UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended March 31, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number: 0-21994
GLYKO BIOMEDICAL LTD.
(Exact name of small business issuer as specified in its charter)
Canada 68-0230537
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11 Pimentel Court, Novato, California 94949
(address of principal executive offices)
(415) 382-6653
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 21,523,044 common shares outstanding
as of April 30, 1997.
<PAGE>
GLYKO BIOMEDICAL LTD.
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited).
Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996...........................3
Consolidated Statements of Operations for the
three months ended March 31, 1997 and 1996.....................4
Consolidated Statements of Cash Flows for the three
months ended March 31, 1997, and 1996..........................5
Notes to Consolidated Financial Statements.....................6
ITEM 2.
Management's Discussion and Analysis
or Plan of Operation...........................................8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings....................................13
ITEM 2. Changes in Securities................................13
ITEM 3. Defaults upon Senior Securities......................13
ITEM 4. Submission of Matters to a Vote of Security Holders .13
ITEM 5. Other Information....................................13
ITEM 6. Exhibits and Reports on Form 8-K.....................13
Signatures ............................................................14
2
<PAGE>
PART I.
ITEM 1. Financial Statements
GLYKO BIOMEDICAL LTD.
CONSOLIDATED BALANCE SHEETS
(unaudited, in U.S. dollars)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------------------- ----------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 708,455 $ 210,992
Trade receivables 143,148 156,176
Inventories 74,677 68,452
Other current assets 33,250 26,025
--------------------- ----------------------
Total current assets 959,530 461,645
Property, plant and equipment, net 157,111 108,045
Other assets 2,206 2,200
--------------------- ---------------------
Total assets $ 1,118,847 $ 571,890
===================== ======================
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 77,905 $ 174,732
Accrued liabilities 148,705 204,504
Deferred rent and related costs 304,669 269,718
Payable to stockholder 217,607 219,811
--------------------- ----------------------
Total current liabilities 748,886 868,765
--------------------- ----------------------
Total liabilities 748,886 868,765
Stockholders' equity (deficit):
Common stock, no par value, unlimited shares
authorized, 21,523,044 shares issued and
outstanding (17,243,044 in 1996) 13,131,250 12,203,065
Common stock warrants 929,585 433,897
Accumulated deficit (13,690,874) (12,933,837)
--------------------- ----------------------
Total stockholders' equity (deficit) 369,961 (296,875)
--------------------- ----------------------
Total liabilities and
stockholders' equity (deficit) $ 1,118,847 $ 571,890
===================== ======================
</TABLE>
See accompanying notes
3
<PAGE>
GLYKO BIOMEDICAL LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in U.S. dollars)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------
1997 1996
---------------- ---------------
<S> <C> <C>
Revenues:
Sales of products and services $ 241,154 $ 404,951
Other revenues 250,020 38,090
---------------- ---------------
Total revenues: 491,174 443,041
Expenses:
Cost of products and services 98,151 146,630
Research and development 844,770 277,421
Selling, general and administrative 314,455 375,242
---------------- ---------------
1,257,376 799,293
---------------- ---------------
Loss from operations (766,202) (356,252)
Interest income 1,923 3,645
Other income 7,254 3,788
---------------- ---------------
Net loss $ (757,025) $ (348,819)
================ ===============
Net loss per common share and
common share equivalents $ (0.04) $ (0.02)
================ ===============
Weighted average number of common shares
and common share equivalents used in
computing per share amounts 17,480,822 14,567,944
================ ===============
</TABLE>
See accompanying notes
4
<PAGE>
GLYKO BIOMEDICAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in U.S. dollars)
<TABLE>
<CAPTION>
Three months ended
-------------------------------------
March 31, March 31,
1997 1996
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (757,025) $ (348,819)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 14,685 17,332
Change in assets and liabilities:
Trade receivables 13,028 121,758
Inventories (6,225) (11,695)
Other current assets (7,231) (5,794)
Accounts payable (96,827) 8,136
Accrued liabilities (55,799) (56,147)
Deferred revenue - (99,161)
Deferred rent and related costs 34,951 48,571
---------------- ----------------
Total adjustments (103,418) 23,000
---------------- ----------------
Net cash used in operating activities (860,443) (325,819)
Cash flows from investing activities:
Capital expenditures (62,487) (2,708)
---------------- ----------------
Net cash used in investing activities (62,487) (2,708)
Cash flows from financing activities:
Repayments on capital lease obligation - (5,112)
Issuance of 4,000,000 shares common stock 1,014,566 -
Issuance of 4,000,000 common stock warrants 434,814 -
Offering costs (28,987) -
---------------- ----------------
Net cash provided by (used in)
financing activities 1,420,393 (5,112)
---------------- ----------------
Net increase (decrease) in cash 497,463 (333,639)
Cash and cash equivalents, beginning of period 210,992 620,720
---------------- ----------------
Cash and cash equivalents, end of period $ 708,455 $ 287,081
================ ================
</TABLE>
See accompanying notes
5
<PAGE>
GLYKO BIOMEDICAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements and related footnotes
have been prepared in conformity with U.S. generally accepted accounting
principles using U.S. dollars. The consolidated financial statements
include the accounts of the Company and its subsidiaries, Glyko, Inc. and
BioMarin Pharmaceutical, Inc. All significant intercompany accounts and
transactions have been eliminated. The balance sheets as of March 31, 1997
and 1996 and the related statements of operations and cash flows for the
periods ended March 31, 1997 and 1996 are unaudited but have been prepared
on substantially the same basis as the annual audited financial statements.
Certain reclassifications have been made to the consolidated financial
statements in the prior periods to conform to classifications used in the
current period. In the opinion of management, the unaudited consolidated
financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the
consolidated financial position, results of operations and cash flows for
those periods presented. The unaudited results for the periods ended March
31, 1997 and 1996 are not necessarily indicative of results to be expected
for the entire year.
The Company believes that its available cash will allow it to fund planned
operations through the second quarter of 1997. The Company's Report of
Independent Public Accountants for the year ended December 31, 1996
indicates that there is substantial doubt about the Company's ability to
continue as a going concern reflecting both the necessity and the
uncertainty of future funding. Such funding may come individually or
collectively from stock issuances, licensing and marketing agreements or by
collaborative research agreements with strategic partners. No assurance can
be given that additional financing will be available or, if available, that
it will be on terms acceptable to the Company or its stockholders. If
adequate funding is not obtained, operations may be adversely affected.
These factors raise substantial doubt about the Company's ability to
continue as a going concern. The Company will delay or eliminate
expenditures in respect of certain products under development such as
additional analytical kits and diagnostic tests in the event sufficient
funding is unavailable.
The accompanying financial statements should be read in conjunction with
the Company's annual report on form 10-KSB for the fiscal year ended
December 31, 1996.
Product Sales
The Company recognizes product revenues and related cost of sales upon
shipment of products. Service revenues are recognized upon completion of
services as evidenced by the transmission of reports to customers. Other
revenues, principally licensing and distribution fees, are recognized upon
completion of applicable contractual obligations.
Loss per Common Share and Common Share Equivalents
Loss per common share and common share equivalents is computed using the
weighted average number of common shares outstanding during each period
presented.
In 1997, the Company will report its loss per common share and common share
equivalents based upon the recently issued Statement of Financial
Accounting Standards No. 128 (SFAS No. 128), "Earnings per Share". The pro
forma effect of this accounting change on the quarter ended March 31 is:
1997 1996
Primary EPS as reported $ (0.04) $ (0.02)
Pro forma effect of SFAS No. 128 0.00 0.00
------- -------
Basic EPS pro forma $ (0.04) $ (0.02)
======= =======
Fully Diluted EPS as reported $ (0.04) $ (0.02)
Pro forma effect of SFAS No. 128 0.00 0.00
------- -------
Diluted EPS pro forma $ (0.04) $ (0.02)
======= =======
6
<PAGE>
GLYKO BIOMEDICAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Termination of Millipore Marketing Agreement
Through 1993 and the first quarter of 1994 the Company sold its products
directly and through sales to Millipore Corporation, ("Millipore") for
resale. During this time Millipore held marketing rights to Glyko products
under the terms of a distribution agreement between Millipore and the
Company. Late in 1993 Millipore announced their intention to exit the
bioscience business and in April 1994 Millipore and the Company agreed to
terminate their distribution agreement. Millipore has granted the Company
all marketing rights to Glyko analytic products and has waived its option
to purchase the Company's analytic business. In turn, Millipore will
receive 500,000 shares of Glyko Biomedical Ltd. common stock, subject to
Canadian regulatory approval. In the third quarter of 1994, the Company
recorded a charge to operations of $219,811 for costs related to the
termination of the Agreement. This amounts represents the estimated fair
market value of stock to be issued as a result of the termination of the
Agreement. The Toronto Stock Exchange has turned down the issuance of the
500,000 shares due to an arms-length issue and requires that an independent
valuation be performed in order to reconsider the issuance of these shares.
No such valuation has been performed to date.
3. Private Equity Placement Offerings
During the second quarter of 1995, the Company closed a private equity
placement offering (the Q295 Financing). Investors participating in the
Q295 Financing purchased approximately 4.786 million units which each
consisted of one share of common stock and one five year warrant to
purchase one share of common stock. The Company issued units in exchange
for cash, and also in exchange for the settlement of certain outstanding
liabilities. The units were priced at Cdn.$0.80 with an exercise price on
the warrant of Cdn.$0.90. The Company established a balance sheet value for
the common stock warrants by subtracting the discounted fair market value
for one share of the Company's common stock from the price of one unit. The
common stock warrants expire in 2000. The Q295 Financing raised
approximately $2.78 million, consisting of approximately $2.36 million in
cash and $420,000 for the settlement of a stockholder/director bridge loan
and certain other liabilities.
During the second quarter of 1996, the Company closed a second private
equity placement offering (the Q296 Financing). Investors participating in
the Q296 Financing purchased 2.5 million units each consisting of one share
of common stock and one half of a two year warrant. One warrant is required
to purchase one share of common stock. The units were priced at Cdn.$0.60
with an exercise price on the warrant of Cdn.$0.80. The Q296 Financing
raised approximately $1.077 million. An additional 175,000 units and
250,000 warrants valued at approximately $130,000 were distributed to
brokers in exchange for services rendered in connection with the Q296
Financing. The Company utilized the Black-Scholes model to value all the
warrants issued in the Q296 Financing at approximately $156,000.
