U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended February 28, 1998
or
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _________ to ________.
Commission File No. 0-21354
ENDOGEN, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Massachusetts 04-2789249
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
30 Commerce Way
Woburn, Massachusetts 01801-1059
(Address of Principal Executive Offices)
(781) 937-0890
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Title Shares Outstanding as of March 26, 1998
- ----------------------------- ---------------------------------------
Common Stock, $0.01 par value 3,440,079
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
Exhibit index located on page 17
Page 1 of 17
<PAGE>
ENDOGEN, INC.
FORM 10-QSB
QUARTER ENDED FEBRUARY 28, 1998
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION Number
- ------------------------------ ------
Item 1 - Financial Statements (Unaudited)
Balance Sheet
February 28, 1998 and May 31, 1997................................. 3
Income Statement
for the three months ended February 28, 1998 and 1997.............. 4
Income Statement
for the nine months ended February 28, 1998 and 1997............... 5
Statement of Cash Flows
for the nine months ended February 28, 1998 and 1997............... 6
Notes to Financial Statements.......................................... 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations......................... 10
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K................................... 15
Signatures.................................................................. 16
Index To Exhibits........................................................... 17
Page 2 of 17
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ENDOGEN, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
February 28, May 31,
1998 1997
------------ -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 819,727 $ 334,050
Accounts receivable, net of allowance for doubtful accounts
and returns of $50,000 at February 28, 1998 and May 31, 1997 1,479,495 1,612,908
Inventories 1,950,787 1,817,440
Prepaid expenses and other current assets 459,091 221,862
Deferred income taxes 188,000 188,000
----------- -----------
Total current assets 4,897,100 4,174,260
----------- -----------
Fixed assets, net 2,178,404 2,327,550
Intangible assets, net 308,699 395,730
Deferred income taxes 280,000 280,000
Other assets 182,687 300,213
----------- -----------
$ 7,846,890 $ 7,477,753
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of note payable - bank $ -- $ 7,633
Equipment line of credit 167,188 --
Current portion of term note payable 133,333 133,333
Current portion of capital lease obligations 6,540 5,528
Accounts payable and accrued expenses 1,251,564 1,292,939
----------- -----------
Total current liabilities 1,558,625 1,439,433
----------- -----------
Term note payable - bank 100,000 200,000
Capital lease obligations and other note payable 9,736 14,776
----------- -----------
109,736 214,776
----------- -----------
Stockholders' equity:
Common stock, $.01 par value; 10,000,000 shares authorized; 3,440,079 and
3,416,319 shares issued and outstanding at February 28, 1998
and May 31, 1997, respectively 34,401 34,162
Additional paid-in capital 6,282,030 6,101,667
Deferred compensation (112,084) --
Accumulated deficit (25,818) (312,285)
----------- -----------
Total stockholders' equity 6,178,529 5,823,544
----------- -----------
$ 7,846,890 $ 7,477,753
=========== ===========
</TABLE>
See notes to unaudited financial statements
Page 3 of 17
<PAGE>
ENDOGEN, INC.
INCOME STATEMENT
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
February 28, February 28,
1998 1997
------------- -------------
<S> <C> <C>
REVENUES: $ 2,487,755 $ 2,479,270
----------- -----------
COSTS AND EXPENSES:
Cost of revenues 980,722 870,940
Selling, general and administrative 990,837 1,024,075
Research and development 482,230 384,125
----------- -----------
2,453,789 2,279,140
----------- -----------
Income from operations 33,966 200,130
Interest expense, net 4,396 37,018
----------- -----------
Income before income taxes 29,570 163,112
Provision for income taxes 9,000 25,000
----------- -----------
Net income $ 20,570 $ 138,112
=========== ===========
Basic earnings per share $ 0.01 $ 0.05
=========== ===========
Diluted earnings per share $ 0.01 $ 0.04
=========== ===========
Shares used in computing:
Basic earnings per share 3,440,079 3,065,853
=========== ===========
Diluted earnings per share 3,591,533 3,371,889
=========== ===========
</TABLE>
See notes to unaudited financial statements
Page 4 of 17
<PAGE>
ENDOGEN, INC.
INCOME STATEMENT
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
February 28, February 28,
1998 1997
------------ ------------
<S> <C> <C>
REVENUES: $ 7,402,215 $ 7,183,381
----------- -----------
COSTS AND EXPENSES:
Cost of revenues 2,759,713 2,485,170
Selling, general and administrative 2,977,655 3,044,458
Research and development 1,226,729 1,014,021
----------- -----------
6,964,097 6,543,649
----------- -----------
Income from operations 438,118 639,732
Interest expense, net 10,651 157,451
----------- -----------
Income before income taxes 427,467 482,281
Provision for income taxes 141,000 75,000
----------- -----------
Net income $ 286,467 $ 407,281
=========== ===========
Basic earnings per share $ 0.08 $ 0.14
=========== ===========
Diluted earnings per share $ 0.08 $ 0.12
=========== ===========
Shares used in computing:
Basic earnings per share 3,429,452 2,991,792
=========== ===========
Diluted earnings per share 3,634,221 3,291,003
=========== ===========
</TABLE>
See notes to unaudited financial statements
Page 5 of 17
<PAGE>
ENDOGEN, INC.
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
February 28, February 28,
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 295,467 $ 407,281
----------- -----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 621,605 561,514
Decrease (increase) in accounts receivable 133,413 (304,243)
Increase in inventories (133,347) (448,791)
(Increase) decrease in prepaid expenses and other assets (144,660) 78,946
Increase in intangible assets -- (20,500)
(Decrease) increase in accounts payable and accrued expenses (41,375) 460,028
----------- -----------
Net cash provided by operating activities 722,103 734,235
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (360,471) (953,559)
----------- -----------
Net cash used for investing activities (360,471) (953,559)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations and notes payable (111,661) (674,028)
Proceeds from borrowings under an equipment line of credit with a bank 167,188 --
Proceeds from borrowings under term loan payable to a bank -- 400,000
Proceeds from issuance of common stock 68,518 116,261
----------- -----------
Net cash provided by (used in) financing activities 124,045 (157,767)
----------- -----------
Net increase (decrease) in cash and cash equivalents 485,677 (377,091)
Cash and cash equivalents, beginning of period 334,050 763,739
----------- -----------
Cash and cash equivalents, end of period $ 819,727 $ 386,648
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 30,193 $ 163,862
=========== ===========
Cash paid for income taxes $ 45,465 $ 50,000
=========== ===========
Issuance of common stock upon conversion of convertible note payable $ -- $ 1,802,680
=========== ===========
</TABLE>
See notes to unaudited financial statements
Page 6 of 17
<PAGE>
ENDOGEN, INC.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited financial statements of Endogen, Inc. (the "Company" or
"Endogen") include, in the opinion of management, all adjustments
(consisting of normal and recurring adjustments) necessary for a fair
presentation of the Company's financial position as of February 28, 1998 and
the results of operations for the three and nine month periods ended
February 28, 1998 and 1997. The results of operations are not necessarily
indicative of results for a full year.
These financial statements should be read in conjunction with the financial
statements contained in the Company's Form 10-KSB filed with the Securities
and Exchange Commission (the "SEC") on August 8, 1997 pursuant to the
Securities Exchange Act of 1934, as amended. Certain information and
footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the SEC rules and regulations.
2. Summary of Significant Accounting Policies
Net Income Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share"
which replaces primary and fully diluted earnings per share with basic and
diluted earnings per share. `Basic' earnings per share is calculated by
dividing net earnings applicable to common shares by the weighted average
number of common shares outstanding during the period. For purposes of
calculating diluted earnings per share the denominator includes both the
weighted average number of shares of common stock outstanding and the number
of dilutive common stock equivalents such as stock options and warrants. The
Company adopted SFAS 128 on December 1, 1997. All prior period per share
amounts have been restated to comply with the standard.
A summary of the shares used in calculating basic and diluted earnings per
share follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 28,
--------------------------- ---------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average number of shares of
common stock outstanding 3,440,079 3,065,853 3,429,452 2,991,792
Dilutive stock options and warrants 151,454 306,036 204,769 299,211
--------- --------- --------- ---------
Shares used in calculating diluted
earnings per share 3,591,533 3,371,889 3,634,221 3,291,003
========= ========= ========= =========
</TABLE>
3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
February 28, May 31,
1998 1997
------------ -------------
<S> <C> <C>
Raw materials and supplies $ 883,846 $ 797,104
Work in process 415,979 369,290
Finished goods 650,962 651,046
----------- -----------
$ 1,950,787 $ 1,817,440
=========== ===========
</TABLE>
Page 7 of 17
<PAGE>
ENDOGEN, INC.
NOTES TO FINANCIAL STATEMENTS
4. Fixed Assets
Fixed assets consist of the following:
<TABLE>
<CAPTION>
February 28, May 31,
1998 1997
------------ -----------
<S> <C> <C>
Laboratory equipment $ 1,140,860 $ 967,289
Computer and office equipment 939,249 847,518
Leasehold improvements 1,728,144 1,632,975
----------- -----------
3,808,253 3,447,782
Accumulated depreciation and amortization (1,629,849) (1,120,232)
----------- -----------
$ 2,178,404 $ 2,327,550
=========== ===========
</TABLE>
5. Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
February 28, May 31,
1998 1997
------------ -----------
<S> <C> <C>
Acquired technology $ 305,290 $ 305,290
Patent costs 68,240 68,240
License costs 401,559 401,559
----------- -----------
775,089 775,089
Accumulated depreciation and amortization (466,390) (379,359)
----------- -----------
$ 308,699 $ 395,730
=========== ===========
</TABLE>
6. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
February 28, May 31,
1998 1997
------------ -----------
<S> <C> <C>
Accounts payable $ 647,444 $ 756,957
Accrued wages and related expenses 247,142 210,064
Accrued taxes 109,847 11,544
Accrued royalties 140,905 241,751
Accrued professional fees 106,226 72,623
=========== ===========
$ 1,251,564 $ 1,292,939
=========== ===========
</TABLE>
Page 8 of 17
<PAGE>
ENDOGEN, INC.
