensee pursuant to Section 4.1(a), Licensee shall pay a further,
non-refundable and non-creditable lump-sum payment of Swiss Francs 55,000.--
(fifty-five thousand) 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.
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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 half-yearly
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 half-year.
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 If after the date of this Agreement, Sandoz grants to another
licensee a similar license of Sandoz Patent Rights and Sandoz Know-How, with
fees and royalties more favorable to such other licensee than as provided in
this Article 5, this Article 5 will be adapted prospectively to conform with
such more favorable terms.
5.12 Licensee shall be entitled to deduct from royalty payments to
Sandoz hereunder the amount of any taxes, levies or charges 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 taxes,
levies or charges. Licensee shall use reasonable efforts to minimize any taxes,
levies or charges 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 taxes, levies or charges, together with copies of all
communications from or with such governmental authority with respect thereto.
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6. VERIFICATION.
6.1 For a period of 2 (two years) 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 once a year, 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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(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 5 (five) years after expiry of this Agreement but at
least 10 (ten) years from the Effective Date of this Agreement.
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8.2 Materials provided to or produced by Licensee under this Agreement,
including CyA, Monoclonal Antibodies, and CyA Derivatives, 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 half year.
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) the date of expiration of the last-to-expire patent included in SANDOZ
Patent Rights; or (ii) the date of expiry of a ten (10) year period from the
date of First Commercial Sale in the last country in which CyA Assays are sold.
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 two years before the latest such
date to determine whether and how Sandoz' supply to Licensee of CyA and CyA
metabolites [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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have 90 days to rectify this deficiency, or if such deficiency is one which
requires more than ninety (90) 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
ninety (90) 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 ninety (90) 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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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 without the prior written
consent of the other party hereto other than to an entity acquiring all or
substantially all of the stock of assets of the assignor by merger,
consolidation, purchase or similar transaction. 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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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.
-15-
<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 November 30, 1996
(extended from September 22, 1996).
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 March 15, 1997 (extended from November 30, 1996).
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, to be marketed using SANDOZ trademarks;
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 to a CyA Assay which, in addition to
a Monoclonal Antibody, further comprises a [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; (ii) must be capable of being read by a small
portable fluorometer, total dimensions not to exceed two hundred-fifty (250)
cubic inches; and (iii) must be capable of being utilized and read at room
temperature (15-30 degrees C) within fifteen (15) minutes or less.
3.2 In addition to providing CyA standards, Monoclonal Antibody and CyA
Metabolites as provided in section 2 of the ANTIBODY LICENSE AGREEMENT, SANDOZ
will also provide [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] to develop and demonstrate feasibility of its CyA EASY Assay.
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 hand-held fluorometers with total dimensions less than 250 cubic inches,
this License shall be exclusive. For CyA EASY Assays intended to be read by
other types of readers (in particular by fully automated, random access, high
throughput immunoassay system analyzers, including but not limited to the
Abbott TDx, IMx and AxSym assay readers and the like, or by radiometers of any
type), 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 to use the SANDOZ trademarks to identify and promote the sale of CyA
EASY Assays manufactured and sold anywhere in the world pursuant to this
Agreement.
4.3 All CyA EASY Assays sold by LICENSEE pursuant to this Agreement
shall be marked or otherwise identified using the SANDOZ trademarks, 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 at its sole discretion by written
previous notice of one year, its obligation to provide such materials to
LICENSEE, provided it makes available the know-how to manufacture such
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] to
LICENSEE within one (1) month after the date of such notification. The
Non-exclusive Licenses granted to LICENSEE hereunder shall not be affected
thereby.
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 twenty-five
percent (25%) 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 twenty-five percent (25%) 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 LICENSEE 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 forty-five (45) 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 non-refundable payment of Swiss Francs
500,000 (five hundred thousand) as follows: (a) upon execution of this
Agreement, LICENSEE shall pay to SANDOZ the amount of Swiss Francs 250,000 (two
hundred fifty thousand); and (b) upon the date of first commercial sale of the
CyA EASY Assays, LICENSEE shall pay SANDOZ the amount of Swiss Francs 250,000
(two hundred fifty thousand). Of this payment, Swiss Francs 250,000 (two
hundred fifty thousand) shall be creditable against up to 50% of any royalties
due under Article 6.2 of this Agreement.
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 If after the date of this Agreement, Sandoz grants to another
licensee a similar licence of Sandoz Easy Patent Rights and Sandoz Easy
Know-How, with fees and royalties more favorable to such other licensee than as
provided in this Article 6, this Article 6 will be adapted prospectively to
conform with such more favorable terms.
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 fourteen (14) days 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
-6-
<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 CyA, CyA Metabolites, or [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 CyA, CyA Metabolites, or
[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.
-7-
<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, shall bear a SANDOZ Trademark
(alone, and/or in the form of a logo, and/or in conjunction with a longer
identification, e.g. "NEORAL Cyclosporine Assay" or the like);
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; however, LICENSEE agrees to cooperate with SANDOZ and
to execute such documents and provide such information as may be reasonably
necessary to register and maintain the SANDOZ Trademarks and where required to
register the trademark license granted hereunder with the appropriate
authorities;
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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,
particularly in connection with their use in monitoring SANDOZ's microemulsion
preconcentrate formulation of CyA, and regarding the relationship between the
readout from LICENSEE's CyA EASY Assay and the pharmacokinetics of SANDOZ's
microemulsion preconcentrate formulation of CyA;
c. Cooperative programs in which CyA EASY Assays and SANDOZ's
microemulsion preconcentrate formulation of CyA are offered as a package based
on purchase sales levels or other considerations.
In the event of co-promotion, both parties agree to use their
commercially reasonable efforts to co-promote CyA EASY Assays of LICENSEE so as
to maximize sales of both LICENSEE's CyA EASY Assays and SANDOZ's microemulsion
preconcentrate formulation of CyA. 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 Sales and distribution channels for LICENSEE's CyA EASY Assay
product shall be discussed with SANDOZ on a country-by-country basis. 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
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<PAGE> 10
USA, Japan, and Europe (including Switzerland and all countries in the European
Economic Area), 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 This Agreement shall extend indefinitely unless earlier
terminated by agreement of the parties or pursuant to this Article 12.
12.2 LICENSEE shall have the right to terminate this Agreement
at any time upon one year's written notice.
12.3 If the ANTIBODY LICENSE AGREEMENT is terminated before the later
of the following dates (i) the date of expiration of the last-to-expire patent
included in Sandoz Patent Rights; or (ii) the date of expiry of a ten (10) year
period from the date of first Commercial Sale in the last country in which CyA
Assays are launched, either party shall have the right to terminate this
Agreement effective as of the date of the termination of the ANTIBODY LICENSE
AGREEMENT.
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
ninety (90) days 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 ninety (90) days 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 fifty percent (50%)
of the voting interest in, or a greater than fifty percent (50%) 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: (i) the date of expiration of the
last to expire patent included in the EASY Patent Rights in such country or (ii)
the date of expiry of a period which is ten (10) years from first Commercial
Sale of a CyA EASY Assay in such country, following which time LICENSEE's
successor shall have a paid up license to make, have made, use and sell CyA Easy
Assays for such country.
12.6 Upon the later of the following dates: (i) the date of expiration
of the last-to-expire patent included in the EASY Patent Rights or (ii) the date
of expiry of a period which is ten (10) years from the first Commercial Sale of
a CyA EASY Assay in the last country in which the CyA EASY Assay is launched,
LICENSEE shall have the right to terminate the Non-exclusive License to use the
SANDOZ Trademarks granted under Article 4.2 of this Agreement. 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 ninety (90) days from
such discovery to cure such deficiencies, or if any such deficiency is one which
requires more than ninety (90) days 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's 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 (i) grant to SANDOZ a worldwide, non-exclusive license (royalty to be
negotiated in good faith) with right of sublicense to Affiliates to make, have
made, use and sell the CyA EASY Assays developed by LICENSEE, (ii) within one
month shall provide to SANDOZ any know how necessary to produce such assays,
and (iii) shall agree to supply to SANDOZ or its sublicensee, or shall
authorize its supplier to supply to SANDOZ or its sublicensee, or shall provide
to SANDOZ or its sublicensee the necessary license (royalty to be negotiated in
good faith) with right of sublicense to Affiliates to make, have made, use and
sell, fluorometers of the same type sold by LICENSEE and suitable for use in
connection with LICENSEE's CyA EASY Assays.
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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].
<TABLE>
<CAPTION>
=========================================================================================================================
Country Patent Numbers Expiry date*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Australia 623078 17/06/04
- -------------------------------------------------------------------------------------------------------------------------
Austria 0296123 15/06/08
- -------------------------------------------------------------------------------------------------------------------------
Belgium 0296123 15/06/08
- -------------------------------------------------------------------------------------------------------------------------
Canada 569655** 16/06/08
- -------------------------------------------------------------------------------------------------------------------------
Denmark 3352/88*** 17/06/08
- -------------------------------------------------------------------------------------------------------------------------
England 0296123 15/06/08
- -------------------------------------------------------------------------------------------------------------------------
Finland 87928 17/06/08
- -------------------------------------------------------------------------------------------------------------------------
France 0296123 15/06/08
- -------------------------------------------------------------------------------------------------------------------------
Germany P3851268.8 15/06/08
- -------------------------------------------------------------------------------------------------------------------------
Greece 0296123 15/06/08
- -------------------------------------------------------------------------------------------------------------------------
Holland 0296123 15/06/08
- -------------------------------------------------------------------------------------------------------------------------
Hungary 204101 17/06/08
- -------------------------------------------------------------------------------------------------------------------------
Ireland 1838/88 15/06/08
- -------------------------------------------------------------------------------------------------------------------------
Israel 86789 17/06/08
- -------------------------------------------------------------------------------------------------------------------------
Italy 0296123 15/06/08
- -------------------------------------------------------------------------------------------------------------------------
Japan 151056/88*** 18/06/08
- -------------------------------------------------------------------------------------------------------------------------
Luxembourg 0296123 15/06/08
- -------------------------------------------------------------------------------------------------------------------------
Malaysia 103735 30/09/08
- -------------------------------------------------------------------------------------------------------------------------
New Zealand 225071 17/06/04
- -------------------------------------------------------------------------------------------------------------------------
Nigeria 10516 17/06/08
- -------------------------------------------------------------------------------------------------------------------------
Pakistan 131350 16/06/04
- -------------------------------------------------------------------------------------------------------------------------
Philippines 25933 19/12/08
- -------------------------------------------------------------------------------------------------------------------------
Portugal 87763 14/04/07
- -------------------------------------------------------------------------------------------------------------------------
Poland 159763 04/07/03
- -------------------------------------------------------------------------------------------------------------------------
South Africa 88/4344 17/06/08
- -------------------------------------------------------------------------------------------------------------------------
South Korea 7371/88 18/06/08
- -------------------------------------------------------------------------------------------------------------------------
Spain 0296123 15/06/08
- -------------------------------------------------------------------------------------------------------------------------
Sweden 0296123 15/06/08
- -------------------------------------------------------------------------------------------------------------------------
Switzerland 0296123 15/06/08
- -------------------------------------------------------------------------------------------------------------------------
Taiwan NI-45155 10/03/06
- -------------------------------------------------------------------------------------------------------------------------
United States 5116816 26/05/09
=========================================================================================================================
</TABLE>
* 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 WO 95/07468 which claims the EASY assay
and related assay systems for immunophilin binding compounds. Patents resulting
from this application will expire in 2014 in most countries, not counting
possible extensions.
-14-
<PAGE> 15
SCHEDULE C
SANDOZ owns several trademarks relating to its proprietary
microemulsion preconcentrate formulation of cyclosporine. The trademark used
by SANDOZ to brand its formulation may vary somewhat from country to country
but is generally one of the following:
NEORAL
SANDIMMUN NEORAL
SANDIMMUNE NEORAL
OPTORAL
SANDIMMUN OPTORAL
SANDIMMUNE OPTORAL
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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.
-1-
<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: Fentanyl; Methadone;
6AM; Cotinine; LSD; and Propoxyphene (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) In addition to Related Products, Supplier agrees to offer
to CMS in writing the first right of refusal to distribute in the Territory (as
defined below) during the remaining term of this Agreement any new products
intended for use in diagnostic testing not referred to in Section 1(c) hereof
which are marketed by Supplier under Supplier's trademark or tradename alone
during the term of this Agreement (hereinafter referred to as the "Unrelated
Products"), 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 Unrelated Product (such
minimums shall be calculated on a pro rata basis if the six-month period prior
to the availability of such Unrelated 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 6(e) hereof or reduced in accordance with Section 5(a)
hereof). It is understood and agreed that Unrelated Products for which CMS has
rights of first offer under this Section 1(d) shall not include any product
which is marketed under the trademark or tradename of any third party or which
marketed under both trademarks or tradenames of a third party and Supplier,
jointly. Upon notification by Supplier of its intent to market any Unrelated
Product, CMS and Supplier will negotiate in good faith for sixty (60) days in
an effort to agree upon the terms and conditions for an exclusive
distributorship agreement in the Territory for Unrelated Products. Nothing
contained herein shall obligate Supplier to offer CMS the right to distribute
Unrelated Products on the same or substantially similar terms as contained in
this Agreement. During the negotiation period referred to above, CMS and
Supplier will discuss whether the definition of the Territory for any Unrelated
Product should be revised for greater precision and to establish appropriate
market segments to be reserved to Supplier. In the event that CMS and Supplier
are unable to reach an agreement regarding the distribution of any Unrelated
Product during the negotiation period referred to above, Supplier may not grant
exclusive distribution rights for such Unrelated Product 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 Unrelated Products, during the term
of this Agreement or otherwise.
(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
-3-
<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
-4-
<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, unlimited; (ii) during
the second year following the date of first product shipment, credit will be
limited for each lot shipped to CMS to a number of Kits not to exceed 12% of the
number of Kits in such lot; and (iii) during the third year following the date
of first Product shipment and each year thereafter, credit will be limited for
each lot shipped to CMS to a number of Kits not to exceed 10% of the number of
Kits in such lot. 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: hospitals (including government,
university, military and psychiatric hospitals); reference labs; drug
rehabilitation centers that are part of a hospital facility; health maintenance
organizations; planned parenthood centers; and physician group practices of
forty (40) or more physicians. 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: free-standing drug rehabilitation centers; prisons
and prison hospitals; physician practices of less than forty (40) physicians;
probation and parole programs; public and private sector workplace testing;
industrial laboratories; non-hospital military on-site testing programs (i.e.,
ADCO, [this space intentionally left blank] recruiting centers); high school,
college, university and professional sports programs; government agencies;
public carriers; and veterinary clinics and animal testing. 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 no
later than sixty (60) days after Supplier's Food and Drug Administration
(hereinafter referred to as "FDA") submission of a 510(k) premarket notification
to market the Product. Supplier shall give prompt notice to CMS of such FDA
submission. This first purchase order shall be for thirty thousand (30,000)
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.
-9-
<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
-10-
<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 260,
280, 385, 385A and 385B, 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, free of charge, 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
three million dollars ($3,000,000) 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
-12-
<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 one hundred twenty-five dollars ($125) 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
- -------------------
* Months 1 and 2, 250 Kits each; month 3, 100 Kits; Month 4, 75 Kits; months 5,
6, 7, 8 and 9, 50 Kits each; months 10, 11 and 12, 25 Kits each.
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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 be less than [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 15 days
of invoice by Supplier; months 10 through 24 - within 30 days of invoice by
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<PAGE> 18
Supplier; after month 24 - within 45 days 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 three
(3) years 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 exceed five (5) years 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 one (1) year if at the end of the original three-year term CMS has
purchased an aggregate of one million four hundred ninety-three thousand
(1,493,000) 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 one (1) additional year
if CMS purchases one million eighty-two thousand (1,082,000) or more Product
units, net of any credits under Section 1(e) (calculated on an equivalent units
basis), during the first one-year 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
---------- --------- -----
1 1 30,000
2 50,000
2 3 213,000**
4 190,000
3 5 247,000
6 336,000
4 7 371,000
8 402,000
5 9 436,000
10 473,000
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.
** Any excess units purchased over the minimums for the first and second
six-month periods will be applied toward the minimum purchases for the
six-month period.
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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) Supplier may also terminate this Agreement during the Agreement
term without cause if, upon termination, Supplier pays CMS a one-time payment
(the "Buy-out Amount") of [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] of the balance of unrealized sales on CMS's renewal
purchase requirements during the remainder of the original term of this
Agreement or CMS's last effective minimum purchase requirements (prior to any
elimination of such requirements pursuant to Section 17(c)) during the
then-current extension term, as the case may be. The buyout in each of Year 4
and Year 5, if applicable, shall be calculated on [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION]. In the event CMS's minimum
purchase requirements are eliminated pursuant to Section 17(c), the Maximum
Buy-out Amount for the fourth and fifth year of this Agreement shall be
calculated on the last minimum purchase requirement in effect prior to the
termination of such minimum purchase requirements, subject to the provisions of
Section 17(d).
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
Unit price is to be based on the weighted average sales price for Product units
sold by CMS in the prior six-month period. In these examples, a sales price of
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] per
Product unit was used. The Maximum Buy-out Amount at any time during Years 1
through 3 will be calculated similarly, using the aggregate renewal purchase
level for those three years.
