AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 11, 2003
REGISTRATION NO. 333-109196
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
BIOVERIS CORPORATION
(Exact name of registrant as specified in its charter)
---------------------
DELAWARE 3826 80-0076765
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
SAMUEL J. WOHLSTADTER
CHIEF EXECUTIVE OFFICER
16020 INDUSTRIAL DRIVE BIOVERIS CORPORATION
GAITHERSBURG, MARYLAND 20877 16020 INDUSTRIAL DRIVE
TELEPHONE: (301) 869-9800 GAITHERSBURG, MARYLAND 20877
(Address, including ZIP Code, and telephone number, TELEPHONE: (301) 869-9800
including area code, of registrant's principal executive (Name, address, including ZIP Code, and telephone number,
offices) including area code, of agent for service)
---------------------
COPY TO:
SARKIS JEBEJIAN, ESQ.
CRAVATH, SWAINE & MOORE LLP
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
TELEPHONE: (212) 474-1000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this registration
statement and the satisfaction or waiver of all other conditions to the merger
(as defined herein) pursuant to the merger agreement described herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
CALCULATION OF REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED(1) REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.001 per
share................................ 26,728,705(2) N/A $238,560,000(3) $19,299.50(3)
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
(1) This registration statement relates to securities of the registrant issuable
to holders of common stock, par value $0.001 per share, or IGEN common
stock, of IGEN International, Inc., a Delaware corporation, or IGEN, in the
proposed merger of 66 Acquisition Corporation II, a Delaware corporation and
a wholly-owned subsidiary of Roche Holding Ltd, or Roche, with and into
IGEN. This registration statement also relates to rights to purchase shares
of the registrant's series A participating cumulative preferred stock, which
will be attached to all shares of the registrant's common stock pursuant to
the registrant's stockholder rights agreement expected to be entered into
prior to the merger. Until the occurrence of events described in the
registrant's stockholder rights agreement, the rights are not exercisable
and are evidenced by and not separable from certificates for shares of the
registrant's common stock.
(2) Based on the maximum number of shares of the registrant's common stock to be
distributed in connection with the merger, calculated as the product of (a)
26,728,705, the aggregate number of shares of IGEN common stock outstanding
on September 24, 2003 (other than shares owned by IGEN, Roche, 66
Acquisition Corporation II or the registrant) or issuable pursuant to the
exercise of outstanding options and warrants prior to the date the merger is
expected to be completed, and (b) the exchange ratio of one share of the
registrant's common stock for each share of IGEN common stock.
(3) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant to
Rule 457(f) under the Securities Act. Pursuant to Rule 457(f)(2) under the
Securities Act, based on the book value as of September 30, 2003 of the
assets (including cash) to be received by the registrant in the transaction
in which the shares of the registrant's securities registered pursuant
hereto will be issued. A registration fee in the amount of $19,348.04 was
paid on September 26, 2003 in connection with the filing of the registration
statement by the registrant on September 26, 2003.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT OFFER OR SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROXY STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 11, 2003
[IGEN LOGO]
16020 INDUSTRIAL DRIVE
GAITHERSBURG, MD 20877
, 2003
Dear Stockholder:
I am pleased to invite you to attend the special meeting of stockholders of
IGEN International, Inc., to be held on January , 2004, at 10:00 a.m., local
time, at . At the special meeting, IGEN
will ask you to vote on a proposal to adopt an agreement and plan of merger, or
the merger agreement, pursuant to which Roche Holding Ltd will acquire IGEN and
IGEN will simultaneously distribute the common stock of BioVeris Corporation to
its stockholders. This transaction will resolve the long-running dispute between
IGEN and Roche over ORIGEN(R) technology, IGEN's electrochemiluminescence
technology used by Roche in its diagnostics business.
The transaction will occur in the following steps:
- IGEN will restructure its operations so that BioVeris Corporation, a newly
formed, wholly-owned subsidiary of IGEN, will assume IGEN's biodefense,
life science and industrial product lines as well as IGEN's opportunities
in the clinical diagnostics and healthcare fields, and will own IGEN's
intellectual property, IGEN's equity interest in Meso Scale Diagnostics,
LLC., cash and certain other rights and licenses currently held by IGEN;
and
- A wholly-owned subsidiary of Roche will merge with and into IGEN, as a
result of which IGEN will become a wholly-owned subsidiary of Roche and
BioVeris will become an independent, publicly-traded company owned by IGEN
stockholders. Simultaneously with the completion of the merger, certain
ongoing commercial agreements between BioVeris and certain affiliates of
Roche will become effective.
If the merger agreement is adopted and the merger and related transactions
are subsequently completed, you will be entitled to receive the following for
each share of IGEN common stock you own:
- $47.25 in cash, without interest; and
- one share of BioVeris common stock.
The receipt of the cash and BioVeris common stock will be fully taxable to
you.
IGEN's common stock is quoted on The NASDAQ National Market(R) under the
symbol "IGEN." If the merger agreement is adopted and the merger and related
transactions are subsequently completed, IGEN common stock will cease to be
quoted on NASDAQ. BioVeris has applied for its common stock to be quoted on The
NASDAQ National Market(R) under the symbol "BIOV." There is currently no public
trading market for the shares of BioVeris common stock.
The IGEN board of directors has carefully reviewed and considered the terms
and conditions of the proposed merger and related transactions and has
unanimously determined that the merger agreement is advisable and in the best
interests of IGEN and its stockholders. THE IGEN BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT. YOU ARE NOT BEING ASKED TO VOTE
ON THE RESTRUCTURING OF IGEN'S OPERATIONS.
At the special meeting, IGEN will also ask stockholders to vote on a
proposal to approve the BioVeris 2003 stock incentive plan described in this
proxy statement/prospectus. The completion of the merger and related
transactions are not conditioned on approval of the BioVeris 2003 stock
incentive plan. THE IGEN BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
PROPOSED BIOVERIS 2003 STOCK INCENTIVE PLAN AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE ADOPTION OF THE BIOVERIS 2003 STOCK INCENTIVE PLAN.
This proxy statement/prospectus describes the merger agreement, the proposed
merger and related transactions and provides specific information concerning the
special meeting. IGEN AND BIOVERIS URGE YOU TO READ THIS PROXY
STATEMENT/PROSPECTUS CAREFULLY, INCLUDING THE SECTION ENTITLED "RISK FACTORS"
BEGINNING ON PAGE 18.
Your vote is important. IGEN cannot complete the merger unless the merger
agreement is adopted by the affirmative vote of the holders of a majority of the
shares of IGEN common stock outstanding and entitled to vote at the special
meeting. FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
ADOPTION OF THE MERGER AGREEMENT. Only holders of record of IGEN common stock
at the close of business on November 17, 2003 are entitled to vote at the
special meeting.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. Therefore, after reading this proxy
statement/prospectus, please complete, sign, date and return the enclosed proxy
card as promptly as possible.
I strongly support the proposed merger and related transactions and join
with the IGEN board of directors in enthusiastically recommending that you vote
"FOR" the adoption of the merger agreement and the approval of the BioVeris 2003
stock incentive plan.
Sincerely,
Samuel J. Wohlstadter
Chairman and Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE MERGER DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS OR THE BIOVERIS COMMON STOCK TO BE DISTRIBUTED IN
CONNECTION WITH THE MERGER, OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROXY STATEMENT/PROSPECTUS IS DATED , 2003,
AND IS FIRST BEING MAILED TO IGEN STOCKHOLDERS ON OR ABOUT , 2003.
ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about IGEN from documents that are not included in or
delivered with this proxy statement/prospectus. This information is available to
you without charge upon your written or oral request. You can obtain the
documents incorporated by reference in this proxy statement/prospectus by
requesting them in writing or by telephone from IGEN at the following address
and telephone number:
16020 Industrial Drive
Gaithersburg, MD 20877
Attention: Secretary
Telephone: (301) 869-9800 ext. 3501
If you would like to request documents, please do so by , 2004 to
receive them before the special meeting.
See "Where You Can Find More Information" on page 192.
[IGEN LOGO]
16020 INDUSTRIAL DRIVE
GAITHERSBURG, MD 20877
, 2003
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY , 2004
---------------------
To the Stockholders of IGEN International, Inc.:
IGEN International, Inc. will hold a special meeting of its stockholders on
January , 2004, at 10:00 a.m., local time, at
, for the following purposes:
1. To consider and vote upon a proposal to adopt the agreement and plan
of merger dated as of July 24, 2003, among Roche Holding Ltd, 66 Acquisition
Corporation II, a wholly-owned subsidiary of Roche, IGEN International, Inc.
and BioVeris Corporation. Pursuant to the merger agreement:
- 66 Acquisition Corporation II will merge with and into IGEN, as a
result of which IGEN will become a wholly-owned subsidiary of Roche;
and
- each outstanding share of IGEN common stock (other than shares held by
IGEN stockholders who validly exercise appraisal rights) will be
converted into the right to receive $47.25 in cash, without interest,
and one share of BioVeris common stock.
As part of the restructuring of IGEN's operations prior to the merger,
BioVeris will assume IGEN's biodefense, life science and industrial product
lines as well as IGEN's opportunities in the clinical diagnostics and
healthcare fields, and will own IGEN's intellectual property, IGEN's equity
interest in Meso Scale Diagnostics, LLC., cash and certain other rights and
licenses currently held by IGEN. Simultaneously with the completion of the
merger, certain ongoing commercial agreements between BioVeris and certain
affiliates of Roche will become effective. You are not being asked to vote
on the restructuring of IGEN's operations.
2. To consider and vote upon a proposal to approve the BioVeris 2003
stock incentive plan.
3. To transact any other business as may properly come before the
special meeting or any adjournment or postponement of the special meeting.
These items of business are described in this proxy statement/prospectus.
Only holders of record of shares of IGEN common stock at the close of business
on November 17, 2003, the record date for the special meeting, are entitled to
notice of, and to vote at, the special meeting and any adjournments or
postponements of the special meeting.
Your vote is very important, regardless of the number of shares you own.
Please vote as soon as possible to make sure that your shares are represented at
the meeting. To vote your shares, you may complete, sign, date and return the
enclosed proxy card or you may submit your proxy by telephone or over the
Internet. If you are a holder of record, you may also cast your vote in person
at the special meeting. If your shares are held in an account at a brokerage
firm or bank, you must instruct them on how to vote your shares. If you do not
vote or do not instruct your broker or bank how to vote, it will have the same
effect as voting against the adoption of the merger agreement.
PLEASE DO NOT SEND ANY STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS
COMPLETED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK
CERTIFICATES.
IGEN stockholders who do not vote in favor of adoption of the merger
agreement have the right under Delaware law to demand appraisal of their shares
of IGEN common stock and to receive payment in cash for the fair value of their
shares as determined by the Delaware Court of Chancery. A copy of the provision
of Delaware law that grants appraisal rights and specifies the required
procedures for demanding appraisal is attached to this proxy
statement/prospectus as Annex 17.
By Order of the Board of Directors,
George V. Migausky
Secretary
Gaithersburg, Maryland
, 2003
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS ABOUT THE MERGER AND RELATED
TRANSACTIONS AND THE SPECIAL MEETING...................... 1
SUMMARY..................................................... 4
The Companies and the Litigation.......................... 4
General................................................... 5
The Special Meeting....................................... 7
The Merger and Related Transactions....................... 8
Comparative Per Share Information......................... 15
Summary Historical Consolidated Financial Data............ 16
RISK FACTORS................................................ 18
Risks Relating to the Merger and Related Transactions..... 18
Directors of IGEN have potential conflicts of interest
in recommending that you vote in favor of adoption of
the merger agreement.................................. 18
Depending on BioVeris's stock price on the first day of
trading after the completion of the merger, BioVeris
could be required to pay up to $20 million to IGEN,
which would considerably reduce BioVeris's available
cash.................................................. 19
Risks Relating to BioVeris and Its Business............... 19
The IGEN businesses that BioVeris will assume have a
history of losses and BioVeris will have future losses
and negative cash flow................................ 19
If BioVeris is unable to establish new collaborations,
or any collaborations BioVeris establishes do not
result in the successful introduction or marketing of
new products based on BioVeris's technology,
BioVeris's growth may be slowed and its business could
be materially adversely affected...................... 20
To achieve commercial success, BioVeris must complete
development of its products and those products must
gain market acceptance or BioVeris's business could be
materially adversely affected......................... 20
BioVeris's quarterly operating results may fluctuate
significantly, and these fluctuations may cause its
stock price to be volatile............................ 21
The accompanying BioVeris consolidated financial
statements may not necessarily be indicative of
BioVeris's financial position, results of operations
or cash flows had BioVeris been operated on a
stand-alone basis..................................... 22
BioVeris may not be able to raise sufficient additional
capital to successfully develop its business.......... 22
BioVeris's access to funds could be negatively impacted
by many factors, including volatility in the price of
BioVeris common stock, losses from operations and
capital market conditions............................. 23
BioVeris may experience design, development,
implementation and other difficulties that could delay
or prevent its introduction of new or enhanced
products or affect the performance of existing
products, which could adversely affect its business.
In addition, if the markets for BioVeris's products
change or evolve in an unexpected manner, BioVeris's
business could be materially adversely affected....... 23
BioVeris expects to rely on sales of the M-SERIES
product family for a significant portion of its
revenues, and a decline in sales of these products
could cause adverse financial results and negatively
affect BioVeris's business prospects.................. 23
BioVeris's competitors and potential competitors may
have or develop diagnostic products and technologies
that are more attractive than BioVeris's existing or
future diagnostic products............................ 24
BioVeris has limited manufacturing experience, which
puts it at a competitive disadvantage and could have a
material adverse effect on BioVeris's business,
financial condition and revenue....................... 24
i
PAGE
----
BioVeris has limited manufacturing facilities for its
products and BioVeris may not find additional
facilities suitable for future growth, which could
materially adversely affect its business and
prospects............................................. 24
BioVeris has no experience selling, marketing or
distributing clinical diagnostic products. Its failure
to establish a sales force with technical expertise or
to establish an effective distribution system for its
clinical diagnostic products could materially
adversely affect BioVeris's business prospects and
revenues.............................................. 25
Failure to manage BioVeris's growth could adversely
affect BioVeris's business............................ 25
The success of BioVeris's business depends on patents
that will expire over time and that must be actively
pursued, obtained, maintained and protected.
BioVeris's business could be harmed if it has future
disagreements with Roche over the scope of the license
agreement............................................. 25
BioVeris's business could be harmed if it infringes, or
is alleged to have infringed, the intellectual
property of others.................................... 26
Because BioVeris intends to develop products that are
based on patents and technology that it has licensed
from others, the owners of those patents and
technology might claim that products developed or sold
by BioVeris violate those licenses. Additionally, a
third party might object to a license that BioVeris
holds or to the scope of the license granted to
BioVeris.............................................. 26
MSD and BioVeris may have different views of the scope
of the exclusive license to BioVeris's technology
previously granted to MSD and the scope of MSD's
rights under its joint venture agreement with
BioVeris, which could affect BioVeris's ability to
expand its business directly or through
collaborations........................................ 28
BioVeris relies on trade secrets and other information
that cannot be protected by patents, which could harm
BioVeris's business if they were disclosed to or
independently developed by others..................... 28
Because BioVeris cannot use the IGEN name or
derivatives of the IGEN name or names that are
confusingly similar to the IGEN name after the
completion of the merger, its existing and potential
customers, vendors, recruiting candidates and
investors may not recognize the new company name or
brands, which may cause its revenues to decline and
its business prospects to suffer...................... 28
BioVeris depends on a limited number of suppliers for
materials used in the manufacturing of its products,
and any interruption in the supply of those materials
could hamper its ability to manufacture products and
meet customer orders.................................. 28
BioVeris depends on highly trained and skilled
employees and management, and it may not be able to
attract and retain sufficient personnel, which could
adversely affect its business......................... 29
BioVeris may change the focus of its business or enter
into new healthcare fields, which could result in the
incurrence of additional costs and exposure to
additional or different business risks................ 29
BioVeris has a substantial investment in MSD that, if
MSD is not able to adequately fund its business plan,
could become worthless................................ 29
Upon completion of the merger, MSD and MST have the
right to purchase BioVeris's interest in MSD at a
discount from fair market value, payable over time in
installments equal to the sum of 5% of the MSD net
sales, as determined in accordance with the MSD
agreements, and 20% of the net proceeds realized from
certain third-party financings in accordance with the
MSD agreements, and there is no assurance that the
purchase price would equal or exceed the book value of
BioVeris's interest in MSD or that such future net
sales of MSD or third-party financings will
materialize........................................... 30
BioVeris's ability to develop products may be
negatively affected by social issues relating to
animal testing........................................ 30
Risks Relating to Regulation and Government Contracts..... 31
ii
PAGE
----
BioVeris's ability to obtain and retain U.S. government
contracts is subject to uncertainties, and U.S.
government contracts may be terminated, which could
materially adversely affect BioVeris's financial
condition, operating results, business and
prospects............................................. 31
BioVeris must obtain Food and Drug Administration
clearance or approval to market its clinical
diagnostic products, which is often costly and time
consuming. If BioVeris does not obtain the necessary
clearances or approvals, its business prospects would
suffer................................................ 32
BioVeris is subject to comprehensive government
regulation, which may involve significant costs and
may restrict its ability to conduct business.......... 32
BioVeris's business could be adversely affected by a
negative audit by the U.S. government................. 33
Cost over-runs on contracts with the U.S. government
could subject BioVeris to losses or adversely affect
its future business................................... 33
Restrictions on healthcare costs and healthcare and
insurance financing practices could limit demand for
BioVeris's products, which would hurt BioVeris's
business and business prospects....................... 33
Risks Relating to the Industry............................ 34
BioVeris is exposed to product liability risks that, if
not adequately covered by insurance, may have a
material adverse effect on its financial condition.... 34
Risks Relating to BioVeris Common Stock................... 34
BioVeris's executive officers and directors exercise
significant influence over BioVeris and may have
significant influence over the outcome of proposed
corporate actions supported or opposed by other
BioVeris stockholders................................. 34
Provisions in BioVeris's charter documents may
discourage potential acquisitions of BioVeris, even
those which the holders of a majority of BioVeris
common stock may favor, which may adversely affect the
market price of BioVeris common stock, reduce the
likelihood of offers to acquire BioVeris and prevent
changes in BioVeris's management...................... 34
There is currently no public trading market for the
shares of BioVeris common stock, and there is no
assurance that an active public trading market will
develop............................................... 35
BioVeris's stock price may be volatile and could drop
precipitously and unexpectedly........................ 35
BioVeris does not plan to pay any cash dividends on
BioVeris common stock................................. 36
BioVeris may need to raise additional capital in the
future and BioVeris may grant options or other
equity-based awards to its executive officers,
directors, employees and consultants, from time to
time, either of which would result in dilution to
BioVeris stockholders................................. 36
The Exon-Florio Act may inhibit potential acquisition
bids, which may adversely affect the market price of
BioVeris common stock................................. 37
THE SPECIAL MEETING......................................... 38
Date, Time and Place...................................... 38
Purpose of the Special Meeting............................ 38
Recommendations of the IGEN Board of Directors............ 38
Record Date; Shares Entitled to Vote; Quorum.............. 38
Votes Required............................................ 38
Share Ownership of IGEN Directors, Executive Officers and
Affiliates............................................. 39
Proxies................................................... 39
Revocation of Proxies..................................... 40
Solicitation of Proxies................................... 40
THE COMPANIES AND THE LITIGATION............................ 41
Roche..................................................... 41
IGEN...................................................... 41
BioVeris.................................................. 41
The Litigation............................................ 42
iii
PAGE
----
THE MERGER AND RELATED TRANSACTIONS......................... 43
Background to the Merger and Related Transactions......... 43
Reasons for the Merger and Related Transactions........... 53
Opinion of Lehman Brothers................................ 55
Interests of IGEN's Directors and Executive Officers in
the Merger and Related Transactions.................... 60
The Related Transaction Agreements and Commercial
Agreements............................................. 63
Accounting Treatment of the Restructuring................. 64
Form of the Merger........................................ 64
Merger Consideration...................................... 64
Ownership of BioVeris Following the Merger................ 64
Conversion of Shares; Procedures for Exchange of
Certificates........................................... 64
Effective Time of the Merger.............................. 65
Post-Closing Arrangements Between Roche, IGEN and
BioVeris............................................... 65
NASDAQ Stock Exchange Listing of BioVeris Common Stock.... 65
Delisting and Deregistration of IGEN Common Stock......... 65
U.S. Federal Income Tax Consequences...................... 66
Antitrust Matters......................................... 67
Appraisal Rights.......................................... 68
IGEN Employee Benefits Matters............................ 70
Effect on Options and Warrants Relating to IGEN Common
Stock.................................................. 71
RESTRUCTURING AGREEMENT..................................... 72
THE MERGER AGREEMENT........................................ 76
POST-CLOSING AND OTHER ARRANGEMENTS......................... 88
Post-Closing Covenants Agreement.......................... 88
Tax Allocation Agreement.................................. 92
Ongoing Litigation Agreement.............................. 93
Global Consent and Agreement.............................. 96
MSD Letter Agreement...................................... 98
BioVeris Preferred Stock Purchase Agreement............... 99
Release and Agreement..................................... 100
COMMERCIAL AGREEMENTS....................................... 102
License Agreement......................................... 102
Improvements License Agreement............................ 104
Covenants Not to Sue...................................... 106
PCR License Agreements.................................... 107
CAPITALIZATION.............................................. 111
DIVIDEND POLICY............................................. 111
PRO FORMA CONSOLIDATED BALANCE SHEET........................ 112
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA............. 114
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 116
DESCRIPTION OF THE BIOVERIS BUSINESS........................ 135
MANAGEMENT.................................................. 154
iv
PAGE
----
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS........ 162
PRINCIPAL STOCKHOLDERS...................................... 172
DESCRIPTION OF BIOVERIS CAPITAL STOCK....................... 173
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF BIOVERIS AND
IGEN...................................................... 178
Capitalization............................................ 178
Number, Election, Vacancy and Removal of Directors........ 178
Amendments to Charter Documents........................... 179
Amendments to By-laws..................................... 180
Notice of Stockholder Actions............................. 180
Special Stockholder Meetings.............................. 182
Limitation of Personal Liability and Indemnification of
Directors and Officers................................. 182
Dividends................................................. 184
Voting Rights; Required Vote for Authorization of Certain
Actions................................................ 184
SHARES ELIGIBLE FOR FUTURE SALE............................. 186
APPROVAL OF BIOVERIS 2003 STOCK INCENTIVE PLAN.............. 187
Description of the BioVeris 2003 Stock Incentive Plan..... 187
LEGAL MATTERS............................................... 192
EXPERTS..................................................... 192
OTHER MATTERS............................................... 192
FUTURE STOCKHOLDER PROPOSALS................................ 192
WHERE YOU CAN FIND MORE INFORMATION......................... 192
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 195
BIOVERIS CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL
STATEMENTS................................................ F-1
ANNEXES
Annex 1 -- Restructuring Agreement
Annex 2 -- Agreement and Plan of Merger
Annex 3 -- Post-Closing Covenants Agreement
Annex 4 -- Tax Allocation Agreement
Annex 5 -- Ongoing Litigation Agreement
Annex 6 -- Global Consent and Agreement
Annex 7 -- MSD Letter Agreement
Annex 8 -- BioVeris Preferred Stock Purchase Agreement
Annex 9 -- Release and Agreement
Annex 10 -- License Agreement
Annex 11 -- Improvements License Agreement
Annex 12 -- Covenants Not to Sue
Annex 13 -- PCR Product License Agreement
Annex 14 -- PCR Services License Agreement
Annex 15 -- Opinion of Lehman Brothers
Annex 16 -- BioVeris 2003 Stock Incentive Plan
Annex 17 -- Delaware Appraisal Rights
v
QUESTIONS AND ANSWERS ABOUT THE MERGER AND RELATED TRANSACTIONS AND THE SPECIAL
MEETING
Below are brief answers to frequently asked questions concerning the merger
and related transactions and the special meeting. These questions and answers do
not, and are not intended to, address all of the information that may be
important to you. You should read carefully this entire proxy
statement/prospectus and the other documents to which IGEN and BioVeris refer
you. Roche, when used in this proxy statement/prospectus, refers to Roche
Holding Ltd or Roche Holding Ltd and its subsidiaries and affiliates, unless the
context otherwise requires.
Q: WHAT WILL HAPPEN TO IGEN AS A RESULT OF THE MERGER AND RELATED TRANSACTIONS?
WHO IS BIOVERIS?
A: As part of the restructuring of IGEN's operations prior to the merger,
BioVeris Corporation, a newly formed, wholly-owned subsidiary of IGEN, will
assume IGEN's biodefense, life sciences and industrial product lines as well
as IGEN's opportunities in the clinical diagnostics and healthcare fields,
and will own IGEN's intellectual property, IGEN's equity interest in Meso
Scale Diagnostics, LLC., a company formed by IGEN and Meso Scale
Technologies, LLC., which is a company established and wholly-owned by a son
of IGEN's and BioVeris's chairman and chief executive officer, cash and
certain other rights and licenses currently held by IGEN. IGEN will retain
IGEN's remaining businesses, including worldwide, non-exclusive, fully-paid,
royalty-free rights to ORIGEN(R) technology, IGEN's electrochemiluminescence,
or ECL, technology in the human in vitro diagnostics field. As a result of
the merger, IGEN will become a wholly-owned subsidiary of Roche.
Upon completion of the merger and related transactions, BioVeris will become
an independent, publicly-traded company owned by IGEN stockholders. BioVeris
will have the assets described above as well as certain ongoing commercial
agreements with affiliates of Roche.
Q: WHAT WILL I RECEIVE IN THE MERGER AND RELATED TRANSACTIONS?
A: Upon completion of the merger and related transactions, each outstanding
share of IGEN common stock (other than shares held by stockholders who
validly exercise appraisal rights) will be converted into the right to
receive:
- $47.25 in cash, without interest; and
- one share of BioVeris common stock.
Q: WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND RELATED
TRANSACTIONS TO ME?
A: The receipt of cash and BioVeris common stock pursuant to the merger should
be treated as a single integrated transaction for U.S. Federal income tax
purposes. In such case, generally speaking, each IGEN stockholder will
recognize gain or loss equal to the difference, if any, between:
- the sum of the amount of cash received plus the fair market value of the
BioVeris common stock received (valued at the time of the distribution of
shares of BioVeris common stock); and
- such stockholder's adjusted tax basis in its IGEN common stock immediately
prior to the merger.
Such gain or loss will generally be capital gain or loss, and generally will
be long-term capital gain or loss if the IGEN common stock exchanged in the
merger had been held for more than one year at the time of the merger.
The tax consequences of the merger and related transactions are complex and
may vary depending on your particular circumstances. In addition, the U.S.
Internal Revenue Service could contend, and a court might agree, that the
merger and related transactions should be characterized in a manner different
than that described above. You should carefully read the full section of this
proxy statement/prospectus regarding the U.S. Federal income tax consequences
of the merger and related transactions, and are urged to consult your own tax
advisors concerning the tax consequences to you of the merger and related
transactions, including any applicable Federal, state, local and foreign tax
consequences.
1
Q: WHAT DOES THE IGEN BOARD OF DIRECTORS RECOMMEND?
A: The IGEN board of directors unanimously recommends that IGEN stockholders
vote "FOR" the adoption of the merger agreement and "FOR" the approval of the
proposed BioVeris 2003 stock incentive plan described in this proxy
statement/prospectus.
Q: WHAT STOCKHOLDER APPROVALS ARE NEEDED TO ADOPT THE MERGER AGREEMENT?
A: The adoption of the merger agreement requires the affirmative vote of
stockholders holding a majority of the shares of IGEN common stock
outstanding on the record date for the special meeting.
Q: WHAT STOCKHOLDER APPROVALS ARE NEEDED TO APPROVE THE PROPOSED BIOVERIS 2003
STOCK INCENTIVE PLAN?
A: The approval of the proposed BioVeris 2003 stock incentive plan requires the
vote of a majority of the votes cast, excluding abstentions, at the special
meeting at which a quorum is present.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
proxy statement/prospectus, please complete, sign, date and return your proxy
card in the enclosed postage-paid return envelope so that your shares may be
represented at the special meeting of IGEN stockholders. You may also submit
your proxy by telephone or over the Internet by following the instructions on
your proxy card.
Q: WHAT IF I DO NOT VOTE?
A: If you fail to either submit a proxy or vote in person, it will have the same
effect as a vote against the adoption of the merger agreement because the
required vote of IGEN stockholders is based upon the number of outstanding
shares of IGEN common stock, rather than upon the number of shares actually
voted. Failure to either submit a proxy or vote in person will have no effect
on the approval of the proposed BioVeris 2003 stock incentive plan.
If you sign, date and return your proxy card and do not indicate how you want
to vote, IGEN will count your proxy as a vote in favor of the adoption of the
merger agreement and a vote in favor of the approval of the proposed BioVeris
2003 stock incentive plan. If you sign, date and return your proxy card and
abstain from voting, it will have the same effect as a vote against the
adoption of the merger agreement but will have no effect on the approval of
the proposed BioVeris 2003 stock incentive plan.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways.
- First, you can send a written notice stating that you would like to revoke
your proxy.
- Second, you can complete and submit a new proxy bearing a later date.
If you choose either of these two methods, you must submit your notice of
revocation or your new proxy before the special meeting to IGEN at 16020
Industrial Drive, Gaithersburg, MD 20877, Attention: Secretary. You may
also submit your new proxy by telephone or over the Internet. If your
shares are held in an account at a brokerage firm or a bank, you should
contact your broker or bank to change your vote.
- Third, if you are a holder of record as of the close of business on
November 17, 2003, the record date for the special meeting, you can attend
the special meeting and vote your shares in person. Attendance at the
special meeting will not in and of itself constitute revocation of a proxy.
Q: IF MY IGEN SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: Your broker will vote your shares of IGEN common stock only if you provide
instructions on how to vote. You should follow the directions provided by
your broker regarding how to instruct your broker to vote your shares.
Without instructions, your shares will not be voted, which will have the same
effect as a vote against the adoption of the merger agreement and will have
no effect on the approval of the proposed BioVeris 2003 stock incentive plan.
2
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, you will be sent a transmittal form with
instructions for the surrender of IGEN common stock certificates. Please do
not send in your stock certificates with your proxy card.
Q: AM I ENTITLED TO APPRAISAL RIGHTS?
A: Yes, if you do not vote in favor of adoption of the merger agreement, you may
exercise your right under Delaware law to demand appraisal of your shares of
IGEN common stock and to receive payment in cash for the fair value of your
shares as determined by the Delaware Court of Chancery. The fair value of
shares of IGEN common stock as determined by the Delaware Court of Chancery
may be more or less than or the same as the value of the merger consideration
to be paid to IGEN stockholders who do not exercise appraisal rights. You
should carefully read the full section in this proxy statement/prospectus
entitled "The Merger and Related Transactions -- Appraisal Rights" and the
copy of the relevant provision of Delaware law attached as Annex 17 to this
proxy statement/prospectus for a more complete description of appraisal
rights and the procedures to exercise your appraisal rights.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: IGEN and BioVeris are working to complete the merger as quickly as possible.
If the merger agreement is adopted by IGEN stockholders, IGEN and BioVeris
expect to complete the merger shortly after the special meeting.
Q: HOW WILL I KNOW IF THE MERGER AND RELATED TRANSACTIONS HAVE OCCURRED?
A: If the merger and related transactions occur, BioVeris will make a public
announcement and you will receive notice by mail.
Q: ARE THERE ANY IMPORTANT RISKS ABOUT THE MERGER AND RELATED TRANSACTIONS OF
WHICH I SHOULD BE AWARE?
A: Yes, there are important risks involved. Before making any decision on how to
vote and whether to vote, IGEN and BioVeris encourage you to read carefully
and in its entirety the "Risk Factors" section of this proxy
statement/prospectus that begins on page 18.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger and related transactions or if you
need additional copies of this proxy statement/prospectus or the enclosed
proxy card, you should contact:
IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, MD 20877
Attention: Secretary
Telephone: (301) 869-9800 ext. 3501
3
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all the information that is important
to you. To understand the merger and related transactions fully and for a more
complete description of the terms of the merger, you should read carefully this
entire proxy statement/prospectus and the other documents to which IGEN and
BioVeris refer you. See also "Where You Can Find More Information" on page 192.
THE COMPANIES AND THE LITIGATION (PAGE 41)
ROCHE HOLDING LTD
Grenzacherstrasse 124, CH-4070
Basel, Switzerland
Telephone: (+41) 61-688-8880
Roche is one of the world's leading innovation-driven healthcare groups.
Roche's core businesses are pharmaceuticals and diagnostics. Roche is one of the
world's leading providers of diagnostic systems, one of the leading suppliers of
pharmaceuticals for cancer and a leader in virology and transplantation. As a
supplier of products and services for the prevention, diagnosis and treatment of
disease, Roche contributes on a broad range of fronts to improving people's
health and quality of life. Roche employs approximately 65,000 people in 150
countries around the world.
IGEN INTERNATIONAL, INC.
16020 Industrial Drive
Gaithersburg, MD 20877
Telephone: (301) 869-9800
IGEN and its licensees develop, manufacture and market products based on
IGEN's ECL technology. IGEN believes that its ECL technology, which detects and
measures biological substances, offers significant advantages over competing
detection and measurement methods by providing a unique combination of speed,
sensitivity, flexibility and throughput in a single technology platform. ECL
technology is incorporated into IGEN's and its licensees' instrument systems and
reagents, which are the biological and chemical compounds that are used to
perform a test, or assay, on such instrument systems.
BIOVERIS CORPORATION
16020 Industrial Drive
Gaithersburg, MD 20877
Telephone: (301) 869-9800
BioVeris is a newly formed, wholly-owned subsidiary of IGEN. As part of the
restructuring of IGEN's operations prior to the merger, BioVeris will assume
IGEN's biodefense, life sciences and industrial product lines, as well as IGEN's
opportunities in the clinical diagnostics and healthcare fields, and will own
IGEN's intellectual property, IGEN's equity interest in Meso Scale Diagnostics,
LLC., which is referred to in this proxy statement/prospectus as MSD, a company
formed by IGEN and Meso Scale Technologies, LLC., which is referred to in this
proxy statement/prospectus as MST, which is a company established and
wholly-owned by a son of IGEN's and BioVeris's chairman and chief executive
officer, cash and certain other rights and licenses currently held by IGEN.
Simultaneously with the completion of the merger, certain ongoing commercial
agreements between BioVeris and certain affiliates of Roche will become
effective.
BioVeris's strategy is based on the direct development and sale of its
products utilizing its technologies, while at the same time entering into
collaborations with third parties that can assist BioVeris in its product
development, manufacturing and marketing efforts. Key elements of BioVeris's
strategy are to:
- pursue collaborative relationships to accelerate new product development
and enhance global manufacturing and marketing capabilities;
- establish leadership positions in emerging markets; and
- develop and market product line extensions and an expanded menu of
assays.
4
THE LITIGATION
Since 1997, IGEN and Roche have been involved in a lawsuit in the Southern
Division of the U.S. District Court for the District of Maryland, which is
referred to in this proxy statement/prospectus as the District Court, relating
to, among other things, IGEN's ability to terminate a license agreement for ECL
technology that was granted in 1992 to a company that became a subsidiary of
Roche. On July 9, 2003, the U.S. Court of Appeals for the Fourth Circuit, which
is referred to in this proxy statement/prospectus as the Appellate Court, among
other things, affirmed IGEN's right to terminate the license while vacating the
$400 million punitive damage award against the subsidiary of Roche and reversing
$86.8 million of the compensatory damage award against the subsidiary of Roche.
This lawsuit is referred to in this proxy statement/ prospectus as the Roche
litigation. In addition, on July 9, 2003, IGEN sent a notice to the subsidiary
of Roche confirming termination of the license and filed patent infringement
lawsuits against the subsidiary in Maryland and in Germany. These lawsuits have
been stayed by agreement of the parties pending completion of the merger.
GENERAL
RECOMMENDATIONS OF THE IGEN BOARD OF DIRECTORS (PAGE 38)
The IGEN board of directors has unanimously determined that the merger
agreement is advisable and in the best interests of IGEN and its stockholders,
unanimously approved the merger agreement and unanimously recommends that IGEN
stockholders vote "FOR" the adoption of the merger agreement. You are not being
asked to vote on the restructuring of IGEN's operations.
To review the background to and reasons for the merger, as well as certain
risks related to the merger, see "The Merger and Related Transactions" on page
43 and "Risk Factors -- Risks Relating to the Merger and Related Transactions"
on page 18.
The IGEN board of directors also unanimously recommends that IGEN
stockholders vote "FOR" the approval of the proposed BioVeris 2003 stock
incentive plan.
OPINION OF LEHMAN BROTHERS (PAGE 55)
In deciding to approve the merger, the IGEN board of directors considered
the opinion of Lehman Brothers, its financial advisor in connection with the
merger, that, based upon and subject to the matters described in the opinion, as
of July 24, 2003 (the date of the merger agreement), from a financial point of
view, the consideration to be received by IGEN stockholders in the merger was
fair to such stockholders. The full text of the written opinion of Lehman
Brothers, which sets forth the assumptions made, matters considered and
limitations on the review undertaken in connection with the opinion, is attached
as Annex 15. The opinion is not a recommendation as to how you should vote your
shares. You are urged to read this opinion carefully and in its entirety.
INTERESTS OF IGEN'S DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER AND RELATED
TRANSACTIONS (PAGE 60)
In considering the recommendation of the IGEN board of directors that you
vote "FOR" the adoption of the merger agreement, you should be aware that the
members of the IGEN board of directors and IGEN's executive officers have
personal interests in the merger and related transactions that are or may be
different from, or in addition to, the interests of other IGEN stockholders.
These interests include:
- accelerated vesting of options to acquire 307,383 shares of IGEN common
stock, in the aggregate, which would entitle the members of the IGEN
board of directors and IGEN's executive officers to receive, in the
aggregate, approximately $5.5 million in cash and 307,383 shares of
BioVeris common stock;
- continued rights to indemnification and exculpation from liabilities for
certain acts or omissions;
- continued coverage under directors' and officers' liability insurance
with limits of $30 million for claims arising from or related to facts or
events which occurred at or prior to the completion of the merger;
- continued employment of IGEN's three executive officers in similar
positions with BioVeris for annual salaries anticipated to be initially
comparable to the current sala-
5
ries being received from IGEN, which is approximately $1,011,000 in the
aggregate;
- receipt by Messrs. Samuel Wohlstadter, Richard Massey and George Migausky
of a transaction bonus of $1,278,000, $450,000 and $450,000,
respectively, simultaneous with completion of the merger and related
transactions; and
- appointment of the members of the IGEN board of directors (other than Mr.
Richard Cass) to the BioVeris board of directors, with each non-employee
director entitled to receive a $10,000 annual retainer, a $1,000
attendance fee per meeting attended, the options discussed in the next
paragraph and additional fees for serving on committees of the BioVeris
board of directors, which represent an increase from the compensation
non-employee directors were entitled to receive from IGEN.
Furthermore, if approved by IGEN stockholders, BioVeris will adopt the
BioVeris 2003 stock incentive plan pursuant to which each of BioVeris's
non-employee directors will automatically receive annual grants of options to
purchase 4,000 shares of BioVeris common stock and BioVeris's executive officers
will be eligible to receive option grants or other equity-based awards. In
addition, any person who is appointed or elected as a non-employee director of
BioVeris will automatically receive grants of options to purchase 4,000 shares
of BioVeris common stock.
In addition, as part of the merger and related transactions:
- BioVeris has agreed to make a final capital contribution of $37.5 million
(of which any amount in excess of $30 million will be funded by Mr.
Samuel Wohlstadter, IGEN's and BioVeris's chairman and chief executive
officer, through the purchase of shares of BioVeris series B preferred
stock that economically mirror the class C interests in MSD to be held by
BioVeris) to MSD, a company formed by IGEN and MST, which is a company
established and wholly-owned by Mr. Jacob Wohlstadter, a son of Mr.
Samuel Wohlstadter;
- BioVeris has agreed to assume IGEN's obligations under Mr. Jacob
Wohlstadter's employment agreement, consulting agreement and
indemnification agreement, pursuant to which Mr. Jacob Wohlstadter will
be entitled to receive an annual salary of $250,000 plus bonus and
benefits from MSD, compensation from BioVeris for consulting services, if
any, that may be provided to and at the request of BioVeris and
indemnification by BioVeris against claims arising from services rendered
to BioVeris; and
- BioVeris has agreed to assume all of IGEN's current agreements and
understandings with companies controlled by Mr. Samuel Wohlstadter,
including certain shared services agreements and license agreements.
Also, upon completion of the merger, the MSD joint venture agreement will
expire and MSD will have the right to purchase BioVeris's entire interest in MSD
for a purchase price equal to fair market value determined in accordance with
the MSD joint venture agreement, less a discount factor. The discount factor
will be equal to 7.5% if the MSD joint venture agreement expires upon the
completion of the merger and has not been otherwise terminated before
completion. In the event MSD or MST elects to purchase BioVeris's interest in
MSD, BioVeris will only be entitled to receive the purchase price payable over
time in installments equal to the sum of 5% of MSD net sales, as determined in
accordance with the MSD agreements, and 20% of the net proceeds realized from
certain third-party financings in accordance with the MSD agreements. In the
event such future net sales of MSD or third-party financings do not materialize,
BioVeris will not receive any payments from MSD or MST, as the case may be, for
the purchase of BioVeris's interest in MSD.
For a more complete description, see "The Merger and Related
Transactions -- Interests of IGEN's Directors and Executive Officers in the
Merger and Related Transactions" and "Certain Relationships and Related Party
Transactions."
In addition, in considering the recommendation of the IGEN board of
directors that you vote "FOR" the approval of the proposed BioVeris 2003 stock
incentive plan, you should be aware that the members of the IGEN board of
directors and IGEN's executive officers have personal interests in the approval
of the BioVeris 2003 stock
6
incentive plan that are or may be different from, or in addition to, the
interests of others IGEN stockholders, including being eligible to receive
option grants or other equity-based awards under the BioVeris 2003 stock
incentive plan if adopted.
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF BIOVERIS AND IGEN (PAGES 173 AND
178)
IGEN stockholders, whose rights are currently governed by IGEN's
certificate of incorporation and by-laws and Delaware law, will, upon completion
of the merger, become BioVeris stockholders and their rights with respect to
their ownership of BioVeris common stock will be governed by BioVeris's
certificate of incorporation and by-laws, which are similar to IGEN's
certificate of incorporation and by-laws, and Delaware law. In addition,
BioVeris intends to adopt prior to the completion of the merger and related
transactions a stockholder rights agreement, pursuant to which shares of
BioVeris preferred stock will be designated as BioVeris series A participating
cumulative preferred stock for issuance in connection with the exercise of the
right attached to each share of BioVeris common stock. For a more complete
description, see "Description of BioVeris Capital Stock" and "Comparison of
Rights of Common Stockholders of BioVeris and IGEN."
THE SPECIAL MEETING (PAGE 38)
The special meeting of IGEN stockholders will take place on January ,
2004, at 10:00 a.m., local time, at . At the special meeting,
holders of IGEN common stock will be asked to adopt the merger agreement and
approve the proposed BioVeris 2003 stock incentive plan. You are not being asked
to vote on the restructuring of IGEN's operations.
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM (PAGE 38)
If you were the owner of record of IGEN common stock at the close of
business on November 17, 2003, the record date for the special meeting, you are
entitled to vote at the special meeting.
On the record date for the special meeting, 24,979,961 shares of IGEN
common stock were issued and outstanding and entitled to vote at the special
meeting. You will have one vote on each matter submitted to a vote at the
special meeting for each share of IGEN common stock that you owned on the record
date for the special meeting.
VOTES REQUIRED (PAGE 38)
The adoption of the merger agreement requires the affirmative vote of
stockholders holding a majority of the shares of IGEN common stock outstanding
on the record date for the special meeting.
The approval of the proposed BioVeris 2003 stock incentive plan requires
the vote of a majority of the votes cast, excluding abstentions, at the special
meeting at which a quorum is present.
ANTITRUST MATTERS (PAGE 67)
United States antitrust laws prohibit Roche and IGEN from completing the
merger until they have furnished certain information and materials to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
applicable waiting period has expired or been terminated. On September 5, 2003,
Roche and IGEN each filed the required notification and report forms with the
Antitrust Division and the Federal Trade Commission and Roche requested early
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. Early termination of the required waiting period was
granted effective on September 29, 2003. For a more complete description, see
"The Merger and Related Transactions -- Antitrust Matters."
APPRAISAL RIGHTS (PAGE 68)
IGEN stockholders who do not vote in favor of adoption of the merger
agreement have the right under Delaware law to demand appraisal of their shares
of IGEN common stock and to receive payment in cash for the fair value of their
shares as determined by the Delaware Court of Chancery. The fair value of shares
of IGEN common stock as determined by the Delaware Court of Chancery may be more
or less than or the same as the value of the merger consideration to be paid to
IGEN stockholders who do not exercise appraisal rights. To exercise appraisal
rights, IGEN stockholders must not vote in favor of adoption of the merger
agreement and must precisely follow specific procedures, or the appraisal rights
may be lost. For a description of these procedures, see "The Merger and Related
7
Transactions -- Appraisal Rights" and the copy of the relevant provision of
Delaware law attached as Annex 17 to this proxy statement/prospectus.
SHARE OWNERSHIP OF IGEN'S DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATES (PAGE 39)
At the close of business on the record date for the special meeting, IGEN's
directors and executive officers and their respective affiliates beneficially
owned and were entitled to vote 5,368,318 shares of IGEN common stock, which
represented approximately 21% of the shares of IGEN common stock outstanding on
that date.
THE MERGER AND RELATED TRANSACTIONS (PAGE 43)
The merger agreement is attached as Annex 2 to this proxy
statement/prospectus. IGEN and BioVeris encourage you to read the merger
agreement carefully because it is one of the principal documents governing the
merger and related transactions.
THE AGREEMENTS
Simultaneously with the execution and delivery of the merger agreement,
IGEN, BioVeris, Roche and certain of Roche's affiliates, including 66
Acquisition Corporation II, which is referred to in this proxy
statement/prospectus as the merger sub, and Roche Diagnostics GmbH, which is
referred to in this proxy statement/prospectus as Roche Diagnostics, IGEN LS
LLC, which is referred to in this proxy statement/prospectus as the license sub,
Mr. Samuel Wohlstadter, Mr. Jacob Wohlstadter, MSD, MST, which is a company
established and wholly-owned by Mr. Jacob Wohlstadter, and JW Consulting
Services L.L.C., also a company established and wholly-owned by Mr. Jacob
Wohlstadter, also entered into the following agreements:
- the restructuring agreement, attached as Annex 1;
- the post-closing covenants agreement, attached as Annex 3;
- the tax allocation agreement, attached as Annex 4;
- the ongoing litigation agreement, attached as Annex 5;
- the global consent and agreement, attached as Annex 6;
- the MSD letter agreement, attached as Annex 7;
- the BioVeris preferred stock purchase agreement, attached as Annex 8;
- the release and agreement, attached as Annex 9;
- the improvements license agreement, attached as Annex 11;
- the covenants not to sue, attached as Annex 12;
- the PCR product license agreement, attached as Annex 13; and
- the PCR services license agreement, attached as Annex 14.
In addition, simultaneously with the execution and delivery of the merger
agreement, IGEN and the license sub entered into the license agreement, attached
as Annex 10.
The restructuring agreement, the post-closing covenants agreement, the tax
allocation agreement, the ongoing litigation agreement, the global consent and
agreement and the release and agreement are referred to in this proxy
statement/prospectus as the related transaction agreements. The improvements
license agreement, the covenants not to sue, the license agreement, the PCR
product license agreement and the PCR services license agreement are referred to
in this proxy statement/prospectus as the ongoing commercial agreements.
THE RESTRUCTURING AND THE LICENSE AGREEMENT(PAGES 72 AND 102)
Pursuant to the restructuring agreement between IGEN and BioVeris, prior to
the completion of the merger, IGEN will transfer certain of its assets and
liabilities to BioVeris, which is referred to in this proxy statement/prospectus
as the restructuring. As part of the restructuring, BioVeris, a newly formed,
wholly-owned subsidiary of IGEN, will assume IGEN's biodefense, life sciences
and industrial product lines as well as IGEN's opportunities in the clinical
diagnostics and healthcare fields, and will own IGEN's intellectual property,
IGEN's equity interest in MSD, a company formed by IGEN and MST, which is a
company established and wholly-owned by Mr. Jacob Wohlstadter, a son of IGEN's
and
8
BioVeris's chairman and chief executive officer, cash, and certain other rights
and licenses currently held by IGEN. IGEN and the license sub will retain IGEN's
remaining businesses, including worldwide, non-exclusive, fully-paid,
royalty-free rights to ECL technology in the human in vitro diagnostics field
described below.
Upon completion of the merger and related transactions, BioVeris will
become an independent, publicly-traded company owned by IGEN stockholders.
BioVeris will have the assets described above as well as certain ongoing
commercial agreements with affiliates of Roche.
Following completion of the merger, IGEN and Roche, on the one hand, and
BioVeris, on the other hand, will indemnify each other with respect to various
losses, damages, claims and liabilities, including those arising out of IGEN's
and BioVeris's respective businesses.
Under the license agreement, IGEN and its affiliates granted to the license
sub, effective simultaneously with the completion of the merger, a worldwide,
non-exclusive, fully-paid, royalty-free license under patents and technology
that relate to detection methods and systems which employ ECL technology, but
specifically excluding technology related to gene amplification or compounds
composed of or capable of binding with nucleotides, which collectively are
referred to in this proxy statement/prospectus as the licensed ECL technology.
The license may be used only in a specific field, generally described in this
proxy statement/prospectus as the human in vitro diagnostics field, to develop,
make, reproduce, modify, use, sell and otherwise commercially exploit specified
products. The license sub will remain a subsidiary of IGEN, and therefore will
be a subsidiary of Roche, following the merger. IGEN's rights, as licensor under
the license agreement, will be transferred to BioVeris as part of the
restructuring.
ACCOUNTING TREATMENT OF THE RESTRUCTURING (PAGE 64)
The transfer of certain assets and liabilities by IGEN to BioVeris will be
accounted for based upon the authoritative guidance governing the distribution
of nonmonetary assets to an entity under "common control." As such, IGEN's
historical cost basis in the assets and liabilities transferred will become the
initial recorded value of these assets and liabilities by BioVeris upon
completion of the restructuring.
THE MERGER (PAGE 76)
At the completion of the merger, the merger sub, a wholly-owned subsidiary
of Roche, will merge with and into IGEN. IGEN will survive the merger as a
wholly-owned subsidiary of Roche.
Upon completion of the merger and related transactions, each outstanding
share of IGEN common stock (other than shares held by stockholders who validly
exercise appraisal rights) will be converted into the right to receive:
- $47.25 in cash, without interest; and
- one share of BioVeris common stock.
CONDITIONS TO THE COMPLETION OF THE MERGER (PAGE 76)
Roche and IGEN will complete the merger only if they satisfy, or in some
cases, waive, several conditions, including the following:
- the adoption of the merger agreement by IGEN stockholders;
- the expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976;
- the absence of any legal restraint or prohibition preventing the
completion of the merger;
- the registration statement of which this proxy statement/prospectus forms
a part not being the subject of any stop order or proceedings seeking a
stop order;
- certain consents by MSD or agreements to which MSD is party, which are
more fully described below, must be in full force and effect and must not
have been amended or modified without the consent of Roche and IGEN; and
- the release and agreement, among IGEN, BioVeris and certain companies
owned or controlled by Mr. Samuel Wohlstadter, which is more fully
described below, must be in full force and effect and must not
9
have been amended or modified without the consent of Roche, IGEN and
BioVeris.
Roche's obligation to complete the merger is subject to satisfaction or
waiver of additional conditions, including the following:
- the accuracy of IGEN's representations and warranties in the merger
agreement, subject in some instances as to materiality or transaction
material adverse effect;
- the performance by IGEN of its obligations under the merger agreement,
subject in some instances as to materiality or transaction material
adverse effect;
- the completion by IGEN of the restructuring;
- the payment in full by IGEN of its 8.5% senior secured notes; and
- the receipt by IGEN of a solvency opinion from an independent solvency
firm of nationally recognized reputation substantially to the effect that
BioVeris will not be insolvent after giving effect to the merger and
related transactions.
A "transaction material adverse effect" means any change, effect,
occurrence, condition, development or any state of facts, except those arising
out of, related to, or in connection with, the Roche litigation or the patent
infringement litigation against Roche Diagnostics in Maryland and Germany or
principally attributable to the economy in general or BioVeris's industry in
general, that
- renders IGEN insolvent immediately prior to completion of the merger or
- after giving effect to the merger and related transactions (1) results in
or would reasonably be expected to result in a loss by IGEN or BioVeris
of certain licenses or intellectual property rights, in the case of each,
that materially impairs the legal right of Roche Diagnostics and its
affiliates to make, have made, use, sell, place or otherwise
commercialize products using the licensed ECL technology or (2) renders
BioVeris insolvent at the time of the merger.
IGEN's obligation to complete the merger is also subject to satisfaction or
waiver of additional conditions, including the following:
- the accuracy of Roche's and the merger sub's representations and
warranties in the merger agreement, subject in some instances as to
materiality;
- the performance by Roche and the merger sub in all material respects of
their obligations under the merger agreement;
- BioVeris's common stock must have been approved for listing on a national
securities exchange or approved for quotation on The NASDAQ Stock
Market(R); and
- Roche having loaned to IGEN $214 million minus the amount of cash
received by IGEN from the exercise of IGEN stock options and warrants
from the date of the merger agreement to the date that is two business
days prior to the completion of the merger (this loan will remain IGEN's
obligation after completion of the merger).
For a more complete description, see "The Merger Agreement -- Conditions."
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEE; FEES AND EXPENSES (PAGES
80 AND 81)
The merger agreement contains provisions addressing the circumstances under
which Roche or IGEN may terminate the merger agreement. In addition, the merger
agreement provides that, in several circumstances, IGEN may be required to pay
Roche a termination fee of $26.6 million, including if IGEN terminates the
merger agreement to accept a superior proposal. In addition, if the merger
agreement is terminated in specified circumstances, IGEN is required to
reimburse Roche for all of its reasonable expenses in connection with the merger
agreement, the related transaction agreements, the ongoing commercial agreements
and the merger and related transactions, subject to a $5 million cap. For a more
complete description, see "The Merger Agreement -- Termination of the Merger
Agreement" and "The Merger Agreement -- Fees and Expenses."
Except if the merger agreement is terminated in specified circumstances,
each of Roche and IGEN, will pay its own fees and expenses in
10
connection with the merger and related transactions. IGEN will either pay its
expenses prior to the completion of the merger or such expenses will be assumed
by BioVeris pursuant to the restructuring agreement.
POST-CLOSING COVENANTS AGREEMENT (PAGE 88)
The post-closing covenants agreement among Roche, IGEN and BioVeris governs
certain relationships between BioVeris and Roche following completion of the
merger, including, among other things:
- indemnification by BioVeris and Roche of each other with respect to
certain matters;
- an agreement by Roche not to solicit BioVeris's employees;
- continued indemnification of IGEN's current or former directors and
officers;
- continued coverage under directors' and officers' liability insurance for
claims arising from or related to facts or events which occurred at or
prior to the completion of the merger;
- a continuing standstill agreement;
- limitations on certain claims by BioVeris, Roche and their respective
affiliates against each other or their respective affiliates; and
- mutual releases between Roche, on the one hand, and BioVeris, on the
other hand, of certain liabilities.
TAX ALLOCATION AGREEMENT (PAGE 92)
The tax allocation agreement among Roche, the merger sub, IGEN and BioVeris
allocates responsibility among the parties for preparing and filing tax returns
and paying taxes. This agreement also provides for BioVeris to make a payment to
IGEN of up to $20 million. The amount of the payment will depend upon the
average of the high and the low trading prices of BioVeris common stock on the
first day of trading after the completion of the merger. A payment will be due
if such average is at least approximately $11.41 per share and the maximum
payment will be due if such average exceeds approximately $13.28, in each case
based on the assumption that BioVeris will have $205 million in cash and cash
equivalents immediately after completion of the merger and prior to making any
payments due pursuant to the related transaction agreements, the ongoing
commercial agreements or the MSD letter agreement. The distribution of BioVeris
stock will be a taxable transaction for IGEN and the purpose of this payment is
for BioVeris to share in a portion of the tax that IGEN might incur as a result
of that distribution. The formula, which takes into account the expected
approximate tax basis and tax rate that would be used in IGEN's calculation of
its tax, was negotiated by Roche and IGEN as part of the overall negotiation of
the merger.
ONGOING LITIGATION AGREEMENT (PAGE 93)
The ongoing litigation agreement among IGEN and certain affiliates of Roche
provides for all litigation between IGEN and Roche to be suspended pending the
completion of the merger. As a result, on July 25, 2003, Roche Diagnostics filed
a motion to withdraw its petition to the Appellate Court for rehearing of the
Roche litigation and on August 1, 2003, the Appellate Court granted the motion.
The Appellate Court returned the matter to the District Court on August 8, 2003
for entry of a final order consistent with the Appellate Court ruling. The
parties have not made any filing with the District Court, and the District Court
has not issued any further orders in this case. In connection with the patent
infringement litigation in Maryland, on August 1, 2003, IGEN and Roche
Diagnostics filed a joint motion to stay, which was promptly granted by the
court. In connection with the patent infringement litigation in Germany, on
August 8, 2003, IGEN and Roche Diagnostics jointly filed the required documents
to obtain a stay of the patent infringement litigation in Germany. No further
action is required of the parties or the court in order to stay the proceedings.
In addition, in the ongoing litigation agreement Roche agreed to pay IGEN a
monthly fee of $5 million as partial consideration for the ongoing litigation
agreement.
GLOBAL CONSENT AND AGREEMENT (PAGE 96)
The global consent and agreement among BioVeris, IGEN, Roche, MSD, MST, Mr.
Jacob Wohlstadter and JW Consulting Services, L.L.C., sets forth, among other
things, the consent of MSD, MST, Mr. Jacob Wohlstadter and
11
JW Consulting Services, L.L.C. to the transfer of IGEN's interest in MSD to
BioVeris and grants all waivers and consents of such parties necessary to permit
the completion of the merger and related transactions and the performance by
IGEN, BioVeris and each consenting party of their obligations under the merger
agreement, the related transaction agreements and the ongoing commercial
agreements.
MSD LETTER AGREEMENT AND BIOVERIS PREFERRED STOCK PURCHASE AGREEMENT (PAGE 98
AND 99)
Pursuant to the MSD letter agreement among IGEN, BioVeris, MSD, MST, Mr.
Jacob Wohlstadter and JW Consulting Services, L.L.C., a company established and
wholly-owned by Mr. Jacob Wohlstadter, BioVeris agreed to make a final capital
contribution of $37.5 million to MSD, a company formed by IGEN and MST, which is
a company established and wholly-owned by Mr. Jacob Wohlstadter, a son of Mr.
Samuel Wohlstadter, IGEN's and BioVeris's chairman and chief executive officer.
Of the $37.5 million, Mr. Samuel Wohlstadter will fund any amount in excess of
$30 million through the purchase of shares of BioVeris preferred stock that
economically mirror the class C interests in MSD to be held by BioVeris, as
specified in the BioVeris preferred stock purchase agreement between Mr. Samuel
Wohlstadter and BioVeris.
In addition, IGEN and MST agreed to extend the expiration of the terms of
the MSD joint venture agreement until the later of
- November 30, 2003, or
- the earlier of the completion of the merger or the termination of the
merger agreement in accordance with its terms.
RELEASE AND AGREEMENT (PAGE 100)
Hyperion Catalysis International, Wellstat Biologics Corporation, Wellstat
Therapeutics Corporation, Proteinix Corporation and Integrated Chemical
Synthesizers, Inc., which are collectively referred to in this proxy
statement/prospectus as the related companies, have entered into a release and
agreement with BioVeris and IGEN, pursuant to which, among other things, IGEN
and the related companies agreed to release each other from any liabilities or
obligations arising out of their relationship or any of their agreements and
understandings, and that all such agreements and understandings would be
transferred to BioVeris.
IMPROVEMENTS LICENSE AGREEMENT (PAGE 104)
Under the improvements license agreement entered into simultaneously with
the execution and delivery of the merger agreement, Roche Diagnostics and its
affiliates granted to IGEN, effective simultaneously with the completion of the
merger, an irrevocable, worldwide, non-exclusive, fully-paid, royalty-free,
perpetual license under certain patents covering and technologies based on:
- Roche Diagnostics' ECL instruments and all aspects of ECL assays
developed prior to the completion of the merger;
- certain polymerase chain reaction, or PCR, technology; or
- all aspects of ECL technology and robotics used or developed by Roche
Diagnostics or its affiliates prior to the completion of the merger to be
used in performing ECL testing (other than certain antibodies, antigens
and certain reagents).
The license may be used to develop, make, reproduce, modify, use, sell and
otherwise commercially exploit any product or service based on ECL technology.
IGEN has agreed, however, that the license does not permit it to manufacture or
sell ECL instruments that both meet certain specifications and use specific
intellectual property in the field defined in the improvements license
agreement. IGEN has further agreed that the license does not permit it to
develop, use, manufacture or sell ECL assays that contain labeling that make
them useable on:
- ECL instruments manufactured, sold or placed by Roche Diagnostics or its
licensees or resellers in the field defined in the improvements license
agreement; or
- ECL instruments that meet certain specifications, use specific
intellectual property and are manufactured by IGEN, its affiliates,
sublicensees or authorized third parties which are used in the field
defined in the improvements license agreement.
In addition, IGEN is licensed to use certain Hitachi intellectual property
rights to make any product or service based on ECL technology, but
12
only outside the field defined in the improvements license agreement, which is
generally human in vitro diagnostics. IGEN's interests under this agreement will
be assigned to BioVeris as part of the restructuring.
COVENANTS NOT TO SUE (PAGE 106)
Under the covenants not to sue entered into simultaneously with the
execution and delivery of the merger agreement, each of Roche, Roche Diagnostics
and the license sub agreed on behalf of themselves and their respective
affiliates that, effective simultaneously with the completion of the merger,
they would not, directly or indirectly, pursue any claim against BioVeris, MSD
or MST or any of their respective affiliates, sublicensees and other related
parties, that the manufacture, use or sale of a product, the provision of any
service, or the practice of any method that is, in each case, conducted with
respect to a product or service that uses ECL technology and is conducted after
completion of the merger infringes certain Roche and Roche Diagnostics ECL
patents that are filed or acquired after the completion of the merger. Those ECL
patents owned by Roche or Roche Diagnostics or their affiliates that claim their
earliest priority from a patent application filed on or before the completion of
the merger are licensed to BioVeris under the improvements license agreement.
Also, each of BioVeris, MSD and MST agreed on behalf of themselves and
their respective affiliates that, effective simultaneously with the completion
of the merger, they would not, directly or indirectly, pursue any claim against
Roche, Roche Diagnostics, the license sub or any of their respective affiliates
and other related parties, that the manufacture, use or sale of a product or the
provision of any service or the practice of any method that is, in each case,
conducted with respect to a product or service that uses ECL technology in the
field and is conducted after completion of the merger infringes certain
BioVeris, MSD or MST ECL patents that are filed or acquired after the completion
of the merger. Those ECL patents owned by IGEN or its affiliates, excluding MSD
and MST, that claim their earliest priority from a patent application filed on
or before the completion of the merger are licensed to the license sub under the
license agreement.
The covenants do not, however, prevent actions or claims based on
violations of the license agreement or the improvements license agreement.
PCR LICENSE AGREEMENTS (PAGE 107)
Under the PCR license agreements entered into simultaneously with the
execution and delivery of the merger agreement, F. Hoffmann-La Roche Ltd, Roche
Diagnostics and Roche Molecular Systems, Inc. granted to BioVeris and its
affiliates, effective simultaneously with the completion of the merger and in
return for a license fee of $50 million plus royalties as specified in the PCR
license agreements, worldwide, non-exclusive licenses under patents that cover
PCR inventions for:
- the performance of sample collection, preparation, transport and/or
isolation of nucleic acid sequences using PCR;
- the amplification of nucleic acid sequences using PCR;
- the detection of nucleic acid sequences using PCR;
- the synthesis, purification, labeling and/or immobilization of nucleic
acid probes used in PCR; and/or
- the control of contamination.
The licenses may be used to make, use and sell certain products and perform
certain services in specified fields.
MARKET PRICES AND DIVIDEND INFORMATION (PAGE 111)
Shares of IGEN common stock are quoted on The NASDAQ National Market(R).
The following table presents the last reported sale price of a share of IGEN
common stock, as reported by the Dow Jones & Company, Inc. on:
- July 21, 2003, the last full trading day prior to the published press
reports that Roche and IGEN were in advanced discussions regarding the
proposed merger;
- July 23, 2003, the last full trading day prior to the public announcement
that Roche and IGEN had signed the definitive merger agreement; and
13
- December 10, 2003, the last practicable trading day prior to the date of
this proxy statement/prospectus.
IGEN
DATE COMMON STOCK
---- ------------
July 21, 2003.................. $34.40
July 23, 2003.................. 37.79
December 10, 2003.............. 60.56
BioVeris has no history as an independent, publicly-traded company.
BioVeris has applied for its common stock to be quoted on The NASDAQ National
Market(R) under the symbol "BIOV" and it is anticipated that BioVeris common
stock will be quoted on The NASDAQ National Market(R) immediately after the
completion of the merger.
IGEN has never paid a dividend. It is anticipated that BioVeris will not
pay dividends in the foreseeable future, if at all. See "Dividend Policy."
14
COMPARATIVE PER SHARE INFORMATION
The following table shows certain per share data of IGEN and BioVeris and
also shows similar information reflecting the completion of the merger of Roche
and IGEN, which is referred to as "pro forma" information.
The comparative per share data is derived from, and should be read with,
the historical financial statements of IGEN that are included in the documents
described under "Where You Can Find More Information" on page 192 and the
historical financial statements of BioVeris included in this proxy
statement/prospectus.
IGEN has not declared or paid any cash dividends on IGEN common stock
during any of the periods presented.
All BioVeris per share information is based on the number of shares of
BioVeris common stock expected to be outstanding upon completion of the merger
and related transactions.
YEAR ENDED SIX MONTHS
MARCH 31, ENDED
2003 SEPTEMBER 30, 2003
---------- ------------------
IGEN:
Historical net income (loss) per diluted share.............. $(1.19) $ 0.26
Unaudited pro forma net income (loss) per diluted share..... $(1.19) $ 0.26
Unaudited historical book value per diluted share........... $ 0.54 $ 2.24
Unaudited pro forma book value per diluted share............ $ 0.54 $ 2.24
Historical cash dividends per diluted share................. $ -- $ --
Unaudited pro forma cash dividends per diluted share........ $ -- $ --
BIOVERIS:
Historical net loss per share............................... $(1.90) $(0.89)
Pro forma net loss per share................................ $(1.90) $(0.89)
Unaudited historical book value per share................... $ 0.77 $ 0.97
Unaudited pro forma book value per share.................... $ 8.72 $ 8.93
Historical cash dividends per share......................... $ -- $ --
Unaudited pro forma cash dividends per share................ $ -- $ --
15
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
You should read the following summary historical consolidated financial
data of BioVeris in conjunction with BioVeris's consolidated financial
statements and notes and the other information contained in or incorporated by
reference into this proxy statement/prospectus. The summary historical
consolidated balance sheet data as of March 31, 2002 and 2003 and the summary
historical consolidated statements of operations data for the fiscal years ended
March 31, 2001, 2002 and 2003 have been derived from BioVeris's consolidated
financial statements that have been audited by Deloitte & Touche LLP,
independent auditors, and are included elsewhere in this proxy
statement/prospectus. The summary historical consolidated balance sheet data as
of March 31, 1999, 2000 and 2001 and September 30, 2003 and the summary
historical consolidated statements of operations data for the fiscal years ended
March 31, 1999 and 2000 and the six month periods ended September 30, 2002 and
2003 have been derived from BioVeris's unaudited consolidated financial
statements as of or for the periods then ended not included or incorporated by
reference in this proxy statement/prospectus. The unaudited consolidated
financial statements for the fiscal years ended March 31, 1999 and 2000 and the
six month periods ended September 30, 2002 and 2003 have been prepared on a
basis consistent with BioVeris's audited consolidated financial statements and,
in the opinion of BioVeris's management, include all adjustments, consisting
only of normal recurring adjustments considered necessary for a fair
presentation of BioVeris's consolidated financial position and consolidated
results of operations for these periods. BioVeris's consolidated results of
operations for the six months ended September 30, 2002 and 2003 are not
necessarily indicative of results for the year ending March 31, 2004 or any
future period.
The assets and businesses of BioVeris have historically been owned and
operated by IGEN. The accompanying financial statements have been prepared and
are presented as if BioVeris had been operating as a separate entity using
IGEN's historical cost basis in the assets and liabilities and including the
historical operations of the businesses and assets to be transferred to BioVeris
from IGEN as part of the restructuring.
IGEN has not declared or paid any cash dividends on IGEN common stock
during any of the periods presented.
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1999 2000 2001 2002 2003 2002 2003
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues:
Product sales.............. $ 4,949 $ 7,743 $ 8,935 $ 12,077 $ 16,487 $ 6,971 $ 10,414
Royalty income............. 839 1,118 892 1,050 1,107 513 540
Contract fees.............. -- -- 3,987 116 180 49 70
-------- -------- -------- -------- -------- -------- --------
Total revenues........... 5,788 8,861 13,814 13,243 17,774 7,533 11,024
-------- -------- -------- -------- -------- -------- --------
Operating costs and expenses:
Product costs.............. 1,340 2,262 3,112 5,361 8,005 2,958 5,773
Research and development... 14,016 18,335 27,983 26,829 22,766 11,933 10,252
Selling, general and
administrative........... 8,854 12,242 13,200 19,217 20,453 10,197 9,184
-------- -------- -------- -------- -------- -------- --------
Total operating costs and
expenses............... 24,210 32,839 44,295 51,407 51,224 25,088 25,209
-------- -------- -------- -------- -------- -------- --------
Loss from operations......... (18,422) (23,978) (30,481) (38,164) (33,450) (17,555) (14,185)
Other, net................... (198) (80) (243) (39) 154 159 48
Equity in loss of
affiliate.................. -- -- -- (10,947) (17,598) (9,455) (9,680)
-------- -------- -------- -------- -------- -------- --------
Net loss................... $(18,620) $(24,058) $(30,724) $(49,150) $(50,894) $(26,851) $(23,817)
======== ======== ======== ======== ======== ======== ========
16
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1999 2000 2001 2002 2003 2002 2003
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Unaudited pro forma net loss
per common share(1)........ $ (0.70) $ (0.90) $ (1.15) $ (1.84) $ (1.90) $ (1.00) $ (0.89)
======== ======== ======== ======== ======== ======== ========
Unaudited pro forma common
shares outstanding(1)...... 26,729 26,729 26,729 26,729 26,729 26,729 26,729
======== ======== ======== ======== ======== ======== ========
MARCH 31,
----------------------------------------------- SEPTEMBER 30,
1999 2000 2001 2002 2003 2003
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Working capital................. $(2,531) $ 181 $(1,301) $ 1,193 $ 4,733 $ 5,140
Total assets.................... 6,983 13,752 16,379 21,518 29,160 32,449
Net investment by IGEN.......... (188) 5,955 6,775 14,151 20,665 26,060
---------------
(1) Based on the number of shares of BioVeris common stock expected to be
outstanding upon completion of the merger and related transactions.
17
RISK FACTORS
In addition to the other information included and incorporated by reference
in this proxy statement/ prospectus, IGEN stockholders should consider carefully
the matters described below in determining whether to vote for adoption of the
merger agreement. BioVeris is a newly formed, wholly-owned subsidiary of IGEN.
Upon completion of the merger and related transactions, BioVeris will become an
independent, publicly-traded company. The assets and businesses BioVeris will
assume as part of the restructuring have historically been owned and operated by
IGEN. The following risks relating to BioVeris and its businesses assumes the
restructuring and the merger and related transactions have been completed.
RISKS RELATING TO THE MERGER AND RELATED TRANSACTIONS
DIRECTORS OF IGEN HAVE POTENTIAL CONFLICTS OF INTEREST IN RECOMMENDING THAT
YOU VOTE IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT.
The members of the IGEN board of directors have personal interests in the
merger and related transactions that are or may be different from, or in
addition to, the interests of other IGEN stockholders. These interests include:
- accelerated vesting of options to acquire 270,633 shares of IGEN common
stock, in the aggregate, which would entitle IGEN's directors to receive,
in the aggregate, approximately $4.9 million and 270,633 shares of
BioVeris common stock;
- continued rights to indemnification and exculpation from liabilities for
certain acts or omissions;
- continued coverage under directors' and officers' liability insurance
with limits of $30 million for claims arising from or related to facts or
events which occurred at or prior to the completion of the merger;
- continued employment of IGEN's two directors who are also executive
officers in similar positions with BioVeris for annual salaries
anticipated to be initially comparable to the current salaries being
received from IGEN, which is approximately $743,000 in the aggregate;
- receipt by IGEN's two directors who are also executive officers in their
capacities as executive officers of a transaction bonus simultaneous with
completion of the merger and related transactions in the aggregate amount
of approximately $1.7 million; and
- appointment of the members of the IGEN board of directors (other than Mr.
Richard Cass) to the BioVeris board of directors with each non-employee
director entitled to receive a $10,000 annual retainer, a $1,000
attendance fee per meeting attended, the options discussed in the next
paragraph and additional fees for serving on committees of the BioVeris
board of directors, which represent an increase from the compensation
non-employee directors were entitled to receive from IGEN.
Furthermore, if approved by IGEN stockholders, BioVeris will adopt the
BioVeris 2003 stock incentive plan pursuant to which each of BioVeris's
non-employee directors will automatically receive annual grants of options to
purchase 4,000 shares of BioVeris common stock and BioVeris's executive officers
will be eligible to receive option grants and other equity-based awards.
In addition, as part of the merger and related transactions:
- BioVeris has agreed to make a final capital contribution of $37.5 million
(of which any amount in excess of $30 million will be funded by Mr.
Samuel Wohlstadter, IGEN's and BioVeris's chairman and chief executive
officer, through the purchase of shares of BioVeris series B preferred
stock that economically mirror the class C interests in MSD to be held by
BioVeris) to MSD, a company formed by IGEN and MST, which is a company
established and wholly-owned by Mr. Jacob Wohlstadter, a son of Mr.
Samuel Wohlstadter;
- BioVeris has agreed to assume IGEN's obligations under Mr. Jacob
Wohlstadter's employment agreement, consulting agreement and
indemnification agreement, pursuant to which Mr. Jacob
18
Wohlstadter will be entitled to receive an annual salary of $250,000 plus
bonus and benefits from MSD, compensation from BioVeris for consulting
services, if any, that may be provided to and at the request of BioVeris
and indemnification by BioVeris against claims arising from services
rendered to BioVeris; and
- BioVeris has agreed to assume all of IGEN's current agreements and
understandings with companies controlled by Mr. Samuel Wohlstadter,
including certain shared services agreements and license agreements.
For a more complete description, see "The Merger and Related
Transactions -- Interests of IGEN's Directors and Executive Officers in the
Merger and Related Transactions."
The receipt of these benefits or the undertaking of certain obligations by
BioVeris in connection with the merger and related transactions may have
influenced these directors in making their recommendation that you vote in favor
of the adoption of the merger agreement.
DEPENDING ON BIOVERIS'S STOCK PRICE ON THE FIRST DAY OF TRADING AFTER THE
COMPLETION OF THE MERGER, BIOVERIS COULD BE REQUIRED TO PAY UP TO $20 MILLION
TO IGEN, WHICH WOULD CONSIDERABLY REDUCE BIOVERIS'S AVAILABLE CASH.
Under the tax allocation agreement, BioVeris is required to make a payment
to IGEN of up to $20 million. The amount of the payment will depend upon the
average of the high and low trading prices of BioVeris common stock on the first
day of trading after completion of the merger. The amount of the payment, which
will not exceed $20 million, will equal 40% of the excess of:
- the product of (1) the average of the high and low trading price for a
share of BioVeris common stock on the first day of trading after the
completion of the merger and (2) the number of shares of BioVeris common
stock distributed in the merger; over
- $100 million plus the amount of cash and cash equivalents as reflected on
BioVeris's balance sheet, as measured immediately after the completion of
the merger.
The distribution of BioVeris stock will be a taxable transaction for IGEN
and the purpose of this payment is for BioVeris to share in a portion of the tax
that IGEN might incur as a result of that distribution. The formula, which takes
into account the expected approximate tax basis and tax rate that would be used
in IGEN's calculation of its tax, was negotiated by Roche and IGEN as part of
the overall negotiation of the merger.
There is currently no public trading market for the shares of BioVeris
common stock, and BioVeris is unable to predict the trading price for its common
stock. A payment will be due if the average of the high and low market
capitalization for BioVeris on the first day of trading of BioVeris common stock
after completion of the merger is at least $305 million, or approximately $11.41
per share and the maximum payment will be due if the average exceeds $355
million, or approximately $13.28 per share, in each case based on the assumption
that BioVeris will have $205 million in cash and cash equivalents immediately
after the completion of the merger and prior to making any payments due pursuant
to the related transaction agreements, the ongoing commercial agreements or the
MSD letter agreement. Any payment by BioVeris to IGEN would reduce BioVeris's
available cash and could have a material adverse effect on BioVeris's business.
RISKS RELATING TO BIOVERIS AND ITS BUSINESS
THE IGEN BUSINESSES THAT BIOVERIS WILL ASSUME HAVE A HISTORY OF LOSSES AND
BIOVERIS WILL HAVE FUTURE LOSSES AND NEGATIVE CASH FLOW.
BioVeris incurred net losses of $23.8 million for the six months ended
September 30, 2003, and $50.9 million, $49.2 million and $30.7 million for the
years ended March 31, 2003, 2002 and 2001, respectively. BioVeris expects to
continue to incur operating losses and negative cash flow as a result of its
19
expenses for manufacturing, marketing and sales capabilities, research and
product development, general and administrative costs and its share of losses in
MSD.
While BioVeris seeks to attain profitability, BioVeris cannot be sure that
it will ever achieve product or other revenue sufficient for it to attain this
objective. BioVeris's ability to become profitable in the future will depend on,
among other things, BioVeris's ability to:
- expand the distribution and increase sales of certain of its products;
- upgrade and enhance the M-SERIES family of products;
- introduce new products into the market;
- develop its marketing, sales and distribution capabilities
cost-effectively; and
- continue certain former IGEN collaborations and establish successful new
collaborations with corporate partners to develop and market products
that incorporate its technologies and provide necessary funding.
IF BIOVERIS IS UNABLE TO ESTABLISH NEW COLLABORATIONS, OR ANY COLLABORATIONS
BIOVERIS ESTABLISHES DO NOT RESULT IN THE SUCCESSFUL INTRODUCTION OR MARKETING
OF NEW PRODUCTS BASED ON BIOVERIS'S TECHNOLOGY, BIOVERIS'S GROWTH MAY BE
SLOWED AND ITS BUSINESS COULD BE MATERIALLY ADVERSELY AFFECTED.
One aspect of BioVeris's strategy is to enter into collaborative
relationships with established healthcare and other companies to assist BioVeris
in developing its technologies or manufacturing or marketing its products for
certain markets. BioVeris may not be able to enter into collaborations on terms
that are favorable to it, if at all. In addition, BioVeris cannot assure you
that third parties, including its licensees (such as MSD, Roche or bioMerieux,
Inc., which is referred to in this proxy statement/ prospectus as bioMerieux),
suppliers or others will not object to possible new collaborations. See "Risk
Factors -- Risks Relating to BioVeris and Its Business -- MSD and BioVeris may
have different views of the scope of the exclusive license previously granted to
MSD and the scope of MSD's rights under its joint venture agreement with
BioVeris, which could affect BioVeris's ability to expand its business directly
or through collaborations."
As a result of this strategy, BioVeris may have no, or only limited,
control over the amount of resources that its collaborators will devote to the
development or marketing of products based on BioVeris's technology. For
instance, BioVeris's collaborators:
- may decide not to, or may fail to successfully, develop, market or sell
products based on BioVeris's technology;
- may not devote sufficient resources to the development, marketing or sale
of these products based on BioVeris's technology; or
- may terminate their agreements with BioVeris.
If any of these events occur with respect to one of the companies BioVeris
is collaborating with, BioVeris would not receive the benefits of the
collaboration and BioVeris's growth could be slowed and its business could be
materially adversely affected.
TO ACHIEVE COMMERCIAL SUCCESS, BIOVERIS MUST COMPLETE THE DEVELOPMENT OF ITS
PRODUCTS AND THOSE PRODUCTS MUST GAIN MARKET ACCEPTANCE OR BIOVERIS'S BUSINESS
COULD BE MATERIALLY ADVERSELY AFFECTED.
Many of BioVeris's potential products, including certain M-SERIES products,
are at an early stage of development and BioVeris has not introduced any
clinical diagnostics products. Products under development require additional
research and development efforts, including clinical testing and regulatory
approval, prior to commercial use. BioVeris's potential products are subject to
the risks of failure inherent in the development of products based on new
technologies. These risks include the possibilities that:
- BioVeris's design or approach may not be successful;
20
- BioVeris's products may not be compatible with existing technology;
- BioVeris's products may be found ineffective or fail to meet the
applicable regulatory standards or receive necessary regulatory
clearances;
- BioVeris's estimates of the market size and potential for its products
may prove incorrect;
- third parties may market superior or equivalent products; or
- BioVeris's products may not be recognized in the market due to unfamiliar
brand names.
BioVeris's business, business prospects and financial results would be hurt
if its products are not accepted as alternatives to other existing or new
products and do not gain market acceptance.
BIOVERIS'S QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, AND THESE
FLUCTUATIONS MAY CAUSE ITS STOCK PRICE TO BE VOLATILE.
BioVeris's quarterly operating results will depend upon:
- the volume and timing of orders and product deliveries for biodefense
products, M-SERIES systems or other products, which orders and deliveries
are based on BioVeris's customers' requirements;
- the success of M-SERIES system upgrades and enhancements, which upgrades
and enhancements involve increased product costs at the time of the
upgrade or enhancement, and customer acceptance of those enhancements and
upgrades;
- the amount of revenue recognized from royalties and other contract
revenues, which revenues are dependent upon the efforts of BioVeris's
licensees and collaborators;
- whether BioVeris's instruments are sold or leased to customers, which
will affect the timing of the recognition of revenue from the sale or
lease;
- the timing of BioVeris's introduction of new products, which could
involve increased expenses associated with product development and
marketing;
- the volume and timing of product returns and warranty claims, which, if
products are returned or have warranty claims that are unexpected, may
involve increased costs in excess of amounts reserved for returns or
claims;
- BioVeris's competitors' introduction of new products, which may affect
the purchase decision of or timing of orders by BioVeris's customers and
prospective customers while the competitors' product is assessed;
- the amount of expenses BioVeris incurs in connection with the operation
of its business, including
- research and development costs, which increases or decreases based on
the products in development and
- sales and marketing costs, which are based on product launches or
promotions and sales incentives that might be in effect from time to
time;
- unexpected termination of government contracts or orders, which could
result in decreased sales and increased costs due to excess capacity,
inventory, personnel and other expenses; and
- BioVeris's share of losses in MSD, which are based on results of MSD's
operations over which BioVeris has limited influence, which for the three
and six months ended September 30, 2003 totaled $4.5 million and $9.7
million, respectively, compared to $5.0 million and $9.5 million for the
three and six months ended September 30, 2002.
These factors may cause BioVeris's quarterly operating results to fluctuate
significantly, which in turn, may cause its stock price to be volatile. In
addition, because BioVeris's revenues and operating results are
21
expected to be volatile and difficult to predict, BioVeris believes that
period-to-period comparisons of its results of operations will not be a good
indication of its future performance.
THE ACCOMPANYING BIOVERIS CONSOLIDATED FINANCIAL STATEMENTS MAY NOT NECESSARILY
BE INDICATIVE OF BIOVERIS'S FINANCIAL POSITION, RESULTS OF OPERATIONS OR CASH
FLOWS HAD BIOVERIS BEEN OPERATED ON A STAND-ALONE BASIS.
The assets and businesses of BioVeris have historically been owned,
operated and fully integrated with IGEN. The accompanying consolidated financial
statements of BioVeris have been prepared and are presented as if BioVeris had
been operating as a separate entity. In order to fairly present the operating
results of BioVeris, these financial statements reflect the application of
certain estimates and allocations. BioVeris's consolidated statements of
operations include all revenues and costs that are directly attributable to the
BioVeris businesses, as well as certain expenses of IGEN that have been
allocated to BioVeris using various assumptions. These expenses include an
allocated share of general and administrative salaries as well as certain other
shared costs (primarily facility, human resources, legal, accounting and other
administrative costs) which were allocated based upon percentage of total
revenue or percentage of total headcount, as appropriate. While management
believes that the allocation methodologies are reasonable and appropriate,
different allocation methodologies would result in changes to BioVeris's
operating results.
Upon completion of the merger and related transactions, BioVeris will
become an independent, publicly-traded company and will therefore be operated on
a stand-alone basis. The financial information in the accompanying BioVeris
consolidated financial statements may not reflect the financial position,
results of operations and cash flows of BioVeris in the future or what they
would have been had BioVeris been operating as a stand-alone entity in the past.
BIOVERIS MAY NOT BE ABLE TO RAISE SUFFICIENT ADDITIONAL CAPITAL TO
SUCCESSFULLY DEVELOP ITS BUSINESS.
BioVeris will need substantial amounts of money to fund its operations on
an ongoing basis. Upon the completion of the merger and related transactions and
following the final capital contribution to MSD, BioVeris expects to have
approximately $125 million in cash available to operate and invest in its
business, subject to a possible payment of up to $20 million to IGEN pursuant to
the tax allocation agreement. BioVeris expects its available cash to be
sufficient to fund its operations for at least one year, but cannot predict how
long its available cash will be sufficient to fund its operations thereafter.
BioVeris may need to raise substantial amounts of money to fund a variety
of future activities integral to the development of its business, including:
- for research and development to successfully develop BioVeris's
technologies;
- to obtain regulatory approval for BioVeris's products;
- to file and prosecute patent applications to protect BioVeris's
technology;
- to respond to innovations that BioVeris's competitors develop;
- to retain qualified employees, particularly in light of competition for
qualified scientists and engineers;
- to make new arrangements to market BioVeris's technology;
- to manufacture products itself or through a third party;
- to provide funding for expanded or new facilities; and
- to market different products to different geographic markets, either
through expanding its sales and distribution capabilities or relying on a
third party.
The failure to raise sufficient additional capital for BioVeris to develop
its business would adversely affect its business prospects.
22
BIOVERIS'S ACCESS TO FUNDS COULD BE NEGATIVELY IMPACTED BY MANY FACTORS,
INCLUDING VOLATILITY IN THE PRICE OF BIOVERIS COMMON STOCK, LOSSES FROM
OPERATIONS AND CAPITAL MARKET CONDITIONS.
BioVeris may not have access to enough funds on favorable terms, if at all,
to successfully operate and develop its business. BioVeris may try to raise
necessary additional capital by issuing additional debt or equity securities.
Holders of debt securities would have priority over BioVeris's equity holders
with respect to the proceeds from the sale of its assets in the event of
liquidation of its business, and any debt financings BioVeris obtains may
contain restrictive terms that limit BioVeris's operating flexibility. If
BioVeris raises additional capital by selling additional common or preferred
stock, the holdings of existing stockholders would be diluted.
If BioVeris is unable to raise additional capital it may have to consider
pursuing arrangements with other companies that may not be available on terms
favorable to BioVeris. In addition, BioVeris may have to scale back, or even
eliminate, some of its programs.
BIOVERIS MAY EXPERIENCE DESIGN, DEVELOPMENT, IMPLEMENTATION AND OTHER
DIFFICULTIES THAT COULD DELAY OR PREVENT ITS INTRODUCTION OF NEW OR ENHANCED
PRODUCTS OR AFFECT THE PERFORMANCE OF EXISTING PRODUCTS, WHICH COULD ADVERSELY
AFFECT ITS BUSINESS. IN ADDITION, IF THE MARKETS FOR BIOVERIS'S PRODUCTS
CHANGE OR EVOLVE IN AN UNEXPECTED MANNER, BIOVERIS'S BUSINESS COULD BE
MATERIALLY ADVERSELY AFFECTED.
The development of new or enhanced products is a complex and uncertain
process requiring the accurate anticipation of technological and market trends
as well as precise technological execution. BioVeris may experience design,
development, implementation and other difficulties that could delay or prevent
its introduction of new or enhanced products, or products that BioVeris may
develop, manufacture or market with third parties or affect the performance of
existing products, such as those which IGEN experienced with the development of
M-SERIES instruments. These difficulties and delays may cause expenses to
increase and BioVeris's product sales to fluctuate. In addition, if BioVeris
experiences design, development or implementation difficulties in developing,
manufacturing, distributing or marketing these instruments, it would sell fewer
of its products and its business prospects would be adversely affected.
BioVeris expects the markets for its products to change and evolve. These
changes could facilitate the market demand for BioVeris's new or enhanced
products, including the need for products that could be utilized in clinical
point-of-care sites and field-testing of environmental samples in the biodefense
market. If market demand does not change or evolve as BioVeris anticipates or if
BioVeris is not able to develop products that meet the evolving market demand,
its business prospects would be adversely affected.
In addition, the markets for BioVeris's products are characterized by
evolving industry standards and government regulations, the need for updated and
effective technology and new product introductions. BioVeris's success will
depend in part upon its ability to profitably enhance existing products and
develop and introduce new products. BioVeris may not be able to avoid the
obsolescence of its products due to technological change and evolving industry
standards and government regulations.
If BioVeris experiences design, development, implementation or other
difficulties that delay or prevent its introduction of new or enhanced products
or if the markets change or evolve in an unexpected manner, BioVeris's business
could be materially adversely affected.
BIOVERIS EXPECTS TO RELY ON SALES OF THE M-SERIES PRODUCT FAMILY FOR A
SIGNIFICANT PORTION OF ITS REVENUES, AND A DECLINE IN SALES OF THESE PRODUCTS
COULD CAUSE ADVERSE FINANCIAL RESULTS AND NEGATIVELY AFFECT BIOVERIS'S
BUSINESS PROSPECTS.
BioVeris expects to derive a significant portion of its revenues from sales
of M-SERIES products. Any factor adversely affecting the pricing or demand of
M-SERIES products, including market acceptance
of competing products, could cause BioVeris's revenues to decline, resulting in
adverse financial results and negatively affecting BioVeris's business
prospects.
23
Additionally, BioVeris intends to market M-SERIES products in markets in
which BioVeris has little or no experience. BioVeris may not be able to
successfully market the M-SERIES family of products in those markets, which
could cause an adverse affect on BioVeris's business prospects.
BIOVERIS'S COMPETITORS AND POTENTIAL COMPETITORS MAY HAVE OR DEVELOP
DIAGNOSTIC PRODUCTS AND TECHNOLOGIES THAT ARE MORE ATTRACTIVE THAN BIOVERIS'S
EXISTING OR FUTURE DIAGNOSTIC PRODUCTS.
BioVeris's business will be subject to intensive competition from
established companies, development stage companies and research and academic
institutions, and BioVeris expects this competition to intensify. Many of these
companies and institutions have one or more competitive advantages over
BioVeris, including, among other things:
- more money to invest;
- more established diagnostic products;
- long-standing relationships with customers;
- greater expertise and resources in developing, manufacturing, marketing
and selling diagnostic products;
- a larger, more experienced workforce; and
- more experience in obtaining regulatory approval for clinical testing
products.
As a result, BioVeris's competitors may develop, manufacture market or sell
diagnostic products that are more effective or commercially attractive than
BioVeris's current or future diagnostic products. In addition, these competitors
may offer broader product lines, discounts and may have greater name recognition
than BioVeris. Furthermore, BioVeris competes against companies that utilize ECL
technology licensed to them by BioVeris, including Roche and MSD, a company in
which BioVeris also has an interest.
As a result, BioVeris may not be able to compete successfully against its
competitors. This could have a material adverse effect on BioVeris's business,
financial condition and revenues.
BIOVERIS HAS LIMITED MANUFACTURING EXPERIENCE, WHICH PUTS IT AT A COMPETITIVE
DISADVANTAGE AND COULD HAVE A MATERIAL ADVERSE EFFECT ON BIOVERIS'S BUSINESS,
FINANCIAL CONDITION AND REVENUE.
BioVeris lacks experience in large-scale manufacturing and has no
experience in the manufacturing of clinical diagnostic products, which could
hamper its ability to manufacture existing products or new products that it
develops. BioVeris has two options to address this competitive disadvantage.
First, BioVeris could expand its internal ability to manufacture products,
which, to date, has only been done in a limited way. Second, BioVeris could
contract with a third party to manufacture products for it based on its
technology, which, to date, it has not done.
If BioVeris is unable to expand its own manufacturing capability or find a
suitable manufacturer on acceptable terms in a timely manner, BioVeris may be
unable to meet demand for existing products and could be delayed in introducing
new products to the market. Failure to meet demand for existing products or
delays in introducing new products could put BioVeris at a competitive
disadvantage and could have a material adverse effect on BioVeris's business,
financial condition and revenue.
BIOVERIS HAS LIMITED MANUFACTURING FACILITIES FOR ITS PRODUCTS AND BIOVERIS
MAY NOT FIND ADDITIONAL FACILITIES SUITABLE FOR FUTURE GROWTH, WHICH COULD
MATERIALLY ADVERSELY AFFECT ITS BUSINESS AND PROSPECTS.
BioVeris faces risks inherent in operating a single facility for the
manufacture of its products. BioVeris does not have alternative production
facilities available should its Gaithersburg, Maryland manufacturing facility
cease to function. If BioVeris's facility were not operational for an extended
period of time, including due to an unforeseen plant shutdown, then BioVeris's
business and future prospects could be materially adversely affected.
24
In addition, BioVeris may need to expand and enhance its research,
development and production facilities. BioVeris may encounter difficulties in
locating suitable additional facilities to meet its requirements. BioVeris may
also be required to make material capital expenditures at a new facility at a
time when it has limited capital resources available to it.
BioVeris may also experience difficulties or delays in integrating its
operations into new facilities. These difficulties might include delays in the
availability of a new facility or problems associated with equipment
installation. In addition, any facility that BioVeris obtains for production of
clinical testing or biodefense products will be subject, on an ongoing basis, to
a variety of regulatory requirements including quality systems regulations,
international quality standards and other regulatory standards. BioVeris may
encounter difficulties expanding its manufacturing operations in accordance with
these regulations and standards, which could result in manufacturing delays and
an inability to meet product demand and its business prospects could be
materially adversely affected.
If BioVeris is not successful at identifying and obtaining additional
facilities to meet its future growth needs, or BioVeris is unable to pay for
facility enhancements and improvements, its business would suffer.
BIOVERIS HAS NO EXPERIENCE SELLING, MARKETING OR DISTRIBUTING CLINICAL
DIAGNOSTIC PRODUCTS. ITS FAILURE TO ESTABLISH A SALES FORCE WITH TECHNICAL
EXPERTISE OR TO ESTABLISH AN EFFECTIVE DISTRIBUTION SYSTEM FOR ITS CLINICAL
DIAGNOSTIC PRODUCTS COULD MATERIALLY ADVERSELY AFFECT BIOVERIS'S BUSINESS
PROSPECTS AND REVENUES.
BioVeris needs to develop selling, marketing and distribution capabilities
for its planned clinical diagnostic products. To market clinical diagnostic
products directly to customers, and not through a licensee or third party
distributor or collaborator, BioVeris will need to develop a substantial sales
force with technical expertise. BioVeris will also need to establish a
distribution system to support its sales force. Alternatively, BioVeris could
license or contract with another company to provide sales and distribution
services for its products. BioVeris may not be able to develop a sufficient
sales and distribution force or find a suitable company to fill that role for
it, which could materially adversely affect BioVeris's business prospects and
revenues.
FAILURE TO MANAGE BIOVERIS'S GROWTH COULD ADVERSELY AFFECT BIOVERIS'S
BUSINESS.
BioVeris expects to grow by increasing its presence in existing markets and
introducing new products it develops into new potential markets. BioVeris's
growth strategy will place a strain on its management and its operating and
financial systems.
As BioVeris grows, its personnel, systems, manufacturing capabilities and
resources, procedures and controls may be inadequate to support future
operations and BioVeris will need to hire, train and retain additional
personnel. BioVeris may also need to improve and expand its financial and
management controls, reporting systems and operating systems as well as other
aspects of its infrastructure, including research and development or
manufacturing facilities. BioVeris may encounter difficulties integrating
additional personnel, as well as improving, expanding and integrating new
systems or facilities, which could adversely affect BioVeris's business.
THE SUCCESS OF BIOVERIS'S BUSINESS DEPENDS ON PATENTS THAT WILL EXPIRE OVER
TIME AND THAT MUST BE ACTIVELY PURSUED, OBTAINED, MAINTAINED AND PROTECTED.
BIOVERIS'S BUSINESS COULD BE HARMED IF IT HAS FUTURE DISAGREEMENTS WITH ROCHE
OVER THE SCOPE OF THE LICENSE AGREEMENT.
BioVeris's business success or failure will depend, in part, on its ability
to pursue, obtain, and maintain adequate patent protection for ECL technology
and BioVeris's other technologies. BioVeris's patents may not adequately protect
its technology from being used by its competitors.
BioVeris's business depends heavily on patents that will expire over time
and may be challenged or circumvented by competitors. Patents allow BioVeris,
for a time, to prevent others it has not licensed from using BioVeris's
inventions to compete against it.
25
Companies may challenge or seek to invalidate patents or circumvent valid
claims in patents, all of which could make it necessary for BioVeris to defend
its patents in litigation. Litigation over patents poses the following risks to
BioVeris's business:
- litigation costs can be extremely high, which could drain BioVeris's
financial resources; and
- litigation over BioVeris's patents could discourage other companies from
working with it to develop and market new products based on the
technology covered by those disputed patents.
If BioVeris loses some patent protection, its competitive advantage could
be eroded, third parties may be able to use its technology without paying
BioVeris and BioVeris's financial condition and business prospects would be
adversely affected.
Effective simultaneously with the completion of the merger, Roche, through
the license sub, will be licensed by BioVeris to exploit ECL technology subject
to the limitations described in the license agreement. Although IGEN and Roche
negotiated the terms of the license agreement in an effort to minimize the areas
of potential future disputes, there are no assurances that BioVeris and Roche
will continue to agree on the scope, permitted use and other material terms of
the license agreement. Future disputes with Roche over the scope of the license
agreement, such as disputes over the field or the types of products that Roche
is permitted to develop and sell, might lead to lengthy and costly legal
proceedings, which could adversely affect BioVeris's financial condition and
future business prospects.
BIOVERIS'S BUSINESS COULD BE HARMED IF IT INFRINGES, OR IS ALLEGED TO HAVE
INFRINGED, THE INTELLECTUAL PROPERTY OF OTHERS.
If BioVeris's products or services were to infringe the intellectual
property (including patent rights) of others, BioVeris or its licensees could:
- be required to alter, or abandon products or processes;
- be required to obtain a license from the intellectual property holder;
- lose customers that are reluctant to continue using BioVeris's or its
licensees' products or services;
- be forced to abandon development work with respect to these products; and
- be required to pay damages that could be substantial.
If BioVeris or its licensees infringe the intellectual property (including
patent rights) of others, BioVeris's business could be damaged if BioVeris were
unable to make necessary alterations or obtain a necessary license on acceptable
terms, if at all.
In addition, if BioVeris's products or services were alleged to have
infringed the intellectual property (including patent rights) of others,
BioVeris would be forced to defend itself in litigation and might be enjoined
from further sale of its products or required to pay monetary damages or amounts
in settlement of the suit, which could adversely affect BioVeris's prospects,
drain its financial resources and discourage other companies from working with
it.
BECAUSE BIOVERIS INTENDS TO DEVELOP PRODUCTS THAT ARE BASED ON PATENTS AND
TECHNOLOGY THAT IT HAS LICENSED FROM OTHERS, THE OWNERS OF THOSE PATENTS AND
TECHNOLOGY MIGHT CLAIM THAT PRODUCTS DEVELOPED OR SOLD BY BIOVERIS VIOLATE
THOSE LICENSES. ADDITIONALLY, A THIRD PARTY MIGHT OBJECT TO A LICENSE THAT
BIOVERIS HOLDS OR TO THE SCOPE OF THE LICENSE GRANTED TO BIOVERIS.
BioVeris's success or failure will also depend, in part, on the patent
rights and technology of others, including patents and technology being licensed
to BioVeris from affiliates of Roche. Effective simultaneously with the
completion of the merger, BioVeris will be licensed by affiliates of Roche to
exploit certain improvements from Roche Diagnostics and certain PCR technology,
subject to the limitations described in the improvements license agreement and
the PCR license agreements. Although IGEN and Roche negotiated the terms of the
improvements license agreement and the PCR license
26
agreements in an effort to minimize the areas of potential future disputes,
there are no assurances that BioVeris and Roche will continue to agree on the
scope, permitted use and other material terms of the improvements license
agreement or the PCR license agreements. Future disputes with Roche over the
scope, permitted use and other material terms of the improvements license
agreement or the PCR license agreements, such as disputes over the field or
types of products that BioVeris is permitted to develop and sell, may lead to
lengthy and costly legal proceedings, or could interfere with or preclude
BioVeris from proceeding with one or more development programs, whether
conducted independently or through a collaborative arrangement.
In addition, third parties may object to the scope, permitted use and other
material terms of one or more of the licenses granted to BioVeris by certain
Roche affiliates. For example, Roche has advised BioVeris that Applera
Corporation and its affiliate Applied Biosystems, which is referred to in this
proxy statement/prospectus as Applied Biosystems, have notified Roche that one
or more of the PCR licenses granted by certain Roche affiliates to BioVeris
under the improvements license agreement and the PCR license agreements may
infringe exclusive rights to PCR technology held by, or other contract rights
of, Applied Biosystems. Applied Biosystems has commenced litigation and
arbitration against Roche regarding their respective rights relating to PCR
technology. Certain Roche affiliates have made certain representations and
provided certain warranties on their right to grant the licenses that have been
granted to BioVeris, including representations and warranties that: the rights
and licenses granted under the improvements license agreement and the
performance by Roche Diagnostics of its obligations under the improvements
license agreement will not conflict with any agreement, contract or other
arrangement to which it is a party or by which it is bound; Roche Diagnostics
has title to or license rights sufficient to grant such license rights granted
under the improvements license agreement to BioVeris and its affiliates; Roche
Diagnostics has not licensed or otherwise disposed of such licensed intellectual
property rights in any manner that limits BioVeris's or its affiliates'
exploitation of the licenses granted by Roche Diagnostics under the improvements
license agreement; certain Roche affiliates have the full power and right to
grant to BioVeris and its affiliates the licenses granted under the PCR license
agreements; and the execution by certain Roche affiliates of the PCR license
agreements will not constitute a breach or default under any contract,
instrument or agreement to which such Roche affiliate or any of their affiliates
are a party or by which such Roche affiliate or any of their affiliates are
bound. Roche has advised IGEN that it believes Applied Biosystems' allegations
are without merit and intends to contest them vigorously. There are no
assurances that BioVeris will not be named as a defendant in either of those
actions or that Roche will prevail in the litigation and arbitration, or that
the terms of any resolution or settlement of these proceedings will not be
unfavorable to BioVeris. If BioVeris is named as a defendant in either of those
proceedings, it would be subject to the risks identified in the immediately
preceding risk factor. Further, a final determination, settlement or other
resolution in the arbitration or litigation may limit, preclude or interfere
with Bioveris's ability to exploit certain PCR technology licensed under the
improvements license agreement or the PCR license agreements. Although BioVeris
does not sell, or have under development, any product based on the PCR
technology being licensed from Roche, if Applied Biosystems prevails in its
claims against Roche, BioVeris may be required to obtain a license from Applied
Biosystems for certain patents covering PCR technology to avoid future potential
claims of infringement related to any development program that it might
establish for future products based on PCR technology and may face many of the
risks described in the immediately preceding risk factor.
Further, BioVeris licenses technology from other companies and academic
institutions. Because access to this technology is necessary to operate its
business, BioVeris must be certain that it complies with these license
agreements. BioVeris's business could be harmed if it breached any of these
license agreements and lost the rights to use this patented technology or if
BioVeris were unable to renew existing licenses on acceptable terms, if at all,
or get additional licenses that it may need on acceptable terms, if at all. In
addition, BioVeris may need to litigate the scope and validity of patents held
by others and such litigation could be a substantial cost for it.
27
MSD AND BIOVERIS MAY HAVE DIFFERENT VIEWS OF THE SCOPE OF THE EXCLUSIVE
LICENSE TO BIOVERIS'S TECHNOLOGY PREVIOUSLY GRANTED TO MSD AND THE SCOPE OF
MSD'S RIGHTS UNDER ITS JOINT VENTURE AGREEMENT WITH BIOVERIS, WHICH COULD
AFFECT BIOVERIS'S ABILITY TO EXPAND ITS BUSINESS DIRECTLY OR THROUGH
COLLABORATIONS.
BioVeris intends to expand its business through internal development
programs and through new or expanded collaborative arrangements. MSD may view
the scope of its exclusive license and other rights under its license agreement
and other agreements with BioVeris in a way that interferes with or precludes
BioVeris from proceeding with one or more development programs. BioVeris cannot
assure you that MSD will not object to BioVeris's future business plans, whether
conducted independently or through a collaborative arrangement. Additionally,
MSD may believe that BioVeris must obtain MSD's consent prior to entering into
proposed collaborative arrangements. The other party to a proposed collaboration
with BioVeris may also require BioVeris to obtain MSD's consent to avoid any
future disputes or disagreements. For example, in connection with the merger and
related transactions, Roche required IGEN to obtain MSD's consent to the
execution and delivery of the license agreement. In addition, MSD's consent is
required for BioVeris to transfer its interests in MSD. If BioVeris is required
to obtain MSD's consent for any reason, there are no assurances that BioVeris
will be able to obtain that consent at all or on terms that would not have an
adverse effect on BioVeris's business, financial condition or results of
operations. In addition, if BioVeris chooses not to obtain MSD's consent, MSD
may sue BioVeris to enforce rights it believes it has. Such a lawsuit could
materially harm BioVeris's business and future business prospects.
BIOVERIS RELIES ON TRADE SECRETS AND OTHER INFORMATION THAT CANNOT BE
PROTECTED BY PATENTS, WHICH COULD HARM BIOVERIS'S BUSINESS IF THEY WERE
DISCLOSED TO OR INDEPENDENTLY DEVELOPED BY OTHERS.
In addition to patents, BioVeris also relies in its business on trade
secrets, know-how and other proprietary information. If this information were
disclosed to or independently developed by competitors, BioVeris's business
would suffer.
BioVeris seeks to protect this information, in part, by entering into
confidentiality agreements with licensees, employees and consultants that
prohibit these parties from disclosing its confidential information. These
agreements may not provide adequate protection for BioVeris's trade secrets,
know-how and other proprietary information or ensure that the information
BioVeris shares with others during the course of its business will remain
confidential. BioVeris may not have sufficient legal remedies under the
agreements or otherwise to correct or compensate for unauthorized disclosures or
sufficient resources to seek redress. If BioVeris is not able to be adequately
redressed for the unauthorized disclosure of its trade secrets, know-how or
other proprietary information, its competitive position may be undermined and
its business may suffer.
BECAUSE BIOVERIS CANNOT USE THE IGEN NAME OR DERIVATIVES OF THE IGEN NAME OR
NAMES THAT ARE CONFUSINGLY SIMILAR TO THE IGEN NAME AFTER THE COMPLETION OF
THE MERGER, ITS EXISTING AND POTENTIAL CUSTOMERS, VENDORS, RECRUITING
CANDIDATES AND INVESTORS MAY NOT RECOGNIZE THE NEW COMPANY NAME OR BRANDS,
WHICH MAY CAUSE ITS REVENUES TO DECLINE AND ITS BUSINESS PROSPECTS TO SUFFER.
BioVeris will assume IGEN's biodefense, life science and industrial product
lines, which were previously marketed under the IGEN name or derivatives of the
IGEN name. BioVeris's existing and potential customers, vendors and investors
generally may not recognize the new brand. The name change may also cause
difficulties in recruiting qualified personnel. If BioVeris fails to build
strong brand recognition for its new brands, its revenues may decline and its
business prospects may suffer.
BIOVERIS DEPENDS ON A LIMITED NUMBER OF SUPPLIERS FOR MATERIALS USED IN THE
MANUFACTURING OF ITS PRODUCTS, AND ANY INTERRUPTION IN THE SUPPLY OF THOSE
MATERIALS COULD HAMPER ITS ABILITY TO MANUFACTURE PRODUCTS AND MEET CUSTOMER
ORDERS.
BioVeris depends on vendors to supply key materials that it uses in its
products. Some of these materials are available only from limited sources. From
time to time, suppliers may extend lead time, limit
28
supplies or increase prices due to capacity constraints or other factors. In the
event of a reduction in, interruption of, or degradation in the quality of the
supply of any of the materials required by BioVeris, or an increase in the cost
of obtaining those materials, BioVeris would be forced to locate an alternative
source of supply. If no alternative source were available or if an alternative
source were not available on a timely basis, at a reasonable cost or otherwise
on acceptable terms, BioVeris's ability to manufacture one or more of its
products would be delayed or halted. Any changes in sources of supply may
require additional engineering or technical development to ensure consistent and
acceptable performance of BioVeris's products. If any of these events occur,
BioVeris's product costs may increase, it might be unable to deliver products in
a timely fashion, it could lose sales as well as customers, and its business
would be significantly harmed as a result.
BIOVERIS DEPENDS ON HIGHLY TRAINED AND SKILLED EMPLOYEES AND MANAGEMENT, AND
IT MAY NOT BE ABLE TO ATTRACT AND RETAIN SUFFICIENT PERSONNEL, WHICH COULD
ADVERSELY AFFECT ITS BUSINESS.
BioVeris needs to hire staff and retain its staff, both of which are
difficult in a competitive marketplace. Because BioVeris is a technology
company, it depends heavily on scientists and engineers to develop products and
to build a successful business. Research and development efforts could suffer if
BioVeris is not able to hire and retain enough qualified scientists and
engineers, which would adversely affect its business. BioVeris competes with
other technology companies and research and academic institutions for
experienced scientists. Many of these companies and institutions have greater
resources than BioVeris does and thus may be in a better position to attract
desirable candidates.
In addition to scientists, BioVeris also needs to hire managers who have
regulatory, manufacturing and marketing capabilities. If BioVeris is not able to
hire managers with these skills, or develop expertise in these areas, its
business could suffer.
BIOVERIS MAY CHANGE THE FOCUS OF ITS BUSINESS OR ENTER INTO NEW HEALTHCARE
FIELDS, WHICH COULD RESULT IN THE INCURRENCE OF ADDITIONAL COSTS AND EXPOSURE
TO ADDITIONAL OR DIFFERENT BUSINESS RISKS.
BioVeris has broad discretion in determining the future strategy and focus
of its business and may enter new healthcare fields in which it has limited or
no experience. A significant change in the focus of BioVeris's business could
result in a loss of its previous investment, the incurrence of additional costs,
including research and development costs, and exposure to additional or
different business risks. Incurrence of additional costs and exposure to
additional risks could materially adversely affect BioVeris's business.
BIOVERIS HAS A SUBSTANTIAL INVESTMENT IN MSD THAT, IF MSD IS NOT ABLE TO
ADEQUATELY FUND ITS BUSINESS PLAN, COULD BECOME WORTHLESS.
Following the completion of the merger, BioVeris will make a final capital
contribution of $37.5 million (of which any amount in excess of $30 million will
be funded by Mr. Samuel Wohlstadter through the purchase of shares of BioVeris
series B preferred stock that economically mirror the class C interests in MSD
to be held by BioVeris) to MSD, a company formed by IGEN and MST, which is a
company established and wholly-owned by Mr. Jacob Wohlstadter, a son of Mr.
Samuel Wohlstadter. As of September 30, 2003, $75.3 million had been invested in
MSD, and the book value of BioVeris's interest in MSD as recorded on its balance
sheet was approximately $14.8 million. BioVeris has no intention to provide
additional funding to MSD after the final capital contribution is made. BioVeris
expects that MSD will require substantial additional funding for its ongoing
operations. If MSD is not able to obtain this funding, BioVeris could lose its
ability to realize the value of most or all of its investment in MSD.
29
UPON THE COMPLETION OF THE MERGER, MSD AND MST HAVE THE RIGHT TO PURCHASE
BIOVERIS'S INTEREST IN MSD AT A DISCOUNT FROM FAIR MARKET VALUE, PAYABLE OVER
TIME IN INSTALLMENTS EQUAL TO THE SUM OF 5% OF THE MSD NET SALES, AS
DETERMINED IN ACCORDANCE WITH THE MSD AGREEMENTS, AND 20% OF THE NET PROCEEDS
REALIZED FROM CERTAIN THIRD-PARTY FINANCINGS IN ACCORDANCE WITH THE MSD
AGREEMENTS, AND THERE IS NO ASSURANCE THAT THE PURCHASE PRICE WOULD EQUAL OR
EXCEED THE BOOK VALUE OF BIOVERIS'S INTEREST IN MSD OR THAT SUCH FUTURE NET
SALES OF MSD OR THIRD-PARTY FINANCINGS WILL MATERIALIZE.
As part of the restructuring, IGEN's equity interest in MSD will be
transferred to BioVeris because Roche did not want to acquire the interest. MSD
and MST do not have the right to purchase IGEN's or BioVeris's, as the case may
be, interest in MSD until the MSD joint venture agreement expires, or in certain
cases, is terminated. The MSD joint venture agreement will expire upon
completion of the merger and, as a result, MSD and MST will have the right to
purchase for a purchase price equal to fair market value (to be determined in
accordance with the provisions and procedures set forth in the MSD agreements,
which will include a determination by appraisers if the parties are unable to
agree on fair market value), less a 7.5% discount factor, BioVeris's entire
interest in MSD, including BioVeris's preferred interests that entitle it to a
preferred return on its investment in MSD. The MSD joint venture agreement also
could be terminated prior to its expiration by MSD or MST as a result of a
breach of IGEN's obligations, including IGEN's funding obligations to MSD, or as
a result of MSD's termination of Mr. Jacob Wohlstadter's employment (other than
for cause or disability), but BioVeris has no reason to believe such a breach
will occur. At September 30, 2003, the book value of BioVeris's interest in MSD
as recorded on its balance sheet was approximately $14.8 million and, on a pro
forma basis to recognize the final capital contribution to be made to MSD by
BioVeris following the completion of the merger, would be approximately $52.3
million. In addition, after BioVeris makes its final capital contribution to
MSD, it is expected to have preferred interests in MSD of approximately $107.6
million, exclusive of the up to $7.5 million of preferred interests to be funded
by Mr. Samuel Wohlstadter through the purchase of BioVeris series B preferred
stock to the extent the final capital contribution exceeds $30 million. BioVeris
will no longer be entitled to a preferred return in the event MSD or MST elects
to purchase BioVeris's interest in MSD and will only be entitled to receive the
purchase price payable over time in installments equal to the sum of 5% of the
MSD net sales, as determined in accordance with the MSD agreements, and 20% of
the net proceeds realized or from certain third-party financings in accordance
with the MSD agreements. In the event such future net sales of MSD or
third-party financings do not materialize, BioVeris will not receive any
payments from MSD or MST, as the case may be, for the purchase of BioVeris's
interest in MSD.
The parties must either agree on a fair value or the valuation of MSD is to
be resolved through a third-party appraisal procedure. If MSD or MST exercises
its right to purchase BioVeris's interest in MSD, there can be no assurance that
the purchase price for the MSD interests will be equal to or exceed the book
value reflected on the BioVeris balance sheet. In the event the purchase price
is less than the book value, BioVeris will not realize the carrying value of
most or all of its investment in MSD. Furthermore, BioVeris will only be
entitled to receive the purchase price payable over time in installments equal
to the sum of 5% of MSD net sales, as determined in accordance with the MSD
agreements, and 20% of the net proceeds realized from certain third-party
financings in accordance with the MSD agreements. In the event such future net
sales of MSD or third-party financings do not materialize, BioVeris will not
receive any payments from MSD or MST, as the case may be, for the purchase of
BioVeris's interest in MSD.
The JVOC will, on behalf of BioVeris, conduct the negotiations to determine
fair value in accordance with the procedures described in the MSD agreements.
Neither Mr. Samuel Wohlstadter nor any other interested party will participate
on behalf of BioVeris in the negotiations. For a further description of MSD's
and MST's right to purchase BioVeris's interest in MSD, see "Certain
Relationships and Related Party Transactions -- MSD and the MSD Agreements."
30
BIOVERIS'S ABILITY TO DEVELOP PRODUCTS MAY BE NEGATIVELY AFFECTED BY SOCIAL
ISSUES RELATING TO ANIMAL TESTING.
BioVeris's research and development activities have occasionally involved,
and in the future might involve, limited testing in mice and rats. In addition,
testing in the future may involve other animals. Animal rights groups and other
organizations and individuals have attempted to stop animal testing activities
by pressing for legislation and regulation of such activities and by other
means, BioVeris's ability to develop products may be negatively affected by a
ban on animal testing or by action taken by groups or individuals opposed to
these tests.
RISKS RELATING TO REGULATION AND GOVERNMENT CONTRACTS
BIOVERIS'S ABILITY TO OBTAIN AND RETAIN U.S. GOVERNMENT CONTRACTS IS SUBJECT
TO UNCERTAINTIES, AND U.S. GOVERNMENT CONTRACTS MAY BE TERMINATED, WHICH COULD
MATERIALLY ADVERSELY AFFECT BIOVERIS'S FINANCIAL CONDITION, OPERATING RESULTS,
BUSINESS AND PROSPECTS.
The U.S. government may refuse to permit BioVeris to assume U.S. government
contracts from IGEN, and BioVeris's ability to secure additional contracts, is
subject to uncertainties related to the government's future funding commitments.
While BioVeris is not aware of any reason why the U.S. government would object
to BioVeris's assumption of IGEN's U.S. government contracts, if the U.S.
government were to refuse to permit BioVeris to assume these contracts,
BioVeris's operating results and business prospects would be materially
adversely affected. IGEN has requested that the U.S. government consent to the
assignment to BioVeris of 26 active government contracts, consisting of 12
purchase orders or other agreements relating to the purchase of products, seven
confidentiality agreements, three cooperative research and development
agreements, two license agreements, one research grant and one product
evaluation agreement. Substantially all of the revenue to be derived from these
contracts is attributable to two contracts with the Department of Defense, or
the DOD, one of which is for the purchase of up to $23.0 million of ECL
technology-based tests for the detection of specific toxins in environmental
samples and the second of which is for approximately $591,000 for the
development of assays for the detection of select agents in food. In addition,
IGEN is seeking the consent of the U.S. government for the transfer to BioVeris
of 22 completed contracts that have expired or for which all obligations have
been satisfied.
The prospects for BioVeris's biodefense business are also highly sensitive
to changes in national and international government policies and funding
priorities. Changes in domestic or foreign government policies or priorities,
including funding levels through agency or program budget reductions by the U.S.
Congress or executive agencies, could materially adversely affect BioVeris's
ability to retain or obtain U.S. government contracts, and its business
prospects could suffer.
The U.S. government can terminate, suspend or modify any of its contracts
with BioVeris either for its convenience or if BioVeris defaults by failing to
perform under the terms of the applicable contract. A termination or suspension
for convenience could result in BioVeris having excess capacity, inventory,
personnel, unreimbursable expenses or charges or other adverse effects on its
financial condition. A termination arising out of BioVeris's default could
expose BioVeris to claims for damages and may have a material adverse effect on
its ability to compete for future U.S. government contracts and orders.
U.S. government contracts may span one or more years and may include
multiple renewal options in favor of the U.S. government. U.S. government
agencies generally have the right not to exercise these option periods for any
reason, including lack of funding, or if the agency is not satisfied with the
counterparty's performance of the contract. If the U.S. government terminates
any of BioVeris's contracts, BioVeris's financial condition and operating
results could be materially adversely affected.
In addition to unfavorable termination provisions, certain of IGEN's U.S.
government contracts contain provisions that grant to the U.S. government a
non-exclusive, non-transferable, irrevocable, paid-up license to use inventions
made by IGEN in the course of performing such contracts, or have such inventions
used by or on behalf of the U.S. government, for research or other government
purposes.
31
BioVeris will be subject to these provisions when it assumes these contracts and
new U.S. government contracts entered into by BioVeris may also include similar
provisions.
BIOVERIS MUST OBTAIN FOOD AND DRUG ADMINISTRATION CLEARANCE OR APPROVAL TO
MARKET ITS CLINICAL DIAGNOSTIC PRODUCTS, WHICH IS OFTEN COSTLY AND TIME
CONSUMING. IF BIOVERIS DOES NOT OBTAIN THE NECESSARY CLEARANCES OR APPROVALS,
ITS BUSINESS PROSPECTS WOULD SUFFER.
