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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
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 0-19841
i-STAT CORPORATION
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(Exact name of Registrant as specified in its charter)
DELAWARE 22-2542664
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
303 COLLEGE ROAD EAST, PRINCETON, NJ 08540
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(Address of principal executive offices) (Zip code)
(609) 243-9300
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant
to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $.15 PER SHARE
SERIES A PREFERRED STOCK PURCHASE RIGHTS
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_______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. _____
Number of shares of Common Stock outstanding as of January 15, 1997: 11,215,748
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant as of January 15, 1997 is approximately
$162,066,355. Shares of voting stock held by each executive officer and director
and by each person who owns 5% or more of any voting stock have been excluded in
that such persons may be deemed affiliates of the Registrant. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
DOCUMENTS INCORPORATED BY REFERENCE
(To The Extent Indicated Herein)
Part III incorporates certain information by reference to the Registrant's Proxy
Statement for its 1997 Annual Meeting of Stockholders.
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TABLE OF CONTENTS
<TABLE>
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Item Page
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PART I
<S> <C> <C>
1. Business
(a) General development of business...................................................... 1
(b) Industry segment and geographic area data............................................ 8
(c) Description of business.............................................................. 1
2. Properties................................................................................ 8
3. Legal Proceedings......................................................................... 8
4. Submission of Matters to a Vote of Security Holders....................................... 9
PART II
5. Market for the Registrant's
Common Equity and Related
Stockholder Matters...................................................................... 12
6. Selected Consolidated Financial Data..................................................... 13
7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations................................................................ 14
8. Financial Statements and
Supplementary Data
(a) Financial Statements................................................................ 22
(b) Selected Quarterly Financial Data................................................... 37
9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure............................................................................... 16
PART III
10. Directors and Executive Officers of
the Registrant........................................................................... 10, 16
11. Executive Compensation................................................................... 16
12. Security Ownership of Certain
Beneficial Owners and Management......................................................... 17
13. Certain Relationships and Related Transactions........................................... 17
PART IV
14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K........................................................ 18
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This Annual Report contains both historical financial information and
forward looking statements. The Company operates in a high technology, emerging
market environment that involves significant risks and uncertainties which may
cause actual results to vary from such forward looking statements and to vary
significantly from reporting period to reporting period. These risks include,
among others, competition from existing manufacturers and marketers of blood
analysis products who have greater resources than the Company, the uncertainty
of new product development initiatives, difficulties in transferring new
technology to the manufacturing stage, market resistance to new products and
point-of-care blood diagnosis, domestic and international regulatory
constraints, uncertainties of international trade, pending and potential
disputes concerning ownership of intellectual property, dependence upon
strategic corporate partners for assistance in development of new markets and
other risks detailed from time to time in the Company's filings with the
Securities and Exchange Commission.
PART I
ITEM 1. BUSINESS
i-STAT Corporation ("i-STAT" or the "Company"), was incorporated in
Delaware in 1983, and develops, manufactures and markets medical diagnostic
products for blood analysis that provide health care professionals with
immediate and accurate critical diagnostic information at the point of patient
care. The Company's current products, known as the i-STAT(R) System, consist of
portable, hand-held analyzers and single-use, disposable cartridges, each of
which simultaneously performs different combinations of commonly ordered blood
tests in approximately two minutes. The i-STAT System uses a simple, one-step
procedure, the results of which can be easily linked by infrared transmission to
a health care provider's information system. As of December 31, 1996, i-STAT had
777 customers throughout the United States, as well as customers in Japan,
Western Europe, Canada and South America. The Company intends for the i-STAT
System to become the standard of care for blood analysis at the patient's side.
The i-STAT System provides accurate and reliable blood test results
more quickly and more simply than the most advanced clinical laboratory
equipment. Blood analysis performed at the point of patient care with the i-STAT
System permits more timely diagnosis and therapeutic intervention and reduces
the occurrence of common testing errors. The Company believes these attributes
of the i-STAT System result in improved patient care and lower overall health
care costs. In addition, the Company believes that the i-STAT System reduces or
eliminates the need for expensive capital equipment, specialized labor force,
equipment maintenance and space required for traditional testing laboratories.
The original i-STAT System, introduced in September 1992, was capable
of performing six of the most commonly ordered blood tests, which are tests for
sodium, potassium, chloride, glucose, urea nitrogen and hematocrit. In 1994, the
Company expanded the testing capabilities of the i-STAT System through the
introduction of cartridges which perform tests for pH, ionized calcium and
bicarbonate. In 1995, the Company introduced cartridges which measure arterial
blood gases (pH, PCO(2) and PO(2)). The Company believes that 95% of the
approximately 200 million blood tests (electrolyte and blood gas) performed on a
"stat" basis in the United States each year now can be conducted using the
i-STAT System. The Company believes that because the i-STAT System can now
perform the vast majority of the tests required on a "stat" basis, it is
substantially more attractive as a total replacement for hospital "stat"
laboratories. The Company has additional tests under development.
i-STAT's near-term objective is to further increase sales of its test
cartridges to the critical care departments of hospitals in the United States,
where the highest volume of "stat" blood tests are performed. The Company
intends to achieve this goal, for the most part, by focusing its sales efforts
on those hospitals that have the greatest likelihood of fully adopting the
i-STAT System throughout all of their critical care departments and of using the
i-STAT System as their principal means of testing blood. By virtue of the
strategic technology and marketing alliance concluded in mid-1995 between the
Company and Hewlett-Packard Company ("HP"), the i-STAT System was introduced and
marketed in Western Europe by HP during 1996. In addition, i-STAT and HP are
jointly developing a blood analysis device (the "Integrated Analyzer"), based on
the i-STAT System, that can be integrated into HP's customer installed base of
patient monitoring systems. This device is planned to be introduced during 1997.
The Company's longer-term strategy is to expand its distribution throughout Asia
and to increase its efforts, through the use of distribution and partnering
arrangements, to market its products to alternate site health care providers
such as physician offices, freestanding dialysis centers, nursing homes,
outpatient clinics, emergency medical services units, home healthcare agencies
and veterinary clinics.
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i-STAT SYSTEM COMPONENTS
The i-STAT System is composed of two types of analyzers, which are
hand-held, portable instruments, and various single-use, disposable cartridges,
which contain the electrochemical biosensors necessary to perform the
desired blood tests. The i-STAT System includes peripheral components that
enable the results of tests to be transmitted by infrared means to both a
proprietary information system for managing the user's point-of-care testing
program and to the user's information systems for billing and archiving. One of
the Company's analyzers is thermostatically controlled and can be used for all
cartridges manufactured by the Company and the other can be used for all
cartridges manufactured by the Company except the arterial blood gas
cartridges. The Company's single-use, disposable cartridges currently allow the
i-STAT System to perform blood tests for sodium, potassium, chloride, glucose,
urea nitrogen, hematocrit, ionized calcium, arterial blood gases, (pH, PCO2 and
PO2), and bicarbonate, and to derive certain other values, such as total carbon
dioxide, base excess, anion gap, hemoglobin and O2 saturation, by calculation
from the tests performed.
i-STAT believes its proprietary thin-film, biosensor technology
provides the Company with significant competitive advantages over other
technologies. As a result of the Company's proprietary know-how and the
attributes of its thin-film biosensors, the i-STAT System produces accurate
results in approximately two minutes in an easy, single step procedure, is small
enough to be hand-held and to be carried from patient to patient, operates with
only two to three drops of blood and is virtually maintenance free. The
Company's thin-film technology uses micro-fabrication techniques which permit
dimensionally small product features resulting in faster reactions than larger
configurations such as those used in thick-film technology. Thin-film technology
permits i-STAT's biosensors to "wet-up" quickly with small amounts of calibrant
and blood samples, thereby enabling the Company to package its biosensors in a
dry state while retaining the ability to produce results in approximately two
minutes. The Company believes that packaging its biosensors in a dry state
facilitates extended shelf life and simplifies the calibration process. The
Company's disposable cartridges have a shelf life ranging from a minimum of six
months to a maximum of twelve months. In addition, the Company's thin-film
biosensor technology permits the cartridges in the i-STAT System to be
configured to perform multiple tests and combinations of tests. The Company
believes products based on other existing technologies cannot achieve
performance characteristics or product design features of the type described
above.
MARKETING AND DISTRIBUTION
The Company currently markets the i-STAT System primarily to the
critical care departments of hospitals in the United States, where the highest
volume of blood tests are performed on a "stat" basis. The i-STAT System also is
marketed to hospitals in Japan, Western Europe, Canada and South America. The
Company markets and distributes the i-STAT System in the United States and
Canada principally through its own direct sales and marketing organization, in
Japan through Japanese marketing partners and in South America through selected
distribution channels. In February 1996, HP began marketing and distributing the
i-STAT System in certain countries in Europe through its distribution
arrangements with the Company. The Company is actively planning market
introduction into other foreign markets, including, but not limited to, through
its arrangements with HP. In April 1996, the Company and HP entered into a
marketing agreement pursuant to which HP and the Company have begun to jointly
market the Company's products into the critical care departments of hospitals in
the United States which meet certain criteria; all product sales continue to be
made by the Company.
In July 1995, the Company entered into license and distribution
agreements with HP at which time HP invested approximately $61 million in
exchange for 2,138,702 shares of the Company's Series B Preferred Stock (the
"Series B Stock"). Pursuant to the distribution agreement, HP has become the
exclusive distributor of the Company's current products, and certain new
products the Company may develop, in Europe, Africa, the Middle East and the
former Soviet block countries, for a period of three years. Upon the occurrence
of certain events, HP's exclusivity term may be extended or the distributorship
may be converted into a non-exclusive arrangement. If HP's distributorship is
converted to a non-exclusive arrangement for failure to meet designated
milestones, HP will not be entitled to distribute new products introduced by the
Company during the period of nonexclusivity. The Company's license agreement
with HP provides for the grant by the Company to HP of a perpetual, worldwide
license under certain of the Company's intellectual property to develop and
distribute the Integrated Analyzer. HP will have no license to lease or sell
Integrated Analyzers outside the field of professionally attended human
healthcare institutions. The license does not include the right to make, use or
sell the Company's cartridges and will be subject to the payment of royalties.
The license will be
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exclusive for three years and may be extended depending on the achievement by HP
of designated milestones, but under certain circumstances the license may become
non-exclusive. The license agreement also provides that, during the exclusivity
period, HP will have a right of first refusal to license from the Company new
intellectual property for Integrated Analyzers on substantially the same terms
as the license agreement. In addition, if after the exclusivity period the
Company grants to any third party a license to make and distribute Integrated
Analyzers on royalty terms more favorable to the third party than under the HP
license agreement, then HP's royalty obligations generally will be adjusted to
such third party's rates. The license agreement is scheduled to expire generally
at the time of expiration of the Company's last-to-expire patent covering the
licensed technology. HP plans market introduction of the Integrated Analyzer
during 1997.
In August 1988, the Company entered into product commercialization
and distribution agreements with JCR Pharmaceuticals Inc. and FUSO Inc., two
Japanese pharmaceutical and medical device companies. Pursuant to such
agreements, i-STAT granted exclusive distribution rights covering Japan, South
Korea and Taiwan for an initial period which expires in December 1997; and an
additional five-year, exclusive period expiring in December 2002, if a certain
minimum quantity of products has been purchased during the initial period. If
such minimums are not purchased, the Japanese companies retain non-exclusive
rights during the five-year period from December 1997 to December 2002. These
agreements, which expire in 2002, also provide the Japanese companies with a
right of first offer with respect to the distribution of the covered products in
certain Southeast Asian countries. The Company understands that JCR has assigned
to Fuso all distribution rights under these agreements. Sales to FUSO
represented approximately 24.7% of the Company's worldwide sales (including
deferred revenue) for 1996.
The Company, through its marketing efforts and through distribution
and partnering arrangements, is in the early stages of introduction of the
i-STAT System to health care providers other than hospitals, such as
free-standing dialysis centers, emergency medical services, home care providers,
outpatient clinics, physicians' offices and nursing homes. The Company markets
its products to veterinarians' offices in the U.S. through a distribution
agreement with Sensor Devices, Inc. Over the longer term, the Company expects to
increase its efforts to market its products to such alternate site health care
providers through the use of distribution and partnering arrangements.
COMPETITION
The Company competes principally with manufacturers of traditional
blood analysis equipment used by clinical laboratories. Historically, most
clinical testing has been performed in the hospital or commercial laboratory
setting. These clinical laboratories provide analyses similar to those conducted
by the i-STAT System and have traditionally been effective at processing large
panels of tests with the use of skilled technicians and complex equipment. While
i-STAT cannot provide the same range of tests, the Company believes that its
products offer several advantages over clinical laboratories, including lower
costs, faster results and reduced opportunity for error. In addition, the i-STAT
System's testing capabilities currently are sufficiently broad to enable larger
health care facilities to close "stat" laboratories and replace them wholly with
the i-STAT System.
Other companies may introduce products performing the same or similar
functions as the i-STAT System. In such case, the Company may not be able to
compete effectively with these products, or these products may render the
Company's products obsolete. The Company is aware of products that have been
developed and are being marketed for point-of-care analysis of some or all of
the analytes measured by the i-STAT System. The Company believes that these
products are more difficult to use and more costly, test for fewer analytes than
the i-STAT System and otherwise do not offer the same features and benefits.
To the extent that the i-STAT System achieves penetration into
non-hospital markets such as veterinarians' offices, doctors' offices, nursing
homes and outpatient clinics, it may face competition from commercial
laboratories and from established pharmaceutical and medical device companies
which have developed multitest blood analyzers specifically for use in these
markets. The Company believes that its products are capable of competing
favorably with these other products on the basis of ease-of-use, speed, the
ability to conduct tests without a skilled technician, variety of test menu,
cost-effectiveness and accuracy of results.
Other manufacturers and academic institutions are currently
conducting research and development with respect to blood testing technologies,
including biosensor technology, and other companies may in the future engage
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in research and development activities regarding products competitive with those
of the Company. Certain of the Company's current and potential competitors have
significantly greater financial, technical, manufacturing and marketing
resources than the Company.
Although the Company's patents may prevent or restrict others from
successfully developing or marketing competing systems in the United States or
other countries, the Company may be required to expend substantial resources to
enforce its patents through litigation or otherwise to maintain its competitive
advantage. See "Patents and Proprietary Rights."
MANUFACTURING
The Company's products are manufactured by the Company with various
components being supplied by outside vendors. The Company manufactures its
biosensors in order to protect the proprietary nature of the Company's products
and to control the development and enhancement of its proprietary technology.
Other cartridge components are manufactured to the Company's specifications by
outside vendors. Final assembly, quality testing and inspection of cartridges
are performed by the Company. All components of the analyzers as well as
peripheral components, such as the infrared data communication link, are either
custom fabricated by outside suppliers or purchased by the Company from outside
sources. Software for the analyzers and peripheral systems is engineered and
maintained by the Company. All major assembly, software download and final
quality testing and inspection are performed by the Company.
Most product manufacturing and assembly by the Company is conducted
in its 52,000 square foot facility in Kanata, Ontario, Canada. This facility,
which is leased, includes an 8,000 square foot Class 1000 clean room augmented
by additional environmentally controlled assembly and packaging space. The
Company also conducts cartridge assembly and inspection in a 30,325 square foot
leased facility in Plainsboro, New Jersey. In addition, the Company assembles
analyzers at its principal offices in Princeton, New Jersey. The Company
believes that its manufacturing capacity is sufficient to meet its immediately
foreseeable production requirements. The Company is currently manufacturing its
cartridges at an annualized rate of over 4,000,000 cartridges per year and
believes that, with certain engineering changes it is in the process of
implementing, its current manufacturing facilities could yield in excess of
45,000,000 cartridges per year.
The Company maintains a comprehensive quality assurance and quality
control program, which includes complete documentation of all material
specifications, operating procedures, maintenance and equipment calibration
procedures, training programs and quality control test methods. To control the
quality of its finished products, the Company utilizes statistical process
control systems during the manufacturing process and comprehensive performance
testing of finished goods. The Company believes that it operates in accordance
with all applicable regulations including the Food and Drug Administration (the
"FDA") Good Manufacturing Practices.
The majority of the raw materials and purchased components used to
manufacture the Company's products are readily available from more than one
source. The Company is also developing alternative sources for some of the raw
materials it presently obtains from a single source. Some of the components of
the i-STAT System are custom manufactured by a limited number of outside
vendors. While the Company's efforts to expand the number of vendors having the
capacity to produce these components continue, the loss of its sources of supply
for these components could adversely impact, for a period of time, the Company's
ability to meet the demand for its products.
RESEARCH AND DEVELOPMENT
From commencement of the Company's operations in 1984 until 1992,
most of its financial resources were dedicated to the development of the core
technology that has resulted in the i-STAT System. The Company continues to
engage in research and development in order to improve its existing products and
develop new products based on the i-STAT System technology. The Company
currently is developing tests for measurement of creatinine, ionized magnesium
and coagulation, and is working on expanding its existing product range. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of research and development costs during 1994, 1995
and 1996.
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As of December 31, 1996 the Company's research and development staff
consisted of 66 full-time employees, 26 of whom hold advanced degrees in
chemistry, engineering, software and related disciplines.
PATENTS AND PROPRIETARY RIGHTS
i-STAT pursues a policy of seeking patent protection, both in the
United States and abroad, for each of the areas of invention embodied in the
i-STAT System. The Company holds sixteen United States utility patents related
to the i-STAT System, the earliest of which was issued on September 5, 1989,
which on average have over 13 years remaining on their patent terms, and two
United States design patents related to the i-STAT System. These patents relate
to the unique functional features and fabrication of the electrode technology
contained in the i-STAT cartridges, operation of the cartridges, the
technologies used in the i-STAT analyzers, in-house quality control
instrumentation and matters related to other potential uses of the i-STAT
System. The Company has fourteen pending United States utility patent
applications. The Company has received patents in Japan, Europe, Canada and
Taiwan corresponding to certain of the patents issued in the United States and
has filed or plans to file for patent protection in certain countries which
represent a significant segment of the intended market for its products. There
can be no assurance that additional patents for i-STAT's products will be
obtained, or that issued patents will provide substantial protection or be of
commercial benefit to i-STAT. The issuance of a patent is not conclusive as to
its validity or enforceability, nor does it provide the patent holder with
freedom to operate without infringing the patent rights of others. A patent
could be challenged by litigation and, if the outcome of such litigation were
adverse to the patent holder, competitors could be free to use the subject
matter covered by the patent, or the patent holder may license the technology to
others in settlement of such litigation. The invalidation of key patents owned
by the Company or nonapproval of pending patent applications could create
increased competition, with potential adverse effects on the Company and its
business prospects. In addition, there can be no assurance that any application
of the Company's technology will not infringe patents or proprietary rights of
others or that, as a result of such infringement, licenses that might be
required for the Company's processes or products would be available on
commercially reasonable terms, if at all. See Item 3. "Legal Proceedings".
Pursuant to the Company's license agreement with HP, the Company has
granted HP certain rights to commence and control prosecution of any third party
infringement actions involving the intellectual property covered under the HP
license agreement.
In addition to its patent protection, i-STAT also relies upon trade
secrets, know-how and continuing technological innovation. The Company maintains
a policy requiring all employees and consultants to sign confidentiality
agreements under which they agree not to use or disclose i-STAT's confidential
information as long as that information remains proprietary or, in some cases,
for fixed time periods. There can be no assurance, however, that such
proprietary technology will not be independently developed or that secrecy will
not be breached. Under Company policy, all technical employees are required to
agree to assign to the Company all rights to any inventions made during their
employment or relating to the Company's activities and not to engage in
activities similar to the Company's for any other person or entity during the
term of their employment or for at least six months thereafter.
i-STAT is aware that research efforts in biosensor technology are
taking place at universities, government laboratories and other corporations
around the world and that numerous patent applications have been filed, and that
patents have been issued, relating to fundamental technologies and to specific
biosensor products and processes. If patents that cover the technologies,
products or processes utilized by the Company are issued to third parties,
i-STAT may have to obtain licenses under such patents. No assurance can be given
concerning the terms on which such licenses would be available, if at all.