Supplier shall only have the right to exercise the buyout option during Years 1
through 3 of this Agreement if there is a merger, reorganization, change of
control or sale of all or substantially all of the stock or assets of Supplier.
The buyout in Years 1 through 3 will be calculated as follows:
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
In the event that the Agreement is automatically extended under Section 17(c)
for a term of seven (7) years from the date of first shipment of Product to CMS,
the Maximum Buy-out Amount for a termination without cause by Supplier during
Years 6 or 7 would be calculated based upon a percentage of the difference
between [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] of the sales in Years 5 or 6, respectively, and the actual sales in
Years 6 or 7, as the case may be. Assuming the prior year's sales of Product are
$40,000,000, the Buy-out Amount in Year 6 or 7, as the case may be, would be
calculated as follows:
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
Except as provided in Sections 1(e), 6(f) and 4(g), payment of any sums
calculated under this Section 6(d) shall constitute CMS's sole and exclusive
remedy in the event Supplier terminates this Agreement without cause.
(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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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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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 Boehringer-Mannheim or Abbott Laboratories, Inc., or any
of their respective subsidiaries, divisions or affiliates; or (v) the Successor
is Baxter International, Inc. 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 seven (7) years 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 seven year 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 within 30
days of the closing of such transaction, in which case this Agreement shall
terminate 180 days from the date of the closing of such transaction and Supplier
(or Biosite Diagnostics Incorporated in any Acquisition 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 (i) an amount equal to
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] less
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] of
the aggregate actual sales of CMS during such period, or (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
--------------------------
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<PAGE> 39
EXHIBIT A
CONTINUING GUARANTY
A. BIOSITE DIAGNOSTICS INCORPORATED (hereinafter referred to as
"Seller"), having its principal office and place of business at 11030
ROSELLE STREET, SUITE D, SAN DIEGO, CALIFORNIA 92121, hereby
guarantees that all Products (including their packaging, labeling and
shipping) comprising each shipment or other delivery hereinafter made
by Seller (hereinafter referred to as "Products") to or on the order
of Curtin Matheson Scientific, Inc., a Delaware corporation, having
its principal place of business at 9999 Veterans Memorial Drive,
Houston, Texas 77038, or to any of its divisions, subsidiaries or its
affiliate, Markson Science, Inc., or any of their customers
(hereinafter collectively referred to as "CMS"), are as of the date of
such shipment or delivery, not in violation of any applicable federal,
state or local laws, nor any regulations, rules declarations,
interpretations and orders issued thereunder, INCLUDING, WITHOUT
LIMITATION, THOSE SET FORTH ON THE ATTACHED SCHEDULE 1 HERETO, and
that the Products are merchantable and fit for their intended
purpose(s).
B. With respect to Products that are privately labeled for CMS, Seller
agrees to make no change in such Products or the CMS artwork on the
label, labeling or packaging relating thereto without first obtaining
the express written consent of CMS. Seller recognizes that CMS is the
owner of the trademarks and trade names connoting CMS which it may
elect to use in the promotion and sale of the Products and that Seller
has no right or interest in such trademarks or trade names.
C. Seller hereby agrees that it will reimburse CMS for any costs and
expenses incurred by CMS associated with any product corrective action
relating to the Products requested by Seller or required by any
governmental entity.
D. Seller agrees to procure and maintain product liability insurance with
respect to the Products (Broad Form Vendors' Endorsement) and
contractual liability coverage relating to this Guaranty, naming CMS,
as defined above, as an additional insured, with minimum limits in
each case of $3,000,000 covering the products sold by Seller which
includes, but is not necessarily limited to, the Products. Seller
shall, ON OR BEFORE DELIVERY OF SUCH PRODUCTS, furnish to CMS a
certificate of insurance evidencing the foregoing coverages and limits
and referencing the provisions of this Guaranty. The insurance shall
not be cancelled or changed without providing CMS within ten (10) days
prior written notice.
E. Subject to the provisions of Section 6(h) of the Distribution
Agreement between the parties dated November 11, 1991, Seller agrees
to and shall indemnify and hold harmless CMS (and with respect to
Subparagraph E.(i) below, CMS's customers) from any and all claims,
actions, costs, expenses and damages, including reasonable attorney's
fees and expenses arising out of: (i) any actual or alleged patent,
trademark or copyright infringement in the use, sale advertising or
packaging of the Products; (ii) any breach of the warranties or
guarantees set forth in this Guaranty or in the Distribution Agreement
between the parties dated November 11, 1991; (iii) the sale or use of
the Products where such liability results from the act or omission of
Seller (whether for breach of warranty, strict liability in tort,
negligence or otherwise); provided, that in each case CMS gives Seller
prompt notice of any such claim, permits Seller to assume sole control
of the defense thereof and provides all reasonable assistance in
connection with the defense of such claim. CMS shall have the right
to retain its own counsel and to participate in such defense, with the
fees and expenses to be paid by Seller, if representation of CMS by
counsel retained by Seller would be inappropriate due to actual
differing interests between CMS and any other party represented by
such counsel in such proceeding. Seller's obligation to indemnify CMS
shall not be limited by the amount of insurance coverage provided for
in Paragraph D hereof.
F. Seller agrees to and shall provide required Material Safety Data
Sheets for any Product containing hazardous chemicals, as required by
federal, state or local law.
G. Seller agrees to and shall accept, at its facility, all of CMS's
unsold or expired Products containing hazardous chemicals for
disposal. All costs of disposal are the sole responsibility of
Seller.
H. This Guaranty shall be continuing and shall be binding upon the Seller
and his or its heirs, executors, administrators, successors and/or
assigns, whichever the case may be, and shall inure to the benefit of
CMS, its successors and assigns and to the benefit of its officers,
directors, agents and employees and their heirs, executors,
administrators, and assigns.
I. The agreements and obligations of Seller set forth in this Guaranty
are in consideration of purchases made by CMS from Seller and said
obligations are in addition to (and supersede to the extent of any
conflict) any obligations of Seller to CMS or CMS to Seller.
CURTIN MATHESON SCIENTIFIC, INC: SELLER:
/s/ Cecil Kost BIOSITE DIAGNOSTICS INCORPORATED
- ------------------------------- -----------------------------
Title: Senior Vice President Full Corporate Name or Name Under Which
Sales/Marketing Seller's Business is Conducted
/s/ Kim D. Blickenstaff
-----------------------------------
Signature of Authorized Representative
President
-----------------------------------
Title
Kim D. Blickenstaff,
President
------------------------------------
Printed Name and Title of Authorized
Representative
November 11, 1991
-------------------------------------
Date
IMPORTANT: Please sign and return original Guaranty accompanied by the
Certificate of Insurance described in Paragraph D above, to: Curtin Matheson
Scientific, Inc., P.O. Box 1546, Houston, Texas 77251-1546, ATTN: Insurance
Department
Seller specifically guarantees to CMS that:
1. Seller is not in violation of the Emergency Planning and Community
Right-to-Know Act of 1986 ("SARA") or the Occupational Safety and
Health Act Hazard Communication Standard or the California Safe
Drinking Water and Toxic Enforcement Act of 1986 ("California
Proposition 65").
2. Seller is not in violation of the Sherman Act, the Clayton Act, the
Robinson-Patman Act or the Federal Trade Commission Act with respect
to the manufacture, marketing or sale of the Products, and the
Products are properly labeled as to content as required by applicable
Federal Trade Commission Trade Practice Rules.
3. Seller is not in violation of the Foreign Corrupt Practices Act of
1977, as amended.
4. Seller is not in violation of the Immigration Reform and Control Act
of 1986, as amended, or any of the regulations promulgated pursuant
thereto.
5. The Products are not in violation of any of the provisions of the Fair
Packaging and Labeling Act.
6. The Products are not adulterated or misbranded within the meaning of
the Federal Food, Drug and Cosmetic Act, as amended (the "FFDC Act"),
or within the meaning of any applicable state or municipal law in
which the definitions of adulteration and misbranding are
substantially identical with those contained in the FFDC Act, and the
Products are not products which may not, under the provisions of the
FFDC Act, be introduced into interstate commerce or which may not
under substantially similar provisions of any state or municipal law
be introduced into commerce.
7. The Products are not in violation of the Consumer Product Safety Act,
the Poison Prevention Act or the Federal Hazardous Substances Act, in
each case as amended, and all standards and regulations thereunder,
and if the Products are hazardous substances, are not misbranded
hazardous substances or banned hazardous substances within the meaning
of the Federal Hazardous Substances Act, as amended.
8. The Products are not in violation of any of the provisions of the
Federal Insecticide, Fungicide and Rodenticide Act, as amended.
9. The Products have not been manufactured in violation of any of the
provisions of the Fair Labor Standards Act of 1938, as amended, and
the regulations and orders issued thereunder.
10. The Products are not misbranded under the provisions of the Wool
Products Labeling Act of 1939, as amended.
11. The Products have not been manufactured in violation of any applicable
provision of the Equal Employment Opportunity Act of 1972, as amended,
or any provisions of related Executive Orders.
12. The Products have not been manufactured in violation of the
Occupational Safety and Health Act of 1970 and all standards and
regulations issued thereunder, or of any applicable state laws and
regulations pertaining to job safety and health.
13. The Products are not in violation of the Toxic Substance Control Act,
or any standards and regulations issued thereunder; or
14. The Products, and any warranties made with respect thereto, are not in
violation of the Magnuson-Moss Warranty Federal Trade Commission
Improvement Act.
Seller, if engaged in the marketing or handling of Products, fabrics or related
materials subject to the Flammable Fabrics Act, as amended and regulations
thereunder, hereby guarantees to CMS that with regard to all the Products,
fabrics or related materials sold or to be sold to CMS by Seller for which
flammability standards have been issued, amended or continued in effect under
the Flammable Fabrics Act, as amended, reasonable and representative tests as
prescribed by the Consumer Product Safety Commission have been performed which
show that the Products, fabrics or related materials, at the time of their
shipment or delivery by Seller, conform to such of the above-mentioned
flammability standards as are applicable thereto. This Guaranty shall also
apply to any applicable codes of the National Fire Protection Association
("NFPA") and to any applicable state or local laws substantially identical to
the Flammable Fabrics Act or which adopt the tests provided for in any
applicable code of the NFPA.
The special guaranties set forth above may, where applicable, be based upon a
written guaranty received by Seller for those Products for which it is not a
manufacturer.
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<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
<PAGE> 42
CMS $20.00 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 thirty (30) days 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 forty-five (45) days 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 $13,000,000 $13,000,000
July 1 -
September 30, 1996 $ 7,200,000 $20,200,000
October 1 -
December 31, 1996 $ 7,800,000 $28,000,000
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
5% 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
$28,000,000 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 one-half (1/2) 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
one-half (1/2) 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 one-half (1/2) the
amount of the price paid by such customer therefor provided such amount shall in
no event exceed Supplier's one-half (1/2) 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 one-half (1/2) 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
sixty (60) days."
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
EXHIBIT B
MUTUAL RELEASE
AND COVENANTS NOT TO SUE
This Mutual Release and Covenants Not to Sue (hereinafter referred to
as the "Mutual Release") is entered into by the following parties:
(1) Biosite Diagnostics Incorporated, a corporation, its past and
present directors, managers, officers, shareholders, agents, employees,
attorneys, successors, assigns and any subsidiaries or affiliated corporations
and each of them, separately and collectively (hereinafter "Biosite");
(2) Curtin Matheson Scientific Inc., a corporation, its past and
present directors, managers, officers, shareholders, agents, employees,
attorneys, successors, assigns and any subsidiaries or affiliated corporations,
and each of them, separately and collectively (hereinafter "CMS"); and
(3) Fisher Scientific International Inc., a corporation, its past and
present directors, managers, officers, shareholders, agents, employees,
attorneys, successors, assigns and any subsidiaries or affiliated corporations,
and each of them, separately and collectively (hereinafter "Fisher").
Background of Dispute
W H E R E A S, Biosite and CMS entered into a Distribution Agreement
dated as of November 11, 1991 (the "Distribution Agreement");
W H E R E A S, Biosite provided to CMS a letter dated December 26, 1995
stating, among other things, that "Biosite hereby exercises its right to
terminate the Agreement without cause effective as of today;"
W H E R E A S, Fisher provided to Biosite a draft letter dated December
28, 1995 which, among other things, purports to reject Biosite's termination of
the Distribution Agreement and alleges that Biosite breached certain alleged
commitments to CMS and Fisher concerning the Distribution Agreement;
W H E R E A S, Biosite denies that the termination was in any way
improper, and further denies that it has made such commitments as alleged or
that it has breached any material commitment to CMS and/or Fisher (the parties'
dispute concerning the propriety and effect of Biosite's December 26, 1995
letter is hereinafter referred to as the "Dispute");
<PAGE> 49
W H E R E A S, the parties are separately entering into a written
amendment of the Distribution Agreement which amendment will be effective
according to its terms and which is not the subject of this Mutual Release;
W H E R E A S, the parties wish resolve the Dispute without incurring
the expense and burden of litigation;
N O W T H E R E F O R E, in consideration of mutual covenants contained
herein and other good and valuable consideration, the parties hereto agree as
follows:
CMS and Fisher Releases of Biosite
1. CMS and Fisher, individually and collectively, hereby
release and forever discharge Biosite from:
(a) any and all claims, liens, demands, causes of action,
obligations, damages and liabilities, known or unknown, that CMS and/or Fisher
have had in the past, or now have against Biosite arising directly or indirectly
out of, or related in any way to the Dispute. CMS and Fisher each expressly
understand and acknowledge that it is possible that unknown losses or claims
exist or that present losses may have been underestimated in amount or severity,
and CMS and Fisher explicitly took that into account in determining the amount
of consideration to be paid for the giving of this Mutual Release, and a portion
of said consideration, having been bargained for between the parties with the
knowledge of the possibility of such unknown claims, was given in exchange for a
full accord, satisfaction and discharge of all such claims. Consequently, CMS
and Fisher expressly waive all rights under California Civil Code section 1542,
which provides that:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
2. CMS and Fisher understand that this Mutual Release includes all
claims for costs, expenses and attorneys' fees, taxable or otherwise, incurred
by it in or arising out of the Dispute.
3. CMS and Fisher each acknowledge that nothing contained in this
Mutual Release constitutes an admission or concession of liability by Biosite on
account of any said claims or matters, liability for which is expressly denied.
4. CMS and Fisher expressly understand that both direct and indirect
breaches of this Mutual Release are proscribed, and, therefore, CMS and Fisher
covenant that they will not directly or indirectly encourage or aid, except as
required by due legal process, the commencement or prosecution of, against
Biosite, any
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<PAGE> 50
action or other proceeding based upon any claims, liens, demands, causes of
action, obligations, damages or liabilities which are the subject of this Mutual
Release.
5. CMS and Fisher each warrant that no other person or entity has
claimed or now claims any interest in the subject of this Mutual Release, and
that each has the sole right and exclusive authority to execute this Mutual
Release on its behalf and that neither has sold, assigned or otherwise set over
to any other person or entity, any claim, lien, demand, cause of action,
obligation, damage or liability covered hereby.
Biosite's Releases of CMS and Fisher
6. Biosite hereby releases and forever discharges CMS and
Fisher, individually and collectively, from:
(a) any and all claims, liens, demands, causes of action,
obligations, damages and liabilities, known or unknown, that Biosite has had in
the past, or now has against CMS and/or Fisher arising directly or indirectly
out of, or related in any way to the Dispute. Biosite expressly understands and
acknowledges that it is possible that unknown losses or claims exist or that
present losses may have been underestimated in amount or severity, and Biosite
explicitly took that into account in determining the amount of consideration to
be paid for the giving of this Mutual Release, and a portion of said
consideration, having been bargained for between the parties with the knowledge
of the possibility of such unknown claims, was given in exchange for a full
accord, satisfaction and discharge of all such claims. Consequently, Biosite
expressly waives all rights under California Civil Code section 1542, which
provides that:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
7. Biosite understands that this Mutual Release includes all claims for
costs, expenses and attorneys' fees, taxable or otherwise, incurred by it in or
arising out of the Dispute.
8. Biosite acknowledges that nothing contained in this Mutual Release
constitutes an admission or concession of liability by CMS and/or Fisher on
account of any said claims or matters, liability for which is expressly denied.
9. Biosite expressly understands that both direct and indirect breaches
of this Mutual Release are proscribed, and, therefore, Biosite covenants that it
will not directly or indirectly encourage or aid, except as required by due
legal process, the commencement or prosecution of, against Biosite, any action
or other proceeding based upon any claims, liens, demands,
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<PAGE> 51
causes of action, obligations, damages or liabilities which are the subject of
this Mutual Release.
10. Biosite warrants that no other person or entity has claimed or now
claims any interest in the subject of this Mutual Release, and that it has the
sole right and exclusive authority to execute this Mutual Release on its behalf
and that it has not sold, assigned or otherwise set over to any other person or
entity, any claim, lien, demand, cause of action, obligation, damage or
liability covered hereby.
General Provisions
11. This Mutual Release shall be binding upon and for the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors, devises and assigns.
