<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission File Number 0-19841
i-STAT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-2542664
-------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
303 College Road East, Princeton, New Jersey 08540
(Address of Principal Executive Offices) (Zip Code)
(609) 243-9300
--------------
(Registrant's telephone number, including area code)
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 | |
The number of shares outstanding of each of the Issuer's classes of common stock
as of the latest practicable date.
<TABLE>
<CAPTION>
Class August 12, 1998
----- ---------------
<S> <C>
Common Stock, $ .15 par value 13,244,415
</TABLE>
<PAGE> 2
i-STAT CORPORATION
TABLE OF CONTENTS
PAGE
NUMBER
------
PART I FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Consolidated Condensed Statements of Operations and
Comprehensive Income for the three months and six
months ended June 30, 1998 and 1997 ......................... 3
Consolidated Condensed Balance Sheets as of June 30,
1998 and December 31, 1997 .................................. 4
Consolidated Condensed Statements of Cash Flows for
the six months ended June 30, 1998 and 1997 ................. 5
Notes to Consolidated Condensed Financial Statements ........... 6 - 10
ITEM 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations ......... 11 - 16
PART II OTHER INFORMATION
ITEM 1 - Legal Proceedings ..................................... 17
ITEM 4 - Submission of Matters to a Vote of Security
Holders ............................................... 18
ITEM 6 - Exhibits and Reports on Form 8-K ...................... 19
SIGNATURES ........................................................... 20
2
<PAGE> 3
i-STAT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales .......................... $ 10,454 $ 9,146 $ 19,240 $ 16,952
Cost of sales ...................... 8,431 7,258 16,121 13,591
------------ ------------ ------------ ------------
Gross profit .............. 2,023 1,888 3,119 3,361
------------ ------------ ------------ ------------
Operating expenses:
Research and development ........ 2,022 1,808 3,791 3,427
General and administrative ...... 1,844 1,521 3,699 2,978
Consolidation of operations ..... (7) -- 729 --
Sales and marketing ............. 3,230 3,337 6,502 6,069
------------ ------------ ------------ ------------
Total operating expenses ..... 7,089 6,666 14,721 12,474
------------ ------------ ------------ ------------
Operating loss ............ (5,066) (4,778) (11,602) (9,113)
------------ ------------ ------------ ------------
Other income (expense), net ........ 345 298 754 639
------------ ------------ ------------ ------------
Net loss ........................... (4,721) (4,480) (10,848) (8,474)
------------ ------------ ------------ ------------
Other comprehensive income/(loss):
Foreign currency translation .... (5) (5) (12) (4)
------------ ------------ ------------ ------------
Comprehensive loss ................. $ (4,726) $ (4,485) $ (10,860) $ (8,478)
============ ============ ============ ============
Basic and diluted net loss per share $ (0.31) $ (0.32) $ (0.71) $ (0.62)
============ ============ ============ ============
Shares used in computing basic and
diluted net loss per share ...... 15,369,324 14,032,398 15,362,564 13,700,335
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated condensed financial statements.
3
<PAGE> 4
i-STAT CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 22,033 $ 32,914
Accounts receivable, net .......................... 6,354 5,206
Inventories ....................................... 5,544 5,927
Prepaid expenses and other current assets ......... 668 775
--------- ---------
Total current assets ........................... 34,599 44,822
Plant and equipment, net of accumulated depreciation
of $19,046 and $16,858 ............................ 13,830 12,619
Other assets ......................................... 1,640 1,729
--------- ---------
Total assets ................................... $ 50,069 $ 59,170
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................. $ 2,383 $ 2,174
Accrued expenses .................................. 5,185 3,733
Deferred revenue .................................. 133 218
--------- ---------
Total current liabilities ...................... 7,701 6,125
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 .................................... -- --
Series B Preferred Stock, $.10 par value,
2,138,702 shares authorized and issued ......... 214 214
Common Stock, $.15 par value, shares authorized
25,000,000; shares issued 13,244,957 at June
30, 1998 and 13,203,527 at December 31, 1997 ... 1,987 1,981
Additional paid-in capital ........................ 209,908 209,594
Other, net ........................................ (304) (194)
Accumulated deficit ............................... (169,133) (158,273)
Accumulated other comprehensive loss related to
foreign currency translation ................... (304) (277)
--------- ---------
Total stockholders' equity ..................... 42,368 53,045
--------- ---------
Total liabilities and stockholders' equity ..... $ 50,069 $ 59,170
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated condensed financial statements.
4
<PAGE> 5
i-STAT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................. $(10,848) $ (8,474)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ...................... 2,247 1,850
Deferred revenue ................................... (85) (1,541)
Other .............................................. (106) (95)
Change in assets and liabilities ..................... 1,155 (397)
-------- --------
Net cash used in operating activities .............. (7,637) (8,657)
-------- --------
Cash flows from investing activities:
Purchase of investments .............................. -- (22,976)
Purchase of equipment ................................ (3,398) (2,431)
Other ................................................ (125) (69)
-------- --------
Net cash used in investing activities .............. (3,523) (25,476)
-------- --------
Cash flows from financing activities:
Proceeds from sale of Common Stock ................... 320 288
Net proceeds from private placement of Common Stock .. -- 22,957
-------- --------
Net cash provided by financing activities .......... 320 23,245
Effect of currency exchange rate changes on cash ....... (41) (37)
-------- --------
Net decrease in cash and cash equivalents .............. (10,881) (10,925)
Cash and cash equivalents at beginning of period ....... 32,914 28,417
-------- --------
Cash and cash equivalents at end of period ............. $ 22,033 $ 17,492
======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated condensed financial statements.
5
<PAGE> 6
i-STAT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. GENERAL
Basis of Presentation:
The information presented as of June 30, 1998 and 1997, and for the
periods then ended, is unaudited, but includes all adjustments (consisting
only of normal recurring accruals) which the management of i-STAT
Corporation (the "Company") believes to be necessary for the fair
presentation of results for the periods presented. The results for the
interim periods are not necessarily indicative of results to be expected
for the year. The year end consolidated condensed balance sheet data was
derived from the audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. These
condensed financial statements should be read in conjunction with the
Company's audited financial statements for the year ended December 31,
1997, including the Notes thereto, which were included as part of the
Company's Annual Report on Form 10-K, File No. 0-19841.
Recently Issued Accounting Pronouncements:
The Company has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income", which establishes standards for the
reporting and display of comprehensive income and its components in a full
set of financial statements. The adoption of this Statement had no impact
on the Company's net loss or stockholders' equity. Statement No. 130
requires foreign currency translation adjustments, which prior to adoption
were reported separately in stockholders' equity, to be included in other
comprehensive earnings. Prior year financial statements have been
reclassified to conform to the requirements of Statement No. 130.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131 " Disclosures about Segments of an Enterprise and Related
Information" which establishes standards for the way that public business
enterprises report information about operating segments, geographic areas,
products and major customers. The Company is required to adopt this
standard as of the end of 1998 and is currently evaluating the impact of
this standard on the Company's required disclosure.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132 "Employers' Disclosures about Pensions and Other
Postretirement Benefits." This statement modifies financial statement
disclosures related to pension and other postretirement plans, including
standardization of disclosures for pension plans and other postretirement
plans, permitting the aggregation of information regarding certain plans,
additional disclosures related to the change in benefit obligations and
the fair value of plan assets, and elimination of certain other
disclosures. As with SFAS Nos. 130 and 131, this statement addresses
disclosure issues and therefore will not have an effect on the Company's
financial position or results of operations, and the Company is required
to adopt this standard as of the end of 1998.
Reclassification:
Certain reclassifications have been made to 1997 amounts to conform them
to the 1998 presentation.
6
<PAGE> 7
i-STAT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
(continued)
2. NET LOSS PER SHARE
The Company has adopted Statement of Financial Accounting Standards No.
128 "Earnings Per Share" which requires the presentation of basic earnings
per share (EPS), and diluted earnings per share. Basic EPS excludes
dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. The Company
has not included potential common shares in the diluted per-share
computation as the result is antidilutive.
The numerator (loss) and denominator (shares) of the basic and diluted per
share computations were as follows:
<TABLE>
<CAPTION>
In thousands of dollars, except shares and per share amount
---------------------------------------------------------------------------------------------
Loss Shares Per-Share Amount Before
Comprehensive Income/(Loss)
<S> <C> <C> <C>
For the quarter ended June 30, 1998 $ (4,721) 15,369,324 $(0.31)
====================================================
For the quarter ended June 30, 1997 $ (4,480) 14,032,398 $(0.32)
====================================================
For the six months ended June 30, 1998 $(10,848) 15,362,564 $(0.71)
====================================================
For the six months ended June 30, 1997 $ (8,474) 13,700,335 $(0.62)
====================================================
</TABLE>
Basic and diluted 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 calculations
since their date of issuance as they are convertible into common shares on
a 1:1 basis and have substantially the same characteristics as common
stock.
Options to purchase 2,240,764 shares of common stock at $1.50 - $34.11 per
share, which expire on various dates from February 1999 to June 2008, were
outstanding at June 30, 1998. These shares were not included in the
computation of diluted EPS because the effect would be antidilutive due to
the net loss.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
(In thousands of dollars)
<S> <C> <C>
Raw materials $2,071 $2,206
Work in process 2,312 1,482
Finished goods 1,161 2,239
------ ------
$5,544 $5,927
====== ======
</TABLE>
7
<PAGE> 8
i-STAT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
(continued)
4. 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. In February 1998, the Court entered summary judgment in favor
of the Company on the issue of patent infringement. Accordingly, the
Company has been found not to infringe, either literally or under the
patent law "doctrine of equivalents", Nova's patent. However, the
plaintiff has appealed and should it prevail on this issue, a prospect
which the Company believes to be unlikely, it could have a material
impact on the financial position, results of operations and cash flows
of the Company. The Company had asserted and is pursuing 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 other similarly situated, Plaintiff,
v. i-STAT Corporation, William P. Moffitt, Lionel M. 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 and negligent misrepresentation,
and is predicated on a "fraud on the market" theory 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, on April
28, 1998, the Court entered summary judgment in favor of all the
defendants. However, the plaintiffs have appealed and, should they 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 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.
5. CONSOLIDATION OF OPERATIONS
In January 1998, the Company decided to consolidate all its cartridge
assembly operations in its manufacturing facility in Ontario, Canada. In
order to facilitate this move, the Company will relocate its cartridge
assembly operation in Plainsboro, New Jersey to its manufacturing facility
in Ontario, Canada. The relocation of cartridge assembly commenced in June
1998, with the transfer of one assembly line to Canada, and is expected to
be completed by December 1998. As a result of this consolidation of
operations, 66 employees in the cartridge assembly operations were
notified during the first quarter of 1998 that their employment would be
terminated.
The Company's lease for its instrument operations, engineering, customer
support, selected research and development, marketing and administrative
facility in Princeton, New Jersey, expires in September 1998. The Company
will relocate these activities, together with product distribution
operations currently located in the Plainsboro facility, to a 37,474
square foot leased facility in East Windsor, New Jersey. The charge to
earnings in 1998 for these relocations, including severance and retention
payments to affected employees, the physical move of equipment, rent and
utilities on the unoccupied Plainsboro facility until that lease expires
in February 1999, and readdressing packaging, marketing materials and
stationery, and miscellaneous costs is estimated to be approximately $1.5
million, with approximately $0.7 million being recorded as a charge to
earnings in the six months ended June 30, 1998. The charge to earnings in
the first six months of 1998 comprises approximately $0.6 million for
severance and retention payments, and approximately $0.1 million for lease
costs in respect of the unoccupied Plainsboro facility. Retention payments
are charged to expense over the retention period.
8
<PAGE> 9
i-STAT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
(continued)
6. SUBSEQUENT EVENTS
On August 3, 1998, the Company and Abbott Laboratories ("Abbott") signed
agreements (the "Alliance Agreements") providing for a long-term sales,
marketing and research alliance. Abbott will become, subject to the
existing rights of the Company's other international distributors, the
exclusive worldwide distributor of the Company's hand-held blood analyzer
products (including cartridges) and any new products the Company may
develop for use in the professionally attended human healthcare delivery
market. The closing of the Alliance Agreements is expected to occur on or
before the fifth business day after the expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and satisfaction or waiver of applicable closing
conditions. Either party may terminate the Alliance Agreements if the
closing does not occur by December 11, 1998.
Abbott will assume the Company's current product sales to U.S. customers
(the "Base Business") at no profit to Abbott, and the Company and Abbott
will share in the incremental profits derived from product sales beyond
the Base Business. Abbott will prepay to the Company a total of
$25,000,000 during the first three years of the Marketing and
Distribution Agreement (the "Distribution Agreement") as guaranteed
future purchases of incremental units. Such prepayments will be repaid by
the Company to Abbott as a credit against actual purchases by Abbott of
incremental units above the Base Business. The parties expect that
distribution under the Distribution Agreement will commence in the United
States on January 1, 1999.
The Distribution Agreement expires on December 31, 2003, subject to
automatic extensions for additional one-year periods, unless either party
provides the other with at least 12 months prior written notice, except
that the Company may terminate the Distribution Agreement on December 31,
2001 if Abbott fails to achieve a three- year milestone minimum growth
rate in sales of the Company's products covered by the Distribution
Agreement. If the Distribution Agreement is terminated, other than (i) by
the Company for cause or for Abbott's failure to achieve the three-year
milestone minimum growth rate; or (ii) by Abbott if Abbott delivers the
requisite notice terminating the Distribution Agreement after the initial
term, then, the Company will be obligated to pay to Abbott a one-time
termination fee calculated to compensate Abbott for a portion of its costs
in undertaking the distribution relationship, and residual payments for
five years following termination based on a percentage of Abbott's net
sales of the Company's products during the final twelve months of the
Distribution Agreement. In the event that such termination occurs within
the first three years of the Distribution Agreement, the Company also must
refund Abbott for any gross margin prepayments made and not yet credited
to Abbott at the time of such termination.
Under the terms of the Funded Research & Development and License Agreement
(the "Research Agreement"), the Company will conduct research and will
develop products primarily to be commercialized by Abbott. Such research
and development will be funded by Abbott and Abbott will have exclusive
worldwide commercialization rights to the products developed under the
Research Agreement subject to rights previously granted to third parties
and certain other limitations. The parties have identified two initial
projects to pursue under the Research Agreement, including the research
and development of tests useful in the diagnosis and treatment of
myocardial infarction and coronary artery disease. The Company and Abbott
will jointly own the intellectual property which is developed during the
course of work performed under the Research Agreement. In addition, Abbott
will license certain of its intellectual property to the Company which is
necessary to develop and manufacture the products contemplated by the
Research Agreement. The Research Agreement terminates upon expiration or
termination of the Distribution Agreement, unless earlier terminated as
provided therein. Upon such expiration or earlier termination, both the
Company and Abbott will be permitted to distribute the products developed
under the Research Agreement in the territory covered by the Distribution
Agreement.
9
<PAGE> 10
i-STAT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
(continued)
At the closing under the Stock Purchase Agreement, Abbott will purchase
2,000,000 shares (the "Purchased Shares") of the Company's Common Stock,
par value $0.15 per share, at a price of $11.35 per share, for an
aggregate purchase price of $22,700,000 before expenses. The Purchased
Shares will represent, after issuance, approximately 11.5% of the
outstanding voting securities of the Company. The Stock Purchase
Agreement, together with a related Registration Rights Agreement which is
to be executed at closing, contains certain terms and conditions
pertaining to the voting and transfer of the Purchased Shares.
In addition to the Distribution Agreement, the Research Agreement and the
Stock Purchase Agreement, on August 3, 1998, the Company and Abbott also
entered into a Standstill Agreement providing, among other things, for
limitations on Abbott's ability to purchase the Company's Common Stock, or
to propose any merger or business combination with the Company or purchase
of a material portion of the Company's assets.
The foregoing description of the Alliance Agreements and the Registration
Rights Agreement is qualified in its entirety by reference to the actual
text of such agreements, copies of which are being filed with the
Commission as exhibits to this Quarterly Report on Form 10-Q.
10
<PAGE> 11
i-STAT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL; RECENT DEVELOPMENTS
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(R) System also 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.
The i-STAT(R) System currently performs blood tests for sodium,
potassium, chloride, glucose, urea nitrogen, hematocrit, ionized calcium,
arterial blood gases, 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. 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(R) System technology. The Company currently is
developing three tests for the measurement of coagulation: partial
thromboplastin time ("aPTT"), activated clotting time ("ACT") and prothombin
time ("PT"), and is studying the development of tests to measure enzymes,
hematology parameters (such as platelets and white blood cell counts) and other
analytes. The Company has not yet sought US Food and Drug Administration
clearance to market tests for ACT or PT and, on August 5, 1998, the Company
received notice from the FDA that it must resubmit its request for clearance of
the aPTT test. Subject to receipt of clearance to market by the FDA, the
Company expects to commence commercialization of its first coagulation test
during the first quarter of 1999.
The Company currently markets and distributes its products in the United
States and Canada principally through its own direct sales and marketing
organization, in Japan through Japanese marketing partners, in Europe through
Hewlett-Packard Company ("HP") and in Mexico, South America, China, Australia,
and certain other Asian and Pacific Rim countries, through selected distribution
channels. The Company and HP also jointly market the Company's products into the
critical care departments in hospitals in the United States which meet certain
criteria. Pursuant to a technology collaboration between the Company and HP, in
November 1997 HP commenced selling a patient monitoring system (the "Integrated
Analyzer") which integrates all of the blood diagnostics capabilities of the
i-STAT(R) System. In the long-term, the Company hopes to realize significant
cartridge revenue growth and royalty revenues from the sale of the Integrated
Analyzer by HP.
On August 3, 1998, the Company entered into a long-term sales, marketing
and research alliance with Abbott Laboratories which, among other things, is
expected both to significantly affect the Company's research and development
programs and alter the manner in which the Company markets and sells its
products worldwide. See "Long-Term Sales, Marketing and Research Alliance".
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998
The Company generated revenues of approximately $10.5 million and $9.1
million for the three months ended June 30, 1998 and 1997, respectively,
including international revenues (as a percentage of total revenues) of $3.1
million (29.7%) and $2.8 million (31.0%), respectively. Sales to the Company's
Japanese marketing partners represented approximately 10.7% and 18.5% of the
Company's worldwide sales for the three months ended June 30, 1998 and 1997,
respectively. International sales included deferred Japanese revenue of
approximately $0.8 million (8.5% of total revenues) for the three months ended
June 30, 1997. There was no comparable deferred revenue in the three months
ended June 30, 1998, as the balance of such deferred revenue was fully amortized
to income at December 31, 1997.
The $2.1 million (24.9%) increase in product revenues (excluding the
deferred revenue of $0.8 million in the same period of the prior year) was
primarily due to increased shipment volume of the Company's cartridges
reflecting higher cartridge consumption by existing hospital customers and the
addition of new hospital customers in the U.S. and
11
<PAGE> 12
i-STAT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
internationally. Worldwide cartridge shipments increased 47.7% to 1,621,300
units in the three months ended June 30, 1998, from 1,097,693 units in the three
months ended June 30, 1997. Revenues from the increased cartridge shipments were
partially offset by lower worldwide average selling prices per cartridge, which
declined from approximately $5.40 to $4.68 per cartridge in the same periods.
Cartridge average selling prices are expected to continue to decline as the
customer mix shifts to higher volume customers that receive lower cartridge list
prices.
Gross profit increased by approximately $0.1 million to $2.0 million in
the quarter ended June 30, 1998, compared with a gross profit of $1.9 million in
the quarter ended June 30, 1997. The prior year number for the same period
includes approximately $0.8 million of deferred Japanese revenue. Exclusive of
deferred revenue, gross profit on product revenue increased by approximately
$0.9 million (81.2%) from $1.1 million to $2.0 million. 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 $2.0 million (19.3%) and $1.8 million (19.8%) for the
three months ended June 30, 1998 and 1997, respectively, consisting of costs
associated with the personnel, material, equipment and facilities necessary for
conducting new product development.
The Company incurred general and administrative expenses (as a percentage
of sales) of approximately $1.8 million (17.6%) and $1.5 million (16.6%) for the
three months ended June 30, 1998 and 1997, 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 dollar increase from year to year is primarily
attributable to increased legal fees and expenses associated with the defense of
the Nova patent infringement action and other legal matters, and the Company's
increased need for management personnel and other services to support its
growth.
The Company incurred sales and marketing expenses (as a percentage of
sales) of approximately $3.2 million (30.9%) and $3.3 million (36.5%) for the
three months ended June 30, 1998 and 1997, respectively, consisting primarily of
salaries, benefits, travel, and other expenditures for sales representatives,
product literature, market research, clinical studies, advertising and other
sales and marketing costs.
Other income, net, which remains the same at approximately $0.3 million
for the three months ended June 30, 1998, and for the three months ended June
30, 1997, primarily reflects interest income earned on cash and cash equivalents
balances.
Net losses for the three months ended June 30, 1998 increased 5.4 percent
to approximately $4.7 million, or 31 cents per share, compared with a net loss
of $4.5 million, or 32 cents per share, for the three months ended June 30,
1997. The weighted average number of shares used in computing basic and diluted
net loss per share was 15.369 million and 14.032 million in the 1998 and 1997
periods, respectively. The increase in the net loss, in part reflects the
reduction of deferred revenue ($0.8 million).
SIX MONTHS ENDED JUNE 30, 1998
The Company generated revenues of approximately $19.2 million and $17.0
million for the six months ended June 30, 1998 and 1997, respectively, including
international revenues (as a percentage of total revenues) of $5.6 million
(29.0%) and $5.1 million (30.0%), respectively. Sales to the Company's Japanese
marketing partners represented approximately 10.8% and 20.0% of the Company's
worldwide sales for the six months ended June 30, 1998 and 1997, respectively.
International sales included deferred Japanese revenue of approximately $1.5
million (9.1% of total revenues) for the six months ended June 30, 1997. There
was no comparable deferred revenue in the six months ended June 30, 1998, as the
balance of such deferred revenue was fully amortized to income at December 31,
1997.
The $3.8 million (24.9%) increase in product revenues (excluding the
deferred revenue of $1.5 million in the same period of the prior year) was
primarily due to increased shipment volume of the Company's cartridges
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 42.3% to 2,905,875 units in the six months ended
June 30, 1998,
12
<PAGE> 13
i-STAT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
from 2,041,668 units in the six months ended June 30, 1997. Revenues from the
increased cartridge shipments were partially offset by lower worldwide average
selling prices per cartridge, which declined from approximately $5.51 to $4.77
per cartridge in the same periods. Cartridge average selling prices are expected
to continue to decline as the customer mix shifts to higher volume customers
that receive lower cartridge list prices.
Gross profit decreased by approximately $0.3 million to $3.1 million in
the six months ended June 30, 1998, compared with a gross profit of $3.4 million
in the six months ended June 30, 1997. The prior year number for the same period
includes approximately $1.5 million of deferred Japanese revenue. Exclusive of
deferred revenue, gross profit on product revenue increased by approximately
$1.2 million (63.2%) from $1.9 million to $3.1 million. 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 $3.8 million (19.7%) and $3.4 million (20.2%) for the
six months ended June 30, 1998 and 1997, respectively, consisting of costs
associated with the personnel, material, equipment and facilities necessary for
conducting new product development.
The Company incurred general and administrative expenses (as a percentage
of sales) of approximately $3.7 million (19.2%) and $3.0 million (17.6%) for the
six months ended June 30, 1998 and 1997, 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 dollar increase from year to year is primarily
attributable to increased legal fees and expenses associated with the defense of
the Nova patent infringement action and other legal matters, and the Company's
increased need for management personnel and other services to support its
growth.
In January 1998, the Company decided to consolidate all its cartridge
assembly operations in its manufacturing facility in Ontario, Canada. In order
to facilitate this move, the Company will relocate its cartridge assembly
operation in Plainsboro, New Jersey to its manufacturing facility in Ontario,
Canada. The relocation of cartridge assembly commenced in June 1998, with the
transfer of one assembly line to Canada, and is expected to be completed by
December 1998. As a result of this consolidation of operations, 66 employees in
the cartridge assembly operations were notified during the first quarter of 1998
that their employment would be terminated. The Company's lease for its
instrument operations, engineering, customer support, selected research and
development, marketing and administrative facility in Princeton, New Jersey,
expires in September 1998. The Company will relocate these activities, together
with product distribution operations currently located in the Plainsboro
facility, to a 37,474 square foot leased facility in East Windsor, New Jersey.
The charge to earnings in 1998 for these relocations, including severance and
retention payments to affected employees, the physical move of equipment, rent
and utilities on the unoccupied Plainsboro facility until that lease expires in
February 1999, and readdressing packaging, marketing materials and stationery,
and miscellaneous costs is estimated to be approximately $1.5 million, with
approximately $0.7 million being recorded as a charge to earnings in the six
months ended June 30, 1998. The charge to earnings in the first six months of
1998 comprises approximately $0.6 million for severance and retention payments,
and approximately $0.1 million for lease costs in respect of the unoccupied
Plainsboro facility. Retention payments are charged to expense over the
retention period. The Company expects the consolidation to reduce future
manufacturing and operating costs by approximately $2.0 million per year,
commencing in the first quarter of 1999. Such savings will come from lower
personnel costs, after hiring 52 employees for the expanded cartridge assembly
operations in Ontario, Canada, and lower rent, utilities and other overhead
expenses.
The Company incurred sales and marketing expenses (as a percentage of
sales) of approximately $6.5 million (33.8%) and $6.1 million (35.8%) for the
six months ended June 30, 1998 and 1997, respectively, consisting primarily of
salaries, benefits, travel, and other expenditures for sales representatives,
product literature, market research, clinical studies, advertising and other
sales and marketing costs. The dollar increase from year to year is attributable
to increased sales and marketing personnel and other marketing costs necessary
to support the Company's growth in product sales.
The increase in other income, net, to approximately $0.8 million for the
six months ended June 30, 1998, from approximately $0.6 million for the six
months ended June 30, 1997, primarily reflects higher interest income earned on
higher cash and cash equivalents balances.
13
<PAGE> 14
i-STAT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Net losses for the six months ended June 30, 1998 increased 28.1 percent
to approximately $10.9 million, or 71 cents per share, compared with a net loss
of $8.5 million, or 62 cents per share, for the six months ended June 30, 1997.
The weighted average number of shares used in computing basic and diluted net
loss per share was 15.363 million and 13.700 million in the 1998 and 1997
periods, respectively. The increase in the number of shares in 1998 primarily
reflects the private placement of 1.850 million shares in June 1997. The
increase in the net loss, in part reflects the reduction of deferred revenue
($1.5 million) and the charge for operations consolidation costs ($0.7 million)
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had cash and cash equivalents of
approximately $22.0 million, a decline of approximately $10.9 million from the
December 31, 1997 balance of approximately $32.9 million. The decrease primarily
reflects approximately $7.6 million of cash used in operating activities and
equipment purchases of approximately $3.4 million during the six months ended
June 30, 1998. Working capital decreased by approximately $11.8 million from
$38.7 million to $26.9 million during the same period, primarily reflecting the
decrease in cash and cash equivalents, and an increase of approximately $1.4
million in accrued expenses. The increase in accrued expenses includes the
charge for operations consolidation expenses of approximately $0.7 million. 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. Additional
liquidity is expected to be provided by the issuance of 2,000,000 shares of
common stock and the prepayments of future gross margin discussed below in
connection with the Long-term Sales, Marketing and Research Alliance. 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. 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
marketing and sales activities, its new product development efforts,
manufacturing efficiencies and competitive conditions.
The impact of inflation on the Company's business has been minimal and is
expected to be minimal for the near-term.
LONG-TERM SALES, MARKETING AND RESEARCH ALLIANCE
On August 3, 1998, the Company and Abbott Laboratories ("Abbott") signed
agreements (the "Alliance Agreements") providing for a long-term sales,
marketing and research alliance. Abbott will become, subject to the existing
rights of the Company's other international distributors, the exclusive
worldwide distributor of the Company's hand-held blood analyzer products
(including cartridges) and any new products the Company may develop for use in
the professionally attended human healthcare delivery market. The closing of the
Alliance Agreements is expected to occur on or before the fifth business day
after the expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and satisfaction or waiver
of applicable closing conditions. Either party may terminate the Alliance
Agreements if the closing does not occur by December 11, 1998.
Abbott will assume the Company's current product sales to U.S. customers
(the "Base Business") at no profit to Abbott, and the Company and Abbott will
share in the incremental profits derived from product sales beyond the Base
Business. Abbott will prepay to the Company a total of $25,000,000 during the
first three years of the Marketing and Distribution Agreement (the "Distribution
Agreement") as guaranteed future purchases of incremental units. Such
prepayments will be repaid by the Company to Abbott as a credit against actual
purchases by Abbott of incremental units above the Base Business. The parties
expect that distribution under the Distribution Agreement will commence in the
United States on January 1, 1999.
The Distribution Agreement expires on December 31, 2003, subject to
automatic extensions for additional one-year periods, unless either party
provides the other with at least 12 months prior written notice, except that the
Company may terminate the Distribution Agreement on December 31, 2001 if Abbott
fails to achieve a three- year milestone
14
<PAGE> 15
i-STAT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
minimum growth rate in sales of the Company's products covered by the
Distribution Agreement. If the Distribution Agreement is terminated, other than
(i) by the Company for cause or for Abbott's failure to achieve the three-year
milestone minimum growth rate; or (ii) by Abbott if Abbott delivers the
requisite notice terminating the Distribution Agreement after the initial term,
then, the Company will be obligated to pay to Abbott a one-time termination fee
calculated to compensate Abbott for a portion of its costs in undertaking the
distribution relationship, and residual payments for five years following
termination based on a percentage of Abbott's net sales of the Company's
products during the final twelve months of the Distribution Agreement. In the
event that such termination occurs within the first three years of the
Distribution Agreement, the Company also must refund Abbott for any gross margin
prepayments made and not yet credited to Abbott at the time of such termination.
Under the terms of the Funded Research & Development and License Agreement
(the "Research Agreement"), the Company will conduct research and will develop
products primarily to be commercialized by Abbott. Such research and development
will be funded by Abbott and Abbott will have exclusive worldwide
commercialization rights to the products developed under the Research Agreement
subject to rights previously granted to third parties and certain other
limitations. The parties have identified two initial projects to pursue under
the Research Agreement, including the research and development of tests useful
in the diagnosis and treatment of myocardial infarction and coronary artery
disease. The Company and Abbott will jointly own the intellectual property which
is developed during the course of work performed under the Research Agreement.
In addition, Abbott will license certain of its intellectual property to the
Company which is necessary to develop and manufacture the products contemplated
by the Research Agreement. The Research Agreement terminates upon expiration or
termination of the Distribution Agreement, unless earlier terminated as provided
therein. Upon such expiration or earlier termination, both the Company and
Abbott will be permitted to distribute the products developed under the Research
Agreement in the territory covered by the Distribution Agreement.
At the closing under the Stock Purchase Agreement, Abbott will purchase
2,000,000 shares (the "Purchased Shares") of the Company's Common Stock, par
value $0.15 per share, at a price of $11.35 per share, for an aggregate purchase
price of $22,700,000 before expenses. The Purchased Shares will represent, after
issuance, approximately 11.5% of the outstanding voting securities of the
Company. The Stock Purchase Agreement, together with a related Registration
Rights Agreement which is to be executed at closing, contains certain terms and
conditions pertaining to the voting and transfer of the Purchased Shares.
In addition to the Distribution Agreement, the Research Agreement and the
Stock Purchase Agreement, on August 3, 1998, the Company and Abbott also entered
into a Standstill Agreement providing, among other things, for limitations on
Abbott's ability to purchase the Company's Common Stock, or to propose any
merger or business combination with the Company or purchase of a material
portion of the Company's assets.
The foregoing description of the Alliance Agreements and the Registration
Rights Agreement is qualified in its entirety by reference to the actual text of
such agreements, copies of which are being filed with the Commission as exhibits
to this Quarterly Report on Form 10-Q.
The alliance with Abbott is expected to strengthen the Company's marketing
and distribution capability, accelerate the development of new products, and
enhance liquidity.
15
<PAGE> 16
i-STAT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
IMPACT OF YEAR 2000
The "Year 2000" issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Based on a recent assessment, the Company determined that it will be
required to modify some portions of its software so that its computer systems
will function properly with respect to dates in the year 2000 and thereafter.
The Company presently believes that with modifications to existing software and
conversions to new software, the Year 2000 issue will not pose significant
operational problems for its computer systems. However, if such modifications
and conversions are not made, or are not completed timely, the Year 2000 issue
could have a material impact on the operations of the Company.
The Company has initiated formal communications with all of its
significant suppliers to determine the extent to which the Company is vulnerable
to those third parties' failure to remediate their own Year 2000 issues.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company or a conversion that is incompatible with the
Company's system would not have an adverse effect on the Company's systems. The
Company has determined that it has no exposure to contingencies related to the
Year 2000 issue for the products it has sold.
The Company will utilize both internal and external resources to reprogram
and test its computer software for Year 2000 modifications. The Company
anticipates completing the Year 2000 project prior to any anticipated impact on
its operating systems. The cost of the Year 2000 project is not expected to be
material, as the required changes to internally supported software are small
relative to the updates performed in the normal course of business and changes
to externally supported software are covered by service contracts. The
assessment of the costs of the project and the timing of the completion of Year
2000 modifications is based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.
All statements contained in this management's discussion and analysis of
financial condition and results of operation other than statements of historical
financial information, are forward looking statements. Forward looking
statements include statements concerning plans, objectives, goals, strategies,
future events or performance and underlying assumptions and other statements
which are other than historical facts. Although the Company believes that its
expectations are based on reasonable assumptions, 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. The Company does not undertake to update the
results discussed herein as a result of changes in risks or operating results.
16
<PAGE> 17
i-STAT CORPORATION
PART II - OTHER INFORMATION
ITEM 1. 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. In
February 1998, the Court entered summary judgment in favor of the Company on
the issue of patent infringement. Accordingly, the Company has been found not
to infringe, either literally or under the patent law "doctrine of
equivalents", Nova's patent. However, the plaintiff has appealed and should it
prevail on this issue, a prospect which the Company believes to be unlikely, it
could have a material impact on the financial position, results of operations
and cash flows of the Company. The Company had asserted and is pursuing
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 other similarly situated, Plaintiff, v. i-STAT
Corporation, William P. Moffitt, Lionel M. 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 and negligent misrepresentation, and is predicated on a "fraud on the
market" theory 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,
on April 28, 1998, the Court entered summary judgment in favor of all
defendants. However, the plaintiffs have appealed and, should they 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 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.
17
<PAGE> 18
i-STAT CORPORATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The company held its Annual Meeting of Stockholders on May 29, 1998, at
which time three matters were submitted to a vote of stockholders. A description
of the matters voted upon and a voting tabulation for each matter is as follows:
I. Election of seven members to the Board of Directors, each to serve
until the next annual meeting.
<TABLE>
<CAPTION>
Number of Votes
-------------------------------------------------------------
Name of Nominee For Against/Withheld Abstentions Broker Non-Votes
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J. Robert Buchanan, M.D 11,141,703 334,940 N/A N/A
----------------------------------------------------------------------------------------
Curtis J. Crawford 11,141,903 334,740 N/A N/A
----------------------------------------------------------------------------------------
James A. Cyrier 10,977,803 498,840 N/A N/A
----------------------------------------------------------------------------------------
Richard Hodgson 11,141,603 335,040 N/A N/A
----------------------------------------------------------------------------------------
Imants R. Lauks 11,141,903 334,740 N/A N/A
----------------------------------------------------------------------------------------
William P. Moffitt 11,140,228 336,415 N/A N/A
----------------------------------------------------------------------------------------
Lionel N. Sterling 11,141,903 334,740 N/A N/A
----------------------------------------------------------------------------------------
</TABLE>
II. Approval of the Company's 1998 Stock Option Plan.
<TABLE>
<CAPTION>
Number of Votes
-------------------------------------------------------------
For Against/Withheld Abstentions Broker Non-Votes
-------------------------------------------------------------
<S> <C> <C> <C>
5,217,765 2,472,496 334,108 N/A
</TABLE>
III. Ratification of the appointment of Coopers & Lybrand L.L.P., now
known as PricewaterhouseCoopers L.L.P., as independent accountants
to audit the Company's books and accounts for the year 1998.
<TABLE>
<CAPTION>
Number of Votes
-------------------------------------------------------------
For Against/Withheld Abstentions Broker Non-Votes
-------------------------------------------------------------
<S> <C> <C> <C>
11,430,778 29,157 16,708 N/A
</TABLE>
18
<PAGE> 19
i-STAT CORPORATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Restated Certificate of Incorporation (Form S-8/S-3
Registration Statement, File No. 33-48889)*
3.2 By-Laws (Form 10-K for fiscal year ended December 31,
1996)*
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)*
10.41 Lease Agreement, dated July 16, 1998, between
Brandywine Operating Partnership L.P. and Registrant
10.42 Common Stock Purchase Agreement, dated as of August 3,
1998, between Registrant and Abbott Laboratories
10.43 Standstill Agreement, dated as of August 3, 1998,
between Registrant and Abbott Laboratories
10.44 Form of Registration Rights Agreement to be entered
into by Registrant and Abbott Laboratories
**10.45 Marketing and Distribution Agreement, dated as of
August 3, 1998, between Registrant and Abbott
Laboratories
**10.46 Funded Research & Development and License Agreement,
dated as of August 3, 1998, between Registrant and
Abbott Laboratories
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.
** Confidential treatment requested as to certain
provisions
(b) Reports on Form 8-K
During the quarter for which this Report on Form 10-Q is
filed, no reports on Form 8-K were filed.
19
<PAGE> 20
i-STAT CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: August 14, 1998
i-STAT CORPORATION
(Registrant)
BY: /s/ William P. Moffitt
--------------------------
William P. Moffitt
President and Chief
Executive Officer
(Principal Executive Officer)
BY: /s/ Roger J. Mason
--------------------------
Roger J. Mason
Vice President of Finance,
Treasurer and Chief
Financial Officer
(Principal Financial Officer and
Accounting Officer)
20
<PAGE> 21
EXHIBIT INDEX
EXHIBIT NO.
- -----------
10.41 Lease Agreement, dated July 16, 1998, between Brandywine Operating
Partnership L.P. and Registrant
10.42 Common Stock Purchase Agreement, dated as of August 3, 1998, between
Registrant and Abbott Laboratories
10.43 Standstill Agreement, dated as of August 3, 1998, between Registrant and
Abbott Laboratories
10.44 Form of Registration Rights Agreement to be entered into by Registrant
and Abbott Laboratories
10.45 Marketing and Distribution Agreement, dated as of August 3, 1998,
between Registrant and Abbott Laboratories
10.46 Funded Research & Development and License Agreement, dated as of August
3, 1998, between Registrant and Abbott Laboratories
27 Financial Data Schedule
<PAGE> 1
Exhibit 10.41
NEW JERSEY
EXECUTION
LEASE
BRANDYWINE OPERATING PARTNERSHIP, L.P.,
LANDLORD,
AND
i-STAT CORPORATION,
TENANT,
FOR SUITE 100
104 WINDSOR CENTER
EAST WINDSOR, NEW JERSEY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
1. SUMMARY OF DEFINED TERMS 1
2. PREMISES 4
3. TERM 5
4. TENANT IMPROVEMENTS 6
5. FIXED RENT; SECURITY DEPOSIT 6
6. ADDITIONAL RENT 10
7. UTILITIES 19
8. SIGNS; USE OF PREMISES AND COMMON AREAS 19
9. ENVIRONMENTAL MATTERS 21
10. TENANT'S ALTERATIONS 26
11. CONSTRUCTION LIENS 27
12. ASSIGNMENT AND SUBLETTING 28
13. LANDLORD'S RIGHT OF ENTRY 30
14. REPAIRS AND MAINTENANCE 30
15. INSURANCE; SUBROGATION RIGHTS 33
16. INDEMNIFICATION 35
17. QUIET ENJOYMENT 36
18. FIRE DAMAGE 36
19. SUBORDINATION; RIGHTS OF MORTGAGEE 38
20. CONDEMNATION 38
21. ESTOPPEL CERTIFICATE 39
22. DEFAULT 40
23. CURING TENANT DEFAULTS 45
24. CURING LANDLORD DEFAULTS 45
25. LANDLORD'S REPRESENTATIONS AND WARRANTIES 46
26. SURRENDER 46
27. RULES AND REGULATIONS 47
28. GOVERNMENTAL REGULATIONS 47
29. NOTICES 49
30. BROKERS 49
31. CHANGE OF BUILDING/PROJECT NAME 50
32. LANDLORD'S LIABILITY 50
33. AUTHORITY 51
34. NO OFFER 51
35. RENEWAL 51
36. RIGHT OF FIRST NEGOTIATION FOR EXPANSION SPACE 53
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
38. MISCELLANEOUS PROVISIONS 55
39. WAIVER OF TRIAL BY JURY 59
40. CONSENT TO JURISDICTION 59
EXHIBITS
EXHIBIT "A" LEGAL DESCRIPTION
EXHIBIT "A-1" SPACE PLAN OF PREMISES
EXHIBIT "A-2" CONFIRMATION OF LEASE TERM
EXHIBIT "B" WORK AGREEMENT
EXHIBIT "C" RULES AND REGULATIONS
EXHIBIT "D" CLEANING SPECIFICATIONS
EXHIBIT 5(c) LETTER OF CREDIT
</TABLE>
i
<PAGE> 4
LEASE
THIS LEASE (this "Lease") entered into as of the ___ day of July, 1998,
by and between BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership, with an office at 1009 Lenox Drive, Lawrenceville, New Jersey
08648, ("Landlord"), and i-STAT CORPORATION, a Delaware corporation, with its
principal place of business at 303 College Road East, Princeton, New Jersey
08540 ("Tenant").
WITNESSETH
In consideration of the mutual covenants herein set forth, and
intending to be legally bound, the parties hereto covenant and agree as follows:
1. SUMMARY OF DEFINED TERMS.
The parties agree that the following defined terms, as used in this
Lease, shall have the meanings and shall be construed as set forth below:
(a) "Building": The building located at 104 Windsor Center
Drive, East Windsor, New Jersey.
(b) "Commencement Date": July 15, 1998.
(c) "Expiration Date": September 30, 2003, unless otherwise
extended pursuant to the terms hereof.
(d) "Project": The Building, the land and all other
improvements located at 104 Windsor Center Drive, East Windsor, New Jersey, as
more particularly described in Exhibit "A" attached hereto.
(e) "Premises": Suite No. 100, being an approximately 37,474
rentable square foot portion of the first floor of the Building shown on the
space plan attached hereto as Exhibit "A-1" and made a part hereof, such space
being comprised of approximately 33,824 square feet being referred to as the
"Initial Space" and approximately 3,650 square feet being referred to as the
"Remainder Space", including access to and non-exclusive use of that certain
loading dock attached thereto, access to and use of common areas of the Project
and all appurtenances thereto and a minimum of one hundred forty-five (145)
unreserved parking spaces.
<PAGE> 5
(f) "Term": Commencing on the Commencement Date and expiring
on the Expiration Date, unless such Term is otherwise extended or terminated in
accordance with the terms hereof.
(g) "Fixed Rent":
<TABLE>
<CAPTION>
FIXED RENT PER MONTHLY
RENTABLE SQUARE FOOT INSTALLMENTS ANNUAL
LEASE YEAR PER ANNUM OF FIXED RENT FIXED RENT
---------- --------- ------------- ----------
<S> <C> <C> <C>
1-5 $17.50 $54,649.58 $655,795.00
</TABLE>
(h) "Security Deposit": $400,000.00, to be held and disbursed
as more fully set forth in Section 5 hereof.
(i) "Rent Commencement Date": October 1, 1998, subject to
Section 5(a) hereof.
(j) "Tenant's Allocated Share": 56.05%.
(k) "Rentable Area": The Premises contain 37,474 rentable
square feet. The Building contains 66,855 rentable square feet.
(l) "Permitted Uses": Tenant shall be permitted to use the
Premises in a manner consistent with the operation of Tenant's corporate
offices, including but not limited to, general office purposes, research and
development, sales and marketing, wholesale sales, light manufacturing and
assembly of medical device products, as such may be changed from time to time
based on written notice to Landlord, warehouse and distribution, and any and all
legally permissible activities directly related or incidental thereto, such
directly related or incidental use not to exceed an aggregate of 5,000 rentable
square feet, such space not necessarily being contiguous. Landlord hereby
warrants and represents that, to the best of its knowledge, information and
belief based solely on the East Windsor Township Zoning Letter attached hereto,
applicable zoning and the Building's certificate of occupancy permit Tenant's
Permitted Uses at the Premises. Landlord shall not unreasonably withhold,
condition or delay its consent to uses at the Premises other than those
specified above, provided such other uses are generally in keeping with the
standards of the Building.
(m) "Broker": Cushman & Wakefield of New Jersey, Inc.
2
<PAGE> 6
(n) "Notice Address/Contact"
Tenant: Prior to Tenant's occupancy of the Premises:
i-STAT Corporation
303 College Road East
Princeton, New Jersey 08540
Attn: Roger Mason,
Chief Financial Officer
After Tenant's occupancy of the Premises:
At the Premises
Attn: Roger Mason,
Chief Financial Officer
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
1055 Washington Boulevard
Stamford, Connecticut 06901
Attn: Esteban A. Ferrer, Esq.
Landlord: Brandywine Operating Partnership, L.P.
1009 Lenox Drive
Lawrenceville, New Jersey 08648
Attn: George D. Sowa, Vice President
with a copy to:
Brandywine Realty Trust
16 Campus Boulevard
Suite 150
Newtown Square, Pennsylvania 19073
Attn: Brad A. Molotsky,
General Counsel
(o) "Tenant's Standard Industrial Classification Number": 3845
(p) "Additional Rent": All sums of money or charges required
to be paid by Tenant pursuant to the express terms and conditions this Lease
other than Fixed Rent, whether or not such sums or charges are designated as
"Additional Rent".
(q) "Rent": All Fixed Rent and Additional Rent payable by
Tenant to Landlord under this Lease.
3
<PAGE> 7
(r) "Expense Stop": Expense Stop shall mean $4.48 per rentable
square foot per year.
(s) "Work Agreement": Exhibit "B" attached hereto and
incorporated herein by this reference.
2. PREMISES.
(a) Landlord does hereby lease, demise and let unto Tenant and
Tenant does hereby hire and lease from Landlord the Premises for the Term, upon
the provisions, conditions and limitations set forth herein. The lease of the
Premises to Tenant includes the right, together with other tenants of the
Building and members of the public, to use the common public areas of the
Building and all appurtenances related thereto.
(b) Landlord hereby warrants and represents, to the best of
its knowledge without independent verification, that the Premises is comprised
of approximately 37,474 rentable square feet of space.
(c) Landlord hereby further warrants and represents that, as
of the Commencement Date: (i) the Premises shall be vacant, broom-clean and
ready for Tenant's exclusive occupancy; (ii) all fit-up work to be performed by
Landlord, if any, shall be substantially completed such that Tenant and its
contractors may reasonably commence construction of the Tenant Improvements
(hereinafter defined); (iii) all mechanical equipment and utility systems
serving the Premises shall be in operating condition; (iv) the Premises shall be
structurally sound and "water-tight"; (v) Tenant's access to the Premises shall
be unimpeded; (vi) Landlord has not received written notice that the Premises
and the Building do not comply with all applicable laws, codes, statutes,
ordinances, guidelines, rules and regulations; and (vii) to the best of
Landlord's knowledge there are no existing mechanical problems with the Building
systems. Landlord's warranties and representations under this Section 2 shall be
true and correct as of the commencement of the Term. Any provisions in this
Lease purporting to require Tenant to accept the Premises "as is" shall be
subject to Landlord's covenants, warranties and representations set forth in
this Lease, and shall be further subject to any pre-existing conditions not
created by Tenant, including, without limitation, any latent defects.
4
<PAGE> 8
3. TERM.
(a) The Term of this Lease shall commence on July 15, 1998
with respect to the Initial Space and upon the vacation of the Remainder Space
by Chesapeake Park Inc. (such date being estimated as being on or before July
29, 1998)(collectively, the "Commencement Date"). Notwithstanding anything to
the contrary set forth herein, Tenant's obligation to pay to Landlord any Fixed
Rent or Additional Rent provided for herein shall not commence until the Rent
Commencement Date.
(b) In the event that completion of the Tenant Improvements
(hereinafter defined) is delayed for any reason: (i) this Lease shall remain in
full force and effect and Tenant shall have no claim against Landlord by reason
of any such delay, except to the extent such delay is a Landlord Delay
(hereinafter defined in the Work Agreement); and (ii) commencing on the Rent
Commencement Date, Tenant shall be obligated to pay to Landlord full Fixed Rent
and Additional Rent owing under this Lease.
4. TENANT IMPROVEMENTS. Tenant, at Tenant's sole cost and expense,
subject, however, to application of the Improvement Allowance (hereinafter
defined in the Work Agreement), shall construct in the Premises the Tenant
Improvements (hereinafter described in the Work Agreement) in accordance with
the terms of the Work Agreement. In the event that Landlord and Tenant have not
finally agreed upon the scope and details of the Tenant Improvements as of the
date of execution of this Lease, Tenant's submissions to Landlord of plans and
specifications detailing such work shall be subject to Landlord's written
approval in accordance with the Work Agreement. Upon completion of the Tenant
Improvements, Tenant shall execute the Confirmation of Lease Term attached
hereto as Exhibit "A-2".
5. FIXED RENT; SECURITY DEPOSIT.
(a) Commencing on the Rent Commencement Date, Tenant shall pay
to Landlord without notice, set-off or demand (except as otherwise set forth
herein), the Fixed Rent payable hereunder in equal monthly installments in the
amounts set forth in Section 1(g) hereof, in advance on the first day of each
calendar month during the Term by wire transfer of immediately available funds
to the account at First Union National Bank, account no. 2030000359075; such
transfer to be confirmed to Brandywine Realty
5
<PAGE> 9
Services Corporation's accounting department (610-325-5622 - fax) by written
facsimile with ABA federal reference routing number 031000503; provided,
however, that in the event that Landlord fails to deliver the Remainder Space on
or before October 1, 1998, Landlord shall provide Tenant with a rent credit in
the amount of Five Thousand Three Hundred, Twenty Two Dollars and Ninety Two
Cents($5,322.92) to be applied to the monthly installment(s) of Fixed Rent next
coming due under this Lease. Landlord shall notify Tenant's Chief Financial
Officer by fax within one (1) business day at the address set forth herein if
Landlord does not receive such wire transfer after receiving Tenant's fax of the
ABA federal reference number. Notwithstanding the immediately preceding
sentence, Tenant shall pay the first monthly installment of Fixed Rent to
Landlord upon the execution of this Lease by Tenant. Otherwise, Fixed Rent shall
not commence nor be due and owing until the Rent Commencement Date.
Notwithstanding the foregoing, in the event Chesapeake Park,
Inc. fails to vacate and surrender the Remainder Space on or before July 28,
1998, the following terms and conditions shall apply: (i) Landlord shall, at
Landlord's sole cost and expense, no later than Wednesday, July 29, 1998, file
with the appropriate court (and pursue in an expeditious and diligent manner to
completion) an eviction action against Chesapeake Park, Inc. seeking to obtain
full possession of the Remainder Space as soon as possible thereafter, and
Landlord shall deliver the Remainder Space to Tenant as soon as Landlord
recovers possession of such space from Chesapeake Park, Inc.; (ii) in the event
the Tenant Improvements to the Remainder Space are not completed before October
1, 1998 as a result of delays in completion of same resulting from Chesapeake
Park, Inc.'s failure to vacate and surrender the Remainder Space on or before
July 28, 1998, the Rent Commencement Date with regard to the Remainder Space
only shall be extended on a day for day basis for each day including and after
July 28, 1998 Landlord is unable to deliver the Remainder Space provided that
completion of the Tenant Improvements for such Remainder Space is delayed after
September 17, 1998; (iii) in the event Tenant incurs additional third-party,
out-of-pocket costs in completing the Tenant Improvements, Landlord shall
reimburse Tenant for the actual additional costs as evidenced by third-party
invoices incurred by Tenant as a result thereof, including, without limitation,
causing tradesmen to return to the Premises after completing their work on the
Initial Space, fees of architects for field changes or other conforming changes
to the Tenant's Plans and governmental filing and permit fees, if any, which
reimbursement shall, at Tenant's
6
<PAGE> 10
option, be either in cash or a rent credit to be applied to the monthly
installment(s) of Fixed Rent next coming due under this Lease upon Tenant's
delivery of invoices to Landlord documenting such additional costs; (iv)
Landlord's liability to Tenant in subparagraph (iii) above shall be limited to
the holdover rent actually collected by Landlord from Chesapeake Park, Inc. for
each month and portion of a month that Chesapeake Park, Inc. remains in
possession of the Remainder Space after July 28, 1998; and (v) Landlord shall
pursue, at Landlord's sole cost and expense, in an expeditious and diligent
manner to completion, any and all actions against Chesapeake Park, Inc.
necessary to recover the holdover rent from Chesapeake Park, Inc.
