<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
------------------------
FORM 10-Q
------------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number: 000-20985
CALYPTE BIOMEDICAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1226727
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
1440 FOURTH STREET, BERKELEY, CALIFORNIA 94710
(Address of principal executive offices) (Zip Code)
(510) 749-5100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
The registrant had 20,415,650 shares of common stock outstanding as of
November 10, 1999.
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<PAGE>
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at
September 30, 1999 (unaudited) and December 31,
1998................................................................ 3
Condensed Consolidated Statements of Operations for the Three and
Nine Months Ended September 30, 1999 and 1998 (unaudited)........... 4
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998 (unaudited)....................... 5
Notes to Condensed Consolidated Financial
Statements (unaudited).............................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk......................................................... 18
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds........................... 19
Item 5. Other Information................................................... 19
Item 6. Exhibits and Reports on Form 8-K.................................... 21
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
9/30/99 12/31/98
----------- ----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................................... $ 4,883 $ 3,121
Securities held to maturity .................................................. 720 650
Accounts receivable .......................................................... 532 157
Inventories .................................................................. 1,590 1,748
Notes receivable - officers and employees .................................... 504 498
Note receivable - related party .............................................. - 768
Other current assets ......................................................... 270 666
----------- ----------
Total current assets ................................................ 8,499 7,608
Property and equipment, net of accumulated depreciation of $3,908
at September 30, 1999 and $3,357 at December 31, 1998 ........................ 1,294 1,783
Intangibles, net of accumulated amortization of $11 at
September 30, 1999 and $3 at December 31, 1998 ............................... 45 346
Other assets ...................................................................... 188 208
----------- ----------
$ 10,026 $ 9,945
----------- ----------
----------- ----------
LIABILITIES, MANDATORILY REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................. $ 930 $ 1,147
Accrued expenses ............................................................. 1,462 1,227
Note payable - current ....................................................... 900 -
Capital lease obligations - current portion .................................. 121 290
Deferred revenue ............................................................. 500 500
----------- ----------
Total current liabilities ........................................... 3,913 3,164
Deferred rent obligation .......................................................... 26 31
Capital lease obligations - long-term portion ..................................... 60 23
----------- ----------
Total liabilities ................................................... 3,999 3,218
Mandatorily redeemable Series A preferred stock, $0.001 par ----------- ----------
value; no shares authorized, 100,000 shares issued and
outstanding; aggregate redemption and liquidation value
of $1,000 plus cumulative dividends .......................................... 2,186 2,096
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $0.001 par value; 5,000,000 shares
authorized; no shares issued and outstanding ............................. - -
Common Stock, $0.001 par value; 30,000,000 shares authorized; 20,415,650
and 13,870,453 shares issued and outstanding as of September 30, 1999 and
December 31, 1998, respectively .......................................... 20 14
Common Stock subscribed ...................................................... - 3
Additional paid-in capital ................................................... 68,143 61,476
Deferred compensation ........................................................ (51) (107)
Accumulated deficit .......................................................... (64,271) (56,755)
----------- ----------
Total stockholders' equity .......................................... 3,841 4,631
----------- ----------
----------- ----------
$ 10,026 $ 9,945
----------- ----------
----------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE>
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ----------------------------
1999 1998 1999 1998
-------- ------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Product sales ............................................ $ 1,077 $ 147 $ 2,825 $ 684
-------- ------- -------- ---------
Operating expenses:
Product costs ............................................ 1,266 454 3,382 1,503
Research and development costs ........................... 864 1,155 3,437 2,883
Selling, general and administrative costs ................ 1,317 1,190 3,663 2,953
-------- ------- -------- ---------
Total expenses ......................................... 3,447 2,799 10,482 7,339
-------- ------- -------- ---------
Loss from operations ................................. (2,370) (2,652) (7,657) (6,655)
Interest income, interest expense and other income .......... 45 63 143 266
-------- ------- -------- ---------
Loss before income taxes ............................. (2,325) (2,589) (7,514) (6,389)
Income taxes ................................................ - - (2) (2)
-------- ------- -------- ---------
Net loss ........................................... (2,325) (2,589) (7,516) (6,391)
Less dividends on mandatorily redeemable Series A
preferred stock ........................................... (30) (30) (90) (90)
-------- ------- -------- ---------
Net loss attributable to common stockholders ................ $ (2,355) $(2,619) $ (7,606) $ (6,481)
-------- ------- -------- ---------
-------- ------- -------- ---------
Net loss per share attributable to common stockholders
(basic and diluted) ....................................... $ (0.12) $ (0.20) $ (0.40) $ (0.48)
-------- ------- -------- ---------
-------- ------- -------- ---------
Weighted average shares used to compute
net loss per share attributable to common
stockholders (basic and diluted) .......................... 20,399 13,422 18,966 13,404
-------- ------- -------- ---------
-------- ------- -------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-4-
<PAGE>
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................................................... $ (7,516) $ (6,391)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ...................................................... 559 390
Amortization of deferred compensation .............................................. 56 305
Forgiveness of note receivable from officer ........................................ - 57
Write-off of note and interest receivable to research and development costs ........ 890 -
Changes in operating assets and liabilities:
Accounts receivable ............................................................ (375) (65)
Inventories .................................................................... 451 (686)
Other current assets ........................................................... (112) (40)
Other assets ................................................................... 20 18
Accounts payable, accrued expenses and deferred
revenue ................................................................... 100 453
Deferred rent obligation ....................................................... (5) (5)
-------- --------
Net cash used in operating activities ................................... (5,932) (5,964)
-------- --------
Cash flows from investing activities:
Purchase of equipment .................................................................. (62) (197)
Notes receivable from officers ......................................................... (6) (346)
Loan to Pepgen ......................................................................... (64) (768)
Purchase of securities held to maturity ................................................ (1,450) (1,873)
Proceeds from maturity of securities ................................................... 1,380 -
-------- --------
Net cash used in investing activities ................................... (202) (3,184)
-------- --------
Cash flows from financing activities:
Proceeds from sale of stock ............................................................ 8,132 126
Expenses related to sale of stock ...................................................... (854) -
Expenses related to purchase of certain assets of Cambridge Biotech .................... (68) -
Principal payments on capital lease obligations ........................................ (214) (342)
Principal payments on notes payable .................................................... (1,100) -
Proceeds from notes payable ............................................................ 2,000 -
-------- --------
Net cash provided by (used in) financing activities ..................... 7,896 (216)
-------- --------
Net increase (decrease) in cash and cash equivalents ...................................... 1,762 (9,364)
Cash and cash equivalents at beginning of period .......................................... 3,121 10,820
-------- --------
Cash and cash equivalents at end of period ................................................ $ 4,883 $ 1,456
-------- --------
-------- --------
Supplemental disclosure of cash flow activities:
Cash paid for interest ............................................................... $ 154 $ 93
Cash paid for income taxes ........................................................... 2 2
Supplemental disclosure of noncash activities:
Refinance of capital lease obligation ................................................ 82 -
Acquisition of equipment through obligations under capital leases .................... - 34
Dividends accrued on mandatorily redeemable Series A preferred stock ................. 90 90
Revaluation of acquisition of certain assets of Cambridge Biotech .................... 293 -
Conversion of common stock subscribed to common stock ................................ 3 -
Deferred compensation attributable to stock grants ................................... - 50
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
-5-
<PAGE>
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(1) THE COMPANY AND BASIS OF PRESENTATION
Calypte Biomedical Corporation (the Company) was incorporated on November 11,
1989. The Company's primary activities are to sell its FDA-approved urine
Human Immunodeficiency Virus Type I (HIV-1) enzyme immunoassay (EIA)
screening test, its FDA-approved urine and serum HIV-1 Western Blot
supplemental tests, perform research and development on new products and
obtain FDA approval for its urine-based diagnostic tests. Prior to March 31,
1998, the Company was considered a development stage enterprise. On June 1,
1998, the Company announced that the U.S. Food and Drug Administration
licensed the urine HIV-1 Western Blot test that confirms the presence of
antibodies to HIV-1 in urine samples. The new test is used on samples that
are repeatedly reactive in the Company's HIV-1 urine antibody screening test.
The new test completes the only available urine-based HIV test method.
Accordingly, the Company ceased being a development stage enterprise.
In December 1998, Calypte acquired from Cambridge Biotech Corporation certain
assets relating to the Western Blot product line for certain infectious
diseases. The acquisition included the urine-based and serum-based HIV-1
Western Blot products, as well as a supplemental test for Lyme Disease and
Human T-Lymphotropic Virus (HTLV).
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company, pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC), and reflect all adjustments
(consisting of normal recurring adjustments) which, in the opinion of
management, are necessary for a fair presentation of the Company's financial
position as of September 30, 1999 and the results of its operations for the
three and nine months ended September 30, 1999 and 1998 and its cash flows
for the nine months ended September 30, 1999 and 1998. Interim results are
not necessarily indicative of the results to be expected for the full year.
This information should be read in conjunction with the Company's audited
consolidated financial statements for each of the years in the three year
period ended December 31, 1998 included in Form 10-K filed with the SEC on
March 25, 1999.
Certain information in footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted pursuant to the rules and
regulations of the SEC.
(2) SIGNIFICANT ACCOUNTING POLICIES
NET LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
Basic net loss per share attributable to common stockholders is computed by
dividing net loss by the weighted average number of shares of common stock
outstanding during the period presented. The computation of diluted earnings
per common share is similar to the computation of basic net loss per share
attributable to common stockholders, except that the denominator is increased
for the assumed conversion of convertible securities and the exercise of
dilutive options using the treasury stock method. The weighted average shares
used in computing basic and diluted net loss per share attributable to common
stockholders are equivalent for the periods presented. Options and warrants
were excluded from the computation of loss per share as their effect is
antidilutive.
-6-
<PAGE>
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(3) INVENTORIES
Inventories are stated at the lower of cost or market and the cost is
determined using the first-in, first-out method. Inventories as of September
30, 1999 and December 31, 1998 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
Raw Materials $ 310 $ 300
Work-in-Process 1,092 1,134
Finished Goods 188 314
---------- ---------
Total Inventory $ 1,590 $ 1,748
---------- ---------
---------- ---------
</TABLE>
(4) ADJUSTMENT OF PURCHASE PRICE ALLOCATION
On December 17, 1998, the Company acquired the assets relating to the Western
Blot product line for certain infectious diseases from Cambridge Biotech
Corporation for a total purchase price of $2,090,000. During the first
quarter of 1999, management adjusted its estimates of the fair value of
assets acquired in connection with the allocation of the purchase price. As a
result, intangible assets were reduced and inventory was increased by
$293,000.
(5) NOTE RECEIVABLE - RELATED PARTY (PEPGEN CORPORATION)
Pepgen Corporation is a development stage company in which Calypte has a
minority equity interest.
During 1998, the Company loaned Pepgen $768,000 at an interest rate of 10%.
During the first quarter of 1999, the Company loaned Pepgen an additional
$64,000 at an interest rate of 10%. The Company's note receivable from Pepgen
totaling $832,000 as of March 31, 1999 was secured by all intellectual
property of Pepgen. The entire loan plus interest was due July 1, 1999.
In May 1999, Pepgen received a financing offer from a third party that was
contingent upon Calypte converting its note receivable due from Pepgen into
an additional equity interest in Pepgen. At a meeting of the Calypte Board of
Directors, the Board agreed for such a conversion to take place. Effective
March 31, 1999, the Company has written off its total investment in the note
receivable from Pepgen including all accrued interest as research and
development costs. Additional amounts of $63,000 were spent on research and
development related to Pepgen during the second quarter of 1999.
-7-
<PAGE>
CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(6) LINE OF CREDIT
In January 1999, the Company entered into a line of credit agreement to
borrow up to $2.0 million at an interest rate of prime plus 1 1/4%. At
September 30, 1999, the prime rate was 8.25%. The agreement requires the
Company to maintain certain financial covenants and comply with certain
reporting and other requirements. In addition, borrowings under the line of
credit agreement are secured by Calypte's assets. In January 1999, Calypte
drew down $2.0 million on the line of credit. During the third quarter of
1999, the Company repaid $1.1 million on the line of credit. The balance of
the line of credit at September 30, 1999 of $900,000 is to be repaid in nine
equal monthly installments of principal, plus accrued interest.
(7) SUBSEQUENT EVENT
On October 6, 1999, Calypte announced that its affiliated therapeutic
company, Pepgen Corporation, secured $3.8 million in a new round of
financing. Following the closing of the financing, Calypte owns 41 percent of
Pepgen.
-8-
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE STATEMENTS IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" THAT RELATE TO FUTURE PLANS, EVENTS OR
PERFORMANCE ARE FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. ACTUAL RESULTS, EVENTS OR PERFORMANCE MAY DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF A
VARIETY OF FACTORS, INCLUDING THOSE SET FORTH UNDER "FACTORS THAT MAY AFFECT
FUTURE RESULTS, EVENTS OR PERFORMANCE" BELOW. THE COMPANY UNDERTAKES NO
OBLIGATION TO PUBLICLY UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
OVERVIEW
Calypte's efforts are primarily focused on selling, developing and obtaining
approval for Calypte's urine-based and serum-based diagnostic tests for
sexually transmitted diseases. In August 1996, we received a product license
and an establishment license from the U.S. Food and Drug Administration (FDA)
to manufacture and sell Calypte's urine-based HIV-1 screening test for use in
professional laboratory settings. In June 1998, we announced that the FDA had
licensed the urine HIV-1 Western Blot supplemental test that confirms the
presence of antibodies to HIV-1 in urine samples. The new test is used on
samples that are repeatedly reactive in our HIV-1 urine antibody screening
test. The new test completes the only available FDA-approved urine-based HIV
test method. There can be no assurance the Company will have significant
revenues from sales of the HIV-1 urine screening assay or the supplemental
test.
In December 1998, Calypte acquired from Cambridge Biotech certain assets
relating to the Western Blot product line for certain infectious diseases.
The acquisition included the urine-based and serum-based HIV-1 Western Blot
products, as well as a supplemental test for Lyme Disease and Human
T-Lymphotropic Virus (HTLV).
The Company expects operating losses to continue as the Company continues its
marketing and sales activities for its FDA-approved products and conducts
additional research and development for subsequent products. Our marketing
strategy is to use distributors, focused direct selling and marketing
partners to penetrate certain targeted domestic and international markets.
The Company plans to maintain a small direct sales force to sell the
Company's urine-based HIV-1 test to laboratories serving the life insurance
market. International and other U.S. markets will be addressed utilizing
diagnostic product distributors. 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.
-9-
<PAGE>
RESULTS OF OPERATIONS
The following represents selected financial data:
<TABLE>
<CAPTION>
(in thousands) (in thousands)
------------------------ -----------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenue $ 1,077 $ 147 $ 2,825 $ 684
-------- -------- -------- --------
Operating expenses:
Product costs 1,266 454 3,382 1,503
Research and development 864 1,155 3,437 2,883
Selling, general and administrative 1,317 1,190 3,663 2,953
-------- -------- -------- --------
Total expenses 3,447 2,799 10,482 7,339
-------- -------- -------- --------
Loss from operations (2,370) (2,652) (7,657) (6,655)
Interest income (net of interest expense) and other income 45 63 143 266
-------- -------- -------- --------
Loss before income taxes $ (2,325) $ (2,589) $ (7,514) $ (6,389)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
In the third quarter of 1999, revenue increased $930,000 or 633% to $1.1
million from $147,000 in the prior year's comparable period, due primarily to
the acquisition of certain assets of Cambridge Biotech Corporation and the
sale of products related to that acquisition.
Product costs increased $812,000 or 179% to $1.3 million for the three months
ended September 30, 1999 from $454,000 for the three months ended September
30, 1998. Product costs during the three months ended September 30, 1999 were
higher due to the sale of products related to the acquisition of certain
assets of Cambridge Biotech Corporation.
Research and development expenses decreased $291,000 or 25% to $864,000 for
the three months ended September 30, 1999 from $1.2 million in the
corresponding period of the prior year. The decrease was due to research
funding made to outside organizations and more personnel hired to complete
research and development studies in 1998.