The manufacture, packaging, labeling, advertising, promotion, distribution
and sale of medical devices such as clinical diagnostic products are subject to
governmental regulation by national and local government agencies in the United
States and abroad. The U.S. Food and Drug Administration, or FDA, regulates many
of the areas in which BioVeris conducts its research and in which BioVeris is
and expects to be developing, manufacturing and marketing products. In
particular, BioVeris must obtain FDA clearance or approval before it can market
clinical diagnostic products, such as those in development for the clinical
point-of-care market segment. The process of obtaining necessary clearances or
approvals is often costly, time consuming and uncertain. In addition, BioVeris
may begin to distribute reagents specifically for research use under an
exemption. If the FDA disagrees with BioVeris's classification of, or the manner
in which BioVeris markets and sells, those reagents, it may impose restrictions
on BioVeris's business operations and subject BioVeris to sanctions that could
adversely affect its business prospects. BioVeris has very limited experience
obtaining FDA clearance and approval and may not be successful in obtaining FDA
clearance or approval for any of its clinical diagnostic products, which would
materially adversely affect its business prospects. Further, clearance or
approval may place substantial restrictions on the indications for which the
product may be marketed or to whom it may be marketed.
To obtain permission from the FDA to market in the U.S., BioVeris, or the
companies with which BioVeris works, will need to either obtain Section 510(k)
pre-market notification clearance or approval of a pre-market approval
application from the FDA. To obtain clearance for marketing, BioVeris, or the
companies with which BioVeris works, must demonstrate substantial equivalence to
a similar legally marketed product by submitting a pre-market notification to
the FDA. The FDA may require preclinical and clinical data to support a
substantial equivalence determination. Clinical trials for gathering supporting
data can take extended periods of time to complete and there can be no assurance
that the FDA will find a device substantially equivalent.
If BioVeris does not successfully demonstrate substantial equivalence, or
if BioVeris is required to obtain pre-market approval, BioVeris would have to
conduct extensive clinical testing of these products, which could take years to
complete. Extensive testing could involve substantial additional costs and might
delay bringing clinical diagnostic products to market, weakening BioVeris's
competitive position. If BioVeris fails to obtain FDA clearance or approval for
new products altogether, BioVeris will be unable to market these products at all
for clinical use in the U.S.
BIOVERIS IS SUBJECT TO COMPREHENSIVE GOVERNMENT REGULATION, WHICH MAY INVOLVE
SIGNIFICANT COSTS AND MAY RESTRICT ITS ABILITY TO CONDUCT BUSINESS.
BioVeris expects that certain of its future products will be subject to
continuing FDA requirements, including compliance with the FDA's Good
Manufacturing Practices and the FDA's medical device reporting regulation.
BioVeris expects that it may need to spend a substantial amount of money to
comply on an ongoing basis with government regulations. Government agencies,
such as the FDA, Department of Homeland Security, Department of Commerce and the
Environmental Protection Agency, or EPA, regulate many of BioVeris's products as
well as products that BioVeris plans to develop, manufacture, market and sell,
including products for the clinical diagnostics, biodefense and industrial
markets.
The costs of complying with governmental regulations and any restrictions
that government agencies might impose could have a significant impact on
BioVeris's business. If BioVeris increases its manufacturing and expands its
product offerings, these costs will increase.
Whether BioVeris manufactures products itself or contracts with another
company to manufacture products based on its technology, the FDA and other
government agencies will continually review and
32
periodically inspect the manufacturing process. If any of these agencies were to
discover a problem with BioVeris's products, the manufacturing process or the
manufacturing facility, they could place restrictions on these products and on
the manufacturer and impose sanctions. For example, the FDA could require
BioVeris to recall, or even totally withdraw, a product from the market or close
a manufacturing facility.
In addition to FDA regulations, the process of manufacturing products is
subject to a variety of environmental laws and regulations, including laws and
regulations governing the use, management and disposal of hazardous, radioactive
and infectious materials and wastes, the discharge of pollutants into the air
and water, and the cleanup of contaminated sites. BioVeris could incur
substantial costs, including cleanup costs, fines and penalties, claims for
damages, such as personal injury or property damages, and loss of permits
required for its operations, if it fails to comply with these laws or
regulations. BioVeris's operations are also subject to various employee health
and safety laws and regulations, including those concerning occupational injury
and illness and employee exposure to hazardous, radioactive and infectious
materials. While BioVeris has procedures in place to protect employees from
exposure to such materials, it cannot assure you that potentially harmful
exposure will not occur or that it will not be liable to employees as a result.
In addition, because of the limited information currently available regarding
some of the hazardous, radioactive and infectious materials used in BioVeris's
businesses, there may be unknown risks involved with the use of and exposure to
such materials. In some circumstances there may be no body of knowledge or
standard protocols for dealing with these risks. Costs associated with such
environmental, health and safety matters could have a material adverse effect on
BioVeris's business and financial condition. In addition, in connection with
BioVeris's biodefense business, the DOD or other government agencies may require
additional security measures to be implemented at BioVeris's facility, which
could cause BioVeris to incur substantial additional costs.
BIOVERIS'S BUSINESS COULD BE ADVERSELY AFFECTED BY A NEGATIVE AUDIT BY THE
U.S. GOVERNMENT.
U.S. government agencies routinely audit and investigate government
contractors. These agencies review a contractor's performance under its
contracts. If an audit results in a finding of improper activities, BioVeris may
be subject to civil and criminal penalties and administrative sanctions,
including termination of contracts, forfeiture of profits, suspension of
payments, fines and suspension or prohibition from doing business with the U.S.
government. In addition, BioVeris could suffer serious harm to its business
reputation if allegations of impropriety were made against it.
COST OVER-RUNS ON CONTRACTS WITH THE U.S. GOVERNMENT COULD SUBJECT BIOVERIS TO
LOSSES OR ADVERSELY AFFECT ITS FUTURE BUSINESS.
The U.S. government contracts that BioVeris intends to assume from IGEN are
fixed-price contracts and therefore BioVeris will receive a fixed price
irrespective of the actual costs it incurs in connection with the performance of
such assumed contract. Consequently, BioVeris will be required to absorb any
costs in excess of the fixed price that may be set forth in the contract. If
BioVeris is unable to control the costs it incurs in performing under these
contracts, its financial condition and operating results could be materially
adversely affected. Cost over-runs also may adversely affect BioVeris's ability
to sustain its performance under the contract and obtain future U.S. government
contract awards.
RESTRICTIONS ON HEALTHCARE COSTS AND HEALTHCARE AND INSURANCE FINANCING
PRACTICES COULD LIMIT DEMAND FOR BIOVERIS'S PRODUCTS, WHICH WOULD HURT
BIOVERIS'S BUSINESS AND BUSINESS PROSPECTS.
In the U.S. and elsewhere, demand for clinical diagnostic testing is
dependent, in part, on consumers' ability to be reimbursed for the cost of the
tests by third-party payers, such as government agencies, health maintenance
organizations and private insurers. Medicaid and other third-party payers are
increasingly challenging the prices charged for medical services, including
clinical diagnostic tests. They are also attempting to contain costs by limiting
their coverage of, and the amount they will reimburse for, clinical diagnostic
tests and other healthcare products.
33
Without adequate coverage and reimbursement, consumer demand for clinical
diagnostic tests may decrease. Decreased demand would likely cause potential
sales of BioVeris's clinical diagnostic products, and sales by BioVeris's
licensees, to decrease because fewer tests would be performed or prices would be
lowered, or both. Reduced sales or royalty income would hurt BioVeris's business
and business prospects.
In many foreign markets, governments directly set the prices that clinical
diagnostic companies may charge for their products and services. In the U.S., a
number of legislative and regulatory proposals aimed at changing the healthcare
system have been proposed in recent years and BioVeris expects this to continue.
Foreign and domestic legislative and regulatory initiatives that limit
healthcare coverage may have a material adverse effect on BioVeris's business
and business prospects.
RISKS RELATING TO THE INDUSTRY
BIOVERIS IS EXPOSED TO PRODUCT LIABILITY RISKS THAT, IF NOT ADEQUATELY COVERED
BY INSURANCE, MAY HAVE A MATERIAL ADVERSE EFFECT ON ITS FINANCIAL CONDITION.
Product liability is a major risk in marketing products for the clinical
diagnostics, biodefense and industrial markets. BioVeris may not be able to
insure adequately against risk of product liability. BioVeris may face product
liability for claims and lawsuits brought by customers. Damages awarded in
product liability cases can be very large. While BioVeris has product liability
insurance, this coverage is limited. BioVeris may not have adequate product
liability insurance to cover it against its potential liabilities or be able to
maintain current levels of product liability insurance on acceptable terms, if
at all. Claims or losses in excess of BioVeris's product liability insurance
coverage or not covered by BioVeris's product liability insurance could have a
material adverse effect on its financial condition.
RISKS RELATING TO BIOVERIS COMMON STOCK
BIOVERIS'S EXECUTIVE OFFICERS AND DIRECTORS EXERCISE SIGNIFICANT INFLUENCE
OVER BIOVERIS AND MAY HAVE SIGNIFICANT INFLUENCE OVER THE OUTCOME OF PROPOSED
CORPORATE ACTIONS SUPPORTED OR OPPOSED BY OTHER BIOVERIS STOCKHOLDERS.
Upon completion of the merger and related transactions, BioVeris's
executive officers and directors in the aggregate, will own approximately 23.2%
of the outstanding shares of BioVeris common stock. Upon completion of the
merger, BioVeris's chairman and chief executive officer will own approximately
17.8% of the outstanding shares of BioVeris common stock, BioVeris's president
and chief operating officer will own approximately 4.2% of the outstanding
shares of BioVeris common stock and BioVeris's other directors and executive
officers will own approximately 1.2% of the outstanding shares of BioVeris
common stock. As a result, certain of BioVeris's executive officers or directors
may have significant influence over the election of directors and may be able to
significantly influence the outcome of proposed corporate actions supported or
opposed by other BioVeris stockholders. In addition, as a result of their
shareholdings, certain of BioVeris's executive officers and directors could have
significant influence over the outcome of potential transactions, including
acquisition transactions, that may be supported by other BioVeris stockholders.
PROVISIONS IN BIOVERIS'S CHARTER DOCUMENTS MAY DISCOURAGE POTENTIAL
ACQUISITIONS OF BIOVERIS, EVEN THOSE WHICH THE HOLDERS OF A MAJORITY OF
BIOVERIS COMMON STOCK MAY FAVOR, WHICH MAY ADVERSELY AFFECT THE MARKET PRICE
OF BIOVERIS COMMON STOCK, REDUCE THE LIKELIHOOD OF OFFERS TO ACQUIRE BIOVERIS
AND PREVENT CHANGES IN BIOVERIS'S MANAGEMENT.
BioVeris's certificate of incorporation and by-laws contain provisions that
may have the effect of discouraging a third party from acquiring BioVeris by
means of a tender offer, proxy contest or otherwise. BioVeris's certificate of
incorporation and by-laws:
- classify the BioVeris board of directors into three classes, with
directors of each class serving for a staggered three-year period;
34
- provide that BioVeris's directors may be removed only for cause and only
upon the approval of the holders of at least a majority of the voting
power of all BioVeris's shares entitled to vote generally in the election
of such directors then outstanding, voting together as a single class;
- prohibit BioVeris stockholders from calling special meetings and prohibit
action by BioVeris stockholders by written consent;
- require at least 66 2/3% of the voting power of all BioVeris shares
entitled to vote generally in the election of directors then outstanding,
voting together as a single class, to alter, amend or repeal certain
provisions, including the provisions relating to BioVeris's classified
board, the election, appointment and removal of BioVeris's directors and
action by stockholders by written consent described above;
- permit the BioVeris board of directors to fill vacancies and newly
created directorships on the BioVeris board of directors; and
- contain advance notice requirements for stockholder proposals.
In addition, under BioVeris's certificate of incorporation, the BioVeris
board of directors also has the authority to issue up to 15,000,000 shares of
preferred stock in one or more series. The BioVeris board of directors can fix
the powers, preferences and rights of any such series without stockholder
approval. The BioVeris board of directors could, therefore, issue, without
stockholder approval, preferred stock with voting and other rights that could
adversely affect the voting power of the holders of BioVeris common stock or
otherwise make it more difficult for a third party to gain control of BioVeris.
Such provisions would make the removal of incumbent directors more
difficult and time-consuming and may have the effect of discouraging a tender
offer or other takeover attempt not previously approved by the BioVeris board of
directors.
In addition, BioVeris intends to adopt a stockholder rights agreement prior
to the completion of the merger, pursuant to which one BioVeris right will
attach to each share of BioVeris common stock outstanding. The BioVeris rights
will in most cases cause substantial dilution to a person that attempts to
acquire or merge with BioVeris without the approval of the BioVeris board of
directors by permitting the holders of the BioVeris rights (other than the
person attempting to acquire or merge with BioVeris) to, upon the occurrence of
specified circumstances, purchase, at a substantial discount, shares of BioVeris
series A participating cumulative preferred stock or shares of common stock of
the person that attempts to acquire or merge with BioVeris. Accordingly, the
existence of the BioVeris rights may deter potential acquirors from making a
takeover proposal or a tender offer. For further description of the stockholder
rights plan, see "Description of BioVeris Capital Stock -- Rights Agreement."
THERE IS CURRENTLY NO PUBLIC TRADING MARKET FOR THE SHARES OF BIOVERIS COMMON
STOCK, AND THERE IS NO ASSURANCE THAT AN ACTIVE PUBLIC TRADING MARKET WILL
DEVELOP.
BioVeris is unable to predict the trading price for its common stock.
Although BioVeris has applied for its shares to be quoted on The NASDAQ National
Market(R), an active public trading market for BioVeris common stock may not
develop or be sustained after the completion of the merger, which could affect
your ability to sell shares of BioVeris common stock and may depress the market
price of BioVeris common stock.
BIOVERIS'S STOCK PRICE MAY BE VOLATILE AND COULD DROP PRECIPITOUSLY AND
UNEXPECTEDLY.
BioVeris has applied for shares of BioVeris common stock to be quoted on
The NASDAQ National Market(R). The prices of publicly traded stocks often
fluctuate. The price of BioVeris common stock may rise or fall dramatically,
without any change in BioVeris's business performance. In the past, the stock
price of technology companies has been especially volatile. BioVeris expects
that this will continue to be the case. For example, from January 1, 2003 until
December 10, 2003, the NASDAQ Biotechnology Index has ranged from a low of
467.46 to a high of 801.40.
35
In addition to these fluctuations, an investment in BioVeris common stock
could be affected by a wide variety of factors that relate to BioVeris's
businesses and industry, many of which are outside of its control. For example,
the price of BioVeris common stock could be affected by:
- new product introductions by BioVeris, its licensees or its competitors;
- innovations by BioVeris's competitors;
- BioVeris's competitors' announcements of their financial results;
- changes in BioVeris's financial estimates and recommendations by security
analysts relating to BioVeris, its licensees or its competitors;
- disputes over patents or other rights relied on by BioVeris;
- publicity relating to BioVeris, its licensees or its competitors;
- regulations affecting BioVeris, its licensees, its industry or the
customers to which BioVeris sells its products;
- issuances of BioVeris common stock or other BioVeris capital stock, or
securities exercisable for or convertible into BioVeris capital stock;
- economic, business and other market conditions; and
- fluctuations in BioVeris's performance and the performance of its
licensees.
In addition, if BioVeris's revenues or financial results in any period fail
to meet the investment community's expectations, there could be an immediate
adverse impact on BioVeris's stock price.
Upon the completion of the merger and related transactions, Mr. Samuel
Wohlstadter is expected to hold 4,761,437 shares, or 17.8% of the outstanding
shares of BioVeris common stock and Dr. Richard Massey is expected to hold
1,118,955, or 4.2% of the outstanding shares of BioVeris common stock. Although
Mr. Samuel Wohlstadter and Dr. Massey have no intention to sell a substantial
number of shares of BioVeris common stock, their shares will not be subject to a
lock-up agreement and may be sold in the public market in accordance with
applicable securities laws.
The market price of BioVeris common stock could decline as a result of
sales of a substantial number of shares of BioVeris common stock or the
perception that these sales could occur. In addition, the sale of shares of
BioVeris common stock by Mr. Samuel Wohlstadter or Dr. Massey could impair the
ability of BioVeris to raise capital through the sale of additional shares of
BioVeris common stock or other securities convertible into shares of BioVeris
common stock in the future.
BIOVERIS DOES NOT PLAN TO PAY ANY CASH DIVIDENDS ON BIOVERIS COMMON STOCK.
BioVeris has no plans to pay cash dividends on BioVeris common stock in the
foreseeable future, if at all.
BIOVERIS MAY NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE AND BIOVERIS MAY
GRANT OPTIONS OR OTHER EQUITY-BASED AWARDS TO ITS EXECUTIVE OFFICERS,
DIRECTORS, EMPLOYEES AND CONSULTANTS, FROM TIME TO TIME, EITHER OF WHICH WOULD
RESULT IN DILUTION TO BIOVERIS STOCKHOLDERS.
Your investment in BioVeris common stock could be diluted if BioVeris
issues additional shares of BioVeris common stock or securities convertible
into, or exercisable for, shares of BioVeris common stock in the future, which
BioVeris may need to do to raise funds for its business. Sales of additional
shares of BioVeris common stock or the conversion of securities into, or the
exercise of securities for, shares of BioVeris common stock could cause the
market price of BioVeris common stock to decrease.
Under the BioVeris 2003 stock incentive plan, if approved, BioVeris's
executive officers, directors, employees and consultants may from time to time
be granted options or other equity-based awards, such as phantom stock or
restricted stock, to purchase up to 5.3 million shares of BioVeris common stock.
If
36
BioVeris's executive officers, directors, employees and consultants exercise
their options or other equity based awards, if and when granted and exercisable,
and purchase shares of BioVeris common stock, your investment in BioVeris common
stock will be diluted.
THE EXON-FLORIO ACT MAY INHIBIT POTENTIAL ACQUISITION BIDS, WHICH MAY
ADVERSELY AFFECT THE MARKET PRICE OF BIOVERIS COMMON STOCK.
Section 721 of Title VII of the Defense Production Act of 1950, also known
as the Exon-Florio Act, authorizes the president of the U.S. or his designees to
initiate an investigation into the potential effects on national security of a
business combination of a U.S. corporation and a foreign entity that could
result in foreign control of the U.S. corporation. Subject to certain
exceptions, under the Exon-Florio Act, the president may suspend or prohibit any
foreign acquisition, merger or takeover of a U.S. corporation if there is
credible evidence that the foreign entity exercising control might take action
that threatens national security and there is no provision of law adequate to
protect national security.
Due to BioVeris's current and potential future involvement in the
biodefense industry, the Exon-Florio Act could inhibit potential acquisition
bids from foreign entities, which could adversely affect the market price of
BioVeris common stock.
37
THE SPECIAL MEETING
This proxy statement/prospectus is being furnished to IGEN stockholders as
of the record date for the special meeting as part of the solicitation of
proxies by the IGEN board of directors for use at the special meeting.
DATE, TIME AND PLACE
The special meeting of IGEN stockholders will be held on January , 2004,
at 10:00 a.m., local time, at .
PURPOSE OF THE SPECIAL MEETING
At the special meeting, holders of IGEN common stock will be asked to
consider and vote upon a proposal to adopt the merger agreement, to consider and
vote upon a proposal to approve the proposed BioVeris 2003 stock incentive plan
and to transact any other business that properly comes before the special
meeting or any adjournment or postponement of the special meeting. Holders of
IGEN common stock are not being asked to vote on the restructuring.
If the merger agreement is adopted and the merger and related transactions
are subsequently completed, each outstanding share of IGEN common stock (other
than shares held by stockholders who validly exercise appraisal rights) will be
converted into the right to receive $47.25 in cash, without interest, and one
share of BioVeris common stock. Shares held as treasury stock and shares held by
Roche or the merger sub will be canceled and retired and will cease to exist and
no consideration will be delivered in exchange for these shares.
RECOMMENDATIONS OF THE IGEN BOARD OF DIRECTORS
The IGEN board of directors has unanimously determined that the merger
agreement is advisable and in the best interests of IGEN and its stockholders.
The IGEN board of directors has unanimously approved the merger agreement and
related transactions and unanimously recommends that IGEN stockholders vote
"FOR" the adoption of the merger agreement. Holders of IGEN common stock are not
being asked to vote on the restructuring. The IGEN board of directors also
unanimously recommends that IGEN stockholders vote "FOR" the approval of the
proposed BioVeris 2003 stock incentive plan.
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of IGEN common stock at the close of business on
November 17, 2003, the record date for the special meeting, are entitled to
notice of, and to vote at, the special meeting.
On the record date for the special meeting, 24,979,961 shares of IGEN
common stock were issued and outstanding. Holders of record of IGEN common stock
on the record date for the special meeting are entitled to one vote per share on
each matter submitted to a vote at the special meeting.
A quorum will be present at the special meeting if a majority of all the
shares of IGEN common stock outstanding on the record date for the special
meeting and entitled to vote at the special meeting are represented at the
special meeting in person or by proxy duly authorized. If a quorum is not
present at the special meeting, it is expected that the special meeting will be
adjourned or postponed to solicit additional proxies.
VOTES REQUIRED
The adoption of the merger agreement requires the affirmative vote of
stockholders holding a majority of the shares of IGEN common stock outstanding
on the record date for the special meeting. The failure by the holder of any
outstanding shares of IGEN common stock to either submit a proxy or vote in
person at the special meeting will have the same effect as a vote against the
adoption of the merger agreement
38
because the required vote of IGEN stockholders is based upon the number of
outstanding shares of IGEN common stock, rather than upon the number of shares
actually voted.
The approval of the proposed BioVeris 2003 stock incentive plan requires
the vote of a majority of the votes cast, excluding abstentions, at the special
meeting at which a quorum is present The failure by the holder of any
outstanding shares of IGEN common stock to either submit a proxy or vote in
person at the special meeting will have no effect on the approval of the
proposed BioVeris 2003 stock incentive plan.
Assuming the 2003 BioVeris stock incentive plan is approved, under the
National Association of Securities Dealers' marketplace rules, the BioVeris
board of directors may not materially increase the numbers of shares authorized
and reserved for issuance under the 2003 BioVeris stock incentive plan without
further stockholder approval.
SHARE OWNERSHIP OF IGEN DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATES
At the close of business on the record date for the special meeting, IGEN's
directors and executive officers and their respective affiliates beneficially
owned and were entitled to vote 5,368,318 shares of IGEN common stock, which
represented approximately 21% of the shares of IGEN common stock outstanding on
that date.
PROXIES
All shares represented by duly authorized proxies received in time for the
special meeting will be voted at the special meeting in the manner specified by
the holders of those proxies. Duly authorized proxies that do not contain voting
instructions will be voted "FOR" the adoption of the merger agreement and "FOR"
the approval of the proposed 2003 BioVeris stock incentive plan.
Shares of IGEN common stock represented at the special meeting but not
voting, including shares representing abstentions or broker non-votes, will be
treated as present at the special meeting for purposes of determining the
presence or absence of a quorum for the transaction of all business.
Brokers who hold shares of IGEN common stock in "street name" for customers
who are the beneficial owners of such shares may not give a proxy to vote those
customers' shares without specific instructions from those customers. These
non-voted shares are referred to as "broker non-votes" and count as votes
against the adoption of the merger agreement and do not count for any purpose in
determining the approval of the proposed BioVeris 2003 stock incentive plan.
ACCORDINGLY, IF YOUR SHARES ARE HELD IN THE NAME OF A BANK OR BROKER, PLEASE
FOLLOW THE INSTRUCTIONS YOU RECEIVE ON YOUR PROXY CARD TO ENSURE YOUR SHARES ARE
PROPERLY VOTED AT THE MEETING.
Because the adoption of the merger agreement requires the affirmative vote
of stockholders holding a majority of the shares of IGEN common stock
outstanding on the record date for the special meeting, abstentions, failures to
vote and broker non-votes will count as votes against the adoption of the merger
agreement, but will have no effect on the approval of the proposed BioVeris 2003
stock incentive plan.
The persons named as proxies by a stockholder may propose and vote for one
or more adjournments of the special meeting, including adjournments to permit
further solicitations of proxies. No proxy voted against the proposal to adopt
the merger agreement will be voted in favor of any such adjournment or
postponement.
IGEN does not expect that any matter other than the proposal to adopt the
merger agreement and the proposal to approve the proposed BioVeris 2003 stock
incentive plan will be brought before the special meeting. If, however, the IGEN
board of directors properly presents other matters, the persons named as proxies
will vote in accordance with their judgment unless authority to do so is
withheld on the proxy card.
39
REVOCATION OF PROXIES
The grant of a proxy pursuant to this solicitation does not preclude a
stockholder from voting in person at the special meeting. A stockholder may
revoke a proxy at any time prior to its exercise by:
- notifying the Secretary of IGEN in writing that the proxy has been
revoked;
- submitting a new proxy bearing a later date, including a proxy given by
telephone or over the Internet; or
- appearing at the special meeting and voting in person, if such
stockholder is a record holder.
Attendance at the special meeting will not in and of itself constitute
revocation of a proxy. If a stockholder chooses either of the first two methods,
the new proxy or the notice of revocation, as the case may be, must be submitted
to IGEN at 16020 Industrial Drive, Gaithersburg, Maryland 20877, Attention:
Secretary.
SOLICITATION OF PROXIES
IGEN will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of IGEN may solicit proxies from stockholders by telephone or other
electronic means or in person. IGEN will make arrangements with brokerage houses
and other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of stock held of record by these
persons. IGEN will reimburse these custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses in doing so.
Georgeson Shareholder Communications, Inc., a company that provides proxy
solicitation services, will assist in the solicitation of proxies by IGEN. IGEN
will pay Georgeson Shareholder Communications, Inc. a fee of $12,500, plus
customary additional payments for telephone solicitations and reimbursement of
certain out-of-pocket expenses, and will indemnify Georgeson Shareholder
Communications, Inc. against certain liabilities arising out of its proxy
solicitation services on behalf of IGEN.
IGEN STOCKHOLDERS SHOULD NOT RETURN ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS. After the merger is completed, IGEN stockholders will be sent a
transmittal form with instructions for the surrender of IGEN common stock
certificates.
40
THE COMPANIES AND THE LITIGATION
ROCHE
Roche is one of the world's leading innovation-driven healthcare groups.
Roche's core businesses are pharmaceuticals and diagnostics. Roche is one of the
world's leading providers of diagnostic systems, one of the leading suppliers of
pharmaceuticals for cancer and a leader in virology and transplantation. As a
supplier of products and services for the prevention, diagnosis and treatment of
disease, Roche contributes on a broad range of fronts to improving people's
health and quality of life. Roche employs approximately 65,000 people in 150
countries around the world.
Roche was organized in Switzerland in 1895. The address of Roche's
principal executive offices is Grenzacherstrasse 124, CH-4070, Basel,
Switzerland, and its telephone number is (+41) 61-688-8880.
IGEN
IGEN and its licensees develop, manufacture and market products based on
IGEN's ECL technology. IGEN believes that its ECL technology, which detects and
measures biological substances, offers significant advantages over competing
detection and measurement methods by providing a unique combination of speed,
sensitivity, flexibility and throughput in a single technology platform. ECL
technology is incorporated into IGEN's and its licensees' instrument systems and
reagents, which are the biological and chemical compounds that are used to
perform a test, or assay, on such instrument systems.
IGEN was incorporated in California in 1982 as IGEN, Inc., and on November
19, 1996, IGEN, Inc. merged into IGEN International, Inc., a newly-formed
Delaware corporation. The address of IGEN's principal executive offices is 16020
Industrial Drive, Gaithersburg, Maryland 20877, and its telephone number is
(301) 869-9800.
BIOVERIS
BioVeris is a newly-formed, wholly-owned subsidiary of IGEN. As part of the
restructuring, BioVeris will assume IGEN's biodefense, life science and
industrial product lines, as well as IGEN's opportunities in the clinical
diagnostics and healthcare fields, and will own IGEN's intellectual property,
IGEN's equity interest in MSD, a company formed by IGEN and MST, which is a
company established and wholly-owned by Mr. Jacob Wohlstadter, a son of IGEN's
and BioVeris's chairman and chief executive officer, cash and certain other
rights and licenses currently held by IGEN. Simultaneously with the completion
of the merger, certain ongoing commercial agreements between BioVeris and
certain affiliates of Roche will become effective.
BioVeris's strategy is based on the direct development and sale of its
products utilizing its technologies, while at the same time entering into
collaborations with third parties that can assist BioVeris in its product
development, manufacturing and marketing efforts. Key elements of BioVeris's
strategy are to:
- pursue collaborative relationships to accelerate new product development
and enhance global manufacturing and marketing capabilities;
- establish leadership positions in emerging markets; and
- develop and market product line extensions and an expanded menu of
assays.
BioVeris was organized as a Delaware limited liability company on June 6,
2003 as IGEN Integrated Healthcare, LLC, and on September 22, 2003, IGEN
Integrated Healthcare, LLC was converted into BioVeris Corporation, a
newly-formed Delaware corporation. The address of BioVeris's principal executive
offices is 16020 Industrial Drive, Gaithersburg, Maryland 20877, and its
telephone number is (301) 869-9800.
41
THE LITIGATION
Since 1997, IGEN and Roche have been involved in a lawsuit in the District
Court relating to, among other things, IGEN's ability to terminate a license
agreement for ECL technology that was granted in 1992 to a company that became a
subsidiary of Roche. On July 9, 2003, the Appellate Court, among other things,
affirmed IGEN's right to terminate the license while vacating the $400 million
punitive damage award against the subsidiary of Roche and reversing $86.8
million of the compensatory damage award against the subsidiary of Roche. This
lawsuit is referred to in this proxy statement/prospectus as the Roche
litigation. In addition, on July 9, 2003, IGEN sent a notice to the subsidiary
of Roche confirming termination of the license and filed patent infringement
lawsuits against the subsidiary in Maryland and Germany. These lawsuits have
been stayed by agreement of the parties pending completion of the merger.
42
THE MERGER AND RELATED TRANSACTIONS
BACKGROUND TO THE MERGER AND RELATED TRANSACTIONS
In 1992, IGEN entered into a license agreement with Boehringer Mannheim
GmbH, which is referred to in this proxy statement/prospectus as the 1992
license agreement, for the development, use, manufacture and sale of ECL-based
clinical immunoassay and nucleic acid test systems in certain defined fields
specified in the 1992 license agreement.
Beginning in 1996, disputes began to arise between IGEN and Boehringer
Mannheim regarding the proper interpretation of, and Boehringer Mannheim's
compliance with, the 1992 license agreement. In May 1997, Roche agreed to
acquire Boehringer Mannheim. In August 1997, IGEN engaged Lehman Brothers Inc.,
or Lehman Brothers, as its advisor to assist IGEN and its legal advisors in
assessing the value of its position and attempting to resolve the dispute
between IGEN and Boehringer Mannheim and to identify opportunities and advise
IGEN with respect to possible asset transfers, merger and other transactions
with Boehringer Mannheim.
On September 15, 1997, IGEN filed a lawsuit against Boehringer Mannheim in
the District Court, alleging that, among other things, Boehringer Mannheim
failed to perform certain material obligations under the 1992 license agreement.
On that same date, Boehringer Mannheim filed suit against IGEN in the U.S.
District Court for the District of Indiana asserting that IGEN had breached its
contractual obligations to Boehringer Mannheim under the 1992 license agreement.
From time to time in late 1997 and in 1998, representatives of IGEN, Lehman
Brothers and Boehringer Mannheim (and after its acquisition of Boehringer
Mannheim, Roche) discussed a number of potential options for a possible
settlement. No agreement was reached.
In December 1997, IGEN International KK, or IGEN KK, a Japanese subsidiary
of IGEN, filed a lawsuit in Tokyo District Court, Tokyo, Japan against Hitachi,
Ltd. or Hitachi. This lawsuit is referred to in this proxy statement/prospectus
as the Tokyo litigation. In the Tokyo litigation, IGEN KK sought to enjoin
Hitachi from infringing its intellectual property rights relating to ECL
technology and to prevent Hitachi from manufacturing, using or selling the
Elecsys 2010 instrument in Japan. Hitachi was the sole manufacturer for Roche of
that instrument.
In March 1998, Roche completed its acquisition of Boehringer Mannheim and
renamed the company Roche Diagnostics. Also in March 1998, IGEN and Roche
Diagnostics agreed that Roche Diagnostics would voluntarily dismiss the lawsuit
it previously filed in Indiana and that the litigation between them would
proceed in the District Court. In connection with that agreement, IGEN
stipulated that it would not terminate the 1992 license agreement unless and
until the Appellate Court, confirmed it was entitled to do so.
In the Roche litigation, IGEN alleged that Roche Diagnostics breached
material obligations under the 1992 license agreement, including that Roche
Diagnostics failed to develop and commercialize ECL technology according to the
contractual timetable, failed to exploit the license to the extent contemplated
by the parties, failed to phase out certain non-royalty-bearing product lines,
exploited ECL technology outside of the fields specified in the 1992 license
agreement, failed to properly treat intellectual property rights regarding ECL
technology, failed to maintain records essential to the computation of
royalties, and failed to properly compute royalties. In the lawsuit, IGEN sought
compensatory damages as well as injunctive and declaratory relief, including a
judicial declaration of its right to terminate the 1992 license agreement. Roche
Diagnostics filed counterclaims against IGEN alleging that, among other things,
IGEN breached its obligations under the 1992 license agreement by permitting
other licensees to exercise certain rights to ECL technology, by failing to
share certain improvements to ECL technology with Roche Diagnostics and by
declining to defend Roche Diagnostics in the Serono litigation described below.
Roche Diagnostics also alleged that IGEN had misrepresented its own intentions
with respect to the expansion of rights granted to Eisai Co., Ltd., which is
referred to in this proxy statement/prospectus as Eisai, under a
43
separate license agreement. Roche Diagnostics further alleged that IGEN breached
the 1992 license agreement and had interfered with its business relationships by
filing the Tokyo litigation.
In June 1998, Laboratorios Serono S.A., a subsidiary of Ares-Serono S.A.,
or Serono, filed a patent infringement claim against IGEN, Roche Diagnostics,
Roche Diagnostics Corporation and bioMerieux (formerly Organon Teknika) in the
U.S. District Court for the District of Delaware. Serono claimed that a Serono
patent was infringed by the parties. F. Hoffmann-La Roche Ltd subsequently
acquired the patent from Serono and continued in Serono's place to assert
infringement against IGEN and bioMerieux. This lawsuit against IGEN is referred
to in this proxy statement/prospectus as the Serono litigation.
In August 1998, senior executives from IGEN met for the first time with Dr.
Franz Humer, chief executive officer of Roche, as well as other senior
executives of Roche in Basel, Switzerland to discuss a possible settlement of
the Roche litigation. Although the parties discussed various settlement options,
no agreement was reached.
On October 19, 1998, the District Court issued a preliminary injunction,
following a motion by IGEN earlier in the year, prohibiting Roche Diagnostics
from marketing its Elecsys products in physicians' office laboratories and
requiring Roche Diagnostics to escrow all revenues from past sales to
physicians' office laboratories pending the outcome of the Roche litigation and
to transfer all of its current Elecsys customers constituting physicians' office
laboratories to IGEN.
From time to time in 1999 through January 2001, representatives of IGEN and
representatives of Roche held meetings and discussions regarding a possible
settlement of the Roche litigation. Although during this period IGEN and Roche
discussed a number of potential options for a possible settlement, no agreement
was reached.
On August 18, 2000, IGEN filed an amended complaint with the District Court
in the Roche litigation asserting additional breach of contract claims and a
claim for unfair competition. In this amended complaint, IGEN added a request
that Roche be required to pay punitive damages to IGEN.
During 2001, Roche retained Merrill Lynch and The Taylor Companies to
assist it in evaluating potential options for a possible resolution of the Roche
litigation as well as the possibility of Roche acquiring 100% of the stock of
IGEN, which is discussed below.
On February 23, 2001, the trial in the Serono litigation began. The trial
was completed on February 28, 2001. After post-trial briefing, the case was
taken under advisement by the court.
On March 5, 2001, Mr. Heino von Prondzynski, member of the Executive
Committee of Roche and the Head of Roche Diagnostics, wrote to Mr. Samuel
Wohlstadter regarding the possibility of Roche acquiring 100% of the stock of
IGEN as a means of resolving the dispute between Roche and IGEN.
On March 8, 2001, following telephone conversations between Messrs. von
Prondzynski and Wohlstadter, Mr. Wohlstadter wrote to Mr. von Prondzynski
indicating that an acquisition of IGEN at an appropriate price might be an
attractive option for resolving the Roche litigation. IGEN requested, on advice
of counsel, that Roche execute a confidentiality and standstill agreement prior
to commencing more specific discussions about Roche's proposal that it acquire
100% of the stock of IGEN. At various times thereafter in March 2001 and early
April 2001, Messrs. Wohlstadter and von Prondzynski discussed the execution of a
confidentiality and standstill agreement and initiation of discussions regarding
the economic and other major terms of Roche's proposal. They were not able to
reach agreement on these preliminary matters.
On March 19, 2001, the IGEN board of directors held a special meeting to
consider their response to Mr. von Prondzynski's March 5, 2001 letter. Members
of management described the recent conversations and contacts between
representatives of IGEN and representatives of Roche. Representatives of
Cravath, Swaine & Moore LLP, or Cravath, special counsel to IGEN, discussed the
directors' fiduciary duties in responding to Roche's letter and answered
questions from the directors. Representatives of Lehman Brothers discussed their
views and preliminary analyses of the financial aspects of a possible
acquisition of IGEN. Representatives of Wilmer, Cutler & Pickering, counsel to
IGEN, gave a presentation regarding
44
the dispute with Roche. Representatives of Morris, Nichols, Arsht & Tunnell,
counsel to IGEN, gave a presentation regarding the Serono litigation. The IGEN
board of directors authorized Mr. Samuel Wohlstadter to continue discussions,
including discussions regarding valuation, with Mr. von Prondzynski regarding a
possible transaction subject to obtaining a confidentiality and standstill
agreement executed by Roche. Roche declined to enter into this agreement.
On March 26, 2001, the District Court granted IGEN's motion for summary
judgment in the Roche litigation with respect to the allegation that Roche
Diagnostics breached the 1992 license agreement by taking improperly calculated
and unsubstantiated "rental surcharge" deductions against reported sales of
royalty-bearing products. The District Court also dismissed Roche Diagnostics'
counterclaims for fraud and tortious interference with its business, as well as
Roche Diagnostics' related request for punitive damages.
On April 6, 2001, the IGEN board of directors received a written
non-binding expression of interest from Mr. von Prondzynski and Mr. Andreas
Knierzinger, Head of Mergers and Acquisitions of Roche, proposing that Roche
acquire 100% of IGEN's outstanding common stock for cash consideration of up to
$500 million, subject to completion of due diligence. Roche's expression of
interest expired by its terms at 5:00 p.m., EDT, on April 20, 2001. In response
to IGEN's written request on April 19, 2001, Roche, on April 24, 2001, extended
the deadline for IGEN to respond to its expression of interest until 5:00 p.m.,
EDT, on April 27, 2001.
On April 11, 2001, Mr. Samuel Wohlstadter sent a letter to Mr. von
Prondzynski to acknowledge receipt of the April 6, 2001 expression of interest
and reiterate IGEN's request that Roche execute a confidentiality and standstill
agreement prior to commencing discussions regarding the specific terms of
Roche's proposal.
On April 19, 2001, the IGEN board of directors held a special meeting at
which members of management described the recent conversations between
representatives of IGEN and representatives of Roche as well as the April 6,
2001 expression of interest received from Roche. The IGEN board of directors
also authorized management to formally engage Lehman Brothers as IGEN's
financial advisor in connection with the evaluation of proposals to acquire IGEN
or an interest in IGEN.
On April 25, 2001, the IGEN board of directors held a special meeting to
consider the April 6, 2001 expression of interest from Roche. Members of
management described the recent conversations and contacts between
representatives of IGEN and representatives of Roche. Representatives of Cravath
discussed the IGEN board of directors' fiduciary duties in considering Roche's
expression of interest and also described the terms of Roche's expression of
interest. Representatives of Lehman Brothers made a detailed financial
presentation regarding Roche's expression of interest and indicated that, based
on and subject to the matters to be contained in the written opinion, as of that
date, from a financial point of view, the consideration which had been offered
in Roche's expression of interest was inadequate to the stockholders of IGEN and
Lehman Brothers would be prepared to issue an opinion in writing to that effect.
Representatives of Wilmer, Cutler & Pickering gave a presentation regarding the
Roche litigation. Representatives of Morris, Nichols, Arsht & Tunnell gave a
presentation regarding the Serono litigation. Upon completing its deliberation,
the IGEN board of directors unanimously decided to reject Roche's expression of
interest. The IGEN board of directors decided, however, that if mutually
acceptable terms could be reached, an acquisition transaction could still be a
constructive approach to resolving the parties' dispute. On that same day, Mr.
Samuel Wohlstadter advised Mr. von Prondzynski by letter of the IGEN board of
directors' decision and again conveyed the IGEN board of directors' request that
Roche execute an appropriate confidentiality and standstill agreement with IGEN
so that further discussions could take place.
From time to time during the period from May 2001 until mid-October 2001,
representatives of IGEN and representatives of Roche had preliminary discussions
concerning valuation and possible structures for an acquisition of IGEN by
Roche. Representatives of IGEN continued to request that Roche execute an
appropriate confidentiality and standstill agreement.
45
On August 10, 2001, the District Court granted two of IGEN's motions for
summary judgment in the Roche litigation with respect to the allegations that
Roche Diagnostics breached the 1992 license agreement by settling the Serono
litigation without IGEN's consent and by failing to cease development of a
competing product line. The District Court also ruled that Roche Diagnostics'
field was limited solely to hospitals (with certain exceptions), clinical
reference laboratories and blood banks.
On October 16, 2001, Roche, Roche Diagnostics and IGEN executed a
confidentiality agreement, including a standstill provision that would remain in
effect for three months, which was the expected duration of the jury trial in
connection with the Roche litigation. After execution of the confidentiality
agreement, IGEN suggested to Roche a possible transaction structure whereby
Roche would acquire 100% of IGEN, with IGEN stockholders receiving, in exchange
for their IGEN stock, cash from Roche and shares of common stock of a new public
company to be spun-off by IGEN. The new company would contain certain assets and
liabilities of IGEN to be identified by the parties. This transaction structure
is referred to in this proxy statement/prospectus as the Newco transaction.
On October 24, 2001, the jury trial in connection with the Roche litigation
began.
In November 2001, Roche, IGEN and the remaining defendants reached a
settlement of the Serono litigation. In that settlement, Roche dismissed with
prejudice all claims against IGEN, paid IGEN $5.7 million as reimbursement for
legal fees incurred in the Serono litigation and granted IGEN a fully-paid,
perpetual, worldwide, non-exclusive license (with the right to grant
sublicenses) to the patent at issue.
From time to time in November and early December 2001, representatives of
IGEN and Roche and their respective legal and financial advisors continued to
have discussions regarding a possible Newco transaction.
On December 8, 2001, representatives of the Taylor Companies informed
representatives of IGEN that Roche was no longer willing to discuss a possible
Newco transaction, but that Roche was prepared to discuss an acquisition of 100%
of IGEN's stock for cash.
On December 9, 2001, the IGEN board of directors held a special meeting at
which members of management described the recent discussions between
representatives of IGEN and Roche and their respective financial and legal
advisors. After discussion, the IGEN board of directors authorized management to
continue discussions with respect to a possible acquisition by Roche of 100% of
IGEN's stock for cash.
In mid-December 2001, Roche and its financial and legal advisors conducted
business and legal due diligence in connection with a potential acquisition of
IGEN at the offices of Wilmer, Cutler & Pickering. In addition, representatives
of IGEN and Roche and their respective legal advisors exchanged drafts of a
merger agreement and a stockholder agreement and continued to discuss the terms
of a possible acquisition by Roche of 100% of IGEN's stock for cash. Numerous
significant issues were raised in these discussions, including price, IGEN's
requirements for a high level of closing certainty and Roche's requirements that
certain ongoing obligations, including those related to MSD, be terminated in
connection with an acquisition by Roche. These issues remained unresolved at the
conclusion of the jury trial in connection with the Roche litigation referred to
below.
On January 3, 2002, the jury trial in connection with the Roche litigation
ended, and on January 10, 2002, the jury rendered a verdict that Roche
Diagnostics had breached the 1992 license agreement, had violated its duty of
good faith and fair dealing to IGEN in connection with a license for nucleic
acid tests and had engaged in unfair competition against IGEN, and that IGEN had
violated its duty of good faith and fair dealing to Roche as a result of the
prosecution of the Tokyo litigation.
On February 15, 2002, the District Court issued a final order of judgment
that confirmed the jury's decision awarding $105 million in compensatory damages
and $400 million in punitive damages, entitling IGEN to terminate the 1992
license agreement and directing Roche Diagnostics to grant to IGEN for use in
IGEN's retained fields a license to all improvements with respect to ECL
technology developed by
46
Roche Diagnostics under the 1992 license agreement. Roche Diagnostics was also
ordered, at its sole cost and expense, to deliver those improvements to IGEN and
to provide all other information and materials required or necessary to enable
IGEN to commercialize those improvements. The final order of judgment also
barred Roche Diagnostics from marketing, selling, placing or distributing
outside of its licensed field any products based on ECL technology, including
its Elecsys diagnostics product line. The final order also found in IGEN's favor
on all of Roche Diagnostics' counterclaims, except for one for which IGEN was
ordered to pay $500,000, which it paid promptly.
On February 20, 2002, IGEN sent a notice to Roche Diagnostics terminating
the 1992 license agreement effective upon the expiration of Roche Diagnostics'
time to file a notice of appeal of the District Court decision in connection
with the Roche litigation, if Roche Diagnostics had not filed a notice to appeal
by that time, or at such time as the Appellate Court has issued a final order
concluding the appeal that did not reverse or vacate those portions of the
judgment entitling IGEN to terminate the 1992 license agreement.
On April 15, 2002, the District Court reaffirmed its final order of
judgment. In May 2002, Roche filed notices of appeal of the final order of
judgment to the Appellate Court. Roche Diagnostics appealed certain aspects of
the final order of judgment to the Appellate Court. During the appeal process
Roche Diagnostics was obligated to continue to comply with the terms of the 1992
license agreement, including its obligation to continue to pay IGEN royalties on
Roche Diagnostics' sales of royalty bearing products and to share and deliver
improvements. Roche Diagnostics' obligation to pay the $505 million of monetary
damages awarded to IGEN was suspended until completion of the appeal process.
On May 28 and 29, 2002, representatives of IGEN and representatives of
Roche met in Washington, D.C. to continue their negotiations regarding various
alternatives to resolve their dispute, but no agreement was reached.
On June 13, 2002, IGEN and Hitachi settled the Tokyo litigation.
In June and July 2002, the parties participated in the Appellate Court's
mandated mediation program. On June 21, 2002, at the direction of the Appellate
Court's senior circuit mediator, Foley & Lardner, counsel to Roche Diagnostics,
sent a letter to Wilmer, Cutler & Pickering conveying a settlement proposal for
the mediation session. That proposal reiterated a proposal made by Roche to IGEN
during the parties' meeting on May 29, 2002. The proposal included a payment to
IGEN in the amount of $250 million in settlement of all of the issues in the
litigation, the acquisition of 5% of IGEN's outstanding stock from stockholders
for $150 million and the payment of a fixed annual fee of $100 million per year,
to the extent Roche Diagnostics in fact continued to use ECL technology, for 10
years for a worldwide, non-exclusive license for the use of ECL technology in
Roche Diagnostics' field as specified in the final order of judgment. The
proposal also included a supply agreement pursuant to which Roche Diagnostics
would make available to IGEN, for use in IGEN's retained fields, Roche
Diagnostics' products based on ECL technology as well as a continued supply of
reagents comparable to those provided for in the 1992 license agreement. The
parties were unable to resolve the dispute through the mediation process.
Separately, in July and August 2002, IGEN and Roche exchanged drafts of,
and held a series of negotiation sessions regarding, a possible settlement
agreement and certain related commercial agreements to resolve the Roche
litigation.
On August 8, 2002, Mr. Wohlstadter and Dr. Humer met in Zurich, Switzerland
and discussed various aspects of a possible settlement. On August 14, 2002, Dr.
Humer sent a letter to Mr. Samuel Wohlstadter to follow up on their discussions
and advise him of the critical points of any settlement offer, including an
absolute maximum financial burden for Roche of $1.1 billion on a net present
value basis under any possible structure. Based on conversations with
representatives of Roche, representatives of IGEN understood Roche's position to
mean that the cash payment by Roche in any settlement would be less than $1.1
billion due to downward adjustments resulting from any non-cash value perceived
to be provided by Roche and certain unspecified costs to Roche related to the
transaction structure selected.
47
During the period from August through September 2002, IGEN and Roche filed
their appellate briefs in connection with Roche's appeal of the District Court's
judgment.
From time to time in August, September and October 2002, representatives of
IGEN and Roche and their respective advisors continued to engage in discussions
regarding a possible settlement and related matters.
In mid-October 2002, IGEN proposed to Roche that Roche reconsider the Newco
transaction structure as a means of resolving the outstanding issues. In late
October, representatives of IGEN and Roche and their respective legal advisors
met in New York to discuss the Newco transaction structure. At this meeting,
representatives of IGEN made a presentation regarding the Newco transaction
structure. Representatives of Roche indicated a willingness to consider the
Newco transaction structure, but reiterated the maximum value Roche had said it
would provide in any transaction structure and therefore indicated it would be
Roche's position that in the Newco transaction structure the cash to IGEN
stockholders and the Roche-provided funding for BioVeris would be less than $1.1
billion. IGEN's representatives indicated that, while they would not accept
Roche's proposed cap on value, they were nevertheless willing to proceed with
the negotiation of documentation and other terms in connection with a possible
Newco transaction. As a result of the meetings, the parties began to pursue the
Newco transaction structure as a framework for resolving their dispute.
Representatives of Roche advised representatives of IGEN that a number of issues
remained to be resolved, including obtaining the consent of MSD, to any
transaction between Roche and IGEN.
In late October and early November 2002, representatives of IGEN and Roche
and their respective legal advisors exchanged drafts of a merger agreement,
related transaction agreements and ongoing commercial agreements (including
agreements by Roche to supply BioVeris with finished instruments to be marketed
and sold by BioVeris and key ingredients used to produce assays) in connection
with the Newco transaction structure.
In early December 2002, representatives of IGEN and Roche and their
respective legal advisors met again in New York to discuss and negotiate the
Newco transaction structure, the terms of a possible transaction and the ongoing
commercial agreements.
In January 2003, representatives of IGEN and Roche and their respective
legal advisors met in New York, and from time to time in January and February
2003 held a series of telephone conferences and a video conference, to discuss
the Newco transaction structure, including a new proposal by IGEN regarding the
Newco transaction structure designed to reduce the likelihood of future disputes
regarding the commercialization of ECL technology, and to negotiate the ongoing
commercial agreements. During this period, the parties exchanged various drafts
of the ongoing commercial agreements.
On February 24, 2003, the Appellate Court heard oral arguments on the
appeal by Roche of the judgment of the District Court.
From time to time in March, April and early May 2003, representatives of
IGEN and Roche and their respective legal advisors met in New York and held a
series of telephone conferences to discuss, and exchanged drafts of, the merger
agreement, related transaction agreements, the ongoing commercial agreements and
other related issues regarding a possible Newco transaction. In connection with
these discussions, Roche stated that it would require that the Roche litigation
be settled at the time of signing the definitive agreements relating to a Newco
transaction (rather than at completion of the transaction) pursuant to a
settlement agreement that would provide Roche with a new, limited license for a
limited period, irrespective of whether the Newco transaction was ultimately
completed. IGEN agreed to discuss this concept. During this period Roche and
Davis Polk & Wardwell, or Davis Polk, legal advisors to Roche, also conducted
business and legal due diligence relating to IGEN in a data room established in
New York.
On April 28, 2003, in connection with obtaining MSD's consent to the Newco
transaction as requested by Roche, IGEN, Roche, Roche Diagnostics and MSD
entered into a confidentiality agreement
48
to permit MSD to review drafts of the merger agreement, related transaction
agreements and ongoing commercial agreements as well as other information
relating to the Newco transaction.
On May 9, 2003, the IGEN board of directors held a meeting in Washington,
D.C. Representatives of Wilmer, Cutler & Pickering updated the IGEN board of
directors on the status of the Roche litigation, members of management gave a
detailed presentation of a proposed business plan for BioVeris and
representatives of Lehman Brothers gave a detailed financial presentation
relating to a possible Newco transaction. Representatives of Cravath reviewed
with the IGEN board of directors the fiduciary duties of the directors in
considering the possible transaction with Roche, the material terms of and the
open issues in connection with the related transaction agreements and certain
legal issues related to the Newco transaction structure. A representative of
Hale and Dorr LLP, counsel to IGEN, reviewed the status and the material terms
of the ongoing commercial agreements.
From time to time in mid- to late May 2003 and early to mid-June 2003,
representatives of IGEN and Roche and their respective legal advisors met in New
York and held a series of telephone conferences to continue to discuss and
exchange comments on various drafts of a settlement agreement, the merger
agreement, the related transaction agreements and the ongoing commercial
agreements, as well as to discuss the need for and possible financial terms of
separate PCR license agreements. During these discussions, the parties made
various proposals intended to ensure that the parties would have a high level of
certainty that the Newco transaction would in fact close if definitive
agreements were in fact agreed. In addition, during this period Davis Polk
reviewed additional documents relating to IGEN in the data room.
In late June 2003, representatives of IGEN and Roche and their respective
legal advisors met again in New York to discuss various alternatives relating to
closing certainty as well as various drafts of the merger agreement, related
transaction agreements and ongoing commercial agreements. Davis Polk also
provided an initial draft of the MSD global consent agreement.
On July 3, 2003, Mr. Samuel Wohlstadter and other representatives of IGEN's
senior management met with Dr. Humer and other representatives of Roche's senior
management to discuss various aspects of the Newco transaction, including
valuation. At that meeting, the parties once again discussed the possibility of
an all-cash acquisition of 100% of IGEN's stock and Dr. Humer reiterated his
previously expressed value limits. The members of IGEN senior management who
attended the meeting understood that this approach would result in less than
$1.1 billion being paid to IGEN stockholders.
On July 8, 2003, Mr. Wohlstadter and Dr. Humer exchanged letters regarding
the completion of due diligence and seeking to come to resolution on the
remaining business issues, including valuation.
On July 9, 2003, the Appellate Court issued its opinion in the Roche
litigation. The opinion affirmed IGEN's right to terminate the 1992 license
agreement, affirmed IGEN's right to certain improvements and left intact IGEN's
right to receive $18.6 million in compensatory damages. The Appellate Court,
however, vacated the $400 million punitive damage award against Roche and
reversed $86.8 million in compensatory damages.
Also on July 9, 2003, the IGEN board of directors held a special meeting at
which the board evaluated the consequences of the termination of the 1992
license agreement and the status of the negotiations with Roche toward a
possible transaction. Upon completing its deliberations, the IGEN board of
directors authorized management to send the notice to Roche Diagnostics
confirming termination of the 1992 license agreement and instructed management
to file patent infringement suits against Roche Diagnostics. On the same date,
IGEN sent a notice to Roche Diagnostics confirming termination of the 1992
license agreement and filed patent infringement suits against Roche Diagnostics
in Maryland and Germany.
On July 10, 2003, Dr. Humer sent a letter to Mr. Samuel Wohlstadter
indicating that a negotiated transaction would still be in the parties' best
interests and advising IGEN that Roche was considering an acquisition of 100% of
IGEN's stock, subject to the parties resolving their outstanding issues in
connection with the transaction, including obtaining MSD's consent. On the same
date, the IGEN board of directors held a special meeting to discuss the status
and timing of the discussions with Roche. Members of
49
management described the recent conversations and contacts between
representatives of IGEN and representatives of Roche and discussed the expected
schedule of future discussions with Roche.
During the week of July 14, 2003, representatives of IGEN and
representatives of Roche met in New York and discussed resolution of the
remaining issues. At the outset of the meeting on July 14, 2003, Dr. Humer
discussed the possibility of an all-cash acquisition of 100% of IGEN's common
stock at $42.00 per share. Mr. Samuel Wohlstadter responded that he would be
prepared to recommend to the IGEN board of directors an acquisition of 100% of
IGEN's common stock at $62.00 per share. At the close of the meeting, Dr. Humer
proposed an all-cash acquisition of 100% of IGEN's common stock at $48.00 per
share and in response Mr. Samuel Wohlstadter requested $52.00 per share.
Although the parties did not reach an agreement with respect to valuation, Mr.
Wohlstadter and Dr. Humer agreed to instruct their respective negotiating teams
to resolve all other issues during the week of July 14, 2003 and that they would
meet again on July 19, 2003 to further discuss valuation. In addition, each of
the parties acknowledged that there would be a high level of closing certainty
along the lines previously proposed by IGEN.
In addition on July 14, 2003, representatives of Roche, a representative of
the joint venture oversight committee of the IGEN board of directors (a
committee that consisted of three independent directors with the authority and
responsibility for matters relating to MSD; on the dates described in this
background to the merger and related transactions, Messrs. Anthony Rees, Robert
R. Salsmans and Joop Sistermans were the members of the committee), or the JVOC,
a representative of Potter Anderson & Corroon LLP, or Potter Anderson, counsel
to the JVOC, and Mr. Jacob Wohlstadter met to discuss obtaining the consent of
MSD and MST, which is a company established and wholly-owned by Mr. Jacob
Wohlstadter and is IGEN's joint venture partner in MSD, to a transaction between
Roche and IGEN. Mr. Jacob Wohlstadter had from time to time participated in
previous negotiations with Roche in his capacity as a representative of MSD and
to facilitate obtaining any consent of MSD or MST which Roche might require, as
well as in his capacity as a consultant to IGEN. Mr. Jacob Wohlstadter proposed
that in exchange for the consent of MSD and MST to the acquisition and the
waiver by MSD of certain of its rights under the MSD joint venture agreement,
MSD would receive continued funding as well as the assets and rights that would
have been transferred to BioVeris in a Newco transaction (including a license to
Roche's PCR technology), but excluding any supply agreements relating to
finished instruments or key ingredients. Representatives of Roche indicated a
willingness to consider MSD's proposal to receive these assets and rights. Upon
learning of Mr. Jacob Wohlstadter's proposal to Roche, and Roche's willingness
to consider it, representatives of IGEN met again with Roche and inquired
whether Roche was prepared to pursue the Newco transaction with BioVeris
receiving the assets and rights covered by that proposal without reduction of
the total cash payment by Roche. Roche indicated a willingness to proceed
negotiating the Newco transaction on this basis.
Between July 15 and 18, 2003, the representatives of IGEN and Roche and
their respective legal advisors met and held numerous telephone conferences in
New York and exchanged drafts of and comments on the merger agreement, the
related transaction agreements, the ongoing commercial agreements and an ongoing
litigation agreement, in each case related to the Newco transaction structure.
On July 15 and July 19, 2003, Mr. Jacob Wohlstadter and representatives of
the JVOC and their respective legal advisors had several discussions regarding
the terms under which MSD and MST would provide their consent to a possible
Newco transaction. MSD's and the JVOC's respective legal advisors also exchanged
drafts of the MSD consent and MSD proposed a letter agreement between IGEN,
BioVeris, MSD and MST outlining certain additional matters relating to the
consent. MSD's proposals contemplated that IGEN and BioVeris would pay to MSD
$10 million upon execution of the consent and an additional $60 million upon the
earlier of the completion of the merger or the termination of the merger
agreement. In addition, MSD's proposals contemplated extensive amendments to the
MSD joint venture agreement and other related agreements. Mr. Jacob Wohlstadter
explained the basis for MSD's proposals, among other things stating that a
change of control of IGEN would trigger a one-time payment from IGEN to MSD of
$20.6 million based on IGEN's funding commitment for the period through November
30, 2003, and that the Newco transaction as contemplated would eliminate MSD's
future
50
access to reagents from Roche. In response, the JVOC proposed that MSD receive
no payments or other consideration in connection with the consent and further
informed Mr. Jacob Wohlstadter that it was unwilling to discuss amendments to
the MSD joint venture agreement and other related agreements in connection with
obtaining MSD's consent. On July 19 and 20, 2003, at the invitation of the JVOC,
Mr. Richard Cass, IGEN's only non-management director who was not a member of
the JVOC, frequently participated in the discussions and deliberations among the
JVOC regarding MSD and the possible transaction with Roche.
On July 19, 2003, representatives of IGEN and Roche and their respective
legal advisors met in New York and discussed and negotiated valuation and other
open issues. Mr. Samuel Wohlstadter and Dr. Humer then met and agreed that, if
MSD's and MST's consents could be obtained and the documentation finalized to
the mutual satisfaction of the parties, Roche would provide $52.00 of value to
be allocated as IGEN desired between a direct payment to IGEN stockholders and
funding for BioVeris, as well as an additional $50 million of funding for
BioVeris. Following their meeting, Mr. Samuel Wohlstadter and Dr. Humer
instructed their respective negotiating teams to resolve the remaining issues
promptly.
From July 19 through 23, 2003, representatives of IGEN and Roche and their
respective legal advisors continued to conduct negotiations to finalize the PCR
license agreements. On July 20, 2003, Cravath distributed revised drafts of the
merger agreement and related transaction agreements to Roche, Davis Polk, MSD
and its legal advisors and IGEN's other legal advisors. Also on July 20, 2003,
representatives of Roche and its legal advisors met in New York and Davis Polk
provided representatives of IGEN and its legal advisors with comments on the
revised merger agreement and related transaction agreements. Representatives of
IGEN and Roche and their respective legal advisors continued to discuss the
remaining non-valuation issues.
Also on July 20, 2003, Mr. Jacob Wohlstadter and representatives of the
JVOC and their respective legal advisors had a telephone conference to discuss
MSD's proposed changes to the MSD consent and the proposed MSD letter agreement.
That afternoon, Mr. Jacob Wohlstadter revised his requested consent payment
downward to a one-time payment of $37.5 million, plus the payment by BioVeris of
all of MSD's and MST's expenses in connection with the merger and consent, which
Mr. Jacob Wohlstadter estimated at $2.5 million through July 31, 2003. That same
day, the JVOC made a counter-offer that BioVeris would provide additional
funding to MSD of $30 million, of which $20.6 million would be payable upon
completion of the proposed transaction with Roche and $9.4 million payable six
months thereafter, and that the MSD joint venture agreement would expire upon
the first to occur of the completion of the merger or the termination of the
merger agreement. The JVOC rejected substantially all the changes to the MSD
joint venture agreement and other related agreements being requested by Mr.
Jacob Wohlstadter. These discussions continued on July 21 and 22, 2003, and MSD
and the JVOC and their respective legal advisors exchanged revised drafts of the
MSD consent and MSD letter agreement, and Mr. Jacob Wohlstadter provided the
JVOC with written materials explaining his position, including that he had
already made a number of significant concessions based on the position of the
JVOC.
Later on July 20, 2003, the IGEN board of directors held a special meeting
at which management updated the directors on the status of their discussions
with Roche and the JVOC updated the directors on the discussions with Mr. Jacob
Wohlstadter and described the proposal that the JVOC made to Mr. Jacob
Wohlstadter earlier that day. The IGEN board of directors discussed various
alternatives in the event an agreement could not be reached with MSD and MST for
their consent.
On July 21, 2003, the JVOC met with Mr. Samuel Wohlstadter and told him the
JVOC would not agree to increase the additional funding for MSD above $30
million unless the Wohlstadter family provided the additional amount. After
consideration, Mr. Samuel Wohlstadter indicated that at the JVOC's request and
as an accommodation to facilitate completion of the Newco transaction, he was
willing to invest indirectly in MSD by financing any BioVeris capital
contribution exceeding $30 million. His agreement to do so was finalized on July
23, 2003.
51
Also on July 21, 2003, the IGEN board of directors held a special meeting
and discussed the current status of the possible Newco transaction.
Representatives of Cravath discussed the fiduciary duties of the IGEN board of
directors in connection with the consideration of the proposed transaction and
various counsel to IGEN discussed the status of pending litigation. Members of
management reviewed for the IGEN board of directors the structure of the
transaction and the BioVeris business plan. The IGEN board of directors then
discussed the relationship between IGEN and MSD, including that the JVOC and MSD
had not yet been able to reach an agreement for MSD's and MST's consent to a
transaction between IGEN and Roche and discussed a number of alternatives,
including the purchase by Mr. Samuel Wohlstadter of shares of BioVeris preferred
stock that economically mirror the class C interests in MSD to be held by
BioVeris, the proceeds of which would be used to fund a portion of the final
capital contribution to MSD. Representatives of Lehman Brothers then made a
detailed financial presentation regarding the Newco transaction and rendered an
oral opinion, which was subsequently confirmed in writing on July 24, 2003 that,
based upon and subject to the matters to be contained in the written opinion, as
of the date of meeting, from a financial point of view, the consideration to be
received by the stockholders of IGEN in the proposed transaction is fair to such
stockholders and Lehman Brothers would be prepared to issue an opinion in
writing to that effect, assuming satisfactory resolution of the remaining
outstanding issues. Representatives of Cravath presented to the IGEN board of
directors a summary of the principal terms of the draft merger agreement and
related transaction agreements. Members of management presented to the IGEN
board of directors a summary of the principal terms of the ongoing commercial
agreements.
On July 22, 2003, in response to a press report, IGEN issued a press
release confirming that it was in discussions with Roche with respect to a
potential transaction.
On July 22, 23 and 24, 2003, representatives of IGEN and Roche and their
respective legal advisors continued to exchange drafts of the various related
transaction agreements and ongoing commercial agreements and have telephone
conferences to finalize these agreements. On these dates, Mr. Samuel
Wohlstadter, representatives of IGEN and Roche and their respective legal
advisors also negotiated a release and agreement with respect to certain
companies that are affiliated with Mr. Samuel Wohlstadter.
On July 23, 2003, Roche filed a petition with the Appellate Court for a
re-hearing of a portion that court's decision in the Roche litigation.
Also on July 23, 2003, after Mr. Jacob Wohlstadter agreed to withdraw his
request that changes be made to the MSD joint venture agreement and other
related agreements and the BioVeris preferred stock purchase agreement with Mr.
Samuel Wohlstadter regarding the BioVeris preferred stock was finalized, a
representative of the JVOC and Mr. Jacob Wohlstadter and their respective legal
advisors sought to finalize the MSD consent and MSD letter agreement. In
addition, on July 23, 2003, in-house counsel to IGEN and Cravath were asked by
the JVOC to review the near-final versions of the MSD letter agreement and MSD
consent. On the evening of July 23, 2003, the JVOC and Mr. Jacob Wohlstadter
agreed that BioVeris would provide additional funding to MSD of $37.5 million
following completion of the proposed transaction with Roche. In addition, the
parties agreed that the MSD joint venture agreement would expire upon the first
to occur of the completion of the merger or the termination of the merger
agreement. Mr. Jacob Wohlstadter and the JVOC agreed that the issues relating to
expenses would not be addressed in the letter agreement, without prejudice to
either party's position concerning IGEN's existing obligation to pay such
expenses.
On July 24, 2003, the JVOC and its counsel met at 10:00 a.m. and considered
the agreements with MSD, MST and Mr. Jacob Wohlstadter, pursuant to which, among
other things, MSD and MST would grant their consent to the proposed transaction
between IGEN and Roche, BioVeris would agree to provide a final capital
contribution of $37.5 million (of which any amount in excess of $30.0 million
would be funded by Mr. Samuel Wohlstadter through the purchase of shares of
BioVeris preferred stock that economically mirror the class C interests in MSD
to be held by BioVeris) to MSD and the MSD joint venture agreement would expire
upon the first to occur of the completion of the merger or the termination
52
of the merger agreement. The JVOC resolved to recommend the agreements with MSD,
MST and Mr. Jacob Wohlstadter to the IGEN board of directors.
Also on July 24, 2003, the IGEN board of directors held a special meeting
at 11:00 a.m. to consider and approve the proposed transaction, whereby Roche
would acquire IGEN and simultaneously IGEN would distribute to its stockholders
shares of a new public company holding certain of IGEN's assets and liabilities.
Representatives of Cravath reviewed the purpose of the meeting and explained the
agenda for the meeting. Representatives of Potter Anderson then summarized the
results of the negotiations among the JVOC, MSD and MST in connection with
obtaining the consents of MSD and MST to the proposed transaction and the
principal terms of the MSD letter agreement. After discussion, the members of
the JVOC unanimously recommended to the IGEN board of directors that they
approve the agreements with MSD, MST and Mr. Jacob Wohlstadter. Management then
summarized the developments relating to the ongoing litigation agreement and the
ongoing commercial agreements. Representatives of Cravath then provided an
update concerning the remaining agreements in connection with the proposed
transaction and summarized the principal terms of the release and agreement, the
MSD consent, the MSD letter agreement and the purchase agreement between
BioVeris and Mr. Samuel Wohlstadter regarding the BioVeris preferred stock.
Representatives of Lehman Brothers advised the IGEN board of directors that they
had reviewed the developments in the transaction and rendered an oral opinion,
which was subsequently confirmed in writing that, based upon and subject to the
matters contained in the written opinion, as of that date, from a financial
point of view, the consideration to be received by the stockholders of IGEN in
the proposed transaction is fair to such stockholders. After discussion and
consideration, the IGEN board of directors unanimously voted to approve the
merger and related transactions, declared the merger agreement to be advisable
and resolved to recommend that IGEN stockholders vote in favor of the adoption
of the merger agreement. Following the board meeting, representatives of IGEN,
Roche and MSD and their respective advisors met at Cravath's offices to
finalize, execute and deliver the merger and related transaction agreements and
ongoing commercial agreements.
At 4:21 p.m. on July 24, 2003, immediately following the execution and
delivery of the merger agreement and related transaction agreements and ongoing
commercial agreements, IGEN and Roche issued a joint press release announcing
the proposed transaction between IGEN and Roche.
REASONS FOR THE MERGER AND RELATED TRANSACTIONS
REASONS FOR THE TRANSACTION.
In reaching its determination to approve the merger agreement and the
related transaction agreements, the merger and related transactions, and to
unanimously recommend that IGEN stockholders adopt the merger agreement, the
IGEN board of directors consulted with its management team, financial advisors,
legal counsel and other advisors and considered the short-term and long-term
interests of IGEN and its stockholders. In particular, the IGEN board of
directors considered the following factors, all of which it deemed favorable, in
reaching its determination to approve the merger agreement and the related
transaction agreements and the merger and related transactions:
- the IGEN board of directors' view that the merger maximizes the value to
IGEN stockholders of the right to terminate IGEN's license to Roche
Diagnostics gained in the Roche litigation and is thus in the best
interests of IGEN and its stockholders;
- the IGEN board of directors' conclusion that Roche would provide more
value for the rights it had lost as a result of the Roche litigation than
any other party;
- the cash portion of the merger consideration represents a substantial
premium to the historical price of IGEN's common stock;
- the total expected transaction value to IGEN stockholders represents a
significant premium to the historical price of IGEN's common stock;
53
- the opportunity for IGEN stockholders to benefit from BioVeris's
potential growth through their continued ownership of BioVeris;
- the presentations of Lehman Brothers to the IGEN board of directors, and
the opinion of Lehman Brothers that, based upon and subject to the
matters described in the opinion, as of the date of the opinion, from a
financial point of view, the consideration to be received by IGEN
stockholders in the merger was fair to such stockholders;
- the IGEN board of directors' view that the merger will enable IGEN to
maximize the value of its technology, assets and businesses;
- following the merger and the final contribution to MSD, BioVeris would be
free from debt (other than trade payables) and have approximately $125
million in cash;
- BioVeris will own IGEN's intellectual property rights, including those
related to ECL technology, and obtain the rights to certain improvements
relating to Roche's Elecsys product line including the right to
commercialize that technology directly and through third-party
collaborators, subject to the terms of the improvements license
agreement;
- the opportunity for BioVeris to create additional value through its
assumption of IGEN's biodefense, life science and industrial product
lines as well as IGEN's opportunities in the clinical diagnostics and
healthcare fields, and through the commercialization of IGEN's
intellectual property, including ECL technology;
- the opportunity for BioVeris to create additional value through the
establishment of new strategic partnerships;
- the terms and conditions of the merger agreement and the related
transaction agreements, including the provisions that permit IGEN to
continue to receive unsolicited inquiries and proposals regarding other
potential business combinations, negotiate and provide information to
third parties making such inquiries or proposals, and, subject to the
satisfaction of certain conditions, in the exercise of its fiduciary
duties, withdraw or modify its recommendation to IGEN stockholders
regarding the merger, or terminate the merger agreement, and enter into a
more favorable transaction with a third party, subject to the payment of
a $26.6 million termination fee to Roche; and
- the IGEN board of directors' belief that the conditions to the completion
of the merger are limited and likely to be satisfied.
The IGEN board of directors also considered a number of potentially
negative factors in its deliberations concerning the merger agreement and the
related transaction agreements, including:
- the risk that the benefits sought to be achieved in the merger and
related transactions will not be achieved, including that BioVeris is not
successful in achieving growth or developing its business;
- the fact that it was and is difficult to estimate what the value of the
shares of BioVeris common stock will be at the time they are distributed
to IGEN stockholders;
- the risk that an active public trading market for BioVeris common stock
does not currently exist and may not develop after the completion of the
merger;
- the obligation of BioVeris to make to MSD a class C capital contribution
in the amount of $37.5 million (of which any amount in excess of $30
million will be funded by Mr. Samuel Wohlstadter through the purchase of
shares of BioVeris preferred stock that economically mirror the class C
interests in MSD to be held by BioVeris);
- the obligation of BioVeris to pay up to $20 million to IGEN to the extent
the average of the high and the low market capitalization for BioVeris on
the first day of trading of BioVeris's common stock after the completion
of the merger exceeds a certain threshold; and
54
- the risks to IGEN's business that might result from constraints imposed
by interim operating covenants contained in the merger agreement.
The IGEN board of directors also considered the financial viability of
BioVeris as an independent company. Set forth below are the material factors
considered by the IGEN board of directors in analyzing the restructuring:
- the financial condition, results of operations, business and prospects of
BioVeris as an independent company, including the expected $125 million
of initial cash;
- management's business plan for BioVeris;
- the fact that BioVeris would have a different and smaller revenue base,
including substantially less royalty revenue, than IGEN and significant
operating losses;
- the current biodefense, life science, industrial and clinical diagnostics
industries and market conditions in the global clinical diagnostics
market; and
- the indemnification obligations of BioVeris to Roche and IGEN following
the completion of the merger.
The IGEN board of directors was aware of the potential benefits of the
merger and related transactions to the members of IGEN's management and the IGEN
board of directors, discussed below in "-- Interests of IGEN's Directors and
Executive Officers in the Merger and Related Transactions." The IGEN board of
directors determined that these potential benefits were such that they would not
affect the ability of the members of the IGEN board of directors to discharge
their duties.
In view of the wide variety of factors considered by the IGEN board of
directors, the IGEN board of directors did not find it practicable to, and did
not, quantify or otherwise attempt to assign relative weights to the specific
factors considered. The IGEN board of directors viewed its position and
recommendation as being based on the totality of the information presented to
and considered by it. After taking into consideration all of the factors set
forth above, the IGEN board of directors determined that the potential benefits
of the proposed merger and related transactions far outweighed the potential
detriments associated with the proposed merger and related transactions.
RECOMMENDATION OF THE IGEN BOARD OF DIRECTORS
The IGEN board of directors has carefully reviewed and considered the terms
and conditions of the proposed merger and related transactions, has unanimously
approved the merger agreement and the related transaction agreements, and has
unanimously determined that the merger agreement is advisable and in the best
interests of IGEN and its stockholders. Accordingly, the IGEN board of directors
unanimously recommends that IGEN stockholders vote "FOR" the adoption of the
merger agreement. IGEN stockholders are not being asked to vote on the
restructuring.
OPINION OF LEHMAN BROTHERS
On July 24, 2003, Lehman Brothers rendered its opinion to the IGEN board of
directors that as of such date, and based upon and subject to certain matters
stated therein, from a financial point of view, the consideration to be received
by the IGEN stockholders in the merger is fair to the IGEN stockholders.
THE FULL TEXT OF LEHMAN BROTHERS' WRITTEN OPINION, DATED JULY 24, 2003,
WHICH IS REFERRED TO AS THE LEHMAN BROTHERS OPINION, IS ATTACHED AS ANNEX 15 TO
THIS PROXY STATEMENT/PROSPECTUS. STOCKHOLDERS MAY READ SUCH OPINION FOR A
DISCUSSION OF THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, FACTORS CONSIDERED AND
LIMITATIONS UPON THE REVIEW UNDERTAKEN BY LEHMAN BROTHERS IN RENDERING ITS
OPINION. THE FOLLOWING IS A SUMMARY OF THE LEHMAN BROTHERS OPINION AND THE
METHODOLOGY THAT LEHMAN BROTHERS USED TO RENDER ITS FAIRNESS OPINION.
Lehman Brothers' advisory services and opinion were provided for the
information and assistance of the IGEN board of directors in connection with its
consideration of the merger. The Lehman Brothers
55
opinion is not intended to be and does not constitute a recommendation to any
IGEN stockholder as to how such stockholder should vote on the merger. Lehman
Brothers was not requested to opine as to, and the Lehman Brothers opinion does
not address, IGEN's underlying business decision to proceed with or effect the
merger.
In arriving at its opinion, Lehman Brothers reviewed and analyzed:
- the merger agreement and the specific terms of the merger and related
transactions;
- publicly available information concerning IGEN and Roche that Lehman
Brothers believed to be relevant to its analysis;
- financial and operating information with respect to the business,
operations and prospects of IGEN and BioVeris furnished to Lehman
Brothers by IGEN, including, without limitation, certain projections of
future financial performance of IGEN and BioVeris prepared by the
management of IGEN;
- a trading history of IGEN common stock from its initial public offering
on February 3, 1994 to July 24, 2003;
- a comparison of the historical financial results and present financial
condition of IGEN with those of other companies that Lehman Brothers
deemed relevant; and
- a comparison of the financial terms of the proposed merger and related
transactions with the financial terms of certain other transactions that
Lehman Brothers deemed relevant.
In addition, Lehman Brothers had discussions with IGEN management
concerning IGEN's businesses, operations, assets, financial condition and
prospects and undertook such other studies, analyses and investigations as
Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by Lehman
Brothers without assuming any responsibility for independent verification of
such information. Lehman Brothers further relied upon the assurances of IGEN
management that they were not aware of any facts or circumstances that would
make such information inaccurate or misleading. With respect to the financial
projections of IGEN and BioVeris, upon advice of IGEN, Lehman Brothers assumed
that such projections were reasonably prepared on a basis reflecting the best
currently available estimates and judgments of IGEN management as to IGEN's and
BioVeris's future financial performance and that IGEN and BioVeris would perform
substantially in accordance with such projections. Lehman Brothers was not
authorized to solicit and did not solicit any indications of interest from any
third party with respect to the purchase of all or a part of IGEN's business. In
arriving at its opinion, Lehman Brothers did not conduct a physical inspection
of IGEN's properties and facilities and did not make or obtain any evaluations
or appraisals of the assets or liabilities of IGEN. The Lehman Brothers opinion
was necessarily based upon market, economic and other conditions as they existed
on, and could be evaluated as of, the date of such opinion.
In connection with rendering its opinion, Lehman Brothers performed certain
financial and other analyses as described below. In arriving at its opinion,
Lehman Brothers did not ascribe a specific range of value to IGEN, but rather
made its determination as to the fairness, from a financial point of view, to
IGEN stockholders of the consideration to be paid by Roche in the merger on the
basis of financial analyses. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial and comparative analysis and the application of those methods to the
particular circumstances, and, therefore, such an opinion is not readily
susceptible to summary description. Furthermore, in arriving at its opinion,
Lehman Brothers did not attribute any particular weight to any analysis or
factor considered by it, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Accordingly, Lehman
Brothers believes that its analyses must be considered as a whole and that
considering any portion of such analyses and factors, without considering all
analyses and factors as a whole, could create a misleading or incomplete view of
the process underlying its opinion. In its analyses, Lehman Brothers made
numerous assumptions with respect to industry
56
performance, general business and economic conditions and other matters, many of
which are beyond the control of IGEN. These assumptions may not be realized and
actual results may differ materially from historical results or from the
anticipated results used by Lehman Brothers in performing its analysis. Any
estimates contained in these analyses were not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth therein. In addition, analyses relating
to the value of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold.
The following is a summary of the material financial analyses used by
Lehman Brothers in connection with providing its opinion to the IGEN board of
directors. Considering any portion of such analyses and the factors considered,
without considering all analyses and factors, could create a misleading or
incomplete view of the process underlying the Lehman Brothers opinion.
EVALUATION OF IGEN
Lehman Brothers evaluated each of the following sources of value to IGEN
stockholders:
Roche Royalties Under the 1992 License Agreement. Lehman Brothers
estimated the value of the royalty stream from Roche under the 1992 license
agreement based on a discounted cash flow analysis using financial projections
prepared by IGEN management. In such analysis, Lehman Brothers applied the then
existing royalty rates being paid by Roche to an estimate of the revenues
projected to be generated by Roche through the use of the IGEN technology
licensed under the 1992 license agreement. The stream of after-tax cash flows
resulting from this calculation was discounted to the present using rates of
between 10% and 12%. Based on this analysis, Lehman Brothers calculated a
present value of the license giving rise to the pre-existing royalty stream of
approximately $410 to $475 million.
Lehman Brothers believed that the right to terminate this license, a right
upheld by the Appellate Court in July 2003, gave IGEN an opportunity to improve
on the value of the royalty stream discussed above, but was not able to place
any precise estimate on the magnitude of such potential improvement.
Point-of-Care Business Taken Over From Roche and Assay Development
Business. Lehman Brothers estimated the value of the point-of-care business
taken over from Roche and the related assay development business based on a
discounted cash flow analysis using financial projections prepared by IGEN
management. The point-of-care business was taken over from Roche pursuant to a
July 1998 court ruling and was limited to the existing installed base. The
stream of cash flows resulting from the point-of-care and assay development
businesses were discounted to the present using rates of between 10% and 12%.
Based on this analysis, Lehman Brothers calculated a present value of the
point-of-care and assay development businesses of approximately $1.9 to $2.0
million.
Other IGEN Businesses. Lehman Brothers estimated the value of the other
IGEN businesses based on a discounted cash flow analysis using financial
projections prepared by IGEN management. These businesses included IGEN's life
science, biodefense, industrial and point-of-care diagnostics businesses and
other royalty and contract fees. These businesses represented approximately
$17.8 million of IGEN's revenues in fiscal 2003. While the projections indicated
a very significant increase in the revenues of these businesses, Lehman Brothers
recognized that these businesses were in a fairly early stage of development and
would require significant investment over the next several years. As a result of
the risk associated with these activities and the investment and time required
to reach break-even, the stream of cash flows resulting from these activities
were discounted using rates of between 30% and 40%. Lehman Brothers estimated a
value for these businesses at the end of the projection period based on a range
of multiples of estimated EBITDA of between 9.0x and 11.0x.
Due to the limited visibility in the financial forecasts beyond the early
years, Lehman Brothers examined the results of the analysis over both a
five-year period ending March 31, 2008 and a seven-year period ending March 31,
2010. Based on the discount rates and terminal value multiples outlined above,
Lehman Brothers calculated a present value of the cash flows and terminal value
from the other IGEN businesses of approximately $36.1 to $99.7 million using the
projections for the five years ended March 31,
57
2008. If the analysis were extended to March 31, 2010, the resulting present
value of the cash flows and terminal value from the other IGEN businesses would
be approximately $102.0 to $251.4 million. Lehman Brothers believed it was
appropriate to focus more closely on the five-year analysis and concluded that
the present value of the cash flows and terminal value from the other IGEN
businesses would be in the range of $70 to $100 million. At the mid-point of
this range, Lehman Brothers noted that the value reflected a multiple of 4.8x
fiscal 2003 revenues and 2.2x fiscal 2004 projected revenues. While the analysis
of the other IGEN businesses included the cash cost of providing IGEN's 2003
funding commitment to MSD, Lehman Brothers did not attempt to independently
value IGEN's interest in MSD nor did they value IGEN's interests in Wellstat
Therapeutics Corporation, or Wellstat Therapeutics, and Proteinix Corporation,
or Proteinix. Lehman Brothers viewed these interests as investments in privately
held and early stage development companies that had an uncertain future value.
Lehman Brothers noted that the transaction provided for IGEN stockholders to
receive the full value of the other IGEN businesses and the interests in MSD,
Wellstat Therapeutics and Proteinix through the distribution of shares of
BioVeris common stock to IGEN stockholders.
Net Financial Assets in IGEN. In addition to the operating assets, Lehman
Brothers evaluated the net financial assets of IGEN. On July 9, 2003, the
Appellate Court upheld $18.6 million in monetary damages related to the
litigation between IGEN and Roche. Lehman Brothers assumed that the taxable gain
from the judgment proceeds would be fully offset by IGEN's existing net
operating losses. As of March 31, 2003, IGEN had available for income tax
reporting purposes net operating loss and general business credit carryforwards
approximating $206.3 million and $7.3 million, respectively. The judgment
proceeds of $18.6 million would therefore be fully offset by these
carryforwards. As of June 30, 2003, IGEN had $22.3 million of cash, $16.7
million of third party debt and $32.3 million face amount of convertible
debentures (convertible into IGEN common stock at a price of $31.00 per share),
approximately 1.551 million options with an average exercise price of $18.29 per
share and approximately 282,000 warrants with an exercise price of $31.00 per
share. For purposes of its analysis, and because the IGEN stock price was in
excess of $31.00 per share, Lehman Brothers assumed that the convertible
debentures were converted and all outstanding options and warrants were
exercised. The proceeds from the exercise of options and warrants would be
approximately $37.1 million. The combination of the proceeds from the judgment,
the proceeds from the exercise of options and warrants and the cash, less the
third party debt, resulted in a net cash position of $60.9 million. In light of
the investment required to fund IGEN's ongoing operations and that the net
financial assets would be required to fund the investment, Lehman Brothers
believed that the value of the net financial assets should be discounted by
approximately 25% when considered in the context of IGEN's overall valuation.
Based on this analysis, Lehman Brothers ascribed a value of $46.2 million to the
net financial assets of IGEN.
Combining the valuations outlined above, Lehman Brothers noted that IGEN
would have a value of between $528.1 and $623.1 million before giving effect to
the value associated with the option to terminate the license to Roche or the
interests in MSD, Wellstat Therapeutics or Proteinix. Lehman Brothers further
noted that this value represented approximately $19.75 to $23.31 per share.
EVALUATION OF THE CONSIDERATION
In the merger, IGEN stockholders will receive a cash payment from Roche and
one share of BioVeris common stock for each share of IGEN common stock held by
such stockholder. Lehman Brothers evaluated the following sources of value to
IGEN stockholders:
Cash Consideration. IGEN stockholders will receive $47.25 per share for
each share of IGEN common stock outstanding. Lehman Brothers noted that the cash
consideration alone represented a 27.0% premium to the closing price of IGEN
common stock on July 24, 2003 (the date of the announcement of the merger), a
39.4% premium to the closing price of IGEN common stock on July 18, 2003, a
39.4% premium to the 60-day average closing price of IGEN common stock as of
July 24, 2003 and a 1.3% premium to its all-time high.
58
BioVeris. Lehman Brothers estimated the value of BioVeris based on a
discounted cash flow analysis using financial projections prepared by IGEN
management. BioVeris will include IGEN's life science, biodefense, industrial
testing and point-of-care diagnostics businesses and other royalty and contract
fees, as well as the newly acquired licenses to PCR technology. BioVeris will
also own IGEN's current interest in MSD, Wellstat Therapeutics and Proteinix. As
discussed above, these businesses represented approximately $17.8 million of
IGEN's revenues in fiscal 2003. While the projections indicated a very
significant increase in the revenues of these businesses, Lehman Brothers
recognized that these businesses were in a fairly early stage of development and
would require significant investment over the next several years. In addition,
in light of the non-exclusive nature of the license granted to the license sub
post-merger, BioVeris may grant licenses to other parties to use its technology
in the diagnostics field. As a result of the risk associated with these
activities and the investment and time required to reach break-even, BioVeris's
projected cash flows were discounted using rates of between 30% and 40%. Lehman
Brothers estimated a value of BioVeris at the end of the projection period based
on a range of multiples of estimated EBITDA of between 9.0x and 11.0x.
Due to the limited visibility in the financial forecasts of BioVeris beyond
the early years, Lehman Brothers examined the results of the analysis over both
a five-year period ending March 31, 2008 and a seven-year period ending March
31, 2010. Based on the discount rates and terminal value multiples outlined
above, Lehman Brothers calculated a present value of the cash flows and terminal
value of BioVeris to be approximately $50.0 to $133.4 million using the
projections for the five years ended March 31, 2008. If the analysis were
extended to March 31, 2010, the resulting present value of the cash flows and
terminal value for BioVeris would be approximately $103.7 to $270.7 million.
Lehman Brothers believed it was appropriate to focus more closely on the
five-year analysis and concluded that the present value of the cash flows and
terminal value of BioVeris would be in the range of $95 to $125 million. At the
mid-point of this range, Lehman Brothers noted that the value reflected a
multiple of 6.2x BioVeris's fiscal 2003 revenues and 2.5x BioVeris's fiscal 2004
projected revenues. While the analysis of BioVeris included the cash cost of
providing IGEN's 2003 MSD funding commitment and the $37.5 million final capital
contribution to MSD by BioVeris following completion of the merger, Lehman
Brothers did not attempt to independently value IGEN's interest in MSD nor did
they value IGEN's interests in Wellstat Therapeutics and Proteinix.
Cash Balance in BioVeris. In addition to the operating assets, Lehman
Brothers evaluated the cash balance in BioVeris. At or before the completion of
the merger, IGEN will contribute all of its available cash, after the payment of
fees and expenses associated with the merger, to BioVeris. Based on the balances
at June 30, 2003, Lehman Brothers estimated the aggregate cash contribution to
be approximately $213.4 million. Upon the completion of the merger, BioVeris
will acquire a PCR product license from Roche for a cash payment of $50 million,
reducing the net cash balance at BioVeris to approximately $163.4 million. In
light of the investment required to fund BioVeris's ongoing operations and that
the cash would be required to fund the investment, Lehman Brothers believed that
the value of the cash should be discounted by approximately 25% when considered
in the context of BioVeris's overall valuation. Based on this analysis, Lehman
Brothers ascribed a value of $122.6 million to the cash balance of BioVeris.
Combining the value Lehman Brothers ascribed to the cash balances at
BioVeris and the present value of the cash flows and terminal value discussed
above, Lehman Brothers arrived at an estimated trading value of BioVeris of
approximately $217.6 to $247.6 million. Lehman Brothers noted that BioVeris
would have a small revenue base and significant operating losses as it invested
in the development of its businesses. In light of the limited equity research
coverage of IGEN pre-merger, Lehman Brothers noted that the initial trading
value of BioVeris could be less than the aggregate value suggested above.
Assuming a distribution of one share of BioVeris common stock for each
share of IGEN common stock, the analysis above suggests a per share value of
BioVeris common stock of between $8.14 and $9.26 per share, and an aggregate
value of the merger, including both the $47.25 per share of cash and the
suggested per share value of BioVeris common stock, of between $55.39 and $56.51
per share. Lehman Brothers noted that at the mid-point, the aggregate value of
the merger represented a premium of 50.4%
59
to the closing stock price of IGEN common stock on July 24, 2003 (the date of
the announcement of the merger), a 65.1% premium to the closing stock price of
IGEN common stock on July 18, 2003, a 65.0% premium to the 60-day average
closing price of IGEN common stock as of July 24, 2003 and a 20.0% premium to
its all-time high.
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The IGEN board of directors
selected Lehman Brothers because of its expertise, reputation and familiarity
with IGEN and the biotechnology and pharmaceutical industries generally and
because its investment banking professionals have substantial experience in
transactions comparable to the merger.
As compensation for its services in connection with the merger, IGEN has
agreed to pay Lehman Brothers a fee equal to 1.2% of the consideration paid in
the merger, which is approximately $16.7 million, of which IGEN paid to Lehman
Brothers $250,000 in May 2001 and $750,000 in July 2002 in connection with a
Lehman Brothers opinion issued in April 2001, and the remainder of which will be
paid upon completion of the merger. In addition, IGEN has agreed to reimburse
Lehman Brothers upon completion of the merger for reasonable out-of-pocket
expenses incurred in connection with the merger and to indemnify Lehman Brothers
for certain liabilities that may arise out of its engagement by IGEN and the
rendering of the Lehman Brothers opinion.
In the ordinary course of its business, Lehman Brothers may actively trade
in the debt or equity securities of IGEN and Roche for its own account and for
the accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities. In addition, LBI Group Inc. an affiliate of
Lehman Brothers, held approximately $10 million in principal amount of
outstanding convertible debt of IGEN, which was converted into approximately
322,580 shares of IGEN common stock on September 22, 2003.
INTERESTS OF IGEN'S DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER AND RELATED
TRANSACTIONS
In considering the recommendation of the IGEN board of directors that IGEN
stockholders vote "FOR" the adoption of the merger agreement, IGEN stockholders
should be aware that the members of the IGEN board of directors and IGEN's
executive officers have personal interests in the merger and related
transactions that are or may be different from, or in addition to, the interests
of other IGEN stockholders. These interests are summarized below. The IGEN board
of directors was aware of, and considered, the interests of the IGEN directors
and executive officers in approving the merger agreement and the related
transaction agreements.
ACCELERATED VESTING
Upon completion of the merger, all outstanding options granted under IGEN's
stock option plans, including unvested options, will be canceled and the holder
of any such options will have the right to receive for each share covered by
such option:
- cash from Roche equal to the excess of $47.25 over the exercise price of
such option (without interest); and
- one share of BioVeris common stock.
60
Upon completion of the merger, the vesting of such unvested options held by the
members of the IGEN board of directors and IGEN's executive officers will,
therefore, in effect, accelerate. BioVeris expects that as of December 31, 2003,
the value of option rights held by IGEN's directors and executive officers that
will be accelerated will be as follows:
NAME VALUE OF ACCELERATED OPTIONS
---- ----------------------------
Samuel J. Wohlstadter.................. $2,975,700 plus 175,000 shares of BioVeris common
stock
Richard J. Massey, Ph.D. .............. $1,271,203 plus 68,133 shares of BioVeris common
stock
George V. Migausky..................... $510,895 plus 36,750 shares of BioVeris common
stock
Richard W. Cass........................ $214,430 plus 8,000 shares of BioVeris common
stock
Anthony R. Rees........................ $214,430 plus 8,000 shares of BioVeris common
stock
Robert R. Salsmans..................... $119,750 plus 5,000 shares of BioVeris common
stock
Joop Sistermans........................ $153,590 plus 6,500 shares of BioVeris common
stock
INDEMNIFICATION AND INSURANCE
The post-closing covenants agreement provides that Roche will, to the
fullest extent permitted by law, cause IGEN to honor all of its existing
obligations to indemnify the current or former directors or officers of IGEN,
whether pursuant to IGEN's certificate of incorporation or by-laws or individual
indemnity agreements, for acts or omissions occurring prior to completion of the
merger. The post-closing covenants agreement also provides that Roche shall not
permit IGEN to amend or repeal any provision of its certificate of incorporation
or by-laws if such action would adversely affect the rights of individuals who
on or prior to the completion of the merger were entitled to advances,
indemnification or exculpation thereunder for actions or omissions prior to the
completion of the merger.
The post-closing covenants agreement also provides that for six years after
the completion of the merger, Roche will cause to be maintained in effect the
current policies of directors' and officers' liability insurance with policy
limits of $30 million maintained by IGEN for claims arising from or related to
facts or events which occurred at or prior to the completion of the merger.
Roche's obligation to provide this insurance coverage is subject to a cap of
250% of the amount per annum required to be paid by IGEN in the twelve months
ending December 12, 2003. However, if the annual premiums for such insurance
exceed such amount, Roche shall nevertheless obtain such insurance and BioVeris
will pay the excess over 250% of the amount per annum required to be paid by
IGEN in the twelve months ending December 12, 2003. IGEN has been advised by its
directors' and officers' liability insurer that the total cost for such
insurance would be approximately 200% of the amount per annum required to be
paid by IGEN in the twelve months ending December 12, 2003.
CONTINUATION OF EXECUTIVE OFFICERS AND DIRECTORS
IGEN's three executive officers are expected to continue in similar
positions with BioVeris and their annual salary is anticipated to be initially
comparable to the current salaries being received from IGEN, which is
approximately $1,011,000 in the aggregate. For a more complete description of
BioVeris's executive officers and the compensation of BioVeris's executive
officers, see "Management."
IGEN's directors, other than Mr. Richard Cass, are expected to continue as
directors of BioVeris. Non-employee directors of BioVeris are expected to
receive increased compensation from the compensation they received at IGEN. For
a more complete description of BioVeris's directors and the compensation of
BioVeris's directors, see "Management -- Compensation of Directors" and
"Management -- Executive Compensation."
61
TRANSACTION BONUS PAYMENTS
Simultaneous with completion of the merger and related transactions, the
following executive officers of IGEN will be entitled to receive transaction
bonus payments in the amounts set forth below:
NAME TRANSACTION BONUS
---- -----------------
Samuel J. Wohlstadter....................................... $1,278,000
Richard J. Massey, Ph.D..................................... 450,000
George V. Migausky.......................................... 450,000
Each transaction bonus payment is contingent upon the individual executive
officer providing a release of the respective obligations of IGEN and BioVeris
under IGEN's termination protection program.
STOCK OPTIONS
If approved by the IGEN stockholders, BioVeris will adopt the BioVeris 2003
stock incentive plan pursuant to which BioVeris executive officers and directors
will be eligible to receive option grants and other equity-based awards. The
proposed BioVeris 2003 stock incentive plan provides that on the day following
each annual meeting of BioVeris stockholders, each non-employee director shall
receive an automatic grant of options to purchase 4,000 shares of BioVeris
common stock. In addition, any person who is appointed or elected as a
non-employee director at any other time shall automatically be granted an option
to purchase 4,000 shares of BioVeris common stock on the date of such
appointment or election. Each grant will have an exercise price equal to fair
market value on the date of grant and will vest in full on the first anniversary
of the grant date.
MSD AND THE MSD AGREEMENTS
As part of the restructuring, IGEN will transfer its equity interest in MSD
to BioVeris and will assign the MSD agreements to BioVeris. BioVeris has agreed,
under the MSD letter agreement, to make a final capital contribution of $37.5
million to MSD on the first business day following the completion of the merger.
Of the $37.5 million, any amount in excess of $30 million (including any interim
funding provided by IGEN as described in the next sentence) will be funded by
Mr. Samuel Wohlstadter through the purchase of shares of BioVeris series B
preferred stock that economically mirror the class C interest in MSD to be held
by BioVeris, as specified in the BioVeris preferred stock purchase agreement. In
the event the completion of the merger has not occurred prior to December 1,
2003, IGEN has agreed under the MSD letter agreement to provide continued
interim funding at approximately $1.7 million per month until the earlier to
occur of the completion of the merger or termination of the merger agreement.
The monthly interim funding is one-twelfth of IGEN's aggregate funding
commitment under the 2003 MSD budget approved by the JVOC. After the
restructuring, Dr. Richard Massey, IGEN's and BioVeris's president and chief
operating officer, will be BioVeris's representative on the MSD board of
managers and will also serve as the treasurer and secretary of MSD. Dr. Massey
will receive no compensation from MSD or BioVeris for serving as the treasurer
and secretary of MSD. Neither Dr. Massey nor any other executive officer or
director of IGEN or BioVeris has any ownership interest in MST or MSD, other
than through ownership of interests in IGEN or BioVeris and other than the
BioVeris series B preferred stock to be purchased by Mr. Samuel Wohlstadter if
and only to the extent that BioVeris's final capital contribution (including any
interim funding provided by IGEN as described above) exceeds $30 million. Mr.
Samuel Wohlstadter and Mrs. Nadine Wohlstadter disclaim any ownership interest
in MST or MSD as a result of Mr. Jacob Wohlstadter's direct or indirect
ownership interest in those entities.
As part of the restructuring, BioVeris will assume IGEN's obligations under
the following agreements:
- an employment agreement among MSD, IGEN, MST and Mr. Jacob Wohlstadter,
pursuant to which Mr. Jacob Wohlstadter will be entitled to receive from
MSD an annual salary of $250,000, subject to annual adjustment, an annual
cash bonus in an amount not to exceed 20% of his annual salary and other
pension, welfare and fringe benefits;
62
- a consulting agreement between IGEN and Mr. Jacob Wohlstadter, pursuant
to which Mr. Jacob Wohlstadter will be entitled to receive from BioVeris
such fees as BioVeris and Mr. Jacob Wohlstadter agree to when consulting
services, if any, that may be provided to and at the request of BioVeris;
and
- an indemnification agreement between IGEN, Mr. Jacob Wohlstadter and JW
Consulting Services, L.L.C., a company established and wholly-owned by
Mr. Jacob Wohlstadter, pursuant to which BioVeris will indemnify Mr.
Jacob Wohlstadter and JW Consulting Services, L.L.C. against any claims
arising out of the performance or non-performance of services to or for
the benefit of BioVeris.
Also, upon completion of the merger, the MSD joint venture agreement will
expire and MSD will have the right to purchase BioVeris's entire interest in MSD
for a purchase price equal to fair market value determined in accordance with
the MSD joint venture agreement, less a discount factor. The discount factor
will be equal to 7.5% if the MSD joint venture agreement expires upon the
completion of the merger and has not been otherwise terminated before
completion. In the event MSD or MST elects to purchase BioVeris's interest in
MSD, BioVeris will only be entitled to receive the purchase price payable over
time in installments equal to the sum of 5% of MSD net sales, as determined in
accordance with the MSD agreements, and 20% of the net proceeds realized from
certain third-party financings in accordance with the MSD agreements. In the
event such future net sales of MSD or third-party financings do not materialize,
BioVeris will not receive any payments from MSD or MST, as the case may be, for
the purchase of BioVeris's interest in MSD.
For a more complete description of the employment agreement, the consulting
agreement and the indemnification agreement, see "Certain Relationships and
Related Party Transactions -- MSD and the MSD Agreements."
RELEASE AND AGREEMENT
Simultaneously with the execution and delivery of the merger agreement,
Hyperion Catalysis International, Wellstat Biologics Corporation, Wellstat
Therapeutics, Proteinix and Integrated Chemical Synthesizers, Inc., which are
referred to in this proxy statement/prospectus as the related companies, entered
into the release and agreement with BioVeris and IGEN, pursuant to which, among
other things, IGEN, on the one hand, and the related companies, on the other
hand, agreed to release each other from any liabilities or obligations arising
out of their relationship or any of their agreements and understandings, which
are referred to in this proxy statement/prospectus as the related company
agreements, and agreed that all related company agreements would be transferred
to BioVeris.
THE RELATED TRANSACTION AGREEMENTS AND THE ONGOING COMMERCIAL AGREEMENTS
Simultaneously with the execution and delivery of the merger agreement,
IGEN, BioVeris, MSD, MST, Roche and certain of Roche's affiliates and the
related companies also entered into the following agreements (although not all
of the foregoing parties are parties to each agreement): the restructuring
agreement; the post-closing covenants agreement; the tax allocation agreement;
the ongoing litigation agreement; and a global consent and agreement. In
addition, simultaneously with the execution and delivery of the merger
agreement, IGEN and the license sub entered into the license agreement.
Furthermore, IGEN, the license sub, BioVeris, MSD, MST, Roche and certain of
Roche's affiliates entered into the following agreements (although not all of
the foregoing parties are parties to each agreement): the improvements license
agreement; the covenants not to sue; the PCR product license agreement; and the
PCR services license agreement.
Also simultaneously with the execution and delivery of the merger
agreement, IGEN, BioVeris, MSD, MST, JW Consulting Services, L.L.C. and Mr.
Jacob Wohlstadter entered into the MSD letter agreement and IGEN and Mr. Samuel
Wohlstadter entered into the BioVeris preferred stock purchase agreement.
63
ACCOUNTING TREATMENT OF THE RESTRUCTURING
The transfer of certain assets and liabilities by IGEN to BioVeris will be
accounted for based upon the authoritative guidance governing the distribution
of nonmonetary assets to an entity under "common control." As such, IGEN's
historical cost basis in the assets and liabilities transferred will become the
initial recorded value of these assets and liabilities by BioVeris upon
completion of the restructuring.
FORM OF THE MERGER
Subject to the terms and conditions of the merger agreement and in
accordance with Delaware law, upon the completion of the merger, the merger sub,
a wholly-owned subsidiary of Roche and a party to the merger agreement, will
merge with and into IGEN. IGEN will survive the merger as a wholly-owned
Delaware subsidiary of Roche. The license sub will remain a wholly-owned
subsidiary of IGEN after the merger.
MERGER CONSIDERATION
Upon completion of the merger, each outstanding share of IGEN common stock
(other than shares held by stockholders who validly exercise appraisal rights)
will be converted into the right to receive $47.25 in cash, without interest,
and one share of BioVeris common stock, except that any treasury stock and stock
owned immediately prior to the completion of the merger by Roche or the merger
sub, if any, will be canceled and retired and will cease to exist and no
consideration will be delivered in exchange for these shares. Roche and the
merger sub have represented in the merger agreement that they do not own any
shares of IGEN common stock. The consideration to be received in the merger was
determined through arms' length negotiations between Roche and IGEN.
Upon completion of the merger, all outstanding options granted under IGEN's
stock option plans, including unvested options, will be canceled and the holder
of any such options will have the right to receive for each share covered by
such option cash from Roche equal to the excess of $47.25 over the exercise
price of such option (without interest) and one share of BioVeris common stock.
OWNERSHIP OF BIOVERIS FOLLOWING THE MERGER
Immediately following the merger, IGEN's former stockholders will own 100%
of the outstanding shares of BioVeris common stock.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
The conversion of IGEN common stock into the right to receive cash and
BioVeris common stock will occur automatically upon the completion of the
merger. As soon as reasonably practicable after the completion of the merger,
the exchange agent designated by Roche, will send a transmittal form to each
former IGEN stockholder. The transmittal form will contain instructions for the
surrender of IGEN common stock certificates. IGEN STOCKHOLDERS SHOULD NOT RETURN
ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
After the completion of the merger, each certificate that previously
represented shares of IGEN common stock will no longer be outstanding, will be
automatically canceled and retired, will cease to exist and will represent only
the right to receive cash and that number of shares of BioVeris common stock
into which such shares are converted in the merger.
Until holders of certificates previously representing IGEN common stock
have surrendered those certificates to the exchange agent for exchange, those
holders will not receive any dividends or distributions on the shares of
BioVeris common stock into which such former IGEN shares have been converted
with a record date after the date on which the merger is completed. When holders
surrender such certificates, they will receive any dividends and distributions
with a record date after the date on which the merger is completed and a payment
date on or prior to the date of surrender, without interest.
64
In the event of a transfer of ownership of IGEN common stock that is not
registered in IGEN's transfer records, a certificate representing the proper
number of shares of BioVeris common stock may be issued to a person other than
the person in whose name the certificate so surrendered is registered if:
- the certificate is properly endorsed or otherwise is in proper form for
transfer; and
- the person requesting the issuance pays any transfer or other taxes
resulting from the issuance of shares of BioVeris common stock to a
person other than the registered holder of the certificate.
All cash and shares of BioVeris common stock issued in exchange for shares
of IGEN common stock will be issued in full satisfaction of all rights relating
to such shares of IGEN common stock.
After the merger is completed, each stockholder exercising his or her
appraisal rights will no longer have any rights as a stockholder of IGEN with
respect to his or her shares, except for the right to receive payment of the
judicially-determined fair value of his or her shares pursuant to Delaware law,
if the stockholder has validly perfected and not withdrawn such right.
EFFECTIVE TIME OF THE MERGER
The merger will become effective upon the filing of the certificate of
merger with the Secretary of State of the State of Delaware or such other time
as Roche and IGEN shall agree and specify in the certificate of merger. The
filing of the certificate of merger will occur as soon as practicable after
satisfaction or waiver of the conditions to the completion of the merger
described in the merger agreement, which IGEN and BioVeris expect will be
shortly after of the special meeting.
POST-CLOSING ARRANGEMENTS BETWEEN ROCHE, IGEN AND BIOVERIS
The terms of the post-closing covenants agreement will govern the terms of
the relationship between Roche and IGEN, on the one hand, and BioVeris, on the
other hand, after the completion of the merger with respect to, among other
things, indemnification rights, continuation of insurance and a standstill
agreement by Roche with respect to BioVeris. For a more complete description of
the terms of the post-closing covenants agreement, see "Post-Closing and Other
Arrangements -- Post-Closing Covenants Agreement."
The tax allocation agreement allocates responsibility among the parties for
preparing and filing tax returns, and paying taxes. For a more complete
description of the terms of the tax allocation agreement, see "Post-Closing and
Other Arrangements -- Tax Allocation Agreement."
The license agreement, the improvements license agreement and the PCR
license agreements provide that certain ongoing commercial arrangements between
BioVeris and certain affiliates of Roche will become effective simultaneously
with the completion of the merger. The covenants not to sue provides that
certain ongoing obligations of BioVeris and certain affiliates of Roche to forgo
claims of patent infringement will become effective simultaneously with the
completion of the merger. For a more complete description of the license
agreement, the improvements license agreement, the PCR license agreements and
the covenants not to sue, see "Commercial Agreements."
NASDAQ STOCK EXCHANGE LISTING OF BIOVERIS COMMON STOCK
It is a condition to the completion of the merger that the BioVeris common
stock to be distributed to IGEN stockholders in the merger have been approved
for listing on a national securities exchange, or approved for quotation on The
NASDAQ National Market(R), in either case subject only to official notice of
issuance. BioVeris has applied to have its common stock quoted on The NASDAQ
National Market(R) and its common stock will be registered under the Securities
Exchange Act of 1934, as amended.
DELISTING AND DEREGISTRATION OF IGEN COMMON STOCK
After completion of the merger, IGEN common stock will be delisted from The
NASDAQ National Market(R) and will be deregistered under the Securities Exchange
Act of 1934, as amended.
65
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion, which is based on an opinion that IGEN received
from its special counsel, Cravath, Swaine & Moore LLP, summarizes the material
U.S. Federal income tax consequences of the receipt by IGEN stockholders of
BioVeris common stock in connection with the merger and the concurrent exchange
of shares of IGEN common stock for cash in the merger. The merger and the
distribution of BioVeris common stock in conjunction with the merger,
collectively, are referred to as the "transaction" in this discussion of U.S.
Federal income tax consequences. This discussion is based on current law,
including the Internal Revenue Code of 1986, as amended, which is referred to in
this proxy statement/prospectus as the Code, existing and proposed Treasury
regulations, and administrative rulings and pronouncements and court decisions,
all of which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences described herein.
This summary only applies to stockholders who hold IGEN common stock as a
capital asset within the meaning of Section 1221 of the Code (generally
speaking, for investment purposes). In addition, this summary does not describe
all the tax consequences that may be relevant to a stockholder in light of its
particular circumstances and does not apply to certain types of IGEN
stockholders, such as insurance companies, financial institutions, regulated
investment companies, dealers in securities or currencies, tax-exempt
organizations, holders of IGEN common stock who hold such stock as part of a
position in a straddle, or as part of a hedging, conversion or other integrated
transaction, stockholders who have a functional currency other than the U.S.
dollar, S corporations, small business investment companies, real estate
investment trusts or traders who use a mark-to-market method of accounting for
their securities holdings. In addition, this summary does not address the U.S.
Federal income tax consequences of the transaction to any IGEN stockholder who,
for U.S. Federal income tax purposes, is a nonresident alien individual, foreign
corporation, foreign partnership or foreign estate or trust, and does not
address the tax consequences of the transaction under state, local or foreign
tax laws.
ACCORDINGLY, IGEN STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE TAX CONSEQUENCES OF THE TRANSACTION, INCLUDING THE APPLICABLE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE TRANSACTION,
IN THEIR PARTICULAR CIRCUMSTANCES.
The parties to the merger agreement intend that the transaction will
constitute a single integrated transaction with respect to IGEN and its
stockholders for U.S. Federal income tax purposes, consisting of the receipt of
BioVeris common stock in redemption of a portion of a stockholder's outstanding
IGEN common stock coupled with a cash purchase of such stockholder's remaining
IGEN common stock by Roche in connection with the complete termination of the
IGEN stockholder's interest in IGEN. IGEN has received an opinion from its
special counsel, Cravath, Swaine & Moore LLP, to the effect that, and based on
such opinion IGEN believes that, the transaction should be so treated for U.S.
Federal income tax purposes and, therefore, that the receipt of both BioVeris
common stock and the cash consideration in connection with the merger should
qualify as taxable sales or exchanges of IGEN common stock. Unless otherwise
specified, this discussion assumes that the transaction will be treated in the
manner described above.
Accordingly, the transaction will result in the following U.S. Federal
income tax consequences:
Each holder of IGEN common stock will recognize capital gain or loss, if
any, equal to the difference between (1) the sum of the amount of cash received
in the merger plus the fair market value of the BioVeris common stock received
by such holder at the time of distribution of BioVeris common stock in
connection with the merger and (2) the holder's adjusted basis in the IGEN
common stock immediately prior to the transaction.
- Such gain or loss will be capital gain or loss, and generally will be
long-term capital gain or loss if the IGEN common stock exchanged in the
transaction had been held for more than one year at the time of the
transaction.
- The amount and character of gain or loss will be computed separately for
each block of IGEN common stock that was purchased by the stockholder in
the same transaction.
66
- The tax basis of the BioVeris common stock received by IGEN stockholders
in the transaction will be equal to the fair market value of such stock
at the time of the distribution of BioVeris common stock in connection
with the merger.
- The holding period of the BioVeris common stock received by IGEN
stockholders in the transaction will commence on the day after the
distribution of BioVeris common stock in connection with the merger.
One reasonable method of determining the fair market value of the BioVeris
common stock received by IGEN stockholders in the transaction would be to use
the average of the high and low trading prices of BioVeris common stock on the
first full day of trading following the distribution of BioVeris common stock in
connection with the merger. Nevertheless, IGEN stockholders are urged to consult
their own tax advisors regarding this matter.
No ruling has been or will be sought from the U.S. Internal Revenue
Service, or the IRS, in connection with the transaction, and the IRS could
disagree with the characterization of the transaction as set forth above. In
particular, the IRS could contend, and a court might agree, that the value of
the BioVeris common stock received or the cash merger consideration received
should be treated as a dividend, rather than as proceeds attributable to a sale
or exchange of IGEN common stock, in which case the relevant IGEN stockholder
would have to include the full amount of such dividend in its income without
being able to offset its basis in its IGEN common stock against such dividend.
IGEN stockholders are urged to consult their own tax advisors concerning the
proper characterization of the transaction and the resulting tax consequences to
them, including, if the transaction is treated as giving rise to a dividend, the
availability of preferential rates of taxation under recently enacted
legislation for dividends received by individuals and the treatment of their
basis in their IGEN common stock.
An IGEN stockholder may be subject to "backup withholding" at a rate of 28%
on payments (including, if and to the extent taxed as a dividend as described
below, the distribution of BioVeris common stock) received in connection with
the transaction unless such holder (1) provides a correct taxpayer
identification number (which, in the case of an individual, is such
stockholder's social security number) and any other required information to the
exchange agent, or (2) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact, all in accordance with
the requirements of the backup withholding rules. If an IGEN stockholder does
not provide a correct taxpayer identification number, such stockholder, in
addition to being subject to backup withholding may be subject to penalties
imposed by the IRS. Any amount paid as backup withholding does not constitute an
additional tax and will be creditable against such stockholder's U.S. Federal
income tax liability. IGEN stockholders should consult with their own tax
advisors as to their qualifications for exemption from backup withholding and
the procedure for obtaining such exemption. An IGEN stockholder may prevent
backup withholding by completing an IRS Form W-9 or substitute W-9 and
submitting it to the exchange agent for the merger when such stockholder submits
such stockholder's stock certificate(s) following the completion of the merger.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN U.S. FEDERAL
INCOME TAX CONSEQUENCES OF THE TRANSACTION AND DOES NOT PURPORT TO BE A
COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS THAT MAY BE
RELEVANT THERETO. THUS, IGEN STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE TAX CONSEQUENCES TO THEM OF THE TRANSACTION, INCLUDING
THE PROPER CHARACTERIZATION OF THE TRANSACTION, TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FOREIGN, FEDERAL, STATE, LOCAL,
AND OTHER APPLICABLE TAX LAWS, AND THE EFFECT OF ANY PROPOSED CHANGES IN THE
TAX LAWS.
ANTITRUST MATTERS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and related
rules, certain transactions, including the merger, may not be completed unless
certain waiting period requirements have been satisfied. On September 5, 2003,
Roche and IGEN each filed a Notification and Report Form with the Antitrust
Division of the Department of Justice and the Federal Trade Commission and Roche
requested early termination of the required waiting period under the
Hart-Scott-Rodino Antitrust
67
Improvements Act of 1976. Early termination of the required waiting period was
granted effective September 29, 2003. At any time before or after the completion
of the merger, the Antitrust Division, the Federal Trade Commission or others
could take action under the antitrust laws, including seeking to prevent the
merger, to rescind the merger or to conditionally approve the merger upon the
divestiture of substantial assets of Roche or IGEN. There can be no assurance
that a challenge to the merger on antitrust grounds will not be made or, if such
a challenge is made, that it would not be successful. See "The Merger
Agreement -- Conditions."
APPRAISAL RIGHTS
The following summary of the provisions of Section 262 of the Delaware
General Corporation Law, or Section 262, is not intended to be a complete
statement of the provisions and is qualified in its entirety by reference to the
full text of Section 262, a copy of which is attached to this proxy
statement/prospectus as Annex 17 and is incorporated into this summary by
reference.
Under Delaware law, if the merger is completed, each holder of record of
IGEN common stock who:
- files written notice with IGEN of an intention to exercise rights to
appraisal of his, her or its shares prior to the taking of the vote on
the merger at the IGEN special meeting;
- does not vote in favor of the merger;
- holds his, her or its shares on the date the merger is completed; and
- follows the procedures set forth in Section 262;
will be entitled to be paid for his, her or its shares of IGEN common stock by
the surviving corporation the fair value in cash of the shares of IGEN common
stock. The fair value of shares of IGEN common stock will be determined by the
Delaware Court of Chancery, exclusive of any element of value arising from the
merger. The shares of IGEN common stock with respect to which holders have
perfected their appraisal rights in accordance with Section 262 and have not
effectively withdrawn or lost their appraisal rights are referred to in this
proxy statement/prospectus as the dissenting shares.
Within ten days after the completion of the merger, IGEN, as the surviving
corporation in the merger, must mail a notice to all stockholders who have
complied with the first and second bullet above notifying such stockholders of
the completion of the merger. Within 120 days after the completion of the
merger, such holders of IGEN common stock may file a petition in the Delaware
Court of Chancery demanding appraisal of their shares. Failure to file this
petition in a timely way will result in the loss of appraisal rights.
Notwithstanding the foregoing, at any time, within 60 days of the completion of
the merger, such stockholders may withdraw their demand for appraisal. Within
120 days after the completion of the merger, the holders of dissenting shares
may also, upon written request, receive from IGEN a statement setting forth the
aggregate number of shares not voted in favor of the merger and with respect to
which demands for appraisals have been received and the aggregate number of
holders of such shares.
Appraisal rights are available only to the record holder of shares. If you
wish to exercise appraisal rights but have a beneficial interest in shares which
are held of record by or in the name of another person, such as a broker or
nominee, you should act promptly to cause the record holder to follow the
procedures set forth in Section 262 to perfect your appraisal rights.
A demand for appraisal should be signed by or on behalf of the stockholder
exactly as the stockholder's name appears on the stockholder's stock
certificates. If the shares are owned of record in a fiduciary capacity, such as
by a trustee, guardian or custodian, the demand should be executed in that
capacity, and if the shares are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand should be executed by or on
behalf of all joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a record holder;
however, in the demand the agent must identify the record owner or owners and
expressly disclose that the agent is executing the demand as an agent for the
record owner or owners. A record holder such as a broker who holds shares as
nominee for several beneficial owners may exercise appraisal rights for the
68
shares held for one or more beneficial owners and not exercise rights for the
shares held for other beneficial owners. In this case, the written demand should
state the number of shares for which appraisal rights are being demanded. When
no number of shares is stated, the demand will be presumed to cover all shares
held of record by the broker or nominee.