On March 21, 1997, the Company closed a Cdn.$2.0 million financing (the
Q197 Financing) to fund the start-up of BioMarin Pharmaceutical, Inc. which
was formed to develop the Company's pharmaceutical products. As a result of
this financing, the Company issued 4.0 million units at Cdn.$0.50 per unit,
each unit consisting of one common share and one common share purchase
warrant. Each warrant can be exercised for one share of common stock at
Cdn.$1.00 per share, expiring on March 21, 1999. An additional 280,000
units and 280,000 warrants valued at approximately $131,000 were
distributed to the brokers in exchange for services rendered in connection
with the Q197 Financing. The Company utilized the Black-Scholes model to
value all the warrants issued in the Q197 Financing at approximately
$496,000.
7
<PAGE>
ITEM 2.
GLYKO BIOMEDICAL LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This report contains certain forward looking statements which involve
risks and uncertainties, including statements regarding the Company's
strategy, financial performance and revenue sources. The Company's
actual results could differ materially from the results anticipated in
these forward looking statements as a result of certain factors set
forth under "Risk Factors" and elsewhere in this report.
Overview:
Glyko Biomedical Ltd. is a Canadian holding company that owns all of the capital
stock of Glyko, Inc. and BioMarin Pharmaceutical, Inc. Glyko, Inc. and BioMarin
Pharmaceutical, Inc. are operating companies based in California. The following
discussion and the accompanying consolidated financial statements include the
accounts of Glyko Biomedical Ltd., Glyko, Inc., and BioMarin Pharmaceutical,
Inc. presented on a consolidated basis. Numerical references in the following
discussion are rounded to the nearest thousand. Since its inception in October
1990, Glyko has engaged in research and development of new techniques to analyze
and manipulate carbohydrates for research, diagnostic and pharmaceutical
purposes. The Company has developed a line of analytic instrumentation
laboratory products that include an imaging system, analysis software and
chemical analysis kits. The Company is continuing to develop additional chemical
kits for use with the imaging system, and is also developing a line of
carbohydrate diagnostic products. In March, 1997, the Company raised Cdn.$2.0
million to fund the start-up of BioMarin Pharmaceutical, Inc. which was formed
to develop the Company's pharmaceutical products. The Company has incurred a net
loss in each period since its inception and expects to continue to incur losses
at least through 1997. For the period from its inception to March 31, 1997, the
Company has incurred cumulative losses of $13,691,000.
The Three Month Periods Ended March 31, 1997 and 1996
Revenue for the first quarter of 1997 was $491,000 and consisted primarily of
sales of products and services of $241,000 and other revenues representing a
distribution fee of $250,000. Sales of products and services consisted of sales
of chemical analysis kits, fees for custom and contract analytical services and
sales of imaging systems. Revenue for the first quarter of 1996 was $443,000 and
consisted of sales of products and services of $405,000 and other revenues of
$38,000. Sales of products and services consisted of sales of imaging systems,
sales of chemical analysis kits, and fees for custom analytical services. The
decline in product revenues in the first quarter of 1997 compared to the same
period in 1996 was due principally to reduced sales volume due to the relocation
of the Company's California facilities in February which caused approximately
eight weeks of delays in fulfilling orders.
Cost of products and services in the first quarter of 1997 was $98,000 compared
to $146,000 for the same period in 1996. Reduced sales volumes of all products
was the primary reason for the decrease in cost of products and services.
Research and development expenses were $845,000 for the first quarter of 1997
compared to $277,000 for the same period in 1996. Research fees related to the
development of BioMarin's pharmaceutical products were primarily responsible for
the significant increase in overall expense. The Company anticipates that future
BioMarin research and development expenditures will be funded by future 1997
financings for BioMarin.
Selling, general and administrative expenses were $314,000 in the first quarter
of 1997, compared to $375,000 for the same period in 1996, a decrease of
$61,000. The decrease is primarily due to the cut-back in staff in October 1996.
8
<PAGE>
Liquidity and Capital Resources
During the second quarter of 1995, the Company closed a private equity placement
offering (the Q295 Financing). Investors participating in the Q295 Financing
purchased approximately 4.786 million "units" that consisted of one share of
common stock and one five year warrant to purchase one share of common stock.
The Company issued units in exchange for cash, and also in exchange for the
settlement of certain outstanding liabilities. The units were priced at
Cdn.$0.80 with an exercise price on the warrant of Cdn.$0.90. The Q295 Financing
raised approximately $2.78 million, consisting of approximately $2.36 million in
cash and $420,000 for the settlement of a stockholder/director bridge loan and
other liabilities.
During the second quarter of 1996, the Company closed a second private equity
placement offering (the Q296 Financing). Investors participating in the Q296
Financing purchased 2.5 million units each consisting of one share of common
stock and one half of a two year warrant. One warrant is required to purchase
one share of common stock. The units were priced at Cdn.$0.60 with an exercise
price on the warrant of Cdn.$0.80. The Q296 Financing raised approximately
$1.077 million. An additional 175,000 units and 250,000 warrants valued at
approximately $130,000 were distributed to brokers in exchange for services
rendered in connection with the Q296 Financing. The Company utilized the
Black-Scholes model to value all the warrants issued in the Q296 Financing at
approximately $156,000.
On March 21, 1997, the Company closed a Cdn.$2.0 million financing (the
Q197 Financing) to fund the start-up of BioMarin Pharmaceutical, Inc. which was
formed to develop the Company's pharmaceutical products. As a result of this
financing, the Company issued 4.0 million units at Cdn.$0.50 per unit, each unit
consisting of one common share and one common share purchase warrant. Each
warrant can be exercised for one share of common stock at Cdn.$1.00 per share,
expiring on March 21, 1999. An additional 280,000 units and 280,000 warrants
valued at approximately $131,000 were distributed to the brokers in exchange for
services rendered in connection with the Q197 Financing. The Company utilized
the Black-Scholes model to value all the warrants issued in the Q197 Financing
at approximately $496,000.
The Company's net cash position increased by $497,000 in the first quarter of
1997. Net cash proceeds of $1.420 million from the Q197 Financing were offset by
cash used in operating activities of $860,000. Cash used in operating activities
in the first quarter of 1997 reflected the operating loss of $757,000 plus the
payment of liabilities accrued on last year's books partially offset by the
collections of accounts receivable and a deferral of payments for rent and
related costs. Capital expenditures for the first quarter of 1997 were
relatively insignificant at $62,000.
Management believes the proceeds of the Q197 Financing and the one-time
distribution agreement fee earned in the first quarter of 1997 and an OEM
agreement fee earned in the second quarter of 1997 will allow the Company to
maintain liquidity through the second quarter of 1997. To maintain liquidity
beyond the second quarter of 1997, the Company will have to; raise additional
capital, reduce expenses considerably, increase sales significantly, or realize
some combination of these factors. There can be no assurance that the Company
will be successful in maintaining liquidity. Management may consider selling
certain assets or technology rights to raise additional capital. The Company
will continue to seek additional funding through various means including but not
limited to stock issuances, licensing and marketing agreements and collaborative
research agreements with strategic partners. However, there can be no assurance
that such agreements will be reached and that additional funding will be
obtained. See "Risk Factors - Future Capital Requirements."
In 1997, management expects spending to increase due to the research and program
expenses of BioMarin. It is anticipated that these expenditures will be funded
by subsequent 1997 financings for BioMarin. The Company is not committed to make
any significant capital expenditures.
9
<PAGE>
RISK FACTORS
Future Capital Requirements - Uncertainty of Future Funding
The Company believes that its available cash will allow it to fund planned
operations through the second quarter of 1997. The Company's Report of
Independent Public Accountants for the year ended December 31, 1996 indicates
that there is substantial doubt about the Company's ability to continue as a
going concern reflecting both the necessity and the uncertainty of future
funding. Such funding may come individually or collectively from stock
issuances, licensing and marketing agreements or by collaborative research
agreements with strategic partners. No assurance can be given that additional
financing will be available or, if available, that it will be on terms
acceptable to the Company or its stockholders. If adequate funding is not
obtained, operations may be adversely affected. These factors raise substantial
doubt about the Company's ability to continue as a going concern. The Company
will delay or eliminate expenditures in respect of certain products under
development such as additional analytical kits and diagnostic tests in the event
sufficient funding is unavailable. See "Management's Discussion or Plan of
Operation - Liquidity and Capital Resources".
History of Operating Losses - Uncertainty of Future Profitability
The Company commenced its research activities in December 1990 and first
recorded revenues in December 1992. While sales increased in 1994 and 1995, the
Company has not yet made a net annual operating profit. There is no assurance
that sales will increase in future quarters. The accumulated deficit as of March
31, 1997 was approximately $13.7 million. The Company anticipates that operating
losses may continue. See "Management's Discussion and Analysis or Plan of
Operation."
Diagnostic Products - No Prior Commercial Manufacturing or Marketing
In 1996 the Company began marketing its first diagnostic product, the Urinary
Carbohydrate Analysis Kit. In order to manufacture its diagnostic products in
commercial quantities and to market products independently, the Company will
need to expand its production and marketing capabilities and/or establish
arrangements with third parties having the capacity for such manufacturing or
marketing. Anticipated operating revenues and cash resources will not be
sufficient to expand manufacturing and marketing capabilities for diagnostic
products currently under development. There can be no assurance that the Company
will be able to successfully market or manufacture its diagnostic products. To
the extent that the Company arranges with third parties to manufacture or market
any diagnostic products, the commercial success of such products may depend upon
the efforts of those third parties.
Early Stage of Diagnostic Product Development
Only one of the Company's diagnostic products has been approved for commercial
sale, the Urinary Carbohydrate Analysis Kit. Potential products currently under
development by the Company will require significant additional development, and
some must undergo several phases of clinical testing and will likely require
significant further investment prior to their final commercialization. See
"Uncertainty of Regulatory Approval." Anticipated operating revenues and cash
resources will not be sufficient to facilitate significant further development
of diagnostic products. There can be no assurance that any of the Company's
products under development, either now or in the future, will be successfully
developed, prove to be effective in clinical trials, receive required regulatory
approvals, be capable of being produced in commercial quantities at reasonable
costs, or be successfully marketed.