GOVERNMENT REGULATION
The i-STAT System is a medical diagnostic device subject to the
provisions of the Food, Drug and Cosmetic Act (the "FDC Act") and implementing
regulations. The 1976 Medical Device Amendments and the Safe Medical Device
Amendments of 1990 to the FDC Act provide comprehensive regulation of all stages
of development, manufacture, distribution and promotion of medical devices.
There are two regulatory routes by which to bring a medical diagnostic device to
market: the Pre-market Approval Application ("PMA") and the Pre-market
Notification ("510(k) Notification"). The PMA requires a comprehensive review of
specified pre-clinical and clinical data, prior to an FDA finding that a device
is safe and effective for its designated indicated use. The 510(k) Notification
permits
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marketing upon a demonstration to the FDA's satisfaction that a device is
substantially equivalent to a device already in commercial distribution. The
clearance process can require extended periods of testing, both prior to and
after submissions are made. Review of submissions can take protracted periods of
time and involve significant resource expenditure. There is no certainty that
the FDA will clear any given device for marketing.
All of the Company's current products have received clearance to
market for use by health care professionals in all health care settings pursuant
to 510(k) Notifications. Any change or modification of an analyzer or a
cartridge that could significantly affect the safety or efficiency of the device
would require the filing of a new 510(k) Notification, and the Company would not
be able to market the i-STAT System as modified until FDA clearance is received.
The FDA may not concur in any such modification, and any such concurrence may be
subject to delay and require significant resources to provide the FDA with
needed data.
FDA regulations classify medical devices into three classes that
determine the degree of regulatory control to which the manufacturer of the
device is subject. The FDA classified the i-STAT System (as currently
configured) in Class II, meaning that the device may at some time in the future
also have to comply with mandatory performance standards or other "special
controls" if it is to remain in commercial distribution. The Company cannot
predict whether such additional standards or controls will ever be enacted, nor
what impact the enactment of such standards or controls might have on its
ability to produce and sell its products. Such standards or controls may relate
to any aspect of product performance which must be controlled to minimize any
risk associated with use of the device. All devices, including those
manufactured in Canada, must be manufactured in accordance with Good
Manufacturing Practices specified in implementing regulations under the FDC Act.
These practices control every phase of production from the design control and
incoming receipt of raw materials, components and subassemblies to the labeling,
tracing of consignees after distribution and follow-up and reporting of
complaint information.
The FDA has the authority to conduct unannounced inspections of all
facilities where devices are manufactured or assembled, and, if the investigator
observes conditions which might be violations, those conditions must be
corrected or satisfactorily explained, or the manufacturer could face regulatory
action that might include physical removal of the product from the marketplace.
The Company's New Jersey facilities were inspected in November 1994 and June
1995 and at each time found free of any violations. The FDA also regulates
labeling for devices and supervises the advertising for devices restricted to
use by health care professionals, such as the i-STAT System.
Recently, the FDA has pursued a more rigorous enforcement program to
ensure that regulated firms, such as the Company, comply with the provisions of
the FDC Act. A firm not in compliance may face a variety of regulatory actions,
ranging from warning letters, product detention, device alerts and mandatory
recalls or field corrections, to seizures, injunction actions, civil penalties
and criminal prosecutions of the firm or responsible individuals, employees,
officers or directors. The commencement of any action against the Company of the
type described above could seriously impact the Company's ability to conduct
business.
The Company's products are also affected by the Clinical Laboratory
Improvement Act of 1988 ("CLIA"). This law is intended to assure the quality and
reliability of all medical testing in the United States regardless of where
tests are performed. The regulations require laboratories performing blood
chemistry tests to meet specified standards in the areas of personnel
qualification, administration, participation in proficiency testing, patient
test management, quality control, quality assurance and inspections. The
regulations have established three levels of regulatory control based on test
complexity -- "waived," "moderate complexity" and "high complexity." The
Company's products have been designated as "moderate complexity." Subsequent
categorization of the Company's products as "high complexity" tests could hinder
the Company's ability to market its products. Expansion into alternate site
markets, particularly doctors' offices, may be limited by the regulatory burden
imposed by the classification of the i-STAT System as a moderately complex test
under CLIA. There can be no assurance that CLIA regulations or future
administrative interpretations of CLIA will not have an adverse impact on the
Company.
The Company and its products are also subject to a variety of state
laws and regulations in those states where its products are marketed, sold or
used. Certain states currently restrict or control, to varying degrees, the use
of medical devices such as the i-STAT System outside the clinical laboratory by
persons other than doctors or technologists. These restrictions have hindered
the Company's ability to market its products in these locations. The Company is
seeking interpretations, rulings or changes in relevant laws and regulations
that will remove or ameliorate
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these restrictions. Although the Company has been successful in gaining
favorable rulings and changes in certain relevant laws and regulations, there
can be no assurance that the Company will be successful in its efforts to remove
or ameliorate all these legal restrictions.
The Company distributes the i-STAT System outside the United States
in Japan, Canada and South America and plans to do so in other foreign
countries. Through its arrangements with HP, in February 1996 the Company
commenced introduction of the i-STAT System in Western Europe. The i-STAT System
is and will be subject to a wide variety of laws and regulations in these
markets, ranging from simple product registration in certain countries to
complex clearance and production controls in others. Speaking generally, the
extent and complexity of regulation of medical devices is increasing worldwide,
with regulation in some countries already nearly as comprehensive as that in the
United States. The Company anticipates that this trend will continue and that
the cost and time required to obtain approval to market in any given country
will increase, with no assurance that such approval will be given.
Because some of the Company's production facilities currently are
located in Canada, sales of the Company's products in the United States are
subject to U.S. laws regulating international trade practices. The Company does
not believe that these laws will materially and adversely affect its marketing
strategy or operations generally, although such laws are subject to change and
the Company cannot accurately predict the impact on the Company of any future
changes.
Federal, state and foreign regulations regarding the sale of medical
devices are subject to change. The Company cannot predict what impact, if any,
such changes may have on its business.
REIMBURSEMENT
Third party payors can indirectly affect the pricing or the relative
attractiveness of the Company's products by regulating the maximum amount of
reimbursement provided for blood testing services. If the reimbursement amounts
for blood testing services are decreased in the future, it may decrease the
amount which physicians and hospitals are able to charge patients for such
services and consequently the price the Company can charge for its products.
EMPLOYEES
As of December 31, 1996, the Company employed 471 persons on a
full-time basis. The Company expects to hire additional employees during 1997.
None of i-STAT's employees is covered by a collective bargaining agreement.
i-STAT believes that its relationship with its employees is good and that its
success is dependent on, among other things, achieving and retaining scientific
and technological superiority and being capably managed. Consequently, the
success of the Company is highly dependent upon the continued availability of a
limited number of executives, scientists and engineers, the loss of some of whom
could have a material and adverse effect on the Company.
INSURANCE
The Company maintains a "claims made" product liability insurance
policy in the amount of $1 million, and an excess liability insurance policy in
the amount of $15 million, which are the maximum payouts for all claims that
could be made during a calendar year. The Company may seek broader coverage in
greater amounts depending on the rate of sales of the i-STAT System. If the
Company does not or cannot maintain its existing or comparable products
liability insurance, its ability to market its products may be significantly
impaired. The amount and scope of any insurance coverage upon which the Company
relies may not be adequate to protect the Company in the event a successful
product liability claim is made upon the Company. No product liability insurance
claim has ever been made by the Company. The Company also maintains
comprehensive general liability and business interruption liability insurance
policies. The Company's Kanata, Ottawa, wafer fabrication facility is the only
source of its proprietary thin film, biosensor chips, and, consequently, any
damage to the facility as a result of fire or other causes could materially and
adversely impact the Company. The amount and scope of any insurance coverage may
not be adequate to protect the Company in the event of any such loss.
7
<PAGE> 10
BACKLOG
In order to obtain discounts from i-STAT's established list price for
its products, some customers commit to purchase a specified quantity of i-STAT's
products for a period of time. However, at December 31, 1996, the Company did
not believe its backlog to be material.
SEASONALITY
The Company's operating results may fluctuate from quarter to quarter
due to many factors. Sales may be slower in the traditional vacation months, may
be accelerated in the fourth calendar quarter by customers whose annual budgets
are about to expire (especially affecting analyzer purchases), may be distorted
by unusually large analyzer shipments from time to time, or may be affected by
the timing of customer cartridge ordering patterns. (For example, a customer
might order two quarterly cartridge shipments in one quarter, perhaps at the
beginning of the end of the quarter, and none in the next quarter.)
GEOGRAPHIC SEGMENT DATA
Information regarding geographic segment data is provided in Note 15
to Notes to Consolidated Financial Statements.
ITEM 2. PROPERTIES
The Company's principal manufacturing facility is located at 436
Hazeldean Road, Kanata, Ontario, Canada, where it leases a 52,000 square-foot
space. The lease is for a term expiring in February 1999, subject, at the
Company's option, to renewal for one five-year term. The Company also leases
executive offices in Princeton, New Jersey, where it occupies approximately a
30,745 square-foot space. The Princeton lease expires in September 1998 subject,
at the Company's option, to two five-year options to renew. The Company has
established a cartridge assembly facility in Plainsboro, New Jersey, where it
leases a 30,325 square-foot space. The lease is for a term expiring in February
1999, subject, at the Company's option, to renewal for one five-year term.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in a case entitled Nova Biomedical
Corporation, Plaintiff v. i-STAT Corporation, Defendant. The Complaint, which
was filed in the United States District Court for the District of Massachusetts
on June 27, 1995, alleges infringement by i-STAT of Nova's U.S. Patent No.
4,686,479. The Plaintiff seeks unspecified damages and that the damages be
trebled. Nova also is asking for attorneys' fees and prejudgment interest. The
case currently is in the preliminary stages of discovery. The Company is
contesting the case vigorously and does not believe that it has infringed the
Nova patent. The Company has obtained an opinion from recognized patent counsel
to the effect that no infringement has occurred. However, if the plaintiff
should prevail in this matter, it could have a material impact on the financial
position, results of operations and cash flows of the Company. The Company has
asserted counterclaims under the antitrust laws alleging that Nova commenced the
action knowing that the patent was not infringed and that it had reason to
believe that the patent was invalid and unenforceable.
The Company is a defendant in a class action complaint entitled Susan
Kaufman, on behalf of herself and all others similarly situated, Plaintiff, v.
i-STAT Corporation, William P. Moffitt, Lionel N. Sterling, Imants R. Lauks and
Matthias Plum, Jr. The class action was brought by Susan Kaufman on her behalf
and on behalf of all purchasers of the Company's Common Stock between May 9,
1995 and March 19, 1996. The complaint, which was filed in the Superior Court of
New Jersey in Mercer County on June 19, 1996, alleges New Jersey common law
"fraud on the market" in connection with certain sales of i-STAT stock by the
Company's chief executive officer, chief technology officer and two outside
directors during a nine-month period. The plaintiffs seek unspecified
compensatory damages, interest and payment of all costs and expenses incurred in
connection with the class action. The Company believes the complaint is without
merit and intends to vigorously contest it. However, if the plaintiff should
prevail in this matter, it could have a material impact on the financial
position, results of operation and cash flows of the Company.
8
<PAGE> 11
The Company is a defendant in a case entitled Customedix Corporation,
Plaintiff v. i-STAT Corporation, Defendant. The Complaint, which was filed in
the United States District Court for the District of Connecticut on December 26,
1996, alleges infringement by i-STAT of Customedix's U.S. Patent No. 4,342,964.
The Plaintiff seeks injunctive relief and an accounting for i-STAT's profits and
the damages to Customedix from such alleged infringement. The case currently is
in the preliminary stages of discovery. The Company intends to contest the case
vigorously and does not believe that it has infringed the Customedix patent. The
Company has obtained an opinion from recognized patent counsel to the effect
that no infringement has occurred. However, if the plaintiff should prevail in
this matter, it could have a material impact on the financial position, results
of operation and cash flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable.
9
<PAGE> 12
EXECUTIVE OFFICERS
The executive officers of the Company and their respective ages and positions
with the Company are as follows:
William P. Moffitt Age 50. Mr. Moffitt is the Company's President and Chief
Executive Officer and also serves on the Company's Board
of Directors. From July 1989 through November 1991, Mr.
Moffitt held the position of Executive Vice President of
the Company. Mr. Moffitt was elected President of the
Company in November 1991 and Chief Executive Officer of
the Company in February 1993. Mr. Moffitt was elected a
director in May 1990. From 1985 to 1989, Mr. Moffitt was
President of the Physician Diagnostic Division of Baxter
Healthcare Corp., a diversified health care company. He
holds a B.S. from Duke University.
Imants R. Lauks Age 44. Dr. Lauks is a founder of the Company and serves
as a director and as the Company's Executive Vice
President and Chief Technology Officer. Dr. Lauks has
served as a director since the Company's incorporation
in 1983. He has served as the Company's Executive Vice
President since 1995, as its Vice President of Research
and Development from 1983 to 1995, and as its Chief
Technology Officer since 1991. He is internationally
recognized for his research on ion sensing phenomena in
microfabricated sensors, charge transport in membranes,
surface physics and gas-solid chemical interactions. Dr.
Lauks has spent twenty years researching and developing
unique microfabricated sensors, resulting in
thirty-eight scientific publications, eighteen United
States patents, eight Canadian patents, five Taiwanese
patents and fourteen pending United States patent
applications to date. Until he founded the Company in
1983, Dr. Lauks was a tenured Associate Professor at the
University of Pennsylvania in the Moore School of
Engineering. He is an Associate of the Royal College of
Science in London, England. He received both a Ph.D. in
Electrical Engineering and a B.S. in Chemistry from
Imperial College of London University.
Patricia Hennessey Age 43. Ms. Hennessey has served as Vice President of
Sales and Marketing since she joined the Company in
January 1995. She has over fifteen years of sales,
marketing and general management experience in the
medical device field. From 1986 to 1994, Ms. Hennessey
was employed by C.R. Bard, Inc. in a series of
senior-level marketing and general management positions
and most recently Vice President of Marketing of the
USCI Division. Ms. Hennessey received an M.B.A. from
Harvard University.
Noah J. Kroloff Age 34. Mr. Kroloff has served as Vice President of
Business Development and Strategy since he joined the
Company in May 1994. From September 1990 to May 1994, he
was a manager at McKinsey & Company, a leading
management consulting firm, where he specialized in
international alliances among medical products
companies. Prior to joining McKinsey, he served in
consulting and business development roles for several
biotechnology companies and for Merck & Co., Inc. Mr.
Kroloff received an M.B.A. in finance and marketing from
the MIT Sloan School of Management.
Roger J. Mason Age 48. Mr. Mason has served as Vice President of
Finance, Treasurer and Chief Financial Officer since he
joined the Company in July 1996. From October 1994 to
June 1996, he was Vice President, Finance and Treasurer,
and Chief Financial Officer at Concurrent Computer
Corporation, a publicly held, leading worldwide supplier
of networked and distributed, high performance, real
time, fault-tolerant computing systems. From April 1991
to October 1994, Mr. Mason served as Chief Financial
Officer and Treasurer at Integral Peripherals Inc., a
disk drive manufacturer. From 1981 to 1991, he held
senior executive positions at Maxtor Corporation, a
publicly held disk drive manufacturer, MiniScribe
Corporation, a publicly held disk drive manufacturer
whose assets were acquired by Maxtor Corporation, and
Ironstone Group, Inc., a publicly held holding company.
His experience also includes public accounting with
Coopers & Lybrand and Honey, Perriam & Company. He is a
fellow of the Institute of Chartered Accountants in
England and Wales.
10
<PAGE> 13
Michael P. Zelin Age 36. Mr. Zelin has served as Vice President of
Systems Development since March 1992. Since joining the
Company in February 1986 he has held various technical
positions including Manager and Director of Systems
Engineering, and has contributed to nine of the
Company's U.S. patents or patents pending.
Executive officers of the Company are elected by the Board of
Directors of the Company.
11
<PAGE> 14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
The Company's Common Stock is traded on the NASDAQ National Market
System under the symbol "STAT". The following table sets forth for the periods
indicated the range of high and low prices for the Company's Common Stock as
reported on NASDAQ.
<TABLE>
<CAPTION>
1996 High Low
- ---- ---- ---
<S> <C> <C>
First Quarter.................................. 41 24
Second Quarter................................. 30 1/2 14 3/4
Third Quarter.................................. 19 11 1/2
Fourth Quarter................................. 25 13 3/4
1995 High Low
- ---- ---- ---
First Quarter.................................. 28 16 1/2
Second Quarter................................. 40 1/2 18 1/4
Third Quarter.................................. 45 3/4 28
Fourth Quarter................................. 38 28
</TABLE>
HOLDERS
There were approximately 411 holders of the Company's Common Stock of
record as of January 15, 1997.
RIGHTS
On June 29, 1995, the Company declared a dividend distribution of
rights (each, a "Right") to purchase a certain number of units at a price of
$104.00, subject to adjustment. The Rights are deemed to attach to and trade
together with the Common Stock. Each unit is equal to one one-hundredth of a
share of Series A Junior Participating Preferred Stock of the Company. Rights
are distributed in connection with issuances of shares of Common Stock and
Series B Stock. The Rights are not exercisable until the occurrence of certain
events enumerated in the Stockholder Protection Agreement between the Company
and First Fidelity Bank, National Association, the Company's rights agent. Until
a Right is exercised, no holder of Rights will have rights as a stockholder of
the Company (other than rights resulting from such holder's ownership of Common
Stock or Series B Stock), including, without limitation, the right to vote or to
receive dividends. A description of the Rights is hereby incorporated by
reference from the Company's Current Report on Form 8-K dated July 10, 1995, as
amended.
DIVIDENDS
Except for the Rights, the Company has not declared or paid dividends
on its Common Stock to date and intends to retain future earnings, if any, for
use in its business for the foreseeable future.
12
<PAGE> 15
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below have been
derived from the audited financial statements of the Company. The consolidated
financial statements of the Company as of December 31, 1996 and 1995 and for
each of the years in the three-year period ended December 31, 1996, together
with the notes thereto and the related report of Coopers & Lybrand L.L.P.,
independent accountants, are included elsewhere in this Report. The selected
consolidated financial data set forth below should be read in conjunction with
the consolidated financial statements, related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Report.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands of dollars, except share and per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales........................................ $ 30,330 $ 20,102 $ 10,695 $ 4,798 $ 833
Cost of sales.................................... 26,291 22,013 14,803 10,227 2,129
Operating expenses:
Research and development...................... 5,780 5,664 8,333 4,476 8,024
General and administrative.................... 5,778 4,937 4,004 3,584 3,056
Sales and marketing........................... 11,991 11,506 8,484 6,051 4,147
Relocation.................................... -- -- -- (900) --
Other income, net................................ 2,054 1,010 1,249 1,563 1,521
Net loss......................................... (17,456) (23,008) (23,680) (17,077) (15,002)
Net loss per share............................... ($1.31) ($1.90) ($2.16) ($1.87) ($1.88)
Shares used in computing
net loss per share ........................... 13,321,603 12,122,089 10,974,467 9,110,888 7,962,555
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands of dollars)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term investments $ 28,417 $ 49,519 $ 21,619 $ 47,030 $ 35,512
Working capital.................................. 33,577 55,942 23,537 47,473 33,491
Total assets..................................... 55,365 74,050 39,178 59,239 42,404
Accumulated deficit.............................. (141,300) (123,844) (100,836) (77,156) (60,079)
Total stockholders' equity....................... $ 46,834 $ 63,594 $ 26,093 $ 49,517 $ 30,583
</TABLE>
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BACKGROUND AND OVERVIEW
The Company's results for the year ended December 31, 1996 are marked
by a significant increase in product sales, significant improvements in
manufacturing efficiencies and a significant reduction in net loss.