If any holder of IGEN common stock who demands appraisal of his, her or its
shares under Section 262 fails to perfect, or effectively withdraws or loses the
right to appraisal, his, her or its shares will be converted into a right to
receive cash and the number of shares of BioVeris common stock in accordance
with the terms of the merger agreement. Dissenting shares lose their status as
dissenting shares if:
- the merger is abandoned;
- the dissenting stockholder fails to file a written notice with IGEN of an
intention to exercise rights to appraisal of his, her or its shares prior
to the taking of the vote on the merger at the IGEN special meeting;
- the dissenting shares are voted in favor of the merger;
- neither IGEN nor the stockholder files a petition or intervenes in a
pending action within 120 days after the completion of the merger; or
- the stockholder delivers to IGEN, as the surviving corporation, within 60
days of the effective date of the merger, or thereafter with IGEN's
approval, a written withdrawal of the stockholder's demand for appraisal
of the dissenting shares, although no appraisal proceeding in the
Delaware Court of Chancery may be dismissed as to any stockholder without
the approval of the court.
If an appraisal petition is properly filed, after determining which
stockholders are entitled to appraisal, the Delaware Court of Chancery will
appraise the "fair value" of their shares of IGEN common stock, excluding any
element of value arising from the accomplishment or expectation of the merger,
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value. The Delaware Court of Chancery will determine
the amount of interest, if any, to be paid upon the amounts to be received by
IGEN's stockholders whose shares have been appraised.
IGEN'S STOCKHOLDERS CONSIDERING THE EXERCISE OF APPRAISAL RIGHTS SHOULD BE
AWARE THAT THE FAIR VALUE OF THEIR SHARES OF IGEN COMMON STOCK AS DETERMINED
UNDER SECTION 262 COULD BE MORE THAN, THE SAME AS OR LESS THAN THE VALUE OF THE
MERGER CONSIDERATION THEY WOULD RECEIVE PURSUANT TO THE MERGER AGREEMENT IF THEY
DID NOT SEEK APPRAISAL OF THEIR SHARES OF IGEN COMMON STOCK AND THAT INVESTMENT
BANKING OPINIONS AS TO THE FAIRNESS OF THE MERGER CONSIDERATION FROM A FINANCIAL
POINT OF VIEW ARE NOT OPINIONS AS TO THE FAIR VALUE OF SUCH COMMON STOCK UNDER
SECTION 262. The Delaware Supreme Court has stated that "proof of value by any
techniques or methods that are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in the
appraisal proceedings.
The costs of the appraisal action may be determined by the Delaware Court
of Chancery and taxed upon the parties as the court deems equitable. The court
may also order that all or a portion of the expenses incurred by any stockholder
in connection with an appraisal, including, without limitation, reasonable
attorneys' fees and the fees and expenses of experts utilized in the appraisal
proceeding, be charged pro rata against the value of all of the shares entitled
to appraisal.
Failure to follow the steps required by Section 262 for perfecting
appraisal rights may result in the loss of appraisal rights. If an IGEN
stockholder has lost his, her, or its appraisal rights, such stockholder will be
entitled to receive the consideration with respect to the holder's dissenting
shares in accordance with the merger agreement. In view of the complexity of the
provisions of Section 262, IGEN stockholders who are considering objecting to
the merger should consult their own legal advisors.
69
IGEN EMPLOYEE BENEFITS MATTERS
IGEN has adopted a termination protection program, the purpose of which is
to encourage the named executive officers and 31 other key employees who
participate in the program to continue as employees in the event of a "change of
control" of IGEN, as defined in the termination protection program. The
termination protection program provides that in the event a covered employee's
employment is terminated without "cause" or the employee resigns for "good
reason" within 30 months following a "change of control" of IGEN, or a covered
employee's employment is terminated prior to a "change of control" at the
request of a party involved in such "change of control" or otherwise in
connection with or in anticipation of a "change of control," then the employee
shall be entitled to receive a cash payment equal to 1.5 to 3 times the sum of
the employee's annual salary plus bonus (3 times in the case of the named
executive officers). Subject to certain exceptions, "good reason" means, for
purposes of the termination protection program,
- a decrease in (or failure to increase in accordance with the terms of any
employment contract) the covered employee's base salary or bonus
opportunity,
- a diminution in the aggregate employee benefits and perquisites provided
to the covered employee,
- a diminution in the covered employee's title, reporting relationship,
duties or responsibilities,
- relocation of the covered employee's primary office more than 35 miles
from its current location, or
- the failure by any successor to the company to explicitly assume the
termination protection program and IGEN's obligations thereunder.
The termination protection program also provides that covered employees are
entitled to continued welfare and pension benefits for up to 18 months (or in
the case of the named executive officers, for up to 36 months (or life, with
respect to medical and dental benefits and annual comprehensive physical)). In
addition, the termination protection program provides reimbursement for
outplacement services and provides a gross-up for any "parachute" excise tax
imposed on payments made under the termination protection program, and for the
advancement of costs and expenses incurred by the employee related to the
termination protection program.
As a result of the restructuring, BioVeris will assume IGEN's liabilities
and obligations under the IGEN termination protection program. BioVeris intends
to terminate the IGEN termination protection program and replace it with a
similar termination protection program. For a more complete description of
BioVeris's termination protection program see "Management -- Executive
Compensation -- BioVeris Termination Protection Program." The completion of the
merger will not constitute a "change of control" under the termination
protection program to the extent that BioVeris offers "qualifying positions" to
employees covered by the termination protection program. In the restructuring
agreement, effective upon completion of the merger, BioVeris has agreed to offer
to each employee who participates in the termination protection program
employment in a "qualifying position," as defined in the termination protection
program. At such time, BioVeris has also agreed to offer to each employee of
IGEN who does not participate in the termination protection program
substantially comparable employment to the employment of such employee
immediately prior to completion of the merger. Nothing contained in the
restructuring agreement relating to such agreements by BioVeris will confer on
any employee any right to continued employment after the completion of the
merger, and each employee will continue to be employed "at-will" subject to any
requirements under applicable foreign law or any applicable individual agreement
to the contrary.
Upon completion of the merger, IGEN's executive officers will be entitled
to receive a transaction bonus payment, contingent upon the executive officer
providing a release of the respective obligations of IGEN and BioVeris under
IGEN's termination protection program. See "Management -- Executive
Compensation -- Transaction Bonus Payments."
Effective upon completion of the merger, BioVeris will assume all of IGEN's
employee benefits and compensation liabilities, other than liabilities related
to IGEN's stock option plans.
70
EFFECT ON OPTIONS AND WARRANTS RELATING TO IGEN COMMON STOCK
OPTIONS
Upon completion of the merger, all outstanding options granted under IGEN's
stock option plans, including unvested options, will be canceled and the holder
of any such options will have the right to receive for each share covered by
such option cash from Roche equal to the excess of $47.25 over the exercise
price of such option (without interest) and one share of BioVeris common stock.
On the record date for the special meeting, options to acquire 1,462,906
shares of IGEN common stock with a weighted average exercise price of $18.46 per
share were outstanding.
WARRANTS
Following the completion of the merger, the holder of outstanding IGEN
warrants will, upon exercise, be entitled to:
- receive from BioVeris the number of shares of BioVeris common stock and
cash in lieu of fractional shares of BioVeris common stock as if such
holder had exercised the warrants for the shares of IGEN common stock
issuable upon exercise of the warrants immediately prior to the
completion of the merger, and
- receive from Roche or IGEN the amount of cash as if such holder had
exercised the warrants for the shares of IGEN common stock issuable upon
exercise of the warrants immediately prior to the completion of the
merger.
On the record date for the special meeting, warrants to purchase 282,258
shares of IGEN common stock with an exercise price of $31.00 per share were
outstanding. These warrants are held by LBI Group Inc., an affiliate of Lehman
Brothers, OTA Limited Partners and Susquehanna Capital Group. None of the
warrant holders is an affiliate of BioVeris or related to, or an affiliate of,
any of BioVeris's officers or directors.
71
RESTRUCTURING AGREEMENT
This is a summary of the material terms of the restructuring agreement. The
complete restructuring agreement is attached as Annex 1 to this proxy
statement/prospectus and is incorporated herein by reference. You should read
the entire restructuring agreement carefully.
GENERAL
BioVeris is a newly formed wholly-owned subsidiary of IGEN organized for
purposes of the merger and related transactions. Simultaneously with the
execution of the merger agreement, BioVeris and IGEN entered into the
restructuring agreement. The completion of the restructuring of IGEN as
contemplated by the restructuring agreement is a condition to the completion of
the merger. IGEN will not proceed with the merger unless the restructuring is
completed.
THE RESTRUCTURING
Prior to the completion of the merger, IGEN will complete the
restructuring. As part of the restructuring, BioVeris will assume IGEN's
biodefense, life science and industrial product lines as well as IGEN'S
opportunities in the clinical diagnostics and healthcare fields, and will own
IGEN's intellectual property, IGEN's interests in MSD, cash and certain other
rights and licenses currently held by IGEN. IGEN will retain IGEN's remaining
businesses, assets and obligations, primarily representing its clinical testing
business, including:
- worldwide, non-exclusive, fully-paid, royalty-free rights and license to
commercialize certain ECL-based immunochemistry systems in the specific
clinical testing field generally described as the human in vitro
diagnostics field;
- IGEN's physicians' office laboratory business, including the continued
right to distribute clinical tests to physicians' office laboratories,
the retention of all of the recorded assets and liabilities of the
physicians' office laboratory business and the continuation of customer
relationships and access to customers through customer contracts;
- unpublished patent applications and technical information of Hitachi High
Technology Corporation; and
- certain trademarks, including the "IGEN" name and derivatives of "IGEN,"
including ORIGEN(R) and PATHIGEN(R).
Upon completion of the merger, BioVeris will become an independent,
publicly-traded company owned by IGEN stockholders. BioVeris will have the
assets described above, as well as certain ongoing commercial agreements with
affiliates of Roche.
TRANSFER OF ASSETS
Prior to the completion of the merger, IGEN will contribute, convey,
assign, transfer and deliver, or cause to be contributed, conveyed, assigned,
transferred and delivered, to BioVeris, all of IGEN's or its applicable
subsidiaries' rights, title and interest in and to the assets of IGEN or its
applicable subsidiaries, other than specified assets described below that will
remain with IGEN.
Assets that will transfer to BioVeris include:
- all assets that will not remain with IGEN, including IGEN's biodefense,
life science and industrial product lines, IGEN's intellectual property,
IGEN's interests in MSD and certain other rights and licenses held by
IGEN;
- shares of stock in subsidiaries of IGEN other than the license sub and
BioVeris;
- the license agreement and IGEN's rights, title and interest under such
license agreement (other than any right, title and interest of the
license sub);
72
- the improvements license agreement and IGEN's rights, title and interest
under such improvements license agreement;
- BioVeris's rights and interests under the merger agreement and the
related transaction agreements;
- BioVeris's rights and interests under the covenants not to sue and the
PCR license agreements;
- any and all names, imprints, trademarks, trade names, trade name rights,
trade dress, domain names, service marks, service mark rights and service
names, whether or not registered, including all common law rights and all
goodwill associated therewith, in each case, except the IGEN name or any
of the foregoing that include or are derivatives of the IGEN name; and
- copies of certain identified records that will be retained by IGEN,
including the minute books of IGEN, the financial, accounting and tax
records of IGEN, all filings made by IGEN with the SEC and NASDAQ, all
filings and other documentation relating to the IGEN name and its
derivatives, certain litigation files of IGEN, all documentation relating
to the assets and liabilities which are to remain with IGEN following the
restructuring and all documentation relating to the IGEN stock plans.
The following assets will remain with IGEN following the restructuring:
- all claims, defenses and judgments arising out of the Roche litigation
and the patent infringement suits brought by IGEN against Roche
Diagnostics in Maryland and Germany;
- certain identified IGEN records, including the minute books of IGEN, the
financial, accounting and tax records of IGEN, all filings made by IGEN
with the SEC and NASDAQ, all filings and other documentation relating to
the IGEN name and its derivatives, certain litigation files of IGEN, all
documentation relating to the assets and liabilities which are to remain
with IGEN following the restructuring and all documentation relating to
the IGEN stock plans;
- IGEN's limited liability company interests in the license sub;
- the license sub's rights and interests under the license agreement and
the covenants not to sue;
- IGEN's rights and interests under the merger agreement and the related
transaction agreements;
- the IGEN name and all other names, imprints, trademarks, trade names,
trade name rights, trade dress, domain names, service marks, service mark
rights and service names of IGEN and its subsidiaries, whether or not
registered, that include or are derivatives of the IGEN name;
- IGEN's bank accounts (but not any cash in such bank accounts);
- all rights under IGEN's insurance policies, subject to certain
exceptions;
- certain identified permits of IGEN;
- certain identified contracts (including various securities purchase
agreements and registration rights agreements);
- the existing agreements between IGEN and Roche or their respective
affiliates, which are referred to in this proxy statement/prospectus as
I/R agreements, other than certain identified agreements that will be
transferred to BioVeris, which are referred to in this proxy
statement/prospectus as the BioVeris I/R agreements;
- all of the unpublished patent applications and technical information of
Hitachi High Technologies Corporation provided to Roche Diagnostics,
which in turn Roche Diagnostics has provided to IGEN prior to the date of
the restructuring agreement;
- the note pursuant to which Roche will loan to IGEN $214 million minus the
amount of cash received by IGEN from July 24, 2003 to two business days
before completion of the merger from the exercise of IGEN stock options
and warrants, which is referred to in this proxy statement/prospectus as
the Roche note;
73
- receivables from and inventory intended for transferred physicians'
office laboratories; and
- any cash IGEN receives from the exercise of IGEN stock options or
warrants after the date that is two business days prior to completion of
the merger, such cash.
ASSUMPTION OF LIABILITIES
At or prior to completion of the merger, BioVeris and/or one of BioVeris's
subsidiaries will unconditionally assume and undertake to pay, satisfy and
discharge all liabilities of IGEN arising from events, occurrences, actions,
omissions, facts or circumstances occurring or existing prior to the completion
of the merger, other than specified liabilities described below that will remain
with IGEN.
The following liabilities will remain with IGEN following the
restructuring:
- any liabilities of IGEN under any of the merger agreement or the related
transaction agreements, other than liabilities for its breaches prior to
the completion of the merger;
- any liabilities of the license sub under the license agreement or the
covenants not to sue, other than liabilities for its breaches prior to
the completion of the merger;
- any liabilities of IGEN owed to Roche or its affiliates, including under
the I/R agreements, other than the BioVeris I/R agreements;
- any liabilities of IGEN arising out of the Roche litigation and the
patent infringement suits brought by IGEN against Roche Diagnostics in
Maryland and Germany;
- any liabilities of IGEN with respect to transferred physicians' office
laboratories, other than liabilities arising from acts or omissions by
IGEN prior to the completion of the merger;
- any liabilities of IGEN pursuant to the Roche note described above; and
- any liabilities of IGEN under any contracts retained by IGEN, subject to
certain exceptions.
CONVERSION; CAPITALIZATION OF BIOVERIS AND ITS SUBSIDIARIES
On September 22, 2003, IGEN Integrated Healthcare, LLC was converted from a
limited liability company into a corporation in accordance with Section 18-216
of the Delaware Limited Liability Company Act and simultaneously changed its
name to BioVeris Corporation. Prior to completion of the merger, IGEN will cause
the number of authorized shares of BioVeris common stock to be sufficient to
complete the merger and related transactions.
The restructuring agreement further provides that:
- IGEN will determine, in its sole discretion, the identity of BioVeris's
directors and officers;
- following its conversion to a corporation, BioVeris may enter into a
stockholder rights agreement; and
- prior to completion of the merger, BioVeris may create one or more
subsidiaries and may transfer any or all of its assets to such
subsidiaries.
NONASSIGNABLE CONTRACTS; RETAINED CONTRACTS
The restructuring agreement provides that it will not constitute an
agreement to assign or transfer any permit, sales order, purchase order, open
bid or other commitment or contract if an assignment or transfer of the same
without consent or waiver of the other party would constitute a breach or in any
way impair BioVeris's rights under such contracts. IGEN is obliged to use its
reasonable best efforts to obtain all necessary consents and waivers to assign
the applicable contracts to BioVeris, although IGEN is not required to pay any
amount to any person from whom such consents or waivers may be required. If any
consent or waiver is not obtained prior to the completion of the merger, then
BioVeris will cooperate, at BioVeris's expense, with IGEN following the merger
in any reasonable arrangement under which BioVeris
74
will obtain the economic claims, rights and benefits under such contracts. Such
reasonable arrangement may include the subcontracting, sublicensing or
subleasing to BioVeris of any and all rights of IGEN against such other party
arising out of a breach or cancellation by such other party and the enforcement
by IGEN of such rights. To the extent that BioVeris is able to receive the
economic claims, rights and benefits of such contracts, BioVeris will be
responsible for any liabilities arising under such contracts.
INTERCOMPANY ARRANGEMENTS
All contracts, arrangements and commitments, whether oral or written,
solely between IGEN and BioVeris, and their respective operating units, entered
into prior to completion of the merger will terminate upon completion of the
merger. In addition, at or before completion of the merger, IGEN will cause all
intercompany indebtedness between BioVeris, on the one hand, and IGEN, on the
other hand, to be canceled.
USE OF NAME
Within 30 days after the completion of the merger, BioVeris and its
subsidiaries will take or cause to be taken all actions necessary to change the
name of any of the BioVeris companies to a name that does not include the "IGEN"
name and all derivatives thereof, including any name confusingly similar
thereto.
EMPLOYEE MATTERS
BioVeris has agreed to offer to each employee who participates in IGEN's
termination protection program employment in a "qualifying position" (as defined
in such termination protection program) upon completion of the merger. BioVeris
has also agreed to offer, upon completion of the merger, to each employee of
IGEN who does not participate in the termination protection program
substantially comparable employment to the employment of such employee by IGEN
immediately prior to completion of the merger. Nothing contained in the
restructuring agreement relating to such agreements by BioVeris will confer on
any employee any right to continued employment after the completion of the
merger, and each employee will continue to be employed "at-will" subject to any
requirements under applicable foreign law or any applicable individual agreement
to the contrary.
Effective upon completion of the merger, BioVeris will assume all of IGEN's
employee benefits and compensation liabilities, other than with respect to
IGEN's stock plans. BioVeris will generally be entitled to amend or terminate
any employee benefit plan that IGEN otherwise has the right to terminate.
BioVeris agreed to reimburse IGEN for all costs and expenses reasonably incurred
by IGEN pursuant to the employee plans transferred to BioVeris after completion
of the merger. The merger and related transactions are not intended to
constitute a termination of employment of any employee that would entitle such
employee to receive severance or similar compensation and benefits.
AMENDMENT AND TERMINATION
Prior to the completion of the merger, for so long as the merger agreement
remains in effect, the restructuring agreement may not be amended or modified,
and no provision of it may be waived, without Roche's prior written consent.
In the event the merger agreement is terminated pursuant to its terms, the
restructuring agreement will automatically and simultaneously terminate and the
restructuring will automatically and simultaneously be abandoned without
BioVeris's approval or the approval of IGEN stockholders.
75
THE MERGER AGREEMENT
This is a summary of the material provisions of the merger agreement. The
complete merger agreement is attached as Annex 2 to this proxy
statement/prospectus and is incorporated herein by reference. You should read
the entire merger agreement carefully.
THE MERGER
Under the merger agreement, following the restructuring and the
satisfaction or waiver of the other specified conditions, the merger sub, a
wholly-owned subsidiary of Roche, will merge with and into IGEN, as a result of
which IGEN will become a wholly-owned subsidiary of Roche. Upon completion of
the merger BioVeris will become an independent, publicly-traded company owned by
IGEN stockholders. Upon completion of the merger each outstanding share of IGEN
common stock (other than shares held by stockholders who validly exercise
appraisal rights, shares held as treasury stock and shares held by Roche or the
merger sub) will be converted into the right to receive:
- $47.25 in cash, without interest; and
- one share of BioVeris common stock.
Holders of IGEN common stock who vote against the merger may elect to
exercise appraisal rights under Delaware law as a result of the merger.
CONDITIONS
CONDITIONS TO ROCHE'S AND IGEN'S OBLIGATIONS TO COMPLETE THE MERGER
The respective obligations of each party to complete the merger are subject
to the satisfaction or waiver on or prior to the closing date of the merger of
the following conditions:
- the adoption of the merger agreement by the affirmative vote of
stockholders of IGEN representing a majority of the shares of IGEN common
stock outstanding on the record date;
- the expiration or termination of any waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976;
- the absence of any temporary restraining order, injunction or other order
issued by any court of competent jurisdiction or other law preventing
completion of the merger;
- the BioVeris registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, must have been declared effective by
the SEC and must not be the subject of any stop order or proceedings
seeking a stop order;
- each of the global consent and agreement, the consent by MSD and MST to
the license agreement, the covenants not to sue and the joinder of MSD
and MST to the ongoing litigation must be in full force and effect and
must not have been amended or modified without the consent of Roche and
IGEN; and
- the release and agreement among IGEN, BioVeris and certain companies
owned or controlled by Mr. Samuel Wohlstadter must be in full force and
effect and must not have been amended or modified without the consent of
Roche, IGEN and BioVeris.
CONDITIONS TO OBLIGATIONS OF ROCHE TO COMPLETE THE MERGER
Roche's obligations to complete the merger are further subject to the
satisfaction or waiver on or prior to the closing date of the merger of the
following additional conditions:
- IGEN's representations and warranties as to its ability to license
certain intellectual property rights that comprise the licensed ECL
technology, certain matters relating to Eisai, the absence of a
76
transaction material adverse effect (as described below) since March 31,
2003, and BioVeris's solvency must be true and correct;
- IGEN's representations and warranties as to its capitalization must be
true and correct in all material respects;
- IGEN's remaining representations and warranties must be true and correct,
other than failures to be true and correct that, individually or in the
aggregate, do not have a transaction material adverse effect;
- IGEN must have complied with its obligations not to make certain
amendments to its or its subsidiaries' organizational documents and not
to sell or otherwise dispose of any material subsidiary or any asset or
property, except for sales or dispositions to an unrelated third person
that do not have a transaction material adverse effect;
- IGEN must have complied with its obligation not to amend, waive or fail
to enforce the license agreement;
- IGEN must have complied in all material respects with its obligations
relating to appraisal of shares, dividends and distributions, stock
splits and reclassifications, securities repurchases, share issuances,
option grants, amendments to the terms of outstanding securities, mergers
and acquisitions, debt incurrence, loans and investments, employee
compensation and benefit plans, stock options, limitations on initiating
or encouraging claims against Roche and its affiliates and the IGEN
stockholder rights agreement;
- IGEN must have complied with its remaining covenants under the merger
agreement, other than failures to perform that, individually or in the
aggregate, do not have a transaction material adverse effect;
- BioVeris and IGEN must have completed the restructuring;
- IGEN must have paid in full its 8.5% senior secured notes; and
- IGEN must have received a solvency opinion from an independent solvency
firm of nationally recognized reputation substantially to the effect that
BioVeris will not be insolvent after giving effect to the merger and
related transactions.
"Transaction material adverse effect" means any change, effect, occurrence,
condition, development or state of facts that
- renders IGEN insolvent immediately prior to completion of merger, or
- after giving effect to the merger and related transactions
- results in or would reasonably be expected to result in a loss
- by IGEN (through the license sub) of its ownership of, rights to and
under and license under the license agreement or
- by BioVeris of, or a failure by BioVeris to obtain or retain, its
ownership of, rights to and license of the licensed ECL technology,
in each case, that materially impairs the legal right of Roche
Diagnostics and its affiliates to make, have made, use, sell, place or
otherwise commercialize products using the licensed ECL technology, or
- renders BioVeris insolvent at the time of the merger.
"Transaction material adverse effect" excludes any changes, effects,
occurrences, conditions, developments or state of facts
77
- arising out of, related to, or in connection with the Roche litigation or
the patent infringement litigation brought by IGEN against Roche
Diagnostics in Maryland and Germany or
- principally attributable to the economy in general or BioVeris's industry
in general.
CONDITIONS TO OBLIGATIONS OF IGEN TO COMPLETE THE MERGER
IGEN's obligations to complete the merger are further subject to the
satisfaction or waiver on or prior to the closing date of the merger of the
following additional conditions:
- Roche's and the merger sub's representations and warranties that are
qualified as to materiality must be true and correct, and those that are
not so qualified must be true and correct in all material respects;
- Roche and the merger sub must have performed in all material respects all
obligations required to be performed by them and complied in all material
respects with their agreements and covenants under the merger agreement;
- Roche Diagnostics will have paid to IGEN $18,600,000 in respect of
damages arising out of the Roche litigation and $10,620,000 in respect of
royalties due under the 1992 license agreement for the quarter ended June
30, 2003;
- the shares of BioVeris common stock to be issued to IGEN stockholders
must have been approved for listing on a national securities exchange or
approved for quotation on The NASDAQ Stock Market(R); and
- Roche will have loaned to IGEN $214 million minus the amount of cash
received by IGEN from the exercise of IGEN stock options and warrants
from the date of the merger agreement to the date that is two business
days prior to the completion of the merger.
In accordance with the terms of the ongoing litigation agreement, in July
2003, Roche Diagnostics paid to IGEN $18,600,000 in respect of damages arising
out of the Maryland contract action and $10,620,000 in respect of royalty
payment due under the 1992 license agreement for the quarter ended June 30,
2003. In August 2003, Roche Diagnostics reported an additional $255,000 of
royalty payment due under the 1992 license agreement for the quarter ended June
30, 2003, and paid the additional amount.
NO SOLICITATION; RECOMMENDATION OF THE IGEN BOARD OF DIRECTORS; SUPERIOR
PROPOSALS
IGEN agreed that it will not, and will not permit any of its
representatives to,
- directly or indirectly solicit, initiate or encourage the submission of
any company takeover proposal (as described below),
- enter into any agreement with respect to any company takeover proposal,
- grant any waiver or release under any standstill or similar agreement
with respect to any class of equity securities of IGEN or any subsidiary
of IGEN, or
- directly or indirectly,
- participate in any discussions or negotiations with, or furnish any
information with respect to, IGEN or any subsidiary of IGEN to any
person that is seeking to make, or has made, any company takeover
proposal or
- afford access to the business, properties, assets, books or records of
IGEN or any subsidiary of IGEN to, or otherwise cooperate in any way
with, or knowingly assist, participate in, facilitate or encourage any
effort by any person that is seeking to make, or has made, any company
takeover proposal.
However, if prior to obtaining IGEN stockholder approval, the IGEN board of
directors receives an unsolicited company takeover proposal that the IGEN board
of directors determines in good faith, after
78
receipt of the advice of its financial advisor and outside legal counsel, is
reasonably likely to result in a proposal that is, a "superior company proposal"
(as described below), then IGEN and its representatives may provide information
(subject to a confidentiality agreement) and participate in discussions or
negotiations in connection with such company takeover proposal. IGEN must
promptly advise Roche orally and in writing of any company takeover proposal or
any inquiry from a third party to an officer or director of IGEN with respect to
the making of a company takeover proposal, the identity of the person making any
such company takeover proposal or inquiry and the material terms of any such
company takeover proposal or inquiry.
The IGEN board of directors will not:
- withdraw or modify in a manner adverse to Roche, or propose publicly to
withdraw or modify in a manner adverse to Roche, the approval or
recommendation of the merger agreement or the merger by the IGEN board of
directors, unless the IGEN board of directors determines in good faith,
after consultation with outside counsel, that it is necessary to do so in
order to comply with its fiduciary duties;
- approve any letter of intent or acquisition or other agreement relating
to a company takeover proposal (other than a confidentiality agreement as
described above); or
- approve or recommend, or propose publicly to approve or recommend, any
company takeover proposal.
If, however, prior to obtaining IGEN stockholder approval, the IGEN board of
directors receives a superior company proposal, then the IGEN board of directors
may, having first complied with the notification requirements summarized above
and taken into account any revised proposal from Roche, after three business day
approve and recommend such superior company proposal and cause IGEN to terminate
the merger agreement and enter into a definitive agreement with respect to such
superior company proposal.
IGEN
- will, and will cause its subsidiaries to, and will instruct its
representatives to, cease immediately and cause to be terminated all
activities, discussions or negotiations, if any, with any persons
conducted prior to the date of the merger agreement with respect to any
company takeover proposal and
- will promptly request each person, if any, that has executed a
confidentiality agreement within the 12 months prior to the date of the
merger agreement in connection with such person's consideration of any
company takeover proposal to return or destroy all confidential
information furnished to such person by or on behalf of IGEN or any
subsidiary of IGEN.
A "company takeover proposal" means
- any proposal or offer for a merger, consolidation, dissolution,
recapitalization or other business combination involving IGEN,
- any proposal or offer to acquire in any manner, directly or indirectly,
over 20% of the equity securities or consolidated total assets of IGEN,
or
- any other transaction the consummation of which would reasonably be
expected to impede, prevent or materially delay the merger,
in each case other than
- the merger and related transactions,
- the performance of obligations pursuant to the ongoing commercial
agreements or
- any transaction involving BioVeris or BioVeris's subsidiaries that will
be consummated after completion of the merger.
79
A "superior company proposal" means any bona fide, unsolicited written
proposal to acquire, directly or indirectly, including pursuant to a tender or
exchange offer, a merger, a consolidation, a liquidation or dissolution, a
recapitalization or similar transaction, more than 50% of the combined voting
power of the shares of IGEN common stock then outstanding or all or
substantially all of the assets of IGEN and its subsidiaries, taken as a whole,
on terms which the IGEN board of directors determines in good faith to be more
favorable to the holders of IGEN common stock than the merger and related
transactions (after consultation with a financial advisor of nationally
recognized reputation), taking into account all the terms and conditions of such
proposal, including any break-up fees, expense reimbursement provisions and
conditions to consummation, and the merger agreement (including any proposal by
Roche to amend the terms of the merger and related transactions), and for which
financing, to the extent required, is then fully committed or reasonably
determined to be available by the IGEN board of directors.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to the completion
of the merger, whether before or after receipt of the IGEN stockholder approval:
- by mutual written consent of Roche, the merger sub, IGEN and BioVeris;
- by either Roche or IGEN
- if the merger does not occur on or before July 24, 2004, unless the
failure to complete the merger is the result of a material breach of the
merger agreement by the party seeking to terminate the merger agreement,
- if any law preventing the merger comes into effect or if any
governmental entity issues an order or injunction or takes any other
action permanently preventing the completion of the merger and such
order, injunction or other action will have become final and
nonappealable, unless such order, injunction or other action is the
result of a material breach of the merger agreement by the party seeking
to terminate the merger agreement, or
- if the IGEN stockholders do not adopt the merger agreement upon a vote
at the IGEN stockholders meeting;
- by Roche, if the IGEN board of directors
- withdraws or adversely modifies its approval or recommendation of the
merger agreement or the merger to the IGEN stockholders, or proposes
publicly to do so,
- fails to recommend to the IGEN stockholders that they adopt the merger
agreement, or
- approves or recommends any company takeover proposal, or proposes
publicly to do so;
- by IGEN
- if the IGEN board of directors exercises its right described above to
accept a superior company proposal,
- if Roche breaches or fails to perform in any material respect any of its
representations, warranties or covenants contained in the merger
agreement, which breach or failure to perform, if capable of being
cured, has not been cured within 30 days after the giving of written
notice to Roche of such breach, or
- if it has not received the $18,600,000 payment in respect of damages
arising out of the Roche litigation, the $10,620,000 royalty payment due
under the 1992 license agreement for the quarter ended June 30, 2003 or
the monthly $5,000,000 payment due to it from Roche Diagnostics in
accordance with the ongoing litigation agreement.
80
FEES AND EXPENSES
GENERAL
The merger agreement provides that, except as otherwise provided in the
merger agreement or in any related transaction agreement, all fees and expenses
incurred in connection with the merger and related transactions will be paid by
the party incurring such expenses.
TERMINATION FEE
IGEN will pay to Roche a termination fee of $26.6 million if:
- the merger agreement is terminated by IGEN because the IGEN board of
directors received and accepted an unsolicited superior company proposal
and IGEN then completes the transactions contemplated by such superior
company proposal or any other company takeover proposal providing for the
acquisition of over 50% of the stock or assets of IGEN; or
- (1) the merger agreement is terminated by Roche because the IGEN board of
directors withdrew or adversely modified its recommendation to the IGEN
stockholders, or proposed publicly to do so, and (2) IGEN then
consummates the transactions contemplated by a company takeover proposal
providing for the acquisition of over 50% of the stock or assets of IGEN
within 12 months after the termination of the merger agreement; or
- (1) any person make a company takeover proposal for over 50% of the stock
or assets of IGEN and (2) the merger agreement is terminated because the
merger will not have occurred on or before July 24, 2004 (but only if the
IGEN stockholder meeting has not been held by the date that is two days
prior to such outside date) and (3) IGEN then consummates the
transactions contemplated by a company takeover proposal providing for
the acquisition of over 50% of the stock or assets of IGEN within 12
months after the termination of the merger agreement.
In addition, IGEN agreed to reimburse Roche for all its reasonable expenses
of up to $5 million incurred in connection with the merger agreement, the
ongoing commercial agreements and the merger and related transactions in the
event that the merger agreement is terminated for the reasons described in
either the first or second bullets of the preceding paragraph.
CONDUCT OF BUSINESS PENDING THE MERGER
IGEN agreed that, subject to specified exceptions, during the period from
the date of the merger agreement to the completion of the merger, it will, and
will cause each of its subsidiaries to, conduct its business in the usual,
regular and ordinary course consistent with past practice and, to the extent
consistent with the foregoing, will use their reasonable best efforts to
preserve intact their business organizations and relationships with third
parties. In addition, without limiting the generality of the previous sentence,
during the period from the date of the merger agreement to the completion of the
merger, IGEN agreed that, subject to specified exceptions, it will not, and will
not permit any of its subsidiaries to, without Roche's prior written consent:
- declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock;
- split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock;
81
- purchase, redeem or otherwise acquire any shares of its capital stock or
any other securities of IGEN or any rights, warrants or options to
acquire any such shares or other securities other than
- the issuance of IGEN common stock (and associated IGEN rights) upon
- the exercise of IGEN stock options outstanding as of the date of the
merger agreement and in accordance with the terms of such stock
options in effect as of the date of the merger agreement,
- the conversion of IGEN convertible debentures outstanding as of the
date of the merger agreement and in accordance with the terms of such
convertible debentures in effect as of the date of the merger
agreement, and
- the exercise of IGEN warrants outstanding as of the date of the merger
agreement and in accordance with the terms of such warrants in effect
as of the date of the merger agreement,
- the issuance of IGEN capital stock upon the exercise of IGEN rights and
- pursuant to the IGEN stock plans as in effect on the date of the merger
agreement;
- issue, deliver, sell or grant any shares of its capital stock, any other
voting securities, any securities convertible into or exchangeable for,
or any options, warrants or rights to acquire, any such shares, voting
securities or convertible or exchangeable securities, or any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock based
performance units, in each case other than
- the issuance of shares of IGEN common stock (and associated IGEN rights)
upon
- the exercise of IGEN stock options outstanding as of the date of the
merger agreement and in accordance with the terms of such stock
options in effect as of the date of the merger agreement,
- the conversion of IGEN convertible debentures outstanding as of the
date of the merger agreement and in accordance with the terms of such
convertible debentures in effect as of the date of the merger
agreement, and
- the exercise of IGEN warrants outstanding as of the date of the merger
agreement and in accordance with the terms of such warrants in effect
as of the date of the merger agreement, and
- the issuance of IGEN capital stock upon the exercise of IGEN rights;
- amend or propose to amend its certificate of incorporation or by-laws or
other comparable organizational documents (other than amendments or
proposals to the certificate of incorporation, by-laws or other
comparable charter or organizational documents of BioVeris, any
subsidiary of IGEN that is contemplated to become BioVeris's subsidiary
pursuant to the restructuring or any of BioVeris's other subsidiaries,
that do not materially impair BioVeris's ability or the ability of any
subsidiary of IGEN that is contemplated to become BioVeris's subsidiary
pursuant to the restructuring or any of BioVeris's other subsidiaries to
perform its obligations under the merger agreement, any related
transaction agreement or any ongoing commercial agreement or complete the
merger and related transactions or perform their obligations under any
ongoing commercial agreement);
- make any change in accounting methods, principles or practices materially
affecting the reported consolidated assets, liabilities or results of
operations of IGEN or any subsidiary of IGEN, except for any such change
required by generally accepted accounting principles or applicable law;
- make or change any material tax election, change any annual tax
accounting period, file any material amended tax returns or claims for
material tax refunds, enter into any material closing agreement, settle
any material tax claim, audit or assessment or surrender any right to
claim a material tax refund, offset or other reduction in liabilities for
taxes;
82
- amend any material term of any outstanding security of IGEN or any
subsidiary of IGEN;
- merge or consolidate with any other person or acquire a material amount
of stock or assets of any unrelated third person, in each case other than
- one or more acquisitions of stock or assets (including inventory and
fixed assets) of any unrelated third person by BioVeris involving the
expenditure in the aggregate of no greater than $20,000,000 (or its
equivalent in any other currency) minus the amount of any loan, advance
or capital contribution to, or investment in, any unrelated person or
- any acquisition of inventory or fixed assets in the ordinary course
consistent with past practice;
- sell, lease, license or otherwise dispose of any material subsidiary or
any assets or property, including any intellectual property right, except
in each case for such sales, leases, licenses or other dispositions to an
unrelated third person that do not have a transaction material adverse
effect;
- incur, assume or guarantee any indebtedness for borrowed money in an
aggregate principal amount in excess of $10,000,000 (or its equivalent in
any other currency), whether pursuant to one or more transactions, other
than any guarantee by IGEN or any subsidiary of IGEN pursuant to any
agreement in effect as of the date of the merger agreement;
- create or incur any lien on any material asset of IGEN and subsidiaries
of IGEN, taken as a whole, other than in the ordinary course consistent
with past practice;
- make any loan, advance or capital contribution to, or investment in, any
other person, other than
- loans, advances or capital contributions to, or investments in, its
wholly-owned subsidiaries,
- the extension of trade credit in the ordinary course consistent with
past practice,
- investments in any person in the ordinary course pursuant to IGEN's
investment policy approved by the IGEN board of directors as in effect
as of the date of the merger agreement,
- loans, advances, capital contributions or investments specifically
disclosed to Roche at the time the merger agreement was entered into,
- loans, advances or capital contributions to, or investments in, any
unrelated third person that are not otherwise permitted by the merger
agreement and involve the expenditure in the aggregate of no greater
than $20,000,000 minus the amount of any expenditure to acquire the
stock or assets of any unrelated third person (other than acquisitions
of inventory or fixed assets in the ordinary course);
- any establishment, adoption or amendment (except as required by
applicable law) of any collective bargaining or material bonus, profit
sharing, thrift, pension, retirement, deferred compensation,
compensation, stock option, restricted stock or other benefit plan
covering any director, officer or employee of IGEN or any subsidiary of
IGEN (other than BioVeris, any subsidiary that is contemplated to become
a subsidiary of BioVeris pursuant to the restructuring or any of
BioVeris's other subsidiaries); or
- authorize any of, or commit, propose or agree to take any of, the
foregoing actions.
STANDSTILL
From the date of the merger agreement to the earlier of completion of the
merger or the fifth anniversary of termination of the merger agreement, Roche
will not and will not permit any of its affiliates to
- acquire, agree to acquire or make any proposal to acquire, directly or
indirectly, any securities or assets of IGEN or any subsidiary of IGEN,
except at the unsolicited specific written request of IGEN,
83
- propose to enter into, directly or indirectly, any tender or exchange
offer, merger or other business combination or similar transaction
involving IGEN or any subsidiary of IGEN, except at the unsolicited
specific written request of IGEN,
- form, join or in any way participate in a "group" (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934) with respect to
any securities of IGEN or any subsidiary of IGEN,
- enter into any discussions, negotiations, arrangements, understandings or
agreements (whether written or oral) with any other person regarding any
possible purchase or sale of any securities or assets of IGEN or any
subsidiary of IGEN,
- make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" (as such terms are used in the proxy rules of
the Securities and Exchange Commission) to vote, or seek to advise or
influence any person with respect to the voting of, any securities of
IGEN or any subsidiary of IGEN,
- call, or seek to call, a meeting of IGEN's shareholders or initiate or
propose any stockholder proposal or execute any written consent with
respect to IGEN,
- otherwise act, alone or in concert with others, to seek or attempt to
control or influence the management, the IGEN board of directors or
policies of IGEN (except to the extent conduct or settlement of
litigation between Roche Diagnostics and IGEN might be deemed such an
attempt),
- disclose any intention, plan or arrangement inconsistent with the
foregoing or
- advise, assist or encourage any other persons in connection with any of
the foregoing.
During the standstill period, Roche will not
- request, directly or indirectly, that IGEN or any of its representatives
amend or waive any provisions of the standstill, or
- take any action which could reasonably be expected to require IGEN to
make a public announcement regarding the possibility of a business
combination, merger or similar transaction other than the merger and
related transactions and the transactions contemplated by the ongoing
commercial agreements.
LIMITATIONS ON CERTAIN CLAIMS
Roche and IGEN each agreed not to assert or pursue, and not to permit their
respective affiliates to assert or pursue or encourage any other person to
assert or pursue, either before or after the completion of the merger, any
actions or claims against the other or its affiliates or current or former
directors, officers, members of the board of managers, members, managers,
employees, consultants, advisors, attorneys, trustees or agents, in each case
based on acts or omissions occurring prior to the date of the merger agreement
or after the date of the merger agreement and prior to the completion of the
merger, except as required by subpoena or other judicial or legal process or as
required by any inquiry by a governmental entity, in each case only to the
extent such inquiry or requirement to cooperate has not arisen as a result of
its breach of this provision. This covenant, however, does not
- prevent actions to enforce the merger agreement, any related transaction
agreement, any ongoing commercial agreement, any I/R agreement, any
BioVeris I/R agreement, any agreement entered into between IGEN, BioVeris
or any of their respective affiliates, on the one hand, and any of Roche
Diagnostics Corporation, Roche, the merger sub, Roche Diagnostics, F.
Hoffmann-La Roche Ltd and Roche Molecular Systems, Inc. or any of their
respective affiliates, on the other hand, after the date of the merger
agreement but prior to the completion of the merger or any provision in
those agreements in accordance with its terms,
84
- apply to any act or omission that constitute fraud in the inducement with
respect to the merger agreement, any related transaction agreement or any
ongoing commercial agreement or
- apply to any action permitted or required by the ongoing litigation
agreement. For a more complete description of the ongoing litigation
agreement see "Post-Closing and Other Arrangements -- Ongoing Litigation
Agreement."
OTHER COVENANTS
Each of IGEN and Roche have agreed to use their reasonable best efforts to
complete the merger. The merger agreement also contains other customary
covenants relating to the consummation of the merger and related transactions,
including covenants relating to the IGEN stockholder meeting and this proxy
statement/prospectus, listing of BioVeris's common stock, access to information,
confidentiality and public announcements.
REPRESENTATIONS AND WARRANTIES OF IGEN
The merger agreement contains representations and warranties made by IGEN
relating to, among other things:
- corporate organization, standing and power;
- capitalization;
- subsidiaries;
- authorization, execution, delivery, performance and enforceability of the
merger agreement, related transaction agreements and ongoing commercial
agreements;
- approval by the IGEN board of directors of the merger agreement, related
transaction agreements and ongoing commercial agreements and the merger
and related transactions;
- absence of conflicts;
- required consents, approvals, orders and authorizations;
- intellectual property rights;
- engagement and payment of fees of brokers, investment bankers and
financial advisors;
- receipt by IGEN of fairness opinion from its financial advisors;
- documents filed by IGEN with the SEC and the accuracy of information
contained in such documents;
- financial statements;
- IGEN disclosure documents filed under the Securities Exchange Act of
1934, as amended, relating to the merger and related transactions;
- pending or threatened litigation;
- absence of specified changes or events;
- benefit plans and matters relating to the Employee Retirement Income
Security Act of 1974;
- absence of material undisclosed liabilities of IGEN;
- transactions with related persons;
- compliance with applicable laws and judgments;
- environmental matters;
85
- filing of tax returns and payment of taxes by IGEN; and
- BioVeris's solvency.
In addition, the merger agreement provides that IGEN makes no
representations or warranties with respect to Roche or its affiliates or their
businesses, properties, assets or operations, any business relationship between
IGEN and its affiliates or Roche and its affiliates, or any action, suit,
proceeding or contract to which Roche or its affiliates is a party, subject to
certain exceptions.
REPRESENTATIONS AND WARRANTIES OF ROCHE
The merger agreement contains representations and warranties made by Roche
relating to, among other things:
- corporate organization, standing and power;
- authorization, execution, delivery, performance and enforceability of the
merger agreement and related transaction agreements;
- absence of conflicts;
- required consents, approvals, orders and authorizations;
- engagement and payment of fees of brokers, investment bankers and
financial advisors;
- availability of funds for the acquisition contemplated by the merger
agreement and to perform its obligations under the merger agreement and
the related transaction agreements;
- financial statements; and
- no ownership of IGEN common stock by Roche.
EMPLOYEE STOCK OPTIONS
As soon as reasonably practicable following the date of the merger
agreement, the IGEN board of directors will adopt such resolutions or take such
other actions as may be required in order that each outstanding IGEN employee
stock option, whether vested or unvested, will be canceled upon completion of
the merger and that the holders of such IGEN employee stock options will be
entitled to receive
- a cash payment from Roche equal to the product of
- the excess of $47.25 over the exercise price of such option and
- the number of shares of IGEN common stock for which such option will not
theretofore have been exercised, and
- a number of shares of BioVeris common stock equal to the number of shares
of IGEN common stock for which such option will not theretofore have been
exercised.
AMENDMENT
The merger agreement may be amended by the parties at any time before or
after the stockholders of IGEN adopt the merger agreement. After receipt of the
IGEN stockholder approval, however, no amendment will be made that by applicable
law requires further approval by IGEN stockholders without the further approval
of such stockholders. The merger agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties. Notwithstanding
the foregoing, at any time prior to adoption of the merger agreement by IGEN
stockholders, BioVeris may, in its sole discretion and with, if necessary,
approval of the BioVeris board of directors, unilaterally change the exchange
ratio to equal the product of a number determined by BioVeris and such ratio
prior to such change.
86
EXTENSION; WAIVER
At any time prior to the completion of the merger, the parties may:
- extend the time for performance of any of the obligations or other acts
of any other parties to the merger agreement;
- waive inaccuracies in representations and warranties of any other party
contained in the merger agreement or in any related document; or
- waive compliance with any of the agreements or conditions contained in
the merger agreement, except that no such waiver may be made after the
merger agreement has been adopted by IGEN stockholders which by law
requires further approval by IGEN stockholders unless such approval is
obtained.
Any agreement on the part of a party to any such extension or waiver will
be valid only if set forth in an instrument in writing signed on behalf of such
party.
87
POST-CLOSING AND OTHER ARRANGEMENTS
POST-CLOSING COVENANTS AGREEMENT
This is a summary of the material provisions of the post-closing covenants
agreement. The post-closing covenants agreement is attached as Annex 3 to this
proxy statement/prospectus and is incorporated herein by reference. You should
read the entire post-closing covenants agreement carefully.
GENERAL
Simultaneously with the execution of the merger agreement, Roche, IGEN and
BioVeris entered into the post-closing covenants agreement. The post-closing
covenants agreement governs certain relationships between BioVeris and Roche
following completion of the merger.
INDEMNIFICATION
Indemnification by BioVeris. From and after completion of the merger,
BioVeris will indemnify, defend and hold harmless Roche and its affiliates,
subsidiaries and representatives, which are referred to in this proxy
statement/prospectus as the Roche indemnitees, from and against, and pay or
reimburse the Roche indemnitees for, all losses, as incurred, to the extent:
- relating to or arising from the businesses, assets or liabilities
transferred to and assumed by BioVeris in the restructuring, whether such
losses relate to or arise from events, occurrences, action, omissions,
facts or circumstances occurring, existing or asserted before, at or
after completion of the merger;
- relating to or arising from specified contracts retained by IGEN
following the restructuring, whether such losses relate to or arise from
events, occurrences, actions, omissions, facts or circumstances
occurring, existing or asserted before, at or after completion of the
merger; provided, however, that with respect to losses related to or
arising from events, occurrences, facts or circumstances relating to or
arising from actions or omissions by IGEN occurring after completion of
the merger, BioVeris will not be liable to the extent such losses
directly relate to or arise from actions or omissions by IGEN that are
inconsistent in any respect with any written instruction from BioVeris
with respect to such retained contract;
- relating to or arising from any untrue statement or allegedly untrue
statement of a material fact contained in any of the filings in
connection with the merger and related transactions required to be made
with the SEC by IGEN prior to completion of the merger or by BioVeris at
any time, or any omission to state in any of such filings a material fact
relating to IGEN, BioVeris or any of its subsidiaries required to be
stated in the filings or necessary to make the statements in the filings,
in light of the circumstances under which they were made, not misleading,
but in each case not with respect to statements made in such filings or
incorporated by reference in such filings based upon information supplied
by Roche or any of its affiliates or any of their respective
representatives specifically for inclusion or incorporation by reference
in such filings;
- relating to or arising from the breach by BioVeris or any of its
subsidiaries of any agreement or covenant contained in the merger
agreement or any related transaction agreement which is to be performed
or complied with after completion of the merger;
- relating to or arising from the breach by IGEN or BioVeris prior to
completion of the merger of any agreement or covenant contained in the
merger agreement or any related transaction agreement which is to be
performed or complied with prior to completion of the merger;
- relating to or arising from the breach by the license sub of any
agreement or covenant contained in the license agreement or the covenants
not to sue, in each case which is to be performed or complied with prior
to completion of the merger; or
88
- relating to or arising from any guarantee, performance bond or other
contract that Roche, any of its affiliates or IGEN may be required to
grant in favor of, or enter into with, any governmental entity, whether
prior to, at or after completion of the merger, in connection with any
contract entered into prior to completion of the merger by IGEN or any
subsidiary of IGEN with any governmental entity.
Indemnification by Roche. From and after completion of the merger, Roche
will indemnify, defend and hold harmless BioVeris and its affiliates,
subsidiaries and representatives, which are referred to in this proxy
statement/prospectus as the BioVeris indemnitees, from and against, and pay or
reimburse the BioVeris indemnitees, for all losses, as incurred, to the extent:
- relating to or arising from the business, assets or liabilities retained
by IGEN in the restructuring, whether such losses relate to or arise from
events, occurrences, actions, omissions, facts or circumstances
occurring, existing or asserted before, at or after completion of the
merger;
- relating to or arising from specified contracts retained by IGEN with
respect to such losses relating to or arising from events, occurrences,
facts or circumstances relating to or arising from actions or omissions
by IGEN occurring after completion of the merger that are inconsistent in
any respect with any written instruction from BioVeris with respect to
such retained contract;
- relating to or arising from any untrue statement of a material fact
contained in any of the filings in connection with the merger and related
transactions required to be made with the SEC by IGEN or BioVeris, or any
omission or alleged omission to state in any such filings a material fact
required to be stated in such filings or necessary to make the statements
in such filings, in light of the circumstances under which they were
made, not misleading, but only with respect to statements made in the
filings or incorporated by reference in the filings based upon
information supplied by Roche or any of its affiliates or any of their
respective representatives (including, after completion of the merger,
IGEN and the subsidiaries of IGEN) specifically for inclusion or
incorporation by reference in the filings;
- relating to or arising from the breach by Roche or any of its affiliates
(other than, prior to completion of the merger, IGEN, BioVeris or any of
their affiliates) of any agreement or covenant contained in the merger
agreement or any transaction agreement, whether such losses relate to or
arise from events, occurrences, actions, omissions, facts or
circumstances occurring, existing or asserted before, at or after
completion of the merger; or
- relating to or arising from the breach by IGEN of any agreement or
covenant contained in the merger agreement or any related transaction
agreement which is to be performed or complied with by it after
completion of the merger.
The post-closing covenants agreement also contains provisions governing
indemnification procedures and limitations. The post-closing covenants agreement
also provides that all indemnification payments shall be reduced to take account
of the net present value of any net tax benefit realized by the indemnitee in
connection with or otherwise arising from the incurrence of an indemnifiable
loss.
AGREEMENT NOT TO SOLICIT EMPLOYEES
For a period of two years from and after completion of the merger, Roche
will not, and will not permit its subsidiaries to, directly or indirectly,
solicit for employment any individual employed by BioVeris, any of its
subsidiaries or any of its respective divisions. It will not constitute a breach
of the previous sentence if Roche or its subsidiaries make solicitations for
employment by general advertisements in periodicals of broad distribution or
other advertisement media of similar nature that are not specifically directed
at BioVeris's employees.
89
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Roche will, to the fullest extent permitted by law, cause IGEN to honor all
of its existing obligations to indemnify the current or former directors or
officers of IGEN, whether pursuant to IGEN's certificate of incorporation or
by-laws or individual indemnity agreements, for acts or omissions occurring
prior to completion of the merger. From completion of the merger until the sixth
anniversary of the merger, Roche will maintain in effect the current policies of
directors' and officers' liability insurance maintained by IGEN with respect to
claims arising from or related to events which occurred at or before completion
of the merger. However, Roche will not be obligated to pay premiums in excess of
250% of the amount per annum required to be paid by IGEN in the twelve months
ending December 12, 2003, provided, that, if the annual premiums exceed 250% of
the amount per annum required to be paid by IGEN in the twelve months ending
December 12, 2003, Roche will nevertheless be obligated to obtain such insurance
and BioVeris will pay IGEN the amount of any such excess cost. IGEN has been
advised by its directors' and officers' liability insurer that the total cost
for such insurance would be 200% of the amount per annum required to be paid by
IGEN in the twelve months ending December 12, 2003.
LIMITATIONS ON CERTAIN CLAIMS
BioVeris and Roche each agreed not to assert or pursue, and not to permit
their respective affiliates to assert or pursue or encourage any other person to
assert or pursue, either before or after the completion of the merger, any
actions or claims against the other or their respective affiliates or current or
former directors, officers, members of the board of managers, members, managers,
employees, consultants, advisors, attorneys, trustees or agents, in each case
based on acts or omissions occurring prior to the date of the merger agreement
or after the date of the merger agreement and prior to the completion of the
merger, claims except as required by subpoena or other judicial or legal process
or as requested by any inquiry by a governmental entity, in each case only to
the extent such inquiry or requirement to cooperate has not arisen as a result
of its breach of this provision. This covenant, however, does not
- prevent actions to enforce the merger agreement, any related transaction
agreement, any ongoing commercial agreement, any I/R agreement, any
BioVeris I/R agreement, any agreement entered into between IGEN, BioVeris
or any of their respective affiliates, on the one hand, and any of Roche
Diagnostics Corporation, Roche, the merger sub, Roche Diagnostics, F.
Hoffmann-La Roche Ltd and Roche Molecular Systems, Inc. or any of their
respective affiliates, on the other hand, after the date of the merger
agreement but prior to the completion of the merger or any provision in
those agreements in accordance with its terms, or
- apply to acts or omissions that constitute fraud in the inducement with
respect to the merger agreement, any related transaction agreement or any
ongoing commercial agreement.
STANDSTILL
From the date of completion of the merger to the fourth anniversary of the
date of completion of the merger, Roche will not and will not permit any of its
affiliates to
- acquire, agree to acquire or make any proposal to acquire, directly or
indirectly, any securities or assets of BioVeris or any of its
subsidiaries, except at BioVeris's unsolicited specific written request,
- propose to enter into, directly or indirectly, any tender or exchange
offer, merger or other business combination or similar transaction
involving BioVeris or any of its subsidiaries, except at BioVeris's
unsolicited specific written request,
- form, join or in any way participate in a "group" (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934) with respect to
any securities of BioVeris or any of its subsidiaries,
90
- enter into of any discussions, negotiations, arrangements, understandings
or agreements (whether written or oral) with any other person regarding
any possible purchase or sale of any securities or assets of BioVeris or
any of its subsidiaries,
- make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" (as such terms are used in the proxy rules of
the Securities Exchange Commission) to vote, or seek to advise or
influence any person with respect to the voting of, any securities of
BioVeris or any of its subsidiaries,
- call, or seek to call, a meeting of BioVeris's stockholders or initiate
or propose any stockholder proposal or execute any written consent with
respect to BioVeris,
- otherwise act, alone or in concert with others, to seek or attempt to
control or influence BioVeris's management, board of directors or
policies (except to the extent conduct or settlement of litigation
between Roche Diagnostics and IGEN might be deemed such an attempt),
- disclose any intention, plan or arrangement inconsistent with the
foregoing or
- advise, assist or encourage any other persons in connection with any of
the foregoing.
During the standstill period, Roche will not
- request, directly or indirectly, that BioVeris or any of its
representatives amend or waive any provisions of the standstill, or
- take any action which could reasonably be expected to require BioVeris to
make a public announcement regarding the possibility of a business
combination, merger or similar transaction other than the merger and
related transactions and the transactions contemplated by the ongoing
commercial agreements.
TRANSFERRED CUSTOMERS
From and after completion of the merger, BioVeris will assume IGEN's rights
to be indemnified for product liability claims arising from sales made prior to
the completion of the merger under the supply, services and support agreement
dated as of May 1, 2000 between IGEN and Roche Diagnostics relating to
transferred physicians' office laboratory customers that had been transferred to
IGEN from Roche pursuant to an injunction by the District Court prohibiting
Roche Diagnostics from marketing its Elecsys products in physicians' office
laboratories and requiring Roche Diagnostics to escrow all revenues from past
sales to physicians' office laboratories pending the outcome of the Roche
litigation and to transfer all of its current Elecsys customers constituting
physicians' office laboratories to IGEN.
PCR LICENSE PAYMENT
BioVeris agreed to make the $50 million PCR license payment in accordance
with the PCR product license agreement. For a more complete description of the
PCR product license agreement see "Commercial Agreements -- PCR License
Agreements."
MUTUAL RELEASE
Roche, on the one hand, and IGEN and BioVeris, on the other hand, release,
as of immediately prior to completion of the merger, the other and its past,
present and future affiliates and its and their respective successors,
predecessors, assigns, heirs, officers, directors, members of the board of
managers, members, managers, employees, consultants and trustees from, and agree
not to bring any action against the foregoing related to, all debts, demands,
actions, causes of action, suits, accounts, covenants, contracts, agreements,
torts, damages, claims, defenses, offsets, judgments, demands and liabilities
whatsoever which have been or could have been asserted against the other person
arising out of or relating to events or actions taken by such other person prior
to the completion of the merger. The release does not, however,
91
- affect any person's right to enforce the merger agreement, any related
transaction agreement, any ongoing commercial agreement, any I/R
agreement, any BioVeris I/R agreement, any agreement entered into between
IGEN, BioVeris or any of their respective affiliates, on the one hand,
and any of Roche Diagnostics Corporation, Roche, the merger sub, Roche
Diagnostics, F. Hoffmann-La Roche Ltd and Roche Molecular Systems, Inc.
or any of their respective affiliates, on the other hand, after the date
of the merger agreement but prior to the completion of the merger or any
provision in those agreements in accordance with its terms or
- apply to any act or omission which constitutes fraud in the inducement
with respect to the merger agreement, any related transaction agreement
or any ongoing commercial agreement.
OTHER COVENANTS
The post-closing covenants agreement also contains other covenants relating
to, among other things, insurance, records, access, public announcements,
preservation of privileges and confidentiality. In addition, neither BioVeris
nor Roche will consolidate with or merge into, or sell, convey transfer or
lease, in one transaction or a series of related transactions, all or
substantially all of its assets to, any person, unless the resulting, surviving
or transferee person expressly assumes in writing all of its obligations under
the post-closing covenants agreement.
TERMINATION
In the event the merger agreement is terminated pursuant to its terms prior
to the completion of the merger, the post-closing covenants agreement will
automatically and simultaneously terminate. In the event of such termination, no
party will have any liability to any other party pursuant to the post-closing
covenants agreement. In addition, Roche, BioVeris and IGEN agree that the
completion of the merger will not constitute a termination of the post-closing
covenants agreement.
TAX ALLOCATION AGREEMENT
This is a summary of the material provisions of the tax allocation
agreement. The tax allocation agreement is attached as Annex 4 to this proxy
statement/prospectus and is incorporated herein by reference. You should read
the entire tax allocation agreement carefully.
GENERAL
Simultaneously with the execution of the merger agreement, Roche, the
merger sub, IGEN and BioVeris entered into the tax allocation agreement. In
general, the tax allocation agreement allocates responsibility among the parties
for preparing and filing tax returns and paying taxes.
ALLOCATION OF RESPONSIBILITY FOR TAXES
Taxes Attributable to Pre-Merger Periods (Other Than Transaction
Taxes). The tax allocation agreement provides that IGEN will prepare and file
all tax returns of IGEN relating to pre-merger periods, with very limited
exceptions. IGEN must prepare such returns in accordance with its historic
practices and in accordance with the representations, covenants and other
provisions of the tax allocation agreement. Except as described below under
"-- Transaction Taxes", BioVeris will be liable for, will indemnify Roche and
IGEN against, and will be entitled to receive and retain all refunds of, any
taxes of IGEN attributable to pre-merger periods.
Transaction Taxes. The tax allocation agreement provides that Roche and
IGEN will be solely liable for, will jointly and severally indemnify BioVeris
against, and will be entitled to receive and retain all refunds of, taxes (other
than transfer taxes) directly or indirectly resulting from, arising in
connection with or otherwise related to the merger and related transactions, any
transaction undertaken to prepare for the merger and related transactions and
any of the actions taken pursuant to the ongoing litigation agreement. This
agreement also provides for BioVeris to make a payment to IGEN of up to $20
million. The amount
92
of the payment will depend upon the average of the high and the low trading
prices of BioVeris common stock on the first day of trading after the completion
of the merger. A payment will be due if such average is at least approximately
$11.41 per share and the maximum payment will be due if such average exceeds
approximately $13.28, in each case based on the assumption that BioVeris will
have $205 million in cash and cash equivalents immediately after completion of
the merger and prior to making any payments due pursuant to the related
transaction agreements, the ongoing commercial agreements or the MSD letter
agreement. The distribution of BioVeris stock will be a taxable transaction for
IGEN and the purpose of this payment is for BioVeris to share in a portion of
the tax that IGEN might incur as a result of that distribution. The formula,
which takes into account the expected approximate tax basis and tax rate that
would be used in IGEN's calculation of its tax, was negotiated by Roche and IGEN
as part of the overall negotiation of the merger.
Taxes Attributable to Post-Merger Periods. The tax allocation agreement
provides that IGEN will prepare and file all tax returns relating to IGEN and
pay all taxes of IGEN attributable to post-merger periods, and BioVeris will
prepare and file all tax returns relating to BioVeris and pay all taxes of
BioVeris attributable to post-merger periods.
Indemnification for Breach of Representations and Covenants. The tax
allocation agreement provides that the parties will indemnify each other for
breach of the representations and covenants set forth in the agreement.
ONGOING LITIGATION AGREEMENT
This is a summary of the material provisions of the ongoing litigation
agreement. The ongoing litigation agreement is attached as Annex 5 to this proxy
statement/prospectus and is incorporated herein by reference. You should read
the entire ongoing litigation agreement carefully.
GENERAL
Simultaneously with the execution of the merger agreement, IGEN, Roche
Diagnostics and Roche Diagnostics Corporation entered into the ongoing
litigation agreement. Meso Scale Technologies, LLC. and Meso Scale Diagnostics,
LLC. joined the ongoing litigation agreement to confirm their agreement with
specified provisions of the ongoing litigation agreement. The ongoing litigation
agreement sets forth agreements of the parties relating to the litigation among
them.
STANDSTILL
Maryland Patent Action. Following execution of the ongoing litigation
agreement, IGEN and Roche filed the "Maryland joint motion to stay" (in the form
attached as Appendix B to the ongoing litigation agreement) pursuant to which
IGEN and Roche agreed to stay any proceedings relating to IGEN International
Inc. v. Roche Diagnostics GmbH and Roche Diagnostics Corp., Case No. PJM
03CV2000 (D. Md. filed July 9, 2003), and any successor action, which is
referred to in this proxy statement/ prospectus as the Maryland patent action.
IGEN and Roche agreed, until the earlier of completion of the merger or
termination of the merger agreement, to take such further actions as may be
reasonably necessary, appropriate, desirable, or required in order to facilitate
the District Court entering and maintaining the order contemplated by the
Maryland joint motion to stay. On August 1, 2003 IGEN and Roche Diagnostics
filed the Maryland joint motion to stay, which was promptly granted by the
District Court.
Roche Litigation. Under the ongoing litigation agreement, Roche agreed
that it will file or cause to be filed any and all motions, pleadings and
documents in IGEN International Inc. v. Roche Diagnostics GmbH, Case No. PJM
97CV3461 (D. Md. filed October 15, 1997), appealed as Appeal No. 02-1537 (4th
Circuit decided July 9, 2003), and any successor action which is referred to in
this proxy statement/
93
prospectus as the Roche litigation, appropriate or necessary to withdraw its
petition for a panel rehearing filed on July 23, 2003. Each of Roche and IGEN
agreed that:
- it will not take any action or file any additional motions or pleadings
in the Roche litigation, including any further motions for rehearing or
rehearing en banc that may be or could be filed with the Appellate Court,
or any petition for writ of certiorari to the United States Supreme
Court, in the Roche litigation;
- it will take any and all action that may reasonably be required or
necessary in order to stay, or withdraw with the right to refile, any
motion filed prior to the date of the ongoing litigation agreement in the
District Court with respect to the Roche litigation that remains pending;
and
- any time periods or limitations with respect to the right of any party to
appeal any order of the District Court entered in the Roche litigation on
or after the date of the ongoing litigation agreement will be tolled
until the earlier of completion of the merger or termination of the
merger agreement.
On July 25, 2003, Roche Diagnostics filed a motion to withdraw its petition
for rehearing and on August 1, 2003, the Appellate Court granted that motion.
The Appellate Court returned the matter to the District Court on August 8, 2003
for entry of a final order consistent with the Appellate Court ruling. The
parties have not made any filing with the District Court, and the District Court
has not issued any further orders in this case.
German Patent Action. Roche and IGEN agreed that IGEN will be authorized
to proceed to serve or have served on Roche, and that Roche will be authorized
to indicate to the court its intention to defend itself in, IGEN International
Inc. v. Roche Diagnostics GmbH and Roche Diagnostics Inc., File No. LG
Dusseldorf 4b O 258/03 (Dusseldorf, Germany filed July 9, 2003) and any
successor action, which is referred to in this proxy statement/prospectus as the
German patent action. Roche and IGEN further agreed to jointly take all steps
necessary to stay the German patent action after service especially by
requesting a stay ("Ruhen des Verfahrens gemaSS sec. 251 ZPO") until the earlier
of completion of the merger or termination of the merger agreement by filing the
German joint motion to stay (in the form attached as Appendix A to the ongoing
litigation agreement) pursuant to which IGEN and Roche agree to stay any
proceedings relating to the German patent action, within a week after the date
of the ongoing litigation agreement. Roche agreed that it will refrain from
taking any steps to achieve a dismissal of the German patent action at any time
before the earlier of completion of the merger or termination of the merger
agreement. However, to the extent that dismissal occurs before the earlier of
completion of the merger or termination of the merger agreement, Roche and IGEN
will take all steps necessary promptly to re-instate the German patent action
through to the earlier of completion of the merger or termination of the merger
agreement.
On August 8, 2003, IGEN and Roche Diagnostics jointly made the required
filings to obtain a stay of the German patent action. No further action is
required of the parties or the court in order to stay the proceedings.
Subsequent Actions. IGEN will, upon advice of counsel in order to preserve
its legal rights being asserted in the Maryland patent action and the German
patent action, be permitted to withdraw and promptly re-file either of the
Maryland patent action and the German patent action and such withdrawal and
re-filing will not be a violation of any of IGEN's obligations under the ongoing
litigation agreement. Roche agreed that it will not object to the withdrawal and
re-filing of a complaint or other pleading in either of the Maryland patent
action or the German patent action.
Promptly after completion of the merger:
- IGEN will withdraw and terminate each of the Maryland patent action and
the German patent action and use its reasonable best efforts to cause the
dismissal of such actions as soon as practicable after such withdrawal
and termination; and
94
- Roche will cooperate and use its reasonable best efforts to cause the
dismissal of the Maryland patent action and the German patent action.
Any pleadings, motions, filings and other submissions to or with the courts
having jurisdiction over the Maryland patent action and the German patent action
that would adversely impact the intellectual property of BioVeris will require
BioVeris's consent, which shall not be unreasonably withheld, conditioned or
delayed.
ONGOING OBLIGATIONS AND COVENANTS
Covenant of Cooperation. Each of Roche and IGEN will cooperate with the
other in all reasonable respects, including in the preparation, execution and
filing of all necessary or appropriate papers with the appropriate forums, to
consummate and carry out the purposes and intent of each of the standstill
provisions summarized above. In addition, Roche and IGEN agreed that prior to
the earlier of completion of the merger or termination of the merger agreement
it will take all further necessary steps and actions before the courts having
jurisdiction over the Maryland patent action and the German patent action to
avoid dismissal of the complaints pending in each of those cases prior to the
earlier of completion of the merger or termination of the merger agreement.
Covenant Not to Sue. IGEN will not commence any new patent suit or
prosecute any patent suit against Roche for any acts of Roche occurring between
the date of termination of the 1992 license agreement through to the earlier of
completion of the merger or termination of the merger agreement that, if taken
prior to termination of the 1992 license agreement, would have been within the
scope of the license granted under the 1992 license agreement. However, nothing
in the ongoing litigation agreement will preclude IGEN from asserting or filing,
and IGEN reserves the right to assert and file, any claim, suit, action and
proceeding against Roche and any of its affiliates for any acts taken after the
date of termination of the 1992 license agreement that are not within the scope
of the license granted under the 1992 license agreement.
Compliance with Judgment. Until the completion of the merger, each of IGEN
and Roche will comply with all of its obligations under and in respect of the
final judgment entered by the District Court in the Roche litigation or any
final judgment entered not inconsistent with the mandate to be returned by the
Appellate Court in connection with the opinion of the Appellate Court. In
addition, each of IGEN and Roche will take all action necessary to cause the
District Court to enter a final judgment not inconsistent with the mandate to be
returned by the Appellate Court in connection with the opinion of the Appellate
Court.
PAYMENTS
Under the ongoing litigation agreement, Roche agreed to make the following
payments to IGEN:
- not later than two business days after the date of the ongoing litigation
agreement, $18.6 million as full payment of the compensatory damages
awarded in the Roche litigation;
- not later than two business days after the date of the ongoing litigation
agreement, $10.62 million as full payment to IGEN for royalties due and
payable under the 1992 license agreement for sales made in the second
calendar quarter ended June 30, 2003;
- not later than two business days after the date of the ongoing litigation
agreement, $5.0 million as partial consideration for the ongoing
litigation agreement; and
- on the last business day of each month during the term of the ongoing
litigation agreement, commencing in August 2003, $5.0 million as partial
consideration for the ongoing litigation agreement.
Roche has made the payments to IGEN required to have been made under the
terms of the ongoing litigation agreement as of the date of this proxy
statement/prospectus.
95
TERM AND TERMINATION
Term. The ongoing litigation agreement will remain in full force and
effect from the date of the ongoing litigation agreement until the earlier to
occur of completion of the merger or termination of the merger agreement.
Termination. IGEN may, in its sole discretion, terminate the ongoing
litigation agreement if Roche fails to make any payment when due, which failure
has not been cured within ten days after IGEN has delivered to Roche written
notice thereof.
GLOBAL CONSENT AND AGREEMENT
This is a summary of the material provisions of the global consent and
agreement. The global consent and agreement is attached as Annex 6 to this proxy
statement/prospectus and is incorporated herein by reference. You should read
the entire global consent and agreement carefully.
GENERAL
MSD is a joint venture formed by MST and IGEN in 1995. MSD was formed for
the development, manufacture, marketing and sale of products utilizing a
proprietary combination of MST's multi-array technology together with IGEN's ECL
technology. MST is a company established and wholly-owned by Mr. Jacob
Wohlstadter, a son of Mr. Samuel Wohlstadter, IGEN's and BioVeris's chief
executive officer. In August 2001, IGEN amended the MSD joint venture agreement
and certain license and other agreements with MSD and MST to continue the MSD
joint venture and entered into various related agreements, which are referred to
in this proxy statement/prospectus as the MSD agreements. An independent
committee of the IGEN board of directors, with the advice of independent
advisors and counsel, negotiated and approved the MSD agreements.
Simultaneously with the execution of the merger agreement, BioVeris, IGEN,
Roche, MSD, MST, Mr. Jacob Wohlstadter and JW Consulting Services, L.L.C.
entered into the global consent and agreement, pursuant to which, among other
things, Mr. Jacob Wohlstadter, JW Consulting Services, L.L.C., MSD and MST, or
the consenting parties, consented to the transfer of IGEN's interest in MSD to
BioVeris.
CONSENT
Each of the consenting parties consented to each of the merger agreement,
the related transaction agreements and the ongoing commercial agreements and to
the completion of the merger and related transactions, and granted all waivers
and consents that are necessary under the MSD agreements to permit the
completion of the merger and related transactions and the performance by IGEN,
BioVeris and each consenting party of their obligations under the merger
agreement, the related transaction agreements and the ongoing commercial
agreements in accordance with their terms. Notwithstanding the preceding
sentence, the foregoing consents do not
- apply to any act or omission which constitutes fraud in the inducement
with respect to the global consent and agreement, the letter agreement
dated July 24, 2003 between IGEN, BioVeris and the consenting parties,
which is referred to in this proxy statement/prospectus as the MSD letter
agreement, any MSD transaction document (as defined below) or the
transactions contemplated by the global consent and agreement, the merger
agreement and related transaction agreements, or
- affect any consenting party's rights to enforce the global consent and
agreement, the MSD letter agreement, any MSD transaction document to
which it is a party or the merger agreement or any related transaction
agreement to which it is a third party beneficiary, in each case, in
accordance with its respective terms, and
96
In addition, the global consent and agreement also provides that, after the
completion of the restructuring, all of the MSD agreements will remain in full
force and effect and will be enforceable against each of the consenting parties
and BioVeris in accordance with their respective terms.
"MSD transaction documents" means the consent to the license agreement, the
joinder to the ongoing litigation agreement, the covenants not to sue, the
license agreement and the ongoing litigation agreement.
ACKNOWLEDGMENT AND CONSENT
Each consenting party acknowledged that, pursuant to the restructuring
agreement and as part of the restructuring, all of IGEN's rights under and in
respect of the MSD agreements will be assigned to, and all of IGEN's liabilities
under and in respect of the MSD agreements will be assumed by, BioVeris upon the
effectiveness of the restructuring, which is referred to in this proxy
statement/prospectus as the MSD transfer.
Each consenting party consented to the MSD transfer and, as of and with
effect from the completion of the MSD transfer, unconditionally released IGEN
from its obligations, duties and liabilities under the MSD agreements, whether
arising before, at or after the MSD transfer. Each consenting party expressly
consented to the assumption by BioVeris of all rights, obligations, duties and
liabilities of IGEN under the MSD agreements and agreed to perform its
obligations, duties and liabilities under the MSD agreements in accordance with
their terms in favor of BioVeris. In this regard, MST consented to BioVeris's
admission as a class A member, a class B member and a class C member of MSD,
effective upon the completion of the MSD transfer, as successor to IGEN. Each of
the events described in the previous sentence is conditioned upon the
consummation of the MSD transfer, will occur simultaneously with the MSD
transfer without any further action by any party, and, together with the MSD
transfer, will have the effect of amending the MSD agreements.
BioVeris, IGEN and each consenting party agreed that as of and with effect
from the MSD transfer, each of the MSD agreements will cease to create or confer
any rights or obligations on or as to IGEN, except for IGEN's confidentiality
obligations under such agreements, and each of the MSD agreements will continue
as an agreement among the parties to the MSD agreements (other than IGEN) and
BioVeris on the same terms and conditions as those stated in such MSD agreement.
BioVeris, IGEN, MSD and MST agreed to amend and restate each such MSD agreement
to reflect such matters effective from the MSD transfer.
Each consenting party agreed that, notwithstanding any provision of any MSD
agreement to the contrary, such consenting party will not be entitled to any
payment from IGEN as a result of or in connection with the transactions
contemplated by the merger agreement or the MSD transfer, except as specifically
provided in the letter agreement and except as provided in any stock option
agreements between IGEN and any employee of MSD (including all stock option
agreements with Mr. Jacob Wohlstadter granted to him in his capacity as a
consultant to IGEN).
As of and with effect from the completion of the MSD transfer, except for
the rights of the license sub under the license agreement and the consent of MSD
and MST to the license agreement,
- BioVeris will own all right, title and interest in and to all
intellectual property and other proprietary and confidential information
or materials owned by IGEN as of the date of the global consent and
agreement or benefits acquired by IGEN between the date of the global
consent and agreement and immediately prior to the completion of the MSD
transfer to which any consenting party has any direct or indirect rights
or benefits (including patents, copyrights and trade secrets) pursuant to
the MSD agreements, and
- IGEN thereafter will hold no interest in MSD nor will it have possession
of, or rights or access to, any proprietary or confidential information
of any consenting party, and IGEN will not own or otherwise have rights
or seek to own or otherwise have rights in any intellectual property or
other proprietary information or materials which any consenting party
owns or to which any consenting
97
party otherwise has any direct or indirect rights or benefits (including
patents, copyrights and trade secrets) pursuant to the MSD agreements.
NO CHANGE OF CONTROL
BioVeris, IGEN and each consenting party each agreed that the execution and
delivery of the merger agreement and related transaction agreements does not,
and the consummation of the merger and related transactions will not, constitute
a "change in control" as defined in the MSD joint venture agreement dated as of
November 30, 1995 among MSD, MST and IGEN, which is referred to in this proxy
statement/prospectus as the MSD joint venture agreement, or the employment
agreement dated as of August 15, 2001 among MSD, IGEN, MST and Mr. Jacob
Wohlstadter.
LIMITATION ON CERTAIN CLAIMS
Roche, on the one hand, and the consenting parties, on the other hand, each
agreed not to, and not to permit their affiliates to encourage any other person
to, assert any rights or pursue any actions or claims against the other or their
respective affiliates or current or former directors, officers, members of the
board of managers, members, managers, employees, consultants, advisors,
attorneys, trustees or agents based on acts or omissions occurring prior to
completion of the merger. This covenant, however, does not
- prevent actions to enforce the merger agreement or any related
transaction agreement, MSD transaction document, I/R agreement or
BioVeris I/R agreement,
- apply to acts or omissions that constitute fraud in the inducement with
respect to the merger agreement or any related transaction agreement, MSD
transaction document, I/R agreement or BioVeris I/R agreement, or
- apply to actions permitted or required by the ongoing litigation
agreement.
MUTUAL RELEASE
Roche, on the one hand, and each consenting party, on the other hand,
release, as of immediately prior to completion of the merger, the other and its
past, present and future affiliates and its and their respective successors,
assigns, heirs, officers, directors, members of the board of managers, members,
managers, employees, consultants and trustees from, and agree not to bring any
action against the foregoing related to, all debts, demands, actions, causes of
action, suits, accounts, covenants, contracts, agreements, torts, damages,
claims, defenses, offsets, judgments, demands and liabilities whatsoever which
have been or could have been asserted against the other person arising out of or
relating to events or actions taken by such other person prior to the completion
of the merger. The release does not, however,
- affect any person's right to enforce the merger agreement or any related
transaction agreement, MSD transaction document, BioVeris I/R agreement
or any provision in the global consent and agreement, or
- apply to any act or omission which constitutes fraud in the inducement
with respect to the merger agreement, any related transaction agreement,
MSD transaction document or any BioVeris I/R agreement.
MSD LETTER AGREEMENT
This is a summary of the material provisions of the MSD letter agreement.
The MSD letter agreement is attached as Annex 7 to this proxy
statement/prospectus and is incorporated herein by reference. You should read
the entire MSD letter agreement carefully.
98
Simultaneously with the execution and delivery of the merger agreement,
IGEN, BioVeris and the consenting parties entered into the MSD letter agreement,
pursuant to which, among other things:
- IGEN and MST agreed to extend the expiration of the term of the MSD joint
venture agreement such that it will expire on the later of
- November 30, 2003, or
- the earlier of the completion of the merger or the termination of the
merger agreement in accordance with its terms; and
- BioVeris agreed to make to MSD a class C capital contribution in the
amount of $37.5 million on the first business day following completion of
the merger. However, in the event completion of the merger has not
occurred prior to December 1, 2003, IGEN will provide continued funding
to MSD to be paid monthly on the first day of each month commencing on
December 1, 2003 in an amount per month equal to one-twelfth ( 1/12th) of
the aggregate committed funding of IGEN under the approved 2003 budget
pursuant to the MSD joint venture agreement, which is approximately $1.7
million per month, until the earlier to occur of completion of the merger
or termination of the merger agreement in accordance with its terms. Such
interim funding will reduce the amount of BioVeris's contribution
following completion of the merger. In the event completion of the merger
does not occur, MSD will not have any obligation to repay any amounts
provided to MSD as interim funding (except to the extent IGEN is entitled
to receive distributions on the class C interests pursuant to the MSD
joint venture agreement).
BIOVERIS PREFERRED STOCK PURCHASE AGREEMENT
This is a summary of the material provisions of the letter agreement
entered into by BioVeris and Mr. Samuel Wohlstadter. The BioVeris preferred
stock purchase agreement is attached as Annex 8 to this proxy
statement/prospectus and is incorporated herein by reference. You should read
the entire BioVeris preferred stock purchase agreement carefully.
At the request of the JVOC and as an accommodation to facilitate completion
of the merger, Mr. Samuel Wohlstadter entered into the BioVeris preferred stock
purchase agreement, pursuant to which he agreed to subscribe for a new series of
preferred stock to be issued by BioVeris following its conversion into a
corporation and completion of the merger for an aggregate cash amount of $7.5
million. The $7.5 million amount will be reduced by any reduction agreed to by
the parties to the MSD letter agreement of the aggregate amount BioVeris is
obligated to pay to MSD pursuant to the MSD letter agreement and will be payable
at such time as BioVeris is obligated to pay MSD an aggregate amount in excess
of $30 million. The BioVeris preferred stock will have a liquidation preference
of $0.01 per share and will rank pari passu with BioVeris's existing and future
preferred stock. Except for its liquidation preference, the economic
characteristics of the BioVeris preferred stock will mirror, in all respects,
BioVeris's economic interest in the class C interests in MSD received by
BioVeris as a result of the capital contribution to MSD made by BioVeris with
the proceeds for the sale of BioVeris preferred stock to Mr. Samuel Wohlstadter.
BioVeris may redeem the BioVeris preferred stock for $0.01 per share at any time
BioVeris is no longer entitled to receive distributions with respect to the
class C interests described in the previous sentence pursuant to the MSD limited
liability company agreement, and a proportionate part of the BioVeris preferred
stock will be redeemed by BioVeris in connection with any redemption by MSD of
the class C interests held by BioVeris in MSD described in the previous
sentence. No distributions on the BioVeris preferred stock will be paid unless
and until distributions are paid on such class C interests in accordance with
the MSD limited liability company agreement, in which event distributions on the
BioVeris preferred stock will be paid in the same manner and amount as such
distributions on the class C interests. The shares of BioVeris preferred stock
will be entitled in the aggregate to 1,000 votes on all matter on which holders
of BioVeris common stock may vote. In addition, BioVeris may not consent to any
adverse change to the terms of the class C interests described in this paragraph
without the consent of the holders of the BioVeris preferred stock. For a more
complete description of the BioVeris preferred stock, see "Description of
BioVeris Capital Stock -- Preferred Stock -- Series B Preferred Stock."
99
RELEASE AND AGREEMENT
This is a summary of the material provisions of the limited mutual release
and agreement. The release and agreement is attached as Annex 9 to this proxy
statement/prospectus and is incorporated herein by reference. You should read
the entire release and agreement carefully.
GENERAL
Simultaneously with the execution of the merger agreement, Hyperion
Catalysis International, Wellstat Biologics Corporation, Wellstat Therapeutics
Corporation, Proteinix Corporation and Integrated Chemical Synthesizers, Inc.,
which are referred to in this proxy statement/prospectus as the related
companies, entered into the release and agreement with BioVeris and IGEN,
pursuant to which, the parties made certain agreements with respect to the
relationship, agreements and understandings between IGEN and the related
companies, which are referred to in this proxy statement/prospectus as the
related company agreements.
MUTUAL RELEASES
IGEN, on the one hand, and each of the related companies, on the other
hand, release, as of the time immediately prior to completion of the merger, the
other and its past, present and future affiliates and its and their respective
successors, predecessors, assigns, heirs, officers, directors, employees,
consultants and trustees from all debts, demands, actions, causes of action,
suits and liabilities whatsoever which have been or could have been asserted
against the other person arising out of or relating to any relationship between
IGEN or any of its affiliates at or prior to the effectiveness of the release,
on the one hand, and any related company or any of its affiliates, on the other
hand, or any related company agreement in existence at or prior to the
effectiveness of the release. The release does not, however:
- affect any person's right to enforce the release and agreement, the
merger agreement or any related transaction agreement, any ongoing
commercial agreement or any BioVeris I/R agreement;
- relieve BioVeris or any related company from the obligation to pay any
amounts accrued or due and payable under any related company agreement;
- apply to any pursuit of any action against any person other than in
connection with a released matter;
- constitute a grant to IGEN of a license, any freedom to operate, or any
covenant not to sue under any intellectual property owned by, licensed
to, or otherwise held at the time of completion of the merger by any
related company; or
- constitute a grant to any related company of a license, any freedom to
operate, or any covenant not to sue under any intellectual property owned
by, licensed to, or otherwise held at the time of completion of the
merger by IGEN, BioVeris or any of their subsidiaries.
CERTAIN AGREEMENTS
IGEN and each of the related companies agreed that as part of the
restructuring, each related company agreement that is not in writing will be
memorialized in writing and executed on behalf of each of the parties thereto.
In addition, each of the related companies acknowledged that, pursuant to
the restructuring agreement and as part of the restructuring, all of IGEN's
rights and liabilities under and in respect of the related company agreements
will be assigned to and assumed by BioVeris immediately prior to completion of
the merger. Each of the related companies consented to this assignment and
assumption and, as of the time immediately prior to completion of the merger,
unconditionally released IGEN from all obligations, duties and liabilities under
the related company agreements whether arising before, at or after the
assignment or assumption. Each of the related companies agreed to perform its
obligations, duties and liabilities under the related company agreements in
favor of BioVeris, and BioVeris expressly agreed to assume and
100
perform IGEN's obligations, duties and liabilities under the related company
agreements in favor of the related companies. Accordingly, BioVeris, IGEN, and
each of the related companies agreed that with effect from the assignment and
assumption each of the related company agreements will no longer create or
confer any rights or obligations on or as to IGEN (or its affiliates (other than
BioVeris or any of its subsidiaries)) but will continue among the parties
thereto (other than IGEN) and BioVeris on the same terms and conditions as those
stated in such related company agreement. BioVeris, IGEN and each of the related
companies agreed to amend and restate each such related company agreement to
reflect such novation.
101
COMMERCIAL AGREEMENTS
LICENSE AGREEMENT
This is a summary of the material provisions of the license agreement. The
license agreement is attached as Annex 10 to this proxy statement/prospectus and
is incorporated herein by reference. You should read the entire license
agreement carefully.
GENERAL
Simultaneously with the execution of the merger agreement, IGEN entered
into the license agreement with the license sub, a wholly-owned subsidiary of
IGEN that will become an indirect subsidiary of Roche upon completion of the
merger. As part of the restructuring prior to the completion of the merger,
IGEN's rights, title and interest under the license agreement (other than any
right, title and interest of the license sub) will be transferred to BioVeris,
so that, after the transfer, the license agreement will be between BioVeris and
the license sub. BioVeris will then be bound by all the obligations, and
BioVeris will be entitled to all the rights, of IGEN under the license
agreement.
LICENSES
IGEN and its affiliates will grant to the license sub simultaneously with
the completion of the merger, a worldwide, non-exclusive, royalty-free license
under patents and technology that relate to detection methods and systems that
employ ECL technology, but specifically excluding technology related to gene
amplification or compounds composed of or capable of binding with nucleotides
and analogs thereof. The license may be used only in the field described below
to develop, manufacture, reproduce, modify, use, sell and otherwise commercially
exploit the products specified below.
The license sub may only sublicense these rights to its affiliates. Subject
to certain requirements and conditions, the license sub may grant to its
distributors, contract manufacturers, toll manufacturers, component suppliers,
leasing agents and other third parties engaged by the license sub to assist in
the commercialization of the licensed patents and technology immunity from suit
under the licensed patents and technology in the licensed field but solely for
the benefit of the license sub. Furthermore, such authorized third parties shall
have the rights to use the licensed patents and technology in the licensed field
as may be necessary to allow such third parties to assist the license sub and
its affiliate sublicensees in the commercialization of the licensed patents and
technology.
The field in which this license may be used is the analysis of specimens
taken from a human body for the purpose of testing for a physiological or
pathological state, a congenital abnormality, safety and compatibility of a
treatment or to monitor therapeutic measures, but the field specifically
excludes analysis for:
- life science research or development;
- patient self testing use;
- drug discovery or drug development, including clinical research or
determinations in or for clinical trials or in the regulatory approval
process for a drug or therapy; and
- veterinary, food, water or environmental testing or use.
The products for which the license may be used, which are referred to in
this proxy statement/prospectus as licensed products, are limited to:
- diagnostic instruments that use or are based on the licensed ECL
technology solely for use with one of the immunoassays described below,
if the instruments satisfy each of 10 criteria relating primarily to
size, capacity and functionality, and services and spare parts related to
such instruments; and
102
- immunoassay methods for human in vitro diagnostic testing consisting of
or based on the licensed ECL technology and (1) that have obtained
approvals from, or been registered with, applicable governmental
agencies, if required, or been manufactured in accordance with the
regulations of applicable governmental agencies, (2) that are
manufactured and sold solely in reagent packs and (3) in which the
detection or quantification of an analyte is determined by the binding of
an antibody or antibody fragment, but excluding assays for drugs of
abuse, therapeutic drug monitoring (with two specific exceptions),
detection of exposure to chemical agents or weapons, detection of certain
biological agents, toxins or weapons or certain allergies, assays that
incorporate nucleic acids or utilize or detect nucleic acid or use
compounds that are composed of, or capable of binding with, nucleotides
or analogs thereof and assays that include the use of disposable
electrodes or a patterned surface used for one or more measurements.
In addition to the license described above, IGEN and its affiliates will
grant to the license sub simultaneously with the completion of the merger, a
worldwide, non-exclusive, royalty-free license under the licensed ECL technology
to provide licensed products (which may include assays not yet approved by or
registered with the applicable governmental agencies nor manufactured in
accordance with the regulations of applicable governmental agencies) to certain
users for specific limited purposes pertaining to the development or evaluation
testing of licensed products or to obtain or extend regulatory approval for such
licensed products.
Roche Diagnostics' current Elecsys 1010, Elecsys 2010 and the ECL Module of
the E-170 instruments, as well as listed immunoassays that meet specified
criteria, are deemed to be products that are permitted under this license
agreement. The license sub has agreed not to develop, use, manufacture or sell
ECL assays that are packaged specifically for, and function only for use on,
instruments manufactured or sold by BioVeris or its licensees or resellers.
The license sub must assure that its affiliate sublicensees and third-party
commercializing agents assign to the license sub all intellectual property
rights to ECL technology that they may develop or create.
PAYMENTS
There are no license fees, royalties or milestones payable to IGEN (or,
after the restructuring, BioVeris) under the license agreement. However, the
license sub may continue to sell licensed products for out-of-field uses of such
ECL instrument until BioVeris notifies the license sub in writing that it is
prohibited from making any further such sales. In addition, the license sub will
pay BioVeris 65% of all undisputed revenues earned through out-of-field sales of
licensed products for the prior year.
TERM
The license agreement takes effect on the completion of the merger. The
license agreement lasts until the expiration of all licensed patents and the
complete loss of confidential and proprietary status of all licensed ECL
technology. The license sub may terminate the license if BioVeris materially
breaches the agreement. Subject to certain limitations, BioVeris can terminate
the license agreement only if the license sub or any of its affiliates sells,
places or otherwise commercializes instruments or assays that use ECL technology
and that fail to qualify as licensed products.
In advance of any sale, the license sub may request a determination from
BioVeris whether a particular instrument or assay is within the scope of the
licensed product definitions.
Disputes as to whether a product qualifies as a licensed product will be
resolved by arbitration in accordance with the license agreement.
103
INDEMNIFICATION
The license sub indemnifies BioVeris against all claims, damages, losses,
costs and expenses arising from the license sub's sale of licensed products. The
license sub is also jointly and severally responsible for any breaches of the
license agreement by its affiliate sublicensees.
ASSIGNMENT
Neither party may assign its rights under the license agreement without the
consent of the other party, except that no such consent is required with respect
to an assignment of any or all of its rights and obligations to an affiliate or
of all (but not less than all) of its rights and obligations under the license
agreement to an acquiror of all or substantially all of the assets or business
of the assigning party related to such party's use of ECL technology. IGEN is
explicitly permitted to assign its rights to BioVeris and will assign its rights
to BioVeris as part of the restructuring.
CONSENT
MSD and MST signed a separate consent to the licenses granted to the
license sub in the license agreement under which they consented to and joined in
such licenses and waived any right to restrict or limit the license sub's and
its affiliates' exercise of the licenses granted in the license agreement.
IMPROVEMENTS LICENSE AGREEMENT
This is a summary of the material provisions of the improvements license
agreement and other important information relating to the improvements license
agreement. The improvements license agreement is attached as Annex 11 to this
proxy statement/prospectus and is incorporated herein by reference. You should
read the entire improvements license agreement carefully.
GENERAL
Simultaneously with the execution of the merger agreement, IGEN entered
into the improvements license agreement with Roche Diagnostics. As part of the
restructuring prior to the completion of the merger, IGEN's rights, title and
interest under the improvements license agreement will be transferred to
BioVeris, so that, after the transfer, the improvements license agreement will
be between Roche Diagnostics and BioVeris. BioVeris will then be bound by all
the obligations, and BioVeris will be entitled to all the rights, of IGEN under
the improvements license agreement.
Roche has advised BioVeris that Applied Biosystems has notified Roche that
one or more of the PCR licenses granted by certain Roche affiliates to BioVeris,
including potentially the PCR license granted under the improvements license
agreement, may infringe exclusive rights to PCR technology held by, or other
contract rights of, Applied Biosystems. Applied Biosystems has commenced
litigation and arbitration against Roche regarding their respective rights
relating to PCR technology. Certain Roche affiliates have made certain
representations and provided certain warranties in the improvements license
agreement on their right to grant the licenses that have been granted to
BioVeris, including representations and warranties that: the rights and licenses
granted under the improvements license agreement and the performance by Roche
Diagnostics of its obligations under the improvements license agreement will not
conflict with any agreement, contract or other arrangement to which it is a
party or by which it is bound; Roche Diagnostics has title to or license rights
sufficient to grant such license rights granted under the improvements license
agreement to BioVeris and its affiliates; and Roche Diagnostics has not licensed
or otherwise disposed of such licensed intellectual property rights in any
manner that limits BioVeris's or its affiliates' exploitation of the licenses
granted by Roche Diagnostics under the improvements license agreement. Roche has
advised IGEN that it believes that Applied Biosystems' allegations are without
merit and intends to contest them vigorously. There are no assurances that
BioVeris will not be named as a defendant in either of those actions or that
Roche will prevail in the litigation and arbitration, or that the terms of any
resolution or settlement of these proceedings will not be unfavorable to
BioVeris. The results of these legal proceedings may limit, preclude or
interfere with BioVeris's ability to exploit certain PCR
104
technology licensed under the improvements license agreement. See "Risk
Factors -- Risks Relating to BioVeris and Its Business -- Because BioVeris
intends to develop products that are based on patents and technology that it has
licensed from others, the owners of those patents and technology might claim
that products developed or sold by BioVeris violate those licenses.
Additionally, a third party might object to a license that BioVeris holds or to
the scope of the license granted to BioVeris."
LICENSES
Roche Diagnostics and its affiliates will grant to BioVeris, simultaneously
with the completion of the merger, an irrevocable, worldwide, non-exclusive,
fully-paid, royalty-free, perpetual license under certain patents covering and
technologies based on
- Roche Diagnostics' ECL instruments and all aspects of ECL assays
developed prior to the completion of the merger,
- certain PCR technology, or
- all aspects of ECL technology and robotics that, prior to the completion
of the merger, Roche Diagnostics or any of its affiliates used or
developed to be used in performing ECL testing (other than specific
antibodies, antigens and reagents).
The license may be used without a field restriction (except as set forth in
the next sentence) to develop, make, reproduce, modify, use, sell and otherwise
commercially exploit any product or service based on ECL technology. In
addition, BioVeris is licensed to use certain intellectual property rights of
Hitachi High Technology Corporation and its affiliates only outside the field
defined in the improvements license agreement to develop, make, reproduce,
modify, use, sell and otherwise commercially exploit any product or service
based on ECL technology. Subject to an exception, the field in the improvements
license agreement is the same as the field in the license agreement. BioVeris
may sublicense rights under both of these licenses to affiliates and third
parties.
As of the completion of the merger, the improvements license agreement will
supersede the 1992 License Agreement and the licenses granted by Roche
Diagnostics pursuant to the final order of judgment.
The license does not permit BioVeris to develop, use, manufacture, sell or
otherwise commercialize instruments based on ECL technology that meet certain
specifications and use specific intellectual property, which are referred to in
this proxy statement/prospectus as copycat instruments, in the field. In
addition, the license does not permit BioVeris to develop, use, manufacture or
sell ECL assays that contain labelling that make them useable on ECL instruments
manufactured, sold or placed by Roche Diagnostics or its licensees or resellers,
or on copycat instruments, in the field.
BioVeris must assure that its sublicensees and third-party commercializing
agents assign to BioVeris all intellectual property rights to patents or
technology licensed by Roche Diagnostics or Hitachi under the improvements
license agreement that such sublicensees or third-parties may develop or create.
PAYMENTS
There are no license fees, royalties or milestones payable to Roche
Diagnostics under the improvements license agreement. BioVeris may continue to
sell copycat instruments or products such as assays used on copycat instruments
in the field until the license sub notifies BioVeris in writing that it is
prohibited from making any further such sales. In addition, BioVeris will pay to
Roche Diagnostics 65% of all undisputed revenues earned through its in-field
sales of such instruments and products for the prior year.
TERM
The improvements license agreement takes effect on the completion of the
merger. The improvements license agreement lasts until the expiration of all
licensed patents and the complete loss of confidential and
105
proprietary status of all licensed Roche Diagnostics technology. The
improvements license agreement cannot be terminated by Roche Diagnostics for any
breach by BioVeris.
INDEMNIFICATION
BioVeris indemnifies Roche Diagnostics against all claims, damages, losses,
costs and expenses arising from BioVeris's sale of licensed products. BioVeris
is also jointly and severally responsible for any breaches by its sublicensees.
ASSIGNMENT
Neither party may assign its rights under the improvements license
agreement without the consent of the other party, except that no such consent is
required with respect to an assignment of any or all of its rights and
obligations to an affiliate or of all (but not less than all) of its rights and
obligations under the improvements license agreement to an acquiror of all or
substantially all of the assets or business of the assigning party related to
such party's use of ECL technology. IGEN is explicitly permitted to assign its
rights to BioVeris and will assign its rights to BioVeris as part of the
restructuring.
COVENANTS NOT TO SUE
This is a summary of the material provisions of the covenants not to sue.
The covenants not to sue is attached as Annex 12 to this proxy
statement/prospectus and is incorporated herein by reference. You should read
the entire covenants not to sue carefully.
GENERAL
Simultaneously with the execution of the merger agreement, BioVeris entered
into the covenants not to sue with Roche, Roche Diagnostics, MSD, MST and the
license sub.
Term. The covenants not to sue takes effect on the completion of the
merger. If the merger agreement is terminated pursuant to its terms prior to the
completion of the merger, the covenants not to sue automatically and
simultaneously terminates.
Assignment. No party may assign its rights under the covenants not to sue
without the consent of all of the parties to the covenants not to sue, except
that such consent is not required with respect to an assignment of any or all of
a party's rights and obligations to an affiliate of the assigning party or of
all (but not less than all) of its rights and obligations under the covenants
not to sue to an acquiror of all or substantially all of the assets or business
of the assigning party related to such party's use of ECL technology.
COVENANT FROM ROCHE AND RELATED PARTIES
Covenant. Each of Roche and Roche Diagnostics and, after the closing of
the merger, the license sub, on behalf of itself and its affiliates, agreed that
it will not directly or indirectly assert or pursue (or induce or cooperate with
any third party to assert or pursue) any claim against BioVeris, MSD or MST, or
any of their respective affiliates, sublicensees and other related parties, that
the manufacture, use, sale, offer for sale, importation or exploitation of any
product, the authorization of others to do any of the foregoing, the provision
of any service, the practice of any method or the promulgation of any
specification that, in each case, is conducted with respect to a product or
service that uses ECL technology and is conducted after the completion of the
merger infringes certain ECL patents that are filed or acquired after the
completion of the merger. In order for BioVeris's, MSD's or MST's affiliates,
sublicensees or other related parties to receive the benefit of the covenant not
to sue, they must be bound by the covenant in favor of the Roche entities and
the license sub, as described below.
The covenant does not block actions or claims based on violations of the
ongoing commercial agreements.
106
Any sale, transfer or other disposition of a Roche patent from which
BioVeris receives protection under this covenant or of an intellectual property
right licensed to BioVeris, as the assignee of IGEN's rights, under the
improvements license agreement is subject to this covenant.
Termination. The covenant shielding BioVeris, MSD and MST terminates on
the last date on which a Roche entity may assert or bring any legal or equitable
claim against any of BioVeris, MSD and MST, or any of their affiliates or
related parties, under any of the Roche patents from which BioVeris receives
protection under this covenant.
COVENANT FROM BIOVERIS, MSD AND MST AND RELATED PARTIES
Covenant. Each of MSD, MST and BioVeris, on behalf of itself and its
affiliates, agreed that it will not directly or indirectly assert or pursue (or
induce or cooperate with any third party to assert or pursue) any claim against
Roche, Roche Diagnostics, the license sub, or any of their affiliates and other
related parties, that the manufacture, use, sale, offer for sale, importation or
exploitation of any product, the authorization of others to do any of the
foregoing, the provision of any service, the practice of any method or the
promulgation of any specification that, in each case, is conducted with respect
to a licensed product or service in the field, as defined in the license
agreement, and is conducted after the completion of the merger infringes certain
ECL patents that are filed or acquired after the completion of the merger. In
order for any of Roche's, Roche Diagnostics' or the license sub's affiliates or
other related parties to receive the benefit of the covenant not to sue, it must
be bound by the covenant in favor of BioVeris, MSD and MST, as described above.
The covenant does not block actions or claims based on violations of the
ongoing commercial agreements.
Any sale, transfer or other disposition of a BioVeris, MSD or MST patent
from which Roche receives protection under this covenant or of an intellectual
property right licensed to the license sub under the license agreement is
subject to this covenant.
If the license agreement is terminated or expires, nothing in the covenants
not to sue prevents BioVeris, MSD, MST or their respective affiliates from
directly or indirectly asserting or pursuing any claim against the Roche
entities for activities after the date of such termination or expiration that
would infringe any of the patents under which the Roche entities and the license
sub would otherwise be protected under this covenant.
The covenant not to sue does not shield the Roche entities and the license
sub from any future claims brought by MSD or MST against Roche, Roche
Diagnostics, the license sub, their affiliates or related parties that their
activities conducted after the completion of the merger in conjunction with ECL
technology that uses or infringes any intellectual property right of MSD or MST
relating to carbon electrodes, disposable electrodes or multi-array assays
defined in the license agreement.
Termination. The covenant shielding the Roche entities terminates on the
earlier of (i) the last date on which BioVeris, MSD or MST may assert or bring
any legal or equitable claim against any of the Roche entities, or their
affiliates or related parties, under any of BioVeris's patents from which they
receive protection, or (ii) the date that the license agreement is terminated.
PCR LICENSE AGREEMENTS
This is a summary of the material provisions of the PCR license agreements
and other important information relating to the PCR license agreements. The PCR
license agreements are attached as Annex 13 and Annex 14 to this proxy
statement/prospectus and are incorporated herein by reference. You should read
the entire PCR license agreements carefully.
107
GENERAL
Simultaneously with the execution of the merger agreement, BioVeris entered
into the PCR license agreements with F. Hoffmann-La Roche Ltd, Roche Diagnostics
and Roche Molecular Systems, Inc. One agreement grants BioVeris rights to make,
import, use and sell certain PCR products within specified fields, while the
other agreement grants BioVeris rights to perform certain PCR services within
specified fields.
Roche has advised BioVeris that Applied Biosystems has notified Roche that
one or more of the PCR licenses granted by certain Roche affiliates to BioVeris,
including potentially the PCR licenses granted under one or more of the PCR
license agreements, may infringe exclusive rights to PCR technology held by, or
other contract rights of, Applied Biosystems. Applied Biosystems has commenced
litigation and arbitration against Roche regarding their respective rights
relating to PCR technology. Certain Roche affiliates have made certain
representations and provided certain warranties in the PCR license agreements on
their right to grant the licenses that have been granted to BioVeris, including
representations and warranties that: certain Roche affiliates have the full
power and right to grant to BioVeris and its affiliates the licenses granted
under the PCR license agreements and the execution by certain Roche affiliates
of the PCR license agreements will not constitute a breach or default under any
contract, instrument or agreement to which such Roche affiliates or any of their
affiliates are a party or by which such Roche affiliates or any of their
affiliates are bound. Roche has advised IGEN that it believes that Applied
Biosystems' allegations are without merit and intends to contest them
vigorously. There are no assurances that BioVeris will not be named as a
defendant in either of those actions or that Roche will prevail in the
litigation and arbitration, or that the terms of any resolution or settlement of
these proceedings will not be unfavorable to BioVeris. The results of these
legal proceedings may limit, preclude or interfere with BioVeris's ability to
exploit certain PCR technology licensed under the PCR license agreements. See
"Risk Factors -- Risks Relating to BioVeris and Its Business -- Because BioVeris
intends to develop products that are based on patents and technology that it has
licensed from others, the owners of those patents and technology might claim
that products developed or sold by BioVeris violate those licenses.
Additionally, a third party might object to a license that BioVeris holds or to
the scope of the license granted to BioVeris."
LICENSES
Effective simultaneously with the completion of the merger and for a
license fee of $50 million plus royalties as specified in the PCR license
agreements, the Roche entities will grant to BioVeris and its affiliates,
worldwide, non-exclusive licenses under patents that cover PCR inventions for
- the performance of sample collection, preparation, transport and/or
isolation of nucleic acid sequences using PCR,
- the amplification of nucleic acid sequences using PCR,
- the detection of nucleic acid sequences using PCR,
- the synthesis, purification, labeling and/or immobilization of nucleic
acid probes used in PCR and/or
- the control of contamination.
The licensed patents do not include:
- any rights to inventions for biological and chemical target information,
such as nucleic acid sequences, the making, selling or using of which
would infringe a claim of a patent or patent application owned by the
Roche entities and available for license to BioVeris and that is not
included in the patent list attached to each agreement at the completion
of the merger; or
- any rights to inventions for instruments and/or automation of PCR related
inventions.
108
BioVeris and its affiliates may make, import, use, sell and offer to sell
certain products (excluding stand-alone enzyme reagents and certain
instruments), and authorize end users to perform diagnostic services using such
products, in the fields of animal diagnostics, paternity determination,
transplant typing, in vitro human diagnostics, plasma testing and DNA molecule
manufacturing. BioVeris and its affiliates may also use PCR technology
internally for the research, development, improvement, quality control and
quality assurance of such products. BioVeris and its affiliates may use the
license internally to determine the nucleic acid sequences for screening blood
and blood products or for quality control purposes in the production of blood
products, but may not use the test results for diagnostic purposes or for the
treatment of an individual. BioVeris may also perform in vitro human and animal
diagnostic testing using PCR technology.
For purposes of these agreements, MSD will be considered, regardless of
BioVeris's relationship with MSD, an affiliate of BioVeris that may operate
under the licenses granted by the Roche entities under these agreements. Neither
BioVeris nor its affiliates may sublicense BioVeris's rights under the licenses,
except that BioVeris may permit its end users to use the licensed products to
perform in vitro human and animal diagnostic testing procedures, may permit its
research collaborators to practice PCR to do applied research, development,
improvement, quality control or quality assurance for licensed products and may
market in vitro human and animal diagnostic testing procedures performed by
other licensed laboratories. The agreements specifically do not permit BioVeris
to make or sell Roche's patented enzymes (stand-alone) for use with BioVeris's
products.
LICENSE NEGOTIATIONS
At the request of the Roche entities, BioVeris will enter into good faith
negotiations to grant the Roche entities a worldwide, non-exclusive,
royalty-bearing, field-limited license with respect to BioVeris's patent rights
that claim PCR inventions. At BioVeris's request, Roche will enter into good
faith negotiations with BioVeris with respect to a license under the Roche PCR
patents for fields other than the licensed fields if Roche has the right to
grant such licenses in such other fields and makes it a practice to license such
other fields to third parties.
PAYMENTS
BioVeris will pay to the Roche entities a license fee of $50 million no
later than two business days after the completion of the merger. BioVeris will
also pay royalties on sales of the licensed products in the licensed fields and
on any instrument, accessory, device or system sold for use with the licensed
products in the licensed fields at royalty rates ranging from 3% to 20% of net
sales, depending on the field, the year, the country of sale and the patents
covering such products. BioVeris will pay royalties of $16 or $25 for every PCR
plasma test BioVeris performs or has a laboratory perform. BioVeris will pay
royalties ranging from 5% to 20% of net service revenue that BioVeris receives
for diagnostic testing procedures that BioVeris performs using PCR technology,
including any performed by IGEN prior to execution of the PCR services license
agreement.
MOST FAVORED LICENSEE
If, after the completion of the merger, Roche grants a license to a third
party in the fields of human or animal diagnostic services or products and
diagnostic processes using PCR for human diagnostic purposes, under
substantially equivalent terms and conditions as the relevant PCR license
agreement, but under substantially equivalent terms and conditions as the PCR
license agreements, at more favorable royalty rates, BioVeris may elect to
receive such more favorable rates. In considering whether the terms and
conditions of the license granted to the third party is substantially equivalent
to the PCR license agreements, the termination provisions of the PCR license
agreements will not be considered. If BioVeris elects to receive the more
favorable royalty rates offered to the third party, BioVeris must also accept
all the terms and conditions offered to the third party, except that the
termination provisions of the PCR license agreements will not be changed.
109
BioVeris's right to receive the more favorable rates will not apply if the
Roche entities receive substantial technology or intellectual property rights as
consideration for granting such a license to the third party.
ROYALTY REDUCTIONS DUE TO INFRINGEMENT
If, in any country, an unlicensed third party is selling products
equivalent to one of BioVeris's licensed diagnostic kits, and those sales
represent at least 15% of total sales of competitive products in such country,
BioVeris may reduce by 50% the royalties that BioVeris pays to Roche in that
country if Roche does not license that third party or sue that third party for
infringement within a certain period of time. If the unlicensed third party's
sales represent at least 30% of the competitive market, the royalties that
BioVeris pays to Roche are eliminated in that country if Roche does not license
that third party or sue that third party for infringement within a certain
period of time. If and when Roche then licenses that third party or sues that
third party for infringement, the royalty rates return to their original levels.
An enforcement proceeding pursued against an infringer for sales in one major
territory will satisfy Roche's obligation to pursue enforcement against such
infringing products in all countries. If no substantial infringement exists in
any such major territory, then a suit in any other country where such
substantial infringement exists will satisfy Roche's obligation to bring an
enforcement action. For purposes of the PCR license agreements, the term "major
territory" shall mean any of the United States, Great Britain, Germany, France,
Italy, the Netherlands and Japan.
TERM
The PCR license agreements take effect on the completion of the merger and
expire upon the expiration of the last valid claim of the licensed patents. The
PCR product license agreement can be terminated by Roche if BioVeris does not
pay the $50 million license fee. Each PCR license agreement can be terminated by
Roche if BioVeris does not pay undisputed royalties owed under the agreement
within a specified time period or if BioVeris does not pay disputed royalties
owed under the agreement within 30 days after a final arbitrated resolution of
such dispute. Each PCR license agreement can be terminated by BioVeris on
written notice to Roche. Otherwise, the PCR licenses are perpetual and
irrevocable.
INDEMNIFICATION
BioVeris will indemnify the Roche entities against all claims, damages,
losses, costs and expenses arising from sales by BioVeris or its affiliates of
the licensed products and services. BioVeris is also jointly and severally
responsible for any breaches by its affiliates.
ASSIGNMENT
Neither the Roche entities nor BioVeris may assign its rights or
obligations under the PCR license agreements without the prior consent of the
other, except that such consent is not required with respect to an assignment of
any or all of a party's rights and obligations under a PCR license agreement to
an affiliate of such assigning party or of all (but not less than all) of its
rights and obligations under a PCR license agreement to an acquiror of all or
substantially all of the assets or business of the assigning party related to
such party's use of the licensed patents.
INTERSECTION WITH IMPROVEMENTS LICENSE AGREEMENT
If there is an inconsistency between one of the PCR license agreements and
the improvements license agreement, the improvements license agreement will
control. For example, if BioVeris is licensed under the royalty-free
improvements license agreement to make, use or sell a product or service, and
BioVeris does not need a license under the PCR license agreements to make, use
or sell such product or service, then BioVeris does not have to pay a royalty to
the Roche entities to make, use or sell such product or service.
110
CAPITALIZATION
The following table sets forth BioVeris's historical and pro forma
capitalization as of September 30, 2003 on an actual basis and on a pro forma
basis to give effect to the merger and related transactions. You should read
this table in conjunction with BioVeris's consolidated financial statements and
notes and the information under "Selected Historical Consolidated Financial
Data."
AS OF SEPTEMBER 30, 2003
------------------------
ACTUAL PRO FORMA
---------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
Cash........................................................ $ -- $125,000
======== ========
Long-term liabilities....................................... $ 26 $ 26
-------- --------
Stockholders' equity:
Preferred stock, par value $0.001 per share, 15,000,000
shares authorized, issuable in series:
Series A, 600,000 shares designated, none issued, actual
and pro forma.......................................... -- --
Series B, 1,000 shares designated, none issued, actual;
1,000 shares issued and outstanding, pro forma......... -- 7,500
Common stock, par value $0.001 per share, 100,000,000
shares authorized, none issued, actual; 26,728,705
shares issued and outstanding, pro forma............... -- 27
Additional paid-in capital................................ -- 231,033
Net investment by IGEN.................................... 26,060 --
-------- --------
Total stockholders' equity.................................. 26,060 238,560
-------- --------
Total capitalization...................................... $ 26,086 $238,586
======== ========
Following completion of the merger there are expected to be approximately
26,728,705 shares of BioVeris common stock issued and outstanding. See "Pro
Forma Consolidated Balance Sheet" for a description of pro forma adjustments.
DIVIDEND POLICY
BioVeris does not intend to pay any dividends on BioVeris common stock in
the foreseeable future, if at all.
111
PRO FORMA CONSOLIDATED BALANCE SHEET
The following unaudited pro forma consolidated balance sheet as of
September 30, 2003 has been prepared as if the merger and related transactions
were completed as of September 30, 2003 and should be read in conjunction with
BioVeris's consolidated financial statements and notes and the other information
contained in or incorporated by reference into this proxy statement/prospectus.
SIX MONTHS ENDED SEPTEMBER 30, 2003
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN THOUSANDS)
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash...................................................... $ -- 205,000 (1) $125,000
(50,000)(2)
(37,500)(3)
7,500 (4)
-- (5)
Accounts receivable, net.................................. 5,058 5,058
Inventory................................................. 5,145 5,145
Prepaid expenses and other................................ 1,300 1,300
------- --------
Total current assets............................... 11,503 136,503
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET................... 5,793 5,793
OTHER NONCURRENT ASSETS:
Investment in affiliate................................... 14,790 37,500 (3) 52,290
Other..................................................... 363 50,000 (2) 50,363
------- --------
Total assets....................................... $32,449 $244,949
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 3,794 $ 3,794
Accrued wages and benefits................................ 2,018 2,018
Deferred revenue.......................................... 551 551
------- --------
Total current liabilities.......................... 6,363 6,363
DEFERRED REVENUE............................................ 26 26
------- --------
Total liabilities.................................. 6,389 6,389
------- --------
COMMITMENTS AND CONTINGENCIES............................... -- -- (5) --
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.001 per share, 15,000,000
shares authorized, issuable in series:
Series A, 600,000 shares designated, none issued,
historical and pro forma................................ -- -- --
Series B, 1,000 shares designated, none issued,
historical; 1,000 shares issued and outstanding, pro
forma;.................................................. -- 7,500 (4) 7,500
Common stock, par value $0.001 per share, 100,000,000
shares authorized, none issued, historical; 26,728,705
shares issued and outstanding, pro forma................ -- 27 (6) 27
Additional paid-in capital................................ -- 205,000 (1) 231,033
26,033 (6)
Net investment by IGEN.................................... 26,060 (26,060)(6) --
------- --------
Total stockholders' equity......................... 26,060 238,560
------- --------
Total liabilities and stockholders' equity......... $32,449 $244,949
======= ========
112
---------------
(1) Reflects cash to be transferred from IGEN to BioVeris based upon cash
assumed to be on-hand as follows (in thousands):
Cash on-hand at IGEN immediately prior to merger............ $ 32,500
Proceeds of loan from Roche............................... 214,000
Transaction closing costs................................. (24,000)
Repayment of 8.5% senior secured notes with related
"make-whole" payment................................... (15,000)
Transaction bonuses of directors, executive officers and
other employees........................................ (2,500)
--------
Cash on-hand to be transferred from IGEN to BioVeris upon
merger.................................................... $205,000
--------
(2) Assumes payment of $50 million to certain affiliates of Roche for a
worldwide, non-exclusive license under patents that cover certain PCR
inventions. BioVeris will also pay royalties based on the sales of licensed
products by BioVeris and on any instrument, accessory, device or system sold
for use with the licensed products, the revenue that BioVeris receives for
diagnostic testing procedures that BioVeris performs using PCR technology
and the number of PCR plasma tests BioVeris performs or has a laboratory
perform. For a more complete description of the PCR license agreements, see
"Commercial Agreements -- PCR License Agreements." BioVeris will amortize
the license fee over an estimated useful life of 10 years based primarily
upon the remaining useful life of the underlying patents, taking into
account potential technological obsolescence.
(3) Assumes payment of the capital contribution of $37.5 million to MSD. After
the restructuring, and subject to MSD's and MST's right to buy BioVeris's
interests in MSD, BioVeris will hold a 31% voting interest in MSD and after
the capital contribution of $37.5 million to MSD, will be entitled to a
preferred return on $115.1 million.
(4) Assumes purchase by Mr. Samuel Wohlstadter of $7.5 million of shares of
series B preferred stock that economically mirror the class C interest in
MSD to be held by BioVeris to be issued by BioVeris.
(5) Pursuant to the tax allocation agreement among Roche, the merger sub, IGEN
and BioVeris, BioVeris may be required to make a payment to IGEN of up to
$20 million within ten days of receiving notice from Roche. The amount of
the payment will depend on the average of the high and the low trading
prices of BioVeris common stock on the first day of trading after the
completion of the merger. A payment will be due if such average is at least
approximately $11.41 per share and the maximum payment will be due if such
average exceeds approximately $13.28, in each case based on the assumption
that BioVeris will have $205 million in cash and cash equivalents
immediately after completion of the merger and prior to making any payments
due pursuant to the related transaction agreements, the ongoing commercial
agreements or the MSD letter agreement. If paid in full, the amount of cash,
on a pro forma basis at September 30, 2003 would be $105 million.
(6) Reflects the reclassification of net investment by IGEN to common stock and
additional paid-in capital upon distribution of 26,728,705 shares of
BioVeris common stock.
113
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
You should read the following selected historical consolidated financial
data of BioVeris in conjunction with BioVeris's consolidated financial
statements and notes and the other information contained in or incorporated by
reference into this proxy statement/prospectus. The selected historical
consolidated balance sheet data as of March 31, 2002 and 2003 and the selected
historical consolidated statements of operations data for the fiscal years ended
March 31, 2001, 2002 and 2003 have been derived from BioVeris's consolidated
financial statements that have been audited by Deloitte & Touche LLP,
independent auditors, and are included elsewhere in this proxy
statement/prospectus. The selected historical consolidated balance sheet data as
of March 31, 1999, 2000 and 2001 and September 30, 2003 and the selected
historical consolidated statements of operations data for the fiscal years ended
March 31, 1999 and 2000 and the six month periods ended September 30, 2002 and
2003 have been derived from BioVeris's unaudited consolidated financial
statements as of or for the periods then ended not included or incorporated by
reference in this proxy statement/prospectus. BioVeris's unaudited consolidated
financial statements for the fiscal years ended March 31, 1999 and 2000 and the
six month periods ended September 30, 2002 and 2003 have been prepared on a
basis consistent with BioVeris's audited consolidated financial statements and,
in the opinion of BioVeris's management, include all adjustments, consisting
only of normal recurring adjustments considered necessary for a fair
presentation of BioVeris's consolidated financial position and consolidated
results of operations for these periods. The consolidated results of operations
for the six months ended September 30, 2002 and 2003 are not necessarily
indicative of results for the year ending March 31, 2004 or any future period.
