SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995, or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________to___________
_________________
Commission file number 0-17272
__________________
TECHNE CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1427402
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
614 MCKINLEY PLACE N.E. (612) 379-8854
MINNEAPOLIS, MN 55413 (Registrant's telephone number,
(Address of principal (Zip Code) including area code)
executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (X) No ( )
At May 1, 1995, 9,395,346 shares of the Company's Common Stock (par value
$.01) were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
TECHNE CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 3/31/95 6/30/94
----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 5,227,011 $ 5,878,346
Short-term investments 9,254,368 4,987,701
Accounts receivable (net) 7,174,629 6,592,961
Inventories 2,903,361 2,513,561
Deferred income taxes 749,000 764,000
Other current assets 367,526 198,898
----------- -----------
Total current assets 25,675,895 20,935,467
Deferred income taxes 466,000 385,000
Prepaid license fee 607,200 -
Fixed assets (net) 4,134,737 4,357,108
Intangible assets (net) 895,205 1,127,946
----------- -----------
TOTAL ASSETS $31,779,037 $26,805,521
=========== ===========
LIABILITIES & EQUITY
Trade accounts payable $ 1,453,859 $ 1,226,864
Salary and related accruals 1,177,405 1,140,737
Other payables 592,225 624,033
Income taxes payable 218,107 536,906
Current portion of long-term debt - 29,875
----------- -----------
Total current liabilities 3,441,596 3,558,415
Deferred rent 390,500 292,400
Common stock, par value $.01 per
share; authorized 50,000,000;
issued and outstanding 9,395,346
and 9,329,151, respectively 93,953 93,292
Additional paid-in capital 8,404,412 8,110,798
Retained earnings 19,257,027 14,677,038
Accumulated foreign currency translation
adjustments 191,549 73,578
----------- -----------
Total stockholders' equity 27,946,941 22,954,706
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $31,779,037 $26,805,521
=========== ===========
</TABLE>
See notes to unaudited Financial Statements.
<PAGE>
TECHNE CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
------------------------ ----------- -----------
3/31/95 3/31/94 3/31/95 3/31/94
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $12,576,041 $10,963,432 $34,897,468 $29,431,032
Cost of sales 5,003,971 4,550,513 13,905,344 12,671,550
----------- ----------- ----------- -----------
Gross margin 7,572,070 6,412,919 20,992,124 16,759,482
Operating expenses:
Selling, gen. and admin. 2,888,020 2,468,472 8,233,788 6,865,740
Research and development 2,130,800 1,752,288 6,199,942 4,702,373
Amortization expense 58,877 143,044 232,741 429,131
Interest expense 1,543 2,681 7,521 4,484
Interest income (145,974) (44,914) (320,981) (123,011)
----------- ----------- ----------- -----------
4,933,266 4,321,571 14,353,011 11,878,717
----------- ----------- ----------- -----------
Earnings before
income taxes 2,638,804 2,091,348 6,639,113 4,880,765
Income taxes 855,000 630,000 2,041,000 1,495,000
----------- ----------- ----------- -----------
NET EARNINGS $ 1,783,804 $ 1,461,348 $ 4,598,113 $ 3,385,765
=========== =========== =========== ===========
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.19 $ 0.15 $ 0.48 $ 0.36
=========== =========== =========== ===========
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING 9,534,610 9,488,578 9,504,720 9,522,971
=========== =========== =========== ===========
</TABLE>
See notes to unaudited Financial Statements.
<PAGE>
TECHNE CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------
3/31/95 3/31/94
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $4,598,113 $3,385,765
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 1,213,051 1,353,394
Deferred income taxes (66,000) (471,000)
Deferred rent 98,100 110,700
Other (24,546) -
Change in current assets and current
liabilities, net of acquisition:
(Increase) decrease in:
Accounts receivable (495,120) (398,839)
Inventories (357,294) (162,410)
Other current assets (163,397) (65,004)
Increase (decrease) in:
Trade account/other payables 161,994 247,966
Salary and related accruals 34,226 208,339
Income taxes payable (225,259) 333,000
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,773,868 4,541,911
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiary, net of cash acquired - (1,788,558)
Purchase of short-term investments (8,625,970) (3,448,313)
Proceeds from sale of short-term investments 4,399,303 2,930,000
Additions to fixed assets (723,841) (1,056,979)
Increase in long-term prepaid license fee (607,200) -
---------- ----------
NET CASH USED BY INVESTING ACTIVITIES (5,557,708) (3,363,850)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt (29,875) (26,776)
Issuance of common stock 179,151 27,011
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 149,276 235
EFFECT OF EXCHANGE RATE CHANGES ON CASH (16,771) (10,128)
---------- ----------
NET CHANGE IN CASH AND EQUIVALENTS (651,335) 1,168,168
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 5,878,346 3,979,114
---------- ----------
CASH AND EQUIVALENTS AT END OF PERIOD $5,227,011 $5,147,282
========== ==========
</TABLE>
See notes to unaudited Financial Statements.
<PAGE>
TECHNE CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. BASIS OF PRESENTATION:
The unaudited Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles and with
instructions to Form 10-Q and Article 10 of Regulation S-X. The
accompanying unaudited Consolidated Financial Statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
presentation of the results for the interim periods presented. All such
adjustments are of a normal recurring nature.
A summary of significant accounting policies followed by the Company is
detailed in the Annual Report to Shareholders for Fiscal 1994. The Company
follows these policies in preparation of the interim Financial Statements.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that the
Financial Statements be read in conjunction with the Company's Financial
Statements and Notes thereto for the fiscal year ended June 30, 1994
included in the Company's Annual Report to Shareholders for Fiscal 1994.
Certain Balance Sheet captions appearing in this interim report are as
follows:
<TABLE>
<CAPTION>
3/31/95 6/30/94
----------- -----------
<S> <C> <C>
ACCOUNTS RECEIVABLE
Accounts receivable $ 7,304,629 $ 6,745,961
Less reserve for bad debts 130,000 153,000
----------- -----------
NET ACCOUNTS RECEIVABLE $ 7,174,629 $ 6,592,961
=========== ===========
INVENTORIES
Raw materials $ 1,588,073 $ 1,352,031
Work in process 74,987 67,025
Supplies 120,138 104,537
Finished goods 1,120,163 989,968
----------- -----------
TOTAL INVENTORIES $ 2,903,361 $ 2,513,561
=========== ===========
FIXED ASSETS
Laboratory equipment $ 6,393,824 $ 5,955,057
Office equipment 1,999,364 1,770,129
Leasehold improvements 1,712,369 1,586,336
----------- -----------
10,105,557 9,311,522
Less accumulated depreciation and
amortization 5,970,820 4,954,414
----------- -----------
NET FIXED ASSETS $ 4,134,737 $ 4,357,108
=========== ===========
INTANGIBLE ASSETS
Customer list $ 1,010,000 $ 1,010,000
Technology licensing agreements 500,000 500,000
Goodwill 1,225,547 1,225,547
----------- -----------
2,735,547 2,735,547
Less accumulated amortization 1,840,342 1,607,601
----------- -----------
NET INTANGIBLE ASSETS $ 895,205 $ 1,127,946
=========== ===========
</TABLE>
<PAGE>
B. EARNINGS PER SHARE:
Shares used in the earnings per share computations are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------
3/31/95 3/31/94
---------- ----------
<S> <C> <C>
Primary:
Weighted average number of common shares 9,357,473 9,311,115
Dilutive effect of stock options and warrants 147,247 211,856
---------- ----------
Average common and common equivalent shares
outstanding 9,504,720 9,522,971
========== ==========
Fully diluted:
Weighted average number of common shares 9,357,473 9,311,115
Dilutive effect of stock options and warrants 160,863 218,155
---------- ----------
Average common and common equivalent shares
outstanding 9,518,336 9,529,270
========== ==========
</TABLE>
Fully diluted earnings per share are not separately reported since the
effect of dilution is less than three percent.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations Quarter And Nine Months Ended March 31, 1995
vs. Quarter And Nine Months Ended March 31, 1994
------------------------------------------------------------------
Company Structure
Techne Corporation has two operating subsidiaries: Research and Diagnostic
Systems, Inc. (R&D Systems) located in Minneapolis, Minnesota and R&D
Systems Europe Ltd. (R&D Europe) located in Abingdon, England. R&D Systems
has two divisions: Biotechnology and Hematology. The Biotechnology
Division manufactures purified cytokines (proteins), antibodies and assay
kits which are sold primarily to biomedical researchers and clinical
research laboratories. The Hematology Division develops and manufactures
whole blood hematology controls and calibrators which are sold to hospital
and clinical laboratories to check the performance of their hematology
instruments to assure the accuracy of hematology test results. R&D Europe
was acquired by the Company effective July 1, 1993 and is the distributor
for R&D Systems' biotechnology products in Europe. R&D Europe also
develops and manufactures its own line of biotechnology products and
distributes products for several other biotechnology companies. In fiscal
1992, a foreign sales corporation, Techne Export Inc., was incorporated as
a subsidiary of the Company.
Net Sales
Net sales for the quarter ended March 31, 1995 were $12,576,041, an
increase of $1,612,609 (15%) from the quarter ended March 31, 1994. Sales
for the nine months ended March 31, 1995 increased $5,466,436 (19%) from
$29,431,032 to $34,897,468. R&D Europe sales for the quarter and nine
months ended March 31, 1995 increased $791,343 (25%) and $2,451,427 (31%),
respectively, from the quarter and nine months ended March 31, 1994.
Approximately 60% of R&D Europe sales were from the distribution of R&D
Systems' products. R&D Systems sales, net of intercompany sales to R&D
Europe, increased $821,266 (10%) and $3,015,009 (14%) for the quarter and
nine months ended March 31, 1995, respectively.
Approximately 54% and 64% of the increase in consolidated sales for the
quarter and nine months, respectively, was due to the increase in sales of
R&D Systems' immunoassay (Quantikine) kits. In fiscal 1990, the
Biotechnology Division of R&D Systems released its first immunoassay kits
and currently there are 49 kits on the market. Sales of these kits by R&D
Systems and R&D Europe for the quarter and nine months ended March 31, 1995
were $4,904,692 and $13,667,265 compared to $4,026,531 and $10,187,496 for
the quarter and nine months ended March 31, 1994.