Selling, general and administrative expenses increased $127,000 or 11% to
$1.3 million for the three months ended September 30, 1999 from $1.2 million
for the three months ended September 30, 1998. The increase was primarily
related to general and administrative costs associated with assets acquired
from Cambridge Biotech Corporation offset by a decrease in the use of outside
consultants and sales conferences in 1999.
Interest income (net of interest expense) and other income decreased $18,000
or 29% to $45,000 for the three months ended September 30, 1999 from $63,000
for the three months ended September 30, 1998. The decrease was primarily due
to a decrease in the interest earned from cash reserves and securities held
to maturity and the increase in interest expense related to borrowings on the
bank line of credit.
-10-
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
In the first nine months of 1999, revenue increased $2.1 million or 313% to
$2.8 million from $684,000 in the prior year's comparable period due
primarily to the acquisition of certain assets of Cambridge Biotech
Corporation and the sale of products related to that acquisition.
Product costs increased $1.9 million or 125% to $3.4 million for the nine
months ended September 30, 1999 from $1.5 million for the nine months ended
September 30, 1998. Product costs during the nine months ended September 30,
1999 were higher due to the sale of products related to the acquisition of
certain assets of Cambridge Biotech Corporation.
Research and development expenses increased $554,000 or 19% to $3.4 million
for the nine months ended September 30, 1999 from $2.9 million in the
corresponding period of the prior year. The increase was primarily due to the
write-off of notes and interest receivable from a related party as research
and development in 1999 offset by research funding made to outside
organizations in 1998.
Selling, general and administrative expenses increased $710,000 or 24% to
$3.7 million for the nine months ended September 30, 1999 from $3.0 million
for the nine months ended September 30, 1998. The increase was primarily
related to general and administrative costs associated with assets acquired
from Cambridge Biotech Corporation offset by a decrease in the use of outside
consultants in 1999.
Interest income (net of interest expense) and other income decreased $123,000
or 46% to $143,000 for the nine months ended September 30, 1999 from $266,000
for the nine months ended September 30, 1998. The decrease was primarily due
to a decrease in the interest earned from cash reserves and securities held
to maturity and the increase in interest expense related to borrowings on the
bank line of credit.
LIQUIDITY AND CAPITAL RESOURCES
FINANCING ACTIVITIES
The Company has financed operations from inception primarily through the
private placement of preferred stock and common stock, the Company's Initial
Public Offering (IPO) of common stock and, to a lesser extent, from payments
related to research and development agreements, a bank line of credit,
equipment lease financings and borrowings from notes payable.
In January 1999, the Company completed a private placement of 3,102,500
shares of its Common Stock at $1.00 per share. The Company received net
proceeds of approximately $2.8 million after deducting placement agent
commissions and additional expenses associated with the private placement.
In January 1999, the Company drew down $2.0 million on a line of credit with
a bank. The borrowings under the line of credit agreement are secured by
Calypte's assets. During the third quarter of 1999, the Company repaid $1.1
million on the line of credit. The balance of the line of credit at September
30, 1999 of $900,000 is to be repaid in nine equal monthly installments of
principal, plus accrued interest.
In April 1999, the Company completed a private placement of 3,398,000 shares
of its Common Stock at $2.25 per share. The Company received net proceeds of
approximately $7.0 million after deducting placement agent commissions and
additional expenses associated with the private placement.
-11-
<PAGE>
Although the Company believes current cash will be sufficient to meet the
Company's operating expenses and capital requirements, the Company's future
liquidity and capital requirements will depend on numerous factors, including
market acceptance of its products, regulatory actions by the FDA and other
international regulatory bodies, intellectual property protection and the
ability to raise additional capital in a timely manner.
There can be no assurance that the Company's products will be successfully
commercialized or that the Company will achieve significant product revenue.
In addition, there can be no assurance that the Company will achieve or
sustain profitability in the future. 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. Any failure to raise
additional financing will likely place us in significant financial jeopardy.
Therefore, the Company cannot predict the adequacy of its capital resources
on a long-term basis.
Our independent auditors have issued their report on our 1998 financial
statements which states in part that we have suffered recurring losses and
have limited liquidity, both of which raise substantial doubt about our
ability to continue as a going concern.
OPERATING ACTIVITIES
For the nine months ended September 30, 1999 and September 30, 1998, the
Company's cash used in operations was $5.9 million and $6.0 million,
respectively. The cash used in operations was primarily for inventory,
marketing the complete urine-based HIV-1 testing method and funding research
and development, manufacturing, selling, and general and administrative
expenses of the Company.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 is effective for fiscal years beginning after June 15, 1999. SFAS No. 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designed as part of a hedge transaction and, if it
is, the type of hedge transaction. In June 1999, the FASB issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133." SFAS No. 137 delays the
effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000.
The Company does not expect that the adoption of SFAS Nos. 133 and 137 will
have a material impact on its consolidated financial statements because the
Company does not currently hold any derivative instruments.
-12-
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS, EVENTS OR PERFORMANCE
You should consider carefully the following risk factors, along with the
other information contained or incorporated by reference in this Form 10-Q,
in evaluating the Company. These factors, among others, may cause actual
results, events or performance to differ materially from those expressed in
any forward-looking statements we make in this Form 10-Q or in press releases
or other public disclosures.
UNCERTAIN MARKET ACCEPTANCE OF OUR NEW METHOD OF DETERMINING THE
PRESENCE OF HIV ANTIBODIES. Our products incorporate a new method of
determining the presence of HIV antibodies. There can be no assurance that we
will obtain:
- any significant degree of market acceptance among physicians, patients
or health care payors; or
- recommendations and endorsements by the medical community which are
essential for market acceptance of the products.
We have FDA approval to market our urine HIV-1 screening and confirmatory
test in the United States and in July, 1998 we began marketing this product.
However, to date this product has only generated limited revenues and not
achieved significant market penetration. The failure of our products to
obtain market acceptance would have a material adverse effect on us.
WE HAVE LITTLE EXPERIENCE SELLING AND MARKETING OUR HIV-1 URINE-BASED
SCREENING TEST. We have little experience marketing and selling our products
either directly or through our distributors, since we only began such sales
in the second half of 1998. The success of our products depends upon
alliances with third-party distributors. There can be no assurance that:
- our direct selling efforts will be effective;
- our distributors will successfully market our products; or
- if our relationships with distributors terminate, we will be able to
establish relationships with other distributors on satisfactory terms,
if at all.
Any disruption in our distribution, sales or marketing network could have a
material adverse effect on us.
WE HAVE SUSTAINED LOSSES IN THE PAST AND WE EXPECT TO SUSTAIN LOSSES IN
THE FUTURE. We have incurred losses in each year since our inception. Our net
loss for the nine months ended September 30, 1999 was $7.5 million and our
accumulated deficit as of September 30, 1999 was $64.3 million. We expect
operating losses to continue as we continue our marketing and sales
activities for our FDA-approved products and conduct additional research and
development for subsequent products.
OUR QUARTERLY RESULTS MAY FLUCTUATE DUE TO CERTAIN REGULATORY, MARKETING
AND COMPETITIVE FACTORS OVER WHICH WE HAVE LITTLE OR NO CONTROL. The factors
listed below, some of which we cannot control, may cause our revenues and
results of operations to fluctuate significantly:
- actions taken by the FDA or foreign regulatory bodies relating to our
products;
- the extent to which our products gain market acceptance;
- the timing and size of distributor purchases; and
- introductions by competitors of alternative means for testing for HIV.
WE DEPEND UPON THE VIABILITY OF THREE PRODUCTS - OUR HIV-1 URINE-BASED
SCREENING TEST AND OUR URINE AND BLOOD BASED SUPPLEMENTAL TESTS. Our HIV-1
urine-based screening test and urine and blood-based supplemental tests are
our only products. Accordingly, we may have to cease operations if our
screening and supplemental tests fail to achieve market acceptance or
generate significant revenues.
-13-
<PAGE>
OUR PRODUCT DEPENDS UPON RIGHTS TO TECHNOLOGY THAT WE HAVE LICENSED FROM
THIRD PARTY PATENT HOLDERS AND THERE CAN BE NO ASSURANCE THAT THE RIGHTS WE
HAVE UNDER THESE LICENSING AGREEMENTS ARE SUFFICIENT OR THAT WE CAN
ADEQUATELY PROTECT THOSE RIGHTS. We currently have the right to use patent
and proprietary rights which are material to the manufacture and sale of our
HIV-1 urine-based screening test under licensing agreements with New York
University, Cambridge Biotech Corporation, Repligen Corporation, and the
Texas A&M University System.
WE RELY ON SOLE SOURCE SUPPLIERS THAT WE CANNOT QUICKLY REPLACE FOR
CERTAIN COMPONENTS CRITICAL TO THE MANUFACTURE OF OUR PRODUCTS. Any delay or
interruption in the supply of these components could have a material adverse
effect on us by significantly impairing our ability to manufacture products
in sufficient quantities, particularly as we increase our manufacturing
activities in support of commercial sales.
WE HAVE LIMITED EXPERIENCE IN MANUFACTURING OUR PRODUCTS AND LITTLE
EXPERIENCE IN MANUFACTURING OUR PRODUCTS IN COMMERCIAL QUANTITIES. We may
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.
THE SUCCESS OF OUR PLANS TO ENTER INTERNATIONAL MARKETS MAY BE LIMITED
OR DISRUPTED DUE TO RISKS RELATED TO INTERNATIONAL TRADE AND MARKETING AND
THE CAPABILITIES OF OUR DISTRIBUTORS. We anticipate that international
distributor sales will generate a significant portion of our revenues for the
next several years. We believe that our urine-based test can provide
significant benefits in countries that do not have the facilities or
personnel to safely and effectively collect and test blood samples. The
following risks may limit or disrupt our international sales;
- 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 exchanges rates.
Some of our distributors have limited international marketing
experience. There can be no assurance that these distributors will be able to
market successfully our products in foreign markets.
WE FACE INTENSE COMPETITION IN THE MEDICAL DIAGNOSTIC PRODUCTS MARKET
AND RAPID TECHNOLOGICAL ADVANCES BY COMPETITORS. Competition in our
diagnostic market is intense and we expect it to increase. Within the United
States, our competitors include a number of well-established manufacturers of
HIV tests using blood samples, plus at least one system for the detection of
HIV antibodies using oral fluid samples. Many of our competitors have
significantly greater financial, marketing and distribution resources than we
do. Our competitors may succeed in developing or marketing technologies and
products that are more effective than ours.
These developments could render our technologies or products obsolete or
noncompetitive or otherwise have a material adverse effect on us.
-14-
<PAGE>
OUR ABILITY TO MARKET OUR PRODUCT DEPENDS UPON OBTAINING AND MAINTAINING
FDA AND FOREIGN REGULATORY APPROVALS. Numerous governmental authorities in the
United States and other countries regulate our products. The FDA regulates our
products under federal statutes and regulations related to pre-clinical and
clinical testing, manufacturing, labeling, distribution, sale and promotion of
medical devices in the United States.
If we fail to comply with FDA regulations, or if the FDA believes that we
are not in compliance with such regulations, the FDA can:
- detain or seize our products;
- issue a recall of our products;
- prohibit marketing and sales of our products; and
- assess civil and criminal penalties against us, our officers or our
employees.
We also plan to sell our products in certain foreign countries where they
may be subject to similar local regulatory requirements. The imposition of any
of the sanctions described above could have a material adverse effect on us.
The regulatory approval process in the United States and other countries is
expensive, lengthy and uncertain. We may not obtain necessary regulatory
approvals or clearances in a timely manner, if at all. We may lose previously
obtained approvals or clearances or fail to comply with regulatory requirements.
The occurrence of any of these events would have a material adverse effect on
Calypte.
Before we begin to manufacture our product at our Alameda facility, we must
obtain FDA approval for that facility. Delays in receiving the FDA's approval or
other difficulties which we encounter in scaling-up our manufacturing capacity
to meet demand could have a material adverse effect on us.
WE HAVE RECEIVED WARNING LETTERS FROM THE FDA AND WE MUST SATISFY THE
FDA'S CONCERNS IN ORDER TO AVOID REGULATORY ACTION AGAINST US. In November
1998, the Company received a Warning Letter from the FDA following an
inspection by the FDA of the Company's manufacturing facility in Berkeley,
California. On December 11, 1998, the Company responded in writing to each of
the alleged deficiencies cited in the Warning Letter. Subsequently, the
Company received a letter from the FDA in which the FDA requested further
responses from the Company with regard to certain of such alleged
deficiencies. The Company responded to the subsequent letter on June 1, 1999.
On September 28, 1999, the FDA conducted a follow up inspection of the
Company's Berkeley and Alameda, California facilities. If the FDA is not
satisfied with the Company's responses and the Company's corrective actions,
it could take regulatory actions against the Company including license
suspension, revocation, or denial, seizure of products or injunction, or
civil penalties or criminal sanctions. Any such FDA action would have a
material adverse effect upon the Company's ability to conduct operations. In
addition, failure of the Company to satisfy the FDA as to such Warning Letter
could adversely affect the Company's pending FDA license application for the
Alameda facility.
In May 1999, the Company received a Warning Letter from the FDA following an
inspection by the FDA of the Company's manufacturing facility in Rockville,
Maryland. The Warning Letter was based upon an inspection of the Rockville
manufacturing facility that was conducted between November 30 and December
11, 1998, which cited a number of significant observations. If the FDA is not
satisfied with the Company's responses and the Company's corrective actions,
it could take regulatory actions against the Company including license
suspension, revocation, or denial, seizure of products or injunction, or
civil penalties or criminal sanctions. Any such FDA action would have a
material adverse effect upon the Company's ability to conduct operations. In
addition, failure of the Company to satisfy the FDA as to such Warning Letter
could adversely affect the Company's pending FDA license application for the
Rockville facility. On May 24, 1999, the Company responded in writing to each
of the alleged deficiencies cited in the Warning Letter.
-15-
<PAGE>
AS A SMALL MANUFACTURER OF A MEDICAL DIAGNOSTIC PRODUCT, WE ARE EXPOSED
TO PRODUCT LIABILITY AND RECALL RISKS FOR WHICH INSURANCE COVERAGE IS
EXPENSIVE, LIMITED AND POTENTIALLY INADEQUATE. We manufacture medical
diagnostic products which subject us to risks of product liability claims or
product recalls, particularly in the event of false positive or false
negative reports. A product recall or a successful product liability claim or
claims which exceed our insurance coverage could have material adverse effect
on us. We maintain a $10,000,000 claims made policy of product liability
insurance. However, product liability insurance is expensive. In the future
we may not be able to obtain coverage on acceptable terms, if at all.
Moreover, our insurance coverage may not adequately protect us from liability
which we incur in connection with clinical trials or sales of our products.
OUR CHARTER DOCUMENTS MAY INHIBIT A TAKEOVER. Certain provisions of our
Certificate of Incorporation and Bylaws could:
- - discourage potential acquisition proposals;
- - delay or prevent a change in control of Calypte;
- - diminish stockholders' opportunities to participate in tender offers for
our common stock, including tender offers at prices above the then current
market price; or
- - inhibit increases in the market price of our common stock that could result
from takeover attempts.
INVESTOR'S ABILITY TO TRADE OUR COMMON STOCK MAY BE LIMITED BY TRADING
VOLUME. The trading volume in our common shares has been relatively limited.
A consistently active trading market for our common stock may not develop.
WE HAVE ADOPTED A SHAREHOLDER RIGHTS PLAN THAT MAY HAVE CERTAIN
ANTI-TAKEOVER EFFECTS. On December 15, 1998, the Board of Directors of
Calypte declared a dividend distribution of one preferred share purchase
right ("Right") for each outstanding share of Common Stock of the Company.
The dividend is payable to the stockholders of record on January 5, 1999 with
respect to share of Common Stock issued thereafter until a subsequent
"distribution date" defined in a Rights Agreement and, in certain
circumstances, with respect to share of Common Stock issued after the
Distribution Date. The description and terms of the Rights are set forth in a
Rights Agreement between the Company and ChaseMellon Shareholder Service,
L.L.C. as Rights Agent, dated as of December 15, 1998.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the
Company without conditioning the offer on the Rights being redeemed or a
substantial number of Rights being acquired. However, the Rights should not
interfere with any tender offer, or merger, which is approved by the Company
because the Rights do not become exercisable in the event of a permitted
offer or other acquisition exempted by the Board.