NOTES TO FINANCIAL STATEMENTS
7. Borrowings
In August 1997, the Company modified its existing credit agreement with a
bank to provide for, among other things, an additional demand line of credit
of up to $250,000 available to finance certain equipment purchases through
April 1998 (the "Equipment Line"). Borrowings under the Equipment Line bear
interest at the prime rate plus 1.25% and are secured by all corporate
assets of the Company. The Equipment Line contains a feature whereby
outstanding borrowings at April 1998 automatically convert into a term loan
payable in thirty-six equal principal installments plus interest. The
Company has outstanding borrowings under the Equipment Line of $167,188 at
February 28, 1998. The credit agreement was also modified to extend the
maturity date on the Company's existing revolving line of credit to August
1998 and to reduce the interest rate to the prime rate plus 1.0%.
Additionally, the interest rate on the existing term note payable was
reduced to the prime rate plus 1.25%.
8. Common Stock
On November 6, 1997, the stockholders of the Company approved an increase in
the number of shares available for issuance under the Company's 1992 Stock
Plan from 768,499 to 1,000,000 shares.
9. Commitments
On August 21, 1997, the Company entered into a Product Development and
Marketing Agreement (the "Agreement") with Third Wave Technologies, Inc.
("Third Wave") of Madison, Wisconsin. Under the terms of the Agreement,
Endogen will fund certain research and development activities at Third Wave
in exchange for certain exclusive, worldwide rights to sell and distribute
to the life science research market messenger RNA ("mRNA") quantitation kits
jointly developed by the two companies. Funding payments, not to exceed
$1,050,000 in total, will be made to Third Wave quarterly by the Company
over a three year period beginning December 1, 1997. In connection with the
Agreement, the Company issued a five-year warrant to Third Wave for the
purchase of up to 125,000 shares of Endogen common stock at a price of $6.00
per share. The warrant vests ratably over three years from August 31, 1997.
The Company has ascribed a value of $134,500 to such warrant, which is being
amortized on a straight-line basis over three years.
Page 9 of 17
<PAGE>
ENDOGEN, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion includes forward-looking statements, including, but
not limited to, statements with respect to the Company's future financial
performance, operating results, plans and objectives. Actual results may differ
materially from those currently anticipated depending upon a variety of factors.
Endogen is principally engaged in the development, manufacture and sale of
specialty reagents and immuno-assay test kits for pharmaceutical, biotechnology
and biomedical research. These products include over 330 specialty reagents and
64 immuno-assay test kits that measure immune system function in human, mouse,
rat, or porcine samples. Products marketed under Endogen's name are sold
directly in the United States and through distributors in over 40 foreign
countries. The Company also sells products on a private label basis to customers
who market these products under their own brand names.
Results of Operations
As an aid to understanding Endogen's operating results, the following table
shows each item from the income statement expressed as a percentage of revenues.
PERCENTAGE OF REVENUES
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 28,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues.................................... 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of revenues.......................... 39.4% 35.1% 37.3% 34.6%
Selling, general, and administrative...... 39.8% 41.3% 40.2% 42.4%
Research and development.................. 19.4% 15.5% 16.6% 14.1%
Income from operations...................... 1.4% 8.1% 5.9% 8.9%
Interest expense, net..................... 0.2% 1.5% 0.1% 2.2%
Net income before income taxes.............. 1.2% 6.6% 5.8% 6.7%
Provision for income taxes................ 0.4% 1.0% 1.9% 1.0%
Net income.................................. 0.8% 5.6% 3.9% 5.7%
</TABLE>
Three Month Period Ended February 28, 1998 As Compared
with the Three Month Period Ended February 28, 1997
------------------------------------------------------
Revenues
For the three months ended February 28, 1998, total revenues increased to
$2,487,755 from $2,479,270 in the same period last year, an increase of $8,485.
Domestic and international sales of Endogen branded products increased to
$1,758,147 during the third quarter of fiscal 1998 from $1,598,429 in the same
quarter last year, an increase of 10%. This growth was due primarily to
increased sales volume from existing Endogen product lines, new product
introductions and an expansion of the international distribution network. This
increase was offset in part by a 38% decline in private label sales, which
decreased to $553,639 in the third quarter of fiscal 1998 from $893,233 during
the third quarter of fiscal 1997. This decline was attributable primarily to a
decrease in sales to one major private label customer. The Company believes that
this customer has undertaken to increase its inventory turnover which reduced
Endogen's third quarter private label sales.
Page 10 of 17
<PAGE>
ENDOGEN, INC.
Cost of Revenues
Cost of revenues was $980,722 for the three months ended February 28, 1998
compared with $870,940 for the same period last year, an increase of $109,782 or
13%. As a percentage of revenues, cost of revenues was 39% and 35% in the
three-month periods ended February 28, 1998 and 1997, respectively. The increase
in cost of revenues as a percentage of revenues during the third quarter of
fiscal 1998 was due in part to changes in the mix of products sold, increases in
full-time headcount as a result of the Company's fiscal 1997 growth, and higher
fixed overhead costs.
Selling, General and Administrative Expenses
Selling, general and administrative expense was $990,837 for the three months
ended February 28, 1998 compared with $1,024,075 for the same period last year,
a decrease of $33,238 or 3%. The decrease was due primarily to a decline in
professional fees incurred in fiscal 1998 and the timing of certain advertising
and promotion costs offset in part by increases in sales and administrative
staffing over the prior year period. As a percentage of revenues, selling,
general and administrative expense decreased to 40% of revenues for the three
months ended February 28, 1998 compared with 41% for the same period last year.
Research and Development Expenses
Research and development expense was $482,230 for the three months ended
February 28, 1998 versus $384,125 for the same period last year, an increase of
$98,105, or 26%. The increase is attributable to the Company's funding of mRNA
product development internally and at Third Wave Technologies, Inc. Research and
development expense increased as a percentage of revenues to 19% for the three
months ended February 28, 1998 from 16% for the same period last year. Endogen
plans to continue to spend heavily on product development for new products and
to upgrade existing products.
Interest Expense, net
Net interest expense was $4,396 for the three months ended February 28, 1998
compared with net interest expense of $37,018 for the same period last year, a
decrease of $32,622 or 88%. Interest expense for the three-month period ended
February 28, 1997, reflects interest incurred on the convertible subordinated
note (the "T Cell Note") in the original principal amount of $2,002,978 issued
by Endogen in connection with the T Cell Diagnostics, Inc. acquisition in March
1996. The T Cell Note was converted into shares of the Company's common stock in
February 1997. In addition, during fiscal 1997 and fiscal 1998, interest expense
was incurred in connection with borrowings under notes payable, an equipment
line of credit and capital lease obligations.
Income Taxes
The Company's effective tax rate was 30% for the three months ended February
28, 1998 as compared to 15% for the comparable period in fiscal 1997. The
increase in the effective tax rate in fiscal 1998 is primarily the result of the
Company's use of its remaining net operating loss carryforwards during fiscal
1998.
Nine Month Period Ended February 28, 1998 As Compared
with the Nine Month Period Ended February 28, 1997
-----------------------------------------------------
Revenues
For the nine months ended February 28, 1998, total revenues increased to
$7,402,215 from $7,183,381 in the same period last year, an increase of $218,834
or 3%. Domestic and international sales of Endogen branded products increased to
$5,252,635 during the first nine months of fiscal 1998 from $4,622,117 in the
same period last year, an increase of 14%. This growth was due primarily to
increased sales volume from existing Endogen product lines, new product
introductions and an expansion of the international distribution network. This
increase was offset in part by a 24% decline in private label sales, which
decreased to $1,930,449 in the first nine months of fiscal 1998 from $2,526,081
during the first nine months of fiscal 1997. This decline was attributable
primarily to a decrease in sales to one major private label customer. The
Company has responded to this customer's requirements to decrease its inventory
levels which has consequently reduced the Company's shipments over the
nine-month period.
Page 11 of 17
<PAGE>
ENDOGEN, INC.
Cost of Revenues
Cost of revenues was $2,759,713 for the nine months ended February 28, 1998
compared with $2,485,170 for the same period last year, an increase of $274,543
or 11%. As a percentage of revenues, cost of revenues was 37% and 35% in the
nine-month periods ended February 28, 1998 and 1997, respectively. The increase
in cost of revenues as a percentage of revenues during the first nine months of
fiscal 1998 was due in part to changes in the mix of products sold, increases in
full-time headcount as a result of the Company's fiscal 1997 growth, higher
fixed overhead costs and increased royalty expenses associated with new product
introductions.
Selling, General and Administrative Expenses
Selling, general and administrative expense was $2,977,655 for the nine
months ended February 28, 1998 compared with $3,044,458 for the same period last
year, a decrease of $66,803 or 2%. The decrease was due primarily to a decline
in professional fees incurred in fiscal 1998 offset in part by increases in
sales and administrative staffing over the prior year period. As a percentage of
revenues, selling, general and administrative expense decreased to 40% of
revenues for the nine months ended February 28, 1998 compared with 42% for the
same period last year.