(b) In the event any Fixed Rent or Additional Rent, charge,
fee or other amount due from Tenant under the express terms of this Lease are
not paid to Landlord within five (5) days that same is past due, Tenant shall
also pay as Additional Rent a service and handling charge equal to ten (10%)
percent of the total payment then due. This provision shall not prevent Landlord
from exercising any other remedy herein provided or otherwise available at law
or in equity in the event of any default by Tenant.
(c) Upon the payment by Landlord of (I) 75% of the Improvement
Allowance (as defined in the Work Agreement), Tenant shall deliver to Landlord,
as escrow agent, a Letter of Credit substantially in the form attached hereto as
Exhibit 5(c) for the benefit of Landlord, in the sum of Three Hundred Fifty
Thousand Dollars ($350,000.00) (the "L/C Deposit"), and (II) the remaining 25%
of the Improvement Allowance in accordance with the Work Letter, Tenant shall
deposit with Landlord cash in the form of a check the amount of Fifty Thousand
Dollars ($50,000.00) (the "Cash Deposit") (the L/C Deposit and the Cash Deposit
are hereinafter collectively referred to as the "Security Deposit"). The
Security Deposit shall be provided to Landlord as security (and not prepaid
rent) for the payment of Fixed Rent and Additional Rent and for the faithful
performance by Tenant of all other covenants, conditions and agreements of this
Lease. Landlord shall have no right in or to the Security Deposit unless and
until Tenant has defaulted under this Lease. In no event shall the Security
Deposit be subject to the rights of creditors and/or Landlord's mortgagee(s),
unless a default by Tenant has otherwise occurred under this Lease.
(d) Subject to Section 5(e) below (and provided Landlord has
not otherwise drawn down the Cash Deposit) the following adjustments shall be
made to the L/C Deposit: (i) on
7
<PAGE> 11
the first anniversary of the Rent Commencement Date the amount of the L/C
Deposit shall be reduced to Two Hundred Sixty Two Thousand, Five Hundred Dollars
($262,500.00) and shall remain in full force and effect thereafter; (ii) on the
second anniversary of the Rent Commencement Date, the amount of the L/C Deposit
shall be reduced to One Hundred Seventy-five Thousand Dollars ($175,000.00) and
shall remain in full force and effect thereafter; (iii) on the third anniversary
of the Rent Commencement Date, the amount of the L/C Deposit shall be reduced to
Eighty Seven Thousand Five Hundred Dollars ($87,500.00) and shall remain in full
force and effect; and (iv) on the fourth anniversary of the Rent Commencement
Date, the L/C Deposit shall be terminated. If any sum payable by Tenant to
Landlord shall be overdue and unpaid beyond applicable notice and cure periods,
if any, or if Landlord makes any payments on behalf of Tenant, or if Tenant
fails to perform any of the express terms of this Lease, then Landlord, at its
option and without prejudice to any other remedy which Landlord may have, may
apply all or part of the L/C Deposit to compensate Landlord for the non-payment
of Fixed Rent or Additional Rent.
(e) Notwithstanding anything to the contrary contained herein,
if either: (A) an individual monetary Event of Default (including any stated
notice and cure periods hereunder, if any) being in an amount less than $60,000
occurs hereunder more than one (1) time during the Term hereof, or (B) a
monetary Event of Default costing $60,000 or more ever occurs; even if either of
such defaults has been cured, Tenant shall have no right to reduce the L/C
Deposit and such L/C Deposit shall remain in place for the benefit of Landlord
in the amount then in existence at the time of the occurrence of the Event of
Default, without reduction, for the remainder of the Term.
(f) Landlord shall hold the Cash Deposit in a separate,
FDIC-insured account at a reputable national banking institution, with offices
in the East Windsor, New Jersey area. Landlord shall keep Tenant duly apprized
of the location and account number for the Cash Deposit. If any sum payable by
Tenant to Landlord shall be overdue and unpaid beyond applicable notice and cure
periods, or if Landlord makes any payments on behalf of Tenant, or if Tenant
fails to perform any of the terms of this Lease, then Landlord, at its option
and without prejudice to any other remedy which Landlord may have, may apply all
or part of the Cash Deposit to compensate Landlord for the payment of Fixed Rent
or Additional Rent. Tenant shall restore the Cash Deposit to the original sum
deposited within fifteen (15) days after Landlord's written demand to so
restore. The Cash Deposit,
8
<PAGE> 12
plus any interest accrued thereon, shall be repaid to Tenant within thirty (30)
days after the expiration or earlier termination of the Term of this Lease.
(g) In the event of the sale or transfer of Landlord's
interest in the Building, Landlord shall transfer Landlord's rights in the
Security Deposit to the purchaser or assignee, in which event Tenant shall look
only to the new landlord for the return of the Security Deposit; provided said
purchaser or assignee agrees to assume all of Landlord's obligations under this
Lease. In the event of any permitted assignment of all of Tenant's interest in
this Lease, the Security Deposit shall be returned to Tenant if the assignee
posts a replacement security deposit.
(h) Landlord hereby approves the form of letter of credit
attached hereto as Exhibit "5(c)" and incorporated herein by this reference,
which letter of credit shall be for a term of four (4) years and subject to the
terms and conditions of this Section 5.
6. ADDITIONAL RENT.
(a) Tenant shall pay to Landlord, as Additional Rent, the
following charges ("Recognized Expenses"):
(i) Insurance Premiums. The following insurance
premiums paid or payable by Landlord for insurance with respect to the Project
as follows:
(A) Fire and extended coverage insurance
(including demolition and debris removal);
(B) Insurance against Landlord's rental loss
or abatement (but not including business interruption coverage on behalf of
Tenant), from damage or destruction from fire or other casualty;
(C) Landlord's comprehensive liability
insurance (including bodily injury and property damage) and boiler insurance;
and
(D) Such other insurance as Landlord or any
reputable mortgage lending institution holding a mortgage on the Building may
reasonably require; provided the premiums for such insurance are commercially
reasonable and consistent with the
9
<PAGE> 13
cost of similar insurance procured by landlords of comparable properties.
If the coverage period of any of such insurance obtained by Landlord commences
before or extends beyond the Term, the total premium therefore shall be
equitably prorated over the Term of this Lease. If any such insurance is
provided by blanket coverage, the part of the premium allocated to the Project
shall be equitably determined by Landlord but shall not exceed the amount of
premium due if insurance was provided by a policy only insuring the Project.
Should Tenant's occupancy or use of the Premises at any time change and thereby
cause an increase in such insurance premiums on the Premises, the Building
and/or the Project, Tenant shall pay to Landlord the entire amount of such
increase. Landlord warrants and represents to Tenant that Tenant's Permitted
Uses under this Lease shall not result in an increase in Landlord's insurance
premiums.
(ii) Operating Expenses. All actual and reasonably
allocated costs (based on Tenant's usage or equitably determined by Landlord)
and the Building related common area expenses incurred and paid by Landlord
during the Term, including, but not limited to:
(A) The operation of the Building and the
Project, including, but not limited to, lighting; cleaning of the Building
exterior and common areas of the Building exterior and interior; trash removal
and recycling; repairs and maintenance of fire suppression and alarm systems;
utilities benefitting the common areas of the Building and the Project; removing
snow, ice and debris and maintaining all landscape areas (including replacing
and replanting flowers, shrubbery and trees); maintaining and repairing all
other exterior improvements on the Project; all repairs and compliance costs
necessitated by laws enacted or which become effective after the Commencement
Date including, without limitation, any additional regulations or requirements
enacted after the date hereof regarding the Americans With Disabilities Act (as
such applies to the Project or the common areas of the Building but not to any
individual tenant's space); storm water runoff required of Landlord under
applicable laws, rules and regulations; and policing and regulating traffic to
and from the Project. Landlord's obligation to provide snow removal services
shall be limited to the parking areas and the sidewalk entrances;
(B) Non-capital expense or charge which
would be considered an expense of maintaining, operating or
10
<PAGE> 14
repairing the Project under generally accepted accounting principles; and
(C) The amortized cost of any capital repair
(using the useful life of such capital repair for purposes of figuring the
amortized cost) to the Building and the common areas specifically related
thereto which (i) reduces the Recognized Expenses hereunder, or (ii) is for the
necessary replacement or repair of the Building systems; and
(D) Management fee not to exceed four
percent (4%) of Fixed Rent which is applicable to the overall operation of the
Project. It is expressly understood that legal fees incurred in an action
against an individual tenant shall not be included as an operating expense
pursuant to this Section 6(a)(ii). Landlord shall not collect more than 100% of
the total actual costs and allocated costs actually incurred as permitted
hereunder.
In addition to the foregoing, pursuant to Section 14(f),
Tenant may elect to provide its own janitorial service or to have Landlord
provide such service at Tenant's sole cost and expense, such cost to not be a
part of the Expense Stop hereunder.
Notwithstanding the foregoing, the term "Recognized Expenses"
shall not include any of the following:
(A) the cost of repairs or other work
occasioned by fire, windstorm or other casualty or the condemnation of a portion
of the Project;
(B) leasing commissions, accountants',
consultants', auditors' or attorneys' fees, costs and disbursements and other
expenses incurred in connection with negotiations or disputes with other tenants
or prospective tenants or other occupants, or associated with the enforcement of
any other leases or the defense of Landlord's title to or interest in the real
property or any part thereof;
(C) the costs incurred by Landlord in
connection with construction of the Building and related facilities, the
correction of defects in the construction of the Building;
(D) the costs (including permit, licenses
and inspection fees) incurred in renovating or otherwise
11
<PAGE> 15
improving, decorating, painting or redecorating the non-common areas of the
Building, space for other tenants or occupants in the Building, or vacant space
in the Building;
(E) the costs of any items or services sold
or provided to tenants (including Tenant) for which Landlord is reimbursed by
such tenants;
(F) depreciation and amortization;
(G) the costs incurred due to a breach by
Landlord or any other tenant of the terms and conditions of any lease;
(H) overhead and profit increment paid to
subsidiaries or affiliates of Landlord for management or other services on or to
the Building or for supplies or other materials, to the extent that the costs of
such services, supplies or materials exceed the reasonable costs that would have
been paid had the services, supplies or materials been provided by unaffiliated
parties on a reasonable basis;
(I) interest on debt or amortization
payments on any mortgage or deeds of trust or any other borrowings and any
ground rent;
(J) ground rents or rentals payable by
Landlord pursuant to any over-lease;
(K) any compensation paid to clerks,
attendants or other persons in commercial concessions operated by Landlord;
(L) all items and services for which Tenant
reimburses Landlord or which Landlord provides selectively to one or more
tenants or occupants of the Building (other than Tenant) without reimbursement;
(M) the costs incurred by Landlord in
managing or operating any "pay for" parking facilities within the Project;
(N) the Recognized Expenses (including
attorneys' fees) resulting from the negligence or willful misconduct of
Landlord;
12
<PAGE> 16
(O) any fines or fees for Landlord's failure
to comply with governmental, quasi-governmental, or regulatory agencies' rules
and regulations;
(P) legal, accounting and other expenses
related to Landlord's financing, re-financing, mortgaging or selling of the
Building or the Project;
(Q) any environmental compliance or
remediation costs of any kind except if caused by Tenant or its agents,
licensees or invitees;
(R) any costs, fees or expenses not
expressly referred to in this Lease, or any costs required to be paid by
Landlord alone hereunder, or otherwise provided to be paid by parties other than
Tenant;
(S) wages, salaries, fees and fringe
benefits paid to administrative or executive personnel or officers or partners
of Landlord who are not directly involved in the management and operations of
the Building other than reasonably allocated accounts receivable clerks;
(T) the cost of any square footage additions
to the Project;
(U) the cost of capital improvements to the
roof, structure, footings, foundation and facade of the Building;
(V) the cost of overtime or other expense to
Landlord in curing its defaults under this or any other lease or performing work
expressly provided in this or any other lease to be borne at Landlord's sole
expense; and
(W) the cost of any utilities furnished to
rentable areas in the Building other than the Premises not comprising common
areas thereof.
(b) Taxes. Taxes shall be defined as all taxes, assessments
and other governmental charges ("Taxes"), including special assessments for
public improvements which are levied or assessed against the Project during the
Term or, if levied or assessed prior to the Term, which properly are allocable
to the Term, and real estate tax appeal expenditures incurred by Landlord to the
extent of any reduction resulting thereby. Notwithstanding the foregoing, Taxes
shall not include: any inheritance, estate, succession, transfer, gift,
franchise, corporation, net income, profit tax, capital levy that is or may
13
<PAGE> 17
be imposed upon Landlord or other non-real estate taxes; any Taxes resulting
from a transfer of the Building or the Project; and any increase in Taxes due to
capital improvements other than the Tenant Improvements in the Building;
provided, however, that if at any time during the Term the method of real estate
taxation prevailing as of the Commencement Date shall be altered so that in lieu
thereof or as a substitute for the whole or any part of the Taxes now levied,
assessed or imposed on real estate as there shall be levied, assessed or imposed
(i) a tax on the rents received from such real estate, or (ii) a license fee
measured by the rents receivable by Landlord from the Premises or any portion
thereof, or (iii) a tax or license fee imposed upon the Premises or any portion
thereof, then the same shall be included in the computation of Taxes hereunder.
(c) In the event Landlord receives any refunds or abatements
of Taxes during any periods for which Tenant has made Additional Rent payments
therefor, Landlord shall promptly so notify Tenant and Tenant shall promptly
receive Tenant's Allocable Share of such refunds or abatements in the form of
reimbursement(s) or Additional Rent credit(s), at the sole option of Tenant and
the Expense Stop shall be adjusted to reflect such reduced Taxes. In addition,
Tenant shall have the right, from time to time, after notice to Landlord, by
appropriate proceedings conducted diligently and in good faith, to contest the
amount(s) or validity of any Taxes, and Landlord agrees to reasonably cooperate,
at no cost to Landlord, with Tenant in such proceedings.
(d) Commencing January 1, 1999, and in each calendar year
thereafter during the Term (as same may be extended), Tenant shall pay, in
monthly installments in advance, on account of Tenant's Allocated Share of
Recognized Expenses and Taxes on a per square foot basis, the estimated amount
of the increase of such Recognized Expenses and Taxes on a per square foot basis
for such year in excess of the Expense Stop multiplied by the rentable square
footage of the Premises as determined by Landlord in its reasonable discretion
and as set forth in a notice, such notice to include the basis for such
calculation, to be provided to Tenant prior to such date (e.g., if Tenant's
Allocated Share of the 1999 Recognized Expenses and Taxes is $5.48, then Tenant
shall be responsible for payment of Recognized Expenses and Taxes in the amount
of $37,474 (being [$5.48 - $4.48] x 37,474). Prior to the end of that year and
thereafter for each successive calendar year (each, a "Lease Year"), or any part
thereof, Landlord shall send to Tenant a statement of projected increases in
Recognized Expenses and Taxes in excess of the Expense Stop
14
<PAGE> 18
and shall indicate what Tenant's projected share of Recognized Expenses and
Taxes shall be. Said amount shall be paid in equal monthly installments in
advance by Tenant as Additional Rent commencing January 1 of the applicable
Lease Year.
Tenant shall have the right, at its sole cost and
expense, to audit or have its appointed accountant audit Landlord's records
related to Recognized Expenses and Taxes provided that any such audit may not
occur more frequently than once each calendar year nor apply to any year prior
to the then current calendar year (unless such audit uncovers a miscalculation
in Recognized Expenses and/or Taxes in excess of Five Thousand Dollars
($5,000.00). In the event Tenant's audit discloses any discrepancy, Landlord and
Tenant shall use their best efforts to resolve the dispute and make an
appropriate adjustment, failing which, they shall submit any such dispute to
arbitration pursuant to the rules and under the jurisdiction of the American
Arbitration Association in Mercer County, New Jersey. The decision rendered in
such arbitration shall be final, binding and non-appealable. The expenses of
arbitration, other than individual legal and accounting expenses which shall be
the respective parties' responsibility, shall be divided equally between the
parties. In the event, by agreement or as a result of an arbitration decision,
it is determined that the actual Recognized Expenses and/or Taxes exceeded those
claimed by Landlord, Landlord shall refund the difference between the amount of
Recognized Expenses and/or Taxes paid by Tenant and the actual amount of
Recognized Expenses and/or Taxes to Tenant within ten (10) business days of such
determination, together with interest thereon at the statutory rate if such
reconciliation is not completed within four (4) months. In addition, if it is
determined that the aggregate amount of Recognized Expenses and/or Taxes paid by
Tenant exceed those claimed by Landlord by more than six percent (6%), the
actual, reasonable costs of Tenant's audit (including legal and accounting
costs) shall be reimbursed by Landlord.
(e) If during the course of any Lease Year, Landlord shall
have reason to believe that the Recognized Expenses and Taxes shall be different
than that upon which the aforesaid projections were originally based, then
Landlord shall be entitled to adjust the amount by reallocating the remaining
payments for such year, for the months of the Lease Year which remain for the
revised projections, and to advise Tenant of an adjustment in future monthly
amounts to the end result that the Recognized Expenses and Taxes shall be
collected on a reasonably current basis each Lease Year.
15
<PAGE> 19
(f) Within four (4) months following the end of each Lease
Year or as soon thereafter as administratively available, Landlord shall send to
Tenant a statement of actual expenses incurred for Recognized Expenses and Taxes
for the prior Lease Year showing the Tenant's Allocated Share due from Tenant.
Landlord shall use its best efforts to provide Tenant with the aforesaid
statements on or before February 28 of each Lease Year. If Landlord is unable to
provide such statements by February 28, Landlord shall not have been deemed to
waive its right to collect any such amounts as Additional Rent. If Landlord is
unable to provide final statements on or before February 28 of each Lease Year,
Landlord shall provide Tenant with its unaudited internal estimates of such
costs by February 28, with the caveat that the final statements may deviate from
the estimate provided. In the event the amount prepaid by Tenant exceeds the
amount that was actually due then Landlord shall issue a credit to Tenant in an
amount equal to the over charge, which credit Tenant may apply to future
payments on account of Recognized Expenses and Taxes until Tenant has been fully
credited with such over charge. In the alternative, Tenant shall have the right
to request that Landlord pay such over charge directly to Tenant, which amount
Landlord shall pay to Tenant within thirty (30) days after Tenant's election. In
addition, if the over charge due to Tenant is more than the aggregate total of
future Additional Rent payments, Landlord shall pay to Tenant the difference
between the credit and such aggregate total. In the event Landlord has
undercharged Tenant then Landlord shall send Tenant an invoice with the
additional amount due, which amount shall be paid in full by Tenant within
fifteen (15) days of Tenant's receipt of such invoice.
(g) The payments of Recognized Expenses and Taxes hereunder
shall for all purposes be treated and considered as Additional Rent, and the
failure of Tenant to pay the same as and when due in advance and without demand
shall have the same effect as failure to pay any installment of Fixed Rent and
shall afford Landlord all the remedies in this Lease therefor as well as at law
or in equity.
(h) If the Term of this Lease shall have expired and the
amount prepaid by Tenant exceeds the amount that was actually due to Landlord,
then Landlord shall refund any remainder to Tenant within sixty (60) days after
the expiration of the Term.
16
<PAGE> 20
(i) Tenant shall not be liable for any increases in Related
Expenses or Taxes which are not fairly allocable to the Term.
7. UTILITIES. From and after the Commencement Date, Tenant shall make
arrangements with each utility company and public body to provide, in Tenant's
name, gas and telephone services necessary for Tenant's use of the Premises, and
Tenant shall cause such utilities to be separately metered, to the extent
possible. Tenant shall cause electricity to be separately metered as part of its
Work Agreement. Tenant shall pay directly to the companies furnishing said
utility services the cost of all service connection fees and the cost of all
utilities consumed by Tenant throughout the Term. If any utility service is not
separately metered, Landlord shall pay the bills for the Building, and Tenant
shall pay to Landlord prior to the time when each bill becomes due the Tenant's
Allocated Share or such reasonably allocated costs based on Tenant's usage. In
the event that Tenant fails to pay in a timely manner any sum required under
this Section 7, Landlord shall have the right, but not the obligation, upon
prior written notice to Tenant, to pay any such sum. Any sum so paid by Landlord
shall be deemed to be owing by Tenant to Landlord and due and payable as
Additional Rent within fifteen (15) days after written demand therefor. Tenant's
obligations for the payment of the costs incurred for utilities that serve the
Premises prior to the termination of this Lease shall survive termination
hereof.
8. SIGNS; USE OF PREMISES AND COMMON AREAS.
(a) Landlord shall, at Landlord's sole cost and expense,
provide Tenant with standard identification signage on all of the Building's
directories, exterior directional signs and at the entrance to the Premises. No
other signs shall be placed, erected or maintained by Tenant at any place upon
the Premises, the Building or the Project, except as otherwise set forth in
Section 8(e) below.
(b) Tenant may use and occupy the Premises only for the
express purposes stated in Section 1(l) above; and the Premises shall not be
used or occupied, in whole or in part, for any other purpose without the prior
written consent of Landlord; provided that Tenant's right to so use and occupy
the Premises shall remain expressly subject to the provisions of Section 28
17
<PAGE> 21
herein. No machinery or equipment shall be permitted that shall cause vibration,
noise or disturbance beyond the Premises.
(c) Tenant shall not commit or suffer any waste upon the
Premises, the Building or the Project or any nuisance, or any other act or thing
which may disturb the quiet enjoyment of any other tenant in the Building or the
Project.
(d) Tenant shall have the right, non-exclusive and in common
with others, to use the exterior paved driveways and walkways of the Building
for vehicular and pedestrian access to the Building. Tenant shall also have the
right, in common with other tenants of the Building and Landlord, to use in the
designated parking areas of the Project one hundred forty-five (145) parking
spaces on a non-reserved basis at the Project for the parking of vehicles of
Tenant, its employees, agents, contractors, suppliers, vendors, customers,
invitees and licensees, incident to Tenant's Permitted Uses of the Premises.
Landlord warrants and represents to its knowledge that Tenant's Permitted Uses
shall not overburden the parking at the Building (including, but not limited to,
Tenant's right to use the loading dock attached to the Premises). Landlord shall
have the right to establish reasonable regulations, applicable to all tenants,
governing the use of or access to any interior or exterior common areas; and
such regulations, when communicated by written notification from Landlord to
Tenant, shall be deemed incorporated by reference hereinafter and part of this
Lease provided such regulations do not result in any material change to Tenant's
use and enjoyment of the Premises and/or such common areas.
(e) Notwithstanding anything to the contrary set forth herein,
Tenant shall have the right, so long as Tenant occupies at least 30,000 square
feet, to install and shall maintain if installed, a free-standing exterior
monument sign near or adjacent to the entrance to the Premises not to exceed 32
square feet(the "Sign"), as determined by Tenant in its sole reasonable
discretion, which identifies Tenant provided that (i) the Sign is permitted
under and conforms to all applicable laws, rules and regulations of the State of
New Jersey and any other governmental authorities having appropriate
jurisdiction; (ii) Tenant obtains all approvals and permits required for the
installation of the Sign; and (iii) all of the terms and conditions of this
Section 8(e) have been satisfied. The design, materials, size, color, exact
location and other attributes of the Sign must be approved by Landlord in its
reasonable discretion. Tenant shall pay for the purchase, installation and
maintenance of the Sign, at its sole cost and expense, and shall install the
Sign reasonably
18
<PAGE> 22
promptly after the Tenant has obtained all required consents and approvals.
Tenant acknowledges that Landlord makes no representations or warranties
regarding the ability or likelihood of Tenant's obtaining all necessary
approvals or permits for the Sign and Tenant agrees that the failure to obtain
any such approvals or permits shall not relieve Tenant from any obligations
under this Lease. On or before the end of the Term, Tenant shall, at its
expense, remove the Sign and repair that portion of the Building and/or the
Project affected thereby to the condition such part of the Building was in at
the time the Sign was installed, ordinary wear and tear and casualty excepted.
9 ENVIRONMENTAL MATTERS.
(a) Hazardous Substances.
(i) Tenant shall not, except as provided in
subsection 9(a)(ii) below, bring or otherwise cause to be brought or permit any
of its agents, employees, contractors or invitees to bring in, on or about any
part of the Premises, the Building or the Project, any hazardous substance or
hazardous waste in violation of law, as such terms are or may be defined in (x)
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. 9601 et seq., as the same may from time to time be amended, and the
regulations promulgated pursuant thereto ("CERCLA"); the United States
Department of Transportation Hazardous Materials Table (49 CFR 172.102); by the
Environmental Protection Agency as hazardous substances (40 CFR Part 302); the
Clean Air Act; and the Clean Water Act, and all amendments, modifications or
supplements thereto; and/or (y) the Industrial Site Recovery Act, formerly known
as the Environmental Cleanup Responsibility Act, N.J.S.A. 13:1K-6 et seq., as
the same may from time to time be amended, and the regulations promulgated
pursuant thereto ("ISRA"); and/or (z) any other rule, regulation, ordinance,
statute or requirements of any governmental or administrative agency regarding
the environment.
19
<PAGE> 23
(ii) Tenant may bring to and use at the Premises,
hazardous substances, supplies or other items, incidental to its normal business
operations under the Standard Industrial Classification Number referenced in
Section 1(o) above in accordance with all laws. Tenant shall store and handle
such substances in strict accordance with all environmental laws. In addition,
Landlord recognizes that Tenant's business operations include the use and
handling of human blood and human blood related products. Landlord agrees that
Tenant shall be permitted to use and handle such blood and blood products so
long as Tenant complies with all applicable laws relating thereto with the terms
and conditions of this Section 9.
(iii) Landlord hereby warrants and represents, based
solely on the Phase I Report delivered to Tenant, that it has no knowledge, of
any hazardous materials or substances in or about the Premises, the Building or
the Project, which are environmentally hazardous or harmful, or which violate
applicable laws, codes, statutes, ordinances, guidelines, rules and regulations.
Said hazardous substances and materials include, without limitation, asbestos,
radon, PCB's or petroleum products. Landlord shall have sole liability for, and
Tenant shall have no liability for, any and all hazardous materials (and any
related equipment such as, but not limited to, underground storage tanks) not
created or deposited by Tenant or its licensees, employees, agents or invitees.
In addition, Landlord has delivered to Tenant on or before the Commencement Date
the environmental assessments or reports which Landlord has regarding the
Premises, the Building or the Project.
(b) Industrial Site Recovery Act.
(i) Tenant represents and warrants that Tenant's
Standard Industrial Classification Number as designated in the Standard
Classification Manual prepared by the Office of Management and Budget, and as
set forth in Section 1(o) hereof, is correct. Tenant covenants and agrees to
notify Landlord at least thirty (30) days prior to any change of facts which
would result in the change of Tenant's Standard Industrial Classification Number
from its present number.
20
<PAGE> 24
(ii) Except for (i) the drawing of human blood from
employees, and (ii) the storage and use of animal blood, each type of blood
stated in (i) and (ii) to be used in connection with testing operations
utilizing single use disposable cartridges, and (iii) the disposal of the
by-products and residual blood from such testing, each of (i), (ii), and (iii)
to be done in accordance with all applicable laws, Tenant shall not engage in
operations at the Premises which involve the generation, manufacture, refining,
transportation, treatment, storage, handling or disposal of "hazardous
substances" or "hazardous waste" as such terms are defined under ISRA. Tenant
further covenants that it will not cause or permit to exist any "discharge" (as
such term is defined under ISRA) on or about the Premises.
(iii)(A) If Tenant's operations at the Premises now
or hereafter constitute an "Industrial Establishment" subject to the
requirements of ISRA, then prior to: (1) closing operations or transferring
ownership or operations of Tenant at the Premises (as defined under ISRA), (2)
the expiration or sooner termination of this Lease, or (3) any assignment of
this Lease or any subletting by Tenant of any portion of the Premises, Tenant
shall, at its expense, comply with ISRA by obtaining, at Tenant's sole cost and
expense, either a Letter of Non-Applicability ("LNA"), De Minimis Quantity
Exemption, Remediation Agreement, Expedited Review approval, or any other
applicable authorization letter issued by NJDEP ("ISRA Clearance") authorizing
Tenant's ISRA-triggering event. Further, if required under ISRA, Tenant shall
proceed to cause NJDEP to issue a No Further Action Letter in connection with
Tenant's ISRA-triggering event. Provided, further, that in no event shall Tenant
be responsible for investigation, remediation or any other actions related to
contamination or conditions existing prior to the execution of this Lease. Any
failure of Tenant to provide any information and submission as required under
N.J.S.A. 13:1K-11.9, shall constitute a default under this Lease. Any assignee
or subtenant of Tenant shall be deemed to have acknowledged, and by entering
into such assignment or sublease, and/or by entering into possession of the
Premises, does hereby, acknowledge, their obligations to comply with ISRA,
jointly and severally with Tenant under the provisions of this Lease.
(B) With respect to any ISRA-triggering
event where Landlord is the "triggering party," Landlord shall comply with ISRA,
at Landlord's sole cost and expense, by obtaining ISRA Clearance authorizing
Landlord's ISRA-triggering event. (By way of example only, and without
limitation, Landlord shall be deemed
21
<PAGE> 25
the triggering party in the event of (1) a sale of the Premises (2) a change in
control of Landlord, a stock sale, partnership situation change and/or (3) asset
sale). Further, if required under ISRA, Landlord shall proceed to cause NJDEP to
issue a No Further Action Letter in connection with Landlord's ISRA-triggering
event.
Landlord and Tenant acknowledge that the use of
institutional controls, engineering controls, deed restrictions, deed notices,
classification exception areas, or the like ("Controls"), may be required as
part of a remediation program under ISRA and each party hereby consents to the
reasonable use of such Controls.
Upon written request of the other party, each party
shall cooperate with the other in obtaining ISRA approvals, and in inspections
required by NJDEP, which shall include execution of all affidavits required by
NJDEP and any other requirements requested by NJDEP.
(iv) Any representation or certification made by
Landlord or Tenant in connection with an application for an ISRA "LNA" or other
authorization letter or approval from NJDEP shall also constitute a
representation and warranty in favor of the other party, i.e., the Landlord or
Tenant, as the case may be. Any misrepresentation or breach of warranty
contained in Tenant's applications to NJDEP, if any, shall constitute a default
under this Lease; provided, however, if ISRA approvals requested by NJDEP are
not issued due to factors relating solely to the Building or parties other than
Tenant and its agents, contractors and employees, then Tenant shall be deemed to
have complied with this provision.
(v) With respect to an ISRA-triggering event of the
Tenant, in the event Tenant is obligated, under this Section or otherwise, to
perform and/or cooperate in performing any ISRA obligations and/or obtain and/or
cooperate in obtaining any ISRA approval, by way of an LNA, Remediation
Agreement, "negative declaration", the performance of an approved remedial
action work plan, the obtaining of a no further action letter, and/or otherwise
(collectively the "ISRA Obligations") and, prior to fully performing such ISRA
Obligations, there occurs the scheduled expiration of the Term of this Lease or
Tenant's cessation of operations (collectively, a "Lease Termination"), and in
the event (i) Landlord is obligated to deliver possession to a new tenant and
(ii) under ISRA, Landlord is prevented from being able to deliver lawful
possession because of such failure
22
<PAGE> 26
of Tenant to procure ISRA Clearance, then Tenant shall, following such Lease
Termination, pay, at the time and in the manner Fixed Rent payments were due
during the Term, an amount equal to: (i) Fixed Rent in effect immediately prior
to such Lease Termination; and (ii) Additional Rent as provided under the Lease
until such ISRA Clearance has been procured. Provided, however, that Landlord
shall not be entitled to any such payments so long as Tenant procures ISRA
Clearance for all ISRA-triggering events of the Tenant, if any, in accordance
with this Lease, it being specifically understood that certain ISRA Obligations
of Tenant may extend beyond the Lease Termination.
(c) Additional Terms.
(i) In the event of Tenant's failure to comply with
this Section, Landlord may, after written notice to Tenant and Tenant's failure
to cure or diligently proceed to cure (if such matter cannot be cured within
(30) days) within thirty (30) days of its receipt of such notice, at Landlord's
option, perform any and all of Tenant's obligations as aforesaid and all costs
and expenses incurred by Landlord in the exercise of this right shall be deemed
to be Additional Rent payable on demand and with interest at the Default Rate
until payment.
(ii) The parties acknowledge and agree that Tenant
shall not be held responsible for any environmental issues or latent defects at
the Premises unless such issue was caused by (as opposed to being exacerbated
by) an action or omission of Tenant or its agents, employees, invitees or
consultants activities at the Premises.
(iii) This Section 9 shall survive the expiration or
sooner termination of this Lease for the applicable statute of limitations
period.
10. TENANT'S ALTERATIONS. Tenant will not secure any fixture, apparatus
or equipment or make alterations, improvements or physical additions
(collectively, "Alterations") of any kind to any part of the Premises without
first obtaining the written consent of Landlord, such consent not to be
unreasonably withheld, conditioned or delayed. Landlord's consent shall not be
required for the installation of any office equipment or fixtures including
internal partitions which do not require the disturbance of any structural
elements or systems (other than attachment thereto) within the Building and the
performance of minor cosmetic decorating and remodeling in the Premises. Once
23
<PAGE> 27
Landlord has approved Tenant's Alterations, Tenant, prior to the commencement of
labor or supply of any materials, must furnish to Landlord: (i) certificates of
insurance evidencing (A) general public liability insurance for personal injury
and property damage in the minimum amount of $1,000,000.00 combined single
limit, (B) statutory workman's compensation insurance, and (C) employer's
liability insurance from each contractor to be employed (all such policies shall
be non-cancelable without thirty (30) days' prior written notice to Landlord and
shall be in amounts and with companies reasonably satisfactory to Landlord);
(ii) construction documents prepared and sealed by a registered New Jersey
architect if such Alteration is in excess of Twenty Five Thousand Dollars
($25,000.00); (iii) all applicable building permits required by law; and (iv) an
executed, effective waiver of mechanics liens from such contractors and all
sub-contractors. Any consent by Landlord permitting Tenant to do any or cause
any work to be done in or about the Premises shall be and hereby is conditioned
upon Tenant's work being performed by workmen and mechanics working in harmony
and not interfering with labor employed by Landlord, Landlord's mechanics or
their contractors or by any other tenant or their contractors. Notwithstanding
the foregoing, once Landlord has approved specific contractors or subcontractor
to perform the Alterations, Landlord shall not be permitted to withdraw its
approval of Tenant's use of said contractors and subcontractors until after such
Alterations have been completed.
All Alterations (whether temporary or permanent in character)
made in or upon the Premises shall be Landlord's property upon installation and
shall remain on the Premises without compensation to Tenant unless Tenant shall,
upon requesting Landlord's approval for such Alterations, have given written
notice to Landlord that Tenant shall remove same at the expiration of this
Lease, in which event Tenant shall promptly remove such Alterations and restore
the Premises to its condition prior to the Alterations being completed,
reasonable wear and tear and casualty excepted. All furniture, movable trade
fixtures and equipment installed by Tenant may be removed by Tenant at the
termination of this Lease, or if not so removed shall, at the option of
Landlord, become the property of Landlord. All such installations, removals and
restoration shall be accomplished in a good and workmanlike manner so as not to
damage the Premises or the Building and in such manner so as not to disturb
other tenants in the Building. If Tenant fails to remove any items required to
be removed pursuant to this Section 10, Landlord may do so and the costs and
expenses thereof shall be deemed Additional Rent hereunder and shall be
reimbursed by
24
<PAGE> 28
Tenant to Landlord within fifteen (15) business days of Tenant's receipt of an
invoice therefor from Landlord.
11. CONSTRUCTION LIENS.
(a) Tenant will not voluntarily suffer or permit any
contractor's, subcontractor's or supplier's lien (a "Construction Lien") to be
filed against the Premises or any part thereof by reason of work, labor services
or materials supplied to Tenant or claimed to have been supplied to Tenant. If
any Construction Lien shall at any time be filed against the Premises or any
part thereof, Tenant, within thirty (30) days after notice of the filing
thereof, shall cause it to be discharged of record by payment, deposit, bond,
order of a court or competent jurisdiction or otherwise. If Tenant shall fail to
cause such Construction Lien to be discharged within the period aforesaid, then
in addition to any other right or remedy, Landlord may, but shall not be
obligated to, discharge such Construction Lien either by paying the amount
claimed to be due or by procuring the discharge of such lien by deposit or by
bonding proceedings. Any amount so paid by Landlord, plus all of Landlord's
costs and expenses associated therewith (including, without limitation,
reasonable legal fees), shall constitute Additional Rent payable by Tenant under
this Lease and shall be paid by Tenant to Landlord on demand with interest from
the date of advance by Landlord at the Default Rate (hereinafter defined).
(b) Nothing in this Lease, or in any consent to the making of
Alterations shall be deemed or construed in any way as constituting
authorization by Landlord for the making of any Alterations by Tenant within the
meaning of Section 3 of the Construction Lien Law (P.L. 1993, c. 318) or any
amendment thereof, or constituting a request by Landlord, express or implied, to
any contractor, subcontractor or supplier for the performance of any labor or
the furnishing of any materials for the use or benefit or Landlord.
12. ASSIGNMENT AND SUBLETTING.
(a) Except as otherwise set forth herein, Tenant shall not,
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed and which consent shall be granted
or denied within (i) ten (10) days for a general office use subtenant or
assignee or (ii) twenty (20) days for a non-office use subtenant or assignee of
Tenant's request for such consent, assign or hypothecate this Lease or any
25
<PAGE> 29
interest herein or sublet the Premises or any part thereof for all other uses.
If Landlord fails to respond to Tenant's request within such ten (10) or twenty
(20) day period, as the case may be, Landlord shall be deemed to have approved
such request. Any of the foregoing acts without such consent shall be void.
Subject to Section 12(f) below, this Lease shall not, nor shall any interest
herein, be assignable as to the interest of Tenant by operation of law or by
merger, consolidation or asset sale, without the written consent of Landlord.
(b) If at any time or from time to time during the term of
this Lease Tenant desires to assign all or any part of the Premises (i)
consisting of more than an aggregate of 7,000 square feet, (ii) to more than a
total of two subtenants or assignees at any time, or (iii) for a period in
excess of 2-1/2 years, under any events set forth above as (i), (ii) or (iii),
Tenant shall give notice to Landlord of such intent. Landlord shall have the
option, exercisable by notice given to Tenant within thirty (30) days after
receipt of Tenant's notice, of reacquiring the portion of the Premises proposed
to be assigned and terminating the Lease with respect thereto.
(c) Tenant shall pay to Landlord fifty percent (50%) of any
sums or other economic consideration received by Tenant as a result of any
subletting, assignment or license (less the cost of leasehold improvements made
to the sublet or assigned portion of the Premises by Tenant for subtenant or
assignee, and other reasonable expenses incident to the subletting or
assignment, including standard leasing commissions) whether denominated as
rentals under the sublease or otherwise, which exceed, in the aggregate, the
total sums which Tenant is obligated to pay Landlord under this Lease (prorated
to reflect obligations allocable to that portion of the Premises subject to such
sublease or assignment) without affecting or reducing any other obligation of
Tenant hereunder.
(d) Regardless of Landlord's consent, no subletting or
assignment shall release Tenant of Tenant's obligation or alter the primary
liability of Tenant to pay the Rent and to perform all other obligations to be
performed by Tenant hereunder. The acceptance of rental by Landlord from any
other person shall not be deemed to be a waiver by Landlord of any provision
hereof. Consent to one assignment or subletting shall not be deemed consent to
any subsequent assignment or subletting. In the event of default by any assignee
of Tenant or any subtenant of Tenant in the performance of any of the terms
hereof, Landlord may
26
<PAGE> 30
proceed directly against Tenant without the necessity of exhausting remedies
against such assignee or subtenant.
(e) In the event that (i) the Premises or any part thereof are
sublet and Tenant is in default under this Lease, or (ii) this Lease is assigned
by Tenant, then, Landlord may collect Rent from the assignee or subtenant and
apply the net amount collected to the rent herein reserved; but no such
collection shall be deemed a waiver of the provisions of this Section 12 with
respect to assignment and subletting, or the acceptance of such assignee or
subtenant as Tenant hereunder, or a release of Tenant from further performance
of the covenants herein contained.
(f) Notwithstanding anything to the contrary set forth herein,
Tenant shall have the right, upon prior written notice to Landlord, but without
obtaining Landlord's consent, to assign this Lease or sublet all or part of the
Premises to any affiliate which is at least fifty-one percent (51%) owned by
Tenant, parent, subsidiary which is at least fifty-one percent (51%) owned by
Tenant, divisional entity which is at least fifty-one percent (51%) owned by
Tenant, joint venture entity of Tenant which is at least fifty-one percent (51%)
owned by Tenant, or to any entity arising by virtue of merger, consolidation or
other business combination with Tenant which is at least fifty-one percent (51%)
owned by Tenant, or Tenant's parent entity, or to any purchaser of all or
substantially all of Tenant's stock or assets so long as such entity has a net
worth of at least $50,000,000, or to any entity under the ownership or control
of Tenant's parent entity or holding entity (individually, a "Related Entity"
and collectively, "Related Entities"), so long as Tenant continues to remain
liable under the terms of this Lease. The provisions of Section 12(b) and
Section 12(e), above, shall not apply to the assignment of this Lease or the
subletting of all or a portion of the Premises to a Related Entity.
27
<PAGE> 31
13. LANDLORD'S RIGHT OF ENTRY. Landlord, its agents and employees may
enter the Premises at all reasonable times during regular business hours upon
twenty-four (24) hours prior notice to Tenant (except in the case of an
emergency, in which case no prior notice is necessary) for the purpose of
conducting inspections, repairs, alterations to adjoining space, appraisals, or
other reasonable purposes, including the enforcement of Landlord's rights under
this Lease, provided Landlord shall use reasonable efforts not to unreasonably
interfere with Tenant's business operations during any such access. Landlord
also shall have the right to enter the Premises at all reasonable times during
regular business hours after giving prior notice to Tenant and Landlord shall
provide written notice to Tenant during the last nine (9) months of the Term, to
exhibit the Premises to any prospective purchaser, tenant and/or mortgagee.
14. REPAIRS AND MAINTENANCE.
(a) Except as specifically otherwise provided in Sections
14(b) and (c) below, Tenant, at its sole cost and expense and throughout the
Term of this Lease, shall keep and maintain the Premises and any installed
signage per Section 8 in good order and condition, free of accumulation of dirt
and rubbish, and shall promptly make all non-structural repairs necessary to
keep and maintain such good order and condition, reasonable wear and tear and
casualty excepted. Tenant shall have the option of replacing lights, ballasts
and tubes, itself or it shall have the ability to advise Landlord of Tenant's
desire to have Landlord make such repairs. If requested by Tenant, Landlord
shall replace such lights, ballasts and tubes within a reasonable time of notice
to Landlord and shall charge Tenant for such services at Landlord's standard
rate (such rate to be competitive with the market rate for such services).
Tenant shall not use or permit the use of any portion of the Premises for
outdoor storage. When used in this Section 14, the term "repairs" shall include
replacements and renewals when necessary. All repairs made by Tenant shall
utilize materials and equipment which are at least equal in quality and
usefulness to those originally used in constructing the Building and the
Premises. Landlord hereby warrants and represents that the HVAC system serving
the Premises shall be in operational order and condition on the Commencement
Date, and shall, throughout the Term, provide levels of ventilation, humidity,
heating and cooling which are appropriate for Tenant's Permitted Use. Except for
damage caused by Tenant's negligence or willful misconduct,
28
<PAGE> 32
Landlord shall be responsible for maintenance, repairs, replacements and
additions to said HVAC system during the Term, said maintenance to include
periodic testing and cleaning of the duct work as is reasonably necessary to
avoid unsafe or unhealthy interior air conditions. Any overtime charges for
Tenant's HVAC usage shall be proportionately reduced to reflect any simultaneous
usage by other tenants. In addition, the rates for such overtime usage shall not
exceed the normal and customary rates charged at comparable first-class office
buildings in the Mercer County, New Jersey area. Tenant's Allocated Share of
Landlord's cost for HVAC service, maintenance and repairs shall be included as a
portion of Recognized Expenses.
(b) Landlord, throughout the Term of this Lease, at Landlord's
sole cost and expense so long as such damage is not caused by Tenant or its
agents, licensees, employees or invitees' acts or omissions, shall make all
necessary repairs to the structural elements of the Building including, without
limitation, footings, foundations and the structural steel columns and girders
forming a part of the Premises and the Building.
(c) Landlord, throughout the Term of this Lease, shall make
all necessary repairs to the Building and the common areas, including the roof,
walls, exterior portions of the Premises and the Building, utility lines,
equipment and other utility facilities in the Building, which serve more than
one tenant of the Building, and to any driveways, sidewalks, curbs, loading
docks, parking and landscaped areas, and other exterior improvements for the
Building. Tenant shall pay Tenant's Allocated Share of the cost of all repairs
to be performed by Landlord pursuant to this Section 14(c) as Additional Rent as
provided, and as limited with respect to capital items, in accordance with
Section 6 hereof.
(d) Landlord shall keep and maintain all common areas
appurtenant to the Building and any sidewalks, parking areas, curbs and access
ways adjoining the Project in a clean and orderly condition, free of
accumulation of dirt, rubbish, snow and ice, and shall keep and maintain all
landscaped areas in a neat and orderly condition. Tenant shall pay Tenant's
Allocated Share of the cost of all work to be performed by Landlord pursuant to
this Section 14(d) as Additional Rent as provided in Section 6 hereof.
(e) Notwithstanding anything herein to the contrary, repairs
to the Premises, the Building or the Project and its appurtenant common areas
caused as a result of the negligence or
29
<PAGE> 33
willful misconduct of Tenant or any employee, agent, invitees or contractor of
Tenant shall be made at the sole cost and expense of Tenant, except to the
extent covered by Landlord's insurance.
(f) Tenant shall have the right to elect to have Landlord
provide Tenant with janitorial services for the Premises, Monday through Friday
of each week in accordance with the guidelines set forth in Exhibit "D" attached
hereto and Tenant shall pay Landlord the actual cost thereof as Additional Rent
as provided in Section 6 hereof. In no event shall Tenant be responsible for any
portion of the cost of such janitorial services (i) if Tenant does not utilize
such janitorial services, or (ii) for any tenant or other occupant of the
building.
15. INSURANCE; SUBROGATION RIGHTS.
(a) Tenant shall obtain and keep in force at all times during
the Term hereof, at its own expense, com general liability insurance including
contractual liability and personal injury liability and all similar coverages,
with combined single limits of $3,000,000.00 on account of bodily injury to or
death of one or more persons as the result of any one accident or disaster and
on account of damage to property or in such other amounts as Landlord may from
time to time require pursuant to policies set forth in the next sentence. The
policy limits set forth herein shall be subject to periodic review, and Landlord
reserves the right to require that Tenant increase the liability coverage limits
if, in the reasonable opinion of Landlord, the coverage becomes inadequate and
is less than commonly maintained by tenants of similar buildings in the area
making similar uses.
(b) Tenant shall, at its sole cost and expense, maintain in
full force and effect on all Tenant's trade fixtures, equipment and personal
property on or in the Premises, a policy of all risk property insurance covering
the full replacement value of such property. Tenant shall also provide and keep
in force, business interruption insurance in an amount equivalent to twelve (12)
months' Fixed Rent and Additional Rent which shall not contain a deductible
greater than seventy-two (72) hours.
(c) All insurance required hereunder shall not be subject to
cancellation without at least thirty (30) days' prior notice (except in the
event of non-payment of premiums) to all insureds, and shall name Landlord,
Brandywine Realty Trust, Brandywine Realty Services Corporation and Tenant as
additional insureds, as their interests may appear, and, if requested by
30
<PAGE> 34
Landlord, shall also name as an additional insured any mortgagee or holder of
any mortgage which may be or become a lien upon any part of the Premises. Prior
to the Commencement Date, Tenant shall provide Landlord with certificates of the
policy or policies of insurance above referred to, with evidence that the
coverages required have been obtained and that premiums have been paid in full
for the policy periods. Tenant shall also furnish to Landlord throughout the
Term hereof replacement certificates or copies of renewal polices, together with
evidence of like paid premiums at least ten (10) days prior to the expiration
dates of the then current policy or policies. All the insurance required under
this Lease shall be issued by insurance companies authorized to do business in
the State of New Jersey with a financial rating of at least an A as rated in the
most recent edition of Best's Insurance Reports and in business for the past
five years. The limit of any such insurance shall not limit the liability of
Tenant hereunder. If Tenant fails to procure and maintain such insurance,
Landlord may, but shall not be required to, procure and maintain the same, at
Tenant's expense to be reimbursed by Tenant as Additional Rent within ten (10)
days of written demand; provided, however, that Landlord shall be required to
give Tenant ten (10) business days notice of its intent to procure insurance on
Tenant's behalf and Tenant shall fail to procure same (or provide proof that
such insurance already exists) within such ten (10) business day period. Any
deductible under such insurance policy or self-insured retention under such
insurance policy in excess of Five Thousand Dollars ($5,000) must be approved by
Landlord in writing prior to issuance of such policy. Tenant shall not
self-insure without Landlord's prior written consent. The policy limits set
forth herein shall be subject to periodic review, and Landlord reserves the
right to require that Tenant increase the liability coverage limits if, in the
reasonable opinion of Landlord, the coverage becomes inadequate and is less than
commonly maintained by tenants of similar buildings in the area making similar
uses.
(d) Landlord shall obtain and maintain the following insurance
during the Term of this Lease: (i) replacement cost insurance including all risk
perils on the Building and on the Project, and (ii) general liability insurance
(including bodily injury and property damage) covering Landlord's operations at
the Project in amounts held by reasonably prudent landlords of comparable
first-class properties in the Mercer County, New Jersey area.
(e) Each party hereto, and anyone claiming through or under
them by way of subrogation, waives and releases any cause
31
<PAGE> 35
of action it might have against the other party and Brandywine Realty Trust and
their respective employees, officers, partners, trustees and agents, on account
of any loss or damage that is insured against under any insurance policy
required to be obtained hereunder that covers the Project, the Building or the
Premises, Landlord's or Tenant's fixtures, personal property, the Tenant
Improvements or business and which names Landlord and Brandywine Realty Trust or
Tenant, as the case may be, as a party insured. Each party hereto agrees that it
will cause its insurance carrier to endorse all applicable policies waiving the
carrier's right of recovery under subrogation or otherwise against the other
party. During any period while such waiver of right of recovery is in effect,
each party shall look solely to the proceeds of such policies for compensation
for loss, to the extent such proceeds are paid under such policies.
16. INDEMNIFICATION. Tenant shall defend, indemnify and hold harmless
Landlord and Brandywine Realty Trust and their respective employees and agents
from and against any and all actions, damages, liability and expense (including
all expenses and liabilities incurred in defense of any such claim or any action
or proceeding brought thereon) arising from (i) Tenant's use of the Premises in
violation of the terms of the Lease, (ii) the conduct of Tenant's business in
violation of the terms of the Lease, (iii) any activity, work or things done,
permitted or suffered by Tenant in or about the Premises or elsewhere contrary
to the requirements of this Lease, (iv) any breach or default in the performance
of any obligation on Tenant's part to be performed under the terms of this
Lease, and (v) any negligence or willful act of Tenant or any of Tenant's
agents, contractors or employees. In the event Landlord, Brandywine Realty
Services Corporation or Brandywine Realty Trust shall be made a party to any
litigation commenced against Tenant, its agents, subtenants, licensees,
concessionaires, contractors, customers or employees, then Tenant shall defend
(with counsel reasonably acceptable to Landlord), indemnify and hold harmless
Landlord, Brandywine Realty Services Corporation and Brandywine Realty Trust and
Tenant shall pay all costs, expenses and reasonable attorney's fees incurred or
paid by Landlord and Brandywine Realty Trust in connection with such litigation.
Tenant shall further indemnify and hold harmless Landlord, Brandywine Realty
Services Corporation and Brandywine Realty Trust from and against any and all
third-party claims, actions, damages, liability and expense which may be imposed
upon or incurred by or asserted against Landlord by reason of (A) loss of life,
personal injury and/or damage to property occurring in or about the Premises,
occasioned
32
<PAGE> 36
by reason of any act or omission of Tenant, its agents, subtenants, licensees,
concessionaires, contractors, customers, employees and/or third parties and (B)
any failure on the part of Tenant to keep, observe and perform any of the terms,
covenants, agreements, conditions, limitations or Rules and Regulations
contained in this Lease on Tenant's part to be kept, observed and performed.
Tenant's indemnity of Landlord set forth herein specifically excludes any
losses, liabilities, claims, damages or expenses arising from the negligence or
misconduct of Landlord or Landlord's agents, employees, contractors, or
invitees, or arising from Landlord's breach of its obligations or
representations under this Lease. In addition, in no event shall Tenant ever be
liable for any consequential or punitive damages. Landlord hereby agrees to
indemnify, defend and hold Tenant harmless from and against any and all losses,
liabilities, claims, damages or expenses (including, without limitation,
reasonable attorneys' fees and costs), arising from or in connection with the
negligence or misconduct of Landlord or Landlord's agents, employees or
contractors, or arising from or in connection with Landlord's breach of its
obligations or representations in this Lease. Any provisions in this Lease which
purport to limit, waive or release Landlord or Tenant for its negligence or
misconduct (or the negligence or misconduct of Landlord's or Tenant's agents,
employees or contractors) shall be of no effect.