WE MAY BE REMOVED FROM THE NASDAQ SMALLCAP MARKET IF WE FAIL TO MEET
CERTAIN MAINTENANCE CRITERIA. The Nasdaq Stock Market inquired on one
occasion whether we continue to meet the maintenance criterion for trading on
the Nasdaq SmallCap Market. We currently meet the maintenance criterion but
our ability to continue to do so will depend on whether we are able to
maintain net tangible assets of at least $2,000,000 and whether the minimum
bid price for our common stock exceeds $1.00 per share for at least ten
consecutive business days during any period of 120 consecutive business days.
The public trading volume of our common stock and the ability of our
stockholders to sell their shares could be significantly impaired if we fail
to meet the maintenance criteria and are removed from the Nasdaq SmallCap
Market. In that case, our common stock would trade on either the OTC bulletin
board, a regional exchange or in the pink sheets, which would likely result
in an even more limited trading volume.
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<PAGE>
THE PRICE OF CALYPTE'S COMMON STOCK HAS BEEN HIGHLY VOLATILE DUE TO SEVERAL
FACTORS WHICH WILL CONTINUE TO EFFECT THE PRICE OF OUR STOCK. Our common stock
has traded as low as $1.00 and as high as $3.31 during the first nine months of
1999. Some of the factors leading to the volatility include:
- - price and volume fluctuations in the stock market at large which do not
relate to our operating performance;
- - fluctuations in our operating results;
- - announcements of technological innovations or new products which we or our
competitors make;
- - FDA and international regulatory actions;
- - availability of reimbursement for use of our products from private health
insurers, governmental health administration authorities and other
third-party payors;
- - developments with respect to patents or proprietary rights;
- - public concern as to the safety of products that we or others develop;
- - changes in health care policy in the United States or abroad;
- - changes in stock market analysts' recommendations regarding Calypte, other
medical products companies or the medical product industry generally; and
- - issuance by us of additional shares of Common Stock in public or private
financings.
CALYPTE AND THE PRICE OF CALYPTE SHARES MAY BE ADVERSELY EFFECTED BY THE
PUBLIC SALE OF A SIGNIFICANT NUMBER OF THE SHARES ELIGIBLE FOR FUTURE SALE.
Nearly all outstanding shares of our common stock are freely tradable. Sales
of common stock in the public market could materially adversely affect the
market price of our common stock. Such sales also may inhibit our ability to
obtain future equity or equity-related financing on acceptable terms.
OUR RESEARCH AND DEVELOPMENT OF THE HIV-1 URINE-BASED TEST INVOLVES THE
CONTROLLED USE OF HAZARDOUS MATERIALS. There can be no assurance that our
safety procedures for handling and disposing of hazardous materials such as
azide will comply with applicable regulations. In addition, we cannot
eliminate the risk of accidental contamination or injury from these
materials. We may be held liable for damages from such an accident and that
liability could have a material adverse effect on us.
WE MAY NOT BE ABLE TO RETAIN OUR KEY EXECUTIVES AND RESEARCH AND
DEVELOPMENT PERSONNEL. As a small company with only 50 employees, our success
depends on the services of key employees in executive and research and
development positions. The loss of the services of one or more of such
employees could have a material adverse effect on us.
WE HAVE NOT COMPLETED OUR YEAR 2000 COMPLIANCE PROGRAM SO THE POTENTIAL
COSTS AND COMPLICATIONS ASSOCIATED WITH YEAR 2000 COMPLIANCE CANNOT BE
DETERMINED AT THIS TIME. Calypte has a formal Year 2000 Program focusing on
five key readiness areas: 1) hardware, addressing information technology; 2)
software, addressing business, research, financial, inventory planning,
production control, product distribution and customer support; 3) firmware,
addressing built-in microprocessors that control production and
non-production equipment; 4) third party suppliers of critical inventory; and
5) third party service providers.
Calypte established a Year 2000 Task Force earlier this year. The task
force has systematically examined each of the five key readiness areas by 1)
identifying items with Year 2000 compliance concerns; 2) assessing the risk
and impact of noncompliance for each item identified; and 3) correcting
non-compliant items and testing the corrections to ensure readiness at both
component and system levels. We have completed risk assessment in each area
for our California and Maryland facilities, and correction and testing and
the development of contingency plans are in process. Calypte's key suppliers
have informed us that they have achieved substantial Year 2000 compliance.
We have also completed correction and testing in the Hardware readiness area
and we believe that area to be Year 2000 compliant. Our assessment of our
suppliers' Year 2000 readiness is based solely upon information received from
our suppliers. Calypte does not have the means to independently verify the
Year 2000 compliance of its suppliers. Based on the information from our key
suppliers
-17-
<PAGE>
and compliance in our Hardware area, Calypte has identified software and
third party service providers as the remaining areas in which Year 2000
failures could reasonably occur. Our Year 2000 Task Force is currently in
the process of developing contingency plans for those areas. We expect to
complete the development and testing of our contingency plans by December 17,
1999. Until we have completed our contingency plans we will not be in a
position to identify our most reasonably likely worst case Year 2000
scenario. As of September 30, 1999, we have spent a total of approximately
$27,000 on our Year 2000 program.
We estimate that total Year 2000 costs to upgrade systems for our
California and Maryland facilities will range from $35,000 to $45,000 with
the majority of total costs to be incurred in the next month. At this time we
do not anticipate that Calypte will incur significant operating expenses or
be required to invest heavily in computer system improvements because our
manufacturing process does not rely heavily on automation and our existing
computer hardware has proven to be Year 2000 compliant. However, Calypte is
continuing to assess and develop alternatives that will require refinement of
its cost estimate over time. There can be no assurance that there will not be
a delay in, or increased costs associated with, our Year 2000 compliance
program. Therefore, the potential impact of possible complications on
Calypte's financial condition and results of operations cannot be determined
at this time. If computer systems used by Calypte or its suppliers or the
product integrity of products provided to Calypte by suppliers fail or
experience significant difficulties related to the Year 2000, Calypte's
operations and financial condition could be adversely effected.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since December 31, 1998, there have been no material changes in the Company's
market risk exposure.
-18-
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Within the three years ended September 30, 1999, the Company completed
three private placements of shares of its Common Stock. See "Financing
Activities" in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section. The shares sold in each private
placement were exempt from registration with the Securities and Exchange
Commission pursuant to Rule 506 of Regulation D of the Securities Act of 1933
as amended ("Securities Act"). Shares were sold only to accredited investors
as defined in Rule 501 of the Securities Act and were registered for resale
by such investors on Forms S-3 filed on October 21, 1997, January 19, 1999
and March 30, 1999. The proceeds from each private placement have been used
to finance operations.
ITEM 5. OTHER INFORMATION
ADVANCE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
The Company's 1999 annual meeting is scheduled to be held on November 18,
1999. The date of its 2000 annual meeting has been advanced to June 15, 2000.
Under the rules of the Securities and Exchange Commission, stockholder
proposals submitted for next year's Proxy Statement must be received by the
Company no later than the close of business on January 14, 2000, to be
considered. Proposals should be addressed to William A. Boeger, Secretary,
Calypte Biomedical Corporation, 1440 Fourth Street, Berkeley, California
94710.
Any stockholder who wishes to bring a proposal before the Calypte Biomedical
Corporation 2000 Annual Meeting of Stockholders, but does not wish to include
it in the Company's proxy materials, must provide written notice of the
proposal to Calypte's Secretary, at the above address, by February 14, 2000.
CHANGES TO SENIOR MANAGEMENT
On September 24, 1999, Calypte announced changes in several key management
positions. John DiPietro, chief operating officer and chief financial
officer, left Calypte to pursue other business interests. Upon his departure,
DiPietro agreed to continue his association with the Company through
nomination to its board of directors. Dick Van Maanen, the Company's
director of sales and marketing, was named acting general manager of
Calypte's California operations. In addition, Don Kafader joined the Company
as its director of regulatory affairs on September 21, 1999.
-19-
<PAGE>
SUBSEQUENT EVENT
On October 19, 1999, Calypte Biomedical announced further changes in several
key management positions. Nancy Katz joined Calypte as president, chief
operating officer, chief financial officer and as a member of its board of
directors. David Collins, a member of the Company's board, assumed the role
of chief executive officer. William A. Boeger, Calypte's former CEO,
continues to serve as chairman of the board.
Boeger, who has been chairman since 1994, was asked to take on the additional
duties of president and CEO in 1997. During his tenure as president, Boeger
helped Calypte obtain FDA approval for its urine HIV-1 tests, acquire the HIV
testing assets from Cambridge Biotech, restructure its overseas distribution
and sign a major domestic distributor. In addition to his role as chairman,
Boeger will continue as a consultant to the Company, focusing on key projects
to increase domestic and international adoption of Calypte's HIV-1 tests.
Dave Collins brings to his new role at Calypte more than 30 years of
experience in the pharmaceutical industry. Most recently, Collins was
president of Schering-Plough HealthCare Products, Inc. This Schering-Plough
subsidiary manufactures over-the-counter drugs like Drixoral Cold Medicine
and Afrin Nasal Spray. Prior to working for Schering-Plough, Collins held a
variety of positions during his 26-year career at Johnson & Johnson which
included vice chairman, board of directors for Public Affairs & Planning,
chairman, Consumer Products Sector, general counsel and corporate secretary.
Nancy Katz brings more than 18 years of experience in pharmaceutical
marketing and sales to Calypte. Prior to joining Calypte, Katz served as
president of Zila Pharm Inc., a prescription and non-prescription oral health
care products company. Prior to working for Zila Pharm Inc., Katz led sales
and marketing efforts for LifeScan, the diabetes testing division of Johnson
& Johnson. Katz also served as vice president of U.S. marketing, directing
LifeScan's marketing and customer call center departments. During her
seven-year career at Schering-Plough Healthcare Products, she held numerous
positions including senior director and general manager, marketing director,
Footcare New Products and product director, OTC New Products.
-20-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibit 10.51* Non-Exclusive Patent License Agreement
between the Registrant and Public Health
Service, dated June 30, 1999.
Exhibit 10.52* Distribution Agreement between the
Registrant and Carter-Wallace, Inc., dated as
of September 9, 1999.
Exhibit 10.53 Letter Agreement between the Registrant and
John D. DiPietro, dated as of September 17,
1999.
Exhibit 10.54 Consulting Agreement between the Registrant
and John D. DiPietro, dated as of September 17,
1999.
Exhibit 27 Financial Data Schedule
b. Reports on Form 8-K
None
------------------------
*Confidential treatment has been granted as to certain portions of
this exhibit.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALYPTE BIOMEDICAL CORPORATION
-------------------------------
(Registrant)
Date: 11/15/99 By: /s/ Nancy E. Katz
----------------------------
Nancy E. Katz
PRESIDENT, CHIEF OPERATING OFFICER AND
CHIEF FINANCIAL OFFICER
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
a. Exhibit 10.51* Non-Exclusive Patent License Agreement
between the Registrant and Public Health
Service, dated June 30, 1999.
Exhibit 10.52* Distribution Agreement between the
Registrant and Carter-Wallace, Inc., dated as
of September 9, 1999.
Exhibit 10.53 Letter Agreement between the Registrant and
John D. DiPietro, dated as of September 17,
1999.
Exhibit 10.54 Consulting Agreement between the Registrant
and John D. DiPietro, dated as of September 17,
1999.
Exhibit 27 Financial Data Schedule
------------------------
*Confidential treatment has been granted as to certain portions of
this exhibit.
<PAGE>
Exhibit 10.51
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
PUBLIC HEALTH SERVICE
PATENT LICENSE AGREEMENT--NONEXCLUSIVE
COVER PAGE
For PHS internal use only:
Patent License Number: L-108-99/0
Serial Number(s) of Licensed Patent(s) and/or Patent Application(s):
06/602,945; 06/602946; 06/643,729; 06/785,638; 07/117,937
Licensee: Calypte Biomedical, Inc.
Cooperative Research and Development Agreement (CRADA) Number (if
applicable): N/A
Additional Remarks: None
Public Benefit(s): N/A
This Patent License Agreement, hereinafter referred to as the "AGREEMENT",
consists of this Cover Page, an attached AGREEMENT, a Signature Page, Appendix A
(List of Patent(s) and/or Patent Application(s)), Appendix B (Fields of Use and
Territory), Appendix C (Royalties), Appendix D (Modifications), Appendix E
(Benchmarks), and Appendix F (Commercial Development Plan). The Parties to this
AGREEMENT are:
1) The National Institutes of Health ("NIH"), the Centers for
Disease Control and Prevention ("CDC"), or the Food and
Drug Administration ("FDA"), hereinafter singly or
collectively referred to as "PHS", agencies of the United
States Public Health Service within the Department of
Health and Human Services ("DHHS"); and
2) The person, corporation, or institution identified above
and/or on the Signature Page, having offices at the address
indicated on the Signature Page, hereinafter referred to as
"LICENSEE".
THE SYMBOL '[**]' IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
<PAGE>
PHS PATENT LICENSE AGREEMENT--NONEXCLUSIVE
PHS and LICENSEE agree as follows:
1. BACKGROUND
1.01 In the course of conducting biomedical and behavioral research,
PHS investigators made inventions that may have commercial
applicability.
1.02 By assignment of rights from PHS employees and other inventors,
DHHS, on behalf of the United States Government, owns intellectual
property rights claimed in any United States and/or foreign patent
applications or patents corresponding to the assigned inventions.
DHHS also owns any tangible embodiments of these inventions
actually reduced to practice by PHS.
1.03 The Secretary of DHHS has delegated to PHS the authority to enter
into this AGREEMENT for the licensing of rights to these
inventions.
1.04 PHS desires to transfer these inventions to the private sector
through commercialization licenses to facilitate the commercial
development of products and processes for public use and benefit.
1.05 LICENSEE desires to acquire commercialization rights to certain of
these inventions in order to develop processes, methods, and/or
marketable products for public use and benefit.
2. DEFINITIONS
2.01 "BENCHMARKS" mean the performance milestones that are set forth in
Appendix E.
2.02 "COMMERCIAL DEVELOPMENT PLAN" means the written commercialization
plan attached as Appendix F.
2.03 "FIRST COMMERCIAL SALE" means the initial transfer by or on behalf
of LICENSEE or its sublicensees of LICENSED PRODUCTS or the
initial practice of a LICENSED PROCESS by or on behalf of LICENSEE
or its sublicensees in exchange for cash or some equivalent to
which value can be assigned for the purpose of determining NET
SALES.
2.04 "GOVERNMENT" means the Government of the United States of America.
2.05 "LICENSED FIELDS OF USE" means the fields of use identified in
Appendix B.
2.06 "LICENSED PATENT RIGHTS" shall mean:
a) Patent applications (including provisional
patent applications and PCT patent
applications) and/or patents listed in
Appendix A, all divisions and continuations
of these applications, all patents issuing
from such applications, divisions, and
continuations, and any reissues,
reexaminations, and extensions of all such
patents;
b) to the extent that the following contain one
or more claims directed to the invention or
inventions disclosed in a) above: i)
continuations-in-part of a) above; ii) all
divisions and continuations of these
continuations-in-part; iii) all patents
issuing from such continuations-in-part,
divisions, and continuations; iv) priority
patent application(s) of a) above; and v) any
reissues, reexaminations, AND EXTENSIONS OF
ALL SUCH PATENTS;
c) to the extent that the following contain one
or more claims directed to the invention or
inventions disclosed in a) above: all
THE SYMBOL '[**]' IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
<PAGE>
counterpart foreign and U.S. patent
applications and patents to a) and b) above,
including those listed in Appendix A.
LICENSED PATENT RIGHTS shall NOT include b) or c) above to
the extent that they contain one or more claims directed to
new matter which is not the subject matter disclosed in a)
above.
2.07 "LICENSED PROCESS(es)" means processes which, in the course of
being practiced would, in the absence of this AGREEMENT, infringe
one or more claims of the LICENSED PATENT RIGHTS that have not
been held invalid or unenforceable by an unappealed or
unappealable judgment of a court of competent jurisdiction.
2.08 "LICENSED PRODUCT(s)" means tangible materials which, in the
course of manufacture, use, sale, or importation would, in the
absence of this AGREEMENT, infringe one or more claims of the
LICENSED PATENT RIGHTS that have not been held invalid or
unenforceable by an unappealed or unappealable judgment of a court
of competent jurisdiction.