Research and Development Expenses
Research and development expense was $1,226,729 for the nine months ended
February 28, 1998 versus $1,014,021 for the same period last year, an increase
of $212,708, or 21%. Research and development expense increased as a percentage
of revenues to 17% for the nine months ended February 28, 1998 from 14% for the
same period last year. Endogen plans to continue to spend heavily on product
development for new products and to upgrade existing products. In August 1997,
the Company entered into a Product Development and Marketing Agreement with
Third Wave Technologies, Inc. for the joint development of a new line of
products which will quantitatively measure levels of mRNA. A significant portion
of the increase in research and development expenditure between the nine-month
periods relates to investment in the mRNA program.
Interest Expense, net
Net interest expense was $10,651 for the nine months ended February 28, 1998
compared with net interest expense of $157,451 for the same period last year, a
decrease of $146,800 or 93%. Interest expense for the nine-month period ended
February 28, 1997, reflects interest incurred on the T Cell Note. The T Cell
Note was converted into shares of the Company's common stock in February 1997.
In addition, interest expense decreased in fiscal 1998 versus fiscal 1997 as a
result of the reduction in average outstanding borrowings under other notes
payable and capital lease obligations.
Income Taxes
The Company's effective tax rate was 33% for the nine months ended February
28, 1998 as compared to 16% for the comparable period in fiscal 1997. The
increase in the effective tax rate in fiscal 1998 is primarily the result of the
Company's use of its remaining net operating loss carryforwards during fiscal
1998.
Liquidity and Capital Resources
The substantial growth of Endogen's business has led to increased liquidity
requirements to fund working capital needs and capital expenditures. This
includes financing inventories and accounts receivable to support the Company's
growing operations, as well as purchases of new laboratory equipment and
leasehold improvements to support new product development. In addition, in
connection with its Product Development and Marketing Agreement with Third Wave,
the Company is obligated to make funding payments, not to exceed $1,050,000 in
total, to Third Wave in quarterly installments over a three year period
beginning December 1, 1997. Endogen has financed its liquidity needs primarily
through cash from operations, a working capital line of credit, an equipment
line of credit and a term loan payable to a bank.
Page 12 of 17
<PAGE>
ENDOGEN, INC.
At February 28, 1998, Endogen's cash position was $819,727, an increase of
$485,677 from May 31, 1997. At February 28, 1998, the Company had $850,000
available under a working capital line of credit and $82,812 under an equipment
line of credit with a bank. The interest rate on these lines is 1.0% and 1.25%
above the bank's prime rate, respectively.
Cash Flows from Operating Activities
Net cash provided by operations during the nine-month period ended February
28, 1998 was $722,103 as compared to $734,235 in the same fiscal 1997 period.
For the first nine months of fiscal 1998, net cash provided by operating
activities consisted primarily of depreciation and amortization of $621,605, net
income of $286,467 and a decrease in accounts receivable of $133,413. This was
offset in part by an increase in inventories of $133,347, an increase in prepaid
expenses and other assets of $144,660 and a decrease in accounts payable and
accrued expenses of $41,375. For the first nine months of fiscal 1997, net cash
provided by operations consisted primarily of net income of $407,281,
depreciation and amortization of $561,514, decreased prepaid expenses and other
assets of $78,946 and an increase in accounts payable and accrued expenses of
$460,028. This was partially offset by increased accounts receivable of
$304,243, increased inventories of $448,791 and increased intangible assets of
$20,500.
Cash Flows from Investing Activities
Investments in capital equipment totaled $360,471 and $953,559 for the nine
months ended February 28, 1998 and 1997, respectively.
Cash Flows from Financing Activities
During the nine-month period ended February 28, 1998, cash was used to
decrease borrowings by $111,661 and was offset by proceeds of $167,188 from
borrowings under an equipment line of credit and from the issuance of common
stock of $68,518. In the first nine months of fiscal 1997, cash was used to
decrease net borrowings by $274,028, and was offset in part by proceeds from the
issuance of common stock of $116,261.
The Company expects to continue expanding operations through internal growth
and strategic acquisitions which offer products similar or complementary to
those offered by the Company. Although the Company has no material current
acquisition agreements or arrangements, there may be opportunities which require
additional external financing, and the Company may from time to time seek to
obtain additional funds from public or private issuance of equity or debt
securities. There can be no assurance that such financing will be available at
all or on terms acceptable to the Company.
Based on management's current projections, Endogen believes that its
financial resources and cash flows from operations, together with borrowings
available from credit agreements with a bank, will be sufficient to finance its
current and planned operations for at least the next twelve months. There can be
no assurance, however, that the Company will not require additional working
capital and, if it does require such capital, that such capital will be
available to the Company on acceptable terms, if at all.
Year 2000
The Company recognizes that it must ensure that its services and operations
will not be adversely affected by Year 2000 software failures (the "Year 2000
issue") which can arise in time-sensitive software applications with two-year
digits to define the applicable year. In such applications, a date using "00" as
the year may be recognized as the year 1900 rather than the year 2000. The
Company is in the process of upgrading many of its business and computer
operating systems with software which, when upgraded, are Year 2000 compatible.
The Company is planning to complete all necessary Year 2000 upgrades of its
major systems and is currently identifying and developing conversion strategies
for its remaining systems that may be impacted by the Year 2000 issue. There can
be no assurance, however, that there will not be a delay in, or increased costs
associated with, the implementation of such changes, and the Company's ability
to implement such changes could have an adverse effect on future results of
operations. In addition, there can be no assurances that the Company's customers
and suppliers will not be adversely affected by their own Year 2000 issues,
which may indirectly adversely and materially affect the Company.
Page 13 of 17
<PAGE>
ENDOGEN, INC.
Certain Factors That May Affect Future Results
The Company does not provide forecasts of the future financial performance of
the Company. However, from time to time, information provided by the Company or
statements made by its employees may contain "forward-looking" information that
involve risks and uncertainties. In particular, statements contained in this
Form 10-QSB that are not historical facts constitute forward-looking statements
and are made under the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The Company's actual results of operations and
financial condition have varied and may in the future vary significantly from
those stated in any forward-looking statements. The Company's future operating
results are subject to risks and uncertainties and are dependent upon many
factors, including, without limitation, the Company's ability to (i) meet its
working capital and future liquidity needs, (ii) successfully implement its
strategic growth strategies, (iii) understand, anticipate and respond to rapidly
changing technologies, market trends and customer needs, (iv) develop,
manufacture and deliver high quality, technologically advanced products on a
timely basis to withstand competition from competitors which may have greater
financial, information gathering and marketing resources than the Company, (v)
obtain and protect licensing and intellectual property rights necessary for the
Company's technology and product development and on terms favorable to the
Company, and (vi) recruit and retain highly talented professionals in a
competitive job market. The Company's ability to market and sell its products
could also be adversely affected by the emergence of new competitors in the
market place and by changes resulting in increased government regulation of the
manufacture and sale of its products. In addition, a significant portion of the
Company's revenues are attributable to international customers, which may be
adversely affected by factors including fluctuations in exchange rates, adverse
political and economic conditions, tariff regulation, and difficulties in
obtaining export licenses. Each of these factors, and others, are discussed from
time to time in the filings made by the Company with the Securities and Exchange
Commission, including, but not limited to, the Company's Annual Report on Form
10-KSB filed on August 8, 1997 and its Quarterly Reports on Form 10-QSB filed on
October 9, 1997 and January 13, 1998.
Page 14 of 17
<PAGE>
ENDOGEN, INC.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) - EXHIBITS
The following exhibits, required by Item 601 of Regulation S-B, are filed
as a part of this Quarterly Report on Form 10-QSB. Exhibit numbers, where
applicable, correspond to those of Item 601 of Regulation S-B.
10.1* License and Option Agreement by and between Endogen, Inc. and
Becton, Dickinson and Company through its subsidiary PharMingen
dated February 28, 1998
10.2* Supply Agreement by and between Endogen, Inc. and Becton, Dickinson
and Company through its subsidiary PharMingen dated February 28,
1998
11.1 Statement Re: Computation of Per Share Earnings
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
27.3 Restated Financial Data Schedule
* Confidential treatment has been requested as to omitted portions pursuant
to Rule 24b-2 promulgated under the Securities and Exchange Act of 1934, as
amended.
(b) - REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
Page 15 of 17
<PAGE>
ENDOGEN, INC.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ENDOGEN, INC.
BY:
Date: April 3, 1998
/s/ Owen A. Dempsey
----------------------------------
Owen A. Dempsey
Director, President and
Chief Executive Officer
Date: April 3, 1998
/s/ Avery W. Catlin
----------------------------------
Avery W. Catlin
Vice President, Finance, Treasurer
and Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
Page 16 of 17
<PAGE>
ENDOGEN, INC.
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
10.1* License and Option Agreement by and between Endogen, Inc. and
Becton, Dickinson and Company through its subsidiary PharMingen
dated February 28, 1998.
10.2* Supply Agreement by and between Endogen, Inc. and Becton,
Dickinson and Company through its subsidiary PharMingen dated
February 28, 1998.
11.1 Statement Re: Computation of Earnings per Share.
27.1 Financial Data Schedule.
27.2 Restated Financial Data Schedule.
27.3 Restated Financial Data Schedule.
* Confidential treatment has been requested as to omitted portions pursuant
to Rule 24b-2 promulgated under the Securities and Exchange Act of 1934, as
amended.