Approximately 17% and 11% of the increase in consolidated sales for the
quarter and nine months, respectively, was due to increased sales of other
R&D Systems' product by R&D Europe. In addition, approximately 12% and 10%
of the increase in consolidated sales for the quarter and nine months ended
March 31, 1995, was from an increase in the distribution of products from
non-affiliated companies by R&D Europe. Sales of R&D Systems' Hematology
Division for the quarter increased $104,493, while sales for the nine
months ended March 31, 1995 decreased $66,907, due mainly to competitive
factors.
Fourth quarter sales are expected to be slightly less than third quarter,
due to the annual slow down of European sales during the summer months.
Gross Margins
Gross margins, as a percentage of sales, increased from the prior year.
Margins for the third quarter of fiscal 1995 were 60.2% compared to 58.5%
for the same quarter in fiscal 1994. Margins for the nine months ended
March 31, 1995 were 60.2% compared to 56.9% for the same period in fiscal
1994.
The increase for the quarter was mainly due to an increase in R&D Europe
gross margins. R&D Europe gross margins were 48.2% compared to 41.2% for
the quarter ended March 31, 1994. This increase is due to favorable
exchange rate variances on purchases from R&D Systems as a result of
weakening dollar. R&D Europe gross margins for the nine months ended March
31, 1995 also increased from 44.3% to 47.5%. Additionally, gross margins
for the nine months for R&D Systems' Biotechnology Division increased
slightly from 65.3% to 66.3% and gross margins for R&D Systems' Hematology
Division also increased slightly from 33.2% to 34.5%.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $419,548 (17%) from
the third quarter of fiscal 1994 to the third quarter of fiscal 1995.
These expenses also increased $1,368,048 (20%) for the first nine months
of fiscal 1995. Approximately $241,000 and $568,000 of the increase in
selling, general and administrative expenses for the quarter and nine
months was due to wages and benefits related to Biotechnology and
Hematology Division administration and sales staff added since the prior
year. Additionally, $132,000 and $274,000 of the increase in selling,
general and administrative expenses for the quarter and nine months was a
result of Biotechnology Division consulting expenses related to computer,
personnel and strategic planning. In addition, approximately $306,000 of
the increase for the nine months in selling, general and administrative
expenses was due to marketing costs related to additional advertising,
promotional materials and catalog printing costs incurred by R&D Systems'
Biotechnology Division and R&D Europe.
Research and Development Expenses
Research and development expenses increased $378,512 (22%) for the quarter
ended March 31, 1995 and $1,497,569 (32%) for the nine months ended March
31, 1995. R&D Europe and R&D Systems' research and development expenses
increased $85,805 and $292,707, respectively for the quarter ended March
31, 1995 and $354,096 and $1,143,473, respectively, for the nine months
ended March 31, 1995. The increases related to products currently under
development, several of which were released in the third quarter of fiscal
1995. The products currently under development, several of which will be
released in the fourth quarter, include both biotechnology and hematology
products.
Net Earnings
Earnings before income taxes increased $547,456 from $2,091,348 in the
third quarter of fiscal 1994 to $2,638,804 in the third quarter of fiscal
1995. Earnings before income taxes for the nine months increased
$1,758,348 from $4,880,765 to $6,639,113. The increase in earnings before
income taxes for the quarter ended March 31, 1995 is mainly due to an
increase in R&D Europe earnings of $519,045 as a result of increased sales
and gross margin percentage. The increase in earnings before taxes for the
nine months is mainly the result of an increase in Biotechnology Division
earnings before tax of $1,088,846 and an increase in R&D Europe earnings
before tax of $959,087, partially offset by a decrease in Hematology
Division earnings for the nine months. The increases in Biotechnology
Division and R&D Europe results were due to increases in sales and gross
margins, partially offset by higher expenses. The decrease in Hematology
earnings from the prior year was the result of a slight decrease in sales
and increased expenses.
Income taxes for the quarter and nine months ended March 31, 1995 were
provided at a rate of approximately 32% and 31% of consolidated pretax
earnings, respectively, compared to 30% and 31% for comparable periods in
fiscal 1994. U.S. federal and state taxes have been reduced as a result
of the credit for research and development expenditures and the benefit of
the foreign sales corporation. Foreign income taxes have been provided at
a rate of 33% which approximates the tax rate in the United Kingdom.
Impact of Inflation
-------------------
The majority of the Company's increase in sales has resulted from an
increase in units shipped and the introduction of new products, not from
price increases. The Company believes that, to date, inflation has had no
appreciable effect on the Company's operations.
Liquidity and Capital Resources
-------------------------------
At March 31, 1995, cash and cash equivalents and short-term investments
were $14,481,379 compared to $10,866,047 at June 30, 1994. The Company is
accumulating cash and short-term investments for future expansion purposes.
The Company believes it can meet its future cash, working capital
requirements and capital additions through currently available funds and
cash generated from operations. The Company has an unsecured line of
credit of $750,000. The interest rate on the line of credit is at prime.
Cash Flows From Operating Activities
The Company generated $4,166,668 from operating activities in the first
nine months of fiscal 1995 compared to $4,541,911 for the first nine months
of fiscal 1994. The increase was the result of increased net earnings.
Cash Flows From Investing Activities
During the nine months ended March 31, 1995 and 1994, respectively, the
Company invested a net $4,226,664 and $518,313 in short-term investments.
The Company's investment policy is to place excess cash in short-term
certificates of deposit and low risk tax-exempt government bonds. The
objective of this policy is to obtain the highest possible return with the
lowest risk, while keeping the funds accessible.
In July, 1993 the Company acquired its R&D Europe subsidiary for $2,300,000
cash plus a 5 year warrant for 50,000 shares of Company common stock.
Additional costs associated with the acquisition were $87,241. Cash
acquired in the transaction was $598,683, for a net cash outflow of
$1,788,558. Cash used to fund the acquisition was obtained from cash and
cash equivalents and short-term investments on hand at June 30, 1993.
Capital additions were $723,841 for the first nine months of fiscal 1995
compared to $1,056,979 for the first nine months of fiscal 1994. The major
additions in both periods were for laboratory and computer equipment.
Total capital additions of leasehold improvements, laboratory and computer
equipment planned for the remainder of fiscal 1995 are expected to cost
approximately $300,000 and are expected to be financed through currently
available cash and cash generated from operations.
During the nine months ended March 31, 1995 the Company made a $1,000,000
prepayment to Cistron Biotechnology, Inc. under a License and Supply
Agreement. The agreement grants the Company a sublicense to sell recombinant
interleukin-1 beta protein and interleukin-1 beta precursor assays made by
Cistron to the research market worldwide. The $1,000,000 prepayment is being
amortized over five years. The Company and Cistron also signed a Research
and Development Agreement under which the Company will support Cistron's
development of an interleukin-1 beta assay kit for the detection and
monitoring of periodontal disease in humans, in exchange for co-exclusive
marketing rights to such product. Payments under the research agreement
will be made in 10 quarterly installments of $100,000 beginning July 1,
1995 and are expected to be financed through cash generated from
operations.
Cash Flows From Financing Activities
Cash of $29,875 and $26,776 was used to reduce long-term borrowings in the
first nine months of fiscal 1995 and 1994, respectively. Cash of $179,151
and $27,011 was received during the nine months ended March 31, 1995 and
1994, respectively, for the exercise of options for 59,604 and 11,853
shares of common stock. During the first nine months of fiscal 1995 and
1994, options for 9,091 and 13,940 shares of common stock, respectively,
were exercised in noncash transactions by the surrender of 2,500 and 2,144
shares of the Company's common stock with market values of $25,000 and
$25,192., respectively.
During the fourth quarter of fiscal 1995, the Company plans to purchase
approximately $400,000 of Techne common stock for contribution to the
Company's Stock Bonus Plan. In addition, subject to market conditions and
share prices, the Company plans to purchase up to $5,000,000 in Techne
common stock over the next twelve months. Any such purchases will be
funded from currently available cash and short-term investments. The
Company has never paid dividends and has no plans to do so in fiscal 1995.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SHAREHOLDERS
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
See exhibit index immediately following signature page.
B. REPORTS ON FORM 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TECHNE CORPORATION
(Company)
Date: May 10, 1995 /s/Thomas E. Oland
---------------------
Thomas E. Oland
President, Chief Executive
and Financial Officer
EXHIBIT INDEX
TO
FORM
10-Q
TECHNE CORPORATION
Exhibit
Number Description
-------- -----------
10.1 Agreement dated March 16, 1995 between the Company and
Roger C. Lucas, Ph.D. relating to termination of certain
agreements and redefining relationship.
10.2 Non-Enforcement of Patent Rights dated March 15, 1995 by
New England Medical Center Hospitals, Inc., Tufts University,
Massachusetts Institute of Technology and Wellesley College
in favor of Research and Diagnostic Systems, Inc. ("R & D").
10.3 Non-Enforcement of Patent Rights dated March 21, 1995 by
Cistron Biotechnology, Inc. ("Cistron") in favor of R & D.
10.4 License and Supply Agreement dated March 21, 1995 between
Cistron and R & D.
10.5 Research and Development Agreement dated April 10, 1995
between Cistron and R & D.
27 Financial Data Schedule
AGREEMENT
Date: March 16, 1995
Parties: Techne Corporation, a
Minnesota corporation
614 McKinley Place N.E.
Minneapolis, Minnesota 55413
Roger C. Lucas, Ph.D.
614 McKinley Place N.E.
Minneapolis, Minnesota 55413
Recitals:
A. Techne Corporation ("Techne") and Dr. Lucas are parties to an
Employment Agreement dated April 30, 1993 (the "Employment Agreement") and an
Employee Agreement with respect to Inventions, Proprietary Information, and
Unfair Competition dated May 28, 1981 (the "Confidentiality Agreement").
B. Pursuant to the Employment Agreement, Dr. Lucas is currently
Executive Vice President, Chief Scientific Officer, Secretary and Senior
Executive Officer, Biotechnology Division of Techne and Research and
Diagnostic Systems, Inc. ("R&D"), a subsidiary of Techne. As used herein,
the term "the Company" shall include Techne and its subsidiaries, including
R&D and R&D Systems Europe, Ltd. (R&D Europe"), unless specifically provided
otherwise. Dr. Lucas is also a member of the Board of Directors of Techne
and of R&D.
C. The Company and Dr. Lucas desire to terminate the Employment
Agreement, amend the Confidentiality Agreement and redefine their relationship
pursuant to the terms of this Agreement.
Agreements:
1. Termination of Employment Agreement. Effective as of the date of
this Agreement, the Employment Agreement is terminated and of no further force
and effect, except as provided herein.
2. Resignations. Effective as of the close of business on June 30,
1995, Dr. Lucas will resign (i) as an officer of Techne, R&D and R&D Europe
and (ii) as a director of R&D and R&D Europe.