2.09 "LICENSED TERRITORY" means the geographical area identified in
Appendix B.
2.10 "NET SALES" means the total gross receipts for sales of LICENSED
PRODUCTS or practice of LICENSED PROCESSES by or on behalf of
LICENSEE or its sublicensees, and from leasing, renting, or
otherwise making LICENSED PRODUCTS available to others without
sale or other dispositions, whether invoiced or not, less returns
and allowances, packing costs, insurance costs, freight out, taxes
or excise duties imposed on the transaction (if separately
invoiced), and wholesaler and cash discounts in amounts customary
in the trade to the extent actually granted. No deductions shall
be made for commissions paid to individuals, whether they be with
independent sales agencies or regularly employed by LICENSEE, or
sublicensees, and on its payroll, or for the cost of collections.
2.11 "PRACTICAL APPLICATION" means to manufacture in the case of a
composition or product, to practice in the case of a process or
method, or to operate in the case of a machine or system; and in
each case, under such conditions as to establish that the
invention is being utilized and that its benefits are to the
extent permitted by law or GOVERNMENT regulations available to the
public on reasonable terms.
3. GRANT OF RIGHTS
3.01 PHS hereby grants and LICENSEE accepts, subject to the terms and
conditions of this AGREEMENT, a nonexclusive license under the
LICENSED PATENT RIGHTS in the LICENSED TERRITORY to make and have
made, to use and have used, to sell and have sold, to offer to
sell, and to import any LICENSED PRODUCTS in the LICENSED FIELDS
OF USE and to practice and have practiced any LICENSED PROCESSES
in the LICENSED FIELDS OF USE.
3.02 This AGREEMENT confers no license or rights by implication,
estoppel, or otherwise under any patent applications or patents of
PHS other than LICENSED PATENT RIGHTS regardless of whether such
patents are dominant or subordinate to LICENSED PATENT RIGHTS.
4. SUBLICENSING
4.01 LICENSEE has no right to sublicense.
5. STATUTORY AND PHS REQUIREMENTS AND RESERVED GOVERNMENT RIGHTS
5.01 Prior to the FIRST COMMERCIAL SALE, LICENSEE agrees to provide PHS
reasonable quantities of LICENSED PRODUCTS or materials made
through the LICENSED PROCESSES for PHS research use.
5.02 LICENSEE agrees that products used or sold in the United States
embodying LICENSED PRODUCTS or produced through use of LICENSED
PROCESSES shall be manufactured substantially in the United
States, unless a written waiver is obtained in advance from
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PHS.
6. ROYALTIES AND REIMBURSEMENT
6.01 [**]
6.02 [**]
6.03 [**]
6.04 [**]
6.05 [**]
6.06 [**]
6.07 [**]
6.08 [**]
6.09 [**]
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6.10 [**]
7. PATENT FILING, PROSECUTION, AND MAINTENANCE
7.01 PHS agrees to take responsibility for the preparation, filing,
prosecution, and maintenance of any and all patent applications or
patents included in the LICENSED PATENT RIGHTS.
8. RECORD KEEPING
8.01 LICENSEE agrees to keep accurate and correct records of LICENSED
PRODUCTS made, used, sold, or imported and LICENSED PROCESSES
practiced under this AGREEMENT appropriate to determine the amount
of royalties due PHS. Such records shall be retained for at least
five (5) years following a given reporting period and shall be
available during normal business hours for inspection at the
expense of PHS by an accountant or other designated auditor
selected by PHS for the sole purpose of verifying reports and
payments hereunder. The accountant or auditor shall only disclose
to PHS information relating to the accuracy of reports and
payments made under this AGREEMENT. If an inspection shows an
underreporting or underpayment in excess of five percent (5%) for
any twelve (12) month period, then LICENSEE shall reimburse PHS
for the cost of the inspection at the time LICENSEE pays the
unreported royalties, including any late charges as required by
Paragraph 9.07 of this AGREEMENT. All payments required under
this Paragraph shall be due within thirty (30) days of the date
PHS provides LICENSEE notice of the payment due.
8.02 LICENSEE agrees to have an audit of sales and royalties conducted
by an independent auditor at least every two (2) years if annual
sales of the LICENSED PRODUCT or LICENSED PROCESSES are over two
(2) million dollars. The audit shall address, at a minimum, the
amount of gross sales by or on behalf of LICENSEE during the audit
period, terms of the license as to percentage or fixed royalty to
be remitted to the GOVERNMENT, the amount of royalty funds owed to
the GOVERNMENT under this AGREEMENT, and whether the royalty
amount owed has been paid to the GOVERNMENT and is reflected in
the records of the LICENSEE. The audit shall also indicate the
PHS license number, product, and the time period being audited. A
report certified by the auditor shall be submitted promptly by the
auditor directly to PHS on completion. LICENSEE shall pay for the
entire cost of the audit.
9. REPORTS ON PROGRESS, BENCHMARKS, SALES, AND PAYMENTS
9.01 Prior to signing this AGREEMENT, LICENSEE has provided to PHS the
COMMERCIAL DEVELOPMENT PLAN at Appendix F, under which LICENSEE
intends to bring the subject matter of the LICENSED PATENT RIGHTS
to the point of PRACTICAL APPLICATION. This COMMERCIAL
DEVELOPMENT PLAN is hereby incorporated by reference into this
AGREEMENT. Based on this plan, performance BENCHMARKS are
determined as specified in Appendix E.
9.02 LICENSEE shall provide written annual reports on its product
development progress or efforts to commercialize under the
COMMERCIAL DEVELOPMENT PLAN for each of the LICENSED FIELDS OF USE
within sixty (60) days after December 31 of each calendar year.
These progress reports shall include, but not be limited to:
progress on research and development, status of applications for
regulatory approvals, manufacturing, marketing, importing, and
sales during the preceding calendar year, as well as plans for the
present calendar year. PHS also encourages these reports to
include information on any of LICENSEE's public service activities
that relate to the LICENSED PATENT RIGHTS. If reported progress
differs from that projected in the COMMERCIAL DEVELOPMENT PLAN and
BENCHMARKS, LICENSEE shall explain the reasons for such
differences. In any such annual report, LICENSEE may propose
amendments to the COMMERCIAL DEVELOPMENT PLAN, acceptance of which
by PHS may not be denied unreasonably. LICENSEE agrees to
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provide any additional information reasonably required by PHS to
evaluate LICENSEE's performance under this AGREEMENT. LICENSEE
may amend the BENCHMARKS at any time upon written consent by PHS.
PHS shall not unreasonably withhold approval of any request of
LICENSEE to extend the time periods of this schedule if such
request is supported by a reasonable showing by LICENSEE of
diligence in its performance under the COMMERCIAL DEVELOPMENT PLAN
and toward bringing the LICENSED PRODUCTS to the point of
PRACTICAL APPLICATION.
9.03 LICENSEE shall report to PHS the dates for achieving BENCHMARKS
specified in Appendix E and the FIRST COMMERCIAL SALE in each
country in the LICENSED TERRITORY within thirty (30) days of such
occurrences.
9.04 [**]
9.05 Royalties due under Article 6 shall be paid in U.S. dollars. For
conversion of foreign currency to U.S. dollars, the conversion
rate shall be the New York foreign exchange rate quoted in THE
WALL STREET JOURNAL on the day that the payment is due. All
checks and bank drafts shall be drawn on United States banks and
shall be payable, as appropriate, to "NIH/Patent Licensing." All
such payments shall be sent to the following address: NIH,
P.O. Box 360120, Pittsburgh, PA 15251-6120. Any loss of exchange,
value, taxes, or other expenses incurred in the transfer or
conversion to U.S. dollars shall be paid entirely by LICENSEE.
The royalty report required by Paragraph 9.04 of this AGREEMENT
shall accompany each such payment, and a copy of such report shall
also be mailed to PHS at its address for notices indicated on the
Signature Page of this AGREEMENT.
9.06 LICENSEE shall be solely responsible for determining if any tax on
royalty income is owed outside the United States and shall pay any
such tax and be responsible for all filings with appropriate
agencies of foreign governments.
9.07 Interest and penalties may be assessed by PHS on any overdue
payments in accordance with the Federal Debt Collection Act. The
payment of such late charges shall not prevent PHS from exercising
any other rights it may have as a consequence of the lateness of
any payment.
9.08 All plans and reports required by this Article 9 and marked
"confidential" by LICENSEE shall, to the extent permitted by law,
be treated by PHS as commercial and financial information obtained
from a person and as privileged and confidential, and any proposed
disclosure of such records by the PHS under the Freedom of
Information Act (FOIA), 5 U.S.C. ' 552 shall be subject to the
predisclosure notification requirements of 45 CFR ' 5.65(d).
10. PERFORMANCE
10.01 LICENSEE shall use its reasonable best efforts to bring the
LICENSED PRODUCTS and LICENSED PROCESSES to PRACTICAL APPLICATION.
"Reasonable best efforts" for the purposes of this provision shall
include adherence to the COMMERCIAL DEVELOPMENT PLAN at Appendix F
and performance of the BENCHMARKS at Appendix E.
10.02 Upon the FIRST COMMERCIAL SALE, until the expiration of this
AGREEMENT, LICENSEE shall use its reasonable best efforts to make
LICENSED PRODUCTS and LICENSED PROCESSES reasonably accessible to
the United States public.
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11. INFRINGEMENT AND PATENT ENFORCEMENT
11.01 PHS and LICENSEE agree to notify each other promptly of each
infringement or possible infringement of the LICENSED PATENT
RIGHTS, as well as any facts which may affect the validity, scope,
or enforceability of the LICENSED PATENT RIGHTS of which either
Party becomes aware.
11.02 [**]
12. NEGATION OF WARRANTIES AND INDEMNIFICATION
12.01 PHS offers no warranties other than those specified in Article 1.
12.02 PHS does not warrant the validity of the LICENSED PATENT RIGHTS
and makes no representations whatsoever with regard to the scope
of the LICENSED PATENT RIGHTS, or that the LICENSED PATENT RIGHTS
may be exploited without infringing other patents or other
intellectual property rights of third parties.
12.03 PHS MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER DEFINED
BY THE CLAIMS OF THE LICENSED PATENT RIGHTS OR TANGIBLE MATERIALS
RELATED THERETO.
12.04 PHS does not represent that it will commence legal actions against
third parties infringing the LICENSED PATENT RIGHTS.
12.05 LICENSEE shall indemnify and hold PHS, its employees, students,
fellows, agents, and consultants harmless from and against all
liability, demands, damages, expenses, and losses, including but
not limited to death, personal injury, illness, or property damage
in connection with or arising out of: a) the use by or on behalf
of LICENSEE, its directors, employees, or third parties of any
LICENSED PATENT RIGHTS; or b) the design, manufacture,
distribution, or use of any LICENSED PRODUCTS, LICENSED PROCESSES
or materials by LICENSEE, or other products or processes developed
in connection with or arising out of the LICENSED PATENT RIGHTS.
LICENSEE agrees to maintain a liability insurance program
consistent with sound business practice.
13. TERM, TERMINATION, AND MODIFICATION OF RIGHTS
13.01 This AGREEMENT is effective when signed by all parties and shall
extend to the expiration of the last to expire of the LICENSED
PATENT RIGHTS unless sooner terminated as provided in this Article
13.
13.02 In the event that LICENSEE is in default in the performance of any
material obligations under this AGREEMENT, including but not
limited to the obligations listed in Article 13.05, and if the
default has not been remedied within ninety (90) days after the
date of notice in writing of such default, PHS may terminate this
AGREEMENT by written notice and pursue outstanding amounts owed
through procedures provided by the Federal Debt Collection Act.
13.03 In the event that LICENSEE becomes insolvent, files a petition in
bankruptcy, has such a
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petition filed against it, determines to file a petition in
bankruptcy, or receives notice of a third party's intention to
file an involuntary petition in bankruptcy, LICENSEE shall
immediately notify PHS in writing. Furthermore, PHS shall have
the right to terminate this AGREEMENT immediately upon
LICENSEE's receipt of written notice.
13.04 LICENSEE shall have a unilateral right to terminate this AGREEMENT
in any country or territory by giving PHS sixty (60) days written
notice to that effect.
13.05 [**]
13.06 [**]
13.07 [**]
13.08 [**]
14. GENERAL PROVISIONS
14.01 Neither Party may waive or release any of its rights or interests
in this AGREEMENT except in writing. The failure of the
GOVERNMENT to assert a right hereunder or to insist upon
compliance with any term or condition of this AGREEMENT shall not
constitute a waiver of that right by the GOVERNMENT or excuse a
similar subsequent failure to perform any such term or condition
by LICENSEE.
14.02 This AGREEMENT constitutes the entire agreement between the
Parties relating to the subject matter of the LICENSED PATENT
RIGHTS, and all prior negotiations, representations, agreements,
and understandings are merged into, extinguished by, and
completely
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expressed by this AGREEMENT.
14.03 The provisions of this AGREEMENT are severable, and in the event
that any provision of this AGREEMENT shall be determined to be
invalid or unenforceable under any controlling body of law, such
determination shall not in any way affect the validity or
enforceability of the remaining provisions of this AGREEMENT.
14.04 If either Party desires a modification to this AGREEMENT, the
Parties shall, upon reasonable notice of the proposed modification
by the Party desiring the change, confer in good faith to
determine the desirability of such modification. No modification
will be effective until a written amendment is signed by the
signatories to this AGREEMENT or their designees.
14.05 The construction, validity, performance, and effect of this
AGREEMENT shall be governed by Federal law as applied by the
Federal courts in the District of Columbia.
14.06 All notices required or permitted by this AGREEMENT shall be given
by prepaid, first class, registered or certified mail or by an
express/overnight delivery service provided by a commercial
carrier, properly addressed to the other Party at the address
designated on the following Signature Page, or to such other
address as may be designated in writing by such other Party.
Notices shall be considered timely if such notices are received on
or before the established deadline date or sent on or before the
deadline date as verifiable by U.S. Postal Service postmark or
dated receipt from a commercial carrier. Parties should request a
legibly dated U.S. Postal Service postmark or obtain a dated
receipt from a commercial carrier or the U.S. Postal Service.
Private metered postmarks shall not be acceptable as proof of
timely mailing.
14.07 This AGREEMENT shall not be assigned by LICENSEE except: a) with
the prior written consent of PHS, such consent not to be withheld
unreasonably; or b) as part of a sale or transfer of substantially
the entire business of LICENSEE relating to operations which
concern this AGREEMENT. LICENSEE shall notify PHS within ten (10)
days of any assignment of this AGREEMENT by LICENSEE, and LICENSEE
shall pay PHS, as an additional royalty, one percent (1%) of the
fair market value of any consideration received for any assignment
of this AGREEMENT within thirty (30) days of such assignment.
14.08 LICENSEE agrees in its use of any PHS-supplied materials to comply
with all applicable statutes, regulations, and guidelines,
including PHS and DHHS regulations and guidelines. LICENSEE
agrees not to use the materials for research involving human
subjects or clinical trials in the United States without complying
with 21 CFR Part 50 and 45 CFR Part 46. LICENSEE agrees not to
use the materials for research involving human subjects or
clinical trials outside of the United States without notifying
PHS, in writing, of such research or trials and complying with the
applicable regulations of the appropriate national control
authorities. Written notification to PHS of research involving
human subjects or clinical trials outside of the United States
shall be given no later than sixty (60) days prior to commencement
of such research or trials.
14.09 LICENSEE acknowledges that it is subject to and agrees to abide by
the United States laws and regulations (including the Export
Administration Act of 1979 and Arms Export Control Act)
controlling the export of technical data, computer software,
laboratory prototypes, biological material, and other commodities.
The transfer of such items may require a license from the
cognizant Agency of the U.S. GOVERNMENT or written assurances by
LICENSEE that it shall not export such items to certain foreign
countries without prior approval of such agency. PHS neither
represents that a license is or is not required or that, if
required, it shall be issued.
14.10 LICENSEE agrees to mark the LICENSED PRODUCTS or their packaging
sold in the United States with all applicable U.S. patent numbers
and similarly to indicate "Patent Pending" status. All LICENSED
PRODUCTS manufactured in, shipped to, or sold in other countries
shall be marked in such a manner as to preserve PHS patent rights
in such countries.