17. QUIET ENJOYMENT. Provided Tenant has performed all of the terms and
conditions of this Lease, including the payment of Fixed Rent and Additional
Rent, to be performed by Tenant, Tenant shall peaceably and quietly hold and
enjoy the Premises for the Term, without hindrance from Landlord, or anyone
claiming by through or under Landlord.
18. FIRE DAMAGE.
(a) Except as provided below, in case of damage to the
Premises by fire or other casualty, Landlord shall repair the damage within one
hundred eighty (180) days of such damage. Such repair work shall be commenced
promptly following notice of the damage and completed with due diligence, taking
into account the time required for Landlord to effect a settlement with and
procure insurance proceeds from the insurer, and excluding delays due to Force
Majeure (hereinafter defined). In the event of any casualty damage or loss
rendering all or part of the Premises, or Tenant's access thereto, untenantable,
all Fixed Rent and Additional Rent shall be proportionately abated to reflect
the
33
<PAGE> 37
rentable area of the Premises (and access thereto) remaining tenantable after
such casualty. Said abatement shall begin as of the date of the casualty and end
on the date Landlord tenders possession of the Premises restored and rendered
tenantable for Tenant's business operations.
(b) Notwithstanding the foregoing, if (i) the damage is of a
nature or extent that, in Landlord's reasonable judgment (to be communicated to
Tenant within sixty (60) days from the date of the casualty), the repair and
restoration work would require more than one hundred eighty (180) consecutive
days to complete after the casualty and, assuming normal work crews not engaged
in overtime by sending written notice of such termination to the other party
within ten (10) days of Tenant's receipt of the notice from Landlord described
above, or (ii) if more than fifty percent (50%) of the total area of the
Building is extensively damaged, Landlord and Tenant shall each have the right
to terminate this Lease and all the unaccrued obligations of the parties hereto
by sending written notice of such termination to the other party within thirty
(30) days of such casualty. Such notice is to specify a termination date no less
than ten (10) days after its transmission. In addition to the foregoing, in the
event the Premises are untenantable because of the nature or extent of the
damage, all Fixed Rent and Additional Rent shall be abated as of the date of the
casualty.
(c) Notwithstanding the foregoing, if (i) all or substantially
all (i.e., fifty percent (50%) or more) of the rentable area of the Premises are
rendered untenantable by such casualty; or (ii) the Premises cannot reasonably
be restored within one hundred eighty (180) days of the casualty loss; or (c) a
casualty loss occurs during the last year of the Term and affects fifty percent
(50%) or more of the rentable area of the Premises, then, in any of said events,
Tenant shall have the right to cancel this Lease effective on the date of such
casualty, without liability, upon written notice to Landlord, in which case upon
payment of all outstanding amounts owed Landlord through the effective date of
termination and performance of all obligations hereunder through such effective
date, Landlord shall immediately return any prepaid Fixed Rent, the L/C and the
Cash Deposit.
19. SUBORDINATION; RIGHTS OF MORTGAGEE.
34
<PAGE> 38
(a) Subject to Section 19(c) hereof, this Lease shall be
subject and subordinate at all times to the lien of any mortgages now or
hereafter placed upon the Premises, the Building and/or the Project and land of
which they are a part without the necessity of any further instrument or act on
the part of Tenant to effectuate such subordination. Tenant further agrees to
execute and deliver upon demand such further instrument or instruments
evidencing such subordination of this Lease to the lien of any such mortgage and
such further instrument or instruments of attornment as shall be desired by any
mortgagee or proposed mortgagee or by any other person.
(b) In the event Landlord shall be or is alleged to be in
default of any of its obligations owing to Tenant under this Lease, Tenant
agrees to give to the holder of any mortgage (collectively the "Mortgagee") now
or hereafter placed upon the Premises, the Building and/or the Project, notice
by registered mail of any such default which Tenant shall have served upon
Landlord, provided that prior thereto Tenant has been notified in writing (by
way of Notice of Assignment of Rents and/or Leases or otherwise in writing to
Tenant) of the name and addresses of any such Mortgagee.
(c) Tenant's subordination and attornment to any future
mortgages, ground leases or encumbrances shall be conditioned upon its receipt
of reasonable and binding nondisturbance agreements protecting Tenant's tenancy
as long as Tenant is not in default of its obligations under this Lease.
Landlord hereby represents and warrants that there are no mortgages or ground
leases affecting the Project.
20. CONDEMNATION.
(a) If more than twenty (20%) percent of the floor area of the
Premises is taken or condemned for a public or quasi-public use (a sale in lieu
of condemnation to be deemed a taking or condemnation for purposes of this
Lease), this Lease shall, at either party's option, terminate as of the date
title to the condemned real estate vests in the condemnor, and Fixed Rent and
Additional Rent herein reserved shall be apportioned and paid in full by Tenant
to Landlord to that date and all rent prepaid for period beyond that date shall
forthwith be repaid by Landlord to Tenant and neither party shall thereafter
have any liability hereunder.
(b) If less than twenty (20%) percent of the floor area of the
Premises is taken or if neither Landlord nor Tenant
35
<PAGE> 39
have elected to terminate this Lease pursuant to Section 20(a) above, Landlord
shall promptly do such work as may be reasonably necessary to restore the
portion of the Premises not taken to tenantable condition.
(c) If this Lease is not terminated after any such taking or
condemnation, Fixed Rent and Additional Rent shall be equitably reduced in
proportion to the area of the Premises which has been taken for the balance of
the Term.
(d) If a part or all of the Premises shall be taken or
condemned, all compensation awarded upon such condemnation or taking shall go to
Landlord. Notwithstanding the foregoing, nothing in this Lease shall preclude
Tenant from claiming and collecting from the condemning authority an award for
Tenant's trade fixtures, loss of business, and moving and relocation costs.
21. ESTOPPEL CERTIFICATE. Each party agrees at any time and from time
to time, within ten (10) days after the other party's written request, to
execute, acknowledge and deliver to the other party a written instrument in
recordable form certifying that this Lease is unmodified and in full force and
effect (or if there have been modifications, that it is in full force and effect
as modified and stating the modifications), and the dates to which Fixed Rent,
Additional Rent, and other charges have been paid in advance, if any, and
stating whether or not to the best knowledge of the party signing such
certificate, the requesting party is in default in the performance of any
covenant, agreement or condition contained in this Lease and, if so, specifying
each such default of which the signer may have knowledge. It is intended that
any such certification and statement delivered pursuant to this Section 21 may
be relied upon by any prospective purchaser of the Project or the Building or
any mortgagee thereof or any assignee of Landlord's interest in this Lease or of
any mortgage upon the fee of the Premises or any part thereof.
22. DEFAULT. In the event:
(i) Tenant fails to pay any installment of Fixed Rent or any
amount of Additional Rent when due, and such failure shall continue for a period
of ten (10) calendar days after Tenant's receipt of written notice to Tenant of
such failure;
(ii) any attachment or execution against a substantial part
of Tenant's assets or of Tenant's interests in
36
<PAGE> 40
this Lease remains unstayed or undismissed or is not bonded over for a period of
more than thirty (30) days from the recording of such attachment;
(iii) a substantial part of Tenant's assets are taken by
final unappealable judgment in any action against Tenant,
(iv) Tenant fails to observe or perform any of the Tenant's
express obligations herein contained within thirty (30) days after Tenant's
receipt of written notice specifying the default, or the expiration of such
additional time period as is reasonably necessary for Tenant to cure such
default, provided Tenant immediately commences and thereafter proceeds with all
due diligence and in good faith to cure such default;
(v) Tenant makes any assignment for the benefit of creditors
except in the case of purchase money financing;
(vi) a petition is filed or any proceeding is commenced
against Tenant under any federal or state bankruptcy or insolvency law and such
petition or proceeding is not dismissed within ninety (90) days;
then, in any such event, an Event of Default shall be deemed to exist and Tenant
shall be in default hereunder.
If an Event of Default shall occur, the following provisions
shall apply and Landlord shall have, in addition to all other rights and
remedies available at law or in equity, the rights and remedies set forth
herein, which rights and remedies may be exercised upon or at any time following
the occurrence of an Event of Default unless, prior to such exercise, the Event
of Default has been cured by Tenant in all material respects:
(a) Acceleration of Rent. By notice to Tenant, Landlord shall
have the right to accelerate all Fixed Rent and all expense installments due
hereunder and otherwise payable in installments over the remainder of the Term,
and, at Landlord's option, any other Additional Rent to the extent that such
Additional Rent can be determined and calculated to a fixed sum; and the amount
of accelerated rent to the termination date, without further notice or demand
for payment, shall be due and payable by Tenant within fifteen (15) days after
Landlord has so notified Tenant, such amount collected from Tenant shall be
discounted to present value using an interest rate of ten percent (10%) per
annum. Additional Rent which has not been included, in
37
<PAGE> 41
whole or in part, in accelerated rent, shall be due and payable by Tenant during
the remainder of the Term, in the amounts and at the times otherwise provided
for in this Lease.
(b) Termination of Lease. By notice to Tenant, Landlord shall
have the right to terminate this Lease as of a date specified in the notice of
termination and in such case, Tenant's rights, including any based on any
options to renew, to the possession and use of the Premises shall end absolutely
as of the termination date; and this Lease shall also terminate in all respects
except for the provisions hereof regarding Landlord's damages and Tenant's
liabilities arising prior to, out of and following the Event of Default and the
ensuing termination. Following such termination and the notice of same provided
above (as well as upon any other termination of this Lease by expiration of the
Term or otherwise) Landlord immediately shall have the right to recover
possession of the Premises; and to that end, Landlord may enter the Premises and
take possession, without the necessity of giving Tenant any notice to quit or
any other further notice, with or without legal process or proceedings, and in
so doing Landlord may remove Tenant's property (including any improvements or
additions to the Premises which Tenant made, unless made with Landlord's consent
which expressly permitted Tenant to not remove the same upon expiration of the
Term), as well as the property of others as may be in the Premises, and make
disposition thereof in such manner as Landlord may deem to be commercially
reasonable and necessary under the circumstances.
(c) Tenant's Continuing Obligations/Landlord's Reletting
Rights.
(i) Unless and until Landlord shall have terminated
this Lease under Section 22(a) above, Tenant shall remain fully liable and
responsible to perform all of the covenants and to observe all the conditions of
this Lease throughout the remainder of the Term to the early termination date;
and, in addition, Tenant shall pay to Landlord, upon demand and as Additional
Rent, the total sum of all costs, losses and expenses, including reasonable
attorneys' fees, as Landlord incurs, directly or indirectly, because of any
Event of Default having occurred.
(ii) If Landlord either terminates Tenant's right to
possession without terminating this Lease or terminates this Lease and Tenant's
leasehold estate as above provided, then, subject to the provisions below,
Landlord shall have the unrestricted right to relet the Premises or any part(s)
thereof
38
<PAGE> 42
to such tenant(s) on such terms and for such period(s) as Landlord may deem
appropriate. Landlord agrees to use reasonable efforts to mitigate its damages
hereunder in the event of an Event of Default by Tenant, provided that Landlord
shall not be liable to Tenant for its inability to mitigate damages if it shall
endeavor to relet the Premises in a like manner as it offers other comparable
vacant space or property available for leasing to others in the Project of which
the Building is a part. If Landlord relets the Premises after such a default,
the costs recovered from Tenant shall be reallocated to take into consideration
any additional rent which Landlord receives from the new tenant which is in
excess to that which was owed by Tenant.
(d) Landlord's Damages.
(i) The damages which Landlord shall be entitled to
recover from Tenant shall not exceed the sum of:
(A) all Fixed Rent and Additional Rent
accrued and unpaid as of the termination date; and
(B) (i)all costs and expenses incurred by
Landlord in recovering possession of the Premises, including removal and storage
of Tenant's property, and (ii) the costs and expenses of restoring the Premises
to the condition in which the same were to have been surrendered by Tenant as of
the expiration of the Term; and
(C) the then discounted present value (as
stated in Section 22(a) above) of all Fixed Rent and Additional Rent (to the
extent that the amount(s) of Additional Rent has been then determined) otherwise
payable by Tenant over the remainder of the Term as reduced to present value.
Less deducting from the total determined under subparagraphs (A), (B) and (C)
all Rent and all other Additional Rent to the extent determinable as aforesaid,
(to the extent that like charges would have been payable by Tenant) which
Landlord receives from other tenant(s) by reason of the leasing of the Premises
or part during or attributable to any period falling within the otherwise
remainder of the Term.
The damage sums payable by Tenant under the preceding provisions of this Section
22(c) shall be payable on demand from time to time as the amounts are
determined; and if from Landlord's subsequent receipt of rent as aforesaid from
reletting, there be
39
<PAGE> 43
any excess payment(s) by Tenant by reason of the crediting of such rent
thereafter received, the excess payment(s) shall be refunded by Landlord to
Tenant, without interest.
(e) Interest on Damage Amounts. Any sums payable by Tenant
hereunder, which are not paid after the same shall be due, shall bear interest
from that day until paid at the rate of four (4%) percent over the then Prime
Rate as published daily under the heading "Money Rates" in The Wall Street
Journal, unless such rate be usurious as applied to Tenant, in which case the
highest permitted legal rate shall apply (the "Default Rate").
(f) Landlord's Statutory Rights. Landlord shall have all
rights and remedies now or hereafter existing at law or in equity with respect
to the enforcement of Tenant's obligations hereunder and the recovery of the
Premises. No right or remedy herein conferred upon or reserved to Landlord shall
be exclusive of any other right or remedy, but shall be cumulative and in
addition to all other rights and remedies given hereunder or now or hereafter
existing at law. Landlord shall be entitled to injunctive relief in case of the
violation, or attempted or threatened violation, of any covenant, agreement,
condition or provision of this Lease, or to a decree compelling performance of
any covenant, agreement, condition or provision of this Lease.
(g) Remedies Not Limited. Nothing herein contained shall limit
or prejudice the right of Landlord to exercise any or all rights and remedies
available to Landlord by reason of default or to prove for and obtain in
proceedings under any bankruptcy or insolvency laws, an amount equal to the
maximum allowed by any law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater, equal to, or less than the amount of the loss or damage referred to
above.
(h) No Waiver by Landlord. No delay or forbearance by Landlord
in exercising any right or remedy hereunder, or Landlord's undertaking or
performing any act or matter which is not expressly required to be undertaken by
Landlord shall be construed, respectively, to be a waiver of Landlord's rights
or to represent any agreement by Landlord to undertake or perform such act or
matter thereafter. Waiver by Landlord of any breach by Tenant of any covenant or
condition herein contained (which waiver shall be effective only if so expressed
in writing by Landlord) or failure by Landlord to exercise any right or remedy
in respect of any such breach shall not constitute a waiver or relinquishment
for the future of Landlord's right to have any
40
<PAGE> 44
such covenant or condition duly performed or observed by Tenant, or of
Landlord's rights arising because of any subsequent breach of any such covenant
or condition nor bar any right or remedy of Landlord in respect of such breach
or any subsequent breach. Landlord's receipt and acceptance of any payment from
Tenant which is tendered not in conformity with the provisions of this Lease or
following an Event of Default (regardless of any endorsement or notation on any
check or any statement in any letter accompanying any payment) shall not operate
as an accord and satisfaction or a waiver of the right of Landlord to recover
any payments then owing by Tenant which are not paid in full, or act as a bar to
the termination of this Lease and the recovery of the Premises because of
Tenant's previous default.
23. CURING TENANT DEFAULTS. If Tenant shall default in the performance
of any of its non-monetary obligations hereunder, Landlord without prejudice and
in addition to any other rights it may have at law or in equity, after giving
Tenant written notice of such default and after failure by Tenant within thirty
(30) days of the receipt of such notice to correct or to undertake and
diligently pursue correction of said default(s) in which event the thirty (30)
day period shall be extended for a reasonable time not to exceed an additional
fifteen (15) days (which notice and/or opportunity to cure shall not be required
in case Landlord shall determine that an emergency exists requiring prompt
action), may cure such defaults(s) on behalf of Tenant; and Tenant shall
reimburse Landlord on demand for all costs incurred by Landlord in that regard
plus interest thereon from the date(s) of expenditure at the Default Rate, which
shall be deemed Additional Rent payable hereunder.
24. CURING LANDLORD DEFAULTS. If Landlord shall default in the
performance of any of its non-monetary obligations hereunder which will result
in a material adverse effect on Tenant's operations within the Premises, Tenant
without prejudice and in addition to any other rights it may have at law or in
equity, after giving Landlord written notice of such default and after failure
by Landlord within thirty (30) days of the receipt of such notice to correct or
to undertake and diligently pursue correction of said default(s) in which event
the thirty (30) day period shall be extended for a reasonable time (which notice
and/or opportunity to cure shall not be required in case Tenant shall determine
that an emergency exists requiring prompt action and Landlord's on-site
maintenance personnel are not promptly available), may cure such defaults(s) on
behalf of Landlord; and
41
<PAGE> 45
Landlord shall reimburse Tenant within ten (10) days of written demand with all
invoices documenting such costs for all costs incurred by Tenant in that regard
plus interest thereon from the date(s) of expenditure at the Default Rate. In
the event Landlord fails to reimburse Tenant or object to the costs thereof
within thirty (30) days of Tenant's written demand for such payment, Tenant
shall have the right to offset such amount against Fixed Rent and Additional
Rent next coming due under this Lease.
25. LANDLORD'S REPRESENTATIONS AND WARRANTIES. Landlord represents and
warrants to Tenant as follows:
(1) Landlord is the fee owner of the Building and the Project;
(2) Subject to Chesapeake Park Inc.'s vacation of the
Remainder Space with respect to the ability to occupy and lease such Remainder
Space, Landlord has the full right, power and authority to lease the Premises to
Tenant as provided in this Lease;
(3) Tenant shall have access and use of the Premises
twenty-four (24) hours per day, seven (7) days per week, at no extra charge
other than for overtime HVAC and maintenance after standard building hours of
8:00 a.m. to 6:00 p.m., Monday through Friday.
26. SURRENDER. Tenant shall, at the expiration of the Term, promptly
quit and surrender the Premises in good order and condition and in conformity
with the applicable provisions of this Lease, excepting only reasonable wear and
tear and damage by fire or other casualty. Tenant shall have no right to
holdover beyond the expiration of the Term and in the event Tenant shall fail to
deliver possession of the Premises as herein provided, such occupancy shall not
be construed to effect or constitute other than a tenancy at sufferance. During
any period of occupancy beyond the expiration of the Term the amount of Fixed
Rent owed to Landlord by Tenant shall automatically become two hundred percent
(200%) of the sum of Fixed
42
<PAGE> 46
Rent as calculated under the provisions of this Lease. If Tenant fails to
surrender the space within thirty (30) days of the termination date, Landlord
may elect to automatically extend the Term on a month-to-month basis, at
Landlord's option, with a Fixed Rent of two hundred percent (200%) of the sum of
the Fixed Rent as calculated under the provisions of this Lease. The failure or
delay of Landlord in notifying or evicting Tenant following the expiration or
sooner termination of the Term shall not create any tenancy rights in Tenant and
any such payments by Tenant may be applied by Landlord against its costs and
expenses, including attorney's fees incurred by Landlord as a result of such
holdover. If Landlord accepts Tenant's holdover Rent, Landlord agrees to treat
Tenant as a holdover (as opposed to a trespasser).
27. RULES AND REGULATIONS. Tenant agrees that at all times during the
Term of this Lease (as same may be extended) Tenant, its employees, agents,
invitees and licensees shall comply with all rules and regulations specified on
Exhibit "C" attached hereto and made a part hereof (the "Rules and
Regulations"), together with all reasonable Rules and Regulations as Landlord
may from time to time promulgate provided they do not increase the financial
burdens of Tenant or unreasonably restrict Tenant's rights under this Lease. In
case of any conflict or inconsistency between the provisions of this Lease and
any Rules and Regulations, the provisions of this Lease shall control. Landlord
shall have no duty or obligation to enforce any Rule and Regulation, or any
term, covenant or condition of any other lease, against any other tenant, and
Landlord's failure or refusal to enforce any Rule or Regulation or any term,
covenant of condition of any other lease against any other tenant shall be
without liability to Landlord or Tenant. However, if Landlord does enforce Rules
or Regulations, Landlord shall endeavor to enforce same equally in a
non-discriminatory manner.
28. GOVERNMENTAL REGULATIONS.
(a) Tenant shall, in the use and occupancy of the Premises and
the conduct of Tenant's business operations therein, at all times comply with
all applicable laws, ordinances, orders, notices, rules and regulations of the
federal, state and municipal governments, or any of their departments and the
regulations of the insurers of the Premises, the Building and/or the Project.
Except as immediately set forth above, Landlord, at its sole cost and expense,
shall comply with all applicable laws, codes, statutes, ordinances, rules and
regulations relating to the Premises, the Building and/or the Project,
including, without limitation, building, health, disability and fire code
requirements.
43
<PAGE> 47
(b) Without limiting the generality of the foregoing, Tenant
shall (i) obtain, at Tenant's expense, before engaging in Tenant's business
operations within the Premises, all necessary licenses and permits including
(but not limited to) state and local business licenses or permits, and (ii)
remain in compliance with and keep in full force and effect at all times all
licenses, consents and permits necessary for the lawful conduct of Tenant's
business or profession at the Premises. Tenant shall pay all personal property
taxes, income taxes and other taxes, assessments, duties, impositions and
similar charges which are or may be assessed, levied or imposed upon Tenant and
which, if not paid, could be liened against the Premises or against Tenant's
property therein or against Tenant's leasehold estate.
(c) Landlord shall be responsible for compliance with Title
III of the Americans with Disabilities Act of l990, 42 U.S.C. Section 12181 et
seq. and its regulations, (collectively, the "ADA") (i) as to the design and
construction of the Building and the Project, including, without limitation, the
exterior common areas (e.g., sidewalks and parking areas) and the interior
common areas (e.g., elevators and public lavatories). Except as set forth above
in the initial sentence hereto, Tenant shall be responsible for compliance of
the Premises with the ADA, if applicable, to the extent that it affects the use
and occupancy of the Premises and/or the conduct of Tenant's business therein,
which compliance shall include, without limitation (i) provision for full and
equal enjoyment of the goods, services, facilities, privileges, advantages or
accommodations of the Premises as contemplated by and to the extent required by
the ADA, (ii) compliance relating to requirements under the ADA or amendments
thereto arising after the date of this Lease and (iii) compliance relating to
the design, layout, renovation, redecorating, refurbishment, alteration, or
improvement to the Premises made or requested by Tenant at any time.
(d) Tenant shall indemnify, protect, defend and save Landlord
harmless with regard to any notice of violation by Tenant with any law, order,
ordinance, regulation, permit, license or other governmental matter in any way
relating to the conduct of Tenant's business or profession in the Premises. If
Landlord is named as defendant or a responsible party with respect to any
alleged violation by Tenant as aforesaid, Landlord also may require, by notice
to Tenant, that the matters or conduct giving rise thereto be discontinued by
Tenant unless and until the alleged violation is resolved in Tenant's favor.
44
<PAGE> 48
(e) Landlord shall indemnify, protect, defend, and save Tenant
harmless with regard to any non-compliance or alleged non-compliance by Landlord
with any law, order, ordinance, regulation, permit, license, or other
governmental matter in any way relating to the Landlord's operation or ownership
of the Building and the Project.
29. NOTICES. Wherever in this Lease it shall be required or permitted
that notice or demand be given or served by either party to this Lease to or on
the other party, such notice or demand shall be deemed to have been duly given
or served if in writing and either: (i) personally served; (ii) delivered by
pre-paid nationally recognized overnight courier service (e.g., Federal Express)
with evidence of receipt required for delivery; or (iii) forwarded by registered
or certified mail, return receipt requested, postage prepaid; in all such cases
addressed to the parties at the addresses set forth in Section 1 (n) hereof.
Each such notice shall be deemed to have been given to or served upon the party
to which addressed on the date the same is delivered or delivery is refused.
Either party hereto may change its address to which said notice shall be
delivered or mailed by giving written notice of such change to the other party
hereto, as herein provided.
30. BROKERS. Landlord and Tenant represent and warrant to each other
that neither has had any dealings, negotiations or consultations with respect to
the Premises or this transaction with any broker or finder other than the Broker
identified in Section 1(m) hereof; and that otherwise no broker or finder called
the Premises to Tenant's attention for lease or took any part in any dealings,
negotiations or consultations with respect to the Premises or this Lease. Each
party agrees to indemnify and hold the other harmless from and against all
liability, cost and expense, including attorney's fees and court costs, arising
out of any misrepresentation or breach of warranty under this Section 30.
31. CHANGE OF BUILDING/PROJECT NAME. Landlord reserves the right at any
time and from time to time to change the name by which the Building and/or
Project is designated; provided, however, that Landlord shall provide Tenant
with thirty (30) days prior written notice of Landlord's intention to so change
the name of the Building.
45
<PAGE> 49
32. LANDLORD'S LIABILITY. Landlord's obligations hereunder shall be
binding upon Landlord only for the period of time that Landlord is in ownership
of the Building; and, upon termination of that ownership, Tenant, except as to
any obligations which have then due and owing, shall look solely to Landlord's
successor in interest in the Building for the satisfaction of each and every
obligation of Landlord hereunder. Landlord shall have no personal liability
under any of the terms, conditions or covenants of this Lease and Tenant shall
look solely to the equity of Landlord in the Building of which the Premises form
a part for the satisfaction of any claim, remedy or cause of action accruing to
Tenant as a result of the breach of any action of this Lease by Landlord. In
addition to the foregoing, no recourse shall be had for any obligation of
Landlord or Brandywine Realty Trust, or for any claim based on Landlord's
obligations under this Lease against any past, present of future trustee,
shareholder, officer, director, agent or employee of Landlord or Brandywine
Realty Trust, whether by virtue of any statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such other liability
being expressly waived and released by Tenant with respect to the above-named
individuals and entities. Any provisions in this Lease which purport to release
Landlord of its obligations under this Lease upon any transfer of Landlord's
interest in the Project, shall only release Landlord for said obligations
accruing on and after such transfer. Any provisions in this Lease which purport
to limit Tenant's recourse against Landlord to Landlord's interest in the
Project shall include any and all proceeds derived from such interest,
including, without limitation, any sales, rental and insurance proceeds.
33. AUTHORITY.
(a) Tenant represents and warrants that (i) Tenant is duly
organized, validly existing and legally authorized to do business in the State
of New Jersey, and (ii) the persons executing this Lease are duly authorized to
execute and deliver this Lease on behalf of Tenant.
(b) Landlord represents and warrants that (i) Landlord is duly
organized, validly existing and legally authorized to do business in the State
of New Jersey, and (ii) the persons executing this Lease are duly authorized to
execute and deliver this Lease on behalf of Landlord.
46
<PAGE> 50
34. NO OFFER. The submission of the Lease by Landlord to Tenant for
examination does not constitute a reservation of or option for the Premises or
of any other space within the Building or in other buildings owned or managed by
Landlord or its affiliates. This Lease shall become effective as a Lease only
upon the execution and legal delivery thereof by both parties hereto.
35. RENEWAL.
(a) Tenant shall have and is hereby granted the option to
extend the Term hereof for one (1) additional period of five (5) years (a
"Renewal Period"), provided (i) Tenant gives written notice to Landlord of
Tenant's election to exercise such extension option no later than nine (9)
months prior to the expiration of the last Lease Year of the Term, and (ii) no
event exists at the time of the exercise of such option or arises subsequent
thereto, which event by notice and/or the passage of time would constitute an
Event of Default if not cured within the applicable cure period.
(b) All terms and conditions of this Lease, including, without
limitation, all provisions governing the payment of Additional Rent, shall
remain in full force and effect during the Renewal Period, except that Fixed
Rent payable during the first Lease Year of the Renewal Period shall be equal to
the lesser of (i) ninety-five percent (95%) of the then-current Fair Market
Rental Rate (hereinafter defined) with respect to comparable office space at the
time of the commencement of the Renewal Period (using an expense stop based on
then current cost in the calendar year in which the Renewal Period commences),
or (ii) Fixed Rent payable during the last Lease Year of the initial Term or the
Renewal Period, as the case may be. As used in this Lease, the term "Fair Market
Rental Rate" shall mean the fair market rental rate per square foot of rentable
area that would be agreed upon between a landlord and a tenant entering into a
new lease for comparable space as to location, configuration, view and elevator
exposure, size and use, in a comparable building as to location, quality,
reputation and age, with a comparable build-out, a comparable term and a
comparable Expense Stop for operating expense and real estate tax pass-throughs
assuming the following: (A) the landlord and the tenant are informed and
well-advised and each is acting in what it considers its own best interests and
(B) the tenant will continue to pay Tenant's Allocated Share of increases in
Recognized Expenses and Taxes over a new expense stop (which, for Tenant, is the
calendar year during which occurs the first day of the Renewal Period).
47
<PAGE> 51
(c) Landlord and Tenant shall negotiate in good faith to
determine Fixed Rent for the first Lease Year of the Renewal Period, for a
period of thirty (30) days after the date on which Landlord receives Tenant's
written notice of Tenant's election to exercise the extension option provided
for under this Section 35. If Landlord and Tenant cannot agree on the Fair
Market Rent, the Fair Market Rent shall be established by the following
procedure: (1) Tenant and Landlord shall agree on a single MAI certified
appraiser who shall have a minimum of ten (10) years experience in real estate
leasing in the market in which the Premises is located and who has not conducted
within the previous five (5) years and does not presently conduct and does not
anticipate conducting business in the future with either Tenant or Landlord, (2)
Landlord and Tenant shall each notify the other (but not the appraiser), of its
determination of such Fair Market Rent and the reasons therefor, (3) during the
next fourteen (14) days both Landlord and Tenant shall prepare a written
critique of the other's determination and shall deliver it to the other party,
(4) on the tenth (10th) day following delivery of the critiques to each other,
Landlord's and Tenant's determinations and critiques (as originally submitted to
the other party, with no modifications whatsoever) shall be submitted to the
appraiser, who shall decide whether Landlord's or Tenant's determination of Fair
Market Rent is more correct. The determinations so chosen shall be the Fair
Market Rent. The appraiser shall not be empowered to choose any number other
than the Landlord's or Tenant's. The fees of the appraiser shall be split by the
parties.
(d) Should Landlord and Tenant reach agreement as to Fixed
Rent for the first Lease Year of the Renewal Period within the thirty (30) day
period set forth in Section 28(c), above, Tenant shall execute an amendment
modifying this Lease within a reasonable period of time after Landlord presents
same to Tenant, or, in the alternative, within a reasonable period of time after
the appraisers' determination of same, which agreement shall set forth, inter
alia, Fixed Rent for first Lease Year of the Renewal Period.
36. RIGHT OF FIRST NEGOTIATION FOR EXPANSION SPACE.
(a) In the event that any space in the Building becomes or is
reasonably anticipated by Landlord to become vacant and freely available for
Landlord to lease to Tenant during the
48
<PAGE> 52
Term (including any renewals or extensions thereof), Landlord shall provide
Tenant with written notice ("Availability Notice") of the availability of such
space (the "Expansion Space"). In addition, Landlord shall advise Tenant in
writing of any lease requests or requests for proposal which Landlord receives
which Landlord reasonably believes are likely to meet Landlord's then existing
leasing criteria (the "Interest Notice"). Provided that no Event of Default
occurs which is not cured within the applicable cure period and Tenant provides
to Landlord written notice ("Expansion Notice"), within thirty (30) days after
receipt of Landlord's Interest Notice, of Tenant's desire to expand the Premises
into the Expansion Space, Tenant shall have the first opportunity (the "Right of
First Opportunity") to negotiate with Landlord for a ten (10) day period
immediately following Tenant's delivery of such Expansion Notice, the terms on
which it will lease the Expansion Space and secure an amendment or addendum to
the Lease (the "Expansion Amendment") executed and delivered by Landlord and
Tenant evidencing such terms. In the event that (i) Landlord and Tenant fail to
agree on such terms and execute and deliver an Expansion Amendment within such
ten (10) day period, or (ii) Tenant fails to deliver the Expansion Notice (or
otherwise fails to comply with any other condition to the exercise of its Right
of First Opportunity) within the time period set forth above, Tenant's Right of
First Opportunity to lease the Expansion Space pursuant to this Section 36 shall
terminate until such time that additional Expansion Space becomes available in
the future (i.e., the Interest Notice party does not execute a lease or it
executes a lease and the term thereunder expires), and subject to Section 37
below, Landlord shall have the right to lease the Expansion Space at any time to
any other person or entity upon the same terms and conditions which Landlord
offered said Expansion Space to Tenant. Time is of the essence in this Section
36.
(b) If Tenant leases the Expansion Space, within the time and
in the manner provided in this Section 36, then as of the Expansion Space
Commencement Date (hereinafter defined), the parties shall execute a mutually
agreeable form of Lease Amendment.
37. RIGHT OF FIRST REFUSAL. With respect to the Expansion Space, if
prior to Tenant's delivery of an Expansion Notice to Landlord, Landlord receives
a third party (i) written offer to lease space in the Building, (ii) executed
Request for Proposal, or (ii) executed letter of intent to lease space in the
Building, (any of events (i), (ii) or (iii) being referred to as an "Offer")
Landlord shall advise Tenant in writing of such Offer
49
<PAGE> 53
together with a copy of such Offer. Provided that no event has occurred which
with the passage of time or the giving of notice would be deemed an Event of
Default if not cured within the applicable cure period, Tenant is granted the
right of first refusal (the "Right of First Refusal") to agree to all of the
terms and conditions of the Offer with respect to the entire space noted in any
such Offer. Tenant shall have until 5:00 p.m. E.S.T. on the tenth (10th) day
from its receipt of the Offer from Landlord to exercise in writing its Right of
First Refusal, and, thereby, be bound by the terms and conditions of such Offer.
If Tenant exercises its Right of First Refusal, the Offer space shall
immediately become part of the leased Premises hereunder at the lease rates set
forth in the Offer and Landlord and Tenant shall execute a mutually agreed upon
form of Lease Amendment with respect to the space and terms set forth in the
Offer. If Tenant does not exercise its Right of First Refusal within the above
noted time period, Tenant shall be deemed to have refused to exercise its Right
of First Refusal for such Offer. Notwithstanding the foregoing, if Landlord does
not enter into such Offer with respect to the space therein described, then
Tenant's Right of First Negotiation and Right of First Refusal shall thereafter
apply to such space. Time is of the essence in connection with this provision of
the Lease.
38. MISCELLANEOUS PROVISIONS.
A. Successors. The respective rights and obligations provided
in this Lease shall bind and inure to the benefit of the parties hereto, their
successors and assigns.
B. Governing Law. This Lease shall be construed, governed and
enforced in accordance with the laws of the State of New Jersey, without regard
to principles relating to conflicts of law.
C. Severability. If any provisions of this Lease shall be held
to be invalid, void or unenforceable, the remaining provisions hereof shall in
no way be affected or impaired and such remaining provisions shall remain in
full force and effect.
D. Captions. Marginal captions, titles or exhibits and riders
and the table of contents in this Lease are for convenience and reference only,
and are in no way to be construed as defining, limiting or modifying the scope
of intent of the various provisions of this Lease.
50
<PAGE> 54
E. Gender. As used in this Lease, the word "person" shall mean
and include, where appropriate, an individual, corporation, partnership or other
entity; the plural shall be substituted for the singular, and the singular for
the plural, where appropriate; and the words of any gender shall mean to include
any other gender.
F. Entire Agreement. This Lease, including the Exhibits,
supersedes any prior discussions, proposals, negotiations and discussions
between the parties and this Lease contains all the agreements, conditions,
understandings, representations and warranties made between the parties hereto
with respect to the subject matter hereof, and may not be modified orally or in
any manner other than by an agreement in writing signed by both parties hereto
or their respective successors in interest. Without in any way limiting the
generality of the foregoing, this Lease can only be extended pursuant to the
terms hereof, and in Tenant's case, with the due exercise of an option (if any)
contained herein or a formal agreement signed by both Landlord and Tenant
specifically extending the terms. Until a final binding amendment or
modification is signed, no negotiations, correspondence by Landlord or offers to
extend the terms shall be deemed an extension of the termination date for any
period whatsoever.
G. Counterparts. This Lease may be executed in any number of
counterparts, each of which when taken together shall be deemed to be one and
the same instrument.
H. Telefax Signatures. The parties acknowledge and agree that
notwithstanding any law or presumption to the contrary a telefaxed signature of
either party whether upon this Lease or any related document shall be deemed
valid and binding and admissible by either party against the other as if same
were an original ink signature.
I. Calculation of Time. In computing any period of time
prescribed or allowed by any provision of this Lease, the day of the act, event
or default from which the designated period of time begins to run shall not be
included. The last day of the period so computed shall be included, unless it is
a Saturday, Sunday or a legal holiday, in which event the period runs until the
end of the next day which is not a Saturday, Sunday, or legal holiday. Unless
otherwise provided herein, all Notices and other periods expire as of 5:00 p.m.
(local time in East Windsor, New Jersey) on the last day of the Notice or other
period.
51
<PAGE> 55
J. No Merger. There shall be no merger of this Lease or of the
leasehold estate hereby created with the fee estate in the Premises or any part
thereof by reason of the fact that the same person, firm, corporation, or other
legal entity may acquire or hold, directly or indirectly, this Lease of the
leasehold estate and the fee estate in the Premises or any interest in such fee
estate, without the prior written consent of Landlord's mortgagee.
K. Time of the Essence. TIME IS OF THE ESSENCE IN ALL
PROVISIONS OF THIS LEASE, INCLUDING ALL NOTICE PROVISIONS TO BE PERFORMED BY OR
ON BEHALF OF TENANT AND LANDLORD.
L. Recordation of Lease. Tenant shall have the right to record
a memorandum of this Lease upon written notice to Landlord. Upon either Tenant's
or Landlord's request, the parties agree to execute a short form of this Lease
for recording purposes containing such terms as the parties believe appropriate
or desirable, the expense thereof to be borne by the party requesting such
recording. If such a short form of this Lease is recorded, upon the termination
of this Lease, Tenant shall execute, acknowledge, and deliver to Landlord an
instrument in writing releasing and quitclaiming to Landlord all right, title
and interest of Tenant in and to the Premises arising from this Lease or
otherwise, all at the cost of Landlord.
M. Accord and Satisfaction. No payment by Tenant or receipt by
Landlord of a lesser amount than any payment of Fixed Rent or Additional Rent
herein stipulated shall be deemed to be other than on account of the earliest
stipulated Fixed Rent or Additional Rent due and payable hereunder, nor shall
any endorsement or statement or any check or any letter accompanying any check
or payment as Rent be deemed an accord and satisfaction. Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such Rent or pursue any other right or remedy provided for in this
Lease, at law or in equity.
N. No Partnership. Landlord does not, in any way or for any
purpose, become a partner of Tenant in the conduct of its business, or
otherwise, or joint venturer or a member of a joint enterprise with Tenant. This
Lease establishes a relationship solely of that of a landlord and tenant.
O. Attorneys' Fees. In the event Landlord and Tenant engage in
any litigation regarding any subject matter relating to this Lease, the
unsuccessful litigant shall pay the successful
52
<PAGE> 56
litigant all reasonable costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred by the successful litigant in
connection with such litigation.
P. General Abatement. If all or part of the Premises (or
Tenant's access thereto) are rendered untenantable and continue for four (4)
consecutive days, and such conditions were not caused by Tenant, Tenant's Rent
obligations shall proportionately abate for the duration of such untenantable
conditions, said abatement to reflect the portions of the Premises which are
untenantable. The conditions giving rise to such abatement shall include,
without limitation, casualty losses, environmental conditions and Landlord's
failure to perform its maintenance, repair and replacement obligations under the
Lease which cause a material adverse effect on Tenant's operations.
Notwithstanding the foregoing, if such untenantable conditions arise and
continue for four (4) consecutive days at any time during the last year of the
Term, and affect the material operations of Tenant's business or more of the
rentable area of the Premises, Tenant shall have the right to terminate this
Lease, without liability, upon written notice to Landlord, in which case
Landlord shall immediately return any prepaid Rent, the L/C Deposit and the Cash
Deposit.
Q. Force Majeure. Landlord and Tenant shall be excused from
performing an obligation or undertaking other than the payment of Rent and
Additional Rent provided for in this Lease so long as such performance is
prevented or delayed, retarded or hindered by Act of God, force majeure, fire,
earthquake, flood, explosion, action of the elements, war, invasion,
insurrection, riot, mob violence, sabotage, inability to procure or a general
shortage of labor, equipment, facilities, materials or supplies in the open
market, failure of transportation, strike, lockout, action of labor unions, a
taking by eminent domain, requisition, laws orders of government, or of civil,
military or naval authorities, or any other cause whether similar or dissimilar
to the foregoing, not within the reasonable control of Landlord or Tenant,
including reasonable delays for adjustments of insurance ("Force Majeure").
39. WAIVER OF TRIAL BY JURY. LANDLORD AND TENANT WAIVE THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT
MATTER OF THIS LEASE. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY
MADE BY TENANT AND TENANT ACKNOWLEDGES THAT NEITHER LANDLORD NOR ANY PERSON
ACTING ON BEHALF OF LANDLORD HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS
WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR
53
<PAGE> 57
NULLIFY ITS EFFECT. TENANT FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR
HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS LEASE AND IN
THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE
WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
TENANT FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND
RAMIFICATIONS OF THIS WAIVER PROVISION AND AS EVIDENCE OF SAME HAS EXECUTED THIS
LEASE.
40. CONSENT TO JURISDICTION. Tenant hereby consents to the exclusive
jurisdiction of the state courts located in Mercer County, New Jersey and to the
federal courts located in the District of New Jersey.
54
<PAGE> 58
IN WITNESS WHEREOF, the parties hereto have executed this
Lease under seal the day and year first above written.
WITNESS: LANDLORD:
BRANDYWINE OPERATING
PARTNERSHIP, L.P.
By: Brandywine Realty Trust,
- ------------------------- Its general partner
By:
------------------------------------------
Gerard H. Sweeney,
President and CEO
WITNESS: TENANT:
i-STAT CORPORATION
By:
- ------------------------ ------------------------------------------
Name:
Title:
55
<PAGE> 59
EXHIBIT "A"
LEGAL DESCRIPTION OF THE PROJECT
[Attach]
A-1
<PAGE> 60
EXHIBIT "A-1"
SPACE PLAN OF THE PREMISES
A-1-1
<PAGE> 61
EXHIBIT "A-2"
CONFIRMATION OF LEASE TERM
THIS MEMORANDUM made as of the ___ day of _________, 1998, between
BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, with an
office at 16 Campus Boulevard, Suite 150, Newtown Square, Pennsylvania 19073
("Landlord") and _________________________, with its principal place of business
at ______________________________ ______________________ ("Tenant"), who entered
into a lease dated for reference purposes as of ___________ __, 1998, covering
certain premises located at ________________________________________________.
All capitalized terms, if not defined herein, shall be defined as they are
defined in the Lease.
1. The Parties to this Memorandum hereby agree that the date of
______________, 1998 is the "Commencement Date" of the Term, that the date
___________, 1998 is the Rent Commencement Date and the date _________ is the
expiration date of this Lease.
2. Tenant hereby confirms the following:
(a) That it has accepted possession of the Premises pursuant
to the terms of the Lease;
(b) That Landlord has fulfilled all of its duties as set forth
in the Lease;
(c) That there are no offsets or credits against rentals, nor
has any security deposit been paid except as provided by the Lease terms;
(d) That the Lease is in full force and effect.
3. This Memorandum, each and all of the provisions hereof, shall inure
to the benefit, or bind, as the case may require, the parties hereto, and their
respective successors and assigns, subject to the restrictions upon assignment
and subletting contained in the Lease.
WITNESS: LANDLORD:
BRANDYWINE OPERATING PARTNERSHIP,
L.P.
By: Brandywine Realty Trust,
A-1-2
<PAGE> 62
its general partner
By:
- ----------------------------- -------------------------------------
[SEAL]
WITNESS: TENANT:
i-STAT CORPORATION
By:
- ----------------------------- -------------------------------------
[SEAL]
A-1-3
<PAGE> 63
EXHIBIT "B"
WORK AGREEMENT
This Work Agreement (this "Work Agreement") is attached to and made a
part of that certain Lease (the "Lease") dated July ___, 1998, by and between
Brandywine Operating Partnership, L.P., as landlord ("Landlord") and i-STAT
Corporation, as tenant ("Tenant") for the premises (the "Premises") described
therein in the building located at 104 Windsor Center Drive, East Windsor, New
Jersey (the "Building"). It is the intent of this Work Agreement that Tenant
shall be permitted freedom in the design and layout of the Premises, consistent
with applicable building codes and requirements of law, including without
limitation the Americans With Disabilities Act, and with sound architectural and
construction practice in similarly situated buildings. Capitalized terms not
otherwise defined in this Work Agreement shall have the meanings set forth in
the Lease. In the event of any conflict between the terms hereof and the terms
of the Lease, the terms hereof shall prevail for the purposes of design and
construction of the Tenant Improvements (hereinafter defined).
A. TENANT IMPROVEMENTS. All construction, improvements or alterations
required by Tenant in the Premises (the "Tenant Improvements") shall be
undertaken by Tenant, at Tenant's sole cost and expense, subject to the
application of the Improvement Allowance (hereinafter defined), in accordance
with the terms of this Work Agreement.
B. PLANS AND SPECIFICATIONS.
1. SPACE PLANNER/ARCHITECT. Tenant shall employ the services
of The AZTEC Corporation/AZTEC Architects P.C. (the "Space Planner") to prepare
space plans and working drawings and specifications for the Tenant Improvements.
Tenant's Plan (hereinafter defined) shall be prepared in accordance with the
Building standard format for working drawings and with information furnished by
and coordination with Landlord's space planner and structural, mechanical,
electrical and plumbing engineers. Tenant shall be solely responsible for all
fees and costs of the Space Planner, subject to the application of the
Improvement Allowance.
2. TIME SCHEDULE. Landlord and Tenant shall adhere to the
following schedule:
B-1
<PAGE> 64
a. Tenant has delivered the Final Space Plan and
Landlord has accepted such Final Space Plan subject to receipt and review of
mechanical and electrical plans. Within seven (7) days after Landlord has
approved the Preliminary Plan, Tenant shall furnish to Landlord for its review
and approval a proposed detailed space plan for the Tenant Improvements (the
"Final Space Plan") prepared by the Space Planner. The Final Space Plan shall
contain the information and otherwise comply with the reasonable requirements of
Landlord. Landlord shall advise Tenant of Landlord's approval or disapproval of
the Final Space Plan within seven (7) days after Tenant submits the Final Space
Plan to Landlord. Tenant shall revise the proposed Final Space Plan to meet
Landlord's objections, if any, and resubmit the Final Space Plan to Landlord for
its review and approval promptly after Landlord notifies Tenant of Landlord's
objections, if any. Landlord shall respond to any revised Final Space Plan
submitted by Tenant within three (3) business days after its submission.
b. On or before July 24th, Tenant shall furnish to
Landlord for its review and approval all architectural plans, working drawings
and specifications (the "Contract Documents") for the construction of the Tenant
Improvements in the Premises in accordance with the Final Space Plan. The
Contract Documents shall include without limitation the final mechanical,
electrical, plumbing and structural plans and specifications for the Premises
and all final architectural plans, working drawings and specifications for the
Tenant Improvements. The Contract Documents shall be sufficient in form and
substance to enable the Contractor (hereinafter defined) to obtain a building
permit for the construction of the Tenant Improvements. Landlord shall advise
Tenant of Landlord's approval or disapproval of the Contract Documents, or any
of them, within three (3) business days after Tenant submits the Contract
Documents to Landlord. Tenant shall revise the Contract Documents to meet
Landlord's objections, if any, and resubmit the Contract Documents to Landlord
for its review and approval promptly after Landlord notifies Tenant of
Landlord's objections, if any. Landlord shall respond to any revised Contract
Documents submitted by Tenant within three (3) business days after their
submission.
c. The Preliminary Plan, the Final Space Plan and the
Contract Documents are referred to collectively herein as the "Tenant's Plan."
d. The Tenant's Plan shall comply with all applicable
building codes, laws and regulations (including without limitation the Americans
With Disabilities Act).
B-2
<PAGE> 65
3. CHANGES. If there are any changes requested by
Tenant, after Landlord's approval of Tenant's Plan in accordance with the
schedule set forth above, each such change must be approved by Landlord (which
approval shall not be unreasonably withheld, conditioned or delayed) and paid
for by Tenant subject, however, to the application of the Improvement Allowance
described in Section C.2 below. Tenant shall be responsible for all
architectural and engineering costs and delivery resulting from such changes
subject, however, to the application of the Improvement Allowance described in
Section C.2 below.
C. COST OF TENANT IMPROVEMENTS.
1. CONSTRUCTION COSTS. All costs of design and construction of
the Tenant Improvements, including without limitation the costs of all space
planning, architectural and engineering work related thereto, all governmental
and quasi-governmental approvals and permits required therefor, the cost to
install the Tenant Improvements by the Contractor (hereinafter defined), all
other direct and indirect construction costs (collectively, "Construction
Costs"), shall be paid by Tenant, subject, however, to the application of the
Improvement Allowance described in Section C.2 below, not previously disbursed
pursuant to this Work Agreement (the "Available Allowance").
2. IMPROVEMENT ALLOWANCE. Landlord agrees to provide to Tenant
an allowance (the "Improvement Allowance") in the amount of Six Hundred Eighteen
Thousand Three Hundred Twenty-One Dollars ($618,321.00) (or Sixteen and 50/100
Dollars ($16.50) per rentable square foot of the Premises), to be applied solely
to the Construction Costs and the reasonably documented costs of Landlord's
construction manager not to exceed $1,200 (being $60/hour for a 20 hour period).
In addition, Landlord agrees to fund 1/2 the cost of (i) the demising wall, and
(ii) the shipping door in the loading dock area and other loading dock
improvements as shown on Tenant's Plans, Landlord's portion of such costs not to
exceed $10,000, to be built by Tenant in accordance with the Tenant's Plan.
Subject to the provisions of Section C.3, below, the Construction Costs shall be
paid by Landlord to the extent of, and shall be deducted by Landlord from, the
Available Allowance, as invoices therefor are rendered to Landlord as and when
Construction Costs are actually incurred by Tenant; provided, however, that
Landlord shall have received a final lien release and Tenant shall have
satisfied all of the other conditions set forth in Section C.3, below. In the
event that Tenant does not expend all of the Improvement Allowance for costs
permitted hereunder, the unused portion of the Improvement Allowance shall be
credited to monthly installments of Fixed Rent
B-3
<PAGE> 66
next coming due under the Lease. Notwithstanding the foregoing, Tenant shall not
be permitted to use more than Fifty-Six Thousand Two Hundred Eleven Dollars
($56,211.00)(or One and 50/100 Dollars ($1.50) per rentable square foot of the
Premises) of the Improvement Allowance for the Construction Costs pertaining to
design fees, architectural and engineering drawings and construction documents.
3. DISBURSEMENT OF IMPROVEMENT ALLOWANCE. Disbursement of the
Improvement Allowance shall be subject to the following conditions:
a. The Draw Request shall include Tenant's Space
Planners and Tenant's certification that the Tenant Improvements covered thereby
have been satisfactorily completed, and shall be substantiated by invoices for
such work. Within fifteen (15) days of Landlord's receipt of the final Draw
Request, Landlord shall make payment to the Contractor or as otherwise directed
by Tenant, subject as hereinafter provided.
b. The draw request covering construction work shall
be accompanied by the AIA Application and Certificate for Payment (AIA Documents
G702 and G703), certified by the Space Planner, and covering only such work as
is actually installed in the Premises. All Certificates for Payment shall
include full releases of lien.
c. Landlord shall not disburse the initial 75% of the
Improvement Allowance until Landlord has received a final Draw Request
accompanied by final lien waivers and/or other evidence reasonably satisfactory
to Landlord that all contractors, workers, material and service suppliers and
all other persons having claims against Tenant for payment of work done or
material or services supplied in connection with the Tenant Improvements have
been paid in full, a temporary certificate of occupancy has been issued by the
relevant local authority, and Tenant has accepted the Premises. Upon delivery by
Tenant and receipt by Landlord of a final certificate of occupancy from the
relevant local authorities, Landlord shall release the remaining 25% of the
Improvement Allowance.
4. COSTS EXCEEDING AVAILABLE ALLOWANCE. All Construction Costs
in excess of the Available Allowance shall be paid by Tenant within thirty (30)
days of receipt by Tenant of invoices therefor.