The Company's revenues are affected principally by the number of
hospitals using the i-STAT System and the rate at which i-STAT's disposable
cartridges are used by these hospitals. This, in turn, is highly dependent upon
the willingness of hospitals to adapt their traditional blood diagnostic testing
approaches to the point-of-care system advocated by the Company. During 1996 the
Company began to focus its marketing efforts primarily on potential large scale
adopters of the i-STAT System. Such high volume customers tend to require a
longer sales cycle as the marketing focus with respect to such customers is on
having these customers re-engineer or replace their "stat" lab departments with
the i-STAT System, as compared to other potential customers who may be using the
i-STAT System as a supplement to their existing arrangements. To further this
strategy, the Company has recently expanded its policy of offering substantial
price discounts to high volume users. The Company believes that this strategy
will accelerate the rate of market penetration for its products and thus have a
beneficial long-term effect upon revenue growth. However, the near-term rate of
growth in sales revenue and gross margin will be adversely impacted by both the
longer sales cycle and the lower cartridge prices that such high volume
customers may receive.
The first beneficiaries of the Company's recent expanded pricing
strategy will be existing customers who already exceed the new volume discount
thresholds. These customers represented approximately 22.6% of 1996 worldwide
cartridge sales volume. It is possible that this percentage will rapidly
increase because there are other existing customers which will qualify for the
lower pricing by making incremental volume purchase commitments. These volume
discounts only will be provided to customers who commit to purchase 30,000 or
more cartridges per year, with the highest discounts going to purchasers of
80,000 or more cartridges per year. The Company believes that the gross margin
impact of lowering the selling prices for high volume customers can be more than
offset by lower manufacturing costs per cartridge produced as a result of the
incremental cartridge sales volume generated by the expanded pricing strategy.
However, it is likely to be more than a year before the benefits from any such
incremental sales volume are realized because of the long sales and
implementation cycle involved.
The Company anticipates that, during the second half of 1997,
additional revenues will be realized from the planned introduction of the HP
Integrated Analyzer. However, the extent of the impact upon revenues will be
affected by both the timing of such introduction and the likelihood that some of
the initial purchasers of the Integrated Analyzer will be existing users of the
hand-held analyzer sold by the Company. Therefore, net cartridge revenue growth
attributable to usage of the HP Integrated Analyzer may not, in the near term,
be significant.
RESULTS OF OPERATIONS
The Company generated revenues of approximately $30.3 million, $20.1
million and $10.7 million in 1996, 1995 and 1994, including international
revenues (as a percentage of worldwide revenues) of $9.5 million (31.2%), $3.9
million (19.4%) and $1.0 million (9.4%), respectively. International revenues
include deferred Japanese revenue which has been amortized to income at the rate
of approximately $3.2 million, $1.4 million and $0.5 million for 1996, 1995 and
1994, respectively. The balance of approximately $3.2 million of such deferred
revenue will be fully amortized by December 31, 1997, when the period of
exclusivity under the Company's agreements with its Japanese marketing partners
comes up for review. Sales to its Japanese marketing partners represented
approximately 24.7%, 14.4% and 9.2% of the Company's worldwide sales (including
deferred revenue) for 1996, 1995 and 1994, respectively.
The $10.2 million (50.9%) increase in revenues from 1995 to 1996 was
primarily due to increased shipment volume of the Company's cartridges and
analyzers, reflecting higher cartridge consumption by existing hospital
customers and the addition of new hospital customers in the U.S. and
internationally. Worldwide cartridge shipments increased 50.0% to 3,157,192
units from 2,104,061 units and worldwide analyzer shipments increased 85.9% to
2,340 units from 1,259 units for the twelve months ended December 31, 1996 and
1995, respectively. Other elements of the increase in revenues included 1)
recognition of an additional $1.8 million of deferred revenue, due to a change
in accounting estimate
14
<PAGE> 17
in 1996, from the Company's Japanese marketing partners, 2) higher average
selling prices per unit of the Company's analyzers, and 3) slightly higher
worldwide average selling prices per unit of the Company's cartridges,
reflecting increases in the unit transfer prices specified in the Company's
contracts with its Japanese partners which were partially offset by lower
average selling prices per unit in the U.S. as a result of a shift to higher
volume U.S. customers that receive lower cartridge prices. The $9.4 million
(88.0%) increase in revenues from 1994 to 1995 primarily reflects the
introduction of the Company's arterial blood gas cartridges.
The manufacturing costs associated with product sales in 1996, 1995
and 1994 were approximately $26.3 million, $22.0 million, and $14.8 million,
respectively. This resulted in a gross profit of $4.0 million in 1996, compared
with a gross loss of $1.9 million and $4.1 million in 1995 and 1994,
respectively. The improvement in gross margin was primarily due to increased
shipment volume of the Company's cartridges and analyzers. The additional
deferred revenue and higher average selling prices noted above also contributed
to the gross margin improvement. To the extent that sales volume increases, the
Company expects its gross profit to improve as manufacturing costs (including
direct labor and a large component of overhead) are spread over a larger number
of product units.
The Company incurred research and development costs (as a percentage
of sales) of approximately $5.7 million (19.1%), $5.6 million (28.1%) and $8.3
million (77.9%) in 1996, 1995 and 1994, respectively, consisting of costs
associated with the personnel, material, equipment and facilities necessary for
conducting new product development. Research and development costs declined
significantly in 1995 from 1994 due to the completion of development of the
Company's arterial blood gas products in 1994. The Company's current research
and development program includes the development of tests for the measurement of
creatinine, ionized magnesium and coagulation, which are scheduled to move into
the production phase over the next twelve to eighteen months. The Company also
is studying the development of tests to measure enzymes, hematology parameters
(such as platelets and white blood cell counts) and other analytes.
Consequently, research and development expenditures are expected to increase
significantly over the next three years. The amount and timing of such increase
will depend upon numerous factors including the level of activity at any point
in time, the breadth of the Company's development objectives and the success of
its development programs.
The Company incurred general and administrative expenses (as a
percentage of sales) of approximately $5.8 million (19.1%), $4.9 million (24.6%)
and $4.0 million (37.4%) in 1996, 1995 and 1994, respectively. General and
administrative expenses consisted primarily of salaries and benefits of
personnel, office costs, professional fees and other costs necessary to support
the Company's infrastructure. The year-to-year increase primarily reflects the
Company's increased need for management personnel and other services to support
its growth, and legal fees and expenses associated with the defense of the Nova
patent infringement action.
The Company incurred sales and marketing expenses (as a percentage of
sales) of approximately $12.0 million (39.5%), $11.5 million (57.2%) and $8.5
million (79.3%) in 1996, 1995 and 1994, respectively, consisting primarily of
salaries, commissions, benefits, travel and other expenditures for sales
representatives, product literature, market research, clinical studies and other
sales infrastructure costs. The dollar increase from year to year is
attributable to increased marketing activities, and the hiring of management and
other marketing personnel necessary to support the Company's planned growth in
product sales.
The increase in investment income to approximately $2.1 million, from
$1.4 million and from $1.2 million in 1996, 1995 and 1994, respectively,
primarily reflects additional interest income earned on significantly higher
cash and cash equivalent balances subsequent to July 1995. Such higher balances
reflect the receipt in mid-1995 of net proceeds of approximately $59.2 million
in connection with the issuance of Series B Stock to HP. Interest income is
expected to decline in the near future as cash and cash equivalent balances
decline. The Company also recorded a charge against other income (expense), net,
of $0.4 million in the twelve months ended December 31, 1995 relating to the
implementation of stockholder protection measures and a proposed offering of
securities that was terminated.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had cash, cash equivalents and
short-term investments of approximately $28.4 million, a decline of $21.1
million from the December 31, 1995 balance of approximately $49.5 million,
primarily reflecting approximately $16.2 million of cash used in operating
activities and equipment purchases of approximately $5.2 million during the year
ended December 31, 1996. Working capital declined by approximately $22.4 million
from $55.9
15
<PAGE> 18
million to $33.5 million during the same period, primarily reflecting
the decline in cash, cash equivalents and short-term investments. The Company
expects its existing funds to continue to decline until its revenues are
sufficient to support its growth, but to be sufficient to meet its obligations
and its liquidity and capital requirements for the near term. The Company
regularly monitors capital raising alternatives in order to take advantage of
opportunities to supplement its current working capital upon favorable terms,
including joint ventures, strategic corporate partnerships or other alliances
and the sale of equity and/or debt securities, and expects during 1997 to
seriously explore means by which to fund the Company's planned increased
investment in research and development and maintain its working capital at a
desirable level while the expanded pricing strategy discussed previously is in
the early stages of implementation. The Company's need, if any, to raise
additional funds to meet its working capital and capital requirements will
depend upon numerous factors, including the results of its product marketing and
sales activities, its new product development efforts, manufacturing
efficiencies and competitive conditions.
The change in additional paid-in capital and unearned compensation,
net, under stockholders' equity primarily reflects: 1) a change of estimate with
respect to the Company's Strategic Milestone Stock Award Program of $2.3
million, and 2) treasury stock of $0.7 million which was retired in 1996. During
the first quarter of 1996 the Company achieved its first milestone under its
Strategic Milestone Stock Award Program. In connection with the achievement of
this milestone, an aggregate amount of $33,000 will be recognized as a non-cash
compensation expense over a 27 month period. This represents a reduction of
approximately $2.3 million from amounts previously estimated as of December 31,
1995. The difference relates to changes in the price of the Company's Common
Stock since the inception of the program.
At December 31, 1996, the Company had available for Federal Income
Tax purposes net operating loss carryforwards of approximately $122 million,
which expire in varying amounts through 2011. The timing and manner in which the
operating loss carryforwards may be utilized in any year by the Company will be
limited by Section 382 of the Internal Revenue Code.
The impact of inflation and foreign currency translation on the
Company's business has been minimal and is expected to be minimal for the
near-term.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14 for an Index to Financial Statements and Financial
Statement Schedules. Such Financial Statements and Schedules are incorporated
herein by reference.
CHANGES IN AND DISAGREEMENTS WITH
ITEM 9. ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors and executive officers of the
Company and compliance with Section 16(a) of the Securities Exchange Act of
1934, as amended, is included under the caption "Election of Directors" of the
Proxy Statement for the 1997 Annual Meeting of Stockholders and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is included under the
caption "Executive Compensation" of the Proxy Statement for the 1997 Annual
Meeting of Stockholders and is incorporated herein by reference.
16
<PAGE> 19
SECURITY OWNERSHIP OF CERTAIN
ITEM 12. BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial
owners and management is included under the captions "Principal Stockholders"
and "Election of Directors" of the Proxy Statement for the 1997 Annual Meeting
of Stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning transactions and other relationships, if any,
between the Company and its directors, officers or principal stockholders is
included under the caption "Certain Transactions" of the Proxy Statement for the
1997 Annual Meeting of Stockholders and is incorporated herein by reference.
17
<PAGE> 20
PART IV
EXHIBITS, FINANCIAL STATEMENT
ITEM 14. SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
(1) Financial Statements -- The following are included in Item 8:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants................................................................. 23
Consolidated Statements of Operations for each of the
three years in the period ended December 31, 1996............................................... 24
Consolidated Balance Sheets at December 31, 1996 and 1995......................................... 25
Consolidated Statements of Changes in Stockholders' Equity
for each of the three years in the period ended December 31, 1996............................... 26
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 1996............................................... 27
Notes to Consolidated Financial Statements........................................................ 28
(2) Financial Statement Schedules -- The following are included in Item 14(d):
Report of Independent Accountants................................................................. 38
Schedule II -- Valuation and Qualifying Accounts.................................................. 39
</TABLE>
Consolidated financial statement schedules not filed herein have been
omitted either because they are not applicable, not required or the equivalent
information has been included in the consolidated financial statements and notes
thereto or elsewhere herein.
18
<PAGE> 21
(a) Exhibits
--------
Exhibit No. Description
---------- -----------
(3.1) Restated Certificate of Incorporation (Form S-8/S-3
Registration Statement, File No. 33-48889)*
(3.2) By-laws
(3.3) Certificate of Designation, Preferences and Rights of Series
A Preferred Stock (Form 8-K, dated July 10, 1995 and amended
on September 11, 1995)*
(3.4) Certificate of Designation, Preferences and Rights of Series
B Preferred Stock (Form 8-K, dated July 10, 1995 and amended
on September 11, 1995)*
(4.1) Stockholder Protection Agreement, dated as of June 26, 1995,
between Registrant and First Fidelity Bank, National
Association (Form 8-K, dated July 10, 1995 and amended on
September 11, 1995)*
(10.1) Series A Convertible Preferred Stock Purchase Agreement (Form
S-1 Registration Statement, File No. 33-44800)*
(10.2) Restated Registration Rights Agreement, dated May 3, 1990,
among the Registrant and certain of its stockholders (Form
S-1 Registration Statement, File No. 33-44800)*
(10.3)** 1985 Stock Option Plan (Form S-8 Registration Statement, File
No. 33-96114)*
(10.4.1) Form of Incentive Stock Option Agreement under 1985 Stock
Option Plan (U.S. Resident Non-Affiliate) (Form 10-K for
fiscal year ended December 31, 1992)*
(10.4.2)** Form of Incentive Stock Option Agreement under 1985 Stock
Option Plan (U.S. Resident Affiliate) (Form 10-K for fiscal
year ended December 31, 1992)*
(10.4.3) Form of Non-Statutory Stock Option Agreement under 1985 Stock
Option Plan (U.S. Resident Non-Affiliate) (Form 10-Q for
quarter ended September 30, 1996)*
(10.4.4)** Form of Non-Statutory Stock Option Agreement under 1985 Stock
Option Plan (U.S. Resident Affiliate) (Form 10-Q for quarter
ended September 30, 1996)*
(10.4.5) Form of Non-Statutory Stock Option Agreement under 1985 Stock
Option Plan (Ontario Resident Non-Affiliate) (Form 10-Q for
quarter ended September 30, 1996)*
(10.4.6)** Form of Non-Statutory Stock Option Agreement under 1985 Stock
Option Plan (Ontario Resident Affiliate) (Form 10-Q for
quarter ended September 30, 1996)*
(10.4.7) Form of Non-Statutory Stock Option Agreement under 1985 Stock
Option Plan (Quebec Resident Non-Affiliate) (Form 10-Q for
quarter ended September 30, 1996)*
* These items are hereby incorporated by reference from the exhibits of the
filing or report indicated (except where noted, Commission File No. 0-19841)
and are hereby made a part of this Report.
** This exhibit is a management contract or compensatory plan required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c).
19
<PAGE> 22
Exhibit No. Description
- ----------- -----------
(10.4.8)** Form of Non-Statutory Stock Option Agreement under 1985 Stock
Option Plan (Quebec Resident Affiliate) (Form 10-Q for
quarter ended September 30, 1996)*
(10.6) Shareholders' Agreement, dated July 19, 1985, among the
Registrant and certain of its stockholders, with amendments
thereto (Form S-1 Registration Statement, File No. 33-44800)*
(10.11) Letter Agreement between the Registrant and Japanese
corporate entities, dated August 23, 1988 (Form S-1
Registration Statement, File No. 33-44800)*
(10.12) Letter Agreement between the Registrant and Japanese
corporate entities, dated August 23, 1988 (Form S-1
Registration Statement, File No. 33-44800)*
(10.13) Distribution Agreement between the Registrant and Japanese
corporate entities, dated August 23, 1988 (Form S-1
Registration Statement, File No. 33-44800)*
(10.15) Development Agreement between the Registrant and Japanese
corporate entities, dated August 23, 1988 (Form S-1
Registration Statement, File No. 33-44800)*
(10.20) Lease Agreement, dated May 23, 1993, between Linpro Princeton
O.R. Offices II L.P. and the Registrant (Form 10-Q for
quarter ended June 30, 1993)*
(10.21) Lease Agreement, dated December 23, 1991, between William S.
Burnside (Canada) Limited, "In Trust" and the Registrant
(Form 10-K for fiscal year ended December 31, 1993)*
(10.23) i-STAT 1994 Stock Award Plan (Form S-8 Registration
Statement, File No. 33-76152)*
(10.24) Form of Stock Award Agreement under 1994 Stock Award Plan
(Form S-8 Registration Statement, File No. 33-76152)*
(10.25)** Letter Agreement, dated April 15, 1994, between Registrant
and Noah Kroloff (Form 10-Q for quarter ended June 30, 1994)*
(10.27)** Letter Agreement, dated November 22, 1994, between Registrant
and Patricia Hennessey (Form 10-K for fiscal year ended
December 31, 1994)*
(10.28) Series B Preferred Stock Purchase Agreement, dated as of June
23, 1995, between the Registrant and Hewlett-Packard Company
(Form 8-K, dated July 10, 1995 and amended on September 11,
1995)*
* These items are hereby incorporated by reference from the exhibits of the
filing or report indicated (except where noted, Commission File No. 0-19841)
and are hereby made a part of this Report.
** This exhibit is a management contract or compensatory plan required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c).
20
<PAGE> 23
Exhibit No. Description
- ----------- -----------
(10.29) Registration Rights Agreement between the Registrant and
Hewlett-Packard Company (Form 8-K, dated July 10, 1995 and
amended on September 11, 1995)*
(10.30) License Agreement between the Registrant and Hewlett-Packard
Company (Form 8-K, dated July 10, 1995 and amended on
September 11, 1995)*
(10.31) Distribution Agreement between the Registrant and
Hewlett-Packard Company (Form 8-K, dated July 10, 1995 and
amended on September 11, 1995)*
(10.33) Amendment, dated March 28, 1995 to Lease Agreement dated
December 23, 1991, between William S. Burnside (Canada)
Limited, "In Trust" and the Registrant (Form 10-Q for quarter
ended March 31, 1996)*
(10.34)** Letter Agreement, dated June 6, 1996 between the Registrant
and Roger J. Mason (Form 10-Q for quarter ended June 30,
1996)*
(10.35) Form of Officer Indemnification Agreement
(10.36) Form of Director Indemnification Agreement
(10.37) Amendment, dated November 20, 1996 to Lease Agreement dated
May 27, 1993, between Linpro Princeton O.R. Offices II L.P.
and the Registrant.
(21) Subsidiaries of the Registrant (Form S-1 Registration
Statement, File No. 33-44800)*
(23) Consent of Coopers & Lybrand, L.L.P., Independent Accountants
(24) Powers of Attorney, executed by certain officers of the
Registrant and the individual members of the Board of
Directors, authorizing such officers of the Registrant to
file amendments to this Report, are located on the signature
page of this Report.
(27) Financial Data Schedule
* These items are hereby incorporated by reference from the exhibits of the
filing or report indicated (except where noted, Commission File No. 0-19841)
and are hereby made a part of this Report.
** This exhibit is a management contract or compensatory plan required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c).