3. Continued Engagements. Dr. Lucas will continue to serve as a member
of the Board of Directors of Techne, subject to his nomination by the board
and election by the shareholders of Techne, at least until the annual meeting
of the shareholders of Techne held after the close of fiscal 1997. During the
two-year period ending June 30, 1997 (the "Employment Period"), Dr. Lucas will
also be an employee of the Company, obligated to perform such services and
duties as reasonably requested by the Board of Directors of the Company from
time to time; provided, however, that in no event shall Dr. Lucas be required
to devote more than 10 hours per calendar quarter as an employee of the
Company. During the Employment Period, in connection with the performance of
his duties hereunder, Dr. Lucas may use office space and secretarial support
services of the Company on an "as-needed" basis.
4. Compensation.
a. In consideration for his employment with the Company during the
Employment Period, Dr. Lucas shall be entitled to receive the annual base
salary currently being paid to him. During the Employment Period, Dr.
Lucas will not be entitled to any other compensation as a director of
Techne. After the Employment Period, if Dr. Lucas continues to serve as a
director of Techne, he will be entitled to the same compensation and
benefits provided to other directors of Techne for their services as
directors.
b. Dr. Lucas shall be entitled to receive any incentive bonus that
he earns for fiscal 1995 based upon the goals established by the Board of
Directors of the Company, all in accordance with the terms of Section 2.2
of the Employment Agreement. Dr. Lucas shall be entitled to a profit
sharing plan contribution for fiscal 1995 on the same basis as other
employees of the Company.
c. Dr. Lucas shall be granted the option for 25,000 shares of the
Company's Common Stock specified in Section 2.3 of the Employment
Agreement without regard to 1995 pre-tax earnings in recognition of his
past contributions to the Company and agreement to continue to serve as a
director.
d. By July 31, 1995, the Company shall pay Dr. Lucas the monetary
value of his accrued but unused vacation time through June 30, 1995. No
vacation time shall accrue for the benefit of Dr. Lucas following June 30,
1995.
e. During the Employment Period, for as long as Dr. Lucas is not
employed by another entity which provides health and similar insurance
benefits generally to its employees, Dr. Lucas will be entitled to
participate in the employee health and similar insurance benefit plans
from time to time established by the Company and made available generally
to all of its employees. Dr. Lucas shall participate in any of the
Company's pension, profit sharing, stock, cash or other performance plans
for fiscal 1995 but will not participate in any such plans thereafter.
f. The Company will continue to carry the same life insurance on
the life of Dr. Lucas through the term of the Employment Period as the
Company carried on the date of this Agreement.
g. Dr. Lucas shall continue to hold options previously granted to
him in accordance with their respective terms and conditions.
h. Dr. Lucas' right, pursuant to Section 5.3 of the Employment
Agreement, to purchase insurance policies on his life owned by the Company
shall continue in full force and effect.
5. Confidentiality Agreement. Dr. Lucas and the Company agree to amend
the Confidentiality Agreement by deleting sections 4(a) and (b) of the
Confidentiality Agreement and replacing such sections with the following:
"During this employment and following its termination, Employee will not
attempt, individually or through any other person or entity withwhich he is
affiliated as an officer, director, shareholder, employee or consultant,
directly or indirectly to target or solicit for employment any officer or
employee of the Company or its affiliates or any former officer or employee
of the Company or its affiliates, without the Company's prior written consent."
The remaining provisions of the Confidentiality Agreement shall continue to be
in full force and effect.
6. Registration Right. So long as Dr. Lucas is a director of Techne and
subject to Rule 144 in connection with sales of Techne Common stock, if Dr.
Lucas deems the volume restrictions of Rule 144 too limiting for his personal
purposes, the Company at its expense will, upon Dr. Lucas' request, register
on Form S-3 the shares of Techne Common Stock beneficially held by him, his
spouse and children, provided, however, that in no event shall the Company be
obligated under this section to register such shares if doing so would have a
material adverse effect on financing plans of the Company.
7. Public and Private Statements. The Company agrees that it shall make
no disparaging or defamatory statements regarding Dr. Lucas or his
contributions to the Company. Dr. Lucas agrees that he shall make
no disparaging or defamatory statements regarding the Company or any of its
officers, directors or employees. The Company and Dr. Lucas shall agree on the
text of an announcement of his change of status and coordinate the
communication of such change to the public, employees of the Company,
shareholders and analysts.
8. Expenses. The Company agrees to pay the reasonable fees of Dr.
Lucas' attorney and accountant in connection with the negotiation of this
Agreement in an aggregate amount not to exceed $3,000.
9. Entire Agreement. This Agreement and the Confidentiality Agreement
as amended hereby, together with any addenda, represents the only agreements
among the parties concerning the subject matter hereof and supersedes all prior
agreements whether written or oral, relating thereto, including without
limitation the Employment Agreement.
10. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors. This Agreement shall not
be assignable by either party without the prior written consent of the other.
Any and all assignments of this Agreement or any interest therein not made in
accordance with this paragraph shall be void.
11. No Waiver. Any waiver of any term or condition of this Agreement by
either party shall not operate as a waiver of any continued breach of such term
or condition, or any other term or condition, nor shall any failure to enforce
a provision of this Agreement operate as a waiver of such provision or of any
other provision of this Agreement.
12. Further Assurances. The parties shall from time to time, upon the
reasonable request of any other party hereto, execute and deliver such other
documents and instruments and take such other action as such other party may
reasonably request so as to more effectively permit the consummation of the
transactions contemplated in this Agreement.
13. Severability. Should any provision of this Agreement, or its
application, to any extent be held invalid or unenforceable, the remainder of
this Agreement and its application, excluding such invalid or unenforceable
provisions shall not be affected by such exclusion and shall continue valid and
enforceable to the fullest extent permitted by law or equity.
14. Governing Law. This Agreement shall for all purposes be governed and
interpreted in accordance with the laws of the State of Minnesota.
15. Arbitration. Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between the
disputing parties in a good faith effort to arrive at a mutual settlement of
any such controversy. If, notwithstanding, such dispute cannot be resolved,
such dispute shall be settled by binding arbitration. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall be a retired state or federal judge or an
attorney who has practiced securities or business litigation for at least 10
years. If the parties cannot agree on an arbitrator within 20 days, any party
may request that the chief judge of the District Court for Hennepin County,
Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the
provisions of this Agreement, and the commercial arbitration rules of the
American Arbitration Association, unless such rules are inconsistent with the
provisions of this Agreement. Limited civil discovery shall be permitted for
the production of documents and taking of depositions. Unresolved discovery
disputes may be brought to the attention of the arbitrator who may dispose of
such dispute. The arbitrator shall have the authority to award any remedy or
relief that a court of this state could order or grant; provided, however, that
punitive or exemplary damages shall not be awarded. The arbitrator may award
to the prevailing party, if any, as determined by the arbitrator, all of its
costs and fees, including the arbitrator's fees, administrative fees, travel
expenses, out-of-pocket expenses and reasonable attorneys' fees. Unless
otherwise agreed by the parties, the place of any arbitration proceedings shall
be Hennepin County, Minnesota.
IN WITNESS WHEREOF, each of the parties hereto have executed this
Agreement in the manner appropriate to each, all as of the date first above
written.
Techne Corporation
By
-------------------------- ---------------------
Thomas E. Oland, President Roger C. Lucas, Ph.D.
NON-ENFORCEMENT OF PATENT RIGHTS
This Non-enforcement of Patent Rights is entered into on this 15th day of
March, 1995 by New England Medical Center Hospitals, Inc., 171 Harrison Avenue,
Boston, Massachusetts 02111 ("NEMC"), Trustees of Tufts College, Tufts
University School of Medicine, 136 Harrison Avenue, Boston, Massachusetts 02111
("TUFTS"), Massachusetts Institute of Technology, 77 Massachusetts Avenue,
Cambridge, Massachusetts 02_39 ("MIT") and Wellesley College, Wellesley,
Massachusetts 02181 ("WELLS") (NEMC, TUFTS, MIT and WELLS are collectively
referred to herein as the "Institutions"), in favor of R & D Systems, Inc.,
614 McKinley Place, N.E., Minneapolis, Minnesota 55413 ("R&D");
WITNESSETH:
WHEREAS the Institutions are parties to that certain License Agreement
dated December 1, 1983 with Cistron Biotechnology, Inc., Box 3004, 10
Bloomfield Avenue, Pine Brook, New Jersey 07058 ("Cistron") pursuant to which
the Institutions granted rights to Cistron to manufacture and sell
interleukin-1 beta ("IL-1b") gene fragments, proteins and products utilizing
such gene fragments and proteins (the "License Agreement"); and
WHEREAS Cistron has recently made a claim against R&D that R&D's
manufacture and sale of the mature interleukin-1 beta ("IL-1b") gene fragments,
proteins and the supply of its IL-1b protein as a standard in its IL-1b assay
kits (collectively, the "Products"), infringes the patents licensed to Cistron
(the "Patents") under the License Agreement; and
WHEREAS, Cistron and R&D have reached a settlement of the claims made
by Cistron against R&D, without any admission of liability, and intend to enter
into a License and Supply Agreement (the "Supply Agreement"); and
WHEREAS, R&D has indicated its unwillingness to enter into the Supply
Agreement without the execution of this Agreement by the Institutions;
NOW THEREFORE, in consideration of the rights, obligations and premises
set forth in the Supply Agreement the Institutions, intending to be bound
thereby, agree as follows:
Upon payment in full by R&D to Cistron of the license fee specified
under paragraph 2.3 of the Supply Agreement, the Institutions, for themselves
and their successors and assigns, agree absolutely and unconditionally not to
enforce any of the Patent rights against R&D, its parent corporation,
subsidiary or affiliate corporations, successors and assigns relating to R&D's
manufacture and sale of the Products on or before the Effective Date of the
Supply Agreement. However, nothing contained herein shall be construed as
(a) granting or implying any right to R&D under any existing or future letters
patent covering the PRECURSOR KIT or IL-1b PROTEIN (as such terms are defined
in the Supply Agreement) other than those rights specifically granted in the
Supply Agreement or (b) implying, by estoppel, any agreement by the
Institutions not to enforce their rights under the Patents for any potential
future infringement of the Patents by R&D.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
Each of the Institutions has caused this Release to be executed in a
manner appropriate to each to be effective as of the date set forth above.
NEW ENGLAND MEDICAL CENTER
HOSPITALS, INC.