10
<PAGE>
Technology and Competition
The primary competitive factors in biotechnology are the ability to create and
maintain scientifically advanced technology, to attract and maintain personnel,
and to have available adequate financial resources to maintain the Company
through its research, development and commercialization of technology stages.
The technology on which the Company's business is based uses proven laboratory
methods of electrophoresis and bioseparation. Nevertheless there is a technical
risk associated with reducing-to-practice the basic technology for new
applications. There is no assurance that the Company will be able to develop an
economical or practical way to separate human materials for clinical diagnosis,
or that it will be able to devise specific reagents required to obtain a needed
reaction. Other companies may develop basic carbohydrate technology which
directly competes for the carbohydrate diagnostic market. Furthermore,
conventional diagnostic technology (such as enzyme or radioactive immunoassay)
may accomplish new breakthroughs in analyzing carbohydrates (which so far has
been difficult). Additionally, other newer technologies such as nucleic acid
hybridization may become competitive and erode the Company's potential shares of
diagnostic markets.
Competition in bioinstrumentation is intense. Many companies, universities, and
research organizations are engaged in the research and development of products
in the areas being developed by the Company. Many of these have financial,
technical, manufacturing and marketing resources greater than those of the
Company. Several major research instrument companies have undertaken recently to
establish capabilities in carbohydrate technology and may apply such technology
for essentially the same purpose as the Company. As a result carbohydrate
technology will become an area of more intense competition. In order to compete
successfully the Company must expand its efforts to develop new products and
uses for its current products in research and diagnosis. There can be no
assurance that the Company will be able to do so effectively.
Patents and Proprietary Technology
The Company's success will depend in part on its ability to obtain patents,
protect trade secrets and not infringe the patents of others. The Company has
been issued patents as well as filed applications for U.S. and foreign patents
and has exclusive licenses to patents or patent applications of others. The
Company intends in the future to apply for patents in various jurisdictions for
inventions forming part of its technology. No assurance can be given that patent
applications will result in the issue of patents or that, if issued, patents
obtained by the Company will confer on the Company a preferred position with
respect to the technology or products claimed.
There can be no assurance that others will not independently develop products
similar to the Company's, duplicate the Company's products or design around the
Company's patents. In addition the Company may be required to obtain licenses to
others' patents. No assurance can be given that such licenses can be obtained on
terms acceptable to the Company. These factors could cause the Company to
encounter delays in product market introductions or adversely affect the
Company's development or sale of products requiring licenses from third parties.
The Company's products and technologies could be subject to claims of
infringement by others. Patent conflicts and litigation can be expensive, and
could have a material adverse effect on the Company's results of operations.
Product Liability and Lack of Insurance
The Company is subject to the risk of exposure to product liability claims in
the event that the use of its technology results in adverse effects during
testing or commercial sale. The Company currently does not maintain product
liability insurance. There can be no assurance that the Company will be able to
obtain product liability insurance coverage at economically reasonable rates, or
that such insurance will provide adequate coverage against all possible claims.
11
<PAGE>
Uncertainty of Regulatory Approval
The Company's diagnostics products will require regulatory approval by
government agencies. This includes pre-clinical and clinical testing and
approval processes in the U.S. and other countries. Compliance can take several
years and require substantial expenditures. There can be no assurance that
difficulties or excessive costs will not be encountered by the Company in this
process or that required approvals will be obtained. The Company will not be
able to market its diagnostic products until required approvals have been
obtained.
Dependence on Key Personnel
The Company's success will depend in large part upon its ability to attract and
retain highly qualified scientific and management personnel. The Company faces
competition for such personnel from other companies, academic institutions,
government entities and other organizations. The Company depends on its key
management, including John Klock and Christopher Starr, and the departure of
either person could have a material adverse effect on the Company.
12
<PAGE>
PART II.
ITEM 1. Legal Proceedings. None
ITEM 2. Changes in Securities: None
ITEM 3. Defaults upon Senior Securities. None
ITEM 4. Submission of Matters to a Vote of Security Holders None
ITEM 5. Other Information. None
ITEM 6. Exhibits and Reports on Form 8-K.
(a) The following documents are filed as part of this report
Exhibit 10.1, Toyobo Distribution Agreement
Exhibit 27, Financial Data Schedule.
(b) Reports on Form 8K
On April 3, 1997, the Company filed a Current Report on Form 8K to
report the completion of a financing which was exempt from the
registration requirements of Section 5 of the Securities Act of 1933,
as amended, pursuant to the exemption from such requirements provided
by Regulation S of the Act.
13
<PAGE>
SIGNATURES
March 31, 1997
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.
Glyko Biomedical Ltd.
Date: May 12, 1997 By: /s/ John C. Klock
------------------------------
John C. Klock, M.D.
President and Chief Executive
Officer
14
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
INTERNATIONAL DIAGNOSTIC DISTRIBUTION AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of
February 17, 1997 (the "Effective Date"), by and between Glyko, Inc., a Delaware
corporation having its offices at 81 Digital Drive, Novato, CA 94949, United
States ("Glyko"), and Toyobo Co. Ltd, a Japanese corporation having its offices
at 2-8 Dojima Hama 2-chome. Kita-ku, Osaka 530 Japan ("Toyobo"), each
individually a "Party" or collectively, the "Parties", as the case may be.
WITNESSETH:
Whereas, Glyko is engaged in the research, manufacture and sale of diagnostic
products, including the Products, as defined below;
Whereas, Toyobo desires to (i) be appointed as exclusive distributor for the
sale of the Products in the Territory, as defined below; (ii) cooperate in
reducing the logistics cost for importing the Products into the Territory from
the U.S.A.; and (iii) conduct sales promotions for the expansion of the market
of the Products in the Territory; and
Whereas, Glyko is willing to appoint Toyobo to such distributorship, subject to
terms and conditions herein.
In consideration of the mutual covenants and conditions herein contained, and
intending to be legally bound hereby, the Parties mutually agree as follows:
1. DEFINITIONS
1.1 "Exclusive" means there will be, at most, one distributor, i.e.,
Toyobo, appointed by Glyko to represent the Products in the Territory.
1.2 "FDA" means the United States Food and Drug Administration or
its successor agency.
1.3 "Field" means the diagnosis and medical management of human
disease, and excludes the fields of therapeutic pharmaceuticals and treatment of
disease.
1.4 "Net Sales" means the gross sales price invoiced by Toyobo or its
affiliates or sublicensees, as a result of the sale, lease, or other transfer or
disposition of a Product for value, or for internal use thereof, less normal and
customary credits for returns and allowances, cash and trade discounts actually
taken, sales, use excise or similar taxes, duties, insurance and freight and
other shipping expenses, to the extent that such items are separately stated on
Toyobo's invoices to purchasers.
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CONFIDENTIAL TREATMENT REQUESTED
1.5 "Products" mean any current and, subject to Article 3, any future
FDA approved product developed by Glyko for use in the Field (as defined below)
including, but not limited to, FACE(R) (fluorophore-assisted carbohydrate
electrophoresis) diagnostic products for the analysis of carbohydrates, which
include: the FACE Imager, including FACE Software; FACE Diagnostic Kits,
including those for capillary electrophoresis; individual reagent packs,
standards, controls, precast gels, columns and buffers; enzymes; and diagnostic
services. For purposes of this Agreement, Glyko's Urinary Carbohydrate Analysis
kit for Lysosomal Storage Diseases, approved by the FDA on November 8, 1995 (the
"Urinary Carbohydrate Analysis Kit"), shall not be considered a current Product
of Glyko unless and until Toyobo exercises its rights and performs its
obligations in accordance with the terms of Article 3 below. Glyko's current
Products and Product prices are attached hereto as Exhibit A.
1.6 "Territory" means the country of Japan, and includes all purchasers
whose principal place of business or corporate headquarters is located in Japan.
2. APPOINTMENT OF DISTRIBUTOR
2.1 Appointment. Subject to the terms and conditions herein, Glyko
hereby appoints Toyobo as the Exclusive distributor for the distribution and
sale of the Products within the Field in the Territory during the term of this
Agreement, and Toyobo hereby accepts such appointment. Toyobo shall use its best
efforts to promote and sell the Products to the maximum number customers within
the Territory.
2.2 Limitations.
2.2.1 Activities Outside of the Territory. Toyobo shall not
solicit orders or pursue leads for any Product from any prospective
purchaser with a principal place of business or corporate headquarters
located outside of the Territory. If Toyobo receives an order or lead
for any Product from a prospective purchaser having a principal place
of business or corporate headquarters located outside the Territory,
Toyobo shall immediately notify Glyko thereof, and Toyobo shall not
accept any such orders. Toyobo shall not deliver or tender (or cause to
be delivered or tendered) any Product outside of the Territory. Toyobo
shall not sell any Product to a purchaser if it knows or has reason to
believe that such purchaser intends to remove that Product from the
Territory, and Toyobo shall not, without the prior written consent of
Glyko, sell, market or distribute any version of any Product other than
the version Glyko shall designate from time to time as its most current
version.
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CONFIDENTIAL TREATMENT REQUESTED
2.2.2 Non-Competition. Toyobo warrants to Glyko that it does
not currently distribute, promote, or sell any lines or products that
compete with the Products. During the term hereof, Toyobo agrees that
it shall not represent, distribute, promote, sell or attempt to engage
in any of the foregoing activities in respect of any line or product
that, in Glyko's judgment, competes with the Products which Toyobo
distributes under this Agreement. In order to avoid prospective
competition and duplicate developments between the Products and
Toyobo's products in the diagnosis field, Glyko and Toyobo will
periodically disclose to each other their respective development plans
and candidate items in the diagnostics field.
3. RIGHT-OF-FIRST-REFUSAL
3.1 Grant. Glyko hereby grants to Toyobo an exclusive
right-of-first-refusal to distribute and sell in the Field in the Territory (i)
any Products developed by Glyko and the marketing of which is approved by the
FDA after the Effective Date, and (ii) the Urinary Carbohydrate Analysis Kit. To
the extent it has the right to do so, this right-of-first-refusal also applies
to any Products which may be in-licensed by Glyko or OEM manufactured by others
for Glyko.