12. The parties hereto warrant that no promise, inducement or agreement
not expressed herein has been made to them in connection with this Mutual
Release, and that this Mutual Release constitutes the entire agreement between
the parties herein named. It is expressly understood and agreed that this Mutual
Release may not be altered, amended, modified or otherwise changed in any
respect whatsoever except by a writing duly executed by authorized
representatives of the parties hereto. The parties hereto hereby agree and
acknowledge that they will make no claim at any time or place that this Mutual
Release has been orally altered or modified or otherwise changed by oral
communication of any kind or character.
13. This Mutual Release is entered into by the undersigned parties
freely and voluntarily, and with and upon advice of counsel. Each party hereto
warrants that the person signing below on its behalf is authorized to sign this
Mutual Release on its behalf and to bind it to the terms of this Mutual Release.
14. Should any provision of this Mutual Release be held invalid or
illegal, such illegality shall not invalidate the whole of this agreement, but,
rather, the Mutual Release shall be construed as if it did not contain the
illegal part, and the rights and obligations of the parties shall be construed
and enforced accordingly.
15. This document may be executed in duplicate originals,
each of which is equally admissible in evidence.
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<PAGE> 52
16. This Mutual Release shall be construed and enforced pursuant to the
laws of the State of California.
Biosite Diagnostics Incorporated Date: 3/12/96
----------------------
By: /s/ Kim D. Blickenstaff
-----------------------------
Title: President
--------------------------
Curtin Matheson Scientific, Inc. Date: 3/19/96
----------------------
By: /s/ Jack Daniels
-----------------------------
Title: Vice President
--------------------------
Fisher Scientific International Inc. Date: 3/19/96
----------------------
By: /s/ Jack Daniels
-----------------------------
Title: Vice President
--------------------------
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<PAGE> 53
[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 5% of CMS' purchases for 1996 as a rebate
penalty (estimated to be 1.2 million).
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 4,600 kits or greater per month for
Q4 1996, then Biosite will renew the contract for 1997, 1998 and 1999.
Biosite will also forgive 1/4 of the 5% rebate penalty associated
with not making the original Triage milestone by June, 1996.
- - If CMS achieves a running rate of between 4,500 and 4,599 kits per
month for Q4 1996, then Biosite will renew the contract through 1997
only and CMS
<PAGE> 54
Mr. Jack Daniels
August 9, 1996
Page 2
will pay Biosite 1/4 of the 5% of the 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 4,600 kits per month will be
considered made, if the monthly end user shipments for
October, November and December average 4,600 kits or
more.
- - 1996 Non-Performance: If CMS achieves a running rate of less than 4,500
kits per month for Q4 1996, then CMS will pay Biosite 1/4 of the 5%
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 5% rebate penalty associated with not making the
original Triage milestone by June, 1996 in each year the target is met.
<PAGE> 55
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 5% 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 4,600 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> 56
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> 57
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 30 days.
- - 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> 58
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
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<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, Afghanistan, Bangladesh, Bhutan,
Brunei, Burma, Cambodia, China, Hong Kong, India, Indonesia, Laos, Malaysia,
Maldives, Mongolia, Nepal, South Korea, North Korea, Pakistan, Philippines,
Singapore, Sri Lanka, Taiwan, Thailand and Vietnam.
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, Bahrain, Iran, Iraq,
Israel, Jordan, Kuwait, Lebanon, Oman, Saudi Arabia, Syria, Qatar, United Arab
Emirates and Yemen.
1.10 "Pacific Island Countries" shall mean, collectively,
Australia, Fiji, Kiribati, Nauru, New Zealand, Papua New Guinea, Solomon
Islands, Tonga, Tuvalu, Vanuatu and Western Samoa.
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<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.
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<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.
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<PAGE> 6
Milestone 2 by September end, 1995
Milestone 3 by June end, 1996
Milestone 4 by October end, 1996
.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 any
disposable in vitro immunoassay test device in combination with a hand held
reader
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<PAGE> 7
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 bench-top dry chemistry assay system including future
modifications and improvements (currently marketed under the name SPOTCREM) or
any non-portable bench-top instruments for measurement of immunoassay tests
including cardiac analytes such as CKMB, Troponin I and Myoglobin in combination
or reagents.
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 Biosite shall not sell to such
new distributor(s) new readers or any new reader applications products
virtually identical or similar to the Reader in the Agreement at prices which
are more favorable, at a comparable volume of sales, than those prices charged
to KDK pursuant to the Agreement. If more favorable prices are given to such
third party(ies), Biosite shall notify KDK in writing and the prices to KDK
shall be amended to reflect such prices.
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 fourth anniversary of the
First Commercial Sale of the Testing Device. The sales price for each Testing
Device for
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orders received on or after such fourth anniversary 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 second anniversary 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 second anniversary and prior to the fourth anniversary of the First
Commercial Sale of the Reader. The sales price for each Reader for orders
received on or after such fourth anniversary 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 one
(1) year 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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5.2.2 Reader. Prior to, and during the period of one (1) year
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 two weeks after receipt of firm orders. Biosite shall use
commercially reasonable efforts to deliver the Product within three (3) months
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. In the event that Biosite decides to
discontinue the manufacture of the Product, upon KDK's request the parties
shall negotiate, in good faith, a contract under which Biosite transfers or
licenses KDK with the Patent Rights and any other proprietary information
necessary for KDK tomanufacture the Product in the Territory.
5.4 Payments. KDK shall pay Biosite within forty-five (45) 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 sixty (60) days prior to the
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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 twelve-month 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 twenty-four (24) months 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 ninety (90) days at no cost to KDK. 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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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 remain the property
of KDK.
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6.4 Quarterly Reports. KDK shall prepare and provide Biosite with
quarterly written sale reports within 30 days of the end of each calendar
quarter (January-March, April-June, July-September, October-December),
commencing with the first calendar quarter after the First Commercial Sale. The
quarterly reports shall summarize sales (sales figures only) of the Testing
Device and the Reader by KDK and its subdistributors during the preceding
quarter 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 discounted 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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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 six (6) months,
commencing with the first calendar half-year after the effective date of the
Agreement. Biosite shall send KDK, on a quarterly basis, reports on the status
and progress of the Development Program for which Biosite is responsible,
commencing with the first calendar quarter 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 five (5) 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" 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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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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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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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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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 ten (10) years 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 (a) KDK shall have the right to extend the
term of the Agreement for an additional two (2) years, by giving written notice
to Biosite not less than one hundred eighty (180) days prior to the expiration
of the initial term; and (b) if KDK exercises such option to extend the
Agreement, after expiration of such two (2) year extension and any extension
thereafter, the Agreement automatically shall be renewed for successive periods
of two (2) years each.
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 ninety (90) days after notice thereof from they
non-breaching party, or (b) at any time after the expiration of the initial ten
(10) year term and the first two (2) year extension (total twelve (12) years) if
extended of the Agreement, upon not less than one hundred eighty (180) days
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 twelve (12) months 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 five (5)
years 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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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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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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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 without the consent of the
other party which may not be unreasonably withheld or delayed; provided,
however, that at any time on or after the third anniversary of the date of the
first Commercial Sale, either party may, without such consent, assign the
Agreement and its rights and obligations hereunder in connection with the
transfer or sale of all or substantially all of its business, or in the event
of its merger or consolidation or change in control or similar transaction. 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,
-20-
<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 ------------------------
------------------------
-22-
<PAGE> 23
Exhibit A: Product Specifications
System Design Specifications
1) PROJECT GOAL: To develop and launch a panel of quantitative assays for
cardiac markers and an instrument suitable for the
point-of-care setting by Summer 1996.
2) POINT-OF-CARE
MARKET (P-O-C): P-O-C for cardiac markers is defined as the emergency
department, chest pain center or coronary care unit. In
each of these settings, the assay would be performed by
non-laboratory health care personnel.
3) CUSTOMER NEEDS:
a) Assay: o No sample processing
o Fast
o Easy to use
o Cardiac markers useful in early diagnosis of AMI
o State of the art assay performance
o Cost effective
o Reliable
o Result influences diagnostic decisions
b) Instrument: o Easy to use
o Fast
o Reliable
o Documentation of results
o Cost effective
o Minimal Maintenance
4) PRODUCT DESIGN PARAMETERS
a) Assay:
<TABLE>
<CAPTION>
CUSTOMER NEED DESIGN PARAMETER GOAL
<S> <C> <C>
No sample processing Sample selection Anticoagulated whole blood,
plasma and serum
Easy to use # Assay steps 1 step
Packaging Unitized device, prepackaged
requiring no reagent preparation
</TABLE>
1
<PAGE> 24
<TABLE>
<CAPTION>
<S> <C> <C>
Useful markers Panel Myo, CKMB, Trop I
Good Performance Fast 10 minutes to result
Accuracy Agreement with reference
preparation and standards
Precision [CONFIDENTIAL MATERIAL
REDACTED AND FILED
SEPARATELY WITH THE
COMMISSION]
Agreement with [CONFIDENTIAL MATERIAL
market leaders REDACTED AND FILED
SEPARATELY WITH THE
COMMISSION]
Reliable Controls Device and instrument
o Functional check internal validation
o Calibration check controls to determine
completion of assay and
eliminate the need for
timing step, factory
determined calibration and
input calibration data via
E-prom.
Kit stability 12 mos RT at launch, 24 mos
at RT final goal.
</TABLE>
b) Instrument
<TABLE>
<CAPTION>
CUSTOMER NEED DESIGN PARAMETER GOAL
<S> <C> <C>
Easy to use Calibration o Bar coded strip on device
for lot data input
Data entry keypad, o Simplistic user interface
function
Keys o Alpha-numeric input
Maintenance o No user serviceable parts
o Spill and contamination
resistant case
Mistake resistant Controls o Instrument prompts/ok's
o Instrument electronic
checks (post)
o Results blocked if any
invalid checks occur for
assay
o Requires user ID to use
o Requires spec ID to proceed
o QC check device
Identification o Bar coded lot/exp date
</TABLE>
2
<PAGE> 25
b) Instrument (continued)
<TABLE>
<CAPTION>
CUSTOMER NEED DESIGN PARAMETER GOAL
<S> <C> <C>
Reliable to be determined by mutual agreement by April end 95
Portable Size o Portable or small desk top
Power requirements o Powered ac/dc converter
Result documentation Printer o Built-in printer
o Printout with date, time
user & Pt ID, Lot#, assay
results, control results,
normal range, out of range
flags for QC and patients
Data Storage o 100 patient panel results
with all data (Lot, time,
date int. QC results) and
30 QC results
o Segregated QC memory
Interface o Data downloadable to
laboratory data management
system
Cost effective Instrument cost [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE
COMMISSION]
Accommodate new, EEPROM Update o Reprogrammable
other assays EEPROM on-site
o Panel selection by user
</TABLE>
3
<PAGE> 26
ASSAY SPECIFICATIONS
1) Assay Format: A panel of sandwich immunoassays using a combination of
monoclonal and polyclonal antibodies for the quantitative detection of three
cardiac markers in 10 minutes. The assay is performed in a wholly contained
disposable device which is analyzed using a portable instrument.
2) Procedure: 1. Label device.
2. Add an unmeasured amount of anticoagulated whole
blood, plasma or serum to sample port.
3. Input specimen ID. Insert device into instrument for
incubation, assay validation and quantification of
results. Instrument will determine when assay is
finished via internal control values. Any devices
run simultaneously can be read after 1st device is
quantified.
4. Results displayed and printed.
3) Cardiac Marker Menu/Detection Limits:
Marker Minimum Detectable Dose (MDD) Assay Range
CKMB [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
Myoglobin WITH THE COMMISSION]
Troponin I
Minimum Indicating Limit of each Marker on Display
CKMB [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
Myoglobin WITH THE COMMISSION]
Troponin I
4) Internal Control: Two internal controls that control for timing and
proper assay performance.
5) Specificity: CKMB [CONFIDENTIAL MATERIAL REDACTED
Myoglobin AND FILED SEPARATELY
Troponin I WITH THE COMMISSION]
6) Precision: CKMB % CV at ng/ml*
Myoglobin % CV at ng/ml*
Troponin I % CV at ng/ml*
*to be determined through mutual agreement by April end
95
7) Correlation: Results must have [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] agreement with
market leaders for each assay.
4
<PAGE> 27
8) Incubation time: One incubation step of (less than) 3
minutes/not observed by user.
9) Sample requirements: An unmeasured amount of anticoagulated whole
blood; plasma or serum.
10) Standardization: CKMB - AACC Reference Material for CKMB
Myoglobin - Purified myoglobin
Troponin I - Cloned protein
11) Calibration: Factory set and recorded on E-prom provided in
each kit. Bar code on device (Lot #/expiration
date) is read when device is inserted into
Instrument for quantitation.
12) Device Failure Rate: (less than) 0.5%
13) Storage and Stability: Stored at room temperature for 24 months, 12
months at launch.
5
<PAGE> 28
COMPETITIVE PRODUCT MATRIX
<TABLE>
<S> <C> <C> <C>
1) CKMB DADE ABBOTT OPUS
---- ---- ------ ----
MMD 0.4 ng/ml 0.7 ng/ml (less than) 1.0 ng/ml
Range 0.4-125 0.7-300 1.0-300
Precision 5.4%-8.3% 8.6%-8.7%
TAT 8 min 30 min 20 min
Sample serum serum/plas. serum/plas.
Norm range (less than) 4.7 ng/ml (less than) 5.0 ng/ml
2) MYOGLO DADE OPUS
------ ---- ----
MMD 1.2 ng/ml (less than) 1.0 ng/ml
Range 1.2-1000 1.0-650
Precision 1.3%-8.3% 3.2%-8.9%
TAT 8 min 10 min
Sample serum/plas.
Norm range 0-110 ng/ml (less than) 90 ng/ml
3) TROP I DADE ABBOTT
------ ---- ------
MMD 0.45 ng/ml 0.75 ng/ml
Range 0-100 0-100
Precision (less than) 10% 3%-10%
TAT 8 min 2 hr (R&D)
Sample serum
Norm range (less than) 0.5 ng/ml
4) TROP T DADE ABBOTT
------ ---- ------
MMD 0.04 ng/ml
Range 0.04-10 ng/ml
Precision (less than) 5%
TAT
Sample serum
Norm range 0-0.1 ng/ml
</TABLE>
6
<PAGE> 29
INSTRUMENT SPECIFICATIONS
1) Instrument design: A portable instrument designed to be used at the
point-of-care setting by non-laboratory health care
personnel. It requires minimal and self evident user
interface to operate.
2) Procedure: 1. Power on
2. Automatic POST
3. Enter user ID
4. Select operational mode
5. Enter sample ID
6. Insert device.
7. Instrument monitors control zones and determine
completion of assay
8. Multiple zones are read and results displayed
on screen and printed
9. Insert next device
3) HARDWARE
a) Dimensions: Portable and compact, maximum footprint 8"x10"x6", less
than 10 lbs.
b) Optical Reader: Capable of reading at least four assay test zones and
two control zones.
c) Device ID/data input: Each device has bar coded strip with test type, Lot #,
expiration date, calibration date, control zone data.
d) User data interface: Alpha-numeric keypad
Mode key(s)
Power key
Enter key
Timer
e) Display Screen: Alpha-numeric, minimum of six lines display.
Japanese character (Katakana)
f) Data Output: On board printer with continuous event logging. Host
computer interface with bi-directional data transfer.
g) Power requirements: Battery operated with AC adapter.
Display of operated time with Battery and requiring
time for recharging.
Indication of consumption power.
Usable with disposable battery (AAA).
7
<PAGE> 30
h) Memory storage: Capable of 100 patient panel results with all associated
data e.g., time, date, internal controls, etc. and 30 QC
panels.
i) Clock: Real time clock with date and time. Assay timer.
j) Serviceability: No user serviceable parts. Optics and Internal
components cleaned by operator.
k) Failure rate:
to be determined through mutual agreement by April and
95
4) SOFTWARE
a) Operational modes: Data entry
Key access for data entry e.g., normal ranges,
user ID list.
Normal ranges
Control ranges
User ID
Patient ID
Date retrieval
QC
Patient
Time/date of last QC run
Analyze assay
Print
Set clock/timer
b) Screen prompt: ID entry
Result storage remaining
Download memory
Time since last QC
Error Messages
Lockout with unacceptable electronic validation
checks.
Lockout with exp reagents.
Lockout with out of range or elapsed time QC.
Result lockout with out of range internal
control zones.
Lockout with unapproved user ID.
Improper device alignment.
Lockout with QC check device failure.
8
<PAGE> 31
Exhibit B
Patents
Patent Number 07/887,526 - Diagnostic device and apparatus for the controlled
movement of reagents without membranes.
-2-
<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
-1-
<PAGE> 3
Project Plan and a breadboard reader to evaluate fluorescence remission signals
by a PC.
Within 10 days after BIOSITE's acceptance of the results of the
feasibility study as described above, BIOSITE will pay LRE the actual costs for
the feasibility study as invoiced up to a maximum of DM 125.000.00.
2.2 Functional Fluorescence Reader
LRE shall deliver in accordance with the specifications and the Project
Plan 5 (five) Functional Fluorescence Readers with machined optics and
controlled by PC, designed to evaluate Prototype cardiac marker devices.