14.11 By entering into this AGREEMENT, PHS does not directly or
indirectly endorse any product
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or service provided, or to be provided, by LICENSEE whether
directly or indirectly related to this AGREEMENT. LICENSEE
shall not state or imply that this AGREEMENT is an endorsement
by the GOVERNMENT, PHS, any other GOVERNMENT organizational
unit, or any GOVERNMENT employee. Additionally, LICENSEE shall
not use the names of NIH, CDC, PHS, or DHHS or the GOVERNMENT
or their employees in any advertising, promotional, or sales
literature without the prior written consent of PHS.
14.12 The Parties agree to attempt to settle amicably any controversy or
claim arising under this AGREEMENT or a breach of this AGREEMENT,
except for appeals of modifications or termination decisions
provided for in Article 13. LICENSEE agrees first to appeal any
such unsettled claims or controversies to the designated PHS
official, or designee, whose decision shall be considered the
final agency decision. Thereafter, LICENSEE may exercise any
administrative or judicial remedies that may be available.
14.13 Nothing relating to the grant of a license, nor the grant itself,
shall be construed to confer upon any person any immunity from or
defenses under the antitrust laws or from a charge of patent
misuse, and the acquisition and use of rights pursuant to 37 CFR
Part 404 shall not be immunized from the operation of state or
Federal law by reason of the source of the grant.
14.14 Paragraphs 8.01, 9.06-9.08, 12.01-12.05, 13.07, 13.08, and 14.12
of this AGREEMENT shall survive termination of this AGREEMENT.
SIGNATURES BEGIN ON NEXT PAGE
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PHS PATENT LICENSE AGREEMENT--NONEXCLUSIVE
SIGNATURE PAGE
For PHS:
/s/ Jack Spiegel 6/30/99
- --------------------------------------------- ---------------
Jack Spiegel, Ph.D. Date
Director, Division of Technology Development and Transfer
Office of Technology Transfer
National Institutes of Health
Mailing Address for Notices:
Office of Technology Transfer
National Institutes of Health
6011 Executive Boulevard, Suite 325
Rockville, Maryland 20852-3804 U.S.A.
For LICENSEE (Upon, information and belief, the undersigned expressly certifies
or affirms that the contents of any statements of LICENSEE made or referred to
in this document are truthful and accurate.):
by:
/s/ William A. Boeger 6/23/99
- --------------------------------------------- ---------------
Signature of Authorized Official Date
William A. Boeger
- ---------------------------------------------
Printed Name
CEO
- ---------------------------------------------
Title
Official and Mailing Address for Notices:
William A. Boeger
President and CEO
Calypte Biomedical
1265 Harbor Bay Pkwy.
Alameda, CA 94502
Any false or misleading statements made, presented, or submitted to the
GOVERNMENT, including any relevant omissions, under this AGREEMENT and during
the course of negotiation of this AGREEMENT are subject to all applicable civil
and criminal statutes including Federal statutes 31 U.S.C. '' 3801-3812 (civil
liability) and 18 U.S.C. ' 1001 (criminal liability including fine(s) and/or
imprisonment).
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APPENDIX A--PATENT(s) OR PATENT APPLICATION(s)
PATENT(s) OR PATENT APPLICATION(s):
USPA SN 06/602,945, filed April 23, 1984, (USPN 4,520,113, issued May 28,
1985) "Serological Detection of Antibodies to HTLV-III in Sera of
Patients with AIDS and Pre-AIDS Conditions"
USPA SN 06/602,946, filed April 23, 1984, (USPN 4,647,773, issued March
3, 1987) "Method of Continuous Production of Retrovirus (HTLV-III) from
Patients with AIDS and Pre-AIDS"
USPA SN 06/643,729, filed August 24, 1984, (USPN 4,652,599, issued March
24, 1987) "Method of Continuous Production of Retrovirus (HTLV-III) from
Patients with AIDS and Pre-AIDS Using Permissive Cells"
USPA SN 06/785,638, filed October 8, 1985, (USPN 4,708,818, issued
November 24, 1987) "Human Immunodeficiency Viruses Associated with
Acquired Immune Deficiency Syndrome (AIDS), A Diagnostic Method for AIDS
and Pre-AIDS and a Kit Therefor"
USPA SN 07/117,937, filed November 5, 1987, (USPN 5,135,684, issued
August 4, 1992) "Human Immunodeficiency Viruses Associated with Acquired
Immune Deficiency Syndrome (AIDS), A Diagnostic Method for AIDS and
Pre-AIDS and a Kit Therefor"
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APPENDIX B--LICENSED FIELDS OF USE AND TERRITORY
[**]
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OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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APPENDIX C--ROYALTIES
[**]
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OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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APPENDIX D--MODIFICATIONS
PHS and LICENSEE agree to the following modifications to the Articles and
Paragraphs of this AGREEMENT:
(Amended)
6.02 [**]
(Amended)
13.01 This AGREEMENT is effective AUGUST 6, 1996 when signed by all
parties and shall extend to the expiration of the last to expire
of the LICENSED PATENT RIGHTS unless sooner terminated as provided
in this Article 13.
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OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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APPENDIX E--BENCHMARKS AND PERFORMANCE
LICENSEE agrees to the following BENCHMARKS for its performance under this
AGREEMENT and, within thirty (30) days of achieving a BENCHMARK, shall notify
PHS that the BENCHMARK has been achieved.
None.
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APPENDIX F--COMMERCIAL DEVELOPMENT PLAN
The COMMERCIAL DEVELOPMENT PLAN shall be as described in the license
application.
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Exhibit 10.52
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
DISTRIBUTION AGREEMENT
EFFECTIVE on the 9th day of September, 1999 (the "Effective Date"), by
and between CALYPTE BIOMEDICAL CORPORATION, a corporation having an office at
1440 Fourth Street, Berkeley, California 94710 (hereinafter referred to as
"SUPPLIER") and CARTER-WALLACE, INC., a corporation organized and existing
pursuant to the laws of the State of Delaware, U.S.A., and having its
principal office at 1345 Avenue of the Americas, New York, New York 10105
(hereinafter referred to as "CW").
W I T N E S S E T H: THAT
-------------------
WHEREAS, SUPPLIER desires to supply CW with the Products (as hereinafter
defined) for use and sale by CW, and CW desires to purchase, market,
distribute and sell the Products on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, SUPPLIER and CW mutually agree as follows:
ARTICLE I
- ---------
DEFINITIONS
-----------
The following terms as used in this Agreement shall have the following
meanings:
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1. "Affiliate" shall mean a corporation or any other entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the designated party, but
only for so long as the relationship exists.
2. "Territory" shall mean the United States, its territories,
possessions and Puerto Rico.
3. "Third Party" shall mean any person, association of any kind, or
body corporation other than CW or its Affiliates or SUPPLIER or its
Affiliates.
4. "Contract Year" shall mean the period commencing on the Effective
Date of this Agreement and ending twelve (12) months after the Effective Date
and subsequent twelve (12) month periods commencing on the anniversary of the
day immediately following the end of the first Contract Year during the term
of this Agreement.
5. "Information and Data" shall mean information, know-how, secret
process, technical data, patents and techniques regarding the Products, their
method of formulation and manufacture and their use and application presently
owned or possessed by SUPPLIER or hereafter developed, acquired or possessed
by SUPPLIER.
6. "Products" shall mean collectively the products listed on Schedule
A, attached to this Agreement and incorporated herein by reference, and any
improvements to those products and any additional products added to this
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Agreement in accordance with its terms or as a result of the mutual written
agreement of the parties hereto.
7. "Average Selling Price" shall mean the actual revenues received by
CW for sales of the Products after allowance for trade and cash discounts,
rebates, allowances, returns, free goods and replacements actually granted,
shipping costs and taxes and other governmental charges, except income taxes,
applicable to sales divided by the total number of units sold.
ARTICLE II
- ----------
RIGHTS
------
1. During the term hereof, CW and its Affiliates shall have the
exclusive right to market, promote, distribute and sell the urine-based
Products, and the co-exclusive right, along with SUPPLIER, to market,
promote, distribute and sell the serum-based Products, in all markets in the
Territory, excluding life insurance testing and blood bank screening. CW
shall have the right to sublicense its rights hereunder and to subcontract
its activities hereunder with the prior written approval of SUPPLIER, which
shall not be unreasonably withheld. Any sublicense agreement between CW and
a sublicensee hereunder shall require that the sublicensee comply with the
terms related to promotion, advertising and complaint documentation, as
described in Article IV 5 and 6 hereof. The Products distributed by CW and
its Affiliates in the Territory will initially be sold under the SUPPLIER'S
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label, and the Product box shall bear a label provided to SUPPLIER by CW and
affixed by SUPPLIER, which identifies the Product as one distributed by
Wampole Laboratories. [**] In the event that Product is sold with Wampole
Laboratories labeling, there shall be an acknowledgement on the label that
SUPPLIER is the manufacturer/developer of the Products, which acknowledgement
shall be in the form, shall have the content and shall be placed on the
labels for the Products as set forth on Schedule B.
2. [**]
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OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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2. (Continued) [**]
3. [**]
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OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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3. (Continued) [**]
4. [**]
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OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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4. (Continued) [**]
5. Notwithstanding anything provided herein to the contrary, SUPPLIER
shall not have the right to terminate CW'S exclusivity or co-exclusivity for
failure of CW to purchase quantities which CW would have had to purchase in
order for CW to maintain exclusivity or co-exclusivity, as the case may be,
if the reason for CW'S failure to purchase such quantities is that SUPPLIER
has failed to supply to CW the Products ordered by CW as provided in this
Agreement or if CW'S failure to purchase such quantities is as a result of
recall or as a result of failure of the Products to perform properly in
accordance with Supplier's published specifications therefore(but excluding
customer misuse) when used by CW customers.
6. Notwithstanding any provision in this Agreement to the contrary,
nothing herein shall be deemed to grant SUPPLIER or its Affiliates or any
Third Party any rights in or to any of CW'S or CW'S Affiliates' patent rights
or other intellectual property rights; nor, except as specifically provided
herein, to grant to CW or its Affiliates any rights in or to any of
Supplier's or Supplier's Affiliates' patent rights or other intellectual
property rights to CW or its Affiliates.
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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ARTICLE III
- -----------
PURCHASE OF PRODUCTS AND SUPPLY OF SAMPLES
------------------------------------------
1. During the term of this Agreement, SUPPLIER shall manufacture the
Products at its plants at 1440 Fourth Street Berkeley, California 94710
and/or 1500 East Gude Drive, Rockville, MD 20850 or such other location as
shall be mutually agreed to in writing by the parties, and shall sell to CW
such quantities of Products as CW orders from SUPPLIER from time to time as
provided herein, labeled and packaged by SUPPLIER as specified by CW,
provided such labeling and packaging is commercially reasonable and not
excessive in cost to SUPPLIER, and conforms to FDA and other applicable
regulations.
2. SUPPLIER shall sell the Products to CW in fully labeled packaged
form at the prices set forth in Schedule C hereto incorporated herein by
reference, F.O.B. SUPPLIER'S plant in Berkeley, California or Rockville, MD
as the case may be. In the event CW requests in writing that Product be sold
in bulk packaged form, SUPPLIER shall use its best efforts to sell the
Product to CW in this form, subject to the approval of the US FDA, if such
approval is required. The price of the Products to be used as samples is
also set forth on Schedule C. Except as provided below with respect to any
agreement between CW and a Third Party, SUPPLIER shall be responsible for any
royalty due a Third Party in connection with the Products which SUPPLIER
supplies to CW hereunder.
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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3. Within ninety (90) days after receipt by SUPPLIER of a written
order from CW for Products, SUPPLIER shall ship the Products to CW's
warehouse in Cranbury, New Jersey, but on an exceptions basis if requested by
CW in writing, SUPPLIER shall make commercially reasonable efforts to ship
Products directly to CW'S customers, in accordance with the shipping
instructions received by SUPPLIER from CW. Shipping charges will be prepaid
by SUPPLIER and will be charged on the invoices by SUPPLIER to CW. Supplier
shall be responsible for establishing shelf life subject to CW'S approval.
SUPPLIER shall ship Products with the best shelf life possible, with CW'S
understanding that such shelf life may be influenced by factors beyond
SUPPLIER'S control, including, but not limited to, FDA lot release procedures
and orders from CW which were not forecasted to SUPPLIER by CW. In any
event, SUPPLIER will not ship EIA test products or Western Blot test products
to CW with less than six (6) months and three (3) months remaining shelf
life, respectively, without CW'S written consent. SUPPLIER shall be
responsible for establishing SHELF life subject to CW'S approval. SUPPLIER
shall invoice CW for the Products upon the shipment of the Products by
SUPPLIER as directed by CW in writing. In the event the Products supplied by
SUPPLIER hereunder are found by CW not to conform to the specifications
agreed to between the parties and set forth in Schedule D, as such failure to
conform is determined by CW following the quality control tests set forth in
Schedule E attached hereto and incorporated herein as reference, or shall
otherwise be found to be defective, CW shall so notify SUPPLIER
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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and SUPPLIER shall after verifying the defect with its own testing, at
SUPPLIER'S cost, replace such defective quantity of the Products and at
SUPPLIER'S cost, ship such replacement Products to CW to the location to
which such defective Products were shipped, or such other location specified
by CW, as quickly as commercially feasible after the giving of such notice to
SUPPLIER by CW. If SUPPLIER'S quality assurance personnel disagree with CW'S
assessment, the parties shall mutually agree upon an independent testing
laboratory and the parties agree to abide by the decision of such laboratory
as to whether the Products are defective. If the independent testing
laboratory determines that the Products are defective, the cost of such
testing shall be paid for by SUPPLIER. If the independent testing laboratory
determines that the Products are not defective, the cost of such testing
shall be paid for by CW. CW shall accept or reject the Products within
thirty (30) days following its receipt of each shipment of the Products. In
the event that CW does not reject in writing any portion of a shipment within
thirty (30) days after its receipt of such shipment, such lack of response
shall be deemed acceptance of the Products not so rejected. Products may be
rejected only due to defects in the Products or their failure to meet
specifications set forth in Schedule D which failure can be ascertained at
such time by the quality control tests specified on Schedule E hereto. Such
acceptance or rejection shall not apply to defects or failure of the Products
to meet specifications which do not become apparent until a later date
(hereinafter referred to as "Non-apparent Defects"). CW shall have a
reasonable
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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period of time after it learns of such Non-apparent Defects to reject such
Products by so notifying SUPPLIER in writing thereof. Following SUPPLIER'S
or an independent testing laboratory's verification of such defects, SUPPLIER
may issue a Returned Goods Authorization Number to CW so that some or all
rejected Products can be returned by CW to SUPPLIER at SUPPLIER'S expense.
Alternatively, SUPPLIER may request that CW destroy, at SUPPLIER'S expense,
some or all of the affected Products at SUPPLIER'S expense. Under no
circumstance shall CW return Product to SUPPLIER without a SUPPLIER issued
Return Goods Authorization Number. The costs of testing by such independent
testing laboratory to determine whether such Products are defective shall be
paid by CW or SUPPLIER as determined under this section with respect to other
defects discovered by CW. The terms of all purchase orders shall be
consistent with the terms of this Agreement and, in the event of any
inconsistency, the terms provided herein shall prevail.
4. [**]
5. Monthly, by the 8th day of each month, CW shall provide SUPPLIER
with a twelve (12) month rolling forecast of CW'S projected requirements of
the Products for the Territory, the first three (3) months of which shall be
binding. SUPPLIER shall produce and ship to CW and if requested by CW, in
writing, shall ship directly to CW'S customers or CW'S Affiliates,
sufficient Products so as to meet CW'S firm monthly commitment. SUPPLIER
shall use its best efforts to produce and ship to CW, or if requested by CW
in writing to ship directly to CW'S
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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customers Products ordered by CW over CW'S forecast. Products shipped by
SUPPLIER that are requested by CW, in writing, but which were not in the
relevant CW forecast may be not CW-labeled and/or may have less shelf life
than CW requested, but only with CW'S written agreement in each such instance.