The assets and businesses of BioVeris have historically been owned and
operated by IGEN. The accompanying financial statements have been prepared and
are presented as if BioVeris had been operating as a separate entity using
IGEN's historical cost basis in the assets and liabilities and including the
historical operations of the businesses and assets to be transferred to BioVeris
from IGEN as part of the restructuring.
IGEN has not declared or paid any cash dividends on IGEN common stock
during any of the periods presented.
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1999 2000 2001 2002 2003 2002 2003
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues:
Product sales.............. $ 4,949 $ 7,743 $ 8,935 $ 12,077 $ 16,487 $ 6,971 $ 10,414
Royalty income............. 839 1,118 892 1,050 1,107 513 540
Contract fees.............. -- -- 3,987 116 180 49 70
-------- -------- -------- -------- -------- -------- --------
Total revenues........... 5,788 8,861 13,814 13,243 17,774 7,533 11,024
-------- -------- -------- -------- -------- -------- --------
Operating costs and expenses:
Product costs.............. 1,340 2,262 3,112 5,361 8,005 2,958 5,773
Research and development... 14,016 18,335 27,983 26,829 22,766 11,933 10,252
Selling, general and
administrative........... 8,854 12,242 13,200 19,217 20,453 10,197 9,184
-------- -------- -------- -------- -------- -------- --------
Total operating costs and
expenses............... 24,210 32,839 44,295 51,407 51,224 25,088 25,209
-------- -------- -------- -------- -------- -------- --------
Loss from operations......... (18,422) (23,978) (30,481) (38,164) (33,450) (17,555) (14,185)
Other, net................... (198) (80) (243) (39) 154 159 48
Equity in loss of
affiliate.................. -- -- -- (10,947) (17,598) (9,455) (9,680)
-------- -------- -------- -------- -------- -------- --------
Net loss................... $(18,620) $(24,058) $(30,724) $(49,150) $(50,894) $(26,851) $(23,817)
======== ======== ======== ======== ======== ======== ========
114
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1999 2000 2001 2002 2003 2002 2003
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Unaudited pro forma net loss
per common share(1)........ $ (0.70) $ (0.90) $ (1.15) $ (1.84) $ (1.90) $ (1.00) $ (0.89)
======== ======== ======== ======== ======== ======== ========
Unaudited pro forma common
shares outstanding(1)...... 26,729 26,729 26,729 26,729 26,729 26,729 26,729
======== ======== ======== ======== ======== ======== ========
MARCH 31,
----------------------------------------------- SEPTEMBER 30,
1999 2000 2001 2002 2003 2003
------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Working capital................. $(2,531) $ 181 $(1,301) $ 1,193 $ 4,733 $ 5,140
Total assets.................... 6,983 13,752 16,379 21,518 29,160 32,449
Net investment by IGEN.......... (188) 5,955 6,775 14,151 20,665 26,060
---------------
(1) Based upon the number of shares of BioVeris common stock expected to be
outstanding upon completion of the merger and related transactions.
115
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The numbers in this Managements' Discussion and Analysis of Financial
Condition and Results of Operations may not tie directly to the numbers in
BioVeris's consolidated financial statements due to rounding.
OVERVIEW
BioVeris develops, manufactures and markets its M-SERIES(R) family of
products, which can serve as a platform for diagnostic systems to be used for
the detection and measurement of biological or chemical substances. BioVeris
incorporates its technologies into its instrument systems, tests and reagents,
which are the biological and chemical components used to perform such tests.
Using the M-SERIES platform, BioVeris intends to integrate technologies and
products to develop small, expandable and modular systems that can perform a
wide variety of immunodiagnostic and nucleic acid tests.
BioVeris's products are designed to be sold in the worldwide diagnostics
markets, including:
- Clinical diagnostics. The clinical diagnostics market includes the
testing of patient samples to measure the presence of disease and monitor
medical conditions. BioVeris is developing products to be used in the
clinical diagnostics market and believes that its products are best
suited for the immunodiagnostic and nucleic acid testing market segments
of the clinical testing market. The immunodiagnostic and nucleic acid
testing market segment sizes are estimated to be $6 billion and $1.5
billion, respectively.
- Non-clinical diagnostics for the biodefense, life science and industrial
markets. The non-clinical diagnostics market includes biodefense
products for the detection of bacteria, viruses and toxins that may pose
a military or public health threat; life science testing for drug
discovery and development that is performed by pharmaceutical and
biotechnology companies; and industrial testing for the detection of
foodborne and waterborne disease causing pathogens. The life science
market size is estimated to be $2.5 billion.
BioVeris believes that the emergence of simple, more accurate and
cost-effective clinical diagnostic products is shifting the site of clinical
diagnostic testing from clinical reference laboratories and central hospital
laboratories to decentralized patient care centers, such as physicians' offices,
ambulatory clinics, hospital emergency rooms, surgical and intensive care units,
hospital satellite laboratories and nurses' stations, which are collectively
referred to in this proxy statement/prospectus as clinical point-of-care sites.
BioVeris's own product development efforts will be focused on M-SERIES
instruments and tests for the clinical diagnostics market, particularly for
point-of-care sites. BioVeris will seek to develop, market and sell products for
the clinical point-of-care market segment through a combination of direct
efforts and collaborative arrangements. BioVeris also intends to pursue
opportunities in the clinical reference laboratory and central hospital
laboratory market segments through collaborative arrangements.
The M1-M clinical analyzer is the first clinical diagnostic system being
developed by BioVeris and builds on the M-SERIES instruments currently being
sold by IGEN in the biodefense and life science markets. BioVeris's initial
commercial focus for the M1-M will be to provide cardiac assays that test for
heart attack and congestive heart failure. BioVeris is developing the cardiac
assays using, among other things, improvements licensed from an affiliate of
Roche. BioVeris believes that these improvements will reduce product development
timelines. BioVeris also believes that the M1-M clinical analyzer will provide
results to a physician rapidly with the same levels of sensitivity, accuracy or
consistency as a large instrument in a clinical reference laboratory or in a
central laboratory, thereby permitting the physician to make a more timely
decision regarding the patient's course of treatment. BioVeris will seek
approval from the FDA for the M1-M clinical analyzer and other in vitro
diagnostics products at the appropriate stage of their product development.
BioVeris's M-SERIES instruments are already being used in biodefense
programs for homeland security, including by the Department of Defense, or DOD.
BioVeris believes there will be an increasing
116
opportunity to sell its products for biodefense tools by governmental and
military organizations around the world, as well as in public health. BioVeris
is also selling two types of M-SERIES instruments for life science research to
pharmaceutical and biotechnology researchers, as well as to scientists at
academic and government research institutions.
The assets and businesses of BioVeris have historically been owned and
operated by IGEN. The financial statements of BioVeris have been prepared and
are presented as if BioVeris had been operating as a separate entity using the
historical cost basis in the assets and liabilities of IGEN and including the
historical operations of businesses and assets to be transferred to BioVeris
from IGEN as part of the restructuring.
Results of operations in the future are likely to fluctuate substantially
from quarter to quarter as a result of various factors, which include:
- the volume and timing of orders and product deliveries for biodefense
products, M-SERIES systems or other products, which orders and deliveries
are based on BioVeris's customers' requirements;
- the success of M-SERIES system upgrades and enhancements, which upgrades
and enhancements involve increased product costs at the time of the
upgrade or enhancement, and customer acceptance of those enhancements and
upgrades;
- the amount of revenue recognized from royalties and other contract
revenues, which revenues are dependent upon the efforts of BioVeris's
licensees and collaborators;
- whether BioVeris's instruments are sold or leased to customers, which
will affect the timing of the recognition of revenue from the sale or
lease;
- the timing of BioVeris's introduction of new products, which could
involve increased expenses associated with product development and
marketing;
- the volume and timing of product returns and warranty claims, which, if
products are returned or have warranty claims that are unexpected, may
involve increased costs in excess of amounts reserved for returns or
claims;
- BioVeris's competitors' introduction of new products, which may affect
the purchase decision of or timing of orders by BioVeris's customers and
prospective customers while the competitors' product is assessed;
- the amount of expenses BioVeris incurs in connection with the operation
of its business, including
- research and development costs, which increases or decreases based on
the product in development and
- sales and marketing costs, which are based on product launches or
promotions and sales incentives that might be in effect from time to
time;
- unexpected termination of government contracts or orders, which could
result in decreased sales and increased costs due to excess capacity,
inventory personnel and other expenses; and
- BioVeris's share of losses in MSD, which are based on results of MSD's
operations over which BioVeris has limited influence, which for the three
and six months ended September 30, 2003 totaled $4.5 million and $9.7
million, respectively, compared to $5.0 million and $9.5 million for the
three and six months ended September 30, 2002.
BioVeris expects to incur additional operating losses as a result of its
expenses for manufacturing, marketing and sales capabilities, research and
product development, general and administrative costs, the expenses of its
affiliate and compensation expense associated with a change in the value of IGEN
employee stock options in connection with the merger. Upon completion of the
merger, the excess of $47.25 plus the average first day trading price of
BioVeris common stock over the exercise price of all
117
IGEN employee stock options will be recorded as compensation expense by
BioVeris. As of November 17, 2003, options to acquire 1,462,906 shares of IGEN
common stock with a weighted average exercise price of $18.46 per share were
outstanding. BioVeris's ability to become profitable in the future will be
affected by, among other things, BioVeris's ability to expand the distribution
and increase sales of existing products, upgrade and enhance the M-SERIES family
of products, introduce new products into the market, generate higher revenue,
develop marketing, sales and distribution capabilities cost-effectively, and
continue collaborations established by IGEN or establish successful new
collaborations with corporate partners to develop, manufacture, market and sell
products that incorporate BioVeris technologies.
RESULTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
Revenues. Total revenues were $11.0 million for the six months ended
September 30, 2003, an increase of $3.5 million or 46% from $7.5 million for the
six months ended September 30, 2002. Product sales were $10.4 million for the
six months ended September 30, 2003, an increase of $3.4 million or 49% from
$7.0 million for the six months ended September 30, 2002. This increase in
product sales resulted from sales of products for the life science market of
$7.1 million for the six months ended September 30, 2003, an increase of $1.3
million from $5.8 million for the six months ended September 30, 2002 and sales
of biodefense products of $3.3 million for the six months ended September 30,
2003, an increase of $2.1 million from $1.2 million for the six months ended
September 30, 2002. Sales of products for the life science market increased due
to increased sales of the M-SERIES family of products. BioVeris anticipates
continued increases in biodefense-related sales as a result of its ongoing
biodefense initiatives. As part of the merger and related transactions, BioVeris
expects to assume a contract between IGEN and the DOD pursuant to which the DOD
may purchase tests for the detection of specific toxins in environmental samples
from IGEN. Under the contract, the DOD may, at its option, make purchases of up
to $23.0 million over a period of up to 48 months. As of September 30, 2003, the
DOD had purchased approximately $1.7 million of products and, under the
contract, may purchase up to a maximum of $7.0 million in the 12-month period
ending June 2004. BioVeris's sales of its products for the life science market
are subject to a number of uncertainties, including the fact that BioVeris is
not a party to significant long-term contracts for the sale of its products for
the life science market that would provide predictable sales. Therefore, the
volume and timing of product orders from BioVeris's life science customers are
based on their requirements, which may vary over time. As a result, BioVeris
believes it does not have sufficient information to reasonably project its
future sales in the life science market.
Operating Costs and Expenses. Product costs were $5.8 million (55% of
product sales) for the six months ended September 30, 2003 compared to $3.0
million (42% of product sales) for the six months ended September 30, 2002.
Product costs for the six months ended September 30, 2003, as a percentage of
product sales, increased due to costs incurred in connection with instrument
upgrades (3% of product sales) and detection module upgrades (11% of product
sales) for existing life science customers. These voluntary upgrades were
provided to enhance overall customer satisfaction. The instrument and detection
module upgrade programs, with their associated costs, are expected to continue
through December 31, 2003. BioVeris's future product costs are subject to a
number of uncertainties relating to, among other things, the launch of new
instrument systems.
Research and development expenses were $10.3 million for the six months
ended September 30, 2003, a decrease of $1.6 million or 14% from $11.9 million
for the six months ended September 30, 2002, due primarily to lower personnel
and facilities costs for development projects. Research and development expenses
primarily relate to ongoing development costs and product enhancements
associated with the M-SERIES family of products, development of new assays and
research and development of new systems and technologies, including
point-of-care products. BioVeris expects research and development costs to
increase as product development and core research continue to expand, including
costs associated with BioVeris's efforts in developing clinical diagnostics and
biodefense testing products.
118
Selling, general and administrative expenses were $9.2 million for the six
months ended September 30, 2003, a decrease of $1.0 million or 10% from $10.2
million for the six months ended September 30, 2002, due to lower personnel
costs. For each of the periods, BioVeris was fully integrated with IGEN and the
accompanying consolidated financial statements reflect the application of
certain estimates and allocations. BioVeris's consolidated statements of
operations include all revenues and costs that are directly attributable to the
BioVeris businesses. In addition, certain expenses of IGEN have been allocated
to BioVeris using various assumptions that, in the opinion of management, are
reasonable. These expenses include an allocated share of general and
administrative salaries as well as certain other shared costs (primarily
facility, human resources, legal, accounting and other administrative costs)
which were allocated based upon percentage of total revenue or percentage of
total headcount, as appropriate. There are no other selling, general and
administrative expenses for the six months ended September 30, 2003 and 2002
other than these allocated expenses.
Since 1995, IGEN has retained Wilmer, Cutler & Pickering to perform legal
services in connection with the Roche litigation and other matters. Mr. Richard
Cass, one of IGEN's directors, is a partner of the law firm of Wilmer, Cutler &
Pickering and is chairman of its Corporate Practices Group. In addition, Ms.
Jennifer M. Drogula, who became the daughter-in-law of IGEN's and BioVeris's
chief executive officer in March 2002, has been a partner of the firm since
January 2001. BioVeris recorded approximately $100,000 in legal fees to the law
firm for each of the six months ended September 30, 2003 and 2002. BioVeris
expects that it will continue to retain the law firm in the future.
IGEN's and BioVeris's chief executive officer, Mr. Samuel Wohlstadter, is
the principal and controlling stockholder, a director and the chief executive
officer of each of Wellstat Biologics Corporation, or Wellstat Biologics,
Wellstat Therapeutics Corporation, or Wellstat Therapeutics, Hyperion Catalysis
International, or Hyperion, and Proteinix Corporation, or Proteinix, which are
referred to in this proxy statement/prospectus as the affiliated companies.
IGEN's and BioVeris's president and chief operating officer, Dr. Richard Massey,
is also a director of Hyperion and a less than 10% stockholder in Proteinix.
These companies are therefore considered affiliates of BioVeris for the purpose
of this discussion.
After completion of the merger and related transactions, BioVeris will have
shared services arrangements with each of the affiliated companies. These shared
services include accounting and finance, human resources and other
administrative services, as well as facility related costs and services. Shared
services costs allocated to these companies totaled $600,000 and $500,000 for
the six months ended September 30, 2003 and 2002, respectively, which reduced
certain operating costs and expenses for the respective periods. Amounts
allocated to the affiliated companies are calculated and billed monthly based
upon costs incurred by BioVeris and are determined through allocation methods
that include time-spent and square footage utilized. Amounts due from affiliated
companies under these shared services agreements were approximately $300,000 and
$39,000 at September 30, 2003 and 2002, respectively, and were paid subsequent
to each respective period end. See "Certain Relationships and Related Party
Transactions."
Interest Expense and Other. Interest expense, net of other income, was
approximately $48,000 and $200,000 of income for the six months ended September
30, 2003 and 2002, respectively.
Equity in Loss of Affiliate. MSD is a joint venture formed by IGEN and MST
in 1995. MSD was formed for the development, manufacture, marketing and sale of
products utilizing a proprietary combination of MST's multi-array technology
together with IGEN's technology. BioVeris has recorded its proportionate share
of MSD losses, representing approximately 100% of MSD's losses, for each
respective period as equity in loss of affiliate consistent with accounting for
equity method investments. As part of the merger and related transactions, IGEN
will transfer its interest in MSD to BioVeris. Equity in loss of affiliate was
$9.7 million for the six months ended September 30, 2003 and $9.5 million for
the six months ended September 30, 2002. See "Description of the BioVeris
Business -- Collaborations and License Arrangements -- MSD" and "Certain
Relationships and Related Party Transactions -- MSD and MSD Agreements."
119
MSD's losses increased in fiscal 2003 primarily due to higher costs
associated with its transition from a development stage entity to a commercial
operating company. MSD had not commenced commercial operations during fiscal
2002 and its product sales commenced in October 2002. The increase in MSD's
losses during the six months ended September 30, 2003 results primarily from
increases in sales and marketing expenses which were offset only in part by the
growth in revenues.
MSD manufactures markets and sells instrument systems, including the Sector
HTS and the Sector PR, which combine MST's multi-array technology and IGEN's ECL
technology. The Sector HTS is an ultra high throughput drug discovery system
engineered for applications such as high throughput screening and large-scale
proteomics. The Sector PR is a smaller system designed for benchtop applications
such as assay development, research in therapeutic areas, cellular biology and
medium throughput screening. MSD also manufactures and markets its own line of
reagents, assays and plates that are used on these systems.
As of September 30, 2003, MSD had cash and short-term investments of $5.0
million with working capital of $8.6 million. During the six months ended
September 30, 2003, MSD used $1.8 million for the purchase of inventory and $1.3
million for the purchase of property, equipment and leasehold improvements. See
"Liquidity and Capital Resources" for a discussion of our funding commitments to
MSD.
Net Loss. BioVeris's net loss was $23.8 million for the six months ended
September 30, 2003, a decrease of $3.1 million or 11% from $26.9 million for the
six months ended September 30, 2002. BioVeris's net loss is primarily caused by
its operating expenses, and its equity in loss of affiliate, exceeding its
revenues. The decrease in net loss from the prior period is primarily due to
growth in BioVeris's product sales.
BioVeris's net loss is expected to increase upon completion of the merger,
as a result of compensation expense associated with a change in the value of
IGEN employee stock options in connection with the merger. Upon completion of
the merger, the excess of $47.25 plus the average first day trading price of
BioVeris common stock over the exercise price of all IGEN employee stock options
will be recorded as compensation expense by BioVeris. As of November 17, 2003,
options to acquire 1,462,906 shares of IGEN common stock with a weighted average
exercise price of $18.46 per share were outstanding.
YEARS ENDED MARCH 31, 2003 AND 2002
Revenues. Total revenues were $17.8 million for the fiscal year ended
March 31, 2003, an increase of approximately $4.6 million or 34% from $13.2
million in fiscal 2002. Product sales were $16.5 million in fiscal 2003, an
increase of $4.4 million or 37% from $12.1 million in fiscal 2002. This increase
in product sales resulted from sales of products for the life science market of
$11.9 million in fiscal 2003, an increase of $1.0 million from $10.9 million in
fiscal 2002, and sales of biodefense products of $4.6 million in fiscal 2003, an
increase of $3.4 million from $1.2 million in fiscal 2002. Sales of products for
the life science market increase due to increased sales of the M-SERIES family
of products. BioVeris anticipates continued increases in biodefense-related
sales as a result of its ongoing biodefense initiatives. BioVeris's sales of its
products for the life science market are subject to a number of uncertainties,
including the fact that BioVeris is not a party to significant long-term
contracts for the sale of its products for the life science market that would
provide predictable sales. Therefore, the volume and timing of product orders
from BioVeris's life science customers are based on their requirements, which
may vary over time. As a result, BioVeris believes it does not have sufficient
information to reasonably project its future sales in the life science market.
Operating Costs and Expenses. Product costs were $8.0 million (49% of
product sales) in fiscal 2003 compared to $5.4 million (44% of product sales) in
fiscal 2002. Product costs in fiscal 2002 included a write-off of approximately
$1.1 million representing the remaining net book value of the TRICORDER
detection modules incorporated into customers' M-SERIES systems. The cost of
these modules had previously been recorded as a fixed asset and depreciated over
their estimated useful life, and should have been recorded as product costs upon
shipment and sale. BioVeris determined that the adjustment did not
120
have a material impact on fiscal 2002 or prior period financial statements and,
accordingly, did not revise such financial statements. Of the $1.1 million
adjustment, approximately $200,000 is related to fiscal 2002 and the remaining
$900,000 is related to prior fiscal years (approximately $400,000 and $500,000
related to fiscal 2001 and 2000, respectively). Excluding the $900,000
write-off, product costs were 37% of product sales in fiscal 2002. Product costs
in fiscal 2003, as a percentage of product sales, increased from 37%, as
adjusted, to 49% primarily due to costs incurred in connection with instrument
upgrades for existing life science customers (7% of product sales) and warranty
costs in excess of the warranty reserve (4% of products sales). The voluntary
instrument upgrades were provided to enhance overall customer satisfaction. The
instrument upgrade program, with its associated costs, is expected to continue
through December 31, 2003. BioVeris's future product costs are subject to a
number of uncertainties relating to, among other things, the launch of new
instrument systems.
Research and development expenses were $22.8 million in fiscal 2003, a
decrease of $4.0 million or 15% from $26.8 million in fiscal 2002. Of the $26.8
million in fiscal 2002, $2.4 million was spent funding MSD joint venture
activities prior to the amendment and extension of the MSD joint venture
agreements in August 2001. See "-- Equity in Loss of Affiliate" below for a
discussion of activities relating to MSD in fiscal 2003 and 2002. Research and
development expenses primarily relate to ongoing development costs and product
enhancements associated with the M-SERIES family of products, development of new
assays for the life science market and research and development of new systems
and technologies, including point-of-care products.
Selling, general and administrative expenses were $20.5 million in fiscal
2003, an increase of $1.3 million or 6% from $19.2 million in fiscal 2002. This
increase was primarily attributable to additional personnel and support costs
required to support the increase in sales and customers. For each of the
periods, BioVeris was fully integrated with IGEN and the accompanying
consolidated financial statements reflect the application of certain estimates
and allocations. BioVeris's consolidated statements of operations include all
revenues and costs that are directly attributable to the BioVeris businesses. In
addition, certain expenses of IGEN have been allocated to BioVeris using various
assumptions that, in the opinion of management, are reasonable. These expenses
include an allocated share of general and administrative salaries as well as
certain other shared costs (primarily facility, human resources, legal,
accounting and other administrative costs) which were allocated based upon
percentage of total revenue or percentage of total headcount, as appropriate.
There are no other selling, general and administrative expenses for fiscal 2003
and fiscal 2002 other than these allocated expenses.
Since 1995, IGEN has retained Wilmer, Cutler & Pickering to perform legal
services in connection with the Roche litigation and other matters. Mr. Richard
Cass, one of IGEN's directors, is a partner of the law firm of Wilmer, Cutler &
Pickering and is chairman of its Corporate Practices Group. In addition, Ms.
Jennifer M. Drogula, who became the daughter-in-law of IGEN's and BioVeris's
chief executive officer in March 2002, has been a partner of the firm since
January 2001. BioVeris recorded approximately $100,000 and $400,000 in legal
fees to the law firm for the years ended March 31, 2003 and 2002, respectively.
After completion of the merger and related transactions, BioVeris will have
shared services arrangements with each of the affiliated companies. These shared
services include accounting and finance, human resources and other
administrative services, as well as facility related costs and services. Shared
services costs allocated to these companies totaled $1.0 million and $1.3
million in fiscal 2003 and 2002, respectively, which reduced certain operating
costs and expenses for the respective years. Amounts allocated to the affiliated
companies are calculated and billed monthly based upon costs incurred by
BioVeris and are determined through allocation methods that include time-spent
and square footage utilized. Amounts due from affiliated companies under these
shared services agreements were approximately $200,000 and $100,000 at March 31,
2003 and 2002, respectively, and were paid subsequent to each respective year
end. See "Certain Relationships and Related Party Transactions."
121
Interest Expense and Other. Interest expense, net of other income, was
approximately $200,000 of income in fiscal 2003 and $39,000 of expense in fiscal
2002. This increase in income was due to foreign currency transaction gains in
the fiscal 2003 period.
Equity in Loss of Affiliate. MSD is a joint venture formed by MST and IGEN
in 1995. MSD was formed for the development, manufacture, marketing and sale of
products utilizing a combination of MST's multi-array technology together with
IGEN's technology. Beginning on July 1, 2001, MSD was transitioning from a
development stage entity to a commercial enterprise and milestones establishing
the continued viability of MSD were first achieved in the quarter ended
September 30, 2001. For example, prototypes had been assembled demonstrating
product feasability, and MSD was anticipating initial product launch in
approximately one year. As a result of this transition, MSD's expenses were no
longer primarily research and development. Accordingly, since July 1, 2001,
BioVeris has recorded only its proportionate share of MSD losses, representing
approximately 100% of MSD's losses, for each respective period as equity in loss
of affiliate consistent with accounting for equity method investments. As part
of the merger and related transactions, IGEN will transfer its interest in MSD
to BioVeris. Equity in loss of affiliate was $17.6 million in fiscal 2003, and
$10.9 million in fiscal 2002. In addition, approximately $2.4 million of the
fiscal 2002 MSD contributions, all occurring prior to July 1, 2001, were
recorded by BioVeris as research and development expenses based upon the
significance and character of the MSD losses. In connection with entering into
the MSD agreements in August 2001, IGEN transferred certain equipment and
leasehold improvements to MSD in an amount of approximately $800,000, which
amount is included in the in-kind contributions to MSD in such year. See
"Description of the BioVeris Business -- Collaborations and License
Arrangements -- MSD" and "Certain Relationships and Related Party
Transactions -- MSD and MSD Agreements."
MSD's losses increased in fiscal 2003, primarily due to higher costs
associated with its transition from a development stage entity to a commercial
operating company. MSD commenced product sales in October 2002, and during the
year ended March 31, 2003, its product sales totaled $3.2 million. MSD increased
its staffing during fiscal 2003 primarily for development personnel and new
sales and marketing personnel to support the launch of its products. These
personnel increases resulted in higher costs for both research and development
and sales and marketing.
As of March 31, 2003, MSD had cash and short-term investments of $600,000
with working capital of $3.5 million. During the year ended March 31, 2003, MSD
used $2.2 million for the purchase of inventory and $3.9 million for the
purchase of property, equipment and leasehold improvements. See "Liquidity and
Capital Resources" for a discussion of BioVeris's funding commitments to MSD.
Net Loss. BioVeris's net loss was $50.9 million in fiscal 2003, an
increase of $1.7 million or 4% from the net loss of $49.2 million in fiscal year
2002. This increase was primarily due to higher losses by MSD in fiscal 2003,
reflected as an increase in equity in loss of affiliate, offset by the growth in
BioVeris's fiscal 2003 product sales.
BioVeris's net loss is expected to increase upon completion of the merger,
as a result of compensation expense associated with a change in the value of
IGEN employee stock options in connection with the merger. Upon completion of
the merger, the excess of $47.25 plus the average first-day trading price of
BioVeris common stock over the exercise price of all IGEN employee stock options
will be recorded as compensation expense by BioVeris. As of November 17, 2003,
options to acquire 1,462,906 shares of IGEN common stock with a weighted average
exercise price of $18.46 per share were outstanding.
YEARS ENDED MARCH 31, 2002 AND 2001
Revenues. Total revenues were $13.2 million for fiscal 2002, a decrease of
approximately $600,000 or 4% from $13.8 million in fiscal 2001. Product sales
were $12.1 million in fiscal 2002, an increase of $3.2 million or 35% from $8.9
million in fiscal 2001. The increase in product sales resulted primarily from
sales of products for the life science market of $10.9 million in fiscal 2002,
an increase of $2.0 million from $8.9 million in fiscal 2001 due to increased
sales of the M-SERIES family of products. Royalty income was $1.1 million in
fiscal 2002, an increase of $200,000 or 18% from $900,000 in fiscal 2001. The
122
increase in royalty income was primarily attributable to higher sales by
BioVeris's licensees. Contract fees were $100,000 in fiscal 2002, a decrease of
$3.9 million or 97% from $4.0 million in fiscal 2001. This decrease was
primarily due to non-recurring contract fees in fiscal 2001 in connection with
an alliance with Bayer Diagnostics.
Operating Costs and Expenses. Product costs were $5.4 million (44% of
product sales) in fiscal 2002 compared to $3.1 million (35% of product sales) in
fiscal 2001. Product costs in fiscal 2002 included a write-off of approximately
$1.1 million representing the remaining net book value of TRICORDER(R) detection
modules incorporated into customers' M-SERIES systems. The cost of these modules
had previously been recorded as a fixed asset and depreciated over their
estimated useful life, and should have been recorded as product costs upon
shipment and sale. BioVeris determined that the adjustment did not have a
material impact on fiscal 2002 or prior period financial statements and,
accordingly, did not revise such financial statements. Of the $1.1 million
adjustment, approximately $200,000 is related to fiscal 2002 and the remaining
$900,000 is related to prior fiscal years (approximately $400,000 and $500,000
related to fiscal 2001 and 2000, respectively). Excluding the $900,000
write-off, product costs were 37% of product sales in fiscal 2002.
Research and development expenses were $26.8 million in fiscal year 2002, a
decrease of $1.2 million or 4% from $28.0 million in fiscal 2001. Of the $26.8
million in fiscal 2002, $2.4 million was spent funding MSD joint venture
activities prior to the amendment and extension of the MSD joint venture
agreements in August 2001. Of the $28.0 million in fiscal 2001, $8.3 million was
spent funding MSD joint venture activities. See "-- Equity in Loss of Affiliate"
below for a discussion of MSD activity in fiscal 2002. The fiscal 2002 increase
in other research and development expense of $4.6 million, or 23%, primarily
relate to ongoing development costs and product enhancements associated with the
M-SERIES family of products, development of new assays for the life science
market and research and development of new systems and technologies, including
point-of-care products.
Selling, general and administrative expenses were $19.2 million in fiscal
2002, an increase of $6.0 million or 46% from $13.2 million in fiscal 2001. This
increase was primarily attributable to additional personnel costs of
approximately $4.4 million required to support the increase in sales and
customers, as well as legal and other expenses of $1.6 million largely
associated with the amendment and extension of the MSD agreements. For each of
the periods, BioVeris was fully integrated with IGEN and the accompanying
consolidated financial statements reflect the application of certain estimates
and allocations. BioVeris's consolidated statements of operations include all
revenues and costs that are directly attributable to the BioVeris businesses. In
addition, certain expenses of IGEN have been allocated to BioVeris using various
assumptions that, in the opinion of management, are reasonable. These expenses
include an allocated share of general and administrative salaries as well as
certain other shared costs (primarily facility, human resources, legal,
accounting and other administrative costs) which were allocated based upon
percentage of total revenue or percentage of total headcount, as appropriate.
There are no other selling, general and administrative expenses for fiscal 2002
and fiscal 2001 other than these allocated expenses.
Since 1995, IGEN has retained Wilmer, Cutler & Pickering to perform legal
services in connection with the Roche litigation and other matters. Mr. Richard
Cass, one of IGEN's directors, is a partner of the law firm of Wilmer, Cutler &
Pickering and is chairman of its Corporate Practices Group. In addition, Ms.
Jennifer M. Drogula, who became the daughter-in-law of IGEN's and BioVeris's
chief executive officer in March 2002, has been a partner of the firm since
January 2001. BioVeris recorded approximately $400,000 and $200,000 in legal
fees to the law firm for the years ended March 31, 2002 and 2001, respectively.
After completion of the merger and related transactions, BioVeris will have
shared services arrangements with each of the affiliated companies. These shared
services include accounting and finance, human resources and other
administrative services, as well as facility related costs and services. Shared
services costs allocated to these companies totaled $1.3 million and $1.4
million in fiscal 2002 and 2001, respectively, which reduced certain operating
costs and expenses for the respective years. Amounts
123
allocated to the affiliated companies are calculated and billed monthly based
upon costs incurred by BioVeris and are determined through allocation methods
that include time-spent and square footage utilized. Amounts due from affiliated
companies under these shared services agreements were approximately $100,000 at
each of March 31, 2002 and 2001, and were paid subsequent to each respective
year end. See "Certain Relationships and Related Party Transactions."
Interest Expense and Other. Interest expense, net of other income, was
$39,000 in fiscal 2002 and approximately $200,000 in fiscal 2001. This decrease
is due to foreign currency transaction losses in the fiscal 2002 period.
Equity in Loss of Affiliate. MSD is a joint venture formed by MST and IGEN
in 1995. MSD was formed for the development, manufacture, marketing and sale of
products utilizing a proprietary combination of MST's multi-array technology
together with IGEN's technology. Beginning on July 1, 2001, MSD was
transitioning from a development stage entity to a commercial enterprise and
milestones establishing the continued viability of MSD were first achieved in
the quarter ended September 30, 2001. For example, prototypes had been assembled
demonstrating product feasability, and MSD was anticipating initial product
launch in approximately one year. As a result of this transition, MSD's expenses
were no longer primarily research and development. Accordingly, since July 1,
2001, BioVeris has recorded only its proportionate share of MSD losses,
representing approximately 100% of MSD's losses, for each respective period as
equity in loss of affiliate consistent with accounting for equity method
investments. As part of the merger and related transactions, IGEN will transfer
its interest in MSD to BioVeris. For fiscal 2002, equity in loss of affiliate
was $10.9 million. In addition, approximately $2.4 million of the fiscal 2002
MSD contributions, all occurring prior to July 1, 2001, and approximately $8.3
million of the fiscal 2001 MSD contributions, were recorded by BioVeris as
research and development expenses based upon the significance and character of
the MSD losses. In connection with entering into the MSD agreements in August
2001, IGEN transferred certain equipment and leasehold improvements to MSD in an
amount of approximately $800,000, which amount is included in the in-kind
contributions to MSD in such year. See "Description of the BioVeris
Business -- Collaborations and License Arrangements -- MSD", and "Certain
Relationships and Related Transactions -- MSD and MSD Agreements."
During fiscal 2002, MSD had not commenced commercial operations and its
losses increased primarily due to higher costs associated with increasing its
staffing primarily for research and development and sales and marketing
personnel. As of March 31, 2002, MSD had cash and short-term investments of $4.2
million with working capital of $3.7 million. During the year ended March 31,
2002, MSD used $2.0 million for the purchase of property and equipment. See
"Liquidity and Capital Resources" for a discussion of our funding commitments to
MSD.
Net Loss. BioVeris's net loss was $49.2 million in fiscal 2002, an
increase of $18.5 million or 60% from the net loss of $30.7 million in fiscal
2001. This increase was primarily due to a decline in contract fee revenue as
well as higher selling, general and administrative expenses and losses
attributable to MSD's activities.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the merger and related transactions, Roche will loan to
IGEN $214 million minus the amount of cash received by IGEN from the exercise of
IGEN stock options and warrants from July 24, 2003 to the date that is two
business days prior to the completion of the merger. These funds, less
transaction costs, will be contributed by IGEN to BioVeris as part of the
restructuring. The related promissory note will remain the obligation of IGEN
and BioVeris will have no obligations associated with this debt. After the PCR
license payment of $50 million to certain affiliates of Roche and the final
capital contribution of $37.5 million (of which any amount in excess of $30
million will be funded by Mr. Samuel Wohlstadter, IGEN's and BioVeris's chairman
and chief executive officer through the purchase of shares of BioVeris series B
preferred stock that economically mirror the class C interests in MSD to be held
by BioVeris) to MSD, BioVeris is expected to commence its operations following
completion of the merger with approximately $125 million in cash.
124
IGEN has historically held all cash in a centralized treasury and has
provided all of the necessary funding for the operations of BioVeris since the
inception of the assumed businesses. Accordingly, as of September 30, 2003,
BioVeris had no cash, cash equivalents or short-term investments. IGEN has the
ability and intent to fund the businesses being transferred to BioVeris until
such time as the merger is completed.
Net cash used for operating activities was $12.7 million and $17.4 million,
for the six months ended September 30, 2003 and 2002, respectively, and $33.1
million, $34.2 million and $26.5 million for the years ended March 31, 2003,
2002 and 2001, respectively. These changes between periods are primarily due to
the size of each period's operating loss, the accounting for contributions to
MSD and changes in working capital accounts.
BioVeris used cash of $900,000 and $2.0 million during the six months ended
September 30, 2003 and 2002, respectively, and $3.3 million, $5.6 million and
$4.9 million during the years ended March 31, 2003, 2002 and 2001, respectively,
for the acquisition of equipment and leasehold improvements. BioVeris's
investments in MSD totaled $15.3 million and $10.8 million for the six months
ended September 30, 2003 and 2002, respectively, and $20.5 million and $16.4
million for the years ended March 31, 2003 and 2002, respectively.
The tax allocation agreement provides that Roche and IGEN will be solely
liable for, will jointly and severally indemnify BioVeris against, and will be
entitled to receive and retain all refunds of, taxes (other than transfer taxes)
directly or indirectly resulting from, arising in connection with or otherwise
related to the merger and related transactions, any transaction undertaken to
prepare for the merger and related transactions and any of the actions taken
pursuant to the ongoing litigation agreement. This agreement also provides for
BioVeris to make a payment to IGEN of up to $20 million. The amount of the
payment will depend upon the average of the high and the low trading prices of
BioVeris common stock on the first day of trading after the completion of the
merger. A payment will be due if such average is at least approximately $11.41
per share and the maximum payment will be due if such average exceeds
approximately $13.28, in each case based on the assumption that BioVeris will
have $205 million in cash and cash equivalents immediately after completion of
the merger and prior to making any payments due pursuant to the related
transaction agreements, the ongoing commercial agreements or the MSD letter
agreement. The distribution of BioVeris stock will be a taxable transaction for
IGEN and the purpose of this payment is for BioVeris to share in a portion of
the tax that IGEN might incur as a result of that distribution. The formula,
which takes into account the expected approximate tax basis and tax rate that
would be used in IGEN's calculation of its tax, was negotiated by Roche and IGEN
as part of the overall negotiation of the merger.
BioVeris believes that material commitments for capital expenditures and
additional or expanded facilities may be required in a variety of areas, such as
product development programs. BioVeris is evaluating new facilities for
development, manufacturing and other corporate uses and is negotiating to secure
new space, which if concluded, would result in additional facilities costs.
BioVeris has not, at this time, made material commitments for any such capital
expenditures or facilities and has not secured additional sources, if necessary,
to fund such commitments.
Net cash provided by financing activities was $29.0 million and $30.2
million, for the six months ended September 30, 2003 and 2002, respectively, and
$57.0 million, $56.3 million and $31.5 million for the years ended March 31,
2003, 2002 and 2001, respectively. These amounts in each respective period
primarily represent the cash contributed, net of receipts, by IGEN to BioVeris.
125
As of September 30, 2003, BioVeris's material future obligations were as
follows:
SIX MONTHS YEARS ENDED MARCH 31,
ENDED ----------------------------------------------
MARCH 31, 2009 AND
CONTRACTUAL OBLIGATIONS TOTAL 2004 2005 2006 2007 2008 THEREAFTER
----------------------- -------- ---------- ------ ------ ------ ------ ----------
(IN THOUSANDS)
PCR license fee.......... $ 50,000 $ 50,000 $ -- $ -- $ -- $ -- $ --
MSD funding
commitment(1).......... 42,854 42,854 -- -- -- -- --
Operating leases(2)...... 20,565 1,161(3) 3,169 3,228 3,280 3,352 6,375
-------- -------- ------ ------ ------ ------ ------
Total contractual
obligations............ $113,419 $ 94,015 $3,169 $3,228 $3,280 $3,352 $6,375
-------- -------- ------ ------ ------ ------ ------
------------
(1) Includes a final capital contribution of $37.5 million to MSD from BioVeris
following the completion of the merger, of which any amount in excess of $30
million will be funded by IGEN's and BioVeris's chairman and chief executive
officer through the purchase of shares of BioVeris series B preferred stock
that economically mirror the class C interest in MSD to be held by BioVeris.
(2) Includes amounts under leases entered into after September 30, 2003.
(3) Excludes $196,000 with respect to operating leases that will be allocated to
MSD through December 31, 2003. These amounts are included in the MSD funding
commitment amount in the line immediately above.
Following the completion of the merger, and after paying certain
obligations including the PCR license fee and satisfying the MSD funding
commitment described below, BioVeris expects to commence its operations with
approximately $125 million in cash.
BioVeris will pay certain affiliates of Roche a fee of $50 million for a
worldwide, non-exclusive license under patents that cover certain PCR inventions
in accordance with the PCR product license agreement. BioVeris will also owe
royalties on sales of the licensed products and on sales of any instrument,
accessory, device or system sold for use with the licensed products and on the
performance of licensed tests. BioVeris will amortize the license fee over an
estimated useful life of 10 years based primarily upon the remaining useful life
of the underlying patents, taking into account potential technological
obsolescence.
MSD is a joint venture formed by MST and IGEN in 1995. As part of the
merger and related transactions, IGEN's equity interest in the MSD joint venture
will be transferred to BioVeris. Under the MSD agreements, IGEN's funding
commitment was based on an annual budget of MSD approved by the JVOC. IGEN's
remaining funding commitment may be satisfied in part through in-kind
contributions of scientific and administrative personnel and shared facilities.
In accordance with the MSD joint venture agreement, the value of these in-kind
contributions is based upon costs incurred by BioVeris as determined through
allocation methods that include time-spent and square footage utilized. During
the years ended March 31, 2003, 2002 and 2001 and the six months ended September
30, 2003 and 2002, operating costs allocated to MSD by BioVeris in connection
with shared personnel and facilities totaled $11.9 million, $11.4 million, $5.6
million, $4.1 million and $5.8 million, respectively. Since July 1, 2001, these
operating costs allocated to MSD reduced BioVeris's operating costs and expenses
and increased the equity in loss of affiliate in the consolidated statements of
operations.
The JVOC approved funding for MSD for the period from January 1, 2003 to
November 30, 2003 in an amount of $20.6 million, subject to a permitted variance
of 15%. As of September 30, 2003, the remaining funding commitment to MSD was
$5.4 million. Upon the completion of the merger, the MSD joint venture agreement
will expire. Following completion of the merger, BioVeris will use its cash to
make a final capital contribution of $37.5 million to MSD. Of the final capital
contribution of $37.5 million, any amount in excess of $30 million will be
funded by IGEN's and BioVeris's chairman and chief executive officer through the
purchase of shares of BioVeris series B preferred stock that economically mirror
the class C interest in MSD to be held by BioVeris. Under the terms of the
series B preferred stock, BioVeris
126
may redeem the BioVeris series B preferred stock for $0.01 per share at any time
BioVeris is no longer entitled to receive distributions with respect to the
class C interests described in the previous sentence pursuant to the MSD limited
liability company agreement. BioVeris will redeem a proportionate part of the
BioVeris series B preferred stock in connection with any redemption by MSD of
the class C interests held by BioVeris in MSD described in the previous
sentence. No distributions on the BioVeris series B preferred stock will be paid
unless and until distributions are paid on such class C interests in accordance
with the MSD limited liability company agreement, in which event distributions
on the BioVeris series B preferred stock will be paid in the same manner and
amount as such distributions on the class C interests. The shares of BioVeris
series B preferred stock will be entitled in the aggregate to 1,000 votes on all
matter on which holders of BioVeris common stock may vote. In addition, BioVeris
may not consent to any adverse change to the terms of the class C interests in
MSD described in this paragraph without the consent of the holders of the
BioVeris series B preferred stock. For a more complete description of BioVeris
series B preferred stock, see "Description of BioVeris Capital
Stock -- Preferred Stock -- Series B Preferred Stock."
BioVeris's obligation to make the final contribution to MSD is separate
from its remaining obligation to provide funding to MSD through November 30,
2003. For the six months ended September 30, 2003 and 2002, total contributions
to MSD were $15.3 million and $10.8 million, respectively, including $3.7
million in the six months ended September 30, 2003, which related to the
permitted budget variances from prior years. For the years ended March 31, 2003,
2002 and 2001, contributions to MSD were $20.5 million, $19.6 million and $8.3
million, respectively.
IGEN, BioVeris and MSD agreed that the MSD joint venture agreement will
expire on the later of
- November 30, 2003, or
- the earlier of (1) the date of the completion of the merger and related
transactions or (2) the termination of the merger and related
transactions in accordance with the terms of the agreements governing
such transaction. IGEN, BioVeris and MSD also agreed that funding for MSD
would not be extended other than pursuant to the agreements related to
the Roche merger and related transactions.
In addition, in accordance with the MSD agreements, MST and MSD have the
right to terminate the MSD joint venture agreement under certain circumstances,
including
- breach of IGEN's obligations, including IGEN's funding obligations to
MSD,
- MSD's termination of Jacob Wohlstadter's employment (other than for cause
or disability),
- if Jacob Wohlstadter is entitled to terminate his employment agreement
for good reason (as defined in his employment agreement) or
- upon a change in control of IGEN, as defined.
MSD and Jacob Wohlstadter have each agreed that the merger and related
transactions will not constitute a change in control for purposes of the MSD
agreements and the Jacob Wohlstadter employment agreement.
As part of the restructuring, IGEN's equity interest in MSD will be
transferred to BioVeris because Roche did not want to acquire the interest. MSD
and MST do not have the right to purchase IGEN's or BioVeris's, as the case may
be, interest in MSD until the MSD joint venture agreement expires, or in certain
cases, is terminated. The MSD joint venture agreement will expire upon
completion of the merger and, as a result, MSD and MST will have the right to
purchase for a purchase price equal to fair market value (to be determined in
accordance with the provisions and procedures set forth in the MSD agreements,
which will include a determination by appraisers if the parties are unable to
agree on fair market value), less a 7.5% discount factor, BioVeris's entire
interest in MSD, including BioVeris's preferred interests that entitle it to a
preferred return on its investment in MSD. The MSD joint venture agreement also
could be terminated prior to its expiration as a result of a breach of IGEN's
obligations, including IGEN's funding obligations to MSD, or as a result of
MSD's termination of Mr. Jacob Wohlstadter's employment (other than for cause or
disability), in which case MSD and MST would have the right to purchase IGEN's
or BioVeris's, as the case may be, interest in MSD, but BioVeris has no
127
reason to believe such an event will occur. BioVeris will no longer be entitled
to a preferred return on its investment in MSD in the event MSD or MST elects to
purchase BioVeris's interest in MSD.
If MSD or MST exercises this right, it will be required to pay IGEN or
BioVeris, as the case may be, the outstanding purchase price plus simple
(cumulated, not compounded) interest at the fixed annual rate of 0.5% over the
prime rate in effect on the date that MSD or MST, as the case may be, elects to
purchase the interests. The purchase price is payable over time in installments
equal to the sum of 5% of MSD net sales, as determined in accordance with MSD
agreements, and 20% of the net proceeds realized by MSD from the sale of its
debt or equity securities in any third-party financing after the date of the
sale of IGEN's or BioVeris's, as the case may be, interest in MSD. In the event
such future net sales or third-party financings do not materialize, BioVeris
will not receive any payments from MSD or MST, as the case may be, for the
purchase of BioVeris's interest in MSD. As security for the payment obligation,
IGEN or BioVeris, as the case may be, will hold a security interest in the
interests in MSD that are being purchased. MST or MSD, as the case may be, may
repay all or any part of the outstanding purchase price plus accrued interest at
any time and from time to time without penalty.
Following the expiration of the MSD joint venture agreement, many of the
licenses and other arrangements with MSD and MST assigned to BioVeris will
continue indefinitely in accordance with their terms. These include:
- the IGEN/MSD license agreement, pursuant to which BioVeris granted to MSD
a worldwide, perpetual, exclusive license (with certain exceptions) to
BioVeris's technology, including ECL technology, for use in MSD's
research program, defined in the MSD agreements;
- the MSD/MST sublicense agreement (but only as to IGEN or BioVeris
technology or improvements developed before IGEN or BioVeris ceases to be
a member of MSD), pursuant to which MST was granted a worldwide,
perpetual, non-exclusive sublicense to use BioVeris's technology to make,
use or sell products or processes applying or related to the technologies
used in the MSD research program outside the diagnostic field; and
- certain indemnification obligations to Mr. Jacob Wohlstadter and to each
officer and member of MSD's board managers with respect to any action
taken by such person during the time JGEN or BioVeris, as the case may
be, was a member of MSD by reason of the fact that such person is or was
an officer or member of MSD's board of managers.
In addition, certain of BioVeris's obligations under the MSD joint venture
agreement will survive its expiration or termination, including:
- to cooperate and work in good faith and use reasonable best efforts to
assist MSD in securing third-party financing,
- confidentiality obligations,
- to make available to MSD the benefits of certain agreements with
third-party licensors, suppliers, vendors, distributors and other
providers,
- to assign to MSD all proprietary information and intellectual property
within the MSD research program or research technologies, as described in
the MSD agreements, and to ensure that its employees protect such
proprietary information,
- to defend and indemnify MSD against all claims arising out of the conduct
of the MSD research program and to maintain liability insurance to cover
the risk of liability resulting from the conduct of that program, and
- unless MSD or MST exercises its right to purchase BioVeris's interests in
MSD, not to vote against or refuse to consent to, agree to or approve any
action supported by MST unless a committee of the BioVeris board of
directors reasonably concludes, after having considered the interests of
MSD, that the action is not in the best interests of BioVeris and its
stockholders.
Notwithstanding expiration or termination of the MSD joint venture
agreement, BioVeris will be required to continue to pay the expenses associated
with prosecuting and maintaining the patents licensed
128
by MST to MSD in connection with the original formation of the MSD joint venture
unless and until MSD or MST exercises its right to purchase BioVeris's interests
in MSD.
Following the expiration or termination of the MSD joint venture agreement,
MSD will be entitled to continue to lease certain facilities and related
equipment from BioVeris (including laboratory facilities located in BioVeris's
corporate headquarters) pursuant to the terms of the existing sublease
agreements with MSD. The term of each sublease will expire one day prior to the
expiration of the prime lease for that facility. Each sublease agreement
provides that, subject to certain exceptions, BioVeris must exercise all
available extension rights under the prime lease. Following termination or
expiration of the MSD joint venture agreement, each of MSD and BioVeris may
unilaterally terminate any or all of the subleases by providing at least 18
months prior written notice of termination. If BioVeris elects to terminate a
sublease for a facility, MSD may elect, notwithstanding any termination of the
sublease, to remain in the subleased facility after the 18-month period expires
for any period of time selected by MSD, but not longer than one day prior to the
expiration of the prime lease (including any extensions of the prime lease).
After a notice of termination of a sublease has been sent, MSD will be required
to pay its pro rata share of all rental and other expenses incurred by BioVeris
under the prime lease. MSD and MST may elect, if either exercises its right to
purchase BioVeris's interests in MSD, to have its rental and expense payment
obligations for the 18-month period included in the purchase price of those
interests in MSD.
MSD has an employment agreement with Mr. Jacob Wohlstadter, its president
and chief executive officer, the current term of which runs through November 30,
2004. The term of the employment agreement will automatically renew for a
12-month period on November 30 of each year unless either MSD or Mr. Jacob
Wohlstadter gives notice of termination no later than 180 days prior to that
renewal date. That employment agreement provides for a salary at the annual rate
of $250,000 through November 30, 2003. Thereafter, the salary is to be increased
as agreed to by MSD and Mr. Jacob Wohlstadter. In addition, Mr. Jacob
Wohlstadter is also eligible to receive, at the discretion of the JVOC of the
IGEN or BioVeris board of directors, as the case may be, an annual cash bonus in
an amount not to exceed 20% of his annual salary. Mr. Jacob Wohlstadter is also
entitled to receive pension, welfare and fringe benefits comparable to those
received by senior executives of BioVeris and other insurance benefits. If MSD
terminates the employment agreement without cause, or Mr. Jacob Wohlstadter
terminates the employment agreement for good reason (which includes a "change in
control" of BioVeris, as defined), Mr. Jacob Wohlstadter will be entitled to
receive, in addition to salary and pro rata bonus and adjustments earned through
the 60th day following the notice of termination, an amount equal to from 3 to
12 times (depending on the reason for the termination) the monthly pro rata
salary, bonus and adjustments in effect at the time of the termination. Under
the employment agreement, Mr. Jacob Wohlstadter is also entitled to receive a
gross-up for any "parachute" excise tax that may be imposed on payments made or
benefits provided pursuant to the agreement. In addition, upon such a
termination prior to the expiration of the MSD joint venture agreement, MSD and
MST will have a joint right to purchase BioVeris's interest in MSD on the terms
described above. BioVeris will be responsible directly or indirectly for all
amounts payable, costs incurred and other obligations under the employment
agreement prior to the termination of BioVeris's funding obligation to MSD upon
completion of the merger, which generally are expected to be paid out of its
funding commitment to MSD. That funding commitment ends when the merger is
completed as will most of BioVeris's obligations under the employment agreement,
except that BioVeris will remain obligated to maintain in effect directors and
officers liability insurance coverage for Mr. Jacob Wohlstadter and to pay Mr.
Jacob Wohlstadter the applicable salary, pro rata bonus and adjustments in
effect at the time of termination as described above and a gross-up for any
"parachute" excise tax that may be imposed. MSD and Mr. Jacob Wohlstadter have
each agreed that the merger and related transactions will not constitute a
change in control for purposes of the MSD agreements and the employment
agreement. BioVeris will also indemnify Mr. Jacob Wohlstadter against certain
liabilities, including liability from the MSD joint venture relating to the
period of IGEN's or BioVeris's involvement with MSD.
Mr. Jacob Wohlstadter has a consulting agreement with IGEN that will be
assumed by BioVeris. This consulting agreement will be automatically renewed on
August 15, 2004, for a period of three years unless either BioVeris or Mr. Jacob
Wohlstadter gives notice to the contrary no later than 90 days before
129
that date. Pursuant to the consulting agreement, Mr. Jacob Wohlstadter will be
entitled to receive such fees as BioVeris and Mr. Jacob Wohlstadter agree to
when consulting services are requested by BioVeris. BioVeris has no obligation
to request any consulting services from Mr. Jacob Wohlstadter. During fiscal
2002, Mr. Jacob Wohlstadter received $275,000 from IGEN for consulting services
performed for IGEN for the period 1995 through 2001. Mr. Jacob Wohlstadter did
not perform any compensable consulting services during fiscal 2002, 2003 or the
six months ended September 30, 2003. In his role as a consultant, Mr. Jacob
Wohlstadter also received stock option grants from IGEN. In May 1997, he was
granted options to purchase 180,000 shares of IGEN common stock with an exercise
price of $6.00 per share, which was the fair market value on the date of grant.
These options will expire on May 8, 2007, and are fully vested. In August 2000,
Mr. Jacob Wohlstadter was granted options to purchase 75,000 shares of IGEN
common stock, with an exercise price of $18.75 per share, which was the fair
market value on the date of grant. These options will expire on August 1, 2010,
and 48,749 shares are exercisable as of December 1, 2003. Upon completion of the
merger, these options will be canceled and Mr. Jacob Wohlstadter will have the
right to receive for each share covered by such option cash from Roche equal to
the excess of $47.25 over the exercise price of such option (without interest)
and one share of BioVeris common stock.
Mr. Jacob Wohlstadter and JW Consulting Services, L.L.C., a company
established and wholly-owned by Mr. Jacob Wohlstadter, have an indemnification
agreement with IGEN that BioVeris will assume. Pursuant to the indemnification
agreement, BioVeris will indemnify Mr. Jacob Wohlstadter and JW Consulting
Services, L.L.C. against any claims arising out of the performance or
non-performance of services to or for the benefit of BioVeris.
For more information about the MSD agreements and BioVeris's relationship
with MSD, see "Certain Relationships and Related Party Transactions."
Product development for BioVeris's clinical diagnostic products is at an
early development stage and is subject to a number of technical and commercial
uncertainties and in part depends upon BioVeris's ability to enter into new
collaborative arrangements. Accordingly, BioVeris has not yet completed a
business plan for its clinical diagnostic products, does not have definitive
product introduction timelines or budgets and has not determined the additional
funding, personnel, facilities, equipment or technology that may be required to
implement its plans.
Furthermore, BioVeris will need substantial amounts of money to fund its
operations on an ongoing basis. BioVeris expects its available cash to be
sufficient to fund its operations for at least one year, but it cannot predict
how long its available cash will be sufficient to fund its operations
thereafter. In this regard, BioVeris expects that it will from time to time have
discussions with third parties, including multinational corporations, regarding
various business arrangements including distribution, marketing, research and
development, joint venture and other business agreements, which could provide
for substantial up-front fees or payments. BioVeris cannot assure you that it
will successfully complete any of the foregoing arrangements and access to funds
could be adversely impacted by many factors, including the volatility of the
price of BioVeris common stock, continuing losses from its operations,
establishment of new business arrangements, the status of new product launches,
general market conditions and other factors described under "Risk Factors" and
elsewhere in this proxy statement/prospectus.
If BioVeris is unable to raise additional capital, it may have to scale
back, or even eliminate, some programs. Alternatively, BioVeris may consider
pursuing arrangements with other companies, such as granting licenses or
entering into joint ventures or collaborations, on terms that may not be
favorable to it.
As of September 30, 2003, BioVeris had no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES
A critical accounting policy is one that is both important to the portrayal
of BioVeris's financial position and results of operations and requires the
application of difficult, subjective or complex judgments by management. As a
result, critical accounting policies are subject to an inherent degree of
uncertainty.
130
In applying those policies, management uses its judgment to determine the
appropriate assumptions to be used in the determination of certain estimates.
These estimates are based on BioVeris's management's experience, terms of
existing contracts, observance of trends in the industry, information provided
by customers, and information available from other outside sources, as
appropriate. BioVeris's critical accounting polices include:
Expense Allocations -- The assets and businesses of BioVeris have
historically been owned, operated and fully integrated with IGEN. The financial
statements of BioVeris have been prepared and are presented as if BioVeris had
been operating as a separate entity. In order to fairly present the operating
results of BioVeris, these financial statements reflect the application of
certain estimates and allocations. BioVeris's consolidated statements of
operations include all costs that are directly attributable to the BioVeris
businesses, as well as certain expenses of IGEN that have been allocated to
BioVeris using various assumptions. These expenses include an allocated share of
general and administrative salaries as well as certain other shared costs
(primarily facility, human resources, legal, accounting and other administrative
costs) which were allocated based upon percentage of total revenue or percentage
of total headcount, as appropriate. While management believes that the
allocation methodologies are reasonable and appropriate, different allocation
methodologies could result in changes to BioVeris's operating results.
Revenue Recognition -- BioVeris derives revenue principally from three
sources: product sales, royalty income and contract fees. Product sales revenue
is generally recognized when persuasive evidence of an arrangement exists, the
price to the buyer is fixed and determinable, collectibility is reasonably
assured and the product is shipped to the customers thereby transferring title
and risk of loss. For instrument sales, the instrument and the related
installation are considered to be separate elements under EITF 00-21. Revenue is
recognized for the instrument upon shipment and is recognized for the
installation when complete based upon the residual value method. For instrument
and reagent sales, there is no option of return and refund, only the option to
repair or replace. Other than the installation required for the instruments,
there are no contingencies, allowances or other post-sale obligations. Rental
revenue associated with instruments that are leased is recognized ratably over
the life of the lease agreements. Revenue associated with extended warranty
arrangements is recognized over the term of the extended warranty contract.
Royalty income is recorded when earned, based on information provided by
licensees. Revenue from services performed under contracts is recognized when
obligations under the contract have been satisfied. The satisfaction of
obligations may occur over the term of the underlying customer contract, if the
contract is based on the achievement of certain "milestones," or may occur at
the end of the underlying customer contract, if based only upon delivery of the
final work product.
The majority of BioVeris's product sales and contract fees contain standard
terms and conditions. Certain transactions may contain negotiated terms that
require contract interpretation to determine the appropriate amount of revenue
to be recognized. In addition, BioVeris must assess whether collectibility is
reasonably assured. While management believes its interpretations and judgments
are reasonable, different assumptions could result in changes in the timing of
revenue recognition.
Joint Venture Accounting -- BioVeris accounts for its ownership in the MSD
joint venture on the equity method as it has determined that it does not control
MSD's operations. Factors considered in determining BioVeris's level of control
include the fact that it has less than 50% of the voting equity interest in MSD;
that it does not have exclusive authority over MSD decision making and has no
ability to unilaterally modify the joint venture agreements; and that it has the
right to appoint only one out of two seats on MSD's board of managers. A
different assessment of these factors could provide for the use of consolidation
accounting rather than the equity method, in which case a consolidation of
BioVeris's financial statements with those of MSD would be appropriate.
Consolidation accounting would require certain reclassifications within
BioVeris's consolidated financial statements but would not materially effect
BioVeris's financial position or net loss. See "Notes to Consolidated Financial
Statements -- Note 4 -- Meso Scale Diagnostics Joint Venture."
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities," or FIN 46. FIN 46 provides guidance on variable
interest entities such as the MSD joint
131
venture and the framework through which an enterprise assesses consolidation of
a variable interest entity. BioVeris adopted FIN 46 as of October 1, 2003 and
has determined that MSD qualifies as a variable interest entity under FIN 46
because substantially all of MSD's funding is being provided by BioVeris and
BioVeris's voting rights are not proportional to its obligation to absorb a
majority of the potential future losses of MSD. Accordingly, beginning October
1, 2003, BioVeris will consolidate the financial results of MSD. Consolidation
accounting will require certain reclassifications within BioVeris's consolidated
financial statements, but is not expected to materially effect its financial
position or net loss, as BioVeris has already recorded approximately 100% of
MSD's losses. Historical financial information of MSD is summarized in Note 4 of
BioVeris's consolidated financial statements and the audited MSD financial
statements are included in the March 31, 2003 IGEN Form 10-K and incorporated by
reference into the registration statement of which this proxy
statement/prospectus is a part.
Allowance for Doubtful Accounts -- BioVeris maintains reserves on customer
accounts where estimated losses may result from the inability of its customers
to make required payments. These reserves are determined based on a number of
factors, including the current financial condition of specific customers, the
age of accounts receivable balances and historical loss rates. If the financial
condition of BioVeris's customers were to deteriorate, resulting in an
impairment of their ability to make payments, an additional allowance may be
required.
Inventory -- BioVeris records its inventory at the lower of cost or market
using the first-in, first-out method. BioVeris regularly reviews inventory
quantities on hand and records a reserve for excess and obsolete inventory based
primarily on an estimated forecast of product demand and production requirements
for the next twelve months. Reserves are recorded for the difference between the
cost and the market value. Those reserves are based on significant estimates.
BioVeris's estimates of future product demand may prove to be inaccurate, in
which case BioVeris may have understated or overstated the provision required
for excess and obsolete inventory. In addition, BioVeris's industry is
characterized by technological change, frequent new product development and
product obsolescence that could result in an increase in the amount of obsolete
inventory quantities on hand. Although BioVeris makes every effort to ensure the
accuracy of its forecasts of future product demand, any significant
unanticipated changes in demand or technological developments could have a
significant impact on the values of BioVeris's inventory and BioVeris's reported
operating results.
Evaluation of Long-lived Assets -- BioVeris has different long-lived assets
recorded on its balance sheet that include equipment and leasehold improvements,
investments and other assets. BioVeris evaluates the potential impairment of
long-lived assets based whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be fully recoverable. In evaluating
the recoverability of an asset, management's policy is to compare the carrying
amount of an asset with the projected undiscounted cash flow. While management
believes that its projections are reasonable and that no impairment of these
assets exists, different assumptions could affect these evaluations and result
in impairment charges against the carrying value of these assets.
Warranty Reserve -- BioVeris warrants its products against defects in
material and workmanship for one year after sale and records estimated future
warranty costs at the time revenue is recognized. A reserve for future warranty
claims is recorded based upon management's review of historical results,
supplemented by expectations of future costs. Unanticipated changes in actual
warranty costs could impact BioVeris's operating results.
Capitalized Software Costs -- BioVeris records software development costs
in accordance with SFAS No. 86, "Accounting for the Costs of Computer Software
to be Sold, Leased, or Otherwise Marketed." BioVeris applies its judgment in
determining when software being developed has reached technological feasibility,
and at that point BioVeris would capitalize software development costs. To date,
software development has been substantially completed concurrently with the
establishment of technological feasibility, and accordingly, no costs have been
capitalized to date.
132
RECENT ACCOUNTING PRONOUNCEMENTS
In November 2002, the Financial Accounting Standards Board, or FASB, issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Guarantees of Indebtedness of Others," or FIN 45. FIN 45
establishes new disclosure and liability recognition requirements for direct and
indirect guarantees with specified characteristics. The initial recognition and
measurement provisions of FIN 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. The disclosure
requirements in FIN 45 are effective for both annual and interim periods ending
after December 15, 2002. BioVeris adopted FIN 45 as of March 31, 2003 and the
implementation did not have a material effect on its financial position, results
of operations or cash flows.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of SFAS No. 123," or
SFAS 148. SFAS 148 amends SFAS 123, "Accounting for Stock-Based Compensation,"
or SFAS 123, to provide alternative methods of voluntarily transitioning to the
fair value based method of accounting for stock-based employee compensation.
SFAS 148 also amends the disclosure requirements of SFAS 123 to require
disclosure of the method used to account for stock-based employee compensation
and the effect of the method on reported results in both annual and interim
financial statements. This pronouncement is effective for both annual and
interim periods beginning after December 15, 2002. BioVeris has elected to
follow the recognition and measurement principles of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," in its accounting
for employee stock options. In accordance with SFAS 148, BioVeris has adopted
the annual and interim period disclosure requirements in this proxy statement/
prospectus.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities," or FIN 46. FIN 46 provides guidance on variable
interest entities such as the MSD joint venture and the framework through which
an entity assesses consolidation of a variable interest entity. BioVeris adopted
FIN 46 as of October 1, 2003 and has determined that MSD qualifies as a variable
interest entity under FIN 46 because substantially all of MSD's funding is being
provided by BioVeris and BioVeris's voting rights are not proportional to its
obligation to absorb a majority of the potential future losses of MSD.
Accordingly, beginning October 1, 2003, BioVeris will consolidate the financial
results of MSD. Consolidation accounting will require certain reclassifications
within BioVeris's consolidated financial statements but is not expected to
materially effect its financial position or net loss, as BioVeris has already
recorded approximately 100% of MSD's losses. Historical financial information of
MSD is summarized in Note 4 of BioVeris's consolidated financial statements and
the audited MSD financial statements are included in the March 31, 2003 IGEN
Form 10-K and incorporated by reference into the registration statement of which
this proxy statement/prospectus is a part.
In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133 on
Derivative Instruments and Hedging Activities," or SFAS 149. SFAS 149 amends and
clarifies, financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The amendments set forth in SFAS 149 require that
contracts with comparable characteristics be accounted for similarly. SFAS 149
is generally effective for contracts entered into or modified after June 30,
2003 and for hedging relationships designated after June 30, 2003. The
implementation of SFAS 149 did not have a material effect on BioVeris's
financial position, results of operations or cash flows.
In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial
Instruments with Characteristics of Both Liability and Equity," or SFAS 150.
SFAS 150 establishes standards regarding the classification and measurement of
certain financial instruments with characteristics of both liabilities and
equity. SFAS 150 is effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. The implementation of SFAS 150 did
not have a material effect on BioVeris's financial position, results of
operations or cash flows.
133
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The assets and businesses of BioVeris have historically been owned and
operated by IGEN, which holds all cash in a centralized treasury and has
provided all of the necessary funding for the operations of BioVeris.
Accordingly, no cash is reflected on the consolidated balance sheets of BioVeris
and there are no market risk sensitive instruments.
BioVeris is exposed to changes in exchange rates where it sells direct in
local currencies, primarily in the United Kingdom and Germany. Certain other
foreign sales are denominated in U.S. dollars and have no exchange rate risk.
Gains and losses resulting from foreign currency transactions have historically
not been material.
134
DESCRIPTION OF THE BIOVERIS BUSINESS
BioVeris is a newly formed wholly-owned subsidiary of IGEN. Upon completion
of the merger and related transactions, BioVeris will become an independent,
publicly-traded company. The assets and businesses of BioVeris have historically
been owned and operated by IGEN. The following description of the BioVeris
business assumes the restructuring and the merger and related transactions have
been completed.
OVERVIEW
BioVeris develops, manufactures and markets its M-SERIES(R) family of
products, which can serve as a platform for diagnostic systems to be used for
the detection and measurement of biological or chemical substances. BioVeris
incorporates its technologies into its instrument systems, tests and reagents,
which are the biological and chemical components used to perform such tests.
Using the M-SERIES platform, BioVeris intends to integrate technologies and
products to develop small, expandable and modular systems that can perform a
wide variety of immunodiagnostic and nucleic acid tests.
BioVeris's products are designed to be sold in the worldwide diagnostics
markets, including:
- Clinical diagnostics. The clinical diagnostics market includes the
testing of patient samples to measure the presence of disease and monitor
medical conditions. BioVeris is developing products to be used in the
clinical diagnostics market and believes that its products are best
suited for the immunodiagnostic and nucleic acid testing market segments
of the clinical testing market. The immunodiagnostic and nucliec acid
testing market segment sizes are estimated to be $6 billion and $1.5
billion, respectively.
- Non-clinical diagnostics for the biodefense, life science and industrial
markets. The non-clinical diagnostics market includes biodefense
products for the detection of bacteria, viruses and toxins that may pose
a military or public health threat; life science testing for drug
discovery and development that is performed by pharmaceutical and
biotechnology companies; and industrial testing for the detection of
foodborne and waterborne disease causing pathogens. The life science
market size is estimated to be $2.5 billion.
BioVeris believes that the emergence of simple, more accurate and
cost-effective clinical diagnostic products is shifting the site of clinical
diagnostic testing from clinical reference laboratories and central hospital
laboratories to decentralized patient care centers, such as physicians' offices,
ambulatory clinics, hospital emergency rooms, surgical and intensive care units,
hospital satellite laboratories and nurses' stations, which are collectively
referred to in this proxy statement/prospectus as clinical point-of-care sites.
BioVeris's own product development efforts will initially be focused on M-SERIES
instruments and tests for the clinical diagnostics market, particularly for
point-of-care sites. BioVeris will seek to develop, market and sell products for
the clinical point-of-care market segment through a combination of direct
efforts and collaborative arrangements. BioVeris also intends to pursue
opportunities in the clinical reference laboratory and central hospital
laboratory market segments through collaborative arrangements.
The M1-M clinical analyzer is the first clinical diagnostic system being
developed by BioVeris and builds on the M-SERIES instruments currently being
sold by IGEN in the biodefense and life science markets. BioVeris's initial
commercial focus for the M1-M will be to provide cardiac assays that test for
heart attack and congestive heart failure. BioVeris is developing the cardiac
assays using, among other things, improvements licensed from an affiliate of
Roche. BioVeris believes that these improvements will reduce product development
timelines. BioVeris also believes that the M1-M clinical analyzer will provide
results to a physician rapidly with the same levels of sensitivity, accuracy or
consistency as a large instrument in a clinical reference laboratory or in a
central laboratory, thereby permitting the physician to make a more timely
decision regarding the patient's course of treatment. BioVeris will seek
approval from the FDA for the M1-M clinical analyzer and other in vitro
diagnostics products at the appropriate stage of their product development.
135
BioVeris's M-SERIES instruments are already being used in biodefense
programs for homeland security, including by the DOD. BioVeris believes there
will be an increasing opportunity to sell its products for biodefense tools by
governmental and military organizations around the world, as well as in public
health. BioVeris is also selling two types of M-SERIES instruments for life
science research to pharmaceutical and biotechnology researchers, as well as to
scientists at academic and government research institutions. BioVeris also
intends to pursue opportunities in the biodefense and life science market
segments through a combination of direct efforts and collaborative arrangements.
BioVeris will own or have rights to use the trademarks BioVeris, M-SERIES
and TRICORDER. IGEN owns the trademarks IGEN, ORIGEN and PATHIGEN, which it will
retain in the merger. BioVeris will have no right or interest in those
trademarks. This proxy statement/prospectus refers to brand names, trademarks
and service marks of other companies and those brand names, trademarks and
service marks are the property of those other holders.
BioVeris was organized as IGEN Integrated Healthcare, LLC, a Delaware
limited liability company on June 6, 2003, and converted to BioVeris
Corporation, a newly formed Delaware corporation on September 22, 2003.
BioVeris's executive offices are located at 16020 Industrial Drive,
Gaithersburg, Maryland 20877.
BIOVERIS'S STRATEGY
BioVeris's strategy is based on the direct development and sale of its
products utilizing its technologies, while at the same time entering into
collaborations with third parties that can assist BioVeris in its product
development, manufacturing and marketing efforts. Key elements of BioVeris's
strategy are to:
- Pursue collaborative relationships to accelerate new product development
and enhance global manufacturing and marketing capabilities. BioVeris
intends to pursue collaborative relationships that would help BioVeris to
achieve its goals, particularly with respect to the development and
manufacturing of new products and entry into new markets. BioVeris will
seek to partner with industry leaders that would complement BioVeris's
capabilities by manufacturing or distributing co-developed products
through their sales organizations. Negotiations are ongoing with a world
leader in mobile electronics and systems technology to manufacture one of
BioVeris's instruments. There can be no assurance that these negotiations
will result in an agreement with such manufacturer on terms favorable to
BioVeris, if at all or that such manufacturer will be successful in
manufacturing BioVeris's instruments.
- Establish leadership positions in emerging markets. BioVeris has
identified new market opportunities and is developing and providing
innovative products for those markets based on its technologies. BioVeris
had previously identified the emerging biodefense market and utilized its
ECL technology and innovation to develop and provide leading edge
products for this market. BioVeris plans to continue to develop and
launch new products through internal development, collaborations and
possibly through acquisitions. BioVeris intends to explore opportunities
to continue to expand its presence in the biodefense market and develop
products, including unique assays, for the emerging clinical
point-of-care diagnostics market. In addition, BioVeris plans to focus on
identifying therapeutic peptides and antibodies and on the potential link
between the use of these peptides and antibodies and diagnostic tests,
which could allow for better treatment of patients by providing
physicians the ability to more promptly and efficiently diagnose patients
who should take a particular medication.
- Develop and market product line extensions and an expanded menu of
assays. BioVeris intends to continue to develop and market extensions of
its existing products through new instrumentation and an expanded menu of
assays. BioVeris plans to extend the M-SERIES family of instruments,
which currently includes two commercial products, to include new
instruments for the biodefense and clinical point-of-care diagnostics
markets. In addition, BioVeris plans to continue to add new assays to its
existing menu of currently available assays. For example, BioVeris's
biodefense menu of
136
assays currently includes assays for biological agents, such as
staphylococcus enterotoxin B and botulinum toxin and BioVeris plans to
expand this menu to include additional assays, such as for anthrax and
smallpox. Using this approach, BioVeris expects to expand its presence in
the market and create brand recognition.
BIOVERIS'S TECHNOLOGY
BioVeris's M-SERIES(R) family of products will incorporate a number of
technologies, including:
- ECL technology developed by IGEN and owned by BioVeris;
- various improvements to ECL technology developed by Roche Diagnostics and
licensed to BioVeris;
- polymerase chain reaction technology developed by Roche Diagnostics and
licensed to BioVeris for use in several specified markets, including the
human and animal in vitro diagnostics markets, which is referred to in
this proxy statement/prospectus as PCR technology; and
- unit dose cartridge technology for packaging reagents in a ready-to-use
format that remain stable at room temperature.
In addition, BioVeris is seeking to incorporate novel centrifugation
technology for separating serum or plasma from whole blood cells.
ECL TECHNOLOGY
ECL technology is a technology based on electrochemiluminescence that is
protected by patents in the United States and internationally.
ECL technology permits the detection and measurement of a biological or
chemical substance within a given sample. It works by labeling the targeted
substance within a sample using a compound and binding the newly labeled
substance to magnetizable beads. The beads can then be separated from the rest
of the sample using a magnet. When this newly labeled substance is stimulated,
the label emits light at a particular wavelength. The light emitted by the label
can be measured with a high degree of accuracy. The level of intensity of the
light emitted by the label is determined by the amount of the targeted
biological substance present in the sample for the label to attach itself to.
Thus, the light emissions permit the accurate detection and measurement of the
targeted biological or chemical substance.
ECL technology provides a uniform format that can be used to conduct a
multitude of tests, including immunodiagnostic tests and nucleic acid tests. The
essential component of an ECL technology-based system is the flow cell, which
contains a magnet to separate the labeled substance from the sample being tested
and a light detector to measure the electrochemiluminescence. The flow cell has
been designed so that it can be incorporated into a variety of instruments,
ranging from large central laboratory random access systems to small batch
systems.
BioVeris believes that the major features and benefits of ECL
technology-based systems are:
- Simplicity: uniform testing format reduces time and labor in performing
a test or series of tests and permits complete automation of the testing
process.
- Flexibility: enables a single instrument to perform immunodiagnostic
tests on large and small molecules and to perform nucleic acid tests,
including in the form of DNA and RNA tests.
- Cost: reduces the cost per test by minimizing the amount of expensive
reagents needed and the number of steps required to prepare a sample for
testing.
- Speed: reduces time from test set-up to detection, producing rapid
results and enabling high sample throughput.
- Sensitivity: allows detection of targeted biological substances at very
low concentrations.
- Consistency: provides highly-reproducible measurements.
137
- Accuracy: provides results that are identical or close to the standard
reference measurement.
- Stability: extends the shelf-life of the reagent that contains the label
used in testing and improves measurement accuracy.
BioVeris believes that ECL technology is well suited for the continued
development and sale of the M-SERIES family of instruments that can be used in
all of BioVeris's target diagnostic markets. BioVeris believes the technology
will permit virtually all immunodiagnostic and nucleic acid tests to be
performed on similar instrumentation using the same detection method.
ECL technology is well established in the market, evidenced by the fact
that BioVeris's licensees have developed multiple product lines based on ECL
technology and have sold or placed over 9,000 systems with customers worldwide
which generate over $500 million in annual sales. Substantially all of these
sales and placements have been made by Roche, one of the world's leading
providers of clinical diagnostic products, which as a result of its ownership of
IGEN upon completion of the merger will have a worldwide, non-exclusive,
royalty-free license for BioVeris's ECL technology for use with certain defined
systems and immunoassay methods for the clinical diagnostics market. BioVeris
will not receive royalties or any other payments as a result of sales by Roche
of products in accordance with this license. There can be no assurance that
BioVeris will succeed in profitably developing, marketing and selling products
based on ECL technology.
IMPROVEMENTS FROM ROCHE
During the development of its Elecsys product line, certain affiliates of
Roche made improvements to intellectual property licensed to it by IGEN. These
improvements are protected by patents, know-how and trade secrets and relate to:
- Roche Diagnostics' ECL instruments and all aspects of ECL assays
developed prior to the completion of the merger;
- certain PCR technology; and
- certain aspects of ECL technology and robotics used or developed prior to
the completion of the merger.
The license may be used without a field restriction (except as set forth in
the next sentence) to develop, make, reproduce, modify, use, sell and otherwise
commercially exploit any product or service based on ECL technology. In
addition, BioVeris is licensed to use certain intellectual property rights of
Hitachi High Technology Corporation and its affiliates only outside the field
defined in the improvements license agreement to develop, make, reproduce,
modify, use, sell and otherwise commercially exploit any product or services
based on ECL technology. Subject to an exception, the field in the improvements
license agreement is the same as the field in the license agreement. BioVeris
may sublicense rights under both of these licenses to affiliates and third
parties.
The license does not permit BioVeris to develop, use, manufacture, sell or
otherwise commercialize instruments based on ECL technology that meet certain
specifications and use specific intellectual property, which are referred to in
this proxy statement/prospectus as copycat instruments, in the field. In
addition, the license does not permit BioVeris to develop, use, manufacture or
sell ECL assays that contain labeling that make them useable on ECL instruments
manufactured, sold or placed by Roche Diagnostics or its licenses or resellers,
or on copycat instruments, in the field.
For more information about the improvements license agreement, see
"Commercial Agreements -- Improvements License Agreement."
PCR TECHNOLOGY
PCR technology includes the amplification of specific nucleic acid
sequences to a sufficient quantity of the nucleic acid sequence to permit
detection and quantification. The process of nucleic acid
138
amplification is commonly used for diagnostic procedures involving infectious
agents, such as the AIDS virus, because of the need to detect the smallest
amount of virus possible in the blood or other clinical samples.
The PCR license agreements obtained by BioVeris will allow it to develop
nucleic acid tests for several specified markets, including the human and animal
in vitro diagnostics markets. BioVeris believes that nucleic acid tests are
currently the fastest growing segment of the clinical diagnostics market and
would complement BioVeris's immunodiagnostic product line. For more information
about the PCR license agreements, see "Commercial Agreements -- PCR License
Agreements."
Roche has advised BioVeris that Applied Biosystems has notified Roche that
one or more of the PCR licenses granted by certain Roche affiliates to BioVeris
under the improvements license and the PCR license agreements may infringe
exclusive rights to PCR technology held by, or other contract rights of, Applied
Biosystems. Applied Biosystems has commenced litigation and arbitration against
Roche regarding their respective rights relating to PCR technology. Certain
Roche affiliates have made certain representations and provided certain
warranties on their right to grant the licenses that have been granted to
BioVeris, including representations and warranties that: the rights and licenses
granted under the improvements license agreement and the performance by Roche
Diagnostics of its obligations under the improvements license agreement will not
conflict with any agreement, contract or other arrangement to which it is a
party or by which it is bound; Roche Diagnostics has title to or license rights
sufficient to grant such license rights granted under the improvements license
agreement to BioVeris and its affiliates; Roche Diagnostics has not licensed or
otherwise disposed of such licensed intellectual property rights in any manner
that limits BioVeris's or its affiliates' exploitation of the licenses granted
by Roche Diagnostics under the improvements license agreement; certain Roche
affiliates have the full power and right to grant to BioVeris and its affiliates
the licenses granted under the PCR license agreements; and the execution by
certain Roche affiliates of the PCR license agreements will not constitute a
breach or default under any contract, instrument or agreement to which such
Roche affiliates or any of their affiliates are a party or by which such Roche
affiliates or any of their affiliates are bound. Roche has advised IGEN that it
believes that Applied Biosystems' allegations are without merit and intends to
contest them vigorously. There are no assurances that BioVeris will not be named
as a defendant in either of those actions or that Roche will prevail in the
litigation and arbitration, or that the terms of any resolution or settlement of
these proceedings will not be unfavorable to BioVeris. The results of these
legal proceedings may limit, preclude or interfere with BioVeris's ability to
exploit certain PCR technology licensed under the improvements license and PCR
license agreements. See "Risk Factors -- Risks Relating to BioVeris and Its
Business -- Because BioVeris intends to develop products that are based on
patents and technology that it has licensed from others, the owners of those
patents and technology might claim that products developed or sold by BioVeris
violate those licenses. Additionally, a third party might object to a license
that BioVeris holds or to the scope of the license granted to BioVeris."
UNIT DOSE CARTRIDGE TECHNOLOGY
BioVeris has a unique technology utilizing a disposable unit dose cartridge
that BioVeris expects will be inexpensive to manufacture and contains all the
reagents necessary to perform several different immunoassays on a single sample
of blood from a patient. These reagents will be packaged so that they remain
stable at room temperature for several months. This method of packaging reagents
differs from the typical method of packaging reagents in a container that holds
reagents for 100 to 200 tests for a single type of immunoassay and usually must
be refrigerated. BioVeris has demonstrated that the test results using the unit
dose cartridge are accurate and consistent with the results obtained using
conventional instruments and kits used in central hospital laboratories.
BioVeris believes the ease of use, room temperature stability, accuracy and
consistency of test results associated with this technology are important
features for use in clinical point-of-care sites and biodefense applications.
139
CENTRIFUGATION TECHNOLOGY
BioVeris is seeking to incorporate into its M-SERIES family of products
novel centrifugation technology that it is negotiating to acquire. BioVeris
believes that this centrifugation technology will substantially enhance the ECL
technology-based instruments that BioVeris intends to develop for clinical
point-of-care sites. IGEN has funded feasibility studies for this centrifugation
method that demonstrate that this centrifugation method can separate serum or
plasma from whole blood in less than 60 seconds and in the process deliver the
serum or plasma to a disposable unit dose cartridge. The serum or plasma has the
same characteristics, specifically being free of white blood cells, red blood
cells and platelets without rupturing these cells, as serum or plasma separated
from whole blood using conventional methods. This novel centrifuge is small and
BioVeris believes it can be incorporated into instruments that it is developing.
The conventional process of separation involves a centrifugation step that takes
15 minutes. Following separation, a technician must manually remove the tube of
blood from the centrifuge and pore off the serum or plasma into a test cup,
which much be done using a biological safety cabinet to avoid the risk of
infection. The novel centrifugation method being evaluated by BioVeris has the
potential to avoid this safety hazard as well as the potential for advantages of
speed, lower cost and ease of use. In a point-of-care setting this technology
may also eliminate the delays associated with processing multiple samples. These
delays occur when the technician performing the test has to wait, as long as 30
minutes, before loading more blood samples.
PRODUCTS AND MARKETS USING BIOVERIS TECHNOLOGY
The following table summarizes the range of products that BioVeris and its
licensees have developed and are developing using BioVeris technology. For a
description of the commercial arrangements and license agreements that BioVeris
has with licensees and collaborators see "-- Collaborations and License
Arrangements and "Commercial Agreements." In general, BioVeris will receive
royalties or other payments as a result of product sales by its licensees other
than Roche.
BIOVERIS PRODUCTS CUSTOMER APPLICATION MARKET STATUS
----------------- -------------------- ------ ------
M-SERIES (M-1M Clinical Screen, monitor and Clinical Development
Analyzer System and diagnose medical
clinical diagnostic conditions
tests)
Picolumi Screen, monitor and Clinical Distribution
diagnose medical and
conditions manufacturing
rights from
Eisai (outside
of Japan)
BioVeris(TM) Detection Detection of bacteria, Biodefense Product sales
System and Reagents viruses and toxins
Drug Discovery and Life science Product sales
Development
M-SERIES (M384 Analyzer Drug discovery and Life science Product sales
and Reagents) development
M-SERIES (M-1R Drug discovery and Life science Product sales
Analyzer) development
Detection of food and Biodefense Pre-launch
beverage contaminants
and bacteria, viruses
and toxins
Test Panel for Detection of food and Industrial Product sales
BioVeris(TM) beverage contaminants
Detection System
Cell Culture Reagents Biological research Life science Product sales
140
LICENSEE PRODUCTS CUSTOMER APPLICATION MARKET STATUS LICENSEE
----------------- -------------------- ------ ------ --------
Elecsys 2010/1010/ ECL Screen, monitor and Clinical Product sales Roche
module of E170 diagnose medical
conditions
NucliSens/NASBA QR Screen, monitor and Clinical Product sales bioMerieux
diagnose medical
conditions
Screen, monitor and Life science Product sales bioMerieux
diagnose medical
conditions
Picolumi Screen, monitor and Clinical Product sales Eisai (Japan)
diagnose medical
conditions
Sector HTS/Sector PR Drug discovery and Life science Product sales MSD
development
BIOVERIS PRODUCTS AND MARKETS
CLINICAL DIAGNOSTICS
BioVeris plans to manufacture and sell products utilizing its technologies
for the clinical in vitro diagnostics market. In vitro diagnostic testing, which
is the process of analyzing blood, urine and other samples to screen for,
monitor and diagnose diseases and other medical conditions or to determine the
chemical and microbiological constituents of the samples is one type of testing
used by the clinical diagnostics market. BioVeris believes that ECL technology
is best suited for the blood-based immunodiagnostic and nucleic acid testing
segments of the clinical diagnostics market. The immunodiagnostic market segment
was estimated to have had approximately $6 billion in annual sales in 2002. The
nucleic acid testing market segment was estimated to have had approximately $1.5
billion in annual sales in 2001. Clinical diagnostic testing is performed in
many locations, including testing by clinical reference laboratories, central
hospital laboratories, and blood banks, as well as testing at clinical
point-of-care sites. BioVeris's products for the clinical in vitro diagnostics
market will generally require approval or clearance by the FDA prior to the
marketing of the products, which BioVeris will seek in the appropriate stage of
product development. See "Business -- Government Regulation -- Clinical
Diagnostic Products" for a more detailed description of the government
regulations to which BioVeris is subject in connection with products for the
clinical in vitro diagnostics market.
Point-of-Care Systems. Many diagnostic tests performed today involve a
follow-up treatment decision by the physician, but the test and treatment
process are usually decoupled. In most situations, samples of blood are drawn
from a patient in the physician's office, emergency room or hospital room and
sent to a laboratory at another location where the tests are performed. Test
results are returned to the physician several hours or even several days later.
BioVeris believes that there is demand among physicians, patients and
third-party payers for clinical diagnostic products that reduce turnaround time
by bringing laboratory testing closer to the patient and providing the physician
with fast, quality and cost-effective results thereby permitting the physician
to deliver prompt feedback to the patient.
Most immunodiagnostic systems for clinical point-of-care sites have had
limited market penetration because of the lengthy turnaround time for test
results, the need for skilled labor to perform the tests and the high cost of
the tests. BioVeris believes that the emergence of simple, more accurate and
cost-effective diagnostic products is shifting the site of in vitro diagnostic
testing from clinical reference laboratories and central hospital laboratories
to alternative sites.
BioVeris is developing a new instrument system, the M1-M clinical analyzer,
to be a part of its M-SERIES family of instruments. BioVeris plans to integrate
ECL, PCR, and other technologies into a small, expandable and modular system for
the performance of immunodiagnostic and nucleic acid tests. The M1-M clinical
analyzer is being designed for ease of use and the ability to provide fast
results and is
141
expected to be marketed to clinical point-of-care sites bringing laboratory
testing closer to the patient thereby providing the associated benefits
described above. BioVeris believes that the M1-M clinical analyzer may also be
used in clinical reference laboratories, central hospital laboratories, and
blood banks, which presently constitute the majority of the clinical diagnostics
market.
Using, among other things, improvements from certain affiliates of Roche,
BioVeris plans to initially focus on the development and sale of cardiac assays
that test for heart attack and congestive heart failure. The currently available
cardiac tests for use at the clinical point-of-care sites are not as sensitive,
accurate, or consistent as similar tests run in a central laboratory. BioVeris
believes the M1-M can provide rapid turn-around time with the same levels of
sensitivity, accuracy and consistency as a large instrument in a clinical
reference laboratory or a hospital central laboratory. In addition, BioVeris
intends to develop other immunoassays.
BioVeris believes that its novel centrifugation method may be incorporated
into the M1-M clinical analyzer to separate serum or plasma from whole blood,
providing additional advantages to the use of the M1-M in clinical point-of-care
sites.
BioVeris is exploring collaborative business arrangements to accelerate the
development, manufacture and marketing of ECL technology-based products for
clinical point-of-care applications.
Clinical/Reference and Central Hospital Laboratory Systems. One of the
significant applications of ECL technology is in large, highly automated
clinical immunodiagnostic systems used in clinical reference laboratories,
central hospital laboratories and blood banks. These laboratories currently
constitute the vast majority of the clinical diagnostics market. To serve these
laboratories, systems must be able to perform a wide variety of immunodiagnostic
tests on a large number of samples consistently, cost effectively and quickly.
Although BioVeris does not currently manufacture or sell products for the
clinical diagnostics market, it intends to pursue opportunities for the clinical
reference and central hospital laboratory market segment through collaborative
arrangements.
NON-CLINICAL DIAGNOSTICS
Biodefense. BioVeris is commercializing products in the emerging market
segment for biodefense, which involves the detection of bacteria, viruses and
toxins that may pose a military or public health threat, as well as for the
detection of foodborne and waterborne disease causing pathogens. BioVeris's
currently available instruments include the BIOVERIS(TM) Detection System and
M-SERIES M1-R Instrument. BioVeris believes there will be an increasing
opportunity to use its products as a biodefense tool in governmental and
military organizations around the world, as well as in public health, due to the
early adoption of BioVeris products by key decision makers. BioVeris believes
there currently are no dominant competitors. BioVeris expects that its
nonclinical products for biodefense will generally not require the approval of a
U.S. government agency prior to marketing of the products. See "Business --
Government Regulation -- Biodefense and Industrial Testing Products" for a more
detailed description of the government regulations to which BioVeris is subject
in connection with its products for biodefense.
U.S. Army scientists at Fort Detrick, Maryland have developed ECL
technology-based biological tests designed to measure specific agents and toxins
in environmental samples. As part of the merger and related transactions,
BioVeris expects to assume a contract between IGEN and the DOD pursuant to which
the DOD may purchase these tests from IGEN. Under the contract, the DOD may, at
its option, make purchases of up to $23.0 million over a period of up to 48
months. As of September 30, 2003, the DOD had purchased approximately $1.7
million of products and, under the contract, may purchase up to a maximum of
$7.0 million in the 12-month period ending June 2004. The tests are used by
various laboratories and field sites of the DOD, as well as other U.S.
government agencies. For risks related to BioVeris's contracts with the
government see "Risk Factors -- Risks Relating to Regulation and Government
Contracts."
BioVeris expects to continue to work with the DOD and other U.S. government
agencies to expand the use of ECL technology-based products in a variety of
homeland security and biodefense initiatives,
142
including the development of reagents for the detection of biological agents,
such as anthrax, staphylococcus enterotoxin B and botulinum, or toxins in
environmental samples.
The Automated Biological Agent Testing System program at the Edgewood
Chemical and Biological Center, Aberdeen Proving Ground, in conjunction with
BioVeris and Beckman Coulter, has integrated an M-SERIES instrument system with
Beckman Coulter's SAGIAN(TM) and Biomek(R) FX lab automation systems to automate
sample preparation and plate handling for ECL technology-based immunoassays.
This program is designed for high throughput detection of biological agents and
incorporates reagents that are being manufactured by BioVeris. BioVeris is also
engaged in early-stage initiatives for product development for this market
including:
- The Cooperative Research and Development Agreement with the U.S. Army
Medical Research Institute of Infectious Diseases for the development of
tests for the detection of biological toxins;
- The development of a botulinum toxin test for the Centers for Disease
Control and Prevention, or the CDC;
- A contract with the DOD to develop assays for the detection of select
agents in food; and
- Integration of ECL technology into the Air Force biological testing
program.
Certain of IGEN's U.S. government contracts contain provisions that grant
to the U.S. government a non-exclusive, non-transferable, irrevocable, paid-up
license to use inventions made by IGEN in the course of performing such
contracts, or have such inventions used by or on behalf of the U.S. government,
for research or other government purposes. BioVeris will be subject to these
provisions when it assumes these contracts and new U.S. government contracts
entered into by BioVeris may also include similar provisions. See "Risk
Factors -- Risks Relating to Regulation and Government Contracts."
BioVeris is developing additional ECL technology-based products for the
biodefense market. This includes the M-SERIES M1-HS (Homeland Security) Analyzer
which is an enhanced model of the M-SERIES M1-R instrument designed to meet the
specific needs of biodefense customers. The M1-HS analyzer is expected to be
"ruggedized" to meet military specifications for an instrument to be deployed to
the field with self-contained reagents and a portable carrying case.
BioVeris also plans to develop an additional M-SERIES instrument that can
be both miniaturized and "ruggedized" for use primarily by soldiers; "first
responders," such as fire, police and emergency medical workers; medical
workers; hospitals; food processors; field inspectors from the Environmental
Protection Agency, or the EPA, the Department of Agriculture, or the Food and
Drug Administration, or the FDA; and border patrol inspectors.
BioVeris's presence in the biodefense market also provides the opportunity
to sell products to other diagnostics markets. In addition to manufacturing
specific tests for the detection of biological agents or toxins for the DOD,
BioVeris has developed its own line of tests that can be sold to the
pharmaceutical, biotechnology and food industries. These products include tests
for the detection of Botulinum toxins A, B, E and F, Staphylococcal enterotoxins
A and B, Ricin and anthrax. BioVeris intends to expand this product line to meet
the demands of the market. BioVeris believes that tests developed for the
biodefense field may also have utility in the clinical diagnostic markets by
providing tests for patients exposed to biological agents or toxins.
Industrial. BioVeris manufactures and sells a panel of tests for the
detection of foodborne and waterborne disease-causing pathogens, such as E. coli
O157, Salmonella, Campylobacter and Listeria. These tests are used as a quality
control method for testing food and beverage products, such as meat used in
hamburger, for bacteria that have caused numerous outbreaks of gastrointestinal
and kidney-related disease worldwide. BioVeris expects that its products for
industrial testing will generally not require the approval of a U.S. government
agency prior to marketing of the products. See "Business -- Government
Regulation -- Biodefense and Industrial Testing Products" for a more detailed
description of the government regulations to which BioVeris is subject in
connection with its products for industrial testing.
143
Life Science. BioVeris provides products and services for the discovery
and development of new drugs to the life science market. Its product development
and marketing efforts center on two M-SERIES instruments -- the M384 and the
M1-R instruments -- each of which build on the ECL technology-based applications
provided by the M-SERIES systems and the BIOVERIS Detection System.
BioVeris's products can be used by pharmaceutical and biotechnology
companies, universities and other research organizations in most phases of drug
discovery, including:
- validating targets identified through genomics;
- screening of large numbers of compounds generated through combinatorial
chemistry;
- re-testing and optimization of lead compounds; and
- clinical trial testing of drug candidates.
After identifying disease targets and synthesizing chemical compounds,
researchers attempt to find compounds that are drug candidates. This drug
discovery process involves developing an assay to determine whether a particular
compound has the desired effect on a target and then screening compounds using
that assay.
BioVeris believes that the need of pharmaceutical and biotechnology
companies to rapidly identify therapeutic targets, screen thousands of compounds
per day against those targets and then optimize the leads has created new
opportunities for ECL technology-based systems in the pharmaceutical and
biotechnology industry. BioVeris's M-SERIES instruments are compatible with
multi-well microplates that are commonly used in drug discovery and development
laboratories and can be fully integrated with many existing automation and
robotic systems. These instruments were designed to enable researchers to test
new biological targets against potential drug compounds with higher levels of
accuracy and sensitivity. BioVeris believes they may also perform highly
sensitive tests more quickly at a lower cost and this may permit a drug
candidate to move more rapidly into the later stages of drug development,
clinical trials and ultimately into the market.
BioVeris believes that the sensitivity and accuracy of these M-SERIES
systems create advantages over many competitive detection technologies. They
permit the user to:
- more quickly adapt the ECL technology to develop and then perform the
specific, desired assays, compared to the longer periods required by
other existing competing technologies;
- reduce the use of rare components, such as proprietary compounds,
antibodies or clinical trial samples, that must be used to run assays;
and
- have more confidence in the results the tests produce.
BioVeris's expertise in developing assays allows it to assist customers in
determining whether a proposed assay is feasible and to assist with the
development and performance of assays that comply fully with the FDA's Good
Manufacturing Practices.
BioVeris's M-SERIES life science customers include many of the major
pharmaceutical and biotechnology companies in the United States and Europe. In
addition to the M-SERIES instruments BioVeris sells or leases, it typically
receives commitments from customers for purchases of proprietary reagents.
BioVeris markets the M-SERIES product family directly through its own sales,
marketing and applications teams.
Instrument systems originally designed for the life science market are now
being used in biodefense and may be used in the clinical diagnostics market as
well. BioVeris believes that its presence in the life science market provides it
with the opportunity to identify novel tests that may have utility in the
clinical diagnostics market. While continuing to support its existing
bio-pharmaceutical and academic customers, BioVeris may selectively pursue other
commercial opportunities in the life science market in support of its overall
corporate strategy. BioVeris's products that will be sold only for research use
in the life science market generally do not require the approval of a U.S.
government agency prior to marketing of the products. See
"Business -- Government Regulation -- Life Science Research Products" for a more
144
detailed description of the government regulations to which BioVeris is subject
in connection with its products for the life science market.
COLLABORATIONS AND LICENSE ARRANGEMENTS
BioVeris expects to explore and negotiate collaborative business
arrangements to accelerate the development, manufacture and marketing of ECL
technology-based products, in particular into the clinical diagnostics market.
In addition, BioVeris has license arrangements with Roche Diagnostics,
bioMerieux Eisai and MSD.
ROCHE DIAGNOSTICS
As a result of Roche's ownership of IGEN, upon completion of the merger, an
affiliate of Roche, one of the world's leading providers of clinical diagnostic
products, will have a worldwide, royalty-free, non-exclusive license to develop,
make, reproduce, modify, use, sell and otherwise commercially exploit certain
clinical immunoassay instruments and assays using defined ECL technology owned
by BioVeris in the human in vitro diagnostics field, including the continued
sale and further development of its Elecsys products. For a further description
of this license, see "Commercial Agreements -- License Agreement."
BioVeris will not receive royalties or other payments as a result of
product sales by Roche in accordance with the license agreement.
Under the improvements license agreement effective simultaneously with the
completion of the merger, BioVeris will have a worldwide, non-exclusive,
fully-paid, royalty-free, perpetual license under certain patents covering and
technologies based on:
- Roche Diagnostics' ECL instruments and all aspects of ECL assays
developed prior to the completion of the merger;
- certain PCR technology; or
- all aspects of ECL technology and robotics that, prior to the completion
of the merger, Roche Diagnostics or any of its affiliates used or
developed to be used in performing ECL testing (other than specific
antibodies, antigens and reagents).
In addition, BioVeris is licensed to use certain intellectual property
rights of Hitachi High Technology Corporation and its affiliates only outside
the field defined in the improvements license agreement to develop, make,
reproduce, modify, use, sell and otherwise commercially exploit any product or
service based on ECL technology.
Roche has advised BioVeris that Applied Biosystems has notified Roche that
one or more of the PCR licenses granted by certain Roche affiliates to BioVeris
under the improvements license agreement and the PCR license agreements may
infringe exclusive rights to PCR technology held by, or other contract rights
of, Applied Biosystems. Applied Biosystems has commenced litigation and
arbitration against Roche regarding their respective rights relating to PCR
technology. Certain Roche affiliates have made certain representations and
provided certain warranties on their right to grant the licenses that have been
granted to BioVeris, including representations and warranties that: the rights
and licenses granted under the improvements license agreement and the
performance by Roche Diagnostics of its obligations under the improvements
license agreement will not conflict with any agreement, contract or other
arrangement to which it is a party or by which it is bound; Roche Diagnostics
has title to or license rights sufficient to grant such license rights granted
under the improvements license agreement to BioVeris and its affiliates; Roche
Diagnostics has not licensed or otherwise disposed of such licensed intellectual
property rights in any manner that limits BioVeris's or its affiliates'
exploitation of the licenses granted by Roche Diagnostics under the improvements
license agreement; certain Roche affiliates have the full power and right to
grant to BioVeris and its affiliates the licenses granted under the PCR license
agreements; and the execution by certain Roche affiliates of the PCR license
agreements will not constitute a breach or default under any contract,
instrument or agreement to which such Roche affiliates or any of their
affiliates are a party or by
145
which such Roche affiliates or any of their affiliates are bound. Roche has
advised IGEN that it believes that Applied Biosystems' allegations are without
merit and intends to contest them vigorously. There are no assurances that
BioVeris will not be named as a defendant in either of those actions or that
Roche will prevail in the litigation and arbitration, or that the terms of any
resolution or settlement of these proceedings will not be unfavorable to
BioVeris. The results of these legal proceedings may limit, preclude or
interfere with BioVeris's ability to exploit certain PCR technology licensed
under the improvements license agreement and PCR license agreements. See "Risk
Factors -- Risks Relating to BioVeris and Its Business -- Because BioVeris
intends to develop products that are based on patents and technology that it has
licensed from others, the owners of those patents and technology might claim
that products developed or sold by BioVeris violate those licenses.
Additionally, a third party might object to a license that BioVeris holds or to
the scope of the license granted to BioVeris."
For a further description of this license, see "Commercial
Agreements -- Improvements License Agreement."
BIOMERIEUX
bioMerieux has a license from BioVeris for the development and worldwide
development, use, manufacture and sale of ECL technology-based nucleic acid test
systems on a co-exclusive basis for certain segments of the clinical diagnostics
market and on a non-exclusive basis for certain segments of the life science
market. bioMerieux specializes in products for central hospital laboratories and
blood banks and has incorporated its proprietary nucleic acid sequence-based
amplification technology and ECL technology into its NucliSens line of
diagnostic virology products, which are marketed with test kits for the
detection of HIV-1 RNA and CMV (cytomegalovirus). The agreement with bioMerieux
extends until the expiration of the patents BioVeris licenses to bioMerieux, and
BioVeris receives royalty payments from bioMerieux on the relevant product sales
by bioMerieux.
EISAI
Eisai, a leading Japanese pharmaceutical company, has a license to
manufacture and market a class of ECL technology-based diagnostic systems for
the clinical diagnostics market in Japan on a non-exclusive basis.
Eisai introduced its first ECL-based product under the trade name Picolumi
in 1997. BioVeris receives royalties on the relevant product sales by Eisai. The
agreement with Eisai extends until the later of May 10, 2010, and the expiration
of the patents BioVeris licenses to Eisai. Eisai is obligated to make royalty
payments to BioVeris at a reduced royalty rate for a period of seven years after
expiration of the agreement.
MSD
As part of the restructuring, BioVeris will assume IGEN's interest in MSD,
a joint venture formed in 1995 by IGEN and MST, which is a company established
and wholly-owned by Mr. Jacob Wohlstadter, a son of BioVeris's and IGEN's
chairman and chief executive officer. MSD develops, manufactures, markets and
sells products utilizing a combination of MST's multi-array technology and
BioVeris's technology. MSD manufactures, markets and sells instrument systems,
including the Sector HTS and the Sector PR, which combine MST's multi-array
technology and IGEN's ECL technology. The Sector HTS is an ultra high throughput
drug discovery system engineered for applications such as high throughput
screening and large-scale proteomics. The Sector PR is a smaller system designed
for benchtop applications such as assay development, research in therapeutic
areas, cellular biology and medium throughput screening. MSD also manufactures
and markets a line of its own reagents, assays and plates that are used on these
MSD systems. MSD commenced product sales in October 2002 and, during fiscal
2003, MSD had product sales of $3.2 million and a net loss of $18.2 million.
The MSD joint venture agreement will expire upon completion of the merger
and MSD and MST have the right to purchase IGEN's or BioVeris's, as the case may
be, interest in MSD for a purchase price
146
equal to fair market value (determined in accordance with the procedures set
forth in the MSD agreements, which includes third-party appraisal if the parties
are unable to agree on fair market value) minus a discount factor. If MSD or MST
exercises this right, it will be required to pay BioVeris the outstanding
purchase price plus simple (cumulated, not compounded) interest at the fixed
annual rate of 0.5% over the prime rate in effect on the date that MSD or MST,
as the case may be, elects to purchase the interests. The purchase price is
payable over time in installments equal to the sum of 5% of MSD net sales, as
determined in accordance with the MSD agreements, and 20% of the net proceeds
realized by MSD from the sale of its debt or equity securities in any
third-party financing after the date of the sale of BioVeris's interest in MSD.
Nevertheless, following the expiration of the MSD joint venture agreement, many
of the licenses and other arrangements with MSD and MST assigned to BioVeris
will continue indefinitely. For a more complete description of the MSD
agreements and IGEN's relationship with MSD, see "Certain Relationships and
Related Party Transactions."
INTELLECTUAL PROPERTY
BioVeris pursues a policy of seeking patent protection to preserve its
technology and its right to capitalize on the results of its research and
development activities and, to the extent it may be necessary or advisable, to
exclude others from appropriating its technology. BioVeris will also rely on
trade secrets, know how, continuing technological innovations and licensing
opportunities to develop and maintain its competitive position.
BioVeris intends to prosecute and defend its intellectual property,
including its patents, trade secrets and know-how. BioVeris plans to regularly
search for third-party patents in its fields of endeavor, both to shape its
patent strategy as effectively as possible and to identify possible
collaborations and licensing opportunities.
After the restructuring, BioVeris expects to own approximately 69 issued
U.S. patents, and approximately 24 pending U.S. patent applications in the
diagnostics field. Additionally, BioVeris expects to own approximately 145
granted foreign patents and approximately 70 pending foreign patent applications
in the diagnostics field. These patents and patents applications are important
to BioVeris's business and cover various aspects of ECL technology and products,
as well as the methods for their production and use. The pending patent
applications in the diagnostics field may not be granted and others may
challenge BioVeris's patents. BioVeris's ECL patents will begin to expire in
2005; however, patent coverage for ECL technology will continue through 2018.
BioVeris plans to continue to protect its technology with new patent filings,
which could further extend its patent coverage.
Additionally, at the same time, BioVeris expects to own patents and patent
applications outside of the diagnostics field. More specifically, BioVeris will
own approximately 35 issued U.S. patents, approximately 10 pending U.S. patent
applications, approximately 100 non-U.S. patents and approximately 30 patent
applications in the fields of catalytic antibodies and other novel biocatalysts,
molecular displays and hybridoma screening, and jointly own one pending U.S.
patent application in the field of therapeutic compounds. The pending patent
applications outside the diagnostics field may not be granted and others may
challenge BioVeris's patents outside the diagnostics field.
BioVeris's business could be harmed if it loses the patent protection
currently enjoyed by IGEN or if pending patents are not issued to BioVeris.
GOVERNMENT REGULATION
The research and development, manufacturing, marketing, sale and
distribution of both existing and future products based on ECL technology are
subject to comprehensive government regulation. Government regulation by various
Federal, state, and local agencies, which includes detailed inspection of, and
controls over, research and laboratory procedures, safety, clinical
investigations, manufacturing, marketing, sampling, labeling, distribution,
record keeping, storage and disposal practices, substantially increases the
time, difficulty and costs incurred in obtaining and maintaining the clearance
or approval to market newly developed and existing products. In particular,
government regulatory actions can result in,
147
among other things, delays in the release of BioVeris's and its licensees'
products, injunction, seizure or recall of BioVeris's or its licensees'
products, suspension or revocation of the authority necessary for their
production and sale, and other civil or criminal sanctions, including monetary
penalties that could be substantial.
International sales of products by BioVeris and its licensees will also be
subject to a significant degree of government regulation, including
international standards (such as those set by the International Organization for
Standards), European Union directives and other country-specific rules and
regulations. For example, many countries, directly or indirectly through
reimbursement limitations, control the cost of most clinical diagnostic
products. Furthermore, many developing countries limit the importation of raw
materials and finished products. International regulations may also have an
impact on U.S. regulations. In addition, the FDA regulates the export of
products from the United States.
BIODEFENSE AND INDUSTRIAL TESTING PRODUCTS
BioVeris's biodefense products will be subject to stringent Federal, state,
local and foreign laws, regulations and policies governing their manufacture,
storage, sale, distribution and export. In addition, the U.S. government has
adopted, and is expected to continue to adopt, laws, regulations and rules
governing the research, development, procurement and handling of pathogens that
may be used in a bioterrorist attack or other agents that may cause a public
health emergency and to permit government inspection and oversight of facilities
engaged in the research, development, manufacture or sale of select agents.
Under several statutes recently enacted, the Department of Homeland Security,
FDA, Department of Commerce and various other regulatory authorities have been
charged with establishing and implementing programs designed to enhance the
security of food and water supplies, as well as the environment, from terrorist
attacks. These legislative initiatives include recordkeeping, registration,
notification, import, export, manufacturing and various other compliance
measures. This is a rapidly evolving regulatory landscape and many of the
possible rules and regulations have not yet been proposed or adopted. BioVeris
may be required to incur significant costs to comply with such laws and
regulations in the future, and such laws or regulations may have a material
adverse effect upon its ability to do business.
LIFE SCIENCE RESEARCH PRODUCTS
BioVeris's products that will be sold for life science research use only,
including the M-SERIES instruments used in the life science market, must be
properly labeled as "for research use only -- not for use in diagnostic
procedures", as required by the FDA, but do not generally require FDA approval
prior to marketing. Research does not include clinical investigations and is
narrowly defined by the FDA to apply to the early development of product
concepts. The FDA has begun to impose new distribution requirements and
procedures on companies selling research use only products, such as the
requirement that the seller receive specified certifications from its customers
as to the customers' intended use of the product. BioVeris expects that the FDA
will develop additional restrictions of this nature some of which may adversely
affect BioVeris.
CLINICAL DIAGNOSTIC PRODUCTS
The FDA, and other Federal, state, local, and foreign authorities,
regulate, among other things, the development, clinical testing, manufacture,
packaging, labeling, storage, distribution and promotion of medical devices,
including products intended for clinical diagnostic purposes. The FDA imposes
specific requirements on the conduct of clinical studies and requires approval
of the study by an institutional review board and, in some cases, by the FDA,
depending upon the product and its use. Before a new device can be introduced
into the market, the manufacturer must generally obtain marketing clearance
through a section 510(k) pre-market notification or approval through a
pre-market approval application. The testing, preparation of necessary
applications and processing of those applications by the FDA is expensive and
time consuming.
BioVeris's and its licensees' clinical diagnostic products will be
regulated as medical devices. Significant difficulties or costs may be
encountered to obtain FDA clearances or approvals and that could delay or
preclude BioVeris or its licensees from marketing products for clinical
diagnostic purposes.
148
Furthermore the FDA may request additional data following the original
submission. Delays imposed by the governmental review process may materially
reduce the period during which BioVeris or its licensees will have the exclusive
right to exploit BioVeris's products or technologies.
The FDA will clear a device under section 510(k) if the submitted
information establishes that the proposed device is "substantially equivalent"
to a legally marketed class I or II medical device, or to a class III medical
device for which the FDA has not yet called for a pre-market approval
application. Commercial distribution can begin only after the FDA issues an
order that the device is substantially equivalent to a device that is legally
marketed and not subject to a pre-market approval requirement. The FDA may
determine that a proposed device is not substantially equivalent to a legally
marketed device, in which case a pre-market approval will be required to market
the device, unless additional information can be submitted to support a
substantial equivalence determination, or the FDA, pursuant to a timely request,
makes a risk-based determination that a device that is not substantially
equivalent device can be classified into class I or II. An FDA request for
additional data could require that clinical studies of the device's safety and
effectiveness be performed. Clearance, if obtained, may be conditioned on
labeling restrictions or conducting a lengthy postmarket surveillance study.
A pre-market approval application must be filed and approved before a
device can be marketed if a proposed device is not substantially equivalent to a
legally marketed device, as discussed above, or if it is a class III device that
was in commercial distribution prior to May 28, 1976, for which the FDA has
called for pre-market approval. A pre-market approval application must be
supported by valid scientific evidence, which typically includes extensive
pre-clinical data and well controlled or partially controlled clinical trials,
to demonstrate the safety and effectiveness of the device. Obtaining approval
can take several years and approval may be conditioned on, among other things,
substantial restrictions on indications for use and the conduct of postmarket
surveillance studies. Generally, the pre-market approval process requires much
more extensive pre-filing testing than does the section 510(k) pre-market
notification procedure and involves a significantly longer FDA review after the
date of filing. In responding to a pre-market approval application, the FDA may
grant marketing approval, may request additional information, may set
restrictive limits on claims for use or may deny the application altogether.
After the pre-market clearance or approval for the medical device has been
received, it may still be withdrawn if compliance with regulatory standards is
not maintained or if problems occur after the device reaches the market. The FDA
may require post-market surveillance programs to monitor the effect of medical
devices that have been sold, and has the power to prevent or limit further
marketing of medical devices based on the results of these post-marketing
programs. In addition, the FDA's medical device reporting regulation requires
reports to the FDA whenever information reasonably suggests that a marketed
device may have caused or contributed to death or serious injury, or when a
device malfunctions and if the malfunction were to recur, the device would be
likely to cause or contribute to a death or a serious injury.
In addition to obtaining FDA approval for each medical device, under the
pre-market approval application procedures, BioVeris or its licensees must seek
FDA approval of their manufacturing facilities and procedures. The FDA will also
inspect clinical diagnostics companies on a routine basis for regulatory
compliance with its Good Manufacturing Practices regardless of whether the
product was cleared under section 510(k) or approved under pre-market approval.
BioVeris's and its licensees' clinical diagnostic products will be affected
by the Clinical Laboratory Improvement Amendments of 1988, which is intended to
insure the quality and reliability of medical testing and may have the effect of
discouraging, or increasing the cost of, clinical diagnostic testing. The
regulations establish numerous requirements applicable to clinical diagnostics.
Under these regulations, the specific requirements that a laboratory must meet
depend upon the complexity of the tests performed by the laboratory. Under the
clinical laboratory improvement regulations, all laboratories performing
moderately complex or highly complex tests will be required to comply with
stringent standards and requirements.
Because the regulations' interpretation is uncertain, it is possible that
certain of BioVeris's or its licensees' products may be categorized as highly
complex tests, in which case penetration of the point-of-
149
care market would be reduced because not all laboratories would meet the
standards required to conduct such tests.
In addition, future changes in regulations or interpretations made by the
U.S. Department of Health and Human Services, FDA, Centers for Medicare &
Medicaid Services or other regulatory bodies may adversely affect BioVeris and
its licensees.
In addition to the foregoing, BioVeris will be, and its licensees are,
subject to numerous Federal, state and local laws and regulations relating to
such matters as safe working conditions, laboratory and manufacturing practices,
fire hazard control, and environmental protection, including disposal of
hazardous or potentially hazardous substances. BioVeris does not expect
compliance with these laws and regulations to have a material effect on its
financial results, capital requirements or competitive position, and BioVeris
has no plans for material capital expenditures relating to such matters.
However, BioVeris and its licensees may be required to incur significant costs
to comply with such laws and regulations in the future, and such laws or
regulations may have a material adverse effect upon BioVeris's and its
licensees' ability to do business.
Sales of BioVeris's and its licensees' products outside the U.S. are also
subject to extensive regulatory requirements, which vary widely from country to
country. The time required to obtain the necessary approvals may be longer or
shorter than that required for FDA clearance or approval.
GOVERNMENT CONTRACTS AND REGULATION
The contracts with U.S. and foreign government agencies and departments
that BioVeris expects to assume as part of the restructuring will require that
BioVeris comply with numerous regulations, rules and policies, including those
governing procedures for soliciting, awarding and funding government contracts.
In addition, BioVeris will be required to comply with numerous ongoing
obligations following the award of a government contract, including those
relating to record keeping, workplace compliance, third-party contracting, and
disclosure of information. Failure to comply with these requirements may lead to
a denial of a contract award, a challenge to a previously awarded contract,
attempts by the U.S. government to terminate a contract, and restrictions on a
company's ability to participate in future bids to secure government contracts.
In addition, BioVeris is required to obtain certain security clearance
certifications and comply with security clearance standards and requirements,
including those affecting personnel and facilities. Sales of certain of
BioVeris's products to international government agencies may be subject to local
government regulations and procurement policies and practices, as well as to
regulations relating to import-export control, including prior notification of,
and pre-clearance for, export of certain goods having military applications.
ENVIRONMENTAL REGULATION
BioVeris's operations will be subject to stringent foreign, Federal, state
and local laws, rules and regulations relating to the protection of the
environment, including those governing the use, handling and disposal of
hazardous, radioactive and infectious materials and wastes, the discharge of
pollutants into the air and water and the cleanup of contaminated sites. Some of
BioVeris's operations will require permits, and these permits will be subject to
modification, renewal and revocation by issuing authorities. Although BioVeris
believes that it will be in compliance with these laws and regulations in all
material respects, BioVeris may be required to incur significant costs to
maintain or achieve compliance if additional or stricter environmental and
health and safety requirements are imposed in the future or in the event of any
noncompliance at BioVeris's facilities.
REIMBURSEMENT
Third-party payers, such as governmental programs and private insurance
plans, can indirectly affect the pricing or the relative attractiveness of
BioVeris products by regulating the maximum amount of
150
reimbursement they will provide for diagnostic testing services. In recent
years, healthcare costs have risen substantially, and third-party payers have
come under increasing pressure to reduce such costs.
In this regard, the Federal government, in an effort to reduce healthcare
costs, may take actions that may involve reductions in reimbursement rates. If
the reimbursement amounts for diagnostic testing services are decreased in the
future, it may decrease the amount which physicians, clinical laboratories and
hospitals are able to charge patients for such services and consequently the
price BioVeris and its collaborators will be able to charge for their products.
COMPETITION
BioVeris competes in the non-clinical diagnostics markets, including
biodefense, industrial and life science markets with its diagnostic instruments,
reagents and assays and expects to compete in the clinical diagnostics market.
BioVeris believes that the principal competitive factors in these markets are:
- the time required to run tests with the product;
- the level of sensitivity, accuracy and consistency of the product;
- the relative ease of use of the product;
- the quality of support and services for the product;
- flexibility and expandability of the product;
- product time-to-market;
- product safety;
- market acceptance of product; and
- product price.
Although BioVeris believes that it competes favorably with respect to the
above factors, competition in the diagnostics market is intense and BioVeris
does not hold a leading competitive position in any of the markets in which it
competes.
BioVeris expects to compete with a number of domestic and international
companies, including Roche, Johnson & Johnson, Abbott Laboratories, Bayer,
Biosite Incorporated and Dade Behring, Inc. Many of BioVeris's competitors now
have and in the future may continue to have access to greater resources than
BioVeris does and, therefore, may be better equipped to develop, manufacture,
market and sell its products. These companies may develop and introduce products
and processes competitive with or superior to BioVeris's. In addition, BioVeris
will directly compete against its current and future licensees, including
bioMerieux, Roche and MSD.