By
Its
TRUSTEES OF TUFTS COLLEGE
By
Its
MASSACHUSETTS INSTITUTE OF
TECHNOLOGY
By
Its
WELLESLEY COLLEGE
By
Its
NON-ENFORCEMENT OF PATENT RIGHTS
EFFECTIVE DATE: March 21, 1995
PARTIES:
Cistron Biotechnology, Inc.
Box 3004
10 Bloomfield Avenue
Pine Brook, NJ 07058 ("Cistron")
R & D Systems, Inc.
614 McKinley Place, N.E.
Minneapolis, MN 55413 ("R&D")
RECITALS:
A. Cistron has recently made a claim against R&D that R&D's manufacture
and sale of the mature interleukin-1 beta ("IL-1b") gene fragments, proteins
and the supply of its IL-1b protein as a standard in its IL-1b assay kits
(collectively, the "Products"), infringes certain patents licensed to Cistron
(the "Patents") by New England Medical Center Hospitals, Inc., Tufts
University, Massachusetts Institute of Technology and Wellesley College (the
"Institutions").
B. The parties seek to settle such claim, without any admission of
liability, by entering into a License and Supply Agreement entered into on
March 21, 1995 and this Non-Enforcement of Patent Rights.
AGREEMENT:
In consideration of the rights, obligations and mutual premises set forth
in the License and Supply Agreement Cistron, intending to be bound thereby,
agrees as follows:
Upon payment in full by R&D of the license fee specified under paragraph
2.3 of the License and Supply Agreement, Cistron, for itself and its successors
and assigns, agrees absolutely and unconditionally not to enforce any of the
Patent rights against R&D, its parent corporation, subsidiary or affiliate
corporations, successors and assigns relating to R&D's manufacture and sale of
the Products on or before the Effective Date of the License and Supply
Agreement. However, nothing contained herein shall be construed as
(a) granting or implying any right to R&D under any existing or future letters
patent covering the PRECURSOR KIT or IL-1b PROTEIN (as such terms are defined
in the License and Supply Agreement) other than those rights specifically
granted in the License and Supply Agreement or (b) implying, by estoppel, any
agreement not to enforce its rights under the Patents for any potential future
infringement of the Patents by R&D. Cistron represents and warrants to R&D that
it has the full, exclusive right to bring any infringement action to enforce
the Patents.
Cistron has caused this Release to be executed in the manner appropriate
to it to be effective as of the date set forth above.
CISTRON BIOTECHNOLOGY, INC.
By /s/Bruce C. Galton
-------------------
Its President & CEO
LICENSE AND SUPPLY AGREEMENT
EFFECTIVE DATE: March 21, 1995
PARTIES:
Cistron Biotechnology, Inc.
Box 2004
10 Bloomfield Avenue
Pine Brook, New Jersey, USA 07058 ("CISTRON")
Research and Diagnostic Systems, Inc.
614 McKinley Place NE
Minneapolis, Minnesota, USA 55413 ("R&D")
RECITALS:
A. CISTRON has an exclusive, worldwide license from the New England
Medical Center Hospitals, Inc., Tufts University, Massachusetts Institute of
Technology and Wellesley College (the "Institutions") to make, use and sell,
and to sublicense to others, products utilizing the human interleukin-1 beta
("IL-1b"), which is the subject of patents owned by the Institutions, and to
make, use and sell products incorporating the inventions claimed in such
patents and related technology (the "License Agreement").
B. CISTRON has developed and is selling an IL-1b precursor assay and
IL-1b mature protein in the research market under the terms of the License
Agreement.
C. R&D desires to purchase the IL-1b precursor research assay product
and IL-1b mature protein for resale pursuant to the terms and conditions of
this Agreement.
AGREEMENT:
In consideration of the rights, obligations and mutual premises set forth
herein, CISTRON and R&D, intending to be bound thereby, agree as follows:
Article 1. Definitions
The following terms as used in this Agreement shall have meanings set
forth in the Article.
1.1 Territory. "TERRITORY" shall mean the research market worldwide.
1.2 Precursor Kit(s). "PRECURSOR KIT(S)" shall mean the following
finished, but unlabelled, components of CISTRON's IL-1b human precursor assay
(catalog 03-1000).
a. 1 Monoclonal antibody coated 96 well strip microtiter plate,
foil sealed
b. 1 Vial of recombinant IL-1b precursor standard (lyophilized,
50ng/ML after reconstituting)
c. 1 Vial of IL-1b precursor polyclonal antibody (lyophilized,
11 mL after reconstituting)
d. 1 Bottle of conjugate (liquid concentrate, 0.5mL)
1.3 IL-1b Protein. "IL-1b PROTEIN" shall mean CISTRON's IL-1b mature
protein (catalog 01-1600).
1.4 Confidential Information. "CONFIDENTIAL INFORMATION" shall mean
any proprietary information or materials belonging to the disclosing party
(whether or not patentable) including, but not limited to, formulations,
techniques, methodology, equipment, data, reports, including any negative
developments, know-how, sources of supply, patent positioning, consultants and
business plans and purchase forecasts which are communicated to, learned by, or
otherwise acquired by the party receiving such information or materials during
or in the course of this Agreement.
Notwithstanding the foregoing, CONFIDENTIAL INFORMATION shall not include any
information which (a) is or becomes part of the public domain through no act or
omission on the part of the receiving party, (b) is disclosed to a third party
by the disclosing party without restriction on such third party, (c) is in the
receiving party's possession at or prior to the time of disclosure under this
Agreement and the receiving party is under no prior obligation of
confidentiality with respect thereto, (d) is disclosed to the receiving party
by a third party having no obligation of confidentiality with respect thereto,
(e) is independently developed by the receiving party, or (f) is released from
confidential treatment by written consent of the disclosing party.
1.5 IL-1b Patents. "IL-1b PATENTS" shall mean all United States and
foreign patents and patent applications and any divisions, continuations,
continuations in part, reissues, reexaminations, renewals and extensions
thereof, and all pending applications therefor: (a) which are set forth on
Appendix A, or (b) which claim inventions that are related to IL-1b or
derivatives, mutants, variants, fragments or chemical analogues thereof, and
which are conceived or reduced to practice in whole or in part by
(i) employees, agents or contractors of CISTRON during the AGREEMENT PERIOD or
(ii) which are licensed to CISTRON, or (c) which are derived in whole or in
part from material, information or data proprietary to CISTRON and provided by
CISTRON to R&D and as reduced to writing by either party within thirty (30)
days of transfer and the receipt of which is acknowledged in writing by R&D.
1.6 Agreement Period. "AGREEMENT PERIOD" shall mean the time commencing
with the execution of this Agreement and extending until the last to expire of
the IL-1b PATENTS as regards the sale and use of the IL-1b PROTEIN and for a
period of seven (7) years as regards the PRECURSOR KIT.
1.7 Affiliate. "AFFILIATE" shall mean any division of R&D and any wholly
owned subsidiary of Techne Corporation, R&D's parent corporation.
Article 2. Supply Agreement
2.1 Purchase and Supply. During the AGREEMENT PERIOD, R&D agrees to
purchase PRECURSOR KITS and IL-1b PROTEIN from CISTRON for resale in the
TERRITORY under R&D's name and CISTRON agrees to manufacture and supply to R&D
PRECURSOR KITS and IL-1b PROTEIN on a non-exclusive basis under the terms and
conditions set forth in this Agreement.
2.2 Restrictions. Except as provided in paragraph 2.11 and paragraph
4.1, R&D agrees (a) to no longer sell its IL-1b gene or gene fragments (catalog
BBG 2 and BBG 25), its IL-1b protein (catalog 201-LB), or supply its IL-1b
protein as a standard in its IL-1b assay kit(s), (b) to purchase all of its
requirements for IL-1b PROTEIN only from CISTRON and (c) to utilize only the
IL-1b PROTEIN obtained from CISTRON as the standard in its IL-1b assay kit(s).
2.3 License Fee. R&D agrees to pay to CISTRON immediately following the
execution of this Agreement by both parties, a nonrefundable payment of One
Million Dollars ($1,000,000) as payment in full for the right and license
granted by CISTRON to R&D to purchase, use and resell in the TERRITORY the
PRECURSOR KITS and IL-1b PROTEIN (either alone or packaged with other
components, e.g. in an assay kit) on a non-exclusive basis only on the terms
and conditions set forth in this Agreement.
2.4 Prices.
a. PRECURSOR KITS. CISTRON agrees to manufacture and supply
PRECURSOR KITS to R&D at the following prices:
Quarterly R&D Purchases Sale Price/Kit to R&D
less than 125 kits $225.00 each plus freight and insurance
125 - 175 $195.00 each plus freight and insurance
176 - 250 $186.00 each plus freight and insurance
251 + $164.00 each plus freight and insurance
b. IL-1b PROTEIN. CISTRON agrees to manufacture and supply IL-1b
PROTEIN to R&D at the following prices:
Bulk Order by R&D Sale Price to R&D
1 mg to 10 mg $3,500.00/mg plus freight and insurance
11 mg to 15 mg $3,000.00/mg plus freight and insurance
16 mg + $2,500.00/mg plus freight and insurance
2.5 Purchase Orders/Forecasts. R&D will provide CISTRON with its
estimated purchase order requirements on a two calendar quarter rolling basis.
The first calendar quarter (or portion thereof) of such estimate shall
constitute a firm purchase order, the second calendar quarter of such estimate
shall be for information purposes only. R&D will provide the first such
rolling estimate to CISTRON upon execution of this Agreement and thereafter no
later than thirty (30) days prior to the start of each calendar quarter.
2.6 Increased Forecasts. Should R&D increase a calendar quarter's
purchase orders by twenty percent (20%) or more from that quarter's prior
estimate, CISTRON will use its best efforts to fill such increased order.
However, R&D may not refuse acceptance of shipment from CISTRON of quantities
equating to eighty percent (80%) of that quarter's prior estimate; provided,
however, R&D shall have the right to manufacture or have manufactured the
twenty percent (20%) shortfall of IL-1b PROTEIN in accordance with the
provisions of paragraphs 2.11 and 4.1.
2.7 Initial PRECURSOR KITS Order. R&D will place an order for a minimum
of one hundred (100) PRECURSOR KITS on the Effective Date of this Agreement.
2.8 Acceptance of Orders/Title. All orders from R&D will be subject to
acceptance by CISTRON. All purchases pursuant to orders by R&D shall be, at
CISTRON's option, F.O.B. Pine Brook, New Jersey, USA or other place of
manufacture. Title to, and risk of loss of and damage to, any shipments of the
PRECURSOR KITS or IL-1b PROTEIN shall pass to R&D when such Products are
delivered at any F.O.B. location to a carrier designated by R&D in its
purchase order. If R&D has failed to specify a carrier in its purchase order,
CISTRON may use a carrier of its choice.