Within 10 days after BIOSITE's acceptance of the Functional
Fluorescence Readers as described above, BIOSITE will pay LRE all actual cost
for the Functional Fluorescence Reader as invoiced up to a maximum of DM
280.000.00.
2.3 Prototype Meter.
In accordance with the Specifications (Attachment A) and the Project
Plan (Attachment B) LRE will deliver such number of Prototype Meters,
performing the major functions of the final product as BIOSITE requests (which
shall not be less than 50 nor more than 100). The majority of the mechanical
parts will be machined and the housing will be close to the final design.
Within 10 days after BIOSITE's acceptance of the first 5 (five)
Prototype Meters as described above, BIOSITE will pay LRE the actual costs for
the Prototype Meter development as invoiced up to a maximum of DM 785.000.00
(DM 825.000.00 with optional printer).
Additional Prototype Meters requested by BIOSITE shall be built and
supplied by LRE at a transfer price per meter of [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] with optional printer).
Within 30 days after BIOSITE's acceptance of each additional Prototype Meter
requested by BIOSITE, BIOSITE will pay LRE the transfer price therefor as
invoiced.
2.4 Preproduction Meter.
The development work for the Preproduction Meter shall be initialed by
written approval of the Prototype Meters by BIOSITE (see Art. 3.3).
12 (twelve) Preproduction Meters will be delivered in accordance to
the final Specifications including tooled parts and final software. The
delivery date is shown in the Project Plan (Attachment B).
Within 10 days after BIOSITES's acceptance of the 12 (twelve)
Preproduction Meters as described above, BIOSITE will pay LRE the actual costs
for the Preproduction Meter development as invoiced up to a maximum of DM
670.000.00 (DM 885.000.00 with optional printer).
Additional Preproduction Meters can be built by LRE, provided that
BIOSITE will place an order timely in advance at an increased transfer price
per meter not to exceed [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] with optional printer) which will be quoted separately by
LRE. Within 30 days after BIOSITE's acceptance of each additional Preproduction
Meter ordered by BIOSITE, BIOSITE will pay LRE the transfer price therefor as
invoiced.
The development will be completed with the shipment of the first 12
(twelve) Preproduction Meters as described above and the written acceptance of
BIOSITE.
2.5 Termination of Development.
(a) By BIOSITE.
During the development phase BIOSITE may terminate the agreement
without there being and without giving any causes on 30 days prior written
notice to LRE.
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
-2-
<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").
If BIOSITE terminates the agreement during the development phase for
any reason other than paragraph 10.3, BIOSITE shall have no rights or license
to use or disclose the Joint Technology.
(b) By LRE.
During the development phase LRE may terminate the agreement only (i)
under paragraph 10.3, or (ii) upon 30 days prior written notice to BIOSITE, if
the parties mutually determine in the course of one of the development phases
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.
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.
-3-
<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
-4-
<PAGE> 6
The total cost of the additional tooling necessary to efficiently
produce the estimated quantity of Prototype Meters is estimated to be
DM 195,000.00 (DM 215,000.00 with optional printer).
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
- one third with approval by BIOSITE to order the tooling.
----------------------------------------------------------
- one third after shipment of first Prototype Meters, and
----------------------------------------------------------
- one third after final shipment of Prototype Meters by LRE.
----------------------------------------------------------
3.3 Preproduction Meter Tooling.
The total cost of tooling for the Preproduction Meters is estimated to
be DM 440,000.00 (DM 485,000.00 with optional printer).
The tooling has to be ordered 6-8 months 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
- one third with approval by BIOSITE to order the tooling.
-----------------------------------------------------------------------
- one third after shipment of first Preproduction Meters, and
-----------------------------------------------------------------------
- one third after final approval by BIOSITE of the tooling for use in the
-----------------------------------------------------------------------
-5-
<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
-6-
<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 two (2) years 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).
-7-
<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) During the term of this agreement, LRE shall not develop or
commercialize, other than for the account or benefit of BIOSITE, any portable
meter (collectively, the "Competitive Meters") for the quantitative measurement
of (i) any analytes which are quantitatively measured by any portable meter
which BIOSITE is actively developing or commercializing together with LRE, or
(ii) any other analytes listed on Exhibit A hereto. 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), with respect to
(i) any analytes which are quantitatively measured by any portable meter which
BIOSITE is actively developing or commercializing together with LRE within one
year prior to the expiration or termination of this Agreement, or (ii) any other
analytes listed on Exhibit A hereto shall survive such expiration or termination
for a period of two (2) years 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 NO ROYALTIES
Subject to the provisions of paragraph 4.2(e), any proprietary
rights (like copy rights, patents, etc.), that LRE or BIOSITE
already possess or that will be created under this agreement,
and that are utilized for design and manufacture of the
Fl-Meter under this agreement, may be so utilized without any
obligation of either party to pay royalties to the other
party.
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 first 2 quarters prior to the beginning of
the first full year of production and an update each subsequent quarter
(revolving forecast) for the following 4 quarters.
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<PAGE> 13
The shipments will commence about 4 months 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 first quarter
all Fl-Meters firmly ordered for the first quarter according to BIOSITE's
binding order. BIOSITE shall purchase in the 2nd quarter at least two-thirds of
the quantity ordered for the 2nd quarter. The remaining one-third of the
quantity firmly ordered for the 2nd quarter may be accepted by BIOSITE
alternatively in the third or fourth quarter following the order and forecast.
The forecast for the 3rd quarter and not purchased in the 3rd or 4th quarter
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 3rd quarter and not purchased in the
-12-
<PAGE> 14
3rd or 4th quarter 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 4th
quarter 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 500 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 50 F1-Meters in
-13-
<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 four (4) months,
(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 four (4) months after receipt of BIOSITE's next
order, or (b) otherwise, delivery by LRE shall commence not later than ten (10)
months 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 six (6) months, 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 first 12 months of production and depend
on the total quantity of Fl-Meters ordered during such period. The transfer
prices are:
- at up to [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] per year [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] with optional printer.
- at up to [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] per year [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] with optional printer.
- at up to [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] per year [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] with optional printer.
After the first 12 months of production, the transfer prices will be
reduced as follows:
- at up to [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] per year [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] with optional printer.
- at up to [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] per year [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] with optional printer.
- at up to [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] per year [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] with optional printer.
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.
-16-
<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 five (5)
years 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
-18-
<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
-19-
<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 12
months prior written notice, or the first time, however, with
effect on December 31, 1998.
(b) LRE can terminate the agreement earlier if BIOSITE will not place a
minimum order of 300 F1-Meters within a period of 12 months.
(c) BIOSITE can terminate this agreement earlier if LRE fails to supply
BIOSITE with its firmly ordered quantities of Fl-Meters for two (2)
consecutive calendar quarters under Art. 5.
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
-20-
<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
---------
ADDITIONAL ANALYTES
-------------------
<TABLE>
<CAPTION>
Category Analytes
<S> <C>
Other Drugs [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION]
Therapeutic Drugs [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION]
Drug Monitoring Sandimmune
Sandimmune Neoral
[CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION]
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
</TABLE>
20
<PAGE> 29
ATTACHMENT B Page 7
- --------------------------------------------------------------------------------
project plan CK-Meter LRE Relais + Elektronik Sept 1994
Customer: Biosite Diagnostics
Resources Abbreviations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nr. Name Kurzel
- --------------------------------------------------------------------------------
<S> <C> <C>
16 Biosite BIOSITE
- --------------------------------------------------------------------------------
2 Bereichsleitung / J. Denker BL
- --------------------------------------------------------------------------------
14 EE E
- --------------------------------------------------------------------------------
5 Elektronik Entwicklung EE
- --------------------------------------------------------------------------------
9 Einkauf EK
- --------------------------------------------------------------------------------
13 Extem Ext
- --------------------------------------------------------------------------------
6 Fertigungsleitung Medizin FLME
- --------------------------------------------------------------------------------
1 Geschaftsleitung / R. Hartwich GL
- --------------------------------------------------------------------------------
15 MK M
- --------------------------------------------------------------------------------
3 Marketing/Kunde M/K
- --------------------------------------------------------------------------------
11 Fertigung Medizin MED
- --------------------------------------------------------------------------------
4 Konstruktion MK
- --------------------------------------------------------------------------------
7 Projektleitung PL
- --------------------------------------------------------------------------------
10 Qualitats Leitung QA
- --------------------------------------------------------------------------------
8 Qualitatssicherung/Entwicklung QAE
- --------------------------------------------------------------------------------
12 Qualitatssicherung Inspection QAI
- --------------------------------------------------------------------------------
17 Resourcen Resources
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CKM03 page 7
- --------------------------------------------------------------------------------
</TABLE>
LRE RELAIS + ELEKTRONIK GMBH
Bereich Medizintechnik Munich, Sept. 21, 1994/BU/AH
Annex 1
- -----
To Contract Fl-Meter
- --------------------
SPECIFICATION FOR Fl-METER
1. Previous remark
1.1 Cooperation with Biosite
1.1.1 This specification will be changed and supplemented, as necessary,
during development.
1.1.2 LRE commits themselves to support Biosite concerning changes or
supplementation of this specification, and to immediately inform Biosite
in the case of any variation of the unit from the specification.
1.1.3 Should it prove, during development, that the requirements of this
specification are not sufficient, have to be supplemented or cannot be
met, LRE and Biosite must come to an agreement concerning the new or
changed requirements
1.1.4 The characteristics defined in this valid specification are the basis
for the minimum requirements. The test procedures shall be fixed in an
agreement concerning the final quality control.
1.1.5 Biosite provides the test and control standards necessary for control
of the development steps and quality control in series production.
1.2 System
This specification describes the technical requirements and the frame
conditions for development of a fluorescence photometer for
quantitative determination up to [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] parameters in blood. Accuracy of
the whole system has to be defined for each parameter.
The upper and lower limit for the measurement range should be defined
by Masterstandard high and low up to [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] parameters. Measurement
values are relative and will be converted by means of blank values
determined during
- --------------------------------------------------------------------------------
page-1-of 34
<PAGE> 30
adjustment of the equipment. Display of the measurement result shall be
the parameter concentration in digital numbers. The lot-specific data
are stored in a code chip.
2. Fl-Meter as part of a diagnostic system
-----------------------
2.1 Fl-Meter shall be used as part of a closed diagnostic system for
determination of parameter in blood in conjunction with code chip.
2.2 The instrument evaluates biosite cardiac device.
Description of this test device, see Annex 1 of this specification.
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
2.3 [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
2.4 [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
2.5 For the adjustment and control of the instrument, Biosite shall provide
control devices (Master-standards) (see Annex 9) equivalent to the test
devices (Annex 1)
3. Description of the instrument
-----------------------
3.1 Design
LRE makes proposals concerning the housing as well as the arrangement
of keys and display and come to an agreement with Biosite.
Biosite defines:
- Color of housing
- Color of keys
- Inscription of housing (designation, logo, inscription of operation
element
- --------------------------------------------------------------------------------
page-2-of 34
<PAGE> 31
- Text of model identification label
3.2 The instrument consists of the following elements:
[27 PAGES OF CONFIDENTIAL SPECIFICATIONS REDACTED AND FILED SEPARATELY
WITH THE COMMISSION]
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
<PAGE> 32
Annex 7: Packaging
- -------------------------
[CONFIDENTIAL MATERIAL REDACTED & FILED SEPARATELY WITH THE COMMISSION]
Annex 8: Linear mode and emission measurement
- ----------------------------------------------------
[CONFIDENTIAL MATERIAL REDACTED & FILED SEPARATELY WITH THE COMMISSION]
Annex 9: Industrial design
- ---------------------------------
[CONFIDENTIAL MATERIAL REDACTED & FILED SEPARATELY WITH THE COMMISSION]
Annex 9: Industrial design
- ---------------------------------
[CONFIDENTIAL MATERIAL REDACTED & FILED SEPARATELY WITH THE COMMISSION]
Annex 9: Industrial design
- ---------------------------------
[CONFIDENTIAL MATERIAL REDACTED & 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>
-i-
<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 Quarterly 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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<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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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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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 10% 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 4 months after receipt of MERCK's order
by BIOSITE. In the event BIOSITE is able to fill orders by MERCK in
less than 4 months 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.
MERCK will pay all taxes and charges,
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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 twelve 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 50%, 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 BIOSITE.
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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4.7 QUARTERLY REPORTS. MERCK will provide BIOSITE with quarterly reports
within 30 days of the end of each calendar quarter (January - March,
April - June, July - September, October - December). The quarterly
reports shall summarize PRODUCT sales during the preceding quarter 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
at no extra cost 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
without charge 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 5 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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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 five (5) years after the date hereof and
thereafter shall be automatically renewed for successive one year
terms, unless terminated by either party by written notice to the other
at least six (6) months
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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 thirty (30) calendar days
after receiving written demand therefor;
b) By either party, effective immediately, 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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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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- 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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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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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.
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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 without the prior written
consent of the other party. A merger, acquisition, or sale of all or
substantially all of the assets of a party shall not be deemed an
assignment requiring the consent of the other party hereto.
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) 400 test kits (25 test devices each) minimum
within the first 12 months
Merck Clevenot (France) 400 test kits (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:
- - prisons
- - parole programs
- - public and private sector workplace testing
- - industrial work doctors, except MERCK customers as of the date of this
AGREEMENT.
- - U.S. military hospitals and on-site testing programs (i.e., Alcohol and
Drug Coordination Centers [ADCO], recruiting centers)
- - high school, college, university and professional sports programs and
associations
- - government agencies and customs
- - public carriers
- - police and criminal police
- - blood drawing sites outside hospital
- - specific methadone programs outside the MEDICAL SEGMENT
The MEDICAL SEGMENT comprises:
- - hospitals (including government, university, non-U.S. military and
psychiatric hospitals)
- - non-U.S. military on-site testing programs
- - emergency rooms and ambulances
- - reference labs
- - industrial work doctors (MERCK customers), as of the date of this AGREEMENT
- - drug information centers
- - drug rehabilitation centers
- - methadone programs within the MEDICAL SEGMENT
- - health maintenance organizations
- - planned parenthood centers
- - private/public forensic institutes
- - private/commercial labs
- - medical specialists for laboratory diagnostics
- - physicians and physician group practices
EXHIBIT I continued
- - wholesale dealers
- - pharmacies
- - police doctors
<PAGE> 28
EXHIBIT II
(Product specifications)
Merck Cat. No. 16477
Products: (a) BIOSITE's Triage 7 Panel (the "Triage 7 Panel") for
abused drugs which includes tests for the following abused
drugs: Phencyclidine; Tetrahydrocannabinol; Cocaine;
Amphetamines/Methamphetamines; Opiates; Benzodiazepines; and
Barbiturates.
(b) BIOSITE's proposed Triage 8 Panel (the "Triage 8 Panel") for
abused drugs which includes tests for the following abused
drugs: Phencyclidine; Tetrahydrocannabinol; Cocaine;
Amphetamines/Methamphetamines; Opiates; Benzodiazepines; and
Barbiturates and Methadone.
(c) Any modified or improved versions of BIOSITE's Triage 7 Panel or
Triage 8 Panel which BIOSITE offers to MERCK for sale in the
TERRITORY.
Method of The Triage(R) Panel for Drugs of Abuse is a competitive
analysis: binding immunoassay in which a chemically labeled drug (drug
conjugate) competes with drug which may be present in the urine
for antibody binding sites. After a brief incubation, the
reaction mixture is transferred to the membrane in the Detection
Area. Free drug conjugate that is displaced from antibody
binding sites by drug in the urine, binds to a zone of
monoclonal antibody that is immobilized on the membrane. The
membrane is washed to remove the unbound conjugate and clear the
background. Test results are visually read.
A positive specimen produces a distinct colored bar in the Drug
Detection Zone adjacent to the drug name. A negative specimen
does not produce a colored bar.
Shelf-life: The current PRODUCT shelf-life is 9 months upon date of invoice.
BIOSITE will use its best efforts to extend PRODUCT shelf-life
to 12 months until market launch of the PRODUCT by MERCK, and to
18 months as soon as ongoing real-time stability tests provided
results accordingly.
Storage: The reagents contained in the Triage(R) Panel for Drugs of
Abuse should be stored at room temperature (15 degrees - 25
degrees C) and are stable until the date stamped on the outer
box. MERCK is responsible for maintaining PRODUCT temperature
during any shipment of the PRODUCT.
Package: Triage(R)7 and Triage(R)8
25 test cassettes/kit
---------------------
Test Device 25 each
Wash Solution 1 x 8 ml
Pipet 1 each
Pipet Tips 50 each
Artwork: The layouts for outer box, foil pouch and wash solution labels
and the films for insert-sheets will be sent to BIOSITE by
MERCK. Printing, packing and labeling by BIOSITE.
Reagents: Mouse monoclonal antibodies against Phencyclidine
Benzodiazepines, Cocaine, Amphetamines/Methamphetamines,
Tetrahydrocannabinol, Opiates and Barbiturates immobilized on
a membrane.
Mouse monoclonal antibodies against Phencyclidine,
Benzodiazepines, Cocaine, Amphetamines/Methamphetamines,
Tetrahydrocannabinol, Opiates and Barbiturates lyophilized in a
protein matrix containing (less than) 0.01% sodium azide.