PROPERTIES
BioVeris's principal administrative, marketing, manufacturing and research
and development facilities consist of approximately 165,000 square feet located
in five buildings in Gaithersburg, Maryland. BioVeris has an additional 21,000
square feet of leased research and development, sales and office facilities in
McLean, Virginia; San Diego, California; New York, New York; the District of
Columbia; and Oxfordshire, England. BioVeris's leases expire at various times
from 2005 through 2010. BioVeris believes that current facilities should be
adequate for immediate business requirements but additional facilities may be
required if BioVeris successfully expands its business operations. BioVeris is
evaluating new facilities for development, manufacturing and other corporate
uses and is in negotiations to secure new space, which, if concluded, would
result in additional facilities costs.
151
MANUFACTURING
BioVeris's current commercial manufacturing operations consist of the
manufacture of the M-SERIES family of products and reagents, biodefense and
industrial testing products, and cell culture research biologicals. BioVeris
operates a qualified Good Manufacturing Practices and ISO 9001 facility.
BioVeris uses a variety of suppliers and believes that it does not depend on any
supplier that cannot be replaced in the ordinary course of business. Any changes
in source of supply may require additional engineering or technical development,
with costs and delays that could be significant, to ensure consistent and
acceptable performance of the products.
BioVeris does not manufacture any clinical diagnostic products. BioVeris is
presently evaluating plans for future manufacturing of its clinical diagnostic
products. These plans may include direct and third-party manufacturing.
Negotiations are ongoing with a world leader in mobile electronics and systems
technology to manufacture one of BioVeris's instruments. There can be no
assurance that these negotiations will result in an agreement with such
manufacturer on terms favorable to BioVeris, if at all or that such manufacturer
will be successful in manufacturing BioVeris's instruments.
See "Risk Factors -- Risks Relating to BioVeris and Its
Business -- BioVeris has limited manufacturing experience, which puts it at a
competitive disadvantage and could have a material adverse effect on BioVeris's
business, financial condition and revenue," "Risk Factors -- Risks Relating to
BioVeris and Its Business -- BioVeris has limited manufacturing facilities for
its products and BioVeris may not find additional facilities suitable for future
growth, which could materially adversely affect its business and prospects" and
"Risk Factors -- Risks Relating to BioVeris and Its Business -- BioVeris depends
on a limited number of suppliers for materials used in the manufacturing of its
products, and any interruption in the supply of those materials could hamper its
ability to manufacture products and meet customer orders."
SALES AND MARKETING
BioVeris also maintains a direct sales and marketing group in the United
States and Europe that consists of approximately 30 people. BioVeris's direct
sales group focuses on sales of the M-SERIES family of products and the
BIOVERIS(TM) Detection System, together with reagents and services, to various
government agencies in the biodefense market, food and beverage producers and
contract testing laboratories in the industrial market and other potential
customers in the life science market.
In addition to BioVeris's direct and indirect sales and marketing efforts,
BioVeris's licensees and collaborators also conduct sales and marketing of
BioVeris's products. See "Description of the BioVeris Business -- Collaborations
and License Arrangements."
BioVeris is evaluating plans for the marketing and sale of its products
currently in development. BioVeris may seek to market and sell a portion of its
products indirectly through distributors who sell products that complement
BioVeris's products.
HUMAN RESOURCES
As of November 30, 2003, BioVeris employed 303 individuals, of whom 221
were engaged in research, product development, manufacturing and operations
support, and 82 in marketing, sales and applications support and general
administration. Of BioVeris's employees, 41 have Ph.D. degrees. A significant
number of BioVeris's management and professional employees have had prior
experience with pharmaceutical, biotechnology, diagnostic or medical products,
computer software or electronics companies. None of BioVeris's employees is
covered by a collective bargaining agreement, and management considers relations
with its employees to be satisfactory.
Certain of BioVeris's employees provide services to certain related
companies, including MSD.
The ability to maintain BioVeris's competitive position will depend, in
part, upon its continued ability to attract and retain qualified scientific,
technical and managerial personnel. Competition for such personnel is intense.
152
LEGAL PROCEEDINGS
BioVeris is involved, from time to time, in various routine legal
proceedings arising out of the normal and ordinary operation of its business,
which it does not anticipate will have a material adverse impact on its
business, financial condition, results of operations or cash flows. However,
BioVeris may in the future be involved in litigation relating to its business,
products or intellectual property, which could adversely affect BioVeris's
prospects or impair its financial resources.
See "Risk Factors -- Risks Relating to BioVeris and Its Business -- The
success of BioVeris's business depends on patents that will expire over time and
that must be actively pursued, obtained, maintained and protected. BioVeris's
business could be harmed if it has future disagreements with Roche over the
scope of the license agreement," "Risk Factors -- Risks Relating to BioVeris and
Its Business -- BioVeris's business could be harmed if it infringes, or is
alleged to have infringed, the intellectual property of others" and "Risk
Factors -- Risks Relating to the Industry -- BioVeris is exposed to product
liability risks that, if not adequately covered by insurance, may have a
material adverse effect on its financial condition."
SEASONAL ASPECTS, BACKLOG AND RENEGOTIATION
There are no significant seasonal aspects to BioVeris's business. Orders
for BioVeris's products will be filled on a current basis, and order backlog is
not expected to be material to BioVeris's business. A material portion of
BioVeris's business is expected to be subject to contracts that may be
terminated at the election of the government. In the event BioVeris's biodefense
business expands, the portion of BioVeris's business subject to contracts that
may be terminated at the election of the government is likely to expand. For a
further description of risks related to BioVeris's contracts with the
government, see "Risk Factors -- Risks Relating to Regulation and Government
Contracts."
OPERATING SEGMENT
BioVeris currently operates in one business segment. BioVeris is currently
engaged in the development, manufacturing and marketing of diagnostic products
for the detection and measurement of biological and chemical substances.
GEOGRAPHIC SEGMENTS
BioVeris does not believe it has material risks relating to its foreign
business.
153
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain available information regarding
BioVeris's directors and executive officers.
NAME AGE POSITIONS
---- --- ---------
Richard J. Massey, Ph.D.(1)..... 57 Director, President and Chief Operating Officer
George Migausky................. 49 Vice President and Chief Financial Officer; Secretary
Anthony Rees(2)(4).............. 59 Director
Robert Salsmans(2)(3)(4)........ 58 Director
Joop Sistermans(2)(3)(4)........ 60 Director
Samuel J. Wohlstadter(1)........ 62 Director, Chairman and Chief Executive Officer
---------------
(1) Member of non-officer stock option committee.
(2) Member of audit committee.
(3) Member of executive compensation committee.
(4) Member of the joint venture oversight committee, or JVOC.
Richard J. Massey, Ph.D. is BioVeris's President and Chief Operating
Officer and was one of the founders of IGEN. Since February 1992, he has also
been IGEN's President and Chief Operating Officer. He served as Senior Vice
President of IGEN from 1985 to 1992. From 1981 until he joined IGEN in 1983, Dr.
Massey was a faculty member in the Microbiology and Immunology Department at
Rush Medical Center in Chicago. Prior to that, he was Senior Research Scientist
at the Frederick Cancer Research Center/National Cancer Institute.
George V. Migausky is BioVeris's Chief Financial Officer. Since 1985, he
has also been IGEN's Chief Financial Officer. Between 1985 and 1992, in addition
to serving as IGEN's Chief Financial Officer on a part-time basis, Mr. Migausky
also served as financial advisor to several other privately held companies.
Prior to joining IGEN in 1985, he spent nine years in financial management and
public accounting positions, most recently as a Manager with the High Technology
Group of Deloitte & Touche.
Anthony Rees, D. Phil is a director of BioVeris and has served as a
director of IGEN since 2000. He was also a director of Science at Syntem, a
private biopharmaceutical company that is focused on the discovery and
development of Central Nervous System medicines, a position he held from January
2000 until August 2003. He continues as a member of the Syntem Scientific
Advisory Board. From 1997 to the end of 1999, he served as a non-executive
director of Syntem. Professor Rees has held faculty positions at the University
of Oxford from 1980 to 1990 and the University of Bath (Great Britain) where,
from 1990 to 1993, he was Head of the Biochemistry Department and from 1993 to
1997, he was Head of the School of Biology and Biochemistry. He is currently
Professorial Research Fellow. Professor Rees has been Executive Editor of the
journal Protein Engineering since 1997. In 1989, he co-founded and in 1994, he
took public Oxford Molecular PLC, a British software company. While on
sabbatical from Oxford University from 1989 to 1990, Professor Rees was employed
by IGEN as Vice President of Research. Professor Rees received his doctoral
degree from Oxford University.
Robert R. Salsmans is a director of BioVeris and served as a director of
IGEN since 1995. From November 2001 to August 2003, he also was President and
Chief Executive Officer of Diosynth RTP, Inc., the United States subsidiary of
Diosynth, which is a business unit that is part of the Pharma group of Akzo
Nobel N.V., a holding company with high technology operating units in the
biotechnology, medical, and pharmaceutical industries, a position he has held
since November 2001. From September 1994 to August 2001, Mr. Salsmans was
President and Chief Executive Officer of Organon Teknika B.V. in the
Netherlands. From October 1993 through August 1994, Mr. Salsmans served as
Managing Director of
154
Organon Teknika B.V., a business unit of Akzo Nobel, and from 1990 through
September 1993, he served as Managing Director of Organon International B.V.
Joop Sistermans is a director of BioVeris and has served as a director of
IGEN since 1999. He is also Chairman, Advisory Council for Science and
Technology Policy to the Dutch Government and Parliament, a position he has held
since January 1, 2003. In addition, Mr. Sistermans has been Chairman,
Supervisory Board of Thuiszorg Kempenstreek (Netherlands), a public organization
for homecare, a position he has held since 2000. He also serves on the Advisory
Committee Economy, Ecology and Technology for the Dutch Ministry of Economic
Affairs, a position he has held since 1999. Mr. Sistermans is a Supervisory
Board member for the University of Twente, the Netherlands, a position he has
held since 1997 and of the Maastricht School of Management, the Netherlands, a
position he has held since 2001. Mr. Sistermans has served on the Boards of
Directors of United Biomedical Inc., Hauppauge, NY since 1999, of the Bio
Primate Research Centre, Rijswijk, the Netherlands since 1997, of Keygene N.V.
in Wageningen, the Netherlands since 2002 and of Aglaia Biomedical N.V. since
2003. He was Vice Chairman of the Framework Programme Expert Advisory Group of
the European Commission for Innovative Products, Processes and Organisations in
Brussels, Belgium from 1998 until 2003. From 1999 to 2000, Mr. Sistermans served
as Executive Vice President of Origin International B.V., a member company of
the Philips Electronics Group of Companies based in the Netherlands. Mr.
Sistermans was employed by Akzo Nobel from 1974 to 1999, and was a member of the
Executive Council and Executive Vice President responsible for Strategy and
Technology from 1994 until 1999. Mr. Sistermans previously served on the IGEN
board of directors from 1993 to 1995 while in the position of President and
Chief Executive Officer of Akzo Nobel's Organon Teknika business unit.
Samuel J. Wohlstadter is BioVeris's Chairman of the Board and Chief
Executive Officer and was one of the founders of IGEN. Since IGEN's formation in
1982, he has also been IGEN's Chairman of the Board and Chief Executive Officer.
Mr. Wohlstadter has been a venture capitalist for more than 25 years and has
experience in founding, supporting and managing high technology companies,
including Amgen Inc., a biotechnology company, and Applied Biosystems, Inc., a
medical and biological research products company. Mr. Wohlstadter is also Chief
Executive Officer of Hyperion Catalysis International, an advanced materials
company, which he founded in 1981; of Wellstat Therapeutics Corporation
(formerly known as Pro-Neuron, Inc.), a drug discovery company, which he founded
in 1985; of Proteinix Corporation, a development stage company organized to
conduct research in intracellular metabolic processes, which he founded in 1988;
and of Wellstat Biologics Corporation (formerly known as Pro-Virus, Inc.), a
drug discovery company, which commenced operations in 1994.
All of IGEN's directors and executive officers will resign from their
positions at IGEN upon completion of the merger.
CLASSIFIED BOARD OF DIRECTORS
The BioVeris board of directors is divided into three classes. Messrs.
Richard J. Massey and Robert R. Salsmans will be the class of directors with an
initial term expiring at BioVeris's first annual stockholders meeting for
election of directors. Messrs. Anthony R. Rees and Joop Sistermans will be the
class of directors with an initial term expiring at BioVeris's second annual
stockholders meeting for election of directors. Mr. Samuel J. Wohlstadter will
be the class of directors with an initial term expiring at BioVeris's third
annual stockholders meeting for election of directors. After their initial
terms, directors will generally serve for three years.
CORPORATE GOVERNANCE AND COMMITTEES OF THE BOARD OF DIRECTORS
The BioVeris board of directors acts as nominating committee for selecting
nominees for election as directors. BioVeris's by-laws permit stockholders
eligible to vote for the election of directors at the Annual Meeting to make
nominations for directors, but only if such nominations are made pursuant to
timely notice in writing to its Secretary. BioVeris's by-laws also permit
stockholders to propose other business brought before an annual meeting,
provided that such proposals are made pursuant to timely notice to the
155
Secretary. To be timely, notice must generally be delivered to BioVeris's
principal executive offices no later than the close of business on the 120th
calendar day prior to the first anniversary of the preceding year's annual
meeting. See "Comparison of Rights of Common Stockholders of BioVeris and
IGEN -- Notice of Stockholder Actions -- BioVeris."
The BioVeris board of directors will have an audit committee, an executive
compensation committee, a non-officer stock option committee and a JVOC. The
BioVeris board of directors does not have a standing nominating committee.
The audit committee will review BioVeris's auditing, accounting, financial
reporting and internal control functions and makes recommendations to the
BioVeris board of directors for the selection of the independent auditor. In
discharging its duties, the committee will review and approve the scope of the
annual audit and the independent auditor's fees; meet independently with
BioVeris's internal accounting staff, independent auditor and senior management;
and review the general scope of BioVeris's accounting, financial reporting,
annual audit and internal audit program, and matters relating to internal
control systems as well as the results of the annual audit. The audit committee
will have three members: Messrs. Salsmans, Sistermans and Rees, each of whom is
independent as defined in Rule 4200(a)(15) of the National Association of
Securities Dealers' marketplace rules. The BioVeris board of directors has
adopted a written charter for the audit committee. The written charter for the
audit committee provides that the audit committee will review and approve all
related party transactions; provide oversight for the BioVeris board of
directors with respect to related party transactions, including a review with
the independent auditor of any new or ongoing related party transactions; and
advise the BioVeris board of directors with respect to BioVeris policies and
procedures regarding compliance with the related party transaction policy.
BioVeris intends to establish a policy statement on conflicts of interest
for employees, officers, directors and members of any outside advisory board of
BioVeris and a policy statement on related party transactions, which provides
that all material related party transactions are subject to the review and
approval of the audit committee (excluding any director who may be an interested
party).
Any transaction between BioVeris and Mr. Samuel Wohlstadter (or any other
officer or director), or any transaction between BioVeris and any of the related
companies, will be subject to review and approval by the audit committee.
The executive compensation committee will be responsible for establishing
BioVeris's compensation programs for executive officers and making
determinations concerning executive salaries and incentive compensation, awards
stock options to executive officers under BioVeris's 2003 stock incentive plan
and otherwise determining executive officer compensation levels and performing
such other functions regarding compensation as the BioVeris board of directors
may delegate. The executive compensation committee will have two members:
Messrs. Salsmans and Sistermans, both of whom are "non-employee directors" and
"outside directors" as defined in the rules promulgated by the SEC and Section
162(m) of the Internal Revenue Code. The BioVeris board of directors has
established a written charter for the executive compensation committee.
The non-officer stock option committee will have authority to grant stock
options to persons who are not, at the time of the grant of the option,
executive officers subject to Section 16 of the Securities Exchange Act of 1934,
as amended. The non-officer stock option committee has two members: Mr. Samuel
Wohlstadter and Dr. Massey.
The JVOC will have the authority and responsibility for overseeing and
monitoring BioVeris's participation in MSD, a joint venture with MST; ensuring
BioVeris's compliance with its obligations to MSD; establishing its position on
issues arising under current agreements with MSD, MST and Mr. Jacob Wohlstadter;
negotiating amendments to existing agreements or any new agreements with MSD,
MST or Mr. Jacob Wohlstadter, as the committee deems necessary; and providing
instructions and direction to BioVeris's designee to the board of managers of
MSD. The JVOC must consist of at least two independent directors appointed by
the BioVeris board of directors. The current members of the JVOC
156
are: Messrs. Salsmans, Sistermans and Rees, each of whom is independent as
defined in Rule 4200(a)(15) of the National Association of Securities Dealers'
marketplace rules and Section 10A of the Securities Exchange Act of 1934, as
amended. The BioVeris board of directors has established a written charter for
the JVOC.
COMPENSATION OF DIRECTORS
Set forth below is information regarding the compensation of BioVeris's
directors while serving as directors of IGEN in fiscal 2003.
Each non-employee director of IGEN received an attendance fee of $1,000 for
each meeting of the IGEN board of directors that he attended. In fiscal 2003,
the aggregate compensation paid to non-employee directors (directors other than
Mr. Wohlstadter and Dr. Massey) was $33,000. Effective May 2003 each
non-employee director of IGEN:
- receives an annual retainer of $10,000 and an attendance fee of $1,000
for each meeting of the IGEN board of directors that he attends;
- that serves on the JVOC or audit committee receives an additional annual
retainer of $10,000 plus an attendance fee of $1,000 for each meeting of
such committee that he attends.
IGEN maintains a policy for reimbursing all expenses incurred by members of
the IGEN board of directors in connection with attendance at board meetings.
IGEN's employee directors were not entitled to compensation in their capacities
as directors.
Under IGEN's 1994 Non-Employee Directors' Stock Option Plan or the 1994
Directors Plan, each non-employee director of IGEN was automatically granted an
option to purchase 10,000 shares of IGEN common stock effective on the date of
such director's election or appointment to the IGEN board of directors. In
addition, non-employee directors were granted additional options from time to
time. Set forth below is a table of options granted under this plan to and held
by IGEN non-employee directors as of December 1, 2003.
NUMBER OF SHARES
UNDERLYING NUMBER OF EXERCISE OR BASE
NAME OPTIONS GRANTED SHARES VESTED PRICE ($/SH) EXPIRATION DATE
---- ---------------- ------------- ---------------- ---------------
Richard W. Cass.......... 10,000 6,500 $15.69 June 2010
10,000 4,500 23.30 June 2011
Anthony R. Rees.......... 4,500 1,000 15.69 June 2010
10,000 4,500 23.30 June 2011
Robert R. Salsmans....... 10,000 10,000 6.25 August 2005
10,000 4,500 23.30 June 2011
Joop Sistermans.......... 10,000 8,000 24.69 September 2009
10,000 4,500 23.30 June 2011
Upon the completion of the merger, all of the above options will be canceled and
the holder of any such option will instead have the right to receive for each
share covered by such option:
- cash from Roche equal to the excess of $47.25 over the exercise price of
such option; and
- one share of BioVeris common stock.
After the completion of the merger, BioVeris's executive compensation
committee will determine the compensation of BioVeris's directors. BioVeris
anticipates that the compensation for each director will initially be as set
forth below. However, BioVeris cannot assure you that changes will not be made
to the compensation practices and policies if BioVeris's executive compensation
committee deems them appropriate.
157
Following completion of the merger, each non-employee director of BioVeris:
- will be entitled to receive an annual retainer of $10,000 and an
attendance fee of $1,000 for each meeting of the BioVeris board of
directors that he attends;
- that serves on the JVOC or the audit committee will be entitled to
receive an additional annual retainer of $10,000 plus an attendance fee
of $1,000 for each meeting of such committee he attends; and
- that serves on the executive compensation committee will be entitled to
receive an additional annual retainer of $5,000 plus an attendance fee of
$1,000 for each meeting of the executive compensation committee he
attends.
Under the proposed BioVeris 2003 stock incentive plan, on the day following
each annual meeting of stockholders of BioVeris, each non-employee director
shall receive an automatic grant of options to purchase 4,000 shares of BioVeris
common stock. In addition, any person who is appointed or elected as a
non-employee director at any other time shall automatically be granted an option
to purchase 4,000 shares of BioVeris common stock on the date of such
appointment or election. Each grant will have an exercise price equal to fair
market value on the date of grant and will vest in full on the first anniversary
of the grant date. Notwithstanding anything herein to the contrary, each
non-employee director who is serving at the time the merger is completed will
receive an option to purchase 4,000 shares of BioVeris common stock as of the
date the merger is completed.
EXECUTIVE COMPENSATION
Set forth below is information regarding the compensation of BioVeris's
executive officers, which are collectively referred to as the named executive
officers in this proxy statement/prospectus, while serving as executive officers
of IGEN. After the merger, the compensation of BioVeris's named executive
officers will be determined by BioVeris's compensation committee. BioVeris
anticipates that the annual salary for each of BioVeris's named executive
officers will initially be comparable to the salaries they received in fiscal
2003 from IGEN. However, BioVeris cannot assure you that changes will not be
made to the compensation practices and policies if BioVeris's compensation
committee deems them appropriate.
SUMMARY COMPENSATION TABLE
The following table sets forth compensation awarded or paid to, or earned
by, each of the named executive officers for fiscal 2003, 2002 and 2001. The
current annual salary being paid by IGEN to Mr. Samuel Wohlstadter, Dr. Massey
and Mr. Migausky is $426,000, $344,000 and $241,000, respectively.
ANNUAL COMPENSATION
SECURITIES
UNDERLYING
FISCAL IGEN OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) (# SHARES) COMPENSATION
--------------------------- ------ -------- -------- ------------ ------------
Samuel J. Wohlstadter............... 2003 $411,332 $250,000 150,000 $3,240(2)
Chairman and Chief 2002 392,167 250,000 -- 3,077(2)
Executive Officer(9) 2001 370,000 170,400 200,000 2,704(2)
Richard J. Massey, Ph.D. ........... 2003 331,833 125,000 50,000 5,452(3)
President and Chief 2002 316,208 200,000 -- 5,163(4)
Operating Officer 2001 298,000 136,200 100,000 4,767(5)
George V. Migausky.................. 2003 232,500 117,000 40,000 8,754(6)
Vice President and Chief 2002 221,667 112,500 -- 8,350(7)
Financial Officer 2001 209,000 60,000 25,000 7,929(8)
---------------
(1) Bonuses are paid to each employee after the end of each fiscal year.
(2) Consists of life insurance premiums paid.
158
(3) Consists of 401(k) match amount of $3,875 and annual life insurance premiums
paid in the amount of $1,577.
(4) Consists of 401(k) match amount of $3,656 and annual life insurance premiums
paid in the amount of $1,507.
(5) Consists of 401(k) match amount of $3,609 and annual life insurance premiums
paid in the amount of $1,158.
(6) Consists of 401(k) match amount of $5,523 and annual life insurance premiums
paid in the amount of $3,231.
(7) Consists of 401(k) match amount of $5,290 and annual life insurance premiums
paid in the amount of $3,060.
(8) Consists of 401(k) match amount of $5,225 and annual life insurance premiums
paid in the amount of $2,704.
(9) Excludes annual salary of $21,000 paid to Nadine Wohlstadter, the wife of
Mr. Samuel Wohlstadter, who was employed full-time by IGEN as an Executive
Coordinator. During the fiscal year ended 2003, IGEN made an additional one
time payment to Mrs. Wohlstadter of $101,500 representing unpaid salary for
the period from June 1, 1997 through March 31, 2002. Mrs. Wohlstadter is
expected to hold the same position at BioVeris following the completion of
the restructuring.
IGEN STOCK OPTION GRANTS AND EXERCISES
IGEN has granted options to its named executive officers under its 1985
stock option plan and its 1994 stock option plan. Upon completion of the merger,
all outstanding options granted under IGEN's stock option plans, including
unvested options, will be canceled and the holder of any such option will have
the right to receive for each share covered by such option:
- cash from Roche equal to the excess of $47.25 over the exercise price of
such option; and
- one share of BioVeris common stock.
IGEN Option Grants in Fiscal 2003. The following table sets forth
information relating to options granted by IGEN to each of the named executive
officers during fiscal 2003.
IGEN OPTION GRANTS IN LAST FISCAL YEAR(1)
POTENTIAL
REALIZED VALUE
AT ASSUMED
ANNUAL RATES OF
PERCENTAGE OF STOCK PRICE
TOTAL OPTIONS APPRECIATION FOR
NUMBER OF SHARES GRANTED TO EXERCISE OR OPTION TERM(2)
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION -----------------
NAME OPTIONS GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
---- ---------------- ------------- ----------- ---------- ------ ------
(IN MILLIONS)
Samuel J. Wohlstadter.... 150,000 39.7% $37.91 6/4/2012 $3.6 $9.1
Richard J. Massey........ 50,000 13.2 37.91 6/4/2012 1.2 3.0
George V. Migausky....... 40,000 10.6 37.91 6/4/2012 1.0 2.4
---------------
(1) Each of these options was granted pursuant to IGEN's 1994 stock option plan.
(2) In accordance with the rules of the Securities and Exchange Commission,
shown are the hypothetical gains or "option spreads" that would exist for
the respective options. These gains are based on assumed rates of annual
compounded stock price appreciation of 5% and 10% from the date the option
was granted over the full option term. The 5% and 10% assumed rates of
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent IGEN's estimate or projection of future
increase in the price of IGEN common stock.
159
Aggregated IGEN Stock Option Exercises in Last Fiscal Year and Fiscal
Year-End Stock Option Values. The following table sets forth information
related to options exercised by the named executive officers during fiscal 2003,
and the number of shares subject to both exercisable and unexercisable options
and the value of options held at fiscal year-end.
AGGREGATED IGEN OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES ACQUIRED VALUE MARCH 31, 2003 MARCH 31, 2003
NAME ON EXERCISE REALIZED(1) EXERCISABLE(2),(10) EXERCISABLE(3),(10)
---- --------------- ----------- ---------------------- --------------------
(IN MILLIONS)
Samuel J. Wohlstadter.... -- -- 350,000(4) $ 3.3(7)
Richard J. Massey........ 36,761 $1,055,614 243,239(5) 4.4(8)
George V. Migausky....... -- -- 192,500(6) 3.4(9)
---------------
(1) Based on the closing price of a share of IGEN common stock on the date of
exercise minus the exercise price and multiplied by the number of shares
acquired.
(2) Includes both "in-the-money" and "out-of-the-money" options. "In-the-money"
options are options with exercise prices below the market price of IGEN
common stock on March 31, 2003.
(3) Based on the closing price of IGEN common stock on March 31, 2003, of
$35.39 minus the exercise price. The closing price of IGEN common stock on
December 10, 2003 was $60.56.
(4) Includes 100,000 shares underlying options that are fully vested under the
option vesting schedule; and 250,000 shares underlying options that are not
vested but may be purchased by Mr. Samuel Wohlstadter under an early
exercise feature of the option. If Mr. Samuel Wohlstadter leaves the employ
of IGEN, IGEN may repurchase any shares purchased using this early exercise
feature at the exercise price per share to the extent the applicable
options were not yet fully vested at that time under the option vesting
schedule.
(5) Includes 143,239 shares underlying options that are fully vested under the
option vesting schedule; and 100,000 shares underlying options that are not
vested but may be purchased by Dr. Richard Massey under an early exercise
feature of the option. If Dr. Richard Massey leaves the employ of IGEN,
IGEN may repurchase any shares purchased using this early exercise feature
at the exercise price per share to the extent the applicable options were
not yet fully vested at that time under the option vesting schedule.
(6) Includes 139,999 shares underlying options that are fully vested under the
option vesting schedule; and 52,501 shares underlying options that are not
vested but may be purchased by Mr. George Migausky under an early exercise
feature of the option. If Mr. George Miguasky leaves the employ of IGEN,
IGEN may repurchase any shares purchased using this early exercise feature
at the exercise price per share to the extent the applicable options were
not yet fully vested at that time under the option vesting schedule.
(7) Includes approximately $1.6 million of value attributable to shares
underlying options that are not vested but may be purchased by Mr. Samuel
Wohlstadter under an early exercise feature of the option. If Mr. Samuel
Wohlstadter leaves the employ of IGEN, IGEN may repurchase any shares
purchased using this early exercise feature at the exercise price per share
to the extent the applicable options were not yet fully vested at that time
under the option vesting schedule.
(8) Includes approximately $800,000 of value attributable to shares underlying
options that are not vested but may be purchased by Dr. Richard Massey
under an early exercise feature of the option. If Dr. Richard Massey leaves
the employ of IGEN, IGEN may repurchase any shares purchased using this
early exercise feature at the exercise price per share to the extent the
applicable options were not yet fully vested at that time under the option
vesting schedule.
160
(9) Includes approximately $200,000 of the value attributable to shares
underlying options that are not vested but may be purchased by Mr. George
Migausky under an early exercise feature of the option. If Mr. George
Migausky leaves the employ of IGEN, IGEN may repurchase any shares
purchased using this early exercise feature at the exercise price per share
to the extent the applicable options were not yet fully vested at that time
under the option vesting schedule.
(10) Upon completion of the merger, all outstanding options granted under IGEN's
stock option plans, including unvested options, will be canceled and the
holder of any such options will have the right to receive for each share
covered by such option cash from Roche equal to the excess of $47.25 over
the exercise price of such option (without interest) and one share of
BioVeris common stock.
BIOVERIS TERMINATION PROTECTION PROGRAM
BioVeris intends to adopt a termination protection program effective upon
completion of the merger and related transactions, the purpose of which will be
to encourage the named executive officers and other key employees who will
participate in the program to continue as employees in the event of a "change of
control" of BioVeris, as defined in the termination protection program. The
termination protection program will provide that in the event a covered
employee's employment is terminated without "cause" or the employee resigns for
"good reason" within 30 months following a "change of control" of BioVeris, or a
covered employee's employment is terminated prior to a "change of control" at
the request of a party involved in such "change of control" or otherwise in
connection with or in anticipation of a "change of control," then the employee
shall be entitled to receive a cash payment equal to 1.5 to 3 times the sum of
the employee's annual salary plus bonus (3 times in the case of the named
executive officers). Subject to certain exceptions, "good reason" means, for
purposes of the termination protection program,
- a decrease in (or failure to increase in accordance with the terms of any
employment contract) the covered employee's base salary or bonus
opportunity,
- a diminution in the aggregate employee benefits and perquisites provided
to the covered employee,
- a diminution in the covered employee's title, reporting relationship,
duties or responsibilities,
- relocation of the covered employee's primary office more than 35 miles
from its current location, or
- the failure by any successor to BioVeris to explicitly assume the
termination protection program and BioVeris's obligations thereunder.
The termination protection program will also provide that covered employees
are entitled to continued welfare and pension benefits for up to 18 months (or
in the case of the named executive officers, for up to 36 months (or life, with
respect to medical and dental benefits and an annual comprehensive physical)).
In addition, the termination protection program will provide reimbursement for
outplacement services and will provide a gross-up for any "parachute" excise tax
imposed on payments made under the termination protection program, and for the
advancement of costs and expenses incurred by the employee related to the
termination protection program.
TRANSACTION BONUS PAYMENTS
Simultaneous with completion of the merger and related transactions, the
following executive officers of IGEN will be entitled to receive transaction
bonus payments in the amounts set forth below:
TRANSACTION
NAME BONUS
---- -----------
Samuel J. Wohlstadter....................................... $1,278,000
Richard J. Massey, Ph.D..................................... 450,000
George V. Migausky.......................................... 450,000
Each transaction bonus payment is contingent upon the individual executive
officer providing a release of the respective obligations of IGEN and BioVeris
under IGEN's termination protection program.
161
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
MSD AND THE MSD AGREEMENTS
MSD is a joint venture formed by MST and IGEN in 1995. MSD was formed for
the development, manufacture, marketing and sale of products utilizing a
combination of MST's multi-array technology together with IGEN's technology. MST
is a company established and wholly-owned by Mr. Jacob Wohlstadter, a son of
IGEN's and BioVeris's chief executive officer. In August 2001, IGEN amended the
MSD joint venture agreement, the MSD limited liability company agreement and
certain license and other agreements with MSD and MST to continue the MSD joint
venture and entered into various related agreements, including employment and
consulting agreements with Mr. Jacob Wohlstadter. These agreements, as amended,
are referred to in this proxy statement/prospectus as the MSD agreements. An
independent committee of the IGEN board of directors, with the advice of
independent advisors and counsel, negotiated and approved the MSD agreements. As
part of the restructuring, IGEN will transfer its equity interest in MSD to
BioVeris and will assign the MSD agreements to BioVeris. While the MSD joint
venture agreement will expire upon the completion of the merger, BioVeris will
continue to hold its limited liability company interest in MSD unless and until
MSD or MST exercises its right to purchase BioVeris's interest on the terms
provided in the MSD joint venture agreement and described below or unless
BioVeris transfers its interest, which transfer requires the consent of MST.
MSD manufactures, markets and sells instrument systems, including the
Sector HTS and the Sector PR, which combine MST's multi-array technology and
IGEN's ECL technology. The Sector HTS is an ultra high throughput drug discovery
system engineered for applications such as high throughput screening and
large-scale proteomics. The Sector PR is a smaller system designed for benchtop
applications such as assay development, research in therapeutic areas, cellular
biology and medium throughput screening. MSD also manufactures and markets a
line of its own reagents, assays and plates that are used on these systems. MSD
commenced product sales in October 2002, and, during fiscal 2003, MSD had
product sales of $3.2 million and a net loss of $18.2 million.
Under the MSD agreements, IGEN's funding commitment to MSD was based on an
annual budget of MSD approved by the JVOC, a committee of the IGEN board of
directors consisting of independent directors. The JVOC approved funding for MSD
by IGEN for the period from January l, 2003 to November 30, 2003 in an amount of
$20.6 million, subject to a permitted variance of 15%. As of September 30, 2003,
IGEN's remaining funding commitment to MSD was $5.4 million and, except as
described in the next paragraph, IGEN has no commitment to provide any funding
to MSD for any period after November 30, 2003. IGEN's remaining funding
commitment may be satisfied in part through in-kind contributions of scientific
and administrative personnel and shared facilities. For fiscal 2003, 2002 and
2001, IGEN made total contributions to MSD of $20.5 million, $19.6 million and
$8.3 million, respectively. During fiscal 2002, IGEN transferred certain
equipment and leasehold interests to MSD in the amount of $839,000, which amount
is included in the in-kind contributions to MSD in such year.
Separate from and in addition to IGEN's remaining funding commitment under
the MSD agreements for the period from January 1, 2003 to November 30, 2003,
BioVeris has agreed under the MSD letter agreement to make a final capital
contribution of $37.5 million to MSD on the first business day following the
completion of the merger. Of the $37.5 million, Mr. Samuel Wohlstadter will fund
any amount in excess of $30.0 million (including any interim funding provided by
IGEN as described in the next sentence) through the purchase of shares of
BioVeris series B preferred stock that economically mirror the class C interests
in MSD to be held by BioVeris, as specified in the BioVeris preferred stock
purchase agreement. In addition, in the event the merger is not completed prior
to December 1, 2003, IGEN has agreed under the MSD letter agreement to provide
continued interim funding to MSD payable monthly on the first day of each month
commencing on December 1, 2003 until the earlier to occur of completion of the
merger or termination of the merger agreement. The monthly interim funding will
equal approximately $1.7 million, which is one-twelfth of IGEN's aggregate
funding commitment under the MSD budget for 2003 approved by the JVOC. Any
interim funding will reduce the amount of BioVeris's final capital contribution
following the completion of the merger.
162
In addition, MSD, MST and Mr. Jacob Wohlstadter, which together are
referred to as the indemnified parties, have submitted to IGEN invoices for
legal fees and expenses for the period from March 1, 2003 through September 30,
2003 in the amount of approximately $1.3 million that they assert were
reasonably incurred in connection with the indemnified parties' participation
and involvement in IGEN's ongoing negotiations and settlement of the Roche
litigation and their review of the documents relating to the merger and related
transactions. The indemnified parties have claimed that IGEN must reimburse
these fees and expenses pursuant to a letter agreement entered into between the
indemnified parties and IGEN in August 2001. The JVOC, through its counsel, has
reviewed the relevant invoices, and, without conceding the validity of the
indemnified parties' claims, has offered to pay in settlement of these claims a
portion of the legal fees and expenses as a final settlement. The indemnified
parties have not agreed to the JVOC's offer of a final settlement and there can
be no assurances as to whether agreement will be reached with respect to this
matter. No amount that may be paid by IGEN or BioVeris under these invoices or
pursuant to such agreement shall unless otherwise agreed by the parties be
deemed or construed as a capital contribution to MSD or otherwise offset IGEN's
remaining funding commitment to MSD.
After the restructuring, and subject to MSD's and MST's right to buy
BioVeris's interest in MSD, BioVeris will replace IGEN as a member of MSD and
will hold a 31% voting equity interest in MSD and be entitled to a preferred
return on $72.2 million of the funds previously invested by IGEN in MSD through
September 30, 2003 and on all additional funds invested by IGEN and BioVeris
thereafter, including the $37.5 million contribution to be made following the
completion of the merger. This preferred return would be payable out of a
portion of both future profits and certain third-party financings of MSD,
generally before any payments are made to other equity holders. MST is the only
other member of MSD and owns the remaining 69% voting equity interest in MSD.
Although the MSD joint venture agreement will expire upon completion of the
merger, unless and until MSD or MST exercises its right described below to
purchase BioVeris's interest in MSD, BioVeris will retain the right to appoint 1
of 2 members of MSD's board of managers, and BioVeris will generally have the
right to approve significant MSD governance matters. In exercising this right,
an independent committee of the BioVeris board of directors must consider
BioVeris's interests and the interests of BioVeris stockholders while also
taking into consideration the interests of MSD.
After the restructuring, Dr. Richard Massey, IGEN's and BioVeris's
president and chief operating officer, will be BioVeris's representative on the
MSD board of managers and will also serve as the treasurer and secretary of MSD.
Dr. Massey will receive no compensation from MSD or BioVeris for serving as the
treasurer and secretary of MSD. The other member of the MSD board of managers is
Mr. Jacob Wohlstadter, who is the sole owner of MST and serves as president and
chief executive officer of MSD. Neither Dr. Massey nor any other executive
officer or director of IGEN or BioVeris has any ownership interest in MST or
MSD, other than through ownership of interests in IGEN or BioVeris and other
than the BioVeris series B preferred stock to be purchased by Mr. Samuel
Wohlstadter to the extent that BioVeris's final capital contribution (including
any interim funding provided by IGEN as described in the second preceding
paragraph) exceeds $30.0 million. Mr. Samuel Wohlstadter and Mrs. Nadine
Wohlstadter disclaim any ownership interest in MST or MSD as a result of Mr.
Jacob Wohlstadter's ownership interest in those entities.
Under the terms of the IGEN/MSD license agreement, which is one of the MSD
agreements, BioVeris granted to MSD a worldwide, perpetual, exclusive license
(with certain exceptions) to BioVeris's technology, including ECL technology,
for use in MSD's research program, defined in the MSD agreements and which is
referred to in this proxy statement/prospectus as the MSD research program. The
MSD research program involves the use in diagnostic procedures, including
diagnostic procedures utilizing ECL technology, of:
- selection and screening methods, including high throughput screening and
methods involving large numbers of determinations, in each case relating
only to claimed or inventive subject matter of the patents or know-how
licensed by MST to MSD;
163
- disposable electrodes; and
- multi-array diagnostic.
MSD and MST signed a consent to the licenses granted to the license sub in
the license agreement under which they consented to and joined in such licenses
and waived any right to restrict or limit the license sub's and its affiliates'
exercise of the licenses granted in the license agreement. In the restructuring,
IGEN will assign the IGEN/MSD license agreement to BioVeris. The IGEN/MSD
license agreement will survive expiration of the MSD joint venture agreement and
the termination of BioVeris's status as a member of MSD. In addition, if
BioVeris ceases to be a member of MSD, it will become entitled to receive
quarterly royalty payments from MSD of 3% of the net sales price on all products
developed and sold by MSD using the patents BioVeris will receive as part of the
restructuring. The royalty obligation will expire as the relevant BioVeris
patents expire.
MST holds a worldwide, perpetual, non-exclusive sublicense from MSD, which
is referred to in this proxy statement/prospectus as the MSD/MST sublicense
agreement, to use BioVeris's technology to make, use or sell products or
processes applying or related to the technologies used in the MSD research
program outside the diagnostic field. For purposes of the MSD agreements, the
diagnostic field is defined to mean all diagnostic devices and procedures for
the measurement or detection of identifiable substances for human clinical
research, environmental, agricultural, veterinary, food testing, industrial or
similar purposes. BioVeris is entitled to receive quarterly royalty payments
from MST of 6% of the net sales price on any products developed and sold by MST
using the patents BioVeris will receive as part of the restructuring. BioVeris
will assume IGEN's obligation under the MSD agreements to make its technology
available for sublicense by MSD to MST, and these obligations will survive the
expiration of the MSD joint venture agreement and the termination of BioVeris's
or MST's status as a member of MSD. BioVeris will not, however, be obligated to
make available for sublicense by MSD to MST any technology or improvements to
BioVeris's technology developed after the expiration of the MSD joint venture
agreement or the termination of BioVeris's or MST's status as a member of MSD.
In addition, BioVeris may terminate its participation in the MSD/MST sublicense
agreement upon MSD's or MST's material breach, after notice and an opportunity
to cure the breach.
During the term of the MSD joint venture agreement, MSD is IGEN's and MST's
exclusive means of conducting the MSD research program, and IGEN is obligated to
refrain from developing or commercializing any products, processes or services
that are related to the MSD research program in the diagnostic field, as defined
for the purposes of the MSD agreements, or to MSD's research technologies as
described in the MSD agreements, subject to certain exceptions. As part of the
MSD joint venture agreement, MSD granted to BioVeris an exclusive, worldwide,
royalty-free license to use in the diagnostic field certain defined improvements
developed by MSD in the MSD research program. After the expiration or
termination of the MSD joint venture agreement, the license granted to BioVeris
to use in the diagnostic field certain defined ECL improvements developed by MSD
will remain in effect. However, BioVeris, may not make, use or sell products,
processes or services that use certain defined ECL improvements granted to it by
MSD if doing so would compete with MSD in the diagnostic field or use research
technologies defined in the MSD agreements. In addition, after BioVeris ceases
to be member of MSD, MSD may require BioVeris to distribute its products
pursuant to a mutually agreeable distribution agreement, and BioVeris will be
required to pay to MST a royalty of 3% of net sales of MSD products sold by
BioVeris. During its term, the MSD joint venture agreement limits the business
of MSD to performing the MSD research program and developing, manufacturing,
marketing and selling products in the diagnostic field. After termination of the
MSD joint venture agreement, this limitation on MSD's business activity will no
longer apply. Furthermore, following the termination or expiration of the MSD
joint venture agreement, BioVeris will remain subject to limitations on its
ability to manufacture, market and sell in the diagnostic field, as defined in
the MSD agreements, instruments that use an electrode to start the ECL process
where the electrode is disposable, consumable or not permanently installed and
MST will retain sole ownership of all inventions, concepts, know-how and
technology developed by MSD as well as all patent applications, patents and
copyrights.
164
As part of the merger agreement and related transaction agreements,
BioVeris, IGEN and MSD agreed that the MSD joint venture agreement will expire
on the later of November 30, 2003, or the earlier of the date of the completion
of the merger and related transactions or the termination of the merger
agreement. In addition, in accordance with the MSD agreements, MST and MSD have
the right to terminate the MSD joint venture agreement prior to its expiration
under certain circumstances, including
- breach of IGEN's obligations, including IGEN's funding obligations to
MSD,
- MSD's termination of Mr. Jacob Wohlstadter's employment (other than for
cause or disability),
- if Mr. Jacob Wohlstadter is entitled to terminate his employment
agreement for good reason (as defined in his employment agreement) or
- upon a change in control of IGEN, as defined.
MSD and Mr. Jacob Wohlstadter have each agreed that the merger and related
transactions will not constitute a change in control for purposes of the MSD
agreements.
As part of the restructuring, IGEN's equity interest in MSD will be
transferred to BioVeris because Roche did not want to acquire the interest. MSD
and MST do not have the right to purchase IGEN's or BioVeris's, as the case may
be, interest in MSD until the MSD joint venture agreement expires, or in certain
cases, is terminated. The MSD joint venture agreement will expire upon
completion of the merger and, as a result, MSD and MST will have the right to
purchase for a purchase price equal to fair market value (to be determined as
described below), less a 7.5% discount factor, BioVeris's entire interest in
MSD, including BioVeris's preferred interests that entitle it to a preferred
return on its investment in MSD. MSD or MST has until 90 days following the
completion of the merger to exercise its right to begin the sale process. Under
the MSD joint venture agreement, the parties must negotiate in good faith for 30
days to attempt to agree on a purchase price for BioVeris's interest, after
which time the MSD joint venture agreement provides for an appraisal of the fair
market value of BioVeris's interest in MSD (including its preferred interests).
The MSD joint venture agreement provides for this appraisal to be accomplished
within 45 days after appraisers are appointed by each of BioVeris and either MSD
or MST, as applicable, but may be extended an additional 45 days or more through
the required appointment of a third appraiser if the value determined by the
first two appraisers differs by more than 10%. Fair market value will equal the
average of the determinations of both appraisers, if there are only two
appraisers, or the average of the two closest determinations, if there are three
appraisers. MSD or MST must exercise its right to purchase BioVeris's interest
within 60 days after the purchase price has been determined pursuant to this
appraisal process. If MSD or MST exercises this right, it will be required to
pay BioVeris the outstanding purchase price plus simple (cumulated, not
compounded) interest at the fixed annual rate of 0.5% over the prime rate in
effect on the date that MSD or MST, as the case may be, elects to purchase the
interests. The purchase price is payable over time in installments equal to the
sum of 5% of MSD net sales, as determined in accordance with the MSD agreements,
and 20% of the net proceeds realized by MSD from the sale of its debt or equity
securities in any third-party financing after the date of the sale of BioVeris's
interest in MSD. In the event such net sales or third-party financings do not
materialize, BioVeris will not receive any payments from MSD or MST, as the case
may be, for the purchase of BioVeris's interest in MSD. As security for the
payment obligation, BioVeris will hold a security interest in the interests in
MSD that are being purchased. MST or MSD, as the case may be, may repay all or
any part of the outstanding purchase price plus accrued interest at any time and
from time to time without penalty. Each of BioVeris and either MSD or MST, as
applicable, will be responsible for all fees and costs of the appraiser
designated by it and one-half of all fees and costs of the third appraiser, if
any, provided that, upon the election of MSD or MST, as applicable, IGEN will
pay MSD's or MST's, as applicable, share of such fees and costs, in which case
such fees and costs may be added to the purchase price of BioVeris's interest in
MSD.
Following the expiration of the MSD joint venture agreement, if MSD or MST
exercises its right to purchase BioVeris's interest in MSD, BioVeris will:
- remove its appointed designee from MSD's board of managers;
165
- vote its interest in MSD in the manner requested by MST, subject to
certain limitations;
- provide reasonable cooperation and provide such consents (including the
execution and delivery of amendments to the MSD agreements as may be
reasonably required) to permit MSD to raise additional capital; and
- terminate its status as a party to the MSD/MST license agreement.
Following the expiration of the MSD joint venture agreement, many of the
licenses and other arrangements with MSD and MST assigned to BioVeris will
continue indefinitely in accordance with their terms. These include the IGEN/MSD
license agreement, the MSD/MST sublicense agreement (but only as to IGEN or
BioVeris technology or improvements developed before IGEN or BioVeris ceases to
be a member of MSD), and certain indemnification obligations to Mr. Jacob
Wohlstadter. In addition, certain of BioVeris's obligations under the MSD joint
venture agreement will survive its termination, including:
- to cooperate and work in good faith and use reasonable best efforts to
assist MSD in securing third-party financing,
- confidentiality obligations,
- to make available to MSD the benefits of certain agreements with
third-party licensors, suppliers, vendors, distributors and other
providers,
- to assign to MSD all proprietary information and intellectual property
within the MSD research program or research technologies, as described in
the MSD agreements, and to ensure that its employees protect such
proprietary information,
- to defend and indemnify MSD against all claims arising out of the conduct
of the MSD research program and to maintain liability insurance to cover
the risk of liability resulting from the conduct of that program, and
- unless MSD or MST exercises its right to purchase BioVeris's interests in
MSD, not to vote against or refuse to consent to, agree to or approve any
action supported by MST unless a committee of the BioVeris board of
directors reasonably concludes, after having considered the interests of
MSD, that the action is not in the best interests of BioVeris and its
stockholders.
Notwithstanding termination of the MSD joint venture agreement, BioVeris
will be required to continue to pay the expenses associated with prosecuting and
maintaining the patents licensed by MST to MSD in connection with the original
formation of the MSD joint venture unless and until MSD or MST exercises its
right to purchase BioVeris's interests in MSD.
Following the expiration of the MSD joint venture agreement, BioVeris will
no longer be required to provide research personnel and corporate services to
MSD. Nevertheless BioVeris expects that it will continue to provide these
services to MSD on a transitional basis at MSD's expense. In addition, following
the expiration or termination of the MSD joint venture agreement, MSD will be
entitled to continue to lease certain facilities and related equipment from
BioVeris (including laboratory facilities located in BioVeris's corporate
headquarters) pursuant to the terms of the existing sublease agreements with
MSD. The term of each sublease will expire one day prior to the expiration of
the prime lease for that facility. Each sublease agreement provides that,
subject to certain exceptions, BioVeris must exercise all available extension
rights under the prime lease. Following termination or expiration of the MSD
joint venture agreement, each of MSD and BioVeris may unilaterally terminate any
or all of the subleases by providing at least 18 months prior written notice of
termination. If BioVeris elects to terminate a sublease for a facility, MSD may
elect, notwithstanding any termination of the sublease, to remain in the
subleased facility after the 18-month period expires for any period of time
selected by MSD, but not longer than one day prior to the expiration of the
prime lease (including any extensions of the prime lease). After a notice of
termination of a sublease has been sent, MSD will be required to pay its pro
rata share of all rental and other expenses incurred by BioVeris under the prime
lease. MSD and MST may elect, if either exercises
166
its right to purchase BioVeris's interests in MSD, to have its rental and
expense payment obligations for the 18-month period included in the purchase
price of those interests in MSD.
In addition, following the termination or expiration of the MSD joint
venture agreement, the restrictions on MSD offering employment to employees of
BioVeris will cease.
MSD has an employment agreement with Mr. Jacob Wohlstadter, its president
and chief executive officer, the current term of which runs through November 30,
2004. The term of the employment agreement will automatically renew for a
12-month period on November 30 of each year unless either MSD or Mr. Jacob
Wohlstadter gives notice of termination no later than 180 days prior to that
renewal date. That employment agreement provides for a salary at the annual rate
of $250,000 through November 30, 2003. Thereafter, the salary is to be increased
as agreed to by MSD and Mr. Jacob Wohlstadter. In addition, Mr. Jacob
Wohlstadter is also eligible to receive, at the discretion of the JVOC of the
IGEN or BioVeris board of directors, as the case may be, an annual cash bonus in
an amount not to exceed 20% of his annual salary. Mr. Jacob Wohlstadter is also
entitled to receive pension, welfare and fringe benefits comparable to those
received by senior executives of BioVeris and other insurance benefits. If MSD
terminates the employment agreement without cause, or Mr. Jacob Wohlstadter
terminates the employment agreement for good reason (which includes a "change in
control" of BioVeris, as defined), Mr. Jacob Wohlstadter will be entitled to
receive, in addition to salary and pro rata bonus and adjustments earned through
the 60th day following the notice of termination, an amount equal to from 3 to
12 times (depending on the reason for the termination) the monthly pro rata
salary, bonus and adjustments in effect at the time of the termination. Under
the employment agreement, Mr. Jacob Wohlstadter is also entitled to receive a
gross-up for any "parachute" excise tax that may be imposed on payments made or
benefits provided pursuant to the agreement. In addition, upon such a
termination prior to the expiration of the MSD joint venture agreement, MSD and
MST will have a joint right to purchase BioVeris's interest in MSD on the terms
described above. BioVeris will be responsible directly or indirectly for all
amounts payable, costs incurred and other obligations under the employment
agreement prior to the termination of BioVeris's funding obligation to MSD upon
completion of the merger, which generally are expected to be paid out of its
funding commitment to MSD. That funding commitment ends when the merger is
completed as will most of BioVeris's obligations under the employment agreement,
except that BioVeris will remain obligated to maintain in effect directors and
officers liability insurance coverage for Mr. Jacob Wohlstadter and to pay Mr.
Jacob Wohlstadter the applicable salary, pro rata bonus and adjustments in
effect at the time of termination as described above and a gross-up for any
"parachute" excise tax that may be imposed. MSD and Mr. Jacob Wohlstadter have
each agreed that the merger and related transactions will not constitute a
change in control for purposes of the MSD agreements and the employment
agreement. BioVeris will also indemnify Mr. Jacob Wohlstadter against certain
liabilities, including liability from the MSD joint venture relating to the
period of IGEN's or BioVeris's involvement with MSD.
During the years ended March 31, 2003, 2002 and 2001, BioVeris's
contributions to MSD were $20.5 million, $19.6 million and $8.3 million,
respectively. During the years ended March 31, 2003, 2002 and 2001, BioVeris
recorded $17.6 million (as equity in loss of affiliate), $13.3 million ($10.9
million as equity in loss of affiliate and $2.4 as research and development
expense), and $8.3 million (as research and development expense), respectively.
BioVeris's investment in affiliate totaled $9.2 million and $6.2 million at
March 31, 2003 and 2002, respectively. Effective October 1, 2003 IGEN will
consolidate the financial results of MSD in accordance with the Financial
Accounting Standards Board Interpretation No. 46, "Consolidation of Variable
Interest Entities." See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Critical Accounting Policies -- Joint
Venture Accounting" and "Consolidated Financial Statements -- Notes to
Consolidated Financial Statements -- Note 4 -- Meso Scale Diagnostics Joint
Venture" for discussion of consolidation accounting of the MSD investment.
Mr. Jacob Wohlstadter has a consulting agreement with IGEN that will be
assumed by BioVeris. This consulting agreement will be automatically renewed on
August 15, 2004, for a period of three years
167
unless either BioVeris or Mr. Jacob Wohlstadter gives notice to the contrary no
later than 90 days before that date. Pursuant to the consulting agreement, Mr.
Jacob Wohlstadter will be entitled to receive such fees as BioVeris and Mr.
Jacob Wohlstadter agree to when consulting services are requested by BioVeris.
BioVeris has no obligation to request any consulting services from Mr. Jacob
Wohlstadter. During fiscal 2002, Mr. Jacob Wohlstadter received $275,000 from
IGEN for consulting services performed for IGEN for the period 1995 through
2001. Mr. Jacob Wohlstadter did not perform any compensable consulting services
during fiscal 2002, 2003 or the six months ended September 30, 2003. In his role
as a consultant, Mr. Jacob Wohlstadter also received stock option grants from
IGEN. In May 1997, he was granted options to purchase 180,000 shares of IGEN
common stock with an exercise price of $6.00 per share, which was the fair
market value on the date of grant. These options will expire on May 8, 2007, and
are fully vested. In August 2000, Mr. Jacob Wohlstadter was granted options to
purchase 75,000 shares of IGEN common stock, with an exercise price of $18.75
per share, which was the fair market value on the date of grant. These options
will expire on August 1, 2010, and 48,749 shares are exercisable as of December
1, 2003. Upon completion of the merger, these options will be canceled and Mr.
Jacob Wohlstadter will have the right to receive for each share covered by such
option cash from Roche equal to the excess of $47.25 over the exercise price of
such option (without interest) and one share of BioVeris common stock.
Mr. Jacob Wohlstadter and JW Consulting Services, L.L.C., a company
established and wholly-owned by Mr. Jacob Wohlstadter, have an indemnification
agreement with IGEN that BioVeris will assume. Pursuant to the indemnification
agreement, BioVeris will indemnify Mr. Jacob Wohlstadter and JW Consulting
Services, L.L.C. against any claims arising out of the performance or
non-performance of services to or for the benefit of BioVeris. In addition,
BioVeris will be obligated under the MSD limited liability company agreement to
indemnify each officer and member of the board of managers of MSD with respect
to any action taken by such person during the time IGEN or BioVeris, as the case
may be, was a member of MSD by reason of the fact that such person is or was an
officer or a member of the board of managers of MSD.
RELATED COMPANIES
In fiscal 1994, IGEN entered into a joint venture with Hyperion to develop
and commercialize biomedical products utilizing advanced materials. In fiscal
1995, the joint venture was terminated and IGEN entered into a supply agreement
with Hyperion. Dr. Richard Massey and Mr. Samuel Wohlstadter are directors of
Hyperion. In addition, Mr. Samuel Wohlstadter is the principal and controlling
stockholder of Hyperion, beneficially owning more than 50% of the outstanding
common stock of Hyperion. Mr. Samuel Wohlstadter is also the chief executive
officer of Hyperion. During fiscal 2003, IGEN did not pay to, or receive from,
Hyperion any amounts under these agreements. In addition, Hyperion has a shared
services arrangement with BioVeris under which BioVeris will provide certain
administrative and other services at cost to Hyperion. The total amounts billed
to by Hyperion under this arrangement for fiscal 2003 and the six months ended
September 30, 2003 were $338,000 and $147,000, respectively. Amounts due under
this arrangement were $175,000 and $67,000 at March 31, 2003 and September 30,
2003, respectively, which were paid subsequent to each respective period end.
Mr. Samuel Wohlstadter is also the principal and controlling stockholder, a
director and the chief executive officer of each of Wellstat Biologics, Wellstat
Therapeutics and Proteinix. Dr. Massey is a less than 10% stockholder in
Proteinix. In 1993, IGEN licensed certain diagnostic technologies from, and
certain pharmaceutical technologies to, Proteinix and Wellstat Therapeutics. No
royalties have ever been earned or accrued under these agreements. Wellstat
Biologics, Proteinix and Wellstat Therapeutics each has had a shared services
arrangement with IGEN since 1994, 1992 and 1986, respectively, under which IGEN
provides and BioVeris will provide certain services. These services include
accounting and finance, human resources and other administrative services, as
well as facility related costs and services. The total amounts billed to
Wellstat Biologics, Wellstat Therapeutics and Proteinix under this agreement for
fiscal 2003 were $313,000, $352,000 and $6,000, respectively, and for the six
months ended September 30, 2003 were $150,000, $210,000 and $62,000,
respectively. Amounts due under these arrangements were $53,000
168
and $227,000 at March 31, 2003 and September 30, 2003, respectively, which were
paid subsequent to each respective period end.
In 1993, IGEN enacted a reorganization that included the discontinuation of
its pharmaceutical development operations. As part of that reorganization, IGEN
entered into an agreement with Pro-Neuron, Inc., which was renamed Wellstat
Therapeutics, that will be assigned by IGEN to BioVeris as part of the
restructuring. Under the agreement, Wellstat Therapeutics assumed contractual
and financial responsibility for IGEN's commitments, agreements and contract
research programs related to the IGEN prodrug cancer program. In connection with
this assumption, IGEN granted to Wellstat Therapeutics an exclusive, worldwide
and perpetual license to its patents, patent applications, know-how and trade
secrets relating to the IGEN prodrug cancer program, subject to certain
limitations. IGEN is entitled to receive a royalty from Wellstat Therapeutics
based on net sales of products made pursuant to the license. To date, there have
been no products developed under this license. At the same time, Wellstat
Therapeutics granted to IGEN an exclusive, worldwide and perpetual license to
its patents, patent applications, know-how and trade secrets relating to
Wellstat Therapeutics's proprietary diagnostics product opportunities, subject
to certain limitations, in a field that includes research, industrial and
clinical diagnostic markets. Wellstat Therapeutics is entitled to receive a
royalty from BioVeris based on net sales made pursuant to the license. To date,
there have been no products developed under this license. In connection with the
assumption of contractual and financial responsibility for IGEN's commitments,
agreements and contract research programs and the grants of the licenses,
Wellstat Therapeutics was paid $5 million by IGEN, which is currently scheduled
convert into 4.5% of the fully diluted equity of Wellstat Therapeutics on
December 31, 2003. This equity right has no historic cost basis in the
consolidated financial statements of IGEN. Should Wellstat Therapeutics offer to
repay to IGEN the $5 million payment plus an annual rate of return of 8%, IGEN
has the right to accept cash or retain a 4.5% equity position. IGEN and Wellstat
Therapeutics, through their respective legal advisors, are negotiating the terms
under which Wellstat Therapeutics may acquire, and IGEN or BioVeris, as the case
may be, may sell the 4.5% equity right in Wellstat Therapeutics and the parties
would agree either to amend or terminate the existing licensing agreements
between IGEN and Wellstat Therapeutics or that Proteinix, Wellstat Therapeutics
or an affiliate of those companies would purchase the intellectual property
currently licensed exclusively to Wellstat Therapeutics. The audit committee of
the IGEN board of directors is directing the negotiations for and on behalf of
IGEN and any agreement would be subject to audit committee approval. There can
be no assurances whether any agreement will be reached with respect to this
matter or what terms any such agreement may contain.
Also in 1993, as part of the discontinuation of its pharmaceutical
development operations, IGEN entered into an agreement with Proteinix, that will
be assigned by IGEN to BioVeris as part of the restructuring. Under the
agreement, Proteinix assumed contractual and financial responsibility for IGEN's
commitments, agreements and contract research programs related to the IGEN
Abzymes program development operations. In connection with this assumption, IGEN
granted to Proteinix an exclusive, worldwide and perpetual license to its
patents, patent applications, know-how and trade secrets relating to the IGEN
Abzymes program, subject to certain limitations. IGEN is entitled to receive a
royalty from Proteinix based on net sales of products made pursuant to the
license. To date, there have been no products developed under this license. At
the same time, Proteinix granted to IGEN an exclusive, worldwide and perpetual
license to its patents, patent applications, know-how and trade secrets relating
to Proteinix's ubiquitin fusion technology for the production of diagnostic
reagents together with product opportunities, subject to certain limitations, in
a field that includes research, industrial and clinical diagnostic markets.
Proteinix is entitled to receive a royalty from BioVeris based on net sales made
pursuant to the license. To date, there have been no products developed under
this license. In connection with the assumption of contractual and financial
responsibility for IGEN's commitments, agreements and contract research programs
and the grants of the licenses, Proteinix was paid $3.2 million by IGEN, which
is currently scheduled convert into 4.5% of the fully diluted equity of
Proteinix on December 31, 2003. This equity right has no historic cost basis in
the consolidated financial statements of IGEN. Should Proteinix offer to repay
to IGEN the $3.2 million payment plus an annual rate of return of 8%, IGEN has
the right to accept cash or retain a 4.5% equity position. IGEN and Proteinix,
through their respective
169
legal advisors, are negotiating the terms under which Proteinix may acquire, and
IGEN or BioVeris, as the case may be, may sell the 4.5% equity right in
Proteinix and the parties would agree to either amend or terminate the existing
licenses between IGEN and Proteinix or Proteinix, Wellstat Therapeutics or an
affiliate of those companies would purchase the intellectual property currently
licensed exclusively to Proteinix. The audit committee of the IGEN board of
directors is directing the negotiations on behalf of IGEN and any agreement
would be subject to audit committee approval. There can be no assurances whether
any agreement will be reached with respect to this matter or what terms any such
agreement may contain.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
In connection with the exercise of employee stock options in July 2000, Mr.
Samuel Wohlstadter, IGEN's and BioVeris's chief executive officer, received a
loan from IGEN. The loan was a 6.62% simple interest only, full recourse loan
against all assets of Mr. Samuel Wohlstadter in the principal amount of
$2,060,500 maturing in July 2007. Interest charged to and paid by Mr. Samuel
Wohlstadter under this loan arrangement during fiscal 2003 was $136,405. The
loan is collateralized by the pledge of 100,000 shares of IGEN common stock.
This loan will be transferred to BioVeris as part of the restructuring and will
be repaid upon completion of the merger.
In connection with the exercise of an employee stock option in July 2000,
Dr. Richard Massey, president and chief operating officer, received a loan from
IGEN. The loan was a 6.62% simple interest only, full recourse loan against all
assets of Dr. Massey in the principal amount of $1,649,000, maturing in July
2007. Interest charged to and paid by Dr. Massey under this loan arrangement
during fiscal 2003 was $109,164. The loan was collateralized by the pledge of
80,000 shares of IGEN common stock owned by Dr. Massey. This loan has been
repaid in full and the pledged collateral has been released.
Since 1995, IGEN has retained Wilmer, Cutler & Pickering to perform legal
services in connection with the Roche litigation and other matters. Mr. Richard
Cass, one of IGEN's directors, is a partner of the law firm of Wilmer, Cutler &
Pickering and is chairman of its Corporate Practices Group. In addition, Ms.
Jennifer M. Drogula, who became the daughter-in-law of IGEN's and BioVeris's
chairman and chief executive officer in March 2002, has been a partner of the
firm since January 1, 2001. IGEN recorded approximately $2.1 million, $11.2
million and $5.8 million in legal fees to the law firm for fiscal 2003, 2002 and
2001, respectively. Amounts due to the law firm totaled $432,000 and $1.7
million as of March 31, 2003 and 2002, respectively. BioVeris expects that it
will continue to retain the law firm in the future.
In addition, IGEN engaged the law firm of Hale and Dorr LLP to provide
legal services in connection with the Roche litigation and otherwise. IGEN first
engaged this law firm in 1994. Ms. Deborah Wohlstadter, the wife of Mr. Jacob
Wohlstadter and daughter-in-law of IGEN's and BioVeris's chairman and chief
executive officer since December 2001, is a junior partner in that law firm.
IGEN recorded approximately $396,000 in legal fees paid to that firm during
fiscal 2003. BioVeris expects that it will continue to retain the law firm in
the future.
In 2001, Brown Simpson and Laurence Paskowitz initiated separate
stockholder derivative lawsuits for and on behalf of the shareholders of IGEN in
the Circuit Court for Montgomery County, Maryland, or the Circuit Court, against
four of IGEN's current directors, two former directors, three executive officers
and IGEN as a nominal defendant. The complaints alleged breach of fiduciary
duties by the named individual defendants in connection with transactions
between IGEN and other entities in which certain directors and officers are
alleged to have an interest, including MSD.
Both lawsuits sought principally the following: that the defendants hold in
trust and be required to account for and restore to IGEN damages that it has
allegedly sustained by reason of the allegations and relief relating to board
and management composition. The Paskowitz complaint also sought damages for a
class of IGEN stockholders for direct claims against the individual defendants.
The complaints did not include any claims against IGEN.
170
In May 2002, the Circuit Court issued an opinion and order dismissing all
claims asserted against all of the defendants in both cases. No appeal was filed
by the Brown Simpson plaintiff and the decision in that case is now final. The
Paskowitz plaintiff filed an appeal to the Court of Special Appeals in Maryland
seeking review only for one direct claim. A final decision of the Court of
Special Appeals was issued in March 2003 affirming the dismissal of the
complaint by the Circuit Court. No appeal was filed and the decisions dismissing
all claims in all of these cases are now final.
LIMITATION ON THE LIABILITY OF DIRECTORS AND EXECUTIVE OFFICERS
BioVeris's certificate of incorporation provides that, to the fullest
extent permitted by Delaware law, BioVeris will indemnify its directors and its
officers. BioVeris's certificate of incorporation also provides that BioVeris
may maintain insurance, at its expense, to protect BioVeris and any of its
directors, officers or employees against any such expense, liability or loss
whether or not BioVeris would have the power to indemnify that person against
such expense, liability or loss under Delaware law. Pursuant to these
provisions, BioVeris has entered into indemnity agreements with each of its
directors and executive officers and certain of its key employees. BioVeris will
obtain director and officer liability insurance, as well as continued coverage
under directors' and officers' liability insurance for claims arising from or
related to facts or events which occurred at or prior to the completion of the
merger.
In addition, BioVeris's certificate of incorporation provides that its
directors shall not be liable for monetary damages for breach of the directors'
fiduciary duty of care as a director, except liability for
- any breach of the director's duty of loyalty to BioVeris or its
stockholders,
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
- under section 174 of Delaware law or
- any transaction from which a director derived an improper personal
benefit.
If Delaware law is amended to authorize corporate action further
eliminating or limiting personal liability of directors, then the liability of a
director shall be eliminated or limited to the fullest extent permitted by
Delaware law.
171
PRINCIPAL STOCKHOLDERS
The following table sets forth the amount of BioVeris common stock expected
to be beneficially owned, upon the completion of the merger, by:
- each person or entity known by BioVeris to beneficially own more than 5%
of IGEN common stock;
- each of BioVeris's directors;
- each of BioVeris's named executive officers; and
- all of BioVeris's directors and executive officers as a group upon
completion of the merger.
Unless otherwise stated, BioVeris's expected beneficial ownership is
calculated based upon the amount of beneficial ownership of IGEN common stock as
of November 17, 2003 and the number of additional shares of BioVeris common
stock such person will have a right to receive upon completion of the merger by
reason of IGEN stock options held by such person.
PERCENT
NUMBER OF OF
NAME SHARES TOTAL
---- --------- -------
Samuel J. and Nadine Wohlstadter............................ 4,761,437 17.8%
Richard J. Massey, Ph.D..................................... 1,118,955 4.2
George V. Migausky.......................................... 265,065 *
Robert R. Salsmans.......................................... 20,000 *
Joop Sistermans............................................. 20,000 *
Anthony Rees................................................ 23,100 *
All directors and executive officers as a group (6
persons).................................................. 6,208,557 23.2
---------------
* Less than 1%
172
DESCRIPTION OF BIOVERIS CAPITAL STOCK
The following summary describes the material terms of BioVeris's capital
stock. To fully understand the actual terms of BioVeris capital stock, you
should refer to BioVeris's certificate of incorporation and by-laws, which are
filed as exhibits to the registration statement of which this proxy
statement/prospectus is a part.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
BioVeris's authorized capital stock consists of 100,000,000 shares of
common stock, par value $0.001 per share, and 15,000,000 shares of preferred
stock, par value $0.001 per share of which 600,000 shares will be designated as
series A participating cumulative preferred stock and 1,000 shares will be
designated as series B preferred stock. At the close of business on September
24, 2003, approximately 1,000 shares of BioVeris common stock were issued.
COMMON STOCK
VOTING RIGHTS
Each share of BioVeris common stock is entitled to one vote on all matters
submitted to a vote of stockholders on which the holders of common stock are
entitled to vote.
The affirmative vote of holders of:
- a majority of the outstanding shares of BioVeris common stock, subject to
the requirements of any preferred stock then outstanding, is required to
increase or decrease the number of authorized shares of preferred stock
(but not below the number of shares thereof then outstanding);
- at least 66 2/3% of the voting power of all of BioVeris's shares entitled
to vote generally in the election of directors then outstanding, voting
together as a single class, is required to alter, amend or repeal or
adopt any provision inconsistent with
- article V of BioVeris's certificate of incorporation, relating to
stockholder action by written consent,
- article VII of BioVeris's certificate of incorporation, relating to
BioVeris's classified board of directors and the election, appointment
and removal of BioVeris's directors,
- article VIII of BioVeris's certificate of incorporation, relating to the
adoption, alteration, amendment and repeal of BioVeris's by-laws,
- the last sentence of article IX of BioVeris's certificate of
incorporation, relating to the voting requirements described in this
paragraph,
- article X of BioVeris's certificate of incorporation, relating to the
limitation of personal liability and indemnification of BioVeris's
directors, and
- section 2.02, relating to calling a special meeting of BioVeris's
stockholders, and section 2.07, relating to the notice required for
stockholder business and nominations, of BioVeris's by-laws if such
action is being taken by vote of the stockholders, and
- at least a majority of the voting power of all of BioVeris's shares
entitled to vote generally in the election of directors then outstanding,
voting together as a single class, is required
- to remove any director, which removal may only be effected for cause
- to alter, amend or repeal, or adopt any new provision of, BioVeris's
certificate of incorporation, except as described above, or
- to alter, amend or repeal or adopt new by-laws, except as described
above.
173
DIVIDENDS
BioVeris's by-laws provide that the BioVeris board of directors may from
time to time declare dividends on BioVeris's outstanding shares in accordance
with applicable law and BioVeris's certificate of incorporation.
OTHER RIGHTS
As provided by Delaware law, upon the liquidation, dissolution or winding
up of BioVeris, all holders of BioVeris common stock are entitled to share
ratably in any assets available for distribution to holders of shares of
BioVeris common stock, subject to the preferential rights of any preferred stock
then outstanding. Shares of BioVeris common stock are not subject to redemption
and do not have preemptive rights to purchase additional shares of BioVeris
common stock.
PREFERRED STOCK
The BioVeris board of directors is authorized to provide for the issuance
of shares of preferred stock in one or more series, to establish the number of
shares to be included in each such series and to fix the designation, powers,
privileges, preferences and rights of the shares of each series (including
price, dividend rate, liquidation preference and conversion provisions) and
their qualifications, limitations and restrictions. The BioVeris board of
directors may, without the approval of holders of BioVeris common stock, issue
preferred stock with voting or other rights that could adversely affect the
voting power and other rights of the holders of BioVeris common stock and could
have anti-takeover effects, including the preferred stock or rights to acquire
preferred stock in connection with implementing the stockholder rights
agreement.
SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK
For a description of the BioVeris series A participating cumulative
preferred stock, see "Description of BioVeris Capital Stock -- Rights
Agreement."
SERIES B PREFERRED STOCK
DIVIDENDS. Subject to having legally available funds, at any time (each of
the following events is referred to in this proxy/statement prospectus as a
dividend event):
- BioVeris receives any distribution from MSD, including payments by MSD in
connection with the purchase of BioVeris's class C interest in MSD
pursuant to the MSD joint venture agreement; or
- BioVeris receives any proceeds with respect to a sale, transfer or other
disposition of its class C interest in MSD, including payments by MST in
connection with the purchase of BioVeris's class C interest in MSD
pursuant to the MSD joint venture agreement,
the BioVeris board of directors will declare cash dividends on shares of series
B preferred stock, payable on or before 60 days after such dividend event, in an
amount per share equal to the product of:
- the amount of distribution or proceeds received by BioVeris in connection
with such dividend event; and
- the applicable percentage immediately prior to such dividend event.
The applicable percentage as of any given time is, subject to certain
adjustments, the quotient of
- $7,500, which represents the initial per share purchase price of series B
preferred stock, over
- BioVeris's class C capital account with MSD as of such given time, as
determined in accordance with the MSD limited liability company
agreement.
174
For example, assuming BioVeris's class C capital account with MSD is $75
million,
- if MSD makes a distribution of $10,000 to BioVeris the BioVeris board of
directors will declare a dividend of $1 per share of series B preferred
stock outstanding, or
- if MST or MSD purchases all of BioVeris's class C interests in MSD for
the amount of $10,000,000, the BioVeris board of directors will declare a
dividend of $1,000 per share of series B preferred stock outstanding, and
the dividend would be payable on or before 60 days after BioVeris receives the
MSD distribution or the proceeds of the sale, as the case may be.
RANK. The series B preferred stock will rank pari passu with all other
classes or series of BioVeris capital stock, except for BioVeris common stock or
any other class or series of BioVeris capital stock over which the series B
preferred stock has preference or priority in the payment of dividends or in the
distribution of assets on any liquidation, dissolution or winding up of
BioVeris.
VOTING RIGHTS. The holders of series B preferred stock will be entitled to
one vote per share and will vote together with the holders of BioVeris common
stock as a single class on all matters on which holders of BioVeris common stock
are entitled to vote. However, the vote of at least 66 2/3% of the voting power
of all shares of series B preferred stock at the time outstanding, voting
separately as a class, will be required to effect any approval of or consent by
BioVeris to any alteration of the terms of the class C interest in MSD that
would adversely affect BioVeris's rights with respect to its class C interest in
MSD. In addition, under Delaware law, the series B preferred stock would be
entitled to vote as a class on any amendment that would increase or decrease the
aggregate number of authorized shares of such class, increase or decrease the
par value of the shares of such class, or alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely.
MANDATORY REDEMPTION. Within 30 days after BioVeris receives a liquidation
distribution from MSD pursuant to the MSD limited liability company agreement,
BioVeris will redeem all outstanding shares of series B preferred stock at a
price per share equal to the sum of:
- the amount of the liquidation distribution received by BioVeris
multiplied by the applicable percentage immediately prior to the receipt
of such liquidation distribution by BioVeris; and
- any accrued and unpaid dividends.
OPTIONAL REDEMPTION. At any time after BioVeris is no longer entitled to
receive any distribution from MSD with respect to its class C interest in MSD,
BioVeris may, at the option of the BioVeris board of directors, redeem all of
the outstanding shares of series B preferred stock at a price of $0.01 per share
plus accrued and unpaid dividends.
LIQUIDATION RIGHTS. In the event of a liquidation, dissolution or winding
up of BioVeris, holders of series B preferred stock will be entitled to receive,
before any distribution or payment out of BioVeris's assets is made to the
holders of BioVeris common stock, a distribution of $0.01 per share plus accrued
and unpaid dividends. After payment in full of $0.01 per share plus any accrued
and unpaid dividends, holders of series B preferred stock will not be entitled
to any further participation in any distribution of the assets of BioVeris.
CLASSIFIED BOARD
The BioVeris directors, other than those who may be elected by the holders
of any class or series of stock having a preference over BioVeris common stock
as to dividends or upon liquidation, are divided into three classes of
directors, as nearly equal in number as possible. The BioVeris directors will
serve staggered terms so that the initial terms of directors expire either at
the first, second or third annual meeting following the effectiveness of
BioVeris's certificate of incorporation. Following the initial terms, each class
of directors will serve three-year terms.
175
RIGHTS AGREEMENT
BioVeris intends to adopt a stockholder rights agreement pursuant to a
rights agreement prior to the completion of the merger. Set forth below is a
summary of the material provisions expected to be included in the rights
agreement. The summary does not include a complete description of all of the
terms of the rights agreement. You are urged to read carefully the relevant
provisions of the rights agreement, copies of which will be filed with the SEC
and will be sent to you upon request. See "Where You Can Find More Information."
EXERCISABILITY OF RIGHTS
Under the rights agreement, one right, referred to in this proxy
statement/prospectus as a BioVeris right, attaches to each share of BioVeris
common stock outstanding and, when exercisable, entitles the registered holder
to purchase from BioVeris one one-thousandth of a share of BioVeris series A
participating cumulative preferred stock at an initial exercise price expected
to be a multiple of approximately three to five times the expected trading price
of BioVeris common stock, subject to customary antidilution adjustments.
The BioVeris rights will not become exercisable until the earlier of:
- such time as BioVeris learns that a person (other than (1) Mr. Samuel
Wohlstadter and Mrs. Nadine Wohlstadter and their affiliates, associates
and heirs and any trust or foundation to which they have transferred or
may transfer BioVeris common stock, (2) any person that has become,
immediately following the completion of the merger, the beneficial owner
of more than 10% of BioVeris common stock then outstanding and if such
person was not an "Acquiring Person" under IGEN's stockholder rights
agreement and if such person does not become the beneficial owner of any
additional shares of BioVeris common stock (unless such person does not
beneficially own more than 10% of BioVeris common stock then outstanding
upon becoming the beneficial owner of such additional shares) and (iii)
prior to the completion of the merger, IGEN) has become the beneficial
owner of more than 10% of BioVeris common stock then outstanding, such
person being referred to in this proxy statement/prospectus as an
acquiring person; and
- such date as may be designated by the BioVeris board of directors
following the commencement of, or the first public disclosure of an
intent to commence, a tender offer or exchange offer that would result in
a person becoming the beneficial owner of more than 10% of BioVeris
common stock then outstanding.
"Flip In" Feature. In the event a person becomes an acquiring person, each
holder of a BioVeris right, except for such person, will have the right to
acquire, upon exercise of each BioVeris right, a number of one one-thousandths
of a share of series A participating cumulative preferred stock equal to the
number of shares of BioVeris common stock which at the time would have a market
price of twice the exercise price. For example, assuming that an exercise price
of $40 is in effect on the date that the flip-in feature of the BioVeris rights
is exercised, any holder of a BioVeris right, except for the acquiring person or
its affiliates or associates, may exercise his or her BioVeris right by paying
to BioVeris $40 to receive from BioVeris a number of shares of BioVeris series A
preferred stock equal to the number of shares of BioVeris common stock worth
$80.
"Exchange" Feature. At any time after a person becomes an acquiring
person, but prior to a person becoming the beneficial owner of more than 50% of
BioVeris common stock then outstanding, the BioVeris board of directors may, at
its option, exchange all or some of the BioVeris rights, except for those held
by the acquiring person or its affiliates or associates, for consideration per
BioVeris right of one-half of the number of shares of BioVeris common stock that
would be issuable at such time upon the exercise of each right. Use of the
exchange feature means that eligible BioVeris rights holders would not have to
pay a purchase price before receiving shares of BioVeris common stock.
176
"Flip Over" Feature. In the event that, after a person becomes an
acquiring person:
- BioVeris merges into another entity;
- another entity merges into BioVeris; or
- BioVeris sells 50% or more of its assets or earning power,
each holder of a BioVeris right, except for the acquiring person or its
affiliates or associates, will have the right to receive, upon exercise of the
BioVeris right, instead of one one-thousandth of a share of series A
participating cumulative preferred stock, shares of the acquiring company's
common stock having a value equal to twice the exercise price of the BioVeris
right.
Redemption of Rights. At any time prior to the earlier to occur of:
- any public announcement that a person has become the beneficial owner of
more than 10% of BioVeris common stock then outstanding; and
- the tenth anniversary of the adoption of the rights agreement,
the BioVeris board of directors may redeem all of the BioVeris rights at a
redemption price of $0.001 per right, subject to adjustment. The right to
exercise the BioVeris rights will terminate upon redemption, and at that time,
each holder of a BioVeris right will have the right to receive only the
redemption price for each BioVeris right they hold.
Amendment of Rights. At any time before a person becomes an acquiring
person the BioVeris board of directors, without the approval of the holders of
the BioVeris rights, may amend the terms of the rights agreement. However, at
any time after a person becomes an acquiring person, the BioVeris board of
directors, without the approval of the holders of the BioVeris rights, may not
amend the rights agreement in any manner that would adversely affect the
interest of the holders of the BioVeris rights, excluding the interests of such
person.
Anti-Takeover Effects. The BioVeris rights have anti-takeover effects.
Once the BioVeris rights have become exercisable, in most cases the BioVeris
rights will cause substantial dilution to a person that attempts to acquire or
merge with BioVeris. Accordingly, the existence of the BioVeris rights may deter
potential acquirors from making a takeover proposal or a tender offer. The
BioVeris rights should not interfere with any merger or other business
combination approved by the BioVeris board of directors because BioVeris may
redeem the BioVeris rights and because the BioVeris board of directors can amend
the rights agreement so that a transaction approved by the BioVeris board of
directors would not cause the BioVeris rights to become exercisable.
ANTI-TAKEOVER CONSIDERATIONS
Delaware law and BioVeris's certificate of incorporation and by-laws
contain a number of provisions which may have the effect of discouraging
transactions that involve an actual or threatened change of control of BioVeris.
For a further description of these provisions, see "Comparison of Rights of
Common Stockholders of BioVeris and IGEN," "Description of BioVeris Capital
Stock -- Classified Board," "Description of BioVeris Capital Stock -- Preferred
Stock" and "Description of BioVeris Capital Stock -- Rights Agreement."
177
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS
OF BIOVERIS AND IGEN
Both BioVeris and IGEN are corporations formed under and governed by the
laws of the State of Delaware, which is referred to in this proxy
statement/prospectus as Delaware law. Accordingly, any differences in the rights
of BioVeris and IGEN stockholders are based on the provisions set forth in the
certificate of incorporation and by-laws of each company.
The following description summarizes the material differences that may
affect the rights of BioVeris's stockholders and IGEN stockholders but does not
purport to be a complete statement of all those differences, or a complete
description of the specific provisions referred to in this summary. The
identification of specific differences is not intended to indicate that other
equally or more significant differences do not exist. You should read carefully
the relevant provisions of BioVeris's certificate of incorporation and by-laws
and IGEN's certificate of incorporation and by-laws.
BioVeris's certificate of incorporation and by-laws and IGEN's certificate
of incorporation and by-laws will be sent to IGEN stockholders upon request. See
"Where You Can Find More Information."
CAPITALIZATION
BIOVERIS
BioVeris's authorized capital stock is described above under "Description
of BioVeris Capital Stock."
IGEN
The total authorized shares of capital stock of IGEN consist of:
- 50,000,000 shares of IGEN common stock, par value $0.001 per share
- 10,000,000 shares of IGEN preferred stock, par value $0.001 per share, of
which:
- 600,000 shares have been designated as IGEN series A junior
participating preferred stock; and
- 25,000 shares have been designated as IGEN series B convertible
preferred stock.
At the close of business on December 8, 2003, approximately 24,983,466
shares of IGEN common stock were issued and outstanding and no shares of IGEN
preferred stock were issued and outstanding.
The IGEN certificate of incorporation provides that the IGEN board of
directors is authorized to provide for the issuance from time to time of shares
of IGEN preferred stock in one or more series. The IGEN board of directors is
expressly authorized to fix or alter from time to time the designations, powers,
preferences and rights of the shares (including price, dividend rate,
liquidation preference and conversion provisions) and the qualifications,
limitations or restrictions of any wholly unissued series of IGEN preferred
stock. The IGEN board of directors may also increase or decrease the number of
shares of any series subsequent to the issuance of shares of such series, but
not below the number of shares of such series then outstanding.
NUMBER, ELECTION, VACANCY AND REMOVAL OF DIRECTORS
BIOVERIS
BioVeris's certificate of incorporation provides that the total number of
its directors, which will be not less than three, is determined from time to
time pursuant to a resolution adopted by a majority of the total number of
directors that it would have if there were no vacancies on the BioVeris board of
directors. BioVeris currently has five directors.
BioVeris's certificate of incorporation provides that its directors, other
than those who may be elected by the holders of any class or series of stock
having a preference over BioVeris common stock as to dividends or upon
liquidation, will be divided into three classes, which shall be as nearly equal
in number
178
as possible. BioVeris's directors serve staggered terms so that its directors'
terms expire either at the first, second or third annual meeting following the
effectiveness of BioVeris's certificate of incorporation. Holders of BioVeris
common stock are not entitled to vote cumulatively for the election of
directors. BioVeris's certificate of incorporation provides that any director
may be removed from office only for cause by the affirmative vote of the holders
of at least a majority of the voting power of all of BioVeris's shares entitled
to vote generally in the election of directors then outstanding, voting together
as a single class. No decrease in the number of directors constituting the
BioVeris board of directors shall shorten the term of any incumbent director.
Subject to any rights of the holders of any class or series of stock having a
preference over BioVeris common stock as to dividends or upon liquidation to
elect directors under specified circumstances, newly created directorships
resulting from any increase in the number of directors and any vacancies on the
BioVeris board of directors resulting from death, resignation, disqualification,
removal or other cause shall be filled by the affirmative vote of a majority of
the remaining directors then in office, even though less than a quorum. Any
director elected to a newly created or vacant directorships shall hold office
until the next succeeding annual meeting of shareholders following his election
by the directors, and, if elected by the stockholders at such meeting, shall
serve for the remainder of the full term of the class of directors in which the
new dictatorship was created or the vacancy occurred and until such director's
successor shall have been duly elected and qualified.
IGEN
The IGEN certificate of incorporation provides that the number of directors
of IGEN shall be fixed exclusively by one or more resolutions adopted by the
IGEN board of directors. The IGEN board of directors currently has six
directors. The IGEN certificate of incorporation provides that the IGEN board of
directors will be divided into three classes in accordance with one or more
resolutions adopted by the IGEN board of directors. Each director serves for a
term ending on the date of the third annual meeting of stockholders following
the annual meeting at which the director was elected. Holders of IGEN common
stock are not entitled to vote cumulatively for the election of directors. The
IGEN certificate of incorporation provides that any director may be removed from
office at any time with cause by an affirmative vote of the holders of a
majority of the voting power of all the then outstanding shares of voting stock
of IGEN entitled to vote at an election of directors. No decrease in the number
of directors constituting the board of directors may shorten the term of any
incumbent director. Newly created directorships resulting from any increase in
the number of directors and any vacancies on the IGEN board of directors
resulting from death, resignation, disqualification, removal or other causes
shall be filled by the affirmative vote of a majority of the directors then in
office, even if the remaining directors do not constitute a quorum. Any director
elected to a vacant or newly created directorship shall hold office for the
remainder of the full term of the director for which the vacancy was created or
occurred and until such director's successor shall have been duly elected and
qualified.
AMENDMENTS TO CHARTER DOCUMENTS
BIOVERIS
BioVeris's certificate of incorporation provides that at any time from time
to time, any provision contained in its certificate of incorporation may be
altered, amended or repealed, and any other provision authorized by Delaware law
may be adopted in the manner prescribed by law. The affirmative vote of the
holders of at least 66 2/3% of the voting power of all BioVeris's shares
entitled to vote generally in the election of directors then outstanding, voting
together as a single class, shall be required to alter, amend or repeal or adopt
any provision inconsistent with:
- article V of BioVeris's certificate of incorporation relating to
stockholder action by written consent;
- article VII of BioVeris's certificate of incorporation relating to its
classified board of directors and the election, appointment and removal
of its directors;
- article VIII of BioVeris's certificate of incorporation relating to the
adoption, alteration, amendment and repeal of its by-laws;
179
- the last sentence of article IX of BioVeris's certificate of
incorporation relating to the voting requirements described in this
sentence; and
- article X of BioVeris's certificate of incorporation, relating to the
limitation of personal liability and indemnification of its directors.
IGEN
The IGEN certificate of incorporation provides that IGEN reserves the right
to amend, alter, change or repeal any provision contained in the IGEN
certificate of incorporation in the manner prescribed by Delaware law and the
certificate of incorporation. The IGEN certificate of incorporation also
provides that, notwithstanding any other provisions of the IGEN certificate of
incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to the affirmative vote of the holders of any
particular class or series of the then-outstanding shares of IGEN voting stock
entitled to vote at an election of directors required by law, the IGEN
certificate of incorporation or the terms of any preferred stock, the
affirmative vote of at least 66 2/3% of the voting power of all of the
then-outstanding shares of IGEN voting stock entitled to vote at an election of
directors voting together as a class, shall be required to alter, amend or
repeal provisions relating to directors, limitation of liability and amendment
of the IGEN certificate of incorporation.
AMENDMENTS TO BY-LAWS
BIOVERIS
BioVeris's certificate of incorporation provides that its by-laws may be
altered, amended or repealed and new by-laws may be adopted:
- at any annual or special meeting of stockholders, by the affirmative vote
of the holders of a majority of the voting power of all BioVeris's shares
entitled to vote generally in the election of directors then outstanding,
voting together as a single class, except with respect to any proposed
alteration, amendment or repeal of, or the adoption of any by-law
inconsistent with
- section 2.02 of BioVeris's by-laws, relating to calling a special
meeting of its stockholders and
- section 2.07 of BioVeris's by-laws, relating to the notice required for
the stockholder business and nominations,
which shall require the affirmative vote of the holders of at least
66 2/3% of the voting power of all BioVeris's shares entitled to vote
generally in the election of directors then outstanding, voting together
as a single class; or
- by the affirmative vote of a majority of the total number of directors
that BioVeris would have if there were no vacancies on the BioVeris board
of directors.
IGEN
The IGEN certificate of incorporation and by-laws provide that the IGEN
board of directors and IGEN stockholders are each expressly authorized to amend
or repeal the IGEN by-laws. Such action by the IGEN stockholders requires the
affirmative vote of at least 66 2/3% of the power of all the then outstanding
shares of voting stock of IGEN entitled to vote at an election of directors.
NOTICE OF STOCKHOLDER ACTIONS
BIOVERIS
BioVeris's by-laws provide that notice, which states the place, date and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered by BioVeris not
less than 10 days or more than 60 days, or a shorter or longer period as
permitted by law, before the date of the meeting, either personally, by mail or
by other lawful means, to each stockholder of
180
record entitled to vote at the meeting. BioVeris's by-laws further provide that
the only matters that may be considered and acted upon at a special meeting of
stockholders are those matters brought before the meeting through the notice of
meeting.
Under BioVeris's by-laws, any stockholder of record may submit proposals to
be brought before an annual meeting. The notice must contain a brief description
of the business desired to be brought before the meeting, the text of the
proposal or business, the reasons for conducting such business and any material
interest of the stockholder in such proposed business, and the beneficial
owners, on whose behalf the proposal is made. If the proposal relates to a
director nomination, the notice must also include all information relating to
each such person that is required to be disclosed in solicitations of proxies
for election of directors in an election contest, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended. To be timely, a stockholder's notice relating to an annual meeting
shall be delivered to BioVeris's secretary at BioVeris's principal executive
offices not later than the close of business on the 120th day prior to the first
anniversary of the preceding year's annual meeting, except that if the date of
the annual meeting is more than 30 days before or more than 60 days after such
anniversary date, the notice must be delivered not earlier than the close of
business on the 90th day prior to the annual meeting and not later than the
close of business on the later of the 60th day prior to the annual meeting or
the 10th day following the day on which public announcement of the date of the
annual meeting is first made by BioVeris. With respect to BioVeris's 2004 annual
meeting, August 28, 2004 has been deemed to be the first anniversary of the
preceding year's annual meeting. A stockholder's notice relating to a director
nomination for a special meeting shall be delivered to BioVeris's secretary at
BioVeris's principal executive offices not earlier than the close of business on
the 120th day prior to such special meeting and not later than the close of
business on the later of the 90th day prior to the special meeting or the 10th
day following the day on which public announcement first made of the date of the
special meeting and of the nominees proposed by the BioVeris board of directors
to be elected at the special meeting.
IGEN
The IGEN by-laws provide that a written notice of the place, date, hour and
purpose or purposes of each meeting of stockholders shall be given not less than
10 days nor more than 60 days before the date of the meeting to each stockholder
entitled to vote at the meeting. The IGEN by-laws further provide that the only
matters that may be considered and acted upon at an annual meeting of
stockholders are those matters brought before the meeting
- through the notice of meeting,
- by or at the direction of the IGEN board of directors, or
- by a stockholder of IGEN upon proper written notice.
Under the IGEN by-laws, a stockholder of IGEN may submit proposals,
including director nominations, before an annual meeting of the stockholders by
giving timely written notice to IGEN's secretary. The stockholder's notice must
set forth, among other things, a brief description of the business the
stockholder desires to bring before the annual meeting and the reasons for doing
so, the name and address, as they appear on IGEN's books, of the stockholder
advancing the proposal, the class and number of shares of IGEN that are
beneficially owned by the stockholder, any material interest of the stockholder
in the proposal and any other information that is required to be provided by the
stockholder pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended, in his capacity as a proponent of a stockholder proposal. If
the proposal relates to a director nomination, the notice must also include
information regarding the nominee. To be timely, a stockholder's notice must be
delivered to or mailed and received at IGEN's principal executive offices not
later than 120 days prior to the date of IGEN's proxy statement released to
stockholders in connection with the preceding year's annual meeting of
stockholders, except that if the date of the current year's annual meeting is
changed by more than 30 days from the date contemplated at the time of the
previous year's proxy statement, the notice must be received not earlier than
the close of business on the 90th day prior to such annual meeting and not later
than the
181
close of business on the later of the 60th day prior to the annual meeting, or
the 10th day following the date on which public announcement of the date of the
annual meeting is first made by IGEN.
SPECIAL STOCKHOLDER MEETINGS
BIOVERIS
BioVeris's by-laws provide that special meetings of its stockholders may be
called only by the chairman of the BioVeris board of directors, by BioVeris's
chief executive officer, or by the BioVeris board of directors pursuant to a
resolution approved by a majority of the total number of directors that BioVeris
would have if there were no vacancies. Only business set forth in the notice of
the special meeting may be conducted at the special meeting.
IGEN
The IGEN by-laws provide that special meetings of the stockholders may be
called only by the Chairman of the IGEN board of directors, IGEN's chief
executive officer or the IGEN board of directors pursuant to a resolution
adopted by a majority of the total number of authorized directors (whether or
not there are any vacancies in the previously authorized directorships at the
time the resolution is presented to the board of directors for adoption). Only
matters set forth in the notice of the special meeting or such additional
matters as may be determined by the IGEN board of directors may be transacted at
the special meeting.
LIMITATION OF PERSONAL LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
BIOVERIS
BioVeris's certificate of incorporation provides that no director shall be
held personally liable to BioVeris or its stockholders for monetary damages for
breach of fiduciary duty as a director, except, if required by Delaware law, for
liability:
- for any breach of a director's duty of loyalty to BioVeris, or BioVeris's
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- statutory liability for any unlawful payment of dividends or unlawful
stock purchase or redemption; or
- for any transaction from which the director derived an improper personal
benefit.
BioVeris's certificate of incorporation provides that to the full extent
authorized by Delaware law, it will indemnify any person who was or is made a
party or is threatened to be made a party to, or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a BioVeris
director or officer or, while serving as a BioVeris director or officer, is or
was at BioVeris's request also serving as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
against all expense, cost, liability and loss (including attorneys' fees,
judgments, fines, amounts paid or to be paid in settlement, court costs, witness
fees, excise taxes or penalties arising under the Employee Retirement Income
Security Act of 1974, as in effect from time to time incurred in connection with
such proceeding) reasonably incurred or suffered by such person in connection
therewith. Such indemnification shall continue as to a person who has ceased to
be a director or officer and will inure to the benefit of his or her heirs,
executors and administrators.
BioVeris will pay all expenses incurred in defending any such proceeding in
advance of its final disposition. However, if and to the extent Delaware law
requires, the payment of such expenses incurred by a director or officer in such
person's capacity as a director or officer in advance of the final disposition
of a proceeding, will be made only upon delivery to BioVeris of an undertaking,
by or on behalf of the
182
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified.
BioVeris may, to the extent authorized by the BioVeris board of directors from
time to time, grant rights to indemnification and pay all expenses incurred in
defending any proceeding in advance of its final disposition, to any of
BioVeris's employees or agents on the same terms and conditions upon which it is
required to advance the expenses of BioVeris's directors and officers.
BioVeris's certificate of incorporation further provides that the right to
indemnification and the advancement of expenses set forth in BioVeris's
certificate of incorporation are not exclusive of any other right that any
person may have or acquire under any statute, provision of BioVeris's
certificate of incorporation, by-laws, agreement, vote of stockholders or
disinterested directors or otherwise. No repeal or modification of the
provisions of the certificate of incorporation relating to personal liability
and indemnification shall in any way diminish or adversely effect the rights of
any of the BioVeris directors, officers, employees or agents in respect of any
occurrence or matter arising prior to the repeal or modification.
BioVeris's certificate of incorporation also provides that BioVeris may
maintain insurance, at its expense, to protect BioVeris and any of its
directors, officers or employees against any such expense, liability or loss
whether or not BioVeris would have the power to indemnify that person against
such expense, liability or loss under Delaware law.
IGEN
The IGEN certificate of incorporation provides that no director shall be
held personally liable to IGEN or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability:
- for any breach of a director's duty of loyalty to IGEN or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- statutory liability for any unlawful payment of dividends or unlawful
stock purchase or redemption; or
- for any transaction from which the director derived an improper personal
benefit.
The IGEN by-laws provide that, to the fullest extent not prohibited by
Delaware law, IGEN will indemnify its directors and officers.
However, the IGEN by-laws also provide that IGEN is not required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless:
- such indemnification is expressly required to be made by law;
- the proceeding was authorized by IGEN's board of directors;
- such indemnification is provided by IGEN, in its sole discretion,
pursuant to the powers vested in IGEN under Delaware law; or
- such indemnification is required pursuant to any other rights which such
person may have.
IGEN will advance to any person who is or was threatened to be made a party
to or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, because he
is or was a director or officer of IGEN or is or was serving at the request of
IGEN as a director or executive officer of another corporation or of a
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, all expenses incurred by a director or officer in
connection with such proceeding upon receipt of an undertaking, by or on behalf
of such person, to repay all advanced expenses if it is ultimately determined
that such person is not entitled to be indemnified under IGEN's by-laws or
otherwise.
183
IGEN will not make any advance to an officer of IGEN (except because the
officer is or was a director of IGEN) in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, if a determination is
reasonably and promptly made
- by IGEN's board of directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or
- if such quorum is not obtainable, or even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion,
that the facts known to the decision-making party at the time such determination
is made demonstrate clearly and convincingly that the person acted in bad faith
or in a manner that the person did not believe to be in or not opposed to the
best interests of IGEN.
Any repeal or modification of the right to indemnification and advancement
of expenses conferred by the IGEN by-laws shall not affect any rights in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of IGEN. The IGEN by-laws further
provide that the rights to indemnification and advancement of expenses set forth
in the IGEN by-laws are not exclusive of any other right which any person may
have or acquire under any statute, provision of the IGEN certificate of
incorporation, by-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
The IGEN by-laws also provide that, to the fullest extent permitted by
Delaware law, IGEN, upon approval by the IGEN board of directors, may purchase
insurance on behalf of any person required or permitted to be indemnified
pursuant to IGEN's by-laws.
DIVIDENDS
BIOVERIS
BioVeris's by-laws provide that its board of directors may from time to
time declare dividends on BioVeris's outstanding shares in accordance with the
law and its certificate of incorporation.
IGEN
The IGEN by-laws provide that, subject to the provisions of its certificate
of incorporation, if any, the IGEN board of directors may declare dividends
pursuant to law at any meeting.
VOTING RIGHTS; REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
BIOVERIS
Each holder of BioVeris common stock is entitled to one vote for each share
held of record and may not cumulate votes for the election of directors.
BioVeris is subject to section 203 of the Delaware law which prohibits a
publicly held Delaware corporation from consummating a "business combination,"
except under certain circumstances, with an "interested stockholder" for a
period of three years after the date such person became an "interested
stockholder" unless:
- before such person became an interested stockholder, the board of
directors of the corporation approved either the business combination or
the transaction in which the interested stockholder became an interested
stockholder;
- upon the consummation of the transaction that resulted in the interested
stockholder becoming such, the interested stockholder owned at least 85%
of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding shares held by directors who are also
officers of the corporation and shares held by employee stock plans in
which employee participants
184
do not have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer; or
- following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders
by the affirmative vote of the holders of at least 66 2/3% of the
outstanding voting stock of the corporation not owned by the interested
stockholder.
The term "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns, or, within the prior three years,
owned, 15% or more of a corporation's outstanding voting stock. The BioVeris
board of directors has taken the action necessary for Section 203 not to apply
to Mr. Samuel Wohlstadter and Mrs. Nadine Wohlstadter.
The term "business combination" includes mergers, consolidations, asset
sales involving 10% or more of a corporation's assets and other similar
transactions resulting in a financial benefit to an interested stockholder.
Section 203 makes it more difficult for an "interested stockholder" to effect
various business combinations with a corporation for a three-year period. A
Delaware corporation may "opt out" of section 203 with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or by-laws resulting from an amendment approved by
holders of at least a majority of the outstanding voting stock. Neither the
BioVeris certificate of incorporation nor the BioVeris by-laws contain any such
provision.
IGEN
Each holder of IGEN common stock is entitled to one vote for each share
held of record and may not cumulate votes for the election of directors.
IGEN is also subject to section 203 of the Delaware law as described above.
Neither the IGEN certificate of incorporation nor the IGEN by-laws contain a
provision to "opt out" of section 203 of the Delaware law.
185
SHARES ELIGIBLE FOR FUTURE SALE
BioVeris estimates that 26,728,705 shares of BioVeris common stock will be
issued in the merger, based on the number of shares of IGEN common stock and
IGEN stock options and warrants outstanding on November 17, 2003 and the
exchange ratio for IGEN common stock specified in the merger agreement. BioVeris
common stock issued in the merger will not be subject to any restrictions on
transfer arising under the Securities Act of 1933, except for shares issued to
any person who is an "affiliate" of IGEN, BioVeris or Roche at the time the
merger is submitted for vote for purposes of Rule 145 under the Securities Act.
186
APPROVAL OF BIOVERIS 2003 STOCK INCENTIVE PLAN
On September 24, 2003, the BioVeris board of directors adopted, subject to
IGEN stockholder approval, the BioVeris 2003 stock incentive plan. Up to
5,300,000 shares of BioVeris common stock (subject to adjustment in the event of
stock splits and other similar events) may be issued pursuant to awards granted
under the BioVeris 2003 stock incentive plan.
The IGEN board of directors believes that the future success of BioVeris
depends, in large part, upon the ability of BioVeris to maintain a competitive
position in attracting, retaining and motivating key personnel. ACCORDINGLY, THE
IGEN BOARD OF DIRECTORS BELIEVES APPROVAL OF THE BIOVERIS 2003 STOCK INCENTIVE
PLAN IS IN THE BEST INTERESTS OF BIOVERIS AND ITS STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE BIOVERIS 2003 STOCK INCENTIVE PLAN
AND THE RESERVATION OF 5,300,000 SHARES OF BIOVERIS COMMON STOCK FOR ISSUANCE
THEREUNDER.
DESCRIPTION OF THE BIOVERIS 2003 STOCK INCENTIVE PLAN
The following is a brief summary of the BioVeris 2003 stock incentive plan,
a copy of which is attached as Annex 16 to this proxy statement/prospectus. The
following summary is qualified in its entirety by reference to the BioVeris 2003
stock incentive plan.
TYPES OF AWARDS
The BioVeris 2003 stock incentive plan provides for the grant of incentive
stock options intended to qualify under Section 422 of the Code, non-statutory
stock options, restricted stock awards and other stock-based awards, including
the grant of shares based upon certain conditions, the grant of securities
convertible into BioVeris common stock and the grant of stock appreciation
rights, all of which are collectively referred to in this proxy
statement/prospectus as awards.
Incentive Stock Options and Non-statutory Stock Options. Optionees receive
the right to purchase a specified number of shares of BioVeris common stock at a
specified option price and subject to such other terms and conditions as are
specified in connection with the option grant. Subject to the limitations
described below, options may be granted at an exercise price which may not be
less than the fair market value of the BioVeris common stock on the date of
grant. Under present law, incentive stock options and options intended to
qualify as performance-based compensation under Section 162(m) of the Code may
not be granted at an exercise price less than 100% of the fair market value of
the BioVeris common stock on the date of grant (or less than 110% of the fair
market value in the case of incentive stock options granted to optionees holding
more than 10% of the voting power of BioVeris). Options may not be granted for a
term in excess of ten years. The BioVeris 2003 stock incentive plan permits the
following forms of payment of the exercise price of options:
- payment by cash, check or, at the discretion of the BioVeris board of
directors, a "cashless exercise" through a broker;
- surrender to BioVeris of shares of BioVeris common stock;
- to the extent permitted by applicable law and the BioVeris board of
directors, delivery to BioVeris of a promissory note;
- any other lawful means; or
- any combination of these forms of payment.
The BioVeris 2003 stock incentive plan provides that on the day following
each annual meeting of BioVeris stockholders each non-employee director will
receive an automatic grant of options to purchase 4,000 shares of BioVeris
common stock. In addition, any person who is appointed or elected as a non-
employee director at any other time will receive an automatic grant of options
to purchase 4,000 shares of BioVeris common stock on the date of such
appointment or election. Each grant will have an exercise
187
price equal to fair market value on the date of grant and will vest in full on
the first anniversary of the grant date.
Restricted Stock Awards. Restricted stock awards entitle recipients to
acquire shares of BioVeris common stock, subject to the right of BioVeris to
repurchase all or part of such shares from the recipient in the event that the
conditions specified in the applicable award are not satisfied prior to the end
of the applicable restriction period established for such award.
Other Stock-Based Awards. Under the BioVeris 2003 stock incentive plan,
the BioVeris board of directors has the right to grant other awards based upon
the BioVeris common stock having such terms and conditions as the BioVeris board
of directors may determine, including the grant of shares based upon certain
conditions, the grant of securities convertible into BioVeris common stock and
the grant of stock appreciation rights.
ELIGIBILITY TO RECEIVE AWARDS
Employees, officers, directors, consultants and advisors (and any
individuals who have accepted an offer for employment) of BioVeris and its
subsidiaries and of other business ventures in which BioVeris has a significant
interest are eligible to be granted awards under the BioVeris 2003 stock
incentive plan. Under present law, however, incentive stock options may only be
granted to employees of BioVeris and its subsidiaries. The maximum number of
shares with respect to which awards may be granted to any participant under the
BioVeris 2003 stock incentive plan may not exceed 500,000 shares per calendar
year.
PLAN BENEFITS
As of November 30, 2003, approximately 306 persons were eligible to receive
awards under the BioVeris 2003 stock incentive plan, including BioVeris's
executive officers and non-employee directors. The granting of awards under the
BioVeris 2003 stock incentive plan is discretionary, and BioVeris cannot now
determine the number or type of awards to be granted in the future to any
particular person or group.
ADMINISTRATION
The BioVeris 2003 stock incentive plan is administered by the BioVeris
board of directors. The BioVeris board of directors has the authority to adopt,
amend and repeal the administrative rules, guidelines and practices relating to
the BioVeris 2003 stock incentive plan and to interpret the provisions of the
BioVeris 2003 stock incentive plan. Pursuant to the terms of the BioVeris 2003
stock incentive plan, the BioVeris board of directors may delegate authority
under the BioVeris 2003 stock incentive plan to one or more committees or
subcommittees of the BioVeris board of directors. To the extent permitted by
applicable law, the BioVeris board of directors may delegate to one or more
executive officers the power to grant awards to employees or officers who are
not executive officers of BioVeris, provided that the BioVeris board of
directors will fix the terms of the awards to be granted by such executive
officers (including the exercise price of such awards, which may include a
formula by which the exercise price will be determined) and the maximum number
of shares subject to awards that the executive officers may grant. The BioVeris
board of directors authorized the executive compensation committee to administer
certain aspects of the BioVeris 2003 stock incentive plan, including the
granting of options to executive officers, and has authorized, to the extent
permitted by applicable law, the non-officer stock option committee the power to
grant awards to employees of BioVeris who are not executive officers of
BioVeris, subject to certain limitations set by the BioVeris board of directors.
Subject to any applicable limitations contained in the BioVeris 2003 stock
incentive plan, the BioVeris board of directors, the executive compensation
committee, or the non-officer stock option committee, as the case may be,
selects the recipients of awards and determines:
- the number of shares of BioVeris common stock covered by options and the
dates upon which such options become exercisable;
- the exercise price of options;
188
- the duration of options (which may not exceed 10 years);
- the number of shares of BioVeris common stock subject to any restricted
stock or other stock-based awards and the terms and conditions of such
awards, including conditions for repurchase, issue price and repurchase
price.
The BioVeris board of directors is required to make appropriate adjustments
in connection with the BioVeris 2003 stock incentive plan and any outstanding
awards to reflect stock splits, stock dividends, recapitalizations, spin-offs
and other similar changes in capitalization. The BioVeris 2003 stock incentive
plan also contains provisions addressing the consequences of any "reorganization
event," which is defined as:
- any merger or consolidation of BioVeris with or into another entity as a
result of which all of the BioVeris common stock is converted into or
exchanged for the right to receive cash, securities or other property or
- any exchange of all of the BioVeris common stock for cash, securities or
other property pursuant to a share exchange transaction.
Upon the occurrence of a reorganization event, all outstanding options are to be
assumed, or substituted for, by the acquiring or succeeding corporation.
However, if the acquiring or succeeding corporation does not agree to assume, or
substitute for, outstanding options, then the BioVeris board of directors must
either accelerate the options to make them fully exercisable prior to
consummation of the reorganization event or provide for a cash out of the value
of any outstanding options. Upon the occurrence of a reorganization event, the
repurchase and other rights of BioVeris under each outstanding restricted stock
award will inure to the benefit of the acquiring or succeeding corporation. The
BioVeris board of directors will specify the effect of a reorganization event on
each award at the time the award is granted.
If any award expires or is terminated, surrendered, canceled or forfeited,
the unused shares of BioVeris common stock covered by such award will again be
available for grant under the BioVeris 2003 stock incentive plan, subject,
however, in the case of incentive stock options, to any limitations under the
Code.
AMENDMENT OR TERMINATION
No award may be made under the BioVeris 2003 stock incentive plan after
September 24, 2013, but awards previously granted may extend beyond that date.
The BioVeris board of directors may at any time amend, suspend or terminate the
BioVeris 2003 stock incentive plan, except that no award designated as subject
to Section 162(m) of the Code by the BioVeris board of directors after the date
of such amendment shall become exercisable, realizable or vested (to the extent
such amendment was required to grant such award) unless and until such amendment
shall have been approved by BioVeris's stockholders.
If IGEN stockholders do not approve the adoption of the BioVeris 2003 stock
incentive plan, the BioVeris 2003 stock incentive plan will not go into effect,
and BioVeris will not grant any awards under the BioVeris 2003 stock incentive
plan. In such event, the BioVeris board of directors will consider whether to
adopt alternative arrangements based on its assessment of the needs of BioVeris.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the U.S. Federal income tax consequences that
generally will arise with respect to awards granted under the BioVeris 2003
stock incentive plan and with respect to the sale of BioVeris common stock
acquired under the BioVeris 2003 stock incentive plan. This summary is based on
the Federal tax laws in effect as of the date of this proxy statement. Changes
to these laws could alter the tax consequences described below.
189
INCENTIVE STOCK OPTIONS
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
BioVeris common stock acquired through the exercise of the option, or ISO stock.
The exercise of an incentive stock option, however, may subject the participant
to the alternative minimum tax.
Generally, the tax consequences of selling ISO stock will vary depending on
the date on which it is sold. If the participant sells ISO stock more than two
years from the date the option was granted, or the grant date, and more than one
year from the date the option was exercised, or the exercise date, then the
participant will recognize long-term capital gain in an amount equal to the
excess of the sale price of the ISO stock over the exercise price.
If the participant sells ISO stock prior to satisfying the above waiting
periods, referred to as a disqualifying disposition, then all or a portion of
the gain recognized by the participant will be ordinary compensation income and
the remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO stock for more than
one year prior to the date of sale.
If a participant sells ISO stock for less than the exercise price, then the
participant will recognize capital loss in an amount equal to the excess of the
exercise price over the sale price of the ISO stock. This capital loss will be a
long-term capital loss if the participant has held the ISO stock for more than
one year prior to the date of sale.
NON-STATUTORY STOCK OPTIONS
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a non-statutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
non-statutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the BioVeris common
stock acquired through the exercise of the option, or NSO stock on the exercise
date over the exercise price.
With respect to any NSO stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the NSO
stock and the participant's tax basis in the NSO stock. This capital gain or
loss will be a long-term gain or loss if the participant has held the NSO stock
for more than one year prior to the date of the sale.
RESTRICTED STOCK AWARDS
A participant will not recognize taxable income upon the grant of a
restricted stock award unless the participant makes a Section 83(b) election. If
the participant makes a valid Section 83(b) election within 30 days of the date
of the grant, then the participant will recognize ordinary compensation income,
for the year in which the award is granted, in an amount equal to the difference
between the fair market value of the BioVeris common stock at the time the award
is granted and the purchase price paid for the BioVeris common stock. If a valid
Section 83(b) election is not made, then the participant will recognize ordinary
compensation income, at the time that the forfeiture provisions or restrictions
on transfer lapse, in an amount equal to the difference between the fair market
value of the BioVeris common stock at the time of such lapse and the original
purchase price paid for the BioVeris common stock. The participant will have a
tax basis in the BioVeris common stock acquired equal to the sum of the price
paid and the amount of any ordinary compensation income recognized.
Upon the disposition of the BioVeris common stock acquired pursuant to a
restricted stock award, the participant will recognize a capital gain or loss
equal to the difference between the sale price of the BioVeris common stock and
the participant's tax basis in the BioVeris common stock. This capital gain or
loss will be a long-term capital gain or loss if the shares are held for more
than one year.
190
OTHER STOCK-BASED AWARDS
The tax consequences associated with any other stock-based award granted
under the BioVeris 2003 stock incentive plan will vary depending on the specific
terms of such award. Among the relevant factors are whether or not the award has
a readily ascertainable fair market value, whether or not the award is subject
to forfeiture provisions or restrictions on transfer, the nature of the property
to be received by the participant under the award and the participant's holding
period and tax basis for the award or underlying BioVeris common stock.
TAX CONSEQUENCES TO BIOVERIS
The grant of an award under the BioVeris 2003 stock incentive plan
generally will have no tax consequences to BioVeris. Moreover, in general,
neither the exercise of an incentive stock option nor the sale of any BioVeris
common stock acquired under the BioVeris 2003 stock incentive plan will have any
tax consequences to BioVeris. BioVeris or its parent or subsidiary, as the case
may be, generally will be entitled to a business-expense deduction, however,
with respect to any ordinary compensation income recognized by a participant
under the BioVeris 2003 stock incentive plan, including in connection with a
restricted stock award or as a result of the exercise of a non-statutory stock
option or a disqualifying disposition. Any such deduction will be subject to the
limitations of Section 162(m) of the Code.
191
LEGAL MATTERS
The legality of the BioVeris common stock being offered by this proxy
statement/prospectus will be passed upon for BioVeris by Cravath, Swaine & Moore
LLP.
EXPERTS
BioVeris's consolidated financial statements as of March 31, 2002 and 2003
and for each of the three years ended March 31, 2003, included in this proxy
statement/prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein and elsewhere in this proxy
statement/prospectus, and have been so included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the IGEN board of
directors knows of no matters that will be presented for consideration at the
special meeting other than as described in this proxy statement/prospectus.
FUTURE STOCKHOLDER PROPOSALS
IGEN intends to call its 2003 annual meeting of stockholders as soon as
practicable following the date of the special meeting. IGEN may decide to
postpone or cancel the 2003 annual meeting based on the expected date for
completion of the merger described in this proxy statement/prospectus.
Stockholder proposals intended to be presented at IGEN's 2004 annual
meeting submitted outside the processes of Rule 14a-8 must be received in
writing by IGEN no later than March 31, 2004, together with all supporting
documentation required by IGEN's by-laws.
BioVeris's 2004 annual meeting of stockholders is scheduled to be held on
September 16, 2004. BioVeris stockholders who wish to present proposals pursuant
to Rule 14a-8 promulgated under the Securities Exchange Act for consideration at
the 2004 annual meeting must submit the proposals in proper form to BioVeris at
its address set forth in this proxy statement/prospectus not later than April
30, 2004 for the proposals to be considered for inclusion in BioVeris's proxy
statement and form of proxy relating to the 2004 annual meeting.
Stockholder proposals intended to be presented at BioVeris's 2004 annual
meeting submitted outside the processes of Rule 14a-8 must be received in
writing by BioVeris not later than the close of business on April 30, 2004,
together with all supporting documentation required by BioVeris's by-laws.
WHERE YOU CAN FIND MORE INFORMATION
IGEN files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information that IGEN files with the
Securities and Exchange Commission at the Securities and Exchange Commission's
public reference room located at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. Please call the Securities and Exchange Commission
at 1-800-SEC-0330 for further information about the public reference rooms.
These Securities and Exchange Commission filings are also available to the
public from commercial document retrieval services and at the website maintained
by the Securities and Exchange Commission at http://www.sec.gov.
On September 26, 2003, BioVeris filed a registration statement on Form S-4
to register with the Securities and Exchange Commission BioVeris common stock to
be issued to IGEN stockholders in the merger. This proxy statement/prospectus is
a part of that registration statement and constitutes BioVeris's prospectus in
addition to being IGEN's proxy statement. As allowed by Securities and Exchange
192
Commission rules, this proxy statement/prospectus does not contain all the
information you can find in BioVeris's registration statement or the exhibits to
those registration statements. After the merger, BioVeris will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and BioVeris will be required to file reports, proxy statements and other
information with the Securities and Exchange Commission. BioVeris's registration
statement and its exhibits are available, and BioVeris's reports, proxy
statements and other information will be available, for inspection and copying
at the Securities and Exchange Commission as set forth above.
The Securities and Exchange Commission allows IGEN to "incorporate by
reference" information into this proxy statement/prospectus, which means that
IGEN can disclose important information to you by referring you to other
documents filed separately with the Securities and Exchange Commission. The
information incorporated by reference is considered part of this proxy
statement/prospectus, except for any information superseded by information
contained directly in this proxy statement/prospectus or in later filed
documents incorporated by reference in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the following
documents that IGEN (File No. 000-23252) has previously filed with the
Securities and Exchange Commission. These documents contain important business
and financial information about IGEN that is not included in or delivered with
this proxy statement/prospectus.
- Annual Report on Form 10-K for the fiscal year ended March 31, 2003
- Quarterly Reports on Form 10-Q for the quarters ended June 30, 2003 and
September 30, 2003
- Current Reports on Form 8-K filed on July 10, 2003 (and amendment
thereto), July 25, 2003, July 28, 2003, July 30, 2003, September 29, 2003
and October 30, 2003
- Proxy Statement for 2004 annual meeting of stockholders dated July 29,
2003
- The description of IGEN common stock contained in its Registration
Statement on Form 8-A filed on December 10, 1996 (and amendment thereto)
IGEN also incorporates by reference additional documents that may be filed
with the Securities and Exchange Commission under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act between the date of this proxy statement/prospectus
and the date of the special meeting of IGEN stockholders. These include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as proxy statements.