3.2 Payment. In exchange for the exclusive right-of-first-refusal
granted to Toyobo pursuant to Section 3.1, Toyobo hereby agrees to pay to Glyko
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. Such payment shall be made to Glyko
within thirty (30) days of the Effective Date of this Agreement, in accordance
with Section 4.8.
3.3 Exercise of Right-of-First-Refusal.
3.3.1 Future Products. Within ninety (90) days of the date
Glyko makes a submission to the FDA requesting regulatory approval of a Product
developed by Glyko after the Effective Date, it will so notify Toyobo, and such
notice will include a technical description and relevant information of the
Product. In the event Toyobo desires to exercise its right-of-first-refusal with
respect to such Product, Toyobo shall so notify Glyko within ninety (90) days of
the date it receives sufficient information on the Product, including the
documents submitted to the FDA by Glyko required for it to make a decision for
exercising the right-of-first refusal. In consideration of its exercise of its
right-of-first-refusal in respect of any such Product, Toyobo agrees to pay to
Glyko XXXXXXXXXXXXXXXXXXXXX within thirty (30) days of the date Glyko receives
FDA approval therefor, or within ninety (90) days after Toyobo receives from
Glyko enough information on the Product, including the documents submitted to
the FDA by Glyko, for it to make a decision for exercising its right-of first
refusal, whichever comes later. In further consideration of the rights granted
herein to Toyobo in respect of Products developed by Glyko which receive
regulatory approval after the Effective Date, Toyobo agrees to pay Glyko
XXXXXXXXXXXXXXXXXXXXX in respect of any Product for which it has exercised its
right-of-first-refusal (i)within thirty (30) days of the date the Product
receives regulatory approval (Shohnin) in Japan or (ii) on an installment basis
to be mutually agreed upon by the Parties. It is understood between the Parties
that once Toyobo has made the payment under this Section as to a Product, Toyobo
shall not be obliged to make such payment to Glyko as to the revised or upgraded
version of the Product developed by or for Glyko.
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CONFIDENTIAL TREATMENT REQUESTED
3.3.2 Urinary Carbohydrate Analysis Kit. With
respect to the Urinary Carbohydrate Analysis Kit, Toyobo shall have thirty
(30) days from the Effective Date to exercise its
right-of-first-refusal. In the event Toyobo elects to exercise such right in
respect of the Urinary Carbohydrate Analysis Kit, it shall so notify Glyko by
facsimile transmission within such thirty (30) day period, and concurrently with
provision of such notice, Toyobo shall pay to Glyko XXXXXXXXXXXXXXXXXXX. In
addition, Toyobo agrees to pay to Glyko XXXXXXXXXXXXXXXXXXXXXXXXXXX within
thirty (30) days of the date the Urinary Carbohydrate Analysis Kit receives
Japanese regulatory approval (Shohnin).
3.4 Glyko's Support for Obtaining Japanese Regulatory Approvals. In the
event that Toyobo exercises its right-of-first refusal with respect to any
Products developed by Glyko after the Effective Date and specifically including
the Urinary Carbohydrate Analysis Kit, Glyko shall make its best efforts to
support Toyobo to obtain Japanese regulatory approvals (Shohnin) for such
Products.
3.5 No Exercise In the event Toyobo does not timely exercise its
right-of-first-refusal in respect to any Product or make any payment due as a
result of such exercise, Glyko shall be free to itself distribute and sell, or
grant to one or more third parties the right to distribute, sell, and engage in
any other activity relating thereto, any such Product, provided that the terms
offered to a third party inside of the Field in the Territory are not more
favorable than those offered to Toyobo under Sections 3.3.1 or 3.3.2 of this
Agreement.
3.6 Cap. During the term of this Agreement and any extension hereof,
Toyobo shall have no obligation to make any payment pursuant to Section 3.3 in
the event it has paid to Glyko during the initial term of this Agreement
XXXXXXXXXXXXXXXXXX with respect to exercising its rights under Section 3.2 and
3.3 to distribute Products approved for sale in the Field in the Territory after
the Effective Date.
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CONFIDENTIAL TREATMENT REQUESTED
3.7 Consideration for Payment The Parties agree and confirm that the
payments by Toyobo to Glyko under Sections 3.2 and 3.3 hereof are in
consideration of the appointment of Toyobo as the Exclusive distributor for the
distribution and sale of the Products within the Field in the Territory and the
right-of-first-refusal regarding the future Products, and such payments are not
related to Glyko's patents, know-how, trademarks, tradenames or other
intellectual property rights.
4. PRICES AND PAYMENT
4.1 Purchase Orders. During the term hereof, Toyobo shall order
products from Glyko by submitting a written purchase order identifying: the
Products ordered by catalog number and quantity; the requested delivery date(s);
and any export/import information required to enable Glyko to fill the order.
All purchase orders for Products are subject to acceptance by Glyko. Glyko shall
have no liability to Toyobo with respect to purchase orders which are not
accepted; provided, however, that Glyko will not unreasonably reject any
purchase order for Products which do not require any modification or addition in
order to meet the specifications of Toyobo or their customers, and which
corresponds to quantities of Products forecast by Toyobo in accordance with
Section 4.2.
4.2 Forecasts. To facilitate Glyko's production scheduling, within five
(5) days of the beginning of each calendar month during the term hereof, Toyobo
shall provide Glyko in writing with a rolling forecast of Toyobo's anticipated
monthly requirements of Products for the following six (6) month period
commencing on the date of such forecast. Toyobo agrees to use reasonable efforts
to make each such forecast as accurate as possible.
4.3 Product Prices. Toyobo's net price for Glyko-manufactured Products
shall be determined by applying XXXXXXXXXXXXXXXXXXXXXX to Glyko's U.S. published
list prices then in effect. Toyobo's net price for Products not manufactured by
Glyko shall be determined XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. Glyko may from time to
time change its prices for Products by giving Toyobo written notice at least
ninety (90) days prior to any such change; provided, however, that no price
change shall affect Products ordered pursuant to purchase orders already
accepted by Glyko prior to the date a price change of a Product becomes
effective.
4.4 Resale Pricing. XXXXXXXXXXXXXXXXXXXXXXXXXXXX.
4.5 Cancellation, Rescheduling, and Returns. Purchase orders placed by
Toyobo and accepted by Glyko shall not be canceled or rescheduled unless
mutually agreed upon by both Parties, except purchase orders may be canceled by
Toyobo if Products are not shipped within thirty (30) days of the delivery date
requested in the corresponding purchase order. No Product may be returned for
any reason without first obtaining Glyko's prior written consent.
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CONFIDENTIAL TREATMENT REQUESTED
4.6 Compliance with Laws. The ultimate shipment of Products to Toyobo
shall be subject to the right and ability of Glyko to make such sales, and
obtain required licenses and permits, under all decrees, statutes, rules and
regulations of the government of the United States and agencies or
instrumentalities thereof presently in effect or which may be in effect
hereafter. Any purchase order which has been accepted by Glyko but which cannot
be fulfilled due to any such decree, statute, rule, or regulation shall be
considered to have been rejected when submitted to Glyko for acceptance or
rejection. Toyobo hereby agrees: (i) to assist Glyko in obtaining any such
required licenses or permits by supplying such documentation or information as
may be requested by Glyko; (ii) to comply with such decrees, statutes, rules and
regulations of the government of the United States and agencies or
instrumentalities thereof; (iii) to maintain the necessary records to comply
with such decrees, statutes, rules and regulations; (iv) not to export any
Products except in compliance with such decrees, statutes, rules and
regulations; (v) not to sell, transfer or otherwise dispose of Products in
violation of the export laws, rules and regulations of the United States; and
(vi) to indemnify and hold harmless Glyko, its officers, directors, and
employees from any and all fines, damages, losses, costs and expenses (including
reasonable attorneys' fees) incurred by Glyko as a result of any breach of this
Section 4.6 by Toyobo.
4.7 Shipping. Unless Toyobo requests otherwise, all Products ordered by
Toyobo pursuant to this Agreement shall be packed for shipment and storage in
accordance with Glyko's standard commercial practices and shipped directly to
Toyobo. It is Toyobo's obligation to notify Glyko of any special packaging
requirements (which shall be at Toyobo's expense). Title and risk of loss or
damage to a Product shall pass to Toyobo upon the removal of such Products from
Glyko's facility. If a purchase order is accepted in accordance with Section 4.1
above, the prices for Products covered by such purchase order shall be Glyko's
net prices F.O.B. Glyko's facility at Novato, CA 94949 USA, which are then in
effect on the date of Glyko's acceptance. Glyko will prepay and add to the
invoice all charges for freight and insurance. Toyobo is responsible for all
customs duties, taxes and any other expenses incurred in connection with
furnishing the Products. All claims for apparent non-conforming shipments must
be made in writing to Glyko within ten (10) days of the receipt of the Products
by Toyobo. Any claims not made within such period as to apparent condition shall
be deemed waived and released. All claims for latent non-conforming shipments
due to quality problems shall be resolved and reimbursed between the Parties in
good faith, by cooperating in pursuing the cause of such quality problems.
4.8 Payment. All amounts due and payable with respect to a Product
tendered by Glyko in accordance with Section 4.7 shall be paid in full within
forty-five (45) days after the receipt by Toyobo of an invoice for the shipment.
All such amounts, and any other payment due pursuant to the terms of this
Agreement, shall be paid in US Dollars by wire transfer of immediately available
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CONFIDENTIAL TREATMENT REQUESTED
funds to the bank listed below (or such other bank as Glyko may specify in
writing) or by other means specified in writing and mutually agreed by both
Parties to:
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
All costs incurred in connection with such wire transfer shall be the
responsibility of Toyobo. Whenever any amount hereunder is due on a day which is
not a day on which the bank to which payments are to be made by Toyobo to Glyko
hereunder is open for business (a "Business Day"), such amount shall be paid on
the next Business Day. Amounts due hereunder shall be considered paid as of the
day such funds are received by the aforementioned bank. No part of any amount
payable to Glyko hereunder may be reduced due to any counterclaim, set-off,
adjustment or other right which Toyobo might have or assert against Glyko, any
other Party or otherwise.