21
<PAGE> 24
i-STAT CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Description Page
- ----------- ----
<S> <C>
Report of Independent Accountants............................................................................ 23
Consolidated Statements of Operations for each of the three years in the period
ended December 31, 1996................................................................................... 24
Consolidated Balance Sheets as of December 31, 1996 and 1995................................................. 25
Consolidated Statements of Changes in Stockholders' Equity
for each of the three years in the period ended December 31, 1996......................................... 26
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1996..................................................................... 27
Notes to Consolidated Financial Statements................................................................... 28
</TABLE>
22
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of i-STAT Corporation:
We have audited the accompanying consolidated balance sheets of
i-STAT Corporation as of December 31, 1996 and 1995, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of i-STAT
Corporation and Subsidiary as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Princeton, New Jersey
January 28, 1997
23
<PAGE> 26
i-STAT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net sales............................................ $ 30,330 $ 20,102 $ 10,695
Cost of sales........................................ 26,291 22,013 14,803
---------- ---------- ----------
Gross profit (loss)............................... 4,039 (1,911) (4,108)
Operating expenses:
Research and development.......................... 5,780 5,664 8,333
General and administrative........................ 5,778 4,937 4,004
Sales and marketing............................... 11,991 11,506 8,484
---------- ---------- ----------
Total operating expenses....................... 23,549 22,107 20,821
---------- ---------- ----------
Operating loss.............................. (19,510) (24,018) (24,929)
Other income (expense):
Investment income ................................ 2,105 1,421 1,248
Other ............................................ (51) (411) 1
---------- ---------- ----------
Other income (expense), net.................... 2,054 1,010 1,249
---------- ---------- ----------
Net loss ............................................ ($17,456) ($23,008) ($23,680)
========== ========== ==========
Net loss per share................................... ($1.31) ($1.90) ($2.16)
========== ========== ==========
Shares used in computing net loss per share.......... 13,321,603 12,122,089 10,974,467
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
24
<PAGE> 27
i-STAT CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
December 31,
-------------------------
1996 1995
--------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents .............................................. $ 28,417 $ 47,494
Short-term investments (Note 1) ........................................ -- 2,025
Accounts receivable, net of reserve for doubtful accounts of $195
in 1996 and $110 in 1995 ............................................ 4,948 4,053
Inventories (Note 2) ................................................... 7,788 9,003
Prepaid expenses and other current assets .............................. 955 688
--------- ---------
Total current assets ................................................ 42,108 63,263
Plant and equipment, net (Note 3) ......................................... 11,534 9,163
Intangible assets, net (Note 4) ........................................... 1,166 928
Other assets .............................................................. 557 696
--------- ---------
Total assets ........................................................ $ 55,365 $ 74,050
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ....................................................... $ 1,537 $ 1,554
Accrued expenses (Note 5) .............................................. 3,754 2,527
Deferred revenue, current (Note 9) ..................................... 3,240 3,240
--------- ---------
Total current liabilities ........................................... 8,531 7,321
Deferred revenue, non-current (Note 9) .................................... -- 3,135
--------- ---------
Total liabilities ................................................... 8,531 10,456
--------- ---------
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, $.10 par value, shares authorized 7,000,000:
Series A Junior Participating Preferred Stock, $.10 par value,
1,500,000 shares authorized; none issued at December 31, 1996
and December 31, 1995 ............................................ -- --
Series B Preferred Stock, $.10 par value, 2,138,702 shares authorized
and issued at December 31, 1996 and December 31, 1995 ............ 214 214
Common Stock, $.15 par value, shares authorized 25,000,000;
shares issued 11,215,214 at December 31, 1996
and 11,123,698 at December 31, 1995 ................................. 1,682 1,669
Treasury Stock ......................................................... -- (691)
Additional paid-in capital ............................................. 186,434 188,698
Unearned compensation .................................................. (19) (2,354)
Foreign currency translation adjustment ................................ (177) (98)
Accumulated deficit .................................................... (141,300) (123,844)
--------- ---------
Total stockholders' equity .......................................... 46,834 63,594
--------- ---------
Total liabilities and stockholders' equity .......................... $ 55,365 $ 74,050
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
25
<PAGE> 28
i-STAT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
----------------------------- -----------------------------
Additional
Number Par Number Par Paid-in
of shares Value of Shares Value Capital
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 ............. -- $ -- 10,930,668 $ 1,640 $ 125,231
Shares issued at $.525 to $12.375 per share
under the 1985 Stock Option Plan and
exercise of warrants (Note 8) ............. 61,565 9 453
Restricted Stock issued at $14.22 ......... 29,450 4 414
Compensation related to options issued,
net of forfeitures ..................... 311
Net unrealized investment loss ............
Amortization of unearned compensation
related to options issued ..............
Purchase and retirement of Treasury Stock . (14,398) (2) (232)
Translation adjustment ....................
Net loss for the year .....................
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 ............. -- -- 11,007,285 1,651 126,177
Shares issued at $1.50 to $14.85 per share
under the 1985 Stock Option Plan
(Note 8) ................................. 114,913 18 573
Restricted Stock issued at $23.13 ......... 1,500 34
Compensation related to options
issued net of forfeitures .............. 2,916
Shares (Series B Preferred Stock) issued
to Hewlett-Packard Company at
$28.50 per share ....................... 2,138,702 214 58,998
Net unrealized investment gain ............
Amortization of unearned compensation
related to options issued ..............
Purchase of Treasury Stock during year ....
Translation adjustment ....................
Net loss for the year .....................
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 ............. 2,138,702 214 11,123,698 1,669 188,698
Shares issued at $1.50 to $23.125 per share
under the 1985 Stock Option Plan
(Note 8) ............................... 111,347 16 706
Compensation related to options
issued net of forfeitures .............. (2,216)
Amortization of unearned compensation
related to options issued ..............
Purchase of Treasury Stock during year ....
Retirement of Treasury Stock during year .. (19,831) (3) (754)
Translation adjustment ....................
Net loss for the year .....................
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 ............. 2,138,702 $ 214 11,215,214 $ 1,682 $ 186,434
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Unearned
Treasury Compen- Accumulated
Stock sation Other Deficit
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 ............. $ -- ($ 135) ($ 63) ($ 77,156)
Shares issued at $.525 to $12.375 per share
under the 1985 Stock Option Plan and
exercise of warrants (Note 8) .............
Restricted Stock issued at $14.22 ......... (209)
Compensation related to options issued,
net of forfeitures ..................... (311)
Net unrealized investment loss ............ (625)
Amortization of unearned compensation
related to options issued .............. 381
Purchase and retirement of Treasury Stock .
Translation adjustment .................... 63
Net loss for the year ..................... (23,680)
----------- ----------- ----------- -----------
Balance, December 31, 1994 ............. -- (274) (625) (100,836)
Shares issued at $1.50 to $14.85 per share
under the 1985 Stock Option Plan
(Note 8) .................................
Restricted Stock issued at $23.13 ......... (17)
Compensation related to options
issued net of forfeitures .............. (2,916)
Shares (Series B Preferred Stock) issued
to Hewlett-Packard Company at
$28.50 per share .......................
Net unrealized investment gain ............ 625
Amortization of unearned compensation
related to options issued .............. 853
Purchase of Treasury Stock during year .... (691)
Translation adjustment .................... (98)
Net loss for the year ..................... (23,008)
----------- ----------- ----------- -----------
Balance, December 31, 1995 ............. (691) (2,354) (98) (123,844)
Shares issued at $1.50 to $23.125 per share
under the 1985 Stock Option Plan
(Note 8) ...............................
Compensation related to options
issued net of forfeitures .............. 2,216
Amortization of unearned compensation
related to options issued .............. 119
Purchase of Treasury Stock during year .... (66)
Retirement of Treasury Stock during year .. 757
Translation adjustment .................... (79)
Net loss for the year ..................... (17,456)
----------- ----------- ----------- -----------
Balance, December 31, 1996 ............. $ -- ($ 19) ($ 177) ($ 141,300)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
26
<PAGE> 29
i-STAT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................................................. ($17,456) ($23,008) ($23,680)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ......................................... 2,888 2,381 2,013
Accounts receivable provision ......................................... 85 85 --
Write-off of patents .................................................. -- 90 --
Gains on disposal of equipment ........................................ (8) -- (3)
Deferred revenue ...................................................... (3,136) (1,374) (503)
Expense related to restricted stock, options and warrants ............. 119 853 591
Change in assets and liabilities:
Accounts receivable ...................................................... (980) (655) (2,406)
Inventories .............................................................. 1,215 (4,292) (1,777)
Prepaid expenses and other current assets ................................ (224) (254) (129)
Accounts payable ......................................................... (17) (1,429) 1,056
Accrued expenses ......................................................... 1,227 174 908
Restricted cash, letter of credit ........................................ 96 118 (22)
-------- -------- --------
Net cash used in operating activities ................................. (16,191) (27,311) (23,952)
-------- -------- --------
Cash flows from investing activities:
Purchases of investments ................................................. -- (10,032) (17,597)
Sales of investments ..................................................... 2,025 25,532 42,833
Purchase of equipment .................................................... (5,196) (4,218) (2,924)
Cost of intangible assets ................................................ (311) (227) (105)
Proceeds from sale of equipment .......................................... 19 -- 3
-------- -------- --------
Net cash used in investing activities ................................. (3,463) 11,055 22,210
-------- -------- --------
Cash flows from financing activities:
Proceeds from sale of development, distribution and manufacturing rights . -- -- 1,900
Proceeds from sale of Common Stock ....................................... 656 608 228
Proceeds from sale of Preferred Stock .................................... -- 59,212 --
Purchase of Treasury Stock ............................................... -- (691) --
-------- -------- --------
Net cash provided by financing activities ............................. 656 59,129 2,128
-------- -------- --------
Effect of currency exchange rate changes on cash ............................ (79) (98) 63
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ..................... (19,077) 42,775 449
Cash and cash equivalents at beginning of year ........................... 47,494 4,719 4,270
-------- -------- --------
Cash and cash equivalents at end of year ................................. $ 28,417 $ 47,494 $ 4,719
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid for income taxes ............................................... -- -- --
======== ======== ========
Cash paid for interest ................................................... -- $ 1 $ 1
======== ======== ========
Supplemental disclosures of cash flow information and non cash investing and
financing activities:
Equipment purchases included in accounts payable at year end ............. $ 136 $ 361 --
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
27
<PAGE> 30
i-STAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Nature of Operations
The accompanying consolidated financial statements include the accounts
of i-STAT Corporation and i-STAT Canada Limited, collectively known as i-STAT or
the Company. All significant intercompany accounts and transactions have been
eliminated in consolidation. The Company develops, manufactures and markets
medical diagnostic products for blood analysis that provide health care
professionals with immediate and accurate critical diagnostic information at the
point of patient care. The Company's products currently are marketed through the
Company's direct sales force principally to hospitals in the United States and
Canada and through marketing partners in other countries.
The Company operates in a high technology, emerging market environment
that involves significant risks and uncertainties which may cause results to
vary significantly from reporting period to reporting period. These risks
include, but are not limited to, among others, competition from existing
manufacturers and marketers of blood analysis products who have greater
resources than the Company, the uncertainty of new product development
initiatives, difficulties in transferring new technology to the manufacturing
stage, market resistance to new products and point-of-care blood diagnosis,
domestic and international regulatory constraints, uncertainties of
international trade, pending and potential disputes concerning ownership of
intellectual property and dependence upon strategic corporate partners for
assistance in development of new markets.
Cash, Cash Equivalents and Short-Term Investments
Cash and cash equivalents include investments with original maturities
of three months or less. Short-term investments include investments which have a
maturity of greater than three months and which are intended to be sold within
one year. The Company implemented the provisions of Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS No. 115) in 1994.
The January 1, 1994 balance of stockholders' equity was reduced by
$233,000 to reflect the net unrealized losses on securities, all of which had
been classified as available for sale, that were previously carried at the lower
of cost or market. Realized gains and losses are calculated on the specific
identification method. Gross unrealized losses were $0, $175,000 and $234,000
for 1996, 1995 and 1994, respectively.
Foreign Currency Translation/Transactions
Generally Consolidated Balance Sheet amounts have been translated using
exchange rates in effect at the balance sheet dates and the translation
adjustments have been included in the foreign currency translation adjustment as
a separate component of Consolidated Stockholders' Equity. Amounts related to
transactions in the Consolidated Statements of Operations have been translated
using the average exchange rates in effect each year and transaction gains and
losses which are not material have been included therein.
Inventories
Inventories are carried at the lower of actual cost or market and cost
is accounted for on the first-in first-out (FIFO) basis.
Plant and Equipment
Plant and equipment are stated at cost and are depreciated on a
straight-line basis over their useful lives which are estimated to be three to
seven years. Leasehold improvements are amortized over five years or the term of
the lease, whichever is less. The cost of major additions and betterments are
capitalized; maintenance and repairs which do not improve or extend the life of
the respective assets are charged to operations as incurred. When depreciable
assets are retired or sold the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is reflected in the
Consolidated Statements of Operations.
28
<PAGE> 31
i-STAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Patents, Licenses and Trademarks
Costs to obtain and maintain and defend patents, licenses and
trademarks are capitalized and amortized on a straight-line basis over their
estimated useful lives or a period of 17 years, whichever is shorter. The
Company reviews these items on a regular basis for realization.
Unearned Compensation
Unearned compensation related to stock options and awards is amortized
over the period during which the options become exercisable or awards are
earned.
Deferred Revenue
The Company recognized deferred revenue ratably during 1995 and 1994 as
cartridges were shipped to its Japanese distributors based on the forecast of
total cartridges to be shipped during the contract period. Effective January 1,
1996, the Company began recognizing deferred revenue on a straight-line basis
through December 31, 1997, when the period of exclusivity under the Company's
agreements with its Japanese marketing partners comes up for review.
Income Taxes
The Company accounts for income taxes in accordance with the Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
No. 109), which requires an asset and liability approach for financial
accounting and reporting of income taxes. In addition, deferred income taxes are
adjusted for changes in income tax rates.
Net Loss per Share
Net loss per share is calculated using the weighted average number of
common shares and preferred shares outstanding for all periods presented.
Preferred shares have been included in the calculation since their date of
issuance as they are convertible into common on a 1:1 basis and have
substantially the same characteristics as common stock. Options outstanding are
not included in the calculation as they are anti-dilutive.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Concentration of Credit Risk
The Company's significant concentrations of credit risk are with its
cash, short-term investments and accounts receivable. Substantially all the
Company's cash and cash equivalents at December 31, 1996 were invested in the
securities of a single U.S. Government Agency. Accounts receivable are generally
with major hospitals. The Company provides credit to its customers on an
unsecured basis after evaluating their credit status.
Reclassification
Certain reclassifications have been made to 1995 amounts to conform
them to the 1996 presentation.
29
<PAGE> 32
i-STAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
------ ------
(In thousands of dollars)
<S> <C> <C>
Raw materials .......................... $2,477 $3,113
Work in process ........................ 1,596 1,146
Finished goods ......................... 3,715 4,744
------ ------
$7,788 $9,003
====== ======
</TABLE>
3. PLANT AND EQUIPMENT
Plant and equipment, net, consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
-------- --------
(In thousands of dollars)
<S> <C> <C>
Manufacturing equipment .......................... $ 20,344 $ 15,895
Furniture and fixtures ........................... 762 641
Leasehold improvements ........................... 2,992 2,385
-------- --------
24,098 18,921
Less accumulated depreciation and amortization ... (12,564) (9,758)
-------- --------
$ 11,534 $ 9,163
======== ========
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets, net consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1996 1995
------- -------
(In thousands of dollars)
<S> <C> <C>
Patents, licenses and trademarks ........... $ 1,440 $ 1,129
Less accumulated amortization .............. (274) (201)
------- -------
$ 1,166 $ 928
======= =======
</TABLE>
Amortization expense was approximately $73,000, $38,000 and $46,000 for
the years ended December 31, 1996, 1995 and 1994, respectively.
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
------ ------
(In thousands of dollars)
<S> <C> <C>
Payroll and withholding taxes .............. $ 695 $ 695
Professional fees .......................... 398 394
Accrued commissions ........................ 280 365
Rent ....................................... 128 201
Other ...................................... 2,253 872
------ ------
Total accrued expenses .................. $3,754 $2,527
====== ======
</TABLE>
30
<PAGE> 33
i-STAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. LEASING TRANSACTIONS
The Company's lease for its manufacturing facility in Ontario, Canada
expires in February 1999 and is subject, at the Company's option, to one
five-year option to renew. Rent expense was approximately $335,000, $254,000 and
$296,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
The Company's lease for its administrative, marketing and selected
research and development facility in Princeton, New Jersey, expires in
September, 1998 and is subject, at the Company's option, to two five-year
options to renew. Rent expense for this facility was approximately $484,000,
$483,000 and $479,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
The Company's lease for its assembly facility in Plainsboro, New Jersey
expires in February 1999 and is subject, at the Company's option, to one
five-year option to renew. At December 31, 1996 other assets include $473,000 in
restricted cash which acts as collateral for the leasehold improvements made in
the facility. Rent expense for this facility was approximately $357,000,
$359,000 and $308,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. In November, 1996 the Company entered into a lease for additional
space in the assembly facility in Plainsboro, New Jersey. Rental payments on
this additional space will begin in 1997.
As of December 31, 1996, future minimum lease payments, are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,: Operating
Leases
(In thousands of dollars)
<S> <C>
1997.................................................................. $ 1,109
1998.................................................................. 1,011
1999.................................................................. 117
2000.................................................................. 0
2001.................................................................. 0
2002.................................................................. 0
-------
Total minimum lease payments.......................................... $ 2,237
=======
</TABLE>
7. PREFERRED STOCK
The Company has authorized 7,000,000 shares of preferred stock. The
rights, preferences, qualifications, and voting powers are determined by the
Board of Directors. In June, 1995 the Board designated 1,500,000 shares as
Series A Junior Participating Preferred Stock that may be issued in the future
in connection with certain shareholder protection measures. Also in June, 1995
the Board designated 2,138,702 shares as Series B Preferred Stock (the "Series B
Stock"). The Series B Stock is convertible into Common Stock on a 1:1 basis,
subject to certain potential adjustments and has substantially the same
characteristics as the Common Stock. The Series B Stock was issued to
Hewlett-Packard Company ("HP") at $28.50 per share in July, 1995 for net
proceeds of approximately $59.2 million.
31
<PAGE> 34
i-STAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. STOCK OPTIONS
As incentives to Company personnel and others, the Board of Directors
from time to time grants options to purchase shares of the Company's Common
Stock. All options are granted under the 1985 Stock Option Plan ("the Plan").
The maximum number of issuable shares of Common Stock is 3,000,000 of which
1,130,230 are available for grant at December 31, 1996. Options under the Plan
can be issued until November 26, 2005. The option price generally is based upon
the fair market value of the Company's Common Stock at the time of the grant.
All outstanding options become exercisable over a two to five-year period from
the date of grant. Unexercised options expire five to ten years from the date of
grant or three months following termination of the optionee's employment,
whichever occurs first.
During 1995, the Company implemented a Strategic Milestone Stock Award
Program in which employees (including most executive officers) were eligible to
participate. Under this program, options were granted under the Company's 1985
Stock Option Plan to purchase up to 764,387 shares of Common Stock. The exercise
price of the options granted was $23.125 per share, representing the fair market
value of the Common Stock at the inception of the program. These options became
exercisable if two pre-selected milestones were met, on the basis of
approximately 50% of the underlying shares for each milestone. The options vest
over two years from the attainment of the applicable milestone. During the first
quarter of 1996 the Company achieved its first milestone under its Strategic
Milestone Stock Award Program; the second milestone was not achieved. In
connection with the achievement of the first milestone, an aggregate amount of
$33,000 will be recognized as a non-cash compensation expense over a 27 month
period.
The table below is a summary of stock option activity under the Plan for the
years 1994, 1995, and 1996:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Number of Exercise Fair Value Range of
Options Shares Price per per Option Exercise
Exercisable Outstanding Share Granted Prices
----------- ----------- ----- ------- ------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1994 ................. 437,372 $ 4.91
Balance January 1, 1994 ................. 894,557 $ 7.55 $0.53-$18.50
Options granted ......................... 224,754 $ 13.31
Options exercised ....................... (43,565) ($ 8.43)
Options forfeited ....................... (43,878) ($ 11.13)
---------
Balance December 31, 1994 ............... 584,406 $ 5.80
Balance December 31, 1994 ............... 1,031,868 $ 8.61 $0.53-$18.50
Options granted ......................... 185,638 $ 21.17 $ 14.60
Options exercised ....................... (112,913) ($ 5.09)
Options forfeited ....................... (20,432) ($ 9.69)
---------
Balance December 31, 1995 ............... 650,780 $ 7.71
Balance December 31, 1995 ............... 1,084,161 $ 11.11 $1.50-$23.125
Options granted ......................... 218,026 $ 23.74 $ 16.61
Options granted - Strategic Milestone
Stock Award Program .................. 764,387 $ 23.12 $ 15.70
Options exercised ....................... (111,041) ($ 6.49)
Options forfeited ....................... (76,734) ($ 21.51)
Options forfeited - Strategic Milestone .
Stock Award Program .................. (381,050) ($ 23.13)
---------
Balance December 31, 1996 ............... 746,700 $ 9.79
Balance December 31, 1996 ............... 1,497,749 $ 15.84 $10.52-$26.228
=========
</TABLE>
32
<PAGE> 35
i-STAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The weighted average remaining contractual lives of outstanding options
at December 31, 1996 was approximately 5.8 years.
The Company applies the provisions of Opinion 25 ("APB 25") and related
Interpretations in accounting for its stock based compensation plans.