Page 17 of 17
Exhibit 10.1
LICENSE AND OPTION AGREEMENT
This License and Option Agreement made as February 28, 1998 ("Effective Date"),
between Becton, Dickinson and Company a corporation of the state of New Jersey,
through its subsidiary PharMingen having its principle offices at 10975
Torreyana Road, San Diego CA 92121 and its Affiliates both foreign and domestic
(hereinafter individually and collectively "BECTON") and ENDOGEN, Inc. a
corporation of the state of Massachusetts having its principle offices at 30
Commerce Way, Woburn, MA 01801-1059 (hereinafter "ENDOGEN").
W I T N E S E T H:
WHEREAS, ENDOGEN has exclusive rights with respect to the Licensed Patents, as
defined below, pursuant to the license agreements by and between ENDOGEN, having
acquired exclusive rights to these Licensed Patents from T Cell Sciences, Inc.
and the following universities: Stanford University, The Ontario Cancer
Institute, The California Institute of Technology, the Massachusetts Institute
of Technology, Harvard University, and the Dana-Farber Cancer Institute, Inc.,
hereinafter referred to individually and collectively as the "INSTITUTIONS". The
exclusive licenses between T Cell Sciences, Inc. and the INSTITUTIONS are dated
October 1, 1992 for the alpha beta related Licensed Patents and November 1, 1992
for gamma delta related Licensed Patents hereinafter individually and
collectively "ENDOGEN License";
WHEREAS, BECTON wishes to obtain worldwide, non-exclusive rights under said
ENDOGEN License to make, use, have made, sell, have sold on its behalf and
import Products for research use only ("RUO"); and
WHEREAS, the parties also desire to enter into an option arrangement, in which
ENDOGEN will grant to Becton and Becton will accept an option for a worldwide
exclusive license in and to Licensed Patents for all in-vitro diagnostic ("IVD")
applications, such option being contingent and exercisable upon the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, ENDOGEN and BECTON agree as follows:
<PAGE>
Section 1. DEFINITIONS
- ------------------------
1.1 "Licensed Patent(s)" shall mean any issued patents or pending patent
applications claiming priority to the technology as described in ENDOGEN
License, including those listed, or issued on applications listed in Exhibit A,
together with any divisions, continuations in whole or in part, re-examination
and/or reissues, both foreign and domestic of the foregoing patents and pending
applications, to which ENDOGEN has or shall have during the term hereof the
right to grant sublicenses.
1.2 "Product(s)" shall mean any substance or antibody used to detect TcR
proteins, the manufacture, use or sale of which (but for the license granted to
BECTON in this License Agreement) would infringe upon (or would contribute to
the infringement of) a claim of any Licensed Patent as the claim coverage
provided by each issued patent has been agreed to by the parties hereto and
delineated in Exhibit C. The claim coverage description provided in Exhibit C is
for the purpose of identifying the Products covered thereby. For each currently
pending application (both foreign and domestic) which subsequently issues as a
patent, or for any Licensed Patent which would cover a Product but the parties
have not agreed in writing as to the claim coverage, then the parties shall
agree in writing as to the claim coverage provided by such subsequently issued
patent and Licensed Patents.
1.3 "Net Sales" means the amount billed or invoiced on sales of Licensed
Products by BECTON or its Affiliates less:
(a) Customary trade, quantity or cash discounts and non-affiliated brokers' or
agents' commissions actually allowed and taken.
(b) Amounts repaid or credited by reason of rejection or return; and/or To the
extent separately stated on purchase orders, invoices or other documents of
sales, taxes or duties levied on and/or other governmental charges made as to
production, sale, transportation, delivery or use and paid by or on behalf of
BECTON.
1.4 "Valid Claim" shall mean a claim of an issued patent which has not lapsed or
become abandoned or been rendered invalid or unenforceable by a court of
competent jurisdiction or an administrative agency from which no appeal can be
or is taken.
<PAGE>
1.5 "TcR Antibody Patents" shall mean the Licensed Patents, both foreign and
domestic, to TcR antibodies and which are separately identified in Exhibit B.
1.6 "Affiliate(s)" shall mean any legal entity such as corporation, partnership,
or limited liability company that is controlled by BECTON. For the purpose of
this definition, the term "control" means (i) beneficial ownership of at least
Fifty Percent (50%) of the voting securities of a corporation or other
organization with voting securities or (ii) a Fifty Percent (50%) or greater
interest in the net assets or profits of a partnership or other business
organization without voting rights.
Section 2. LICENSE
- --------------------
2.1 ENDOGEN hereby grants to BECTON, who accepts the same a non-exclusive,
indivisible, worldwide right and license, without the right to grant
sublicenses, under the Licensed Patents to make, have made, use, sell, have sold
and import the Product for RUO applications only and to grant to its customers,
the right to use the Product sold by Becton hereunder for RUO applications only.
Section 3. FEES AND ROYALTIES
- -------------------------------
3.1 BECTON shall pay to ENDOGEN a one time, non-returnable, non-creditable
license fee of [CONFIDENTIAL TREATMENT REQUESTED]* within thirty (30) days of
the Effective Date, which fee payment shall not be creditable against royalties
due and payable under Paragraph 3.2, providing that within [CONFIDENTIAL
TREATMENT REQUESTED]* of the Effective Date ENDOGEN enters into [CONFIDENTIAL
TREATMENT REQUESTED]* agreement in and to [CONFIDENTIAL TREATMENT REQUESTED]*.
In the event that ENDOGEN does not enter into such [CONFIDENTIAL TREATMENT
REQUESTED]* agreement with [CONFIDENTIAL TREATMENT REQUESTED]* within such
period, then [CONFIDENTIAL TREATMENT REQUESTED]* shall be fully creditable
against future royalties due and payable
- ----------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
by BECTON, however, BECTON shall not apply the credit on more than [CONFIDENTIAL
TREATMENT REQUESTED]*
3.2 In consideration of the License granted hereunder and pursuant to Exhibit C,
BECTON shall pay ENDOGEN a royalty which is a percentage of Net Sales with
respect to all Products, covered by a Valid Claim of an issued patent, which are
manufactured, used, sold, or otherwise transferred by or for BECTON. The
applicable royalty rates are as follows:
Royalty Net Sales Yearly Aggregate
------- --------------------------
[CONFIDENTIAL TREATMENT REQUESTED]*
3.3 Consistent with the parties' understanding and agreement expressed in this
Section 3, it is further understood by both parties hereto that the Products as
presently contemplated or as configured in the future may be sold in a
combination package, composite or kit containing other products, components or
items which would not be used in methods subject to the license granted herein.
In such event, Net Sales, for purposes of determining royalty payments on the
combination package, shall be calculated by the following applicable method:
(a) By multiplying the Net Sales of that combination package by the
fraction A/A+B, where A is the price, during the royalty paying period in
question, of the Product when sold separately, and B is the price, during
the royalty paying period in question, of the other components in the
combination package or kit; or
- ----------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
(b) In the event that no such separate sales are made of the Product during
the royalty paying period in question, Net Sales for purposes of
determining royalty payments shall be calculated by multiplying the Net
Sales of that combination package or kit by the fraction C/C+D, where C is
the standard fully absorbed cost to BECTON of the Product and D is the
standard fully absorbed cost to BECTON of the other components in the
combination package or kit, such costs being determined by using BECTON's
standard accounting procedures which shall be in accordance with generally
accepted accounting practice.
3.4 It is also understood that a Product may be sold under a reagent rental
agreement, or analogous agreement where a purchaser is provided an instrument
for use in conjunction with a Product and the costs associated with the
placement and use of the instrument are not separately billed, but instead
represent some portion of the purchase price of the Product, such that the
transaction does not enable determination of the Net Sales solely in respect of
a Product. In such event, the Net Sales for those units of such a particular
Product which are sold on a reagent rental or analogous basis shall be
calculated by multiplying for each Product, (a) the average Net Sales price per
unit when the said Product is sold to end users on other than a reagent rental
or analogous basis, by (b) the number of such units of said Product sold on a
reagent rental or analogous basis during the period for which Net Sales is being
calculated.
3.5 For all situations in Exhibit C where a reduced royalty is to paid upon the
sale of Product, the royalty due under Paragraph 3.2 above shall be
[CONFIDENTIAL TREATMENT REQUESTED]*.
3.6 Nothing contained herein shall obligate BECTON to pay royalties on sales of
any Product by BECTON to its Affiliates or vice versa or to pay royalties more
than once in respect of sales of any Product or to pay multiple royalties for
any reason.
- ----------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
3.7 In the event that BECTON is required to pay an additional royalty, for the
Products related to TcR technology, on a per country basis, on a per country
basis, to a third party in order to make, use, sell or import the Products, then
the royalty due and payable to ENDOGEN hereunder shall be [CONFIDENTIAL
TREATMENT REQUESTED]*.
Section 4. PAYMENTS, RECORDS, AND REPORTS
- -------------------------------------------
4.1 Royalties shall accrue when Products with respect to which royalty payments
are required under this Agreement are first sold by or for BECTON. The Product
shall be considered sold when billed out.
4.2 BECTON shall keep full, true and accurate books of account containing all
particulars that may be necessary for the purpose of showing the amounts of
royalty payable to ENDOGEN. Said books of account shall be kept at BECTON's
principal place of business of the appropriate division of BECTON to which this
Agreement relates. Said books and the supporting data shall be open at all
reasonable times for the length of this Agreement following the end of the
calendar year to which they pertain, to the inspection of ENDOGEN or its agents
for the purpose of verifying BECTON's royalty statement or compliance in other
aspects with this Agreement. Should such inspection lead to the discovery of a
greater than [CONFIDENTIAL TREATMENT REQUESTED]* discrepancy in reporting to
BECTON's detriment, then [CONFIDENTIAL TREATMENT REQUESTED]*
4.3 BECTON shall deliver to each ENDOGEN true and accurate reports, giving such
particulars of the business conducted by BECTON under this Agreement as shall be
pertinent to royalty accounting hereunder within sixty (60) days after March 31,
June 30, September 30, and December 31 of each year. These reports shall include
at least the following:
(a) number of each and total Products manufactured, leased and sold by
BECTON;
(b) accounting for Net Sales of each and total Products, noting the
deductions applicable as provided in Section 1.3; and
(c) running royalties due under Section 3.