4.9 Late Payments. All amounts due and owing to Glyko hereunder but not
paid by Toyobo on the due date thereof shall bear interest (in US Dollars) at
the rate of the lesser of: (i) one per cent (1%) per annum above the then
applicable prime interest rate announced by Westamerica Bank, 402 Ignacio
Boulevard, Novato, CA 94949, USA, for 90-day loans in US Dollars to prime
commercial customers in USA; or (ii) the maximum lawful interest rate permitted
under applicable law. Such interest shall accrue on the balance of unpaid
amounts from time to time outstanding from the date on which portions of such
amounts become due and owing until payment thereof in full.
4.10 Currency Conversion. If any currency conversion is required in
connection with the calculation of payments hereunder, such conversion shall be
made using the selling exchange rate for conversion of the foreign currency into
US Dollars, quoted for current transactions reported in The Wall Street Journal
for the last business day of the calendar quarter to which such payment
pertains.
4.11 Conflicting Terms. In the event of any discrepancy between
any purchase order accepted by Glyko and this Agreement, the terms of this
Agreement shall govern.
4.12 Other Agreements. During the term of this Agreement, Glyko
agrees not to negotiate any new supply agreement with OEM customers for the
Territory. Toyobo acknowledges and agrees that Glyko has a prior distribution
and supply agreement in effect with XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXX and that this Agreement shall not affect such prior agreement in any
way. This Agreement shall also not be affected by Glyko giving a license to any
third party for the use of its technology outside the Field described in this
Agreement.
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CONFIDENTIAL TREATMENT REQUESTED
5. MANUFACTURING RIGHTS
5.1 Second Source. In the event Glyko is unable or fails to fill
purchase orders for Products accepted in accordance with Section 4.1 for three
(3) consecutive months at any time during the term of this Agreement, Toyobo
shall have the right, but not the obligation, to (i) subject to Section 5.2,
select a second source to manufacture Products for all or part of its Product
supply needs in the Field in the Territory, or (ii) itself undertake the
manufacture of part or all of its Product supply needs in the Field in the
Territory. In the event Toyobo either selects a second manufacturing source or
itself undertakes such manufacture of Products, Glyko agrees to cooperate with
and use its best efforts to enable the second source or Toyobo, as the case may
be, to begin and continue such manufacture as soon as is commercially
practicable after receipt of notice from Toyobo exercising such right, and to
provide such assistance to such third Party or Toyobo as may be required in
manufacturing Products. In this regard, in the event Toyobo requests in writing
that Glyko provide manufacturing assistance in respect of the manufacture of
Products, promptly after receipt of such request Glyko shall use its best
efforts to dispatch to the second source or Toyobo, as the case may be, one or
more mutually agreed technical personnel to assist in establishing a Product
manufacturing operation; provided however, that Toyobo agrees to reimburse Glyko
for all reasonable expenses, including, but not limited to, salary, benefits,
travel, meals, and lodging expenses for any such personnel provided by Glyko in
connection with rendering such assistance. It is understood that the rights
granted to Toyobo in this Section 5.1 shall apply only to those Products for
which Glyko fails to fill in accordance with Toyobo's accepted purchase orders,
and shall not relate to Products for which Glyko has met its obligations
hereunder.
5.2 Third party Manufacture. In the event Toyobo selects a third party
to manufacture all or part of its Products supply, it agrees that such rights
will be granted only to third parties which agree in writing to manufacture
Products only in Japan and only for Toyobo's account for distribution in the
Territory pursuant to this Agreement and not to sell Products other than to
Toyobo, and Toyobo agrees that any agreement pursuant to which any such third
party is granted such rights shall name Glyko as an intended third party
beneficiary having the right to enforce such agreement against the third party,
and to provide Glyko with an English language translating thereof.
5.3 Technology Transfer. In the event Toyobo exercises its rights
pursuant to this Article 5, Glyko agrees to provide Toyobo with those
specifications, drawings, designs, technical documentation, materials suppliers,
and other information as are reasonable and necessary to enable Toyobo or a
third party manufacturer to manufacture the Products.
5.4 No Implied Licenses. Nothing in this Agreement is intended to grant
any rights or licenses under any patents, copyrights, trade secrets, or other
intellectual property or information proprietary to Glyko except those rights
and licenses expressly granted herein.
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CONFIDENTIAL TREATMENT REQUESTED
5.5 Consideration. In the event Toyobo exercises its rights pursuant to
this Article 5, Toyobo shall pay to Glyko XXXXXXXXXXXXXXXXXXXXXXXXXXXX in
accordance with this Article 5. In addition, in the event Toyobo contracts with
one or more third parties to manufacture, distribute, or sell Products in the
Territory, Toyobo shall pay Glyko XXXXXXXXXXXXXX of any consideration other than
royalties received from any such third party in exchange for such rights.
5.6 Reports and Payment. Toyobo shall make royalty or other payments
due Glyko pursuant to Section 5.5 within sixty (60) days after the end of each
calendar quarter during which such royalty obligation accrued or other payment
was received. Each royalty payment or other payment shall be accompanied by a
report by Toyobo describing the royalty or other payment calculations due
hereunder, including, without limitation, (i) Net Sales of Products within such
calendar quarter, (ii) payments and other consideration received from third
parties during such quarter in respect of rights granted, if any, pursuant to
Section 5.2, and (iii) all prices and data necessary to perform the calculations
set forth in Section 5.5.
5.7 Records and Inspection. Toyobo shall keep at its principal offices
complete, true, and accurate business books and records of account in sufficient
detail to enable the royalties and/or other payments due Glyko under this
Article 5 to be verified, which books and records shall be maintained until at
least two (2) years following the relevant royalty or other payment period. Not
more than two (2) times each calendar year during the term of this Agreement
Glyko shall be entitled to inspect and audit such books and records to verify
the accuracy of (i) the reports provided to Glyko under Section 5.6 and (ii) the
amount of the accompanying payments. Any such audit shall be conducted by an
independent third party who is bound by strict confidentiality. Such audit shall
follow reasonable advance notice to Toyobo and shall occur during Toyobo's
normal business hours. If any such audit reveals an underpayment by Toyobo of
its payment obligations hereunder, Toyobo shall promptly remit to Glyko the
amount of such underpayment, with interest, as provided in Section 4.8. If any
such audit reveals an underpayment of ten percent (10%) or more, Toyobo shall
also reimburse Glyko's costs of the audit.
6. OTHER OBLIGATIONS OF TOYOBO
6.1 Sales Promotion and Training. Toyobo shall develop a program for
the promotion and sale of the Products within the Territory, including sales
forecasts and marketing strategies. Toyobo may send one or more technically
competent sales representatives to Glyko's facility for training on the
Products. This training will be provided at Glyko's expense; however, the
salaries, travel, and living expenses for the Toyobo personnel to be trained
shall be at the expense of Toyobo.
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CONFIDENTIAL TREATMENT REQUESTED
6.2 Service. Toyobo shall employ competent and experienced technical
and service personnel, provide appropriate service shop facilities, and maintain
an adequate stock of spare parts so as to render prompt and adequate service to
the users of the Products in the Territory. Toyobo will maintain copies of
technical service records and from time to time allow Glyko access to these
records solely for the purpose of assuring Glyko that adequate customer
assistance and technical support are being provided to customers.
6.3 Translation of Materials. Toyobo may translate, at its own expense,
any user and technical manuals and advertising and marketing information with
respect to the Products into the languages of its customers, and in such event
will provide Glyko with copies of all such materials for review by Glyko. Toyobo
shall assign all copyrights in such translations to Glyko. Glyko shall not be
liable for translation errors made by Toyobo or at Toyobo's direction or for the
non-conformance of such translated materials with laws and regulations in force
from time to time in the Territory. Toyobo shall indemnify and hold Glyko
harmless to the extent that a third party brings claims against Glyko based on
such errors or non-conformance.
7. GLYKO'S OBLIGATIONS
7.1 Samples and Literature. Glyko shall provide Toyobo such marketing
and technical literature and Product samples as Glyko may in its discretion
consider necessary to assist with the promotion of the Products in the
Territory. Glyko will provide customer sales leads in the Territory as they
arise from Glyko's marketing activities outside of the Territory.
7.2 Training. Glyko shall provide training at its facility in Novato,
California to Toyobo's personnel in connection with the marketing, sale,
installation, maintenance and support of the Products; provided, however, that
Glyko shall have no obligation to expend more than an aggregate of eighty (80)
hours of its personnel's time in providing such training.
7.3 Changes to Products. Glyko reserves the right at any time to make
changes in the design of and to add improvements to any Product or to
discontinue the manufacture of any particular Product. All such changes,
additions, and/or discontinuances shall be made with a minimum of one hundred
eighty (180) days prior written notice to Toyobo unless the circumstances
relating thereto are beyond Glyko's control. If Glyko announces a revised
version of any Product and as a consequence of such announcement Toyobo is
prohibited by virtue of Paragraph 2.2.1 above from marketing a previous version
of such Product received within thirty (30) days of such announcement (the
"Obsolete Inventory"), Glyko shall use reasonable efforts to supply to Toyobo
without charge such information and additional components as shall permit Toyobo
to modify the Obsolete Inventory so that such inventory will be functionally
equivalent to the revised version of the Product. To the extent practicable,
such information and additional components for the conversion of an up-dated or
revised version of a Product shall also be supplied by Glyko to Toyobo at
reasonable prices for any inventory or already distributed Products received by
Toyobo more than thirty (30) days prior to such announcement, for sale or
upgrading by Toyobo or sale to its existing customers upon request.
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CONFIDENTIAL TREATMENT REQUESTED
8. SOFTWARE LICENSE
8.1 Software. The Products include any and all software programs in
object code form only (hereinafter referred to as the "Software") which are an
integral part of the Products. All current Software are Windows-based programs
that manage operation of the FACE Imager, acquire the gel image, and perform
analysis of the gel images.
8.2 Software License. Ancillary to the distributor appointment under
Section 2.1 Glyko hereby grants to Toyobo free of charge a non-exclusive and
non-transferable license, without the right to sublicense (except as is provided
in Section 8.4), in the Territory to use the Software and related documentation
provided by Glyko solely for Toyobo's internal use in connection with the sale
and promotion of the Products during the term of this Agreement. Toyobo shall
not disclose, furnish, transfer, or otherwise make available the Software or any
portion thereof or related documentation provided by Glyko in any form to any
third party (other than to an End-User Customer pursuant to Section 8.4) and,
except as permitted in Section 8.5, shall not duplicate, decompile, reverse
engineer, or disassemble the Software or any part thereof or any such related
documentation.