IGEN has supplied all information contained or incorporated by reference in
this proxy statement/ prospectus relating to IGEN, as well as information
relating to BioVeris.
IGEN stockholders should not send in their IGEN certificates until they
receive the transmittal materials from the exchange agent. IGEN stockholders of
record who have further questions about their share certificates or the exchange
of their IGEN common stock for cash and BioVeris common stock should contact the
exchange agent at the address or telephone number that will be included in the
transmittal materials.
If you are a stockholder, IGEN may have sent you some of the documents
incorporated by reference, but you can obtain any of them through IGEN, the
Securities and Exchange Commission or the Securities and Exchange Commission's
website as described above. Documents incorporated by reference are available
from IGEN without charge, excluding all exhibits, except that if IGEN has
specifically incorporated by reference an exhibit in this proxy
statement/prospectus, the exhibit will also be provided without charge.
Stockholders may obtain documents incorporated by reference in this proxy
statement/ prospectus by requesting them in writing or by telephone from IGEN at
the following address:
16020 Industrial Drive
Gaithersburg, MD 20877
Attention: Secretary
Telephone: (301) 869-9800 ext. 3501
193
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. BioVeris and IGEN have not
authorized anyone to provide you with information that is different from what is
contained in this proxy statement/prospectus. This proxy statement/ prospectus
is dated , 2003. You should not assume that the information contained
in this proxy statement/prospectus is accurate as of any date other than that
date. Neither the mailing of this proxy statement/prospectus to stockholders nor
the distribution of BioVeris common stock in the merger creates any implication
to the contrary.
194
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains forward-looking statements within
the meaning of the federal securities laws that relate to future events or
BioVeris's future financial performance. All statements in this proxy
statement/prospectus that are not historical facts, including statements about
markets and potential markets, market growth for diagnostic products, potential
impact of competitive products, BioVeris's expectations regarding future
royalties and revenue, the potential market for products in development,
prospects for future business arrangements with third parties, financing plans,
the outcome of the merger, the description of BioVeris's plans and objectives
for future operations, assumptions underlying such plans and objectives, the
need for and availability of additional capital are hereby identified as
"forward-looking statements." The words "may," "should," "will," "expect,"
"could," "anticipate," "believe," "estimate," "plan," "intend" and similar
expressions have been used to identify certain of the forward-looking
statements. In this proxy statement/prospectus BioVeris has based these
forward-looking statements on management's current expectations, estimates and
projections and they are subject to a number of risks, uncertainties and
assumptions that could cause actual results to differ materially from those
described in the forward-looking statements. Such forward-looking statements
should, therefore, be considered in light of various important factors,
including those set forth in this proxy statement/prospectus. The following
important factors are among those that may cause actual results to differ
materially from BioVeris's forward-looking statements:
- the outcome of the merger;
- changes in BioVeris's strategy and business plan, including its plans for
the clinical diagnostics, biodefense, life science and industrial markets
and other healthcare opportunities;
- BioVeris's ability to develop and introduce new or enhanced products,
including incorporating unit dose cartridges and completion of pending
negotiations for novel centrifuge technologies;
- BioVeris's ability to enter into new collaborations on favorable terms,
if at all;
- BioVeris's ability to expand the distribution and increase sales of
existing products;
- the demand for rapid testing products in each of BioVeris's markets;
- BioVeris's ability to expand its manufacturing capabilities or find a
suitable manufacturer on acceptable terms or in a timely manner,
including the completion of pending negotiations for contract
manufacturing of one of BioVeris's instruments;
- BioVeris's ability to develop its selling, marketing and distribution
capabilities;
- BioVeris's and its licensees' ability to obtain FDA and other
governmental approvals for its and their clinical testing products;
- the ability of BioVeris's licensees to effectively develop and market
products based on the technology BioVeris licenses to them;
- domestic and foreign governmental and public policy changes, particularly
related to healthcare costs, that may affect new investments and
purchases made by BioVeris's customers;
- availability of financing and financial resources in the amounts, at the
times and on the terms required to support BioVeris's future business;
- rapid technological developments in each of BioVeris's markets and its
ability to respond to those changes in a timely, cost-effective manner;
- any potential future disputes regarding the scope, permitted use and
other material terms of BioVeris's license agreements, including those
with Roche and MSD;
- the outcome of the litigation and arbitration between Applied Biosystems
and Roche;
- protection and validity of BioVeris's patent and other intellectual
property rights;
195
- statements regarding relationships between BioVeris and the related
companies; and
- changes in general economic, business and industry conditions.
These forward-looking statements are found at various places throughout
this proxy statement/ prospectus and the other documents incorporated by
reference, including, but not limited to, IGEN's Annual Report on Form 10-K for
the year ended March 31, 2003, including any amendments. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date of this proxy statement/prospectus. Neither BioVeris nor
IGEN undertake any obligation to publicly update or release any revisions to
these forward-looking statements to reflect events or circumstances after the
date of this proxy statement/prospectus or to reflect the occurrence of
unanticipated events.
The foregoing list sets forth some, but not all, of the factors that could
have an impact upon BioVeris's and IGEN's ability to achieve results described
in any forward-looking statements. Investors are cautioned not to place undue
reliance on such statements that speak only as of the date made. Investors also
should understand that it is not possible to predict or identify all such
factors and that this list should not be considered a complete statement of all
potential risks and uncertainties. Investors should also realize that if
underlying assumptions prove inaccurate or unknown risks or uncertainties
materialize, actual results could vary materially from BioVeris's and IGEN's
projections.
196
BIOVERIS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Cash Flows....................... F-5
Consolidated Statements of Net Investment by IGEN........... F-6
Notes to Consolidated Financial Statements.................. F-7
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
BioVeris Corporation:
We have audited the accompanying consolidated balance sheets of BioVeris
Corporation and subsidiaries (the Company), a component of IGEN International,
Inc., as of March 31, 2002 and 2003, and the related consolidated statements of
operations, cash flows and net investment by IGEN International, Inc. for each
of the three years in the period ended March 31, 2003. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying consolidated financial statements have been prepared from the
separate records maintained by the Company and may not necessarily be indicative
of the conditions that would have existed or the results of operations if the
Company had been operated as an unaffiliated company. Portions of certain
expenses represent allocations made from home-office items applicable to the
Company as a whole.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
March 31, 2002 and 2003, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 2003, in conformity
with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
McLean, Virginia
September 25, 2003
F-2
BIOVERIS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31,
----------------- SEPTEMBER 30,
2002 2003 2003
------- ------- -------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Accounts receivable, net.................................. $ 2,768 $ 5,434 $ 5,058
Inventory................................................. 4,462 5,448 5,145
Prepaid expenses and other................................ 1,234 2,286 1,300
------- ------- -------
Total current assets................................... 8,464 13,168 11,503
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET................... 6,429 6,456 5,793
OTHER NONCURRENT ASSETS:
Investment in affiliate................................... 6,243 9,164 14,790
Other..................................................... 382 372 363
------- ------- -------
Total assets........................................... $21,518 $29,160 $32,449
======= ======= =======
LIABILITIES AND NET INVESTMENT BY IGEN
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 4,438 $ 4,758 $ 3,794
Accrued wages and benefits................................ 2,359 3,170 2,018
Deferred revenue.......................................... 418 507 551
Capital lease obligations................................. 56 -- --
------- ------- -------
Total current liabilities.............................. 7,271 8,435 6,363
DEFERRED REVENUE............................................ 96 60 26
------- ------- -------
Total liabilities...................................... 7,367 8,495 6,389
COMMITMENTS AND CONTINGENCIES............................... -- -- --
NET INVESTMENT BY IGEN...................................... 14,151 20,665 26,060
------- ------- -------
Total liabilities and net investment by IGEN........... $21,518 $29,160 $32,449
======= ======= =======
See notes to consolidated financial statements.
F-3
BIOVERIS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------ -------------------------
2001 2002 2003 2002 2003
-------- -------- -------- ----------- -----------
(UNAUDITED)
REVENUES:
Product sales....................... $ 8,935 $ 12,077 $ 16,487 $ 6,971 $ 10,414
Royalty income...................... 892 1,050 1,107 513 540
Contract fees....................... 3,987 116 180 49 70
-------- -------- -------- -------- --------
Total revenues................... 13,814 13,243 17,774 7,533 11,024
-------- -------- -------- -------- --------
OPERATING COSTS AND EXPENSES:
Product costs....................... 3,112 5,361 8,005 2,958 5,773
Research and development............ 27,983 26,829 22,766 11,933 10,252
Selling, general and
administrative................... 13,200 19,217 20,453 10,197 9,184
-------- -------- -------- -------- --------
Total operating costs and
expenses....................... 44,295 51,407 51,224 25,088 25,209
-------- -------- -------- -------- --------
LOSS FROM OPERATIONS.................. (30,481) (38,164) (33,450) (17,555) (14,185)
INTEREST EXPENSE...................... (30) (27) (29) (10) --
OTHER, NET............................ (213) (12) 183 169 48
EQUITY IN LOSS OF AFFILIATE........... -- (10,947) (17,598) (9,455) (9,680)
-------- -------- -------- -------- --------
NET LOSS.............................. $(30,724) $(49,150) $(50,894) $(26,851) $(23,817)
======== ======== ======== ======== ========
UNAUDITED PRO FORMA NET LOSS PER
COMMON SHARE........................ $ (1.15) $ (1.84) $ (1.90) $ (1.00) $ (0.89)
======== ======== ======== ======== ========
UNAUDITED PRO FORMA COMMON SHARES
OUTSTANDING......................... 26,729 26,729 26,729 26,729 26,729
======== ======== ======== ======== ========
See notes to consolidated financial statements
F-4
BIOVERIS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------ -------------------------
2001 2002 2003 2002 2003
-------- -------- -------- ----------- -----------
(UNAUDITED)
OPERATING ACTIVITIES:
Net loss.............................. $(30,724) $(49,150) $(50,894) $(26,851) $(23,817)
Adjustments to reconcile net loss to
net cash used for operating
activities:
Depreciation and amortization....... 3,272 5,322 3,677 2,232 1,602
Loss on disposal of equipment....... -- -- 90 -- 37
Expense related to stock options.... -- 219 386 184 261
Equity in loss of affiliate......... -- 10,947 17,598 9,455 9,680
Changes in assets and liabilities:
Accounts receivable.............. 1,335 (1,326) (2,666) (1,355) 376
Inventory........................ (1,905) 1,666 (1,428) (72) 275
Prepaid expenses and other....... (404) 330 (1,052) 267 986
Accounts payable and accrued
expenses....................... 2,604 (1,631) 1,131 (1,166) (2,116)
Deferred revenue................. (725) (553) 53 (55) 10
-------- -------- -------- -------- --------
Net cash used for operating
activities.................. (26,547) (34,176) (33,105) (17,361) (12,706)
-------- -------- -------- -------- --------
INVESTING ACTIVITIES:
Expenditures for equipment and
leasehold improvements........... (4,925) (5,642) (3,331) (2,025) (939)
Increase in other long-term
assets........................... -- (85) (11) (10) --
Investment in affiliate............. -- (16,351) (20,519) (10,790) (15,306)
-------- -------- -------- -------- --------
Net cash used for investing
activities.................. (4,925) (22,078) (23,861) (12,825) (16,245)
-------- -------- -------- -------- --------
FINANCING ACTIVITIES:
Cash contributed by IGEN, net....... 31,544 56,307 57,022 30,215 28,951
Payments under capital lease
obligations...................... (72) (53) (56) (29) --
-------- -------- -------- -------- --------
Net cash provided by financing
activities.................. 31,472 56,254 56,966 30,186 28,951
-------- -------- -------- -------- --------
NET CHANGE IN CASH.................... -- -- -- -- --
CASH, BEGINNING OF PERIOD............. -- -- -- -- --
-------- -------- -------- -------- --------
CASH, END OF PERIOD................... $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURES:
Cash payments of interest........... $ 30 $ 27 $ 29 $ 10 $ --
======== ======== ======== ======== ========
Equipment and leasehold improvements
contributed to affiliate......... $ -- $ 839 $ -- $ -- $ --
======== ======== ======== ======== ========
See notes to consolidated financial statements.
F-5
BIOVERIS CORPORATION
CONSOLIDATED STATEMENTS OF NET INVESTMENT BY IGEN
(IN THOUSANDS)
YEARS ENDED MARCH 31, SIX MONTHS ENDED
------------------------------ SEPTEMBER 30,
2001 2002 2003 2003
-------- -------- -------- ------------------
(UNAUDITED)
BALANCE, BEGINNING OF PERIOD................. $ 5,955 $ 6,775 $ 14,151 $ 20,665
NET LOSS..................................... (30,724) (49,150) (50,894) (23,817)
CAPITAL CONTRIBUTED BY IGEN.................. 31,544 56,526 57,408 29,212
-------- -------- -------- --------
BALANCE, END OF PERIOD....................... $ 6,775 $ 14,151 $ 20,665 $ 26,060
======== ======== ======== ========
See notes to consolidated financial statements.
F-6
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company and Basis of Presentation -- On July 24, 2003, IGEN
International, Inc. (IGEN) and Roche Holding Ltd (Roche) jointly announced that
they had reached definitive agreements pursuant to which Roche will acquire IGEN
and IGEN will simultaneously distribute the common stock of a new company,
BioVeris Corporation (the Company), to its stockholders (the merger). The
transaction will occur in the following steps:
- IGEN will restructure its operations so that the Company, a newly formed,
wholly-owned subsidiary of IGEN, will assume IGEN's biodefense, life
science and industrial product lines as well as IGEN's opportunities in
the clinical diagnostics and healthcare fields and will own IGEN's
intellectual property, IGEN's equity interest in Meso Scale Diagnostics,
LLC. (MSD), cash and certain other rights and licenses currently held by
IGEN; and
- A wholly-owned subsidiary of Roche will merge with and into IGEN, as a
result of which IGEN will become a wholly-owned subsidiary of Roche and
the Company will become an independent, publicly-traded company owned by
IGEN stockholders. Simultaneously with the completion of the merger,
certain ongoing commercial agreements between the Company and certain
affiliates of Roche will become effective.
The obligations of the parties to complete the merger are subject to
certain conditions, including the adoption of the merger agreement by IGEN
stockholders, the receipt by IGEN of a solvency opinion substantially to the
effect that the Company will not be insolvent after giving effect to the merger
and related transactions and the execution and delivery of the ongoing
commercial agreements, and that Roche will have loaned IGEN up to $214 million,
such loan remaining the obligation of IGEN following the completion of the
merger. All cash on hand at IGEN will be transferred to BioVeris as part of the
restructuring.
The Company was organized as IGEN Integrated Healthcare, LLC, a Delaware
limited liability company, on June 6, 2003, and converted into BioVeris
Corporation, a newly formed Delaware corporation on September 22, 2003. IGEN
Integrated Healthcare, LLC was, and the Company is, a wholly-owned subsidiary of
IGEN.
The assets and businesses of the Company have historically been owned and
operated by IGEN. The accompanying financial statements have been prepared and
are presented as if the Company had been operating as a separate entity using
IGEN's historical cost basis in the assets and liabilities and including the
historical operations of the businesses and assets to be transferred to the
Company from IGEN as part of the restructuring. Accordingly, IGEN's net
investment in the Company is shown in lieu of stockholders' equity in the
accompanying consolidated balance sheets. IGEN holds all cash in a centralized
treasury and has provided all of the necessary funding for the operations of the
Company. Accordingly, no cash is reflected on the accompanying consolidated
balance sheets. IGEN has the ability and intent to fund the businesses being
transferred to BioVeris until such time as the merger is completed.
For each of the periods presented in the consolidated financial statements,
the Company was fully integrated with IGEN and these financial statements
reflect the application of certain estimates and allocations. The Company's
consolidated statements of operations include all revenues and costs that are
directly attributable to the Company's businesses. In addition, certain expenses
of IGEN have been allocated to the Company using various assumptions. These
expenses include an allocated share of general and administrative salaries as
well as certain other shared costs (primarily facility, human resources, legal,
accounting and other administrative costs). General and administrative salaries
have been allocated primarily based upon an estimate of actual time spent on the
businesses of the Company. Facilities costs and centralized administrative
services have been allocated based upon a percentage of total product sales
F-7
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
as well as a percentage of total headcount. Management believes these allocation
methodologies and estimations are reasonable based upon the nature of the
related expenses and management's knowledge of the level of effort and space
required to support the businesses of the Company. Allocated expenses of $13.2
million, $19.2 million, $20.5 million, $10.2 million, and $9.2 million are
included in selling, general and administrative expenses in the accompanying
consolidated statements of operations for the fiscal years ended March 31, 2001,
2002 and 2003, and the six months ended September 30, 2002 and 2003,
respectively. These allocated expenses were derived from total IGEN selling,
general and administrative expenses of $16.8 million, $24.0 million, $24.7
million, $12.3 million and $12.0 million for the fiscal years ended March 31,
2001, 2002 and 2003, and the six months ended September 30, 2002 and 2003,
respectively. The financial information included herein may not reflect the
financial position, results of operations and cash flows of the Company in the
future or what they would have been had BioVeris been operating as a stand-alone
entity in the past.
On or before the date of the merger, IGEN Europe, Inc. and IGEN
International, K.K. will become wholly-owned subsidiaries of the Company,
therefore the consolidated financial statements include the accounts of the
Company and these subsidiaries. All significant intercompany transactions and
balances have been eliminated.
Estimates -- In addition to the estimates noted above, the preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentration of Credit Risk -- During the years ended March 31, 2001, 2002
and 2003, and the six months ended September 30, 2002 and 2003, agencies of the
U.S. government accounted for 2%, 11%, 26%, 19% and 17% of total revenue,
respectively, and 11%, 43% and 29% of total accounts receivable as of March 31,
2002 and 2003 and September 30, 2003, respectively.
Allowance for Doubtful Accounts -- The Company maintains reserves on
customer accounts where estimated losses may result from the inability of its
customers to make required payments. These reserves are determined based on a
number of factors, including the current financial condition of specific
customers, the age of accounts receivable balances and historical loss rates.
Inventory -- Inventory is recorded at the lower of cost or market using the
first-in, first-out method and consists of the following:
MARCH 31,
--------------- SEPTEMBER 30,
2002 2003 2003
------ ------ -------------
(UNAUDITED)
(IN THOUSANDS)
Finished goods......................................... $2,041 $2,234 $2,019
Work in process........................................ 1,149 869 425
Raw materials.......................................... 1,272 2,345 2,701
------ ------ ------
Total................................................ $4,462 $5,448 $5,145
====== ====== ======
Equipment and Leasehold Improvements -- Equipment and leasehold
improvements are carried at cost, less accumulated depreciation and
amortization. Depreciation on equipment, which includes lab instruments and
furniture, is computed over the estimated useful lives of the assets, generally
three to five years, using straight-line or accelerated methods. Leasehold
improvements are amortized on a straight-line basis over the life of the lease.
During the year ended March 31, 2002, the Company changed its
F-8
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
depreciation method for certain equipment from an accelerated method to
straight-line. The impact of this change was not material to the Company's
financial position or results of operations.
Equipment and leasehold improvements consist of the following:
MARCH 31,
------------------ SEPTEMBER 30,
2002 2003 2003
-------- ------- -------------
(UNAUDITED)
(IN THOUSANDS)
Lab instruments and equipment....................... $ 7,761 $ 6,274 $ 6,628
Office furniture and equipment...................... 7,492 5,847 6,234
Leasehold improvements.............................. 2,864 3,618 3,773
-------- ------- --------
18,117 15,739 16,635
Accumulated depreciation and amortization........... (11,688) (9,283) (10,842)
-------- ------- --------
Total............................................. $ 6,429 $ 6,456 $ 5,793
======== ======= ========
Capitalized Software Costs -- Software development costs incurred after
technological feasibility is established are capitalized in accordance with
Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed." To date,
software development has been substantially completed concurrently with the
establishment of technological feasibility, and accordingly, no costs have been
capitalized to date.
Evaluation of Long-Lived Assets -- The Company evaluates the potential
impairment of long-lived assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable. In
evaluating the recoverability of an asset, management's policy is to compare the
carrying amount of an asset with the projected undiscounted future cash flow.
Management believes no impairment of these assets exists as of March 31, 2002
and 2003 and September 30, 2003.
Warranty Reserve -- The Company warrants its products against defects in
material and workmanship for one year after sale and records estimated future
warranty costs at the time revenue is recognized. A reserve for future warranty
claims is recorded based upon management's review of historical claims,
supplemented by expectations of future costs. The Company also offers extended
warranty arrangements to customers, for which related costs are recorded as
incurred.
Warranty reserve activity is as follows:
YEAR ENDED SIX MONTHS ENDED
MARCH 31, 2003 SEPTEMBER 30, 2003
-------------- ------------------
(UNAUDITED)
(IN THOUSANDS)
BALANCE, BEGINNING OF PERIOD.......................... $ 170 $ 250
Provisions recorded................................. 1,278 743
Actual costs incurred............................... (1,198) (743)
------- -----
BALANCE, END OF PERIOD................................ $ 250 $ 250
======= =====
Fair Value of Financial Instruments -- The carrying amounts of the
Company's financial instruments, which include accounts receivable, accounts
payable and accrued expenses, approximate their fair value due to their short
maturities.
Revenue Recognition -- The Company derives revenue principally from three
sources: product sales, royalty income and contract fees.
F-9
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
Product sales revenue is recognized when persuasive evidence of an
arrangement exists, the price to the buyer is fixed and determinable,
collectibility is reasonably assured and the product is shipped to the customer
thereby transferring title and risk of loss. For instrument sales, the
instrument and the related installation are considered to be separate elements
under EITF 00-21. Revenue is recognized for the instrument upon shipment and is
recognized for the installation when complete based upon the residual value
method. For instrument and reagent sales, there is no option of return and
refund, only the option to repair or replace. Other than the installation
required for the instruments, there are no contingencies, allowances or other
post-sale obligations. Rental revenue associated with instruments that are
leased is recognized ratably over the life of the lease agreements. Revenue
associated with extended warranty arrangements is recognized over the term of
the extended warranty contract.
Royalty income is recorded when earned, based on information provided by
licensees.
Revenue from services performed under contracts is recognized when
obligations under the contract have been satisfied. The satisfaction of
obligations may occur over the term of the underlying customer contract, if the
contract is based on the achievement of certain "milestones," or may occur at
the end of the underlying customer contract, if based only upon delivery of the
final work product.
Research and Development -- Research and development costs are expensed as
incurred.
Foreign Currency -- Gains and losses from foreign currency transactions,
such as those resulting from the settlement of foreign receivables or payables,
are included in the results of operations as incurred. These amounts were not
material during the years ended March 31, 2001, 2002 and 2003 and the six months
ended September 30, 2002 and 2003.
Income Taxes -- The assets and businesses of the Company have historically
been owned and operated by IGEN. The Company was not a separate legal or tax
entity and the operating results of the Company were included in IGEN's
consolidated Federal and state income tax returns. As a result, income taxes
have been calculated as if the Company was a stand-alone entity filing a
separate tax return.
Stock-Based Compensation -- The Company has elected to follow the
recognition and measurement principals of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations
in accounting for employee stock options and, accordingly, will not recognize
compensation cost for options granted under its 2003 stock incentive plan whose
exercise price equaled the market value of a share of the underlying common
stock on the date of grant.
The Company did not have any stock option grants. The following table
illustrates the effect on net loss and net loss per share as if IGEN had applied
the fair value recognition provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-
Based Compensation -- Transition and Disclosure -- An Amendment of SFAS No.
123," to stock-based
F-10
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
employee compensation and the resulting costs attributable to the Company's
employees were reflected in the consolidated financial statements:
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
------------------------------ -------------------------
2001 2002 2003 2002 2003
-------- -------- -------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net loss, as reported.............. $(30,724) $(49,150) $(50,894) $(26,851) $(23,817)
Deduct: Total stock-based employee
compensation expense determined
under fair value method.......... (1,625) (1,974) (2,455) (1,252) (896)
-------- -------- -------- -------- --------
Net loss, as adjusted.............. $(32,349) $(51,124) $(53,349) $(28,103) $(24,713)
======== ======== ======== ======== ========
Net loss per share:
Net loss per common share, as
reported......................... $ (1.15) $ (1.84) $ (1.90) $ (1.00) $ (0.89)
Net loss per common share, as
adjusted......................... $ (1.21) $ (1.91) $ (2.00) $ (1.05) $ (0.92)
All per share information for the Company is based on the number of shares
of common stock of the Company projected to be outstanding upon completion of
the merger and related transactions. The net loss, as adjusted, and net loss per
share, as adjusted, disclosed above is not representative of the effects on net
loss and net loss per share on an as adjusted basis in future years, as future
years will include grants by the Company of options for the Company common
stock. In addition, upon completion of the merger, all options for IGEN common
stock will be canceled.
The fair value of options for IGEN common stock was estimated at the date
of grant using a Black-Scholes option pricing model with the following
assumptions:
SIX MONTHS
YEARS ENDED ENDED
MARCH 31, SEPTEMBER 30,
------------------ -------------
2001 2002 2003 2002 2003
---- ---- ---- ----- -----
(UNAUDITED)
Expected dividend yield............................... 0% 0% 0% 0% 0%
Expected stock price volatility....................... 71% 71% 68% 69% 65%
Risk-free interest rate............................... 5.5% 4.3% 3.4% 3.8% 2.3%
Expected option term (in years)....................... 5 5 5 5 5
Based on this calculation, the weighted average fair value of options
granted was $9.66, $15.68, $20.56, $21.37 and $21.09, during the years ended
March 31, 2001, 2002 and 2003 and the six months ended September 30, 2002 and
2003, respectively.
Pro Forma Net Loss Per Share -- The Company uses SFAS No. 128, "Earnings
per Share," for the calculation of basic and diluted earnings per share. For all
periods presented, unaudited pro forma net loss per share is based on the number
of common shares expected to be outstanding upon completion of the merger and
related transactions.
Interim Financial Statements -- The accompanying unaudited interim
consolidated financial statements as of September 30, 2003 and 2002 have been
prepared in conformity with accounting principles generally accepted in the
United States of America. In the opinion of management, all adjustments
consisting only of normal recurring adjustments considered necessary for a fair
presentation have been included. The Company's consolidated results of
operations for any period are not necessarily indicative of the results for the
full year or for any other period.
F-11
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
New Accounting Standards -- In November 2002, the Financial Accounting
Standards Board (FASB) issued Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness of
Others," or FIN 45. FIN 45 establishes new disclosure and liability recognition
requirements for direct and indirect guarantee with specified characteristics.
The initial recognition and measurement provisions of FIN 45 are applicable on a
prospective basis to guarantees issued or modified after December 31, 2002. The
disclosure requirements in FIN 45 are effective for both annual and interim
periods ending after December 15, 2002. The Company adopted FIN 45 as of March
31, 2003 and the implementation did not have a material effect on its financial
position, results of operation or cash flows.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of SFAS No. 123" (SFAS
148). SFAS 148 amends SFAS 123, "Accounting for Stock-Based Compensation" (SFAS
123), to provide alternative methods of voluntarily transitioning to the fair
value based method of accounting for stock-based employee compensation. SFAS 148
also amends the disclosure requirements of SFAS 123 to require disclosure of the
method used to account for stock-based employee compensation and the effect of
the method on reported results in both annual and interim financial statements.
This pronouncement is effective for both annual and interim periods beginning
after December 15, 2002. The Company has elected to follow the recognition and
measurement principles of Accounting Principles Board Opinion No. 25,
"Accounting For Stock Issued to Employees," in its accounting for employee stock
options. In accordance with SFAS 148, the Company has adopted the annual and
interim period disclosure requirements.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46). FIN 46 provides guidance on variable
interest entities and the framework through which an enterprise assesses
consolidation of a variable interest entity. FIN 46 was effective immediately
for variable interest entities created or acquired after January 31, 2003. In
October 2003, the FASB issued Staff Position FIN 46-6, which extended the
effective date of FIN 46 for variable interest entities created or acquired
before February 1, 2003 to the first interim or annual period ending after
December 15, 2003. The Company adopted FIN 46 as of October 1, 2003 and has
determined that MSD qualifies as a variable interest entity under FIN 46 because
substantially all of MSD's funding is being provided by the Company and the
Company's voting rights are not proportional to its obligation to absorb a
majority of the potential future losses of MSD. Accordingly, beginning October
1, 2003, the Company will consolidate the financial results of MSD.
Consolidation accounting will require certain reclassifications within the
Company's consolidated financial statements but is not expected to materially
affect its financial position or net loss, as the Company has already recorded
approximately 100% of MSD's losses. See Note 4 for the historical financial
information of MSD.
In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133 on
Derivative Instruments and Hedging Activities" (SFAS 149). SFAS 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The amendments set forth in SFAS 149 require that
contracts with comparable characteristics be accounted for similarly. SFAS 149
is generally effective for contracts entered into or modified after June 30,
2003 and for hedging relationships designated after June 30, 2003. The
implementation of SFAS 149 did not have a material effect on the Company's
financial position, results of operations or cash flows.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity" (SFAS
150). SFAS 150 establishes standards regarding the classification and
measurement of certain financial instruments with characteristics of both
liabilities and
F-12
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
equity. SFAS 150 is effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. The implementation of SFAS 150 did
not have a material effect on the Company's financial position, results of
operations or cash flows.
2. LICENSE AND RESEARCH AGREEMENTS
IGEN granted a license to bioMerieux, for the development and
worldwide-development, use, manufacture and sale of ECL-based nucleic acid test
systems on a co-exclusive basis for certain segments of the clinical diagnostics
market and on a non-exclusive basis for certain segments of the life science
market. Among other things, the agreement provides for royalty payments to IGEN
on product sales and for product supply arrangements between the parties. This
agreement will be assigned to the Company in connection with the restructuring.
Royalty income from bioMerieux of $276,000, $252,000, $236,000, $80,000 and
$74,000 has been recognized in the accompanying consolidated financial
statements for the years ended March 31, 2001, 2002, and 2003, and the six
months ended September 30, 2002 and 2003, respectively.
IGEN granted a license to Eisai, for the manufacture and market of a class
of ORIGEN-based diagnostic systems on an exclusive basis for the clinical
diagnostics market in Japan. The agreement provides for royalty payments to IGEN
on product sales. In 2002, IGEN and Eisai executed an extension of the license
under which the license became non-exclusive in July 2003. This agreement will
be assigned to the Company in connection with the restructuring. Royalty income
from Eisai of $609,000, $798,000, $871,000, $433,000 and $466,000 has been
recognized in the accompanying consolidated financial statements for the years
ended March 31, 2001, 2002 and 2003, and the six months ended September 30, 2002
and 2003, respectively.
3. STOCK OPTION PLANS
In September 2003, the board of directors of the Company adopted, subject
to IGEN stockholder approval, the BioVeris 2003 Stock Incentive Plan (Stock
Plan). Up to 5.3 million shares of common stock of the Company (subject to
adjustment in the event of stock splits and other similar events) may be issued
pursuant to awards granted under the Stock Plan.
The Stock Plan provides for the grant of incentive stock options intended
to qualify under Section 422 of the Internal Revenue Code of 1986, as amended,
non-statutory stock options, restricted stock awards and other stock-based
awards, including the grant of shares based upon certain conditions, the grant
of securities convertible into common stock of the Company and the grant of
stock appreciation rights (collectively, Awards).
Employees, officers, directors, consultants and advisors, including any
individuals who have accepted an offer for employment, of the Company and its
subsidiaries are eligible to be granted awards under the Stock Plan. Incentive
stock options may only be granted to employees of the Company and its
subsidiaries. Approval of the Stock Plan requires the affirmative vote of the
IGEN stockholders and no awards have been granted.
In August 2000, IGEN granted 75,000 non-qualified stock options under its
1994 Stock Option Plan in connection with a consulting arrangement for services
to be provided to it. The consultant is also the sole owner of Meso Scale
Technologies (MST) and is a son of IGEN's and the Company's chairman and chief
executive officer (see Note 4). As a result of certain events in fiscal 2002 and
pursuant to Financial Accounting Standards Board Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock Compensation -- an
Interpretation of APB Opinion No. 25" and EITF 96-18, "Accounting for Equity
F-13
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
Instruments That Are Issued To Other Than Employees For Acquiring, or in
Conjunction with Selling, Goods or Services," IGEN began recognizing expense on
a monthly basis as the options are earned and vest, based upon fair value
calculated in accordance with the Black-Scholes option pricing model. Changes in
the fair value of the unvested options will result in changes in future expense
recognition. The options vest ratably over a five-year period through August
2005. As the consulting services were provided to the the Company's businesses,
compensation expense of $219,000, $386,000, $184,000 and $261,000 has been
reflected in the accompanying financial statements for the years ended March 31,
2002 and 2003 and the six months ended September 30, 2002 and 2003,
respectively.
The Company did not have any stock option grants. Certain detailed stock
option disclosures related to options granted under IGEN stock option plans have
been omitted from these notes to consolidated financial statements as all such
options will be canceled in connection with the merger and related transactions
and the holder of any such options will have the right to receive for each share
covered by such option cash from Roche equal to the excess of $47.25 over the
exercise price of such option and one share of the Company's common stock. The
excess of $47.25 plus the average first day trading price of BioVeris common
stock over the exercise price of all IGEN employee stock options will be
recorded as compensation expense by BioVeris upon completion of the merger and
related transactions. As of March 31, 2003, there were options to acquire
approximately 1.6 million shares of IGEN common stock, with a weighted average
exercise price of $18.16 per share.
4. MESO SCALE DIAGNOSTICS JOINT VENTURE
MSD is a joint venture formed by MST and IGEN in 1995. MSD was formed for
the development, manufacture, marketing and sale of products utilizing a
combination of MST's multi-array technology together with IGEN's technology. MST
is a company established and wholly-owned by Jacob Wohlstadter, a son of IGEN's
and the Company's chairman and chief executive officer. In August 2001, IGEN
amended the MSD joint venture agreement, the MSD limited liability company
agreement and certain license and other agreements with MSD and MST to continue
the MSD joint venture and entered into various related agreements (the MSD
agreements). An independent committee of the IGEN board of directors, with the
advice of independent advisors and counsel, negotiated and approved the MSD
agreements. As part of the restructuring, IGEN will transfer its equity interest
in MSD to the Company and will assign the MSD agreements to the Company.
MSD manufactures, markets and sells instrument systems, including the
Sector HTS and the Sector PR, which combine MST's multi-array technology and
IGEN's ECL technology. The Sector HTS is an ultra high throughput drug discovery
system engineered for applications such as high throughput screening and
large-scale proteomics. The Sector PR is a smaller system designed for benchtop
applications such as assay development, research in therapeutic areas, cellular
biology and medium throughput screening. MSD also manufactures and markets a
line of its own reagents, assays and plates that are used on these systems. MSD
commenced product sales in October 2002.
Under the MSD agreements, IGEN's funding commitment was based on an annual
budget of MSD approved by the Joint Venture Oversight Committee (JVOC), a
committee of the IGEN board of directors consisting of independent directors.
The JVOC approved funding for MSD by IGEN for the period from January 1, 2003 to
November 30, 2003 in an amount of $20.6 million, subject to a permitted variance
of 15%. As of September 30, 2003, IGEN's remaining funding commitment to MSD was
$5.4 million. IGEN's remaining funding commitment may be satisfied in part
through in-kind contributions of scientific and administrative personnel and
shared facilities. For the years ended March 31, 2001, 2002 and 2003 and the six
months ended September 30, 2002 and 2003, IGEN made total contributions to MSD
of $8.3 million, $19.6 million, $20.5 million, $10.8 million and $15.3 million,
F-14
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
respectively. During the year ended March 31, 2002, IGEN transferred certain
equipment and leasehold interests to MSD in the amount of $839,000, which amount
is included in the in-kind contributions to MSD in such year.
Separate from and in addition to IGEN's remaining funding commitment under
the MSD agreements for the period from January 1, 2003 to November 30, 2003, the
Company has agreed to make a final capital contribution of $37.5 million to MSD
following the completion of the merger. Of the $37.5 million, Samuel
Wohlstadter, IGEN's and the Company's chairman and chief executive officer, will
fund any amount in excess of $30.0 million (including any interim funding
provided by IGEN as described in the next sentence) through the purchase of the
Company's series B preferred stock that economically mirror the class C
interests in MSD to be held by BioVeris. In addition, in the event the merger is
not completed prior to December 1, 2003, IGEN has agreed to provide continued
interim funding to MSD, payable monthly on the first day of each month
commencing on December 1, 2003 until the earlier to occur of completion of the
merger or termination of the merger agreement. The monthly funding will equal
approximately $1.7 million, which is 1/12th of IGEN's aggregate funding
commitment under the MSD budget for 2003 approved by the JVOC. Any interim
funding will reduce the amount of the Company's final capital contribution
following the completion of the merger.
After the restructuring, and subject to MSD's and MST's right to buy
BioVeris's interests in MSD, the Company will replace IGEN as a member of MSD
and will hold a 31% voting equity interest in MSD and be entitled to a preferred
return on $72.2 million of the funds previously invested by IGEN in MSD through
September 30, 2003 and on all additional funds invested by IGEN and the Company
thereafter. This preferred return would be payable out of a portion of both
future profits and certain third-party financings of MSD, generally before any
payments are made to other equity holders. Although MST owns the remaining 69%
voting equity interest in MSD, the Company generally has the right to approve
significant MSD governance matters. In exercising this right, an independent
committee of the Company board of directors must consider the Company's
interests and the interests of the Company's stockholders while also taking into
consideration the interests of MSD.
IGEN and MST are the sole members of MSD, and each holds one seat on MSD's
two-member board of managers. After the restructuring, Dr. Richard Massey,
IGEN's and the Company's president and chief operating officer, will be the
Company's representative on the MSD board of managers and will also serve as the
treasurer and secretary of MSD. The other member of the MSD board of managers is
Mr. Jacob Wohlstadter, who is the sole owner of MST and serves as president and
chief executive officer of MSD.
Under the terms of one of the MSD agreements, IGEN granted to MSD a
worldwide, perpetual, exclusive license (with certain exceptions) to IGEN's
technology, including ECL technology, for use in MSD's research program, defined
in the MSD agreements. If the Company ceases to be a member of MSD, it will
become entitled to receive royalty payments from MSD on all products developed
and sold by MSD using the Company's patents.
MST holds a worldwide, perpetual, non-exclusive sublicense from MSD for
certain non-diagnostic applications of the Company's technology. The Company is
entitled to receive royalty payments from MST on any products developed and sold
by MST using the patents the Company will receive as part of the restructuring.
During the term of the MSD joint venture agreement, MSD is IGEN's and MST's
exclusive means of conducting the MSD research program, and IGEN is obligated to
refrain from developing or commercializing any products, processes or services
that are related to the MSD research program in the diagnostic field, as defined
for purposes of the MSD agreements, or to MSD's research technologies as
F-15
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
described in the MSD agreements, subject to certain exceptions. After the
expiration or termination of the MSD joint venture agreement, IGEN or the
Company, as applicable, may not use the improvements granted to it by MSD if
doing so would compete with MSD in the diagnostic field or use research
technologies defined in the MSD agreements.
As part of the merger agreement and related transaction agreements, the
Company, IGEN and MSD agreed that the MSD joint venture agreement will expire on
the later of November 30, 2003, or the earlier of the date of the completion of
the merger and related transactions or the termination of the merger agreement.
In addition, in accordance with the MSD agreements, MST and MSD have the right
to terminate the MSD joint venture agreement prior to its expiration under
certain circumstances, including breach of IGEN's obligations, including IGEN's
funding obligations to MSD, MSD's termination of Mr. Jacob Wohlstadter's
employment (other than for cause or disability), if Mr. Jacob Wohlstadter is
entitled to terminate his employment agreement for good reason (as defined in
his employment agreement) or upon a change in control of IGEN, as defined.
MSD and Mr. Jacob Wohlstadter have each agreed that the merger and related
transactions will not constitute a change in control for purposes of the MSD
agreements.
Upon the expiration of the MSD joint venture upon the completion of the
merger, MSD and MST will have the right to purchase BioVeris's interest in MSD
for a purchase price equal to fair market value (to be determined in accordance
with the provisions and procedures set forth in the MSD agreements, which shall
include a determination by appraisers if the parties are unable to agree on fair
market value) minus a discount factor of 7.5%. If MSD or MST exercises this
right, it will be required to pay the Company the outstanding purchase price
plus simple (cumulated, not compounded) interest at the fixed annual rate of
0.5% over the prime rate in effect on the date that MSD or MST, as the case may
be, elects to purchase the interests. The purchase price is payable over time in
installments equal to the sum of 5% of MSD net sales, as determined in
accordance with the MSD agreements, and 20% of the net proceeds realized by MSD
from the sale of its debt or equity securities in any third-party financing
after the date of the sale the Company's interest in MSD. As security for the
payment obligation, the Company will hold a security interest in the interests
in MSD that are being purchased. MST or MSD, as the case may be, may repay all
or any part of the outstanding purchase price plus accrued interest at any time
and from time to time without penalty.
Following the expiration of the MSD joint venture agreement, many of the
licenses and other arrangements with MSD and MST assigned to the Company will
continue indefinitely.
MSD has an employment agreement with Mr. Jacob Wohlstadter, its president
and chief executive officer, the current term of which runs through November 30,
2004 and provides for a salary at the annual rate of $250,000 through November
30, 2003. Thereafter, the salary is to be increased as agreed to by MSD and Mr.
Jacob Wohlstadter. In addition, Mr. Jacob Wohlstadter is also eligible to
receive, at the discretion of the JVOC of the IGEN or BioVeris board of
directors, as the case may be, an annual cash bonus in an amount not to exceed
20% of his annual salary. During year ended December 31, 2003, Mr. Jacob
Wohlstadter is expected to receive $250,000 from his employment at MSD. If MSD
terminates the employment agreement without cause, or Mr. Jacob Wohlstadter
terminates the employment agreement for good reason (which includes a "change in
control" of BioVeris, as defined), Mr. Jacob Wohlstadter will be entitled to
receive, in addition to salary and pro rata bonus and adjustments earned through
the 60th day following the notice of termination, an amount equal to from 3 to
12 times (depending on the reason for the termination) the monthly pro rata
salary, bonus and adjustments in effect at the time of the termination. Under
the employment agreement Mr. Jacob Wohlstadter is also entitled to receive a
gross-up for any "parachute" excise tax imposed on payments made or benefits
provided pursuant to the agreement. In addition, upon such a termination prior
to the expiration of the MSD joint venture
F-16
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
agreement, MSD and MST shall have a joint right to purchase the Company's
interest in MSD on terms described above. The Company will be responsible for
all amounts payable, costs incurred and other obligations under the employment
agreement prior to the termination of the Company's funding obligation to MSD
following the completion of the merger, which generally are expected to be paid
out of IGEN's funding commitment to MSD and the Company's one-time contribution
to MSD. MSD and Mr. Jacob Wohlstadter have each agreed that the merger and
related transactions will not constitute a change in control for purposes of the
MSD agreements and the employment agreement. The Company will also indemnify Mr.
Jacob Wohlstadter against certain liabilities, including liability from the MSD
joint venture relating to the period of IGEN's or the Company's involvement with
MSD. In addition, the Company will be obligated under the MSD agreements to
indemnify each board member or officer of MSD with respect to any action taken
by such person prior to the Company ceasing to be a member of MSD by reason of
the fact that such person is or was a board member or an officer of MSD.
Since inception of the MSD joint venture, the equity method has been
utilized to account for this investment. Prior to July 1, 2001, given MSD's
status as a development stage enterprise without having established
technological feasibility of its intended product offering, the Company
considered its investments in MSD to be other than temporarily impaired. As
such, any residual investment book value, after recognizing the Company's share
of MSD losses in accordance with the equity method, was written off upon
contribution. All expenses related to the MSD investment prior to July 1, 2001
were recorded as research and development expenses based upon the significance
and character of the MSD losses as substantially all contributions supported
research and development initiatives. Beginning on July 1, 2001, taking into
account the progress made by MSD in the development of its products, the Company
determined that no additional impairments were required to its prospective
contributions and thus ceased writing-off the amount of its contributions to MSD
that were in excess of MSD's losses. At that time, MSD was transitioning from a
development stage entity to a commercial enterprise and milestones establishing
the continued viability of MSD were first achieved in the quarter ended
September 30, 2001. For example, prototypes had been assembled demonstrating
product feasibility, and MSD was anticipating initial product launch in
approximately one year. As a result of this transition, MSD's expenses were no
longer primarily research and development. Accordingly, since July 1, 2001, the
Company has recorded only its proportionate share of MSD losses, representing
approximately 100% of MSD's losses, for each respective period as equity in loss
of affiliate consistent with accounting for equity method investments.
MSD-related research and development expenses totaled $8.3 million ($5.9
million of equity method losses and $2.4 million of impairment losses) and $2.4
million ($2.2 million of equity method losses and $200,000 of impairment losses)
for the years ended March 31, 2001 and 2002, respectively. MSD-related losses
included in equity in loss of affiliate were $10.9 million and $17.6 million for
the years ended March 31, 2002 and 2003, respectively. During the years ended
March 31, 2001, 2002 and 2003 and the six months ended September 30, 2002 and
2003, operating costs allocated to MSD by the Company in connection with shared
personnel and facilities totaled $5.6 million, $11.4 million, $11.9 million,
$5.8 million and $4.1 million, respectively. Since July 1, 2001, these allocated
operating costs reduced certain operating costs and expenses and increased
Equity in Loss of Affiliate in the accompanying consolidated statements of
operations. The Company's investment in affiliate totaled $6.2 million and $9.2
million at September 30, 2002 and 2003, respectively. See Note 1 for discussion
of consolidation accounting of the MSD investment as of October 1, 2003.
F-17
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
Summarized financial information for MSD is as follows:
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
-------------------------- -----------------
2001 2002 2003 2002 2003
------ ------- ------- ------ -------
(UNAUDITED)
(IN THOUSANDS)
Revenue............................... $ -- $ -- $ 3,247 $ 314 $ 3,000
Operating expenses.................... 6,185 13,560 21,357 9,930 12,804
Net loss.............................. 6,185 13,541 18,215 9,577 9,798
MARCH 31,
---------------- SEPTEMBER 30,
2002 2003 2003
------ ------- -------------
(UNAUDITED)
(IN THOUSANDS)
Current assets......................................... $4,571 $ 5,685 $10,334
Total assets........................................... 8,305 11,904 16,965
Current liabilities.................................... 885 2,226 1,631
Total liabilities...................................... 931 2,226 1,781
Total members' equity.................................. 7,374 9,678 15,184
5. INCOME TAXES
The Company's operating results historically have been included in IGEN's
consolidated Federal and state income tax returns. As a result, income taxes
have been calculated as if the Company was a stand-alone entity filing a
separate tax return. For the years ended March 31, 2001, 2002 and 2003, and for
the six months ended September 30, 2002 and 2003, the Company recorded no
Federal or state income tax expense and did not owe or pay Federal or state
income tax as calculated by applying statutory rates.
In connection with the merger and related transactions, Roche will be
acquiring all of the historical net operating loss and tax credit carryforwards
of IGEN. The Company however, will be assuming IGEN's historical cost basis in
the assets and liabilities transferred to the Company from IGEN. Deferred income
tax assets and liabilities have been computed for differences between financial
reporting and tax bases of the assets and liabilities assumed that will result
in taxable or deductible amounts in the future. The computation of deferred
income taxes is based on enacted tax laws and rates applicable to periods in
which the differences are expected to affect the taxable income of the Company
after the completion of
F-18
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
the merger. The approximate tax effects of temporary differences that will give
rise to the Company's deferred tax assets are as follows:
MARCH 31,
-----------------
2002 2003
------- -------
(IN THOUSANDS)
Deferred tax assets:
Accruals and reserves....................................... $ 468 $ 551
Deferred revenue............................................ 198 219
Equipment and leasehold improvements........................ 976 1,304
Investment in affiliate..................................... 1,791 1,954
Other....................................................... 45 (238)
------- -------
Total deferred tax asset.................................. 3,478 3,790
Less: valuation allowance................................... (3,478) (3,790)
------- -------
Net deferred tax asset................................. $ -- $ --
======= =======
A valuation allowance equal to the total net deferred tax assets has been
provided as of March 31, 2002 and 2003 as it is more likely than not that
deferred tax assets will not be realized. The increase in the valuation
allowance on the deferred tax asset was $2.6 million and $300,000 for the years
ended March 31, 2002 and 2003, respectively. As a result of state income taxes
and a valuation allowance, the provision for income taxes recorded in the
accompanying consolidated statements of operations differs from the amount that
would have resulted by applying the U.S. Federal income tax statutory rate.
6. EMPLOYEE SAVINGS PLAN
IGEN has an Employee Savings Plan intended to qualify under Sections 401(a)
and 401(k) of the Internal Revenue Code of 1986, as amended, and subject to the
Employee Retirement Income Security Act of 1974, as amended. IGEN made
discretionary contributions of $275,000, $459,000, $544,000, $140,000 and
$138,000 for the years ended March 31, 2001, 2002 and 2003, and the six months
ended September 30, 2002 and 2003, respectively, attributable to BioVeris
employees. As part of the restructuring, the Company will assume all liabilities
with respect to this plan.
The Company intends to establish a 401(k) employee benefit plan similar in
nature to the plan formerly provided to its employees by IGEN.
7. RELATED PARTIES
The Company's chairman and chief executive officer, Mr. Samuel Wohlstadter,
is the principal and controlling stockholder, a director and the chief executive
officer of each of Wellstat Biologics Corporation, Wellstat Therapeutics
Corporation, Hyperion Catalysis International (Hyperion) and Proteinix
Corporation (Proteinix). The Company's president and chief operating officer,
Dr. Richard Massey, is also a director of Hyperion and a less than 10%
stockholder in Proteinix. These companies are therefore considered the Company's
affiliates for the purpose of this discussion. After the completion of the
merger and related transactions, the Company will have shared services
arrangements with each of these affiliated companies. These shared services
include accounting and finance, human resources and other administrative
services, as well as facility related costs and services. Shared services costs
allocated to these companies totaled $1.9 million, $1.3 million, $1.0 million,
$500,000 and $600,000 for the years ended March 31, 2001, 2002 and 2003, and the
six months ended September 30, 2002 and 2003, respectively, which reduced
certain operating costs and expenses for the respective periods. Amounts
allocated to these affiliated companies are
F-19
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
calculated and billed monthly based upon costs incurred by the Company and are
determined through allocation methods that include time-spent and square footage
utilized. Amounts due from affiliated companies under the shared services
arrangements were $94,000, $228,000 and $294,000 at March 31, 2002 and 2003 and
September 30, 2003, respectively, which were paid subsequent to each respective
period-end.
IGEN has licensed certain diagnostic technologies from affiliated companies
and has licensed certain pharmaceutical technologies to affiliated companies. No
royalties have ever been earned or accrued under these license agreements. These
license agreements will be assigned to the Company in connection with the
restructuring.
8. COMMITMENTS AND CONTINGENCIES
Capital Leases -- IGEN is obligated under capital lease agreements for
certain equipment. These leases will be assigned to the Company in connection
with the restructuring and will expire during the year ending March 31, 2004.
The aggregate discounted lease payments are recorded as a liability, and the
fair market value of the related leased assets are capitalized and amortized
over the estimated useful lives of the assets. Total assets capitalized pursuant
to such agreements were approximately $350,000 and $224,000 and $224,000 at
March 31, 2002 and 2003 and September 30, 2003, respectively, with accumulated
amortization totaling approximately $307,000, $220,000 and $224,000 at March 31,
2002 and 2003 and September 30, 2003, respectively.
Operating Leases -- IGEN leased office, laboratory and manufacturing
facilities pursuant to operating leases expiring at various times from fiscal
2004 through fiscal 2010. These leases will be assigned to the Company in
connection with the restructuring. Rent expense for these operating leases
totaled approximately $2.4 million, $2.6 million, $2.9 million, $1.4 million and
$1.4 million for the years ended March 31, 2001, 2002 and 2003, and the six
months ended September 30, 2002 and 2003, respectively.
At March 31, 2003, the future minimum operating lease payments are as
follows:
OPERATING
LEASE
YEARS ENDED MARCH 31, PAYMENTS
--------------------- --------------
(IN THOUSANDS)
2004........................................................ $ 2,635
2005........................................................ 2,650
2006........................................................ 2,683
2007........................................................ 2,735
2008........................................................ 2,807
2009 and thereafter......................................... 5,921
-------
Total..................................................... $19,431
=======
License Payment -- In connection with the merger and related transactions,
the Company has committed to pay certain affiliates of Roche a fee of $50
million after the completion of the merger for a worldwide, non-exclusive
license under patents that cover certain PCR inventions.
Tax Allocation Contingency -- Pursuant to the tax allocation agreement
among Roche, a subsidiary of Roche, IGEN and the Company, the Company may be
required to pay IGEN up to $20 million to the extent that the average of the
high and low market capitalization for the Company on the first day of trading
of the Company's common stock after the completion of the merger exceeds a
specified threshold.
F-20
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
9. SEGMENT INFORMATION
The Company operates in one business segment. It is engaged in the
development, manufacturing and marketing of diagnostic products for the
detection and measurement of biological and chemical substances. Product sales
by region are as follows:
SIX MONTHS ENDED
YEARS ENDED MARCH 31, SEPTEMBER 30,
-------------------------- ----------------
2001 2002 2003 2002 2003
------ ------- ------- ------ -------
(IN THOUSANDS)
(UNAUDITED)
United States.......................... $4,371 $ 8,004 $11,993 $5,122 $ 7,668
------ ------- ------- ------ -------
United Kingdom......................... 612 1,789 1,823 998 712
All other foreign...................... 3,952 2,284 2,671 851 2,034
------ ------- ------- ------ -------
Total foreign........................ 4,564 4,073 4,494 1,849 2,746
------ ------- ------- ------ -------
Total............................. $8,935 $12,077 $16,487 $6,971 $10,414
====== ======= ======= ====== =======
Substantially all of the Company's assets are held in the United States.
Product sales by market are as follows:
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
-------------------------- ----------------
2001 2002 2003 2002 2003
------ ------- ------- ------ -------
(IN THOUSANDS)
(UNAUDITED)
Life Science........................... $8,935 $10,940 $11,895 $5,765 $ 7,062
Biodefense............................. -- 1,137 4,592 1,206 3,352
------ ------- ------- ------ -------
Total............................. $8,935 $12,077 $16,487 $6,971 $10,414
====== ======= ======= ====== =======
10. VALUATION AND QUALIFYING ACCOUNTS
The following table sets forth activity in the Company's allowance for
doubtful accounts:
BALANCE AT PROVISIONS BALANCE AT
BEGINNING OF PERIOD RECORDED WRITE-OFFS END OF PERIOD
------------------- ---------- ---------- -------------
(IN THOUSANDS)
FOR THE YEARS ENDED MARCH 31,
2001............................. $ 64 $135 $(169) $ 30
2002............................. 30 60 (1) 89
2003............................. 89 135 (76) 148
FOR THE SIX MONTHS ENDED SEPTEMBER
30, 2003 (UNAUDITED)............. $148 $ 30 $ -- $178
F-21
BIOVERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INCLUDING INFORMATION APPLICABLE TO UNAUDITED PERIODS)
11. QUARTERLY OPERATING RESULTS (UNAUDITED)
FOR THE YEARS ENDED MARCH 31, FIRST SECOND THIRD FOURTH
----------------------------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2002
Revenue.................................... $ 2,429 $ 3,366 $ 4,144 $ 3,304
Loss from operations(1).................... (10,705) (8,639) (7,902) (10,918)
Net loss(2)................................ (10,712) (11,877) (11,669) (14,892)
Net loss per common share(3)............... $ (0.40) $ (0.44) $ (0.44) $ (0.56)
2003
Revenue.................................... $ 3,130 $ 4,403 $ 5,529 $ 4,712
Loss from operations....................... (8,630) (8,924) (8,008) (7,888)
Net loss(2)................................ (12,924) (13,926) (11,313) (12,731)
Net loss per common share(3)............... $ (0.48) $ (0.52) $ (0.42) $ (0.48)
2004
Revenue.................................... $ 5,073 $ 5,951
Loss from operations....................... (7,368) (6,817)
Net loss(2)................................ (12,518) (11,299)
Net loss per common share(3)............... $ (0.47) $ (0.42)
---------------
(1) Operating costs and expenses for the fourth quarter includes a write-off of
$1.1 million of TRICORDER detection modules previously recorded as fixed
assets. The cost of these modules had previously been recorded as a fixed
asset and depreciated over their estimated useful life, and should have been
recorded as product costs upon shipment and sale. The Company determined
that the adjustment did not have a material impact on fiscal 2002 or prior
period financial statements and accordingly, did not revise such financial
statements. Of the $1.1 million adjustment, $200,000 is related to fiscal
2002 and the remaining $900,000 is related to prior fiscal years
(approximately $400,000 and $500,000 in fiscal 2001 and 2000, respectively).
(2) See Note 4 of the consolidated financial statements for a description of the
recording of losses under the equity method of accounting related to the MSD
investment.
(3) Based on the number of shares of the Company common stock expected to be
outstanding upon completion of the merger and related transactions.
The sum of quarterly per share amounts may not be equal to per share
amounts reported for year-to-date periods due to changes in the number of shares
outstanding and the effects of rounding for each period.
F-22
ANNEX
1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RESTRUCTURING AGREEMENT
DATED AS OF JULY 24, 2003,
BETWEEN
IGEN INTERNATIONAL, INC.
AND
IGEN INTEGRATED HEALTHCARE, LLC
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
------
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions................................................. A-1-1
ARTICLE II
CONVERSION; CAPITALIZATION OF NEWCO AND ITS SUBSIDIARIES
SECTION 2.01 Conversion and Capitalization of Newco...................... A-1-5
SECTION 2.02 Newco Rights Plan........................................... A-1-5
SECTION 2.03 Newco Subsidiaries.......................................... A-1-5
ARTICLE III
TAX MATTERS
ARTICLE IV
RESTRUCTURING AND ASSUMED LIABILITIES
SECTION 4.01 Restructuring............................................... A-1-6
SECTION 4.02 Assumed Liabilities......................................... A-1-6
SECTION 4.03 Transfer and Assumption Documentation....................... A-1-6
SECTION 4.04 Nonassignable Contracts; Retained Contracts................. A-1-7
SECTION 4.05 Intercompany Arrangements................................... A-1-7
ARTICLE V
OTHER AGREEMENTS
SECTION 5.01 Use of Name................................................. A-1-7
SECTION 5.02 Books and Records........................................... A-1-8
SECTION 5.03 Further Assurances.......................................... A-1-8
SECTION 5.04 Cooperation................................................. A-1-8
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01 Employment of Employees..................................... A-1-8
SECTION 6.02 Liabilities Generally....................................... A-1-8
SECTION 6.03 Preservation of Rights to Amend or Terminate Plans.......... A-1-9
SECTION 6.04 Reimbursement; Indemnification.............................. A-1-9
SECTION 6.05 Actions By Newco............................................ A-1-9
SECTION 6.06 No Termination.............................................. A-1-9
A-1-i
PAGE
------
ARTICLE VII
CONDITIONS
ARTICLE VIII
MISCELLANEOUS AND GENERAL
SECTION 8.01 Modification or Amendment................................... A-1-10
SECTION 8.02 Termination................................................. A-1-10
SECTION 8.03 Notices..................................................... A-1-10
SECTION 8.04 Interpretation.............................................. A-1-11
SECTION 8.05 Severability................................................ A-1-11
SECTION 8.06 Counterparts................................................ A-1-11
SECTION 8.07 Entire Agreement; Third-Party Beneficiaries................. A-1-11
SECTION 8.08 Certain Obligations......................................... A-1-12
SECTION 8.09 Governing Law............................................... A-1-12
SECTION 8.10 Assignment.................................................. A-1-12
SECTION 8.11 Enforcement; Consent to Service of Process.................. A-1-12
SECTION 8.12 Extension; Waiver........................................... A-1-12
A-1-ii
RESTRUCTURING AGREEMENT dated as of July 24, 2003 (this "Restructuring
Agreement"), between IGEN INTERNATIONAL, INC., a Delaware corporation (the
"Company"), and IGEN INTEGRATED HEALTHCARE, LLC, a Delaware limited liability
company ("Newco") and a direct wholly owned subsidiary of the Company.
WHEREAS ROCHE HOLDING LTD, a joint stock company organized under the laws
of Switzerland ("Parent"), 66 ACQUISITION CORPORATION II, a Delaware corporation
and a wholly owned subsidiary of Parent ("Sub"), the Company and Newco have
entered into an Agreement and Plan of Merger, dated as of the date of this
Restructuring Agreement (the "Merger Agreement"), providing for the Merger (as
defined in the Merger Agreement);
WHEREAS as a condition to their willingness to enter into the Merger
Agreement, the parties thereto have requested that the parties hereto enter into
this Agreement;
WHEREAS the respective Boards of Directors of the Company and Newco have
approved this Restructuring Agreement, pursuant to which the Restructuring (as
defined below) will be consummated;
WHEREAS the purpose of the Restructuring is to make possible the Merger by
separating from the Assets (as defined below) and Liabilities of the Company and
its subsidiaries those Assets and Liabilities that Parent will not acquire; and
WHEREAS in the Restructuring, the Newco Assets (as defined below) will be
transferred to Newco or one or more of its subsidiaries, which will thereafter
conduct the Newco Business (as defined below), and Newco or one or more of its
subsidiaries will assume the Assumed Liabilities (as defined below).
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. Unless otherwise noted, terms used but not
defined in this Restructuring Agreement shall have the meanings set forth in the
Merger Agreement. In addition, the following terms shall have the following
meanings:
"Assets" shall mean any and all of the business, assets, properties,
interests and rights of whatever kind and nature, whether tangible or
intangible, whether real, personal or mixed, whether fixed, contingent or
otherwise, and wherever located, including the following:
(a) real property interests (including leases, subleases and
licenses), land, plants, buildings, improvements and fixtures thereon and
all other easements, rights, privileges and appurtenances thereto;
(b) machinery, equipment, tooling, vehicles, furniture and fixtures,
leasehold improvements, repair parts, tools, plant, laboratory and office
equipment and other tangible personal property, together with any rights or
claims arising out of the breach of any express or implied warranty by the
manufacturers or sellers of any of such assets or any component part
thereof;
(c) inventories, including raw materials, work-in-process, finished
goods, parts, accessories and supplies (including items in transit, on
consignment or in the possession of any third party);
(d) cash, bank accounts, notes, loans and accounts receivable (whether
current or not current), interests as beneficiary under letters of credit,
advances and performance and surety bonds;
(e) certificates of deposit, banker's acceptances, shares of stock
(including capital stock of subsidiaries), bonds, debentures, evidences of
indebtedness, certificates of interest or participation in profit-sharing
agreements, collateral-trust certificates, reorganization certificates or
subscriptions,
A-1-1
transferable shares, investment contracts, voting trust certificates, puts,
calls, straddles, options, swaps, collars, caps and other securities or
hedging arrangements of any kind;
(f) financial, accounting, Tax, operating and other data and records,
including books, minute books, records, notes, sales and sales promotional
data, advertising materials, credit information, cost and pricing
information, customer and supplier lists, reference catalogs, payroll and
personnel records, minute books, stock ledgers, stock transfer records and
other similar property, rights and information;
(g) patents (including all reissues, divisions, continuations,
continuations in part and extensions thereof), patent applications
(including renewal applications), patent rights, patent improvements and
related technology, patent improvement rights, trademarks, trademark
applications, registrations and other rights, trade names and trade dress,
domain names, trade name rights and other indications of origin, service
marks, service mark rights, service names, copyrights and copyright
applications and registrations, commercial and technical information
(including engineering, production and other designs, drawings, notebooks
and other recording methods, specifications, formulae and technology),
computer and electronic data processing programs and software, inventions,
processes, trade secrets, know-how, confidential information and other
proprietary property, rights and interests;
(h) Contracts, sale orders, purchase orders, open bids and other
commitments and all other legally binding arrangements, whether written or
oral, and all rights and interests therein (including rights to earned or
accrued but unpaid amounts);
(i) credits, prepaid expenses, deposits and receipts held by third
parties;
(j) claims, causes of action, choses in action, rights under insurance
policies, rights under express or implied warranties, rights of recovery,
rights of set-off, rights of subrogation and all other rights of any kind;
(k) Permits (as defined in this Section 1.01);
(l) all rights in and to products sold or leased (including products
returned after the Restructuring and rights of rescission, repletion and
reclamation); and
(m) goodwill and going concern value.
"Assumed Liabilities" shall mean all Liabilities of the Company and the
subsidiaries of the Company arising from events, occurrences, actions,
omissions, facts or circumstances occurring or existing before the Effective
Time, whether asserted before, at or after the Effective Time, other than the
Continuing Company Liabilities. For the avoidance of doubt, Assumed Liabilities
shall include the Liabilities of the Company under the License Agreement, the
Improvements License Agreement and any Newco Litigation.
"Company" shall have the meaning set forth in the Preamble.
"Company Records" shall mean
(a) the minute books of the Company;
(b) the financial, accounting and Tax records of the Company;
(c) all filings made by the Company (i) with the SEC and all
correspondence with the SEC related thereto and (ii) with NASDAQ and all
correspondence with NASDAQ related thereto;
(d) all filings and other documentation related to the I Names (as
defined in this Section 1.01);
(e) certain litigation files of the Company to be identified by the
Company prior to the Effective Time;
(f) all documentation related to the Continuing Company Assets (other
than the Continuing Company Assets described in clause (b) of the
definition of such term);
A-1-2
(g) all documentation related to the Continuing Company Liabilities;
and
(h) all documentation related to the Company Stock Plans.
"Continuing Company Assets" shall mean
(a) all claims, defenses, offsets, Judgments and demands arising out
of (i) the License Litigation, including the Final Judgment (as modified by
the Court of Appeals Opinion) or any final judgment entered by the United
States District Court for the District of Maryland, and (ii) the New Patent
Litigation;
(b) the Company Records;
(c) the capital stock of the Continuing Licensee Subsidiary and the
entire right, title and interest of the Company therein;
(d) the Continuing Licensee Subsidiary's (i) right, title and interest
under the License Agreement and (ii) rights and interests under the
Covenants Not to Sue;
(e) the Company's rights and interests under the Transaction
Agreements (including this Restructuring Agreement);
(f) the "IGEN" name and all other names, imprints, trademarks, trade
names, trade name rights, trade dress, domain names, service marks, service
mark rights and service names of the Company and its applicable
subsidiaries, whether or not registered, that include or are derivatives of
the "IGEN" name, including all common law rights and all goodwill
associated therewith (collectively, the "I Names");
(g) the Company's bank accounts (but not any cash in such bank
accounts);
(h) all rights under the insurance policies of the Company (except as
provided in Section 3.01 of the Post-Closing Covenants Agreement);
(i) the Permits of the Company set forth on Schedule 1.01(a);
(j) the Retained Contracts and the entire right, title and interest of
the Company in each Retained Contract;
(k) the I/R Agreements (as defined below), other than the Newco I/R
Agreements (as defined below), and the entire right, title and interest of
the Company in each I/R Agreement, other than any Newco I/R Agreement;
(l) the Hitachi Technical Information (as defined below);
(m) the Parent Note and the entire right, title and interest of the
Company therein;
(n) with respect to the Transferred Customers (as defined below), (i)
all amounts due to the Company under open purchase orders or other
receivables and (ii) all inventory intended for sale to such Transferred
Customers; and
(o) to the extent the Company receives any cash from the exercise of
Company Stock Options or Company Warrants after the Cut-Off Date, such
cash.
"Continuing Company Business" shall mean the Continuing Company Assets and
the Continuing Company Liabilities and the businesses of the Company and the
subsidiaries of the Company and their respective predecessors arising out of or
related thereto.
"Continuing Company Liabilities" shall mean (a) subject to Section 2.01(e)
of the Post-Closing Covenants Agreement, any Liabilities of the Company under
any Transaction Agreement, (b) subject to Section 2.01(f) of the Post-Closing
Covenants Agreement, any Liabilities of the Continuing Licensee Subsidiary under
the License Agreement or the Covenants Not to Sue, (c) any Liabilities of the
Company or any subsidiary of the Company owed to Parent or any of its
affiliates, including under the I/R
A-1-3
Agreements, other than the Newco I/R Agreements, (d) any Liabilities of the
Company or any subsidiary of the Company owed to Parent or any of its affiliates
arising out of (i) the License Litigation, including the Final Judgment (as
modified by the Court of Appeals Opinion) or any final judgment entered by the
United States District Court for the District of Maryland, and (ii) the New
Patent Litigation, (e) any Liabilities of the Company with respect to the
Transferred Customers, other than Liabilities arising from breaches by the
Company prior to the Effective Time for which the Company would have had an
indemnification obligation under Article X of the Supply, Services and Support
Agreement (as defined in the Post-Closing Covenants Agreement) if the
Transactions had not occurred, (f) any Liabilities of the Company pursuant to
the Parent Note and (g) subject to Section 2.01(b) of the Post-Closing Covenants
Agreement, any Liabilities of the Company under any Retained Contract.
"Continuing Licensee Subsidiary" shall mean IGEN LS LLC, a Delaware limited
liability company and a wholly owned subsidiary of the Company.
"Employees" shall mean all employees of the Company and the Company
Subsidiaries immediately prior to the Effective Time.
"Hitachi Technical Information" shall mean all of the unpublished patent
applications and technical information of Hitachi High Technologies Corporation
provided to R Diagnostics, which in turn R Diagnostics has provided to the
Company prior to the date of this Restructuring Agreement.
"I Names" shall have the meaning set forth in subsection (f) of the
definition of Continuing Company Assets.
"Intercompany Arrangements" shall have the meaning set forth in Section
4.05.
"I/R Agreements" means the agreements set forth on Schedule 1.01(b) hereto.
"Legally Permitted" shall have the meaning set forth in Section 6.06.
"License Agreement" shall mean the License Agreement dated as of the date
of this Restructuring Agreement between the Company and the Continuing Licensee
Subsidiary.
"Merger Agreement" shall have the meaning set forth in the Recitals.
"Newco" shall have the meaning set forth in the Preamble.
"Newco Assets" shall have the meaning set forth in Section 4.01.
"Newco Business" shall mean all the businesses of the Company and the
subsidiaries of the Company and their respective predecessors, at or at any time
prior to the Effective Time, other than the Continuing Company Business.
"Newco Certificate of Incorporation" shall have the meaning set forth in
Section 2.01.
"Newco Companies" shall mean Newco and its subsidiaries (determined after
giving effect to the transactions contemplated by Article IV of this
Restructuring Agreement).
"Newco I/R Agreements" shall mean all documents, understandings and
arrangements relating to (a) the transfer from R Diagnostics to the Company of
the patent application entitled "Assays Employing Electrochemiluminescent Label
and Electrochemiluminescence Quencher", (b) all agreements reached by the ECL
committee of R Diagnostics and the ECL Committee of the Company at meetings
between the two parties, (c) all agreements reached by the improvements
transition teams of each of R Diagnostics and the Company at meetings between
the two parties and (d) the Assignment dated as of July 3, 2003, by R Corp in
favor of the Company.
"Newco Litigation" means any Action (as defined in the Post-Closing
Covenants Agreement) in which the Company or any of its subsidiaries or one or
more of their respective officers, directors or Employees is a named defendant
relating to, involving or arising out of events occurring prior to the Effective
Time.
A-1-4
"Newco Names" shall have the meaning set forth in Section 4.01(f).
"Parent" shall have the meaning set forth in the Recitals.
"Permits" of a person shall mean such person's approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights of or
with all Governmental Entities, including (a) all authorizations under the
Federal Food, Drug, and Cosmetic Act of 1938, as amended, and the regulations of
the Federal Food and Drug Administration promulgated thereunder and (b) under
Environmental Law.
"Restructuring" shall have the meaning set forth in Section 4.02.
"Restructuring Agreement" shall have the meaning set forth in the Preamble.
"Retained Contracts" shall mean the Contracts set forth on Schedule 1.01(c)
hereto.
"Sub" shall have the meaning set forth in the Recitals.
"Termination Protection Program" shall have the meaning set forth in
Section 6.01.
"Transferred Benefit Plans" shall have the meaning set forth in Section
6.02.
"Transferred Customers" shall mean each point-of-care customer under the
Supply, Services and Support Agreement, dated as of May 1, 2000, between the
Company and R Diagnostics.
ARTICLE II
CONVERSION; CAPITALIZATION OF NEWCO AND ITS SUBSIDIARIES
SECTION 2.01 Conversion and Capitalization of Newco. (a) Prior to the
Effective Time, the Company, as the sole member of Newco, shall (i) authorize
the conversion of Newco to a corporation in accordance with Section 18-216 of
the Delaware Limited Liability Company Act pursuant to which all outstanding
limited liability company interests in Newco shall be converted into Newco
Common Stock and (ii) cause Newco, in accordance with Section 265 of the DGCL,
to file with the Secretary of State of the State of Delaware (A) a certificate
of conversion and (B) a certificate of incorporation substantially in the form
attached hereto as Exhibit A (the "Newco Certificate of Incorporation"), each
executed in accordance with Section 103 of the DGCL. Prior to the Effective
Time, Newco shall in connection with the conversion referred to in the previous
sentence adopt by-laws substantially in the form attached hereto as Exhibit B.
Notwithstanding the foregoing, Newco may amend its certificate of incorporation
or its by-laws in a manner consistent with Section 6.01(a)(iii) of the Merger
Agreement.
(a) Prior to the Effective Time, the Company shall cause the number of
authorized shares of Newco Common Stock to be sufficient in order to
consummate the Transactions.
(b) The Company shall determine, in its sole discretion, the identity
of Newco's directors and officers.
(c) Prior to or at the Effective Time, the Company shall cause Newco
to change its name to a name that does not include any I Name.
SECTION 2.02 Newco Rights Plan. Prior to the Effective Time, but
following Newco's conversion to a corporation (as set forth in Section 2.01),
Newco may enter into a shareholder rights agreement commonly associated with the
adoption of a "rights plan" and distribute the rights contemplated thereby in
connection with the distribution of the Newco Common Stock in the Merger.
SECTION 2.03 Newco Subsidiaries. Prior to the Effective Time, Newco may
create one or more subsidiaries and may transfer any or all of the Newco Assets
to such subsidiaries at any time or from time to time. Prior to the Effective
Time, Newco or any subsidiary of Newco may (a) issue shares of its capital stock
to the Company, Newco or any subsidiary of Newco and (b) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock.
A-1-5
ARTICLE III
TAX MATTERS
Notwithstanding anything in this Restructuring Agreement to the contrary,
Liabilities of the parties for Taxes are subject to the terms of the Tax
Allocation Agreement. All obligations of Newco under the Tax Allocation
Agreement shall be treated as Assumed Liabilities and not as Continuing Company
Liabilities under this Restructuring Agreement and all obligations of the
Company under the Tax Allocation Agreement shall be treated as Continuing
Company Liabilities and not as Assumed Liabilities under this Restructuring
Agreement.
ARTICLE IV
RESTRUCTURING AND ASSUMED LIABILITIES
SECTION 4.01 Restructuring. Prior to the Effective Time, the Company and
its subsidiaries shall contribute, convey, assign, transfer and deliver, or
cause to be contributed, conveyed, assigned, transferred and delivered, to Newco
or to the appropriate subsidiary or subsidiaries of Newco specified by the
Company in its sole discretion prior to the Effective Time all of the Company's
or its applicable subsidiaries' right, title and interest in and to all Assets
of the Company or its applicable subsidiaries (including (a) shares of stock in
subsidiaries of the Company other than Newco and the Continuing Licensee
Subsidiary, (b) the License Agreement and the Company's entire right, title and
interest thereunder (other than any right, title and interest of the Company in
the License Agreement through the Continuing Licensee Subsidiary), (c) the
Improvements License Agreement and the Company's entire right, title and
interest thereunder, (d) Newco's rights and interests under the Transaction
Agreements, (e) Newco's rights and interests under the Covenants Not to Sue, the
PCR License Agreement and the PCR Services Agreement, (f) other than the I
Names, any and all names, imprints, trademarks, trade names, trade name rights,
trade dress, domain names, service marks, service mark rights and service names,
whether or not registered, including all common law rights and all goodwill
associated therewith (collectively, the "Newco Names") and (g) copies of the
Company Records, subject to Section 5.02 of this Restructuring Agreement) other
than the Continuing Company Assets (such contributed, conveyed, assigned,
transferred and delivered Assets, the "Newco Assets") solely in exchange for
Newco Common Stock or limited liability company interests in Newco. For the
avoidance of doubt, the transfer of the Covered ECL Technology to Newco or its
applicable subsidiaries as part of the Restructuring shall be subject to the
License Agreement.
SECTION 4.02 Assumed Liabilities. Notwithstanding anything in Section
4.01 to the contrary, the parties agree that, except as otherwise specifically
set forth in any Transaction Agreement (including the treatment of Liabilities
for Taxes as set forth in Article III or employee-related Liabilities as set
forth in Section 6.02) or any Commercial Agreement, at or prior to the Effective
Time, (a) Newco shall, or shall cause the appropriate subsidiary or subsidiaries
of Newco specified by the Company in its sole discretion prior to the Effective
Time to, unconditionally assume and undertake to pay, satisfy and discharge all
the Assumed Liabilities when such Assumed Liabilities become due in accordance
with their terms and (b) the Company shall retain or shall unconditionally
assume and undertake to pay, satisfy and discharge, all the Continuing Company
Liabilities when such Continuing Company Liabilities become due in accordance
with their terms. The transactions contemplated by Sections 4.01 and 4.02 of
this Restructuring Agreement are referred to collectively as the
"Restructuring".
SECTION 4.03 Transfer and Assumption Documentation. In furtherance of the
contribution, conveyance, assignment, transfer and delivery of the Assets and
the assumption of the Liabilities, in each case, in accordance with this Article
IV, (a) the transferor shall execute and deliver, and cause its subsidiaries to
execute and deliver, such deeds, bills of sale, stock powers, certificates of
title, assignments of Contracts and other instruments of contribution,
conveyance, assignment, transfer and delivery necessary or appropriate to
evidence such contribution, conveyance, assignment, transfer and delivery and
(b) the
A-1-6
transferee shall execute and deliver such instruments of assumption as necessary
or appropriate to evidence such assumption.
SECTION 4.04 Nonassignable Contracts; Retained Contracts. (a)
Notwithstanding anything in this Restructuring Agreement to the contrary, this
Restructuring Agreement shall not constitute an agreement to assign or transfer
any Permit, sales order, purchase order, open bid or other commitment or
Contract if an assignment or transfer or attempted assignment or transfer of the
same without the Consent or waiver of the other party or parties thereto would
constitute a breach thereof or in any way impair the rights of the Newco
Companies thereunder.
(b) The Company shall use its reasonable best efforts to obtain all
Consents and waivers and to resolve all impracticalities of assignments or
transfers necessary to assign or transfer to the applicable Newco Company
the Newco Assets to be conveyed pursuant to Section 4.01; provided,
however, that the Company shall not be required to pay or commit to pay any
amount to (or incur any obligation in favor of) any person from whom any
such Consent or waiver may be required (other than nominal filing or
application fees). If and when such Consents and waivers are obtained, the
assignment or transfer of the applicable Newco Asset shall be effected in
accordance with the terms of this Restructuring Agreement. If any such
Consent or waiver is not obtained prior to the Effective Time, then after
the Effective Time, the Company and Newco shall cooperate (at Newco's
expense) in any lawful and reasonable arrangement reasonably proposed by
Newco under which Newco shall obtain the economic claims, rights and
benefits under the Permit, sales order, purchase order, open bid or other
commitment or Contract with respect to which the Consent or waiver has not
been obtained in accordance with this Restructuring Agreement. Such
reasonable arrangement may include (a) the subcontracting, sublicensing or
subleasing to Newco of any and all rights of the Company against such other
party arising out of a breach or cancelation thereof by such other party
and (b) the enforcement by the Company of such rights. To the extent, and
only to the extent, Newco is able to receive the economic claims, rights
and benefits under such Permit, sales order, purchase order, open bid or
other commitment or Contract, Newco shall be responsible for the Assumed
Liabilities, if any, arising under such Permit, sales order, purchase
order, open bid or other commitment or Contract.
SECTION 4.05 Intercompany Arrangements. All Contracts, arrangements and
commitments (other than this Restructuring Agreement, the other Transaction
Agreements and the Commercial Agreements), whether oral or written, solely
between any Newco Company or any operating unit of any Newco Company, on the one
hand, and the Company or any operating unit of the Company (other than any Newco
Company or operating unit thereof), on the other hand, entered into prior to the
Effective Time ("Intercompany Arrangements") shall terminate upon the Effective
Time. All amounts under such Intercompany Arrangements which are unbilled and
have not been charged to the related Contract, arrangement or commitment as of
the Effective Time shall be canceled upon the Effective Time. At or before the
Effective Time, the Company shall cause all intercompany indebtedness (which
shall include payables and receivables) between the Newco Companies or any
operating unit of any Newco Company, on the one hand, and the Company (or any
operating unit of the Company (other than any Newco Company or operating unit
thereof)), on the other hand, including any indebtedness under the Intercompany
Arrangements, to be canceled.
ARTICLE V
OTHER AGREEMENTS
SECTION 5.01 Use of Name. (a) Except as provided below, from and after
the Effective Time, Newco and its subsidiaries shall have all rights in and use
of the Newco Names and the Company shall take such actions as are necessary or
appropriate to vest such rights in Newco or any of its subsidiaries. As a result
and subject to Section 5.01(b), prior to the Effective Time, the Company shall
take or cause to be taken all action necessary or appropriate to promptly
deliver to Newco any and all stationery, business cards, brochures, sales
literature, promotional material and other documents, including invoices and
purchase orders, bearing any Newco Name.
A-1-7
(b) Within 30 days after the Closing Date, (i) the Company and its
subsidiaries shall cease using and shall destroy all stationery, business
cards, brochures, sales literature, promotional material and other
documents, including invoices and purchase orders, in its possession
bearing any Newco Name even if such stationery, business cards, brochures,
sales literature, promotional material or other documents, including
invoices and purchase orders, includes any I Name and (ii) Newco and its
subsidiaries shall (A) destroy all stationery, business cards, brochures,
sales literature, promotional material and other documents, including
invoices and purchase orders, in its possession bearing any I Name even if
such stationery, business cards, brochures, sales literature, promotional
material or other documents, including invoices and purchase orders, also
includes any Newco Name and (B) take or cause to be taken all actions
necessary to change the name of any of the Newco companies to eliminate
from the name "IGEN" and all derivatives thereto, including any name
confusingly similar thereto.
SECTION 5.02 Books and Records. Prior to or as promptly as practicable
after the Effective Time, Newco shall, and shall cause the other Newco Companies
to, deliver to the Company the Company Records; provided that Newco shall be
entitled to retain copies of such Company Records (unless Newco determines in
good faith, after consultation with outside counsel, that such retention of
copies would reasonably be expected to result in the loss of any applicable
claim to privilege, immunity, confidentiality or other similar protection) and
such copies shall for all purposes constitute Newco Assets.
SECTION 5.03 Further Assurances. The parties agree that if, after the
completion of the Restructuring, either party or its affiliates holds Assets
which by the terms hereof or of the Merger Agreement were intended to be
assigned and transferred to, or retained by, the other party, such party shall,
at its expense, promptly assign and transfer or cause to be assigned and
transferred such Assets to the other party, and the parties agree that the
transferring party will hold such Assets as trustee of the transferee party and
all income and risk of loss of the transferred Assets until the completion of
the Restructuring shall be for the account of the intended owner. Each of the
parties hereto, at its own cost and expense, promptly shall execute such
documents and other instruments and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and to
consummate the transactions contemplated hereby.
SECTION 5.04 Cooperation. The parties shall cooperate with each other in
all reasonable respects to ensure (a) that the Restructuring and the assumption
of the Continuing Company Liabilities and the Assumed Liabilities are
consummated in accordance with the terms hereof, (b) the retention by the
Company of the Continuing Company Assets, (c) the transfer to Newco of all the
Newco Assets and (d) the allocation of employee Liabilities and provision of
employee benefits in accordance with the provisions of Article VI.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01 Employment of Employees. Effective as of the Effective Time,
Newco shall offer to each Employee (a) who participates in the Company's
Termination Protection Program (the "Termination Protection Program") employment
in a Qualifying Position (as defined in the Termination Protection Program) and
(b) who does not participate in the Company's Termination Protection program
substantially comparable employment to the employment of such Employee
immediately prior to the Effective Time. For the avoidance of doubt, Newco
hereby assumes as an Assumed Liability the Termination Protection Program and
the Company's obligation thereunder. Nothing contained in this Section 6.01
shall confer on any Employee any right to continued employment after the
Effective Time, and each Employee shall continue to be employed "at-will"
subject to any requirements under applicable foreign Law or any applicable
individual agreement to the contrary.
SECTION 6.02 Liabilities Generally. Without limiting the generality of
Section 4.02, effective as of the Effective Time, Newco shall assume and be
solely responsible for all Liabilities (including any
A-1-8
Liabilities imposed by Law) with respect to each employee benefit plan, as such
term is defined in Section 3(3) of ERISA, each employment, severance or similar
Contract, plan, arrangement or policy and each other plan or arrangement
providing for compensation, bonuses, profit-sharing, stock option or other stock
related rights or other forms of incentive or deferred compensation, health or
medical benefits, disability benefits, workers' compensation, supplemental
unemployment benefits, severance benefits or post-employment pension or welfare
benefits, which is maintained, administered or contributed to by the Company or
any Company Subsidiary and covers any Employee or former employee (and their
beneficiaries) of, or independent contractor (and their beneficiaries) with
respect to, the Company or any Company Subsidiary, other than the Company Stock
Plans and the Termination Protection Program, (such plans and arrangements are
referred to collectively herein as the "Transferred Benefit Plans").
SECTION 6.03 Preservation of Rights to Amend or Terminate Plans. Except
as otherwise expressly provided in the Merger Agreement or this Restructuring
Agreement, no provision of this Restructuring Agreement shall be construed as a
limitation on the right of Newco to amend or terminate any Transferred Benefit
Plan which right the Company or Newco, as applicable, would otherwise have under
the terms of such Transferred Benefit Plan or otherwise, and no provision of
this Restructuring Agreement shall be construed to create a right in any
Employee or beneficiary of such Transferred Benefit Plan that such Employee or
beneficiary would not otherwise have under the terms of the Transferred Benefit
Plan itself.
SECTION 6.04 Reimbursement; Indemnification. Newco acknowledges that the
Company may incur costs and expenses (including contributions to plans and the
payment of insurance, or other similar premiums) after the Effective Time
pursuant to any of the Transferred Benefit Plans. Accordingly, Newco agrees to
reimburse the Company, as promptly as practicable but in any event within 30
days of receipt from the Company of appropriate verification, for all such costs
and expenses reasonably incurred after the Effective Time. If applicable foreign
Law requires that the Company incur Liabilities in respect of Employees,
notwithstanding the terms of this Restructuring Agreement, then Newco shall
fully indemnify and hold harmless the Company to the extent of such Liabilities.
All Liabilities retained, assumed or indemnified by Newco pursuant to this
Article VI shall in each case be deemed to be Assumed Liabilities and shall be
subject to the indemnification provisions set forth in Article II of the
Post-Closing Covenants Agreement.
SECTION 6.05 Actions By Newco. Any action required to be taken under this
Article VI may be taken by one or more of the Newco Companies.
SECTION 6.06 No Termination. To the extent permitted by applicable Law,
the Company and Newco agree (a) that the transactions contemplated by this
Restructuring Agreement, the other Transaction Agreements and the Commercial
Agreements shall not constitute a termination of employment of any Employee that
would entitle such Employee to receive severance or similar compensation and
benefits and (b) to use their reasonable best efforts to amend, if necessary,
any applicable Company Benefit Plans so to provide. If under applicable foreign
Law, any Employee employed outside the U.S. is deemed to have incurred a
termination of employment as a result of the transactions contemplated by this
Restructuring Agreement which entitles such Employee to receive any payment or
benefit under any non-U.S. Transferred Benefit Plan, governmental plan or
arrangement or pursuant to any Law, including severance benefits, irrespective
of such individual's continued employment by Newco, then notwithstanding
anything in this Restructuring Agreement to the contrary, to the extent Legally
Permitted (as defined below), appropriate adjustments shall be made to the
treatment of such Employee during such continued employment, including not
giving such Employee credit for prior service or treating such Employee as
having been newly hired immediately after such deemed termination, for purposes
of all applicable non-U.S. Transferred Benefit Plans. "Legally Permitted" means
permitted under the Law of the country, the labor union, works council or
collective bargaining agreement, including mandated waiting periods before which
working conditions (including benefits) cannot be changed, and upon receiving
required agreement from individuals or Transferred Benefit Plan trustees,
foundation boards and members, and any other organizations having a recognized
right to determine or affect benefits or funding of the Transferred Benefit
Plan.
A-1-9
ARTICLE VII
CONDITIONS
The obligations of the Company and Newco to consummate the Restructuring
shall be subject to each of the Transaction Agreements and each of the
Commercial Agreements having been executed and delivered by each of the parties
thereto and being in full force and effect. This Article VII shall in no way
restrict the ability of the Company or Newco to consummate the Restructuring or
any portion thereof prior to the satisfaction of any condition thereto.
ARTICLE VIII
MISCELLANEOUS AND GENERAL
SECTION 8.01 Modification or Amendment. The parties hereto may modify or
amend this Restructuring Agreement only by written agreement executed and
delivered by duly authorized officers of the respective parties; provided,
however, that prior to the Effective Time, for so long as the Merger Agreement
remains in effect, this Agreement shall not be amended or modified, and no
provision hereof waived, without the prior written consent of Parent.
SECTION 8.02 Termination. In the event the Merger Agreement is terminated
pursuant to its terms prior to the Effective Time, this Restructuring Agreement
shall automatically and simultaneously terminate and the Restructuring shall
automatically and simultaneously be abandoned without the approval of Newco or
the stockholders of the Company. In the event of such termination, no party
shall have any Liability to any other party pursuant to this Restructuring
Agreement. It is understood and agreed that the consummation of the Merger shall
not constitute a termination of this Restructuring Agreement. The
Confidentiality Agreement and the Letter Agreement shall survive termination of
this Restructuring Agreement prior to the Effective Time.
SECTION 8.03 Notices. All notices, requests, claims, demands and other
communications under this Restructuring Agreement shall be in writing and shall
be deemed given upon receipt by the parties at the following addresses (or at
such other address for a party as shall be specified by like notice) of a fax
followed by delivery of such notice by overnight courier of an international
reputation:
(a) if to the Company (after the Effective Time), to
Roche Holding Ltd
Grenzacherstrasse 124
CH-4070 Basel
Switzerland
Attention: Bruno Maier
Fax: +41 61 688 3196
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Ulrika Ekman
Fax: (212) 450-3800
A-1-10
(b) if to the Company (prior to the Effective Time) or to Newco, to
IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, MD 20877
Attention: President
Fax: (301) 208-3789
with a copy to:
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, NY 10019
Attention: Philip A. Gelston
Sarkis Jebejian
Fax: (212) 474-3700
SECTION 8.04 Interpretation. When a reference is made in this
Restructuring Agreement to a Section, Exhibit, Schedule or party, such reference
shall be to a Section of, or an Exhibit, Schedule or party to, this
Restructuring Agreement unless otherwise indicated. The headings contained in
this Restructuring Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Restructuring Agreement.
Whenever the words "include", "includes" or "including" are used in this
Restructuring Agreement, they shall be deemed to be followed by the words
"without limitation". The words "hereof", "herein", "hereby" and "hereunder" and
words of similar import when used in this Restructuring Agreement shall refer to
this Restructuring Agreement as a whole and not to any particular provision of
this Restructuring Agreement. The words "date hereof" shall refer to the date of
this Restructuring Agreement. The term "or" is not exclusive. The word "extent"
in the phrase "to the extent" shall mean the degree to which a subject or other
thing extends, and such phrase shall not mean simply "if". The definitions
contained in this Restructuring Agreement are applicable to the singular as well
as the plural forms of such terms. Any agreement or instrument defined or
referred to herein or in any agreement or instrument that is referred to herein
means such agreement or instrument as from time to time amended, modified or
supplemented. References to a person are also to its permitted successors and
assigns.
SECTION 8.05 Severability. If any term or other provision of this
Restructuring Agreement is invalid, illegal or incapable of being enforced by
any applicable Law, or public policy, all other conditions and provisions of
this Restructuring Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Restructuring Agreement so as to effect the original intent of the parties
as closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
SECTION 8.06 Counterparts. This Restructuring Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties. Each party
need not sign the same counterpart.
SECTION 8.07 Entire Agreement; Third-Party Beneficiaries. This
Restructuring Agreement (a) taken together with the other Transaction
Agreements, the Commercial Agreements, the Confidentiality Agreement and the
Letter Agreement constitute the entire agreement, and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the Transactions and the transactions contemplated by the Commercial
Agreements; provided, however, that as of and after the Effective Time, the
Confidentiality Agreement shall have no further force and effect and shall be
superseded by Section 3.07 of the Post-Closing Covenants Agreement and (b)
nothing contained
A-1-11
in this Restructuring Agreement is intended to confer upon any person other than
the parties hereto and Parent, which shall be a third party beneficiary to this
Restructuring Agreement, any benefit, right or remedy under or by reason of this
Restructuring Agreement.
SECTION 8.08 Certain Obligations. Whenever this Restructuring Agreement
requires any of the subsidiaries of any party to take any action, this
Restructuring Agreement will be deemed to include an undertaking on the part of
such party to cause such subsidiary to take such action; provided, however, for
the avoidance of doubt, at any time after the Effective Time, the Newco
Companies shall not be considered to be subsidiaries of the Company.
SECTION 8.09 Governing Law. This Restructuring Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
SECTION 8.10 Assignment. Neither this Restructuring Agreement nor any of
the rights, interests or obligations under this Restructuring Agreement shall be
assigned, in whole or in part, by operation of law or otherwise by any of the
parties without the prior written consent of the other parties. Any purported
assignment without such consent shall be void; provided, however, the parties
acknowledge and agree that the conversion of Newco in accordance with Section
2.01 of this Restructuring Agreement and the continuation of Newco as a result
thereof shall be deemed not to be an assignment and shall not require any
consent of any party. Subject to the preceding sentences, this Restructuring
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 8.11 Enforcement; Consent to Service of Process. The parties
agree that irreparable damage would occur in the event that any of the
provisions of this Restructuring Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Restructuring Agreement and to enforce specifically the terms
and provisions of this Restructuring Agreement in any New York state court or
any Federal court located in the State of New York, this being in addition to
any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any New York state court or any Federal court located in the
State of New York in the event any dispute arises out of this Restructuring
Agreement or any transaction contemplated in this Restructuring Agreement, (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, (c) agrees that it will
not bring any action relating to this Restructuring Agreement or any transaction
contemplated in this Restructuring Agreement in any court other than any New
York state court or any Federal court located in the State of New York and (d)
waives any right to trial by jury with respect to any action related to or
arising out of this Restructuring Agreement or any transaction contemplated in
this Restructuring Agreement.
SECTION 8.12 Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties or (b) waive compliance with any
of the agreements or conditions contained in this Restructuring Agreement. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of any party to this Restructuring Agreement to assert any of its
rights under this Restructuring Agreement or otherwise shall not constitute a
waiver of such rights.
A-1-12
IN WITNESS WHEREOF, this Restructuring Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first herein above written.
IGEN INTERNATIONAL, INC.,
By /s/ SAMUEL J. WOHLSTADTER
------------------------------------
Name: Samuel J. Wohlstadter
Title: Chairman and Chief
Executive Officer
IGEN INTEGRATED HEALTHCARE, LLC,
By /s/ RICHARD J. MASSEY
------------------------------------
Name: Richard J. Massey
Title: President and Chief
Operating Officer
A-1-13
SCHEDULE 1.01(b)
I/R AGREEMENTS
1. Option for License and Technology Development Agreement by and between
R Diagnostics and the Company, dated December 19, 1991.
2. Development Agreement between R Diagnostics and the Company, dated
April 15, 1994, as amended by Amendment, dated December 4, 1996, Second
Amendment, dated May 8, 2001, Third Amendment, dated July 23, 2002, and Fourth
Amendment, dated February 10, 2003.
3. The Supply, Services and Support Agreement dated as of May 1, 2000,
between the Company and R Diagnostics.
4. Advance Royalty Agreement by and between R Diagnostics and the Company,
dated January 9, 1997.
5. Agreement between F. Hoffmann-La Roche Ltd. and the Company, signed by
F. Hoffmann-La Roche Ltd. on November 16, 1990, and the Company on December 18,
1990.
6. Material Transfer Agreement by and between Hoffmann-La Roche Inc. and
the Company, dated December 20, 1995.
7. Agreement Relating to the Videotaping of Roche Training Presentations
between R Diagnostics and the Company, signed by R Diagnostics on December 16,
2002, and the Company on December 13, 2002.
8. 2002 ECL Translation Cost Approval by Roche
9. Confidentiality Agreement between the Boehringer Mannheim Biochemicals
Division of Boehringer Mannheim Corporation and the Company, dated June 19,
1986.
10. Confidentiality Agreement between the Boehringer Mannheim Biochemicals
Division of Boehringer Mannheim Corporation and the Company, dated November 7,
1986.
11. Secrecy Agreement between the Company and F. Hoffmann-La Roche & Co.
Limited Company, dated September 16, 1988.
12. Non-disclosure Agreement between the Company and the Research and
Development Division of Boehringer Mannheim Corporation, dated December 5, 1990.
13. Confidential Disclosure Agreement by and among the Company, Boehringer
Mannheim Corporation and PA Consulting, dated July 15, 1992.
14. Agreement by and among F. Hoffmann-La Roche Ltd., the Company and B.
Hauptman & Associates.
15. Agreement between F. Hoffmann-La Roche Ltd. and the Company, dated May
9, 2000.
16. Letter Agreement by and among the Company, F. Hoffmann-La Roche Ltd.
and R Diagnostics, dated as of October 8, 2001.
17. Letter Agreement by and among Hogan & Hartson LLP, Hoffmann-La Roche
Inc., MSD and MST, dated December 27, 2001.
18. Letter Agreement between the Company and R Diagnostics, dated November
6, 2002.
19. Nondisclosure Agreement between the Company and F. Hoffmann-La Roche
Co., LTD., dated September 6, 1988.
20. Non-Disclosure Agreement between the Company and F. Hoffmann-La Roche
Co., LTD, dated January 25, 1989.
A-1-14
21. Nondisclosure Agreement between the Company and Hoffmann-La Roche
Inc., signed by the Company on June 6, 1989, and Hoffmann-La Roche Inc. on June
1, 1989.
22. Nondisclosure Agreement between the Company and F. Hoffmann-La Roche
Ltd., dated June 24, 1991.
23. Nondisclosure Agreement between the Company and R Diagnostics, signed
by R Diagnostics on June 14, 1991, and the Company on June 12, 1991.
24. Nondisclosure Agreement between the Company and R Diagnostics, dated
April 23, 1993.
25. Letter Agreement between the Company and R Diagnostics, dated October
21, 1999.
26. 2002 Acknowledgement of Withdrawal of Debit Note
27. Allocation Agreement by and between the Company and Roche Diagnostics
Corporation, signed by the Company on January 7, 2001, and Roche Diagnostics
Corporation on January 10, 2001.
28. Letter Agreement between R Diagnostics and the Company, dated May 20,
2002.
29. Letter Agreement between the Company and R Diagnostics, dated February
6, 2003.
30. Letter Agreement between R Diagnostics and the Company, dated February
5, 2002.
31. Letter Agreement between R Diagnostics and the Company, dated
September 11, 2002.
32. Letter Agreement between R Diagnostics and the Company, dated June 12,
2001.
33. Letter from R Diagnostics to the Company, dated April 1, 2003, and
Letter from the Company to R Diagnostics, dated April 21, 2003.
34. Study Agreement between the Company and Syntex (USA) Inc., dated March
15, 1995.
35. Assignment dated as of July 3, 2003, by R Corp in favor of the
Company.
36. All documents, understandings and arrangements relating to the
transfer from R Diagnostics to the Company of the patent application entitled
"Assays Employing Electrochemiluminescent Label and Electrochemiluminescence
Quencher."
37. All ongoing court imposed obligations applicable to R Diagnostics and
any of its affiliates and the Company arising from any litigation between such
parties.
38. All agreements between Wilmer, Cutler & Pickering and Foley & Lardner
in connection with the License Litigation.
39. All documents, understanding and arrangements relating to all
agreements reached by the ECL committee of R Diagnostics and the Company at
meetings between the two parties.
40. All documents, understandings and arrangements relating to all
agreements reached by the improvements transition teams of R Diagnostics and the
Company at meetings between the two parties.
41. All documents, understandings and arrangements relating to all
agreements between R Diagnostics and the Company relating to transfer pricing of
ECL assays.
A-1-15
SCHEDULE 1.01(C)
RETAINED CONTRACTS
1. Common Stock Purchase Agreement, dated as of February 9, 2001, between
the Company and Acqua Wellington North American Equities Fund, Ltd., and the
accompanying Letter Agreement thereto, dated the same date thereof.
2. Common Stock Purchase Agreement, dated as of December 7, 2001, between
the Company and Acqua Wellington Opportunity I, Ltd.
3. Common Stock Purchase Agreement, dated as of December 7, 2001, between
the Company and Acqua Wellington Private Placement Fund, Ltd.
4. Common Stock Purchase Agreement, dated as of March 8, 2002, between the
Company and Acqua Wellington Opportunity I, Ltd.
5. Common Stock Purchase Agreement, dated March 8, 2002, between the
Company and Acqua Wellington Private Placement Fund, Ltd.
6. The Registration Rights Agreement, dated as of December 7, 2001,
between the Company and Acqua Wellington Opportunity I, Ltd.
7. The Registration Rights Agreement, dated as of December 7, 2001,
between the Company and Acqua Wellington Private Placement Fund, Ltd.
8. The Registration Rights Agreement, dated as of March 8, 2002, between
the Company and Acqua Wellington Opportunity I, Ltd.
9. The Registration Rights Agreement, dated March 8, 2002, between the
Company and Acqua Wellington Private Placement Fund, Ltd.
10. Securities Purchase Agreement, dated as of January 11, 2000, among the
Company and the purchasers party thereto.
11. Purchase Agreement, dated as of December 16, 1997, among the Company
and the purchasers party thereto.
12. Registration Rights Agreement, dated as of January 11, 2000, among the
Company and the other persons party thereto.
13. The Company's $30,000,000 8.50% Senior Secured Notes due 2006.
14. Note Purchase Agreement, dated as of March 22, 1999, among the Company
and the purchasers party thereto.
15. Collateral Account and Security Agreement, dated as of March 22, 1999,
among the Company, the purchasers from time to time party thereto, Bankers Trust
Company, as Collateral Agent and Bankers Trust Company, as Depositary Agent.
16. The Company Rights Agreement.
A-1-16
ANNEX 2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 24, 2003,
AMONG
ROCHE HOLDING LTD,
66 ACQUISITION CORPORATION II,
IGEN INTERNATIONAL, INC.
AND
IGEN INTEGRATED HEALTHCARE, LLC
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
------
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.................................................. A-2-2
SECTION 1.02. Closing..................................................... A-2-2
SECTION 1.03. Effective Time.............................................. A-2-2
SECTION 1.04. Effects..................................................... A-2-3
SECTION 1.05. Certificate of Incorporation and By-laws.................... A-2-3
SECTION 1.06. Directors................................................... A-2-3
SECTION 1.07. Officers.................................................... A-2-3
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES
SECTION 2.01. Effect on Capital Stock..................................... A-2-3
SECTION 2.02. Exchange of Certificates.................................... A-2-4
SECTION 2.03. Company Convertible Debentures.............................. A-2-8
SECTION 2.04. Company Warrants............................................ A-2-8
ARTICLE III
RELATED TRANSACTIONS
SECTION 3.01. Restructuring of Assets and Assumption of Liabilities....... A-2-8
SECTION 3.02. Ongoing Litigation Agreement................................ A-2-8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Organization, Standing and Power............................ A-2-9
SECTION 4.02. Capital Structure; Subsidiaries............................. A-2-9
SECTION 4.03. Newco....................................................... A-2-10
SECTION 4.04. Authority; Execution and Delivery; Enforceability........... A-2-10
SECTION 4.05. No Conflicts; Consents...................................... A-2-11
SECTION 4.06. Intellectual Property....................................... A-2-12
SECTION 4.07. Brokers; Schedule of Fees and Expenses...................... A-2-13
SECTION 4.08. Opinion of Financial Advisor................................ A-2-14
SECTION 4.09. SEC Filings................................................. A-2-14
SECTION 4.10. Financial Statements........................................ A-2-14
SECTION 4.11. Disclosure Documents........................................ A-2-14
SECTION 4.12. Litigation.................................................. A-2-15
SECTION 4.13. Absence of Certain Changes.................................. A-2-15
SECTION 4.14. Employee Matters Generally; Company Benefit Plans........... A-2-16
SECTION 4.15. No Undisclosed Material Liabilities......................... A-2-16
SECTION 4.16. Transactions with Related Persons........................... A-2-16
SECTION 4.17. Compliance with Law and Judgments........................... A-2-17
SECTION 4.18. Environmental Matters....................................... A-2-17
SECTION 4.19. Tax Matters................................................. A-2-18
A-2-i
PAGE
------
SECTION 4.20. Newco Solvency.............................................. A-2-18
SECTION 4.21. Limitation.................................................. A-2-18
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
SECTION 5.01. Organization, Standing and Power............................ A-2-19
SECTION 5.02. Sub......................................................... A-2-19
SECTION 5.03. Authority; Execution and Delivery; Enforceability........... A-2-19
SECTION 5.04. No Conflicts; Consents...................................... A-2-20
SECTION 5.05. Brokers..................................................... A-2-20
SECTION 5.06. Financing................................................... A-2-20
SECTION 5.07. Financial Statements........................................ A-2-20
SECTION 5.08. Stock Ownership; Interested Stockholders.................... A-2-20
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 6.01. Conduct of Business......................................... A-2-21
SECTION 6.02. No Solicitation............................................. A-2-23
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. Preparation of the Proxy Statement, the Newco Form S-4 and
the Newco Form 8-A; Company Stockholders Meeting............ A-2-25
SECTION 7.02. Access to Information; Confidentiality...................... A-2-25
SECTION 7.03. Reasonable Best Efforts; Notification....................... A-2-26
SECTION 7.04. Stock Options............................................... A-2-27
SECTION 7.05. Certain Claims.............................................. A-2-27
SECTION 7.06. Fees and Expenses........................................... A-2-28
SECTION 7.07. Public Announcements........................................ A-2-29
SECTION 7.08. Transfer Taxes.............................................. A-2-29
SECTION 7.09. Rights Agreement; Consequences if Rights Triggered.......... A-2-29
SECTION 7.10. Listing of Newco Common Stock............................... A-2-29
SECTION 7.11. Modifications to the License Agreement...................... A-2-29
SECTION 7.12. Standstill.................................................. A-2-29
SECTION 7.13. Pending Litigation.......................................... A-2-30
SECTION 7.14. Company Secured Notes....................................... A-2-30
SECTION 7.15. Restructuring............................................... A-2-30
SECTION 7.16. Notices of Certain Events................................... A-2-30
SECTION 7.17. Company Financing Transaction............................... A-2-31
ARTICLE VIII
CONDITIONS PRECEDENT
SECTION 8.01. Conditions to Each Party's Obligation to Effect the
Merger...................................................... A-2-31
SECTION 8.02. Conditions to Obligations of Parent and Sub................. A-2-32
A-2-ii
PAGE
------
SECTION 8.03. Conditions to Obligations of the Company and Newco.......... A-2-32
SECTION 8.04. Frustration of Closing Conditions........................... A-2-33
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. Termination................................................. A-2-33
SECTION 9.02. Effect of Termination....................................... A-2-34
SECTION 9.03. Amendment................................................... A-2-34
SECTION 9.04. Extension; Waiver........................................... A-2-34
SECTION 9.05. Procedure for Termination, Amendment, Extension or Waiver... A-2-35
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Nonsurvival of Representations and Warranties............... A-2-35
SECTION 10.02. Notices..................................................... A-2-35
SECTION 10.03. Definitions................................................. A-2-36
SECTION 10.04. Interpretation.............................................. A-2-39
SECTION 10.05. Severability................................................ A-2-39
SECTION 10.06. Counterparts................................................ A-2-39
SECTION 10.07. Entire Agreement; No Third-Party Beneficiaries.............. A-2-39
SECTION 10.08. Governing Law............................................... A-2-39
SECTION 10.09. Assignment.................................................. A-2-39
SECTION 10.10. Enforcement; Consent to Service of Process.................. A-2-40
A-2-iii
INDEX OF DEFINED TERMS
Acquiring Person........................ Company Rights Agreement
Affiliate............................... Section 10.03
Agreement............................... Preamble
Appraisal Shares........................ Section 2.01(d)
Assumed Liabilities..................... Restructuring Agreement
Authorized Agent........................ Section 10.10(b)
Cash Amount............................. Section 7.17
Certificates............................ Section 2.02(b)
Certificate of Merger................... Section 1.03
Closing................................. Section 1.02
Closing Date............................ Section 1.02
Code.................................... Recitals
Commercial Agreements................... Section 10.03
Company................................. Preamble
Company Benefit Plan.................... Section 4.14(c)
Company Board........................... Section 4.04(b)
Company By-laws......................... Section 4.01
Company Capital Stock................... Section 4.02(a)
Company Charter......................... Section 4.01
Company Common Stock.................... Recitals
Company Convertible Debentures.......... Section 4.02(a)
Company Derivative Securities........... Section 4.02(a)
Company Disclosure Letter............... Article IV
Company Records......................... Restructuring Agreement
Company Rights.......................... Section 4.02(a)
Company Rights Agreement................ Section 4.02(a)
Company SEC Filings..................... Section 4.09(a)
Company Secured Notes................... Section 7.14
Company Series A Preferred Stock........ Section 4.02(a)
Company Series B Preferred Stock........ Section 4.02(a)
Company Stockholder Approval............ Section 4.04(c)
Company Stockholders Meeting............ Section 7.01(b)
Company Stock Option.................... Section 7.04(c)
Company Stock Plans..................... Section 7.04(c)
Company Subsidiaries.................... Section 4.02(b)
Company Takeover Proposal............... Section 6.02(h)
Company Warrants........................ Section 4.02(a)
Confidentiality Agreement............... Section 7.02
Consent................................. Section 4.05(b)
Continuing Licensee Subsidiary.......... Restructuring Agreement
Contract................................ Section 4.05(a)
Court of Appeals Opinion................ Section 10.03
Covenants Not To Sue.................... Section 10.03
A-2-iv
Covenant Payment........................ Recitals
Covered ECL Technology.................. Section 10.03
Cut-Off Date............................ Section 7.17
Damages Payment......................... Recitals
DGCL.................................... Section 1.01
Distribution Date....................... Company Rights Agreement
Effective Time.......................... Section 1.03
Environmental Law....................... Section 10.03
ERISA................................... Section 4.14(a)
ERISA Affiliate......................... Section 4.14(a)
Excess Shares........................... Section 2.02(e)
Exchange Act............................ Section 4.05(b)
Exchange Agent.......................... Section 2.02(a)
Exchange Fund........................... Section 2.02(a)
Exchange Ratio.......................... Section 2.01(c)
FHLR.................................... Section 10.03
Final Judgment.......................... Section 3.02(b)
GAAP.................................... Section 4.10
Governmental Entity..................... Section 4.05(b)
Hazardous Material...................... Section 10.03
HSR Act................................. Section 4.05(b)
Hyperion................................ Section 4.16(e)
ICS..................................... Section 4.16(e)
Improvements License Agreement.......... Section 10.03
Insolvent............................... Section 10.03
Intellectual Property Rights............ Section 10.03
Intended Treatment...................... Recitals
I/R Agreements.......................... Restructuring Agreement
Judgment................................ Section 4.05(a)
June 30 Royalty Payment................. Recitals
JW...................................... Section 10.03
JW Consulting........................... Section 10.03
Law..................................... Section 4.05(a)
Letter Agreement........................ Section 7.02
Liabilities............................. Section 10.03
License Agreement....................... Restructuring Agreement
Licensed Intellectual Property Rights... Section 10.03
License Litigation...................... Section 10.03
Liens................................... Section 4.02(b)
Limited Mutual Release and Agreement.... Section 10.03
Loan.................................... Section 7.17
Merger.................................. Recitals
Merger Consideration.................... Section 2.01(c)
MSD..................................... Section 10.03
MSD Agreements.......................... Section 10.03
A-2-v
MSD Consent............................. Section 10.03
MST..................................... Section 10.03
Nasdaq.................................. Section 2.02(e)
Newco................................... Preamble
Newco Common Stock...................... Recitals
Newco Company........................... Restructuring Agreement
Newco Form 8-A.......................... Section 4.05(b)
Newco Form S-4.......................... Section 4.05(b)
Newco Information....................... Post-Closing Covenants Agreement
Newco I/R Agreement..................... Restructuring Agreement
Newco Rights............................ Section 10.03
Newco Shares Trust...................... Section 2.02(e)
New Patent Litigation................... Section 10.03
1992 License Agreement.................. Section 10.03
Ongoing Litigation Agreement............ Recitals
Option Shares........................... Section 7.04(a)
Outside Date............................ Section 9.01(b)
Owned Intellectual Property Rights...... Section 10.03
Parent.................................. Preamble
Parent Material Adverse Effect.......... Section 10.03
Parent Note............................. Section 7.17
PCR License Agreement................... Section 10.03
PCR Services Agreement.................. Section 10.03
Per Share Cash Merger Consideration..... Recitals
Person.................................. Section 10.03
Post-Closing Covenants Agreement........ Recitals
Proteinix............................... Section 4.16(e)
Proxy Statement......................... Section 4.05(b)
R Corp.................................. Recitals
R Diagnostics........................... Recitals
Related Persons......................... Section 4.16
Release................................. Section 10.03
Representatives......................... Section 6.02(a)
Restructuring........................... Restructuring Agreement
Restructuring Agreement................. Recitals
RMS..................................... Section 10.03
R Party................................. Section 10.03
SEC..................................... Section 4.05(b)
Section 262............................. Section 2.01(d)
Securities Act.......................... Section 4.09(c)
Senior Secured Notes
Purchase Agreement.................... Section 10.03
Shares Acquisition Date................. Company Rights Agreement
Sub..................................... Preamble
Subsidiary.............................. Section 10.03
A-2-vi
Subsidiary Securities................... Section 4.02(b)
Superior Company Proposal............... Section 6.02(h)
Surviving Corporation................... Section 1.01
Tax Allocation Agreement................ Recitals
Taxes................................... Section 4.19(f)
Taxing Authority........................ Section 4.19(f)
Tax Return.............................. Section 4.19(f)
Transactions............................ Section 1.01
Transaction Agreements.................. Section 10.03
Transaction Material Adverse Effect..... Section 10.03
Transfer Taxes.......................... Section 7.08
Voting Company Debt..................... Section 4.02(a)
Wellstat Biologics...................... Section 4.16(e)
Wellstat Therapeutics................... Section 4.16(e)
A-2-vii
AGREEMENT AND PLAN OF MERGER dated as of July 24, 2003 (this "Agreement"),
among ROCHE HOLDING LTD, a joint stock company organized under the laws of
Switzerland ("Parent"), 66 ACQUISITION CORPORATION II, a Delaware corporation
("Sub") and a wholly owned subsidiary of Parent, IGEN INTERNATIONAL, INC., a
Delaware corporation (the "Company"), and IGEN INTEGRATED HEALTHCARE, LLC, a
Delaware limited liability company ("Newco") and a wholly owned subsidiary of
the Company.
WHEREAS the respective Boards of Directors of Parent, Sub, the Company and
Newco have approved and declared advisable this Agreement and the transactions
contemplated hereby on the terms and subject to the conditions set forth in this
Agreement and the sole stockholder of Sub has adopted this Agreement;
WHEREAS simultaneously with the execution and delivery of this Agreement,
the Company, Roche Diagnostics GmbH, a German limited liability company ("R
Diagnostics"), Roche Diagnostics Corporation, an Indiana corporation ("R Corp"),
MSD (as defined in Section 10.03) and MST (as defined in Section 10.03) are
entering into an agreement (the "Ongoing Litigation Agreement") pursuant to
which, among other things, R Diagnostics and R Corp shall (a) deliver to the
Company payment not later than two business days after the date of this
Agreement, by wire transfer to a bank account designated by the Company, (i)
$18,600,000 in immediately available funds (the "Damages Payment") in respect of
damages arising out of the License Litigation (as defined in Section 10.03), and
(ii) $10,620,000 in immediately available funds for the royalties payment due
and payable under the 1992 License Agreement (as defined in Section 10.03) for
the quarter ended June 30, 2003 (the "June 30 Royalty Payment"), (b) be entitled
to rely on the covenant not to sue with respect to the Licensed ECL Technology
(as defined in the 1992 License Agreement (as defined in Section 10.03)) in
accordance with the terms of the Ongoing Litigation Agreement until the earlier
to occur of the Effective Time (as defined in Section 1.03) and the termination
of this Agreement for any reason and (c) deliver to the Company payment, by wire
transfer to a bank account designated by the Company, $5,000,000 in immediately
available funds (i) not later than two business days after the date of this
Agreement and (ii) on the last day of each month ending after August 1, 2003,
and prior to the earlier to occur of the Effective Time and the date of
termination of this Agreement for any reason (each such payment, a "Covenant
Payment" and collectively, the "Covenant Payments"); provided that R Diagnostics
shall be obligated in accordance with the Ongoing Litigation Agreement to make a
Covenant Payment immediately prior to the Effective Time or not later than two
business days after the Merger Agreement is terminated;
WHEREAS simultaneously with the execution and delivery of this Agreement,
the Company and Newco are entering into an agreement (the "Restructuring
Agreement") pursuant to which, prior to the Effective Time, the Restructuring
(as defined in the Restructuring Agreement) will be effected, as part of which
(a) certain of the assets of the Company will be transferred to Newco or one or
more of Newco's subsidiaries and (b) Newco or one or more of its subsidiaries
will assume the Assumed Liabilities (as defined in the Restructuring Agreement);
WHEREAS on the terms and subject to the conditions set forth in this
Agreement, at the Effective Time, Sub will merge with and into the Company (the
"Merger") as a result of which (a) a portion of each issued share of common
stock, par value $0.001 per share, of the Company (including, except as the
context otherwise requires, the associated Company Rights (as defined in Section
4.02(a)), the "Company Common Stock"), not owned by the Company, Parent, Sub or
Parent's other subsidiaries shall be converted into the right to receive a
number of fully paid and non-assessable shares of common stock, par value $0.001
per share, of Newco (including, except as the context otherwise requires, the
associated Newco Rights (as defined in Section 10.03), the "Newco Common
Stock"), equal to the Exchange Ratio (as defined in Section 2.01(c)), in
exchange for such portion of each share of Company Common Stock that is equal in
value to the Newco Common Stock received and (b) the remaining portion of each
share of Company Common Stock shall be converted into the right to receive cash
in an amount equal to $47.25 (the "Per Share Cash Merger Consideration"), each
as herein provided;
A-2-1
WHEREAS the Company and Parent intend to treat the exchange of Company
Common Stock for cash and the exchange of Company Common Stock for Newco Common
Stock as a single integrated transaction comprising a taxable sale or exchange
of Company Common Stock as described in Section 1001 of the Internal Revenue
Code of 1986, as amended (the "Code"), and a complete redemption of the
remaining Company Common Stock owned by the relevant shareholders within the
meaning of Section 302(b)(3) of the Code, respectively (the "Intended
Treatment");
WHEREAS simultaneously with the execution and delivery of this Agreement,
Parent, the Company and Newco are entering into an agreement (the "Post-Closing
Covenants Agreement") that sets forth certain agreements that will govern
certain matters that may arise following the Effective Time;
WHEREAS simultaneously with the execution and delivery of this Agreement,
Parent, Sub, the Company and Newco are entering into an agreement (the "Tax
Allocation Agreement") relating to certain Tax (as defined in Section 4.19(f))
matters;
WHEREAS simultaneously with the execution and delivery of this Agreement,
the parties hereto and their applicable affiliates are entering into certain
other agreements relating to the Transactions (as defined in Section 1.01) and
certain other commercial arrangements; and
WHEREAS Parent, Sub, the Company and Newco desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to establish various conditions to the Merger.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. On the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), Sub shall be merged with and into the Company at the Effective
Time. At the Effective Time, the separate corporate existence of Sub shall cease
and the Company shall continue as the surviving corporation (the "Surviving
Corporation"). The Merger and the other transactions contemplated by this
Agreement and the other Transaction Agreements (as defined in Section 10.03) are
referred to in this Agreement collectively as the "Transactions".
