<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 1996
REGISTRATION NO. 333-04105
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CALYPTE BIOMEDICAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3826 06-1226727
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1440 FOURTH STREET
BERKELEY, CALIFORNIA 94710
(510) 526-2541
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN P. DAVIS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CALYPTE BIOMEDICAL CORPORATION
1440 FOURTH STREET
BERKELEY, CALIFORNIA 94710
(510) 526-2541
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies to:
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JOHN B. GOODRICH, ESQ. ALAN C. MENDELSON, ESQ.
AARON J. ALTER, ESQ. ROBERT J. BRIGHAM, ESQ.
WILSON SONSINI GOODRICH & ROSATI COOLEY GODWARD CASTRO HUDDLESON & TATUM
PROFESSIONAL CORPORATION FIVE PALO ALTO SQUARE, 4TH FLOOR
650 PAGE MILL ROAD 300 EL CAMINO REAL
PALO ALTO, CALIFORNIA 94304-1050 PALO ALTO, CALIFORNIA 94306-2155
(415) 493-9300 (415) 843-5000
</TABLE>
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. / /
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If the only securities being delivered pursuant to this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
CALYPTE BIOMEDICAL CORPORATION
------------------------
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN
PROSPECTUS OF PART I ITEMS OF FORM S-1
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ITEM NUMBER AND HEADING IN FORM S-1
REGISTRATION STATEMENT LOCATION OF CAPTION IN PROSPECTUS
---------------------------------------------------- -----------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page; Outside
Back Cover Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Prospectus Summary; Risk Factors
4. Use of Proceeds..................................... Use of Proceeds
5. Determination of Offering Price..................... Outside Front Cover Page;
Underwriting
6. Dilution............................................ Dilution
7. Selling Security Holders............................ Not Applicable
8. Plan of Distribution................................ Outside and Inside Front Cover
Pages; Underwriting; Outside Back
Cover Page
9. Description of Securities to be Registered.......... Prospectus Summary; Capitalization;
Description of Capital Stock;
Shares Eligible for Future Sale
10. Interests of Named Experts and Counsel.............. Legal Matters; Experts
11. Information with Respect to the Registrant.......... Outside and Inside Front Cover
Pages; Prospectus Summary; Risk
Factors; Use of Proceeds; Dividend
Policy; Capitalization; Dilution;
Selected Consolidated Financial
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions;
Principal Stockholders; Description
of Capital Stock; Shares Eligible
for Future Sale; Consolidated
Financial Statements; Outside Back
Cover Page
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
</TABLE>
<PAGE> 3
2,400,000 SHARES
LOGO
COMMON STOCK
------------------------------------------------
All of the shares of common stock ("Common Stock") offered hereby are being sold
by Calypte Biomedical Corporation ("Calypte" or the "Company"). Prior to this
Offering, there has been no public market for the Common Stock, and there can be
no assurance that such a market will develop or, if one does develop, that it
will be sustained. For a discussion of the factors considered in determining the
initial public offering price, see "Underwriting." The Common Stock has been
approved for listing on the Nasdaq SmallCap Market under the symbol "CALY."
------------------------------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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Per Share.................... $6.00 $0.42 $5.58
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Total(3)..................... $14,400,000 $1,008,000 $13,392,000
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</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriter.
(2) Before deducting expenses payable by the Company estimated at $1,020,000.
(3) The Company has granted to the Underwriters an option, exercisable within 45
days from the date of this Prospectus, to purchase up to 360,000 additional
shares solely to cover over-allotments, if any. If the Underwriters exercise
such option in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $16,560,000, $1,159,200 and
$15,400,800, respectively. See "Underwriting."
------------------------------------------------
The shares of Common Stock are offered by the Underwriter, subject to prior
sale, withdrawal, cancellation or modification of the offer without notice,
delivery to and acceptance by the Underwriter, and certain other conditions. It
is expected that delivery of the shares of Common Stock, offered hereby will be
made in San Francisco, California, on or about July 31, 1996.
------------------------------------------------
PACIFIC GROWTH EQUITIES, INC.
The date of this Prospectus is July 26, 1996.
<PAGE> 4
THE CALYPTE HIV-1 URINE-BASED TEST HAS NOT BEEN APPROVED BY THE FDA FOR
MARKETING IN THE UNITED STATES. THE TEST CANNOT BE SOLD IN THE UNITED STATES
UNLESS AND UNTIL SUCH FDA APPROVAL IS OBTAINED, IF AT ALL.
[Pictures to Come]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ SMALLCAP MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
The Company intends to furnish its stockholders with annual reports containing
consolidated financial statements audited by its independent auditors and
quarterly reports containing unaudited consolidated financial data for the first
three quarters of each fiscal year.
CalypteTM and SentinelTM are trademarks of the Company. This Prospectus also
contains trademarks and tradenames of other companies.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including the Consolidated Financial Statements and Notes thereto,
appearing elsewhere in this Prospectus.
THE COMPANY
Calypte Biomedical Corporation ("Calypte" or the "Company") believes that it is
a leader in the development of a urine-based screening test for the detection of
Human Immunodeficiency Virus Type-1 ("HIV-1"), the putative cause of Acquired
Immunodeficiency Syndrome ("AIDS"). The Company has integrated several
proprietary technologies to develop a test which, in Company-funded clinical
trials conducted by or on behalf of the Company, detected the presence of HIV
antibodies in urine with 99.33% sensitivity (as compared to blood). Specificity
of the screening test with a companion western blot confirmatory test was 100%.
Calypte believes that its proprietary urine-based test offers significant
advantages compared to existing blood-based tests, including ease-of-use, lower
costs, and significantly reduced risk of infection from collecting and handling
specimens. Urine collection is non-invasive and painless, and urine is the most
commonly collected body fluid. The Company estimates that the cost of
collecting, handling, testing and disposing of urine specimens will be
significantly less than that of blood specimens. Independent studies report that
the likelihood of finding infectious HIV virus in urine is extremely low, which
greatly reduces the risk and cost of accidental exposure to health care workers,
laboratory personnel, and patients being tested.
On March 28, 1996, the Company received a letter from the U.S. Food and Drug
Administration ("FDA") stating that the Company's HIV-1 urine screening test was
approvable pending finalization of the package insert and other labeling. The
Company's screening test, when used with the western blot confirmatory test for
urine licensed from Cambridge Biotech Corporation ("Cambridge Biotech"), will
provide the only complete urine-based HIV testing system. This western blot test
is already licensed by the FDA for use with blood, and is currently pending FDA
clearance for use with urine. On June 21, 1996, the FDA Blood Products Advisory
Committee ("BPAC") determined that the clinical data and test protocol of the
Cambridge biotech urine western blot confirmatory test supported its use to
determine a positive HIV-1 test result. Based on the data presented, the BPAC
recommended that the Cambridge Biotech urine western blot confirmatory test not
be considered a stand-alone supplemental test and that positive reported results
in urine be subsequently verified by using a blood sample. The Company believes
that this subsequent verification will be addressed in the product labeling,
which may instruct physicians that patients receiving positive HIV-1 test
results in urine should receive proper follow-up medical care, counseling and
verification of HIV status by testing a subsequent blood sample. While any
recommendation of the BPAC is not binding on the FDA, there can be no assurance
that the FDA will grant approval of the Cambridge Biotech urine confirmatory
test or will not require additional data or clinical trials before granting such
approval. Any significant delay in obtaining approval for the Cambridge Biotech
urine confirmatory test could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company believes
that the benefits of its testing system will enable it to penetrate existing
markets and expand into new markets that are currently not served by blood-based
and oral fluid-based HIV test systems.
The Company also intends to submit a pre-market application ("PMA") to the FDA
for approval to market the Company's over-the-counter ("OTC") home urine
collection kit. The Company's home collection kit would allow consumers, in the
privacy of their homes, to take a urine sample, mail it to Calypte Biomedical
Laboratories for analysis and then anonymously obtain results and professional
counseling by telephone. On May 14, 1996, Direct Access Diagnostics, a
subsidiary of Johnson & Johnson, received FDA clearance for the first OTC home
blood collection kit for HIV. In addition, on July 22, 1996, Home Access Health
Corp. received FDA clearance for another OTC home collection kit for HIV. The
Company believes that these FDA approved OTC products will accelerate consumer
acceptance and awareness of home collection for HIV. The Company believes that
an OTC urine collection kit for HIV would have advantages compared to an OTC
blood collection kit for HIV.
HIV is the leading cause of death for persons age 25 to 44 in the United States.
Those infected with HIV are generally asymptomatic until several years after HIV
infection, and during this period most are unaware of their HIV status.
According to the World Health Organization, HIV currently infects approximately
16.9 million individuals and is forecasted to infect between 30 and 40 million
individuals by the year 2000.
It is estimated that 27 million blood bank screening tests were performed in
1993 and 23 million non-blood bank HIV screening tests are projected to be
performed in 1996 in the United States. In addition to blood banks, the largest
domestic demand for HIV testing is generated by physicians, the life insurance
industry, the military, the criminal justice system and the Immigration and
Naturalization Service. The high cost of testing blood for HIV has precluded
large HIV public health screening programs. Even in the United States, only four
million of the 14 million life insurance policies written each year currently
utilize HIV screening.
The Company's objective is to be the leader in the development and
commercialization of urine-based diagnostic tests. The Company's primary
strategy is to exploit the advantages of using urine instead of blood for HIV
testing in order to establish its diagnostic screening test as the screening
method of choice for HIV. The Company plans to build upon its expertise in
urine-based diagnostics to develop additional urine-based tests for sexually
transmitted diseases and other human conditions. Initially, the Company intends
to focus on developing and commercializing urine-based screening tests for
HIV-2, Chlamydia and H. pylori. The key components of the Company's business
strategy are to: (i) target and expand the life insurance testing market, (ii)
penetrate the United States clinical laboratory market, (iii) pursue
international markets through distributor relationships, (iv) establish Calypte
Biomedical Laboratories, (v) enter the emerging OTC market, and (vi) develop
additional urine-based diagnostics.
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
3
<PAGE> 6
THE OFFERING
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<S> <C>
Common Stock offered by the Company..................... 2,400,000 shares
Common Stock to be outstanding after the offering....... 10,259,046 shares(1)
Use of proceeds......................................... Expand product development efforts and support
clinical trials; develop Calypte Biomedical
Laboratories; expand manufacturing capacity;
redeem mandatorily redeemable preferred stock;
repay certain indebtedness; and for working
capital and general corporate purposes.
Proposed Nasdaq National Market symbol.................. CALY
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------- ---------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
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CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue............................................... $ -- $ -- $ -- $ -- $ --
Loss from operations.................................. (6,303) (5,462) (10,380) (1,462) (2,723)
Net loss attributable to common stockholders.......... (6,301) (5,587) (10,411) (1,428) (2,846)
Net loss per share attributable to common
stockholders(2)..................................... $ (1.35) $ (0.99) $ (1.50) $ (0.21) $ (0.41)
Weighted average shares used to compute net loss per
share attributable to common stockholders(2)........ 4,666,236 5,671,038 6,934,334 6,933,854 6,934,520
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996(1)
----------------------------
ACTUAL AS ADJUSTED(3)
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...................................................... $ 1,842 $ 9,447
Working capital................................................................ (3,791) 6,815
Total assets................................................................... 4,826 12,431
Mandatorily Redeemable Series A Preferred Stock................................ 1,766 --
Deficit accumulated during development stage................................... (33,217) (33,217)
Total stockholders' equity (deficit)........................................... (4,248) 8,124
</TABLE>
- ---------------
(1) The actual and as adjusted information excludes, as of June 21, 1996, (i)
1,311,420 shares of Common Stock issuable upon exercise of outstanding
options granted under the Company's stock option plans at a weighted average
exercise price of $0.54 per share, (ii) 1,303,007 shares of Common Stock
available for future grant under the Company's stock option plans, (iii)
warrants to purchase 1,066,355 shares of Common Stock at prices ranging from
$5.00 to $7.50 per share and (iv) options to purchase 475,000 shares of
Common Stock at $7.50 per share. See "Capitalization" and
"Management -- Stock Option Plans" and Notes 9, 10 and 12 of Notes to
Consolidated Financial Statements and Notes 5, 6 and 7 of Notes to
Consolidated Condensed Financial Statements.
(2) See Note 2 of Notes to Consolidated Financial Statements and Note 2 of Notes
to Consolidated Condensed Financial Statements.
(3) Adjusted to give effect to (i) the receipt of the net proceeds from the sale
of 2,400,000 shares of Common Stock offered by the Company hereby at an
initial public offering price of $6.00 per share and after deducting the
underwriting discounts and commissions and estimated offering expenses
payable by the Company, (ii) the redemption by the Company of its
Mandatorily Redeemable Series A Preferred Stock including accumulated unpaid
dividends and (iii) the repayment of $2.5 million of current notes payable.
As adjusted information also reflects the repayment of $503,000 of current
notes payable which were repaid by the Company in April 1996. See "Use of
Proceeds" and "Capitalization."
---------------
Except as otherwise noted, all information in this Prospectus (i) assumes no
exercise of the Underwriter's over-allotment option, (ii) reflects the
reincorporation of the Company into Delaware to be effected in July 1996, and
(iii) except in the Consolidated Financial Statements reflects, (a) the
conversion of outstanding shares of Convertible Preferred Stock of the Company
(except for the Mandatorily Redeemable Series A Preferred Stock being redeemed
after the Offering) into Common Stock, which will occur automatically upon the
completion of this Offering. See "Capitalization," "Description of Capital
Stock" and "Underwriting."
RISK FACTORS
The principal risks of the offering include uncertainty of FDA approval for
the Company's urine-based HIV-1 screening test and the Cambridge Biotech urine
western blot confirmatory test, the Company's dependence on a single supplier
for a urine-based confirmatory test, which itself remains subject to FDA
approval, a limited operating history of losses and reliance on proprietary
technology. For a discussion of considerations relevant to an investment in the
Common Stock, see "Risk Factors" beginning on page 5.
4
<PAGE> 7
RISK FACTORS
This Prospectus contains forward looking statements that involve risks and
uncertainties. The following risk factors should be carefully considered by
potential investors, before purchasing the Common Stock offered hereby:
UNCERTAINTY OF REGULATORY APPROVAL FOR HIV-1 SCREENING TEST. The Company has
filed a product license application ("PLA") and an establishment licensing
application ("ELA") with the FDA relating to its urine-based HIV-1 screening
test. On March 28, 1996, the Company received a letter from the FDA stating that
the Company's HIV-1 urine screening test was approvable, pending finalization of
the package insert and other labeling. The satisfaction of these conditions is
determined solely by the FDA, and the Company cannot predict when approval of
its test may be received, if at all. There can be no assurance that the Company
will ultimately receive approval for its urine-based HIV-1 test. Failure to
obtain approval for its test would have a material adverse effect on the
Company's business, financial condition and results of operations.
DEPENDENCE ON SOLE SOURCE OF SUPPLY AND REGULATORY APPROVAL OF CONFIRMATORY
TEST. In order to minimize the possibility of false positive reports, positive
HIV screening results must be confirmed with an additional test format before
being reported to the physician or patient in the United States and in most
developed countries. The Company has entered into an agreement with Cambridge
Biotech under which both Calypte and Cambridge Biotech will market and
distribute a urine-capable western blot confirmatory test which uses technology
licensed from the Company. The western blot kit manufactured by Cambridge
Biotech has already received FDA approval for blood testing, and is the only
confirmatory test for which application has been made for FDA approval for use
with urine. On June 21, 1996, the BPAC determined that the clinical data and
test protocol of the Cambridge Biotech urine western blot confirmatory test
supported its use to determine a positive HIV-1 test result; however, the BPAC
recommended that the Cambridge Biotech urine western blot confirmatory test not
be considered a stand-alone supplemental test and that positive reported results
in urine be subsequently verified by using a blood sample. There can be no
assurance that the FDA will grant approval of the Cambridge Biotech urine
confirmatory test or will not require additional data or clinical trials before
granting such approval. Failure to obtain, or any significant delay in
obtaining, approval for the Cambridge Biotech urine confirmatory test could have
a material adverse effect on the Company's business, financial condition and
results of operations.
LIMITED OPERATING HISTORY; HISTORY OF LOSSES. The Company has a limited history
of operations, and since its inception in February 1988, the Company has been
primarily engaged in research and development. As of March 31, 1996, the Company
has generated revenues of $2.4 million primarily from research and development
contracts. The Company has experienced significant operating losses since
inception and, as of March 31, 1996, had an accumulated deficit of $33.2
million. The Company expects operating losses to continue as it initiates
marketing and sales activities and expands research and development. The Company
does not have experience in manufacturing, marketing or selling its products in
commercial quantities. There can be no assurance that the Company's products
will be successfully commercialized or that the Company will achieve significant
product revenues. In addition, there can be no assurance that the Company will
achieve or sustain profitability in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
RELIANCE ON PROPRIETARY TECHNOLOGY AND KNOW-HOW; LICENSE OBLIGATIONS. The
Company's ability to compete effectively will depend in large part on its
ability to develop and maintain proprietary aspects of its technology. The
Company has the right to utilize certain patents and proprietary rights under
licensing agreements with New York University ("NYU"), Cambridge Biotech,
Repligen Corporation ("Repligen"), Texas A&M University System and Stanford
University. These license arrangements secure intellectual property rights for
the manufacture and sale of the Company's products. Pursuant to these license
agreements, the Company must pay product royalties and under certain agreements
the Company must make minimum royalty payments. In the event that the Company
does not receive approval for its urine-based HIV-1 test or develop alternate
sources of revenues, the obligation to make minimum royalty payments could have
a material adverse impact on the Company's results of operations. Failure to
make required minimum royalty payments may result in the loss of exclusivity or
termination of the license. There can be no assurance that the Company will be
able to maintain exclusivity or maintain its current license agreements.
Termination of any of these
5
<PAGE> 8
licenses could have a material adverse effect on the Company's business,
financial condition and results of operations.
The HIV testing industry has been characterized by extensive litigation
regarding patents and other intellectual property rights. Litigation or
interference proceedings could result in significant diversion of efforts by the
Company's management and technical personnel. There are a number of filed and
issued patents involved with the detection of HIV antibodies. One such patent is
currently owned by Chiron Corporation. There can be no assurances that Chiron
will not assert claims relating to this patent against the Company. Patent
litigation can be costly and protracted. The expense of litigating a claim
against the Company for patent infringement could have a material adverse effect
on the Company's business, financial condition and results of operations. In the
event that the Company were found to be infringing a validly issued patent, and
the Company could not obtain a license to such patent on reasonable terms, the
Company could be forced to pay damages, obtain a license to such patent at a
significantly higher rate or, possibly, remove its urine-based HIV-1 test from
the market. Such an event would have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business -- Reliance On Proprietary Technology and Know-How."
In addition, there can be no assurance that competitors, many of which have
substantial resources and have made substantial investments in competing
technologies, do not have, or will not seek to apply for and obtain, patents
that will prevent, limit or interfere with the Company's ability to make, use or
sell its products either in the U.S. or in international markets. There can be
no assurance that the Company will not be required to obtain additional cross
licenses in the future or that the Company will not in the future become subject
to patent infringement claims and litigation or interference proceedings
declared by the U.S. Patent and Trademark Office ("USPTO") to determine the
priority of inventions. The defense and prosecution of intellectual property
suits, USPTO interference proceedings and related legal and administrative
proceedings are both costly and time consuming. Litigation may be necessary to
enforce patents issued to or licensed by the Company, to protect trade secrets
or know-how owned by the Company or to determine the enforceability, scope and
validity of the proprietary rights of others.
The Company relies on trade secrets and proprietary know-how, which it seeks to
protect, in part, through appropriate confidentiality and proprietary
information agreements. These agreements generally provide that all information
developed by or made known to the individual by the Company during the course of
the individual's relationship with the Company is to be kept confidential and
not disclosed to third parties, except in specific circumstances. The agreements
generally provide that all inventions conceived by the individual in the course
of rendering services to the Company shall be the exclusive property of the
Company; however, certain of the Company's agreements with consultants, who
typically are employed on a full-time basis by academic institutions or
hospitals, do not contain assignment of invention provisions. There can be no
assurance that proprietary information or confidentiality agreements with
employees, consultants and others will not be breached, that the Company would
have adequate remedies for any breach, or that the Company's trade secrets will
not otherwise become known to or independently developed by competitors. See
"Business -- Reliance on Proprietary Technology and Know-How."
UNCERTAINTY OF MARKET ACCEPTANCE; LACK OF SALES AND MARKETING EXPERIENCE. The
Company's first product represents a new method of determining the presence of
HIV antibodies in humans, and there can be no assurance that this product will
gain market acceptance even if necessary international and U.S. regulatory and
reimbursement approvals are obtained. The Company believes that recommendations
and endorsements by the medical diagnostic community will be essential for
market acceptance of this product, and there can be no assurance that any such
recommendations or endorsements will be obtained. Failure of the Company's
products to achieve market acceptance would have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company has no experience marketing and selling its product either directly
or through distributors. The Company intends to establish a small direct sales
force for sales to certain U.S. laboratories. There can be no assurance that the
Company's marketing and direct sales efforts will be successful. The Company's
sales and marketing strategy relies significantly upon third party distributors
for the sale of its product. There can be no assurance that these distributors
will market the Company's product successfully or that, if such relationships
are terminated, the Company will be able to establish relationships with other
distributors on satisfactory
6
<PAGE> 9
terms, if at all. Any disruption in the Company's distribution, sales or
marketing network could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business -- Sales,
Marketing and Distribution."
DEPENDENCE ON A SINGLE PRODUCT. The Company's HIV-1 urine-based screening test,
if licensed for marketing by the FDA, will be the Company's only FDA-approved
product. Upon approval, there can be no assurance that the Company's marketing
efforts will be successful. Furthermore, because the screening test will
represent the Company's sole near-term product, the Company could be required to
cease operations if this product fails to achieve market acceptance or generate
significant revenue. See "Business -- Products."
DEPENDENCE UPON KEY SUPPLIERS. The Company purchases raw materials and
components used in its products from various suppliers and relies on single
sources for several of these components. Establishment of additional or
replacement suppliers for these components cannot be accomplished quickly. The
Company has a number of single-source components, and any delay or interruption
in supply of these components could significantly impair the Company's ability
to manufacture its products in commercial quantities, and therefore would have a
material adverse effect on the Company's business, financial condition and
results of operations, particularly if and when the Company scales up its
manufacturing activities in support of commercial sales. See
"Business -- Manufacturing."
LIMITED MANUFACTURING EXPERIENCE; SCALE-UP RISK. The Company has only limited
experience in manufacturing its product. The Company has primarily manufactured
its product in limited quantities for submission to the FDA for ongoing
compliance, international clinical trials and building its inventory in
anticipation of commercialization. The Company does not have experience in
manufacturing its products in commercial quantities. Manufacturers often
encounter difficulties in scaling-up production of new product, including
problems involving production yields, quality control and assurance, raw
material supply and shortages of qualified personnel. The Company's
manufacturing relies on certain rare reagents including its viral seed stock,
the loss of which would impair the Company's ability to manufacture its product.
The Company currently manufactures its product in, and is awaiting final FDA
license for, its Berkeley, California facility. The Company is completing
qualification of a larger manufacturing facility in Alameda, California, and is
preparing an amendment to its pending establishment license for this facility.
Difficulties encountered by the Company in manufacturing scale-up to meet
commercial demand, including delays in receiving FDA approval for the Alameda
facility, could have a material adverse effect on its business, financial
condition and results of operations. See "Business -- Manufacturing" and
" -- Government Regulation."
DEPENDENCE UPON INTERNATIONAL DISTRIBUTORS AND SALES. The Company intends to
market and sell its products internationally through a network of distributors,
and the Company's international sales are dependent upon the marketing efforts
of, and sales by, these distributors. The Company anticipates that a significant
portion of its revenues for the next several years will be derived from
international distributor sales. International sales and operations involve a
number of inherent risks and may be limited or disrupted by the imposition of
government controls, export license requirements, political instability, trade
restrictions, changes in tariffs, difficulties in managing international
operations and fluctuations in foreign currency exchange rates. The Company's
distribution agreement with Otsuka Pharmaceutical Co. Ltd. is terminable without
cause upon 120 days prior notice. Certain of the Company's distributors have
limited international marketing experience, and there can be no assurance that
the Company's distributors will be able to market successfully the Company's
products in any international market. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business -- Sales,
Marketing and Distribution."
INTENSE COMPETITION IN COMPANY'S MARKETS AND RAPID TECHNOLOGICAL ADVANCES BY
COMPETITORS. Competition in the emerging market for HIV testing is intense and
is expected to increase. The Company believes its principal competition will
come from existing HIV blood-based assays and from oral fluid testing assays.
Furthermore, new testing methodologies could be developed in the future that
render the Company's urine-based HIV test impractical, uneconomical, or
obsolete. Most of the Company's competitors have significantly greater
financial, manufacturing, technical, research, marketing, sales, distribution
and other resources than the Company. There can be no assurance that the
Company's competitors will not succeed in developing or marketing technologies
and products that are more effective than those developed by the Company or that
would render the Company's technologies or products obsolete or otherwise
commercially unattractive. In addition, there can be no assurance that
competitors will not succeed in obtaining regulatory approval for such
7
<PAGE> 10
products, or introducing or commercializing them prior to the Company. Such
developments could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Competition."
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS. The Company expects that its
revenues and results of operations may fluctuate significantly from quarter to
quarter and will depend on a number of factors, many of which are outside the
Company's control. These factors include actions relating to regulatory matters,
the extent to which the Company's products gain market acceptance, the timing
and size of distributor purchases, introduction of alternative means for testing
for HIV, competition, the timing and cost of new product introductions, and
general economic conditions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
EXTENSIVE GOVERNMENT REGULATION. The Company's products are subject to extensive
regulation by the FDA and, to varying degrees, by state and foreign regulatory
agencies. The manufacture and sale of diagnostic products, including the
Company's products, are subject to extensive regulation by numerous governmental
authorities in the U.S. and other countries. In the U.S., the Company's products
are regulated either as biologics, such as in the case of the Company's HIV-1
urine-based screening test, or as medical devices, as in the case of the
Company's anticipated HIV-1 urine collection kit. The process of obtaining FDA
and other required regulatory approvals is lengthy, expensive and uncertain,
frequently requiring from one to several years from the date of FDA submissions
if approval is obtained at all. Sales of diagnostic tests and products outside
of the U.S. are subject to foreign regulatory requirements that vary widely from
country to country. The time required to obtain approval for sale in foreign
countries may be longer or shorter than that required for FDA approval and the
requirements may differ. The preparation of required applications and the
subsequent foreign regulatory approval process is expensive, lengthy and
uncertain. There can be no assurance that the Company will be able to obtain
necessary regulatory approvals or clearances in a timely manner or at all, and
delays in receipt of or failure to receive such approvals or clearances, the
loss of previously received approvals or clearances, or failure to comply with
existing or future regulatory requirements would have a material adverse effect
on the Company's business, financial condition and results of operations. If the
FDA believes that a company is not in compliance with the regulations, it can
institute proceedings to detain or seize a product or prohibit marketing and
sales of the Company's products, issue a recall, and assess civil and criminal
penalties against the Company, its officers or its employees, and take other
enforcement actions.
The Company intends to file a pre-market approval application ("PMA") with the
FDA for the HIV-1 urine collection kit which constitutes an application for
approval of over-the-counter sales of this urine collection device so that
consumers could purchase the device for the collection and mailing of specimens
directly to the Company for HIV testing. The Company believes that a submission
for this device must set forth Calypte's plans for reporting results to the
consumer and for providing counseling services as well as the collection kit
itself. There can be no assurance that the FDA will approve the Company's HIV-1
urine collection device for over-the-counter distribution and sale. Furthermore,
there can be no assurance that the FDA will not request additional data or
require that the Company conduct further clinical studies causing the Company to
incur further cost and delay. In addition, there can be no assurance that the
FDA will not limit the intended use of the Company's products as a condition of
PMA approval.
In addition, the manufacture, sale or use of the Company's products are subject
to regulation by other federal entities, such as the Occupational Safety and
Health Agency, the Environmental Protection Agency, and by various state
agencies, including the California Environmental Protection Agency. Federal and
state regulations regarding the manufacture, sale or use of the Company's
products are subject to future change and these changes could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Distribution of the Company's products outside the U.S. is also subject to
extensive government regulation. In a majority of foreign countries, FDA
approval is required first in order to receive approval in that country. The
export by the Company of certain of its products which have not yet been cleared
for domestic commercial distribution may be subject to FDA export restrictions.
Failure to obtain necessary regulatory approvals, or failure to comply with
regulatory requirements, would have a material adverse effect on the Company's
business, financial condition and results of operations.
8
<PAGE> 11
The Company will be required to adhere to applicable FDA regulations regarding
current Good Manufacturing Practices ("cGMP") in the U.S. and similar
regulations in other countries, which include testing, control and documentation
requirements. Ongoing compliance with GMP and other applicable regulatory
requirements, such as reporting requirements, will be monitored through periodic
inspections by state and federal agencies, including the FDA, and by comparable
agencies in other countries. Failure to comply with applicable regulatory
requirements, including marketing products for unapproved uses, could result in,
among other things, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, refusal of the government
to grant premarket clearance or premarket approval for products, withdrawal of
approvals and criminal prosecution. In addition, changes in existing regulations
or adoption of new governmental regulations or policies could prevent or delay
regulatory approval of the Company's products or result in increased regulatory
costs. Furthermore, once approval is granted, subsequent modifications to the
approved product or manufacturing process may require a supplemental PLA and ELA
or PMA as the case may be or may require the submission of a new PMA
application, which could require substantial additional clinical data and FDA
review.
Due to the nature of its manufacturing processes, the Company is subject to
stringent federal, state and local laws, rules, regulations and policies
governing the use, generation, manufacture, storage, air emission, discharge,
handling and disposal of certain materials and wastes. There can be no assurance
that the Company will not be required to incur significant costs to comply with
land use and environmental regulations as manufacturing is scaled-up to
commercial levels, nor that the operations, business or financial condition of
the Company will not be materially and adversely affected by current or future
environmental laws, rules, regulations and policies. There can be no assurance
that the Company will be able to obtain and maintain all required permits in
connection with the operation of its manufacturing facilities. When and if the
Company begins to produce products on a commercial scale, it will be a
significant user and disposer of water. The disposal of water used in the
Company's manufacturing processes must comply with applicable federal, state and
local environmental protection laws, and compliance with these laws may be
costly and difficult. See "Business -- Manufacturing."
ESTABLISHMENT AND REGULATION OF REFERENCE LABORATORY. The Company intends to
establish a clinical reference laboratory in connection with seeking approval
for an OTC home urine collection kit for HIV-1. There are a number of risks in
establishing a reference laboratory especially for testing for HIV. The Company
must, among other actions, seek to hire and retain key laboratory personnel,
purchase necessary equipment, secure required permits, incur marketing expenses,
obtain customers, and comply with government regulations. The Company's planned
laboratory would test for HIV using the Company's urine-based HIV-1 test and, if
approvals are obtained, receive home collected urine for HIV testing. The
Company may be required to offer counseling in connection with the reporting of
results to laboratory customers. There can be no assurance that the Company can
establish or receive the necessary approval for the laboratory.
If the Company establishes a reference laboratory for the testing of urine
samples using the Company's urine-based HIV-1 screening test, the Company's
laboratory would be regulated under the Clinical Laboratory Improvement
Amendments of 1988 ("CLIA"). CLIA is intended to ensure the quality and
reliability of all medical testing in laboratories in the U.S. by requiring that
any health care facility in which testing is performed meet specified standards
in the areas of personnel qualification, administration, participation in
proficiency testing, patient test management, quality control, quality
assurance, and inspections. The regulations have established three levels of
regulatory control based on the test's complexity: "waived," "moderately
complex," and "highly complex." Calypte believes that its test will be
categorized as highly complex, which would require the Company and laboratories
using its test to meet certain quality control and personnel standards that are
more rigorous than those for moderately complex tests. Under the CLIA
regulations, all laboratories performing high or moderately complex tests are
required to obtain either a registration certificate or certifications of
accreditation from the Health Care Finance Administration ("HCFA"). There can be
no assurance that the CLIA regulations and future administrative interpretations
of CLIA will not have an adverse impact on the potential market for the
Company's products. The Company would also be subject to state laboratory
licensure standards and laws governing the disposal of infectious and/or
hazardous wastes.
PRODUCT LIABILITY AND RECALL RISK; LIMITED INSURANCE COVERAGE. The manufacture
and sale of medical diagnostic products entail significant risk of product
liability claims or product recalls. While the Company
9
<PAGE> 12
maintains product liability insurance, the Company faces the risk of litigation
in the event of false positive or false negative reports. There can be no
assurance that the Company's existing insurance coverage limits will be adequate
to protect the Company from any liabilities it might incur in connection with
the clinical trials or sales of its products. In addition, the Company may
require increased product liability coverage as its products are commercialized.
Such insurance is expensive and in the future may not be available on acceptable
terms, if at all. A successful product liability claim or series of claims
brought against the Company in excess of its insurance coverage, or a recall of
the Company's products, could have a material adverse effect on the Company's
business, financial condition and results of operations.
DEPENDENCE UPON KEY PERSONNEL. The Company is dependent upon a number of key
management and technical personnel. The Company has employment agreements with
the members of its core management team. The Company's ability to manage its
transition to commercial-scale operations, and hence its success, will depend on
the efforts of these individuals, among others. The loss of the services of one
or more key employees could have a material adverse effect on the Company. The
Company's success will also depend on its ability to attract and retain
additional highly qualified management and technical personnel. The Company
faces intense competition for qualified personnel, many of whom are often
subject to competing employment offers, and there can be no assurance that the
Company will be able to attract and retain such personnel.
William A. Boeger is the Chief Executive Officer and Chief Financial Officer of
Pepgen, a 49% owned therapeutic subsidiary of the Company, and Dr. Howard B.
Urnovitz is President and Chief Science Officer. In addition, Mr. Boeger and Dr.
Urnovitz are both officers of the Chronic Illness Research Foundation, a non-
profit organization. Accordingly, although these individuals will devote such
amount of their working hours as they reasonably deem necessary to the business
of the Company, these individuals do not devote all of their working hours to
the Company's affairs. See "Business -- Employees" and "Management."
CONTROL BY DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATED ENTITIES. The Company's
directors, executive officers and entities affiliated with them will, in the
aggregate, beneficially own approximately 34.49% of the Company's outstanding
Common Stock following the completion of this Offering. Accordingly, these
stockholders, individually and as a group, would be able to effectively control
the Company on substantially all matters requiring approval by the stockholders
of the Company, including the election of directors and the approval of mergers
or other business combination transactions. See "Principal Stockholders."
NO PRIOR PUBLIC TRADING MARKET; POSSIBLE VOLATILITY OF STOCK PRICE;
DILUTION. Prior to this Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or, if one does develop, that it will be maintained. The initial public offering
price, which is established by negotiations between the Company and the
Underwriters, may not be indicative of prices that will prevail in the trading
market. The stock market has from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies. These broad market fluctuations may adversely affect the
market price of the Company's Common Stock. In addition, the market price of the
shares of Common Stock is likely to be highly volatile. Factors such as
fluctuations in the Company's operating results, announcements of technological
innovations or new products by the Company or its competitors, FDA and
international regulatory actions, actions with respect to reimbursement matters,
developments with respect to patents or proprietary rights, public concern as to
the safety of products developed by the Company or others, changes in health
care policy in the U.S. and internationally, changes in stock market analysts'
recommendations regarding the Company, other medical products companies or the
medical product industry generally and general market conditions may have a
significant effect on the market price of the Common Stock. The initial public
offering price is substantially higher than the net tangible book value per
share of Common Stock. Investors purchasing shares of Common Stock in this
Offering will therefore incur immediate and substantial net tangible book value
dilution. See "Underwriting and Dilution."
RISK OF UNALLOCATED PROCEEDS. The Company expects that it will use a portion of
the net proceeds of this offering for general corporate purposes, including
working capital. Of the approximately $12.4 million net proceeds from the
Offering, approximately $850,000, or 6.8%, will be used for such general
corporate purposes. The Company has no specific plans as to the use of the
unallocated proceeds from this offering. Pending use, the Company plans to
invest the net proceeds in investment-grade, interest-bearing securities.
Accordingly, management will have significant flexibility in applying a portion
of the net proceeds of this offering. See "Use of Proceeds."
10
<PAGE> 13
POTENTIAL ADVERSE EFFECT ON MARKET PRICE OF SHARES ELIGIBLE FOR FUTURE
SALE. Sales of Common Stock (including shares issued upon the exercise of
outstanding options) in the public market after this Offering could materially
adversely affect the market price of the Common Stock. Such sales also might
make it more difficult for the Company to sell equity securities or
equity-related securities in the future at a time and price that the Company
deems appropriate. Upon the expiration of certain lock-up agreements entered
into by holders of Common Stock and options of the Company 180 days from the
date of this Prospectus, approximately 5,686,146 shares of Common Stock will
become eligible for immediate public resale subject to the volume limitations of
Rule 144, under Rule 144(k) or by non-affiliates holding stock issued to them
under Rule 701, while a total of 7,392,010 shares will be entitled to
registration rights with respect to such shares. See "Shares Eligible for Future
Sale," "Business -- Investment in Pepgen Corporation" and "Certain
Transactions."
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS. Certain provisions of
Calypte's Certificate of Incorporation and Bylaws could discourage potential
acquisition proposals and could delay or prevent a change in control of Calypte.
Such provisions could diminish the opportunities for a stockholder to
participate in tender offers, including tender offers at a price above the then
current market value of the Common Stock. Such provisions may also inhibit
increases in the market price of the Common Stock that could result from
takeover attempts. In addition, the Board of Directors of Calypte, without
further stockholder approval, may issue Preferred Stock with such terms as the
Board of Directors may determine, that could have the effect of delaying or
preventing a change in control of Calypte. The issuance of Preferred Stock could
also adversely affect the voting power of the holders of Common Stock, including
the loss of voting control to others. See "Description of Capital
Stock -- Change of Control Provisions."
DIVIDENDS. The Company has accumulated unpaid dividends on its Series A
Preferred Stock, which accumulated dividends will be paid upon redemption of the
Series A Preferred Stock upon the closing of this Offering. The Company
currently intends to retain any future earnings for future growth and,
therefore, does not anticipate either declaring or paying any cash dividends in
the foreseeable future.
11
<PAGE> 14
THE COMPANY
Urnotech Calypte Biomedical Corporation was incorporated in California in
November 1989, changed its name to Calypte Biomedical Corporation in November
1992 and will be reincorporated in Delaware in July 1996. The Company's
principal office is located at 1440 Fourth Street, Berkeley, California 94710,
and its telephone number is (510) 526-2541.
USE OF PROCEEDS
The net proceeds to the Company from the sale of 2,400,000 shares of Common
Stock offered by the Company hereby at an initial public offering price of $6.00
per share will be approximately $12.4 million ($14.4 million if the
Underwriter's over-allotment option is exercised in full). Of the net proceeds
of this Offering, the Company expects to expend approximately $3.5 million to
expand product development efforts and to support clinical trials, approximately
$2.5 million to fund the development of Calypte Biomedical Laboratories,
approximately $1.0 million to expand manufacturing capacity, approximately $2.0
million to redeem the Company's Series A Preferred Stock, approximately $1.3
million to repay a loan bearing interest at the prime rate plus 3.5% (11.75% at
July 25, 1996) due on August 5, 1996 to Silicon Valley Bank, $1.0 million to
repay the Pepgen promissory note bearing interest at 4% per annum due on October
31, 1996, and approximately $250,000 to repay a note bearing interest at 10% per
annum due on August 1, 1996 to the Purdue Frederick Corporation. The balance of
the net proceeds amounting to approximately $850,000 will be used for working
capital and general corporate purposes. A portion of the proceeds may also be
used for investments in or acquisitions of complementary businesses, products or
technologies. From time to time the Company considers and engages in discussions
with other parties regarding possible investments in or acquisitions of
complementary businesses, products or technologies, although there are currently
no agreements or understandings regarding any such investments or acquisitions.
Pending the use of the proceeds as described above, the Company intends to
invest such net proceeds in short-term, investment grade, interest-bearing
securities.
DIVIDEND POLICY
The Company has accumulated unpaid dividends on its Series A Preferred Stock,
which accumulated dividends will be paid upon redemption of the Series A
Preferred Stock upon the closing of this Offering. The Company currently intends
to retain any future earnings for future growth and, therefore, does not
anticipate either accumulating, declaring or paying any cash dividends in the
foreseeable future.
12
<PAGE> 15
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March 31,
1996 (i) on an actual basis, (ii) on a pro forma basis to reflect (a) the
automatic conversion of all outstanding shares of Convertible Preferred Stock
into Common Stock upon the closing of this Offering and (b) the repayment of
approximately $503,000 of current notes payable which were repaid by the Company
in April 1996 and (iii) on an as adjusted basis to give effect to (a) the
receipt by the Company of the net proceeds from the sale of 2,400,000 shares of
Common Stock offered hereby at an initial public offering price of $6.00 per
share after deducting the underwriting discounts and commissions and estimated
offering expenses payable by the Company, (b) the redemption by the Company of
its mandatorily redeemable Series A Preferred Stock, including accumulated
unpaid dividends and (c) the repayment of approximately $2,498,000 of current
notes payable. This table should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes thereto and the Consolidated
Condensed Financial Statements of the Company and the Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
<S> <C> <C> <C>
Long-term portion of capital lease obligations.......... $ 683 $ 683 $ 683
Mandatorily Redeemable Series A Preferred Stock:
100,000 shares authorized at $0.001 par value; 100,000
shares issued and outstanding, actual; 100,000
shares issued and outstanding, pro forma; no shares
issued and outstanding, as adjusted................ 1,766 1,766 --
Stockholders' equity (deficit):
Convertible Preferred Stock, $0.001 par value,
8,637,638 shares authorized; 6,832,416 shares
issued and outstanding, actual; no shares issued or
outstanding, pro forma and as adjusted............. 7 -- --
Preferred Stock, no shares authorized, actual and pro
forma; 5,000,000 shares authorized, as adjusted; no
shares issued or outstanding, actual pro forma and
as adjusted........................................ -- -- --
Common Stock, $0.001 par value; 12,000,000 shares
authorized, actual; 20,000,000 shares authorized,
pro forma and as adjusted; 574,018 shares issued
and outstanding, actual; 7,406,434 shares issued
and outstanding, pro forma; 9,806,434 shares issued
and outstanding, as adjusted (1)................... -- 7 9
Additional paid-in capital............................ 29,329 29,329 41,699
Deferred compensation................................. (367) (367) (367)
Deficit accumulated during development stage.......... $(33,217) $ (33,217) $ (33,217)
======== ======== ========
Total stockholders' equity (deficit).......... $ (4,248) $ (4,248) $ 8,124
======== ======== ========
Total capitalization.......................... $ (1,799) $ (1,799) $ 8,807
======== ======== ========
</TABLE>
- ---------------
(1) The actual, pro forma, and as adjusted information excludes, as of March 31,
1996, (i) 1,292,561 shares of Common Stock issuable upon exercise of
outstanding options granted under the Company's stock option plans at a
weighted average exercise price of $0.54 per share, (ii) 1,321,907 shares of
Common Stock available for grant under the Company's stock option plans,
(iii) warrants to purchase 1,762,101 shares of Common Stock at prices
ranging from $5.00 to $7.50 per share and options to purchase 475,000 shares
of Common Stock at $7.50 per share. See "Capitalization" and
"Management -- Stock Option Plans" and Notes 9, 10 and 12 of Notes to
Consolidated Financial Statements and Notes 5, 6 and 7 of Notes to
Consolidated Condensed Financial Statements.
13
<PAGE> 16
DILUTION
As of March 31, 1996, the Company had negative pro forma net tangible book value
of $(4,247,684) or $(0.57) per share of Common Stock. "Pro forma net tangible
book value" per share represents the amount of total pro forma tangible assets
less total pro forma liabilities and less total pro forma mandatorily redeemable
Series A Preferred Stock divided by 7,406,434, the pro forma number of shares of
Common Stock issued and outstanding after giving effect to the automatic
conversion upon consummation of the offering of net outstanding shares of
Convertible Preferred Stock at March 31, 1996 into Common Stock. Without taking
into account any other changes in the pro forma net tangible book value after
March 31, 1996, other than to give effect to the receipt by the Company of the
net proceeds from the sale of the 2,400,000 shares of Common Stock offered
hereby at an initial public offering price of $6.00 per share, the pro forma as
adjusted net tangible book value of the Company as of March 31, 1996 would have
been approximately $8,124,132 or $0.83 per share. This represents an immediate
increase in net tangible book value of $1.40 per share to existing stockholders
and an immediate dilution of net tangible book value of $5.17 per share to new
investors purchasing shares at an initial public offering price of $6.00 per
share. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share............................. $ 6.00
Pro forma net tangible book value per share before the offering... (0.57)
Increase per share attributable to new investors.................. 1.40
------
Pro forma net tangible book value per share after the offering...... 0.83
-----
Dilution per share to new investors................................. $ 5.17
=====
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1996, the
differences between existing stockholders and purchasers of shares in the
offering (at an initial public offering price of $6.00 per share) with respect
to the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- ------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 7,406,434 75.5% $30,816,598 68.2% $4.16
New investors............... 2,400,000 24.5 14,400,000 31.8 6.00
--------- ----- ----------- -----
Total............. 9,806,434 100.0% $45,216,598 100.0%
========= ===== =========== =====
</TABLE>
The foregoing table assumes no exercise of stock options or warrants outstanding
after March 31, 1996. As of March 31, 1996, there were options outstanding to
purchase a total of 1,292,561 shares of Common Stock at a weighted average
exercise price of $0.54 per share: there were warrants outstanding to purchase
1,762,101 shares of Common Stock at prices ranging from $5.00 to $7.50 per
share; and there were options to purchase 475,000 shares of Common Stock at
$7.50 per share. To the extent that any shares of Common Stock are issued on
exercise of any of these options or warrants or additional options or warrants
granted after March 31, 1996, there will be further dilution to new investors.
See "Management -- Stock Plans" and Notes 9, 10 and 12 of Notes to Consolidated
Financial Statements and Notes 5, 6 and 7 of Notes to Consolidated Condensed
Financial Statements.
14
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data as of and for the years ended December
31, 1991, 1992, 1993, 1994 and 1995 are derived from the audited consolidated
financial statements of the Company. The financial statements of the Company as
of December 31, 1994 and 1995 and for each of the years in three-year period
ended December 31, 1995, together with the notes thereto and the related report
of KPMG Peat Marwick LLP independent certified public accountants, are included
elsewhere in this Prospectus. The selected consolidated financial data set forth
below as of and for the three months ended March 31, 1995 and 1996, and for the
period from February 18, 1988 (inception) through March 31, 1996 were derived
from unaudited consolidated condensed financial statements, which are included
elsewhere in this Prospectus, and include, in the opinion of the Company, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the Company's financial position at that date and results
of operations for those periods. The results for the three months ended March
31, 1996 are not necessarily indicative of the results for any future period.
The selected consolidated financial data set forth below is qualified in its
entirety by, and should be read in conjunction with, the Consolidated Financial
Statements and Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in the
Prospectus.
<TABLE>
<CAPTION>
FEBRUARY 18,
1988
THREE MONTH PERIOD (INCEPTION)
YEAR ENDED DECEMBER 31, ENDED MARCH 31, THROUGH
--------------------------------------------------------- ---------------------- MARCH 31,
1991 1992 1993 1994 1995 1995 1996 1996
--------- --------- --------- --------- --------- --------- --------- ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenue earned under research
and development contracts,
substantially from related
parties..................... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 2,390
Operating expenses:
Research and development.... 1,205 2,604 4,519 3,644 5,018 971 1,827 22,174
Purchased in-process
research and development
costs..................... -- -- -- -- 2,500 -- -- 2,500
Selling, general and
administrative............ 1,096 1,280 1,784 1,818 2,862 491 896 11,823
--------- --------- --------- --------- --------- -------- --------- ---------
Loss from operations.......... (2,301) (3,884) (6,303) (5,462) (10,380) (1,462) (2,723) (34,107)
Interest income (expense),
net......................... (58) 45 108 (35) 78 43 (98) (131)
Other income.................. 5 38 15 31 12 21 5 76
--------- --------- --------- --------- --------- -------- --------- ---------
Loss before income taxes and
extraordinary item.......... (2,354) (3,801) (6,180) (5,466) (10,290) (1,398) (2,816) (34,162)
Income taxes.................. (51) (1) (1) (1) (1) -- -- (61)
--------- --------- --------- --------- --------- -------- --------- ---------
Loss before extraordinary
item........................ (2,405) (3,802) (6,181) (5,467) (10,291) (1,398) (2,816) (34,223)
Extraordinary gain on debt
extinguishment.............. 485...... -- -- -- -- -- -- 485
--------- --------- --------- --------- --------- -------- --------- ---------
Net loss...................... (1,920) (3,802) (6,181) (5,467) (10,291) (1,398) (2,816) (33,738)
Less dividend on mandatorily
redeemable Series A
preferred stock............. (120) (120) (120) (120) (120) (30) (30) (766)
--------- --------- --------- --------- --------- -------- --------- ---------
Net loss attributable to
common stockholders......... $ (2,040) $ (3,922) $ (6,301) $ (5,587) $ (10,411) $ (1,428) $ (2,846) $(34,504)
========= ========= ========= ========= ========= ======== ========= =========
Net loss per share
attributable to common
stockholders before
extraordinary item.......... $ (1.49) $ (1.13) $ (1.35) $ (0.99) $ (1.50) $ (0.21) $ (0.41)
Extraordinary gain on debt
extinguishment, per share... 0.29 -- -- -- -- -- --
--------- --------- --------- --------- --------- -------- ---------
Net loss per share
attributable to common
stockholders(1)............. $ (1.20) $ (1.13) $ (1.35) $ (0.99) $ (1.50) $ (0.21) $ (0.41)
========= ========= ========= ========= ========= ======== =========
Weighted average shares used
to
compute net loss per share
attributable to common
stockholders(1)............. 1,694,089 3,468,920 4,666,236 5,671,038 6,934,334 6,933,854 6,934,520
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1996
-------------------------------------------------- ------------------------
1991 1992 1993 1994 1995 ACTUAL PRO FORMA(2)
------- ------- -------- -------- -------- -------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 2,233 $ 7,254 $ 1,492 $ 4,478 $ 2,559 $ 1,842 $ 1,339
Working capital................................... 1,196 6,042 867 3,117 (2,402) (3,791) (3,791)
Total assets...................................... 2,561 7,770 2,887 5,965 5,337 4,826 4,323
Long-term portion of capital lease obligations and
notes payable................................... 471 310 462 196 543 683 683
Mandatorily redeemable Series A preferred stock... 1,256 1,376 1,496 1,616 1,736 1,766 1,766
Deficit accumulated during development stage...... (4,659) (8,461) (14,643) (20,110) (30,401) (33,217) (33,217)
Total stockholders' equity (deficit).............. (213) 4,812 (26) 2,659 (2,746) (4,248) (4,248)
</TABLE>
- ---------------
(1) See Note 2 of Notes to Consolidated Condensed Financial Statements and Note
2 of Notes to Consolidated Condensed Financial Statements.
(2) Reflects the conversion of 6,832,416 shares of Convertible Preferred Stock
into 6,832,416 shares of Common Stock as of March 31, 1996 and reflects the
repayment of $503,000 of current notes payable which were repaid by the
Company in April 1996.
15
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
OVERVIEW
Since commencement of operations in 1988, the Company has reported its results
as a development stage company, engaged in research, development and
commercialization of its products. The Company's efforts have been primarily
focused on developing and obtaining approval for its urine-based diagnostic
tests for sexually transmitted diseases. In March, 1996, the Company received a
letter from the FDA stating that the Company's urine-based HIV-1 test was
approvable pending finalization of the package insert and other labeling.
The Company has a limited history of operations and has experienced significant
operating losses since inception. As of March 31, 1996, the Company had an
accumulated deficit of $33.2 million. The Company has not begun to market its
urine-based HIV-1 test. The Company expects operating losses to continue as it
initiates marketing and sales activities and additional research and
development. The Company's marketing strategy is to use distributors, focused
direct selling and marketing partners to penetrate certain targeted domestic
markets. The Company plans to maintain a small direct sales force to sell the
Company's urine-based HIV-1 test to 12 major laboratories serving the life
insurance, military, immigration and criminal justice markets. Other U.S. and
all international markets will be penetrated utilizing diagnostic product
distributors.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 and 1995
Research and development expense, consisting primarily of research,
manufacturing and quality assurance personnel and materials related to the
development of the urine-based HIV-1 test, increased 88% to $1.8 million for the
three months ended March 31, 1996 from $971,000 for the three months ended March
31, 1995. The increase was principally due to additional personnel, facility and
material costs required for increased manufacturing activity.
Selling, general and administrative expenses, consisting primarily of personnel,
outside consultants, facility operating leases and related expenses, increased
82% to $896,000 for the three months ended March 31, 1996 from $491,000 for the
three months ended March 31, 1995. The increase was primarily due to personnel
additions and related expenses.
Interest income (expense) and other income, consisting primarily of interest
earned on cash and cash equivalents, interest paid on equipment lease financing
and interest paid or accrued on outstanding notes payable, decreased $157,000 to
$(93,000) for the three months ended March 31, 1996 from $64,000 for the three
months ended March 31, 1995. The decrease was primarily due to interest payments
on the Company's bank line of credit and interest accrued on the note payable to
Pepgen, and also due to lower interest income as a result of lower cash
balances.
Years Ended December 31, 1995 and 1994
Research and development expenses increased 38% to $5.0 million in 1995 from
$3.6 million for 1994. This increase was principally due to additional personnel
and material costs required for increased manufacturing activities.
Purchased in-process research and development costs of $2.5 million were
incurred in 1995; no such costs were incurred in 1994. The 1995 costs were
attributable solely to the Company's investment in Pepgen Corporation and the
resulting write-off of research and development in process acquired. Pepgen is a
research and development company engaged primarily in the development of
therapeutic compounds.
16
<PAGE> 19
Selling, general and administrative expenses, increased 57% to $2.9 million in
1995 from $1.8 million in 1994. This increase was primarily due to additional
legal and consulting fees relating to general corporate matters and an increase
in marketing personnel in anticipation of product launch.
Interest income (expense) and other income, increased $94,000 to $90,000 in 1995
from ($4,000) in 1994. This increase was primarily due to interest earned on
proceeds from preferred stock offerings.
Years Ended December 31, 1994 and 1993
Research and development expenses decreased 19%, to $3.6 million in 1994 from
$4.5 million in 1993. The decrease was due primarily to approximately $1.0
million of non-recurring payments made in 1993 for patent license fees and
technology licenses.
Interest income (expense) and other income decreased $127,000 to ($4,000) for
1994 from $123,000 for 1993. This decrease related primarily to a full year of
interest payments in 1994 on equipment lease lines.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed operations from inception primarily through the private
placement of preferred stock and, to a lesser extent, from payments related to
research and development agreements, bank lines of credit, equipment lease
financings and borrowings from notes payable. Since inception through March 31,
1996, the Company has received approximately $30.3 million in net proceeds from
private placements of the Company's equity securities. In addition,
approximately $1.3 million was borrowed by the Company through equipment lease
financings, of which approximately $1.1 million was outstanding as of March 31,
1996, and $2.4 million was received from research and development agreements. In
addition, in December 1995 the Company executed a $2.0 million line of credit
with a bank which was due on March 5, 1996. In March 1996 the Company signed an
amendment to the agreement, whereby the Company agreed to repay $500,000 on the
line of credit and the due date was extended to July 5, 1996. In April, the
Company repaid the $500,000 and the line of credit was reduced to $1.5 million.
In addition, the Company has a note payable to a former related party for
$248,000 due August 1, 1996.
During the three months ended March 31, 1996 and the years ended December 31,
1995, 1994 and 1993 the Company's cash used in operations was $2.1 million, $6.6
million, $4.6 million, and $6.6 million, respectively. The cash used in
operations was primarily to fund research and development expenses related to
the urine-based HIV-1 test along with general and administrative expenses of the
Company.
The Company has entered into employment agreements with officers and other
employees of the Company, with varying terms and lengths. Included in current
liabilities at March 31, 1996 is $260,000 payable to an officer for relocation
expense.
The Company acquired equipment and leasehold improvements during the three
months ended March 31, 1996 and the years ended December 31, 1995, 1994, and
1993 of $217,000, $1.1 million, $625,000, and $813,000, respectively. Costs
incurred included the purchase of equipment relating to build-out and scale-up
of manufacturing facilities in 1996 and 1995, the build-out of the Company's
Alameda facility in 1994 and the renovation of its manufacturing facility in
Berkeley in 1994 and 1993.
During 1995, the Company acquired a 49% interest in Pepgen for $2.5 million,
comprised of $1.0 million in cash paid at closing, a note payable of $1.0
million, and options to purchase 475,000 shares of Common Stock valued at
$500,000. The note payable is due upon the earlier of (i) October 1996 or (ii)
60 days following either FDA approval of the Company's urine-based HIV-1
screening test or the closing of this Offering. Other than the payment of the
$1.0 million promissory note, Calypte does not have any ongoing commitments to
fund Pepgen.
The Company has entered into an agreement that provides for royalty payments to
former related parties based on sales of certain products conceived by the
former related parties prior to March 30, 1989.
The Company has entered into arrangements with various organizations to receive
the right to utilize certain patents and proprietary rights under licensing
agreements in exchange for the Company making certain royalty
17
<PAGE> 20
payments based on sales of certain products and services. The royalty
obligations are based on a percentage of net sales of licensed products and
include minimum annual royalty payments under some agreements.
In August 1993 and as amended in 1994, the Company entered into a research
agreement that allowed for a university to perform certain research on behalf of
the Company for a seven-year period. Under the terms of the agreement, the
Company may negotiate certain license rights to the inventions made by the
university resulting from this research. The Company's annual payment under this
agreement is approximately $150,000 through 1999.
As of March 31, 1996, the Company had $1.8 million in cash and cash equivalents.
Subsequent to March 31, 1996 and as of June 21, 1996 the Company received $3.3
million in proceeds related to the exercise of warrants issued in conjunction
with the Series E Preferred Stock offering in May and June 1995. As of June 21,
1996, potential proceeds related to unexercised warrants expiring on June 23,
1996, totaled $1.0 million.
The Company expects to use a portion of the net proceeds of this Offering for
research and development and clinical studies, increase of manufacturing
capacity, repayment of a bank line of credit, redemption of the Series A
Preferred Stock, repayment of the note payable to a former related party,
repayment of the note issued to Pepgen, as well as for working capital and
general corporate purposes. A portion of the proceeds may also be used for
investments in or acquisitions of complementary businesses, products or
technologies. Although the Company believes net proceeds from this Offering,
together with current cash, will be sufficient to meet the Company's operating
expenses and capital requirements for at least the next twelve months, the
Company's future liquidity and capital requirements will depend on numerous
factors, including regulatory actions by the FDA and other international
regulatory bodies, market acceptance of its products, and intellectual property
protection. There can be no assurance that the Company will not be required to
raise additional capital or that such capital will be available on acceptable
terms, if at all.
18
<PAGE> 21
BUSINESS
THE COMPANY
Calypte Biomedical Corporation ("Calypte" or the "Company") believes that it is
a leader in the development of a urine-based screening test for the detection of
Human Immunodeficiency Virus, Type-1 ("HIV-1"), the putative cause of Acquired
Immunodeficiency Syndrome ("AIDS"). The Company has integrated several
proprietary technologies to develop a test which, in Company-funded clinical
trials conducted by or on behalf of the Company, detected the presence of HIV
antibodies in urine with 99.33% sensitivity (as compared to blood). Specificity
of the screening test with a companion western blot confirmatory test was 100%.
Calypte believes that its proprietary urine-based test offers significant
advantages compared to existing blood-based tests, including ease-of-use, lower
costs, and significantly reduced risk of infection from collecting and handling
specimens. Urine collection is non-invasive and painless, and urine is the most
commonly collected body fluid. The Company estimates that the cost of
collecting, handling, testing and disposing of urine specimens will be
significantly less than that of blood specimens. Independent studies report that
the likelihood of finding infectious HIV virus in urine is extremely low, which
greatly reduces the risk and cost of accidental exposure to health care workers,
laboratory personnel, and patients being tested.
On March 28, 1996, the Company received a letter from the FDA stating that the
Company's HIV-1 urine screening test was approvable pending finalization of the
package insert and other labeling. The Company's screening test, when used with
the western blot confirmatory test for urine licensed exclusively from Cambridge
Biotech, will provide the only complete urine-based HIV testing system. This
western blot test is already licensed by the FDA for use with blood, and is
currently pending FDA clearance for use with urine. On June 21, 1996, the FDA
Blood Products Advisory Committee ("BPAC") determined that the clinical data and
test protocol of the Cambridge Biotech urine western blot confirmatory test
supported its use to determine a positive HIV-1 test result. Based on the data
presented, the BPAC recommended that the Cambridge Biotech urine western blot
confirmatory test not be considered a stand-alone supplemental test and that
positive reported results in urine be subsequently verified by using a blood
sample. The Company believes that this subsequent verification will be addressed
in the product labeling, which may instruct physicians that patients receiving
positive HIV-1 test results in urine should receive proper follow-up medical
care, counseling and verification of HIV status by testing a subsequent blood
sample. While any recommendation of the BPAC is not binding on the FDA, there
can be no assurance that the FDA will grant approval of the Cambridge Biotech
urine confirmatory test or will not require additional data or clinical trials
before granting such approval. Any significant delay in obtaining approval for
the Cambridge Biotech urine confirmatory test could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company believes that the benefits of its testing system will enable it to
penetrate existing markets and expand into new markets that are currently not
served by blood-based and oral fluid-based HIV test systems.
The Company also intends to submit a PMA to the FDA for approval of the
Company's OTC home urine collection kit. The Company's home collection kit would
allow consumers, in the privacy of their homes, to take a urine sample, mail it
to Calypte Biomedical Laboratories for analysis and then anonymously obtain
results and professional counseling by telephone. On May 14, 1996, Direct Access
Diagnostics, a subsidiary of Johnson & Johnson, received FDA clearance for the
first OTC home blood collection kit for HIV. In addition, on July 22, 1996, Home
Access Health Corp. received FDA clearance for another OTC home collection kit
for HIV. The Company believes that these FDA approved OTC products will
accelerate consumer acceptance and awareness of home collection for HIV. The
Company believes that an OTC urine collection kit for HIV would have advantages
compared to an OTC blood collection kit for HIV.
The Company intends to develop and commercialize additional urine-based tests
for other sexually transmitted diseases and other human retroviruses and
diseases based on its enabling urine testing technologies. Initially, the
Company intends to focus on developing and commercializing urine-based screening
tests for HIV-2, Chlamydia and H. pylori.
Upon approval, the Company intends to market its urine-based HIV-1 screening
test through direct sales personnel and distributors depending upon the market
segment and the location of the market. Calypte believes that its urine-based
test will achieve market acceptance because of safety, cost, convenience, and
19
<PAGE> 22
painless collection of the fluid to be tested. There can be no assurance that
the Company's products or the Company's planned products will receive FDA
clearance or approval and become commercially available.
BACKGROUND
HIV is the putative cause of AIDS, which is the leading cause of death for
persons ages 25 to 44 in the U.S. Those infected with HIV generally do not show
symptoms of AIDS until several years after HIV infection, if at all. Because
most persons infected with HIV are asymptomatic for AIDS and are unaware of
their HIV status, such persons do not avail themselves of medical treatment and
may unknowingly expose others to the risk of infection. Prior exposure to HIV
can be detected in laboratory tests even though the individual infected with HIV
is asymptomatic.
According to the World Health Organization, Human Immunodeficiency Virus ("HIV")
currently infects approximately 16.9 million individuals worldwide and will
infect between 30 and 40 million individuals worldwide by the year 2000. HIV is
spread by a transfer of bodily fluids primarily through sexual contact, blood
transfusions, sharing intravenous needles, accidental needle sticks or
transmission from infected mothers to newborns. The Rockefeller Foundation
reports that heterosexual transmission accounts for more than 70% of HIV
infection worldwide. The incidence of HIV-2 is insignificant except in certain
countries in West Africa where its incidence is more frequently reported.
The discovery in 1984 of circulating HIV antibodies in the blood led to the
development and widespread use of HIV blood screening tests. Testing by blood
banks of blood used in transfusions soon followed in an effort to maintain and
protect the integrity of the blood supply. Most HIV antibody screening tests are
EIAs. These tests operate on the principle that antibodies will react with a
known antigen; this reaction is detected by using enzymes as indicators. It is
estimated that 27 million blood bank screening tests were performed in 1993 and
23 million non-blood bank HIV screening tests are projected to be performed in
1996 in the United States. Outside of blood bank screening, the largest domestic
demand for HIV testing is generated by physicians, the life insurance industry,
the military, the criminal justice system and the Immigration and Naturalization
Service.
To minimize the risk of incorrectly reporting that an individual is infected
with HIV (a false positive result), most countries require a strict testing
protocol. The protocol is to first test a sample for the presence of HIV. Any
sample found to be reactive in the initial screen is then retested in duplicate.
If either of the retests are reactive, the same sample is tested again using a
more precise and expensive confirmatory test. The presence of HIV antibodies,
based on the results of the confirmatory test, is considered diagnostic for HIV
infection.
HIV blood testing can be expensive and poses risk of infection to health care
personnel. The typical HIV screening test requires a trained health care worker
or phlebotomist to draw and centrifuge a blood sample, which is then tested for
the presence of HIV antibodies. Blood is typically drawn at physician offices,
hospitals, or blood draw stations, where trained personnel are available, and
then sent to a laboratory for HIV testing. Blood samples and related
blood-sampling equipment require careful handling to avoid accidental exposure
to blood-borne pathogens, including HIV. In addition, the use of blood-based
tests has become increasingly costly because of the costs of disposing of
potentially infected specimens, syringes, needles and transfer tubes. The
overall cost of blood-based testing has precluded large public health screening
programs, particularly in less developed countries, many of which have
significantly higher rates of HIV infection than that of the U.S. Even in the
United States, certain populations are not routinely screened due to the high
cost of blood-based testing. For example, currently only four million of the
approximately 14 million life insurance policies written each year utilize HIV
screening.
In December 1994, the FDA approved the first non-invasive method for HIV-1
testing, an oral fluid-based screening test and collection device. Collection of
oral fluid is technique dependent, and detailed instructions on the proper use
of the oral fluid collection device need to be carefully followed. In addition,
oral fluid is not commonly collected and is rarely tested for other diagnostic
purposes. In June 1996, one manufacturer received approval from the FDA for a
western blot oral-fluid confirmatory test.
20
<PAGE> 23
HIV screening can also be performed by using a dried blood spot ("DBS")
specimen. DBS sampling, which was developed in the late 1980's, is a variant of
blood sampling for the testing of newborns. The DBS sampling method involves
sticking a baby's heel or an adult's finger with a sharp lancet and collecting
five or six drops of blood onto filter paper. The laboratory punches the dried
blood spots out of the filter paper, and the non-cellular components of the
blood spot are eluted back in liquid form by soaking the punches in diluent. The
resulting fluid is then assayed by one of several traditional serum/plasma EIAs.
The DBS method, which is comparable in cost to traditional serum tests, is
susceptible to problems in sample variability, the adequacy of volume for
testing, pain on sample withdrawal, and invasiveness.
The Company believes that a large market opportunity exists for home urine
collection and remote testing for HIV infection. On May 14, 1996 and July 22,
1996, the FDA approved DBS OTC home collection kits for HIV. These collection
kits, to be marketed by Direct Access Diagnostics, a subsidiary of Johnson &
Johnson, and Home Access Health Corp., respectively, are reported to each retail
for approximately $40. ChemTrak Incorporated has also submitted an application
to the FDA for a DBS OTC home collection kits for HIV. The Company believes that
these FDA approved OTC products will accelerate consumer acceptance and
awareness of home collection for HIV.
The human immune system typically requires a number of months to begin producing
antibodies following exposure to HIV. There is no consensus in the scientific
community as to whether antibodies can first be detected in blood, urine or oral
fluid. Moreover, the Company is not aware of any conclusive data that indicates
how long before an infected individual's blood, oral fluids or urine will
indicate he or she is HIV positive.
THE CALYPTE URINE-BASED HIV-1 SCREENING TEST
Calypte's proprietary urine-based HIV-1 screening test is non-invasive, easy to
use, reliable and avoids many of the costs and risks associated with blood-based
testing. The Company's screening test, when used with the western blot
confirmatory test for urine licensed exclusively from Cambridge Biotech, will
provide the only complete urine-based HIV testing system. Laboratories using the
Company's system can complete the entire testing profile for HIV-1 using a
single urine specimen. The Company believes that the benefits of its testing
system will enable it to penetrate existing markets and expand into new markets
that are not served currently by the more expensive blood and oral fluid-based
HIV test systems. Key benefits of the Company's test include:
Ease of Use/Non-Invasive Collection. Urine is the most commonly collected bodily
fluid for laboratory testing as it is already being collected for testing
purposes other than the detection of HIV. Because it requires no special
preservatives or containers, it is also easier to collect, handle, and discard
than blood. Furthermore, the Company's test is in standard EIA format and is
designed to be used with standard laboratory equipment. Blood sampling is
invasive and, for many patients, stressful and painful. The ability to screen
non-invasively for HIV in all types of patients, including intravenous drug
users and newborns, will enhance patient comfort and may significantly increase
the voluntary testing rates in patients who might otherwise decline testing.
Moreover, unlike urine collection, obtaining an uncontaminated oral fluid
specimen is highly technique-dependent, requiring specific placement of a
sterile collection device in the mouth, rubbing the collection device along the
gum line, and holding it in place for no less than two and no more than five
minutes.
Lower Overall Cost. The Company's urine-based screening test may lower
significantly the overall cost of testing for HIV because the cost of
collecting, transporting, testing and disposing of urine specimens can be
significantly less than that of blood specimens, and less than the cost of an
oral fluid screening test. Additional cost savings may accrue as a function of
reduced needlestick incidents and associated counseling, testing and lost
productivity. With respect to oral fluid screening tests, the Company believes
that each oral fluid collection device costs between $2.00 to $4.00, while a
urine collection cup costs approximately $0.20. Moreover, since urine is often
already being collected for other testing purposes, the incremental cost of
collecting urine samples is likely to be lower than collecting oral fluids.
21
<PAGE> 24
Safety. Independent studies have concluded that the likelihood of finding
infectious HIV virus in urine is extremely low. There have been no reported
cases of transmission of HIV virus through contact with urine of HIV-infected
patients. Accordingly, the risk of HIV infection to health care and laboratory
workers accidentally exposed to urine samples is negligible. Since no needles
are used in the Calypte urine sampling process, the test eliminates this route
of accidental infection. In developing countries, where the supply of sterile
needles and syringes cannot be guaranteed, the safety benefits of using urine
sampling extend to patients as well as to health care workers.
Reliability. The Company has performed clinical studies demonstrating the
effectiveness of using urine as a reliable and clinically valid sample for HIV
testing. In Company-funded clinical trials conducted by or on behalf of the
Company, for the HIV-1 urine EIA, a total of approximately 11,000 matched blood
and urine specimens were tested. In two different studies, assay specificity was
assessed by testing samples from a combined subset of low risk individuals, and
specificity of the screening test in conjunction with the confirmatory tests was
100%. Sensitivity (correlation to blood tests) of the urine screening test was
estimated by testing samples from a subset of individuals with a clinical
diagnosis of AIDS at five sites, and sensitivity was 99.33%.
In spite of the benefits of the Company's urine-based screening test, such test
represents a new method of determining the presence of HIV antibodies.
Blood-based and oral fluid based tests, which constitute competitive products,
have the advantage of already being commercially marketed and have gained
acceptance from the medical community. Furthermore, both blood-based and oral
fluid based tests have been shown to be reliable media for detection of HIV.
There can be no assurance that the Company's urine-based screening test will
gain any significant degree of market acceptance among physicians, patients or
health care payors, even if necessary regulatory and reimbursement approvals are
obtained. Moreover, even after such regulatory approvals are obtained, the
Company may recommend, whether required as a condition to approval of the
urine-based confirmatory test or otherwise, that a blood test be obtained as a
prelude to any medical care rendered for persons diagnosed with HIV.
The Company's test uses an industry standard 96 well microtiter plate to detect
antibodies to HIV-1 in urine. The HIV-1 antibodies, when present in urine, bind
to Calypte's proprietary antigen coated on prepared microtiter plates. A
subsequent enzymatic reaction produces a color change revealing the presence of
HIV-1 antibodies.
The test requires only 200 microliters of urine (approximately four drops) and
can be performed using standard laboratory equipment. Collection of the urine
can take place any time of day, and the test does not require a 24-hour voided
specimen or a midstream, clean-catch sample. Samples can be shipped and stored
at two to 30 degrees centigrade for up to 55 days before testing. The laboratory
protocol for testing urine is nearly identical to that of blood, requiring few,
if any, modifications to existing laboratory protocols.
The Company has entered into an agreement with Cambridge Biotech under which
both Calypte and Cambridge Biotech will market and distribute a urine-capable
western blot confirmatory test which uses technology licensed from the Company.
The western blot kit manufactured by Cambridge Biotech has already received FDA
approval for blood testing, and is the only confirmatory test for which
application has been made for FDA approval for use with urine. Clinical data
related to the Cambridge Biotech License Application Amendment was reviewed by
the BPAC on June 21, 1996. The BPAC provides guidance to the FDA on issues
related to product licence applications currently under review by the FDA. At
the June 21, 1996 meeting, the BPAC determined that the clinical data and test
protocol of the Cambridge Biotech urine western blot confirmatory test supported
its use to determine a positive HIV-1 test result. Based on the data presented,
the BPAC recommended that the Cambridge Biotech urine western blot confirmatory
test not be considered a stand-alone supplemental test and that positive
reported results in urine be subsequently verified by using a blood sample. The
Company believes that this subsequent verification will be addressed in the
product labeling, which may instruct physicians that patients receiving positive
HIV-1 test results in urine should receive proper follow-up medical care,
counseling and verification of HIV status by testing a subsequent blood sample.
While any recommendation of the BPAC is not binding on the FDA, there can be no
assurance that the FDA will grant approval of the Cambridge Biotech urine
confirmatory test or will not
22
<PAGE> 25
require additional data or clinical trials before granting such approval. Any
significant delay in obtaining approval for the Cambridge Biotech urine
confirmatory test could have a material adverse effect on the Company's
business, financial condition and results of operations.
STRATEGY
The Company's objective is to be the leader in the development and
commercialization of urine-based diagnostic tests. The Company's primary
strategy is to exploit the advantages of using urine instead of blood for HIV
testing to establish its diagnostic screening test as the screening method of
choice for HIV. In addition, building on its expertise in urine-based
diagnostics, the Company intends to develop additional urine-based tests for
sexually transmitted diseases and other human conditions. The key components of
the Company's business strategy are to:
- -- Target and Expand Life Insurance Testing Market. Upon FDA approval, the
Company intends to market its urine-based HIV screening test kit directly to
the five major laboratories that perform the substantial majority of HIV
tests for the domestic life insurance industry. These laboratories currently
collect and test urine from most life insurance applicants for other diseases
and risks. Because of the overall lower cost and because urine is already
routinely collected, the Company believes that its test will enable life
insurance companies to increase the number of applicants tested for HIV.
- -- Penetrate U.S. Clinical Laboratory Market. The Company, through its
distributors, intends to market its tests to laboratories currently serving
physicians. Because of restrictions on the collection of blood in the
physician's office imposed by CLIA, many physicians refer their HIV "at-risk"
patients to phlebotomists at outside laboratory service centers for blood
collection. The Company's urine-based HIV test will allow physicians' offices
to collect the specimen for use with the Company's HIV test.
- -- Pursue International Markets Through Distributor Relationships. Upon approval
from appropriate regulatory authorities, the Company intends to market its
HIV test in international markets pursuant to existing worldwide distribution
agreements. Because of its safety, ease of collection and lower costs, the
Company believes that its urine-based test may be widely employed in certain
international markets not presently served by HIV blood tests.
- -- Enter Emerging OTC Market. The Company intends to file a PMA for FDA approval
of its OTC urine collection kit for home collection. The Company believes
that its OTC urine collection kit would be used by consumers who desire home
urine collection and anonymous HIV testing through Calypte Biomedical
Laboratories. The Company intends to collaborate with a corporate partner to
market and distribute its collection kit to retail outlets in the United
States.
- -- Establish Calypte Biomedical Laboratories. The Company intends to establish
Calypte Biomedical Laboratories -- a reference testing laboratory to perform
HIV testing of home-collected urine specimens.
- -- Develop Additional Urine-Based Diagnostics. The Company intends to develop
and commercialize additional urine-based tests for other sexually transmitted
diseases, other human retroviruses and non-sexually transmitted diseases
based on its enabling urine testing technologies. Initially, the Company
intends to focus on developing and commercializing a urine-based screening
test for HIV-2, Chlamydia and H. pylori.
PRODUCTS UNDER DEVELOPMENT
OTC. The Company believes a market opportunity exists for home urine collection
and remote testing for HIV infection. The Company intends to submit an
application for FDA approval for an OTC home urine collection device, which the
consumer would purchase at retail outlets instead of visiting a physician's
office or laboratory for HIV testing. The consumer would provide a specimen sent
in a prepaid mailer to the Company's testing laboratory, Calypte Biomedical
Laboratories. The Company would perform the test, and the consumer will obtain
the results by telephoning the Company and identifying himself or herself with a
unique code to preserve anonymity. The Company believes that the FDA will
require that the results of the tests be reported under strictly controlled
protocols, including counseling. In the event that the Company's OTC HIV home
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urine collection kit is approved by the FDA, the Company intends to continue to
manufacture the urine-based HIV-1 test and operate the testing laboratory. The
Company plans to enter into an agreement with an OTC marketing partner to market
and distribute the collection kit.
Chlamydia. The Company received a notice of allowance for a U.S. patent for the
detection of Chlamydia antibodies in urine and is developing a urine-based
Chlamydia detection test. It has been estimated that there are 4.0 million new
cases of Chlamydia occurring annually in the United States and more than 25
million tests for Chlamydia were performed in the United States in 1990, and the
annual Chlamydia test market has been estimated to increase by 15% per year.
Existing tests for Chlamydia, because they require a urethral swab or a blood
sample, are uncomfortable for the patient. The majority of Chlamydia patients
are asymptomatic and therefore, seldom seek medical treatment. Chlamydia is
considered to be a significant cause of pelvic inflammatory disease, tubal
infertility and ectopic pregnancies.
HIV-2. The Company is also developing a test for HIV-2, the less common form of
HIV. The Company believes that such a test is important in certain export
markets where the incidence of HIV-2 is higher or where such testing is mandated
by government regulation. In addition, the Company believes that the ability to
detect HIV-2 antibodies will be of value in protecting the Company's competitive
position. The Company has the first right of negotiation with Cambridge Biotech
for certain rights for the detection of HIV-2 under the Cambridge Biotech patent
license from Sanofi Diagnostic Pasteur.
H. pylori. The Company is in discussions with Otsuka Pharmaceutical Co., Ltd.
("Otsuka") to obtain a license to distribute Otsuka's urine-based diagnostic
test for Helicobacter pylori (H. pylori), the putative cause of gastric ulcers
and other intestinal conditions. The H. pylori urine-based test is currently
under development at Otsuka.
Other Diagnostics. The Company is also planning to evaluate the development of
urine-based diagnostic tests for syphilis and herpes. Ultimately, the Company
intends to expand its diagnostic test line so that it will be possible to test
for a wide range of sexually transmitted and other diseases with a single,
non-invasively collected urine sample.
SALES, MARKETING AND DISTRIBUTION
The Company's marketing strategy is to use distributors, focused direct selling
and marketing partners to penetrate certain targeted domestic markets. The
Company plans to maintain a small direct sales force to sell the Company's HIV-1
screening test and potential future products to 12 major laboratories serving
the life insurance, military, immigration and criminal justice markets. Other
U.S. and all international markets will be penetrated utilizing diagnostic
product distributors. The Company will work collaboratively with its
distributors to market and promote the products in their local markets.
The following table summarizes the markets and geographic regions covered by the
Company and its distributors for its HIV-1 test:
<TABLE>
<CAPTION>
COMPANY GEOGRAPHIC REGION MARKETS
---------------- -------------------------------- --------------------------------
<S> <C> <C>
Calypte United States 12 laboratories serving the life
insurance, military, immigration
and criminal justice markets.
Calypte Canada All
Seradyn United States All but the above laboratories.
Seradyn Europe, Latin America, Africa, All
Middle East
Otsuka Asia, Australia, New Zealand All
Travenol Israel All
</TABLE>
Seradyn, Inc. Seradyn, Inc. ("Seradyn") a subsidiary of Mitsubishi Chemical
Corporation, is a manufacturer and distributor of clinical diagnostic and
industrial/analytical instrumentation products. In April 1995, the Company
entered into an agreement with Seradyn under which Seradyn was granted exclusive
distribution rights for the HIV-1 tests under the trade name "Seradyn Sentinel"
for all non-Calypte accounts in the United
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States, and all customers in Europe, Latin America, Africa and the Middle East
(excluding Israel). The agreement provides for certain minimum purchases by
Seradyn. If such minimum purchases are not met, the Company has the right to
terminate the agreement or render Seradyn's rights non-exclusive for the region
in which the minimum purchases were not met, provided that Seradyn will be
guaranteed the prices given to Calypte's most favored customers in the
territory. The initial term of the agreement extends through December 1998.
Seradyn has the right to extend the agreement for successive two-year terms
provided it has met minimum sales requirements. Seradyn has agreed to assist the
Company in obtaining regulatory approvals in its distribution territory at the
Company's expense. The agreement also grants Seradyn a right of first refusal on
distribution rights for certain new products which may be developed during the
term of the agreement.
Otsuka Pharmaceutical Co., Ltd. Otsuka Pharmaceutical Co., Ltd ("Otsuka") is a
Japanese integrated health care and consumer products conglomerate. In August
1994 the Company entered into a distribution agreement with Otsuka, which gives
Otsuka exclusive distribution rights for the urine-based HIV-1 test and to use
the trademark "Calypte" to market the test in 22 Asian countries, Australia and
New Zealand. To maintain exclusivity, the agreement requires that Otsuka
purchase certain annual minimums, which increase each year, and total 70 million
tests over ten years. Otsuka has agreed to use its best efforts to obtain
regulatory approvals for the product in its territory. The agreement is for a
term of ten years, and is terminable without cause by Otsuka upon 120-days
notice. The Company has committed up to one-half of its total manufacturing
capacity to Otsuka. If the Company is unable to meet Otsuka's manufacturing
requirements, Otsuka has a right to manufacture tests itself. The agreement also
grants Otsuka the right of first refusal to distribute certain new products
which may be developed during the term of the agreement.
Travenol Laboratories (Israel) Ltd. In December 1994 the Company entered into an
agreement with Travenol Laboratories (Israel) Ltd. ("Travenol"), a division of
Baxter-Travenol Laboratories. The agreement gives Travenol exclusive rights to
distribute the HIV-1 test and to use the trademark "Calypte" within Israel.
Under the agreement, Travenol will undertake registration of the product in
Israel with the Company paying regulatory fees. The term of the agreement is
perpetual unless terminated earlier for specified causes. No minimum purchase
levels are required.
The Company's products represent a new method of determining the presence of HIV
antibodies and there can be no assurance that these products will gain any
significant degree of market acceptance among physicians, patients or health
care payors, even if necessary international and U.S. regulatory and
reimbursement approvals are obtained. The Company believes that recommendations
and endorsements by the medical community will be essential for market
acceptance of the products, and there can be no assurance that any such
recommendations or endorsements will be obtained. The Company has no experience
marketing and selling its products either directly or through its distributors.
The Company's marketing strategy relies upon its alliances with third-party
distributors for the success of its products. There can be no assurance that the
Company's direct sales force will be effective, that its distributors will
market successfully the Company's products or that, if such relationships are
terminated, the Company will be able to establish relationships with other
distributors on satisfactory terms, if at all. Any disruption in the Company's
distribution, sales or marketing network, or failure of the Company's products
to achieve market acceptance, could have a material adverse effect on the
Company's business, financial condition and results of operations.
MANUFACTURING
The manufacture of the Company's urine-based HIV test involves antigen
production, plate processing and preparation of certain washes and other
reagents. Under cGMP, all steps are recorded, those requiring measurement or
calculation are checked by a second technician and all components are inspected
and/or tested at four stages by quality control technicians. Antigen production
involves cell culture, antigen expression and purification. Following
purification, the antigen is tested extensively and optimized for plate coating.
The coating of standard 96 well microtiter plates with antigen is completed
using standard plate coating equipment. Following binding of the antigen to the
plates, the plates are blocked and stabilized to prevent nonspecific binding of
the antigen. The plates are then dried and packaged in foil pouches. The washes
and reagents are produced using standard solution preparation techniques.
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Calypte's manufacturing operations are located in Berkeley, California with an
annual capacity of approximately 4.5 million tests. The Company has applied for
an establishment license from the FDA for the production of its HIV-1 screening
test at this facility. The Company has completed a larger manufacturing facility
in Alameda, California and is manufacturing pilot lots required for an amendment
to its pending FDA license for approval of this facility. The capacity of the
Alameda facility is approximately 20 million tests per year. Additionally, the
Company has entered into a manufacturing agreement with Biomira Diagnostics,
Inc., a Canadian corporation, for the production of the Company's tests for
export to certain international markets, in compliance with Company
specifications.
Calypte purchases raw materials and components used in the manufacture of its
product from various suppliers and relies on single sources for several of these
components. Establishment of additional or replacement suppliers for these
components cannot be accomplished quickly. The Company has a number of
single-source components, and any delay or interruption in supply of these
components could significantly impair the Company's ability to manufacture its
products in sufficient quantities, and therefore would have a material adverse
effect on the Company's business, financial condition and results of operations,
particularly as the Company scales up its manufacturing activities in support of
commercial sales.
The Company has limited experience in manufacturing its products. The Company
currently manufactures its products in limited quantities for submission to FDA
for ongoing compliance, international clinical trials and building its inventory
in anticipation of commercialization. The Company does not have experience in
manufacturing its products in commercial quantities. Manufacturers often
encounter difficulties in scaling-up production of new products, including
problems involving production yields, quality control and assurance, raw
material supply and shortages of qualified personnel. Such assumptions may be
incomplete or inaccurate and unanticipated events and circumstances are likely
to occur. The larger Alameda facility will be needed if initial demand exceeds
the more limited capacity of the Berkeley facility. Difficulties encountered by
the Company in manufacturing scale-up to meet demand, including delays in
receiving FDA approval for the Alameda facility, could have a material adverse
effect on its business, financial condition and results of operations.
Due to the nature of its manufacturing processes, the Company is subject to
stringent federal, state and local laws, rules, regulations and policies
governing the use, generation, manufacture, storage, air emission, discharge,
handling and disposal of certain materials and wastes. There can be no assurance
that the Company will not be required to incur significant costs to comply with
land use and environmental regulations as manufacturing is scaled-up to
commercial levels, nor that the operations, business or financial condition of
the Company will not be materially and adversely affected by current or future
environmental laws, rules, regulations and policies. There can be no assurance
that the Company will be able to obtain and maintain all required permits in
connection with the operation of its manufacturing facilities. When and if the
Company begins to produce products on a commercial scale, it will be a
significant user and disposer of water. The disposal of water used in the
Company's manufacturing processes must comply with applicable federal, state and
local environmental protection laws, and compliance with these laws may be
costly and difficult.
TECHNOLOGY
The Company's HIV-1 urine-based test is based on the finding of scientists at
the New York University Medical Center in 1988 that antibodies to HIV-1 could be
found in urine. Prior to this discovery, it was commonly held that antibodies to
systemic infections could not pass through the kidneys, and thus, could not be
found in the urine of infected individuals. The researchers showed that HIV-1
envelope antibodies were present in all urine samples from HIV-1 seropositive
subjects. Building on this discovery, the Company developed an HIV-1 urine
enzyme immunoassay ("EIA") to detect antibodies to HIV-1 in urine. There are two
proprietary features of the Company's HIV-1 urine-based EIA that result in a
format sensitive enough to detect the low levels of HIV antibodies in urine: the
antigen target and the sample buffer in the assay.
Recognizing the prominence of envelope antibodies in urine, the antigen target
in the assay is a full length, recombinant glycosylated HIV-1 envelope protein,
rgp160. Although this antigen is a recombinant glycoprotein, it is identical to
the viral envelope protein gp160 in amino acid sequence and in the presence of
carbohydrate at glycosylation sites. This kind of antigen target can efficiently
capture the full range of HIV-1
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envelope specific antibodies produced in the human polyclonal response to the
virus. The microwell assay format permits the high availability of epitopes of
the recombinant envelope glycoprotein for antibody binding. This availability of
epitopes results in the sensitivity verified in clinical trials.
The Company has non-exclusive rights to the proprietary process used to express
the recombinant HIV-1 envelope glycoprotein from Texas A&M University. This
proprietary process for manufacture of rgp160 begins with the baculovirus
expression vector system established in an insect cell culture. The consistent
and high levels of rgp160 expression in baculovirus infected insect cell culture
is a critical step in the overall manufacture of rgp160. The Company improved
and upgraded the Repligen process with a proprietary process which uses a system
in which the HIV-1 envelope protein is produced in the insect cell membrane
rather than typical tissue culture systems where the protein is secreted into
insect cell culture media. Rgp160 is an insoluble protein and requires detergent
based extraction and purification procedures which are proprietary.
The Company developed and has obtained a U.S. patent claiming a sample buffer
formulation, which is used in the HIV-1 urine test. This sample buffer acts as a
diluent for urine in the assay procedure and significantly increases test
specificity by reducing non-specific binding of immunoglobulins (non-specific
antibodies) and other substances in urine that would decrease specificity and
sensitivity of HIV-1 antibody binding. Sample buffer is manufactured in the
Company's facilities.
The Company's products incorporate classical immunoassay technology based on
antibody-antigen reactions. Antibodies are immune system proteins produced as a
result of an organism's immune response to substances (antigens) foreign to the
body and specifically bind to antigens and signal the immune system to assist in
eliminating them. Immunoassays are used for diagnostic applications where the
presence or absence of a specific analyte is being evaluated and allow the
detection of some analytes at levels as low as one part per billion. Antigens
include viruses, bacteria, parasites, chemical toxins and other foreign
substances and hormones.
The HIV-1 urine assay format includes a standard 96 well microtiter plate which
is compatible with standard laboratory instrumentation. The microwell plates are
coated with proprietary recombinant HIV-1 envelope protein antigen. Patient
urine and the unique specimen diluent are introduced to the microwell
simultaneously. If HIV-1 antibodies are present, they bind to the antigen coated
well and remain during the subsequent wash steps. An enzyme labeled conjugate is
added to the well. This conjugate binds specifically to human antibody which
remains from the previous step. Following another wash, substrate reagent is
added and color development occurs due to the presence of the enzyme conjugate
in the well. This color is measured spectrophotometrically on a standard
laboratory microwell plate reader. The presence of HIV antibody in the specimen
is indicated by the development of color in the microwell, and the intensity of
the color is proportional to the amount of antibody.
CLINICAL TRIALS
The Company has performed preclinical and clinical studies which support the use
of urine as a reliable and clinically valid sample. Four of the studies are
described below:
Metpath Laboratories, Inc. The feasibility of HIV-1 antibody detection in urine
was established in a large preclinical study at Metpath Laboratories, Inc. which
included 7,357 urine samples from a low risk population. A positive prevalence
rate for HIV-1 in urine of 0.80% agreed with the reported HIV-1 serum positive
rate. Of the 1,746 urine samples matched to serum, five urine positives agreed
with the five serum positives. For urine negatives, 1,736 out of 1,741 were
correctly identified resulting in a 99.71% correlation to serum. In addition, in
a study of 94 paired urine and serum samples from subjects previously determined
to be HIV-1 seropositive, antibodies to HIV-1 were detected in all urine by
Calypte's urine-based HIV-1 screening test.
Center for AIDS Prevention Studies and the University of California at San
Francisco. Researchers at the Center for AIDS Prevention Studies and the
University of California at San Francisco ("UCSF") carried out a large
validation study of the diagnostic accuracy of the urine-based HIV-1 screening
test for HIV envelope antibodies in urine. Matched blood and urine specimens
collected from 586 recovering alcoholics were tested by two independent
laboratories blinded to results at the other site. The matched urine samples
were tested by
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and confirmed by a urine-based western blot. The urine-based HIV-1 screening
test when confirmed by a urine western blot led to a correct diagnosis in all
samples. The authors reported that the urine EIA demonstrated a specificity of
100% and a sensitivity also estimated to be 100%.
Multicenter Trial. In clinical trials for the urine-based HIV-1 screening test
conducted at five geographic locations, approximately 11,000 matched blood and
urine specimens were tested. Assay specificity was assessed by testing paired
urine and serum samples from a combined subset of 7,074 low risk individuals.
Specificity of the screening test (prior to confirmation with western blot) was
determined to be 99.18%. In diagnosis of AIDS, sensitivity was estimated to be
99.33%. Paired urine and serum specimens from asymptomatic and symptomatic HIV-1
infected subjects and subjects at high risk for HIV-1 infection were also
tested. Urine correlation with blood for these 614 samples was 98.20%.
Japanese Ministry of Health Study. An independent study of the performance of
the urine-based HIV-1 screening test was carried out by the Japanese Ministry of
Health and reported at the 1994 International AIDS Conference in Yokohama,
Japan. Paired urine and serum samples from 200 HIV-1 infected subjects and 700
healthy subjects in a low risk population were tested using the urine-based
HIV-1 screening test, confirmed by urine western blot and compared with serum
EIA and serum western blot results. There was agreement between all 200 urine
positives and serum positives and agreement between all 700 urine negative and
serum negative results. Urine correlation with serum was 100% for all urine
samples tested.
INVESTMENT IN PEPGEN
In October 1995 Calypte purchased a 49% equity interest in Pepgen, a therapeutic
research and drug development company with two lead compounds in preclinical
evaluation. The first compound is an interferon product, called interferon-tau,
which in early animal trials has shown to be effective both as an anti-viral and
anti-tumor agent with less toxicity than other interferons. Pepgen has planned
further preclinical studies and if the preclinical studies are successful,
Pepgen anticipates seeking approval from the FDA to commence human clinical
trials. Pepgen's second lead compound is a growth factor called uteroferrin.
This compound has stimulatory effects on the growth and differentiation of blood
cells. Uteroferrin is a glycoprotein that is secreted by the uterine
endometrioepithelium. Based on animal studies, the stimulation of hematopoietic
cells by uteroferrin appears to act at an earlier stage of stem cell development
than other known hematopoietic growth factors.
Pepgen holds an exclusive worldwide license to both of these compounds from the
University of Florida. The Company purchased its equity position in Pepgen for
$2.5 million, comprised of $1.0 million paid at closing, $1.0 million payable to
Pepgen pursuant to a promissory note and options to purchase the Company's
Common Stock valued at $500,000. The $1.0 million promissory note is due and
payable upon the earlier of (i) October 1996 or (ii) 60 days following either
FDA approval of the Company's urine-based HIV-1 screening test or the closing of
this Offering. The options were granted to Pepgen shareholders for the purchase
of an aggregate of 475,000 shares of the Company's Common Stock at a price of
$7.50 per share, of which 100,000 are immediately exercisable and the remaining
375,000 are exercisable upon attainment of certain milestones. The options
expire at the earlier of September 2005 or three years after becoming
exercisable. In addition, Calypte has the right of first negotiation to purchase
the remaining 51% of Pepgen at fair market value, and the Company is entitled to
elect two of the seven Board members of Pepgen. Other than the payment of the
$1.0 million promissory note, Calypte does not have any ongoing commitments to
fund Pepgen. See "Certain Transactions" and "Use of Proceeds."
PATENTS, PROPRIETARY RIGHTS AND LICENSES
The Company believes that its future success will depend in large part on its
ability to protect its patents and proprietary rights. Accordingly, the
Company's ability to compete effectively will depend in part on its ability to
develop and maintain proprietary aspects of its technology. The Company has one
U.S. patent, four pending U.S. patent applications, and thirteen foreign
patents, and sixteen pending foreign patent applications. In addition, the
Company has the right to utilize certain patents and proprietary rights under
licensing agreements with NYU, Cambridge Biotech, Repligen, Texas A&M University
System and Stanford
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University. These license arrangements secure intellectual property rights for
the manufacture and sale of the Company's products.
The Company has licensed from NYU, on an exclusive basis, a U.S. patent for the
detection of antibodies to HIV in urine. The rights under the license extend
until the expiration of the U.S. patent in 2009 provided the Company makes
certain payments. The Company has the right to make, use, sell and sublicense
products utilizing the technology described in the patent and is obligated to
make certain fixed and royalty payments to NYU to maintain exclusivity of the
license. In connection with the NYU license, the Company also funded research at
NYU, and expects to continue to do so through 1999. The Company has exclusive
worldwide license to NYU inventions that arise from the research funded by the
Company.
The Company has sublicensed from Cambridge Biotech proprietary technology
related to the HIV envelope glycoprotein. The Company has a non-exclusive
worldwide sublicense to make, have made, use and sell products that relate to
the licensed technology. The Company is required to pay Cambridge Biotech
royalties on products incorporating the licensed technology. The license extends
until the expiration of the licensed patents in 2005, although the Company can
terminate the agreement at any time upon 30-day's written notice.
The Company has been granted a non-exclusive license from Texas A&M University
to make, have made, use and sell products based on its proprietary recombinant
expression systems. The Company is required to pay certain fixed and royalty
payments to Texas A&M University on net sales varying with the content of Texas
A&M's technology in the Company's products.
The Company licensed from Repligen HIV-1 gp160 recombinant virus seed stock. The
Company has been granted (i) an exclusive license to make, have made, use and
sell products incorporating this material for diagnostic purposes, and (ii)
non-exclusive license to make, have made, use and sell the gp160 seed stock for
research purposes. For seven years beginning on the date the Company first
realizes net sales from products incorporating gp160, the Company must pay to
Repligen certain royalties on net sales derived such from products and certain
royalties on net sublicensing revenue derived from sales of products
incorporating. In addition, the Company is required to pay certain fixed and
royalty payments for a non-transferrable, non-exclusive license from Stanford
University to a patent relating to recombinant DNA processes.
The HIV testing industry has been characterized by extensive litigation
regarding patents and other intellectual property rights. Litigation or
interference proceedings could result in significant diversion of efforts by the
Company's management and technical personnel. There are a number of filed and
issued patents involved with the detection of HIV antibodies. One such patent is
currently owned by Chiron Corporation. While the Company, based on the opinion
of its patent counsel, believes that its urine-based HIV-1 screening test does
not infringe the Chiron patent, there can be no assurances that Chiron will not
assert such claims against the Company. Patent litigation can be costly and
protracted. The expense of litigating a claim against the Company for patent
infringement could have a material adverse effect on the Company's business,
financial condition and results of operations. In the event that the Company was
found to be infringing a validly issued patent, and the Company could not obtain
a license to such patent on reasonable terms, the Company could be forced to pay
damages, obtain a license to such patent at a significantly higher rate or,
possibly, remove its urine-based HIV-1 screening test from the market. Such an
event would have a material adverse effect on the Company's business, financial
condition and results of operations.
There can be no assurance that the Company will not in the future become subject
to patent infringement claims and litigation or interference proceedings
declared by the USPTO to determine the priority of inventions.
Although patent and intellectual property disputes in the medical diagnostic
area have often been settled through licensing or similar arrangements, costs
associated with such arrangements may be substantial and could include ongoing
royalties. Furthermore, there can be no assurance that necessary licenses would
be available to the Company on satisfactory terms if at all. Adverse
determinations in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent the Company from manufacturing and selling its
products, which would have a material adverse effect on the Company's business,
financial condition and
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results of operations. There can be no assurance that the Company will be able
to maintain exclusivity under or maintain its current license agreements.
The Company relies on trade secrets and proprietary know-how, which it seeks to
protect, in part, through appropriate confidentiality and proprietary
information agreements. These agreements generally provide that all confidential
information developed or made known to the individual by the Company during the
course of the individual's relationship with the Company is to be kept
confidential and not disclosed to third parties, except in specific
circumstances. The agreements generally provide that all inventions conceived by
the individual in the course of rendering services to the Company shall be the
exclusive property of the Company; however, certain of the Company's agreement
with consultants, who typically are employed on a full-time basis by academic
institutions or hospitals, do not contain assignment of invention provisions.
There can be no assurance that proprietary information or confidentiality
agreements with employees, consultants and others will not be breached, that the
Company would have adequate remedies for any breach, or that the Company's trade
secrets will not otherwise become known to or independently developed by
competitors.
GOVERNMENT REGULATION
Overview
The Company's products are subject to extensive regulation by the FDA and, to
varying degrees, by state and foreign regulatory agencies. The Company's
products are regulated by the FDA under the Federal Food, Drug, and Cosmetic Act
(the "Act"), as amended by the Medical Device Amendments of 1976 and the Safe
Medical Devices Act of 1990, among other laws. Under the Act, the FDA regulates
the preclinical and clinical testing, manufacturing, labeling, distribution,
sale and promotion of medical devices in the U.S. The FDA prohibits a device,
whether or not cleared under a 510(k) premarket notification or approved under a
PMA, from being marketed for unapproved clinical uses. If the FDA believes that
a company is not in compliance with the regulations, it can institute
proceedings to detain or seize a product, issue a recall, prohibit marketing and
sales of the Company's products and assess civil and criminal penalties against
the Company, its officers or its employees. Furthermore, the Company plans to
sell products in certain foreign countries of which impose local regulatory
requirements. The preparation of required applications and subsequent FDA and
foreign regulatory approval process is expensive, lengthy and uncertain. Failure
to comply with FDA and similar foreign requirements could result in civil
monetary penalties or criminal sanctions, restrictions on or injunctions against
marketing of the Company's products. Additional enforcement actions may
potentially include seizure or recall of the Company's products, and other
regulatory action. There can be no assurance that the Company will be able to
obtain necessary regulatory approvals or clearances in a timely manner or at
all, and delays in receipt of or failure to receive such approvals or
clearances, the loss of previously received approvals or clearances, or failure
to comply with existing or future regulatory requirements would have a material
adverse effect on the Company's business, financial condition and results of
operations.
HIV-1 Screening and Diagnostic Tests
The Company's HIV-1 screening test is regulated by the FDA Center for Biologics
Evaluation and Research. When the test was submitted to the FDA in September
1992, the FDA required a PLA and an ELA for the Company's Berkeley, California
manufacturing facility.
OTC Home Urine Collection Kit
The Company intends to file a PMA with the FDA for the HIV-1 home urine
collection kit which would allow consumers, in the privacy of their homes to
take a urine sample, mail it to Calypte Biomedical Laboratories for analysis and
then anonymously obtain results and professional counseling by telephone. The
Company believes that a submission for FDA approval of this product must set
forth the Company's plans for the reporting of results to the consumer and
consumer counseling services. In addition, the PMA will need to include the
results of extensive clinical studies and manufacturing information and may be
reviewed by a panel of experts outside the FDA. Clinical studies need to be
conducted in accordance with FDA requirements, and
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the failure to strictly comply with such requirements could result in the FDA's
refusal to accept the data or in other sanctions.
There can be no assurance that the FDA will approve the Company's HIV-1 home
urine collection kit for OTC distribution and sale. Furthermore, there can be no
assurance that the FDA will not request additional data or require that the
Company conduct further clinical studies causing the Company to incur additional
costs and delay. In addition, there can be no assurance that the FDA will not
limit the intended use of the Company's products as a condition of PMA approval.
Failure to receive or delays in receipt of FDA approvals, or any FDA limitations
on the intended use of the Company's products, would have a material adverse
effect on the Company's business, financial condition and results of operations.
Manufacturing Facilities
The FDA requires the Company's products to be manufactured in compliance with
cGMP regulations. In addition, the Company is subject to certain additional
manufacturing regulations imposed by the State of California. These regulations
require that the Company manufacture its products and maintain related
documentation for testing and control activities. The Company's facilities and
manufacturing processes have been periodically inspected by the State of
California and other agencies and remain subject to audit from time to time. The
Company believes that it is in substantial compliance with all applicable
federal and state regulations. Nevertheless, there can be no assurance its
manufacturing facility will satisfy cGMP or California manufacturing
requirements. Enforcement of the cGMP regulations has increased significantly in
the last several years, and the FDA has publicly stated that compliance will be
more strictly enforced. In the event that the FDA determines the Company to be
out of compliance with its regulations and to the extent that the Company is
unable to convince the FDA of the adequacy of its compliance, the FDA has the
power to assert penalties, including injunctions or temporary suspension of
shipment until compliance is achieved. In addition, FDA will not approve ELA or
PMA if the facility is found in noncompliance with cGMPs. Such penalties could
have a material adverse effect on the Company's business, financial condition
and results of operations.
In addition, the manufacture, sale or use of the Company's products are subject
to regulation by other federal entities, such as the Occupational Safety and
Health Agency, the Environmental Protection Agency, and by various state
agencies, including the California Environmental Protection Agency. Federal and
state regulations regarding the manufacture, sale or use of the Company's
products are subject to future change, and these changes could have a material
adverse effect on the Company's business, financial condition and results of
operations.
International
Distribution of the Company's products outside the United States is also subject
to regulatory requirements that vary from country to country. In a number of
foreign countries, FDA approval is required prior to approval in that country.
The export by the Company of certain of its products which have not yet been
approved for domestic commercial distribution may be subject to FDA export
restrictions. To date, the Company has not received approval for the sale of its
product in any foreign country. Failure to obtain necessary regulatory approvals
or failure to comply with regulatory requirements would have a material adverse
effect on the Company's business, financial condition and results of operations.
Calypte Biomedical Laboratories
Any of Calypte's laboratory customers, using the Company's diagnostic devices
for clinical use in the United States, and the Company itself when it
establishes its own laboratory, will be regulated under CLIA. CLIA is intended
to ensure the quality and reliability of all medical testing in laboratories in
the United States by requiring that any health care facility in which testing is
performed meet specified standards in the areas of personnel qualification,
administration, participation in proficiency testing, patient test management,
quality control, quality assurance and inspections. The regulations have
established three levels of regulatory control based on complexity: "waived,"
"moderately complex," and "highly complex." Calypte believes that its test will
be categorized as highly complex tests for clinical use in the United States.
Laboratories that perform
31
<PAGE> 34
either moderately or highly complex tests must meet quality control and
personnel standards. Personnel requirements for highly complex tests are more
rigorous than those for moderately complex tests, requiring that personnel have
more education and experience than personnel conducting moderately complex
tests. Under the CLIA regulations, all laboratories performing high or
moderately complex tests are required to obtain either a registration
certificate or certifications of accreditation from the Health Care Financial
Administration. There can be no assurance that the CLIA regulations and future
administrative interpretations of CLIA will not have an adverse impact on the
potential market for the Company's products.
Therapeutic Products
If the Company exercises its rights to acquire a controlling interest in or
substantially all of Pepgen, Calypte will be required to obtain FDA approval for
Pepgen's therapeutic products, a process which has historically been
substantially more costly and time consuming than for diagnostic products. To
obtain such approval, the Company must conduct preclinical safety and toxicology
studies in the laboratory and Phase I, II, and III clinical studies under FDA
approved protocols. The results of the pre-clinical and clinical testing for a
new drug, together with detailed manufacturing and other information, would then
be submitted to the FDA in the form of a new drug application. In responding to
a new drug application, the FDA may refuse to accept the application for filing,
request additional information or deny the application if the FDA determines
that the application does not satisfy its regulatory approval criteria. The
process of completing clinical testing usually takes a number of years and
requires the expenditure of substantial resources. The length of the FDA review
period varies widely depending upon the amount and quality of the data in the
application and the nature and indications of the proposed product. In addition,
the FDA may require post-marketing reporting and may require surveillance
programs to monitor the usage and side effects of the drug product after product
approval. The Company has no current plans to acquire the remaining equity
ownership in Pepgen or to develop Pepgen therapeutic products.
COMPETITION
Competition in the in vitro diagnostic market is intense and expected to
increase. Within the United States, the Company will face competition from a
number of well-established manufacturers of blood-based EIAs, plus at least one
system for the detection of HIV antibodies using oral fluid samples. In
addition, the Company may face intense competition from competitors with
significantly greater financial, marketing and distribution resources than the
Company, several of whom have already submitted applications to FDA for approval
of their OTC products.
The suppliers of blood-based HIV tests in the United States include Abbott
Laboratories ("Abbott"), Organon-Teknika Corporation ("Organon-Teknika"), Sanofi
Diagnostic Pasteur ("Sanofi"), Ortho Diagnostics ("Ortho") and Cambridge
Biotech. All of these companies have many years of HIV market experience, and
they typically offer a number of different testing products. Abbott, Sanofi and
Ortho currently sell FDA-licensed blood-based HIV-1/HIV-2 combination tests on
the market in the United States, and other companies may be developing
HIV-1/HIV-2 products.
The Company believes that HIV screening tests which permit the use of oral fluid
may offer significant competition to the Company's urine-based HIV-1 screening
test. The OraSure(TM) collection device manufactured by Epitope, Inc.
("Epitope") used in conjunction with an HIV-1 EIA manufactured by Organon-
Teknika received FDA approval for marketing in the United States in December
1994. In June 1996, Epitope received approval from the FDA for a western blot
oral-fluid confirmatory test.
The Company is not aware of any competitors which have submitted urine-based HIV
screening tests to the FDA, but there can be no assurance that such tests will
not be submitted in the future for approval by the FDA. The Company is aware of
only one other manufacturer, Murex Corporation ("Murex"), which has publicly
announced urine capability for an HIV test. Murex manufactures a number of HIV
assays in microtiter format, none of which have been submitted to the FDA for
review. One such microtiter assay, "gacelisa," is intended for use on saliva and
urine samples but is marketed only outside of the U.S. primarily as a research
assay. Murex markets one HIV product in the U.S., the SUDS(TM) rapid test, which
is intended for use on serum and plasma only. Although urine capability for this
test has been reported in scientific literature,
32
<PAGE> 35
the Company is not aware of any applications for expanded sampling claims for
this assay. In addition, the SUDS(TM) assay format is not conducive to
high-volume testing.
Essentially all of the Company's competitors actively market their diagnostic
products outside of the U.S. In addition, outside of the U.S., where the
regulatory requirements for HIV screening tests are less onerous than those of
the FDA, a much wider range of competitors can be found. Manufacturers from
Japan, Canada, Europe, and Australia offer a number of HIV screening tests in
those markets including HIV-1/HIV-2 tests, rapid tests and other non-EIA format
tests, which are not approved for sale in the U.S. market. There can be no
assurances that the Company's products will compete effectively against these
products in foreign markets, or that these competing products will not achieve
FDA approval.
Three companies have submitted applications to the FDA for OTC HIV blood
testing: Direct Access Diagnostics, a subsidiary of Johnson & Johnson, Home
Access Health Corporation, and ChemTrak Incorporated. The FDA has approved the
home collection kit for HIV blood testing developed by Direct Access
Diagnostics. The Company believes that an OTC HIV testing system which does not
require consumers to collect their own blood may compete favorably against DBS
systems. However, there can be no assurances that the earlier market entry of
these competitors, their substantial promotional and distribution resources, and
future introduction of HIV-1/HIV-2 products will not prevent the Company from
competing favorably. The Company's inability to compete favorably with respect
to any of these factors could have a material adverse effect on its business,
financial condition, and results of operations.
If the Company is successful in developing and introducing urine-based Chlamydia
or other STD tests, it will face competition from established diagnostic testing
companies with greater financial, marketing and distribution resources than the
Company. Some of these companies are marketing established tests in widely-used
formats. In addition, Abbott Laboratories has applied for FDA approval for a
urine-based diagnostic test for chlamydia antigen.
EMPLOYEES
As of March 31, 1996, the Company had 59 full time employees, 13 of whom were
engaged in or directly supported the Company's research and development
activities, 29 of whom were in manufacturing, facilities and quality assurance,
three of whom were in marketing and sales and 14 of whom were in administration.
The Company's employees are not represented by a union or collective bargaining
entity. The Company believes its relations with its employees are good.
FACILITIES
The Company currently leases approximately 20,000 square feet of office,
research and manufacturing space in Berkeley, California. The existing lease
expires in June 1997, with an option to renew the lease for two one-year terms.
The Company also leases approximately 22,000 square feet of office and
manufacturing space in Alameda, California. The existing lease expires in
November, 1998, with an option to renew the lease for two successive five-year
periods. The Company believes that existing facilities are adequate to support
the Company's activities for the foreseeable future.
LEGAL PROCEEDINGS
An action was brought against the Company in California Superior Court by a
former employee, alleging, in connection with the Company's termination of the
employee, gender and age discrimination, wrongful termination, breach of
contract and breach of implied covenant of good faith and fair dealing. This
former employee has requested in her complaint compensatory and punitive damages
along with attorneys fees and costs. The Company believes that the claims are
without merit and plans to vigorously defend against them.
SCIENTIFIC ADVISORY BOARD
The Scientific Advisory Board is composed of certain of the Company's scientists
and other leading scientists who have been actively involved in pioneering HIV
research. Scientific Advisory Board members meet as a
33
<PAGE> 36
group and individually with management and key scientific employees of the
Company on a regular basis. Scientific Advisory Board members have taken an
active role in helping the Company identify scientific and product development
opportunities and recruiting and evaluating the Company's scientific staff. The
Company has granted options to acquire its Common Stock to members of the
Scientific Advisory Board.
The members of the Scientific Advisory Board and their experience are set forth
below:
ABUL K. ABBAS, M.D., Professor, Department of Pathology, Harvard Medical School.
Dr. Abul Abbas is an expert in the cellular interactions and cytokine regulation
of the immune response. Professor Abbas received his M.D. in India in 1968 and
interned at Harvard Medical School in 1970. He has held the position of
Professor of Pathology since 1991. Professor Abbas has also received the
Parke-Davis Award for Experimental Pathology (1987).
ALVIN FRIEDMAN-KIEN, M.D., Professor, New York University Medical Center, New
York. Since 1994, Dr. Friedman-Kien has been a Professor of Microbiology and
Dermatology at New York University Medical Center and Bellevue Hospital. Dr.
Friedman-Kien is a clinician and researcher with expertise in the field of AIDS
and AIDS related opportunistic infections. In particular, Professor
Friedman-Kien is an expert in the etiological relationship between HIV and other
human viruses. The detection of antibodies to HIV in urine was first reported by
Dr. Friedman-Kien. Dr. Friedman-Kien graduated in 1956 with a B.A. degree from
Brown University and received an M.D. degree from Yale University Medical School
in 1960.
TOBY D. GOTTFRIED, PH.D. is the Company's Director of Research and Development.
See "Management -- Directors and Executive Officers."
HOWARD JOHNSON, PH.D., Graduate Research Professor, Department of Microbiology
and Cell Science at the University of Florida in Gainesville. From 1985 to 1988
he was Professor in the Department of Comparative and Experimental Pathology at
the University of Florida. Prior to this, Dr. Johnson was also on the faculty of
the University of Texas. He was also Founder and President of PepTech, Inc., a
subsidiary of Pepgen, and holds the patent on arginine vasopressin-binding
antihypertensive peptide. He is currently a member of a National Advisory
Council for the National Institutes of Health. Dr. Johnson received his B.S. and
Ph.D. degrees from The Ohio State University.
NORMAN KLINMAN, M.D., PH.D., Member, Department of Immunology, The Scripps
Research Institute, La Jolla, California. Dr. Klinman received his M.D. in 1962
and Ph.D. in Microbiology in 1965 from the University of Pennsylvania. He served
on the faculty of the Department of Pathology and Microbiology at the University
of Pennsylvania for 10 years before accepting his current position in 1978 in
the Department of Immunology at Scripps.
DANIEL LANDERS, M.D., Director for the Division of Reproductive and Infectious
Diseases and Immunology, Department of Obstetrics, Gynecology & Reproductive
Sciences, Magee-Womens Hospital at the University of Pittsburgh. From 1992 to
1995, Dr. Landers was Associate Professor for the Department of Obstetrics,
Gynecology and Reproductive Sciences at UCSF. He is a well-known expert in
sexually transmitted diseases in women, and the recipient of numerous awards,
including the Susman Memorial Award for the Infectious Diseases Society of
America, Young Investigator Award for Infectious Disease Society for OB/GYN, an
NIH Physician-Scientist Award, and the Pediatric AIDS Foundation Scholar Award.
He received his M.D. in 1980 at UCSF.
LUC MONTAGNIER, M.D., Professor, Pasteur Institute, Paris, France. Professor
Montagnier began his career as a researcher at the Centre National de la
Recherche Scientifique. In 1972, he joined the Pasteur Institute and formed the
Division of Viral Oncology. In 1983, he discovered the HIV virus and showed its
etiologic role in AIDS. In 1985, his research team isolated the second human
AIDS virus (HIV-2) from West African patients. Among the numerous honors and
prizes received by Professor Montagnier are the Rosen Price (1971), the Gallien
Prize (1985), the Lasker Prize (1986), the Gairdner Price (1987), the Japan
Prize (1988), and the Amsterdam Prize (1994). He is also a Comandeur de l'Ordre
National merite and is a Director of the French National Center of Scientific
Research.
HOWARD B. URNOVITZ, PH.D. is the Company's Chief Science Officer and a Director.
See "Management -- Directors and Executive Officers."
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<PAGE> 37
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the executive
officers and directors of the Company as of May 15, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- ----------------------------------------------
<S> <C> <C>
William A. Boeger (1)(2)....... 46 Chairman of the Board of Directors
John P. Davis.................. 54 President, Chief Executive Officer and Member
of the Board of Directors
Howard B. Urnovitz, Ph.D....... 42 Chief Science Officer and Member of the Board
of Directors
John J. DiPietro............... 38 Vice President of Finance, Chief Financial
Officer and Secretary
Toby Gottfried, Ph.D........... 57 Director of Research and Development
Richard Van Maanen............. 36 Director of Marketing, Sales and Business
Development
Jeffrey Lang................... 45 Director of Operations
Cynthia Green.................. 49 Director of Regulatory Affairs and Quality
Assurance and Quality Control
Kuo-Yu (Frank) Chiang.......... 44 Member of the Board of Directors
David Collins (1).............. 62 Member of the Board of Directors
Julius R. Krevans, M.D. (2).... 71 Member of the Board of Directors
Mark Novitch, M.D. (1)......... 64 Member of the Board of Directors
Roger Quy, Ph.D. (2)........... 45 Member of the Board of Directors
Hideji Nonomura................ 49 Member of the Board of Directors
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
WILLIAM A. BOEGER has served as the Company's Chairman of the Board since
January 1994. From January 1994 until September 1995, Mr. Boeger served as the
Company's Chairman, President and Chief Executive Officer. Mr. Boeger has been a
Director of the Company since 1991. He is a founder and Managing General Partner
of Quest Ventures, a venture capital partnership founded in August 1985. Prior
to that he was a General Partner of Continental Capital Ventures, a venture
capital partnership. Before entering the venture capital field, he worked at
Harvard Medical School and Peter Bent Brigham Hospital and served on the faculty
of the Amos Tuck Business School at Dartmouth College. Mr. Boeger also serves as
Chief Executive Officer and Chief Financial Officer of Pepgen Corporation, the
49% owned therapeutic subsidiary of Calypte. He also serves on the Board of
Directors of IRIDEX Corporation and several private life sciences companies and
non-profit corporations. Mr. Boeger received his M.B.A. from the Harvard
Business School and his B.S. from Williams College.
JOHN P. DAVIS has served as the Company's President and Chief Executive Officer
since September 1995. He joined the Company in May 1995 as President and Chief
Operating Officer. Prior to joining the Company, from 1984 until 1995, Mr. Davis
was co-founder, President and, later, Chief Executive Officer of Dianon Systems,
Inc., a medical laboratory company specializing in oncology, urology, and
anatomic pathology testing services and information systems. From 1981 until
1984, Mr. Davis was Division President of API, a diagnostic products division of
American Home Products Corporation. Mr. Davis was employed from 1966 until 1981
by Abbott Laboratories, a multinational health care corporation company, where
he held senior management positions in both the Ross Laboratories and the
Diagnostics Products Divisions, most recently as Division Vice President and
General Manager of the Diagnostic Products Business Unit. Mr. Davis also serves
as a director of Pepgen and is a member of the board of directors of Athena
Neuroscience Inc. He is a board
35
<PAGE> 38
member and Vice Chairman of the Board of Directors of Dianon Systems Inc. Mr.
Davis received a B.S. from The Ohio State University.
HOWARD B. URNOVITZ, PH.D. is the founder of the Company and serves as Chief
Science Officer. Prior to founding the Company in 1988, Dr. Urnovitz was a
Senior Scientist at the Institute of Cancer Research in San Francisco from 1985
to 1987. He was Director of Molecular and Cellular Engineering at Xoma
Corporation, a biotechnology corporation, from 1983 to 1985. Prior to this, he
was Director of the Hybridoma Laboratory at the University of Iowa. Dr. Urnovitz
received a B.S. in Microbiology and a Ph.D. in Microbiology from the University
of Michigan, and completed a post-doctoral study at Washington University.
JOHN J. DIPIETRO has served as the Company's Vice President of Finance, Chief
Financial Officer and Secretary since October 1995. Prior to joining the
Company, he was Vice President of Finance, Chief Financial Officer and Secretary
of Meris Laboratories, a full service clinical laboratory, from 1991 until 1995.
While at Meris Laboratories, Mr. DiPietro, inter alia, was a respondent in an
SEC administrative proceeding (No. 3-8484), dated September 26, 1994 in which,
without admitting or denying the SEC's findings, Mr. DiPietro consented to the
entry of an order that Mr. DiPietro cease and desist from committing or causing
any violation, and any future violations of Sections 17(a)(2) and (3) of the
Securities Act, Section 13(a) of the Exchange Act and Rules 126-20, 13a-1, and
13a-13 thereunder. From 1980 until 1983 and from 1986 until 1991, Mr. DiPietro
was a Senior Manager at Price Waterhouse. Mr. DiPietro served as Credit Manager
for Motorola, Inc., an electronics company, from 1983 until 1986. He is a
Certified Public Accountant and received his M.B.A. from the University of
Chicago, Graduate School of Business and a B.S. in accounting from Lehigh
University.
TOBY GOTTFRIED, PH.D. has served as Director of Research and Development since
joining the Company in 1988. From 1983 until 1988 she was a founding Senior
Scientist of Carcinex Corporation, a cancer therapeutic company. From 1978 until
1980, Dr. Gottfried was a scientist at the Hepatitis Research Laboratory of the
University of California, San Francisco Medical Center. Dr. Gottfried received
her Ph.D. in Biochemistry from the University of Pennsylvania and her B.S. from
Cornell University.
RICHARD VAN MAANEN has served as Director of Marketing, Sales and Business
Development since March 1993. Prior to joining Calypte, Mr. Van Maanen held
several positions from 1987 until 1993 at ADI Diagnostics Inc., a medical
manufacturing company, including Director of Sales and Marketing, Marketing
Manager, and Canadian Business Manager. From 1983 until 1987 he held sales and
marketing positions with the Diagnostics Division of Abbott Laboratories and
from 1981 until 1983 he was with Millipore Corporation, a filtration products
company. Mr. Van Maanen received a B.S. in Biology from the University of
Guelph, Ontario.
JEFFREY LANG has served as Director of Operations since June 1993. From January
1992 until May 1993 he was Director of Operations at Varian Associates, a
medical products company, supporting medical device operations. Prior to that,
from October 1983 until December 1991 Mr. Lang held several positions with Airco
Coating Technology, an engineering and glass coating company, including Vice
President of Manufacturing and Engineering, Director of Manufacturing and
Engineering, and Operations Manager. From February 1973 until October 1983, he
held several positions with Miles Laboratories, a pharmaceutical company,
including Production Manager, Senior Manufacturing Engineer, and Production
Supervisor. Mr. Lang received his B.S. in Physics from California State
University, Hayward.
CYNTHIA GREEN has served as Director of Regulatory Affairs, Quality Assurance
and Quality Control since June 1992. From July 1990 until May 1992, she was
Manager of Regulatory and Quality Assurance at CellPro Inc., a biotechnology
company. Prior to that, from March 1983 until July 1990, Ms. Green worked at
Genetic Systems, a manufacturer of HIV and hepatitis diagnostic products, as the
Quality Assurance and Quality Control Manager. Ms. Green received a B.S. in
Bacteriology and Public Health from Washington State University.
FRANK CHIANG has served on the Company's Board of Directors since March 1992.
From 1972 to the present he has been employed by the Ta Chiang Corporation,
Ltd., a Taiwanese holding corporation, where he has served in a number of
executive capacities including his most recent position as President. Mr. Chiang
also
36
<PAGE> 39
serves on the Board of Directors of the G.C.H. Company, the Ta Security Limited
Company, and the Fidelity Venture Capital Corporation.
DAVID COLLINS has served on the Company's Board of Directors since December
1995. From October 1994 to the present, Mr. Collins has served as a consultant
in the health care industry. From September 1989 until September 1994 he served
as Executive Vice President with Schering-Plough Corporation, a medical products
company, and President of the HealthCare Products division, responsible for all
OTC and consumer health care products. From February 1988 to August 1989, he was
a founding partner of Galen Partners, a venture capital firm. From July 1962 to
February 1988, he held several positions at Johnson & Johnson, including Vice
Chairman Board of Directors for Public Affairs & Planning and Vice Chairman
Executive Committee & Chairman Consumer Sector. He is also a member of the Board
of Directors of Penederm, Inc., Lander, Inc., and Claneil Enterprises, Inc., a
private company. Mr. Collins received his L.L.B. at Harvard Law School and his
B.A. at the University of Notre Dame.
JULIUS KREVANS, M.D. has served on the Company's Board of Directors since March
1995. Dr. Krevans has been Chancellor Emeritus and Director of International
Medical Care at University of California at San Francisco since 1993. From 1982
until 1993, Dr. Krevans served as Chancellor at UCSF, and was Dean of the School
of Medicine at UCSF from 1971 until 1982. Prior to this, Dr. Krevans served as
Dean for Academic Affairs at The Johns Hopkins University School of Medicine
where he also served on the faculty for 18 years and was Professor of Medicine
from 1968 until 1971. He is also a director of Neoprobe. Dr. Krevans served as a
director of Parnassus Pharmaceuticals Incorporated, which was liquidated under
Chapter 7 of the Federal Bankruptcy Code in 1995. Dr. Krevans received his M.D.
from New York University, College of Medicine and completed a residency in
Medicine at The Johns Hopkins University School of Medicine.
MARK NOVITCH, M.D. has served on the Company's Board of Directors since
September 1995. Dr. Novitch has been a Professor of Health Care Sciences at
George Washington University since October 1994. From 1993 until October 1994,
Dr. Novitch was a private consultant in the pharmaceutical industry. From 1985
until 1993, Dr. Novitch served in senior executive positions with the Upjohn
Company, a medical products company, including Vice Chairman of the Board of
Directors, Corporate Executive Vice President, Corporate Senior Vice President
for Scientific Administration and Corporate Vice President. Prior to this, for
14 years, Dr. Novitch served with the FDA where from 1983 until 1984 he was
Acting Commissioner. For seven years, Dr. Novitch was on the faculty at Harvard
Medical School. He is also a member of the Board of Directors of Osiris
Therapeutics, Inc., Neurogen Corporation, Guidant Corporation and Alteon, Inc.
Dr. Novitch received his A.B. from Yale University, and his M.D. from the New
York Medical College.
ROGER QUY, PH.D. has served on the Company's Board of Directors since November
1991. Dr. Quy has been general partner of Technology Partners, a venture capital
firm focused on early stage companies since 1989. From 1982 to 1989, Dr. Quy
held several management positions with Hewlett-Packard Corporation including
member of Directors Staff for Hewlett-Packard Labs and Research and Development
for HP Labs Europe. He serves as a Chairman or a Director of several early stage
medical companies. Dr. Quy received an M.B.A. in finance from the Haas School of
Business, University of California at Berkeley, a Ph.D. in Neuroscience and a
B.A. from the University of Keele, England.
HIDEJI NONOMURA has served on the Company's Board of Directors since December
1995. Mr. Nonomura is currently the Director of the Diagnostic Reagents Division
of Otsuka Pharmaceutical Company and has served in this capacity since April
1996. From January 1991 until March 1996, Mr. Nonomura served as the Director of
Overseas Affairs of Otsuka Pharmaceutical Company. Mr. Nonomura holds a B.S. in
Chemistry from Tokyo University of Education.
DIRECTOR COMPENSATION
The Company's directors are reimbursed for their out-of-pocket travel expenses
associated with their attendance at Board meetings. Under the Company's 1995
Director Option Plan, non-employee directors of the Company receive automatic
grants of stock options to purchase shares of Common Stock. In addition, all
outside directors receive $5,000 per year in consideration of their attendance
on the Board of Directors.
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<PAGE> 40
1995 DIRECTOR OPTION PLAN
The Company's Director Option Plan was adopted by the Company's Board of
Directors in December 1995 and stockholders in 1996. Under the Director Option
Plan, the Company reserved 200,000 shares of Common Stock for issuance to the
directors of the Company pursuant to nonstatutory stock options. Under the
Director Option Plan directors who are also not employees or consultants of the
Company automatically receive an option to purchase 12,000 shares of Common
Stock (the "First Option") on the date on which such person first becomes a
director, whether through election by the stockholders of the Company or
appointment by the Board to fill a vacancy. Thereafter, each such person shall
receive an option to acquire 3,000 shares of the Company's Common Stock (the
"Subsequent Option") on each date of the Company's Annual Meeting of
Stockholders where such outside director is reelected. Each option granted under
the Director Option Plan shall be exercisable at 100% of the fair market value
of the Company's Common Stock on the date such option was granted. Twenty-five
percent of the First Option shall vest one year after the date of grant, with
25% vesting each anniversary thereafter. Twelve and one-half percent of the
shares subject to the Subsequent Option shall be exercisable on the first day of
each month following the date of grant. The Plan shall be in effect for a term
of ten years unless sooner terminated under the Director Option Plan.
EXECUTIVE COMPENSATION
The following table sets forth certain compensation awarded or paid by the
Company during the year ended December 31, 1995 to its Chief Executive Officer
and each of the other most highly compensated executive officers of the Company
whose salary and bonus for such fiscal year were in excess of $100,000
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
SECURITIES
UNDERLYING
ANNUAL COMPENSATION OPTIONS
------------------------------------- GRANTED
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER (#)
- ------------------------------------------ -------- ------- ------- ------------
<S> <C> <C> <C> <C>
William A. Boeger, Chief Executive Officer
and Chairman of the Board of
Directors(1)............................ $272,500(2) $ -- $ 7,210(3) 220,000(4)
John P. Davis, President and Chief
Executive Officer(5).................... 126,602 -- 15,819(6) 320,000
Howard B. Urnovitz, Chief Science
Officer................................. 139,691 16,816 -- 180,000
Cynthia Green, Director of Regulatory
Affairs and QA/QC....................... 192,000(7) -- 9,961(3) --
</TABLE>
38
<PAGE> 41
- ---------------
(1) Mr. Boeger served as the Company's Chairman of the Board of Directors, Chief
Executive Officer, and President until May 1995. From May 1995 to September
1995 he served as Chairman of the Board of Directors and Chief Executive
Officer. Since September 1995 he has served as Chairman of the Board of
Directors.
(2) $135,000 was paid to an affiliate of Quest Ventures, a venture capital
partnership of which Mr. Boeger is Managing General Partner, in 1995 for
services rendered by Mr. Boeger in 1994. $118,750 was paid to an affiliate
of Quest Ventures in 1995 for services rendered by Mr. Boeger in 1995.
$18,750 was paid to Pepgen Corporation, a subsidiary of the Company of which
Mr. Boeger is President and Chief Financial Officer, in 1995 for services
rendered by Mr. Boeger in 1995.
(3) Represents reimbursements for living expenses.
(4) Excludes options to purchase 67,303 shares issued to an affiliate of Quest
Ventures.
(5) Mr. Davis joined the Company in May 1995 as its President and Chief
Operating Officer. In September 1995 Mr. Davis was named President and Chief
Executive Officer.
(6) Represents reimbursements for living expenses. Excludes $75,000 which the
Company accrued for reimbursement of moving expenses. Such amount was not
paid in 1995.
(7) Ms. Green is retained by the Company as a consultant.