D. CONSTRUCTION.
B-4
<PAGE> 67
1. SELECTION OF TENANT'S CONTRACTOR. Once Landlord has
approved the Tenant's Plan, Tenant shall prepare a bid package in order to
obtain a fixed price bid for the construction of the Tenant Improvements (the
"Bid Package"). Tenant shall submit the Bid Package to each of the following
general contractors: Selkirk Group; Sweetwater Construction Corporation; NOVA
Corporation; and NTX Incorporated (the "Approved General Contractors"). Once
Tenant has received from the Approved General Contractors bids for the
construction of the Tenant Improvements, Tenant shall select the contractor to
undertake the Tenant Improvements (the "Contractor") from the foregoing list of
Approved General Contractors.
2. CONSTRUCTION BY THE CONTRACTOR. In undertaking the Tenant
Improvements, Tenant and the Contractor shall comply with the following
conditions:
a. No work shall proceed without Landlord's prior
written approval (which shall not be unreasonably withheld, conditioned or
delayed) of (i) Tenant's subcontractors, and (ii) compliance by Tenant with the
insurance requirements set forth below;
b. All work (except pre-construction work) shall be
performed in conformity with (i) the final approved Tenant's Plan, (ii) all
applicable codes and regulations of governmental authorities having jurisdiction
over the Building and the Premises, and (iii) valid building permits and other
authorizations from appropriate governmental agencies, when required, which
shall have been obtained at Tenant's sole expense. Any work not acceptable to
the appropriate governmental agencies shall be promptly corrected or replaced at
Tenant's expense; and
c. Before any work is commenced or the Contractor's
equipment is moved onto any part of the Building, the Contractor and all
subcontractors shall deliver to Landlord certificates evidencing the following
types of insurance coverage in the following minimum amounts:
(165535 Worker's compensation coverage as
required by law and employers liability coverage, including without limitation
bodily injury caused by disease with a limit of $250,000.00 per employee;
(265535 Comprehensive general liability
policy to include, without limitation, completed operations, property damage,
independent contractor's and personal injury
B-5
<PAGE> 68
coverage with limits in an amount of not less than $2,000,000.00 Combined Single
Limit; and
(365535 Automobile liability coverage, with
bodily injury limits of at least $1,000,000.00 per accident.
E. DELAY BY TENANT OR LANDLORD. No delay by Tenant in completing the
Tenant Improvements shall delay or otherwise affect the Rent Commencement Date.
In the event that Landlord fails to approve or reject the Contract Documents
and/or any other documents or reasonable requests submitted to Landlord within
the applicable Response Period (hereinafter defined) (a "Landlord Delay") such
requests shall be deemed approved by Landlord. If the Tenant Improvements are
not substantially completed by September 30, 1998, notwithstanding commercially
reasonable efforts by Tenant to do so, then for each such day of Landlord Delay,
the Rent Commencement Date shall be extended by one (1) day. As used herein, the
term "Response Period" shall mean the time periods set forth in subsections
B.2.a, b and c, above, or elsewhere in this Work Agreement or the Lease, within
which Landlord is required to approve or reject Contract Documents, or any other
documents or reasonable requests respectively.
B-6
<PAGE> 69
EXHIBIT "C"
BUILDING RULES AND REGULATIONS
LAST REVISION: FEBRUARY 1, 1998
Landlord reserves the right to rescind any of these rules and make such other
and further rules and regulations as in the reasonable judgment of Landlord
shall from time to time be needed for the safety, protection, care and
cleanliness of the Project, the operations thereof, the preservation of good
order therein and the protection and comfort of its tenants, their agents,
employees and invitees, which rules when made and notice thereof given to Tenant
shall be binding upon him in a like manner as if originally prescribed. Landlord
will notify Tenant in writing of any changes to the Building Rules and
Regulations.
1. Sidewalks, entrances, passages, elevators, vestibules, stairways,
corridors, halls, lobby and any other part of the Building shall not be
obstructed or encumbered by any tenant or used for any purpose other
than ingress or egress to and from each tenant's premises. Landlord
shall have the right to control and operate the common portions of the
Building and exterior facilities furnished for common use of the
tenants (such as the eating, smoking, and parking areas) in a
commercially reasonable, non-arbitrary, non-prejudicial and prudent
manner. Landlord shall program the exterior lights, to the extent
possible, to stay on until 11:00 p.m.
2. No awnings or other projections shall be attached to the outside walls
of the Building without the prior written consent of Landlord. All
drapes, or window blinds, must be of a quality, type and design, color
and attached in a manner approved by Landlord.
3. No showcases or other articles shall be put in front of or affixed to
any part of the exterior of the Building, or placed in hallways or
vestibules in the common areas without the prior written consent of
Landlord.
4. Rest rooms and other plumbing fixtures shall not be used for any
purposes other than those for which they were constructed and no
debris, rubbish, rags or other substances shall be thrown therein. Only
standard toilet tissue may be flushed in commodes. All damage resulting
from any misuse of these fixtures shall be the responsibility of the
Tenant who, or whose employees or agents shall have caused same.
C-1
<PAGE> 70
5. Tenants shall not construct or maintain, use or operate in any part of
the Project any electrical device, wiring or other apparatus in
connection with a loud speaker system or other sound/communication
system which may be heard outside the Premises. Any such communication
system to be installed within the Premises shall require prior written
approval of Landlord, which approval shall not be unreasonably
withheld, conditioned or delayed.
6. No bicycles, baby carriages or other vehicles and no animals, birds or
other pets of any kind shall be brought into or kept in or about the
Building; provided, however, Tenant may store its Employee's bicycles
within the Premises, all such bicycles to be brought into the Project
via the loading doors.
7. No tenant shall cause or permit any unusual or objectionable odors to
be produced upon or permeate from its premises.
8. No tenant, or employees of Tenant, shall make any unseemly or
disturbing noises or disturb or interfere with the occupants of this or
neighboring buildings or residences by voice, musical instrument,
radio, talking machines, whistling, singing, or in any way. All passage
through the Building's hallways, elevators, and main lobby shall be
conducted in a quiet, business-like manner.
9. No tenant shall throw anything out of the doors, windows, or down
corridors or stairs of the Building.
10. No tenant may change the use of the premises without the prior written
approval of Landlord. Tenant shall be permitted to use the Premises for
the Permitted Use.
11. Tenant shall not place or use in or about the Premises or Project any
explosives, gasoline, kerosene oil, acids, caustics or any other
flammable, explosive, or hazardous material without prior written
consent of Landlord.
12. No smoking is permitted in the rest rooms, hallways, elevators, stairs,
lobby, exit and entrances vestibules, sidewalks, parking lot area
except for the designated exterior smoking area. All cigarette ashes
and butts are to be deposited in the containers provided for same, and
not disposed of on sidewalks, parking lot areas, or toilets within the
Building rest rooms.
13. Tenants are not to install any additional locks or bolts of any kind
upon any door or window of the Building without
C-2
<PAGE> 71
prior written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed. Each tenant must, upon
the termination of tenancy, return to the Landlord all keys for the
Premises, either furnished to or otherwise procured by such tenant, and
all security access card to the Building.
14. All doors to hallways and corridors shall be kept closed during
business hours except as they may be used for ingress or egress.
15. Tenant shall not use the name of the Building, Landlord or Landlord's
agent in any way in connection with his business except as the address
thereof. Landlord shall also have the right to prohibit any advertising
by Tenant, which, in its sole opinion, tends to impair the reputation
of the Building or its desirability as a building for offices, and upon
written notice from Landlord, Tenant shall refrain from or discontinue
such advertising.
16. Tenants must be responsible for all security access cards issued to
them, and to secure the return of same from any employee terminating
employment with them. No person/company other than Building tenants
and/or their employees may have security access cards unless Landlord
grants prior written approval.
17. All deliveries by vendors, couriers, clients, employees or visitors to
the Building which involve the use of a hand cart, hand truck, or other
heavy equipment or device must be made via the Freight Elevator. Except
to the extent Landlord recovers under applicable insurance or from the
applicable vendor, Tenant shall be responsible to Landlord for any loss
or damage resulting from any deliveries made by or for Tenant to the
Building.
18. Landlord reserves the right to inspect all freight to be brought into
the Building, and to exclude from the Building all freight or other
material which violates any of these rules and regulations.
19. Tenants will refer all contractors, contractor's representatives and
installation technicians, rendering any service on or to the premises
for such tenant, to Landlord for Landlord's approval and supervision
before performance of any contractual service or access to Building.
This provision shall apply to all work performed in the Building
including installation of telephones, telegraph equipment, electrical
devices and attachments and installations of any
C-3
<PAGE> 72
nature affecting floors, walls, woodwork, trim, windows, ceilings,
equipment or any other physical portion of the Building. Landlord
reserves right to require that all agents of contractors/vendors sign
in and out of the Building.
20. Landlord reserves the right to exclude from the Building at all times
any person who is not known or does not properly identify himself to
Landlord's management or security personnel.
21. No space within the Building, or in the common areas such as the
parking lot, may be used at any time for the purpose of lodging,
sleeping, or for any immoral or illegal purposes.
22. No employees or invitees of Tenant shall use the hallways, stairs,
lobby, or other common areas of the Building as lounging areas during
"breaks" or during lunch periods.
23. Each tenant, before closing and leaving their premises, shall use their
commercially reasonable efforts to lower the blinds within their
spaces.
24. No canvassing, soliciting or peddling is permitted in the Building or
its common areas by tenants, their employees, or other persons. Each
tenant shall cooperate to prevent same and shall report any such
incident to Landlord's management.
25. No mats, trash, or other objects shall be placed in the public
corridors, hallways, stairs, or other common areas of the Building.
26. Tenant must place all recyclable items of cans, bottles, plastic and
office recyclable paper in appropriate containers provided by Landlord
in each tenant's space. Removable of these recyclable items will be by
Landlord's janitorial personnel.
27. Landlord does not maintain suite finishes which are non-standard, such
as kitchens, bathrooms, wallpaper, special lights, etc.
28. No pictures, signage, advertising, decals, banners, etc. are permitted
to be placed in or on windows in such a manner as they are visible from
the exterior, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld, conditioned or delayed.
C-4
<PAGE> 73
29. Tenant and Tenant's employees are prohibited at any time from eating or
drinking in hallways, elevators, rest rooms, lobby or lobby vestibules.
30. Tenant shall be responsible to Landlord for any acts of vandalism
performed in the Building by its employees, agents, invitees or
visitors.
31. No tenant shall permit the visit to its premises of persons in such
numbers or under such conditions as to interfere with the use and
enjoyment of the entrances, hallways, elevators, lobby or other public
portions or facilities of the Building and exterior common areas by
other tenants.
36. Landlord's employees shall not perform any work or do anything outside
of their regular duties unless under special instructions from
Landlord. Requests for such requirements must be submitted in writing
to Landlord.
32. Tenant agrees that neither tenant nor its agents, employees, licensees
or invitees will interfere in any manner with the installation and/or
maintenance of the heating, air conditioning and ventilation facilities
and equipment.
33. Landlord will not be responsible for lost or stolen personal property,
equipment, money or jewelry from tenant's area or common areas of the
Project, except where such loss was caused by Landlord, its agent or
employees.
34. Landlord will not permit entrance to tenant's premises by use of pass
key controlled by Landlord, to any person at any time without written
permission of tenant, except employees, contractors or service
personnel supervised or employed by Landlord.
35. Tenant and its agents, employees and invitees shall observe and comply
with the driving and parking signs and markers on the Building grounds
and surrounding areas.
36. Tenant and its employees, invitees and agents shall not enter other
separate tenants' hallways, restrooms or premises unless they have
received prior approval from Landlord's management.
************
C-5
<PAGE> 74
EXHIBIT "D"
CLEANING SPECIFICATIONS
[Attach]
D-1
<PAGE> 75
EXHIBIT "5(c)"
LETTER OF CREDIT
[Attach]
D-2
<PAGE> 1
Exhibit 10.42
EXECUTION COPY
COMMON STOCK PURCHASE AGREEMENT
between
i-STAT CORPORATION
and
ABBOTT LABORATORIES
dated as of
August 3, 1998
<PAGE> 2
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
August 3, 1998, between i-STAT Corporation, a Delaware corporation (the
"Company"), and Abbott Laboratories, an Illinois corporation ("Purchaser").
ARTICLE I
SALE OF COMMON STOCK
1.1 Sale and Issuance of Common Stock. Subject to the terms and
conditions in this Agreement, the Company will issue and sell to Purchaser, and
Purchaser will purchase from the Company, at the Closing (as defined in Section
1.2), 2,000,000 shares (the "Shares") of Common Stock, $0.15 par value, of the
Company (the "Common Stock") at a purchase price (the "Purchase Price") of
$11.35 per share, for a total Purchase Price of $22,700,000. The number of
Shares and the Purchase Price per Share are subject to appropriate adjustment in
the event of any stock split, reverse stock split, stock dividend,
recapitalization or other similar event which may occur prior to the Closing (as
defined below).
1.2 Closing Dates. The closing of the purchase and sale of the Shares
(the "Closing") shall be held at the offices of Paul, Hastings, Janofsky &
Walker LLP, 399 Park Avenue, New York, New York at 10:00 a.m., as soon as
practicable, but in any event no later than the fifth Business Day (as defined
in Section 10.1) following expiration or early termination of all waiting
periods imposed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended ("HSR Act") and satisfaction (or waiver, if permissible) of all other
closing conditions set forth in Articles IV and V of this Agreement, or at such
other time and place upon which the Company and Purchaser shall mutually agree
(the date of the Closing is hereinafter referred to as the "Closing Date").
1.3 Delivery of Shares; Payment of Purchase Price. At the Closing, the
Company will deliver to Purchaser a certificate or certificates representing the
Shares purchased by Purchaser against payment of the Purchase Price therefor by
wire transfer at the Closing of immediately available funds to the account or
accounts specified by the Company in writing at least two Business Days prior to
the Closing Date.
1.4 Legend. The certificate or certificates evidencing the Shares shall
be subject to a legend restricting transfer under the Securities Act of 1933, as
amended (the "Securities Act"), and referring to restrictions on transfer and
rights of first refusal herein, such legend to be substantially as follows:
(a) "The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, or any state securities law. Such shares may
not be sold or transferred in the absence of such
registration or an opinion of counsel reasonably
satisfactory to the Company as to the availability of
an exemption from registration."
<PAGE> 3
(b) "The shares represented by this certificate are
subject to restrictions on transfer, including any
sale, pledge or other hypothecation, and rights of
first refusal set forth in a Stock Purchase Agreement
dated August 3, 1998 between the Company and
Purchaser, a copy of which is on file at the
Company's principal executive offices."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser as follows:
2.1 Organization, Standing and Power.
(a) Each of the Company and the Company Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and as proposed to be conducted. Each of the
Company and the Company Subsidiary is duly qualified as a foreign corporation
and is in good standing in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except for
such failures, if any, to be so qualified and in good standing, which either
individually or in the aggregate would not have a "Material Adverse Effect" (as
hereinafter defined) on the Company. Material Adverse Effect when used in
connection with any entity means any change or effect that is materially adverse
to the business, financial condition, results of operations, properties, assets
or liabilities of such entity taken as a whole. Except as set forth on Schedule
2.1(a), the Company has no direct or indirect equity interest in or loans to any
partnership, corporation, joint venture, business association or other entity.
The Company has delivered to Purchaser complete and correct copies of the
Certificate of Incorporation and Bylaws, or similar charter documents, of the
Company and the Company Subsidiary, in each case as amended to the date hereof
and will furnish to Purchaser true and correct copies of any amendments thereto
through the term of this Agreement.
(b) Except for the Company Subsidiary, which is wholly-owned
by the Company, the Company has no Subsidiaries or affiliated companies and does
not otherwise own or control, directly or indirectly, any equity interest in any
corporation, association or business entity.
2.2 Capital Structure. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock and 7,000,000 shares of Preferred
Stock, $.10 par value per share. Of the 7,000,000 shares of Preferred Stock
authorized, 1,500,000 shares have been designated Series A Junior Participating
Preferred Stock (the "Series A Stock") and 2,138,702 shares have been designated
as Series B Preferred Stock (the "Series B Stock"). At July 31, 1998, there were
13,244,415 shares of Common Stock issued and outstanding, no shares of Series A
Stock issued and outstanding, and 2,138,702 shares of Series B Stock issued and
outstanding. All such issued and outstanding shares have been duly authorized
and validly
<PAGE> 4
issued and are fully paid and non-assessable and no issued and outstanding
shares are subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws or any agreement to which the Company is a party or by
which the Company may be bound. All outstanding shares of the Company's capital
stock have been issued in compliance with applicable federal and state
securities laws. The Company has reserved for issuance shares of Common Stock in
connection with the following options and convertible securities: (i) 3,000,000
shares of Common Stock, reserved for issuance pursuant to the Company's 1985
Stock Option Plan, of which, at July 31, 1998, options to purchase 2,240,650
shares were outstanding and 234,036 shares remain available for issuance
pursuant to options that may be granted under such Plan; (ii) 60,000 shares of
Common Stock, reserved for issuance pursuant to the Company's 1994 Stock Award
Plan, of which, at July 31, 1998, 2,600 shares remained available for future
awards; (iii) 2,300,000 shares of Common Stock, reserved for issuance pursuant
to the Company's 1998 Stock Option Plan, of which, at July 31, 1998, options to
purchase 27,000 shares were outstanding and 2,273,000 shares remain available
for issuance pursuant to options that may be granted under such Plan. 1,500,000
shares of the Series A Stock have been reserved for issuance pursuant to the
Rights Agreement. Except as set forth on Schedule 2.2, there are no other
options, warrants, conversion privileges or other contractual rights presently
outstanding or in existence to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities or the
capital stock or other securities of the Company Subsidiary.
2.3 Authority.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and each of the other Alliance
Agreements, and to consummate the transactions contemplated hereby and thereby.
All corporate action on the part of the Company, its directors and stockholders
necessary for the authorization, execution, delivery and performance of this
Agreement and the other Alliance Agreements, and the authorization, sale,
issuance and delivery of the Shares contemplated hereby, has been taken. This
Agreement and each of the other Alliance Agreements when duly executed and
delivered by the Company shall each constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, except that
the availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought. The issuance and sale of
the Shares contemplated hereby will not give rise to any preemptive rights or
rights of first refusal in existence as of the date hereof on behalf of any
person pursuant to any provision of any agreement between the Company and any
such person or the Company's Certificate of Incorporation or Bylaws.
(b) The Shares have been duly authorized and, upon the issuance and
delivery of the Shares and the payment of the Purchase Price therefor pursuant
to this Agreement, the Shares will be duly and validly issued and outstanding,
fully paid and non-assessable, and Purchaser shall have good and marketable
title to the Shares free of any liens or restrictions (unless created by the
Purchaser or any of its Affiliates), other than restrictions expressly set forth
in the Alliance
<PAGE> 5
Agreements (as defined in Section 10.1) or restrictions on transferability under
applicable securities laws.
2.4 No Conflict. Except as set forth on Schedule 2.4, and subject to
compliance with the HSR Act and such filings as may be required pursuant to
federal and state securities laws, the execution and delivery of each of the
Alliance Agreements does not, and the consummation of the transactions
contemplated hereby and thereby will not, result in any violation of, or default
under (with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation pursuant
to, or a loss of benefits under, any provision of the Certificate of
Incorporation or Bylaws of the Company, or any mortgage, indenture, lease or
other agreement or instrument, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company, its properties or
assets, (including, without limitation, any agreement with HP (as defined in
Section 10.1) or FUSO Pharmaceutical Industries, Ltd.) the effect of which would
have a Material Adverse Effect on the Company or restrict its power to perform
its obligations as contemplated hereby.
2.5 SEC Reports. All reports required to be filed by the Company since
January 1, 1997 to the date of this Agreement under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), copies of which have been furnished to
Purchaser (the "SEC Reports"), have been duly filed, were substantially in
compliance with the requirements of their respective forms as of the dates at
which the information was furnished, were complete and correct in all material
respects as of their respective dates, and contained (as of such respective
dates) no untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited consolidated interim financial
statements of the Company included in the SEC Reports fairly present in all
material respects, in conformity with United States generally accepted
accounting principles applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of the Company as of
the dates thereof and the Company's consolidated results of operations and cash
flows for the periods then ended. Except as reflected or reserved against in the
consolidated balance sheet of the Company at March 31, 1998, the Company has no
liabilities of any nature (whether accrued, absolute, contingent or otherwise),
except for liabilities incurred in the ordinary course of business since March
31, 1998 and liabilities which would not, individually or in the aggregate, have
a Material Adverse Effect on the Company.
2.6 Absence of Changes. Except as and to the extent specifically
disclosed in the SEC Reports filed prior to the date of this Agreement or as set
forth on Schedule 2.6 hereof, since March 31, 1998: (a) there has not been one
or more events, occurrences or developments or state of circumstances or facts,
particular to the Company, which individually or collectively has had or
reasonably would be expected to result in a Material Adverse Effect on the
Company; and (b) there has not been one or more breaches or defaults or events
that have resulted, or which, with notice or lapse of time or both, would result
in any breach or default under any material contract of the Company or the
Company Subsidiary, except for any such breaches or defaults that individually
or collectively would not reasonably be expected to have a Material Adverse
Effect on the Company.
<PAGE> 6
2.7 Governmental Consent, etc. No consent, approval or authorization
of, or designation, declaration or filing with, any governmental authority on
the part of the Company is required in connection with the execution and
delivery of this Agreement, or the offer, sale or issuance of the Shares, or the
consummation of any other transaction contemplated hereby, except the filing of
such forms with the United States Department of Justice and the Federal Trade
Commission as shall be required by the HSR Act, and the expiration or
termination of any waiting periods thereunder and such filings as may be
required to be made with the Securities and Exchange Commission (the "SEC"), the
National Association of Securities Dealers (the "NASD"), and any state
securities commission.
2.8 Rights Agreement. The execution of this Agreement, the consummation
of the transactions contemplated hereby and any future acquisitions or proposed
acquisitions of shares of Common Stock by Purchaser or its Affiliates pursuant
to and in conformance with the terms of this Agreement and the Standstill
Agreement (as defined in Section 10.1) will not cause any adverse consequence to
Purchaser or its Affiliates or the Company as a consequence of the Rights
Agreement, including, without limitation, the occurrence of the Separation Time
(as defined in the Rights Agreement) or any adjustment to the Exercise Price (as
defined in the Rights Agreement). Without limiting the generality of the
foregoing, the Company's Board of Directors has taken all necessary and
appropriate action prior to the date of this agreement such that (a) Purchaser
and its Affiliates collectively constitute a "Minority Investor" (as such term
is defined in the Rights Agreement) and (b) the "Minority Percentage" (as such
term is defined in the Rights Agreement) applicable to Purchaser and its
Affiliates is twenty-five (25) percent.
2.9 DGCL Section 203. Any transaction or series of transactions in
which Purchaser or any of its Affiliates may become "interested stockholders"
(as defined in Section 203 of the Delaware General Corporation Law) which
transaction or series of transactions do not violate the terms of this Agreement
or the Standstill Agreement are authorized and approved effective at the Closing
by the Board of Directors of the Company for the purposes of Section 203 of the
Delaware General Corporation Law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
3.1 Investment. Purchaser will acquire the Shares pursuant to this
Agreement for investment for its own account, not as a nominee or agent, and not
with a view or any present intention to, or for resale in connection with, any
distribution thereof. Purchaser understands that the Shares and any other shares
purchased by Purchaser from the Company pursuant to this Agreement have not
been, and will not be, registered under the Securities Act or any state
securities laws for sale to Purchaser by reason of a specific exemption from the
registration provisions of the Securities Act and such state securities laws,
which depends upon, among other things, the bona fide nature of Purchaser's
investment intent and the accuracy of Purchaser's
<PAGE> 7
representations as expressed herein. Should Purchaser in the future decide to
offer to dispose of any Shares, or any interest therein, it agrees to do so only
in compliance with the Securities Act and such state securities laws, and this
Agreement.
3.2 Organization. Purchaser is a corporation duly organized and validly
existing in good standing under the laws of the State of Illinois, with all
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as presently conducted and as proposed
to be conducted.
3.3 Authority. Purchaser has all requisite corporate right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Purchaser
and the consummation by Purchaser of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on behalf of Purchaser.
This Agreement, when duly executed and delivered by Purchaser, shall constitute
the legal, valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
except that the availability of equitable remedies is subject to the discretion
of the court before which any proceeding therefor may be brought.
3.4 No Conflict. Subject to compliance with the HSR Act and such
filings as may be required pursuant to federal and state securities laws, the
execution and delivery of each of the Alliance Agreements does not, and the
consummation of the transactions contemplated hereby will not, result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation pursuant to, or a loss of benefits under, any provision of the
Certificate of Incorporation or Bylaws of Purchaser, or any mortgage, indenture,
lease or other agreement or instrument, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Purchaser, its
properties or assets, the effect of which would have a Material Adverse Effect
on Purchaser or restrict its power to perform its obligations as contemplated
hereby.
3.5 Governmental Consents, etc. No consent, approval or authorization
of, or designation, declaration or filing with any governmental authority on the
part of Purchaser is required in connection with the valid execution and
delivery of this Agreement, or the purchase of the Shares, or the consummation
of any other transaction contemplated hereby, except the filing of such forms
with the United States Department of Justice and the Federal Trade Commission as
shall be required by the HSR Act, and the expiration or termination of any
waiting periods thereunder and such filings, as may be required to be made with
the SEC, the NASD and any state securities commission.
3.6 Investigation. The Company or its representatives have made
available to Purchaser all documents and information that Purchaser has
requested relating to its acquisition of the Shares. Purchaser has had a
reasonable opportunity to discuss the Company's business, management and
financial affairs with the Company's management and Purchaser has received
satisfactory responses from management of the Company to Purchaser's inquiries.
<PAGE> 8
3.7 Purchaser. Purchaser has such knowledge and experience in business
and financial matters that it is capable of evaluating the merits and risks of
its investment in the Shares. Purchaser is able to bear the economic risk of
ownership of the Shares for an indefinite period of time.
ARTICLE IV
CONDITIONS TO OBLIGATIONS OF PURCHASER
Purchaser's obligation to purchase the Shares at the Closing
is subject to the fulfillment on or prior to the Closing Date of each of the
following conditions, unless waived in writing by Purchaser:
4.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Article II hereof and in Section 14.5 of the
Distribution Agreement shall be true and correct in all material respects when
made and on the Closing Date with the same force and effect as if they had been
made on and as of said date.
4.2 Covenants. All covenants and agreements contained in this Agreement
to be performed or complied with by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
4.3 Opinion of Counsel to the Company. Purchaser shall have received
from Paul, Hastings, Janofsky & Walker LLP, counsel to the Company, an opinion
addressed to it, dated the Closing Date, in substantially the form of Exhibit A.
4.4 No Order Pending. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this Agreement.
4.5 HSR Act. Both Purchaser and the Company shall have filed such forms
with the United States Department of Justice and the Federal Trade Commission as
shall be required by the HSR Act. The applicable waiting periods under the HSR
Act shall have expired or earlier been terminated without notice from such
governmental agencies that additional inquiries are being made.
4.6 No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law, rule or regulation prohibiting or restricting the purchase and
sale of the Shares or requiring any consent or approval of any person which
shall not have been obtained to issue the Shares.
4.7 Compliance Certificate. The Company shall have delivered to the
Purchaser a certificate, in substantially the form of Exhibit B, executed on
behalf of the Company by the President of the Company, dated the Closing Date,
and certifying to the fulfillment of the conditions specified in Sections 4.1
and 4.2.
4.8 Alliance Agreements. (a) The Company shall have executed and
delivered to Purchaser each of the Alliance Agreements; and
<PAGE> 9
(b) The "Closing" referred to in Section 1.22 of the
Distribution Agreement shall have occurred or shall be occurring simultaneously.
4.9 Authorizing Resolutions. Purchaser shall have received a
Secretary's Certificate certifying as to the resolutions adopted by the
Company's Board of Directors approving this Agreement and the transactions
contemplated hereby, including resolutions relating to Sections 2.8 and 2.9
hereof, in form and substance reasonably acceptable to Purchaser.
The non-fulfillment of any of the foregoing conditions (whether or not
the Closing occurs) shall not result in any liability to any party hereto unless
such non-fulfillment is a result of a breach of this Agreement or any of the
other Alliance Agreements by such party.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The Company's obligation to sell and issue the Shares at the Closing is
subject to the fulfillment on or prior to the Closing Date of each of the
following conditions, unless waived in writing by the Company:
5.1 Representations and Warranties Correct. The representations and
warranties made by Purchaser in Article III hereof shall be true and correct in
all material respects when made and on the Closing Date with the same force and
effect as if they had been made on and as of said date.
5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by Purchaser on or prior to the
Closing Date shall have been performed or complied with in all material
respects.
5.3 Opinion of Counsel to Purchaser. The Company shall have received
from David S. Fishman, counsel to the Purchaser, an opinion addressed to it,
dated the Closing Date, in substantially the form of Exhibit G.
5.4 No Order Pending. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this Agreement.
5.5 HSR Act. Both Purchaser and the Company shall have filed such forms
with the United States Department of Justice and the Federal Trade Commission as
shall be required by the HSR Act. The applicable waiting periods under the HSR
Act shall have expired or earlier been terminated without notice from such
governmental agencies that additional inquiries are being made.
5.6 No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law rule or regulation prohibiting or restricting the purchase and
sale of the Shares or requiring any consent or approval of any person which
shall not have been obtained to issue the Shares.
<PAGE> 10
5.7 Compliance Certificate. Purchaser shall have delivered to the
Company a certificate in substantially the form of Exhibit H, executed on behalf
of Purchaser by an officer of Purchaser, dated the Closing Date, and certifying
to the fulfillment of the conditions specified in Sections 5.1 and 5.2.
5.8 Alliance Agreements. (a) Purchaser shall have executed and
delivered to the Company the Standstill Agreement, the Registration Rights
Agreement, the Research Agreement and the Distribution Agreement (each as
defined in Section 10.1); and
(b) The "Closing" referred to in Section 1.22 of the
Distribution Agreement shall have occurred or shall be occurring simultaneously.
The non-fulfillment of any of the foregoing conditions (whether or not
the Closing occurs) shall not result in any liability to any party hereto unless
such non-fulfillment is a result of a breach of this Agreement or any of the
Alliance Agreements by such party.
ARTICLE VI
COVENANTS OF THE COMPANY
6.1 Attendance at Meetings of the Board of Directors.
(a) Nothing herein shall be deemed to confer upon Purchaser
any contractual right to designate a member of the Company's Board of Directors.
For so long as Purchaser holds shares of Voting Stock (as defined in Section
10.1) representing at least 10% of the then outstanding Total Voting Power of
the Company (as defined in Section 10.1), the Company shall permit Purchaser to
designate an employee of Purchaser, who shall be approved by the Company, such
approval not to be unreasonably withheld or delayed, to have visitation rights
to all proceedings and activities of the Company's Board of Directors (the
"Attendance Right"). The Attendance Right shall not include the right to attend
either (1) executive sessions (as defined in paragraph (c) below) of the
Company's Board of Directors or (2) meetings of committees of the Company's
Board of Directors.
(b) A reduction in Purchaser's percentage ownership of Voting
Stock below 10% shall not cause the loss of Purchaser's Attendance Right under
paragraph (a) above if the event causing the reduction is the sale or issuance
by the Company of additional shares of Voting Stock resulting in dilution of
Purchaser's percentage ownership level, and not a disposition by Purchaser of
its Voting Stock; except, however, where such reduction is a result of
Purchaser's failure to exercise its maintenance rights as provided in Article
VIII.
(c) For purposes of this Section 6.1, an "executive session"
shall mean those portions of Board of Directors meetings at which only members
of the Board of Directors are permitted to be present, together with their
invited counsel, advisors and executive officers of the Company. Purchaser shall
cause its designee under paragraph (a) above to execute a confidential
<PAGE> 11
disclosure agreement with the Company mutually agreeable to the Company and
Purchaser prior to attendance at any proceeding of the Company's Board of
Directors. Except as provided in paragraph (d) below, the Company shall provide
to Purchaser's representative all notices and materials at the same time as it
provides the same to the members of the Board of Directors.
(d) Any designee of Purchaser shall be entitled, and the
Company may require such designee, to excuse himself or herself from all
discussions and deliberations of the Board of Directors of the Company (or any
committee constituted by the Board) concerning competitors of Purchaser or
relationships between the Company and Purchaser. Upon notice to Purchaser's
designee, the Company may refrain from sending or providing to Purchaser, or
Purchaser may refuse to receive, any information otherwise disseminated to the
directors of the Company concerning competitors of Purchaser or relationships
between the Company and Purchaser.
6.2 Notice of Certain Transactions. From and after the Closing Date, in
addition to any other notices required or permitted by this Agreement, the
Company shall give Purchaser written notice within two (2) Business Days if any
person or group of persons makes, announces an intention to make, or the Company
otherwise receives, an Acquisition Proposal (as defined in Section 10.1). In
addition, from and after the Closing Date, the Company shall give Purchaser
written notice within two (2) Business Days of receipt by the Company of filing
of (i) any notice under the HSR Act relating to an acquisition of assets or
Voting Securities of the Company, (ii) any statement on Schedule 13D or Schedule
14D-1 (or any successor schedule to such schedules) under the Exchange Act
relating to any Voting Stock, and (iii) any amendments to any of the foregoing,
other than those filed by an Institutional Investor (as defined in Section
10.1). In its written notice to Purchaser, the Company shall disclose the
material terms of such event, except that the Company need not disclose the name
of the person making such Acquisition Proposal or filing. From and after the
Closing Date, the Company shall also give Purchaser written notice of its
engagement in negotiations with HP pursuant to Section 6.6(b) of the HP Purchase
Agreement (as defined in Section 10.1) (which notice shall specify the date on
which such negotiations commenced and the date on which the exclusive
negotiation period under such Section 6.6(b) will expire) and, subject to any
confidentiality restrictions to which the Company may be subject, shall notify
Purchaser in writing of the occurrence of any material events with respect to
any such negotiations during the 30-day exclusive negotiating period under such
section.
6.3 Rights Agreement. From and after the Closing Date:
(a) the Company will not amend, interpret or enforce the
Rights Agreement, or adopt any new shareholder rights agreement or other similar
arrangement, plan or measure, if such amendment, interpretation, enforcement or
adoption would prohibit the ability of Purchaser to hold or acquire Beneficial
Ownership of shares of Voting Stock which do not exceed 25% of the outstanding
shares of Voting Stock; and
(b) if the Company amends or interprets the Rights Agreement
(or any new shareholder rights agreement or other similar arrangement, plan or
measure) to permit any person or persons (including HP) other than an
Institutional Investor (as defined in the Rights Agreement) to acquire
Beneficial Ownership of 25% or more of the outstanding shares of Voting
<PAGE> 12
Stock without becoming an Acquiring Person (as defined in the Rights Agreement),
then the Company shall also amend or interpret, as the case may be, the Rights
Agreement to provide that Purchaser shall also be able to acquire Beneficial
Ownership of the number of shares of Voting Stock necessary to reach the same
percentage ownership position in the Company that such person or persons are
permitted to reach without becoming an Acquiring Person.
6.4 No Objection. Except as required by law, the Company shall not
interpose any objection or take any legal action as a plaintiff in connection
with the acquisition by Purchaser of such number of shares of Voting Stock as is
permitted to be owned by Purchaser pursuant to and in conformance with this
Agreement and the Standstill Agreement.
6.5 Sale of Shares. The Company shall take such action as is reasonably
necessary, subject to compliance with applicable law, to issue and sell to
Purchaser the Shares and any additional shares of capital stock which Purchaser
shall be entitled to purchase from the Company pursuant to and in conformance
with this Agreement and the Standstill Agreement.
6.6 HSR Act. The Company shall file such forms with the United States
Department of Justice and the Federal Trade Commission as shall be required by
the HSR Act as promptly as practicable upon execution of this Agreement, shall
promptly respond to any requests for additional information and shall cooperate
fully with Purchaser with respect to compliance with the HSR Act.
ARTICLE VII
COVENANTS OF PURCHASER
7.1 Voting. From and after the Closing Date, Purchaser shall take such
action as may be required so that all shares of Common Stock owned by Purchaser
are voted in favor of nominees to the Board of Directors of the Company in
accordance with the recommendation of the Board of Directors, provided that
Purchaser shall not be so obligated if Purchaser, in its sole discretion,
determines that doing so would be adverse to Purchaser's interest in the
Company. Unless the Company otherwise consents in writing, Purchaser shall take
such action as may be required so that all shares of Common Stock owned by
Purchaser are voted in accordance with the recommendations of the Board of
Directors on all other matters, other than Significant Events (as defined in
Section 10.1 below), to be voted on by holders of Voting Stock; provided,
however, that if Purchaser disagrees with the Board's recommendation as to any
matter, the Voting Stock Beneficially Owned by Purchaser may be voted with
respect to such matter in not less than the same proportion as the votes cast by
all holders of Voting Stock (excluding Purchaser) with respect to such matter.
With respect to Significant Events, (i) Purchaser may vote all shares of Voting
Stock Beneficially Owned by Purchaser up to and including that number of shares
representing 15% of the Total Voting Power of the Company (the "15% Threshold")
as Purchaser determines in its sole discretion on any Significant Event
presented to be voted on by the holders of Voting Stock, and (ii) Purchaser
shall vote any shares of Voting Stock Beneficially Owned by Purchaser
representing more than the 15% Threshold, at its election, either in accordance
with the recommendations of the Board of Directors or in the same
<PAGE> 13
proportion as the votes cast by all holders of Voting Stock with respect to such
matter.
7.2 Acquisition of Stock. Subject to the rights and obligations of
Purchaser set forth in the Standstill Agreement, Purchaser shall advise
management of the Company as to Purchaser's general plans to increase by 1% or
more its percentage interest in the Total Voting Power of the Company reasonably
in advance of any such acquisitions. Purchaser shall advise management of the
Company as promptly as practicable, but in no event later than seven (7)
Business Days, following any acquisition by Purchaser of additional shares of
Voting Stock representing increments of 1% or more of the Total Voting Power of
the Company.
7.3 Transfers of the Shares. (a) For so long as the Standstill
Agreement is in effect, and subject to the provisions of the Standstill
Agreement and Article IX hereof, except pursuant to an effective registration
statement, Purchaser may not sell more than 200,000 Shares in any three (3)
month period (a sale by Purchaser of a portion of the Shares which is permitted
by this Section 7.3 but is not made pursuant to an effective registration
statement shall be a "Permitted Sale"). In connection with any Permitted Sale,
other than a Permitted Sale in connection with an acquisition of the Company or
a tender or exchange offer for all of the Voting Stock, Purchaser agrees to use
its best efforts to effect as wide a distribution as reasonably practicable,
including, but not limited to, preventing any buyer from owning more than 5%
(calculated from publicly available filings as of the time not more than five
(5) Business Days before the date of signing any definitive agreement relating
to a Permitted Sale and, in the absence of any such filing, determined on the
basis of the Purchaser's actual knowledge after due inquiry) of the Voting
Stock.
(b) Purchaser agrees to take and hold the Shares subject to
the provisions of federal and state securities laws. Purchaser agrees that prior
to any Permitted Sale, it will obtain (i) a written opinion of Purchaser's legal
counsel (who shall be reasonably acceptable to the Company) addressed to the
Company and which shall be reasonably satisfactory in form and substance to the
Company's counsel, to the effect that the proposed Permitted Sale may be
effected without registration under the Securities Act, (ii) a "no action"
letter from the SEC to the effect that the proposed Permitted Sale of such
securities without registration will not result in a recommendation by the staff
of the SEC that action be taken with respect thereto, or (iii) such other
showing that may be reasonably satisfactory to legal counsel to the Company.
Each certificate representing shares of the Common Stock transferred as above
provided shall bear a restrictive legend substantially as set forth in Section
1.4 above.
(c) Purchaser will cause any proposed transferee of Common
Stock in a Permitted Sale, prior to such transfer, to agree, in a writing
reasonably satisfactory to the Company, to take and hold such securities subject
to the foregoing conditions.
7.4 HSR Act. Purchaser shall file such forms with the United States
Department of Justice and the Federal Trade Commission as shall be required by
the HSR Act as promptly as practicable upon execution of this Agreement, shall
promptly respond to any requests for additional information and shall cooperate
fully with the Company with respect to compliance with the HSR Act.
<PAGE> 14
ARTICLE VIII
RIGHT TO MAINTAIN
For purposes of this Article VIII, the term "Maintenance Percentage"
shall mean the percentage interest in Total Voting Power of the Company
Beneficially Owned by Purchaser immediately prior to an issuance by the Company
of any Voting Stock.
8.1 Stock Plan Issuances. Notwithstanding the provisions of Section 8.2
below, Purchaser shall have no rights to purchase additional shares of Voting
Stock from the Company to maintain the Maintenance Percentage if the percentage
interest of Purchaser in the Total Voting Power of the Company is reduced as a
result of an issuance after the date hereof by the Company of any Voting Stock
(including any issuance resulting from the conversion or exercise of any
security or other right to acquire Voting Stock) pursuant to the Company's
present or future stock option, stock purchase or other stock plans or otherwise
for compensatory purposes for the benefit of employees, directors, consultants
or others.
8.2 Other Issuances. From and after the Closing Date, in the event that
the Company issues additional shares of Voting Stock (other than an issuance to
which Section 8.1 applies) including, without limitation, in a public offering
registered under the Securities Act, a private sale to a third party or in
connection with a merger (other than any merger in which the holders of Voting
Stock of the Company immediately prior to such merger will cease to Beneficially
Own 50% or more of the outstanding voting stock of the surviving parent entity)
or acquisition by the Company, including any issuance following conversion of
any security convertible into or exchangeable for Voting Stock or upon exercise
of any option, warrant or other right to acquire any Voting Stock, as a result
of which issuance the percentage interest of Purchaser in the Total Voting Power
of the Company is reduced below the Maintenance Percentage, then, subject to the
rights and obligations of Purchaser set forth in the Standstill Agreement,
Purchaser shall be entitled to purchase additional whole shares of Voting Stock
from the Company as provided in this Section 8.2.
(a) Negotiated Purchases.
(i) In the event that a person or group (the "Buyer")
wishes to acquire any Voting Stock pursuant to a Negotiated Purchase
(as defined in Section 10.1) (the "Negotiated Purchase Shares"), the
Company shall notify Purchaser in writing (the "Company Notice") before
entering into an agreement to sell Negotiated Purchase Shares.
Purchaser shall notify the Company by written notice ("Purchaser's
Notice") within thirty (30) calendar days after receipt of the
Company's Notice (the "Reply Period") as to whether Purchaser desires
to acquire additional shares of Voting Stock from the Company to
maintain its percentage ownership at the Maintenance Percentage.
(ii) If Purchaser notifies the Company within the
Reply Period that Purchaser desires to purchase additional shares
directly from the Company, then Purchaser shall have the option to
purchase from the Company such number of shares of
<PAGE> 15
Voting Stock as will cause Purchaser's percentage interest in the Total
Voting Power of the Company to be maintained at the Maintenance
Percentage. If Purchaser does not elect to participate in the
Negotiated Purchase within the Reply Period, then Purchaser shall no
longer have the right to acquire additional shares from the Company in
connection with the Negotiated Purchase to which the notice referred.
(b) Public Offering. In the event of a proposed issuance of
Voting Stock pursuant to a public offering registered under the Securities Act
(a "Registered Offering"), the Company shall, not later than thirty (30)
calendar days prior to the effective date of the registration statement for such
Registered Offering, give written notice to Purchaser, which notice shall
include the number of shares of Voting Stock which the Company believes
Purchaser is entitled to acquire as a result of the Registered Offering (the
"Public Issuance Notice"). Upon receipt of the Public Issuance Notice, Purchaser
shall have fifteen (15) Business Days to notify the Company in writing (the
"Registered Offering Reply Period") of its decision to acquire additional Voting
Stock. If Purchaser elects to acquire additional Voting Stock within the
Registered Offering Reply Period, then the Company shall be obligated to sell
and Purchaser shall be obligated to purchase such Voting Stock concurrently with
the Registered Offering that would result in Purchaser's retaining or achieving
the Maintenance Percentage.
8.3 Price. Purchaser must exercise its option as to all shares
described in any notice that it gives to the Company under this Article VIII
(provided that Purchaser is permitted to do so pursuant to the terms of this
Agreement and the Standstill Agreement and that such exercise would not result
in any adverse effects to Purchaser under the Rights Plan) or such option may
not be exercised at all. If Purchaser exercises its option to purchase such
shares from the Company pursuant to this Article VIII, the shares shall be sold
to Purchaser at the price per share determined as follows:
(a) If the event giving rise to Purchaser's right is an
issuance of Voting Stock upon conversion of any security convertible into or
exchangeable for Voting Stock, or upon exercise of any option, warrant or right
to acquire any Voting Stock, and is not treated under Section 8.3(b) or (c), the
price shall be the lower of (i) the conversion price per share of Voting Stock
set forth in the convertible security, option, warrant or right, and (ii) the
Average Market Price per share of Common Stock determined as of the date of such
conversion or exercise.
(b) If the event giving rise to Purchaser's rights is a sale
or issuance of Voting Stock other than a Registered Offering for cash or
property, including, without limitation, for securities or assets by way of a
merger with or acquisition of another company, then such shares shall be
purchased on the same terms as such shares were purchased from the Company by
the Buyer. If the purchase price paid by the Buyer for Voting Stock sold by the
Company includes any property or other form of consideration other than cash,
the value of such property or other consideration included in such purchase
price shall be jointly determined by the Company and Purchaser in good faith. If
the Company and Purchaser cannot agree on the purchase price paid by the Buyer,
then the parties hereby agree that the purchase price shall be deemed to be
equal to the Average Market Price as of the date that the transactions
contemplated by the Negotiated Purchase are publicly announced.
<PAGE> 16
(c) If the event giving rise to Purchaser's rights is a
Registered Offering, the price shall be the price per share at which the Common
Stock is sold by the Company in the Registered Offering.
(d) In all other cases, the price shall be the Average Market
Price per share of Common Stock determined as of the date of the issuance and
sale of such Common Stock.
8.4 Closing. The purchase and sale of any shares of Common Stock to be
issued by the Company to Purchaser pursuant to this Article VIII shall take
place at 10:00 a.m. not later than the fifth Business Day following the issuance
of shares by the Company which gives rise to Purchaser's rights under this
Article VIII and the expiration or early termination of all waiting periods
imposed on such sale by the HSR Act and the receipt of all other applicable
regulatory approvals or, if no waiting period is imposed on such sale by the HSR
Act, not later than the third Business Day following the issuance of shares by
the Company which gives rise to Purchaser's rights under this Article VIII in
compliance with applicable laws, rules and regulations, at the principal offices
of the Company, or at such other time and place as the Company and Purchaser may
agree. The purchase price shall be payable in cash by wire transfer of
immediately available funds. The Company and Purchaser will use their reasonable
efforts to comply with all federal and state laws, rules and regulations and
requirements of the NASD and of any stock exchange applicable to any purchase
and sale of shares of Voting Stock under this Article VIII. The issuance of such
shares shall be subject to compliance with applicable laws, rules and
regulations and requirements of any applicable stock exchange and the absence of
any order in effect enjoining or restraining such exercise or issuance.
8.5 Notice. Every three (3) months, the Company will provide, if
requested by Purchaser, a statement from the Company of the number of shares of
Voting Stock outstanding and the nature of any transaction resulting in any
increase in the number of shares of Voting Stock outstanding from the number
outstanding at the time of the immediately preceding statement and the number of
shares of Common Stock which the Company believes Purchaser is entitled to
acquire under this Article VIII at such time.
ARTICLE IX
THE COMPANY'S RIGHT OF FIRST REFUSAL
For so long as Purchaser or any of its Affiliates owns any Shares:
9.1 Right of First Refusal. Prior to making any sale or transfer of the
Shares (other than to any Affiliate of Purchaser), Purchaser shall give the
Company the opportunity to purchase such Common Stock in the following manner:
(a) Purchaser shall give notice (the "Transfer Notice") to the
Company in writing of such intention specifying the portion of the Shares
proposed to be sold or transferred. If Purchaser (i) has received an offer from
a third party with a proposed price per share, then Purchaser shall include in
the Transfer Notice such price therefor and the other material terms
<PAGE> 17
upon which such disposition is proposed to be made, or (ii) if Purchaser has not
received an offer from a third party with a proposed price per share and the
other material terms upon which such disposition may be made, then Purchaser
shall include in the Transfer Notice the price and other material terms in which
it wishes to dispose of such Shares. The Company shall have the right
exercisable by written notice (the "Company Notice") to Purchaser within twenty
(20) Business Days after receipt of the Transfer Notice, to elect to purchase
all, but not less than all, of the Common Stock that Purchaser proposes to
transfer at the price (the "Transfer Price") and on the other terms set forth in
the Transfer Notice. For purposes of this Section 9.1, the "Transfer Price" may
refer to a predetermined formula for calculating a price at the time of the
closing of the disposition, which formula is based on the market price of the
Common Stock over a given period ending on or prior to the closing date of the
disposition.
(b) If the Company exercises its right of first refusal under
Section 9.1(a), the closing of the purchase of the Common Stock with respect to
which such right has been exercised shall take place within thirty (30) calendar
days after the date Purchaser receives the Company Notice, and the Company and
Purchaser shall be legally obligated to consummate the purchase contemplated
thereby and shall use their reasonable efforts to secure any approvals required
in connection therewith.
(c) If the Company does not exercise its right of first
refusal hereunder within the time specified for such exercise or does not
purchase the Common Stock within the time specified for such purchase, then
Purchaser shall be free, during the period of ninety (90) calendar days
following the expiration of such time for exercise or purchase, to sell the
Common Stock specified in such Transfer Notice, at a price equal to or greater
than the applicable Transfer Price and with other terms no less favorable to
Purchaser than the terms set forth in the Transfer Notice. Such transferee of
Purchaser shall acquire such Common Stock free from any of the provisions of
this Agreement (other than Section 1.4, if applicable); provided, however, such
Common Stock shall be subject to the provisions of the Registration Rights
Agreement and any restrictions imposed under applicable securities laws.
(d) The Company's rights under this Section 9.1 shall
terminate upon the termination of this Agreement by Purchaser or the Company in
accordance with Section 11.1(a).
9.2 Assignment of Rights. In the event that the Company elects to
exercise a right of first refusal under this Article IX, the Company may
specify, prior to closing such purchase, and upon not less than three (3)
Business Days' prior notice to the Purchaser, one or more persons as its
designee to purchase any portion of the Common Stock to which such notice
relates. If the Company shall designate another person or persons as the
purchaser(s) pursuant to this Section 9.2, the giving of notice of acceptance of
the right of first refusal by the Company shall constitute a legally binding
obligation of the Company to complete such purchase if any such designee shall
fail to do so.
9.3 Transfer of Shares to Affiliates. If Purchaser sells or transfers
any of the Shares to any Affiliate of Purchaser, such Affiliate of Purchaser
shall be subject to this Article IX with respect to such Shares to the same
extent as Purchaser and Purchaser shall cause any such
<PAGE> 18
Affiliate to comply with this Article IX.
ARTICLE X
DEFINITIONS
10.1 Certain Definitions. As used in this Agreement:
(a) The term "Acquisition Proposal" shall mean one or more of
the following: (i) a third party (other than an Institutional Investor or HP)
publicly discloses that it has acquired, or has the right to acquire Voting
Stock of the Company and such acquisition will result in such third party
Beneficially Owning 15% or more of the Total Voting Power of the Company; (ii)
the Company executes a definitive agreement in principle with a third party
which, if consummated, would result in the then current stockholders of the
Company owning less than a majority of the Total Voting Power of the Company or
its successor, or involving a sale of all or substantially all of the assets of
the Company; (iii) a third party makes a tender offer or exchange offer to
purchase the Company's Voting Stock to which the Company's response is to redeem
the Rights Agreement, respond neutrally or respond favorably; or (iv) a third
party solicits proxies with respect to the Company's Voting Stock in connection
with, or participates in an "election contest" as such term is used in Rule
14a-11 of Regulation 14A of the Exchange Act, relating to the election of
directors.
(b) The term "Affiliate", when used to indicate a relationship
with a specified person, shall mean a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such specified person.
(c) The term "Alliance Agreements" means this Agreement, the
Standstill Agreement, the Registration Rights Agreement, the Research Agreement
and the Distribution Agreement.
(d) The term "Average Market Price" of any security at any
date shall be the average of the closing prices for a share or other single unit
of such security on the thirty (30) consecutive trading days ending on the
trading date last preceding the date of determination of such price on the
principal national securities exchange on which such security is listed, or, if
such security is not listed on any national securities exchange, the average of
the closing sales prices for a share of such security on the National
Association of Securities Dealers Automated Quotation Systems ("NASDAQ") or, if
such closing sales prices shall not be reported on NASDAQ, the average of the
mean between the closing bid and asked prices of a share of such security in
such case as reported by The Wall Street Journal, or, if such prices shall not
be so reported, as the same shall be reported by the National Quotation Bureau
Incorporated, or, in all other cases, the fair market value of such securities
at such date as determined by a single nationally recognized investment banking
firm jointly selected by the Company and Purchaser. For this purpose, the
parties shall use all commercially reasonable efforts to cause any determination
of such fair market value to be made within ten (10) Business Days after the
date on which the value is to be measured. The determination of such fair market
value by the investment banking firm selected in the manner set forth above
shall be conclusive.
