<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the period ended SEPTEMBER
30, 1998
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
to .
Commission File No. 0-28218
------------------------
AFFYMETRIX, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 77-0319159
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
3380 CENTRAL EXPRESSWAY, SANTA CLARA, 95051
CALIFORNIA (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (408)731-5000
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
COMMON SHARES OUTSTANDING ON SEPTEMBER 30, 1998: 22,969,917
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
AFFYMETRIX, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets at September 30, 1998 and December 31, 1997........................... 3
Condensed Statements of Operations for the Three and Nine Months Ended September 30, 1998 and
1997......................................................................................... 4
Condensed Statements of Cash Flows for the Nine Months Ended September 30, 1998 and 1997....... 5
Notes to Condensed Financial Statements........................................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................................................. 12
Item 2. Changes in Securities and Use of Proceeds...................................................... 12
Item 6. Exhibits and Reports on Form 8-K............................................................... 13
SIGNATURES................................................................................................. 14
</TABLE>
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AFFYMETRIX, INC.
CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash, cash equivalents and short-term investments.................................. $ 89,970 $ 71,573
Accounts receivable................................................................ 8,500 6,216
Inventories........................................................................ 4,177 2,637
Other current assets............................................................... 2,232 748
------------- ------------
Total current assets............................................................. 104,879 81,174
Net property and equipment........................................................... 25,299 19,088
Other assets......................................................................... 10,771 908
------------- ------------
$140,949 $101,170
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities.................................................................. $ 11,341 $ 9,621
Other liabilities.................................................................... 5,327 513
Convertible redeemable preferred stock............................................... 49,857 --
Stockholders' equity:
Common stock....................................................................... 159,272 158,924
Accumulated deficit................................................................ (85,507) (67,269)
Other.............................................................................. 659 (619)
------------- ------------
Total stockholders' equity....................................................... 74,424 91,036
------------- ------------
$140,949 $101,170
------------- ------------
------------- ------------
</TABLE>
- - ------------------------
Note: The balance sheet at December 31, 1997 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See accompanying notes.
3
<PAGE>
AFFYMETRIX, INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ----------------------
1998 1997 1998 1997
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Product........................................................... $ 6,492 $ 1,046 $ 14,941 $ 2,408
Contract.......................................................... 7,178 1,891 16,788 4,709
Grant............................................................. 1,352 2,071 4,116 5,441
--------- --------- ---------- ----------
Total Revenue................................................... 15,022 5,008 35,845 12,558
Costs and expenses:
Cost of product revenue........................................... 3,496 907 9,421 2,751
Research and development.......................................... 9,702 6,725 26,154 19,804
Selling, general and administrative............................... 8,290 3,980 20,933 9,426
--------- --------- ---------- ----------
Total costs and expenses........................................ 21,488 11,612 56,508 31,981
--------- --------- ---------- ----------
Loss from operations................................................ (6,466) (6,604) (20,663) (19,423)
Interest income, net................................................ 1,561 1,297 3,932 3,984
--------- --------- ---------- ----------
Net loss............................................................ (4,905) (5,307) (16,731) (15,439)
Preferred Stock dividends........................................... (813) -- (1,508) --
--------- --------- ---------- ----------
Loss attributable to Common Stockholders............................ $ (5,718) $ (5,307) $ (18,239) $ (15,439)
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Basic and diluted loss per common share............................. $ (0.25) $ (0.23) $ (0.80) $ (0.68)
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
See accompanying notes.
4
<PAGE>
AFFYMETRIX, INC.
CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1998 1997
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................................... $ (16,731) $ (15,439)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization........................................................ 3,921 1,870
Amortization of investment premiums, net............................................. -- --
Change in operating assets and liabilities:
Accounts receivable................................................................ (2,284) (1,957)
Inventories........................................................................ (1,540) (1,124)
Other current assets............................................................... (583) (424)
Other assets....................................................................... (73) (618)
Accounts payable and other accrued liabilities..................................... (268) 4,124
Deferred revenue................................................................... 1,157 13
----------- ----------
Net cash used in operating activities............................................ (16,401) (13,555)
Cash flows from investing activities:
Capital expenditures................................................................... (9,758) (10,284)
Payment for acquisition of technology.................................................. (5,900) --
Proceeds from the sale of short-term investments....................................... 107,157 90,227
Proceeds from maturities of short-term investments..................................... -- 12,237
Purchases of short-term investments.................................................... (127,987) (80,673)
----------- ----------
Net cash (used in)/provided by investing activities.............................. (36,488) 11,507
Cash flows from financing activities:
Issuance of common stock............................................................... 348 134
Issuance of Series AA Convertible redeemable preferred stock, net of costs............. 49,857 --
Preferred stock dividends paid......................................................... (695) --
Principal payments on capital lease obligation......................................... (168) (153)
----------- ----------
Net cash provided by/(used in) financing activities.............................. 49,342 (19)
Net (decrease)/increase in cash and cash equivalents..................................... (3,547) (2,067)
Cash and cash equivalents at beginning of period......................................... 4,779 14,143
----------- ----------
Cash and cash equivalents at end of period............................................... $ 1,232 $ 12,076
----------- ----------
----------- ----------
Non cash financing activities:
Obligation related to acquisition of technology.......................................... $ 5,000 $ --
----------- ----------
----------- ----------
</TABLE>
See accompanying notes.
5
<PAGE>
AFFYMETRIX, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring entries) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended September
30, 1998 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1998. For further information, refer to the
financial statements and notes thereto included in the Annual Report on Form
10-K for the year ended December 31, 1997 filed by Affymetrix, Inc.
("Affymetrix" or the "Company").
REVENUE RECOGNITION
Contract and grant revenue includes revenue earned from services performed
pursuant to commercial collaboration and supply agreements and government
grants, and subscription fees earned under EasyAccess-TM- supply agreements.
Revenue from grants and research and development reimbursements are recorded in
the period in which the costs are incurred or in which the revenue is earned as
defined in the related agreement. Revenue from subscription fees earned under
EasyAccess-TM- supply agreements are recorded ratably over the term of the
agreement. Payments received in advance under these arrangements are recorded as
deferred revenue until earned. Direct costs associated with these contracts and
grants are reported as "research and development" expense. Product revenue is
recognized upon shipment. Reserves are provided for performance contingencies,
anticipated returns and warranty expenses at the time the associated revenue is
recognized.
NOTE 2--CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
As of September 30, 1998, debt securities held by the Company are comprised
of U.S. Government obligations and U.S. Corporate debt securities. They are
classified as available-for-sale and are carried at fair value with unrealized
gains and losses reported in shareholders' equity.
NOTE 3--INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
Raw material.................................................... $ 2,146 $ 934
Work in process................................................. 44 160
Finished goods.................................................. 1,987 1,543
------ ------
Total....................................................... $ 4,177 $ 2,637
------ ------
------ ------
</TABLE>
6
<PAGE>
NOTE 4--COMPREHENSIVE LOSS
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which
establishes standards for reporting comprehensive income and its components. The
adoption of SFAS 130 had no impact on the Company's results of operations or
financial condition.
The components of comprehensive loss for the three and nine months ended
September 30, 1998 and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ----------------------
1998 1997 1998 1997
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Loss attributable to common shareholders......... $ (5,718) $ (5,307) $ (18,239) $ (15,439)
Unrealized gain (loss) on securities............. 918 105 951 71
--------- --------- ---------- ----------
Comprehensive loss............................... $ (4,800) $ (5,202) $ (17,288) $ (15,368)
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
NOTE 5--CONVERTIBLE REDEEMABLE PREFERRED STOCK
On April 14, 1998 the Company completed the sale of 1,634,522 shares of
Series AA Preferred Stock to Glaxo Wellcome Americas, Inc. (a wholly owned
subsidiary of Glaxo Wellcome plc) for net proceeds of approximately $49.9
million. The Preferred Stock has a cumulative, annual dividend of 6.5%. The
Preferred Stock is convertible into Affymetrix Common Stock at approximately $40
per share and is subject to redemption provisions.
NOTE 6--AGREEMENTS WITH BECKMAN COULTER, INC. ("BCI")
In July 1998, the Company entered into a series of agreements with BCI that
will provide Affymetrix with a license to commercialize DNA arrays under certain
patents, including patents owned by or licensed to BCI, including certain
patents invented by Professor Edwin Southern of Oxford University. Under the
agreements, Affymetrix made a $5.9 million payment to BCI and agreed to provide
an additional $5.0 million in services, cash or stock to BCI over the next seven
years. In addition, Affymetrix will make royalty payments based on sales of
certain products. The payments and obligations to BCI were accounted for as the
purchase of an intangible asset which will be amortized over its estimated
useful life.
NOTE 7--SUBSEQUENT EVENT--ADOPTION OF STOCKHOLDER RIGHTS PLAN
On October 15, 1998, the Board of Directors of the Company declared a
dividend of (i) one preferred share purchase right (a "Right") for each
outstanding share of common stock of the Company, and (ii) a number of Rights
for each share of Series AA Preferred Stock of the Company equal to the number
of shares of common stock into which such share of Series AA Preferred Stock was
convertible. The dividend is payable on October 27, 1998 (the "Record Date") to
the stockholders of record on that date. Each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series B
Junior Participating Preferred Stock, par value $.01 per share, of the Company
(the "Series B Preferred Stock") at a price of $125.00 per one one-thousandth of
a share of Series B Preferred Stock, subject to adjustment. The Rights will be
exercisable if a person or group hereafter acquires beneficial ownership of 15%
or more of the Common Stock of the Company or announces a tender offer for 15%
or more of the Common Stock. The Board of Directors will be entitled to redeem
the Rights at one cent per Right at any time before any such person hereafter
acquires beneficial ownership of 15% or more of the outstanding Common Stock. If
a person or group hereafter acquires 15% or more of the outstanding Common Stock
of the Company, each Right will entitle its holder to purchase, at the Right's
exercise price, a number of
7
<PAGE>
NOTE 7--SUBSEQUENT EVENT--ADOPTION OF STOCKHOLDER RIGHTS PLAN (CONTINUED)
shares of Common Stock having a market value at that time of twice the Right's
exercise price. Rights held by the 15% holder will become void and will not be
exercisable to purchase shares at the bargain purchase price. If the Company is
acquired in a merger or other business combination transaction after a person
acquires 15% or more of the Company's Common Stock, each Right will entitle its
holder to purchase, at the Right's then-current exercise price, a number of the
acquiring company's common shares having a market value at that time of twice
the Right's exercise price. Any person currently owning in excess of 15% of the
aggregate voting power of the Common Stock and Series AA Preferred Stock will
not become an "Acquiring Person" until such person acquires beneficial ownership
of additional shares of Common Stock. The Rights will expire in ten years.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations as of September 30, 1998 and for the three month periods ended
September 30, 1998 and 1997 should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
All statements in this discussion that are not historical are
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act, including statements regarding the Company's "expectations",
"beliefs", "hopes", "intentions", "strategies" or the like. Such statements are
subject to risks and uncertainties that could cause actual results to differ
materially for Affymetrix from those projected, including, but not limited to,
uncertainties relating to technological approaches, product development,
manufacturing and market acceptance, uncertainties related to cost and pricing
of Affymetrix products, dependence on collaborative partners, uncertainties
relating to sole source suppliers, uncertainties relating to FDA and other
regulatory approvals, competition, risks relating to intellectual property of
others and the uncertainties of patent protection and litigation. These and
other risk factors are discussed in Affymetrix' Annual Report on Form 10-K for
the year ended December 31, 1997. Affymetrix expressly disclaims any obligation
or undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in Affymetrix'
expectations with regard thereto or any change in events, conditions, or
circumstances on which any such statements are based.
OVERVIEW
Affymetrix, Inc. has developed and intends to establish its
GeneChip-Registered Trademark- system as the platform of choice for acquiring,
analyzing and managing complex genetic information in order to improve the
diagnosis, monitoring and treatment of disease. The Company's GeneChip system
consists of disposable DNA probe arrays containing gene sequences on a chip,
reagents for use with the probe arrays, a scanner and other instruments to
process the probe arrays, and software to analyze and manage genetic
information.
The business and operations of the Company were commenced in 1991 by Affymax
N.V. ("Affymax") and were initially conducted within Affymax. In March 1992, the
Company was incorporated as a California corporation and wholly owned subsidiary
of Affymax and in September 1998 was reincorporated as a Delaware corporation.
Beginning in September 1993, the Company issued equity securities which diluted
Affymax' ownership in Affymetrix. In March 1995, Glaxo plc, now Glaxo Wellcome
plc ("Glaxo"), acquired Affymax, including its ownership interest in Affymetrix.
On April 14, 1998 the Company completed the sale of 1,634,522 shares of Series
AA Preferred Stock to Glaxo Wellcome Americas, Inc. (a wholly owned subsidiary
of Glaxo) for net proceeds of approximately $49.9 million. The Preferred Stock
is convertible into Affymetrix Common Stock at approximately $40 per share.
Glaxo's acquisition of the Series AA Preferred Stock increased Glaxo's
beneficial ownership of Affymetrix to approximately 37%.
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Product revenue was $6.5 million and $14.9 million for the three and nine
months ended September 30, 1998, respectively, compared to $1.0 million and $2.4
million in the three and nine months ended September 30, 1997. The increases
resulted from growth in placements of GeneChip systems and the accompanying
sales of GeneChip probe arrays and related products. Contract revenue was $7.2
million and $16.8 million for the three and nine months ended September 30,
1998, respectively, compared to $1.9 million and $4.7 million in the three and
nine months ended September 30, 1997. The increases in commercial contract
revenue resulted principally from fees earned under the Company's EasyAccess-TM-
9
<PAGE>
subscription-based supply agreements and achievement of milestones under other
commercial contracts, including revenue of $2.0 million earned from the
completion of a custom chip project in September 1998. Grant revenue was $1.4
million and $4.1 million for the three and nine months ended September 30, 1998,
respectively, compared to $2.1 million and $5.4 million in the three and nine
months ended September 30, 1997. The decreases are primarily due to lower
activity under government grants including grants from the Advanced Technology
Program and NIH National Center for Human Genome Research. The Company expects
grant revenues to fluctuate in the future due to the level of activity performed
under the grants and the timing of certain grant revenue billings.
Cost of product revenue was $3.5 million and $9.4 million for the three and
nine months ended September 30, 1998, respectively, compared to $0.9 million and
$2.8 million for the three and nine months ended September 30, 1997. The Company
has experienced, and continues to experience, variation in the manufacturing
yield of its GeneChip products which has impacted, and will continue to impact,
the Company's ability to meet its commitments to deliver product to its
customers in a timely manner. Difficulty in providing timely delivery of
products adversely affects the Company's relationships with its customers, its
business, its financial condition and results of operations. Margins have
fluctuated, and will continue to fluctuate significantly, as a result of
variation in manufacturing yields and as the Company continues development of
its manufacturing capabilities, including the start-up of the planned West
Sacramento, California facility. Margins also fluctuate as a result of changes
in the mix of products sold. In addition, the Company sells products in certain
foreign countries and thus revenue and margins will fluctuate due to changes in
currency exchange rates. However, the impact of changing currency rates to date
has been immaterial and the Company does not engage in hedging activities.
Research and development expenses were $9.7 million and $26.2 million for
the three and nine months ended September 30, 1998, respectively, compared to
$6.7 million and $19.8 million the three and nine months ended September 30,
1997. The increase in research and development expenses was attributable
primarily to the hiring of additional research and development personnel and
associated purchases of research supplies. The Company expects research and
development spending to increase over the next several years as product
development and core research efforts continue to expand.
Selling, general and administrative expenses were $8.3 million and $20.9
million for the three and nine months ended September 30, 1998, respectively,
compared to $4.0 million and $9.4 million the three and nine months ended
September 30, 1997. The increase in selling, general and administrative expenses
resulted primarily from the Company's expansion of commercial activities and
significantly increased legal costs arising from the Company's ongoing patent
litigation. Selling, general and administrative expenses are expected to
continue to increase as the Company expands sales and marketing, prosecutes and
defends its intellectual property position and defends against claims made by
third parties, and adds management and support staff. In particular, the Company
expects legal costs to increase over the next several months as ongoing patent
litigation with Hyseq, Inc. and with Incyte Pharmaceuticals, Inc. and Synteni,
Inc. approach their respective trial dates.
Net interest income was $1.6 million and $3.9 million for the three and nine
months ended September 30, 1998, respectively, compared to $1.3 million and $4.0
million the three and nine months ended September 30, 1997. The fluctuations in
net interest income result principally from variation in the Company's
short-term investment balances.