The following table sets forth information concerning stock options granted to
the Named Executive Officers during the fiscal year ended December 31, 1995.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR(1) ($/SH)(2) DATE 5%($) 10%($)
- ---------------------------- ---------- -------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William A. Boeger........... 220,000(4) 22.2% $0.50 01/25/01 $1,658,926 $2,228,461
John P. Davis............... 320,000(5) 32.2% $0.50 05/31/05 $2,967,478 $4,819,986
Howard B. Urnovitz.......... 180,000(6) 18.1% $0.50 01/25/01 $1,357,303 $1,823,286
Cynthia Green............... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Based on an aggregate of 992,371 options granted under the Company's
Incentive Stock Plan to employees and directors of, and consultants to, the
Company during the year ended December 31, 1995, including the Named
Executive Officers.
(2) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board of
Directors.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant. It is calculated using the public offering price of
$6.00 per share assuming the stock price appreciates from the date of grant
at the indicated annual rate compounded annually for the entire term of the
option and the option is exercised and sold on the last day of its term for
the appreciated stock price. With respect to options granted at fair market
value, no gain to the optionee is possible unless the stock price increases
over the option term.
(4) Options granted become exercisable at the rate of 110,000 of the shares
subject to the option at January 25, 1995 and 8.34% of the remaining 110,000
shares subject to the option each month thereafter for the next 12 months.
The options expire six years from the date of grant, or earlier upon
termination of employment.
39
<PAGE> 42
(5) Options granted become exercisable at the rate of 20% of the shares subject
to the option at May 1, 1996 and at the rate of 1.67% per month thereafter
for the next four years. The options expire ten years from the date of
grant, or earlier upon termination of employment.
(6) Options granted become exercisable at the rate of 25% of the shares subject
to the option at January 25, 1996 and at the rate of 2.08% per month
thereafter for the next three years.
The following table sets forth information concerning option exercises for the
year ended December 31, 1995, with respect to each of the Named Executive
Officers.
AGGREGATED OPTION EXERCISES IN 1995
AND DECEMBER 31, 1995 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISABLE IN-THE-MONEY
OPTIONS OPTIONS AT
SHARES AT DECEMBER 31, 1995 DECEMBER 31, 1995
ACQUIRED ON VALUE (EXERCISABLE/ (EXERCISED/
NAME EXERCISE($) REALIZED($) UNEXERCISABLE) UNEXERCISABLE)(1)
- ------------------------------ ----------- ----------- -------------------- -----------------------
<S> <C> <C> <C> <C>
William A. Boeger............. -- -- 210,831/ 9,169 $ 1,159,571/ $ 50,430
John P. Davis................. -- -- -- / 320,000 $-- / $1,760,000
Howard B. Urnovitz............ -- -- 105,000/ 180,000 $ 606,900/ $ 990,000
Cynthia Green................. -- -- 10,625/ 27,625 $ 58,588/ $ 152,038
</TABLE>
- ---------------
(1) Value realized and value of unexercised in-the-money options is based on a
value of $6.00 per share of the Company's Common Stock, the public offering
price, even though at the December 31, 1995 the fair market value of the
Common Stock was determined by the Board of Directors to be $5.00 per share.
Amounts reflected are based on the assumed value minus the exercise price
multiplied by the number of shares acquired on exercise and do not indicate
that the optionee sold such stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee is responsible for determining salaries, incentives
and other forms of compensation for directors, officers and other employees of
the Company and administers various incentive compensation and benefit plans.
The Compensation Committee consists of Dr. Krevans, Dr. Quy and Mr. Boeger, who
is a non-voting member.
INCENTIVE STOCK PLAN
A total of 2,740,992 shares of Common Stock have been reserved for issuance
under the Company's Incentive Stock Plan (the "Stock Plan"). As of March 31,
1996, 126,524 shares had been issued upon the exercise of stock options granted
under the Stock Plan, 1,292,561 shares were subject to outstanding options and
1,321,907 remained available for future grant. The Stock Plan is administered by
the compensation committee of the board of directors. Under the Stock Plan,
options may be granted to employees, including directors who are employees, and
consultants. Only employees may receive "incentive stock options," which are
intended to qualify for certain tax treatment; nonemployees receive
"nonstatutory stock options," which do not qualify for such treatment. In the
event of a change in control of the Company, including a merger or sale of
substantially all of the Company's assets, outstanding options may be assumed by
any successor corporation or may become exercisable. The exercise price of
incentive stock options under the Stock Plan must at least equal the fair market
value of the Common Stock on the date of grant, while the exercise price of
nonstatutory options must at least equal 85% of such market value. Options
granted under the Stock Plan generally vest on a cumulative monthly basis over
four or five years, and in the case of incentive stock options, must be
exercised within six or ten years. The Board may amend or modify the Stock Plan
at any time. The Stock Plan will terminate in 2001, unless sooner terminated by
the Board.
40
<PAGE> 43
1995 EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "Purchase Plan") was adopted by
the Company's Board of Directors in December 1995 and stockholders in June 1996.
The Purchase Plan is intended to qualify under Section 423 of the Code. The
Company has reserved 300,000 shares of Common Stock for issuance under the
Purchase Plan. Under the Purchase Plan, an eligible employee may purchase shares
of Common Stock from the Company through payroll deductions of up to 10% of his
or her compensation, at a price per share equal to 85% of the lower of (i) the
fair market value of the Company's Common Stock on the first day of an offering
period under the Purchase Plan or (ii) the fair market value of the Common Stock
on the last day of an offering period. Except for the first offering period,
each offering period will last for twenty-four months and will commence the
first day on which the national stock exchanges and The Nasdaq Stock Market are
open for trading, on or after May 1 and November 1 of each year. The first
offering period will begin upon the effective date of this Offering and will end
at the end of the twenty-fourth month after such date. Any employee who is
customarily employed for at least 20 hours per week and more than five months
per calendar year, who has been so employed for at least three consecutive
months on or before the commencement date of an offering period is eligible to
participate in the Purchase Plan.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
The Company has recently reincorporated in Delaware, in part to take advantage
of certain provisions in Delaware's corporate law relating to limitations on
liability of corporate officers and directors. The Company believes that the
reincorporation into Delaware, the provisions of its Certificate of
Incorporation and Bylaws and the separate indemnification agreements outlined
below are necessary to attract and retain qualified persons as directors and
officers.
The Company's Certificate of Incorporation limits the liability of directors to
the maximum extent permitted by Delaware law. Delaware law provides that
directors of a company will not be personally liable for monetary damages for
breach of their fiduciary duties as directors, except for liability (i) for any
breach of their duty of loyalty to the company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments or dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of Delaware General
Corporation Law or (iv) for transactions from which the director derived an
improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify its officers and
directors and may indemnify its employees and other agents to the fullest extent
provided by Delaware law, including those circumstances where indemnification
would otherwise be discretionary under Delaware law. The Company believes that
indemnification under its Bylaws covers at least negligence on the part of
indemnified parties. The Bylaws authorize the use of indemnification agreements
and the Company has entered into such agreements with each of its directors and
executive officers.
The Company has obtained officer and director liability insurance with respect
to liabilities arising out of certain matters, including matters arising under
the Securities Act.
At present, there is no pending litigation or proceeding involving any director
or officer, employee or agent of the Company where indemnification will be
required or permitted. The Company is not aware of any threatened litigation or
proceeding which may result in a claim for such indemnification.
41
<PAGE> 44
CERTAIN TRANSACTIONS
FORMATION OF THE COMPANY AND RELATED TRANSACTIONS
From its inception to June 21, 1996, the Company has issued or sold shares of
Common Stock at prices ranging from $0.20 to $8.10, and Series B, Series C,
Series D and Series E Preferred Stock at prices of $1.86, $3.70, $5.00 and $5.00
to $7.50 per share, respectively, to the following directors, entities
affiliated with directors, and 5% stockholders.
<TABLE>
<CAPTION>
SERIES SERIES SERIES SERIES
NAME COMMON B C D E
- ------------------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Directors
William A. Boeger.............................. -- -- -- -- --
John P. Davis.................................. -- -- -- -- --
Howard B. Urnovitz............................. 139,000 -- -- -- --
David Collins.................................. -- -- -- -- --
Julius R. Krevans.............................. -- -- -- -- 4,000
Mark Novitch................................... -- -- -- -- --
Roger Quy...................................... -- -- -- -- --
Hideji Nonomura................................ -- -- -- -- --
Kuo-Yu (Frank) Chiang.......................... 5,662 -- 556,082 -- --
Entities Affiliated with Directors
Quest Ventures II (1).......................... 29,322 79,680 83,482 14,850 --
Quest Ventures International(1)................ 20,042 54,461 57,059 10,150 --
Otsuka Pharmaceutical Co., Ltd.(2)............. -- 268,282 164,685 260,000 600,000
Technology Partners West Fund IV(3)............ -- -- 270,270 150,000 200,000
Steven F. Urnovitz(4).......................... 1,569 -- -- -- --
Other 5% Stockholders
Suez Technology Fund........................... 30,853 134,141 209,459 50,000 66,500
H&Q HealthCare Investors....................... -- -- -- 200,000 50,400
H&Q Life Sciences Investors.................... -- -- -- 100,000 48,300
Entities Affiliated with MVP Investors,
L.P. ....................................... -- -- 216,217 242,000 --
</TABLE>
- ---------------
(1) William A. Boeger is a founder of the Company and Managing General Partner
of Quest Ventures, an affiliate of these entities.
(2) Hideji Nonomura is the Director of the Diagnostic Reagents Division of
Otsuka Pharmaceutical Co., Ltd.
(3) Roger Quy is a general partner of Technology Partners, an affiliate of
Technology Partners West Fund IV.
(4) Steven F. Urnovitz is the brother of Howard B. Urnovitz.
Upon the completion of this Offering, each outstanding share of Series B, C, D
and E Preferred Stock will be converted into one share of Common Stock.
PEPGEN CORPORATION
In October 1995, Calypte purchased a 49% equity interest in Pepgen Corporation.
Pepgen is a research and development stage company involved in the field of
human therapeutics. Calypte purchased the equity position for a total of
$2,500,000, with $1,000,000 paid in cash at closing, a promissory note in the
amount of $1,000,000 and options to purchase 475,000 shares of Common Stock
valued at $500,000. The note is due and payable the earlier of (i) October 1996
or (ii) 60 days following either the Company's approval by the FDA of its HIV-1
urine assay or the completion of a public offering of securities. In addition to
its 49% ownership, Calypte has the first right of negotiation to purchase the
remaining 51% of Pepgen at fair market value.
42
<PAGE> 45
Calypte is also entitled to elect two of seven members of the Pepgen board of
directors. Other than the second installment of the equity purchase described
above, Calypte does not anticipate that it will use any of the proceeds from
this Offering for Pepgen (see "Use of Proceeds"). Pepgen expects to fund its
product development through loans, grants, collaborations, or equity investment
from corporate partners and governmental agencies. Calypte has no ongoing
obligation to provide Pepgen with any additional funds beyond its original
equity investment. The option grants by the Company in connection with its
purchase of 49% of Pepgen, were granted to the current Pepgen shareholders and
consisted of options to purchase an aggregate of 475,000 shares of Calypte
Common Stock at an exercise price of $7.50 per share. 100,000 of such shares are
exercisable immediately, with the remaining shares subject to exercise upon the
attainment of the following milestones:
<TABLE>
<CAPTION>
MILESTONE CALYPTE SHARES SUBJECT TO ADDITIONAL OPTIONS
- -------------------------------------------------------- --------------------------------------------
<S> <C>
Upon signing of a Research and Development Contract with
proceeds of $1,000,000 or more to Pepgen 100,000 shares
Upon signing of a licensing agreement with proceeds of
$5,000,000 or more to Pepgen 100,000 shares
Upon the filing of an Investigation of New Drug ("IND")
application with the FDA or with similar agencies in
Europe or Japan 25,000 shares
Upon the filing of a New Drug Application ("NDA") with
the USFDA or with similar agencies in Europe or Japan 50,000 shares
Upon first commercial sales of a Pepgen product based on
an NDA 100,000 shares
</TABLE>
EMPLOYMENT ARRANGEMENTS
On April 10, 1995, and amended as of April 22, 1996, the Company entered into an
employment agreement with John P. Davis providing for employment of Mr. Davis as
the Company's President and Chief Executive Officer for a term from May 1, 1995
through December 31, 1996. The agreement is automatically renewable each year
subject to 90 days notice prior to the end of each calender year. Mr. Davis'
salary under this agreement initially $185,000 per year, increased to $195,000
per year upon his appointment as Chief Executive Officer of the Company, which
occurred in September 1995. Mr. Davis is also eligible for a maximum $35,000
bonus in 1996. This agreement also entitles Mr. Davis to moving expenses in
connection with relocating Mr. Davis and his family from Connecticut to
California, which expenses shall not exceed $150,000 and which expenses shall be
increased sufficiently to reimburse Mr. Davis for the taxes owed on such
expenses. In addition, Mr. Davis shall be entitled to receive $1,000 per month
as reimbursement for temporary living expenses for up to nine months. The
agreement also provides that Mr. Davis shall receive a $375 car allowance and
reimbursement for all operating expenses, maintenance, licence fees, and
insurance. Mr. Davis shall also be entitled to vacation and other benefits
provided to the Company's employees generally. Mr. Davis was granted an option
to purchase 320,000 shares of Common Stock at $0.50 per share, which option Mr.
Davis can exercise as to 64,000 of the shares on May 1, 1996, and 5,333 shares
per month thereafter, or in the event of an acquisition of the Company as to all
of the shares subject to the option. In the event Mr. Davis's employment with
the Company is terminated by the Company other than for cause (i) during the
first year of employment, Mr. Davis shall receive his base salary for 12 months;
(ii) during the second year or employment, Mr. Davis shall receive his base
salary for nine months; and (iii) thereafter, he shall receive his base salary
for six months.
On January 10, 1994, the Company entered into an employment agreement with
William Boeger, the Company's Chairman of the Board and a Director, and the
Company's former Chief Executive Officer. This agreement provided that Mr.
Boeger would devote not less than one-half time to the Company, and the Company
would issue to Mr. Boeger or Quest Ventures, an investment partnership with
which Mr. Boeger served as a principal prior to joining the Company, an option
to acquire 154,276 shares of the Company at an exercise price of $0.50 per
share.
On January 25, 1995, the Company entered into an employment agreement with
Howard Urnovitz, a Founder, Director, and Chief Science Officer of the Company.
This agreement provides for annual salary of $140,000
43
<PAGE> 46
plus an annual bonus not to exceed $35,000 per year. Dr. Urnovitz will also be
entitled to vacation and other benefits available to the Company's employees
generally. The agreement provides that on the date the Company's urine-based HIV
test is approved by the FDA, the Company will forgive $42,500 in principal owed
to the Company on the promissory note and reduce the collateral securing the
note by one-half, and, pay Dr. Urnovitz a one-time bonus to defray the federal
tax liability on the deemed income from the forgiveness of the note. When this
agreement was executed, all of Dr. Urnovitz's unvested stock options immediately
vested, and Dr. Urnovitz was granted an option to acquire 180,000 shares of the
Company's Common Stock at $0.50 per share, which option Dr. Urnovitz can
exercise as to 25% of the shares one year after grant and 2.08% of the shares
per month thereafter, subject to ratable 48-month vesting. If the Company
terminates Dr. Urnovitz's employment other than for cause, Dr. Urnovitz would be
entitled to six months of base salary.
In March 1992, the Company loaned Dr. Howard Urnovitz $85,000. The loan is
evidenced by the above-mentioned promissory note and secured by shares of Common
Stock of the Company owned by Dr. Urnovitz. The note, as amended, provides for
current interest payments at the rate of 7% per annum, and a lump-sum remaining
principal repayment in March 1997.
In May 1993, the Company entered into a Business Consultant Agreement with
Cynthia L. Green, the Company's Director of Regulatory Affairs and Quality
Assurance and Quality Control. The agreement is automatically renewable each
year unless cancelled by either party on 90 days notice. Ms. Green's fee for
acting as Director of Regulatory Affairs and Quality Assurance and Quality
Control for the Company was set at $16,000 per month. In addition, Ms. Green
received an option to acquire 2,500 shares of Common Stock at an exercise price
equal to the fair market value of the Common Stock on the date of grant. Such
option vests 20% one year after grant, plus 1.66667% per month thereafter. In
September 1992, Ms. Green was granted an option to purchase 2,500 shares of
Common Stock at an exercise price equal to the fair market value of the Common
Stock on the date of grant. Such option vests 20% one year after grant, plus
1.66667% per month thereafter. In January 1994, Ms. Green was issued 8,250
shares of Common Stock at a purchase price equal to the fair market value of the
Common Stock on the date of issuance. Such shares vested 11 months after
issuance. In March 1994, Ms. Green was issued an option for 25,000 shares at an
exercise price equal to the fair market value of the Common Stock on the date of
grant. Such option vests upon FDA approval of the Company's HIV-1 urine-based
test.
In October 1995, the Company entered into an employment agreement with John J.
DiPietro, providing for the employment of Mr. DiPietro as the Company's Vice
President, Finance and Chief Financial Officer, for a term from October 1995
through December 1996. The agreement is automatically renewable each year
subject to 90 days notice prior to the end of each calendar year. Mr. DiPietro's
salary under this agreement is initially $125,000 per year. This agreement also
provides Mr. DiPietro with reimbursement for the cost of a corporate apartment,
which expenses shall be increased sufficiently to reimburse Mr. DiPietro for the
taxes owed on such expenses. Mr. DiPietro is also eligible for a bonus under the
Company's bonus plan and shall be entitled to vacation and other benefits
provided to the Company's employees generally. Mr. DiPietro was granted an
option to purchase 35,000 shares of Common Stock at $1.00 per share, which
option Mr. DiPietro can exercise as to 20% of the shares one year after grant
and 583 shares per month thereafter, or in the event of certain defined events
or an acquisition of the Company, as to all of the shares subject to the option.
In the event Mr. DiPietro's employment with the Company is terminated by the
Company other than for cause, (i) during the first year of employment, Mr.
DiPietro shall receive his base salary for nine months; (ii) thereafter, Mr.
DiPietro shall receive his base salary for six months.
FUTURE TRANSACTIONS
All future transactions, including any loans from the Company to its officers,
directors, principal stockholders or affiliates, will be approved by a majority
of the board of directors, including a majority of the independent and
disinterested members of the board of directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no less favorable
to the Company than could be obtained from unaffiliated third parties.
44
<PAGE> 47
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to the Company with respect to
the beneficial ownership of its Common Stock as of May 10, 1996, and as adjusted
to reflect the sale of Common Stock offered by the Company hereby and conversion
of all outstanding shares of Preferred Stock into shares of Common Stock, for
(i) each who is known by the Company to own beneficially more than 5% of the
Common Stock, (ii) each of the Company's directors, (iii) each Named Executive
Officer and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT OF TOTAL(2)
SHARES -----------------------
BENEFICIALLY BEFORE AFTER
5% STOCKHOLDERS, DIRECTORS AND OFFICERS OWNED(1) OFFERING OFFERING
- ------------------------------------------------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
Otsuka Pharmaceutical Co., Ltd.(3)............................................. 1,493,147 18.99% 14.28%
463-10 Kagasuno
Kawauchi-cho
Tokoshima Japan
Hideji Nonomura(3)............................................................. 1,493,147 18.99 14.28
Entities Affiliated with Quest Ventures(4)..................................... 723,322 9.00 6.80
126 South Park
San Francisco, CA 94107
William A. Boeger(4)........................................................... 723,322 9.00 6.80
Technology Partners(5)......................................................... 620,270 8.09 6.05
1550 Tiburon Boulevard, Suite A
Belvedere, CA 94920
Roger Quy, Ph.D.(5)............................................................ 620,270 8.09 6.05
Kuo-Yu (Frank) Chiang.......................................................... 561,744 7.33 5.48
Suez Technology Fund(6)........................................................ 557,453 7.21 5.40
3000 Sand Hill Road
Bldg. 2, Suite 160
Menlo Park, CA 94028
Entities Affiliated with MVP Investors, L.P.................................... 458,217 5.98 4.47
45 Milk Street
Boston, MA 02109
Entities Affiliated with H&Q Capital Management(7)............................. 417,400 5.43 4.06
Howard B. Urnovitz, Ph.D.(8)................................................... 307,749 3.93 2.95
John P. Davis(9)............................................................... 69,333 * *
Richard Van Maanen(10)......................................................... 25,902 * *
Toby Gottfried, Ph.D.(11)...................................................... 15,462 * *
Cynthia Green(12).............................................................. 11,207 * *
Jeffrey Lang(13)............................................................... 5,083 * *
Julius R. Krevans, M.D.(14).................................................... 4,000 * *
John J. DiPietro............................................................... -- * *
David Collins.................................................................. -- * *
Mark Novitch, M.D.............................................................. -- * *
All directors and executive officers as a group
(14 persons)(3)(4)(5)(8)(9)(10)(11)(12)(13)(14).............................. 3,837,219 49.03% 34.49%
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%
(1) Based on 7,664,651 shares outstanding prior to the Offering and 10,259,046
shares outstanding after the Offering. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission. In
computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Common Stock subject to
options held by that person that are currently exercisable or exercisable
within 60 days of May 10, 1996 are deemed outstanding. To the Company's
knowledge, except as set forth in the footnotes to this table and subject
to applicable community property laws, each person named in this table has
sole voting and investment proves with respect to the shares set forth
opposite such person's name. Except as otherwise indicated, the address of
each of the persons in this table is as follows: c/o Calypte Biomedical
Corporation, 1440 Fourth Street, Berkeley, California 94710.
(2) Assumes no exercise of the Underwriters' over allotment option to purchase
up to 375,000 additional shares of Common Stock. See "Underwriting."
(3) Includes 200,000 shares subject to warrants exercisable within 60 days. Mr.
Nonomura is a director of the Company and an affiliate of Otsuka
Pharmaceutical Co., Ltd.
(4) Includes 154,276 shares subject to options exercisable within 60 days owned
by entities affiliated with Quest Ventures. Also includes 220,000 shares
subject to options exercisable within 60 days owned by Mr. Boeger. Mr.
Boeger is a partner of Quest Ventures.
(5) Includes 620,270 shares owned by Technology Partners. Mr. Quy is a director
of the Company and an affiliate of Technology Partners.
(6) Includes 66,500 shares subject to warrants exercisable within 60 days.
(7) Includes 18,700 shares subject to warrants exercisable within 60 days.
(8) Includes 168,749 shares subject to options exercisable within 60 days.
(9) Includes 69,333 subject to options exercisable within 60 days.
(10) Includes 25,902 shares subject to options exercisable within 60 days.
(11) Includes 10,062 shares subject to options exercisable within 60 days.
(12) Includes 11,207 shares subject to options exercisable within 60 days.
(13) Includes 5,083 shares subject to options exercisable within 60 days.
(14) Includes 2,000 shares subject to warrants exercisable within 60 days.
45
<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company will consist of 20,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock, after giving effect to the
restatement of the Company's Articles of Incorporation upon the closing of this
Offering. The following summaries of certain provisions of the Common Stock and
Preferred Stock do not purport to be complete and are subject to, and qualified
in their entirety by, the provisions of the Company's Articles of Incorporation,
which is included as an exhibit to the Registration Statement of which this
Prospectus forms a part, and by applicable law.
COMMON STOCK
As of June 21, 1996 there were 7,859,046 shares of Common Stock outstanding,
which were held of record by 245 stockholders. The holders of Common Stock are
entitled to one vote per share on all matters to be voted upon by the
stockholders. Subject to preferences that may be applicable to any outstanding
Preferred Stock, the holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the board of
directors out of funds legally available for that purpose. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior distribution rights of
Preferred Stock, if any, then outstanding. The Common Stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the Common Stock. All outstanding shares
of Common Stock are fully paid and nonassessable, and the shares of Common Stock
to be issued upon the closing of this Offering will be fully paid and
nonassessable.
PREFERRED STOCK
The board of directors has the authority, without action by the stockholders, to
designate and issue Preferred Stock in one or more series and to designate the
rights, preferences and privileges of each series, any or all of which may be
greater than the rights of the Common Stock. It is not possible to state the
actual effect of the issuance of any shares of Preferred Stock upon the rights
of holders of the Common Stock until the board of directors determines the
specific rights of the holders of such Preferred Stock. However, the effects
might include, among other things, restricting dividends on the Common Stock,
diluting the voting power of the Common Stock, impairing the liquidation rights
of the Common Stock and delaying or preventing a change in control of the
Company without further action by the stockholders. The Company has no present
plans to issue any shares of Preferred Stock.
WARRANTS
As of June 21, 1996, the Company had outstanding warrants to purchase 1,066,355
shares of Common Stock, at a weighted average exercise price of $5.42 per share.
Such warrants expire on various dates, the latest of which is 7 years from the
effective date of the Offering. The holders of such warrants are entitled to
certain registration rights with respect to the Common Stock issued upon
exercise thereon. See "Description of Capital Stock -- Registration Rights."
CHANGE OF CONTROL PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and Bylaws may
have the effect of preventing, discouraging or delaying any change in the
control of the Company and may maintain the incumbency of the Board of Directors
and management. The authorization of undesignated preferred stock makes it
possible for the Board of Directors to issue preferred stock with voting or
other rights or preferences that could impede the success of any attempt to
change control of the Company.
The Company is subject to the provisions of Section 203 of the Delaware General
Corporation Law (the "Antitakeover Law") regulating corporate takeovers. The
Antitakeover Law prevents certain Delaware corporations, including those whose
securities are listed on the Nasdaq National Market, from engaging, under
certain circumstances, in a "business combination" (which includes a merger or
sale of more than 10% of the corporation's assets) with any "interested
stockholder" (a stockholder who acquired 15% or more of the corporation's
outstanding voting stock without the prior approval of the corporation's Board
of Directors) for
46
<PAGE> 49
three years following the date that such stockholder became an "interested
stockholder." A Delaware corporation may "opt out" of the Antitakeover Law with
an express provision in its original certificate of incorporation or an express
provision in its certificate of incorporation or bylaws resulting from a
stockholders' amendment approved by at least a majority of the outstanding
voting shares. The Company has not "opted out" of the application of the
Antitakeover Law.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
The holders of 7,392,010 shares of Common Stock (the "Registrable Securities")
or their transferees are entitled to certain rights with respect to the
registration of such shares under the Securities Act. These rights are provided
under the terms of an agreement between the Company and the holders of
Registrable Securities. Subject to certain limitations in the agreement, the
holders of at least 30% of the Registrable Securities may require, on two
occasions beginning after three months from the date of this Prospectus, that
the Company use its best efforts to register the Registrable Securities for
public resale. If the Company registers any of its Common Stock either for its
own account or for the account of other security holders, the holders of
Registrable Securities are entitled to include their shares of Common Stock in
the registration, subject to the ability of the underwriters to limit the number
of shares included in the offering. The holders of Registrable Securities may
also require the Company (not more than once during any 12-month period) to
register all or a portion of their Registrable Securities on Form S-3 when use
of such form becomes available to the Company, provided, among other
limitations, that the proposed aggregate selling price (net of any underwriters'
discounts or commissions) is at least $1.0 million. All registration expenses
must be borne by the Company and all selling expenses relating to Registrable
Securities must be borne by the holders of the securities being registered.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is First
Interstate Bank of California. Its telephone number is (415) 773-7801.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no market for the Common Stock of the
Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect market prices prevailing from time to time. As
described below, no shares currently outstanding will be available for sale
immediately after this Offering due to certain legal restrictions on resale.
Sales of substantial amounts of Common Stock of the Company in the public market
after the restrictions lapse could adversely affect the prevailing market price
and the ability of the Company to raise equity capital in the future.
Upon the completion of this Offering, the Company will have 10,259,046 shares of
Common Stock outstanding, assuming no exercise of options or warrants after June
21, 1996. Of these shares, the 2,400,000 shares sold in this Offering will be
freely tradable without restriction under the Securities Act, unless held by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act. The remaining 7,859,046 shares of Common Stock held by existing
stockholders were issued and sold by the Company in reliance on exemptions from
the registration requirements of the Securities Act. These shares may be sold in
the public market only if registered, or pursuant to an exemption from
registration such as Rule 144, 144(k) or 701 under the Securities Act.
Stockholders who in the aggregate hold 97% of the shares of Common Stock of the
Company outstanding immediately prior to the completion of this Offering have
entered into lock-up agreements under which they have agreed not to offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of, or agree
to dispose of, directly or indirectly, any shares of Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable for or
convertible into Common Stock owned by them for a period of 180 days after the
date of this Prospectus, without the prior written consent of the
Representatives of the Underwriters. The Company has entered into a similar
agreement, except that the Company may grant options and issue stock under its
current stock option and stock purchase plans and pursuant to other currently
outstanding options.
47
<PAGE> 50
As of June 21, 1996, 2,852,775 shares were subject to outstanding options and
warrants. Of these shares 75% are subject to the lock-up agreements described
above. Approximately 120 days after the date of this Prospectus, the Company
intends to file a Registration Statement on Form S-8 covering shares issuable
under the Company's 1991 Stock Plan (including shares subject to then
outstanding options), 1995 Director Option Plan and 1995 Employee Stock Purchase
Plan, thus permitting the resale of such shares in the public market without
restriction under the Securities Act after expiration of the applicable
agreements.
Upon expiration of the lock-up agreements, approximately 2,465,586 shares of
Common Stock will become eligible for immediate public resale, pursuant to Rule
144(k) or for non-affiliates in certain cases pursuant to Rule 701. An
additional 3,220,560 shares will be available for resale subject to the volume
limitations of Rule 144. 7,392,010 of the shares outstanding immediately
following the completion of this Offering will be entitled to registration
rights with respect to such shares upon the release of lock-up agreements. The
number of shares sold in the public market could increase if such rights are
exercised.
In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated) who has beneficially owned shares for at least two years
(including the holding period of any prior owner, except an affiliate) is
entitled to sell in "broker's transactions" or to market makers, within any
three-month period commencing 90 days after the date of this Prospectus, a
number of shares that does not exceed the greater of (i) one percent of the
number of shares of Common Stock then outstanding (approximately 101,000 shares
immediately after this Offering) or (ii) the average weekly trading volume of
the Common Stock during the four calendar weeks preceding the required filing of
a Form 144 with respect to such sale. Sales under Rule 144 are generally subject
to certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least three years, is entitled to sell such shares
without having to comply with the manner of sale, public information, volume
limitation or notice provisions of Rule 144. Under Rule 701 under the Securities
Act, persons who purchase shares upon exercise of options granted prior to the
effective date of this Offering are entitled to sell such shares 90 days after
the effective date of this Offering in reliance on Rule 144, without having to
comply with the holding period requirements of Rule 144 and, in the case of
non-affiliates, without having to comply with the public information, volume
limitation or notice provisions of Rule 144.
The Securities and Exchange Commission has recently proposed reducing the
initial Rule 144 holding period to one year and the Rule 144(k) holding period
to two years. There can be no assurance as to when or whether such rule changes
will be enacted. If enacted, such modification will have a material effect on
the time when shares of the Company's Common Stock become eligible for resale.
48
<PAGE> 51
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriter named below, through Pacific Growth Equities, Inc., has agreed to
purchase from the Company the following respective number of shares of Common
Stock:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---------------------------------------------------------- ------------------
<S> <C>
Pacific Growth Equities, Inc.............................. 2,400,000
==============
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriter are
subject to certain conditions precedent, including the absence of any material
adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company, its counsel and independent
auditors. The nature of the Underwriter's obligation is such that they are
committed to purchase all shares of the Common Stock offered hereby if any of
such shares are purchased.
The Underwriter proposes to offer the shares of Common Stock directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus. After the initial public offering of the shares, the offering price
and other selling terms may be changed by the Underwriter.
The Company has granted to the Underwriter an option, exercisable not later than
45 days after the date of this Prospectus, to purchase up to 360,000 additional
shares of Common Stock at the initial public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriter exercises this option, it will have a firm
commitment to purchase the number of shares of Common Stock to be purchased by
it shown in the above table. The Company will be obligated, pursuant to the
option, to sell such shares to the Underwriter to the extent the option is
exercised. The Underwriter may exercise such option only to cover
over-allotments made in connection with the sale of shares of Common Stock
offered hereby.
The offering of the shares is made for delivery when, as and if accepted by the
Underwriter and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriter reserves the right
to reject an order for the purchase of shares in whole or in part.
The Company has agreed to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
the Underwriter may be required to make in respect thereof.
Stockholders, including the executive officers and directors, who will own in
the aggregate 7,611,736 shares of Common Stock after the offering, have agreed
that they will not, without the prior written consent of Pacific Growth
Equities, Inc. offer, sell or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common Stock or securities exchangeable
for or convertible into shares of Common Stock owned by them during the 180-day
period following the date of this Prospectus. The Company has agreed that it
will not, without the prior written consent of Pacific Growth Equities, Inc.
offer, sell or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable for or
convertible into shares of Common Stock during the 180-day period following the
date of this Prospectus, except that the Company may issue. Upon the exercise of
options granted prior to the date hereof, and may grant additional options under
its stock and employee stock purchase plans, provided that, without the prior
written consent of Pacific Growth Equities, Inc., such additional options shall
not be exercisable during such period. Sales of such shares in the future could
adversely affect the market price of the Common Stock.
The Underwriter has informed the Company that it does not intend to confirm
sales to accounts over which they exercise discretionary authority.
Prior to this Offering, there has been no public market for the Common Stock.
The initial public offering price for the Common Stock was determined by
negotiation between the Company and the Underwriter. The factors considered in
determining the initial public offering price include prevailing market and
economic conditions, revenues and earnings of the Company, market valuations of
other companies engaged in activities
49
<PAGE> 52
similar to the Company estimates of the business potential and prospects of the
Company, the present state of the Company's business operations and the
Company's management.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Certain legal matters will be passed upon for the Underwriters
by Cooley Godward Castro Huddleson & Tatum, Palo Alto, California. As of the
date of this Prospectus, Wilson Sonsini Goodrich & Rosati, Professional
Corporation beneficially owns 10,000 shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements of Calypte Biomedical Corporation and
subsidiary (a development stage company) as of December 31, 1994 and 1995 and
for each of the years in the three-year period ended December 31, 1995, and for
the period from February 18, 1988 (inception) through December 31, 1995, and the
financial statements of Pepgen Corporation and subsidiary (a development stage
enterprise) as of December 31, 1993 and 1994, and for the period from July 8,
1992 (inception) through December 31, 1992 and for each of the years in the
two-year period ended December 31, 1994 and for the period from July 8, 1992
(inception) through December 31, 1994, have been included herein and in the
Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
The statements in this Prospectus in paragraphs 2 and 3 under the caption "Risk
Factors -- Reliance on Proprietary Technology and Know-How" and in paragraphs 6
and 7 under the caption "Business -- Patents, Proprietary Rights and Licenses"
have been reviewed and approved by Arnold, White & Durkee, special patent
counsel for the Company, as experts in such matters, and included herein in
reliance upon such review and approval.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. a Registration Statement on Form S-1 under the
Securities Act with respect to the shares of Common Stock being offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and such Common Stock, reference is made
to the Registration Statement and to the exhibits and schedules filed as a part
thereof. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are intended to disclose the material
elements thereof, but are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement. A copy of the Registration Statement may
be inspected without charge at the Commission's principal office in Washington,
D.C., and copies of all or any part of the Registration Statement may be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, upon payment of certain fees prescribed by the
Commission. In addition, the Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission through the Electronic Data Gathering, Analysis, and Retrieval
system.
50
<PAGE> 53
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS, CALYPTE BIOMEDICAL CORPORATION (A DEVELOPMENT STAGE
ENTERPRISE)
Independent Auditors' Report..................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995..................... F-3
Consolidated Statements of Operations for the years ended December 31, 1993, 1994
and 1995 and for the period from February 18, 1988 (inception) through December
31, 1995........................................................................ F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the period from
February 18, 1988 (inception) through December 31, 1995......................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994
and 1995 and for the period from February 18, 1988 (inception) through December
31, 1995........................................................................ F-7
Notes to Consolidated Financial Statements....................................... F-8
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, CALYPTE BIOMEDICAL CORPORATION (A
DEVELOPMENT STAGE ENTERPRISE) (UNAUDITED)
Consolidated Condensed Balance Sheets as of December 31, 1995 and March 31,
1996............................................................................ F-23
Consolidated Condensed Statements of Operations for the three-months ended March
31, 1995 and 1996 and for the period from February 18, 1988 (inception) through
March 31, 1996.................................................................. F-24
Consolidated Condensed Statements of Cash Flows for the three-months ended March
31, 1995 and 1996 and for the period from February 18, 1988 (inception) through
March 31, 1996.................................................................. F-25
Notes to Consolidated Condensed Financial Statements............................. F-26
PRO FORMA FINANCIAL INFORMATION, CALYPTE BIOMEDICAL CORPORATION (A DEVELOPMENT STAGE
ENTERPRISE) (UNAUDITED)
Pro Forma Financial Information.................................................. F-30
Pro Forma Consolidated Condensed Statement of Operations for the year ended
December 31, 1995............................................................... F-31
CONSOLIDATED FINANCIAL STATEMENTS, PEPGEN CORPORATION (A DEVELOPMENT STAGE ENTERPRISE)
Independent Auditors' Report..................................................... F-32
Consolidated Balance Sheets as of December 31, 1993 and 1994..................... F-33
Consolidated Statements of Operations for the period from July 8, 1992
(inception) through December 31, 1992, for the years ended December 31, 1993 and
1994 and the period from July 8, 1992 (inception) through December 31, 1994..... F-34
Consolidated Statements of Shareholders' Equity (Deficiency) for the period from
July 8, 1992 (inception) through December 31, 1994.............................. F-35
Consolidated Statements of Cash Flows for the period from July 8, 1992
(inception) through December 31, 1992, for the years ended December 31, 1993 and
1994 and the period from July 8, 1992 (inception) through December 31 1994...... F-36
Notes to Consolidated Financial Statements....................................... F-37
CONSOLIDATED FINANCIAL STATEMENTS, PEPGEN CORPORATION (A DEVELOPMENT STAGE ENTERPRISE)
(UNAUDITED)
Consolidated Balance Sheet as of December 31, 1995............................... F-43
Consolidated Statements of Operations for the year ended December 31, 1995 and
for the period from July 8, 1992 (inception) through December 31, 1995.......... F-44
Consolidated Statements of Shareholders' Equity (Deficiency) for the period July
8, 1992 (inception) through December 31, 1995................................... F-45
Consolidated Statements of Cash Flows for the year ended December 31, 1995 and
for the period from July 8, 1992 (inception) through December 31, 1995.......... F-46
Notes to Consolidated Financial Statements....................................... F-47
</TABLE>
F-1
<PAGE> 54
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Calypte Biomedical Corporation:
We have audited the accompanying consolidated balance sheets of Calypte
Biomedical Corporation and subsidiary (a development stage enterprise) (the
Company) as of December 31, 1994 and 1995, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for
each of the years in the three-year period ended December 31, 1995, and for the
period from February 18, 1988 (inception) through December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Calypte Biomedical
Corporation and subsidiary (a development stage enterprise) as of December 31,
1994 and 1995, and the consolidated results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1995,
and for the period from February 18, 1988 (inception) through December 31, 1995,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
San Francisco, California
January 16, 1996
F-2
<PAGE> 55
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1994 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................................. $ 4,477,924 $ 2,558,650
Other current assets................................................... 40,956 755,572
------------ ------------
Total current assets................................................ 4,518,880 3,314,222
Property and equipment, net.............................................. 1,255,521 1,854,010
Note receivable from officer............................................. 85,000 42,500
Other assets............................................................. 105,115 126,144
------------ ------------
$ 5,964,516 $ 5,336,876
=========== ===========
LIABILITIES, MANDITORILY REDEEMABLE
PREFERRED STOCK, AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable....................................................... $ 169,429 $ 1,053,536
Accrued expenses....................................................... 365,850 643,911
Notes payable -- current portion....................................... 277,255 3,258,456
Capital lease obligations -- current portion........................... 89,519 260,214
Deferred revenue....................................................... 500,000 500,000
------------ ------------
Total current liabilities........................................... 1,402,053 5,716,117
Deferred rent obligation................................................. 91,280 87,357
Notes payable -- long-term portion....................................... 10,613 --
Capital lease obligations -- long-term portion........................... 185,232 542,725
------------ ------------
Total liabilities................................................... 1,689,178 6,346,199
Mandatorily redeemable Series A preferred stock, $0.001 par value;
100,000 shares authorized, issued, and outstanding; aggregate
redemption and liquidation value of $1,000,000 plus cumulative
dividends.............................................................. 1,616,438 1,736,438
Commitments and contingencies
Stockholders' equity (deficit):
Series B convertible preferred stock, $0.001 par value; 804,860 shares
authorized; 804,846 shares issued and outstanding as of December 31,
1994 and 1995; aggregate liquidation value of $1,500,235 as of
December 31, 1994 and 1995.......................................... 805 805
Series C convertible preferred stock, $0.001 par value; 1,702,727
shares authorized; 1,702,705 shares issued and outstanding as of
December 31, 1994 and 1995; aggregate liquidation value of
$6,300,004 as of December 31, 1994 and 1995......................... 1,703 1,703
Series D convertible preferred stock, $0.001 par value; 2,130,051
shares authorized; 2,116,999 shares issued and outstanding as of
December 31, 1994 and 1995; aggregate liquidation value of
$10,584,995 as of December 31, 1994 and 1995........................ 2,117 2,117
Series E convertible preferred stock, $0.001 par value; 4,000,000
shares authorized; 1,077,500 and 1,967,866 shares issued and
outstanding as of December 31, 1994 and 1995, respectively;
aggregate liquidation value of $5,387,500 and $9,839,330 as of
December 31, 1994 and 1995, respectively............................ 1,077 1,967
Common stock, $0.001 par value; 12,000,000 shares authorized; 569,352
and 573,899 shares issued and outstanding as of December 31, 1994
and 1995, respectively.............................................. 569 574
Additional paid-in capital............................................. 22,762,330 28,014,030
Deferred compensation.................................................. -- (365,871)
Deficit accumulated during development stage........................... (20,109,701) (30,401,086)
------------ ------------
Total stockholders' equity (deficit)................................ 2,658,900 (2,745,761)
------------ ------------
$ 5,964,516 $ 5,336,876
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 56
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 18,
1988
(INCEPTION)
YEARS ENDED DECEMBER 31, THROUGH
----------------------------------------- DECEMBER 31,
1993 1994 1995 1995
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue earned under research and
development contracts, substantially from
related parties.......................... $ -- $ -- $ -- $ 2,390,187
Operating expenses:
Research and development................. 4,518,984 3,643,781 5,017,545 20,346,564
Purchased in-process research and
development costs..................... -- -- 2,500,000 2,500,000
Selling, general and administrative...... 1,784,318 1,818,560 2,862,049 10,926,405
----------- ----------- ------------ ------------
Loss from operations............. (6,303,302) (5,462,341) (10,379,594) (31,382,782)
Interest income............................ 163,509 47,714 194,944 569,828
Interest expense........................... (55,274) (81,782) (116,842) (603,019)
Other income............................... 15,395 31,027 11,707 70,443
----------- ----------- ------------ ------------
Loss before income taxes and
extraordinary item............. (6,179,672) (5,465,382) (10,289,785) (31,345,530)
Income taxes............................... (1,600) (1,600) (1,600) (60,750)
----------- ----------- ------------ ------------
Loss before extraordinary item... (6,181,272) (5,466,982) (10,291,385) (31,406,280)
Extraordinary gain on debt
extinguishment........................... -- -- -- 485,453
----------- ----------- ------------ ------------
Net loss......................... (6,181,272) (5,466,982) (10,291,385) (30,920,827)
Less dividend on mandatorily redeemable
Series A preferred stock................. (120,000) (120,000) (120,000) (736,438)
----------- ----------- ------------ ------------
Net loss attributable to common
stockholders............................. $(6,301,272) $(5,586,982) $(10,411,385) $(31,657,265)
=========== =========== ============ ============
Net loss per share attributable to common
stockholders............................. $ (1.35) $ (0.99) $ (1.50)
=========== =========== ============
Weighted average shares used to compute net
loss per share attributable to common
stockholders............................. 4,666,236 5,671,038 6,934,334
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 57
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
PERIOD FROM FEBRUARY 18, 1988 (INCEPTION) THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
JOINT CONVERTIBLE PREFERRED STOCK ADDITIONAL
VENTURERS' ----------------------------------------- COMMON PAID-IN DEFERRED
CAPITAL SERIES B SERIES C SERIES D SERIES E STOCK CAPITAL COMPENSATION
----------- -------- -------- -------- -------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock as of
February 18, 1988 (date of
inception).................... $ -- $ -- $ -- $ -- $ -- $75,500 $ -- $ --
Capital contributions.......... 1,610,779 -- -- -- -- -- -- --
Exchange of Calypte, Inc. stock
for 100,000 shares of common
stock and 100,000 shares of
mandatorily redeemable Series
A preferred stock of the
Company on November 11, 1989
at $0.001 per share.......... -- -- -- -- -- (75,400) -- --
Common stock of 60,035 shares
issued for cash.............. -- -- -- -- -- 60 99,837 --
Compensation paid by issuance
of 170,610 shares of common
stock........................ -- -- -- -- -- 171 33,951 --
Conversion of notes payable to
61,426 shares of common
stock........................ -- -- -- -- -- 60 12,225 --
Conversion of notes payable to
29,506 shares of Series B
convertible preferred
stock........................ -- 30 -- -- -- -- 54,970 --
Series B convertible preferred
stock of 775,340 shares
issued for cash.............. -- 775 -- -- -- -- 1,387,333 --
Series C convertible preferred
stock of 810,812 shares
issued for cash.............. -- -- 811 -- -- -- 2,946,008 --
Dividend requirements on
mandatorily redeemable Series
A preferred stock............ -- -- -- -- -- -- (90,000) --
Net loss....................... (1,610,779) -- -- -- -- -- -- --
----------- -------- -------- -------- -------- ------- ----------- ------------
Balances as of December 31,
1991......................... -- 805 811 -- -- 391 4,444,324 --
Exercise of stock options for
68,083 shares of common
stock........................ -- -- -- -- -- 68 13,128 --
Compensation paid by issuance
of 31,670 shares of common
stock........................ -- -- -- -- -- 32 5,267 --
Series C convertible preferred
stock of 891,893 shares
issued for cash.............. -- -- 892 -- -- -- 3,208,379 --
Series D convertible preferred
stock of 800,000 shares
issued for cash.............. -- -- -- 800 -- -- 5,718,631 --
Dividend requirements on
mandatorily redeemable Series
A preferred stock............ -- -- -- -- -- -- (120,000) --
Net loss....................... -- -- -- -- -- -- -- --
----------- -------- -------- -------- -------- ------- ----------- ------------
Balances as of December 31,
1992......................... $ -- $805 $1,703 $ 800 $ -- $ 491 $13,269,729 $ --
<CAPTION>
DEFICIT
ACCUMULATED TOTAL
DURING STOCKHOLDERS'
DEVELOPMENT EQUITY
STAGE (DEFICIT)
------------ -------------
<S> <C> <C>
Issuance of common stock as of
February 18, 1988 (date of
inception).................... $ -- $ 75,500
Capital contributions.......... -- 1,610,779
Exchange of Calypte, Inc. stock
for 100,000 shares of common
stock and 100,000 shares of
mandatorily redeemable Series
A preferred stock of the
Company on November 11, 1989
at $0.001 per share.......... (924,600) (1,000,000)
Common stock of 60,035 shares
issued for cash.............. -- 99,897
Compensation paid by issuance
of 170,610 shares of common
stock........................ -- 34,122
Conversion of notes payable to
61,426 shares of common
stock........................ -- 12,285
Conversion of notes payable to
29,506 shares of Series B
convertible preferred
stock........................ -- 55,000
Series B convertible preferred
stock of 775,340 shares
issued for cash.............. -- 1,388,108
Series C convertible preferred
stock of 810,812 shares
issued for cash.............. -- 2,946,819
Dividend requirements on
mandatorily redeemable Series
A preferred stock............ (166,438) (256,438)
Net loss....................... (3,567,913) (5,178,692)
------------ -------------
Balances as of December 31,
1991......................... (4,658,951) (212,620)
Exercise of stock options for
68,083 shares of common
stock........................ -- 13,196
Compensation paid by issuance
of 31,670 shares of common
stock........................ -- 5,299
Series C convertible preferred
stock of 891,893 shares
issued for cash.............. -- 3,209,271
Series D convertible preferred
stock of 800,000 shares
issued for cash.............. -- 5,719,431
Dividend requirements on
mandatorily redeemable Series
A preferred stock............ -- (120,000)
Net loss....................... (3,802,496) (3,802,496)
------------ -------------
Balances as of December 31,
1992......................... $ (8,461,447) $ 4,812,081
</TABLE>
F-5
<PAGE> 58
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
PERIOD FROM FEBRUARY 18, 1988 (INCEPTION) THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
JOINT CONVERTIBLE PREFERRED STOCK ADDITIONAL
VENTURERS' ----------------------------------------- COMMON PAID-IN DEFERRED
CAPITAL SERIES B SERIES C SERIES D SERIES E STOCK CAPITAL COMPENSATION
----------- -------- -------- -------- -------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances as of December 31,
1992......................... $ -- $805 $1,703 $ 800 $ -- $ 491 $13,269,729 $ --
Common stock of 2,500 shares
issued for cash.............. -- -- -- -- -- 3 1,997 --
Exercise of stock options for
22,444 shares of common
stock........................ -- -- -- -- -- 23 8,640 --
Compensation paid by issuance
of 10,000 shares of common
stock........................ -- -- -- -- -- 10 7,990 --
Series D convertible preferred
stock of 199,999 shares
issued for cash.............. -- -- -- 200 -- -- 1,444,729 --
Dividends requirements on
mandatorily redeemable Series
A preferred stock............ -- -- -- -- -- -- (120,000) --
Net loss....................... -- -- -- -- -- -- -- --
---- ---- ------ ------ ------ ---- ----------- --------
Balances as of December 31,
1993......................... -- 805 1,703 1,000 -- 527 14,613,085 --
Conversion of Series D
convertible preferred stock
into 1.5 shares for each
share outstanding as of March
3, 1994; 500,000 additional
shares issued................ -- -- -- 500 -- -- (500) --
Common stock of 11,250 shares
issued for cash.............. -- -- -- -- -- 11 8,839 --
Exercise of stock options for
31,334 shares of common
stock........................ -- -- -- -- -- 31 12,034 --
Series D convertible preferred
stock of 617,000 shares
issued for cash.............. -- -- -- 617 -- -- 2,885,466 --
Series E convertible preferred
stock of 1,077,500 shares
issued for cash.............. -- -- -- -- 1,077 -- 5,363,406 --
Dividend requirements on
mandatorily redeemable Series
A preferred stock............ -- -- -- -- -- -- (120,000) --
Net loss....................... -- -- -- -- -- -- -- --
---- ---- ------ ------ ------ ---- ----------- --------
Balance as of December 31,
1994......................... -- 805 1,703 2,117 1,077 569 22,762,330 --
Series E convertible preferred
stock of 888,446 shares
issued for cash, 1,920 issued
for other than cash.......... -- -- -- -- 890 -- 4,302,278 --
Exercise of stock options for
4,547 shares of common
stock........................ -- -- -- -- -- 5 2,431 --
Dividend requirements on
mandatorily redeemable Series
A preferred stock............ -- -- -- -- -- -- (120,000) --
Options issued upon the
investment in Pepgen
Corporation.................. -- -- -- -- -- -- 500,000 --
Compensation relating to
granting of stock options.... -- -- -- -- -- -- 566,991 (566,991)
Amortization of deferred
compensation................. -- -- -- -- -- -- -- 201,120
Net loss....................... -- -- -- -- -- -- -- --
---- ---- ------ ------ ------ ---- ----------- --------
Balances as of December 31,
1995......................... $ -- $805 $1,703 $2,117 $1,967 $ 574 $28,014,030 $ (365,871)
==== ==== ====== ====== ====== ==== =========== ========
<CAPTION>
DEFICIT
ACCUMULATED TOTAL
DURING STOCKHOLDERS'
DEVELOPMENT EQUITY
STAGE (DEFICIT)
------------ -------------
<S> <C> <C>
Balances as of December 31,
1992......................... $ (8,461,447) $ 4,812,081
Common stock of 2,500 shares
issued for cash.............. -- 2,000
Exercise of stock options for
22,444 shares of common
stock........................ -- 8,663
Compensation paid by issuance
of 10,000 shares of common
stock........................ -- 8,000
Series D convertible preferred
stock of 199,999 shares
issued for cash.............. -- 1,444,929
Dividends requirements on
mandatorily redeemable Series
A preferred stock............ -- (120,000)
Net loss....................... (6,181,272) (6,181,272)
------------- -----------
Balances as of December 31,
1993......................... (14,642,719) (25,599)
Conversion of Series D
convertible preferred stock
into 1.5 shares for each
share outstanding as of March
3, 1994; 500,000 additional
shares issued................ -- --
Common stock of 11,250 shares
issued for cash.............. -- 8,850
Exercise of stock options for
31,334 shares of common
stock........................ -- 12,065
Series D convertible preferred
stock of 617,000 shares
issued for cash.............. -- 2,886,083
Series E convertible preferred
stock of 1,077,500 shares
issued for cash.............. -- 5,364,483
Dividend requirements on
mandatorily redeemable Series
A preferred stock............ -- (120,000)
Net loss....................... (5,466,982) (5,466,982)
------------- -----------
Balance as of December 31,
1994......................... (20,109,701) 2,658,900
Series E convertible preferred
stock of 888,446 shares
issued for cash, 1,920 issued
for other than cash.......... -- 4,303,168
Exercise of stock options for
4,547 shares of common
stock........................ -- 2,436
Dividend requirements on
mandatorily redeemable Series
A preferred stock............ -- (120,000)
Options issued upon the
investment in Pepgen
Corporation.................. -- 500,000
Compensation relating to
granting of stock options.... -- --
Amortization of deferred
compensation................. -- 201,120
Net loss....................... (10,291,385) (10,291,385)
------------- -----------
Balances as of December 31,
1995......................... $(30,401,086) $ (2,745,761)
============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 59
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 18, 1988
YEARS ENDED DECEMBER 31, (INCEPTION)
---------------------------------------- THROUGH DECEMBER 31,
1993 1994 1995 1995
----------- ----------- ------------ --------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................... $(6,181,272) $(5,466,982) $(10,291,385) $(30,920,827)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 198,445 331,760 465,585 1,817,247
Loss on sale or disposal of equipment................... 5,254 -- 73,581 115,192
Extraordinary gain on debt extinguishment............... -- -- -- (485,453)
Amortization of deferred compensation................... -- -- 201,120 201,120
Compensation paid by stock issuance..................... 8,000 -- -- 47,421
Purchased in-process research and development costs..... -- -- 2,500,000 2,500,000
Changes in operating assets and liabilities:
Other current assets................................. (235,269) 254,426 (714,616) (516,732)
Organizational costs................................. -- -- -- (123,074)
Other assets......................................... (33,537) (52,925) 21,471 (407,484)
Accounts payable and accrued expenses................ (395,206) 319,802 1,162,168 2,099,517
Deferred rent obligation............................. 33,422 57,858 (3,923) 87,350
Note payable in exchange for expenses paid on behalf
of the Company..................................... -- -- -- 191,964
----------- ----------- ------------ ------------
Net cash used in operating activities.............. (6,600,163) (4,556,061) (6,585,999) (25,393,759)
----------- ----------- ------------ ------------
Cash flows from investing activities:
Proceeds from disposition of equipment...................... -- -- -- 25,000
Purchase of equipment....................................... (504,343) (625,231) (476,299) (2,276,552)
Investment in Pepgen........................................ -- -- (1,000,000) (1,000,000)
----------- ----------- ------------ ------------
Net cash used in investing activities.............. (504,343) (625,231) (1,476,299) (3,251,552)
----------- ----------- ------------ ------------
Cash flows from financing activities:
Proceeds from the sale of stock............................. 1,510,664 8,493,415 4,444,516 28,279,403
Expenses paid related to sale of stock...................... (55,072) (221,934) (138,912) (870,006)
Prepaid license fee......................................... -- -- -- 500,000
Principal payments on notes payable......................... (188,890) (76,322) (29,412) (916,926)
Principal payments on capital lease obligations............. (5,520) (28,137) (133,168) (166,824)
Proceeds from notes payable................................. 81,860 -- 2,000,000 2,692,035
Capital contributions....................................... -- -- -- 75,500
Joint ventures' capital contributions....................... -- -- -- 1,610,779
----------- ----------- ------------ ------------
Net cash provided by financing activities.......... 1,343,042 8,167,022 6,143,024 31,203,961
----------- ----------- ------------ ------------
Net (decrease) increase in cash and cash equivalents.......... (5,761,464) 2,985,730 (1,919,274) 2,558,650
Cash and cash equivalents at beginning of period.............. 7,253,658 1,492,194 4,477,924 --
----------- ----------- ------------ ------------
Cash and cash equivalents at end of period.................... $ 1,492,194 $ 4,477,924 $ 2,558,650 $ 2,558,650
=========== =========== ============ ============
Supplemental disclosure of cash flow activities:
Cash paid for interest...................................... $ 52,975 $ 83,036 $ 104,509 $ 478,178
Cash paid for income taxes.................................. 1,600 1,600 1,600 60,100
Supplemental disclosure of noncash activities:
Acquisition of equipment through obligations under capital
leases.................................................... 308,408 -- 661,356 969,764
Accrued liabilities converted to notes payable.............. -- -- -- 363,091
Accrued liabilities converted to common stock............... -- -- -- 38,978
Notes payable converted to common stock..................... -- -- -- 458,760
Notes payable converted to Series B convertible preferred
stock..................................................... -- -- -- 50,000
Note payable issued upon investment in Pepgen Corporation... -- -- 1,000,000 1,000,000
Options issued upon investment in Pepgen Corporation........ -- -- 500,000 500,000
Dividend on mandatorily redeemable Series A preferred
stock..................................................... 120,000 120,000 120,000 736,438
Deferred compensation attributable to stock grants.......... -- -- 566,991 566,991
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 60
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994, AND 1995
(1) THE COMPANY AND BASIS OF PRESENTATION
Calpyte Biomedical Corporation (the Company) was incorporated on November 11,
1989 and is a development stage enterprise. The Company's primary activities
have been to obtain funding and to perform research and development. The Company
is in the process of applying for approvals to market and sell its product in
both domestic and foreign markets.
The accompanying consolidated financial statements include the results of
operations of the Company and its wholly owned subsidiary, Calypte, Inc., and
Calypte Biomedical Company (the Joint Venture). All significant intercompany
accounts and transactions have been eliminated in consolidation.
The Company accounts for its 49% interest in Pepgen Corporation (Pepgen) under
the equity method (Note 12).
In December 1995, the Board of Directors authorized the incorporation of a
wholly owned subsidiary in the state of Delaware. After receipt of stockholder
approval and upon closing of the Company's initial public offering (IPO), the
Board of Directors intends to direct management to merge the Company into the
Delaware subsidiary, with the Delaware company becoming the surviving entity.
The Board of Directors has authorized 20 million shares of common stock in the
Delaware company.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash equivalents consist primarily of fixed income securities. The Company
considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Machinery and equipment, furniture
and fixtures, and computer equipment are depreciated using the straight-line
method over the estimated useful life of the assets, generally four to five
years. Leasehold improvements and equipment under capital leases are amortized
or depreciated over the shorter of the lease term or the useful life of the
improvement.
Fair Value of Financial Instruments
Financial assets and liabilities have carrying values which approximate their
fair values for all periods presented. The carrying amounts of cash and cash
equivalents approximate fair value because of their short-term nature and
because such accounts are invested in accounts earning market rates of interest.
The carrying values of notes payable, except for the note payable to Pepgen,
approximate fair value because the interest rates on the notes payable
approximate current market rates available to the Company. The fair market
values of the note payable to Pepgen and the note receivable from shareholder
are not readily determinable due to their related party nature.
Revenue
Revenue from product sales is recognized upon product shipment.
Deferred Revenue
Deferred revenue is accrued on payments received from customers in advance of
product shipment and will be recognized as revenue upon shipment of the related
products.
F-8
<PAGE> 61
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
Income Taxes
Prior to January 1, 1993, income taxes were provided for all items included in
the accompanying consolidated statements of operations regardless of when such
items were reported for income tax purposes in accordance with the requirements
of Accounting Principles Board Opinion No. 11, Accounting for Income Taxes.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes. SFAS No. 109 requires an
asset and liability approach for the financial reporting of income taxes. Under
SFAS No. 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
Reclassifications
Certain reclassifications in the accompanying consolidated financial statements
have been made in order to conform to the December 31, 1995 consolidated
financial statement presentation.
Net Loss Per Share Attributable to Common Stockholders
Except as noted below, net loss per share attributable to common stockholders is
computed using the weighted average number of shares of common stock
outstanding. Common equivalent shares from stock options and warrants are
excluded from the computation as their effect is antidilutive, except that,
pursuant to the Securities and Exchange Commission (SEC) Staff Accounting
Bulletin No. 83, common stock issued for consideration below the assumed initial
public offering (IPO) price and warrants exercised, warrants granted and stock
options granted with exercise prices below the IPO price during the 12-month
period preceding the date of the initial filing of the Registration Statement,
even when antidilutive, have been included in the calculation of common
equivalent shares, using the treasury stock method based on the assumed IPO
price, as if they were outstanding for all periods presented.
Furthermore, common equivalent shares from convertible preferred stock that will
be converted upon the completion of the Company's IPO are included using the "as
if converted" method.
In accordance with paragraph 23 of Accounting Principles Board Opinion No. 15,
pro forma net loss per share has been presented to reflect the use of proceeds
from the Company's IPO to repay the mandatorily redeemable Series A preferred
stock and to repay certain debt obligations as of the beginning of the period
presented. The pro forma weighted average shares for the year ended December 31,
1995 were 7,640,048 and pro forma net loss was $10,174,543 which resulted in pro
forma net loss per share of $1.33 for the year ended December 31, 1995.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-9
<PAGE> 62
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
(3) OTHER CURRENT ASSETS
Other current assets as of December 31, 1994 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
Receivable under equipment lease line of credit....... $ -- $315,846
Deferred public offering costs........................ -- 200,667
Other prepaid expenses................................ 13,732 205,977
Other................................................. 27,224 33,082
------- --------
$40,956 $755,572
======= ========
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1994 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Computer equipment.............................. $ 133,993 $ 237,405
Machinery and equipment......................... 775,878 1,403,520
Furniture and fixtures.......................... 225,961 187,657
Leasehold improvements.......................... 1,257,605 1,415,402
----------- -----------
2,393,437 3,243,984
Accumulated depreciation and amortization....... (1,137,916) (1,389,974)
----------- -----------
Property and equipment, net..................... $ 1,255,521 $ 1,854,010
========== ==========
</TABLE>
During 1988, property was purchased from an unrelated party subject to a note
for $442,052. The note was subsequently assigned to Purdue Frederick
Diagnostics, Inc., a former related party of the Company. The Company's
remaining obligation is reflected in notes payable (Note 6). The Company
recognized depreciation expense of $178,000, $315,000 and $466,000 for the years
ended December 1993, 1994 and 1995, respectively.
(5) ACCRUED EXPENSES
Accrued expenses as of December 31, 1994 and 1995 consisted of the following:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Accrued minimum royalty payments..................... $120,000 $160,000
Accrued management fee to shareholder................ 135,000 --
Other................................................ 110,850 483,911
-------- --------
$365,850 $643,911
======== ========
</TABLE>
F-10
<PAGE> 63
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
(6) NOTES PAYABLE
Notes payable as of December 31, 1994 and 1995 consisted of the following:
<TABLE>
<CAPTION>
1994 1995
------- ----------
<S> <C> <C>
Prime plus 3.5%; 12% as of December 31, 1995; note
payable to a bank; secured by property and
equipment; due March 1996......................... $ -- $2,000,000
10% note payable to a former related party; secured
by property and equipment; due October 1995....... 247,843 247,843
12% note payable; secured by equipment; due April
1996.............................................. 40,025 10,613
4% note payable to Pepgen, due the earlier of: 60
days following either FDA approval of the
Company's urine-based HIV-1 test or completion of
an IPO; or April 23, 1996......................... -- 1,000,000
------- ----------
Notes payable.................................. 287,868 3,258,456
Less current portion................................ 277,255 3,258,456
------- ----------
Long-term portion................................... $10,613 $ --
======= =========
</TABLE>
In December 1995, the Company entered into a line of credit agreement with a
bank to borrow up to $2,000,000 at an interest rate of prime plus 3.5%. The
agreement requires the Company to maintain a balance of cash and cash
equivalents of not less than $700,000 as of the last day of each month during
the term of the agreement. In addition, borrowings under the line of credit
agreement are secured by the Company's assets. Borrowings under the line of
credit are due upon the earlier of the closing of the Company's sale of its
common stock in an IPO or March 5, 1996, at which time the line of credit
agreement will expire.
The note payable to Pepgen relates to the Company's September 1995 investment in
Pepgen (Note 12).
The Company intends to extend the note payable to a former related party.
In March 1991, the Company issued 61,426 shares of common stock in satisfaction
of notes payable of $458,760 and accrued interest of $38,978. The difference
between the fair market value of the common stock and the exchange value of
$8.103 per share resulted in an extraordinary gain on debt extinguishment of
$485,453.
(7) LEASES
Capital Leases
In 1993, and as amended in 1995, the Company obtained two equipment lease lines
of credit which aggregated $2,300,000 and were collateralized by the related
equipment acquired with the borrowings. The Company's ability to draw additional
funds on these lease lines of credit expired in December 1995. However,
drawdowns subsequent to the expiration have been allowed under one of the lease
lines. Lease payments under the lines of credit are based on the total delivered
equipment cost multiplied by a monthly rate factor of approximately 3.5%
(approximate effective interest rate of 18% per annum). In addition, as partial
consideration for obtaining the lease lines, the Company issued certain warrants
to purchase common stock of the Company (Note 9).
F-11
<PAGE> 64
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
Equipment acquired under the lease lines of credit as of December 31, 1994 and
1995 consisted of the following:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Machinery and equipment............................ $ 226,251 $ 887,607
Leasehold improvements............................. 82,157 82,157
--------- ---------
308,408 969,764
Accumulated depreciation and amortization.......... (129,959) (250,149)
--------- ---------
$ 178,449 $ 719,615
========= =========
</TABLE>
Future minimum lease payments under capital leases as of December 31, 1995 were:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------------------------------
<S> <C>
1996............................................... $390,028
1997............................................... 349,063
1998............................................... 314,964
--------
1,054,055
Less amount representing interest....................... 251,116
--------
Present value of capital lease obligations.............. 802,939
Less current portion of capital lease obligations....... 260,214
--------
Capital lease obligations -- long-term portion.......... $542,725
========
</TABLE>
Operating Leases
The Company leases office and manufacturing space in Berkeley and Alameda,
California, under two noncancelable operating leases. Under the Alameda lease
agreement, the Company is required to provide a security deposit in the form of
a letter of credit in the amount of $50,000, secured by a $50,000 certificate of
deposit which is included in other assets in the accompanying consolidated
balance sheets. Total rent expense, net of income from a one-year sublease
agreement of $184,000 in 1995, under these leases was $209,627, $504,971, and
$327,056 for the years ended December 31, 1993, 1994, and 1995, respectively.
Future minimum rental payments under all noncancelable operating leases as of
December 31 were:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------------------------------------
<S> <C>
1996.................................................. $ 559,560
1997.................................................. 472,560
1998.................................................. 314,405
1999.................................................. 11,004
2000.................................................. 7,866
----------
Total.......................................... $1,365,395
==========
</TABLE>
(8) MANDATORILY REDEEMABLE PREFERRED STOCK
In February 1988, a Joint Venture was formed between Calypte, Inc. and CBC
Diagnostics, Inc. (CBC), formerly known as Purdue Frederick Diagnostics, Inc.
When the Company was incorporated, the Company issued common stock and
mandatorily redeemable Series A preferred stock in exchange for all the common
F-12
<PAGE> 65
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
stock of Calypte, Inc. and all of the interests of the venturers in the Joint
Venture. The Joint Venture's losses up to total capital contributions were
allocated to CBC, who reported the losses on its income tax return.
Holders of mandatorily redeemable Series A preferred stock shares are entitled
to a preference over holders of common stock in involuntary or voluntary
liquidation, in the amount of $10.00 per share plus all accrued but unpaid
dividends (the redemption value) at the date of liquidation. The Company has the
option to voluntarily redeem all or a portion of the mandatorily redeemable
Series A preferred stock at any time that funds are legally available. The
Company is required to redeem all shares of mandatorily redeemable Series A
preferred stock within 60 days of any fiscal year-end in which the Company
attains $3,000,000 in retained earnings, and funds are legally available. The
mandatorily redeemable Series A preferred stock is nonvoting.
Holders of mandatorily redeemable Series A preferred stock shares are entitled
to receive cumulative dividends at the rate of $1.20 per share per annum.
Through December 31, 1995, cumulative preferred dividends totaling $736,438 have
been charged to stockholders' equity to accrete for the mandatorily redeemable
Series A preferred stock redemption value with a corresponding increase in the
recorded amount of the mandatorily redeemable Series A preferred stock.
(9) STOCKHOLDERS' EQUITY
Reverse Stock Split
On November 22, 1994, the stockholders and the Board of Directors approved a
1-for-10 reverse stock split of the Company's common and preferred stock. Par
value remained at $0.001. The stock accounts have been reduced and additional
paid-in capital has been increased to reflect the change in the cumulative par
value of the stock issued. All share and per share information in the
accompanying consolidated financial statements have been adjusted to reflect
this reverse stock split.
Series B Convertible Preferred Stock
Holders of Series B convertible preferred stock are entitled to a preference
over the holders of mandatorily redeemable Series A preferred stock in
involuntary or voluntary liquidation in the amount of $1.864 per share, subject
to certain limitations.
Series C Convertible Preferred Stock
Holders of Series C convertible preferred stock are entitled to a preference
over the holders of mandatorily redeemable Series A preferred stock and the
holders of Series B convertible preferred stock in involuntary or voluntary
liquidation in the amount of $3.70 per share, subject to certain limitations.
Series D Convertible Preferred Stock
In 1992, 800,000 shares of Series D convertible preferred stock were issued at a
price of $7.50 per share.
In 1993, an additional 199,999 shares of Series D convertible preferred stock
were issued at a price of $7.50 per share.
In March 1994, in accordance with certain antidilution rights, each outstanding
share of Series D convertible preferred stock was converted into 1.5 shares of
Series D convertible preferred stock. The liquidation preference and conversion
price of the Series D convertible preferred stock was reduced to $5.00 per
share. Also, the Company issued an additional 617,000 shares of Series D
convertible preferred stock during 1994 at a price of $5.00 per share.
F-13
<PAGE> 66
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
Holders of the Series D convertible preferred stock are entitled to a preference
over the holders of mandatorily redeemable Series A preferred stock and the
holders of Series B and C convertible preferred stock in involuntary or
voluntary liquidation in the amount of $5.00 per share, subject to certain
limitations.
Series E Convertible Preferred Stock
In November 1994, the Board of Directors authorized the issuance of up to
3,200,000 shares of Series E convertible preferred stock. In May 1995, the Board
of Directors increased the authorized shares of Series E convertible preferred
stock to 4,000,000. During 1994, 1,077,500 shares of Series E convertible
preferred stock along with warrants to purchase an additional 1,079,100 shares
of Series E convertible preferred stock were issued at $5.00 per share. Each
warrant gives the holder the right to purchase a share of Series E convertible
preferred stock for $5.00 per share.
During 1995, an additional 890,366 shares of Series E convertible preferred
stock were issued at a price of $5.00 per share. In connection with this
issuance, warrants to purchase an additional 885,046 shares of Series E
convertible preferred stock were issued. Each of the warrants gives its holder
the right to purchase a share of Series E convertible preferred stock for $7.50.
Holders of Series E convertible preferred stock are entitled to a preference
over the holders of mandatorily redeemable Series A preferred stock, and the
holders of Series B, C, and D convertible preferred stock in involuntary or
voluntary liquidation in the amount of $5.00 per share, subject to certain
limitations.
Rights of Convertible Preferred Stockholders
Holders of the Series B, C, D, and E convertible preferred stock are entitled to
(i) receive one vote for each share of common stock into which their shares are
convertible; (ii) elect members of the Company's Board of Directors; and (iii)
receive dividends prior and in preference to any payment of any dividend on
common stock.
Automatic Conversion of Convertible Preferred Stock
The Series B, C, D and E convertible preferred stock is convertible at any time
into common stock of the Company at the initial ratio of one share of common
stock for one share of Series B, C, D or E convertible preferred stock. The
conversion ratio is adjustable under certain circumstances. Dividends are not
cumulative and will not accrue unless declared.
Series B, C, D, and E convertible preferred stock are automatically convertible
into shares of common stock immediately upon the closing of the Company's IPO at
a per share price of not less than $7.50 and which results in aggregate cash
proceeds to the Company of at least $8,000,000.
Common Stock Warrants and Options
During 1993, the Company issued stock warrants for the purchase of 35,155 shares
of the Company's common stock at exercise prices ranging from $5.00 to $7.50 per
share as partial consideration for obtaining two lease lines of credit (Note 7).
These warrants expire upon the later of 2003 or five years after the closing of
the Company's sale of its common stock in a public offering.
During 1995, the Company made an investment in Pepgen, a development stage
enterprise. The Company's investment consisted in part, of options for the
purchase of up to 475,000 shares of the Company's common stock at an exercise
price of $7.50 per share (see Note 12).
F-14
<PAGE> 67
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
Convertible Preferred Stock Warrants
In conjunction with the Series D convertible preferred stock offerings during
1993 and 1994, the Company issued a stock warrant for the purchase of 18,000
shares of the Company's Series D convertible preferred stock at an exercise
price of $5.60 per share. This warrant expires on the earlier of the warrant's
expiration date of February 1996, the date of closing of the Company's sale of
common stock at a per share price of not less than $10.00 and which results in
aggregate cash proceeds to the Company of at least $10,000,000, or upon the
occurrence of certain other events as set forth in the warrant agreement. In
addition, the Company issued stock warrants for the purchase of 2,800 shares of
the Company's Series D convertible preferred stock at an exercise price of $6.00
per share. These warrants expire in 1997.
In conjunction with the Series E convertible preferred stock offerings in
November 1994 and May, June and September 1995, the Company issued stock
warrants for the purchase of 1,079,100, 414,000, 430,046 and 41,000 shares,
respectively, of the Company's Series E convertible preferred stock. The
warrants issued in November 1994 are exercisable at $5.00 per share and expire
in November 1997. The warrants issued in May, June and September 1995 are
exercisable at $7.50 per share and expire upon the earlier of one year after the
date of issue, 60 days following receipt by the Company of FDA approval on its
urine-based HIV-1 test, or 60 days following the closing date of the Company's
IPO. As of December 31, 1995, there were 1,079,100 of the $5.00 warrants
outstanding and 885,046 of the $7.50 warrants outstanding.
Change of Control Provisions
Certain provisions of the Company's Certificate of Incorporation and Bylaws may
have the effect of preventing, discouraging or delaying any change in the
control of the Company and may maintain the incumbency of the Board of Directors
and management. The authorization of undesignated preferred stock makes it
possible for the Board of Directors to issue preferred stock with voting or
other rights or preferences that could impede the success of any attempt to
change control of the Company.
(10) INCENTIVE STOCK AND STOCK OPTION PLANS
Incentive Stock Plan
In April 1991, the Company's Board of Directors approved the adoption of the
Company's Incentive Stock Plan (the Stock Plan) which authorized the issuance of
up to 290,992 shares of the Company's common stock. In January 1992 and November
1994, 200,000 and 1,000,000 additional shares, respectively, of common stock
were authorized by the Company's Board of Directors for issuance under the Stock
Plan. In December 1995, 1,250,000 additional shares of common stock were
authorized by the Company's Board of Directors. Under the Stock Plan, employees
or consultants may be granted options that allow for the purchase of shares of
the Company's common stock.
Under the terms of the Stock Plan, nonstatutory stock options may be granted
only to employees, including directors who are employees, and consultants.
Incentive stock options may be granted only to employees.
Nonstatutory stock options may be granted under the Stock Plan at a price not
less than 85% of the fair market value of the common stock on the date the
option is granted. Incentive stock options may be granted under the Stock Plan
at a price not less than 100% of the fair market value of the common stock on
the date the option is granted. The fair value of the common stock is determined
by the Board of Directors and includes consideration of a variety of factors
including other equity transactions of the Company. Options granted under the
Stock Plan generally vest monthly over four to five years. The term of the
nonstatutory and incentive stock options granted is 10 years or less from the
date of the grant, as provided in the option agreements.
F-15
<PAGE> 68
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
Incentive and nonstatutory stock options granted to employees and consultants
who, on the date of grant, own stock representing more than 10% of the voting
power of all classes of stock of the Company are granted at an exercise price
not less than 110% of the fair market value of the common stock. Any options
granted are exercisable at the time and under conditions as determined by the
Company's Board of Directors. The Board of Directors may amend or modify the
Stock Plan at any time. The Stock Plan will terminate in 2001, unless sooner
terminated by the Board of Directors.
The following table summarizes activity under the Stock Plan:
<TABLE>
<CAPTION>
OPTIONS EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding as of December 31, 1992................. 248,845 $ 0.20 - 0.40
Granted........................................... 62,300 0.40 - 0.50
Exercised......................................... (22,444) 0.20 - 0.40
Canceled.......................................... (6,808) 0.40 - 0.50
--------- ------------
Outstanding as of December 31, 1993................. 281,893 0.20 - 0.50
Granted........................................... 148,582 0.50 - 1.00
Exercised......................................... (31,334) 0.20 - 0.50
Canceled.......................................... (84,314) 0.20 - 1.00
--------- ------------
Outstanding as of December 31, 1994................. 314,827 0.20 - 1.00
Granted........................................... 992,371 0.50 - 5.00
Exercised......................................... (4,547) 0.50 - 1.00
Canceled.......................................... (17,237) 0.50 - 1.00
--------- ------------
Outstanding as of December 31, 1995................. 1,285,414 $ 0.20 - 5.00
========= ============
Exercisable as of December 31, 1995................. 543,799 $ 0.20 - 5.00
========= ============
</TABLE>
As of December 31, 1995, 1,329,173 shares of common stock were available for
grant under the Stock Plan.
In accordance with Staff Accounting Bulletin No. 83, the Company has recorded
deferred compensation of $567,000 for the difference between the grant price and
the deemed fair value of the stock for financial reporting purposes at the grant
date related to stock options granted within one year of a planned public
offering of the Company's common stock. This amount is being amortized over the
relevant period of benefit. For the year ended December 31, 1995, $201,000 was
amortized.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
Accounting for Stock-Based Compensation. SFAS No. 123 applies to all
transactions in which an entity acquires goods or services by issuing equity
instruments such as common stock, except for employee stock ownership plans.
SFAS No. 123 establishes a new method of accounting for stock-based compensation
arrangements with employees which is fair value based. The statement encourages
(but does not require) employers to adopt the new method in place of the
provisions of Accounting Principles Board Opinion No. 25 (APB No. 25),
Accounting for Stock Issued to Employees. Companies may continue to apply the
accounting provisions of APB No. 25 in determining net income; however, they
must apply the disclosure requirements SFAS No. 123. If the Company were to
adopt the fair value based method of SFAS No. 123, a higher compensation cost
would result for fixed stock option plans and a different compensation cost
would result for the Company's contingent or variable stock option plans. The
recognition provisions and disclosure requirements of SFAS No. 123 are effective
for the year ending December 31, 1996. The Company has elected to continue to
use its current practice under APB No. 25.
Also see Notes 9 and 12 regarding outstanding warrants.
F-16
<PAGE> 69
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
1995 Employee Stock Purchase Plan
In December 1995, the Company's Board of Director's approved the Company's
Employee Stock Purchase Plan (the Purchase Plan) subject to the closing of the
Company's IPO of its common stock. The Purchase Plan is intended to qualify
under Section 423 of the Internal Revenue Code (the Code). The Company will
reserve 300,000 shares of common stock for issuance under the Purchase Plan.
Under the Purchase Plan, an eligible employee may purchase shares of common
stock from the Company through payroll deductions of up to 10% of his or her
compensation, at a price per share equal to 85% of the lower of (i) the fair
market value of the Company's common stock on the first day of an offering
period under the Purchase Plan or (ii) the fair market value of the common stock
on the last day of an offering period. Except for the first offering period,
each offering period will last for twenty-four months and will commence the
first day on which the national stock exchanges and the Nasdaq Stock Market are
open for trading, on or after May 1 and November 1 of each year. The first
offering period will begin upon the effective date of the Company's IPO and will
end at the end of the twenty-fourth month after such date. Any employee who is
customarily employed for at least 20 hours per week and more than five months
per calendar year, who has been employed for at least three consecutive months
on or before the commencement date of an offering period is eligible to
participate in the Purchase Plan.
1995 Director Option Plan
In December 1995, the Company's Board of Director's approved the Company's
Director Option Plan (the Director Option Plan) subject to the closing of the
Company's IPO of its common stock. Under the Director Option Plan, the Company
will reserve 200,000 shares of common stock for issuance to the directors of the
Company pursuant to nonstatutory stock options. Under the Director Option Plan,
directors who are not employees or consultants of the Company automatically
receive an option to purchase 12,000 shares of common stock (the First Option)
on the date on which such person first becomes a director, whether through
election by the stockholders of the Company or appointment by the Board of
Directors to fill a vacancy. Thereafter, each person shall receive an option to
acquire 3,000 shares of the Company's common stock (the Subsequent Option) on
each date such outside director is reelected. Each option granted under the
Director Option Plan shall be exercisable at 100% of the fair market value of
the Company's common stock on the date such option was granted. Twenty-five
percent of the First Option shall vest one year after the date of grant, with
25% vesting each anniversary thereafter. Twelve and one-half percent of the
shares subject to the Subsequent Option shall be exercisable on the first day of
each month following the date of grant. The plan shall be in effect for a term
of ten years unless sooner terminated under the Director Option Plan.
(11) SECTION 401(K) PLAN
In October 1995 (effective January 1, 1995), the Company adopted a Retirement
Savings and Investment Plan (the 401(k) Plan) covering the Company's full-time
employees located in the United States. The 401(k) Plan is intended to qualify
under Section 401(k) of the Internal Revenue Code, so that contributions to the
401(k) Plan by employees or by the Company, and the investment earnings thereon,
are not taxable to employees until withdrawn from the 401(k) Plan, and so that
contributions by the Company, if any, will be deductible by the Company when
made. Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by up to the statutorily prescribed annual limit and to have the
amount of such reduction contributed to the 401(k) Plan. The 401(k) Plan
permits, but does not require, additional matching contributions to the 401(k)
Plan by the Company on behalf of all participants in the 401(k) Plan. The
Company has not made any contributions to the 401(k) Plan.
F-17
<PAGE> 70
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
(12) INVESTMENT IN PEPGEN CORPORATION
During 1995, the Company purchased a 49% equity interest in Pepgen for $1.0
million paid at closing, $1.0 million payable to Pepgen pursuant to a promissory
note (Note 6) and options to purchase the Company's common stock valued at
$500,000. The options were granted to Pepgen stockholders' for the purchase of
an aggregate of 475,000 shares of the Company's common stock at a price of $7.50
per share, of which 100,000 of such shares were immediately exercisable upon
signing of the agreement and the remaining 375,000 shares become exercisable
upon attainment of certain milestones. The Company valued the options utilizing
the Black-Scholes pricing model which considered the terms of the options, other
market assumptions consistent with those as determined by an independent
valuation appraiser, a volatility index for the biotechnology industry and
certain other factors related to the probability and timing of attaining related
milestones. The options expire in September 2005. In addition, Calypte has the
right of first negotiation to purchase the remaining 51% of Pepgen at fair
market value, and the Company is entitled to elect two of the seven Board
members of Pepgen. Other than the payment of the $1.0 million dollar promissory
note, Calypte does not have any ongoing commitments to fund Pepgen.
The Company uses the equity method to account for its investment in Pepgen. Upon
completion of this transaction, the Company wrote-off its entire investment in
Pepgen as purchased in-process research and development costs.
(13) INCOME TAXES
As discussed in Note 2, the Company adopted SFAS No. 109 effective January 1,
1993 on a prospective basis. The cumulative effect of this change in accounting
for income taxes did not have a significant effect on the consolidated financial
statements.
Income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 34% to pretax losses as a result of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Computed "expected" tax expense..... $(2,101,600) $(1,829,600) $(3,418,300)
Meals and entertainment expenses,
and officers' life insurance not
deductible for income taxes....... 3,300 7,000 5,500
Research expenses................... 59,000 62,900 86,200
State tax expense................... 1,100 1,100 1,100
Losses and credits for which no
benefit has been recognized....... 2,089,200 1,790,100 3,334,500
Other............................... (49,400) (29,900) (7,400)
----------- ----------- -----------
$ 1,600 $ 1,600 $ 1,600
=========== =========== ===========
</TABLE>
F-18
<PAGE> 71
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets is presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
----------- ------------
<S> <C> <C>
Deferred tax assets:
Employee benefit reserves, including accrued
vacation.................................... $ 13,000 $ 25,500
Start-up and other capitalization.............. 9,100 7,300
Fixed assets, due to differences in
depreciation................................ 224,500 298,800
Deferred rent.................................. 36,600 35,100
Net operating loss carryover................... 6,290,100 8,941,100
Research and development credit................ 600,400 920,900
Loss contingency............................... 20,100 20,100
Purchased research and development............. -- 978,400
----------- ------------
Total gross deferred tax assets........ 7,193,800 11,227,200
Less valuation allowance......................... (7,193,800) (11,227,200)
----------- ------------
Net deferred tax asset................. $ -- $ --
=========== ============
</TABLE>
The net change in the valuation allowance for the years ended December 31, 1993,
1994, and 1995 was an increase of $2,444,000, $2,142,000, and $4,033,400,
respectively. Because there is uncertainty regarding the Company's ability to
realize its deferred tax assets, a 100% valuation allowance has been
established.
As of December 31, 1995, the Company had federal tax net operating loss
carryforwards of approximately $24,107,000, which will expire in the years 2004
through 2010. The Company also has federal research and development credit
carryforwards as of December 31, 1995 of approximately $750,000, which will
expire in the years 2005 through 2010.
State tax net operating loss carryforwards were approximately $12,133,000 and
state research and development credit carryforwards were $259,000 as of December
31, 1995. The state net operating loss carryforwards will expire in the years
1997 through 2000 and the state research and development credits will expire in
the years 2005 through 2010.
The Company's ability to utilize its net operating loss and research and
development tax credit carryforwards may be limited in the future if it is
determined that the Company experienced an ownership change, as defined in
Section 382 of the Internal Revenue Code, as a result of prior transactions or
upon the completion of the IPO.
(14) ROYALTY, LICENSE, AND RESEARCH AGREEMENTS
Royalty and License Agreements
The Company has entered into an agreement that provides for royalty payments to
former related parties based on sales of certain products conceived by the
former related parties prior to March 30, 1989.
The Company has entered into arrangements with various organizations to receive
the right to utilize certain patents and proprietary rights under licensing
agreements in exchange for the Company making certain royalty payments based on
sales of certain products and services. The royalty obligations are based on a
percentage of net sales of licensed products and include minimum annual royalty
payments under some agreements. During 1993, the Company paid $1,040,000 in
product license and related legal fees as consideration for these
F-19
<PAGE> 72
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
agreements, which has been recorded as research and development expense in the
accompanying consolidated statements of operations.
Research Agreement
In August 1993 and as amended in 1994, the Company entered into a research
agreement that allowed for a university to perform certain research on behalf of
the Company for a seven-year period. Under the terms of the agreement, the
Company may negotiate certain license rights to the inventions made by the
university resulting from this research. The Company's annual payment under this
agreement is approximately $150,000 through 1999.
(15) DISTRIBUTION AGREEMENTS
Seradyn, Inc.
In April 1995, the Company entered into an agreement with Seradyn, Inc.
(Seradyn), under which Seradyn was granted exclusive distribution rights for the
Company's urine-based HIV-1 test under the trade name "Seradyn Sentinel" for all
non-Calypte accounts in the United States and all customers in Europe, Latin
America, Africa, and the Middle East (excluding Israel). The agreement provides
for certain minimum purchases by Seradyn. If such minimum purchases are not met,
the Company has the right to terminate the agreement or render Seradyn's rights
non-exclusive for the region in which the minimum purchases were not met
provided that Seradyn will be guaranteed the prices given to Calypte's most
favored customers in the territory. The initial term of the agreement extends
through December 1998. Seradyn has the right to extend the agreement for
successive two-year terms provided it has met minimum sales requirements.
Seradyn has agreed to assist the Company in obtaining regulatory approvals in
its distribution territory at the Company's expense. The agreement also grants
Seradyn a right of first refusal on distribution rights for certain new products
which may be developed during the term of the agreement.
Otsuka Pharmaceutical Co., Ltd.
In August 1994, the Company entered into a distribution agreement with Otsuka
Pharmaceutical Co., Ltd. (Otsuka), a drug development and distribution company
incorporated in Japan. Otsuka is also a stockholder of the Company. The
agreement gives Otsuka exclusive distribution rights for the Company's
urine-based HIV-1 test and to use the name "Calypte" to market the test in 22
Asian countries, Australia and New Zealand. To maintain exclusivity, the
agreement requires that Otsuka purchase certain annual minimums, which increase
each year, and total 70 million tests over ten years. Otsuka has agreed to use
its best efforts to obtain regulatory approvals for the product in its
territory. In 1993, Otsuka paid $500,000 to the Company to be applied against
future commercial product purchases from the Company. The Company recorded this
$500,000 payment as deferred revenue as of December 31, 1994 and 1995.
The agreement between the Company and Otsuka is for a term of ten years, and is
terminable without cause by Otsuka upon 120-days notice. The Company has
committed up to one-half of its total manufacturing capacity to Otsuka. If the
Company is unable to meet Otsuka's manufacturing requirements, Otsuka has a
right to manufacture tests itself. The agreement also grants Otsuka the right of
first refusal to distribute certain new products which may be developed during
the term of the agreement.
F-20
<PAGE> 73
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
Travenol Laboratories (Israel) Ltd.
In December 1994, the Company entered into an agreement with Travenol
Laboratories (Israel) Ltd. (Travenol). The agreement gives Travenol exclusive
rights to distribute the Company's urine-based HIV-1 test under the trade name
"Calypte" within Israel. Under the agreement, Travenol will undertake
registration of the product in Israel with the Company paying regulatory fees.
The term of the agreement is perpetual unless terminated earlier for specified
causes. No minimum purchase levels are required under this agreement.
(16) CONSULTING AND EMPLOYEE AGREEMENTS
On April 10, 1995, the Company entered into an employment agreement with an
officer which is effective from May 1, 1995 through December 31, 1996. Under the
agreement the officer is receiving a salary of $195,000 per year and is eligible
for a maximum bonus in 1996 of $35,000. The agreement is automatically renewable
each year subject to three months notice prior to the end of each calendar year.
In the event the officer's employment with the Company is terminated by the
Company other than for cause, the officer may be entitled to receive his base
salary for up to 12 months. In addition, the Company agreed to pay the officer's
moving expenses in connection with his relocation to California.
On January 1, 1995, the Company entered into an employment agreement with an
officer for the year ended December 31, 1995, which provided for an annual
salary of $140,000 plus an annual bonus not to exceed $35,000 per year. The
agreement was automatically renewed for the year ending December 31, 1996 and is
automatically renewable each year subject to three months notice prior to the
end of each calendar year.
The Company has entered into other employee and consulting agreements with
varying terms, in the ordinary course of business.
(17) RELATED PARTY TRANSACTIONS
Included in revenue earned under research and development contracts is
$2,099,116 for the period from February 18, 1988 (inception) to December 31,
1995 earned from CBC or its affiliates. The founders of the Company included
entities affiliated with CBC.
In March 1992, the Company advanced $85,000 to a stockholder and officer of the
Company in exchange for a note receivable issued by the stockholder and officer.
In anticipation of the forgiveness of a portion of the note, the Company
wrote-off half of the note during 1995. The remaining $42,500 balance of the
note is due March 20, 1997 and is secured by shares in the Company's common
stock acquired by the borrower since 1989. Interest income recognized by the
Company and paid by the borrower was $6,132, $5,950, and $5,950 in 1993, 1994,
and 1995, respectively.
In January 1994, the Company entered into an agreement with a stockholder of the
Company for management services. Expense related to cash payments under this
agreement for such services was $135,000 and $137,500 for 1994 and 1995,
respectively. In addition, options to purchase 154,276 shares of the Company's
common stock at a per share price of $0.50 were granted to the stockholder.
(18) LEGAL MATTERS
The Company is subject to litigation from time to time in the ordinary course of
business. Although the amount of any liability with respect to such litigation
cannot be determined, in the opinion of management such liability, if any, will
not have a material adverse effect on the Company's financial condition or
results of operations.
F-21
<PAGE> 74
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994, AND 1995
(19) ACCOUNTING CHANGES
In connection with the Company's filing of a registration statement with the SEC
for the planned sale of common stock in an IPO and pursuant to the provisions of
APB Opinion No. 20, Accounting Changes, the Company has retroactively restated
its consolidated financial statements for all periods presented to reclassify
its mandatorily redeemable Series A preferred stock out of permanent equity and
to accrue dividends on the manditorily redeemable Series A preferred stock
regardless of their declaration by the Company's Board of Directors. The impact
of this change was to recognize dividends of $120,000 in each of the years in
the three-year period ended December 31, 1995 and $736,438 for the period
February 18, 1988 (inception) through December 31, 1995. In addition, the
Company changed its policy with regards to the date it commences depreciating
and amortizing amounts capitalized for new facilities to the date such
facilities are available for their intended use. This change resulted in an
increase in the 1994 net loss of approximately $86,000.
F-22
<PAGE> 75
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, 1996
DECEMBER 31, --------------------------------
1995 ACTUAL PRO FORMA(NOTE 2)
------------ ------------ -----------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents........................................... $ 2,558,650 $ 1,841,696 $ 1,339,003
Other current assets................................................ 755,572 914,591 914,591
------------ ------------ ------------
Total current assets......................................... 3,314,222 2,756,287 2,253,594
Property and equipment, net........................................... 1,854,010 1,884,298 1,884,298
Note receivable from officer.......................................... 42,500 42,500 42,500
Other assets.......................................................... 126,144 143,485 143,485
------------ ------------ ------------
$ 5,336,876 $ 4,826,570 $ 4,323,877
============ ============ ============
LIABILITIES, MANDATORILY REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses............................... $ 1,697,447 $ 2,249,153 $ 2,249,153
Notes payable -- current portion.................................... 3,258,456 3,250,536 2,747,843
Capital lease obligations -- current portion........................ 260,214 423,384 423,384
Deferred revenue.................................................... 500,000 625,000 625,000
------------ ------------ ------------
Total current liabilities.................................... 5,716,117 6,548,073 6,045,380
Deferred rent obligation.............................................. 87,357 76,876 76,876
Capital lease obligations -- long-term portion........................ 542,725 682,867 682,867
------------ ------------ ------------
Total liabilities............................................ 6,346,199 7,307,816 6,805,123
Mandatorily redeemable Series A preferred stock, $0.001 par value;
100,000 shares authorized, issued, and outstanding; aggregate
redemption and liquidation value of $1,000,000 plus cumulative
dividends........................................................... 1,736,438 1,766,438 1,766,438
Commitments and contingencies
Stockholders' equity (deficit):
Series B convertible preferred stock, $0.001 par value; 804,860
shares authorized; 804,846 shares issued and outstanding as of
December 31, 1995 and March 31, 1996 (-0- shares pro forma);
aggregate liquidation value of $1,500,235 as of March 31, 1996
($-0- pro forma).................................................. 805 805 --
Series C convertible preferred stock, $0.001 par value; 1,702,727
shares authorized; 1,702,705 shares issued and outstanding as of
December 31, 1995 and March 31, 1996 (-0- shares pro forma);
aggregate liquidation value of $6,300,004 as of March 31, 1996
($-0- pro forma).................................................. 1,703 1,703 --
Series D convertible preferred stock, $0.001 par value; 2,130,051
shares authorized; 2,116,999 shares issued and outstanding as of
December 31, 1995 and March 31, 1996 (-0- shares pro forma);
aggregate liquidation value of $10,585,000 as of March 31, 1996
($-0- pro forma).................................................. 2,117 2,117 --
Series E convertible preferred stock, $0.001 par value; 4,000,000
shares authorized; 1,967,866 and 2,207,866 shares issued and
outstanding as of December 31, 1995 and March 31, 1996,
respectively (-0- shares pro forma); aggregate liquidation value
of $11,039,330 as of March 31, 1996 ($-0- pro forma).............. 1,967 2,207 --
Common stock, $0.001 par value; 12,000,000 shares authorized
(20,000,000 shares pro forma); 573,899 and 574,018 shares issued
and outstanding as of December 31, 1995 and March 31, 1996,
respectively (7,406,434 shares pro forma)......................... 574 574 7,406
Additional paid-in capital.......................................... 28,014,030 29,329,343 29,329,343
Deferred compensation............................................... (365,871) (366,914) (366,914)
Deficit accumulated during development stage........................ (30,401,086) (33,217,519) (33,217,519)
------------ ------------ ------------
Total stockholders' equity (deficit)......................... (2,745,761) (4,247,684) (4,247,684)
============ ============ ============
$ 5,336,876 $ 4,826,570 $ 4,323,877
============ ============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-23
<PAGE> 76
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
THREE MONTHS FEBRUARY 18, 1988
ENDED MARCH 31, (INCEPTION)
--------------------------- THROUGH MARCH 31,
1995 1996 1996
----------- ----------- -----------------
<S> <C> <C> <C>
Revenue earned under research and development
contracts, substantially from related
parties........................................ $ -- $ -- $ 2,390,187
Operating expenses:
Research and development....................... 970,811 1,827,559 22,174,123
Purchased in-process research and development
costs....................................... -- -- 2,500,000
Selling, general and administrative............ 491,527 896,185 11,822,590
----------- ----------- ------------
Loss from operations................... (1,462,338) (2,723,744) (34,106,526)
Interest income.................................. 60,761 36,939 606,767
Interest expense................................. (17,749) (134,845) (737,864)
Other income..................................... 21,066 5,217 75,660
----------- ----------- ------------
Loss before income taxes and
extraordinary item................... (1,398,260) (2,816,433) (34,161,963)
Income taxes..................................... -- -- (60,750)
----------- ----------- ------------
Loss before extraordinary item......... (1,398,260) (2,816,433) (34,222,713)
Extraordinary gain on debt extinguishment........ -- -- 485,453
----------- ----------- ------------
Net loss............................... (1,398,260) (2,816,433) (33,737,260)
Less dividend on mandatorily redeemable Series A
preferred stock................................ (30,000) (30,000) (766,438)
----------- ----------- ------------
Net loss attributable to common stockholders..... $(1,428,260) $(2,846,433) $ (34,503,698)
=========== =========== ============
Net loss per share attributable to common
stockholders................................... $ (0.21) $ (0.41)
=========== ===========
Weighted average shares used to compute net loss
per share attributable to common
stockholders................................... 6,933,854 6,934,520
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-24
<PAGE> 77
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
THREE MONTHS FEBRUARY 18, 1988
ENDED MARCH 31, (INCEPTION)
----------------------- THROUGH MARCH 31,
1995 1996 1996
---------- ---------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................... $(1,398,260) $(2,816,433) $(33,737,260)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................... 104,354 187,070 2,004,317
Loss on sale or disposal of equipment........... 61,718 -- 115,192
Extraordinary gain on debt extinguishment....... -- -- (485,453)
Amortization of deferred compensation........... -- 44,391 245,505
Compensation paid by stock issuance............. 22,000 -- 47,421
Purchased in-process research and development
costs......................................... -- -- 2,500,000
Changes in operating assets and liabilities:
Other current assets.......................... (7,176) (159,019) (675,752)
Organizational costs.......................... -- -- (123,074)
Other assets.................................. (300) (17,341) (424,825)
Accounts payable, accrued expenses and
deferred revenue........................... (192,909) 676,706 2,776,222
Deferred rent obligation...................... (981) (10,481) 76,876
Note payable in exchange for expenses paid on
behalf of the Company...................... -- -- 191,964
----------- ----------- ------------
Net cash used in operating activities...... (1,411,554) (2,095,107) (27,488,867)
----------- ----------- ------------
Cash flows from investing activities:
Proceeds from disposition of equipment............. -- -- 25,000
Purchase of equipment.............................. (106,550) -- (2,276,552)
Investment in Pepgen Corporation................... -- -- (1,000,000)
----------- ----------- ------------
Net cash used in investing activities...... (106,550) -- (3,251,552)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from the sale of stock.................... 18,900 1,300,119 29,579,524
Expenses paid related to sale of stock............. (779) -- (870,006)
Prepaid license fee................................ -- -- 500,000
Principal payments on notes payable................ (7,026) (7,920) (924,846)
Principal payments on capital lease obligations.... (21,000) (66,688) (233,513)
Proceeds from notes payable........................ -- -- 2,692,035
Capital contributions.............................. -- -- 75,500
Joint ventures' capital contributions.............. -- -- 1,610,779
Proceeds from capital lease obligations............ -- 152,642 152,642
----------- ----------- ------------
Net cash (used in) provided by financing
activities............................... (9,905) 1,378,153 32,582,115
----------- ----------- ------------
Net (decrease) increase in cash and cash
equivalents........................................ (1,528,009) (716,954) 1,841,696
Cash and cash equivalents at beginning of period..... 4,477,924 2,558,650 --
----------- ----------- ------------
Cash and cash equivalents at end of period........... $2,949,915 $1,841,696 $ 1,841,696
=========== =========== ============
Supplemental disclosure of cash flow activities:
Cash paid for interest............................. $ 17,749 $ 95,822 $ 574,000
Cash paid for income taxes......................... -- -- 60,100
Supplemental disclosure of noncash activities:
Acquisition of equipment through obligations under
capital leases.................................. -- 217,358 1,187,122
Accrued liabilities converted to notes payable..... -- -- 363,091
Accrued liabilities converted to common stock...... -- -- 38,978
Notes payable converted to common stock............ -- -- 458,760
Notes payable converted to Series B convertible
preferred stock................................. -- -- 50,000
Note payable issued upon investment in Pepgen
Corporation..................................... -- -- 1,000,000
Options issued upon investment in Pepgen
Corporation..................................... -- -- 500,000
Dividend on mandatorily redeemable Series A
preferred stock................................. 30,000 30,000 766,438
Deferred compensation attributable to stock
grants.......................................... -- 45,425 612,416
</TABLE>
See accompanying notes to consolidated condensed financial statements.
F-25
<PAGE> 78
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1995 AND 1996
The accompanying unaudited consolidated condensed financial statements have been
prepared by the Company, pursuant to the rules and regulations of the Securities
and Exchange Commission, and reflect all adjustments which, in the opinion of
management, are necessary for a fair statement of the results for the interim
periods presented. Operating results for the three months ended March 31, 1996,
are not necessarily indicative of the results to be expected for the year.
Certain information in footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
has been condensed or omitted pursuant to such rules and regulations. These
consolidated condensed financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto for the year ended
December 31, 1995.
(1) THE COMPANY AND BASIS OF PRESENTATION
Calypte Biomedical Corporation (the Company) was incorporated on November 11,
1989 and is a development stage enterprise. The Company's primary activities
have been to obtain funding and to perform research and development. The Company
is in the process of applying for approvals to market and sell its product in
both domestic and foreign markets.
The accompanying consolidated condensed financial statements include the results
of operations of the Company and its wholly owned subsidiary, Calypte, Inc., and
Calypte Biomedical Company (the Joint Venture). All significant intercompany
accounts and transactions have been eliminated in consolidation.
The Company accounts for its 49% interest in Pepgen Corporation (Pepgen) under
the equity method (Note 7).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Pro Forma Financial Information
Pro forma stockholders' equity (deficit) of the Company as of March 31, 1996
gives effect to the conversion of 6,832,416 shares of Series B, C, D, and E
convertible preferred stock into 6,832,416 shares of common stock and gives
effect to the reincorporation of the Company into a Delaware company and
authorization for the Company to issue up to 20 million shares of common stock.
Pro forma financial information also gives effect, as of March 31, 1996, to
repayment of $502,693 of current notes payable which were repaid in April 1996.
Net Loss Per Share Attributable to Common Stockholders
Except as noted below, net loss per share attributable to common stockholders is
computed using the weighted average number of shares of common stock
outstanding. Common equivalent shares from stock options and warrants are
excluded from the computation as their effect is antidilutive, except that,
pursuant to the Securities and Exchange Commission (SEC) Staff Accounting
Bulletin No. 83, common stock issued for consideration below the assumed IPO
price and warrants exercised, warrants granted and stock options granted with
exercise prices below the IPO price during the 12-month period preceding the
date of the initial
F-26
<PAGE> 79
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
MARCH 31, 1995 AND 1996
filing of the registration statement, even when antidilutive, have been included
in the calculation of common equivalent shares, using the treasury stock method
based on the assumed IPO price, as if they were outstanding for all periods
presented.
Furthermore, common equivalent shares from convertible preferred stock that will
be converted upon the completion of the Company's IPO are included using the "as
if converted" method.
In accordance with paragraph 23 of Accounting Principles Board Opinion No. 15,
pro forma net loss per share has been presented to reflect the use of proceeds
from the Company's IPO to repay the mandatorily redeemable Series A preferred
stock and to repay certain debt obligations as of the beginning of the period
presented. The pro forma weighted average shares for the three months ended
March 31, 1996 were 7,645,234 and pro forma net loss was $2,681,587 which
resulted in pro forma net loss per share of $0.35 for the three months ended
March 31, 1996.
(3) NOTES PAYABLE -- CURRENT PORTION
Notes payable consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ----------
<S> <C> <C>
Prime plus 3.5%; 11.75% as of March 31, 1996; note
payable to a bank; secured by property and
equipment; due July 5, 1996...................... $2,000,000 $2,000,000
10% note payable to a former related party; secured
by property and equipment; due August 1, 1996.... 247,843 247,843
12% note payable; secured by equipment; due April
1996............................................. 10,613 2,693
4% note payable to Pepgen, due the earlier of: 60
days following either FDA approval of the
Company's urine-based HIV-1 test or completion of
an IPO; or April 23, 1996 (extended to October
31, 1996 in May 1996)............................ 1,000,000 1,000,000
---------- ----------
Notes payable -- current portion......... $3,258,456 $3,250,536
========== ==========
</TABLE>
In December 1995, the Company entered into a line of credit agreement with a
bank to borrow up to $2,000,000 at an interest rate of prime plus 3.5%. The
agreement requires the Company to maintain a balance of cash and cash
equivalents of not less than $700,000 as of the last day of each month during
the term of the agreement. In addition, borrowings under the line of credit
agreement are secured by the Company's assets. In March 1996, the Company
extended the due date of the line of credit such that the line of credit is due
July 5, 1996. In connection with the extension, the Company made a $500,000
principal payment in April 1996 and the available line of credit was reduced to
$1,500,000. Also, see note 9.
The note payable to Pepgen Corporation (Pepgen) relates to the Company's
September 1995 investment in Pepgen.
(4) LEASE COMMITMENTS
In 1993, and as amended in 1995, the Company obtained two equipment lease lines
of credit which aggregated $2,300,000 and were collateralized by the related
equipment acquired with the borrowings. The Company's ability to draw additional
funds on these lines of credit expired in December 1995. However, drawdowns
subsequent to the expiration have been allowed under one of these lease lines.
Lease payments under the lines of credit are based on the total delivered
equipment cost multiplied by a monthly rate factor of approximately
F-27
<PAGE> 80
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
MARCH 31, 1995 AND 1996
3.5% (approximate effective interest rate of 18% per annum). Through March 31,
1996, total borrowings under these equipment lease lines of credit were
approximately $1,340,000 to be repaid through 1998.
(5) STOCKHOLDERS' EQUITY
Automatic Conversion of Convertible Preferred Stock
Series B, C, D, and E convertible preferred stock are automatically convertible
into shares of common stock immediately upon the closing of the Company's IPO at
a per share price of not less than $7.50 and which results in aggregate cash
proceeds to the Company of at least $8,000,000.
Convertible Preferred Stock Warrants
On February 6, 1996, 18,000 warrants issued in conjunction with the Series D
convertible preferred stock offerings during 1993 and 1994 expired unexercised.
Warrants to purchase 2,800 shares of the Company's Series D convertible
preferred stock at an exercise price of $6.00 per share remain outstanding and
unexercised as of March 31, 1996. These warrants expire in 1997.
In conjunction with the Series E convertible preferred stock offerings in
November 1994 and in May, June and September 1995, the Company issued stock
warrants for the purchase of 1,079,100, 414,000, 430,046 and 41,000 shares,
respectively, of the Company's Series E convertible preferred stock. The
warrants issued in November 1994 are exercisable at $5.00 per share and expire
in November 1997. The warrants issued in May, June and September 1995 are
exercisable at $7.50 per share and expire upon the earlier of one year after the
date of issue, 60 days following receipt by the Company of FDA approval on its
urine-based HIV-1 test, or 60 days following the closing date of the Company's
IPO.
During the three months ended March 31, 1996, the Company received proceeds of
$1,000,000 and $300,000 from the exercise of 200,000 of the $5.00 warrants and
40,000 of the $7.50 warrants, respectively. As of March 31, 1996, there were
879,100 of the $5.00 warrants outstanding and 845,046 of the $7.50 warrants
outstanding.
(6) INCENTIVE STOCK PLAN
Under the Company's Incentive Stock Plan (the Stock Plan), 1,490,992 shares are
authorized for issuance and in December 1995, 1,250,000 additional shares of
common stock were authorized by the Company's Board of Directors for issuance
under the Stock Plan. Under the Stock Plan, employees or consultants may be
granted options that allow for the purchase of shares of the Company's common
stock.
The following table summarizes activity under the Stock Plan for the three
months ended March 31, 1996:
<TABLE>
<CAPTION>
OPTIONS EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding as of December 31, 1995................. 1,285,414 $ 0.20 - 5.00
Granted........................................... 7,400 1.00
Exercised......................................... (119) 1.00
Canceled.......................................... (134) 1.00
---------
Outstanding as of March 31, 1996.................... 1,292,561 0.20 - 5.00
========
Exercisable as of March 31, 1996.................... 630,780 0.20 - 5.00
========
</TABLE>
As of March 31, 1996, 1,321,907 shares of common stock were available for grant
under the Stock Plan.
F-28
<PAGE> 81
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
MARCH 31, 1995 AND 1996
(7) INVESTMENT IN PEPGEN CORPORATION
During 1995, the Company purchased a 49% equity interest in Pepgen for $1.0
million paid at closing, $1.0 million payable to Pepgen pursuant to a promissory
note (Note 3) and options to purchase the Company's common stock valued at
$500,000. The options were granted to Pepgen stockholders for the purchase of an
aggregate of 475,000 shares of the Company's common stock at a price of $7.50
per share, of which 100,000 of such shares were immediately exercisable upon
signing of the agreement and the remaining 375,000 shares become exercisable
upon attainment of certain milestones. The options expire in 2005. In addition,
Calypte has the right of first negotiation to purchase the remaining 51% of
Pepgen at fair market value, and the Company is entitled to elect two of the
seven Board members of Pepgen. Other than the payment of the $1.0 million dollar
promissory note, Calypte does not have any ongoing commitments to fund Pepgen.
The Company uses the equity method to account for its investment in Pepgen. Upon
completion of this transaction, the Company wrote-off its entire investment in
Pepgen as purchased in-process research and development costs.
(8) LEGAL MATTERS
The Company is subject to litigation from time to time in the ordinary course of
business. Although the amount of any liability with respect to such litigation
cannot be determined, in the opinion of management such liability, if any, will
not have a material adverse effect on the Company's financial condition or
results of operations.
(9) SUBSEQUENT EVENTS
Series E Stock Warrants
From March 31, 1996 to May 10, 1996, the Company received an additional $131,000
and $1,740,000 from the exercise of an additional 26,200 of the $5.00 warrants
and 231,976 of the $7.50 warrants, respectively. As of May 10, 1996, there were
852,900 of the $5.00 warrants and 613,070 of the $7.50 warrants outstanding.
Royalty and License Agreement
In April 1996, the Company signed an agreement with a corporation for the joint
development of a diagnostic product. As part of the agreement, the Company
granted a license to the corporation to make, use and sell the product. The
Company will receive royalty payments from the corporation based on a percentage
of net sales of the licensed product.
Authorization of Initial Public Offering
On May 16, 1996, the Board of Directors authorized the Company's management to
file a registration statement with the SEC permitting the Company to sell shares
of its common stock to the public.
Extension of Line of Credit
On July 5, 1996, the Company extended the due date of the line of credit with
the bank such that the line of credit is due August 5, 1996. In connection with
the extension, the Company made a $250,000 principal payment in July 1996 and
the available line of credit was reduced to $1,250.000.
F-29
<PAGE> 82
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
MARCH 31, 1995 AND 1996
Automatic Conversion of Convertible Preferred Stock
In July 1996, the Company's Certificate of Incorporation was amended to provide
that the Series B, C, D, and E convertible preferred stock are automatically
convertible into shares of common stock immediately upon the closing of the
Company's initial public offering. The previous provisions which required a
minimum per share price of $7.50 and minimum aggregate cash proceeds to the
Company of $8,000,000 were eliminated from the Company's Certificate of
Incorporation.
F-30
<PAGE> 83
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
PRO FORMA FINANCIAL INFORMATION
During 1995, the Company acquired a 49% interest in Pepgen Corporation (Pepgen)
for $2.5 million. The $2.5 million was comprised of $1.0 million cash, a $1.0
million note payable and options granted to Pepgen shareholders to purchase
475,000 shares of the Company's common stock valued at $500,000. Other than the
payment of the $1.0 million note payable, Calypte does not have any ongoing
commitments to fund Pepgen. The Company uses the equity method to account for
its investment in Pepgen. Upon completion of the investment, the Company wrote
off its entire investment in Pepgen as purchased in-process research and
development costs.
The following Unaudited Pro Forma Consolidated Condensed Statement of Operations
gives the effect to the investment as if it had occurred on January 1, 1995. No
other unaudited pro forma consolidated condensed financial information is
presented since the transaction is already included in the audited Consolidated
Balance Sheet of the Company as of December 31, 1995 and in the unaudited
Consolidated Condensed Statement of Operations of the Company for the
three-month period ended March 31, 1996.
The Unaudited Pro Forma Consolidated Condensed Statement of Operations does not
purport to present the results of operations of Calypte Biomedical Corporation
had the transaction assumed therein occurred on the date specified, nor is it
indicative of the results of operations that may be achieved in the future.
The Unaudited Pro Forma Consolidated Condensed Statement of Operations is based
on certain assumptions and the adjustment described in Note(1) to the Unaudited
Pro Forma Consolidated Condensed Statement of Operations included herein and
should be read in conjunction with Management's Discussion and Analysis of
Financial Conditions and Results of Operations and the Consolidated Financial
Statements of the Company and the related Notes thereto and the Financial
Statements of Pepgen and the related Notes thereto included herein.
F-31
<PAGE> 84
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CALYPTE PRO FORMA CALYPTE
HISTORICAL ADJUSTMENT PRO FORMA
----------- ---------- -----------
<S> <C> <C> <C>
Revenue earned under research and development
contracts, substantially from related parties..... $ -- $ -- $ --
Operating expenses:
Research and development.......................... 5,017,545 -- 5,017,545
Purchased in-process research and development
costs.......................................... 2,500,000 -- 2,500,000
Selling, general and administrative............... 2,862,049 -- 2,862,049
------------- -------- -------------
Loss from operations...................... (10,379,594) -- (10,379,594)
Interest income..................................... 194,944 -- 194,944
Interest expense.................................... (116,842) (30,000)(1) (146,842)
Other income........................................ 11,707 -- 11,707
------------- -------- -------------
Loss before income taxes.................. (10,289,785) (30,000) (10,319,785)
Income taxes........................................ (1,600) -- (1,600)
------------- -------- -------------
Net loss.................................. (10,291,385) (30,000) (10,321,385)
Less dividend on mandatorily redeemable Series A
preferred stock................................... (120,000) -- (120,000)
------------- -------- -------------
Net loss attributable to common stockholders........ $(10,411,385) $(30,000) $(10,441,385)
============= ======== =============
Net loss per share attributable to common
stockholders...................................... $ (1.50) $ (1.51)
============= =============
Weighted average shares used to compute net loss per
share attributable to common stockholders......... 6,934,334 6,934,334
============= =============
</TABLE>
- ---------------
(1) For purposes of the accompanying unaudited pro forma financial statement,
additional interest expense has been provided on the $1 million Pepgen note
payable at the rate of 4% for the period January 1 through September 30,
1995, the assumed transaction date for purposes of the pro forma financial
statement.
F-32
<PAGE> 85
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Pepgen Corporation:
We have audited the consolidated balance sheets of Pepgen Corporation and
subsidiary (a development stage enterprise) (the Company) as of December 31,
1993 and 1994, and the related consolidated statements of operations,
shareholders' equity (deficiency) and cash flows for the period from July 8,
1992 (inception) through December 31, 1992, for each of the years in the
two-year period ended December 31, 1994, and for the period from July 8, 1992
(inception) through December 31, 1994. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Pepgen Corporation
and subsidiary (a development stage enterprise) as of December 31, 1993 and
1994, and the results of their operations and their cash flows for the period
from July 8, 1992 (inception) through December 31, 1992, for each of the years
in the two-year period ended December 31, 1994, and for the period from July 8,
1992 (inception) through December 31, 1994, in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 1 to the
consolidated financial statements, the Company's losses from operations and
accumulated deficit during the development stage raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in note 1 to the consolidated
financial statements. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
KPMG Peat Marwick LLP
San Francisco, California
November 15, 1995
F-33
<PAGE> 86
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1993 1994
--------- ---------
<S> <C> <C>
Current assets:
Cash............................................................... $ 11,691 $ 1,905
Other current assets............................................... 12,794 1,711
--------- ---------
Total current assets....................................... 24,485 3,616
Intangible assets, net of accumulated amortization of $1,573 in 1993
and $17,024 in 1994................................................ 105,716 113,758
Organization costs, net of accumulated amortization of $6,576 in 1993
and $12,822 in 1994................................................ 24,648 18,402
--------- ---------
$ 154,849 $ 135,776
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable................................................... $ 28,552 $ 24,816
Accrued salary..................................................... 8,030 105,000
Accrued consulting fees............................................ 3,000 24,700
Convertible notes payable to shareholder........................... -- 80,000
--------- ---------
Total current liabilities.................................. 39,582 234,516
Convertible notes payable to shareholder............................. 55,000 --
--------- ---------
Total liabilities.......................................... 94,582 234,516
--------- ---------
Commitments and subsequent events
Shareholders' equity (deficiency):
Convertible preferred stock, no par value, 20,000,000 shares
authorized, 763,300 shares issued and outstanding in 1993 and
1994, aggregate liquidation value of $381,650................... 381,650 381,650
Common stock, no par value, 40,000,000 shares authorized, 3,960,000
shares issued and outstanding in 1993 and 1994.................. 4,500 4,500
Deficit accumulated during the development stage................... (325,883) (484,890)
--------- ---------
Total shareholders' equity (deficiency).................... 60,267 (98,740)
--------- ---------
$ 154,849 $ 135,776
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-34
<PAGE> 87
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JULY 8, 1992 JULY 8, 1992
(INCEPTION) YEARS ENDED DECEMBER (INCEPTION)
THROUGH 31, THROUGH
DECEMBER 31, ----------------------- DECEMBER 31,
1992 1993 1994 1994
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
Revenue earned under research,
development and licensing agreements... $ -- $ -- $ 100,000 $ 100,000
Operating expenses:
Research and development............... 9,000 110,375 91,728 211,103
General and administrative............. 62,434 142,474 166,479 371,387
--------- --------- ---------
Total operating expenses....... 71,434 252,849 258,407 582,490
Loss before income taxes....... (71,434) (252,849) (158,207) (482,490)
Provision for income taxes............... 800 800 800 2,400
--------- --------- ---------
Net loss....................... $(72,234) $(253,649) $(159,007) $ (484,890)
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-35
<PAGE> 88
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
PERIOD FROM JULY 8, 1992 (INCEPTION) THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
DEFICIT
CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK DURING THE
------------------ ------------------ DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT STAGE TOTAL
------- -------- --------- ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Net loss for the period from July 8,
1992 (inception) through December
31, 1992.......................... -- $ -- -- $ -- $ (72,234) $(72,234)
------- -------- --------- ------ -------- --------
Balances as of December 31, 1992.... -- -- -- -- (72,234) (72,234)
Issuance of common shares for
cash.............................. -- -- 3,900,000 3,900 -- 3,900
Issuance of convertible preferred
shares for cash................... 700,000 350,000 -- -- -- 350,000
Issuance of common shares on
conversion of note payable and
accrued interest.................. -- -- 60,000 600 -- 600
Issuance of convertible preferred
shares on conversion of note
payable and accrued interest...... 63,300 31,650 -- -- -- 31,650
Net loss............................ -- -- -- -- (253,649) (253,649)
------- -------- --------- ------ -------- --------
Balances as of December 31, 1993.... 763,300 381,650 3,960,000 4,500 (325,883) 60,267
Net loss............................ -- -- -- -- (159,007) (159,007)
------- -------- --------- ------ -------- --------
Balances as of December 31, 1994.... 763,300 $381,650 3,960,000 $4,500 $(484,890) $(98,740)
======= ======== ========= ====== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-36
<PAGE> 89
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JULY 8, 1992 JULY 8, 1992
(INCEPTION) (INCEPTION)
THROUGH YEARS ENDED DECEMBER 31 THROUGH
DECEMBER 31, ----------------------- DECEMBER 31,
1992 1993 1994 1994
------------ --------- --------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................. $(72,234) $(253,649) $(159,007) $ (484,890)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization........................... 2,582 7,817 21,697 32,096
Purchased research and development
cost................................. -- 49,315 -- 49,315
(Increase) decrease in other current
assets............................... -- (12,794) 11,083 (1,711)
Increase in intangible assets.......... (50,453) (56,836) (23,493) (130,782)
Increase in organization costs......... (3,989) (27,235) -- (31,224)
Increase (decrease) in accounts payable
and accrued liabilities.............. 63,568 (23,986) 114,934 154,516
--------- ---------- ---------- ----------
Net cash used in operating
activities...................... (60,526) (317,368) (34,786) (412,680)
--------- ---------- ---------- ----------
Cash flows used in investing activities --
loans to and acquisition of PepTech....... -- (49,315) -- (49,315)
--------- ---------- ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of notes payable to
shareholder............................ 55,000 55,000 80,000 190,000
Principal repayments on notes payable to
shareholder............................ -- (25,000) (55,000) (80,000)
Proceeds from issuance of common stock.... -- 3,900 -- 3,900
Proceeds from issuance of convertible
preferred stock........................ -- 350,000 -- 350,000
Change in bank overdraft.................. 5,526 (5,526) -- --
--------- ---------- ---------- ----------
Net cash provided by financing activities... 60,526 378,374 25,000 463,900
--------- ---------- ---------- ----------
Net (decrease) increase in cash............. -- 11,691 (9,768) 1,905
Cash at beginning of period................. -- -- 11,691 --
--------- ---------- ---------- ----------
Cash at end of period....................... $ -- $ 11,691 $ 1,905 $ 1,905
========= ========== ========== ==========
Supplemental disclosure of cash flow
information:
Cash paid during the year for income
taxes.................................. $ 800 $ 800 $ 800 $ 2,400
Supplemental disclosure of noncash financing
activities:
Conversion of note payable and accrued
interest to shareholder to common and
convertible preferred stock............ -- 32,250 -- 32,250
</TABLE>
See accompanying notes to consolidated financial statements.
F-37
<PAGE> 90
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1994
(1) THE COMPANY
Pepgen Corporation (the Company) was incorporated in California on July 8, 1992
as a biopharmaceutical company and is currently conducting research.
The Company is in the development stage and has experienced losses since
inception; the Company's accumulated deficit during the development stage, (July
8, 1992 (inception) through December 31, 1994) was $484,890, including a loss of
$159,007 for the year ended December 31, 1994. Cash flows used in operations
were $34,786 in 1994. The Company's ability to continue as a going concern is
dependent upon management's ability to raise additional equity capital or obtain
debt financing to fund future operations. Management is actively seeking
additional financing and, during 1995, entered into an agreement with another
development stage enterprise to obtain such financing (Note 9).
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern and, accordingly, do not give
effect to adjustments that would be necessary should the Company be required to
realize its assets and satisfy its liabilities in other than the normal course
of business.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, PepTech, Inc. (PepTech). All intercompany
transactions and balances have been eliminated in consolidation.
Organization Costs
Organization costs are stated at cost and are being amortized over five years
using the straight-line method.
Research and Development
Research and development costs are expensed as incurred (Note 3).
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted rates expected to
apply to taxable income in years in which those temporary differences are
expected to be recovered or settled. Valuation allowances are established when
it is more likely than not that deferred tax assets will not be realized.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, at the date of financial statements, and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
F-38
<PAGE> 91
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993 AND 1994
Intangible Assets
Intangible assets consist of license fees and patent support costs. Such fees
and costs are capitalized and amortized over their estimated useful life of ten
years using the straight-line method. Amortization commences once final approval
of the related patent has been obtained. Such fees and costs are charged to
operations when it is determined that the patent will not be obtained or when
the Company determines that it will not pursue research or development of the
subject technology.
(3) ACQUISITION OF PEPTECH
On July 16, 1993, the Company acquired all of the outstanding capital stock of
PepTech for $25,000 cash, the cancellation of notes receivable from PepTech
totaling $20,000, and other expenses of $4,315. The acquisition was accounted
for as a purchase.
The sole shareholder and employee of PepTech is the principal researcher with
respect to certain technology and compounds pursuant to which the Company has
obtained license rights. PepTech has obtained a research grant, and has applied
for additional grants related to such technology and compounds. At the date of
acquisition, PepTech had no tangible assets or liabilities. Accordingly, the
entire purchase price was charged to operations at acquisition as purchased
research and development expense.
(4) NOTES PAYABLE TO SHAREHOLDER
Notes payable to shareholder (President) consist of the following at December
31:
<TABLE>
<CAPTION>
1993 1994
------- --------
<S> <C> <C>
Promissory notes to shareholder, uncollateralized, due
December 31, 1995..................................... $55,000 $ 80,000
Less current portion.................................... -- (80,000)
-------- -------
Long term portion....................................... $55,000 $ --
======== =======
</TABLE>
During 1994, the Company issued convertible promissory notes totaling $80,000 to
a shareholder and officer, payable on December 31, 1995. Of the total, $60,000
of these notes bear interest at 10% per annum while $20,000 are non-interest
bearing. These notes, including accrued interest, are convertible at the option
of the holder, in whole or in part, into shares of fully-paid and nonassessable
convertible preferred stock of the Company upon issuance of preferred stock by
the Company for proceeds of not less than $1,000,000 (the New Preferred Stock),
at a rate per share equal to the then fair market value. Shares issued upon
conversion would have the same rights, preferences and privileges, and be
subject to all of the same restrictions, as the New Preferred Stock. In
connection with the issuance of the convertible promissory notes, the noteholder
obtained an option to purchase up to 160,000 shares of common stock for the
price of $.01 per share at the time of issuance of the New Preferred Stock. The
Company must provide the holder notice of at least 20 days prior to the issuance
of the New Preferred Stock. Should the noteholder not give the Company notice of
his election to convert, the conversion feature and common stock option will
expire on the earlier of the issuance of New Preferred Stock or December 31,
1995.
Subsequent to December 31, 1994 the Company issued to the President and another
shareholder additional convertible promissory notes in the amount of $127,000.
These notes have the same terms as those issued in 1994, including the option to
purchase up to 254,000 shares of common stock at a price of $.01 per share.
Also, during 1995 the $20,000 non-interest bearing notes existing at December
31, 1994 and $100,000 of the notes issued in 1995 were repaid with all related
conversion and stock option features (for the purchase of 240,000
F-39
<PAGE> 92
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993 AND 1994
shares) expiring unexercised. The remaining balance of notes payable, including
accrued interest, all to the President, were converted into a new note payable
on November 15, 1995 which bears interest at 6.25% per annum. All conversion and
stock option features related to the notes expired unexercised.
During 1994, the Company issued convertible promissory notes totaling $55,000 to
a shareholder and officer with the same terms as the notes issued in 1993. The
1993 notes were prepaid in 1994 and the conversion feature and related option
expired.
(5) SHAREHOLDERS' EQUITY (DEFICIENCY)
The Company has two classes of stock: convertible preferred stock and common
stock. As of December 31, 1994, preferred stock consists of only Series A, for
which the Company has designated 8,000,000 of the 20,000,000 authorized shares.
The preferences, privileges, and restrictions granted or imposed on the
preferred stock are:
Dividend Rights
Holders of Series A preferred stock are entitled to dividends at an
annual rate of 8% per annum of the original $.50 per share price
(Original Purchase Price), if declared, prior to the payment of any
dividend on common stock. The right to such dividends is not
cumulative. No shares of common stock shall receive any dividend at a
rate which is greater than the rate at which the dividends are
simultaneously paid in respect of the preferred stock. No dividends
have been declared through December 31, 1994.
Conversion Rights
Each share of Series A preferred stock is, at any time, at the option
of the holder, convertible into shares of fully-paid and nonassessable
common stock. Each share of preferred stock is convertible into the
number of shares of common stock that results from dividing the
conversion price of preferred stock in effect at the time of
conversion into the Original Purchase Price for each share of
preferred stock being converted. The conversion price is subject to
adjustment from time to time.
Automatic Conversion
Upon either the voluntary conversion of at least 70% of the originally
issued shares of Series A preferred stock or the completion of a
qualified initial public offering in which the Company receives
proceeds of at least $5,000,000 at a price of at least $3.00 per
share, subject to adjustment, each share of preferred stock shall
automatically be converted into shares of common stock at the
conversion price for preferred stock then in effect.
Liquidation Rights
In the event of any liquidation, dissolution, or winding up of the
Company, the holders of Series A preferred stock shall be entitled to
an amount equal to the Original Purchase Price per share, plus all
declared but unpaid dividends, if any. If insufficient funds are
available to pay the full preference amount, then the amount available
shall be distributed ratably among the holders of the Series A
preferred stock. After payment of the liquidation preference to all
preferred shareholders, remaining assets of the Company shall be
distributed ratably to all common shareholders.
F-40
<PAGE> 93
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993 AND 1994
Voting Rights
Holders of Series A preferred stock are entitled to the number of
votes per share that would be equivalent to the number of shares of
common stock into which the shares of Series A preferred stock is
convertible.
Stock Options
During 1993, the Board of Directors of the Company approved the 1993 Flexible
Stock Incentive Plan (the Plan). Under the Plan, the Company may grant
nonqualified and incentive stock options to directors, officers, employees and
consultants of the Company to acquire up to 2,300,000 common shares of the
Company, which the Company has reserved. The exercise price of the options shall
equal the fair market value of the stock at the date of grant. The term of any
stock option may not exceed ten years from the date of grant. All options are
nonassignable.
In 1994, the Company granted to its President and founding shareholder options
to purchase of 100,000 shares of common stock at $.001 per share, the common
stock's then fair market value. Subsequent to December 31, 1994, the Company
granted additional options to its President and founding shareholder to purchase
another 100,000 common shares of stock at $.001 per share, the then fair market
value of the common stock. During 1995 all of these outstanding options were
exercised.
In 1995 the Board of Directors of the Company approved the 1995 Stock Option
Plan (the 1995 Plan). Under the 1995 Plan, the Company may grant nonqualified
and incentive stock options to directors, officers, employees and consultants of
the Company to acquire up to 30% of the fully diluted number of common shares of
the Company. The exercise price of the option shall equal the fair market value
of the stock at the date of grant. The term of any stock option may not exceed
ten years from the date of grant. All options are nonassignable.
(6) RESEARCH, DEVELOPMENT AND LICENSING AGREEMENTS
In 1992, the Company entered into a licensing agreement with a university to
obtain the right to utilize certain patents in exchange for a $57,000 cash
payment, future milestone payments of up to $250,000 and future royalty payments
or sales on products covered by the technology under license.
In 1992, the Company entered into an agreement with a university to perform
certain research and development work. Under this agreement, the Company paid
eight quarterly cash installments of $9,000 over the research period, which
expired in October 1994.