SECTION 1.02. Closing. The closing of the Merger (the "Closing") shall
take place at the offices of Cravath, Swaine & Moore LLP, 825 Eighth Avenue, New
York, New York 10019 at 10:00 a.m. on the second business day following the
satisfaction (or, to the extent permitted by Law (as defined in Section
4.05(a)), waiver by the applicable party or parties) of the conditions set forth
in Article VIII (other than those conditions that by their terms cannot be
satisfied until the time of the Closing but subject to the satisfaction (or, to
the extent permitted by Law, waiver by the applicable party or parties) of such
conditions); provided, however, that if all the conditions set forth in Article
VIII shall not have been satisfied (or, to the extent permitted by Law, waived
by the applicable party or parties) on such second business day, then the
Closing shall take place on the first business day on which all such conditions
shall have been satisfied (or, to the extent permitted by Law, waived by the
applicable party or parties). The date on which the Closing occurs is referred
to in this Agreement as the "Closing Date".
SECTION 1.03. Effective Time. Prior to the Closing, the Company shall
prepare, and, as soon as practicable on the Closing Date, the Company shall file
with the Secretary of State of the State of Delaware, a certificate of merger
(the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL. Parent or the Surviving Corporation shall make all other
filings or recordings required under the DGCL as soon as practicable on or after
the Closing Date. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with such Secretary of State, or at such
other time as Parent and the Company shall agree and specify in the Certificate
of Merger (the time at which the Merger becomes effective being the "Effective
Time").
A-2-2
SECTION 1.04. Effects. The Merger shall have the effects set forth in
Section 259 of the DGCL.
SECTION 1.05. Certificate of Incorporation and By-laws. (a) The
certificate of incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be amended at the Effective Time so that Article IV of
such certificate of incorporation is amended to read in its entirety as follows:
"The total number of shares of all classes of stock which the corporation shall
have authority to issue is 100,000 shares of Common Stock, par value $0.001 per
share", and, as so amended, such certificate of incorporation shall be the
certificate of incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable Law.
(b) The by-laws of Sub as in effect immediately prior to the Effective Time
shall be the by-laws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable Law.
SECTION 1.06. Directors. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.07. Officers. The officers of Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected or appointed and qualified, as the case may be.
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of any shares of
Company Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, par value $0.001 per share, of the
Surviving Corporation.
(b) Cancelation of Treasury Stock and Parent-Owned Stock. Each share
of Company Common Stock that is owned by the Company, Parent or Sub shall
no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and no consideration shall be delivered or
deliverable in exchange therefor. Each share of Company Common Stock that
is owned by any subsidiary of the Company or Parent (other than Sub) shall
automatically be converted into one fully paid and nonassessable share of
common stock, par value $0.001 per share, of the Surviving Corporation.
(c) Conversion of Company Common Stock. (i) Subject to Sections
2.01(b), 2.01(d) and 2.02(e), (A) a portion of each issued and outstanding
share of Company Common Stock shall be converted into the right to receive,
from the Company, one (the "Exchange Ratio") fully paid and nonassessable
share of Newco Common Stock in exchange for such portion of each share of
Company Common Stock that is equal in value to the Newco Common Stock
received and (B) the remaining portion of each issued and outstanding share
of Company Common Stock shall be converted into the right to receive, from
Parent or Sub, an amount in cash equal to the Per Share Cash Merger
Consideration.
(ii) The shares of Newco Common Stock and the cash amount payable
upon the conversion of shares of Company Common Stock pursuant to this
Section 2.01(c) and cash in lieu of fractional shares of Newco Common
Stock as contemplated by Section 2.02(e) are referred to collectively as
the "Merger Consideration". As of the Effective Time, all such shares of
Company Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares
A-2-3
of Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive Merger Consideration and any
dividends or other distributions to which such holder is entitled
pursuant to Section 2.02(c) upon surrender of such certificate in
accordance with Section 2.02, without interest, and except for the right
to receive payments to which such holder is entitled pursuant to Section
2.02(d), without interest.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to
the contrary, shares ("Appraisal Shares") of Company Common Stock that are
outstanding immediately prior to the Effective Time and that are held by
any person who is entitled to demand and properly demands appraisal of such
Shares pursuant to, and who complies in all respects with, Section 262 of
the DGCL ("Section 262") shall not be converted into Merger Consideration
as provided in Section 2.01(c), but rather the holders of Appraisal Shares
shall be entitled to payment of the fair value of such Appraisal Shares in
accordance with Section 262; provided, however, that if any such holder
shall fail to perfect or otherwise shall waive, withdraw or lose the right
to appraisal under Section 262, then the right of such holder to be paid
the fair value of such holder's Appraisal Shares shall cease and such
Appraisal Shares shall be deemed to have been converted as of the Effective
Time into, and to have become exchangeable solely for the right to receive,
Merger Consideration as provided in Section 2.01(c). The Company shall
serve prompt notice to Parent of any demands received by the Company for
appraisal of any shares of Company Common Stock, and Parent shall have the
right to participate in and direct all negotiations and proceedings with
respect to such demands. Prior to the Effective Time, the Company shall
not, without the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands, or agree to do
any of the foregoing.
(e) Adjustments. If, during the period between the date of this
Agreement and the Effective Time, the number of shares of Company Common
Stock issued and outstanding changes (or there is established a record date
for changing) as a result of a reclassification, recapitalization, stock
split or combination, stock dividend, exchange or readjustment of the
Company Common Stock, the Per Share Cash Merger Consideration and the
Exchange Ratio shall be appropriately adjusted to reflect such
reclassification, recapitalization, stock split or combination, stock
dividend, exchange or readjustment.
(f) Withholding Rights. Any of Parent, the Surviving Corporation,
Newco or the Exchange Agent (as defined in Section 2.02(a)) shall be
entitled to deduct and withhold from the consideration otherwise payable to
any person pursuant to this Article II such amounts as it may be required
to deduct and withhold with respect to the making of such payment in
accordance with the Intended Treatment under any provision of Federal,
state, local or foreign Tax law. To the extent that amounts so deducted or
withheld and paid over to the appropriate Taxing Authority (as defined in
Section 4.19(f)) are attributable to the portion of the consideration
consisting of Newco Common Stock, then the Surviving Corporation, Newco or
the Exchange Agent, as the case may be, will be treated as though the
applicable payor withheld an appropriate amount of such consideration
otherwise payable to a holder of Company Common Stock pursuant to this
Agreement and then sold such consideration for an amount of cash equal to
its fair market value at the time of such deemed sale and paid such cash
proceeds to the appropriate Taxing Authority. All deducted or withheld
amounts described in this Section 2.01(f) shall, for all purposes of this
Agreement, be treated as having been paid to the applicable holder of the
Company Common Stock, Company Convertible Debentures or Company Warrants
(Company Convertible Debentures and Company Warrants, each as defined in
Section 4.02(a)), as the case may be, in respect of which the Surviving
Corporation, Parent or the Exchange Agent, as the case may be, made such
deduction and withholding.
SECTION 2.02. Exchange of Certificates.
(a) Exchange Agent. (i) As of the Effective Time, the Company shall, or
Newco shall, on behalf of the Company, deposit in trust with a bank or trust
company as may be designated by Parent and reasonably acceptable to the Company
(the "Exchange Agent"), for the benefit of the holders of shares of
A-2-4
Company Common Stock outstanding immediately prior to the Effective Time,
certificates representing the shares of Newco Common Stock (including all shares
of Newco Common Stock owned by the Company at the Effective Time, whether as a
result of the Restructuring or otherwise) issuable pursuant to Section 2.01 in
exchange for shares of Company Common Stock converted pursuant to this Article
II and (ii) Parent shall from time to time as needed deposit in trust with the
Exchange Agent for the benefit of holders of shares of Company Common Stock,
cash necessary to pay the cash amount of the Merger Consideration payable
pursuant to Section 2.01 in exchange for the shares of Company Common Stock
converted pursuant to this Article II (such shares of Newco Common Stock and
cash, together with any dividends or other distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the Newco Common Stock and cash
contemplated to be issued or paid pursuant to Section 2.01 out of the Exchange
Fund. The Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates (the "Certificates") that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock, (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify prior to the
Effective Time) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for Merger Consideration. Upon surrender of a
Certificate for cancelation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of Newco Common Stock (together with cash in lieu of fractional shares)
and the amount of cash that such holder has the right to receive pursuant to the
provisions of this Article II, and the Certificate so surrendered shall
forthwith be canceled. Until such time as a certificate representing Newco
Common Stock is issued to or at the direction of the holder of a surrendered
Certificate, such Newco Common Stock shall be deemed not outstanding and shall
not be entitled to vote on any matter. In the event of a transfer of ownership
of Company Common Stock that is not registered in the transfer records of the
Company, a certificate representing the appropriate number of whole shares of
Newco Common Stock (together with cash in lieu of fractional shares) and the
appropriate amount of cash may be issued and paid to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
Taxes required by reason of the issuance of shares of Newco Common Stock and the
payment of cash to a person other than the registered holder of such Certificate
or establish to the reasonable satisfaction of Parent and Newco that such Taxes
have been paid or are not applicable. No interest shall be paid or accrue on any
cash payable upon surrender of any Certificate.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Newco Common Stock with a record date after
the Effective Time shall be paid to the holder of any Certificate with respect
to the shares of Newco Common Stock issuable upon surrender thereof, and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 2.02(e), until the surrender of such Certificate in accordance with
this Article II. Subject to applicable Law, following surrender of any such
Certificate, there shall be paid to the holder of the certificate representing
whole shares of Newco Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of any cash payable in
lieu of a fractional share of Newco Common Stock to which such holder is
entitled pursuant to Section 2.02(e) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Newco Common Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such whole shares of Newco
Common Stock.
A-2-5
(d) No Further Ownership Rights in Company Common Stock. The Merger
Consideration paid upon the surrender for exchange of Certificates in accordance
with the terms of this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
that may have been declared or made by the Company on such shares of Company
Common Stock in accordance with the terms of this Agreement or prior to the date
of this Agreement and that remain unpaid at the Effective Time, and after the
Effective Time there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of shares of Company Common Stock
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, any Certificates formerly representing shares of Company Common
Stock are presented to the Surviving Corporation or the Exchange Agent for any
reason, they shall be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Newco Common Stock shall be issued upon the conversion of
Company Common Stock pursuant to Section 2.01, and such fractional share
interests shall not entitle the owner thereof to vote or to any rights of a
holder of Newco Common Stock. For purposes of this Section 2.02(e), all
fractional shares to which a single record holder would be entitled as a result
of the conversion of all shares of Company Common Stock held by such holder as
of the Effective Time under all Certificates shall be aggregated and
calculations shall be rounded to three decimal places.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (A) the number of shares of
Newco Common Stock delivered to the Exchange Agent by the Company or Newco
pursuant to Section 2.02(a) over (B) the aggregate number of whole shares
of Newco Common Stock to be issued to holders of Company Common Stock
pursuant to Section 2.02(b) (such excess being herein called the "Excess
Shares"). As soon after the Effective Time as practicable, the Exchange
Agent, as agent for the holders of Company Common Stock, shall sell the
Excess Shares at then prevailing prices on the Nasdaq Stock Market
("Nasdaq"), if the shares of Newco Common Stock are quoted on Nasdaq, or
otherwise on the national securities exchange on which the shares of Newco
Common Stock are listed, all in the manner provided in Section
2.02(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent shall be
executed on the Nasdaq or such national securities exchange, as the case
may be, and shall be executed in round lots to the extent practicable. The
proceeds from such sale or sales available for distribution to the holders
of Company Common Stock shall be reduced by the compensation payable to the
Exchange Agent and the expenses incurred by the Exchange Agent, in each
case, in connection with such sale or sales of the Excess Shares, including
all related commissions, Transfer Taxes (as defined in Section 7.08) and
other out-of-pocket transaction costs. Until the net proceeds of such sale
or sales have been distributed to the holders of Company Common Stock
entitled thereto, the Exchange Agent shall hold such proceeds in trust for
such holders of Company Common Stock (the "Newco Shares Trust"). The
Exchange Agent shall determine the portion of the Newco Shares Trust to
which each holder of a Certificate shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the Newco
Shares Trust by a fraction, the numerator of which is the amount of the
fractional share interest in a share of Newco Common Stock to which such
holder is entitled under Section 2.01(c) (or would be entitled but for this
Section 2.02(e)) and the denominator of which is the aggregate amount of
fractional interests in a share of Newco Common Stock to which all holders
of Company Common Stock are entitled.
(iv) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Company Common Stock in lieu of any
fractional share interests in Newco Common Stock, the Exchange Agent shall
in accordance with this Article II, make available such amounts, without
interest, to the former holders of Company Common Stock entitled to receive
such cash.
A-2-6
(f) Termination of Exchange Fund and Newco Shares Trust. Any portion of
the Exchange Fund that remains undistributed to the holders of the Certificates
for 9 months after the Effective Time shall be delivered (i) in the case of
shares of Newco Common Stock deposited in the Exchange Fund by the Company or
Newco and cash deposited in the Exchange Fund by Newco, to Newco and (ii) in the
case of cash deposited in the Exchange Fund by Parent or the Surviving
Corporation, to Parent or the Surviving Corporation, as applicable, in each case
upon demand, and any holders of the Certificates who have not theretofore
complied with this Article II shall thereafter (x) look only to Newco for, and
Newco shall remain liable for, payment of their claim for Newco Common Stock and
any dividends or distributions with respect to Newco Common Stock and (y) look
only to Parent for, and Parent shall remain liable for, payment of their claim
for cash payable pursuant to Section 2.01(c)(i)(B), in each case in accordance
with this Article II. Any portion of the Newco Shares Trust that remains
undistributed to the holders of the Certificates for 9 months after the
Effective Time shall be delivered to Newco, upon demand, and any holder of the
Certificates who has not theretofore complied with this Article II shall
thereafter look only to Newco for payment of its claim for such cash.
(g) No Liability. None of Parent, Sub, the Company, Newco or the Exchange
Agent shall be liable to any person in respect of any shares of Newco Common
Stock or cash from the Exchange Fund or the Newco Shares Trust delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar Law. If any Certificate has not been surrendered prior to the date on
which Merger Consideration in respect of such Certificate (or any dividends or
other distributions with respect thereto) would otherwise escheat to or become
the property of any Governmental Entity (as defined in Section 4.05(b))), any
such shares or cash in respect of such Certificate shall, to the extent
permitted by applicable Law, become the property of the Surviving Corporation
(with respect to any remaining cash payable pursuant to Section 2.01(c)(i)(B))
and the property of Newco (with respect to any remaining shares of Newco Common
Stock and cash related thereto), free and clear of all claims or interest of any
person previously entitled thereto.
(h) Investment of Exchange Fund and the Newco Shares Trust. The Exchange
Agent shall invest any cash included in the Exchange Fund and payable pursuant
to Section 2.01(c)(i)(B) as directed by Parent, and any other cash included in
the Exchange Fund as directed by Newco, in each case on a daily basis. Pending
payment of such funds to the holders of Certificates for shares of Company
Common Stock, such funds will be held and shall be invested by the Exchange
Agent as directed in accordance with the previous sentence (so long as such
directions do not impair the rights of holders of Company Common Stock) in the
direct obligations of the United States, obligations for which the full faith
and credit of the United States is pledged to provide for the payment of
principal and interest or commercial paper rated of the highest quality by
Moody's Investors Services, Inc. or Standard & Poor's Corporation. Parent or
Newco, as applicable, will promptly replace any monies lost through any
investment made in accordance with its instructions pursuant to this Section
2.02(h). If for any reason (including losses) the Exchange Fund or the Newco
Shares Trust is inadequate to pay the amounts to which holders of the Company
Common Stock shall be entitled under this Article II, Parent and the Surviving
Corporation shall in any event be liable for payment thereof (with respect to
cash payable pursuant to Section 2.01(c)(i)(B)) and Newco shall in any event be
liable for payment thereof (with respect to shares of Newco Common Stock and
cash related thereto). The Exchange Fund and the Newco Shares Trust shall not be
used except as provided in this Agreement. Any interest and other income
resulting from such investments shall be paid to Parent or the Surviving
Corporation, as Parent directs (with respect to cash payable pursuant to Section
2.01(c)(i)(B)) and to Newco (with respect to any other cash).
(i) Lost, Stolen or Destroyed Certificates. If any Certificate has been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
reasonably required by Parent or Newco, the posting by such person of a bond in
such reasonable amount as Parent or Newco may direct as indemnity against any
claim that may be made against it with respect to such Certificate, the Exchange
Agent will deliver in exchange for such lost, stolen or destroyed Certificate
the Merger Consideration (and any dividends or other distributions with respect
thereto) pursuant to this Article II.
A-2-7
SECTION 2.03. Company Convertible Debentures. As of and after the
Effective Time, from time to time and at any time upon the conversion of any
Company Convertible Debentures by any holder thereof, (a) Newco shall deliver to
such holder the number of shares of Newco Common Stock and cash in lieu of
fractional shares of Newco Common Stock such holder would have been entitled to
receive as if such holder had converted the Company Convertible Debentures into
shares of Company Common Stock immediately prior to the Effective Time and (b)
Parent shall, or shall cause the Company to, deliver to such holder the amount
of cash such holder would have been entitled to receive as if such holder had
converted the Company Convertible Debentures into shares of Company Common Stock
immediately prior to the Effective Time.
SECTION 2.04. Company Warrants. As of and after the Effective Time, from
time to time and at any time upon the exercise of any Company Warrants by any
holder thereof, (a) Newco shall deliver to such holder the number of shares of
Newco Common Stock and cash in lieu of fractional shares of Newco Common Stock
as if such holder had exercised the Company Warrant for the shares of Company
Common Stock issuable upon exercise of the Company Warrant immediately prior to
the Effective Time and (b) Parent shall, or shall cause the Company to, deliver
to such holder the amount of cash as if such holder had exercised the Company
Warrant for the shares of Company Common Stock issuable upon exercise of the
Company Warrant immediately prior to the Effective Time.
ARTICLE III
RELATED TRANSACTIONS
SECTION 3.01. Restructuring of Assets and Assumption of
Liabilities. Prior to the Effective Time and pursuant to the terms of the
Restructuring Agreement, the Company and the Company Subsidiaries (as defined in
Section 4.02(b)), including Newco, shall consummate the Restructuring upon the
terms and subject to the conditions set forth in the Restructuring Agreement.
SECTION 3.02. Ongoing Litigation Agreement. (a) Simultaneously with the
execution and delivery of the Ongoing Litigation Agreement, Parent shall cause R
Diagnostics to pay to the Company the Damages Payment and the June 30 Royalty
Payment. The Damages Payment and the June 30 Royalty Payment are non-refundable
and irrevocable in all circumstances.
(b) Notwithstanding any provision in this Agreement to the contrary, the
parties agree that the Damages Payment is made solely with respect to the
monetary damages awarded in the License Litigation as set forth in the Court of
Appeals Opinion (as defined in Section 10.03) and that, except as provided in
the Ongoing Litigation Agreement, neither the Company nor R Diagnostics shall be
deemed to have (i) made a settlement with respect to, waived, given-up,
compromised, prejudiced or qualified in any manner (A) the right of such person
to fully prosecute the New Patent Litigation (as defined in Section 10.03), (B)
any rights or interests of such person which are the subject of the New Patent
Litigation or (C) any claim made or to be made by such person, whether for
damages or otherwise, in the New Patent Litigation or (ii) made a settlement
with respect to, waived, given up, compromised, prejudiced or qualified in any
manner any of its other rights or interests under the final judgment entered by
the United States District Court for the District of Maryland in the License
Litigation on February 15, 2002 (the "Final Judgment")(as modified by the Court
of Appeals Opinion) or any final judgment entered by the United States District
Court for the District of Maryland not inconsistent with the mandate to be
returned by the United States Court of Appeals for the Fourth Circuit in
connection with the Court of Appeals Opinion.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub that, except (a) as
disclosed or set forth in the Company SEC Filings (as defined in Section
4.09(a)) filed and publicly available prior to the date of
A-2-8
this Agreement or (b) as set forth in the letter (with specific reference to the
Section of this Agreement to which the information stated in such letter relates
and such other Sections to the extent a matter is disclosed in such a way as to
make its relevance to the information called for by such other Section
reasonably apparent) dated the date of this Agreement, from the Company to
Parent and Sub (the "Company Disclosure Letter"), and, in each case subject to
Section 4.21:
SECTION 4.01. Organization, Standing and Power. Each of the Company,
Newco and the Continuing Licensee Subsidiary (as defined in the Restructuring
Agreement) is duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all corporate or limited liability company
powers, as applicable, governmental licenses and Consents (as defined in Section
4.05(b)) required to carry on its business as now conducted, except for any such
licenses and Consents the failure of which to have or obtain that, individually
or in the aggregate, does not have a Transaction Material Adverse Effect (as
defined in Section 10.03). The Company has made available to Parent true and
complete copies of the certificate of incorporation of the Company, as amended
through the date of this Agreement (as so amended, the "Company Charter"), the
by-laws of the Company, as amended through the date of this Agreement (as so
amended, the "Company By-laws"), and the certificate of formation and the
limited liability company agreement of each of Newco and the Continuing Licensee
Subsidiary, in each case, as amended through the date of this Agreement.
SECTION 4.02. Capital Structure; Subsidiaries. (a) The authorized capital
stock of the Company consists of 50,000,000 shares of Company Common Stock and
10,000,000 shares of Preferred Stock, par value $0.001 per share, of which (x)
600,000 shares are designated as Series A Junior Participating Preferred Stock
(the "Company Series A Preferred Stock") and (y) 25,000 shares are designated as
Series B Convertible Preferred Stock, par value $0.001 per share (the "Company
Series B Preferred Stock" and, together with the Company Common Stock and the
Company Series A Preferred Stock, the "Company Capital Stock"). At the close of
business on July 17, 2003, (i) 23,775,277 shares of Company Common Stock were
issued and outstanding, (ii) no shares of Company Capital Stock were held by the
Company in its treasury, (iii) 1,550,509 shares of Company Common Stock were
subject to outstanding Company Stock Options (as defined in Section 7.04(c)) and
742,256 additional shares of Company Common Stock were reserved for and subject
to issuance pursuant to the Company Stock Plans (as defined in Section 7.04(c)),
(iv) 600,000 shares of Company Series A Preferred Stock were reserved for and
subject to issuance in connection with the rights (the "Company Rights") issued
pursuant to the Rights Agreement dated as of November 6, 1996 (as amended from
time to time, the "Company Rights Agreement"), between the Company and The First
National Bank of Boston, as Rights Agent, (v) 1,129,032 shares of Company Common
Stock were reserved for and subject to issuance upon conversion of the
Subordinated Convertible Debentures of the Company (the "Company Convertible
Debentures") at a conversion price of $31.00 per share and (vi) warrants to
purchase 282,258 shares of Company Common Stock with an exercise price of $31.00
per share were outstanding (the "Company Warrants"). Except as set forth above,
at the close of business on July 17, 2003, no shares of capital stock or other
voting securities of the Company were issued, reserved for issuance or
outstanding. There are no outstanding stock appreciation rights linked to the
price of Company Common Stock and granted under any Company Stock Plan. Section
4.02(a) of the Company Disclosure Letter sets forth a true and complete list, as
of the close of business on July 17, 2003, of all outstanding Company Stock
Options, Company Convertible Debentures, Company Warrants and all other rights,
if any (collectively, the "Company Derivative Securities"), to purchase or
receive Company Common Stock issued or granted by the Company or any Company
Subsidiary, the number of shares subject thereto, the grant dates and exercise
prices thereof. All outstanding shares of Company Common Stock are, and all such
shares that may be issued prior to the Effective Time will be when issued, duly
authorized, validly issued, fully paid and nonassessable. Except as set forth
above, there are not any bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which holders of Company
Common Stock may vote ("Voting Company Debt"). Except as set forth above and
except for changes since July 17, 2003, resulting from the exercise or
conversion of the Company Derivative Securities outstanding on such date or
permitted to be issued pursuant to this Agreement, there are not any options,
warrants, rights, convertible or exchangeable
A-2-9
securities, "phantom" stock rights, stock appreciation rights, stock-based
performance units, commitments, Contracts (as defined in Section 4.05(a)),
arrangements or undertakings of any kind to which the Company or any Company
Subsidiary is a party or by which any of them is bound (i) obligating the
Company or any Company Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity
interests in, or any security convertible or exercisable for or exchangeable
into any capital stock of or other equity interest in, the Company or of any
Company Subsidiary or any Voting Company Debt or (ii) obligating the Company or
any Company Subsidiary to issue, grant, extend or enter into any such option,
warrant, call, right, security, commitment, Contract, arrangement or
undertaking. As of the date of this Agreement, there are not any outstanding
contractual obligations of the Company or any Company Subsidiary to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or any
Company Subsidiary. No Company Subsidiary owns any shares of Company Common
Stock.
(b) Section 4.02(b) of the Company Disclosure Letter lists each subsidiary
of the Company (the "Company Subsidiaries"). Each Company Subsidiary (other than
Newco and the Continuing Licensee Subsidiary) is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is organized (in the case of good standing, to the
extent such jurisdiction recognizes such concept) and has all corporate powers,
governmental licenses and Consents required to carry on its business as now
conducted, except for any such licenses and Consents the failure of which to
have or obtain that, individually or in the aggregate, does not have a
Transaction Material Adverse Effect. All of the outstanding capital stock of, or
other voting securities or ownership interests in, each Company Subsidiary, is
owned by the Company, directly or indirectly, free and clear of all pledges,
claims, liens, charges, encumbrances, mortgages, security interests and other
adverse claims of any kind or nature whatsoever (collectively, "Liens") and free
of any other limitation or restriction (including any restriction on the right
to vote, sell or otherwise dispose of such stock or other securities or
ownership interests). There are no outstanding (i) securities of the Company or
any Company Subsidiary convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any Company
Subsidiary or (ii) options or other rights to acquire from the Company or any
Company Subsidiary or other obligation of the Company or any Company Subsidiary
to issue, any capital stock, voting securities or other ownership interests in,
or any securities convertible into or exchangeable for, any capital stock,
voting securities or ownership interests in, any Company Subsidiary (the items
in clauses (i) and (ii) being referred to collectively as the "Subsidiary
Securities"). There are no outstanding obligations of the Company or any Company
Subsidiary to repurchase, redeem or otherwise acquire any Subsidiary Securities.
SECTION 4.03. Newco. Since the date of its formation, Newco has not
carried on any business or conducted any operation other than the execution of
this Agreement, the other Transaction Agreements to which it is a party and the
Commercial Agreements (as defined in Section 10.03) to which it is party, the
performance of its obligations hereunder and thereunder and matters ancillary
thereto.
SECTION 4.04. Authority; Execution and Delivery; Enforceability. (a) Each
of the Company and Newco has all requisite corporate or limited liability
company power and authority, as applicable, to execute and deliver (i) each
Transaction Agreement to which it is a party and to consummate the Transactions
contemplated thereby and (ii) each Commercial Agreement to which it is a party
and to perform its obligations thereunder. The execution and delivery by each of
the Company and Newco of (A) each Transaction Agreement to which it is a party
and the consummation by each of the Company and Newco of the Transactions
contemplated thereby and (B) each Commercial Agreement to which it is a party,
and the performance by each of the Company and Newco of its obligations
thereunder, in each case have been duly authorized by all necessary corporate
action on the part of the Company and by all limited liability company action on
the part of Newco, subject, in the case of the Merger, to receipt of the Company
Stockholder Approval (as defined in Section 4.04(c)). Each of the Company and
Newco has duly executed and delivered this Agreement, each other Transaction
Agreement to which it is a party and each Commercial Agreement to which it is a
party, and, assuming due execution and delivery hereof and thereof by each party
hereto and thereto that is not an affiliate of the Company, this Agreement, each
A-2-10
such Transaction Agreement and each such Commercial Agreement constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms.
(b) The Board of Directors of the Company (the "Company Board"), at a
meeting duly called and held, duly and unanimously adopted resolutions (i)
approving this Agreement, each other Transaction Agreement, the Merger and the
other Transactions, (ii) approving each Commercial Agreement and the performance
by the Company of its obligations thereunder, (iii) determining that the terms
of the Merger and the other Transactions are fair to and in the best interests
of the Company and its stockholders, (iv) recommending that the Company's
stockholders adopt this Agreement and (v) declaring that this Agreement is
advisable. Assuming the accuracy of Parent's and Sub's representations and
warranties in Section 5.08, such resolutions are sufficient to render
inapplicable to this Agreement and the Merger the provisions of Section 203 of
the DGCL, and to the Company's knowledge, no other state takeover statute or
similar statute or regulation applies or purports to apply to the Company with
respect to this Agreement or the Merger. The Company as the sole member of
Newco, has approved (A) each other Transaction Agreement, the Merger and the
other Transactions and (B) each Commercial Agreement to which Newco is a party
and the performance by Newco of its obligations thereunder. The Company as the
sole member of Newco will adopt this Agreement.
(c) Assuming the accuracy of Parent's and Sub's representations and
warranties in Section 5.08, the only vote of holders of any class or series of
Company Capital Stock that is necessary to approve and adopt this Agreement and
the Merger is the adoption of this Agreement by the holders of a majority of the
outstanding shares of Company Common Stock (the "Company Stockholder Approval").
The affirmative vote of the holders of Company Capital Stock, or any of them, is
not necessary to consummate any Transaction other than the Merger.
SECTION 4.05. No Conflicts; Consents. (a) The execution and delivery by
each of the Company and Newco of this Agreement and the other Transaction
Agreements to which it is a party and each Commercial Agreement to which it is a
party do not, and the consummation of the Merger and the other Transactions and
the performance by the Company or Newco of its obligations under the Commercial
Agreements and compliance with the terms hereof and thereof will not, conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancelation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets of the Company
or any Company Subsidiary under, any provision of (i) the Company Charter, the
Company By-laws or the comparable charter, organizational or formation documents
of any Company Subsidiary, (ii) any contract, lease, license, indenture, note,
bond, agreement, permit, concession, franchise or other instrument (other than a
Company Benefit Plan (as defined in Section 4.14(c))) (a "Contract") to which
the Company or any Company Subsidiary is a party or by which any of their
respective properties or assets is bound or (iii) subject to the filings and
other matters referred to in Section 4.05(b), any judgment, order or decree
("Judgment") or statute, law, ordinance, rule or regulation whether foreign or
domestic ("Law") applicable to the Company or any Company Subsidiary or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii) above, any such items that, individually or in the aggregate, do not have
a Transaction Material Adverse Effect and do not materially impair the ability
of the Company or any Company Subsidiary to perform its obligations under this
Agreement, any other Transaction Agreement or any Commercial Agreement or to
consummate the Transactions.
(b) No consent, approval, license, permit, order or authorization
("Consent") of, or registration, declaration or filing with, or permit from, any
domestic or foreign (whether national, Federal, state, provincial, local or
otherwise) government or any court of competent jurisdiction, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign (each, a "Governmental Entity"), is required to be obtained
or made by the Company or any Company Subsidiary in connection with the
execution, delivery and performance of this Agreement, any other Transaction
Agreement or any Commercial Agreement by the Company or any Company Subsidiary
or the consummation of the Transactions or the performance by the Company or any
Company Subsidiary of its obligations under the Commercial Agreements, other
than (i) compliance with and filings under the Hart-
A-2-11
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
(ii) the filing with the Securities and Exchange Commission (the "SEC") of (A) a
proxy statement relating to the adoption of this Agreement by the Company's
stockholders (as amended or supplemented from time to time, the "Proxy
Statement"), (B) a registration statement on Form S-4 to be filed with the SEC
by the Company in connection with the distribution of Newco Common Stock in the
Merger (as amended or supplemented from time to time, the "Newco Form S-4"), (C)
a registration statement on Form 8-A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), in connection with the distribution of Newco
Common Stock in the Merger (the "Newco Form 8-A") and (D) such reports under
Sections 13 and 16 of the Exchange Act as may be required in connection with
this Agreement, the other Transaction Agreements, the Merger and the other
Transactions, (iii) the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware and appropriate documents with the relevant
authorities of the other jurisdictions in which the Company is qualified to do
business, (iv) such filings with and approvals of a national securities exchange
or Nasdaq to permit the shares of Newco Common Stock that are to be distributed
in the Merger to be approved for listing on such national securities exchange,
or approved for quotation on Nasdaq, as the case may be, in either case subject
to official notice of issuance, (v) compliance with and such filings as may be
required under applicable Environmental Law (as defined in Section 10.03), (vi)
such filings as may be required in connection with Transfer Taxes, (vii) filings
under any applicable state takeover Law and (viii) such other items (A) that may
be required under the applicable Law of Switzerland, Germany or Italy, (B)
required solely by reason of the participation of Parent (as opposed to any
third party) in the Transactions or (C) that the failure of which to obtain or
make, individually or in the aggregate, does not have a Transaction Material
Adverse Effect and does not materially impair the ability of the Company or any
Company Subsidiary to perform its obligations under this Agreement, any other
Transaction Agreement or any Commercial Agreement or to consummate the
Transactions.
(c) Assuming the accuracy of Parent's and Sub's representations and
warranties in Section 5.08, the Company and the Company Board have taken all
action necessary to (i) render the Company Rights inapplicable to this
Agreement, the Merger and the other Transactions and (ii) ensure that (A)
neither Parent nor any of its affiliates or associates is or will become an
"Acquiring Person" (as defined in the Company Rights Agreement) by reason of
this Agreement, the Merger or any other Transaction), (B) a "Distribution Date"
(as defined in the Company Rights Agreement) shall not occur by reason of this
Agreement, the Merger or any other Transaction and (C) the Company Rights shall
expire immediately prior to the Effective Time.
SECTION 4.06. Intellectual Property. (a) The Company and the Company
Subsidiaries own, jointly own, or have been licensed the right to use pursuant
to licenses that remain in full force and effect, all Intellectual Property
Rights (as defined in Section 10.03) that constitute Covered ECL Technology.
(b) As of the Effective Time, assuming the due authorization, execution and
delivery by each party thereto that is not an affiliate of the Company as of the
Effective Time, the License Agreement (as defined in the Restructuring
Agreement) will constitute Newco's legal, valid and binding obligation,
enforceable against Newco in accordance with its terms.
(c) (i) The Company has all requisite corporate power and authority to
enter into the License Agreement and to grant the license to the Continuing
Licensee Subsidiary under the Covered ECL Technology pursuant to the License
Agreement and to fully perform its obligations thereunder, and the grant of
rights and licenses, and the performance of its obligations thereunder, will not
conflict with the Company Charter or any Contract or other arrangement to which
the Company is a party or by which it is bound, (ii) the Company has title to or
license rights in the Covered ECL Technology sufficient to grant such license
rights to the Continuing Licensee Subsidiary and its affiliates, (iii) the
Company has not assigned, transferred, licensed or otherwise disposed of the
Covered ECL Technology in any manner that limits or restricts the Continuing
Licensee Subsidiary's or its affiliates' exploitation of the license granted by
the Company thereunder and (iv) no Consent, notice or waiver, to or from any
person (other than the Consent attached to the License Agreement), including
from any Governmental Entity or third party holder of Intellectual Property
Rights, is required to be obtained or made by the Company in connection
A-2-12
with its execution and delivery, or by Newco in connection with its performance
following the Effective Time, of the License Agreement, other than, in the case
of each of clauses (i), (ii), (iii) and (iv) above, any such items that,
individually or in the aggregate, do not have a Transaction Material Adverse
Effect. For purposes of this Section 4.06(c), the Continuing Licensee Subsidiary
shall be deemed not to be an affiliate or a subsidiary of the Company.
(d) Neither the Company nor any Company Subsidiary has infringed,
misappropriated or otherwise violated any Intellectual Property Right of any
person, except for any such infringement, misappropriation or other conflict
that individually or in the aggregate does not have a Transaction Material
Adverse Effect. There is no action, suit, investigation or proceeding pending
against or affecting, or, to the knowledge of the Company, threatened against,
the Company or any Company Subsidiary or any of their present or former
officers, directors and employees (i) challenging or seeking to deny or
restrict, the rights of the Company or any Company Subsidiary in any of the
Owned Intellectual Property Rights (as defined in Section 10.03) and the
Licensed Intellectual Property Rights (as defined in Section 10.03), (ii)
alleging that the use of the Owned Intellectual Property Rights or any services
provided, processes used or products manufactured, used, imported or sold by the
Company or any Company Subsidiary do or may conflict with, or the Licensed
Intellectual Property Rights misappropriate, infringe or otherwise violate any
Intellectual Property Right of any third party or (iii) alleging that the
Company or any Company Subsidiary in the provision of services, use of processes
or manufacture of products has infringed, misappropriated or otherwise violated
any Intellectual Property Right of any third party, except in the case of each
of clauses (i), (ii) and (iii) above, for such actions, suits, investigations or
proceedings the outcome of which individually or in the aggregate does not have
a Transaction Material Adverse Effect.
(e) The Company and the Company Subsidiaries hold all right, title and
interest in and to all material Owned Intellectual Property Rights and all of
the Company's and the Company Subsidiaries' licenses under material Licensed
Intellectual Property Rights, free and clear of any Lien. In each case where a
patent or patent application, trademark registration or trademark application,
service mark registration or service mark application, or copyright registration
or copyright application included in the Owned Intellectual Property is held by
assignment, the assignment has been recorded with the Governmental Entity from
which the patent or registration issued or before which the application or
application for registration is pending, except in each case for failures to
record that, individually or in the aggregate, do not have a Transaction
Material Adverse Effect. Each of the Company and the Company Subsidiaries has
taken all reasonable and necessary actions to maintain and protect its material
Owned Intellectual Property Rights and its rights in the material Licensed
Intellectual Property Rights.
(f) To the knowledge of the Company, no person has infringed,
misappropriated or otherwise violated any Owned Intellectual Property Right or
Licensed Intellectual Property Right, except for any such infringement,
misappropriation or other violation that individually or in the aggregate does
not have a Transaction Material Adverse Effect. The Company and the Company
Subsidiaries have taken reasonable steps in accordance with customary industry
practice to maintain the confidentiality of all material confidential
Intellectual Property Rights of the Company or any Company Subsidiary that are
material to the business and operations of the Company and the Company
Subsidiaries, taken as a whole, and the value of which to the Company or any
Company Subsidiary is contingent upon the confidentiality thereof, and to the
knowledge of the Company, such confidential information has not been disclosed
other than to employees, consultants, Representatives (as defined in Section
6.02(a)) and agents of the Company or any Company Subsidiary or other persons
bound to the Company or a Company Subsidiary by a written obligation of
confidentiality.
(g) The Company has not delivered any of the notices contemplated by
Section 3 or 4 of the Extension Agreement dated July 11, 2002, by and between
the Company and Eisai Co., Ltd.
SECTION 4.07. Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than as set forth in
Section 4.07 of the Company Disclosure Letter, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with
A-2-13
the Merger and the other Transactions or the execution and delivery of the
Commercial Agreements based upon arrangements made by or on behalf of the
Company.
SECTION 4.08. Opinion of Financial Advisor. The Company has received the
opinion of Lehman Brothers Inc., dated the date of this Agreement, to the effect
that, as of such date, the Merger Consideration is fair from a financial point
of view to the holders of Company Common Stock. The Company will deliver a true
and complete copy of such opinion to Parent promptly after receipt thereof.
SECTION 4.09. SEC Filings. (a) The Company has made available to Parent
(i) the Company's annual reports on Form 10-K for its fiscal years ended March
31, 2003, 2002 and 2001, as amended, (ii) its proxy statement relating to
meetings of, or actions taken without a meeting by, the stockholders of the
Company held since March 31, 2000, and (iii) all of its other reports, forms,
statements, schedules, registration statements and other documents (including
exhibits and other information incorporated therein) filed with the SEC since
March 31, 2001 (the documents referred to in this Section 4.09(a) being referred
to collectively as the "Company SEC Filings").
(b) As of its respective filing date, each such Company SEC Filing filed
pursuant to the Exchange Act did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(c) Each such Company SEC Filing that is a registration statement, as
amended or supplemented, if applicable, filed pursuant to the Securities Act of
1933, as amended (the "Securities Act"), as of the date such statement or
amendment became effective, did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(d) As of its filing date, each Company SEC Filing complied as to form in
all material respects with the applicable requirements of the Securities Act or
the Exchange Act, as the case may be.
SECTION 4.10. Financial Statements. The audited consolidated financial
statements (including the related notes) and unaudited consolidated interim
financial statements (including the related notes) of the Company included in
the Company SEC Filings comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with U.S.
generally accepted accounting principles ("GAAP") (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods shown
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
SECTION 4.11. Disclosure Documents. (a) Each document required to be
filed by the Company with the SEC or required to be distributed or otherwise
disseminated to the Company's stockholders in connection with the Merger and the
other Transactions, including the Proxy Statement and the Newco Form S-4, to be
filed with the SEC in connection with the Merger and the other Transactions, and
any amendments or supplements thereto, when filed, distributed or disseminated,
as applicable, will comply as to form in all material respects with the
applicable requirements of the Exchange Act.
(b) (i) At the time the Proxy Statement or any amendment or supplement
thereto is first mailed to stockholders of the Company, and at the time such
stockholders vote on adoption of this Agreement, the Proxy Statement, as amended
or supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) at the time
the Newco Form S-4 or any amendment or supplement thereto becomes effective, the
Newco S-4, as amended or supplemented, will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representation or
A-2-14
warranty is made by the Company in this Section 4.11(b) with respect to
statements made or incorporated by reference therein based on information
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in such documents.
SECTION 4.12. Litigation. Except with respect to intellectual property,
environmental matters and tax matters, which are the subject of Sections 4.06,
4.18 and 4.19, respectively, there is no action, suit or proceeding or, to the
knowledge of the Company, investigation, pending against, or to the knowledge of
the Company, threatened against, the Company or any Company Subsidiary or any of
their respective properties or any of their respective present or former
officers or directors, in each case in their capacity as officers or directors
of the Company or any Company Subsidiary, before any court or arbitrator or
before or by any Governmental Entity which, individually or in the aggregate,
has a Transaction Material Adverse Effect.
SECTION 4.13. Absence of Certain Changes. (a) From March 31, 2003 until
the date of this Agreement the business of the Company and the Company
Subsidiaries has been conducted in the ordinary course consistent with past
practice.
(b) Since March 31, 2003, there has not been (i) any event, occurrence or
development or state of circumstances or facts which, individually or in the
aggregate, has had or has a Transaction Material Adverse Effect or (ii) any
labor dispute, other than routine individual grievances, or any activity or
proceeding by a labor union or representative thereof to organize any employees
of the Company or any Company Subsidiary, which employees were not subject to a
collective bargaining agreement at March 31, 2002, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to such
employees.
(c) From March 31, 2003 until the date of this Agreement, there has not
been
(i) (A) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the
Company or any Company Subsidiary other than dividends and distributions by
a direct or indirect wholly owned subsidiary of the Company to its parent
or (B) any repurchase, redemption or other acquisition by the Company or
any Company Subsidiary of any outstanding shares of capital stock or other
securities of the Company or any Company Subsidiary other than (x) the
issuance of Company Common Stock upon (1) the exercise of Company Stock
Options outstanding as of the date of this Agreement and in accordance with
the terms thereof in effect as of the date of this Agreement, (2) the
conversion of Company Convertible Debentures outstanding as of the date of
this Agreement and in accordance with the terms thereof in effect as of the
date of this Agreement and (3) the exercise of Company Warrants outstanding
as of the date of this Agreement and in accordance with the terms thereof
in effect as of the date of this Agreement and (y) pursuant to the Company
Stock Plans as in effect on the date of this Agreement;
(ii) any amendment of any material term of any outstanding security of
the Company or any Company Subsidiary;
(iii) any incurrence, assumption or guarantee by the Company or any
Company Subsidiary of any indebtedness for borrowed money in an aggregate
principal amount in excess of $10,000,000;
(iv) any change in any method of accounting or accounting principles
or practices materially affecting the reported consolidated assets,
liabilities or results of operations of the Company or any Company
Subsidiary, except for any such change required by a change in GAAP or
applicable Law;
(v) any material Tax election made or changed, any annual Tax
accounting period changed, any method of Tax accounting adopted or changed,
any material amended Tax Returns (as defined in Section 4.19(f)) or claims
for material Tax refunds filed, any material closing agreement entered
into, any material Tax claim, audit or assessment settled, or any right to
claim a material Tax refund, offset or other reduction in Liability (as
defined in Section 10.03) for Taxes surrendered, in each case by the
Company or any Company Subsidiary;
A-2-15
(vi) any creation or other incurrence by the Company or any Company
Subsidiary of any Lien on any material asset other than in the ordinary
course consistent with past practice;
(vii) any making of any loan, advance or capital contributions to, or
investment in, any person other than (A) loans, advances or capital
contributions to, or investments in, its wholly-owned subsidiaries, (B) the
extension of trade credit in the ordinary course consistent with past
practice or (C) investments in any person in the ordinary course pursuant
to the Company's investment policy approved by the Company Board as in
effect on the date of this Agreement, a copy of which policy is set forth
in Section 4.13(c) of the Company Disclosure Letter;
(viii) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or
any Company Subsidiary that is material to the Company and the Company
Subsidiaries, taken as a whole;
(ix) any sale, lease, license or other disposition of any Owned
Intellectual Property Right other than sales, leases, licenses or other
dispositions that have not had a Transaction Material Adverse Effect; or
(x) any (A) entry into or amendment of any severance or termination
arrangement or any employment, deferred compensation or similar agreement
with any director or officer of the Company or any Company Subsidiary or
(B) establishment, adoption or amendment (except as required by applicable
Law) of any collective bargaining or material bonus, profit-sharing,
thrift, pension, retirement, deferred compensation, compensation, stock
option, restricted stock or other benefit plan or arrangement covering any
director, officer or employee of the Company or any Company Subsidiary.
SECTION 4.14. Employee Matters Generally; Company Benefit Plans. (a) None
of the Company, any Company Subsidiary and any of its ERISA Affiliates (as
defined below) sponsors, maintains, contributes to or is required to contribute
to any employee plan subject to Title IV of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 412 of the Code, and none
of the Company, any Company Subsidiary and any of its ERISA Affiliates has in
the past maintained, contributed to or been required to contribute to any
employee plan subject to Title IV of ERISA or Section 412 of the Code. For
purposes of this Section, "ERISA Affiliate" of any entity means any other entity
that, together with such entity, would be treated as a single employer under
Section 414 of the Code.
(b) None of the Company, any Company Subsidiary, any of the Company's ERISA
Affiliates and any predecessor thereof contributes to, or has in the past
contributed to, any multiemployer plan, as defined in Section 3(37) of ERISA.
(c) "Company Benefit Plan" means any agreement, plan, program, policy or
other arrangement, in each case, covering one or more current or former
employees or directors of, or current or former independent contractors with
respect to, the Company or any Company Subsidiary.
SECTION 4.15. No Undisclosed Material Liabilities. Except with respect to
environmental matters and tax matters, which are the subject of Sections 4.18
and 4.19, respectively, there are no Liabilities of the Company or any Company
Subsidiary other than Liabilities that do not have, individually or in the
aggregate, a Transaction Material Adverse Effect.
SECTION 4.16. Transactions with Related Persons. (a) Section 4.16(a) of
the Company Disclosure Letter sets forth a list of all Contracts, promises,
commitments and understandings in effect as of the date of this Agreement with
Related Persons and not required to be disclosed in the Company SEC Filings
pursuant to Item 404 of Regulation S-K and, with respect to any such oral
Contract, promise, commitment or understanding, a true and complete description
thereof. Since March 31, 2003, neither the Company nor any Company Subsidiary
has (i) purchased, leased or otherwise acquired any material property or assets
or obtained any material services from, (ii) sold, leased or otherwise disposed
of any material property or assets or provided any material services to (except
with respect to remuneration for
A-2-16
services rendered in the ordinary course as director, officer or employee of the
Company or any Company Subsidiary), (iii) entered into or modified in any manner
any Contract, promise, commitment or understanding with or (iv) borrowed any
money from, or made or forgiven any loan or other advance to, any officer,
director or affiliate of the Company or any Company Subsidiary or any person who
has a family relationship (as defined in Item 401(d) of Regulation S-K) with any
officer, director or affiliate of the Company or any Company Subsidiary
(collectively, "Related Persons"). Prior to the date of this Agreement, the
Company has made available to Parent or its Representatives true and complete
copies of each written Contract, promise, commitment and understanding between
the Company or any Company Subsidiary, on the one hand, and any Related Person,
on the other.
(b) Neither the Company nor any Company Subsidiary has any Contracts,
promises, commitments or understandings that include any material obligation or
commitment between the Company or any Company Subsidiary and any Related Person.
(c) The assets of the Company or any Company Subsidiary do not include any
receivable or other obligation or commitment from a Related Person to the
Company or any of Company Subsidiary.
(d) The Liabilities of the Company and the Company Subsidiaries do not
include any payable or other obligation or commitment from the Company or any
Company Subsidiary to any Related Person.
(e) Prior to the date of this Agreement, the Company has made available to
Parent or its Representatives true and complete copies of each Contract,
promise, commitment and understanding between the Company, any Company
Subsidiary or any of their respective affiliates, on the one hand, and MSD, MST,
JW, JW Consulting (each of JW and JW Consulting, as defined in Section 10.03),
Hyperion Catalysis International, a California corporation ("Hyperion"),
Wellstat Biologics Corporation, a Delaware corporation ("Wellstat Biologics"),
Wellstat Therapeutics Corporation, a California corporation ("Wellstat
Therapeutics"), Proteinix Corporation, a Delaware corporation ("Proteinix"), and
Integrated Chemical Synthesizers, Inc., a Delaware corporation ("ICS"), or any
of their respective affiliates, on the other hand (or, with respect to any such
oral Contract, promise, commitment or understanding, a true and complete
description thereof).
(f) For purposes of the definition of "Related Person", each of JW, JW
Consulting, Hyperion, Wellstat Biologics, Wellstat Therapeutics, Proteinix and
ICS shall be deemed to be an affiliate of the Company.
SECTION 4.17. Compliance with Law and Judgments. Except with respect to
intellectual property, environmental matters and tax matters, which are the
subject of Sections 4.06, 4.18 and 4.19, respectively, from March 31, 2001, (a)
each of the Company and the Company Subsidiaries has been in compliance with all
applicable Law and Judgments, except for instances of possible noncompliance
that, individually or in the aggregate, does not have a Transaction Material
Adverse Effect and (b) to the knowledge of the Company, the Company is not under
investigation with respect to and has not been threatened to be charged with or
been given written notice of any violation of, any applicable Law or Judgment,
except in each case for such investigations, charges or notices that
individually or in the aggregate do not have a Transaction Material Adverse
Effect.
SECTION 4.18. Environmental Matters. With such exceptions as do not have,
individually or in the aggregate, a Transaction Material Adverse Effect:
(a) No written notice, demand, request for information, citation, summons
or order has been received, no penalty has been assessed, and no investigation,
action, claim, suit or proceeding is pending or, to the knowledge of the
Company, is threatened by any Governmental Entity or other person pursuant to or
arising out of any Environmental Law; and
(b) there are no Liabilities of the Company or any Company Subsidiary
arising under or pursuant to any Environmental Law and arising from actions
occurring or conditions existing on or prior to the Effective Time.
A-2-17
SECTION 4.19. Tax Matters. (a) All material Tax Returns required by
applicable Law to be filed with any Taxing Authority by, or on behalf of, the
Company or any Company Subsidiary have been filed when due in accordance with
applicable Law, and all such material Tax Returns are, or will be at the time of
filing, true and complete in all material respects.
(b) The Company and each Company Subsidiary has paid (or has had paid on
its behalf) or has withheld and remitted to the appropriate Taxing Authority all
Taxes due and payable, or, where payment is not yet due, has established (or has
had established on its behalf and for its sole benefit and recourse) in
accordance with GAAP an accrual for all material Taxes through the end of the
most recent taxable period ending prior to the date of this Agreement.
(c) The income and franchise Tax Returns of the Company and the Company
Subsidiaries through the Tax year ended December 31, 1998 have been examined and
closed or are Tax Returns with respect to which the applicable period for
assessment under applicable Law, after giving effect to extensions or waivers,
has expired.
(d) The Company and each Company Subsidiary have withheld all material
amounts required to have been withheld by them in connection with amounts paid
or owed to any employee, independent contractor, creditor, shareholder or any
other third party; such withheld amounts were either duly paid to the
appropriate Taxing Authority or set aside in accounts for such purpose. The
Company and each Company Subsidiary have reported such withheld amounts to the
appropriate Taxing Authority and to each such employee, independent contractor,
creditor, shareholder or any other third party, as required under any Law.
(e) As of the date of this Agreement, there is no material audit, action,
suit, investigation or proceeding now pending or, to the knowledge of the
Company, threatened in writing against or with respect to Company or the Company
Subsidiaries in respect of any Tax.
(f) The following terms shall have the meanings set forth below:
"Taxes" means (i) all forms of taxation or duties imposed, or required to
be collected or withheld, including charges, together with any related interest,
penalties or other additional amounts, (ii) Liability for the payment of any
amount of the type described in the preceding clause (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group or (iii)
Liability for the payment of any amounts as a result of being party to any Tax
sharing agreement (other than this Agreement or any other Transaction Agreement)
or as a result of any express or implied obligation to indemnify any other
person with respect to the payment of any amount described in the immediately
preceding clauses (i) or (ii) (other than an obligation to indemnify under the
Tax Allocation Agreement).
"Taxing Authority" means the United States Internal Revenue Service and any
other national, Federal, state, provincial, local, or other Governmental Entity,
whether domestic or foreign, responsible for the administration of Taxes.
"Tax Return" means any return, filing, report, questionnaire, information
statement or other document required to be filed, including amended returns that
may be filed, for any taxable period with any Taxing Authority (whether or not a
payment is required to be made with respect to such filing).
SECTION 4.20. Newco Solvency. Immediately following the Effective Time,
and after giving effect to the Restructuring and the other Transactions and the
execution and delivery of the Commercial Agreements, Newco will not be
Insolvent.
SECTION 4.21. Limitation. NOTWITHSTANDING ANY PROVISION IN THIS AGREEMENT
TO THE CONTRARY, (A) NO REPRESENTATION OR WARRANTY IS MADE BY THE COMPANY WITH
RESPECT TO (I) PARENT OR ANY OF ITS AFFILIATES OR THEIR RESPECTIVE BUSINESSES,
PROPERTIES (INCLUDING ANY OR ALL PATENTS, PATENT RIGHTS, TRADEMARKS, TRADEMARK
RIGHTS, TRADE NAMES, TRADE NAME RIGHTS, SERVICE MARKS, SERVICE MARK RIGHTS AND
OTHER INTELLECTUAL PROPERTY OWNED BY PARENT OR ANY OF ITS AFFILIATES), ASSETS OR
OPERATIONS,
A-2-18
(II) ANY BUSINESS RELATIONSHIP BETWEEN THE COMPANY OR ANY OF ITS AFFILIATES, ON
THE ONE HAND, AND PARENT OR ANY OF ITS AFFILIATES, ON THE OTHER HAND, OR (III)
ANY ACTION, SUIT, PROCEEDING OR CONTRACT TO WHICH PARENT OR ANY OF ITS
AFFILIATES IS A PARTY (INCLUDING THE LICENSE LITIGATION, THE NEW PATENT
LITIGATION, ANY SUCH CONTRACTS TO WHICH THE COMPANY OR ANY COMPANY SUBSIDIARY IS
OR WAS A PARTY AND IN PARTICULAR THE 1992 LICENSE AGREEMENT AND THE ONGOING
LITIGATION AGREEMENT), AND (B) NO FACT, EVENT, CHANGE, EFFECT OR DEVELOPMENT
RELATING TO ANY OF THE FOREGOING SHALL BE DEEMED TO RESULT IN THE BREACH BY THE
COMPANY OF ANY REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT IN THIS AGREEMENT
OR OTHERWISE IN A TRANSACTION MATERIAL ADVERSE EFFECT; PROVIDED, HOWEVER, THAT
THIS SECTION 4.21 SHALL IN NO WAY MODIFY THE REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND NEWCO IN SECTION 4.06.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub, jointly and severally, represent and warrant to the Company
as follows:
SECTION 5.01. Organization, Standing and Power. Each of Parent and Sub is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized (in the case of good standing, to the
extent such jurisdiction recognizes such concept) and has all corporate powers,
governmental licenses and Consents required to carry on its business as now
conducted, except for any such licenses and Consents the failure of which to
have or obtain that, individually or in the aggregate, does not have a Parent
Material Adverse Effect (as defined in Section 10.03). Parent has made available
to the Company true and complete copies of the articles of incorporation and
other organizational documents, in each case as amended to the date of this
Agreement, for each of Parent and Sub. Bearer shares and non-voting equity
securities of Parent are listed on the SWX Swiss Exchange.
SECTION 5.02. Sub. (a) Since the date of its incorporation, Sub has not
carried on any business or conducted any operations other than the execution of
this Agreement, the performance of its obligations hereunder and matters
ancillary thereto.
(b) The authorized capital stock of Sub consists of 1,000 shares of common
stock, par value $0.001 per share, all of which have been validly issued, are
fully paid and nonassessable and are owned by Parent free and clear of any Lien.
SECTION 5.03. Authority; Execution and Delivery; Enforceability. Each R
Party (as defined in Section 10.03) has all requisite power and authority to
execute and deliver (a) each Transaction Agreement to which it is a party and to
consummate the Transactions contemplated thereby and (b) each Commercial
Agreement to which it is a party and to perform its obligations thereunder. The
execution and delivery by each R Party of (i) each Transaction Agreement to
which it is a party and the consummation by it of the Transactions contemplated
thereby and (ii) each Commercial Agreement to which it is a party, and the
performance by each R Party of its obligations thereunder, in each case have
been duly authorized by all necessary action on the part of such R Party.
Parent, as sole stockholder of Sub, will adopt this Agreement. Each of Parent
and Sub has duly executed and delivered this Agreement and each other
Transaction Agreement to which it is a party, and, assuming due execution and
delivery hereof and thereof by each party hereto and thereto that is not an
affiliate of Parent, this Agreement and each such Transaction Agreement
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms. Each R Party has duly executed and delivered each
Transaction Agreement to which it is a party and each Commercial Agreement to
which it is a party, and, assuming the due authorization, execution and delivery
thereof by each party thereto that is not an affiliate of Parent, each
A-2-19
Transaction Agreement and each Commercial Agreement constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms.
SECTION 5.04. No Conflicts; Consents. (a) The execution and delivery by
each R Party of this Agreement and the other Transaction Agreements to which it
is a party and each Commercial Agreement to which it is a party, do not, and the
consummation of the Merger and the other Transactions and the performance by
such R Party of its obligations under the Commercial Agreements and compliance
with the terms hereof and thereof will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancelation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets of any R Party under, any
provision of (i) the articles of incorporation or other organizational documents
of any R Party, (ii) any Contract to which any R Party or any of its affiliates
is a party or by which any of their respective properties or assets is bound or
(iii) subject to the filings and other matters referred to in Section 5.04(b),
any Judgment or Law applicable to any R Party or any of their respective
properties or assets, other than, in the case of clauses (ii) and (iii) above,
any such items that, individually or in the aggregate, do not have a Parent
Material Adverse Effect and do not materially impair the ability of any R Party
to perform its obligations under this Agreement, any other Transaction Agreement
or any Commercial Agreement or to consummate the Transactions.
(b) No Consent of, or registration, declaration or filing with, or permit
from, any Governmental Entity is required to be obtained or made by any R Party
in connection with the execution, delivery and performance of this Agreement,
any other Transaction Agreement or Commercial Agreement by any R Party or the
consummation of the Transactions or the performance by any R Party under the
Commercial Agreements, other than (i) compliance with and filings under the HSR
Act, (ii) the filing with the SEC of such reports under Sections 13 and 16 of
the Exchange Act, as may be required in connection with this Agreement, the
other Transaction Agreements, the Merger and the other Transactions, (iii) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, (iv) compliance with and such filings as may be required under
applicable Environmental Law, (v) such filings as may be required in connection
with Transfer Taxes, (vi) filings under any applicable state takeover Law and
(vii) such other items (A) required solely by reason of the participation of the
Company (as opposed to any third party) in the Transactions or (B) that the
failure of which to obtain or make, individually or in the aggregate, does not
have a Parent Material Adverse Effect and does not materially impair the ability
of any R Party to perform its obligations under this Agreement, any other
Transaction Agreement or any Commercial Agreement or to consummate the
Transactions.
SECTION 5.05. Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Merger and the other
Transactions or the execution and delivery of the Commercial Agreements based
upon arrangements made by or on behalf of Parent or any of its affiliates.
SECTION 5.06. Financing. At the Effective Time, Parent and Sub will have
available all of the funds necessary for the acquisition of all shares of
Company Common Stock pursuant to the Merger and to perform their respective
obligations under this Agreement and the other Transaction Agreements.
SECTION 5.07. Financial Statements. The audited consolidated financial
statements (including the related notes) of Parent for the year ended December
31, 2002, have been prepared in accordance with international accounting
standards applied on a consistent basis during the period involved (except as
may be indicated in the notes thereto) and fairly present the consolidated
financial position of Parent and its consolidated subsidiaries as of the date
thereof and the consolidated results of their operations and cash flows for the
period shown.
SECTION 5.08. Stock Ownership; Interested Stockholders. Neither Parent
nor Sub beneficially owns any Company Common Stock and neither Parent nor Sub
is, or at any time during the three years preceding the date of this Agreement
has been, an "interested stockholder" of the Company, as such term is defined in
Section 203(c)(5) of the DGCL.
A-2-20
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 6.01. Conduct of Business. (a) Conduct of Business by the
Company. Except for matters set forth in the Company Disclosure Letter or
otherwise expressly contemplated by this Agreement, any other Transaction
Agreement or any of the Commercial Agreements, from the date of this Agreement
to the Effective Time the Company shall, and shall cause each Company Subsidiary
to, conduct its business in the usual, regular and ordinary course consistent
with past practice and, to the extent consistent therewith, shall use their
reasonable best efforts to preserve intact their business organizations and
relationships with third parties. In addition, and without limiting the
generality of the foregoing, except for matters set forth in the Company
Disclosure Letter or otherwise expressly contemplated by this Agreement, any
other Transaction Agreement or any of the Commercial Agreements, from the date
of this Agreement to the Effective Time, the Company shall not, and shall not
permit any Company Subsidiary to, do any of the following without the prior
written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, its capital stock, other than dividends and
distributions by a direct or indirect wholly owned subsidiary of the
Company to its parent, (B) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or (C)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any Company Subsidiary or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities
other than (1) the issuance of Company Common Stock (and associated Company
Rights) upon (x) the exercise of Company Stock Options outstanding as of
the date of this Agreement and in accordance with the terms thereof in
effect as of the date of this Agreement, (y) the conversion of Company
Convertible Debentures outstanding as of the date of this Agreement and in
accordance with the terms thereof in effect as of the date of this
Agreement and (z) the exercise of Company Warrants outstanding as of the
date of this Agreement and in accordance with the terms thereof in effect
as of the date of this Agreement, (2) the issuance of Company Capital Stock
upon the exercise of Company Rights and (3) pursuant to the Company Stock
Plans as in effect on the date of this Agreement;
(ii) issue, deliver, sell or grant (A) any shares of its capital
stock, (B) any Voting Company Debt or other voting securities, (C) any
securities convertible into or exchangeable for, or any options, warrants
or rights to acquire, any such shares, Voting Company Debt, voting
securities or convertible or exchangeable securities or (D) any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock-based
performance units, in each case other than (1) the issuance of Company
Common Stock (and associated Company Rights) upon (x) the exercise of
Company Stock Options outstanding as of the date of this Agreement and in
accordance with the terms thereof in effect as of the date of this
Agreement, (y) the conversion of Company Convertible Debentures outstanding
as of the date of this Agreement and in accordance with the terms thereof
in effect as of the date of this Agreement and (z) the exercise of Company
Warrants outstanding as of the date of this Agreement and in accordance
with the terms thereof in effect as of the date of this Agreement, and (2)
the issuance of Company Capital Stock upon the exercise of Company Rights;
(iii) amend or propose any amendment to its certificate of
incorporation, by-laws or other comparable charter or organizational
documents (other than amendments or proposals to the certificate of
incorporation, bylaws or other comparable charter or organizational
documents of Newco, any Company Subsidiary that is contemplated to become a
subsidiary of Newco pursuant to the Restructuring or any other subsidiary
of Newco that do not materially impair the ability of Newco, any Company
Subsidiary that is contemplated to become a subsidiary of Newco pursuant to
the Restructuring or any other subsidiaries of Newco to perform its
obligations under this Agreement, any other Transaction Agreement or any
Commercial Agreement or consummate the Transactions or perform their
obligations under any Commercial Agreement);
A-2-21
(iv) make any change in accounting methods, principles or practices
materially affecting the reported consolidated assets, liabilities or
results of operations of the Company or any Company Subsidiary, except for
any such change required by GAAP or applicable Law;
(v) make or change any material Tax election; change any annual Tax
accounting period; file any material amended Tax Returns or claims for
material Tax refunds; enter into any material closing agreement; settle any
material Tax claim, audit or assessment; or surrender any right to claim a
material Tax refund, offset or other reduction in Liabilities for Taxes;
(vi) amend any material term of any outstanding security of the
Company or any Company Subsidiary;
(vii) merge or consolidate with any other person or acquire a material
amount of stock or assets of any unrelated third person, in each case other
than (A) one or more acquisitions of stock or assets (including inventory
and fixed assets) of any unrelated third person by any Newco Company (as
defined in the Restructuring Agreement) involving the expenditure in the
aggregate of no greater than $20,000,000 (or its equivalent in any other
currency) minus the amount of any loan, advance or capital contribution to,
or investment in, any unrelated third person made pursuant to Section
6.01(a)(xi)(F) or (B) any acquisition of inventory or fixed assets in the
ordinary course consistent with past practice;
(viii) sell, lease, license or otherwise dispose of any material
subsidiary or any assets or property, including any Intellectual Property
Right, except in each case for such sales, leases, licenses or other
dispositions to an unrelated third person that do not have a Transaction
Material Adverse Effect;
(ix) incur, assume or guarantee any indebtedness for borrowed money in
an aggregate principal amount in excess of $10,000,000 (or its equivalent
in any other currency), whether pursuant to one or more transactions, other
than any guarantee by the Company or any Company Subsidiary pursuant to any
agreement in effect as of the date of this Agreement;
(x) create or incur any Lien on any material asset of the Company and
the Company Subsidiaries, taken as a whole, other than in the ordinary
course consistent with past practice;
(xi) make any loan, advance or capital contributions to, or investment
in, any person other than (A) to the extent permitted by Section
6.01(a)(ix), (B) loans, advances or capital contributions to, or
investments in, its wholly-owned subsidiaries, (C) the extension of trade
credit in the ordinary course consistent with past practice, (D)
investments in any person in the ordinary course pursuant to the Company's
investment policy approved by the Company Board as in effect as of the date
of this Agreement, a copy of which policy is set forth in Section 4.13(c)
of the Company Disclosure Letter, (E) loans, advances or capital
contributions to, or investments in, any person as described in, or
pursuant to any agreement listed in Section 6.01(a)(xi)(E) of the Company
Disclosure Letter or (F) loans, advances or capital contributions to, or
investments in, any unrelated third person that are not otherwise permitted
by clauses (A) through (E) of this Section 6.01(a)(xi) and involve the
expenditure in the aggregate of no greater than $20,000,000 minus the
amount of any expenditure made pursuant to Section 6.01(a)(vii)(A);
(xii) any establishment, adoption or amendment (except as required by
applicable Law) of any collective bargaining or material bonus,
profit-sharing, thrift, pension, retirement, deferred compensation,
compensation, stock option, restricted stock or other benefit plan covering
any director, officer or employee of the Company or any Company Subsidiary
(other than Newco, any Company Subsidiary that is contemplated to become a
subsidiary of Newco pursuant to the Restructuring or any other subsidiaries
of Newco); for the avoidance of doubt this clause (xii) shall not be
construed to prohibit any award or payment of any bonus or other
compensation to any director, officer or other employee on an individual
basis in a manner consistent with past practice; or
A-2-22
(xiii) authorize any of, or commit or agree to take any of, the
foregoing actions; provided, however, that prior to the Effective Time,
Newco may authorize, or commit or agree to take, any such action after the
Effective Time.
(b) Consent. Notwithstanding the second sentence of Section 6.01(a),
Parent shall not unreasonably withhold, condition or delay its consent with
respect to any request by the Company with respect to any action prohibited by
Section 6.01(a)(iv), 6.01(a)(v), 6.01(a)(x), 6.01(a)(xi), 6.01(a)(xii) or
6.01(a)(xiii)(solely to the extent relating to actions described in Section
6.01(a)(iv), 6.01(a)(v), 6.01(a)(x), 6.01(a)(xi) or 6.01(a)(xii)).
(c) Actions by Parent and the Company. (i) Parent shall not, and shall not
permit any of its affiliates to, take any action that would, or that is
reasonably likely to, result in any condition to the Merger set forth in Article
VIII, not being satisfied.
(ii) The Company shall not, and shall not permit any of its affiliates
to, take any action that would, or that is reasonably likely to, result in
any condition to the Merger set forth in Article VIII, not being satisfied.
SECTION 6.02. No Solicitation. (a) The Company shall not, nor shall it
authorize or permit any Company Subsidiary to, nor shall it authorize or permit
any officer, director or employee of, or any investment banker, attorney or
other advisor or representative (collectively, "Representatives") of, the
Company or any Company Subsidiary to, (i) directly or indirectly solicit,
initiate or encourage the submission of any Company Takeover Proposal (as
defined in Section 6.02(h)), (ii) enter into any agreement with respect to any
Company Takeover Proposal (except a confidentiality agreement in accordance with
this Section 6.02(a)), (iii) grant any waiver or release under any standstill or
similar agreement with respect to any class of equity securities of the Company
or any Company Subsidiary or (iv) directly or indirectly (A) participate in any
discussions or negotiations with, or furnish any information with respect to,
the Company or any Company Subsidiary to any person that is seeking to make, or
has made, any proposal that constitutes a Company Takeover Proposal or (B)
afford access to the business, properties, assets, books or records of the
Company or any Company Subsidiary to, otherwise cooperate in any way with, or
knowingly assist, participate in, facilitate or encourage any effort by any
person that is seeking to make, or has made, any proposal that constitutes a
Company Takeover Proposal; provided, however, that prior to obtaining the
Company Stockholder Approval the Company and its Representatives may, in
response to a Company Takeover Proposal that was not solicited by the Company
and that did not otherwise result from a breach of this Section 6.02(a), and
subject to compliance with Sections 6.02(c) and 6.02(d), (x) furnish information
with respect to the Company and the Company Subsidiaries to the person making
such Company Takeover Proposal and its Representatives pursuant to a customary
confidentiality agreement with terms not materially less favorable to the
Company and not materially less restrictive to the person making such Company
Takeover Proposal than those contained in the Confidentiality Agreement (as
defined in Section 7.02) and Section 7.12 of this Agreement (a copy of which
shall be provided to Parent for informational purposes only) and (y) participate
in discussions or negotiations (including solicitation of a revised Company
Takeover Proposal) with such person and its Representatives regarding such
Company Takeover Proposal, if and only if, in the case of each of (x) and (y)
above, the Company Board determines in good faith, after receipt of the advice
of its financial advisor and outside legal counsel, that such Company Takeover
Proposal is reasonably likely to result in a Superior Company Proposal (as
defined in Section 6.02(h)).
(b) Neither the Company Board nor any committee thereof shall (i) withdraw
or modify in a manner adverse to Parent or Sub, or propose publicly to withdraw
or modify in a manner adverse to Parent or Sub, the approval or recommendation
by the Company Board or any such committee of this Agreement or the Merger, in
each case unless the Company Board determines in good faith, after consultation
with outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties under applicable Law, (ii) approve any letter of intent,
agreement in principle, acquisition agreement or similar agreement relating to
any Company Takeover Proposal or (iii) approve or recommend, or propose publicly
to approve or recommend, any Company Takeover Proposal.
A-2-23
(c) In addition to the obligations of the Company set forth in Section
9.05(b)(iii), the Company shall promptly (and in no event later than 1 business
day after receipt of the relevant proposal or inquiry) advise Parent orally and
in writing of any Company Takeover Proposal or any inquiry from a third party to
an officer or director of the Company with respect to the making of a Company
Takeover Proposal, the identity of the person making any such Company Takeover
Proposal or inquiry and the material terms of any such Company Takeover Proposal
or inquiry. The Company shall keep Parent promptly informed of the status
(including any change to the material terms) of any such Company Takeover
Proposal.
(d) Nothing contained in this Section 6.02 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the good faith judgment of the Company Board,
after consultation with outside counsel, failure so to disclose would be
inconsistent with its obligations under applicable Law.
(e) Notwithstanding clauses (a) and (b) of this Section 6.02, if, prior to
obtaining the Company Stockholder Approval, the Company Board receives a
Superior Company Proposal, then the Company Board may, in accordance with
Section 9.05(b) (including the notice provisions therein), approve and recommend
such Superior Company Proposal and cause the Company to terminate this Agreement
and concurrently enter into a definitive agreement providing for implementation
of such Superior Company Proposal.
(f) The Company (i) shall, and shall cause the Company Subsidiaries to, and
shall instruct its Representatives to, cease immediately and cause to be
terminated all activities, discussions or negotiations, if any, with any persons
conducted prior to the date of this Agreement with respect to any Company
Takeover Proposal and (ii) shall promptly request each person, if any, that has
executed a confidentiality agreement within the 12 months prior to the date of
this Agreement in connection with such person's consideration of any Company
Takeover Proposal to return or destroy all confidential information heretofore
furnished to such person by or on behalf of the Company or any Company
Subsidiary.
(g) The Company shall promptly inform the Company Subsidiaries and its
Representatives of the obligations undertaken in this Section 6.02.
(h) For purposes of the Transaction Agreements:
"Company Takeover Proposal" means (i) any proposal or offer for a
merger, consolidation, dissolution, recapitalization or other business
combination involving the Company, (ii) any proposal or offer to acquire in
any manner, directly or indirectly, over 20% of the equity securities or
consolidated total assets of the Company or (iii) any other transaction the
consummation of which would reasonably be expected to impede, prevent or
materially delay the Merger, in each case other than (A) the Transactions,
(B) the performance of obligations pursuant to the Commercial Agreements or
(C) any transaction involving Newco or its subsidiaries that will be
consummated after the Effective Time.
"Superior Company Proposal" means any bona fide, unsolicited written
proposal made by a third party to acquire, directly or indirectly,
including pursuant to a tender or exchange offer, a merger, a
consolidation, a liquidation or dissolution, a recapitalization or similar
transaction, more than 50% of the combined voting power of the shares of
Company Common Stock then outstanding or all or substantially all of the
assets of the Company and the Company Subsidiaries, taken as a whole, on
terms which the Company Board determines in good faith to be more favorable
to the holders of Company Common Stock than the Transactions (after
consultation with a financial advisor of nationally recognized reputation),
taking into account all the terms and conditions of such proposal,
including any break-up fees, expense reimbursement provisions and
conditions to consummation, and this Agreement (including any proposal by
Parent to amend the terms of the Transactions), and for which financing, to
the extent required, is then fully committed or reasonably determined to be
available by the Company Board.
A-2-24
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. Preparation of the Proxy Statement, the Newco Form S-4 and
the Newco Form 8-A; Company Stockholders Meeting. (a) As soon as practicable
following the date of this Agreement, the Company shall (i) prepare the Proxy
Statement, the Newco Form S-4 and the Newco Form 8-A and (ii) file the Proxy
Statement, the Newco Form S-4 and the Newco Form 8-A with the SEC. The Proxy
Statement will be included as a prospectus in the Newco Form S-4. Each of the
Company and Parent shall use its reasonable best efforts to have the Newco Form
S-4 declared effective under the Securities Act as promptly as practicable after
such filing. Each of the Company and Parent shall use its reasonable best
efforts to cause the Proxy Statement to be mailed to the Company's stockholders
as promptly as practicable after the Newco Form S-4 is declared effective under
the Securities Act. Each of Parent and the Company shall also take any action
(other than qualifying to do business in any jurisdiction in which is not now so
qualified or to file a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the issuance
and distribution of Newco Common Stock in the Merger. Parent shall furnish all
information concerning Parent, the Transactions, the Transaction Agreements and
the Commercial Agreements and shall provide all other assistance and cooperation
as may be reasonably requested by the Company in connection with the
preparation, filing and distribution of the Proxy Statement and the Newco Form
S-4 and any other action described in this Section 7.01(a). The parties shall
notify each other promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for amendments or supplements
to the Proxy Statement, the Newco Form S-4 or the Newco Form 8-A or for
additional information and shall supply each other with copies of all
correspondence between it or any of its Representatives, on the one hand, and
the SEC or its staff on the other hand, with respect to the Proxy Statement, the
Newco Form S-4, the Newco Form 8-A, the Merger, the other Transactions, the
Transaction Agreements or the Commercial Agreements. Each of the Company and
Parent shall use its reasonable best efforts to respond as promptly as
practicable to any such comments or requests of the SEC. If at any time prior to
receipt of the Company Stockholder Approval there shall occur any event that
should be set forth in an amendment or supplement to the Proxy Statement, the
Newco Form S-4 or the Newco Form 8-A, the Company shall promptly prepare and
mail to its stockholders such an amendment or supplement, and Parent shall
cooperate in connection therewith. The Company shall not mail any Proxy
Statement, the Newco Form S-4 or the Newco Form 8-A or any amendment or
supplement thereto, to which Parent reasonably objects in a timely manner.
(b) The Company shall, as promptly as practicable following the date of
this Agreement (taking into account any delays reasonably required as a result
of the occurrence of any event described in the last sentence of this clause
(b)), duly call, give notice of, convene and hold a meeting of its stockholders
(the "Company Stockholders Meeting") for the purpose of seeking the Company
Stockholder Approval. The Company shall, through the Company Board, recommend to
its stockholders that they give the Company Stockholder Approval, except to the
extent that the Company Board shall have withdrawn or modified its approval or
recommendation of this Agreement, the Restructuring or the Merger as permitted
by Section 6.02(b). Without limiting the generality of the foregoing, the
Company agrees that its obligations pursuant to the first sentence of this
Section 7.01(b) shall not be affected by (i) the commencement, public proposal,
public disclosure or communication to the Company of any Company Takeover
Proposal or (ii) the withdrawal or modification by the Company Board of its
approval or recommendation of this Agreement, the Restructuring or the Merger.
SECTION 7.02. Access to Information; Confidentiality. The Company shall,
and shall cause each Company Subsidiary to, afford to Parent, and to Parent's
affiliates and their respective officers, employees and Representatives,
reasonable access during normal business hours during the period after the date
of this Agreement and prior to the Effective Time to the Company Records (as
defined in the Restructuring Agreement); provided, however, that such access
will not unreasonably interfere with the normal operations of the Company or any
Company Subsidiary and the reasonable out-of-pocket expenses of the Company and
any Company Subsidiary incurred in connection therewith will be paid by Parent;
provided further, however, that the Company or any Company Subsidiary may
withhold (a) any document or
A-2-25
information that (i) the disclosure of which would violate any Contract with a
third party or any applicable Law or Judgment or would result in the waiver of
any legal privilege or work-product protection or (ii) otherwise relates to any
litigation (A) between the Company and any of its affiliates, on the one hand,
and Parent and any of its affiliates, on the other hand (including the License
Litigation and the New Patent Litigation), or (B) in which the party requesting
such document or information or any of its affiliates otherwise has an interest,
or (b) such portions of documents or information that its outside counsel
advises should not be disclosed in order to ensure compliance with antitrust or
other similar Laws. Subject to the next two sentences of this Section 7.02, all
information exchanged pursuant to this Section 7.02 shall be subject to the
confidentiality agreement dated October 8, 2001, between the Company and
affiliates of Parent (the "Confidentiality Agreement"), and the letter agreement
dated November 6, 2002, between the Company and R Diagnostics (the "Letter
Agreement"). As of and after the Effective Time, the Confidentiality Agreement
shall have no further force and effect and shall be superseded by Section 3.07
of the Post-Closing Covenants Agreement. As of and after the Effective Time,
Parent shall, and shall cause its affiliates to, treat all Newco Information (as
defined in the Post-Closing Covenants Agreement), including information
exchanged pursuant to this Section 7.02, as subject to Section 3.07 of the
Post-Closing Covenants Agreement. None of the Company Records provided or
received by any party to this Agreement will affect any of the representations
and warranties of the parties hereto contained in this Agreement or the
conditions hereunder to the obligations of the parties hereto.
SECTION 7.03. Reasonable Best Efforts; Notification. Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties shall
use its reasonable best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
Transactions, including (a) the taking of all acts necessary to cause the
conditions to Closing to be satisfied as promptly as practicable, (b) the
obtaining of all necessary actions or nonactions, waivers and Consents from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities, if any) and the taking of all
reasonable steps as may be necessary to obtain a Consent or waiver from, or to
avoid an action or proceeding by, any Governmental Entity, (c) the obtaining of
all necessary Consents or waivers from third parties; provided, however, that
the parties shall not be required to pay or commit to pay any amount to (or
incur any obligation in favor of) any person from whom any such Consent or
waiver may be required (other than nominal filing or application fees), (d) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of any of the
Transactions, including seeking to have any stay, order or injunction entered by
any court or other Governmental Entity preventing consummation of any of the
Transactions vacated or reversed and (e) the execution and delivery of any
additional instruments necessary to consummate the Transactions and to fully
carry out the purposes of this Agreement and the other Transaction Agreements.
In connection with and without limiting the foregoing, (i) the Company and the
Company Board shall (A) take all action necessary to ensure that no state
takeover statute or similar statute or regulation is or becomes applicable to
any Transaction or this Agreement or any other Transaction Agreement and (B) if
any state takeover statute or similar statute or regulation becomes applicable
to any Transaction or this Agreement or any other Transaction Agreement, take
all action necessary to ensure that the Merger and the other Transactions may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger and the other Transactions and (ii) Parent, on behalf of itself and
its subsidiaries and affiliates, is hereby deemed to have granted any consent
with respect to, and waived compliance with any requirements of, any term or
provision of any Contract or arrangement in effect as of the date of this
Agreement, between and among Parent or any of its subsidiaries or affiliates, on
the one hand, and the Company or any Company Subsidiaries or affiliates, on the
other hand, to the extent necessary in order to consummate the Transactions
without resulting in a breach, default or other violation of any such Contract
or arrangement. Notwithstanding the foregoing, the Company and its
Representatives shall not be prohibited under this Section 7.03 from taking any
action permitted by Section 6.02.
A-2-26
SECTION 7.04. Stock Options. (a) As soon as reasonably practicable
following the date of this Agreement (or, in the case of any Company Stock Plan
adopted after the date of this Agreement and prior to the Effective Time, as
soon as reasonably practicable following the date of such Plan's adoption), the
Company Board (or, if appropriate, any committee administering the Company Stock
Plans) shall adopt such resolutions or take such other actions as may be
required in order that each outstanding Company Stock Option, whether vested or
unvested, shall be canceled upon the occurrence of the Effective Time, and that
the holder of such Company Stock Option shall become entitled, within five
business days following the Effective Time, to receive (i) a cash payment from
Parent, in an amount equal to the product of (A) the excess of the Per Share
Cash Merger Consideration over the exercise price of such Company Stock Option
multiplied by (B) the number of shares of Company Common Stock for which such
Company Stock Option shall not theretofore have been exercised (the "Option
Shares") and (ii) a number of shares of Newco Common Stock from the Company
equal to the product of (A) the Exchange Ratio multiplied by (B) the number of
Option Shares. To the extent that the foregoing provisions would otherwise
require the Company to provide to the holder of a Company Stock Option a
fractional share of Newco Common Stock, the Exchange Agent will instead pay cash
in lieu of such fractional share based on the value of a share of Newco Common
Stock determined in accordance with Section 2.02(e). All payments and
distributions pursuant to this Section shall be subject to all appropriate
withholding.
(b) Prior to the Effective Time, the Company Board shall adopt resolutions
terminating the Company Stock Plans, and deleting provisions in any other
Company Benefit Plan providing for the issuance, transfer or grant of any
capital stock of the Company or any interest in respect of any capital stock of
the Company, as of the Effective Time.
(c) In this Agreement:
"Company Stock Option" means any option to purchase Company Common
Stock granted under any Company Stock Plan.
"Company Stock Plans" means the Company's 2001 Broad Based Option
Plan, the Company's 1994 Stock Option Plan, the Company's 1994 Non-Employee
Directors Stock Option Plan, the Company's 1985 Stock Option Plan and any
plans permitting the grant of options to purchase Company Common Stock that
are adopted by the Company or any Company Subsidiary after the date of this
Agreement and prior to the Effective Time in compliance with the terms of
this Agreement, in each case as amended through the date of this Agreement.
SECTION 7.05. Certain Claims. (a) Parent shall not, and shall not permit
any affiliate of Parent or encourage any other person to, either before or after
the Effective Time, assert any rights or pursue any actions or claims, whether
directly or on a derivative basis, against (i) the Company or any of its
affiliates or Newco or any affiliate of Newco or (ii) any of the current or
former directors, officers, members of the board of managers, members, managers,
employees, consultants, advisors, attorneys, trustees or agents of the Company
or any of its affiliates or Newco or any affiliate of Newco (in each case,
solely in their capacities as such), in each case for acts or omissions
occurring (A) prior to the date of this Agreement or (B) after the date of this
Agreement and prior to the Effective Time, whether known or unknown, and Parent
shall not, and Parent shall not permit any affiliate of Parent to, cooperate
with any person in the assertion of any such rights or pursuing any such actions
or claims except (x) as required by subpoena or other judicial or legal process
or (y) as required by any inquiry by a Governmental Entity, but in each case
only to the extent such inquiry or requirement to cooperate has not arisen as a
result of a breach of this Section 7.05(a); provided, however, that this Section
7.05(a) shall not (1) affect any person's right to enforce any Transaction
Agreement, any Commercial Agreement, any I/R Agreement (as defined in the
Restructuring Agreement), any Newco I/R Agreement (as defined in the
Restructuring Agreement), any agreement entered into between the Company, Newco
or any of their respective affiliates, on the one hand, and any of the R Parties
or any of their respective affiliates, on the other hand, after the date of this
Agreement but prior to the Effective Time or any provision herein or therein in
accordance with its terms, (2) apply to any act or omission which constitutes
fraud in the inducement with respect to any
A-2-27
Transaction Agreement or any Commercial Agreement or (3) apply to any action
permitted or required by the Ongoing Litigation Agreement; provided further,
however, that in the event this Agreement is terminated, this Section 7.05(a)
shall be null and void and shall not operate as a waiver or release of any
rights, actions, interests or claims that might have been asserted or pursued
but for this Section 7.05(a).
(b) The Company shall not, and shall not permit any affiliate of the
Company or encourage any other person to, either before or after the
Effective Time, assert any rights or pursue any actions or claims, whether
directly or on a derivative basis, against (i) Parent or any of its
affiliates or (ii) any of the current or former directors, officers,
members of the board of managers, members, managers, employees,
consultants, advisors, attorneys, trustees or agents of Parent or any of
its affiliates (in each case, solely in their capacities as such), in each
case for acts or omissions occurring (A) prior to the date of this
Agreement or (B) after the date of this Agreement and prior to the
Effective Time, whether known or unknown, and the Company shall not, and
shall not permit any affiliate of the Company to, cooperate with any person
in the assertion of any such rights or pursuing any such actions or claims
except (x) as required by subpoena or other judicial or legal process or
(y) as required by any inquiry by a Governmental Entity, but in each case
only to the extent such inquiry or requirement to cooperate has not arisen
as result of a breach of this Section 7.05(b); provided, however, that this
Section 7.05(b) shall not (1) affect any person's right to enforce any
Transaction Agreement, any Commercial Agreement, any I/R Agreement, any
Newco I/R Agreement, any agreement entered into between the Company, Newco
or any of their respective affiliates, on the one hand, and any of the R
Parties or any of their respective affiliates, on the other hand, after the
date of this Agreement but prior to the Effective Time or any provision
herein or therein in accordance with its terms, (2) apply to any act or
omission which constitutes fraud in the inducement with respect to any
Transaction Agreement or any Commercial Agreement or (3) apply to any
action permitted or required by the Ongoing Litigation Agreement; provided
further, however, that prior to the Effective Time, the Company shall be
entitled to take any and all actions necessary to dismiss the New Patent
Litigation; and provided further, however, that in the event this Agreement
is terminated, this Section 7.05(b) shall be null and void and shall not
operate as a waiver or release of any rights, actions, interests or claims
that might have been asserted or pursued but for this Section 7.05(b).
SECTION 7.06. Fees and Expenses. (a) Except as provided in this Agreement
or in any other Transaction Agreement, all fees and expenses incurred in
connection with the Merger and the other Transactions shall be paid by the party
incurring such fees or expenses (it being understood that such fees and expenses
of the Company shall be paid by the Company prior to the Closing or assumed by
Newco pursuant to the Restructuring Agreement) whether or not the Merger is
consummated.
(b) The Company shall pay to Parent a fee of $26,600,000 if: (i) the
Company terminates this Agreement pursuant to Section 9.01(d) and consummates
the transactions contemplated by the applicable Superior Company Proposal or any
other Company Takeover Proposal (solely for the purpose of this Section 7.06(b),
"Company Takeover Proposal" shall have the meaning set forth in the definition
of Company Takeover Proposal in Section 6.02(h), except that the reference in
such definition to "20%" shall be deemed to be a reference to "50%") received by
the Company following such termination, or (ii) (A) either (1) Parent terminates
this Agreement pursuant to Section 9.01(c) or (2) (x) after the date of this
Agreement, any person makes a Company Takeover Proposal, (y) the Merger shall
not have occurred on or before the Outside Date (as defined in Section
9.01(b)(i)) and (z) this Agreement is thereafter terminated pursuant to Section
9.01(b)(i) (but only if the Company Stockholders Meeting has not been held by
the date that is two days prior to the date of such termination), and (B) within
12 months after such termination the Company consummates the transactions
contemplated by a Company Takeover Proposal. For the avoidance of doubt, the
parties expressly agree that in no event will a fee be paid pursuant to this
Section 7.06(b) unless and until the transactions contemplated by a Company
Takeover Proposal (including a Company Takeover Proposal that constitutes a
Superior Company Proposal) are consummated (and the payment of such fee shall
otherwise be subject to the other provisions of this Section 7.06(b)). Any fee
due under this Section 7.06(b) shall be paid by wire
A-2-28
transfer of same-day funds on the date of such consummation of transactions
referred to in Section 7.06(b)(i) or 7.06(b)(ii)(B), as the case may be, to an
account designated by Parent.
(c) The Company shall reimburse Parent and Sub for all their reasonable
expenses incurred in connection with this Agreement, the Commercial Agreements,
the Merger, the other Transactions or the execution and delivery of the
Commercial Agreements (i) in the event this Agreement is terminated by the
Company in the circumstances described in Section 7.06(b)(i), no later than the
date of such termination by the Company or (ii) in the event this Agreement is
terminated by Parent pursuant to Section 9.01(c), within two business days after
such termination by Parent; provided that the aggregate amount of such
reimbursement shall not exceed $5,000,000. All payments made pursuant to this
Section 7.06(c) shall be paid by wire transfer of same day funds on the date
such payment is due to an account designated by Parent.
(d) The Company acknowledges that the agreements contained in this Section
7.06 are an integral part of the Transactions and that, without these
agreements, Parent and Sub would not enter into this Agreement.
SECTION 7.07. Public Announcements. Prior to the Effective Time, Parent
and Sub, on the one hand, and the Company and Newco, on the other hand, shall
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or other public statements with
respect to the Merger, the other Transactions, the Commercial Agreements and the
transactions contemplated thereby and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable Law, court process or by obligations pursuant to any
listing agreement with any national securities exchange.
SECTION 7.08. Transfer Taxes. Subject to Section 2.01(f), all stock
transfer, real estate transfer, documentary, stamp, recording and other similar
Taxes (including interest, penalties and additions to any such Taxes) ("Transfer
Taxes") incurred in connection with the Transactions shall be paid as set forth
in the Tax Allocation Agreement.
SECTION 7.09. Rights Agreement; Consequences if Rights Triggered. Except
as approved in writing by Parent, the Company Board shall not (a) amend the
Company Rights Agreement, (b) redeem the Company Rights or (c) take any action
with respect to, or make any determination under, the Company Rights Agreement,
except, in each case, to the extent necessary to comply with the fiduciary
duties of the Company Board as determined by it in good faith after consultation
with outside counsel. If any Distribution Date or Shares Acquisition Date (as
defined in the Company Rights Agreement) occurs under the Company Rights
Agreement at any time during the period from the date of this Agreement to the
Effective Time, the Company and Parent shall make such adjustment to the Merger
Consideration as the Company and Parent shall mutually agree so as to preserve
the economic benefits that the Company and Parent each reasonably expected on
the date of this Agreement to receive as a result of the Merger and the other
Transactions.
SECTION 7.10. Listing of Newco Common Stock. The Company shall use its
reasonable best efforts to cause the shares of Newco Common Stock to be
distributed in the Merger to be approved for listing on a national securities
exchange or approved for quotation on Nasdaq, in each case subject to official
notice of issuance, prior to the Closing Date.
SECTION 7.11. Modifications to the License Agreement. The Company shall
not, prior to the Effective Time, amend, waive or fail to enforce any provision
of the License Agreement without the prior written consent of Parent.
SECTION 7.12. Standstill. From the date of this Agreement to the earlier
of the Effective Time or the fifth anniversary of the termination of this
Agreement in accordance with Section 9.01, Parent shall not, and Parent shall
not permit any of its affiliates to, in any manner, whether publicly or
otherwise, directly or indirectly, other than pursuant to or in furtherance of
the Merger on the terms and subject to the conditions set forth in or as
otherwise permitted by this Agreement, (a) acquire, agree to acquire or make any
proposal to acquire, directly or indirectly, any securities or assets of the
Company or any
A-2-29
Company Subsidiary, except at the unsolicited specific written request of the
Company, (b) propose to enter into, directly or indirectly, any tender or
exchange offer, merger or other business combination or similar transaction
involving the Company or any Company Subsidiary, except at the unsolicited
specific written request of the Company, (c) form, join or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) with respect to any securities of the Company or any Company Subsidiary,
(d) enter into any discussions, negotiations, arrangements, understandings or
agreements (whether written or oral) with any other person (other than its
Representatives) regarding any possible purchase or sale of any securities or
assets of the Company or any Company Subsidiary, (e) make, or in any way
participate, directly or indirectly, in any "solicitation" of "proxies" (as such
terms are used in the proxy rules of the SEC) to vote, or seek to advise or
influence any person with respect to the voting of, any securities of the
Company or any Company Subsidiary, (f) call, or seek to call, a meeting of the
Company's shareholders or initiate or propose any shareholder proposal or
execute any written consent with respect to the Company, (g) otherwise act,
alone or in concert with others, to seek or attempt to control or influence the
management, Company Board or policies of the Company (except to the extent
conduct or settlement of litigation between R Diagnostics and the Company might
be deemed such an attempt), (h) disclose any intention, plan or arrangement
inconsistent with the foregoing or (i) advise, assist or encourage any other
persons in connection with any of the foregoing. During the applicable period
covered by the preceding sentence of this Section 7.12, Parent shall not, and
Parent shall not permit any of its affiliates to, (i) request, directly or
indirectly, that the Company or any of its Representatives amend or waive any
provisions of this Section 7.12 (including, this sentence) or (ii) take any
action which could reasonably be expected to require the Company to make a
public announcement regarding the possibility of a business combination, merger
or similar transaction other than the Merger, the other Transactions and the
transactions contemplated by the Commercial Agreements.
SECTION 7.13. Pending Litigation. Each of the parties hereto acknowledges
and agrees that their obligations, agreements and covenants under this
Agreement, any other Transaction Agreement or any Commercial Agreement shall not
in any way be diminished or otherwise affected by, and the consummation of the
Merger, any of the other Transactions or the transactions contemplated by any of
the Commercial Agreements and shall not in any way be conditioned upon or
delayed as a result of, the status of or any development relating to the License
Litigation or the New Patent Litigation.
SECTION 7.14. Company Secured Notes. Prior to the Effective Time, the
Company shall give each holder of the 8.50% Senior Secured Notes of the Company
(the "Company Secured Notes") notice of optional prepayment in accordance with
Section 8.2 of the Senior Secured Notes Purchase Agreement (as defined in
Section 10.03) and shall thereafter pay in full the Company Secured Notes and
discharge and satisfy in full all obligations of the Company under the Senior
Secured Notes Purchase Agreement, if any, in accordance with such notice and
otherwise in accordance with the procedures set forth in the Senior Secured
Notes Purchase Agreement.
SECTION 7.15. Restructuring. The parties to this Agreement acknowledge
and agree that the implementation of the Restructuring, any of the other
Transactions or the performance by the relevant parties of their obligations
under the Commercial Agreements, in each case in accordance with their
respective terms, shall not constitute (a) a breach or failure to be true or
correct of any of the representations, warranties, agreements or covenants set
forth in this Agreement or any other Transaction Agreement or (b) otherwise
result in the failure of any condition to the obligations of any party hereto to
effect the Merger or any other Transaction.
SECTION 7.16. Notices of Certain Events. (a) The Company shall promptly
notify Parent of:
(i) any notice or other communication from any person alleging that
the Consent of such person is or may be required in connection with the
Transactions or the execution and delivery of the Commercial Agreements;
(ii) any notice or other communication from any Governmental Entity in
connection with the Transactions or the execution and delivery of the
Commercial Agreements; and
A-2-30
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, the Company or any
Company Subsidiary that, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section 4.06, 4.12,
4.17, 4.18 or 4.19 or that relate to the consummation of the Transactions
or the execution and delivery of the Commercial Agreements.
(b) Parent shall promptly notify the Company of:
(i) any notice or other communication from any person alleging that
the Consent of such person is or may be required in connection with the
Transactions or the execution and delivery of the Commercial Agreements;
(ii) any notice or other communication from any Governmental Entity in
connection with the Transactions or the execution and delivery of the
Commercial Agreements; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, any R Party that relate
to the consummation of the Transactions or the execution and delivery of
the Commercial Agreements.
SECTION 7.17. Company Financing Transaction. Prior to the Effective Time,
each of Parent and the Company shall execute and deliver a note in substantially
the form attached hereto as Exhibit A (the "Parent Note") pursuant to which
Parent shall loan (the "Loan") to the Company an amount equal to $214,000,000
minus the amount (the "Cash Amount") of cash received by the Company from (a)
the exercise of Company Stock Options and (b) the exercise of Company Warrants,
in each case during the period from the date of this Agreement to 5:00 p.m., New
York City time, on the date (the "Cut-Off Date") that is two business days prior
to the Effective Time. The Company shall provide Parent with written notice of
the Cash Amount one day prior to the Effective Time. Immediately prior to the
Effective Time, Parent shall make the Loan.
ARTICLE VIII
CONDITIONS PRECEDENT
SECTION 8.01. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. The Company shall have obtained the Company
Stockholder Approval.
(b) Antitrust. Any waiting period under the HSR Act applicable to the
Merger shall have expired or been terminated.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other Law preventing the consummation of the
Merger shall be in effect; provided, however, that prior to asserting this
condition the applicable party shall have used its reasonable best efforts
to prevent the entry of any such injunction or other order and to appeal as
promptly as possible any such injunction or other order that may be
entered.
(d) Form S-4. The Newco Form S-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(e) MSD. The MSD Agreements shall be in full force and effect and
shall not have been amended or modified, and no provision thereof shall
have been waived, without the prior written consent of Parent and the
Company.
A-2-31
(f) Limited Mutual Release and Agreement. The Limited Mutual Release
and Agreement shall be in full force and effect and shall not have been
amended or modified, and no provision thereof shall have been waived,
without the prior written consent of Parent, the Company and Newco.
SECTION 8.02. Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are further subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. (i) The representations and
warranties of the Company contained in Sections 4.06(c), 4.06(g),
4.13(b)(i) and 4.20 shall be true and correct, (ii) the representations and
warranties of the Company contained in Section 4.02(a) shall be true and
correct in all material respects, (iii) all other representations and
warranties of the Company contained in this Agreement (A) that are
qualified by a reference to materiality or a Transaction Material Adverse
Effect shall be true and correct (without regard to such reference), other
than for such failures to be true and correct that, individually or in the
aggregate, do not have a Transaction Material Adverse Effect, and (B) that
are not so qualified shall be true and correct, other than for such
failures to be true and correct that, individually or in the aggregate, do
not have a Transaction Material Adverse Effect, in the case of each of
clauses (i), (ii), (iii)(A) and (iii)(B), as of the date of this Agreement
and as of the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case as of such
earlier date), and (iv) Parent shall have received a certificate signed by
the chief executive officer of the Company to the foregoing effect.
(b) Performance of Obligations of the Company. (i) The Company shall
have performed (A) its obligations required to be performed by it under
Sections 6.01(a)(iii), 6.01(a)(viii) and 7.11, (B) in all material respects
its obligations required to be performed by it under Sections 2.01(d),
6.01(a)(i), 6.01(a)(ii), 6.01(a)(vi), 6.01(a)(vii), 6.01(a)(ix),
6.01(a)(xi), 6.01(a)(xii), 6.01(a)(xiii) (solely to the extent relating to
actions described in Section 6.01(a)(i), 6.01(a)(ii), 6.01(a)(vi),
6.01(a)(vii), 6.01(a)(ix), 6.01(a)(xi) or 6.01(a)(xii)), 7.04, 7.05 and
7.09, (C) its obligations required to be performed by it under covenants in
this Agreement qualified by a reference to materiality or a Transaction
Material Adverse Effect (without regard to such reference), other than such
failures to perform that, individually or in the aggregate, do not have a
Transaction Material Adverse Effect, and (D) all other obligations under
this Agreement, other than such failures to perform that, individually or
in the aggregate, do not have a Transaction Material Adverse Effect and
(ii) Parent shall have received a certificate signed by the chief executive
officer of the Company to the foregoing effect.
(c) Pre-Merger Transactions. The transactions contemplated by Section
3.01 shall have been consummated in accordance with the terms of this
Agreement and the Restructuring Agreement in all material respects.
(d) Company Secured Notes. The Company shall have paid in full the
Company Secured Notes as contemplated by Section 7.14.
(e) Solvency Opinion. The Company shall have received an opinion from
Duff & Phelps, LLC, American Appraisal Associates, Inc., Valuation
Research, Inc. or other independent solvency firm of nationally recognized
reputation reasonably acceptable to Parent in customary form and subject to
customary qualifications and assumptions addressed to the Company Board
substantially to the effect that Newco will not be Insolvent immediately
after the Effective Time and after giving effect to the Restructuring, the
other Transactions and the execution and delivery of the Commercial
Agreements.
SECTION 8.03. Conditions to Obligations of the Company and Newco. The
obligations of the Company and Newco to effect the Merger are further subject to
the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. (i) The representations and
warranties of Parent and Sub in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and
warranties of Parent and Sub in this Agreement that are not so qualified
shall be true and correct
A-2-32
in all material respects, in each case as of the date of this Agreement and
as of the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case on and as of
such earlier date) and (ii) the Company and Newco shall have received a
certificate signed by the chief executive officer of Parent to the
foregoing effect.
(b) Performance of Obligations of Parent and Sub. (i) Parent and Sub
shall have performed in all material respects their obligations and
complied in all material respects with their agreements and covenants under
this Agreement and (ii) the Company and Newco shall have received a
certificate signed by the chief executive officer of Parent to the
foregoing effect.
(c) Pre-Merger Transactions. The payment of the Damages Payment and
the June 30 Royalty Payment shall have been made in accordance with the
terms of the Ongoing Litigation Agreement.
(d) Listing of Newco Common Stock. The shares of Newco Common Stock
issuable to the Company's stockholders as contemplated by this Agreement
shall have been approved for listing on a national securities exchange, or
approved for quotation on Nasdaq, in either case subject only to official
notice of issuance.
(e) Financing. The Parent Note shall have been executed and delivered
by the parties thereto and the Company shall have received from Parent not
less than $214,000,000 minus the Cash Amount in immediately available
funds.
SECTION 8.04. Frustration of Closing Conditions. Neither the Company, on
the one hand, nor Parent or Sub, on the other hand, may rely on the failure of
any condition set forth in Article VIII to be satisfied if such failure was
caused by the failure of the Company, on the one hand, or Parent or Sub on the
other hand, to use its reasonable best efforts to consummate the Merger and the
other Transactions, as required by and subject to Section 7.03.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after receipt of Company
Stockholder Approval:
(a) by mutual written consent of Parent, Sub, the Company and Newco;
(b) by either Parent or the Company:
(i) if the Merger does not occur on or before July 24, 2004 (the
"Outside Date"), unless the failure to consummate the Merger is the
result of a material breach of this Agreement by the party seeking to
terminate this Agreement; provided, however, that the passage of such
period shall be tolled for any part thereof during which any party shall
be subject to a non-final order, injunction or action preventing the
Merger;
(ii) if any Law preventing the Merger shall come into effect or if
any Governmental Entity issues an order, or injunction, or takes any
other action permanently preventing the consummation of the Merger and
such order, injunction or other action shall have become final and
nonappealable, unless such order, injunction or other action is the
result of a material breach of this Agreement by the party seeking to
terminate; provided, however, that prior to seeking to terminate, such
party shall have used its reasonable best efforts to prevent such
injunction, order or other action and to appeal as promptly as possible
any such injunction, order or other action; or
(iii) if, upon a vote at the Company Stockholders Meeting or any
postponement or adjournment thereof, the Company Stockholder Approval is
not obtained;
(c) by Parent, if the Company Board or any committee thereof (i)(A)
withdraws or modifies, in a manner adverse to Parent or Sub, or (B)
proposes publicly to withdraw or modify, in a manner
A-2-33
adverse to Parent or Sub, in either case, its approval or recommendation of
this Agreement or the Merger, (ii) fails to recommend to the Company's
stockholders that they adopt this Agreement or (iii) approves or
recommends, or proposes publicly to approve or recommend, any Company
Takeover Proposal;
(d) by the Company in accordance with Section 9.05(b), including the
notice provisions therein;
(e) by the Company, if Parent breaches or fails to perform in any
material respect any of its representations, warranties or covenants
contained in this Agreement, which breach or failure to perform, if capable
of being cured, has not been cured within 30 days after the giving of
written notice to Parent of such breach (provided that the Company may not
terminate this Agreement pursuant to this Section 9.01(e) if it is then in
material breach of any of its representations, warranties or covenants in
this Agreement); or
(f) by the Company if it has not received the Damages Payment, the
June 30 Royalty Payment or any Covenant Payment in immediately available
funds in accordance with the terms of this Agreement and the Ongoing
Litigation Agreement.
SECTION 9.02. Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 9.01, this
Agreement shall forthwith become void and have no effect, without any Liability
on the part of Parent, Sub or the Company, other than Section 3.02, Section
4.07, Section 5.05, the fourth to last sentence of Section 7.02, Section 7.06,
7.07, 7.12, this Section 9.02 and Article X, which provisions shall survive such
termination, and except for any liability that results from the material breach
by a party of any representation, warranty or covenant set forth in this
Agreement. Notwithstanding any provision in this Agreement to the contrary, as a
result of the termination of this Agreement, neither Parent (on behalf of R
Diagnostics) nor the Company shall be deemed to have (a) made a settlement with
respect to, waived, given-up, compromised, prejudiced or qualified in any manner
(i) its right to fully prosecute the New Patent Litigation, (ii) any of its
rights or interests which are the subject of the New Patent Litigation or (iii)
any claim made or to be made by either Parent or the Company, whether for
damages or otherwise, in the New Patent Litigation or (b) made a settlement with
respect to, waived, given up, compromised, prejudiced or qualified in any manner
any of its rights or interests under the Final Judgment (as modified by the
Court of Appeals Opinion) or any final judgment entered by the United States
District Court for the District of Maryland consistent with the mandate to be
returned by the United States Court of Appeals for the Fourth Circuit in
connection with the Court of Appeals Opinion. Each of the Confidentiality
Agreement and the Letter Agreement shall survive termination of this Agreement.
SECTION 9.03. Amendment. This Agreement may be amended by the parties at
any time before or after receipt of the Company Stockholder Approval; provided,
however, that after receipt of the Company Stockholder Approval, there shall be
made no amendment that by applicable Law requires further approval by the
stockholders of the Company without the further approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties. Notwithstanding the foregoing, at any time prior
to receipt of the Company Stockholder Approval, Newco may, in its sole
discretion and with, if necessary, approval of its Board of Directors,
unilaterally change the Exchange Ratio to equal the product of (a) a number
determined by Newco and (b) such ratio prior to such change.
SECTION 9.04. Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 9.03, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
A-2-34
SECTION 9.05. Procedure for Termination, Amendment, Extension or
Waiver. (a) A termination of this Agreement pursuant to Section 9.01, an
amendment of this Agreement pursuant to Section 9.03 or an extension or waiver
pursuant to Section 9.04 shall, in order to be effective, require in the case of
Parent, Sub, the Company or Newco, action by its Board of Directors or the duly
authorized designee of its Board of Directors.
(b) The Company may terminate this Agreement pursuant to Section 9.01(d)
only if (i) the Company Board has received a Company Takeover Proposal, (ii) the
Company Board shall have determined in good faith that such Company Takeover
Proposal constitutes a Superior Company Proposal, (iii) the Company has notified
Parent in writing of the determination described in Section 9.05(b)(ii), the
identity of the person making the Superior Company Proposal and the material
terms and conditions of the Superior Company Proposal; (iv) at least three
business days following receipt by Parent of the notice referred to in Section
9.05(b)(iii), and, taking into account any revised proposal made by Parent since
receipt of the notice referred to in Section 9.05(b)(iii), such Superior Company
Proposal remains a Superior Company Proposal and the Company Board has again
made the determinations referred to in Section 9.05(b)(ii) (although no
additional time period shall be required following such determinations, but it
being understood that any amendment to the price or any other material terms of
such a Superior Company Proposal shall require an additional notice and a new
three business day period), (v) the Company is in compliance with Section 6.02
and (vi) the Company Board concurrently approves and recommends, and the Company
concurrently enters into, a definitive agreement providing for the
implementation of such Superior Company Proposal.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 10.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 10.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given upon receipt by the parties at the following addresses (or at such other
address for a party as shall be specified by like notice) of a fax followed by
delivery of such notice by overnight courier of an international reputation:
(a) if to Parent or Sub or, after the Effective Time, the Company, to
Roche Holding Ltd
Grenzacherstrasse 124
CH-4070 Basel
Switzerland
Attention: Bruno Maier
Fax: +41 61 688 3196
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Ulrika Ekman
Fax: (212) 450-3800
A-2-35
(b) if to Newco or, prior to the Effective Time, the Company, to
IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, MD 20877
Attention: President
Fax: (301) 208-3789
with a copy to:
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, NY 10019
Attention: Philip A. Gelston
Sarkis Jebejian
Fax: (212) 474-3700
SECTION 10.03. Definitions. For purposes of the Transaction Agreements:
An "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person. For the avoidance of
doubt, (a) none of MSD, MST, JW, JW Consulting, Hyperion Catalysis,
Wellstat Biologics, Wellstat Therapeutics, Proteinix and ICS is an
affiliate of the Company or Newco for purposes of the Transaction
Agreements and (b) neither Genentech, Inc., a Delaware corporation, nor
Chugai Pharmaceutical Co., Ltd, a Japanese company, is an affiliate of
Parent or Sub for purposes of the Transaction Agreements.
"Commercial Agreements" means the Covenants Not to Sue, the
Improvements License Agreement, the License Agreement, the PCR License
Agreement and the PCR Services Agreement.
"Court of Appeals Opinion" means the Opinion of the Court of Appeals
for the Fourth Circuit dated July 9, 2003, with respect to Appeal No.
02-1537 (4th Cir.).
"Covered ECL Technology" shall have the meaning given to the term
Licensed ECL Technology in the License Agreement.
"Covenants Not to Sue" means that certain agreement entered into
simultaneously with the execution and delivery of this Agreement by Newco,
MSD, MST, R Diagnostics, Parent and the Continuing Licensee Subsidiary
providing for the reciprocal covenants not to sue of each party thereto.
"Environmental Law" means any binding and applicable Law, code,
Judgment, injunction, Consent, or agreement issued, promulgated or entered
into by or with any Governmental Entity, relating in any way to pollution,
preservation or reclamation of natural resources, the presence, management,
Release or threat of Release of, or exposure to, Hazardous Materials or to
human health and safety.
"FHLR" means F. Hoffmann-La Roche Ltd, a Swiss limited liability
company.
"Hazardous Material" means any chemical, material, substance, waste,
pollutant or contaminant that is prohibited or regulated by or pursuant to
any Environmental Law, including petroleum products and byproducts,
asbestos, urea formaldehyde foam insulation, asbestos or
asbestos-containing materials, medical or infectious wastes,
polychlorinated biphenyls, radon gas, chlorofluorocarbons and all other
ozone-depleting substances.
"Improvements License Agreement" means that certain agreement entered
into simultaneously with the execution and delivery of this Agreement by
the Company and R Diagnostics providing for the license of certain
intellectual property improvements.
A-2-36
"Insolvent" with respect to any person means, on the date of
determination, (a) the fair value of the assets of such person, at a fair
valuation, will not exceed its liabilities, subordinated, contingent or
otherwise, (b) the present fair saleable value of the property of such
person will not exceed the amount that will be required to pay the probable
liability of its debts and other liabilities, subordinated, contingent, or
otherwise, as such liabilities become absolute and matured, or (c) such
person will be unable to pay its liabilities, subordinated, contingent or
otherwise, as such liabilities become absolute and matured. Any
determination as to the Insolvency of any person shall be made in a manner
consistent with and assuming the Intended Treatment.
"Intellectual Property Rights" means (a) trademarks, service marks,
brand names, certification marks, trade dress, assumed names, trade names
and other indications of origin, the goodwill associated with the foregoing
and registrations in any jurisdiction of, and applications in any
jurisdiction to register, the foregoing, (b) patents, applications for
patents (including divisions, continuations, continuations in part and
renewal applications), (c) non-public information, trade secrets and
confidential information and rights in any jurisdiction to limit the use or
disclosure thereof by any person, and (d) copyrighted works and
registrations or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof.
"JW" means Jacob Wohlstadter, an individual whose business address is
MSD, 9238 Gaither Road, Gaithersburg, MD 20877.
"JW Consulting" means JW Consulting Services, L.L.C., a Delaware
limited liability company.
"Liabilities" means any and all debts, liabilities, commitments and
obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown,
whenever or however arising and whether or not the same would be required
by GAAP to be reflected in financial statements or disclosed in the notes
thereto.
"Licensed Intellectual Property Rights" means all Intellectual
Property Rights owned by a third party and licensed or sublicensed to
either the Company or any Company Subsidiary.
"License Litigation" means Civil Action PJM-97-3461 (D. Md.) and
Appeal No. 02-1537 (4th Cir.).
"Limited Mutual Release and Agreement" means the Release and Agreement
dated as of the date of this Agreement, among the Company, Newco, Hyperion,
Wellstat Biologics, Wellstat Therapeutics, Proteinix and ICS.
"MSD" means Meso Scale Diagnostics, LLC., a Delaware limited liability
company.
"MSD Agreements" means the agreements set forth on Schedule A to this
Agreement.
"MSD Consent" means the Global Consent and Agreement dated as of the
date of this Agreement, among Parent, the Company, Newco, MSD, MST, JW and
JW Consulting.
"MST" means Meso Scale Technologies, LLC., a Delaware limited
liability company.
"Newco Rights" mean the rights issued pursuant to a shareholder rights
agreement as contemplated by Section 2.02 of the Restructuring Agreement.
"New Patent Litigation" means Civil Action Case No. PJM 03CV2000
pending as of the date of this Agreement before the United States District
Court for the District of Maryland and any related actions (other than the
License Litigation) and the Civil Action, Case No. LG Dusseldorf 4b O
258/03, in the regional court of Dusseldorf, Germany, filed on July 9,
2003, and any related actions (other than the License Litigation).
"1992 License Agreement" means the License and Technology Development
Agreement dated as of September 23, 1992, between the Company and R
Diagnostics.
A-2-37
"Owned Intellectual Property Rights" means all Intellectual Property
Rights owned or jointly owned by either the Company or any Company
Subsidiary.
A "Parent Material Adverse Effect" means a material adverse effect on
the business or assets of Parent and its subsidiaries, taken as a whole,
other than facts, events, changes, effects and developments relating to the
economy in general or to Parent's industry in general and not specifically
relating to Parent or any of its subsidiaries.
"PCR License Agreement" means the License Agreement (Human IVD,
Veterinary IVD, HLA Typing, Paternity, DNA Manufacturing and Plasma
Testing) dated as of the date of this Agreement, among Newco, R
Diagnostics, FHLR and RMS (as defined in this Section 10.03).
"PCR Services Agreement" means the License Agreement (Human IVD
Services and Animal Diagnostic Services) dated as of the date of this
Agreement, among Newco, R Diagnostics, FHLR and RMS.
A "person" means any individual, firm, corporation, partnership,
company, limited liability company, trust, joint venture, association,
Governmental Entity or other entity.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing or
migrating into or through the environment or any facility, building or
structure.
"RMS" means Roche Molecular Systems, Inc., a Delaware corporation.
"R Parties" means R Corp, Parent, Sub, R Diagnostics, FHLR and RMS.
"Senior Secured Notes Purchase Agreement" means the Note Purchase
Agreement, dated as of March 22, 1999, among the Company and the purchasers
party thereto.
A "subsidiary" of any person means another person, an amount of the
voting securities or other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person. For the avoidance of doubt, neither
Genentech, Inc., a Delaware corporation, nor Chugai Pharmaceutical Co.,
Ltd., a Japanese company, is a subsidiary of Parent or Sub for purposes of
the Transaction Agreements.
"Transaction Agreements" means this Agreement, the Restructuring
Agreement, the Post-Closing Covenants Agreement, the Tax Allocation
Agreement, the Limited Mutual Release and Agreement, the Ongoing Litigation
Agreement and the MSD Consent.
A "Transaction Material Adverse Effect" means any change, effect,
occurrence, condition, development or state of facts that (a) renders the
Company Insolvent immediately prior to the Effective Time or (b) after
giving effect to and assuming the consummation of the Restructuring and the
other Transactions, (i) results in or would reasonably be expected to
result in a loss (in whole or in part or for any period of time other than
any such loss that arises out of or results from any action by, or failure
to act on the part of, R Diagnostics or any of its affiliates) (A) by the
Company (through the Continuing Licensee Subsidiary) of its ownership of,
rights to and under and license under the License Agreement or (B) by Newco
of, or a failure by Newco to obtain or retain, its ownership of, rights to
and license of the Intellectual Property Rights that comprise the Covered
ECL Technology, in the case of each of clauses (i)(A) and (i)(B) that
materially impairs the legal right of R Diagnostics and its affiliates,
taken as a whole, to make, have made, use, sell, place or otherwise
commercialize products using Covered ECL Technology as contemplated by the
License Agreement or (ii) renders Newco Insolvent at the Effective Time;
provided, however, that no change, effect, occurrence, condition or
development or state of facts (x) arising out of, related to, or in
connection with, the License Litigation or the New Patent Litigation or (y)
principally attributable to the economy in general or Newco's industry in
general shall constitute a Transaction Material Adverse Effect.
A-2-38
SECTION 10.04. Interpretation. When a reference is made in this Agreement
to a Section, Exhibit, Schedule or party, such reference shall be to a Section
of, or an Exhibit, Schedule or party to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein", "hereby" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The words "date hereof" shall refer to the date of this Agreement.
The term "or" is not exclusive. The word "extent" in the phrase "to the extent"
shall mean the degree to which a subject or other thing extends, and such phrase
shall not mean simply "if". The words "in the ordinary course consistent with
past practice" and words of similar import when used in this Agreement with
respect to Newco or any of its subsidiaries shall be interpreted to mean in the
ordinary course consistent with past practice of the Company and the Company
Subsidiaries. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms. For the avoidance of doubt,
all lower case words used in this Agreement shall be interpreted in accordance
with Delaware Law unless such lower case word is otherwise defined in this
Agreement. Any agreement or instrument defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement or
instrument as from time to time amended, modified or supplemented. References to
a person are also to its permitted successors and assigns.
SECTION 10.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any applicable
Law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
SECTION 10.06. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties. Each party need not sign
the same counterpart.
SECTION 10.07. Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the Company Disclosure Letter (a) taken together with the other
Transaction Agreements, the Commercial Agreements, the Confidentiality Agreement
and the Letter Agreement, constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the Transactions and the transactions contemplated by the
Commercial Agreements; provided, however, that as of and after the Effective
Time, the Confidentiality Agreement shall have no further force and effect and
shall be superseded by Section 3.07 of the Post-Closing Covenants Agreement and
(b) except for the provisions of Article II, Section 7.04 and Section 7.05, is
not intended to confer upon any person other than the parties any rights or
remedies.
SECTION 10.08. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 10.09. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Any purported assignment without such
consent shall be void; provided, however, the parties acknowledge and agree that
the conversion of Newco in accordance with Section 2.01 of the Restructuring
Agreement and the continuation of Newco as a result thereof shall be deemed not
to be an assignment and shall not require any consent of any party. Subject to
A-2-39
the preceding sentences, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and assigns.