IMPACT OF YEAR 2000
The Company has begun to assess the potential impact of the Year 2000
computer problem on its products (including GeneChip systems and software),
information systems, embedded systems (including computers used in its
manufacturing process) and on the ability of certain third parties to supply
critical materials and services. The Company has completed the assessment of its
products and believes them to be Year 2000 ready. The Company expects to
complete the assessment of its computer systems, embedded systems, certain third
party suppliers and major customers by the first quarter of 1998, and to take
10
<PAGE>
necessary remediation action by the end of 1999. Expenditures to date have not
been material and have consisted solely of the limited use of outside
consultants and the time of certain company personnel. Based on the partial
assessment completed through September 30, 1998, the Company does not currently
expect the future costs of completing the assessment, making system
modifications, purchasing replacement computer systems and assessing the Year
2000 readiness of material third party suppliers and major customers to be
material. While the Company does not anticipate a material business interruption
to result from the Year 2000 problem, the Company gives no assurances that its
systems will be Year 2000 ready and the Company cannot guarantee the Year 2000
readiness of key third party suppliers and service providers and major
customers. Pending the completion of the assessment of the Company's Year 2000
readiness, the Company may make certain contingency plans (for example the
stockpile of critical raw materials in late 1999), but currently such plans have
not been developed. If any of the Company's computer systems, embedded systems,
key third party suppliers and services providers and major customers are not
Year 2000 ready, the Company may experience a business interruption which would
have a material adverse impact on the Company's results of operations and
financial condition.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company's cash, cash equivalents, and
short-term investments were $90.0 million compared to $71.6 million at December
31, 1997. The increase is primarily attributable to the proceeds from the
issuance of Series AA Preferred Stock partially offset by cash used to fund the
Company's operating loss and capital expenditures for expansion of manufacturing
capacity.
Net cash used in operating activities was $16.4 million for the nine months
ended September 30, 1998, as compared to $13.6 million for the nine months ended
September 30, 1997. The increase in net cash used in operating activities
resulted primarily from increases in the Company's net loss and changes in
operating assets and liabilities.
The Company's investing activities, other than purchases, sales and
maturities of available-for-sale securities, consisted of capital expenditures,
which totaled $9.8 million for the nine months ended September 30, 1998 and
$10.3 million for the nine months ended September 30, 1997. Capital expenditures
during the first nine months of 1998 included investments in land, facilities,
and production and laboratory equipment. The Company expects to spend an
additional $5 million to $10 million over the next year to complete the new
manufacturing facility in West Sacramento, California. Also included in
investing activities is a $5.9 million payment made to Beckman Coulter, Inc.
("BCI") under the terms of a series of agreements with BCI that will provide
Affymetrix with a license to commercialize DNA arrays under certain patents
owned by or licensed to BCI, including certain patents invented by Professor
Edwin Southern of Oxford University. Under the agreements, Affymetrix will also
provide services and make certain future payments to BCI and will pay royalties
on sales of certain products.
Financing activities for the nine months ended September 30, 1998, include
net proceeds of $49.9 million from the issuance of Series AA Preferred Stock and
cash dividends paid on the Series AA Preferred Stock of $0.7 million.
The Company anticipates that its existing capital resources will enable it
to maintain currently planned operations and planned capital expenditures
through at least 2000. However, this expectation is based on the Company's
current operating plan and capital expenditure plan, which could change, and
therefore the Company could require additional funding sooner than anticipated.
In addition, the Company expects its capital requirements to increase over the
next several years as it expands its facilities and acquires scientific
equipment to support expanded manufacturing and research and development
efforts. The Company's long-term capital expenditure requirements will depend on
numerous factors, including: the progress of its research and development
programs; initiation or expansion of research programs; the development of
commercial scale manufacturing capabilities; its ability to maintain existing
collaborative and customer arrangements and establish and maintain new
collaborative and customer arrangements; the costs involved in preparing,
filing, prosecuting, defending and enforcing intellectual property rights; the
effectiveness of product commercialization activities and arrangements; the
purchase of patent licenses; and other factors.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 18, 1998 the Company filed a lawsuit in Federal District Court in
the Northern District of California against Hyseq, Inc. ("Hyseq") alleging
infringement of U.S. Patent Nos. 5,795,716 and 5,744,305 ('305). Hyseq had
previously filed lawsuits alleging infringement by Affymetrix of U.S. Patent
Nos. 5,202,231; 5,525,464; and 5,695,940. On September 1, 1998 the Company added
U.S. Patent No. 5,800,992 ('992) to the complaint of infringement against Hyseq.
Also on September 1, 1998, the Company filed a complaint against Synteni,
Inc. ("Synteni") and Incyte Pharmaceuticals, Inc. ("Incyte") in Federal District
Court in Delaware alleging infringement of the '305 Patent and the '992 Patent.
Earlier, in January 1998, the Company sued Synteni and Incyte asserting
infringement of U.S. Patent No. 5,445,934. On September 21, 1998, Incyte and
Synteni filed an answer asserting various defenses to the lawsuit, and asserted
several counterclaims including a request for declaration of noninfringement and
invalidity, an assertion of unfair competition, a request for a declaration that
Synteni and Dari Shalon (an employee of Synteni) have not misappropriated any of
Affymetrix' trade secrets, a claim of tortuous interference with Incyte and
Synteni's economic advantage, and a claim of trade libel. Affymetrix believes
these counterclaims are without merit. The actions by Affymetrix against Incyte,
Synteni, and Hyseq seek to enjoin commercial activities relating to the
Affymetrix patents as well as to obtain damages and attorneys' fees. In
connection with the assertion of infringement against Incyte and Synteni,
Affymetrix filed a request for preliminary injunction against Incyte and
Synteni.
There can be no assurance that Affymetrix will prevail in such litigation
activities or be successful in asserting its patent rights. The Company is
likely to incur substantial costs and expend substantial personnel time in
asserting the Company's patent rights against Hyseq, Incyte, and Synteni and
defending against counterclaims filed by Hyseq, Incyte, and Synteni. Failure to
successfully enforce its patent rights or defend against counterclaims, or the
loss of these patent rights or others would remove a legal obstacle to
competitors in designing systems with similar competitive advantages, which
could have a material adverse effect on the Company's business, financial
condition and operating results.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On October 15, 1998, the Board of Directors of the Company declared a
dividend of (i) one preferred share purchase right (a "Right") for each
outstanding share of common stock of the Company, and (ii) a number of Rights
for each share of Series AA Preferred Stock of the Company equal to the number
of shares of common stock into which such share of Series AA Preferred Stock was
convertible. The dividend is payable on October 27, 1998 (the "Record Date") to
the stockholders of record on that date. Each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series B
Junior Participating Preferred Stock, par value $.01 per share, of the Company
(the "Series B Preferred Stock") at a price of $125.00 per one one-thousandth of
a share of Series B Preferred Stock, subject to adjustment. The Rights will be
exercisable if a person or group hereafter acquires beneficial ownership of 15%
or more of the Common Stock of the Company or announces a tender offer for 15%
or more of the Common Stock. The Board of Directors will be entitled to redeem
the Rights at one cent per Right at any time before any such person hereafter
acquires beneficial ownership of 15% or more of the outstanding Common Stock. If
a person or group hereafter acquires 15% or more of the outstanding Common Stock
of the Company, each Right will entitle its holder to purchase, at the Right's
exercise price, a number of shares of Common Stock having a market value at that
time of twice the Right's exercise price. Rights held by the 15% holder will
become void and will not be exercisable to purchase shares at the bargain
purchase price. If the Company is acquired in a merger or other business
combination transaction after a person acquires 15% or more of the Company's
Common Stock, each Right will entitle its holder to purchase, at the Right's
then-current exercise price, a number of the acquiring company's common shares
having a market value at that time of twice the Right's exercise price. Any
person currently owning in excess of 15%
12
<PAGE>
of the aggregate voting power of the Common Stock and Series AA Preferred Stock
will not become an "Acquiring Person" until such person acquires beneficial
ownership of additional shares of Common Stock. The Rights will expire in ten
years.
On June 6, 1996, a Registration Statement on Form S-1 (No. 333-3648) was
declared effective by the Securities and Exchange Commission, pursuant to which
6,153,000 shares of the Company's Common Stock, no par value, were offered and
sold for the account of the Company at a price of $15.00 per share, generating
gross offering proceeds of $92.3 million for the account of the Company. The
managing underwriters for the offering were Robertson Stephens, CS First Boston
and Montgomery Securities.
From the effective date of the Registration Statement to September 30, 1998,
the Company incurred $6.2 million in underwriting discounts and commissions and
$1.0 million in other related expenses. Total expenses incurred in connection
with the offering were $7.2 million. The net proceeds of the offering, after
deducting the foregoing expenses, were $85.1 million. No direct or indirect
payments were made to directors, officers, or general partners of the Company or
their associates, or to persons owning 10% or more of any class of equity
securities of the Company and its affiliates.
From the effective date of the Registration Statement to September 30, 1998,
the Company estimates that it has used the net proceeds of the offering as
follows: (i) temporary investment in marketable debt securities, $40.1 million;
and (ii) working capital, $45.0 million.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- - ----------- ------------------------------------------------------------------------------------
<S> <C>
10.34* Consortium Agreement between Beckman Coulter, Inc. and Affymetrix dated July 31,
1998.
10.35 Letter Agreement between Beckman Coulter, Inc. and Affymetrix dated July 29, 1998.
27 Financial data schedule.
</TABLE>
- - ------------------------
* Confidential treatment requested.
(b) Reports on Form 8-K.
On September 29, 1998, the Company filed a Report on Form 8-K announcing
that it had changed its state of incorporation from California to Delaware.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
November 16, 1998
<TABLE>
<S> <C> <C>
AFFYMETRIX, INC.
By: /s/ EDWARD M. HURWITZ
-----------------------------------------
Edward M. Hurwitz
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
</TABLE>
14
<PAGE>
AFFYMETRIX, INC.
EXHIBIT INDEX
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- - ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.34* Consortium Agreement between Beckman Coulter, Inc. and Affymetrix dated July 31, 1998.
10.35 Letter Agreement between Beckman Coulter, Inc. and Affymetrix dated July 29, 1998.
27 Financial data schedule.
</TABLE>
- - ------------------------
* Confidential treatment requested.
<PAGE>
CONSORTIUM AGREEMENT
CONSORTIUM AGREEMENT effective this day of , 1998 by and
between BECKMAN COULTER, INC., a Delaware corporation, having a place of
business at 4300 North Harbor Boulevard, Fullerton, California 92834-3100
("BCI") and AFFYMETRIX, INC., a corporation, having a place of
business at 3380 Central Expressway, Santa Clara, California 95051
("Affymetrix").
R E C I T A L S
I. Affymetrix is in the business of developing, manufacturing and selling
Array Chips (as that term is hereinafter defined), and has proprietary
technology and intellectual property relative to the making and using of
Array Chips and instruments for using and reading Array Chips.
II. BCI is in the business of developing, manufacturing and selling automated
instruments systems for the bioresearch and human clinical diagnostic
markets. BCI has developed technology relating to the manufacture of Array
Chips and has access to proprietary chemistry used in the preparation of
oligomers. BCI also has proprietary technology which can be applied to
automating processes which use Array Chips.
III. The parties agree to cooperate, each with the other, to develop Array
Chips and systems for using Array Chips, to accelerate market acceptance,
uses and applications of Array Chips and to develop and commercialize
Array Chip products, processes and systems.
NOW THEREFORE in consideration of the mutual undertakings contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
ARTICLE 1.0 INTENT OF PARTIES AND DEFINITION
The intent of the parties is to cooperate to accelerate market acceptance,
applicability and use of Array Chips in the bioresearch and diagnostics markets.
To this end, the parties will enter and execute the various agreements and
relationships contemplated by this Agreement and use their individual strengths,
collectively, to jointly develop individual arrays, and instruments and systems
for processing and using arrays. This Agreement shall be construed in accordance
with this intent.
For purposes of this Agreement the term "Array Chip" shall mean a series of
polynucleotides arranged in an array on a substrate to perform quantitative or
qualitative analyses.
ARTICLE 2.0 RESEARCH AND DEVELOPMENT OF ARRAY CHIPS
AFFYMETRIX RESEARCH ON BEHALF OF BCI--Affymetrix shall, in accordance with
attached Exhibit A, perform Five Million Dollars ($5,000,000) in contract
research and development services for and under the direction of BCI on Array
Chip technology and products of interest to BCI.
ARTICLE 3.0 SYSTEMS FOR USING AND PROCESSING ARRAY CHIPS;
COMMERCIAL COOPERATION
3.1 IMMEDIATE OBJECTIVES--Affymetrix shall, within ( ) days of the
signing of this Agreement complete and implement the design modifications
of the scanners and other instruments and systems it currently sells for
use with Array Chips to efficiently and effectively interact with BCI's
[ ].(1)
- - ------------------------
(1) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1
<PAGE>
3.2 LONG TERM OBJECTIVES--Subject to Paragraph 3.4, Affymetrix, for its part,
agrees that it will use reasonable commercial efforts consistent with
commercial opportunity to assure any scanners, instruments and systems it
hereafter sells and promotes during the ten (10) years following the
effective date of this Agreement will, at the time of first commercial
sale, be configured and adapted to efficiently and effectively interact
with BCI's then current laboratory information and management system. BCI,
for its part, agrees during the aforesaid term to keep Affymetrix informed
of its developments in laboratory information and management systems and of
the modifications required in Affymetrix' scanners, instruments and systems
to facilitate use with BCI's laboratory information and management systems.
3.3 BCI AS A PREFERRED SYSTEM PROVIDER--Subject to Paragraph 3.4, Affymetrix
shall, during the ten (10) years following the effective date of this
Agreement use commercially reasonable efforts to actively promote BCI, with
Affymetrix' customers, as the preferred source for systems integration and
laboratory information and management systems and products. Included within
such promotion, by way of example only and not limitation, shall be (a)
Affymetrix, at least once each calendar quarter, providing to BCI, a list
of customers to whom it has sold an Affymetrix scanner or instrument or
similar system for using or processing Array Chips in the preceding three
(3) months, such list to include the name and address of the customer, the
identity of a key contact and the type or model of Affymetrix scanner,
instrument or system sold; the foregoing information shall only be used by
BCI to promote the sale of its laboratory information and management
systems, products and services; (b) semi-annual meetings between the
relevant marketing and sales management of Affymetrix and BCI to develop,
execute and administer co-marketing and promotional plans for Array Chips;
scanners, instruments and systems which use and process Array Chips;
systems which automate processing of Array Chips; and, market
opportunities, uses and applications for Array Chips; and, (c) each party
(a "first party") permitting the other party (a "second party") to use the
first party's trademarks and depictions of its products in marketing and
promotional literature; such second party literature to be subject to the
first party's review and approval, not to be unreasonably, withheld or
delayed, prior to release by such second party.
3.4 The ten (10) year term for cooperation and collaboration in Paragraphs 3.2
and 3.3 shall be extended thereafter, from year to year, unless either
party provides written notice to the other party at least ninety (90) days
prior to the expiration of the ten (10) year term or any anniversary
thereof, of its intention to terminate such cooperation.
ARTICLE 4.0 ARRAY CHIP MANUFACTURE AND DISTRIBUTION
Affymetrix and BCI will enter the agreement attached hereto as Exhibit B for
the OEM manufacture by Affymetrix and the sale by BCI of Array Chips for use on
instruments and systems manufactured or distributed by BCI.
ARTICLE 5.0 EXCHANGE OF INTELLECTUAL PROPERTY
5.1 BCI LICENSE TO AFFYMETRIX--BCI and Affymetrix shall enter into the license
agreement attached hereto as Exhibit C for the license by BCI to Affymetrix
of the BCI Array Chip making technology and intellectual property set forth
in Exhibit C.
5.2 AFFYMETRIX LICENSE TO BCI--BCI and Affymetrix shall enter into the license
agreement attached hereto as Exhibit D for the license by Affymetrix to BCI
of the Affymetrix Array Chip making and using technology and intellectual
property.
5.3 COOPERATION TO OBTAIN LICENSE UNDER SOUTHERN PATENTS--BCI agrees to and
shall, promptly after the signing of this Agreement, make a written request
to Oxford Gene Technology ("OGT"), in accordance with Section 9.2 of that
certain Patent License Agreement between Beckman Instruments, Inc. and Isis
Innovation Limited, to grant Affymetrix a non-exclusive, world-wide license
2
<PAGE>
under U.S. Patents 5,436,327 and 5,700,637 and each of their foreign
counterparts (the "Southern Patents") on reasonable terms and conditions.
BCI further agrees to use commercially reasonable efforts to require OGT to
comply with its obligations under such Section. For purposes of this
Paragraph 4.3 it is understood that commercially reasonable efforts does
not require litigation or the bringing of a lawsuit by BCI. If the
foregoing BCI efforts do not result in the grant of a license to Affymetrix
under the Southern Patents [ ](2) from the date of the BCI
letter to OGT then the parties agree to consult and cooperate with each
other to explore alternatives available to effectuate the intent of this
Paragraph and to further the goals of the parties to commercialize Array
Chips.
5.4 PAYMENT TO BCI--Affymetrix shall, not later than five (5) business days
after obtaining the license under the Southern Patents from OGT, or any
successor in interest, pay to BCI the sum of Five Million Dollars
($5,000,000).
ARTICLE 6.0 EXCLUSIVITY ON BCI SYSTEMS
Affymetrix will not knowingly, after exercising due caution, care and
diligence, and undertaking reasonable inquiry, sell any of its Array Chips to an
end user who will use such Array Chips on an instrument, system or device
manufactured or distributed by BCI. Similarly, Affymetrix will proactively and
regularly inform each of its dealers and distributors of Affymetrix Array Chips
that such Array Chips should not be sold to end users who will use such Array
Chips on an instrument, system or device manufactured or distributed by BCI. For
the avoidance of doubt, BCI's instruments, systems and devices, as those terms
are used in this Article 6.0 does not include SAMI? or SILAS? products or
services.
