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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 25, 1997
CHEMTRAK INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 0-19749 77-0295388
(State of jurisdiction) (Commission File No.) (IRS Employer
Identification No.)
929 E. Arques Avenue
Sunnyvale, CA 94086-4520
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (408) 773-8156
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Item 5. Other Events
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On September 25, 1997, ChemTrak Incorporated (the "Company") announced
the termination of its Distribution and Supply Agreement with Astra Merck Inc.
("AMI") and the signing of an Option Agreement with AMI. AMI will make a $2.4
million payment to the Company for the Company's release of AMI's liabilities
under the Distribution and Supply Agreement and in partial consideration for the
Option Agreement. The Termination Agreement, the Option Agreement, and a press
release announcing these events are filed as exhibits hereto and are
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
10.42 Termination Agreement between the Company and Astra Merck Inc.
("AMI") dated September 25, 1997.
10.43 Option Agreement between the Company and AMI dated September 25,
1997.
99.1 Press Release
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ChemTrak Incorporated
Dated: September 30, 1997 By: /s/ Edward F. Covell
--------------------------------------
Edward F. Covell
President and
Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------- --------------
<S> <C>
10.42 Termination Agreement between the Company and Astra Merck Inc.
("AMI") dated September 25, 1997.
10.43 Option Agreement between the Company and AMI dated September 25,
1997.
99.1 Press Release
</TABLE>
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Exhibit 10.42
EXECUTION COPY
TERMINATION AGREEMENT AND RELEASE OF CLAIMS
THIS TERMINATION AGREEMENT AND RELEASE OF CLAIMS (the "Termination
Agreement") is entered into as of this 25th day of September, 1997 by and
between ChemTrak Incorporated, a Delaware corporation ("ChemTrak") and Astra
Merck, Inc., a Delaware corporation ("AMI").
BACKGROUND
The parties hereto entered into a Distribution and Supply Agreement
dated as of March 1, 1995 (the "Initial Agreement"), as amended by the First
Amendment to Distribution and Supply Agreement dated as of December 29, 1995
(the "First Amendment') and the Second Amendment to Distribution and Supply
Agreement dated as of December 30, 1996 (the "Second Amendment," together with
the Initial Agreement and the First Amendment, the "Agreement"). The parties now
desire to terminate the Agreement pursuant to Article 10 thereof and otherwise
on the terms and conditions set forth herein. Capitalized terms used but not
defined herein shall have the meaning ascribed to them in the Agreement.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and intending to be legally bound, the parties
hereby agree as follows:
1. Termination. The parties hereby terminate the Agreement. Within five
(5) business days after the execution of this Termination Agreement, AMI shall
pay to ChemTrak the amount of Two Million Four Hundred Thousand Dollars
($2,400,000) by wire transfer to a bank in the United States designated by
ChemTrak pursuant to the wire transfer instructions attached hereto as Exhibit
A.
2. Inventory and Marketing Materials. As soon as possible after the
date hereof, (i) ChemTrak shall relabel any and all Hp Product, product inserts
and other marketing materials in a way which prevents the identification of
AMI's name or logo or any reference to AMI in any manner whatsoever including,
without limitation, by removing AMI's name from the Hp Product in the manner set
forth in ChemTrak's letter dated September 22, 1997 delivered by Thomas M. Waugh
to AMI attached hereto as Exhibit B; and (ii) ChemTrak shall provide evidence
reasonably satisfactory to AMI that it has relabeled the foregoing including,
without limitation, by submitting samples of the Hp Product, the product inserts
and other marketing materials which have been relabeled to AMI for approval. AMI
shall bear no responsibility for, nor incur any liability with respect to, any
Hp Product which is relabeled hereunder. In no event shall ChemTrak use AMI's
name or any trademarks, tradenames or copyrights owned or used by AMI.
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3. Trademark. AMI hereby assigns all of its rights to the Trademark to
ChemTrak and shall execute all documents and perform all acts which ChemTrak
reasonably requires to transfer the ownership of the Trademark.
4. Surviving Obligations. Notwithstanding Section 10.6 of the
Agreement, only the obligations set forth in Sections 8.4, 13.1, 16.8 and
Article 14 of the Agreement shall survive termination of the Agreement
hereunder.
5. Mutual Releases. ChemTrak and AMI hereby irrevocably release each
other and each other's Affiliates, shareholders, officers, directors, employees,
successors, assigns and other agents, from any and all claims of whatsoever kind
or nature, whether known or unknown, accrued or unaccrued, that either of them
may have against the other arising from any matter or occurrence from the
beginning of time through the date hereof including, without limitation, the
termination of the Agreement and the payment of any amounts outstanding for Hp
Product under the Agreement or any invoice provided pursuant thereto, except as
provided pursuant to Section hereof.