Accordingly, compensation expense has been recognized in the financial
statements in respect to the above plans to the extent required by APB 25. Had
compensation costs for the above plans been determined based on the fair value
at the grant dates for awards under those plans consistent with the method of
Statement of Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation", the Company's net loss and net loss per share would have been
increased to the pro forma amounts below:
<TABLE>
<CAPTION>
1996 1995
---- ----
(In thousands of dollars, except per share data)
<S> <C> <C>
Pro forma net loss ........................... ($22,038) ($23,801)
Pro forma net loss per share ................. ($ 1.65) ($ 1.96)
</TABLE>
As options vest over a varying number of years, and awards are
generally made each year, the proforma impacts shown here may not be
representative of future proforma expense amounts due to the annual grant of
options by the Company, the impact of the Strategic Milestone Stock Award
Program and the variable vesting of options. The pro forma additional
compensation expense of $ 4,582,000 and $ 793,000 for 1996 and 1995,
respectively, was calculated based on the fair value of each option grant using
the Black-Scholes model with the following weighted-average assumptions used for
grants:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Dividend yield ......................................... - 0 - - 0 -
Expected volatility .................................... 56.44 56.44
Risk free interest rate ................................ 6.40% 7.12%
Expected option lives .................................. 8 years 8 years
</TABLE>
9. DEVELOPMENT, DISTRIBUTION AND MANUFACTURING RIGHTS AGREEMENTS
In August 1988, the Company entered into development, distribution and
instrument manufacturing license agreements with two Japanese companies. Total
sales under these agreements were $7,492,000, $2,887,000 and $984,000 for the
years ended December 31, 1996, 1995 and 1994, respectively, including deferred
revenue of $3,151,000, $1,374,000 and $503,000, respectively. At December 31,
1996, $3,240,000 is recorded as deferred revenue, current, and is being
amortized to income on a straight-line basis through 1997. The Company also has
other license and distribution agreements, including agreements with HP (see
Note 12).
33
<PAGE> 36
i-STAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
10. INCOME TAXES
At December 31, 1996, the Company had a net operating loss carryforward
of approximately $122,000,000 for United States Federal income tax purposes
which expires in varying amounts through 2011. The Company also has unused
research and development tax credits of approximately $1,100,000 for United
States Federal income tax purposes which expire in varying amounts through 2011.
Additionally, the Company has unused Canadian investment tax credits of
approximately $2,221,000 which expire in varying amounts through 2003. The
timing and manner in which the operating loss carryforwards and credits may be
utilized in any year by the Company will be limited by Internal Revenue Code
Section 382.
The Company accounts for income taxes in accordance with the provisions
of Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
The Company provides a valuation allowance against the net deferred tax debits
due to the uncertainty of realization. The increase in the valuation allowance
for the years ended December 31, 1996 and 1995 was $3,437,000 and $11,733,000,
respectively.
Temporary differences and carryforwards which give rise to the deferred
tax assets and liabilities at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
Deferred Tax Deferred Tax
Assets (Liabilities) Assets (Liabilities)
(In thousands of dollars)
<S> <C> <C>
Net Operating Loss -- U.S. ............... $ 41,439 $ 35,867
Net Operating Loss -- Canada ............. 858 1,236
Net Operating Loss -- Province (Can) ..... 846 2,286
State Taxes .............................. 7,116 6,249
Deferred Revenue ......................... 1,101 2,168
Tax Credits -- U.S. ...................... 1,100 1,005
Tax Credits -- Canada .................... 2,221 3,104
Intangibles .............................. (268) (222)
Depreciation -- U.S. ..................... 104 446
Depreciation -- Canada ................... 180 (203)
Depreciation -- Province (Can) ........... 160 (187)
Other .................................... 1,145 816
-------- --------
56,002 52,565
-------- --------
Valuation Allowance -- U.S. .............. (44,621) (40,080)
Valuation Allowance -- Canada ............ (3,259) (4,137)
Valuation Allowance -- Province (Can) .... (1,006) (2,099)
Valuation Allowance -- State ............. (7,116) (6,249)
-------- --------
Total Deferred Taxes ..................... $ -- $ --
======== ========
</TABLE>
11. SAVINGS AND INVESTMENT RETIREMENT PLAN
i-STAT has a defined contribution savings and investment retirement
plan under section 401(k) of the Internal Revenue Code, as amended, whereby
substantially all full-time employees are eligible to participate. i-STAT has
not made any matching contributions to the Plan.
34
<PAGE> 37
i-STAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
12. RELATED PARTY TRANSACTIONS
One director of the Company has provided consulting services to the
Company. Consulting fees incurred totaled approximately $30,000 for each of the
years ended December 31, 1996, 1995 and 1994.
The Company had the following activity with HP, primarily related to
license and distribution agreements.
<TABLE>
<CAPTION>
1996 1995
---- ----
(In thousands of dollars)
<S> <C> <C>
Revenues .................................... $961 $25
Purchases ................................... $370 $14
Receivable at year end ...................... $ 67 $ 7
Payable at year end ......................... $158 --
</TABLE>
13. SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION
Maintenance and repairs expense for the years ended December 31, 1996,
1995 and 1994 was approximately $723,000, $675,000 and $585,000, respectively.
14. COMMITMENTS AND CONTINGENCIES
The Company is a defendant in a case entitled Nova Biomedical
Corporation, Plaintiff v. i-STAT Corporation, Defendant, The Complaint, which
was filed in the United States District Court for the District of Massachusetts
on June 27, 1995, alleges infringement by i-STAT of Nova's U.S. Patent No.
4,686,479. The Plaintiff seeks unspecified damages and that the damages be
trebled. Nova also is asking for attorneys' fees and prejudgment interest. The
case currently is in the preliminary stages of discovery. The Company is
contesting the case vigorously and does not believe that it has infringed the
Nova patent. The Company has obtained an opinion from recognized patent counsel
to the effect that no infringement has occurred. However, if the plaintiff
should prevail in this matter, it could have a material impact on the financial
position, results of operations and cash flows of the Company. The Company has
asserted counterclaims under the antitrust laws alleging that Nova commenced the
action knowing that the patent was not infringed and that it had reason to
believe that the patent was invalid and unenforceable.
The Company is a defendant in a class action complaint entitled Susan
Kaufman, on behalf of herself and all others similarly situated, Plaintiff, v.
i-STAT Corporation, William P. Moffitt, Lionel N. Sterling, Imants R. Lauks and
Matthias Plum, Jr. The class action was brought by Susan Kaufman on her behalf
and on the behalf of all purchasers of the Company's Common Stock between May 9,
1995 and March 19, 1996. The complaint, which was filed in the Superior Court of
New Jersey in Mercer County on June 19, 1996, alleges New Jersey common law
"fraud on the market" in connection with certain sales of i-STAT stock by the
Company's chief executive officer, chief technology officer and two outside
directors during a nine-month period. The plaintiffs seek unspecified
compensatory damages, interest and payment of all costs and expenses incurred in
connection with the class action. The Company believes the complaint is without
merit and intends to vigorously contest it. However, if the plaintiff should
prevail in this matter, it could have a material impact on the financial
position, results of operation and cash flows of the Company.
The Company is a defendant in a case entitled Customedix Corporation,
Plaintiff v. i-STAT Corporation, Defendant. The Complaint, which was filed in
the United States District Court for the District of Connecticut on December 26,
1996, alleges infringement by i-STAT of Customedix's U.S. Patent No. 4,342,964.
The Plaintiff seeks injunctive relief and an accounting for i-STAT's profits and
the damages to Customedix from such alleged infringement. The case currently is
in the preliminary stages of discovery. The Company intends to contest the case
vigorously and does not believe that it has infringed the Customedix patent. The
Company has obtained an opinion from recognized patent counsel to the effect
that no infringement has occurred. However, if the plaintiff should prevail in
this matter, it could have a material impact on the financial position, results
of operation and cash flows of the Company.
35
<PAGE> 38
i-STAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
15. GEOGRAPHIC SEGMENT DATA
The Company is engaged in the development, manufacturing and marketing of its
proprietary blood analysis products in the health care sector.
The Company's operations are classified into the following geographic areas:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
(In thousands of dollars)
<S> <C> <C> <C>
Operating Loss:
Domestic ................. ($17,631) ($23,613) ($24,379)
Canada ................... (1,879) (405) (550)
-------- -------- --------
Total .................... ($19,510) ($24,018) ($24,929)
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
(In thousands of dollars)
<S> <C> <C> <C>
Identifiable Assets:
Domestic ....................... $47,173 $66,794 $33,521
Canada ......................... 8,192 7,256 5,657
------- ------- -------
Total .......................... $55,365 $74,050 $39,178
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
(In thousands of dollars)
<S> <C> <C> <C>
Net Sales:
Domestic ....................... $20,878 $16,194 $ 9,689
Canada ......................... 286 190 22
Japan .......................... 7,492 2,887 984
Other International ............ 1,674 831 0
------- ------- -------
Total .......................... $30,330 $20,102 $10,695
======= ======= =======
</TABLE>
36
<PAGE> 39
i-STAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1996
----
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(In thousands of dollars, except share and per share data)
<S> <C> <C> <C> <C>
Net sales ........................ $ 6,411 $ 6,740 $ 7,772 $ 9,407
Gross profit ..................... $ 612 $ 104 $ 1,122 $ 2,201
Net loss ......................... ($ 4,287) ($ 5,102) ($ 4,009) ($ 4,058)
Net loss per share ............... ($ 0.32) ($ 0.38) ($ 0.30) ($ 0.30)
Weighted average shares used in
computing net loss per share... 13,284,845 13,324,591 13,326,127 13,350,836
</TABLE>
<TABLE>
<CAPTION>
1995
----
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(In thousands of dollars, except share and per share data)
<S> <C> <C> <C> <C>
Net sales ........................ $ 3,359 $ 5,125 $ 5,591 $ 6,027
Gross profit (loss) .............. ($ 1,742) ($ 538) ($ 258) $ 627
Net loss ......................... ($ 6,531) ($ 6,441) ($ 4,912) ($ 5,124)
Net loss per share ............... ($ 0.59) ($ 0.58) ($ 0.37) ($ 0.39)
Weighted average shares used in
computing net loss per share... 11,014,771 11,041,186 13,200,238 13,232,163
</TABLE>
During the fourth quarter of 1995, the Company recorded compensation
expense of $667,000 in connection with the Strategic Milestone Stock Award
Program (see Note 8) and recorded a favorable inventory adjustment of $689,000.
Net loss per common share amounts are calculated independently for each
of the quarters presented. The sum of the quarters may not equal the full year
net loss per common share amounts.
37
<PAGE> 40
REPORT OF INDEPENDENT ACCOUNTANTS
FINANCIAL STATEMENT SCHEDULE
Our report on the consolidated financial statements of i-STAT
Corporation is included in Item 14 of this Annual Report on Form 10-K. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index in Item 14 of this
Annual Report on Form 10-K.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Princeton, New Jersey Coopers & Lybrand L.L.P.
January 28, 1997
38
<PAGE> 41
SCHEDULE II
i-STAT CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance at
Beginning Costs and Other end of
of Period Expenses Accounts Deductions Period
--------- -------- -------- ---------- ------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1996:
Reserve for Doubtful Accounts .... $ 110 $ 85 -- -- $ 195
======= ======= ======= ======== =======
For the year ended December 31, 1995:
Reserve for Doubtful Accounts .... $ 25 $ 85 -- -- $ 110
======= ======= ======= ======== =======
For the year ended December 31, 1994:
Reserve for Doubtful Accounts .... $ 25 -- -- -- $ 25
======= ======= ======= ======== =======
For the year ended December 31, 1996:
Tax Valuation Reserve ............ $52,565 $ 3,437 -- -- $56,002
======= ======= ======= ======== =======
For the year ended December 31, 1995:
Tax Valuation Reserve ............ $40,832 $11,733 -- -- $52,565
======= ======= ======= ======== =======
For the year ended December 31, 1994:
Tax Valuation Reserve ............ $29,888 $10,944 -- -- $40,832
======= ======= ======= ======== =======
</TABLE>
39
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in New Jersey on the
26th day of March, 1997.
i-STAT CORPORATION
By: /s/ William P. Moffitt
-------------------------------------
William P. Moffitt
President and Chief Executive Officer
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William P. Moffitt and Roger J. Mason, or
either of them, his attorney-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendments to this Report, and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorney-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ William P. Moffitt President, Chief Executive Officer March 26, 1997
- ------------------------------ and Director (Principal Executive Officer)
William P. Moffitt
/s/ Roger J. Mason Vice President of Finance, Treasurer March 26, 1997
- ------------------------------ and Chief Financial Officer (Principal
Roger J. Mason Financial and Accounting Officer)
/s/ J. Robert Buchanan Director March 26, 1997
- ------------------------------
J. Robert Buchanan
/s/ James A. Cyrier Director March 26, 1997
- ------------------------------
James A. Cyrier
/s/ Curtis J. Crawford Director March 26, 1997
- ------------------------------
Curtis J. Crawford
/s/ Richard Hodgson Director March 26, 1997
- ------------------------------
Richard Hodgson
/s/ Imants R. Lauks Director March 26, 1997
- ------------------------------
Imants R. Lauks
/s/ Matthias Plum, Jr. Director March 26, 1997
- ------------------------------
Matthias Plum, Jr.
/s/ Lionel N. Sterling Director March 26, 1997
- ------------------------------
Lionel N. Sterling
</TABLE>
40
<PAGE> 43
Exhibit No. Description Sequential Page No.
3.2 By-laws
(10.35) Form of Officer Indemnification Agreement
(10.36) Form of Director Indemnification Agreement
(10.37) Amendment, dated November 20, 1996 to Lease Agreement
dated May 27, 1993, between Linpro Princeton O.R. Offices
II L.P. and the Registrant.
23 Consent of Coopers & Lybrand, L.L.P., Independent
Accountants
24 Powers of Attorney, executed by certain officers of the
Registrant and the individual members of the Board of
Directors, authorizing such officers of the Registrant to
file amendments to this Report, are located on the
signature page of this report.
27 Financial Data Schedule
41
<PAGE> 1
EXHIBIT 3.2
AMENDED AND
RESTATED
B Y - L A W S
OF
I-STAT CORPORATION
(a Delaware corporation)
-------------
ARTICLE I
OFFICES
SECTION 1. OFFICES. The Corporation shall maintain its registered
office in the State of Delaware at 32 Loockerman Square, Suite L-100, Dover,
Delaware 19901 and its resident agent at such address is United States
Corporation Company. The Corporation may also have offices in such other places
in the United States or elsewhere as the Board of Directors may, from time to
time, appoint or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders for
the election of directors and for such other business as may properly be
conducted at such meeting shall be held at such place, either within or without
the State of Delaware, and at such time and date as the Board of
<PAGE> 2
Directors shall determine by resolution and set forth in the notice of the
meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders,
unless otherwise prescribed by statute, may be called by the Chairman of the
Board, the President or by resolution of the Board of Directors. Notice of each
special meeting shall be given in accordance with Section 3 of this Article II.
Unless otherwise required by law, business transacted at any special meeting of
stockholders shall be limited to the purpose stated in the notice.
SECTION 3. NOTICE OF MEETINGS. Whenever stockholders are required
or permitted to take any action at a meeting, a written notice of the meeting,
which shall state the place, date and time of the meeting, and, in the case of a
special meeting, the purposes for which the meeting is called, shall be mailed
to or delivered to each stockholder of record entitled to vote thereat. Such
notice shall be given not less than ten (10) days nor more than sixty (60) days
before the date of any such meeting.
SECTION 4. QUORUM. Unless otherwise required by law or the
Certificate of Incorporation, the holders of a majority of the issued and
outstanding stock entitled to vote thereat, present in person or represented by
proxy shall constitute a quorum for the transaction of business at all meetings
of stockholders.
-2-
<PAGE> 3
SECTION 5. VOTING. Unless otherwise provided in the Certificate
of Incorporation, each stockholder shall be entitled to one vote for each share
of capital stock held by such stockholder. Unless otherwise provided in the
Certificate of Incorporation, all elections of directors shall be decided by
plurality vote. Unless otherwise required by law, these By-laws or the
Certificate of Incorporation, all other stockholder action shall be decided by
majority vote. All matters submitted to a stockholder vote shall be by written
ballot.
SECTION 6. INSPECTORS. The Board of Directors may, in advance of
any meeting of stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof. If any of the inspectors so appointed shall
fail to appear or act, the chairman of the meeting may, or if inspectors shall
not have been appointed, the chairman of the meeting shall, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall
-3-
<PAGE> 4
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the results, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the office
of director shall act as an inspector of an election of directors.
SECTION 7. CHAIRMAN OF MEETINGS. The Chairman of the Board of
Directors of the Corporation, or, in his absence or disability, the President of
the Corporation, shall preside at all meetings of the stockholders.
SECTION 8. SECRETARY OF MEETING. The Secretary of the Corporation
shall act as Secretary at all meetings of the stockholders. In the absence or
disability of the Secretary, the Chairman of the Board of Directors or the
President shall appoint a person to act as Secretary at such meetings.
SECTION 9. LISTS OF STOCKHOLDERS. The officer who has charge of
the stock ledger of the Corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled
-4-
<PAGE> 5
to vote at the meeting, arranged in alphabetical order, showing the address of
each stockholder and the number and class of shares held by each. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city where the meeting is to
be held, which shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the meeting and may be inspected by any stockholder who is
present.
SECTION 10. ACTION WITHOUT MEETING. Unless otherwise provided by
the Certificate of Incorporation, any action required by law to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
such meetings, may be taken without a meeting, without prior notice and without
a vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote were present and voted. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
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SECTION 11. ADJOURNMENT. At any meeting of stockholders of the
Corporation, if less than a quorum be present, a majority of the stockholders
entitled to vote thereat, present in person or by proxy, shall have the power to
adjourn the meeting from time to time without notice other than announcement at
the meeting until a quorum shall be present. Any business may be transacted at
the adjourned meeting which might have been transacted at the meeting originally
noticed. If the adjournment is for more than thirty days, or if after the
adjournment a new record date, as provided for in Section 5 of Article V of
these By-Laws, is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
SECTION 12. NOTICE OF STOCKHOLDER BUSINESS. (a) At an annual
meeting of the stockholders, only such business shall be conducted as shall have
been brought before the meeting (i) pursuant to the Corporation's notice of
meeting; (ii) by or at the direction of the Board of Directors; or (iii) by any
stockholder of the Corporation who is a stockholder of record at the time of
giving of the notice provided for in this Section 12, who shall be entitled to
vote at such meeting and who complies with the notice procedures set forth in
this Section 12.
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(b) For business to be properly brought before an annual meeting
by a stockholder pursuant to clause (a)(iii) of this Section 12, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
120 days nor more than 150 days prior to the first anniversary of the date of
the Company's notice of annual meeting for the preceding year's annual meeting;
provided, however, that in the event that the date of the meeting is changed by
more than 30 days from the anniversary date of the preceding year's annual
meeting, notice by the stockholder to be timely must be received no later than
the close of business on the 10th day following the earlier of the day on which
notice of the date of the meeting was mailed or public disclosure was made. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (i) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting; (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, and the name
and address of the beneficial owner, if any, on whose behalf the proposal is
made; (iii) the
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class and number of shares of the Corporation which are owned beneficially and
of record by such stockholder of record and by the beneficial owner, if any, on
whose behalf the proposal is made; and (iv) any material interest of such
stockholder of record and the beneficial owner, if any, on whose behalf the
proposal is made in such business.
(c) Notwithstanding anything in these By-laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 12. The Chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the procedures
prescribed by these By-laws, and if he should so determine, he shall so declare
to the meeting and such business shall not be transacted. Notwithstanding the
foregoing provisions of this Section 12, a stockholder shall also comply with
all applicable requirements of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder with respect to the matters set forth
in this Section 12.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. POWERS. The property, business and affairs of the
Corporation shall be managed and controlled by its Board of Directors. The Board
shall exercise all of
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the powers and duties conferred by law except as provided by the Certificate of
Incorporation or these By-Laws.