ARTICLE 7.0 ADDITION OF HEWLETT PACKARD TO THE CONSORTIUM
It is the express intention of the parties to enter into good faith
negotiations with Hewlett Packard Company ("HP") to make HP part of this
Agreement. The execution of this intention is subject to the following
understandings: (a) HP will OEM manufacture Array Chips for Affymetrix and BCI
on reasonable terms and conditions, (b) any monetary consideration paid by HP to
joint the consortium or for the rights provided under Paragraph 5.3 hereof will
be paid to and retained by BCI, and (c) any running royalties will be paid to
and retained by Affymetrix.
ARTICLE 8.0 TRANSFER OF INTEREST
Neither party may assign this Agreement or the rights set forth herein
without the prior written consent of the other party; provided that
[ ](3)
ARTICLE 9.0 MISCELLANEOUS
9.1 ENTIRE AGREEMENT; BINDING PROVISIONS; SEPARABILITY--Except as to the side
letter from BCI to Affymetrix of even date herewith, this Agreement
constitutes the entire agreement between the parties pertaining to its
subject matter and fully supersedes any and all prior agreements or
understandings between the parties pertaining to such subject matter. The
covenants and agreements contained in this Agreement shall be binding upon,
and inure to the benefit of, the heirs, executors, administrators, personal
representatives, successors and permitted assigns of the respective parties
hereto. Each provision of this Agreement shall be considered separable,
and, if for any reason any provision or provisions hereof are determined to
be invalid or contrary to any existing or future law, such invalidity shall
not impair the operation of effect of those portions of this Agreement that
are valid.
- - ------------------------
(2) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(3) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
3
<PAGE>
9.2 FURTHER ASSURANCES--Each of the parties hereto does hereby covenant and
agree on behalf of itself, its successors and its assigns, without further
consideration, to prepare, execute, acknowledge, file, record, publish and
deliver such other instruments, documents and statements, and to take such
other action as may be required by law or necessary to effectively carry
out the purposes of this Agreement.
9.3 NOTICES--Any notice, consent, payment, demand or communication required or
permitted to be given by any provision of this Agreement shall be in
writing and shall be (a) delivered personally to the party or to an officer
of the party to whom the same is directed, or (b) sent by facsimile or
registered or certified mail, return receipt requested, postage prepaid
addressed as follows:
BCI: Beckman Coulter, Inc.
4300 North Harbor Boulevard
Fullerton, California 92834-310
0 Attention: President
with a copy to: Beckman Coulter, Inc.
4300 North Harbor Boulevard
Fullerton, California 92834-3100
Attention: General Counsel
Affymetrix: Affymetrix, Inc.
3380 Central Expressway
Santa Clara, California 95051
Attention: President
with a copy to: Affymetrix, Inc.
3380 Central Expressway
Santa Clara, California 95051
Attention: General Counsel
Any such notice shall be deemed to be delivered, given and received for
all purposes as of (i) the date so delivered, if delivered personally,
(ii) upon receipt, if sent by facsimile with confirmation of receipt in
good order requested and received, or (iii) on the date of receipt or
refusal indicated on the return receipt, if sent by registered or
certified mail, return receipt requested, postage prepaid, and properly
addressed.
9.4 GOVERNING LAW--This Agreement, including its existence, validity,
construction and operating effect, and the right of each of the parties
hereto, shall be governed by and construed in accordance with the laws of
the State of California.
9.5 AMENDMENTS--No amendments to this Agreement shall be effective without the
prior written approval of all parties, which approval may be given or
withheld in the sole and absolute discretion of a party.
9.6 COUNTERPARTS--This Agreement may be executed in any number of multiple
counterparts, each of which shall be deemed to be an original copy and all
of which together shall constitute one agreement, binding on all parties
hereto.
9.7 TITLES; PRONOUNS--Article and Paragraph titles are for descriptive purposes
only and shall not control or alter the meaning of this Agreement as set
forth in the text. All pronouns and variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as
appropriate.
9.8 RELATIONSHIP--It is not the intention of the parties that this Agreement
create a partnership or association. Neither party is granted any right or
authority hereunder to assume or create any
4
<PAGE>
obligation, express or implied, or to make any representations, warranties
or guarantees on behalf or in the name of the other party.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of the last date written below.
<TABLE>
<S> <C> <C>
BECKMAN COULTER, INC.
a Delaware corporation
By: /s/ John Wareham
---------------------------------------
Its: Chief Executive Officer
---------------------------------------
Date: July 31, 1998
---------------------------------------
AFFYMETRIX, INC.
a corporation
By: /s/ Stephen P.A Fodor
---------------------------------------
Its: President and Chief Executive Officer
---------------------------------------
Date: July 31, 1998
---------------------------------------
</TABLE>
5
<PAGE>
Exhibit A to the Consortium Agreement
dated as of July 31, 1998
July 31, 1998
Mr. Steve Fodor, President
Affymetrix, Inc.
3380 Central Expressway
Santa Clara, California 95051
Dear Mr. Fodor:
This letter, with your signature below, will serve as the outline for
agreements to be hereafter negotiated under which Affymetrix, Inc.
("Affymetrix") has granted Beckman Coulter, Inc. ("BCI") a credit of
$5,000,000 to be applied against contract research and development services
to be performed by Affymetrix on array chip technology and products of
interest to BCI. In addition to other terms and conditions acceptable to the
parties, the agreements will contain the following:
1. BCI will identify the array chip technology or products of interest (the
"Services"). There may be more than one set of Services. Each set of
Services will be embodied in a separate agreement. Unless Affymetrix is
blocked by a pre-existing agreement with a third party, it will perform the
Services requested by BCI.
2. Prior to commencing a set of Services, the parties will agree on, and
embody in the respective agreement, a budget and milestones and a proposed
completion date for such Services.
3. Affymetrix will charge against the credit of $5,000,000 on a time and
material basis using billing and overhead rates for the employees utilized
which are at least as favorable as those charged internally by Affymetrix
for its own research and development activities.
4. Affymetrix will use reasonable commercial efforts to complete the services.
5. BCI will own inventions and know-how generated by Affymetrix in the
performance of the Services. BCI will grant licenses to Affymetrix, on
reasonable terms and
-1-
<PAGE>
conditions to be hereafter negotiated, to use such patents and know-how on
array chips which do not directly compete with array chips distributed by
BCI.
6. If the parties do not sign an agreement for Services embodying the
understandings of this letter within five (5) years of the above date, then
Affymetrix, at its option, will either pay BCI $5,000,000 or give BCI
shares of Affymetrix stock having a value of $5,000,000. If Affymetrix
elects to give BCI shares of Affymetrix stock, such shares shall be
registered and fungible on receipt by BCI. If Affymetrix does not
perform or agree to perform Services for BCI having a value of at least
$5,000,000 within seven (7) years of the above date, then Affymetrix will,
at its option, either pay BCI the difference between $5,000,000
and the value of Services performed or agreed to be performed on such
fifth (5th) anniversary or give BCI shares of Affymetrix stock of the value
of such difference; such shares shall be registered and fungible by BCI on
receipt.
If the foregoing properly sets forth our intent, please sign both copies of
this letter in the space indicated and return one copy to me; the second copy is
for your files.
Very truly yours,
Beckman Coulter, Inc.
by:
-------------------------------
title:
----------------------------
Understood and Accepted:
Affymetrix, Inc.
by:
------------------------------
title:
---------------------------
-2-
<PAGE>
Exhibit B to the Consortium Agreement
dated as of July 31, 1998
OEM SUPPLY AGREEMENT
OEM SUPPLY AGREEMENT ("Agreement") effective this _____ day of _____ 1998
by and between AFFYMETRIX, INC. a California corporation, having a place of
business at 3380 Central Expressway, Santa Clara, California 95051
("Affymetrix", as that term is further defined in Paragraph 1.2 hereof) and
BECKMAN COULTER, INC., a Delaware corporation, having a place of business at
4300 North Harbor Boulevard, Fullerton, California 92834-3100 ("BCI", as that
term is further defined in Paragraph 1.4 hereof).
R E C I T A L S
I. Affymetrix is in the business of developing, manufacturing and selling
Array Chips (as that term is hereinafter defined).
II. BCI desires to purchase Array Chips from Affymetrix for resale to BCI
customers.
NOW THEREFORE, in consideration of the mutual covenants and undertakings
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound, agree as follows:
ARTICLE 1.0 DEFINITIONS
The following terms, when used herein with an initial capital letter and
without regard to whether they appear in the singular, plural or possessive
form, shall have the following defined meanings:
1.1 "AFFILIATE" shall mean any corporation or other form of limited liability
legal person, partnership, association, joint venture or other form of
business entity controlled by,
-1-
<PAGE>
controlling or under common control with a party hereto. As used herein,
the word and root "control" in the context of a corporation shall mean
the ownership, directly or indirectly, of more than fifty percent (50%)
of the voting shares or other equity interests entitled to vote in the
election of directors of the corporation; and, in the context of any
other form of business entity, the right to receive more than fifty
percent (50%) of the net profits of such entity and the right to a
majority interest in the management and control of such entity; provided
that notwithstanding the foregoing definition, BCI may not have as an
Affiliate entitled to receive the benefits of the licenses granted under
Section 3.1 hereof (a) a corporation wherein any of the companies listed in
Exhibit A is more than a passive investor in such Affiliate and such
passive investor does not have the right to manage or control such
Affiliate or (b) a partnership wherein any of the companies listed in
Exhibit A is a partner.
1.2 "AFFYMETRIX" shall mean Affymetrix, Inc., its divisions and Affiliates and
its and their permitted successors and assigns.
1.3 "ARRAY CHIPS" shall mean a series of polynucleotides arranged
on a substrate to perform quantitative or qualitative analyses.
1.4 "BCI" shall mean Beckman Coulter, Inc., its divisions and Affiliates and
its and their permitted successors and assigns.
1.5 "BCI SYSTEM" shall mean an instrument, device or system manufactured or
distributed by BCI which uses Array Chips to perform quantitative or
qualitative analyses. For the avoidance of doubt, if an instrument, device
or system is manufactured by a third party and distributed by BCI only
those specific instruments, devices or systems which are sold or leased or
otherwise distributed to end users (directly or indirectly) by BCI are BCI
Systems and the identical instrument, device or system which is sold,
leased or otherwise distributed directly to the end user by the
manufacturer or indirectly from the manufacturer to a third party and then
to the end user are not BCI Systems.
-2-
<PAGE>
1.6 "PRODUCT" shall mean an Array Chip manufactured by Affymetrix and sold to
BCI under the terms of this Agreement.
ARTICLE 2.0 IDENTIFICATION OF ARRAY CHIPS AS PRODUCTS
2.1 IDENTIFICATION OF ARRAY CHIPS BY AFFYMETRIX - Affymetrix shall, from time
to time, notify BCI, in writing, of: (a) Array Chips which Affymetrix is
then manufacturing for a third party, which Array Chips are not exclusive
or proprietary to such third party, or (b) Array Chips which Affymetrix is
willing to manufacture for BCI. Such notice shall contain an offer from
Affymetrix to manufacture and supply such Array Chips to BCI under the
terms of this Agreement. Such notice shall also contain the specifications
of such Array Chip, the transfer price for such Array Chip at an identified
annual volume of purchases by BCI (the "Target Purchases") and a price
ladder showing the transfer prices if the BCI purchases in any year are
above or below the Target Purchases. The proposed transfer prices in such
offer shall be fixed for the first year of BCI purchases.
2.1.1 The Affymetrix offer shall remain open for not less than six (6)
months from the date of receipt by BCI and may be accepted by
BCI, by written notice to that effect to Affymetrix within such
period. If BCI accepts such offer, such Array Chip shall become
a Product under this Agreement.
2.2 IDENTIFICATION OF ARRAY CHIPS BY BCI - BCI may, from time to time, propose
an Array Chip to be developed by Affymetrix and, when developed,
manufactured by Affymetrix under this Agreement. The BCI proposal shall be
in writing and shall specify the particulars of the Array Chip and contain
an estimate of BCI's anticipated purchases in each of the next five (5)
years.
2.2.1 The BCI proposal shall remain in effect for not less than three
(3) months from the date of receipt by Affymetrix. Affymetrix
may, by written notice
-3-
<PAGE>
to BCI, at any time within such period offer to develop and
manufacture the proposed Array Chip for BCI. The Affymetrix
offer will include a development schedule, the amount (if
any) of Affymetrix development expenses to be reimbursed by
BCI, the specifications for the Array Chip, a proposed first
delivery date when commercial scale deliveries will begin,
a transfer price for such Array Chip at Target Purchases
and a price ladder showing the transfer prices if the
BCI purchases in any year are above or below the Target
Purchases. The proposed transfer prices in such offer shall be
fixed for the first year of BCI purchases.
2.2.2 The Affymetrix offer shall remain open for not less than three
(3) months from the date of receipt by BCI and may be accepted by
BCI by written notice to Affymetrix to that effect within such
period. If BCI accepts such offer such Array Chip shall become a
Product under this Agreement.
2.2.3 Affymetrix and BCI are parties to a research and development
agreement of even date herewith under which Affymetrix has agreed
to perform $5,000,000 of contract research and development
services on Array Chip technology and products of interest to BCI
(the "R and D Agreement"). To the extent that any part of the
$5,000,000 under the R and D Agreement is unspent and an
Affymetrix offer under Paragraph 2.2.1 hereof includes
development expenses to be reimbursed by BCI then BCI shall
off-set such development expenses by applying the unspent R and D
funds up to the full amount of such development expenses.
ARTICLE 3.0 MANUFACTURE AND SUPPLY
3.1 SUPPLY - PURCHASE COMMITMENT - Affymetrix agrees to and shall manufacture,
sell and deliver to BCI and BCI shall purchase and take from Affymetrix
such quantities of the Products as BCI may order in accordance with
Paragraphs 3.4 and 3.4.1 hereof.
-4-
<PAGE>
3.2 SPECIFICATIONS - Each Product shall conform to its specifications in the
Affymetrix offer of Article 2.0. Such specifications shall automatically
be added to this Agreement, as Exhibit A, concurrently with the BCI
acceptance of such offer. Notwithstanding the preceding sentence, BCI may
at any time request changes, modifications or additions to the
specifications either prior or subsequent to their addition to Exhibit A.
Affymetrix will negotiate in good faith such changes, modifications or
additions, including any corresponding adjustment to the transfer price or
other applicable terms and conditions of this Agreement and will use
reasonable commercial efforts to incorporate such BCI requested changes,
modifications or additions. The new specifications will then be added to
Exhibit A in replacement for the specification in the Affymetrix offer of
Article 2.0.
3.3 CHANGES TO THE PRODUCTS - Affymetrix shall notify BCI of any proposed
changes to a Product or to the raw materials used therein, or the methods
for their manufacture, storage or shipment which may alter the Product's
stability or performance. Such notice shall include a full description of
the proposed change and sufficient samples of the proposed new product for
BCI to determine if the new product meets each and all of the
specifications for such Product in Exhibit A, correlates in all respects
with the Product or requires any operating software change for the BCI
System. BCI will complete such determination promptly, but in no event
longer than four (4) months after receipt of such samples. If BCI
determines that the proposed new product either does not meet
specifications or does not correlate with the existing Product, then
Affymetrix will, at its option, either not make the change or continue to
sell BCI the existing Product for the remainder of the term of this
Agreement. If BCI determines that the proposed new product meets
specifications and correlates with the existing Product but requires a
change to the operating software for the BCI System, then Affymetrix agrees
to and shall: (a) continue to sell BCI the existing Product until the
introduction of BCI's next regularly scheduled software modification for
the effected BCI System and (b) provide sufficient samples of the new
product at the prices specified in Paragraph 4.3, for BCI to perform system
validation. If BCI determines that the proposed new product meets
-5-
<PAGE>
specifications, correlates with the existing Product and does not require
any change to the operating software, then Affymetrix may make the desired
changes and introduce the new product on ninety (90) days prior written
notice.
3.4 FORECASTS AND ORDERING OF PRODUCT - BCI shall, promptly after acceptance of
an Affymetrix offer under Article 2.0 for a Product provide Affymetrix with
a written forecast of the quantities of such Product which BCI anticipates
it will purchase from Affymetrix during each of the next twelve (12)
months. A non-cancelable BCI Purchase Order for the total quantity, if
any, specified during the initial six (6) months of this Agreement, shall
accompany the forecast. The remaining six (6) months of the forecast shall
be BCI's best estimate of its requirements for such Product from Affymetrix
during such period. The forecast shall not be binding on either party and
shall be used for planning purposes only.
3.4.1 BCI shall, within ten (10) days of the end of each three (3)
month period commencing with the acceptance of the Affymetrix
offer of Article 2.0 for a Product, send Affymetrix a revised
twelve (12) month forecast for such Product. BCI shall include
with each revised forecast a non-cancelable Purchase Order for
the quantities, if any, of such Product specified in months four
(4) through six (6). The remaining six (6) months of the revised
forecast shall be BCI's best estimate of its requirements for
such Product from Affymetrix during such period, shall not be
binding on either party and shall be used for planning purposes
only.
3.4.2 Affymetrix shall build Products for BCI only in response to a BCI
Purchase Order and not to a BCI forecast.
3.4.3 Each BCI Purchase Order shall set forth the quantity to be
purchased, the delivery date, the form in which the Products are
to be shipped and shipping instructions.
-6-
<PAGE>
3.5 DELIVERY - Affymetrix shall deliver the Products in the quantities
specified in the BCI Purchase Orders, FOB Affymetrix loading dock.
Affymetrix understands and accepts that BCI operates on a "just-in-time"
manufacturing system and that the delivery date specified by BCI in the
non-cancelable Purchase Order is when BCI needs the Products in-house.