In 1993, the Company entered into an agreement with an independent research
group to perform certain research and development work. Under this agreement,
the Company paid quarterly cash installments of $8,000 over the research period,
which expired in May 1995. As of December 31, 1994, $13,300 was accrued under
this agreement.
During 1993, the Company entered into a licensing agreement with an independent
research group to obtain the right to utilize certain patents and proprietary
rights in exchange for a $15,000 cash payment, future milestone payments of up
to $125,000 and future royalty payments on sales of products covered by the
technology under license.
During 1994, the Company entered into an agreement with a pharmaceutical company
whereby consideration, totaling $100,000, was received by the Company in
exchange for the rights to evaluate the Company's material over a defined period
of time which is dependent on the achievement of certain technical milestones
and to enter into a worldwide, exclusive licensing agreement with the Company
for the acquisition of the related
F-41
<PAGE> 94
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993 AND 1994
patent, should it be obtained. The agreement was extended for an additional
month for an additional $25,000 in 1995.
In 1995, the Company entered into a research and development agreement with an
international company for the right to evaluate certain of the Company's
research, and an exclusive right to negotiate a license for patent rights in
certain countries. The Company received a $400,000 nonrefundable payment, and
will receive another $600,000 over the term of the agreement which expires in
1996. In connection with the agreement, the Company paid an $80,000 finders fee
to another party.
(7) COMMITMENTS
Consulting Agreement
In August 1993, the Company entered into a consulting agreement with one of its
founding shareholders. This agreement was terminated in August 1994. The total
amount earned and accrued as of December 31, 1994 was $24,700.
Employment Agreement
In July 1992, the Company entered into a five-year employment agreement with its
President, Chief Executive Officer and one of its founding shareholders. The
total amount earned in 1994 and 1993 was $108,000 and $95,000, respectively, of
which $116,000 was accrued at December 31, 1994.
(8) INCOME TAXES
The provision for income taxes for all periods presented in the accompanying
consolidated statements of operations represent minimum California franchise
taxes.
The significant tax effected components of temporary differences and
carryforwards of December 31, 1993 and 1994 are as follows:
<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
Capitalized research and development............... $ 10,300 $ 17,000
Accrued expenses................................... 15,800 62,000
Net operating loss carryforwards................... 84,200 94,000
Depreciation and amortization...................... 38,000 40,800
Other.............................................. 2,800 8,000
--------- --------
Total deferred tax assets.................. 151,100 221,800
Valuation allowance................................ (151,100) (221,800)
--------- --------
Net deferred tax asset..................... $ -- $ --
========= ========
</TABLE>
The Company has established a valuation allowance to offset all deferred tax
assets at December 31, 1993 and 1994 as it is considered more likely than not
that the Company will not receive future benefit.
The Company had a net operating loss carryforward as of December 31, 1994
available to offset future taxable income for federal tax purposes of
approximately $268,200, which expires from 2002 to 2009. The Company's
utilization of its net operating loss and credit carryforwards to offset taxable
income will be subject to annual limitations pursuant to Section 382 of the
Internal Revenue Code due to cumulative changes in stock ownership.
F-42
<PAGE> 95
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993 AND 1994
(9) SUBSEQUENT EVENT
Subsequent to December 31, 1994, the Company and its shareholders entered into a
Master Stock Purchase Agreement (the Agreement) with Calypte Biomedical
Corporation, a development stage enterprise (Calypte), that provided for the
issuance of 3,041,406 of new shares of convertible preferred stock to Calypte in
exchange for cash of $45,875 and a note receivable in the amount of $1,000,000.
The Agreement also provided for the acquisition by Calypte of all 763,300
outstanding shares of the Company's convertible preferred stock from the
existing preferred shareholders for $954,125 in cash and for the issuance of
options for the purchase of Calypte common stock to the existing common
shareholders of the Company. After completion of the above transaction, Calypte
owned 49% of the Company's outstanding stock.
The convertible preferred stock acquired by Calypte is convertible into common
stock of the Company, at the option of the holder, at any time, at an initial
ratio of one share of common stock for one share of convertible preferred stock
and carries other conversion, voting, and dividend rights similar to those held
by the previous convertible preferred stock shareholders. The convertible
preferred stock has a liquidation preference aggregating $2,000,000 in the event
of an involuntary or voluntary liquidation.
Concurrent with the above transaction, the Company issued warrants to Calypte
that provide Calypte with the right to purchase up to 5,435,294 shares of the
Company's convertible preferred stock at a price of $0.01 per share. The
warrants may be exercised only to the extent that currently outstanding or new
options issued under the Company's 1995 Stock Option Plan are exercised for the
purchase of the Company's common stock or as a result of the Company granting
stock awards to any management employee of the Company for no consideration at a
ratio of 99.5% of the newly issued common shares.
The $1,000,000 note receivable from Calypte bears interest at 4% per annum and
is payable at the earlier of (a) six months from the date of issuance or (b) 60
days following either Calypte receiving FDA approval on its HIV-1 urine testing
product or the closing of the sale of Calypte's common stock in a public
offering.
Other terms of the Agreement provide Calypte with certain rights with regard to
the appointment of directors and the right of first negotiation to purchase the
remaining 51% of the Company at fair market value.
Also, concurrent with the Agreement, the Company entered into a separate
agreement that provides for payments to the former convertible preferred
shareholders and to the current common shareholders upon the receipt of
licensing fees from certain prospects identified as of the date of the
Agreement. The aggregate obligation to these current and former shareholders
consists of 20% of the net licensing fees, as defined, received prior to October
1996 from any of the prospects identified in the Agreement.
F-43
<PAGE> 96
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER
31, 1995
-----------
<S> <C>
Current assets -- Cash and cash equivalents................................... $ 193,320
Intangible assets, net of accumulated amortization of $20,808................. 209,778
Organization costs, net of accumulated amortization of $19,067................ 12,157
---------
$ 415,255
=========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued liabilities.................................... $ 210,565
Note payable to shareholder................................................. 98,523
---------
Total liabilities................................................... 309,088
---------
Shareholders' equity:
Convertible preferred stock, no par value, 20,000,000 shares authorized,
3,804,706 shares issued and outstanding.................................. 1,427,525
Common stock, no par value, 40,000,000 shares authorized, 4,160,000 shares
issued and outstanding................................................... 4,700
Amounts due from shareholder................................................ (1,011,667)
Deficit accumulated during the development stage............................ (314,391)
---------
Total shareholders' equity.......................................... 106,167
---------
$ 415,255
=========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-44
<PAGE> 97
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
JULY 8, 1992
(INCEPTION)
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1995 1995
------------ ------------
<S> <C> <C>
Revenue earned under research, development and licensing
agreements and grants....................................... $ 481,385 $ 581,385
Operating expenses:
Research and development.................................... 36,868 247,971
General and administrative.................................. 256,225 627,612
--------- ---------
Total operating expenses............................ 293,093 875,583
--------- ---------
Income (loss) from operations....................... 188,292 (294,198)
Other income (expense):
Interest income............................................. 12,598 12,598
Interest expense............................................ (17,351) (17,351)
--------- ---------
Income (loss) before income taxes................... 183,539 (298,951)
Provision for income taxes.................................... 13,040 15,440
--------- ---------
Net income (loss)................................... $ 170,499 $ (314,391)
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-45
<PAGE> 98
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
(UNAUDITED)
PERIOD FROM JULY 8, 1992 (INCEPTION) THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
DEFICIT
CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK AMOUNTS DUE DURING THE
---------------------- ------------------ FROM DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT SHAREHOLDER STAGE TOTAL
--------- ---------- --------- ------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss for the period from July 8,
1992 (inception) through December 31,
1992................................. -- $ -- -- $ -- $ -- $ (72,234) $ (72,234)
-------
-----
--------- ---------- ---------- ---------- -------- --------
Balances as of December 31, 1992....... -- -- -- -- -- (72,234) (72,234)
Issuance of common shares for cash..... -- -- 3,900,000 $3,900 -- -- 3,900
Issuance of convertible preferred
shares for cash...................... 700,000 350,000 -- -- -- -- 350,000
Issuance of common shares on conversion
of note payable and accrued
interest............................. -- -- 60,000 600 -- -- 600
Issuance of convertible preferred
shares on conversion of note payable
and accrued interest................. 63,300 31,650 -- -- -- -- 31,650
Net loss............................... -- -- -- -- -- (253,649) (253,649)
-------
-----
--------- ---------- ---------- ---------- -------- --------
Balances as of December 31, 1993....... 763,300 381,650 3,960,000 4,500 -- (325,883) 60,267
Net loss............................... -- -- -- -- -- (159,007) (159,007)
-------
-----
--------- ---------- ---------- ---------- -------- --------
Balances as of December 31, 1994....... 763,300 381,650 3,960,000 4,500 -- (484,890) (98,740)
Exercise of stock options.............. -- -- 200,000 200 -- -- 200
Issuance of convertible preferred
shares for cash and promissory
note................................. 3,041,406 1,045,875 -- -- (1,000,000 ) -- 45,875
Interest earned on promissory note..... -- -- -- -- (11,667 ) -- (11,667)
Net income............................. -- -- -- -- -- (170,499) (170,499)
-------
-----
--------- ---------- ---------- ---------- -------- --------
Balances as of December 31, 1995....... 3,804,706 $1,427,525 4,160,000 $4,700 $(1,011,667) $(314,391) $ 106,167
========= ========== ========== ============ ========== ======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-46
<PAGE> 99
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
JULY 8, 1992
(INCEPTION)
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1995 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................ $ 170,499 $ (314,391)
--------- ---------
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Noncash interest on shareholder note payable.................. 11,523 11,523
Amortization.................................................. 10,029 39,875
Purchased research and development cost....................... -- 49,315
(Increase) decrease in other current assets................... (9,956) (11,667)
Increase in intangible assets................................. (99,805) (230,587)
Increase in organization costs................................ -- (31,225)
Increase in accounts payable and accrued liabilities.......... 56,050 212,817
--------- ---------
Net cash provided by (used in) operating activities......... 138,340 (274,340)
--------- ---------
Cash used in investing activities -- acquisition of PepTech:....... -- (49,315)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable to shareholders.......... 127,000 317,000
Principal repayments of notes payable to shareholders............ (120,000) (200,000)
Proceeds from exercise of stock options.......................... 200 200
Proceeds from issuance of common stock........................... -- 3,900
Proceeds from issuance of convertible preferred stock............ 45,875 395,875
--------- ---------
Net cash provided by financing activities..................... 53,075 516,975
--------- ---------
Net increase in cash.......................................... 191,415 193,320
Cash and cash equivalents, beginning of period..................... 1,905 --
--------- ---------
Cash and cash equivalents, end of period........................... $ 193,320 $ 193,320
========= =========
Supplemental disclosure of noncash financing activities:
Promissory note due from shareholder received in exchange for
preferred stock............................................... $1,000,000 $1,000,000
Interest earned on promissory note due from shareholder.......... 11,667 11,667
Interest expense on shareholder note payable converted to new
shareholder note payable...................................... 11,523 11,523
Refinance of shareholder notes payable........................... 87,000 87,000
Conversion of note payable and accrued interest to common and
preferred stock............................................... -- 32,250
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes.................................................. 800 3,200
Interest...................................................... 5,828 5,828
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-47
<PAGE> 100
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1995
(1) THE COMPANY
Pepgen Corporation (the "Company") was incorporated in California on July 8,
1992 as a biopharmaceutical company.
The Company is in the development stage, has a working capital deficit and has
an accumulated deficit during the development stage of $314,391 at December 31,
1995. Moreover, the recoverability of the carrying value of the Company's assets
is entirely dependent upon the Company's ability to develop products related to
its patents, obtain regulatory approvals and successfully market its products.
Revenues to date have been primarily from research and development agreements in
an effort to develop the Company's products. The Company's planned principal
operations have not yet commenced. The Company is actively seeking additional
funding; however, the outcome of these activities is uncertain. These matters
raise a substantial doubt about the Company's ability to continue as a going
concern.
The accompanying consolidated financial statements have been prepared on a basis
of accounting principles applicable to a going concern and, accordingly, they do
not give effect to adjustments that would be necessary should the Company be
required to realize its assets and satisfy its liabilities in other than the
normal course of business.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, PepTech, Inc. (PepTech). All intercompany
transactions have been eliminated in consolidation.
Intangible Assets
Intangible assets consist of license fees and patent support costs. Such fees
and costs are capitalized and amortized over their estimated useful life of ten
years using the straight-line method. Amortization commences once final approval
of the related patent has been obtained. Such fees and costs are charged to
operations when it is determined that the patent will not be obtained or when
the Company determines that it will not pursue research or development of the
subject technology.
Organization Costs
Organization costs are stated at cost and are being amortized over their
estimated useful lives of five years using the straight-line method.
Research and Development
Research and development costs are expensed as incurred.
Income Taxes
Deferred income taxes are recognized for temporary differences between financial
statement and income tax bases of assets and liabilities using enacted rates in
effect for the years in which the differences are expected to reverse. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. The provision for income taxes represents the
tax payable for the period and the change during the period in deferred tax
assets and liabilities.
F-48
<PAGE> 101
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
DECEMBER 31, 1995
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, and amounts on deposit with
financial institutions that are readily convertible into cash with an acquired
maturity date of 90 days or less.
Fair Value of Financial Instruments
Financial assets and liabilities have carrying values which approximate their
fair values for all periods presented.
(3) ACQUISITION OF PEPTECH
On July 16, 1993, the Company acquired all of the outstanding capital stock of
PepTech for $25,000 cash, the cancellation of notes receivable from PepTech
totaling $20,000, and other expenses of $4,315.
The sole shareholder and employee of PepTech is the principal researcher with
respect to certain technology and compounds pursuant to which the Company has
obtained license rights. Moreover, PepTech has obtained a research grant, and
has applied for additional grants, related to such technology and compounds. At
the date of acquisition, PepTech had no tangible assets or liabilities.
Accordingly, the entire purchase price was charged to operations as purchased
research and development expenses.
(4) NOTE PAYABLE TO SHAREHOLDER
Note payable to shareholder consists of the following at December 31, 1995:
<TABLE>
<S> <C>
Promissory note to shareholder, uncollateralized, interest
payable at 6.25% per annum, no stated repayment date.......... $ 98,523
Less current portion............................................ (98,523)
--------
$ --
========
</TABLE>
(5) EQUITY
In 1995, the Company entered into a Master Stock Purchase Agreement (the
"Agreement") with a biomedical firm whereby, upon the completion of the events
contemplated by the Agreement, as described below, the biomedical firm would
acquire 49% of the fully-diluted common stock of the Company.
Under the terms of the Agreement, the biomedical firm purchased all of the
outstanding preferred shares from the existing shareholders for cash and certain
options to purchase common stock in the biomedical firm, and an additional
3,041,406 preferred shares from the Company for total consideration to the
Company of $1,045,875. Cash of $45,875 was paid at the closing and a promissory
note in the amount of $1,000,000 was issued. This promissory note bears interest
at 4% per annum and is payable at the earlier of: (a) October 1996 or (b) sixty
days following either FDA approval of the biomedical firm's major product or
completion of an initial public offering of the biomedical firm's common stock.
The Company also issued warrants to purchase an additional 5,435,294 shares of
the Company's preferred stock at $.001 per share. These warrants may be
exercised only to the extent that currently outstanding or new options issued
under the Company's 1995 Stock Option Plan are exercised for the purchase of the
Company's common stock or as a result of the Company granting stock awards to
any management employee of the Company for no consideration at a ratio of 99.5%
of the newly issued common shares.
F-49
<PAGE> 102
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
DECEMBER 31, 1995
If payment of the promissory note is not made in accordance with its terms, the
Company may repurchase or redeem the 3,041,406 shares of preferred stock for
$45,875, and the warrants to purchase the additional shares of preferred stock
shall expire.
Preferred Stock
The Company has authorized 20,000,000 shares of preferred stock of which
10,000,000 shares are designated as Series A Preferred Stock ("Series A
preferred"). The other 10,000,000 shares are currently undesignated.
Holders of Series A preferred stock are entitled to annual dividends at the rate
of 8%, payable quarterly. The dividends are not cumulative and are only payable
if declared by the Company's Board of Directors. Interest shall not be paid on
any undeclared or unpaid dividends. No dividends may be paid to common stock
shareholders until full annual dividends are declared and paid to the preferred
shareholders. No dividends have been declared as of December 31, 1995.
In the event of any liquidation, dissolution or wind up of the Company, either
voluntary or involuntary, the Series A preferred holders are entitled to an
aggregate liquidation value of $2,000,000.
The Series A preferred shares are convertible, at the holder's option, at any
time into an equal number of shares of the Company's common stock. The preferred
shares will automatically convert into common shares upon the earlier of: (a)
the closing of a firm commitment initial public offering with a price per common
share of no less than $3.00 and aggregate gross proceeds of no less than
$5,000,000, or (b) the voluntary conversion into common shares of at least 70%
of the issued and outstanding Series A preferred shares.
Series A preferred shareholders have voting rights in their equivalent number of
common shares, as if converted. Under the terms of the Agreement, the biomedical
firm is entitled to 49% of the voting interest in the Company at all times prior
to the conversion of Series A preferred shares to common shares.
(6) STOCK OPTIONS
During 1995, the Company approved the 1995 Incentive and Non-Statutory Stock
Option Plan (the Plan). This Plan replaced the 1993 Flexible Stock Incentive
Plan. Under the Plan, the Company may grant nonqualified and incentive stock
options to officers, employees and consultants of the Company to acquire up to
5,657,143 common shares of the Company. As of December 31, 1995, there were
1,885,695 options granted and outstanding under the Plan to the Company's Chief
Executive Officer, Chairman and founding shareholder as part of his employment
agreement (Note 7). These options are fully vested, are exercisable, and have an
exercise price of $.02 per share, the estimated fair market value of the
Company's common stock at the grant date.
During 1995, the Company approved a resolution with respect to compensation of
outside directors. Each outside director will be granted options to acquire
20,000 shares of common stock to be vested over four years, at the rate of 5,000
per year, at an exercise price of $.02 per share. As of December 31, 1995, no
options had been granted to outside directors.
In 1994, the Company granted options to acquire 100,000 shares of common stock
to its President and founding shareholder at $.001 per share, the estimated fair
market value of the Company's common stock at the grant date. In March 1995, the
Company granted an additional 100,000 common stock options to its President at
$.001 per share, the estimated fair market value of the Company's common stock
at the grant
F-50
<PAGE> 103
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
DECEMBER 31, 1995
date. The options to acquire 200,000 shares of common stock were exercised in
November 1995 for cash proceeds of $200.
(7) COMMITMENTS AND CONTINGENCIES
Research and Development Agreements
In 1993, the Company entered into an agreement with an independent research
group to perform certain research and development work. Under this agreement,
the Company paid quarterly cash installments over the research period, which
expired in May 1995. The amount paid under this agreement in 1995 was
approximately $11,000.
During 1994, the Company entered into an agreement with a major pharmaceutical
company whereby consideration, totaling $100,000, was received by the Company in
exchange for the rights to evaluate the Company's material over a defined period
of time and to enter into a worldwide, exclusive licensing agreement with the
Company for the acquisition of the related patent, should it be obtained. The
agreement was extended for one additional month during 1995 for an additional
$25,000. The agreement was mutually terminated subsequent to this one month
extension.
During 1995, the Company entered into an agreement with a major Japanese
research firm whereby a non-refundable cash payment of $400,000 was received by
the Company in 1995 for the right to use the Company's material in a research
and development program over a defined period of time. The agreement provides
for total consideration of $1,000,000 with the remainder to be paid upon the
attainment of certain milestones by the research program. Upon completion of the
research program, the Japanese firm has the option to pay the Company an
additional $3,000,000 for the right to negotiate an exclusive licensing
arrangement for the product in Japan and Korea. The negotiation period would be
over three months and the option payment would be non-refundable regardless of
the outcome of the negotiations.
Federal Research Grant
The Company is a recipient of a federal research grant amounting to $75,002. As
of December 31, 1995, the Company received $56,385 of this grant. The grant
expires on March 1, 1996.
Employment Agreement
In November 1995, the Company entered into an employment agreement with its
Chief Executive Officer, Chairman and one of its founding shareholders. The
agreement, which replaced a previous employment agreement, provides for minimum
annual salary and benefits. In the event of involuntary termination, as defined,
the Company is liable for twelve months of salary. The Company also granted the
executive fully vested options to acquire 1,885,695 shares of common stock (Note
6). The agreement expires on December 31, 1996, unless renewed. The total amount
earned by this executive in 1995 under employment agreements was $120,000.
Corporate Partnership Agreement
In March 1995, the Company entered into a twelve-month corporate partnership
agreement with an agent whereby the Company would pay the agent a defined
percentage of revenues or license fees received as a result of the agent
locating a corporate partner in Japan or Korea. During the year ended December
31, 1995, the Company paid the agent $80,000 for services performed.
F-51
<PAGE> 104
PEPGEN CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
DECEMBER 31, 1995
Net Licensing Fee Agreements
In September 1995, the Company entered into net licensing agreements, whereby
for a period of one year, the Company will pay ten percent of any net licensing
fee, as defined, received by the Company to the common shareholders and an
additional ten percent of any net licensing fee, as defined, to the previous
holders of preferred stock (prior to the investment by the biomedical firm --
see Note 5). No amounts were earned or paid under these net licensing fee
agreements for the year ended December 31, 1995.
(8) INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED JULY 8, 1992
DECEMBER 31, (INCEPTION) THROUGH
1995 DECEMBER 31, 1995
------------ -------------------
<S> <C> <C>
Current:
Federal...................................... $ -- $ --
State........................................ 13,040 15,440
------- -------
$ 13,040 $15,440
======= =======
</TABLE>
The Company's effective tax rate differs from the U.S. federal statutory rate
due primarily to losses incurred for which benefits have not been realized, the
change in the valuation allowance and the effect of state income tax.
The tax effected amounts of temporary differences as of December 31, 1995 are as
follows:
<TABLE>
<S> <C>
Deferred tax assets:
Capitalized research and development...................... $ 20,647
State income taxes........................................ 4,434
Accrued expenses.......................................... 85,875
Net operating loss carryforwards.......................... 17,014
Other..................................................... 5,291
---------
Total deferred tax assets......................... 133,261
Valuation allowance....................................... (133,261)
---------
Net deferred tax asset............................ $ --
=========
</TABLE>
The Company has a net operating loss carryforward as of December 31, 1995
available to offset future taxable income for federal tax purposes of
approximately $50,000, which begins to expire in 2001.
In general, Section 382 of the Internal Revenue Code includes provisions which
limit the amount of net operating loss carryforwards and other tax attributes
that may be used annually in the event that a 50% ownership change (as defined)
takes place in any three-year period. The Company is currently evaluating
whether any adjustments are required as a result of Section 382.
(9) CONCENTRATION OF CREDIT RISK
The Company maintains its cash accounts in a commercial bank. At December 31,
1995, cash on deposit was in excess of the federally insured limit of $100,000
by approximately $84,000.
F-52
<PAGE> 105
THE CALYPTE HIV-1 URINE-BASED TEST HAS NOT BEEN APPROVED BY THE FDA FOR
MARKETING IN THE UNITED STATES. THE TEST CANNOT BE SOLD IN THE UNITED STATES
UNLESS AND UNTIL SUCH FDA APPROVAL IS OBTAINED, IF AT ALL.
<PAGE> 106
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD
BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 5
The Company............................ 12
Use of Proceeds........................ 12
Dividend Policy........................ 12
Capitalization......................... 13
Dilution............................... 14
Selected Consolidated Financial Data... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 16
Business............................... 19
Management............................. 35
Certain Transactions................... 42
Principal Stockholders................. 45
Description of Capital Stock........... 46
Shares Eligible for Future Sale........ 47
Underwriting........................... 49
Legal Matters.......................... 50
Experts................................ 50
Additional Information................. 50
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
------------------
UNTIL AUGUST 20, 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,400,000 SHARES
LOGO
COMMON STOCK
--------------------
PROSPECTUS
--------------------
PACIFIC GROWTH EQUITIES, INC.
July 26, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 107
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale of
Common Stock being registered. All amounts are estimates except the SEC
registration fee NASD filing fee and Nasdaq listing fee.
<TABLE>
<CAPTION>
AMOUNT TO BE
PAID BY THE
COMPANY
------------
<S> <C>
SEC registration fee............................................ $ 9,914
NASD filing fee................................................. 3,375
Nasdaq listing fee.............................................. 50,000
Printing and engraving costs.................................... 125,000
Legal fees and expenses......................................... 400,000
Accounting fees and expenses.................................... 230,000
Directors' and officers' prospectus liability insurance......... 120,000
Blue Sky fees and expenses...................................... 15,000
Transfer Agent and Registrar fees............................... 15,000
Miscellaneous expenses.......................................... 51,711
--------
Total................................................. $1,020,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.
Article VIII of the Registrant's Certificate of Incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware
law.
Article VI of the Registrant's Bylaws provides for the indemnification of
officers, directors and third parties acting on behalf of the corporation if
such person acted in good faith and in a manner reasonably believed to be in and
not opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his conduct was unlawful.
The Registrant has entered into indemnification agreements with its directors
and executive officers, in addition to indemnification provided for in the
Registrant's Bylaws, and intends to enter into indemnification agreements with
any new directors and executive officers in the future.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since May, 1993, the Registrant has issued and sold the following unregistered
securities.
1. In August 1993, the Company issued and sold 2,500 shares of Common Stock to
one consultant at a price of $0.80 per share.
2. In April 1994, the Company issued and sold 10,000 shares of Common Stock to
one accredited investor at a price of $0.80 per share.
3. In September 1994, the Company issued and sold 1,250 shares of Common Stock
to three employees at prices ranging from $0.50 to $1.00.
4. From December 28, 1992 to June 9, 1994, the Registrant issued and sold
2,116,999 shares of Series D Preferred Stock, convertible into 2,116,999 shares
of Common Stock, to a total of 44 accredited investors for an aggregate purchase
price of $10,584,996.
5. From November 10, 1994, to September 1, 1995, the Registrant issued to 72
accredited investors warrants to acquire 1,964,146 shares of Series E Preferred
Stock exercisable at prices per share ranging from $5.00 to $7.50.
II-1
<PAGE> 108
6. On June 26, 1995, the Registrant issued to 2 accredited investors warrants to
acquire 35,155 shares of Common Stock exercisable at prices per share ranging
from $5.00 to $7.50.
7. From February 2, 1993 to June 23, 1994, the Registrant issued warrants to 2
accredited investors to acquire 2,800 shares of Series D Preferred Stock
exercisable at prices per share ranging from $5.60 to $6.00.
8. On October 12, 1995, the Registrant issued to the 6 shareholders of Pepgen
options to acquire 475,000 shares of Common Stock at $7.50.
9. From May 1, 1993 to June 21, 1996, the Registrant issued employees, officers,
and consultants options to acquire 1,369,186 shares of Common Stock at exercise
prices per share ranging from $0.22 to $5.00.
10. From November 30, 1994 to June 21, 1996 the Registrant issued and sold a
total of 2,660,437 shares of Series E Preferred Stock, convertible into
2,660,437 shares of Common Stock, to a total of 72 accredited investors for an
aggregate purchase price of $15,420,080.
11. From May 1993 to May 1996, the Company has issued to those individuals
referred to in 9 above 39,527 shares of Common Stock upon exercise of options at
prices ranging from $0.20 to $1.00 per share.
The sales of the securities in paragraphs 2, 4, 5, 6, 7, 8 and 10 were deemed to
be exempt from registration under the Securities Act in reliance on Section 4(2)
of the Securities Act, or Regulation D or Regulation S promulgated thereunder.
The sales of securities in paragraphs 1, 3, 9, and 11 were deemed to be exempt
from registration under the Securities Act in reliance on Rule 701 promulgated
under Section 3(b) of the Securities Act as transactions by an issuer not
involving a public offering or transactions pursuant to compensatory benefit
plans and contracts relating to compensation as provided under such Rule 701.
With respect to the grants of stock options, an exemption from registration was
unnecessary in that none of the transactions involved a "sale" of securities as
such term is used in Section 2(3) of the Securities Act.
The recipients of the securities in each such transaction represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof, and appropriate legends
were affixed to the share certificates and instruments issued in such
transactions. All recipients received adequate information about the Registrant
or had access, through employment or other relationships to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement among the Registrant and the Underwriters
therein represented by Pacific Growth Equities, Inc.
3.1* Restated Articles of Incorporation of Calypte Biomedical Corporation, a
California corporation, as currently in effect.
3.2* Form of Restated Certificate of Incorporation of the Company to be filed
after the closing of the offering made under this Registration Statement.
3.3* Bylaws of the Registrant, as currently in effect.
4.1* Registrant's specimen common stock certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1* Form of Indemnification Agreement between the Company and each of its
directors and officers.
10.2* Incentive Stock Plan.
10.3* 1995 Director Option Plan.
10.4 1995 Employee Stock Purchase Plan.
10.5* Lease Agreement between the Registrant and Charles A. Grant and Mark
Greenberg, dated as of November 30, 1990.
10.6* Second Lease Extension Agreement between Registrant and Charles A. Grant
and Mark Greenberg, dated as of May 14, 1991.
</TABLE>
II-2
<PAGE> 109
<TABLE>
<C> <S>
10.7* Lease Extension Agreement between Registrant and Charles A. Grant and Mark
Greenberg, dated as of February 5, 1992.
10.8* Lease Extension Agreement between Registrant Charles A. Grant and Mark
Greenberg, dated as of April 15, 1993.
10.9* Standard Form Lease 1255-1275 Harbor Bay Parkway Harbor Bay Business Park
between Commercial Center Bank and the Registrant, dated as of August 22,
1992.
10.10* Employment Agreement between the Registrant and John P. Davis, dated as of
April 10, 1995 as amended.
10.11* Amendment No. 1 to Employment Agreement between the Registrant and John P.
Davis, dated as of April 22, 1996.
10.12* Employment Agreement between the Registrant and Howard B. Urnovitz, dated
as of January 25, 1995.
10.13* Employment Agreement between the Registrant and John J. DiPietro, dated as
of September 26, 1995.
10.14* Business Consultant Agreement between the Registrant and Cynthia Green,
dated as of May 1, 1993.
10.15+ License Agreement between the Registrant and New York University, dated as
of August 13, 1993.
10.16* First Amendment to License Agreement between the Registrant and New York
University, dated as of January 11, 1995.
10.17* Second Amendment to License Agreement between the Registrant and New York
University, dated as of October 15, 1995.
10.18+ Third Amendment to License Agreement between the Registrant and New York
University, dated as of January 31, 1996.
10.19+ Research Agreement between the Registrant and New York University, dated
August 12, 1993.
10.20+ First Amendment to Research Agreement between the Registrant and New York
University, dated as of January 11, 1995.
10.21+ Sublicense Agreement between the Registrant and Cambridge Biotech
Corporation, dated as of March 31, 1992.
10.22+ Master Agreement between the Registrant and Cambridge Biotech Corporation,
dated as of April 12, 1996.
10.23+ Sub-License Agreement between the Registrant and Cambridge Biotech
Corporation, dated as of April 12, 1996.
10.24+ Agreement between the Registrant and Repligen Corporation, dated as of
March 8, 1993.
10.25+ Non-Exclusive License Agreement between the Registrant and The Texas A&M
University System, dated as of September 12, 1993.
10.26+ Non-Exclusive License Agreement between the Registrant and The Board of
Trustees of the Leland Stanford Junior University, dated as of March 1,
1993.
10.27+ Distribution Agreement between the Registrant and Otsuka Pharmaceutical
Co., Ltd., dated as of August 7, 1994.
10.28+ Distribution Agreement between the Registrant and Seradyn, Inc., dated as
of April 10, 1995.
10.29+ Distribution Agreement between the Registrant and Travenol Laboratories
(Israel), Ltd., dated as of December 31, 1994.
10.30+ Manufacturing/Packing Agreement between the Registrant and Biomira
(formerly ADI) Diagnostics Inc., dated as of September 27, 1994.
10.31* Loan and Bridge Security Agreement between the Registrant and Silicon
Valley Bank, dated as of December 8, 1995.
10.32* First Amendment to Loan and Security Agreement between the Registrant and
Silicon Valley Bank, dated as of March 5, 1996.
</TABLE>
II-3
<PAGE> 110
<TABLE>
<C> <S>
10.33* Form of Option Agreement for Stockholders of Pepgen Corporation dated as of
October 12, 1995.
10.34* $1.0 Million Promissory Note delivered to Pepgen Corporation, dated as of
October 12, 1995.
10.35* Equipment Lease Agreement between the Registrant and Phoenix Leasing, dated
as of August 20, 1993.
10.36* Equipment Lease Agreement between the Registrant and Meir Mitchell/GATX,
dated as of August 20, 1993.
11.1 Statement of Computation of Net Income Per Share.
21.1* Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors.
23.2* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
counsel to the Registrant (included in Exhibit 5.1).
23.3* Consent of Arnold White & Durkee.
24.1* Power of Attorney (see page II-5).
27.1* Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
+ Confidential treatment requested as to certain portions of this exhibit.
(b) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above have been omitted because the information required to
be set forth therein is not applicable or is shown in the financial statements
or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions referenced in Item 14 of this
Registration Statement or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of Prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE> 111
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant, Calypte
Biomedical Corporation, a corporation organized under the laws of the State of
California, has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Berkeley,
State of California, on the 25th day of July, 1996.
CALYPTE BIOMEDICAL CORPORATION
By: /s/ John P. Davis
------------------------------------
John P. Davis
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------- ----------------
<S> <C> <C>
*/s/ William A. Boeger, III Chairman of Board of July 25, 1996
- --------------------------------------------- Directors
William A. Boeger, III
/s/ John P. Davis President, Chief Executive July 25, 1996
- --------------------------------------------- Officer and Director
John P. Davis (Principal Executive
Officer)
Chief Science Officer and
- --------------------------------------------- Director
Howard B. Urnovitz, Ph.D.
/s/ John J. DiPietro Vice President of Finance, July 25, 1996
- --------------------------------------------- Chief Financial Officer and
John J. DiPietro Secretary (Principal
Accounting Officer)
- --------------------------------------------- Director
Kuo-Yu (Frank) Chiang
*/s/ David Collins Director July 25, 1996
- ---------------------------------------------
David Collins
*/s/ Julius R. Krevans, M.D. Director July 25, 1996
- ---------------------------------------------
Julius R. Krevans, M.D.
*/s/ Mark Novitch, M.D. Director July 25, 1996
- ---------------------------------------------
Mark Novitch, M.D.
Director
- ---------------------------------------------
Roger Quy, Ph.D.
Director
- ---------------------------------------------
Hideji Nonomura
*By: /s/ John J.
DiPietro
- ---------------------------------------------
John J. DiPietro
Attorney-in-fact
</TABLE>
II-5
<PAGE> 112
APPENDIX--(DESCRIPTION OF GRAPHICS)
INSIDE FRONT COVER
[Graphic: The Manufacturing Process. This four panel graphic depicts the
Registrant's manufacturing process. The first panel depicts a laboratory staff
member holding a roller bottle containing a liquid. This person is standing in
front of an incubator containing roller bottles.]
Graphic Caption: Antigen production begins with the growth of proprietary cell
lines. Cells are grown in complex media, rotated in roller-bottles, and
incubated under controlled conditions.
[Graphic: Second panel. The second panel depicts a laboratory staff member
sitting in front of a laboratory hood under which are placed roller bottles.
The person is sitting in front of the hood dipping a pipette into one of the
roller bottles under the hood.]
Graphic Caption: Cells are infected with a vector carrying the genetic
information for the expression of HIV-1 envelope protein (rgp 160). Infected
cells containing rgp 160 are harvested, frozen and used for antigen puri-
fication.
[Graphic: Third panel. The third panel depicts certain laboratory equipment.]
Graphic Caption: Rgp 160 is purified in a sequential bioprocess incorporating
proprietary manufacturing techniques.
[Graphic: Fourth panel. This panel depicts the Company's test wells being
coated with antigen.]
Graphic Caption: Microwell plates are produced by automated filling of wells
with diluted rgp 160, incubation, blocking and packaging with dessicant.
GATEFOLD FOLLOWING INSIDE FRONT COVER
[Graphic: The HIV-1 Virus and Calypte urine test. This graphic depicts in one
panel the HIV-1 virus envelope structure and seven panels depicting the
operation of the Company's urine HIV-1 test for a positive and a negative test.]
Graphic Caption: Panel 1: The complex structure of HIV-1, the virus highly
associated with AIDS. Gp 160 is glyco-protein from the envelope region of the
HIV-1 virus. The same protein is manufactured in a recombinant form (rgp 160)
for use in the Calypte HIV-1 urine assay.
Graphic Caption: Panel 2: How the test works. Positive urine. Urine from HIV-1
positive subject which contains HIV-1 anti-bodies is added to a test well.
Graphic Caption: Panel 3: Human HIV-1 antibodies in urine bind to the rgp 160
in the well.
<PAGE> 113
Graphic Caption: Panel 4: Conjugate containing an enzyme is added to the well.
The conjugate will bind only to the human HIV-1 antibody. After the well is
washed, substrate reagent is added and color development occurs indicating the
presence of human HIV-1 antibody in the well.
Graphic Caption: Panel 5: The microwell plate coated with proprietary
recombinant HIV-1 rgp 160 antigen being filled with urine.
Graphic Caption: Panel 6: Negative Urine. Urine from HIV-1 negative subject
which contains no HIV-1 antibodies is added to a test well.
Graphic Caption: Panel 7: No antibodies are present in urine to bind to the rgp
160 in the well.
Graphic Caption: Panel 8: Conjugate containing an enzyme is added to the well.
The conjugate will not bind since the human HIV-1 antibody is not present.
After the well is washed, substrate reagent is added and color development will
not occur since no antibody and therefore no conjugate is present in the well.
Page Caption: The Calypte HIV-1 urine-based test has not been approved by the
FDA for marketing in the United States. The test cannot be sold in the United
States unless and until such FDA approval is obtained, if at all.
INSIDE BACK COVER
[Graphic: The HIV-1 Urine EIA Test Kit. This graphic depicts the Company's test
kit, including various bottles of reagents and packages of tests.]
Graphic Caption: The Calypte FDA HIV-1 Urine EIA Test Kit. When used with the
Western blot confirmatory test Calypte will provide the first and only complete
urine-based HIV testing system.
Page Caption: The Calypte HIV-1 urine-based test has not been approved by the
FDA for marketing in the United States. The test cannot be sold in the United
States unless and until such FDA approval is obtained, if at all.
<PAGE> 114
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
----- -------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement among the Registrant and the Underwriters
therein represented by Pacific Growth Equities, Inc.
3.1* Restated Articles of Incorporation of Calypte Biomedical Corporation, a
California corporation, as currently in effect.
3.2* Form of Restated Certificate of Incorporation of the Company to be filed after
the closing of the offering made under this Registration Statement.
3.3* Bylaws of the Registrant, as currently in effect.
4.1* Registrant's specimen common stock certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1* Form of Indemnification Agreement between the Company and each of its directors
and officers.
10.2* Incentive Stock Plan.
10.3* 1995 Director Option Plan.
10.4 1995 Employee Stock Purchase Plan.
10.5* Lease Agreement between the Registrant and Charles A. Grant and Mark Greenberg,
dated as of November 30, 1990.
10.6* Second Lease Extension Agreement between Registrant and Charles A. Grant and
Mark Greenberg, dated as of May 14, 1991.
10.7* Lease Extension Agreement between Registrant and Charles A. Grant and Mark
Greenberg, dated as of February 5, 1992.
10.8* Lease Extension Agreement between Registrant Charles A. Grant and Mark
Greenberg, dated as of April 15, 1993.
10.9* Standard Form Lease 1255-1275 Harbor Bay Parkway Harbor Bay Business Park
between Commercial Center Bank and the Registrant, dated as of August 22, 1992.
10.10* Employment Agreement between the Registrant and John P. Davis, dated as of
April 10, 1995 as amended.
10.11* Amendment No. 1 to Employment Agreement between the Registrant and John P.
Davis, dated as of April 22, 1996.
10.12* Employment Agreement between the Registrant and Howard B. Urnovitz, dated as of
January 25, 1995.
10.13* Employment Agreement between the Registrant and John J. DiPietro, dated as of
September 26, 1995.
10.14* Business Consultant Agreement between the Registrant and Cynthia Green, dated
as of May 1, 1993.
10.15+ License Agreement between the Registrant and New York University, dated as of
August 13, 1993.
10.16* First Amendment to License Agreement between the Registrant and New York
University, dated as of January 11, 1995.
10.17* Second Amendment to License Agreement between the Registrant and New York
University, dated as of October 15, 1995.
10.18+ Third Amendment to License Agreement between the Registrant and New York
University, dated as of January 31, 1996.
10.19+ Research Agreement between the Registrant and New York University, dated August
12, 1993.
10.20+ First Amendment to Research Agreement between the Registrant and New York
University, dated as of January 11, 1995.
</TABLE>
<PAGE> 115
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
----- -------------------------------------------------------------------------------
<C> <S>
10.21+ Sublicense Agreement between the Registrant and Cambridge Biotech Corporation,
dated as of March 31, 1992.
10.22+ Master Agreement between the Registrant and Cambridge Biotech Corporation,
dated as of April 12, 1996.
10.23+ Sub-License Agreement between the Registrant and Cambridge Biotech Corporation,
dated as of April 12, 1996.
10.24+ Agreement between the Registrant and Repligen Corporation, dated as of March 8,
1993.
10.25+ Non-Exclusive License Agreement between the Registrant and The Texas A&M
University System, dated as of September 12, 1993.
10.26+ Non-Exclusive License Agreement between the Registrant and The Board of
Trustees of the Leland Stanford Junior University, dated as of March 1, 1993.
10.27+ Distribution Agreement between the Registrant and Otsuka Pharmaceutical Co.,
Ltd., dated as of August 7, 1994.
10.28+ Distribution Agreement between the Registrant and Seradyn, Inc., dated as of
April 10, 1995.
10.29+ Distribution Agreement between the Registrant and Travenol Laboratories
(Israel), Ltd., dated as of December 31, 1994.
10.30+ Manufacturing/Packing Agreement between the Registrant and Biomira (formerly
ADI) Diagnostics Inc., dated as of September 27, 1994.
10.31* Loan and Bridge Security Agreement between the Registrant and Silicon Valley
Bank, dated as of December 8, 1995.
10.32* First Amendment to Loan and Security Agreement between the Registrant and
Silicon Valley Bank, dated as of March 5, 1996.
10.33* Form of Option Agreement for Stockholders of Pepgen Corporation dated as of
October 12, 1995.
10.34* $1.0 Million Promissory Note delivered to Pepgen Corporation, dated as of
October 12, 1995.
10.35* Equipment Lease Agreement between the Registrant and Phoenix Leasing, dated as
of August 20, 1993.
10.36* Equipment Lease Agreement between the Registrant and Meir Mitchell/GATX, dated
as of August 20, 1993.
11.1 Statement of Computation of Net Income Per Share.
21.1* Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors.
23.2* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel
to the Registrant (included in Exhibit 5.1).
23.3* Consent of Arnold White & Durkee.
24.1* Power of Attorney (see page II-5).
27.1* Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
+ Confidential treatment requested as to certain portions of this exhibit.
<PAGE> 1
EXHIBIT 10.4
CALYPTE BIOMEDICAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Employee Stock Purchase
Plan of Calypte Biomedical Corporation.
1. Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the
company.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "Common Stock" shall mean the Common Stock of the
Company.
(d) "Company" shall mean Calypte Biomedical Corporation
and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all compensation reportable
on Form W-2, including without limitation base straight time gross earnings,
sales commissions, payments for overtime, shift premiums, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an
Employee of the Company for tax purposes whose customary employment with the
Company is at least twenty (20) hours per week and more than five (5) months in
any calendar year. For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship will be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each
Offering Period.
(i) "Exercise Date" shall mean the last day of each
Offering Period.
<PAGE> 2
(j) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:
(1) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the National Market or the Nasdaq Small Cap Market of The Nasdaq
Stock Market, its Fair Market Value shall be the closing sale price for the
Common Stock (or the mean of the closing bid and asked prices, if no sales were
reported), as quoted on such exchange (or the exchange with the greatest volume
of trading in Common Stock) or system on the date of such determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable, or;
(2) If the Common Stock is quoted on the NASDAQ
system (but not on the National Market System thereof) or is regularly quoted by
a recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.
(4) For purposes of the Enrollment Date under
the first Offering Period under the Plan, the Fair Market Value shall be the
price to the public as set forth in the final prospectus included within the
Registration Statement in Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock.
(k) "Offering Periods" shall mean a periods of
approximately twenty-four (24) months during which an option granted pursuant to
the Plan may be exercised, commencing on the first Trading Day on or after May
1and November 1 of each year and terminating on the last Trading Day in the
periods ending twenty-four months later. The first Offering Period shall be the
period commencing with the first Trading Day on or after the date on which the
Company's registration statement on Form S-1 is declared effective by the
Securities and Exchange Commission. The duration and timing of Offering Periods
may be changed pursuant to Section 4 of this Plan.
(l) "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(m) "Plan" shall mean this Employee Stock Purchase Plan.
(n) "Purchase Period" shall mean the approximately six
month period commencing after an Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date.
(o) "Purchase Price" shall mean an amount equal to 85% of the
Fair Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
-2-
<PAGE> 3
(p) "Reserves" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
(q) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(r) "Trading Day" shall mean a day on which national
stock exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall
be employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after May 1 and November 1 each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance with
Section 19 hereof. The first Offering Period shall begin on the effective date
of the Company's initial public offering of the Company's Common Stock that is
registered with the Securities and Exchange Commission. The Board shall have the
power to change the duration of Offering Periods (including the commencement
dates thereof) with respect to future offerings without stockholder approval if
such change is announced at least fifteen (15) days prior to the scheduled
beginning of the first Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's payroll
office prior to the applicable Enrollment Date. An eligible Officer may become a
participant in the Plan by completing a subscription agreement authorizing
payroll
-3-
<PAGE> 4
deductions and an irrevocable election in the form of Exhibit B to this Plan and
filing it with the Company's payroll office prior to the applicable Enrollment
Date.
(b) Payroll deductions for a participant shall commence
on the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her
subscription agreement, he or she shall elect to have payroll deductions made on
each pay day during the Offering Period in an amount not exceeding ten percent
(10%) of the Compensation which he or she receives on each pay day during the
Offering Period.
(b) All payroll deductions made for a participant shall
be credited to his or her account under the Plan and will be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant other than Officers may discontinue his
or her participation in the Plan as provided in Section 10 hereof, or may
increase or decrease the rate of his or her payroll deductions during the
Offering Period by completing or filing with the Company a new subscription
agreement authorizing a change in payroll deduction rate. The Board may, in its
discretion, limit the number of participation rate changes during any Offering
Period. The change in rate shall be effective with the first full payroll period
following five (5) business days after the Company's receipt of the new
subscription agreement unless the Company elects to process a given change in
participation more quickly. A participant's subscription agreement shall remain
in effect for successive Offering Periods unless terminated as provided in
Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof,
a participant's payroll deductions may be decreased to 0% at such time during
any Purchase Period which is scheduled to end during the current calendar year
(the "Purchase Offering Period") that the aggregate of all payroll deductions
which were previously used to purchase stock under the Plan in a prior Purchase
Period which ended during that calendar year plus all payroll deductions
accumulated with respect to the Current Purchase Period equal $21,250. Payroll
deductions shall recommence at the rate provided in such participant' s
subscription agreement at the beginning of the first Purchase Period which is
scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock. At
any time, the
-4-
<PAGE> 5
Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on the Exercise Date of such Offering Period (at
the applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than a
number of shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof. The
option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the
Plan as provided in Section 10 hereof, his or her option for the purchase of
shares will be exercised automatically on the Exercise Date, and the maximum
number of full shares subject to option shall be purchased for such participant
at the applicable Purchase Price with the accumulated payroll deductions in his
or her account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant' s account for the subsequent
Purchase Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date
on which a purchase of shares occurs, the Company shall arrange the delivery to
each participant who requests in writing, as reasonable and appropriate, of a
certificate representing the shares purchased upon exercise of his or her
option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all
the payroll deductions credited to his or her account and not yet used to
exercise his or her option under the Plan at any time by giving written notice
to the Company in the form of Exhibit C to this Plan. All of the participant's
payroll deductions credited to his or her account will be paid to such
participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period will be automatically terminated,
and no further payroll deductions for the purchase of shares will be made during
the Offering Period. If a participant withdraws from an Offering Period, payroll
deductions
-5-
<PAGE> 6
will not resume at the beginning of the succeeding Offering Period unless the
participant delivers to the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as
defined in Section 2(g) hereof ), for any reason, he or she will be deemed to
have elected to withdraw from the Plan and the payroll deductions credited to
such participant's account during the Offering Period but not yet used to
exercise the option will be returned to such participant or, in the case of his
or her death, to the person or persons entitled thereto under Section 14 hereof,
and such participant's option will be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an Employee
for the participant's customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.
(c) A participant's withdrawal from an Offering Period
will not have any effect upon his or her eligibility to participate in any
similar plan which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering Period
from which the participant withdraws.
11. Interest. No interest shall accrue on the payroll deductions
of a participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be 300,000
(pre-split) shares, subject to adjustment upon changes in capitalization of the
Company as provided in Section 18 hereof. If on a given Exercise Date the number
of shares with respect to which options are to be exercised exceeds the number
of shares then available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a manner
as shall be practicable and as it shall determine to be equitable.
(b) The participant will have no interest or voting right
in shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the
Plan will be registered in the name of the participant or in the name of the
participant and his or her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered
by the Board or a committee of members of the Board appointed by the Board. The
Board or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all parties.
-6-
<PAGE> 7
(b) Rule 16b-3 Limitations. Notwithstanding the
provisions of Subsection (a) of this Section 13, in the event that Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor provision ("Rule 16b-3") provides specific requirements
for the administrators of plans of this type, the Plan shall be administered
only by such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such parti cipant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees at least annually, which statements will set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
-7-
<PAGE> 8
18. Adjustments Upon Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the Reserves as well as the price per
share of Common Stock covered by each option under the Plan which has not yet
been exercised shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Offering Period will
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale
of all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each option under the Plan shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Exercise Date (the "New Exercise Date") or to cancel each
outstanding right to purchase and refund all sums collected from participants
during the Offering Period then in progress. If the Board shortens the Offering
Period then in progress in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for his option has been changed to the New Exercise Date and that his
option will be exercised automatically on the New Exercise Date, unless prior to
such date he has withdrawn from the Offering Period as provided in Section 10
hereof. For purposes of this paragraph, an option granted under the Plan shall
be deemed to be assumed if, following the sale of assets or merger, the option
confers the right to purchase, for each share of option stock subject to the
option immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale of
assets or merger by holders of Common Stock for each share of Common Stock held
on the effective date of the transaction (and if such holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if
such consideration received in the sale of assets or merger was not solely
common stock of the successor corporation or its parent (as defined in Section
424(e) of the Code), the Board may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
option to be solely common stock of the
-8-
<PAGE> 9
successor corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock and the sale of assets or
merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each out standing option, in the event the
Company effects one or more reorganizations, recapitalization, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section 18
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain stockholder approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the Offering
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
20. Notices. All notices or other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon
-9-
<PAGE> 10
which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being pur chased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
-10-
<PAGE> 11
EXHIBIT A
CALYPTE BIOMEDICAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________ hereby elects to participate in
the Calypte Biomedical Corporation Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan") and subscribes to purchase shares of
the Company' s Common Stock in accordance with this Subscription
Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (not to exceed 10%) during
the Offering Period in accordance with the Employee Stock Purchase
Plan. (Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete "Employee Stock Purchase Plan."
I understand that my participation in the Employee Stock Purchase Plan
is in all respects subject to the terms of the Plan. I understand that
the grant of the option by the Company under this Subscription
Agreement is subject to obtaining shareholder approval of the Employee
Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse Only):
___________________________________
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares), I will be
treated for federal income tax purposes as having received ordinary
income at the time of such disposition in an amount equal to the excess
of the fair market value of the shares at the time such shares were
purchased by me over the price which I paid for the shares. I hereby
agree to notify the Company in writing within 30 days after the date of
any disposition of shares and I will make adequate provision for
Federal, state or other tax withholding obligations, if any, which
arise upon the disposition of the Common Stock. The
<PAGE> 12
Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any
time after the expiration of the 2-year holding period, I understand
that I will be treated for federal income tax purposes as having
received income only at the time of such disposition, and that such
income will be taxed as ordinary income only to the extent of an amount
equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I
paid for the shares, or (2) 15% of the fair market value of the shares
on the first day of the Offering Period. The remainder of the gain, if
any, recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print) _____________________________________________
(First) (Middle) (Last)
_________________________ _____________________________________
Relationship
_____________________________________
(Address)
EMPLOYEE NAME: (Please print) ___________________________________________
(First) (Middle) (Last)
_____________________________________
_____________________________________
(Address)
-2-
<PAGE> 13
Employee's Social
Security Number: ___________________________________
Employee's Address: __________________________________
__________________________________
__________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: ___________________ __________________________________
Signature of Employee
__________________________________
Spouse's Signature (If beneficiary
other than spouse)
-3-
<PAGE> 14
EXHIBIT B
CALYPTE BIOMEDICAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
SECTION 16 INSIDER IRREVOCABLE ELECTION AND WAIVER
To: Plan Administrator
With respect to the purchase period ending ______________________, 19___ (the
"Next Period") under the Company's Employee Stock Purchase Plan (the "Plan") and
for all future periods, I hereby irrevocably elect:
(i) to have amounts withheld from each of my paychecks during such
period at the rate of ___% of my compensation (as defined in
the Plan) per pay period (minimum ___% and maximum ___%); AND
(ii) to purchase shares at the end of the period designated above
with all amounts deducted from my pay and held in my account
under the Plan at the end of such period.
I hereby waive any rights that I would otherwise have under the Plan to withdraw
from, or to change my rate or amount of payroll deductions, during such period.
I understand that this election and waiver must be made prior to the
commencement of the Next Period. I further understand that this irrevocable
election may only be terminated by an irrevocable notice of termination which
takes effect at least six months after it has been made.
Signed:_________________________
Name:___________________________
Date:___________________________
<PAGE> 15
EXHIBIT C
CALYPTE BIOMEDICAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Calypte
Biomedical Corporation Employee Stock Purchase Plan which began on ___________
19____ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
_______________________________
_______________________________
_______________________________
Signature:
_______________________________
Date: _________________________
<PAGE> 1
EXHIBIT 10.15
AGREEMENT
Between
NEW YORK UNIVERSITY
and
CALYPTE BIOMEDICAL CORPORATION
License Agreement
<PAGE> 2
080693 3573m
NYU/CALYPTE
LICENSE AGREEMENT
I N D E X
<TABLE>
<S> <C> <C>
Section 1. Definitions page 2
Section 2. Effective Date page 4
Section 3. Title page 4
Section 4. Patents and Patent Applications page 5
Section 5. Grant of License page 7
Section 6. Payments for License page 8
Section 7. Method of Payment page 13
Section B. Development and Commercialization page 13
Section 9. NYU's "March-in" Rights and Obligations page 14
Section 10. Defense of NYU Patent page 18
Section 11. Infringement of NYU Patent page 20
Section 12. Liability and Indemnification page 25
Section 13. Security for Indemnification page 26
Section 14. Expiry and Termination page 28
Section 15. NYU's and CORPORATION's Agreements
with respect to HORL page 29
Section 16. Representations and Warranties by CORPORATION page 34
Section 17. Representations and Warranties by NYU page 35
Section 18. No Assignment page 36
Section 19. Use of Name page 36
Section 20. Confidentiality page 37
Section 21. Miscellaneous page 38
Appendix I - NYU Patents and Patent Applications
Appendix II - Correspondence and Documents Concerning Abbott
Appendix III - NYU-HORL Agreement and First Amendment
</TABLE>
<PAGE> 3
080693
NYU/CALYPTE
LICENSE AGREEMENT
This Agreement, effective as of Aug 12th, (the "Effective Date"),
is by and between:
NEW YORK UNIVERSITY (hereinafter "NYU), a corporation organized and
existing under the laws of the State of New York and having a place of business
at 70 Washington Square South, New York, New York 10012
AND
CALYPTE BIOMEDICAL CORPORATION (hereinafter "CORPORATION"), a
corporation organized and existing under the laws of the State of California
having its principal office at 1440 Fourth Street, Berkeley, California 94710.
RECITALS
WHEREAS, NYU is the owner of certain inventions relating to the
detection of antibodies to human immunodeficiency virus (HIV) in urine, all as
more particularly described in the NYU Patents (as hereinafter defined)-.
WHEREAS, CORPORATION is engaged in the research, development,
manufacture, sale, use and distribution of products for the detection of
antibodies to HIV in urine; and
WHEREAS, subject to the terms and conditions hereinafter set forth,
NYU is willing to grant to CORPORATION and CORPORATION is willing to accept
from NYU the License (as hereinafter defined).
NOW, THEREFORE. in consideration of the mutual promises and agreements
contained herein, the parties hereto hereby agree as follows:
- 1 -
<PAGE> 4
1. Definitions.
Whenever used in this Agreement, the following terms shall have the
following meanings:
a. "Calendar Year" shall mean any consecutive period of twelve
months commencing on the first day of January of any year.
b. "Combination Product" shall mean a product containing Licensed
Product(s) combined or bundled with other non-Licensed
Product(s) in a single package.
c. "Corporation Entity" shall mean any company or other legal
entity which controls, or is controlled by, or is under common
control with, CORPORATION; control means the holding of fifty
and one tenth percent (50.1%) or more of (i) the capital stock
and/or (ii) the voting rights and/or OM the right to elect or
appoint directors.
d. "HORL" shall mean Home Office Reference Laboratory, Inc., a
corporation organized and existing under the laws of the State
of Delaware, having its principal offices at 10310 West 84th
Terrace, Lenexa, Kansas 66214, and shall include HORL
Corporation Entities (as such term is defined in the NYU-HORL
Agreement). The "NYU-HORL Agreement" shall mean the agreement
between NYU and HORL dated November 15, 1989 and amended in
April 1992 with respect to the practice of NYU Patents for use
in testing for insurance purposes, a copy of which agreement
and amendment, with financial terms redacted, is annexed
hereto as Appendix III.
- 2 -
<PAGE> 5
e. "License" shall mean the exclusive worldwide license under the
NYU Patents (as hereinafter defined) to make, have made, use,
sell or otherwise distribute the Licensed Products (as
hereinafter defined), during the term of this Agreement.
f. "Licensed Product(s)" shall mean any product for the analysis
of a human urine sample of an individual to assay HIV
antibodies in urine covered by one or more Valid Claims (as
hereinafter defined) of the NYU Patents.
g. "Net Sales" shall mean the total amount received in connection
with sales of the Licensed Products and/or performance of
Tests and/or Confirmatory Tests (as hereinafter defined),
after deduction of all the following to the extent applicable:
i) all trade, case and quantity credits, discounts,
refunds or rebates;
ii) allowances or credits for returns;
iii) sales commissions; and
iv) sales taxes (including value-added tax).
h. "NYU Patents" shall mean U.S. patents and patent applications
(including U.S. Patent No. 4,865,966, issued on September 12,
1989, and U.S. Patent No. 5,122,446, issued on June 16, 1992),
and foreign counterpart patent applications and patents
thereto; owned, assigned or assignable to NYU, and any
reissues, renewals, divisions, continuations,
continuationsin-part, substitutes, divisions-or extensions
thereof, and
- 3 -
<PAGE> 6
pending applications therefor, including those identified in
annexed Appendix I and forming an integral part hereof, which
are related to the detection of antibodies to HIV in urine.
i. "NYU Scientist" shall mean Dr. Alvin Friedman-Kien of NYU.
j. "Sublicensee shall mean any third party to whom a sublicense
is granted by CORPORATION as described in Section 5.c. below..
k. "Test" shall mean a test of a human urine sample to assay HIV
antibodies and which is covered by one or more Valid Claims
(as hereineafter defined) of the NYU Patents. "Confirmatory
Test" shall mean a Test (as defined in this subsection) used
to verify a result obtained by using a Licensed Product.
l. "Valid Claim" shall mean a claim of an issued NYU Patent which
has not expired, lapsed, become abandoned or dedicated to the
public or been declared or rendered invalid or unenforceable
by reason of reissue, reexamination, disclaimer or final
judgment by a court of competent jurisdiction or
administrative agency from which no appeal can be or is taken.
2. Effective Date.
This Agreement shall be effective as of the Effective Date and shall
remain in full force and effect until it expires or is terminated in
accordance with its provisions.
3. Title.
Subject to the terms and conditions of this Agreement, it is hereby
agreed that all right, title and interest, in and to the NYU Patents,
vests solely in NYU.
- 4 -
<PAGE> 7
4. Patents and Patent Applications.
a. CORPORATION shall, simultaneously with the signing of this
Agreement pay NYU the sum of [ *
], being the amount of all costs and fees
incurred by NYU up to the Effective Date in connection with the
NYU Patents.
b. ALL applications and proceedings with respect to the NYU
Patents after the Effective Date shall be prosecuted and
maintained by NYU at the expense of CORPORATION. Against the
submission of detailed quarterly invoices, CORPORATION shall
reimburse NYU for all reasonable out of pocket costs and fees
incurred by NYU during the term of this Agreement, in connection
with the drafting, filing, maintenance, prosecution, and
issuance of the NYU Patents. Such reimbursable costs and fees
shall not include NYU overhead charges and/or internal costs.
NYU shall not be entitled to reimbursement for patent filing,
prosecution and maintenance expenses in excess of ten thousand
dollars (U.S. $10,000) per year with respect to the NYU Patents
unless NYU has obtained the prior written consent of CORPORATION
to- such expenses. In the event CORPORATION refuses to consent
to such expenditures on a particular patent or patent
application, NYU shall be free to pursue patent protection with
respect to that particular patent or application at NYU's
expense and all rights to that patent or application shall
revert to NYU and CORPORATION shall have no right to make, use,
sell, manufacture or have manufactured products which are
covered by a Valid Claim
*Confidential portion has been omitted
and filed separately with the Commission
- 5 -
<PAGE> 8
of such patent or application. However, CORPORATION's
License under this Agreement shall continue with respect to
all other NYU Patents.
c. CORPORATION shall have the right to approve and comment on the
strategy and prosecution of the NYU Patents. NYU shall not
abandon any NYU Patents without first consulting with
CORPORATION and obtaining CORPORATION's consent for such
abandonment unless abandonment is in favor of a subsequent
patent application claiming the subject matter of the proposed
abandoned application and the patentability of the subject
matter is not negatively affected. Both parties agree to
cooperate with each other regarding the NYU Patents, and NYU
agrees to use its best efforts to obtain and maintain the NYU
Patents.
d. Nothing herein contained shall be deemed to be a warranty by
NYU that
i) NYU can or will be able to obtain any patent or
patents on any patent application or applications in
the NYU Patents or any portion thereof, or that any
of the NYU Patents will afford adequate or
commercially worthwhile protection, or
ii) that the manufacture, use, or sale of any Licensed
Product will not infringe any patent(s) of a third
party.
- 6 -
<PAGE> 9
5. Grant of License.
a. Subject to the terms and conditions hereinafter set forth, NYU
hereby grants to CORPORATION and CORPORATION hereby accepts
from NYU the License as defined in Section l.e.
b. The License granted to CORPORATION in Section 5.a. hereto
shall remain in force, if not previously terminated under the
terms of this Agreement, until the expiration date of the last
to expire of the NYU Patents.
c. CORPORATION shall be entitled to grant sublicenses under the
License to a Corporation Entity or to other third parties.
All sublicenses shall only be granted by CORPORATION under a
written agreement, copies of which shall be provided by
CORPORATION to NYU and HORL as soon as practicable after the
signing thereof. Each sublicense granted by CORPORATION.
hereunder shall be subject and subordinate to the terms and
conditions of this Agreement and shall contain (inter-alia)
the following provisions:
(1) the sublicense shall expire automatically on the
termination of the License;
(2) the sublicense shall not be assignable, in whole or
in part;
(3) the Sublicensee shall not grant further sublicenses;
(4) the sublicense agreement shall include i) an
obligation by the Sublicensee to obtain and maintain
insurance and to provide evidence thereof to NYU and
to indemnify NYU as described in Sections 12 and 13
of this Agreement and the
- 7 -
<PAGE> 10
sublicense agreement shall state that NYU is an
intended third party beneficiary of such sublicense
agreement for the purposes of enforcing such
indemnification and insurance provisions, and ii) the
text of Section 15.b. and 15.d. of this Agreement,
applicable to Sublicensee, and shall state that HORL
is an intended third party beneficiary of such
sublicense agreement for the purpose of enforcing
such provisions for so long as Section 15 is
applicable to this Agreement.
(5) the breach by any Sublicensee of its obligations to
CORPORATION shall not be deemed a breach by
CORPORATION and such breach shall not, in any way,
affect CORPORATION's rights and obligations under
this Agreement. However, in the event of a material
breach (including without limitation, a failure to
pay royalties due) by a Sublicensee, CORPORATION
shall promptly notify NYU of the breach and either
promptly terminate the sublicense agreement or shall
continue to be obligated for payment to NYU of all
royalties due from the Sublicensee.
(6) the right of NYU to audit Sublicensee's records at
its own expense.
6. Payments for License.
a. In consideration for the grant and during the term of the
License, CORPORATION shall pay to NYU:
- 8 -
<PAGE> 11
(1) on the Effective Date, a non-refundable,
non-creditable (except as provided in Section ll.j.)
license issue fee of [ *
] ; and
(2) a royalty of [ * ] percent [ * ] of the Net Sales of
Licensed. Product(s) by CORPORATION, Corporation
Entity and Sublicensees in any country in which the
Licensed Product is covered by a Valid Claim(s); and
(3) a royalty of [ * ] percent [ * ] of the Net Sales for
each Test and Confirmatory Test by CORPORATION,
Corporation Entity, and Sublicensees in any country
in which the Test or Confirmatory Test is covered by
a Valid Claim; and
(4) a royalty of [ * ] percent [ * ] of Net
Sales of Licensed Products by CORPORATION,
Corporation Entity or Sublicensees in any country in
which an NYU Patent has not issued if such Licensed
Product was manufactured in a country in which the
Licensed Product is covered by a Valid Claim(s).
(5) If more than one of the royalty rates should be
applicable to any transaction or to any Licensed
Product, only a single royalty shall be due and that
royalty shall be computed at the highest applicable
rate. No royalties shall be due upon sales of
Licensed Products to and between Corporation Entities
or Sublicensee(s) for further sale; provided,
however, that royalties with respect to such sales
shall be payable upon a sale of such Licensed
Products to any person or entity that is not either a
'Corporation Entity or a Sublicensee.
*Confidential portion has been omitted
and filed separately with the Commission
- 9-
<PAGE> 12
(6) If Licensed Product is sold as a Combination Product,
then the Net Sales attributable to such Licensed
Product shall be based upon the ratio of the list
price for the Licensed Product to the combined list
prices of the Licensed Product and the other
non-Licensed Product(s); provided that where there is
no list price for a component of the Combination
Product. the parties agree to negotiate the
appropriate ratio in good faith. If CORPORATION
desires to sell a Combination Product for which there
is no list price for components, CORPORATION shall
notify NYU and commence such .negotiations in good
faith. In such case, CORPORATION shall have no right
to sell such Combination Product-until and unless NYU
and CORPORATION shall have concluded a written
agreement with respect to the ratio of royalties to
be paid by CORPORATION with respect to such
Combination Product(s).
b. For the purpose of computing the royalties due to NYU
hereunder, the year shall be divided into four quarters ending
on March 31, June 30, September 30 and December 31'. Not
later than sixty (60) days after the end of each quarter in
each Calendar Year during the term of the License, CORPORATION
shall submit to NYU a full and detailed report of payments due
NYU under the terms of this Agreement for the preceding
quarter year (hereinafter "the Quarterly Report"), setting
forth the Net Sales and all royalties or other consideration
upon which such payments are computed and including at least
i) total sales of Licensed Products;
- 10 -
<PAGE> 13
ii) the deductions permitted under subsection 1.g. to
arrive at Net Sales of Licensed Products;
iii) total amount received with respect to Tests and
Confirmatory Tests;
iv) the deductions permitted under subsection 1.g. to
arrive at Net Sales of Tests and Confirmatory Tests;
and
v) the royalty computations on Licensed Products, Tests
and Confirmatory Tests.
The Quarterly Report shall separately state the total Net
Sales, Tests and Confirmatory Tests of CORPORATION.
Corporation Entity and Sublicensees with respect to Net Sales,
Tests and Confirmatory Tests to persons or entities engaged in
testing for insurance purposes.
If no royalties or other payments are due, a statement shall
be sent to NYU stating such fact. Payment of the full amount
of any royalties or other payments due to NYU for the
preceding quarter year shall accompany each Quarterly Report.
CORPORATION shall keep for a period of at least three (3)
years after the date of entry, full, accurate and complete
books and records consistent with sound business and
accounting practices and in such form and in such detail as to
enable the determination of the amounts due to NYU from
CORPORATION pursuant to the terms of this Agreement.
- 11 -
<PAGE> 14
As part of CORPORATION's normal annual audit or a special
audit if sooner, the payments and Quarterly Reports will be
verified for accuracy. In the event a correction needs to be
made regarding the payment and/or Report, CORPORATION will
make the ap propriate payment and send NYU a new Report within
sixty (60) days.
c. On reasonable notice and during regular business hours, NYU or
the authorized representative of NYU shall each have the right
to inspect the books of accounts, records and other relevant
documentation of CORPORATION or of Corporation Entity and of
Sublicensees insofar as they relate to the production,
marketing and sale of the Licensed Products or Tests, in order
to ascertain or verify the amount of royalties and other
payments due to NYU hereunder, and the accuracy of the
information provided to NYU in the aforementioned reports.
This inspection shall be at NYU's expense, provided, however,
that all information received as a result of the inspection
shall be maintained in confidence by NYU and its
representatives; provided, however, that NYU shall have the
right to use such information to enforce the terms of this
Agreement. NYU's right to inspect must be exercised within
three (3) years of NYU's receipt of the Report which NYU
desires to verify. In the event an audit conducted by NYU
demonstrates amounts due to NYU in excess of ten percent (10%)
of the total amount paid to NYU with respect to any Calendar
Year, CORPORATION shall reimburse NYU for the expenses of
NYU's audit.
- 12 -
<PAGE> 15
d. Beginning on January 1. 1994 and continuing thereafter until
this Agreement shall terminate or expire, CORPORATION agrees
that if the total amounts paid to NYU under subsection 6.a.
hereof do not amount to [ * ] dollars (U.S. [
* ]) in the 1995 Calendar Year, [ *
] dollars (U.S. [ * ]) in the 1996
Calendar Year and [ * ] (U.S.
[ * ]) in the 1997 Calendar Year and each Calendar Year
thereafter, CORPORATION will pay to NYU within ninety (90)
days after the end of each such Calendar Year, as additional
royalty, the difference between the amount of the total
royalties paid to NYU by CORPORATION in such Calendar Year and
the amount stated herein with respect to such Calendar Year
(hereinafter Minimum Annual Royalty), failing which NYU shall
have the right, upon written notice to CORPORATION, to convert
the License to a non-exclusive license, having the same
royalty rates as in Section 6.a. In the event the License has
been converted to a non-exclusive license, CORPORATION shall
no longer be obligated to pay the Minimum Annual Royalty of
this subsection.
7. Method of Payment.
Royalties and any other payments due to NYU hereunder shall be paid to
NYU in United States dollars. Any such royalties on or other payments
relating to transactions in a foreign currency shall be
*Confidential portion has been omitted
and filed separately with the Commission
- 13 -
<PAGE> 16
converted into United States dollars based on the conversion rate for
the particular currency as listed in the Wall Street Journal on the
last business day of the quarter for which such royalty or other
payment is due. If restrictions on the transfer of currency exist in
any country such as to prevent CORPORATION from making payments in the
United States or in U.S. dollars, CORPORATION shall make payments due
in such country in local currency and/or deposit such payments in a
local bank designated by NYU.
8. Development and Commercialization.
a. CORPORATION agrees that it is developing at least one Licensed
Product(s), and will pursue reasonable activities necessary in
order to attempt to obtain the approval of the Food and Drug
Administration (FDA) or other appropriate authority, for the
production, use and sale of the Licensed Product(s) by
CORPORATION or its Corporate Entity.
b. CORPORATION undertakes to begin the regular commercial
production, use and sale of the Licensed Products in good
faith and as soon as practicable, subject to FDA or other
governmental agency license or approval.
9. NYU's "March-in" Rights and Obligations.
a. During the period commencing upon the Effective Date and
continuing for forty (40) months thereafter. CORPORATION
shall
- 14 -
<PAGE> 17
have no obligation to grant sublicenses under the License.
Following such initial 40-month period, CORPORATION undertakes
to negotiate and grant a sublicense under the License to any
interested party and in the event CORPORATION has not granted
a sublicense to said interested party after a six-month period
of, good faith negotiations with such party, NYU shall have
"march-in" rights to grant a non-exclusive license in and to
the NYU Patents directly to such third party. In the event
NYU grants a non-exclusive license with the interested party
which contains terms more favorable than those under Section
6.a.(2) (4) of this Agreement, NYU agrees that this Agreement
shall be deemed appropriately amended to provide such terms to
CORPORATION and its Sublicensees, effective immediately upon
execution of the non-exclusive license. Therefore,
CORPORATION and its Sublicensees shall have most favored
licensee status.
b. In the event NYU grants a non-exclusive license pursuant to
this Section 9, NYU shall provide CORPORATION with a copy of
the license agreement and pay to CORPORATION [ *
] percent [ * ] of any monetary consideration
(including royalties on Net Sales) received by NYU under the
terms of, or as a consideration for the grant of, a
non-exclusive license of any rights in and to the NYU Patents.
Such non-exclusive license shall be in writing, shall not be
assignable in whole or in part and shall not include the right
to grant sublicenses under the non-exclusive license. Such
non-exclusive license shall contain terms substantially
identical to Section 15 of this Agreement, for so long as
* Confidential portion has been omitted
and filed separately with the Commission
- 15 -
<PAGE> 18
Section 15 is applicable to this Agreement. A breach by the
non-exclusive licensee of its obligations shall not be deemed
a breach by NYU and such breach shall not, in any way, affect
NYU's rights and obligations under this Agreement. However,
in the event the non-exclusive licensee fails to pay royalties
due to NYU, and in which CORPORATION shares pursuant to this
Section, NYU shall notify CORPORATION and if requested by
CORPORATION, NYU shall promptly terminate the non-exclusive
license agreement. In the event the non-exclusive licensee
grants sublicenses in breach of the non-exclusive license with
NYU and CORPORATION demonstrates conclusively to NYU that such
sublicensing has occurred, NYU shall promptly terminate the
nonexclusive license agreement.
c. For the purpose of computing the payments due to CORPORATION
under this Section 9, the year shall be divided into four
quarters ending on March 31, June 30, September 30 and
December 31. Not later than sixty (60) days after the end of
each quarter in each Calendar Year during the term of the
non-exclusive license, NYU shall submit to CORPORATION a full
and detailed report of payments due CORPORATION under the
terms of the non-exclusive license for the preceding quarter
year, setting forth the payments due to CORPORATION, setting
forth the net sales and/or lump sum payments and all other
royalties or consideration upon which such payments are
computed and including at least the total sales of product,
the deductions permitted to arrive at the net sales and the
royalty computations.
- 16 -
<PAGE> 19
If no royalties or other payments are due, a statement shall
be sent to CORPORATION stating such fact. Payment of the full
amount due to CORPORATION for the preceding quarter year shall
accompany each report. NYU shall keep for a period of at
least three (3) years after the date of entry, full, accurate
and complete books and records consistent with sound business
and accounting practices and in such form and in such detail
as to enable the determination of the amounts due to
CORPORATION from NYU pursuant to the terms of this Agreement.
As part of NYU's normal annual audit, the payments and reports
will be verified for accuracy. In the event a correction
needs to be made regarding the payment and/or report, NYU will
make the appropriate payment and send CORPORATION a new report
within sixty (60) days.
d. On reasonable notice and during regular business hours,
CORPORATION or the authorized representative of CORPORATION
shall each have the right to inspect the books of accounts,
records and other relevant documentation of NYU insofar as
they relate to revenues from the non-exclusive license, in
order to ascertain or verify the amount of royalties and other
payments due to CORPORATION hereunder, and the accuracy-of the
information provided to CORPORATION in the aforementioned
reports. This inspection shall be at CORPORATION's expense,
provided, however, that all information received as a result
of the inspection shall be maintained in confidence by
CORPORATION and its representatives; provided, however that
CORPORATION
- 17 -
<PAGE> 20
shall have the right to use such information to enforce the
terms of this Agreement. CORPORATION's right to inspect must
be exercised within three (3) years of CORPORATION's receipt
of the report which CORPORATION desires to verify. In the
event an audit conducted by CORPORATION demonstrates amounts
due to CORPORATION in excess of five percent (5%) of the total
amount paid to CORPORATION with respect to any Calendar Year,
NYU shall reimburse CORPORATION for the expenses of
CORPORATION'S audit.
e. Payments due to CORPORATION shall be paid to CORPORATION in
United States dollars. Any payments relating to transactions
in a foreign currency shall be converted into United States
dollars based on the conversion rate for the particular
currency as listed in the Wall Street Journal on the last
business day of the quarter for which payment is due. If
restrictions on the transfer of currency exist in any country
such as to prevent NYU from making payments in the United
States or in U.S. dollars, NYU shall make payments due in such
country in local currency and/or deposit such payments in a
local bank designated by CORPORATION.
10. Defense of NYU Patent.
a. NYU has disclosed to CORPORATION that Abbott Laboratories,
Inc. (hereinafter "Abbott") has asserted a claim of ownership
rights with respect to the NYU Patents as contained in
correspondence and documents in Appendix II annexed hereto and
made an integral part of this Agreement. Throughout the term
of this Agreement,
- 18 -
<PAGE> 21
NYU shall notify CORPORATION in writing within ten (10)
business days every time NYU and/or the NYU Scientist is
contacted by or contacts (orally or in writing) Abbott
regarding the claim of ownership rights with respect to the
NYU Patent(s). NYU also shall provide copies to CORPORATION
of any correspondence it or the NYU Scientist receives or has
received from Abbott, or sends or has sent to Abbott in this
regard within ten (10) business days of receiving or sending.
b. Upon the Effective Date, CORPORATION shall pay to NYU the sum
of [ * ] (U.S. $ [ * ])
to be held by NYU in a special interest-bearing
account and expended only for out-of-pocket legal defense fees
and costs in the event that a third party asserts a claim with
respect to the ownership and/or validity of the NYU Patents
("the Legal Defense Fund"). NYU shall not expend the Legal
Defense Fund (including the accumulated interest) for any
purpose except for reasonable out-of-pocket legal defense fees
and costs for six (6) years after the first sale of Licensed
Product or after the initiation of a lawsuit by the third
party, provided such lawsuit is initiated during such six-year
period, whichever is later. In the event that the Legal
Defense Fund is not expended during such period, the Legal
Defense Fund shall be the property of NYU without restriction;
however, any accumulated interest will be the property of
CORPORATION without restriction. In the event the Legal
Defense Fund (including the accumulated interest) is
exhausted, NYU shall have no further obligation to CORPORATION
*Confidential portion has been omitted
and filed separately with the Commission
- 19 -
<PAGE> 22
with respect to defense against such ownership and/or validity
of lawsuit except as provided under Section 11. NYU shall not
settle such ownership and/or validity lawsuit without
providing CORPORATION with written notice at least thirty (30)
days in advance-of the settlement. In the event NYU decides
to settle such lawsuit, it shall not assign its entire
ownership rights of NYU Patents to a third party as part of
the settlement without CORPORATION's prior written approval.
c. Any expenses incurred by CORPORATION or NYU in conjunction
with the prosecution of any suit or the settlement thereof
relating to a third party assertion of a claim with respect to
the ownership and/or validity of the NYU Patents shall be
first paid for from the Legal Defense Fund (including the
accumulated interest), provided such lawsuit is initiated
during the six (6) year period described in Section 10.b.
11. Infringement of NYU Patent.
a. In the event a party to this Agreement acquires information
that a third party is infringing one or more of the NYU
Patents, the party acquiring such information shall promptly
notify the other party to the Agreement in writing of such
infringement.
b. In the event of an infringement of an NYU Patent, CORPORATION
shall have an exclusive right (but not the obligation) to
bring suit against the infringer for a period of six (6)
months after acquiring information that a third party is
infringing; provided,
- 20 -
<PAGE> 23
however, that CORPORATION shall not have the right to bring
suit against HORL or a HORL Corporation Entity or any third
party which has been granted immunity from claims of
infringement of the NYU Patents for the sole purpose of
providing Test kits exclusively for HORL or for HORL
Corporation Entities during the term of the NYU-HORL
Agreement. (This protection against an infringement action
shall not apply if the third party, which has been granted
immunity, itself sells Test kits or provides Test kits to any
entity other than to HORL and HORL Corporation Entities.)
Should CORPORATION elect to bring suit against an infringer
and NYU is joined as a party plaintiff in any such suit, NYU
shall have the right to approve the counsel selected by
CORPORATION to represent CORPORATION and NYU, which approval
shall not be unreasonably withheld. The expenses of such suit
or suits that CORPORATION elects to bring, including any
reasonable out-of-pocket expenses of NYU incurred in
conjunction with the prosecution of such suit or the
settlement thereof, shall be paid for entirely by CORPORATION
and CORPORATION shall hold NYU free, clear r and harmless from
and against any and all costs of such litigation, including
attorneys' fees.
c. In the event CORPORATION exercises the right to sue herein
conferred, it shall have the right to first reimburse itself
out of any sums recovered in such suit or in settlement
thereof for all costs and expenses of every kind and
character, including attorneys' fees, necessarily involved in
the prosecution of any
- 21 -
<PAGE> 24
such suit, and if after such reimbursement, any funds shall
remain from said recovery, CORPORATION shall promptly pay to
NYU an amount equal to five percent (5%) of such remainder and
CORPORATION shall be entitled to receive and retain the
balance of the remainder of such recovery.
d. In the event CORPORATION does not bring suit by the end of the
six (6) month period described in b. above, NYU shall have the
right (but not the obligation) to bring suit, after written
notice to CORPORATION of its intention. If CORPORATION is
joined as a party plaintiff in any such suit, CORPORATION
shall have the right to approve the counsel selected by NYU to
represent NYU and CORPORATION, which approval shall not be
unreasonably withheld. The expenses of such suit or suits
that NYU elects to bring, including any reasonable
out-of-pocket expenses of CORPORATION incurred in conjunction
with the prosecution of such suit or the settlement thereof,
shall be paid for entirely by NYU and NYU shall hold
CORPORATION free, clear and harmless from and against any and
all costs of such litigation, including attorneys' fees.
e. In the event NYU exercises-the right to sue herein conferred,
it shall have the right to first reimburse itself out of any
sums recovered in such suit or in settlement thereof for all
costs and expenses of every kind and character, including
attorneys' fees, necessarily involved in the prosecution of
any such suit, and if after such reimbursement, any funds
shall remain from
- 22 -
<PAGE> 25
said recovery, NYU shall pay CORPORATION an amount equal to
five percent (5%) of such remainder and NYU shall be entitled
to receive and retain the balance of the remainder of such
recovery.
f. CORPORATION shall not have the right to grant cross-license(s)
to a third party in settlement of any infringement action,
except with the consent of NYU, and provided that the
following conditions are satisfied:
1) NYU is consulted beforehand and is reasonably
satisfied that the third party has a legal position
or right which does, or could, limit CORPORATION's
ability to market or to make, have made, sell or
distribute Licensed Products;
2) The rights received by CORPORATION under such
agreement cover only Licensed Products and are not
directed to other products;
3) NYU incurs no financial or legal liabilities under
such agreement, and the terms of such agreement would
not cause NYU to be subject to a claim of breach
under the NYU-HORL Agreement; and
4) NYU shall receive royalties in accordance with the
provisions of Section 6.a. with respect to Licensed
Products, Tests and Confirmatory Tests by such
crosslicensee.
g. In any suit with respect to the NYU Patents, the parties shall
cooperate fully, and upon the request and at the expense of
the party bringing suit, the other party shall make available
to the
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<PAGE> 26
party bringing suit all records, papers, information, samples,
specimens, individuals and the like which may be relevant.
h. Each party shall always have the right to be represented by
counsel of its own selection and at its own expense in any
suit for infringement of the NYU Patents instituted by the
other party to this Agreement under the terms hereof.
i. In the event a court of competent jurisdiction determines in a
final judgment from which no further appeal can or has been
taken that a claim of one or more NYU Patents is invalid or
unenforceable, no further payment with respect to Licensed
Products covered by said NYU Patent(s) shall be due or owing
hereunder and CORPORATION and HORL shall have a paid-up
license as to the affected NYU Patent(s).
j. In the event a court of competent jurisdiction determines in a
final judgment from which no further appeal can or has been
taken that NYU co-owns one or more NYU Patents with a third
party, or if there is a settlement approved by NYU to such
effect, this Agreement and the License granted hereunder shall
remain in effect; however, CORPORATION shall be credited in
the amount of [ * ] with
respect to future royalties as of the date of such final court
determination or settlement and shall be immediately relieved
from CORPORATION's obligation to pay NYU Minimum Annual
Royalties.
*Confidential portion has been omitted
and filed separately with the Commission
- 24 -
<PAGE> 27
k. In the event a court of competent jurisdiction determines in a
final judgement that NYU does not own one or more NYU Patents,
or if there is a settlement approved by NYU to such effect, no
further payment with respect to Licensed Products covered by
said patent(s) shall be due or owing hereunder.
12. Liability and Indemnification.
a. CORPORATION shall indemnify, defend and hold harmless NYU and
its trustees, officers, medical and professional staff,
employees, students and agents and their respective
successors, heirs and assigns (the "Indemnitees"), against any
liability, damage, loss or expense (including reasonable
attorneys' fees and expenses of litigation) incurred by or
imposed upon the Indemnitees or any one of them in connection
with any claims, suits, actions, demands or judgments arising
out of the design, production, manufacture, sale, use in
commerce or in human clinical trials, lease, or promotion by
CORPORATION or by a Sublicensee, Corporation Entity or agent
of CORPORATION of any Licensed Product, process or service
relating to, or developed pursuant to, this Agreement.
b. CORPORATION's indemnification obligation under this Section 12
shall not apply to any liability, damage, loss or expense to
the extent that it is attributable to the negligent activities
or willful misconduct of any such Indemnitee.
c. CORPORATION agrees, at its own expense, to provide attorneys
reasonably acceptable to NYU to defend against any actions
brought
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<PAGE> 28
or filed against any Indemnitee with respect to the subject of
indemnity to which such Indemnitee is entitled hereunder,
whether or not such actions are rightfully brought.
13. Security for Indemnification.
a. At such time as any Licensed Product, process or service
relating to, or developed pursuant to, this Agreement is being
commercially distributed or sold (other than for the purpose
of obtaining regulatory approvals) by CORPORATION or by a
Corporation Entity, Sublicensee or agent of CORPORATION,
CORPORATION shall at its sole cost and expense, procure and
maintain policies of comprehensive general liability insurance
in amounts not less than five million dollars (U.S.
$5,000,000.00) per incident and five million dollars (U.S.
$5,000,000.00) annual aggregate and naming the Indemnitees as
additional insureds. Such comprehensive general liability
insurance shall provide (i) product liability coverage and
(ii) broad form contractual liability coverage for
CORPORATION's indemnification under Section 12 of this
Agreement. If CORPORATION elects to self-insure all or part
of the limits described above (including deductibles or
retentions which are in excess of two hundred fifty thousand
dollars (U.S. $250,000) annual aggregate) such self-insurance
program must be approved by NYU, which approval shall not be
unreasonably withheld. The minimum amounts of insurance
coverage required under this Section 13 shall not be
- 26 -
<PAGE> 29
construed to create a limit of CORPORATION's liability with
respect to its indemnification under Section 12 of this
Agreement.
b. CORPORATION shall provide NYU with written evidence of such
insurance upon request of NYU. CORPORATION shall provide NYU
with written notice at least ninety (90) days prior to the
cancellation, non-renewal or material change in such
insurance, where possible, or ten (10) business days after
CORPORATION receives notice of such from the insurance
company; if CORPORATION does not obtain replacement insurance
providing comparable coverage within ninety (90) days of
notification, NYU shall have the right to terminate this
Agreement according to the provisions of this Agreement.
c. CORPORATION shall maintain such comprehensive general
liability insurance beyond the expiration or termination of
this Agreement during (i) the period that any product, process
or service, relating to, or developed pursuant to, this
Agreement is being commercially distributed or sold (other
than for the purpose of obtaining regulatory approvals) by
CORPORATION, Corporation Entity, a Sublicensee or agent of
CORPORATION and (ii) a reasonable period after the period
referred to in c(i) above which in no event shall be less than
seven (7) years after the term of this Agreement.
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<PAGE> 30
14. Expiry and Termination.
a. Unless earlier terminated pursuant to this Section 14 hereof,
this Agreement shall expire on the expiration of the period of
the License as set forth in Section 5.b. above.
b. At any time prior to expiration of this Agreement, either
party may terminate this Agreement forthwith for cause, as
"cause" is described below, by giving written notice to the
other party. Cause for termination by one party of this
Agreement shall be deemed to exist if the other party
materially breaches or defaults in the performance or
observance of any of the provisions of this Agreement and such
breach or default is not cured within ninety (90) days or, in
the case of failure to pay any amounts due hereunder, thirty
(30) days (unless otherwise specified herein) after the giving
of notice by the other party specifying such breach or
default, or if either NYU or CORPORATION or Corporation Entity
discontinues its business.
c. Any amount payable hereunder by one of the parties to the
other, which has not been paid by the date on which such
payment is due, shall bear interest from such date until the
date on which such payment is made, at the rate of one percent
(1%) per annum in excess of the prime rate prevailing at the
Citibank, N.A., in New York, during the period of arrears and
such amount and the interest thereon may be set off against
any amount due, whether in terms of this Agreement or
otherwise, to the party in default by any non-defaulting
party.
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<PAGE> 31
d. CORPORATION may terminate this Agreement without cause upon
thirty (30) days' written notice to NYU. CORPORATION
may, after the effective date of such termination, sell some
or all Licensed Products CORPORATION has in inventory at the
date of termination, provided it pays royalty thereon under
Section 6.a. of this Agreement.
e. Upon termination of this Agreement for any reason and prior to
expiration as set forth in Section 14.a. hereof, all rights in
and to the NYU Patents shall revert to NYU, and CORPORATION
shall not be entitled to make any further use whatsoever of
the NYU Patents.
f. Termination of this Agreement shall not relieve either party
of any obligation to the other party incurred prior to such
termination. In the event of termination during a Calendar
Year for which Minimum Annual Royalties would be due to NYU
pursuant to Section 6.d., CORPORATION shall pay such Minimum
Annual Royalties on a pro rata basis for such year.
g. Sections 3, 10, 12, 13, 14, 19 and 20 hereof shall survive and
remain in full force and effect after any termination,
cancellation or expiration of this Agreement.
15. NYU's and CORPORATION's Agreements with respect to HORL.
a. The provisions of this Agreement are subject to the provisions
of the NYU-HORL Agreement, as defined in Section l.d. hereof.
The provisions of this Section 15 shall be in effect until
such time as the NYU-HORL Agreement expires or is terminated.
During the
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<PAGE> 32
time the NYU-HORL Agreement is in effect, NYU agrees to
provide to CORPORATION with any further revisions or
amendments (with financial terms redacted) to the NYU-HORL
Agreement within ten (10) business days of their execution and
to provide to CORPORATION any information regarding the
NYU-HORL Agreement or relationship which alters or affects
CORPORATION's or NYU's obligations under the present
NYU-CORPORATION Agreement also within ten (10) business days
of NYU's knowledge of the information. If a revision or
amendment to the NYU-HORL Agreement would alter or affect
CORPORATION's or NYU's obligation under this Agreement, then
CORPORATION must provide its prior written consent to such
revision or amendment which consent shall not be unreasonably
withheld.
b. CORPORATION, Corporation Entity and Sublicensees shall offer
to HORL Licensed Products to perform Tests on terms no less
favorable than said Licensed Products are supplied to any
other person or entity performing testing for insurance
purposes; provided, however, HORL shall not be obligated to
purchase said Licensed Products from CORPORATION, Corporation
Entity or Sublicensee but shall be free to purchase said
Licensed Products from a third party.
c. NYU shall have the right to provide to HORL copies of
Quarterly and Annual Reports and other information which may
be obtained by NYU pursuant to Section 6.b-d., provided that
HORL has agreed in writing to maintain such Reports and
information in confidence and
- 30 -
<PAGE> 33
not to disclose them to any third party except for the purposes
of enforcing HORL's rights pursuant to the NYU-HORL Agreement,
this Agreement, or both.
d. So long as the NYU-HORL Agreement is in effect, CORPORATION,
Corporation Entity and Sublicensees shall not bring any suit for
infringement of the NYU Patents against HORL or against a third
party which has been granted immunity from claims of
infringement of the NYU Patents for the sole purpose of
providing Test kits exclusively for HORL and HORL Corporation
Entities pursuant to Section 5.c. of the NYU-HORL Agreement.
CORPORATION, Corporation Entity and Sublicensees shall be
permitted to bring suit for infringement of the NYU Patents
against a third party which has been granted immunity if the
third party sells Test kits or provides Test kits to any entity
other than to HORL or HORL Corporation Entities.
e. In the event HORL purchases Test kits from a third party to
which immunity from claims of infringement of the NYU Patents is
granted pursuant to Section 5.c. of the NYU-HORL Agreement, NYU
shall pay CORPORATION [ * ] percent
([ * ]%) of any royalties and payments received by NYU pursuant
to Section 6.a. (2) of the NYU-HORL Agreement with respect to
Tests performed using such Test kits. NYU shall provide
CORPORATION with the HORL Agreement payment schedule. The
immunity contract to the third party shall not grant further
immunity to other parties. A breach by the third party of its
obligations shall not be deemed a breach by NYU of this
Agreement and such breach shall not, in any way, affect NYU's
rights and obligations under this Agreement. However,
*Confidential portion has been omitted
and filed separately with the Commission
- 31 -
<PAGE> 34
in the event that such third party sells Test kits to any party
except HORL and/or HORL Corporation Entities in commercial
quantities and CORPORATION demonstrates conclusively to NYU
that such sales have occurred, NYU shall notify such third
party that it is in breach of the Immunity and shall demand
cure, failing which, NYU shall promptly terminate the immunity
contract.
f. For the purpose of computing the payments due to CORPORATION
under this Section 15, the year shall be divided into four
quarters ending on March 31, June 30, September 30 and December
31. Not later than sixty (60) days after the end of each
quarter in each Calendar Year during the term of the third
party immunity contract, NYU shall submit to CORPORATION a full
and detailed report of payments due CORPORATION under the terms
of the contract for the preceding quarter year, setting forth
the payments due to CORPORATION, setting forth the net sales
and/or lump sum payments and all other royalties or
consideration upon which such payments are computed and
including at least the total sales of product, the deductions
permitted to arrive at the net sales and the royalty
computations.
g. If no royalty or other payments are due, a statement shall be
sent to CORPORATION stating such fact. Payment of the full
amount due to CORPORATION for the preceding quarter year shall
accompany each report. NYU shall keep for a period of at least
three (3) years after the date of entry, full, accurate and
complete books and records consistent with sound business and
accounting practices and in such form and in such detail as to
enable the determination
- 32 -
<PAGE> 35
of the amount due to CORPORATION from NYU pursuant to the terms
of this Agreement. As part of NYU's normal annual audit, the
payments and reports will be verified for accuracy. In the
event a correction needs to be made regarding the payment
and/or report, NYU will make the appropriate payment and send
CORPORATION a new Report within sixty (60) days.
h. On reasonable notice an during regular business hours,
CORPORATION or the authorized representative of CORPORATION
shall each have the right to inspect the books of accounts,
records and other relevant documentation of NYU insofar as they
relate to revenues from the third party immunity contract, in
order to ascertain or verify the amount of royalties and other
payments due to CORPORATION hereunder, and the accuracy of the
information provided to CORPORATION in the aforementioned
reports. This inspection shall be at CORPORATION's expense,
provided, however, that all information received as a result of
the inspection shall be maintained in confidence by CORPORATION
and its representatives; provided, however that CORPORATION
shall have the right to use such information to enforce the
terms of this Agreement. CORPORATION's right to inspect must be
exercised within three (3) years of CORPORATION's receipt of
the report which CORPORATION desires to verify. In the event
an audit conducted by CORPORATION demonstrates amounts due to
CORPORATION in excess of ten percent (10%) of the total amount
paid to CORPORATION with respect to any Calendar Year, NYU
shall reimburse CORPORATION for the expenses of CORPORATION's
audit.
- 33 -
<PAGE> 36
Payments due to CORPORATION shall be paid to CORPORATION in
United States dollars. Any payments relating to transactions
in a foreign currency shall be converted into United States
dollars based on the conversion rate for the particular
currency as listed in the Wall Street Journal on the last
business day of the quarter for which payment is due. If
restrictions on the- transfer of currency exist in any country
such as to prevent NYU from making payments in the United
States or in U.S. dollars, NYU shall make payments due in such
country in local currency and/or deposit such payments in a
local bank designated by CORPORATION.
i. CORPORATION shall not perform Tests for insurance screening
purposes except that CORPORATION and/or Corporation Entity may
perform Confirmatory Tests.
j. HORL is an intended third party beneficiary of this Agreement
for the purpose of enforcing this Section 15.
16. Representations and Warranties by CORPORATION.
CORPORATION hereby represents and warrants to NYU as follows:
(1) CORPORATION is a corporation duly organized, validly-existing
and in good standing under the laws of the State of California.
CORPORATION has been granted all requisite power and authority
to carry on its business and to own and operate its properties
and assets. The execution, delivery and performance of this
Agreement have been duly authorized by the Board of Directors
of CORPORATION.
- 34 -
<PAGE> 37
(2) There is no pending or, to CORPORATION's knowledge, threatened
litigation involving CORPORATION which would have any effect on
this Agreement or on CORPORATION's ability to perform its
obligations hereunder; and
(3) There is no indenture, contract, or agreement to which
CORPORATION is a party or by which CORPORATION is bound which
prohibits or would prohibit the execution and delivery by
CORPORATION of this Agreement or the performance or observance
by CORPORATION of any term or condition of this Agreement.
17. Representations and Warranties by HYU.
NYU hereby represents and warrants to CORPORATION as follows:
(1) NYU is a corporation duly organized,, validly existing and in
good standing under the laws of the State of New York. NYU has
been granted all requisite power and authority to carry on its
business and to own and operate its properties and assets. The
execution, delivery and performance of this Agreement have been
duly authorized by the Board of Trustees of NYU;
(2) There is no pending or, to NYU's knowledge, threatened
litigation involving NYU which would have any effect on this
Agreement or on NYU's ability to perform its obligations
hereunder;
(3) There is no indenture, contract, or agreement to which NYU
and/or the NYU Scientist is a party or by which NYU and the NYU
Scientist is bound which prohibits or would prohibit the
execution and delivery by NYU of this Agreement or the
- 35 -
<PAGE> 38
performance or observance by NYU of any term or condition of
this Agreement; and
(4) Subject to the claim of ownership rights by Abbott as set forth
in Section 10.a. hereof and subject to the rights of HORL as
set forth in Section 15. hereof, NYU is the owner of the entire
right, title, and interest in and to NYU Patents and has the
sole right to grant licenses under such NYU Patents; and NYU
has not granted licenses thereunder to any other person or
entity except as set forth in Section 15 of this Agreement.
18. No Assignment.
Neither CORPORATION nor NYU shall have the right to assign, delegate or
transfer at any time to any party, in whole or in part, any or all of
the rights, duties and interest herein granted without first obtaining
the written consent of the other to such assignment, which consent
shall not be unreasonably withheld. However, CORPORATION shall have
the right to assign, delegate or transfer at any time, in whole or in
part, any or all of the rights, duties and interest herein granted to a
Corporation Entity provided written notice is given promptly to NYU and
Corporation Entity undertakes in writing to perform all the obligations
of CORPORATION pursuant to this Agreement.
19. Use of Name.
Without the prior written consent of the other party which consent
shall not be unreasonably withheld in accordance with the business
- 36 -
<PAGE> 39
practices and policies of the party whose consent is sought, neither
CORPORATION nor NYU shall use the name of the other party or any
adaptation thereof or of any staff member, employee or student of the
other party, including without limitation, in any product labeling,
advertising or sales literature. However, in the event that disclosure
is in connection with any public or private offering, is in connection
with a lawsuit settlement involving NYU and/or Joint Inventions, is in
conjunction with any application for regulatory approval, or is
required by law, either party can make factual statements concerning
this Agreement or file copies of this Agreement so long as the other
party has an opportunity to review and comment on the statements. The
comment period shall be ten (10) working days from the receipt of the
statements unless the parties agree to an extension. Except as
provided herein, neither NYU nor CORPORATION will issue public
announcements about this Agreement.
20. Confidentiality.
Except to the extent expressly authorized in this Agreement, the
parties agree that, for the term of this Agreement plus six (6) years
thereafter, the receiving party of written information marked
confidential by the providing party, shall keep it confidential and
shall not publish, use, or otherwise disclose it except to the extent
the receiving party can establish that such information:
1. was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure by the
providing party;
- 37 -
<PAGE> 40
2. was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving
party;
3. became generally available to the public or otherwise part of
the public domain after its disclosure and other than through
any act or omission of the receiving party in breach of this
Agreement; or
4. was subsequently lawfully disclosed to the receiving party by a
third party.
Each party may disclose the other's information to the extent such
disclosure is reasonably necessary in prosecuting or defending patents
and litigation, complying with applicable governmental regulations and
laws, conducting clinical trials, or negotiating with potential
sublicensees.
21. Miscellaneous.
a. In carrying out this Agreement the parties shall comply with
all applicable local, state and federal laws and regulations.
b. If any provision of this Agreement is determined to be invalid
or void, the remaining provisions shall remain in effect.
c. This Agreement shall be deemed to have been made in the State
of New York and shall be governed and interpreted in all
respects under the laws of the State of New York.
d. Any dispute arising under this Agreement shall be resolved in
an action in the courts of New York State or the federal courts
located in New York State, and the parties hereby consent to
personal jurisdiction of such courts in any such action.
- 38 -
<PAGE> 41
e. All payments or notices required or permitted to be given under
this Agreement shall be given in writing and shall be effective
when either personally delivered or deposited, postage prepaid,
in the United States registered or certified mail, addressed as
follows:
To NYU: New York University Medical Center
550 First Avenue
New York, NY 10016
Attention: Isaac T. Kohlberg Vice President for
Industrial Liaison
and
Office of Legal Counsel
New York University
Bobst Library
70 Washington Square South
New York, NY 10012
Attention: Annette B. Johnson, Esq.
Associate General Counsel
To CORPORATION: Calypte Biomedical Corporation
1440 Fourth Street
Berkeley, California 94710
Attention: David J. Robison, Ph.D. President and
Chief Executive Officer
or such other address or addresses as either party may
hereafter specify by written notice to the other. Such notices
and communications shall be deemed effective on the date of
delivery or fourteen (14) days after having been sent by
registered or certified mail, whichever is earlier.
- 39 -
<PAGE> 42
f. This Agreement (and the annexed Appendices) constitute the
entire Agreement between the parties with respect to the
subject matter contained herein and no variation, modification
or waiver of any of the terms or conditions hereof shall be
deemed valid unless made in writing and signed by both parties
hereto. This Agreement supersedes any and all prior
agreements or understandings with respect to the subject
matter contained herein, whether oral or written, between
CORPORATION and NYU.
g. No waiver by either party of any non-performance or violation
by the other party of any of the covenants, obligations or
agreements of such other party hereunder shall be deemed to be
a waiver of any subsequent violation or non-performance of the
same or any other covenant, agreement or obligation, nor shall
forbearance by ,any party be deemed to be a waiver by such
party of its rights or remedies with respect to such violation
or non-performance.
h. The descriptive headings contained in this Agreement are
included-for convenience and reference only and shall not be
held to expand, modify or aid in the interpretation,
construction or meaning of this Agreement.
i. It is not the intent of the parties to create a partnership or
joint venture or to assume partnership responsibility or
liability. The obligations of the parties shall be limited to
those set out herein and such obligations shall be several and
not joint.
- 40 -
<PAGE> 43
j. In the event of a delay caused by inclement weather, fire,
flood, strike, or other labor dispute, act of God, act of
governmental officials or agencies, or any other cause beyond
the control of either party, such party shall be excused from
performance hereunder for the period of time attributable to
such delay.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date and year first above written.
NEW YORK UNIVERSITY
By:
--------------------------------
Isaac T. Kohlberg
Vice President for
Title: Industrial Liaison
-----------------------------
Date:
-------------------------------
CALYPTE BIOMEDICAL CORPORATION
By:
-------------------------------
Title:
-----------------------------
Date:
-----------------------------
3573/169m - 41 -
<PAGE> 44
APPENDIX I
U.S. PATENTS
<TABLE>
<S> <C>
Method for Detecting Antibodies to Human Immunodeficiency Virus Patent No: 4,865,966
Granted: 9/12/89
Method for Detecting Antibodies to Human Immunodeficiency Virus Patent No: 5,122,446
Granted: 6/16/92
</TABLE>
FOREIGN PATENTS AND APPLICATIONS
<TABLE>
<CAPTION>
COUNTRY SERIAL NO, STATUS PATENT NO,
- ------- --------- ------ ---------
<S> <C> <C> <C>
Australia 17182/88 Issued 617671
Canada 564,232 Pending
Japan 504037/88 Pending
Nigeria 59/88 Issued RP10207
South Korea 7016/88 Pending
Sri Lanka 9968 Issued 9968
</TABLE>
<PAGE> 45
United States Patent [19] [11] Patent Number: 4,865,966
Friedman-Kien et al. [45] Date of Patent: Sep. 12, 1989
- ------------------------------------------------------------------------------
[54] METHOD FOR DETECTING ANTIBODIES
TO HUMAN IMMUNODEFICIENCY VIRUS
[75] Inventors: Alvin E. Friedman-Kien; Yunzhen
Cao; William Borkowsky, all of New York, N.Y.
[73] Assignee: New York University, New York, N.Y.
[21] Appl. No.: 40,013
[22] Filed: Apr. 17, 1987
[51] Int. CL4........................ C12Q 1/68; GOIN 33/53
[52] U.S. CL................................... 435/5; 435/7;
435/810; 436/501; 436/513; 436/808; 436/811
[58] Field of Search 435/5, 7, 810; 436/501,
436/513, 808, 811
(56] References Cited
U.S. PATENT DOCUMENTS
4,464,474 8/1984 Coursaget et al. 436/513
4,725,669 2/1988 Essex et al. 530/395
OTHER PUBLICATIONS
Meryhew, N. L. et al., J. Rheumat., 10: 913-919, 1983.
Wrier, E. et al., J. Clin. Invest., 42:1340-1352, 1962.
Hanson, L. A. et al., J. Clin. Invest., 44: 703-715, 1963.
Rao, T. K. S. et al., New England J. Med. 310: 669-673, 1994.
Trinick. T. R. et al., Clinica Chimica Acta, 139:113-117, 1984,
Franklin, E. C., J Clin. Invest. 38: 2159-2167, 1959.
Lerner, A. M. et al., J Clin. Invest., 41: 805-815, 1962.
Remington, J. S. et al., Nature. 194: 408-409, 1962.
Primary Examiner - Christine M. Nucker
Attorney, Agent, or Firm - Darby & Darby
[57] ABSTRACT
Disclosed herein is a method of screening mammals for antibodies to viral
agents by collecting a urine sample from a mammal to be tested and assaying the
sample for antibodies directed against the specific viral agent.
20 Claims, 2 Drawing Sheets
<PAGE> 46
U.S. PATENT Sep. 12, 1989 Sheet 1 of 2 4,865,966
FIG. 1
<PAGE> 47
U.S. PATENT Sep. 12.1989 Sheet 2 of 2 4,865,966
FIG. 2
<PAGE> 48
4,865,966
1
METHOD FOR DETECTING ANTIBODIES TO HUMAN IMMUNODEFICIENCY VIRUS
BACKGROUND OF THE INVENTION
The present invention relates to a method for detecting antibodies
directed against Human Immunodeficiency Virus which can be used for diagnosing
AIDS and related diseases, and identifying latent, asymptomatic carriers such
infections.
Acquired Immune Deficiency Syndrome (AIDS) was initially recognized and
reported in 1981. Since that time, clinical and epidemiological data have
revealed that the incidence of AIDS has reached epidemic levels
throughout the world. The causative agent of AIDS has been identified as an
RNA retrovirus, the Human T-Cell Leukemia Virus Type III (HTLV-III), also known
a Lymphadenopathy Associated Virus (LAV) and AIDS-associated retrovirus (ARV)
and recently renamed Human Immunodeficiency Virus (HIV). AIDS patients may
suffer from a broad spectrum of opportunistic infections such as Pneumocystis
carinii, Candida albicans, herpes simplex virus and cytomegalovirus, and are
also frequently afflicted with certain tumors, especially Kaposi's Sarcoma. It
has been estimated that the number of patients with AIDS in the United States
continues to double approximately every twelve months.
The putative AIDS virus, HIV, has been isolated from peripheral blood
mononuclear cells, cerebrospinal fluid, semen, neural tissue, saliva, tears and
rarely, urine. In order to determine the prevalence of HIV in the general
population, it has been suggested that mass screenings of the population for
the presence of antibodies directed against the AIDS virus be undertaken.
However, since antibody substances are generally found only in human blood and
serum, the proposed screening techniques involve obtaining a blood of serum
sample from the patient who is to be screened.
A variety of serological tests have been developed to detect the
presence of antibodies to HIV (indicative of exposure to HIV) in the blood of
patients with AIDS, AIDS-Related Complex (ARC) and healthy (i.e. asymptomatic
virus carriers. FDA-approved ELISA (enzyme-linked immunosorbent assay), as well
as experimental Western Blot kits for the measurement of antibodies against HIV
are now available. These include recent (but still experimental) ELISA assay
kits that detect specific antibodies directed against the viral envelope
protein (gp41 or ENV) and a viral core protein (p24 or CORE) as well as kits
utilizing Western Blot technology for detecting the major antigenic proteins of
HIV. In addition, methods have been recently developed for detecting these
viral antigens in tissue culture fluids of HIV-infected cells cultured in vitro
as well.
All of the current AIDS detection methods employ invasive procedures to
obtain a blood or serum sample to be analyzed for the presence of antibodies to
the HIV virus, i.e. the insertion of a hollow needle or other means for
withdrawing a fluid sample from a vein, artery or subcutaneous space. These
procedures involve some degree of risk to the health care personnel who are
involved in collecting and analyzing these samples as Acquired Immune
Deficiency Syndrome may possibly be contracted through inadvertent exposure to
a syringe or needle that has been employed to obtain a blood or serum sample
from a patient that is afflicted with the disease. Moreover, individuals who
are pres-
2
ently considered to be at a high risk of contacting AIDS, such as homosexual
men and intravenous drug users, and non-high risk individuals who should be
screened, often have unfounded fears that they can contract the disease while
being tested for it, and therefore avoid exposure to any test procedures which
involve withdrawing blood or serum using a needle.
These problems would be overcome by a non-invasive method for screening
for antibodies to HIV. Such a method should be suitable for use in mass
screenings and avoid the inherent drawbacks of the prior art invasive
serological techniques.
SUMMARY OF THE INVENTION
It has now been unexpectedly discovered that antibodies to HIV can be
detected in the urine of patients that have been exposed to, or infected with,
HIV. This is a particularly surprising discovery since heretofore it was
believed that antibodies could not be detected in human urine except in certain
individuals suffering from renal disease. The present invention discloses a
non-invasive method for determining whether a patient is infected with HIV virus
by detecting the presence of antibodies directed against HIV in the urine of a
patient to be screened for HIV.
It is therefore an object of the present invention to provide a
non-invasive method for screening for antibodies directed against infectious
agents.
In another aspect, the present invention provides a non-invasive method
for determining whether an individual has been exposed to a specific viral
agent. The method comprises detecting the presence of antibodies directed
against the specific viral agent in the urine of a patient who has not been
immunized against the specific viral agent.
These and other aspects of the present invention will be apparent to
those of ordinary skill in the art in light of the present description,
accompanying claims and appended drawings.
BRIEF DESCRIPTION OF THE FIGURES
FIG. 1 is a representative Western Blot analysis of the concentrated
urine samples of the present invention.
FIG. 2 is a double-diffusion gradient immunometric analysis of HIV
antibodies present in the urine of an HIV-infected individual.
DETAILED DESCRIPTION OF THE INVENTION
It has now been unexpectedly discovered that antibodies to the AIDS
virus (HIV) are present in the urine of AIDS-patients and HIV-infected
individuals, including individuals, including individuals that are not
suffering from renal disorders. In addition, the present inventors have
directly identified these HIV antibodies as being members of the IgG and IgA
classes of immunoglobulins by immunodiffusion techniques. This discovery is
surprising because the prior art suggests that meaningful titers of antiviral
antibodies are only present in the urine of patients afflicted with kidney
disease, or those who have been immunized by vaccination with the poliovirus
vaccine.
Franklin. E. C. (J. Clin. Invest. 38:2159-2167, 1959) has disclosed
that proteins, including albumin, alpha, beta and gamma globulins, were present
in the concentrated urine of normal humans. However, these fragments were only
one sixth the size of mature immuno-
<PAGE> 49
4,865,966
3
globulins and were thought to be natural breakdown products of antibody
molecules. Specific antibodies were not examined.
An article by Lerner, A. M. et al (J. Clin. Invest. 41: 805-815, 1962)
discloses that antibodies to poliovirus could be detected in the urine of
normal individuals who had been immunized with poliovirus vaccine. However,
all of the individuals with detectable urine antibodies had received at least 3
or more inoculations with the vaccine, and urines were analyzed shortly
thereafter. The presence of antiviral antibodies in the urine of non-immunized
individuals has not been previously reported in the literature. Indeed, the
present inventors were unable to detect antibodies directed against
cytomegalovirus (CMV) or hepatitis virus in the urine of individuals known to
be infected with such viral agents. In the case of CMV, AIDS patients with
serum titers of 1:1500 to 1:20,000 of anti-CMV antibodies did not have
detectable anti-CMV urinary antibodies, as assayed by ELISA.
Intact antibodies (or fragments of antibodies) directed against HIV
present in the urine of infected individuals have not heretofore been reported
in the literature. Urinary antibodies are usually found only in non-immunized
patients suffering from diseases of the kidney and/or liver such as nephrotic
syndrome, glomerulonephritis, hepatorenal syndrome or from those afflicted with
multiple myeloma, an immunoproliferative disorder.
The amount of HIV antibodies present in the urine is approximately 20
fold lower than that found in serum, and is below the limits of detection of
all currently available diagnostic techniques. Therefore, the urine must be
concentrated, i.e. its volume must be reduced relative to its initial void
volume must be reduced relative to its initial void volume, before assaying for
such antibodies. As more sensitive methods of antibody detection become
available, it is contemplated that the urine concentration step may be
eliminated.
The method of the present invention comprises obtaining a urine sample
voided by a patient to be screened for exposure to HiV, concentrating the urine
sample by reducing the volume of such sample at least about 20 fold in relation
to its initial (void) volume, and assaying the concentrated sample for the
presence of antibodies to HIV. The assay is conducted using techniques that
are well-known for detecting the presence of such antibodies in serum.
Although in theory as little as 1-5 ml of urine could be examined for the
presence of the antibodies sought to be detected, using currently available
methods for antibody detection, 40-100 mls of urine are desirably recovered
from the patient to be tested and used in the assay procedure. The
concentrated urine can be used immediately, stored for 24 hours or longer at 4
deg. C. before use and can be frozen (but deteriorates upon multiple
freezing and thawing).
Any of the numerous methods that are well known to those skilled in the
art can be used to concentrate (reduce the volume) of the urine sample to be
analyzed. Examples of techniques which can be used in practicing the method of
the present invention include, but are not limited to, air evaporation,
membrane dialysis, rotary evaporation, and preferably using a Minicon B15
concentrator (Amicon, Danvers, Mass.) with a 60,000 dalton membrane filter as
detailed in Example 1 below. Urine can also be concentrated by lyophilization,
but this requires larger volumes (e.g. at least 200 ml).
Once the urine sample has been substantially concentrated, it can be
assayed for the presence of antibodies to
4
HIV. As used herein with respect to urine volume reduction, substantially
concentrated means a volume reduction of at least 20 fold in relation to the
initial (void) urine volume, and preferably between about 40 fold and 200 fold
with respect to urine volume reduction, i.e. a reduction in volume from an
initial (void) volume of 40 ml to a final volume of 2 ml is a 20 fold
reduction. The sample thus obtained can be assayed for antibodies to HIV
proteins using standard antibody detection techniques including by way of
non-limiting example, ELISA, Western Blotting, ratio-immunoassay, and
immunodiffusion.
In a preferred embodiment of the present invention, the well-known
Western Blot Analysis method is employed for anti-HIV antibody detection. This
technique has been found to be the most reliable currently available method for
detecting HIV antibodies in the urine of mammals. The technique generally
comprises separating proteins (in this case, HiV proteins) by gel
electrophoresis on the basis of molecular weight, transferring the separated
proteins to a suitable solid support, (such as a nitrocellulose filter or
alternatively, a nylon filter), and incubating the serum (or urine) of an
HIV-infected individual with the separated proteins. This causes specific HIV
antibodies present in the serum (or urine) to bind to their respective
proteins. HIV antibodies are then detected using labeled anti-human HIV
antibodies. This method of detecting antibodies to HIV is preferred due to its
sensitivity and the fact that specific antibodies to viral proteins are
examined. The incidence of false positive results which are inherent when
employing ELISA assays is substantially reduced by using Western Blot Analysis.
An alternative embodiment of the present invention utilizes on Enzyme
Linked Immunosorbent Assay (ELISA) as a means for detecting antibodies specific
for HIV. ELISA assays for the detection of antibodies to the HIV virus can
either be competitive or non-competitive (as described by E. Engvall in Methods
in Enzymology, 70: 419439, incorporated herein by reference).
ELISA's are immunoassays used (in this case) to quantitate the amount
of antibodies present in a sample to be analyzed. The assays employ a
chromagen (a color producing substance) for detecting the antibody: antigen
complex formed. Antibodies used in ELISA are covalently coupled to these
chromogens, such as ortho-phenylendediamine or ortho-dianisidine, the formed
producing a tangerine-colored product in the presence of a peroxide (such as
hydrogen peroxide) and the latter a yellow-orange colored product in the
presence of a peroxide. These colors absorb light at specific wave-lengths
(ortho-phenylendediamine at 492nm and ortho-dianisidine at 400 nm) and are
detected and quantitated using a spectrophotometer.
Non-competitive ELISA tests employ an immobilized antigen in order to
capture any antibodies and an enzyme-labeled second antibody directed against
the species in which the test antibody has been elicited. If for example,
human antibodies are being measured, then goat or rabbit anti-human antibodies
are the labeled, second antibody. The amount of antibody present is directly
proportional to the amount of bound, labeled second antibody. Competitive
ELISA's comprise a reaction in which unlabeled (the biological sample to be
tested) and enzyme-labeled antibodies compete for a
<PAGE> 50
4,865,966
5
limited, known amount of antigen. In this case, the reaction is performed
until equilibrium is reached, and the concentration of unknown antibody is
inversely proportional to the amount of bound, enzyme-labeled antibodies. For
example, if there are no antibodies in the unknown sample, all of the labeled
antibodies will bind to the antigen, and a high value, indicated by an increased
color, will be obtained when measuring the amount of enzyme label present.
Commercially-available ELISA assay kits which can be used in practicing
the alternative embodiment of the present invention are available from Abbott
Labs (Chicago, Ill.) under Catalog Number 1037 and as ENVACOR (Human T Cell
Lymphotropic Virus III, EIA, Catalogue No. 2791-22, Abbott International
Diagnostics, Weisbaden, West Germany). The 1037 assay utilizes a
non-competitive ELISA (as described in Example 3 below) whereas the ENVACOR
test uses a competitive ELISA (as described in Example 2 below). These kits
contain the components listed in Examples 2 and 3 below and are offered for use
in assaying serum (not urine) for antibodies to HIV.
One important advantage of the method of the present invention is that
the biological sample to be analyzed (urine) can be easily obtained by
non-invasive techniques, and therefore, the risk of transmitting an HIV
infection to laboratory and health care personnel (e.g. through accidental
puncture with a contaminated needle) is essentially eliminated.
The method of the present invention can be carried out rapidly, limited
only by the time it takes to concentrate the urine sample to be tested. In
broad terms, this can be done in a period of time of less than 90 minutes, when
the samples are to be concentrated 200 fold. Concentrating the urine 20-40 fold
can be accomplished in less than 60 minutes. The sample can then be analyzed
using the commercially-available HIV Serum testing kits.
The invention is described further below in specific working examples
which are intended to illustrate the invention without limiting its scope.
EXAMPLE 1:
Urine Concentration
Serum samples and 60-100 ml of urine were collected (and numerically
coded for patient confidentiality) from the following groups of patients: 28
AIDS-associated Kaposi's sarcoma (AIDS-KS) patients; 21
ARC patients; 48 asymptomatic HIV-infected high risk individuals including (37
homosexual men, 5 female intravenous drug users and 1 female transfusion
recipient); and 16 patients suffering from AIDS-related opportunistic
infections (AIDS-OI), such as Penumocystis carinii and cytomegalovirus
(Table I contains specific patient identification and assay results) In
addition, 17 non-AIDS disease patients' urine and serum, including patients
diagnosed as having cirrhosis and hepatoma (1), hepatitis (3), Lupus (3),
glomerulonephritis (3), nephrotic syndrome (1), Lupus-nephritis (1), heart
failure (1), Lepromatous leprosy (1), tuberculosis (2) and DM nephropathy (1),
plus samples from 30 apparently normal, healthy heterosexuals were obtained.
The urine samples obtained from all of the normal controls and AIDS patients'
displayed essentially normal controls and AIDS patients' displayed essentially
normal values for proteins, when assayed using standard urinalysis techniques
well known in the art. Proteinuria (the presence of abnormally high
concentrations of protein in the urine) is routinely detected using a
"dipstick" that regis-
6
ters the presence of high (over 150 mg) concentrations of
urinary protein. This is indicated by a color change on the dip stick, which
is then compared to standards for quantitation.
The collected urine specimens were centrifuged in conical tubes at 1500
RPM for 15 minutes at room temperature. The supernatant was decanted and saved
and the pellet was discarded.
The supernatant obtained above was concentrated between 20 and 200 fold
in relation to the volume of initial urine sample collected from the subject to
be tested using a Minicon B15 concentrator with a 60,000 dalton membrane
(Amicon, Danvers, Mass.). The concentrator operates by retaining any substance
greater than 60,000 daltons molecular weight on the membrane filter, while the
solution is evaporated. This takes approximately one hour. (To concentrate
the urinary volume 200 times (200X) from an initial or starting volume i.e to
1/200 of its starting volume using the Mincon apparatus takes approximately 90
minutes). The concentrated urine sample can be stored at 4 deg. C. for up to
30 days before use, or used immediately for assay as detailed in Examples 2-5
below. For Western Blot analysis or immunodiffusion studies, sample volumes
are preferably further concentrated 200 fold i.e. to 1/200 of the starting
volume. The amount each sample was concentrated is listed in Tables 1, 2 and
4 below.
EXAMPLE 2:
Elisa Assay Of Concentrated Urine Samples
The serum and concentrated urine samples collected in Example 1 were
assayed for the presence of antibodies to ENV and CORE HIV antigens as
described (Allain, J.P. et al, Lancet I: 1233-1236, 1986, incorporated by
reference) using an Abbott Envacore assay kit. This is a competitive ELISA in
which known amounts of HIV proteins and antibodies are added together with the
sample to be tested. The presence of antibodies in the ample is indicated by a
reduction in the binding of the control antisera with the control antibody.
The manufacturer's instructions were followed exactly as provided. In
addition, blood samples were collected and analyzed simultaneously.
The kit contains a specimen diluent (containing bovine and goat sera
and 0.1% sodium azide), enzyme-conjugated polyclonal antibody to HIV envelope
and core proteins, beads coated with recombinant gp41 or gp24 HIV proteins,
ortho-phenylenediamene (OPD) substrate, a positive and a negative HIV antibody
control and instructions for use.
Fifty microliters of the specimen to be tested, or control, were
incubated with 20 microliters of diluent supplied by the manufacturer and 200
microliters of enzyme-conjugated polyclonal human antibody to HIV envelope or
core proteins. Beads coated with recombinant gp41 or p24 HIV proteins were
added to separate wells containing either the HIV ENV or CORE antibodies.
After 16 to 22 hours incubation at room temperature, the beads were washed and
transferred to appropriate reaction tubes. Three hundred microliters of
ortho-phenylenediamine substrate was then added to each tube and the reaction
allowed to proceed for 30 minutes before addition of 1 ml 1N H(2)SO4 to stop the
reaction. Absorbance values of the solution were measured at 492 nm using a
spectrophotometer sold by Abbott Labs under the name Quantum II, number
3303-11. A positive result for the presence of urine or serum antibodies
<PAGE> 51
4,865,966
7
to either the HIV p24 or gp41 proteins was defined as any specimen with
absorbance values equal to or less than 0.5 times the sum of the optical
density (0.D.) of mean negative control (provided by the manufacturer) optical
density (0.D.) plus the 0.D. of the mean positive
8
control (provided by the manufacturer) as measured in above.
A tabular identification of the patients screened with the present
invention and the assay results are presented in Tables 1 and 2 and summarized
in Table 3.
TABLE 1
- --------------------------------------------------------------------------------
The Antibodies to HIV in the serum and urine of
AIDS-KS, AIDS-OI, ARC groups, and HR groups
-------------------------------------------
<TABLE>
<CAPTION>
Presence in Presence in
Serum of Urine of
Patient ----------- -----------
Number Sex Code Concentration ENV Core ENV Core
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 M 1029 47X + + + -
2 M 993 100X + + - -
3 M 716 42X + - + -
4 M 818 33X + - + -
5 M 871 67X + + + -
6 M 894 33X + + + -
7 M 953 40X + - + -
8 M 5009 34X + + + -
9 M 5018 45X + - + -
10 M 5057 39X + + + -
11 M 5062 42X + + - -
12 M 1028 48X - + + -
13 M 828 42X + + + -
14 M 5061 37X + - + -
15 M 5059 35X + - - -
16 M 276 20X + + + -
17 M 1056 40X-200X + + - -
18 M 5098 40X + + - -
19 M 5013 35-200X + - - -
20 M 5050 20X + + + -
21 M 5074 42X + - - -
22 M 5080 42X + + - -
23 M 5051 40X + + - -
24 M 5083 41X + - + -
25 M 5097 40X + - + -
26 M 1083 42X + - + -
27 M 1081 40X + - - -
28 M 1084 40X + + - -
ARC Patients
- ------------
29 M 1022 56-200X + + - -
30 M 857 62-200X + + - -
31 M 920 47X + - + -
32 M 598 35X + + - -
33 M 1002 40X + + + -
34 M 1015 35X + - + -
35 M 1016 35X + + - -
36 M 1021 50X + + + -
37 M 949 40X + + + -
38 M 901 100X + - + -
39 M 898 100X + - + -
40 M 956 100X + + + -
41 M 839 47X + - + -
42 M 1039 41X + - + -
43 M HEN03 41X + - + -
44 M HEN04 42X + - + -
45 M HEN05 42X + - + -
46 M HEN06 42X + - + -
47 M HEN07 41X + - + -
48 M HEN08 42X + + + -
49 M HEN09 40X + + + -
- ---------------------------------------------------------------------------
</TABLE>
ENV = Antibody to HIV envelope [ant-cav (gp41)]
Core = Antibody to HIV core [anti-gag (p24)]
TABLE 2
- --------------------------------------------------------------------------------
Antibodies to HIV in the serum
and urine of the High-Risk group and AIDS-OI
--------------------------------------------
<TABLE>
<CAPTION>
Serum Urine
Patient Fold ----------- -----------
Number Sex Code Concentration ENV Core ENV Core
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
50 M 1024 37-200X + - - -
51 M 1060 30X + - - -
52 M 1059 32X - - - -
53 M 1062 40X + - - -
54 M 1057 28X + + + -
55 M 1055 32X - - - -
56 M 1058 40X + + + -
</TABLE>
<PAGE> 52
4,865,966
9
TABLE 2 - continued
- --------------------------------------------------------------------------------
Antibodies to HIV in the serum
and urine of the High-Risk group and AIDS-OI
--------------------------------------------
<TABLE>
<CAPTION>
Serum Urine
Patient Fold ----------- -----------
Number Sex Code Concentration ENV Core ENV Core
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
57 M 1052 37X - - - -
58 M A(2)-014 50X + + + -
59 M A(1)-078 33X + - + -
60 M 0697550 40X + - + -
61 M 0820835 44X + + + -
62 M 1061 41X + + + -
63 M A(1)-029 40X + + - -
64 M A(1)-136 41X + + - -
65 M A(1)-138 39X + - - -
66 M A(1)-044 41X + + + -
67 M A(1)-045 40X + + + -
68 M A(1)-173 42X + + + -
69 M A(1)-003 42X + + + +
70 F 1065754 40X + + + -
71 M 0471024 40X + + + -
72 M A(2)-132 40X + + + -
73 M A(2)-115 40X + + + +
74 M A(1)-060 40X + + - -
75 M A(1)-178 43X + + - -
76 M A(2)-090 40X + + + -
77 M A(2)-097 40X + + + -
78 M A(2)-137 40X + + + -
79 F U16 41X + - + +
80 M 1091 42X - - - -
81 M 1093 42X + + + -
82 M 1110 40X + - + -
83 M 1121 40X + - + -
84 M 1080 41X - - - -
85 M 1070 40X + - + -
86 M 1111 40X + + - -
87 M 1107 40X + + + +
88 M 1116 49X + + + +
89 F 941151 46X + - + -
90 M 1098 41X + - + -
91 F U17 40X + - - -
92 F U19 42X + + + +
93 F U20 42X + + + -
94 M A(2)-036 42X + - + -
95 M A(1)-082 40X + + - -
96 M A(i)-177 42X + - - -
97 M 1073 40X + - - -
PATIENTS WITH OPPORTUNISTIC INFECTIONS
--------------------------------------
98 M 644 40X + + + -
99 M 1063 23X + - - -
100 M 155 43X + + - -
101 M 156 40X o/ / + -
102 M 157 40X + + - -
103 M 1108 40X + - + -
104 M 1112 40X + - - -
105 M 1113 42X + + - -
106 M 159 41X + - + -
107 F 160 41X + - + -
108 M 161 40X + + + -
109 F 162 42X + + + -
110 M 164 44X + + + -
111 M 165 40X + - + -
112 M 166 41X + - + -
113 M 473 33X + - + -
- --------------------------------------------------------------------------------
</TABLE>
o/ = not done
TABLE 3
- --------------------------------------------------------------------------------
Summary of ELISA assay for HIV ENV antiodies
in the Concentrated Urine Samples
--------------------------------------------
<TABLE>
<CAPTION>
SERUM/URINE SERUM/URINE SERUM/URINE % SERUM/URINE
PATIENT TYPE + - + + - - + +
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIDS/KS 8 20 0 20/28 = 71.4%
ARC 4 17 0 17/21 = 81.0%
HIGH RISK 13 30 5 30/3 = 69.7%
OPPORTUNISTIC 5 11 0 11/16 = 68.8%
INFECTION
- -------------------------------------------------------------------------------------------
TOTAL 30 78 5 78/113 = 72.3%
- -------------------------------------------------------------------------------------------
</TABLE>
Referring to Tables 1 and 2, it can be seen that 71.4% of the AIDS-induced
Kaposi's sarcoma patients, 81% of
10
the ARC patients, 69.7 of the patients in the high risk
<PAGE> 53
4,865,966
11
group and 68.8% of patients suffering from opportunistic infections had
antibodies to the ENV protein (gp41) of HIV present in their urine and that
such antibodies were detected using the methods of the present invention. The
total percentage of patients with detectable HIV ENV antibodies was 72.2%. The
core antigen was only detected in the urine of 6 individuals, those being in
the asymptomatic infected high risk group. All of the non-AIDS disease
patients and the normal, healthy heterosexuals' urine and serum were negative
for antibodies to both HIV proteins.