6. During the term of this Agreement, SUPPLIER shall maintain on hand
sufficient quantities of qualified raw materials for the Products as
necessary to produce and deliver within the required time frames the
quantities of the Products in the Territory as specified in CW'S latest
twelve (12) month rolling forecast.
7. [**]
ARTICLE IV
- ----------
MANUFACTURE, PACKAGING, APPROVALS AND TECHNICAL SERVICE
-------------------------------------------------------
1. The Products supplied by SUPPLIER hereunder shall meet the
specifications set forth in Schedule D attached hereto and shall pass the
quality control tests set forth in Schedule E hereto.
2. SUPPLIER shall arrange for the performance and reporting to CW of
quality control tests on the Products and provide CW the results in the form
of the
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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Certificate of Analysis set forth in Schedule F.
3. SUPPLIER shall grant access to its facilities and request that its
product materials and manufacturing testing subcontractors and contract
manufacturers grant access to their facilities to CW'S manufacturing, quality
control and compliance inspectors or their designees and such other
inspectors as determined by CW from time to time, at times during normal
working hours requested in advance by CW during the term of this Agreement,
and shall allow such inspectors to inspect the manufacturing and quality
control testing operations and compliance procedures relating to the Products
and all manufacturing and quality control records relating thereto. Such
inspectors shall conduct their inspection in such a manner as not to
unreasonably interfere with normal business operations.
4. SUPPLIER shall at its cost and expense use diligent efforts to
obtain and maintain approvals for CW to distribute and sell the Products
throughout the Territory. SUPPLIER shall provide to CW all information and
data used by SUPPLIER to obtain and maintain approval to market the Products
from the appropriate governmental agencies. CW shall have the right to use
all such information and data except Supplier's confidential manufacturing
information in connection with the marketing of the Products throughout the
Territory, as CW believes in good faith to be necessary, and CW shall have
the right to refer to all information and data which SUPPLIER has filed with
any governmental agency relating to the Products.
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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5. SUPPLIER shall supply to CW copies of all data on the Products
SUPPLIER has, including raw data, which CW requires and requests of SUPPLIER
in good faith, in order to support claims for the Products, the claims in the
Products inserts and in order to support advertising and promotional claims
for the Products. CW shall not release any promotional materials for the
Products without prior written approval of SUPPLIER, which approval shall not
be unreasonably withheld or delayed.
6. CW and SUPPLIER shall maintain complaint files in accordance with
all applicable laws and regulations and shall promptly and fully communicate
with each other with respect thereto. CW shall instruct its customers,
sublicensees, and subcontractors to direct inquiries regarding Product
failure to CW'S Technical Services staff. In the event that CW Technical
Services efforts fail to rectify the alleged failure, then SUPPLIER'S
Technical Services staff shall be notified by CW and SUPPLIER'S Technical
Services staff shall diligently investigate the alleged failure and if a
Product failure is confirmed, diligently rectify it. CW and SUPPLIER shall
investigate each complaint reported to it of a failure of the Products and
shall maintain a written record of each such investigation. CW and SUPPLIER
shall, immediately after receiving each such complaint and promptly after
completing each investigation, send the other party a copy of each such
complaint, a full report on each investigation conducted by or on behalf of
the sending party, and a copy of any medical device report submitted to the
FDA under the Medical Device
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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Reporting regulations. Supplier shall conduct on going Product surveillance
in accordance with all applicable laws and regulations and shall retain
sufficient Product with which to carry out such Product surveillance program.
7. SUPPLIER shall promptly notify CW of any FDA or other governmental
inspection of SUPPLIER or any of SUPPLIER'S contract manufacturers that
relates in any manner to the Products, including without limitation their
manufacturing operations, disposal of the Products and the safety, and health
of employees engaged in the manufacture, storage or distribution of the
Products, and SUPPLIER shall promptly provide CW with a written report of the
results of each such inspection. In addition, SUPPLIER shall immediately
request an unpurged copy of the inspection report from the FDA or any other
governmental authority under the Freedom of Information Act, and immediately
after receiving it, forward the report to CW. Each of the parties will
promptly send the other a copy of any notices, reports or other
communications it receives from the FDA or any other governmental authority,
including without limitation any foreign governmental authority, anywhere in
the world concerning the Products.
8. If, as a result of an FDA inspection or as a result of any
complaints or for any other reason SUPPLIER or any of its contract
manufacturers decide to alter the Products, or any components of the
Products, or materially alter manufacturing procedures, quality control
testing operations and/or compliance procedures relating to any of the
Products, CW shall be given written notice of such proposed
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OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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alteration at least ninety (90) days prior to its implementation or such
shorter period agreed to in writing by CW, and such notice shall be
accompanied by a written report which justifies the contemplated change(s)
and no alteration shall be made without CW'S written approval which CW shall
not unreasonably withhold. In the event such changes are mandated by the
FDA, SUPPLIER will provide written notice to CW, but such changes will not
require the written approval of CW.
9. Copies, notices and reports under Article IV 6, 7 and 8 above shall
be sent to CW'S Vice President of Quality Control, Vice President of Safety,
Health and Environmental Affairs and Vice President of Compliance at the
following address:
Carter-Wallace, Inc.
P. O. Box #1001
Half Acre Road
Cranbury, New Jersey 08512
10. In the event that CW'S inspectors or their designees find that
SUPPLIER'S manufacturing operations are not reasonably in conformance with
Quality System Regulations of the Federal Food and Drug Administration
("QSR's") or any other pertinent laws or regulations, SUPPLIER shall
promptly, after receiving written notice thereof from CW, correct them to
the mutual satisfaction of CW and SUPPLIER so as to bring them into
compliance with QSR's or other pertinent laws or regulations.
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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11. CW shall provide technical service CW determines is appropriate to
its customers of the Products. SUPPLIER shall provide to CW without
additional cost all technical support which CW reasonably requires in order
for CW to provide technical service to CW'S customers.
ARTICLE V
- ---------
TERM OF AGREEMENT
-----------------
This Agreement shall commence on the Effective Date and, unless sooner
terminated as provided in Article XII, shall remain in effect for an initial
term of five (5) years after the Effective Date (the "Initial Term"). Not
less than ninety (90) days prior to the end of the initial five (5) year
term, the parties will determine and agree in writing the terms and
conditions under which the Agreement may be extended. If the parties have
not so agreed in writing by ninety (90) days prior to the end of the Initial
Term, this Agreement will terminate automatically at the end of the Initial
Term.
ARTICLE VI
- ----------
LABELS, INSERTS, PACKAGING MATERIALS AND MARKETING
--------------------------------------------------
1. Subject to Article II and Article IV 5, CW shall determine in its
sole discretion but after consultation with SUPPLIER as to relevant
regulatory matters, how the Products are to be marketed, promoted and
distributed and the labels,
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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labeling, inserts, packaging materials for the Products including the graphic
elements on them as well as the copy, artwork and layout provided all labels
are compatible with SUPPLIER'S packaging equipment and are in accordance with
applicable laws and regulations. Notwithstanding the above, the shipping
cartons and containers and the labeling and markings thereon used in the
transportation of the Products from SUPPLIER to CW or its designees shall be
the responsibility of SUPPLIER and shall conform to all applicable laws and
regulations, including applicable governmental marketing authorizations.
ARTICLE VII
- -----------
IMPROVEMENTS AND CLAIMS
-----------------------
Promptly upon completing the development of any change or improvement to
the Products and promptly upon acquiring any change or improvement
(hereinafter all changes and/or improvements shall be referred to as
"Improvements") to the Products, SUPPLIER shall provide CW with the
information listed in Schedule G hereto, incorporated herein by reference,
regarding such Improvements. All such Improvements shall automatically be
included in the rights granted to CW hereunder and CW shall have exclusive or
co-exclusive rights, as the case may be, to market, promote, distribute and
sell the Products incorporating such Improvement in the Territory under the
terms and conditions of this Agreement as apply to the Products. If CW
desires to purchase the Products with
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OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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<PAGE>
such Improvements, CW shall notify SUPPLIER in writing, and SUPPLIER shall
supply to CW such quantities of the Products with such Improvements as CW
shall order from SUPPLIER. The price of the Products with Improvements shall
be the same price as provided in Schedule C except that SUPPLIER may increase
the price by an amount equal to the amount which permits SUPPLIER to maintain
the same gross profit margins with respect to the Product to which the price
increase applies as SUPPLIER was achieving with respect to such Product
during the one year period prior to the introduction into such Product of the
relevant Improvement. On written request by CW, SUPPLIER will provide
verification to the reasonable satisfaction of CW that such increase is
necessary to maintain the same gross profit margins with respect to the
Product to which that price increase applies as SUPPLIER was achieving with
respect to such Product in the one year period prior to the introduction into
such Product of the relevant Improvement. Determination of such increase in
costs shall be in accordance with generally accepted accounting principles
consistently applied in the manner in use by SUPPLIER at the time of
executing this Agreement. SUPPLIER will maintain records of such costs for a
minimum of three (3) years after the period to which such records pertain and
CW shall have the right to audit such costs. Those records shall be open
during reasonable business hours to CW'S accountants and to a certified
public accounting firm selected by CW and acceptable to SUPPLIER, which
acceptance shall not be unreasonably withheld, who shall, at CW'S expense,
have access to
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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such cost records for the purpose of verifying whether the increase in costs
are calculated in accordance with this Article VII. Such accountants shall
treat as confidential, subject to the provision of Article XIII hereof, any
information about SUPPLIER to which they are exposed in the course of such
audit other than the aforesaid costs (provided that neither such accountants
nor CW will publicly reveal such costs except to the extent legally required
to do so or necessary to enforce CW's rights hereunder) and such accountants'
opinion as to their accuracy. In the event a controversy arises concerning
said costs, the SUPPLIER shall retain its books and records relating to such
costs until the resolution of the controversy.
ARTICLE VIII
- ------------
RIGHT OF FIRST REFUSAL
------------------------------
[**]
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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RIGHT OF FIRST REFUSAL (Continued)
---------------------------------------
[**]
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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ARTICLE IX
- ----------
WARRANTY, INDEMNITY AND INSURANCE
---------------------------------
1. SUPPLIER guarantees and warrants with respect to the Products it
manufactures or has manufactured for it and supplies or has supplied to CW
and its Affiliates hereunder:
(a) that the Products supplied hereunder shall conform to, and be
manufactured and delivered to CW in accordance with the specifications set
forth in Schedule D, and pass the quality control tests set forth on Schedule
E and will be manufactured in plants which have been registered with the
United States Food and Drug Administration which are in compliance with, and
that the Products shall at all times be manufactured in accordance with, the
applicable QSR's and shall be in compliance with all other applicable
Federal, State and local Laws and Regulations;
(b) that the Products when delivered by SUPPLIER to CW, CW's
Affiliates or CW's customers will not be adulterated or misbranded within the
meaning of the Federal Food, Drug and Cosmetic Act and regulations
thereunder, nor within the meaning of any substantially similar state or
municipal law, nor is any such Product one which may not under such Act or
other law be introduced into interstate or intrastate commerce, and shall
conform with the applicable laws and regulations administered by the
Environmental Protection Agency, Consumer
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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Product Safety Commission, the Department of Transportation, Occupational
Safety and Health Administration or Interstate Commerce Commission, as
applicable;
(c) that the Products have been manufactured in accordance with
the provisions of the Fair Labor Standards Act of 1938, as amended, to the
extent applicable;
(d) that SUPPLIER has not received significant complaints relating
to the Products either with respect to the number of complaints received or
the kind of complaints received such that a reasonable person would question
the safety, efficacy, accuracy or reliability of the Products or the methods
for manufacturing or testing them; and
(e) that SUPPLIER owns and/or has the right to sublicense all
rights to the Products, that it owns and/or has the rights to sublicense to
SUPPLIERS subcontractors, the manufacturing of the Products and has all
information necessary to manufacture the Products and that SUPPLIER has the
right to enter into this Agreement and to license CW to distribute and sell
the Products as provided herein.
2. (a) SUPPLIER shall protect, defend, indemnify and hold CW and its
Affiliates and their officers and directors, employees, agents, successors
and assigns, harmless from all demands, claims, actions, liability, loss,
damage, costs and expenses including without limitation reasonable fees and
costs of attorneys
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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incurred by CW or its Affiliates resulting or arising from any claim of
injury or death to any Third Party or injury or damage to property of any
Third Party, (1) caused by or claimed to be caused by any defects in the
Products supplied by SUPPLIER to CW or its Affiliates or CW'S customers, (2)
caused by or claimed to be caused by any error, omission, intentional
misconduct or a failure or regulatory non-compliance by SUPPLIER, its Agents
or Affiliates in the manufacturing, labeling or packaging of any of the
Products, or (3) caused by or claimed to be caused by the development,
manufacturing, packaging or supplying of the Products by SUPPLIER under this
Agreement, or (4) caused by or claimed to be caused by the breach of any
warranty in Article IX hereof, whether said demands, claims, liability, loss,
damage, costs and expense is sustained by SUPPLIER or CW or its Affiliates or
any Third Party, except to the extent such claimed injury or death or damage
is caused by CW or its agents or Affiliates. In the event of any claim
arising under Article IX, prompt written notice of such claim shall be given
by CW to SUPPLIER. SUPPLIER shall have the right to conduct the defense in
respect thereof but CW may have counsel present at its own expense and shall
be entitled, at CW'S expense to participate in the defense of any such claim.
CW shall cooperate with SUPPLIER in such defense at the expense of SUPPLIER.
No settlement of any such matter where CW is a party to the claim or is a
defendant with respect thereto, shall be made without the written approval of
CW which shall not be unreasonably withheld.
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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(b) SUPPLIER shall protect, defend, indemnify and hold CW and its
Affiliates and their respective directors, officers, employees, agents,
successors and assigns harmless from and against any and all demands, claims,
actions, liability, loss, damage, cost and expense (including without
limitation reasonable fees and costs of attorneys incurred by CW or its
Affiliates) resulting or arising out of any claim by a Third Party that the
Products or the manufacture or processing used in or in connection with the
Products infringes any valid and enforceable patents or other intellectual
property rights of such Third Party or to the extent that any other claim or
action is made or brought against CW or its Affiliates or SUPPLIER by a Third
Party, whether or not a director, officer, employee or agent of SUPPLIER,
relating to SUPPLIER'S manufacture of the Products. CW shall give SUPPLIER
prompt written notice of any such claim asserted against CW or CW'S
Affiliates. SUPPLIER shall have the right to conduct the defense in respect
of such claim, but CW may have counsel present at CW'S own expense and shall
be entitled, at CW'S expense, to participate in the defense of any such
claim. No settlement of any such matter, where CW is a party to the claim or
is a defendant, with respect thereto, shall be made without the written
approval of CW which shall not be unreasonably withheld.
(c) SUPPLIER shall protect, defend, indemnify and hold harmless
CW and its Affiliates against any liability, loss, damage, cost and expense
(including without limitation, reasonable fees and the costs of attorney's
incurred by
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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CW or its Affiliates), incurred by CW or its Affiliates to effect, or as a
result of, a recall of any Products that is requested by the FDA (including a
recall or safety alert effected by CW or its Affiliates voluntarily to
forestall regulatory or other action by the FDA or other governmental
authority, including without limitation any foreign governmental authority,
anywhere in the world, provided that, if time and circumstances permit, CW
shall consult with Supplier reasonably in advance of initiating any such
voluntary recall), provided that the reason for such recall is attributable
to a defect or failure of the Products or an error, omission, intentional
misconduct, failure or regulatory non-compliance by SUPPLIER in the
manufacture, labeling, or packaging of the Products. To the extent that time
and circumstances permit, CW shall give SUPPLIER notice of a recall or
safety alert requested or imposed by any regulatory body affecting the
Products.