8.3 Ownership of Software. Title to and ownership of any and all
proprietary rights in or related to the Software, related documentation provided
by Glyko, and all partial or complete copies of such Software and related
documentation permitted to be made hereunder or under end-user sublicense
agreements shall at all times remain with Glyko or its assignees. This Agreement
and end-user sublicense agreements shall not be construed as a sale or other
transfer of any rights in the Software, related documentation, and any copies or
any part thereof provided by Glyko. All references in this Agreement to sale,
resale, or purchase of the Products, or references of like effect, shall, with
respect to the Software and related documentation provided by Glyko, mean
licenses or sublicenses of the Software and such related documentation pursuant
to Sections 8.2 or 8.4. All references in this Agreement to purchasers of the
Products, or references of like effect, shall, with respect to the Software and
related documentation provided by Glyko, mean Toyobo or its customers as a
licensee or sublicensees of the Software and such related documentation who have
entered into end-user sublicense agreements pursuant to Section 8.4.
8.4 Software Sublicensing. Toyobo is hereby granted a
non-exclusive right to sublicense the Software, related
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CONFIDENTIAL TREATMENT REQUESTED
documentation, or any part thereof provided by Glyko solely to End-User
Customers for use only in conjunction with the Products. Prior to delivery of
the Software, such related documentation, or any part thereof to an End-User
Customer, such End-User Customer shall execute Glyko's then current end-user
sublicense agreement, the current version of which is attached hereto as Exhibit
B. Any attempt to transfer or assign the Software, such related documentation,
or any copies or any part thereof shall be null and void (except for sublicenses
granted in accordance with this Section 8.4). For the purposes of this Section,
"End-User Customer" shall mean a customer of Toyobo which purchases Products
incorporating the Software or any part thereof.
8.5 Reproduction Limitations. The Software and related documentation
provided by Glyko pursuant to this Agreement may be copied or reproduced by
Toyobo, in whole or in part, for its internal use only in connection with the
sale and promotion of the Products. No more than one copy of the Software, such
related documentation, or any part thereof in any form shall be in existence
(and in the possession of Toyobo) at any time without the prior written consent
of Glyko, other than (i) copies of the Software resident in Products themselves;
(ii) one copy of the Software created solely for archival and/or restart
purposes; and (iii) copies of the Software and related documentation designated
for delivery to specific End-User Customers, which copies are governed by
end-user sublicense agreements already executed by such End-User Customers.
Glyko provides no installation or warranty for copies of the Software made by
Toyobo, unless otherwise agreed by Glyko in writing.
8.6 Software Records. Toyobo shall maintain records specifically
identifying each copy of the Software, related documentation, or any part
thereof and the associated Products provided by Glyko and delivered pursuant to
this Agreement to End-User Customers, and Toyobo shall make such records
available to Glyko during regular business hours upon reasonable notice for
purpose of enforcement of the terms and conditions of this Section 8.6. Glyko
shall have the right, on reasonable advance notice to Toyobo, to inspect
Toyobo's place of business to ensure its compliance with the provisions of this
Section 8.6.
8.7 Remedies for Infringement. IF THE SOFTWARE OR ANY PART THEREOF
BECOMES, OR IN GLYKO'S OPINION IS LIKELY TO BECOME, THE SUBJECT OF A CLAIM OF
INFRINGEMENT OF A PATENT OR COPYRIGHT OF A THIRD PARTY, TOYOBO SHALL PERMIT
GLYKO, AT ITS OPTION AND EXPENSE, TO (I) PROCURE FOR TOYOBO AND ITS END-USER
CUSTOMERS THE RIGHT TO CONTINUE USING SUCH SOFTWARE, (II) REPLACE OR MODIFY SUCH
SOFTWARE SO THAT IT BECOMES NON-INFRINGING, OR (III) GRANT TOYOBO A REFUND FOR
SUCH SOFTWARE. GLYKO'S PERFORMANCE OF ONE OF THE PRECEDING ALTERNATIVES SET
FORTH IN CLAUSE (I), (II) OR (III) OF THIS SECTION 8.7 ABOVE SHALL CONSTITUTE
FULL AND COMPLETE SATISFACTION OF ANY AND ALL CLAIMS TOYOBO MIGHT HAVE AGAINST
GLYKO ARISING FROM SUCH INFRINGEMENT.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
8.8 Limitations. GLYKO SHALL HAVE NO LIABILITY TO TOYOBO OR ITS
END-USER CUSTOMERS WITH RESPECT TO ANY CLAIM OF PATENT OR COPYRIGHT INFRINGEMENT
TO THE EXTENT SUCH CLAIM IS BASED UPON (I) USE OF A PRODUCT IN COMBINATION WITH
ANY SOFTWARE, HARDWARE, MACHINE OR OTHER DEVICE NOT PROVIDED BY GLYKO WHERE SUCH
PRODUCT WOULD NOT BY ITSELF SO INFRINGE, (II) CHANGES OR MODIFICATIONS TO A
PRODUCT NOT MADE OR AUTHORIZED IN WRITING BY GLYKO, (III) ANY CLAIM OF
INFRINGEMENT OF ANY PATENT OR COPYRIGHT IN WHICH TOYOBO OR ANY OF ITS AFFILIATES
HAS AN INTEREST, OR (IV) USE OF A PRODUCT IN A MANNER FOR WHICH IT WAS NOT
DESIGNED.
8.9 Notices. Toyobo shall retain and shall not alter or obscure any
notices, markings, or other insignia which are affixed to the Software, related
documentation, or any part thereof at the time of delivery by Glyko of such
Software or such related documentation. To the extent that Toyobo is allowed to
make copies of the Software, such related documentation, or any part thereof
pursuant to Section 8.5, Toyobo agrees to reproduce and include such notices,
markings, and insignia on all such copies.
9. RELATIONSHIP OF THE PARTIES
9.1 Independent Contractor. Toyobo shall be considered to be an
independent contractor. The relationship between Glyko and Toyobo shall not
be construed to be that of employer and employee, nor to constitute a
partnership, joint venture, or agency of any kind.
9.2 Expense Responsibility. Toyobo shall pay all of its expenses,
including, without limitation, all travel, lodging, and entertainment expenses
incurred in connection with its activities hereunder, and Glyko shall have no
obligation to reimburse Toyobo for any of those expenses.
9.3 No Contracting. Toyobo shall have no right to enter into any
contracts or commitments in the name of, or on behalf of, Glyko, or to bind
Glyko in any respect whatsoever.
9.4 No Other Obligations. In addition, Toyobo shall not obligate or
purport to obligate Glyko by issuing or making any affirmations,
representations, warranties, or guaranties with respect to Products to any third
party, other than the warranties described in attached Exhibit C.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
10. REPORTS
In addition to reports provided pursuant to Section 5.6, Toyobo shall
provide Glyko with written quarterly reports summarizing its, and its
affiliates, sublicensees, or subdistributors sales and marketing activities
which promote the Products in the Territory, any unusual forecasts, and the
names, addresses, and phone and fax numbers of End-User Customers. Any such
end-user information shall only be used by Glyko during the term of the
Agreement to communicate directly with End-User Customers in the event of a
Product default notice, and then only in the event Toyobo has not adequately
apprised End-User Customers thereof in a timely manner. Glyko shall be free to
use of any such information after the expiration or termination of this
Agreement.
11. TRADEMARKS AND TRADE NAMES
11.1 Grant of Rights. Ancillary to its activities as the Exclusive
distributor for the Products, Toyobo may use Glyko's trademarks, service marks
and trade names listed below (hereinafter referred to as the "Trademarks") on a
non-exclusive and non-transferable basis free of charge in the Territory only
for the duration of this Agreement and solely for display or advertising
purposes in connection with selling, distribution, and promotion of the Products
in accordance with this Agreement:
Glyko(R) and FACE(R) (Fluorophore Assisted Carbohydrate Electrophoresis)
Toyobo shall not at any time do or permit any act to be done which may in any
way impair the rights of Glyko in the Trademarks. All Trademarks shall be and
remain the sole property of Glyko. Except as otherwise provided in this
Agreement, Toyobo acknowledges and agrees that it neither has nor is acquiring
hereby any license, concession, rights of use, or any other right, title, or
interest in or to any trademarks, trade names, patents, copyrights,
developments, specifications, techniques and other proprietary and confidential
information and related intellectual property relating to the Products or which
serve to distinguish the Products.
11.2 Other Toyobo Obligations. Toyobo shall: (i) use the Trademarks in
compliance with all relevant laws and regulations; (ii) accord Glyko the right
to inspect during normal business hours Toyobo's facilities used in connection
with efforts to sell, distribute, and promote Products in order to confirm that
Toyobo's use of such Trademarks is in compliance with this Section 11.2; (iii)
not modify any of the Trademarks in any way and not use any of the Trademarks on
or in connection with any goods or services other than the Products; and (iv)
Toyobo shall promptly notify Glyko of any infringement or use by others of any
word, name, title, or expression which so nearly resembles the Trademark as to
likely cause confusion or uncertainty in the public at large.
11.3 Glyko's Obligations. Glyko agrees to defend, indemnify, and hold
Toyobo harmless from and against any claims, suits or liability arising out of
any claim that the marketing, advertising and/or sale or use by Toyobo or its
customers of the Products under trade name or Trademarks designated or used by
Glyko infringes on any trademark, trade name or proprietary or other
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
interest of any third party in the Territory. Glyko reserves the right to change
its trademarks or trade names during the course of this Agreement if Glyko deems
it reasonable on the basis of any such claim or potential claim of infringement.
12. LIMITED WARRANTY
12.1 Limited Warranties. As to all components of the Products
manufactured by Glyko, Glyko makes the warranties set forth in Exhibit C,
attached hereto and made a part hereof. As to all components of the Products
manufactured by any entity other than Glyko, Glyko extends to Toyobo the
warranties as to such components provided by such other entity to Glyko for the
length of time that such warranty remains valid for Glyko. The time and scope of
the warranties described in Exhibit C shall not exceed the time and scope of any
warranties granted by Toyobo to any purchaser of such Product.