If no royalties shall be due for any Product in any jurisdiction, BECTON shall
report so.
- ----------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
4.4 All payments made hereunder shall be made to ENDOGEN at the
address set forth in Section 10 of this Agreement, or at such other address as
ENDOGEN shall specify by written notice, and shall be in U.S.A. dollars.
However, if any payment on account of sales is received by BECTON on a foreign
currency, such amount shall be converted monthly to United States funds at the
rate set internally by BECTON'S international finance department providing
exchange rates, used by BECTON, for translation of end of the month balance
sheets and following month income statements. These applicable conversion rates
shall periodically be provided by BECTON to ENDOGEN with each written royalty
report.
4.5 The royalty amount due under this Agreement shall be considered
overdue if it is received by ENDOGEN later than twenty (20) days past the due
date of the corresponding royalty report. Such overdue royalty shall bear
interest from the twenty-first day past the due date of the corresponding
royalty report until the payment thereof, at a rate of two percent (2%) above
the prime rate in effect at the Chase Manhattan Bank on the due date of the
corresponding royalty report. The payment of such interest shall not foreclose
ENDOGEN from exercising any other right it may have as a consequence of the
lateness of any payment.
Section 5 MAINTENANCE AND ENFORCEMENT OF LICENSED PATENTS
- -----------------------------------------------------------
5.1 ENDOGEN agrees to reasonably prosecute and maintain, the Licensed Patents.
ENDOGEN shall advise BECTON promptly of any significant developments during the
prosecution of Licensed Patents such as the issuance of, or rejection of, or
filing of any continuations continuations-in-part of any Licensed Patents.
BECTON shall have the option but not the obligation to participate in the
preparation of any responses, if any, to any such developments.
5.2 BECTON agrees to reimburse ENDOGEN [CONFIDENTIAL TREATMENT REQUESTED]*.
Additional patents and countries may be added by mutual agreement of the parties
in writing.
- -----------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24B-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
5.3 In the event that [CONFIDENTIAL TREATMENT REQUESTED]* becomes a
[CONFIDENTIAL TREATMENT REQUESTED]*, then BECTON's reimbursement under Section
5.2 shall be [CONFIDENTIAL TREATMENT REQUESTED]*. In the event that any
additional entities, having gross revenues equal to or greater than
[CONFIDENTIAL TREATMENT REQUESTED]* per year, become [CONFIDENTIAL TREATMENT
REQUESTED]* then the reimbursement paid by BECTON hereunder shall be
[CONFIDENTIAL TREATMENT REQUESTED]*.
5.4 ENDOGEN and BECTON shall notify each other promptly in writing if either
becomes aware of any infringement or suspected infringement of the Licensed
Patents.
Section 6 OPTION TERMS AND CONDITIONS
- ---------------------------------------
6.1 ENDOGEN hereby grants BECTON an option to take an exclusive license,
without the right to grant sublicense, in and to the Licensed Patents to make,
use, have made, sell, have sold and import the Product for all IVD applications
only (hereinafter referred to as "Option"). Such Option shall continue from the
Effective Date until the expiration of the last to expire of the Licensed
Patents, providing that Becton continues to pay the annual Option renewal fees
as provided in Paragraph 6.5 below.
6.2 BECTON hereby accepts the Option granted herein by executing this Option
Agreement and paying ENDOGEN a non-returnable, non-creditable option fee of
[CONFIDENTIAL TREATMENT REQUESTED]* within thirty (30) days of the Effective
Date.
6.3 At any time following the Effective Date BECTON may exercise the Option for
each IVD Product by one of the following mechanisms, promptly thereafter the
parties shall amend this Agreement to include the IVD Products and any terms and
conditions related thereto. Promptly following exercise of the Option the
parties shall agree in writing as to the claim coverage provided by the Licensed
Patents pertaining to the IVD Products.
(i) Initiation of a clinical trial, which initiation shall include the
parties mutually agreeing to a definitive protocol to be initiated for
the purpose of
- ----------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
obtaining data for U.S. Food and Drug Administration ("FDA") filing or
any equivalent foreign agency or regulatory body filing, to obtain
regulatory approval for the sale of a specific product for sale as an
IVD Product and by payment to ENDOGEN, within thirty (30) days of such
initiation, a [CONFIDENTIAL TREATMENT REQUESTED]* or
(ii) In the event ENDOGEN identifies, in writing to BECTON, a proposed
specific IVD Product, the use of which is supported by at least one
publication in a leading scientific journal or other mutually agreed
to support, BECTON shall [CONFIDENTIAL TREATMENT REQUESTED]* from
receipt of such notice initiate pre-clinical development, which shall
consist of the proposal of a development plan for IVD Product
production, seeking regulatory approval and marketing forecasts and
proposals of the specific IVD Products, such development plan must be
approved by ENDOGEN, however, ENDOGEN's approval shall not be
unreasonably denied or delayed. Also, to complete BECTON's exercising
of the Option, BECTON shall, within thirty (30) days following the
expiration of such [CONFIDENTIAL TREATMENT REQUESTED]*, pay ENDOGEN a
one time exercise fee for that IVD Product [CONFIDENTIAL TREATMENT
REQUESTED]*.
6.4 Upon approval of such IVD Product under subparagraphs 6. 3 (i) or (ii),
above, by the FDA or other equivalent foreign agency or regulatory body, BECTON
shall [CONFIDENTIAL TREATMENT REQUESTED]* within thirty (30) days of such
approval. It is the intention of the parties that such fees are to be paid
[CONFIDENTIAL TREATMENT REQUESTED]* IVD Product and regardless of the number of
regulatory approved uses or applications for that IVD Product.
6.5 To maintain the Option for the time period set in Paragraph 6.1; BECTON
shall pay to ENDOGEN an annual Option renewal fee of [CONFIDENTIAL TREATMENT
REQUESTED]*
- ----------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
within thirty (30) days of the anniversary date of the Effective Date. Such
annual Option renewal fee shall be paid yearly beginning on the first
anniversary of the Effective Date and continuing thereafter for a period of
[CONFIDENTIAL TREATMENT REQUESTED]* years.
Section 7. TERM AND TERMINATION
- ---------------------------------
7.1 Unless sooner terminated as hereinafter provided, the term of this Agreement
shall be from the date hereof and shall continue for the life of the Licensed
Patent(s) on a per Product basis.
7.2 If BECTON shall, at anytime default in any obligation hereunder, including
but not limited to: failing to make any report, providing materially false
reports, failing to pay any royalties or failing to permit the inspection of its
books and records or is in material breach of any provision of this Agreement as
herein above required, and such default shall not be cured within sixty (60)
days after written notice from ENDOGEN to BECTON specifying the nature of the
default, ENDOGEN shall have the right to terminate this Agreement by giving
written notice to the BECTON and upon the giving of such notice, such license
shall terminate one (1) month thereafter.
7.3 Any termination pursuant to this Section 7 shall not relieve BECTON or
ENDOGEN of any obligation or liability which accrued, or cause of action or
claim which accrued or to accrue hereunto prior to such termination, and such
termination shall not affect in any manner any rights of either party under this
Agreement, or rescind or give rise to any right to rescind anything done or any
payments made or other consideration given hereunder prior to the time such
termination becomes effective.
Section 8. WARRANTY
- ---------------------
8.1 ENDOGEN represents and warrants:
(a) that the ENDOGEN License is in full force and effect;
- ----------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
(b) that it has the right to grant the license set forth in Section 3 and
the Option set forth in Section 5 hereof;
(c) that there are no outstanding agreements, assignments or encumbrances
inconsistent with the provisions this Agreement other than as expressly set
forth herein; and that to the best of ENDOGEN's knowledge all Licensed Patents,
which have issued as patents are valid and enforceable;
8.2 ENDOGEN makes no other representations or warranties, express or implied,
nor does ENDOGEN assume any liability in respect of any infringement or patents
or other rights of third parties due to BECTON'S operation under the license
herein granted.
Section 9. DISAGREEMENTS
- --------------------------
9.1 (a) In the event there is a disagreement between the ENDOGEN and BECTON, the
parties shall attempt in good faith to resolve any dispute arising out of or
relating to this Agreement promptly by negotiations between executives who have
authority to settle the controversy. Any party may give the other party(ies)
written notice of any dispute hereunder not resolved in the normal course of
business. Within twenty (20) days after delivery of said notice, executives of
each of the parties shall discuss by telephone or meet at a mutually acceptable
time and place, and thereafter as often as they reasonably deem necessary, to
exchange relevant information and to attempt to resolve the dispute. If the
matter has not been resolved within sixty (60) days of the disputing party's
notice, or if the parties fail to discuss or meet within twenty (20) days, any
party may initiate mediation of the controversy or claim under the then current
Center for Public Resources Procedure for Mediation of Business Disputes.
(b) If a negotiator intends to be accompanied at a telephone conference or a
meeting by an attorney, the other negotiators shall be given at least three (3)
working days' notice of such intention and may also be accompanied by an
attorney. All negotiations pursuant to this clause are confidential and shall be
treated as compromise and settlement negotiations for purposes of the Federal
Rules of Evidence and any state rules of evidence.