EXAMPLE 3:
A subset of the urine samples analyzed in Example 1 were re-examined
using two commercially-available non-competitive HIV ELISA detection kits. KIT
I (HTLV III EIA kit, Lot No. 1590HR00, Abbott Laboratories, Chicago, Ill.) is
an FDA-approved clinical diagnostic kit; Kit II (EIA Clinical Diagnostic Kit,
Catalog No. 1037, Abbott Laboratories, Chicago, Ill.) is intended for
investigative use only.
Each of the kits contain HIV antigen-coated beads, goat anti-human
antibody conjugated to horseradish peroxidase, a positive control, a negative
control, specimen diluent containing bovine and goat sera, OPD and an OPD
diluent containing citrate-phosphate buffer and
12
0.02% hydrogen peroxide, reaction trays,, assay tubes and instructions for use.
The assay for the presence in the urine of a patient to be tested of
antibodies to HIV is performed as follows. 10 microliters of control or
diluted specimen is dispensed into preselected wells of the reaction tray.
Each well can hold up to 400 microliters of fluid. Two hundred microliters of
specimen diluent and one bead are added per well. The reactions are incubated
for about 1 hour at 40 leg. C. Thereafter, the supernatant (i.e. liquid) is
discarded and the bead washed three times with 4 to 6 ml of distilled or
deionized water. Two hundred microliters of labeled goat-anti-human antibodies
are then added and incubated at 40 deg. C. for about 2 hours. The supernatant
is removed and the bead is washed as above. The bead is transferred to an
assay tube, 300 microliters of OPD substrate solution is added, and the
solution is incubated for about 30 minutes. 1 ml of 1N sulfuric acid is added
and the absorbance of the solution determined at 492 nm in a standard Abbott
Labs spectrophotometer (Model 3303-11 available from Abbott Labs). A positive
value is indicated if a sample is within the rnge of 0.5 to 1.5 times the
positive control mean.
The results of these assays are presented below in Table 4.
TABLE 4
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
KIT I KIT II
PATIENT FOLD URINE HIV URINE HIV ENVEL-
NUMBER PATENT CONCENTRATION ANTIBODY OPE ANTIBODY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIDS-KS
- -------
1 1029 47X + +
3 716 42X + +
4 818 33X + +
5 871 67X - +
6 894 33X + +
7 953 40X - +
8 5009 34X + +
9 5018 45X - +
10 5057 39X - +
11 5062 42X - -
12 1028 48X + +
13 828 42X - +
14 5061 37X + +
16 276 20X - +
17 1056 40X-200X - +
19 5013 35X-200X - -
20 5050 20X - +
21 5074 42X + +
22 5080 42X - -
ARC
----
30 857 62x-200x - -
31 920 47X - +
32 598 35X - -
33 1002 40X + +
34 1015 35X - +
35 1016 35X - -
36 949 40X - +
40 956 100X - +
41 839 47X - +
HIGH-RISK
- ---------
52 1059 32X - -
53 1067 40X - -
54 1057 28X - +
55 1055 32X - -
57 1052 37X - -
58 A2-014 50X - +
59 A1-078 33X - +
60 0697550 40X - +
61 0820535 44X - +
62 1061 41X - +
63 A1-029 40X - -
64 A1-136 41X - -
65 A1-138 39X - -
66 A1-044 41X - +
67 A1-045 40X - +
</TABLE>
<PAGE> 54
4,865,966
13
TABLE 4-continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KIT I KIT II
Patient Fold Urine HIV Urine HIV
Number Patent Concentration Antibody Envelope Antibody
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
68 A1-173 42X - +
69 A1-003 42X + +
PATIENTS WITH OPPORTUNISTIC INFECTION
--------------------------------------
98 644 40x + +
99 1063 23x - -
100 155 43x - -
101 156 40x + +
102 157 40x - -
- -------------------------------------------------------------------------------
</TABLE>
The results presented in Table 4 demonstrate that urine
antibodies to HIV are more readily detectable when employing a more sensitive
ELISA assay kit (Kit II). This is the same as for serum antibodies. A limited
number of these samples were further analyzed using the Western Blot technique
as described below in Example 4.
EXAMPLE 4:
Western Blot Analysis Of Concentrated Urine Samples
Western Blot analysis for the presence of antibodies to HIV was
performed on the urine and serum samples collected from 59 HIV sero-positive
(including 18 AIDS-KS, 27 High Risk individuals, 6 ARC and 8 O.I. patients
selected from those reported in Tables 1 and 2 above) and 30 non-AIDS disease
patients. A commercially-available kit (Biotech/DuPont HTLV-III Western Blot
Kit, available from E. I. DuPont de Nemours and Co., Inc., Wilmington, Del.) was
used in making the analysis. The kit contains precut nitrocellulose membrane
strips with immobilized viral antigens that have been separated by sodium
dodecyl sulfate/polyacrylamide gel electrophoresis (SDS-PAGE) and electroblotted
onto the membrane; control sera, including a negative control, a weak positive
control and a strong positive control; blotting buffer (Tris buffered saline
with 5% nonfat dry milk and also containing heat inactivated normal goat serum);
wash buffer (Tris buffered saline containing tween-20 detergent); biotinylated
goat anti-human IgG; avidin-horse-radish peroxidase; 4-chloro-1-naphthol in
solution; hydrogen peroxide; and an incubation tray. The kit was used exactly
according to the manufacturer's instructions as described below.
The assay comprises soaking the strips in 2 mls of wash buffer in a well
of the wash tray for 30 minutes
14
at room temperature; the liquid is then drained off and discarded. The strips
are then washed with 2 mls of blotting buffer for 5-10 minutes at room
temperature. Twenty microliters of a 200 fold concentrated urine sample are
added to the wells containing the strips and blotting buffer and the reactant
incubated overnight at room temperature. Thereafter, the mixture in the wells
is aspirated and discarded and the wells are washed once with 2 mls of wash
buffer. Two additional 2 ml washes (with wash buffer) are performed at room
temperature, allowing 5 minutes soaking between each wash and discarding the
wash afterwards.
The nitorcellulose strips are developed as follows. Two mls of
biotinylated goat anti-human IgG are added to each well and allowed to incubate
for 60 minutes at room temperature on a rocking or rotary apparatus. The strips
are then washed with 2 mls of wash buffer per strip for 5 minutes; this step is
then repeated 3 additional times at room temperature, discarding the wash after
each use. Two mls per strip of avidin-horseradish peroxidase are added and
incubated for 60 minutes at room temperature on a rocking or rotary apparatus.
The strips are washed 3 times as above. Two mls of a 50:50 mixture of
4-chloro-1-naphthol and hydrogen peroxide are then added and allowed to incubate
for 10-15 minutes or until the color develops at room temperature. The presence
of color on the strip indicates that the strip has been exposed to a biological
fluid (i.e. urine) containing antibodies to HIV.
The strips are scored for the presence of antibodies to HIV as negative
(-) i.e. no antibodies to HIV detected, weakly positive (+) or strongly positive
(+) using the controls supplied by the manufacturer as references. The results
are presented in Table 5 and FIG. 1.
TABLE 5
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Results of Western Blot analysis of concentrated urine samples
--------------------------------------------------------------
Patient
Number Code p17 p24 p31 p41 p51 p55 p66 p110/p120 p160
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AIDS-KS
-------
1 1029 - - - + - - - + +
7 953 - - + +- - - - + +
8 5009 - + + - + + - + +
9 5018 - - + + + - + + +
10 5057 - + + - + - + + +
12 1028 - - - + - - - + +
13 828 - - + - - - - + +
14 5061 - - + +- - - - + +
16 276 - + + + + + + + +
17 1056 - - - - +- +- +- + +
18 5098 - + - + - + - + +
21 5074 - - + - + - + + -
22 5080 - - - - - - - - -
23 5051 - - - - - - - - +
24 5083 - - - + - - - + +
25 5097 - - - + - - - + +
26 1083 - - - - - - - - -
27 1081 - - - + - + - - +
</TABLE>
<PAGE> 55
4,865,966
15
TABLE 5-Continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Results of Western Blot analysis of concentrated urine samples
--------------------------------------------------------------
PATIENT
NUMBER CODE p17 p24 p31 p41 p51 p55 p66 p110/p120 p160
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ARC
- ---
33 1002 - + + + + + + + +
40 956 - - + + + - + + +
42 1039 - + + + + + + + +
43 Hen03 - - - + - - + - -
43 Hen04 - - + + + - + + +
43 Hen05 + - + + + + + + +
Asymptomatic High-Risk homosexuals
----------------------------------
54 1057 - + + + - - + + +
58 A2-014 - + - + - + + + +
- - - -
59 A1-078 - + + + - + + + +
-
60 697550 - - + + + + + + +
61 820835 - + + * + + + + +
62 1061 - - - - - - - + +
66 A1044 - - + - - - - + +
67 A1-045 - + + + + + + + +
68 A1-173 + + + + + + + + +
69 A1-003 + + + + + + + + +
70 1065754 + + + + + + + + +
71 471024 - + - - - + + + +
72 A2-132 + + + + + + + + +
74 A2-060 - - - - - - - - +
75 A2-178 - + + + + + + + +
76 A2-090 - + - + - + + + +
77 A2-097 + + + + + + + + +
78 A2-137 + + + + + + + + +
79 U16 + + + + + + + + +
81 1093 - + - + - + + + +
82 1110 - + + + + + + + +
83 1121 - - - * - - - - +
85 1070 + + - + - + + + +
86 1111 - * + + + - + - +
87 1107 + + + + + + + + +
88 1116 + + + + + + + + +
90 1098 + + + + + + + + +
Opportunistic Infections
------------------------
98 644 - - - - - - - - -
99 1063 - - - - - - - - -
100 156 - - - + - - - + +
102 157 - * - - - - - - +
103 1108 + - + + + + + + +
104 1112 - - - + + - + + +
105 1113 - - + + + + + + +
113 473 + + + + + + + + +
- -----------------------------------------------------------------------------------------
* = indeterminate results
</TABLE>
TABLE 6
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Comparison of Results of Western Blot analysis
of concentrated urine and serum samples
----------------------------------------------
HIV AIDS-KS ARC HIGH-RISK O.L.
--------------- --------------- --------------- ---------------
Protein Serum Urine Serum Urine Serum Urine Serum Urine
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
p17 18/18* 1/18 2/6 1/6 26/27 11/27 7/8 1/8
p24 18/18 5/18 6/6 2/6 25/27 23/27 7/8 1/8
p31 18/18 9/18 6/6 5/6 26/27 19/27 7/8 3/8
p41 18/18 11/18 6/6 6/6 26/27 23/27 8/8 5/8
p51 18/18 8/18 6/6 5/6 27/27 16/27 8/8 4/8
p55 18/18 7/18 6/6 3/6 27/27 21/27 8/8 3/8
p66 18/18 7/18 6/6 6/6 27/27 23/27 8/8 4/8
p120 18/18 15/18 6/6 5/6 27/27 24/27 8/8 5/8
p160 18/18 16/18 6/6 5/6 27/27 26/27 8/8 8/8
- -------------------------------------------------------------------------------------------
*18 positives per 18 patients tested.
</TABLE>
Referring to Table 5, p17 is a protein component produced upon cleavage
of p55 to p24 is the viral core protein, p31 is the viral endonuclease, p41 is
the mature envelope protein, p51 and p66 are components of the viral reverse
transcriptase, p55 is a precursor to the viral core protein and p160 is a
precursor to the envelope protein; p110/120 is a mixture of 2 proteins which
co-migrate in this gel system: p120 is a protein component produced upon
processing of the p160 pro-
16
tein to gp41; p110 is a protein component of the virus whose function is
currently unknown.
An example of a typical a Western Blot analysis of the concentrated
urine and serum samples obtained by practicing the method of the present
invention is shown in FIG. 1. Referring to FIG. 1, lane 22 is the negative
control; the numbers to the right represent the various HIV proteins discussed
above. Above lines 12-16 and 18-2 are the corresponding
<PAGE> 56
4,865,966
17
patients as referred to in Table 5 above. For example, urine obtained from
patient No. 956 (FIG. 1, lane 16), suffering from ARC contained antibodies
directed against all of the HIV proteins except p24 (Core) and p17. The
significance of this finding is presently unknown.
As can be seen from the data in Table 5 and summarized in Table 6,
antibodies to HIV antigens can be readily found (when present) in the
concentrated urine samples using this more sensitive technique. In particular,
antibodies to p160 in the concentrated urine could be detected in 55 out of the
59 HIV-positive individuals tested (93.2%). These results also demonstrate
that the use of concentrated urine in this preferred embodiment of the present
invention does not lead to false positive, since specific viral proteins are
identified.
EXAMPLE 4:
Double-Diffusion Gradient Immunoelectrophoretic
Analysis Of HIV Antibody-Containing Urine Samples
Concentrated urine sample No. 956 (Table I), which tested positive for
HIV antigens using Western Blot analyses and antibodies directed against the
envelope protein using ELISA, was further concentrated 200 fold and analyzed by
double-diffusion gradient immuno-electrophoresis (DDG-IEB) as described by J.V.
Chuba, in J. App. Biochem., 1: 37-50, 1979, (incorporated by reference). Serum
samples from this patient were collected and analyzed in parallel to the patient
urine samples as a positive control.
Briefly, replicate samples of 3 microliters of urine and serum
respectively were electrophoresed in commercially prepared 0.5% agarose thin
layer gels (Paragon, Beckman Instruments Brea, Calif.). Troughs were placed at
right angles to the gels for the addition of antisera. Electrophoresis was
performed by subjecting the gels to 20 minutes of direct current on a slightly
modified Hyland Power Pack (Costa Mesa, Calif.) at the 40 mA setting. The
running buffer contained barbital buffer B-2 (0.075 M, pH 8.6; containing 0.2%
(w/v) sodium azide) mixed with an equal volume of 3.0 mM aqueous calcium
lactate solution.
After eletrophoresis, the antisera troughs were completed by removing
the corresponding segment of the gel between the precut slits, and conventional
parallel-trough immunodiffusion was performed. 7.5 microliters of anti-human
IgG, IgM and IgA (Behring Diagnostics, San Diego, Calif.) at a concentration of
5.5 micrograms per ml was added to the troughs and incubated for 20 minutes at
room temperature. Thereafter, the gels were stained and examined for the
development of precipitin lines. Anti-albumin antibodies were included in the
serum samples as a positive control.
As shown in FIG. 2, IgG (11) and IgA (13) immunoglobulins were
identified in the urine sample of patient No. 956. IgM, although present in
the serum did not appear in the urine (12). This is not surprising due to the
large size of this immunoglobulin (approximately 900,000 daltons).
Anti-albumin antibodies reacted with the serum samples, as expected (10),
forming a sharp percipitin line of identity (lane 1). These results confirm
the positive results obtained from the ELISA and Western Blot detection
procedures, and demonstrate that they were not due to artifacts caused by use of
concentrated urine samples.
The above invention has been described in terms of preferred
embodiments. It would be obvious to those of
18
ordinary skill in the art that many additions, deletions and substitutions
could be made without departing from the spirit and scope of the invention, as
claimed below.
What is claimed is:
1. A method for detecting antibodies to human immunodeficiency virus
which comprises the steps of:
collecting a void urine sample from a human subject to be tested for the
presence of antibodies to human immunodeficiency virus to form a
liquid specimen;
adjusting the volume of said liquid specimen to a level sufficient to
enable antibodies to human immunodeficiency virus present in
said specimen to be detected by assay; and
assaying a predetermined quantity of said liquid specimen for the
presence of said antibodies to human immunodeficiency virus.
2. The method of claim 1 wherein said adjusting step comprise reducing
the volume of said urine sample at least twenty-fold in relation to the void
volume of said urine sample.
3. The method of claim 1 wherein said assaying step comprises exposing
said urine specimen to an enzyme-linked immunosorbent assay for human
immunodeficiency virus.
4. The method of claim 1 wherein said assaying step comprises
conducting a western blot analysis of a portion of said urine specimen.
5. The method of claim 1 wherein said assaying step comprises
electrophoresing a predetermined quantity of said urine specimen using
an electrophoresis gel,
excising a portion of the electrophoresis gel, and
examining the excised gel portion for the presence of antibodies to
human immunodeficiency virus.
6. The method of claim 1 wherein said antibodies are directed against
viral proteins of human immunodeficiency virus.
7. The method of claim 6 wherein aid antibodies comprise antibodies
directed against human immunodeficiency virus viral protein p41.
8. The method of claim 1 wherein said antibodies comprise antibodies
directed against human immunodeficiency virus viral protein p24.
9. The method of claim 1 wherein said antibodies comprise antibodies
directed against human immunodeficiency virus viral protein p160.
10. The method of claim 1 wherein said antibodies comprise IgG.
11. The method of claim 1 wherein said antibodies comprise IgA.
12. A method for detecting the presence of antibodies to human
immunodeficiency virus in a human subject which comprises the steps of:
collecting a void urine sample from said human subject,
adjusting the volume of said void sample to a level sufficient to enable
antibodies to human immunodeficiency virus present in said
sample to be detected by assay, thereby forming a test specimen
and
assaying said test specimen for the presence of at least one antibody to
a human immunodeficiency virus protein selected from the group
consisting of human immunodeficiency virus viral protein p17,
and p24.
<PAGE> 57
4,865,966
19
13. A method for determining whether a human subject has been infected
with human immunodeficiency virus (HIV) comprising the steps of:
collecting a void urine sample from said subject;
adjusting the volume of said void urine sample to a level sufficient to
enable antibodies to human immunodeficiency virus present in
said sample to be detected by assay, thereby forming a test
specimen;
assaying said specimen for the presence of antibodies to a HIV viral
protein;
comparing the results of said assay with those of the same assay
performed with urine from a HIV-free control human subject.
14. The method of claim 13 wherein said assaying step comprises
exposing said urine specimen to an enzyme-linked immunosorbent assay.
15. The method of claim 13 wherein said assaying step comprises
conducting a western blot analysis of a portion of said urine specimen.
16. The method of claim 13 wherein said antibodies comprise antibodies
directed against at least one HIV viral protein selected from the group
consisting of p41, p24, p160, and p17.
20
17. The method of claim 13 wherein said antibodies comprise antibodies
directed against at least one HIV viral protein selected from the group
consisting of p17 and p24.
18. The method of claim 13 wherein said antibodies comprise antibodies
of the IgG isotype.
19. The method of claim 13 wherein said antibodies comprise antibodies
of the IgA isotype.
20. A method for screening a human subject for exposure to human
immunodeficiency virus (HIV) comprising the steps of:
collecting a void urine sample from said subject;
adjusting the volume of said void urine sample to a level sufficient to
enable antibodies to HIV present in said sample to be detected
by assay, thereby forming a test specimen;
assaying said specimen for the presence in said specimen of at least one
antibody to an HIV viral protein; and
determining whether said subject has been exposed to HIV based on the
positive presence of said antibody in said sample.
* * * * *
<PAGE> 58
UNITED STATES PATENT [19] [11] PATENT NUMBER: 5,122,446
FRIEDMAN-KIEN ET AL. [45] DATE OF PATENT: JUN. 16, 1992
- --------------------------------------------------------------------------------
[54] METHOD FOR DETECTING ANTIBODIES TO HUMAN IMMUNODEFICIENCY VIRUS
[75] Inventors: Alvin Friedman-Kien; Cao Yunzhen, both of New York; William
Borkowsky, Brooklyn, all of N.Y.
[73] Assignee: New York University, New York, N.Y.
[21] Appl. No.: 204,871
[22] Filed: Jun. 10, 1988
RELATED U.S. APPLICATION DATA
[63] Continuation-in-part of Ser. No. 40,013, Apr. 17, 1987 Pat. No. 4,865,966.
[51] Int. CL(5) .................................................. G01N 33/569
[52] U.S. CL ................................................ 435/5; 435/7.92;
435/7.93; 435/7.94; 435/7.95; 435/974;
435/975; 436/501; 436/513; 436/808; 436/811
[58] Field of Search ................................435/5, 7, 810, 7.92-7.95,
435/974, 975; 436/501, 513, 808, 811
[56] REFERENCES CITED
U.S. PATENT DOCUMENTS
<TABLE>
<S> <C> <C> <C>
4,560,647 12/1985 Stocker ..................... 435/5
4,725,669 2/1988 Essex et. al ................ 530/395
4,865,966 9/1989 Freidman-Kien ............... 435.5
</TABLE>
FOREIGN PATENT DOCUMENTS
<TABLE>
<S> <C> <C> <C>
0132170 1/1985 European Pat. Off.
WO86/02930 5/1986 World Int. Prop. O. .......... 435/5
88/07680 10/1988 World Int. Prop. O. .......... 435/5
</TABLE>
OTHER PUBLICATIONS
Journal of Clinical Investigation, vol. 41, No. 4, 1962, pp. 805-815, M. Lerner
et al., "Neutralizing Antibody to Polioviruses in Normal Human Tissue".
Chemical Abstracts, vol. 77, Sep. 22, 1977, Abstract No. 87578.
Blood, vol. 67, No. 3, 1986, pp. 831-834, New York, D.W. Archibald et al.,
"Antibodies to Human T-Lymphotropic Virus Type III (HTLV-III) in Saliva of
Acquired Immunodeficiency Syndrome (AIDS) Patients and in Persons at Risk for
AIDS".
Clinica Chimica Acta, vol. 139, 1984, pp. 113-117, T.R. Trinick et al.,
"Measurement of Urinary Immunoglobulins G, A and M by an Enzyme Linked
Immunosorbent Assay (ELISA)".
Lancet, Apr. 9, 1988, pp. 831, 832, Cao et al., "IGG Antibodies to HIV-1 in
Urine of HIV-1 Seropositive Individuals".
AIDS Research and Human Retroviruses, vol. 5, No. 3, 1989, pp. 311-320, New
York, Y. Cao et al., "Antibodies to Human Immunodeficiency Virus Type I in the
Urine Specimens of HIV-1-Seropositive Individuals". Lerner et al.,
"Neutralizing Antibody to Poliovirus in Normal Human Urine", Virology, (1961),
14:383-5.
Meryhew, N.L. et al., J. Rheumat., 10:913-919, 1983.
Takayanagi et al., Clinicopathological Significance of the Analysis of Urinary
Antibody Activatives, Rinsho Byroi, The Japanese Journal of Clinical Pathology,
vol. 22 (Suppl.) Oct. 1974, p. 184, (English Translation).
Bulletino Dell Instituto Sieriterapico Milanese, vol. 51, No. 1, 1972, pp.
90-102, D. DeDonate et al., "Sugli Anticorporpi Antivirali Delle Urine",
(Chemical Abstracts, vol. 77, Sep. 22, 1977, Abstract No. 86578).
Primary Examiner -- Christine Nucker
Attorney, Agent, or Firm -- Darby & Darby
[57] ABSTRACT
Disclosed herein is a method of screening mammals for antibodies to viral
agents by collecting a urine sample from a mammal to be tested and assaying the
sample for antibodies directed against the specific viral agent.
13 CLAIMS, 2 DRAWING SHEETS
<PAGE> 59
U.S. PATENT JUNE 16, 1992 SHEET 1 OF 2 5,122,446
[CHART]
FIG. 1
<PAGE> 60
U.S. PATENT JUNE 16, 1992 SHEET 2 OF 2 5,122,446
[CHART]
FIG. 2
<PAGE> 61
5,122,446
1
METHOD FOR DETECTING ANTIBODIES TO
HUMAN IMMUNODEFICIENCY VIRUS
This application is a continuation-in-part application of co-pending
U.S. patent application Ser. No. 040,013 filed Apr. 17, 1987 of Friedman-Kien
et al now U.S. Pat. No. 4,865,956.
The present invention related to a method for detecting antibodies
directed against Human Immunodeficiency Virus which can be used for diagnosing
AIDS and related diseases, and identifying latent, asymptomatic carriers of
such infections.
Acquired Immune Deficiency Syndrome (AIDS) was initially recognized and
reported in 1981. Since that time, clinical and epidemiological data have
revealed that the incidence of AIDS has reached epidemic levels throughout the
world. The causative agent of AIDS has been identified as an RNA retrovirus,
the Human T-Cell Leukemia Virus Type III (HTLV-III), also known as
Lymphadenopathy Associated Virus (LAV) and AIDS-associated retrovirus (ARV) and
recently renamed Human Immunodeficiency Virus (HIV). AIDS patients may suffer
from a broad spectrum of opportunistic infections such as Pneumocystis carinii,
Candida albicans, herpes simplex virus and cytomegalovirus, and are also
frequently afflicted with certain tumors, especially Kaposi's Sarcoma. It has
been estimated that the number of patients with AIDS in the United States
continues to double approximately every twelve months.
The putative AIDS virus, HIV, has been isolated from peripheral blood
mononuclear cells, cerebrospinal fluid, semen, neural tissue, saliva, tears and
rarely, urine. In order to determine the prevalence of HIV in the general
population, it has been suggested that mass screenings of the population for
the presence of antibodies directed against the AIDS virus be undertaken.
However, since antibody substances are generally found only in human blood and
serum, the proposed screening techniques involve obtaining a blood or serum
sample from the patient who is to be screened.
A variety of serological tests have been developed to detect the
presence of antibodies to HIV (indicative of exposure to HIV) in the blood of
patients with AIDS, AIDS-Related Complex (ARC) and healthy (i.e. asymptomatic)
virus carriers. FDA-approved ELISA (enzyme-linked immunosorbent assay), as
well as experimental Western Blot kits for the measurement of antibodies
against HIV are now available. These include recent (but still experimental)
ELISA assay kits that detect specific antibodies directed against the viral
envelope protein (gp41 or ENV) and a viral core protein (p24 or CORE) as well
as kits utilizing Western Blot technology for detecting the major antigenic
proteins of HIV. In addition, methods have been recently developed for
detecting these viral antigens in tissue culture fluids, of HIV-infected cells
cultured in vitro as well.
All of the current AIDS detection methods employ invasive procedures to
obtain a blood or serum sample to be analyzed for the presence of antibodies to
the HIV virus, i.e. the insertion of a hollow needle or other means for
withdrawing a fluid sample from a vein, artery or subcutaneous space. These
procedures involve some degree of risk to the health care personnel who are
involved in collecting and analyzing these samples as Acquired Immune
Deficiency Syndrome may possi-
2
bly be contracted through inadvertent exposure to a syringe or needle that has
been employed to obtain a blood or serum sample from a patient that is
afflicted with the disease. Moreover, individuals who are presently considered
to be at a high risk of contacting AIDS, such as homosexual men and intravenous
drug users, and non-high risk individuals who should be screened, often have
unfounded fears that they can contract the disease while being tested for it,
and therefore avoid exposure to any test procedures which involve withdrawing
blood or serum using a needle.
These problems would be overcome by a non-invasive method for screening
for antibodies to HIV. Such a method should be suitable for use in mass
screenings and avoid the inherent drawbacks of the prior art invasive
serological techniques.
SUMMARY OF THE INVENTION
It has now been unexpectedly discovered that antibodies to HIV can be
detected in the urine of patients that have been exposed to, or infected with,
HIV. This is a particularly surprising discovery since heretofore it was
believed that antibodies could not be detected in human urine except in certain
individuals suffering from renal disease. The present invention discloses a
non-invasive method for determining whether a patient is infected with HIV
virus by detecting the presence of antibodies directed against HIV in the urine
of a patient to be screened for HIV.
It is therefore an object of the present invention to provide a
non-invasive method for screening for antibodies directed against infectious
agents.
In another aspect, the present invention provides a non-invasive method
for determining whether an individual has been exposed to a specific viral
agent. The method comprises detecting the presence of antibodies directed
against the specific viral agent in the urine of a patient who has not been
immunized against the specific viral agent.
These and other aspects of the present invention will be apparent to
those of ordinary skill in the art in light of the present description,
accompanying claims and appended drawings.
BRIEF DESCRIPTION OF THE FIGURES
FIG. 1 is a drawing showing a representative Western Blot analysis of
the concentrated urine samples of the present invention.
FIG. 2 is a drawing showing a double-diffusion gradient immunometric
analysis of HIV antibodies present in the urine of an HIV infected individual.
DETAILED DESCRIPTION OF THE
INVENTION
It has now been unexpectedly discovered that antibodies to the AIDS
virus (HIV) are present in the urine of AIDS-patients and HIV-infected
individuals, including individuals that are not suffering from renal disorders.
In addition, the present inventors have directly identified these HIV
antibodies as being members of the IgG and IgA classes of immunoglobulins by
immuno-diffusion techniques. This discovery is surprising because the prior
art suggests that meaningful titers of antiviral antibodies are only present in
the urine of patients afflicted with kidney disease, or those who have been
immunized by vaccination with the poliovirus vaccine.
<PAGE> 62
5,122,446
3
Franklin, E. C. (J. Clin. Invest. 38:2159-2167, 1959) has disclosed that
proteins, including albumin, alpha, beta and gamma globulins, were present in
the concentrated urine of normal humans. However, these fragments were only one
sixth the size of mature immunoglobulins and were thought to be natural
breakdown products of antibody molecules. Specific antibodies were not
examined.
An article by Lerner, A. M. et al (J. Clin. Invest. 41: 805-815, 1962)
discloses that antibodies to poliovirus could be detected in the urine of
normal individuals who had been immunized with poliovirus vaccine. However,
all of the individuals with detectable urine antibodies had received at least 3
or more inoculations with the vaccine, and urines were analyzed shortly
thereafter. The presence of antiviral antibodies in the urine of non-immunized
individuals has not been previously reported in the literature. Indeed, the
present inventors were unable to detect antibodies directed against
cytomegalovirus (CMV) or hepatitis virus in the urine of individuals known to be
infected with such viral agents. In the case of CMV, AIDS patients with serum
titers of 1:1500 to 1:20,000 of anti-CMV antibodies did not have detectable
anti-CMV urinary antibodies, as assayed by ELISA.
Intact antibodies (or fragments of antibodies) directed against HIV
present in the urine of infected individuals have not heretofore been reported
in the literature. Urinary antibodies are usually found only in non-immunized
patients suffering from diseases of the kidney and/or liver such as nephrotic
syndrome, glomerulonephritis, hepatorenal syndrome or from those afflicted with
multiple myeloma, an immunoproliferative disorder.
The amount of HIV antibodies present in the urine is approximately 20
fold lower than that found in serum, and is often below the limits of detection
of currently available diagnostic techniques. Therefore, the urine must be
concentrated, i.e. its volume is preferably be reduced relative to its initial
void volume, before assaying for such antibodies. More sensitive methods of
antibody detection such as those of Example 5, permit the urine concentration
step to be eliminated.
The method of the present invention comprises obtaining a urine sample
voided by a patient to be screened for exposure to HIV, optionally
concentrating the urine sample by reducing the volume of such sample at least
about 20 fold in relation to its initial (void) volume, and assaying the
concentrated or unconcentrated sample as the casing for the presence of
antibodies to HIV. The assay is conducted using techniques that are well-known
for detecting the presence of such antibodies in serum. Although as little as
1-5 ml of urine could be examined for the presence of the antibodies sought to
be detected, using most currently available methods for antibody detection,
40-100 mls of urine are desirably recover from the patient to be tested and
used in the assay procedure. The urine can be used immediately, stored for 24
hours or longer at 4 deg. C. before use and can be frozen (but deteriorates
upon multiple freezing and thawing).
If it is determined that concentration of urine is desired, any of
the numerous methods that are well known to those skilled in the art can be used
to concentrate (reduce the volume) of the urine sample to be analyzed.
Examples of techniques which can be used in practicing the method of the
present invention include, but are not limited to, air evaporation, membrane
dialysis, rotary
4
evaporation, and preferably using a Minicon B15 concentrator (Amicon, Danvers,
MA) with a 60,000 dalton membrane filter as detailed in Example 1 below. Urine
can also be concentrated by lyophilization, but this requires larger volumes
(e.g. at least 200 ml).
Once the urine sample has been substantially concentrated, it can be
assayed for the presence of antibodies to HIV. As used herein with respect to
urine volume reduction, substantially concentrated means a volume reduction of
at least 20 fold in relation to the initial (void) urine volume, and preferably
between about 40 fold and 200 fold with respect to urine volume reduction, i.e.
a reduction in volume from an initial (void) volume of 40 ml to a final volume
of 2 ml is a 20 fold reduction. The samples can also by lyophilized and
resuspended (in, for example isotonic saline) in any volume desired, but as
mentioned above, this requires larger volumes.
The sample can be assayed for antibodies to HIV proteins using standard
antibody detection techniques including by way of non-limiting example, ELISA,
Western Blotting, radio-immunoassay, and immunodiffusion.
In a preferred embodiment of the present invention, the well-known
Western Blot Analysis method is employed for anti-HIV antibody detection. This
technique has been found to be the most reliable currently available method for
detecting HIV antibodies in the urine of mammals. The technique generally
comprises separating proteins (in this case, HIV proteins) by gel
electrophoresis on the basis of molecular weight, transferring the separated
proteins to a suitable solid support, (such as a nitrocellulose filter or
alternatively, a nylon filter), and incubating the serum (or urine) of an
HIV-infected individual with the separated proteins. This causes specific HIV
antibodies present in the serum (or urine) to bend to their respective
proteins. HIV antibodies are then detected using labeled anti-human HIV
antibodies. This method of detecting antibodies to HIV is preferred due to its
sensitivity and the fact that specific antibodies to viral proteins are
examined. The incidence of false positive results which are inherent when
employing ELISA assays is substantially reduced by using Western Blot Analysis.
An alternative embodiment of the present invention utilizes on Enzyme
Linked Immunosorbent Assay (ELISA) as a means for detecting antibodies specific
for HIV. ELISA assays for the detection of antibodies to the HIV virus can
either be competitive or non-competitive (as described by E. Engvall in Methods
in Enzymology. 70: 419439, incorporated herein by reference).
ELISA's are immunoassays used (in this case) to quantitate the amount of
antibodies present in a sample to be analyzed. The assays employ a chromogen (a
color producing substance) for detecting the antibody: antigen complex formed.
Antibodies used in ELISA are covalently coupled to these chromogens, such as
orthophenylenediamine or orthodianisidine, the former producing a
tangerine-colored product in the presence of a peroxide. These colors absorb
light at specific wavelengths (ortho-phenylenediamine at 492nm and
ortho-dianisidine at 400nm) and are detected and quantitated using a
spectrophotometer.
Non-competitive ELISA tests employ an immobilized antigen in order to
capture any antibodies and an enzyme-labeled second antibody directed against
the
<PAGE> 63
5
species in which the test antibody has been elicited. If for example, human
antibodies are being measured, then goat or rabbit anti-human antibodies are
the labeled, second antibody. Competitive ELISA's comprise a reaction in which
unlabeled (the biological sample to be tested) and enzyme-labeled antibodies
compete for a limited, known amount of antigen. In this case, the reaction is
performed until equilibrium is reached, and the concentration of unknown
antibody is inversely proportional to the amount of bound, enzyme-labeled
antibodies. For example, if there are no antibodies in the unknown sample, all
of the labeled antibodies will bind to the antigen, and a high value, indicated
by an increased color, will be obtained when measuring the amount of enzyme
label present.
Commercially-available ELISA assay kits which can be used in practicing
the alternative embodiment of the present invention are available from Abbott
Labs (Chicago, Ill.) under Catalog Number 1037 and as ENVACOR (Human T Cell
Lymphotropic Virus III, EIA, Catalogue No. 2791-22, Abbott International
Diagnostics, Weisbaden, West Germany). The 1037 assay utilizes a
non-competitive ELISA (as described in Example 3 below) whereas the ENVACOR
test uses a competitive ELISA (as described in Example 2 below). These kits
contain the components listed in Examples 2 and 3 below and are offered for use
in assaying serum (not urine) for antibodies to HIV.
One important advantage of the method of the present invention is that
the biological sample to be analyzed (urine) can be easily obtained by
non-invasive techniques, and therefore, the risk of transmitting an HIV
infection to laboratory and health care personnel (e.g. through accidental
puncture with a contaminated needle) is essentially eliminated.
The method of the present invention can be carried out rapidly. In
cases where the urine is concentrated, the speed of carrying out the method of
the present invention limited only by the time it takes to concentrate the
urine sample to be tested. In broad terms, this can be done in a period of
time of less than 90 minutes, when the samples are to be concentrated 200 fold
Concentrating the urine 20-40 fold can be accomplished in less than 60 minutes.
The sample can then be analyzed using the commercially-available HIV Serum
testing kits.
The invention is described further below in specific working examples
which are intended to illustrate the invention without limiting its scope.
EXAMPLE 1
Urine Concentration
Serum samples and 60-100 ml of urine were collected (and numerically
coded for patient confidentiality) from the following groups of patients: 28
AIDS-associated Kaposi's sarcoma (AIDS-KS) patients; 21 ARC patients; 48
asymptomatic HIV-infected high risk individuals including (37 homosexual men, 5
female intravenous drug users and 1 female transfusion recipient); and 16
patients suffering from AIDS-related opportunistic infections (AIDS-OI), such
as Pneumocystis Carinii and cytomegalovirus (Table I contains specific patient
identification and assay results) In addition, 17 non-AIDS disease patients'
urine and serum, including patients diagnosed as having cirrhosis and hepatoma
(1), hepatitis (3). Lupus (3), glomerulonephritis (3), nephrotic
6
syndrome (1), Lupus-nephritis (1), heart failure (1), Lepromatous leprosy (1),
tuberculosis (2) and DM nephropathy (1), plus samples from 30 apparently
normal, health heterosexuals were obtained. The urine samples obtained from
all of the normal controls and AIDS patients' displayed essentially normal
values for proteins, when assayed using standard urinalysis techniques well
known in the art. Proteinuria (the presence of abnormally high concentrations
of protein in the urine) is routinely detected using a "dipstick" that
registers the presence of high (over 150 mg) concentrations of urinary protein.
This is indicated by a color change on the dipstick, which is then compared to
standards for quantitation.
The collected urine specimens were centrifuged in conical tubes at 1500
RPM for 15 minutes at room temperature. The supernatant was decanted and saved
and the pellet was discarded.
The supernatant obtained above was concentrated between 20 and 200 fold
in relation to the volume of initial urine sample collected from the subject to
be tested using a Minicon B15 concentrator with a 60,000 dalton membrane
(Amicon, Danvers, MA). The concentrator operates by retaining any substance
greater than 60,000 daltons molecular weight on the membrane filter, while the
solution is evaporated. This takes approximately one hour. (To concentrate
the urinary volume 200 times (200X) from an initial or starting volume i.e. to
1/200 of its starting volume using the mincon apparatus takes approximately 90
minutes). The concentrated urine sample can be stored at 4 deg.C for up to 30
days before use, or used immediately for assay as detailed in Examples 2-5
below. For Western Blot analysis or immunodiffusion studies, sample volumes are
preferably further concentrated 200 fold i.e. to 1/200 of the starting volume.
The amount each sample was concentrated is listed in Tables 1, 2 and 4 below.
EXAMPLE 2
Elisa assay of Concentrated Urine Samples
The serum and concentrated urine samples collected in Example I were
assayed for the presence of antibodies to ENV and CORE HIV antigens as
described (Allain, J. P. et al, Lancet I: 1233-1236, 1986, incorporated by
reference )using an Abbott Envacore assay kit. This is a competitive ELISA in
which known mounts of HIV proteins and antibodies are added together with the
sample to be tested. The presence of antibodies in the sample is indicated by
a reduction in the binding of the control antisera with the control antibody.
The manufacturer's instructions were followed exactly as provided. In
addition, blood samples were collected and analyzed simultaneously.
The kit contains a specimen diluent (containing bovine and goat sera
and 0.1% sodium azide), enzyme-conjugated polyclonal antibody to HIV envelope
and core proteins, beads coated with recombinant gp41 or gp24 HIV proteins,
orthophenylenediamene (OPD) substrate, a positive and a negative HIV antibody
control and instructions for use.
Fifty microliters of the specimen to be tested, or control, were
incubated with 20 microliters of diluent supplied by the manufacturer and 200
microliters if enzyme-conjugated polyclonal human antibody to HIV envelope or
core proteins. Beads coated with recombinant gp41 or p24 HIV proteins were
added to separate wells containing either the HIV ENV or CORE anti-
<PAGE> 64
5,122,446
7
bodies. After 16 to 22 hours incubation at room temperature, the beads were
washed and transferred to appropriate reaction tubes. Three hundred
microliters of ortho-phenylenediamine substrate was then added to each tube and
the reaction allowed to proceed for 30 minutes before addition of 1 ml 1N H2SO4
to stop the reaction. Absorbance values of the solution were measured at 492
nm using a spectrophotometer sold by Abbott Labs under the name Quantum II,
number 3303-11. A positive result for the presence of urine or serum
antibodies
8
to either the HIV p24 or gp41 proteins was defined as any specimen
with absorbance values equal to or less than 0.5 times the sum of the optical
density (O.D.) of mean negative control (provided by the manufacturer) optical
density (O.D.) plus the O.D. of the mean positive control (provided by the
manufacturer) as measured in above.
A tabular identification of the patients screened with the present
invention and the assay results are presented in Tables 1 and 2 and summarized
in Table 3.
TABLE 1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
THE ANTIBODIES TO HIV IN THE SERUM AND URINE OF
AIDS-KS, AIDS-OI, ARC GROUPS, AND HR GROUPS
-----------------------------------------------
PRESENCE IN PRESENCE IN
SERUM OF URINE OF
PATIENT ------------ ------------
NUMBER SEX CODE CONCENTRATION ENV CORE ENV CORE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AIDS-KS
- --------
1 M 1029 47X + + + -
2 M 993 100X + + - -
3 M 716 42X + - + -
4 M 818 33X + - + -
5 M 871 67X + + + -
6 M 894 33X + + + -
7 M 953 40X + - + -
8 M 5009 34X + + + -
9 M 5018 45X + - + -
10 M 5057 39X + + + -
11 M 5062 42X + + - -
12 M 1028 48X - + + -
13 M 828 42X + + + -
14 M 5061 37X + - + -
15 M 5059 35X + - - -
16 M 276 20X + + + -
17 M 1056 40X-200X + + - -
18 M 5098 40X + + - -
19 M 5013 35-200X + - - -
20 M 5050 20X + + + -
21 M 5074 42X + - - -
22 M 5080 42X + + - -
23 M 5051 40X + + - -
24 M 5083 41X + - + -
25 M 5097 40X + - + -
26 M 1083 42X + - + -
27 M 1081 40X + - - -
28 M 1084 40X + + - -
ARC Patients
- ------------
29 M 1022 56-200X + + - -
30 M 857 62-200X + + - -
31 M 920 47X + - + -
32 M 598 35X + + - -
33 M 1002 40X + + + -
34 M 1015 35X + - + -
35 M 1016 35X + + - -
36 M 1021 50X + + + -
37 M 949 40X + + + -
38 M 901 100X + - + -
39 M 898 100X + - + -
40 M 956 100X + + + -
41 M 839 47X + - + -
42 M 1039 41X + - + -
43 M HEN03 41X + - + -
44 M HEN04 42X + - + -
45 M HEN05 42X + - + -
46 M HEN06 42X + - + -
47 M HEN07 41X + - + -
48 M HEN08 42X + + + -
49 M HEN09 40X + + + -
- --------------------------------------------------------------------------------
</TABLE>
ENV = Antibody to HIV envelope [anti-env (gp41)]
Core = Antibody to HIV core [anti-gag (p24)]
TABLE 2
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ANTIBODIES TO HIV IN THE SERUM AND URINE OF THE HIGH-RISK GROUP AND AIDS-OI
---------------------------------------------------------------------------
SERUM URINE
PATIENT FOLD ------------ ------------
NUMBER SEX CODE CONCENTRATION ENV CORE ENV CORE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
HIGH-RISK
- ---------
50 M 1024 37-200x + - - -
</TABLE>
<PAGE> 65
5,122,446
9
TABLE 2-continued
- --------------------------------------------------------------------------------
Antibodies to HIV in the serum and urine of the High-Risk group and AIDS-O1
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Serum Urine
Patient Fold -------------- --------------
Number Sex Code Concentration ENV Core ENV Core
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
51 M 1060 30x + - - -
52 M 1059 32x - - - -
53 M 1062 40x + - - -
54 M 1057 28x + + - -
55 M 1055 32x - - - -
56 M 1058 40x + + + -
57 M 1052 37x - - - -
58 M A2-014 50x + + + -
59 M A1-078 33x + + + -
60 M 0697550 40x + - + -
61 M 0820835 44x + + + -
62 M 1061 41x + + + -
63 M A1-029 40x + + - -
64 M A1-136 41x + + - -
65 M A1-138 39x + - - -
66 M A1-044 41x + + + -
67 M A1-045 40x + + + -
68 M A1-173 42x + + + -
69 M A1-003 42x + + + -
70 F 1065754 40x + + + -
71 M 0471024 40x + + + -
72 M A2-132 40x + + + -
73 M A2-115 40x + + + -
74 M A1-060 40x + + - -
75 M A1-178 43x + + - -
76 M A2-090 40x + + + -
77 M A2-097 40x + + + -
78 M A2-137 40x + + + -
79 F U16 41x + - + -
80 M 1091 42x - - - -
81 M 1093 42x + + + -
82 M 1110 42x + + + -
83 M 1121 40x + - + -
84 M 1080 41x - - - -
85 M 1070 40x + - + -
86 M 1111 40x + + - -
87 M 1107 40x + + + +
88 M 1116 49x + + + +
89 F 941151 46x + - + -
90 M 1098 41x + - + -
91 F U17 40x + - - -
92 F U19 42x + + + +
93 F U20 42x + + + -
94 M A2-036 42x + - + -
95 M A1-082 40x + + - -
96 M A1-177 42x + - - -
97 M 1073 40x + - - -
</TABLE>
<TABLE>
<CAPTION>
PATIENTS WITH
OPPORTUNISTIC
INFECTIONS
- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
98 M 644 40x + + + -
99 M 1063 23x + - - -
100 M 155 43x + + - -
101 M 156 40x ./ / + -
102 M 157 40x + + - -
103 M 1108 40x + - + -
104 M 1112 40x + - - -
105 M 1113 42x + + - -
106 M 159 41x + - + -
107 F 160 41x + - + -
108 M 161 40x + + + -
109 F 162 42x + + + -
110 M 164 44x + + + -
111 M 165 40x + - + -
112 M 166 41x + - + -
113 M 473 35x + - + -
</TABLE>
- --------------------------------------------------------------------------------
. / = not done
TABLE 3
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Summary of ELISA assay for HIV ENV antibodies in the Concentrated Urine Samples
- -------------------------------------------------------------------------------
SERUM/URINE SERUM/URINE SERUM/URINE % SERUM/URINE
PATIENT TYPE + - + + - - + +
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AIDS/KS 8 20 0 20/28 = 71.4%
ARC 4 17 0 17/21 = 81.0%
HIGH RISK 13 30 5 30/3 = 69.7%
</TABLE>
10
<PAGE> 66
5,122,446
11
TABLE 3
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Summary of ELISA assay for HIV ENV antibodies in the Concentrated Urine Samples
- -------------------------------------------------------------------------------
SERUM/URINE SERUM/URINE SERUM/URINE % SERUM/URINE
PATIENT TYPE + - + + - - + +
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPPORTUNISTIC 5 11 0 11/16 = 68.8%
INFECTION -- -- -- --------------
TOTAL 30 78 5 78/113 = 72/2%
- --------------------------------------------------------------------------------
</TABLE>
Referring to Tables 1 and 2, it can be seen that 71.4% of the
AIDS-induced Kaposi's sarcoma patients, 81% of the ARC patients, 69.7% of the
patients in the high risk group and 68.8% of patients suffering from
opportunistic infections had antibodies to the ENV protein (gp41) of HIV
present in their urine and that such antibodies were detected using the methods
of the present invention. The total percentage of patients with detectable HIV
ENV antibodies was 72.2%. The core antigen was only detected in the urine of 6
individuals, those being in the asymptomatic infected high risk group. All of
the non-AIDS disease patients and the normal, healthy heterosexuals' urine and
serum were negative for antibodies to both HIV proteins.
EXAMPLE 3
A number of the urine samples analyzed in Example 1 were re-examined
using two commercially-available non-competitive HIV ELISA detection kits. KIT
I (HTLV III EIA kit, Lot No. 1590HR00, Abbott Laboratories, Chicago, Ill.) is
an FDA-approved clinical diagnostic kit., Kit II 9EIA Clinical Diagnostic Kit,
Catalog No. 1037, Abbott Laboratories, Chicago, IL) is intended for
investigative use only.
Each of the kits contain HIV antigen-coated beads, goat anti-human
antibody conjugated to horseradish peroxidase, a positive control, a negative
control, speci-
12
men diluent containing bovine and goat sera, OPD and OPD diluent containing
citrate-phosphate buffer and 0.02% hydrogen peroxide, reactron trays, assay
tubes and instructions for use.
The assay for the presence of the urine of a patient to be tested of
antibodies to HIV is performed as follows. 10 microliters of control or diluted
specimen is dispensed into preselected wells of the reaction tray. Each well
can hold up to 400 microliters of fluid. Two hundred microliters of specimen
diluent and one bead are added per well. The reactions are incubated for about
1 hour at 40 degrees C. Thereafter, the supernatant (i.e. liquid) is discarded
and the bead washed three times with 4 to 6 ml of distilled or deionized water.
Two hundred microliters of labeled goat-anti-human antibodies are then added
and incubated at 40 degrees C for about 2 hours. The supernatant is removed
and the bead is washed as above. The bead is transferred to an assay tube, 300
microliters of OPD substrate solution is added, and the solution is incubated
for about 30 minutes. 1 ml on IN sulfuric acid is added and the absorbance of
the solution is determined at 492 nm in a standard Abbott Labs
spectrophotometer (Model 3303-11 available from Abbott Labs). A positive value
is indicated if a sample is within the range of 0.5 to 1.5 times the positive
control mean.
The results of these assays are presented below in Table 4.
TABLE 4
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KIT I KIT II
Patient Fold Urine HIV Urine HIV Envelope
Number Patient Concentration Antibody Antibody
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AID-KS
------
1 1029 47 X + +
3 716 42 X + +
4 818 33 X + +
5 871 67 X - +
6 894 33 X + +
7 953 40 X - +
8 5009 34 X + +
9 5018 45 X - +
10 5057 39 X - +
11 5062 42 X - -
12 1028 48 X + +
13 828 42 X - +
14 5061 37 X + +
16 276 20 X - +
17 1056 40 X-200 X - +
19 5013 35 X-200 X - -
20 5050 20 X - +
21 5074 42 X + +
22 5080 42 X - -
ARC
-----
30 857 62 X-200 X - -
31 920 47 X - +
32 598 35 X - -
33 1002 40 X + +
34 1015 35 X - +
35 1016 35 X - -
36 949 40 X - +
40 956 100 X - +
41 839 47 X - +
HIGH-RISK
- ---------
52 1059 32 X - -
53 1067 40 X - -
</TABLE>
<PAGE> 67
5,122,446
13
TABLE 4-continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
KIT URINE
PATIENT FOLD URINE HIV URINE HIV ENVELOPE
NUMBER PATENT CONCENTRATION ANTIBODY ANTIBODY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
54 1057 28x - -
55 1055 32x - -
57 1052 37x - -
58 A2-014 50x - +
59 A1-078 33x - +
60 0697550 40x - +
61 0820535 44x - +
62 1061 41x - +
63 A1-029 40x - -
64 A1-136 41x - -
65 A1-138 39x - -
66 A1-044 41x - +
67 A1-045 40x - +
68 A1-173 42x - +
69 A1-003 42x + +
PATIENTS WITH
OPPORTUNISTIC
INFECTION
- -------------
98 644 40X + +
99 1063 23X - -
100 155 43X - -
101 156 40X + +
102 157 40X - -
- --------------------------------------------------------------------------------
</TABLE>
The results presented in Table 4 demonstrate that urine antibodies to
HIV are more readily detectable when employing a more sensitive ELISA assay kit
(Kit II). This is the same as for serum antibodies. A limited number of these
samples were further analyzed using the Western Blot technique as described
below in Example 4.
EXAMPLE 4
Western Blot analysis of Concentrated Urine Samples
Western Blot analysis for the presence of antibodies to HIV was
performed on the urine and serum samples collected from 59 HIV sero-positive
(including 18 AIDS-KS, 27 High Risk individuals, 6 ARC and 8 O.I. patients
selected from those reported in Tables 1 and 2 above) and 30 non-AIDS disease
patients. A commercially-available kit (Biotech/DuPont HTLV-III Western Blot
Kit, available from E. I. DuPont De Nemours and Co., Inc., Wilmington, Del.)
was used in making the analysis. The kit contains precut nitrocellulose
membrane strips with immobilized viral antigens that have been separated by
sodium dodecyl sulfate/polyacrylamide gel electrophoresis (SDS-PAGE) and
electroblotted onto the membrane; control sera, including a negative control, a
weak positive control and a strong positive control; blotting buffer (Tris
buffered saline with 5% nonfat dry milk and also containing heat inactivated
normal goat serum); wash buffer (Tris buffered saline containing tween-20
detergent); biotinylated goat anti-human IgG; avidin-horseradish peroxidase;
4-chloro-1-naphthol in solution; hydrogen peroxide; and an incubation tray.
The kit was used exactly according to the manufacturer's instructions as
described below.
The assay comprises soaking the strips in 2 mls of wash buffer in a
well of the wash tray for 30 minutes at
14
room temperature; the liquid is then drained off and discarded. The strips are
then washed with 2 mls of blotting buffer for 5-10 minutes at room temperature.
Twenty microliters of a 200 fold concentrated urine sample are added to the
wells containing the strips and blotting buffer and the reactant incubated
overnight at room temperature. Thereafter, the mixture in the wells is
aspirated and discarded and the wells are washed once with 2 mls of wash
buffer. Two additional 2 ml washes (with wash buffer) are performed at room
temperature, allowing 5 minutes soaking between each wash and discarding the
wash afterwards.
The nitrocellulose strips are developed as follows. Two mls of
biotinylated goat anti-human IgG are added to each well and allowed to incubate
for 60 minutes at room temperature on a rocking or rotary apparatus. The
strips are then washed with 2 mls of wash buffer per strip for 5 minutes; this
step is then repeated 3 additional times at room temperature, discarding the
wash after each use. Two mls per strip of avidin-horseradish peroxidase are
added and incubated for 60 minutes at room temperature on a rocking or rotary
apparatus. The strips are washed 3 times as above. Two mls of a 50:50 mixture
of 4-chloro-1-naphthol and hydrogen peroxide are then added and allowed to
incubate for 10-15 minutes or until the color develops at room temperature.
The presence of color on the strip indicates that the strip has been exposed to
a biological fluid (i.e. urine) containing antibodies to HIV.
The strips are scored for the presence of antibodies to HIV as negative
(-) i.e. no antibodies to HIV detected, weakly positive (plus or minus) or
strongly positive (+) using the controls supplied by the manufacturer as
references. The results are presented in Table 5 and FIG. 1.
TABLE 5
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
RESULTS OF WESTERN BLOT ANALYSIS OF CONCENTRATED URINE SAMPLES
--------------------------------------------------------------
PATIENT
NUMBER CODE p17 p24 p31 p41 p51 p55 p66 p110/p120 p160
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AID-KS
- ------
1 1029 - - - + - - - + +
7 953 - - + +- - - - + +
8 5009 - + + - + + - + +
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 68
TABLE 5
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
RESULTS OF WESTERN BLOT ANALYSIS OF CONCENTRATED URINE SAMPLES
--------------------------------------------------------------
PATIENT
NUMBER CODE p17 p24 p31 p41 p51 p55 p66 p110/p120 p160
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AID-KS
- ------
9 5018 - - + + + - + + +
10 5057 - + + - - + - + +
12 1028 - - - + - - - + +
13 828 - - + - + + + + +
14 5061 - - + +- - - - + +
16 276 - + + + + + + + +
17 1056 - - - - +- +- +- + +
18 5098 - + - + - + - + +
21 5074 - - + - + - + + -
22 5080 - - - - - - - - -
23 5051 - - - - - - - - +
24 5083 - - - + - - - + +
25 5097 - + + + + + + + +
26 1083 - - - - - - - - -
27 1081 - - - + - + - + +
ARC
----
33 1002 - + + + + + + + +
40 956 - - + + + - + + +
42 1039 - + + + + + + + +
43 Hen03 - - - + - - + - -
44 Hen04 - - + + + - + + +
45 Hen05 + - + + + + + + +
Asymptomatic
High-Risk
homosexuals
- ------------
54 1057 - + + + - - + + +
58 A2-014 - +- - +- - +- +- + +
59 A1-078 - + + +- - + + + +
60 697550 - - + + + + + + +
61 820835 - + + o + + + + +
62 1061 - - - - - - - + +
66 A1-044 - - + - - - - + +
67 A1-045 - + + + + + + + +
68 A1-173 + + + + + + + + +
69 A1-003 + + + + + + + + +
70 1065754 + + + + + + + + +
71 471024 - + - - - + + + +
72 A2-132 + + + + + + + + +
74 A1-060 - - - - - - - - +
75 A1-178 - + + + + + + + +
76 A2-090 - + - + - + + + +
77 A2-097 + + + + + + + + +
78 A2-137 + + + + + + + + +
79 U16 + + + + + + + + +
81 1093 - + - + - + + + +
82 1110 - + + + + + + + +
83 1121 - - - o - - - - +
85 1070 + + - + - + + + +
86 1111 - o + + + - + - +
87 1107 + + + + + + + + +
88 1116 + + + + + + + + +
90 1098 + + + + + + + + +
Opportunistic
Infections
- -------------
98 644 - - - - - - - - -
99 1063 - - - - - - - - -
100 156 - - - + - - - + +
102 157 - o - - - - - - +
103 1108 + - + + + + + + +
104 1112 - - - + + - + + +
105 1113 - - + + + + + + +
113 473 + + + + + + + + +
- --------------------------------------------------------------------------------
</TABLE>
o = indeterminate results
TABLE 6
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMPARISON OF RESULTS OF WESTERN BLOT ANALYSIS
OF CONCENTRATED URINE AND SERUM SAMPLES
----------------------------------------------
HIV AIDS-KS ARC HIGH-RISK O.I.
-------------- -------------- -------------- --------------
PROTEIN SERUM URINE SERUM URINE SERUM URINE SERUM URINE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
p17 18/18* 1/18 2/6 1/6 26/27 11/27 ? ?
p24 18/18 5/18 6/6 2/6 25/27 23/27 ? ?
p31 18/18 9/18 6/6 5/6 26/27 19/27 8/8 ?
p41 18/18 11/18 6/6 6/6 26/27 23/27 8/8 ?
p51 18/18 8/18 6/6 5/6 27/27 16/27 8/8 4/8
p55 18/18 7/18 6/6 3/6 27/27 21/27 8/8 ?
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 69
5,122,446
17
TABLE 6-continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Comparison of Results of Western Blot analysis
of concentrated urine and serum samples
----------------------------------------------
HIV AIDS-KS ARC HIGH-RISK O.L.
--------------- --------------- --------------- ---------------
Protein Serum Urine Serum Urine Serum Urine Serum Urine
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
p66 18/18 7/18 6/6 6/6 27/27 23/27 8/8 4/8
p120 18/18 15/18 6/6 5/6 27/27 24/27 8/8 ?
p160 18/18 16/18 6/6 5/6 27/27 26/27 8/8 8/8
- -------------------------------------------------------------------------------------------
*18 positives per 18 patients tested.
</TABLE>
Referring to Table 5, p17 is a protein component produced upon cleavage
of p55 to p(greater than or equal to), p(greater than or equal to) is the viral
core protein, p31 is the viral endonuclease, p41 is the mature envelope protein,
p51 and p66 are components of the viral reverse transcriptase, p55 is a
precursor to the viral core protein and p160 is a precursor to the envelope
protein; p110/120 is a mixture of 2 proteins which co-migrate in this gel
system: p120 is a protein component produced upon processing of the p160 protein
to gp41; p110 is a protein component of the virus whose function is currently
unknown.
An example of a typical a Western Blot analysis of the concentrated
urine and serum samples obtained by practicing the method of the present
invention is shown in FIG. 1. Referring to FIG. 1, lane 22 is the negative
control, lane 23 the weakly positive control and lane 24 the strong positive
control; the numbers to the right represent the various HIV proteins discussed
above. Above lines 12-16 and 18-21 are the corresponding patients as referred
to in Table 5 above. For example, urine obtained from patient No. 956 (FIG. 1,
lane 16) suffering from ARC contained antibodies directed against all of the
HIV proteins except p24 (Core) and p17. The significance of this finding is
presently unknown.
As can be seen from the data in Table 5 and summarized in Table 6,
antibodies to HIV antigens can be readily found (when present) in the
concentrated urine samples using this more sensitive technique. In particular,
antibodies to p160 in the concentrated urine could be detected in 55 out of the
59 HIV-positive individuals tested (93.2%). These results also demonstrate
that the use of concentrated urine in this preferred embodiment of the present
invention does not lead to false positives, since specific viral proteins are
identified.
EXAMPLE 4
Double-Diffusion Gradient Immunoelectrophoretic
Analysis of HIV Antibody-Containing Urine Samples
Concentrated urine sample No. 956 (Table I), which tested positive for
HIV antigens using Western Blot analyses and antibodies directed against the
envelope protein using ELISA, was further concentrated 200 fold and analyzed by
double-diffusion gradient immuno-electrophoresis (DDG-IEP) as described by J. V.
Chuba in J.App. Biochem., 1:37-50, 1979, (incorporated by reference). Serum
samples from this patient were collected and analyzed in parallel to the patient
urine samples as a positive control.
Briefly, replicate samples of 3 microliters of urine and serum
respectively were electrophoresed in commercially prepared 0.5% agarose thin
layer gels (Paragon, Beckman Instruments Brea, Calif.). Troughs were placed at
right angles to the gels for the addition of antisera. Electrophoresis was
performed by subjecting the gels to 20 minutes of direct current on a slightly
modified Hyland Power Pack (Costa Mesa, Calif.) at the 40 mA setting. The
running buffer contained barbi-
18
tal buffer B-2 (0.075M, pH 8.6; containing 0.2% (w/v) sodium azide) mixed with
an equal volume of 3.0 mM aqueous calcium lactate solution.
After electrophoresis, the antisera troughs were completed by removing
the corresponding segment of the gel between the precut slits, and conventional
parallel trough immunodiffusion was performed. 7.5 microliters of anti-human
IgG. IgM and IgA (Behring Diagnostics, San Diego, CA) at a concentration of 5.5
micrograms per ml was added to the troughs and incubated for w0 minutes at room
temperature. Thereafter, the gels were stained and examined for the
development of percipitin lines. Anti-albumin antibodies were included in the
serum samples as a positive control.
As shown in FIG. 2, IgG (11) and IgA (13) immunoglobulins were
identified in the urine sample of patient No. 956. IgM, although present in the
serum did not appear in the urine (12). This is not surprising due to the
large size of this immunoglobulin (approximately 900,000 daltons).
Anti-albumin antibodies reacted with the serum samples, as expected (10),
forming a sharp percipitin line of identity (lane 1). These results confirm the
positive results obtained from the ELISA and Western Blot detection procedures,
and demonstrate that they were not due to artifacts caused by use of
concentrated urine samples.
EXAMPLE 5
Analysis of Unconcentrated Urine Samples for HIV
Antibodies by Western Blot and Elisa
In example 4 above, 20 microliters of each concentrated urine sample
tested was diluted with 2 ml (i.e. a 1:100 dilution) of the diluted wash buffer
provided by the manufacturer before conducting the Western Blot analysis. Using
unconcentrated urine, the present inventors have increased this recommended
urine volume to be tested to 2 ml and no diluted wash buffer was added. The
Western Blot assay was then performed exactly as described in Example 4 above.
These samples were then compared with 200-fold concentrated urine samples and
serum samples obtained from HIV sero-positive individuals.
For the ELISA assay, the manufacturer's suggested assay procedure,
usually used for serum analysis, requires 10 microliters of each serum specimen
to be diluted with 200 microliters of the specimen diluent provided in the EIA
kit. 10 microliters of this diluted specimen is then further diluted with 200
microliters of the specimen diluent provided in each well. This is a 400-fold
dilution of the sample.
The above procedure (designed for serum analysis) was adapted and
modified for evaluation of detectable antibodies to HIV in the unconcentrated
urine specimens. The recommended first step dilution of the urine specimen with
the specimen diluent was eliminated. Instead, the volumes of unconcentrated
urine samples
<PAGE> 70
5,122,446
19
tested were increased to 150 microliters, to which 50 microliters of specimen
diluent was added. The assay was then performed exactly as described in
Example 3 above.
The results of these assays is shown in Table 7.
TABLE 7
- --------------------------------------------------------------------------------
Presence of antibodies to HIV-1 seropositive individuals
as determined by ELISA and Western Blot tests.
--------------------------------------------------------
<TABLE>
<CAPTION>
Catalog Total Number of reactive (%) by Western Blot
of # ELISA -------------------------------------------------------------------------------------------------
Samples Tested No. (%) p17 p24 p31 gp41 p51 p55 p66 gp120 gp160
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Serum 100 100(100) 87(87.0) 96(96.0) 97(97.0) 100(100) 98(98.0) 99(99.0) 99(99.0) 100(100) 100(100)
Conc. 100 91/91 24/87 52/96 61/97 69/100 57/98 50/99 71/99 96/100 100/100
Urine (100) (27.6) (53.1) (62.9) (69.0) (58.2) (50.5) (71.7) (96.0) 100
200 X
Unconc. 100 93/100 27/87 56/96 67/97 79/100 58/98 48/99 73/99 99/100 100/100
Urine (93.0) (31.0) (58.3) (69.1) (79.0) (58.2) (48.5) (73.7) (99.0) (100)
using
*modified
pressure
</TABLE>
- --------------------------------------------------------------------------------
*See Method
From the results presented in Table 7 above, it can be seen that
unconcentrated urine can be used in both the Western Blot and ELISA assays.
The above invention has been described in terms of preferred
embodiments. It would be obvious to those of ordinary skill in the art that
man additions, deletions and substitutions could be made without departing from
the spirit and scope of the invention, as claimed below.
What is claimed is:
1. A method for identifying the members of a human patient population
that have been infected with Human Immunodeficiency Virus (HIV) which comprises:
contacting a quantity of urine voided by a member of said patient
population with an immunoreagent specific for detecting the presence of said
urine of an antibody to at least one HIV protein, to form a complex,
detecting the presence of said complex after said contacting step to
obtain a result,
comparing said result with a standard result which has been obtained by
contacting with said immunoreagent urine of at least one human subject know to
be free of HIV infection.
2. A method for determining whether a human subject has been infected
with Human Immunodeficiency Virus (HIV) comprising the steps of:
obtaining a urine sample from said human,
assaying said sample by contacting at least an aliquot of said sample
with an immunoreagent specific for detecting the presence of an antibody to at
least one HIV protein in said sample to form a complex,
detecting said complex after said contacting step to obtain a result,
comparing said result of said assay with those of the same assay
performed with urine from at least one HIV-free control human subject.
3. A method for screening a human subject for exposure to Human
Immunodeficiency Virus (HIV) comprising the steps of:
obtaining a urine sample from said subject;
assaying said sample by contacting at least an aliquot of said sample
with an immunoreagent specific for detecting the presence of an antibody to at
least one HIV protein to form a complex,
detecting said complex, and
20
determining whether said subject has been exposed to HIV based on the
positive presence of at least one antibody of HIV in said sample.
4. A method for detecting the presence of antibodies to Human
Immunodeficiency Virus (HIV) in a human subject comprising the steps of:
obtaining a urine sample from said human subject;
assaying said sample for the presence of at least one antibody to at
least one HIV protein by contacting at least an aliquot of said sample with an
immunoreagent specific for detecting the presence of said antibody, said
protein being selected from the group consisting of p17, p24 and combinations
thereof.
5. The method of any one of claims 1-4 wherein said antibodies are
directed against Human Immunodeficiency Virus viral protein p24, and said
immunoreagent comprises an antigen immunochemically reactive with said
antibodies.
6. The method of any one of claims 1-4 wherein said antibodies are
directed against HIV viral protein gp 160 and said immunoreagent comprises and
antigen immunochemically reactive with said antibodies.
7. The method of any one of claims 1-4 wherein said antibodies are
directed against HIV viral protein gp120 and said immunoreagent comprises an
antigen immunochemically reactive with said antibodies.
8. The method of any one of claims 1-4 wherein said urine sample is
less than one week old.
9. The method of any one of claims 1-4 wherein said immunoreagent
comprises an antigen immunochemically reactive with an antibody raised against
an HIV viral protein and specific for detecting antibodies to said protein.
10. The method of claim 9 wherein said antibodies are detected using
an enzyme-linked immunosorbent assay.
11. The method of claim 9 wherein said antibodies are detected using
Western Blot.
12. The method of claim 9 wherein said antibodies are detected using
immunodiffusion.
13. The method of claim 9 wherein said antibodies are members of the
group consisting of antibodies directed against HIV viral protein gp41
(anti-gp41), antibodies directed against HIV viral protein p24 (anti-p24) and
combinations thereof and said specific immunoreagent respectively comprises and
antigen selected from the group consisting of antigens immunochemically
reactive with anti-gp41, antigens immunochemically reactive with anti-p24 and
combinations of said antigens.
<PAGE> 71
APPENDIX II
Brief Statement Relating to Rights To Licensed Patents
------------------------------------------------------
1. Patent Nos. 4,865,966 and 5,122,446 relate to a urine test for
antibodies to HIV. The three inventors, Drs. Friedman-Kien, Cao and Borkowsky,
are faculty members and employees of New York University (NYU). All have
assigned their rights in the inventions to NYU.
2. Abbott Laboratories has advised NYU that it claims "rights under
its agreements with Dr. Friedman-Kien." Abbott's claim is described in a
letter to NYU attached hereto. Without attempting to recite the full history
of the invention, Abbott appears to be referring to the following:
One of the inventors, Dr. Friedman-Kien, conducted research for Abbott
pursuant to an agreement signed by Abbott and Dr. Friedman-Kien which provided
that inventions made by Dr. Friedman-Kien as a result of conducting the study
were to be the sole property of Abbott. The protocol which defined the study
referred to tests on blood supplies with Abbott test kits for the presence of
HIV antigens. NYU received a payment for that work. Dr. Friedman-Kien signed a
second agreement on the same subject, but it was returned to Abbott by NYU with
a letter rejecting it and proposing revisions which were never agreed. (Abbott
also proposed an agreement to Dr. Friedman-Kien to test blood for the presence
of HIV antibodies, but that agreement was not signed.)
3. NYU maintains that it is the rightful owner of the patents, because
the inventions were assigned to NYU by the three
<PAGE> 72
employee-inventors and NYU believes that the invention (relating ???? ??????
antibodies) was outside the scope of the Abbott agreement (relating to blood
antigens) with Dr. Friedman-Kien, among other reasons.
<PAGE> 73
PATTERSON, BELKNAAP, WEBB & TYLER
A PROFESSIONAL CORPORATION
30 ROCKEFELLER PLAZA
NEW YORK, N.Y. 10110
(212) ???-????
October 30, 1989
Dr. A.E. Friedman-Kien
New York University Medical Center
Department of Microbiology
550 First Avenue
New York, NY 10016
New York Medical Center
School of Medicine
Office of Grants Administration
& Institutional Studies
550 First Avenue
New York, NY 10016
Re: Abbott Laboratories/
Method for Detecting Antibodies
to Human Immunodeficiency Virus
Dear Sirs:
On August 4, 1986, Dr. Friedman-Kien signed a contract with Abbott
Laboratories ("Abbott") pursuant to which he was retained by Abbott to conduct
a clinical study in relation to HTLV antigens. Pursuant to the terms of this
contact, Dr. Friedman-Kien, agreed, inter alia, as follows:
Any information, inventions or discoveries (whether patentable or not),
innovations, suggestions, ideas and reports, made or developed by you as a
result of conducting the Study shall be promptly disclosed to Abbott and shall
be the sold property of Abbott. You agree, upon Abbott's request and at
Abbott's expense, to execute such documents and to take such other actions as
Abbott deems necessary or appropriate to obtain patents in Abbott's name
covering any of the foregoing.
<PAGE> 74
-2-
A further agreement, containing the same provision quoted above, was signed Dr.
Friedman-Kien on September 29, 1986.
We understand that Dr. Friedman-Kien has now obtained a patent for
inventions and discoveries that may be governed by the agreements referenced
above or are otherwise the result of work product to which Abbott has rights. We
further understand that Dr. Friedman-Kien and/or New York University have been
engaged in discussions with other parties concerning the possible commercial
development of inventions and discoveries governed by these agreements.
Abbott intends vigorously to protect any and all of its rights under
its agreements with Dr. Friedman-Kien.
In order for Abbott to be able to protect its rights under these
agreements, we ask you immediately to inform the undersigned, in writing, of
any and all agreements, or discussions that may lead to an agreement, involving
Dr. Friedman-Kien and/or New York University that relate in any way to Dr.
Friedman-Kien's research concerning HTLV antigens. We further ask that you
provide a copy of this letter to any and all persons or entities with whom Dr.
Friedman-Kien and/or New York University have entered into such agreements, so
that such persons or entities will be on notice of Abbott's rights concerning
Dr. Friedman-Kien's research.
Very truly yours,
/s/ FREDERICK T. DAVIS
-----------------------------
Frederick T. Davis
<PAGE> 75
ABBOTT
Diagnostics Division
Abbott Laboratories
Abbott Park, Illinois 60064
July 14, 1986
Dr. A.E. Friedman Kien.
New York University Medical Center
Dept. of Microbiology
Medical Science Building - Rm 272
550 First Avenue
New York, NY 10076
Dear Dr. Friedman - Kien:
Abbott Laboratories ("Abbott") desires to retain you to conduct a clinical
study (Study") in relation to Abbott HTLV III Antigen EIA an the following
terms and conditions:
1. You agree to conduct the Study within the term of this Agreement, in
strict adherence to one or more protocols and related information to
be provided to you by Abbott. Abbott will provide you with a
sufficient quantity of Abbott HTLV III Antigen EIA to conduct the
Study, and may also, at its option, provide you with certain-other
Materials to be utilized in the Study. All such protocols,
information, Abbott HTLV III Antigen EIA kits, and other "materials"
shall remain Abbott's sole property. and you agree not to use
Materials for any purpose other than the study or give Materials to-
any third party without Abbott's prior written permission. You
further agree that you will assert no claim, patent or otherwise, to
the Materials, their use. or manufacture. Your Abbott contact will be
Sally Hojvat, of Abbott's Diagnostic Division, or whomever Abbott may
designate.
2. Within thirty (30) days following completion of the Study, you will
furnish Abbott with a written report, in such detail as Abbott may
specify, setting forth the results of the Study, and including all of
the data generated by the Study. Such report and data shall be the
sole property of Abbott.
3. It is understood and agreed that Abbott, in contracting for your
services hereunder, is contracting for the services of Dr. Friedman -
Kien, who will be personally responsible for your activities under this
Agreement. If such personal services are not available for any reason,
Abbott may terminate this Agreement immediately without any further
liability.
<PAGE> 76
Dr. Friedman - Kien
July 14, 1986
Page Two
4. During the course of the Study, you agree that you will provide assay
results and patient histories where possible on the number of
specimens previously agreed to which will be assayed as per the
protocol These specimens will represent surplus specimens only, from
patients or subjects... in an ongoing program. Specimens must not be
taken specifically for the purpose of evaluating the Abbott HTLV III
Antigen EIA
5. At full consideration for your services hereunder and for your
agreement to the terms and conditions hereof, Abbott agrees to pay you
twenty dollars ($20.00) per specimen, not to exceed a total of fifteen
thousand dollars ($15,000.00), payable within forty-five (45) days
following completion of the Study.
6. During the term of this Agreement and thereafter, you will exercise
due care to prevent the unauthorized disclosure of Confidential
InformationConfidential Information shall include all information
concerning Abbott disclosed to you by Abbott or developed as a result
of conducting the Study and all Materials provided hereunder, except
any portion thereof which:
a. is known to you before receipt thereof under this Agreement,
as evidenced by your written records;
b. is disclosed to you after acceptance of this Agreement by a
third person who ha's a right to make such disclosure; or
c. is or becomes part of the public domain through no fault of
yours.
Further, during the term of this Agreement and thereafter. you
shall not use Confidential Information or Materials for any
purpose other than that indicated in this Agreement without
Abbott's prior written approval.
7. You agree not to use the name of Abbott in any publicity or
advertising without Abbott's prior written approval.
8. You will be free to publish the results of the Study, but with due
regard to the protection of Confidential Information. For that
purpose, you agree to provide Abbott with a copy of any proposed
publication relating to the results of the Study at least sixty (60)
days prior to submission thereof for publication. You further agree
not to submit any such proposed publication without Abbott's prior
written approval, which approval shall not be unreasonably withheld.
<PAGE> 77
Dr. Friedman - Kien
July 14. 1986
Page Three
9. Any information, inventions or discoveries (whether patentable or
not), innovations, suggestions, ideas and reports, made or developed
by you as a result of conducting the Study shall be promptly disclosed
to Abbott. and shall be the sole property of Abbott. You agree, upon
Abbott's request and at Abbott's expense, to execute such suc
documents and to take such other actions as Abbott deems necessary or
appropriate to obtain patents in Abbott's name covering any of the
foregoing.
10. You agree not to disclose to Abbott any information which is
proprietary to a third party.
11. You warrant and represent that the terms of this Agreement are not
inconsistent with other contractual obligations you may have.
12. This Agreement shall be effective for the period beginning 07/21/86
and ending 12/21/86. Either party may terminate this Agreement
without cause upon thirty (30) days prior written notice to the other
party. Termination of this Agreement shall not affect any rights or
obligations which have accrued prior thereto.
13. Your status under this Agreement is that of an independent contractor,
and you have no authority to bind or act on behalf of Abbott. You may
not assign this Agreement to any third party, and any attempted
assignment shall be null and void.
14. This Agreement contains our entire understanding with respect to the
matters herein contained, and supersedes all previous agreements and
undertakings with respect thereto. This Agreement may be modified
only by written agreement signed by the parties.
15. This Agreement shall be governed by and construed In accordance with
the laws of the State of Illinois.
If the foregoing terms and conditions are acceptable, please sign and date the
enclosed copy of this letter In the space provided below, and return it to
Sally Hojvat.
Very truly yours,
ABBOTT LABORATORIES ACCEPTED:
/s/ WILLIAM STALL /s/ A.E. FRIEDMAN - KIEN
- ------------------------------- ------------------------------
William Stall Dr. Friedman - Kien
Manager, Hepatitis/AIDS
Quality and Scientific Support Date of Acceptance:
<PAGE> 78
APPENDIX III
AGREEMENT
BETWEEN
HOME OFFICE REFERENCE LABORATORY
AND
NEW YORK UNIVERSITY
<PAGE> 79
NYU/HORL
11 /I 6/89
I N D E X
<TABLE>
<S> <C> <C>
Section 1. Definitions page 2
Section 2. Effective Date page 4
Section 3. Performance of the NYU Research Project page 4
Section 4. Funding of the NYU Research Project page 5
Section 5. Immunity from Claims of Infringement
by NYU page 6
Section 6. Payments for Immunity page 7
Section 7. Commercialization page 10
Section 8. Conversion to Non-Exclusive Immunity page 11
Section 9. Patents and Patent Applications page 12
Section 10. Infringement of NYU Patents
by Third Parties page 13
Section 11. Warranties by NYU page 16
Section 12. Tern, and Termination page 16
Section 13. Liability and Indemnification page 18
Section 14. Publication page 19
Section 15. Confidential Information page 20
Section 16. Representations and Covenants by Corporation page 21
Section 17. No Assignment page 22
Section 18. Use of Name page 22
Section 19. Miscellaneous page 23
</TABLE>
<PAGE> 80
AGREEMENT
This Agreement, made and effective as of ___________________, 198__,
("the Effective Date") is by and between:
NEW YORK UNIVERSITY a corporation organized and existing under the
laws of the State of New York and having a place of business at 550 First
Avenue, New York, New York 10016 (hereinafter "NYU")
AND
HOME OFFICE REFERENCE LABORATORY a corporation organized and existing
under the laws of the State of Delaware having its principal office at 10310
West 84th Terrace, Lenaxa, Kansas 66214 (hereinafter "HORL").
RECITALS
WHEREAS, Drs. Alvin Friedman-Kien, Yunzhen Cao, and William Borkowsky
of NYU have made certain inventions relating to methods and/or assays for the
detection of HIV antibodies in urine, which inventions have been assigned to
NYU, all as more particularly described in U.S. Patent no. 4,865,966, granted
on September 12, 1989, and a pending U.S. Patent Application no. 204,871 filed
on June 10, 1988 ("the C.I.P. Application") and counterpart foreign patent
application assigned to NYU, identified in annexed Appendix I forming an
integral PART hereof;
- 1 -
<PAGE> 81
WHEREAS, NYU desires to conduct further research with respect to
detection of HIV antibodies in urine, with the hope of making advances in the
detection and prevention of the Acquired Immune Deficiency Syndrome ("A I DS"
all as more fully described with respect to the NYU Research Project (as
hereinafter defined);
WHEREAS, HORL is prepared to sponsor the NYU Research Project (as
hereinafter described);
WHEREAS, subject to the terms and conditions hereinafter set forth,
NYU is willing to grant to HORL and HORL is willing to accept from NYU an
assurance of immunity from infringement claims by NYU against HORL with respect
to HORL's use and practice of the inventions described in the NYU Patents (as
hereinafter defined);
NOW, THEREFORE, IT IS HEREBY DECLARED AND AGREED BETWEEN THE PARTIES
AS FOLLOWS:
1. Definitions
Whenever used in this Agreement, the following terms shall have the
following meanings:
a. "NYU Research Project" shall mean the investigations during
the Research Period (as hereinafter defined) with respect to
methods and/or assays for the detection of HIV antibodies in
urine under the supervision of Dr. Alvin Friedman-Kien
(hereinafter "the NYU Scientist") at NYU in accordance with
the research program described in annexed Appendix II which
forms an integral part hereof.
- 2 -
<PAGE> 82
b. "NYU Research Period" shall mean the three year period
commenting upon January 1, 1990 and concluding on
December 31, l992.
c. "NYU Patents" shall mean all United States and foreign patents
and patent applications, and any divisions, continuations', in
whole or in part, reissues, renewals and extensions thereof,
and pending applications therefor:
(1) which are identified on annexed Appendix I; and
(2) any such patents and patent applications which claim
improvements to the patents and patent applications
described in Appendix I and which are conceived and
reduced to practice, by students or employees of NYU
during the term and in the course of the NYU Research
Project.
d. "HORL Corporation Entities" shall mean any company or other
legal entity which controls, or is controlled by, or is under
common control with, HORL; control means the holding of fifty
percent (50%) or more of (i) the capital and/or (ii) the
voting rights and/or (iii) the right to elect or appoint
directors.
e. "Test" shall mean a test of a urine sample of an individual
to. assay HIV antibodies in urine for use in the insurance
testing field and which is covered by a claim of any
unexpired NYU Patent which has not been disclaimed, or held
invalid by a court of competent jurisdiction (from which no
appeal can be taken).
- 3 -
<PAGE> 83
f. "Calendar year 1. shall mean the consecutive period of twelve
months commencing on January I of each year and ending on
December 31 of such year.
2. Effective Date
This Agreement shall be effective as of the Effective Date and shall
remain in full force and effect until terminated in accordance with
Section 12 hereof.
3. Performance of the NYU Research Project
a. In consideration of the sums to be paid to NYU as set forth in
Section 4 below, NYU undertakes to perform the NYU Research
Project at NYU under the supervision of the NYU Scientist
during the the Research Period. If, during the Research
Period the NYU Scientist shall cease to supervise the NYU
Research Project, then NYU shall endeavor to find from among
the scientists of NYU a scientist or scientists acceptable to
HORL to continue the supervision of the NYU Research Project
in place of the NYU Scientist. Nothing herein contained,
however, shall be deemed to impose an obligation on NYU to
find a replacement for the NYU Scientist.
b. Nothing contained in this Agreement shall be construed as a
warranty on the part of NYU that any results or inventions
will be acnieved by the NYU Research Project, or that the NYU
Patents and/or any other results or inventions achieved by the
- 4 -
<PAGE> 84
NYU Research Project, if any, are or will be commercially
exploitable and furthermore, NYU makes no warranties
whatsoever as to the commercial or scientific value of the NYU
Patents and/or as to any results which may be achieved in the
NYU Research Project.
c. Within sixty (60) days after the end of each half-year of the
Research Period, NYU shall prepare a written report
summarizing the results of the work conducted on the NYU
Research Project during the preceding half-year.
d. NYU will have full authority and responsibility for the NYU
Research Project. All students and employees of NYU who work
on the NYU Research Project will do so as employees or
students of NYU, and not as employees of HORL.
e. All right, title and interest, in and to any results or
inventions achieved by the NYU Research Project, and in and to
any drawings, plans, diagrams, specifications, and other
documents containing any such results or inventions shall vest
solely in NYU.
4. Funding of the NYU Research Project
a. As compensation to NYU for the performance of the NYU Research
Project during the Research Period, HORL will pay NYU a total
of one million one hundred and seventy five thousand dollars
($1,175,000) according to the following schedule:
- 5 -
<PAGE> 85
(1) Upon the Effective date of this Agreement, HORL shall
pay to NYU three hundred ninety-one thousand six
hundred sixty seven dollars ($391,667.00).
(2) On January 1, 1991, HORL shall pay to NYU three
Hundred ninety-one thousand six hundred sixty-seven
dollars ($391,667.00).
(3) On January 1, 1992, HORL shall pay to NYU three
hundred ninety-one thousand six hundred sixty-six
dollars ($391,666.00).
b. Nothing in this Agreement shall be interpreted to prohibit NYU
(or the NYU Scientist) from obtaining additional financing or
research grants for the NYU Research Project from third
parties including government agencies, which grants or
financing may render ell or part of the NYU Research Project
and the results thereof subject to the patent rights of the
U.S. government and its agencies, as set forth 'IN Title 35
U.S.C. Section 200 et seq, or subject to the patent policies
of such third parties.
5. Immunity from Claims of Infringement by NYU
a. Subject to the terms and conditions hereinafter set forth, NYU
hereby grants to HORL and HORL Corporation Entities immunity
from claims of infringement of tne NYU Patents which, but for
the provisions of this Section 5, could lawfully be brought by
NYU ("Immunity"). The Immunity shall be exclusive with
respect to testing for insurance purposes and NYU shall not
grant
- 6 -
<PAGE> 86
Immunity or a license to practice the NYU Patents to any other
person, company, or entity which provides testing services for
insurance purposes during the term of this Agreement except as
provided in Section 6. hereof.
b. The Immunity granted to HORL in Section 5.a. hereof shall
remain in force, if not previously terminated under the terms
of this Agreement, until the expiration date of the last to
expire of the NYU Patents.
c. Upon the written request of HORL, NYU shall extend the
Immunity to providers of Test kits which provide such kits
exclusively for HORL or for HORL Corporation Entities.
6. Payments for Immunity
a. In consideration for the grant of immunity hereunder, HORL
shall pay to NYU
(1) on the Effective Date, One Hundrea seventy-five
thousand dollars ($175,000.00) as reimbursement for
patenting costs and legal expenses incurred by NYU
with respect I to the NYU Patents; and
(2) a royalty for each Test performed by HORL and/or HORL
Corporation Entities, calculated upon the annual
total number of such Tests performed in each calendar
year, in accordance with the following schedule:
- 7 -
<PAGE> 87
<TABLE>
<CAPTION>
Tests performed in Royalty Payment
Calendar Year per lest
------------------ ---------------
<S> <C>
0 - 500,000 $ 0.50
500,001 - 1,500,000 $ 0.35
1,500,001 - 2,500,000 $ 0.30
2,500,001 - 5,000,000 $ 0.25
5,000,001 and over $ 0.20
</TABLE>
b. For the purpose of computing the royalties due to NYU
hereunder, each calendar year shall be divided into four
quarters, ending on March 31, June 30, September 30 and
December 31. HORL shall, within thirty (30) days from the end
of each quarter in each calendar year during the term of this
Agreement, submit to NYU a full and detailed report of
royalties due to NYU under the terms of this Agreement for the
preceding quarter (hereinafter "the Quarterly Report"),
setting forth the numbers of Tests performed by HORL and HORL
Corporation Entities upon which such royalties are computed.
If no royalties are due, a statement shall be sent to NYU
stating such fact. The full amount of any royalties due to
NYU for the preceding part of the year shall accompany each
such report. HORL shall keep and shall cause HORL Corporation
Entities to keep for a period of at least six (6) years after
the date of entry, full, accurate and complete books and
records consistent with sound business and accounting
practices
- 8 -
<PAGE> 88
and in such form and in such detail as to enable the
determination of the amounts due to NYU from HORL pursuant to
the terms of this Agreement.
c. Within thirty (30) days after the end of each calendar year,
commencing with the calendar year ending December 31, 1990,
HORL shall furnish NYU with a report (hereinafter "the Annual
Report"), verified BY an independent certified public
accountant, relating to the royalties due to NYU pursuant to
this Agreement in respect of the calendar year covered by the
said report and containing the same details as those specified
in subsection b. above in respect of the Quarterly Report.
d. On reasonable notice and during regular business hours, NYU or
the authorized representative of NYU shall each have the right
to inspect the books of accounts, records and other relevant
documentation of HORL or of HORL Corporation Entities insofar
as they relate to the Tests, in order to ascertain or verify
the amount of royalties due to NYU hereunder, and the accuracy
of the information provided to NYU in the aforementioned
reports.
e. Beginning on January 1, 1990 and continuing thereafter until
this Agreement shall terminate or expire, HORL agrees that if
the total royalties paid to NYU under subsection 6.a. (2)
nereof do not amount to two hundred thousand dollars
($200,000) for the first calendar year and two hundred fifty
thousand dollars ($250,000) for every calendar year
thereafter,
- 9 -
<PAGE> 89
HORL will pay to NYU within thirty days after the end of each
such calendar year, as additional royalty:
(1) for the first calendar year, the difference between
the amount of the total royalties paid to NYU by HORL
in the first calendar year and two hundred thousand
dollars ($200,000), failing which, NYU shall have the
right solely at its election, upon written notice to
HORL, to terminate this Agreement; and
(2) for the second calendar year and each calendar year
thereafter, the difference between the amount of the
total royalties paid to NYU by HORL in such calendar
year and two hundred fifty thousand dollars
($250,000), failing which, NYU shall have the right
solely at its election, upon written notice to HORL,
to terminate this Agreement.
7. Commercialization
a. HORL undertakes to begin the regular commercial use and
marketing of Tests for the life insurance testing field during
the first half of 1990, and thereafter during the remainder of
the term of this Agreement to continue such use and marketing
diligently.
b. In the event that a person, corporation or entity which
provides tests exclusively for HORL or for HORL Corporation
Entities or a person, corporation or entity acting pursuant to
written agreement with NYU undertakes to obtain approval in
the United States of America of the Food and Drug
Administration ("FDA")
- 10 -
<PAGE> 90
for use and marketing of Tests, HORL shall cooperate fully at
the written request of NYU, with such person, corporation or
entity, including by providing results of efficacy and clinical
tests, studies and other activities if any, undertaken by HORL
and HORL Corporation Entities with respect to Tests.
8. conversion to Non-Exclusive Immunity
a. In the event that the total Tests performed during the last
quarter of 1992 by HORL and HORL Corporation Entities, as
reported on the report due to NYU on January 30, 1993, does
not equal or exceed one million Tests or in the event that,
after such date, the total Tests performed by HORL and HORL
Corporation Entities, as reported to NYU on a quarterly basis
does not equal or exceed four million Tests for a calendar
year, NYU shall have the right to grant Immunity or a license
to third parties providing testing for insurance purposes,
provided that the terms of granting such Immunity or a license
to such third party shall De no more favorable to such third
party than the terms of this Agreement are to HORL.
b. In the event NYU exercises the right to grant Immunity or a
license to a third party providing testing for insurance
purposes as described in Section 8.a., NYU shall pay to HORL
fifty percent (50%) of the net royalties and fees (after
deduction of all costs and expenses, including reasonable
attorneys' fees, incurred by NYU in negotiating and concluding
- 11 -
<PAGE> 91
such agreement with such third party) paid to NYU by such third
party in consideration of such Immunity or license.
9. Patents and Patent Applications
a. NYU will promptly disclose to HORL in writing any inventions
which may constitute potential NYU Patents.
b. At the initiative of HORL or NYU, the parties shall consult
with each other regarding the filing of patent applications in
respect of any inventions which constitute potential NYU
patents, including but without limitation, the timing of the
filing of such applications, the jurisdiction within which
foreign counterparts of such applications should be filed and
other details pertaining to the prosecution and maintenance of
patent rights.
c. NYU will file, prosecute and maintain through patent counsel
selected by NYU, patent applications on any inventions which
constitute potential NYU Patents, and selected for patenting
by HORL pursuant to this Section 9 by written notice to NYU.
d. NYU and HORL shall assist, and cause their respective
employees and consultants to assist each other, in assembling
inventorship information and data for the filing and
prosecution of patent applications on inventions which
constitute potential NYU Patents. The-scope, content and
inventorship of such patent applications, and the prosecution
thereof, will be determined by NYU after consultation with
- 12 -
<PAGE> 92
HORL as set forth in Section 9.b. hereof.
e. All NYU Patents selected for patenting by HORL pursuant to
this Section 9 shall be filed, prosecuted and maintained by
NYU at the expense of HORL. Against the submission of
invoices, HORL shall reimburse NYU for all costs and fees
incurred by NYU during the tern, of this Agreement, in
connection with the preparation, filing, maintenance and
prosecution of the NYU Patents selected for patenting by HORL.
f. If at any time during the term of this Agreement HORL decides
that it is undesirable, as to one or more countries, to
prosecute or maintain any patents or patent applications
selected for patenting by HORL pursuant to this Section 9, it
shall give prompt written notice thereof to NYU, and upon
receipt of such notice HORL shall be released from its
obligations to bear all of the expenses to be incurred
thereafter as to such countries in conjunction with such
patent(s) or patent applications.
10. Infringement of NYU Patents by Third Parties
a. In the event a party to this Agreement acquires information
that a third party is infringing one or more of the NYU
Patents by using or marketing tests for insurance purposes,
the party acquiring such information shall promptly notify the
other party to this Agreement in writing of such infringement
setting forth in specific detail the name of the infringers
and the
- 13 -
<PAGE> 93
nature of the infringement. In such event, HORL shall be
entitled to request NYU to initiate suit for discontinuance of
said infringement, provided that such request is made in
writing by HORL and also provided that HORL submits evidence
reasonably acceptable to NYU of such infringement. Within 60
days after receipt of such written request and evidence
reasonably acceptable to NYU of such infringement, NYU shall
commence suit for discontinuance of said infringement. NYU
and HORL shall jointly select legal counsel. NYU shall manage
the conduct of litigation, in consultation with HORL, giving
consideration to HORL's preferences in such matters. The
expenses of such suit(s) that HORL requests NYU to bring,
including any expenses of NYU incurred in conjunction with the
prosecution of such suit(s) or the settlement thereof, shall
be paid for entirely by HORL and HORL shall hold NYU free,
clear and harmless from and against any and all costs and
expenses of such litigation, including attorneys fees
necessarily involved in the prosecution of any such suit(s),
provided, however, that HORL shall have the right to deduct
such costs and expenses from royalties as provided in Section
10.b. hereof. NYU shall not compromise or settle such
litigation Without the prior written consent of HORL, which
shall not be unreasonably withheld.
b. in the event HORL exercises the right to request NYU to sue
herein conferred, it shall have the right to deduct from
- 14 -
<PAGE> 94
royalties otherwise payable to NYU all costs and expenses of
every kind and character, including attorneys' fees,
necessarily involved in the prosecution of any such suit, and
paid by HORL, provided that such deductions shall not at any
time exceed fifty percent (50%) of the royalties payable to
NYU on each payment date.
c. Any sums recovered in such suit or settlement thereof shall be
disbursed as follows and in the following order:
(1) NYU shall be repaid any sums which were deducted from
royalties otherwise payable to NYU pursuant to
subsection b. above.
(2) HORL shall be reimbursed for sums paid by HORL for
costs and expenses of litigation which had not
previously been deducted from royalties otherwise
payable to NYU.
(3) Any remaining balance shall be divided equally
between NYU and HORL.
d. HORL agrees to cooperate fully with NYU at NYU's request,
including by giving testimony and producing documents lawfully
requested in the course of a suit prosecuted by NYU for
infringement of the NYU Patents. All reasonable expenses
(including attorneys' fees) incurred by HORL in connection
with such cooperation shall be an expense of litigation and
may be deducted from royalties as provided in subsection b.
above.
- 15 -
<PAGE> 95
11. Warranties by NYU
a. NYU has disclosed to HORL that Abbott Laboratories, Inc.
(hereinafter "Abbott") has asserted a claim of rights with
respect to NYU Patents. Subject to the claim of rights in the
NYU Patents which has been claimed by Abbott and which NYU has
disclosed to HORL, NYU warrants that NYU owns all rights and
title to the NYU Patents free and clear of any claim by a
third party and that NYU has all requisite authority to enter
into this Agreement.
b. Nothing herein contained shall be deemed to be a warranty by
NYU that
i) NYU can or will be able to obtain any patent or
patents on any patent application or applications in
the NYU Patents or any portion thereof, or that any
of the NYU Patents will afford adequate or
commercially worthwhile protection, or
ii) that the manufacture, use, practice or sale of any
element of the NYU Patents will not infringe any
patent(s) of a third party.
12. Term and Termination
a. This Agreement shall commence upon the effective Date and,
unless terminated pursuant to this Section 12 or Section 6.e.,
hereof, shall expire on the expiration of the last to expire
NYU Patents.
- 16 -
<PAGE> 96
b. Upon expiration of the NYU Research Period, HORL may terminate
this Agreement effective on February 1 of any calendar year by
giving sixty (60) days prior written notice to NYU of such
intended termination.
C. At any time prior to expiration either party may terminate this
Agreement for cause. Cause for termination of this Agreement
shall be deemed to exist when there has been a material breach by
either party of any of the terms of this Agreement, and when the
breaching party has failed to cure such breach within sixty (60)
days after receipt of written notice thereof from the
non-breaching party.
d. NYU may, upon giving written notice of termination, immediately
terminate this Agreement upon receipt of notice that HORL has
become insolvent or has suspended business or has filed a
voluntary petition or has filed an answer admitting the
jurisdiction of the U.S. Bankruptcy Court in the material
allegations of, or has consented to, an involuntary petition
purporting to be pursuant to any reorganization or insolvency law
of any jurisdiction, or has made an assignment for the benefit of
creditors or has applied for or consented to the appointment of a
receiver or trustee of a substantial part of its property.
e. Any amount payable hereunder by one of the parties to the other,
which has not been paid by its due date of payment shall bear
interest from its due date of payment until the
- 17 -
<PAGE> 97
date of actual payment, at the rate of two percent (2%) per annum
in excess of the Prime Rate prevailing at the Citibank, Inc.,
New York, New York, during the period of arrears and such amount
and the interest thereon may be set off against any amount due,
whether under terms of this Agreement or otherwise, to the party
in default by any non-defaulting party.
f. After termination of this Agreement for any reason, NYU shall be
entitled to assert claims of infringement of the NYU Patents
against HORL and/or HORL Corporation Entities for any use or
practice of the NYU Patents by HORL and HORL Corporation Entities
after the date of such termination.
g. Termination of this Agreement shall not relieve the parties of
any obligation occurring prior to such termination.
h. Sections 13 and 15 hereof shall survive and remain in full force
and effect after any termination, cancellation or expiration of
this Agreement.
13. Liability and Indemnification
a. HORL shall, at all times during the term of this Agreement and
thereafter, defend, indemnify and hold harmless NYU and its
trustees, officers, agents, employees, faculty and students from
and against any and all liability, loss, damages and expenses
(including attorneys' fees), they may suffer as the result of
claims, demands, costs or judgments which may be made or
instituted against them or any of them arising out of
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<PAGE> 98
the performance of the Tests by HORL and/or HORL Corporation
Entities, or out of any representation made by HORL pursuant to
Section 16 of this Agreement. HORL's obligation to defend,
indemnify and hold harmless shall include, but not be limited to,
claims, demands, costs or judgments, whether for money damages or
equitable relief.
b. NYU agrees to notify HORL as soon as NYU becomes aware of a claim
or action for which indemnification may be sought pursuant to
this Section 13. At NYU's request, HORL shall provide attorneys
to defend against any claim or action with respect to the subject
of indemnity contained herein, whether or not such claims are
rightfully brought or filed.
14. Publication
a. Prior to submission of publication of a manuscript describing the
results of any aspect of the NYU Research Project, NYU shall send
HORL a copy of the manuscript to be submitted, and shall allow
HORL 30 days from the date of mailing to determine whether the
manuscript contains such subject matter for which patent
protection should be sought prior to publication of such
manuscript, for the purpose of protecting an invention which may
constitute NYU Patents. Should HORL believe the subject matter of
the manuscript contains a patentable invention, then prior to the
expiration of 30 days from the mailing date of such manuscript
to HORL by NYU, HORL shall
-19-
<PAGE> 99
give written notification to NYU of
i) its determination that such manuscript contains patentable
subject matter for which patent protection should be sought,
and
ii) the countries in which such patent protection should be
sought.
b. After the expiration of 30 days from the date of mailing such
manuscript to HORL, unless NYU has received the written notice
specified above from HORL, NYU shall be free to submit such
manuscript for publication to publish the disclosed research
results in any manner consistent with academic standards.
C. Upon receipt of such written notice from HORL, NYU will
thereafter delay submission of the manuscript for an additional
period of up to 60 days to permit preparation and filing of U.S.
patent application by NYU on the subject matter to be disclosed
in such manuscript. After expiration of such 60-day period, or
the filing of a patent application on each such invention,
whichever shall occur first, NYU shall be free to submit the
manuscript and to publish the disclosed results.
15. Confidential Information
a. Unless otherwise required by applicable law or regulations, HORL
and NYU shall maintain, in confidence, the terms of this
Agreement. Except as provided in Section 15.b. below, HORL shall
maintain any and all of the results or inventions
-20-
<PAGE> 100
achieved by the NYU Research Project and the NYU Patents in
confidence and shall not release or disclose any tangible or
intangible component thereof to any third party without first
receiving the prior written consent of NYU to said release or
disclosure. This obligation of confidentiality shall not apply to
any component of the results or inventions achieved by the NYU
Research Project and the NYU Patents which is part of the public
domain prior to the Effective Date of this Agreement or which
becomes a part of the public domain not due to some unauthorized
act by or omission of HORL after the Effective Date of this
Agreement or which is disclosed to HORL by a third party who has
the right to make such disclosure.
b. The provisions of Section 15.a. notwithstanding, HORL may
disclose the results or inventions achieved by the NYU Research
Project and the NYU Patents in confidence to third parties who
need to know the same in order to secure regulatory approval for
the Tests.
16. Representation and Covenants by HORL
HORL hereby represents and warrants to NYU as follows:
a. HORL is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. HORL has
been granted all requisite power and authority to carry on its
business and to own and operate its properties and assets. The
execution, delivery and performance of this Agreement have
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<PAGE> 101
been duly authorized by the Board of Directors of HORL.
b. There is no pending or threatened litigation involving HORL which
would have any effect on this Agreement or on HORL's ability to
perform its obligations hereunder.
C. There is no indenture, contract, or agreement to which HORL is a
party or by which HORL is bound which prohibits or would prohibit
the execution and delivery by HORL of this Agreement or the
performance or observance by HORL of any term or condition of
this Agreement.
17. No Assignment
Subject to the terms of this Agreement, HORL shall not have the right to
assign, delegate or transfer at any time to any party, in whole or in
part, any or all of the rights, duties and interest herein granted
without first obtaining the written consent of NYU or such assignment,
which shall not be unreasonably withheld.
18. Use of Name.
Without the prior written consent of NYU, HORL shall not use the name of
NYU or of any NYU staff member, employee or student, or any adaptation
thereof;
i) in any advertising, promotional or sales literature;
ii) in connection with any public or private offering or in
conjunction with any application for regulatory approval,
unless disclosure is otherwise required by law, in which
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<PAGE> 102
case HORL may make factual statements concerning the Agreement
or file copies of the Agreement after providing NYU with an
opportunity to comment and reasonable time within which to do so
on such statement in draft.
Except as provided herein, neither NYU or HORL will issue public
announcements about this Agreement or the status or existence of the NYU
Research Project without prior written approval of the other party.
19. Miscellaneous.
a. In carrying out this Agreement the parties shall comply with all
local, state and federal laws and regulations.
b. If any provision of this Agreement is determined to be invalid
or void, the remaining provisions shall remain in effect.
c. This Agreement shall be deemed to have been made in the State of
New York and shall be governed and interpreted in all respects
under the laws of the State of New York.
d. All payments or notices required or permitted to be given under
this Agreement shall be given in writing and shall be effective
when either personally delivered or deposited, postage prepaid,
in the United States registered or certified mail, addressed as
follows:
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<PAGE> 103
To NYU: New York University Medical Center
550 First Avenue
New York, NY 10016
Attention: Isaac T. Kohlberg, Esq.
Vice President for
Industrial Liaison
and
Office of Legal Counsel
New York University
Bobst Library
70 Washington Square South
New York, NY 10012
Attention: Annette B. Johnson, Esq.
Associate General Counsel
To HORL: Home Office Reference Laboratory
10310 West 84th Terrace
Lenaxa, Kansas 66214
Attention: Kenneth A. Stelzer
President and Chief
Executive Officer
and
Hillix, Brewer, Hoffhaus, Whittaker
& Hormer, Esqs.
27th Floor
Commerce Towers
P.O. Box 13367
Kansas City, Missouri 64199-3367
Attention: R. Dennis Wright, Esq.
or such other address or addresses as either party may hereafter specify by
written notice to the other. Such notices and communications shall be deemed to
have been received by the addressee on the date of delivery or fourteen (14)
days after having been sent by registered mail.
-24-
<PAGE> 104
e. This Agreement (and the annexed Appendices) constitute the entire
Agreement between the parties, and no variation, modification or waiver
of any of the terms or conditions hereof shall be deemed valid unless
made in writing and signed by both parties hereto. This Agreement
supersedes any and all prior agreements or understandings, whether oral
or written, between HORL and NYU.
f. No waiver by either party of any non-performance or violation by the
other party of any of the convenants, obligations or agreements of such
other party hereunder shall be deemed to be a waiver of any subsequent
violation or non-performance of the same or any other covenant,
agreement or obligation, nor shall forbearance by any party be deemed to
be a waiver by such party of its rights or remedies with respect to such
violation or non-performance.
g. The descriptive headings contained in this Agreement are included for
convenience and reference only and shall not be held to expand, modify
or aid in the interpretation, construction or meaning of this Agreement.
h. It is not the intent of the parties to create a partnership or joint
venture or to assume partnership responsibility or liability. The
obligations of the parties shall be limited to those set out herein and
such obligations shall be several and not joint.
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<PAGE> 105
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
date and year first above written.
NEW YORK UNIVERSITY
By: /s/ Isaac T. Kohlberg
-------------------------
Isaac T. Kohlberg
Witnessed By: Title: Vice President for
Industrial Liaison
/s/ Annette Johnson Date: November 17th, 1989
- ----------------------------- ------------------------
HOME OFFICE REFERENCE LABORATORY, INC.
By: /s/ Kenneth A. Stelzer
-------------------------
Kenneth A. Stelzer
Witnessed By:
Title: President and Chief Executive Officer
/s/ [illegible] Date: November 15, 1989
- ----------------------------- --------------------------
[Home Office Reference
Laboratory, Inc. Corporate Seal]
-26-
<PAGE> 106
4/8/92
FIRST AMENDMENT TO
NYU/HORL
AGREEMENT
This Agreement, effective as of November 15, 1989 ("the Effective
Date"), is by and between NEW YORK UNIVERSITY, a corporation organized and
existing under the laws of the State of New York and having a place of business
at 70 Washington Square South, New York, New York 10012 (hereinafter "NYU") and
HOME OFFICE REFERENCE LABORATORY a corporation organized and existing under the
laws of the State of Delaware having its principal offices at 10310 West 84th
Terrace, Lenaxa, Kansas 66214 (hereinafter "HORL").
RECITALS
WHEREAS, NYU and HORL have entered into an agreement, effective November
15, 1989 ("the Agreement") concerning a research project and rights to certain
intellectual property including certain intellectual property owned by NYU and
invented by Drs. Alvin Friedman-Kien, Yunzhen Cao, and William Borowsky relating
to methods and/or assays for the detection of HIV antibodies in urine and
identified in Appendix I of the Agreement ("the Pre-Existing Inventions", as
term is defined in the Agreement); and
WHEREAS, NYU and HORL desire to modify the Agreement with respect to the
Pre-Existing Inventions:
NOW, THEREFORE, the Agreement is hereby modified pursuant to Section
19(e) therein to amend Subsection 6e. as follows:
<PAGE> 107
1. Section 6e. shall now read:
"Beginning on January 1, 1990 and continuing thereafter until this
Agreement shall terminate or expire, HORL agrees that if the total
royalties paid to NYU under subsection 6.a. (2) hereof do not amount to
two hundred thousand dollars ($200,000) for each of the first, second
and third calendar years and two hundred fifty thousand dollars
($250,000) for every calendar year thereafter, HORL will pay to NYU
within thirty days after the end of each such calendar year, as
additional royalty:
(1) for each of the first, second and third calendar years, the
difference between the amount of the total royalties paid to NYU
by HORL in each of the first, second and third calendar years and
two hundred thousand dollars ($200,000), failing which, NYU shall
have the right solely at its election, upon written notice to
HORL, to terminate this Agreement; and
(2) for the fourth calendar year and each calendar year thereafter,
the difference between the amount of the total royalties paid to
NYU by HORL in such calendar year and two hundred fifty thousand
dollars ($250,000), failing which, NYU shall have the right
solely at its election, upon written notice to HORL, to terminate
this Agreement.
Any term not defined herein is intended to have the meaning defined in
the Agreement. All Section numbers and Appendices herein refer to that
Agreement.
NEW YORK UNIVERSITY HOME OFFICE REFERENCE LABORATORY
By: /s/ Issac T. Kohlberg By: /s/ Kenneth A. Stelzer
-------------------------- ---------------------------
Isaac T. Kohlberg Kenneth A. Stelzer
Vice President for President and Chief Executive
Industrial Liaison Officer
Date: 4/8/92 Date: 4/24/92
------------ -----------
<PAGE> 1
EXHIBIT 10.18
THIRD AMENDMENT TO THE AGREEMENT
BETWEEN
NEW YORK UNIVERSITY AND CALYPTE BIOMEDICAL CORPORATION
This Third Amendment to Agreement (hereafter "Amendment") is effective
on January 31, 1996 by and between CALYPTE Biomedical Corporation, a
corporation organized and existing under the laws of California, having a place
of business at 1440 Fourth Street, Berkeley, California 94710 (hereafter
"CORPORATION"); and NEW YORK UNIVERSITY, a corporation organized and existing
under the laws of the State of New York, having a place of business at
70 Washington Square South, New York, New York 10012 (hereafter "NYU").
W I T N E S S E T H:
WHEREAS, CORPORATION and NYU entered into a certain agreement made and
effective as of August 12, 1993 (the "License Agreement"), pursuant to which,
inter alia, NYU granted to CORPORATION certain rights to certain inventions
relating to the detection of antibodies to human immunodeficiency virus (HIV)
in urine, and the parties agreed to certain other related matters as specified
herein; and
WHEREAS, CORPORATION and NYU wish to modify certain terms and conditions
of the License Agreement as specified herein;
NOW, THEREFORE, in consideration of the premises and the covenants,
conditions and promises set forth below, the parties hereto hereby agree as
follows:
1. Except as expressly provided for herein, all terms and conditions of the
Agreement shall remain in full force and effect.
2. Terms which are defined in the Agreement shall have the same meanings
when used in this Amendment, unless a different definition is given
herein.
<PAGE> 2
3. Section 1.f. of the License Agreement shall be, and hereby is, amended
in its entirety so that, as amended, Section 1.f. shall read as follows:
"Licensed Product(s)" shall mean:
i) any product for the analysis of a human urine sample of an
individual to assay HIV antibodies covered by one or more Valid
Claims (as hereinafter defined) of the NYU Patents; and
ii) any product for the collection of such sample.
4. Section 6.d. of the License Agreement shall be, and hereby is, amended
in its entirety so that, as amended, Section 6.d. shall read as follows:
d. Beginning January 1, 1994 and continuing thereafter until this
Agreement shall terminate or expire, CORPORATION agrees that if
the total amounts paid to NYU under subsection 6.a. hereof do
not amount to [ * ] (U.S.$ [ * ]) in
the 1994 Calendar Year, [ * ] (U.S.$ [ * ])
in the 1995 Calendar Year, [ * ] (U.S.$ [ * ])
in the 1996 Calendar Year, [ * ] (U.S.$ [ * ])
in the 1997 Calendar
Year, [ * ] (U.S.$ [ * ]) in the 1998
Calendar Year, [ * ] (U.S.$ [ * ])
in the 1999 Calendar Year, and [ * ] (U.S.$ [ * ])
in the 2000 Calendar Year and each Calendar
Year thereafter, CORPORATION will pay to NYU within ninety (90)
days after the end of each such Calendar Year, as additional
royalty, the difference between the amount of the total
royalties paid to NYU by CORPORATION in such Calendar Year, and
the amount stated herein with respect to such Calendar Year
(hereinafter Minimum Annual Royalty), failing which NYU shall
have the right, upon written notice to CORPORATION, to convert
the License to a non-exclusive
*Confidential portion has been omitted
and filed separately with the Commission
2
<PAGE> 3
license, having the same royalty rates as in Section 6.a. In
the event the License has been converted to a non-exclusive
license, CORPORATION shall no longer be obligated to pay the
Minimum Annual Royalty of this subsection.
5. Section 9. of the License Agreement, as amended by the First Amendment,
shall be, and hereby is, deleted and amended in its entirety, and said
Section shall be left blank and marked as follows:
9. Intentionally Left Blank
IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment as
follows:
NEW YORK UNIVERSITY CALYPTE BIOMEDICAL CORPORATION
BY: /s/ ISAAC T. KOHLBERG BY: /s/ JACK P. DAVIS
--------------------------- --------------------------
Isaac T. Kohlberg Jack P. Davis
Title: Vice President for Title: President and CEO
Industrial Liaison
Date: 2/5/96 Date: January 31, 1996
------------------ -----------------------
3
<PAGE> 1
EXHIBIT 10.19
AGREEMENT
Between
NEW YORK UNIVERSITY
and
CALYPTE BIOMEDICAL CORPORATION
Research Agreement
<PAGE> 2
June 4, 1993
Mr. Isaac T. Kohlberg
Vice President of Industrial Liaison
NYU Medical Center
550 First Avenue
New York, NY 10016
Dear Isaac:
I have read the Research Agreement ("the Agreement") between New York
University and Calypte Biomedical Corporation dated 8/13/93. The contents of
the Agreement are fully acceptable to me.
I warrant that I am not bound by or party to any agreement which prohibits or
would prohibit the execution and delivery by NYU of the Agreement or the
performance or observance by NYU of any term or condition of the Agreement.
I agree to act, to the best of my ability, in accordance with the terms of the
Agreement insofar as they relate to me.
Sincerely yours,
/s/ ALVIN FRIEDMAN-KIEN, M.D.
Alvin Friedman-Kien, M.D.
<PAGE> 3
NYU/CALYPTE
RESEARCH AGREEMENT
I N D E X
---------
<TABLE>
<S> <C> <C> <C>
Section I. Definitions page 2
Section 2. Effective Date page 4
Section 3. Performance of the NYU Research Project page 4
Section 4. Funding of the NYU Research Project page 5
Section 5. Title page 7
Section 6. Patents and Patent Applications page 8
Section 7. License Rights page 10
Section 8. Option to Acquire Shares page 12
Section 9. Publication page 13
Section 10. Expiry and Termination page 14
Section 11. No Assignment page 16
Section 12. Confidential Information page 16
Section 13. Representations and Warranties by CORPORATION page 17
Section 14. Representations and Warranties by NYU page 18
Section 15. Use of Name page 19
Section 16. Miscellaneous page 20
Appendix I - Research Project
Appendix II - Stock Purchase Agreement
</TABLE>
<PAGE> 4
NYU/CALYPTE
RESEARCH AGREEMENT
This Agreement, made and effective as of August 12th, 1993, (the
"Effective Date") is by and between:
NEW YORK UNIVERSITY (hereinafter "NYU"), a corporation organized and
existing under the laws of the State of New York and having a place of business
at 70 Washington Square South, New York, New York 10012
AND
CALYPTE BIOMEDICAL CORPORATION (hereinafter "CORPORATION"), a
corporation organized and existing under the laws of the State of California
having its principal office at 1440 Fourth Street, Berkeley, California 94710.
RECITALS
WHEREAS, NYU is willing to perform the NYU Research Project (as
hereinafter defined) under the direction of Dr. Alvin Friedman-Kien of NYU
(hereinafter "the NYU Scientist");
WHEREAS, CORPORATION is prepared to sponsor the NYU Research Project;
WHEREAS, subject to the terms and conditions hereinafter set forth,
CORPORATION desires to sponsor and NYU is willing to perform the NYU Research
Project (as hereinafter defined);
- 1 -
<PAGE> 5
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereto hereby agree as follows:
1. Definitions.
Whenever used in this Agreement, the following terms shall
have the following meanings:
a. "Corporation's Confidential Information" shall mean
all confidential or proprietary information of
CORPORATION disclosed in writing, or reduced to
writing within thirty (30) days of an oral
disclosure, and marked "Confidential" by CORPORATION
in connection with this Agreement, including without
limitation, any product or marketing plan.
b. "Field" shall mean the analysis of HIV antibodies in
urine.
c. "Joint Inventions" shall mean any invention made by
at least one employee or consultant (not being an
employee or student of NYU) of CORPORATION and one
employee or student of NYU during the Research Period
of the NYU Research Project (as hereinafter defined).
d. "NYU Inventions" shall mean any invention relating to
the NYU Research Project (as hereinafter defined)
made solely by the NYU Scientist, employees or
students of NYU during the Research Period and in the
course of the performance of the NYU Research
Project.
e. "NYU Know-How" shall mean any information and
materials including, but not limited to,
pharmaceutical, chemical, biological and biochemical
products, technical and
- 2 -
<PAGE> 6
non-technical data, materials, methods and processes
and any drawings, plans, diagrams, specifications
and/or other documents containing such information,
discovered, developed or acquired by, or on behalf of
the NYU Scientist, employees or students of NYU
during the term and in the course of the NYU Research
Project.
f. "NYU Research Project" shall mean the investigations
during the Research Period (as hereinafter defined)
into the Field under the supervision of the NYU
Scientist in accordance with the research program
described in annexed Appendix I which forms an
integral part hereof.
g. "Research Technology" shall mean all NYU Inventions
and NYU Know-How, and NYU's interest in Joint
Inventions.
h. "Research Period" shall mean the three-year period
commencing on the Effective Date hereof and any
extensions thereof as to which NYU and CORPORATION
shall mutually agree in writing.
i. "Rights Period" shall mean the period from the
Effective Date to the date one year after the end of
the Research Period or, in the event of early
termination of this Agreement pursuant to Section
3.a. hereof, one year after the date of CORPORATION's
written notice to NYU that CORPORATION elects to
terminate the Agreement.
- 3 -
<PAGE> 7
2. Effective Date.
This Agreement shall be effective as of the Effective Date and
shall remain in full force and effect until it expires or is
terminated in accordance with Section 10. hereof.
3. Performance of the NYU Research Project.
a. In consideration of the sums to be paid to NYU as
set forth in Section 4 below, NYU undertakes to
perform the NYU Research Project under the
supervision of the NYU Scientist during the Research
Period. If, during the Research Period the NYU
Scientist shall cease to supervise the NYU Research
Project, then NYU shall promptly so notify
CORPORATION and CORPORATION shall have the option to
terminate this Agreement and shall have no further
obligation for funding of the NYU Research Project.
CORPORATION shall promptly advise NYU in writing if
CORPORATION so elects. Nothing herein contained
shall be deemed to impose an obligation on NYU to
find a replacement for the NYU Scientist.
b. Nothing contained in this Agreement shall be
construed as a warranty on the part of NYU that any
results or inventions will be achieved by the NYU
Research Project, or that the Research Technology
and/or any other results or inventions achieved by
the NYU Research Project, if any, are or will be
commercially exploitable and furthermore, NYU makes
no warranties whatsoever as to the commercial or
scientific value of the Research Technology and/or as
to any results which may be achieved in the NYU
Research Project.
- 4 -
<PAGE> 8
c. Within sixty (60) days after the end of each year of
the Research Period, NYU shall prepare a detailed
written report describing and summarizing the results
of the work conducted on the NYU Research Project
during the preceding year.
d. NYU will have full authority and responsibility for
the NYU Research Project. All students and employees
of NYU who work on the NYU Research Project will do
so as employees or students of NYU, and not as
employees of CORPORATION.
e. NYU agrees to make available and/or transfer to
CORPORATION, at CORPORATION's request, a sample
and/or copy of the NYU Know-How provided such NYU
Know-How is available in transferable quantities
and/or reproducible form.
f. During the term of this Agreement the Research
Technology shall be used only for scientific research
and shall not be used on human beings or in the
diagnosis of human beings.
4. Funding of the NYU Research Project.
a. As compensation to NYU for work to be performed on
the NYU Research Project during the Research Period,
subject to any earlier termination of the Research
Project pursuant to Section 3.a. hereof, CORPORATION
will pay NYU the total sum of [ * ]
(U.S.$ [ * ]) , payable in six (6)
equal and consecutive installments every six (6)
months in
*Confidential portion has been omitted
and filed separately with the Commission
- 5 -
<PAGE> 9
the amount of [ * ])
each, commencing upon the Effective Date and
according to the following schedule:
<TABLE>
<S> <C>
Effective Date
February 12, 1994 [ * ]
August 12, 1994 [ * ]
February 12, 1995 [ * ]
August 12, 1995 [ * ]
February 12, 1996 [ * ]
</TABLE>
b. Nothing in this Agreement shall be interpreted to
prohibit NYU (or the NYU Scientist) from obtaining
additional financing or research grants for the NYU
Research Project from government agencies, which
grants or financing may render all or part of the NYU
Research Project and the results thereof subject to
the patent rights of the U.S. Government and its
agencies, as set forth in Title 35 U.S.C. Section 200
et seq. However, NYU and the NYU Scientist are
prohibited from obtaining additional financing or
research grants for the NYU Research Project from
other third parties.
*Confidential portion has been omitted
and filed separately with the Commission
- 6 -
<PAGE> 10
c. In the event CORPORATION desires to fund the NYU
Research Project beyond the first three years of the
Research Period, CORPORATION shall give written
notice to NYU at least three (3) months prior to the
termination of the Research Period and NYU and
CORPORATION shall negotiate in good faith a budget
and research plan to extend the Research Period, and
the terms of this Agreement (other than the research
plan and budget) shall continue in full force and
effect with respect to such extended Research Period.
d. The funds or compensation paid by CORPORATION to NYU
for work to be performed under this Agreement shall
be placed in a separate account and expended in
performance of the NYU Research Project as set forth
herein.
5. Title.
a. All right, title and interest, in and to the Research
Technology, and in and to any drawings, plans,
diagrams, specifications, and other documents
containing any of the Research Technology shall vest
solely in NYU.
b. For so long as the NYU Scientist is employed by NYU,
any and all inventions made by the NYU Scientist and
relating to the Field shall be owned solely by NYU,
unless such inventions are jointly made by
CORPORATION personnel and the NYU Scientist and/or
NYU personnel and/or NYU students, in which case such
inventions shall be Joint Inventions and jointly
owned with all right, title and interest vesting
jointly in NYU and CORPORATION as defined under the
laws of the United States of America.
- 7 -
<PAGE> 11
6. Patents and Patent Applications.
a. NYU will require the NYU Scientist and its employees
and students working on the NYU Research Project to
disclose potential NYU Inventions and/or Joint
Inventions to NYU's Office of Industrial Liaison
promptly upon the making thereof. NYU will disclose
all such NYU Inventions and/or Joint Inventions to
CORPORATION in writing within sixty (60) days after
such NYU Invention and/or Joint Invention was
disclosed to NYU's Office of Industrial Liaison.
b. CORPORATION shall promptly disclose to NYU in writing
the making of any Joint Invention by any employee or
consultant of CORPORATION within sixty (60) days
after such invention was disclosed to CORPORATION.
c. At the initiative of CORPORATION or NYU, the parties
shall consult with each other regarding the filing
and prosecution of all patent applications with
respect to the NYU Inventions or Joint Inventions.
Such patent applications shall be filed, prosecuted
and maintained by patent counsel jointly selected by
NYU and CORPORATION. Copies of all such patent
applications and patent office actions shall be
forwarded to each of NYU and CORPORATION on a timely
basis. NYU and CORPORATION shall each also have the
right to have such patent applications and patent
office actions independently reviewed by other patent
counsel separately retained by NYU or CORPORATION.
d. If CORPORATION requests and provides written
approval, all applications and proceedings with
respect to the NYU Inventions and Joint Inventions
shall be filed, prosecuted and maintained
- 8 -
<PAGE> 12
by NYU at the expense of CORPORATION. Against the submission
of detailed quarterly invoices, CORPORATION shall reimburse
NYU for all reasonable out-of pocket costs and fees incurred
by NYU during the term of this Agreement, in connection with
the filing, maintenance, prosecution, and issuance of the NYU
Inventions and/or Joint Inventions; provided, however, NYU
shall not be entitled to reimbursement for patent filing,
prosecution and maintenance expenses in excess of ten thousand
dollars ($10,000) per year with respect to any NYU Inventions
or Joint Inventions unless NYU has obtained the prior written
consent of CORPORATION to such expenses. In the event
CORPORATION refuses consent for such expenditures relating to
a NYU Invention, NYU shall be free to pursue patent protection
with respect to such NYU Invention at NYU's sole expense and
all rights to such NYU Invention shall revert to NYU and
CORPORATION shall have no rights with respect to such NYU
Invention. In the event CORPORATION refuses consent for
expenditures relating to a Joint Invention, NYU shall be free
to pursue patent protection with respect to such Joint
Invention at NYU's sole expense. However, all right, title
and interest shall remain jointly owned and vested in NYU and
CORPORATION.
e. CORPORATION shall have the right to comment on and
approve the strategy and prosecution of the patent
applications. NYU shall not abandon any applications
without first consulting with CORPORATION and
obtaining CORPORATION's consent for such abandonment
unless abandonment is in favor of a subsequent
- 9 -
<PAGE> 13
patent application claiming the subject matter of the
proposed abandoned application and the patentability
of the subject matter is not negatively affected.
The parties agree to cooperate with each other
regarding the patent applications for NYU Inventions
and Joint Inventions and NYU agrees to use its best
efforts to obtain and maintain any patent
applications and patents on NYU Inventions and Joint
Inventions.
f. Nothing herein contained shall be deemed to be a
warranty by NYU that NYU can or will be able to
obtain any patent or patents on any patent
application or applications with respect to the NYU
Inventions or Joint Inventions or any portion
thereof, or that any of such patents will afford
adequate or commercially worthwhile protection.
g. Nothing herein contained shall be deemed to be a
warranty by CORPORATION that CORPORATION can or will
be able to obtain any patent or patents on any patent
application or applications with respect to Joint
Inventions or any portion thereof, or that any such
patents will afford adequate or commercially
worthwhile protection.
7. License Rights.
a. Subject to rights of the U.S. Government and its
agencies, if any, and to the provisions of this
Section 7.a., NYU shall grant CORPORATION an
exclusive, worldwide, license with right to
sublicense to make, have made, use and/or sell any
products or materials, related to or covered by the
NYU Inventions, and/or
- 10 -
<PAGE> 14
NYU's interest in Joint Inventions, and/or NYU Know-How.("the
License"). The License shall be set forth in an executed
license agreement, containing other terms and provisions as
shall be negotiated in good faith and using best efforts by
NYU and CORPORATION. The term of the license agreement shall
remain in force, unless previously terminated under the
executed license agreement, until the expiration date of the
last to expire patent rights or in the case of non-patentable
rights, for a period of at least ten (10) years from the
execution date of the license agreement. CORPORATION shall
have nine (9) months from the first disclosure by NYU of an
NYU Invention, Joint Inventions, or NYU Know-How to request
and conclude an agreement with respect to the License. If
CORPORATION has not concluded such an agreement with NYU
within nine (9) months after such disclosure, CORPORATION's
rights under this Section 7.a. shall terminate and NYU shall
have the right to commence negotiations with a third party
with respect to NYU Inventions, NYU's share of Joint
Inventions and NYU Know-How disclosed to CORPORATION.
b. During the Rights Period. NYU shall not disclose the
Research Technology to any third party except with
CORPORATION's prior written consent or pursuant to
Sections 9 and 12 hereof, until and unless such
Research Technology has been offered to CORPORATION
pursuant to Section 7.a. above and CORPORATION has
failed to conclude a license agreement as provided in
Section 7.a. above.
c. If, during the Rights Period, NYU shall negotiate a
license agreement with a third party relating to any
part of the Research
<PAGE> 15
Technology after the expiration Of CORPORATION's
rights as provided in Section 7.a. NYU shall offer
CORPORATION the right to enter into such license
agreement upon the same terms and conditions
negotiated with such third party; such right shall be
exercisable by CORPORATION for a period of thirty
(30) days after receipt by CORPORATION of a copy of
such negotiated agreement from NYU. If CORPORATION
fails to execute such negotiated agreement within
such 30-day period, NYU shall have no further
obligation to CORPORATION and shall be free to
execute such negotiated agreement with a third party.
8. Option to Acquire Shares
CORPORATION hereby grants NYU the option to purchase shares of
the CORPORATION's Common Stock, in the quantities, and on the
terms, set forth in the Stock Purchase Agreement which is
annexed hereto as Appendix II. The option described herein
shall be exercisable by NYU during the period commencing upon
the Effective Date and terminating six (6) months thereafter
("the option period"). If NYU chooses to exercise such
option, it shall given written notice thereof to the
CORPORATION within the option period. Closing for the
purchase of the stock shall be at such time, date and place as
are mutually satisfactory to the CORPORATION and NYU, provided
that such closing shall occur not later than two (2) weeks
after delivery by NYU of the notice that it is exercising its
option to purchase stock. Payment for the stock purchased by
NYU shall be made in full at the closing by
- 12 -
<PAGE> 16
check payable to the CORPORATION. On or before the closing,
NYU and CORPORATION shall enter into the Stock Purchase
Agreement annexed as Appendix H.
9. Publication.
a. Prior to submission for publication or presentation
of a manuscipt describing the results of any aspect
of the NYU Research Project, NYU shall send
CORPORATION a copy of the manuscript to be submitted
or presented, and shall allow CORPORATION sixty (60)
days from the date of such mailing to determine
whether the manuscript i) discloses Corporation's
Confidential Information or ii) contains subject
matter for which patent protection should be sought
for an NYU Invention or Joint Invention prior to
publication or presentation of such manuscript.
Should CORPORATION believe the subject matter of the
manuscript discloses Corporation's Confidential
Information or contains a patentable invention, then
prior to the expiration of such 60-day period from
the mailing date of such manuscript to CORPORATION by
NYU, CORPORATION shall given written notification to
NYU of its determination.
b. After the expiration of the sixty (60) day period
from the date of mailing such manuscript to
CORPORATION, unless NYU has received the written
notice specified above from CORPORATION, NYU shall be
free to submit such manuscript for publication or
presentation to publish the disclosed research
results in any manner consistent with academic
standards.
- 13 -
<PAGE> 17
c. Upon receipt of such written notice from CORPORATION
that such manuscript discloses Corporation's
Confidential Information, NYU shall delete such
information from the publication or presentation.
d. Upon receipt of such written notice from CORPORATION
that the manuscript contains patentable inventions,
NYU will thereafter delay submission of the
manuscript for an additional period of up to sixty
(60) days to permit the preparation and filing in
accordance with Section 6. hereof of U.S. patent
application by NYU on the subject matter to be
disclosed in such manuscript. After expiration of
such 60-day period, or the filing of a patent
application on each such invention, whichever shall
occur first, NYU shall be free to submit or present
the manuscript and to publish the disclosed results.
e. CORPORATION shall have the right to render comments
on the manuscript, if any, to NYU and/or the NYU
Scientist. NYU shall consider CORPORATION's
comments, but NYU's decision as to what the
publication or presentation shall contain will be
final, subject to compliance with c. and d. above.