SECTION 2. NUMBER AND TERM. The number of directors shall be set
at not less than five nor more than ten. Within the limits specified above, the
number shall be fixed from time to time by the Board.
SECTION 3. RESIGNATIONS. Any director may resign at any time.
Such resignation shall be made in writing, and shall take effect at the time
specified therein, and if no time is specified, at the time of its receipt by
the President or Secretary. The acceptance of a resignation shall not be
necessary to make it effective.
SECTION 4. REMOVAL. Any director may be removed with or without
cause, at any time by the affirmative vote of the holders of a majority of the
outstanding shares of each class of stock entitled to vote for the election of
directors at any annual or special meeting of the stockholders called for that
purpose. Except as provided in the Certificate of Incorporation or otherwise
prescribed by statute, vacancies thus created may be filled by the directors as
provided in Section 5 of this Article III.
SECTION 5. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Except as
provided in the Certificate of Incorporation and in Section 4 of this Article
III, vacancies occurring in any directorship and newly created
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directorships may be filled by a majority vote of the remaining directors then
in office. Any director so chosen shall hold office for the unexpired term of
his predecessor and until his successor shall be elected and qualify or until
his earlier death, resignation or removal. The Board may not fill the vacancy
created by removal of a director by electing the director so removed.
SECTION 6. MEETINGS. An annual organizational meeting of the
Board of Directors shall be held immediately after each annual meeting of the
stockholders, or at such time and place as may be noticed for the meeting.
Regular meetings of the Board may be held without notice at such
places and times as shall be determined from time to time by resolution of the
directors.
Unless otherwise required by Delaware law, special meetings of
the Board shall be called by the President or by the Secretary on the written
request of any two directors with at least two days' notice to each director and
shall be held at such place as may be determined by the directors or as shall be
stated in the notice of the meeting.
SECTION 7. QUORUM, VOTING AND ADJOURNMENT. A majority of the
total number of directors or any committee thereof shall constitute a quorum for
the transaction of business. The vote of a majority of the directors present at
a meeting at which a quorum is present shall be the act
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of the Board. In the absence of a quorum, a majority of the directors present
thereat may adjourn such meeting to another time and place. Notice of such
adjourned meeting need not be given if the time and place of such adjourned
meeting are announced at the meeting so adjourned.
SECTION 8. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the Board, designate one or more committees, including
but not limited to an Executive Committee and an Audit Committee, each such
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee
to replace any absent or disqualified member at any meeting of the committee.
Any such committee, to the extent provided in the resolution of the Board, shall
have and may exercise all the powers and authority of the Board of Directors in
the management of the business and affairs of the Corporation and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority to amend the Certificate
of Incorporation, adopt an agreement of merger or consolidation, recommend to
the stockholders the sale, lease, or exchange of all or substantially all of the
Corporation's properties and assets, recommend to the stockholders a dissolution
of the Corporation or a
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revocation of a dissolution or to amend, or recommend to the stockholders the
amendment of, these By-laws. Unless a resolution of the Board expressly
provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock of the Corporation. All
committees of the Board shall report their proceedings to the Board when
required.
SECTION 9. ACTION WITHOUT A MEETING. Unless otherwise restricted
by the Certificate of Incorporation or these By-laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board or
any committee thereof consent thereto in writing.
SECTION 10. COMPENSATION. The Board of Directors shall have the
authority to fix the compensation of directors for their services. A director
may also serve the Corporation in other capacities and receive compensation
therefor.
SECTION 11. TELEPHONIC MEETING. Unless otherwise restricted by
the Certificate of Incorporation, members of the Board, or any committee
designated by the Board, may participate in a meeting by means of conference
telephone or similar communications equipment in which all persons participating
in the meeting can hear each other.
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Participation in such telephonic meeting shall constitute the presence in person
at such meeting.
SECTION 12. NOMINATION OF DIRECTORS BY STOCKHOLDERS. (a) Only
persons who are nominated in accordance with the procedures set forth in these
By-laws shall be eligible to serve as directors. Nominations of persons for
election to the Board of Directors of the Corporation may be made at a meeting
of stockholders (i) by or at the direction of the Board of Directors or (ii) by
any stockholder of the Corporation who is a stockholder of record at the time of
giving of notice provided for in this Section 12, who shall be entitled to vote
for the election of directors at the meeting and who complies with the notice
procedures set forth in this Section 12.
(b) Nominations by stockholders shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation (i) in the case of an annual
meeting, not less than 120 days nor more than 150 days prior to the first
anniversary of the date of the Company's notice of annual meeting for the
preceding year's annual meeting; provided however, that in the event that the
date of the annual meeting is changed by more than 30 days from the anniversary
date of the preceding year's annual
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meeting, notice by the stockholder to be timely must be so received not later
than the close of business on the 10th day following the earlier of the day on
which notice of the date of the meeting was mailed or public disclosure was made
and (ii) in the case of a special meeting at which Directors are to be elected,
not later than the close of business on the 10th day following the earlier of
the day on which notice of the date of the meeting was mailed or public
disclosure was made. Such stockholder's notice shall set forth (i) as to each
person whom the stockholder proposes to nominate for election or reelection as a
Director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of Directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected);
(ii) as to the stockholder giving the notice (x) the name and address, as they
appear on the Corporation's books, of such stockholder, (y) the class and number
of shares of the Corporation which are beneficially owned by such stockholder
and also which are owned of record by such stockholder; and (iii) as to the
beneficial owner, if any, on whose behalf the nomination is made, (x) the name
and address of such person, and (y) the class and number of
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shares of the Corporation which are beneficially owned by such person. At the
request of the Board of Directors, any person nominated by the Board of
Directors for election as a Director shall furnish to the Secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee.
(c) No person shall be eligible to serve as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 12. The Chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by these By-laws, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this Section 12, a stockholder shall
also comply with all applicable requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder with respect to the
matters set forth in this Section 12.
ARTICLE IV
OFFICERS
SECTION 1. The officers of the Corporation shall include a
Chairman of the Board, a President (who may also be given the title of Chief
Executive Officer), a Secretary and one or more subordinate officers, all of
whom shall be
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elected by the Board of Directors and who shall hold office for a term of one
year and until their successors are elected and qualify or until their earlier
resignation or removal. In addition, the Board of Directors may elect one or
more Vice Presidents, including a Senior Vice President and an Executive Vice
President, a Treasurer and one or more Assistant Treasurers and one or more
Assistant Secretaries, who shall hold their office for such terms and shall
exercise such powers and perform such duties, not inconsistent with the powers
and duties specified in these By-laws, as shall be determined from time to time
by the Board of Directors. The initial officers shall be elected at the first
meeting of the Board of Directors and, thereafter, at the first organizational
meeting of the Board held after each annual meeting of the stockholders. Any
number of offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors may
appoint such other officers and agents as it deems advisable, who shall hold
their office for such terms and shall exercise and perform such powers and
duties as shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. The Chairman of the Board of Directors shall
be a member of the Board and shall preside at all meetings of the Board of
Directors and of the
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stockholders. In addition, the Chairman of the Board shall have such powers and
perform such other duties as from time to time may be assigned to him by the
Board of Directors.
SECTION 4. PRESIDENT. The President shall be the chief executive
officer of the Corporation and may be given the title of Chief Executive Officer
if the Board of Directors so elects. He shall exercise such duties as
customarily pertain to the office of President, and shall have general and
active management of the property, business and affairs of the Corporation,
subject to the supervision and control of the Board. He shall perform such other
duties as prescribed from time to time by the Board or these By-laws.
In the absence, disability or refusal of the Chairman of the
Board to act, or the vacancy of such office, the President shall preside at all
meetings of the stockholders and of the Board of Directors. Except as the Board
of Directors shall otherwise provide with respect to a given transaction or act,
the President shall execute bonds, mortgages and other contracts on behalf of
the Corporation, and shall cause the seal of the Corporation to be affixed to
any instrument requiring it and, when so affixed, the seal shall be attested by
the signature of the Secretary or the Treasurer or an Assistant Secretary or an
Assistant Treasurer.
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SECTION 5. VICE PRESIDENTS. Each Vice President, of whom one or
more may be designated a Senior Vice President or an Executive Vice President,
shall have such powers and shall perform such duties as shall be assigned to him
by the President or the Board of Directors.
SECTION 6. TREASURER. The Treasurer shall have custody of the
corporate funds, securities, evidences of indebtedness and other valuables of
the Corporation and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation. He shall deposit all moneys
and other valuables in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the Corporation, taking
proper vouchers therefor. He shall render to the President and Board of
Directors, upon their request, a report of the financial condition of the
Corporation. If required by the Board of Directors, he shall give the
Corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the Board shall prescribe.
The Treasurer shall have such further powers and perform such
other duties incident to the office of Treasurer as from time to time are
assigned to him by the Board.
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SECTION 7. SECRETARY. The Secretary shall: (a) cause minutes of
all meetings of the stockholders and directors to be recorded and kept; (b)
cause all notices required by these By-Laws or otherwise to be given properly;
and (c) see that the minute books, stock books, and other nonfinancial books,
records and papers of the Corporation are kept properly. The Secretary shall
have such further powers and perform such other duties as prescribed from time
to time by the Board.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Each
Assistant Treasurer, if any are elected, and each Assistant Secretary, if any
are elected, shall be vested with all the powers and shall perform all the
duties of the Treasurer and Secretary, respectively, in the absence, disability
or refusal of such officer to act, unless or until the Board of Directors shall
otherwise determine. In addition, Assistant Treasurers and Assistant Secretaries
shall have such powers and shall perform such duties as shall be assigned to
them by the Board.
SECTION 9. CORPORATE FUNDS AND CHECKS. The funds of the
Corporation shall be kept in such depositories as shall from time to time be
prescribed by the Board of Directors. All checks or other orders for the payment
of money shall be signed by the Chairman of the Board, the President or the
Treasurer or such other person or agent as
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may from time to time be authorized and with such countersignature, if any, as
may be required by the Board of Directors.
SECTION 10. OWNERSHIP OF STOCK OF ANOTHER CORPORATION. The
Chairman of the Board, the President or the Treasurer, or such other officer or
agent as shall be authorized by the Board of Directors, shall have the power and
authority, on behalf of the Corporation, to attend and to vote at any meeting of
stockholders of any corporation in which the Corporation holds stock and may
exercise, on behalf of the Corporation, any and all of the rights and powers
incident to the ownership of such stock at any such meeting, including the
authority to execute and deliver proxies and consents on behalf of the
Corporation.
SECTION 11. DELEGATION OF DUTIES. In the absence, disability or
refusal of any officer to exercise and perform his duties, the Board of
Directors may delegate to another officer such powers or duties.
SECTION 12. RESIGNATION AND REMOVAL. Any officer of the
Corporation may be removed from office for or without cause at any time by the
Board of Directors. Any officer may resign at any time in the same manner
prescribed under Section 3 of Article III of these By-laws.
SECTION 13. VACANCIES. The Board of Directors shall have power to
fill vacancies occurring in any office.
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ARTICLE V
STOCK
SECTION 1. CERTIFICATES OF STOCK. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by, or in the name of
the Corporation by, the Chairman of the Board or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, certifying the number and class of shares of stock in the
Corporation owned by him. Any or all of the signatures on the certificate may be
a facsimile. The Board of Directors shall have the power to appoint one or more
transfer agents and/or registrars for the transfer or registration of
certificates of stock of any class, and may require stock certificates to be
countersigned or registered by one or more of such transfer agents and/or
registrars.
SECTION 2. TRANSFER OF SHARES. Shares of stock of the Corporation
shall be transferable upon its books by the holders thereof, in person or by
their duly authorized attorneys or legal representatives, upon surrender to the
Corporation by delivery thereof to the person in charge of the stock and
transfer books and ledgers. Such certificates shall be cancelled and new
certificates shall thereupon be issued. A record shall be made of each transfer.
Whenever any transfer of shares shall be made for collateral
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security, and not absolutely, it shall be so expressed in the entry of the
transfer if, when the certificates are presented, both the transferor and
transferee request the Corporation to do so. The Board shall have power and
authority to make such rules and regulations as it may deem necessary or proper
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
SECTION 3. LOST CERTIFICATES. A new certificate of stock may be
issued in the place of any certificate previously issued by the Corporation,
alleged to have been lost, stolen, destroyed or mutilated, and the Board of
Directors may, in their discretion, require the owner of such lost, stolen,
destroyed or mutilated certificate, or his legal representative, to give the
Corporation a bond, in such sum as the Board may direct, in order to indemnify
the Corporation against any claims that may be made against it in connection
therewith.
SECTION 4. STOCKHOLDERS OF RECORD. The Corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder thereof, in fact, and shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any other person,
whether or not it shall have express or other
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notice thereof, except as otherwise expressly provided by law.
SECTION 5. STOCKHOLDERS RECORD DATE. In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting, provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
SECTION 6. DIVIDENDS. Subject to the provisions of the
Certificate of Incorporation, the Board of Directors may at any regular or
special meeting, out of funds legally available therefor, declare dividends upon
the stock of the Corporation. Before the declaration of any dividend, the Board
of Directors may set apart, out of any funds of the Corporation available for
dividends, such sum or sums as
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from time to time in their discretion may be deemed proper for working capital
or as a reserve fund to meet contingencies or for such other purposes as shall
be deemed conducive to the interests of the Corporation.
ARTICLE VI
NOTICE AND WAIVER OF NOTICE
SECTION 1. NOTICE. Whenever any written notice is required to be
given by law, the Certificate of Incorporation or these By-Laws, such notice, if
mailed, shall be deemed to be given when deposited in the United States mail,
postage prepaid, addressed to the person entitled to such notice at his address
as it appears on the books and records of the Corporation. Such notice may also
be sent by telegram.
SECTION 2. WAIVER OF NOTICE. Whenever notice is required to be
given by law, the Certificate of Incorporation or these By-laws, a written
waiver thereof signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened, and the execution by a person
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of a written consent in lieu of meeting shall constitute a waiver of notice of
the action taken by such written consent. Neither the business to be transacted
at, nor the purpose of, any meeting of the stockholders, directors, or members
of a committee of the Board need be specified in any written waiver of notice.
ARTICLE VII
AMENDMENT OF BY-LAWS
SECTION 1. AMENDMENTS. These By-Laws may be amended or repealed
or new By-Laws may be adopted by the affirmative vote of a majority of the Board
of Directors at any regular or special meeting of the Board. By-Laws adopted by
Board of Directors may be amended or repealed by shareholders.
ARTICLE VIII
SECTION 1. SEAL. The seal of the Corporation shall be circular in form and shall
have the name of the corporation on the circumference and the jurisdiction and
year of incorporation in the center.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall
end on December 31st of each year, or such other twelve consecutive months as
the Board of Directors may designate.
SECTION 3. INDEMNIFICATION. The Corporation shall, to the fullest
extent permitted by the General
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Corporation Law of the State of Delaware, indemnify members of the Board and
individuals at any time appointed by the Board as executive officers of the
Corporation, and may, if authorized by the Board, indemnify its other officers,
and its employees and agents and any and all persons whom it shall have power to
indemnify against any and all expenses, liabilities or other matters.
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EXHIBIT 10.35
OFFICER INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this
16th day of October, 1996, between i-STAT Corporation, a Delaware corporation
("i-STAT"), and __________________ ("Indemnitee").
WITNESSETH THAT:
WHEREAS, Indemnitee is an executive officer of i-STAT and in such
capacity is performing a valuable service for i-STAT; and
WHEREAS, the by-laws of i-STAT (the "By-laws") provide for the
indemnification of its directors and executive officers to the maximum extent
authorized by law; and
WHEREAS, Section 145 of the Delaware General Corporation Law (the
"DGCL") specifically provides that it shall not be deemed exclusive of any other
rights to indemnification or advancement of expenses to which directors or
officers may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise; and
WHEREAS, the number of lawsuits and shareholders' derivative
lawsuits against corporations, their directors and officers has increased in
recent years, such lawsuits frequently are without merit and seek damages in
amounts having no reasonable relationship to the amount of compensation received
by the directors and officers from the corporation, and such lawsuits whether or
not meritorious are expensive and time-consuming to defend; and
WHEREAS, recent developments with respect to the application and
interpretation of the business judgment rule and statutory and by-law
indemnification provisions have created uncertainty regarding the adequacy and
reliability of the protections afforded to directors and officers thereby; and
WHEREAS, adequate directors and officers liability insurance may
not be available at a reasonable cost; and
WHEREAS, i-STAT wishes to have Indemnitee continue to serve as an
executive officer of i-STAT free from undue concern for unpredictable or
unreasonable claims for damages by reason of Indemnitee's status as an officer
of i-STAT, by
<PAGE> 2
reason of Indemnitee's decisions or actions on its behalf or by reason of
Indemnitee's decisions or actions in another capacity while serving as an
officer of i-STAT; and
WHEREAS, Indemnitee has expressed reluctance to continue to serve
as an executive officer of i-STAT without assurances that adequate insurance and
indemnification is and will continue to be provided; and
WHEREAS, in order to induce Indemnitee to continue to serve as an
executive officer of i-STAT, i-STAT has determined and agreed to enter into this
Agreement with Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's continued
service as an executive officer of i-STAT, the parties agree as follows:
1. Directors and Officers Liability Insurance.
(a) Except as provided in (b) below, i-STAT hereby agrees
to use its best efforts to obtain and maintain directors and officers liability
insurance for Indemnitee for so long as Indemnitee shall continue to serve as an
executive officer of i-STAT and thereafter so long as Indemnitee shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that Indemnitee was an executive officer of i-STAT.
(b) i-STAT shall have no obligation hereunder to obtain or
maintain directors and officers liability insurance if, in the reasonable
business judgment of the Board of Directors of i-STAT, such insurance is not
reasonably available, the premium costs for such insurance are disproportionate
to the amount of coverage provided, or the coverage provided by such insurance
is limited, by exclusions or otherwise, so as to provide an insufficient
benefit.
(c) In all policies of directors and officers liability
insurance, Indemnitee shall be covered as an insured party in such a manner as
to provide Indemnitee the same rights and benefits, subject to the same
limitations, as are accorded to i-STAT's executive officer most favorably
insured by such policies.
(d) i-STAT shall give prompt written notice to Indemnitee
of any amendment or other change or modification, or any proposed amendment,
change or modification, to any policy of directors and officers
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<PAGE> 3
liability insurance maintained by i-STAT and covering Indemnitee.
2. Indemnification. Subject only to the exclusions set forth in
this Agreement, i-STAT hereby agrees to hold harmless and indemnify Indemnitee
to the full extent authorized or permitted by Section 145 of the DGCL, including
any amendment thereof, or any other statutory provisions authorizing or
permitting such indemnification which are adopted after the date hereof.
Notwithstanding the foregoing, i-STAT shall not be required to indemnify
Indemnitee for any losses to the extent that such losses are covered by
directors and officers liability insurance as described in Section 1 above.
Without limiting the generality of the foregoing:
(a) Third Party Actions. i-STAT shall indemnify Indemnitee
if Indemnitee was or is a party or is threatened to be made a party to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of i-STAT) by reason of
the fact that Indemnitee is or was or had agreed to serve (so long as Indemnitee
actually is serving or did so serve) as an executive officer of i-STAT, or is or
was serving or had agreed to serve (so long as Indemnitee actually is serving or
did so serve) at the request of i-STAT as an executive officer, employee or
agent of another corporation, limited liability company, partnership, joint
venture, trust or other enterprise, against any and all expenses (including
attorneys' fees), liabilities, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by Indemnitee or on Indemnitee's
behalf in connection with such action, suit or proceeding, and any appeal
therefrom, if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of i-STAT,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe Indemnitee's conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent shall not, of itself, create a presumption
that Indemnitee did not satisfy the foregoing standard of conduct to the extent
applicable thereto.