Accordingly, Affymetrix will plan, manufacture, test and provide adequate
transportation time to assure that the delivery date is met. Affymetrix
will promptly communicate to the BCI Purchasing Agent any anticipated
delays in delivery so that special shipping or other arrangements can be
made. Affymetrix will be responsible for any extra shipping charges
associated with or resulting from late shipments. Any disputes arising
from delivery scheduling shall, to the extent possible, be resolved by the
BCI Purchasing Agent and the Affymetrix Account Manager. Any unresolved
disputes shall be transferred to BCI and Affymetrix Vice-Presidents for
settlement. Any disputes which have not been settled by the party's
Vice-Presidents will be resolved in accordance with Paragraph 14.2.
3.5.1 BCI is not required to accept partial shipments.
3.6 RETURN MATERIAL AUTHORIZATION - Affymetrix agrees to promptly respond to
all requests for return material authorizations and bear all freight and
insurance costs associated with either Products which do not meet
specifications or over shipments of Product.
3.7 PRODUCT PROBLEM - Each party shall promptly communicate to the other all
information which comes to its attention pertaining to adverse reactions,
product anomalies, or stability problems relative to or having a bearing on
the Products. Affymetrix shall promptly investigate and regularly report
back to BCI on its actions contemplated and taken to resolve all such
problems.
-7-
<PAGE>
3.8 PRODUCT CORRECTIVE ACTION - BCI shall be responsible for, coordinate and
conduct any corrective action required for Products sold hereunder to
its customers. If such corrective action is caused by the failure or
fault of Affymetrix to comply with Paragraphs 3.2 or 5.1, then
Affymetrix shall replace, at no cost to BCI, all Products affected
thereby and shall reimburse BCI for collection of the defective Product
and shipment of replacement Product.
3.8.1 Each party shall retain samples of each quantity of Products sold
hereunder. The number of samples retained shall be specified by
BCI prior to Affymetrix establishing the Target Price and the
conditions of storage shall be specified by the current labeling
of the Products and shall be used to determine if any product
failures or product corrective actions are the result of a
failure of Affymetrix to conform with the requirements
of Paragraphs 3.2 or 5.1 or the result of an Affymetrix design or
manufacturing defect and thus the responsibility of Affymetrix or
a storage or handling defect and thus the responsibility of BCI.
3.9 PURCHASE AND SALE FORMS - Any terms and conditions on either a BCI
Purchase Order or an Affymetrix Order Acknowledgment or any other
document relating to the purchase, sale or transfer of Products between
the parties which are in conflict with any of the terms of this
Agreement shall be null and void and without legal effect.
3.10 TECHNICAL LITERATURE AND MARKETING ASSISTANCE - Affymetrix shall supply
BCI with copies of all current and hereafter developed published
technical literature relative to the Products. BCI may freely copy such
literature, in whole or in part, without royalty or payment to
Affymetrix therefor and may use such copies only in conjunction with its
sale and customer support of the Products. BCI shall, prior to using
such copied literature, obtain Affymetrix approval to the copy,
graphics and format of such copied literature, which approval shall not
be unreasonably withheld or delayed.
-8-
<PAGE>
3.11 PROGRAM MANAGER - Each party shall appoint a Program Manager who,
except for notices under Article 6.0, shall be the source of all
communications from, and the addressee of all communications to, such
party relative to the Products. The Program Managers shall meet from
time to time, not less than semi-annually, to discuss each party's
performance and resolve any differences.
ARTICLE 4.0 PRICING AND PAYMENT
4.1 PRICING - Subject to Paragraph 4.2, the transfer price from Affymetrix
to BCI for each Product shall be that specified in the Affymetrix offer
of Article 2.0.
4.2 PRICE CHANGES - Affymetrix may, after the first anniversary of this
Agreement and subject to the restrictions in the next three (3)
sentences, adjust the transfer prices for a Product to incorporate
actual changes in the raw materials and labor costs associated with the
manufacture of such Product. There shall be not more than one (1)
upward adjustment of the price of such Product sold hereunder during any
continuous twelve (12) month period. Affymetrix shall provide BCI not
less than ninety (90) days prior written notice of any proposed increase
in the purchase price. Notwithstanding anything in this Paragraph 4.2
to the contrary, the maximum increase in the transfer price of a Product
in any twelve (12) month period shall not exceed the increase, if any,
in the Producer Price Index for Drugs (Code #283) published by the
Bureau of Labor Statistics of the United States Department of Labor
using the preceding twelve (12) month period as the base year. BCI may,
if it has reduced its average net selling price of a Product to its
customers as a result of competitive forces in the market place (e.g.,
lower market prices or the introduction by a competitor of a similar
product) request a price reduction from Affymetrix. Such a request
shall be made in writing and include BCI's reasoning and support
documentation. Affymetrix shall, not later than ninety (90) days after
receipt of such request, confirm, in writing, whether or not it will
reduce the purchase price for such Product by the same percentage amount
that BCI has reduced the price of such Product to its customers. If
Affymetrix will reduce the purchase price,
-9-
<PAGE>
such new price shall be effective on the date of such notice. If
Affymetrix will not reduce the purchase price, then BCI may, at any
time thereafter, on one hundred eighty (180) days prior written
notice, terminate this Agreement without any penalty therefor or
any right arising in Affymetrix as a result thereof.
4.3 PRICE FOR PRODUCTS USED IN INTERNAL TESTING - Notwithstanding anything
in this Agreement to the contrary, the prices charged by Affymetrix for
Products to be used by BCI for application to the BCI System validation,
systems integration or other internal or quality control testing shall
be Affymetrix' standard cost plus twenty percent (20%). BCI shall
identify on its Purchase Order the quantity of Products required for the
foregoing purposes and subject to the prices of this Paragraph 4.3 and
certify that such Products are for internal purposes only.
4.4 PAYMENT TERMS - BCI shall pay each Affymetrix invoice for Products
within thirty (30) days of the latter of receipt of the Products or the
invoice.
4.5 INVOICE INFORMATION - Affymetrix will include the following information
on all invoices and packing slips: (i) Purchase Order number including
the alpha character prefix, (ii) line item number, (iii) release number,
and, on invoices, the packing slip number. Affymetrix understands and
agrees that failure to comply with these requirements may delay payment.
ARTICLE 5.0 QUALITY ASSURANCE AND COMPLIANCE WITH LAWS
5.1 WARRANTY - Subject to the next sentence, Affymetrix warrants that the
Products are upon receipt by Beckman and shall be for a period of not
less than six (6) months thereafter free from defects in materials and
workmanship and shall conform to each and all of the specifications
therefor in attached Exhibit A. Affymetrix will use reasonable
commercial efforts to increase the period of the warranty to twelve (12)
months. Affymetrix shall use reasonable commercial efforts to replace
any Products which fail to comply with the foregoing warranty.
Affymetrix' sole obligation
-10-
<PAGE>
under this warranty is limited to replacing, as soon as possible, any
Products that do not conform with the first sentence of this Paragraph
5.1.
THE FOREGOING WARRANTY SHALL BE IN LIEU OF ANY OTHER
WARRANTIES EXPRESS OR IMPLIED, RESPECTING THE PRODUCTS
SUPPLIED HEREUNDER, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. IN NO CASE SHALL AFFYMETRIX BE LIABLE FOR
CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING FROM OR IN ANY WAY
CONNECTED WITH THE WARRANTY OF THIS PARAGRAPH 5.1.
5.1.1 Affymetrix, subject to the next sentence hereof,
warrants that the Products do not infringe any valid patents
owned by a third party and not licensed to Affymetrix. The
foregoing warranty shall not apply (a) to a Product wherein
BCI specified the Gene or Genes to be incorporated and it is
the Gene or Genes which infringe, or (b) to a Product wherein
BCI specified a change in the design or structure of the
Product and but for the BCI specified change the Product would
not infringe, or (c) to a Product which, in and of itself,
does not infringe but only that Product in combination with
something not provided by Affymetrix which infringes.
5.2 QUALITY TESTING - Affymetrix agrees to and shall, prior to shipment of
any of the Products sold hereunder, perform each of the quality tests on
such Products to be hereafter agreed by the parties and attached to this
Agreement as Exhibit B. Affymetrix shall provide a Certificate of
Analysis in a form mutually agreed upon by the parties specifying
conformance to the preceding sentence and the numerical or other results
of such testing.
-11-
<PAGE>
5.3 RECEIPT AND ACCEPTANCE - BCI may reject any shipment of Products that
does not conform to the warranty of Paragraph 5.1
5.4 GOOD MANUFACTURING PRACTICES - Affymetrix represents and warrants
that it will at all times under this Agreement use commercially
reasonable efforts to comply with U.S. FDA good manufacturing practices
then in effect and conform to all other applicable statutes and
regulations. BCI may, from time to time, upon not less than five (5)
days prior written notice to Affymetrix inspect the Affymetrix
facilities where the Products are being manufactured and/or stored.
5.5 QUALITY GOAL - BCI's quality goal is to receive, and Affymetrix' quality
goal is to supply, defect-free material. Accordingly, the parties agree
to a "zero-defect" objective. Affymetrix understands BCI's supplier
philosophy and quality supplier principles, and accepts those principles
as the basis of the relationship between Affymetrix and BCI. Affymetrix
and BCI agree to communicate openly and to work together on quality
programs to achieve long-term success for the businesses involved.
Meetings to review progress will be held. This Paragraph 5.5 is not
intended to impose on either party any legal obligations additional to
those imposed by the other sections of this Agreement. It is intended
simply to recognize the quality focus on which the parties' business
relationship is based.
5.6 MSDS - Affymetrix shall, if required by law, provide "Material Safety
Data Sheets" for the Products, as required by 29 CFR 1910.1200.
5.7 REGULATORY APPROVAL - Affymetrix shall assist BCI in obtaining any
regulatory approvals required to make, use and/or sell diagnostic
products made from or with the Products. Such assistance shall be at
BCI's expense and include, but not be limited to, providing such
information and data relative to the Products as may be requested or
required by any governmental agency or body.
-12-
<PAGE>
ARTICLE 6.0 RIGHTS TO BECKMAN
6.1 EXCLUSIVE SELLER AND DISTRIBUTOR - Affymetrix hereby appoints BCI, and
BCI accepts appointment, as Affymetrix' sole and exclusive seller and
distributor throughout the world of the Products for use on BCI Systems.
Nothing in the preceding sentence or this Agreement shall prevent
Affymetrix from selling Array Chips identical to Products for use on
Affymetrix systems or instruments or the instruments or systems of a
third party.
6.2 RESTRICTIONS ON AFFYMETRIX - Affymetrix will not knowingly, after
exercising due caution, care and diligence, and undertaking reasonable
inquiry, sell any Array Chips to an end user who will use such Array
Chips on a BCI System. Similarly, Affymetrix will proactively and
regularly inform each of its dealers and distributors of Affymetrix
Array Chips that such Array Chips should not be sold to an end user who
will use such Array Chips on a BCI System.
ARTICLE 7.0 CONFIDENTIALITY
7.1 CONFIDENTIALITY - Each party shall maintain in confidence (with the same
level of care as the receiving party uses to safeguard its own highly
confidential and proprietary information, but no less than a reasonable
level of care) any information received during the term of this
Agreement from the other party in written or graphic form or other
tangible medium of expression that is marked confidential. Neither
party shall copy nor publish, disseminate nor disclose such information
to any third party nor use such information except for the furtherance
of the specific purposes of this Agreement without the express written
permission of such other party. Subject to the next sentence, the
foregoing obligations of confidentiality and non-use shall continue for
five (5) years after the expiration of this Agreement. The obligation
of the first two sentences shall not apply to any information which is:
(a) now or hereafter comes into the public domain, or (b) which is
already in the possession of the receiving party other
-13-
<PAGE>
than as a result of having received it from the disclosing party and as
shown by written records, or (c) is brought to the receiving party by a
third party who does not require that it be maintained confidential or
(d) is independently developed by the receiving party without use of or
access to the information of the disclosing party. Information shall
not be deemed to be in the public domain or in the receiving party's
possession merely because it is embraced by more general information in
the public domain or the receiving party's possession or merely because
individual items of the information are in the public domain or the
receiving party's possession. Upon termination of this Agreement, each
party shall, at the other party's request, destroy or return to such
other party all copies of such information; provided that, counsel for
each receiving party may retain one (1) copy of such information solely
for the purpose of monitoring such party's obligation of confidentiality
under this Agreement.
7.2 OBLIGATIONS OF RECEIVING PARTY - Each party agrees that it shall, at its
sole cost, take all measures (including but not limited to court
proceedings) to restrain its officers, employees, directors and agents
from unauthorized use or disclosure of the Information.
7.3 INJUNCTION - Each party, acknowledges and agrees that money damages
would not be a sufficient remedy for its breach of this Article 7.0 and
that the disclosing party shall be entitled to equitable relief
including injunction and specific performance as a remedy for any such
breach. Such remedies shall not be deemed the exclusive remedy for the
receiving party's breach but shall be in addition to all other remedies
available to the disclosing party. Article 14.0 shall not be a
limitation on the remedies available to the disclosing party for a
breach by the receiving party of this Article 7.0.
-14-
<PAGE>
ARTICLE 8.0 THIRD PARTY PATENTS
Subject to the next sentence hereof, Affymetrix agrees to and shall
defend, indemnify and hold BCI and its customers harmless, including
attorneys fees necessary to consider, advise and defend, from and against any
suit, proceeding, claim or loss and any damages or penalties awarded or
agreed to therein so far as such suit or proceeding is based upon an
assertion that the use or sale of Products purchased under this Agreement
constitutes an infringement of any Letters Patent. The foregoing indemnity
shall not apply (a) to a Product wherein BCI specified the Gene or Genes to
be incorporated and it is the Gene or Genes which infringe, or (b) to a
Product wherein BCI specified a change in the design or structure of the
Product and but for the BCI specified change the Product would not be alleged
to infringe, or, (c) to a Product which, in and of itself, is not alleged to
infringe but only that Product in combination with something not provided by
Affymetrix is alleged to infringe. If a Product is, in such suit or
proceeding, held to infringe and its further use or sale is enjoined
Affymetrix shall, at its sole cost and expense, either: (1) procure for BCI
and its direct and indirect customers, the right to continue using and
selling such Product, (2) replace the same with a non-infringing equivalent,
or (3) modify such Product so that it becomes non-infringing. Affymetrix will
be responsible for and manage all court proceedings on behalf of BCI for
claims made under this Paragraph. BCI shall assist Affymetrix at Affymetrix'
cost in any reasonable way in handling court proceedings. Affymetrix has the
right on behalf of BCI to settle claims brought under this Paragraph by third
parties.
ARTICLE 9.0 HOLD HARMLESS
9.1 HOLD HARMLESS - Affymetrix agrees to and shall defend, indemnify and
hold BCI, its employees, agents and officers harmless, including
attorneys fees necessary to consider, advise and defend, from and
against any suit or proceeding alleging injury to persons, including
death, or property and any liability, damages or penalties awarded
therein and resulting from and arising out of Affymetrix' negligence
in manufacturing, storage, packaging or transport of Products prior to
receipt thereof by BCI. BCI agrees to and shall defend, indemnify and
hold Affymetrix,
-15-
<PAGE>
its employees, agents and officers harmless, including attorneys fees
necessary to consider, advise and defend, from and against any suit
or proceeding alleging injury to persons, including death, or property
and any liability, damages or penalties awarded therein and resulting
from or arising out of BCI's negligence in handling, storage or
transport of Products after receipt thereof from Affymetrix. Neither
party will settle a claim from a third party without the prior written
consent of the other party hereto. Each indemnifying party will be
responsible for and manage court proceedings on behalf of the
indemnified party on claims brought by a third party under this
Paragraph. The indemnified party shall assist the indemnifying party
at the indemnifying party's cost in any reasonable way in handling
court proceedings. The indemnifying party has the right on behalf
of the indemnified party to settle claims from third parties brought
under this Paragraph.
9.2 INSURANCE - Each party shall at all times during the term of this
Agreement self insure for, or purchase and maintain, comprehensive
general liability insurance including products liability, contractual
liability and broad form property damage with combined single limits for
bodily injury and/or death and property damage of $5,000,000 for any one
occurrence. Such insurance shall also require thirty (30) days' prior
written notice of cancellation or material change in coverage. The
insurance to apply to any claim will be governed by Paragraph 9.1 and
with respect to a party's indemnification obligations thereunder,
provide that such insurance is primary without right of contribution
from any other insurance which might otherwise be available to the
insured party and provide that in the event of loss payment under a
policy the insurer shall waive any rights of subrogation against the
insured party and shall waive any set-off or counterclaim or any other
deduction whether by attachment or otherwise as respects the activities
under this Agreement or any other agreement between the parties.
-16-
<PAGE>
ARTICLE 10.0 TERM AND TERMINATION
10.1 TERM - the term of this Agreement shall be ten (10) years from the
effective date identified on Page 1.
10.2 TERMINATION FOR CAUSE - Should either party be in default as to any
material term of this Agreement and fail to remedy same within forty-five
(45) days after receipt of written notice of such default by the
non-defaulting party, then the non-defaulting party shall have, in
addition to all other remedies available at law or in equity,
the right to terminate this Agreement upon delivery of written notice of
termination to the defaulting party, provided that:
(a) Such notice specifies with particularity the basis for such
default.