(d) Provided the Environmental Conditions (as hereinafter defined)
were not caused by CW, SUPPLIER shall to defend, indemnify and save harmless
CW, its officers, directors, employees, agents, successors and assigns, from
and against any damage, liability, loss, claims, cost or expense (including
without limitation reasonable fees and costs of attorneys' incurred by CW or
its Affiliates), arising out of any claim by any person, government or other
entity, however arising for personal injury, wrongful death, property damage,
economic loss, costs of abatement, costs of remediation, damage to natural
resources, civil penalties, or any other claim, demand, notice, or expense
arising out of or relating to:
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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( i) the presence, generation, handling, treatment, storage,
disposal, discharge, or release of any solid waste, hazardous waste,
hazardous substance, toxic substance, petroleum, contaminant or pollutant, or
any other environmental condition, on, at, beneath, or near SUPPLIER'S
facility; and,
(ii) the presence, generation, handling, treatment, storage,
disposal, discharge, or release of any solid waste, hazardous waste,
hazardous substance, petroleum, toxic substance, contaminant or pollutant,
from SUPPLIER'S facility to another facility, site, or property not owned or
controlled by CW or its Affiliates. The items listed in (i) and (ii) are
referred to as the "Environmental Conditions".
(e) [**]
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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[**]
SUPPLIER shall provide CW with Certificates of Insurance coverage
showing that SUPPLIER possesses the above insurance at the stated limits and
which provides that said insurance cannot be cancelled except after at least
thirty (30) days' prior written notice to CW. SUPPLIER shall immediately notify
CW in writing of any erosion in the above stated limits. SUPPLIER hereby
waives any rights of subrogation.
3. This Article IX shall survive termination of this Agreement.
ARTICLE X
- ---------
PRODUCT REPRESENTATION
----------------------
Any statements, representations, promotional materials or advertisements
concerning the Products which are not made in reliance on or supported by
information or data supplied in writing by SUPPLIER shall be the sole
responsibility of CW, and CW shall protect, defend, indemnify and hold
harmless SUPPLIER and its directors, officers, employees, agents, successors
and assigns from and against any and all demands, claims, actions, liability,
loss, damage, cost and expense (including reasonable fees and costs of
attorney's) resulting or arising, directly or
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OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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<PAGE>
indirectly, out of any such statements, representations, promotional
materials or advertisements covering the Products which are not made in
reliance on or supported by information or data supplied by SUPPLIER, whether
such demands, claims, actions, liability, loss, damage, cost and expense is
sustained by SUPPLIER or CW or any Third Party. In the event of any claim
arising under this covenant of indemnity, prompt written notice of the claim
shall be given to CW which shall have the right to conduct the defense in
respect thereto, but SUPPLIER may have counsel present at SUPPLIER'S own
expense and shall be entitled at SUPPLIER'S expense to participate in the
defense of any such claim. SUPPLIER shall cooperate with CW in such defense
at the expense of CW. No settlement of any such matter shall be made without
the written approval of SUPPLIER and CW, which shall not be unreasonably
withheld.
ARTICLE XI
- ----------
TRADEMARKS
----------
During the term hereof, and thereafter solely in connection with selling
of remaining inventory of Products, CW and its Affiliates shall have the
right to use for the Products and the marketing and sale of the Products
hereunder, trademarks owned by CW and/or its Affiliates, and/or licensed to
CW and/or its Affiliates by third parties, and SUPPLIER shall have no rights
with respect to said trademarks whatsoever. In the event CW desires, during
the term hereof and to the extent
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
29
<PAGE>
necessary for CW and its Affiliates to sell off their remaining inventory of
Products after termination or expiration of this Agreement, CW shall have the
right but not the obligation to use SUPPLIER'S trademarks and copyrights and
if CW uses such trademarks and/or copyrights, CW shall use in customary size
and placement on the Products and their packaging, -Registered Trademark- or
- -TM- symbols and customary copyright notice with respect to such trademarks
or copyright, also indicating SUPPLIER'S ownership thereof. If SUPPLIER
advises CW, IN WRITING, that SUPPLIER has obtained a patent covering a
particular Product, CW shall, at SUPPLIER'S written request, include an
appropriate notice or symbol as requested by SUPPLIER indicating that such
patent covers the Product.
ARTICLE XII
- -----------
TERMINATION FOR BREACH, ETC.
----------------------------
1. After termination of this Agreement, CW shall have the right to
market, distribute and sell the Products purchased from SUPPLIER pursuant to
the terms hereof during the term of this Agreement.
2. Notwithstanding any provision in this Agreement to the contrary,
failure by CW or SUPPLIER to comply substantially with any of their
respective material obligations and conditions contained in this Agreement
shall entitle the other party to give to the party in default written notice
requiring such other party to cure good such default. If such default is not
cured within forty-five (45) days after
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
30
<PAGE>
giving of such notice, the notifying party shall be entitled (without
prejudice to any of its other's rights under this Agreement) to terminate
this Agreement by giving at least forty-five (45) days written notice of
termination to the other party, except that a default in payment must be
cured within thirty (30) days after the giving of notice requiring the
defaulting party to cure such default, and the Agreement shall terminate
thirty (30) days after said notice is given, if such payment default is not
timely cured. The right of either party to terminate this Agreement as
herein provided shall not be affected in any way by the terminating party's
waiver of or failure to take action with respect to any previous default of
the other party. Termination of this Agreement shall not relieve either party
of its obligations incurred prior to termination and not fully discharged by
the date of such termination.
3. Within thirty (30) days after termination of this Agreement, CW
shall pay SUPPLIER any and all amounts still owed SUPPLIER for all Products
either (a) ordered by CW and delivered to and accepted by CW or (b) shipped
by SUPPLIER to CW'S customers at CW'S request, in each case prior to such
termination.
ARTICLE XIII
- ------------
CONFIDENTIALITY
---------------
During the term of this Agreement and subsequent thereto, CW and
SUPPLIER each shall exercise at least the same degree of care to safeguard
the confidentiality of confidential, or proprietary and trade secret
information disclosed
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
31
<PAGE>
to it by the other party and any intellectual and proprietary rights therein
as it would exercise to safeguard the confidentiality of its own
confidential, proprietary or trade secret information. Any confidential,
proprietary or trade secret information, designated as such, disclosed
hereunder: (i) orally and then promptly reduced to writing and provided by
the disclosing party to the other party or (ii) in writing by the disclosing
party at the time of disclosure shall be maintained in confidence by the
party receiving the disclosure and shall not be utilized for any purpose
except for the purposes contemplated by this Agreement and shall not be
disclosed to any Affiliate or Third Party unless they have executed a writing
obligating themselves to the terms of this Article XIII. These obligations
to maintain in confidence and not use the aforesaid confidential, proprietary
or trade secret information shall not apply to: (a) any such information in
the public domain at the time of disclosure or which falls into the public
domain otherwise than through breach of this Article, (b) any such
information which, at the time of disclosure, was demonstrably already known
to or in the possession of the party receiving disclosure, without breach of
this Agreement, (c) any such information which, following such disclosure, is
obtained by the party receiving disclosure from a Third Party not under an
obligation of confidentiality with respect to such information to the
disclosing party, or (d) which is independently developed by employees of the
party receiving the disclosure or affiliated companies who have not had
access to the relevant confidential, proprietary or trade secret information
of the other party hereto
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
32
<PAGE>
provided hereunder.
Notwithstanding any provision in this Agreement to the contrary,
confidential, proprietary or trade secret information which must by law be
divulged to governmental authorities in connection with the performance of
this Agreement or otherwise can be disclosed to such governmental authorities
provided that the disclosing party follows applicable governmental
regulations and/or procedures to seek to require that the governmental
authorities hold such information in confidence and notifies the other party,
in writing, of such disclosure, if feasible, reasonably prior to such
disclosure. This Article XIII shall survive termination of this Agreement.
ARTICLE XIV
- -----------
INTERPRETATION
--------------
The construction, validity and performance of this Agreement shall be
governed in all respects by the laws of the State of New York. The validity,
construction, and interpretation of this Agreement shall be governed by the
internal laws of the State of New York. In connection with any dispute or
controversy arising out of or relating to this Agreement, both parties
consent to the jurisdiction of and venue in the United States Federal
District Court for the Southern District of New York.
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
33
<PAGE>
ARTICLE XV
- ----------
FORCE MAJEURE
-------------
If the performance of this Agreement or of any obligations hereunder,
except for the payment of monies, is prevented, restricted or interfered with
by reason of any cause beyond the reasonable control of the affected party,
except for the payment of monies, the party so affected upon prompt notice to
the other party shall be excused from such performance to the extent of such
prevention, restriction or interference, provided that the party so affected
shall use its best efforts to avoid or remove such cause of non-performance
and shall continue performance hereunder with the utmost dispatch whenever
such causes are removed.
ARTICLE XVI
- -----------
NOTICES
-------
Any notice required or permitted to be given under this Agreement shall
be mailed by express mail with a reputable carrier including national
couriers such as Fed Ex, registered or certified first-class mail, postage
prepaid, or by facsimile with confirmed answerback, addressed to the party to
be notified at its address stated at the beginning of this Agreement (with
facsimile numbers on the signature page hereof), or at such other address as
may hereafter be furnished in writing to the notifying party, except those
copies, notices and reports under Article IV 6, 7 and 8
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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<PAGE>
hereof shall be addressed as specified in Article IV 9 hereof.
ARTICLE XVII
- ------------
WAIVER
------
The failure on the part of SUPPLIER or CW to exercise or enforce any
rights conferred upon such party hereunder shall not be deemed to be a
waiver of any such rights nor operate to bar the exercise or enforcement
thereof by such party at any time or times thereafter.
ARTICLE XVIII
- -------------
ASSIGNABILITY
-------------
This Agreement, and all rights and obligations hereunder, are personal
as between the parties, and except as provided below, shall not be assigned
in whole or in part by either of the parties to any other person or company
without the prior written consent of the other party except by a party to the
successor or assignee of substantially all such party's business relating to
diagnostic products for professional use. CW may assign this Agreement or
any of its rights or obligations hereunder to an Affiliate, acceptable to
SUPPLIER, which acceptance Supplier shall not, acting in good faith,
unreasonably withhold, which has agreed in writing to be bound hereby.
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
35
<PAGE>
ARTICLE XIX
- -----------
ENTIRE AGREEMENT
----------------
This Agreement constitutes the entire agreement between the parties with
respect to the specific subject matter hereof, and replaces and supersedes
any other previous understandings and agreements between them with respect
thereto including those understandings and agreements that may be contained
in correspondence or in verbal interchanges between the parties and their
attorneys. Neither party shall be bound by any definition, condition,
warranty or representation other than as expressly stated in this Agreement.
No waiver or modification of this Agreement shall be valid except by written
agreement executed by the parties hereto.
ARTICLE XX
- ----------
SEVERABILITY
------------
If any provision of this Agreement should be proven unlawful or
non-enforceable, such provision will be considered a nullity, but such
nullity will not affect the validity of the remaining terms and conditions of
this Agreement, and the parties shall substitute, to the extent lawfully
permissible, a new provision embodying the intentions of the parties.
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
36
<PAGE>
ARTICLE XXI
- -----------
INDEPENDENT CONTRACTOR
----------------------
The parties are independent contractors as to each other, and neither is an
agent, employee or legal representative of the other and neither party shall
execute any agreement or other instrument purporting to bind the other or
hold themselves out as an agent, employee, or legal representative of the
other party. This Agreement shall not be deemed to establish an agency
relationship, joint venture or partnership between SUPPLIER and CW.
ARTICLE XXII
- ------------
MISCELLANEOUS
-------------
1. Neither party may disclose the terms and conditions of this
Agreement to any Third Party, person or company, except as may be required by
law or except that either party may disclose such terms to a prospective
successor or assignee of substantially all its business relating to
diagnostic products, without the prior written consent of the other party, or
to such party's principal shareholders, current and future banks and
prospective investors provided that, if reasonably feasible, in each case of
such disclosure the recipient is bound by a written obligation to the
disclosing party hereto, to keep such information confidential.
2. As used in this Agreement, the singular includes the plural and
plural includes the singular, wherever so required by fact or context. The
headings
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
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<PAGE>
appearing at the beginning of the numbered articles hereof have been inserted
for convenience only and do not constitute a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their representative duly authorized officers as of the effective
date.
CALYPTE BIOMEDICAL CORPORATION
By: /s/ William A. Boeger
----------------------------
Title: CEO
-------------------------
Facsimile: 510-814-8408
CARTER-WALLACE, INC.
By: /s/ Ralph Levine
----------------------------
Ralph Levine
Title: President
-------------------------
Facsimile: 212-339-5200
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
38
<PAGE>
Schedules A - G
[**]
THE SYMBOL "[**]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
39
<PAGE>
Exhibit 10.53
[CALYPTE BIOMEDICAL CORPORATION LETTERHEAD]
September 17, 1999
John J. DiPietro
5615 Morningside Drive
San Jose, CA 95138
Re: YOUR SERVICE AS A DIRECTOR OF CALYPTE
Dear John:
Upon your signature at the end of this letter where indicated, this
letter will be the binding agreement (the "AGREEMENT"), effective as of
September 17, 1999 (the "EFFECTIVE DATE"), between Calypte Biomedical
Corporation ("CALYPTE") and you with respect to the matters set forth herein.
1. RESIGNATION AS AN EMPLOYEE, CHIEF OPERATING OFFICER AND CHIEF
FINANCIAL OFFICER OF CALYPTE; ELECTION AS DIRECTOR OF CALYPTE.
(a) RESIGNATION AS AN EMPLOYEE, CHIEF OPERATING OFFICER AND CHIEF
FINANCIAL OFFICER OF CALYPTE. You hereby resign, as of the Effective Date,
as an employee of Calypte and as Chief Financial Officer and as Chief
Operating Officer of Calypte. You and Calypte acknowledge that such
resignation is mutually amicable and results from your desire to pursue other
interests. You will receive payment of all accrued salary and vacation as
required by law, and you will continue to receive any benefits accorded to
you as a departed employee under the terms of the Company's benefits plans or
applicable law (e.g., option to elect continued health coverage under COBRA).
(b) ELECTION AS DIRECTOR OF CALYPTE. At the meeting of Calypte's
Board of Directors (the "BOARD") held next after the Effective Date, the
Board will elect you as a Director of Calypte. The Company will place your
name for election as a Director of the Company with respect to any election
of Directors, and you will serve as a Director of the Company, in each case
until the earliest of the date of your death, your written resignation from
the Board, or the date upon which you have not been re-elected as a Director
by the stockholders of the Company, or the date upon which the Board
determines in good faith that such nomination would not be in the best
interests of the Company or its stockholders. During your service as a
Director of Calypte you will be entitled to such indemnification, stock
and/or stock options and other benefits from the Company as are made
available from time to time by the Company to other Directors.
2. GENERAL. This Agreement may be executed in counterparts, each of
which will be deemed an original, but both of which together will constitute one
and the same instrument. This Agreement will be governed by the laws of the
State of California without regard to its body of law controlling conflict of
laws. This Agreement is the
<PAGE>
complete and exclusive agreement between you and Calypte regarding the
specific subject matter of this Agreement and supersedes in their entirety
all prior agreements, understandings and communications, oral or written,
between us regarding the specific subject matter of this Agreement, will be
binding upon and inure to our respective successors and assigns, and upon
your heirs, executors and administrators, and may only be amended by a
writing signed by each of us or our respective successors, assigns or
authorized representatives. We acknowledge that you and the Company are,
simultaneously with execution and delivery of this agreement, executing and
delivering a Consulting Agreement of even date herewith.
Sincerely,
/s/ William Boeger
-------------------------------------
William Boeger
President and Chief Executive Officer
ACCEPTED AND AGREED:
/s/ John DiPietro
- -------------------------------------
John J. DiPietro
Date signed: September 17, 1999
------------
<PAGE>
[CALYPTE BIOMEDICAL CORPORATION LETTERHEAD]
September 17, 1999
John J. DiPietro
5615 Morningside Drive
San Jose, CA 95138
Re: CONSULTING AGREEMENT WITH CALYPTE
Dear John:
Upon your signature at the end of this letter where indicated, this
letter will be the binding agreement (the "AGREEMENT"), effective as of
September 17, 1999 (the "EFFECTIVE DATE"), between Calypte Biomedical
Corporation ("CALYPTE") and you with respect to your provision of service as
a consultant to Calypte as provided in this letter (the services described in
Sections 1(a) and (b) hereof are referred to herein as the "SERVICES"), from
and after your resignation, as of the date hereof, as an employee of and as
Chief Operating Officer and Chief Financial Officer of the Company.