<PAGE> 19
(e) The term "Beneficial Ownership" shall have the meaning
contemplated by Rule 13d-3 promulgated under the Exchange Act.
(f) The term "Business Day" shall mean any day other than a
day which is a Saturday or Sunday or other day on which commercial banks in New
York, New York are authorized or required to remain closed.
(g) "Company Subsidiary" shall mean i-STAT Canada Limited, a
corporation organized under the laws of Canada.
(h) The term "Distribution Agreement" means the Marketing and
Distribution Agreement in the form of Exhibit F to this Agreement.
(i) The term "group" shall have the meaning contemplated by
Section 13-3(d)(3) of the Exchange Act, and the rules and regulations
promulgated thereunder.
(j) The term "HP" shall mean Hewlett-Packard Company, a
Delaware corporation (as successor by merger to Hewlett-Packard Company, a
California corporation).
(k) The term "HP Purchase Agreement" shall mean that certain
Series B Preferred Stock Purchase Agreement dated as of June 23, 1995, between
the Company and HP.
(l) The term "Negotiated Purchase" means a transaction between
the Company and any person or group pursuant to which such person or group
acquires from the Company (or has the right to acquire from the Company) Voting
Stock or any securities convertible into or exchangeable for voting stock or any
other right to acquire voting stock. Notwithstanding the foregoing, the term
"Negotiated Purchase" shall not include (i) any agreement between the Company
and any underwriter(s) in connection with a public offering, or (ii) issuances
of Voting Stock pursuant to any present or future compensatory stock, stock
purchase or option plan or other compensatory issuances to employees, directors,
officers, consultants, or others.
(m) The term "person" shall mean any person, individual,
corporation, partnership, trust or other nongovernmental entity or any
governmental agency, court, authority or other body (whether foreign, federal,
state, local or otherwise).
(n) The term "Registration Rights Agreement" means the
Registration Rights Agreement in the form of Exhibit C to this Agreement.
(o) The term "Research Agreement" means the Funded Research &
Development and License Agreement in the form of Exhibit E to this Agreement.
(p) The term "Rights Agreement" means the Stockholder
Protection Agreement dated as of June 26, 1995 between the Company and First
Fidelity Bank, National
<PAGE> 20
Association, as rights agent.
(q) The term "Significant Event" means any (i) proposed
amendment to the Certificate of Incorporation or Bylaws of the Company that
would be materially detrimental to the interest of Purchaser in the Company,
(ii) Acquisition Proposal, (iii) sale of the Company (by way of merger,
disposition of all or substantially all assets or otherwise), (iv)
recapitalization of the Company, (v) liquidation or dissolution of the Company,
(vi) transaction the effect of which is to cause the Voting Stock of the Company
to be neither listed on any national securities exchange nor authorized to be
quoted on any national inter-dealer quotation system or (vii) action which
Purchaser, in its sole discretion, determines would be adverse to Purchaser's
interest in the Company.
(r) The term "Standstill Agreement" means the Standstill
Agreement in the form of Exhibit D to this Agreement.
(s) The term "Subsidiary" of a person means any corporation
more than fifty percent (50%) of whose outstanding voting securities are, or any
partnership, joint venture or other entity more than fifty percent (50%) of
whose total equity interest is, directly or indirectly, owned by such person.
(t) The term "Total Voting Power of the Company" means the
total number of votes which may be cast in the election of directors of the
Company at any meeting of stockholders of the Company if all securities entitled
to vote in the election of directors of the Company were present and voted at
such meeting (other than votes that may be cast only upon the happening of a
contingency).
(u) The term "Voting Stock" means the Common Stock, Preferred
Stock and any other securities issued by the Company having the ordinary power
to vote in the election of directors of the Company (other than securities
having such power only upon the happening of a contingency).
ARTICLE XI
MISCELLANEOUS
11.1 Termination of Agreement.
(a) The Company may terminate its obligation to perform or
observe any of its covenants and agreements hereunder if Purchaser materially
violates or fails to perform materially any of the covenants or agreements of
Purchaser under this Agreement, and Purchaser may terminate its obligations to
perform or observe any of its covenants and agreements hereunder if the Company
materially violates or fails to perform materially any of the covenants or
agreements of the Company under this Agreement; provided, however, the Company
or Purchaser, as the case may be, may not terminate any of its obligations under
this Agreement pursuant to this sentence unless it shall have delivered written
notice of such default to the other party and such default shall not have been
cured within thirty (30) calendar days after the
<PAGE> 21
delivery of such notice.
(b) This Agreement may be terminated, and the transactions
contemplated abandoned, by either the Company or Purchaser by written notice to
the other if the Closing does not occur on or before the date which is one
hundred and thirty (130) days from the execution of this Agreement.
(c) This Agreement may be terminated by Purchaser or the
Company at any time after the date that a permanent injunction or order by any
governmental authority, including under the HSR Act, preventing consummation of
the transactions contemplated by this Agreement has become final and
non-appealable.
(d) This Agreement shall terminate if at any time after the
date hereof, Purchaser beneficially owns less than one (1) million shares of
Common Stock (as adjusted to give effect to any stock splits, reverse stock
splits, stock dividends, recapitalizations or any similar transactions or
events).
(e) Notwithstanding anything to the contrary in this
Agreement, the provisions of Sections 11.4 (to the extent such Section 11.4 has
not been earlier terminated pursuant to its terms) shall survive the termination
of this Agreement and the transactions contemplated herein for a period to last
indefinitely.
11.2 Reasonable Efforts. As long as the other party hereto is not in
default of any material obligation under this Agreement, each of the Company and
Purchaser shall use its reasonable efforts to take all actions required under
the HSR Act and under any law, rule or regulation adopted subsequent to the date
hereto in order that the respective agreements and covenants of the parties
hereto may be carried out on a timely basis in the manner contemplated by this
Agreement.
11.3 Governing Law; Alternative Dispute Resolution. This Agreement and
the legal relations between the parties arising hereunder shall be governed by
and interpreted in accordance with the laws of the State of New York without
regard to its conflict of laws principles. The parties hereto agree that any
disputes which may arise during the term of this Agreement which relate to
either party's rights and/or obligations hereunder shall be resolved in
accordance with the ADR provisions attached hereto as Exhibit I.
11.4 Indemnification and Survival of Representations and Warranties.
(a) Subsequent to the Closing Date, the Company shall
indemnify and hold harmless Purchaser from and against any liability, loss or
damage, together with all reasonable costs or expenses related thereto,
including reasonable attorney's fees and expenses but excluding consequential,
indirect or similar types of damage not the direct result of the harm suffered
or incurred (collectively, "Losses"), actually suffered or incurred by Purchaser
to the extent such Losses arise out of or result from the untruth and inaccuracy
of any of the representations and warranties of the Company contained in Section
2.3, Section 2.4 or Section
<PAGE> 22
2.8 hereof.
(b) Subsequent to the Closing Date, Purchaser shall indemnify
and hold harmless the Company from and against any Loss actually suffered or
incurred by the Company and arising out of or resulting from the untruth and
inaccuracy of any of the representations and warranties of Purchaser contained
in Sections 3.1, 3.3, 3.6 or 3.7 hereof.
(c) No person shall be liable for any claim for
indemnification under this Section 11.4 unless written notice of a claim for
indemnification is delivered by the person seeking indemnification (the
"Indemnitee") to the person from whom indemnification is sought (the
"Indemnitor") with respect to breaches of the representation and warranties
before the expiration of the applicable survival period and within 30 days after
the Indemnitee has received notice or knowledge of the matter giving rise to
such claim for indemnification. All notices given pursuant to this subsection
(c) shall set forth with reasonable specificity the basis for the claim for
indemnification and the amount of Losses with respect to such claim. Failure of
the Indemnitee to give notice within said 30-day period shall not be deemed a
waiver of its rights under this Section 11.4 except to the extent such failure
shall have actually prejudiced the Indemnitor or caused it to incur additional
costs, expenses or liabilities.
(d) Promptly, and in any event within 30 days, after the
assertion by any third party of any claim, demand or notice (a "Third Party
Claim") against an Indemnitee that results or may result in the incurrence by
such Indemnitee of any Loss for which such Indemnitee would be entitled to
indemnification hereunder, such Indemnitee shall notify the Indemnitor of such
Third Party Claim in writing. By written notice (the "Defense Notice") to the
Indemnitee within 30 days after receipt by the Indemnitor of notice of the Third
Party Claim (or sooner if such claim so requires), the Indemnitor shall notify
the Indemnitee that the Indemnitor will conduct, at its own expense, the defense
against the Third Party Claim in its own name or, if necessary, in the name of
the Indemnitee. The Indemnitee, at its own expense, shall have the right to
employ separate counsel in any such Third Party Claim and/or to participate in
the defense thereof; provided, however, that if (i) the Indemnitee shall have
received an opinion of counsel reasonably acceptable to the Indemnitor to the
effect that the interests of the Indemnitee and the Indemnitor with respect to
the Third Party Claim are sufficiently adverse to prohibit the representation by
the same counsel of both parties or (ii) the employment of such separate counsel
has been specifically authorized in writing by the Indemnitor, the reasonable
fees and expenses of such separate counsel shall be borne by the Indemnitor. If
the Indemnitor shall fail to give the Defense Notice within such 30-day period
(or such shorter period if such claim so requires), the Indemnitor shall be
deemed to have elected not to conduct the defense of the subject claim. The
party conducting the defense of any Third Party Claim shall use reasonable
efforts to keep the other party appraised of all significant developments with
respect thereto. No Third Party Claim may be settled by the Indemnitor without
the written consent of the Indemnitee, which consent shall not be unreasonably
withheld; provided, however, that if such settlement involves the payment of
money only and the Indemnitee is completely indemnified therefor the Indemnitee
shall not be entitled to withhold its consent. The Indemnitee shall not settle
any Third Party Claim that is being defended in good faith by the Indemnitor.
Failure of the Indemnitee to give timely, complete or accurate notice as
provided in this subsection (d) will
<PAGE> 23
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise damaged or prejudiced as a result of such
failure to give timely notice.
(e) The amount of any Loss subject to indemnification under
this Section 11.4 shall be calculated net of any amounts which have been
previously recovered by the Indemnitee under insurance policies or other
collateral sources (such as contractual indemnities of any person which are
contained outside this Agreement). In the event any such amounts that may be
recoverable under such insurance policies or other collateral sources are not
received before any claim for indemnification is paid pursuant to this Section
11.4, then the Indemnitee shall, at its election, either pursue such insurance
policies or collateral sources with reasonable diligence or assign all such
rights to the Indemnitor. In the event any such recovery is received after any
claim for indemnification is paid by the Indemnitor, the amount of such recovery
shall be applied as follows: first, to reimburse the Indemnitee or the
Indemnitor, as the case may be, for its out-of-pocket expenses (including
reasonable attorneys' fees and expenses) expended in pursuing such recovery;
second, to refund any payments made by the Indemnitor which would not have been
so paid had such recovery been obtained prior to such payment; and third, any
excess to the Indemnitee. If the Indemnitee either fails to pursue any such
insurance policies or collateral sources with reasonable diligence or to assign
all such rights to the Indemnitor, then the Indemnitor shall have the right of
subrogation to pursue such insurance policies or collateral sources and may take
any reasonable actions necessary to pursue such rights of subrogation in its
name or the name of the party from whom subrogation is obtained. The Indemnitee
shall cooperate with the Indemnitor in pursuing any such subrogation claim.
(f) The rights of the parties for indemnification relating to
this Agreement and the transactions contemplated hereby shall be strictly
limited to those contained in this Section 11.4, and such indemnification rights
shall be the exclusive remedy available to the parties subsequent to the Closing
Date with respect to any matter in any way relating to this Agreement or any of
the other documents contemplated by this Agreement or arising in connection
herewith or therewith. To the maximum extent permitted by law, Purchaser and the
Company hereby waive, and shall cause their Affiliates to waive, all other
rights and remedies with respect to any such matter.
(g) The representations and warranties contained in Articles
II and III of this Agreement (other than those contained in Sections 2.3 and 2.8
and Sections 3.1, 3.3, 3.6 and 3.7 which shall survive indefinitely) shall not
survive the Closing Date.
11.5 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective permitted
successors and assigns. This Agreement may not be transferred or assigned by
operation of law or otherwise without the prior written consent of the other
party; except that Purchaser may assign this Agreement to any direct or indirect
Subsidiary; provided, however, that no such assignment shall relieve or limit
Purchaser's obligations hereunder; and provided, further, that Purchaser shall
promptly notify the Company of any such assignment and provide the Company with
copies of any instrument
<PAGE> 24
evidencing such assignment.
11.6 Entire Agreement; Amendment. This Agreement, the other Alliance
Agreements and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subject matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, between the parties relating to the
subject matter hereof and thereof. Neither party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein. Neither this Agreement nor any term hereof may
be amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.
11.7 Notices and Dates. Any notice or other communication given under
this Agreement shall be sufficient if in writing and delivered by hand, by
messenger or by courier, or transmitted by facsimile, to a party at its address
set forth below (or at such other address as shall be designated for such
purpose by such party in a written notice to the other party hereto):
(a) if to the Company, to it at:
i-STAT Corporation
303A College Road East
Princeton, NJ 08540
Chief Financial Officer
Fax: (609) 243-0507
with a copy addressed as set forth above but to the attention of:
Paul, Hastings, Janofsky & Walker LLP
1055 Washington Boulevard
Stamford, CT 06901
Attention: Esteban A. Ferrer, Esq.
Fax: (203) 359-3031
(b) if to Purchaser, to it at:
Abbott Laboratories
100 Abbott Park Road
Dept. 9RK; Bldg. AP6C
Abbott Park, IL 60064
Attention: Director, Technology Acquisitions,
Diagnostics Division
Fax: (847) 937-6951
with a copy addressed as set forth above but to the attention of:
Dept. 322; Bldg. AP6D
<PAGE> 25
Attention: Divisional Vice President,
Domestic Legal Operations
Fax: (847) 938-1206
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, by messenger or by courier, or upon confirmation of
receipt if sent by facsimile.
11.8 Further Assurances. The parties hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments or
documents as any other party may reasonably request from time to time in order
to carry out the intent and purposes of this Agreement and the consummation of
the transactions contemplated thereby. Neither the Company nor Purchaser shall
voluntarily undertake any course of action inconsistent with satisfaction of the
requirements applicable to them set forth in this Agreement, and each shall
promptly do all such acts and take all such measures as may be appropriate to
enable them to perform as early as practicable the obligations herein and
therein required to be performed by them.
11.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
11.10 Severability. If any provision of this Agreement is determined to
be unenforceable for any reason, it shall be adjusted rather than voided, if
possible, to achieve the intent of the parties. In any event, all of the other
provisions shall be deemed valid and enforceable to the greatest possible
extent.
11.11 Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such references shall be to a Section or Exhibit to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The table of contents and headings contained in this
Agreement have been inserted for convenience of reference only and shall not be
relied upon in construing this Agreement. Use of any gender herein to refer to
any person shall be deemed to comprehend masculine, feminine, and neuter unless
the context clearly requires otherwise.
11.12 Public Statements. Each of Purchaser and the Company shall not,
without the prior approval of the other party, make or cause to be made any
press release or other public statement concerning the transactions contemplated
by this Agreement or disclose any of the terms and conditions hereof, except as
and only to the extent that any party hereto is advised by legal counsel to be
so obligated by law or the regulations of any stock exchange or the NASD. The
parties hereby acknowledge the Company's obligation, subject to Section 19.3 of
the Distribution Agreement, to disclose the Alliance Agreements pursuant to the
rules and regulations under the Exchange Act.
11.13 Brokers.
<PAGE> 26
(a) To the extent that the Company has engaged, consented to
or authorized any broker, finder or intermediary to act on its behalf, directly
or indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement, all fees, commissions, and other
payments owing to such person as a result of its or its employees participation,
negotiations, or other actions taken in connection with this Agreement are the
sole responsibility and obligation of the Company. The Company hereby agrees to
indemnify and hold harmless Purchaser from and against all fees, commissions or
other payments owing to any such person acting or claiming to act on behalf of
the Company hereunder.
(b) Purchaser has not engaged, consented to or authorized any
broker, finder or intermediary, to act on its behalf, directly or indirectly, as
a broker, finder or intermediary in connection with the transactions
contemplated by this Agreement. Purchaser hereby agrees to indemnify and hold
harmless the Company from and against all fees, commissions or other payments
owning to any such person or firm acting or claiming to act on behalf of
Purchaser hereunder.
11.14 Costs and Expenses. Each party hereto shall pay its own costs and
expenses incurred in connection herewith, including the fees of its counsel,
auditors and other representatives, whether or not the transactions contemplated
herein are consummated.
11.15 No Third Party Rights. Nothing in this Agreement shall create or
be deemed to create any rights in any person or entity not a party to this
Agreement.
11.16 Specific Performance. Each party's obligations under this
Agreement is unique. Because the breach by any party of the provisions of this
Agreement would cause irreparable harm and significant injury that would be
difficult to ascertain and would not be compensable by damages alone, the
parties agree that each party will have the right to seek enforcement hereof by
injunction, specific performance or other equitable relief without prejudice to
any other rights and remedies the party seeking enforcement may have.
11.17 Mutual Drafting. This Agreement is the joint product of Purchaser
and the Company, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of Purchaser and the Company and their
respective legal counsel and advisers and any rule of construction that a
document shall be interpreted or construed against the drafting party shall not
be applicable.
[The remainder of this page intentionally left blank.]
<PAGE> 27
IN WITNESS WHEREOF, Purchaser and the Company have caused this
Agreement to be signed by their respective representatives as of the date first
above written.
I-STAT CORPORATION
By: ___________________________
Name:
Title:
ABBOTT LABORATORIES
By: ___________________________
Name:
Title:
<PAGE> 1
Exhibit 10.43
EXECUTION COPY
STANDSTILL AGREEMENT
between
i-STAT CORPORATION
and
ABBOTT LABORATORIES
dated as of
August 3, 1998
<PAGE> 2
THIS STANDSTILL AGREEMENT (the "Agreement") is made as of August 3,
1998, between i-STAT Corporation, a Delaware corporation (the "Company"), and
Abbott Laboratories, an Illinois corporation ("Purchaser").
WHEREAS, concurrent with this Agreement, the Company and Purchaser are
entering into a Common Stock Purchase Agreement (the "Stock Purchase
Agreement"), pursuant to which, among other things, Purchaser shall acquire
certain shares of the Company's Common Stock, par value $.15 per share; and
WHEREAS, in connection with the transactions contemplated by this
Agreement and the Stock Purchase Agreement, the Company and Purchaser have also
entered into (i) a Funded Research & Development and License Agreement pursuant
to which Purchaser shall reimburse the Company for the development and
manufacture of certain new products and own such resulting intellectual property
jointly with the Company, and (ii) a Marketing and Distribution Agreement (the
"Distribution Agreement") pursuant to which the Company shall sell its products
to Purchaser for distribution in the territory defined in such Distribution
Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and subject to the terms and conditions set forth herein below,
the Company and Purchaser agree as follows:
1. DEFINITIONS
For purposes of this Agreement, each of the following terms
shall have the following meaning:
(i) "beneficially own" and "beneficial owner" have
the meanings contemplated by Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Exchange Act.
(ii) "HP" means Hewlett-Packard Company, a Delaware
corporation (as successor by merger to Hewlett-Packard
Company, a California corporation).
(iii) "HP Agreement" means the Series B Preferred
Stock Purchase Agreement dated as of June 23, 1995 between the
Company and HP.
(iv) "HP Stock" means the Voting Stock of the Company
beneficially owned by HP.
(v) "Purchaser Group" means Purchaser, its
Subsidiaries and Affiliates, their respective officers and
directors, and any person acting on behalf of Purchaser, any
of such Subsidiaries or Affiliates or their respective
officers and directors.
(vi) "Rights Agreement" means that certain
Stockholder Protection
<PAGE> 3
Agreement dated as of June 26, 1995 between the Company and
First Fidelity Bank, National Association, as rights agent.
(vii) "Voting Stock" means the Common Stock and any
other securities of the Company generally entitled to vote for
the election of directors of the Company.
Capitalized terms used herein but not defined herein shall
have the meanings given them in the Stock Purchase Agreement.
2. PURCHASER'S STANDSTILL COVENANT
(a) Purchaser covenants and agrees that during the period
beginning on the date hereof and ending on the date which is one (1)
year after the termination of the initial term of the Distribution
Agreement (unless earlier terminated pursuant to the provisions of
Section 3 of this Agreement) (the "Standstill Period"), neither
Purchaser nor any other member of the Purchaser Group will, without the
prior written consent of the Company, except as otherwise expressly
permitted in and pursuant to this Agreement and the Stock Purchase
Agreement:
(i) in any manner acquire, agree to acquire, make any
proposal to acquire or announce or disclose any intention to
make a proposal to acquire, directly or indirectly, any Voting
Stock, if, immediately after such acquisition, Purchaser would
beneficially own more than the greater of (A) 25% of the then
outstanding Voting Stock and (B) such higher percentage of the
outstanding Voting Stock which HP may be permitted to
beneficially own at any time hereafter without violation of
Section 7.4 of the HP Agreement and without adverse effect
pursuant to the Rights Agreement (or any successor plan or
agreement thereto);
(ii) propose to enter into, or announce or disclose
any intention to propose to enter into, directly or
indirectly, any merger or business combination involving the
Company or any of its Subsidiaries or to purchase, directly or
indirectly, all or substantially all of the assets of the
Company and its Subsidiaries, taken as a whole;
(iii) request the Company (or its directors,
officers, employees or agents), directly or indirectly, to
take any action which would require the Company to make a
public announcement regarding the possibility of (A) a
business combination or merger involving the Company or any of
its Subsidiaries, on the one hand, or Purchaser or any member
of the Purchaser Group, on the other hand, or (B) the sale to
Purchaser or any member of the Purchaser Group of all or
substantially all of the assets of the Company and its
Subsidiaries, taken as a whole; or
<PAGE> 4
(iv) form, join or in any way participate in a
"group" (within the meaning of Section 13(d)(3) of the
Exchange Act) or otherwise act in concert with any person for
the purpose of circumventing the provisions of this Agreement,
including, but not limited to, any agreement with respect to
the HP Stock;
(v) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms are
defined or used in Regulation 14A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), to vote, or
seek to advise or influence any person with respect to the
voting of, any Voting Stock, or become a "participant" in any
"election contest" (as such terms are used or defined in
Regulation 14A of the Exchange Act).
(b) Purchaser covenants and agrees that during the Standstill
Period no member of the Purchaser Group, as part of or together with
any other "group" (within the meaning of Section 13(d) of the Exchange
Act) which any member of the Purchaser Group may be deemed to have
joined or become a member or participant in respecting any Voting
Stock, without the prior written consent of the Company, shall in any
manner acquire, agree to acquire, make any proposal to acquire or
announce or disclose any intention to make a proposal to acquire,
directly or indirectly, any Voting Stock, if immediately after such
acquisition, such persons, in the aggregate, would beneficially own
more than 45% of the then outstanding Voting Stock.
3. TERMINATION
(a) The restrictions on the Purchaser and the Purchaser Group
included in Section 2 of this Agreement shall immediately terminate if:
(i) the Company is in material breach of this
Agreement, the Stock Purchase Agreement, or any of the other
Alliance Agreements and the applicable cure period, if any,
for such breach has expired;
(ii) a third party (other than HP or an Institutional
Investor, as such latter term is defined in the Rights
Agreement) publicly discloses that it has acquired, or has the
right to acquire Voting Stock and such acquisition will result
in such third party beneficially owning 15% or more of the
Voting Stock;
(iii) HP acquires Voting Stock and such acquisition
results in HP beneficially owning more than 25% of the Voting
Stock without violation of Section 7.4 of the HP Agreement and
without adverse effect pursuant to the Rights Agreement (or
any successor plan or agreement thereto);
(iv) the Company executes a definitive agreement with
a third party with respect to any transaction which, if
consummated, would result in the then current stockholders of
the Company owning less than a majority of the Voting Stock of
the Company or its successor, or involving a sale of all or
substantially all of the assets of the Company;
<PAGE> 5
(v) a third party makes a tender or exchange offer to
purchase any class of Voting Stock to which the Company's
response is to take any action to cause the Rights Agreement
to be inapplicable to such tender or exchange offer, to
respond neutrally or to respond favorably;
(vi) a third party solicits proxies with respect to
any class of Voting Stock in connection with, or participates
in an "election contest", as such term is used in Rule 14a-11
of Regulation 14A of the Exchange Act, relating to, the
election of at least a majority of the directors of the
Company; or
(vii) if the Stock Purchase Agreement shall have been
terminated in accordance with its terms without the Closing
(as defined therein) having occurred.
(b) The Company shall notify Purchaser in writing within two
Business Days of the occurrence of any of the events or circumstances
set forth in Section 3(a) which notice shall include an explanation in
reasonable detail of the facts and circumstances surrounding such
occurrence.
4. MISCELLANEOUS
(a) Governing Law. This Agreement and the legal relations
between the parties arising hereunder shall be governed by and
interpreted in accordance with the laws of the State of Delaware
without regard to its conflict of laws principles. The parties hereto
agree to submit to the jurisdiction of the federal and state courts of
the State of Delaware situated in Wilmington with respect to the breach
or interpretation or the enforcement of any and all rights, duties,
liabilities, obligations, powers, and other relations between the
parties arising under this Agreement. Each party acknowledges that a
breach of any of the provisions of this Agreement would cause
irreparable and immediate harm and significant injury to the
non-breaching party, and that monetary damages would not adequately
compensate the non-breaching party and would be difficult to ascertain.
Accordingly, the parties hereby agree (i) that each party shall be
entitled, in addition to any other remedy to which such party may be
entitled at law or in equity, to compel specific performance of this
Agreement in any federal court or state court of the State of Delaware
situated in Wilmington, Delaware and (ii) to waive, in any such action
for specific performance, any defense of adequacy of a remedy at law.
(b) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. This Agreement may not be
transferred or assigned by operation of law or otherwise without the
prior written consent of the other party except that Purchaser may
assign its rights under this Agreement to any direct or indirect
Subsidiary of Purchaser. No such assignment shall relieve any member of
the Purchaser Group from its obligations hereunder.
<PAGE> 6
(c) Entire Agreement; Amendment. This Agreement constitutes
the full and entire understanding and agreement between the parties
with regard to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, between the
parties relating to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended, waived or discharged other than by
a written instrument signed by each party.
(d) Notices and Dates. Any notice or other communication given
under this Agreement shall be sufficient if in writing and delivered by
hand, by messenger or by courier, or transmitted by facsimile, to a
party at its address set forth below (or at such other address as shall
be designated for such purpose by such party in a written notice to the
other party hereto):
i. if to the Company, to it at:
i-STAT Corporation
303A College Road East
Princeton, NJ 08540
Attention: Chief Financial Officer
Fax: (609) 243-0507
with a copy addressed as set forth above but to the attention
of:
Paul, Hastings, Janofsky & Walker LLP
1055 Washington Boulevard
Stamford, CT 06901
Attention: Esteban A. Ferrer, Esq.
Fax: (203) 359-3031
ii. if to Purchaser, to it at:
Abbott Laboratories
100 Abbott Park Road
Dept. 9RK, Bldg. AP6C
Abbott Park, IL 60064
Attention: Director, Technology Acquisitions,
Diagnostics Division
Fax: (847) 937-6951
with a copy addressed as set forth above but to the attention
of:
Dept. 322; Bldg. AP6D
Attention: Divisional Vice President,
Domestic Legal Operations
<PAGE> 7
Fax: (847) 938-1206
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given when delivered if
delivered personally, by messenger or by courier, or upon confirmation of
receipt if sent by facsimile.
(e) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which
shall constitute one instrument.
(f) Severability. If any provision of this Agreement is
determined to be unenforceable for any reason, it shall be adjusted
rather than voided, if possible, to achieve the intent of the parties.
In any event, all other provisions shall be deemed valid and
enforceable to the greatest possible extent.
(g) Interpretation. When a reference is made in this Agreement
to Sections, such references shall be to a Section to this Agreement
unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be
followed by the words "without limitation." Use of any gender herein to
refer to any person shall be deemed to comprehend masculine, feminine,
and neuter unless the context clearly requires otherwise.
(h) Mutual Drafting. This Agreement is the joint product of
Purchaser and the Company, and each provision hereof has been subject
to the mutual consultation, negotiation and agreement of Purchaser and
the Company and their respective legal counsel and advisers and any
rule of construction that a document shall be interpreted or construed
against the drafting party shall not be applicable.
[The remainder of this page intentionally left blank]
<PAGE> 8
IN WITNESS WHEREOF, the Company and Purchaser have caused this
Agreement to be signed by their respective representatives as of the date first
above written.
ABBOTT LABORATORIES
By: _________________________
Name:
Title:
I-STAT CORPORATION
By: _________________________
Name:
Title:
<PAGE> 1
Exhibit 10.44
EXHIBIT C
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
BETWEEN
I-STAT CORPORATION
AND
ABBOTT LABORATORIES
DATED AS OF
_________________, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of
________ __, 1998 by and between i-STAT Corporation, a Delaware corporation (the
"Company"), and Abbott Laboratories, an Illinois corporation ("Purchaser").
RECITALS
WHEREAS, the Company and Purchaser are parties to a certain Stock
Purchase Agreement dated as of August 3, 1998 (the "Purchase Agreement"),
pursuant to which, among other things, Purchaser is acquiring as of the date
hereof and may acquire in the future certain shares (the "Shares") of the
Company's Common Stock, par value $.15 per share; and
WHEREAS, the Company is granting to Purchaser certain demand and
piggyback registration rights in connection with Purchaser's purchase of the
Shares pursuant to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms shall
have the following respective meanings:
"Affiliate" shall mean, with respect to any person, each of such
person's officers, directors, employees and agents, and each other person
controlling such person within the meaning of the Securities Act.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"HP Registrable Securities" shall mean "Registrable Securities" as such
term is defined in the HP Registration Agreement.
"HP Registration Agreement" shall mean that certain Registration Rights
Agreement, dated as of June 23, 1995, between Hewlett-Packard Company and the
Company.
"Register", "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean the Shares and any shares of Common
Stock of the
<PAGE> 3
Company issued or issuable in respect of the Shares upon any stock split, stock
dividend, recapitalization, or similar event and held by Purchaser until such
time as (i) a registration statement covering such securities has been declared
effective by the Commission and such securities have been disposed of pursuant
to such effective registration statement, or (ii) such securities may be sold
pursuant to Rule 144 (or any successor or similar rule) under the Securities
Act, or (iii) such securities have been transferred and may be sold by the
transferee without registration under the Securities Act, after which such
securities shall no longer be Registrable Securities.
"Registration Expenses" shall mean all expenses incurred by the Company
in complying with Sections 2 and 3 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
compliance (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the Registrable Securities
registered by Purchaser and all fees and disbursements of counsel for Purchaser.
2. Requested Registration.
a. Request for Registration. In case the Company shall receive from
Purchaser a written request that the Company effect any registration with
respect to any of the Registrable Securities, the Company shall, as soon as
practicable, use all commercially reasonable efforts to effect such registration
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) on Form S-3 or, if Form S-3 is not available, then
on Form S-1 (or any successor forms of registration statements to such Forms S-3
or S-1 or other available registration statements) and as would permit or
facilitate the sale and distribution of the Registrable Securities for which
registration is requested. The registration statement filed pursuant to the
request of Purchaser under this Section 2(a) may include securities of the
Company held by officers or directors of the Company or others who, by virtue of
agreements with the Company, are entitled to include their securities in any
such registration, but the Company shall have no absolute right to include
securities for its own account in any such registration.
b. Notwithstanding the foregoing, the Company shall not be obligated to
file a registration statement to effect any such registration pursuant to this
Section 2:
i. unless the amount of Registrable Securities for which
registration is
<PAGE> 4
requested is at least 1,000,000 shares (as adjusted for any stock
split, stock dividend, recapitalization or similar event) and the fair
market value of such securities (which shall be equal to the Average
Market Price, as such term is defined in the Purchase Agreement,
multiplied by the number of such securities) is at least $15,000,000;
provided, however, that if the total number of Registrable Securities
held by Purchaser (but not a transferee of Purchaser) is less than
1,000,000 shares (as adjusted to give effect to any stock split,
reverse stock split, stock dividend, recapitalization or any similar
event or transaction) or the fair market value of such shares is less
than $15,000,000, then Purchaser (but not a transferee of Purchaser)
may request registration under this Section 2 as to all but not less
than all of such Registrable Securities as may then be held by
Purchaser; or
ii. during the twelve (12) month period beginning on the
closing date of any registration of the Company's Common Stock,
provided that the securities offered under such registration have been
sold; or
iii. if the holders of the HP Registrable Securities have
requested pursuant to Section 2 of the HP Registration Agreement that
the Company file a registration statement for an underwritten public
offering of the Company's securities at any time within 180 days prior
to the request from Purchaser under Section 2(a) hereof.
c. Underwriting. If the offering of securities made under this Section
2 is underwritten, the Company (together with Purchaser) shall enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 2, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing underwriter
may limit the number of Registrable Securities to be included in such
registration to the extent required by such limitation. Purchaser acknowledges
and agrees that, if any holder of the HP Registrable Securities has requested,
pursuant to Section 3 of the HP Registration Agreement, that securities of the
Company held by such holder be included in such registration, the securities
sought to be registered by all such holders of the HP Registrable Securities may
not be reduced to less than 30% of the total value of the securities to be
distributed through such registration. If the managing underwriter has not
limited the number of Registrable Securities to be included in such
registration, the Company may include securities for its own account or for the
account of others in such registration if the number of Registrable Securities
to be included in such registration will not thereby be limited.
3. Company Registration.
a. Notice of Registration. If at any time the Company shall determine
to register any of its securities, either for its own account or the account of
a security holder or holders exercising their respective registration rights,
other than (i) a registration relating solely to employee benefit plans on Form
S-8 (or similar successor form), or (ii) a registration on Form S- 4 (or similar
successor form) relating solely to a Commission Rule 145 transaction, the
Company will:
<PAGE> 5
i. promptly give Purchaser written notice thereof; and
ii. use all commercially reasonable efforts to include in such
registration (and any related qualification under blue sky laws or
other compliance), and in any underwriting involved therein, all
Registrable Securities specified in a written request to the Company
made within 15 Business Days (as such term is defined in the Purchase
Agreement) after receipt of such written notice by Purchaser.
b. Underwriting. If the registration of securities pursuant to this
Section 3 is underwritten, the Company shall so advise Purchaser as a part of
the written notice given under Section 3(a). In such event, Purchaser's right to
registration pursuant to this Section 3 shall be conditioned upon Purchaser's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting shall be subject to the limitations provided herein. The
Company (together with Purchaser) shall enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company. Notwithstanding any other provision of this Section 3, if the
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the Company shall so advise the holders of
securities who have requested to include their securities in such registration,
and the number of shares to be included in such registration shall be reduced by
such minimum number of shares as is necessary to comply with such limitation, as
follows:
i. if the registration was initiated for the account of any
holder of HP Registrable Securities pursuant to Section 2 of the HP
Registration Agreement, the number of shares reduced shall be (A)
first, any shares sought to be registered by the Company for its own
account, (B) second, if further reductions are required, any shares
sought to be registered by other holders (including Purchaser) who have
requested to include their securities in such registration, pro rata
among such holders based on the number of shares requested to be
included in such registration, and (C) third, if still further
reductions are required, any HP Registrable Securities;
ii. if the registration was initiated for the account of any
security holder or holders other than Purchaser or any holder of HP
Registrable Securities (the "Initiating Holders"), the number of shares
reduced shall be (A) first, any shares sought to be registered by the
Company for its own account, (B) second, if further reductions are
required, any shares sought to be registered by holders of securities
other than the Initiating Holders who have requested to include their
securities in such registration, pro rata based on the number of shares
requested to be included in such registration (provided that if any
holder of HP Registrable Securities has requested, pursuant to Section
3 of the HP Registration Agreement, that HP Registrable Securities be
included in such registration, the HP Registrable Securities sought to
be so included may not be reduced to less than 30% of the total value
of the securities to be distributed through such registration), and (C)
third, if still further reductions are required, any securities sought
to be registered by the Initiating Holders.
iii. if the registration was initiated by the Company for its
own account, the
<PAGE> 6
number of shares reduced shall be (A) first, any shares sought to be
registered by holders of securities who have requested to include their
securities in such registration, pro rata based on the number of shares
requested to be included in such registration (provided that if any
holder of the HP Registrable Securities has requested, pursuant to
Section 3 of the HP Registration Agreement, that HP Registrable
Securities be included in such registration, the HP Registrable
Securities sought to be so included may not be reduced to less than 30%
of the total value of the securities to be distributed through such
registration) and (B) second, if further reductions are required,
shares sought to be registered by the Company for its own account.
4. Black Out. In the event the Company determines to register securities
pursuant to an underwritten public offering or in connection with a strategic
transaction, (i) the Company, if advised by its underwriters, shall notify
Purchaser and request that Purchaser refrain from selling any Registrable
Securities, and Purchaser shall refrain from selling any Registrable Securities,
and (ii) the Company shall not be obligated to file a registration statement or
effect any registration, qualification or compliance of Registrable Securities
under Section 2 for a period of 180 days from the date of such notice (the
"Black Out Period"). During any such Black Out Period, Purchaser shall still be
entitled to register shares pursuant to Section 3 of this Agreement.
Notwithstanding the foregoing, (i) the Company shall not be entitled to declare
a Black Out Period prior to twelve months from the end of a previous Black Out
Period, and (ii) the Black Out Period shall end immediately upon the
consummation of the underwritten public offering or strategic transaction or the
Company's decision no longer to pursue such offering or transaction.
5. Expenses of Registration. All Registration Expenses incurred in connection
with a registration pursuant to Sections 2 and 3 shall be borne by the Company.
All Selling Expenses relating to the Registrable Securities which are registered
shall be borne by Purchaser. Notwithstanding the foregoing, after the Company
has effected two registrations pursuant to Section 2, and such registrations
have been declared or ordered effective and the securities offered have been
sold, Purchaser shall bear all Registration Expenses and Selling Expenses
incurred in connection with any subsequent registration pursuant to Section 2.
6. Registration Procedures. In the case of each registration effected by the
Company pursuant to this Agreement, the Company will keep Purchaser advised in
writing, if Purchaser is participating in such registration, as to the
initiation of each registration and as to the completion thereof. At its
expense, the Company will:
a. prepare and file with the Commission a registration statement with
respect to such securities and use all commercially reasonable efforts to cause
such registration statement to become and remain effective for at least 60 days
or until the distribution described in the registration statement has been
completed, whichever first occurs;
b. furnish to Purchaser, if Purchaser is participating in such
registration, such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as Purchaser
may reasonably request, including correspondence with the Commission and any
exchanges on which Registrable Securities are
<PAGE> 7
listed; and
c. notify Purchaser, if Purchaser is participating in such
registration, of any updates or amendments to the prospectus and furnish to
Purchaser any such updated and/or amended prospectuses.
7. Indemnification.
a. The Company will indemnify Purchaser and each of its Affiliates with
respect to any registration, qualification or compliance which has been effected
pursuant to this Agreement, and each underwriter, if any, and each person who
controls any underwriter within the meaning of the Securities Act (the
"Underwriters"), against all expenses, claims, losses, damages or liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation commenced or threatened arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement, prospectus, offering circular or other document,
or any amendment or supplement thereto, incident to any such registration, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of the Securities Act or any state securities law, or
any rule or regulation promulgated thereunder, applicable to the Company in
connection with any such registration, and the Company will reimburse Purchaser,
such Affiliates and the Underwriters for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such expense,
claim, loss, damage or liability arises out of or is based on any untrue
statement or omission, or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to the Company by
Purchaser specifically for use therein.
b. Purchaser will, if Registrable Securities are included in a
registration being effected, indemnify the Company and each of its Affiliates
and the Underwriters, if any, of the Company's securities covered by such a
registration against all expenses, claims, losses, damages and liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation commenced or threatened arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement, prospectus, offering circular or other document,
or any amendment or supplement thereto, incident to any such registration, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by Purchaser of the Securities Act or any state securities law, or any
rule or regulation promulgated thereunder, applicable in connection with any
such registration, and Purchaser will reimburse the Company, such Affiliates and
the Underwriters for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent that such untrue statement or
omission, or alleged untrue statement or omission, is made in such registration
statement, prospectus, offering circular or other document
<PAGE> 8
incident to any such registration in reliance upon and in conformity with
written information furnished to the Company by Purchaser specifically for use
therein. Notwithstanding the foregoing, the liability of Purchaser under this
subsection (b) shall be limited in an amount equal to the public offering price
of the Shares sold by Purchaser, unless such liability arises out of or is based
on willful misconduct by Purchaser.
c. Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and the
Indemnifying Party shall have the option to assume the defense of any such claim
or any litigation resulting therefrom; provided, however, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld); and provided, further, that the Indemnified Party may
participate in such defense at such party's own expense. The failure of an
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. The Indemnifying Party shall not assume such defense for
matters as to which there is a conflict of interest or separate and different
defenses. In the event of a conflict of interest or separate or different
defenses, as determined in the reasonable opinion of counsel to the Indemnified
Party, the Indemnifying Party will pay the reasonable legal fees and expenses of
one counsel to the Indemnified Party. No claim may be settled without the
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld). No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
8. Information from Purchaser. Purchaser shall furnish to the Company such
information regarding Registrable Securities being included in any registration
and the distribution proposed by Purchaser as the Company may request in writing
and as shall be required in connection with any registration referred to in this
Agreement.
9. Rule 144 Reporting. With a view to making available the benefits of certain
rules and regulations of the Commission which may at any time permit the sale of
Registrable Securities to the public without registration, the Company agrees to
use its best efforts to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144 (or any successor or similar rule)
promulgated by the Securities and Exchange Commission under the Securities Act;
b. file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
c. so long as Purchaser owns any Registrable Securities, promptly
furnish to
<PAGE> 9
Purchaser upon request (i) a statement by the Company as to its compliance with
the reporting requirements of Rule 144 (or any successor or similar rule), the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company, and such other publicly filed reports and
documents of the Company, and (iii) such other information in the possession of
the Company as Purchaser may reasonably request in availing itself of any rule
or regulation of the Commission allowing Purchaser to sell any Shares without
registration.
10. Transfer of Registration Rights. The rights to cause the Company to register
securities granted to Purchaser under Sections 2 and 3 (and any other associated
rights or benefits described herein in connection with the right to register
securities) may be transferred or assigned in connection with any transfer or
assignment of Registrable Securities by Purchaser, other than in a sale under
Rule 144 (or any successor or similar rule) or a registration effected pursuant
to Sections 2 or 3 of this Agreement, provided that the transferee or assignee
agrees, in a writing reasonably satisfactory to the Company, to be bound by the
provisions hereof.
11. Amendment. Any provision of this Agreement may be amended or the observance
thereof may be waived (either generally or in particular instance and either
retroactively or prospectively) only with the written consent of both parties.
12. Termination of Registration Rights. The rights granted to Purchaser pursuant
to this Agreement shall terminate at such time as Purchaser can sell all of its
remaining Registrable Securities within a single three-month period pursuant to
Rule 144 under the Securities Act (or any successor or similar rule).
13. Governing Law. This Agreement and the legal relations between the parties
arising hereunder shall be governed by and interpreted in accordance with the
laws of the State of New York without regard to its conflict of laws principles.
The parties hereto agree that any disputes which may arise during the term of
this Agreement which relate to either party's rights and/or obligations
hereunder shall be resolved in accordance with the ADR provisions contained in
Exhibit I to the Stock Purchase Agreement.
14. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties regarding rights to
registration. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon the successors,
assigns, heirs, executors and administrators of the parties hereto.
15. Notices and Dates. Any notice and other communication given under this
Agreement shall be in writing and delivered by hand, by messenger or by courier,
or transmitted by facsimile, to a party at its address set forth below (or at
such other address as shall be designated for such purpose by such party in a
written notice to the other in accordance with the provisions hereof):
if to the Company, to:
i-STAT Corporation
<PAGE> 10
303A College Road East
Princeton, NJ 08540
Attention: Chief Financial Officer
Facsimile: (609) 243-0507
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
1055 Washington Boulevard
Stamford, CT 06901
Attention: Esteban A. Ferrer, Esq.
Facsimile: (203) 359-3031
if to Purchaser, to:
Abbott Laboratories
100 Abbott Park Road
Dept. 9RK; Bldg. AP6C
Abbott Park, IL 60064
Attention: Director, Technology Acquisitions,
Diagnostics Division
Facsimile: (847) 937-6951
with a copy to:
Abbott Laboratories
100 Abbott Park Road
Dept. 322; Bldg. AP6D
Abbott Park, IL 60064
Attention: Divisional Vice President,
Domestic Legal Operations
Facsimile: (847) 938-1206
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given when delivered,
if delivered personally, by messenger or by courier, or upon confirmation of
receipt if sent by facsimile.
16. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
17. Further Assurances. The parties hereto shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments or documents as any
other party may reasonably request
<PAGE> 11
from time to time in order to carry out the intent and purposes of this
Agreement and the consummation of the transactions contemplated thereby. Neither
the Company nor Purchaser shall voluntarily undertake any course of action
inconsistent with satisfaction of the requirements applicable to them set forth
in this Agreement, and each shall promptly do all such acts and take all such
measures as may be appropriate to enable them to perform as early as practicable
the obligations herein and therein required to be performed by them.
18. Severability. If any provision of this Agreement is determined to be
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, to achieve the intent of the parties. In any event, all other
provisions shall be deemed valid and enforceable to the greatest possible
extent.
18. Interpretation. When a reference is made in this Agreement to Sections, such
references shall be to a Section to this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." Use of any gender
herein to refer to any person shall be deemed to comprehend masculine, feminine,
and neuter unless the context clearly requires otherwise.
19. Mutual Drafting. This Agreement is the joint product of Purchaser and the
Company, and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of Purchaser and the Company and their respective
legal counsel and advisers and any rule of construction that a document shall be
interpreted or construed against the drafting party shall not be applicable.
<PAGE> 12
IN WITNESS WHEREOF, the undersigned have executed this Registration
Rights Agreement as of the date set forth above.
i-STAT CORPORATION
By:_____________________________________________
Name:
Title:
ABBOTT LABORATORIES
By:_____________________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.45
MARKETING AND DISTRIBUTION AGREEMENT
THIS AGREEMENT is made by and between Abbott Laboratories, an Illinois
corporation having its principal place of business at 100 Abbott Park Road,
Abbott Park, Illinois 60064-3500 ("Abbott"), and i-STAT Corporation, a Delaware
corporation having its principal place of business at 303 College Road East,
Princeton, New Jersey 08540 ("i-STAT").
WITNESSETH:
WHEREAS, i-STAT develops, manufactures and sells medical diagnostic
products for point-of-care blood analysis;
WHEREAS, i-STAT has entered into a Distribution Agreement with FUSO
Pharmaceutical Industries, Ltd. and JCR Pharmaceutical Co., Ltd. (together
"FUSO") dated August 23, 1988 ("FUSO Agreement") for the distribution of certain
of such i-STAT products in Japan, South Korea and Taiwan;
WHEREAS, i-STAT has entered into a Distribution Agreement with
Hewlett-Packard Company ("HP") dated July 28, 1995 ("HP Agreement") for the
distribution of certain of such i-STAT products in Europe, the Middle East and
Africa;
WHEREAS, i-STAT wishes to expand its worldwide sales of certain of such
products through an additional distribution arrangement;
WHEREAS, Abbott, through its Diagnostics Division ("ADD"), is engaged
in the development, manufacture, marketing and distribution of medical
diagnostic products;
<PAGE> 2
WHEREAS, Abbott desires to become a worldwide distributor of certain of
such i-STAT products;
WHEREAS, in accordance with the terms and conditions hereof, i-STAT is
willing to appoint Abbott as a worldwide distributor of all such products, and
Abbott is willing to accept such appointment;
WHEREAS, concurrent with this Agreement, Abbott and i-STAT are
executing a stock purchase agreement and other related agreements by which
Abbott will acquire a minority ownership interest in i-STAT ("Stock Purchase
Agreements"); and
WHEREAS, concurrent with this Agreement, Abbott and i-STAT are
executing a research and development agreement by which Abbott will fund joint
research and development projects designed to develop for commercialization by
Abbott additional medical diagnostic products ("Funded Research & Development
and License Agreement" and, together with this Agreement and the Stock Purchase
Agreements, the "Alliance Agreements").
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and upon the terms and subject to conditions set forth below,
Abbott and i-STAT hereby agree as follows:
ARTICLE 1 - DEFINITIONS
The following words and phrases, when used herein with initial capital
letters, shall have the meanings set forth or referenced below:
1.1 "Actual Cartridge Purchase Price" shall mean the price for
Cartridges (as hereinafter defined) purchased hereunder by
Abbott and its Affiliates (as hereinafter defined)
-2-
<PAGE> 3
from i-STAT and its Affiliates calculated during the year-end
reconciliation described in Section 5.3.
1.2 "Additional Units" shall mean the number of Cartridges
purchased hereunder by Abbott and its Affiliates from i-STAT
and its Affiliates in a Contract Year (as hereinafter defined)
that exceeds the Estimated Volume of Cartridges, all of which
is more fully described in Section 5.5.
1.3 "Affiliate" shall mean, with respect to each Party (as
hereinafter defined), any legal entity which is, directly or
indirectly, controlling, controlled by or under common control
with such Party. For purposes of this definition, a Party
shall be deemed to control another entity if it owns or
controls, directly or indirectly, more than fifty percent
(50%) of the voting equity of the other entity (or other
comparable ownership interest for an entity other than a
corporation).
1.4 "Analyte" shall mean an individual compound, protein or
fragment thereof, or substance which is the target of
quantitative or qualitative measurement.
1.5 "Analyzer" shall mean a device that processes Cartridges and
is capable of detecting at least one (1) Analyte for use in
the Field, including analyzers integrated into in vitro
diagnostic devices, but excluding analyzers which are not
integrated into in vitro diagnostic devices, which devices are
devices designed primarily for the delivery of patient care
(e.g., the monitors currently being marketed and distributed
by HP pursuant to a license from i-STAT).
1.6 "Ancillary Products" shall mean any hardware (not including
Cartridges) and/or software that is not part of an Analyzer,
but is essential to the use of an Analyzer (e.g., a simulator
device used for testing Analyzers by simulating certain of the
electrical characteristics
-3-
<PAGE> 4
of a Cartridge or by some other testing means), and which is
identified on Schedule 1.6, as may be amended from time to
time.
1.7 "Annualized" shall mean the number being measured during the
Base Period divided by the number of days in the Base Period
times three hundred sixty-five (365).
1.8 "AUP" shall mean average unit selling price.
1.9 "Base AUP" shall mean the Net Sales (as hereinafter defined)
of Cartridges sold by i-STAT and its Affiliates in the Field
(as hereinafter defined) in the United States (as hereinafter
defined) to Base Customers (as hereinafter defined) *** (as
hereinafter defined), divided by the number of Cartridges sold
by i-STAT and its Affiliates in the United States to Base
Customers ***.
1.10 "Base Customers" shall mean customers that purchased
Cartridges from i-STAT and its Affiliates under Third Party
Agreements (as hereinafter defined) for use in the Field in
the United States as of the Starting Date.
1.11 "Base Fully Burdened Manufacturing Cost" shall mean ***
*** Confidential treatment requested
-4-
<PAGE> 5
1.12 "Base Period" shall mean the period from and including January
1, 1998, until, but not including, the Starting Date.
1.13 "Base Sales" shall mean the Annualized Net Sales of i-STAT
Products (as hereinafter defined) by i-STAT and its Affiliates
in the Field in the United States.
1.14 "Base Units" shall mean the Annualized number of Cartridges
sold by i-STAT and its Affiliates in the Field in the United
States.
1.15 "Book Value" shall mean the Purchase Price (as hereinafter
defined) of the Analyzers, less accumulated depreciation based
on a depreciation schedule determined in accordance with
Abbott's standard accounting procedures, but not to exceed
four (4) years.
1.16 "Business" shall mean the promotion, marketing, distribution
and sale of i-STAT Products by i-STAT and its Affiliates in
the Field in the United States.
1.17 "Business Day" means any day other than a day which is a
Saturday or Sunday or other day on which commercial banks in
New York, New York are authorized or required to remain
closed.
1.18 "Calendar Quarter" shall mean a period of three (3)
consecutive calendar months commencing on January 1, April 1,
July 1 or October 1 of any Contract Year.