(b) Such termination shall only relieve the parties of obligations
which would have arisen under this Agreement after the effective
date of termination and shall in no way relieve the parties from
any obligations existing on the date of such termination.
(c) The failure of the non-defaulting party to terminate this
Agreement for any cause shall not constitute a waiver of such
right in the future as to any subsequent default.
ARTICLE 11.0 NOTICES
All notices provided for in this Agreement shall be in writing and shall
be considered delivered when they are personally delivered or are sent by
facsimile, with acknowledgement of receipt in good order requested and received,
or deposited in the mail, registered first class, postage prepaid, or sent by
DHL, Federal Express or similar overnight carrier, addressed to the respective
parties as follows:
-17-
<PAGE>
If to Beckman: Beckman Coulter, Inc.
4300 North Harbor Boulevard
Fullerton, California 92834-3100
Attention: President
with a copy to: Beckman Coulter, Inc.
4300 North Harbor Boulevard
Fullerton, California 92834-3100
Attention: General Counsel
If to Affymetrix: Affymetrix, Inc.
3380 Central Expressway
Santa Clara, California 95051
Attention: President
Affymetrix, Inc.
3380 Central Expressway
Santa Clara, California 95051
Attention: General Counsel
ARTICLE 12.0 SEVERABILITY
12.1 INVALID OR UNENFORCEABLE PROVISIONS - In the event a court of competent
jurisdiction holds any provision of this Agreement to be invalid or
unenforceable, such holding shall have no effect on the remaining
provisions and they shall continue in full force and effect.
12.2 CONFLICT WITH APPLICABLE STATUTE - If any of the provisions of this
Agreement are in conflict with any applicable statute or rule of law,
then such provisions shall be deemed inoperative to the extent that they
conflict therewith and shall be deemed to be modified so as to conform
with such statute or rule of law.
12.3 EFFECT AND REMEDIES - In the event that the provisions of this Agreement
are materially altered as a result of Paragraphs 12.1 and 12.2, the
parties will renegotiate the affected terms and conditions to resolve
any inequities.
-18-
<PAGE>
ARTICLE 13.0 ASSIGNMENT
Neither party shall assign this Agreement to another without the prior
written consent of the other party; provided, however, that either party may
assign this Agreement to an Affiliate or a successor in ownership of all or
substantially all of the business assets of the party seeking to assign this
Agreement. Any other purported assignment shall be void. This Agreement shall
be a binding obligation of the heirs, successors and permitted assigns of all
the right, title and interest of either party hereto.
ARTICLE 14.0 LAW GOVERNING AND CONSTRUCTION
14.1 GOVERNING LAW - This Agreement shall be governed by and construed in
accordance with the laws of California, without regard to the conflicts
of laws provisions thereof. Both parties agree to use their best
efforts in a good faith attempt to settle as promptly as possible any
and all disputes arising from transactions pursuant to this Agreement,
but failing an amicable settlement, such disputes shall be decided in
accordance with Paragraph 14.2.
14.2 MEDIATION AND ARBITRATION - Except for breaches or anticipated breaches
of Article 7.0, any controversy or conflict involving this Agreement,
its interpretation or the respective rights or obligations of the
parties shall first be submitted to their respective Vice-Presidents for
resolution. If they cannot agree, the controversy shall be submitted to
mediation to be held in a mutually agreeable neutral place. If the
parties still cannot settle the controversy or reach an accommodation,
the matter shall be submitted to binding arbitration to be conducted in
California at a location to be mutually agreed in accordance with the
following rules:
-19-
<PAGE>
(a) there shall be a panel of three (3) arbitrators, all of whom
shall be lawyers and at least two (2) of which shall be competent
to fully understand the technology relating to the Products and
BCI Systems. If the parties cannot agree on the selection of the
three (3) then each shall pick one (1) arbitrator and the two (2)
so chosen shall select the third.
(b) All disputes which are not specifically raised by the parties in
the arbitration process shall be forever waived.
(c) The arbitration proceeding shall be governed by (i) the rules and
understandings set forth in this Paragraph 14.2 or as hereafter
agreed upon in writing by the parties, and (ii) to the extent not
inconsistent with such rules and understandings, by the
Commercial Arbitration Rules of the American Arbitration
Association.
(d) The parties agree to refrain from filing a lawsuit with regard to
any aspect of their controversy and to abide by and perform any
award rendered by the arbitrators. The parties further agree
that a judgment of a Court having jurisdiction may be entered
upon the award and an execution may be issued for its collection.
(e) At least two (2) of the panel of arbitrators must agree on each
point in controversy for an award to be rendered.
(f) The arbitration hearing shall be convened within forty-five (45)
days of request therefor by either party. The request shall be
in writing and sent in accordance with Article 11.0. The hearing
shall be limited to three days: Each party shall have a maximum
of eight (8) hours to put on its main case and four (4) hours for
rebuttal. Neither party shall engage in extended
cross-examination or other tactics which have the effect of
substantially altering this allocation.
-20-
<PAGE>
(g) The parties agree to exchange all documents they intend to
produce at the hearing at least thirty (30) days in advance of
taking of depositions, serving of interrogatories or any other
form of discovery and neither party may compel the appearance of
the other party's employees, officers, directors or consultants.
(h) The arbitrator's decision must be rendered within thirty (30)
days after completion of the arbitration hearing.
(i) A transcript may, at the option of the parties, be made. Either
party may, at its expense, tape record or video tape the
proceedings.
(j) All applicable common law or statutory privileges such as
attorney-client or attorney work product shall be applicable to
the arbitration proceedings.
(k) Either party may, at its option, use prepared testimony as long
as the witness whose testimony is so presented is available to
the other party for cross-examination.
(l) Each party shall bear its own expenses for the arbitration and
they shall each share equally in the expenses and fees of the
arbitration panel.
14.3 MUTUALITY - This Agreement has been drafted after considerable
negotiation by the parties and on the basis of mutual understanding;
neither party shall be prejudiced as being the drafter thereof.
-21-
<PAGE>
ARTICLE 15.0 PUBLIC STATEMENTS
Neither party shall make any public announcement or authorize or author
any statement to the press regarding this Agreement or any of its terms or
conditions of the relationships between the parties created by this Agreement
without the prior written permission of the other party. The terms and
conditions of this Agreement shall be maintained as confidential in accordance
with Article 7.0 hereof.
ARTICLE 16.0 FORCE MAJEURE
Each of the parties hereto shall be excused from the performance of its
obligations under this Agreement in the event performance is prevented by Force
Majeure. For purposes of this Agreement, Force Majeure is defined as a cause
beyond the control of the effected party, including but not limited to acts of
God, acts, laws or regulations of any government, civil disorder, strikes,
destruction of production facilities or material by fire, water, earthquake or
storm, epidemics and failures of public utilities or common carriers. The party
incurring a Force Majeure condition shall notify the other party that such
condition exists within five (5) days of the time such party learns of such
condition. Should such Force Majeure condition continue for forty-five (45)
days after such notice, the non-affected party may, at its option, terminate
this Agreement.
ARTICLE 17.0 RELATIONSHIP CREATED
The relationship created by this Agreement shall be strictly that of a
supplier and purchaser. Neither party is hereby constituted an agent or legal
representative of the other party for any purpose whatsoever. Neither party is
granted any right or authority hereunder to assume or create any obligation,
express or implied, or to make any representations, warranties or guarantees on
behalf or in the name of the other party, except to the extent that such right
or authority, or such representations, warranties or guarantees are expressly
provided for in this Agreement.
-22-
<PAGE>
ARTICLE 18.0 ENTIRE AGREEMENT, MODIFICATION
18.1 ENTIRE AGREEMENT - This instrument contains the entire and only
agreement between the parties respecting the subject matter hereof and
supersedes all previous negotiations, representations, understandings,
promises or conditions, both written and oral, heretofore made between
the parties with respect to the subject matter hereof.
18.2 MODIFICATION - No waiver, alteration or modification of this Agreement
shall be valid unless made in writing and signed by a duly authorized
representative of BCI and Affymetrix.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement by
their duly authorized representatives as of the day and year first written
above.
Beckman Coulter, Inc. Affymetrix, Inc.
By: By:
---------------------------- -----------------------------
Date: Date:
------------------------- ---------------------------
-23-
<PAGE>
EXHIBIT C TO THE CONSORTIUM AGREEMENT
DATED AS OF JULY 31, 1998
LICENSE AGREEMENT
License Agreement effective this day of 1998 ("Effective Date")
by and between AFFYMETRIX, INC. a corporation, having a place of
business at 3380 Central Expressway, Santa Clara, California 95051
("Affymetrix", as that term is more fully defined in Paragraph 1.2 hereof) and
BECKMAN COULTER, INC., a Delaware corporation, having a place of business at
4300 North Harbor Boulevard, Fullerton, California 92834-3100 ("BCI", as that
term is more fully defined in Paragraph 1.4 hereof).
R E C I T A L S
I. BCI and Affymetrix are members of a consortium that has as one of its
principal objectives the development and commercialization of Array Chips
(as that term is hereafter defined) and analytical processes which use such
Array Chips.
II. BCI has patents and pending patent applications covering the making of
Array Chips.
III. Affymetrix desires to acquire a license under the BCI patents related to
the making of Array Chips.
NOW THEREFORE in consideration of the mutual understandings contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties intending to be legally bound, agree as
follows:
ARTICLE 1.0 DEFINITIONS
The following terms, when used herein with an initial capital letter and
without regard to whether they appear in the singular, plural or possessive
form, shall have the following defined meanings:
1.1 "AFFILIATE" shall mean any corporation or other form of limited liability
legal person, partnership, association, joint venture or other form of
business entity controlled by, controlling or under common control with a
party hereto. As used herein, the word and root "control" in the context of
a corporation shall mean the ownership, directly or indirectly, of more
than fifty percent (50%) of the voting shares or other equity interests
entitled to vote in the election of directors of the corporation; and, in
the context of any other form of business entity the right to receive at
least fifty percent (50%) of the net proceeds of such entity.
1.2 "AFFYMETRIX" shall mean Affymetrix, Inc., its divisions and Affiliates and
its and their permitted successors and assigns.
1.3 "ARRAY CHIPS" shall mean a series of polynucleotides arranged on a
substrate to perform quantitative or qualitative analyses.
1.4 "BCI" shall mean Beckman Coulter, Inc., its divisions and Affiliates and
its and their permitted successors and assigns.
1.5 "BACTERIOLOGY FIELD" shall mean and be limited to: (i) detection and or
identification of bacterial and fungal microorganisms, and/or (ii) the
determination of antibiotic resistance of such bacterial and fungal
microorganisms, in each case limited to use in the Clinical Diagnosis (as
that term is hereafter defined) of human disease.
1.6 "CLINICAL DIAGNOSIS" shall mean a process in which a sample of fluid or
other material collected from individual humans that is used to aid in
diagnosis of one or more human diseases, the results of such
1
<PAGE>
process used for communication to such persons or their physicians or other
caregivers for clinical decisions in connection with such individual
humans.
1.7 "LICENSED PRODUCT" shall mean any Array Chip, component, product, kit,
instrument or system which, but for the licenses and rights granted herein,
would infringe any valid claim in an unexpired and non-lapsed patent in the
Patent Rights.
1.8 "LICENSED PROCESS" shall mean any process, method or procedure the practice
or use of which, but for the licenses and rights granted herein, would
infringe any valid claim in an unexpired and non-lapsed patent in the
Patent Rights.
1.9 "NET SALES" shall mean the gross receipts of Affymetrix from the sale of
Royalty-Bearing Products to an unaffiliated third party, less those of the
following actually incurred by Affymetrix as an element of such sales:
transportation, special packing and crating charges, insurance, custom
duties, commissions, returns, allowances in lieu of actual returned or
rejected Royalty-Bearing Products, sales, use and turnover taxes, and
trade, quantity, contract and cash discounts. The value of Royalty-Bearing
Products transferred by Affymetrix to unaffiliated third parties as free
samples or the use of Royalty-Bearing Products by Affymetrix for sales
demonstration purposes or for quality control or other internal,
non-revenue generating purposes shall not be included in the calculation of
Net Sales.
In the event a Royalty-Bearing Product is sold in combination with other
apparatus or products, as part of a kit, or in any other combination, and
the Royalty-Bearing Product is not separately valued on the invoice or
other document evidencing such sale, the Net Sales of the Royalty-Bearing
Product shall be the then current list price for the Royalty-Bearing
Product when sold separately or, in the absence of such list price, shall
be determined by multiplying the aggregate selling price of the combination
by a fraction the numerator of which shall be Affymetrix' standard costs
for the Royalty-Bearing Product and the denominator of which shall be
Affymetrix' standard cost for the total combination at the time of the
sale. In the event that both the Royalty-Bearing Product and other product
have separate list prices but are being sold at a combination price which
is less than the total of the separate list prices, then the Net Sales of
the Royalty-Bearing Product shall be determined by multiplying the invoice
price charged for the combination by a fraction, the numerator of which is
the list price of the Royalty-Bearing Product and the denominator of which
is the sum of the list prices of the Royalty-Bearing Product and such other
products.
1.10 "PATENT RIGHTS" shall mean all applications for patent and patents, filed
or issued in any country of the world, (a) now owned or controlled by BCI
or at any time during the twenty (20) years commencing with the Effective
Date owned or controlled by BCI and (b) relating to or useful in the
manufacture or use or processing of Array Chips; provided that Patent
Rights shall not include the specific claims of any such applications or
patents related to: (i) specific genes, or (ii) computer software for
using the data generated from the use of Array Chips, or (iii) readers or
instruments or systems for using Array Chips to perform analyses or for
automating such analyses, or (iv) pre-treatment of samples prior to their
interaction with an Array Chip. For purposes of this definition, a patent
or application for patent is controlled by BCI if BCI is a licensee under
such patent or application and BCI has the right to grant sublicenses to
third parties, in each case without regard to whether BCI would thereby be
responsible for reporting to and/or paying royalties to such third party
as a result or as a consequence thereof or as a result or consequence of
Affymetrix' use of such patent or application. If a patent or application
for patent is controlled by BCI it shall be sublicensed to Affymetrix at
the same royalty rate as BCI pays to its licensor promptly after BCI's
acquisition of such control.
1.11 "ROYALTY-BEARING PRODUCT" shall mean the Affymetrix Licensed Product with
the lowest selling price which is separately priced for sale as an
individual unit by Affymetrix in the ordinary course of business, even if
the Patent Rights include one or more claims to a larger unit of the
product, component, kit, instrument or system or to the overall product
and Affymetrix sells such larger unit and/or overall product or the Patent
Rights include one or more claims to the use of such product,
2
<PAGE>
component, kit, instrument or system or a method which utilizes such
product, component, kit, instrument or system whether such method is
practiced by Affymetrix or the direct or indirect customers of Licensed
Products purchased from Affymetrix.
ARTICLE 2.0 REPRESENTATIONS AND WARRANTIES
2.1 BCI REPRESENTATIONS AND WARRANTIES--BCI represents and warrants that (a) it
owns or otherwise has the right to grant the licenses and rights provided
for herein under all of the applications or patents presently in the Patent
Rights, and (b) it will use commercially reasonable efforts to obtain the
right in any license agreement it hereafter enters with third parties to
obtain rights to applications for patent or patents of such third parties
wherein the applications for patent or patent are useful or necessary for
making or using Array Chips and not subject to exclusions (i)-(iv) of the
definition of Patent Rights, to pass such license on to Affymetrix under
the same terms and conditions as those granted to Affymetrix by such third
parties.
2.2 AFFYMETRIX REPRESENTATIONS AND WARRANTIES--Affymetrix represents and
warrants that they will not knowingly, after exercising due caution, care
and diligence, and undertaking reasonable inquiry sell any of its Array
Chips (whether or not made under the license of Paragraph 3.1) to an end
user who will use such Array Chips on an instrument, system or device
manufactured or distributed by BCI. Affymetrix further represents and
warrants that they will proactively and regularly inform each of their
dealers and distributors of Array Chips (whether or not made under the
license of Paragraph 3.1 that such Array Chips should not be sold to end
users who will use such Array Chips on an instrument, system or device
manufactured or distributed by BCI.
ARTICLE 3.0 LICENSE GRANT
3.1 LICENSE GRANT--Subject to the proviso hereafter, BCI hereby grants to
Affymetrix and Affymetrix accepts a royalty bearing, non-exclusive,
world-wide right and license under the Patent Rights to (a) make, have
made, import, use, sell, lease and otherwise dispose of Licensed Products
in all fields, uses and applications except for the Bacteriology Field and
except for use on any instrument, system or device manufactured or
distributed by BCI, (b) to practice Licensed Processes, and (c) to pass on
to its direct and indirect customers of Licensed Products the right to
practice Licensed Processes; provided that, the exception as to the
Bacteriology Field shall be only for so long in time and only to the extent
that Affymetrix is excluded from such Field by the executory license
agreement with BioMerieux in effect as of the Effective Date.
3.2 PATENT MARKING--Affymetrix shall attach a label or product insert on each
Licensed Product reasonably reflecting patent numbers of issued U.S.
patents covering such Licensed Product and owned by BCI and will reasonably
modify such labels or inserts periodically at the direction of BCI to add
or delete patent numbers.