Lyophilized TRIS and TRIS X HCI buffer (final concentration 200
mmol/1)
Reagents Wash 100 mmol/1 Boric acid
Solution: 150 mmol/1 Sodium Chloride
0.02% Triton X-100
0.02% Sodium Azide
Certificates: BIOSITE shall provide MERCK with a notarially certified copy of
a certificate confirming that BIOSITE produces according to GMP
(Good Manufacturing Practice) for all products listed above.
Quality A lot-specific quality-control report sheet is provided by
control: BIOSITE with each shipment.
A Quality control test procedure (QTP) is provided by BIOSITE.
Price per kit: See EXHIBIT IV.
[See also PRODUCT insert, attached.]
<PAGE> 29
EXHIBIT III
(Territory)
COUNTRIES:
Europe: Including but not limited to, Germany, Austria, Switzerland,
France, Spain, Portugal, Italy, Belgium, Netherlands and
Luxembourg, Scandinavia, UK, Ireland, Turkey, Slovenia, Croatia,
Yugoslavia
East Europe: Former Warsaw Pact Countries, including CIS (former USSR)
Middle East: Israel, Syria, Saudi-Arabia, Iran, Iraq, Kuwait, United Arab
Emirates
North Africa: Egypt, Tunisia, Libya, Algeria, Morocco
Republic of South Africa
Pakistan, India
<PAGE> 30
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> 31
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: 70,000
2. Calendar year 1994: 90,000
3. Calendar year 1995: 130,000
4. Calendar year 1996: 150,000 to 200,000
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> 32
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: Including, but not limited to: Argentina, Brazil, Chile,
Mexico, Peru, Venezuela
-1-
<PAGE> 33
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: 70,000
2. Calendar year 1994: 90,000
3. Calendar year 1995: 130,000
4. Calendar year 1996: 150,000 TO 200,000
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> 34
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) 400 test kits (25 test devices each)
minimum within the first 12 months
Merck Clevenot (France) 400 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> 35
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 one year.
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> 36
The 1994 minimum quantity of test cassettes to be purchased by MERCK and its
affiliates will be 90,000 cassettes.
The transfer price and the minimum purchase quantities for 1995 through 1997
remain as in the Distributorship Agreement subject to discussion based on
actual experiences in 1994.
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> 37
11.12.95 [MERCK logo]
DIAG M
Dr. B. Utz
6120
781337 Merck KGaA Darmstadt Deutschland
------------------------------------
AMENDMENT TO THE DISTRIBUTORSHIP AGREEMENT
between
Merck KGaA, Frankfurter Str. 250, 64271 Darmstadt, Federal Republic of Germany -
hereinafter called MERCK - and BIOSITE DIAGNOSTICS Incorporated, 11030 Roselle
Street, San Diego, CA 94121, United States of America - hereinafter called
BIOSITE.
BIOSITE agrees to invoice MERCK at [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] per device for TRIAGE(R) 7 and TRIAGE(R) 8
beginning November 1, 1995. The price shall be subject to change by BIOSITE on
1-year's notice to MERCK.
BIOSITE and MERCK mutually agree on the quantity of 150,000 test devices to be
purchased by MERCK from BIOSITE in 1996 including those being sold directly by
BIOSITE to CUSTOMERS in the TERRITORY, as defined in EXHIBIT I, and Thailand.
The non-binding forecast for 1997 of [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] test devices will be renegotiated at the end of
the year.
This amendment will replace the EXHIBITS IV and V in the distributorship
agreement.
Besides this, the terms and conditions of the distributorship agreement and its
amendments are applicable.
Darmstadt, 11th December 1995
Merck KGaA Biosite Diagnostics
i.V. i.V. President
<PAGE> 38
/s/ Dr. Reckman /s/ Dr. Utz /s/ Kim Blickenstaff
- --------------- ----------- --------------------
(Dr. Reckmann) (Dr. Utz) (Kim Blickenstaff)
<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, Albania, Austria, Belgium,
Bosnia Herzogovina, Bulgaria, Croatia, Czech Republic, Denmark, Estonia,
Finland, France, Georgia, Germany, Greece, Hungary, Ireland, Italy, Latvia,
Liechtenstein, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal,
Romania, Russia, Serbia, Slovakian Republic, Slovania, Spain, Sweden,
Switzerland, Turkey, Ukraine, the United Kingdom, White Russia and Yugoslavia.
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, Argentina, Belize,
Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala,
Guyana, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and
Venezuela.
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,
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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:
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(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) one hundred percent (100%)
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) one hundred
percent (100%) 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) one hundred percent (100%) 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) thirty percent (30%) 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 US$5,300,000.
(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) twelve percent (12%) 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 sixty (60) days after
June 30 and December 31 during the term of the Development Program, and within
sixty (60) days 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 ninety (90) days 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 one hundred percent (100%) 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) seventy percent (70%) of those costs paid by Biosite
to LRE to fund the development of the Reader under the Reader Development and
Supply Agreement, (b) one hundred percent (100%) 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) one hundred percent (100%) 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 sixty
percent (60%) by Biosite and forty percent (40%) 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 five (5) years 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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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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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 five (5) 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
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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 one-half (1/2) 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)
two thirds (2/3) 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) one third (1/3) 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 ninety (90) days 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 ninety (90)
days 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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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
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.
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 without the
consent of the other party; provided, however, that either Biosite or Merck may,
without such consent, assign the Agreement and its rights and obligations
hereunder in connection with the transfer or sale of all or substantially all of
its business, or in the event of its merger or consolidation or change in
control or similar transaction. 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
I. Test Device (Biosite)
o Develop one-step test device.
o Develop pilot production plant.
o Develop full-scale production plant.
II. Reagents (Biosite)
o Purchase/characterize antigens for CKMB, Troponin I, Myoglobin
and controls.
o Obtain antigen licenses where needed.
o Develop monoclonal antibodies to CKMB, Troponin I, Myoglobin
and controls.
o Obtain antibody licenses where needed.
o Select monoclonal antibodies for conjugates and solid phase.
o Develop fluorescent label dyes for antibody/dye conjugates.
III. Test Panel (Biosite)
o Select reagents for desired performance in test devices.
o Optimize test panel to meet product performance specification
(sensitivity, range, specification).
o Optimize test panel for performance with clinical specimen.
o Scale-up pilot plant to support manufacture of test panels for
optimization activities.
o Conduct North American clinical trials and obtain regulatory
approvals.
o Develop full-scale manufacturing plant to support world-wide
demand for test panels.
<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, Albania, Austria, Belgium,
Bosnia Herzogovina, Bulgaria, Croatia, Czech Republic, Denmark, Estonia,
Finland, France, Georgia, Germany, Greece, Hungary, Ireland, Italy, Latvia,
Liechtenstein, Lithuania, Luxembourg, the Netherlands, Norway, Poland,
Portugal, Romania, Russia, Serbia, Slovakian Republic, Slovania, Spain, Sweden,
Switzerland, Turkey, Ukraine, the United Kingdom, White Russia and Yugoslavia:
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, Argentina, Belize,
Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala,
Guyana, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and
Venezuela.
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 Noncompetition. During the term of the Agreement, neither Biosite
nor Merck shall, for itself or with any Affiliate or Third Party, market,
promote, sell or distribute any disposable in vitro immunoassay test device in
combination with a hand held reader in the Territory for use in the Field,
without the prior express written consent of the other party.
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 second anniversary 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 (a) the
fully-burdened cost to Biosite, expressed on a per unit manufactured basis, of
manufacturing the Testing Device, together with the packaging thereof, including
the cost of materials, direct labor and benefits, and overhead, with inventory
used for the Testing Device shipped to be determined on a FIFO basis but
consistent with product lot releases, all as determined in accordance with
generally accepted accounting principles and consistently with Biosite's
accounting practices for other products manufactured, plus (ii) all royalties
owing to Third Parties in connection with the sale of the Testing Device by
Biosite to Merck or its subdistributors hereunder.
b. The "Average Market Price" shall equal the average of the
per unit sales price of the Testing Device to end users in Italy, Germany,
France and Spain for use in the Field. If the parties are unable to determine
or to agree on the per unit sales price of the Testing Device to end users in
such countries for purposes of such calculation, such per unit sales price in
such countries shall be determined by independent market research conducted by
a mutually acceptable Third Party, provided that such research and determined
per unit sales price is reasonably acceptable to the Steering Committee.
4.1.2 The Sales Price shall be revised by the mutual agreement of the
parties from time to time on or after the first anniversary of the First
Commercial Sale. At such times after such first anniversary 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
Merck. Biosite shall use its commercially reasonable efforts to meet scheduled
delivery dates. The lead time for shipping of ordered Testing Devices shall be
four (4) months after receipt by Biosite of each order from Merck. In the event
Biosite is able to fill orders by Merck in less than four (4) months, 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. Merck 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 thirty (30) days 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 sixty (60) days 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 ten percent (10%) 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 sixty (60) days 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 succeeding four (4) quarters. Merck shall be required to purchase
one hundred percent (100%) 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 twenty
five percent (25%) 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 one hundred fifty percent (150%)
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 following the
procedures provided by Biosite upon arrival in Darmstadt, 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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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
two (2) consecutive calendar quarters in accordance with the provisions of this
Article 4, if Merck requests in writing within thirty (30) days after the end of
such second calendar quarter, Biosite shall grant Merck a license (without the
right to grant sublicenses) 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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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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6.6 Quarterly Reports. Merck shall prepare and provide Biosite with
quarterly written sales reports within 30 days of the end of each calendar
quarter (January - March, April - June, July - September, October - December),
commencing with the first calendar quarter after the First Commercial Sale. The
quarterly reports shall summarize sales of the Testing Device and the Reader by
Merck and its subdistributors during the preceding quarter 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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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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ARTICLE 9
CONFIDENTIALITY AND PROPRIETARY RIGHTS
9.1 Confidentiality.
9.1.1 During the term of the Agreement, and for a period of five (5)
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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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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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
seven (7) years after the date of the First Commercial Sale. Thereafter, the
Agreement automatically shall be renewed for successive periods of one (1) year
each, unless terminated by either party upon twelve (12) months 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 ninety (90) days after notice thereof from the
non-breaching party.
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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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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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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 without the
consent of the other party; provided, however, that either Biosite or Merck may,
without such consent, assign the Agreement and its rights and obligations
hereunder in connection with the transfer or sale of all or substantially all of
its business, or in the event of its merger or consolidation or change in
control or similar, transaction. 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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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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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
Ixsys cloning or expression vectors, 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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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 fifth anniversary of the Effective
Date, relating (a) to the immunoassay screening of monoclonal antibodies, (b)
to the chemical modifications of haptens to make antibody targets, (c) to
methods for coupling haptens and proteins with proteins and solid phase
components, and (d) to immunoassay methods, including but not limited to the
technology described generally on Schedule 1.4A, all to the extent and only to
the extent that Biosite now has, or hereafter before the fifth anniversary of
the Effective Date will have, the right to grant licenses, immunities or other
rights, thereunder, but excluding the specific chemical modifications and
compositions as described on Schedule 1.4B.
1.5 "Collaborative Biosite Antibodies" means, collectively,
(a) those immunoglobin-based molecules (including, but not limited to
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
identified after the Effective Date by Biosite using Ixsys Technology or Ixsys
Improvements, and (b) those modified Biosite Antibodies of which the
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] after
the Effective Date by Biosite using Ixsys Technology or Ixsys Improvements.
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
all in vitro diagnostic immunoassays.
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 fifth anniversary of the Effective Date,
that relates to methods, techniques, materials or compositions (a) for
developing and screening combinatorial [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] libraries for use in the Immunoassay Field, and
(b) for producing and screening [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION] for use in the Immunoassay Field, [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION], including, but not
limited to, those patents and patent applications listed on attached Schedule
1.12, together with 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 Ixsys now has, or
hereafter before the fifth anniversary of the Effective Date will have, the
right to grant licenses, immunities or other rights thereunder.
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1.13 "Libraries" means heavy and light chain antibody gene
libraries and combinatorial 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 antigen or hapten 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 fifth anniversary 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 twentieth anniversary of the Effective
Date; provided, however, that in the event of a Biosite Assignment, the period
shall continue until the last to expire patent within (1) those Ixsys Patent
Rights or (ii) Future Ixsys Patent Rights, provided one or more valid claims of
such patent would be infringed by the making, using or selling of an Assignee
Antibody as provided herein.
1.20 "Assignee Antibodies" means those Collaborative Biosite
Antibodies and those Biosite Antibodies developed or made by Biosite or
Biosite's assignee using Ixsys cloning or expression vectors, 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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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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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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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 fifth
anniversary 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, without the right to grant further sublicenses, (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 Third Party Sale or Production. Notwithstanding anything
to the contrary in this Agreement, Biosite shall have the right, in connection
with the sale to a third party of Biosite Antibodies or Collaborative Biosite
Antibodies, to grant to such third party the right to produce and sell such
Biosite Antibodies and Collaborative Biosite Antibodies from hosts provided by
Biosite; provided, however, that any such third party shall have no right,
title or license under the Ixsys Technology or the Ixsys Improvements.
6.4 Third Party Licenses. If, on or before the fifth
anniversary of the Effective Date, any third party grants or assigns to Ixsys
any rights in the Immunoassay Field which constitute Ixsys Technology or Ixsys
Improvements, or grants or assigns to Biosite any rights in the Immunoassay
Field which constitute Biosite Technology or Biosite Improvements, then Ixsys or
Biosite, as the case may be, shall grant a sublicense under such rights to the
other party 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 world-wide non-exclusive license from
Ixsys under such Future Patent Rights, without the right to grant further
sublicenses, (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. If Ixsys grants a
license under any Future Ixsys Patent Right to any third party (other than an
Affiliate of Ixsys) at a royalty rate or on other financial terms more
favorable to such third party than those set forth in the license granted to
Biosite under this Section 6.5.1, Ixsys promptly shall notify Biosite thereof.
If Biosite gives written notice to Ixsys of its election to substitute the more
favorable financial terms within thirty (30) days of Ixsys's notice to Biosite,
then the license granted to Biosite under this Section 6.5.1 automatically
shall be amended and adjusted to include all of the financial terms and
conditions (including all less favorable terms and conditions) of such third
party license taken as a whole.
6.5.2 If the parties mutually agree, Ixsys shall produce, for
use by Biosite solely in the Immunoassay Field, such heavy and light chain
antibody gene libraries and combinatorial 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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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 cloning or
expression vectors. 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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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 the number of different Assignee Antibodies in the combination
Product and as its denominator the total number of different antibodies
utilized in the combination product. All other provisions of Section 7.1 shall
remain in full force and effect.
7.3 Royalty Reports. For each calendar quarter during the
Royalty Period, Biosite shall furnish to Ixsys a quarterly written report
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 cloning or expression vectors 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 sixtieth (60th) day following the close of each calendar quarter 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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<PAGE> 13
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 thirty
(30) days 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 one hundred ten percent (110%) 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 ten (10) years 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 the expiration of Biosite's
obligations to pay royalties under the Agreement.
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
ninety (90) days 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 without the prior written consent of
the other party hereto; provided, however, that either Biosite or Ixsys may,
without such consent, assign the Agreement and its rights and obligations
hereunder in connection with the transfer or sale of all or substantially all of
its business, or in the event of its merger or consolidation or change in
control or similar transaction. 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.)
Derivatives of other specific compounds and their conjugates synthesized by
Biosite which are useful as antibody targets for the development and use of
commercial in vitro diagnostic immunoassays for those specific compounds and
their conjugates; but other than derivatives of compounds for use in Ixsys
Technology and Ixsys Improvements as antibody targets for: [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] and (iii)
antibodies for use in Ixsys Technology and Ixsys Improvements as agreed upon by
Biosite and Ixsys.
Hybridomas and other cells producing antibodies that specifically react with
any of the above derivatives and conjugates.
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<PAGE> 24
Schedule 1.6
Biosite Objectives
1. [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
2. [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
3. [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
Ixsys Objectives
4. Develop expertise in antibody purification and characterization.
5. Develop expertise in technology for hapten and/or protein conjugation to
other proteins, including protein chemistry.
6. Develop expertise in the development of reagents for use in antibody
screening and analysis.
Joint Objectives
7. [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
8. [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]
9. [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
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 five (5) business days of the Company's demonstration of the
feasibility of a cyclosporin assay (the "Cyclosporin Products") by
incorporating Sandoz cyclosporin antibodies, EASY Extraction Technology and
Biosite test technology (the "Second Closing"). The purchase and sale of the
Third Closing Debentures shall take place within five (5) business days of the
Company's submission of an application to the United States Food and Drug
Administration for product approval in the United States of the Cyclosporin
Product (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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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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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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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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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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(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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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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(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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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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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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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
-29-
<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. $500,000
Third Closing:
Sandoz Pharma Ltd. $500,000
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
San Diego, California
$500,000 _________, 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 $500,000, 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> 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 10.20
[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.]