1.19 "Cartridge" shall mean the disposable component of a Product
(as hereinafter defined) that contains i-STAT Sensors (as
hereinafter defined) and fluid handling channels and operate
on the Analyzer or any other analyzer or integrated device
sold by a Third Party (as hereinafter defined) under an
agreement with i-STAT.
1.20 "Certificate of Analysis" shall mean finished goods test
results accompanying the release of Products.
-5-
<PAGE> 6
1.21 "Change of Control" shall mean: (a) the consolidation or
merger of i-STAT or any Affiliate of i-STAT with or into any
Third Party wherein the shareholders of i-STAT immediately
prior to such transaction shall cease to be the holders of at
least fifty percent (50%) of the outstanding securities of the
surviving corporation in such transaction; (b) the assignment,
sale, transfer, lease or other disposition of all or
substantially all of the assets of i-STAT; or (c) the
acquisition by any Third Party or group of Third Parties
acting in concert, of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission
("SEC") under the Securities and Exchange Act of 1934) of more
than fifty percent (50%) of the outstanding shares of voting
stock of i-STAT.
1.22 "Closing" shall mean the closing of the transaction provided
for in this Agreement, as more fully described in Section 8.1.
1.23 "Closing Date" shall mean the date on which the Closing
occurs.
1.24 "Co-exclusive FUSO Territory" shall mean the territory into
which FUSO currently has the right to distribute certain
i-STAT Products on a non-exclusive basis pursuant to the FUSO
Agreement, which territory shall be reduced from time to time
pursuant to Sections 2.1 and 2.2. As of the Signing Date (as
hereinafter defined), the Co-exclusive FUSO Territory consists
of Japan, South Korea and Taiwan.
1.25 "Confidential Information" shall mean any and all technical
data, information, materials and other know-how, including
Trade Secrets (as hereinafter defined), presently owned by or
developed by, on behalf of, or derived either directly or
indirectly from Program Technology (as hereinafter defined) of
either Party and/or its Affiliates during the Term (as
hereinafter defined) which relates to a Product, its
development, manufacture, promotion,
-6-
<PAGE> 7
marketing, distribution, sale or use and any and all financial
data and information relating to the business of either of the
Parties and/or of their Affiliates, which a Party and/or its
Affiliates discloses to the other Party and/or its Affiliates
in writing and identifies as being confidential, or if
disclosed orally, visually or through some other media, is
identified as confidential at the time of disclosure and is
summarized in writing within thirty (30) days of such
disclosure and identified as confidential, except any portion
thereof which:
(a) is known to the receiving Party and/or its Affiliates
at the time of the disclosure, as evidenced by its
written records;
(b) is disclosed to the receiving Party and/or its
Affiliates by a Third Party having a right to make
such disclosure;
(c) becomes patented, published or otherwise part of the
public domain through no fault of the receiving Party
and/or its Affiliates; or
(d) is independently developed by or for the receiving
Party and/or its Affiliates without use of
Confidential Information disclosed hereunder, as
evidenced by its written records.
1.26 "Contract Year" shall mean a calendar year during the Term (as
hereinafter defined), beginning on January 1, except that the
first Contract Year may begin on the Starting Date and shall
end on December 31, 1999.
1.27 "Customer Contracts" shall mean those Third Party Agreements
listed on Schedule 1.27.
1.28 "Designated Country" shall mean a country in the Territory (as
hereinafter defined) outside of the United States to which
Products shall be delivered.
-7-
<PAGE> 8
1.29 "Delivered" and "Delivery" shall have the meanings ascribed to
them in Section 6.1.
1.30 "Distributor Territories" shall mean those countries
identified on Schedule 1.30, as may be amended from time to
time in accordance with the provisions of Section 2.4.
1.31 "Estimated Cartridge Purchase Price" shall mean the weighted
average price for Cartridges purchased by Abbott and its
Affiliates from i-STAT and its Affiliates hereunder, as
determined in accordance with the terms of Section 5.2.
1.32 "Estimated Volume of Cartridges" shall mean the estimated
volume of Cartridges in excess of Base Units *** as specified
in Schedule 5.5.
1.33 "Exclusive Territory" shall mean the Territory, except for the
Co-exclusive FUSO Territory, the HP Territory and the
Distributor Territories, subject to the Co-exclusive FUSO
Territory, the HP Territory and the Distributor Territories,
or portions thereof, becoming part of the "Exclusive
Territory" pursuant to Sections 2.1, 2.2, 2.3 and 2.4.
1.34 "FDA" shall mean the United States Food and Drug
Administration and any successor agency thereto.
1.35 "Field" shall mean the professionally attended human
healthcare delivery market, including, without limitation,
hospitals, physician office laboratories, alternate site
facilities, surgi-centers, emergicare, ambulances and home
care. Subject to Abbott's right of first negotiation as set
forth in Section 2.5, "Field" shall not include the consumer
self-testing market.
*** Confidential treatment requested
-8-
<PAGE> 9
1.36 "Fully Burdened Manufacturing Costs" shall mean ***
1.37 "FUSO Agreement" shall mean the Distribution Agreement dated
August 23, 1988, between i-STAT and FUSO.
1.38 "FUSO Development Agreement" shall mean the Development
Agreement dated August 23, 1988, between i-STAT and FUSO.
1.39 "FUSO License Agreement" shall mean the Manufacturing License
Agreement dated August 23, 1988, between i-STAT and FUSO.
1.40 "HP Agreement" shall mean the Distribution Agreement dated
July 28, 1995 between i-STAT and HP.
1.41 "HP Exclusivity Period" shall mean the period under the HP
Agreement during which HP shall have exclusive rights to
distribute certain of i-STAT's products, as determined by
Abbott in its sole discretion.
1.42 "HP License Agreement" shall mean the License Agreement dated
July 28, 1995 between i-STAT and HP.
1.43 "HP Stock Purchase Agreement" means the Series B Preferred
Stock Purchase Agreement dated as of June 23, 1995 between
i-STAT and HP.
*** Confidential treatment requested
-9-
<PAGE> 10
1.44 "HP Territory" shall mean the territory into which HP has the
right to distribute certain i-STAT Products pursuant to the HP
Agreement. As of the Signing Date, the HP Territory consists
of the countries set forth on Schedule 1.44.
1.45 "HSR Act" shall mean the United States Hart-Scott-Rodino
Antitrust Improvements Act of 1976, including all regulations
promulgated thereunder, and any foreign equivalent.
1.46 "Incremental AUP" shall mean the Net Sales of Incremental
Units (as hereinafter defined) sold by Abbott and its
Affiliates in the Territory during a Calendar Quarter divided
by the number of Incremental Units sold by Abbott and its
Affiliates in the Territory during such Calendar Quarter.
1.47 "Incremental Units" shall mean the number of Cartridges
purchased by Abbott and its Affiliates from i-STAT and its
Affiliates hereunder in a Contract Year in excess of the Base
Units.
1.48 "i-STAT Distributors" shall mean Third Parties, other than
FUSO and HP, that, as of the Signing Date, distribute i-STAT
Products in the Distributor Territories, pursuant to
agreements, understandings or arrangements with i-STAT.
1.49 "i-STAT Product" shall mean Analyzers, Cartridges and
Ancillary Products, or any combination of the foregoing, in
the Field, including the manuals, labeling, packaging and
package inserts thereto. For purposes of this Agreement, any
New Product (as hereinafter defined) shall be deemed to be an
"i-STAT Product".
1.50 "i-STAT Sensors" shall mean at least one (1) solid state
potentiometric, amperimetric and/or conductometric microsensor
device or an integrated group of such devices
-10-
<PAGE> 11
designed to detect the presence and/or quantity of at least
one (1) Analyte. ***
1.51 "i-STAT Trademarks" shall mean the trademarks of i-STAT as set
forth in Schedule 1.51.
1.52 "Liabilities" shall mean any claims, damages, losses,
liabilities, debts or obligations of any nature, whether known
or unknown, accrued, absolute, contingent or otherwise, and
whether due or to become due.
1.53 "Minimum Cartridge Purchase Price" shall mean the minimum
price i-STAT shall invoice Abbott and its Affiliates for any
Cartridge as set forth in Schedule 1.53, as may be adjusted in
accordance with the provisions of Section 5.6.
1.54 "Net Sales" shall mean the total of the gross amount billed or
invoiced to Third Parties for the sale of Product, less:
(a) Rebates granted and allowances, trade, quantity or
cash discounts actually allowed and taken;
(b) Retroactive price reductions imposed by government
authorities;
(c) Fees, commissions or rebates lawfully paid pursuant
to contracts with group purchasing organizations;
(d) Amounts actually repaid a Third Party by reason of
rejection or return of defective Product; and
*** Confidential treatment requested
-11-
<PAGE> 12
(e) Upcharges invoiced and paid by Third Parties as part
of a reagent agreement plan or similar arrangement.
1.55 "New Product" shall mean any i-STAT Product or modification or
follow-on to an i-STAT Product intended for use in the Field,
which i-STAT may develop or offer for sale during the Term,
with the exception of Program Products (as hereinafter
defined).
1.56 "Party" shall mean i-STAT or Abbott, and "Parties" shall mean
i-STAT and Abbott.
1.57 "Prepayment" shall mean periodic cash payments made by Abbott
to i-STAT which i-STAT shall credit or repay to Abbott in
accordance with the terms and conditions set forth in Sections
5.5 or 18.3.
1.58 "Product" shall mean i-STAT Products and Program Products.
1.59 "Program Product" shall have the same meaning as is ascribed
to such term under the Funded Research & Development and
License Agreement.
1.60 "Program Technology" shall have the same meaning as is
ascribed to such term under the Funded Research & Development
and License Agreement.
1.61 "Purchase Price" shall mean the price for Analyzers and
Ancillary Products purchased by Abbott and its Affiliates from
i-STAT and its Affiliates hereunder, as more fully described
in Section 5.1.
1.62 "Signing Date" shall mean the last date on which a Party
executes this Agreement.
-12-
<PAGE> 13
1.63 "Specifications" shall mean the Product characteristics set
forth in Schedule 1.63, and New Product and Program Product
characteristics at such time as the same are available and
i-STAT's manufacturing specifications.
1.64 "Starting Date" shall mean January 1, 1999, unless an earlier
date is mutually agreed in writing by the Parties; provided,
however, the Starting Date shall not occur unless the Closing
has first occurred.
1.65 "Term" shall mean the period beginning on the Starting Date
and ending on December 31, 2003 or any extensions thereto,
unless otherwise terminated earlier in accordance with the
terms and conditions of Article 17.
1.66 "Territory" shall mean the Co-exclusive FUSO Territory, the HP
Territory (after the expiration the HP Exclusivity Period),
the Distributor Territories and the Exclusive Territory, which
collectively shall mean the entire world.
1.67 "Third Party" shall mean a natural person, corporation,
partnership, trust, joint venture, governmental authority or
other legal entity or organization other than the Parties
and/or their Affiliates.
1.68 "Third Party Agreements" shall mean all written or oral
agreements, contracts, purchase or sale orders and commitments
with Third Parties for the sale of i-STAT Product in the
United States.
1.69 "Trade" shall mean those potential customers for i-STAT
Product, including, without limitation, facilities operating
in the Field and group purchasing organizations.
1.70 "Trade Secrets" shall mean the technical or nontechnical data,
formulae, patterns, compilations, programs, devices, methods,
techniques, drawings, processes, financial data,
-13-
<PAGE> 14
financial plans, marketing plans, product plans and the like,
owned or licensed by a Party and/or its Affiliates: (a) from
which a Party and/or its Affiliates derives actual or
potential economic value by being held in secrecy and not
known by Third Parties who are not under an obligation of
confidentiality with respect thereto; or (b) which gives such
Party an advantage over Third Party competitors who do not
know or use it.
1.71 "Transition Period" shall mean the period of time between the
Signing Date and the Starting Date.
1.72 "United States" shall mean the fifty (50) states of the United
States, including its territories and possessions and the
District of Columbia and Puerto Rico.
1.73 "Warranty Period" shall have the meaning ascribed to it in
Section 14.1(b).
ARTICLE 2 - APPOINTMENT TO MARKET AND DISTRIBUTE
2.1 Exclusive Appointment. As of the Closing Date, i-STAT hereby
appoints Abbott and its Affiliates for the Term as i-STAT's
exclusive distributor of Products in the Exclusive Territory
for use in the Field and Abbott accepts such appointment. As
part of such appointment under this Section 2.1, Abbott shall
have the right to appoint sub-distributors in those countries
or territories in the Exclusive Territory in which ADD does
not then distribute products similar to Products. The Parties
acknowledge that, during the Term, either pursuant to
Section(s) 2.2, 2.3, 2.4 or otherwise, countries within the
Co-exclusive FUSO Territory, the HP Territory or the
Distributor Territory may no longer be subject to FUSO's, HP's
and i-STAT Distributors' distribution rights for i-STAT
Products, respectively. In such event, i-STAT shall notify
Abbott in writing at least thirty (30) days prior to the
expiration or termination of FUSO's, HP's, or any
-14-
<PAGE> 15
termination of such rights, such countries shall automatically
be deemed part of the Exclusive Territory. As exclusive
distributor hereunder, Abbott and its Affiliates shall have
the sole and exclusive right to market, promote, sell and
distribute Products in the Exclusive Territory for use in the
Field, which right shall operate to exclude all others,
including i-STAT, its Affiliates and all Third Parties;
provided, however, that i-STAT may maintain certain
consultative and technical staff, at i-STAT's expense, to
assist Abbott in connection with such marketing, promotion,
sales and distribution efforts, in accordance with Article 3.
In addition, i-STAT may continue to promote the concept and
benefit of point-of-care testing without violation of its
obligations hereunder.
2.2 Appointment in Co-exclusive FUSO Territory. As of the Closing
Date, i-STAT hereby appoints Abbott and its Affiliates as a
co-exclusive distributor of i-STAT Products with FUSO in the
Co-exclusive FUSO Territory for use in the Field from the
Starting Date until December 31, 2002. As part of such
appointment under this Section 2.2, i-STAT shall not appoint
any other Third Party as a distributor of Products in the
Co-exclusive FUSO Territory; provided, however, Abbott and its
Affiliates shall have the right to appoint sub-distributors in
those countries or territories in the Co-exclusive FUSO
Territory in which ADD does not then distribute products
similar to Products. ***
*** Confidential treatment requested
-15-
<PAGE> 16
***
2.3 Appointment in HP Territory. As of the expiration of the HP
Exclusivity Period (of which i-STAT shall provide written
notice to Abbott), i-STAT hereby appoints Abbott and its
Affiliates as a co-exclusive distributor of i-STAT Products
with HP in the HP Territory until such time as HP no longer
has any rights, on a country-by-country basis (of which i-STAT
shall provide written notice to Abbott), to distribute any
i-STAT Products under the HP Agreement, at which time Abbott
and its Affiliates shall become the exclusive distributor for
Products for such country ***
*** Confidential treatment requested
-16-
<PAGE> 17
***
2.4 Distributor Territories. ***
*** Confidential treatment requested
-17-
<PAGE> 18
***
2.5 Right of First Negotiation. i-STAT hereby grants to Abbott the
first right of negotiation with regard to any transaction
contemplated by i-STAT whereby i-STAT, directly or indirectly,
would license, sell, transfer, convey, assign to a Third Party
or otherwise encumber any right, title or interest of i-STAT
to sell, market, promote or distribute any i-STAT Product in
the consumer self-testing market (other than i-STAT's sales
directly to Third Parties in the usual and customary channel
of distribution of products to the retail consumer market). In
the event i-STAT determines to solicit a proposal for the
foregoing, i-STAT first shall promptly provide, exclusively to
Abbott written notice of such proposed solicitation, including
a detailed summary of all material terms and conditions. In
the event i-STAT receives an unsolicited Third Party proposal
with respect to such a transaction and i-STAT intends to
pursue negotiations with the Third Party submitting such
proposal, i-STAT shall promptly provide, exclusively to
Abbott, a detailed summary of the material terms and
conditions of such proposal. Abbott shall have thirty (30)
days from receipt of the solicitation or the unsolicited
Third Party proposal to advise i-STAT in writing (the
"Negotiation Notice") of whether Abbott shall negotiate with
i-STAT regarding the terms and
*** Confidential treatment requested
-18-
<PAGE> 19
conditions of the solicitation, or will "meet" such
unsolicited Third Party proposal, as the case may be. If
Abbott elects to negotiate with i-STAT regarding the terms
and conditions of the solicitation, or to "meet" such
unsolicited Third Party proposal, as the case may be, Abbott
and i-STAT shall negotiate exclusively in good faith, for not
less than sixty (60) days after Abbott's written election, a
definitive agreement reflecting the material terms of the
solicitation or proposal. If Abbott and i-STAT are unable in
good faith to reach a definitive agreement within the sixty
(60) day period, i-STAT may enter into negotiations and
conclude a definitive agreement with a Third Party on terms
no less favorable to i-STAT than those finally offered
by or to Abbott in all material respects.
2.6 Noncompetition. During the Term, so long as the Product is
materially meeting customer requirements, ADD shall not,
directly or indirectly, promote, market, distribute or sell a
directly competitive product in the Field in the Territory
which "functions the same" as the Products which ADD is
distributing. In the event Abbott notifies i-STAT in writing
that a Product is not materially meeting customer
requirements, Abbott shall afford i-STAT an opportunity to
conform Product to the necessary customer requirements within
a reasonable period of time. If i-STAT cannot or does not
conform such Product to the necessary customer requirements
within such reasonable period of time, then i-STAT promptly
shall notify Abbott in writing of the continuation of such
nonconforming Product, and as of the date of such notice,
Abbott shall no longer be subject to Abbott's obligation of
non-competition for such Product as set forth in this Section
2.6. For purposes of this Section 2.6, "functions the same"
shall mean the following:
***
*** Confidential treatment requested
-19-
<PAGE> 20
***
*** Confidential treatment requested
-20-
<PAGE> 21
***
2.7 Trade Costs. Abbott and its Affiliates shall be responsible
for payment of all rebates, discounts, management fees,
service allowances, credits and taxes associated with the sale
by Abbott or its Affiliates of Products.
2.8 Selling Price. Abbott and its Affiliates shall, in their sole
discretion, determine the final sales price of Products sold
by Abbott and its Affiliates to the Trade; provided, however,
that Abbott shall consult with i-STAT at least once each
Calendar Quarter with respect to i-STAT's observations, ideas
and strategies regarding marketing the Products.
2.9 Contracting Rights. During the Term and subject to existing
rights of FUSO, HP, and i-STAT Distributors with respect to
i-STAT Products, Abbott and its Affiliates shall have the
exclusive right to contract with the Trade for the sale of
Products in the Territory.
2.10 Assignment and Assumption of Customer Contracts. i-STAT shall
use reasonable commercial efforts to assign Customer Contracts
to Abbott or its Affiliate, and Abbott or its Affiliate shall
assume, effective as of the Starting Date, all of i-STAT's
rights and post-Starting Date obligations under the assigned
the Customer Contracts.
(a) i-STAT Liabilities. Notwithstanding the foregoing,
neither Abbott nor its Affiliates are assuming (and
shall not be deemed to have assumed), without
limitation, any Liabilities of i-STAT, its Affiliates
or any Third Party prior to the Starting Date under
the Customer Contracts or any Third Party Agreements.
Without in any way
*** Confidential treatment requested
-21-
<PAGE> 22
limiting the generality of the foregoing, it is
expressly agreed that neither Abbott nor its
Affiliates is assuming any of the following
Liabilities, whether civil or criminal:
(i) any Liability in any way arising out of
or resulting from i-STAT Products manufactured,
distributed or sold by i-STAT, its Affiliates or any
Third Party prior to the Starting Date, whether for
breach of any warranties, expressed or implied, or
any Liabilities to a Third Party, including any
Liabilities under any of the Third Party Agreements;
(ii) any Liabilities arising out of
withdrawals or recalls, rebates, trade or customer
promotional expenses, chargebacks or customer returns
of i-STAT Products manufactured, distributed or sold
by i-STAT, its Affiliates or any Third Party prior to
the Starting Date; or
(iii) any Liabilities for taxes or liens for
taxes or other governmental charges relating to the
Business.
Further, Abbott shall not be liable and i-STAT shall defend,
indemnify and hold Abbott and its Affiliates and their
officers, directors, employees and representatives harmless
from and against Liabilities resulting from or arising out of
the breach by i-STAT or any of its Affiliates of i-STAT's or
its Affiliates' obligations under Third Party Agreements prior
to the Starting Date.
(b) Abbott Liabilities. i-STAT and its Affiliates shall
not be liable, and Abbott shall defend, indemnify and
hold i-STAT and its Affiliates and their officers,
directors, employees and representatives harmless
from and against Liabilities resulting from or
arising out of the breach by Abbott or any of its
Affiliates of Abbott's or any of
-22-
<PAGE> 23
its Affiliates' obligations under assigned Third
Party Agreements from and after the Starting Date.
2.11 Program Products. i-STAT has no rights to market, promote,
sell and/or distribute Program Products in the Field in the
Territory.
ARTICLE 3 - MARKETING AND PROMOTION
3.1 Cooperation. After the Closing Date, Abbott and i-STAT shall
create a marketing council to facilitate communications and
assist Abbott in its decision making, which council shall be
comprised of no less than three (3) and no more than five (5)
representatives from each of Abbott's and i-STAT's sales,
marketing and support organizations. At all times during the
Term, the number of Abbott representatives to the marketing
council shall constitute a majority of the total number of
representatives on such council.
(a) Abbott's Responsibilities. Abbott shall use its
reasonable commercial efforts to promote, market,
sell and distribute Products in the Territory. Such
efforts may include, but shall not be limited to, the
use of sales and marketing representatives who
dedicate greater than *** of their professional
efforts to the marketing, promotion and sale of
Products. Such efforts may also include, but shall
not be limited to, preparing collateral marketing
materials, conducting advertising, presenting
educational seminars, participating in customer
visitations, displaying exhibits at trade shows and
ensuring representation and attendance at industry
meetings, all of which shall be performed in
accordance with ADD's usual and customary practices.
Abbott shall, on an on-going basis, and at Abbott's
cost, train and supervise the appropriate personnel
*** Confidential treatment requested
-23-
<PAGE> 24
within the ADD sales force (including the MediSense
sales force) in the promotion and sale of Products in
the Territory.
(b) i-STAT's Responsibilities. For the initial training,
i-STAT shall provide, at i-STAT's cost, training
personnel, in such scope, time and quantity as the
Parties may mutually agree, to train ADD's sales
force. i-STAT, at i-STAT's cost, also shall assist
Abbott in the preparation of appropriate sales force
training materials. Further, i-STAT shall attend with
Abbott, at i-STAT's expense, major trade shows in
1998 and 1999, as mutually agreed by the Parties, to
provide Abbott with necessary technical and i-STAT
Product information support.
3.2 Development of Promotional and Marketing Materials. Promptly
after the Closing Date, i-STAT shall deliver to Abbott copies
of all promotional and marketing materials owned or controlled
by i-STAT to be used by Abbott and its Affiliates in the
promotion and sale of i-STAT Products hereunder. During the
Term, Abbott shall develop and prepare, at Abbott's sole
discretion and at its cost, promotional and marketing
materials for use in its sale of Products. Prior to
publication, Abbott shall submit all such materials to i-STAT
for verification of technical accuracy and conformity with
regulatory requirements and with i-STAT Trademark usage
guidelines. i-STAT shall provide such verification in writing
within fifteen (15) days of receipt of any such materials and
shall not unreasonably withhold its approval thereof.
3.3 Marketing Plans. Abbott shall develop and prepare, at Abbott's
sole discretion and at its cost, all marketing plans for the
promotion and sale of Products; provided, however, Abbott
shall provide to i-STAT for its review and comment only, prior
to implementation, any marketing plans developed by Abbott
with respect to Products. i-STAT shall not disclose to any
-24-
<PAGE> 25
Third Party, including, without limitation, the i-STAT
Distributors, HP and FUSO, the existence of or any term or
concept contained within any such marketing plans. Abbott
agrees that pricing programs for Products shall be independent
of pricing for other ADD products.
3.4 Sales Reports. Abbott shall provide to i-STAT within thirty
(30) days after each Calendar Quarter, a sales report
reflecting the sales of Product in the Territory by Abbott and
its Affiliates. Each such report shall provide Net Sales
dollars and unit sales of Products, listed separately by
component, for that Calendar Quarter, and for year-to-date.
These sales reports shall be considered Confidential
Information.
3.5 Product Support.
(a) Installation and Training in the United States.
During the Term, i-STAT shall install all Product
sold to the Trade in the United States and shall
provide such Trade with sufficient initial Product
training to enable such Trade to implement the
Product fully. This service shall not include the
installation of network communication hardware and a
software computer interface to the Trade's computer
systems, but shall include the installation and
training related to the i-STAT Central Data Station.
***
(b) Computer Interface Installation. During the Term, if
requested by Abbott, i-STAT shall use its reasonable
commercial efforts to install network communications
hardware and computer interface software to customers
in the Trade in the United States.
*** Confidential treatment requested
-25-
<PAGE> 26
***
(c) Telephone Support. i-STAT shall provide telephone
support to customers in the Trade in the United
States, *** at a quality comparable to the quality of
service i-STAT provides as of the Closing Date.
(d) Product Support Charges. i-STAT shall invoice Abbott
for non-Warranty Period support of Products at: ***
(e) International Support. With respect to the services
and support to be provided by i-STAT as described in
Section 3.5(a), Abbott and its Affiliates shall
provide all such services and support in the
Territory outside of the United States and shall use
reasonable commercial efforts to ***
*** Confidential treatment requested
-26-
<PAGE> 27
To assist Abbott in performing these service and support
activities, i-STAT shall provide Abbott and its Affiliates
such training as may be mutually agreed in the technical
service and support of Products.
3.6 Product Samples. During the Term, i-STAT shall make reasonable
quantities as requested by Abbott and its Affiliates (*** of
actual purchase orders placed by Abbott and its Affiliates) of
Product samples available to Abbott, at *** to be used by
Abbott and its Affiliates and sub-distributors to demonstrate
and sample the Products to the Trade in the Territory, except
to those countries subject to HP's exclusive rights for i-STAT
Products, but only for so long as such rights remain
exclusive. During the Term, i-STAT shall provide as available,
outdated and rejected Product as requested by Abbott at no
charge. i-STAT shall add to each label of such outdated and
rejected Product the following: "Not For Resale".
ARTICLE 4 - MANUFACTURE AND SUPPLY OF PRODUCT
4.1 Manufacture.
(a) Product Supply. Upon the terms and subject to the
conditions of this Agreement, i-STAT shall
manufacture, or cause to be manufactured, and provide
to Abbott such quantities of Products as are
consistent with the forecasting and ordering
provisions set forth in Section 4.2.
(b) Product Labeling and Package Inserts. i-STAT, at its
expense, shall translate and modify each Product's
documentation and labeling and all Analyzer and
certain Ancillary Products, such as central data
station screens and displays, into Spanish,
*** Confidential treatment requested
-27-
<PAGE> 28
Italian, French, Dutch, German and Swedish and Abbott
shall be responsible for translation into any other
language so that such Products comply with all local
requirements for sale and clinical use in each
country or region of the Territory. Each Party shall
assist the other Party with such translation at such
other Party's request. Further, subject to the
requirements of applicable law, i-STAT shall include
on all Products a co-branded label identifying Abbott
and i-STAT with equal prominence.
(c) Product Registrations. i-STAT owns, holds and has all
right, title and interest in and to all registrations
with respect to i-STAT Products, and shall provide,
at i-STAT's sole expense, such authorizations
thereunder to Abbott as may be required to permit
Abbott to distribute the i-STAT Products. If for any
reason, Abbott must obtain additional consents or
authorizations to obtain marketing rights for the
Products in a particular Designated Country, Abbott
shall advise i-STAT in writing and the Parties shall
work together to obtain all such necessary consents
and authorizations, at i-STAT's expense.
(d) Product Changes. i-STAT shall notify Abbott in
writing of any proposed changes in i-STAT's
manufacturing process which affect fit, form or
function of Product. Upon the request of Abbott,
i-STAT shall provide to Abbott representative samples
of such changed Product in sufficient quantities.
Upon such notice of any proposed change, and after
receipt of such representative samples, Abbott may
evaluate and communicate to i-STAT its approval or
disapproval of such change within thirty (30) days
after the date of notice; provided, however, that
Abbott shall not unreasonably withhold its approval
of any such change. Only upon notice of written
approval from Abbott may
-28-
<PAGE> 29
i-STAT incorporate such change into the manufacturing
process. i-STAT shall be obligated only to notify
Abbott in writing of any proposed significant changes
in i-STAT's manufacturing process which do not affect
fit, form or function of Product (which may, but not
necessarily include changes to written quality plans,
changes that affect written quality plans for
production or written quality procedures respecting
the same, as well as, changes outside the validated
level or procedure, in manufacturing procedures,
component part or raw materials vendors,
manufacturing sites or chip shrink and wafer
dimension changes, and Abbott shall have no right of
approval with respect to any such changes.
(e) Certified Vendor. Each Party shall use its reasonable
commercial efforts to enable i-STAT to become an
Abbott certified vendor within three (3) months after
the Closing Date by satisfying the quality
requirements and standards as previously delivered to
i-STAT.
(f) Special Provisions. i-STAT shall maintain stock of
items critical to the manufacture of Products in
accordance with its standard operating procedure for
ordering special materials reflected in SOP-2002, as
may be revised from time to time, and which is
incorporated herein by reference. i-STAT shall
provide Abbott notice of any change to SOP-2002
reasonably likely to affect the production of
Products.
(g) Fully Burdened Manufacturing Costs Report. i-STAT
shall provide to Abbott a written report within
thirty (30) days after each Calendar Quarter
reflecting a detailed analysis of the Fully Burdened
Manufacturing Costs for the preceding Calendar
Quarter for Products purchased on a cost or cost-plus
basis. Further, i-STAT shall advise
-29-
<PAGE> 30
Abbott in writing sufficiently in advance of any
proposed change in i-STAT's accounting methodology
and treatment so that Abbott can adjust its
record-keeping accordingly to integrate such change.
4.2 Forecasting. Within thirty (30) days after the Signing Date,
the Parties shall agree in writing to a forecasting
methodology which, given best reasonable efforts, assures an
uninterrupted supply of Product to the Trade. The components
of the forecasting methodology will include:
(a) Short-term forecasts which ensure proper planning of
manufacturing production to meet demand. Purchase
orders from Abbott to i-STAT should be, within a
mutually acceptable range, consistent with this
forecast;
(b) Long-term forecasts which aid i-STAT in capacity
planning and ensure optimal investments in
manufacturing expansions;
(c) The forecasts shall be developed taking into account
lead time requirements necessary to ramp up
production as well as assuring proper supply of long
lead time materials; and
(d) A mechanism for sharing of expenses associated with
under utilization of capacity and long lead time
materials.
4.3 Failure to Supply. In the event i-STAT does not supply
conforming Products that were ordered in compliance with the
forecasting process to be established in accordance with
Section 4.2, the growth levels necessary to avoid the growth
deficiency described in Section 17.3 shall be reduced by the
quantity of Product not so delivered. In the event i-STAT is
unable to supply Product in accordance with Abbott's and its
Affiliates' firm purchase orders as a result of
-30-
<PAGE> 31
nonconforming Product or an event of force majeure, the growth
levels necessary to avoid the growth deficiency described in
Section 17.3 shall be reduced by the quantity of Product not
supplied.
4.4 Supply Allocation. In the event of a shortage of i-STAT
Product during the portion of the Term in which Abbott is a
co-exclusive distributor of i-STAT Product, i-STAT shall
allocate i-STAT Product in a reasonable manner so as to
support Abbott and its Affiliates as a supplier of i-STAT
Products, and at a minimum, i-STAT shall allocate its
manufacturing capability on a unit basis so that Abbott and
its Affiliates receive the same percentage of i-STAT's total
output of i-STAT Products as Abbott and its Affiliates
received on average during the most recent six (6) months
prior to the shortage.
4.5 Ordering Processing. Except with respect to rights of HP, FUSO
and the i-STAT Distributors to the i-STAT Products, Abbott and
its Affiliates shall be responsible for solicitation and for
receiving and processing orders for Product from the Trade in
the Territory. Purchase orders for Products received by i-STAT
from the Trade in the Exclusive Territory or from Third
Parties under contract with Abbott or its Affiliates in the
Distributor Territory, the Co-exclusive FUSO Territory and the
HP Territory shall be transferred immediately to Abbott for
handling and invoicing. i-STAT may receive and process orders
for Products on behalf of Abbott as mutually agreed from time
to time.
ARTICLE 5 - PRICE AND TERMS
5.1 Purchase Price for Analyzers and Ancillary Products. The
Purchase Price for Analyzers and Ancillary Products shall be
***
*** Confidential treatment requested
-31-
<PAGE> 32
*** except that the Purchase Price for those certain Ancillary
Products that i-STAT purchases from Third Parties as described
in Schedule 1.6 (under "Distributed Products") shall be ***.
During the Term, Abbott and its Affiliates may, at their
discretion, source directly all Ancillary Products purchased
by i-STAT from a Third Party; provided that such Ancillary
Products conform to the Specifications. Prior to contracting
directly for such Ancillary Products, Abbott and its
Affiliates shall advise i-STAT in writing and the Parties
shall coordinate a reasonable transition period in which to
enable i-STAT to reduce any inventory of such Ancillary
Products ordered by i-STAT as a result of a firm purchase
order for such Ancillary Products placed by Abbott or its
Affiliates.
5.2 Estimated Cartridge Purchase Price. Except for the first
Contract Year, wherein the Estimated Cartridge Purchase Price
shall be ***, the Parties shall determine the Estimated
Cartridge Purchase Price to be used for all purchases of
Cartridges by Abbott and its Affiliates for each subsequent
Contract Year on or before *** of the then current Contract
Year. The Estimated Cartridge Purchase Price shall be
determined by assigning a single Estimated Cartridge Purchase
Price, by product code, to be charged in such subsequent
Contract Year based on the projected number of Cartridges
Abbott and its Affiliates shall buy from i-STAT in such
subsequent Contract Year contained in Abbott's annual forecast
provided to i-STAT in accordance with the methodologies to be
mutually agreed to by the Parties under Section 4.2. The
calculation to derive this single Estimated Cartridge Purchase
Price is as follows: ***
*** Confidential treatment requested
-32-
<PAGE> 33
***. The Estimated Cartridge Purchase Price for each Contract
Year is subject to adjustments pursuant to Sections 5.3 and
5.4. (See the example in Schedule 5.2.)
5.3 Year-End Reconciliation. Within fifteen (15) days after the
end of each Contract Year, Abbott and i-STAT shall reconcile,
by product code, the Actual Cartridge Purchase Price for the
just completed Contract Year against the actual number of
Cartridges purchased by Abbott and its Affiliates hereunder as
reflected in the sales reports provided i-STAT pursuant to
Section 3.4. This reconciliation shall be performed to, among
other reasons, ***. The calculations and results of such
reconciliation shall be contained in a written report
submitted to i-STAT within fifteen (15) days after the end of
the just completed Contract Year. i-STAT shall make any
adjustments as to overpayments or underpayments, if any, by
credit or debit memo, as the case may be, within fifteen (15)
days after i-STAT's receipt of the report; provided, however,
any such adjustment in the final Contract Year shall be
handled by a check or wire transfer of the overpayment or
underpayment to the affected Party within thirty (30) days
after the end of the final reconciliation. (See example in
Schedule 5.3)
5.4 Calendar Quarter Reconciliations. Within fifteen (15) days
after the end of each Calendar Quarter, Abbott and i-STAT
shall reconcile, by product code, *** for the just completed
Calendar Quarter against the ***
*** Confidential treatment requested
-33-
<PAGE> 34
***. In addition, i-STAT shall report to Abbott pursuant to Section
4.1(g) *** during the just completed Calendar Quarter. ***
The calculations and results of such reconciliation shall be contained
in a written report submitted to i-STAT within fifteen (15) days after
the end of the just completed Calendar Quarter. i-STAT shall make any
adjustments as to overpayments or underpayments, if any, by credit or
debit memo, as the case may be, within fifteen (15) days after i-STAT's
receipt of the report, provided, however, any such adjustment in the
final Calendar Quarter shall be handled by a check
*** Confidential treatment requested
-34-
<PAGE> 35
or wire transfer of the overpayment or underpayment to the
affected Party within thirty (30) days after the end of the
final reconciliation. (See example in Schedule 5.4)
5.5 Prepayments. Subject to Abbott's satisfaction, at its sole
discretion, that the conditions to Closing described in
Article 8 have been met, or have been waived by Abbott, Abbott
shall prepay to i-STAT a total of Twenty-Five Million Dollars
(US$25,000,000) during the first three (3) Contract Years on
the terms and conditions described below in this Section 5.5.
The Prepayments shall constitute future gross margin to i-STAT
on the sale of Cartridges to Abbott and its Affiliates and
shall be repaid to Abbott by i-STAT as a credit against actual
purchases of Incremental Units *** as part of the Calendar
Quarter reconciliation described in Section 5.4. The
Prepayments shall be made in accordance with the schedule set
forth in Schedule 5.5. ***
*** Confidential treatment requested
-35-
<PAGE> 36
5.6 Minimum Cartridge Purchase Price. Notwithstanding anything in
this Article 5 or any other section of this Agreement to the
contrary, during the Term, the Estimated Cartridge Purchase
Price and the Actual Cartridge Purchase Price shall be no less
than the Minimum Cartridge Purchase Price as set forth in
Schedule 1.53. The Parties shall evaluate the calculation of
the Minimum Cartridge Purchase Price ***, if requested by
either Party, and shall adjust such Minimum Cartridge Purchase
Price, if at all, taking into consideration, but without
limitation, ***.
5.7 Program Product Pricing. Prior to a Program Product launch,
the Parties shall negotiate the purchase price Abbott and its
Affiliates shall pay i-STAT for such Program Product. In
determining such purchase price, the Parties shall consider
such factors as ***. If the Parties are not able to mutually
agree to a purchase price for such Program Product, the
purchase price for such Program Product shall be ***. The
purchase price of any Program Product shall be subject to ***.
5.8 Payment Terms. Each Party shall invoice the other Party or its
Affiliates, as the case may be, for Products purchased and
services provided hereunder, as appropriate. Each Party shall
pay such invoices in United States dollars net thirty (30)
days from the date of receipt of the invoice. In the event
either Party fails to make a payment when due, overdue
payments shall bear
*** Confidential treatment requested
-36-
<PAGE> 37
interest at the rate of one and one-half percent (1.5%) per
month, or if lower, the highest rate permitted by law, from
the date due until paid.
ARTICLE 6 - SHIPMENT AND DELIVERY
6.1 Shipment. Delivery shall occur for Products shipped to
Designated Countries *** for Products shipped in the United
States. ("Delivery" or "Delivered"). Unless otherwise agreed,
freight charges for Products Delivered to the United States
will be *** in its sole discretion. With regard to shipments
of Products to Designated Countries, i-STAT shall ***. i-STAT
may make partial shipments of the Products, subject to prompt
filling of any resulting backorder.
6.2 Delivery in the United States. For Delivery of Products in the
United States, i-STAT shall ship Products sold by Abbott and
its Affiliates in accordance with shipping instructions
provided by Abbott. At Abbott's request (including pursuant to
shipping instructions provided on purchase orders submitted by
Abbott), i-STAT shall ship Products directly to the Trade in
the United States.
6.3 Export Licenses; Import Certificates; Customs and Regulatory
Approval for Delivery of Products Outside the United States.
(a) i-STAT's Duties. i-STAT, at its cost, shall: ***
*** Confidential treatment requested
-37-
<PAGE> 38
*** and take all reasonable steps to cooperate with
Abbott in complying with any import, export or custom
regulations applicable to the Products, to the extent
consistent with applicable law, including filling out
necessary paperwork or reports to obtain any
applicable waiver, exemption or reduction of such
duties in a timely manner.
(b) Abbott's Duties. Abbott shall: ***.
(c) To the extent Abbott or its Affiliates cannot, ***.
6.4 Title and Risk of Loss. Title to and risk of loss of Products
shall pass to Abbott at the time of Delivery. Any loss or
damage to Products prior to Delivery shall be at i-STAT's
risk.
*** Confidential treatment requested
-38-
<PAGE> 39
6.5 Taxes. Subject to Section 6.3(c), any foreign, federal, state,
county or local sales, use, value-added or excise tax or
similar charge, including customs and import duties, or other
tax assessment (other than that assessed against income),
license fee (other than royalties owed to Third Parties) or
other charge lawfully assessed or charged on the sale or
transportation of Products sold pursuant to this Agreement
after Delivery to Abbott shall be paid by Abbott.
6.6 Certificate of Analysis. i-STAT shall provide Abbott with a
Certificate of Analysis with each batch of Cartridges sold to
Abbott hereunder certifying compliance with the
Specifications. Full batch documentation, including batch
production records, and manufacturing and analytical records
shall be available for review by Abbott on site at i-STAT upon
reasonable notice from Abbott.
ARTICLE 7 - ACCEPTANCE OF PRODUCT;
INSPECTION OF MANUFACTURING FACILITY
7.1 i-STAT Testing. i-STAT shall inspect and test Products for
conformity to the Specifications in accordance with its normal
quality assurance procedures as such procedures may be amended
from time to time prior to release to Abbott and its
Affiliates or to the Trade in the United States. i-STAT shall
notify Abbott prior to any change in its quality assurance
procedures that reasonably may be expected to affect the
quality of the Product.
7.2 Abbott Testing. Until such time as i-STAT becomes an Abbott
certified vendor pursuant to Section 4.1(e), acceptance of all
Product shall be subject to Abbott's or its Affiliates'
inspection and approval. Abbott or its Affiliates shall,
within ten (10) days after receipt of the representative
sample of Products, inspect and test such sample and may
reject any representative sample of Products which is:
-39-
<PAGE> 40
(a) not in compliance with the Specifications;
(b) not in compliance with all manufacturing procedures,
in-process controls, testing, specifications and
storage conditions, as set forth in i-STAT's 510(k),
or any foreign equivalent for Product, or any
subsequent amendments thereto;
(c) not manufactured in accordance with cGMPs;
(d) not conforming to instructions agreed upon by the
Parties in writing regarding packaging or transport;
(e) shipped in violation of any applicable statute,
administrative order or regulation;
(f) recalled by any governmental agency or by i-STAT for
reasons for which Abbott and its Affiliates are not
at fault; or
(g) shipped by i-STAT with less than *** dating for
United States sales or *** dating for non-United
States sales with respect to Cartridges and Ancillary
Products having an expiration date.
If Abbott, or its Affiliates, as the case may be, reject any Product,
it shall give i-STAT written notice of such rejection within the ten (10) day
testing period, accompanied by a written summary of the grounds for rejection
and any testing performed by Abbott, or its Affiliates, as the case may be. Upon
receipt of such notice, i-STAT may request Abbott, or its Affiliates, as the
case may be, to return the rejected Product, or samples thereof, for testing by
i-STAT. Abbott's or its Affiliates' rejection shall be final unless i-STAT
notifies Abbott within thirty (30) days after the later of the receipt of the
rejection notice or the rejected Product, or samples thereof, that i-STAT
disagrees with Abbott's or its Affiliates' conclusions with respect to the
rejected Product.
*** Confidential treatment requested
-40-
<PAGE> 41
If the Parties are unable to resolve the dispute, samples of the rejected
Product shall be submitted to a mutually acceptable independent testing
laboratory for analysis. The results of the independent testing laboratory shall
be final and binding on the Parties. The costs of the independent testing
laboratory shall be paid by the Party against whom the discrepancy is resolved.
The Parties' inability to agree upon an independent testing laboratory shall be
resolved through the dispute resolution procedures set forth in Section 21.6.
All i-STAT Product properly rejected by Abbott or its Affiliates pursuant to the
terms and conditions of this Section 7.2 and not otherwise replaced by i-STAT in
a timely fashion to enable Abbott and its Affiliates to consummate the available
sale to the Trade shall be included in any calculation with respect to credits
against Prepayments as described in Section 5.5, growth deficiencies as
described in Section 17.3, *** and any other provision hereunder where the
quantity of Abbott's purchases of i-STAT Product or Net Sales is a factor.
7.3 Abbott Inspection. i-STAT shall permit Abbott, upon reasonable
notice and during regular business hours, but no more often
than once in each Contract Year, access to those areas of
i-STAT's manufacturing facilities where the Products are
manufactured, tested, packaged, stored, handled and shipped to
verify i-STAT's compliance with its obligations hereunder.
ARTICLE 8 - CONDITIONS TO CLOSING
8.1 Closing. The Closing shall be held at the time and place
specified in Section 1.2 of the Stock Purchase Agreement at
the offices of Paul, Hastings, Janofsky & Walker LLP, 399 Park
*** Confidential treatment requested
-41-
<PAGE> 42
Avenue, New York, New York at 10:00 a.m., as soon as
practicable, but in any event no later than the fifth Business
Day following the satisfaction or waiver of the conditions set
forth in this Article 8, or at such other time and place upon
which i-STAT and Abbott shall mutually agree.
8.2 General Conditions. The obligations of Abbott and i-STAT to
effect the Closing shall be subject to the satisfaction at or
prior to the Closing of the following conditions:
(a) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall
have been enacted, entered, promulgated or enforced
by any court of competent jurisdiction or
governmental or regulatory authority or
instrumentality that prohibits the execution,
delivery or performance of any of the Alliance
Agreements, and no proceeding by any governmental or
regulatory authority or instrumentality shall be
pending or threatened, which seeks to prohibit or
declare illegal the execution, delivery or
performance of any of the Alliance Agreement;
(b) All filings under the HSR Act and other laws of any
jurisdiction applicable to the transactions
contemplated in the Alliance Agreements shall have
been made and any required waiting period under such
laws shall have expired or been earlier terminated;
and
(c) The "Closing" as such term is defined in the Stock
Purchase Agreement shall have occurred or shall be
occurring simultaneously.
8.3 Conditions to Obligations of Abbott. The obligations of Abbott
to effect the Closing shall be further subject to the
satisfaction at or prior to the Closing of the following
conditions:
-42-
<PAGE> 43
(a) All corporate and other proceedings taken or to be
taken in connection with the transactions
contemplated in the Alliance Agreements, and all
documents incident thereto, shall be reasonably
satisfactory in form and substance to Abbott and
Abbott's counsel. Without limiting in any way the
generality of the foregoing, i-STAT shall have duly
received all authorizations, waivers, consents,
approvals, licenses, franchises and permits by or of
all persons necessary or advisable, in the reasonable
opinion of Abbott and Abbott's counsel, for the
execution, delivery and performance by i-STAT of its
obligations under the Alliance Agreements;
(b) The representations and warranties of i-STAT
contained herein and in the other Alliance Agreements
shall be true and correct at and as of the Signing
Date and at and as of the Closing Date as though
restated on and as of the Closing Date (except in the
case of any representation and warranty that by its
terms is made as of a date specified therein, in
which case such representation and warranty shall be
true and correct as of such date);
(c) Abbott shall have received from i-STAT's counsel,
Paul, Hastings, Janofsky & Walker LLP, an opinion
addressed to Abbott substantially in the form of
Schedule 8.3, dated the Closing Date; and
(d) Abbott shall have received from i-STAT a certificate
signed by an appropriate officer as to i-STAT's
compliance with the conditions set forth in clauses
(a) and (b) of this Section 8.3.
-43-
<PAGE> 44
8.4 Conditions to Obligations of i-STAT. The obligations of i-STAT
to effect the Closing shall be further subject to the
satisfaction at or prior to the Closing of the following
condition:
(a) All corporate and other proceedings taken or to be
taken in connection with the transactions
contemplated in the Alliance Agreements, and all
documents incident thereto, shall be reasonably
satisfactory in form and substance to i-STAT and
i-STAT's counsel. Without limiting in any way the
generality of the foregoing, Abbott shall have duly
received all authorizations, waivers, consents,
approvals, licenses, franchises and permits by or of
all persons necessary or advisable, in the reasonable
opinion of i-STAT and i-STAT's counsel, for the
execution, delivery and performance by i-STAT of its
obligations under the Alliance Agreements.
8.5 Non-Fulfillment of Conditions. The non-fulfillment of any of
the conditions described in Sections 8.2, 8.3 or 8.4 (whether
or not the Closing occurs) shall not result in any liability
to any Party unless such non-fulfillment is a result of a
breach of this Agreement or any of the other Alliance
Agreements by such Party.
8.6 Condition Subsequent. Within 30 days after the Closing Date
but not later than the Starting Date, i-STAT shall use its
reasonable commercial efforts to assign the Customer Contracts
to Abbott as provided in Section 2.10, together with any
required consents under such of the Customer Contracts
permitting such assignment.
-44-
<PAGE> 45
ARTICLE 9 - REGULATORY COMPLIANCE AND MEDICAL COMPLAINTS
9.1 No Modification to Product. Abbott shall not modify,
repackage, reformulate or alter any Product, including its
label, except with specific written authorization from i-STAT.
9.2 Regulatory Compliance. i-STAT shall be responsible for all
governmental and regulatory filings in the Territory for
Products. All responses to governmental agencies concerning
the Products shall be the sole responsibility of i-STAT, with
reasonable assistance from Abbott, at i-STAT's expense, as
requested by i-STAT. i-STAT shall provide Abbott copies of all
filings and/or responses concerning the Products which occur
after the Closing Date. In the event i-STAT is unable to
obtain or maintain the requisite governmental approvals to
enable Abbott and its Affiliates to sell Products in any such
country in the Territory, Abbott's inability to meet the
purchase or sales targets described in Sections 2.2 (a), 5.5,
and 17.3, and any other provision hereunder where the quantity
of Abbott's purchases of Products or Net Sales is a factor
shall be adjusted based on the most recent six (6) month sales
of the affected Product in such country, multiplied by two (2)
and adjusted for the period that such Product is off the
market, to reflect the adverse impact to Abbott due to the
absence of regulatory clearance.
9.3 Customer Complaints. In the event Abbott or its Affiliates
receives a customer complaint regarding Products, Abbott shall
evaluate the complaint and promptly notify i-STAT in writing
regarding such complaint. If Abbott determines that the
complaint is due to a matter that is within i-STAT's
responsibilities hereunder, then i-STAT, at Abbott's request
and at i-STAT's expense, shall assist Abbott or its Affiliates
in follow-up correction of such complaints. Subject to the
provisions of any nondisclosure agreements by which the
Parties are bound, the Parties shall exchange on a
confidential basis all pertinent information regarding a
customer complaint
-45-
<PAGE> 46
with respect to i-STAT Products sold in the Co-exclusive FUSO
Territory, the HP Territory and the Distributor Territories,
or if the complaint involves a problem common to Abbott and
FUSO, HP and/or the i-STAT Distributors.
ARTICLE 10 - PRODUCT RECALL OR WITHDRAWAL
10.1 Event of Recall and Withdrawal. In the event: (a) any
governmental or regulatory authority in the Territory issues a
request, directive or order that Product be recalled or
withdrawn, or such request, directive or order is imminent;
(b) a court of competent jurisdiction orders such recall or
withdrawal; or (c) either Party reasonably determines after
consultation with the other that a recall or withdrawal is
necessary or advisable (each a "Recall"), the Parties shall
take all appropriate corrective action.
10.2 Expense of Recall. In the event a Recall results from any
cause or event arising from the manufacture, packaging,
shipment of Products by i-STAT and its Affiliates, or the
marketing, promotion, sale or distribution of Products by a
Third Party (excluding Third Parties in privity with Abbott),
or other cause or event attributable to i-STAT, its Affiliates
or Third Parties (excluding Third Parties in privity with
Abbott), i-STAT shall be responsible for the expense of the
Recall. In the event a Recall results from any cause or event
attributable to Abbott, its Affiliates or distributors and
arising from the marketing, promotion, sale or distribution of
Products by Abbott, its Affiliates or distributors, or other
cause or event attributable to Abbott, its Affiliates or
distributors, Abbott shall be responsible for the expense of
the Recall. In each instance, the Parties shall cooperate to
effectuate efficiently the Recall. For purposes of this
Agreement, Recall expenses shall include, without limitation,
the expenses of
-46-
<PAGE> 47
notification and destruction or return of the recalled or
withdrawn Product and Abbott's, its Affiliates' or
sub-distributors' costs for the Products recalled or
withdrawn.