3.3 NOTIFICATIONS OF NEW PATENT RIGHTS--BCI shall, promptly after (a) the
filing of a patent application in the United States which is within the
definition of Patent Rights, and (b) the signing of a license agreement
with a third party granting BCI a license under an application for patent
or patent, anywhere in the world, which would be "controlled by" BCI, as
that term is defined in Paragraph 1.10, provide Affymetrix with a copy of
such application or patent and a written notice that such patent or
application (and any patent issuing from such application or any
continuation, division, continuation-in-part or substitute of such
application) or any reissues or reexaminations of such patents anywhere in
the world are included within the Patent Rights and the rights and licenses
granted to Affymetrix under Paragraph 3.1. Notwithstanding the foregoing or
anything in this Agreement to the contrary, the failure of BCI to notify
Affymetrix of an addition to the Patent Rights in accordance with this
Paragraph 3.3 shall have no effect on the rights granted to Affymetrix
3
<PAGE>
under Paragraph 3.1 and such applications and patents shall be included in
the Patent Rights without regard to whether Affymetrix does or does not
receive such notice.
ARTICLE 4.0 ROYALTIES AND ROYALTY REPORTS
4.1 ROYALTIES--Subject to Paragraph 4.2, Affymetrix shall pay BCI for all of
the licenses and rights granted under Paragraph 3.1 a running royalty of
[ ](1) of Net Sales of Royalty-Bearing Products.
4.2 ROYALTY STACKING--If, at any time during the life of this Agreement,
Affymetrix discovers that any Royalty-Bearing Product or the use thereof
infringes claims of an unexpired patent or patents other than those in the
Patent Rights Affymetrix may, if it has not already done so, negotiate with
the owner of such patents for a license on such terms as Affymetrix deems
appropriate. Should the license with the owner of such patents require the
payment of royalties or other consideration to such owner then the
royalties otherwise payable under this Agreement shall be reduced by the
same amount as the royalties paid or payable to such owner, but such
reduction shall not exceed one-half (1/2) of the royalties payable
hereunder.
4.3 ROYALTY REPORTS--Affymetrix shall, commencing with the calendar quarter
which includes its first sale of a Royalty-Bearing Product and each
calendar quarter thereafter, not later than forty-five (45) days after the
close of its accounting books and records for such quarter, provide to BCI
an accounting report of the type and quantity of each Royalty-Bearing
Product sold by Affymetrix during such calendar quarter and the Net Sales
received therefrom. The royalty due and payable to BCI shall accompany such
report.
4.4 Books and Records--Affymetrix shall keep or cause to be kept books, records
and accounts in accordance with generally accepted accounting principles
consistently applied covering Affymetrix' activities hereunder and
containing all information necessary for the true and accurate
determination of the amounts earned and paid hereunder. Affymetrix shall,
not more than once per year and upon prior reasonable written notice from
BCI, permit a certified public accountant appointed and paid for by BCI
(the "Auditor") and reasonably acceptable to Affymetrix to inspect each
Affymetrix facility manufacturing Royalty-Bearing Products and to review
the previous two (2) years books, records and accounts to verify the
amounts earned by BCI and paid by Affymetrix hereunder. The Auditors shall
furnish to both parties reports stating only its findings during such
inspection as to the accuracy, or the nature and extent of any inaccuracy
of such books, records, accounts and payments.
4.4.1 Any deficiency identified by the Auditor between the amounts actually
earned by BCI under this Article 4.0 and the amounts reported to be
earned and paid on by Affymetrix in accordance with Paragraph 4.3
hereof shall, unless disputed by Affymetrix, be paid to BCI within
thirty (30) days of receipt by Affymetrix of the Auditor's report. The
parties agree to diligently negotiate and promptly settle any disputes
as to the amount of royalties earned by BCI and payable by Affymetrix
hereunder.
4.5 TAXES ON ROYALTIES--All payments provided for in this Agreement refer to
lawful money of the United States of America. All payments shall be made by
Affymetrix to BCI at the office of BCI designated above and shall be made
in the full amounts as herein specified; provided, however, that deduction
may be made from such payments by Affymetrix for amounts required to be
withheld and paid by Affymetrix in respect of any income tax levied or
assessed upon such payments by, and in accordance with the laws of, any
foreign government or taxing authority. BCI shall have the right at any
time or from time-to-time to contest by appropriate proceedings the
validity or amount of any such income tax withheld. If so requested by BCI,
Affymetrix will make such payments under protest, and, on
- - ------------------------
(1) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
4
<PAGE>
behalf and at the expense of BCI, take such other action and render all
reasonable assistance that may be required by BCI in the prosecution of any
such proceedings. Affymetrix will obtain and forward to BCI tax credit
receipts or vouchers for all income taxes thus withheld and paid by
Affymetrix.
4.6 ROYALTIES EARNED IN FOREIGN CURRENCY--In the event that either Net Sales or
the royalties set forth above are initially calculated in a foreign
currency, conversion shall be made in each instance by employing the
closing transfer buying rate for United States dollars quoted by the Wall
Street Journal, for the last business day of the calendar quarter which the
payment covers; provided, however, that if a foreign currency not listed in
the Wall Street Journal is involved, then the closing transfer buying rate
quoted by Citibank (New York) shall be employed in effecting such
conversion thereof.
ARTICLE 5.0 CONSTRUCTION OF PATENTS
If a judgment or decree is entered, which becomes final through the
exhaustion of all permissible applications for rehearing or review by a superior
tribunal, or through the expiration of the time permitted for such applications
(hereinafter referred to as an "irrevocable judgment"), on the validity, scope,
enforceability or priority of any claim or claims of any patent or patent
application included in the Patent Rights the construction placed upon any such
claim or claims by such irrevocable judgment shall be thereafter followed with
respect to acts occurring thereafter.
If such irrevocable judgment holds any claim invalid or unenforceable or is
adverse to the patent containing such claim as to inventorship, or construes all
applicable claims in a patent so as not to cover Royalty-Bearing Product,
Affymetrix shall be relieved thereafter from payment of royalties under Article
4.0 hereof, as to Royalty-Bearing Products sold after the date of such
irrevocable judgment covered only by such claim or claims to which such
irrevocable judgment is applicable, and from the performance of those other acts
which may be required by this Agreement only as to such claim or claims.
ARTICLE 6.0 PROSECUTION OF INFRINGERS
If Affymetrix determines that a third party is infringing a claim of a
patent in the Patent Rights by making, using or selling a product which competes
with a Licensed Product then being sold by Affymetrix, it shall notify BCI
thereof in writing. Such notice shall include information in Affymetrix'
possession relevant to such third party and the competing product. BCI shall
have ninety (90) days in which to either obtain the consent of such third party
to discontinue such infringement or to exercise its right to bring an action to
cause such infringement to cease. BCI shall have no obligation to bring an
action for infringement; provided however, if BCI does not obtain the consent of
such third party to cease infringement or does not bring suit against the third
party under the patent, then Affymetrix shall have the right to discontinue
paying royalties under the effected patent for such product until either the
third party discontinues its infringing activity or BCI brings a lawsuit against
the third party for such infringement.
ARTICLE 7.0 TERM AND TERMINATION
7.1 TERMINATION BY BCI--If Affymetrix shall at any time be in material breach
of this License Agreement, including but not limited to, default on any
payment hereunder, or of the making of any report hereunder, or shall make
any materially false report and should fail to remedy such material breach
within sixty (60) days after written notice thereof by BCI, the latter may,
at its option, terminate this License Agreement by notice to such effect,
provided that such termination shall not release Affymetrix from its
obligation to pay BCI royalties or other sums due and accrued prior to the
date of such termination.
7.2 TERMINATION BY AFFYMETRIX--Affymetrix shall have the right upon three (3)
months prior written notice to BCI to terminate this Agreement in its
entirety or to surrender all right and license under any one
5
<PAGE>
or more of the patents included in the Patent Rights, such surrender being
operative to relieve Affymetrix, as of the effective date of said notice,
of all obligation to pay royalties which would otherwise have accrued
thereafter solely because of such patents. Such termination or surrender
shall not relieve Affymetrix of its obligation to pay royalties or other
sums due and accrued prior to the effective date of such notice or of its
continuing obligation to pay royalties on other than the surrendered
patents included in the Patent Rights.
7.3 TERM--Unless previously terminated as provided herein, the life of this
License Agreement and the license granted herein shall run from the
Effective Date to the end of the term of the last expiring patent now or
hereafter included in the Patent Rights.
ARTICLE 8.0 EXERCISE OF RIGHTS
The failure by one of the parties under this License Agreement to assert its
rights for any breach of this License Agreement shall not be deemed a waiver of
such rights. The rights and remedies specified herein, except those specified as
exclusive, are in addition to and shall not restrict any right or remedy either
party may have at law or in equity for any breach of this License Agreement.
ARTICLE 9.0 ASSIGNMENT
Affymetrix may not assign this License Agreement in whole or in part without
obtaining the prior written approval of BCI, except that Affymetrix shall have
the right to assign this License Agreement without the consent of BCI to any
Affiliate and to any successor of its business to which the subject matter of
this License Agreement relates.
ARTICLE 10.0 FAVORED LICENSEE
In the event that after the Effective Date BCI enters into a license
agreement with a third party in which agreement such third party is licensed to
make, use or sell one or more products under the Patent Rights (or any part
thereof) which Affymetrix is entitled to make, use and sell under this
Agreement, then BCI will notify Affymetrix in writing within thirty (30) days of
entering such an agreement and describe the following terms of any such
agreement:
(i) the scope of the license
(ii) the royalty rate
(iii) any cross license consideration or other consideration; and, if
applicable
(iv) the basis of BCI's belief that the terms of such agreement are not more
favorable than those given to Affymetrix under this Agreement.
If BCI determines in good faith in the exercise of reasonable business
judgment (and not for the purpose of depriving Affymetrix of its rights under
this Article 10.0) that the financial terms of the third party license are less
favorable than this Agreement, then no terms of this Agreement shall be changed.
If BCI determines that the financial terms of the third party license are more
favorable than this Agreement, then BCI shall give Affymetrix the benefit of the
more favorable financial terms for the products licensed to such third party.
For the avoidance of doubt, any Licensed Products which are covered by the grant
of license under this Agreement but are not included in the license granted to
the third party, shall remain at the royalty rate of this Agreement and only the
Licensed Products which are covered by the grant of the license under this
Agreement and are included in the license granted to the third party shall have
the benefit of the more favorable financial terms.
6
<PAGE>
ARTICLE 11.0 NOTICES
All notice and payments required or permitted to be given hereunder shall be
in writing and addressed to the respective parties as follows:
If to Affymetrix: Affymetrix, Inc.
3380 Central Expressway
Santa Clara, California 95051
Attention:
If to BCI: Beckman Coulter, Inc.
4300 North Harbor Boulevard
Fullerton, California 92834-3100
Attention: President
With a copy to: Beckman Coulter, Inc.
4300 North Harbor Boulevard
Fullerton, California 92834-3100
Attention: General Counsel
or such other addresses as may be designated by the respective parties in
writing. A notice shall be deemed given the earlier of the date when actually
received if sent by messenger or facsimile (with notice of receipt in good order
requested and received) or three (3) days after deposit in the United States
registered or certified mail, postage prepaid, and properly addressed.
ARTICLE 12.0 SECTION HEADINGS
Section headings are for convenience only and shall not be construed to
limit or extend the meaning of any portion of this License Agreement.
ARTICLE 13.0 LAW GOVERNING AND CONSTRUCTION
This License Agreement shall be governed by and construed in accordance with
the laws of the State of California as if the Agreement had been delivered in
California and all acts which are done or are required to be done hereunder were
all performed within such State.
ARTICLE 14.0 MISCELLANEOUS
14.1 Nothing in this Agreement shall be construed as conferring any right to
use in advertising, publicity, or other promotional activities any name,
trade name, trademark, or other designation of either party hereto without
the express written approval of the other party.
14.2 BCI makes no warranties as to the validity or scope of any of the Patent
Rights, or that any manufacture, sale, use, or other disposition of the
products licensed hereunder will be free from infringement of patents,
utility models, and/or design patents of third parties. Nothing in this
Agreement shall be considered as conferring any warranty or representation
as to the usefulness, marketability, or merchantability of any products
sold within the scope of the licenses hereunder. Affymetrix and BCI agree
to hold the other harmless from any personal injury or products liability
claims made as a result of the sale of products licensed hereunder.
14.3 The Parties will retain the terms of this Agreement in strict confidence,
except as may be required by regulatory agencies or courts, and will then
use all reasonable precautions to maintain the terms of this Agreement
confidential.
14.4 BCI and Affymetrix represents that they are familiar with the Export
Administration Regulations comprising the compilation of official
regulations and policies governing the export licensing of
7
<PAGE>
commodities and technical data promulgated by the United States Department
of Commerce, Bureau of International Commerce, Office of Export
Administration. Notwithstanding any other provisions of this Agreement,
and each assures the other that with respect to all information and
licenses furnished by or under this Agreement, that it will comply with
such official regulations.
14.5 In the event that any provision of this Agreement is held invalid or
unenforceable for any reason, such unenforceability shall not affect the
enforceability of the remaining provisions of this Agreement, and all
provisions of this Agreement shall be construed so as to preserve the
enforceability hereof.
14.6 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
14.7 This License Agreement has been drafted on the basis of mutual
understanding after considerable negotiation and neither party shall be
prejudiced as being the drafter thereof.
ARTICLE 15.0 ENTIRE AGREEMENT, MODIFICATIONS, ETC.
This instrument contains the entire and only agreement between the parties
relative to the subject matter hereof and supersedes all previous negotiations,
representations, undertakings and agreements both written and oral heretofore
made between the parties as to the subject matter. Any representation, promise
or condition in connection herewith not specifically incorporated herein shall
not be binding upon either party.
No modification, renewal, extension, waiver, cancellation or termination of
this Agreement or of any of the provisions herein contained shall be valid until
and unless made in writing and signed on behalf of the respective parties by
duly authorized officers thereof.
IN WITNESS WHEREOF, the parties have respectively caused this Agreement to
be executed on the dates hereinafter indicated.
<TABLE>
<S> <C> <C> <C>
By: ------------------------------ By: ------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------ ------------------------------
</TABLE>
8
<PAGE>
Exhibit D to the Consortium Agreement
dated as of July 31, 1998
LICENSE AGREEMENT
License Agreement effective this _____ day of _____ 1998 ("Effective Date")
by and between AFFYMETRIX, INC. a California corporation, having a place of
business at 3380 Central Expressway, Santa Clara, California 95051
("Affymetrix", as that term is more fully defined in Paragraph 1.2 hereof) and
BECKMAN COULTER, INC., a Delaware corporation, having a place of business at
4300 North Harbor Boulevard, Fullerton, California 92834-3100 ("BCI", as that
term is more fully defined in Paragraph 1.4 hereof).
R E C I T A L S
I. BCI and Affymetrix are members of a consortium that has as one of its
principal objectives the development and commercialization of Array
Chips (as that term is hereafter defined) and analytical processes which
use such Array Chips.
II. Affymetrix has patents and pending patent applications covering the
making and using of Array Chips. Affymetrix has a development program
which has as its objective the development of technology relating to the
making and using of Array Chips and the acquisition of patents related
to such technology.
III. BCI desires to acquire a license under certain present and hereafter
acquired Affymetrix patents related to the making and using of Array
Chips.
-1-
<PAGE>
NOW THEREFORE in consideration of the mutual understandings contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties intending to be legally bound, agree
as follows:
ARTICLE 1.0 DEFINITIONS
The following terms, when used herein with an initial capital letter and
without regard to whether they appear in the singular, plural or possessive
form, shall have the following defined meanings:
1.1 "AFFILIATE" shall mean any corporation or other form of limited
liability legal person, partnership, association, joint venture or other
form of business entity controlled by, controlling or under common
control with a party hereto. As used herein, the word and root
"control" in the context of a corporation shall mean the ownership,
directly or indirectly, of more than fifty percent (50%) of the voting
shares or other equity interests entitled to vote in the election of
directors of the corporation; and, in the context of any other form of
business entity, the right to receive more than fifty percent (50%) of
the net profits of such entity and the right to a majority interest in
the management and control of such entity; provided that,
notwithstanding the foregoing definition, BCI may not have as an
Affiliate entitled to receive the benefits of the licenses granted under
Section 3.1 hereof (a) a corporation wherein any of the companies listed
in Exhibit A is more than a passive investor in such Affiliate and such
passive investor does not have the right to manage or control
-2-
<PAGE>
such Affiliate or (b) a partnership wherein any of the companies listed
in Exhibit A is a partner.
1.2 "AFFYMETRIX" shall mean Affymetrix, Inc., its divisions and Affiliates
and its and their permitted successors and assigns.
1.3 "ARRAY CHIPS" shall mean a series of polynucleotides arranged
on a substrate to perform quantitative or qualitative analyses.
1.4 "BCI" shall mean Beckman Coulter, Inc., its divisions and Affiliates and
its and their permitted successors and assigns.
1.5 "BCI ARRAY CHIP" shall mean an Array Chip which is sold or used by BCI
and, but for the licenses and rights granted herein, would infringe any
valid claim in an unexpired and non-lapsed patent in the Patent Rights.
1.6 "BACTERIOLOGY FIELD" shall mean and be limited to: (i) detection and
or identification of bacterial and fungal microorganisms, and/or (ii)
the determination of antibiotic resistance of such bacterial and fungal
microorganisms, in each case limited to use in the Clinical Diagnosis
(as that term is hereafter defined) of human disease.