10. Expiry and Termination.
a. Unless earlier terminated pursuant to Section 3.a. or
this Section 10, this Agreement will terminate upon
the expiration of the Rights Period. The provisions
of Sections 8, 9, 10, 12 and 15 hereof shall survive
and remain in full force and effect after any
expiration, cancellation or termination of this
Agreement, including early termination as set forth
below.
- 14 -
<PAGE> 18
b. At any time prior to expiration of this Agreement
pursuant to Section 10.a. hereof, any party may
terminate this Agreement for cause, as "cause" is
described below, by giving written notice to the
other party. Cause for termination by one party of
this Agreement shall be deemed to exist when there
has been a material breach or default by any party of
any of the terms of this Agreement, and when such
breaching or defaulting party has failed to cure such
breach within ninety (90) days after receipt of
written notice thereof from the non-breaching party.
c. Any party to this Agreement may, upon giving notice
of termination, immediately terminate this Agreement
upon receipt of notice that any other party has
suspended its business.
d. Any amount payable hereunder by one of the parties to
the other, which has not been paid by the date on
which such payment is due, shall bear interest from
such date until the date on which such payment is
made, at the rate of one percent (1%) per annum in
excess of the prime rate prevailing at the Citibank,
N.A., in New York, during the period of arrears and
such amount and the interest thereon may be collected
or set off against any amount due, whether in terms
of this Agreement or otherwise, to the party in
default by any non-defaulting party.
e. Upon expiration or termination of this Agreement
pursuant to Sections 10.a. - 10.c. above, and without
execution of an agreement with respect to the License
as provided in Section 7.a., all rights in and to the
Research Technology shall revert to NYU
- 15 -
<PAGE> 19
and CORPORATION shall not be entitled to make any
further use of the Research Technology. However, in
the event that NYU Inventions and/or Joint Inventions
are made during the Research Period, but the
resulting patent applications are filed after the
Research Period ends, CORPORATION shall have the
right to a License as provided in Section 7.a.
f. Termination of this Agreement shall not relieve the
either party of any obligation to the other party
incurred prior to such termination.
11. No Assignment.
Neither CORPORATION nor NYU shall have the right to assign,
delegate or transfer at any time to any party, in whole or in
part, any or all of the rights, duties and interest herein
granted without first obtaining the written consent of the
other to such assignment, which consent shall not be
unreasonably withheld. However, CORPORATION shall have the
right to assign, delegate or transfer at any time, in whole or
in part, any or all of the rights, duties and interest herein
granted to a Corporation Entity upon giving written notice to
NYU.
12. Confidential Information.
Except as otherwise provided in this Section and in Section 9,
the parties agree that for the term of the Rights Period and
for five (5) years thereafter, NYU shall maintain all of
Corporation's Confidential
- 16 -
<PAGE> 20
information disclosed to NYU in confidence and shall not
disclose it to any third party and CORPORATION shall maintain
any Research Technology in confidence and shall not disclose
it to any third party except to the extent the receiving party
can establish that such information:
1. was already known to the receiving party, other than
under an obligation of confidentiality, at the time
of disclosure by the providing party;
2. was generally available to the public or otherwise
part of the public domain at the time of its
disclosure to the receiving party;
3. became generally available to the public or otherwise
part of the public domain after its disclosure and
other than through any act or omission of the
receiving party in breach of this Agreement; or
4. was subsequently lawfully disclosed to the receiving
party by a third party.
Each party may disclose the other's information to the extent
such disclosure is reasonably necessary in prosecuting or
defending patents and litigation, complying with applicable
governmental regulations and laws, and conducting clinical
trials.
13. Representations and Warranties by CORPORATION.
CORPORATION hereby represents and warrants to NYU as follows:
(1) CORPORATION is a corporation duly organized, validly
existing and in good standing under the laws of the
State of California. CORPORATION has been granted all
requisite power and authority to
- 17 -
<PAGE> 21
carry on its business and to own and operate its
properties and assets. The execution, delivery and
performance of this Agreement have been duly
authorized by the Board of Directors of CORPORATION;
(2) There is no pending or, to CORPORATION's knowledge,
threatened litigation involving CORPORATION which
would have any effect on this Agreement or on
CORPORATION's ability to perform its obligations
hereunder; and
(3) There is no indenture, contract, or agreement to
which CORPORATION is a party or by which CORPORATION
is bound which prohibits or would prohibit the
execution and delivery by CORPORATION of this
Agreement or the performance or observance by
CORPORATION of any term or condition of this
Agreement.
14. Representations and Warranties by NYU.
NYU hereby represents and warrants to CORPORATION as follows:
(1) NYU is a corporation duly organized, validly existing
and in good standing under the laws of the State of
New York. NYU has been granted all requisite power
and authority to carry on its business and to own and
operate its properties and assets. The execution,
delivery and performance of this Agreement have been
duly authorized by the Board of Trustees of NYU;
(2) There is no pending or, to NYU's knowledge,
threatened litigation involving NYU which would have
any effection this Agreement or on NYU's ability to
perform its obligations hereunder;
- 18 -
<PAGE> 22
(3) There is no indenture, contract, or agreement to
which NYU and/or the NYU Scientist is a party or by
which NYU and/or the NYU Scientist is bound which
prohibits or would prohibit the execution and
delivery by NYU of this Agreement or the performance
or observance by NYU of any term or condition of this
Agreement; and
(4) That all right, title and interest in and to the
Research Technology is owned solely by NYU and NYU
has the sole right to grant licenses thereto and to
enter into this Agreement.
15. Use of Name.
Without the prior written consent of the other party which
consent shall not be unreasonably withheld in accordance with
the business practices and policies of the party whose consent
is sought, neither CORPORATION nor NYU shall use the name of
the other party or any adaptation thereof or of any staff
member, employee or student of the other party, including
without limitation, in any product labeling, advertising or
sales literature. However, in the event that disclosure is
required in connection with any public or private offering,
in connection with a lawsuit settlement involving NYU and/or
Joint Inventions, in conjunction with any application for
regulatory approval, or is otherwise required by law, either
party can make factual statements concerning this Agreement or
file copies of this Agreement so long as the other party has
an opportunity to review and comment on the statements prior
to such intended disclosure. The comment period shall be ten
(10) working days from the receipt of such
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<PAGE> 23
statements unless the parties agree to an extension. Except
as provided herein, neither NYU nor CORPORATION will issue
public announcements about this Agreement.
16. Miscellaneous.
a. In carrying out this Agreement the parties shall
comply with all applicable local, state and federal
laws and regulations.
b. If any provision of this Agreement is determined to
be invalid or void, the remaining provisions shall
remain in effect.
c. This Agreement shall be deemed to have been made in
the State of New York and shall be governed and
interpreted in all respects under the laws of the
State of New York.
d. Any dispute arising under this Agreement shall be
resolved in an action in the courts of New York State
or the federal courts located in New York State, and
the parties hereby consent to personal jurisdiction
of such courts in any such action.
e. All payments or notices required or permitted to be
given under this Agreement shall be given in writing
and shall be effective when either personally
delivered or deposited, postage prepaid, in the
United States registered or certified mail, addressed
as follows:
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<PAGE> 24
<TABLE>
<S> <C> <C>
To NYU: New York University Medical Center
550 First Avenue
New York, NY 10016
Attention: Isaac T. Kohlberg
Vice President for
Industrial Liaison
and
Office of Legal Counsel
New York University
Bobst Library
70 Washington Square South
New York, NY 10012
Attention: Annette B. Johnson, Esq.
Associate General Counsel
To CORPORATION: Calypte Biomedical Corporation
1440 Fourth Street
Berkeley, California 94710
Attention: David J. Robison, Ph.D.
President and
Chief Executive Officer
</TABLE>
or such other address or addresses as either party may
hereafter specify by written notice to the other. Such
notices and communications shall be deemed effective on the
date of delivery or fourteen (14) days after having been sent
by registered or certified mail, whichever is earlier.
f. This Agreement (and the annexed Appendices)
constitute the entire Agreement between the parties
and no variation, modification or waiver of any of
the terms or conditions hereof shall be deemed valid
unless made in writing and signed by both parties
hereto.
- 21 -
<PAGE> 25
This Agreement supersedes any and all prior agreements or
understandings, whether oral or written, between CORPORATION
and NYU.
g. No waiver by either party of any non-performance or
violation by the other party of any of the
convenants, obligations or agreements of such other
party hereunder shall be deemed to be a waiver of any
subsequent violation or non- performance of the same
or any other covenant, agreement or obligation, nor
shall forbearance by any party be deemed to be a
waiver by such party of its rights or remedies with
respect to such violation or non-performance.
h. The descriptive headings contained in this Agreement
are included for convenience and reference only and
shall not be held to expand, modify or aid in the
interpretation, construction or meaning of this
Agreement.
i. It is not the intent of the parties to create a
partnership or joint venture or to assume partnership
responsibility or liability. The obligations of the
parties shall be limited to those set out herein and
such obligations shall be several and not joint. NYU
shall perform under this Agreement only as an
independent contractor.
- 22 -
<PAGE> 26
j. In the event of a delay caused by inclement weather,
fire, flood, strike, or other labor dispute, act of
God, act of governmental officials or agencies, or
any other cause beyond the control of a party, such
party shall be excused from performance hereunder for
the period of time attributable to such delay.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the effective as of the date and year first above written.
NEW YORK UNIVERSITY
By: /s/ ISAAC T. KOHLBERG
----------------------
Isaac T. Kohlberg
Title: Vice President for
Industrial Liaison
Date: August, 10th, 1993
CALYPTE BIOMEDICAL CORPORATION
By: /s/ David J. Robison
---------------------
Title: President and CEO
Date: August 12, 1993
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<PAGE> 27
APPENDIX I
DETECTION OF INFECTIOUS HIV-I IN URINE OF
SEROPOSITIVE INDIVIDUALS
ABSTRACT
We have previously described the high prevalence of antibodies to HIV-I in
urine from HIV-I seropositive individuals. Recently, we reported the presence
of HIV-I proviral DNA, HIV-I RNA and p24 core protein in urine cell pellets
from AIDS patients. Our data suggest that HIV-I could be transmissible via
urine from seropositive individuals. Urine cell pellets and cell-free
sediments from twenty urine specimens of HIV positive patients will be
collected. Part of the urine cell pellet from each specimen will be incubated
with TNFa which has been previously shown to be, able to stimulate the
expression of HIV-I. The cells and sediments will then be cultured with PBMC
from HIV-I seronegative donors. The infectivity of urine will be determined by
cytopathic effects (CPE), P24 antigen assay, Polyrmerase Chain Reaction (PCR)
and by Electron Microscopy. This study should help to elucidate and confirm if
urine may serve as a potential infectious body fluid for HIV-I.
BACKGROUND
Human immunodeficiency virus type I (HIV-I), the etiologic agent of the
acquired immunodeficiency syndrome (AIDS) has been isolated from the peripheral
blood mononuclear cells (PBMC), and serum from infected individuals; it has
also been found in other body fluids including cerebrospinal fluid, saliva,
tears, vaginal secretions, breast milk, semen, and alveolar fluid.(1-5) Our
laboratory reported that antibodies against HIV-I proteins are found in urine
of HIV seropositive individuals (7). With the rapidly increasing incidence of
HIV-I infection, the question of whether infectious virons of HIV can be
detected in the urine from HIV-I-infected individuals becomes increasingly
important, since urine could serve as a means of HIV-I transmission. Levy et
al., detected HIV-I in one of five urine specimens examined (8). However,
Skolnik et al., were unable to detect HIV-I in the urine specimens from HIV-I
seropositive individuals examined (9). Recently, we reported the presence of
HIV-I proviral DNA sequences in centifuged fresh cell pellets from urine of
HIV-I infected individuals (10). Furthermore, we detected HIV-I RNA and p24
core protein in these urine cell pellets as well (11). The question is raised
whether the urine from HIV-I infected host could potentially serve as an
infectious body fluid for transmission of AIDS. 1) Urine specimens in general
frequently contains small numbers of mononuclear cells (<2 x 106/24 hours);
these same cells when located in blood or lymph nodes are known to serve as
reservoirs of HIV. 2) A variety of renal diseases have been described in HIV-I
infected patients such as nephropathy associated with tubulointersitial
mononuclear cells infiltrate (12). In addition, the incidence of urinary tract
infections is increased in the HIV-I infected host (12). It is probable that
the number of mononuclear cells found in urine of AIDS patients may be greater
than that found in healthy subjects. 3) The structural cells and tissues of the
genitourinary tract, other than the mononuclear cells may be susceptible to
infectious HIV-I. It has been shown that g1omerular endothelial and mesangial
cells can be infected by HIV-I in vitro (13). Hypothetically, the cellular
components found in the urine of an HIV-infected host could contain infectious
virus. As a matter of fact, we have shown that genomic fragments of HIV-I are
present in the cells found in the centrifuged urine pellets from some HIV-I
sempositive individuals (11). These data suggest that HIV-I could be
transmissible via urine from HIV-I seropositive individuals which has not been
previously examined in great detail.
In the only previous report concerning the absence of infectious HIV-I in urine
of seropositive patients. 36ml of ultracentifuged urine pellets were used as
the source of
<PAGE> 28
HIV-I for cell culture; in that study the mononuclear cells found in urine
pellets were likely to have been disrupted during the ultracentrifugation
procedure. The infectivity of HIV-I virions of HIV-I might be diminished in
presence of concentrated various salts or crystals usually found in urine, such
as oxylated and urates, which would be precipitated with the virus at 40C for
1.5 hours. It has been shown that tumor necrosis factor alpha (TNFa) is
capable of inducing HIV-I expression in cells infected with HIV-I (14). The
activity of HIV-I found in cells of urine might be enhanced by TNF-a and
therefore be more easily detected. It is possible that HIV-I virions present
in urine might prove to be infectious if the conventional method used for
collection and detection are modified.
PRELIMINARY STUDIES AND RESULTS
See two previously published papers (attached).
SPECIFIC AIMS
To determine whether urine from HIV-I infected individuals is potentially an
infectious body fluid for the transmission of HIV-I.
EXPERIMENTAL DESIGN AND PROCEDURES
A) Initially the urine samples from a group of about 100 HIV-I
seropositive individual will be screened for the presence of
HIV-I sequences in their fresh urine pellets by Polyrmerase
Chain Reaction (PCR), Reverse Transcriptation-PCR (RTR-PCR),
and in situ hybridization as we have described previously
(10,11).
B) We expect to find at least 20 HIV-I positive urine specimens
to be used for the following studies (see schematic diagram).
Urine specimens will be first centrifugated at 3000 rpm at 40C
for 5 minutes to obtain the cell pellets and the urine
supernants will then be ultracentrifuged at 30,000 rpm at 4O C
for 1.5 hr to obtain cell-free virus, if present. The urine
cell pellets will be washed X3 with HBSS containing
Gentarmycin 50gg/ml, and Amphotericin B l5gg/ml. The
ultracentifugated cell-free sediment will be resuspended in
HBSS containing these antibiotics. Half of the urine cell
pellets from each individual will then be resuspended in RPMI
1640 medium supplemented with 10% fetal calf serum and 100
units of TNF-a/ml (Genzyme) at 370C for 24 hours. The cells
and sediments from urine will also be cultured with 5 x 106
PBMC from HIV-I seronegative donors in RPM2 1640 medium
containing 2gg/ml polybrene (Sigma, St. Louis) and 10%
interleukin-2 (Sigma), supplemented with Penicillin 25ORg/ml.
Streptomycin 250gg/ml, herpes buffer (0.01M), L-glutamine
(2mM) and 20% heat-inactivated fetal calf serum. The donor
PMBC used will have been separated by ficoll-hypaque
differential centrifugation and then stimulated for 3 to 4
days with 10% IL-2 and 10gg/ml of phytohemagglutinin-p (PHA-p:
Sigma. St. Louis) in RPMI-1640 medium.
The cultures will be incubated at 370C in 5% CO2 atmosphere
for 6 weeks. Half the media of each culture will be changed
twice a week. Fresh PBMC stimulated with PHA-p will be added
to the cultures once each week for 6 weeks.
C) The presence of infectious HIV in Urine will be determined by:
1) Cytopathic effect (CPE) including syncytia by
microscopy examination,
<PAGE> 29
2) Cultures will be tested twice weekly for the presence
of HIV-I P24 antigen. by ELISA (Abbott Laboratories)
3) Aliquots of the cell cultures will be collected once
weekly to detect H1V-I DNA and/or RNA by PCR and
RT-PCR methods (11).
4) Electromicroscopy examination of the culture for
possible detection of HIV-I infection will be
performed (15).
In summary, utilizing the modified methods proposed in this proposal, we hope
to ascertain whether the fragments of HIV-I we have recently detected and
described in the urine pellets of seropositive individuals could represent
infectious virus.
REFERENCES:
1. Fujikawa, L.S.S.L., Salhuddin, D. Ablashi, et al., HTLV-III in the
tears of AIDS patients. Ophthalmology 1986 93: 1479-1481.
2. Ho, D.D., T.R. Rata, R.T. Schooley, et al. Infrequency of isolation
of HTLV-III virus from saliva in AIDS. 1985 N. Engl. J. Med. 313:
1606.
3. Ho, D.D., T.R. Rata, R.T. Schooley, et al. Isolation of HTLV-III from
cerebrospinal fluid and neural tissues of patients with - neurologic
syndromes related to the acquired immunodeficiency syndrome. 1985 N.
Engl. J. Med. 313: 1493-1497.
4. Thing, L., S. Sprecher-Goldberger, T. Jonckheer, et al. Isolation of
AIDS virus from cell-free beast milk of three health virus carriers.
1985 Lancet ii 891-892.
5. Vogt, M.W., D.J. Witt, D.Z. Craven, et al. Isolation patterns of the
human immunodeficiency virus from cervical secretions during the
menstrual cycles of women at risk for the acquired immunodeficiency
syndrome. 1987 Ann. Intern. Med. 106: 380-382.
6. Ho, DD, Schooley RE, Rota RT: HTLV-III in the semen and blood of a
healthy homosexual man. Science 1984 226:451-453.
7. Cao YZ, Friedman-Kien AE, Chuba VJ. IgG antibodies to HIV-I in urine
of HIV-I seropositive individuals. Lance 1988, i:831-832.
8. Levey, J.A., L.S. Kaminsky, W.J.W. Morrow, et al. Infection by the
retrovirus associated with the acquired immunodeficiency syndrome.
Ann. Intern. Med. 1985 103: 694-699.
9. Skolnick PR, Kosloff BR, Bechtel LJ et al., Absence of infectious
HIV-I in the urine of seropositive viremic subjects. 1989. L Infect.
Dis. 160:1056-1060.
10. Li JJ, Friedman-Kien AE, Huang YQ. HIV-I DNA proviral sequences in
fresh urine pellets from HIV-I seropositive persons. 1990 Lancet
6:1590-1591.
11. Li, J.J., Huang, Y.Q., Poiesz, B.J. et al. Detection of Human
Immunodeficiency Virus Type I (HIV-I) in Urine Cell Pellets fro HIV-I
Seropositive Individuals. 1992 30: 1051-1055.
12. Mazbar SA, Schoenfeld PY, Humphre MG. Renal involvement in patients
infected with HIV-I: Experience at San Francisco General Hospital.
Kidney Int. 1990 37: 1325 - 1332.
13. Green, D.F., Resnick, L., and Bourgolgere. J.J. HIV infects
glomerular endothelial and mesangial but not epithelial cells in
vitro. 1992 41: 956-960.
14. Poll G, Kinter A, Justement JS et al. Tumor necrosis factor 2
functions in an antocrine manner in the induction of human
immunodeficiency virus expression. Proc. Nat]. Acad. Sci. USA
1990 87: 782-785.
15. Huang YQ, Li JJ, Kim KS, Nicolaides A. Zhang WG, Le J., Poiesz BJ,
Friedman-Kien AE. HIV-I infection and modelation of cytokines and
growth factor expression In Kaposi's sarcoma-derived cells in vitro.
AIDS 1993 7: 317-322.
<PAGE> 30
24 hour Urine Specimens from HIV-I seropositive Individuals
centrifuge
3000 rpm
cell pellet supernatant
centrifuge
30,000 rpm
wash (3x) cell-free pellet
cell pellet
incubate No TNF2
with
TNF2
culture resulting cell culture resulting pellet
pellets with PBMC with PBMC
detection of HIV-I by CPE, PCR, P24, EM
<PAGE> 31
Appendix II
CALYPTE BIOMEDICAL CORPORATION
STOCK PURCHASE AGREEMENT
This agreement is made as of the day of 1993, between
Calypte Biomedical Corporation, a California corporation (the "Company") and New
York University (the "Purchaser").
1. Purchase and Sale of Stock.
The Company hereby sells to the Purchaser and the Purchaser hereby
purchases from the Company, [ * ] shares of the Company's Common
Stock (the "Shares") at a purchase price of $ [ * ] per share for an
aggregate purchase price of [ * ]. The Company will promptly, after
delivery of this Agreement and a check for the aggregate purchase
price, issue a certificate representing the Shares registered in the
name of the Purchaser.
2. Legends.
All certificates representing any of the Shares shall have endorsed
thereon legends in substantially the following form:
a. "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE
OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER
THE ACT IS IN EFFECT AS TO THESE SECURITIES OR THERE IS AN OPINION OF COUNSEL,
SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE."
b. Any legend required to be placed thereon by the California
Commissioner of corporations, or required by the applicable blue sky laws of
any state.
3. Company's Representations.
In connection with the purchase of the Shares, the Company hereby
represents and warrants to the Purchaser as follows:
a. Authorization; Valid Issuance. All corporate action on the
part of the Company necessary for the authorization, execution and delivery of
this Agreement, the performance of all obligations of the Company hereunder and
the authorization, issuance and delivery of the Shares being sold hereunder has
been taken. The Shares, when issued and delivered pursuant to this Agreement,
for the consideration set forth herein, will be duly and validly issued,
fully-paid, and non-assessable.
*Confidential portion has been omitted
and filed separately with the Commission
<PAGE> 32
b. Capitalization. The authorized number of shares of Common
Stock of the Company is 52,000,000. The authorized number of shares of
Preferred Stock of the Company is 42,075,510, of which 1,000,000 shares are
designated Series A Preferred Stock, 8,048,472 shares are designated Series B
Preferred Stock, 17,027,038 shares are designated Series C Preferred Stock, and
16,000,000 are designated Series D Preferred Stock.
As of June 20, 1993, 5,207,780 shares of Common Stock are issued and
outstanding and 1,000,000, 8,048,472, 17,027,038, 9,999,998 shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series
D Preferred Stock, respectively, are issued and outstanding. In addition, the
Company has issued a warrant exercisable for 120,000 shares of Series D
Preferred Stock, which warrant can be exercised at $0.84 per share. Also, the
Company has issued options to acquire 2,655,461 shares of Common Stock, and has
2,254,458 shares of Common Stock available for issuance pursuant to the
Company's 1990 Stock Option Plan.
The Series A Preferred Stock is not convertible into Common Stock.
Each share of Series B, Series C, and Series D Preferred Stock is currently
convertible into one share of Common Stock, subject to future adjustments set
forth in the Company's Restated Articles of Incorporation. Accordingly, the
Company's fully-diluted capitalization (including the Common and Preferred
Stock outstanding, the warrant, and the outstanding options but excluding the
remaining Common Stock available for issuance pursuant to the Company's 1990
Stock option Plan) stated on a Common Stock-equivalent basis, excluding the
shares issued hereby, is 43,058,749 shares of Common Stock.
4. Purchaser's Representations.
In connection with its purchase of the Shares, the Purchaser hereby
represents and warrants to the Company as follows:
a. Investment Intent; Capacity to Protect Interests. The
Purchaser is purchasing the Shares solely for investment and not with any
present intention of selling or otherwise disposing of the Shares or any
portion thereof in any transaction other than a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Act"). The
Purchaser also represents that the entire legal and beneficial interest of the
Shares is being purchased, and will be held, for the Purchaser's account only,
and neither in whole nor in part for any other person.
b. Information concerning company. The Purchaser has had the
opportunity to discuss the plans, operations, and financial condition of the
Company with its officers and has received all information the Purchaser has
deemed appropriate to enable the
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<PAGE> 33
Purchaser to evaluate the financial risk inherent in investing in the Shares.
c. Economic Risk. The Purchaser realizes that the purchase of
the Shares involves a high degree of risk, and the Purchaser is able, without
impairing its financial condition, to hold the Shares for an indefinite period
of time and to suffer a complete loss of its value.
d. Accredited investor. The Purchaser is an "accredited
investor" as defined under Regulation D of the Act.
e. Restricted Securities. The Purchaser acknowledges that the
sale of the Shares has not been registered under the Act. The Shares must be
held indefinitely unless subsequently registered under the Act or an exemption
from such registration is available, and the Company is under no obligation to
register the Shares.
f. Disposition under Rule 144. The Purchaser understands:
1. that the Shares are restricted securities within the
meaning of Rule 144 promulgated under the Act which limits the sale of the
Shares in a public market transaction;
2. that the exemption from registration under Rule 144
will not be available, in any event, for at least two years from the date of
purchase of and actual payment for the Shares, and even then will not be
available unless (A) a public trading market then exists for the Common Stock
of the Company, (B) adequate information concerning the Company is then
available to the public, and (C) other terms and conditions of Rule 144 are
complied with; and
3. that certain sales of the Shares may be made only in
limited amounts in accordance with such terms and conditions.
5. Market Standoff Agreement.
In the event that the Company should propose to offer its securities
to the general public in an initial public offering, the Purchaser agrees, at
the option of the managing underwriters of such offering, not to sell any
securities of the Company, other than securities registered in such offering,
for a period specified by the Company not to exceed 180 days from the effective
date of the registration statement filed with the Securities and Exchange
Commission, pursuant to which such offering is to be made. The Purchaser
further agrees, upon the request of such managing underwriter or underwriters,
to execute and deliver such further agree-
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<PAGE> 34
ments and instruments, consistent herewith, as it or they may reasonably
request to effect this limitation.
6. Right of First Refusal.
Before any of the Shares registered in the name of the Purchaser or of
any transferee thereof may be sold or transferred (including transfer by
operation of law), such Shares shall first be offered to the Company as
follows:
a. The Purchaser shall deliver a notice to the Company stating
(i) the Purchaser's bona fide intention to sell or transfer such Shares, (ii)
the number of such Shares to be sold or transferred, and (iii) the price for
which the Purchaser proposes to sell or transfer such shares, and (iv) the name
of the proposed purchaser or transferee.
b. Within twenty (20) days after receipt of such notice, the
Company or its assignee may elect to purchase all, but not less than all,
Shares to which the notice refers, at the price per share specified in the
notice. Full payment for all the Shares to which the notice refers shall be
made by cash or check to the Purchaser within thirty (30) days after receipt of
the notice.
c. If the Shares to which the notice refers are not elected to be
purchased as provided in Section 6b, the Purchaser may sell the Shares to any
person named in the notice at the price specified in the notice or at a higher
price, provided that such sale or transfer is consummated within sixty (60)
days of the date of the notice to the Company, and, provided further, that any
such sale is in accordance with all the terms and conditions hereof.
d. Any shares so transferred will continue to be subject to the
right of first refusal provided in this Section 6.
The provisions of this Section 6 shall terminate on (i) the effective
date of a registration statement filed by the Company under the Act, with
respect to an underwritten public offering of Common Stock of the Company or
(ii) the closing date of a sale of substantially all of the assets or merger of
the Company pursuant to which shareholders of the Company receive securities of
a buyer whose shares are publicly traded.
7. Registration Rights.
The Purchaser is hereby granted the "piggyback" registration rights
set forth in Section 9.5 of that certain Agreement for the Purchase and Sale of
Series D Preferred Stock dated as of December 28, 1992 by and between the
Company and the purchasers set forth in Exhibit A to such agreement (the
"Series D Agreement") including, without limitation, the indemnification
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<PAGE> 35
rights set forth in Section 9.12, and the Purchaser shall obtain the benefit
of, and agrees to be bound by, the applicable terms and conditions of Section 9
of the Series D Agreement as though the Purchaser were a Holder and the Shares
were Registrable Securities under Section 9 of the Series D Agreement.
Attached hereto as Exhibit A is a copy of Section 9 of the Series D Agreement.
The granting of the foregoing registration rights does not conflict
with any other obligation of the Company.
8. Governing Law.
This agreement shall be governed by the laws of the State of
California, without regard to their conflicts of laws provisions.
9. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this agreement
as of the day and year first above written.
<TABLE>
<S> <C>
NEW YORK UNIVERSITY CALYPTE BIOMEDICAL CORPORATION
By: By:
-------------------------- --------------------------------
David J. Robison, President
Title: and Chief Executive Officer
-----------------------
Address:
---------------------
</TABLE>
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<PAGE> 36
EXHIBIT A
SECTION 9
RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS
9.1 Restrictions on Transfer. The Securities shall not be sold,
assigned, transferred, or pledged except upon the conditions specified in this
section, which conditions are intended to, among other things, ensure
compliance with the provisions of the Act (as defined herein). Each Purchaser
shall cause any proposed transferee of the securities held by a Purchaser to
agree to take and hold such securities subject to the provisions and upon the
conditions specified in this Section.
9.2 Certain Definitions. As used in this Agreement, the following
definitions shall apply:
"Act" means the Securities Act of 1933, as amended, or any successor
federal statute and the rules and regulations of the commission thereunder, as
shall be in effect at the time.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Act.
"Holder" means any holder of outstanding Registrable securities;
provided, however, that for all purposes under this Section, the holder of any
Shares shall be deemed to be the Holder of the Registrable Securities into
which such Shares are then convertible.
"Initiating Holders" means any Holders of not less than 50% of the
Registrable Securities in the aggregate.
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<PAGE> 37
The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act (and any post-effective amendments filed or required to
be filed), and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" means (i) the Conversion Stock; (ii) shares
of the Company's Common Stock issuable or issued upon conversion of the
Company's Series C Preferred, Stock; (iii) shares of the Company's Common Stock
issuable or issued upon conversion of the Company's Series B Preferred Stock;
(iv) exclusively for purposes of registrations pursuant to Section 9.5 hereof,
up to 43,193 shares of Common Stock issuable to Arthur R. Engel ("Engel"); and
(v) any shares of Common Stock of the Company issued or issuable, directly or
indirectly, in respect of the Conversion Stock, Series C Preferred Stock,
Series B Preferred Stock or such stock issued to Engel, upon any stock split,
stock dividend, recapitalization, or similar event, or any shares of Common
Stock otherwise issued or issuable with respect to such stock; provided,
however, that Registrable Securities shall not include any shares of Common
Stock which have previously been registered or sold to the public, or any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 9 are not assigned.
"Registration Expenses" means all reasonable expenses incurred by the
Company in complying with Sections 9.5 and 9.6, including, without limitation,
all registration, qualification and filing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company). Registration
Expenses shall not include selling commissions, discounts or other compensation
paid to underwriters or other agents or brokers to effect the sale.
"Restricted Securities" means the securities of the Company required
to bear the legends set forth in Section 9.3.
9.3 Restrictive Legends. Each stock certificate representing (i)
the Securities (including the Conversion Stock) or (ii) any other securities
issued in respect of the Securities upon any stock split, stock dividend,
recapitalization, merger, consolidation, or similar event, shall (unless
otherwise permitted by the provisions of Section 9.4) be stamped or otherwise
imprinted with legends in substantially the following form (in addition to any
legend required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
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<PAGE> 38
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF.
THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED
UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO
THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL, SATISFACTORY
TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE.
COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION.
Each Purchaser and holder of any Securities consents to the Company
making a notation on its records and giving instructions to any transfer agent
of the Securities in order to implement the restrictions on transfer described
in this Section.
9.4 Notice of Proposed Transfers. Prior to any proposed transfer
of any Restricted Securities, unless there is in effect a registration
statement under the Act covering the proposed transfer, the holder thereof
shall give written notice (the "Notice") to the Company of such holder's
intention to make such transfer. The Notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail. The holder shall
also provide to the Company a written opinion of legal counsel who shall be
satisfactory to the Company, addressed to the Company and satisfactory in form
and substance to the Company's counsel, to the effect that the proposed
transfer of the Restricted Securities may be effected without registration
under the Act, provided that no such opinion need be provided with respect to a
transfer to any partner of any Purchaser which is a partnership. Each stock
certificate evidencing the Restricted Securities so transferred shall bear the
appropriate restrictive legends set forth in Section 9.3, except that such
certificate shall not bear such restrictive legends if in the opinion of
counsel for the Company such legends are not required in order to establish
compliance with any provisions of the securities laws.
9.5 Company Registration.
(a) Notice of Registration. If at any time or from time
to time, the Company shall determine, to register any of its securities, either
for its own account or the account of a security holder or holders exercising
their respective demand registration rights, other than (i) a registration
relating solely to employee benefit plans, or (ii) a registration relating
solely to a Rule 145 transaction, the Company shall:
(i) promptly give to each Holder written notice thereof;
and
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<PAGE> 39
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
by each Holder received by the Company within 15 days after the Company mails
such written notice, subject to the provisions below.
(b) Underwriting. The right of any Holder to
registration pursuant to this Section 9.5 shall be conditioned upon the
participation by such Holder in such underwriting, if any, and the inclusion of
the Registrable Securities of such Holder in the underwriting to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 9.5, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the Registrable Securities held by Holders, provided that
the number of shares of Registrable Securities and other securities that may be
included in the registration and underwriting shall be allocated among all
Holders and other holders in proportion, as nearly as practicable, to the
respective amounts of securities entitled to inclusion (determined without
regard to any requirement of a request to be included in such registration) in
such registration held by all such Holders and other holders at the time of
filing the registration statement. To facilitate the allocation of shares in
accordance with the, above provisions, the Company may round the number of
shares allocated to any Holder to the nearest 100 shares. If any Holder or
other holder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration.
(c) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 9.5 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration.
9.6 Requested Registration.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
underwritten registration, qualification, or compliance with respect to
Registrable Securities held by such Initiating Holders, then the Company shall:
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<PAGE> 40
(i) promptly give written notice of the proposed
registration, qualification, or compliance to all other Holders; and
(ii) as soon as practicable, use its most diligent
efforts to effect all such registration, qualification, or compliance
(including, without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under applicable blue sky
or other state securities laws, and appropriate compliance with applicable
regulations issued under the Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holders joining in such request as are specified in a written
request received by the Company within 30 days after receipt of such written
notice from the Company;
provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification, or compliance pursuant
to this Section 9.6:
(A) in any jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification, or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required
by the Act;
(B) during the period starting with the
date sixty days prior to the Company's estimated date of filing of, and ending
on the date six months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan or initiated by security holders);
(C) unless the aggregate gross offering
price thereof would be at least $10,000,000; or
(D) after the Company has effected one
such registration pursuant to this Section 9.6 and such registration has been
declared or ordered effective.
Subject to the foregoing clauses (A) through (D), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, and in any event within 120 days,
after receipt of the request or requests of the Initiating Holders; provided,
however, that if the Company shall furnish to the Initiating Holders a
certificate signed by the president of the Company stating that in the good
faith judgment of the board of directors of the Company, it would be seriously
detrimental to the Company or its shareholders for such registration
-15-
<PAGE> 41
statement to be filed on or before the date filing would be required and it is
therefore essential to defer the filing of such registration statement, the
Company shall have the right to defer such filing for a reasonable period not
to exceed an additional 120 days.
(b) Underwriting. The right of any Holder to
registration pursuant to this Section 9.6 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent requested (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein.
The Company shall (together with all Holders and holders of other
securities proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by a majority in interest of the
Initiating Holders. Notwithstanding any other provision of this Section 9.6,
if the managing underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders and the other
holders distributing their securities through such underwriting, and no other
securities will be included in such registration until all Registrable
Securities requested to be included in such registration have been included
therein and the Registrable securities included in such registration shall be
allocated among all Holders. electing to participate in such registration as
nearly as practicable in proportion to the number of Registrable Securities
held by each such holder. No Registrable Securities or other securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or
the underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice
to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to 90 days after the effective date
of such registration, or such other shorter period of time as the underwriters
may require. If by the withdrawal of such Registrable Securities a greater
number of Registrable Securities held by other Holders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters),
then the Company shall offer to all Holders who have included Registrable
Securities in such underwriting the right to include additional Registrable
Securities in the same proportion and manner used in determining the
underwriter limitation in this Section 9.6(b). If as a result of such
withdrawals, the
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<PAGE> 42
Holders whose Registrable Securities are to be registered do not own a majority
of the outstanding Registrable Securities, then the request for such
registration shall be deemed to have been withdrawn.
If the managing underwriter has not limited the number of Registrable
Securities to be underwritten, the Company may include securities for its own
account or for the account of others in such registration if the underwriter so
agrees and if the number of Registrable Securities which would otherwise have
been included in such registration and underwriting will not thereby be
limited.
9.7 Form S-3-Registration. In case the Company shall receive from
a Holder or Holders a written request that the Company effect a registration on
Form S-3 and any related qualification or compliance with respect to an amount
of the Registrable Securities owned by such Holder or Holders for which the
anticipated aggregate offering price would be at least $1,000,000, the Company
shall:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance to all other Holders;
and
(b) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within 15 days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification, or compliance pursuant to this Section 9.7: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Company
shall furnish to the Holders a certificate signed by the president of the
Company stating that in the good faith judgment of the board of directors of
the Company, it would be seriously detrimental to the Company and -its
shareholders for such Form S-3 Registration to be effected at such time, in
which event the company shall have the right to defer the filing of the Form
S-3 registration statement for a period of not more than one hundred twenty
(120) days after receipt of the initiating request of the Holder or Holders
under this Section 9.7; provided, however, that the Company shall not utilize
this right more than once in any twelve (12) month period; (3) if the Company
has, within the six (6) month period preceding the date of such request,
already effected a registration on Form S-3 for the Holders pursuant to this
Section 9.7; or (4) in any jurisdiction in which the Company would be required
to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act.
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<PAGE> 43
Subject to the foregoing, the Company shall effect such registration,
qualification, or compliance (including, without limitation, the execution of
an undertaking to file post-effective amendments, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act and any
other governmental requirements or regulations) covering the Registrable
Securities and other securities so requested to be registered as soon as
practicable after receipt of the request or requests of the Holders.
Registrations effected pursuant to this Section 9.7 shall not be counted as a
request for registration or registrations effected pursuant to Sections 9.5 or
9.6.
If the registration to be effected pursuant to this Section 9.7 is to
be an underwritten public offering, it shall be managed by an underwriter or
underwriters acceptable to the Company selected by a majority in interest of
the Holders requesting registration. In such event, the right of any Holder to
registration pursuant to Section 9.7 shall be conditioned upon the
participation by such Holder in such underwriting and the inclusion of the
registrable securities of such Holder in the underwriting to the extent
provided herein. If the managing underwriter so selected determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the Registrable Securities
held by such Holders to be included in such registration. The Company shall so
advise such Holders, and the number of shares of Registrable Securities that
may be included in the registration shall be allocated among such Holders in
proportion to the respective amounts of Registrable Securities which would be
held by each of such Holders at the time of filing of the registration
statement. Any Registrable Securities that are so excluded from the
underwriting shall be excluded from the registration. As used throughout this
Section, the term "Form S-3" shall be deemed to include any equivalent
successor form for registration pursuant to the Act.
9.8 Expenses of Registration.
(a) All Registration Expenses incurred in connection with
the registration, qualification or compliance 'pursuant to Sections 9.5 and 9.6
shall be borne by the Company; provided, however, that the Company shall not be
required to pay for expenses of any registration proceeding begun pursuant to
Section 9.6, the request of which has been subsequently withdrawn by the
Initiating Holders, in which case such expenses shall be borne by the
Initiating Holders of securities (including Registrable Securities) requesting
or causing such withdrawal pro rata in accordance with the number of shares
initially sought to be registered; except that if Holders of a majority of the
Registrable Securities so elect, all Registration Expenses relating to any
withdrawn registration initiated under Section 9.6 will be paid by the Company,
and such withdrawn registration shall be counted as
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<PAGE> 44
the one demand registration -to which Holders are entitled under Section 9.6.
(b) All Registration Expenses and selling expenses
incurred in connection with a registration, qualification, or compliance
pursuant to Section 9.7 shall be borne pro rata by the Holder or Holders
requesting the registration on Form S-3 according to the number of Registrable
Securities included in such registration.
9.9 Letter or Opinion of Counsel in Lieu of Registration. If in
the opinion of counsel for the Company concurred in by counsel for the Holders,
no registration under the Act is required in connection with the disposition of
the Registrable Securities covered by any request made under Sections 9.5 and
9.6 in the manner in which they propose to dispose of the Registrable
Securities included in such request, the Company need not comply with such
request or requests; provided, however, that the Company shall not be so
relieved of its obligations under Sections 9.5 and 9.6 unless such opinion of
counsel for the Company shall have been mailed by the Company to such Holders
within fifteen (15) days after the Company's receipt of their request or
requests; and provided, further, that if counsel for the Company has opined
that no registration is required in connection with any such disposition, such
counsel shall further opine as to whether the removal of any legend from
certificates representing all shares to which such opinion refers is
permissible, and, if so, the Company shall remove from such certificates all
legends no longer required thereon and shall rescind any stop-transfer
instructions previously communicated to its transfer agent relating to such
shares.
9.10 Lock-up. Each Purchaser (or other holder of any Securities)
hereby agrees not to offer, sell, or otherwise dispose of any of the Company's
Common Stock held of record or beneficially owned by such person during such
period, not to exceed 120 days, following the effective date of the
registration statement for the Company's initial underwritten public offering
as is requested by the managing underwriter for such offering, provided that
all officers, directors and holders or 1% or more of the outstanding capital
stock of the Company and all other persons with registration rights are bound
by similar restrictions. Such restriction shall not apply to shares registered
in such offering. In order to enforce this provision, the Company may impose
stop-transfer instructions with respect to such shares until the end of such
period.
9.11 Registration Procedures. If and whenever the company is
required by the provisions of this Section to use its most diligent efforts to
effect promptly the registration of Registrable Securities, the Company shall:
(a) Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its most
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<PAGE> 45
diligent efforts to cause such registration statement to become and remain
effective as provided herein.
(b) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and current and to comply with the provisions of the Act with respect
to the sale or other disposition of all Registrable Securities covered by such
registration statement, including such amendments and supplements as may be
necessary to reflect the intended method of disposition of the prospective
seller or sellers of such Registrable Securities, but for no longer than one
hundred eighty (180) days subsequent to the effective date of such registration
in the case of a registration statement on Form S-1 or S-18 (or any similar
form of registration statement required to set forth substantially identical
information) and for no longer than ninety (90) days in the case of a
registration statement on Form S-3.
(c) Furnish to each prospective seller of Registrable
Securities such number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Act, and such other
documents, as such seller may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Securities of such seller.
9.12 Indemnification. In the event any of the Registrable
Securities are included in a registration statement under this Section:
(a) The Company will indemnify each Holder, each of its
officers and directors and partners and such Holder's separate legal counsel
and independent accountants, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of
the Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Act applicable to the Company in
connection with any such registration, qualification or compliance, and the
company will reimburse each such Holder, each of its officers and directors and
partners and such Holders' separate legal counsel and independent accountants
and each person controlling such Holder, each such
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<PAGE> 46
underwriter and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder or
underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers and its legal counsel and independent accountants,
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Act, and each other such
Holder, each of its officers and directors and each person controlling such
Holder within the meaning of Section 15 of the Act, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, such Holders, such
directors, officers, persons, underwriters or controlling persons for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein; provided, however, that the obligations of each
Holder hereunder shall be limited to an amount equal to the proceeds to each
such Holder of Registrable Securities sold as contemplated herein.
(c) Each party entitled to indemnification under this
Section (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may
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<PAGE> 47
participate in such defense at such party's expense. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation.'
(d) If the indemnification provided for in this Section
is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or expense
referred to herein, then the Indemnifying Party, in lieu of indemnifying the
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party with respect to such loss, liability, claim, damage or
expense in the proportion that is appropriate to reflect the relative fault of
the Indemnifying Party and the Indemnified Party in connection with the
statements or omissions that resulted in such loss, liability, claim, damage or
expense, as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party, and
the parties-' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
9.13 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section.
9.1.4 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at-any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the. Common Stock
of the Company, the Company shall use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Act, beginning 90 days
after (i) the effective date of the first registration statement filed by the
Company for an offering of its securities to the general public, (ii) the
Company registers a class of securities under Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") , or (iii) the Company
issues an offering circular meeting the requirements of Regulation A under the
Act;
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<PAGE> 48
(b) File with the Commission in a timely manner all
reports and other documents required of the Company under the Act and the
Securities Exchange Act of 1934, as amended (at any time after it has become
subject to such reporting requirements); and
(c) Furnish to any Holder promptly upon request a written
statement as to its compliance with the reporting requirements of Rule 144 (at
any time after-90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public) , and of the Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as a Holder may reasonably request in availing itself of any rule
or regulation of the Commission allowing a Holder to sell any such securities
without registration.
9.15 Assignment of Registration Rights. The rights to cause the
Company to register securities granted under this Section may be assigned to a
transferee or assignee in connection with the transfer or assignment of shares
of Registrable Securities only if (i) such shares represent at least 1% of the
outstanding shares of the Company's capital stock (assuming conversion of all
Preferred Stock to Common Stock) on the date of such assignment, or (ii) the
transfer of such shares occurs in a distribution from a Purchaser which is a
partnership to a partner thereof.
9.16 Amendment of Registration Rights. The registration rights
provided in this Section may be-Amended with the written consent of the Company
and the holders of 51% of the Registrable Securities.
9.17 Amendment of Old Agreement. Holders of the outstanding shares
of Series C Preferred Stock and Series B Preferred Stock hold registration
rights provided under an Agreement for the Purchase and Sale of Series C
Preferred Stock dated as of October 18, 1991, and the Addendum thereto dated as
of February 28, 1992, (collectively, the "Old Agreement"). Section 9.16 of the
Old Agreement provides that Section 9 of the Old Agreement may be amended with
the written consent of the Company and holders of 51% of the "Registrable
Securities," as such term is defined in the Old Agreement. The Purchasers
include holders of in excess of 51% of such "Registrable Securities." By their
execution hereof, the Company and the Purchasers which have registration rights
under the Old Agreement agree that, effective at the First Closing hereunder,
the rights of holders of "Registrable Securities" under the Old Agreement shall
be superseded in their entirety by the registration rights under Section 9 of
this Agreement.
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<PAGE> 1
EXHIBIT 10.20
FIRST AMENDMENT TO RESEARCH AGREEMENT
This First Amendment to Research Agreement (hereafter "Amendment") is
made and effective by and between NEW YORK UNIVERSITY, a corporation organized
and existing under the laws of the State of New York, having a place of business
at 70 Washington Square South, New York, New York 10012 (hereafter "NYU"); and
Calypte Biomedical Corporation, a corporation organized and existing under the
laws of California, having a place of business at 1440 Fourth Street, Berkeley,
California 94710 hereafter "CORPORATION").
WITNESSETH:
WHEREAS, CORPORATION and NYU entered into a certain research agreement
made and effective as of August 1 2, 1 993 (the "Research Agreement"), pursuant
to which, inter alia, CORPORATION undertook to fund certain research relating
to the detection of antibodies to human immunodeficiency virus (HIV) in urine
at NYU, and the parties agreed to certain other related matters as specified
herein; and
WHEREAS, CORPORATION and NYU wish to modify certain terms and
conditions of the Agreement as specified herein.
NOW, THEREFORE, in consideration of the premises and the covenants,
conditions and promises set forth below, the parties hereto hereby agree as
follows:
1 . Except as expressly provided for herein, all terms and conditions of
the Research Agreement shall remain in full force and effect.
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<PAGE> 2
2. Terms which are defined in the Agreement shall have the same meanings
when used in this Amendment, unless a different definition is given
herein.
3. Section 1.h of the Research Agreement shall be, and hereby is, amended
in its entirety so that, as amended, said Section 1.h. shall read as
follows:
h. "Research Period" shall mean the period commencing on the
Effective Date hereof and ending on January 1, 1999; provided,
however, if the Exclusivity Period as such term is defined in
Section 9.a. of the License Agreement between NYU and
CORPORATION having an effective date of August 12, 1993 and
amended ___________________________, 1994 is extended to
January 1, 2000 pursuant to the terms of such License
Agreement, the termination date of the Research Period shall
be January 1, 2000.
4. Section 4.a. of the Research Agreement shall be, and hereby is,
amended in its entirety so that, as amended, said Section 4.a. shall
read as follows:
a. As compensation to NYU for work to be performed on the NYU
Research Project during the Research Period, subject to any
earlier termination of the Research Project pursuant to
Section 3.a. hereof, CORPORATION will pay NYU the total sum of
[ *
] ; provided, however, if the Research Period is
extended to January 1, 2000, as provided in Section 1.h.
above, CORPORATION shall pay NYU the total sum of [
* ]
Such sums shall be paid in accordance with the
*Confidential portion has been omitted
and filed separately with the Commission
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<PAGE> 3
Schedule of Payments annexed hereto and incorporated herein as
Exhibit A-1.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as follows:
NEW YORK UNIVERSITY CALYPTE BIOMEDICAL CORPORATION
By: /s/ Isaac T. Kohlberg By: /s/
----------------------------- ----------------------------
Isaac T. Kohlberg
Vice President for
Title: Industrial Liaison Title: President
--------------------------- --------------------------
Date: 1-11-95 Date: 1-6-95
--------------------------- --------------------------
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<PAGE> 4
EXHIBIT A-1 to
FIRST AMENDMENT TO THE RESEARCH AGREEMENT
SCHEDULE OF PAYMENTS
<TABLE>
<S> <C>
Effective Date
February 12, 1994 [ * ]
August 12, 1994 [ * ]
February 12, 1995 [ * ]
August 12, 1995 [ * ]
February 12, 1996 [ * ]
August 1, 1996 [ * ]
January 1, 1997 [ * ]
July 1, 1997 [ * ]
January 1, 1998. [ * ]
July 1, 1998 [ * ]
and, if the Research Period ends on January 1, 2000, then
January 1, 1999 [ * ]
July 1, 1999 [ * ]
</TABLE>
*Confidential portion has been omitted
and filed separately with the Commission
<PAGE> 1
EXHIBIT 10.21
CAMBRIDGE BIOTECH CORPORATION
and
URNOTECH CALYPTE BIOMEDICAL CORPORATION
SUBLICENSE
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
BACKGROUND
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. GRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. ROYALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. PAYMENTS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8. NEGATION OF WARRANTIES AND INDEMNITY . . . . . . . . . . . . . . . . . . . . 6
9. LAWS AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
10. USE OF NAMES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
11. PATENT NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<PAGE> 3
SUBLICENSE AGREEMENT
This is a SUBLICENSE AGREEMENT to be effective as of March 31, 1992,
(the "Effective Date") by and between CAMBRIDGE BIOTECH CORPORATION (CBC), a
Delaware corporation, having offices at 365 Plantation Street, Worcester,
Massachusetts 01605, and Urnotech Calypte Biomedical Corporation, a Californian
corporation having offices at 1440 Fourth Street, Berkeley, CA 94710
(SUBLICENSEE).
BACKGROUND
In the course of research conducted at Harvard University, Department
of Cancer Biology, Harvard School of Public Health, (Harvard) certain
inventions were made relating to the HIV-1 envelope glycoprotein, designated
gp120. Additional inventions relating to the HIV-1 envelope glycoprotein
include gp160 and methods for assay.
Harvard is the owner of these inventions, subject to rights reserved
by the United States Government, pursuant to various assignments by Myron E.
Assets and Tun-Hou Lee to Harvard of all their right, title and interest in and
to the inventions and any patents resulting therefrom
Harvard has been granted U.S. Patent No. 4,725,669 entitled "Assay for
Detecting Infection by Human T-Cell Lymphotrophic Virus-III" issued on February
16, 1988 directed to gp120 and cross-reactive peptides. Currently pending is a
divisional application, U.S. Serial No. 056,134, filed May 29, 1987, directed
to methods for assaying for the glycoproteins.
CBC is the exclusive, worldwide licensee of these inventions and the
issued patent and pending patent applications by way of an exclusive license
agreement from Harvard, and has the right to grant sublicenses thereunder for
making, using or selling of the inventions which are disclosed and claimed in
the issued patent and pending patent applications.
SUBLICENSEE desires to use LICENSED PATENT RIGHTS (AS defined below),
in a commercial diagnostic and research for its own use application only.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
1. DEFINITIONS
1.1. LICENSED PATENT RIGHTS shall mean U.S. Patent No. 4,725,669,
issued February 16, 1988, and pending U.S. Patent Application Serial No.
056,134, filed May 29, 1987, and any divisionals, continuations, or
continuations-in-part based thereon, and any patents which may issue therefrom
and any reissues, re-examinations, or extensions thereof; and any and all
1
<PAGE> 4
foreign patents and patent applications corresponding to any of the foregoing
patents and patent applications, as well as such other patents or patent
applications AS are listed in Appendix A, effective as of THE date said patents
or patent applications are granted or filed, as the case maybe, and the
inventions described or claimed therein.
1.2. FIELD OF USE shall mean only diagnostic application and
research for its own use but not for resale. The diagnostic field of use
includes, but is not limited to, methods for detecting antibodies to HIV-1.
1.3. LICENSED PRODUCT(S) shall mean finished goods covered by or
made in accordance with LICENSED PATENT RIGHTS or sold for use in practicing
LICENSED PROCESSES. The term "finished goods" as used herein shall mean any
and all products in form for USE by an end user and not intended for further
chemical or genetic manipulation. For purposes of example only, LICENSED
PRODUCT(S) may include selling diagnostic kits.
1.4. LICENSED PROCESSES shall mean processes claimed or otherwise
included in the LICENSED PATENT RIGHTS. For purposes of example only, LICENSED
PROCESSES may include (1) services for providing a test result utilizing the
methods of assay covered under the LICENSED PATENT RIGHTS or (2) services for
providing test results utilizing the diagnostic kits covered under LICENSED
PATENT RIGHTS wherein the provider of the services is the manufacturer of the
diagnostic kits.
1.5. NET SALES shall mean the amount received by SUBLICENSEE on
sales of LICENSED PRODUCTS or on sales of services or charges for services
utilizing LICENSED PROCESSES, which amount shall not include:
(1) Amounts repaid or credited by reason of rejection or
return; and
(2) To the extent separately stated on purchase orders,
invoices or other documents of sale, taxes levied on and/or
other governmental charges made as to production, sale,
transportation, delivery or use and paid by or on behalf of
SUBLICENSEE.
1.6. FIRST USE shall mean the date of the initial transfer by
SUBLICENSEE of LICENSED PRODUCTS to any third party in exchange for cash or
some equivalent to which value can be assigned for the purpose of determining
the NET SALES. FIRST USE shall also mean the first application of a LICENSED
PROCESS for a commercial purpose.
1.7. EARNED ROYALTIES shall mean royalties paid or payable by
SUBLICENSEE to CBC determined with respect to NET SALES.
1.8. EFFECTIVE DATE shall mean March 31, 1992.
1.9. PRIME LICENSE shall mean the exclusive license agreement
between Harvard and CBC.
1.10. SUBLICENSEE is understood to include all of its AFFILIATES.
AN Affiliate of
2
<PAGE> 5
SUBLICENSEE shall mean any corporation or other business entity controlled by,
controlling, or under common control with SUBLICENSEE. For this purpose,
'control" means direct or indirect beneficial ownership of at least fifty
percent (50%) of the voting stock or equity, or at least fifty percent (50%)
interest in the income of such corporation or other business.
2. GRANT
2.1. CBC grants to SUBLICENSEE, subject to all the terms and
conditions of this Agreement, a non-exclusive, worldwide right and license to
make, have made, use, and sell LICENSED PRODUCTS and to practice the LICENSED
PROCESSES under LICENSED PATENT RIGHTS in the Field of Use.
2.2. CBC hereby grants to SUBLICENSEE the right to extend the
license granted herein to an AFFILIATE, subject to the terms and conditions of
this Agreement. CBC shall receive prompt written notice of each such extension
and of any termination of such AFFILIATE license. SUBLICENSEE is expressly not
granted a right to sublicense anyone other than an Affiliate under this
Agreement.
2.3. Nothing herein shall preclude any customer of SUBLICENSEE from
using any LICENSED PRODUCT sold to them by SUBLICENSEE.
2.4. CBC shall promptly notify SUBLICENSEE of divisionals,
continuations or continuations-in-part based on or relating to the LICENSED
PATENT RIGHTS, and any patents which may issue therefrom and any reissues,
re-examinations or extensions thereof, as well as any and all foreign patents
and patent applications corresponding thereto or to the LICENSED PATENT RIGHTS,
and shall deliver an amended Appendix A to SUBLICENSEE to reflect any such
changes or additions to the LICENSED PATENT RIGHTS immediately thereafter.
3. ROYALTIES
As consideration for the rights granted hereunder, SUBLICENSEE shall
make the following payments to CBC:
3.1. SUBLICENSEE shall pay to CBC a license fee of [ * ] for the
rights granted hereunder. [ * ] of such fee shall be paid within thirty (30)
days after the EFFECTIVE DATE, and the balance shall be paid on or before
December 31, 1992. Fees are nonrefundable and shall be separated from, and not
credited against, any EARNED ROYALTIES.
3.2. SUBLICENSEE shall pay to CBC EARNED ROYALTIES of [ * ]
percent ([ * ]%) calculated on the NET SALES of all LICENSED PRODUCTS sold by
SUBLICENSEE and its AFFILIATES.
3.3. SUBLICENSEE shall pay to CBC Earned Royalties of [ * ] percent
([ * ]%)
*Confidential portion has been omitted
and filed separately with the Commission
3
<PAGE> 6
calculated on the NET SALES of all services utilizing LICENSED PROCESSES sold
by SUBLICENSEE and its AFFILIATES.
3.4. Only one royalty shall be payable with respect to any LICENSED
PRODUCT or LICENSED PROCESS regardless of whether it or its use is covered by
one or more LICENSED PATENT RIGHTS. On sales between SUBLICENSEE and its
AFFILIATES for resale, the royalty shall be paid on the resale by the
AFFILIATES to any third-party purchaser.
3.5. Under certain circumstances, SUBLICENSEE may reduce the
amount of royalties payable to CBC under this Agreement. If SUBLICENSEE is
paying third party royalties in EXCESS of [ * ]%, not including the royalties
payable under this Agreement, SUBLICENSEE may reduce the amount of royalties
payable to CBC by [ * ] of the third party royalty exceeding [ * ]%
according TO the following schedule:
<TABLE>
<CAPTION>
Royalty Maximum Reduction Royalty Payable
Payable of Third Party Royalty to CBC after
to CBC in Excess of 10% Maximum Reduction
------ ---------------- -----------------
<S> <C> <C>
</TABLE> [ * ]% [ * ] of [ * ]% [ * ]%
Royalties for mechanical apparatus or devices and royalties payable to
CBC or Harvard outside of the scope of this Agreement shall not be included in
computing third party royalties.
4. PAYMENTS AND REPORTS
4.1. SUBLICENSEE agrees to notify CBC promptly, in writing, of the
date of the FIRST USE of LICENSED PRODUCT(S) or LICENSED PROCESS(ES).
4.2. Beginning with date of FIRST USE, SUBLICENSEE shall pay to CBC
EARNED ROYALTIES within thirty (30) days from the end of each calendar quarter,
which is the end of March, June, September, and December. Any royalties not
paid within this time period shall be deemed past due royalties. Any past due
royalties shall bear interest at the rate of the lesser of [ * ] percent [ * ]%
PER ANNUM or the maximum rate permitted by applicable law, from their due date,
which interest shall be paid by SUBLICENSEE to CBC.
4.3. SUBLICENSEE shall also prepare for each calendar quarter after
the date of FIRST USE, a written report acceptable to CBC, setting forth (1)
the NET SALES and the EARNED ROYALTIES payable thereon, including a detailed
listing of all LICENSED PRODUCTS sold and all deductions or exclusions from NET
SALES and (2) the NET SALES and the EARNED ROYALTIES payable thereon, including
a detailed listing of the services provided utilizing LICENSED PROCESSES and of
all deductions or exclusions from NET SALES. The reports required by this
Agreement shall be certified by an officer of SUBLICENSEE to be correct to the
best of SUBLICENSEE's knowledge and information.
*Confidential portion has been omitted
and filed separately with the Commission
4
<PAGE> 7
4.4. All amounts payable to CBC shall be paid in United States
Dollars. In the event any LICENSED PRODUCT or services utilizing Licensed
Processes shall be sold for funds other than United States funds, the NET SALES
of such product shall first be determined in the foreign funds and then
converted into the equivalent United States funds at:
(i) the rate applicable to the transfer of funds arising
from royalty payments as established by the exchange control
authorities of the country of which such funds are the national
currency, for the last business day of the accounting period
for which payment is thus made; or
(ii) if there is no rate so applicable, then the buying
rate for such foreign funds as published by the Wall Street
Journal on the last business day of such calendar accounting
period.
5. BOOKS AND RECORDS
5.1. SUBLICENSEE shall keep, and shall require its AFFILIATES to
keep, accurate and correct records of calculations for determining EARNED
ROYALTIES of LICENSED PROCESSES and on LICENSED PRODUCTS made, used and sold
under this Agreement, appropriate to determine the amount of EARNED ROYALTIES
based on NET SALES at least three (3) years following a given reporting period.
The records shall be available during normal business hours for inspection at
the expense of CBC by a certified public accountant, selected by CBC and
acceptable to SUBLICENSEE, after 10 calendar days' prior written notice to
SUBLICENSEE, for the sole purpose of verifying reports and payments hereunder.
The accountant shall not disclose to CBC any financial information other than
that information relating to the accuracy of reports and payments made under
this Agreement.
6. NOTICES
6.1. Any notice required by this Agreement shall be sent by
registered or certified mail properly addressed or by telex or facsimile, with
a mailed confirmation copy, properly addressed to the other party at the
address designated below, or to another address as may be designated in writing
by the party. The notice shall be effective as of the date of the postmark of
such mailed notice or upon delivery of the telex or facsimile.
For CBC:
CAMBRIDGE BIOTECH CORPORATION
365 Plantation Street
Worcester, Massachusetts 01605
Attn: President
with a copy Attn: General Counsel
5
<PAGE> 8
FOR SUBLICENSEE:
URNOTECH CALYPTE BIOMEDICAL CORPORATION
1440 Fourth Street
Berkeley, CA 94710
Attn: David J. Robison, President and
Chief Executive Officer
7. TERM AND TERMINATION
7.1. The term of this Agreement, unless sooner terminated as
provided herein, shall extend from the EFFECTIVE DATE until expiration of the
last to expire patents included in LICENSED PATENT RIGHTS.
7.2. Upon any breach of, or default under, this Sublicense
Agreement by SUBLICENSEE, CBC may terminate this Agreement by giving ninety
(90) days written notice to SUBLICENSEE. The termination shall take effect at
the end of the ninety-day period, unless during the 90 day notice period
SUBLICENSEE cures such breach or default to CBC's satisfaction.
7.3. SUBLICENSEE has the right to terminate this Agreement by
written notice at any time upon giving ninety (90) days written notice to that
effect to CBC.
7.4. Termination of this Agreement shall not affect any rights or
obligations accrued prior to the date of the termination, including
SUBLICENSEE's obligation to pay all Earned Royalties and SUBLICENSEE's
obligation to indemnify CBC, provided however, that SUBLICENSEE's obligation to
indemnify CBC shall not extend beyond ten (10) years after such termination.
Upon termination of this Agreement all unpaid Earned Royalties due to CBC shall
become due and payable upon delivery of the next quarterly report pursuant to
Section 4.3 hereof.
7.5. Waiver by CBC of a single default or breach or of succession
of defaults or breaches shall not deprive CBC of any right to terminate this
Agreement pursuant to the terms hereof upon the occasion of any subsequent
default or breach.
7.6. Upon termination of the PRIME LICENSE between Harvard and CBC,
this Agreement between CBC and SUBLICENSEE shall be assigned to Harvard and
Harvard shall thereupon assume the rights and obligations of CBC hereunder.'
CBC shall give notice to SUBLICENSEE in the event the PRIME LICENSE is
terminated.
8. NEGATION OF WARRANTIES AND INDEMNITY
8.1. CBC makes no representations or warranties as to the validity
or scope of any LICENSED PATENT RIGHTS.
6
<PAGE> 9
8.2. CBC makes no representations or warranties that the
manufacture, use, sale or other disposal of the LICENSED PRODUCTS is or will be
free from infringement of patents of third parties.
8.3. CBC makes no representations or warranties whatsoever, either
express or implied, as to the merchantability or fitness of the LICENSED
PRODUCTS for a particular purpose, and SUBLICENSEE shall make no statements,
representations or warranties whatsoever to any third parties which are
inconsistent with such disclaimer by CBC.
8.4. SUBLICENSEE shall defend, indemnify and hold harmless CBC and
Harvard, their directors, officers, employees, and agents, from and against any
and all claims, demands, damages, losses, and expenses of any nature, including
attorney's fees, for but not limited to death, personal injury, illness,
property damage or products liability arising from or in connection with any of
the following:
(1) the use by SUBLICENSEE of any method or process
related to the LICENSED PATENT RIGHTS; or
(2) any use, sale or other disposition of any of the
LICENSED PRODUCTS by SUBLICENSEE or any statement,
representation or warranty of SUBLICENSEE with respect
thereto; or
(3) the use of the LICENSED PRODUCTS by any person.
CBC shall reasonably cooperate with SUBLICENSEE in defending any such
claim. CBC shall be entitled to receive information regarding the status of
any such matter and shall be entitled to retain counsel on its own behalf and
at its sole expense if CBC is named as a party or if CBC is not satisfied with
the defense provided by SUBLICENSEE for any reason. The rights and obligations
of this paragraph shall survive termination or expiration of this Agreement.
SUBLICENSEE shall have the exclusive right to control the defense of any such
claim; provided, however, SUBLICENSEE shall not settle any such claim without
first consulting with CBC. CBC and/or Harvard may, at its option, require
SUBLICENSEE to name CBC and/or Harvard as a co-insured on a product liability
insurance policy deemed sufficient by CBC.
9. LAWS AND REGULATIONS
9.1. SUBLICENSEE shall comply with all foreign and United States
federal, state, and local laws, regulations, rules and orders applicable to the
testing, production, transportation, packaging, labeling, sale and use of the
LICENSED PRODUCTS and services utilizing LICENSED PROCESSES
7
<PAGE> 10
10. USE OF NAMES
10.1. SUBLICENSEE shall not use the names "Harvard College" or
"Harvard," the names of the inventors, "Myron E. Essex," or "Tun-Hou Lee," or
the name "Cambridge Biotech Corporation" or any other name or mark by which
Harvard or CBC may be identified for any purpose without prior written consent
obtained from the respective parties in each instance.
11. PATENT NOTICE
11.1. SUBLICENSEE, shall apply the patent marking notices required
by the laws of the United States and relevant countries.
12. MISCELLANEOUS PROVISIONS
12.1. This Agreement constitutes the entire understanding between
the parties with respect to the subject matter hereof and supersedes and
replaces all prior agreements, understandings, writings, and discussions
between the parties relating to said subject matter.
12.2. This Agreement may be amended only by a written instrument
executed by the parties.
12.3. Without prior written approval of CBC, the entire license
granted pursuant to this Agreement shall not be assigned or transferred by
SUBLICENSEE to any other party other than to a successor to the entire business
interest of SUBLICENSEE.
12.4. This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective successors and
permitted assigns.
12.5. This Agreement shall be governed and construed and interpreted
in accordance with the laws of the Commonwealth of Massachusetts.
12.6. If any provision(s) of this Agreement are or become invalid,
or ruled illegal by any court of competent jurisdiction, or are deemed
unenforceable under then current applicable law from time to time in effect
during the term hereof, it is the intention of the parties that the remainder
of this Agreement shall not be affected thereby. It is further the intention
of the parties that, in lieu of each -such provision which is invalid, illegal,
or unenforceable, there be substituted or added as part of this Agreement a
provision which shall be as similar as possible in economic and business
objectives as intended by the parties to such invalid, illegal, or
unenforceable provision.
12.7 In no event shall either party be liable to the other for any
special, or incidental, or consequential, or indirect damages arising in any
way out of this Agreement, however
8
<PAGE> 11
caused and on any theory of liability. This limitation will apply even if the
other party has been advised of the possibility of such damage.
12.8 Except to the extent that Harvard has specific rights set
forth hereunder, the parties intend that only CBC and SUBLICENSEE will benefit
from, and are entitled to enforce the provisions of, this Agreement and that no
other third party beneficiary is intended under this Agreement.
12.9 This Agreement may be executed in counterparts, each of which
shall be deemed an original, but both of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed.
CAMBRIDGE BIOTECH CORPORATION
By: /s/ Frederick V. Casselman
--------------------------------------------
Frederick V. Casselman
Vice President of Legal & Regulatory Affairs
SUBLICENSEE:
URNOTECH CALYPTE BIOMEDICAL CORPORATION
By: /s/ David J. Robison
---------------------------------------------
Name: David J. Robison
Title: President and CEO
Agreed as to Section 7.6:
PRESIDENT AND FELLOWS OF HARVARD COLLEGE
By: /s/ Joyce Brinton
--------------------------------------------------------
Name:
Title: Joyce Brinton, Director
Office for Technology and Trademark Licensing
Harvard University
9
<PAGE> 12
APPENDIX A
1. U.S. PATENT NO. 4,725,669
Title: ASSAY FOR DETECTING INFECTION BY HUMAN T-CELL
LYMPHOTROPIC VIRUS-III
Inventors: Myron E. ESSEX and Tun-Hou LEE
Filed. November 9, 1984
Issued: February 16, 1988
The claims of this patent are directed to gp12O and cross-reactive
peptides.
2. U.S. PATENT APPLICATION SERIAL NO.,056,134
Title: ASSAY FOR DETECTING INFECTION BY HUMAN T-CELL
LYMPHOTROPHIC VIRUS-III
Inventors: Myron E. ESSEX and Tun-Hou LEE
Filed: May 29, 1987
Cross-Reference: division of U.S. 4,725,669
Issued: currently pending
This is a divisional application of U.S. 4,725,669, directed to
methods of assay using the proteins covered by such patent.
<PAGE> 1
EXHIBIT 10.22
MASTER AGREEMENT
AGREEMENT made this 12th day of April, 1996 (the "Effective Date") by
and between Cambridge Biotech Corporation ("Cambridge"), a corporation
organized and existing under the laws of the State of Delaware, debtor and
debtor in possession, Case No. 94-43054-JFQ, United States Bankruptcy Court for
the District of Massachusetts, Western Division, and having a place of business
at 365 Plantation Street, Biotechnology Research Park, Worcester, MA 01605,
U.S.A., and Calypte Biomedical Corporation ("Calypte") a corporation organized
and existing under the laws of California and having a place of business at
1440 Fourth Street, Berkeley,-California.
WHEREAS Calypte is the exclusive worldwide licensee of New York
University to the patents (the NYU Patents") listed in Appendix 1 attached
hereto and incorporated herein by reference relating to detecting HIV
antibodies in urine;
WHEREAS Calypte has developed a microtiter plate EIA (the "Screening
Test") for detection of HIV-1 antibodies in urine using the NYU patents and
Calypte's own technology (the "Calypte Technology");
WHEREAS Calypte has filed a Product License Application with the
United States Food and Drug Administration ("FDA") for the Screening Test and
believes it is in the final stages of FDA review;
WHEREAS Cambridge manufactures an HIV-1 Western blot assay licensed by
the FDA to confirm the results of HIV antibody detection assays using serum and
plasma samples (the "Serum Blot");
WHEREAS Calypte and Cambridge propose by this agreement to develop a
protocol and reagents to use or modify the Serum Blot to confirm the results of
the Screening Test using urine samples (the "Urine Confirmation System"), and
to seek FDA licensure or marketing approval thereof; and
WHEREAS Calypte and Cambridge propose by this agreement to assign
rights and responsibilities for the commercialization of the resulting product;
NOW THEREFORE, and in consideration of the mutual covenants and
undertakings set forth herein, the parties agree as follows:
-1-
<PAGE> 2
1 KIT CONFIGURATION Calypte and Cambridge will agree on the optimal Urine
Confirmation System, taking into account manufacturing and QC efficiencies,
regulatory requirements, marketing advantages, and other relevant criteria.
1.1 Preferred Kit Configuration Based on information presently
available, the parties agree that the preferred Urine
Confirmation System (the "Preferred Kit Configuration")
consists of (i) a kit (the "Urine Control Kit") consisting of
a urine sample panel containing three of each of high
positive, low positive and negative controls and a package
insert describing the composition of such controls, and
referencing their use with the Serum Blot, and (ii) the Serum
Blot with a claim permitting use of urine samples,
interpretive criteria that the appearance of only a gp160 band
is sufficient to declare a positive, and lot release criteria
for urine consisting of testing at the kit level of a
representative number of kits per lot. The parties plan to
seek marketing approval for the Urine Control Kit from the
United States Food and Drug Administration ("FDA") pursuant to
an application under Section 510(k) of the Food, Drug and
Cosmetic Act, and to seek FDA approval of the urine claim for
the Serum Blot under Cambridge's existing Serum Blot product
license. The Urine Control Kit would be manufactured by or on
behalf of Calypte and distributed as set forth in this
Agreement. The Serum Blot would continue to BE manufactured
by Cambridge, and Calypte would have distribution rights as
set forth in this Agreement.
1.2 Alternate Kit Configurations The parties recognize that
alternative kit configurations may include modifications of
the Serum Blot in which urine controls are substituted for or
included in addition to serum controls, with resulting package
insert changes; such configurations are anticipated to require
an amendment to the Serum Blot product license, and are
referred to herein as the "Urine Blot." The Urine Blot would
continue to be manufactured by Cambridge, and Calypte would
have distribution rights as set forth in this Agreement.
Calypte agrees to reimburse Cambridge for the one-time artwork
and/or design costs associated with modifying Cambridge's
package insert and/or packaging if the Urine Blot is selected
as the Urine Confirmation System.
2 PRODUCT DEVELOPMENT Calypte is responsible for and has commenced
development of the Urine Confirmation System.
- 2 -
<PAGE> 3
2.1 Development Kits Cambridge has furnished Calypte free of
charge twenty-four (24) Serum Blot kits for use in carrying out
the development plan, and Calypte intends to purchase
approximately twenty-eight (28) additional kits (including kits
purchased to date) at a price of $[ * ] per kit. Cambridge will
endeavor to supply the foregoing kits from three or four
different manufacturing lots. In the event the FDA requires the
conduct of clinical trials necessitating the use of substantially
more Serum Blots, Cambridge will supply the additional Serum
Blots at a cost of $[ * ] per kit.
2.2 Development Effort Calypte will, at its expense, prepare any
necessary urine controls and other reagents necessary to
enable the Serum Blot to use urine samples and to complete
development of the Urine Confirmation System, and shall
provide Cambridge free of charge with sufficient Urine Control
Kits to enable Cambridge to validate its lot release protocol.
2.3 Draft Report Calypte will prepare a draft report, in a form
agreeable to Cambridge, suitable for submission to the FDA in
support of proposed regulatory submissions.
2.4 Clinical Trials Calypte will at its expense carry out all
clinical trials required for regulatory approval of the Urine
Confirmation System.
2.5 Cambridge obligations Cambridge will make its regulatory and
product development personnel reasonably available to Calypte
for consultation regarding development of the Urine
Confirmation System. Calypte shall reimburse Cambridge only
for reasonable out-of-pocket costs approved in advance.
2.6 Review of Data Calypte shall make available to Cambridge
regulatory and product development personnel ALL relevant pre-
clinical, clinical and other evaluation data regarding the
Screening Test and the Urine Confirmation System, and all
relevant information relating to the manufacture and
validation of the Urine Control Kit.
3 U.S. REGULATORY PLAN Calypte and Cambridge have agreed on a regulatory
plan for obtaining FDA approval and/or licensure of .the Urine Confirmation
System, including clinical trial design and regulatory strategy.
3.1 Preferred Kit Configuration On June 9, 1995, the FDA indicated
verbally that the parties may proceed with
*Confidential portion has been omitted
and filed separately with the Commission
- 3 -
<PAGE> 4
the Preferred Kit Configuration. Accordingly, the parties
have proceeded with the Preferred Kit Configuration, and the
following provisions apply:
3.1.1 The current regulatory strategy is set forth in
Appendix 2, a letter dated May 3, 1995 from Cindy
Green of Calypte to Jay Epstein of the FDA.
3.1.2 Calypte has at its expense prepared and filed on its
behalf an application for 510(k) approval.
3.1.3 Cambridge has at its expense prepared and filed a
supplement to its Serum Blot product license to
permit use of urine samples. Cambridge shall include
a reference to Calypte as licensor of the urine
testing technology, or some other appropriate
reference to Calypte, if inclusion of such reference
is permitted by the FDA and is not likely to
significantly delay regulatory approval.
3.2 Alternative Kit Configurations In the event the FDA changes
the position it took verbally on June 9, 1995 and the Urine
Confirmation System is in the configuration of the Urine Blot,
then the parties shall assess the costs and resources
necessary to satisfy the FDA requirements, and attempt to
negotiate in good faith an acceptable means of sharing this
burden. If the parties fail to reach agreement within ninety
(90) days after receipt of final notice from the FDA that the
Preferred Kit Configuration is not approved, then either party
may terminate this agreement without further recourse.
3.3 Joint Meetings Each party shall offer the other party the
greatest possible advance notice of and the opportunity to be
present at any meeting and participate in any telephone
conference with the FDA regarding the Urine Confirmation
System.
3.4 FDA Questions The parties will prepare responses to FDA
questions with the same approximate allocation of
responsibilities as prevailed in the conduct of the clinical
trials and the preparation of the original submission.
3.5 Inspections Each party shall make its facilities reasonably
available for audit by the FDA. In
- 4 -
<PAGE> 5
addition, each party shall, upon not less than ten (10)
working days prior notice make its facilities available for
audit by the other party, or the other party's designee (to
whom the audited party shall have no reasonable objection),
but only with respect to the utilization of Good manufacturing
Practices for the Urine Confirmation System.
4 Commercialization
4.1 License Simultaneous with the execution and delivery of this
Agreement, Calypte will grant Cambridge a license in the form
of Appendix 3 attached hereto and incorporated herein-by
reference, to make, use and sell Western Blot confirmatory
assays under the NYU Patents and the Calypte Technology.
Calypte represents and warrants that it has the right and
power to grant such license and such license shall be
enforceable in accordance with its terms.
4.2 Distribution Distribution (including in each case the right to
appoint sub-distributors) of the Urine Confirmation System
shall be accomplished in accordance with Sections 4.3 and 4.4.
The parties agree to make commercially reasonable efforts to
cooperate with each other to accommodate unforeseen
distribution problems due to unanticipated kit configurations
or marketing conditions.
4.3 Preferred Kit Configuration In the event the Urine
Confirmation System is in the Preferred Kit Configuration, the
following provisions shall apply:
4.3.1 Calypte shall have a non-exclusive right to
distribute the Serum Blot to its Screening Assay
customers in Asia (as defined in Exhibit 2 of
Appendix 4). At the request of Calypte, Cambridge
(or its designee) shall meet with Calypte during the
three month period following the Effective Date to
discuss extending Calypte's distribution rights to
other customers. During such period (and, if longer,
for thirty (30) days after the initial meeting of the
parties), Cambridge shall not appoint any other
distributors for the Serum Blot in Asia. Unless
Cambridge shall have notified Calypte otherwise
within three months after the Effective Date, then,
commencing three (3) months after the Effective Date,
Calypte
- 5 -
<PAGE> 6
shall also have the nonexclusive right to distribute
the Serum Blot to any other of its customers in Asia,
provided, however, that Cambridge may, on ninety (90)
days prior written notice to Calypte, reduce
Calypte's distribution rights, on a
country-by-country basis, so that Calypte may resell
the Serum Blot only to its Screening Assay customers.
To embody these distribution rights, Calypte and
Cambridge shall, within thirty (30) days after FDA
approval, execute and deliver a distribution
agreement in substantially the form set forth in
Appendix 4. Cambridge shall have no right to
distribute the Urine Control Kit in Asia.
4.3.2 In the United States, Cambridge shall have no right
to distribute the Urine Control Kit, and Calypte
shall have no right to distribute the Serum Blot
except to those accounts which are listed by name in
Exhibit 2 of Appendix 4. Elsewhere in the United
States, Calypte shall make available the Urine
Control Kit to its Screening Assay customers and
notify them of the availability of the Serum Blot
from Cambridge or its designated distributors.
4.3.3 Cambridge shall have no right to distribute the Urine
Control Kit in the rest of the world. Calypte shall
have the exclusive right to distribute the Urine
Control Kit in the rest of the world. In addition,
Calypte shall have the nonexclusive right to
distribute the Serum Blot to its Screening Assay
customers in the rest of the world (except for Italy,
Spain and Portugal), which right shall be exercised
by Calypte only in those regions in which, in
Calypte's reasonable opinion, the Urine Confirmation
System is not being made available to its Screening
Assay customers in a manner consistent with local
regulations and prevailing commercial conditions. To
embody Calypte's Serum Blot distribution rights,
Calypte and Cambridge shall, within thirty (30)
days after FDA approval, execute and deliver a
distribution agreement in substantially the form set
forth in Appendix 4. Calypte shall notify its
Screening Assay customers of the availability of the
Urine
- 6 -
<PAGE> 7
Confirmation System from Cambridge or its designated
distributors.
4.3.4 Calypte, either directly or by arrangement with its
vendors, shall supply Cambridge free of charge with
Urine Control Kits, for use by Cambridge in the
manufacture of the Serum Blot, including use for lot
release testing. Such Urine Control Kits shall be
manufactured in accordance with Good Manufacturing
Practices and shall be shipped with a certificate of
analysis on which Cambridge may rely. Calypte (or
its vendor) shall permit Cambridge, upon not less
than ten (10) working days prior notice, to inspect
Calypte's (or the vendor's) facility with respect to
utilization of Good Manufacturing Practices in
manufacturing the Product. Cambridge shall not be
deemed in default of its supply obligations if
Calypte shall be unable to arrange to supply
Cambridge with Urine Control Kits.
4.3.5 Cambridge and Calypte agree to share, for so long as
the Distribution Agreement shall be in effect, the
cost of additional lot release testing of the Serum
Blot for use with urine samples. Cambridge estimates
that this cost will be approximately $[ * ] per
year. in any given calendar quarter in which
Cambridge sells 150 or fewer Serum Blot kits for
urine testing, Calypte will reimburse Cambridge
$[ * ]. In any given calendar quarter in which
Cambridge sells between 151 and 300 Serum Blot kits
for urine testing, Calypte will reimburse Cambridge
$[ * ]. In any given calendar quarter in which
Cambridge sells 301 to 450 Serum Blot kits for urine
testing, Calypte will reimburse Cambridge $[ * ]. In
any given calendar quarter in which Cambridge sells
more than 450 Serum Blot kits for urine testing, no
reimbursement will be due. Cambridge will invoice
Calypte quarterly for the reimbursement, which
Calypte will pay within 30 days. Cambridge will
review its lot release testing costs annually and
provide Calypte with the results of the review; at
the request of either party, the reimbursement rate
may be adjusted in light of such review.
*Confidential portion has been omitted
and filed separately with the Commission
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<PAGE> 8
4.4 Urine-Blot In the event the Urine Confirmation System is not
in the Preferred Kit Configuration, the parties will negotiate
distribution of the Urine Confirmation System following the
guidelines set forth below:
4.4.1 Calypte shall have an exclusive right to distribute
the Urine Blot to its Screening Test customers in
Asia and to any other customers in Asia, provided,
however, that Cambridge may restrict Calypte's
distribution rights to Calypte's Screening Assay
customers on ninety (90) days prior written notice.
To embody these distribution rights, Calypte and
Cambridge shall, within thirty (30) days after FDA
approval, execute and deliver a distribution
agreement in substantially the form set forth in
Appendix 4.
4.4.2 In the United States, Cambridge shall have the
exclusive right to distribute the Urine Blot
provided, however, that Calypte shall have the
non-exclusive right to distribute the Urine Blot to
its Screening Assay customers in the United States
which are listed by name in Exhibit 2 of Appendix 4.
Calypte shall notify its Screening Assay customers of
the availability of the Urine Blot from Cambridge.
4.4.3 Cambridge shall have the exclusive right to
distribute the Urine Blot in the rest of the world,
provided, however, that Calypte shall have the
nonexclusive right to distribute the Urine Blot to
its Screening Assay customers in the rest of the
world (except for Italy, Spain and Portugal), which
right shall be exercised by Calypte only in those
regions in which, in Calypte's reasonable opinion,
the Urine Confirmation System is not being made
available to its Screening Assay customers in a
manner consistent with local regulations and
prevailing commercial conditions. To embody these
distributions rights, Calypte and Cambridge shall,
within thirty (30) days after FDA approval, execute
and deliver a distribution agreement in substantially
the form set forth in Appendix 4. Calypte shall
notify its Screening Assay customers of the
availability of the Urine Blot from Cambridge.
- 8 -
<PAGE> 9
4.4.4 Calypte shall make reasonable efforts to supply
Cambridge, either directly or by arrangement with
Calypte's vendors, with bulk urine controls
manufactured in accordance with Good Manufacturing
Practices, on terms to be negotiated in good faith,
for use by Cambridge in the manufacture of the Urine
Blot. Cambridge shall not be deemed in default of
any of its supply obligations if Calypte shall be
unable to arrange to supply Cambridge with bulk urine
controls.
5 OTHER AGREEMENTS
5.1 HIV-2 Cambridge is willing to enter into A similar arrangement
for an HIV-2 or HIV-1/2 Western blot, assuming a reasonable
market exists and economic terms can be agreed, but neither
party, shall be obligated to enter into such an arrangement,
and the failure of the parties to reach agreement shall not
constitute a breach of this agreement.
5.2 Manufacture of Screening Test Cambridge is willing to discuss
manufacturing or having manufactured an HIV-1/2 Screening
Assay for distribution by Calypte, and Calypte is willing to
discuss with Cambridge distribution rights and/or patent
licenses to the HIV1/2 Screening Assay, but neither party
shall be obligated to enter into such an arrangement, and the
failure of the parties to reach agreement shall not constitute
a breach of this agreement. Terms may include upfront license
fees, which may be payable in A combination of cash and stock.
6 GOVERNING LAW AND ARBITRATION; VENUE
6.1 Law This Agreement shall be deemed made under, governed by and
construed in accordance with the laws of the Commonwealth of
Massachusetts, without giving effect to conflict of laws
provisions thereof.
6.2 Arbitration Any controversy or claim arising out of OR
relating to this Agreement or the breach thereof shall be
settled by arbitration in accordance with the laws of the
Commonwealth of Massachusetts, such arbitration to be
conducted in California, if arbitration is initiated BY
Cambridge, and in Massachusetts, if arbitration is initiated
by Calypte, and judgment upon the award rendered by the
arbitrators may be enforced in any court of competent
jurisdiction. Nothing contained herein shall prevent the
parties from seeking
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<PAGE> 10
injunctive or other equitable relief in any court of competent
jurisdiction prior to arbitration, but nothing herein shall be
construed as an admission that injunctive or other equitable
relief may be appropriate.
7 General
7.1 Termination/Survival The provisions of Section 4 (except for
Subsections 4.3.4 and 4.3.5) shall be superseded and be of no
further force and effect upon the execution and delivery of
the license and distribution agreements in the forms of
Appendix 3 and Appendix 4, respectively. The provisions of
Subsections 4.3.4 and 4.3.5 and Section 5 shall be terminated
and have no further force and effect upon the termination of
said license and distribution agreements. Except as set forth
herein, this Agreement may be terminated only in accordance
with Section 3.2 or by agreement of the parties. Sections 6
and 7 shall survive any termination of this Agreement.
7.2 Attorneys' Fees In the event any proceeding is commenced to
enforce this Agreement or otherwise relating to this
Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees and costs incurred in connection
therewith.
7.3 Counterparts This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument; however, this Agreement shall be of no force or
effect until executed by both parties.
7.4 Captions Captions and Sections and Subsection headings used
herein are for convenience only, are not a part of this
Agreement, and shall not be used in construing it. Appendices
to this Agreement are incorporated herein by reference.
7.5 Further Assurances Each of the parties agrees to execute and
deliver such further documents and to cooperate in such manner
as may be necessary to implement and give effect to the
agreements contained herein.
7.6 Successors This Agreement shall be binding upon and shall
inure to the benefit of each party, its successors and
permitted assigns. Neither party may assign this Agreement
without the prior written consent
- 10 -
<PAGE> 11
of the other party, which consent shall not be unreasonably
withheld or delayed, provided, however, that either party may
assign this agreement to the purchaser of the business unit to
which this Agreement pertains, or substantially all of the
assets of such business unit.
7.7 Invalidity If any provision of this Agreement, or the
application thereof, is held to be invalid or unenforceable,
the remainder of the Agreement shall continue in full force
and effect.
7.8 Authority The parties executing this Agreement warrant that
they have the requisite authority to do so. Each parties
represents and warrants that it has, or expects to have within
six months after the date hereof, the ability to manufacture
under current Good Manufacturing Practices in FDA-licensed or
otherwise approved facilities the products which it may be
required to manufacture hereunder.
7.9 No Waiver The failure of either party at any time or times to
require performance of any provisions hereof shall in no
manner affect the right at a later time to enforce the same.
No waiver by either party of any condition, or of any breach
of any term, covenant, representation, or warranty contained
in this Agreement, in any one or more instances,.shall be
deemed to be construed as a further breach or a waiver of any
other condition or of any breach of any other term, covenant,
representation, or warranty.
7.10 Prior Performance The parties recognize that, during the time
in which this Agreement was negotiated, each party performed
many of its respective obligations required hereunder.
Execution of this Agreement shall not constitute an
undertaking by either party to reperform any obligation
satisfied during the period of negotiations.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed under seal and in duplicate as of the Effective Date as stated
hereunder by their duly authorized representatives.
CAMBRIDGE BIOTECH CORPORATION CALYPTE BIOMEDICAL CORPORATION
By: /s/ By: /s/ JACK DAVIS
---------------------------- ----------------------------
Jack Davis, President & CEO
Name/Title President & CEO Name/Title
- 11 -
<PAGE> 12
APPENDIX I
NYU PATENTS
"Method for Detecting Antibodies to Human Immunodeficiency Virus" United States
Patent Nos. 4,865,966 and 5,122,446, and any divisions, continuations, or
continuations-in-part based thereon, and any patents which may issues therefrom
and any reissues, re-examinations, or extensions therefor; and any and all
foreign patents and patent applications corresponding to any of the foregoing
patents and applications.
- 12 -
<PAGE> 13
APPENDIX 2
REGULATORY STRATEGY
calyptebomedical
1440 FOURTH STREET
BERKELEY, CALIFORNIA 94710
(510) 526-2541 FAX (510)526-5381
May 3, 1 995
Jay S. Epstein, M.D.
Food and Drug Administration
Center for Biologics Evaluation and Research
Document Control Center
Office of Blood Research and Review
Division of Blood Applications (HFM-30)
Woodmont Office Center, Suite 20ON
1401 Rockville Pike
Rockville, MD 20852-1448
RE: PLA Reference Number 92-0670
Dear Dr. Epstein,
In response to a request from Mr. Howard Balick, I am submitting an
application strategy and proposal for an HIV-1 confirmatory product to
the Document Center as an official request for consideration. Over
the past several months, I have had phone conversations with both Mr.
Balick and Dr. Gary Riordan regarding Calypte's plan to proceed with
the submission of a HIV-1 confirmatory test using urine as a sample
in support of the Calypte HIV-1 Urine EIA test kit currently under
review. On March 6, 1995, a faxed letter was sent to Dr. Riordan to
document the strategy for this application. In this letter, we
requested a meeting with the reviewing committee, Calypte Biomed1cal
and Cambridge Biotech (our partner for the confirmatory test) to
review our preliminary data, the clinical plan and regulatory
strategy.
Background Information
Calypte submitted the PLA/ELA for the HIVA Urine EIA test kit In
September, 1992. In November, 1993, Calypte was notified of the need
to aggressively pursue a confirmatory test to support the HIV-1 Urine
EIA approval. Calypte contacted all licensed manufacturers (and a
number of unlicensed manufacturers) of HIV confirmatory tests. After
several lengthy and unsuccessful attempts to come to terms with one of
the manufacturers, a business agreement was finally reached in March,
1995, with Cambridge Biotech
1
<PAGE> 14
to bring a urine based confirmatory product to market Cambridge
Biotech has had a licensed serum based HIV confirmatory test on the
U.S. market since January, 1991.
The proposed urine confirmatory test will be performed using the
currently licensed Cambridge HIV Western Blot test kit There will be
no changes to the assay components. The urine test samples will be
substituted for the plasma/serum samples. The interpretation will be
based on the reactivity of the serum controls currently included in
the Cambridge kit. They will be run diluted with diluent provided in
the kit using incubations which have been extended to accommodate the
reduced titre. Laboratories wishing to confirm reactive ELISA urine
samples will run the currently licensed Western blot and its serum
controls In conjunction with an accessory HIV-1 Urine Control Kit In
the accessory kit, there will be three levels: a negative, low
positive and high positive. The urine controls will be heat
inactivated and preserved with 0.1% azide. The Reactivity of the
samples will be compared to the diluted low positive serum control
with respect to the band intensity. A positive sample will require a
band at 160kd of equal or greater intensity to the p24 band on the
Reactive Control Strip using the diluted serum control material
supplied in the Cambridge kit If the 160kd band is of lesser intensity
than the p24 band or if there are other bands not meeting the criteria
for positive, but visible, the interpretation will be indeterminate.
If there are no bands, the sample Interpretation will be negative.
There are other examples where the kit control material is dissimilar
from the specimens being tested. In the area of HIV testing, the most
noteworthy is the dried blood spot. It is our understanding that
this example (dissimilar controls and specimens) has been approved for
use by several manufacturers and furthermore, that there are several
other examples of dissimilar controls/specimens under review by CBER.
One purpose of kit controls is to demonstrate assay validity. The
serum controls have been shown to be effective in accomplishing this,
as shown during the four years which the Cambridge kit has been on the
market. The other purpose of the kit controls is to provide a
"calibrated" visual reference to determine positivity. Following
dilution, this can also be accomplished with the Cambridge controls
provided for the urine assay. The current instructions allow the user
to visually compare the p24 band intensity to ANY of the other bands
observed on the test sample. This visual comparison can be equally
successful comparing the urine bands to this p24 band of the diluted
Cambridge control. The Calypte HIV-1 Urine Control Kit can provide
the user with the added security of running controls with the same
specimen-type and will assist the laboratory in meeting CUA
requirements.
2
<PAGE> 15
In the event there are concerns regarding the lot release testing or
CBER's control of the test kit for urines, we feel these concerns can
be satisfied by the standard lot release testing currently performed
on the Cambridge kit. The serum controls will be tested and released
according to the standard procedure.
Currently there are several control kits for HIV and Hepatitis which
have been approved by the 510(K) approval process. We would not
expect that replacing urine for serum/plasma would make this approval
any different than those previously cleared.
The Urine Control kit would include the urine control materials along
with Instructions for running the patient samples (urine) and controls
(serum) with the Cambridge Western Blot kit Therefore, the controls
would be intended for use only with this specific kit. The
instructions would Include interpretation criteria specific for urine
reactivity. The criterion we are intending to use is a reactive 160kd
band with intensity equal to or greater than the p24 band on the
diluted low positive Cambridge serum control. This criterion is the
same (160kd reactive band) as was used in both sets of clinical
studies conducted by Calypte where the Western blots run on urine were
a modified procedure using the BioRad Western Blot assay.
In support of the urine application to the Cambridge Western blot,
Cambridge would submit a labeling transmittal form with the change in
intended use such that urine would be added as an alternative sample
to serum/plasma. The Instructions would direct the user to use the
Urine Control lot in conjunction with the kit serum controls provided
in the currently licensed Cambridge kit.
Clinical Study Plan
The clinical study plan includes the evaluation of a total of 600
patient samples collected under the IND filed for the Calypte
"extended study". These samples have been well characterized by
urine. ETA, urine Western blot (BloRad assay modified for use with
urine), and paired serum ETA and Western blot The samples chosen are
distributed as follows:
200 normal, low risk
200 moderate or unknown risk 100 high risk, positive
100 special disease state (10 from each of 1O categories)
liver disease, kidney disease, autoimmune disorders, IVDA, etc.
5 individual samples from seropositive individuals run in a
dilutional series
We feel It is appropriate to run this study in-house (using Calypte
personnel since the consistency of performance of both the Cambridge
Western blot as well as the modified BioRad urine Western blot
procedures have been well
3
<PAGE> 16
documented in the clinical trial data submitted by both Calypte and/or
the blot manufacturers as well as FDA 's own release testing. The
questions posed by the Calypte modified procedure should not require
challenging the assay by evaluating site to site, operator to
operator, lot to lot, or other parameters since these questions have
already been satisfactorily addressed. Likewise, the more fundamental
questions of whether or not there are antibodies in urine or how the
antibodies react in a Western blot assay have been demonstrated in the
numerous data submitted with both of Calypte's clinical trials. The
samples chosen for testing are based on those populations which we
assume are of greatest concern to the reviewers and those samples
which may have potential problems in a urine based assay.
In summary, the clinical trial strategy Is based on an application
validation, since from Calypte's point of view the sample matrix
change is a minor one.
We are most anxious to resolve this issue and begin the studies.
Since the proposed study is a retrospective one with samples collected
under an IND, we are requesting a waiver for the filing of an IND and
associated 30 day waiting period. Please let us know if there are
suggested changes to the study plan and or submission strategy so that
we can begin these critically important studies. With the plan
described herein, we feel confident that the studies could
be completed rapidly, the data assembled, and the submission filed
with coincident approval with the HIV-1 Urine EIA. Since the
submission is an application only and very minor in comparison to a
standard PLA, we would except to have a review and approval within a
90 day period, if not before. As you know, it would be extremely
beneficial to have both tests approved together.
In past discussions, it has been indicated to Calypte that the
requirement for the Urine EIA approval is contingent ONLY on the
demonstration of clinical data for use an urine in a confirmatory
assay with a commitment to aggressively move toward approval of this
chosen confirmatory test. We have been told clearly that the approval
of the confirmatory test is NOT a requirement for the HIV-1 Urine EIA
approval. Therefore, although our clear preference is for
simultaneous approval of both the EIA and the confirmatory assay, we
do not want approval of the confirmatory assay to in any way delay the
approval of the EIA. Please confirm with us that this is still the
case.
We thank you in advance for your prompt reply to this request and your
careful consideration of the proposal described.
Sincerely,
/s/ CINDY GREEN
----------------------------
Cindy Green, RAC
Director, Regulatory/QA
4
<PAGE> 17
APPENDIX 3 LICENSE
AGREEMENT made this day of 1996 (the "Effective Date") by and
between Cambridge Biotech Corporation ("Cambridge"), a corporation organized and
existing under the laws of the State of Delaware, debtor and debtor in
possession, Case No. 94-43054-JFQ, United States Bankruptcy Court for the
District of Massachusetts, Western Division, and having a place of business at
365 Plantation Street, Biotechnology Research Park, Worcester, MA 01605, U.S.A.,
and Calypte Biomedical Corporation ("Calypte"), a corporation organized and
existing under the laws of the State of California, and having a place of
business at 1440 Fourth Street, Berkeley, CA 94710, U.S.A.
BACKGROUND
In the course of research at New York University "NYU" certain
inventions were made relating to-the ability to detect antibodies to Human
Immunodeficiency Virus in urine samples. NYU is the owner of these inventions,
and has been granted two United States patents, numbered 4,885,966 and
5,122,446, entitled "Method for Detecting Antibodies to Human Immunodeficiency
Virus". The patents were granted September 12, 1989, and June 16, 1992,
respectively.
Calypte is the exclusive, worldwide licensee of these inventions and
the issued patent and pending patent applications by way of an exclusive
license agreement from NYU and has the right to grant sublicenses thereunder,
subject to the limitations set forth in the NYU agreement attached hereto as
Exhibit A, for the making, using or selling of the inventions which have been
disclosed and claimed in the issued patent and pending patent applications.
This Agreement is subject and subordinate to the NYU Agreement attached hereto
as Exhibit A and any conflicts between this Agreement and the NYU Agreement
shall be resolved in favor of the interpretation and meaning set forth in the
NYU Agreement.
RECITALS
WHEREAS, Calypte is the exclusive worldwide licensee of patents
4,865,966 and 5,122,446 and any reissues, renewals, divisions, continuations,
continuations-in-part, substitutes, divisions or extensions thereof, related to
the detection of antibodies to Human Immunodeficiency Virus ("HIV") using urine
samples;
WHEREAS, Cambridge manufactures and distributes a Western Blot Assay
(as hereinafter defined) for the detection of human
<PAGE> 18
antibodies to a variety of HIV proteins and glycoproteins on nitrocellulose
strips using serum and plasma; and
WHEREAS, Cambridge desires to adapt its Western Blot Assay for use
with urine samples, and to license Calypte's Licensed Processes (as hereinafter
defined) and Licensed Patent Rights (AS hereinafter defined) to enable it to
manufacture and distribute the resulting Western Blot Assay in the Field of USE
(as hereinafter defined) and to enable its customers to practice the Licensed
Processes in the Field of Use.
NOW, THEREFORE, and in consideration of the mutual covenants and
undertaking set forth herein, the parties agree as follows:
1. DEFINITIONS
1.1 LICENSED PATENT RIGHTS shall mean U.S. Patents No.
4,865,966 and 5,122,446 issued September 12, 1989, and June 6, 1992,
respectively, and any divisions, continuations, or continuations-in-part based
thereon, and any patents which may issue therefrom and any reissues,
re-examinations, or extensions thereof; and any and all foreign patents and
patent applications corresponding to any of the foregoing patents and
applications, as well as such other patents or patent applications listed in
Exhibit B effective as of the date said patents or patent applications are
granted or filed, as the case may be, and the inventions described or claimed
therein.
1.2 FIELD OF USE shall mean only use in diagnostic
applications and use for research purposes utilizing urine samples. The
diagnostic field of use is limited to methods for detecting antibodies to HIV
utilizing HIV lysates immobilized on nitrocellulose strips in a Western Blot
format.
1.3 LICENSED PRODUCT(S) shall mean HIV diagnostic Western
Blot finished goods covered by or made in accordance with LICENSED PATENT
RIGHTS OR finished goods on which LICENSED PROCESSES are practiced. The term
"finished goods" as used herein shall mean any and all products in any form for
use BY an end user.
1.4 LICENSED PROCESSES shall mean processes claimed OR
otherwise included in the LICENSED PATENT RIGHTS or using Calypte's proprietary
know-how or other technical information and techniques disclosed by Calypte to
Cambridge. For purposes of example only, and not by way of limitation LICENSED
PROCESSES may include (1) services for providing a test result utilizing the
methods of assay covered under the LICENSED PATENT RIGHTS, or (2) services for
providing test results utilizing the LICENSED PRODUCTS.
2
<PAGE> 19
1.5 NET SALES shall mean the amount invoiced by Cambridge
on sales of LICENSED PRODUCTS and/or on sales of services utilizing LICENSED
PROCESSES which amount shall not include:
(a) Amounts repaid or credited by reason of
rejection or return;
(b) Shipping and handling charges, to the extent
separately invoiced; and
(c) Taxes levied on either the Licensed Products
or Licensed Processes, or other governmental charges assessed on the
production, sale, transportation, delivery or use; provided, however, such
taxes or charges are separately stated on purchase orders, invoices or other
documents of sale and are clearly identifiable, and provided further that such
taxes and charges are actually paid by or on behalf of Cambridge.
1.6 FIRST USE shall mean the date of the initial transfer
by Cambridge of any LICENSED PRODUCTS to any third party or date of the first
commercial application of the LICENSED PROCESSES, in each case in the Field of
Use, whichever is earlier, in exchange for consideration of any kind to which
value can reasonably be assigned for purposes of determining Net SALES.
1.7 EARNED ROYALTIES shall mean royalties paid or payable
by Cambridge to Calypte calculated on the basis of NET SALES.
1.8 EFFECTIVE DATE shall mean the date first set forth
above.
1.9 PRIME LICENSE shall mean the exclusive license
agreement between NYU and Calypte, as amended, dated August 12, 1993.
1.10 CAMBRIDGE shall mean Cambridge Biotech Corporation,
the Delaware corporation. An AFFILIATE of Cambridge shall mean any corporation
or other business entity controlled BY, controlling, or under common control
with Cambridge. For this purpose, "control" shall mean direct or indirect
beneficial OR legal ownership of at least fifty percent (50%) interest in such
corporation or business entity.
1.11 WESTERN BLOT OR WESTERN BLOT ASSAY shall mean the
Cambridge HIV Western Blot which is FDA licensed as of the date of execution of
this Agreement, and/or replacements or improved versions thereof. The Western
Blot kit currently consists of nitrocellulose strips onto which HIV I lysate
has been
3
<PAGE> 20
electrophoretically separated and immobilized plus the ancillary buffers,
conjugates, chromagens and other materials customarily provided in the FDA
licensed kit.
1.12 MASTER AGREEMENT shall mean that certain Agreement
dated April 12, 1996, by and between Cambridge and Calypte with respect to the
development of a protocol and reagents for use or modification of the Serum
Blot for purposes of confirming the results of the Screening Test using urine
samples.
1.13 DISTRIBUTION AGREEMENT shall mean the distribution
agreement which is Appendix 4 to the Master Agreement.
2. GRANT OF LICENSE
2.1 Subject to the terms and conditions of this Agreement
and the Prime License, Calypte hereby grants to Cambridge an exclusive royalty
bearing license, with no right to sublicense, to make, use, and sell LICENSED
PRODUCTS and to practice the LICENSED PROCESSES under LICENSED PATENT RIGHTS in
the FIELD OF USE throughout the patent and non-patent countries as listed in
Exhibit C.
2.2 If and to the extent there are divisionals,
continuations or continuation-in-part based on or relating to the
LICENSED PATENT RIGHTS, and any patents which may issue therefrom and an AND
ANY reissues, re-examinations or extensions thereof, as WELL as any and all
foreign patents and patent applications corresponding thereto or to the
LICENSED PATENT RIGHTS, Calypte shall notify Cambridge of such developments and
shall deliver AN amended Exhibit B to Cambridge to reflect any such changes or
additions to the LICENSED PATENT RIGHTS.
2.3 Notwithstanding any provisions to the contrary, end
users of the Licensed Product shall have an implied license to practice the
Licensed Processes in conjunction with their rendering of testing services
related to the detection of antibodies to HIV using urine samples.
3. ROYALTIES. In consideration of the rights granted hereunder,
Cambridge shall make the following payments to Calypte when the same are due:
3.1 Cambridge shall pay to Calypte EARNED ROYALTIES of
[ * ] percent ([ * ]%) on the NET SALES of all LICENSED PRODUCTS sold
by Cambridge for use in the FIELD OF USE to its customers and distributors
within the patent countries (Exhibit B) and [ * ] percent ([ * ]%)
within non-patent countries.
*Confidential portion has been omitted
and filed separately with the Commission
4
<PAGE> 21
3.2 Cambridge shall pay to Calypte EARNED ROYALTIES of
[ * ] percent ([ * ]% calculated on NET SALES of all services
utilizing LICENSED PROCESSES sold by Cambridge.
3.3 Calypte and Cambridge recognize that the Western Blot
Assay may be used by customers for use with samples other than urine, and agree
that royalties shall be payable hereunder only with respect to sales of Western
Blots used with urine samples. In view of the difficulty of determining the
quantity of Western Blot Assays used with urine samples in any given royalty
reporting period, the parties hereby agree to calculate quantities subject to
royalties as follows:
(i) Calypte plans to sell a Urine Control Kit, as
defined in the Master Agreement, containing three 10 ml vials
each of high positive, low positive and negative control. The
parties estimate that, for each Urine Control Kit sold,
approximately 270 Western Blot Assays (10 27-strip kits) will
be run by customers. Calypte agrees to promptly report to
Cambridge after the end of each calendar quarter, the number
of Urine Control Kits sold, and for each Urine Control Kit
sold, Cambridge shall pay a royalty on 10 Western Blot Assay
kits (based on an average net selling price of ALL of its
Western Blot Assays, calculated in accordance with Net Sales);
provided, however, that (a) no royalty shall be due with
respect to sales attributable to the first So Urine Control
Kits sold by Calypte each calendar year; and (b) a royalty
adjustment shall be made with respect to expired Urine Control
Kits with respect to which a royalty was previously paid.
Calypte shall report to Cambridge, within 30 days after the
end of each calendar year, the number of such expired Urine
Control Kits in the inventory of its distributors and if
known, its customers.
(ii) Either party may request a review of the
above method of calculating royalties by delivering notice on
or before December I of any year. In such event, the parties
shall negotiate in good faith a method or methods which
adequately and reasonably approximate the number of Western
Blot Assays used with urine samples. Such new method, if any,
shall be effective for the following calendar year and
*Confidential portion has been omitted
and filed separately with the Commission
5
<PAGE> 22
thereafter unless changed in accordance with this section.
4. PAYMENTS AND REPORTS
4.1 Cambridge agrees to notify Calypte in writing within
three (3) business days after the date of the FIRST USE.
4.2 Beginning with the date of FIRST USE, Cambridge SHALL
remit to Calypte EARNED ROYALTIES within thirty (30) DAYS after the close of
each calendar quarter, which is commonly known as the last. day of March, June,
September, and December or within thirty (30) days following receipt of
Calypte's Urine Control Kit report, whichever is later. Any EARNED ROYALTIES
not paid within the thirty (30) day time period shall be deemed past due
royalties. Past due royalties shall bear-interest at the rate of the lesser of
per annum or the maximum rate permitted by applicable law,
which interest shall accrue commencing on the date the-payment was originally
scheduled to be paid and shall continue to accrue until paid in full.
4.3 Cambridge shall also prepare for each calendar
quarter after the date of FIRST USE, a written report in form and substance
acceptable to Calypte setting forth, among other things (1) the NET SALES and
the EARNED ROYALTIES payable thereon, including a detailed listing of all
LICENSED PRODUCTS sold and all deductions or exclusions from NET SALES, if any
and (2) the NET SALES and the EARNED ROYALTIES payable thereon, including a
detailed listing of the services provided utilizing LICENSED PROCESSES and of
all deductions or exclusions from NET SALES. The reports required by this
Agreement shall be certified by an officer of Cambridge to be correct to the
best of Cambridge's knowledge and information.
4.4 All amounts payable to Calypte shall be in United
States Dollars. In the event that any LICENSED PRODUCT or services utilizing
LICENSED PROCESSES shall be sold for funds other than in United States Dollars
the NET SALES of such product shall first be determined in the foreign funds
and then converted into the equivalent United States Dollars at:
(a) The rate applicable to the transfer of funds
arising from royalty payments as established by the exchange control
authorities of the country of which such funds are the national currency, for
the last business day of the accounting period for which payment is thus made;
or
(b) If there is no rate so applicable, that the
buying rate for such foreign funds as published by the Wall
Confidential portion has been omitted and filed separately with the Commission
6
<PAGE> 23
Street Journal on the last business day of such calendar accounting period.
5. BOOKS AND RECORDS
5.1 Cambridge shall keep complete and accurate books and
records of all business activities relating to the subject matter of this
Agreement including records of EARNED ROYALTIES on LICENSED PROCESSES and
LICENSED PRODUCTS made, used, and sold under this Agreement for a period of at
least three (3) years following a given reporting period. These books and
records shall be available during normal business hours for inspection at the
expense of Calypte by a representative selected by Calypte and reasonably
acceptable to Cambridge, after providing ten days' prior written notice to
Cambridge, for the sole purpose of verifying and authenticating reports and
payments hereunder. The representative of Calypte shall disclose to Calypte
only such financial information of Cambridge as necessary for Calypte TO be
assured of the accuracy of the reports submitted and payments made under this
Agreement.
6. NOTICE
6.1 Any notice required by this Agreement shall be sent
by registered or certified mail, postage prepaid, telex, facsimile, courier
service or personal delivery at the addresses designated below or-to another
address as may be designated BY written notice. Unless otherwise so specified,
any notices given hereunder shall be effective as of the date of the date of
dispatch.
for Calypte:
Calypte Biomedical Corporation
1440 Fourth Street
Berkeley, CA 94710
Attn: President
For Cambridge:
Cambridge Biotech Corporation
365 Plantation Street
Worcester, MA 01605
Attn: President
7. TERM AND TERMINATION
7.1 The term of this Agreement, unless sooner terminated
as provided herein, shall extend from the EFFECTIVE DATE until the expiration
of the last of the patents included in LICENSED PATENT RIGHTS.
7.2 Upon any breach of, OR default under, this Agreement,
Calypte may terminate this Agreement BY giving ninety (90) days' written notice
to Cambridge of such termination and identifying the nature of the breach or
default; such termination shall take effect at the end of the ninety-day
period, unless
7
<PAGE> 24
during such ninety-day period Cambridge cures such breach or default to
Calypte's reasonable satisfaction. If the Master Agreement or the Distribution
Agreement is terminated by Calypte for cause pursuant to the terms set forth
therein, this Agreement shall automatically terminate concurrently with the
termination of such other agreements. In the event the Distribution Agreement
is terminated for any other reason (other than for cause by Calypte) or expires
without renewal, the license granted under this Agreement shall become
non-exclusive for the duration of the remaining term of this Agreement,
subject: to early termination as provided for hereunder. Furthermore,, in the
event this Agreement becomes non-exclusive as provided above, Calypte shall
have no obligation to support or share in the cost of insurance as set forth in
Section 12.14 nor shall it have any obligations whatsoever to share in the
costs set forth in Section 4.3.5 of the Master Agreement relative to testing of
Serum Blot. Upon notice of termination of this Agreement, Cambridge will
immediately undertake such actions as may be required by the United States Food
and Drug Administration to remove the urine application from Product labeling
and report to Calypte a timeline for completion of same.
7.3 Cambridge has the right to terminate this Agreement
by giving twenty-four (24) months, prior written notice to Calypte.
7.4 Termination of this Agreement shall not affect any
rights or obligations accrued prior to the date of termination, including
Cambridge's obligation to pay all earned Royalties and Cambridge's obligation
to indemnify Calypte, provided however, that Cambridge's obligation to
indemnify Calypte shall extend for a period of ten (10) years after such
termination. Upon termination of this Agreement, all unpaid earned Royalties
due to Calypte shall become due and payable upon delivery of the next'
quarterly report pursuant to section 4.3 hereof.
7.5 Waiver by Calypte of a single default or breach or a
succession of defaults or breaches shall not deprive Calypte of any right to
terminate this Agreement pursuant to the terms hereof upon the occurrence of
any subsequent default or breach.
7.6 This Agreement shall automatically expire or
terminate on the termination or expiration of the Prime License,
notwithstanding the fact that Calypte shall exert its best efforts to avoid
termination of the Prime License for cause. In the event that the Prime License
is converted from an exclusive to a nonexclusive license, Cambridge may at its
option extend the duration of this Agreement with Calypte on terms and
conditions mutually agreeable to both parties.
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<PAGE> 25
8. NEGATION OF WARRANTIES AND INDEMNITY.
8.1 Calypte makes no representations or warranties as to
the validity or scope of any LICENSED PATENT RIGHTS.
8.2 Calypte makes no representations or warranties that the
manufacture, use, sale or other disposal of the LICENSED PRODUCTS or the
practice of the LICENSED PROCESSES is or will BE free from infringement of
patents of third parties.
8.3 Calypte's liability for any claim or demand BY
Cambridge shall be limited to and based SOLELY on any material breach of
representation or warranty as set forth therein. EXCEPT AS OTHERWISE SET FORTH
HEREIN CALYPTE HEREBY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. THE SOLE AND ENTIRE MAXIMUM LIABILITY FOR ANY AND ALL
LOSS CLAIM, DAMAGE OR LIABILITY OF ANY KIND SHALL CONSIST OF REPLACEMENT OF THE
LICENSED PRODUCT. IN NO EVENT SHALL CALYPTE BE LIABLE FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES. Cambridge shall make no statements,-representations or
warranties whatsoever to any third parties which are inconsistent with the above
disclaimer.
8.4 Cambridge shall defend indemnity, and hold harmless
Calypte and NYU, their directors, officers, employees and agents from and
against any and all claims, demands, damages, losses and expenses of any nature,
including attorney's fees, for but not limited to death, personal injury,
illness, property damage or product liability arising from or in connection with
any one or more of the following:
(a) the use by Cambridge of any method or process
related to the LICENSED PATENT RIGHTS; or
(b) any use, sale or other disposition of any of
the LICENSED PRODUCTS by Cambridge, or any statement. representation or
warranty made BY Cambridge WITH RESPECT thereto; or
(c) the use of the LICENSED PRODUCTS or LICENSED
PROCESSES by any person.
Calypte shall reasonably cooperate with Cambridge in defending any
such claim, provided Cambridge and/or its insurance carrier shall reimburse
Calypte for all out of pocket expenses incurred in connection therewith.
Calypte shall be entitled to receive information regarding the status of any
such matter upon reasonable notice and shall be entitled to retain counsel on
its
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<PAGE> 26
own behalf and at its own expense to monitor the litigation or if Calypte is
not satisfied with the defense provided by Cambridge for any reason. The
rights and obligations of this paragraph shall survive termination or
expiration of this Agreement. Cambridge shall have the exclusive right to
control the defense of any such claim; provided, however, that Cambridge shall
not settle any such claim without first consulting with Calypte.
9. LAWS AND REGULATIONS.
9.1 Cambridge shall comply with all foreign and United
States federal, state, and local laws regulations, rules and orders applicable
to the testing, production, transportation, packaging, labeling, sale and use of
the LICENSED PRODUCTS and services utilizing LICENSED PROCESSES.
10. USE OF NAMES.
10.1 Cambridge shall not use the names "NYU" "New York
University," the names of the inventors, or the name "Calypte Biomedical
Corporation" or any other name or mark by which NYU or Calypte may be identified
for any purpose without prior written consent obtained from the respective
parties.
11. PATENT NOTICE.
11.1 Cambridge shall apply the patent marking notices
required by the laws of the United States and relevant countries or as
reasonably requested by Calypte.
12. MISCELLANEOUS PROVISIONS.
12.1 This Agreement-constitutes the entire understanding
between the parties with respect to the subject matter hereof and supersedes and
replaces all prior agreements, understandings, writings and discussions between
the parties related to said subject matter.
12.2 This Agreement may be amended only by a written
instrument executed by the parties.
12.3 Except as otherwise set forth herein, without prior
written approval of Calypte, which approval shall not be unreasonably withheld,
this Agreement may not be assigned or transferred, in whole or in part, BY
Cambridge to any other party However on a one-time-only basis, Cambridge shall
be entitled to assign this license, but only under and pursuant to the
following terms and conditions: (i) such assignment.shall be made only to a
business entity that acquires from Cambridge its entire diagnostics division
and business; and (ii) Cambridge and
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<PAGE> 27
Cambridge's assignee shall execute an "Assignment Agreement" in the form
satisfactory to NYU and a copy thereof shall be provided to NYU for review. In
the event Cambridge only divests the Western Blot part but not all of its
diagnostics division and business then Cambridge's right to assign shall be
subject to Calypte's and NYU's approval, which approval shall not be
unreasonably withheld.
12.4 This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns.
12.5 This Agreement shall be governed and construed and
interpreted in accordance the laws of the State of California.
12.6 If any provisions of this Agreement are or become
invalid, or ruled illegal by any court of competent jurisdiction, or are deemed
unenforceable-under then current applicable from time to time in effect during
the term hereof, it is the intention of the parties that the remainder of this
Agreement shall not be affected thereby. It is further the intention of the
parties that, in lieu of each such provision which is invalid, illegal or
unenforceable, there be substituted or added as part of this Agreement a
provision which shall be as similar as possible in economic and business
objectives as intended by the parties to such invalid, illegal or unenforceable
provision.
12.7 In no event shall either party be liable to the other
for any special, or incidental, or consequential, or indirect damages arising
in any way out of this Agreement, however caused, and on any theory of
liability. This limitation will apply even if the other party has been advised
of the possibility of such damage.
12.8 This Agreement may be executed in counterparts, each
of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
12.9 Cambridge agrees that immediately after the execution
of this Agreement, Calypte may provide a copy of this Agreement to NYU for
their review and consideration.
12.10 The parties hereto expressly agree that this
Agreement is subject and subordinate to the Prime License and to the extent
there are provisions set forth herein which are inconsistent or conflicting
with the Prime License, then such provisions shall be revised so as to be
non-conflicting and consistent with the proscription of the Prime License.
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<PAGE> 28
12.11 Cambridge hereby unconditionally agrees that it will
not grant nor attempt to grant any sublicenses of any kind based on the rights
granted hereunder.
12.12 Cambridge agrees to obtain and maintain insurance and
to provide evidence thereof directly to NYU and Calypte and to indemnify NYU in
the manner described below. Cambridge agrees that NYU is an intended third
party beneficiary of this Agreement for the purpose of enforcing such
indemnification and insurance provisions. NYU shall also have the right to
audit Cambridge's records as they may relate to the subject matter of this
Agreement at its own expense.
12.13 Cambridge shall indemnify, defend and hold harmless
NYU and its trustees, officers, medical and professional staff, employees,
students and agents and their respective successors, heirs and assigns (the
"Indemnitees"), against any liability, damage, loss or expense (including
reasonable attorneys, fees and expenses of litigation) incurred by or imposed
upon the Indemnitees or any one of them in connection with any claims, suits,
actions, demands or judgments arising out of the design, production,
manufacture, sale, use in commerce or in human clinical trials, lease, or
promotion by Cambridge of any Licensed Product, Licensed Process or service
relating to or developed pursuant to this Agreement or the Prime License.
Cambridge agrees at its own expense, to provide attorneys reasonably acceptable
to NYU to defend against any actions brought or filed against any Indemnitee
with respect to the subject of indemnity to which such Indemnitee is entitled
under the Prime License, whether or not such actions are rightfully brought.
12.14 At such time as the Licensed Products or Licensed
Processes are distributed or practiced, as the case may be, Cambridge shall
procure and maintain policies of comprehensive general liability insurance in
amounts not less than five million dollars (US $5,000,000) per incident and
five million dollars (US $5,000,000) annual aggregate and naming the
Indemnitees and Calypte as additional insureds. Such comprehensive general
liability insurance shall provide (i) product liability coverage and (ii) broad
form contractual liability coverage for Cambridge's indemnification under the
section above. The minimum amounts of insurance coverage required under this
section shall not be construed to create a limit of Cambridge's liability with
respect to its indemnification of Indemnitees under the sections indicated
above. Cambridge shall provide Calypte and NYU with written evidence of such
insurance upon request. Cambridge shall provide NYU and Calypte with written
notice at least ninety (90) days prior to the cancellation, non-renewal or
material change in such insurance. If Cambridge does not obtain replacement
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<PAGE> 29
insurance providing comparable coverage within ninety (90) days of such average
termination, Calypte may terminate this Agreement. Cambridge shall maintain
such comprehensive general liability insurance during the period that any
product, process or service is being commercially distributed or sold pursuant
to this Agreement, and for a period of seven (7) years after the termination or
expiration of this Agreement. Calypte and Cambridge shall share any additional
insurance premium cost on a 50/50 basis as a direct result of increasing the
coverage for the Licensed Products or Licensed Processes from Cambridge's
existing policy limit to the $5,000,000 limit set forth above.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed.
Calypte Biomedical Corporation Cambridge Biotech Corporation
By: By:
--------------------------- --------------------------------
Name: Name:
--------------------------- --------------------------------
Title: Title:
--------------------------- --------------------------------
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<PAGE> 30
EXHIBIT A
NYU AGREEMENT
(omitted]
<PAGE> 31
Exhibit B
Licensed Patent Rights
"Method for Detecting Antibodies to Human Immunodeficiency Virus" United States
Patent Nos. 4,865,966 and 5,122,446, and any divisions, continuations, or
continuations-in-part based thereon, and any patents which may issues therefrom
and any reissues, reexaminations, or extensions therefor; and any and all
foreign patents and patent applications corresponding to any of the foregoing
patents and applications.
<PAGE> 32
Exhibit C
Patent and Non-Patent Countries
Patent Countries:
United States
Australia
Nigeria
Sri Lanka
Canada (if serial no. 564,232 issues)
Japan (if serial no. 504037/88 issues)
South Korea (if serial no. 7016/88 issues)
Non-Patent Countries:
All countries in the world which are not Patent Countries
<PAGE> 33
APPENDIX 4
NOTE: THIS DRAFT AGREEMENT ASSUMES THAT THE PRODUCT IS THE HIV-1 WESTERN
BLOT CURRENTLY MANUFACTURED BY CAMBRIDGE FOR USE WITH SERUM SAMPLES, AND THAT A
LABEL CHANGE WILL PERMIT THE PRODUCT TO BE USED WITH URINE SAMPLES IN
CONJUNCTION WITH A URINE CONTROL KIT MANUFACTURED BY CALYPTE. IF THAT ROUTE IS
NOT AVAILABLE FROM A REGULATORY STANDPOINT, AND THE PRODUCT COVERED BY THIS
AGREEMENT IS THEREFORE SPECIFICALLY MANUFACTURED FOR USE WITH URINE SAMPLES,
THEN THIS AGREEMENT WILL BE MODIFIED AS INDICATED BY THE BRACKETED MATERIAL.
CBC-CALYPTE WESTERN BLOT DISTRIBUTION AGREEMENT
AGREEMENT made this ___ day of ___________________, 1996 (the
"Effective Date") by and between Cambridge Biotech Corporation ("Cambridge"), a
corporation organized and existing under the laws of the State of Delaware,
debtor and debtor in possession, Case No. 94- 43054-JFQ, United States
Bankruptcy Court for the District of Massachusetts, Western Division, and
having a place of business at 365 Plantation Street, Biotechnology Research
Park, Worcester, MA 01605, U.S.A., and Calypte Biomedical Corporation
("Calypte") a corporation organized and existing under the laws of California
and having a place of business at 1440 Fourth Street, Berkeley, California.
WHEREAS, Cambridge manufactures and/or markets the HIV-1 Western Blot
Kit described in Exhibit 1 (the "Product");
WHEREAS, Calypte is developing and plans to manufacture and sell a
screening assay to detect antibodies to HIV-1 in urine samples (the "Screening
Assay") worldwide and
WHEREAS, Calypte desires to purchase and maintain a stock of the
Product for resale to its customers in the countries listed in Exhibit 2
(collectively, the "Territory");
NOW THEREFORE, and in consideration of the mutual covenants and
undertakings set forth herein, the parties agree as follows:
1. APPOINTMENT.
1.1 Subject to the terms and conditions of this Agreement and the
territorial qualifications set forth in Exhibit 2, Cambridge hereby appoints
Calypte as an authorized distributor of the Product for resale to Calypte's
customers in the Territory for Calypte's own risk, expense and account.
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1.2 Calypte hereby accepts the foregoing appointment as such
authorized distributor and agrees to use reasonable efforts to promote the sale
of and sell the Product in the Territory. (If the Product is the Urine Blot,
"reasonable efforts" will be changed to "best efforts."]
1.3 Calypte may appoint sub-distributors within the Territory,
provided that (i) such sub-distributors deal directly with Calypte, and Calypte
remains responsible for all dealings with Cambridge, (ii) such sub-distributors
operate in accordance with Calypte's rights and obligations under this
Agreement, and (iii) Calypte shall remain responsible to Cambridge for the
performance of this Agreement.
2. NONEXCLUSIVITY.
The degree of exclusivity of Product distribution rights shall be as set forth
in Exhibit 2.
3. CALYPTE'S OBLIGATIONS.
3.1 Calypte shall use reasonable efforts to distribute, market,
promote and sell the Product in the Territory and to maintain and enhance the
goodwill of the Product in the Territory. [If the Product is the Urine Blot,
"reasonable efforts" will be changed to "best efforts."]
3.2 For all purchases of Product by Calypte from Cambridge,
Cambridge shall invoice Calypte for the amounts of Product shipped during the
term of this Agreement at the prices therefor set forth on Exhibit 3 and
Calypte shall pay such invoices in full within thirty (30) days after its
receipt of such invoices.
3.3 Calypte may obtain at its option refunds or credits for
returns of Product equal to the price(s) paid therefor against future purchase
orders for Product, provided that such returns are due to the failure of any
Product to meet its Product Specifications (as defined in Section 7.5 hereof),
upon receipt by Cambridge, within fifteen (15) days after receipt of shipment
of the Product, of documentation provided by Calypte which substantiates such
Product(s) return(s) and the reason(s) therefor. No Product will be accepted
for return by Cambridge without its authorization made in accordance with its
then-current returned goods authorization system.
3.4 Calypte may ["shall" if the Product is the Urine Blot]
advertise and promote the Product in a commercially reasonable manner and at
its sole cost and expense, and Cambridge agrees to cooperate with Calypte in
advertising and promoting the Product, provided that Calypte shall submit a
copy of each advertisement and of all other promotional materials and any
changes thereto to Cambridge for review and written approval by a duly
authorized
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officer of Cambridge, which approval shall not be unreasonably withheld.
Cambridge's cooperation in advertising and promoting the Product shall not
oblige Cambridge to share the expenses associated with same.
3.5 Calypte warrants and represents to Cambridge that it is not,
and shall not hold itself out as, the representative, agent, commission-sales
agent, commissionaire, servant or employee of Cambridge for any purpose, except
as may be provided from time to time by other written instrument signed by both
parties. This Agreement creates no relationship of joint venture, partnership,
limited partnership or agency between the parties. Neither party has any right
or authority to assume or to create any obligation or responsibility on behalf
of the other party except as may from time to time be provided by other written
instrument signed by both parties.
3.6 Calypte shall defend, indemnify and hold harmless Cambridge
from and against any and all claims, demands, liability and expenses, including
reasonable attorneys' fees and costs, arising out of or in any way resulting
from any breach of the warranty set forth in Section 3.5 hereof.
4. ORDERING AND PRICES.
4.1 Calypte shall, on or before the first day of each month,
deliver to Cambridge a forecast of its projected purchases of Product during the
following twelve (12) months. Projected purchases during the first three (3)
months of such forecast shall constitute firm orders, and the forecast for the
remaining months shall be for planning purposes only. Calypte shall purchase
each year the minimum quantities of Product, if any, specified on Exhibit 3.
4.2 Calypte shall purchase from Cambridge, and Cambridge shall
sell to Calypte such quantities of the Product as Calypte may order pursuant to
Section 4.1 at the Product purchase prices set forth in Exhibit 3. Cambridge
shall not increase such prices more frequently than once per year, and in no
event shall the price increase, singularly or in the aggregate, be greater than
those imposed by Cambridge on its other customers which purchase similar volume
of Product.
4.2 There shall be added to the prices for Product amounts equal
to any taxes (including, but not limited to, state and local sales and use
taxes, however designated, levied or based on such prices, this Agreement, or
the Product or their sale or use, exclusive, however, of taxes based on
Cambridge's net income. Any taxes assessable on the Product on or after delivery
shall be borne by Calypte.
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<PAGE> 36
4.4 All invoices rendered by and payments made to Cambridge
hereunder shall be in United States dollars.
5. TECHNICAL SERVICE AND REGULATORY OBLIGATIONS.
5.1 With respect to the Product, Calypte shall provide to its
customers all technical training and support required by them. For this purpose,
Calypte shall maintain and use a trained staff of qualified sales and technical
personnel.
5.2 Calypte shall comply with any and all national, regional and
local legislation, statutory provisions and regulations in effect in every
jurisdiction within the Territory regarding the registration, labeling,
advertising, distribution, use and/or sale of the Product, including without
limitation any and all safety and regulatory compliance rules, and shall make no
representation relative to the performance of any Product except as authorized
by the Cambridge and permitted by law.
6. TRADEMARKS, SERVICE MARKS AND TRADE NAMES.
6.1 Cambridge hereby grants Calypte a nonexclusive license within
the Territory (subject to the exceptions set forth in Exhibit 2 hereto) to use
its trademarks, service marks and trade names in connection with any
advertisement and promotion of the Product permitted hereunder. Calypte shall
not use or alter such marks or names in a manner which may jeopardize or
diminish Cambridge's rights to use them, and all notices of rights therein and
all notices of Cambridge's patent and/or patent pending rights to the Product
shall be clearly designated in all written materials in which such marks and/or
names are used.