ARTICLE 11 - TRANSITION PERIOD
11.1 Conduct During Transition Period. During the Transition
Period, except as otherwise provided for in this Agreement or
as Abbott shall otherwise consent (which consent shall not be
unreasonably withheld), i-STAT covenants and agrees that, with
respect to the Business, i-STAT shall:
(a) not enter into any transaction that would reasonably
be expected to affect the Business adversely;
(b) not amend any Third Party Agreements in any respect
that would affect adversely i-STAT's rights
thereunder, or terminate any of the Third Party
Agreements, other than in accordance with the terms
of such agreements for breach, or default in the
performance of any covenant or obligation thereunder
which default is not cured within any applicable
grace period;
(c) continue its pricing and sales practices
substantially in accordance with i-STAT's past
practices, and in accordance therewith, not offer any
financial terms or incentives to any customers to
purchase i-STAT Products more favorable than the
average cash discount or payment terms as offered by
i-STAT between January 1, 1998 through June 30, 1998;
(d) not enter into any contract providing for any
license, sale, assignment or otherwise transfer any
rights or grant any covenant not to sue with respect
to any i-STAT
-47-
<PAGE> 48
Know-How and Technology (as that term is defined in
Section 1.34 of the Funded Research & Development and
License Agreement) which would have a material
adverse impact on the Business;
(e) continue the customer service hotline and order entry
function with respect to the Business at the same
level of service as provided by i-STAT between
January 1, 1998 through June 30, 1998; and
(f) other than in the ordinary course of business, not
enter into any agreement with any Third Party for the
sale or resale of i-STAT Products or offer any
rebates or other agreements related to i-STAT
Products, unless i-STAT first obtains Abbott's prior
written consent. If Abbott grants such consent, then
such agreement shall be added as a Third Party
Agreement.
11.2 Customer Transition Matters. In accordance with the following
dates, except as otherwise contemplated by this Agreement or
as Abbott shall otherwise agree in writing in advance with
respect to the Business, in order effectively to maintain and
transition the Base Customers from i-STAT to Abbott or its
Affiliates, i-STAT and Abbott each covenant and agree that as
appropriate each shall or shall cause its Affiliates to:
(a) no later than thirty (30) days after the Starting
Date, and for a period of an additional thirty (30)
days, i-STAT shall participate in joint sales calls
with Abbott or its Affiliates, at the discretion of
Abbott, to introduce Abbott's or its Affiliates'
sales representatives to i-STAT's customers;
(b) prior to the Starting Date, i-STAT shall, with
Abbott, participate in planning for the effective
transition of the Base Customers to Abbott or its
Affiliates;
-48-
<PAGE> 49
(c) no later than fifteen (15) days after the Signing
Date, i-STAT and Abbott shall have an initial meeting
and shall continue to meet thereafter until the
Starting Date, as necessary, to integrate or
transition to Abbott or its Affiliates i-STAT's order
entry system, customer and contract numbers, pricing,
i-STAT Product list numbers and the like;
(d) prior to the Starting Date, i-STAT and Abbott shall
meet to determine the Parties' ability to and need
for an integration of systems and any concerns
regarding Year 2000 Compliant (as hereinafter
defined) issues associated with any such integration;
and
(e) prior to the Starting Date, i-STAT and Abbott shall
mutually agree to perform any other transition
activity deemed appropriate.
ARTICLE 12 - BOOKS AND RECORDS
12.1 Abbott and i-STAT each shall maintain proper books and records
in accordance with generally accepted accounting principles
reflecting Net Sales, Base AUP, AUP, Incremental AUP,
Estimated Cartridge Purchase Price, Actual Cartridge Purchase
Price, Purchase Price, Base Fully Burdened Manufacturing Costs
and Fully Burdened Manufacturing Costs calculations, as
appropriate. Upon thirty (30) days' prior written notice to
the audited Party (but not more frequently than once in any
Contract Year, unless there is a dispute, then as frequently
as is necessary), the requesting Party may retain, at its own
expense, an independent certified public accountant reasonably
acceptable to the audited Party to examine the audited Party's
books and records relating to the matters described herein,
which shall be transferred to, if not already at, the audited
Party's principal place of business. Such examination shall
occur at the audited Party's
-49-
<PAGE> 50
principal place of business during normal business hours for
the sole purpose of verifying the accuracy of such
calculations. Such accountant shall be required to execute a
mutually acceptable confidentiality agreement and shall report
to the requesting Party only the amount of any discrepancy in
the calculations. Within thirty (30) days after completion of
such examination, the Parties shall reconcile any underpayment
or overcharge, if any, by credit or debit memo; provided,
however, if such adjustment is to occur at the end of the
final Contract Year, any overpayment or underpayment shall be
paid by check or wire transfer to the affected Party within
thirty (30) days after the end of the final reconciliation.
Such examination rights may be exercised by the Parties only
with respect to records for the then current Contract Year and
the then prior Contract Year.
ARTICLE 13 - PATENTS AND TRADEMARKS
13.1 Trademark License. i-STAT hereby grants to Abbott and its
Affiliates a non-exclusive license, with the right to
sublicense, to use the i-STAT Trademarks in the Field with
respect to i-STAT Products, and in the Program Field (as that
term is defined in the Funded Research & Development and
License Agreement) with respect to Program Products, to
market, promote, distribute and sell Products in the
Territory. On or before January 1 of each Contract Year,
i-STAT shall provide Abbott with a Trademark report reflecting
all applications for Trademarks and the status thereof. In
addition, i-STAT shall, at its expense, file new applications
to register any or all of the i-STAT Trademarks in any or all
of the countries in the Territory, as may be reasonably
requested by Abbott. Abbott shall give i-STAT at least ninety
(90) days' prior written notice before marketing, promoting,
selling or distributing any Product under the i-STAT
-50-
<PAGE> 51
Trademarks in any country not identified in the i-STAT
Trademark report. The Parties shall mutually agree on the
trademark approach in any such country, taking into
consideration, among other things, the length of time required
to obtain trademark registration, laws relating to trademark
use, the existence of any conflicting trademark registrations,
applications or uses and the anticipated sales volumes of the
relevant Products in such country. Any use of an Abbott
trademark by i-STAT shall be subject to Abbott's prior
approval, which approval may be withheld by Abbott at Abbott's
sole discretion.
13.2 Trademark Ownership. It is understood and agreed that i-STAT,
is the sole and exclusive owner of all rights, title and
interests in and to the i-STAT Trademarks. Nothing contained
in this Agreement shall be construed as an assignment to
Abbott of any rights, title or interests in the i-STAT
Trademarks; it being understood that all rights, title and
interests relating to the i-STAT Trademarks are expressly
reserved by i-STAT, except for the rights being licensed
hereunder.
13.3 Infringement. Each Party shall notify the other Party of any
suspected infringements by Third Parties of the i-STAT
Trademarks in the Field or any patent or other proprietary
right of i-STAT in the Field that may come to such Party's
attention. i-STAT shall have the initial right to determine
whether any action shall be taken on account of any such
infringement, and i-STAT shall have the right to employ
counsel of its choosing and to direct the handling of the
litigation and any settlements thereof, at such i-STAT own
expense. In the event i-STAT does not pursue such potential
infringement within three (3) months after notice of such
potential infringement, Abbott shall have the right to take
action on its own behalf, to employ counsel of its choosing
and to direct the handling of the litigation and any
settlements thereof, at
-51-
<PAGE> 52
Abbott's own expense. The Parties agree to cooperate with each
other in maintaining, protecting and defending the Trademarks.
13.4 Possible Removal From Market. Except as provided in Section
13.5, in the event that the manufacture, use, sale or
importation for sale of Product becomes, or, in the opinion of
i-STAT and confirmed by Abbott, may become, the subject of any
claim, suit or proceeding for infringement or if the
manufacture, use, sale or importation for sale of the Product
is or is likely to be enjoined for infringement, i-STAT shall,
at its option and expense, do one (1) or more of the
following:
(a) obtain for Abbott, its Affiliates and
sub-distributors the right to use, sell and import
for sale the Product;
(b) modify the Product so that it becomes non-infringing
or replace the Product with a non-infringing product
while remaining in compliance with i-STAT's published
Specifications in effect at the time; or
(c) require that Abbott, its Affiliates and
sub-distributors cease to deliver the Product in the
affected country.
In the event i-STAT does not perform (a) or (b) above, and such
nonperformance reduces Abbott's annual Net Sales for Products *** Abbott either
may adjust the calculations of its purchase of Product and Net Sales under
Sections 2.2, 5.5 and 17.3, and any other provision hereunder where the quantity
of Abbott's purchases of Product or Net Sales is a factor, by the quantity of
Product affected by such nonperformance, or terminate this Agreement.
13.5 Third Party Claims for Infringement.
*** Confidential treatment requested
-52-
<PAGE> 53
(a) If a Third Party brings a legal action or
administrative proceeding against either or both of
the Parties alleging infringement by Product in the
Field in the Territory, the Parties agree that they
shall confer in good faith to determine the most
effective means of cooperating to defend their sole
and mutual interests. Each Party shall bear its own
expenses related to the defense unless otherwise
agreed at the time.
(b) If the Product which is the subject of the action or
proceeding is an i-STAT Product, i-STAT will be
financially responsible for any judgment and have the
first right to take the lead in the coordinated
defense.
(c) If the Product which is the subject of the action or
proceeding is a Program Product and it is clear that
the predominant aspect of the Product at issue was
contributed by one Party rather than the other, then
the contributing Party will be financially
responsible for any judgment and have the first right
to take the lead in the coordinated defense.
(d) If the Product which is the subject of the action or
proceeding is a Program Product and it is not clear
that the predominant aspect of the Program Product at
issue was contributed by one Party rather than the
other, then the Parties will share equally in any
judgment and negotiate in good faith as to which
Party takes the lead in the coordinated defense.
(e) In any event, with respect to each such legal action
or administrative proceeding:
-53-
<PAGE> 54
(i) Neither Party shall have the right to enter
into any financial, commercial or other
settlement with such Third Party without the
consent of the other Party, which consent
shall not be withheld unreasonably.
(ii) Neither Party shall have the right to make
any adverse admissions relating to
infringement without the consent of the
other Party, which consent shall not be
withheld unreasonably.
(iii) Each Party, upon notice to the other Party,
shall have the right to mitigate potential
damages as such Party deems appropriate,
including, without limitation, stopping the
manufacture of the alleged infringing
Product or action, stopping
commercialization of such alleged infringing
Product or action, stopping
commercialization of such alleged infringing
Program Product or action, redesigning the
alleged infringing Product or action, and
reconfiguring the alleged infringing Product
or action. Any such mitigation taken by a
Party shall not be used against that Party
when determining that Party's performance
under this Agreement.
(f) Any lead taken by a Party under this Section 13.5
relating to defending the other Party in such legal
action or administrative proceeding shall not be used
against the non-lead Party when determining the
non-lead Party's performance under this Agreement.
-54-
<PAGE> 55
Only if a Party fails to perform its obligations under this Section
13.5, shall the other Party be entitled to indemnification for such obligations
pursuant to the provisions of Article 15.
13.6 Co-Labeled Product. i-STAT shall sell Products identified by
an Abbott trademark or trade name only to Abbott and its
Affiliates or to an Abbott-appointed sub- distributor.
13.7 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE
OTHER FOR ANY AMOUNTS REPRESENTING ITS LOSS OF PROFITS, LOSS
OF BUSINESS, OR INDIRECT, SPECIAL, EXEMPLARY, CONSEQUENTIAL OR
PUNITIVE DAMAGES, ARISING FROM THE PERFORMANCE OR
NONPERFORMANCE OF THIS AGREEMENT OR ANY ACTS OR OMISSIONS
ASSOCIATED THEREWITH OR RELATED TO THE USE OF ANY ITEMS OR
SERVICES FURNISHED HEREUNDER, WHETHER THE BASIS OF THE
LIABILITY IS BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE
AND STRICT LIABILITY), STATUTES OR ANY OTHER LEGAL THEORY,
EXCEPT FOR A BREACH BY i-STAT OR ITS AFFILIATES OF SECTION
14.6.
ARTICLE 14 - REPRESENTATIONS AND WARRANTIES
14.1 i-STAT Product Representations and Warranties. i-STAT
represents and warrants that Product delivered to Abbott
hereunder shall be:
(a) manufactured in accordance with cGMPs and the
Specifications;
(b) free from defects in material and workmanship until
one (1) year after date of shipment for the Analyzer
and/or the shelf life for Cartridges and Ancillary
Products having an expiration date (the "Warranty
Period");
(c) free and clear of any Third Party security interest,
lien or encumbrance;
-55-
<PAGE> 56
(d) manufactured in compliance with all applicable
foreign, federal, state and local laws and
regulations in the location of manufacture; and
(e) Year 2000 Compliant as of July 1, 1999 in accordance
with the following terms:
(i) all Product that operate on date data software
and hardware;
(ii) all hardware and software supplied by i-STAT;
and
(iii) all hardware and software used in i-STAT's
manufacturing process of Product shall have no lesser
functionality with respect to records containing
dates before or after January 1, 2000, than
previously with respect to dates prior to January 1,
2000 ("Year 2000 Compliant").
With respect to clauses (a), (b) and (d) of this Section 14.1,
the Parties acknowledge and agree that unless i-STAT fails to deliver
Product consistently to Abbott, at a mutually agreed upon level, any
Product not conforming to clauses (a), (b) and (d) of this Section 14.1
shall be handled in accordance with Section 14.2 and shall not
constitute a material breach of this Agreement.
14.2 Product Replacement or Repair. At its option, i-STAT may
repair or replace Products returned during the Warranty Period
which fail to meet the warranty set forth in Section 14.1
("Defective Products"). Customers in the United States may
return Defective Products directly to i-STAT. Customers
outside the United States shall return Defective Products to
Abbott, its Affiliates or sub-distributors for return to
i-STAT. i-STAT shall accept returned Products in accordance
with the terms in Schedule 14.2. i-STAT shall bear the cost of
return
-56-
<PAGE> 57
shipment of Defective Products to i-STAT and the cost of
shipping repaired or replaced Products to the customer or
Abbott its Affiliates and sub-distributors, as the case may
be.
14.3 Exclusions. i-STAT shall have no obligations with respect to
any defects, damage, or nonconformances of Products that
result from: improper installation by other than i-STAT or an
i-STAT-approved Third Party, operation or maintenance;
unauthorized repair; tampering, unusual environmental
operating conditions outside the Specifications; or from
accidents, or acts of God; or other events of force majeure,
as described in Section 20.1, after Delivery. If any Products
returned for repair or replacement are not defective or
nonconforming or contain defects or a nonconforming condition
caused by a factor outside the scope of i-STAT's warranty, ***
i-STAT's normal service rate for (a) services performed with
respect to such defective returned units, or (b) "no fault
found" with respect to returned units which are not defective,
but only for such returned Products *** stated as a percentage
of returns to total units of Products sold by i-STAT. The
Parties shall meet at least every six (6) months to review the
status of the costs of returns and shall modify the percentage
stated above, as is appropriate.
14.4 Limitation on Warranties. i-STAT MAKES NO WARRANTIES REGARDING
THE PRODUCTS OTHER THAN THE EXPRESS WARRANTIES IN THIS ARTICLE
AND THERE SHALL BE NO IMPLIED OR STATUTORY WARRANTIES,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.
14.5 Patent Representations and Warranties.
*** Confidential treatment requested
-57-
<PAGE> 58
(a) Except as provided in Schedule 14.5, i-STAT represents and
warrants to Abbott as of the Signing Date, and as of the
Closing Date as though restated on and as of the Closing Date,
that:
(i) to its knowledge, there are no Third Party patents,
trademarks or other proprietary rights which are valid and
which would be infringed by making, having made, using,
selling, offering for sale or importing i-STAT Products in
the Territory in accordance with the terms of this
Agreement;
(ii) at no time prior to the termination of the last to
terminate of the Alliance Agreements shall i-STAT enter
into any transaction providing for debt financing which
would (A) result in the imposition of a lien, license,
security interest or other encumbrance upon or transfer of
any of i-STAT's Know-How and Technology, or (B) prohibit or
materially impair i-STAT from fulfilling its obligations
under the Alliance Agreements; and
(iii) to its knowledge, i-STAT is not, and as a result of the
execution and delivery of the Alliance Agreements or the
performance of i-STAT thereunder will not be in violation
of or lose any rights pursuant to any license, sublicense
or agreement previously provided to a Third Party.
14.6 Special Representations Warranties. i-STAT represents and warrants to
Abbott that as of the Signing Date and as of the Closing Date as
though restated on and as of the Closing Date as follows:
(a) The execution, delivery and performance of this Agreement by
i-STAT shall not be in conflict with or result in the breach
of any obligations of i-STAT under any
-58-
<PAGE> 59
agreement by and between i-STAT and FUSO and i-STAT and HP,
respectively, including, without limitation, the FUSO
Agreement, the FUSO Development Agreement, the HP Stock
Purchase Agreement, the FUSO License Agreement, the HP
Agreement or the HP License Agreement;
(b) There is no provision in the FUSO Agreement that will prevent
Abbott from obtaining exclusive distribution rights to i-STAT
Products in accordance with the terms of Section 2.2;
(c) FUSO only has non-exclusive rights to i-STAT Products in the
Co-exclusive Territory and FUSO has no rights to i-STAT
Products outside the Co-exclusive Territory; and
(d) The representations and warranties of clauses (a), (b), and
(c) of this Section 14.6 shall survive for so long as the
agreement between i-STAT and HP or FUSO, respectively,
pertaining to such representations and warranties is still in
effect.
14.7 General Representations and Warranties. Each Party represents and
warrants to the other Party as of the Signing Date and as of the
Closing Date as though restated on and as of the Closing Date, as
follows:
(a) It is a corporation duly organized and validly existing under
the laws of its state of incorporation;
(b) It has the power and authority to execute and deliver the
Alliance Agreements and to perform its obligations thereunder;
-59-
<PAGE> 60
(c) The execution, delivery and performance by it of the
Alliance Agreements and its compliance with the terms
and provisions thereof does not and will not conflict
with or result in a breach of any other agreement or
relationship; and
(d) All hardware and software used in the performance of
its duties and obligations hereunder shall be Year
2000 Compliant no later than July 1, 1999, which
representation shall survive the Closing.
ARTICLE 15 - GENERAL INDEMNIFICATION
15.1 i-STAT Indemnification. i-STAT shall indemnify, defend and
hold Abbott and its Affiliates and their officers, directors,
employees, and representatives harmless from and against any
and all claims, causes of action, suits, proceedings, losses,
damages, demands, fees, expenses, fines, penalties and costs
(including reasonable attorney's fees) arising out of, related
to or in connection with: (a) the manufacture, shipment or use
of Product; (b) the breach of i-STAT's warranties,
representations or covenants set forth in this Agreement; (c)
the termination by i-STAT of any distributor of Product in the
Territory; and/or (d) the wrongful or negligent acts or
omissions on the part of i-STAT's employees, agents or
representatives.
15.2 Abbott Indemnification. Abbott shall indemnify, defend and
hold i-STAT and its Affiliates and their officers, directors,
employees, and representatives harmless from and against any
and all claims, causes of action, suits, proceedings, losses,
damages, demands, fees, expenses, fines, penalties and costs
(including reasonable attorney's fees) arising out, related to
or in connection with: (a) the breach of Abbott's warranties,
representations or covenants set forth in
-60-
<PAGE> 61
this Agreement; or (b) the wrongful or negligent acts or
omissions on the part of Abbott's employees, agents or
representatives.
15.3 Cooperation. Each Party shall promptly notify the other Party
of any claim or potential claim covered by the indemnification
provisions of this Article 15 and under Section 2.10, and
shall include sufficient information to enable the other Party
to assess the facts. Each Party shall cooperate with the other
Party in the defense of all such claims. No settlement or
compromise shall be binding on a Party without such Party's
prior written consent, which consent shall not be unreasonably
withheld or delayed.
15.4 Insurance. i-STAT shall procure and maintain during the Term
comprehensive commercial liability insurance, including
contractual and products liability coverage, in aggregate
annual limits of $20,000,000. i-STAT shall cause Abbott and
its Affiliates to be named as an additional insured on such
policies and i-STAT policies shall be primary with respect to
any indemnification of Abbott and its Affiliates hereunder.
i-STAT shall provide Abbott with not less than thirty (30)
days' prior written notice of any cancellation, modification
or reduction of coverage under such policies.
ARTICLE 16 - INTENTIONALLY OMITTED
ARTICLE 17 - TERM AND TERMINATION
17.1 Term. Subject to early termination as set forth in this
Article 17, this Agreement shall begin on the Signing Date and
shall continue until December 31, 2003. Thereafter, this
Agreement shall be extended automatically for one (1)
additional Contract Year at a time, unless
-61-
<PAGE> 62
either Party provides the other Party with not less than
twelve (12) months' prior written notice of such Party's
decision to terminate this Agreement.
17.2 Termination For Cause. Either Party may terminate this
Agreement for cause upon written notice to the other Party in
the event the other Party: (a) appoints a receiver, executes
an assignment for the benefit of creditors or files or
otherwise becomes subject to bankruptcy or insolvency
proceedings; or (b) materially breaches this Agreement and
fails to cure such breach within sixty (60) days after receipt
of written notice of breach from the non-breaching Party, as
such cure period may be extended for such additional period as
the non-breaching Party reasonably determines that the
breaching Party is diligently pursuing a cure of such breach.
17.3 By i-STAT For Growth Deficiencies. i-STAT shall have the right
to terminate this Agreement at the end of the third Contract
Year only if Abbott ***. In the event of termination pursuant
to this Section 17.3, Abbott and i-STAT shall continue to
perform their obligations hereunder for a period *** to enable
i-STAT to transition back into the business. (See example in
Schedule 17.3)
17.4 By Abbott for Change of Control. Abbott shall have the right
to terminate this Agreement upon twelve (12) months' prior
written notice to i-STAT in the event of a Change of Control
of i-STAT.
17.5 Continuation of Force Majeure. Either Party may terminate this
Agreement in the event a force majeure event continues for one
hundred eighty (180) consecutive days and prevents a Party
from materially performing its obligations under this
Agreement.
*** Confidential treatment requested
-62-
<PAGE> 63
17.6 Delay of Closing. This Agreement may be terminated, and the
transactions contemplated abandoned, by either Party by
written notice to the other Party if the Closing Date does not
occur on or before the date which is one hundred and thirty
(130) days from the Signing Date.
17.7 Accrued Obligations. Termination, expiration, cancellation or
abandonment of this Agreement through any means and for any
reason shall not relieve the Parties of any obligation
accruing prior thereto and shall be without prejudice to the
rights and remedies of either Party with respect to any
antecedent breach of any of the provisions of this Agreement.
17.8 Additional Remedies for Breach. Notwithstanding the terms and
conditions of Section 17.2, neither Party shall be obligated
to terminate this Agreement in the event the other Party
materially breaches this Agreement. The non-breaching Party
shall have the right to seek, in accordance with Section 21.6,
other remedies available to it at law and equity to recover
for such breach, without having to terminate the Agreement.
ARTICLE 18 - CONSEQUENCES OF TERMINATION
18.1 Buy-out of Assets and Inventory. In the event of any
termination of this Agreement pursuant to Article 17, i-STAT
shall, within ninety (90) days after such termination,
purchase from Abbott and its Affiliates *** the Analyzers that
are placed with customers by Abbott and its Affiliates to
Third Parties and at Abbott's and its Affiliates' *** any
inventory of Product held by Abbott or its Affiliates.
18.2 Termination Fee. In the event of any termination of this
Agreement pursuant to Article 17, except for termination by
i-STAT for cause under Section 17.2 or Section 17.3, and
*** Confidential treatment requested
-63-
<PAGE> 64
except for termination by Abbott under Section 17.1, i-STAT
shall pay to Abbott upon the effective date of such
termination, a one-time termination fee *** which fee shall
not be deemed a penalty.
18.3 Prepayment Refund. In the event of any termination of this
Agreement pursuant to Article 17, except for termination by
i-STAT for cause under Section 17.2 or Section 17.3, i-STAT
shall refund to Abbott in cash, upon the effective date of
such termination, any Prepayments made to i-STAT and not
credited to Abbott pursuant to Section 5.5.
18.4 Residual Payments. In the event of any termination of this
Agreement pursuant to Article 17, except for termination by
i-STAT for cause under Section 17.2 or Section 17.3, and
except for termination by Abbott under Section 17.1, and in
consideration of Abbott efforts in developing i-STAT Product
sales and goodwill during the Term, i-STAT shall pay for five
(5) years following the effective date of termination of this
Agreement, a residual to Abbott, equal to the percentages
listed below for the appropriate year, based on Abbott's and
its Affiliates' and sub-distributors' Net Sales of Products
*** during the final twelve (12) months of the Agreement prior
to such termination. i-STAT shall make the residual payments
to Abbott in United States dollars by check or wire transfer
on the first five (5) anniversaries of the termination of this
Agreement. The residual payment schedule is as follows:
Year Percentage of Net Sales
1 ***
2 ***
3 ***
4 ***
5 ***
*** Confidential treatment requested
-64-
<PAGE> 65
ARTICLE 19 - CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS
19.1 Confidentiality. The Parties acknowledge and agree that during
the Term, each of them and their Affiliates may exchange
Confidential Information, and the disclosure and use of any
such Confidential Information shall be governed by the
provisions of this Article 19 and not by the provisions of the
Confidentiality and Standstill Agreement between the Parties,
dated March 11, 1998. Each Party shall use the Confidential
Information of the other Party only for the purpose of the
activities contemplated by this Agreement and shall not
disclose such Confidential Information to a Third Party except
in accordance with the provisions of this Agreement. The
Parties shall ensure that their Affiliates keep all
Confidential Information exchanged hereunder confidential in
accordance with the provisions hereof as though the Affiliates
were parties hereto. This provision shall remain in effect for
a period of three (3) years after termination or expiration of
this Agreement for all Confidential Information excluding
Trade Secrets. Trade Secrets shall be kept confidential by the
Receiving Party (as defined in Section 19.2 hereof) according
to the terms set forth in Section 19.2.
19.2 Handling of Trade Secrets. During the course of its
performance hereunder, a Party (the "Disclosing Party") may
desire or be requested to disclose Confidential Information to
the other Party (the "Receiving Party"), which the Disclosing
Party considers a Trade Secret. In such event, the Disclosing
Party first shall inform the Receiving Party, on a
non-confidential basis, the general nature of the Trade Secret
information. The Receiving Party shall have ten (10) days to
decide whether it wishes to have such Trade Secrets disclosed
to it and to inform the Disclosing Party in writing that it
wishes to receive such a disclosure. Any Trade Secrets so
disclosed between the Parties shall be marked "Trade Secret,"
and the Receiving Party shall not
-65-
<PAGE> 66
disclose or use such Trade Secret for the Term and thereafter
except as expressly permitted under this Agreement. In the
event the Disclosing Party discloses the Trade Secrets to the
Receiving Party without written approval of the Receiving
Party and/or without appropriately marking such information as
"Trade Secret" that Trade Secret shall be handled as
Confidential Information under Section 19.1.
19.3 Confidential Treatment. i-STAT shall seek confidential
treatment for the terms and conditions of this Agreement to
the fullest extent permitted by the SEC and any other
governmental agency or self-regulatory organization to which
i-STAT provides a copy of this Agreement or any of the other
Alliance Agreements. Prior to seeking confidential treatment
from the SEC or any other governmental agency or
self-regulatory organization for any such document, i-STAT
shall consult with Abbott and Abbott's counsel and provide
them with a reasonable opportunity to request the inclusion of
specified provisions in any request by i-STAT for confidential
treatment.
19.4 Public Announcements. Neither Party shall make any public
announcement concerning the Alliance Agreements, nor make any
public statement which includes the name of the other Party or
any of its Affiliates, or otherwise use the name of the other
Party or any of its Affiliates in any public statement or
document without the consent of the other Party, which consent
shall not be unreasonably withheld except: (i) as may be
required by law or judicial order, without the consent of the
other Party, which consent shall not be unreasonably withheld;
or (ii) either Party may include in a subsequent public
statement or document, information regarding the Alliance
Agreements which has already been approved by the other Party.
-66-
<PAGE> 67
ARTICLE 20 - FORCE MAJEURE
20.1 Event of Force Majeure. Neither Party shall be held in breach
of this Agreement for failure to perform any of its
obligations hereunder and, subject to the terms and conditions
of Section 17.5, the time required for performance shall be
extended for a period equal to the period of such delay,
provided that such delay has been caused by or is a result of
any acts of God; acts of the public enemy; civil strife; wars
declared or undeclared; embargoes; labor disputes, including
strikes, lockouts, job actions or boycotts; fires; explosions;
floods; shortages of material or energy; events caused by
reason of laws or regulations or orders by any government,
governmental agency or instrumentality or by any other
supervening unforeseeable circumstances beyond the reasonable
control of the Party so affected. The Party so affected shall:
(a) give prompt written notice to the other Party of the
nature and date of commencement of the force majeure event and
its expected duration; and (b) use its reasonable best efforts
to relieve the effect of such cause as rapidly as possible.
ARTICLE 21 - MISCELLANEOUS
21.1 Relationship of the Parties. The relationship of the Parties
under this Agreement is that of independent contractors.
Nothing contained in this Agreement shall be construed so as
to constitute the Parties as partners, joint venturers or
agents of the other. Neither Party or its Affiliates has any
express or implied right or authority under this Agreement to
assume or create any obligations or make any representations
or warranties on behalf of or in the name of the other Party
or its Affiliates.
21.2 Assignment. Neither Party may assign its rights or obligations
under this Agreement without the prior written consent of the
other Party, which consent shall not be
-67-
<PAGE> 68
unreasonably withheld; provided, however, that Abbott may
assign this Agreement, in whole or in part, without such
consent, to an Affiliate of Abbott; and provided, further,
that Abbott shall promptly notify i-STAT of any such
assignment. Any permitted assignee shall assume all
obligations of its assignor under this Agreement. No
assignment shall relieve any Party of responsibility for the
performance of any obligation which such Party may have or
incur hereunder.
21.3 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of each of the Parties and its successors and
permitted assigns.
21.4 Entire Agreement. This Agreement, including the Schedules,
which are incorporated herein by reference, together with the
other Alliance Agreements and all documents delivered in
connection therewith, set forth the entire understanding of
the Parties concerning the subject matter hereof and
supersedes all written or oral prior agreements or
understandings with respect thereto.
21.5 Governing Law. This Agreement and the legal relations between
the Parties hereunder shall be construed, interpreted and
governed by the law of the State of New York, without regard
to its conflict of laws principles.
21.6 Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be
resolved through the alternate dispute resolution procedure
described in Schedule 21.6; provided, however, that this shall
not prevent a Party from seeking and obtaining injunctive
relief in a court of competent jurisdiction.
21.7 Notices. All notices hereunder shall be in writing and shall
be: (a) delivered personally; (b) mailed by registered or
certified mail, postage prepaid; (c) sent by overnight
-68-
<PAGE> 69
courier; or (d) sent by facsimile or express mail to the
following addresses of the respective Parties:
If to Abbott: Abbott Laboratories
Director, Acquisitions and Technology Assessment
D-9RK, Building AP6C
100 Abbott Park Road
Abbott Park, Illinois 60064-3500
Facsimile Number: (847) 937-6951
with copy to: Divisional Vice President
Domestic Legal Operations
D-322, Building AP6D
100 Abbott Park Road
Abbott Park, Illinois 60064-3500
Facsimile Number: (847) 938-1206
If to i-STAT: i-STAT Corporation
President and Chief Executive Officer
303 College Road East
Princeton, New Jersey 08540
Facsimile Number: (609) 243-0507
with copy to: Paul, Hastings, Janofsky & Walker LLP
1055 Washington Boulevard
Stamford, CT 06901
Attention: Esteban A. Ferrer, Esq.
Facsimile Number: (203) 359-3031
Notice shall be effective: (i) upon receipt if personally delivered; (ii) on the
third Business Day following the date of mailing if sent by registered or
certified mail; (iii) on the second Business Day following the date of delivery
to the express mail service if sent by express mail; and (iv) on the first
Business Day following the date of transmission or delivery to the overnight
courier if sent by facsimile or overnight courier. A Party may change its
address listed above by sending notice to the other Party.
-69-
<PAGE> 70
21.8 Severability. If any provision of this Agreement for any
reason shall be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall
not affect any other term or provision hereof, and this
Agreement shall be interpreted and construed as if such term
or provision, to the extent the same shall have been held to
be invalid, illegal or unenforceable, had never been contained
herein.
21.9 Use of Funds. i-STAT has no present plan or intention to use
the funds from the sale of stock to Abbott under the Stock
Purchase Agreement and the payment of the Prepayments
hereunder ("Funds") for any purpose other than the improvement
and expansion of i-STAT's manufacturing operations, the
development of New Products and Program Products, working
capital, and general corporate purposes consistent with the
foregoing. Abbott acknowledges that i-STAT's plans and
intentions must of necessity be subject to change based on
numerous factors, including the degree of market acceptance of
Products, technological developments, competitive conditions
and other factors which require i-STAT to keep the interests
of all its shareholders in mind. Subject to the foregoing,
i-STAT acknowledges the importance of applying the Funds
towards the support of its strategic relationship with Abbott,
as evidenced by the Alliance Agreements.
21.10 Interpretation. When a reference is made in this Agreement to
Sections or Schedules, such references shall be to a Section
or Schedule to this Agreement unless otherwise indicated. The
words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings
contained in this Agreement have been inserted for convenience
of reference only and shall not be relied upon in construing
this Agreement. Use of any gender herein to refer to any
person shall
-70-
<PAGE> 71
be deemed to comprehend masculine, feminine, and neuter unless
the context clearly requires otherwise.
21.11 Waiver or Modification of Agreement. No waiver or modification
of any of the terms of this Agreement shall be valid unless in
writing and signed by authorized representatives of both
Parties. Failure by either Party to enforce any of its rights
under this Agreement shall not be construed as a waiver of
such rights nor shall a waiver by either Party in one or more
instances be construed as constituting a continuing waiver or
as a waiver in other instances.
21.12 Survival. Expiration or early termination of this Agreement
shall not relieve either Party of its obligations incurred
prior to such expiration or early termination. The following
provisions shall survive expiration or early termination of
this Agreement: Article 1, Sections 2.10, 5.3, 5.4, 5.8,
Articles 10 and 12, Sections 13.5, 13.6 and 13.7, Articles 14
and 15, Section 17.7, Article 18, Sections 19.1, 19.2, 21.5,
21.6, 21.7 and 21.12.
21.13 Headings. The captions to the Articles and Sections in this
Agreement are inserted for convenience only and are not a part
hereof.
21.14 Counterparts. This Agreement may be executed in two (2)
original counterparts, each of which shall be deemed an
original, but both of which together shall constitute one and
the same instrument.
21.15 Mutual Drafting. This Agreement is the joint product of Abbott
and i-STAT, and each provision hereof has been subject to the
mutual consultation, negotiation and agreement of the Parties
and their respective legal counsel and advisers and any rule
of construction that a document shall be interpreted or
construed against the drafting party shall not be applicable.
-71-
<PAGE> 72
IN WITNESS WHEREOF, each Party has caused this Marketing and
Distribution Agreement to be executed on its behalf by its duly authorized
officer as of the Signing Date.
ABBOTT LABORATORIES i-STAT CORPORATION
By:/s/ Miles D. White By:/s/ William P. Moffitt
Name: Miles D. White Name: William P. Moffitt
Title: Executive Vice President Title: President and Chief Executive Officer
Date: August 3, 1998 Date: August 3, 1998
-72-
<PAGE> 1
EXHIBIT 10.46
FUNDED RESEARCH & DEVELOPMENT AND LICENSE AGREEMENT
THIS AGREEMENT is made by and between i-STAT Corporation ("i-STAT"), a
Delaware corporation having its principal place of business at 303 College Road
East, Princeton, New Jersey 08540 and Abbott Laboratories ("Abbott"), an
Illinois corporation having its principal place of business at 100 Abbott Park
Road, Abbott Park, Illinois 60064-3500.
WITNESSETH:
WHEREAS, Abbott has experience in the research, development,
manufacture and marketing of diagnostic tests;
WHEREAS, i-STAT has experience in the research, development,
manufacture and marketing of medical diagnostic products for point-of-care
analysis;
WHEREAS, i-STAT and Abbott have conducted discussions regarding
collaboratively developing diagnostic tests for commercialization that utilize
and adapt i-STAT Know-How and Technology (as hereinafter defined) and Abbott
Know-How and Technology (as hereinafter defined);
WHEREAS, Abbott desires to provide i-STAT with funding for such
research and development work,
WHEREAS, i-STAT agrees to perform such research and development work;
WHEREAS, i-STAT has entered into a Distribution Agreement with FUSO
Pharmaceutical Industries, Ltd. and JCR Pharmaceutical Co. Ltd. (together
"FUSO") dated August 23, 1988 ("FUSO Agreement") for the distribution of certain
of such i-STAT products in
2
<PAGE> 2
Japan, South Korea and Taiwan and, on the same date, has entered into a
Development Agreement with FUSO (the "FUSO Development Agreement") and a
Manufacturing License Agreement with FUSO (the "FUSO License Agreement");
WHEREAS, i-STAT has entered into a Distribution Agreement with
Hewlett-Packard Company ("HP") dated July 28, 1995 ("HP Agreement") for the
distribution of certain of such i-STAT products in Europe, the Middle East and
Africa, and on the same date, entered into a License Agreement with HP ("HP
License Agreement") for the license rights to certain i-STAT intellectual
property in Europe, the Middle East and Africa;
WHEREAS, concurrent with this Agreement, i-STAT and Abbott are
executing stock purchase and related agreements by which Abbott shall acquire a
minority ownership interest in i-STAT ("Stock Purchase Agreements");
WHEREAS, concurrent with this Agreement, i-STAT and Abbott are
executing a distribution agreement by which Abbott shall obtain exclusive or
co-exclusive rights to distribute i-STAT Products (as hereinafter defined) and
exclusive rights to distribute Program Products (as hereinafter defined) in the
Field (as hereinafter defined) ("Marketing and Distribution Agreement" and,
together with this Agreement and the Stock Purchase Agreements, the "Alliance
Agreements").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and subject to the terms and conditions set forth below,
i-STAT and Abbott hereby agree as follows:
3
<PAGE> 3
ARTICLE 1. DEFINITIONS
The following words and phrases, when used herein with initial capital
letters, shall have the meanings set forth or referenced below:
1.1 "Abbott Know-How and Technology" shall mean Abbott's and its
Affiliates' (as hereinafter defined) proprietary rare reagents, immunoassay
system technology, calibrators and controls and accompanying detection
technology, including, but not limited to, manufacturing or production
techniques, formulations, methods, products and processes, and any and all
patents, patent applications, Trademarks (as hereinafter defined), trade names,
service marks, copyrights, know-how, Trade Secret (as hereinafter defined) or
other proprietary rights of Abbott and its Affiliates relating thereto, that are
owned or licensed by Abbott or its Affiliates prior to the Closing Date (as
hereinafter defined) or are extensions to Abbott's proprietary rare reagents,
immunoassay system technology, calibrators and controls and accompanying
detection technology, developed after the Closing Date in programs funded
outside the R&D Program (as hereinafter defined).
1.2 "Actual Cost" shall mean ***
*** CONFIDENTIAL TREATMENT REQUESTED.
4
<PAGE> 4
1.3 "Affiliate" shall mean, with respect to each Party (as hereinafter
defined), any legal entity that is, directly or indirectly, controlling,
controlled by or under common control with such Party. For purposes of this
definition, a Party shall be deemed to control another entity if it owns or
controls, directly or indirectly, more than fifty percent (50%) of the voting
equity of the other entity (or other comparable ownership interest for an entity
other than a corporation).
1.4 "Analyte" shall mean an individual compound, protein or fragment
thereof, or substance which is the target of quantitative or qualitative
measurement.
1.5 "Analyzer" shall mean a device that processes Cartridges (as
hereinafter defined) and is capable of detecting at least one (1) Analyte for
use in the Field (as hereinafter defined), including analyzers integrated into
in vitro diagnostic devices, but excluding analyzers which are not integrated
into in vitro diagnostic devices, which devices are designed primarily for the
delivery of patient care (e.g., the monitors currently being marketed and
distributed by HP pursuant to a license from i-STAT).
1.6 "Ancillary Products" shall mean any hardware (not including
Cartridges) and/or software that is not part of an Analyzer, but is essential to
the use of an Analyzer (e.g., a simulator device used for testing Analyzers by
simulating certain of the electrical characteristics of a Cartridge or by some
other testing means) and which is identified on Schedule 1.6 as may be amended
from time to time.
1.7 "AUP" shall mean the average unit selling price.
5
<PAGE> 5
1.8 "Business Day" shall mean any day other than a day which is a
Saturday or Sunday or other day on which commercial banks in New York, New York
are authorized or required to remain closed.
1.9 "Calendar Quarter" shall mean a period of three (3) consecutive
calendar months commencing on January 1, April 1, July 1 or October 1 of any
Contract Year (as hereinafter defined).
1.10 "Cartridge" shall mean the disposable component of a Program
Product that contains the i-STAT Sensors (as hereinafter defined) and fluid
handling channels and operate on the Analyzer or any other analyzer or
integrated device sold by a Third Party (as hereinafter defined) under an
agreement with i-STAT.
1.11 "Change of Control" shall mean: (a) the consolidation or merger of
i-STAT or any Affiliate of i-STAT with or into any Third Party (as hereinafter
defined) wherein the shareholders of i-STAT immediately prior to such
transaction shall cease to be the holders of at least fifty percent (50%) of the
outstanding securities of the surviving corporation in such transaction; (b) the
assignment, sale, transfer, lease or other disposition of all or substantially
all of the assets of i-STAT; or (c) the acquisition by any Third Party or group
of Third Parties acting in concert, of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission ("SEC") under the
Securities and Exchange Act of 1934) of more than fifty percent (50%) of the
outstanding shares of voting stock of i-STAT.
1.12 "Closing" shall mean the closing of the transaction provided for
in this Agreement, as more fully described in Article 14.
1.13 "Closing Date" shall mean the date on which the Closing occurs.
6
<PAGE> 6
1.14 "Co-exclusive FUSO Territory" shall mean the territory into which
FUSO currently has the right to distribute certain i-STAT Products on a
non-exclusive basis pursuant to the FUSO Agreement, which territory shall be
reduced from time to time pursuant to Section 4.4. As of the Signing Date (as
hereinafter defined), the Co-exclusive FUSO Territory consists of Japan, South
Korea and Taiwan.
1.15 "Commercialize" or "Commercialization" shall mean to promote,
market, sell and/or distribute.
1.16 "Confidential Information" shall mean any and all technical data,
information, materials and other know-how including Trade Secrets presently
owned by or developed by, on behalf of, or derived either directly or indirectly
from Program Technology (as hereinafter defined) of either Party and/or its
Affiliates during the Term (as hereinafter defined) which relates to an i-STAT
Product or a Program Product, its development, manufacture, promotion,
marketing, distribution, sale or use, and any and all financial data and
information relating to the business of either of the Parties and/or of their
Affiliates, which a Party and/or its Affiliates discloses to the other Party
and/or its Affiliates in writing and identifies as being confidential, or if
disclosed orally, visually or through some other media, is identified as
confidential at the time of disclosure and is summarized in writing within
thirty (30) days of such disclosure and identified as confidential, except any
portion thereof which:
(a) is known to the receiving Party and/or its Affiliates at the
time of disclosure, as evidenced by its written records;
7
<PAGE> 7
(b) is disclosed to the receiving Party and/or its Affiliates by a
Third Party having a right to make such disclosure;
(c) becomes patented, published, or otherwise part of the public
domain through no fault of the receiving Party and/or its
Affiliates; or
(d) is independently developed by or for the receiving Party
and/or its Affiliates without use of Confidential Information
disclosed hereunder, as evidenced by its written records.
1.17 "Contract Year" shall mean a calendar year during the Term
beginning on January 1, except that the first Contract Year may begin on the
Starting Date, and shall end on December 31, 1999.
1.18 "Date of First Market Launch" shall mean the date on which Abbott
or its Affiliates first transfer title to and sell Program Product (other than a
Program Product used for clinical studies) to a Third Party in the Territory (as
hereinafter defined) after receipt of regulatory approval (if required in such
country of first market launch).
1.19 "Distributor Territories" shall mean those countries identified on
Schedule 1.19, as may be amended from time to time in accordance with the
provisions of Section 4.4.
1.20 "FDA" shall mean the United States Food and Drug Administration or
any successor agency thereto.
1.21 "Field" shall mean the professionally attended human healthcare
delivery market, including, without limitation, hospitals, physician office
laboratories, alternate site facilities, surgi-centers, emergicare, ambulances
and home care. Subject to Abbott's right of first negotiation as set forth in
Section 2.5 of the Marketing and Distribution Agreement, Field shall not include
the consumer self-testing market.
8
<PAGE> 8
1.22 "510K Filing" shall mean a pre-market notification submission
filed with the FDA requesting clearance to distribute commercially a medical
device for human use in the United States (as hereinafter defined) based on
substantial equivalence to a device currently in commercial distribution.
1.23 "Foreign Regulatory Agency" shall mean an agency or entity of a
government responsible for approving the marketing, sale and/or distribution of
Program Products in a country other than the United States.
1.24 "Fully Burdened Manufacturing Costs" shall mean ***
1.25 "FUSO Agreement" shall mean the Distribution Agreement dated
August 23, 1988, between i-STAT and FUSO.
1.26 "FUSO Development Agreement" shall mean the Development Agreement
dated August 23, 1988, between i-STAT and FUSO.
1.27 "FUSO License Agreement" shall mean the Manufacturing License
Agreement dated August 23, 1988, between i-STAT and FUSO.
1.28 "HP Agreement" shall mean the Distribution Agreement dated July
28, 1995, between i-STAT and HP.
*** CONFIDENTIAL TREATMENT REQUESTED.
9
<PAGE> 9
1.29 "HP Exclusivity Period" shall mean the period under the HP
Agreement during which HP shall have exclusive rights to distribute certain of
i-STAT's products, as determined by Abbott in its sole discretion.
1.30 "HP License Agreement" shall mean the License Agreement dated July
28, 1995, between i-STAT and HP.
1.31 "HP Stock Purchase Agreement" shall mean the Series B Preferred
Stock Purchase Agreement dated as of June 23, 1995, between i-STAT and HP.
1.32 "HP Territory" shall mean the territory into which HP has the
right to distribute certain i-STAT Products pursuant to the HP Agreement, which
territory shall be reduced from time to time pursuant to Section 4.4. As of the
Signing Date, the HP Territory consists of the countries set forth in Schedule
1.32.
1.33 Definition intentionally left blank.
1.34 "i-STAT Know-How and Technology" shall mean i-STAT Products and
i-STAT's or its Affiliates' proprietary sensor and platform technology,
including but not limited to, manufacturing or production techniques,
formulations, methods, products and processes, and any and all patents, patent
applications, Trademarks, trade names, service marks, copyrights, know-how,
Trade Secret, or other proprietary rights of i-STAT and its Affiliates relating
thereto, that are owned or licensed by i-STAT or its Affiliates prior to the
Closing Date or are extensions to i-STAT's and its Affiliates' proprietary
sensor and platform technology developed after the Closing Date in programs not
funded by Abbott.
1.35 "i-STAT Product" shall mean Analyzers, Cartridges and Ancillary
Products, or any combination of the foregoing, in the Field, including the
manuals, labeling, packaging and package inserts thereto. For purposes of this
Agreement, any "New Product" as such term is
10
<PAGE> 10
defined under the Marketing and Distribution Agreement in Section 1.55, shall be
deemed to be an i-STAT Product.
1.36 "i-STAT Sensors" shall mean at least one (1) solid state
potentiometric, amperimetric and/or conductometric microsensor device or an
integrated group of such devices designed to detect the presence and/or quantity
of at least one (1) Analyte. ***
1.37 "Milestone" shall mean one (1) of the following events (as more
fully described in Section 2.3) and "Milestones" shall mean two or more of the
following events: First Milestone shall mean ***; Second Milestone shall mean
***; Third Milestone shall mean ***; and Fourth Milestone shall mean ***.
1.38 "Net Sales" shall mean the total of the gross amount billed or
invoiced to Third Parties for the sale of Program Products, less:
(a) Rebates granted and allowances, trade, quantity or cash
discounts actually allowed and taken;
(b) Retroactive price reductions imposed by government
authorities;
(c) Fees, commissions or rebates lawfully paid pursuant to
contracts with group purchasing organizations;
*** CONFIDENTIAL TREATMENT REQUESTED.
11
<PAGE> 11
(d) Amounts actually repaid a Third Party by reason of rejection
or return of defective Program Product; and
(e) Upcharges invoiced and paid by Third Parties as part of a
reagent agreement plan or similar arrangement.
1.39 "Party" shall mean i-STAT or Abbott, and "Parties" shall mean
i-STAT and Abbott.
1.40 "Prepayment" shall mean periodic cash payments made by Abbott to
i-STAT which i-STAT shall credit or repay to Abbott in accordance with the terms
and conditions set forth in Section 3.2.
1.41 "Program Budget" shall mean the amount of the i-STAT research
effort that may be available for the R&D Program at Abbott's option. The annual
Program Budget shall be calculated as an amount anywhere in the range from a
minimum of *** to a maximum of *** of the total annual sales of i-STAT Products
and Program Products sold by i-STAT to Abbott and its Affiliates and reviewed
annually by the Parties.
1.42 "Program Patents" shall mean the patents and patent applications
included in Program Technology and set forth on Schedule 1.42. As of the Signing
Date, no Program Patents are on Schedule 1.42. Schedule 1.42 may be amended from
time to time.
1.43 "Program Product" shall mean any product derived from the R&D
Program as specified in a Project Plan.
1.44 "Program Technology" shall mean all inventions, discoveries,
developments, know-how including Trade Secrets (excluding i-STAT Know-How and
Technology and Abbott Know-How and Technology), whether patentable or not, which
are disclosed and/or reduced to practice and that derive from the course of work
performed under the R&D Program.
***CONFIDENTIAL TREATMENT REQUESTED.
12
<PAGE> 12
1.45 "Project" shall mean the efforts of the Parties and their
Affiliates relating to a Project Plan for development of a Program Product for
Commercialization.
1.46 "Project Manager" shall be an individual appointed by i-STAT and
approved by the R&D Steering Committee (as set forth in Section 2.2) who is
assigned to a particular Project and who is responsible for coordinating the
efforts of the Project Team.
1.47 "Project Team" shall mean the cross-functional team of individuals
established for development of each Program Product according to a Project Plan
and led by a Project Manager for a given Project.
1.48 "Purchase Price" shall have the meaning set forth in Section 8.2.
1.49 "Regulatory Filing" shall mean an application filed with a
governmental entity for approval by that entity in a country for the sale of a
medical device for human use in such country, such as a 510K Filing.
1.50 "Research and Development Project Plan" or "Project Plan" shall
mean the work program, timetable, Milestones, the quantifiable acceptance
criteria of each Milestone, design goals and Specifications (as hereinafter
defined), listings of appropriate i-STAT Know-How and Technology and appropriate
Abbott Know-How and Technology, estimated budgets and identified
responsibilities of the Parties, and any and all subsequent modifications
thereto, developed by the Project Team, and approved by the R&D Steering
Committee as established for each individual Program Product. The Project Plan
shall be maintained by the Project Manager. The Project Plan may be amended from
time to time by the written mutual agreement of the Parties.
13
<PAGE> 13
1.51 "Research and Development Program" or "R&D Program" shall mean the
research and development work funded by Abbott to be carried out by i-STAT
and/or Abbott according to Project Plans for the development and
Commercialization of Program Products according to the tasks, timetables,
Milestones and budgets as set forth in each Project Plan. The Parties intend
that the scope of the work performed under the R&D Program will be specific to
the intended application of the Program Product. The Parties do not intend to
include work on i-STAT Know-How and Technology which will be funded by i-STAT,
or work on Abbott Know- How and Technology which will be funded by Abbott.
1.52 "Signing Date" shall mean the last date on which a Party executes
this Agreement.
1.53 "Specifications" shall mean the Program Product(s)'
characteristics established by the Project Team and approved by Abbott in
writing, and maintained by the Project Manager.
1.54 "Starting Date" shall mean January 1, 1999, unless an earlier date
is mutually agreed upon in writing by the Parties; provided, however, the
Starting Date shall not occur unless the Closing first has occurred.
1.55 "Term" shall mean the period of time beginning on the Closing Date
and continuing, unless earlier terminated pursuant to Section 9.2, until the
expiration or termination of the Marketing and Distribution Agreement. Term
shall not mean the duration of any license or grant of rights hereunder the
expiration of which shall be separately specified.
1.56 "Territory" shall mean the entire world, except for the
Co-exclusive FUSO Territory, and the HP Territory, subject to the Co-exclusive
FUSO Territory and/or the HP Territory, or portions thereof, becoming part of
the Territory pursuant to Section 4.4.
14
<PAGE> 14
1.57 "Third Party" means a natural person, corporation, partnership,
trust, joint venture, governmental authority or other legal entity or
organization other than the Parties and/or their Affiliates.
1.58 "Trademarks" shall mean the trademarks of either Party used to
co-label Program Products and attached hereto as Schedule 1.58.
1.59 "Trade Secrets" shall mean the technical or nontechnical data,
formulae, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, marketing plans, product
plans and the like, owned or licensed by a Party and/or its Affiliates: (a) from
which a Party and/or its Affiliates derives an actual or potential economic
value by being held in secrecy and not known by Third Parties who are not under
an obligation of confidentiality with respect thereto; or (b) which gives such
Party an advantage over Third Party competitors who do not know or use it.
1.60 "United States" shall mean the fifty (50) states of the United
States, including its territories and possessions, the District of Columbia and
Puerto Rico.