SETTLEMENT AND LICENSE AGREEMENT &
AGREEMENT OF DISMISSAL WITH PREJUDICE
THIS SETTLEMENT AND LICENSE AGREEMENT & AGREEMENT OF DISMISSAL WITH
PREJUDICE ("Agreement") is made as of September 6, 1996 ("Effective Date"), by
and between Biosite Diagnostics, Inc., a Delaware corporation, having an office
and principal place of business at 11030 Roselle Street, San Diego, California
92121 ("Biosite") and Abbott Laboratories, an Illinois corporation, having an
office and principal place of business at 100 Abbott Park Road, Abbott Park,
Illinois 60064 ("Abbott").
WHEREAS, on May 5, 1994, Abbott filed a patent infringement suit
against Biosite in the United States District Court for the Northern District of
Illinois, with respect to United States Patent No. 5,073,484 (Case No. 94 C
2808);
WHEREAS, Biosite and Abbott wish to resolve the issues relating to such
action.
NOW, THEREFORE, in consideration of the mutual promises and obligations
set forth herein, Abbott and Biosite agree as follows;
ARTICLE I - DEFINITIONS
For purposes of this Agreement, the following definitions shall apply:
1.01 The term "Action" means the action presently pending in the
United States District Court for the Northern District of Illinois, Abbott
Laboratories v. Biosite Diagnostics, Inc., bearing the Case Number 94 C 2808.
1.02 The term "Affiliate" means with respect to a party, any other
business entity which directly or indirectly controls, is controlled by, or is
under common control with, such party. A business entity or party shall be
regarded as in control of another business entity if it owns, or directly or
indirectly controls, more than fifty percent (50%) of the voting stock or other
ownership interest of the other business entity.
1.03 The term "Combination Product" means a Product that is sold in
combination with one or more other products which have commercial utility other
than use in combination with a Product.
1.04 The term "DOA Diagnostics Field" means the following field:
the detection and measurement of drugs of abuse in human source materials.
1.05 The term "[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] Diagnostics Field" means the following field: the
detection and measurement of substances in materials not included in the
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
Diagnostics Field, the DOA Diagnostics Field, the Non-DOA Human Diagnostics
Field or the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] Diagnostics Field.
1.06 The term "[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] Diagnostics Field" means the following field: the detection
and measurement of substances in [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION], including but not limited to [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] and the like.
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<PAGE> 2
1.07 The term "Net Sales" means:
(A) the gross invoiced price for all Products sold or otherwise
transferred for tangible value by Biosite or its Affiliates or its sublicensees
(to the extent authorized under this Agreement) in arm's length transactions to
unrelated third parties for monetary or other valuable consideration, less
deductions for:
(i) quantity, trade and cash discounts or rebates, credits
or allowances and adjustments separately and actually credited to customers for
rejections and returns of Products;
(ii) charges for freight, postage, transportation, import
or export taxes, excise taxes and other similar taxes, insurance and other
delivery costs not otherwise charged to the customer; and
(iii) any tax or other government charges imposed on the
sale or use of Products (other than income tax) levied on its sale,
transportation or delivery and borne by Biosite or its Affiliates or its
sublicensees (to the extent authorized under this Agreement).
(B) With respect to Combination Products, the gross invoiced
price of such Combination Products billed to customers by Biosite or its
Affiliates or its sublicensees (to the extent authorized under this Agreement),
less: the allowances and adjustment referred to in subparagraph (A) above,
multiplied by a fraction the numerator of which shall be the gross selling price
of the Product as sold separately and the denominator of which shall be the sum
of the gross selling price(s) of each of the other products having commercial
utility in the Combination Product including the Product. If there is no
established current gross selling price for the Product or for other products
having commercial utility, then for purposes of calculating Net Sales the
standard costs in accordance with Generally Accepted Accounting Principles
("GAAP") of manufacturing of the Product with the other products having
commercial utility shall be used to determine the percentage of sales
attributable to Product.
(C) In the event that a Product sold by Biosite or its
Affiliates or its sublicensees (to the extent authorized under this Agreement)
is increased in price to include an amount to cover the amortized cost of an
instrument system and/or other equipment supplied to a customer by Biosite or
its Affiliates under a Reagent Agreement Plan, Reagent Rental Plan, or other
successor or similar plan (collectively referred to herein as "RAP"), the
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<PAGE> 3
Net Sales for such Product on which royalty shall be calculated shall be
determined by reducing the total Net Sales of such Product (including the total
of sale of Product and instrument system RAP) by the amount of the price
increase attributable to RAP, in accordance with accounting procedures
consistent with GAAP, provided the minimum amount attributable to the Net Sales
of the Product shall be no less than the per unit current retail selling price
of the Product as sold alone to non-RAP customers.
1.08 The term "Non-DOA Human Diagnostics Field" means the following
field: the detection and measurement of substances in human source materials,
excluding the DOA Diagnostics Field.
1.09 The term "Patents" means (A) U.S. Patent No. 5,073,484 and
equivalent foreign patents or patent applications, as set forth in the attached
Exhibit A, and (B) all divisions, continuations, continuations-in-part,
reexaminations, reissues, additions, renewals and extensions of such patents.
1.10 The term "Product" means any rapid immunoassay devices (including
but not limited to those using the Triage(R) platform) which are manufactured
and sold by Biosite or its Affiliates or its sublicensees (to the extent
authorized under this Agreement) on the Effective Date or thereafter, and which
fall within the scope of the claims of any of the Patents or would infringe the
claims of any of the Patents but for the licenses granted under Section 3.01.
1.11 The term "Valid Claim" shall mean a claim of an issued and
unexpired Patent which neither has been held unenforceable or invalid by a
decision of a court or governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal, nor has been
admitted by the holder of the Patent to be invalid or unenforceable through
reissue, reexamination, disclaimer, abandonment or otherwise.
1.12 The term "[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] Diagnostics Field" means the following field: the detection
and measurement of substances in [CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION].
ARTICLE II - RELEASE AND CONCLUSION OF CONTROVERSIES
2.01 As of the Effective Date, Abbott releases and forever discharges
Biosite and its Affiliates, and their respective agents, attorneys, directors,
officers and employees, from any and all claims and demands whatsoever in law
and equity, whether now known or unknown, arising from any infringement or
alleged infringement of one or more claim of any Patents by Biosite or its
Affiliates occurring prior to the Effective Date or arising out of or relating
to the Action or any claims or allegations asserted in the Action, except to the
extent any such claims and demands relate to the manufacture, sale or use of
Products in the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] Diagnostics Field after the Effective Date.
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<PAGE> 4
2.02 As of the Effective Date, Biosite releases and forever discharges
Abbott and its Affiliates, and their respective agents, attorneys, directors,
officers and employees, from any and all claims and demands whatsoever in law
and equity, whether now known or unknown, arising out of or relating to the
Action or any claims or allegations asserted in the Action.
2.03 The parties shall enter into and promptly submit to the United
States District Court for the Northern District of Illinois ("Court") a Joint
Stipulation and Order of Dismissal in the form attached as Exhibit B. The
parties shall take all necessary steps to secure the entry of the Joint
Stipulation and Order of Dismissal. The Action will be finally terminated by the
entry of the Joint Stipulation and Order of Dismissal and no appeal shall be
taken by any party from such Order. This Agreement shall not be filed with the
Court.
2.04 Abbott and Biosite each expressly waives any right or claim it may
have to recover from the other party court costs or attorneys' fees arising from
or in connection with the Action.
2.05 The Protective Order entered in the Action, a copy of which is
attached as Exhibit C, shall remain in full force and effect indefinitely, and
Biosite and Abbott each shall continue to comply with its terms upon the
termination of the Action.
ARTICLE III - LICENSE GRANT
3.01 (A) Upon the date of receipt by Abbott of the sum set forth in
Section 4.01 hereof, Abbott, as of the Effective Date, grants to Biosite and
its Affiliates a fully paid-up, worldwide, non-exclusive license under the
Patents, to make, have made, use, import, offer to sell, sell and have sold
Products in the DOA Diagnostics Field, subject to the terms of Articles VI
and VII hereof.
(B) As of the Effective Date, Abbott also grants to Biosite and
its Affiliates a royalty-bearing (at the rate specified in Section 4.03),
worldwide, non-exclusive license under the Patents to make, have made, use,
import, offer to sell, sell and have sold Products in the Non-DOA Human
Diagnostics Field, subject to the terms of Articles VI and VII hereof.
(C) As of the Effective Date, Abbott also grants to Biosite and
its Affiliates a royalty-bearing (at the rate specified in Section 4.04),
worldwide, non-exclusive license under the Patents to make, have made, use,
import, offer to sell, sell and have sold Products in the [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] Diagnostic Field and the
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
Diagnostics Field, subject to the terms of Articles VI and VII hereof.
(D) Biosite and its Affiliates shall not have the right to grant
sublicenses to any third party under the licenses granted pursuant to Section
3.01(A), (B) or (C), except as provided in Section 3.01(E) and (F) below.
(E) Biosite and its Affiliates shall have the right to grant
sublicenses (without the right to grant further sublicenses) to one or more
third parties under the licenses granted pursuant to Section 3.01(A), (B) and
(C), only if all of the following requirements are met for each such sublicense:
(I) Such sublicense shall be granted only to a third party
collaborator of Biosite in conjunction with a collaborative research and
development relationship between Biosite and such party in which Biosite
retains primary responsibility for either development or manufacturing or
distribution of Products developed under such collaborative relationship
("Collaborative Products") and such sublicense shall only apply to
Collaborative Products.
(II) Such sublicense shall be in writing, shall be
consistent with the terms of this Agreement, and shall provide Abbott with
audit rights for the sublicensee's books of account to the same extent as
Abbott has audit rights for Biosite's books of account pursuant to Section 4.07.
(III) Such sublicense shall be royalty-bearing in all
fields, with the following royalties being payable to Abbott based on the
sublicensee's Net Sales to end-users of Collaborative Products at the following
rates: (a) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION] of Net Sales in the DOA Diagnostics Field and the Non-DOA Human
Diagnostics Field, and (b) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] of Net Sales in the [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] Diagnostics Field and the [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] Diagnostics Field.
Such royalty shall be payable in such countries in the world in which a Valid
Claim exists for as long as a Valid Claim exists in such countries.
(F) Under the scope of the licenses granted pursuant to Section
3.01(A), (B) and (C) (and without the necessity of granting sublicenses to any
third party), Biosite, its Affiliates and its sublicensees (to the extent
authorized under this Agreement) may, at their discretion, use third party
contractors to (i) manufacture Biosite-labelled (or co-labelled) Products (or
components thereof) for sale by Biosite or its Affiliates or its sublicensees
(to the extent authorized under this Agreement) or their respective
distributors and/or (ii) distribute Biosite-labelled (or co-labelled) Products
for Biosite or its Affiliates or its sublicensees (to the extent authorized
under this Agreement), provided that Biosite, its Affiliates and its
sublicensees (to the extent authorized under this Agreement) may not use the
same third party contractor (or an Affiliate of such contractor) to both
manufacture and distribute Biosite-labelled (or co-labelled) Products.
3.02 Biosite and its Affiliates shall not, except as may be required
by law or an order of a court or governmental agency, file, permit to be filed
on their behalf, cooperate with or assist any other party in the filing or
taking of any action before any court or governmental agency to further any
claim, charge, allegation, complaint, lawsuit, legal action, challenge,
opposition, protest, nullity proceeding, reexamination request, or the like
challenging the validity or enforceability of or issuance of any of the
Patents, or seeking the invalidation, revocation, or denial of any of them.
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<PAGE> 5
3.03 Abbott hereby covenants that it will not, and it will cause its
Affiliates not to, file, permit to be filed on their behalf, or take any action
to [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
3.04 No license or any other right is granted by implication or
otherwise with respect to any patent application or patent except as
specifically set forth herein. For the avoidance of doubt, no license is being
granted hereunder in the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] Diagnostics Field.
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<PAGE> 6
ARTICLE IV - PAYMENTS RECORD KEEPING AND REPORTS
4.01 Biosite shall pay to Abbott the amount of Five Million Five
Hundred Thousand U.S. Dollars ($5,500,000) within three (3) business days
following the date of the entry of the Dismissal With Prejudice, by
electronically transferring such funds to the following Abbott bank account:
City Bank of New York
(for Abbott Laboratories)
ABA #[CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
Account #[CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION]
Such payment shall be allocated as follows: (A) Two Million U.S. Dollars
($2,000,000) shall be a payment for Abbott's settlement of the Action and (B)
Three Million Five Hundred Thousand U.S. Dollars ($3,500,000) shall be a payment
for Abbott's license grant pursuant to Section 3.01(A).
4.02 If any of the Patents are held invalid or unenforceable by a court
of competent jurisdiction or any other governmental agency, bureau, commission,
authority or body. In no instance shall Biosite seek or obtain return of the
payment set forth in Section 4.01.
4.03 In consideration of Abbott's license grant pursuant to Section
3.01(B), Biosite shall pay Abbott a royalty of [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] of Biosite's Net Sales of Products in
the Non-DOA Human Diagnostics Field. Such royalty shall be payable in such
countries in the world in which a Valid Claim exists for as long as a Valid
Claim exists in such countries.
4.04 In consideration of Abbott's license grant pursuant to Section
3.01(C), Biosite shall pay Abbott a royalty of [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] of Biosite's Net Sales of Products in
the [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
Diagnostics Field and [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] Diagnostics Field. Such royalty shall be payable in such
countries in the world in which a Valid Claim exists for as long as a Valid
Claim exists in such countries.
4.05 Royalty shall be payable only once with respect to the same unit
of Product irrespective of the number of Valid Claims covering such unit of
Product.
4.06 All royalties due to Abbott hereunder shall be paid in United
States Dollars. Biosite shall be responsible for making the payment to Abbott
which payment shall be made by check or wire transfer, at Biosite's discretion.
In the event that any Product is sold in a
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<PAGE> 7
currency other than United States Dollars, the Net Sales of such Product for the
reporting period shall be converted (for the purpose of calculation of such
royalty) into its equivalent dollar value using standard Biosite financial
report procedures and conversion methodology, which shall be consistent with
GAAP. The royalty shall be paid in United States Dollars based on local sales
converted to United States Dollars. The Biosite conversion methodology for sales
shall be based on monthly averages (end of prior month spot rate plus end of
current month spot rate divided by two) using central bank fixing rates (such as
that in effect at the Chase Manhattan Bank) in countries where available and
open market rates otherwise.
4.07 Biosite shall keep and maintain full, true and accurate books of
account containing all particulars that may be necessary, for the purpose of
showing the amounts payable hereunder to Abbott. The books of account shall be
kept at Biosite's principal place of business. The books of account and the
supporting data shall be open once per year during the term of this Agreement at
reasonable times during normal business hours, for two (2) years following the
end of the calendar year to which they pertain, to the inspection of Abbott or
its representatives for the sole purpose of verifying Biosite royalty statement
or compliance in other respects with this Agreement. The costs and expenses
relating to such inspection shall be borne by Abbott. In the event that Biosite
royalties calculated for any semi-annual period are in error by greater than
minus five percent (5%) for the period of time covered by the inspection,
Biosite shall bear the reasonable costs of any audit and review initiated by
Abbott.
4.08 Biosite, within sixty (60) days after June 30 and December 31 of
each year, shall deliver to Abbott true and accurate reports, giving such
particulars of the business conducted by Biosite during the preceding six-month
period under this Agreement as shall be pertinent to a royalty accounting
hereunder. These shall include at least the following:
(A) number of Products manufactured and sold;
(B) total billings for Products manufactured, used and sold;
(C) deductions applicable as provided in Section 1.07 (Net Sales);
and
(D) total royalty due.
4.09 With each such report set forth in Section 4.08 submitted to
Abbott, Biosite shall pay to Abbott royalty due and payable under this
Agreement. If no royalty shall be due, Biosite shall so report.
4.10 The royalty payments set forth in this Agreement shall, if
overdue, bear interest until payment at a per annum rate of One Percent (1%)
above the prime rate in effect at Chase Manhattan Bank (N.A.) from the due date.
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<PAGE> 8
ARTICLE V - ALTERNATE DISPUTE RESOLUTION
The parties recognize that a bona fide dispute as to certain matters
relating to either party's or their Affiliates' rights and obligations under
this Agreement may from time to time arise. In the event of the occurrence of
such a dispute, either party may, by written notice to the other party, have
such dispute referred to their respective officers designated below or their
successors, for attempted resolution by good faith negotiations within
twenty-eight (28) days after such notice is made as provided under Article X of
this Agreement. Said designated officers are as follows:
FOR ABBOTT: President, Diagnostics Division, or his designee.
FOR BIOSITE: President and Chief Executive Officer, or his designee.
In the event the designated officers are not able to resolve such
dispute within such twenty-eight (28) day period, or any agreed extension
thereof, either party may invoke binding Alternative Dispute Resolution (ADR) in
accordance with the attached Exhibit D.
ARTICLE VI - TERMINATION
6.01 This Agreement, unless earlier terminated as hereinafter provided,
shall expire upon the expiration or lapse of the last of the Patents subject to
the licenses granted under Section 3.01(A), (B) and (C) or the last patent right
of Abbott subject to [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION], whichever occurs later.
6.02 In the event Biosite fails to pay the amount due Abbott under
Section 4.01 within the period of time provided therein, Abbott may terminate
this Agreement if such amount is not paid within ten (10) days following written
notice thereof to Biosite.