(b) Suits By or in the Right of i-STAT. i-STAT shall
indemnify Indemnitee if Indemnitee is or was a party or is threatened to be made
a party to any action or suit by or in the right of i-STAT by reason of the fact
that Indemnitee is or was or had agreed to be (so long as Indemnitee actually is
or did become) an executive officer of i-STAT, or is or was serving or had
agreed to serve (so
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<PAGE> 4
long as Indemnitee actually is or did so serve) at the request of i-STAT as an
executive officer, officer, employee or agent of another corporation, limited
liability company, partnership, joint venture, trust or other enterprise,
against any and all expenses (including attorneys' fees) and, to the extent
permitted by law, amounts paid in settlement actually and reasonably incurred by
Indemnitee or on Indemnitee's behalf in connection with the defense or
settlement of such action or suit or any appeal therefrom provided that
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in or not opposed to the best interests of i-STAT and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been adjudged to be liable to i-STAT unless and only
to the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
(c) Successful Defense. To the extent that Indemnitee has
been successful on the merits or otherwise in the defense of any action, suit or
proceeding referred to in subsections (a) or (b) of this Section 2, or in the
defense of any claim, issue or matter therein, i-STAT shall indemnify Indemnitee
against any and all expenses (including attorneys' fees) actually and reasonably
incurred by Indemnitee or on Indemnitee's behalf in connection therewith.
Dismissal of any action with prejudice, or a settlement not involving any
payment or assumption of liability, shall be deemed a successful defense.
(d) Partial Indemnification. If Indemnitee is entitled to
indemnification under any provision of this Agreement for a portion of the
expenses (including attorneys' fees), liabilities, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by Indemnitee or
on Indemnitee's behalf in the investigation, defense, appeal or settlement of
such suit, action or proceeding, but not, however, for the total amount thereof,
i-STAT shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled.
(e) Advancement of Expenses. All expenses (including
attorney and other expert and professional fees and expenses) incurred by
Indemnitee or on Indemnitee's behalf in defending a civil or criminal action,
suit or proceeding, or in enforcing Indemnitee's rights under any provisions of
this Agreement, shall be paid by i-STAT in advance of the final disposition of
such action, suit or proceeding in the manner prescribed by Section 4 hereof.
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<PAGE> 5
(f) Amendments to Indemnification Rights. i-STAT shall not
adopt any amendment to its Restated Certificate of Incorporation, as amended
(the "Certificate") or By-Laws the effect of which would be to deny, diminish or
encumber Indemnitee's rights to indemnity pursuant to the Certificate, By-Laws,
the DGCL or any other applicable law as applied to any act or failure to act
occurring in whole or in part prior to the date (the "Effective Date") upon
which the amendment was approved by i-STAT's Board of Directors or stockholders,
as the case may be. In the event that i-STAT shall adopt any amendment to the
Certificate or By-Laws the effect of which is to change Indemnitee's rights to
indemnity under such instruments, such amendment shall apply only to acts or
failures to act occurring entirely after the Effective Date thereof. i-STAT
shall give written notice to Indemnitee of any proposal with respect to any such
amendment no later than the date such amendment is first presented to the Board
of Directors (or any committee thereof) for consideration, and shall provide a
copy of any such amendment to Indemnitee promptly after its adoption.
(g) Indemnification for Expenses as a Witness. To the
extent Indemnitee is, by reason of Indemnitee's status as an executive officer
of i-STAT, a witness in any proceeding, i-STAT shall indemnify Indemnitee
against all expenses in connection therewith.
3. Limitations on Indemnification. No indemnity pursuant to
Section 2 hereof shall be paid by i-STAT:
(a) on account of Indemnitee's conduct which is finally
adjudged in a non-appealable decision to have been fraudulent, dishonest or
willful misconduct, or a knowing violation of law;
(b) on account of any suit in which judgment in a final,
non-appealable decision is rendered against Indemnitee for an accounting of
profits made from the purchase or sale by Indemnitee of securities of i-STAT
within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or similar provisions of federal or state law;
(c) on account of the receipt by Indemnitee of any personal
profit or advantage to which Indemnitee is adjudged in a final, non-appealable
decision not to be entitled;
(d) for expenses incurred by Indemnitee, as a plaintiff, in
suits against i-STAT or against directors or other officers of i-STAT (other
than suits brought by Indemnitee to enforce Indemnitee's rights under any
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provisions of this Agreement), unless such suit is authorized by the Board of
Directors or such indemnification is required by law;
(e) if a final, non-appealable decision by a court having
jurisdiction in the matter shall determine that such indemnification is not
lawful; or
(f) for amounts paid by Indemnitee in settlement of any
action or proceeding without i-STAT's written consent.
4. Indemnification Procedures.
(a) Notice to i-STAT. Promptly after receipt by Indemnitee
of notice of the commencement of any action, suit or proceeding, Indemnitee
shall, if a claim in respect thereof is to be made against i-STAT under this
Agreement, notify i-STAT of the commencement thereof. Such notice shall set
forth in reasonable detail the events giving rise to such claim and the amount
requested, if known. Failure of Indemnitee to provide such notice shall not
relieve i-STAT of its obligations under this Agreement except to the extent such
failure has a material and adverse effect on the ability of i-STAT to meet such
obligations.
(b) Notice to Insurers. If, at the time of receipt of such
notice, i-STAT has directors and officers liability insurance in effect, i-STAT
shall give prompt notice of the commencement of such action, suit or proceeding
to the insurers in accordance with the procedures set forth in the respective
policies in favor of Indemnitee. i-STAT shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of Indemnitee, all
losses and expenses payable as a result of such action, suit or proceeding in
accordance with the terms of such policies.
(c) Advancement of Expenses. Subject to subsections (d) and
(e) below, the costs and expenses reasonably incurred by Indemnitee or on
Indemnitee's behalf in investigating, defending or appealing any action, suit or
proceeding, whether civil, criminal, administrative or investigative, or in
enforcing Indemnitee's rights under any provisions of this Agreement, covered by
Section 2 above shall be paid by i-STAT within 20 days of Indemnitee's written
request therefor even if there has been no final disposition of such action,
suit or proceeding. Indemnitee's written request shall state the amount
requested and shall be accompanied by copies of the invoices or other relevant
documentation.
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(d) Undertaking to Repay Advances. Indemnitee agrees that
Indemnitee will reimburse i-STAT for all advances paid by i-STAT to Indemnitee
under this Agreement in the event and only to the extent that it shall
ultimately be determined that Indemnitee was not entitled to be indemnified
under this Agreement.
(e) Assumption of Defense by i-STAT. Except as otherwise
provided below, i-STAT, jointly with any other indemnifying party similarly
notified, will be entitled to assume the defense of any action, suit or
proceeding of which it has been notified by Indemnitee pursuant to subsection
(a) above, with counsel reasonably satisfactory to Indemnitee. After notice from
i-STAT to Indemnitee of its election to assume the defense thereof, i-STAT will
not be liable to Indemnitee under this Agreement for any legal or other expenses
subsequently incurred by Indemnitee; provided, however, that Indemnitee shall
have the right to employ Indemnitee's own counsel in such action, suit or
proceeding at the expense of i-STAT if, at any time after such notice from
i-STAT, (i) the employment of counsel by Indemnitee has been authorized by
i-STAT, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between i-STAT and Indemnitee in the conduct of such
defense, or (iii) i-STAT shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of
Indemnitee's counsel shall be subject to reimbursement in accordance with the
terms of this Agreement. i-STAT shall not be entitled to assume Indemnitee's
defense of any action, suit or proceeding brought by i-STAT or as to which
Indemnitee shall have made the conclusion provided for in clause (ii) above.
(f) Determination of Right to Entitlement. (i) In the event
that Indemnitee incurs liability for any fines, judgments, liabilities,
penalties or amounts paid in settlement, and indemnification is sought under
this Agreement, i-STAT shall pay (or provide for payment if so required by the
terms of any judgment or settlement) such amounts within 30 business days of
Indemnitee's written request therefor unless a determination is made within such
30 business days that the claims giving rise to such request are excluded or
indemnification is otherwise not due under this Agreement. Such determination,
and any determination required by applicable law as to whether Indemnitee has
met the standard of conduct required to qualify and entitle Indemnitee,
partially or fully, to indemnification under Section 2 of this Agreement, shall
be made, at i-STAT's discretion, (1) by the Board of Directors of i-STAT by a
majority vote of the directors who were not parties to such action, suit or
proceeding even though less than a quorum, or (2) if such a majority is not
obtainable, or even if
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<PAGE> 8
obtainable a majority of the disinterested directors so directs, by written
opinion of independent legal counsel selected by i-STAT and reasonably
satisfactory to Indemnitee, or (3) by i-STAT's stockholders; provided, however,
that if a change of control has occurred such determination shall be made by
written opinion of independent legal counsel selected by Indemnitee or, if
requested by Indemnitee, by i-STAT. The term "independent legal counsel" shall
mean for this purpose an attorney or firm of attorneys experienced in matters of
corporation law that is not now nor has within the previous three years been
retained to represent Indemnitee, i-STAT or any other party to the proceeding
giving rise to the claim for indemnification hereunder; provided that
"independent legal counsel" shall not include any person who under applicable
standards of professional conduct would have a conflict of interest in
representing Indemnitee or i-STAT in an action to determine Indemnitee's rights
under this Agreement. The term "change of control" shall mean: (1) the
consummation of any transaction after which any "person" or "group" (as such
terms are used in Sections 3(a)(9), 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act")) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities, or possesses the power to vote or control the vote of securities, of
i-STAT representing 30% or more of the combined voting power of either the
Common Stock or all outstanding securities of i-STAT; or (2) the stockholders of
i-STAT approve a merger or consolidation of i-STAT with any other corporation or
entity, other than a merger or consolidation which would result in the voting
securities of i-STAT outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 66 2/3% of the combined voting
power of the voting securities of i-STAT or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of i-STAT
approve a plan of complete liquidation of i-STAT or an agreement for the sale or
disposition by i-STAT of all or substantially all of i-STAT's assets.
(ii) Notwithstanding the foregoing, Indemnitee may
within 60 days after a determination adverse to Indemnitee has been made as
provided above, or if no determination has been made within 30 business days of
Indemnitee's written request for payment, petition the Court of Chancery of the
State of Delaware or any other court of competent jurisdiction, or may seek an
award in arbitration to be conducted by a single arbitrator pursuant to the
rules of the American Arbitration Association, which award shall be deemed
final, unappealable and binding, to determine
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whether Indemnitee is entitled to indemnification under this Agreement, and such
court or arbitrator, as the case may be, shall thereupon have the exclusive
authority to make such determination unless and until such court or arbitrator
dismisses or otherwise terminates such action without having made a
determination. The court or arbitrator, as the case may be, shall make an
independent determination of entitlement irrespective of any prior determination
made by the Board of Directors, independent legal counsel or stockholders. In
any such action before the court or arbitrator, Indemnitee shall be presumed to
be entitled to indemnification and i-STAT shall have the burden of proving that
indemnification is not required under this Agreement. All fees and expenses of
any arbitrator pursuant to this provision shall be paid by i-STAT.
(g) Enforcement Expenses. In the event that Indemnitee
brings suit or takes any other action to enforce Indemnitee's rights or to
collect monies due under this Agreement, and if Indemnitee is successful
therein, i-STAT shall reimburse (to the extent not previously advanced)
Indemnitee for all of Indemnitee's reasonable expenses, including attorneys'
fees, in any such suit or action.
5. Continuation of Indemnification. i-STAT's obligations to
indemnify Indemnitee hereunder shall continue throughout the period Indemnitee
is an executive officer of i-STAT (or is serving at i-STAT's request in the
capacities described in subsections 2(a) and 2(b) above) and thereafter so long
as Indemnitee shall be subject to any possible claim, action, suit or proceeding
by reason of the fact that Indemnitee was an executive officer of i-STAT (or was
serving in such other capacities).
6. Successors and Assigns. This Agreement shall be binding upon
i-STAT, its successors and assigns (including any transferee of all or
substantially all of its assets and any successor by merger or otherwise by
operation of law), and shall inure to the benefit of Indemnitee and Indemnitee's
heirs, personal representatives, executors and administrators and shall be
binding upon Indemnitee and Indemnitee's successors in interest under this
Agreement.
7. Rights Not Exclusive. The rights provided hereunder shall not
be deemed exclusive of any other rights to which Indemnitee may be entitled
under any provision of law, Certificate of Incorporation, By-law, other
agreement, vote of stockholders or of disinterested directors or otherwise, both
as to action in Indemnitee's official capacity and as to action in any other
capacity while occupying any of the positions referred to in Section 2 of this
Agreement.
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8. Subrogation. Upon payment of any amount under this Agreement,
i-STAT shall be subrogated to the extent of such payment to all of Indemnitee's
rights of recovery therefor and Indemnitee shall take all reasonable actions
requested by i-STAT to secure such rights, including, without limitation,
execution of all documents necessary to enable i-STAT to enforce such rights.
9. Severability. In the event that any provision of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason,
such provision shall be limited or modified in its application to the minimum
extent necessary to avoid a violation of law, and, as so limited or modified,
such provision and the balance of this Agreement shall be enforceable in
accordance with their terms.
10. Integration. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to the
subject matter hereof.
11. Modification. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
12. Notices. All notices given under this Agreement shall be in
writing and delivered either (i) personally, (ii) by registered or certified
mail (postage prepaid, return receipt requested), (iii) by recognized overnight
courier service or (iv) by telecopy (if promptly followed by a copy delivered as
provided in clauses (i), (ii) or (iii) above), as follows:
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If to Indemnitee: _______________________
_______________________
_______________________
If to i-STAT: i-STAT Corporation
303 College Road East
Princeton, NJ 08540
Attention: Chief Executive
Officer
Notices hereunder given as provided above shall be deemed to be duly given upon
delivery if delivered personally, three business days after mailing if by
registered or certified mail, one business day after mailing if by overnight
courier service and upon confirmation of transmission if by telecopy.
13. Governing Law. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the day and year first above written.
i-STAT CORPORATION
By:_____________________________
Name: William P. Moffitt
Title: President and
Chief Executive Officer
________________________________
Indemnitee
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EXHIBIT 10.36
DIRECTOR INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this
____ day of _________, 199_, between i-STAT Corporation, a Delaware corporation
("i-STAT"), and __________________ ("Director").
WITNESSETH THAT:
WHEREAS, Director is a member of the Board of Directors of i-STAT
and in such capacity is performing a valuable service for i-STAT; and
WHEREAS, the by-laws of i-STAT (the "By-laws") provide for the
indemnification of its directors and executive officers to the maximum extent
authorized by law; and
WHEREAS, Section 145 of the Delaware General Corporation Law (the
"DGCL") specifically provides that it shall not be deemed exclusive of any other
rights to indemnification or advancement of expenses to which directors or
officers may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise; and
WHEREAS, the number of lawsuits and shareholders' derivative
lawsuits against corporations, their directors and officers has increased in
recent years, such lawsuits frequently are without merit and seek damages in
amounts having no reasonable relationship to the amount of compensation received
by the directors and officers from the corporation, and such lawsuits whether or
not meritorious are expensive and time-consuming to defend; and
WHEREAS, recent developments with respect to the application and
interpretation of the business judgment rule and statutory and by-law
indemnification provisions have created uncertainty regarding the adequacy and
reliability of the protections afforded to directors and officers thereby; and
WHEREAS, adequate directors and officers liability insurance may
not be available at a reasonable cost; and
WHEREAS, i-STAT wishes to have Director continue to serve as a
member of i-STAT's Board of Directors free from undue concern for unpredictable
or unreasonable claims
<PAGE> 2
for damages by reason of Director's status as a director of i-STAT, by reason of
Director's decisions or actions on its behalf or by reason of Director's
decisions or actions in another capacity while serving as a director of i-STAT;
and
WHEREAS, Director has expressed reluctance to continue to serve
as a member of i-STAT's Board of Directors without assurances that adequate
insurance and indemnification is and will continue to be provided; and
WHEREAS, in order to induce Director to continue to serve as a
member of the Board of Directors of i-STAT, i-STAT has determined and agreed to
enter into this Agreement with Director;
NOW, THEREFORE, in consideration of Director's continued service
as a member of the Board of Directors of i-STAT, the parties agree as follows:
1. Directors and Officers Liability Insurance.
(a) Except as provided in (b) below, i-STAT hereby agrees
to use its best efforts to obtain and maintain directors and officers liability
insurance for Director for so long as Director shall continue to serve as a
director of i-STAT and thereafter so long as Director shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that Director was a director of i-STAT.
(b) i-STAT shall have no obligation hereunder to obtain or
maintain directors and officers liability insurance if, in the reasonable
business judgment of the Board of Directors of i-STAT, such insurance is not
reasonably available, the premium costs for such insurance are disproportionate
to the amount of coverage provided, or the coverage provided by such insurance
is limited, by exclusions or otherwise, so as to provide an insufficient
benefit.
(c) In all policies of directors and officers liability
insurance, Director shall be covered as an insured party in such a manner as to
provide Director the same rights and benefits, subject to the same limitations,
as are accorded to i-STAT's director most favorably insured by such policies.
(d) i-STAT shall give prompt written notice to Director of
any amendment or other change or
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<PAGE> 3
modification, or any proposed amendment, change or modification, to any policy
of directors and officers liability insurance maintained by i-STAT and covering
Director.
2. Indemnification of Director. Subject only to the exclusions
set forth in this Agreement, i-STAT hereby agrees to hold harmless and indemnify
Director to the full extent authorized or permitted by Section 145 of the DGCL,
including any amendment thereof, or any other statutory provisions authorizing
or permitting such indemnification which are adopted after the date hereof.
Notwithstanding the foregoing, i-STAT shall not be required to indemnify
Director for any losses to the extent that such losses are covered by directors
and officers liability insurance as described in Section 1 above. Without
limiting the generality of the foregoing:
(a) Third Party Actions. i-STAT shall indemnify Director if
Director was or is a party or is threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of i-STAT) by reason of the fact that
Director is or was or had agreed to serve as (so long as Director actually is
serving or did so serve) a director of i-STAT, or is or was serving or had
agreed to serve as a director (so long as Director actually is serving or did so
serve) at the request of i-STAT as a director, officer, employee or agent of
another corporation, limited liability company, partnership, joint venture,
trust or other enterprise, against any and all expenses (including attorneys'
fees), liabilities, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by Director or on Director's behalf in
connection with such action, suit or proceeding, and any appeal therefrom, if
Director acted in good faith and in a manner Director reasonably believed to be
in or not opposed to the best interests of i-STAT, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Director's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that Director did not
satisfy the foregoing standard of conduct to the extent applicable thereto.
(b) Suits By or in the Right of i-STAT. i-STAT shall
indemnify Director if Director is or was a party or is threatened to be made a
party to any action or
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suit by or in the right of i-STAT by reason of the fact that Director is or was
or had agreed to be (so long as Director actually is or did become) a director
of i-STAT, or is or was serving or had agreed to serve (so long as Director
actually is or did so serve) at the request of i-STAT as a director, officer,
employee or agent of another corporation, limited liability company,
partnership, joint venture, trust or other enterprise, against any and all
expenses (including attorneys' fees) and, to the extent permitted by law,
amounts paid in settlement actually and reasonably incurred by Director or on
Director's behalf in connection with the defense or settlement of such action or
suit or any appeal therefrom provided that Director acted in good faith and in a
manner Director reasonably believed to be in or not opposed to the best
interests of i-STAT and except that no indemnification shall be made in respect
of any claim, issue or matter as to which Director shall have been adjudged to
be liable to i-STAT unless and only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
Director is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.
(c) Successful Defense. To the extent that Director has
been successful on the merits or otherwise in the defense of any action, suit or
proceeding referred to in subsections (a) or (b) of this Section 2, or in the
defense of any claim, issue or matter therein, i-STAT shall indemnify Director
against any and all expenses (including attorneys' fees) actually and reasonably
incurred by Director or on Director's behalf in connection therewith. Dismissal
of any action with prejudice, or a settlement not involving any payment or
assumption of liability, shall be deemed a successful defense.
(d) Partial Indemnification. If Director is entitled to
indemnification under any provision of this Agreement for a portion of the
expenses (including attorneys' fees), liabilities, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by Director or
on Director's behalf in the investigation, defense, appeal or settlement of such
suit, action or proceeding, but not, however, for the total amount thereof,
i-STAT shall nevertheless indemnify Director for the portion thereof to which
Director is entitled.