ARTICLE 2. JOINT RESEARCH AND DEVELOPMENT PROGRAM
2.1 R&D Steering Committee. Each Party shall designate two (2)
representatives to serve on an R&D Steering Committee. The R&D Steering
Committee shall be responsible for determining the Program Budget available for
research and development of Program Products. In addition, the R&D Steering
Committee shall review prioritization of Projects and allocation of budgeted
funds to the individual Projects, approve Project Plans, recommend the
initiation of
15
<PAGE> 15
Projects, approve Project Managers, monitor the progress of Projects against
budgets, timelines and Milestones, and approve recommendations for prosecuting
Program Patents included in Program Technology. Notwithstanding the joint nature
of these activities, Abbott shall have the final authority for Project
prioritization, budget allocations, date of Project Initiation and final
Specifications for each Project.
2.2 Project Team. Each Program Product shall be developed by a Project
Team which shall include representatives from both Parties, as mutually agreed
by the Parties. i-STAT shall have the responsibility for nominating a Project
Manager to coordinate the efforts of the Project Team, and the R&D Steering
Committee shall have final approval for the Project Manager. The Project Team
shall be responsible for developing and recommending a Project Plan to the R&D
Steering Committee and leading the development tasks necessary to Commercialize
each Program Product as stated in the Project Plan. The Project Plan shall
include, but shall not be limited to, timelines, budgets, assignment of
responsibilities and performance specifications. The performance specifications
shall include both target and minimally acceptable performance specifications
for the Research and Development Prototype, the 510K Filing data set and the
final Program Product in a quantitative and measurable manner. The Project Team
shall recommend to the R&D Steering Committee whether to pursue patent
protection for Program Technology resulting from the Project.
2.3 Project Plan Milestones. The Project Team shall establish specific
criteria for the measurement of the following four (4) Milestones:
(a) First Milestone: ***.
*** CONFIDENTIAL TREATMENT REQUESTED.
16
<PAGE> 16
(b) Second Milestone: ***;
(c) Third Milestone: ***
(d) Fourth Milestone: ***
2.4 Discontinuance of Project. Abbott, in its sole discretion, may
discontinue a Project at any time during such Project. Abbott shall pay i-STAT
the Actual Costs due to i-STAT up to the date upon which i-STAT is notified in
writing such Project is terminated by Abbott. i-STAT shall have the right, but
not the obligation, to take over the Project and provide the necessary funding
for the Project from that point forward. If i-STAT elects to continue the
Project, i-STAT shall develop and solely fund the Project. Abbott shall retain
the exclusive right
*** CONFIDENTIAL TREATMENT REQUESTED.
17
<PAGE> 17
to Commercialize a product resulting from such a Project and such product will
be deemed as an i-STAT Product in the Field, pursuant to the Marketing and
Distribution Agreement.
2.5 Regulatory Filings. The Parties shall meet and discuss the
countries in which to seek regulatory approval and shall mutually agree upon the
strategy to expedite such approval and market entry, including ownership of the
regulatory filing.
ARTICLE 3. DUE DILIGENCE OF THE PARTIES
3.1 Abbott's General Responsibilities. Abbott's responsibilities shall
include, as appropriate:
(a) Identifying and selecting Program Products after discussing
with i-STAT the feasibility of developing such a Program
Product. As of the Signing Date, Abbott has identified the
following candidate Program Products: ***;
(b) Approving the final design goals and Specifications of each
Project Plan established for each Program Product by a Project
Team;
(c) Providing appropriate Abbott Know-How and Technology for
utilization in the R&D Program;
(d) Considering the recommendations of the R&D Steering Committee
and the Project Teams with regard to Project Plans and patent
procurement;
*** CONFIDENTIAL TREATMENT REQUESTED.
18
<PAGE> 18
(e) Using reasonable commercial efforts to diligently undertake,
pursue and support all research activities that are required
to complete the R&D Program and all Project Plans; and
(f) Providing guidance to i-STAT regarding requirements for
Regulatory Filings.
3.2 Payments. Abbott shall reimburse i-STAT for i-STAT's Actual Cost of
the work performed according to the Project Plan. The payments shall be made as
follows: Upon the date of *** (Milestone 1), Abbott shall make a Prepayment to
i-STAT which shall be the estimated budget for the first Calendar Quarter's
expenses of the Project. At the end of each Calendar Quarter, i-STAT shall
submit an invoice, in sufficient detail to facilitate proper review and approval
by Abbott, for all Actual Costs for the Calendar Quarter as well as major
activities or tasks completed. The invoice for the Project's actual first
Calendar Quarter submitted by i-STAT to Abbott shall be compared to the
Prepayment made by Abbott, with the difference either submitted to i-STAT (if
the first Calendar Quarter Actual Cost is higher than the Prepayment), or
credited to Abbott against future payments to be made by Abbott (if the
Prepayment is higher than the first Calendar Quarter's Actual Costs); such
difference shall be paid to i-STAT or credited to Abbott within thirty (30) days
of performing such calculation. Subsequent invoices for each Calendar Quarter's
Actual Cost will be submitted by i-STAT and be subject to review by Abbott, with
payment made to i-STAT within thirty (30) days of receipt and review of such
invoice. Abbott shall have the right to audit i-STAT's books for confirmation of
Actual Costs as set forth in Section 3.4. If Abbott terminates the Project,
i-STAT shall be reimbursed for expenses only up to the date i-STAT is notified
of Abbott's termination.
*** CONFIDENTIAL TREATMENT REQUESTED.
19
<PAGE> 19
3.3 i-STAT's General Responsibilities. i-STAT's responsibilities shall
include, as appropriate:
(a) Providing assistance and advice to Abbott to determine Program
Products;
(b) Performing technical research and development work at its
facilities in connection with and according to the Project
Plan;
(c) Incorporating appropriate i-STAT Know-How and Technology for
development and manufacture of Program Products under the R&D
Program;
(d) Using reasonable commercial efforts to diligently undertake,
pursue and support all research activities that are required
to complete the R&D Program and all Project Plans;
(e) Maintaining proper books and records regarding Actual Costs
and Fully Burdened Manufacturing Costs, as set forth in
Section 3.4; and
(f) Committing to providing Abbott with priority equal to i-STAT's
highest priority for research and development work on every
Project, up to the allocated amount of the Program Budget.
3.4 Records and Audits. i-STAT shall maintain proper books and records
in accordance with generally accepted accounting principles reflecting all
information necessary for the accurate calculation of Actual Cost, Fully
Burdened Manufacturing Cost, and other calculations necessary and appropriate to
determine Purchase Price of Program Products. Upon thirty (30) days' prior
written notice to i-STAT (but not more frequently than once in any Contract
Year, unless there is a dispute, then as frequently as is necessary), Abbott may
retain, at Abbott's expense, an independent certified public accountant
reasonably acceptable to i-STAT to examine i-STAT's books and records relating
to the matters described herein, which shall be
20
<PAGE> 20
transferred to, if not already at, i-STAT's principal place of business. Such
examination shall occur during normal business hours for the sole purpose of
verifying the accuracy of i-STAT's calculations. Such accountant shall be
required to execute a mutually acceptable confidentiality agreement and shall
report to Abbott only the amount of any discrepancy in the calculations. Within
thirty (30) days after completion of such examination, the Parties shall
reconcile any underpayment or overcharge, if any, by credit or debit memo;
provided, however, if such adjustment is to occur at the end of a Contract Year,
any overpayment or underpayment shall be paid by check or wire transfer to
Abbott within thirty (30) days after the end of the final reconciliation. Such
examination rights may be exercised by Abbott only with respect to records for
the then current Contract Year and the then prior Contract Year.
3.5 Delays. Any delay in or failure to complete any Project Plan
according to the Project Plan's design goals, Specifications and timelines shall
neither constitute a failure of diligence by i-STAT nor a breach by i-STAT of
this Agreement unless due to either the gross negligence or willful misconduct
of i-STAT.
ARTICLE 4. OWNERSHIP OF TECHNOLOGY
4.1 Program Technology. All Program Technology invented either solely
or jointly by the Parties shall be owned jointly by the Parties.
4.2 Ownership of i-STAT Know-How and Technology. All i-STAT Know-How
and Technology shall be the sole property of i-STAT. i-STAT shall have no
obligation hereunder to license i-STAT Know-How and Technology to Abbott.
21
<PAGE> 21
4.3 Ownership of Abbott Know-How and Technology. All Abbott Know-How
and Technology shall be the sole property of Abbott. Abbott shall grant a
license to i-STAT under appropriate Abbott Know-How and Technology as identified
in a Project Plan, only for the limited purpose of manufacturing Program
Products for Abbott, for i-STAT or Third Parties only as expressly provided in
this Agreement.
4.4 Right to Commercialize Program Products in the Territory. During
the Term of this Agreement, Abbott and its Affiliates shall have the sole and
exclusive right to Commercialize Program Products in the Territory in the Field.
4.4.1 Right to Commercialize Program Products in the Co-Exclusive FUSO
Territory. During the Term, Abbott and its Affiliates (and not i-STAT nor its
Affiliates) shall have the right to Commercialize Program Products in the Field
in the Co-Exclusive FUSO Territory. Abbott and its Affiliates shall not have the
obligation to sublicense any right to Program Products to any Third Party in the
Field in the Co-exclusive FUSO Territory. If the last to expire of the FUSO
Agreement, FUSO Development Agreement and FUSO License Agreement expires during
the Term, (and i-STAT shall so notify Abbott) then i-STAT shall have the right
to Commercialize Program Products outside the Field in the Co-Exclusive FUSO
Territory.
4.4.2 HP Territory. As of the expiration of the HP Exclusivity Period
(and i-STAT shall so notify Abbott), Abbott and its Affiliates shall have the
sole and exclusive right to Commercialize Program Products in the Field in the
HP Territory.
4.4.3 Other Distributors. In the event that an issue arises in any
Distributor Territory regarding the Commercialization of Program Products, the
Parties shall discuss in good faith a resolution to such issue in a manner
consistent with the provisions of this Agreement.
22
<PAGE> 22
ARTICLE 5. LICENSES
5.1 General. During the Term, Abbott shall have the exclusive and sole
right to Commercialize Program Products in the Field in the Territory. Neither
Party shall have the right to Commercialize Program Products in the HP Territory
while the HP Exclusivity Period is in effect. Abbott, but not i-STAT, shall have
the right to Commercialize Program Products in the Co-exclusive FUSO Territory.
Neither Party shall have the right to grant a license or in any other way convey
to Third Parties any of its rights to Program Technology in the Field in the
Territory, including the HP Territory, without the express written consent of
the other Party. Each Party shall have the right to Commercialize Program
Products outside of the Field in the Territory. Each Party may grant Third
Parties the right to Commercialize the Program Products outside the Field in the
Territory with the express written consent of the other Party, which consent
shall not be withheld unreasonably. At termination of this Agreement, i-STAT
shall have the right: (a) to Commercialize Program Products in the Field in the
Territory according to the terms set forth in Section 8.4; and (b) to
Commercialize Program Products outside the Field. Abbott has a right to
Commercialize Program Products through sub-distributors, and nothing contained
in this Agreement shall be construed to limit Abbott's right to do so.
5.2 Rights of the Parties to License Third Parties.
5.2.1 Neither Party shall have the right to license in whole
or in part Program Technology to a Third Party in the Field in the Territory
including the HP Territory without the express written consent of the other
Party.
23
<PAGE> 23
5.2.2 Neither Party shall have the right to license Program
Technology to Third Parties outside of the Field in the Territory without the
express written consent of the other Party, which consent shall not be withheld
unreasonably.
5.2.3 These sublicense restrictions set forth this section 5.2
shall survive termination or expiration of this Agreement as described in
Article 9.
5.2.4 It is understood and agreed by the Parties that an
original equipment manufacturer or private label manufacturer shall be
considered a sublicensee for purposes of this Agreement.
5.2.5 During the HP Exclusivity Period, neither Party shall
have the right to license or otherwise convey rights to Third Parties to Program
Technology in the HP Territory.
5.3 Rights of the Parties to Grant Rights to Commercialize Program
Products to Third Parties.
5.3.1 Neither Party shall have the right to grant the right to
Commercialize Program Products to a Third Party in the Field in the Territory,
including the HP Territory, without the express written consent of the other
Party.
5.3.2 Neither Party shall have the right to grant the right to
Commercialize Program Products to Third Parties outside of the Field in the
Territory without the express written consent of the other Party, which consent
shall not be withheld unreasonably.
5.3.3 The restrictions set forth in this Section 5.3 shall
survive termination or expiration of this Agreement as described in Article 9.
5.3.4 During the HP Exclusivity Period, neither Party shall
have the right to grant rights to a Third Party to Commercialize the Program
Products in the HP Territory.
24
<PAGE> 24
5.4 License to Abbott Technology and Know-How. In the event that,
during the Term, i-STAT requests a non-exclusive license with no right to
sublicense to utilize Abbott Technology and Know-How incorporated into a Program
Product to Commercialize a Program Product outside the Field, Abbott shall grant
such right to i-STAT, which Abbott shall do unless Abbott is prohibited from
doing so by an agreement with a Third Party. i-STAT shall pay a royalty to
Abbott at the rate of *** of Net Sales of such Program Product sold by i-STAT
and its Affiliates outside the Field. i-STAT's royalty obligation for Abbott
Know-How and Technology shall continue until: ***
i-STAT's obligation to pay Abbott a royalty pursuant to this Section 5.4 shall
survive the expiration or termination of this Agreement, except as provided in
Section 9.3(f).
5.5 Abbott's Right To Commercialize Program Product Outside the Field.
In the event that, during the Term, Abbott requests a non-exclusive right to
Commercialize a Program Product outside the Field, i-STAT may grant such license
to Abbott, which i-STAT shall do unless prohibited from doing so by an agreement
with a Third Party.***.
5.6 No Right to Abbott's Proprietary Sensor Technology. In no event
shall any term or provision in this Agreement be interpreted to grant i-STAT or
its Affiliates a license to Abbott's or its Affiliates' proprietary sensor
technology, or confer any commercial or
*** CONFIDENTIAL TREATMENT REQUESTED.
25
<PAGE> 25
manufacturing right to i-STAT or its Affiliates to Abbott's or its Affiliates'
proprietary sensor technology.
ARTICLE 6. PATENT PROSECUTION AND ENFORCEMENT OF JOINTLY OWNED
PROGRAM TECHNOLOGY
6.1 Patent Prosecution. The R&D Steering Committee shall be responsible
for recommending to Abbott that the Parties seek patent protection for Program
Technology in the name of both Parties as assignees on all inventions,
regardless of inventorship. After receiving a written recommendation from the
R&D Steering Committee, Abbott shall notify i-STAT in writing whether Abbott
agrees to pursue patent protection for any such recommended Program Technology,
and shall indicate to i-STAT in which countries Abbott desires to seek such
protection. Abbott then shall be solely responsible for: (a) filing, prosecuting
and maintaining U.S. rights and foreign applications and patents covering such
Program Technology; and (b) all costs incurred in connection with such
responsibility. Abbott shall keep i-STAT advised as to all material developments
with respect to all Program Patents, and shall supply i-STAT with copies of all
papers received, solicit i-STAT's comments to the papers, and prepare and then
copy i-STAT on any papers proposed to be filed in connection with the
prosecution or defense thereof in a sufficiently reasonable time for i-STAT to
submit its further comments to Abbott. All comments provided by i-STAT to Abbott
shall be reviewed and shall not be unreasonably rejected by Abbott. Abbott shall
use its reasonable good judgment when pursuing patent protection for Program
Patents. Abbott shall have the right to designate counsel of its choice to
perform any or all such related work.
6.2 Discontinuance of Patent Prosecution. If Abbott decides not to
follow the R&D Steering Committee's recommendations to prepare and file a patent
application covering a particular
26
<PAGE> 26
aspect of Program Technology or otherwise seek patent rights to a particular
aspect of Program Technology under Section 6.2, or if Abbott elects to
discontinue the prosecution or maintenance of any Program Patent, Abbott shall
promptly notify i-STAT. i-STAT may, but shall not have the obligation to, file
or continue prosecution of such patent application included in Program Patents
or maintain such Program Patent, at its own expense in the name of both Parties.
6.3 Infringement by Third Parties. In the event a Party has reason to
believe that a Third Party may be infringing any of the Program Patents included
in Program Technology in the Field by the Third Party's manufacture, sale, use
or importation of an infringing product in the Field in the Territory, such
Party shall promptly notify the other Party. Abbott may, in its sole discretion,
elect to enforce any Program Patent included in Program Technology through legal
action or otherwise, and i-STAT agrees to reasonably cooperate with Abbott in
such enforcement. In the event that Abbott requests the assistance of i-STAT and
i-STAT requires the assistance of patent counsel, i-STAT shall so advise Abbott
promptly and, after Abbott's approval, i-STAT shall have the right to retain
patent counsel of its choice at Abbott's expense; provided, however, that Abbott
shall have the right to review all invoices associated therewith, and
discontinue such patent counsel assistance immediately upon notice to i-STAT
hereunder. Abbott shall be responsible for any costs associated with such suit
and/or settlement, and shall be entitled to retain any recovery that may be
obtained in any suit brought by Abbott. If such settlement involves any material
admission(s) by Abbott relating to such suit, Abbott shall use its reasonable
best efforts to ensure the confidential treatment of all its material
admissions. Abbott hereby agrees that it shall not make any material admission
relating to i-STAT Know-how and Technology without the prior written consent of
27
<PAGE> 27
i-STAT, which consent shall not be withheld unreasonably. In the event Abbott
does not commence activities to enforce diligently such Program Patent within
three (3) months after notice of possible infringement is given between i-STAT
and Abbott, i-STAT may institute suit and diligently pursue such suit. Abbott
agrees to serve as a nominal party if its presence is legally required and to
sign any papers necessary to support any litigation. i-STAT shall be entitled to
retain any recovery which may be obtained in any suit brought by i-STAT. Abbott
shall provide reasonable cooperation with respect to any suit which i-STAT may
bring pursuant to this Section 6.3. i-STAT hereby agrees that it shall not make
any material admissions relating to Abbott Know-how and Technology without the
prior written consent of Abbott, which consent shall not be withheld
unreasonably.
6.4 Third Party Claims for Infringement. If a Third Party brings a
legal action or administrative proceeding against either or both of the Parties
alleging infringement by a Program Product in the Field in the Territory, the
Parties agree that they shall confer in good faith to determine the most
effective means of cooperating to defend their sole and mutual interests. Each
Party shall bear its own expenses related to the defense unless otherwise agreed
at the time.
If it is clear that the predominant aspect of the Program Product at
issue was contributed by one Party rather than the other, then the contributing
Party will be financially responsible for any judgment and have the first right
to take the lead in the coordinated defense.
If it is not clear that the aspect of the Program Product at issue was
contributed by one Party rather than the other, then the Parties will share
equally in any judgment and negotiate in good faith as to which Party takes the
lead in the coordinated defense.
In any event with respect to each such legal action or administrative
proceeding:
28
<PAGE> 28
(a) Neither Party shall have the right to enter into any
financial, commercial or other settlement with such Third
Party without the consent of the other Party, which consent
shall not be withheld unreasonably.
(b) Neither Party shall have the right to make any adverse
admissions relating to infringement without the consent of the
other Party, which consent shall not be withheld unreasonably.
(c) Each Party, upon notice to the other Party, shall have the
right to mitigate potential damages as such Party deems
appropriate, including, without limitation, stopping the
manufacture of the alleged infringing Program Product,
stopping Commercialization of such alleged infringing Program
Product, redesigning the alleged infringing Program Product or
action and reconfiguring the alleged infringing Program
Product or action. Any such mitigation taken by a Party shall
not be used against that Party when determining that Party's
performance under the Agreement. Any lead taken by a Party
under this Section 6.4 relating to defending the other Party
in such legal action or administrative proceeding shall not be
used against the non-lead Party when determining the non-lead
Party's performance under this Agreement. Only if a Party
fails to perform its obligations under this Section 6.4 shall
the other Party be entitled to indemnification for such
obligations pursuant to the provisions of Article 13.
29
<PAGE> 29
ARTICLE 7. TRADEMARKS
7.1 Trademark License. i-STAT hereby grants to Abbott and its
Affiliates a non-exclusive license, with the right to sublicense, to use
i-STAT's Trademarks to Commercialize Program Products, in the Field in the
Territory. Pursuant to Section 13.1 of the Marketing and Distribution Agreement,
on or before January 1 of each Contract Year, i-STAT shall provide Abbott with a
Trademark report reflecting all applications for Trademarks and the status
thereof. In addition, i-STAT shall, at its expense, file new applications to
register any or all of the i-STAT's Trademarks in any or all of the countries in
the Territory, as may be reasonably requested by Abbott. Abbott shall give
i-STAT at least ninety (90) days' prior written notice before Commercializing
any Program Product under i-STAT's Trademarks in any country not identified in
i-STAT's Trademark report. The Parties shall mutually agree on the trademark
approach in any such country, taking into consideration, among other things, the
length of time required to obtain trademark registration, laws relating to
trademark use, the existence of any conflicting trademark registrations,
applications or uses and anticipated sales volumes of the relevant Program
Products in such country. Any use of an Abbott Trademark by i-STAT shall be
subject to Abbott's prior approval, which approval may be withheld by Abbott at
Abbott's sole discretion.
7.2 Ownership. It is understood and agreed that i-STAT is the sole and
exclusive owner of all right, title and interest in and to i-STAT's Trademarks.
Nothing contained in this Agreement shall be construed as an assignment to the
non-owning Party of any right, title or interest in i'STAT's Trademarks; it
being understood that all rights, title and interests relating to such
Trademarks are expressly reserved by i-STAT, except for the rights being
licensed hereunder.
30
<PAGE> 30
7.3 Infringement. Each Party shall notify the other Party of any
suspected infringements by Third Parties of the Trademarks in the Field that may
come to a Party's attention. Each Party shall have the initial right to
determine whether any action shall be taken due to any such infringement of its
Trademark. Each Party shall have the right to employ counsel of its choosing and
to direct the handling of the litigation and any settlements thereof with
respect to its own Trademarks. In the event i-STAT does not pursue such
potential infringement within three (3) months after notice of such potential
infringement, Abbott shall have the right to take action on its own behalf, to
employ counsel of its choosing and to direct the handling of the litigation and
any settlement thereof, at Abbott's own expense. The Parties agree to cooperate
with each other in maintaining, protecting and defending its Trademarks.
7.4 Co-Labeled Product. i-STAT covenants and agrees that it shall sell
Program Products identified by an Abbott Trademark or Abbott trade name only to
Abbott and its Affiliates or to an Abbott-appointed sub-distributor.
ARTICLE 8. COMMERCIALIZATION OF PROGRAMS PRODUCTS
8.1 Program Products in the Program Field. Abbott and its Affiliates
shall have the sole, exclusive right, including the right to appoint
sub-distributors, to Commercialize Program Products in the Field for use in the
Territory. Abbott and its Affiliates (and not i-STAT nor its Affiliates) shall
have the right to Commercialize Program Products in the Field in the
Co-exclusive FUSO Territory. Abbott and its Affiliates shall not have the
obligation to sublicense any right to Program Products to any Third Party in the
Field in the Co-Exclusive FUSO Territory. If the last of the
31
<PAGE> 31
FUSO Agreement, FUSO Development Agreement and FUSO License Agreement expires
during the Term, then i-STAT shall have the right to Commercialize Program
Products outside the Field in the Co-Exclusive FUSO Territory. Neither Party
shall have the right to Commercialize Program Products in the Field in the HP
Territory, except as provided in Section 4.4. i-STAT shall manufacture Abbott's
and its Affiliates' requirements of Program Products according to the terms and
conditions set forth in the Marketing and Distribution Agreement, except as
expressly provided in this Agreement. If any term or condition of this Agreement
is inconsistent with a similar term in the Marketing and Distribution Agreement
with regard to Program Products, the term or condition of this Agreement shall
prevail.
8.2 Purchase Price of Program Products.
8.2.1 Regular Purchase Price. Abbott shall pay i-STAT a
Purchase Price for each Program Product sold to Abbott, in accordance with
pricing provisions set forth in the Marketing and Distribution Agreement except
as provided in Section 8.2.2.
8.2.2 Credit for Abbott's Funding of the R&D Program. During
the period that the funding for the Project that developed the Program Product
has not been repaid to Abbott in the amount specified in Section 8.2.3 hereof,
the Purchase Price for that Program Product shall be determined according to the
following provisions. The Purchase Price shall be ***. This difference shall be
credited to Abbott to reimburse Abbott for its funding of the development of
that Program Product, pursuant to Section 8.2.3.
8.2.3 Computation of R&D Funding Reimbursement. Abbott shall
fund each R&D Program pursuant to Section 3.2. Abbott shall accrue the amount so
paid to i-STAT. The amount
*** CONFIDENTIAL TREATMENT REQUESTED.
32
<PAGE> 32
paid to i-STAT shall accrue interest at the rate of ***. The amount to be
reimbursed to Abbott for the Project that developed that Program Product shall
be the total of the amount paid by Abbott to fund that Project plus the interest
on that amount as set forth in this Section 8.2.3.
8.3 Program Products Outside the Field. Each Party shall have the right
to Commercialize Program Products outside the Field. ***
8.4 i-STAT's Rights to Commercialize Program Products in the
Field.
At termination of this Agreement as set forth in Sections 9.1 and 9.2,
i-STAT shall have the right to Commercialize Program Products in the Field
directly to end-users in the Territory and not through any distributor or Third
Party. In the event that i-STAT so elects to Commercialize a Program Product in
the Field, i-STAT shall pay to Abbott a royalty of *** of Net Sales of such
Program Product sold by i-STAT and its Affiliates in the Field in the Territory
***.
*** CONFIDENTIAL TREATMENT REQUESTED.
33
<PAGE> 33
ARTICLE 9. TERM AND TERMINATION
9.1 Term. This Agreement shall commence on the Closing Date, and unless
sooner terminated pursuant to Section 9.2, shall continue in effect until the
expiration or termination of the Marketing and Distribution Agreement. Term
shall not mean the duration of any license or grant of rights hereunder, the
expiration of which, if any, shall be separately specified.
9.2 Early Termination. This Agreement may be terminated in accordance
with the following provisions:
9.2.1 For No Cause By Abbott. For no cause by termination of the
Agreement:
(a) at any time prior to the Date of First Market Launch of the
first Program Product upon sixty (60) days' prior written
notice from Abbott to i-STAT; or
(b) at any time after the Date of First Market Launch of a Program
Product upon one hundred twenty (120) days' prior written
notice from Abbott to i-STAT.
9.2.2 Termination for Cause.
(a) Bankruptcy; Material Breach. Either Party may terminate this
Agreement for cause upon written notice to the other Party in
the event the other Party: (a) appoints a receiver, executes
an assignment for the benefit of creditors or files or
otherwise
***CONFIDENTIAL TREATMENT REQUESTED.
34
<PAGE> 34
becomes subject to bankruptcy or insolvency
proceedings; or (b) materially breaches this
Agreement and fails to cure such breach within sixty
(60) days after written notice of breach from the
non-breaching Party, as such cure period may be
extended for such additional period as the
non-breaching Party reasonably determines that the
breaching Party is diligently pursuing a cure of such
breach.
(b) Uncured Material Breach.
(i) Abbott may terminate this Agreement
for cause upon an uncured material
breach of a warranty or
representation by i-STAT of this
Agreement as set forth in Sections
12.1 and 12.3; or
(ii) i-STAT may terminate this Agreement
upon an uncured material breach of a
warranty or representation by Abbott
as set forth in Sections 12.2 and
12.3.
(c) Delay of Closing. This Agreement may be terminated,
and the transactions contemplated abandoned, by
either Party by written notice to the other Party if
the Closing Date does not occur on or before the date
which is one hundred and thirty (130) days from the
Signing Date.
(d) By Abbott for Change of Control. Abbott shall have
the right to terminate this Agreement upon twelve
(12) months' prior written notice to i-STAT in the
event of a Change of Control of i-STAT.
(e) Non-Fulfillment of Conditions. The non-fulfillment of
any of the conditions described in Article 14
(whether or not the Closing occurs) shall not
35
<PAGE> 35
result in any liability to any Party unless such
non-fulfillment is a result of a breach of this
Agreement or any of the other Alliance Agreements by
such Party.
9.3 Consequences of Expiration or Termination.
9.3.1 On the date of expiration of the Term or early
termination of this Agreement by either Party:
(a) Abbott's obligation to pay for costs of filing patent
applications and patent maintenance of Program
Products under Section 6.1 shall cease;
(b) The Parties shall retain joint ownership of Program
Patents included in Program Technology, joint data
and joint information;
(c) Abbott's right to Commercialize the Program Products
in the Field and outside of the Field shall survive;
(d) i-STAT shall have the right to sell directly to end
users Program Product in the Field in the Territory,
as set forth in Section 8.4 and outside the Field as
set forth in Section 5.1;
(e) If termination was due to a breach of a
representation or warranty under Article 12, then the
non-breaching Party also shall have any remedy under
Article 13;
(f) If i-STAT terminates due to an uncured material
breach by Abbott, i-STAT's obligation to pay
Abbott's development expenses and royalties pursuant
to Section 8.4 shall survive. Notwithstanding the
above, if i-STAT terminates due to an uncured
material breach by Abbott of its obligations of
confidentiality regarding i-STAT's information as set
forth in Article 10, i-STAT shall not be required to
pay royalties pursuant to Section 8.4 for any Program
Products that materially
36
<PAGE> 36
incorporate such i-STAT Confidential Information
included in such material breach by Abbott.
9.3.2 Within sixty (60) days of the date of expiration of the
Term under Section 9.1 or early termination by either Party as set forth in
Section 9.2, each Party shall, except as otherwise provided in this Agreement,
return or destroy all Confidential Information of the other Party; except that
each Party may retain one (1) copy of Confidential Information for archival
purposes solely to confirm compliance with the provisions of Article 10.
9.3.3 Either Party may terminate this Agreement in the event a
force majeure event continues for one hundred eighty (180) consecutive days and
prevents a Party from materially performing its obligations under this
Agreement. Such termination shall not be considered a breach by either Party.
9.3.4 Termination, expiration, cancellation or abandonment of
this Agreement through any means and for any reason shall not relieve the
Parties of any obligation accruing prior thereto and shall be without prejudice
to the rights and remedies of either Party with respect to any antecedent breach
of any of the provisions of this Agreement.
9.3.5 Notwithstanding the terms and conditions of Section
9.2.2(a), neither Party shall be obligated to terminate this Agreement in the
event the other Party materially breaches this Agreement. The non-breaching
Party shall have the right to seek, in accordance with Section 15.5, other
remedies available to it at law and equity to recover for such breach, without
having to terminate this Agreement.
9.4 Survival. Expiration or early termination of this Agreement shall
not relieve either Party of its obligations incurred prior to expiration or
early termination. The following provisions shall
37
<PAGE> 37
survive expiration or early termination of this Agreement or of any extensions
thereof: Article 1 (Definitions); Section 3.2 (Payments); Section 3.4 (Records
and Audit); Article 4 (Ownership Technology); Article 5 (Licenses); Sections 6.3
and (Third Party Infringement), 6.4; Sections 7.2 and 7.4 (Trademarks); Article
8 (Commercialization of Program Products); Sections 9.3 (Consequences of
Expiration or Early Termination) and 9.4 (Survival); Article 10 (Confidential
Information and Trade Secrets, as to the obligations of the Parties); Section
10.5 (Public Announcements); Article 11 (Non-Competition); Article 12
(Representations and Warranties); Article 13 (Indemnification as to events
giving rise to indemnification that occurred prior to termination only); Section
15.4 (Binding Effect); Section 15.5 (Dispute Resolution) Section 15.12
(Governing Law), Section 15.11 (Entire Agreement). In addition, all license
provisions that survive termination, that are irrevocable or that arise due to
termination shall survive in accordance with their terms. Notwithstanding the
above, any other provisions of this Agreement contemplated by their terms to
pertain to a period of time following termination or expiration of this
Agreement shall survive for the specified period of time only.
ARTICLE 10. CONFIDENTIAL INFORMATION
10.1 Confidentiality. The Parties acknowledge that during the term each
of them and their Affiliates will exchange Confidential Information (including
i-STAT Know-How and Technology and Abbott Know-How and Technology) pertaining to
their performance hereunder, and the disclosure and use of any such Confidential
Information shall be governed by the provisons of this Article 10 and not by the
provisions of the Confidentiality and Stand Still Agreement between the Parties,
dated March 11, 1998. Each Party shall use Confidential Information of the other
Party only for the purpose of the activities contemplated by this Agreement and
shall not disclose such Confidential Information to a Third Party except in
accordance with the provisions of this
38
<PAGE> 38
Agreement. The Parties shall ensure that their Affiliates keep all Confidential
Information exchanged hereunder confidential in accordance with the provisions
hereof as though the Affiliates were parties hereto. This provision shall remain
in effect for the term of this Agreement and for a period of three (3) years
after termination or expiration of this Agreement for all Confidential
Information excluding Trade Secrets. Trade Secrets shall be kept confidential by
the Receiving Party according to the terms set forth in Section 10.2.
10.2 Handling of Trade Secrets. During the course of its performance
hereunder, a Party (the "Disclosing Party") may desire or be requested to
disclose Confidential Information to the other Party (the "Receiving Party")
which the Disclosing Party considers a Trade Secret. In such event, the
Disclosing Party first shall inform the Receiving Party, on a non-confidential
basis, of the general nature of the Trade Secret information. The Receiving
Party shall have ten (10) days to decide whether it wishes to have such Trade
Secrets disclosed to it and to inform the Disclosing Party in writing that it
wishes to receive such a disclosure. Any Trade Secrets so disclosed between the
Parties shall be marked "Trade Secret" and the Receiving Party shall not
disclose or use such Trade Secret except as expressly permitted under this
Agreement for the Term of this Agreement and thereafter. In the event that the
Disclosing Party discloses Trade Secrets to the Receiving Party without written
approval of the Receiving Party and/or without appropriately marking such
information as "Trade Secret," that Trade Secret shall be handled as
Confidential Information under Section 10.1
10.3 Permitted Disclosures. Notwithstanding, the above, nothing
contained in this Agreement shall preclude i-STAT or Abbott from utilizing or
disclosing to others its Confidential Information or utilizing Confidential
Information received from the other Party as may be required
39
<PAGE> 39
(a) for regulatory purposes, including Regulatory Filings required to obtain FDA
or other governmental approvals subject to requesting confidential treatment;
(b) for audit, tax or customs purposes subject to requesting confidential
treatment; (c) for purposes of preparing and filing patent applications
consistent with the terms of this Agreement; (d) by law or judicial order, with
the consent of the other Party, which consent shall not be unreasonably
withheld. With respect to Trade Secrets, the consent of the Disclosing Party (as
defined in Section 10.2) shall be required before any disclosure of such Trade
Secret, which consent shall not be withheld unreasonably.
10.4 Publication. Neither Party shall publish or make any presentation
regarding the R&D Program, results of the R&D Program, any Project Plan or any
Program Product, unless such publication has been reviewed and approved by the
other Party at least sixty (60) days prior to its submission for publication,
which approval shall not be withheld unreasonably. If requested, each party
shall allow the other Party a reasonable period of time to seek patent
protection before submitting such proposed disclosure for publication. Such
approval by the other Party shall not be required if such information has been
published previously, is in the public domain without breach of this Agreement,
or was approved or published in writing previously in substantially the same
format.
10.5 Public Announcements. Neither Party shall make any public
announcements concerning the Alliance Agreements, nor make any public statement
which includes the name of the other Party or any of its Affiliates, or
otherwise use the name of the other Party or any of its Affiliates in any public
statement or document, without the consent of the other Party, which consent
shall not be unreasonably withheld, except: (a) as may be required legally by
law or judicial order; or (b) either Party may include in a subsequent public
statement or document, information regarding the Alliance Agreements which has
already been approved by the other Party.
40
<PAGE> 40
10.6 Confidential Treatment. i-STAT shall seek confidential treatment
for the terms and conditions of this Agreement to the fullest extent permitted
by the SEC and any other governmental agency or self-regulatory organization to
which i-STAT provides a copy of this Agreement or any of the other Alliance
Agreements. Prior to seeking confidential treatment from the SEC or any other
governmental agency or self-regulatory organization for any such document,
i-STAT shall consult with Abbott and Abbott's counsel and provide them with a
reasonable opportunity to request the inclusion of specified provisions in any
request by i-STAT for confidential treatment.
ARTICLE 11. NON-COMPETITION
*** CONFIDENTIAL TREATMENT REQUESTED.
41
<PAGE> 41
ARTICLE 12. REPRESENTATIONS AND WARRANTIES
12.1 i-STAT Representations and Warranties as of the Signing Date and
Closing Date and thereafter:
12.1.1 Intellectual Property Representations and Warranties:
i-STAT agrees that it shall represent and warrant to Abbott in a writing which
shall be attached hereto as Schedule 12.1.1 as of the date that i-STAT
identifies specific i-STAT Know-How and Technology for incorporation into a
Project and lists such i-STAT Know-How and Technology in the Project Plan for
development of a particular Program Product, that:
(a) To the best of its knowledge, such i-STAT Know-How
and Technology has not been or will not be obtained
through any intentional activity, omission or
representation by i-STAT that would limit or destroy
the validity of or subrogate i-STAT's rights under
such i-STAT Know-How and Technology, and i-STAT has
no knowledge or information that would impact on or
affect the validity and/or enforceability of any
patents or potential patents included in i-STAT
Know-How and Technology;
(b) To the best of its knowledge, no actions are
threatened or pending before any court or
governmental agency or other tribunal relating to
such i-STAT Know-How and Technology other than (to be
supplied at time of warranty).
(c) To the best of its knowledge, no Third Party has
acquired, owns or possesses any right, title or
interest in or to, either directly or indirectly, the
Program Technology or Program Products which would
permit such Third Party to acquire, own or possess
such right, title or interest through i-STAT's
intellectual property rights in Program Technology
hereunder, and no Third Party possesses any rights
which
42
<PAGE> 42
would permit such Third Party to Commercialize
Program Products due to any rights granted to it by
i-STAT; and
(d) i-STAT is in compliance and shall remain in
compliance with all material terms of any agreement
with a Third Party which grants rights to i-STAT for
technology under such i-STAT Know-How and Technology,
so as not to adversely affect any rights of Abbott
under this Agreement.
12.1.2 Special Representations and Warranties. (a) i-STAT
represents and warrants to Abbott as follows: The execution, delivery and
performance of this Agreement by i-STAT shall not be in conflict with or result
in the breach of any obligations of i-STAT under any agreement by and between
i-STAT and FUSO and i-STAT and HP, respectively, including without limitation,
the FUSO Agreement, the FUSO Development Agreement, the FUSO License Agreement,
the HP Stock Purchase Agreement, the HP Agreement or the HP License Agreement
and with regard to Program Products. This representation and warranty shall
survive for so long as the agreement between i-STAT and HP or FUSO,
respectively, pertaining to such representations and warranties is still in
effect.
12.2 Abbott Representations and Warranties Relating to Intellectual
Property. Abbott agrees that it shall warrant and represent to i-STAT in a
writing which shall be attached hereto as Schedule 12.2 as of the date that
Abbott identifies specific Abbott Know-How and Technology for incorporation into
a Project, and lists such Abbott Know-How and Technology in the Project Plan for
development of a particular Program Product that:
(a) To the best of its knowledge, such Abbott Know-How and
Technology has not been obtained or will not be obtained
through any intentional activity, omission or representation
by Abbott
43
<PAGE> 43
that would limit or destroy the validity of or subrogate
Abbott's rights under such Abbott Know-How and Technology, and
Abbott has no knowledge or information that would impact on or
affect the validity and/or enforceability of any patents or
potential patents included in Abbott Know-How and Technology;
(b) To the best of its knowledge, no actions are threatened or
pending before any court or governmental agency or other
tribunal relating to such Abbott Know-How and Technology other
than (to be supplied at time of warranty);
(c) To the best of its knowledge, no Third Party has acquired,
owns or possesses any right, title or interest in or to,
either directly or indirectly, the Program Technology or
Program Products which would permit such Third Party to
acquire, own or possess such right, title or interest through
Abbott's intellectual property rights in Program Technology
hereunder, and no Third Party possesses any rights which would
permit such Third Party to Commercialize Program Products due
to any rights granted to it by Abbott; and
(d) Abbott is in compliance and shall remain in compliance with
all material terms of any agreement with a Third Party which
grants rights to Abbott for technology under such Abbott
Know-How and Technology, so as not to adversely affect any
rights of i-STAT under this Agreement.
12.3 General Representations and Warranties. Each Party represents and
warrants to the other Party as of the Signing Date and Closing Date that:
(a) It is a corporation duly organized and validly
existing under the laws of its state of
incorporation;
(b) It has the power and authority to execute and deliver
this Agreement and to perform its obligations
hereunder; and
44
<PAGE> 44
(c) The execution, delivery and performance by it of this
Agreement and its compliance with the terms and
provisions hereof does not and will not conflict with
or result in a breach of any other agreement or
relationship.
ARTICLE 13. INDEMNIFICATION
13.1 Indemnifications by i-STAT.
13.1.1 General Indemnification.
i-STAT shall defend, indemnify and hold harmless Abbott and
its Affiliates and their officers, directors, employees and representatives,
from and against any suit, proceeding, claim, liability or loss including
attorneys' fees necessary to consider, advise and defend, ("Claims") which arise
out of or are attributable to any gross negligence or willful misconduct on the
part of i-STAT or its Affiliates and their employees, agents or representatives
which relates to i-STAT's and its Affiliates' performance hereunder.
Notwithstanding the above, i-STAT shall not be liable for Claims of any kind
which arise out of or are attributable to any gross negligence or willful
misconduct of Abbott or its Affiliates and their officers, directors, employees,
agents or representatives with regard to Abbott's performance hereunder.
13.1.2 Intellectual Property Indemnity. i-STAT agrees to and
shall defend, indemnify and hold harmless Abbott and its Affiliates and their
officers, directors, employees and representatives, from and against any Claim
and any damages awarded therefrom so far and to the extent as such suit or
proceeding is based upon an assertion that the i-STAT Know-How and Technology
used hereunder in Program Technology and/or Program Products constitutes an
infringement of any
45
<PAGE> 45
patent, copyright, trademark or any other intellectual property right of a Third
Party; provided, that Abbott shall promptly notify i-STAT of such Claim, as set
forth in Section 13.3.
13.2 Indemnification by Abbott.
13.2.1 General Indemnification.
Abbott shall defend, indemnify and hold harmless i-STAT and its
Affiliates and their officers, directors, employees and representatives from and
against any Claims which arise out of or are attributable to any gross
negligence or willful misconduct on the part of Abbott or its Affiliates and
their officers, directors, employees, agents or representatives which relates to
Abbott's and its Affiliates performance hereunder. Notwithstanding the above,
Abbott shall not be liable for Claims of any kind which arise out of or are
attributable to any gross negligence or willful misconduct of i-STAT, its
employees, agents or representatives with regard to i-STAT's and its Affiliates
performance hereunder.
13.2.2 Intellectual Property Indemnity. Abbott agrees to and
shall defend, indemnify and hold harmless i-STAT and its Affiliates and their
officers, directors, employees and representatives, from and against any Claim
and any damages awarded therefrom so far and to the extent as such suit or
proceeding is based upon an assertion that the Abbott Know-How and Technology
used hereunder in Program Technology and/or Program Products constitutes an
infringement of any patent, copyright, trademark or any other intellectual
property right of a Third Party; provided, that i-STAT shall promptly notify
Abbott of such Claim as set forth in Section 13.3.
13.3 Cooperation. Each Party shall promptly notify the other Party of
any Claim or potential Claim covered by the provisions of Section 6.4 and this
Article 13, and shall include sufficient information to enable the other Party
to assess the facts. If indemnification is sought as
46
<PAGE> 46
a result of any Third Party or sublicensee claim or suit pursuant to Section
6.4, such notice to the indemnifying Party shall be given promptly by the Party
seeking such indemnification.
13.4 Insurance. i-STAT shall procure and maintain during the Term
comprehensive commercial liability insurance, including contractual and products
liability coverage, in the aggregate annual limits of $20,000,000. i-STAT shall
cause Abbott and its Affiliates to be named as an additional insured on such
policies, and i-STAT policies shall be primarily with respect to any
indemnification of Abbott and its Affiliates hereunder. i-STAT shall provide
Abbott with not less than thirty (30) days' prior written notice of any
cancellation, modification or reduction of coverage under such policies.
13.5 Liability Limitation. EXCEPT FOR THIRD PARTY OR SUBLICENSEE
LIABILITY ARISING UNDER ARTICLE 12, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
INDIRECT, INCIDENTAL, PENAL OR CONSEQUENTIAL DAMAGES, OR OTHER SIMILAR DAMAGES
ARISING OUT OF THIS AGREEMENT.
ARTICLE 14. CONDITIONS TO CLOSING
The obligations of Abbott and i-STAT to execute the Alliance Agreements shall be
subject to the satisfaction of Abbott at the Signing Date and as of the Closing
Date of the following conditions:
(a) The representations and warranties of i-STAT contained herein
and in the other Alliance Agreements shall be true and correct
at and as of the Signing Date and at and as of the Closing
Date as though restated on and as of the Closing Date (except
in the case of any representation and warranty that by its
terms is made as of a date
47
<PAGE> 47
specified therein, in which case such representation and
warranty shall be true and correct as of such date);
(b) The "Closing" as such term is defined in the Stock Purchase
Agreement shall have occurred or shall be occurring
simultaneously.
(c) Abbott shall have received from i-STAT a certificate signed by
an appropriate officer as to i-STAT's compliance with the
conditions set forth in paragraph (a) of this Section 14.
ARTICLE 15. MISCELLANEOUS
15.1 Force Majeure. Neither Party shall be held in breach of this
Agreement for failure to perform any of its obligations hereunder and the time
required for performance shall be extended for a period equal to the period of
such delay, provided that such delay has been caused by or is a result of any
acts of God; acts of the public enemy; civil strife; wars declared or
undeclared; embargoes; labor disputes, including strikes, lockouts, job actions
or boycotts; fires; explosions; floods; shortages of material or energy; events
caused by reason of laws or regulations or orders by any government,
governmental agency or instrumentality or by any other supervening unforeseeable
circumstances beyond the reasonable control of the Party so affected. The Party
so affected shall: (a) give prompt written notice to the other Party of the
nature and date of commencement of the force majeure event and its expected
duration; and (b) use its reasonable best efforts to relieve the effect of such
cause as rapidly as possible.
15.2 Notices. All notices hereunder shall be in writing and shall be:
(a) delivered personally; (b) mailed by registered or certified mail, postage
prepaid; or (c) sent by overnight courier; or (d) sent by facsimile or express
mail to the following addresses of the respective Parties:
If to i-STAT: i-STAT Corporation
48
<PAGE> 48
President and Chief Executive Officer
303 College Road East
Princeton, New Jersey 08540
Facsimile Number: (609) 243-0507
With copy to: Paul, Hastings, Janofsky & Walker LLP
1055 Washington Boulevard
Stamford, CT 06901
Attention: Esteban A. Ferrer, Esq.
Facsimile Number: (203) 359-3031
If to Abbott: Abbott Laboratories
Director, Technology Licensing and Acquisitions
D9RK, AP6C
100 Abbott Park Road
Abbott Park, Illinois 60064-3500
Facsimile Number: (847) 937-6951
With copy to: Divisional Vice President
Domestic Legal Division
D-322, AP6D
Abbott Laboratories
100 Abbott Park Road
Abbott Park, Illinois 60064-3500
Facsimile Number: ( 847) 938-1206
Notice shall be effective: (i) upon receipt if personally delivered, (ii) on the
third Business Day following the date of mailing if sent by registered or
certified mail; (iii) on the second Business Day following the date of delivery
to the express mail service if sent by express mail; and (iv) on the first
Business Day following the date of transmission or delivery to the overnight
courier if sent by facsimile or overnight courier. A Party may change its
address listed above by sending notice to the Party.
15.3 Assignment. Neither Party may assign its rights or obligations
under this Agreement without the prior written consent of the other Party, which
consent shall not be unreasonably withheld; provided, however, that Abbott may
assign this Agreement, in whole or in part, without
49
<PAGE> 49
such consent, to an Affiliate of Abbott; and provided, further, that Abbott
shall promptly notify i- STAT of any such assignment. Any permitted assignee
shall assume all obligations of its assignors under this Agreement. No
assignment shall relieve any Party of responsibility for the performance of any
obligation which such Party may have or incur hereunder.
15.4 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of each of the Parties and its successors and permitted assigns.
15.5 Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be resolved through the
alternate dispute resolution procedure ("ADR") described on Schedule 15.5;
provided, however, that this shall not prevent a Party from seeking or obtaining
injunctive relief relating to a breach of confidentiality under Article 10 in a
court of competent jurisdiction.
15.6 Relationship of the Parties. The relationship of the Parties under
this Agreement is that of independent contractors. Nothing contained in this
Agreement shall be construed so as to constitute the Parties as partners, joint
venturers, or agents of the other. Neither Party nor its Affiliates has any
express or implied right or authority under this Agreement to assume or create
any obligations or make any representations or warranties on behalf of or in the
name of the other Party or its Affiliates.
15.7 Non-Solicitation. The Abbott Diagnostics Division of Abbott
("ADD") and i-STAT each hereby agree that, during the Term and for a period of
*** thereafter, a Party shall not solicit to employ any professional level
employee of the other Party with whom it comes in contact during the performance
of this Agreement, so long as that employee is employed by that other Party,
without obtaining the prior written consent of the other Party; provided that:
(a) such employee has not been dismissed or otherwise terminated; and (b) such
employee has not answered a general solicitation for employment.
*** CONFIDENTIAL TREATMENT REQUESTED.
50
<PAGE> 50
15.8 Headings. The captions to the Articles and Sections in this
Agreement are inserted for convenience only and are not a part hereof.
15.9 Waiver or Modification of Agreement. No waiver or modification of
any of the terms of this Agreement shall be valid unless in writing and signed
by authorized representatives of both Parties. Failure by either Party to
enforce any of its rights under this Agreement shall not be construed as a
waiver of such rights nor shall a waiver by either Party in one (1) or more
instances be construed as constituting a continuing waiver or as a waiver in
other instances.
15.10 Severability. If any term or provision of this Agreement for any
reason shall be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other term or
provision hereof, and this Agreement shall be interpreted and construed as if
such term or provision, to the extent the same shall have been held to be
invalid, illegal or unenforceable, had never been contained herein.
15.11 Entire Agreement. This Agreement including the Schedules, which
are incorporated herein by reference, together with the Alliance Agreements
including the StandStill Agreement and the Registration Rights Agreement, and
other documents exchanged in connection therewith sets forth the entire
understanding of the Parties concerning the subject matter hereof and supersedes
all written or oral prior agreements or understandings with respect thereto.
15.12 Governing Law. This Agreement and the legal relations between the
Parties hereunder shall be construed, interpreted and governed by the laws of
the State of New York, without regard to its choice of law principles.
51
<PAGE> 51
15.13 Interpretation. When a reference is made to this Agreement to
Sections or Schedules, such reference shall be to a Section or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The table of contents and headings contained in this
Agreement have been inserted for convenience of reference only and shall not be
relied upon in construing this Agreement. Use of any gender herein to refer to
any person shall be deemed to comprehend masculine, feminine, and neuter unless
the context clearly requires otherwise.
15.14 Counterparts. This Agreement may be executed in two (2) original
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
15.15 Mutual Drafting. This Agreement is the joint product of Abbott
and i-STAT, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of the Parties and their respective
legal counsel and advisers and any rule of construction that a document shall be
interpreted or construed against the drafting party shall not be applicable.
[The remainder of this page intentionally left blank.]
52
<PAGE> 52
[This page intentionally left blank.]
53
<PAGE> 53
IN WITNESS WHEREOF, each Party has caused this Research and Development
and License Agreement to be executed by its duly authorized representative as of
the day and year last below written.
ABBOTT LABORATORIES i-STAT CORPORATION
By: /s/ Miles D. White By: /s/ William P. Moffitt
-------------------------- -----------------------------
Miles D. White William P. Moffitt
Executive Vice President President and Chief Executive Officer
Date: August 3, 1998 Date: August 3, 1998
54
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 22,033
<SECURITIES> 0
<RECEIVABLES> 6,467
<ALLOWANCES> (113)
<INVENTORY> 5,544
<CURRENT-ASSETS> 34,599
<PP&E> 32,876
<DEPRECIATION> (19,046)
<TOTAL-ASSETS> 50,069
<CURRENT-LIABILITIES> 7,701
<BONDS> 0
0
214
<COMMON> 1,987
<OTHER-SE> 40,167
<TOTAL-LIABILITY-AND-EQUITY> 50,069
<SALES> 19,240
<TOTAL-REVENUES> 19,240
<CGS> 16,121
<TOTAL-COSTS> 16,121
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 38
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (10,848)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,848)
<EPS-PRIMARY> (.71)
<EPS-DILUTED> (.71)
</TABLE>