6.2 Calypte shall use such marks and/or names only in such manner
as will comply with the provisions of the applicable trademark laws of the
Territory. Any and all trademark applications which are filed in the Territory
shall be filed by Cambridge and Cambridge shall bear all costs incurred in
connection with such trademark applications and registrations. In each and every
use of such marks and/or names on its packaging, tags, catalogs, and advertising
for the Product, Calypte shall indicate if applicable the registration of such
marks and/or names by the marking provided for by such laws.
6.3 The license granted under Section 6.1 to Calypte shall
terminate upon any termination of this Agreement or, with respect to Calypte's
inventory of Product at the time of termination, six months after such
termination, and thereafter Calypte shall not use Cambridge's trade names,
service marks, or trademarks and shall cooperate to the extent necessary in
notifying the Registrar of Trademarks or other official that it is no longer a
registered user of such marks and/or names, at Calypte's expense.
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7. CAMBRIDGE'S OBLIGATIONS, SPECIFICATIONS AND WARRANTIES.
7.1 Cambridge shall, from time to time during the term of this
Agreement, provide Calypte with reasonable quantities of its then existing
brochures on its Product.
7.2 Cambridge will provide Calypte with a list of all countries in
the Territory in which the Product is approved for sale. Calypte shall use
reasonable efforts ("best efforts" if the Product is the Urine Blot] to obtain
all required regulatory and other governmental or agency approvals for Product
from the proper authorities within the significant markets as denoted in Exhibit
2 in which marketing approval has not been previously obtained, and Cambridge
shall cooperate therewith. Upon Calypte's request, Cambridge shall provide
Calypte with any information in Cambridge's possession or control which is
necessary for Calypte's acquiring such approvals of the Product in the
Territory.
7.3 Cambridge shall use its best efforts to fill orders for
Product within thirty (30) days after the requested delivery date, F.O.B.
Cambridge's plant in Massachusetts or Maryland provided, however, that during
the first three months following the receipt of FDA approval of the use of urine
samples with the Product, Cambridge need only use reasonable efforts to make a
requested delivery date which is less than ninety (90) days after receipt of the
order. Cambridge shall use reasonable efforts, consistent with fulfilling its
obligations to its other customers, to supply Product with the longest possible
shelf life. All Product shall be shipped in finished kits (or bulk packaging if
Cambridge can reasonably accommodate such request) as specified in Calypte's
purchase order. Product shall be in Cambridge's trade dress and bear no
trademarks not owned by either Cambridge or Calypte. [If the Product is the
Urine Blot, the parties will consider a joint Cambridge/Calypte label.] However,
subdistributors may, with prior approval of Cambridge, Calypte and the FDA, afix
a small label identifying themselves as such, provided that such label does not
obscure in any way the trademarks owned by Cambridge or Calypte or any other
text on the packaging. Cambridge shall not be deemed in default of its supply
obligations if Calypte shall be unable to arrange to supply Cambridge with Urine
Control Kits for use in lot release testing of the Product. Notwithstanding any
provision to the contrary, Calypte shall have the right to source substitute
product from a back-up vendor for use only in Calypte's reference laboratory;
such right may be exercised only in the event that Cambridge is unable to supply
Calypte's need for a period exceeding ten (10) business days, and Calypte shall
resume purchases of Product from Cambridge as soon as Cambridge shall have
available sufficient quantities of product to meet Calypte's needs.
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7.4 Cambridge shall notify Calypte immediately should Cambridge
become aware of any defect or condition which may render any of the Product in
violation of the United States Federal Food, Drug, and Cosmetic Act, as amended,
or which may in any way alter the quality or the Product Specifications of any
of the Product. Cambridge shall notify Calypte as far in advance as practical of
any change in the manufacture of the Product which affects the quality or legal
sale of the Product. In the event Cambridge determines that it is necessary to
recall the Product, both parties will cooperate to effect the recall and
Cambridge shall reimburse Calypte for its expenses directly related to the
recall. Cambridge shall permit Calypte (or its designee to whom Cambridge shall
have no reasonable objection), upon not less than ten (10) working days prior
notice, to inspect Cambridge's facility with respect to utilization of Good
Manufacturing Practices in manufacturing the Product.
7.5 Cambridge warrants and represents that its manufacture of the
Product shall be in accordance with current Good Manufacturing Practices, that
the Product complies with the specifications for the Product set forth in the
package insert accompanying each Product kit and any additional release criteria
specified on Exhibit 4 (the "Product Specifications"), and the Product shall not
be adulterated or misbranded within the meaning of the United States Federal
Food, Drug and Cosmetic Act.
7.6 THE FOREGOING WARRANTY SET FORTH IN SECTION 7.5 IS IN LIEU OF
ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Cambridge shall not be liable for any indirect, special, consequential,
incidental or contingent damages incurred by Calypte or any third party due to
any breach of the foregoing warranty. Cambridge's sole liability and Calypte's
exclusive remedy for any breach of the foregoing warranty shall consist of
Cambridge's either replacing the Product or refunding the purchase price
therefor, at Cambridge's sole option.
8. TECHNICAL ASSISTANCE
8.1 Cambridge shall provide training to Calypte's technical
personnel regarding the technical use and support of the Product at a mutually
agreeable site and on mutually agreeable date(s) no more than once per calendar
year. Training shall be provided free of charge, provided that Calypte shall pay
all costs of travel, accommodations and meals and other expenses of its
personnel associated therewith. Cambridge shall supply to Calypte at no charge a
reasonable number of copies of its technical or troubleshooting manuals.
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<PAGE> 39
8.2 At the request of Calypte, Cambridge shall use reasonable
efforts to make its technical personnel available in the Territory to assist
Calypte with any technical problems it may encounter with the Product and which
its personnel have not been able to solve, at 50% of Cambridge's then current
terms, rates and charges for such services provided, however, that Cambridge
shall make no charge for reasonable amounts of telephone consultation.
9. CONFIDENTIALITY.
Calypte shall safeguard as confidential all price lists, customer
lists, quotations and marketing, business and scientific data and information in
any form concerning the Product, and any other information pertaining to the
Product and designated as confidential, and shall not permit their use or
disclosure in any way without the express prior written consent of Cambridge.
Calypte further agrees to surrender and divulge all such confidential
information to Cambridge either on Cambridge's request or on termination of this
Agreement and thereafter shall not retain copies or memoranda of said
information in any form whatsoever.
10. ENTIRE AGREEMENT.
10.1 This Agreement, including Exhibits 1 through 4, sets forth the
entire and only agreement between Cambridge and Calypte pertaining to the
distribution of the Product. Any prior agreements, representations, statements,
negotiations, undertakings, promises or conditions, whether oral or written, are
superseded hereby and shall not be binding upon either party. No waiver,
modification, amendment, addition to or deletion of any of the provisions of
this Agreement shall be effective unless made in writing and signed by an
authorized representative of each of the parties to this Agreement.
10.2 Catalogs, circulars, brochures and similar materials of
Cambridge are issued for general information purposes only and shall not be
deemed to modify or supersede the provisions of this Agreement.
11. OTHER TERMS OF SALE.
11.1 The timely performance of Cambridge's obligations hereunder
shall be limited or excused by events considered "force majeure" including
without limitation acts of war, fire, flood, strike, earthquakes, acts of God,
and permanent Governmental restrictions, and by other events not within the
reasonable control of Cambridge.
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<PAGE> 40
11.2 Cambridge will not change the Product Specifications and
quality of the Product without the prior consent of Calypte, which shall not be
unreasonably withheld.
11.3 Calypte shall carry and maintain liability insurance with such
policy limits and amounts with respect to coverage for personal injury (per
occurrence and in the aggregate) and property damage (per occurrence and in the
aggregate) and exclusions and deductibles as are reasonably acceptable to
Cambridge. A copy of a certificate of such insurance shall be delivered to
Cambridge forthwith after execution of this Agreement. Calypte shall not cancel
such insurance without Cambridge's written consent unless substitute insurance
is obtained prior thereto and to the satisfaction of Cambridge.
12. ASSIGNMENT.
Neither party may assign this Agreement without the prior written
consent of the other party, which consent shall not be unreasonably withheld or
delayed, provided, however, that either party may assign this agreement to the
purchaser of the business unit to which this Agreement pertains, or
substantially all of the assets of such business unit.
13. TERM OF AGREEMENT.
13.1 This Agreement is effective for a three (3) year period
("Initial Period") beginning on the Effective Date and shall continue in effect
thereafter ("Subsequent Periods") unless at least eighteen (18) months prior to
(i) expiration of the Initial Period, or (ii) any termination during the
Subsequent Periods, either party gives the other written notice of its desire
not to continue the Agreement and indicate the effective date of such
termination.
13.2 The provisions in Section 13.1 notwithstanding:
(a) this Agreement may be terminated with immediate
effect upon the giving of written notice by either
party in the event that:
(i) the other party is declared insolvent, or
becomes subject to a petition in bankruptcy
filed by or against it, or is placed under
the control of a receiver, liquidator, or
committee for the benefit of creditors
(excluding, in the case of Cambridge, such
events arising out of the current bankruptcy
proceeding), or
(ii) the other party breaches any material
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<PAGE> 41
obligation imposed upon it by this
Agreement and fails to cure such breach
within thirty (30) days after the giving of
written notice thereof to such other
party; and
(b) Cambridge may terminate this Agreement with immediate
effect upon written notice in the event that Calypte:
(i) assigns or attempts to assign this Agreement
without the prior written consent of
Cambridge, except as provided in Section 12,
or
(ii) ceases to function as a going concern or
abandons the Territory.
14. NOTICES.
Any notice or other communication required to be given hereunder
shall be in writing and be given by air mail, overnight courier or telefax with
a copy by air mail or overnight courier addressed to the parties at their
respective addresses set forth on the first page of this Agreement or to such
other address as any party may designate by written notice to the other party
given in accordance with this Section 14, and shall be deemed to have been given
or rendered upon actual receipt or two (2) days after the date of mailing,
delivery to the courier, or telefax transmission (as the case may be), whichever
is first.
15. EFFECT OF TERMINATION.
15.1 Orders received by Calypte before the termination of this
Agreement shall be executed on the same terms and provisions as during the term
of this Agreement, even if the order delivery is to be effected after the
termination of this Agreement.
15.2 On the termination of this Agreement, Cambridge shall have the
option to purchase from Calypte all Product originally supplied by Cambridge
which may remain unsold and in Calypte's possession at Calypte's purchase price
from Cambridge therefor, provided that such Product are in good and salable
condition with appropriate residual shelf lives. Calypte shall allow inspection
of such Product by Cambridge's personnel for this determination.
16. GOVERNING LAW AND ARBITRATION; VENUE.
16.1 This Agreement shall be deemed made under, governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to conflict of laws provisions thereof.
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<PAGE> 42
16.2 Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration in accordance
with the laws of the Commonwealth of Massachusetts, such arbitration to be
conducted in California, if arbitration is initiated by Cambridge, and in
Massachusetts, if arbitration is initiated by Calypte, and judgment upon the
award rendered by the arbitrator(s) may be enforced in any court of competent
jurisdiction. Nothing contained herein shall prevent the parties from seeking
injunctive or other equitable relief in any court of competent jurisdiction
prior to arbitration.
17. GENERAL.
17.1 Sections 3.5, 3.6, 6.3, 7.6, 9, 15.2, 16 and 17 shall survive
any termination of this Agreement.
17.2 In the event any proceeding is commenced to enforce this
Agreement or otherwise relating to this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees and costs incurred in connection
therewith.
17.3 This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument; however, this Agreement shall be of no
force or effect until executed by both parties.
17.4 Captions and Sections and Subsection headings used herein are
for convenience only, are not a part of this Agreement, and shall not be used in
construing it. Exhibits to this Agreement are incorporated herein by reference.
17.5 Each of the parties agrees to execute and deliver such further
documents and to cooperate in such manner as may be necessary to implement and
give effect to the agreements contained herein.
17.6 This Agreement shall be binding upon and shall inure to the
benefit of each party, its successors and permitted assigns.
17.7 If any provision of this Agreement, or the application
thereof, is held to be invalid or unenforceable, the remainder of the Agreement
shall continue in full force and effect.
17.8 The terms of this Agreement shall supersede the terms of any
subsequent invoice, purchase order or confirmation.
17.9 The parties executing this Agreement warrant that they have
the requisite authority to do so.
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<PAGE> 43
17.10 Calypte shall promptly notify Cambridge of any improper or
unlawful use or infringement of the intellectual property rights of Cambridge
pertaining to the Product which come to its notice. Cambridge will take such
steps and proceedings in respect of said infringements as it may in its sole
discretion think fit and shall have full control of any such proceedings,
including the right to compromise and settle them.
17.11 The failure of either party at any time or times to require
performance of any provisions hereof shall in no manner affect the right at a
later time to enforce the same. No waiver by either party of any condition, or
of any breach of any term, covenant, representation, or warranty contained in
this Agreement, in any one or more instances, shall be deemed to be construed as
a further breach or a waiver of any other condition or of any breach of any
other term, covenant, representation, or warranty.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal and in duplicate as of the Effective Date as stated
hereunder by their duly authorized representatives.
Cambridge Biotech Corporation Calypte Biomedical Corporation
By:_________________________ By:__________________________
____________________________ _____________________________
Name/Title Name/Title
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<PAGE> 44
EXHXBIT 1
Product
HIV-I Western Blot Part No. 98002
[If the Product is the Urine Blot, this will be changed accordingly.]
- 12 -
<PAGE> 45
EXHIBIT 2
TERRITORY
A. Asia (Japan, People's Republic of China, Thailand, South Korea, India,
Australia, Indonesia, New Zealand, Philippines, Bangladesh, Kampuchea, Bhutan,
Taiwan, Vietnam, Myanmar, Laos, Burma, North Korea, Pakistan, Singapore,
Malaysia, Sri Lanka, Nepal and Mongolia):
(1) If the Product is the Serum Blot, Calypte shall have a
non-exclusive right to distribute the Product to its Screening Assay
customers. At the request of Calypte, Cambridge (or its designee) shall
meet with Calypte during the three month period following the Effective
Date to discuss extending Calypte's distribution rights to other
customers. During such period (and, if longer, for thirty (30) days
after the initial meeting of the parties), Cambridge shall not appoint
any other distributors for the Product in Asia. Unless Cambridge shall
have notified Calypte otherwise within three months after the Effective
Date, then, commencing three (3) months after the Effective Date,
Calypte shall also have the nonexclusive right to distribute the
Product to any other of its customers in Asia, provided, however, that
Cambridge may, on ninety (90) days prior written notice to Calypte,
reduce Calypte's distribution rights, on a country-by-country basis, so
that Calypte may resell Product only to its Screening Assay customers.
(2) If the Product is the Urine Blot, Calypte shall have the exclusive
right to distribute the Product to its Screening Assay customers, and a
non-exclusive right, in the case of a Urine Blot with a dual
serum/urine indication, to distribute the Product to any other customer
in Asia, provided, however, that Cambridge may, on ninety (90) days
prior written notice to Calypte, reduce Calypte's distribution rights
so that Calypte may resell Product only to its Screening Assay
customers.
B. Rest of World except United States, Italy, Spain and Portugal:
Calypte shall have the non-exclusive right to distribute the Product to
its Screening Assay customers, which right shall be exercised by
Calypte only in those regions in which in Calypte's reasonable opinion,
the Urine Confirmmation System is not being made available to its
Screening Assay customers in a manner consistent with local regulations
and prevailing commercial conditions. In the event Calypte desires to
exercise such right, it shall give Cambridge ninety (90) days prior
written notice, during which time the parties
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<PAGE> 46
EXHIBIT 2 (cont'd)
shall meet in good faith to explore other means of making the Urine
Confirmation System adequately available.
C. United States:
Calypte shall have no distribution rights in the United States except
to the following accounts: Lab One, Clinical Reference Lab, Osborn
Labs, GIB, Met Life, Calypte Reference Lab, PharmChem, Risk Assessment,
MedExpress, Direct Access Diagnostics and Home Access Health Corp.
D. Significant Markets (Section 7.2): Japan,- People's Republic of China,
Thailand, South Korea. India, Australia, Indonesia
- 14 -
<PAGE> 47
EXHIBIT 3
PRODUCT PURCHASE PRICES
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
Pricing is based on the current 27-test kit configuration. In the event that a
different configuration is introduced, the per strip price will remain as above.
Minimums: [None if the Product is the Serum Blot]:
*Confidential portion has been omitted
and filed separately with the Commission
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<PAGE> 48
EXHIBIT 4
SPECIFICATIONS
Additional Release Criteria (section 7.5): (None if the Product is the Serum
Blot]
- 16 -
<PAGE> 1
EXHIBIT 10.23
LICENSE
AGREEMENT made this 12th day of April 1996 (the "Effective Date") by and
between Cambridge Biotech Corporation ("Cambridge"), a corporation organized
and existing under the laws of the State of Delaware, debtor and debtor in
possession, Case No. 94-43054-JFQ, United States Bankruptcy Court for the
District of Massachusetts, Western Division, and having a place of business at
365 Plantation Street, Biotechnology Research Park, Worcester, MA 01605, U.S.A.,
and Calypte Biomedical Corporation ("Calypte"), a corporation organized and
existing under the laws of the State of California, and having a place of
business at 1440 Fourth Street, Berkeley, CA 94710, U.S.A.
BACKGROUND
In the course of research at New York University ("NYU"), certain
inventions were made relating to the ability to detect antibodies to Human
Immunodeficiency Virus in urine samples. NYU is the owner of these inventions,
and has been granted two United States patents, numbered 4,885,966 and
5,122,446, entitled "Method for Detecting Antibodies to Human Immunodeficiency
Virus". The patents were granted September 12, 1989, and June 16, 1992,
respectively.
Calypte is the exclusive, worldwide licensee of these inventions and the
issued patent and pending patent applications by way of an exclusive license
agreement from NYU and has the right to grant sublicenses thereunder, subject to
the limitations set forth in the NYU agreement attached hereto as Exhibit A, for
the making, using or selling of the inventions which have been disclosed and
claimed in the issued patent and pending patent applications. This Agreement is
subject and subordinate to the NYU Agreement attached hereto as Exhibit A and
any conflicts between this Agreement and the NYU Agreement shall be resolved in
favor of the interpretation and meaning set forth in the NYU Agreement.
RECITALS
WHEREAS, Calypte is the exclusive worldwide licensee of patents
4,865,966 and 5,122,446 and any reissues, renewals, divisions, continuations,
continuations-in-part, substitutes, divisions or extensions thereof, related to
the detection of antibodies to Human Immunodeficiency Virus ("HIV") using
urine samples;
WHEREAS, Cambridge manufactures and distributes a Western Blot
Assay (as hereinafter defined) for the detection of human
<PAGE> 2
antibodies to a variety of HIV proteins and glycoproteins on nitrocellulose
strips using serum and plasma; and
WHEREAS, Cambridge desires to adapt its Western Blot Assay for use with
urine samples, and to license Calypte's Licensed Processes (as hereinafter
defined) and Licensed Patent Rights (as hereinafter defined) to enable it to
manufacture and distribute the resulting Western Blot Assay in the Field of Use
(as hereinafter defined) and to enable its customers to practice the Licensed
Processes in the Field of Use.
NOW, THEREFORE, and in consideration of the mutual covenants and
undertaking set forth herein, the parties agree as follows:
1. DEFINITIONS
1.1 LICENSED PATENT RIGHTS shall mean U.S. Patents No.
4,865,966 and 5,122,446 issued September 12, 1989, and June 6, 1992,
respectively, and any divisions, continuations, or continuations-in-part based
thereon, and any patents which may issue therefrom and any reissues,
re-examinations, or extensions thereof; and any and all foreign patents and
patent applications corresponding to any of the foregoing patents and
applications, as well as such other patents or patent applications listed in
Exhibit B effective as of the date said patents or patent applications are
granted or filed, as the case may be, and the inventions described or claimed
therein.
1.2 FIELD OF USE shall mean only use in diagnostic
applications and use for research purposes utilizing urine samples. The
diagnostic field of use is limited to methods for detecting antibodies to HIV
utilizing HIV lysates immobilized on nitrocellulose strips in a Western Blot
format.
1.3 LICENSED PRODUCT(S) shall mean HIV diagnostic Western Blot
finished goods covered by or made in accordance with LICENSED PATENT RIGHTS OR
finished goods on which LICENSED PROCESSES are practiced. The term "finished
goods" as used herein shall mean any and all products in any form for use by an
end user.
1.4 LICENSED PROCESSES shall mean processes claimed or
otherwise included in the LICENSED PATENT RIGHTS or using Calypte's proprietary
know-how or other technical information and techniques disclosed by Calypte to
Cambridge. For purposes of example only, and not by way of limitation LICENSED
PROCESSES may include (1) services for providing a test result utilizing the
methods of assay covered under the LICENSED PATENT RIGHTS, or (2) services for
providing test results utilizing the LICENSED PRODUCTS.
2
<PAGE> 3
1.5 NET SALES shall mean the amount invoiced by Cambridge on
sales of LICENSED PRODUCTS and/or on sales of services utilizing LICENSED
PROCESSES which amount shall not include:
(a) Amounts repaid or credited by reason of rejection or
return;
(b) Shipping and handling charges, to the extent separately
invoiced; and
(c) Taxes levied on either the Licensed Products or Licensed
Processes, or other governmental charges assessed on the production, sale,
transportation, delivery or use; provided, however, such taxes or charges are
separately stated on purchase orders, invoices or other documents of sale and
are clearly identifiable, and provided further that such taxes and charges are
actually paid by or on behalf of Cambridge.
1.6 FIRST USE shall mean the date of the initial transfer by
Cambridge of any LICENSED PRODUCTS to any third party or date of the first
commercial application of the LICENSED PROCESSES, in each case in the Field of
Use, whichever is earlier, in exchange for consideration of any kind to which
value can reasonably be assigned for purposes of determining Net Sales.
1.7 EARNED ROYALTIES shall mean royalties paid or payable by
Cambridge to Calypte calculated on the basis of NET SALES.
1.8 EFFECTIVE DATE shall mean the date first set forth above.
1.9 PRIME LICENSE shall mean the exclusive license agreement
between NYU and Calypte, as amended, dated August 12, 1993.
1.10 CAMBRIDGE shall mean Cambridge Biotech Corporation, the
Delaware corporation. An AFFILIATE of Cambridge shall mean any corporation or
other business entity controlled by, controlling, or under common control with
Cambridge. For this purpose, "control" shall mean direct or indirect beneficial
or legal ownership of at least fifty percent (50%) interest in such corporation
or business entity.
1.11 WESTERN BLOT OR WESTERN BLOT ASSAY shall mean the
Cambridge HIV Western Blot which is FDA licensed as of the date of execution of
this Agreement, and/or replacements or improved versions thereof. The Western
Blot kit currently consists of nitrocellulose strips onto which HIV I lysate has
been
3
<PAGE> 4
electrophoretically separated and immobilized plus the ancillary buffers,
conjugates, chromagens and other materials customarily provided in the FDA
licensed kit.
1.12 MASTER AGREEMENT shall mean that certain agreement dated
April 12, 1996, by and between Cambridge and Calypte with respect to the
development of a protocol and reagents for use or modification of the Serum
Blot for purposes of confirming the results of the Screening Test using urine
samples.
1.13 DISTRIBUTION AGREEMENT shall mean the distribution
agreement which is Appendix 4 to the Master Agreement.
2. GRANT OF LICENSE
2.1 Subject to the terms and conditions of this Agreement and
the Prime License, Calypte hereby grants to Cambridge an exclusive royalty
bearing license, with no right to sublicense, to make, use, and sell LICENSED
PRODUCTS and to practice the LICENSED PROCESSES under LICENSED PATENT RIGHTS in
the FIELD OF USE throughout the patent and non-patent countries as listed in
Exhibit C.
2.2 If and to the extent there are divisionals, continuations
or continuation-in-part based on or relating to the LICENSED PATENT RIGHTS, and
any patents which may issue therefrom and any reissues, re-examinations or
extensions thereof, as well as any and all foreign patents and patent
applications corresponding thereto or to the LICENSED PATENT RIGHTS, Calypte
shall notify Cambridge of such developments and shall deliver an amended Exhibit
B to Cambridge to reflect any such changes or additions to the LICENSED PATENT
RIGHTS.
2.3 Notwithstanding any provisions to the contrary, end users
of the Licensed Product shall have an implied license to practice the Licensed
Processes in conjunction with their rendering of testing services related to the
detection of antibodies to HIV using urine samples.
3. ROYALTIES. In consideration of the rights granted
hereunder, Cambridge shall make the following payments to Calypte
when the same are due:
3.1 Cambridge shall pay to Calypte EARNED ROYALTIES of
[ * ] ([ * ]%) on the NET SALES of all LICENSED PRODUCTS sold
by Cambridge for use in the FIELD OF USE to its customers and distributors
within the patent countries (Exhibit B) and [ * ]
([ * ]%) within non-patent countries.
* Confidential portion has been omitted
and filed separately with the Commission
4
<PAGE> 5
3.2 Cambridge shall pay to Calypte EARNED ROYALTIES of
[ * ] ([ * ]%) calculated on NET SALES of all services utilizing
LICENSED PROCESSES sold by Cambridge.
3.3 Calypte and Cambridge recognize that the Western Blot
Assay may be used by customers for use with samples other than urine, and agree
that royalties shall be payable hereunder only with respect to sales of Western
Blots used with urine samples. In view of the difficulty of determining the
quantity of Western Blot Assays used with urine samples in any given royalty
reporting period, the parties hereby agree to calculate quantities subject to
royalties as follows:
(i) Calypte plans to sell a Urine Control Kit, as
defined in the Master Agreement, containing three 10 ml
vials each of high positive, low positive and negative
control. The parties estimate that, for each Urine Control
Kit sold, approximately 270 Western Blot Assays (10
27-strip kits) will be run by customers. Calypte agrees to
promptly report to Cambridge after the end of each
calendar quarter, the number of Urine Control Kits sold,
and for each Urine Control Kit sold, Cambridge shall pay a
royalty on 10 Western Blot Assay kits (based on an average
net selling price of all of its Western Blot Assays,
calculated in accordance with Net Sales); provided,
however, that (a) no royalty shall be due with respect to
sales attributable to the first 50 Urine Control Kits sold
by Calypte each calendar year; and (b) a royalty
adjustment shall be made with respect to expired
Urine Control Kits with respect to which a royalty was
previously paid. Calypte shall report to Cambridge, within
30 days after the end of each calendar year, the number of
such expired Urine Control Kits in the inventory of its
distributors and if known, its customers.
(ii) Either party may request a review of the above
method of calculating royalties by delivering notice on or
before December 1 of any year. In such event, the parties
shall negotiate in good faith a method or methods which
adequately and reasonably approximate the number of
Western Blot Assays used with urine samples. Such new
method, if any, shall be effective for the following
calendar year and
* Confidential portion has been omitted
and filed separately with the Commission
5
<PAGE> 6
thereafter unless changed in accordance with this section.
4. PAYMENTS AND REPORTS
4.1 Cambridge agrees to notify Calypte in writing within three
(3) business days after the date of the FIRST USE.
4.2 Beginning with the date of FIRST USE, Cambridge shall
remit to Calypte EARNED ROYALTIES within thirty (30) days after the close of
each calendar quarter, which is commonly known as the last day of March, June,
September, and December or within thirty (30) days following receipt of
Calypte's Urine Control Kit report, whichever is later. Any EARNED ROYALTIES not
paid within the thirty (30) day time period shall be deemed past due royalties.
Past due royalties shall bear interest at the rate of the lesser of [ *
] per annum or the maximum rate permitted by applicable law, which interest
shall accrue commencing on the date the payment was originally scheduled to be
paid and shall continue to accrue until paid in full.
4.3 Cambridge shall also prepare for each calendar quarter
after the date of FIRST USE, a written report in form and substance acceptable
to Calypte setting forth, among other things (1) the NET SALES and the EARNED
ROYALTIES payable thereon, including a detailed listing of all LICENSED PRODUCTS
sold and all deductions or exclusions from NET SALES, if any and (2) the NET
SALES and the EARNED ROYALTIES payable thereon, including a detailed listing of
the services provided utilizing LICENSED PROCESSES and of all deductions or
exclusions from NET SALES. The reports required by this Agreement shall be
certified by an officer of Cambridge to be correct to the best of Cambridge's
knowledge and information.
4.4 All amounts payable to Calypte shall be in United States
Dollars. In the event that any LICENSED PRODUCT or services utilizing LICENSED
PROCESSES shall be sold for funds other than in United States Dollars the NET
SALES of such product shall first be determined in the foreign funds and then
converted into the equivalent United States Dollars at:
(a) The rate applicable to the transfer of funds arising
from royalty payments as established by the exchange control authorities of the
country of which such funds are the national currency, for the last business day
of the accounting period for which payment is thus made; or
(b) If there is no rate so applicable, that the buying
rate for such foreign funds as published by the Wall
* Confidential portion has been omitted
and filed separately with the Commission
6
<PAGE> 7
Street Journal on the last business day of such calendar accounting period.
5. BOOKS AND RECORDS
5.1 Cambridge shall keep complete and accurate books and
records of all business activities relating to the subject matter of this
Agreement including records of EARNED ROYALTIES on LICENSED PROCESSES and
LICENSED PRODUCTS made, used, and sold under this Agreement for a period of at
least three (3) years following a given reporting period. These books and
records shall be available during normal business hours for inspection at the
expense of Calypte by a representative selected by Calypte and reasonably
acceptable to Cambridge, after providing ten days' prior written notice to
Cambridge, for the sole purpose of verifying and authenticating reports and
payments hereunder. The representative of Calypte shall disclose to Calypte only
such financial information of Cambridge as necessary for Calypte to be assured
of the accuracy of the reports submitted and payments made under this Agreement.
6. NOTICE
6.1 Any notice required by this Agreement shall be sent by
registered or certified mail, postage prepaid, telex, facsimile, courier service
or personal delivery at the addresses designated below or to another address as
may be designated by written notice. Unless otherwise so specified, any notices
given hereunder shall be effective as of the date of the date of dispatch.
For Calypte: For Cambridge:
Calypte Biomedical Corporation Cambridge Biotech Corporation
1440 Fourth Street 365 Plantation Street
Berkeley, CA 94710 Worcester, MA 01605
Attn: President Attn: President
7. TERM AND TERMINATION
7.1 The term of this Agreement, unless sooner terminated as
provided herein, shall extend from the EFFECTIVE DATE until the expiration of
the last of the patents included in LICENSED PATENT RIGHTS.
7.2 Upon any breach of, or default under, this Agreement,
Calypte may terminate this Agreement by giving ninety (90) days' written notice
to Cambridge of such termination and identifying the nature of the breach or
default; such termination shall take effect at the end of the ninety-day period,
unless
7
<PAGE> 8
during such ninety-day period Cambridge cures such breach or default to
Calypte's reasonable satisfaction. If the Master Agreement or the Distribution
Agreement is terminated by Calypte for cause pursuant to the terms set forth
therein, this Agreement shall automatically terminate concurrently with the
termination of such other agreements. In the event the Distribution Agreement
is terminated for any other reason (other than for cause by Calypte) or expires
without renewal, the license granted under this Agreement shall become
non-exclusive for the duration of the remaining term of this Agreement, subject
to early termination as provided for hereunder. Furthermore, in the event this
Agreement becomes non-exclusive as provided above, Calypte shall have no
obligation to support or share in the cost of insurance as set forth in Section
12.14 nor shall it have any obligations whatsoever to share in the costs set
forth in Section 4.3.5 of the Master Agreement relative to testing of Serum
Blot. Upon notice of termination of this Agreement, Cambridge will immediately
undertake such actions as may be required by the United States Food and Drug
Administration to remove the urine application from Product labeling and report
to Calypte a timeline for completion of same.
7.3 Cambridge has the right to terminate this Agreement by
giving twenty-four (24) months, prior written notice to Calypte.
7.4 Termination of this Agreement shall not affect any rights
or obligations accrued prior to the date of termination, including Cambridge's
obligation to pay all EARNED ROYALTIES and Cambridge's obligation to indemnify
Calypte, provided however, that Cambridge's obligation to indemnify Calypte
shall extend for a period of ten (10) years after such termination. Upon
termination of this Agreement, all unpaid EARNED ROYALTIES due to Calypte shall
become due and payable upon delivery of the next quarterly report pursuant to
section 4.3 hereof.
7.5 Waiver by Calypte of a single default or breach or a
succession of defaults or breaches shall not deprive Calypte of any right to
terminate this Agreement pursuant to the terms hereof upon the occurrence of
any subsequent default or breach.
7.6 This Agreement shall automatically expire or terminate on
the termination or expiration of the PRIME LICENSE, notwithstanding the fact
that Calypte shall exert its best efforts to avoid termination of the Prime
License for cause. In the event that the PRIME LICENSE is converted from an
exclusive to a nonexclusive license, Cambridge may at its option extend the
duration of this Agreement with Calypte on terms and conditions mutually
agreeable to both parties.
8
<PAGE> 9
8. NEGATION OF WARRANTIES AND INDEMNITY
8.1 Calypte makes no representations or warranties as to the
validity or scope of any LICENSED PATENT RIGHTS.
8.2 Calypte makes no representations or warranties that the
manufacture, use, sale or other disposal of the LICENSED PRODUCTS or the
practice of the LICENSED PROCESSES is or will be free from infringement of
patents of third parties.
8.3 Calypte's liability for any claim or demand by Cambridge
shall be limited to and based solely on any material breach of representation or
warranty as set forth therein. EXCEPT AS OTHERWISE SET FORTH HEREIN CALYPTE
HEREBY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. THE SOLE AND ENTIRE MAXIMUM LIABILITY FOR ANY AND ALL LOSS CLAIM,
DAMAGE OR LIABILITY OF ANY KIND SHALL CONSIST OF REPLACEMENT OF THE LICENSED
PRODUCT. IN NO EVENT SHALL CALYPTE BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL
DAMAGES. Cambridge shall make no statements, representations or warranties
whatsoever to any third parties which are inconsistent with the above
disclaimer.
8.4 Cambridge shall defend indemnity, and hold harmless
Calypte and NYU, their directors, officers, employees and agents from and
against any and all claims, demands, damages, losses and expenses of any nature,
including attorney's fees, for but not limited to death, personal injury,
illness, property damage or product liability arising from or in connection with
any one or more of the following;
(a) the use by Cambridge of any method or process related
to the LICENSED PATENT RIGHTS; or
(b) any use, sale or other disposition of any of the
LICENSED PRODUCTS by Cambridge, or any statement. representation or warranty
made by Cambridge with respect thereto; or
(C) the use of the LICENSED PRODUCTS or LICENSED PROCESSES
by any person.
Calypte shall reasonably cooperate with Cambridge in defending any such
claim, provided Cambridge and/or its insurance carrier shall reimburse Calypte
for all out of pocket expenses incurred in connection therewith. Calypte shall
be entitled to receive information regarding the status of any such matter upon
reasonable notice and shall be entitled to retain counsel on its
9
<PAGE> 10
own behalf and at its own expense to monitor the litigation or if Calypte is not
satisfied with the defense provided by Cambridge for any reason. The rights and
obligations of this paragraph shall survive termination or expiration of this
Agreement. Cambridge shall have the exclusive right to control the defense of
any such claim; provided, however, that Cambridge shall not settle any such
claim without first consulting with Calypte.
9. LAWS AND REGULATIONS.
9.1 Cambridge shall comply with all foreign and United States
federal, state, and local laws regulations, rules and orders applicable to the
testing, production, transportation, packaging, labeling, sale and use of the
LICENSED PRODUCTS and services utilizing LICENSED PROCESSES.
10. USE OF NAMES.
10.1 Cambridge shall not use the names "NYU," "New York
University," the names of the inventors, or the name "Calypte Biomedical
Corporation" or any other name or mark by which NYU or Calypte may be identified
for any purpose without prior written consent obtained from the respective
parties.
11. PATENT NOTICE.
11.1 Cambridge shall apply the patent marking notices required
by the laws of the United States and relevant countries or as reasonably
requested by Calypte.
12. MISCELLANEOUS PROVISIONS.
12.1 This Agreement constitutes the entire understanding
between the parties with respect to the subject matter hereof and supersedes and
replaces all prior agreements, understandings, writings and discussions between
the parties related to said subject matter.
12.2 This Agreement may be amended only by a written
instrument executed by the parties.
12.3 Except as otherwise set forth herein, without prior
written approval of Calypte, which approval shall not be unreasonably withheld,
this Agreement may not be assigned or transferred, in whole or in part, by
Cambridge to any other party However on a one-time-only basis, Cambridge
shall be entitled to assign this license, but only under and pursuant to the
following terms and conditions: (i) such assignment shall be made only to a
business entity that acquires from Cambridge its entire diagnostics division and
business; and (ii) Cambridge and
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<PAGE> 11
Cambridge's assignee shall execute an "Assignment Agreement" in the form
satisfactory to NYU and a copy thereof shall be provided to NYU for review. In
the event Cambridge only divests the Western Blot part but not all of its
diagnostics division and business then Cambridge's right to assign shall be
subject to Calypte's and NYU's approval, which approval shall not be
unreasonably withheld.
12.4 This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns.
12.5 This Agreement shall be governed and construed and
interpreted in accordance the laws of the State of California.
12.6 If any provision(s) of this Agreement are or become
invalid, or ruled illegal by any court of competent jurisdiction, or are deemed
unenforceable under then current applicable from time to time in effect during
the term hereof, it is the intention of the parties that the remainder of this
Agreement shall not be affected thereby. It is further the intention of the
parties that, in lieu of each such provision which is invalid, illegal or
unenforceable, there be substituted or added as part of this Agreement a
provision which shall be as similar as possible in economic and business
objectives as intended by the parties to such invalid, illegal or unenforceable
provision.
12.7 In no event shall either party be liable to the other for
any special, or incidental, or consequential, or indirect damages arising in
any way out of this Agreement, however caused, and on any theory of liability.
This limitation will apply even if the other party has been advised of the
possibility of such damage.
12.8 This Agreement may be executed in counterparts, each of
which shall be deemed an original, but both of which together shall constitute
one and the same instrument.
12.9 Cambridge agrees that immediately after the execution of
this Agreement, Calypte may provide a copy of this Agreement to NYU for their
review and consideration.
12.10 The parties hereto expressly agree that this Agreement
is subject and subordinate to the Prime License and to the extent there are
provisions set forth herein which are inconsistent or conflicting with the Prime
License, then such provisions shall be revised so as to be non-conflicting and
consistent with the proscription of the Prime License.
11
<PAGE> 12
12.11 Cambridge hereby unconditionally agrees that it will not
grant nor attempt to grant any sublicenses of any kind based on the rights
granted hereunder.
12.12 Cambridge agrees to obtain and maintain insurance and to
provide evidence thereof directly to NYU and Calypte and to indemnify NYU in the
manner described below. Cambridge agrees that NYU is an intended third party
beneficiary of this Agreement for the purpose of enforcing such indemnification
and insurance provisions. NYU shall also have the right to audit Cambridge's
records as they may relate to the subject matter of this Agreement at its own
expense.
12.13 Cambridge shall indemnify, defend and hold harmless NYU
and its trustees, officers, medical and professional staff, employees, students
and agents and their respective successors, heirs and assigns (the
"Indemnitees"), against any liability, damage, loss or expense (including
reasonable attorneys' fees and expenses of litigation) incurred by or imposed
upon the Indemnitees or any one of them in connection with any claims, suits,
actions, demands or judgments arising out of the design, production,
manufacture, sale, use in commerce or in human clinical trials, lease, or
promotion by Cambridge of any Licensed Product, Licensed Process or service
relating to or developed pursuant to this Agreement or the Prime License.
Cambridge agrees at its own expense, to provide attorneys reasonably acceptable
to NYU to defend against any actions brought or filed against any Indemnitee
with respect to the subject of indemnity to which such Indemnitee is entitled
under the Prime License, whether or not such actions are rightfully brought.
12.14 At such time as the Licensed Products or Licensed
Processes are distributed or practiced, as the case may be, Cambridge shall
procure and maintain policies of comprehensive general liability insurance in
amounts not less than five million dollars (US $5,000,000) per incident and five
million dollars (US $5,000,000) annual aggregate and naming the Indemnitees and
Calypte as additional insureds. Such comprehensive general liability insurance
shall provide (i) product liability coverage and (ii) broad form contractual
liability coverage for Cambridge's indemnification under the section above. The
minimum amounts of insurance coverage required under this section shall not be
construed to create a limit of Cambridge's liability with respect to its
indemnification of Indemnitees under the sections indicated above. Cambridge
shall provide Calypte and NYU with written evidence of such insurance upon
request. Cambridge shall provide NYU and Calypte with written notice at least
ninety (90) days prior to the cancellation, non-renewal or material change in
such insurance. If Cambridge does not obtain replacement
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<PAGE> 13
insurance providing comparable coverage within ninety (90) days of such average
termination, Calypte may terminate this Agreement. Cambridge shall maintain such
comprehensive general liability insurance during the period that any product,
process or service is being commercially distributed or sold pursuant to this
Agreement, and for a period of seven (7) years after the termination or
expiration of this Agreement. Calypte and Cambridge shall share any additional
insurance premium cost on a 50/50 basis as a direct result of increasing the
coverage for the Licensed Products or Licensed Processes from Cambridge's
existing policy limit to the $5,000,000 limit set forth above.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed.
Calypte Biomedical Corporation Cambridge Biotech Corporation
By: /s/ Jack Davis By:
---------------------------- ---------------------------
Name: Jack Davis Name:
---------------------------- ---------------------------
Title: President & CEO Title: President & CEO
---------------------------- ---------------------------
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<PAGE> 14
EXHIBIT A
NYU/CALYPTE
LICENSE AGREEMENT
This Agreement, effective as of Aug. 12th, 1993 (the "Effective Date"),
is by and between:
NEW YORK UNIVERSITY (hereinafter "NYU"), a corporation organized and
existing under the laws of the State of New York and having a place of business
at 70 Washington Square South, New York, New York 10012
AND
CALYPTE BIOMEDICAL CORPORATION (hereinafter "CORPORATION"), a
corporation organized and existing under the laws of the State of California
having its principal office at 1440 Fourth Street, Berkeley, California 94710.
RECITALS
WHEREAS, NYU is the owner of certain inventions relating to the
detection of antibodies to human immunodeficiency virus (HIV) in urine, all as
more particularly described in the NYU Patents (as hereinafter defined);
WHEREAS, CORPORATION is engaged in the research, development,
manufacture, sale, use and distribution of products for the detection of
antibodies to HIV in urine; and
WHEREAS, subject to the terms and conditions hereinafter set forth, NYU
is willing to grant to CORPORATION and CORPORATION is willing to accept from NYU
the License (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereto hereby agree as follows:
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1. Definitions.
Whenever used in this Agreement, the following terms shall have the
following meanings:
a. "Calendar Year" shall mean any consecutive period of twelve months
commencing on the first day of January of any year.
b. "Combination Product" shall mean a product containing Licensed
Product(s) combined or bundled with other non-Licensed Product(s)
in a single package.
c. "Corporation Entity" shall mean any company or other legal entity
which controls, or is controlled by, or is under common control
with, CORPORATION; control means the holding of fifty and one tenth
percent (50.1%) or more of (i) the capital stock and/or (ii) the
voting rights and/or (iii) the right to elect or appoint directors.
d. "HORL" shall mean Home Office Reference Laboratory. Inc., a
corporation organized and existing under the laws of the State of
Delaware, having its principal offices at 10310 West 84th Terrace,
Lenexa, Kansas 66214, and shall include HORL Corporation Entities
(as such term is defined in the NYU-HORL Agreement). The "NYU-HORL
Agreement" shall mean the agreement between NYU and HORL dated
November 15, 1989 and amended in April 1992 with respect to the
practice of NYU Patents for use in testing for insurance purposes,
a copy of which agreement and amendment, with financial terms
redacted, is annexed hereto as Appendix III.
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<PAGE> 16
e. "License" shall mean the exclusive worldwide license under the NYU
Patents (as hereinafter defined) to make, have made, use, sell or
otherwise distribute the Licensed Products (as hereinafter
defined), during the term of this Agreement.
f. "Licensed Product(s)" shall mean any product for the analysis of a
human urine sample of an individual to assay HIV antibodies in
urine covered by one or more Valid Claims (as hereinafter defined)
of the NYU Patents.
g. "Net Sales" shall mean the total amount received in connection with
sales of the Licensed Products and/or performance of Tests and/or
Confirmatory Tests (as hereinafter defined), after deduction of all
the following to the extent applicable:
i) all trade, case and quantity credits, discounts,
refunds or rebates;
ii) allowances or credits for returns;
iii) sales commissions; and
iv) sales taxes (including value-added tax).
h. "NYU Patents" shall mean U.S. patents and patent applications
(including U.S. Patent No. 4,865,966, issued on September 12, 1989,
and U.S. Patent No. 5,122,446, issued on June 16, 1992), and
foreign counterpart patent applications and patents thereto; owned,
assigned or assignable to NYU, and any reissues, renewals,
divisions, continuations, continuations-in-part, substitutes,
divisions or extensions thereof, and
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pending applications therefor, including those identified in
annexed Appendix I and forming an integral part hereof. which are
related to the detection of antibodies to HIV in urine.
i. "NYU Scientist" shall mean Dr. Alvin Friedman-Kien of NYU.
j. "Sublicensee" shall mean any third party to whom a sublicense is
granted by CORPORATION as described in Section 5.c. below.
k. "Test" shall mean a test of a human urine sample to assay HIV
antibodies and which is covered by one or more Valid Claims (as
hereinafter defined) of the NYU Patents. "Confirmatory Test" shall
mean a Test (as defined in this subsection) used to verify a result
obtained by using a Licensed Product.
1. "Valid Claim" shall mean a claim of an issued NYU Patent which has
not expired, lapsed, become abandoned or dedicated to the public or
been declared or rendered invalid or unenforceable by reason of
reissue, reexamination, disclaimer or final judgment by a court of
competent jurisdiction or administrative agency from which no
appeal can be or is taken.
2. Effective Date.
This Agreement shall be effective as of the Effective Date and shall
remain in full force and effect until it expires or is terminated in
accordance with its provisions.
3. Title.
Subject to the terms and conditions of this Agreement, it is hereby agreed
that all right, title and interest, in and to the NYU Patents, vests
solely in NYU.
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<PAGE> 18
4. Patents and Patent Applications.
a. CORPORATION shall, simultaneously with the signing of this
Agreement pay NYU the sum of [ * ] dollars
(U.S.$ [ * ]), being the amount of all costs and fees
incurred by NYU up to the Effective Date in connection with the
NYU Patents.
b. All applications and proceedings with respect to the NYU Patents
after the Effective Date shall be prosecuted and maintained by NYU
at the expense of CORPORATION. Against the submission of detailed
quarterly invoices, CORPORATION shall reimburse NYU for all
reasonable out of pocket costs and fees incurred by NYU during the
term of this Agreement, in connection with the drafting, filing,
maintenance, prosecution, and issuance of the NYU Patents. Such
reimbursable costs and fees shall not include NYU overhead charges
and/or internal costs. NYU shall not be entitled to reimbursement
for patent filing, prosecution and maintenance expenses in excess
of ten thousand dollars. (U.S. $10,000) per year with respect to
the NYU Patents unless NYU has obtained the prior written consent
of CORPORATION to such expenses. In the event CORPORATION refuses
to consent to such expenditures on a particular patent or patent
application, NYU shall be free to pursue patent protection with
respect to that particular patent or application at NYU's expense
and all rights to that patent or application shall revert to NYU
and CORPORATION shall have no right to make, use, sell, manufacture
or have manufactured products which are covered by a Valid Claim
* Confidential portion has been omitted
and filed separately with the Commission
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<PAGE> 19
of such patent or application. However, CORPORATION's License under
this Agreement shall continue with respect to all other NYU
Patents.
c. CORPORATION shall have the right to approve and comment on the
strategy and prosecution of the NYU Patents. NYU shall not abandon
any NYU Patents without first consulting with CORPORATION and
obtaining CORPORATION's consent for such abandonment unless
abandonment is in favor of a subsequent patent application claiming
the subject matter of the proposed abandoned application and the
patentability of the subject matter is not negatively affected.
Both parties agree to cooperate with each other regarding the NYU
Patents, and NYU agrees to use its best efforts to obtain and
maintain the NYU Patents.
d. Nothing herein contained shall be deemed to be a warranty by NYU
that
i) NYU can or will be able to obtain any patent or
patents on any patent application or applications in
the NYU Patents or any portion thereof, or that any
of the NYU Patents will afford adequate or
commercially worthwhile protection, or
ii) that the manufacture, use, or sale of any Licensed
Product will not infringe any patent(s) of a third
party.
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<PAGE> 20
5. Grant of License.
a. Subject to the terms and conditions hereinafter set forth, NYU
hereby grants to CORPORATION and CORPORATION hereby accepts from
NYU the License as defined in Section 1.e.
b. The License granted to CORPORATION in Section 5.a. hereto shall
remain in force, if not previously terminated under the terms of
this Agreement, until the expiration date of the last to expire of
the NYU Patents.
c. CORPORATION shall be entitled to grant sublicenses under the
License to a Corporation Entity or to other third parties. All
sublicenses shall only be granted by CORPORATION under a written
agreement, copies of which shall be provided by CORPORATION to NYU
and HORL as soon as practicable after the signing thereof. Each
sublicense granted by CORPORATION hereunder shall be subject and
subordinate to the terms and conditions of this Agreement and shall
contain (inter-alia) the following provisions:
(1) the sublicense shall expire automatically on the termination
of the License;
(2) the sublicense shall not be assignable, in whole or in part:
(3) the Sublicensee shall not grant further sublicenses;
(4) the sublicense agreement shall include i) an obligation by
the Sublicensee to obtain and maintain insurance and to
provide evidence thereof to NYU and to indemnify NYU as
described in Sections 12 and 13 of this Agreement and the
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<PAGE> 21
sublicense agreement shall state that NYU is an intended third
party beneficiary of such sublicense agreement for the
purposes of enforcing such indemnification and insurance
provisions, and ii) the text of Section 15.b. and 15.d. of
this Agreement, applicable to Sublicensee, and shall state
that HORL is an intended third party beneficiary of such
sublicense agreement for the purpose of enforcing such
provisions for so long as Section 15 is applicable to this
Agreement.
(5) the breach by any Sublicensee of its obligations to
CORPORATION shall not be deemed a breach by CORPORATION and
such breach shall not, in any way, affect CORPORATION's rights
and obligations under this Agreement. However, in the event of
a material breach (including without limitation, a failure to
pay royalties due) by a Sublicensee, CORPORATION shall
promptly notify NYU of the breach and either promptly
terminate the sublicense agreement or shall continue to be
obligated for payment to NYU of all royalties due from the
Sublicensee.
(6) the right of NYU to audit Sublicensee's records at its own
expense.
6. Payments for License.
a. In consideration for the grant and during the term of the License,
CORPORATION shall pay to NYU:
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<PAGE> 22
(1) on the Effective Date, a non-refundable, non-creditable
(except as provided in Section 11.j.) license issue fee of
[ * ] dollars (U.S. $[ * ]);
and
(2) a royalty of [ * ] percent ([ * ]%) of the Net Sales of
Licensed Product(s) by CORPORATION, Corporation Entity and
Sublicensees in any country in which the Licensed Product is
covered by a Valid Claim(s); and
(3) a royalty of [ * ] percent ([ * ]%) of the Net Sales for each
Test and Confirmatory Test by CORPORATION, Corporation
Entity, and Sublicensees in any country in which the Test or
Confirmatory Test is covered by a Valid Claim; and
(4) a royalty of [ * ] percent ([ * ]%) of Net Sales of
Licensed Products by CORPORATION, Corporation Entity or
Sublicensees in any country in which an NYU Patent has not
issued if such Licensed Product was manufactured in a country
in which the Licensed Product is covered by a Valid Claim(s).
(5) If more than one of the royalty rates should be applicable to
any transaction or to any Licensed Product, only a single
royalty shall be due and that royalty shall be computed at the
highest applicable rate. No royalties shall be due upon sales
of Licensed Products to and between Corporation Entities or
Sublicensee(s) for further sale; provided, however, that
royalties with respect to such sales shall be payable upon a
sale of such Licensed Products to any person or entity that is
not either a Corporation Entity or a Sublicensee.
* Confidential portion has been omitted
and filed separately with the Commission
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<PAGE> 23
(6) If Licensed Product is sold as a Combination Product, then the
Net Sales attributable to such Licensed Product shall be based
upon the ratio of the list price for the Licensed Product to
the combined list prices of the Licensed Product and the other
non-Licensed Product(s); provided that where there is no list
price for a component of the Combination Product, the parties
agree to negotiate the appropriate ratio in good faith. If
CORPORATION desires to sell a Combination Product for which
there is no list price for components, CORPORATION shall
notify NYU and commence such negotiations in good faith. In
such case, CORPORATION shall have no right to sell such
Combination Product until and unless NYU and CORPORATION shall
have concluded a written agreement with respect to the ratio
of royalties to be paid by CORPORATION with respect to such
Combination Product(s).
b. For the purpose of computing the royalties due to NYU hereunder,
the year shall be divided into four quarters ending on March 31,
June 30, September 30 and December 31. Not later than sixty (60)
days after the end of each quarter in each Calendar Year during the
term of the License, CORPORATION shall submit to NYU a full and
detailed report of payments due NYU under the terms of this
Agreement for the preceding quarter year (hereinafter "the
Quarterly Report"), setting forth the Net Sales and all royalties
or other consideration upon which such payments are computed and
including at least
i) total sales of Licensed Products;
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<PAGE> 24
ii) the deductions permitted under subsection 1.g. to
arrive at Net Sales of Licensed Products;
iii) total amount received with respect to Tests and
Confirmatory Tests;
iv) the deductions permitted under subsection 1.g. to
arrive at Net Sales of Tests and Confirmatory Tests;
and
v) the royalty computations on Licensed Products, Tests
and Confirmatory Tests.
The Quarterly Report shall separately state the total Net Sales, Tests and
Confirmatory Tests of CORPORATION, Corporation Entity and Sublicensees
with respect to Net Sales, Tests and Confirmatory Tests to persons or
entities engaged in testing for insurance purposes.
If no royalties or other payments are due, a statement shall be sent to
NYU stating such fact. Payment of the full amount of any royalties or
other payments due to NYU for the preceding quarter year shall accompany
each Quarterly Report. CORPORATION shall keep for a period of at least
three (3) years after the date of entry, full, accurate and complete books
and records consistent with sound business and accounting practices and in
such form and in such detail as to enable the determination of the amounts
due to NYU from CORPORATION pursuant to the terms of this Agreement.
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<PAGE> 25
As part of CORPORATION's normal annual audit or a special audit if sooner,
the payments and Quarterly Reports will be verified for accuracy. In the
event a correction needs to be made regarding the payment and/or Report,
CORPORATION will make the appropriate payment and send NYU a new Report
within sixty (60) days.
c. On reasonable notice and during regular business hours, NYU or the
authorized representative of NYU shall each have the right to inspect the
books of accounts, records and other relevant documentation of CORPORATION
or of Corporation Entity and of Sublicensees insofar as they relate to the
production, marketing and sale of the Licensed Products or Tests, in order
to ascertain or verify the amount of royalties and other payments due to
NYU hereunder, and the accuracy of the information provided to NYU in the
aforementioned reports. This inspection shall be at NYU's expense,
provided, however, that all information received as a result of the
inspection shall be maintained in confidence by NYU and its
representatives; provided, however, that NYU shall have the right to use
such information to enforce the terms of this Agreement. NYU's right to
inspect must be exercised within three (3) years of NYU's receipt of the
Report which NYU desires to verify. In the event an audit conducted by NYU
demonstrates amounts due to NYU in excess of ten percent (10%) of the
total amount paid to NYU with respect to any Calendar Year, CORPORATION
shall reimburse NYU for the expenses of NYU's audit.
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<PAGE> 26
d. Beginning on January 1, 1994 and continuing thereafter until this
Agreement shall terminate or expire. CORPORATION agrees that if the
total amounts paid to NYU under subsection 6.a. hereof do not amount
to [ * ] dollars (U.S.$ [ * ]) in the 1994 Calendar
Year, [ * ] dollars (U.S.$ [ * ]) in the 1995
Calendar Year [ * ] (U.S.$ [ * ]) in the
1996 Calendar Year and [ * ] dollars (U.S.$ [ * ])
[ * ] dollars (U.S.$ [ * ]) in the 1997 Calendar Year and each
Calendar Year thereafter, CORPORATION will pay to NYU within ninety
(90) days after the end of each such Calendar Year, as additional
royalty, the difference between the amount of the total royalties
paid to NYU by CORPORATION in such Calendar Year and the amount
stated herein with respect to such Calendar Year (hereinafter
Minimum Annual Royalty), failing which NYU shall have the right,
upon written notice to CORPORATION, to convert the License to a
non-exclusive license, having the same royalty rates as in Section
6.a. In the event the License has been converted to a non-exclusive
license, CORPORATION shall no longer be obligated to pay the
Minimum Annual Royalty of this subsection.
7. Method of Payment.
Royalties and any other payments due to NYU hereunder shall be paid to NYU
in United States dollars. Any such royalties on or other payments relating
to transactions in a foreign currency shall be
* Confidential portion has been omitted
and filed separately with the Commission
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<PAGE> 27
converted into United States dollars based on the conversion rate for the
particular currency as listed In the Wall Street Journal on the last
business day of the quarter for which such royalty or other payment is
due. If restrictions on the transfer of currency exist in any country such
as to prevent CORPORATION from making payments in the United States or in
U.S. dollars, CORPORATION shall make payments due in such country In local
currency and/or deposit such payments in a local bank designated by NYU.
8. Development and Commercialization
a. CORPORATION agrees that It is developing at least one Licensed
Product(s), and will pursue reasonable activities necessary in order
to attempt to obtain the approval of the Food and Drug
Administration (FDA) or other appropriate authority, for the
production, use and sale of the Licensed Product(s) by CORPORATION
or its Corporate Entity.
b. CORPORATION undertakes to begin the regular commercial production,
use and sale of the Licensed Products In good faith and as soon as
practicable, subject to FDA or other governmental agency license or
approval.
9. NYU's "March-in" Rights and Obligations.
a. During the period commencing upon the Effective Date and continuing
for forty (40) months thereafter, CORPORATION shall
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<PAGE> 28
have no obligation to grant sublicenses under the License. Following such
initial 40-month period, CORPORATION undertakes to negotiate and grant a
sublicense under the License to any interested party and in the event
CORPORATION has not granted a sublicense to said interested party after a
six-month period of good faith negotiations with such party, NYU shall
have "march-in" rights to grant a non-exclusive license in and to the NYU
Patents directly to such third party. In the event NYU grants a
non-exclusive license with the interested party which contains terms more
favorable than those under Section 6.a.(2)-(4) of this Agreement, NYU
agrees that this Agreement shall be deemed appropriately amended to
provide such terms to CORPORATION and its Sublicensees, effective
immediately upon execution of the non-exclusive license. Therefore,
CORPORATION and its Sublicensees shall have most favored licensee status.
b. In the event NYU grants a non-exclusive license pursuant to this Section
9, NYU shall provide CORPORATION with a copy of the license agreement and
pay to CORPORATION [ * ] percent ([ * ]%) of any
monetary consideration (including royalties on Net Sales) received by NYU
under the terms of, or as a consideration for the grant of, a
non-exclusive license of any rights in and to the NYU Patents. Such
non-exclusive license shall be in writing, shall not be assignable in
whole or in part and shall not include the right to grant sublicenses
under the non-exclusive license. Such non-exclusive license shall contain
terms substantially identical to Section 15 of this Agreement, for so long
as
* Confidential portion has been omitted
and filed separately with the Commission
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<PAGE> 29
Section 15 is applicable to this Agreement. A breach by the non-exclusive
licensee of its obligations shall not be deemed a breach by NYU and such
breach shall not, in any way, affect NYU's rights and obligations under
this Agreement. However, in the event the non-exclusive licensee fails to
pay royalties due to NYU, and in which CORPORATION shares pursuant to this
Section, NYU shall notify CORPORATION and if requested by CORPORATION, NYU
shall promptly terminate the non-exclusive license agreement. In the event
the non-exclusive licensee grants sublicenses in breach of the
non-exclusive license with NYU and CORPORATION demonstrates conclusively
to NYU that such sublicensing has occurred, NYU shall promptly terminate
the nonexclusive license agreement.
c. For the purpose of computing the payments due to CORPORATION under this
Section 9, the year shall be divided into four quarters ending on March
31, June 30, September 30 and December 31. Not later than sixty (60) days
after the end of each quarter in each Calendar Year during the term of the
non-exclusive license, NYU shall submit to CORPORATION a full and
detailed report of payments due CORPORATION under the terms of the
non-exclusive license for the preceding quarter year, setting forth the
payments due to CORPORATION, setting forth the net sales and/or lump sum
payments and all other royalties or consideration upon which such payments
are computed and including at least the total sales of product, the
deductions permitted to arrive at the net sales and the royalty
computations.
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<PAGE> 30
If no royalties or other payments are due, a statement shall be sent to
CORPORATION stating such fact. Payment of the full amount due to
CORPORATION for the preceding quarter year shall accompany each report.
NYU shall keep for a period of at least three (3) years after the date of
entry, full, accurate and complete books and records consistent with sound
business and accounting practices and in such form and in such detail as
to enable the determination of the amounts due to CORPORATION from NYU
pursuant to the terms of this Agreement. As part of NYU's normal annual
audit, the payments and reports will be verified for accuracy. In the
event a correction needs to be made regarding the payment and/or report,
NYU will make the appropriate payment and send CORPORATION a new report
within sixty (60) days.
d. On reasonable notice and during regular business hours, CORPORATION or the
authorized representative of CORPORATION shall each have the right to
inspect the books of accounts, records and other relevant documentation of
NYU insofar as they relate to revenues from the non-exclusive license, in
order to ascertain or verify the amount of royalties and other payments
due to CORPORATION hereunder, and the accuracy of the information provided
to CORPORATION in the aforementioned reports. This inspection shall be at
CORPORATION's expense, provided, however, that all information received as
a result of the inspection shall be maintained in confidence by
CORPORATION and its representatives; provided, however that CORPORATION
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<PAGE> 31
shall have the right to use such information to enforce the terms of
this Agreement. CORPORATION's right to inspect must be exercised
within three (3) years of CORPORATION's receipt of the report which
CORPORATION desires to verify. In the event an audit conducted by
CORPORATION demonstrates amounts due to CORPORATION in excess of
five percent (5%) of the total amount paid to CORPORATION with
respect to any Calendar Year, NYU shall reimburse CORPORATION for
the expenses of CORPORATION'S audit.
e. Payments due to CORPORATION shall be paid to CORPORATION in United
States dollars. Any payments relating to transactions in a foreign
currency shall be converted into United States dollars based on the
conversion rate for the particular currency as listed in the Wall
Street Journal on the last business day of the quarter for which
payment is due. If restrictions on the transfer of currency exist in
any country such as to prevent NYU from making payments in the
United States or in U.S. dollars, NYU shall make payments due in
such country in local currency and/or deposit such payments in a
local bank designated by CORPORATION.
10. Defense of NYU Patent.
a. NYU has disclosed to CORPORATION that Abbott Laboratories, Inc.
(hereinafter "Abbott") has asserted a claim of ownership rights with
respect to the NYU Patents as contained in correspondence and
documents in Appendix II annexed hereto and made an integral part of
this Agreement. Throughout the term of this Agreement,
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<PAGE> 32
NYU shall notify CORPORATION in writing within ten (10) business days
every time NYU and/or the NYU Scientist is contacted by or contacts
(orally or in writing) Abbott regarding the claim of ownership rights with
respect to the NYU Patent(s). NYU also shall provide copies to CORPORATION
of any correspondence it or the NYU Scientist receives or has received
from Abbott. or sends or has sent to Abbott in this regard within ten (10)
business days of receiving or sending.
b. Upon the Effective Date, CORPORATION shall pay to NYU the sum of [
* ] dollars (U.S.$ [ * ]) to be held by NYU
in a special interest-bearing account and expended only for out-of-pocket
legal defense fees and costs in the event that a third party asserts a
claim with respect to the ownership and/or validity of the NYU Patents
("the Legal Defense Fund"). NYU shall not expend the Legal Defense Fund
(including the accumulated interest) for any purpose except for reasonable
out-of-pocket legal defense fees and costs for six (6) years after the
first sale of Licensed Product or after the initiation of a lawsuit by the
third party, provided such lawsuit is initiated during such six-year
period, whichever is later. In the event that the Legal Defense Fund is
not expended during such period, the Legal Defense Fund shall be the
property of NYU without restriction; however, any accumulated interest
will be the property of CORPORATION without restriction. In the event the
Legal Defense Fund (including the accumulated interest) is exhausted, NYU
shall have no further obligation to CORPORATION
* Confidential portion has been omitted
and filed separately with the Commission
- 19 -
<PAGE> 33
with respect to defense against such ownership and/or validity of lawsuit
except as provided under Section 11. NYU shall not settle such ownership
and/or validity lawsuit without providing CORPORATION with written notice
at least thirty (30) days in advance of the settlement. In the event NYU
decides to settle such lawsuit, it shall not assign its entire ownership
rights of NYU Patents to a third party as part of the settlement without
CORPORATION's prior written approval.
c. Any expenses incurred by CORPORATION or NYU in conjunction with the
prosecution of any suit or the settlement thereof relating to a third
party assertion of a claim with respect to the ownership and/or validity
of the NYU Patents shall be first paid for from the Legal Defense Fund
(including the accumulated interest), provided such lawsuit is initiated
during the six (6) year period described in Section 10.b.
11. Infringement of NYU Patent.
a. In the event a party to this Agreement acquires information that a third
party is infringing one or more of the NYU Patents, the party acquiring
such information shall promptly notify the other party to the Agreement in
writing of such infringement.
b. In the event of an infringement of an NYU Patent. CORPORATION shall have
an exclusive right (but not the obligation) to bring suit against the
infringer for a period of six (6) months after acquiring information that
a third party is infringing; provided,
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<PAGE> 34
however, that CORPORATION shall not have the right to bring suit against
HORL or a HORL Corporation Entity or any third party which has been
granted immunity from claims of infringement of the NYU Patents for the
sole purpose of providing Test kits exclusively for HORL or for HORL
Corporation Entities during the term of the NYU-HORL Agreement. (This
protection against an infringement action shall not apply if the third
party, which has been granted immunity, itself sells Test kits or provides
Test kits to any entity other than to HORL and HORL Corporation Entities.)
Should CORPORATION elect to bring suit against an infringer and NYU is
joined as a party plaintiff in any such suit, NYU shall have the right to
approve the counsel selected by CORPORATION to represent CORPORATION and
NYU, which approval shall not be unreasonably withheld. The expenses of
such suit or suits that CORPORATION elects to bring, including any
reasonable out-of-pocket expenses of NYU incurred in conjunction with the
prosecution of such suit or the settlement thereof, shall be paid for
entirely by CORPORATION and CORPORATION shall hold NYU free, clear and
harmless from and against any and all costs of such litigation, including
attorneys' fees.
c. In the event CORPORATION exercises the right to sue herein conferred, it
shall have the right to first reimburse itself out of any sums recovered
in such suit or in settlement thereof for all costs and expenses of every
kind and character, including attorneys' fees, necessarily involved in the
prosecution of any
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<PAGE> 35
such suit, and if after such reimbursement, any funds shall remain from
said recovery, CORPORATION shall promptly pay to NYU an amount equal to
five percent (5%) of such remainder and CORPORATION shall be entitled to
receive and retain the balance of the remainder of such recovery.
d. In the event CORPORATION does not bring suit by the end of the six (6)
month period described in b. above, NYU shall have the right (but not the
obligation) to bring suit, after written notice to CORPORATION of its
intention. If CORPORATION is joined as a party plaintiff in any such suit,
CORPORATION shall have the right to approve the counsel selected by NYU
to represent NYU and CORPORATION, which approval shall not be unreasonably
withheld. The expenses of such suit or suits that NYU elects to bring,
including any reasonable out-of-pocket expenses of CORPORATION incurred in
conjunction with the prosecution of such suit or the settlement thereof,
shall be paid for entirely by NYU and NYU shall hold CORPORATION free,
clear and harmless from and against any and all costs of such litigation,
including attorneys' fees.
e. In the event NYU exercises the right to sue herein conferred, it shall
have the right to first reimburse itself out of any sums recovered in such
suit or in settlement thereof for all costs and expenses of every kind and
character, including attorneys' fees, necessarily involved in the
prosecution of any such suit, and if after such reimbursement, any funds
shall remain from
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<PAGE> 36
said recovery, NYU shall pay CORPORATION an amount equal to five percent
(5%) of such remainder and NYU shall be entitled to receive and retain the
balance of the remainder of such recovery.
f. CORPORATION shall not have the right to grant cross-license(s) to a third
party in settlement of any infringement action, except with the consent of
NYU, and provided that the following conditions are satisfied:
1) NYU is consulted beforehand and is reasonably satisfied that the
third party has a legal position or right which does, or could,
limit CORPORATION's ability to market or to make, have made, sell or
distribute Licensed Products;
2) The rights received by CORPORATION under such agreement cover only
Licensed Products and are not directed to other products;
3) NYU incurs no financial or legal liabilities under such agreement,
and the terms of such agreement would not cause NYU to be subject to
a claim of breach under the NYU-HORL Agreement; and
4) NYU shall receive royalties in accordance with the provisions of
Section 6.a. with respect to Licensed Products, Tests and
Confirmatory Tests by such cross-licensee.
g. In any suit with respect to the NYU Patents, the parties shall cooperate
fully, and upon the request and at the expense of the party bringing suit,
the other party shall make available to the
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<PAGE> 37
party bringing suit all records, papers, information, samples, specimens,
individuals and the like which may be relevant.
h. Each party shall always have the right to be represented by counsel of its
own selection and at its own expense in any suit for infringement of the
NYU Patents instituted by the other party to this Agreement under the
terms hereof.
i. In the event a court of competent jurisdiction determines in a final
judgment from which no further appeal can or has been taken that a claim
of one or more NYU Patents is invalid or unenforceable, no further payment
with respect to Licensed Products covered by said NYU Patent(s) shall be
due or owing hereunder and CORPORATION and HORL shall have a paid-up
license as to the affected NYU Patent(s).
j. In the event a court of competent jurisdiction determines in a final
judgment from which no further appeal can or has been taken that NYU
co-owns one or more NYU Patents with a third party, or if there is a
settlement approved by NYU to such effect, this Agreement and the License
granted hereunder shall remain in effect; however, CORPORATION shall be
credited in the amount of [ * ] ($[ * ]) with
respect to future royalties as of the date of such final court
determination or settlement and shall be immediately relieved from
CORPORATION's obligation to pay NYU Minimum Annual Royalties.
* Confidential portion has been omitted
and filed separately with the Commission
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<PAGE> 38
k. In the event a court of competent jurisdiction determines in a final
judgement that NYU does not own one or more NYU Patents, or if there
is a settlement approved by NYU to such effect, no further payment
with respect to Licensed Products covered by said patent(s) shall be
due or owing hereunder.
12. Liability and Indemnification.
a. CORPORATION shall indemnify, defend and hold harmless NYU and its
trustees, officers, medical and professional staff, employees,
students and agents and their respective successors, heirs and
assigns (the "Indemnitees"), against any liability, damage, loss or
expense (including reasonable attorneys' fees and expenses of
litigation) incurred by or imposed upon the Indemnitees or any one
of them in connection with any claims, suits, actions, demands or
judgments arising out of the design, production, manufacture, sale,
use in commerce or in human clinical trials, lease, or promotion by
CORPORATION or by a Sublicensee, Corporation Entity or agent of
CORPORATION of any Licensed Product, process or service relating to,
or developed pursuant to, this Agreement.
b. CORPORATION's indemnification obligation under this Section 12 shall
not apply to any liability, damage, loss or expense to the extent
that it is attributable to the negligent activities or willful
misconduct of any such Indemnitee.
c. CORPORATION agrees, at its own expense, to provide attorneys
reasonably acceptable to NYU to defend against any actions brought
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<PAGE> 39
or filed against any Indemnitee with respect to the subject of
indemnity to which such Indemnitee is entitled hereunder, whether or
not such actions are rightfully brought.
13. Security for Indemnification.
a. At such time as any Licensed Product, process or service relating
to, or developed pursuant to, this Agreement is being commercially
distributed or sold (other than for the purpose of obtaining
regulatory approvals) by CORPORATION or by a Corporation Entity,
Sublicensee or agent of CORPORATION, CORPORATION shall at its sole
cost and expense, procure and maintain policies of comprehensive
general liability insurance in amounts not less than five million
dollars (U.S. $5,000,000.00) per incident and five million dollars
(U.S. $5,000,000.00) annual aggregate and naming the Indemnitees as
additional insureds. Such comprehensive general liability insurance
shall provide (i) product liability coverage and (ii) broad form
contractual liability coverage for CORPORATION's indemnification
under Section 12 of this Agreement. If CORPORATION elects to
self-insure all or part of the limits described above (including
deductibles or retentions which are in excess of two hundred fifty
thousand dollars (U.S. $250,000) annual aggregate) such
self-insurance program must be approved by NYU, which approval shall
not be unreasonably withheld. The minimum amounts of insurance
coverage required under this Section 13 shall not be
- 26 -
<PAGE> 40
construed to create a limit of CORPORATION's liability with respect to its
indemnification under Section 12 of this Agreement.
b. CORPORATION shall provide NYU with written evidence of such insurance upon
request of NYU. CORPORATION shall provide NYU with written notice at least
ninety (90) days prior to the cancellation, non-renewal or material change
in such insurance, where possible, or ten (10) business days after
CORPORATION receives notice of such from the insurance company; if
CORPORATION does not obtain replacement insurance providing comparable
coverage within ninety (90) days of notification, NYU shall have the right
to terminate this Agreement according to the provisions of this Agreement.
c. CORPORATION shall maintain such comprehensive general liability insurance
beyond the expiration or termination of this Agreement during (i) the
period that any product, process or service, relating to, or developed
pursuant to, this Agreement is being commercially distributed or sold
(other than for the purpose of obtaining regulatory approvals) by
CORPORATION, Corporation Entity, a Sublicensee or agent of CORPORATION and
(ii) a reasonable period after the period referred to in c.(i) above which
in no event shall be less than seven (7) years after the term of this
Agreement.
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<PAGE> 41
14. Expiry and Termination.
a. Unless earlier terminated pursuant to this Section 14 hereof, this
Agreement shall expire on the expiration of the period of the
License as set forth in Section 5.b. above.
b. At any time prior to expiration of this Agreement, either party may
terminate this Agreement forthwith for cause, as "cause" is
described below, by giving written notice to the other party. Cause
for termination by one party of this Agreement shall be deemed to
exist if the other party materially breaches or defaults in the
performance or observance of any of the provisions of this Agreement
and such breach or default is not cured within ninety (90) days or,
in the case of failure to pay any amounts due hereunder, thirty (30)
days (unless otherwise specified herein) after the giving of notice
by the other party specifying such breach or default, or if either
NYU or CORPORATION or Corporation Entity discontinues its business.
c. Any amount payable hereunder by one of the parties to the other,
which has not been paid by the date on which such payment is due,
shall bear interest from such date until the date on which such
payment is made, at the rate of one percent (1%) per annum in excess
of the prime rate prevailing at the Citibank, N.A., in New York,
during the period of arrears and such amount and the interest
thereon may be set off against any amount due, whether in terms of
this Agreement or otherwise, to the party in default by any
non-defaulting party.
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<PAGE> 42
d. CORPORATION may terminate this Agreement without cause upon thirty
(30) days' written notice to NYU. CORPORATION may, after the
effective date of such termination, sell some or all Licensed
Products CORPORATION has in inventory at the date of termination,
provided it pays royalty thereon under Section 6.a. of this
Agreement.
e. Upon termination of this Agreement for any reason and prior to
expiration as set forth in Section 14.a. hereof, all rights in and
to the NYU Patents shall revert to NYU, and CORPORATION shall not be
entitled to make any further use whatsoever of the NYU Patents.
f. Termination of this Agreement shall not relieve either party of any
obligation to the other party incurred prior to such termination. In
the event of termination during a Calendar Year for which Minimum
Annual Royalties would be due to NYU pursuant to Section 6.d.,
CORPORATION shall pay such Minimum Annual Royalties on a pro rata
basis for such year.
g. Sections 3, 10, 12, 13, 14, 19 and 20 hereof shall survive and
remain in full force and effect after any termination, cancellation
or expiration of this Agreement.
15. NYU's and CORPORATION's Agreements with respect to HORL.
a. The provisions of this Agreement are subject to the provisions of
the NYU-HORL Agreement, as defined in Section 1.d. hereof. The
provisions of this Section 15 shall be in effect until such time as
the NYU-HORL Agreement expires or is terminated. During the
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<PAGE> 43
time the NYU-HORL Agreement is in effect, NYU agrees to provide to
CORPORATION with any further revisions or amendments (with financial terms
redacted) to the NYU-HORL Agreement within ten (10) business days of their
execution and to provide to CORPORATION any information regarding the NYU-
HORL Agreement or relationship which alters or affects CORPORATION's or
NYU's obligations under the present NYU-CORPORATION Agreement also within
ten (10) business days of NYU's knowledge of the information. If a
revision or amendment to the NYU-HORL Agreement would alter or affect
CORPORATION's or NYU's obligation under this Agreement, then CORPORATION
must provide its prior written consent to such revision or amendment which
consent shall not be unreasonably withheld.
b. CORPORATION, Corporation Entity and Sublicensees shall offer to HORL
Licensed Products to perform Tests on terms no less favorable than said
Licensed Products are supplied to any other person or entity performing
testing for insurance purposes; provided, however, HORL shall not be
obligated to purchase said Licensed Products from CORPORATION, Corporation
Entity or Sublicensee but shall be free to purchase said Licensed Products
from a third party.
c. NYU shall have the right to provide to HORL copies of Quarterly and Annual
Reports and other information which may be obtained by NYU pursuant to
Section 6.b-d., provided that HORL has agreed in writing to maintain such
Reports and information in confidence and
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<PAGE> 44
not to disclose them to any third party except for the purposes of
enforcing HORL's rights pursuant to the NYU-HORL Agreement, this
Agreement, or both.
d. So long as the NYU-HORL Agreement is in effect, CORPORATION, Corporation
Entity and Sublicensees shall not bring any suit for infringement of the
NYU Patents against HORL or against a third party which has been granted
immunity from claims of infringement of the NYU Patents for the sole
purpose of providing Test kits exclusively for HORL and HORL Corporation
Entities pursuant to Section 5.c. of the NYU-HORL Agreement. CORPORATION,
Corporation Entity and Sublicensees shall be permitted to bring suit for
infringement of the NYU Patents against a third party which has been
granted immunity if the third party sells Test kits or provides Test kits
to any entity other than to HORL or HORL Corporation Entities.
e. In the event HORL purchases Test kits from a third party to which immunity
from claims of infringement of the NYU Patents is granted pursuant to
Section 5.c. of the NYU-HORL Agreement. NYU shall pay CORPORATION
[ * ] ([ * ]%) of any royalties and
payments received by NYU pursuant to Section 6.a.(2) of the NYU-HORL
Agreement with respect to Tests performed using such Test kits. NYU shall
provide CORPORATION with the HORL Agreement payment schedule. The immunity
contract to the third party shall not grant further immunity to other
parties. A breach by the third party of its obligations shall not be
deemed a breach by NYU of this Agreement and such breach shall not, in any
way, affect NYU's rights and obligations under this Agreement. However,
* Confidential portion has been omitted
and filed separately with the Commission
- 31 -
<PAGE> 45
in the event that such third party sells Test kits to any party except
HORL and/or HORL Corporation Entities in commercial quantities and
CORPORATION demonstrates conclusively to NYU that such sales have
occurred, NYU shall notify such third party that it is in breach of the
Immunity and shall demand cure, failing which, NYU shall promptly
terminate the immunity contract.
f. For the purpose of computing the payments due to CORPORATION under this
Section 15, the year shall be divided into four quarters ending on March
31, June 30, September 30 and December 31. Not later than sixty (60) days
after the end of each quarter in each Calendar Year during the term of the
third party immunity contract, NYU shall submit to CORPORATION a full and
detailed report of payments due CORPORATION under the terms of the
contract for the preceding quarter year, setting forth the payments due to
CORPORATION, setting forth the net sales and/or lump sum payments and all
other royalties or consideration upon which such payments are computed and
including at least the total sales of product, the deductions permitted to
arrive at the net sales and the royalty computations.
g. If no royalty or other payments are due, a statement shall be sent to
CORPORATION stating such fact. Payment of the full amount due to
CORPORATION for the preceding quarter year shall accompany each report.
NYU shall keep for a period of at least three (3) years after the date of
entry, full accurate and complete books and records consistent with sound
business and accounting practices and in such form and in such detail as
to enable the determination
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<PAGE> 46
of the amount due to CORPORATION from NYU pursuant to the terms of this
Agreement. As part of NYU's normal annual audit, the payments and reports
will be verified for accuracy. In the event a correction needs to be made
regarding the payment and/or report, NYU will make the appropriate payment
and send CORPORATION a new Report within sixty (60) days.
h. On reasonable notice an during regular business hours, CORPORATION or the
authorized representative of CORPORATION shall each have the right to
inspect the books of accounts, records and other relevant documentation of
NYU insofar as they relate to revenues from the third party immunity
contract, in order to ascertain or verify the amount of royalties and
other payments due to CORPORATION hereunder, and the accuracy of the
information provided to CORPORATION in the aforementioned reports. This
inspection shall be at CORPORATION's expense, provided, however, that all
information received as a result of the inspection shall be maintained in
confidence by CORPORATION and its representatives; provided, however that
CORPORATION shall have the right to use such information to enforce the
terms of this Agreement. CORPORATION's right to inspect must be exercised
within three (3) years of CORPORATION's receipt of the report which
CORPORATION desires to verify. In the event an audit conducted by
CORPORATION demonstrates amounts due to CORPORATION in excess of ten
percent (10%) of the total amount paid to CORPORATION with respect to any
Calendar Year, NYU shall reimburse CORPORATION for the expenses of
CORPORATION's audit.
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<PAGE> 47
Payments due to CORPORATION shall be paid to CORPORATION in United
States dollars. Any payments relating to transactions in a foreign
currency shall be converted into United States dollars based on the
conversion rate for the particular currency as listed in the Wall
Street Journal on the last business day of the quarter for which
payment is due. If restrictions on the transfer of currency exist in
any country such as to prevent NYU from making payments in the
United States or in U.S. dollars, NYU shall make payments due in
such country in local currency and/or deposit such payments in a
local bank designated by CORPORATION.
i. CORPORATION shall not perform Tests for insurance screening purposes
except that CORPORATION and/or Corporation Entity may perform
Confirmatory Tests.
j. HORL is an intended third party beneficiary of this Agreement for
the purpose of enforcing this Section 15.
16. Representations and Warranties by CORPORATION.
CORPORATION hereby represents and warrants to NYU as follows:
(1) CORPORATION is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. CORPORATION
has been granted all requisite power and authority to carry on its
business and to own and operate its properties and assets. The
execution, delivery and performance of this Agreement have been duly
authorized by the Board of Directors of CORPORATION,
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<PAGE> 48
(2) There is no pending or, to CORPORATION's knowledge, threatened
litigation involving CORPORATION which would have any effect on this
Agreement or on CORPORATION's ability to perform its obligations
hereunder; and
(3) There is no indenture, contract, or agreement to which CORPORATION
is a party or by which CORPORATION is bound which prohibits or would
prohibit the execution and delivery by CORPORATION of this Agreement
or the performance or observance by CORPORATION of any term or
condition of this Agreement.
17. Representations and Warranties by NYU.
NYU hereby represents and warrants to CORPORATION as follows:
(1) NYU is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York. NYU has been
granted all requisite power and authority to carry on its business
and to own and operate its properties and assets. The execution,
delivery and performance of this Agreement have been duly authorized
by the Board of Trustees of NYU:
(2) There is no pending or, to NYU's knowledge, threatened litigation
involving NYU which would have any effect on this Agreement or on
NYU's ability to perform its obligations hereunder;
(3) There is no indenture, contract, or agreement to which NYU and/or
the NYU Scientist is a party or by which NYU and the NYU Scientist
is bound which prohibits or would prohibit the execution and
delivery by NYU of this Agreement or the
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<PAGE> 49
performance or observance by NYU of any term or condition of this
Agreement; and
(4) Subject to the claim of ownership rights by Abbott as set forth in
Section 1O.a. hereof and subject to the rights of HORL as set forth
in Section 15. hereof, NYU is the owner of the entire right, title,
and interest in and to NYU Patents and has the sole right to grant
licenses under such NYU Patents; and NYU has not granted licenses
thereunder to any other person or entity except as set forth in
Section 15 of this Agreement.
18. No Assignment.
Neither CORPORATION nor NYU shall have the right to assign. delegate or
transfer at any time to any party, in whole or in part, any or all of the
rights, duties and interest herein granted without first obtaining the
written consent of the other to such assignment, which consent shall not
be unreasonably withheld. However, CORPORATION shall have the right to
assign, delegate or transfer at any time, in whole or in part, any or all
of the rights, duties and interest herein granted to a Corporation Entity
provided written notice is given promptly to NYU and Corporation Entity
undertakes in writing to perform all the obligations of CORPORATION
pursuant to this Agreement.
19. Use of Name.
Without the prior written consent of the other party which consent shall
not be unreasonably withheld in accordance with the business
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<PAGE> 50
practices and policies of the party whose consent is sought, neither
CORPORATION nor NYU shall use the name of the other party or any
adaptation thereof or of any staff member, employee or student of the
other party, including without limitation, in any product labeling,
advertising or sales literature. However, in the event that disclosure is
in connection with any public or private offering, is in connection with a
lawsuit settlement involving NYU and/or Joint Inventions, is in
conjunction with any application for regulatory approval, or is required
by law, either party can make factual statements concerning this Agreement
or file copies of this Agreement so long as the other party has an
opportunity to review and comment on the statements. The comment period
shall be ten (10) working days from the receipt of the statements unless
the parties agree to an extension. Except as provided herein, neither NYU
nor CORPORATION will issue public announcements about this Agreement.
20. Confidentiality.
Except to the extent expressly authorized in this Agreement, the parties
agree that, for the term of this Agreement plus six (6) years thereafter.
the receiving party of written information marked confidential by the
providing party, shall keep it confidential and shall not publish, use, or
otherwise disclose it except to the extent the receiving party can
establish that such information:
1. was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure by the
providing party;
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<PAGE> 51
2. was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving party;
3. became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement; or
4. was subsequently lawfully disclosed to the receiving party by a
third party.
Each party may disclose the other's information to the extent such
disclosure is reasonably necessary in prosecuting or defending patents and
litigation, complying with applicable governmental regulations and laws,
conducting clinical trials, or negotiating with potential sublicensees.
21. Miscellaneous.
a. In carrying out this Agreement the parties shall comply with all
applicable local, state and federal laws and regulations.
b. If any provision of this Agreement is determined to be invalid or
void, the remaining provisions shall remain in effect.
c. This Agreement shall be deemed to have been made in the State of New
York and shall be governed and interpreted in all respects under the
laws of the State of New York.
d. Any dispute arising under this Agreement shall be resolved in an
action in the courts of New York State or the federal courts located
in New York State, and the parties hereby consent to personal
jurisdiction of such courts in any such action.
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<PAGE> 52
e. All payments or notices required or permitted to be given under this
Agreement shall be given in writing and shall be effective when
either personally delivered or deposited, postage prepaid, in the
United States registered or certified mail, addressed as follows:
To NYU: New York University Medical Center
550 First Avenue
New York, NY 10016
Attention: Isaac T. Kohlberg
Vice President for
Industrial Liaison
and
Office of Legal Counsel
New York University
Bobst Library
70 Washington Square South
New York, NY 10012
Attention: Annette B. Johnson, Esq.
Associate General Counsel
To CORPORATION: Calypte Biomedical Corporation
1440 Fourth Street
Berkeley, California 94710
Attention: David J. Robison, Ph.D.
President and
Chief Executive Officer
or such other address or addresses as either party may hereafter
specify by written notice to the other. Such notices and
communications shall be deemed effective on the date of delivery or
fourteen (14) days after having been sent by registered or certified
mail, whichever is earlier.
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<PAGE> 53
f. This Agreement (and the annexed Appendices) constitute the entire
Agreement between the parties with respect to the subject matter
contained herein and no variation, modification or waiver of any of
the terms or conditions hereof shall be deemed valid unless made in
writing and signed by both parties hereto. This Agreement supersedes
any and all prior agreements or understandings with respect to the
subject matter contained herein, whether oral or written, between
CORPORATION and NYU.
g. No waiver by either party of any non-performance or violation by the
other party of any of the covenants, obligations or agreements of
such other party hereunder shall be deemed to be a waiver of any
subsequent violation or non-performance of the same or any other
covenant, agreement or obligation, nor shall forbearance by any
party be deemed to be a waiver by such party of its rights or
remedies with respect to such violation or non-performance.
h. The descriptive headings contained in this Agreement are included
for convenience and reference only and shall not be held to expand,
modify or aid in the interpretation, construction or meaning of this
Agreement.
i. It is not the intent of the parties to create a partnership or joint
venture or to assume partnership responsibility or liability. The
obligations of the parties shall be limited to those set out herein
and such obligations shall be several and not joint.
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<PAGE> 54
j. In the event of a delay caused by inclement weather, fire, flood,
strike, or other labor dispute, act of God, act of governmental
officials or agencies, or any other cause beyond the control of
either party, such party shall be excused from performance hereunder
for the period of time attributable to such delay.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date and year first above written.
NEW YORK UNIVERSITY
By: /s/ Isaac T. Kohlberg
-------------------------------
Isaac T. Kohlberg
Vice President for
Title: Industrial Liaison
-------------------------------
Date: Aug. 10th, 1993
-------------------------------
CALYPTE BIOMEDICAL CORPORATION
By: /s/ David J. Robison
-------------------------------
Title: President and CEO
-------------------------------
Date: Aug. 12, 1993
-------------------------------
- 41 -
<PAGE> 55
APPENDIX I
U.S. PATENTS
Method for Detecting Antibodies to Human Immunodeficiency Virus
Patent No: 4,865,966
Granted: 9/12/89
Method for Detecting Antibodies to Human Immunodeficiency Virus
Patent No: 5,122,446
Granted: 6/16/92
FOREIGN PATENTS AND APPLICATIONS
<TABLE>
<CAPTION>
COUNTRY SERIAL NO. STATUS PATENT NO.
- ------- ---------- ------ ----------
<S> <C> <C> <C>
Australia 17182/88 Issued 617671
Canada 564,232 Pending
Japan 504037/88 Pending
Nigeria 59/88 Issued RP10207
South Korea 7016/88 Pending
Sri Lanka 9968 Issued 9968
</TABLE>
<PAGE> 56
EXHIBIT B
LICENSED PATENT RIGHTS
"Method for Detecting Antibodies to Human Immunodeficiency Virus" United States
Patent Nos. 4,865,966 and 5,122,446, and any divisions, continuations, or
continuations-in-part based thereon, and any patents which may issues therefrom
and any reissues, re-examinations or extensions therefor; and any and all
foreign patents and patent applications corresponding to any of the foregoing
patents and applications.
<PAGE> 57
EXHIBIT C
PATENT AND NON-PATENT COUNTRIES
Patent Countries:
United States
Australia
Nigeria
Sri Lanka
Canada (if serial no. 564,232 issues)
Japan (if serial no. 504037/88 issues)
South Korea (if serial no. 7016/88 issues)
Non-Patent Countries:
All countries in the world which are not Patent Countries
<PAGE> 1
EXHIBIT 10.24
AGREEMENT
This Agreement, including the attached Exhibits, ("Agreement") ,
effective as of MARCH 8, 1993 ("Effective Date") , is made and entered into by
and between CALYPTE BIOMEDICAL CORPORATION, a California corporation having its
place of business at 1440 Fourth Street, Berkeley, California 94710,
("Calypte") and REPLIGEN CORPORATION, a Delaware corporation having its place
of business at One Kendall Square, Building 700, Cambridge, Massachusetts 02139
("Repligen")
1. Definitions.
1.1 "Affiliate" shall mean any individual or business
entity which controls, is controlled by or under common control with Calypte,
where "control" shall mean the direct or indirect ownership of more than fifty
percent of the outstanding shares of stock, or other equity interest.
1.2 "Equipment" shall mean those items listed in Exhibit
A.
1.3 "Materials" shall mean those items listed in Exhibit
B including, without limitation, the Seed Stock.
1.4 "Net Sales" shall mean the sum of all amounts, and
the cash equivalent of nonmonetary consideration, received by Calypte and its
Affiliates which is directly attributable to the sale, distribution or other
like disposition of the Royalty Bearing Products, to parties other than
Affiliates or Sublicensees; net of all separately stated taxes (other than taxes
on income), interest and other finance charges paid by customers, packages and
packing, customs duties and other governmental charges, transportation,
insurance and storage charges, and discounts; and less refunds actually paid in
connection with Royalty Bearing Product returns. For the sale, distribution or
other like disposition of Royalty Bearing Products bundled with other products,
the Net Sales attributable to the Royalty Bearing Product shall be based upon
the ratio of the list prices for the Royalty Bearing Product and the other
components of the bundled product, provided that where there is no list price
for a component, the percentage of Net Sales attributable to the Royalty Bearing
Product shall be mutually agreed upon by the parties in good faith.
1.5 "Proprietary Information" shall mean all know-how,
trade secrets, inventions (whether patentable or unpatentable), technical data
and information relating to the gp160 Seed Stock, and existing as of the
Effective Date, including without limitation the items listed in Exhibit C
attached hereto.
1.6 "Royalty Bearing Product" shall mean diagnostic
products that incorporate HIV-1 gp160 and are derived from (i) the
<PAGE> 2
Proprietary Information, (ii) the Materials or (iii) any Improvements thereto,
regardless of the purpose for which such products are sold, distributed or
otherwise disposed of, whether for diagnostic, research or any other purpose.
Notwithstanding the foregoing, HIV-1 gp160 sold or otherwise distributed in a
form other than as included in a diagnostic kit for use in research purposes
shall not be deemed a Royalty Bearing Product.
1.7 "Royalty Period" shall mean the seven (7) year period
beginning upon the first day of the calendar quarter in which Calypte or one of
its Affiliates first derives Net Sales from the Royalty Bearing Products or
Sublicense Revenue (as defined in Section 4.3(b) below)'.
1.8 "Seed Stock" shall mean the HIV-1 gp160 recombinant
virus seed stock (known internally at Repligen as HT3), generated, documented
and characterized in accordance with the work plan and specifications set forth
in Exhibit D. The Seed Stock is also one of the Materials listed in Exhibit B.
1.9 "Seed Stock Documentation" shall mean the documen-
tation of the work performed in accordance with the work plan outlined in
Exhibit D, together with the results of any tests performed in accordance with
the work plan.
1.10 "Improvements" shall mean all improvements, modifi-
cations, variants and derivatives to the Proprietary Information or the Seed
Stock developed by or for Calypte or its Affiliates, or licensed to Calypte from
a Sublicensee, including any intellectual property rights that might arise
therefrom.
1.11 "Sublicensee" shall mean any individual or other
business entity (other than an Affiliate) to which Calypte grants a sublicense
to the rights granted under Section 3. 1 (a) of this Agreement.
2. Purchase.
2.1 Sale. Subject to the terms-and conditions of this
Agreement, Repligen agrees to sell to Calypte, and Calypte agrees to purchase
from Repligen, the Equipment and Material.
3. Grant of Rights.
3.1 License. Subject to the terms and conditions of
this Agreement, Repligen hereby grants to Calypte (a) an exclusive, worldwide,
royalty bearing (as provided in Section 4 below) license, including the right to
grant sublicenses pursuant to Section 3.2 below, to make, have made, use and
sell and otherwise distribute Royalty Bearing Products based upon or
incorporating the Proprietary Information for diagnostic purposes and to
otherwise
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<PAGE> 3
exploit the Proprietary Information for diagnostic purposes, and (b) a
nonexclusive, worldwide, paid-up license, including the right to grant
sublicenses pursuant to Section 3.2 below, to make, have made, use and sell and
otherwise distribute HIV-1 gp160 based upon or incorporating the Proprietary
Information for research purposes,. and to otherwise exploit the Proprietary
Information for research purposes.
3.2 Right to Grant Sublicenses. Calypte shall have the
right under the licenses granted in Section 3.1 above to grant sublicenses to
Affiliates and Sublicensees, provided that no Affiliate or Sublicensee shall
have the right to further sublicense. Calypte shall notify Repligen of every
sublicense agreement, and each amendment thereto, within thirty (30) days after
their execution, and provide Repligen with the name of the Sublicensee or
Affiliate to whom such sublicense was granted and such other information that
the parties reasonably agree Repligen will need to reasonably anticipate its
receipt of royalties on Net Sales and Sublicense Revenue (as defined in Section
4.3(b)).
3.3 Retained Rights. The parties understand and
acknowledge that Repligen retains the right to make, use and sell gp160, and
grant sublicenses related thereto, for any purpose other than to make, have
made, use or sell and otherwise distribute products incorporating gp160, or
otherwise exploit the Proprietary Information, for diagnostic purposes. Repligen
will initiate reasonable procedures to ensure that gp160 sold by Repligen is
used for research purposes only, including without limitation, labeling all
gp160 sold by Repligen with a label limiting use to research purposes only, and
following up with large volume purchasers to ensure they aren't using gp160 for
non-research purposes.
4. Consideration.
4.1 Initial Payments. Calypte agrees to pay to Repligen
in accordance with the
following: [ * ] Dollars ($ [ * ])
(a) The parties acknowledge that Calypte has
already paid a non-refundable fee of [ * ] Dollars ($ [ * ])
prior to execution of this Agreement in consideration for the
Equipment;
(b) Calypte shall pay
[ * ] ($[ * ]) upon the Effective Date in consideration for the Seed
Stock Documentation; and
(c) Calypte shall pay the remaining
[ * ] ($[ * ]) upon final acceptance of the Seed Stock
and Seed Stock Documentation as provided in section 6 in consideration for the
Seed Stock.
*Confidential portion has been omitted
and filed separately with the Commission
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<PAGE> 4
4.2 Calypte Common Stock. In consideration for training
and consultation previously provided, upon acceptance of the Seed Stock by
Calypte pursuant to Section 6 below, Calypte will transfer to Repligen
[ * ] ([ * ]) shares of Calypte Common Stock pursuant to a certain
Stock Purchase Agreement, a form of which is attached hereto as Exhibit E.
4.3 Royalties.
(a) Net Sales. In consideration of the rights
granted under this Agreement, Calypte agrees that it shall pay to Repligen a
royalty equal to [ * ] ([ * ]%) of the Net Sales derived from Royalty Bearing
Products by Calypte and its Affiliates during the Royalty Period.
(b) Sublicense Royalties. On any and all amounts
received or the monetary value of nonmonetary consideration received by Calypte
during the Royalty Period from the grant of a sublicense of the rights granted
under Section 3.1(a) to a Sublicensee pursuant to Section 3.2 ("Sublicense
Revenue") , Calypte shall pay Repligen a royalty of [ * ] ([ * ]%). As
provided in Section 1.11, Affiliates cannot be Sublicensees, and therefore,
amounts received by Calypte from Affiliates shall not be included in
Sublicense Revenue.
4.4 Term of Royalty obligation. Calypte's obligations to
accrue royalties under Section 4.3 shall expire at the conclusion of the Royalty
Period, and, upon payment of all accrued royalties, the license granted in
Section 3.1(a) shall be deemed fully paid.
4.5 Single Royalty. The obligation to pay Repligen a
royalty under Section 4.3 is imposed only once with respect to the same unit of
any Royalty Bearing Product. No obligation to pay a royalty under Section 4.3(b)
shall accrue where Calypte has an obligation to pay a royalty under Section 4.3
(a).
4.6 Royalty Statement and Payments. Commencing on the
Effective Date and continuing until all royalties accruing to Repligen hereunder
have been paid in full, Calypte shall deliver to Repligen within ninety (90)
days after the end of each calendar quarter a report setting forth the amounts,
if any, accruing to Repligen under subsection 4.3 for such quarter and the Net
Sales of Royalty Bearing Products, and Sublicense Revenue received by Calypte,
as well as the various calculations used to compute said amounts, including,
without limitation, quantity and description of such Royalty Bearing Products,
the revenue received by Calypte from such Royalty Bearing Products and the
amount of deductions taken from gross revenues. In case no payment is due for
any such period, Calypte shall so report. A check for the amount of such royalty
(if any) made out in U.S. dollars shall accompany such
*Confidential portion has been omitted
and filed separately with the Commission
-4-
<PAGE> 5
report. Overdue payments shall bear interest at 1% over the prevailing prime
interest rate per annum.
4.7 Record Keeping and Inspection. Calypte shall keep,
and shall cause its Affiliates to keep, true and accurate records and books of
account containing data reasonably required for the computation and verification
of payments to be made as provided by this Agreement, which records and books
shall be open for inspection upon reasonable notice during business hours by
either Repligen's auditor or an independent certified accountant selected by
Repligen, except one to whom Calypte has a reasonable objection, who has agreed
to be bound by nondisclosure provisions reasonably acceptable to both Calypte
and Repligen, for the purpose of verifying the amount of payments due and
payable. Said right of inspection may be exercised not more than once in any
calendar year, but will exist for three (3) years from the date of origination
of any such record, and this requirement and right of inspection shall survive
any termination of this Agreement. Repligen shall be responsible for all
expenses of its auditor(s) or independent accountants associated with such
inspection; provided, that in the event that such inspection reveals an
underpayment of royalties to Repligen in excess of ten percent (10%), then said
inspection shall be at Calypte's expense. If such inspection reveals an
overpayment of royalties to Repligen, at Calypte's election, Repligen shall
promptly reimburse Calypte to the extent of such overpayment or credit such
overpayment against Calypte's next royalty payment to Repligen.
5. Additional Obligations.
5.1 Agreements with CBC and TAMUS. The parties acknowl-
edge that (a) Repligen makes and has made no representation whatsoever that it
is transferring and/or licensing to Calypte all of the rights, materials,
equipment or information that Calypte will need in order to make, use and sell
gp160 and Royalty Bearing Products incorporating gp160, and (b) Cambridge
Bioscience Corporation ("CBC") owns certain patent rights relating to gp160 and
The Texas A&M University System ("TAMUS") owns certain patent rights relating to
a recombinant Baculovirus expression vector system ("BEVS") and methods for the
introduction and expression of heterologous genes in cultured insect cells using
BEVS (the "BEVS" Technology"). Calypte covenants and agrees that, prior to the
first commercial sale of a Royalty Bearing Product by Calypte or an Affiliate,
Calypte shall have entered into (A) a sublicense agreement with CBC relating to
gp160 and (B) a license agreement with TAMUS relating to the BEVS Technology.
Additionally, Calypte will obligate each Sublicensee to obtain such license
rights prior to such Sublicensee beginning distribution or sale of a Royalty
Bearing Product.
5.2 Delivery. Calypte acknowledges that Repligen has
delivered to Calypte the Equipment and one (1) copy of any and all
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<PAGE> 6
tangible embodiments of the Proprietary Information. Within ten (10) days of the
Effective Date, Repligen will deliver to Calypte the Materials, including, the
Seed Stock and one (1) copy of the Seed Stock Documentation, to the extent such
materials have not been previously delivered.
5.3 Supply of gp160. For so long as Calypte continues to
maintain the gp160, Calypte agrees to provide Repligen the right to purchase
gp160 from Calypte upon the terms and conditions of a separate material supply
agreement to be negotiated by the parties. Such supply agreement shall provide
that Repligen may only resell to end users for research purposes only.
5.4 Commercialization. Calypte shall use its good faith
commercially reasonable efforts to develop commercially feasible Royalty Bearing
Products.
6. Acceptance of Seed Stock.
Notwithstanding the delivery to and any prior payment by
Calypte, Calypte's acceptance of the Seed Stock shall be subject to Calypte's
evaluation and acceptance of the Seed Stock and Seed Stock Documentation
according to the criteria set forth in Exhibit F attached hereto ("Acceptance
Criteria") . Within forty five (45) days of delivery of the Seed Stock and Seed
Stock Documentation to Calypte, Calypte will provide to Repligen written
acceptance of the Seed Stock and/or Seed Stock Documentation or if, in Calypte's
reasonable determination, the Seed Stock and Seed Stock Documentation is not
satisfactory to Calypte, a statement of rejection of the Seed Stock and/or Seed
Stock Documentation stating the reasons for such rejection under the Acceptance
Criteria. If Repligen does not receive such written notice of Calypte's
acceptance or rejection within the time allotted, Calypte shall be deemed to
have accepted the Seed Stock and Seed Stock Documentation. In the event of
Calypte's rejection of the Seed Stock and/or the Seed Stock Documentation,
Repligen agrees to. consult with Calypte and, to the extent that it is
reasonably able, to correct any errors or problems identified by Calypte. This
procedure shall continue until either (i) Calypte accepts the Seed Stock and the
Seed Stock Documentation or (ii) Calypte notifies Repligen in writing of its
final rejection of the Seed Stock or the Seed Stock Documentation and
termination of this Agreement. In any event, unless Calypte provides Repligen
with notice of its final rejection of the Seed Stock and Seed Stock
Documentation within ninety (90) days of Repligen's delivery of such material to
Calypte, Calypte shall be deemed to have accepted the Seed Stock and Seed Stock
Documentation and shall be obligated to make the payment set forth in Section
4.1(c) above. Upon Repligen's receipt of such written notice of final rejection
and termination, within thirty (30) days Calypte shall return to Repligen all
Proprietary Information, Seed Stock Documentation and Materials in Calypte's
possession and Repligen
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<PAGE> 7
shall return the amounts paid by Calypte under Sections 4.1(b) and (c) (if paid)
above. The remedy set forth in the preceding clause shall be the sole remedies
of the parties with respect to such termination.
7. Representations and Warranties.
7.1 Representations by Repligen. Repligen represents and
warrants to Calypte that (i) the Seed Stock to be delivered to Calypte hereunder
was obtained in accordance with the work plan and specifications set forth in
Exhibit D, (ii) Repligen has the full corporate authority to enter into this
Agreement and carry out its obligations under this Agreement, (iii) Repligen has
not granted and will not grant during the term of this Agreement any right,
title, license or interest in and to the Equipment, Seed Stock and Proprietary
Information, or any portion thereof, in conflict with the rights, title, license
and interest granted to Calypte herein, (iv) the Equipment, Seed Stock and
Proprietary Information are free and clear of all liens, encumbrances, security
interests and the like, (v) to the best of Repligen's knowledge there are no
actions suits, investigations, claims or proceedings, or threats thereof,
pending or threatened against Repligen in any way relating to the Equipment,
Seed Stock or Proprietary Information.
7.2 Representations of Calypte. Calypte represents and
warrants that Calypte has full corporate authority to enter into and carry out
its obligations under this Agreement.
7.3 Disclaimer. EXCEPT AS PROVIDED ABOVE, THE EQUIPMENT,
MATERIALS, SEED STOCK DOCUMENTATION AND PROPRIETARY INFORMATION ARE PROVIDED TO
CALYPTE ON AN "AS IS" BASIS AND REPLIGEN MAKES NO REPRESENTATIONS OR WARRANTIES,
EXPRESSED OR IMPLIED. BY WAY OF EXAMPLE BUT NOT OF LIMITATION, REPLIGEN MAKES NO
REPRESENTATIONS OR WARRANTIES (A) OF COMMERCIAL UTILITY, (B) OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, OR (C) THAT THE USE OF THE EQUIPMENT,
MATERIALS, SEED STOCK DOCUMENTATION OR PROPRIETARY INFORMATION WILL NOT INFRINGE
ANY THIRD PARTY COPYRIGHT OR TRADEMARK OR OTHER PROPRIETARY RIGHT OF PROPERTY
RIGHTS OF OTHERS. REPLIGEN SHALL NOT BE LIABLE TO CALYPTE, CALYPTE'S SUCCESSORS
OR ASSIGNS OR ANY THIRD PARTY WITH RESPECT TO ANY CLAIM ON ACCOUNT OF OR ARISING
FROM THE USE OF THE EQUIPMENT, MATERIALS, SEED STOCK DOCUMENTATION AND
PROPRIETARY INFORMATION SUPPLIED HEREUNDER OF THE MANUFACTURE, USE OR SALE OF
gp160 OR DIAGNOSTIC PRODUCTS OR ANY OTHER MATERIAL DERIVED THEREFROM.
8. Indemnification.
8.1 Repligen. Repligen shall defend, indemnify and hold
Calypte, its officers, directors, agents and employees (the "Calypte Entities")
harmless from and against any loss, expense, claim, liability or obligation
(including reasonable fees and
-7-
<PAGE> 8
expenses of attorneys and other professionals) (collectively, "Damages") arising
out of or related to any and all claims, demands, proceedings, causes of action
and suits (collectively, "Claims") brought against any Calypte Entity alleging
Damages caused directly or indirectly as a result of Repligen's breach or
alleged breach of the warranties and representations made in Section 7 above.
8.2 Calypte. Calypte shall defend, indemnify and hold
Repligen, its officers, directors, agents and employees (the "Repligen
Entities") harmless from and against any Damages arising out of or related to
any Claims brought against a Repligen Entity alleging Damages caused directly or
indirectly from a result of (i) a breach or alleged breach by a Calypte Entity
of the representations and warranty made in Section 7 above, or its obligations
to obtain licenses from CBC & TAMUS pursuant to the terms of Section 5.1 above,
or (ii) from the manufacturing, use, sale and like disposition of Royalty
Bearing Products.
8.3 Procedures. Each party (the "Indemnified Party")
agrees that the other party (the "Indemnifying Party") , at its sole option,
will be relieved of the foregoing obligation unless the Indemnified Party
notifies the Indemnifying Party promptly in writing of any Claim for which
indemnification may be sought from such Indemnifying Party under this Section 8,
gives the Indemnifying Party sole control (subject to Section 8.4 below) over
the defense and settlement of such Claim; provided that the party may
participate in the defense at its own expense with counsel of its own choosing,
and gives the Indemnifying Party, at the Indemnifying Party's expense,
reasonable information and assistance to settle and/or defend any such Claim.
8.4 Adverse Effect on Rights of Others. Neither party
shall compromise or settle any Claim in any manner that would affect the rights
of the other party without the written consent of such other party, which
consent shall not be unreasonably withheld.
9. Confidentiality.
9.1 Definition. For purposes of this Agreement,
"Confidential Information" shall mean any information, including without
limitation the Proprietary Information, disclosed by one party to the other
pursuant to this Agreement which is in written, graphic, machine readable or
other tangible form and is marked "Confidential". "Proprietary" or in some other
manner to indicate its confidential nature. Confidential Information may also
include oral information disclosed by one party to the other pursuant to this
Agreement, provided that such information is designated as confidential at the
time of disclosure and reduced to a written summary by the disclosing party,
within thirty (30) days after its
-8-
<PAGE> 9
oral disclosure, which is marked in a manner to indicate its confidential nature
and delivered to the receiving party.
9.2 General. Each party shall treat as confidential all
Confidential Information of the other party, shall not use such Confidential
Information except in accordance with this Agreement or otherwise authorized in
writing by disclosing party, shall implement reasonable procedures to prohibit
the disclosure, unauthorized duplication, misuse or removal of the other party's
Confidential Information and shall not disclose such Confidential Information to
any third party except as may be necessary and required in connection with the
rights and obligations of such party under this Agreement, and subject to
confidentiality obligations at least as protective as those set forth herein.
Without limiting the foregoing, each of the parties shall use at least the same
procedures and degree of care which it uses to prevent the disclosure of its own
confidential information of like importance to prevent the disclosure of
Confidential Information disclosed to it by the other party under this
Agreement, but in no event less than reasonable care.
9.3 Exceptions. Notwithstanding the above, neither party
shall have liability to the other with regard to any Confidential Information of
the other which:
(a) was generally known and available in the
public domain at the time it was disclosed or becomes generally known and
available in the public domain through no fault of the receiver;
(b) was known to the receiver at the time of
disclosure as shown by the files of the receiver in existence at the time of
disclosure;
(c) is disclosed with the prior written approval
of the discloser;
(d) was independently developed by the receiver
without any use of the Confidential Information and by employees or other agents
of the receiver who have not been exposed to the Confidential Information,
provided that the receiver can demonstrate such independent development by
documented evidence prepared contemporaneously with such independent
development;
(e) becomes known to the receiver without the
obligation to keep such information confidential from a source other than the
discloser without breach of this Agreement by the receiver and otherwise not in
violation of the discloser's rights; or
-9-
<PAGE> 10
(f) is disclosed pursuant to the order or
requirement of a court, administrative agency, or other governmental body;
provided, that the receiver shall provide prompt, advanced notice thereof to
enable the discloser to seek a protective order or otherwise prevent such
disclosure.
10. Ownership.
10.1 Calypte. Calypte shall own everything which it develops
including, without limitation, all Improvements.
10.2 Repligen. Except as provided in Sections 3 and 10.1 above,
Repligen shall retain title to the Proprietary Information.
11. Term and Termination.
11.1 Term. This Agreement shall become effective upon the Effective
Date and shall remain in effect until terminated.
11.2 Termination by Repligen. Repligen shall have the right to
terminate this Agreement upon notice if Calypte (i) materially breaches either
the terms of the licenses granted under Section 3 or its obligation to pay
royalties to Repligen hereunder pursuant to Section 4 and fails to remedy such
breach within thirty (30) days after being given notice thereof; or (ii) ceases
to be actively engaged in business.
11.3 Termination by Calypte. Calypte shall have the right to
terminate this Agreement upon notice if Repligen materially breaches (i) the
exclusive license grant to Calypte under Section 3.1(a) or (ii) its obligations
under Section 3.3, and fails to remedy such breach within thirty (30) days after
being given notice thereof by Calypte. In the event of any such termination, in
addition to the provisions identified in Section 11.5 below, the licenses
granted to Calypte under Section 3 shall survive; provided that Calypte shall
have no obligation to pay royalties under Section 4 on Net Sales and Sublicensee
Revenues received by Calypte after the effective date of such termination.
11.4 Termination Upon Final Rejection. In the event that Calypte
issues a final rejection of the Seed Stock and the Seed Stock Documentation
pursuant to Section 6, this Agreement (including any licenses granted herein)
shall terminate, and the parties' remedies shall be as set forth in Section 6.
11.5 Survival. The following sections shall survive termination of
this Agreement for any reason: Sections 4.7, 7, 8, 9, 12 and 13, and all other
terms, provisions, representations, right, and obligations contained in this
Agreement that by their sense and context are intended to survive until
performance thereof by either or both parties.
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<PAGE> 11
12. Limitation of Liability.
IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES ARISING IN ANY WAY OUT OF THIS
AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY. THIS LIMITATION WILL
APPLY EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE.
13. General Provisions.
13.1 Independent Contractors. The relationship of Repligen
and Calypte established by this Agreement is that of independent contractors,
and nothing contained in this Agreement shall be construed to (i) give either
party the power to direct or control the day-to-day activities of the other,
(ii) constitute the parties as partners, joint venturers, co-owners or otherwise
as participants in a joint or common undertaking, or (iii) allow either party to
create or assume any obligation on behalf of the other party for any purpose
whatsoever.
13.2 Governing Law. This Agreement shall be governed by,
and construed and interpreted in accordance with, the laws of the state of
Delaware, without regard to conflict of law provisions.
13.3 Entire Agreement. This Agreement together with the
Stock Purchase Agreement and the Letter from Repligen to Calypte dated December
19, 1991 relating to Repligen's transfer to Calypte of Repligen's Biologics Drug
Master File, constitutes the entire and exclusive Agreement between the parties
hereto with respect to the subject matter hereof and supersedes and cancels all
previous agreements, commitments and writings in respect thereof.
13.4 Modification. No modification to this Agreement, nor
any waiver of any rights, shall be effective unless assented to in writing by
the party to be charged and the waiver of any breach or default shall not
constitute a waiver of any other right hereunder or any subsequent breach or
default.
13.5 Notices. Any required notices hereunder shall be sent
to the attention of the President of the party in writing at the address of each
party set forth above, or to such other address as either party may substitute
by written notice to the other in the manner contemplated herein, and shall be
deemed served when delivered or, if delivery is not accomplished by reason or
some fault of the addressee, when tendered.
13.6 Headings. The headings of the several sections of
this Agreement are intended for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
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<PAGE> 12
13.7 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to
either Repligen or Calypte. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, and severability of such provision would materially
change the economic benefit of this Agreement to either Repligen or Calypte,
Repligen and Calypte shall modify such provision in accordance with Section 13.6
to obtain a legal, enforceable and valid provision and provide an economic
benefit to Repligen and Calypte that most nearly effects Repligen's and
Calypte's intent in entering into this Agreement.
13.8 Further Instruments. Each party shall, at the request
of the other party, execute and deliver, or cause to be delivered, all such
assignments, consents, documents or further instruments of transfer or license,
which may be necessary in order to carry out the purposes and intent of this
Agreement.
13.9 Further Assurances. Repligen acknowledges that
Calypte may from time to time request additional information relating to the
Seed Stock of Proprietary Information. Repligen agrees to co-operate in good
faith with Calypte and respond to such requests to the extent it is able.
Repligen is under no obligation to perform additional laboratory work for
Calypte.
13.10 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned are duly authorized to execute this
Agreement on behalf of Repligen and Calypte as applicable.
REPLIGEN CORPORATION CALYPTE BIOMEDICAL CORPORATION
By /s/ F. Michael Egan By /s/ David J. Robinson
---------------------------- --------------------------
Print Name F. Michael Egan Print Name David J. Robinson
------------------- ------------------
Title V.P., Business Dir. Title President and CEO
------------------------ -----------------------
-12-
<PAGE> 13
EXHIBIT A
EQUIPMENT
- - Dynomil Type KDL - Pilot - Impandes, Inc.
- - Pellicon Cassette System - Millipore
<PAGE> 14
EXHIBIT B
MATERIALS
Delivered as of February 17, 1993
- - Frozen cell paste
a. 142 roller bottle equivalents from Manufacturing production
b. 138 roller bottle equivalents from Research production
- - Purified gp160 retain samples - as outlined in Attachment 3 of the
March 26,1992 draft work agreement
- - gp160 "transfer lot"
Not delivered as of February 17, 1993
- - Retained samples of infected cell culture supernatants
- - HT3 Baculovirus Seed Stock
<PAGE> 15
PAGE 1 of 3 PAGES
EXHIBIT C
PROPRIETARY INFORMATION
1. BIOLOGICS MASTER FILE Type II
Recombinant gp160 (r-gp160) - diagnostics Reagent, December 18, 1989
2. gp160 MANUFACTURING PROCESS DOCUMENTATION
DOCUMENT # TITLE
- --------------------------------------------------------------------------------
CELL CULTURE:
SOP-MGF-1176 Expansion of Sf9 Cells from T75 Flasks into additional T75
Flasks
SOP-MGF-1180 Expansion of Sf9 Cells in Shake Flask(s) into Roller Bottles
SOP-MGF-1196 Expansion of Sf9 Cells in Pre-Production Roller Bottles
SOP-MGF-1177 Determination of Total Cell Count and % Cell Viability
SOP-MGF-1215 Seeding of Production Roller Bottles
SOP-MGF-1179 Freezing and Storage of Sf9 Cell Banks
CPR-1121 Thawing of Sf9 Working Cell Bank into T75 Flasks
CPR-1128 Inoculation of Sf9 Cells in Production Roller Bottles
CPR-1137 Harvest of Infected Sf9 Cells, Centrifugation Method
PURIFICATION PROCESS:
CPR-1087 Lysis, concentration, and washing of gp160 cells
CPR-1093-01 Extraction of gp160 into 8M urea
CPR-10088-01 Buffer exchange of gp160 urea extract
CPR-1098-01 Lentil lectin purification of gp160. Batch binding method
CPR-1103-01 Concentration and dialysis of gp160 lentil lectin column eluate
CPR-1141 Equilibration of S-400 column for gp160 purification
CPR-1092-01 Purification of gp160 using S-400 column
CPR-1102-01 Concentration of gp160 S400 column pool
REAGENTS/BUFFERS:
CPR-1090-02 Preparation of gp160 lysis buffer
CPR-1094-01 Preparation of gp160 extraction buffer
CPR-1011-01 Preparation of deionized 8M urea
CPR-1089-01 Preparation of gp160 lentil lectin buffer
CPR-1095-01 Preparation of gp160 lentil lectin elution buffer
CPR-1099-01 Preparation of gp160 lentil lectin regeneration buffer A
CPR-1100-01 Preparation of gp160 lentil lectin regeneration buffer B
CPR-1101-01 Preparation of gp160 lentil lectin storage buffer
CPR-1096-01 Preparation of gp160 dialysis buffer
CPR-1097-01 Preparation of gp160 gel filtration buffer
CPR-1133 Preparation of 0.5N sodium hydroxide
QUALITY CONTROL
QCR-1021 Quality control evaluation of bulk HIV-I recombinant gp160
QA-FM-1078 Approval to vial bulk gp160
<PAGE> 16
PAGE 2 of 3 PAGES
EXHIBIT C
PROPRIETARY INFORMATION
3. RESEARCH NOTEBOOK DOCUMENTATION AND REPORTS
3.1 METHODS
<TABLE>
<CAPTION>
NOTEBOOK# PAGE#'S SUBJECT
<S> <C> <C>
336 2-6, 27-28 Sf9 call growth
336 7-9 Virus infection of cell cultures
336 13 Freezing, storage, and recovery of cell
stocks
336 14-20, Plaque assay method and results
336 21-25 Virus infection method
336 30-31 Transfection method
390 89-90 Shake flask method
390 142-149 Production infection method
NA NA Rcport on serum free medium for Sf9
cells - 9/88
NA NA Roller bottle production methods
NA NA Medium components and insect cell
culture notes
</TABLE>
<PAGE> 17
PAGE 3 of 3 PAGES
EXHIBIT C
PROPRIETARY INFORMATION
3,2 RECOMBINANT BACULOVIRUS HT3 CONSTRUCTION
<TABLE>
<CAPTION>
Notebook # Page #'S Subject
<S> <C> <C>
331 25 List of vectors obtained from G. Smith
336 10-12 Infection of Sf9 cells with AcNPV-E2
331 26,29 Isolation of AcNPV-E2 viral DNA
331 36 Transfection #1: AcONA and Ac36OBgal
336 29,33,36,37,44, Purification and production of
48-50, 85 recombinant BgalAcNPV
336 124, 129-131,141- Transfection and expansion of
142, 150 BgalAcNPV:AcHT3
390 8-9,58-59,69,126
337 148 DNA hybridization method
380 16,31 DNA hybridization results
Virus infection Log VI # 36,41,45,47,70,77,116
Book
Production Infection PI #2
Log Book
733 110-113,117-119, Purification of baculovirus DNA from
121-124,128-129, CSHT3.7 for sequencing
133, 135, 136, 137
TBD TBD DNA sequencing results
</TABLE>
4. PATENT APPLICATION
Recombinant HIV Enbelope Proteins Produced in Insect Cells. Serial number
836,196 filed on February 13, 1992, which is a continuation-in-part of serial
number 091,481 filed on August 31, 1987, which is a continuation-in-part of
serial number 941,111 filed on December 15, 1986.
<PAGE> 18
PAGE 1 of 2 PAGES
EXHIBIT D
WORK PLAN for GENERATION OF SEED STOCK
This work agreement covers work to be performed by Repligen Corporation
regarding the generation, characterization, and documentation of recombinant HT3
Baculovirus seed stock
A. GENERATION and CHARACTERIZATION OF THE SEED STOCK
1. The primary source material will be HT3 seed stock
VI#45.1.C8.MOI-1. This sample is 4 passages from the
BgalAcNPV:AcHT3 co-transfection step. The back-up source
material will be HT3 seed stock PI#2. This sample is 9
passages from the co-transfected material. These seed stocks
have been stored at 4 degrees C in sterile tubes since they
were produced on 5/19/86 and 12/19/86 respectively.
2. A plaque assay with X-gal overlays will be performed on both
samples to confirm the absence of wild type virus.
3. A plaque assay with the normal trypan blue overlays (to
visualize plaques) will be performed on both samples to
determine the titer of the two samples.
4. Sf-9 cells received from ATCC will be put into culture and
expanded for the infection procedure.
5. VI#45.1.C8MOI-1 will be used to infect 1 T-25 flasks
containing 3 x 10(6) Sf-9 cells in 5mLs. The sample is
designated VI 92.2
6. The cell free supernatants from step #5 (VI 92.2) will be
titered by plaque assay and used to infect a T-75 flask
containing 9 x 10(6) Sf-9 cells in 10 mLs. This sample is
designated VI 92.4.
7. The cells from step #6 (VI 92.4) will be analyzed by Western
blot to confirm gp160 expression.
8. The cell free supernatant from step #6 (VI 92.4) will be
titered by plaque assay, examined for wild-type baculovirus
with B-gal overlay plaque assay, and used to infect a T-150
flask containing 1.8 x 10(7) Sf-9 cells in 30 mL. This sample
is designated VI 92.5.
<PAGE> 19
PAGE 2 of 2 PAGES
EXHIBIT D
WORK PLAN for GENERATION OF SEED STOCK
9. The cells from step #8 (VI 92.5) will be analyzed by Western
blot to confirm gp160 expression, and the cell-free
supernatant will be titered by plaque assay.
10. The titered viral stock (VI 92.4) and VI 92.5) will be sent to
Calypte for storage and or further expansion. The total stock
is expected to be between 20 and 60mL of recombinant HT3 virus
at a titer of -10(8) - 10(9) PFU/mL.
B. DOCUMENTATION RELATED TO HT3
1. Notebook documentation of the production of new seed stock
including Sf-9 cell culture, virus infection procedures, and
assay results.
<PAGE> 20
EXHIBIT E
CALYPTE BIOMEDICAL CORPORATION
STOCK PURCHASE AGREEMENT
This agreement is made as of the 8th day of March, 1993, between
Calypte Biomedical Corporation, a California corporation (the "Company") and
Repligen Corporation, a Delaware corporation (the "Purchaser").
1. PURCHASE AND SALE OF STOCK.
In consideration of training and consultation previously
provided in connection with that certain agreement between the Company and
Purchaser of even date herewith regarding a license and the purchase of seed
stock and equipment for a certain cell line (the "Transfer Agreement"), the
Company hereby sells to the Purchaser and the Purchaser hereby purchases from
the Company, 100,000 shares of the Company's Common Stock (the "Shares"). The
Company will promptly, after delivery of this agreement, (a) issue and deliver
to the Purchaser a certificate representing the Shares registered in the name of
the Purchaser, and (b) cause to be delivered to the Purchaser a legal opinion
from Messrs. Wilson, Sonsini, Goodrich & Rosati in form and substance
satisfactory to the Purchaser to the effect that upon issuance hereunder, the
Shares shall be duly authorized, validly issued, fully paid and non-assessable.
2. LEGENDS.
All certificates representing any of the Shares shall have
endorsed thereon legends in substantially the following form:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED,
SOLD, PLEDGED, OR TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS
IN EFFECT AS TO THESE SECURITIES OR THERE IS AN OPINION OF COUNSEL, SATISFACTORY
TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE."
(b) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A RIGHT OF FIRST REFUSAL SET FORTH IN AN AGREEMENT BETWEEN THE
COMPANY AND THE REGISTERED HOLDER, OR HIS PREDECESSOR IN INTEREST, A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
<PAGE> 21
(c) Any legend required to be placed thereon by the California
Commissioner of Corporations, or required by the applicable blue sky laws of
any state.
3. PURCHASER'S REPRESENTATIONS.
In connection with its purchase of the Shares, the Purchaser
hereby represents and warrants to the Company as follows:
(a) INVESTMENT INTENT; CAPACITY TO PROTECT INTERESTS. The
Purchaser is purchasing the Shares solely for investment and not with any
present intention of selling or otherwise disposing of the Shares or any portion
thereof in any transaction other than a transaction exempt from registration
under the Securities Act of 1933, as amended (the "ACT"). The Purchaser also
represents that the entire legal and beneficial interest of the Shares is being
purchased, and will be held, for the Purchaser's account only, and neither in
whole nor in part for any other person.
(b) INFORMATION CONCERNING COMPANY. The Purchaser has had the
opportunity to discuss the plans, operations, and financial condition of the
Company with its officers and has received all information the Purchaser has
deemed appropriate to enable the Purchaser to evaluate the financial risk
inherent in investing in the Shares.
(c) ECONOMIC RISK. The Purchaser realizes that the purchase
of the Shares involves a high degree of risk, and the Purchaser is able,
without impairing its financial condition, to hold the Shares for an indefinite
period of time and to suffer a complete loss of its value.
(d) ACCREDITED INVESTOR. The Purchaser is an "accredited
investor" as defined under Regulation D of the Act.
(e) RESTRICTED SECURITIES. The Purchaser acknowledges that the
sale of the Shares has not been registered under the Act. The Shares must be
held indefinitely unless subsequently registered under the Act or an exemption
from such registration is available, and the Company is under no obligation to
register the Shares.
(f) DISPOSITION UNDER RULE 144. The Purchaser understands:
1. that the Shares are restricted securities within
the meaning of Rule 144 promulgated under the Act which limits the sale of the
Shares in a public market transaction;
2. that the exemption from registration under Rule
144 will not be available, in any event, for at least two years from the date of
purchase of and actual payment for the
-2-
<PAGE> 22
Shares, and even then will not be available unless (A) a public trading market
then exists for the Common Stock of the Company, (B) adequate information
concerning the Company is then available to the public, and (C) other terms and
conditions of Rule 144 are complied with; and
3. that certain sales of the Shares may be made only
in limited amounts in accordance with such terms and conditions.
4. COMPANY'S REPRESENTATIONS.
In connection with its sale of the Shares, the Company hereby
represents and warrants to the Purchaser that the authorized capital of the
Company consists of 52,000,000 shares of Common Stock, $.001 par value,
1,000,000 shares of Series A Preferred Stock, $.001 par value, 8,048,472 shares
of Series B Preferred Stock, $.001 par value, 17,027,038 shares of Series C
Preferred Stock, $.001 par value, and 16,000,000 shares of Series D Preferred
Stock, $0.001 par value, of which 4,918,206 shares of Common Stock, 1,000,000
shares of Series A Preferred Stock, 8,048,472 shares of Series B Preferred
Stock, 17,027,038 shares of Series C Preferred Stock and 9,999,998 shares of
Series D Preferred Stock are issued and outstanding as of February 17, 1993.
There are no existing options, warrants, calls, pledges, liens or commitments of
any character relating to any issued or unissued shares of the Company which
came into effect after January 1992, except: (i) all of the Series D Preferred
Stock, (ii) 8,918,916 shares of Series C Preferred Stock, (iii) a warrant
exercisable for 120,000 shares of Series D Preferred Stock at $0.84 per share,
(iv) 316,695 shares of Common Stock, (v) an increase in the number of shares
available for grant pursuant to the Company's option plan by 2,000,000 shares of
Common Stock, and (vi) options to purchase shares of the Company's Common Stock
issued pursuant to the Company's option plan. Upon issuance, the Shares will be
duly authorized, validly issued, fully paid and non-assessable.
S. MARKET STANDOFF AGREEMENT.
In the event that the Company should propose to offer its
securities to the general public in an initial public offering, the Purchaser
agrees, at the option of the managing underwriters of such offering, not to sell
any securities of the Company, other than securities registered in such
offering, for a period specified by the Company not to exceed 180 days from the
effective date of the registration statement filed with the Securities and
Exchange Commission, pursuant to which such offering is to be made; provided,
however, that any such standoff period specified by the Company shall not be of
any longer duration, or affect a greater proportionate number of owned Shares,
for the Purchaser than for any institutional or management shareholder of the
Company. The
-3-
<PAGE> 23
Purchaser further agrees, upon the request of such managing underwriter or
underwriters, to execute and deliver such further agreements and instruments,
consistent herewith, as it or they may reasonably request to effect this
limitation.
6. RIGHT OF FIRST REFUSAL.
Before any of the Shares registered in the name of the
Purchaser or of any transferee thereof may be sold or transferred (including
transfer by operation of law), such Shares shall first be offered to the Company
as follows:
(a) The Purchaser shall deliver a notice to the Company
stating (i) the Purchaser's bona fide intention to sell or transfer such Shares,
(ii) the number of such Shares to be sold or transferred, and (iii) the price
for which the Purchaser proposes to sell or transfer such shares, and (iv) the
name of the proposed purchaser or transferee.