12.2 Exclusions. Under no circumstances shall the warranties set forth
in Exhibit C apply to any Product which has been used with unapproved assemblies
or sub-assemblies or to any Product which has been customized, modified,
damaged, or misused. Notwithstanding any other provision in this Agreement,
Glyko shall not be held responsible for any damage which may result from a
defective part, except for the replacement of such part as set forth in Exhibit
C.
12.3 No Software Warranties. Toyobo accepts the current version
of the Software "AS IS" without additional warranties,
except as may be provided by Glyko to its customers.
12.4 No Other Warranties. THE PROVISIONS OF THE FOREGOING WARRANTIES
ARE IN LIEU OF ANY OTHER WARRANTY, WHETHER EXPRESS OR IMPLIED, WRITTEN OR ORAL
(INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE).
13. LIMITATIONS ON LIABILITY
13.1 For Glyko. GLYKO'S LIABILITY ARISING OUT OF THE MANUFACTURE, SALE,
OR SUPPLYING OF THE PRODUCTS, OR THEIR USE OR DISPOSITION, WHETHER BASED UPON
WARRANTY, CONTRACT, TORT OR OTHERWISE, SHALL NOT EXCEED THE ACTUAL PURCHASE
PRICE PAID BY TOYOBO FOR THE PRODUCTS.
13.2 Limitations. IN NO EVENT SHALL GLYKO BE LIABLE TO TOYOBO
FOR SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT
LIMITED TO, LOSS OF PROFITS, LOSS OF DATA, OR LOSS OF USE DAMAGES)
ARISING OUT OF THE MANUFACTURE, SALE, OR
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
SUPPLYING OF THE PRODUCTS, EVEN IF GLYKO HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES OR LOSSES.
13.3 Indemnification. Notwithstanding anything set forth herein to the
contrary, Glyko shall indemnify and hold Toyobo harmless from and against all
claims, liabilities, costs, and expenses arising out of a claim that the
manufacture, sale, or use of the Products violates or infringes on a third party
patent or other intellectual property right in the Territory, or a claim that
any defect in the Products caused sickness, disease, death, or damage to
properties except to the extent that such claim is based on modification or
alteration of the Products that is not part of Glyko's design, and provided that
Glyko is promptly given notice of any such claim.
14. TERM AND TERMINATION
14.1 Term. The term of this Agreement shall begin on the later of the
dates that (i) Glyko executes this Agreement or (ii) Toyobo executes this
Agreement (the "Effective Date"). The term of this Agreement shall be ten (10)
years, unless terminated earlier pursuant to the terms of this Article 14 The
term hereof may be extended for additional one (1) year periods upon the mutual
agreement of the Parties.
14.2 Termination for Breach. Upon the occurrence of a material breach
or default as to any material obligation hereunder by any Party and the failure
of the breaching Party to promptly pursue (within thirty (30) days after
receiving written notice thereof from the non-breaching Party) a reasonable
remedy designed to cure (in the reasonable judgment of the non-breaching Party)
such material breach or default within sixty (60) days of receiving such notice,
this Agreement may be terminated by the non-breaching Party by giving written
notice of termination to the breaching Party, such termination being immediately
effective upon the giving of such notice of termination.
14.3 Termination for Insolvency. Upon the filing of a petition in
bankruptcy, insolvency or reorganization against or by any Party, or any Party
becoming subject to a composition for creditors, whether by law or agreement, or
any Party going into receivership or otherwise becoming insolvent (such Party
hereinafter referred to as the "insolvent Party"), this Agreement may be
terminated by the other Party by giving written notice of termination to the
insolvent Party, such termination immediately effective upon the giving of such
notice of termination.
14.4 Termination Due to Change in Control. Upon the occurrence of a
change in control or management or operating personnel of any Party (the
"Changed Party"), the Changed Party shall promptly notify the other Party in
writing within ten (10) calendar days. If, in the reasonable opinion of the
other Party, such change in control, management, or operating personnel of the
Changed Party could have a material adverse effect on the business, prospects,
or operations of the Changed Party, and if the Changed
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Party fails to promptly pursue (within ninety (90) days after receiving written
notice thereof from the other Party) a remedy designed to cure (in the sole
judgment of the other Party) the other Party's objections to such change, this
Agreement may be terminated by the other Party by giving written notice of
termination to the Changed Party, such termination being immediately effective
upon the giving of such notice of termination.
14.5 Effect of Termination. In the event of a termination pursuant to
any of Sections 14.2, 14.3 or 14.4 or upon expiration of this Agreement, no
Party shall have any obligation to the other Party, or to any employee of the
other Party, for compensation or for damages of any kind, whether on account of
the loss by the other Party or such employee of present or prospective sales,
investments, compensation, or goodwill. Each Party, for itself and on behalf of
each of its employees, hereby waives any rights which may be granted to it or
them under the laws and regulations of the Territory or otherwise which are not
granted to it or them by this Agreement. Each Party hereby indemnifies and holds
the other Party harmless from and against any and all claims, costs, damages,
and liabilities whatsoever asserted by any employee, agent, or representative of
such Party under any applicable termination, labor, social security, or other
similar law or regulation. Notwithstanding anything set forth herein to the
contrary, unless (i) this Agreement expires, because Toyobo so desires, or (ii)
this Agreement is terminated by Glyko pursuant to Section 14.2, 14.3 or 14.4,
upon expiration or termination of this Agreement, but no later than 12 months
from expiration or termination, at Toyobo's request, Glyko shall negotiate with
Toyobo in good faith on the terms and conditions of a non-exclusive license for
Toyobo to manufacture, have manufactured, use and sell, under Toyobo's trademark
or tradename, the Products within the Field in the Territory. The running
royalty in the license shall be five percent (5%) of Net Sales of the Products
by Toyobo
14.6 Accrued Obligations. Termination of this Agreement shall not
affect the obligation of Toyobo to pay Glyko all amounts owing or to become
owing as a result of Products tendered or delivered to Toyobo on or before the
date of such termination, as well as interest thereon to the extent any such
amounts are paid after the date they became or will become due pursuant to this
Agreement.
14.7 Survival. Notwithstanding anything else in this Agreement to the
contrary, the Parties agree that Sections 4.8, 4.9, 5.7, 8.3, 8.5, 8.6, 14.5,
14.6, and 14.7, and Articles 12, 13, 15, 22, 23, 26, 27, and 30 shall survive
the termination or expiration of this Agreement, as the case may be, to the
extent required thereby for the full observation and performance by any or all
of the Parties hereto.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
15. REPURCHASE OF INVENTORY
15.1 Repurchase Option. Upon either termination or expiration of this
Agreement, as the case may be, Glyko shall have the option to repurchase
Toyobo's inventory of Products. Within thirty (30) days after such termination
or expiration, Glyko shall elect in writing to either: (i) permit Toyobo to sell
off its remaining inventory of Products; provided, however, that Toyobo shall
comply with all terms and conditions of this Agreement governing such activities
in effect immediately prior to termination or expiration; or (ii) repurchase
Toyobo's inventory of Products which are salable and in the original packages
and unaltered from their original form and design, subject to Glyko's
inspection, test, and acceptance.
15.2 Repurchase Price. Any repurchase of Toyobo's inventory of Products
pursuant to Section 15.1 shall be at the price Toyobo purchased such Products.
Repurchased inventory shall be shipped by Toyobo freight and insurance prepaid,
according to Glyko's instructions. Glyko shall pay Toyobo for such repurchased
Products, plus freight and insurance, within thirty (30) days after Glyko
accepts those Products delivered to its designated facility, it being understood
that in the event Glyko fails to reject any Products within thirty (30) days of
their receipt from Toyobo, Glyko shall be deemed to have accepted such Products.
For the purposes of this provision, "inventory" shall not include Products in
Toyobo's inventory for which Toyobo has accepted purchase orders from third
Party customers in the Territory prior to the date of expiration or termination
of this Agreement.
15.3 Repurchase of Hardware under Reagent Rental System "Hardware
Products under Reagent Rental System" mean machines, equipment and other
hardware within the Products which remain the property of Toyobo, but are in use
by end-user customers free of charge wherein Toyobo is supposed to recover
depreciation, interest and other expenses related to Hardware Products under
Reagent Rental System and to gain some profits through the sale of reagents and
enzymes to such end-user customers. Notwithstanding anything set forth herein to
the contrary, unless (i) this Agreement expires, because Toyobo so desires, or
(ii) this Agreement is terminated by Glyko pursuant to Section 14.2, 14.3 or
14.4, upon expiration or termination of this Agreement, based on Toyobo's
request, Glyko shall repurchase, or cause its new distributor for the Products
in the Territory to purchase from Toyobo all Hardware Products under Reagent
Rental System. Such repurchase of Hardware Products under Reagent Rental System
shall be at the price of Toyobo's book value at the time of such expiration or
termination of this Agreement. Glyko or its new distributor shall pay Toyobo for
the Hardware Products under Reagent Rental System within thirty (30) days after
Toyobo's request for such repurchase.
16. PUBLICITY
Toyobo agrees that any publicity or advertising which shall be released
by it in which Glyko is identified in connection with the Products shall be in
accordance with the terms of this Agreement and any information or data which
Glyko has furnished in connection with this Agreement. Copies of all such
publicity and advertising shall be forwarded to Glyko for review at least thirty
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
(30) days prior to any such release.
17. MODIFICATION
No modification or change may be made in this Agreement except by
written instrument executed by a duly authorized representative of each Party.
18. ASSIGNMENT
This Agreement and the rights and obligations hereunder may not be
assigned, delegated, or transferred by Toyobo without the prior written consent
of Glyko. Glyko may freely assign its interest in this Agreement, or any of its
rights and obligations hereunder.
19. NOTICE
All notices given under this Agreement shall be in writing and shall be
addressed or sent via facsimile to the Parties at their respective addresses or
facsimile numbers set forth below:
If to Toyobo:
Toyobo Co. Ltd
Biochemical Operations Department
Attention: General Manager
Facsimile Number: 81-6-348-3833
If to Glyko:
Glyko, Inc.