(c) If the mediation set forth in Section 9.1 (a) is unsuccessful in settling
the disagreements agree to a binding arbitration under the Commercial
Arbitration Rules of the American Arbitration Association with a single
arbitrator who is mutually agreed to by the parties in writing.
<PAGE>
Section 10. PAYMENTS, NOTICES, AND OTHER COMMUNICATIONS
- ---------------------------------------------------------
10.1 Any payment, notice or other communication required or permitted to be made
or given to either party hereto pursuant to this Agreement shall be sufficiently
made or given on the date of mailing of sent to such party by certified or
registered mail, postage prepaid, addressed to it at its address set forth
below, or to such other address as it shall designate by written notice given to
the other party, as follows:
In the case of ENDOGEN: Endogen, Inc.
30 commerce Way
Woburn, MA 01801-1059
Attn.: President
In the case of BECTON: PharMingen, Inc.
10975 Torreyana Road
San Diego, CA 92121
Attn.: President
And a copy to: Becton, Dickinson and Company
One Becton Drive
Franklin Lakes, New Jersey 07417-1880
Attn: Chief Patent and Licensing Counsel
Section 11. ASSIGNMENTS
- -------------------------
11.1 Neither party shall assign or transfer this Agreement, in whole or in part,
or any interest arising under this Agreement, without the prior written consent
of the other party. Such consent shall not be unreasonably withheld or delayed
and shall not be deemed or operate to relieve the assigning or delegating party
from any liabilities or obligations assumed or to be performed by it hereunder.
Subject to the provisions of this Section, this Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties.
Section 12. APPLICABLE LAW
- ----------------------------
12.1 This Agreement shall be construed, and the legal relations between the
parties hereto shall be determined, in accordance with the law of the State of
New Jersey if any mediation, arbitration or claim is brought by ENDOGEN and in
accordance with the law of the State of Massachusetts if any mediation,
arbitration or claim is brought by BECTON, United States of America.
<PAGE>
Section 13 Public Announcements
- ---------------------------------
13.1 Except as otherwise required by law, neither party shall make any public
announcement with respect to the subject matter or existence of this Agreement
and the transactions completed hereby, nor any other public announcement
mentioning the other party without the prior written consent of the other party,
which consent shall not be unreasonably denied or delayed.
Section 14. MISCELLANEOUS
- ---------------------------
14.1 (a) This Agreement embodies the entire understanding of the parties and
there are no other agreements or understandings between the parties relating to
the subject matter hereof. No amendment or modification of this Agreement shall
be valid or binding upon such parties unless made in writing and signed on
behalf of each of such parties by their respective proper officers thereunto
duly authorized.
(b) The heading of the several Sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement. 14.2 Neither of the parties hereto shall be
liable in damages or have the right to cancel for any delay or default in
performing hereunder (other than delay or default in the payment of money) if
such delay or default is caused by conditions beyond its control, including but
not limited to Acts of God, governmental restrictions, continuing domestic or
international problems such as war or insurrections, strikes, earthquakes,
fires, flood, work stoppages, embargoes and/or other casualty or cause;
provided, however, that any party hereto shall have the right to terminate this
Agreement upon thirty (30) days prior written notice if either party is unable
to fulfill its obligations under this Agreement due to any of the
above-mentioned causes and such inability continues for a period of six (6)
months.
[CONFIDENTIAL TREATMENT REQUESTED]*
- ----------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
SIGNATURES ARE ON THE FOLLOWING PAGES
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date last subscribed below.
ENDOGEN: BECTON:
Endogen, Inc. Becton, Dickinson and Company
Through its Subsidiary PharMingen
By: /s/ Owen A. Dempsey By: /s/ Brad Kraft
--------------------------- -------------------------------------
Owen A. Dempsey Name: Brad Kraft
CEO and President Title: Vice President and General Manager
<PAGE>
EXHIBIT A
---------
Licensed Patents
Issued Patents (US identified but includes all foreign counterparts as well):
- -----------------------------------------------------------------------------
[bullet] [CONFIDENTIAL TREATMENT REQUESTED]*
Pending Patent Applications:
- ----------------------------
To be identified by ENDOGEN within thirty (30) days of the Effective Date.
- ----------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
EXHIBIT B
---------
TcR Antibody Patents
Issued Patents (US identified but includes all foreign counterparts):
- ---------------------------------------------------------------------
[bullet] [CONFIDENTIAL TREATMENT REQUESTED]*
Pending Patent Applications:
- ----------------------------
To be identified by ENDOGEN within thirty (30) days of the Effective Date.
- ----------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
EXHIBIT C
---------
Claim Coverage
[CONFIDENTIAL TREATMENT REQUESTED]*
- ----------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
EXHIBIT C
---------
Claim Coverage Continued
[CONFIDENTIAL TREATMENT REQUESTED]*
- ----------------
*[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
Exhibit 10.2
SUPPLY AGREEMENT
----------------
THIS AGREEMENT, made, executed and effective as of February 28, 1998
(hereinafter "Effective Date"), is between Becton, Dickinson and Company, a New
Jersey corporation, through its subsidiary PharMingen having its principle
office at 10975 Torreyana Road, San Diego, CA 92121-1111 (hereinafter
individually and collectively "Becton") and Endogen, Inc. a Massachusetts
corporation have its principle office at 30 Commerce Way, Woburn, MA 01801-1059
(hereinafter called "Endogen").
W I T N E S S E T H:
--------------------
WHEREAS, Becton desires that Endogen manufacture for Becton [CONFIDENTIAL
TREATMENT REQUESTED]* of Endogen's [CONFIDENTIAL TREATMENT REQUESTED]* in
certain unpackaged bulk quantities; and
WHEREAS, Endogen desires that Becton manufacture for Endogen
[CONFIDENTIAL TREATMENT REQUESTED]* of Becton's [CONFIDENTIAL TREATMENT
REQUESTED]* in certain unpackaged bulk quantities; and
WHEREAS, each of the parties desires to enter into an agreement for the
manufacture, packaging and sale of each of the party's antibodies desired by the
other party.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein and other good and valuable consideration the
sufficiency and receipt of which are hereby acknowledged, the parties hereby
agree as follows:
1.0 Definitions
-----------
As used in this Agreement:
1.1 "Buyer" shall mean a party hereto, be it Becton or Endogen
who is ordering and/or purchasing Products hereunder.
1.2 "Agreement" shall mean this Supply Agreement and any
exhibits, attachments or addenda hereto.
1.3 "Contract Year" shall mean in the context of the first
Contract Year hereunder the twelve-month period commencing on the Effective
Date. Each succeeding Contract Year, if any, shall consist of the twelve
calendar months following the end of the preceding Contract Year.
- ---------------
* [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
<PAGE>
1.4 "Proposed Product(s)" shall mean individually and
collectively Becton products consisting of at least the [CONFIDENTIAL TREATMENT
REQUESTED]* Becton [CONFIDENTIAL TREATMENT REQUESTED]* as identified in Schedule
C and the Endogen products consisting of at least the [CONFIDENTIAL TREATMENT
REQUESTED]* as identified in Schedule D, which Schedules may from time to time
be amended by mutual agreement of the parties in writing.
1.5 "Product(s)" shall mean individually and collectively
Becton products consisting of the [CONFIDENTIAL TREATMENT REQUESTED]* Becton
[CONFIDENTIAL TREATMENT REQUESTED]* as identified in Schedule C and the Endogen
products consisting of the [CONFIDENTIAL TREATMENT REQUESTED]* as identified in
Schedule D, which Schedules may from time to time be amended by mutual agreement
of the parties in writing; and the Specifications for each have been agreed to
by the parties in writing.
1.6 "Specifications" shall mean the research use only ("RUO")
manufacturing specifications, using conventional methods and practices,
packaging, quality assurance, quality control, analyses, methods, timing and
shipping specifications for Product, as being used by each party for the same
Product which it sells under its own label, unless otherwise agreed to by the
parties in writing.
1.7 "Supplier" shall mean a party hereto, be it Becton or
Endogen who is manufacturing and/or supplying Products hereunder.
1.8 "License and Option Agreement" shall mean the agreement
between Endogen and Becton dated February 28, 1998, related to granting to
Becton of certain intellectual property rights with respect to TcR technology to
which Endogen is exclusively licensed, in return for the payment of royalty
payments to Endogen.
2.0 Supply of Product
-----------------
2.1 As of the Effective Date the Supplier shall make
reasonably available to Buyer, the Proposed Products and the Specifications
therefore, which Proposed Product the Buyer shall purchase at the price set in
Section 5, for purposes of evaluation. Following Buyer's evaluation, the Buyer
shall then either accept the Specification provided by the Supplier or propose
an alternative specification. Once the parties have agreed in writing as to the
- ---------------
* [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
-2-
<PAGE>
Specification that shall apply to the Proposed Product, then the Specification
shall become the Specification for the Product and such Product shall be added
as appropriate to Schedule C or Schedule D and be subject to the following terms
and conditions. In the event that the parties are not able to agree on the
specification for the Proposed Product, then Supplier shall replace such
Proposed Product with an alternative Proposed Product.
2.2 During the term of this Agreement (including renewals) and
subject to all of the terms and provisions of this Agreement, Supplier shall
manufacture and sell bulk quantities of unpackaged Product to Buyer. Product
shall be quality control tested, manufactured, stored and shipped by Supplier in
strict conformity with the Specifications. The Supplier shall provide
specifications to the Buyer for each Product within thirty (30) days of the
Effective Date. Quality control testing shall be performed by Supplier in
accordance with the Specifications and the Product shall meet the Specifications
as provided by the Supplier or as the Specifications may be modified by mutual
agreement in writing prior to issuance of any purchase order under Paragraph
3.2.