6.03 In the event Biosite breaches its obligations under Section 3.02,
Abbott may terminate this Agreement immediately upon written notice to Biosite.
6.04 In the event either party files or otherwise becomes subject to
bankruptcy or insolvency proceedings, the other party may terminate this
Agreement immediately upon written notice to the party filing or otherwise
becoming subject to bankruptcy or insolvency proceedings.
6.05 In the event Biosite has not made at least one commercial sale to
an unaffiliated third party of a Product in the [CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE COMMISSION] Diagnostics Field and/or the
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION]
Diagnostics Field on or before April 19, 2000, Biosite's license under Section
3.01(C) in any such fields shall automatically terminate.
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<PAGE> 9
6.06 The following provisions shall survive termination or expiration
of this Agreement: Sections 2.01, 2.02, 2.03, 2.04, 2.05, 3.04, 14.01 and 14.02.
ARTICLE VII - ASSIGNABILITY
Neither this Agreement nor the license herein granted to Biosite shall
be assignable or otherwise transferable by Biosite without the prior written
consent of Abbott, except as expressly provided in this Article VII, in the
event Biosite is acquired by (whether as a result of a sale of a controlling
interest in Biosite's stock or a sale of all or substantially all of Biosite's
assets) or merged with or into a third party during the term of this Agreement,
the licensees granted hereunder may be assigned by Biosite to the third party
which acquires or is merged into Biosite, as follows:
(A) The licenses granted under Section 3.01(A), (B) and (C) may
be assigned with respect to Biosite-labelled (or co-labelled) Products in
existence as of the effective date of such acquisition or merger or under
development by Biosite on the effective date of such acquisition or merger on
the same terms as provided in this Agreement.
(B) The licenses granted under Section 3.01(A) (B) and (C) may be
assigned with respect to Products developed by the acquiring party prior to the
effective date of such acquisition or merger or by the acquiring party and/or
Biosite after the effective date of such acquisition or merger, provided that
royalties shall be payable to Abbott for Net Sales of such Products to
end-users at the following rates:
(i) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] of Net Sales in the DOA Diagnostics Field and the Non-DOA
Human Diagnostics Field; and
(ii) [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE COMMISSION] of Net Sales in the [CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE COMMISSION] Diagnostics Field and the [CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION] Diagnostics Field.
ARTICLE VIII - WARRANTIES
8.01 Abbott represents and warrants to Biosite that:
(A) Abbott has the full right, power and authority to grant the
licenses to Biosite as set forth in Section 3.01 of this Agreement;
(B) this Agreement has been duly authorized, executed and
delivered by Abbott and constitutes a valid, binding and legally enforceable
agreement of Abbott;
(C) the execution and delivery of this Agreement and the
performance by Abbott of its covenants and agreements herein contained,
including the grant of the license to Biosite, are not restricted by and are not
in conflict with, any agreement binding on Abbott or any of its Affiliates;
(D) to the best of Abbott's knowledge, no claim in the Patents has
been held invalid; and
(E) other than the Action and the proceedings referenced in the
attached Exhibit E, to the best of Abbott's knowledge, there are not any legal
proceedings pending challenging the validity or enforceability of any Patents.
8.02 Biosite represents and warrants to Abbott that:
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<PAGE> 10
(A) this Agreement has been duly authorized, executed and
delivered by Biosite and constitutes a valid, binding and legally enforceable
agreement of Biosite; and
(B) the execution and delivery of this Agreement and the
performance by Biosite of its covenants and agreements herein contained are not
restricted by and are not in conflict with, any agreement binding on Biosite or
any of its Affiliates.
ARTICLE IX - APPLICABLE LAW
This Agreement is acknowledged to have been made in and shall be
construed in accordance with the laws of the State of New York, U.S.A.; provided
that all questions concerning the construction or effect of the Patents shall be
decided in accordance with the laws of the country in which the particular
Patents have been filed or granted, as the case may be.
ARTICLE X - NOTICES
Services of all notices hereunder shall be in writing and shall be made
by courier, U.S. Mail, or by facsimile transmission (followed by courier or U.S.
Mail delivery), to the addresses below, and the effective date of giving of such
notices shall be the date on which such notice is actually received by the
recipient. Notices shall be addressed as follows:
If to Abbott:
Director, Technology Acquisition
Abbott Laboratories
D-9RK, AP6C
100 Abbott Park Road
Abbott Park, Illinois 60064-3500
With a copy to:
General Counsel
Abbott Laboratories
D-364, AP6D
100 Abbott Park Road
Abbott Park, Illinois 60064-3500
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If to Biosite:
Mr. Kim Blickenstaff
President and CEO
Biosite Diagnostics, Inc.
11030 Roselle Street
San Diego, California 92121
With a copy to:
Thomas E. Sparks, Jr., Esq.
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
or to any other such address as may from time to time be designated by the
receiving party.
ARTICLE XI - ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof and supersedes any written or oral prior
agreements or understandings with respect thereto.
ARTICLE XII - WAIVER AND MODIFICATION
No variation or modifications of any of the terms or provisions of this
Agreement shall be valid unless in writing and signed by an authorized
representative of both parties hereto. Failure by either party to enforce any
rights under this Agreement shall not be construed as a waiver of such rights
nor shall a waiver by either party in one or more instances be construed as
constituting a continuing waiver or as a waiver in other instances.
ARTICLE XIII - HEADINGS
The headings contained in this Agreement are for convenience and
reference purposes only and shall not affect the meaning or interpretation of
this Agreement
ARTICLE XIV - CONFIDENTIALITY AND PUBLICITY
14.01 The existence of this Agreement and the terms thereof shall
remain confidential. None of the parties shall disclose to or discuss in any
manner with any third party the terms of this Agreement, or any other aspect of
the Action or their respective claims therein, except as provided in Section
14.02.
14.02 Unless mutually agreed upon by the parties, no party, including
its agents, attorneys, directors, officers, employees and Affiliates, shall
originate nor participate in any publicity, news release or other public
statement or announcement, written or oral, whether to
11
<PAGE> 12
the public, press, to stockholders or otherwise, relating to the subject matter
of this Action or issues raised during the Action or this Agreement, to any
amendment hereto or to performance hereunder, save only such announcement as in
the opinion of legal counsel to the party making such announcement is required
by applicable laws or regulations to be made. At least fifteen (15) business
days prior to such announcement, to the maximum extent practicable, the party
making such announcement shall give the other party an opportunity to review and
comment on the form of the announcement, and the party making such announcement
shall give due consideration to the other party's comments. To the extent giving
fifteen (15) business days notice is not practicable, the party making such
announcement shall use its best efforts to give the other party as much time as
possible in advance of such announcement to review and comment on the form of
the announcement.
ARTICLE XV - SEVERABILITY
If any provision of this Agreement shall hereafter be held to be
invalid or unenforceable for any reason, that provision shall be reformed to the
maximum extent permitted to preserve the parties' original intent, failing
which, it shall be severed from this Agreement with the balance of the Agreement
continuing in full force and effect, unless a party would thereby be deprived of
a substantial portion of its consideration. Such occurrence shall not have the
effect of rendering the provision in question invalid in any other jurisdiction
or in any other case or circumstance, or of rendering invalid any other
provisions contained herein to the extent that such other provisions are not
themselves actually in conflict with any applicable law.
ARTICLE XVI - COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed an original.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the Effective Date.
ABBOTT LABORATORIES BIOSITE DIAGNOSTICS, INC.
By: /s/ Miles D. White By: /s/ Kim D. Blickenstaff
---------------------------------- -----------------------------------
Title: SVP - President ADD Title: President & CEO
------------------------------- --------------------------------
Date: 9/6/96 Date: September 6, 1996
-------------------------------- ---------------------------------
12
<PAGE> 13
EXHIBIT A
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION]PATENTS
<TABLE>
<CAPTION>
COUNTRY PATENT/APPLICATION STATUS
NUMBER
<S> <C> <C>
Australia 560,552 Issued 4/9/87
Brazil 8,301,191 Issued 11/22/83
Canada 1,206,878 Issued 7/1/86
EPO Pub. No. 088,636 Granted 8/28/91
(Nationalized in:
Belgium, Germany,
France, United
Kingdom, Italy,
Luxembourg,
Netherlands, Sweden)
India 157,435 Issued 3/29/86
Israel 68,082 Issued 12/31/86
[CONFIDENTIAL [CONFIDENTIAL [CONFIDENTIAL
MATERIAL REDACTED MATERIAL REDACTED MATERIAL REDACTED
AND FILED AND FILED AND FILED
SEPARATELY WITH THE SEPARATELY WITH SEPARATELY WITH THE
COMMISSION] THE COMMISSION] COMMISSION]
South Africa 83/1617 Issued 3/28/84
United States 5,073,484 Issued 12/17/91
</TABLE>
<PAGE> 14
EXHIBIT B
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ABBOTT LABORATORIES, )
)
Plaintiff, )
) No. 94 C 2808
v. )
) Hon. John A. Nordberg
BIOSITE DIAGNOSTICS, INC. )
)
Defendant. )
JOINT STIPULATION AND ORDER OF DISMISSAL
Pursuant to Rule 41 of the Federal Rules of Civil Procedure, the
parties hereto, by their respective counsel, hereby stipulate and agree that
this action and all claims contained therein are hereby dismissed with
prejudice, each party to bear its own costs.
Dated: September ___, 1996
Respectfully submitted,
------------------------------------
Mark Crane
John L. Rogers
Mary Kay McCalla Martire
Hopkins & Sutter
Three First National Plaza
Chicago, Illinois 60602
(312) 558-6600
------------------------------------
Carl E. Moore, Jr.
Marshall O'Toole Gerstein Murray
& Borun
283 W. Wacker Drive
Suite 6300
Chicago, Illinois 60606
(312) 474-6300
Attorneys for Abbot Laboratories
1
<PAGE> 15
------------------------------------
Gerald Sobel
Richard G. Greco
Kaye, Scholer, Fierman, Hays &
Handler, LLP
425 Park Avenue
New York, New York 10022
(212) 836-8500
------------------------------------
John E. Burke
Christopher J. Murdoch
Burke, Weaver & Prell
55 West Monroe Street
Suite 800
Chicago, Illinois 60603
(312) 578-6550
Attorneys for Biosite
Diagnostics, Inc.
SO ORDERED:
_______________________________________
United States District Judge
2
<PAGE> 16
EXHIBIT C
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ABBOTT LABORATORIES, )
)
Plaintiff, ) Civil Action No.
) 94 C 2808
v. )
) Magistrate Judge Bobrick
BIOSITE DIAGNOSTICS, INC. )
)
Defendant. )
PROTECTIVE ORDER
This matter coming on to be heard on the cross motions of plaintiff
Abbott Laboratories ("Abbott") and defendant Biosite Diagnostics, Inc.
("Biosite") for entry of a protective order, the Court having reviewed the
pleadings filed by the parties, having heard the arguments of counsel
concerning the need for entry of a protective order and the appropriate terms
of a protective order, good cause having been shown for the entry of such an
order.
IT IS HEREBY ORDERED that good cause exists for the entry of a
protective order in this matter. IT IS FURTHER ORDERED that the terms of the
protective order are as follows:
1. Definitions
(a) The term "Confidential Information" as used in this
order is to include any information or thing that the designating party in good
faith believes constitutes or discloses or relates to trade secrets, processes,
operations, research, technical or developmental
<PAGE> 17
information, personnel information or apparatus, production, marketing, sales,
shipments or other proprietary data or information of commercial value. It may
include, without limitation, documents produced in this action, during formal
discovery or otherwise; information produced by non-parties which the producing
or designating party is under an obligation to maintain in confidence; answers
to interrogatories and responses to requests for admission or other discovery
requests; deposition, hearing or trial transcripts; and tangible things or
objects that are designated confidential. The information contained therein
and all copies, abstracts, excerpts, analyses or other writings that contain,
reflect, reveal, suggest or otherwise disclose such information shall also be
deemed "Confidential Information". Information originally designated as
"Confidential Information" shall not retain that status after any ruling by any
Court denying in this action such status to it.
(b) The term "Attorneys Eyes' Only" shall mean
Confidential Information which the designating party in good faith believes is
of an especially sensitive nature and which relates to its business or was
disclosed to it in confidence by any third party.
(c) The term "designating party" means the party
producing or designation documents or information as "Confidential" or
"Attorney' Eyes Only" under this Order.
(d) The term "receiving party" shall mean the party to
whom "Confidential" or "Attorneys' Eyes Only" information is produced.
(e) Notwithstanding anything to the contrary herein, the
description "Confidential" or "Attorneys' Eyes Only" shall apply to all that
information so designated by the designating party absent an order of the Court
or subsequent written agreement of the designating party providing otherwise.
2
<PAGE> 18
DESIGNATION OF CONFIDENTIAL AND ATTORNEYS' EYES ONLY INFORMATION
2. The designation of information as "Confidential" or
"Attorneys' Eyes Only" shall be made by placing a legend on each page of the
document so designated stating "Confidential" or "Attorneys' Eyes Only"
respectively. All documents to be so designated shall be marked prior to the
provision of a physical copy thereof to the receiving party. The designation
of any thing as to which inspection or sampling has been requested shall be
made by placing the designation "Confidential" or "Attorneys' Eyes Only" on the
thing or container within which it is stored.
3. When documents or things are produced for inspection, the
documents or things may be collectively designated as "Confidential" or
"Attorneys' Eyes Only" for purposes of the inspection, by letter or otherwise
without marking each document or thing "Confidential" or "Attorneys' Eyes
Only," and such documents or things will be treated as "Confidential" or
"Attorneys' Eyes Only" information under this Order.
4. If any "Confidential" or "Attorneys' Eye Only" information is
produced by a non-party to this litigation, such a non-party shall be
considered a "designation party" within the meaning of that term as it is used
in the context of this Order and both parties to this order should be treated
as receiving parties. The parties recognize that, during the course of this
litigation, "Confidential" and "Attorneys' Eyes Only" information that
originated with a non-party and for which there exists an obligation of
confidentiality may be produced. Such information that the designating party
believes originated with a non-party, but is subject to a confidentiality
obligation may be designated as "Confidential" or "Attorneys' Eyes Only" and
shall be subject to the restrictions of this protective order.
3
<PAGE> 19
5. In the event any designating party discovers, after it has
produced information, that it has inadvertently produced "Confidential" or
"Attorneys Eyes Only" information that has not been correctly designated, the
designating party may redesignate the information by a subsequent notice in
writing specifically identifying the redesignated information, in which event
the parties shall henceforth treat such information in accord with this
Protective Order, and shall undertake a best effort to correct any disclosure
of such information contrary to the redesignation.
6. Any inadvertent production of a document or thing which is
subject to the attorney-client or joint defense privilege or the work product
doctrine shall not constitute a waiver of the privilege or work product
doctrine. In the event any designating party or third party discovers that it
has inadvertently produced a document or thing which is subject to the
above-referenced privileges or work product doctrine, the designating party
must redesignate the information by subsequent notice in writing specifically
identifying the redesignated information, in which event the parties shall
henceforth treat the information as privileged. In addition, the receiving
party shall destroy any copies of the document or thing in its possession,
custody or control, and make its best efforts to correct any disclosure of such
information.
DISCLOSURE OF CONFIDENTIAL AND ATTORNEYS' EYES ONLY INFORMATION
7. Information designated "Confidential" may be disclosed only to
the following:
(a) Outside litigation counsel for the parties, their
partners (shareholders) and associates, and regularly
employed office staffs;
(b) In-house Abbott litigation counsel Katherine M.
Grundin;
(c) Independent consultants or experts and their staff
not employed by or having a prior or existing
relationship with the receiving party or affiliated
with the receiving party or with a receiving party's
licensee or
4
<PAGE> 20
licensor, retained by the attorneys for the parties
either as technical consultants or expert witnesses
for the purposes of this litigation, pursuant to
paragraph 19(c);
(d) Three employees of each corporate party who are
assisting counsel with this litigation, to be
designated in writing by name, title, and job
description within ten days of the entry of this
Order; and
(e) The Court, Court personnel and Official Court Reports
to the extent that "Confidential Information" is
disclosed at a deposition or court session which they
are transcribing.
8. Information designated as "Attorneys' Eyes Only" may be
disclosed only to the following:
(a) Outside litigation counsel, their partners
(shareholders) and associates, and regularly employed
office staffs;
(b) Abbott's in-house litigation counsel Katherine M.
Grundin;
(c) Independent consultants or experts and their staff
not employed by or having a prior or existing
relationship with the receiving party or affiliated
with the receiving party or with a receiving party's
licensee or licensor, retained by the attorneys for
the parties either as technical consultants or expert
witnesses for the purposes of this litigation,
pursuant to paragraph 19(c); and
(d) The Court, Court personnel and Official Court Reports
to the extent that "Attorneys' Eyes Only" information
is disclosed at a deposition or court session which
they are transcribing.
9. The designation of any document or thing as "Confidential" or
"Attorneys' Eyes Only" shall not preclude any party from showing the document
or thing to any person who appears as the author or as an addressee on the face
of the document, or who has been identified by the designating party as having
been provided with the document or the information therein by the designating
party prior to the initiation of the litigation.