6. Liability for Breach of Termination Agreement. If either party shall
fail to comply or otherwise violate any provision of this Termination Agreement,
then the party which has committed such failure or violation ("Breaching Party")
shall be liable to the other party ("Non-Breaching Party") for any and all
damages (including reasonable counsel or other professional fees) resulting from
such failure or violation, and all costs and expenses incurred by the Non-
Breaching Party in remedying the effects of such failure or violation. Each of
the parties hereto acknowledges that the mutual release set forth herein is not
intended to, and shall not, release any claim that the Non-Breaching Party may
have against the Breaching Party for any failure of compliance hereunder or
violation of the terms hereof.
7. Confidentiality. Subject to Section , the parties agree that they
shall keep strictly confidential, and shall not reveal, publish, communicate or
otherwise disseminate the terms and conditions of this Termination Agreement to
any other person or entity; provided, however, that the parties may disclose (i)
the amount paid hereunder to attorneys or accountants who need to know such
information for the purpose of giving tax or financial advice and who first
agree in writing not to disclose the information to others; and (ii) such
information as may be specifically (and only to the extent) required to be
disclosed by applicable law or court order; provided that notice is promptly
delivered to the other party in order to provide an opportunity to challenge or
limit the disclosure obligations.
8. Advice of Counsel. Each party represents and warrants that it has
entered into this Termination Agreement after consultation with its counsel and
that it has not relied on any representation other than those expressly set
forth herein.
9. Waiver. Any waiver of any term or condition of this Termination
Agreement, or any amendment or supplementation of this Termination Agreement,
shall be effective only if in writing. A waiver of any breach or failure to
enforce any of the terms or conditions of this Termination Agreement shall not
in any way affect, limit or waive a party's rights hereunder
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at any time to enforce strict compliance thereafter with every term or condition
of this Termination Agreement.
10. Counterparts. The Termination Agreement may be signed in any number
of counterparts, and by the different parties hereto on separate counterparts,
each of which shall be deemed an original and all of which shall constitute one
and the same instrument, and in pleading or providing any provisions thereof it
shall not be deemed necessary to produce more than one such counterpart. The
Termination Agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of the parties
reflected thereon as the signatories.
11. Successors and Assigns. This Termination Agreement shall inure to
the benefit of and be binding upon the parties and their respective successors
and assigns.
12. Governing Law. The Termination Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the conflicts of laws provisions thereof.
13. Press Release. ChemTrak may disclose and republish all or part of
the press release attached hereto as Exhibit C, and any information contained
therein shall be exempt from the confidentiality undertaking set forth in
Section hereof.
IN WITNESS WHEREOF, the parties have executed this Termination
Agreement as of the date and year first set forth above.
ASTRA MERCK INC. CHEMTRAK INCORPORATED
By: /s/ Matthew W. Emmens By: /s/ Edward F. Covell
--------------------------------- ----------------------------------
Matthew W. Emmens Edward F. Covell
President and Chief President and Chief
Executive Officer Executive Officer
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EXHIBIT A
WIRE INSTRUCTIONS
WELLS FARGO BANK, N.A. - SAN FRANCISCO
ABA 121000248
WFB Acct: #4068-000769
For Further Credit to Account #TR 126679
Name of: ChemTrak Inc.
Attn: Mora Andrews
(415) 396-7188
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EXHIBIT B
[ChemTrak Letterhead]
September 22, 1997
Mr. Jim Rutledge
Astra Merck, Inc.
725 Chesterbrook Boulevard
Wayne, PA 19067-5677
Dear Jim:
After looking at our inventory further and hearing your concerns about
relabeling product, we have reached a decision to scrap all of the existing
boxes and not attempt to relabel them. As for the cassettes, we will remove
Astra Merck's name from the cassettes, I have sent along two cassettes to that
you can see one in which your name has been partially removed and one in which
it is totally removed. These were two sequential cassettes that I pulled from
the warehouse. As you can see, we can completely remove all traces of the Astra
Merck name from the product. I think that this should satisfy all of your
concerns about your name being removed from product that is going into the
field.
Please pass this information on to the appropriate parties within your
organization so that we can continue to expedite the finalizing of this
agreement.
Sincerely,
/s/ Thomas M. Waugh
Thomas M. Waugh
Vice President, Operations
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Exhibit 10.43
OPTION AGREEMENT
THIS OPTION AGREEMENT (the "AGREEMENT") is made as of the 24th day of
September, 1997 (the "EFFECTIVE DATE"), by and between CHEMTRAK INCORPORATED, a
Delaware corporation ("CHEMTRAK") and ASTRA MERCK INC. ("AMI"), a Delaware
corporation.
RECITALS
WHEREAS, the parties have agreed to terminate the Distribution and
Supply Agreement between the parties dated March 1, 1995 ("DISTRIBUTION AND
SUPPLY AGREEMENT"), as amended, regarding the distribution, marketing and sale
of ChemTrak's Heliobacter pylori (H. pylori) assay device ("HP PRODUCT");
WHEREAS, ChemTrak has agreed that AMI may retain certain rights to the
Hp Product allowing AMI to regain the right to distribute, market, and sell the
Hp Product;
NOW, THEREFORE, in consideration of the foregoing premises, the
covenants set forth below and for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. OPTION RIGHTS.