2.3 Supplier shall provide manufacturing capacity sufficient
to supply Buyer's purchase orders for Product, provided that Buyer has provided
the purchase orders as specified in Paragraph 3.2 hereof. Supplier shall fill
orders for Product submitted by Buyer on the delivery date specified and advise
Buyer in advance of Supplier's inability to make full and timely delivery of
Product which Buyer has ordered.
2.4 (a) The Buyer shall have thirty (30) days after receipt of
a delivery of a shipment of Product from Supplier to inspect the shipment and to
notify the Supplier if the shipment of Product fails to meet the Specifications.
The notice date of Buyer's non acceptance shall be the date of telephone notice
to the Supplier with a subsequent confirmation in writing, faxed or mailed by
the Buyer specifying the notice date and the reason for the non acceptance.
(b) In the event that any shipment of Product by Supplier
to Buyer is not accepted by Buyer for any non conformance with the
Specifications, the Buyer shall, if so directed by the Supplier, promptly return
the shipment of Product which was not acceptable to the Supplier at Supplier's
expense and Supplier shall send a replacement shipment of Product conforming to
the Specifications within forty-five (45) days of the notice of non acceptance.
(c) If the Supplier disagrees with the Buyer's reasons for
non acceptance, the Supplier may request re-testing of the non accepted Product
shipment for verification of Buyer's reasons for non acceptance by an
independent laboratory which has been mutually agreed to by the Buyer and
Supplier. The Supplier shall bear the costs for any such re-testing. In the
event the Product is found by the independent laboratory to be in conformance
with the Specifications, then the Buyer shall accept the shipment and the Buyer
shall reimburse the Supplier for the cost of the re-testing.
-3-
<PAGE>
2.5 It is understood and agreed by Supplier that all
trademarks and trade names which are the property of Buyer, are and shall remain
the property of Buyer notwithstanding its use in connection with the sale of
Product by Buyer hereunder. It is also understood by Buyer that all trademarks
and trade names which are the property of Supplier, are and shall remain the
property of Supplier, Buyer shall not use such trademarks and/or trade names in
connection with the sale of Product by Buyer unless, specifically authorized to
do so in writing by the Supplier.
2.6 Nothing herein grants or shall be deemed to grant to a
party hereto any rights in and to any intellectual property rights owned or
licensed by the other party hereto.
2.7 In the event that the Supplier is unwilling or unable to
supply Product to Buyer, then the Supplier agrees to one of the following:
(i) if the Supplier has the right to grant to Buyer a license
or sublicense or to provide the clone or hybridoma, with out such an agreement
then the Supplier shall do so, or then the Supplier shall negotiate in good
faith a sublicense or license agreement and then provide the clone or hybridoma
to the Buyer; or
(ii) if the Supplier does not have the rights specified in (i)
above, then the Supplier agrees to cooperate in good faith to assist the Buyer
in obtaining such a sublicense or a license from the appropriate party.
3.0 Forecasts and Orders
--------------------
3.1 Buyer will submit to Supplier concurrently with the
execution of this Agreement for the first Contract Year and at least six (6)
months prior to the commencement of each subsequent Contract Year during the
term of this Agreement, a non-binding forecast of its estimated requirements for
Product during said year. Said annual forecast shall be updated on a semi-annual
basis.
3.2 Buyer will submit to Supplier at least one (1) month prior
to each desired shipment date, a purchase order for delivery of Buyer's desired
amount of Product. Product shall be shipped in accordance with the delivery
schedule set forth in Buyer's purchase orders.
3.3 Buyer's initial estimated quarterly and annual purchase
requirements for Product are as set forth on Schedule C attached hereto.
4.0 Delivery and Packaging
----------------------
4.1 Supplier shall fulfill the purchase order submitted by
Buyer, in accordance with Paragraph 3.2, by the date indicated thereon by
shipping the Product directly to Buyer in accordance with the shipping
specifications and procedures set forth in the Specifications. Notwithstanding
any contrary provisions of a purchase order, submitted by Buyer hereunder, the
provisions of this Agreement shall govern in all respects the subject matters
covered herein.
-4-
<PAGE>
4.2 Supplier shall provide such information as is reasonably
requested by Buyer, including but not limited to pre-shipment samples of Product
or lots of Product, quality control documentation, quality control results, lot
number(s), and expiration date and a Certificate of Analysis that the Product
when shipped met all applicable Specifications.
4.3 Title to the shipped Product shall pass F.O.B.
5.0 Price and Payment
-----------------
5.1 Product will be sold to Buyer at a price of [CONFIDENTIAL
TREATMENT REQUESTED]* of Product, unless otherwise agreed to by the parties in
writing.
5.2 The prices stated in Paragraph 5.1 are firm for all
Products ordered during the first five (5) Contract Years of this Agreement. In
any additional Contract Years beyond the first five, the parties will mutually
agree to the price per Product.
5.3 Payment for Product received and accepted by Buyer under
Buyer's purchase orders of this Agreement shall be made within thirty (30) days
of Buyer's acceptance under Paragraph 2.4 and receipt of invoice, unless product
shipment is not accepted by Buyer. All payment shall be in U.S. Dollars.
6.0 Term and Termination
--------------------
6.1 This Agreement shall continue in effect for an initial
term of [CONFIDENTIAL TREATMENT REQUESTED]*. This Agreement shall automatically
renew for additional terms of [CONFIDENTIAL TREATMENT REQUESTED]* unless notice
not to renew is sent by the Buyer, identifying the specific Product not to be
renewed, no later than 30 days prior to the end of the initial term or any
renewal term or any renewal term thereafter; such non renewal shall occur
without effecting the supply of all other Products being supplied to the other
party.
6.2 In addition to any other right to terminate provided
herein, either party may at its option and without waiving any rights at law or
in equity, terminate this Agreement upon failure of the other to perform within
thirty (30) days after receipt of notice specifying such failure, unless such
failure shall have been due to Force Majeure, or cannot with reasonable
diligence be cured within such thirty (30) day period and in such case is cured
as soon thereafter
- ---------------
* [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
-5-
<PAGE>
as reasonable diligence will allow. This shall be the sole remedy for breach of
this Agreement by either party.
6.3 In the event that the License and Option Agreement
terminates, this Agreement shall terminate one hundred and eighty (180) days
from the date of termination of the License and Option Agreement.
6.4 In the event either party shall become bankrupt, or
insolvent and/or if the assets of either shall be placed in the hands of a
receiver, assignee or trustee, whether by voluntary act or otherwise, this
Agreement may be terminated by the other party.
6.5 In any Contract Year subsequent to the first Contract
Year, Buyer shall have the right to terminate this Agreement on a Product by
Product basis, upon sixty (60) days' prior written notice to Supplier.
6.6 Termination of this Agreement shall be without prejudice
to the rights, obligations and debts of the parties arising or accruing prior to
such termination.
7.0 Representations and Warranties
------------------------------
7.1 Supplier represents and warrants to Buyer that:
a) All Product to be sold to Buyer hereunder will be
manufactured, packaged and shipped in strict conformity with the Specifications,
will be free from defects in materials and workmanship.
b) All Product will be manufactured, packaged, labeled,
stored and shipped in strict conformity with all applicable U.S. federal, state
and local laws and regulations.
7.2 Supplier also represents and warrants to Buyer that it has
the full power and authority to enter into and to perform this Agreement, and
knows of no contract, agreement, promise, undertaking or other fact or
circumstance which would prevent the full execution and performance of this
Agreement by it.
8.0 Food and Drug Administration and Governmental Applications
----------------------------------------------------------
Supplier shall furnish Buyer any information requested by
United States Food and Drug Administration ("FDA") and other governmental
authorities regarding Supplier's performance hereunder or relating to any other
matter, which Buyer requires for FDA and other governmental submissions.
9.0 Inspection
----------
Supplier agrees to permit Buyer to enter and inspect, at
mutually agreeable times, during normal business hours the facilities in which
the Product are manufactured, processed,
-6-
<PAGE>
packaged or held in order to determine whether such manufacturing, processing,
packaging or holding conforms with applicable Specifications and all applicable
U.S. laws and regulations.
10.0 Quality Control; Documentation
------------------------------
In order to insure compliance with the Specifications,
Supplier shall carry out quality control analyses at the times and by analytical
methods set forth in the Specifications. Supplier shall provide Buyer with
copies of all documentation with respect thereto, and such other documentation
as may be required by the Specifications, at the time of completion of
manufacturing according to Buyer's purchase orders.
11.0 Indemnification
---------------
11.1 Supplier shall indemnify, defend and hold harmless Buyer, its
subsidiaries and affiliates (the "Buyer Indemnities") from and against any and
all claims, demands, losses, liabilities, costs, expenses, or damages (including
reasonable attorneys' fees and related costs) based upon, arising out of, or
resulting from, any breach by Supplier in its performance of this Agreement or
of any representation or warranty made by it herein.
11.2 Buyer shall indemnify, defend and hold harmless Supplier, its
subsidiaries and affiliates (the "Supplier Indemnities") from and against any
and all claims, demands, losses, liabilities, costs, expenses, or damages
(including reasonable attorneys' fees and related costs) based upon, arising out
of, or resulting from, any misuse of the Product by Buyer or any end purchaser.
12.0 Independent Contractor
----------------------
It is understood that the employees, methods, facilities and
equipment of Supplier shall at all times be under its exclusive direction and
control. Supplier relationship to Buyer shall be that of an independent
contractor and nothing in this Agreement shall be construed to constitute
Supplier or any of its employees, as an employee, agent, joint venturer or
partner of Buyer.