1. SERVICES.
(a) BASIC RETAINED SERVICES. Subject to the terms and conditions
of this Agreement, you hereby are retained by Calypte as a consultant to
Calypte from the Effective Date until terminated as provided herein, to
provide up to an aggregate of sixteen (16) hours of Services per calendar
month during the term hereof (or such additional hours as you may agree with
Calypte as provided in Section 1(b) hereof), with travel time counted as
one-half time (I.E., one hour of travel time will be counted as one-half hour
of time spent consulting hereunder), with respect to (i) financial and
operational matters and projects relating to Calypte's current and/or future
products, and (ii) assisting in the selection, recruitment and integration
with Calypte of a Controller and of a Chief Financial Officer, all as may be
requested from time to time during the term hereof orally or in writing by an
officer (President, Chief Executive Officer, Chief Financial Officer, Vice
President) or member of the Board. The number of hours spent by you
hereunder as rendering Services to Calypte will be in addition to time you
spend to discharge your customary duties as a Director of Calypte, including
time to prepare for and attend meetings of the Board and of Board Committees
upon which you serve, during such time as you are serving as a Director of
Calypte. You will not receive any compensation hereunder for your services
as a Director of Calypte, but will be entitled to such indemnification,
stock, and/or stock options and other benefits from the Company as are made
available from time to time by the Company to other Directors.
(b) ADDITIONAL SERVICES. At the request of Calypte, and upon
written agreement between you and Calypte (each of which agreements will be
in the form of EXHIBIT A attached hereto and incorporated herein by
reference, and each of which will be considered as a part of this Agreement
when so mutually executed), and in addition to the basic retained Services
<PAGE>
John J. DiPietro
September 22, 1999
Page 2
rendered as described in Section 1(a) hereof, you will render such number of
hours of Services as are specified therein (with a "day of consulting" being
considered for such purposes as eight (8) hours, and with travel time being
counted as one-half time). You will be paid at the rate of $100.00 per hour
for any such additional hours rendered.
(c) SCHEDULING; LOCATION. The days upon which Calypte will
require your services will be based upon mutually agreeable dates and times.
Calypte will provide as much advance notice as possible to you of the dates
and times required, and you will make every reasonable effort to make
yourself available during such dates. You will not be called upon to render
such hours in excess of two days in any particular month (eight hours per
day) without your prior written approval, and Calypte will not require you to
render such services at dates, times or places that would reasonably
interfere with other work commitments you may have. You may render the
Services by telephone and/or e-mail, and/or on-site at Calypte's headquarters
in the San Francisco Bay Area, and/or at other locations, as determined in
good faith by Calypte after consultation with you as to mutual convenience
and the particular Services required.
(d) REPORTING. You will report to the President or Chief
Executive Officer, and to the Board, and will perform such activities as are
set forth in this Agreement, provided that Calypte may give you direction
through such other officers as specified in Section 1(a) hereof. You may not
assign or subcontract your duties or rights under this Agreement without the
prior written consent of Calypte signed by its President or Chief Executive
Officer.
(e) OTHER ACTIVITIES. Calypte acknowledges and agrees that, while
you will devote such time and effort as is necessary to discharge your duties
hereunder, you will not be providing your full-time services to Calypte, and
that you may consult with or become an employee of other entities as you wish
(including but not limited to accepting full time employment), subject to
your obligations as to confidential and proprietary information of Calypte as
set forth in this Agreement.
2. COMPENSATION AND EXPENSES.
(a) NO CASH COMPENSATION; AMENDMENT OF SECTION 7(D) OF EMPLOYMENT
AGREEMENT WITH RESPECT TO SEVERANCE PAY AND CONTINUED VESTING OF OPTION.
Calypte will pay no cash amount to you for your services rendered under this
Agreement. Instead, Calypte and you hereby agree, pursuant to Section 8 of
the Employment Agreement dated as of October 28, 1998 between you and Calypte
(the "EMPLOYMENT AGREEMENT"), that Section 7(d) of your Employment Agreement
hereby is amended to read as follows, effective as of the day before the
Effective Date; except as herein amended, neither your Employment Agreement
nor such options referred to in said section are amended:
"The Executive may voluntarily terminate his employment at any
time beginning July 1, 1999, in which event he shall receive
severance pay of Fifty-Five Thousand Dollars ($55,000.00). If in
connection with the Executive's voluntary termination of employment
hereunder, the Executive and the Company enter into a
<PAGE>
John J. DiPietro
September 22, 1999
Page 3
written agreement under which the Executive is to render consulting
services to the Company, then from and after the date of such
voluntary termination, vesting (exerciseability) of Executive's
currently outstanding incentive stock option from the Company which
was originally granted to Executive on October 27, 1998, for a
total of 300,000 shares of Common Stock of the Company, originally
vesting over a 24-month period beginning October 27, 1998, at the
rate of 12,500 shares per month, will not cease and such option is
hereby amended to provide that it shall continue after such
termination date to vest (become exerciseable) at the rate of four
thousand (4,000) shares at the end of each monthly anniversary of
the date of such termination, through the earlier of the date of
termination of such consulting agreement or the twelfth (12th)
monthly anniversary of the date of such termination. In addition,
if in connection with any other Calypte stock option plan or grant,
other than a plan or grant provided to directors of Calypte,
Executive has any obligation that requires Executive to exercise an
option to purchase Calypte stock within a specific period of time,
such period of time will not begin until the date of termination of
the Consulting Agreement with Calypte dated September 17, 1999."
(b) EXPENSE REIMBURSEMENT. Calypte will reimburse you for all
reasonable, ordinary and necessary travel and entertainment expenses incurred
by you in conjunction with your services to Calypte hereunder, consistent
with Calypte's then-standard reimbursement policy, and, as applicable, travel
policy, provided, as to a given expense, you have submitted commercially
customary support documentation to Calypte therefor.
3. OUR RELATIONSHIP.
(a) INDEPENDENT CONTRACTOR. In performance of your services under
this Agreement, you will be an independent contractor of, and are not an
agent or employee of, and have no authority to bind, Calypte by contract or
otherwise.
(b) EMPLOYMENT TAXES AND BENEFITS. You will report as
self-employment income all compensation you received pursuant to this
Agreement, including the fair market value of the Shares. You will indemnify
Calypte and hold it harmless from and against all claims, damages, losses and
expenses, relating to any obligation imposed by law on Calypte to pay any
withholding taxes, social security (except for employer's share of social
security, if any), unemployment or disability insurance, or similar items in
connection with compensation received by you pursuant to this Agreement. You
will not be entitled to receive any vacation or illness payments, or to
participate in any plans, arrangements, or distributions by Calypte
pertaining to any bonus, stock option, profit sharing, insurance or similar
benefits for Calypte's employees, except as provided herein or as otherwise
specifically approved by the Board.
(c) NO REMUNERATION AS TO PRODUCTS. You will receive no royalty
or other remuneration on the production or distribution of any products
developed by the Company or by you in connection with or based upon the
Services.
4. INDEMNIFICATION.
<PAGE>
John J. DiPietro
September 22, 1999
Page 4
(a) BY YOU. To the extent determined by a tribunal of competent
jurisdiction (arbitral or judicial), not subject to further appeal, you will
indemnify Calypte and hold it harmless from and against all claims, damages,
losses and expenses, including court costs and reasonable fees and expenses
of attorneys, expert witnesses, and other professionals, arising out of or
resulting from:
(i) Any action by a third party against Calypte to the
extent based on any claim that any Services performed under this Agreement,
or their results, to your actual knowledge (A) infringe a patent, trademark,
copyright or other proprietary right, and/or (B) violate a trade secret of
such third party; and
(ii) Any action by a third party to the extent based on any
conduct by you in performing Services under this Agreement which results in
any of the following and for which such tribunal determines you to be liable
to Calypte under applicable law: (i) any bodily injury, sickness, disease or
death; (ii) any injury or destruction to tangible or intangible property
(including computer programs and data) or any loss of use resulting
therefrom; or (iii) any violation of any statute, ordinance, or regulation.
(b) BY CALYPTE. To the extent legally permitted, and not in
derogation of your obligations under Section 4(a) hereof: (i) you will be
considered as subject to the indemnity provisions of Calypte's Certificate of
Incorporation and Bylaws, a copy of which will be furnished to you upon
request, and (ii) Calypte will indemnify you and hold you harmless from and
against all claims, damages, losses and expenses, including court costs and
reasonable fees and expenses of attorneys, expert witnesses, and other
professionals, arising out of or resulting from any action by a third party
against Calypte or you, or both, in connection with or based upon the
performance by you of the Services, or their result.
5. PROPERTY OF CALYPTE.
(a) DEFINITIONS. For the purposes of this Agreement:
(i) "INVENTIONS" means any and all inventions, ideas,
designs, circuits, schematics, formulas, algorithms, trade secrets, works of
authorship, mask works, developments, methods, processes, techniques,
improvements, and related know-how in the field of research, development and
commercialization in which Calypte is engaged, and which are made by you,
alone or in combination with others, which result from or relate to the
services you perform for Calypte hereunder, and whether made on behalf of
Calypte under this Agreement, or with the use of or as a result of access to
Confidential Information, including but not limited to any derivative work
which constitutes an improvement or modification to any tangible form of
Confidential Information, as hereinafter defined, such as any design,
drawing, or product that embodies Confidential Information.
(ii) "DESIGNS AND MATERIALS" means all designs, discoveries,
inventions, products, computer programs, procedures, improvements, developments,
drawings, notes,
<PAGE>
John J. DiPietro
September 22, 1999
Page 5
documents, information and materials made, conceived or developed by you
alone or with others which result from or relate to the services you perform
for Calypte hereunder.
(iii) "MORAL RIGHTS" means any right to claim authorship of a
work, any right to object to any distortion or other modification of a work,
and any similar right, existing under the law of any country in the world, or
under any treaty.
(b) ASSIGNMENT OF OWNERSHIP. You agree that all the Inventions,
Designs and Materials that (i) are developed using equipment, supplies,
facilities or trade secrets of Calypte, (ii) result from work performed by
you for Calypte or (iii) relate to Calypte's business or current or
anticipated research and development, will be the sole and exclusive property
of Calypte. You hereby irrevocably transfer and assign any and all of your
right, title, and interest in and to Inventions, Designs and Materials,
including but not limited to all patent rights, copyrights, trademarks and
trade secrets, to Calypte. All Inventions, Designs and Materials will be the
sole property of Calypte and Calypte will have the sole right to determine
the treatment of any Inventions, Designs and Materials, including the right
to keep them as trade secrets, to file and execute patent applications on
them, to use and disclose them without prior patent application, to file
registrations for copyright or trademark on them in its own name, or to
follow any other procedure that Calypte deems appropriate. You acknowledge
that copyrightable works prepared by you within the scope of your service
hereunder are "works for hire" under the federal Copyright Act and that
Calypte will be considered the author thereof. If Calypte files an original
United States patent application covering any invention of which you are a
named inventor, you will receive in each case from Calypte an inventor's fee
of One Hundred Dollars $100.00 in cash as full compensation therefor. You
will:
(i) Disclose promptly in writing to Calypte all Inventions,
Designs and Materials; and
(ii) Cooperate with and assist Calypte to apply for, and to
execute any applications and/or assignments reasonably necessary to obtain,
any patent, copyright, trademark or other statutory protection for
Inventions, Designs and Materials in Calypte's name as Calypte deems
appropriate, provided that Calypte will reimburse you for any reasonable
costs incurred by you, and your normal billing rate for reasonable time
incurred, in connection therewith; and
(iii) Otherwise treat all Inventions, Designs and Materials as
"Confidential Information," as defined below. Your obligations to so
disclose, assist, and execute will survive until the earlier of your death or
disability or five years following any expiration or termination of this
Agreement.
(c) MORAL RIGHTS WAIVER. You hereby irrevocably transfer and
assign to Calypte any and all Moral Rights that you may have in any services
you render hereunder, or in any Inventions, Designs and Materials or products
of Calypte. You also hereby forever waive and agree never to assert against
Calypte, its successors or licensees any and all Moral Rights you may
<PAGE>
John J. DiPietro
September 22, 1999
Page 6
have in any such services, Inventions, Designs and Materials or such
products, even after expiration or termination of this Agreement.
(d) COMPANY PROPERTY. All papers, records, data, notes, drawings,
files, documents, samples, devices, products, equipment, and other materials,
including copies and in whatever form, relating to the business of Calypte
that you possess or create as a result of your service to Calypte, whether or
not confidential, are the sole and exclusive property of Calypte.
6. CONFIDENTIAL INFORMATION. You acknowledge that you will acquire
information and materials from Calypte and knowledge about the business,
products, programming techniques, experimental work, customers, clients and
suppliers of Calypte and that all such knowledge, information and materials
acquired, the existence, terms and conditions of this Agreement, and the
Designs and Materials, are and will be the trade secrets and confidential and
proprietary information of Calypte (collectively "CONFIDENTIAL INFORMATION").
Confidential Information will not include, however, any information which is
or becomes part of the public domain through no fault of your own or that
Calypte regularly gives to third parties without restriction on use or
disclosure. You will hold all such Confidential Information in strict
confidence, and will not disclose it to others or use it in any way,
commercially or otherwise, except in performing your services hereunder, and
will not allow any unauthorized person access to it, either before or after
expiration or termination of this Agreement. You will take all action
reasonably necessary and satisfactory to protect the confidentiality of the
Confidential Information in your possession, including, without limitation,
implementing and enforcing operating procedures to minimize the possibility
of unauthorized use or copying of the Confidential Information.
7. TERM OF SERVICE; TERMINATION; EFFECT OF TERMINATION.
(a) TERM OF SERVICE; TERMINATION. This Agreement is for a period
of twelve (12) months from and after the Effective Date, subject to earlier
termination as provided in Section 7(b) hereof.
(b) TERMINATION; EFFECT OF TERMINATION. This Agreement will
terminate automatically upon the earliest of (i) your death, (ii) such date
as you voluntary terminate service, by written notice to Calypte, or the date
upon which Calypte terminates your service hereunder for cause by giving
written notice thereof to you, stating therein that such termination is for
cause and specifying in reasonable detail such cause. For purposes of this
Agreement, "cause" is defined as your willful failure to follow lawful and
commercially reasonable directives of the Board, and/or intentional damage to
the tangible or intangible property of Calypte, and/or conviction of a crime
involving moral turpitude, and/or the performance of any dishonest or
fraudulent act which is or would be, in each case as determined in good faith
by the Board, materially detrimental to the interest of Calypte and its other
stockholders. Upon termination of your service with Calypte for any reason,
Calypte will pay you all of your accrued and unpaid expenses, if any,
provided, as to a given expense, you have submitted commercially customary
support documentation to Calypte therefor. Your obligations of
confidentiality hereunder will survive any such termination, and termination
hereof will not have any effect on any other binding
<PAGE>
John J. DiPietro
September 22, 1999
Page 7
agreement between Calypte and you except to the extent specifically so stated
in such other agreement or agreements.
8. PRIOR CONTRACTS. You represent that except as disclosed in writing
to Calypte, (a) there are no other contracts to assign Inventions, Designs or
Materials that are, as of the Effective Date, in existence between you and
any other person or entity, and (b) as of the Effective Date, you have no
employment, consultancies or undertakings which would restrict or impair your
performance of this Agreement.
9. GENERAL. This Agreement may be executed in counterparts, each of
which will be deemed an original, but both of which together will constitute
one and the same instrument. This Agreement will be governed by the laws of
the State of California without regard to its body of law controlling
conflict of laws. This Agreement is the complete and exclusive agreement
between you and Calypte regarding the specific subject matter of this
Agreement and supersedes in their entirety all prior agreements (except the
Employment Agreement, as applicable, and outstanding stock options),
understandings and communications, oral or written, between us regarding the
specific subject matter of this Agreement, will be binding upon and inure to
our respective successors and assigns, and upon your heirs, executors and
administrators, and may only be amended by a writing signed by each of us or
our respective successors, assigns or authorized representatives.
We look forward to continuing to work with you, as a consultant, as part
of our team for the success of Calypte.
Sincerely,
/s/ William Boeger
-------------------------------------
William Boeger
President and Chief Executive Officer
ACCEPTED AND AGREED:
/s/ John DiPietro
- -------------------------------------
John J. DiPietro
Date signed: September 17, 1999
------------
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