2.9 Shipment. CISTRON will ship R&D the quantity of PRECURSOR KITS and
IL-1b PROTEIN ordered in a quarterly purchase order within forty-five (45) days
of receipt of such purchase order and will invoice R&D on the date of shipment.
R&D shall pay each invoice within thirty (30) days of the date of the invoice.
CISTRON will, whenever possible, ship complete orders; however, should CISTRON
be unable to ship a complete order, CISTRON will so notify R&D. R&D may accept
or refuse partial shipments at its discretion, but may not refuse acceptance of
shipments that comprise not less than eighty percent (80%) of a complete order.
2.10 Quality Control Testing. CISTRON will perform quality control
testing on each lot of PRECURSOR KITS and IL-1b PROTEIN and provide such
manufacturing and quality control information to R&D as may be mutually agreed
as necessary with each new production lot. R&D agrees to keep such information
confidential pursuant to the terms of paragraph 6.2 of this Agreement and to
restrict its use of such information solely to the sale and use of the
PRECURSOR KITS and IL-1b PROTEIN.
2.11 Acceptance. R&D shall perform in-house testing, at its own expense,
as it deems appropriate upon receipt of each product shipment from CISTRON, R&D
will report any product performance deficiencies or quantity discrepancies that
R&D may discover to CISTRON within fifteen (15) days of receipt. Failure to
report any product deficiencies or discrepancies within fifteen (15) days of
the receipt of each product shipment shall constitute acceptance of the
shipment. If R&D notifies CISTRON within fifteen (15) days of its receipt of
PRECURSOR KITS or IL-1b PROTEIN that the Product fails to meet specification,
such non-conforming Products which are due to a defect of one or more of the
components supplied by CISTRON shall be replaced by CISTRON as soon as
reasonably possible thereafter. If CISTRON is unable to supply IL-1b PROTEIN
that meets quality specifications or not in sufficient quantity to fill R&D's
order, R&D may substitute its IL-1b protein only until such time as CISTRON is
able to supply sufficient conforming product.
2.12 Completion of PRECURSOR KITS. R&D will provide buffers for each
PRECURSOR KIT, label the PRECURSOR KITS and components as R&D products and
provide product literature for inclusion of each PRECURSOR KIT.
2.13 Other Terms and Conditions. Any term or condition in an invoice or
other document used by CISTRON which is in addition to or different than the
terms of this Agreement shall be deemed inapplicable.
Article 3. Warranties
3.1 Corporate Authority. CISTRON and R&D each represents and warrants
to the other that:
a. it is a corporation, duly organized, validly existing and in
good standing under the laws of the state of its incorporation;
b. it has taken all necessary action on its part that may be
required under the laws of its state of incorporation and under its
certificate of incorporation and its bylaws to authorize the execution,
delivery and performance of this Agreement; and
c. this Agreement constitutes the valid and legally binding
obligation of such party, enforceable against it in accordance with its
terms.
3.2 License Agreement. CISTRON represents and warrants to R&D that it
has the exclusive, worldwide license from the Institutions to make, use and
sell, and to sublicense to others, products utilizing the IL-1b and to make,
use and sell products incorporating the inventions claimed in the IL-1b PATENTS
and related technology under the terms of the License Agreement.
3.3 Product Warranty. CISTRON warrants (a) the merchantability of
PRECURSOR KITS and IL-1b PROTEIN only for use as research tools and in the case
of the PRECURSOR KIT, only when used in conformance with CISTRON's PRECURSOR
KIT protocol, and (b) that the IL-1b PROTEIN and the PRECURSOR KIT will meet
the written specifications provided by CISTRON and reviewed by R&D. CISTRON
MAKES NO WARRANTY OF MERCHANTABILITY OR PERFORMANCE AFTER EXPIRATION OF THE
FIFTEEN (15) DAY PERIOD DESCRIBED IN PARAGRAPH 2.11 ABOVE.
3.4 DISCLAIMER OF WARRANTIES. THE WARRANTIES SET FORTH IN
THIS ARTICLE 3 ARE THE ONLY WARRANTIES MADE BY THE PARTIES AND
ARE EXPRESSLY IN LIEU OF ANY AND ALL OTHER WARRANTIES EXPRESSED
OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY AND ALL WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
NOTWITHSTANDING ANYTHING STATED HEREIN TO THE CONTRARY, IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR TO ANY
DISTRIBUTEE OF THE OTHER PARTY OR ANYONE ELSE IN PRIVITY WITH THE
OTHER PARTY FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES
REGARDLESS OF WHETHER OR NOT THE FIRST PARTY HAS BEEN APPRISED OF
THE POSSIBILITY THEREOF.
Article 4. Guaranteed Supply
4.1 Uninterrupted Supply. CISTRON agrees to sell to R&D during the
AGREEMENT PERIOD under the price, payment and purchase terms of Article 2 of
this Agreement, R&D's requirements of the IL-1b PROTEIN. If CISTRON is unable
to provide R&D with its requirements of the IL-1b PROTEIN for whatever reason,
including, without limitation, events of force majeure and financial problems,
R&D shall have the right to manufacture or have manufactured its IL-1b protein
(catalog 201-LB) in sufficient quantities to fulfill R&D's requirements as
described in its purchase order delivered to CISTRON and subject to CISTRON'S
right to resume supply in accordance with the provisions of Section 2.11
herein.
Article 5. Term and Termination
5.1 Term. Unless earlier terminated pursuant to paragraphs 5.2, 5.3 or
5.4, the provisions of this Agreement relating to the IL-1b PROTEIN will expire
upon the expiration of the last to expire of the IL-1b PATENTs and the
provisions of this Agreement relating to the PRECURSOR KIT will expire seven
(7) years from the Effective Date of this Agreement. For purposes of this
paragraph, "expire" shall mean expiration, abandonment, cancellation,
disclaimer, award to another in an interference proceeding, or declaration
of invalidity or unenforceability by a court or other authority of competent
jurisdiction from which no further appeal has or can be taken.
5.2 Termination For Breach. Upon material breach of this Agreement by
either party and in the event the breach is not cured within forty-five (45)
days after delivery of written notice to the defaulting party by the other
party, in addition to any other remedy it may have, the notifying party at its
sole option may terminate this Agreement by delivery of an additional
termination notice to the other party at the end of such forty-five (45) day
period.
5.3 Insolvency. This Agreement may be terminated by one party if the
other party becomes insolvent, is unable to pay its debts as they mature, makes
an assignment for the benefit of its creditors, files a petition for protection
under any bankruptcy law, has an involuntary petition for bankruptcy filed
against it, or applies for the appointment of a receiver or trustee for
substantially all of its property or assets or permits the appointment of any
such receiver or trustee who is not discharged within a period of thirty (30)
days after such appointment.
5.4 Infringement by PRECURSOR KIT. The portions of this Agreement
pertaining to the PRECURSOR KIT may be terminated by either party upon learning
of the existence of a third party patent which, in the opinion of competent
legal counsel, is infringed by the sale of the PRECURSOR KIT.
5.5 Post Termination Rights. Upon any termination of this Agreement, R&D
will be entitled to use and sell any completed inventory of PRECURSOR KITS
and/or IL-1b PROTEIN covered by this Agreement which remain on hand as of the
date of the termination, so long as R&D pays to CISTRON the amount applicable
to the purchase of such inventory in accordance with the terms and conditions
as set forth in this Agreement. The above described rights and obligations of
R&D and the rights and obligations of the parties under Section 6.2, Article 7
and Section 8.2 of this Agreement are the only rights and obligations of either
party which shall survive termination of this Agreement.
5.6 Notification of Breach of License Agreement. CISTRON shall notify
R&D immediately if Cistron receives any notice of breach or termination of
CISTRON's license from the Institutions. In such case if CISTRON cannot or
will not cure such breach, CISTRON shall allow R&D to cure such breach and
deduct the cost thereof from the payments due to CISTRON under Article 2 of
this Agreement.
Article 6 Publicity and Confidentiality
6.1 Public Disclosure. The parties shall mutually agree upon the wording
of the initial press release regarding this Agreement. Neither party shall use
the name of the other party in any form of advertising or promotion, without
the express prior written approval of the other party.
6.2 Confidentiality.
a. Obligations. Except as provided in paragraph 6.2.b. below, for
a period of five (5) years from the termination date of this Agreement,
the receiving party will maintain any and all of the CONFIDENTIAL
INFORMATION received from the other party, in confidence, will not use
same for its own benefit except as expressly provided in this Agreement,
and will not release or disclose any tangible or intangible component
thereof to any third party without first receiving the prior written
consent of the disclosing party to said release or disclosure.
b. Exceptions. The provisions of paragraph 6.2.a. notwithstanding,
a receiving party may disclose CONFIDENTIAL INFORMATION of the other party
to its own affiliates or in the event of a disclosure compelled by a court
of competent jurisdiction. In addition, a receiving party may disclose
CONFIDENTIAL INFORMATION of the other party in confidence to any third
party who has a need to know such CONFIDENTIAL INFORMATION for the purpose
of this Agreement; provided that the receiving party will first notify the
other party of the identity of such third party and that such disclosure
will be made under the provisions of a written confidential disclosure
agreement which is binding upon such third party to the same obligations
of confidentiality under which the receiving party is bound to the
disclosing party by the terms of this Agreement. R&D need not notify
CISTRON before disclosing any CONFIDENTIAL INFORMATION of CISTRON to any
AFFILIATE.
Article 7. Indemnification
7.1 Defense By CISTRON. In the event that litigation against R&D and/or
its AFFILIATES, officers, directors, employees or successors and assigns, is
initiated by a third party charging R&D with infringement of a patent as a
result of R&D's resale of IL-1b PROTEIN licensed under this Agreement, R&D
shall promptly notify CISTRON in writing thereof. CISTRON agrees to intervene
on R&D's behalf and to take over the sole defense of the action at CISTRON's
expense. In such event, R&D agrees to cooperate with CISTRON in all respects
including making available relevant records, papers and the like and providing
its employees to testify as requested. CISTRON will reimburse R&D for the
expenses incurred in providing such assistance.
7.2 Settlement. No settlement, consent judgment or other voluntary final
disposition of the suit which adversely affects the IL-1b PATENTS may be
entered into without the consent of CISTRON.