(e) Advancement of Expenses. All expenses (including
attorney and other expert and professional fees and expenses) incurred by
Director or on Director's behalf
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<PAGE> 5
in defending a civil or criminal action, suit or proceeding, or in enforcing
Director's rights under any provisions of this Agreement, shall be paid by
i-STAT in advance of the final disposition of such action, suit or proceeding in
the manner prescribed by Section 4 hereof.
(f) Amendments to Indemnification Rights. i-STAT shall not
adopt any amendment to its Restated Certificate of Incorporation, as amended
(the "Certificate") or By-Laws the effect of which would be to deny, diminish or
encumber Director's rights to indemnity pursuant to the Certificate, By-Laws,
the DGCL or any other applicable law as applied to any act or failure to act
occurring in whole or in part prior to the date (the "Effective Date") upon
which the amendment was approved by i-STAT's Board of Directors or stockholders,
as the case may be. In the event that i-STAT shall adopt any amendment to the
Certificate or By-Laws the effect of which is to change Director's rights to
indemnity under such instruments, such amendment shall apply only to acts or
failures to act occurring entirely after the Effective Date thereof. i-STAT
shall give written notice to Director of any proposal with respect to any such
amendment no later than the date such amendment is first presented to the Board
of Directors (or any committee thereof) for consideration, and shall provide a
copy of any such amendment to Director promptly after its adoption.
(g) Indemnification for Expenses as a Witness. To the
extent Director is, by reason of Director's status as a director of i-STAT, a
witness in any proceeding, i-STAT shall indemnify Director against all expenses
in connection therewith.
3. Limitations on Indemnification. No indemnity pursuant to
Section 2 hereof shall be paid by i-STAT:
(a) on account of Director's conduct which is finally
adjudged in a non-appealable decision to have been fraudulent, dishonest or
willful misconduct, or a knowing violation of law;
(b) on account of any suit in which judgment in a final,
non-appealable decision is rendered against Director for an accounting of
profits made from the purchase or sale by Director of securities of i-STAT
within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or similar provisions of federal or state law;
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<PAGE> 6
(c) on account of the receipt by Director of any personal
profit or advantage to which Director is adjudged in a final, non-appealable
decision not to be entitled;
(d) for expenses incurred by Director, as a plaintiff, in
suits against i-STAT or against other directors of i-STAT (other than suits
brought by Director to enforce Director's rights under any provisions of this
Agreement), unless such suit is authorized by the Board of Directors or such
indemnification is required by law;
(e) if a final, non-appealable decision by a court having
jurisdiction in the matter shall determine that such indemnification is not
lawful; or
(f) for amounts paid by Director in settlement of any
action or proceeding without i-STAT's written consent.
4. Indemnification Procedures.
(a) Notice to i-STAT. Promptly after receipt by Director of
notice of the commencement of any action, suit or proceeding, Director shall, if
a claim in respect thereof is to be made against i-STAT under this Agreement,
notify i-STAT of the commencement thereof. Such notice shall set forth in
reasonable detail the events giving rise to such claim and the amount requested,
if known. Failure of Director to provide such notice shall not relieve i-STAT of
its obligations under this Agreement except to the extent such failure has a
material and adverse effect on the ability of i-STAT to meet such obligations.
(b) Notice to Insurers. If, at the time of receipt of such
notice, i-STAT has directors and officers liability insurance in effect, i-STAT
shall give prompt notice of the commencement of such action, suit or proceeding
to the insurers in accordance with the procedures set forth in the respective
policies in favor of Director. i-STAT shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of Director, all
losses and expenses payable as a result of such action, suit or proceeding in
accordance with the terms of such policies.
(c) Advancement of Expenses. Subject to subsections (d) and
(e) below, the costs and expenses reasonably incurred by Director or on
Director's behalf in investigating, defending or appealing any action, suit or
-6-
<PAGE> 7
proceeding, whether civil, criminal, administrative or investigative, or in
enforcing Director's rights under any provisions of this Agreement, covered by
Section 2 above shall be paid by i-STAT within 20 days of Director's written
request therefor even if there has been no final disposition of such action,
suit or proceeding. Director's written request shall state the amount requested
and shall be accompanied by copies of the invoices or other relevant
documentation.
(d) Undertaking to Repay Advances. Director agrees that
Director will reimburse i-STAT for all advances paid by i-STAT to Director under
this Agreement in the event and only to the extent that it shall ultimately be
determined that Director was not entitled to be indemnified under this
Agreement.
(e) Assumption of Defense by i-STAT. Except as otherwise
provided below, i-STAT, jointly with any other indemnifying party similarly
notified, will be entitled to assume the defense of any action, suit or
proceeding of which it has been notified by Director pursuant to subsection (a)
above, with counsel reasonably satisfactory to Director. After notice from
i-STAT to Director of its election to assume the defense thereof, i-STAT will
not be liable to Director under this Agreement for any legal or other expenses
subsequently incurred by Director; provided, however, that Director shall have
the right to employ Director's own counsel in such action, suit or proceeding at
the expense of i-STAT if, at any time after such notice from i-STAT, (i) the
employment of counsel by Director has been authorized by i-STAT, (ii) Director
shall have reasonably concluded that there may be a conflict of interest between
i-STAT and Director in the conduct of such defense, or (iii) i-STAT shall not in
fact have employed counsel to assume the defense of such action, in each of
which cases the fees and expenses of Director's counsel shall be subject to
reimbursement in accordance with the terms of this Agreement. i-STAT shall not
be entitled to assume Director's defense of any action, suit or proceeding
brought by i-STAT or as to which Director shall have made the conclusion
provided for in clause (ii) above.
(f) Determination of Right to Entitlement. (i) In the event
that Director incurs liability for any fines, judgments, liabilities, penalties
or amounts paid in settlement, and indemnification is sought under this
Agreement, i-STAT shall pay (or provide for payment if so required by the terms
of any judgment or settlement) such amounts within 30 business days of
Director's written
-7-
<PAGE> 8
request therefor unless a determination is made within such 30 business days
that the claims giving rise to such request are excluded or indemnification is
otherwise not due under this Agreement. Such determination, and any
determination required by applicable law as to whether Director has met the
standard of conduct required to qualify and entitle Director, partially or
fully, to indemnification under Section 2 of this Agreement, shall be made, at
i-STAT's discretion, (1) by the Board of Directors of i-STAT by a majority vote
of the directors who were not parties to such action, suit or proceeding even
though less than a quorum, or (2) if such a majority is not obtainable, or even
if obtainable a majority of the disinterested directors so directs, by written
opinion of independent legal counsel selected by i-STAT and reasonably
satisfactory to Director, or (3) by i-STAT's stockholders; provided, however,
that if a change of control has occurred such determination shall be made by
written opinion of independent legal counsel selected by Director or, if
requested by Director, by i-STAT. The term "independent legal counsel" shall
mean for this purpose an attorney or firm of attorneys experienced in matters of
corporation law that is not now nor has within the previous three years been
retained to represent Director, i-STAT or any other party to the proceeding
giving rise to the claim for indemnification hereunder; provided that
"independent legal counsel" shall not include any person who under applicable
standards of professional conduct would have a conflict of interest in
representing Director or i-STAT in an action to determine Director's rights
under this Agreement. The term "change of control" shall mean: (1) the
consummation of any transaction after which any "person" or "group" (as such
terms are used in Sections 3(a)(9), 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act")) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities, or possesses the power to vote or control the vote of securities, of
i-STAT representing 30% or more of the combined voting power of either the
Common Stock or all outstanding securities of i-STAT; or (2) the stockholders of
i-STAT approve a merger or consolidation of i-STAT with any other corporation or
entity, other than a merger or consolidation which would result in the voting
securities of i-STAT outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 66 2/3% of the combined voting
power of the voting securities of i-STAT or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of i-STAT
approve a plan of complete
-8-
<PAGE> 9
liquidation of i-STAT or an agreement for the sale or disposition by i-STAT of
all or substantially all of i-STAT's assets.
(ii) Notwithstanding the foregoing, Director may
within 60 days after a determination adverse to Director has been made as
provided above, or if no determination has been made within 30 business days of
Director's written request for payment, petition the Court of Chancery of the
State of Delaware or any other court of competent jurisdiction, or may seek an
award in arbitration to be conducted by a single arbitrator pursuant to the
rules of the American Arbitration Association, which award shall be deemed
final, unappealable and binding, to determine whether Director is entitled to
indemnification under this Agreement, and such court or arbitrator, as the case
may be, shall thereupon have the exclusive authority to make such determination
unless and until such court or arbitrator dismisses or otherwise terminates such
action without having made a determination. The court or arbitrator, as the case
may be, shall make an independent determination of entitlement irrespective of
any prior determination made by the Board of Directors, independent legal
counsel or stockholders. In any such action before the court or arbitrator,
Director shall be presumed to be entitled to indemnification and i-STAT shall
have the burden of proving that indemnification is not required under this
Agreement. All fees and expenses of any arbitrator pursuant to this provision
shall be paid by i-STAT.
(g) Enforcement Expenses. In the event that Director brings
suit or takes any other action to enforce Director's rights or to collect monies
due under this Agreement, and if Director is successful therein, i-STAT shall
reimburse (to the extent not previously advanced) Director for all of Director's
reasonable expenses, including attorneys' fees, in any such suit or action.
5. Continuation of Indemnification. i-STAT's obligations to
indemnify Director hereunder shall continue throughout the period Director is a
director of i-STAT (or is serving at i-STAT's request in the capacities
described in subsections 2(a) and 2(b) above) and thereafter so long as Director
shall be subject to any possible claim, action, suit or proceeding by reason of
the fact that Director was a director of i-STAT (or was serving in such other
capacities).
6. Successors and Assigns. This Agreement shall be binding upon
i-STAT, its successors and assigns
-9-
<PAGE> 10
(including any transferee of all or substantially all of its assets and any
successor by merger or otherwise by operation of law), and shall inure to the
benefit of Director and Director's heirs, personal representatives, executors
and administrators and shall be binding upon Director and Director's successors
in interest under this Agreement.
7. Rights Not Exclusive. The rights provided hereunder shall not
be deemed exclusive of any other rights to which Director may be entitled under
any provision of law, Certificate of Incorporation, By-law, other agreement,
vote of stockholders or of disinterested directors or otherwise, both as to
action in Director's official capacity and as to action in any other capacity
while occupying any of the positions referred to in Section 2 of this Agreement.
8. Subrogation. Upon payment of any amount under this Agreement,
i-STAT shall be subrogated to the extent of such payment to all of Director's
rights of recovery therefor and Director shall take all reasonable actions
requested by i-STAT to secure such rights, including, without limitation,
execution of all documents necessary to enable i-STAT to enforce such rights.
9. Severability. In the event that any provision of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason,
such provision shall be limited or modified in its application to the minimum
extent necessary to avoid a violation of law, and, as so limited or modified,
such provision and the balance of this Agreement shall be enforceable in
accordance with their terms.
10. Integration. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to the
subject matter hereof.
11. Modification. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
12. Notices. All notices given under this Agreement shall be in
writing and delivered either (i) personally, (ii) by registered or certified
mail (postage prepaid, return receipt requested), (iii) by recognized overnight
courier service or (iv) by telecopy (if promptly followed by a copy delivered as
provided in clauses (i), (ii) or (iii) above), as follows:
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<PAGE> 11
If to Director: _______________________
_______________________
_______________________
If to i-STAT: _______________________
_______________________
_______________________
Notices hereunder given as provided above shall be deemed to be duly given upon
delivery if delivered personally, three business days after mailing if by
registered or certified mail, one business day after mailing if by overnight
courier service and upon confirmation of transmission if by telecopy.
13. Governing Law. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of Delaware.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the day and year first above written.
i-STAT CORPORATION
By:_____________________________
Name:
Title:
________________________________
[Name]
Director
<PAGE> 1
Exhibit 10.37
LEASE MODIFICATION AND EXPANSION AGREEMENT
THIS LEASE MODIFICATION AND EXPANSION AGREEMENT (the "Agreement")
is made as of the 20th day of November, 1996, by and between LINPRO PRINCETON
O.R. OFFICES II LIMITED PARTNERSHIP, a New Jersey limited partnership, with an
address of 666 Plainsboro Road, Suite 1100, P.O. Box 279, Plainsboro, New Jersey
08536 ("Landlord") and I-STAT CORPORATION, a Delaware corporation, with an
address of 303 College Road East, Princeton, New Jersey 08540 ("Tenant").
BACKGROUND
Landlord and Tenant are parties to a certain lease dated May 27,
1993 ("Lease") for certain premises located in 109 Morgan Lane, Plainsboro, New
Jersey (the "Current Premises") as more fully described in the Lease. Landlord
and Tenant desire to expand the Current Premises by providing for the leasing of
approximately 11,200 rentable square feet of additional space, as the same is
depicted on Exhibit "A" hereto (the "Expansion Space") upon the terms and
conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and intending to be legally
bound hereby, Landlord and Tenant agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined in this
Agreement shall have the same meaning as in the Lease. Terms which are defined
herein and used in the Lease shall have a new meaning ascribed to such terms in
this Agreement.
2. PREMISES. Subject to the remaining terms hereof, the Premises
described in Article l(b) of the Lease is hereby expanded to include the
Expansion Space. As of the commencement of the Term for the Expansion Space, all
references in the Lease to the "Premises" shall mean the Premises as amended by
this Agreement.
3. TERM. The Term for the Expansion Space shall commence on
February 1, 1997, and shall end on the same date as the end of the Term of the
Lease for the Current Premises.
<PAGE> 2
4. RENT. The annual Fixed Rent for the Expansion Space shall be
$67,200.00, to be paid in equal monthly installments of $5,600.00. Rental
payments shall be made at the time and in the same manner as payments prescribed
for the Current Premises under the Lease. This paragraph 4 shall in no way
supersede or replace the rental payment or other requirements under the Lease
regarding the Current Premises. However, provided Tenant has complied with all
of the terms and conditions of this Lease on its part to be performed and/or
observed, and is not then in default from time to time hereunder, Tenant shall
not be obligated to make payment of Fixed Rent (not to include Additional Rent)
for the Expansion Space (not to include the Fixed Rent for the Current Premises)
during the first two (2) months of the initial Term for the Expansion Space.
Notwithstanding the foregoing, however, in the event of a default
by Tenant as described in this Lease that entitles Landlord to terminate this
Lease, Tenant shall be obligated to pay to Landlord, immediately upon demand
therefor, as Additional Rent, a sum equal to any and all rent which would have
been payable but for Landlord's granting to Tenant a period of "rent free"
occupancy as provided in the preceding paragraph.
5. ADDITIONAL RENT. Provisions of the Lease relating to the
payment by Tenant of Additional Rent shall remain as provided in the Lease,
except as modified by this paragraph 5. Effective February 1, 1997, and
thereafter through the end of the Term, Tenant's Allocated Share, as defined in
Article 1(i) of the Lease, is amended to be 52.33%, based upon the Rentable
Area, as defined in Article 1(j) of the Lease, of 30,325 square feet.
6. DEMISING OF EXPANSION SPACE. Tenant agrees to accept the
Expansion Space in its current "as is", "where is" condition. No
representations, warranties or covenants by Landlord made with respect to the
Current Premises shall be applicable with respect to the Expansion Space. Tenant
agrees that it shall be responsible, at its sole cost and expense, for the
construction of all improvements to the Expansion Space required or desired by
Tenant, except for any mandated improvements to the Building fire protection
system, as provided in Section 8 hereof. Tenant shall construct its improvements
in accordance with the plans and specifications approved by Landlord, and
otherwise in accordance with the provisions of Article 9 of the Lease. Any
permits, approvals or certificates necessary as the result of Tenant's
improvements shall be obtained by the Tenant at Tenant's sole cost and expense.
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<PAGE> 3
7. BROKERS. Each party represents and warrants to the other party
that it has dealt with no broker or other person entitled to claim fees for such
services in connection with the negotiation and letting of the Expansion Space,
except for Cushman & Wakefield (the "Expansion Space Broker"). Landlord shall be
responsible for the payment of any commission to the Expansion Space Broker
pursuant to Landlord's separate agreement. Each party agrees to defend,
indemnify and hold the other party harmless from and against any and all claims
for brokerage or other commissions which may at any time be asserted against the
indemnified party is untrue, together with any costs and expenses (including
reasonable attorneys fees) relating to such claim.
8. BUILDING FIRE PROTECTION SPRINKLER SYSTEM. Landlord has been
advised by the Township of Plainsboro Fire Marshal that the Township will
require a second riser to be installed as part of the Building fire protection
sprinkler system (the "System") by reason of the occupancy of the Expansion
Space. Landlord disputes this determination and believes the System as now
constructed is in compliance with all applicable code requirements,
notwithstanding the occupancy of the Expansion Space. Landlord covenants and
agrees that it shall contest or appeal at its expense any determination or
citation issued by the Township with respect to installation of the second riser
to the System in order that the legality of the System is confirmed. If
Landlord's contest or appeal shall fail, so as to require installation of the
second riser to the System, then Landlord agrees that it shall promptly comply
at its expense with such mandated installation to the System, and shall use all
reasonable efforts to substantially complete such installation on or before
February 15, 1997.
9. NON-APPLICABLE PROVISIONS. Article 35 of the Lease, relating
to certain rights of the Tenant in the Expansion Space is hereby deleted.
Landlord and Tenant further acknowledge and agree that those provisions of the
Lease, which, by their nature, apply only to the letting of the Current Premises
(e.g. without limitation, Article 4, dealing with construction by Landlord)
shall not apply to the Expansion Space. Landlord and Tenant acknowledge that,
without limiting the foregoing sentences, Tenant's option to extend the Term of
the Lease provided in Article 3F shall apply to the Current Premises and the
Expansion Space. However, the Fixed Rent during the Renewal Term for the
Expansion Space shall be at 95% of the then prevailing fair market rent.
-3-
<PAGE> 4
10. CONFLICT; FINAL AGREEMENT. Except as specifically set forth
herein, all terms and provisions of the Lease (a) are incorporated herein and
made a part hereof as if fully set forth herein and (b) shall continue unamended
in full force and effect. In the event of any inconsistencies between the Lease
and this Agreement, the terms of this Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the date and year first above written.
LANDLORD:
LINPRO PRINCETON O.R. OFFICES II
LIMITED PARTNERSHIP,
A New Jersey limited partnership
By: LCOR Asset Management Limited
Partnership,
Attest or Witness: By: LCOR Inc., General Partner
/s/__________________________ By: /s/__________________________
TENANT:
Attest or Witness: I-STAT CORPORATION,
A Delaware corporation
/s/__________________________ By: /s/__________________________
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<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of i-STAT Corporation on Form S-8/S-3 (File No. 33-48889) and Form
S-8 (File Nos. 33-67456, 33-76152 and 33-96114) of our reports dated January 28,
1997, on our audits of the consolidated financial statements and financial
statement schedule of i-STAT Corporation as of December 31, 1996 and 1995, and
for the years ended December 31, 1996, 1995 and 1994, which reports are included
in this Annual Report on Form 10-K. We also consent to the reference to our firm
under the caption "Selected Consolidated Financial Data".
Princeton, New Jersey Coopers & Lybrand L.L.P.
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 28,417
<SECURITIES> 0
<RECEIVABLES> 5,143
<ALLOWANCES> (195)
<INVENTORY> 7,788
<CURRENT-ASSETS> 42,108
<PP&E> 24,098
<DEPRECIATION> (12,564)
<TOTAL-ASSETS> 55,365
<CURRENT-LIABILITIES> 8,531
<BONDS> 0
0
214
<COMMON> 1,682
<OTHER-SE> 44,938
<TOTAL-LIABILITY-AND-EQUITY> 55,365
<SALES> 30,330
<TOTAL-REVENUES> 30,330
<CGS> 26,291
<TOTAL-COSTS> 26,291
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 263
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (17,456)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,456)
<EPS-PRIMARY> (1.31)
<EPS-DILUTED> 0
</TABLE>