-3-
<PAGE>
1.7 "CLINICAL DIAGNOSIS" shall mean a process in which a sample of fluid or
other material collected from individual humans that is used to aid in
diagnosis of one or more human diseases, the results of such process
used for communication to such persons or their physicians or other
caregivers for clinical decisions in connection with such individual
humans.
1.8 "EXPRESSION ANALYSES" shall mean an Array Chip used for determination of
the amount of one or more expressed messenger RNA in a sample.
1.9 "GENE" shall mean a nucleic acid sequence or set of sequences encoding a
distinct messenger nucleic acid and protein as well as polymorphic
variants of such sequence; provided that, such polymorphic variants must
have at least 99.9% homology with the underlying gene.
1.10 "LICENSED PRODUCT" shall mean any BCI Array Chip or component thereof or
any product, kit, instrument or system which, but for the licenses and
rights granted herein, would infringe any valid claim in an unexpired
and non-lapsed patent in the Patent Rights.
1.11 "LICENSED PROCESS" shall mean any process, method or procedure the
practice or use of which, but for the licenses and rights granted
herein, would infringe any valid claim in an unexpired and non-lapsed
patent in the Patent Rights.
-4-
<PAGE>
1.12 "NET SALES" shall mean the gross receipts of BCI from the sale of BCI
Array Chips to an unaffiliated third party, less those of the following
actually incurred by BCI as an element of such sales: transportation,
special packing and crating charges, insurance, custom duties,
commissions, returns, allowances in lieu of actual returned or rejected
BCI Array Chips, sales, use and turnover taxes, and trade, quantity,
contract and cash discounts. The value of BCI Array Chips transferred
by BCI to unaffiliated third parties as free samples or the use of BCI
Array Chips by BCI for sales demonstration purposes or for quality
control or other internal, non-revenue generating purposes shall not be
included in the calculation of Net Sales.
In the event a BCI Array Chip is sold in combination with other
apparatus or products, as part of a kit, or in any other combination,
and the BCI Array Chip is not separately valued on the invoice or other
document evidencing such sale, the Net Sales of the BCI Array Chip shall
be the then current list price for the BCI Array Chip when sold
separately or, in the absence of such list price, shall be determined by
multiplying the aggregate selling price of the combination by a fraction
the numerator of which shall be BCI's standard costs for the BCI Array
Chip and the denominator of which shall be BCI's standard cost for the
total combination at the time of the sale. In the event that both the
BCI Array Chip and other product have separate list prices but are being
sold at a combination price which is less than the total of the separate
list prices, then the Net Sales of the BCI Array Chip shall be
determined by multiplying the invoice price charged for the combination
by a fraction, the numerator of which is the list price of the
-5-
<PAGE>
BCI Array Chip and the denominator of which is the sum of the list prices
of the BCI Array Chip and such other products.
1.13 "PATENT RIGHTS" shall mean all applications for patent (and any
continuation or continuation-in-part of such applications) and patents
(and reissues of such patents), filed or issued in any country of the
world, (a) now owned or controlled by Affymetrix or at any time during
the seven years and six months commencing with the Effective Date owned
or controlled by Affymetrix and (b) relating to or useful in the
manufacture or use or processing of Array Chips; provided that Patent
Rights shall not include the specific claims of any such applications
or patents related to: (i) photolithographic means or methods for the
manufacture of Array Chips, or (ii) specific genes, or (iii) computer
software for using the data generated from the use of Array Chips,
or (iv) readers or other instrument systems for using Array Chips to
perform analyses, or (v) pre-treatment of samples prior to their
interaction with an Array Chip. For purposes of this definition, a
patent or application for patent is controlled by Affymetrix if
Affymetrix is a licensee under such patent or application and Affymetrix
has the right to grant sublicenses to third parties, in each case
without regard to whether Affymetrix would thereby be responsible
for reporting to and/or paying royalties to such third party as a result
or as a consequence thereof or as a result or consequence of BCI's use
of such patent or application. If a patent or application for patent is
controlled by Affymetrix it shall be sublicensed to BCI at the same
royalty rate as Affymetrix pays to its licensor and subject to the same
restrictions
-6-
<PAGE>
and obligations as apply to Affymetrix promptly after Affymetrix'
acquisition of such control.
ARTICLE 2.0 REPRESENTATIONS AND WARRANTIES
Affymetrix represents and warrants that (a) it owns or otherwise has the
right to grant the licenses and rights provided for herein under all of the
applications or patents presently in the Patent Rights, and (b) it will use
commercially reasonable efforts to obtain the right in any license agreement it
hereafter enters with third parties to obtain rights to applications for patent
or patents of such third parties wherein the applications for patent or patent
are useful or necessary for making or using Array Chips and not subject to
exclusions (i)-(v) of the definition of Patent Rights, to pass such license on
to BCI under the same terms and conditions as those granted to Affymetrix by
such third parties.
ARTICLE 3.0 LICENSE GRANT
3.1 LICENSE GRANT - Subject to the remainder of this Paragraph 3.1,
Affymetrix hereby grants to BCI and BCI accepts a royalty bearing,
non-exclusive, world-wide right and license under the Patent Rights
(without the right to grant sublicenses) to (a) make, have made, import,
use, sell, lease and otherwise dispose of Licensed Products in all
fields, uses and applications except for the Bacteriology Field, (b) to
practice Licensed Processes, and (c) to pass on to its direct and
indirect customers of Licensed Products the right to practice Licensed
Processes on any
-7-
<PAGE>
instrument or system distributed by BCI under a BCI trademark. The
foregoing license is subject to the following provisos: (a) the
exception as to the Bacteriology Field shall be only for so long
in time and only to the extent that Affymetrix is excluded from granting
licenses to others in such Field by the license agreement with
BioMerieux in effect as of the Effective Date; and (b) the right to have
Licensed Products made for BCI by third parties shall not extend to any
third party which Affymetrix has informed BCI is, at the time of BCI's
intention to use such third party as a supplier, an infringer of the
Patent Rights and against which Affymetrix is either in negotiation to
grant them a license or against which Affymetrix intends to bring
litigation to halt such infringement either within the next six (6)
months or within six (6) months of the conclusion of any pending
litigation against another party involving the Patent Rights, unless the
third party intended supplier ceases its infringement or takes a license
from Affymetrix.
3.1.1 BCI shall notify Affymetrix in writing of any third party that
BCI intends to use as a supplier of BCI Array Chips under the
license of Paragraph 3.1. Affymetrix shall, not later than ten
(10) business days after receipt of such notice, inform BCI, in
writing, whether such third party is an infringer of the Patent
Rights and Affymetrix is either in negotiation to grant such
third party a license or Affymetrix intends to bring litigation
against such third party to halt such infringement within the
next six (6) months or within six (6) months of the conclusion of
any pending litigation against another party involving the Patent
Rights. If Affymetrix fails to provide such notice
-8-
<PAGE>
then BCI may use such third party as a supplier of BCI Array
Chips under the license of Paragraph 3.1. If Affymetrix
notifies BCI that such third party is an infringer of the
Patent rights but fails to grant a license within six (6)
months of such notice or to bring a lawsuit to halt such
infringement within the time periods of the second sentence
hereof, then BCI may use such third party as a supplier of
BCI Array Chips under the license of Paragraph 3.1.
3.2 PATENT MARKING - BCI shall attach a label or product insert on each
Licensed Product reasonably reflecting patent numbers of issued
U.S. patents covering such Licensed Product and owned by Affymetrix and
will reasonably modify such labels or inserts periodically at the
direction of Affymetrix to add or delete patent numbers.
3.3 NOTIFICATIONS OF NEW PATENT RIGHTS - Affymetrix shall on or about each
anniversary of this Agreement inform BCI of any U.S. patents which have
issued in the preceding twelve (12) months which fall within the
definition of Patent Rights of Paragraph 1.13 and each patent which is
controlled by Affymetrix wherein the agreement granting such control was
signed in the preceding twelve (12) months. Notwithstanding the
foregoing or anything in this License Agreement to the contrary,
the failure of Affymetrix to notify BCI of an addition to the Patent
Rights in accordance with this Paragraph 3.3 shall have no effect on the
rights granted to BCI under Paragraph 3.1 and such applications and
patents shall be included in the Patent Rights without regard to whether
BCI does or does not receive such notice.
-9-
<PAGE>
ARTICLE 4.0 ROYALTIES AND ROYALTY REPORTS
4.1 ROYALTIES - Subject to Paragraph 4.2 and Paragraphs 4.1.1, BCI shall pay
Affymetrix for all of the licenses and rights granted under this License
Agreement, a running royalty of [ ](1) for each Gene on each BCI
Array Chip used for Expression Analysis and [ ](2) of Net Selling
Price for [ ](3), in each case sold by BCI to an
unaffiliated third party or used by BCI on behalf of an unaffiliated
third party. No royalty shall be due from BCI to Affymetrix for BCI
Array Chips which are: (a) transferred by BCI to an unaffiliated third
party as free samples, or (b) used by BCI for sales demonstration
purposes, or (c) used by BCI for quality control, testing or any other
internal, non-revenue generating purposes.
4.1.1 The royalty of Paragraph 4.1.1 for a BCI Array Chip used for
[ ](4) shall be the applicable royalty to be paid to
Affymetrix only so long as such royalty, when converted to a
percentage of the actual market selling price (to distributors or
end users) of an Array Chip which is competitive with such BCI
Assay Chip and is sold by a party other than BCI (which party is
not infringing the intellectual property rights of Affymetrix
without a license from Affymetrix where Affymetrix is using
reasonable efforts to enforce its patent rights against such
party through litigation) is less than [ ](5) of such
selling price. In such event, BCI may require that the basis of
paying royalties be converted from the foregoing fixed amount of
[ ](6) to a [ ](7).
(1) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(2) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(3) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(4) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(5) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(6) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(7) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
-10-
<PAGE>
of Net Sales. BCI shall notify Affymetrix, in writing, of the
occurrence of such event and that the mechanism described in
this Paragraph 4.1.1 should be invoked with respect to a BCI
Array Chip. The parties shall promptly meet and use their best
efforts to negotiate as to whether adjustment in the royalty
rate is appropriate, and if appropriate such new royalty rate.
If the parties cannot agree within ninety (90) days of such
notice, all royalties [ ](8) shall be placed in escrow
and the matter shall be submitted to arbitration for resolution
pursuant to Paragraph 13.2 below. The parties agree that the
following is an illustration of their intent: [ ](9).
For purposes of this Paragraph an Array Chip is competitive
with a BCI Array Chip if such Array Chip is directed to the
same or substantially the same set of Genes
(8) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(9) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
-11-
<PAGE>
as the BCI Array Chip. If the parties cannot agree to a royalty
percentage, the issue will be submitted to arbitration in
accordance with Article 13.0 hereof.
4.1.2 The royalties herein assume that profits by BCI in association
with Array Chips sales are primarily or exclusively derived from
sales of Array Chips. In the event that material profits are
derived primarily from other sources (such as associated reagent
sales), the parties shall promptly meet and use their best
efforts to negotiate an alternative definition of Net Sales
to account for such sales.
4.2 ROYALTY STACKING - If, at any time during the life of this License
Agreement, BCI discovers that any BCI Array Chip or the use thereof
infringes claims of an unexpired patent or patents other than those in
the Patent Rights BCI may, if it has not already done so, negotiate with
the owner of such patents for a license on such terms as BCI deems
appropriate. Should the license with the owner of such patents
require the payment of royalties or other consideration to such owner
then the royalties otherwise payable under this License Agreement shall
be reduced [ ](10) based on the value of the patents other than
those in the Patent Rights relative to the Patent Rights licensed
under this Agreement. The parties shall meet promptly after BCI takes
the license under such other patents to agree on the relative value of
such patents and the amount of royalty reduction. If the parties
cannot agree the issue may be submitted to arbitration in accordance
with Article 13.0 hereof.
(10) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
-12-
<PAGE>
4.3 ROYALTY REPORTS - BCI shall, commencing with the calendar quarter which
includes its first sale of a BCI Array Chip and each calendar quarter
thereafter, not later than forty-five (45) days after the close of its
accounting books and records for such quarter, provide to Affymetrix an
accounting report of the type and quantity of each BCI Array Chip sold
by BCI during such calendar quarter and the Net Sales received
therefrom. The royalty due and payable to Affymetrix shall accompany
such report.
4.4 BOOKS AND RECORDS - BCI shall keep or cause to be kept books, records
and accounts in accordance with generally accepted accounting principles
consistently applied covering BCI's activities hereunder and containing
all information necessary for the true and accurate determination of the
amounts earned and paid hereunder. BCI shall, not more than once per
year and upon prior reasonable written notice from Affymetrix,
permit a certified public accountant appointed and paid for by
Affymetrix (the "Auditor") and reasonably acceptable to BCI to inspect
each BCI facility manufacturing BCI Array Chips and to review the
previous two (2) years books, records and accounts to verify the amounts
earned by Affymetrix and paid by BCI hereunder. The Auditors shall
furnish to both parties reports stating only its findings during such
inspection as to the accuracy, or the nature and extent of any
inaccuracy of such books, records, accounts and payments.
4.4.1 Any deficiency identified by the Auditor between the amounts
actually earned by Affymetrix under this Article 4.0 and the
amounts reported
-13-
<PAGE>
to be earned and paid on by BCI in accordance with Paragraph 4.3
hereof shall, unless disputed by BCI, be paid to Affymetrix
within thirty (30) days of receipt by BCI of the Auditor's
report. BCI shall also pay interest on the undisputed
amount at the rate of one percent (1%) per month. The parties
agree to diligently negotiate and promptly settle any disputes as
to the amount of royalties earned by Affymetrix and payable by
BCI hereunder. If the deficiency between the amount actually due
to Affymetrix as reported by the Auditor and the amount actually
paid to Affymetrix by BCI is greater than ten percent (10%) in
Affymetrix' favor then BCI shall reimburse Affymetrix for the
actual and reasonable expenses of the Auditor.
4.5 TAXES ON ROYALTIES - All payments provided for in this License Agreement
refer to lawful money of the United States of America. All payments
shall be made by BCI to Affymetrix at the office of Affymetrix
designated above and shall be made in the full amounts as herein
specified; provided, however, that deduction may be made from such
payments by BCI for amounts required to be withheld and paid by BCI in
respect of any income tax levied or assessed upon such payments by,
and in accordance with the laws of, any foreign government or taxing
authority. Affymetrix shall have the right at any time or from
time-to-time to contest by appropriate proceedings the validity or
amount of any such income tax withheld. If so requested by Affymetrix,
BCI will make such payments under protest, and, on behalf and at the
expense of Affymetrix, take such other action and render
-14-
<PAGE>
all reasonable assistance that may be required by Affymetrix in the
prosecution of any such proceedings. BCI will obtain and forward to
Affymetrix tax credit receipts or vouchers for all income taxes thus
withheld and paid by BCI.
4.6 ROYALTIES EARNED IN FOREIGN CURRENCY - In the event that either Net
Sales or the royalties set forth above are initially calculated in a
foreign currency, conversion shall be made in each instance by employing
the closing transfer buying rate for United States dollars quoted by the
Wall Street Journal, for the last business day of the calendar quarter
which the payment covers; provided, however, that if a foreign currency
not listed in the Wall Street Journal is involved, then the closing
transfer buying rate quoted by Citibank (New York) shall be employed in
effecting such conversion thereof.
ARTICLE 5.0 CONSTRUCTION OF PATENTS
If a judgment or decree is entered, which becomes final
through the exhaustion of all permissible applications for rehearing or review
by a superior tribunal, or through the expiration of the time permitted for such
applications (hereinafter referred to as an "irrevocable judgment"), on the
validity, scope, enforceability or priority of any claim or claims of any patent
or patent application included in the Patent Rights the construction placed upon
any such claim or claims by such irrevocable judgment shall be thereafter
followed with respect to acts occurring thereafter.
-15-
<PAGE>
If such irrevocable judgment holds any claim in the Patent Rights
invalid or unenforceable or is adverse to the patent in the Patent Rights
containing such claim as to inventorship, or construes all applicable claims in
a patent in the Patent Rights so as not to cover one or more BCI Array Chips,
BCI shall be relieved thereafter from payment of royalties under Article 4.0
hereof, as to such BCI Array Chips sold after the date of such
irrevocable judgment covered only by such claim or claims to which such
irrevocable judgment is applicable, and from the performance of those other acts
which may be required by this License Agreement only as to such claim or claims.
ARTICLE 6.0 PROSECUTION OF INFRINGERS
If BCI determines that a third party is infringing a claim of a patent
in the Patent Rights by making, using or selling a product which competes with a
BCI Array Chip then being sold by BCI, it shall notify Affymetrix thereof in
writing. Such notice shall include information in BCI's possession relevant to
such third party and the competing product. Affymetrix shall have ninety (90)
days in which to either obtain the consent of such third party to discontinue
such infringement or to exercise its right to bring an action to cause such
infringement to cease. Affymetrix shall have no obligation to bring an action
for infringement; provided however, if Affymetrix does not obtain the consent of
such third party to cease infringement or does not bring suit against the third
party under the patent, then BCI shall have the right to discontinue paying
royalties under the effected patent for BCI Array Chips until either the third
party discontinues its infringing activity or Affymetrix brings a
lawsuit against the third party for such infringement.