1.1. For one (1) year from the Effective Date ("Option Period"),
ChemTrak hereby grants AMI an option ("Option") to obtain non-exclusive rights
to distribute, market and sell the Hp Product.
1.2. AMI may exercise the Option within the Option Period by notifying
ChemTrak thereof in writing and by indicating the date within the Option Period
on which AMI desires to commence the distribution, marketing and sale of the Hp
Product; provided, however, that such date shall be no later than ninety (90)
days from the date of such written notice.
2. TERMS OF DISTRIBUTION.
Prior to the inception of the distribution, marketing and sale of the
Hp Product by AMI and no later than the ninety (90) day period set forth in
Section 1.2 above, the parties shall negotiate and agree on the terms under
which AMI shall distribute, market and sell the HP Product on a non-exclusive
basis in the Territory.
3. TERMINATION OF OPTION RIGHTS.
3.1. This Agreement shall terminate on the first anniversary of the
Effective Date.
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3.2. At any time during the Option Period, ChemTrak may request in
writing that AMI exercise its option as set forth in Section 1.2 above. If
within fourteen (14) days from receipt of such written request, AMI has not
notified ChemTrak of its exercising the Option, this Agreement shall terminate
and the Option shall be deemed to have expired at the end of such fourteen (14)
day period.
4. MISCELLANEOUS
4.1. Any notices to be delivered under this Agreement shall be made in
writing and shall be effective if received by the other party within the periods
specified herein.
4.2. Capitalized terms used but not defined herein shall have the
meaning set forth in the Distribution and Supply Agreement.
4.3. This Option Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to the
conflicts of law provisions thereof.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
signed and delivered by their duly authorized representatives as of the date
first written above.
CHEMTRAK INCORPORATED ASTRA MERCK INC.
By: /s/ Edward F. Covell By: /s/ Matthew W. Emmens
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Title: President/Chief Title: President and Chief
Executive Officer Executive Officer
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Exhibit 99.1
CHEMTRAK RE-ACQUIRES MARKETING RIGHTS TO H. PYLORI TEST
SUNNYVALE, CA - September 25, 1997 -- ChemTrak, Inc. (NASDAQ: CMTR) announced
today that it has re-acquired from Astra Merck, Inc. the rights to market
HpChek(TM), ChemTrak's rapid whole blood Helicobacter Pylori test in the United
States.
Astra Merck will pay ChemTrak a fee of $2.4 million to return marketing rights.
Astra Merck also has the option to a non-exclusive license to distribute the
product in the future.
"We made a difficult decision with HpChek(TM) given the strategic direction of
our anti-secretory medication Prilosec(R) (Omeprazole)," said Diana M. Scott,
Executive Director and GI Business Unit Leader for Astra Merck. "We know that
many more prescriptions for Prilosec are written to treat gastroesophageal
reflux disease (GERD) than H. Pylori associated ulcers. The decision reflects
efforts to focus on the core business. Our confidence in the ability for
HpChek(TM) to detect the H. Pylori antibodies remains high."
"While cancellation of the exclusive marketing agreement is disappointing, we
are pleased that Astra Merck has the option of distributing HpChek(TM) at a
later date through a non-exclusive licensing agreement," said Edward F. Covell,
President and CEO of ChemTrak.
"We appreciate Astra Merck's expression of continued confidence in the product.
Additionally, we are excited about the prospect of making the test more broadly
available in the United States, and plan to pursue a multi-pronged strategy for
introducing the brand into the marketplace. This provides us an excellent
opportunity to have multiple companies marketing our product."
H. pylori is the bacterium that causes the majority of peptic ulcers, and is
associated with stomach cancer if left untreated. It afflicts roughly 40% of the
population in the U.S., and is even more prevalent overseas, particularly in
Japan. It is found in roughly 90% of patients with peptic ulcers and 70% of
patients with gastric ulcers.
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The market for H. pylori testing is very large; over eight million tests are
done annually in the United States alone. HpChek(TM) is a rapid, one-step whole
blood test that will indicate the presence or absence of H. pylori antibodies in
minutes during a patient's visit to the physician's office. It is a quick,
efficient and inexpensive alternative to an endoscopy procedure, which is
invasive and requires trained personnel to administer.
ChemTrak is a full-service personal medical diagnostics company that develops
and manufactures reliable and easy-to-use medical testing systems. ChemTrak
medical test kits are designed to screen and diagnose health conditions with
accuracy comparable to physicians' office and laboratory instrumented tests.
Except for the historical information contained herein, this news release
contains forward looking statements that involve risks and uncertainties. Actual
results might differ materially from these statements due to risks and
uncertainties, including determinations by the Food and Drug Administration, the
impact of competitive products and pricing, the timely development and
acceptance of new products, medical market conditions and other factors
discussed in the Company's 1996 Form 10K.
END
2.