13.0 Public Announcements
--------------------
Except as otherwise required by law, neither party shall make
any public announcement with respect to the subject matter or existence of this
Agreement and the transactions completed hereby, nor any other public
announcement mentioning the other party without the prior written consent of the
other party, which consent shall not be unreasonably denied or delayed.
-7-
<PAGE>
14.0 Assignment and Subcontracting and Acquisition
---------------------------------------------
Neither party shall assign or transfer this Agreement, in
whole or in part, or any interest arising under this Agreement without the prior
written consent of the other party. Such consent shall not be unreasonably
withheld or delayed and shall not be deemed or operate to relieve the assigning
or delegating party from any liabilities or obligations assumed or to be
performed by it hereunder. Subject to the provisions of this Section, this
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties.
15.0 Entire Agreement
----------------
This Agreement, together with the Schedules and exhibits
incorporated herein by reference, contains the entire agreement between the
parties and supersedes all previous written or oral negotiations, commitments,
transactions, or understandings. This Agreement may only be modified in writing,
executed by duly constituted officers of both parties.
16.0 Waiver
------
Either party's waiver of any term or condition of this
Agreement at any time shall not be construed to waive such term or condition at
subsequent times or any other term or condition, nor as a waiver of its rights
to enforce such term or condition.
17.0 Notices
-------
Any notice, request, instruction or other document to be given
hereunder shall be deemed validly given, if in writing and delivered personally,
by overnight courier, or sent by U.S. certified mail, postage prepaid, return
receipt requested, as follows:
If to Becton:
PharMingen, Inc
10975 Torreyana Road
San Diego, CA 92121-1111
Attn: President
And Becton Dickinson Immunocytometry Systems Division
2350 Qume Drive
San Jose, CA 95131
Attn: President
With a copy to: Becton, Dickinson and Company
1 Becton Drive
Franklin Lakes, NJ 07417
Attn: Assistant General Counsel
-8-
<PAGE>
And if to Endogen: Endogen, Inc.
30 Commerce Way
Woburn, MA 01801-1059
Attn: President
All notices and other communications shall be deemed delivered on the
date of actual receipt.
18.0 Headings
--------
The headings and sub-headings herein are inserted for the
convenience of reference only and shall not affect the interpretation of this
Agreement.
19.0 Counterparts
------------
This Agreement may be executed in two (2) counterparts each of
which shall be deemed an original, but both of which only together shall
constitute the same singular effective instrument, and which shall become
effective as of the later date written below when executed by the last party
hereto.
20.0 Severability
------------
If and to the extent that any court of competent jurisdiction holds any
provision (or any part thereof) of this Agreement to be invalid or
unenforceable, such holding shall in no way affect the validity of the remainder
of this Agreement.
21.0 Disagreements
-------------
21.1 (a) In the event there is a disagreement between the
Supplier and Buyer, the parties shall attempt in good faith to resolve any
dispute arising out of or relating to this Agreement promptly by negotiations
between executives who have authority to settle the controversy. Any party may
give the other party(ies) written notice of any dispute hereunder not resolved
in the normal course of business. Within twenty (20) days after delivery of said
notice, executives of each of the parties shall discuss by telephone or meet at
a mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary, to exchange relevant information and to attempt to resolve the
dispute. If the matter has not been resolved within sixty (60) days of the
disputing party's notice, or if the parties fail to discuss or meet within
twenty (20) days, any party may initiate mediation of the controversy or claim
under the then current Center for Public Resources Procedure for Mediation of
Business Disputes.
(b) If a negotiator intends to be accompanied at a
telephone conference or a meeting by an attorney, the other negotiators shall be
given at least three (3) working days'
-9-
<PAGE>
notice of such intention and may also be accompanied by an attorney. All
negotiations pursuant to this clause are confidential and shall be treated as
compromise and settlement negotiations for purposes of the Federal Rules of
Evidence and any state rules of evidence.
(c) If the mediation set forth in Section 21.1(a) is
unsuccessful in settling the dispute then the parties agree to enter into
binding arbitration under the Commercial Arbitration Rules of the American
Arbitration Association, with a single arbitrator who is mutually agreed to by
the parties in writing.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective duly authorized officers in counterpart originals,
as of the date last subscribed below.
Endogen: Becton:
ENDOGEN, INC. BECTON, DICKINSON AND COMPANY
Through its subsidiary PharMingen
By: /s/ Owen A. Dempsey By: /s/ Chun-Ming Huang
-------------------------- -----------------------------
Owen A. Dempsey Chun-Ming Huang, Ph.D.
CEO and President President
-10-
<PAGE>
Schedule A
Becton Products
Catalog No. Description Clone
- ----------- ----------- -----
[CONFIDENTIAL TREATMENT REQUESTED]*
- ---------------
* [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
-11-
<PAGE>
Schedule B
Endogen Products
Shall include [CONFIDENTIAL TREATMENT REQUESTED]* products carried in Endogen's
current catalogue, except [CONFIDENTIAL TREATMENT REQUESTED]* products.
- ---------------
* [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL WHICH HAS BEEN OMITTED
AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
-12-
<PAGE>
Schedule C
Becton Products
<PAGE>
Schedule D
Endogen Products
ENDOGEN, INC.
EXHIBIT 11.1
Computation of Net Income Per Share
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 28,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BASIC
Weighted average number of common
shares outstanding 3,440,079 3,065,853 3,429,452 2,991,792
========== ========== ========== ==========
Net income applicable to common shares $ 20,570 $ 138,112 $ 286,467 $ 407,281
========== ========== ========== ==========
Basic earnings per share $ 0.01 $ 0.05 $ 0.08 $ 0.14
========== ========== ========== ==========
DILUTED
Weighted average number of common
shares outstanding 3,440,079 3,065,853 3,429,452 2,991,792
Weighted average incremental shares from the
assumed exercise of stock options and warrants 151,454 306,036 204,769 299,211
---------- ---------- ---------- ----------
3,591,533 3,371,889 3,634,221 3,291,003
========== ========== ========== ==========
Net income applicable to common shares and
common equivalent shares $ 20,570 $ 138,112 $ 286,467 $ 407,281
========== ========== ========== ==========
Diluted earnings per share $ 0.01 $ 0.04 $ 0.08 $ 0.12
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Form 10-QSB of Endogen, Inc. to which this
exhibit is a part and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000894020
<NAME> Endogen, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> May-31-1998
<PERIOD-START> Jun-01-1997
<PERIOD-END> Feb-28-1998
<EXCHANGE-RATE> 1.00
<CASH> 820
<SECURITIES> 0
<RECEIVABLES> 1,353
<ALLOWANCES> 50
<INVENTORY> 1,951
<CURRENT-ASSETS> 4,897
<PP&E> 3,808
<DEPRECIATION> 1,630
<TOTAL-ASSETS> 7,847
<CURRENT-LIABILITIES> 1,550
<BONDS> 0
0
0
<COMMON> 34
<OTHER-SE> 6,153
<TOTAL-LIABILITY-AND-EQUITY> 7,847
<SALES> 7,402
<TOTAL-REVENUES> 7,402
<CGS> 2,760
<TOTAL-COSTS> 4,204
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 427
<INCOME-TAX> 141
<INCOME-CONTINUING> 286
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 286
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Form 10-QSB of Endogen, Inc. to which this
exhibit is a part and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000894020
<NAME> Endogen, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> May-31-1997
<PERIOD-START> Jun-01-1996
<PERIOD-END> Feb-28-1997
<EXCHANGE-RATE> 1.00
<CASH> 387
<SECURITIES> 0
<RECEIVABLES> 1,754
<ALLOWANCES> 20
<INVENTORY> 1,739
<CURRENT-ASSETS> 4,094
<PP&E> 3,399
<DEPRECIATION> 997
<TOTAL-ASSETS> 7,266
<CURRENT-LIABILITIES> 1,799
<BONDS> 0
0
0
<COMMON> 34
<OTHER-SE> 5,184
<TOTAL-LIABILITY-AND-EQUITY> 7,266
<SALES> 7,183
<TOTAL-REVENUES> 7,183
<CGS> 2,485
<TOTAL-COSTS> 6,544
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 157
<INCOME-PRETAX> 482
<INCOME-TAX> 75
<INCOME-CONTINUING> 407
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 407
<EPS-PRIMARY> .14
<EPS-DILUTED> .12
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Form 10-QSB of Endogen, Inc. to which this
exhibit is a part and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000894020
<NAME> Endogen, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> May-31-1996
<PERIOD-START> Jun-01-1995
<PERIOD-END> Feb-29-1996
<EXCHANGE-RATE> 1.00
<CASH> 744
<SECURITIES> 0
<RECEIVABLES> 1,106
<ALLOWANCES> 20
<INVENTORY> 1,109
<CURRENT-ASSETS> 3,074
<PP&E> 1,672
<DEPRECIATION> 763
<TOTAL-ASSETS> 4,459
<CURRENT-LIABILITIES> 723
<BONDS> 0
0
0
<COMMON> 29
<OTHER-SE> 3,683
<TOTAL-LIABILITY-AND-EQUITY> 4,459
<SALES> 4,410
<TOTAL-REVENUES> 4,410
<CGS> 1,476
<TOTAL-COSTS> 4,229
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 186
<INCOME-TAX> 0
<INCOME-CONTINUING> 186
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 186
<EPS-PRIMARY> .07
<EPS-DILUTED> .06
</TABLE>