10. Documents and other information designated as Attorneys' Eyes
Only by Biosite may not be brought onto the premises of any office or facility
of Abbott, and
5
<PAGE> 21
documents and other information designated as Attorneys' Eye Only by Abbott may
not be brought onto the premises of any office or facility of Biosite.
USE AND CONTROL OF CONFIDENTIAL AND ATTORNEYS' EYES ONLY INFORMATION
11. All information designated "Confidential" or "Attorneys Eyes
Only" disclosed pursuant to this Order shall be used by a recipient thereof
solely for the purposes of this litigation and not for any business or
competitive purposes. It shall be the duty of each party and each individual
having notice of this Protective Order to comply with this Order from the time
of such notice.
12. If such "Confidential" or "Attorneys Eyes Only" information is
contained in deposition, trial or other testimony, the transcript may be
designated as containing "Confidential" or "Attorneys' Eyes Only" information
in accordance with this Order by notifying the other party on the record, at
the time of the testimony, or in writing, within twenty (20) days of receipt of
the transcript of the specific pages and lines of the transcript which contain
"Confidential" or "Attorneys' Eyes Only" information. All depositions,
regardless of whether a designation of confidentiality was made on the record,
shall be treated as containing "Confidential Information" and subject to this
Protective Order until a time twenty (20) days after a transcript of the
deposition is received. All Court proceedings during which "Confidential" or
"Attorneys' Eyes Only" information is likely to be revealed shall be held in
camera unless the Court orders otherwise.
13. All information subject to confidential treatment in
accordance with the terms of this Order that is filed with the Court, and any
pleading, motions or other papers filed with the Court disclosing any
"Confidential" or "Attorneys Eyes Only" information, shall be filed
6
<PAGE> 22
under seal and kept under seal until further order of the Court. Where
possible only confidential portions of filings with the Court shall be filed
under seal.
MISCELLANEOUS
14. This Protective Order is intended to provide a mechanism for
handling the disclosure or production of "Confidential" and "Attorneys' Eyes
Only" information to which there is no objection other than confidentiality.
Each party reserves the right to object to any disclosure of information or
production of any documents it deems to contain "Confidential" or "Attorneys'
Eyes Only" on any other ground it may deem appropriate, and any party may move
for relief from, or general or particular modification of, the mechanism herein
set forth or the application of this Order in any particular circumstance.
15. This Protective Order may only be amended with respect to
specific documents or items of "Confidential" or "Attorneys' Eyes Only"
information by Court order, which may be entered pursuant to the agreement of
the parties hereto. This Protective Order shall remain in force and effect
indefinitely until modified, superseded or terminated by Order of this Court,
which may be entered pursuant to agreement of the parties hereto.
16. Upon final termination of this action (including all appeals)
with respect to any party receiving any "Confidential" or "Attorneys' Eyes
Only" information and at the option of the designating party, the receiving
party shall, within thirty (30) days of such termination, either return to the
designating party or destroy all "Confidential" or "Attorneys' Eyes Only"
information in its possession. In either event, the receiving party shall
specifically describe the materials returned or destroyed and certify their
return or destruction, with the exception that outside counsel may retain one
copy of the pleading or other papers filed with the Court or served in the
course of the litigation, depositions, deposition exhibits and the trial
record.
7
<PAGE> 23
17. No party or person shall disclose or cause to be disclosed to
anyone not specified in Paragraphs 7, 8 or 9 as being entitled to receive it,
any information designated as "Confidential" or "Attorneys' Eyes Only" under
this Protective Order without prior written consent of the designating party or
further order of this Court. If the receiving party learns that "Confidential"
or "Attorneys' Eyes Only" information produced to it is disclosed to or comes
into the possession of any person other than in the manner authorized by this
Order, the receiving party responsible for the disclosure must immediately
inform the designating party of all pertinent facts relating to such disclosure
and shall make every effort to prevent disclosure by each unauthorized person
who received such information.
18. (a) No person other than in-house or retained counsel
representing the parties in this action designated in accordance with
Paragraphs 7, 8, or 9 above shall have access to "Confidential" or "Attorneys'
Eyes Only" information without first signing an Affidavit of Compliance with
the Protective Order (in the form attached as Exhibit 1 hereto) or a
Declaration of Compliance with the Protective Order (in the form attached as
Exhibit 2 hereto). A file of all such original written Affidavits or
Declarations shall be maintained by counsel for the party obtaining them.
(b) Before any non-lawyer employee of a party may be
given access to "Confidential" information under paragraph 7 above, the party
seeking to provide such access must give a copy of the Affidavit or Declaration
referred to in paragraph 18(a) to the attorneys for the designating party.
(c) Before any independent consultant or expert may be
given access to "Confidential" or "Attorney's Eyes Only" information under
paragraphs 7 or 8 above, the party seeking to provide such access must give a
copy of the Affidavit or Declaration referred
8
<PAGE> 24
to in paragraph 18(a) and written notice to the attorneys for the designating
party of the intention to make such disclosure, stating the name, address and a
resume of the background and qualifications of the person to whom disclosure is
proposed. Within ten (10) days from the service of such written notice, the
designating party may object to such disclosure by service of a written notice
of objection on the attorneys for the party seeking to make the disclosure,
stating the reasons for the objection. No disclosure of "Confidential" or
"Attorneys' Eye Only" information may occur prior to the expiration of ten (10)
days from the date of service of the written notice of intent to disclose. If
the designating party serves notice of objection, the party seeking to make the
disclosure must move for leave of Court to do so, and may not make such
disclosure without an Order of the Court authorizing such disclosure.
19. Nothing herein shall prevent any party or non-party from
seeking additional or different relief from the Court not specified in this
Order.
20. Nothing herein shall prevent any party or third party from
disclosing its own "Confidential" or "Attorneys' Eyes Only" information so
designated by itself in any manner that it considers appropriate, nor shall
counsel for either party be precluded from showing or using "Confidential" or
"Attorneys' Eyes Only" information obtained from the opposing party during
examination, at deposition or trial, of any officer, employee or retained
expert of the party who designated the information confidential.
21. Nothing in this Order shall prevent a receiving party from
contending (for the purposes of securing an Order so providing from the Court)
that any or all "Confidential" or "Attorneys' Eyes Only" information is not
confidential. Any receiving party may at any time request that the designating
party cancel the "Confidential" or "Attorneys Eyes Only"
9
<PAGE> 25
designation with respect to any document, object or information. Such request
shall be written, shall be served on counsel for the designating party, and
shall particularly identify the designated "Confidential" or "Attorneys Eyes
Only" information that the receiving party contends is not confidential and the
reasons supporting its contention. If the designating party does not agree to
remove the "Confidential" or "Attorneys' Eyes Only" designation, then the party
contending that such documents or information are not confidential shall file a
motion to be relieved from the restrictions of this Order with respect to the
document or information in question.
22. The restrictions set forth in any of the preceding paragraphs
shall not apply to information or material that: (a) was, is or becomes public
knowledge in a manner other than by violation of this Order; (b) is acquired by
the non-designating party from a third party
10
<PAGE> 26
having the right to disclose such information or material; or (c) was lawfully
possessed by the non-designating party prior to the entry by the Court of this
Order.
APPROVED:
KAYE, SCHOLDER, FIERMAN,
HAYES & HANDLER
DATE: By
----------------------------------- ----------------------------------
Richard G. Greco (RGG 5152)
Attorneys for BIOSITE
DIAGNOSTICS, INC.
DATE: Hopkins & Sutter
-----------------------------------
By
----------------------------------
Mary Kay McCalla
Attorneys for Abbott
Laboratories, Inc.
SO ORDERED:
- ----------------------------------
U.S.M.J.
11
<PAGE> 27
EXHIBIT 1
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ABBOTT LABORATORIES, )
)
Plaintiff, )
)
v. ) Civil Action No.
) 94 C 2808
BIOSITE DIAGNOSTICS, INC. )
) Judge Nordberg
Defendant. )
AFFIDAVIT OF COMPLIANCE
State of __________________________)
) ss
County of _________________________)
I, _____________________________, on Oath, do depose and state as
follows:
1. I live at __________________. I am employed as (state
position) __________________ by (state name and address of employer)
_______________________.
2. I have read the Protective Order entered in this case, a copy
of which has been given to me.
3. I understand and agree to comply with and be bound by the
provisions of this Order, including that upon receipt of any Confidential
Information, I will be personally subject to it, and to all of its requirements
and procedures.
Executed this ____ day of ____, 1994, at __________.
Subscribed and sworn to before me this ____ day of ___________, 1994.
__________________________________
Notary Public
<PAGE> 28
EXHIBIT 2
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ABBOTT LABORATORIES, )
)
Plaintiff, )
)
v. ) Civil Action No.
) 94 C 2808
BIOSITE DIAGNOSTICS, INC. )
) Judge Nordberg
Defendant. )
DECLARATION OF COMPLIANCE
I, _____________________________ do declare and state as
follows:
1. I live at __________________. I am employed as (state
position) __________________ by (state name and address of employer)
_______________________.
2. I have read the Protective Order entered in this case, a copy
of which has been given to me.
3. I understand and agree to comply with and be bound by the
provisions of this Order, including that upon receipt of any Confidential
Information, I will be personally subject to it, and to all of its requirements
and procedures.
4. Further, I declare, as provided by 28 U.S.C. Section 1746,
under penalty of perjury under the laws of the United States of America, that
the foregoing is true and correct.
Executed this ____ day of ____, 1994, at __________.
___________________________________________
Signature
<PAGE> 29
EXHIBIT D
ALTERNATIVE DISPUTE RESOLUTION
The parties recognize that a bona fide dispute as to certain matters may arise
from time to time during the term of this Agreement which relates to either
party's rights and/or obligations. To have such a dispute resolved by this
Alterative Dispute Resolution ("ADR") provision, a party first must send
written notice of the dispute to the other party for attempted resolution by
good faith negotiations between their respective presidents (or their
equivalents) of the affected subsidiaries, divisions, or business units within
twenty-eight (28) days after such notice is received (all references to "days"
in this ADR provision are to calendar days).
If the matter has not been resolved within twenty-eight (28) days of the notice
of dispute, or if the parties fail to meet within such twenty-eight (28) days,
either party may initiate an ADR proceeding as provided herein. The parties
shall have the right to be represented by counsel in such a proceeding.
1. To begin an ADR proceeding, a party shall provide written notice to
the other party of the issues to be resolved by ADR. Within fourteen
(14) days after its receipt of such notice, the other party may, by
written notice to the party initiating the ADR, add additional issues
to be resolved within the same ADR.
2. Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to
preside in the resolution of any disputes in this ADR proceeding. If
the parties are unable to agree on a mutually acceptable neutral
within such period, either party may request the President of the CPR
Institute for Dispute Resolution ("CPR"), 366 Madison Avenue, 14th
Floor, New York, New York 10017, to select a neutral pursuant to the
following procedures:
(a) The CPR shall submit to the parties a list of not
less than five (5) candidates within fourteen (14)
days after receipt of the request, along with a
Curriculum Vitae for each candidate. No candidate
shall be an employee, director, or shareholder of
either party or any of their subsidiaries or
affiliates.
(b) Such list shall include a statement of disclosure by
each candidate of any circumstances likely to affect
his or her impartiality.
(c) Each party shall number the candidates in order of
preference (with the number one (1) signifying the
greatest preference) and shall deliver the list to
the CPR within seven (7) days following receipt of
the list of candidates. If a party believes a
conflict of interest exists regarding any of the
candidates, that party shall provide a written
explanation of the conflict to the CPR along with its
list showing its order of preference
1
<PAGE> 30
for the candidates. Any party failing to return a
list of preferences on time shall be deemed to have no
order of preference.
(d) If the parties collectively have identified fewer
than three (3) candidates deemed to have conflicts,
the CPR immediately shall designate as the neutral
the candidate for whom the parties collectively have
indicated the greatest preference. If a tie should
result between two candidates, the CPR may designate
either candidate. If the parties collectively have
identified three (3) or more candidates deemed to
have conflicts, the CPR shall review the explanations
regarding conflicts and, in its sole discretion, may
either (i) immediately designate as the neutral the
candidate for whom the parties collectively have
indicated the greatest preference, or (ii) issue a
new list of not less than five (5) candidates, in
which ease the procedures set forth in subparagraphs
2(a) - 2(d) shall be repeated.
3. No earlier than twenty-eight (28) days or later than fifty-six (56)
days after selection, the neutral shall hold a hearing to resolve each
of the issues identified by the parties. The ADR proceeding shall
take place at a location agreed upon by the parties. If the parties
cannot agree, the neutral shall designate a location other than the
principal place of business of either party or any of their
subsidiaries or affiliates.
4. At least seven (7) days prior to the hearing, each party shall submit
the following to the other party and the neutral;
(a) a copy of all exhibits on which such party intends to
rely in any oral or written presentation to the
neutral;
(b) a list of any witnesses such party intends to call at
the hearing, and a short summary of the anticipated
testimony of each witness;
(c) a proposed ruling on each issue to be resolved,
together with a request for a specific damage award
or other remedy for each issue. The proposed rulings
and remedies shall not contain any recitation of the
facts or any legal arguments and shall not exceed one
(1) page per issue.
(d) a brief in support of such party's proposed rulings
and remedies, provided that the brief shall not
exceed twenty (20) pages. This page limitation shall
apply regardless of the number of issues raised in
the ADR proceeding.
Pre-hearing discovery shall be allowed, but shall be limited to
narrowly-focused document production and not more than five (5) days
of depositions per party. No other discovery shall be required or
permitted by any means, including depositions, interrogatories,
requests for admissions, or production of documents.
2
<PAGE> 31
5. The hearing shall be conducted on two (2) consecutive days and shall
be governed by the following rules:
(a) Each party shall be entitled to five (5) hours of
hearing time to present its case. The neutral shall
determine whether each party has had the five (5)
hours to which it is entitled.
(b) Each party shall be entitled, but not required, to
make an opening statement, to present regular and
rebuttal testimony, documents or other evidence, to
cross-examine witnesses, and to make a closing
argument. Cross-examination of witnesses shall occur
immediately after their direct testimony, and
cross-examination time shall be charged against tho
party conducting the cross-examination.
(c) The party initiating the ADR shall begin the hearing
and, if it chooses to make an opening statement,
shall address not only issues it raised but also any
issues raised by the responding party. The
responding party, if it chooses to make an opening
statement, also shall address all issues raised in
the ADR. Thereafter, the presentation of regular and
rebuttal testimony and documents, other evidence, and
closing arguments shall proceed in the same sequence.
(d) Except when testifying, witnesses shall be excluded
from the hearing until closing arguments.
(e) Settlement negotiations, including any statements
made therein, shall not be admissible under any
circumstances. Affidavits prepared for purposes of
the ADR hearing also shall not be admissible. As to
all other matters, the neutral shall have sole
discretion regarding the admissability of any
evidence.
6. Within seven (7) days following completion of the hearing, each party
may submit to the other party and the neutral a post-hearing brief in
support of its proposed rulings and remedies, provided that such brief
shall not contain or discuss any new evidence and shall not exceed ten
(10) pages. This page limitation shall apply regardless of the number
of issues raised in the ADR proceeding.
7. The neutral shall rule on each disputed issue within fourteen (14)
days following completion of the hearing. Such ruling shall adopt in
its entirety the proposed ruling and remedy of one of the parties on
each disputed issue but may adopt one party's proposed rulings and
remedies on some issues and the other party's proposed rulings and
remedies on other issues. The neutral shall not issue any written
opinion or otherwise explain the basis of the ruling.
8. The neutral shall be paid a reasonable fee plus expenses. These fees
and expenses, along with the reasonable legal fees and expenses of
the prevailing party
3
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(including all expert witness fees and expenses), the fees and
expenses of a court reporter, and any expenses for a hearing room,
shall be paid as follows:
(a) If the neutral rules in favor of one party on all
disputed issues in the ADR, the losing party shall
pay 100% of such fees and expenses.
(b) If the neutral rules in favor of one party on some
issues and the other party on other issues, the
neutral shall issue with the rulings a written
determination as to how such fees and expenses shall
be allocated between the parties. The neutral shall
allocate fees and expenses in a way that bears a
reasonable relationship to the outcome of the ADD,
with the party prevailing on more issues, or on
issues of greater value or gravity, recovering a
relatively larger share of its legal fees and
expenses.
9. The rulings of the neutral and the allocation of fees and expenses
shall be binding, non-reviewable, and non-appealable, and may be
entered as a final judgment in any court having jurisdiction.
10. Except as provided in paragraph 9 or as required by law, the existence
of the dispute, any settlement negotiations, the ADR hearing, any
submissions (including exhibits, testimony, proposed rulings, and
briefs), and the rulings shall be deemed Confidential Information.
The neutral shall have the authority to impose sanctions for
unauthorized disclosure of Confidential Information.
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<PAGE> 33
EXHIBIT E
PENDING LEGAL PROCEEDINGS INVOLVING
PATENT NO. 5,073,484
1. [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] is involved in an interference with [CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE COMMISSION] assigned to
[CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION].
2. [CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE COMMISSION] has been opposed by two parties. At this time, Abbott has not
received any documents relating to the opposition.
<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.
5 to 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
ERNST & YOUNG LLP
San Diego, California
February 7, 1997