7.3 Payment By CISTRON. In the event of a final judgment in any suit
in which a court of competent jurisdiction, from which there is not appeal,
rules that R&D's resale of IL-1b PROTEIN licensed under this Agreement has
infringed on a third-party's patent requiring R&D to pay damages or a royalty
to a third party, or in the event of a settlement of such suit requiring
damages or royalty payments to be made, CISTRON will pay such damages or
royalty payments on R&D's behalf.
Article 8. General Provisions
8.1 Relationship. The relationship between CISTRON and R&D is that of
independent contractors. CISTRON and R&D are not joint venturers, partners,
principal and agent, master and servant, employer and employee, and have no
relationship other than as independent contracting partners. CISTRON will have
no power to bind or obligate R&D in any manner. Likewise, R&D will have no
power to bind or obligate CISTRON in any manner.
8.2 Arbitration.
a. Submission of Dispute. Any dispute, claim or controversy
arising out of or relating to this Agreement (a "Dispute") shall be
resolved by binding arbitration conducted pursuant to the provisions of
this Agreement and the commercial arbitration rules of the American
Arbitration Association ("AAA"), unless such AAA rules are inconsistent
with the provisions of this Agreement. Even though the arbitrator(s)
shall apply the AAA rules, the arbitration shall not be conducted by the
AAA. Either party may commence arbitration proceedings by delivery of
written notice to the other party describing the Dispute ("Arbitration
Notice").
b. Appointment of Arbitrator(s). The case shall be submitted to a
single arbitrator who shall be a retired state or federal judge or an
attorney who has practiced business litigation for at least ten (10)
years. Each party shall submit a list of three (3) arbitrators to the
other party within ten (10) days after delivery of the Arbitration Notice.
From the combined list, the parties shall mutually agree on the
arbitrator. Should the parties be unable to agree on the choice of an
arbitrator within thirty (30) days after delivery of the Arbitration
Notice, the arbitration shall be conducted by a panel of three (3)
arbitrators. Each party shall choose one arbitrator within ten (10) after
the expiration of the above thirty (30) day period and the two selected
shall choose a third arbitrator within five (5) days after their
appointment.
d. Location of Arbitration. The site of the arbitration shall be
in the state of New York. The exact location within New York shall be
designated by the arbitrator(s).
e. Interim Remedies. Either party may apply to any court having
jurisdiction hereof and seek injunctive relief so as to maintain the
status quo until such time as the arbitration award is rendered or the
Dispute is otherwise resolved.
f. Costs and Fees. Each party shall be responsible for its own
costs and expenses of the arbitration and the costs and fees of the
arbitrator(s) shall be borne equally between the parties, unless the
arbitrator(s) indicate otherwise in the award.
g. Binding Effect. The decision and award rendered by the
arbitrator will be final and binding. Judgment upon the award may be
entered in any court having jurisdiction thereof.
8.3 Entire Agreement. This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter thereof and
supersedes all prior oral or written agreements to this respect. This
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of each party.
8.4 Modifications and Waivers. No purported amendment, modification or
waiver of any provision hereof shall be binding unless set forth in a writing
signed by both parties (in the case of amendments and modifications) or by the
party to be charged thereby (in the case of waivers). Any waiver shall be
limited to the circumstance or event specifically referenced in the written
waiver document and shall not be deemed a waiver of any other term of this
Agreement or of the same circumstance or event upon any recurrence thereof.
8.5 Governing Law. This Agreement will be construed and enforced in
accordance with the laws of the State of New York without reference to its
choice of law principles.
8.6 Headings. The headings in this Agreement have been inserted for the
convenience of the reference only and are not intended to limit or expand on
the meaning of the language contained in the particular article or paragraph.
8.7 Notices. Any notice or other communication required or permitted
under this Agreement shall be made in writing and shall be deemed to have been
delivered upon the earlier of (i) when received, if personally delivered,
(ii) the next business day after delivery if delivered by telecopy or telex,
(iii) the next business day after placement with a reputable overnight delivery
service for next day delivery, or (iv) five (5) business days after depositing
in the U.S. mails for delivery by certified or registered mail, return receipt
requested, postage prepaid and addressed to the appropriate party at the
following address:
To R&D: R&D Systems, Inc.
614 McKinley Place NE
Minneapolis, Minnesota USA 55413
ATTN: Roger C. Lucas, Ph.D.
or Senior Executive Officer/Biotechnology
Copy to: Fredrikson & Byron, P.A.
1100 International Center
900 Second Avenue South
Minneapolis, Minnesota USA 55402
ATTN: Timothy M. Heaney, Esq.
To CISTRON: Cistron Biotechnology, Inc.
Box 2004
10 Bloomfield Avenue
Pine Brook, New Jersey USA 07058
ATTN: Bruce C. Galton
Copy to: Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177-0077
ATTN: Seth I. Truwit, Esq.
Addresses may be changed by delivery of notice to the other parties pursuant to
the terms of this paragraph. Any notice of change of address shall not be
effective until actually received by the addressee.
8.8 Injunctive Relief. The parties acknowledge and agree that a breach
of any of the terms and conditions of this Agreement, including the provisions
relating to confidentiality, may cause irreparable injury to the non-breaching
party and, according, that the prevailing party may seek and obtain in any
arbitration, in addition to damages, any and all available equitable remedies,
including, without limitation, specific performance and injunctive relief.
8.9 Force Majeure. Each party hereto will be excused from performance
for failure or delay in meeting any obligations hereunder due to Acts of God,
acts of war, fire, flood, embargo, riots or revolution, provided that such
excused performance will last only for so long as that party's performance is
reasonably prevented by such force majeure. The party affected by such force
majeure is to use its best efforts to mitigate any damage thus occasioned.
8.10 Severability. The provisions of this Agreement are severable and
in the event that any provision of this Agreement shall be determined to be
invalid or unenforceable, such invalidity or unenforceability shall not in any
way affect the validity or enforceability of the remaining provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Accepted and Agreed to:
CISTRON BIOTECHNOLOGY, INC. RESEARCH AND DIAGNOSTIC
SYSTEMS, INC.
By By
------------------ -----------------
Bruce C. Galton Roger C. Lucas
TITLE: President & COO TITLE: Executive V.P.
DATE: March 31, 1995 DATE: March 31, 1995
APPENDIX A
IL-1b PATENTS
U.S. Patent No. 4,762,914
U.S. Patent No. 4,766,069
U.S. Patent No. 5,001,057
U.S. Patent No. 5,077,219
Foreign Equivalents, including
EPO Publication No. 0161901B1
RESEARCH AND DEVELOPMENT AGREEMENT
EFFECTIVE DATE: April 10, 1995
PARTIES:
Cistron Biotechnology, Inc.
Box 3004
10 Bloomfield Avenue
Pine Brook, New Jersey, USA 07058 ("CISTRON")
Research and Diagnostic Systems, Inc.
614 McKinley Place NE
Minneapolis, Minnesota, USA 55413 ("R&D")
RECITALS:
A. CISTRON has an exclusive, worldwide license from the New England
Medical Center Hospitals, Inc., Tufts University, Massachusetts Institute of
Technology and Wellesley College (the "Institutions") to make, use and sell,
and to sublicense to others products utilizing the human interleukin-1 beta
("IL-1b"), which is the subject of patents owned by the Institutions, and to
make, use and sell products incorporating the inventions claimed in such
patents and related technology (the "License Agreement").
B. CISTRON has begun research and development of a chair-side,
interleukin-1 beta ("IL-1b") assay for the detection and monitoring of
periodontal disease in humans (the "DENTAL KIT") and other new research
products described in the following agreement.
C. R&D desires to support CISTRON's development of the DENTAL KIT and
the new research products in exchange for co-exclusive marketing rights with
CISTRON pursuant to the terms and provisions of the following agreement.
AGREEMENT:
In consideration of the rights, obligations and mutual premises set forth
herein, CISTRON and R&D, intending to be bound thereby, agree as follows:
Article 1. Definitions
The following terms as used in this Agreement shall have the following
meanings:
1.1 Territory. "TERRITORY" shall mean the dental diagnostic market
worldwide as to the DENTAL KIT and the research market worldwide as to the NEW
RESEARCH PRODUCTS.
1.2 Dental Kit. "DENTAL KIT" shall mean a single use, chair-side,
semi-quantitative EIA assay to measure IL-1b in human gingival crevicular
fluid to aid in the detection and/or monitoring of periodontal disease by
dentists and periodontists.
1.3 New Research Products. "NEW RESEARCH PRODUCTS" shall mean newly
identified cytokines, peptides, mutants and/or antibodies thereto, or other
products for the research market developed under the terms of this Agreement.
1.4 IL-1b Patents. "IL-1b PATENTS" shall mean all United States and
foreign patents and patent applications and any divisions, continuations,
continuations in part, reissues, reexaminations, renewals and extensions
thereof, and all pending applications therefor (a) which are set forth on
Appendix A, or (b) which claim inventions that are related to IL-1b or
derivatives, mutants, variants, fragments, antibodies, assays or chemical
analogs thereof, and which are conceived or reduced to practice in whole or in
part by (i) employees, agents or contractors of CISTRON during the term of this
Agreement and/or (ii) which are licensed to CISTRON, and/or (c) which are
derived in whole or in part from material, information or data proprietary to
CISTRON, provided by CISTRON to R&D and reduced to writing by either party
within thirty (30) days of transfer and the receipt of which is acknowledged
in writing by R&D.
1.5 Confidential Information. "CONFIDENTIAL INFORMATION" shall mean
any proprietary information or materials belonging to the disclosing party
(whether or not patentable) including, but not limited to, formulations,
techniques, methodology, equipment, data, reports, know-how, sources of
supply, patent positioning, consultants and business plans including any
negative development which are communicated to, learned by, or otherwise
acquired by the party receiving such information or materials during or in the
course of this Agreement.
Notwithstanding the foregoing, CONFIDENTIAL INFORMATION shall not include any
information which (a) is or becomes part of the public domain through no act or
omission on the part of the receiving party, (b) is disclosed to a third party
by the disclosing party without restriction on such third party, (c) is in the
receiving party's possession at or prior to the time of disclosure under this
Agreement and the receiving party is under no prior obligation of
confidentiality with respect thereto, (d) is disclosed to the receiving party
by a third party having no obligation of confidentiality with respect thereto,
(e) is independently developed by the receiving party, or (f) is released from
confidential treatment by written consent of the disclosing party.