-16-
<PAGE>
ARTICLE 7.0 TERM AND TERMINATION
7.1 TERMINATION BY AFFYMETRIX - If BCI shall at any time be in material
breach of this License Agreement, including but not limited to, default
on any payment hereunder, or of the making of any report hereunder, or
shall make any materially false report and should fail to remedy such
material breach within sixty (60) days after written notice thereof
by Affymetrix, the latter may, at its option, terminate this License
Agreement by notice to such effect, provided that such termination shall
not release BCI from its obligation to pay Affymetrix royalties or other
sums due and accrued prior to the date of such termination.
7.2 TERMINATION BY BCI - BCI shall have the right upon three (3) months
prior written notice to Affymetrix to terminate this License Agreement
in its entirety, such surrender being operative to relieve BCI, as of
the effective date of said notice, of all obligation to pay royalties
which would otherwise have accrued thereafter pursuant to this
Agreement. Such termination or surrender shall not relieve BCI of its
obligation to pay royalties or other sums due and accrued prior to the
effective date of such notice.
7.3 TERM - Unless previously terminated as provided herein, the life of this
License Agreement and the license granted herein shall run from the
Effective Date to the end of the term of the last expiring patent now or
hereafter included in the Patent Rights.
-17-
<PAGE>
7.4 CONTESTING VALIDITY - In the event that BCI or its Affiliates contests
the validity of one or more of the licensed patents or applications
within the Patent Rights, the licenses to such patents or applications
(and no others) shall immediately terminate.
ARTICLE 8.0 EXERCISE OF RIGHTS
The failure by one of the parties under this License Agreement to assert
its rights for any breach of this License Agreement shall not be deemed a waiver
of such rights. The rights and remedies specified herein, except those
specified as exclusive, are in addition to and shall not restrict any right or
remedy either party may have at law or in equity for any breach of this License
Agreement.
ARTICLE 9.0 ASSIGNMENT
BCI may not assign this License Agreement in whole or in part without
obtaining the prior written approval of Affymetrix, except that BCI shall have
the right to assign this License Agreement without the consent of Affymetrix to
any Affiliate and to any successor of its entire business or all or
substantially all of the assets of its entire business; provided that BCI may
not sell such Affiliate or its assets other than as part of a transaction
involving BCI as a whole so long as the assets of such Affiliate include this
License Agreement.
ARTICLE 10.0 FAVORED LICENSEE
-18-
<PAGE>
In the event that after the Effective Date Affymetrix enters into a
license agreement with a third party in which agreement such third party is
licensed to make, use or sell one or more Array Chips under the Patent Rights
(or any part thereof) which BCI is entitled to make, use and sell under this
License Agreement, then Affymetrix will notify BCI in writing within thirty (30)
days of entering such an agreement and describe the following terms of any
such agreement:
(i) the scope of the license including the Genes utilized in or
sought to be identified by the Array Chips covered in such
license.
(ii) the royalty rate
(iii) any cross license consideration or other consideration paid by
the licensee; and, if applicable,
(iv) the basis of Affymetrix' belief that the financial terms of such
agreement are not more favorable than those given to BCI under
this License Agreement.
Subject to the proviso hereafter, if Affymetrix determines in good faith
in the exercise of reasonable business judgment (and not for the purpose of
depriving BCI of its rights under this Article 10.0) that the financial terms of
the third party license are less favorable than this License Agreement, then no
terms of this License Agreement shall be changed; provided that, if BCI
disagrees with Affymetrix' conclusion it may submit the issue to arbitration in
accordance with Article 13.0 hereof. If Affymetrix determines that the
financial terms of the third party license are more favorable than this License
Agreement, then Affymetrix shall give BCI the benefit of the more favorable
financial terms for the products licensed to such third party; provided that the
royalty shall be adjusted in a manner that accounts for all other terms of the
-19-
<PAGE>
license agreement with a third party; provided further that if BCI disagrees
with the royalty adjustment provided by Affymetrix it may submit the issue to
arbitration in accordance with Article 13.0 hereof. For the avoidance of doubt,
any BCI Array Chips which are covered by the grant of license under this License
Agreement but are not Array Chips included in the license granted to the third
party, shall remain at the royalty rate of this License Agreement and only the
BCI Array Chips which are covered by the grant of the license under this License
Agreement and are Array Chips included in the license granted to the third party
shall have the benefit of the more favorable financial terms.
ARTICLE 11.0 NOTICES
All notice and payments required or permitted to be given hereunder
shall be in writing and addressed to the respective parties as follows:
If to Affymetrix: Affymetrix, Inc.
3380 Central Expressway
Santa Clara, California 95051
Attention:
----------------------------
If to BCI: Beckman Coulter, Inc.
4300 North Harbor Boulevard
Fullerton, California 92834-3100
Attention: President
With a copy to: Beckman Coulter, Inc.
4300 North Harbor Boulevard
Fullerton, California 92834-3100
Attention: General Counsel
-20-
<PAGE>
or such other addresses as may be designated by the respective parties in
writing. A notice shall be deemed given the earlier of the date when actually
received if sent by messenger or facsimile (with notice of receipt in good order
requested and received) or three (3) days after deposit in the United States
registered or certified mail, postage prepaid, and properly addressed.
ARTICLE 12.0 SECTION HEADINGS
Section headings are for convenience only and shall not be construed to
limit or extend the meaning of any portion of this License Agreement.
ARTICLE 13.0 LAW GOVERNING AND CONSTRUCTIONS
13.1 APPLICABLE LAW - This License Agreement shall be governed by and
construed in accordance with the laws of the State of California as if
it has been delivered in California, and all acts performed or required
to be performed hereunder have been performed entirely within such
state, not including, however any conflicts of law rule of California
which may direct or refer such determination to the laws of any other
state or country. Neither party shall be entitled to nor request
injunctive or other equitable relief prior to adjudication on the
merits.
13.2 MEDIATION AND ARBITRATION - Any controversy or conflict involving this
License Agreement, its interpretation or the respective rights or
obligations of the parties shall
-21-
<PAGE>
first be submitted to their respective Vice-Presidents for resolution.
If they cannot agree, the controversy shall be submitted to mediation
to be held in a mutually agreeable neutral place. If the parties still
cannot settle the controversy or reach an accommodation, the matter
shall be submitted to binding arbitration to be conducted in
California at a location to be mutually agreed in accordance with the
following rules:
(a) There shall be a panel of three (3) arbitrators, all of whom
shall be lawyers and at least two (2) of which shall be competent
to fully understand the technology relating to Array Chips. If
the parties cannot agree on the selection of the three (3) then
each shall pick one (1) arbitrator and the two (2) so chosen
shall select the third.
(b) All disputes which are not specifically raised by the parties in
the arbitration process shall be forever waived.
-22-
<PAGE>
(c) The arbitration proceeding shall be governed by (i) the rules and
understandings set forth in this Paragraph 13.2 or as hereafter
agreed upon in writing by the parties, and (ii) to the extent not
inconsistent with such rules and understandings, by the
Commercial Arbitration Rules of the American Arbitration
Association.
(d) The parties agree to refrain from filing a lawsuit with regard to
any aspect of their controversy and to abide by and perform any
award rendered by the arbitrators. The parties further agree
that a judgment of a Court having jurisdiction may be entered
upon the award and an execution may be issued for its collection.
(e) At least two (2) of the panel of arbitrators must agree on each
point in controversy for an award to be rendered.
(f) The arbitration hearing shall be convened within forty-five (45)
days of request therefor by either party. The request shall be
in writing and sent in accordance with Article 11.0. The hearing
shall be limited to three days: Each party shall have a maximum
of eight (8) hours to put on its main case and four (4) hours for
rebuttal. Neither party shall engage in extended
cross-examination or other tactics which have the effect of
substantially altering this allocation.
-23-
<PAGE>
(g) The parties agree to exchange all documents they intend to
produce at the hearing at least thirty (30) days in advance of
the opening of the arbitration hearing. There will be no taking
of depositions, service of interrogatories or any other form of
discovery other than producing documents relevant to the
proceedings and neither party may compel the appearance of the
other party's employees, officers, directors or consultants.
(h) The arbitrator's decision must be rendered within thirty (30)
days after completion of the arbitration hearing.
(i) A transcript may, at the option of the parties, be made. Either
party may, at its expense, tape record or video tape the
proceedings.
(j) All applicable common law or statutory privileges such as
attorney-client or attorney work product shall be applicable to
the arbitration proceedings.
(k) Either party may, at its option, use prepared testimony as long
as the witness whose testimony is so presented is available to
the other party for cross-examination.
(l) Each party shall bear its own expenses for the arbitration and
they shall each share equally in the expenses and fees of the
arbitration panel.
-24-
<PAGE>
ARTICLE 14.0 MISCELLANEOUS
14.1 Nothing in this License Agreement shall be construed as conferring any
right to use in advertising, publicity, or other promotional activities
any name, trade name, trademark, or other designation of either party
hereto without the express written approval of the other party.
14.2 Affymetrix makes no warranties as to the validity or scope of any of the
Patent Rights, or that any manufacture, sale, use, or other disposition
of the products licensed hereunder will be free from infringement of
patents, utility models, and/or design patents of third parties.
Nothing in this License Agreement shall be considered as conferring any
warranty or representation as to the usefulness, marketability,
or merchantability of any products sold within the scope of the licenses
hereunder. Affymetrix and BCI agree to hold the other harmless from any
personal injury or products liability claims made as a result of the
sale of products licensed hereunder.
14.3 The Parties will retain the terms of this License Agreement in strict
confidence, except as may be required by regulatory agencies or courts,
and will then use all reasonable precautions to maintain the terms of
this License Agreement confidential.
14.4 BCI and Affymetrix represents that they are familiar with the Export
Administration Regulations comprising the compilation of official
regulations and policies governing the export licensing of commodities
and technical data
-25-
<PAGE>
promulgated by the United States Department of Commerce, Bureau of
International Commerce, Office of Export Administration. Notwithstanding
any other provisions of this License Agreement, and each assures the
other that with respect to all information and licenses furnished by or
under this License Agreement, that it will comply with such official
regulations.
14.5 In the event that any provision of this License Agreement is held
invalid or unenforceable for any reason, such unenforceability shall not
affect the enforceability of the remaining provisions of this License
Agreement, and all provisions of this License Agreement shall be
construed so as to preserve the enforceability hereof.
14.6 This License Agreement may be executed in any number of counterparts,
each of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
14.7 This License Agreement has been drafted on the basis of mutual
understanding after considerable negotiation and neither party shall be
prejudiced as being the drafter thereof.
-26-
<PAGE>
ARTICLE 15.0 ENTIRE AGREEMENT, MODIFICATIONS, ETC.
This instrument contains the entire and only agreement between the
parties relative to the subject matter hereof and supersedes all previous
negotiations, representations, undertakings and agreements both written and oral
heretofore made between the parties as to the subject matter. Any
representation, promise or condition in connection herewith not specifically
incorporated herein shall not be binding upon either party.
No modification, renewal, extension, waiver, cancellation or termination
of this License Agreement or of any of the provisions herein contained shall be
valid until and unless made in writing and signed on behalf of the respective
parties by duly authorized officers thereof.
IN WITNESS WHEREOF, the parties have respectively caused this License
Agreement to be executed on the dates hereinafter indicated.
Beckman Coulter, Inc. Affymetrix, Inc.
By: By:
----------------------------------- -----------------------------
Title: Title:
-------------------------------- --------------------------
Date: Date:
--------------------------------- ---------------------------
-27-
<PAGE>
EXHIBIT A
The following companies and their subsidiaries and Affiliates:
[ ](11)
(11) CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
-28-
<PAGE>
Exhibit 10.35
July 29, 1998
Mr. Steve Fodor, President
Affymetrix, Inc.
3380 Central Expressway
Santa Clara, California 95051
Dear Mr. Fodor:
This letter, with your signature below, will constitute an agreement between
Affymetrix, Inc. ("Affymetrix") and Beckman Coulter, Inc. ("BCI") and will
govern the order of precedence and effective dates of the following document
sets:
I. Consortium Agreement and its Exhibits, including Exhibits thereto
(jointly the "Consortium Agreement").
II. Asset Purchase Agreement and its Exhibits, including Exhibits thereto
(jointly the "Asset Purchase Agreement").
III. License Agreement from Affymetrix to BCI (the "License").
Notwithstanding that each of the foregoing Agreements are signed
contemporaneously with this agreement and thus, by their terms and on their face
have the same effective date as this agreement, it is our intent that certain of
such Agreements not come into full force and effect on the above date and that
this agreement decide the precedence and order of such Agreements coming into
full force and effect. We have agreed as follows:
1. The Consortium Agreement will come into full force and effect on even
date herewith. The parties will promptly and diligently exercise their
best efforts, consistent with the limitations of Paragraph 5.3 of the
Consortium Agreement, to obtain a non-exclusive license for Affymetrix
under the Southern Patents (as such term is defined in such Paragraph)
on reasonable terms and conditions. For purposes of this agreement
"reasonable terms and conditions" means terms and conditions
substantially equivalent
-1-
<PAGE>
to those granted Beckman Instruments in the Isis Agreement (as that term
is hereafter defined) and does not include a requirement that Affymetrix
grant a license under its intellectual property to Oxford Gene
Technology ("OGT"). If OGT grants the requested license under
reasonable terms and conditions within the time specified in such
Paragraph 5.3 then the parties shall thereupon terminate the Asset
Purchase Agreement and the License Agreement and their relationship
shall be bound and determined solely by the Consortium Agreement. BCI
shall refund to Affymetrix $900,000 of the $5,900,000 payment made by
Affymetrix under the Asset Purchase Agreement. If OGT refuses to grant
the requested license under reasonable terms and conditions within the
time specified in such Paragraph 5.3 or any extension thereof agreed by
Affymetrix and BCI then the parties shall, subject to the next sentence
hereof, thereupon, terminate the Consortium Agreement.
2. The Asset Purchase Agreement will come into full force and effect upon
the termination of the Consortium Agreement in accordance with Paragraph
1.
3. BCI represents that as of the day prior to this agreement to its
Knowledge (as that term is defined in the Asset Purchase Agreement) the
Isis Agreement is in full force and effect and to its Knowledge that the
Acquired Assets (as that term is defined in the Asset Purchase
Agreement) includes all of BCI's assets relating to the business in
products licensed under the Isis agreement. For the avoidance of doubt,
the parties agree that U.S. Patent No. 5,653,939 and its U.S. and
foreign counterparts is not related to the business in products licensed
under the Isis Agreement and is not an Acquired Asset. If, for any
reason, the LLC established by the Asset Purchase Agreement is deemed
not to be an Affiliate of Affymetrix, as that term is defined in the
Patent License between Isis Innovation Limited and Beckman Instruments,
Inc. revised on April 17, 1996 (the "Isis Agreement"), and thus not
entitled to access to and use of the Southern Patents, then the License
Agreement shall come into full force and effect. It is expressly
understood and agreed that if for any reason Affymetrix shall be deemed
not to be the assignee of the Isis Agreement under the Asset Purchase
Agreement that Affymetrix shall have no right of action or recourse
against BCI for breach of contract or breach of warranty or failure of
consideration or tort or under any other legal or equitable theory and
no right to terminate or rescind or reform the Asset Purchase Agreement
nor to direct, indirect, special or consequential damages of any kind or
nature nor shall Affymetrix be entitled to demand or receive return of
the consideration paid by Affymetrix to BCI under either the Asset
Purchase Agreement or the License Agreement; provided that if the
foregoing representations are knowingly false Affymetrix may demand and
receive return of all compensation paid to BCI under the Asset Purchase
Agreement. Affymetrix recognizes and accepts
-2-
<PAGE>
that it enters the Asset Purchase Agreement and Affymetrix side letter
of July 31, 1998 and the License Agreement entirely at its own risk.
This agreement contains the full understanding of the parties relative
to it subject matter and fully supersedes any and all prior understanding or
agreement, whether oral or in writing pertaining to such subject matter. This
agreement may only be modified in a writing signed by both of the parties. The
covenants and agreements contained herein shall be binding upon and inure to the
benefit of the heirs, executors, administrators, personal representatives,
successors and assigns of the parties.
This agreement, including its existence, validity, construction and
operating effect and the rights of each of the parties hereto shall be governed
by and construed in accordance with the laws of the State of California.
If the foregoing properly sets forth our agreement and intent, please
sign both copies in the space indicated below and return one copy to me; the
second copy is for your files.
Very truly yours,
Beckman Coulter, Inc.
by: /s/ John Warcham
-------------------------------
title: Chief Executive Officer
----------------------------
Understood and Accepted:
Affymetrix, Inc.
by: /s/ Stephen P.A. Fodor
-------------------------------------------
title: President and Chief Executive Officer
----------------------------------------
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ITEM 1 OF
THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,232
<SECURITIES> 88,738
<RECEIVABLES> 8,500
<ALLOWANCES> 0
<INVENTORY> 4,177
<CURRENT-ASSETS> 104,879
<PP&E> 34,012
<DEPRECIATION> (8,713)
<TOTAL-ASSETS> 140,949
<CURRENT-LIABILITIES> 11,341
<BONDS> 327
49,857
0
<COMMON> 159,272
<OTHER-SE> (84,848)
<TOTAL-LIABILITY-AND-EQUITY> 140,879
<SALES> 14,941
<TOTAL-REVENUES> 35,845
<CGS> 9,421
<TOTAL-COSTS> 9,421
<OTHER-EXPENSES> 47,087
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,424
<INCOME-PRETAX> (18,239)
<INCOME-TAX> 0
<INCOME-CONTINUING> (18,239)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,239)
<EPS-PRIMARY> (0.80)
<EPS-DILUTED> (0.80)
</TABLE>