(b) Within twenty (20) days after receipt of such notice, the
Company or its assignee may elect to purchase all, but not less than all, Shares
to which the notice refers, at the price per share specified in the notice. Full
payment for all the Shares to which the notice refers shall be made by cash or
check to the Purchaser within thirty (30) days after receipt of the notice.
(c) If the Shares to which the notice refers are not elected
to be purchased as provided in Section 6b, the Purchaser may sell the Shares to
any person named in the notice at the price specified in the notice or at a
higher price, provided that such sale or transfer is consummated within sixty
(60) days of the date of the notice to the Company, and, provided further, that
any such sale is in accordance with all the terms and conditions hereof.
(d) Any shares so transferred will continue to be subject to
the right of first refusal provided in this Section 6.
The provisions of this Section 6 shall terminate on (i) the
effective date of a registration statement filed by the Company under the Act,
with respect to an underwritten public offering of Common Stock of the Company
or (ii) the closing date of a sale of substantially all of the assets or merger
of the Company pursuant to which shareholders of the Company receive securities
of a buyer whose shares are publicly traded.
7. REGISTRATION RIGHTS.
The Purchaser is hereby granted the "piggy-back" registration
rights set forth in Section 9.5 of that certain Agreement for the Purchase and
Sale of Series D Preferred Stock dated as of December 28, 1992 by and between
the Company and the purchasers set
-4-
<PAGE> 24
forth in Exhibit A to such agreement (the "Series D Agreement") and the
Purchaser agrees to be bound by the applicable terms and conditions of Section 9
of the Series D Agreement as though the Purchaser were a Holder and the Shares
were Registrable Securities under Section 9 of the Series D Agreement. A copy of
Section 9 of the Series D Agreement has been furnished to the Purchaser and to
the Purchaser's counsel.
8. GOVERNING LAW.
This agreement shall be governed by the laws of the State of
California, without regard to their conflicts of laws provisions.
IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the day and year first above written.
REPLIGEN CORPORATION CALYPTE BIOMEDICAL CORPORATION
By: /s/ F. Michael Egan By: /s/ David J. Robison
------------------------------ ---------------------------
David J. Robison, President
Title: V.P., BUSINESS DEVELOPMENT and Chief Executive Officer
---------------------------
Address: 1 Kendall Square
Building 700
Cambridge, MA 02139
-5-
<PAGE> 25
EXHIBIT F
ACCEPTANCE CRITERIA
The following represents those tests Calypte anticipates
performing to ensure the integrity and viability of the Seed Stock.
Qualification of Seed Stock:
Evaluate HT3 to determine integrity of the seed stock genome
Other tests:
Sterility
Plaque titration
Verify expression
Establish positive identification of expression protein
<PAGE> 1
EXHIBIT 10.25
NON-EXCLUSIVE LICENSE AGREEMENT
Between
The Texas A&M University System
and
Calypte Biomedical Corporation
This Agreement, effective as of the - 12th day of September 1993, by and between
Calypte Biomedical Corporation, a corporation having its principal place of
business in Berkeley, California, hereinafter referred to as "LICENSEE", and The
Texas A&M University System, having its principal offices at College Station,
Texas 77843, hereinafter referred to as "TAMUS".
WITNESSETH
Whereas, the Texas Agricultural Experiment Station, hereinafter
referred to as TAES, a part of The Texas A&M University System, has developed a
novel recombinant baculovirus expression vector system (BEVS) and methods for
the introduction and expression of heterologous genes in cultured insect cells
using BEVS; and
Whereas, TAMUS owns or controls proprietary rights in and to the BEVS
Technology including patent rights, know-how and possessory rights; and
Whereas, TAMUS is committed to promoting the maximum use in research
and the widest commercial utilization of the BEVS Technology; and
Whereas, TAMUS expects to accomplish its goals with respect to BEVS
through a comprehensive licensing program which includes the grant of
non-exclusive rights in the BEVS Technology.
Whereas, LICENSEE wishes to acquire a non-exclusive license under
existing rights to the BEVS Technology;
Now, therefore, in consideration of the premises and the mutual
covenants hereinafter recited, the parties agree as follows:
Article I
Definitions
In this Agreement, unless otherwise provided for or unless inconsistent
with the subject matter or context, the following expressions shall have the
meanings set forth in this Article.
PAGE 1 of 8
<PAGE> 2
1.00 Licensed Patents. The term "Licensed Patents" as used herein shall mean
the United States Patents No. 4,745,051 and 4,879,236, patent
applications and foreign patents or applications listed on Schedule A
which is attached hereto and made a part of this Agreement, any patents
issuing therefrom and any divisions, continuations or
continuations-in-part based thereon and any reissues or extensions
thereof.
1.01 Know How. The term "Know-How" as used herein shall mean all information
including that which is not patentable or otherwise proprietary and
confidential to TAMUS, which relates to the BEVS Technology.
1.02 Licensed Products. The term "Licensed Products" shall mean any product,
the manufacture, use or sale of which is covered by a claim of Licensed
Patents which has neither expired nor been held invalid by a court of
competent jurisdiction from which no appeal has or may be taken.
(i) "End Products" means Licensed Products sold in form for use by
an end user and not intended for further chemical
transformation, genetic manipulation, processing, formulating,
compounding or packaging.
(ii) "Bulk Products" means Licensed Products other than End
Products or "Basic Genetic Products".
(iii) "Basic Genetic Products" means Bulk Products that are sold for
use primarily for further genetic manipulation and services
sold to another which involve the use of the BEVS Technology
and Know-How and/or rights under Licensed Patents.
1.03 Net Sales. The term "Net Sales" shall mean the gross revenue or other
consideration derived by LICENSEE from the actual sale or other
commercial use of Licensed Products, less (i) discounts actually
allowed, (ii) credit for claims, allowances or returned products, (111)
prepaid freight, and (iv) taxes or other governmental charges added to
the face of the invoice and actually paid by LICENSEE. There shall be
no imputed revenues for samples, free goods, or other marketing
programs whereby Licensed Products are given away to induce sales or
other commercial use of the Licensed Products.
1.04 LICENSEE. The term "LICENSEE" shall include any "Affiliate" thereof. An
Affiliate of LICENSEE shall mean any corporation or other business
entity controlled by, controlling or under common control with
LICENSEE. For this purpose "control" means direct or indirect
beneficial ownership of fifty percent (50%) of the voting stock, or
fifty percent (50%) interest in the income of such corporation or other
business.
Article II
License Grant
2.00 LICENSEE is hereby granted, subject to the terms and conditions of this
Agreement, a nonexclusive license, under Licensed Patents to make,
have made, use and sell Licensed Products. TAMUS may, upon written
request from LICENSEE, grant LICENSEE the right to grant sublicenses.
page 2 of 8
<PAGE> 3
2.01 LICENSEE will be informed of any divisions, continuations or
continuations-in-part to Licensed Patents and be granted rights to such
with no additional payments therefore.
2.02 Rights granted by TAMUS under this Agreement may be subject to rights
required to be granted to the Government of the United States of
America pursuant to 35 U.S.C. SS 200 211. LICENSEE hereby agrees to
provide all information and assistance necessary to enable TAMUS to
comply with its obligations to the Government in connection with
subject matter of this Agreement.
2.03 In connection with the license or sale by LICENSEE of its proprietary
technology (whether wholly owner or jointly owned) relating to or
making use of the BEVS Technology, LICENSEE may grant the right to use
the technology licensed hereunder to third parties (defined as
non-affiliates of LICENSEE), so long as royalties are paid by either
LICENSEE or such third parties to TAMUS at the rates established herein
and so long as such third parties observe the terms and conditions of
this Agreement. LICENSEE agrees to pay TAMUS [ * ] ([ * ]%) of any
initial fees obtained from third parties in connection with grants of
rights under this paragraph 2.03, but such payment to TAMUS shall be
limited to not more than [ * ] for each
such grant. LICENSEE will notify TAMUS within thirty (30) days of the
granting of rights to third parties under this paragraph 2.03 and will
also identify the third party. LICENSEE shall forward to TAMUS a copy
of any and all fully executed sublicense agreements, and further agrees
to forward to TAMUS annually a copy of such reports received by
LICENSEE from its sublicensees during the preceding four (4) month
period under the sublicenses as shall be pertinent to royalty
accounting under said sublicense agreements. LICENSEE shall not receive
from sublicensees anything of value in lieu of cash payments based upon
payment obligations of any sublicensee under this Agreement.
Article III
Fees and Royalties
3.00 Initial Payment. Within 15 days after signing of this Agreement,
LICENSEE shall pay TAMUS a non-refundable fee of [ * ]
.
3.01 Annual Fees. Within 45 days after the second and all subsequent
anniversary dates, LICENSEE shall pay TAMUS a non-refundable annual fee
of [ * ] due for each previous year.
From the first anniversary date of this Agreement, each year in which
LICENSEE owes royalty payments to TAMUS, LICENSEE may credit that
year's annual fee against royalty payments due.
3.02 Royalties. All sales by LICENSEE of Licensed Products shall be subject
to royalties as provided in this section.
(i) LICENSEE shall pay TAMUS a royalty equal to [ * ] percent
([ * ]%) ([ * ]% of Net Sales of End Products made or sold
in a country where Licensed Patents exist. If an End
Product is sold in conjunction with another active component
or active components, Net Sales for purposes of determining
royalties on the combination shall be calculated by
multiplying Net Sales of the combination by the fraction
[ * ],
*Confidential portion has been omitted
and filed separately with the Commission
PAGE 3 of 8
<PAGE> 4
where A is the invoice price of the End Product if sold
separately and B is the total invoice price of any other
active component or components in combination if sold
separately. However, in no case shall the calculated fraction
[ * ] be less than [ * ].
(ii) LICENSEE shall pay TAMUS a royalty equal to [ * ]
of Net Sales of Bulk Products made or sold in a country where
Licensed Patents exist.
(iii) LICENSEE shall pay TAMUS a royalty equal to [ * ]
of Net Sales of Basic Genetic Products made or sold in a
country where Licensed Patents exist.
(iv) Royalty payments due under Article III, 3.02 (i), 3.02 (ii),
and 3.02 (iii), may be reduced each year by one times the
annual fee paid each year under 3.01 from the second
anniversary date of this Agreement. Maximum credit allowed
each period is determined by multiplying the royalty due,
less the annual fee due, by [ * ] percent [ * ]. The total
amount of credit that may be used cannot exceed $[ * ] in
the aggregate for the life of the Agreement. The amount of any
credit not used from accumulated credit in one year may be
carried forward and used in succeeding years until the amount
of that accumulated credit is fully used. If LICENSEE owes
royalty to TAMUS for sales before the first anniversary date
of this Agreement, LICENSEE must pay the full amount of
royalty due. If the amount of royalty due is less than the
amount of the annual fee due for that year, the credit allowed
to be carried over to the next period will equal the amount of
the annual fee, and the payment due TAMUS will equal the
annual fee.
Article IV
Payments and Reports
4.00 Within forty-five (45) days after each anniversary date, and for as
long as royalty obligations continue under this Agreement, LICENSEE
shall deliver a report certified by an officer of LICENSEE to TAMUS, in
form acceptable to TAMUS, of the amount of Net Sales of Licensed
Products sold by LICENSEE, and the amount of any royalties due to TAMUS
under Article III of this Agreement. Such report shall state the Net
Sales of Licensed Product sold or otherwise disposed of by LICENSEE on
a country by country basis during the twelve (12) months preceding the
anniversary date. If payments due, LICENSEE shall remit such payment
with the report.
4.01 Payments hereunder shall be made in U.S. dollars in the United States.
With respect to sales in countries outside the United States, royalties
shall be payable in U.S. dollars at the official rate of exchange
prevailing on the last day of each month during the accounting period
in which royalties accrue.
4.02 All overdue payments, fees, and/or royalties shall bear interest from
the due date and will be payable to TAMUS at the Prime Interest Rate(s)
quoted in the Wall Street Journal from the due date up until payment.
4.03 Any tax paid or required to be withheld by LICENSEE on account of
royalties payable to TAMUS under this Agreement shall be deducted from
the amount of royalties otherwise
*Confidential portion has been omitted
and filed separately with the Commission
PAGE 4 of 8
<PAGE> 5
due. LICENSEE shall secure and send to TAMUS proof of any such taxes
withheld and paid by LICENSEE for the benefit of TAMUS.
Article V
Record Keeping and Auditing
5.00 LICENSEE shall maintain full, true and accurate records containing all
information which may be necessary for a determination of the
royalties to be paid to TAMUS under the terms of this Agreement.
Said records shall be open and available for a period of four (4) years
following the rendering by LICENSEE of a royalty report as required by
this Agreement, to the inspection of an independent Certified Public
Accountant, acceptable to LICENSEE, but retained and paid for by TAMUS
solely for the purpose of verifying the correctness of LICENSEE's
compliance with the payment of royalties hereunder.
Article VI
Confidentiality
6.00 While this Agreement is in effect, and for three (3) years thereafter,
any technical or business related information or materials which
LICENSEE, TAMUS, or TAES may disclose to each other shall be treated as
confidential information to the extent permitted by law. It shall be
maintained in confidence by each party and shall not be disclosed to
any third party without prior written consent. This obligation shall
not apply to information which; (i) is in the public domain prior to
the disclosure; (ii) becomes part of the public domain subsequent to
disclosure; (iii) is received from a third party having a right to
disclose it; or, (1v) is in either parties possession prior to
disclosure as shown by reasonable proof. The parties stipulate that
such consent will not be unreasonably withheld, particularly if such
disclosure is necessary to obtain, perfect or maintain patent rights or
any aspect of the BEVS technology.
Article VII
Indemnity and Warranties
7.00 Indemnity. LICENSEE agrees to indemnify and hold TAMUS and TAES
harmless from and against any and all claims, demands, losses or causes
of action related in any way to marketing, commercialization or other
rights granted under this Agreement or to any products or services used
or sold under this Agreement unless such suit results from actions or
misrepresentations on the part of TAMUS and/or TAES.
7.01 Warranty. Nothing in this Agreement shall be construed as a warranty or
representation by TAMUS or TAES as to the validity of any Licensed
Patent. Nothing in this Agreement shall be construed as a warranty or
representation by TAMUS or TAES that anything made, used, sold or
otherwise disposed of under any license granted under this Agreement
is or will be free from infringement of domestic or foreign patent
rights of third parties.
page 5 of 8
<PAGE> 6
Article VIII
Term and Termination
8.00 This Agreement will remain in effect, unless terminated earlier in
accordance with the provisions under this paragraph, until expiration
of the last to expire of the Licensed Patents.
(a) In the event LICENSEE shall at any time fail to make payments,
render reports, maintain standards of quality and
performance, or otherwise abide by the terms herein
provided, or misuse the name of TAMUS or TAES or attempt to
exercise ownership rights over the BEVS, TAMUS shall have the
right to notify LICENSEE that it is in default. Unless the
stated default is corrected by LICENSEE within sixty (60) days
from receipt by LICENSEE of such notice, TAMUS shall be free,
at its option, to terminate this Agreement and the license(s)
and rights granted by it without further notice to LICENSEE.
(b) This Agreement may be terminated by TAMUS at its option and
without prejudice to any other remedy to which it may be
entitled at law or in equity, or elsewhere under this
Agreement, by giving written notice of termination to LICENSEE
if the latter should:
(1) Be adjudicated a voluntary or involuntary bankrupt;
(2) Institute or suffer to be instituted any proceeding
for a reorganization or rearrangement of its affairs;
(3) Make an assignment for the benefit of creditors;
(4) Become insolvent or have a receiver of its assets or
property appointed;
(5) Allow any money against it to remain unsatisfied for
a period of thirty (30) days or longer;
(c) LICENSEE shall have the right to terminate this License at any
time upon six (6) months prior written notice by certified
mail to TAMUS and upon payment of the final minimum annual fee
for the year (even though not complete) in which such
termination takes effect.
(d) Termination of this Agreement or any license granted hereunder
for any reason by either party shall not relieve the parties
of any obligation accruing prior to such termination.
Article IX
Miscellaneous Provisions
9.00 Force Majeure. Each party hereto shall be relieved of its obligations
hereunder to the extent that fulfillment of such obligations shall be
prevented by acts beyond the reasonable control
page 6 of 8
<PAGE> 7
of the party affected thereby.
9.01 Amendment. This Agreement may not be amended, supplemented or otherwise
modified except by an instrument in writing signed by both parties.
9.02 Applicable Law. This Agreement shall be construed and the rights of the
parties determined in accordance with the laws of the State of Texas.
9.03 Titles. The titles of the Articles and Sections of this Agreement are
for general information and reference only, and this Agreement shall
not be construed by reference to such titles.
9.04 Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
sufficiently given for all purposes hereof if mailed by first class,
certified or registered mail postage prepaid, addressed to the party to
be notified at its address shown below, or to such other address as may
have been furnished in writing to the notifying party.
If to TAMUS:
Executive Director
Technology Licensing Office
The Texas A&M University System
College Station, TX 77843
If to TAES: With a copy to:
Director Planning and Budget Officer
Texas Agricultural Experiment Station Contracts and Grants
Texas A&M University Texas Agricultural Experiment
College Station, TX 77843-2147 Station
Texas A&M University
College Station, TX 77843-2147
If to LICENSEE:
Calypte Biomedical Corporation
1440 Forth Street
Berkeley, California 94710
Phone (510) 526-2541
FAX (510) 526-5381
9.05 Prohibition Against Use of Name. Neither party shall use the name,
insignia or symbols of the other or reference any departments or staff
for any purpose whatsoever without prior written consent except that
LICENSEE may state that it is licensed by TAMUS under one
page 7 of 8
<PAGE> 8
or more of the patents and/or applications comprising the Licensed
Patents.
9.06 More Favored Terms. TAMUS intends to grant to third parties a
non-exclusive license to the BEVS technology, as defined in Article II
which contains royalty terms (Article III, 3.01 3.02) that are
essentially similar. If LICENSEE determines that royalty terms on
licenses subsequently granted are more favorable than those granted
herein, LICENSEE shall at its election, be entitled upon written notice
to TAMUS to have this Agreement amended to substitute royalty terms of
such more favorable licensee.
9.07 Export Controls, It is understood that TAMUS is subject to United
States laws and regulations controlling the export of technical data,
computer software, laboratory prototypes and other commodities
(including the Arms Export Control Act, as amended and the Export
Administration Act of 1979), and that its obligations hereunder are
contingent on compliance with applicable United States export laws and
regulations. The transfer of certain technical data and commodities may
require a license from the cognizant agency of the United States
Government and/or written assurances by LICENSEE that LICENSEE shall
not export data or commodities to certain foreign countries without
prior approval of such agency. TAMUS neither represents that a license
shall not be required nor that, if required, it shall be issued.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate originals by their respective officers thereunto duly authorized, the
day and year herein written.
CALYPTE BIOMEDICAL CORPORATION THE TEXAS A&M UNIVERSITY SYSTEM
By: /s/ David J. Robison By: /s/ Herbert H. Richardson
------------------------ -----------------------------
Name David J. Robison, Ph.D. Herbert H. Richardson
Title President & CEO Chancellor
Date: August 20, 1993 Date: 1-12-93
page 8 of 8
<PAGE> 9
SCHEDULE A
LISTING OF PATENT PROPERTIES
Tide: Method for Producing a Recombinant Baculovirus Expression Vector
Assignee: The Texas A&M University System
<TABLE>
<CAPTION>
Country Filing Date Application No. Issue No. Date
- ------- ----------- --------------- --------- ----
<S> <C> <C> <C> <C>
USA 5-27-83 498,858 4,745,051 5-17-88
USA-CIP 5-16-84 609,697 Abandoned
USA-CIP 4-16-87 040,367 4,879,236 11-7-89
USA-CIP 8-24-89 398,096
Argentina 5-24-84 296,755 234,760 6-30-87
Australia 5-25-84 28717/84 581,174 5-26-89
Brazil 5-29-84 P1840266
Canada 5-25-84 455,167 1,222,213 5/26/87
Colombia 5-25-84 232799
Denmark 5-25-84 84/2579
E.P.C.* 5-22-84 84 105841.5 027839 7-15-92
India** 5-24-84 376/Mas/84 160416 7-18-88
India-1** 3-12-86 172/Mas/86 161540 12-23-88
India-2** 8-18-86 664/Mas/86 164388 9-15-88
India-3** 8-18-86 663/Mas/84 164387 9-15-89
Ireland 5-23-84 1269/84
Israel 5-22-84 71906
Japan 5-28-84 108279/84
Korea 5-28-84 84-2931 051,077 04/27/92
</TABLE>
<PAGE> 10
Schedule A
Page 2
<TABLE>
<CAPTION>
Country Filing Date Application No. Issue No. Date
- ------- ----------- --------------- --------- ----
<S> <C> <C> <C> <C>
Korea- 1 11-26-84 84-7390
Korea-2 02-03-90 90-1373
Korea-3 02-03-90 90-1372 52829 7-6-92
Mexico 5-25-84 201,459
Norway 5-25-84 82 2094
New Zealand 5-23-84 208,259 208,259 5-6-88
Philippines 5-28-84 30723 25395 6-3-91
South Africa 5-23-84 84 3914 84 3914 9-25-85
Spain 5-25-84 532,825 532,825 3-12-85
Taiwan** 5-25-84 7312070 050740 12-26-91
Venezuela** 5-27-84 851
</TABLE>
* Designating: Austria, Belgium, France, West Germany, Italy, Great Britain,
Liechtenstein, Luxembourg, Netherlands, Sweden, and Switzerland
**Non-Convention
<PAGE> 11
SCHEDULE B
Calculation of Credit Against Royalties
<TABLE>
<CAPTION>
Year Annual Fee 1 X Credit Cumulative Credit
- ---- ---------- ---------- -----------------
<S> <C> <C> <C>
Initial Fee [ * ] [ * ] [ * ]
2 [ * ] [ * ] [ * ]
3 [ * ] [ * ] [ * ]
4 [ * ] [ * ] [ * ]
5 [ * ] [ * ] [ * ]
6 [ * ] [ * ] [ * ]
7 [ * ] [ * ] [ * ]
8 [ * ] [ * ] [ * ]
</TABLE>
Assume that the first commercial sale is in year 6 and that net
sales on which royalties are due are of Licensed Product. Further assuming
that the royalty rate is , royalties due for the year would be
. Accumulated credits are ; therefore, the royalty payment for
year 6 is calculated as follows:
Total credits to [ * ] year 6 = [ * ]
Royalty due on = [ * ]
Less annual fee paid in year 6 = [ * ]
Royalty due = [ * ]
Royalty due in year 6 = [ * ]
[ * ]
Net royalty due in year 6 = [ * ]
[ * ]
Carry forward credit available in year 7 = [ * ]
[ * ]
*Confidential portion has been omitted
and filed separately with the Commission
<PAGE> 1
EXHIBIT 10.26
LICENSE AGREEMENT
Effective as of 3-1-93 THE BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR
UNIVERSITY, a body having corporate powers under the laws of the State of
California (STANFORD), and CALYPTE BIOMEDICAL CORPORATION a California
corporation having a principal place of business at 1440 Fourth Street,
Berkeley, CA 94710 (LICENSEE) agree as follows
1. BACKGROUND
1.1--In the course of fundamental research programs at the University of
California and STANFORD (Universities), inventions were conceived jointly which
relate to engineering biologically functional replicons possessing desired
genetic properties of parent DNA molecules. These research programs were
supported by the National Science Foundation, the American Cancer Society, and
the National Institutes of Health of the Department of Health, Education and
Welfare, now Health and Human Services (HHS). These agencies and the
Universities agreed that the intellectual property rights resulting from these
inventions (and licensed through this Agreement) would be administered pursuant
and subject to the terms of STANFORD's Institutional Patent Agreement (IPA)
with HHS.
1.2--The Universities have agreed that Stanford will manage the securing of
patent rights and licensing in the public interest, and that any net income
arising therefrom will be shared between the Universities, and designated to be
used for educational and research purposes.
1.3--By assignment of the inventions from the inventors, STANFORD is the
owner of certain U.S. Patent rights and desires to grant licenses under those
rights to licensees for development of products and processes for public use
and benefit.
1.4--LICENSEE desire to develop processes and methods and marketable
products for public use and benefit by using Licensed Patent Rights, and it
will follow good safety practices in such development work.
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<PAGE> 2
2. DEFINITIONS
2.1--Licensed Patent Rights means U.S. Patent No. 4,237,224, issued December
2, 1980, U.S. Patent No. 4,468,464, issued August 28, 1984, and U.S. Patent No.
4,740,470, issued April 26, 1988 and any reissues or extensions thereof.
2.2--Ultimate Consumer means that person or entity whose use of the product
results in its destruction or loss of activity and/or loss of value.
2.3--Licensed Product(s) means materials (including organisms) which, in the
course of manufacture, use, or sale would, in the absence of this license,
infringe one or more claims of Licensed Patent Rights which have not been held
invalid by a court from which no appeal may be taken.
Four categories of Licensed Products are designated:
End Products (Paragraph 2.4)
Basic Genetic Products (Paragraph 2.5)
Process Improvement Products (Paragraph 2.6)
Bulk Products (Paragraph 2.7)
2.4--End Products means marketable goods having at least one component
coming within Licensed Products, or produced by a Licensed Product, which goods
are sold in a form for utilization by the Ultimate Consumer, and are not
intended or marketed for further information, processing, or chemical
transformation, illustrative End Products include:
(a) health care products, sold for patient care and use or
dispensation by medical professionals (for example, dosage
forms of hormones, vaccines, and biosynthesized drugs, films,
fibers or dressings; and reagents or devices used for
diagnostic purposes, incorporating biochemical agents such as
antibodies, enzymes, specific binding proteins or
polysaccharides);
(b) products sold in a form ready for application to seeds, for
addition to feed or crop treating agents, for administration
to animals or for treatment of cells being cultured in order
to improve agriculture, animal production, forestry or
landscaping (such as fertilizers, vaccines, and nitrogen
fixing or pesticidal microorganisms);
(c) microorganisms and/or their products which are suitable for
use as animal or human food, for degrading substances in an
environment, or for increasing the production of desired
substances (such as concentrating minerals, generating gas or
useful compost from low value substrates);
2
<PAGE> 3
(d) reagents for research, such as enzymes or antibodies.
2.5--Basic Genetic Products means materials having at least on component
coming within Licensed Products which are sold or used primarily for further
processing or genetic manipulation and/or are neither End Products, Process
Improvement Products or Bulk Products. Illustrative Basic Genetic Products
include plasmids, transformants, and nucleic acid segments such as expression
regulators and structural gene sequences. Also, Basic Genetic Products include
services using Licensed Products and which services are provided by LICENSEE to
customers on a contract basis.
2.6--Process Improvement Products means materials having at least one
component coming within Licensed Products, which are developed by or for the
LICENSEE, as opposed to being purchased by the LICENSEE, and are used by the
LICENSEE in its manufacturing processes to enhance production efficiency and
where the resulting product is essentially identical to a product manufactured
by the previous process. Illustrative Process Improvement Products include
microorganisms for production of chemical intermediates, amino acids, or
pharmaceuticals; enzymes for chemical manufacturing; antibodies for separation
processes; and nitrogen-fixing microorganisms used by an agricultural company
to reduce fertilizer consumption.
2.7--Bulk Products means materials having at least one component coming
within Licensed Products, or produced by a Licensed Product, which material is
intended for further formulation processing or chemical transformation by a
manufacturer formulator or the like (as distinguished from a distributor,
retailer or Ultimate Consumer). Illustrative Bulk Products include an antibody
or a hormone sold to a chemical company for conversion into functional
chemicals.
2.8.--Net Sales means the gross sales, royalties or fees received by
Licensee, whether invoiced or not, less returns and allowances actually
granted, packing, insurance, freight out, taxes or excise duties imposed on the
transaction (if separately invoiced); wholesaler discounts and cash discounts.
2.9--First Commercial Sale means the initial transfer by LICENSEE of
Licensed Products in exchange for cash or some equivalent to which value can be
assigned for the purpose of determining Net Sales.
2.10--LICENSEE is understood to include all of its Affiliates. An Affiliate
of LICENSEE shall mean any corporation or other business entity controlled by
controlling or under common control, with LICENSEE. For this purpose,
"control" means direct or indirect beneficial ownership of at least fifty
percent (50%) of the voting stock or at least fifth percent (50%) interest in
the income of such corporation of other business.
3
<PAGE> 4
3. GRANT
3.1--STANFORD grants to LICENSEE a non-exclusive, non-transferable right and
license to make, have made, use and sell Licensed Products under Licensed
Patent Rights.
4. COMPLIANCE WITH LAWS, REGULATIONS AND STANDARDS
4.1--LICENSEE agrees to comply with all governmental laws and regulations
applicable to the use, production and/or sale of Licensed Products.
4.2--With respect to operations by the LICENSEE in the United States, its
territories and possessions, LICENSEE specifically expresses its intent to
comply with the physical and biological containment standards set forth in the
NIH Guidelines for Research Involving Recombinant DNA Molecules, dated 21
November 1980 or any subsequent amended version of U.S. Government guidelines
or regulations pertaining to such activities in effect during the term of this
Agreement LICENSEE further agrees to cooperate with government agency(ies)
authorized to monitor compliance with such containment standards.
5. GOVERNMENT TERMS
5.1--This Agreement is subject to the terms and conditions of the HHS, IP
with STANFORD dated April 5, 1972.
6. ROYALTIES
6.1--In consideration of the rights granted herein, LICENSEE shall pay to
STANFORD upon execution of this agreement $ [ * ]. Thereafter, LICENSEE shall
pay a minimum annual advance on earned royalties of $ [ * ] on or before the
first day of February for each calendar year following execution of this
agreement. Said payments are nonrefundable except that they can be credited
against earned royalties to the extent provided in paragraph 6.3.
6.2--All sales or use of Licensed Products by LICENSEE, excepting sales
under paragraph 10.1 to an Affiliate or another licensee of STANFORD or sales
to the United States Government shall be subject to royalty payment as provided
in paragraphs 6.3 to 6.7 inclusive.
6.3--Earned royalty payments due under Article 8 in excess of the annual
minimum $ [ * ] may be reduced up to 50% in any one year by a credit. This
credit is equal to the unreimbursed cumulative excess of the advance royalties
paid in accordance with paragraph 6.1 over the total of the earned royalties
due under paragraph 6.4 to 6.6 inclusive. This reduction in earned royalty
payments may continue so long as is necessary to fully amortize the credit.
6.4--LICENSEE shall pay earned royalties for use of Licensed Patent Rights
for production and sale of End Products based on the total royalty bearing Net
Sales of End
*Confidential portion has been omitted
and filed separately with the Commission
4
<PAGE> 5
Products by LICENSEE. The earned royalty rate for End Products sold in the
U.S. is [ * ] in each calendar year.
6.5--LICENSEE shall pay earned royalties for use of Licensed Patent Rights
to produce in the United States End Products and Bulk Products for sale outside
of the United States of [ * ] of Net Sales of End Products and [ * ] of Net
Sales of Bulk Products in each calendar year.
* SEE ATTACHED ADDENDUM TO PARAGRAPHS 6.4 and 6.5.
6.6--LICENSEE also shall pay earned royalties for use of Licensed Patent
Rights for production and sale of Licensed Products that are not End Products
as follows:
6.6.1--The earned royalty rate of Basic Genetic Products sold in the
U.S. shall be [ * ] of Net Sales.
6.6.2--The earned royalty rate for Bulk Products sold in the U.S. is
[ * ] in each calendar year.
6.6.3--The earned royalty rate for Process Improvement Products shall
be [ * ] of cost savings and economic benefits enjoyed by LICENSEE in each
calendar year.
6.6.4--If LICENSEE can demonstrate that the royalty payments for a
product falling under Basic Genetic Products (paragraph 6.6.1), Bulk
Products (paragraphs 6.6.2) or Process Improvement Products (paragraph
6.6.3) are greater than the royalties that would result if calculated on
the End Product (for sales in the U.S. and other territories) made from or
with such product, it may request negotiation of a lower royalty comparable
to the End Product royalty. such negotiation will be initiated by notice
in writing from LICENSEE to STANFORD giving the nature of the product(s) to
be marketed by LICENSEE and expected use of the product(s).
6.7--If the parties cannot agree after negotiation upon equitable royalty
terms for the use of Licensed Patent Rights under subparagraph 6.6.4, then
either party may submit the matter for decision by arbitration in accordance
with paragraph 14.4. Fees for arbitration shall be borne by the LICENSEE, but
may be credited per paragraph 8.3 against royalties payable to LICENSEE under
the agreement established by means of the arbitration, until such arbitration
fees are fully recovered.
6.7.1--In arriving at a decision, the negotiators and arbitrator(s)
shall consider such factors as the size of the potential market for the
Licensed Product(s) involved the anticipated profit margin, the royalty
rates for End Products, the royalty that would be paid on the End Products
most likely to be prepared for the Ultimate Consumer from the Licensed
Product(s) in question and prevailing royalty rates in the industry to
which the Licensed Product(s) pertain.
*Confidential portion has been omitted
and filed separately with the Commission
5
<PAGE> 6
7. MORE FAVORED TERMS
7.1--STANFORD intends that the terms of all licenses under Licensed Patent
Rights are to be essentially similar to the terms of this license. STANFORD
will advise LICENSEE as to those terms which are different in such other
license agreements, unless said terms are consequent to the operation of any
provision of paragraphs 6.6.4, 6.7 and 6.7.1, whereupon LICENSEE may determine
whether such terms are more favorable that those granted herein. LICENSEE
shall, at its election, be entitled upon written notice to STANFORD to have
this Agreement amended to substitute all terms of such more favorable license
for all terms of this Agreement as of the date upon which such more favorable
license shall have become effective. Such amendment shall, as to royalty,
apply only to prospective royalties.
7.2--In the event LICENSEE chooses to exercise its option under paragraph
7.1. LICENSEE agrees that it shall also accept and be bound by the same terms
and conditions for the benefit of STANFORD as those which are a part of or
shall accompany such other license granted by STANFORD to a third party.
LICENSEE further agrees that in determining whether the royalty rate for a
particular product or process accorded the third party licensee is more
favorable STANFORD may assign a reasonable value to any patent rights or other
consideration it has or will receive in return for the grant of such other
license.
7.3--STANFORD has entered into prior license agreements for Licensed Patent
Rights. This Article 7 does not apply with respect to these prior license
agreements.
8. PAYMENTS AND REPORTS
8.1--LICENSEE agrees to notify STANFORD promptly in writing, of the date of
the First Commercial Sale of a Licensed Product and date of first transaction
under paragraph 10.1
8.2--Beginning with date of First Commercial Sale, royalties from LICENSEE
HEREUNDER (less the credits allowed by paragraphs 6.3 and 6.7 and less the
minimum annual royalty paid in advance for that calendar year) shall be paid to
STANFORD within ninety (90) days after the close of each subsequent calendar
quarter.
8.3--Total credits allowable by operation of paragraphs 6.3 and 6.7 shall in
no case exceed 50% of the excess of current earned royalties over the minimum
royalty due in any given year. Any amount so credited shall be credited only
once against earned royalties payable hereunder.
8.4--LICENSEE shall provide with each earned royalty payment of paragraph
8.2 statement of Net Sales and the applicable royalties in accordance with
Article 6 and a report of each transaction under paragraph 10.1. All such
reports shall be held in
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<PAGE> 7
confidence by STANFORD. Such statements and reports shall be submitted whether
or not a payment in excess of the minimum is due.
8.5--STANFORD is a nonprofit institution. Any taxes, fees, or other charges
imposed by governmental authorities upon payments due STANFORD shall be paid by
LICENSEE. The amounts remitted shall be pursuant to payment terms of the
agreement.
8.6--To facilitate STANFORD's conformance with its Institutional Patent
Agreement, LICENSEE agrees to make an annual report to STANFORD each March 1
covering its progress during the previous calendar year toward
commercialization. Such report: may be general in nature and shall not
include company proprietary information.
8.7--LICENSEE also agrees to make a written report to STANFORD within ninety
(90) days after the date of termination of this License Agreement, stating in
such report the royalty payable hereunder which was not previously reported to
STANFORD LICENSEE shall also continue to make annual reports pursuant to the
provisions of this Article 8 covering Net Sales and the applicable royalties in
accordance with Article 6 received from sale of Licensed Products after
termination of this License Agreement until such time as all such sales shall
have terminated. Continuation of this License Agreement until such time as all
such sales shall have terminated. Concurrent with the submittal of each post-
termination report LICENSEE shall pay STANFORD all applicable royalties.
9. RECORDS
9.1--LICENSEE shall keep complete, true and accurate books of account and
records for the purpose of showing the derivation of all amounts payable to
STANFORD under this License Agreement. Said books and records shall be kept at
LICENSEE's principal place of business for at least three (3) years following
the end of the calendar year to which they pertain and shall be open at all
reasonable times for inspection by a representative of STANFORD for the purpose
of verifying LICENSEE's royalty statements or LICENSEE's compliance in other
respects to this License Agreement. This representative is obliged to treat as
confidential all relevant matters and should be acceptable to LICENSEE.
LICENSEE may specify that this representative be an independent Certified
Public Accountant.
10. OTHER TRANSFERS OF LICENSED PRODUCTS
10.1--It is anticipated that LICENSEE may supply Licensed Products to
Affiliate (as defined in paragraph 2.10) or to another licensee of STANFORD for
further processing and/or sale by the Affiliate or other licensee under
Licensed Patent Rights. No earned royalty shall be payable by LICENSEE with
respect to such Licensed Products, so long as the Affiliate or second licensee
shall be obligated to pay STANFORD royalty under Licensed Patent Rights on its
use or sales thereof. However, reports made by LICENSEE as provided in
paragraph 8.4 shall list each such transaction as a non-royalty bearing sale
and identify such Affiliate or other licensee.
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<PAGE> 8
10.2--If an earned royalty payment has been made to STANFORD for a Licensed
Product used by LICENSEE to make another Licensed Product, that payment may be
deducted by LICENSEE from the earned royalty payment for such resulting
Licensed Product.
11. TERM AND TERMINATION
11.1 The term of this Agreement shall extend from the above effective date
until expiration of the last to expire of Licensed Patent Rights.
11.2 Upon any breach of or default under this License Agreement by
LICENSEE, STANFORD may terminate this License Agreement by ninety (90) days
written notice to LICENSEE. Said notice shall become effective at the end of
such period unless during said period LICENSEE cure such defect or default.
11.3 LICENSEE shall have the right to terminate this Agreement at any time
upon ninety (90) days written notice to STANFORD.
12. ASSIGNABILITY
12.1--This Agreement shall not be assigned except (a) with the advance
written consent of STANFORD or (b) as part of a sale or transfer of
substantially the entire business of LICENSEE relating to operations pursuant
to this license.
13. NEGATION OF WARRANTIES AND INDEMNITY
13.1--Nothing in this Agreement shall be construed as:
(a) a warranty or representation by STANFORD as to the validity or scope
of any Licensed Patent Rights; or
(b) a warranty or representation that anything made, used, sold or
otherwise disposed of under any license granted in this Agreement is
or will be free from infringement of patents of third parties; or
(c) an obligation to bring or prosecute actions or suits against third
parties for infringement; or
(d) conferring the right to use in advertising, publicity or otherwise
any trademark, tradename, or names, or any contraction, abbreviation,
simulation or adaptation thereof, of STANFORD other than Licensed
Patent Rights, regardless of whether such patents are dominant or
subordinate to Licensed Patent Rights (however
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<PAGE> 9
STANFORD is not aware of any STANFORD patent or application dominant
to Licensed Patent Rights); or
(e) conferring by implication, estoppel or otherwise any license or
rights under any patents of STANFORD other than Licensed Patent
Rights, regardless of whether such patents are dominant or
subordinate to Licensed Patent Rights (however STANFORD is not aware
of any STANFORD patent or application dominant to Licensed Patent
Rights); or
(f) an obligation to furnish any know-how not provided in Licensed Patent
Rights.
13.2--STANFORD makes no representations other than those specified in
Article 1. STANFORD MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
13.3--LICENSEE shall defend indemnify and hold STANFORD harmless from and
against all liability, demands, damages, expenses and losses for death,
personal injury, illness or property damage (claims and damages) arising (a)
out of the use by LICENSEE of any method under Licensed Patent Rights, or (b)
out of any use, sale or other disposition of Licensed Products by LICENSEE or
its transferees. As used in this Section, STANFORD includes its trustees,
officers, agents and employees, and LICENSEE includes its Affiliates described
in paragraph 2.10. LICENSEE acknowledges that the technology licensed hereby
as experimental and agrees to take all reasonable precautions to prevent death,
personal injury, illness and property damage.
14. GENERAL
14.1--Neither party may waive or release any of its rights or interests in
this Agreement except in Writing. Failure to assert any right arising from
this Agreement shall not be deemed or construed to be a waiver of such right.
14.2--This License Agreement constitutes the entire agreement between the
parties relating to the subject matter thereof and all prior negotiations,
representations, agreements and understandings are merged into, extinguished
by, and completely expressed by it.
14.3--This Agreement and its effects are subject to and shall be construed
and enforced in accordance with the laws of the State of California.
14.4--Any dispute or controversy arising out of or relating to this License
Agreement its construction or its actual or alleged breaches shall be finally
decided by arbitration conducted in San Francisco, California, by and in
accordance with the Licensing Agreement Arbitration Rules of the American
Arbitration Association. Judgment upon the award rendered may be entered in
the highest court or forum, state or federal having jurisdiction, provided,
however, that the provisions of this Article 14 shall not apply to
9
<PAGE> 10
decision of the validity of patent claims or to any dispute or controversy as
to which any treaty or law prohibits such arbitration.
14.5--All notices required or permitted to be given by the terms of this
Agreement shall be given by prepaid registered or certified mail properly
addressed to the other party at the address designated below or to such other
address as may be designated in writing by such other party and shall be
effective as of the date of the postmark of such mail notice.
LICENSEE
Attention:
STANFORD
Office of Technology Licensing
Stanford University
857 Serra Street, 2nd Floor
Stanford, CA 94305-6225
U.S.A.
Attention: Director
This Agreement is effective as of the date first given above.
LICENSEE CALYPTE BIOMEDICAL CORPORATION
--------------------------------------------
By /s/ DAVID ROBISON
-------------------------------------------------
Title President/CEO
----------------------------------------------
Date April 2, 1993
-----------------------------------------------
10
<PAGE> 11
THE BOARD OF TRUSTEES OF THE
LELAND STANFORD JUNIOR UNIVERSITY
By /s/ KATHERINE KU
--------------------------------------------
Title Director, Technology Licensing
-----------------------------------------
Date April 5, 1993
------------------------------------------
11
<PAGE> 12
STANFORD UNIVERSITY
OFFICE OF TECHNOLOGY LICENSING # 900 WELCH ROAD # SUITE 350
PALO ALTO, CA 94304-1850
(415) 723-0651 # FAX (415) 725-7295
ADDENDUM TO PARAGRAPHS 6.4 AND 6.5
The earned royalty rate for End Products comprising HIV diagnostic test kits
incorporating the recombinant technology covered by the Stanford patents sold
in the United States shall equal [ * ] derived from the sales of
such kits. The sale of such kits produced in the United States and sold
outside the United States shall bear an earned royalty rate of [ * ].
/s/ DAVID ROBINSON April 2, 1993
- ------------------------------------ -------------------------------
Calypte Biomedical Approval Date
/s/ KATHERINE KU April 5, 1993
- ------------------------------------ -------------------------------
Stanford University OTL Approval Date
*Confidential portion has been omitted
and filed separately with the Commission
12
<PAGE> 1
EXHIBIT 10.27
DISTRIBUTION AGREEMENT
between
CALYPTE BIOMEDICAL CORPORATION
and
OTSUKA PHARMACEUTICAL CO., LTD.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
1. DEFINITIONS .................................................... 1
2. GRANT OF RIGHTS ................................................ 5
2.1 Distribution Rights ....................................... 5
2.2 Affiliates and Subdistributors ............................ 6
2.3 Additional Products ....................................... 6
2.3.1 Rights to Additional Products .................. 6
2.3.2 Development Agreement for New Products ......... 9
2.3.3 Product Deletions .............................. 10
2.4 GMP Procedures License .................................... 10
2.5 Option to Sublicense ...................................... 15
3. SUPPLY; PRICE; SHIPMENT; ACCEPTANCE ............................ 15
3.1 Product ................................................... 15
3.2 Price ..................................................... 16
3.2.1 Commercial Test ................................ 16
3.2.2 Development Samples ............................ 17
3.2.3 Promotional Samples ............................ 17
3.2.4 Per Test Pricing ............................... 17
3.2.5 Price Changes .................................. 18
3.2.6 Taxes .......................................... 18
3.3 Forecasts, Orders and Acceptance .......................... 19
3.4 Capacity Commitment ...................................... 21
3.5 Allocation ................................................ 22
3.6 Payment Terms ............................................. 22
3.7 Credit for Previous Payment ............................... 23
3.8 Most Favored Customer ..................................... 24
3.9 Delivery .................................................. 25
3.10 Shipment .................................................. 25
3.11 Acceptance ................................................ 26
3.12 Reservation of Title ...................................... 28
3.13 Packaging ................................................. 28
4. SPECIAL OBLIGATIONS OF EXCLUSIVE DISTRIBUTOR ................... 29
4.1 Minimum Annual Payments/Purchases ......................... 29
4.2 Promotion of the Products ................................. 32
4.3 Competing Products ........................................ 32
4.4 Customer Support .......................................... 32
4.5 Commercially Reasonable Efforts ........................... 33
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
S. ENFORCEMENT OF CERTAIN RIGHTS .................................. 33
5.1 Sale of EL System .......................................... 33
5.2 Third-Party Intellectual Property Rights ................... 34
5.3 Enforcement of Calypte Patent Rights and Calypte
Technology in the Otsuka Territory ......................... 35
5.4 Reduction of Payments ...................................... 36
6. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION ................ 38
6.1 Representations and warranties ............................. 38
6.2 Product Limited Warranty ................................... 41
6.3 Limitation ................................................. 42
6.4 Indemnification ............................................ 43
6.5 Intellectual Property Infringement Indemnity ............... 44
6.6 Products Liability Indemnity ............................... 47
7. CONFIDENTIALITY ................................................ 47
7.1 Confidential Information ................................... 47
7.2 Confidentiality of Agreement ............................... 49
7.3 Exceptions ................................................. 49
7.4 Remedies ................................................... 50
8. LIMITATION OF LIABILITY ........................................ 51
9. TRADEMARKS AND TRADE NAMES ..................................... 51
9.1 Use . . . .................................................. 51
9.2 Approval Representations ................................... 52
10. REGULATORY APPROVALS ........................................... 52
10.1 Obtainment of Approvals ................................... 52
10.2 Reasonable Diligence ...................................... 53
10.3 PLA Countries ............................................. 54
10.4 Separate Filing Countries ................................. 55
10.5 Extension of Time Periods ................................. 56
10.6 Assignment Upon Termination ............................... 56
11. TERM AND TERMINATION ............................................. 57
11.1 Term ...................................................... 57
11.2 Termination for Convenience ............................... 57
11.3 Termination for Cause ..................................... 58
11.4 Termination for Bankruptcy ................................ 59
11.5 Effect of Termination ..................................... 59
11.6 No Liability For Expiration or Termination ................ 59
11.7 Survival .................................................. 60
11.8 Abandonment ............................................... 60
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
12. GENERAL PROVISIONS ............................................. 61
12.1 Currency ................................................ 61
12.2 Language ................................................ 61
12.3 Governing Law ........................................... 62
12.4 Jurisdiction ............................................ 62
12.5 Arbitration ............................................. 62
12.6 Force Majeure ........................................... 63
12.7 Assignment .............................................. 64
12.8 No Third-Party Beneficiaries ............................ 64
12.9 Bankruptcy Code ......................................... 64
12.10 Modifications ........................................... 65
12.11 Notices ................................................. 65
12.12 Descriptive Headings .................................... 66
12.13 Entire Agreement ........................................ 66
12.14 Severability ............................................ 66
12.15 Legal Expenses .......................................... 66
12.16 Counterparts ............................................ 67
12.17 Import & Export Controls ................................ 67
12.18 Independent Contractors ................................. 68
12.19 Manufacture in Japan .................................... 68
</TABLE>
Exhibit A Patents and Patent Applications
Exhibit B El System
Exhibit C GMP Procedures
Exhibit D Escrow Agreement
Exhibit E Specifications
Exhibit F Manufacturing Capacity
<PAGE> 5
DISTRIBUTION AGREEMENT
THIS AGREEMENT, including the attached Exhibits ("Agreement"), executed as of
August 7, 1994 ("Effective Date"), is made and entered into by and between
CALYPTE BIOMEDICAL CORPORATION, a California corporation with principal offices
at 1440 Fourth Street, Berkeley, California Section 94710, United States of
America, ("Calypte") and OTSUKA PHARMACEUTICAL CO., LTD., a corporation
organized under the laws of Japan with principal offices at 2-9, Kanda
Tsukasa-cho, Chiyoda-ku, Tokyo, Japan ("Otsuka").
WHEREAS, Calypte has developed and holds certain rights relating to the Products
(as defined below), and continues to develop new products, which may become
Products within the scope of this Agreement; and
WHEREAS, Otsuka desires to be appointed as Calypte's exclusive distributor for
the Products in the Otsuka Territory, and Calypte is willing to grant Otsuka
such appointment pursuant to the terms and conditions set forth in this
Agreement; and
WHEREAS, Otsuka desires to purchase, and Calypte desires to supply, Otsuka's
requirements for the Products under the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, and subject to the
terms and conditions contained herein, the parties agree as follows:
1. DEFINITIONS
1.1 "Affiliate" shall mean any person, firm or corporation which controls,
is controlled by or is under common control with Otsuka. For purposes
of this Section 1.1,
1
<PAGE> 6
"control" shall mean ownership, directly or indirectly, of fifty
percent (50%) or more of the voting stock of the subject party.
1.2 "Calypte Patent Rights" shall mean all United States and foreign
letters patent and applications for letters patent, industrial models,
industrial designs, utility models, certificates of invention, and
other indicia of invention ownership, including any such rights granted
upon any reissue, division, continuation or continuation-in-part
applications now or hereafter filed, which are reasonably necessary for
the design, development, manufacture, sale or use of diagnostic test
kits for the detection of antibodies to HIV in any bodily fluids, and
other Products hereunder, which are owned or controlled by or licensed
to Calypte during the term of this Agreement, including, without
limitation, the patents and patent applications listed in Exhibit A.
1.3 "Calypte Technology" shall mean all technologies, technical knowledge,
procedures, processes, designs, inventions, discoveries, know-how,
show-how, documentation and other works of authorship and any other
information which is reasonably necessary for the design, development,
manufacture, use and sale of the Products, together with all
copyrights, trade secret rights and other intellectual property rights,
other than Calypte Patent Rights.
1.4 "Competing Product" shall mean any product which tests for the presence
of antibodies to HIV in any non-blood bodily fluid, and which directly
competes in the same market niche with, and is a functional substitute
for, a Product, other than tests used for confirmation purposes (as an
example, a product would be a Competing Product with the initial test
Kit, described in Section 1.9(a), if it
2
<PAGE> 7
tested for the presence of HIV in urine or any other nonblood bodily
fluid and used multi-test plate and the E1A method and was functionally
equivalent to the initial test Kit competing in the same market niche).
1.5 "E1 System" shall mean the E1 System and procedures for use as further
described in Exhibit B attached hereto.
1.6 "GMP Procedures" shall mean the proprietary good manufacturing
practices and procedures relating to the manufacture of the Products as
specified by document title or number in Exhibit C, and such other
information, including names and addresses of suppliers, as shall be
necessary to permit and enable Otsuka or Affiliates, without need for
additional information, to manufacture the Products. As used throughout
this Agreement, GMP Procedures shall mean the then-most current
procedures and other information relating to the manufacture of the
Products at any given time.
1.7 "HIV Urine Kit" shall mean any product which includes tests for the
presence of antibodies to HIV in urine (including products combining
tests for HIV with tests for other diseases or conditions as well.)
1.8 "0tsuka Territory" shall mean Japan, North Korea, South Korea,
Republic of China, People's Republic of China, Hong Kong, Thailand,
Philippines, Indonesia, New Zealand, Australia, Singapore, Malaysia,
India, Pakistan, Bangladesh, Sri Lanka, Myanmar, Kampuchea, Vietnam,
Laos, Nepal, Bhutan and Mongolia. "Country" shall mean each Country
within the Otsuka Territory.
1.9 "Product(s)" shall mean (a) the test kits for the detection of
antibodies to HIV-1 in urine manufactured and
3
<PAGE> 8
sold by or on behalf of Calypte known, as of the Effective Date, as the
Urine HIV-1 EIA Kit or the HIV-1 EIA 96-Well Kit, as further described
in the SPECIFICATIONS set forth in Exhibit E attached hereto; (b)
similar test kits for the detection of antibodies to HIV-1, HIV-2 and
all other strains of HIV in any bodily fluid(s), including combination
kits testing multiple bodily fluids for multiple strains of HIV (as
used throughout this Agreement, the term "bodily fluid" includes,
without limitation, urine, serum, saliva and vaginal washes); (c) all
improvements and modifications to the kits described in (a) and (b)
above and new configurations thereof, during the term of this
Agreement; (d) any products that can reasonably be deemed replacements
for or successors to such kits which Calypte (including its successors
and assigns) may introduce during the term of this Agreement; and (e)
additional products eligible to be included within the definition of
"Products" in accordance with Section 2.3, and all improvements and
modifications thereto, new configurations thereof, and replacements for
or successors to such additional products during the term of this
Agreement. As tests are added within the definition of "Products"
during the term of this Agreement, the parties shall discuss in good
faith and agree upon SPECIFICATIONS therefor, which shall govern the
additional products as the initial SPECIFICATIONS in Exhibit E govern
the initial test kit.
1.10 "Service(s)" shall mean the conducting of diagnostic testing utilizing
a Product.
4
<PAGE> 9
2. GRANT OF RIGHTS
2.1 Distribution Rights.
Subject to the terms and conditions of this Agreement, Calypte hereby
appoints Otsuka as its exclusive distributor for the Products in the
Otsuka Territory and grants to Otsuka the exclusive right, under
Calypte Patent Rights and/or Calypte Technology, to promote, market,
use and sell and otherwise distribute the Products (including
additional products eligible to be included within the definition of
"Products" in accordance with Section 2.3) and perform Services in
every Country in the Otsuka Territory (collectively, in this Section
2.1, "sell and distribute the Products"). For so long as Otsuka's
rights to a given Product or Products remain exclusive in a given
country or countries in the Otsuka Territory, Otsuka shall have the
exclusive right to sell and distribute such Products in such
country(ies) in the Otsuka Territory, and Calypte will not, nor will it
grant any third party the right to, promote, market, use, sell or
distribute any Products (including additional products eligible to be
included within the definition of "Products" in accordance with Section
2.3), or perform Services utilizing any such Products, in any such
country in the Otsuka Territory; provided that, with respect to any
additional product eligible to be included within the definition of
"Products" in accordance with Section 2.3, if Otsuka elects not to
obtain the rights to such additional product in accordance with Section
2.3, and if Otsuka's rights of negotiation and refusal with respect to
an additional product under Section 2.3 are exhausted, then this
section's prohibition of Calypte selling and distributing such specific
additional product shall terminate.
5
<PAGE> 10
2.2 Affiliates and Subdistributors.
Subject to the terms and conditions of this Agreement, Otsuka may
exercise its right to sell and distribute the Products in the Otsuka
Territory itself or, in its discretion, through Affiliates and through
non-Affiliate subdistributors, resellers and other third-party
distributors (such non-Affiliates being collectively defined as
"Subdistributors"), and Otsuka may exercise its right to perform
Services in the Otsuka Territory itself or, in its discretion, through
Affiliates. Otsuka shall be responsible for the due and punctual
performance of any and all responsibilities under this Agreement as
applicable to such Affiliates and Subdistributors.
2.3 Additional Products.
2.3.1 Rights to Additional Products.
In addition to the Product(s) defined in Clauses (a)-(d) of
Section 1.9 above, to which Otsuka acquires rights in
accordance with this Agreement without further negotiation or
change in the terms and conditions of this Agreement, Calypte
hereby grants to Otsuka -- so long as Otsuka's rights
hereunder remain exclusive in Japan -- a right of first
refusal and negotiation, as described here, to obtain the
exclusive right to promote, market, use, sell and otherwise
distribute (collectively, "sell and distribute") in the
Otsuka Territory any and all other test product(s) which
Calypte may introduce during the term of this Agreement
which: (i) are a test of any bodily fluid(s) and which
combine a test for HIV with a test for any disease or
condition other than HIV (a combination test for different
strains of HIV is
6
<PAGE> 11
already included at the outset under Section 1.9(a)-(d)); or
(ii) include any test of any bodily fluid for any strain of
HIV in any format other than those included within the
definition of Product(s) in Section 1.9 (a)-(d) (e.g., a
single test kit available for home use); and/or (iii) test
any bodily fluid for any human endogenous retrovirus.
In accordance with the right granted to Otsuka pursuant to
this Section 2.3.1, Calypte agrees to offer to Otsuka in
writing, and discuss and negotiate in good faith the terms
and conditions of, such rights to sell and distribute such
additional products in the Otsuka Territory prior to any
discussion relating to such rights with a third party. The
initial negotiation period with Otsuka shall be a six (6)
month period commencing after all of the following have
occurred, upon the later to occur of the following: (a)
Calypte's development of, or obtaining the rights to, a
viable new product as described above; (b) Calypte's
provision to Otsuka of sample of such product and related
information and data sufficient to enable Otsuka to evaluate
the product; and (c) receipt by Otsuka of a written offer
from Calypte proposing specific terms and conditions under
which Calypte would agree to Otsuka's exclusive distribution
of such product in the Otsuka Territory. In the event
that Calypte and Otsuka do not reach agreement within such
six (6) month period, Calypte shall then have six (6) months
beginning on the expiration of such period to enter into an
agreement with any third party on
7
<PAGE> 12
terms and conditions that are the same as those previously
offered to Otsuka or that are more favorable to Calypte than
those previously offered to Otsuka. Should Calypte modify the
terms and conditions of its offer such that they are more
favorable to a distributor (Otsuka or a third party) than
those previously rejected by Otsuka, Calypte must first offer
such modified terms and conditions to Otsuka in writing, and
discuss and negotiate in good faith such modified terms and
conditions, prior to offering such modified terms and
conditions to a third party. In the event that Calypte and
Otsuka do not reach agreement within sixty (60) days after
receipt by Otsuka of such proposed modified terms and
conditions, Calypte may, during the subsequent sixty (60) day
period, offer such modified terms and conditions of agreement
to any third party as provided herein and conclude an
agreement on such terms and conditions with a third party
during such period. If at the end of this cycle, Calypte has
reached agreement with no one for the distribution of the new
product in the Otsuka Territory, the cycle of procedures in
this Section 2.3.1 shall be repeated, beginning with a
proposal to Otsuka.
If Calypte and Otsuka reach agreement with respect to the
right of Otsuka to sell and distribute an additional product
in the Otsuka Territory, such additional product shall be
included as a "Product" within the scope of this Agreement
and all of the parties' rights and obligations under this
Agreement with regard to the Product shall also apply to such
additional
8
<PAGE> 13
Product except to the extent the parties mutually agree
otherwise.
2.3.2 Development Agreement for New Products.
Prior to development of a viable new product, if Calypte,has
an idea for development of a new product of the type
described in Section 2.3.1 (i), (ii) or (iii) above, it shall
first offer a proposed development agreement to Otsuka for
consideration and shall negotiate the terms and conditions of
such development agreement in good faith with Otsuka for up
to six (6) months beginning on the date Otsuka receives such
proposed agreement. If the parties do not reach agreement on
the terms of a development agreement within such six (6)
month period, Calypte can enter into a development agreement
with a third party during the subsequent six (6) month period
on terms and conditions that are the same as those offered to
Otsuka or more favorable to Calypte than those offered to
Otsuka. If Calypte enters into such an agreement with a third
party, and if such agreement grants the third party the
rights in the Otsuka Territory to the new product being
developed with the third party's funding, Otsuka shall have
no further rights of first refusal/negotiation under this
Agreement to such new product once it is developed unless the
third party waives or does not pursue its rights to such new
product. If the third party waives its rights to the new
product and Calypte retains the right to distribute such
product to 0tsuka, the parties shall follow the cycle of
9
<PAGE> 14
proposal and negotiation procedures outlined above in Section
2.3.1.
2.3.3 Product Deletions.
If Calypte intends to modify a Product, to introduce a
replacement Product or to cease manufacture of a Product
hereunder due to a planned replacement thereof, Calypte shall
inform Otsuka in writing of such intention at least sixty
(60). days prior to Calypte's filing of a submission to the
appropriate government authority seeking governmental
approval of its manufacture of the modified or replacement
Product, and the parties shall discuss in good faith a
transition plan for the discontinuance of the Product being
modified or replaced; notwithstanding the above, Calypte
hereby commits to continue manufacturing and supplying to
Otsuka the Product (as improved from time to time through
modifications and reconfigurations) unless Calypte introduces
a replacement Product reasonably acceptable to Otsuka.
2.4 GMP Procedures License.
2.4.1 Subject to the terms and conditions of this Agreement and
conditioned upon the occurrence of a Releasing Event (as
defined in Section 2.4.3 below), Calypte hereby grants to
Otsuka a non-exclusive, non-transferable (except to the
extent transfer or assignment is permitted under Section
12.7) license, with right to sublicense only to Affiliates,
to use the GMP Procedures to manufacture or have manufactured
the Products and the exclusive right (subject to such right
10
<PAGE> 15
becoming non-exclusive as provided elsewhere in this
Agreement) to promote, market, use, sell and otherwise
distribute such Products in those countries in the Otsuka
Territory on the date Otsuka exercises this license.
Independent of and in addition to the escrow obligations set
forth in Section 2.4.2, Calypte shall, upon the occurrence of
a Release Event, immediately provide the then-current version
of the GMP Procedures to Otsuka. The entity that actually
manufactures the Products may be, in Otsuka's discretion,
Otsuka, an Affiliate or a third party acting under contract.
The location of the manufacturing facility need not be in the
Otsuka Territory, provided the facility is owned by Otsuka or
an Affiliate or is approved by Calypte.
2.4.2 Calypte assures Otsuka that where Calypte is unable or
otherwise fails to provide the Products to Otsuka in
accordance with the terms of this Agreement, Otsuka may
manufacture or have manufactured the Products for use, sale
and distribution consistent with Otsuka's rights pursuant to
this Agreement. Calypte agrees to place the GMP Procedures
into escrow with a third-party escrow agent, and upon terms
and conditions reasonably acceptable to both parties as set
forth in the Escrow Agreement attached hereto as Exhibit D.
Such escrow shall provide for Calypte to place the
then-current version of the GMP Procedures into escrow upon
the effective date of such escrow, to update such material
within sixty (60) days following the earlier of (i) receipt
of FDA approval for the
11
<PAGE> 16
Product, (ii) receipt of approval to market the Product in
Japan from the appropriate Japanese regulatory agencies or
(iii) six (6) months following the Effective Date of this
Agreement, and then to continue to update such materials at
least every three (3) months thereafter. Such escrow shall
also provide for the release of the GMP Procedures to Otsuka
upon the occurrence of a Releasing Event, and the escrow
agent shall promptly and fully release the GMP Procedures to
Otsuka upon such occurrence. Otsuka shall be entitled to
retain, at Otsuka's expense, a person reasonably acceptable
to Calypte to conduct one (1) inspection per calendar year of
the deposited GMP Procedures to verify the deposit of the GMP
Procedures in accordance with this Agreement and the Escrow
Agreement. Otsuka agrees that, prior to inspection of the
deposited GMP Procedures, such person shall execute an
appropriate confidentiality agreement. Such person shall be
given access to the deposited GMP Procedures in the presence
of a Calypte representative only and adequate time to review
such GMP Procedures; provided, however, that no notes may be
taken during such person's inspection of the GMP Procedures.
2.4.3 For purposes of this Agreement, a "Releasing Event" shall
mean that Calypte fails to, or becomes unable to, supply the
Products to Otsuka as provided hereunder for any reason,
including without limitation, a Force Majeure event, and
Calypte has failed to cure such failure within ninety (90)
days of the delivery date (as provided in Section 3.3.3).
Recognizing that
12
<PAGE> 17
the time period between exercise of this license and the
beginning of commercial manufacture of the Products could be
long, and that continued manufacture of the Products by
Calypte would be preferable to licensing new manufacturing
facilities and exercising its license under this Section 2.4,
Otsuka agrees, in its discretion, to use its reasonable
efforts to assist Calypte, at Calypte's expense, in solving
the problem that is causing Calypte to be unable to supply
the Products to Otsuka hereunder.
2.4.4 Calypte agrees that -- unless Otsuka elects in writing not to
exercise its rights hereunder -- in the event a Releasing
Event does occur, Calypte shall immediately release the GMP
Procedures to Otsuka and shall not impede the escrow agent's
release of same to Otsuka. To the full extent of its right,
power and authority, and conditioned only upon the occurrence
of a Releasing Event, Calypte hereby grants Otsuka a
non-exclusive license and sublicense, with a right to
sublicense to its Affiliates, under licenses from Calypte,
New York University, Cambridge Biotech and such other
licenses as may be necessary or appropriate, to manufacture
or have manufactured the Products for use, sale and
distribution in the Otsuka Territory. In the event Calypte
does not, on the Effective Date of this Agreement, possess
the right, power and authority to grant Otsuka all
sublicenses from third parties necessary for Otsuka to make
the Products upon the occurrence of a Releasing Event,
Calypte shall immediately and diligently pursue such
13
<PAGE> 18
right, power and authority from such third parties, shall
notify Otsuka upon obtaining such right, power and authority,
and shall provide Otsuka written verification thereof. This
section shall be deemed a present and ongoing grant by
Calypte to Otsuka, conditioned upon the occurrence of a
Releasing Event, of all licenses and sublicenses necessary
for Otsuka, Affiliates and third-party manufacturers to
manufacture the Products. Once Otsuka or an Affiliate (or a
third-party manufacturer with whom they may contract)
commences preparations for the manufacture of the Products,
Otsuka and its Affiliates shall not be required by Calypte to
give up the rights granted by Calypte to manufacture the
Products, even if the Releasing Event shall thereafter be
resolved.
2.4.5 If Otsuka chooses to manufacture or have manufactured the
Products under the license and sublicenses granted under
Sections 2.4.1 and 2.4.4 above after the occurrence of a
Releasing Event, to the extent that such license includes the
sublicenses of certain third-party intellectual property
rights to Otsuka requiring the payment of royalties to third
parties not affiliated with Calypte, Otsuka agrees that it
shall pay, directly to such third parties, all royalties due
to such third parties related specifically to Otsuka's
manufacture, use and sale of the Products. Amounts paid to
such third parties shall be deducted from any amounts
otherwise payable to Calypte. In addition, if Otsuka chooses
to manufacture or have manufactured the Products under the
license and
14
<PAGE> 19
sublicenses granted under Section 2.4.1 and 2.4.4 after the
occurrence of a Releasing Event, and Otsuka elects not to
continue purchasing Products manufactured by Calypte, the
minimum annual payment/purchase provisions of Section 4.1
shall be deemed terminated, though Otsuka's exclusive rights
in the Otsuka Territory shall continue.
2.5 Option to Sublicense.
In addition to the sublicenses from New York University and others
described in Section 2.4 above relating to the manufacture of Products
upon the occurrence of a Releasing Event, Calypte agrees that at such
time as Calypte is obligated, under the terms of its patent license
with New York University, to negotiate the grant of sublicenses under
the patents ("NYU Patents") covered by such agreement, Calypte shall
notify Otsuka and shall, at the request of Otsuka, negotiate in good
faith the terms under which it would grant Otsuka such sublicense under
such NYU Patents and use its reasonable and diligent efforts to involve
New York University in such discussions in an effort to obtain for
Otsuka exclusive rights under such NYU Patents coequal with the
exclusivity granted by Calypte to Otsuka hereunder.
3. SUPPLY; PRICE; SHIPMENT; ACCEPTANCE.
3.1 Product.
Subject to the terms and conditions of this Agreement, Otsuka shall
purchase from Calypte, and Calypte shall supply to Otsuka, either
directly or through a third-party supplier designated by Calypte,
Otsuka's requirements of the Products. Such supply shall conform to the
description and specifications of the Products and
15
<PAGE> 20
material, workmanship, packaging and labeling of the Products as set
forth in Exhibit E ("SPECIFICATIONS"), as modified from time to time by
mutual agreement of the parties and as supplemented from time to time
to add SPECIFICATIONS for additional products that become "Products"
within the scope of this Agreement during the term hereof. The
Products supplied by Calypte shall be, manufactured, handled and
packaged by Calypte or its designee in accordance with all applicable
laws and regulations. The Products supplied to Otsuka hereunder are for
Otsuka's (and, in Otsuka's discretion, Affiliates' and
Subdistributors') promotion, marketing, use, sale and distribution in
accordance with the terms of this Agreement, and may not be otherwise
promoted, marketed, used, sold or distributed without Calypte's prior
written consent.
3.2 Price.
3.2.1 Commercial Test.
The parties hereby agree that the price to be paid by Otsuka
for the Products described in Clauses (a), (b), (c) and (d)
of Section 1.9 shall be [ * ] per test,
subject to: a volume discount to be discussed in good faith
between the parties; lower prices for development and
promotional samples as provided in Sections 3.2.2 and 3.2.3
below; the "Most Favored Customer" clause of Section 3.8; and
price changes as agreed upon in accordance with Section
3.2.5.
*Confidential portion has been omitted
and filed separately with the Commission
16
<PAGE> 21
3.2.2 Development Samples.
At Otsuka's request Calypte shall supply Otsuka with up to
two hundred thousand (200,000) tests for development samples
of each Product at a price of [ * ] per
test. Development samples must be labeled in accordance with
applicable regulations. As of the Effective Date of this
Agreement Calypte had already provided Otsuka with
approximately one hundred thousand (100,000) sample tests of
the kit described in Section 1.9(a).
3.2.3 Promotional Samples.
Calypte also agrees to supply Otsuka with promotional samples
of the Products, on a country-by-country basis, at a price of
[ * ] per test. Amounts to be provided
by Calypte will be twenty percent (20%) of the first year's
sales in respective Countries of the Otsuka Territory and ten
percent (10%) of the sales for the second year. At the end of
each such year with respect to each Country of the Otsuka
Territory, Otsuka shall return all unused promotional samples
or, in the case of the first year, credit unused promotional
samples against the second year's sales.
3.2.4 Per Test Pricing.
The pricing provided above is quoted on a "per test" basis. A
test refers to a single well on multi-well plate together
with the associated reagents required to perform a single
test.
*Confidential portion has been omitted
and filed separately with the Commission
17
<PAGE> 22
3.2.5 Price Changes.
The parties agree to renegotiate a higher or lower price in
good faith at reasonable intervals upon request when a party
believes that market conditions require, but no more often
than once per year unless the parties mutually agree
otherwise. Such price renegotiations may include reasonable
adjustments for inflation, increases or decreases in costs of
components or reduction of the NHI price of the Products.
3.2.6 Taxes.
All prices are F.O.B. delivery to the international carrier
in California, unless the parties mutually agree otherwise.
Prices are exclusive of all sales, use or other similar
transaction taxes or duties, if any, imposed directly on the
purchase of the Products by Otsuka where applicable law
imposes such tax or duty. Any such tax or duty shall be borne
by Otsuka. Any tax imposed on the manufacture of the Products
by or on behalf of Calypte, and any tax imposed on sales of
the Products by Calypte prior to F.O.B. delivery to the
international carrier shall be borne by Calypte. When Calypte
has the legal obligation to collect taxes or duties on the
purchase of the Products by Otsuka, the amount of such taxes
and duties shall be added to Calypte's invoice and paid by
Otsuka unless Otsuka provides Calypte with a valid tax
exemption certificate authorized by the appropriate taxing
authority.
18
<PAGE> 23
All payments by Otsuka to Calypte shall be subject to any
applicable withholding taxes imposed upon such payments.
Otsuka agrees to provide to Calypte any and all information
relating to such withholding taxes reasonably requested by
Calypte in connection with Calypte's obligations to taxing
authorities in the United States of America, such information
to include, without limitation, official receipts issued to
Otsuka by appropriate taxing authorities.
3.3 Forecasts, Orders and Acceptance.
3.3.1 During the term of this Agreement, on or before the first day
of each calendar quarter, Otsuka shall submit to Calypte a
rolling forecast showing Otsuka's expected requirements for
the Products over the next twelve (12) months.
3.3.2 The parties agree that in order to protect Calypte's
production scheduling and to ensure a smooth source of supply
to Otsuka, purchase orders submitted by Otsuka to Calypte for
a Product for delivery during the second quarter of any
forecast (i.e. months 4, 5 & 6) (i) shall not, unless Calypte
agrees otherwise in writing, be for less than eighty percent
(80%) of the quantity of such Product forecast for such
quarter in the forecast submitted at the beginning of the
prior calendar quarter ("Minimum Purchase Commitment"), and
(ii) shall be binding upon Calypte, but only to the extent
that they do not exceed either (x) one hundred fifty percent
(150%) of the quantity of such
19
<PAGE> 24
Product forecast for such quarter in the forecast submitted
at the beginning of the prior calendar quarter or (y) the
Calypte Capacity Commitment (as defined in Section 3.4
below). In the event that Otsuka submits purchase orders with
respect to a calendar quarter for the purchase of less than
the Minimum Purchase Commitment (absent Calypte's agreement
to such lesser volume), Otsuka shall be obligated to pay
Calypte the purchase price for the number of units by which
its orders fall short of such required total. Where Otsuka
submits purchase orders for more than one hundred fifty
percent (150%) of the quantity forecasted or more than the
Calypte Capacity Commitment, Calypte shall use its reasonable
efforts to provide the Products in excess of such quantities
if requested by Otsuka, but Calypte shall have no obligation
to provide such excess quantities and its failure to so
provide shall not be a breach of this Agreement.
3.3.3 All purchases and sales between Calypte and Otsuka will be
initiated by Otsuka's issuance of written purchase orders
sent via airmail or facsimile. Additionally, Otsuka may
initiate purchase orders verbally, provided that it confirms
such orders in writing within seven (7) days. Such orders
will state unit quantities, unit descriptions, requested
delivery dates and shipping instructions, including ship-to
locations (which may be to Affiliates or Subdistributors).
Calypte shall accept all purchase orders from Otsuka, subject
to the limitations of Section 3.3.2. Within ten (10)
20
<PAGE> 25
days after its receipt of Otsuka's purchase order, Calypte
will send Otsuka its written acknowledgement and acceptance
(subject to Section 3.3.2) of such order. Calypte's written
acceptance shall include, without limitation, the delivery
date. Such delivery date shall be as requested by Otsuka, if
reasonably possible, provided that Calypte shall not be in
breach of this Agreement if it delivers the ordered Products
within the earlier of ninety (90) days after Calypte's
written acceptance of Otsuka's purchase order or one hundred
(100) days after Calypte's receipt of Otsuka's written
purchase order, unless Otsuka and Calypte otherwise agree in
writing. The terms and conditions of this Agreement will
control all sales of the Products hereunder, and any
additional or different terms or conditions in either party's
purchase order, acknowledgement or similar document will be
of no effect.
3.4 Capacity Commitment.
For purposes of this Agreement, the "Calypte Capacity Commitment" for a
Product shall mean one-half (1/2) of Calypte's total manufacturing
capacity (both Calypte's own manufacturing capacity and the third party
manufacturing capacity for which Calypte contracts) for each Product
until the first commercial sale of such Product in Europe, at which
time the Calypte Capacity Commitment shall be reduced to one-third
(1/3) of Calypte's total manufacturing capacity. The parties understand
and acknowledge that Calypte's manufacturing capacity at the time of
execution of the Agreement, and its future increased capacity, is as
set forth in Exhibit F attached hereto. Should the parties come to the
understanding that
21
<PAGE> 26
the demand for the Products in the Otsuka Territory will come to exceed
the Calypte Capacity Commitment within a foreseeable period of time,
they shall meet to discuss in good faith reasonable ways to increase
Calypte's manufacturing capacity, and Calypte shall use reasonable and
diligent efforts to increase its manufacturing capacity for the
Products.
3.5 Allocation.
In the event that demand for a Product exceeds Calypte's manufacturing
capacity, Calypte will have the right, at its sole discretion, to
allocate its capacity between Otsuka and Calypte's other distribution
channels; provided that in the event of any such allocation, Otsuka
will receive at least a pro-rata share of available units based upon
its pro-rata share of the total orders submitted by all of Calypte's
distribution channels; provided further that in no event will Otsuka
receive less than the Calypte Capacity Commitment for such Product (as
provided in Section 3.4 above) if Otsuka orders such amount.
3.6 Payment Terms.
Upon receipt of Calypte's written acceptance of each and every purchase
order pursuant to Section 3.3, Otsuka shall pay to Calypte thirty
percent (30%) of the purchase price due for each such purchase
order, such payment amount to be (i) paid within ten (10) days of
Otsuka's receipt of Calypte's written acceptance of Otsuka's purchase
order and (ii) non-refundable unless Calypte fails to deliver such
order or except as otherwise provided in Section 3.11. Upon shipment of
the Products, Calypte will submit an invoice to Otsuka requesting
payment of the remaining balance due for such shipment. Provided Otsuka
accepts the shipment in accordance with Section 3.11, Otsuka will make
payment to Calypte of such balance due
22
<PAGE> 27
within sixty (60) days from the date on which Otsuka receives the
invoice or receives the shipment at its facilities or at the
facilities of the Affiliate or Subdistributor to which Otsuka
directed the Products to be shipped, whichever is later, unless
another payment date is agreed to in writing by Calypte and Otsuka.
In the event the Products are properly manufactured, packaged and
shipped and in satisfactory condition when Calypte transfers them to
the international shipper, but are damaged in the course of shipment
to Otsuka or its designees, Otsuka will nevertheless pay the balance
due Calypte. All payments shall be made by wire transfer, check or
other instrument approved by Calypte in United States of America
Dollars in the requisite amount to a bank account as Calypte may from
time to time designate. In the event that any payment due Calypte is
delinquent, interest shall accrue on any overdue amount and be
charged against Otsuka at the rate of one and one-half percent (1.5%)
per month or the maximum rate permitted by law, whichever is less.
Calypte reserves the right to withhold any shipments or its
performance if Calypte has not been paid in accordance with the terms
set forth herein; provided that, due to Otsuka's projected need for a
stable supply of the Products, Calypte shall withhold no shipments or
other performances if Otsuka disputes whether a payment is due, in
which case the parties shall resolve such dispute voluntarily or, if
necessary, through prompt arbitration in accordance with Section
12.5. Otsuka agrees that after it has accepted shipment in accordance
with Section 3.11, it shall not dispute that payment is due on such
shipment.
3.7 Credit for Previous Payment.
Otsuka has already paid Calypte [ *
] pursuant to the
*Confidential portion has been omitted
and filed separately with the Commission
23
<PAGE> 28
License and Supply Agreement of May 10, 1991 (the "License and
Supply Agreement") between the parties hereto, which amount is
creditable against other future payments due Calypte pursuant to
Section 3.1 of the License and Supply Agreement. In exchange for
Otsuka's agreement here to waive its right to the future
creditability of such sum, Calypte hereby agrees to discount by fifty
percent (50%) the price of Product(s) supplied to Otsuka under this
Agreement until, but only until, Otsuka has received a total discount
of [ * ] under
this section. At such time as Otsuka has received a discount in such
amount, there shall be no further discount due under this section.
Pursuant to Section 11.10 of the License and Supply Agreement, which
prohibits any modification of its terms or conditions without the
written consent of the party to be charged, Otsuka hereby agrees, in
exchange for this discount to be granted by Calypte under this
Section 3.7, to waive its right to have the [
* ] paid under the License and Supply
Agreement creditable against other future payments and does hereby
forgive this sum of Calypte.
3.8 Most Favored Customer.
Calypte agrees that the financial terms of this Agreement are at
least as favorable to Otsuka as those provided by Calypte to any
other distributor for similar or lower volumes under similar
circumstances, and that in the event that Calypte offers better terms
to a distributor for similar or lower volumes of the Products under
similar circumstances, Calypte will promptly offer Otsuka the
opportunity to substitute such prices and terms for those contained
in this Agreement (as a whole), effective as of the date such prices
or terms were first granted to such third party.
* Confidential portion has been omitted
and filed separately with the Commission
24
<PAGE> 29
3.9 Delivery.
Calypte will deliver the Products on or before the Delivery date
specified in Calypte's written acceptance of Otsuka's order, provided
such date shall be no later than the earlier of ninety (90) days
after Calypte's written acceptance of Otsuka's order or one hundred
(100) days after Calypte's receipt of Otsuka's order. Calypte will
deliver the Products to Otsuka in containers to be selected by
Calypte, provided that such containers are reasonably acceptance to
Otsuka.
3.10 Shipment.
All the Product shipments shall be F.O.B. delivery to the
international carrier in California (unless the parties mutually
agree otherwise) and will be by air to the destinations selected by
Otsuka in its purchase orders, provided U.S. export laws do not
prohibit Calypte from shipping to such locations. All shipments shall
be on or before the dates as specified in accordance with Sections
3.3.3 and 3.9, unless otherwise agreed. Risk of loss will pass to
Otsuka upon delivery to the international carrier. Unless otherwise
requested by Otsuka, Calypte shall make all international shipping
arrangements, including procuring freight insurance, on behalf of
Otsuka. All international freight insurance and other international
shipping expenses shall be borne by Otsuka. All international freight
charges prepaid by Calypte will be reimbursed by Otsuka.
Notwithstanding the above, in the event that Calypte ships the
Products to Otsuka from a location other than Calypte's facility in
Northern California, United States of America, Calypte will bear the
expense of any shipping and insurance expenses in excess of shipping
and insurance expenses from Northern California, United States of
America. Otsuka shall also bear any and all applicable duties,
customs
25
<PAGE> 30
brokerage fees and other similar charges that may be assessed against
the Product shipments to Otsuka upon or after delivery to the
international carrier in California. Otsuka will be responsible for
filing freight claims. Calypte will advise Otsuka in advance of all
necessary information relating to shipment of the Products including,
without limitation, the identity of the carrier, flight number,
scheduled arrival time, package identification number, insurance
information and similar information. Calypte will also provide to
Otsuka copies of results of Calypte's quality control and product
release test data for each lot of the Products from which the
Products were shipped to Otsuka hereunder.
3.11 Acceptance.
Acceptance by Otsuka of the Products delivered by Calypte hereunder
shall be subject to inspection and testing by Otsuka or, in Otsuka's
discretion, by the Affiliate or Subdistributor to which a shipment is
delivered. In the event that any Product shipment fails to conform
with the SPECIFICATIONS or is otherwise defective in materials,
workmanship or packaging, Otsuka (or its designee) shall have the
right to reject such shipment, provided that (i) rejection is made
within thirty (30) days after receipt out of customs by Otsuka (or
its designee) of such Product shipment, and (ii) such Product
shipment has not been used by Otsuka (or its designee) other than for
acceptance testing and quality control. The sole criteria
for rejection by Otsuka of the Product shipments shall be failure of
the Product shipments to conform with the SPECIFICATIONS or the
determination that such shipment is otherwise defective in material,
workmanship or packaging. Calypte and Otsuka acknowledge that the
SPECIFICATIONS may be modified during the term of this Agreement,
provided, however that any such modification shall be agreed to in
26
<PAGE> 31
writing by the parties. Calypte shall provide its then-current test
protocol used by Calypte to conduct out-going quality assurance
testing for each Product (which test protocol Calypte and Otsuka
shall discuss and agree upon) to Otsuka for use by Otsuka and its
designees in performing their incoming inspection; a copy of such
test method, current as of the Effective Date of this Agreement, is
attached hereto as Exhibit E. At Otsuka's reasonable request and
expense, Calypte will assist Otsuka in developing additional
acceptance tests for the Products, though Otsuka shall be free to
develop any acceptance tests it deems appropriate. The Product
shipments may be rejected by Otsuka only upon written notice by
Otsuka or its designee to Calypte stating the reason or reasons for
rejection. Upon confirmation by Calypte that the Products are
defective, Otsuka shall return or destroy, at Calypte's request, all
or part of the rejected shipment as the parties shall reasonably
agree, with all costs of such return to be deducted from the purchase
price of the Products in that shipment to be paid under Section 3.6.
If there is any dispute between the parties on the conformity to the
SPECIFICATIONS or whether a shipment is otherwise defective, then
such dispute shall be arbitrated in accordance with Section 12.5. At
no cost to Otsuka (including freight, tax, insurance and duties),
Calypte shall replace defective Products and redeliver to Otsuka the
Products within forty-five (45) days after Calypte's receipt of
Otsuka's (or its designee's) written notice of rejection. In the
event that Calypte does not replace defective Products with
acceptable Products within forty-five (45) days of Calypte's receipt
of Otsuka's written notice of rejection, Calypte shall, at Otsuka's
option, promptly (i) refund all portions of the purchase price paid
by Otsuka therefor and reimburse Otsuka for all of Otsuka's
27
<PAGE> 32
costs incurred in returning the rejected Products to Calypte and for
the insurance and other shipping expenses paid by Otsuka in
connection with the initial delivery of the rejected shipment to
Otsuka, or (ii) credit all such amounts paid by Otsuka against future
shipments of the Products. The procedures described in this Section
3.11 in the event of a rejected shipment shall not be deemed to
constitute a waiver of Otsuka's rights or a postponement of Calypte's
performance obligations or -- provided Calypte replaces defective
Product within forty-five (45) days of Otsuka's (or its designee's)
written notice of rejection -- a Releasing Event.
3.12 Reservation of Title.
Transfer of title for any and all the Products shipped to Otsuka
shall be subject to full payment of the purchase price therefor.
Until such full payment, such Products shall remain the property of
Calypte. For all the Products delivered to Otsuka (or its designees)
to which Calypte retains title, Otsuka shall (i) carry full insurance
and (ii) segregate such Products from other products in Otsuka's
inventory.
3.13 Packaging.
All Products supplied by Calypte to Otsuka hereunder will be in the
form of labeled, standard unit packages utilizing standard labeling
format and graphics and in a form consistent with the labeling
requirements for each Country in the Otsuka Territory as agreed upon
by the parties in writing on a country-by-country basis. Cost of
normal packaging and labeling of the Product for shipment to Otsuka
is included in the price of the Product and will be paid by Calypte;
provided, however, the cost of special packaging and labeling agreed
to by the parties will be paid by Otsuka.
28
<PAGE> 33
4. SPECIAL OBLIGATIONS OF EXCLUSIVE DISTRIBUTOR
So long as Otsuka is the exclusive distributor of the Products in the
Otsuka Territory:
4.1 Minimum Annual Payments/Purchases.
Provided Otsuka's rights to distribute the Products in the Otsuka
Territory remain exclusive during the period described below, and as
consideration for such exclusive rights, the parties hereby agree to
the following amounts as minimum annual amounts to be paid or tests
to be purchased by Otsuka:
<TABLE>
<CAPTION>
Minimum Number
Contract Year Minimum Payment or of Tests
------------- ------------------ --------------
<S> <C> <C> <C>
1 [ * ] [ * ]
2 U.S. [ * ] [ * ]
3 [ * ] [ * ]
4 [ * ] [ * ]
5 [ * ] [ * ]
6 [ * ] [ * ]
7 [ * ] [ * ]
8 [ * ] [ * ]
9 [ * ] [ * ]
10 [ * ] [ * ]
</TABLE>
The applicable minimum amount in a given year shall be the lesser of
(i) the specified minimum number of tests (in the aggregate) of
Products purchased by Otsuka, purchased at the then-applicable
purchase price-per-test-per-Product, or (ii) the dollar amount
specified above as the minimum payment. Under Section 3.7, the price
of the first [ * ] worth of Products purchased by Otsuka shall
be discounted by fifty percent (50%) until a total discount of
[ * ] has been granted. For purposes of this Section 4.1, such
discounted amount shall be counted towards satisfying the minimum
payment amounts specified above (thus, the purchase of products worth
[ * ], discounted to [ * ], shall be deemed a payment of
[ * ]. In the event Otsuka should lose its
* Confidential portion has been omitted
and filed separately with the Commission
29
<PAGE> 34
exclusive right to distribute Products in Japan but retain such
exclusive rights in other Countries of the Otsuka Territory, the
minimum annual payments/purchases specified above shall be reduced by
fifty percent (50%).
The first Contract Year shall commence on the Date of First Sale (as
defined below) and end on December 31 immediately thereafter,
provided that if the Date of First Sale is on or after July 1 of a
calendar year, the first Contract Year shall end on December 31 of
the next calendar year. Thereafter, each Contract Year shall consist
of twelve (12) calendar months beginning on January 1 of each
calendar year. As used here, the "Date of First Sale" shall be the
date of Otsuka's first receipt of revenues from the first commercial
sale of the Products or from the first commercial sale of any Service
using or incorporating the Products. If the actual amounts paid or
tests purchased by Otsuka with respect to a given Contract Year are
less than the lesser of the stipulated minimum amount thereof for
such Contract Year, Otsuka shall have the option either to pay or
purchase the balance necessary to bring the amount of payments made
or tests purchased up to the stipulated minimum amount for such
Contract Year, thereby maintaining Otsuka's exclusive rights in the
Otsuka Territory, or not to pay or purchase such additional amount,
in which case Calypte shall have the right, with written notice to
Otsuka within the first sixty (60) days of the beginning of the next
Contract Year, to reduce Otsuka's distributorship to non-exclusive if
Otsuka does not pay the aforesaid balance within sixty (60) days from
the receipt by Otsuka of such notice from Calypte. Beyond such
remedy, however, Otsuka's failure to pay or purchase the minimum
amounts stipulated in this section shall not constitute in any way
whatsoever a breach of this Agreement and, further, Otsuka shall not
be
30
<PAGE> 35
required in any way whatsoever to pay a minimum annual amount or
purchase a minimum number of tests in the event the distributorship
right granted to Otsuka hereunder becomes non-exclusive. In addition,
should Otsuka's obligation to make payments to Calypte terminate or
become suspended under this Agreement, these minimum payment/ purchase
provisions shall similarly be terminated or suspended.
The following example illustrates the above provisions: Assume that in
Contract Year 3 the price-per-test of the Product being distributed by
Otsuka is [ * ] per test, and that Otsuka purchases
tests from Calypte that year and pays Calypte [ * ]
therefor (such payment amount includes any remaining discount to which
Otsuka may then be entitled under Section 3.7 above). As specified
above, in Contract Year 3 the minimum payment amount is [ * ] and
the minimum number of tests to be purchased is [ * ] . Within sixty
(60) days after the end of the Contract Year 3, Calypte may, in its
discretion, send Otsuka a notice of Calypte's intention to reduce
Otsuka's distribution rights in the Otsuka Territory to non-exclusive
unless, within sixty (60) days following Otsuka's receipt of such
notice, Otsuka purchases an additional [ * ] tests (for a cost of
[ * ] at the then-prevailing price-per-test). If Otsuka elects to
make such an additional purchase, its exclusive distributorship shall
be preserved, but the purchase of those additional tests shall
not apply toward the minimum tests to be purchased in Contract Year 4.
If Otsuka elects not to make such additional purchase, Calypte may (in
its discretion) reduce Otsuka's distributorship to non-exclusive.
* Confidential portion has been omitted
and filed separately with the Commission
31
<PAGE> 36
4.2 Promotion of the Products.
Otsuka will, at its own expense, use its commercially reasonable
efforts to promote the distribution of the Products and the
performance of Services in the Otsuka Territory, consistent with the
level of effort it uses to promote its own products of a similar
nature. Otsuka agrees that it will not sell the Products to, or
perform Services utilizing the Products for, customers located
outside the Otsuka Territory without the written approval of Calypte,
which Calypte may give or withhold, and if given, may revoke in its
sole and absolute discretion.
4.3 Competing Products.
Otsuka shall notify Calypte in writing not less than forty-five (45)
days prior to marketing or distributing a Competing Product in the
Otsuka Territory. If Otsuka commences to market and distribute a
Competing Product in any Country in the Otsuka Territory, Otsuka's
marketing and distribution of a Competing Product shall not be deemed
a breach of this Agreement, but Calypte shall have the right, upon at
least ninety (90) day's prior written notice to Otsuka, to terminate
Otsuka's rights to distribute in such Country the Product with which
such Competing Product competes. If at such time Otsuka is
distributing more than one Product in such country, Calypte may only
terminate Otsuka's rights to distribute the Product with which the
Competing Product competes. If Japan is removed from the Otsuka
Territory, minimum annual payments/purchases as stipulated in Section
4.1 shall immediately be reduced by fifty percent (50%).
4.4 Customer Support.
Otsuka agrees that Otsuka is responsible for supporting all Products
it distributes and all Services it performs in the Otsuka Territory.
Otsuka's support for the
32
<PAGE> 37
Products shall be consistent with the level of support it provides
for its own products of similar nature. Otsuka shall maintain
personnel sufficiently knowledgeable with respect to the Products to
answer Subdistributor and other customer questions regarding the use
and operation of the Products marketed by Otsuka.
4.5 Commercially Reasonable Efforts.
Calypte acknowledges and agrees that the provisions of this Section 4
and the provisions of Section 10 (Regulatory Approvals) are in lieu
of any other requirements or promises, express or implied, of
diligent, reasonable or best efforts in the marketing, sale,
distribution or use of the Products, or that in marketing the
Products in the Otsuka Territory Otsuka will achieve any level of
success. In addition, the reasonable efforts and reasonable diligence
to be put forth by Otsuka in accordance with this Section 4 and
Section 10 shall take into account such factors (without limitation)
as the competitiveness of alternative products in the marketplace,
the proprietary position of the Products, the likelihood of
regulatory approval given the regulatory structure of a given County,
the profitability of the Products and alternative products and other
relevant factors. Reasonable efforts shall be determined on a
country-by-country basis, and it is anticipated that the level of
effort will change over time reflecting changes in the status of the
Product and the market involved.
5. ENFORCEMENT OF CERTAIN RIGHTS
5.1 Sale of E1 System.
Calypte shall not knowingly sell or distribute the E1 System to any
third party, or license or otherwise permit any third party to
manufacture or use the
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E1 System, for resale, use in or manufacture of a product that (i)
tests (in whole or in part) for the presence of antibodies to any
strain(s) of HIV or that tests for any human endogenous retrovirus
and (ii) utilizes the technology embodied in the E1 System (defined
here as an "E1 System Product") for sale in, or providing any
services using or incorporating an E1 System Product in, a Country in
which Otsuka has the exclusive right to sell the Products and provide
Services. In the event that Calypte, either through its own efforts
or by being informed by Otsuka, learns that any third party is using
the E1 System in the manufacture of E1 System Products, or is
incorporating technology embodied in the E1 System in any product
that tests for the presence of antibodies to HIV or for a human
endogenous retrovirus, for sale or distribution in or the performance
of services in a Country, or is reselling E1 System to someone who is
doing so, Calypte shall use its reasonable and diligent efforts to
cause such party to discontinue such activities.
5.2 Third-Party Intellectual Property Rights.
So long as Otsuka's rights to the Products remain exclusive in the
Otsuka Territory, Otsuka agrees to use its reasonable efforts to keep
abreast of filings for patents or other intellectual property rights
in the Otsuka Territory that may impinge upon Otsuka's exclusive use
or sale of the Products or provision of Services in the Otsuka
Territory. Where Otsuka becomes aware of any such filings, Otsuka
shall, at its own expense, but only to the extent it deems
commercially appropriate and legally permissible, use its reasonable
efforts (with no obligation to commence or pursue litigation or
formal administrative proceedings) to assist Calypte (which shall
bear its own expenses) in avoiding or preventing the issuance of such
patents or other intellectual property
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rights. Where Otsuka has used its reasonable efforts with regard to
such filings, but a patent or other intellectual property right is
issued, Otsuka shall have those rights specified in Section 6.5
below. In addition, Otsuka will assist Calypte with any registrations
or filings required to obtain copyright, trademark or other
intellectual property rights protection, in Calypte's name, for the
Products in the Otsuka Territory under applicable law. Calypte will
be responsible for all fees or expenses incurred in connection with
such intellectual property rights registrations or filings.
5.3 Enforcement of Calypte Patent Rights and Calypte Technology
in the Otsuka Territory.
In the event that either party discovers that a third party is
promoting, marketing, using, selling or otherwise distributing (i) an
HIV Urine Kit or (ii) an E1 System Product (as defined in Section
5.1) in any Country of the Otsuka Territory, such party shall notify
the other promptly in writing. Calypte and Otsuka shall then consult
with each other as to the best manner to proceed. Calypte shall use
its reasonable and diligent efforts, including by bringing, defending
and maintaining an appropriate suit or action, to obtain the
discontinuance of the promotion, marketing, use, sale or other
distribution of any such product in the Otsuka Territory. If, within
six (6) months of becoming aware of the introduction of any such
product, Calypte fails to obtain a discontinuance of the promotion,
marketing, use, sale or other distribution of such product in such
Country, and elects not to bring suit against such third party, or at
any time after bringing suit chooses to abandon such suit, then
Calypte shall give Otsuka written notice of its decision not to bring
or to abandon suit within ten (10) days of such decision, which
notice shall include the
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circumstances surrounding the sale of such product in such Country,
including evidence of the infringement of any Calypte Patent Rights
or Calypte Technology. Upon receipt of such notice, Otsuka or its
designee may, at its option and expense, bring suit or take other
action against such third party. Any suit or other action by Otsuka
shall be either in the name of Otsuka or in the name of Calypte, or
jointly in the name of both Otsuka and Calypte, as may be required by
the law of the forum. For this purpose Calypte shall, at Calypte's
expense, execute such legal papers necessary for the prosecution of
such suit and provide such reasonable assistance in such suit as
Otsuka may reasonably request. Any amounts recovered by Otsuka from
third parties in bringing action against a party using, selling or
otherwise distributing such products in the Otsuka Territory shall be
applied first to reimburse the expenses incurred by the parties in
connection with such action, and the balance shall be retained by
Otsuka.
5.4 Reduction of Payments.
5.4.1 In addition to the rights specified in Section 5.3, in the
event that anyone other than Otsuka or its designee
introduces any E1 System Products or HIV Urine Kit into any
Country in the Otsuka Territory in which Otsuka has the
exclusive right to sell the Products and provide Services,
then, upon written notice to Calypte, which notice shall
include reasonable evidence of the foregoing, Otsuka shall
have the right either: (i) to maintain its exclusive right
to distribute the Products in such Country but (a) reduce
the amounts payable per test to Calypte by twenty percent
(20%) with respect to the Products to be purchased by Otsuka
for
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distribution in that Country of the Otsuka Territory and (b)
if the Country in which such HIV Urine Kit and/or E1 System
Products are introduced is Japan, reduce the minimum annual
payments/purchases stipulated in Section 4.1 by fifty
percent (50%), in which case Calypte shall thereafter
continue to supply the Products exclusively to Otsuka; or
(ii) to reduce its rights to distribute the Products in such
Country to non-exclusive, in which case Calypte shall
continue to supply the Products ordered by Otsuka in
accordance with Section 3.3, but need not do so exclusively.
5.4.2 Notwithstanding the foregoing, where (i) Otsuka chooses to
maintain its exclusive rights with respect to such Country
and (ii) Calypte commences and diligently pursues legal
action against the party or parties selling HIV Urine Kits
or E1 System Products in such Country, then Otsuka shall pay
an amount equal to the twenty percent (20%) price reduction
under Section 5.4.1(i)(a) applicable to all purchases by
Otsuka from Calypte subject to such reduction in the first
six (6) months of such reduction into an interest-bearing
escrow account with a recognized bank not affiliated with
either party but reasonably acceptable to both parties
("Escrow"). If Calypte succeeds in getting such third
parties to discontinue the sale, use and other distribution
of HIV Urine Kits and E1 System Products in such Country
within two (2) years, the amount payable per test to Calypte
shall thereafter, upon the discontinuance of the sale, use
and other distribution by third
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parties of HIV Urine Kits and E1 System Products in such
Country, revert to the full amount payable with no 20%
reduction and the amounts placed in Escrow during the
initial six-month period shall be paid to Calypte. If
Calypte fails to obtain such a discontinuance within such
two (2) year period, or if Otsuka had exercised its right to
reduce its rights in the Country to non-exclusive and
Calypte sells Products or performs Services in such Country,
or grants a third party the right to do so, then the Escrow
shall be terminated and all amounts placed in Escrow shall
be returned to Otsuka.
6. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION.
6.1 Representations and Warranties.
6.1.1 Calypte represents and warrants that:
(i) Calypte has the full power, right and authority to
grant the rights and licenses contained in this
Agreement and to enter into and carry out its
obligations under this Agreement;
(ii) The Products, and all components thereof, will be
manufactured and handled in compliance with United
States Food and Drug Administration laws and
regulations and all other applicable laws and
regulations of the United States of America, as well
as all applicable laws and regulations of the country
of manufacture, if other than the United States of
America. Any Products
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manufactured outside the United States of America
shall be of equivalent quality to Products
manufactured in the United States of America. Calypte
will manufacture in the United States of America all
Products designated by Otsuka to be used or
distributed in Japan, unless Otsuka (in its sole
discretion) agrees otherwise;
(iii) Prior to manufacturing and exporting the Products,
Calypte will obtain all necessary governmental
approvals for manufacture and export of the Products;
(iv) Calypte has the lawful right to grant the rights
contained in this Agreement under the Calypte Patent
Rights, which are owned and/or controlled by Calypte;
(v) Otsuka's exercise of rights granted by Calypte to
Otsuka herein does not and will not infringe or
otherwise conflict with patent rights, trade secret
rights or other intellectual property rights of any
third party; provided that Calypte's sole obligations
and Otsuka's sole remedies with regard to breach of
this representation and warranty shall be as set
forth in Section 6.5 below;
(vi) Neither Calypte nor any affiliate (including a parent
or subsidiary) of Calypte has previously granted, nor
will grant, any rights to any third party that are
inconsistent with the rights granted to
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Otsuka herein, nor do or will the rights granted
herein conflict with any other agreement or license
to which Calypte or an affiliate of Calypte is or
becomes a party; and
(vii) Calypte will not make any false or misleading
representations to its customers or others relating
to Otsuka, the Products or the rights granted to
Otsuka herein.
6.1.2 Otsuka represents and warrants that:
(i) Otsuka has full power, right and authority to enter
into and carry out its obligations under this
Agreement;
(ii) Otsuka will not make any false or misleading
representations to its customers or others relating
to Calypte, the Products or the rights granted to
Otsuka herein, and will not make any representations,
warranties or guarantees with respect to the
specifications, features or capabilities of the
Products that conflict with Calypte's documentation
relating to the Products; provided that where the
appropriate governmental authority in a Country in
the Otsuka Territory permits different claims with
respect to a Product from those permitted by the FDA
in the United States of America, Otsuka may establish
the permitted scope of claims consistent with the
approvals of such governmental authority;
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(iii) If Otsuka exports Products from Japan to other
Countries in the Otsuka Territory, Otsuka will use
reasonable diligence to obtain necessary export
licenses and permits required to accomplish Otsuka's
lawful export from Japan to other Countries in the
Otsuka Territory, if any, of the Products purchased
by Otsuka hereunder; and
(iv) Otsuka has obtained, or will use its reasonable and
diligent efforts to obtain, any and all consent,
approval, license and/or authorization of any
governmental authority of Japan required in
connection with the valid execution of this
Agreement.
6.2 Product Limited Warranty.
6.2.1 Calypte warrants (i) that all Products, when delivered, will
have a remaining usable shelf life (as measured against the
"use before" date stamped on such Products) of at least the
lesser of (x), twelve (12) months or (y) the expiration date
authorized in applicable approval licenses issued with
respect to such Product by the relevant governmental
authorities ("Shelf Life"), and (ii) that each Product will
conform to the then-current SPECIFICATIONS for such Product
and will be free of defects in material, workmanship and
packaging.
6.2.2 The express warranties set forth in Section 6.2.1 above will
not apply to defects in a Product: (a) caused through no
fault of Calypte (or a third-party supplier of the
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Product designated by Calypte) during shipment to Otsuka by
the international carrier, (b) caused by the storage of the
Products outside of the designated environmental
specifications after receipt by Otsuka, (c) caused by
modifications or alterations made to the Products by any
party other than Calypte after shipment by Calypte, or (d)
caused by the unauthorized use of the Products by Otsuka or
any third party, or use inconsistent with the protocol
accompanying such Product.
6.2.3 Calypte's sole obligation, and Otsuka's sole remedies (in
addition to Calypte's obligations and Otsuka's remedies
under Section 6.4 and Section 6.6) for any breach of this
warranty will be for Calypte to promptly replace at
Calypte's expense any Product which does not conform to this
warranty, or where replacement is impractical, to refund
Otsuka's purchase price therefor and insurance and shipping
expenses incurred in connection therewith. Products returned
under this warranty will be returned and replaced according
to the same procedures established for rejected Products
under Section 3.11 above.
6.3 Limitation.
EXCEPT FOR THE EXPRESS WARRANTIES IN THIS AGREEMENT, CALYPTE PROVIDES
NO WARRANTIES FOR THE PRODUCTS, EXPRESS OR IMPLIED, EITHER IN FACT OR
BY OPERATION OF LAW, STATUTORY OR OTHERWISE, AND CALYPTE AND OTSUKA
SPECIFICALLY DISCLAIM ANY IMPLIED WARRANTY OR MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE BEYOND THE EXPRESS WARRANTIES IN
THIS AGREEMENT.
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6.4 Indemnification.
6.4.1 Calypte hereby agrees to defend and indemnify Otsuka,
Affiliates and Subdistributors against, and hold Otsuka,
Affiliates and Subdistributors harmless from, any loss,
cost, liability or expense (including court costs,
arbitration expenses and reasonable fees of attorneys and
other professionals) arising out of or in connection with a
breach of Calypte's representations and warranties in
Sections 6.1.1 and 6.2, provided that, in the case of a
claim, lawsuit or arbitration: (i) Calypte shall have sole
control of such defense, though Otsuka, in its discretion,
may participate in such defense through attorneys of its
choice; (ii) Otsuka does not settle any claim without
Calypte's prior written consent; and (iii) Otsuka shall
provide notice promptly to Calypte of any actual or
threatened claim of which Otsuka becomes aware. Calypte
agrees to procure insurance coverage for the obligations
described in this Section 6.4.1. In the event of any such
claim, Otsuka shall provide Calypte, at Calypte's expense,
information and assistance as Calypte may reasonably request
for purposes of defense of such claim.
6.4.2 Otsuka hereby agrees to defend and indemnify Calypte
against, and hold Calypte harmless from, any loss, cost,
liability or expense (including court costs, arbitration
expenses and reasonable fees of attorneys and other
professionals) arising out of or in connection with any
action or claim, brought or threatened, arising from a
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breach of Otsuka's representations and warranties
and the use or sale of the Products by Otsuka, its
Affiliates and Subdistributors, excluding any
loss, cost, liability or expense covered by
Sections 6.4.1, 6.5 or 6.6 or resulting from a
breach of this Agreement by Calypte, and
specifically (without limitation) excluding any
obligation on the part of Otsuka to enforce or
defend the Calypte Patent Rights or to defend,
indemnify or hold Calypte harmless from any action
or claim alleging that Otsuka's use or sale of the
Products infringes a third party's patent or other
intellectual property rights. Otsuka's obligations
hereunder are contingent upon (i) Otsuka having
sole control of such defense, though Calypte, in
its discretion, may participate in such defense
through attorneys of its choice; (ii) Calypte
providing notice promptly to Otsuka of any actual
or threatened claim of which Calypte becomes
aware; and (iii) Calypte not settling any claim
without Otsuka's prior written consent. In the
event of any such claim, Calypte shall provide
Otsuka, at Otsuka's expense, information and
assistance as Otsuka may reasonably request for
purposes of defense of such claim.
6.5 Intellectual Property Infringement Indemnity.
6.5.1 Calypte agrees to defend and indemnify Otsuka,
Affiliates and Subdistributors against, and hold
Otsuka, Affiliates and Subdistributors harmless from,
any loss, cost, liability or expense (including court
costs, arbitration expenses and
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reasonable attorney's fees) arising out of or in connection with any action or
claim brought or threatened against Otsuka, an Affiliate or Subdistributor
alleging that the Products under normal use infringe any third party's patent,
copyright, trademark, trade secret or other intellectual property right;
provided that Calypte will be released from its obligations under this Section
6.5 unless Otsuka provides Calypte with (i) prompt written notice of such claim
or action of which Otsuka becomes aware, (ii) sole control and authority over
the defense or settlement of such claim or action, though Otsuka, the Affiliate
or Subdistributor, in Otsuka's discretion, may participate in such defense and
settlement discussions, and (iii) information and reasonable assistance, at
Calypte's expense, to defend and/or settle any such claim or action.
In addition, without limiting the above remedies and obligations, in the event
that, and only for so long as, Otsuka is reasonably required to pay to a third
party royalties or license fees to avoid infringement of patent rights or other
intellectual property rights of such third party by use or sale of the Products
or related Services, Otsuka shall be entitled to deduct (as a credit) from any
amounts otherwise payable to Calypte the full amount of such royalties and
license fees actually paid to such third party, at a rate of twenty percent
(20%) of the amounts otherwise payable to Calypte until Otsuka is fully
reimbursed or compensated for such third party payments; provided that Otsuka
shall be
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entitled to such deduction or credit if the cause of such
infringement is the use or sale of the Product or Service, as
opposed to such infringement stemming from the combination of
Products with other infringing products not provided by
Calypte.
6.5.2 In the event that any Product is held or, in Calypte's sole
opinion, may be held to constitute such an infringement,
Calypte shall, at its option and expense, either: (i) obtain
for Otsuka the right to continue to use such Product as
intended, or (ii) modify such Product so that it becomes
non-infringing, but without materially altering the use or
functionality of the Product, or (iii) replace such Product
with a functionally equivalent non-infringing Product or, if
none of the remedies in (i), (ii) or (iii) is reasonably
available despite Calypte's best efforts to achieve them, (iv)
accept return of the infringing Products and immediately
refund to Otsuka the purchase price paid therefor, and
thereafter the Country in which such infringement action arose
shall be removed from the Otsuka Territory with respect to
such Product.
6.5.3 Notwithstanding the provisions of Section 6.5.1 above,
Calypte assumes no liability for infringement claims
arising from (i) combination of Products with other
products not provided by Calypte, but not applicable to
or covering such Products standing alone, (ii) the
modification of Products unless such modification was
made or authorized by Calypte, where such infringement
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claims would not have occurred but for such modifications, or
(iii) any marking or branding placed on the Products by, or at
the request of, Otsuka.
6.5.4 THE FOREGOING, INCLUDING SECTIONS 5 AND 6, STATES THE ENTIRE
LIABILITY AND OBLIGATIONS OF CALYPTE AND THE EXCLUSIVE REMEDY
OF OTSUKA, WITH RESPECT TO ANY ALLEGED OR ACTUAL INFRINGEMENT
OF PATENTS, COPYRIGHTS, TRADE SECRETS, TRADEMARKS OR OTHER
INTELLECTUAL PROPERTY RIGHTS BY THE PRODUCTS.
6.6 Products Liability Indemnity.
Calypte agrees to defend and indemnify Otsuka, Affiliates and
Subdistributors against, and hold Otsuka, Affiliates and
Subdistributors harmless from, any loss, cost, liability or expense
(including court costs, arbitration expenses and reasonable
attorney's fees) arising out of or in connection with any action or
claim brought or threatened against Otsuka, Affiliates or
Subdistributors alleging that a Product caused personal injury, death
or property damage; provided that (i) Calypte shall have sole control
of such defense, though Otsuka, in its discretion, may participate in
such defense through attorneys of its choice; (ii) Otsuka does not
settle any claim without Calypte's prior written consent; and (iii)
Otsuka shall provide notice promptly to Calypte of any actual or
threatened claim of which Otsuka becomes aware.
7. CONFIDENTIALITY
7.1 Confidential Information.
Otsuka and Calypte acknowledge that during the term of this
Agreement each party will be exposed to certain
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information concerning the other party's business (including, without
limitation, customer lists), technology, products, proposed new
products, product costs, product prices, finances, marketing plans,
business opportunities, research, development or know-how which is
confidential and proprietary to the other party and is not generally
known to the public ("Confidential Information"). Otsuka and Calypte
agree that during and after the term of this Agreement, Otsuka and
its Affiliates and Calypte and its Affiliates will not use and will
not disclose any Confidential Information of the other party except
in accordance with the provisions and for the purposes of this
Agreement (which include and permit Otsuka's promotion, use, sale and
other distribution of the Products). Without limiting the foregoing,
all information pertaining to the Products and/or Calypte Patent
Rights conspicuously marked by Calypte as confidential shall be
deemed Confidential Information of Calypte, and Otsuka agrees that
Otsuka and Affiliates will take reasonable steps not to disclose any
such conspicuously marked Confidential Information of Calypte to any
third party (not including Subdistributors as reasonably necessary,
or counsel or consultants of Otsuka and Affiliates, or third-party
manufacturers in the event Otsuka becomes entitled to manufacture or
have manufactured the Products in accordance with this Agreement)
without the prior written consent of Calypte, except as permitted in
this Agreement. Also, without limiting the foregoing, Calypte agrees
that it will take reasonable steps not to disclose to any third party
(not including counsel and consultants of Calypte) without the prior
written consent of Otsuka any other Confidential Information
conspicuously marked as such by Otsuka, except as permitted in this
Agreement. Otsuka further agrees that Otsuka, including, without
limitation, Affiliates and
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Subdistributors, will not reverse engineer the Products in order to
enable Otsuka, Affiliates, or any third parties to manufacture the
Products in violation of this Agreement. The provisions of this
Section 7 shall survive any termination of this Agreement.
7.2 Confidentiality of Agreement.
Each party agrees that the terms and conditions of this Agreement
shall be treated as Confidential Information and that no reference to
this Agreement or to the terms hereof can be made in any form of
public or commercial advertising without the prior written consent of
the other party. All publicity regarding the announcement of this
Agreement shall be coordinated by both parties. Notwithstanding the
foregoing, each party may disclose the terms and conditions of this
Agreement: (a) as required by any court or other governmental body;
(b) as otherwise required by law; (c) to legal counsel and
consultants of the parties; (d) to accountants, banks and financing
sources and their advisors; (e) in connection with the enforcement of
this Agreement or rights under this Agreement; or (f) in connection
with a merger or acquisition or proposed merger or acquisition, or
the like.
7.3 Exceptions.
The restrictions of Sections 7.1 and 7.2 will not apply to
Confidential Information that (i) is already known to the receiving
party at the time of disclosure to the receiving party; (ii) has
become publicly known through no wrongful act or omission of the
receiving party; (iii) has been rightfully received by the receiving
party from a third party without restriction on disclosure and
without breach of an obligation of confidentiality running directly
or indirectly to the disclosing party; (iv) has been approved
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for release by written authorization of the disclosing party; (v) is
independently developed by the receiving party without use, directly
or indirectly, of the Confidential Information; or (vi) is furnished
to a third party by the disclosing party without restrictions on the
third party's right to disclose the information. The parties agree
that in the event of a dispute with respect to (v) above, the alleged
breaching party shall bear the burden of proof by a preponderance of
the evidence that it developed such information without use, directly
or indirectly, of Confidential Information. In addition, Calypte and
Otsuka may use Confidential Information as reasonably necessary in
(a) filing or prosecuting patent applications, (b) prosecuting or
defending litigation, (c) dispute resolution under Section 12.5, (d)
complying with applicable governmental regulations or conducting
preclinical or clinical trials, and (e) responding to a lawful
governmental demand, all with prior notice to the other party and
with safeguards as appropriate.
7.4 Remedies.
A breach of the restrictions contained in this Section 7 is a breach
of this Agreement which may cause irreparable harm to the
non-breaching party and may, under applicable laws, entitle the
non-breaching party, in addition to any other right or remedy
available, to obtain from any court of competent jurisdiction an
injunction (temporary, preliminary or permanent), or other interim,
ancillary or conservatory remedy or relief, restraining such breach
or threatened breach and specific performance of any such provision.
The parties agree that no bond or other security shall be required in
obtaining such equitable relief.
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8. LIMITATION OF LIABILITY
IN NO EVENT, EXCEPT AS PROVIDED BELOW, WILL EITHER PARTY BE LIABLE TO
THE OTHER FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR INDIRECT
DAMAGES ARISING IN ANY WAY OUT OF THIS AGREEMENT, HOWEVER CAUSED AND
ON ANY THEORY OF LIABILITY; THIS LIMITATION WILL APPLY EVEN IF THE
OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE,
PROVIDED, HOWEVER, THAT THIS LIMITATION SHALL NOT APPLY TO A BREACH
OF THE CONFIDENTIALITY PROVISION SET FORTH IN SECTION 7 ABOVE WITH
RESPECT TO ANY GMP PROCEDURES DISCLOSED TO OTSUKA PURSUANT TO SECTION
2.4; PROVIDED FURTHER THAT THIS LIMITATION SHALL NOT APPLY TO OR
LIMIT A PARTY'S OBLIGATIONS TO INDEMNIFY, DEFEND AND HOLD THE OTHER
PARTY HARMLESS UNDER CIRCUMSTANCES EXPRESSED IN THIS AGREEMENT.
9. TRADEMARKS AND TRADE NAMES.
9.1 Use.
So long as Otsuka purchases Products from Calypte during the term of
this Agreement, Otsuka shall indicate to the public that the Products
incorporate and/or use El System under the trademarks, marks, and
trade names that Calypte may adopt from time to time with respect to
El System and the Products ("Calypte's Marks"); provided that this
obligation is contingent upon Calypte registering Calypte's Marks in
the Otsuka Territory and obtaining authorization from the relevant
governmental authorities to use Calypte's Marks (Calypte shall give
Otsuka written notice of such registration and authorization). Otsuka
shall not alter or remove any such approved Calypte's Marks applied
to the packaging of the Products by Calypte, where such packaging is
as mutually agreed by Otsuka and Calypte. Except as set forth in this
Section 9.1 and as otherwise permitted under this Agreement, nothing
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contained in this Agreement shall grant to Otsuka any right, title or
interest in any of Calypte's Marks. At no time during the term of
this Agreement shall Otsuka challenge or assist others in challenging
any lawfully approved Calypte's Marks used in conjunction with the El
System or the Products or the registration thereof or attempt to
register any trademarks, marks or trade names confusingly similar to
those used by Calypte. In the event a Releasing Event occurs whereby
Otsuka manufactures, or has manufactured, the Product under the GMP
Procedures, Otsuka shall have no right to sell or distribute such
Products under Calypte's Marks, except to the extent required by law,
and any use in violation thereof shall constitute an infringement of
Calypte's rights.
9.2 Approval of Representations
All representations of Calypte's Marks that Otsuka intends to use
shall first be submitted to Calypte for approval (which shall not be
unreasonably withheld) of design, color, size and other details or
shall be exact copies of those used by Calypte, subject to variation
only as reasonably agreed by Calypte. If any of Calypte's Marks are
to be used in conjunction with another trademark on or in relation to
the Products, then Calypte's Marks shall be presented as reasonably
agreed by Calypte and Otsuka, separated from the other so that each
appears to be a mark in its own right, distinct from the other mark.
10. REGULATORY APPROVALS.
10.1 Obtainment of Approvals.
Subject to Calypte's fulfilling its obligations under Section
6.1.1(iii), and so long as Otsuka is the exclusive distributor of the
Products in the Otsuka Territory,
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Otsuka shall use its reasonable diligence in obtaining necessary
governmental approvals or licenses for the distribution and sale of
the Products, which approvals and licenses shall be in Otsuka's name
and owned by Otsuka, subject to Section 10.6; provided, that Calypte
shall provide assistance and support as is reasonably necessary, at
Otsuka's cost and expense, in obtaining any such approval or
licenses. Otsuka shall promptly provide to Calypte (or directly to
the governmental agency, at Otsuka's option) all information relating
to Otsuka's use, sale and distribution of the Products that Calypte
is required to provide to the Food and Drug Administration of the
United States of America or any other governmental agency. Calypte
and Otsuka agree to disclose promptly to the other all reports and
any information which they have available or which become available
to them relating to the safety and efficacy caused by or related to
the Products.
10.2 Reasonable Diligence.
Otsuka's aforesaid reasonable due diligence to obtain governmental
approvals in the Otsuka Territory shall be satisfied as follows with
respect, separately, to: (a) Countries in which registration of the
Products with governmental authorities can be done on the basis of
the approved United States PLA ("PLA Countries") and (b) Countries
which require the filing of a separate application for marketing
approval to local governmental authorities ("Separate Filing
Countries"). Each Country of the Otsuka Territory shall be classified
into one of these groups based upon its governmental requirements.
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10.3 PLA Countries.
Within six (6) months after the later to occur of (a) Otsuka's
receipt from Calypte of the approved U.S. PLA materials necessary for
submitting a complete application package to governmental authorities
in PLA Countries, or (b) the execution of this Agreement, Otsuka
shall undertake to submit an application for governmental approval to
market the Products in such Countries of the Otsuka Territory.
Further, Otsuka shall undertake to commercially launch the Products
in PLA Countries within six (6) months of receiving approval of its
application to market the Products from the appropriate governmental
authority in such Countries.
In the event Otsuka does not submit an application package within the
specified period in a PLA Country, the parties shall discuss the
reasons for the delay, and Calypte shall not unreasonably withhold
its consent to a ninety (90) day extension. If Otsuka does not submit
its application package within the extended period, Calypte shall, at
the end of that extended period, have an option for ninety (90) days
to convert Otsuka's distribution rights from an exclusive to a
non-exclusive basis in that Country of the Otsuka Territory.
In the event Otsuka does not commercially launch the Products in a
PLA Country within the specified period, the parties shall discuss
the reasons for the delay, and Calypte shall not unreasonably
withhold its consent to a ninety (90) day extension for that Country.
If Otsuka does not commercially launch the Products within the
extended period, Calypte shall, at the end of that extended period,
have an option for ninety (90) days to convert Otsuka's distribution
rights from an exclusive to
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a non-exclusive basis in that Country of the Otsuka Territory.
10.4 Separate Filing Countries.
Within twelve (12) months after the later of (a) Otsuka's receipt
from Calypte of all data (in Calypte's possession or available to
Calypte) necessary to initiate clinical studies, or (b) the execution
of this Agreement, Otsuka shall initiate clinical trials in those
Countries of the Otsuka Territory that require them. Further, Otsuka
shall use its best efforts to submit its application package (for
marketing approval) to governmental authorities within twelve (12)
months of initiating clinical trials, provided that Calypte provides
in a timely fashion all data necessary to complete the application
package either through Otsuka or directly to the appropriate
governmental authorities.
In the event Otsuka does not initiate clinical studies within the
specified period in a Separate Filing Country, the parties shall
discuss the reasons for the delay, and Calypte shall not unreasonably
withhold its content to a ninety (90) day extension. If Otsuka does
not initiate clinical studies within the extended period, Calypte
shall, at the end of that extended period, have an option for ninety
(90) days to convert Otsuka's distribution rights from an exclusive
to a non-exclusive basis in that Country of the Otsuka Territory.
In the event Otsuka does not submit its application package to
governmental authorities in a Separate Filing Country within the
specified period, the parties shall discuss the reasons for the
delay, and Calypte shall not unreasonably withhold its consent to a
ninety (90) day extension. If Otsuka does not submit its application
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package to governmental authorities within the extended period, and
if the failure to submit such application package is reasonably
within Otsuka's control, Calypte shall, at the end of that extended
period, have an option for ninety (90) days to convert Otsuka's
distribution rights from an exclusive to a non-exclusive basis in
that Country of the Otsuka Territory.
10.5 Extension of Time Periods.
The time periods specified above for Otsuka's reasonable diligence in
introducing the Products in any Country of the Otsuka Territory shall
be extended in that Country by (a) the duration of Force Majeure
circumstances which delay Otsuka's performance; (b) unanticipated
governmental requests or requirements which delay Otsuka's
performance; and (c) actions or inactions by Calypte which delay
Otsuka's performance.
In addition, the time period for the commercial launch of the
Products in a Country of the Otsuka Territory shall be automatically
extended for an additional two (2) week period for each month less
than six (6) months taken to submit the application package for that
Country. In the case of Separate Filing Countries, the time period
for submitting the marketing approval application package in a
given Country shall be automatically extended for an additional two
(2) week period for each month less than twelve (12) months taken to
initiate clinical trials in that Country.
10.6 Assignment Upon Termination.
Except in the event of abandonment as per Section 11.8 or in the
event of termination of this Agreement by Otsuka due to breach of
this Agreement by Calypte, immediately upon termination of Otsuka's
right to distribute the
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Products in any Country of the Otsuka Territory, Otsuka shall use
reasonable efforts to assign to Calypte, and subject to the
occurrence of such an event, does hereby assign to Calypte, all
regulatory approvals, licenses, etc. then in Otsuka's possession
required for the use, marketing and sale of the Products in such
Country, all to the extent permitted under applicable law. In the
event of such an assignment, Otsuka shall, at Calypte's request and
expense, deliver execute and/or deliver or cause to be delivered, all
such assignments, consents, documents or further instruments of
transfer or license, and take or cause to be taken all such actions
as may be reasonably necessary to effectuate such transfer.
11. TERM AND TERMINATION
11.1 Term.
Unless earlier terminated pursuant to the provisions of this
Agreement, this Agreement shall have an initial term extending from
Effective Date until the end of tenth (10th) Contract Year, and may
be renewed by mutual agreement.
11.2 Termination for Convenience.
At any time and for any reason or for no reason, Otsuka, at Otsuka's
sole option, may terminate this Agreement in its entirety. Such
termination shall be effective one hundred twenty (120) days after
receipt by Calypte of Otsuka's written notice of termination. In the
event of any termination for convenience, Otsuka shall (a) use
reasonable efforts to transfer government approvals to Calypte as
provided in Section 10.6 above; (b) provide Calypte with the name,
addresses, phone, fax and telex numbers and contact person at each of
Otsuka's non-Affiliate Subdistributors of the Products, to the extent
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available to Otsuka; and (iii) Otsuka shall not interfere with or
prevent any such non-Affiliate Subdistributor of Products from
entering into a relationship directly with Calypte or sharing such
Subdistributor's Product customer lists with Calypte. The one hundred
and twenty (120) day notice period shall be reduced if Otsuka
completes the transfer of all necessary government approvals and
delivers the Subdistributor information in less than one hundred
twenty (120) days.
11.3 Termination for Cause.
Without limiting Otsuka's rights in Section 11.2 above, this
Agreement may be terminated by either party upon any material breach
or default by the other party at any time after sixty (60) days'
prior written notice to the breaching party specifying the nature of
the breach or default; provided that, if during said sixty (60) days
the party so notified cures the breach or default complained of, then
this Agreement shall continue in full force and effect; provided
further that if the alleged breaching party disputes having committed
a material beach or default or claims to have cured such breach or
default prior to or within the sixty (60) day period, such dispute
shall be resolved by prompt arbitration in accordance with Section
12.5, and this Agreement shall not terminate under this Section
11.3 until the conclusion of such arbitration, and then only if the
arbitrators decide in favor of the non-breaching party seeking
termination.
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EXHIBIT 10.4
CALYPTE BIOMEDICAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Employee Stock Purchase
Plan of Calypte Biomedical Corporation.
1. Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the
company.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "Common Stock" shall mean the Common Stock of the
Company.
(d) "Company" shall mean Calypte Biomedical Corporation
and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all compensation reportable
on Form W-2, including without limitation base straight time gross earnings,
sales commissions, payments for overtime, shift premiums, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an
Employee of the Company for tax purposes whose customary employment with the
Company is at least twenty (20) hours per week and more than five (5) months in
any calendar year. For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship will be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each
Offering Period.
(i) "Exercise Date" shall mean the last day of each
Offering Period.
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(j) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:
(1) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the National Market or the Nasdaq Small Cap Market of The Nasdaq
Stock Market, its Fair Market Value shall be the closing sale price for the
Common Stock (or the mean of the closing bid and asked prices, if no sales were
reported), as quoted on such exchange (or the exchange with the greatest volume
of trading in Common Stock) or system on the date of such determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable, or;
(2) If the Common Stock is quoted on the NASDAQ
system (but not on the National Market System thereof) or is regularly quoted by
a recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.
(4) For purposes of the Enrollment Date under
the first Offering Period under the Plan, the Fair Market Value shall be the
price to the public as set forth in the final prospectus included within the
Registration Statement in Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock.
(k) "Offering Periods" shall mean a periods of
approximately twenty-four (24) months during which an option granted pursuant to
the Plan may be exercised, commencing on the first Trading Day on or after May
1and November 1 of each year and terminating on the last Trading Day in the
periods ending twenty-four months later. The first Offering Period shall be the
period commencing with the first Trading Day on or after the date on which the
Company's registration statement on Form S-1 is declared effective by the
Securities and Exchange Commission. The duration and timing of Offering Periods
may be changed pursuant to Section 4 of this Plan.
(l) "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(m) "Plan" shall mean this Employee Stock Purchase Plan.
(n) "Purchase Period" shall mean the approximately six
month period commencing after an Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date.
(o) "Purchase Price" shall mean an amount equal to 85% of the
Fair Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
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(p) "Reserves" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
(q) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(r) "Trading Day" shall mean a day on which national
stock exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall
be employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after May 1 and November 1 each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance with
Section 19 hereof. The first Offering Period shall begin on the effective date
of the Company's initial public offering of the Company's Common Stock that is
registered with the Securities and Exchange Commission. The Board shall have the
power to change the duration of Offering Periods (including the commencement
dates thereof) with respect to future offerings without stockholder approval if
such change is announced at least fifteen (15) days prior to the scheduled
beginning of the first Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's payroll
office prior to the applicable Enrollment Date. An eligible Officer may become a
participant in the Plan by completing a subscription agreement authorizing
payroll
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deductions and an irrevocable election in the form of Exhibit B to this Plan and
filing it with the Company's payroll office prior to the applicable Enrollment
Date.
(b) Payroll deductions for a participant shall commence
on the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her
subscription agreement, he or she shall elect to have payroll deductions made on
each pay day during the Offering Period in an amount not exceeding ten percent
(10%) of the Compensation which he or she receives on each pay day during the
Offering Period.
(b) All payroll deductions made for a participant shall
be credited to his or her account under the Plan and will be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant other than Officers may discontinue his
or her participation in the Plan as provided in Section 10 hereof, or may
increase or decrease the rate of his or her payroll deductions during the
Offering Period by completing or filing with the Company a new subscription
agreement authorizing a change in payroll deduction rate. The Board may, in its
discretion, limit the number of participation rate changes during any Offering
Period. The change in rate shall be effective with the first full payroll period
following five (5) business days after the Company's receipt of the new
subscription agreement unless the Company elects to process a given change in
participation more quickly. A participant's subscription agreement shall remain
in effect for successive Offering Periods unless terminated as provided in
Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof,
a participant's payroll deductions may be decreased to 0% at such time during
any Purchase Period which is scheduled to end during the current calendar year
(the "Purchase Offering Period") that the aggregate of all payroll deductions
which were previously used to purchase stock under the Plan in a prior Purchase
Period which ended during that calendar year plus all payroll deductions
accumulated with respect to the Current Purchase Period equal $21,250. Payroll
deductions shall recommence at the rate provided in such participant' s
subscription agreement at the beginning of the first Purchase Period which is
scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock. At
any time, the
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Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on the Exercise Date of such Offering Period (at
the applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than a
number of shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof. The
option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the
Plan as provided in Section 10 hereof, his or her option for the purchase of
shares will be exercised automatically on the Exercise Date, and the maximum
number of full shares subject to option shall be purchased for such participant
at the applicable Purchase Price with the accumulated payroll deductions in his
or her account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant' s account for the subsequent
Purchase Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date
on which a purchase of shares occurs, the Company shall arrange the delivery to
each participant who requests in writing, as reasonable and appropriate, of a
certificate representing the shares purchased upon exercise of his or her
option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all
the payroll deductions credited to his or her account and not yet used to
exercise his or her option under the Plan at any time by giving written notice
to the Company in the form of Exhibit C to this Plan. All of the participant's
payroll deductions credited to his or her account will be paid to such
participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period will be automatically terminated,
and no further payroll deductions for the purchase of shares will be made during
the Offering Period. If a participant withdraws from an Offering Period, payroll
deductions
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will not resume at the beginning of the succeeding Offering Period unless the
participant delivers to the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as
defined in Section 2(g) hereof ), for any reason, he or she will be deemed to
have elected to withdraw from the Plan and the payroll deductions credited to
such participant's account during the Offering Period but not yet used to
exercise the option will be returned to such participant or, in the case of his
or her death, to the person or persons entitled thereto under Section 14 hereof,
and such participant's option will be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an Employee
for the participant's customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.