Article 2. Funded Research and Development Program
2.1 Marketing Rights. CISTRON has initiated research and development of
the DENTAL KIT and certain NEW RESEARCH PRODUCTS. R&D has agreed to support
the research and development of the DENTAL KIT and NEW RESEARCH PRODUCTS in
return for co-exclusive marketing rights with CISTRON in the TERRITORY. For
purposes of this Agreement, "co-exclusive marketing right" shall mean that
CISTRON grants to R&D a sole exclusive license or sublicense, as applicable,
and retains for itself the right, to market the products, but CISTRON shall not
grant any third party any rights to the DENTAL KIT or the NEW RESEARCH
PRODUCTS.
2.2 Research and Development Payments.
a. Calculation. R&D will pay CISTRON an aggregate of One Million
Dollars ($1,000,000) (the "Research Funds") towards the research and
development of the DENTAL KIT according to the preliminary research plan
attached as Appendix B and the NEW RESEARCH PRODUCTS identified in
Appendix B and other NEW RESEARCH PRODUCTS approved by R&D in writing from
time to time. CISTRON and R&D agree to negotiate in good faith to develop
a detailed research plan for the DENTAL KIT and the NEW RESEARCH PRODUCTS
identified on Appendix B and other potential NEW RESEARCH PRODUCTS. R&D
shall have the right to redirect the use of the Research Funds among the
DENTAL KIT and NEW RESEARCH PRODUCTS projects if results of any data or
research is not progressing in a satisfactory or successful manner, as
defined in accordance with the research plan set forth in Appendix B, as
amended from time to time by the parties.
b. Payment. The Research Funds shall be payable in ten (10)
calendar quarterly payments in the amount of $100,000 each, starting July
1, 1995. These quarterly payments are non-refundable and shall be due on
the first day of each calendar quarter regardless of scientific progress.
The Research Funds are not subject to set-off if R&D has any claim against
CISTRON for breach of this Agreement or for any other reason. If R&D
defaults in the payment of any quarterly Research Fund payment and such
payment remains unpaid ten (10) business days after delivery of written
notice of nonpayment by CISTRON to R&D, the remaining Research Funds shall
become immediately due and payable.
2.3 Reports. CISTRON will provide R&D with calendar quarterly written
progress reports on the development of the DENTAL KIT and NEW RESEARCH
PRODUCTS. Such reports shall be delivered within thirty (30) days after the
end of each calendar quarter during the term of this Agreement. Such progress
reports shall be considered Confidential Information and subject to the
confidentiality provisions of Section 5.2.
2.4 License. Upon completion of the preliminary research plan set forth
in Appendix B and upon receipt of the full Research Funds, R&D shall
automatically receive a fully paid right and license to exploit the inventions
and technology covered by the claims in IL-1b PATENTS to market the DENTAL KIT
and the NEW RESEARCH PRODUCTS in the Territory co-exclusively with CISTRON for
the term of this Agreement. R&D acknowledges and agrees that such right and
license may be limited if CISTRON's right to grant such right and license is
limited; provided, however, CISTRON will grant such right and license to the
fullest extent of its right to do so. CISTRON agrees to sell to R&D its
requirements of the DENTAL KIT and the NEW RESEARCH PRODUCTS under the terms
of a supply agreement to be negotiated between the parties in good faith at
such time as quantities and manufacturing costs are determined, but in no event
shall such manufacturing costs for the DENTAL KIT be less than CISTRON's fully
absorbed manufactured cost plus twenty percent (20%). Such supply agreement
shall contain similar provisions as found in the Supply Agreement between the
parties executed on even date herewith.
2.5 DENTAL KIT Patent Rights. Notwithstanding any of the provisions
contained in this Agreement, R&D understands and agrees that CISTRON will
retain ownership of all of its patent rights relating to the DENTAL KIT and/or
NEW RESEARCH PRODUCTS as may presently or hereafter exist.
2.6 FDA Approval. Upon completion of the research plan for the DENTAL
KIT or for any NEW RESEARCH PRODUCT, either party may delivery written notice
to the other party of its desire to file an application with, and seek approval
of, the U.S. Food and Drug Administration or the equivalent United States
regulatory body (the "FDA") for the manufacture and sale of the DENTAL KIT as
a diagnostic product or of a NEW RESEARCH PRODUCT. The other party shall have
a period of one hundred twenty (120) days to elect whether or not to
participate in such application. Such election shall be made by delivery of
written notice to the first party prior to the expiration of the one hundred
twenty (120) day period. If the party elects to participate in such
application, each party shall share equally in the preparation and filing of
such application with the FDA. If the other party elects not to participate
in such application, such party shall loose its co-exclusive rights under this
Agreement and the first party shall have the full, exclusive rights to
manufacture and market the affected product.
Article 3. Warranties
3.1 Corporate Authority. CISTRON and R&D each represents and warrants
to the other that:
a. it is a corporation, duly organized, validly existing and in
good standing under the laws of the state of its incorporation;
b. it has taken all necessary action on its part that may be
required under the laws of its state of incorporation and under its
certificate of incorporation and its bylaws to authorize the execution,
delivery and performance of this Agreement; and
c. this Agreement constitutes the valid and legally binding
obligation of such party, enforceable against it in accordance with its
terms.
3.2 License Agreement. CISTRON represents and warrants to R&D that it
has the exclusive, worldwide license from the Institutions to make, use and
sell, and to sublicense to others, products utilizing the IL-1b and to make,
use and sell products incorporating the inventions claimed in the IL-1b PATENTS
and related technology under the terms of the License Agreement.
3.3 DISCLAIMER OF WARRANTIES. THE WARRANTIES SET FORTH IN
THIS ARTICLE 3 ARE THE ONLY WARRANTIES MADE BY THE PARTIES AND
ARE EXPRESSLY IN LIEU OF ANY AND ALL OTHER WARRANTIES EXPRESSED
OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY AND ALL WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
NOTWITHSTANDING ANYTHING STATED HEREIN TO THE CONTRARY, IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR TO ANY
DISTRIBUTEE OF THE OTHER PARTY OR ANYONE ELSE IN PRIVITY WITH THE
OTHER PARTY FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES
REGARDLESS OF WHETHER OR NOT THE FIRST PARTY HAS BEEN APPRISED OF
THE POSSIBILITY THEREOF.
Article 4. Term and Termination
4.1 Term. Unless earlier terminated pursuant to paragraphs 4.2, 4.3 or
4.4, the provisions of this Agreement will expire upon the expiration of the
last to expire of the IL-1b PATENTS. For purposes of this paragraph, "expire"
shall mean expiration, abandonment, cancellation, disclaimer, award to another
in an interference proceeding, or declaration of invalidity or unenforceability
by a court or other authority of competent jurisdiction from which no further
appeal has or can be taken.
4.2 Termination For Breach. Upon material breach of this Agreement by
either party and in the event the breach is not cured within forty-five (45)
days after delivery of written notice to the defaulting party by the other
party, in addition to any other remedy it may have, the notifying party at its
sole option may terminate this Agreement by delivery of an additional
termination notice to the other party at the end of such forty-five (45) day
period.
4.3 Insolvency. This Agreement may be terminated by one party if the
other party becomes insolvent, is unable to pay its debts as they mature, makes
an assignment for the benefit of its creditors, files a petition for protection
under any bankruptcy law, has an involuntary petition for bankruptcy filed
against it, or applies for the appointment of a receiver or trustee for
substantially all of its property or assets or permits the appointment of any
such receiver or trustee who is not discharged within a period of thirty (30)
days after such appointment.
4.4 Infringement by DENTAL KIT. The portions of this Agreement
pertaining to the DENTAL KIT may be terminated by either party upon learning
of the existence of a third party patent which, in the opinion of competent
legal counsel, is infringed by the sale of the DENTAL KIT.
4.5 Post Termination Rights. Upon any termination of this Agreement, R&D
will be entitled to use and sell any completed inventory of DENTAL KITS and/or
NEW RESEARCH PRODUCTS, so long as R&D pays to CISTRON the amount applicable to
the purchase of such inventory in accordance with the terms and conditions of
the negotiated supply agreement. The above described rights and obligations
of R&D and the rights and obligations of the parties under Sections 5.2 and 6.2
of this Agreement are the only rights and obligations of either party which
shall survive termination of this Agreement.
4.6 Notification of Breach of License Agreement. CISTRON shall notify
R&D immediately if Cistron receives any notice of breach or termination of
CISTRON's license from the Institutions. In such case if CISTRON cannot or
will not cure such breach, CISTRON shall allow R&D to cure such breach and
deduct the cost thereof from the payments due to CISTRON under Article 2 of
this Agreement.
Article 5. Publicity and Confidentiality
5.1 Public Disclosure. The parties shall mutually agree upon the wording
of the initial press release regarding this Agreement. Neither party shall use
the name of the other party in any form of advertising or promotion, without
the express prior written approval of the other party.
5.2 Confidentiality.
a. Obligations. Except as provided in Section 5.2.b. below, for a
period of five (5) years from the termination date of this Agreement, the
receiving party will maintain any and all of the CONFIDENTIAL INFORMATION
received from the other party, in confidence, will not use same for its
own benefit except as expressly provided in this Agreement, and will not
release or disclose any tangible or intangible component thereof to any
third party without first receiving the prior written consent of the
disclosing party to said release or disclosure.
b. Exceptions. The provisions of Section 5.2.a. notwithstanding, a
receiving party may disclose CONFIDENTIAL INFORMATION of the other party
to its own affiliates or in the event of a disclosure compelled by a court
of competent jurisdiction. In addition, a receiving party may disclose
CONFIDENTIAL INFORMATION of the other party in confidence to any third
party who has a need to know such CONFIDENTIAL INFORMATION for the purpose
of this Agreement; provided that the receiving party will first notify the
other party of the identity of such third party and that such disclosure
will be made under the provisions of a written confidential disclosure
agreement which is binding upon such third party to the same obligations
of confidentiality under which the receiving party is bound to the
disclosing party by the terms of this Agreement. A receiving party need
not notify the disclosing party before disclosing any CONFIDENTIAL
INFORMATION of the disclosing party to any affiliate of the receiving
party.
Article 6. General Provisions
6.1 Relationship. The relationship between CISTRON and R&D is that of
independent contractors. CISTRON and R&D are not joint venturers, partners,
principal and agent, master and servant, employer and employee, and have no
relationship other than as independent contractors for the purpose of this
Agreement. CISTRON will have no power to bind or obligate R&D in any manner.
Likewise, R&D will have no power to bind or obligate CISTRON in any manner.