81 Digital Drive
Novato, CA 94949
UNITED STATES
Attention: Chief Executive Officer
w/ copy to: Vice President, Business Development
Facsimile Number: 415-382-7889
Either Party may change its address or its facsimile number for purposes of this
Agreement by giving the other Party written notice of its new address or
facsimile number. Any notice, if given or made by registered or recorded
delivery international air mail
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
letter, shall be deemed to have been received on the earlier of the date
actually received or the date fifteen (15) calendar days after the same was
posted (and in proving such it shall be sufficient to prove that the envelope
containing the same was properly addressed and posted as aforesaid), and, if
given or made by facsimile transmission, shall be deemed to have been received
at the time of dispatch, unless such date of deemed receipt is not a Business
Day, in which case the date of deemed receipt shall be the next such Business
Day.
20. WAIVER
None of the terms, conditions, or provisions of this Agreement shall be
held to have been waived by any act or knowledge on the part of any Party,
except by an instrument in writing signed by a duly authorized officer or
representative of such Party. Further, the waiver by any Party of any right
hereunder or the failure to enforce at any time any of the provisions of this
Agreement, or any rights with respect thereto, shall not be deemed to be a
waiver of any other rights hereunder or any breach or failure of performance of
the other Parties.
21. VALIDITY
Glyko warrants that this Agreement is lawful and may be performed in
accordance with its terms under all laws, rules, and regulations in force in the
United States at the time of the execution hereof. Toyobo warrants that this
Agreement is lawful and may be performed in accordance with its terms under all
laws, rules and regulations in force in Japan at the time of the execution
hereof. Each Party covenants and warrants to the other Party that it will advise
the other Party of any change in the laws of the country to which it is making a
warranty in this Article 21 of which the Party making such warranty becomes
aware if such change might or will impair the validity or lawful performance of
all or any part of this Agreement.
22. CONSTRUCTION OF AGREEMENT AND RESOLUTION OF DISPUTES
22.1 Governing Law. This Agreement, which is in English, shall be
interpreted in accordance with the commonly understood meaning of the words and
phrases used herein in the United States of America, and it and performance of
the Parties hereto shall be construed and governed according to the laws of the
State of California applicable to contracts made and to be fully performed
therein, excluding the United Nations Convention on Contracts for the
International Sale of Goods.
22.1 Dispute Resolution. Any dispute, controversy, or claim
arising out of or relating to this Agreement or to a breach hereof, including
its interpretation, performance, or termination, shall be settled by
negotiation between the Parties. In the event
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
that a negotiated settlement can not be reached, then the issue will be finally
resolved by arbitration. The arbitration shall be conducted by one (1)
arbitrator selected by Glyko and Toyobo or, if they cannot agree on an
arbitrator, by the President of American Arbitration Association. The
arbitration shall be conducted in English and in accordance with the rules of
the American Arbitration Association, which shall administer the arbitration and
act as appointing authority. The arbitration, including the rendering of any
deaccession and award, shall take place in San Francisco, California, United
States, which shall be the exclusive forum for resolving such dispute,
controversy, or claim. The decision of the arbitrator shall be binding upon the
Parties hereto, and the expense of the arbitration (including, without
limitation, the award of reasonable attorneys' fees to the prevailing Party)
shall be paid as the arbitrator determines. The decision of the arbitrator shall
be expressed as a well reasoned, written opinion, which shall be executory, and
judgment thereon may be entered by any court of competent jurisdiction.
22.3 Equitable Remedies. Notwithstanding anything contained in this
Article 22 to the contrary, each Party shall have the right to institute
judicial proceedings against any other Party or anyone acting by, through or
under such other Party, in order to enforce the instituting Party's rights
hereunder through reformation of contract, specific performance, injunction, or
similar equitable relief.
23. CONFIDENTIALITY MAINTAINED
23.1 Proprietary Information. Each Party agrees that the other Party
has a proprietary interest in any information provided by it, whether in
connection with this Agreement or otherwise, and whether in written or oral
form, which is (i) a trade secret, confidential, or proprietary information,
(ii) not publicly known, and (iii) annotated by a legend, stamp, or other
written identification as confidential or proprietary information (hereinafter
referred to as "Proprietary Information"). Each Party shall disclose the
Proprietary Information provided by the other Party only to those of its agents
and employees to whom it is necessary in order to carry out its obligations in
accordance with the terms and conditions hereof. Both during and after the term
of this Agreement, all disclosures by the Party receiving Proprietary
Information to its agents and employees shall be held in strict confidence by
such agents and employees. During and after the term of this Agreement, such
receiving Party, its agents, and employees shall not use the Proprietary
Information for any purpose other than in connection with discharging its duties
in the Territory pursuant to this Agreement. The receiving Party shall, at its
expense, return to the disclosing Party the Proprietary Information provided by
the disclosing Party as soon as practicable after the termination or expiration
of this Agreement. During the term of this Agreement and thereafter, all such
Proprietary Information shall remain the exclusive property of the Party which
provided it. This Article 23 shall also apply to any consultants or
subcontractors that the receiving Party may engage in connection with its
obligations under this Agreement. The confidentiality obligations set forth in
this Section 23.1 shall survive for a period of five (5) years after termination
or expiration of this Agreement.
23.2 Exceptions. Notwithstanding anything contained in this Agreement
to the contrary, each of the Parties shall not be liable for a disclosure of the
Proprietary Information of the other Party if the information so disclosed: (i)
was in the public domain at the time of disclosure without breach of this
Agreement; (ii) was known to or contained in the records of receiving Party at
the time of disclosure by the providing Party, as evidenced by written records;
(iii) was independently developed and is so demonstrated promptly upon receipt
of the documentation and technology by receiving Party; (iv) becomes known to
the receiving party from a source other than the providing party without breach
of this Agreement by receiving party, and can be so demonstrated; (v) must be
disclosed pursuant to a contract or subcontract with a governmental agency in
order to obtain/retain a procurement contract; or (vi) was disclosed pursuant to
court order or as otherwise compelled by law, provided that the Party compelled
to make
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
such disclosure provides the other Party notice thereof sufficiently in advance
of such disclosure so as to provide the other Party a reasonable time within
which to seek a protective or similar order.
24. ENTIRE AGREEMENT
This Agreement and its Exhibits supersedes and cancels any previous
agreements or understandings, whether oral, written or implied, heretofore in
effect and sets forth the entire understanding among Glyko and Toyobo with
respect to the subject matter hereof.
25. NO RIGHTS BY IMPLICATION
No rights or licenses with respect to the Products or the Trademarks
are granted or deemed granted hereunder or in connection herewith, other than
those rights expressly granted in this Agreement.
26. RESPONSIBILITY FOR TAXES
Taxes, whether in Japan or any other country, now or hereafter imposed
with respect to the transactions contemplated hereunder (with the exception of
income taxes or other taxes imposed upon Glyko and measured by the gross or net
income of Glyko) shall be the responsibility of Toyobo, and if paid or required
to be paid by Glyko, the amount thereof shall be added to and become a part of
the amounts payable by Toyobo to Glyko hereunder.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
27. MODIFICATION OF PRODUCT
Toyobo may not customize, modify, or have customized or modified any
Product unless it obtains the prior written consent of Glyko, which consent may
be withheld in the sole discretion of Glyko. Any unauthorized customizing or
modification of any Product by Toyobo or any third Party shall relieve Glyko
from any obligation it would otherwise have had with respect to such Product
under the warranties described in Exhibit C hereto or the indemnification
provisions hereof.
28. FORCE MAJEURE
Neither Glyko nor Toyobo shall be liable in damages, nor shall either
of them be subject to termination of this Agreement by the other Party for any
delay or default in performing any obligation hereunder if that delay or default
is due to any cause beyond the reasonable control and without fault or
negligence of that Party; provided, however, that in order to excuse its delay
or default hereunder, a Party shall notify the other of the occurrence or the
cause, specifying the nature and particulars thereof and the expected duration
thereof; and provided further that within fifteen (15) calendar days after the
termination of such occurrence or cause, such Party shall give notice to the
other Party specifying the date of termination thereof. All obligations of the
Parties shall return to being in full force and effect upon the termination of
such occurrence or cause (including, without limitation, any payments which
became due and payable hereunder prior to the termination of such occurrence or
cause). For the purposes of this Article 28, a "cause beyond the reasonable
control" of a Party shall include, without limiting the generality of the
phrase, any act of God, act of any government or other authority or statutory
undertaking, industrial dispute, fire, explosion, accident, power failure,
flood, riot, or war (declared or undeclared).
29. COMPLIANCE WITH LAWS
Each of Toyobo and Glyko covenants that all of its activities under or
pursuant to this Agreement shall comply with all applicable laws, rules, and
regulations. In particular, but without limitation, Toyobo shall be responsible
for obtaining all licenses, permits, and approvals which are necessary or
advisable for sales of Products in the Territory and for the performance of its
duties hereunder.
30. SEVERABILITY
If any provision of this Agreement is declared invalid or unenforceable
by an arbitrator or court having competent jurisdiction, it is mutually agreed
that this Agreement shall endure except for the provision declared invalid or
unenforceable. In such event, the Parties shall consult and use their best
efforts to agree upon a valid and enforceable provision which shall be a
reasonable substitute for such invalid or unenforceable provision in light of
the original intent of the Parties upon entry into this Agreement.
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
31. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
32. DEFINITION OF AFFILIATES
For the purposes of this Agreement, "affiliates" shall mean all
companies, natural persons, partnerships, and other business entities controlled
by, under common control with, or controlling either Party to this Agreement.
IN WITNESS WHEREOF, the Parties hereto have signed this Agreement.
Toyobo Co. Ltd, as Toyobo Glyko, Inc., as Glyko
By: /s/Seiji Kawabata By: /s/John C. Klock
------------------- ------------------
Name: Seiji Kawabata Name: John C. Klock
Title: General Manager Title: President
Biochemical Operations Department
Date: February 17, 1997 Date: January 14, 1997
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Exhibit A
Current Glyko Diagnostic Products, Services, and Prices
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Exhibit B
Glyko's End-User Sublicense Agreement
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Exhibit C
Limited Product Warranty
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<NAME> Gyko Biomedical Ltd.
<MULTIPLIER> 1
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 708,455
<SECURITIES> 0
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<COMMON> 13,131,250
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<TOTAL-LIABILITY-AND-EQUITY> 1,118,847
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<TOTAL-REVENUES> 491,174
<CGS> (98,151)
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<OTHER-EXPENSES> (1,159,225)
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<CHANGES> 0
<NET-INCOME> (757,025)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