(c) A participant's withdrawal from an Offering Period
will not have any effect upon his or her eligibility to participate in any
similar plan which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering Period
from which the participant withdraws.
11. Interest. No interest shall accrue on the payroll deductions
of a participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be 300,000
(pre-split) shares, subject to adjustment upon changes in capitalization of the
Company as provided in Section 18 hereof. If on a given Exercise Date the number
of shares with respect to which options are to be exercised exceeds the number
of shares then available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a manner
as shall be practicable and as it shall determine to be equitable.
(b) The participant will have no interest or voting right
in shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the
Plan will be registered in the name of the participant or in the name of the
participant and his or her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered
by the Board or a committee of members of the Board appointed by the Board. The
Board or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all parties.
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(b) Rule 16b-3 Limitations. Notwithstanding the
provisions of Subsection (a) of this Section 13, in the event that Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor provision ("Rule 16b-3") provides specific requirements
for the administrators of plans of this type, the Plan shall be administered
only by such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such parti cipant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees at least annually, which statements will set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
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18. Adjustments Upon Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the Reserves as well as the price per
share of Common Stock covered by each option under the Plan which has not yet
been exercised shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Offering Period will
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale
of all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each option under the Plan shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Exercise Date (the "New Exercise Date") or to cancel each
outstanding right to purchase and refund all sums collected from participants
during the Offering Period then in progress. If the Board shortens the Offering
Period then in progress in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for his option has been changed to the New Exercise Date and that his
option will be exercised automatically on the New Exercise Date, unless prior to
such date he has withdrawn from the Offering Period as provided in Section 10
hereof. For purposes of this paragraph, an option granted under the Plan shall
be deemed to be assumed if, following the sale of assets or merger, the option
confers the right to purchase, for each share of option stock subject to the
option immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale of
assets or merger by holders of Common Stock for each share of Common Stock held
on the effective date of the transaction (and if such holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if
such consideration received in the sale of assets or merger was not solely
common stock of the successor corporation or its parent (as defined in Section
424(e) of the Code), the Board may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
option to be solely common stock of the
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successor corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock and the sale of assets or
merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each out standing option, in the event the
Company effects one or more reorganizations, recapitalization, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section 18
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain stockholder approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the Offering
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
20. Notices. All notices or other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon
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which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being pur chased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
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EXHIBIT A
CALYPTE BIOMEDICAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________ hereby elects to participate in
the Calypte Biomedical Corporation Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan") and subscribes to purchase shares of
the Company' s Common Stock in accordance with this Subscription
Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (not to exceed 10%) during
the Offering Period in accordance with the Employee Stock Purchase
Plan. (Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete "Employee Stock Purchase Plan."
I understand that my participation in the Employee Stock Purchase Plan
is in all respects subject to the terms of the Plan. I understand that
the grant of the option by the Company under this Subscription
Agreement is subject to obtaining shareholder approval of the Employee
Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse Only):
___________________________________
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares), I will be
treated for federal income tax purposes as having received ordinary
income at the time of such disposition in an amount equal to the excess
of the fair market value of the shares at the time such shares were
purchased by me over the price which I paid for the shares. I hereby
agree to notify the Company in writing within 30 days after the date of
any disposition of shares and I will make adequate provision for
Federal, state or other tax withholding obligations, if any, which
arise upon the disposition of the Common Stock. The
<PAGE> 74
Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any
time after the expiration of the 2-year holding period, I understand
that I will be treated for federal income tax purposes as having
received income only at the time of such disposition, and that such
income will be taxed as ordinary income only to the extent of an amount
equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I
paid for the shares, or (2) 15% of the fair market value of the shares
on the first day of the Offering Period. The remainder of the gain, if
any, recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print) _____________________________________________
(First) (Middle) (Last)
_________________________ _____________________________________
Relationship
_____________________________________
(Address)
EMPLOYEE NAME: (Please print) ___________________________________________
(First) (Middle) (Last)
_____________________________________
_____________________________________
(Address)
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Employee's Social
Security Number: ___________________________________
Employee's Address: __________________________________
__________________________________
__________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: ___________________ __________________________________
Signature of Employee
__________________________________
Spouse's Signature (If beneficiary
other than spouse)
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EXHIBIT B
CALYPTE BIOMEDICAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
SECTION 16 INSIDER IRREVOCABLE ELECTION AND WAIVER
To: Plan Administrator
With respect to the purchase period ending ______________________, 19___ (the
"Next Period") under the Company's Employee Stock Purchase Plan (the "Plan") and
for all future periods, I hereby irrevocably elect:
(i) to have amounts withheld from each of my paychecks during such
period at the rate of ___% of my compensation (as defined in
the Plan) per pay period (minimum ___% and maximum ___%); AND
(ii) to purchase shares at the end of the period designated above
with all amounts deducted from my pay and held in my account
under the Plan at the end of such period.
I hereby waive any rights that I would otherwise have under the Plan to withdraw
from, or to change my rate or amount of payroll deductions, during such period.
I understand that this election and waiver must be made prior to the
commencement of the Next Period. I further understand that this irrevocable
election may only be terminated by an irrevocable notice of termination which
takes effect at least six months after it has been made.
Signed:_________________________
Name:___________________________
Date:___________________________
<PAGE> 77
EXHIBIT C
CALYPTE BIOMEDICAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Calypte
Biomedical Corporation Employee Stock Purchase Plan which began on ___________
19____ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
_______________________________
_______________________________
_______________________________
Signature:
_______________________________
Date: _________________________
<PAGE> 78
11.4 Termination for Bankruptcy.
This Agreement may be terminated by either party upon written notice
immediately without opportunity to cure if the other party becomes
the subject of a voluntary or involuntary petition in bankruptcy or
any proceeding relating to insolvency, receivership, liquidation, or
composition for the benefit of creditors, if that petition or
proceeding is not dismissed with prejudice within sixty (60) days
after filing.
11.5 Effect of Termination.
11.5.1 Termination of this Agreement pursuant to either Section
11.2, 11.3 or 11.4 shall not relieve the parties of any
obligation accruing prior to such termination.
11.5.2 Upon termination of this Agreement by Otsuka pursuant to
Section 11.2 or by either party pursuant to Section 11.3
or 11.4, Otsuka shall provide Calypte with a written
notice stating the inventory of all the Products in
Otsuka's stock.
11.5.3 Upon termination of this Agreement pursuant to Section
11.2, 11.3 or 11.4, Otsuka may use and sell or otherwise
distribute and dispose of the Products within one (1) year
after termination of this Agreement.
11.6 No Liability For Expiration or Termination.
Without limiting party's rights, obligations and remedies under this
Agreement, neither Calypte nor Otsuka will, solely by reason of the
expiration or termination of this Agreement, be liable to the other
for compensation,
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reimbursement or damages on account of any loss of prospective
profits or anticipated sales or on account of expenditures,
investments, leases, or commitments made in connection with this
Agreement or the anticipation of extended performance hereunder.
11.7 Survival.
The following provisions shall survive expiration or termination of
this Agreement: Sections 6, 7, 8, 11.6 and 12.
11.8 Abandonment.
Whether or not Otsuka's rights in the Otsuka Territory remain
exclusive, Otsuka shall be free, in its discretion, to abandon its
rights and obligations (either all of its rights and obligations or
on a Product-by-Product basis) in a given Country of the Otsuka
Territory for any or no reason. In such case, Otsuka shall give
Calypte at least sixty (60) days prior written notice of such
decision, after which Calypte shall then be free to grant exclusive
distribution rights to the abandoned Products in such Country to a
third party or undertake such distribution itself. If Otsuka has
exclusive rights in the Otsuka Territory at the time it abandons such
rights in a given Country, the minimum payments/purchases described
in Section 4.1 shall continue without reduction with respect to the
rest of the Otsuka Territory; provided that, if Otsuka abandons its
rights in Japan, such minimum amounts shall be reduced by fifty
percent (50%). Otsuka may manifest its lack of intention to market
the Products in a Country by complete inaction during the specified
time periods with respect to seeking governmental approval for the
marketing of the Products or with respect to the commercial launch of
the Products in such Country. Such inaction shall be deemed
constructive abandonment by
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<PAGE> 80
Otsuka of its distribution rights in such Country; provided that such
constructive abandonment shall only be effective if Calypte gives
Otsuka written notice of same, describing the circumstances on which
it bases its conclusion of constructive abandonment, and Otsuka fails
to remedy such circumstances within sixty (60) days of its receipt of
such notice.
In the event Otsuka abandons its distribution rights in any Country
of the Otsuka Territory, Otsuka shall cooperate with Calypte to
transfer its application for marketing approval (if any) in that
Country to Calypte (or its licensee) to the extent local regulations
permit, provided that Calypte shall reimburse Otsuka for its
reasonable direct expenses incurred in making the application.
12. GENERAL PROVISIONS
12.1 Currency.
All payment amounts set forth herein, and all obligations of Calypte
and Otsuka relating to the payment or receipt of money, shall be paid
in United States of America Dollars, except as otherwise provided in
this Agreement.
12.2 Language.
This Agreement is in the English language, which language shall be
controlling in all respects, and all versions hereof in any other
language shall be for accommodation only and shall not be binding
upon the parties hereto. All communications and notices to be made or
given pursuant to this Agreement shall be in the English language.
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<PAGE> 81
12.3 Governing Law.
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of California, United States
of America, without reference to conflict of laws principles, except
that (i) patent rights in connection with the rights granted by
Calypte to Otsuka hereunder shall be governed by the laws of the
country in which such patent rights were obtained and (ii) perfection
of title reserved by Calypte pursuant to Section 3.12 shall be
governed by the laws of Japan.
12.4 Jurisdiction.
Subject to Section 12.5, the parties to this Agreement consent to
personal and exclusive jurisdiction of and exclusive venue in the
state and federal courts located within the Northern District of
California. Otsuka and Calypte hereby expressly consent to (i) the
personal jurisdiction of the federal and state courts within
California, (ii) service of process being effected upon it by
registered mail sent to the address set forth in Section 12.11, and
(iii) the enforcement of a final judgment from such court, following
the conclusion of any appeal of such judgment or expiration of the
time to file such an appeal, whichever is later, in any other
jurisdiction wherein the party against whom enforcement is sought or
any of its assets are present, provided that such enforcement is
conducted in accordance with the laws and procedures of the
jurisdiction in which enforcement is sought.
12.5 Arbitration.
Otsuka and Calypte agree that any dispute or controversy arising out
of, in relation to, or in connection with this Agreement, or the
making, interpretation, construction, performance or breach thereof,
shall be finally settled by
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binding arbitration in San Francisco, California, United States of
America, under the then-current Rules of Arbitration of the
International Chamber of Commerce by three (3) arbitrators appointed
in accordance with such Rules. The arbitral proceedings and all
written evidence shall be in the English language. Any written
evidence originally in a language other than English shall be
submitted in English translation accompanied by the original or a
true copy thereof. The arbitrators may grant injunctive or other
relief in such dispute or controversy. The decision of the
arbitrators shall be final, conclusive and binding on the parties to
the arbitration. After the decision of the arbitrators, judgment may
be entered on that decision in any court of competent jurisdiction.
The parties agree that, any provision of applicable law
notwithstanding, they will not request, and the arbitrators and
courts shall have no authority to award, punitive or exemplary
damages against any party. The costs of the arbitration, including
administrative fees and fees of the arbitrators, shall be shared
equally by the parties. Each party shall bear the cost of its own
attorney's fees and expert witness fees. Notwithstanding the
foregoing, either party shall have the right to apply to any court of
competent jurisdiction for injunctive relief without breach of this
arbitration provision.
12.6 Force Majeure.
Except for obligations relating to the payment of money, neither
party shall be liable for any loss, damage or penalty resulting from
delays or failures in performance of its obligations resulting from
acts of God or other causes beyond its control, including
governmental restrictions and prohibitions; provided that, in the
event of such delay or failure, the affected party will use its
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<PAGE> 83
best efforts, consonant with bound business judgment and to the
extent permitted by law, to correct such delay or failure as
expeditiously as possible; provided further that this Section 12.6
will not extend or delay the time period or periods during which
Calypte is to ship supplies of the Products in accordance with
Section 3 nor affect Otsuka's right to obtain and use the GMP
Procedures under the terms and conditions of this Agreement and the
Escrow Agreement. Each party agrees to notify the other promptly of
any circumstance delaying its performance and to resume performance
as soon thereafter as is reasonably practicable.
12.7 Assignment.
Except as expressly provided in this Agreement with respect to
specified rights and obligations, neither party may assign or
otherwise transfer its rights or obligations under this Agreement to
a third party without the prior written consent of the other party,
which shall not be unreasonably withheld. Any such approved
third-party transferee or assignee must agree to be bound by the
terms and conditions of this Agreement.
12.8 No Third-Party Beneficiaries.
Calypte and Otsuka intend that only Calypte and Otsuka, and Otsuka's
Affiliates and Subdistributors, will benefit from, and are entitled
to enforce the provisions of, this Agreement and that no other
third-party beneficiary is intended under this Agreement.
12.9 Bankruptcy Code.
Calypte and Otsuka acknowledge and agree that this Agreement is
subject to Section 365(n) of Title 11, United States Code (the
"Bankruptcy Code"). If Calypte is a debtor in possession or if a
trustee in bankruptcy is
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<PAGE> 84
appointed for Calypte in a case under the Bankruptcy Code and such
debtor in possession or trustee rejects this Agreement, Otsuka may
elect to treat this Agreement as terminated or to retain its rights
under this Agreement as provided in Section 365(n) of the Bankruptcy
Code. If Otsuka elects to retain its rights under this Agreement, then
upon written request to Calypte or the bankruptcy trustee, Calypte or
such bankruptcy trustee shall not interfere with the rights of Otsuka
as provided in this Agreement.
12.10 Modifications.
No modification to this Agreement, nor any waiver of any rights, shall
be effective unless assented to in writing by the party to be charged,
and the waiver of any breach or default shall not constitute a waiver
of any other right hereunder or any subsequent breach or default.
12.11 Notices.
Any required notices hereunder shall be in writing and shall be deemed
given if delivered (i) in person, or (ii) by prepaid express courier,
or (iii) by registered or certified mail (return receipt requested), at
the address of each party set forth below, or to such other address as
either party may substitute by written notice to the other in the
manner contemplated herein, and shall be deemed served upon receipt or,
if receipt is not accomplished by reason of some fault of the
addressee, when tendered.
If to Calypte: William A. Boeger
President
Calypte Biomedical Corporation
1440 Fourth Street
Berkeley, California 94710 U.S.A.
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<PAGE> 85
If to Otsuka: Hideji Nonomura
Director of Overseas Affairs
Diagnostic Division
Otsuka Pharmaceutical Co., Ltd.
463-10 Kagasuno
Kawauchi-cho, Tokushima Japan
12.12 Descriptive Headings.
The headings of the several sections of this Agreement are intended for
convenience of reference only and are not intended to be a part of or
to affect the meaning or interpretation of this Agreement.
12.13 Entire Agreement.
This Agreement, including the exhibits hereto, constitutes the entire
and exclusive Agreement between the parties hereto with respect to the
subject matter hereof, and supersedes and cancels all previous
registrations, agreements, commitments and writings in respect thereof.
12.14 Severability.
In the event that any provision of this Agreement becomes or is
declared by arbitrators or a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full
force and effect without said provision; provided that no such
severability shall be effective if it materially changes the economic
benefit of this Agreement to either Calypte or Otsuka.
12.15 Legal Expenses.
Except as otherwise expressly provided herein, the prevailing party in
any legal action brought by one party against the other and arising out
of or in connection with this Agreement shall be entitled, in addition
to any other rights and remedies it may have, to reimbursement from the
other party for its expenses, including court costs,
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arbitration expenses and reasonable fees and expenses for attorneys and
other professionals.
12.16 Counterparts.
This Agreement may be executed in counterpart, each of which shall be
deemed an original, but both of which together shall constitute one and
the same instrument.
12.17 Import & Export Controls.
Otsuka understands that Calypte is subject to export regulation by
agencies of the U.S. government, including the U.S. Department of
Commerce, which prohibit export or diversion of certain products and
technology to certain countries ("U.S. Export Regulations"). Calypte
warrants that it is unaware of any U.S. Export Regulations that would
prevent or inhibit it from fulfilling all of its obligations under this
Agreement. Any and all obligations of Calypte to provide the Products,
as well as any technical assistance, and any and all obligations of
Otsuka with respect to obtaining governmental approval or
commercialization of the Products, to the extent affected by U.S.
Export Regulations, will be subject in all respects to such U.S. Export
Regulations, which may from time to time govern the license and
delivery of technology and products abroad by persons subject to the
jurisdiction of the United States, including the Export Administration
Act of 1979, as amended, any successor legislation, and the Export
Administration Regulations issued by the Department of Commerce,
International Trade Administration, or Office of Export Licensing.
Calypte shall notify Otsuka of any export and reexport restrictions set
forth in the export license (if necessary) for every Product shipped to
Otsuka, and Otsuka will comply with such restrictions to the extent
applicable. Without in any way limiting the provisions of
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this Agreement, Otsuka agrees that unless prior authorization is
obtained from the Office of Export Licensing (if necessary), it will
not export, reexport, or transship, directly or indirectly, to country
groups Q, S, W, Y, or Z (as defined in the Export Administration
Regulations), or Afghanistan or the People's Republic of China (which
does not include Taiwan) any of the technical data disclosed to Otsuka
or the direct product of such technical data, if the Export
Administration Regulations prohibit such export, reexport or
transshipment, or otherwise contravene the U.S. Export Regulations in
effect from time to time, to the extent applicable to Otsuka. To the
extent the U.S. Export Regulation described here affect any Countries
in the Otsuka Territory, Otsuka shall be excused from any obligation to
seek regulatory approval for the Products in such Countries and to
commercialize the Products in such Countries.
12.18 Independent Contractors.
The relationship of the parties established by this Agreement is that
of independent contractors, and nothing contained in this Agreement
will be construed (i) to give either party the power to direct or
control the day to day activities of the other or (ii) to constitute
the parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking. Without limiting
Calypte's obligations hereunder, all sales and other agreements between
Otsuka and its customers are Otsuka's exclusive responsibility and will
not affect Calypte's obligations under this Agreement.
12.19 Manufacture in Japan.
Calypte will consider, and discuss in good faith with Otsuka,
permitting Otsuka to manufacture Product(s) on
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behalf of Calypte on mutually agreeable terms and conditions.
IN WITNESS WHEREOF, the undersigned are duly authorized to execute this
Agreement on behalf of Calypte and Otsuka as applicable.
CALYPTE BIOMEDICAL CORPORATION OTSUKA PHARMACEUTICAL CO., LTD.
By: /s/ BILL BOEGER By: /s/ AKIHIKO OTSUKA
-------------------------- ---------------------------
Name: BILL BOEGER Name: AKIHIKO OTSUKA
-------------------------- ---------------------------
Tit1e: PRESIDENT AND CEO Title: PRESIDENT
-------------------------- ---------------------------
Date: AUGUST 4, 1994 Date: AUGUST 7, 1994
-------------------------- ---------------------------
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Exhibit A
List of Calypte Patent Rights
Foreign Patents Issued
Self Contained Multi-Immunoassay Diagnostic Systems- Patent No. 225 771
Self Contained Multi-Immunoassay Diagnostic Systems- Patent No. 88/5777
U.S. Patents Pending
Self Contained Multi-Immunoassay Diagnostic Systems-Serial No. 07/307,361
License Agreements
New York University-Patents Nos. 4,865,966 and 5,122,446
Detection of antibodies to human immunodeficiency virus (HIV) in urine
Repligen Corporation-Patent Application Nos. 836,196; 091,481; and 941,111
HIV-1 gp 160
Cambridge Biotech- Patent No. 4,725,669
"Assay for Detecting Infection by Human T-Cell Lymphotrophic Virus-III"
Stanford University- Patent Nos. 4,237,224; 4,486,464; and 4,740,470
Recombinant DNA
Texas A&M University System- Patents Nos. 4,745,051 and 4,879,236
Recombinant baculovirus expression vector system (BEVS)
<PAGE> 90
EXHIBIT B
E-1 SYSTEM
The Calypte E-1 System and procedures for use are further described in U.S.
Patent Application SELF CONTAINED MULTI-IMMUNOASSAY DIAGNOSTIC SYSTEMS, the
relevant portion of which is attached below.
<PAGE> 91
E-I SYSTEM - PENDING CLAIMS AS OF MAY 12,1994
29. (Thrice amended) A kit f or detecting the presence of a target
human antibody to human immunodeficiency virus (HIV) in a urine sample
comprising
a) a treatment buffer comprising non-immune sera and about 0. 01%
to about 0.5% (w/v) of a plurality of solid phase particles from about 0.5
microns to about 10 microns in diameter, each particle coated with goat,
bovine, or horse immunoglobulin antibodies, the non-immune sera comprising 3%
bovine serum, 3% goat serum, and 3% horse serum;
b) a labelled reagent comprising an enzyme label conjugated to an
anti-human immunoglobulin antibody;
c) a substrate specific for the enzyme label; and
d) a reagent HIV antigen.
34. (Twice amended) A buffer comprising non-immune sera and about 0.01%
to about 0.5% (w/v) of a plurality of solid phase particles from about 0.5
microns to about 10 microns in diameter, each particle coated with goat, bovine,
or horse immunoglobulin antibodies, the non-immune sera comprising 3% bovine
serum, 3% goat serum, and 3% horse serum.
37. (Thrice amended) A method for detecting the presence of a target
human antibody to HIV in a urine sample, said method comprising:
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a) adding a treatment buffer to the sample, which buffer
comprises non-immune sera and 0.01% to 0.5% (w/v) of a plurality of solid phase
particles from about O.5 microns to about 10 microns in diameter, each
particle coated with goat, bovine, or horse immunoglobulin antibodies, the
non-immune sera comprising 3% bovine serum, 3% goat serum, and 3% horse serum;
and
b) contacting the sample with a reagent HIV antigen to form an
antigen-antibody complex containing the target human antibody and the HIV
antigen;
c) contacting the antigen-antibody complex with an enzyme labeled
anti-human immunoglobulin antibody that specifically binds to the target human
antibody; and
d) detecting the presence of the bound label as an indication of
the presence of the target antibody in the urine sample.
40. (Thrice amended) The method of claim 37 wherein the antibody to HIV
specifically binds glycoprotein gp160, gp120 or gp41, or protein p24.
42. (Thrice amended) A method of detecting an HIV antibody in a saliva,
urine, or whole or fractionated blood sample from a human subject, said method
comprising:
a) contacting the sample with a recombinant HIV glycoprotein under
conditions such that the glycoprotein specifically binds to any HIV antibody
present in the sample to form a complex;
<PAGE> 93
b) contacting the complex with an enzyme labeled anti-human
immunoglobulin antibody which specifically binds and labels the complex to form
a labeled complex; and
c) detecting the presence of labeled complex and thereby the
presence of HIV antibody in the sample wherein a treatment buffer is added to
the sample before, or simultaneous with, contacting the sample with the
glycoprotein, said treatment buffer comprising non-immune sera and about 0.01%
to O.5% (w/v) of a plurality of solid phase particles from about 0.5 microns to
about 10 microns in diameter, each particle coated with goat, bovine, or horse
immunoglobulin antibodies, the non-immune sera comprising 3% bovine serum, 3%
goat serum, and 3% horse serum.
48. (Twice amended) A method for detecting in a sample from a human
subject the presence of a target human antibody to HIV which specifically binds
an HIV viral antigen, said method comprising:
a) adding to the sample a treatment buffer comprising non-immune
sera and about 0.01% to about 0.5% (w/v) of a plurality of solid phase particles
from about 0.5 microns to about 10 microns in diameter, each particle coated
with goat, bovine, or horse immunoglobulin antibodies, the non-immune sera
comprising 3% bovine serum, 3% goat serum, and 3% horse serum;
b) using a test strip comprising:
i) a solid support;
ii) said HIV viral antigen bound to a first discrete area on
the solid support;
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iii) a non-target human antibody bound to a second discrete
area on the solid support as a positive control; and
iv) a negative control which will not specifically bind
target human antibody or antihuman antibody bound to a third discrete area on
the solid support;
c) contacting the treated sample with the test strip under
conditions such that the HIV viral antigen bound to the test strip specifically
binds with any target human antibody present in the treated sample;
d) washing the test strip to remove unbound treated sample;
e) contacting the resulting test strip with enzyme labeled
antihuman antibodies which specifically bind to any target human antibodies
bound to, or on, the test strip;
f) detecting the presence of labeled antibodies and thereby the
presence of target human antibodies in the sample; and
g) verifying the correctness of the detection by determining that
the positive control is labeled and the negative control is not labeled.
54. (Twice amended) The method of claim 48 wherein the coated solid
phase particles are prepared using particles individually coated with the
non-immune sera from either goat, bovine, or horse.
<PAGE> 95
55. (Twice amended) A method for detecting in a sample from a human
subject the presence of a target human antibody to HIV which specifically binds
an HIV viral antigen, said method comprising:
a) adding to the sample a treatment buffer comprising non-immune
sera and about 0.01% to about 0.5% (w/v) of a plurality of solid phase particles
from about 0.5 microns to about 10 microns in diameter, each particle coated
with goat, bovine, or horse immunoglobulin antibodies, the non-immune sera
comprising 3% bovine serum, 3% goat serum, and 3% horse serum;
b) using a test strip comprising:
i) wells used as a solid support;
ii) said HIV viral antigen bound to discrete areas on the
solid support;
c) contacting the treated sample with the test strip under
conditions such that the HIV viral antigen bound to the test strip specifically
binds with any target human antibody present in the treated sample;
d) washing the test strip to remove unbound treated sample;
e) contacting the resulting test strip with enzyme labeled
antihuman antibodies which specifically bind to any target human antibodies
bound to, or on, the test strip; and
f) detecting the presence of labeled antibodies and thereby the
presence of target human antibodies in the sample
<PAGE> 96
58. The method of claim 55 wherein the HIV viral antigen is
recombinant gp 160.
<PAGE> 97
EXHIBIT C
PART NUMBER MASTER LIST
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PART NUMBER TITLE OF DOCUMENT
================================================================================
<S> <C>
180000 Preparation of the Master Cell Seed Bank (MCSB)
- --------------------------------------------------------------------------------
180001 Preparation of the Working Cell Seed Bank (WCSB)
- --------------------------------------------------------------------------------
180002 Preparation of the Master Virus Seed Bank (MVSB)
- --------------------------------------------------------------------------------
180003 Preparation of the Working Virus Seed Bank (WVSB)
- --------------------------------------------------------------------------------
200000 Preparation of 1OX TBS, 1% azide
- --------------------------------------------------------------------------------
200002 Preparation of 1% Bovine lgG Coated Beads
- --------------------------------------------------------------------------------
200003 Preparation of 1 % Equine lgG Coated Beads
- --------------------------------------------------------------------------------
200004 Preparation of 1% Goat IgG Coated Beads
- --------------------------------------------------------------------------------
200005 Preparation of BSA-TBS, 0.1% azide
- --------------------------------------------------------------------------------
200006 Preparation of Positive Pool Stock
- --------------------------------------------------------------------------------
200007 Preparation of Grace's Complete Media with 10% FBS
- --------------------------------------------------------------------------------
200008 Preparation of Deionized 8M Urea
- --------------------------------------------------------------------------------
200009 Preparation of Lysis Buffer
- --------------------------------------------------------------------------------
200010 Preparation of Extraction Buffer
- --------------------------------------------------------------------------------
200011 Preparation of Lentil Lectin Buffer
- --------------------------------------------------------------------------------
200013 Preparation of Gel Filtration Buffer
- --------------------------------------------------------------------------------
200015 Preparation of Lentil Lectin Regeneration Buffer A
- --------------------------------------------------------------------------------
200016 Preparation of Lentil Lectin Regeration Buffer B
- --------------------------------------------------------------------------------
200017 Preparation of Lentil Lectin Storage Buffer
- --------------------------------------------------------------------------------
200018 Preparation of Sartocon Cleaning Solution
- --------------------------------------------------------------------------------
200020 Preparation of Buffer Exchanged gp160 Urea Extract
- --------------------------------------------------------------------------------
200021 Preparation of Dialyzed gp16O Lentil Lectin Pool
- --------------------------------------------------------------------------------
200022 Preparation of gp160 Fraction Pool
- --------------------------------------------------------------------------------
200023 Preparation of gp160 Cell Paste
- --------------------------------------------------------------------------------
200024 Preparation of Phosphate-EDTA Buffer
- --------------------------------------------------------------------------------
200025 Preparation of 2 mg/ml chymostatin
- --------------------------------------------------------------------------------
200026 Expansion of Sf9 Cells for the production of gp160
- --------------------------------------------------------------------------------
200027 Heat Inactivation of Fetal Bovine Serum
- --------------------------------------------------------------------------------
200028 Preparation of Wash Buffer
- --------------------------------------------------------------------------------
</TABLE>
3/28/94
<PAGE> 98
PART NUMBER MASTER LIST
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PART NUMBER TITLE OF DOCUMENT
================================================================================
<S> <C>
200029 Preparation of 0.15M NaCl
- --------------------------------------------------------------------------------
200030 Preparation of 0.5M EDTA
- --------------------------------------------------------------------------------
200031 Preparation of Phosphate Flushing Buffer
- --------------------------------------------------------------------------------
300001 Preparation of Conjugate Diluent
- --------------------------------------------------------------------------------
300002 Preparation of Negative Control
- --------------------------------------------------------------------------------
300003 Preparation of Positive Control
- --------------------------------------------------------------------------------
300004 Preparation of Sample Buffer
- --------------------------------------------------------------------------------
300005 Preparation of Substrate Diluent
- --------------------------------------------------------------------------------
300006 Preparation of Stop Solution
- --------------------------------------------------------------------------------
300007 Preparation of Wash Solution
- --------------------------------------------------------------------------------
300009 Preparation of Conjugate Concentrate
- --------------------------------------------------------------------------------
300010 Final Processing of gp16O
- --------------------------------------------------------------------------------
300011 Combining of gp160 Lots
- --------------------------------------------------------------------------------
400001 Filling of Conjugate Concentrate
- --------------------------------------------------------------------------------
400002 Fillinq of Conjugate Diluent
- --------------------------------------------------------------------------------
400003 Filling of Negative Control
- --------------------------------------------------------------------------------
400004 Filling of Positive Control
- --------------------------------------------------------------------------------
400005 Filling of Sample Buffer
- --------------------------------------------------------------------------------
400007 Filling of Substrate Diluent
- --------------------------------------------------------------------------------
400008 Filling of Stop Solution
- --------------------------------------------------------------------------------
400009 Fillinq of Wash Solution
- --------------------------------------------------------------------------------
500000 Coating, Packaging and Labeling of Microwell Strips
- --------------------------------------------------------------------------------
500001 Labeling of Conjugate Concentrate
- --------------------------------------------------------------------------------
500002 Labeling of Conjugate Diluent
- --------------------------------------------------------------------------------
500003 Labeling of Negative Control
- --------------------------------------------------------------------------------
500004 Labeling of Positive Control
- --------------------------------------------------------------------------------
</TABLE>
3/28/94
<PAGE> 99
PART NUMBER MASTER LIST
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PART NUMBER TITLE OF DOCUMENT
================================================================================
<S> <C>
500005 Labeling of Sample Buffer
- --------------------------------------------------------------------------------
500006 Packaging and Labeling of Substrate tablets (25)
- --------------------------------------------------------------------------------
500007 Labeling of Substrate Diluent
- --------------------------------------------------------------------------------
500008 Labeling of Stop Solution
- --------------------------------------------------------------------------------
500009 Labeling of Wash Solution
- --------------------------------------------------------------------------------
500013 Packaging and Labeling of Substrate tablets (15)
- --------------------------------------------------------------------------------
600000 Final Product Packaging (5 plate), HIV-1 Urine EIA
- --------------------------------------------------------------------------------
600001 Final Product Packaging (2 plate), HIV-1 Urine EIA
- --------------------------------------------------------------------------------
</TABLE>
3/28/94
<PAGE> 100
EXHIBIT D
ESCROW AGREEMENT
(To be supplied at a later date)
<PAGE> 101
EXHIBIT E
SPECIFICATIONS
When performed to the manufacturer's instructions, the Product will meet or
exceed the assay validity criteria and the expected performance claims which are
printed in the then current Package Insert for the duration of the Product's
life as indicated by the expiration date on the Product labels.
Calypte will provide to Otsuka the Package Insert as approved by the FDA and any
subsequent replacements within 30 days of its approval by the FDA.
In addition, the Product will meet the following criteria:
O.D.
Negative Control: The average O.D. (n=5) tested has to be less than
0.18.
Positive Control: The average O.D. (n=5) tested has to be within the
range of the mean +/- 20% (1.546-2.319).
Normal Urine: The average O.D. (n=5) tested has to be less than
cutoff point (negative control O.D. + 0.18).
P-Control: The average O.D. (n=5) tested has to be within the
range of the mean +/- 30% (0.914-1.699).
Both Otsuka and Calypte must use the same supply of the Normal Urine and
P-Control in order to verify the specification.
C.V.%
Positive Control: The C.V.(%) of the O.D. (n=5) tested has to be less
than 15.0%
P-Control: The C.V.(%) of the O.D. (n=5) tested has to be less
than 15.0%.
SAMPLING FREQUENCY
Kits corresponding to 2-5% of the total number of kits (each lot)
received by or on behalf of Otsuka every time will be selected randomly
and tested. All the test results of each kit selected have to clear the
specifications.
<PAGE> 102
-2-
APPEARANCE OF KIT
The appearance of all the kit contents such as vials and labels including kit
boxes must show no evidence of leakage, damage or obvious cosmetic defects.
COMPONENTS
Components will be tested and evaluated according to the performance criteria
described above.
CALYPTE BIOMEDICAL OTSUKA PHARMACEUTICAL CO.
By: By:
/s/ Bill Beager /s/ Hideji Nononura
------------------------ --------------------------
Date: Date:
8-4-94 8-7-94
------------------------ ------------------------
<PAGE> 103
EXHIBIT F
CALYPTE MANUFACTURING CAPACITY
1. Berkeley Manufacturing Facility
Maximum capacity is [ * ] plates or [ * ] tests per month
2. Harbor Bay Manufacturing Facility
Maximum capacity is [ * ] plates or [ * ] tests per month
* Confidential portion has been omitted
and filed separately with the Commission
<PAGE> 1
Exhibit 10.28
DISTRIBUTION AGREEMENT
THIS AGREEMENT is entered into by and between CALYPTE BIOMEDICAL
CORPORATION ("Calypte"), a California corporation, and SERADYN, INC.,
("Seradyn"), a Delaware corporation.
RECITALS
A. Calypte develops and manufactures various products designed for
use in the medical and scientific research fields. Specifically, Calypte has
developed and manufactured products for the detection of antibodies to HIV-1 in
urine, which products are more particularly described in the attached Schedule I
(the "Products").
B. Calypte desires to appoint Seradyn as its Exclusive Distributor
(as hereinafter defined) for the Products in the countries designated in the
attached Schedule 2 (the "Territory") and Seradyn desires to be appointed as
Calypte's Exclusive Distributor of the Products, all in accordance with and
subject to the terms and conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises and covenants of the parties contained herein, and each act done
pursuant thereto, it is hereby agreed as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
<PAGE> 2
(a) APPROVED. The term "Approved" shall mean local regulatory approval
for the Products, which permits commercial sale of same, or in the absence of
such approval, the ability to legally market the Products in the applicable
area.
(b) EXCLUSIVE DISTRIBUTOR. The term "Exclusive Distributor" shall mean
that no other distributor or third person or entity, regardless of location of
principal offices, shall have any rights to commercially transfer or otherwise
distribute the Products for'sale in the Territory.
(c) FDA. The term "FDA" shall mean the Food and Drug Administration of
the United States Department of Health and Human Services.
(d) NIH. The term "NIH" shall mean the National Institute of Health,
or any other governmental agency which regulates the commercial sale of the
Products within the Territory.
(e) PROPRIETARY INFORMATION. The term "Proprietary Information" means
the confidential information owned or controlled by Calypte at any time during
the term of this Agreement relating to the Products and the confidential
information owned or controlled by Seradyn at any time during the term of this
Agreement relating to its business or products, the use and disclosure of which
is discussed in Section 11 of this Agreement.
(f) CALYPTE TRADEMARKS. The term "Calypte Trademarks" means the
registered or unregistered trademarks and service marks of Calypte relating to
or concerning the Product that Calypte has the right to use listed on the
attached Schedule 3 and any such trademarks or service marks acquired by Calypte
at any time during the term of this Agreement.
(g) SERADYN TRADEMARKS. The term "Seradyn Trademarks" means the
registered or unregistered trademarks and service marks of Seradyn relating to
or concerning the Product
2
<PAGE> 3
that Seradyn has the right to use listed on the attached Schedule 4 and any such
trademarks or service marks acquired by Seradyn at any time during the term of
this Agreement.
(h) REGION. The term "Region" means any one of the country groups
listed in the attached Schedule 6.
2. TERMS OF DISTRIBUTORSHIP. Subject to the terms and conditions of
this Agreement, Calypte hereby designates and appoints Seradyn as its Exclusive
Distributor in the Territory. Seradyn shall not knowingly sell or transfer
Products purchased hereunder to any customer or distributor intending to use or
sell the Products outside of the Territory and Seradyn shall use its
commercially reasonable efforts in attempting to ensure that no party to whom
Seradyn sells or transfers Products will resell such Products outside of the
Territory. Notwithstanding the appointment by Calypte of Seradyn as the
Exclusive Distributor in the Territory, Calypte retains the right to sell the
Products only to those specific customers listed in the attached Schedule 5,
and to distributors of consumer-targeted home use testing kits who may resell
the Products to retailers or customers for home use only.
In connection with its distribution of the Products, Seradyn shall have
the right to use the Proprietary Information of Calypte and to use the Calypte
and Seradyn Trademarks on and in connection with the sale of the Products. The
parties acknowledge and agree that the Products to be sold by Seradyn will be
co-branded by utilizing both the Calypte Trademarks and the Seradyn Trademarks.
Seradyn shall have the sole right to determine the sale price,
discounts and any other terms and conditions for its sale of the Products.
Subject to the limitations contained herein, Seradyn shall also control the
manner and methods of its marketing, distributing and selling of
3
<PAGE> 4
the Products within the Territory, provided that such manner and methods in no
way portray the Products as low-cost or of inferior quality.
During the term of this Agreement, Seradyn shall have the right of
first refusal to market, distribute and sell any improvements developed by
Calypte with respect to the Products and any similar products developed by
Calypte, including, without limitation, products for the detection of HERVs and
a urine-based sexually transmitted disease (STD) panel. In such event, the
parties will negotiate in good faith as to the pricing and quantities of such
improved and similar Products to be purchased by Seradyn, but otherwise the
distribution of such Products shall be in accordance with the terms and
conditions of this Agreement. If the parties fail to agree on the pricing and
quantity terms within ninety (90) days after the commencement of negotiations,
Calypte will then be free to conclude an arrangement with a third party,
provided that the terms of such arrangement are demonstrably more advantageous
to Calypte than those proposed by Seradyn. As used herein, an "improvement" or
an "improved" Product shall mean any modification to the Product which
effectively replaces the original version and a "similar" Product shall mean any
in vitro diagnostic assay intended for use in a professional laboratory setting
for the detection of similar disease states in similar patient samples as the
Product.
Except for the purposes set forth herein, nothing in this Agreement
shall be deemed to constitute a partnership between the parties hereto or be
deemed to constitute Seradyn as an agent or employee for Calypte for any
purpose, including the right to contract in the name or for the account of
Calypte nor to assume or create any liability or obligation of any kind, express
or implied, on behalf of Calypte in any way or for any purpose. The relationship
4
<PAGE> 5
between the parties is that of independent contractors in which Calypte is the
vendor and Seradyn is the vendee.
3. TERM. Unless sooner terminated or unless renewed as provided
herein, this Agreement shall terminate on December 31, 1998. Unless sooner
terminated, Seradyn shall have the right to renew this Agreement for an
additional term of two (2) years following the end of the initial term and each
renewal term thereafter, provided: (a) Seradyn meets or exceeds the applicable
sales minima detailed in the attached Schedule 6; and (b) Seradyn provides
Calypte of its intention to renew the Agreement no less than ninety (90) days
prior to the date the Agreement would otherwise terminate.
4. COVENANTS OF SERADYN. Seradyn covenants and agrees that:
(a) Subject to the Products obtaining Approved status in each
Region of the Territory described in the attached Schedule 6 and the other terms
contained in Schedule 6 as to Western Europe, Seradyn hereby agrees to purchase
the minimum quantities of the Products specified in Schedule 6 in the first
three applicable years following the dates on which the Products obtain Approved
status in more than fifty percent (50%) of the countries included in a
particular Region. In the event Seradyn fails in any applicable year to purchase
the minimum quantities set forth in Schedule 6 for any particular Region, then
Calypte may, within thirty (30) days of the end of such year, give Seradyn
written notice that unless Seradyn purchases additional Products sufficient to
meet the applicable minimum amount for such year, then the distribution
relationship provided in this Agreement shall cease to be exclusive only for the
particular Region with respect to which the minimum amounts were not purchased.
If, within thirty (30) days after receiving such notice, Seradyn does not place
a purchase order for
5
<PAGE> 6
a sufficient quantity of Products to meet the applicable minimum, then Calypte
may give Seradyn notice that this Agreement is non-exclusive for such Region. In
the event that Seradyn's shortfall for such Region exceeds fifty percent (50%)
of the minimum amount in the first applicable year, or thirty-three percent (33
%) of the minimum amount in the second and third applicable years, then Calypte
may give Seradyn written notice that this Agreement is either non-exclusive or
terminated, at Calypte's option, only for the particular Region with respect to
which the minimum amounts were not purchased. The foregoing shall be the sole
remedy of Calypte in the event Seradyn fails to meet the applicable minimum and
Seradyn will not be liable to Calypte for any damages.
(b) Seradyn agrees to maintain an adequate and competent staff of
sales and technical support personnel.
(c) Seradyn will submit to Calypte for prior approval, which
approval shall not be unreasonably withheld, advertisements, brochures and other
materials that are used only in connection with the distribution of the
Products, regardless of whether or not Calypte Trademarks are actually displayed
on such materials.
(d) Seradyn agrees to maintain an inventory of the Products
sufficient to satisfy the reasonably anticipated demand of Seradyn's customers.
(e) Seradyn shall notify Calypte immediately in writing if Seradyn
is notified or otherwise becomes aware of any defect or condition in the
Products, the packaging of the Products, or the labeling which renders or may
render the Products in violation of any laws, rules or regulations.
6
<PAGE> 7
(f) During the term of this Agreement, provided, Calypte provides
Seradyn with an uninterrupted supply of the Products in the quantities that
Seradyn may reasonably require, Seradyn shall not market, distribute or sell in
the Territory any product manufactured or to be manufactured by any person other
than Calypte, that consists of a urine or saliva based test for the detection of
antibodies to HIV-1.
(g) Seradyn shall utilize the quality control procedures provided
to Seradyn by Calypte to qualify incoming Products to Seradyn's facility.
(h) At Calypte's expense, Seradyn undertakes to assist Calypte in
the registration of the Products with the regulatory authorities in the
Territory and to assist in securing such licenses and registrations which may be
required in connection with the importation and sale of the Products in the
Territory. All such registrations shall be in the name of Calypte. Seradyn shall
provide to Calypte detailed information on the regulatory requirements of each
country in the Territory within nine (9) months of execution of this Agreement.
(i) Seradyn will respect Calypte's rights in connection with the
Products (including but not limited to Calypte's patents, trademarks, and
copyrights), comply with all local laws and regulations with respect thereof,
and assist Calypte in taking any steps necessary to defend such rights. Any
reasonable expenses incurred under this paragraph by Seradyn, and which are
pre-approved by Calypte, shall be reimbursed by Calypte.
(j) Seradyn will acknowledge at all times Calypte's exclusive
right, title, and interest in and to the Calypte Trademarks; and Seradyn will
not at any time do or cause to be done any act or any thing contesting or in any
way impairing or tending to impair any part of such right, title and interest.
In connection with any reference to the Calypte Trademarks,
7
<PAGE> 8
Seradyn shall not in any manner represent that it has ownership interest in the
trademarks or registration thereof, but shall clearly indicate Calypte's
ownership of the Calypte Trademarks.
(k) Seradyn shall use its reasonable efforts to ensure that
Products are sold only to parties which are permitted to use such Products by
the local authorities.
(l) Seradyn shall maintain the capability of effectively
undertaking and documenting a Product recall if so ordered by Calypte or other
accompanying authority, all at Calypte's cost.
(m) Seradyn shall provide to Calypte on a quarterly basis a
breakdown of its Product sales by Region. Seradyn shall permit Calypte's
verification of same at Seradyn's facility during normal business hours and upon
thirty (30) days' advance notice.
5. COVENANTS OF CALYPTE. Calypte covenants and agrees that:
(a) Subject to the provisions of Section 4(a) hereof, Calypte will
not appoint any other person or entity to distribute or sell the Products or
permit anyone to private label the Products for sale in the Territory. Calypte
itself will not distribute or sell the Products, except as permitted in Section
2 hereof.
(b) Subject to the provisions of Sections 6(a) and 12(k) and
Calypte obtaining regulatory approval to enable Calypte to legally sell the
Products, Calypte will provide Seradyn with an uninterrupted supply of the
Products in the quantities that Seradyn may reasonably require.
(c) The Products will be fully assembled and ready for sale upon
delivery to Seradyn, including, but not limited to, bearing both the Calypte
Trademarks and the Seradyn Trademarks in the manner agreed upon by the parties,
and meeting other special needs that
8
<PAGE> 9
Seradyn may reasonably identify upon prior notice to Calypte. Calypte will use
its best efforts to ensure that all Products comply with all legal and
regulatory requirements. The shelf life of the Products will be mutually
acceptable to the parties. Upon prior notification to Calypte, Calypte shall
permit Seradyn to inspect Calypte's facilities, at reasonable intervals, during
normal business hours in order to determine Calypte's adherence to quality and
regulatory compliance standards.
(d) Calypte shall apply for, diligently prosecute, and maintain at
all times such regulatory approvals, permissions, licenses and authorities as
may be in Calypte's opinion, reasonably required to permit the lawful sale and
distribution of the Products in the Territory, other than special approvals
required in order to utilize the Seradyn Trademarks.
(e) Calypte shall furnish Seradyn will copies of all
correspondence, criticisms and complaints pertaining to Products sold to or by
Seradyn, received from customers, end-users or governmental regulators.
(f) Calypte will forward to Seradyn its customer list for the
Products and all inquiries it has received since it commenced production of the
Products and all inquiries it will receive from potential customers regarding
the sale, use and distribution of the Products in the Territory.
(g) Calypte will provide to Seradyn such sales, marketing and
technical training as may be reasonably required, at Seradyn's principal
facility, but not to exceed one week per year of this Agreement. Costs incurred
in such training including travel, accommodation, and a reasonable amount of
Products shall be borne by Calypte. Telephone technical support shall be made
available to Seradyn during Calypte's normal business hours.
9
<PAGE> 10
(h) Calypte will acknowledge at all times Seradyn's exclusive
right, title, and interest in and to the Seradyn Trademarks; and Calypte will
not at any time do or cause to be done any act or any thing contesting or in any
way impairing or tending to impair any part of such right, title and interest.
In connection with any reference to the Seradyn Trademarks, Calypte shall not in
any manner represent that it has ownership interest in the trademarks or
registration thereof, but shall clearly indicate Seradyn's ownership of the
Seradyn Trademarks.
6. PURCHASE ORDERS; PRICING; PAYMENT; AND INSPECTION.
(a) PURCHASE ORDERS AND FORECASTS. Upon execution of this
Agreement, and again six months after execution, Seradyn shall issue to Calypte
a prepaid written purchase order for Product valued at no less than US
[ * ] per order. Calypte shall ship Product against these orders in
accordance with the delivery schedule supplied to Calypte by Seradyn. After
fulfillment of each of these two special orders, prior to the first day of each
calendar quarter, Seradyn shall provide to Calypte a binding purchase order for
its requirements of the Products in such calendar quarter and a good faith
non-binding estimate of the quantity of Products Seradyn will order for delivery
in the four calendar quarters following the calendar quarter to which the
purchase order is applicable (such estimate for the first quarter following the
calendar quarter to which the purchaser order is applicable being referred to as
the "Projected Purchase Order").
(b) TERMS OF PURCHASE ORDERS. Seradyn shall from time to time
place a firm written purchase order for Products, as provided in Section 6(a)
above, in accordance with the following requirements:
* Confidential portion has been omitted
and filed separately with the Commission
10
<PAGE> 11
(i) The original signed purchase order must be received by
Calypte not less than forty-five (45) days prior to the date requested therein
for delivery of the o rdered Products to Seradyn's designated shipper;
(ii) The quantity of Products requested to be delivered in
any calendar quarter shall not be more than 150% of the Projected Purchase Order
for such quarter, except with Calypte's prior written approval;
(iii) The price of Products ordered under the purchase order
shall be as determined under Section 6(c) below; and
(iv) The order may be submitted on Seradyn's standard
purchase order form, and the terms of such form shall be binding on Calypte,
except that any terms inconsistent with the terms of this Agreement shall not be
applicable.
(c) PRICING. The prices which Calypte shall charge to Seradyn for
the Products in the initial term of this Agreement shall be the prices set forth
in the attached Schedule 7. In the event this Agreement is renewed by Seradyn in
accordance with Section 3 hereof, the parties will negotiate in good faith as to
the prices to be charged by Calypte for the Products in the applicable renewal
term. However, if the parties have not agreed on the prices by the beginning of
the renewal term, the prices to be charged by Calypte in the applicable renewal
term shall be based on: (i) the increase in the general Wholesale Price Index,
as published and updated from time to time by the Bureau of Labor Statistics,
for the preceding twenty-four (24) month period for which statistics are
available as of the last day of November of each year; plus (ii) any increase in
the cost of the Products necessitated by complying with applicable laws and
regulations.
11
<PAGE> 12
Notwithstanding anything contained herein to the contrary, Calypte
agrees that the prices for the Products shall at all times be the lowest price
then offered by Calypte to any other distributor or sales representative of the
Products within the Territory, if this Agreement has been converted as to any
particular Region in the Territory to a non-exclusive distributorship in
accordance with Section 4(a). In the event Calypte makes any such sale of the
Products at a lower price than the price provided for in this Agreement, then
the price for the Products to Seradyn shall immediately be reduced to such lower
price, with rebates by Calypte to Seradyn for any price differential Seradyn
paid from the date such lower price was offered to another person or entity
until the date such price went into effect for Seradyn. The parties recognize
that prices may also need to be adjusted downward to enable Seradyn to sell the
Products competitively within particular countries in the Regions.
(d) PAYMENT. After Seradyn has received a shipment of the Products and
provided that the Products have passed Seradyn's initial inspections and conform
to specifications, Seradyn shall pay Calypte for such shipment within thirty
(30) days after receipt of an invoice from Calypte. Any invoice shall specify
the quantities of the Products that were delivered and the number of Seradyn's
purchase order. In the event that Seradyn fails on more than three occasions to
make payment within such thirty (30) day period, Calypte may require alternative
terms of payment upon twenty (20) days' prior written notice to Seradyn.
(e) SHIPPING TERMS. All shipments of Products to Seradyn shall be made
F.O.B. Calypte's facility. Seradyn shall be responsible for the payment of all
shipping and transportation costs as well as all tariffs, customs duties and
charges required to be paid in order to effect delivery to Seradyn. During the
period in which shipment is in transit, all risk
12
<PAGE> 13
of loss or damage to the Products shall be borne by Seradyn and title shall pass
to Seradyn at such time as the shipment is delivered to Seradyn's shipping
carrier at Calypte's facility. Each lot of Products shall be inspected and
tested by Calypte prior to shipment, and a copy of the certificate of analysis
in the form attached hereto in Schedule 8 shall be forwarded with each shipment.
The quality control protocol of Calypte is attached hereto in Schedule 9.
(f) INSPECTION OF PRODUCTS; WARRANTY.
(i) Seradyn shall inspect and test samples of the Product
within fourteen (14) working days after receipt and any non-conformance to
Calypte performance specifications shall be promptly reported to Calypte.
Thereafter, Seradyn shall have the right to conduct inspections and sample
testing on the Products during the shelf life of each Product, and to reject any
portion thereof which does not conform to Calypte performance specifications set
forth in the package insert for each Product. Any rejection of non-conforming
Products shall be effected by written notice to Calypte. Such notice shall
specify with particularity the nature of the non-conformance, and Seradyn will
allow Calypte to examine such allegedly non-conforming Products. In any event,
Seradyn will notify Calypte of any Product non-conformance no later than
fourteen (14) working days prior to the expiration of the shelf life of the
applicable Products. Calypte's liability with respect to non-conforming
Products shall be limited to, at Seradyn's option, either replacing the rejected
Products in a prompt manner or affording Seradyn an account credit in the amount
of the purchase price of the rejected Products. Non-conforming Products shall
either be returned to Calypte or destroyed by Seradyn, at the option and cost of
Calypte. In the event that Products fail to conform to specifications more than
two (2) times within any six (6) month period,
13
<PAGE> 14
Seradyn may, at its option, cancel purchase orders existing at the time it gives
Calypte notice of non-conforming Products without any liability to Calypte.
(ii) In the event that one or more Products which have been
accepted by Seradyn and sold to a customer are claimed to have failed, prior to
the expiration date thereof to conform to Calypte performance specifications
set forth in the package insert, then either the customer or Seradyn may deliver
the allegedly non-conforming Products to Calypte for inspection. If the Products
failed to perform in conformance with specifications due to a manufacturing
defect or for any other reason caused by Calypte, then Calypte, at the
discretion of Seradyn, will either promptly replace the non-conforming Products
and will reimburse the costs of shipping the non-conforming Products to Calypte,
or will refund the amount of the purchase price of the non-conforming Products.
In the event that there is a claim that Products have failed to perform
in conformance with specifications pursuant to clauses (i) and (ii) above, and
Calypte's tests prior to initial shipment of the Products to Seradyn show that
there was no non-conformance and other customers who have received the same lot
number of the Products have not claimed non-conformance, then the parties agree
to submit the allegedly non-conforming Product to an independent party for
testing to determine whether the Product is non-conforming. In addition, if the
Products are found to be non-conforming, then, at either party's option, an
independent audit of Seradyn's product storage and handling procedures may be
conducted to determine if Seradyn may have caused the non-conformance.
14
<PAGE> 15
(iv) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT, CALYPTE MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING FITNESS FOR A PARTICULAR PURPOSE, OR ANY OTHER MATTER, WHICH
RESPECT TO THE PRODUCTS. In no event will Calypte be liable for incidental,
consequential or punitive damages resulting from the failure of the Products to
meet specifications. Calypte warrants that at the time that the Products leave
Calypte's possession, the Products will be in conformity with Calypte's
established specifications for the Products.
7. REPRESENTATIONS AND WARRANTIES OF CALYPTE. Calypte hereby warrants
and represents to Seradyn that:
(a) ORGANIZATION AND CORPORATE AUTHORITY. Calypte is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full corporate power and authority to
enter into this Agreement.
(b) AUTHORIZATION. This Agreement has been duly and validly authorized,
executed and delivered by Calypte and constitutes a valid and binding agreement
of Calypte, enforceable against it in accordance with its terms.
(c) NO BREACH OR DEFAULT. The transactions contemplated by this
Agreement will not result in a breach of or result under any contract,
agreement, license or instrument by which Calypte or its assets are bound or
affected or any court or administrative decree, judgment, ruling or stipulation
to which Calypte is a party or by which it or its assets are bound or affected.
15
<PAGE> 16
(d) TITLE; NO INFRINGEMENT. Calypte has and will have full rights in
and title to the Products, the Calypte Trademarks and its Proprietary
Information, free and clear of any lien, encumbrance or claim of any kind.
Calypte is not knowingly infringing upon the rights of any person under or with
respect to any patent, trademark, service mark, trade name, trade secret,
copyright, or other right relating to the Products.
(e) PRODUCTION CAPACITY AND SUPPLIERS. Calypte possesses the necessary
and appropriate production capacity and the necessary contractual commitments
from suppliers to supply Seradyn with the quantities of the Products as Seradyn
may reasonably require.
(f) COMPLIANCE WITH LAWS. All Products delivered to Seradyn hereunder
shall be manufactured, packed, stored and shipped in accordance with current
Good Manufacturing Practices of the country in which the Products are so
manufactured, packed, stored and shipped. All appropriate approvals of and
registrations with the U.S. Food & Drug Administration ("FDA") and other foreign
or domestic regulatory agencies will be obtained and will remain in full force
and effect. All Products will be free from defects in material or workmanship,
will not be adulterated or misbranded within the meaning of the Food, Drug and
Cosmetic Act or other foreign laws, as the same may be applicable, and will have
been manufactured in accordance with Calypte's specifications as described in
the package insert for the Products. Calypte has not been notified by the FDA or
any other regulatory agency of problems or possible problems with the Products
and Calypte will notify Seradyn if any such communications are received. If
Calypte fails to receive FDA approval for the Products or fails to maintain FDA
registration, then Seradyn may terminate this Agreement only as to the United
States upon notice to Calypte.
16
<PAGE> 17
(g) REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. Calypte covenants
that the representations and warranties contained in this Agreement are true and
accurate as of the date of this Agreement and shall be true and accurate
throughout the term of this Agreement and any renewal periods.
8. REPRESENTATIONS AND WARRANTIES OF SERADYN. Seradyn hereby warrants
and represents to Calypte that:
(a) ORGANIZATION AND CORPORATE AUTHORITY. Seradyn is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full corporate power and authority to
enter into this Agreement.
(b) AUTHORIZATION. This Agreement has been duly and validly authorized,
executed and delivered by Seradyn and constitutes a valid and binding agreement
of Seradyn, enforceable against it in accordance with its terms.
(c) NO BREACH OR DEFAULT. The transactions contemplated by this
Agreement will not result in a breach of or default under any contract,
agreement, license or instrument by which Seradyn or its assets are bound or
affected or any court or administrative decree, judgment, ruling or stipulation
to which Seradyn is a party or by which it or its assets are bound or affected.
(d) TITLE: NO INFRINGEMENT. Seradyn has and will have full rights in
and title to the Seradyn Trademarks and its Proprietary Information, free and
clear of any lien, encumbrance or claim of any kind. Seradyn is not infringing
upon the rights of any person under or with respect to any patent, trademark,
service mark, trade name, trade secret, copyright, or other right relating to
the Seradyn Trademarks or its Proprietary Information.
17
<PAGE> 18
(e) REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. Seradyn covenants
that the representations and warranties contained in this Agreement are true and
accurate as of the date of this Agreement and shall be true and accurate
throughout the term of this Agreement and any renewal periods.
9. TERMINATION.
(a) Notwithstanding the term of this Agreement, either party will have
the right to terminate this Agreement, based on a default by the other party in
its performance of its obligations under this Agreement, except that with
respect to Seradyn's performance of the terms of Section 4(a) hereof, Calypte
shall only have the remedies set forth herein. Notice of any such default shall
be given to the defaulting party and shall specifically identify the nature of
the default. If the default has not been remedied within a ninety (90) day
period after notice has been given, then this Agreement may be immediately
terminated by the non-defaulting party. The assignment by either party for the
benefit of creditors, the initiation of proceedings in bankruptcy, or the
appointment of a receiver for either party shall be construed to be a default
for purposes of this Section.
(b) Upon termination or expiration of this Agreement for any reason:
(i) At Calypte's option, Seradyn may sell its remaining inventory
of the Products within the Territory or Seradyn shall make available to Calypte
or its designee, all current stocks of the Products held by Seradyn with a
minimum of fourth months' shelf life remaining, at the price charged by Calypte
to Seradyn. Any such delivery shall be F.O.B. Seradyn's facility. In any event,
Seradyn shall have the right to sell any Products with less than four months'
shelf life remaining.
18
<PAGE> 19
(ii) Neither party will be liable to the other party for any
compensation based solely on the termination of this Agreement by a party or on
Seradyn's failure to renew this Agreement.
(iii) All purchase orders then in effect shall be deemed cancelled
and the parties shall have no further obligations to one another, except that
the provisions of Section 6(f), 1O and 11 will survive any termination or
expiration of this Agreement.
10. INDEMNIFICATION. Calypte hereby unconditionally agrees to
indemnify and hold Seradyn harmless from and against any and all liabilities,
losses, damages, and claims of whatever kind or nature, including, without
limitation, reasonable attorneys' and paralegals' fees, costs and expenses,
incurred by Seradyn arising out of or in connection with any breach by Calypte
of the obligations, covenants, representations or warranties of Calypte pursuant
to this Agreement or any infringement by the Products upon the rights of any
person under or with respect to any patent, trademark, service mark, trade name,
trade secret, copyright, or other right relating to the Products. Seradyn hereby
unconditionally agrees to indemnify and hold Calypte harmless from and against
any and all liabilities, losses, damages, and claims of whatever kind or nature,
including, without limitation, reasonable attorneys' and paralegals' fees, costs
and expenses, incurred by Calypte arising out of or in connection with any
breach by Seradyn of the obligations, covenants, representations or warranties
of Seradyn pursuant to this Agreement.
The indemnified party shall promptly notify the indemnifying party upon
receipt of any claim or demand which has given or could give rise to a right of
indemnification under this Agreement. If such claim or demand is one asserted by
a third party, the indemnifying party
19
<PAGE> 20
shall have the right to employ such counsel of its choice as is reasonably
acceptable to the indemnified party to defend such claim or demand; provided,
however, that the indemnifying party shall not settle such claim or demand
without the consent of the indemnified party. The indemnified party shall
participate at the cost of the indemnifying party in the defense of any such
claim or demand, upon request by the indemnifying party. So long as the
indemnifying party is defending any such claim or demand in good faith, the
indemnified party shall not settle such claim or demand without the approval of
the indemnifying party. The indemnified party shall make available to the
indemnifying party and its representatives all records and other material
reasonably required by them for their use in contesting any claim or demand
asserted by a third party.
11. PROPRIETARY INFORMATION. The parties acknowledge that certain
Proprietary Information may be exchanged or disclosed by the parties to each
other. Such Proprietary Information shall remain the property of the disclosing
party. Written information which is to be considered proprietary under these
provisions must be clearly and conspicuously marked or identified as proprietary
by the disclosing party. Information disclosed in other than written form shall
be confirmed in writing and identified as proprietary by the disclosing party.
Information disclosed in other than written form shall be confirmed in writing
and identified as proprietary by the disclosing party within ten (10) days from
the date of disclosure.
Each party will take reasonable steps to maintain the confidentiality
of all Proprietary Information disclosed to it by the other and will not
disclose any such Proprietary Information to a third party (including, without
limitation, any customer or potential customer or supplier) without the prior
written consent of the disclosing party and will disclose such Proprietary
20
<PAGE> 21
Information to those employees and agents who have a reasonable need to have
access to such Proprietary Information to promote the purposes of this
Agreement; provided, however, that this obligation to keep such Proprietary
Information confidential shall not apply to Proprietary information which:
(a) was already in the possession of the receiving party prior to
receipt of such Proprietary Information from the disclosing party as established
by the written records of the receiving party; or
(b) is or becomes the subject of a publication or is otherwise
made available to the public without fault of the receiving party; or
(c) is received by the receiving party without restriction of
confidentiality from a third party who is not under or in violation of any
obligation of confidentiality to the disclosing party.
Upon the termination or expiration of this Agreement, all Proprietary
Information exchanged during this Agreement shall constitute to be the sole
property of the disclosing party and thereafter may not be used by the receiving
party; and all written documents, including reproductions and conversions of
such documents, containing any Proprietary Information that are still in the
possession of or under control of the receiving party shall remain the property
of the disclosing party and shall be returned to the disclosing party or
otherwise disposed of as directed within a period of not later than ten (10)
days from the date of receipt of a written demand therefor from the disclosing
party. Each party will take responsible steps with respect to its employees,
customers, potential customers, suppliers, and other contracting parties in
order to insure that any Proprietary Information which may be
21
<PAGE> 22
permitted to be disclosed to any such person by this Section 1 1 shall be deemed
to be, and shall be maintained, as confidential by such person to whom the
Proprietary Information was disclosed.
12. GENERAL.
(a) ASSIGNMENT. This Agreement may not be transferred, delegated or
assigned by either party without the prior written consent of the other party.
This Agreement shall be binding upon, and shall inure to the benefit of, the
successors and assigns of Calypte or Seradyn.
(b) NOTICES. All notices and other communications hereunder shall be in
writing and shall be delivered by hand, transmitted by facsimile, or mailed by
registered or certified mail, return receipt requested, first class postage
prepaid, addressed as follows:
(i) If to Calypte:
Calypte Biomedical Corporation
1440 Fourth Street
Berkeley, California 94710
Facsimile: 510-526-5381
Attention: Director of Sales and Marketing
(ii) If to Seradyn:
Seradyn, Inc.
1200 Madison Avenue
Indianapolis, Indiana 46225
Facsimile: 317-266-2991
Attention: Dwaine Ogden, Vice President
of Sales and Marketing
If delivered personally, the date on which a notice or other
communication is delivered shall be the date on which such delivery is made; if
transmitted by facsimile, the date on which a notice or other communication is
received shall be the date on which delivery is deemed
22
<PAGE> 23
made, provided that receipt is confirmed; and, if delivered by mail, the date on
which such notice or other communication is received shall be the date of
delivery.
Either party hereto may change its address specified for notices herein
by designating a new address by notice in accordance with this Section 12.
(c) WAIVER. Failure of either party to insist upon the strict
performance of any provision hereof, or to exercise any right or remedy, shall
not be deemed a waiver of any right, remedy or existing or subsequent breach or
default, and the election by either party of any particular remedy or default
shall not be deemed exclusive of any other, and all rights and remedies shall be
cumulative.
(d) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana.
(e) MODIFICATION. No modification, extension, renewal, recession or
waiver of any of the provisions herein contained, and no future representation,
promise or condition in connection with the subject matter thereof, shall be
binding, unless made in writing and signed on its behalf by an authorized
representative of the party against whom such is to be enforced.
(f) ENTIRE AGREEMENT. This Agreement represents the entire agreement of
the parties with respect to the subject matter hereto and supersedes any and all
prior agreements between them as to such subject matter, whether written or
oral, except that the terms of any prior confidentiality agreement between the
parties shall continue to be applicable with respect to any disclosure of
Proprietary Information prior to the effective date hereof.
(g) HEADINGS. The headings of the Sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part
hereof.
23
<PAGE> 24
(h) COUNTERPARTS. If this Agreement is executed in counterparts, each
shall be deemed an original but all of which together shall constitute one and
the same instrument. i) VALIDITY. If any provisions of this Agreement shall be
found by a court of competent jurisdiction to be invalid or unenforceable, the
invalidity or unenforceability of such provision shall not affect the other
provisions of this Agreement and all provisions not affected by such invalidity
shall remain in full force and effect.
(i) SCHEDULES. All schedules referenced herein and attached hereto are
deemed to be incorporated into this Agreement.
(k) FORCE MAJEURE. Each of the parties shall be excused from the
performance of its obligations hereunder in the event such performance is
prevented by events beyond the reasonable control of a party, including, without
limitation, acts of God, wars, riots, strikes or other labor disputes, natural
disasters or other severe weather and fires. In such event, the affected party
will notify the other party and provide an estimate of how long performance is
anticipated to be delayed. The minimum purchase commitment of Seradyn provided
for in Section 4(a) hereof shall be reduced for the applicable year in any
affected Region of the Territory, pro rata, based on the number of days
performance of a party is affected.
IN WITNESS WHEREOF, this Agreement is executed by the duly authorized
officers of the parties hereto to be effective as of the 10th day of April,
1995.
CALYPTE BIOMEDICAL CORPORATION
By:
/s/ Wm A. Boeger
--------------------------------------
Printed:
Wm A. Boeger
---------------------------------
Title:
President and CEO
-----------------------------------
"CALYPTE"
24
<PAGE> 25
SERADYN, INC.
By:
/s/ William V. Starrett
--------------------------------------
Printed:
William V. Starrett
---------------------------------
Title:
President
-----------------------------------
"SERADYN"
SS/5675
25
<PAGE> 26
SCHEDULES TO CALYPTE/SERADYN DISTRIBUTION AGREEMENT
<TABLE>
<S> <C>
Schedule 1 Description of the Products
Schedule 2 The Territory
Schedule 3 Calypte Trademarks
Schedule 4 Seradyn Trademarks
Schedule 5 Customers to Whom Calypte Retains the
Right to Sell the Products
Schedule 6 Regions and Minimum Purchase Requirements
Schedule 7 Prices
Schedule 8 Certificate of Analysis Form
Schedule 9 Quality Control Protocol of Calypte
</TABLE>
<PAGE> 27
SCHEDULES TO CALYPTE/SERADYN DISTRIBUTION AGREEMENT
<TABLE>
<S> <C>
Schedule 1 Description of the Products
Schedule 2 The Territory
Schedule 3 Calypte Trademarks
Schedule 4 Seradyn Trademarks
Schedule 5 Customers to Whom Calypte Retains the
Right to Sell the Products
Schedule 6 Regions and Minimum Purchase Requirements
Schedule 7 Prices
Schedule 8 Certificate of Analysis Form
Schedule 9 Quality Control Protocol of Calypte
</TABLE>
<PAGE> 28
SCHEDULE 1 - PRODUCTS
Sentinel(TM) HIV-1
An enzyme immunoassay in microwell format for the detection of
antibodies to HIV-1 in urine, co-labelled under the name and trademarks of
Calypte Biomedical and Seradyn.
Calypte Product Number 600000 480 tests
Calypte Product Number 600001 192 tests
<PAGE> 29
SCHEDULE 2 TO CALYPTE SERADYN
DISTRIBUTION AGREEMENt
The Territory
Seradyn's exclusive distributorship shall apply to the United States of
America and its territories and possessions, and those countries that are listed
in the Regions specified in Schedule 6, subject to Calypte's right to sell the
Products within the United States only to those accounts listed in Schedule 5.
<PAGE> 30
SCHEDULE 3- TRADEMARKS
Calypte
Calypte Hummingbird Logo
Sentinel Tradename
<PAGE> 31
SCHEDULE 4
SERADYN TRADEMARKS
Colorvue HIV
<PAGE> 32
SCHEDULE 5 TO CALYPTE/SERADYN
DISTRIBUTION AGREEMENT
Customers to Who Calypte Retains the
Right to Sell the Products
Home Office Reference Laboratory/Lab One Kansas
Clinical Reference Laboratory Kansas
Osborn Laboratories Kansas
GIB Laboratories New Jersey
PharmChem Laboratories California & Texas
Risk Assessment Tennessee
Med Express Tennessee
Metropolitan Life Assurance New Jersey
Calypte Reference Laboratories California
Direct Access Diagnostics New Jersey
Home Access Health Corporation* Illinois
*"In the event that Home Access Health Corporation elects to subcontract its
labwork with Metpath, it is understood that Seradyn, Inc. is the party that will
sell the Product to Metpath. In such event, it is further understood that the
terms and conditions under which Seradyn sells Product to Metpath for this
specific purpose shall be jointly determined by the parties."
<PAGE> 33
SCHEDULE 6 - PURCHASE MINIMUMS (in number of tests)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
1st Year 2nd Year 3rd Year
- ------------------------------------------------------------------
<S> <C> <C> <C>
U.S.A. [ * ] [ * ] [ * ]
- ------------------------------------------------------------------
Latin America [ * ] [ * ] [ * ]
- ------------------------------------------------------------------
MIDDLE East [ * ] [ * ] [ * ]
- ------------------------------------------------------------------
Western Europe* [ * ] [ * ] [ * ]
- ------------------------------------------------------------------
Eastern Europe [ * ] [ * ] [ * ]
- ------------------------------------------------------------------
Sub-Saharan Africa [ * ] [ * ] [ * ]
- ------------------------------------------------------------------
</TABLE>
* Notwithstanding the foregoing, after the date on which the Products
obtained Approved status in a majority of the countries in Western Europe, the
minimum quantities set forth above for Western Europe shall be proportionally
decreased by the following percentages if any one or more of the countries
described below are not included in the majority of countries in which Approved
Status has been outlined:
<TABLE>
<S> <C>
France 25%
Germany 31%
Italy 18%
Spain 8%
United Kingdom 15%
</TABLE>
* Confidential portion has been omitted
and filed separately with the Commission
<PAGE> 34
<TABLE>
<CAPTION>
LATIN AMERICA MIDDLE EAST WESTERN EUROPE
- ------------- ----------- ---------------
<S> <C> <C>
Mexico Syria United Kingdom
Guatemala Jordan Ireland
Belize Iran Greenland
Honduras Iraq Iceland
Nicaragua UAE Norway
Costa Rica Egypt Sweden
Panama Lebanon Denmark
Columbia Saudi Arabia Finland
Venezuela Afghanistan France
Guyana Oman Spain
Surinam Yemen Portugal
French Guiana Libya Belgium
Ecuador Tunisia Netherlands
Peru Algeria Luxembourg
Brazil Bahrain Germany
Bolivia Qatar Switzerland
Paraguay Austria
Uruguay Italy
Chile Greece
Argentina Turkey
Cuba
Haiti
Dominican Republic
The Bahamas
St. Lucia
Barbados
Grenada
Trinidad & Tobago
</TABLE>
<TABLE>
<CAPTION>
EASTERN EUROPE SUB-SAHARAN AFRICA
- -------------- ------------------
<S> <C>
Estonia Mauritania
Latvia Morocco
Lithuania Mali
Poland Niger
Czech Republic Guinea-Bissau
Slovakia Chad
Russia, Ukraine, and all other former Soviet Republics Sudan
Bulgaria Ethiopia
Romania Somalia
Hungary and a1l African countries
south of these, including
Madagascar, Mauritius and
Seychelles
</TABLE>
<PAGE> 35
SCHEDULE 7 - PRICE
<TABLE>
<CAPTION>
KIT PRICE/ ROYALTY/ TOTAL
PRODUCT SIZE KIT KIT PRICE KIT
<S> <C> <C> <C> <C>
Sentinel(TM) HIV-1 480 tests [ * ] [ * ] [ * ]
Sentinel(TM) HIV-1 192 tests [ * ] [ * ] [ * ]
Extra Wash Solution 450 ml [ * ] [ * ] [ * ]
</TABLE>
* Confidential portion has been omitted
and filed separately with the Commission
<PAGE> 36
SCHEDULE 8
CALYPTE BIOMEDICAL
CALYPTE MANUFACTURED MATERIALS
CERTIFICATE OF ANALYSIS
Description: Sentinel HIV-1 Urine EIA
------------------------
Calypte Part Number:
------------------------
Calypte Lot Number: Expiration Date:
------------------------ ------------
SUMMARY OF RESULTS:
Calypte Testing
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEST SPECIFICATION RESULTS
<S> <C> <C>
HIV- 1 Urine EIA
Negative Control < 0.20
-
Positive Control 1.3 - 2.5
1 Low Positive +
10 Individual random
negatives -
5 Individual random
positives +
5 Individual threshold
positives +/- cutoff
</TABLE>
- ----------------------------- ---------------
QA/QC Supervisor Date
This material meets the established specifications as specified in Document
<PAGE> 37
SCHEDULE 9
Quality Standards Manual
(see Master File)
<PAGE> 1
EXHIBIT 10.29
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 31 st day of December, 1994, by and
between Calypte Biomedical Corporation ("Calypte"), a California corporation,
and Travenol Laboratories (Israel), Ltd., ("DISTRIBUTOR"), incorporated under
the laws of the the State of Israel.
WHEREAS, Calypte is a developer and manufacturer of in vitro diagnostic kits and
kit components, and whereas DISTRIBUTOR wishes to commercially distribute said
kits and kit components in its Territory;
WHEREAS, in consideration of the mutual covenants and promises set forth below,
and with intent to be legally bound, the parties agree as follows:
ARTICLE I - DEFINITIONS
(A) "Product" shall mean the products listed in Schedule 1 hereof.
(B) "FDA" shall mean the Food and Drug Administration of the
United States Department of Health and Human Services
(C) "NIH" shall mean the National Institute of Health, or any
other government agency which regulates the commercial sale
of the Products within the Territory.
(D) "Territory" shall mean the State of Israel.
(E) "Exclusive Distributor" shall mean that no other distributor,
regardless of location of principal offices shall have any
rights to commercially distribute the Products for sale in the
Territory.
(F) "Approved" shall mean local regulatory approval for HIV test
kits, which permits commercial sale of same.
ARTICLE 2 - APPOINTMENT OF DISTRIBUTOR
2.0 APPOINTMENT Calypte hereby designates and appoints DISTRIBUTOR as its
Exclusive Distributor in the Territory for the sale,
promotion, support, and distribution of the Products in
the Territory, subject to the terms and conditions of
this Agreement.
2.1 INDEPENDENT Except for the limited purpose set forth herein,
CONTRACTOR nothing in this Agreement shall be deemed to constitute a
partnership between the parties hereto or be deemed to
constitute DISTRIBUTOR as agent or employee for Calypte
for any purpose, including the right to contract in the
name of or for the account of Calypte nor to assume or
create any liability or obligation of any kind, express
or implied, on behalf of Calypte in any way or for any
purpose. This Agreement does not constitute a Trademark
license or grant. The relationship between the parties is
that of independent contractors in which Calypte is the
vendor and DISTRIBUTOR is the vendee.
<PAGE> 2
ARTICLE 3 TERM
3.0 DATE This Agreement shall become effective as of the date
first shown in this Agreement.
3.1 TERM The Agreement shall be in effect in perpetuity unless
sooner terminated as provided herein.
ARTICLE 4 DISTRIBUTOR'S UNDERTAKINGS
DISTRIBUTOR agrees, at its sole expense (unless otherwise expressly
provided herein), during the term of this Agreement:
4.1.1 BEST EFFORTS At all times to use its best efforts to vigorously and
actively market, advertise, promote, and extend the sale
of the Products throughout the Territory. To this end,
DISTRIBUTOR agrees to maintain an adequate and competent
staff of sales and technical support personnel which can
function in all official languages of the Territory.
DISTRIBUTOR agrees to take all commercially reasonable
efforts to ensure that all advertisements, brochures, and
other materials distributed in connection with the sale
of the Products shall portray the Products according to
the claims dictated by Calypte.
4.1.2 MINIMA To purchase in each twelve month period following the
Approved Status or legal marketing rights in the
Territory of the Products, the minimum quantities of
Product described in Schedule 3, as amended annually. The
minimum purchase quantity for a given contract year shall
be agreed upon by the two parties not less than three
months prior to the start of that contract year.
4.2 EXCLUSIVE Neither directly nor through any third party to solicit
TERRITORY customers for any of the Products outside the Territory
without Calypte's prior written approval.
4.3 REGISTRATION At no overhead charge to Calypte, and in accordance with
AND PERMITS Section 5.8 of this Agreement, DISTRIBUTOR undertakes to
assist Calypte in the registration of the Products with
the regulatory authorities in the Territory, and to
assist in securing such licenses and registrations which
may be required in connection with the importation and
sale of the Products in the Territory. Said registration
shall be in the name of Calypte.
4.4 SALES Every six months the DISTRIBUTOR will provide to Calypte
FORECAST a forecast of its anticipated needs for each of the
subsequent six months.
2
<PAGE> 3
4.5 SALES REPORTS To provide to Calypte upon Calypte's occasional and
reasonable request a summary of prevailing market
conditions, customer attitudes, and competitive
activities, and to generate such reports on a case by
case basis as DISTRIBUTOR deems appropriate.
4.6.1 HANDLING OF To ensure that the Products are handled, stored, and
PRODUCTS shipped in accordance with Calypte's instructions, or in
the absence of specific instructions, in keeping with
standards generally accepted within the industry.
4.6.2 To order, and to maintain a representative selection of
Calypte's up-to-date sales literature or other
promotional material in good condition.
4.6.3 To maintain such stock of the Products as is reasonably
necessary to enable DISTRIBUTOR to comply with its
obligations hereunder.
4.7 SALES LEADS To actively follow up every sales lead supplied by
Calypte.
4.8 CONFIDENTIALITY Not at any time to divulge to any third party any
Confidential Information (as defined in Article 5.3
hereof) relating to the Products or to Calypte's affairs
or business or method of carrying on business, except so
far as is necessary, to those authorized to have access
to such information within DISTRIBUTOR's organization.
4.9 SUB- Not to appoint or subcontract, without the prior written
DISTRIBUTORS approval of Calypte, any subdistributors or sales
representatives in the Territory in connection with the
performance of this Agreement. In the event that Calypte
grants such approval, such appointment shall be made
only in the name and for the account of DISTRIBUTOR,
shall be for a term no longer than the term of this
Agreement, and shall not confer upon such
subdistributors, and/or independent sales any rights
greater than those which are granted by Calypte to
DISTRIBUTOR under this Agreement. DISTRIBUTOR shall also
impose on any such subdistributors and/or independent
sales representatives the same obligations that Calypte
has imposed on DISTRIBUTOR under this Agreement for the
purpose of protecting the goodwill of Calypte and the
Products. DISTRIBUTOR shall defend, indemnify, and hold
Calypte harmless against any claim, loss, liability, or
expense (including attorney's fees and court costs)
arising out of or based upon any claim made by any of
DISTRIBUTOR's subdistributors and/or sales
representatives against Calypte.
4.10 LEGAL To advise Calypte in writing of any changes in legal
STANDARDS pertaining to the Products during the term of
this Agreement, including but not limited to packaging,
labeling and ingredient standards, sufficiently in
advance of the
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imposition of such legal standards as to permit
Calypte's orderly scheduling and delivery of Product
within DISTRIBUTOR's requested time of shipment. Any
losses or damages resulting from a breach of this
provision shall be for DISTRIBUTOR's account.
4.11.1 LABELING To ensure that the Products are sold and promoted in the
form and with the labeling or markings designated by
Calypte, and not to alter, remove, or interfere
therewith without the prior written consent of Calypte.
4.11.2 Notwithstanding the generality of the foregoing, Calypte
hereby authorizes DISTRIBUTOR to affix a small label
which denotes DISTRIBUTOR as the authorized distributor
in the Territory, such label to be applied in a manner
which does not obscure Calypte's tradenames or other
marks.
4.12.1 TRADEMARKS To respect Calypte's rights in connection with the
Products (including but not limited to Calypte's
patents, trademarks, and copyrights), to comply with all
local laws and regulations with respect thereof, and to
assist Calypte in taking any steps necessary to defend
such rights. Any reasonable expenses incurred under this
paragraph by DISTRIBUTOR, and which are preapproved by
Calypte, shall be reimbursed by Calypte.
4.12.2 To acknowledge at all times Calypte's exclusive right,
title, and interest in and to the trademarks associated
with the Products listed in Schedule 1 and registered by
Calypte in the United States of America or the
Terrritory; and not at any time to do or cause to be
done any act or any thing contesting or in any way
impairing or tending to impair any part of such
right, title and interest. In connection with any
reference to the trademarks, DISTRIBUTOR shall not in
any manner represent that it has ownership interest in
the trademarks or registration thereof, but shall
clearly indicate Calypte's ownership of the trademarks.
4.12.3 To use no trademarks, trade names, corporate names, or
trade styles employing the trademarks, whether in
advertising or otherwise, without the prior written
consent of Calypte. Except as provided in Article 9.2,
any and all use by DISTRIBUTOR of said trademarks, trade
names, corporate names or trade styles within the
Territory shall cease upon the expiration or termination
of this Agreement.
4.12.4 To make no statements to the press concerning Calypte or
its Products without the prior written consent of
Calypte.
4.13 MANAGEMENT To provide to Calypte prompt notice, in writing, of any
CHANGE change of key management or ownership and any change in
the mode of operation of DISTRIBUTOR which would
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have direct impact on the relationship between
DISTRIBUTOR and Calypte.
4.14 PROOF OF To use commercially reasonable efforts to ensure that
SALE any Products purchased are for the purpose of sale in
the Territory. DISTRIBUTOR further represents that it
will undertake all commercially reasonable steps to
ensure that the Products are sold exclusively to
customers which are permitted under the laws of the
Territory to purchase and use the Products.
4.15 AUDIT To permit Calypte staff or a Calypte designee, upon
reasonable advance notice, to visit and tour
DISTRIBUTOR's premises.
4.16 COMPETING During the term of this Agreement, neither directly nor
PRODUCTS through any third party to manufacture, sell, promote,
market, or advertise any in vitro 111HIV antibody test
which is to be used on samples other than blood, serum,
or plasma.
4.17 NEW PRODUCTS To accept distribution rights and obligations for new in
vitro laboratory diagnostic Products as they may become
available from time to time, and under such terms and
conditions as the parties may negotiate in good faith.
ARTICLE 5 CALYPTE's UNDERTAKINGS
Calypte agrees, during the term of this Agreement:
5.1.1 EXCLUSIVE To limit the authorized sale of the Products in the
DISTRIBUTOR Territory to DISTRIBUTOR, and to take such action as may
be necessary to ensure compliance of third parties in
this regard.
5.2 FILLING ORDERS To use its best efforts to fill all orders of
DISTRIBUTOR for delivery of the Products hereunder.
Orders shall be placed in writing and mailed or
transmitted by facsimile. No order from DISTRIBUTOR
shall be binding upon Calypte until such order is
accepted by Calypte in writing by mail or facsimile,
such acceptance not to be unreasonably withheldand to be
communicated within two working days of Calypte's
receipt of order.
5.3 CONFIDENTIAL DISTRIBUTOR may receive information from Calypte, its
INFORMATION personnel,or through DISTRIBUTOR!s activities under this
Agreement, either by direct or indirect communication or
observation; more specifically, Calypte will make
available to DISTRIBUTOR, after execution of this
Agreement, such marketing and quality control data, and
other proprietary, secret, and confidential information
owned by Calypte which, in the opinion of Calypte, are
necessary for DISTRIBUTOR to sell the Products (herein
collectively referred to as "Confidential Information").
DISTRIBUTOR shall not make use of the Confidential
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Information other than in connection with the marketing
and sale of the Products under this Agreement and shall
under no circumstances disclose the Confidential
Information to any third party. Except for such of the
Confidential Information that becomes publicly available
through Calypte or independent third parties,
DISTRIBUTOR shall not use, employ or exploit the
Confidential Information, except for the direct benefit
of Calypte, without Calypte's written consent for the
term of this Agreement and seven (7) years thereafter.
5.4 SALES MATERIAL To furnish to DISTRIBUTOR, without charge, a reasonable
supply of sales literature and promotional materials.
The promotional materials may be furnished in the
English language. DISTRIBUTOR may translate the
materials at its own expense, and with prior approval
from Calypte, such approval not to be unreasonably
withheld. Calypte may make reasonable charges if more
than a nominal quantity of these promotional materials
is supplied to DISTRIBUTOR, which will be agreed upon
between Calypte and DISTRIBUTOR in advance.
5.5 WARRANTY To warrant the Products as set out in Article 8 of this
Agreement.
5.6 SALES LEADS To forward to DISTRIBUTOR sales leads and inquiries from
customers located within the Territory, and to promote
the use of the Products by Territory affiliates of
Calypte's customers.
5.7 TRAINING To provide to DISTRIBUTOR such sales, marketing, and
technical training as may be reasonably required, at the
DISTRIBUTOR's principal facility, but not to exceed one
week per year of this Agreement. Costs incurred in such
training including travel, accommodation, and a
reasonable amount of Product shall be borne by Calypte.
Telephone technical support shall be made available to
DISTRIBUTOR during Calypte's normal business hours.
5.8 REGISTRATION To supply at no charge such Product as may be necessary
for testing by the competent authorities within the
Territory in order to permit the Product's legal sale
within the Territory, and to pay such fees as may be
levied by such authorities as part of the approval
process. In addition, to compensate the DISTRIBUTOR or
the regulatory authority for any products used as
reference methods.
ARTICLE 6 PRICE AND PAYMENT
6.1 PRICE AND All prices are F.O.B. destination unless Product must be
PAYMENT shipped from a location outside the Territory, in which
case shipments are F.O.B. Calypte's manufacturing sites
in California and Ontario. Any and all import permits,
licenses, or any other authorizations required to be
obtained
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from any ministry, agency, bank or institute within the
Territory to effect the importation of the Products,
including but not limited to their clearance through the
corresponding customs and health authorities, will be
secured and done or caused to be secured and done by
DISTRIBUTOR if Calypte so requests. Any and all
additional expenses including, but not limited to taxes
and customs duties which may be incurred in acting under
this Agreement are to be similarly borne and paid by
DISTRIBUTOR.
6.2 TERMS OF Terms of payment for the Products sold by Calypte to
PAYMENT DISTRIBUTOR hereunder shall be due within sixty (60)
days from the date of Product receipt by DISTRIBUTOR.
The terms of payment specified shall remain in effect
for so long as DISTRIBUTOR is not delinquent in its
compliance with the specified terms. In the event
DISTRIBUTOR becomes habitually delinquent in such
compliance,in Calypte's opinion, Calypte reserves the
right without prior approval from DISTRIBUTOR to require
alternative terms of payment upon ten (10) days prior
written notice to DISTRIBUTOR.
ARTICLE 7 SHIPPING-TITLE AND RISK-CANCELLATION
7.1 SHIPPING TERMS Products are to be shipped to DISTRIBUTOR from
facilities in Toronto, Canada or from the State of
California, at Calypte's discretion, and the shipping
terms hereafter shall apply: unless otherwise agreed in
writing between the parties, all Products shall be sold
on Calypte's standard shipping terms as communicated to
DISTRIBUTOR and which are in force at the time of
acceptance of the written order, subject only to the
provisions of this Agreement which shall prevail in the
event of any inconsistency between this Agreement and
those terms and conditions.
7.2 RISK OF LOSS Calypte's obligationto effect shipment of the Products
shall be fully discharged upon delivery of Products to
the carrier, and title to, and all risk of damage or
loss to the Products shall pass to DISTRIBUTOR at this
time. Shipments shall be insured at the expense of
DISTRIBUTOR.
7.3 DELIVERY Calypte shall use its best efforts to ship the Products
to DISTRIBUTOR in accordance with DISTRIBUTOR's
instructions. The completion of the formalities
pertaining to the entry of the Products into the
Territory, as well as the payment of any taxes, duties,
or charges relating to same, shall be the sole
responsibility of DISTRIBUTOR.
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<PAGE> 8
ARTICLE 8 WARRANTY - NO CONSEQUENTIAL DAMAGES - INDEMNITY
8.1 WARRANTY Calypte warrants the Products to be of sufficient
quality of materials and manufacture as to meet the
claims and specifications set forth in the Product's
packaging and labelling when used according to the
directions provided therein. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, CALYPTE MAKES NO
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING FITNESS FOR A PARTICULAR PURPOSE, OR
ANY OTHER MATTER, WITH RESPECT TO THE PRODUCTS.
DISTRIBUTOR's exclusive remedy will be for direct
damages, and Calypte's total liability for any and all
losses and damages arising out of any cause whatsoever
(whether such cause be based in contract, warranty,
negligence, strict liability, other tort or otherwise)
will in no event exceed DISTRIBUTOR's landed cost of the
Products in respect to which such cause arises or, at
Calypte's option, the replacement of such Products. In
no event will Calypte be liable for incidental,
consequential or punitive damages resulting from any
cause whatsoever. Calypte warrants that at the time that
the Products left Calypte's possession, they were deemed
to be of good quality.
8.2 DEFECTS Without limiting the generality of the foregoing,
CALYPTE SHALL NOT BE BOUND TO MAKE GOOD ANY DEFECT IN
THE PRODUCTS WHERE THE PRODUCTS HAVE BEEN SUBJECTED TO
MISUSE, NEGLECT, OR ACCIDENTAL DAMAGE.
8.3 TRADEMARKS Calypte is the record owner of registrations for its
trademarks in the Territory and believes it has the
right to use these trademarks throughout the Territory.
Notwithstanding, CALYPTE MAKES NO EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY THAT THE PRODUCTS WILL NOT
INFRINGE THE LEGITIMATE AND VALID TRADEMARKS, TRADE
NAMES, OR OTHER INDUSTRIAL PROPERTY RIGHTS OF THIRD
PARTIES IN THE TERRITORY. DISTRIBUTOR shall immediately
notify Calypte of any such claims of others, and Calypte
shall, at its sole option, have the right to assume the
defense of any such claim.
8.4 INSPECTION It shall be the responsibility of DISTRIBUTOR to inspect
the Products after taking title to same. Notwithstanding
Article 8.1 above, Calypte shall not be liable for any
shortage, breakage, or damage to the Products or for any
breach of warranty, implied or otherwise, unless it
receives written notice of any defect or shortcoming
within thirty (30) days after the date on which
DISTRIBUTOR takes title to the Products, and the defect
or shortcoming results from the fault or negligence of
Calypte. Damage to the
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Products which is clearly obvious upon delivery to the
DISTRIBUTOR shall be reported to Calypte promptly.
8.5 INDEMNIFICATION Calypte shall indemnify and hold DISTRIBUTOR harmless
from any claims, demands, liabilities, suits or expenses
of any kind arising out of any misrepresentations which
Calypte makes concerning the Product supplied by
Calypte.
Calypte shall indemnify DISTRIBUTOR for any damages or
loss actually paid by DISTRIBUTOR resulting from a legal
decision on a claim by third parties made against
DISTRIBUTOR and which is caused by Calypte with respect
to the Products made or supplied by Calypte.
DISTRIBUTOR is responsible for, and shall hold Calypte
harmless from any loss, damage, illness or injury to
persons or property which arises out of or pertains to
the sale, use, packaging, advertising, or promotion of
the Products, and which is caused by the DISTRIBUTOR or
DISTRIBUTOR's subdistributors, agents, or employees.
This provision shall survive the expiration or
termination of this Agreement for any reason.
ARTICLE 9 TERM AND TERMINATION
9.1 TERMINATION Calypte, at its sole option, may immediately terminate
FOR CAUSE this Agreement with respect to the Territory, upon
giving notice to this effect, whenever any of the
following events occurs:
(i) if any governmental unit within the Territory
threatens (in the sole judgement of Calypte) to enact or
enacts any law, decree or regulation which would
restrict the right of Calypte to terminate or elect not
to renew this Agreement as herein provided, or would
make Calypte liable to DISTRIBUTOR for compensation or
damages upon termination or failure to renew this
Agreement;
(ii) if DISTRIBUTOR at any time files a petition of
bankruptcy or insolvency or admits in writing its
inability to pay its debts as they become due and
payable, or if DISTRIBUTOR is adjudicated bankrupt or
insolvent, or if there is filed any petition seeking
reorganization of DISTRIBUTOR, or if a receiver is
appointed for all or substantially all of DISTRIBUTOR's
property, or if DISTRIBUTOR makes an assignment for the
benefit of creditors or if any proceedings are
instituted for the liquidation or winding up of
DISTRIBUTOR;
(iii) if DISTRIBUTOR uses Calypte's trademarks or trade
names or styles in any way which might deceive or
mislead the consumer or which might in any way damage or
impair the reputation or value of such trademarks, trade
names, or styles;
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(iv) if DISTRIBUTOR is at any time nationalized or falls
under the control of any governmental unit within the
Territory.
9.1.1 Calypte, at its sole option, may terminate this
Agreement with respect to the Territory, upon giving one
hundred eighty (180) days written notice to this
effect, if DISTRIBUTOR fails to comply with any of the
terms or conditions herein contained and, after notice
by Calypte requiring DISTRIBUTOR to make good such
default, DISTRIBUTOR fails to cure such default within
ninety (90) days after receipt of such notice.
9.2 Upon termination or expiration of this Agreement for any
reason with respect to the Territory:
i) at Calypte's option, DISTRIBUTOR may sell its
remaining inventory of Product within the Territory, or
shall make available to Calypte or Calypte's designee,
all current stocks of Product held by DISTRIBUTOR with a
minimum of four (4) months' expiration remaining, at
DISTRIBUTOR's landed cost, FOB DISTRIBUTOR's warehouse,
which shall include any duty, freight, insurance
documentation and inland freight to warehouse
distribution.
ii) DISTRIBUTOR shall at its own expense return to
Calypte or its designee all Confidential Information
furnished by Calypte in accordance with Article 5.2
hereof, as well as all sales literature, catalogues,
samples, and other promotional materials supplied by
Calypte;
iii) Calypte will not be liable to pay to DISTRIBUTOR
any termination compensation, benefits or damages of any
kind whatsoever, whether for DISTRIBUTOR's loss of
present or prospective profits, anticipated sales,
expenditures, investments or commitments made in
connection with this Agreement, or due to the
termination of any of DISTRIBUTOR's employees, agents,
or subdistributors, or due to any other matter or cause
whatsoever, and whether provided by any current or
future law, regulation or interpretation thereof by any
authority exercising jurisdiction over this Agreement,
and;
iv) all obligations of Calypte shall be cancelled, but
such expiration or termination will not affect any of
Calypte's rights hereunder, and Calypte will further
have the right, immediately upon such expiration or
termination, to appoint a new distributor or sales
representative. Such expiration or termination will not
affect DISTRIBUTOR's obligation to make payment for any
orders of the Products which remain unpaid at such time.
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9.3 TERMINATION At any time, and for any reason or no reason, Calypte,
FOR at Calypte's sole option, may terminate this Agreement.
CONVENIENCE Such termination shall be effective not less than one
hundred eighty (180) days after receipt by DISTRIBUTOR
of Calypte's written notice of termination.
ARTICLE 10 ASSIGNMENT
DISTRIBUTOR shall not be entitled to assign its rights
and obligations under this Agreement without the written
consent of Calypte.
ARTICLE 11 WAIVER The failure of either party to assert a right under, or
to enforce at any time or for any period of time, the
provisions hereof or the failure of either party to
exercise an option herein shall not be construed as a
waiver of such provision or option and shall in no way
affect that party's right to enforce such provisions or
exercise such options.
ARTICLE 12 ENTIRE AGREEMENT
With the exception of previously signed Confidentiality
Agreements, this Agreement cancels and supersedes any
previous understandings or agreements, oral or written,
between the parties relating to the subject matter
hereof, including any previously existing
distributorship arrangement. This Agreement expresses
the complete and final understanding of the parties with
respect to the subject matter hereof, and may not be
changed in any way except upon the explicit intention of
both parties expressed by a signed written agreement.
Any terms or conditions stated in DISTRIBUTOR's purchase
orders inconsistent with this Agreement shall be null
and void.
ARTICLE 13 VALIDITY If any provision of this Agreement shall be found by a
court of competent jurisdiction to be invalid or
unenforceable, the invalidity or unenforceability of
such provision shall not affect the other provisions of
this Agreement and all provisions not affected by such
invalidity shall remain in full force and effect.
ARTICLE 14 NOTICES
14.1 NOTICE Any notice required or permitted by this Agreement shall
be in writing and in the English language, and shall be
delivered personally or by registered air mail, postage
prepaid, or by facsimile, addressed to the parties as
follows:
If to DISTRIBUTOR: Travenol Laboratories (Israel) LTD.
Haorgim Street PO Box 2
Ashdod 77100
Israel
Facsimile: 972-8-532207
Attention: Director of Marketing
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<PAGE> 12
If to Calypte: Calypte Biomedical Corporation
1440 Fourth Street
Berkeley, California 94710
United States of America
Facsimile: 510-526-5381
Attention: Director of Sales and Marketing
14.2 RECEIPT Any notice sent by registered prepaid air mail properly
addressed and posted shall be deemed to have been
received ten (10) days after it is delivered to the
postal authorities in the country of the party by whom
it is sent. If sent by facsimile, a copy of the
facsimile shall be sent promptly by registered prepaid
air mail to the addressee.
14.3 VERBAL Nothing contained herein shall justify or excuse failure
NOTICE to give verbal notice for the purpose of informing the
other party thereof when prompt notification is
appropriate, but such verbal notice shall not satisfy
the requirement of written notice.
ARTICLE 15 APPLICABLE LAWS
15.1 EXPORT LAWS Calypte is subject to U.S. laws and regulations
governing the export of U.S. products. DISTRIBUTOR
agrees that it will not directly or indirectly engage in
any acts which would cause Calypte to be found in
violation of such laws or regulations.
15.2 PAYMENTS DISTRIBUTOR acknowledges that certain laws of the United
States may result in the imposition of sanctions on
Calypte and its employees in the event that offers,
promises, or payments are directly or indirectly made to
government officials or others for the purpose of
influencing decisions favorable to Calypte, and,
therefore DISTRIBUTOR agrees that neither it nor its
employees will commit such acts or engage in such
activities and that DISTRIBUTOR shall defend, indemnify,
and hold Calypte harmless for any damages, claims,
liabilities and expenses which arise or allegedly arise
from DISTRIBUTOR's violation of the obligations of
articles 15.1 or 15.2.
15.3 ASSURANCES DISTRIBUTOR agrees to furnish to Calypte, by affadavit
or other reasonable means from time to time at Calypte's
request, and to the reasonable satisfaction of Calypte,
assurances that the appointment of DISTRIBUTOR
hereunder, its activities under this Agreement, and the
payment to DISTRIBUTOR of any monies or consideration
contemplated hereunder are proper and lawful under the
laws in force in the Territory. DISTRIBUTOR further
represents that no person employed by it is an official
of any government agency or a corporation owned by a
government unit within the Territory and that no part of
any monies or consideration paid hereunder shall accrue
for the benefit of any such official.
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<PAGE> 13
15.4 TERRITORY If Calypte determines that the appointment or use of
LAWS DISTRIBUTOR is not permitted under the laws and
regulations in force in the Territory, or part of the
Territory. Calypte has the right, at its sole
discretion and upon notice to DISTRIBUTOR, to terminate
this Agreement as Calypte sees fit for the affected
Territory or part of Territory. Upon notice of this
decision, DISTRIBUTOR will cease its activities under
this Agreement within the affected Territory or part of
the Territory and shall not seek damages or compensation
in any form, according to Article 9 of this Agreement.
ARTICLE 16 GOVERNING LAW
This Agreement and the obligations of the parties
hereunder shall be governed and construed in accordance
with the laws of the State of California, U.S.A.
ARTICLE 17 FORCE MAJEURE
Calypte and DISTRIBUTOR will be excused from failure to
perform under this Agreement and will not be liable in
any way for any loss if such failure is due to causes
beyond the reasonable control of either party, including
but not limited to, natural disasters such as
earthquakes or floods, fires, riots, strikes and other
labor disputes, war conditions, shortage of raw
materials or government action for the period any such
conditions exist.
ARTICLE 18 HEADINGS The headings used herein are for convenience only and in
no way affect the liabilities, obligations, or
responsibilities of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
CALYPTE BIOMEDICAL CORPORATION
By:
---------------------------
Title:
President and CEO
------------------------
Date: December 18, 1994
------------------------
DISTRIBUTOR
By:
---------------------------
Title:
------------------------
Date: December 29, 1994
------------------------
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SCHEDULE 1 - PRODUCTS
Sentinel(TM) HIV-1 An enzyme immunoassay in microwell format for the
detection of antibodies to HIV-1 in urine, labelled
under the name and trademarks of Calypte Biomedical.
Cat. No. 600000 480 tests
Cat. No. 600001 192 tests
SCHEDULE 2 - PRICE
PRODUCT PRICE, $US
Sentinel(TM) IRV-1 480 tests [ * ]
192 tests [ * ]
SCHEDULE 3 - MINIMA, TESTS
Minimum purchases of Sentinel(TM) HIV-1 per twelve month period following legal
opportunity to market the Products within the Territory:
12-month period: first Subsequent
No minimum To be negotiated in
accordance with 4.1.2 of this
Agreement
SCHEDULE 4 - TRADEMARKS
Calypte
Calypte hummingbird logo
Sentinel tradename
* Confidential portion has been omitted
and filed separately with the Commission
14
<PAGE> 1
EXHIBIT 10.30
MANUFACTURING/PACKING AGREEMENT
AGREEMENT executed this 27TH day of SEPTEMBER, 1994, between CALYPTE
BIOMEDICAL CORPORATION, a California corporation having a principal place of
business at 1440 Fourth Street, Berkeley, California, U.S.A. (hereinafter
referred to as the "Company"), and ADI DIAGNOSTICS INC., an Ontario corporation
having a principal place of business at 30 Meridian Road, Rexdale, Ontario,
Canada, (hereinafter referred to as "ADI"). This Manufacturing/Packing Agreement
and the exhibits attached hereto are collectively referred to as the
"Agreement".
WHEREAS, The Company has obtained certain formulae, know-how,
technologies and other trade secrets relating to the manufacture and production
of the products described in Exhibit A hereto (hereinafter referred to as
"Products"); and
WHEREAS, The Company desires to disclose such formulae, know-how,
technologies and trade secrets to ADI and to have the Products manufactured,
processed, packed and/or produced by ADI from ingredients and other materials
supplied by the Company and/or ADI on a non-exclusive basis; and
WHEREAS, ADI desires to handle, store and/or process the materials
necessary to produce the Products, and to manufacture, process, handle and/or
store the Products in accordance with the terms and conditions hereof.
<PAGE> 2
-2-
NOW, THEREFORE, in reliance on the foregoing, and in
consideration of the mutual covenants set forth herein and other good and
valuable consideration, the Company and ADI hereby agree as follows:
1. PRODUCTS
This Agreement covers the HIV Products set forth in Exhibit A.
The Products shall conform to the Company and Government Specifications pursuant
to Section 5 ("Specifications") of this Agreement. In the future, Products of
similar design and technology may be added to the Agreement after good faith
negotiation, by written amendment to this Agreement signed by both the Company
and ADI.
2. PRODUCTION
Subject to the Company's obligations in Sections 6 ("Packing
Supplies") and 8 ("Ingredients") of this Agreement, ADI agrees to perform all
necessary services at its facility in Rexdale (hereinafter referred to as
"Plant") and to provide all necessary facilities, equipment and production
materials not supplied by the Company to manufacture, test, pack, store and ship
the Products for the Company. ADI further agrees not to subcontract any aspect
of its obligations as described herein, except the movement of Product by common
carrier, without the express written permission of the Company, which permission
shall not be unreasonably withheld.
<PAGE> 3
-3-
3. QUANTUY
a) Subject to the Company's obligations in Sections 6 ("Packing
Supplies") and 8 ('Ingredients") of this Agreement and to availability, ADI
shall maintain sufficient capacity and quantities of supplies to manufacture,
assemble, test, and pack, pursuant to the terms and conditions of this
Agreement, the projected requirements set forth in Exhibit B hereto for each
type of Product.
b) The parties shall mutually ensure that the manufacturing processes
used at ADI can be practically implemented and reasonably expected to meet the
anticipated demand. The parties understand that of necessity such processes may
differ somewhat from those currently in use by the Company.
4. PRICE
The Company shall pay ADI in accordance with Exhibit A-1.
5. SPECIFICATIONS
(a) The Government Spgcifications.
ADI shall provide all services pertaining to the manufacturing
of the Products in strict accordance with the instructions and specifications
established and provided by the Company, as amended from time to time in
accordance with this Subsection 5(a) and Subsection 3(b) above (hereinafter
referred to as the "Company Specifications"), including but not limited to good
manufacturing practice guidelines and industry standards of quality
<PAGE> 4
-4-
and packaging. The Company represents, covenants and warrants that the Company
Specifications and all amendments thereto shall, to the best of the Company's
knowledge, be in compliance with all applicable laws and regulations of
government regulatory agencies and authorities in countries in which the Company
distributes the Product, and shall provide ADI with written assurance of such
compliance, signed by a duly authorized officer of the Company upon execution of
this Agreement. ADI agrees to inform the Company promptly of any action taken in
relation to the Plant and/or the Products by any such government agencies or
authorities. The Company Specifications may be amended in writing from time to
time by the Company, upon written consent of ADI, which consent shall not be
unreasonably withheld, to reflect changes in the Products or in the containers
or labels of the Products. The Company shall endeavour to provide to ADI as much
advance notice as possible of such changes, and the parties shall agree in
writing to a schedule to implement such changes as soon as possible. Inventory
purchased by ADI and rendered obsolete by such amendments shall be compensated
by the Company at cost plus 15 %, provided however that such inventory was not
purchased by ADI after notice from the Company that such inventory would be
obsolete. Under no circumstances will ADI be required to purchase new equipment
or additional resources as a result of such amendments without reasonable
compensation from the Company, which compensation shall be discussed and
mutually agreed upon between the parties.
<PAGE> 5
-5-
(b) Company Specifications.
All Products manufactured, packaged, and assembled by ADI and
the vials, bottles and other containers in which they are packaged shall be in
compliance with Company Specifications.
6. PACKING SUPPLIES
Subject to the provisions of this Section 6, the Company shall
supply to ADI the supplies, including but not limited to kit boxes, plate
pouches, package inserts, spacers and desiccants (hereinafter collectively
referred to as "Packing Supplies") necessary to pack the quantities of the
Products specified in this Agreement. If, with the Company's prior permission,
ADI uses alternate materials, such supplies shall be invoiced to the Company as
part of the "per kit" fee charged to the Company for ADI's manufacturing,
assembly, storage and shipping activities, as specified in Exhibit A-1. In any
event, ADI shall demonstrate the reliability of such packing materials to the
satisfaction of the Company, prior to their use.
7. MANUFACTURING PACKING FEES AND INVOICING
a) ADI shall invoice the Company as specified in this Agreement for all
fees due and payable to ADI by the Company pursuant to this Agreement. Packing
supplies provided by ADI at the Company's request shall not be billed separately
by ADI, but rather, as part of the manufacturing/packing fees. Each invoice
shall also include such information as the Company may request to permit
cross-reference to other information submitted by ADI
<PAGE> 6
-6-
pursuant to Section 9 (Reports). Upon its written acceptance of a batch of
Products, the Company shall pay such invoices in accordance with the terms
specified in Exhibit A-1 of this Agreement. The Company shall determine the
acceptability of a batch of Products in no more than ten (10) working days
following receipt of sample material and documents from ADI. The Ingredients (as
defined in Section 8 hereof) shall be in compliance with all applicable laws and
regulations as referenced in Section 5, subsection (a).
b) All shipping and handling expenses incurred by ADI on the Company's
behalf will be billed to the Company on a monthly basis at ADI's cost plus 15 %,
but not to exceed cost plus US$500.00 per shipment, in addition to, and
separately from the prices per kit billed for manufacturing, assembly, and
storage specified in Exhibit A-1. Title to the Product and all risks associated
therewith, including shipment, passes to the Company upon written acceptance by
the Company of the batch of Product, as set out in Subsection 7(a) hereof. At
the Company's request, ADI shall process all shipping claims for shipments made
by ADI, on behalf of the Company.
c) In anticipation of the need for ADI to purchase certain equipment
which will enable it to fulfil the obligations described in this Agreement, the
Company agrees to pay to ADI upon execution of this Agreement the sum of
[ * ], which is one third of the total estimated capital expenditure. The
Company waives any and all claims to ownership of said equipment. In the event
that capital expenses are less than [ * ], then ADI shall reimburse the
Company one third of the difference between the actual expenditure and
* Confidential portion has been omitted
and filed separately with the Commission
<PAGE> 7
-7-
the [ * ] estimate. In the event that capital expenditures exceed
[ * ], and the Company provides its written acceptance of the proposed.
purchases, then the Company will pay to ADI one third of the difference between
the actual costs and the [ * ] estimate.
d) In anticipation of the need for ADI to undertake special start-up
activities to fulfil the obligations described in this Agreement, the Company
agrees to pay to ADI the sum of [ * ], in five consecutive monthly
instalments of [ * ], beginning in the month of July, 1994.
e) At the time that this Agreement is signed, the Company has not made
specific commitments to distributors on the minimum remaining shelf-life
acceptable for the Product, nor has the Company articulated a policy of its own
in this regard. As such policies and commitments are made, the Company shall
advise ADI of same immediately and in writing. ADI shall notify the Company in
its routine reports of Product or components which are approaching minimum
shelf-life, and the Company in turn shall advise ADI on its wishes for
disposition of such Product or components. In the event that the Company
requests destruction of short-dated Product or components, ADI shall be entitled
to bill the Company for all costs associated with the disposition of such
short-dated Products at cost plus 15%
* Confidential portion has been omitted
and filed separately with the Commission
<PAGE> 8
-8-
8. INGREDEFNTS
Unless otherwise specified, the Company agrees, at its
expense, to supply ADI at the Plant with the ingredients set forth in Exhibit F
of this Agreement (referred to herein as "Ingredients') necessary for the
production of the Products and to deliver such Ingredients to ADI in time to
enable ADI to meet its commitments under this Agreement. All Ingredients shall
be held by ADI on consignment and at the Company's expense and risk. The Company
agrees to maintain at ADI a minimum of two (2) months' anticipated requirement
of Company-provided Ingredients. The Company represents, covenants and warrants
that to the best of the Company's knowledge, all Ingredients shall be in
compliance with all applicable requirements, laws and regulations as referenced
in Section 5, subsection (a). The Company agrees to enclose with each shipment
of Ingredients supplied by the Company to ADI a Certificate of Analysis.
9. REPORTS
ADI shall deliver to the Company, upon at least fifteen (15)
days' written notice specifying the information to be reported, such written
reports as the Company shall reasonably require, provided that such information
is reasonably available to ADI, in accordance with such submission intervals as
the Company shall reasonably require. In addition, ADI shall deliver to the
Company monthly production reports which shall include the following information
for the month preceding the month of submission of the report: (a) quantity of
Ingredients, Packing Supplies and/or ADI packing supplies received and/or used;
(b) quantity and variety of the Products manufactured, packed and/or shipped;
and (c)
<PAGE> 9
-9-
inventories of Ingredients, Packing Supplies and/or ADI's packing supplies
and Products stored in ADI's warehouse (hereinafter referred to as "Production
Reports").
10. HANDLING
The parties hereto acknowledge the perishability of the
Products and Ingredients. ADI shall handle Products and Ingredients in
accordance with the Company Specifications, including storing all Products and
Ingredients at the temperatures set forth therein. If ADI receives damaged
Packing Supplies or Ingredients which were supplied by the Company, ADI shall
immediately notify the Company and document such damage, and the Company shall
promptly replace all damaged Packing Supplies and Ingredients at the Company's
expense. ADI shall not be responsible for any failure to meet a Delivery Date
specified by the Company which is due to any such damage.
11. SHORTAGES AND LOSS ALLOWANCES
ADI shall, at all times, be responsible for complying with the
Company Specifications relating to the Ingredients, Packing Supplies, Products
and all other Company property in ADI's care, custody or control. ADI shall
reimburse the Company for any unaccounted for or unauthorized usage, loss,
shortage or damage concerning such the Company property, unless ADI can
demonstrate to the satisfaction of the Company that ADI received substandard or
subweight Ingredients and/or Packing Supplies which were purchased or provided
by the Company, except that in manufacturing the Products, ADI shall be
<PAGE> 10
-10-
permitted any processing loss allowances which may be specified in Exhibit C
of this Agreement (the "Loss Allowances').
12. PLACEMENT OF ORDERS
(a) On a monthly basis the Company shall advise ADI, by letter or fax,
of its needs for production for the following three months, the last two months
of which are non binding. The Company shall identify on each order a Delivery
Date, such date being no less than 45 days after the placement of the order. ADI
shall not unreasonably refuse the Company's orders or Delivery Dates, subject to
Sections 4, 6, 8 and 10 hereof and to the availability of Company-supplied
Ingredients and necessary non-Company supplied ingredients or other supplies.
Orders may be placed in such form as the parties may agree upon from time to
time, except that the terms and conditions of this Agreement shall always be in
force.
(b) Batch/Lot Size. The Company shall not order any single production
batch or lot smaller than 96,000 tests or in excess of 960,000 tests without the
written permission of ADI. The only exception to this shall be in the production
of the first three lots, which may be as small as 48,000 tests. Each production
batch or lot shall be assigned a specific Delivery Date at the time the order is
placed, which must be agreed upon in writing by both parties.
<PAGE> 11
-11-
(c) The Company agrees to place at least one manufacturing order prior
to January 1, 1995.
d) In the event that the Company requires more than one labelling
format, the Company shall advise ADI clearly at the time the order is placed of
the proportion of Product to be labelled in each format, or alternatively, will
advise ADI of the proportion of product to be left temporarily as unlabelled
work in process. The Company shall endeavour to limit the number of label
formats.
e) The Company shall provide to ADI the full particulars of Product
shipment and shall ensure ADI is provided with such documentation as may be
necessary to properly effect shipment. The Company accepts all risks associated
with shipment of Product. ADI shall insure shipments in its name at the
Company's expense in accordance with the Company's written instructions. ADI
shall pursue insurance claims for damaged or lost shipments as necessary.
13. PRODUCT SHORTAGE ADJUSTMENTS.
If shortages of the Products occur which are due to the
failure of ADI to manufacture, process, store or handle any ingredients, packing
supplies and/or Products in accordance with the Company Specifications, and
which shortages are in excess of those allowable under the Loss Allowances set
forth in Exhibit C hereto, ADI shall make adjustments in its production schedule
to promptly make up all such shortages at its own
<PAGE> 12
-12-
expense after the shortages have been identified, but in no event later than
14 days after the due date specified by the Company for the Products to be
packed and available for shipment. Such adjustments shall not be at the expense
of meeting any current and future production Delivery Dates.
14. WARRANTIES
(a) ADI represents and warrants that all Products which ADI
manufactures, packs and handles and any packing supplies or ingredients which
ADI furnishes shall strictly conform with the Company Specifications as
referenced in Section 5. EXCEPT FOR THE LATE DELIVERY PENALTIES SET OUT IN
EXHIBIT A-1, ADI'S LIABILITY FOR FAILURE TO MANUFACTURE, PACK OR HANDLE ANY
PRODUCTS, INGREDIENTS OR PACKING SUPPLIES SHALL BE LIMITED TO THE REPLACEMENT OF
SUCH PRODUCTS, PACKING SUPPLIES OR INGREDIENTS OR, AT THE COMPANY'S OPTION, TO
REIMBURSEMENT FOR THE COST OF SUCH PRODUCTS, PACKING SUPPLIES OR INGREDIENTS.
EXCEPT AS STATED HEREIN, ADI GIVES NO OTHER WARRANTIES, WHETHER EXPRESS OR
IMPLIED, AND WHETHER STATUTORY OR OTHERWISE, WITH RESPECT TO THE PRODUCTS,
PACKING SUPPLIES AND INGREDIENTS INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THOSE ARISING FROM A
COURSE OF DEALING OR USAGE OF TRADE. THIS SUBSECTION 14(A) STATES THE ENTIRE
LIABILITY OF ADI WITH RESPECT TO THE WARRANTY GIVEN HEREIN. IN NO EVENT SHALL
<PAGE> 13
-13-
ADI BE LIABLE FOR ANY ADDITIONAL DIRECT, INDIRECT OR CONSEQUENTIAL
DAMAGES OF THE COMPANY, INCLUDING, BUT NOT LIMITED TO, DAMAGES
FOR PERSONAL INJURY AND LOSS OF PROFITS.
(b) The Company represents, covenants and warrants that it possesses
all rights, including all patent, trade-mark, trade secret, copyright and other
industrial and intellectual property and contractual rights, necessary to enable
it to perform its obligations under this Agreement and to permit ADI to perform
its obligations hereunder without the consent of any third party..
15. LICENSES
With the exception of those requirements, licenses and permits
which ADI currently requires to carry out its activities in Canada and
elsewhere, the Company is responsible for complying with the requirements for
all licenses and/or permits required by law to permit the parties hereto to
perform their respective obligations under this Agreement ('Licenses"). ADI
shall use its reasonable efforts to assist the Company in obtaining any such
Licenses.
16. RECALL POLICY
The Company shall have the right to recall any Product which
the Company has reason to believe may not comply with the Company and Government
Specifications, regardless of whether the Product may be harmful to the public.
ADI warrants that it
<PAGE> 14
-14-
possesses the means to enable it or the Company to implement recalls based upon
lot numbers of assembled Product and lot numbers of Product ingredients. Such
recalls shall be in accordance with the procedures set forth in Exhibit D
hereto, which Exhibit may be amended by the Company with the prior written
consent of ADI during the term of this Agreement. ADI shall assist the Company
by providing such information as may be necessary to implement such recall, at
no expense to the Company. Other losses or costs associated with recalls shall
be determined in accordance with Section 19 (Indemnifications). Upon notice to
do so from the Company, whether verbal, or by fax, ADI shall immediately suspend
production of Products which are the subject of the recall until further notice
from the Company. Any verbal or fax recall notification shall be confirmed by
the Company in writing, sent pursuant to Section 28 (e) (Notice) within
forty-eight (48) hours of the verbal or fax notification.
17. TECHNICAL ASSISTANCE AND SAMPLES.
The Company, at its own cost and expense, shall furnish ADI
with such instructions as the Company deems necessary to ensure the proper
manufacturing and packing of its Products in accordance with the Company
Specifications. ADI shall furnish the Company with such number of samples of
Product from each production batch packed under this Agreement as are required
by the Company Specifications and such other samples of Ingredients, Packing
Supplies, and/or ADI ingredients or packing supplies to be used in the Products
as the Company may from time to time request for quality evaluation purposes
upon receipt by ADI of five (5) working days' written notice of such request.
<PAGE> 15
-15-
In order to facilitate the transfer of pertinent manufacturing
information from the Company to ADI, the Company shall bear the reasonable
travel and accommodation expenses to allow up to six ADI representatives to
visit the Company's Berkeley facility for a five-day training session.
Reimbursement of additional travel costs will be negotiated in good faith as
required.
The Company agrees to provide ADI with such additional written
instructions relating to the manufacture, packing and storage of the Products
upon ADI's reasonable request, at the Company's expense.
18. COMPANY INSPECTIONS
Upon reasonable advance notice, and at no expense to ADI,
representatives of the Company, the Company's customers, and pertinent
regulatory agencies shall have access to, and may inspect, the Plant and any
other facilities where Packing supplies, Ingredients, Products, and other
Company property are produced and/or stored.
19. INDEMNIFICATIONS
(a) ADI Indemnification of the CoMagy.
Subject to Subsection 19(b) hereof, ADI shall defend,
indemnify and hold the Company, its officers, directors, employees, agents and
affiliates harmless from and against any and all claims, suits, liabilities,
judgments, losses, damages, costs or expenses (including reasonable attorneys'
fees and costs, whether incurred for the Company's primary defense or
<PAGE> 16
-16-
for the Company's enforcement of its indemnification rights hereunder) arising
out of, or in any way related to: (i) the negligent operation or condition of
the Plant; (ii) the negligent preparation, manufacturing, processing, packaging,
storing, handling, or like treatment of the Ingredients, Packing Supplies or
Products; (iii) the breach of any representations or warranties of ADI contained
herein; or (iv) any negligent act, misfeasance, or nonfeasance by ADI or any of
its agents, contractors, servants or employees, but excepting any such claim,
liability, damage or loss caused directly or indirectly by: the negligence or
fault of the Company, defects in the Ingredients or Packing Supplies which
existed at the time of delivery thereof to ADI, or defects in the Company
Specifications. ADI's obligations hereunder shall survive the termination or
expiration of this Agreement. This indemnity will be in addition to any other
rights and remedies to which the Company may be entitled by law or equity. For
the purposes of this Section 19, "affiliates" shall mean any entity which,
directly or indirectly, owns or is owned by ADI to the extent of greater than
fifty percent (50%) of the stock or other equity interest thereof.
(b) The Company's Indemnification of ADL
Notwithstanding Section 19 (a) above, the Company shall
defend, indemnify and hold ADI, its officers, directors, employees, agents and
affiliates harmless from and against any and all claims, suits, liabilities,
judgments, losses, damages, costs, or expenses (including reasonable attorneys'
fees and costs) arising directly or indirectly out of: (i) the condition of any
Ingredients or Packing Supplies supplied by the Company which existed at the
time of delivery to ADI; (ii) the proper use of and prescribed adherence to the
<PAGE> 17
-17-
Company's formulae, Specifications and instructions as set forth in this
Agreement; (iii) the infringement by ADI of any patent, trade-mark, trade
secret, copyright, confidential information, or other industrial or intellectual
property right or contractual right of any third party; and (iv) the use as
specified by the Company of any licensed trade-marks, brands, marking labels, or
designs. The Company's obligations hereunder shall survive the termination or
expiration of this Agreement. This indemnity will be in addition to any other
rights and remedies to which ADI may be entitled by law or equity.
(c) Obligations for Indemnification for Claims of Third Parties.
The parties' respective obligations with respect to claims of
third parties' under Subsections 19(a) and (b) shall only be effective if: (i)
promptly after the party against whom a claim is made is notified of any claim,
liability, loss, damage, cost or expense, that party reports the same to the
other party by telephone, or fax and the party against whom the claim is made
promptly thereafter confirms the same by written notice to the other party
pursuant to Section 28 (e) (Notice), which notice shall include all
circumstances thereof known to the party against whom the claim is made or its
employees; ii) the other party has the right, but not the duty, to participate
in the defense and settlement of any such third party claim or litigation with
attorneys of the other party's selection without relieving the party against
whom the claim is made of any obligation hereunder; and (iii) the party against
whom the claim is made cooperates with the other party's investigation and/or
defense of any third party claim or suit in which the other party has chosen to
participate.
<PAGE> 18
-18-
20. INSURANCE
(a) Property Insurance.
ADI shall, at its expense, maintain property insurance for
the replacement cost of property which is owned by ADI.
(b) Comprehensive General Liability Insurance.
ADI and the Company shall both maintain, at their expense,
separate comprehensive general liability insurance, including Products,
completed operations and contractual liability insurance, to a limit of not less
than Two Million U.S. Dollars ($US 2,000,000), combined single limit, on an
occurrence basis. ADI and the Company shall each name each other as additional
insured under their respective policies.
(c) The Company shall maintain property, transit and liability
insurance and all other necessary insurance for all Ingredients, Packing
Supplies, Products and other property owned by the Company.
(d) Procedures and Documentation for Insurance.
Each party shall furnish to the other certificates of all
policies of insurance required hereunder, stipulating that each policy has been
endorsed to provide the other party with thirty (30) days' written notice in the
event of cancellation, non-renewal, or material change in the coverage. Such
certificates shall be furnished within thirty (30) days after execution of this
Agreement.
<PAGE> 19
-19-
21. TITLE
Title to all Ingredients, Packing Supplies, any other property
which the Company supplied to ADI and the Products (hereinafter referred to
collectively as "Property") shall remain with the Company at all times and may
be transferred only by the Company to another party. ADI agrees to keep all
Property stored and located in a manner which will facilitate identification of
these items. ADI shall cooperate with the Company in the filing of applicable
petitions to notify any potential creditor that the Company holds title to all
the items referenced in this Section 21, and that ADI has no legal or equitable
interest therein.
22. CONFIDENTIALITY OF INFORMATION
(a) Duty of Secrecy and Confidentiality.
Each party hereto agrees to keep strictly secret and
confidential all information obtained from the other party hereto which is
disclosed in confidence to the other party, whether marked confidential or
otherwise (the "Confidential Information"); provided, however, that Confidential
Information disclosed orally shall be deemed Confidential Information only if
the nature or content of the information is set forth in writing and sent to the
non-disclosing party within ten (10) business days after disclosure thereof.
(b) Restriction on Use.
The parties hereto agree that they shall not use any
Confidential Information for any purpose whatsoever except in the manner
expressly provided for in this Agreement,
<PAGE> 20
-20-
and subject to the limitations and conditions set forth herein. Except as
provided in this Agreement, ADI is expressly prohibited from utilizing any
information obtained from the Company either for its own benefit, or for the
benefit of others. Such information is listed in Exhibits E and G to this
Agreement.
(c) Limitations and Survival of Obligations.
The obligations undertaken by the parties hereto pursuant to
this Section 22 shall not apply to any Confidential Information which is: (i)
obtained from the other party hereto which is or becomes generally available to
the public; (ii) obtained independently from other sources, other than in
consequence of the wilful or negligent act or omission of either of the parties
hereto or their employees; (iii) at the time of disclosure, in the possession of
the party to which such information is furnished, as evidenced by its written
records; or (iv) acquired, independently developed, discovered or arrived at by
the non-disclosing party without use of any Confidential Information received
from the other party. Either party may disclose Confidential Information to any
of its affiliates provided the same agree to be bound by the terms of this
Section 22. Either party may also disclose Confidential Information if the same
is required to be disclosed by law or governmental agencies provided prior
written notice is given to the non-disclosing party. The obligations set forth
in this Section 22, as so limited, shall survive termination of this Agreement
and shall remain in effect and be binding on the parties hereto for a period of
five (5) years after the termination of this Agreement. Should any party be
obligated to a third party to keep certain information confidential beyond
<PAGE> 21
-21- 21
that period, the obligation of the parties hereto to maintain secrecy of such
information shall continue until the party so obligated to a third party is
released by the said third party.
23. ARBITRATION
All disputes, controversies or differences arising in respect
of this Agreement shall be referred to and shall be finally settled by an
arbitration held in Alameda County in the State of California, U.S.A., pursuant
to the rules of the American Arbitration Association before a panel of three (3)
arbitrators selected in accordance with said rules.
24. TRADE-MARKS
Nothing in this Agreement shall be deemed to constitute or
result in an assignment or a license to ADI of any trade-marks, other
intellectual property or technology and know-how licensed to, or owned by the
Company, or in the creation of any equitable or other interest therein, or to
grant ADI any right to use such trade-marks, other intellectual property or
technology and know-how licensed to or owned by the Company except in the
performance of its obligations under this Agreement. Subject to section 22(c)
ADI agrees never to challenge, or to assist in any challenge to, the validity of
the Company's trade marks or other intellectual property rights pursuant to said
license agreement.
<PAGE> 22
-22-
25. TERM AND TERMINATION
(a) The initial term of this Agreement shall become effective on the
date first written above and shall continue in full force and effect for five
(5) years unless terminated by either party with six (6) months written notice
thereof.
(b) Notwithstanding Section 25 (a) hereof, this Agreement will
terminate: (i) upon written notice from either party in the event that a default
by the other party regarding any of its material obligations hereunder remains
uncorrected for a period of ninety (90) days after receipt of written
notification by the other party that such default exists; or (ii) immediately
upon written notice in the event either party becomes insolvent, files for
bankruptcy, or a petition for bankruptcy is filed against it which is not
vacated within (90) days, or if either party should file a petition or
assignment for the benefit of creditors covering any portion of its assets, or
if a receiver or trustee in bankruptcy is appointed.
(c) Upon expiration of this Agreement or in the event of termination,
any and all Property of the Company under the control of ADI shall be returned
to the Company or Company's designee within thirty (30) days from the date of
expiration or termination, and the Company shall have the right to enter ADI's
premises or any other facilities where such Company property is stored within
such thirty (30) day period upon five (5) days' written notice to identify and
remove the Company Property.
<PAGE> 1
EXHIBIT 11.1
CALYPTE BIOMEDICAL CORPORATION
COMPUTATION OF LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -----------------------
1993 1994 1995 1995 1996
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net loss attributable to common
stockholders.................. $(6,301,272) $(5,586,982) $(10,411,385) $(1,428,260) $(2,846,433)
=========== =========== ============ ========== =========
Weighted average shares used to
compute net loss per share
attributable to common
stockholders:.................
Convertible preferred
stock.................... 3,492,026 4,460,402 5,705,714 5,705,234 5,705,871
Common stock............... 514,939 551,365 569,349 569,349 569,378
Number of common shares issued,
warrants granted, warrants
exercised and stock options
granted in accordance with
Staff Accounting Bulletin
No. 83........................ 659,271 659,271 659,271 659,271 659,271
----------- ----------- ------------ --------- ---------
Total................. 4,666,236 5,671,038 6,934,334 6,933,854 6,934,520
=========== =========== ============ ========= =========
Net loss per share
attributable to
common
stockholders........ $ (1.35) $ (0.99) $ (1.50) $ (0.21) $ (0.41)
=========== =========== ============ =========== ===========
</TABLE>
The calculation includes the shares of convertible preferred stock (Series B,
Series C, Series D and Series E) as if they had converted to common stock on
their respective original dates of issuance, because such shares automatically
convert to common stock upon the closing of the public offering of the Company's
common stock.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our reports included herein and to the reference to our
firm under the headings "Selected Consolidated Financial Data" and "Experts" in
the Prospectus.
/s/ KPMG Peat Marwick LLP
San Francisco, California
July 26, 1996