6.2 Arbitration.
a. Submission of Dispute. Any dispute, claim or controversy
arising out of or relating to this Agreement (a "Dispute") shall be
resolved by binding arbitration conducted pursuant to the provisions of
this Agreement and the commercial arbitration rules of the American
Arbitration Association ("AAA"), unless such AAA rules are inconsistent
with the provisions of this Agreement. Even though the arbitrator(s)
shall apply the AAA rules, the arbitration shall not be conducted by the
AAA. Either party may commence arbitration proceedings by delivery of
written notice to the other party describing the Dispute ("Arbitration
Notice").
b. Appointment of Arbitrator(s). The case shall be submitted to a
single arbitrator who shall be a retired state or federal judge or an
attorney who has practiced business litigation for at least ten (10)
years. Each party shall submit a list of three (3) arbitrators to the
other party within ten (10) days after delivery of the Arbitration Notice.
From the combined list, the parties shall mutually agree on the
arbitrator. Should the parties be unable to agree on the choice of an
arbitrator within thirty (30) days after delivery of the Arbitration
Notice, the arbitration shall be conducted by a panel of three (3)
arbitrators. Each party shall choose one arbitrator within ten (10) after
the expiration of the above thirty (30) day period and the two selected
shall choose a third arbitrator within five (5) days after their
appointment.
d. Location of Arbitration. The site of the arbitration shall be
in the State of New York. The exact location within the State of New York
shall be designated by the arbitrator(s).
e. Interim Remedies. Either party may apply to any court having
jurisdiction hereof and seek injunctive relief so as to maintain the
status quo until such time as the arbitration award is rendered or the
Dispute is otherwise resolved.
f. Costs and Fees. Each party shall be responsible for its own
costs and expenses of the arbitration and the costs and fees of the
arbitrator(s) shall be borne equally between the parties, unless the
arbitrator(s) indicate otherwise in the award.
g. Binding Effect. The decision and award rendered by the
arbitrator will be final and binding. Judgment upon the award may be
entered in any court having jurisdiction thereof.
6.3 Entire Agreement. This Agreement sets forth the entire agreement
and understanding between the parties as to the subject matter thereof and
supersedes all prior oral or written agreements to this respect. This
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of each party.
6.4 Modifications and Waivers. No purported amendment, modification or
waiver of any provision hereof shall be binding unless set forth in a writing
signed by both parties (in the case of amendments and modifications) or by the
party to be charged thereby (in the case of waivers). Any waiver shall be
limited to the circumstance or event specifically referenced in the written
waiver document and shall not be deemed a waiver of any other term of this
Agreement or of the same circumstance or event upon any recurrence thereof.
6.5 Governing Law. This Agreement will be construed and enforced in
accordance with the laws of the State of New York without reference to its
choice of law principles.
5.6 Headings. The headings in this Agreement have been inserted for the
convenience of the reference only and are not intended to limit or expand on
the meaning of the language contained in the particular article or section.
5.7 Notices. Any notice or other communication required or permitted
under this Agreement shall be made in writing and shall be deemed to have been
delivered upon the earlier of (i) when received, if personally delivered,
(ii) the next business day after delivery if delivered by telecopy or telex,
(iii) the next business day after placement with a reputable overnight delivery
service for next day delivery, or (iv) five (5) business days after depositing
in the U.S. mails for delivery by certified or registered mail, return receipt
requested, postage prepaid and addressed to the appropriate party at the
following address:
To R&D: R&D Systems, Inc.
614 McKinley Place NE
Minneapolis, Minnesota USA 55413
ATTN: Roger C. Lucas, Ph.D.
or Senior Executive Officer/Biotechnology
Copy to: Fredrikson & Byron, P.A.
1100 International Center
900 Second Avenue South
Minneapolis, Minnesota USA 55402
ATTN: Timothy M. Heaney, Esq.
To CISTRON: Cistron Biotechnology, Inc.
Box 2004
10 Bloomfield Avenue
Pine Brook, New Jersey USA 07058
ATTN: Bruce C. Galton
Copy to: Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177-0077
ATTN: Seth I. Truwit, Esq.
Addresses may be changed by delivery of notice to the other parties pursuant to
the terms of this paragraph. Any notice of change of address shall not be
effective until actually received by the addressee.
6.8 Injunctive Relief. The parties acknowledge and agree that a breach
of any of the terms and conditions of this Agreement, including the provisions
relating to confidentiality, may cause irreparable injury to the non-breaching
party and, according, that the prevailing party may seek and obtain in any
arbitration, in addition to damages, any and all available equitable remedies,
including, without limitation, specific performance and injunctive relief.
6.9 Force Majeure. Each party hereto will be excused from performance
for failure or delay in meeting any obligations hereunder due to Acts of God,
acts of war, fire, flood, embargo, riots or revolution, provided that such
excused performance will last only for so long as that party's performance is
reasonably prevented by such force majeure. The party affected by such force
majeure is to use its best efforts to mitigate any damage thus occasioned.
6.10 Severability. The provisions of this Agreement are severable and in
the event that any provision of this Agreement shall be determined to be
invalid or unenforceable, such invalidity or unenforceability shall not in any
way affect the validity or enforceability of the remaining provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Accepted and Agreed to:
CISTRON BIOTECHNOLOGY, INC. RESEARCH AND DIAGNOSTIC
SYSTEMS, INC.
By By
------------------ ---------------------
Bruce C. Galton Roger C. Lucas, Ph.D.
TITLE: President & COO TITLE: Executive Vice President
APPENDIX A
U.S. Patent No. 4,762,914
U.S. Patent No. 4,766,069
U.S. Patent No. 5,001,057
U.S. Patent No. 5,077,219
Foreign Equivalents, including
EPO Publication No. 0161901B1
APPENDIX B
I. IL-1b LEVELS USED AS AN INDICATOR OF PERIODONTITIS
A. Aim
The aim of this study is twofold. First, to assess the feasibility
of using Interleukin-1 beta (IL-1b) levels as a predictor of
periodontal disease activity and secondly, to develop a semi-
quantitative, chair-side assay for quick and easy measurement of
IL-1b.
B. Background
Previous studies have suggested that IL-1b is present at high levels
in gingival crevicular fluid (GCF) from subjects with periodontal
disease. These studies included a Phase I SBIR grant conducted by
Cistron. This cross-sectional study involved ninety-five (95)
subjects that were evaluated clinically using standard periodontal
parameters. The mean IL-1b level in subjects with periodontitis was
greater than 568pg/mL while the mean level in-health subjects and/or
those with gingivitis was less than 188pg/mL. However, when
in-health subjects were analyzed alone (without subjects with
gingivitis) the mean dropped to 70pg/mL.
Clearly, this study supported the involvement of IL-1b in
periodontitis, but by its cross-sectional design, could not give data
to support the possible use of IL-1b as a predictor. To accomplish
this task, a longitudinal study is needed.
C. Significance
It is estimated that 70% of American adults are affected by some
degree of periodontal disease. Approximately $4 billion was spent in
the U.S. during 1990 for periodontal disease diagnosis and treatment
(Biotechnology News, Vol. 12, No. 24). Current clinical examination
parameters and radiographic evidence only provide subjective insight
into the current activity status of a patient's condition. In our
Phase I SBIR study, mean IL-1b levels were shown to correlate with
clinical diagnosis of periodontitis, gingivitis and in-health. We
hypothesize that IL-1b may mediate, at least in part, the breakdown
of supporting periodontal tissues, including bone. Therefore, a
rapid, in-office assay which measures IL-1b levels in GCF may provide
the practitioner with a valuable tool to aid in the diagnosis of
active disease and to monitor the relative success of site treatment.
D. Experimental Design and Methods
To accomplish the twofold aim as previously discussed, we propose a
three phase study.
Phase I: a longitudinal study to be conducted at one geographical
site, employing 100 subjects with established periodontal disease.
Standard clinical indices will be compared to IL-1b levels found in
GCF collected at the following time intervals: 0, 4, 8 and 12
months. The data from Phase I will be analyzed and the merits of
using IL-1b levels to predict periodontitis will be evaluated.
Phase II: upon the successful completion of Phase I, a second phase
of this study will be started. The main purpose will be to expand
the patient population pool. To accomplish this task, two additional
geographical sites will be added to the study bringing the total
patient population to 300. The same clinical indices that were
employed in Phase I will be used in Phase II. All indices collected
will be compared to IL-1b levels to determine the possible
correlation between IL-1b levels and disease status. If a
correlation exists and IL-1b is a predictor of periodontal disease,
then the resultant data from Phases I and II would be used to gain
FDA approval for an in vitro diagnostic kit.
Phase III: to complete this study in a timely manner, Phase III will
be initiated concurrently with Phase II. The work performed in Phase
III will be dedicated to the development of a user-friendly semi-
quantitative assay system. In fact, much of the success of this
project will be based on acceptance of the assay system by the
practitioner. The envisioned final assay system, therefore, will
have to be a) easy to use with a minimal number of manipulations,
b) completely self contained, and c) able to clearly determine
in-health from disease state.
E. Conclusion
There is a clear window of opportunity to supply the periodontal
market with an in vitro diagnostic assay. This is a large market
that requires an objective quantitative test to determine the status
of periodontal disease activity. To date, there is a void in this
area. It is believed that if a user-friendly, chair-side assay as
previously described was made available to this market, it would be
warmly accepted.
II. NEW RESEARCH PRODUCTS
A. Enzymes
Cistron will develop enzyme(s), antibodies to such enzyme(s), and an
EIA kit to measure such enzyme(s). After development, Cistron will
manufacture the enzyme products for R&D to sell to the research
market on a co-exclusive basis with Cistron under such terms and
conditions as mutually agreed upon.
B. Culture Media Additive
Cistron will develop a new cytokine which may be useful as an
additive to culture medial.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 5,227,011
<SECURITIES> 9,254,368
<RECEIVABLES> 7,304,629
<ALLOWANCES> 130,000
<INVENTORY> 2,903,361
<CURRENT-ASSETS> 25,675,895
<PP&E> 10,105,557
<DEPRECIATION> 5,970,820
<TOTAL-ASSETS> 31,779,037
<CURRENT-LIABILITIES> 3,441,596
<BONDS> 0
<COMMON> 93,953
0
0
<OTHER-SE> 27,852,988
<TOTAL-LIABILITY-AND-EQUITY> 27,946,941
<SALES> 34,897,468
<TOTAL-REVENUES> 34,897,468
<CGS> 13,905,344
<TOTAL-COSTS> 13,905,344
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,521
<INCOME-PRETAX> 6,639,113
<INCOME-TAX> 2,041,000
<INCOME-CONTINUING> 4,598,113
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,598,113
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