SECTION 10.10. Enforcement; Consent to Service of Process. (a) The
parties agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Delaware state court or any Federal court of the United States
of America sitting in the State of Delaware, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (i) consents to submit itself to the personal jurisdiction of any
Delaware state court or any Federal court of the United States sitting in the
State of Delaware in the event any dispute arises out of this Agreement or any
Transaction, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(iii) agrees that it will not bring any action relating to this Agreement or any
Transaction in any court other than in any Delaware state court or any Federal
court of the United States of America sitting in the State of Delaware and (iv)
waives any right to trial by jury with respect to any action related to or
arising out of this Agreement or any Transaction.
(b) Parent hereby appoints Roche Holdings, Inc., with offices on the date
of this Agreement at 1201 N. Orange Street, Suite 1050, Wilmington, Delaware
19801, as its authorized agent (the "Authorized Agent"), upon whom process may
be served in any suit, action or proceeding arising out of or relating to this
Agreement or any Transaction that may be instituted in any court described in
Section 10.10(a). Parent agrees to take any and all reasonable action, including
the filing of any and all documents, that may be necessary to establish and
continue such appointment in full force and effect as aforesaid. Parent agrees
that service of process upon the Authorized Agent shall be, in every respect,
effective service of process upon Parent.
IN WITNESS WHEREOF, Parent, Sub, the Company and Newco have duly executed
and delivered this Agreement, all as of the date first written above.
ROCHE HOLDING LTD,
By /s/ DR. FRANZ B. HUMER
------------------------------------
Name: Franz B. Humer
Title: President and Chairman
By /s/ ERICH HUNZIKER
------------------------------------
Name: Erich Hunziker
Title: Chief Financial Officer
66 ACQUISITION CORPORATION II,
By /s/ GOTTLIEB KELLER
------------------------------------
Name: Gottlieb Keller
Title: President
A-2-40
IGEN INTERNATIONAL, INC.,
By /s/ SAMUEL J. WOHLSTADTER
-----------------------------------
Name: Samuel J. Wohlstadter
Title: Chairman and Chief Executive
Officer
IGEN INTEGRATED HEALTHCARE, LLC,
By /s/ RICHARD J. MASSEY
------------------------------------
Name: Richard J. Massey
Title: President and Chief
Operating Officer
A-2-41
SCHEDULE A
MSD AGREEMENTS
MSD Consent
Consent by MSD and MST to the License Agreement in the form attached to the
License Agreement
Covenants Not to Sue
Joinder of MSD and MST to the Ongoing Litigation Agreement in the form set
forth in the Ongoing Litigation Agreement
A-2-42
ANNEX 3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
POST-CLOSING COVENANTS AGREEMENT
DATED AS OF JULY 24, 2003,
AMONG
ROCHE HOLDING LTD,
IGEN INTERNATIONAL, INC.
AND
IGEN INTEGRATED HEALTHCARE, LLC
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
------
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions................................................. A-3-1
ARTICLE II
INDEMNIFICATION
SECTION 2.01. Indemnification by Newco.................................... A-3-3
SECTION 2.02. Indemnification by Parent................................... A-3-4
SECTION 2.03. Procedures Relating to Indemnification...................... A-3-4
SECTION 2.04. Certain Limitations......................................... A-3-6
SECTION 2.05. Exclusivity of Tax Allocation Agreement..................... A-3-7
SECTION 2.06. Exclusivity of Remedies..................................... A-3-7
ARTICLE III
OTHER AGREEMENTS
SECTION 3.01. Insurance................................................... A-3-7
SECTION 3.02. Characterization of Payments................................ A-3-8
SECTION 3.03. Agreement Not to Solicit Employees.......................... A-3-8
SECTION 3.04. Successors.................................................. A-3-8
SECTION 3.05. Third Party Rights; Notices................................. A-3-8
SECTION 3.06. Retention of Records........................................ A-3-9
SECTION 3.07. Confidentiality; Preservation of Privilege; Access.......... A-3-9
SECTION 3.08. Indemnification; Certain Claims............................. A-3-11
SECTION 3.09. Public Announcements........................................ A-3-12
SECTION 3.10. Standstill.................................................. A-3-13
SECTION 3.11. Transferred Customers....................................... A-3-13
SECTION 3.12. New Patent Litigation....................................... A-3-13
SECTION 3.13. I/R Agreements.............................................. A-3-13
SECTION 3.14. PCR License Payment......................................... A-3-13
ARTICLE IV
MUTUAL RELEASES
SECTION 4.01. Mutual Releases............................................. A-3-13
SECTION 4.02. Enforcement of Article IV................................... A-3-14
ARTICLE V
MISCELLANEOUS AND GENERAL
SECTION 5.01. Effectiveness; Modification or Amendment.................... A-3-14
SECTION 5.02. Termination................................................. A-3-14
SECTION 5.03. Notices..................................................... A-3-14
SECTION 5.04. Interpretation.............................................. A-3-15
SECTION 5.05. Severability................................................ A-3-15
SECTION 5.06. Counterparts................................................ A-3-16
A-3-i
PAGE
------
SECTION 5.07. Entire Agreement; Third-Party Beneficiaries................. A-3-16
SECTION 5.08. Certain Obligations......................................... A-3-16
SECTION 5.09. Governing Law............................................... A-3-16
SECTION 5.10. Assignment.................................................. A-3-16
SECTION 5.11. Enforcement; Consent to Service of Process.................. A-3-16
SECTION 5.12. Extension; Waiver........................................... A-3-17
A-3-ii
POST-CLOSING COVENANTS AGREEMENT dated as of July 24, 2003 (this
"Agreement"), among ROCHE HOLDING LTD, a joint stock company organized under the
laws of Switzerland ("Parent"), IGEN INTERNATIONAL, INC., a Delaware corporation
(the "Company"), and IGEN INTEGRATED HEALTHCARE, LLC, a Delaware limited
liability company ("Newco").
WHEREAS Parent, 66 ACQUISITION CORPORATION II, a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), the Company and Newco have entered
into an Agreement and Plan of Merger dated as of the date of this Agreement (the
"Merger Agreement"), providing for the Merger (as defined in the Merger
Agreement);
WHEREAS simultaneously with the execution and delivery of this Agreement,
the Company and Newco are entering into a Restructuring Agreement, dated as of
the date of this Agreement (the "Restructuring Agreement"), pursuant to which
prior to the Effective Time (as defined in the Merger Agreement), among other
things (a) the Newco Assets (as defined in the Restructuring Agreement) will be
transferred to Newco or one or more of Newco's subsidiaries and (b) Newco or one
or more of its subsidiaries will assume the Assumed Liabilities (as defined in
the Restructuring Agreement);
WHEREAS as a condition to their willingness to enter into the Merger
Agreement and the Restructuring Agreement, the parties thereto have requested
that the parties hereto enter into this Agreement; and
WHEREAS the parties to this Agreement have determined that it is necessary
and desirable to set forth certain agreements that will govern certain matters
that may arise following the Effective Time.
NOW, THEREFORE, in consideration of the foregoing, and the representations,
warranties, covenants and agreements set forth herein, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Unless otherwise noted, terms used but not
defined in this Agreement shall have the meanings set forth in the Merger
Agreement or, if not set forth in the Merger Agreement, in the Restructuring
Agreement. In addition, the following terms shall have the following meanings:
"Action" shall have the meaning set forth in Section 3.07(c).
"Business Day" shall mean any day other than a Saturday, Sunday and
any day on which the banks in Germany, Switzerland or the United States or
the federal courts in the United States are permitted or required by
applicable Law to close.
"Company Recourse Right" shall have the meaning set forth in Section
3.05(b).
"Filings" shall mean the Proxy Statement, the Newco Form S-4, the
Newco Form 8-A and any other document filed or required to be filed with
the SEC by the Company or Newco in connection with the Transactions, or any
preliminary or final form thereof or any amendment or supplement thereto.
"Indemnifiable Losses" shall mean, subject to Section 2.04 and Section
2.05, all losses, Liabilities, damages, deficiencies, fines, expenses,
Actions, demands, Judgments or settlements, whether or not resulting from
Third Party Claims, including interest and penalties recovered by a third
party with respect thereto and out-of-pocket expenses and reasonable
attorneys' and accountants' fees and expenses incurred in the investigation
or defense of any of the same or in asserting, preserving or enforcing any
of an Indemnitee's rights hereunder, suffered or incurred by an Indemnitee.
"Indemnifying Party" shall have the meaning set forth in Section
2.03(a).
A-3-1
"Indemnitee" shall mean any of the Parent Indemnitees or the Newco
Indemnitees, as the case may be, who or which may seek indemnification
under this Agreement.
"PCR License Payment" shall mean the $50,000,000 payment due not later
than two Business Days after the Effective Time pursuant to the PCR License
Agreement.
"Newco Indemnitees" shall mean Newco, each affiliate of Newco,
including any of its direct or indirect subsidiaries, each of their
respective Representatives and each of the heirs, executors, successors and
assigns of any of the foregoing.
"Newco Information" shall mean the Company Records and any and all
information, technical data or know-how, whether written or oral (including
that which relates to research, manufacturing, product plans, products,
services, suppliers, customers, markets, software, developments,
inventions, processes, designs, drawings, engineering, hardware
configuration information, marketing, finances or individuals in the
employment) of any Newco Company after giving effect to the Restructuring,
that the Company or any of its affiliates (including Newco and its
subsidiaries) or any of their respective Representatives furnishes or has
furnished to Parent or any of its affiliates (collectively, the "receiving
person") or any of their respective Representatives whether furnished
orally or in writing or by any other means or gathered by inspection and
regardless of whether the same is specifically marked or designated as
"confidential" or "proprietary", together with any and all notes,
memoranda, analyses, compilations, studies or other documents (whether in
hard copy or electronic media) prepared by the receiving person or any of
its Representatives which contain or otherwise reflect such Newco
Information, together with any and all copies, extracts or other
reproductions of any of the same; provided, however, that the term "Newco
Information" does not include information that:
(a) is or becomes generally available to the public through no
wrongful act of the receiving person or its Representatives; or
(b) is or becomes available to the receiving person on a
non-confidential basis from a source other than (i) the Company or any
of its affiliates, (ii) Newco or any of its affiliates or (iii) their
respective Representatives, provided that such source is not known by
the receiving person to be subject to a confidentiality agreement with
the Company or any of its affiliates or Newco or any of its affiliates.
"Newco Recourse Right" shall have the meaning set forth in Section
3.05(a).
"Newco Successor Company" shall have the meaning set forth in Section
3.04(a).
"Parent Indemnitees" shall mean Parent, each affiliate of Parent,
including any of its direct or indirect subsidiaries (including, after the
Effective Time, the Company), each of their respective Representatives and
each of the heirs, executors, successors and assigns of any of the
foregoing.
"Parent Information" shall mean the Company Records and any and all
information, technical data or know-how, whether written or oral (including
that which relates to research, manufacturing, product plans, products,
services, suppliers, customers, markets, software, developments,
inventions, processes, designs, drawings, engineering, hardware
configuration information, marketing, finances or individuals in the
employment) of Parent or any of its affiliates after giving effect to the
Restructuring and the Merger, that Parent or any of its affiliates or any
of their respective Representatives furnishes or has furnished to the
Company (prior to the Effective Time), Newco or any of their respective
affiliates (collectively, the "receiving person") or any of their
respective Representatives whether furnished orally or in writing or by any
other means or gathered by inspection and regardless of whether the same is
specifically marked or designated as "confidential" or "proprietary",
together with any and all notes, memoranda, analyses, compilations, studies
or other documents (whether in hard copy or electronic media) prepared by
the receiving person or any of its Representatives which contain or
otherwise reflect such Parent Information, together with any and all
copies, extracts or
A-3-2
other reproductions of any of the same; provided, however, that the term
"Parent Information" does not include information that:
(a) is or becomes generally available to the public through no
wrongful act of the receiving person or its Representatives; or
(b) is or becomes available to the receiving person on a
non-confidential basis from a source other than Parent or any of its
affiliates or Representatives, provided that such source is not known by
the receiving person to be subject to a confidentiality agreement with
Parent or any of its affiliates.
"Parent Successor Company" shall have the meaning set forth in Section
3.04(b).
"Prevailing Party" shall have the meaning set forth in Section 4.02.
"Request" shall have the meaning set forth in Section 3.07(c).
"Third Party Claim" shall have the meaning set forth in Section
2.03(a).
ARTICLE II
INDEMNIFICATION
SECTION 2.01. Indemnification by Newco. Subject to the provisions of this
Article II, from and after the Effective Time Newco shall indemnify, defend and
hold harmless the Parent Indemnitees from and against, and pay or reimburse the
Parent Indemnitees for, all Indemnifiable Losses, as incurred, to the extent:
(a) relating to or arising from the Newco Business, the Newco Assets
or the Assumed Liabilities (including the failure by Newco or any Newco
Company to pay, perform or otherwise discharge any of the Assumed
Liabilities in accordance with their terms), whether such Indemnifiable
Losses relate to or arise from events, occurrences, actions, omissions,
facts or circumstances occurring, existing or asserted before, at or after
the Effective Time;
(b) relating to or arising from the Retained Contracts, whether such
Indemnifiable Losses relate to or arise from events, occurrences, actions,
omissions, facts or circumstances occurring, existing or asserted before,
at or after the Effective Time; provided, however, that with respect to
Indemnifiable Losses related to or arising from events, occurrences, facts
or circumstances relating to or arising from actions or omissions by the
Company occurring after the Effective Time, Newco shall not be liable to
the extent such Indemnifiable Losses directly relate to or arise from
actions or omissions by the Company that are inconsistent in any respect
with any written instruction from Newco with respect to such Retained
Contract;
(c) relating to or arising from any untrue or allegedly untrue
statement of a material fact contained in any of the Filings by the Company
prior to the Effective Time or by Newco at any time, or any omission to
state therein a material fact relating to the Company or any Newco Company
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
but in each case not with respect to statements made therein or
incorporated by reference therein based upon information supplied by Parent
or any of its affiliates or any of their respective Representatives
specifically for inclusion or incorporation by reference therein;
(d) relating to or arising from the breach by any Newco Company of any
agreement or covenant contained in any Transaction Agreement which is to be
performed or complied with by it after the Effective Time;
(e) relating to or arising from the breach by the Company or Newco
prior to the Effective Time of any agreement or covenant contained in any
Transaction Agreement which is to be performed or complied with by it prior
to the Effective Time;
A-3-3
(f) relating to or arising from the breach by the Continuing Licensee
Subsidiary of any agreement or covenant contained in the License Agreement
or the Covenants Not to Sue, in each case which is to be performed or
complied with by it prior to the Effective Time; or
(g) relating to or arising from any guarantee, performance bond or
other Contract that Parent, any of its affiliates or the Company may be
required to grant in favor of, or enter into with, any Governmental Entity,
whether prior to, at or after the Effective Time, in connection with any
Contract entered into prior to the Effective Time by the Company or any
Company Subsidiary with any Governmental Entity.
SECTION 2.02. Indemnification by Parent. Subject to the provisions of
this Article II, from and after the Effective Time Parent shall indemnify,
defend and hold harmless the Newco Indemnitees from and against, and pay or
reimburse the Newco Indemnitees, for all Indemnifiable Losses, as incurred, to
the extent:
(a) relating to or arising from the Continuing Company Business, the
Continuing Company Assets or the Continuing Company Liabilities (including
the failure by the Company to pay, perform or otherwise discharge any of
the Continuing Company Liabilities in accordance with their terms), whether
such Indemnifiable Losses relate to or arise from events, occurrences,
actions, omissions, facts or circumstances occurring, existing or asserted
before, at or after the Effective Time (other than Indemnifiable Losses
that relate to or arise from (i) the Retained Contracts, which are the
subject of Section 2.02(b), and (ii) the Transaction Agreements, which are
the subject of Sections 2.02(d) and 2.02(e));
(b) relating to or arising from the Retained Contracts with respect to
such Indemnifiable Losses relating to or arising from events, occurrences,
facts or circumstances relating to or arising from actions or omissions by
the Company occurring after the Effective Time that are inconsistent in any
respect with any written instruction from Newco with respect to such
Retained Contract;
(c) relating to or arising from any untrue statement of a material
fact contained in any of the Filings, or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, but only with respect to statements made
therein or incorporated by reference therein based upon information
supplied by Parent or any of its affiliates or any of their respective
Representatives (including, after the Effective Time, the Company and the
subsidiaries of the Company) specifically for inclusion or incorporation by
reference therein;
(d) relating to or arising from the breach by Parent or any of its
affiliates (other than, prior to the Effective Time, the Company, Newco or
any of their affiliates) of any agreement or covenant contained in any
Transaction Agreement, whether such Indemnifiable Losses relate to or arise
from events, occurrences, actions, omissions, facts or circumstances
occurring, existing or asserted before, at or after the Effective Time; or
(e) relating to or arising from the breach by the Company of any
agreement or covenant contained in any Transaction Agreement which is to be
performed or complied with by it after the Effective Time.
SECTION 2.03. Procedures Relating to Indemnification. (a) In order for an
Indemnitee to be entitled to any indemnification provided for under this
Agreement in respect of, arising out of or involving a claim made by any person
who is not an Indemnitee against such Indemnitee (a "Third Party Claim"), such
Indemnitee must notify the party who may become obligated to provide
indemnification hereunder (the "Indemnifying Party") in writing, and in
reasonable detail, of the Third Party Claim reasonably promptly, and in any
event within 10 Business Days after receipt by such Indemnitee of written notice
of the Third Party Claim; provided, however, that failure to give such
notification shall not affect the indemnification provided hereunder except to
the extent the Indemnifying Party shall have been actually and materially
prejudiced as a result of such failure; provided further, however, that with
respect to any Third Party Claim for which Newco is the Indemnifying Party, such
Indemnifying Party shall be deemed
A-3-4
to have received notice with respect to such Third Party Claim by or against the
Company or any of its subsidiaries (other than the Newco Companies) for which
the Company or any of its subsidiaries (other than the Newco Companies) received
notice prior to the Effective Time. After any required notification (if
applicable), the Indemnitee shall deliver to the Indemnifying Party, promptly
after the Indemnitee's receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnitee relating to the Third Party
Claim.
(b) If a Third Party Claim is made against an Indemnitee, the Indemnifying
Party will be entitled to participate in the defense thereof and, if it so
chooses, to assume the defense thereof (at the expense of the Indemnifying
Party) with counsel selected by the Indemnifying Party and reasonably
satisfactory to the Indemnitee. Should the Indemnifying Party so elect to assume
the defense of a Third Party Claim, the Indemnifying Party will not be liable to
the Indemnitee for any legal expenses subsequently incurred by the Indemnitee in
connection with the defense thereof. If the Indemnifying Party assumes such
defense, the Indemnitee shall have the right to participate, at its own expense,
in the defense thereof solely to assert any additional defenses and to employ
counsel, at its own expense, except as set forth below, separate from the
counsel employed by the Indemnifying Party, it being understood that the
Indemnifying Party shall control such defense. The Indemnifying Party shall be
liable for the reasonable fees and expenses of counsel employed by the
Indemnitee for any period during which the Indemnifying Party has not assumed
the defense thereof (other than during any period in which the Indemnitee shall
have failed to give notice of the Third Party Claim as provided above).
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to
assume the defense of any Third Party Claim (and shall not be liable for the
fees and expenses of counsel incurred by the Indemnitee in defending such Third
Party Claim, except for the reasonable fees and expenses of counsel selected by
the Indemnifying Party and reasonably satisfactory to the Indemnitee) if the
Third Party Claim seeks an order, injunction or other equitable relief or relief
for other than money damages against the Indemnitee which the Indemnitee
reasonably determines, after conferring with its counsel, cannot be separated
from any related claim for money damages. If such equitable or other relief
portion of the Third Party Claim can be so separated from that for money
damages, the Indemnifying Party shall be entitled to assume the defense of the
portion relating to money damages. The indemnification required by Section 2.01
or 2.02, as the case may be, shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or the Indemnifiable Loss is incurred. If the Indemnifying Party
chooses to defend or prosecute a Third Party Claim (i) all the parties hereto
reasonably necessary or appropriate for such defense or prosecution shall
cooperate in the defense or prosecution thereof, which cooperation shall include
the retention in accordance with this Agreement and (upon the Indemnifying
Party's request) the provision to the Indemnifying Party of records and
information which are reasonably relevant to such Third Party Claim, (ii) the
Indemnifying Party shall keep the Indemnitee reasonably informed of all
significant developments in connection with the defense or prosecution of such
Third Party Claim and (iii) the Indemnitee will agree to any settlement,
compromise or discharge of such Third Party Claim which the Indemnifying Party
may recommend (after representing to the Indemnitee that such settlement is
reasonably likely to be acceptable to the parties to the Third Party Claim) and
which by its terms obligates the Indemnifying Party to pay the full amount of
liability in connection with such Third Party Claim; provided, however, that,
without the Indemnitee's consent (which consent shall not be unreasonably
withheld, conditioned or delayed), the Indemnifying Party shall not consent to
entry of any Judgment or enter into any settlement (x) that provides for
injunctive or other nonmonetary relief affecting the Indemnitee or its
properties or (y) that does not include as an unconditional term thereof the
giving by each claimant or plaintiff to such Indemnitee of a release from all
liability with respect to such claim; provided further, however, that if the
Indemnitee does not consent to any settlement recommended by the Indemnifying
Party (after representing to the Indemnitee that such settlement is reasonably
likely to be acceptable to the parties to the Third Party Claim) then the
Indemnifying Party (1) shall not in any event be obligated to indemnify the
Indemnitee, or otherwise be responsible, for any amount in excess of the amount
of the settlement so recommended by the Indemnifying Party and (2) shall be
entitled to reimbursement of the fees and expenses of counsel incurred by the
Indemnifying Party after the date on which the recommendation was made to the
Indemnitee in the event the final and unappealable Judgment
A-3-5
in such Third Party Claim exceeds the amount of the settlement so recommended.
If the Indemnifying Party shall have assumed the defense of a Third Party Claim,
the Indemnitee shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the Indemnifying Party's
prior written consent. If the Indemnifying Party does not or is not entitled to
assume the defense of a Third Party Claim, the Indemnitee may defend the same in
such manner as it may deem appropriate; provided, however, that the Indemnitee
shall not admit any liability with respect to, or settle, compromise or
discharge such Third-Party Claim without the Indemnifying Party's prior written
consent.
(c) In order for an Indemnitee to be entitled to any indemnification
provided for under this Agreement in respect of a claim that does not involve a
Third Party Claim, the Indemnitee shall deliver notice of such claim (in
reasonably sufficient detail to enable the Indemnifying Party to evaluate such
claim) with reasonable promptness to the Indemnifying Party. The failure by any
Indemnitee to give such notification shall not affect the indemnification
provided hereunder except to the extent that the Indemnifying Party shall have
been actually and materially prejudiced as a result of such failure. If the
Indemnifying Party does not notify the Indemnitee within 20 Business Days
following its receipt of such notice that the Indemnifying Party disputes its
liability with respect to such claim under Section 2.01 or 2.02, as the case may
be, the claim shall be conclusively deemed a liability of the Indemnifying Party
under Section 2.01 or 2.02, as the case may be, and the Indemnifying Party shall
pay the amount of such liability to the Indemnitee on demand or, in the case of
any notice in which the amount of the claim (or any portion thereof) is
estimated, on such later date when the amount of such claim (or such portion
thereof) becomes finally determined. If the Indemnifying Party has timely
disputed its liability with respect to such claim, as provided above, the
Indemnifying Party and the Indemnitee shall proceed in good faith to negotiate a
resolution of such dispute and, if not resolved through negotiations, such
dispute shall be resolved by litigation in an appropriate court of competent
jurisdiction.
(d) Notwithstanding any other provision of this Agreement, Newco
acknowledges and agrees that Newco shall (solely at its own cost and expense)
assume and continue the defense of the Newco Litigation and use its reasonable
best efforts to defend any Parent Indemnitee and to cause any Parent Indemnitee
to be dismissed with prejudice as a party to any Newco Litigation.
SECTION 2.04. Certain Limitations. (a) The amount of any Indemnifiable
Losses or other liability for which indemnification is provided under this
Agreement shall be net of any amounts actually recovered by the Indemnitee from
third parties (including amounts actually recovered under insurance policies)
with respect to such Indemnifiable Losses. The Indemnitee shall use its
reasonable best efforts to seek to obtain recovery in respect of any
Indemnifiable Loss or such other liability under any available insurance policy.
(b) No Indemnitee shall be entitled to indemnification provided for under
this Agreement if the facts, events or other circumstances giving rise to the
indemnification claim arose from or are related to (i) any breach of the
representations, warranties, covenants or agreements of such Indemnitee or its
affiliates in this Agreement or in any other Transaction Agreement (it being
understood that the representations, warranties, covenants and agreements of the
Company in the Merger Agreement shall for the sole purpose of this Section
2.04(b) be deemed to have been given by Newco) or (ii) actions, omissions,
inactions or disclosures taken or made by the Indemnitee or its affiliates.
(c) All indemnification payments under this Agreement shall be reduced to
take account of the present value of any net Tax benefit (including any current
or future deductions, any reduction of income or gain upon a sale, disposition,
conveyance, license or other similar transaction as a result of increased Tax
basis, any Tax refunds received, any use of a credit of Taxes and any increase
in the amount of losses, reliefs, allowances or other similar Tax attributes)
realized by the Indemnitee in connection with or otherwise arising (directly or
indirectly) from the incurrence of any Indemnifiable Loss. Upon the written
request of the Indemnifying Party, the Indemnitee shall provide the amount of
the Tax benefit realized by the Indemnitee in connection with or otherwise
arising (directly or indirectly) from the incurrence of any Indemnifiable Loss
together with reasonable detail with respect to such calculation. In computing
the amount of any such Tax benefit, the Indemnitee shall be deemed to recognize
all other items of income, gain, loss, deduction or credit before recognizing
any item arising from the receipt of any indemnification
A-3-6
payment hereunder or the incurrence or payment of any Indemnifiable Loss. The
Indemnitee shall cooperate fully with all requests from the Indemnifying Party
in connection with determining the present value of such net Tax benefit.
(d) The amount of all indemnification obligations under this Agreement
shall be calculated on an after-tax basis (without taking into account any net
operating loss or other similar tax credit or item available to offset such
amount). Any payments made to one party by another party pursuant to this
Agreement shall be treated for all Tax purposes as nontaxable payments
(dividends or capital contributions, as the case may be) made between Newco and
the Company immediately prior to the Merger, unless, and then only to the
extent, otherwise required by a Final Determination (as defined in the Tax
Allocation Agreement).
SECTION 2.05. Exclusivity of Tax Allocation Agreement. Except for
Sections 2.04(c), 2.04(d) and 3.02 of this Agreement, and Sections 2.01(f), 4.19
and 7.08 of the Merger Agreement, the Tax Allocation Agreement shall be the
exclusive agreement among the parties with respect to all Tax matters, including
indemnification and any procedures in connection therewith.
SECTION 2.06. Exclusivity of Remedies. From and after the Effective Time,
the remedies provided for in this Article II shall, as between the parties, be
the exclusive monetary remedies of the parties to this Agreement with respect to
the Transaction Agreements, except if the indemnification for the Indemnifiable
Losses provided for in this Article II is unavailable to any Indemnitee for any
reason, the Indemnifying Party shall contribute to the amount paid or payable by
such Indemnitee as a result of any Indemnifiable Losses in such proportion as is
appropriate to reflect any relevant equitable considerations. Each party hereto
agrees that the previous sentence shall not limit or otherwise affect any
non-monetary right or remedy which any party to this Agreement may have under
the Transaction Agreements or otherwise limit or affect any such party's right
to seek equitable relief, including specific performance. For the avoidance of
doubt, each party hereto agrees that this Article II shall not confer any (a)
additional remedy on any person for any breach of any representation, warranty
or covenant contained in any Commercial Agreement, except as provided in
2.01(f), and (b) remedy on any person for any breach of any covenant or
agreement set forth in any Transaction Agreement that does not survive the
Effective Time.
ARTICLE III
OTHER AGREEMENTS
SECTION 3.01. Insurance. From the Effective Time until the expiration of
such policies according to their terms, the Company shall use its reasonable
best efforts to maintain in effect the insurance policies maintained by the
Company immediately prior to the Effective Time (other than directors' and
officers' liability insurance policies, which are the subject of Section
3.08(b)) for which premiums have been paid in full prior to the Effective Time
and shall not take any action to surrender, terminate or otherwise limit the
coverage thereof; provided, however, that in maintaining such policies, the
Company shall not be required to make any expenditures or incur any Liabilities
with respect to the maintenance of such policies (other than any expenditures in
connection with administering or making claims under such policies, which
expenditures shall be reimbursed by Newco). In the event that any Newco Asset
suffers any damage, destruction or other casualty loss, the Company shall
surrender to Newco (a) all insurance proceeds received with respect to such
damage, destruction or casualty loss and (b) all rights of the Company with
respect to any causes of action in connection with such damage, destruction or
casualty loss. The Company shall make available to the Newco Companies the
benefit of any workers' compensation, general liability, product liability,
automobile liability, umbrella (excess) liability or crime or other insurance
policy covering or relating to the Newco Business, the Newco Assets or the
Assumed Liabilities. The Company shall promptly pay to Newco all insurance
proceeds relating to the Newco Business, the Newco Assets or the Assumed
Liabilities received by the Company under any insurance policy. Nothing in this
Section 3.01 shall (i) reduce, limit or otherwise affect the right of the
Company to seek or obtain insurance proceeds with respect to any damage,
destruction or casualty loss to or of a Continuing Company Asset, nor shall
anything in this Section 3.01 reduce, limit or otherwise affect any of
A-3-7
the rights of Newco or any other Newco Indemnitee set forth in Article II or
(ii) require the Company to obtain any additional insurance with respect to any
Newco Asset.
SECTION 3.02. Characterization of Payments. The payments made pursuant to
this Agreement shall be treated as occurring immediately before the Effective
Time, and none of the Newco Companies, the Company and its subsidiaries and
Parent and its subsidiaries or any affiliate of any of the foregoing shall take
any position inconsistent with such treatment before any Taxing Authority (as
defined in the Tax Allocation Agreement), except to the extent that a Final
Determination with respect to the recipient party causes any such payment to not
be so treated.
SECTION 3.03. Agreement Not to Solicit Employees. (a) Parent understands
that Newco shall be entitled to protect and preserve the going concern value of
the Newco Business to the extent permitted by Law and that Newco would not have
entered into this Agreement, the Restructuring Agreement, the Merger Agreement
or the other Transaction Agreements to which it is a party absent the provisions
of this Section 3.03; provided, however, that this Section 3.03 shall not inure
to the benefit of any person (or such person's affiliates other than Newco and
its subsidiaries as of immediately prior to the date of such sale, conveyance,
transfer, lease or acquisition) (i) to whom Newco sells, conveys, transfers or
leases, in one transaction or a series of related transactions, directly or
indirectly, all or substantially all of its assets or (ii) who acquires, in one
transaction or a series of related transactions, directly or indirectly, more
than a majority of the outstanding shares of Newco Common Stock whether by stock
purchase, merger, share exchange or otherwise.
(b) Parent agrees that for a period of two years from and after the
Effective Time, it shall not, and shall not permit its subsidiaries to, directly
or indirectly, solicit for employment any individual employed by any Newco
Company or any of their respective divisions. Notwithstanding the foregoing, it
shall not constitute a breach of the foregoing sentence if Parent or its
subsidiaries make solicitations for employment by general advertisements in
periodicals of broad distribution or other advertisement media of similar nature
that are not specifically directed at Employees.
SECTION 3.04. Successors. (a) Newco shall not consolidate with or merge
with or into, or sell, convey, transfer or lease, in one transaction or a series
of related transactions, all or substantially all of its assets to, any person,
unless the resulting, surviving or transferee person (the "Newco Successor
Company") shall expressly assume in writing all the obligations of Newco under
this Agreement. Except as otherwise provided in Section 3.03(a), such Newco
Successor Company shall be the successor to Newco and shall succeed to, and be
substituted for, Newco under this Agreement, but in the case of a sale,
conveyance, transfer or lease of less than substantially all of its assets,
Newco shall not be released from its obligations hereunder.
(b) Parent shall not consolidate with or merge with or into, or sell,
convey, transfer or lease, in one transaction or a series of related
transactions, all or substantially all of its assets to, any person, unless the
resulting, surviving or transferee person (the "Parent Successor Company") shall
expressly assume in writing all the obligations of Parent under this Agreement.
Such Parent Successor Company shall be the successor to Parent and shall succeed
to, and be substituted for, Parent under this Agreement, but in the case of a
sale, conveyance, transfer or lease of less than substantially all of its
assets, Parent shall not be released from its obligations hereunder.
SECTION 3.05. Third Party Rights; Notices. (a) In the event that after
the Effective Time any of the Newco Companies holds any right to indemnification
other than a right to indemnification under this Agreement or any other
contractual or other right (collectively, a "Newco Recourse Right") with respect
to any Continuing Company Liability or any Assumed Liability for which the
Company is held responsible, then (i) to the extent possible such Newco Recourse
Right shall be deemed to be held as a shared right of the applicable Newco
Companies and the Company to the extent necessary to protect the Company against
such Continuing Company Liability or such Assumed Liability and (ii) to the
extent not so possible, Newco shall, or shall cause the applicable Newco Company
to, assert or otherwise make available to the Company the full benefit of such
Newco Recourse Right by making a claim on behalf of the Company or taking other
steps reasonably requested by the Company.
A-3-8
(b) In the event that after the Effective Time the Company holds any right
to indemnification or any other contractual or other right (collectively, a
"Company Recourse Right") with respect to any Assumed Liability or any
Continuing Company Liability for which any of the Newco Companies are held
responsible, then (i) to the extent possible such Company Recourse Right shall
be deemed to be held as a shared right of the Company and the applicable Newco
Companies to the extent necessary to protect the Newco Companies against such
Assumed Liability or such Continuing Company Liability and (ii) to the extent
not so possible, the Company shall assert or otherwise make available to the
Newco Companies the full benefit of such Company Recourse Right by making a
claim on behalf of the Newco Companies or taking other steps reasonably
requested by the Newco Companies.
(c) The Company hereby agrees to provide prompt written notice to Newco of
any notice or other written communication received by the Company with respect
to any Retained Contract and a copy of such notice or other written
communication.
SECTION 3.06. Retention of Records. Except as provided in any of the
Transaction Agreements and except for any records related to Taxes (as defined
in the Tax Allocation Agreement) which are the subject of, and governed by, the
Tax Allocation Agreement, if any Company Records (as defined in the
Restructuring Agreement) are retained by the Company or a Newco Company, the
Company shall, and Newco shall, and Newco shall cause the other Newco Companies
to, retain all such Company Records in the Company's or Newco Companies'
possession or under their respective control until such Company Records are at
least six years old (or for such longer period as may be required by Law) except
that if, prior to the expiration of such period, the Company or any Newco
Company wishes to destroy or dispose of any such Company Records that are at
least three years old, then prior to destroying or disposing of any of such
Company Records, (a) the Company or Newco, as applicable, shall provide no less
than 60 days' prior written notice to the other person, specifying the Company
Records proposed to be destroyed or disposed of, and (b) if, prior to the
scheduled date of such destruction or disposal, the other person requests in
writing that any of the Company Records proposed to be destroyed or disposed of
be delivered to such other person, the Company or Newco, as applicable, promptly
shall arrange for the delivery of the requested Company Records to a location
specified by, and at the expense of, the requesting person.
SECTION 3.07. Confidentiality; Preservation of Privilege; Access. (a) (i)
Parent shall keep, and shall cause its affiliates and Representatives to keep,
the Newco Information strictly confidential and will disclose such Newco
Information only to such of its affiliates and Representatives who need to know
such Newco Information and who agree to be bound by this Section 3.07 and agree
not to disclose such Newco Information to any other person. Without the prior
written consent of Newco, Parent shall not, and Parent shall cause each other
receiving person and their respective Representatives not to, disclose the Newco
Information to any person except as may be required by Law or judicial process
and in accordance with this Section 3.07. (ii) Newco shall keep, and shall cause
its affiliates and Representatives to keep, the Parent Information strictly
confidential and will disclose such Parent Information only to such of its
affiliates and Representatives who need to know such Parent Information and who
agree to be bound by this Section 3.07 and agree not to disclose such Parent
Information to any other person. Without the prior written consent of Parent,
Parent shall not, and shall cause each other receiving person and their
respective Representatives not to disclose the Parent Information to any person
except as may be required by Law or judicial process and in accordance with this
Section 3.07.
(b) (i) In the event that any receiving person or any of its
Representatives receives a request or is required by Law or judicial process to
disclose to a court or other tribunal all or any part of the Newco Information,
such receiving party or its Representatives shall promptly notify Newco of the
request in writing, and consult with and assist Newco in seeking a protective
order or request for other appropriate remedy. In the event that such protective
order or other remedy is not obtained or Newco waives compliance with the terms
of this Section 3.07, such receiving party or its Representatives, as
applicable, shall disclose only that portion of the Newco Information or facts
which it determines in good faith, after consultation with outside counsel, is
legally required to be disclosed, and will exercise its reasonable best efforts
to assure that confidential treatment will be accorded such Newco Information or
facts by the persons or entities receiving the same. Newco will be given an
opportunity to review the Newco
A-3-9
Information or facts prior to disclosure. (ii) In the event that any receiving
person or any of its Representatives receives a request or is required by Law or
judicial process to disclose to a court or other tribunal all or any part of the
Parent Information, such receiving party or its Representatives shall promptly
notify Parent of the request in writing, and consult with and assist Parent in
seeking a protective order or request for other appropriate remedy. In the event
that such protective order or other remedy is not obtained or Parent waives
compliance with the terms of this Section 3.07, such receiving party or its
Representatives, as applicable, shall disclose only that portion of the Parent
Information or facts which it determines in good faith, after consultation with
outside counsel, is legally required to be disclosed, and will exercise its
reasonable best efforts to assure that confidential treatment will be accorded
such Parent Information or facts by the persons or entities receiving the same.
Parent will be given an opportunity to review the Parent Information or facts
prior to disclosure.
(c) Each party to this Agreement shall, promptly (and in any event within
10 Business Days of such receipt) upon its receipt or the receipt by any of its
affiliates of a request or requirement (by oral questions, interrogatories,
requests for documents, Parent Information or Newco Information, as applicable,
subpoenas, civil investigative demands or other similar processes) reasonably
regarded as calling for the inspection or production of any documents or other
Parent Information or Newco Information, as applicable, which relates to the
business or operations of any other party to this Agreement (a "Request"),
notify the party to this Agreement whose documents, Parent Information or Newco
Information, as applicable, is the subject of such Request. The preceding
sentence shall apply regardless of whether the person delivering the Request is
a party in the claim, suit, action, arbitration, inquiry, investigation or other
proceeding of any nature (whether criminal, civil, legislative, administrative,
regulatory, prosecutorial or otherwise) by or before any arbitrator or
Governmental Entity or similar person or body (each, an "Action"), to which the
Request relates. In addition to complying with the applicable provisions of
Section 3.07(b), each party shall use reasonable best efforts to assert and
maintain, or cause its affiliates to assert and maintain, any applicable claim
to privilege, immunity, confidentiality or protection in order to protect such
documents and other Parent Information or Newco Information, as applicable, from
disclosure, and shall use reasonable best efforts to seek to condition any
disclosure which may be required on such protective terms as it may reasonably
determine to be appropriate. Following the receipt of the notice described in
the first sentence of this Section 3.07(c), no party may waive an applicable
privilege without the prior written consent of the affected party to this
Agreement (or any affected affiliate or affiliates of any such party) except, in
the opinion of such party's counsel, as required by Law.
(d) From and after the Effective Time, Newco shall, and shall cause each
Newco Company to, afford to Parent, and to Parent's Representatives, reasonable
access during normal business hours to documents within the possession or
control of any Newco Company that were Assets of the Company transferred to
Newco in the Restructuring (other than any Asset that constitutes a Company
Record), to the extent such access is reasonably required for the purposes of
defending any Action commenced or threatened in writing against the Company
(other than any Action which arose or resulted from or is related to any breach
of any Transaction Agreement or in which the Company and Newco's interests are
adverse) directly relating to the business, Assets (other than Intellectual
Property Rights or any Asset related thereto) or Liabilities of the Company as
they existed immediately prior to giving effect to the Restructuring; provided,
however, that such access will not unreasonably interfere with the normal
operations of any Newco Company and the reasonable out-of-pocket expenses of any
Newco Company incurred in connection therewith will be paid by Parent; provided
further, however, that any Newco Company may withhold (i) any document that (A)
the disclosure of which would violate any Contract with a third party or any
applicable Law or Judgment or would result in the waiver of any legal privilege
or work-product protection (provided that such Newco Company shall have used its
reasonable best efforts to obtain a Consent or waiver from such third party or
to establish a joint-defense privilege to the extent it is reasonably available,
as applicable; provided, however, that such Newco Company shall not be required
to pay or commit to pay any amount to (or incur any obligation in favor of) any
person from whom such Consent or waiver may be required) or (B) otherwise
relates to any Action between the Newco and any of its affiliates, on the one
hand, and the Company and any of its affiliates, on the other hand, or (ii) such
documents or portions of documents that Newco determines in good faith, after
consultation with outside
A-3-10
counsel, should not be disclosed in order to ensure compliance with antitrust or
other similar Law or Judgment. For the avoidance of doubt, all documents
provided to Parent, or Parent's Representatives pursuant to this Section 3.07(e)
shall be subject to Parent's obligations with respect to Newco Information
contained in paragraphs (a) and (b) of Section 3.07.
(e) Each of the parties to this Agreement hereby agrees that (i) nothing in
this Section 3.07 shall override any confidentiality obligation owed by it or
its affiliates pursuant to any Commercial Agreement and (ii) in the event of a
conflict between the confidentiality provisions set forth in any Commercial
Agreement, on the one hand, and this Agreement, on the other hand, the
provisions set forth in the applicable Commercial Agreement shall govern.
SECTION 3.08. Indemnification; Certain Claims. (a) To the fullest extent
permitted by Law, Parent shall cause the Company to honor all its obligations to
indemnify (including any obligations to advance funds for expenses) the current
or former directors or officers of the Company for acts or omissions by such
directors or officers occurring prior to the Effective Time to the fullest
extent that such obligations of the Company exist on the date of this Agreement
pursuant to the Company Charter, the Company By-laws or individual indemnity
agreements and such obligations shall survive the Merger and shall continue in
full force and effect in accordance with their respective terms until the
expiration of the applicable statute of limitations with respect to any claims
against such directors or officers arising out of such acts or omissions.
(b) From the Effective Time until the sixth anniversary of the Effective
Time, Parent shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company (provided
that Parent may cause to be substituted therefor policies with reputable and
financially sound carriers of at least the same coverage and amounts containing
terms and conditions which are no less advantageous) with respect to claims
arising from or related to facts or events which occurred at or before the
Effective Time; provided that in satisfying its obligation under this Section
3.08(b), Parent shall not be obligated to pay premiums in excess of 250% of the
amount per annum required to be paid by the Company in the twelve months ending
December 12, 2003, which amount is set forth in clause (x) of Section 6.01
(introductory paragraph) of the Company Disclosure Letter; and provided,
further, that if the annual premiums of such insurance exceed such amount,
Parent shall nevertheless obtain such insurance; provided that Newco shall pay
the Company the amount of any premiums in excess of 250% of the amount per annum
required to be paid by the Company in the twelve months ending December 12,
2003.
(c) Parent shall not permit the Company to amend or repeal any provision of
the Company Charter or Company By-laws after the Effective Time if such action
would adversely affect the rights of individuals who on or prior to the
Effective Time were entitled to advances, indemnification or exculpation
thereunder for actions or omissions by such individuals prior to the Effective
Time. The individuals referred to in the preceding sentence shall include any
individuals who served as of the Effective Time as directors or officers of any
subsidiary of the Company at the Company's request, it being acknowledged by the
parties hereto that each director or officer of the Company who is currently
serving as a director or officer of a subsidiary of the Company is doing so at
such request of the Company.
(d) In the event the Company or any successor to the Company (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity in such consolidation or merger or
(ii) transfers all or substantially all its properties and assets to any person,
then, and in each case, proper provision shall be made so that the successors to
the Company or the successors of any successor to the Company, as the case may
be, honor the obligations of the Company set forth in this Section 3.08. For the
avoidance of doubt, this Section 3.08(d) shall similarly apply to successive
consolidations, mergers and transfers.
(e) Following the Effective Time, Parent shall not, and Parent shall not
permit the Company or any other affiliate of Parent or encourage any other
person to, assert any rights or pursue any Action, whether directly or on a
derivative basis, against (i) the Company or any of its affiliates or Newco or
any of its affiliates or (ii) any of the current or former directors, officers,
members of the board of managers, members, managers, consultants, advisors,
attorneys, trustees, agents or individuals in the employment of
A-3-11
the Company or any of its affiliates or of Newco or any of its affiliates (in
each case, solely in their capacities as such), in each case for acts or
omissions occurring prior to the Effective Time, whether known or unknown, and
Parent shall not, and Parent shall not permit the Company or any other affiliate
of Parent to, cooperate with any person in the assertion of any such rights or
pursuing any such Action except (x) as required by subpoena or other judicial or
legal process or (y) as required by any inquiry by a Governmental Entity, but in
each case only to the extent such inquiry or requirement to cooperate has not
arisen as a result of a breach of this Section 3.08(e); provided, however, that
this Section 3.08(e) shall not (A) affect any person's right to enforce any
Transaction Agreement, any Commercial Agreement, any Newco I/R Agreement or any
agreement entered into between the Company, Newco or any of their respective
affiliates, on the one hand, and any of the R Parties or any of their respective
affiliates, on the other hand, after the date of this Agreement but prior to the
Effective Time or any provision herein or therein in accordance with its terms,
(B) apply to any act or omission which constitutes fraud in the inducement with
respect to any of the Transaction Agreements or any of the Commercial
Agreements, (C) apply to any action permitted or required by Section 3.12 or (D)
apply to any action permitted or required by the Ongoing Litigation Agreement;
provided further, however, that in the event this Agreement is terminated, this
Section 3.08(e) shall be null and void and shall not operate as a waiver or
release of any rights or Actions that might have been asserted or pursued but
for this Section 3.08(e). Following the Effective Time, Parent shall, and shall
cause the Company and its other affiliates to, cooperate with the current and
former directors, officers, members of the board of managers, members, managers,
consultants, advisors, agents and individuals in the employment of the Company
and Newco in seeking the dismissal of any derivative suits or other suits for or
on behalf of shareholders of the Company pending as of the Effective Time.
(f) Following the Effective Time, Newco shall not, and shall not permit any
Newco Company or any affiliate of Newco or encourage any other person to, assert
any rights or pursue any Action, whether directly or on a derivative basis,
against (i) Parent or any of its affiliates or (ii) any of the current or former
directors, officers, members of the board of managers, members, managers,
consultants, advisors, attorneys, trustees, agents or individuals in the
employment of Parent or any of its affiliates (in each case, solely in their
capacities as such), in each case for acts or omissions occurring prior to the
Effective Time, whether known or unknown, and Newco shall not, and shall not
permit any Newco Company or any affiliate of Newco to, cooperate with any person
in the assertion of any such rights or pursuing any such Action except (x) as
required by subpoena or other judicial or legal process or (y) as required by
any inquiry by a Governmental Entity, but in each case only to the extent such
inquiry or requirement to cooperate has not arisen as a result of a breach of
this Section 3.08(f); provided, however, that this Section 3.08(f) shall not (A)
affect any person's right to enforce any Transaction Agreement, any Commercial
Agreement, any Newco I/R Agreement or any agreement entered into between the
Company, Newco or any of their respective affiliates, on the one hand, and any
of the R Parties or any of their respective affiliates, on the other hand, after
the date of this Agreement but prior to the Effective Time or any provision
herein or therein in accordance with its terms, (B) apply to any act or omission
which constitutes fraud in the inducement with respect to any of the Transaction
Agreements or any of the Commercial Agreements, (C) apply to any action
permitted or required by Section 3.12 or (D) apply to any action permitted or
required by the Ongoing Litigation Agreement; provided further, however, that in
the event this Agreement is terminated, this Section 3.08(f) shall be null and
void and shall not operate as a waiver or release of any rights or Actions that
might have been asserted or pursued but for this Section 3.08(f).
SECTION 3.09. Public Announcements. As of and after the Effective Time,
Parent and its subsidiaries, including the Company, on the one hand, and Newco
and its subsidiaries, on the other hand, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to the Merger or the other
Transactions, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
Law, court process or by obligations pursuant to any listing agreement with any
national securities exchange.
A-3-12
SECTION 3.10. Standstill. From the Effective Time to the fourth
anniversary of the Effective Time, Parent shall not, and Parent shall not permit
any of its affiliates to, in any manner, whether publicly or otherwise, directly
or indirectly, in each case, without the prior written approval of Newco (a)
acquire, agree to acquire or make any proposal to acquire, directly or
indirectly, any securities or assets of Newco or any subsidiary of Newco, except
at the unsolicited specific written request of Newco, (b) propose to enter into,
directly or indirectly, any tender or exchange offer, merger or other business
combination or similar transaction involving Newco or any subsidiary of Newco,
except at the unsolicited specific written request of Newco, (c) form, join or
in any way participate in a "group" (within the meaning of Section 13(d)(3) of
the Exchange Act) with respect to any securities of Newco or any subsidiary of
Newco, (d) enter into any discussions, negotiations, arrangements,
understandings or agreements (whether written or oral) with any other person
(other than financial advisors) regarding any possible purchase or sale of any
securities or assets of Newco or any subsidiary of Newco, (e) make, or in any
way participate, directly or indirectly, in any "solicitation" of "proxies" (as
such terms are used in the proxy rules of the SEC) to vote, or seek to advise or
influence any person with respect to the voting of, any securities of Newco or
any subsidiary of Newco, (f) call, or seek to call, a meeting of Newco's
shareholders or initiate or propose any shareholder proposal or execute any
written consent with respect to Newco, (g) otherwise act, alone or in concert
with others, to seek or attempt to control or influence the management, Board of
Directors of Newco or policies of Newco (except to the extent conduct or
settlement of litigation between R Diagnostics and the Company might be deemed
such an attempt), (h) disclose any intention, plan or arrangement inconsistent
with the foregoing or (i) advise, assist or encourage any other persons in
connection with any of the foregoing. During the applicable period covered by
this Section 3.10, Parent shall not, and Parent shall not permit any of its
affiliates to, without the prior consent of Newco (i) request, directly or
indirectly, that Newco or any of its Representatives amend or waive any
provisions of this Section 3.10 (including this sentence) or (ii) take any
action which could reasonably be expected to require Newco to make a public
announcement regarding the possibility of a business combination, merger or
similar transaction other than the Merger, the other Transactions and the
transactions contemplated by the Commercial Agreements.
SECTION 3.11. Transferred Customers. From and after the Effective Time,
Newco shall assume the Company's rights and benefits under Article X of the
Supply, Services and Support Agreement dated as of May 1, 2000 (the "Supply,
Services and Support Agreement"), between the Company and R Diagnostics with
respect to matters that occurred prior to the Effective Time.
SECTION 3.12. New Patent Litigation. Promptly after the Effective Time,
Parent shall cause R Diagnostics to comply with its obligations under Section
2.4(b) of the Ongoing Litigation Agreement.
SECTION 3.13. I/R Agreements. Notwithstanding anything to the contrary
contained in this Agreement, no amendment, modification or waiver with respect
to any I/R Agreement entered into after the Effective Time shall result in any
Liability for Indemnifiable Losses or otherwise for Newco unless Newco consents
in writing to such amendment, modification or waiver.
SECTION 3.14. PCR License Payment. Newco hereby agrees to make the PCR
License Payment in accordance with the PCR License Agreement and the PCR
Services Agreement.
ARTICLE IV
MUTUAL RELEASES
SECTION 4.01. Mutual Releases. Effective immediately prior to the
Effective Time, in consideration of mutual releases, covenants, licenses,
agreements, rights and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Parent, as to itself and its past,
present and future affiliates (including, from and after the Effective Time, the
Company), and its and their respective successors, predecessors, assigns, heirs,
officers, directors, members of the board of managers, members, managers,
employees, consultants and trustees, on the one hand (in each case, solely in
their capacities as such), and each of the Company and Newco, as to itself and
its past, present and
A-3-13
future affiliates, and its and their respective successors, predecessors,
assigns, heirs, officers, directors, members of the board of managers, members,
managers, employees, consultants and trustees, on the other hand (in each case,
solely in their capacities as such), hereby (a) releases, acquits and forever
discharges the other and its past, present and future affiliates and its and
their respective successors, predecessors, assigns, heirs, officers, directors,
members of the board of managers, members, managers, employees, consultants and
trustees (in each case, solely in their capacities as such), in respect of and
from, and (b) agrees not to bring any Action against the other and its past,
present and future affiliates and its and their respective successors,
predecessors, assigns, heirs, officers, directors, members of the board of
managers, members, managers, employees, consultants and trustees (in each case,
solely in their capacities as such) related to or arising our of, in the case of
each of clause (a) and (b), any and all debts, demands, Actions, causes of
action, suits, accounts, covenants, Contracts, agreements, torts, damages and
any and all claims, defenses, offsets, Judgments, demands and Liabilities
whatsoever, of every name and nature, both at law and in equity, known or
unknown, suspected or unsuspected, accrued or unaccrued, which have been or
could have been asserted against such other person, which the releasing person
has or ever had which arise out of or in any way relate or are incidental to
events, circumstances or actions taken by such other person prior to or as of
the Effective Time; provided, however, that the foregoing general release shall
not (i) affect any person's right to enforce any Transaction Agreement, any
Commercial Agreement, any Newco I/R Agreement or any agreement entered into
between the Company, Newco or any of their respective affiliates, on the one
hand, and any of the R Parties or any of their respective affiliates, on the
other hand, after the date of this Agreement but prior to the Effective Time or
any provision herein or therein, in each case in accordance with its terms or
(ii) apply to any act or omission which constitutes fraud in the inducement with
respect to any Transaction Agreement or any Commercial Agreement.
SECTION 4.02. Enforcement of Article IV. In the event of any Action, at
law or in equity, among the parties to this Agreement (including, for purposes
of this Section 4.02, affiliates, successors, assigns, heirs, officers,
directors, members of the board of managers, members, managers, employees,
consultants and trustees, in each case, covered by Section 4.01, that are third
party beneficiaries under Section 5.07) in which a party to such Action (the
"Prevailing Party") obtains a final and nonappealable order of a court of
competent jurisdiction that provides or states that the other party breached
Section 4.01, then the Prevailing Party shall be entitled to reimbursement from
the other party of its legal fees and expenses incurred in such Action.
ARTICLE V
MISCELLANEOUS AND GENERAL
SECTION 5.01. Effectiveness; Modification or Amendment. The parties
hereto agree that (a) Sections 4.01 and 4.02 will become effective immediately
prior to the Effective Time and (b) each other provision of this Agreement will
become effective at the Effective Time and, for the avoidance of doubt,
references to the Company in such other provisions shall mean the Company after
the Effective Time. The parties hereto may modify or amend this Agreement only
by written agreement executed and delivered by duly authorized officers of the
respective parties.
SECTION 5.02. Termination. In the event the Merger Agreement is
terminated pursuant to its terms prior to the Effective Time, this Agreement
shall automatically and simultaneously terminate. In the event of such
termination, no party shall have any liability to any other party pursuant to
this Agreement. It is understood that consummation of the Merger shall not
constitute a termination of this Agreement.
SECTION 5.03. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given upon receipt by the parties at the following
A-3-14
addresses (or at such other address for a party as shall be specified by like
notice) of a fax followed by delivery of such notice by overnight courier (such
courier being of an international reputation):
(a) if to the Company (from and after the Effective Time) or to
Parent, to
Roche Holding Ltd
Grenzacherstrasse 124
CH-4070 Basel
Switzerland
Attention: Bruno Maier
Fax: +41 61 688 3196
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Ulrika Ekman
Fax: (212) 450-3800
(b) if to the Company (prior to the Effective Time) or to Newco, to
IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, MD 20877
Attention: President
Fax: (301) 208-3789
with a copy to:
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, NY 10019
Attention: Philip A. Gelston
Sarkis Jebejian
Fax: (212) 474-3700
SECTION 5.04. Interpretation. When a reference is made in this Agreement
to a Section, Exhibit, Schedule or party, such reference shall be to a Section
of, or an Exhibit, Schedule or party to, this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein", "hereby" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The words "date
hereof" shall refer to the date of this Agreement. The term "or" is not
exclusive. The word "extent" in the phrase "to the extent" shall mean the degree
to which a subject or other thing extends, and such phrase shall not mean simply
"if". The definitions contained in this Agreement are applicable to the singular
as well as the plural forms of such terms. Any agreement or instrument defined
or referred to herein or in any agreement or instrument that is referred to
herein means such agreement or instrument as from time to time amended, modified
or supplemented. References to a person are also to its permitted successors and
assigns.
SECTION 5.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any applicable
Law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any
A-3-15
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 5.06. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties. Each party need not sign the
same counterpart.
SECTION 5.07. Entire Agreement; Third-Party Beneficiaries. This Agreement
taken together with the other Transaction Agreements, the Commercial Agreements
and the Letter Agreement constitutes the entire agreement, and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof and thereof. Except for the provisions
of Article II, Section 3.08 and Article IV, nothing contained in this Agreement
is intended to confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any benefit, right or remedy under
or by reason of this Agreement, provided however, that any claim under Article
II by a Parent Indemnitee or a Newco Indemnitee, as the case may be, that is not
a party to this Agreement shall be brought on behalf of such Parent Indemnitee
or Newco Indemnitee, as the case may be, by the party to this Agreement from
which such Indemnitee's status as a Parent Indemnitee or Newco Indemnitee is
derived.
SECTION 5.08. Certain Obligations. Whenever this Agreement requires any
of the subsidiaries of any party to take any action, this Agreement will be
deemed to include an undertaking on the part of such party to cause such
subsidiary to take such action; provided, however, for the avoidance of doubt,
at any time after the Effective Time, the Newco Companies shall not be
considered to be subsidiaries of the Company.
SECTION 5.09. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 5.10. Assignment. Except as provided in Section 3.04, neither
this Agreement nor any of the rights, interests or obligations under this
Agreement shall be assigned, in whole or in part, by operation of law or
otherwise, by any of the parties without the prior written consent of the other
parties. Any purported assignment without such consent shall be void; provided,
however, the parties acknowledge and agree that the conversion of Newco in
accordance with Section 2.01 of the Restructuring Agreement and the continuation
of Newco as a result thereof shall be deemed not to be an assignment and shall
not require any consent of any party. Except as otherwise provided in Section
3.03(a), subject to the preceding sentences, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 5.11. Enforcement; Consent to Service of Process. (a) The parties
agree that irreparable damage would occur and that the parties would not have
any adequate remedy either pursuant to the indemnification provisions of Section
2.01 or 2.02, as the case may be, or at law in the event that any of the
provisions of this Agreement, including Section 3.03, were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any New York state court or any
Federal court located in the State of New York, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to submit itself to the personal jurisdiction
of any New York state court or any Federal court located in the State of New
York in the event any dispute arises out of this Agreement, (ii) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that it will not bring any
Action relating to this Agreement in any court other than any New York state
court or any Federal court located
A-3-16
in the State of New York and (iv) waives any right to trial by jury with respect
to any Action related to or arising out of this Agreement.
(b) Parent hereby appoints the Authorized Agent as its authorized agent
upon whom process may be served in any Action arising out of or relating to this
Agreement or any Transaction that may be instituted in any court described in
Section 5.11(a). Parent agrees to take any and all reasonable action, including
the filing of any and all documents, that may be necessary to establish and
continue such appointment in full force and effect as aforesaid. Parent agrees
that service of process upon the Authorized Agent shall be, in every respect,
effective service of process upon Parent.
SECTION 5.12. Extension; Waiver. At any time the parties may (a) extend
the time for the performance of any of the obligations or other acts of the
other parties or (b) waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
IN WITNESS WHEREOF, Parent, the Company and Newco have duly executed and
delivered this Agreement, all as of the date first herein above written.
ROCHE HOLDING LTD,
By /s/ DR. FRANZ B. HUMER
------------------------------------
Name: Franz B. Humer
Title: President and Chairman
By /s/ ERICH HUNZIKER
------------------------------------
Name: Erich Hunziker
Title: Chief Financial Officer
IGEN INTERNATIONAL INC.,
By /s/ SAMUEL J. WOHLSTADTER
------------------------------------
Name: Samuel J. Wohlstadter
Title: Chairman and Chief
Executive Officer
IGEN INTEGRATED HEALTHCARE, LLC,
By /s/ RICHARD J. MASSEY
------------------------------------
Name: Richard J. Massey
Title: President and Chief
Operating Officer
A-3-17
ANNEX 4
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TAX ALLOCATION AGREEMENT
DATED AS OF JULY 24, 2003,
AMONG
ROCHE HOLDING LTD,
66 ACQUISITION CORPORATION II,
IGEN INTERNATIONAL, INC.
AND
IGEN INTEGRATED HEALTHCARE, LLC
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
------
ARTICLE I
DEFINITIONS
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
SECTION 2.01. Tax Returns for Pre-Merger Periods and Straddle Periods..... A-4-5
SECTION 2.02. Tax Returns for a Taxable Period Ending After the Effective
Time (Other than Straddle Periods).......................... A-4-5
SECTION 2.03. Manner of Tax Return Preparation............................ A-4-5
SECTION 2.04. Transfer Tax Returns........................................ A-4-5
SECTION 2.05. Amended Returns and Claims for Refund....................... A-4-5
ARTICLE III
PAYMENT AND LIABILITY FOR TAXES
SECTION 3.01. Payment and Liability for Taxes............................. A-4-6
SECTION 3.02. Distribution Gain Payment................................... A-4-7
SECTION 3.03. Payment and Liability for Transfer Taxes.................... A-4-7
SECTION 3.04. Tax Obligations Arising Under a Pre-Merger Period Tax
Sharing Agreement........................................... A-4-7
ARTICLE IV
REPRESENTATIONS AND COVENANTS
SECTION 4.01. Representations of Parent and the Company................... A-4-7
SECTION 4.02. Covenants of Parent and the Company......................... A-4-7
SECTION 4.03. Covenants of Newco.......................................... A-4-8
SECTION 4.04. Consistent Tax and Regulatory Reporting..................... A-4-8
SECTION 4.05. Representation of Newco..................................... A-4-8
ARTICLE V
INDEMNIFICATION; TAX PROCEEDINGS; COOPERATION AND EXCHANGE
OF INFORMATION; DISPUTES
SECTION 5.01. Indemnification for Breach of Representations and
Covenants................................................... A-4-8
SECTION 5.02. Tax Proceedings............................................. A-4-9
SECTION 5.03. Indemnification Payments.................................... A-4-9
SECTION 5.04. Cooperation and Exchange of Information..................... A-4-10
SECTION 5.05. Retention of Information.................................... A-4-10
SECTION 5.06. Disputes.................................................... A-4-11
ARTICLE VI
MISCELLANEOUS AND GENERAL
SECTION 6.01. Modification or Amendment................................... A-4-11
SECTION 6.02. Termination................................................. A-4-11
SECTION 6.03. Notices..................................................... A-4-11
SECTION 6.04. Interpretation.............................................. A-4-12
A-4-i
PAGE
------
SECTION 6.05. Severability................................................ A-4-12
SECTION 6.06. Counterparts................................................ A-4-12
SECTION 6.07. Entire Agreement; Third-Party Beneficiaries................. A-4-12
SECTION 6.08. Certain Obligations......................................... A-4-13
SECTION 6.09. Governing Law............................................... A-4-13
SECTION 6.10. Assignment.................................................. A-4-13
SECTION 6.11. Enforcement; Consent to Service of Process.................. A-4-13
SECTION 6.12. Extension; Waiver........................................... A-4-13
A-4-ii
TAX ALLOCATION AGREEMENT dated as of July 24, 2003 (this "Agreement"),
among ROCHE HOLDING LTD, a joint stock company organized under the laws of
Switzerland ("Parent"), 66 ACQUISITION CORPORATION II, a Delaware corporation
and a direct wholly owned subsidiary of Parent ("Sub"), IGEN INTERNATIONAL,
INC., a Delaware corporation (the "Company"), and IGEN INTEGRATED HEALTHCARE,
LLC, a Delaware limited liability company and a direct wholly owned subsidiary
of the Company ("Newco" and, collectively with Parent, Sub and the Company, the
"Companies").
WHEREAS, as of the date of this Agreement, the Company is the common parent
of an affiliated group of domestic corporations (the "Company Consolidated
Group") within the meaning of Section 1504(a) of the Internal Revenue Code of
1986, as amended (the "Code"), including Newco and its direct and indirect
subsidiaries, which has elected to file consolidated Federal income Tax Returns
(as defined in Article I);
WHEREAS the Company, Roche Diagnostics GmbH, a German limited liability
company ("R Diagnostics"), and Roche Diagnostics Corporation, an Indiana
corporation ("R Corp"), are entering into an agreement (the "Ongoing Litigation
Agreement") pursuant to which, among other things, R Diagnostics and R Corp
shall make several payments to the Company;
WHEREAS the Company and Newco are entering into an agreement (the
"Restructuring Agreement") pursuant to which, prior to the Effective Time (as
defined in Article I), the Restructuring (as defined in Article I) will be
effected, as part of which certain of the assets and liabilities of the Company
will be transferred to Newco or one or more of Newco's subsidiaries;
WHEREAS, the respective Boards of Directors of the Company and Parent have
proposed to cause the merger of Sub with and into the Company (the "Merger") at
the Effective Time in accordance with the Agreement and Plan of Merger dated as
of the date of this Agreement (the "Merger Agreement") among the Companies and R
Company;
WHEREAS, the Companies and R Company intend to treat the exchange of
Company Common Stock (as defined in Article I) for cash and the exchange of
Company Common Stock for Newco Common Stock (as defined in Article I) pursuant
to the Merger as a single integrated transaction comprising a taxable sale or
exchange of Company Common Stock as described in Section 1001 of the Code and a
complete redemption of the remaining Company Common Stock owned by the relevant
shareholders within the meaning of Section 302(b)(3) of the Code, respectively;
WHEREAS, the Companies have determined and agreed that, as a result of the
Merger, for U.S. Federal income tax purposes (i) the Company Consolidated Group
will cease to exist on the Closing Date (as defined in Article I) and (ii) the
Company Consolidated Group's tax year will end on the Closing Date;
WHEREAS, immediately after the Closing Date, the Company will become a
direct, wholly owned subsidiary of Parent; and
WHEREAS, the Companies desire on behalf of themselves, their subsidiaries,
and their successors to set forth their rights and obligations with respect to
Taxes (as defined in Article I) relating to taxable periods before and after the
Merger.
A-4-1
NOW, THEREFORE, in consideration of foregoing, and of the representations,
warranties, covenants and agreements set forth herein, the Companies (each on
behalf of itself, each of its subsidiaries as of the date of this Agreement, its
future subsidiaries and its successors) hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the following meanings:
"Agreement" is defined in the preamble.
"Closing Date" is defined in the Merger Agreement.
"Code" is defined in the recitals.
"Companies" is defined in the preamble.
"Company" is defined in the preamble.
"Company Attributes" is defined in Section 3.01(c) of this Agreement.
"Company Consolidated Group" is defined in the recitals.
"Company Common Stock" is defined in the Merger Agreement.
"Company Group" means (i) the corporations that are members of the
Company Consolidated Group and (ii) the corporations that would be members
of the Company Consolidated Group but for the fact they are not includible
corporations under Section 1504(b) of the Code.
"Confidentiality Agreement" is defined in the Merger Agreement.
"Covered ECL Technology" is defined in the Merger Agreement.
"Distribution Gain Payment" shall mean the amount equal to the product
of (A) the excess, if any, of (i) the First Day Trading Value over (ii) the
sum of $100 million and the Newco Cash Amount multiplied by (B) 40%;
provided, however, the Distribution Gain Payment shall not exceed $20
million.
"Due Date" shall mean, with respect to any Tax Return or payment, the
date on which such Tax Return is due to be filed with, or such payment is
due to be made to, the appropriate Taxing Authority pursuant to applicable
law, giving effect to any applicable extensions of the time for such filing
or payment.
"Effective Time" is defined in the Merger Agreement.
"Final Determination" means the final resolution of liability for any
Tax for any taxable period by or as a result of: (i) a final and
unappealable decision, judgment, decree or other order by any court of
competent jurisdiction; (ii) a final settlement with the IRS, a closing
agreement or accepted offer in compromise under Sections 7121 or 7122 of
the Code or a comparable agreement under the laws of other jurisdictions,
in each case which resolves the entire Tax liability for any taxable
period; (iii) any allowance of a refund or credit in respect of an
overpayment of Tax, but only after the expiration of all periods during
which such refund may be recovered by the jurisdiction imposing the Tax; or
(iv) any other final disposition, including, without limitation, by reason
of the expiration of the applicable statute of limitations.
"First Day Trading Value" means the product of (A) the average of the
high and low trading price for a share of Newco Common Stock on the first
full day of trading after the Merger and (B) the number of shares of Newco
Common Stock distributed.
"Governmental Entity" is defined in the Merger Agreement.
A-4-2
"Group" means the Company Group, the Post-Merger Company Group, or the
Newco Group, as applicable.
"Indemnifying Party" is defined in Section 5.02(a) of this Agreement.
"Indemnitee" is defined in Section 5.02(a) of this Agreement.
"Indemnity Issue" is defined in Section 5.02(a) of this Agreement.
"Intended Tax Treatment" is defined in Section 4.04 of this Agreement.
"IRS" means the United States Internal Revenue Service.
"Letter Agreement" means the letter agreement dated November 6, 2002,
between R Diagnostics and the Company.
"License Agreement" is defined in the Restructuring Agreement.
"Loan" is defined in the Merger Agreement.
"Merger" is defined in the recitals.
"Merger Agreement" is defined in the recitals.
"Neutral Expert" is defined in Section 5.06 of this Agreement.
"Newco" is defined in the preamble.
"Newco Cash Amount" means the amount equal to the cash and cash
equivalents as reflected on Newco's balance sheet, as measured immediately
after the Effective Time.
"Newco Common Stock" is defined in the Merger Agreement.
"Newco Group" means Newco and each corporation that is, immediately
after the Merger, a direct or indirect subsidiary of Newco.
"Non-Transaction Taxes" means Taxes other than (i) Transaction Taxes
and (ii) Transfer Taxes.
"Ongoing Litigation Agreement" is defined in the recitals.
"Parent" is defined in the preamble.
"Person" means any individual, firm, corporation partnership, company,
limited liability company, trust, joint venture, association, Governmental
Entity or other entity.
"Post-Merger Company Group" means (i) any affiliated group of
corporations within the meaning of Section 1504(a) of the Code (or any
other similar state, local or foreign law) of which the Company or any
subsidiary of the Company (or any successor thereto) is or has been a
member or files or is required to file an affiliated, consolidated,
combined, unitary or aggregate Tax Return at any time after the Closing
Date or (ii) in the event that no group as described in the immediately
preceding clause (i) exists, then the group of corporations comprised of
the Company (or any successor thereto) and its direct and indirect
subsidiaries.
"Post-Merger Period" means any taxable period beginning after the
Closing Date and, in the case of any Straddle Period, that portion of such
Straddle Period that begins on the day immediately following the Closing
Date.
"Post-Signing Tax Returns" means any Tax Return of any member of the
Company Group that is required to be filed during the period commencing on
the first day after the date of this Agreement and ending on the Closing
Date.
A-4-3
"Pre-Merger Period" means any taxable period beginning on or before
the Closing Date and, in the case of any Straddle Period, that portion of
such Straddle Period ending on and including the Closing Date.
"Preliminary Transactions" means (i) the Loan and (ii) any transaction
undertaken by any member or members of the Company Group to prepare for the
Restructuring or Merger.
"R Corp" is defined in the recitals.
"R Diagnostics" is defined in the recitals.
"Responsible Party" is defined in Section 2.04 of this Agreement.
"Restructuring" is defined in the Restructuring Agreement.
"Restructuring Agreement" is defined in the recitals.
"Straddle Period" means any taxable period that begins on or before
and ends after the Closing Date.
"Sub" is defined in the preamble.
"Surviving Corporation" is defined in the Merger Agreement.
"Tax Controversy" is defined in Section 5.02(a) of this Agreement.
"Taxes" means (i) all forms of taxation or duties imposed, or required
to be collected or withheld, including, without limitation, charges,
together with any related interest, penalties or other additional amounts,
(ii) liability for the payment of any amount of the type described in the
preceding clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group, and (iii) liability for the
payment of any amounts as a result of being party to any tax sharing
agreement (other than this Agreement) or as a result of any express or
implied obligation to indemnify any other person with respect to the
payment of any amount described in the immediately preceding clauses (i) or
(ii) (other than an obligation to indemnify under this Agreement).
"Taxing Authority" means the IRS and any other state, local, foreign
or other Governmental Entity responsible for the administration of Taxes.
"Tax Return" means any return, filing, report, questionnaire,
information statement or other document required to be filed, including
amended returns that may be filed, for any taxable period with any Taxing
Authority (whether or not a payment is required to be made with respect to
such filing).
"Tax Ruling" means a private letter ruling issued by the IRS.
"Transaction Agreements" is defined in the Merger Agreement.
"Transaction Taxes" means any Taxes directly or indirectly resulting
from, arising in connection with or otherwise related to (i) any of the
actions taken pursuant to the Ongoing Litigation Agreement, (ii) the
Preliminary Transactions, (iii) the Restructuring or (iv) the Merger;
provided, however, Transaction Taxes does not include Transfer Taxes.
"Transactions" is defined in the Merger Agreement.
"Transfer Taxes" is defined in the Merger Agreement.
"Treasury Regulations" means the regulations promulgated from time to
time under the Code as in effect for the relevant taxable period.
"Underpayment Rate" means, with respect to Federal Taxes, the interest
rate specified in Section 6621(a)(2) of the Code and, with respect to any
other Tax, the interest rate specified in applicable law with respect to
such Tax.
A-4-4
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
SECTION 2.01. Tax Returns for Pre-Merger Periods and Straddle
Periods. (a) Except as set forth in Section 2.01(b) of this Agreement, the
Company shall prepare and timely file (or cause to be prepared and timely filed)
all Tax Returns of each member of the Company Group for any Pre-Merger Period or
Straddle Period; provided, however, in the case of any Post-Signing Tax Return
(i) the Company shall deliver (or cause to be delivered) any such Post-Signing
Tax Return to Parent at least 20 days before it is due, (ii) Parent shall have
the right to examine and comment on such Post-Signing Tax Return prior to the
filing thereof and (iii) Parent shall provide the Company with any such
comments, in writing, no later than five days before such Post-Signing Tax
Return is due. Similar provisions shall apply with respect to any consolidated,
combined, unitary, or aggregate state, local, or foreign income Tax Return for
any Pre-Merger Period or Straddle Period that includes any member of the Company
Group or Post-Merger Company Group.
(b) Newco shall, with respect to any Pre-Merger Period or Straddle Period,
prepare (or cause to be prepared) and file (or cause to be filed) all separate
state, local or foreign Tax Returns of each member of the Newco Group and any
consolidated, combined, unitary or aggregate state, local, or foreign Tax
Returns that do not include any member of the Company Group or Post-Merger
Company Group.
SECTION 2.02. Tax Returns for a Taxable Period Ending After the Effective
Time (Other than Straddle Periods). In the case of any Tax Return for any
Post-Merger Period (other than a Straddle Period, which shall be governed by
Section 2.01 of this Agreement), such Tax Returns shall be prepared and filed by
the Company (or by Parent on behalf of the Company) if they relate to any member
of the Post-Merger Company Group and by Newco if they relate to any member of
the Newco Group. No party shall have any responsibility for preparing (or
causing to be prepared) or filing (or causing to be filed) any Tax Return with
respect to any member that is not a member of its Group.
SECTION 2.03. Manner of Tax Return Preparation. All Tax Returns described
in this Article II shall be prepared (i) in a manner consistent, and in
accordance with, the representations, warranties, covenants, agreements and
statements set forth in this Agreement (including, without limitation, Section
4.04 of this Agreement) and the other Transaction Agreements and (ii) in a
manner consistent, and in accordance with, the applicable taxpayer's prior
methods, practices and procedures (except to the extent that departure from such
methods, practices and procedures (X) would be required, in the written opinion
of nationally recognized Tax counsel, by a change in relevant Tax law or (Y)
would not adversely affect another party to this Agreement). Notwithstanding the
previous sentence, Tax Returns shall be prepared in the manner required by, and
in accordance with, any applicable Final Determination.
SECTION 2.04. Transfer Tax Returns. Any Tax Return with respect to any
Transfer Tax incurred in connection with the Transactions shall be prepared and
filed by the party (whether such party is Parent, the Company, Sub, the
Surviving Corporation, or Newco (or any party related to, or affiliate of, any
of the foregoing)) ordinarily responsible therefor under applicable law (in each
case, the "Responsible Party"). Each Responsible Party shall use its reasonable
best efforts to avail itself of any available exemption or exemptions from any
Transfer Taxes. Each of Parent, the Company, Sub, the Surviving Corporation and
Newco (and any party related to, or affiliate of, any of the foregoing) shall
use its reasonable best efforts to cooperate with, and assist, any Responsible
Party described in the immediately preceding sentence in the preparation of any
such Tax Return, including, without limitation, to furnish or otherwise provide
such Responsible Party with information or documentation that may be reasonably
necessary to obtain any exemption described in the immediately preceding
sentence.
SECTION 2.05. Amended Returns and Claims for Refund. Neither Parent nor
any member of the Post-Merger Company Group (nor any entity that directly or
indirectly controls the Company) shall amend (or cause or permit to be amended)
a Tax Return or file (or cause or permit to be filed) a claim for Tax refund
with respect to any Tax Return described in Section 2.01(a) of this Agreement
without the prior written consent of Newco.
A-4-5
ARTICLE III
PAYMENT AND LIABILITY FOR TAXES
SECTION 3.01. Payment and Liability for Taxes. (a) The Company (or
Parent) shall remit (or cause to be remitted) in a timely manner to the
appropriate Taxing Authority all Taxes due in respect of any Tax for which the
Company is required to file a Tax Return (as prepared in accordance with Section
2.03 of this Agreement and taking into account Section 3.01(c) of this
Agreement) pursuant to Section 2.01(a) of this Agreement. Parent and the Company
shall be liable for, shall, jointly and severally, indemnify each member of the
Newco Group against, and shall be entitled to receive and retain all refunds of,
all Taxes (other than Transfer Taxes, the responsibility for which is prescribed
in Section 3.03 of this Agreement) of each member of the Company Group for, or
attributable to, all Pre-Merger Periods; provided, however, Newco shall be
liable for, shall indemnify Parent and each member of the Company Group against,
and shall be entitled to receive and retain all refunds of all Non-Transaction
Taxes of each member of the Company Group for, or attributable to, all
Pre-Merger Periods, except to the extent that such Non-Transaction Taxes arise
or result from, or otherwise relate to, any actions, inactions, omissions or
disclosures taken or made by Parent (or any party related to Parent) or, after
the Closing Date, by the Company or any member of the Post-Merger Company Group,
except for actions, inactions, omissions or disclosures required by (X) any
Transaction Agreement or (Y) applicable United States law. For the avoidance of
doubt, Parent and the Company shall be solely liable for, shall, jointly and
severally, indemnify each member of the Newco Group against, and shall be
entitled to receive and retain all refunds of all Transaction Taxes.
(b) Newco shall remit (or cause to be remitted) in a timely manner to
the appropriate Taxing Authority all Taxes due in respect of any Tax for
which Newco is required to file a Tax Return pursuant to Section 2.01(b) of
this Agreement. Newco shall be liable for, shall indemnify each member of
the Company Group against, and shall be entitled to receive and retain all
refunds of all Non-Transaction Taxes of each member of the Newco Group for
all Tax periods. Parent and the Company shall be liable for, shall
indemnify each member of the Newco Group against and retain all refunds of
all Taxes of each member of the Post-Merger Company Group for all
Post-Merger Periods.
(c) For purposes of this Agreement, including for purposes of
computing the respective amounts of Taxes for which the Company, on the one
hand, and Newco, on the other hand, will be responsible hereunder, the
Companies agree that any and all losses, credits, allowances or other
similar Tax attributes of, or allocated under applicable Tax law to, the
Company (or any member of the Company Group) arising in, or attributable
to, any Pre-Merger Period (collectively, "Company Attributes") shall be
used first to offset income, profits or gains of the Company (or any member
of the Company Group) that arise in, or are attributable to, any Pre-Merger
Period and that do not directly or indirectly result from, arise in
connection with or otherwise relate to the Preliminary Transactions, the
Restructuring or the Merger. For the avoidance of doubt, any Company
Attributes remaining after the application of the immediately preceding
sentence shall be used by the Company (or any member of the Company Group
or Post-Merger Company Group) to offset (i) income, profits or gains that
give rise to any Transaction Taxes and (ii) income, profits or gains that
arise in, or are attributable to, any Post-Merger Period.
(d) (i) To the extent permitted by law or administrative practice, the
taxable year of any member of the Company Group that includes the Effective
Time shall be treated as closing on (and including) the Closing Date. The
parties hereto agree that Treasury Regulations Section
1.1502-76(b)(1)(ii)(B) shall not apply to any transaction directly or
indirectly resulting from, arising in connection with or otherwise related
to the Preliminary Transactions, the Restructuring or the Merger.
(ii) Where it is necessary to apportion between Newco, on the one
hand, and the Company, on the other hand, the Tax liability of an entity
for a Straddle Period which is not treated under this Section 3.01(d) as
closing on the Closing Date, such liability shall be apportioned between
the Pre-Merger Period and the Post-Merger Period on the basis of a
"deemed" interim closing of
A-4-6
the books, except that Taxes (such as real property Taxes) imposed on a
periodic basis shall be allocated on a daily basis. For the avoidance of
doubt, Parent and the Company shall be solely liable for, shall, jointly
and severally, indemnify each member of the Newco Group against, and
shall be entitled to receive and retain all refunds of all Transaction
Taxes.
SECTION 3.02. Distribution Gain Payment. Notwithstanding anything to the
contrary in this Agreement, Newco will pay to the Company the Distribution Gain
Payment in accordance with the principles of Sections 5.03(a) and 5.03(b) of
this Agreement.
SECTION 3.03. Payment and Liability for Transfer Taxes. Notwithstanding
anything to the contrary in this Agreement, the Responsible Party shall remit
(or cause to be remitted) in a timely manner to the appropriate Taxing Authority
all Transfer Taxes. In any case where any member of the Newco Group is the
Responsible Party, Parent and the Company will be liable for, shall, jointly and
severally, indemnify each member of the Newco Group against, and shall be
entitled to receive refunds of one-half of the applicable Transfer Taxes. In the
case where a member of the Newco Group is not the Responsible Party, Newco will
be liable for, shall indemnify Parent and each member of the Company Group
against, and shall be entitled to receive refunds of one-half of the applicable
Transfer Taxes.
SECTION 3.04. Tax Obligations Arising Under a Pre-Merger Period Tax
Sharing Agreement. Except as set forth in this Agreement, any and all existing
Tax sharing agreements, arrangements, understandings and practices regarding
Taxes and their payment, allocation or sharing between any member of the Company
Group and any member of the Newco Group shall be terminated as of the Effective
Time and no remaining liabilities thereunder shall exist thereafter. This
Section 3.04 does not address Tax sharing agreements (if any) solely among
members of the Newco Group or solely among members of the Company Group.
ARTICLE IV
REPRESENTATIONS AND COVENANTS
SECTION 4.01. Representations of Parent and the Company. Each of Parent
and the Company, jointly and severally, represents and warrants to Newco that,
as of the date of this Agreement, there is no plan or intention to:
(a) liquidate any of the members of the Company Group (as comprised
immediately before the Effective Time) or merge or consolidate any of such
persons with any other person subsequent to the Merger; or
(b) sell, dispose or cease to use and exploit the assets of any member
of the Company Group (as comprised immediately before the Effective Time)
subsequent to the Merger, except in the ordinary course of business; or
(c) take any position on any Tax Return, take any action, omit to take
any action or enter into any transaction that is inconsistent with the
Intended Tax Treatment.
SECTION 4.02. Covenants of Parent and the Company. (a) Each of Parent and
the Company agrees not to take, and not to permit (or cause) any member of the
Post-Merger Company Group to take, any action that would cause the Company to be
actually or constructively liquidated within two years of the Effective Time.
(b) Each of Parent and the Company agrees that on or after the Closing
Date, the Company shall not, and shall not permit any member of the
Post-Merger Company Group to, make or change any tax election, change any
accounting method, amend any Tax Return or take any position on any Tax
Return, take any action, omit to take any action or enter into any
transaction that results in a material increase in Tax liability of the
Company with respect to any Pre-Merger Period.
A-4-7
(c) Notwithstanding Section 4.01(a) of this Agreement, Parent, the
Company and the members of the Post-Merger Company Group shall be permitted
to take an action inconsistent with the provisions of Section 4.02(a) of
this Agreement if, prior to taking such action, the Company:
(i) provides notification to Newco of its plans with respect to
such action, and promptly responds to any inquiries by Newco following
such notification; and
(ii) obtains and provides to Newco either:
(A) a Tax Ruling to the effect that such action shall not cause
any of the Transactions to be taxable (directly or indirectly) to
Newco or the historic shareholders of the Company in a manner other
than the Intended Tax Treatment, or
(B) an opinion, in form and substance acceptable to Newco in its
sole discretion, of Cravath, Swaine & Moore LLP (or of other
independent counsel that is nationally recognized as being expert in
Federal Tax matters and is acceptable to Newco in its sole
discretion) to the effect that such action shall not cause any of the
Transactions to be taxable to Newco or the historic shareholders of
the Company in a manner other than the Intended Tax Treatment.
SECTION 4.03. Covenants of Newco. Newco agrees that on or after the
Closing Date, Newco shall not, and shall not permit any member of the Newco
Group to, without the consent of the Company (which consent shall not be
unreasonably withheld, condition or delayed) make or change any tax election,
change any accounting method, amend any Tax Return or take any position on any
Tax Return, take any action, omit to take any action or enter into any
transaction that results in a material increase in Tax liability or a reduction
of any Tax attribute of the Company, except for actions, inactions or omissions
required by (X) any Transaction Agreement or (Y) applicable United States law.
SECTION 4.04. Consistent Tax and Regulatory Reporting. Parent, Sub, the
Company and Newco each agree to report the Transactions as follows, for all Tax
purposes (including, without limitation, all U.S. Federal income Tax purposes)
and all other regulatory or other reporting purposes (the "Intended Tax
Treatment"):
(a) the Restructuring, including, without limitation, the transfer to
Newco of the Covered ECL Technology subject to the License Agreement, will
be reported as a transaction described in Section 351 of the Code whereby
the Company will receive solely Newco Common Stock;
(b) the exchange of Company Common Stock for cash and the exchange of
Company Common Stock for Newco Common Stock, each pursuant to the Merger,
will be reported as a single integrated transaction comprising a taxable
sale or exchange of Company Common Stock as described in Section 1001 of
the Code and a complete redemption of the remaining Company Common Stock
owned by the relevant shareholders within the meaning of Section 302(b)(3)
of the Code, respectively.
SECTION 4.05. Representation of Newco. Newco represents and warrants to
Parent and the Company that, as of the date of this Agreement, there is no plan
or intention to take any position on any Tax Return, take any action, omit to
take any action or enter into any transaction that is inconsistent with the
Intended Tax Treatment.
ARTICLE V
INDEMNIFICATION; TAX PROCEEDINGS; COOPERATION
AND EXCHANGE OF INFORMATION; DISPUTES
SECTION 5.01. Indemnification for Breach of Representations and
Covenants. Subject to the provisions of this Article V, Parent and the Company
shall, jointly and severally, indemnify, defend and hold harmless Newco from and
against, and pay or reimburse Newco for, all liabilities for Taxes as incurred
relating to or arising from the breach by Parent or the Company of any of the
representations or
A-4-8
covenants set forth in Article IV of this Agreement. Subject to the provisions
of this Article V, Newco shall indemnify, defend and hold harmless Parent or the
Company from and against, and pay or reimburse Parent or the Company for, all
liabilities for Taxes as incurred relating to or arising from the breach by
Newco of any of the representations or covenants set forth in Article IV of this
Agreement. The obligations to indemnify and hold harmless pursuant to this
Section 5.01 shall terminate at the time the applicable statutes of limitations
with respect to the Taxes in question expire (giving effect to any extension
thereof); provided, however, that such obligations to indemnify and hold
harmless shall not terminate with respect to any item as to which the person to
be indemnified shall have, before the expiration of the applicable period,
previously made a claim to the other party.
SECTION 5.02. Tax Proceedings. (a) Notification. Within 15 days after a
party (the "Indemnitee") becomes aware of the existence of a Tax issue (an
"Indemnity Issue") that may give rise to an indemnification claim under Article
III or Section 5.01 of this Agreement (a "Tax Controversy"), by it against the
other party (the "Indemnifying Party"), the Indemnitee shall promptly notify the
Indemnifying Party of the Indemnity Issue, and thereafter shall promptly forward
to the Indemnifying Party copies of notices and communications with a Taxing
Authority relating to such Tax Controversy (including, without limitation, any
IRS revenue agent's reports or similar reports, notices of proposed adjustment,
or notices of deficiency).
(b) Control of Tax Proceedings. The Indemnifying Party may elect to
control, and may elect to have sole discretion in handling, settling or
contesting any audit inquiry, information request, audit proceedings, suit,
contest or any other action with respect to a Tax Controversy for which it
would be required to indemnify the other party if it acknowledges in
writing that it has sole liability for any Taxes that might arise in such
proceeding. Notwithstanding anything to the contrary herein, the
Indemnifying Party shall, upon the written request of the Indemnitee, keep
the Indemnitee informed of all material developments relating to the
applicable Tax Controversy and the Indemnitee may, at its own cost and
expense and with its own counsel, monitor and participate in (but not
control) the defense of such applicable Tax Controversy. The Indemnifying
Party shall not admit any liability with respect to, or settle, compromise
or discharge, any Tax proceeding with respect to a Tax Controversy on a
basis that would adversely affect the Indemnitee without obtaining the
Indemnitee's written consent, which consent shall not be unreasonably
withheld, conditioned or delayed; provided, however, if the Indemnitee
unreasonably withholds such consent to any such settlement, compromise or
discharge recommended by the Indemnifying Party, then the Indemnifying
Party (i) shall not in any event be obligated to indemnify the Indemnitee,
or otherwise be responsible, for any amount in excess of the amount of the
settlement, compromise or discharge so recommended by the Indemnifying
Party and (ii) shall be entitled to reimbursement of the fees and expenses
of counsel incurred by the Indemnifying Party after the date on which the
recommendation was made to the Indemnitee in the event the final and
unappealable judgment in such Tax Controversy exceeds the amount of the
settlement, compromise or discharge so recommended. The Indemnitee shall
not admit any liability with respect to, or settle, compromise or
discharge, any Tax Controversy without obtaining the Indemnifying Party's
written consent, which consent shall not be unreasonably withheld,
conditioned or delayed. Any out-of-pocket costs incurred in handling,
settling or contesting a Tax Controversy shall be borne by the Indemnifying
Party.
SECTION 5.03. Indemnification Payments. (a) If an Indemnitee has a claim
for an indemnification payment from an Indemnifying Party under this Agreement,
the Indemnitee shall promptly provide to the Indemnifying Party notice of such
claim, including a description of such claim and a detailed calculation of the
amount of the indemnification payment that is claimed. The Indemnifying Party
shall pay the amount of such indemnification obligation to the Indemnitee no
later than 10 business days prior to the Due Date for the payment of the
relevant Tax or 10 business days after the Indemnifying Party receives the
Indemnitee's calculations of the Indemnifying Party's indemnification obligation
hereunder, whichever occurs last, unless the Indemnifying Party reasonably
disputes the amount of, or its liability for, such payment. Interest shall
accrue with respect to any indemnification payment (including, without
limitation,
A-4-9
any disputed payment that is ultimately required to be made) not made within the
period provided for payment, at the Underpayment Rate in effect under the Code
at such time.
(b) The amount of all indemnification obligations under this Agreement
(other than the Distribution Gain Payment) shall be calculated on an
after-tax basis (without taking into account any net operating loss or
other similar tax credit or item available to offset such amount). Any
payments made to one party by another party pursuant to this Agreement
shall be treated for all Tax purposes as nontaxable payments (distributions
or capital contributions, as the case may be) made immediately prior to the
Merger, unless, and then only to the extent, otherwise required by a Final
Determination.
(c) All indemnification payments under this Agreement shall be reduced
to take account of the present value of any net Tax benefit (including, but
not limited to, any current or future deductions, any reduction of income
or gain upon a sale, disposition, conveyance, license or other similar
transaction as a result of increased Tax basis, any Tax refunds received,
any use of a credit of Taxes and any increase in the amount of losses,
reliefs, allowances or other similar Tax attributes) realized by the
Indemnitee in connection with or otherwise arising (directly or indirectly)
from a Tax Controversy. Upon the written request of the Indemnifying Party,
the Indemnitee shall provide the amount of the Tax benefit realized by the
Indemnitee in connection with or otherwise arising (directly or indirectly)
from a Tax Controversy together with reasonable detail with respect to such
calculation. In computing the amount of any such Tax benefit, the
Indemnitee shall be deemed to recognize all other items of income, gain,
loss, deduction or credit before recognizing any item arising from the
receipt of any indemnification payment hereunder or from a Tax Controversy.
The Indemnitee shall cooperate fully with all commercially reasonable
requests from the Indemnifying Party in connection with determining the
present value of such net Tax benefit.
SECTION 5.04. Cooperation and Exchange of Information. (a) Each member of
the Company Group, Post-Merger Company Group, and the Newco Group shall
cooperate fully with all reasonable requests from the other party in connection
with the preparation and filing of Tax Returns, claims for refund, and Tax
proceedings concerning issues or other matters covered by this Agreement. Such
cooperation shall include, without limitation:
(i) the retention until the expiration of the applicable statute of
limitations (taking into account any extensions or waivers thereof), and
the provision upon request, of Tax Returns, books, records (including,
without limitation, information regarding ownership and Tax basis of
property), documentation and other information relating to the Tax
Returns, including accompanying schedules, related work papers, and any
other documents relating to rulings or other determinations by Taxing
Authorities;
(ii) the execution of any document that may be necessary or
reasonably helpful in connection with any Tax proceeding, or the filing
of a Tax Return or refund claim by a member of the Company Group or
Newco Group, including certification, to the best of a party's
knowledge, of the accuracy and completeness of the information it has
supplied; and
(iii) the use of the parties' reasonable best efforts to obtain any
documentation that may be necessary or reasonably helpful in connection
with any of the foregoing.
Each party shall use its reasonable best efforts to make its employees and
facilities available on a reasonable and mutually convenient basis in connection
with the foregoing matters.
(b) If a party fails to comply with any of its obligations set forth in
Section 5.04(a) of this Agreement upon reasonable request and notice by the
other party, and such failure results in the imposition of additional Taxes, the
nonperforming party shall be liable in full for such additional Taxes.
SECTION 5.05. Retention of Information. Without limiting Section
5.04(a)(i) of this Agreement, if a party wishes to dispose of documentation of
the Company or Newco or any member of its respective Group, including, without
limitation, books, records, Tax Returns and all supporting schedules and
information relating thereto after the expiration of the applicable statute of
limitations (taking into account
A-4-10
any extensions or waivers thereof), then it shall provide written notice to the
other party describing the documentation to be destroyed or disposed of 60 days
prior to taking such action. The other party may arrange to take delivery of the
documentation described in the notice at its expense during the succeeding
60-day period.
SECTION 5.06. Disputes. If the parties disagree as to the calculation of
any Tax or the amount of (but not liability for) any payment to be made under
this Agreement, the parties shall cooperate in good faith to resolve any such
dispute, and any agreed-upon amount shall be promptly paid to the appropriate
party. If the parties are unable to resolve such dispute within 30 days
thereafter, such dispute shall be resolved by a nationally recognized law firm
or independent accounting firm mutually acceptable to the Company and Newco or,
if the Company and Newco are not able to so agree within 10 days after the end
of such 30-day period, then the Company and Newco shall each select such a firm
and such firms shall jointly select a third nationally recognized law firm or
independent accounting firm to resolve the disputed matter (such firm or firms,
the "Neutral Expert"). In all cases, the firm (or, if applicable, each of the
firms) selected to serve as the Neutral Expert shall designate a partner who has
had no prior contact with either party to receive and review any and all
submissions from the parties. The parties shall instruct the Neutral Expert to
render its decision in written form and as promptly as practicable, but in no
event later than 45 days after its selection. The decision of the Neutral Expert
shall be final and binding. The fees and expenses incurred in connection with
such decision shall be shared by the Company and Newco in proportion to the
final allocation of the Tax liability in dispute. Following the decision of the
Neutral Expert, the parties shall each take (or cause to be taken) any action
that is necessary or appropriate to implement such decision, including the
filing of amended Tax Returns.
ARTICLE VI
MISCELLANEOUS AND GENERAL
SECTION 6.01. Modification or Amendment. The parties hereto may modify or
amend this Agreement only by written agreement executed and delivered by duly
authorized officers of all of the respective parties hereto.
SECTION 6.02. Termination. In the event the Merger Agreement is
terminated pursuant to its terms prior to the Effective Time, this Agreement
shall automatically and simultaneously terminate. In the event of such
termination, no party shall have any liability to any other party pursuant to
this Agreement. It is understood that the consummation of the Merger shall not
constitute a termination of this Agreement.
SECTION 6.03. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given upon receipt by the parties at the following addresses (or at such other
address for a party as shall be specified by like notice)
(a) if to the Company (from and after the Effective Time) or to Parent
or Sub, to
Roche Holdings LTD
Grenzaherstrasse 124
CH-4070 Basel
Switzerland
Attention: Bruno Maier
Fax: +41 61 688 3196
A-4-11
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Ulrika Ekman
Fax: (212) 450-3800
(b) if to the Company (prior to the Effective Time) or to Newco, to
IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, MD 20877
Attention: President
Fax: (301) 208-3789
with a copy to:
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, New York 10019
Attention: Philip A. Gelston
Sarkis Jebejian
Fax: (212) 474-3700
SECTION 6.04. Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall not be deemed to be followed
by the words "without limitation", unless so specified. The words "hereof",
"herein", "hereby" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. The words "date hereof" shall refer to the date of
this Agreement. The term "or" is not exclusive. The word "extent" in the phrase
"to the extent" shall mean the degree to which a subject or other thing extends,
and such phrase shall not mean simply "if". The definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such
terms. Any agreement or instrument defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement or
instrument as from time to time amended, modified or supplemented. References to
a person are also to its permitted successors and assigns.
SECTION 6.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any applicable
Law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
SECTION 6.06. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties. Each party need not sign the
same counterpart.
SECTION 6.07. Entire Agreement; Third-Party Beneficiaries. This Agreement
taken together with the other Transaction Agreements, the Confidentiality
Agreement and the Letter Agreement constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the
A-4-12
parties with respect to the subject matter hereof and thereof. Except for
Section 3.01(a), Section 3.01(b), Section 3.03, Section 5.04 and Section 5.05 of
this Agreement, nothing contained in this Agreement is intended to confer upon
any person or entity other than the parties hereto and their respective
successors and permitted assigns, any benefit, right or remedy under or by
reason of this Agreement.
SECTION 6.08. Certain Obligations. Whenever this Agreement requires any
of the subsidiaries of any party to take any action, this Agreement will be
deemed to include, without limitation, an undertaking on the part of such party
to cause such subsidiary to take such action; provided, however, for the
avoidance of doubt, at any time after the Effective Time, Newco and its
subsidiaries shall not be considered to be subsidiaries of the Company.
SECTION 6.09. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 6.10. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Any purported assignment without such
consent shall be void; provided, however, the parties acknowledge and agree that
the conversion of Newco in accordance with Section 2.01 of the Restructuring
Agreement and the continuation of Newco as a result thereof shall be deemed not
to be an assignment and shall not require any consent of any party. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and assigns.
SECTION 6.11. Enforcement; Consent to Service of Process. The parties
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any New York state court or any Federal court located in the State
of New York, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any New York state
court or any Federal court located in the State of New York in the event any
dispute arises out of this Agreement or any Transaction, (ii) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that it will not bring any
action relating to this Agreement or any Transaction in any court other than any
New York state court or any Federal court sitting in the State of New York and
(iv) waives any right to trial by jury with respect to any action related to or
arising out of this Agreement or any Transaction.
SECTION 6.12. Extension; Waiver. At any time prior to the Restructuring,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties or (b) waive compliance with any
of the agreements or conditions contained herein. Any agreement on the part of a
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
A-4-13
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed by its respective duly authorized officer as of the date first set
forth above.
ROCHE HOLDING LTD
By /s/ DR. FRANZ B. HUMER
------------------------------------
Name: Franz B. Humer
Title: President and Chairman
By /s/ ERICH HUNZIKER
------------------------------------
Name: Erich Hunziker
Title: Chief Financial Officer
66 ACQUISITION CORPORATION II
By /s/ GOTTLIEB KELLER
------------------------------------
Name: Gottlieb Keller
Title: President
IGEN INTERNATIONAL, INC.
By /s/ SAMUEL J. WOHLSTADTER
------------------------------------
Name: Samuel J. Wohlstadter
Title: Chairman and Chief
Executive Officer
IGEN INTEGRATED HEALTHCARE, LLC
By /s/ RICHARD J. MASSEY
------------------------------------
Name: Richard J. Massey
Title: President and Chief
Operating Officer
A-4-14
ANNEX 5
ONGOING
LITIGATION AGREEMENT
THIS ONGOING LITIGATION AGREEMENT (the "Agreement") is entered into this
24th day of July, 2003 by and between IGEN INTERNATIONAL, INC., a corporation
duly organized and validly existing under the laws of the State of Delaware,
("IGEN"), ROCHE DIAGNOSTICS GMBH (formerly Boehringer Mannheim GmbH), a company
duly organized and validly existing under the laws of the Federal Republic of
Germany, and ROCHE DIAGNOSTICS CORPORATION, a corporation duly organized and
validly existing under the laws of the State of Indiana (collectively "Roche")
(collectively, the "Parties").
RECITALS
WHEREAS, simultaneously with the execution and delivery of this Agreement,
Roche Holding Ltd and IGEN, together with certain other specified parties, have
executed an Agreement and Plan of Merger of even date herewith (the "Merger
Agreement"), pursuant to which an Affiliate of Roche will merge with and into
IGEN; and
WHEREAS, IGEN and Roche agree that it is in their best interests that the
Parties take certain actions in connection with the following legal proceedings
involving the Parties: Igen International Inc. v. Roche Diagnostics GmbH, Case
No. PJM 97CV3461 (D. Md. filed October 15, 1997), appealed as Appeal No. 02-1537
(4th Circuit decided July 9, 2003), and any successor action (the "Maryland
Contract Action"), Igen International Inc. v. Roche Diagnostics GmbH and Roche
Diagnostics Inc., Case No. PJM 03CV2000 (D. Md. filed July 9, 2003) and any
successor action (the "Maryland Patent Action"), and Igen International Inc. v.
Roche Diagnostics GmbH and Roche Diagnostics Inc., File No. LG Dusseldorf 4b O
258/03 (Dusseldorf, Germany filed July 9, 2003) and any successor action (the
"German Patent Action"); and
WHEREAS, IGEN and Roche agree that the actions contemplated by this
Agreement be without prejudice to either Party with regard to any action that
either Party might have taken in the Maryland Contract Action, the Maryland
Patent Action or the German Patent Action, including the filing of a preliminary
injunction by IGEN in the Maryland Patent Action, and the filing of an
interlocutory injunction by IGEN in addition to the German Patent Action.
NOW, THEREFORE, in consideration of the mutual premises and covenants
hereinafter set forth, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, capitalized terms shall have the respective
meanings set forth below. Capitalized terms used but not defined in this
Agreement shall have the meaning given to such terms in the Merger Agreement:
1.1 Affiliate. "Affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person. Neither
Genentech Inc., 1 DNA Way, South San Francisco, California 94080-4990, USA nor
Chugai Pharmaceutical Co., Ltd, 1-9 Kyobashi 2-chome, Chuo-ku, Tokyo, 104-8301,
Japan shall be deemed an Affiliate of Roche for purposes of this Agreement.
Neither Meso Scale Diagnostics, LLC., 9238 Gaither Road, Gaithersburg, Maryland,
USA 20877 nor Meso Scale Technologies, LLC., 9238 Gaither Road, Gaithersburg,
Maryland, USA 20877 shall be deemed an Affiliate of IGEN for purposes of this
Agreement.
A-5-1
1.2 Commercial Agreements. "Commercial Agreements" shall have the meaning
set forth in the Merger Agreement.
1.3 Effective Time. "Effective Time" shall have the meaning as set forth
in the Merger Agreement.
1.4 Fourth Circuit. "Fourth Circuit" shall mean the U.S. Court of Appeals
for the Fourth Circuit.
1.5 Fourth Circuit Opinion. "Fourth Circuit Opinion" shall mean the
opinion of the Fourth Circuit issued on July 9, 2003 in the Maryland Contract
Action.
1.6 German Joint Motion to Stay. "German Joint Motion to Stay" shall mean
the joint motions to stay the German Patent Action in the forms attached hereto
as Appendix A.
1.7 German Patent Action. "German Patent Action" shall have the meaning
set forth in the Recitals, or any re-filing thereof as contemplated by Section
2.4 and the German Patent Interlocutory Injunction.
1.8 German Patent Interlocutory Injunction. "German Patent Interlocutory
Injunction" shall mean an interlocutory injunction proceeding ("Einstweiliges
Verfugungsverfahren") directed at the same or part of the same matter under
dispute as the German Patent Action.
1.9 Governmental Entity. "Governmental Entity" shall mean any domestic or
foreign (whether a national, federal, state, provincial, local or otherwise)
government or any court of competent jurisdiction, agency or commission or other
governmental authority or instrumentality, domestic or foreign.
1.10 IGEN/Roche Actions. "IGEN/Roche Actions" shall mean the Maryland
Patent Action and the German Patent Action.
1.11 License Agreement. "License Agreement" shall mean the License and
Technology Agreement between IGEN and Roche Diagnostics, GmbH (formerly
Boehringer Mannheim, GmbH) dated as of September 23, 1992.
1.12 Maryland Contract Action. "Maryland Contract Action" shall have the
meaning set forth in the Recitals.
1.13 Maryland District Court. "Maryland District Court" shall mean United
States District Court for the District of Maryland, Southern Division located in
Greenbelt, Maryland.
1.14 Maryland Joint Motion. "Maryland Joint Motion to Stay" shall mean
the joint motion to stay the Maryland Patent Action and proposed form of Order
in the forms attached hereto as Appendix B.
1.15 Maryland Patent Action. "Maryland Patent Action" shall have the
meaning set forth in the Recitals, or any re-filing thereof as contemplated by
Section 2.4.
1.16 Merger. "Merger" shall mean the "Merger" as defined in the Merger
Agreement.
1.17 Merger Agreement. "Merger Agreement" shall have the meaning set
forth in the Recitals.
1.18 Person. "person" shall mean any individual, firm, corporation,
partnership, company, limited liability company, trust, joint venture,
association, Governmental Entity or other entity.
1.19 Transaction Agreements. "Transaction Agreements" shall have the
meaning set forth in the Merger Agreement.
1.20 Termination Date. "Termination Date" shall mean the earlier to occur
of: (i) the Effective Time, or (ii) the termination of the Merger Agreement in
accordance with its terms.
A-5-2
ARTICLE II
STAND STILL PROVISIONS
2.1 Maryland Patent Action. Immediately following the execution and
delivery of this Agreement, the Parties shall file, or cause to be filed, the
Maryland Joint Motion to Stay with the Maryland District Court. Until the
Termination Date, each of the Parties agrees, and shall cause its Affiliates, to
take such further actions as may be reasonably necessary, appropriate,
desirable, or required in order to facilitate the Maryland District Court
entering and maintaining the order contemplated by the Maryland Joint Motion to
Stay.
2.2 Maryland Contract Action. Roche agrees for itself and its Affiliates
that it shall file or cause to be filed any and all motions, pleadings and
documents in the Maryland Contract Action appropriate or necessary to withdraw
its petition for panel rehearing filed on July 23, 2003. Each of the Parties
agrees, for itself and its Affiliates, that: (i) it shall not take any action or
file any additional motions or pleadings in the Maryland Contract Action,
including any further motions for rehearing or rehearing en banc that may be or
could be filed with the Fourth Circuit, or any petition for writ of certiorari
to the United States Supreme Court, in the Maryland Contract Action; (ii) it
shall take any and all action that may reasonably be required or necessary in
order to stay, or withdraw with the right to refile, any motion filed prior to
the date hereof in the Maryland District Court with respect to the Maryland
Contract Action that remains pending; and(iii) any time periods or limitations
with respect to the right of any Party to appeal any order of the Maryland
District Court entered in the Maryland Contract Action on or after the date
hereof shall be tolled until the Termination Date.
2.3 German Patent Action The Parties specifically agree that IGEN shall
be authorized to proceed to serve or have served on Roche, and that Roche shall
be authorized to indicate to the court its intention to defend itself in, the
German Patent Action. The Parties further agree to jointly take all steps
necessary to stay the German Patent Action after service especially by
requesting a stay ("Ruhen des Verfahrens gemaSS sec. 251 ZPO") until the
Termination Date by filing German Joint Motion to Stay within a week after the
date of this Agreement. Roche will refrain from taking any steps to achieve a
dismissal of the German Patent Action at any time before the Termination Date.
However, to the extent that dismissal occurs before the Termination Date, Roche
and IGEN shall take all steps necessary promptly to re-instate the German Patent
Action through to the Termination Date.
2.4 Subsequent Actions. (a) Notwithstanding anything to the contrary
contained in this Agreement, IGEN shall, upon advice of counsel in order to
preserve its legal rights being asserted in the IGEN/Roche Actions, be permitted
to withdraw and promptly re-file any of the IGEN/Roche Actions and such
withdrawal and re-filing shall not be a violation of any of IGEN's obligations
hereunder. Such refiled actions shall be within the definition of the IGEN/Roche
Actions. Roche covenants and agrees that it shall not object to the withdrawal
and re-filing of a complaint or other pleading in any of the IGEN/ Roche
Actions.
(b) Promptly after the Effective Time: (i) IGEN shall, and shall cause its
Affiliates to, withdraw and terminate each of the IGEN/Roche Actions and use its
reasonable best efforts to cause the dismissal of such actions as soon
thereafter as practicable; and (ii) Roche shall, and shall cause its Affiliates
to, cooperate and use its reasonable best efforts to cause the dismissal of the
IGEN/Roche Actions. If the pleadings, motions, filings and other submissions to
or with the courts having jurisdiction over the IGEN/ Roche Actions would
adversely impact the intellectual property of IGEN Integrated Healthcare, LLC
(or any successor thereto), then such pleading, filing or submission shall be
made only after IGEN and Roche have received the prior written consent of IGEN
Integrated Healthcare, LLC. (or any successor thereto), which consent shall not
be unreasonably withheld, conditioned or delayed. IGEN Integrated Healthcare,
LLC., shall be a third party beneficiary of this provision and shall be entitled
to enforce this right as though it were a party hereto.
A-5-3
ARTICLE 3
ONGOING OBLIGATIONS AND COVENANTS
3.1 Covenant of Cooperation. (a) Each Party agrees, for itself and its
Affiliates, to cooperate with the other Party in all reasonable respects,
including in the preparation, execution and filing of all necessary or
appropriate papers with the appropriate forums, to consummate and carry out the
purposes and intent of each of the provisions of Article 2 of this Agreement.
(b) Each of the Parties agrees, for itself and its Affiliates, that prior
to the Termination Date it shall take all further necessary steps and actions
before the court or courts having jurisdiction over of the IGEN/Roche Actions to
avoid dismissal of the complaints pending in each of those cases prior to the
Termination Date; provided, however, that to the extent that either of the
IGEN/Roche Actions is dismissed by the court having jurisdiction in the matter
for any reason prior to the Termination Date, Roche shall not oppose (and if
necessary take appropriate action to allow) the taking by IGEN of all steps
reasonably necessary or desirable to re-instate the IGEN/Roche Action so
dismissed.
3.2 No Inconsistent Actions. Each of the Parties, for itself and its
Affiliates, agrees not to take any action before the Termination Date in
derogation of or inconsistent with the obligations specified in this Agreement,
including filing or prosecuting (other than requesting or providing for service
of process and indicating an intention to defend as contemplated by Section 2.3)
any inter partes or ex parte proceedings anywhere in the world in any court,
patent office or other governmental relating to the subject matter of the
IGEN/Roche Actions or to any of the patents that are the subject of any of the
IGEN/Roche Actions, or any patent in any country claiming priority to any of the
applications to which the patents in suit claim priority.
3.3 Covenant Not To Sue. IGEN agrees that it shall not commence any new
patent suit or prosecute any patent suit against Roche for any acts of Roche
occurring between the date of the termination of the License Agreement through
to (but not subsequent to) the Termination Date that, if taken prior to
termination of the License Agreement, would have been within the scope of the
license granted under the License Agreement. Nothing in this Agreement shall
preclude IGEN or any of its Affiliates from asserting or filing, and IGEN for
itself and each of its Affiliates reserves the right to assert and file, any
claim, suit, action and proceeding against Roche and any of its Affiliates for
any acts taken after the date of the termination of the License Agreement that
are not within the scope of the license granted under the License Agreement.
3.4 Compliance with Judgment.
(a) Until the Effective Time, each of IGEN and Roche shall, and shall cause
each of its Affiliates to, comply with all of its obligations under and in
respect of the final judgment entered by the United States District Court for
the District of Maryland in the License Litigation on February 15, 2002 (the
"Final Judgment") (as modified by the Court of Appeals Opinion) or any final
judgment entered not inconsistent with the mandate to be returned by the United
States Court of Appeals for the Fourth Circuit in connection with the Court of
Appeals Opinion.
(b) Each of IGEN and Roche shall, and shall cause each of its Affiliates
to, take any and all action necessary to cause the United States District Court
for the District of Maryland to enter a final judgment not inconsistent with the
mandate to be returned by the United States Court of Appeals for the Fourth
Circuit in connection with the Court of Appeals Opinion.
3.5 Preservation of Rights. The Parties agree that nothing in this
Agreement can be construed as a waiver of any rights, and is without prejudice
to the ability, of both Parties to prosecute the IGEN/Roche Actions, and any
other actions not prosecuted as a result of this Agreement, after the
Termination Date. Without limiting the generality of the foregoing, Roche
covenants and agrees that it shall not, and shall not permit any of its
Affiliates, to argue or assert that the period between the date of this
Agreement and the Termination Date constitutes undue or unreasonable delay (or
advancing any similar or comparable argument) in IGEN's filing for or seeking a
motion for a preliminary injunction or an interlocutory
A-5-4
injunction in either of the IGEN/Roche Actions or that any such motion was not
timely filed as a result of IGEN's complying with its obligations under this
Agreement.
ARTICLE 4
PAYMENTS
4.1 Payments.
(a) Not later than two Business Days after the date of this Agreement,
Roche shall pay to IGEN $18.6 million as full payment of the compensatory
damages awarded in the Maryland Contract Action.
(b) Not later than two Business Days after the date of this Agreement,
Roche shall pay to IGEN $10.62 million as full payment to IGEN for royalties due
and payable under the License Agreement for sales made in the second calendar
quarter ended June 30, 2003.
(c) Not later than two Business Days after the date of this Agreement,
Roche shall pay to IGEN $5.0 million as partial consideration for this
Agreement.
(d) On the last Business Day of each month during the term of this
Agreement, commencing in August, 2003, Roche shall pay to IGEN $5.0 million as
partial consideration for this Agreement; provided, however, that with respect
to the month in which the Termination Date occurs, Roche shall pay to IGEN
immediately prior to the Effective Time (or, if such Termination Date occurred
as a result of a termination of the Merger Agreement, on or prior to the second
Business Day following such Termination Date) a pro rata portion of such monthly
amount based on the number of days in such month to, but excluding, the
Termination Date.
(e) Any payment due to IGEN under this Agreement shall be paid by wire
transfer of immediately available funds on the date such payment is due. All
payments due under this Agreement shall be made in U.S. dollars.
(f) IGEN agrees and acknowledges that no additional royalty payments are or
will be due or payable under the License Agreement for any period prior to the
date hereof or during the term of this Agreement.
(g) For purposes of this Article 4, "Business Day" shall mean any day other
than a Saturday, Sunday and any day on which the banks in Germany, Switzerland
or the United States or the federal courts in the United States are permitted or
required by applicable Law to close.
ARTICLE 5
[RESERVED]
ARTICLE 6
TERM AND TERMINATION
6.1 Term. Except as provided in Section 6.2, below, unless otherwise
agreed by the Parties, this Agreement shall remain in full force and effect from
and after the date first set forth above until the Termination Date.
6.2 Termination.
IGEN may, in its sole discretion, terminate this Agreement if Roche fails
to make any payment when due, which failure has not been cured within ten days
after IGEN has delivered to Roche written notice thereof.
6.3 Consequences of Termination. In the event of any termination or
expiration of this Agreement, IGEN shall be entitled to continue to prosecute
the IGEN/Roche Actions without delay and both Parties covenant and agree that it
shall not use this Agreement or any actions taken by any of the Parties
hereunder for any purpose, including as evidence in or in support of any
allegation made in, or any possible
A-5-5
defense to, the IGEN/Roche Actions. Notwithstanding the expiration or
termination of this Agreement, the provisions of Articles 1 and 8, and Sections
2.4, 3.3, 3.5, 4.1(d), 4.1(e) and 6.3, shall survive.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
Each Party hereby represents and warrants to the other that: (i) it has not
filed or commenced any suit, claim, demand, proceeding or action ("Action")
against the other Party and there is no such Action pending against the other
Party, other than for the Maryland Contract Claim, the Maryland Patent Action,
and the German Patent Action; and (ii) no consent, notice, approval,
authorization, waiver or permit, to or from any person (other than the consent
attached hereto), including any Governmental Entity or third party is required
to be obtained or made by in connection with its execution, delivery and
performance of this Agreement.
ARTICLE 8
MISCELLANEOUS
8.1 Waiver. No delay or omission on the part of either Party to this
Agreement in requiring performance by the other Party or in exercising any right
hereunder shall operate as a waiver of any provision hereof or of any right or
rights hereunder; and the waiver, omission or delay in requiring performance or
exercising any right hereunder on any one occasion shall not be construed as a
bar to or waiver of such performance or right, or of any right or remedy under
this Agreement, on any future occasion. Any agreement on the part of either
Party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such Party.
8.2 Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their permitted successors and assigns;
provided, however, that neither Party shall assign any of its rights and
obligations hereunder except as consented to by the other Party, which consent
may be granted or withheld in the sole and absolute discretion of the
non-assigning Party. In addition, IGEN agrees that this Agreement shall not be
assigned or assignable to IGEN Integrated Healthcare, LLC as a part of the
transactions contemplated by the Merger Agreement and shall remain a Continuing
Company Asset as that term is defined in the Restructuring Agreement. Any
assignment not in accordance with this Section 8.2 shall be void.
8.3 Notices. Any notice or other communication required or permitted to
be given to either Party hereto shall be in writing and shall be deemed to have
been properly given and to be effective on the date of delivery if delivered in
person or by facsimile (with electronic confirmation of receipt and with a
confirmation copy sent by internationally-recognized air courier service), to
such Party at the following address:
In the case of IGEN:
IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, Maryland 20877
United States of America
Attention: President
Fax: (301) 208-3789
with copies to:
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, NY 10019
A-5-6
Attention: Philip A. Gelston
Sarkis Jebejian
Fax: (212) 474-3700
Wilmer, Cutler & Pickering
2445 M Street, N.W
Washington, DC 20037
Attention: Howard M. Shapiro
Louis R. Cohen
Fax: (202) 663-6363
Finnegan, Henderson, Farabow,
Garrett & Dunner, L.L.P.
1300 I Street, N.W
Washington, DC 20005
Attention: Donald R. Dunner
Fax: (202)408-4400
In the case of Roche Diagnostics GmbH:
Roche Diagnostics GmbH
Sandhofer Strasse 116
D-68305 Mannheim
Federal Republic of Germany
Attention: Legal Department
Fax: 011-49-621-759-4461
In the case of Roche Diagnostics Corporation
Roche Diagnostics Corporation
9115 Hague Road
Indianapolis, Indiana 46250
Attention: Steve Oldham
Fax: (317) 521-3082
with copies, in the case of Roche Diagnostics,
GmbH or Roche Diagnostics Corporation, to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Ulrika Ekman
Fax: (212) 450-3800
8.4 Headings. The headings of the several Sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
8.5 Force Majeure. Any delays in performance by any Party under this
Agreement (other than a Party's failure to make payments hereunder) shall not be
considered a breach of this Agreement if and to the extent caused by occurrences
beyond the reasonable control of the Party affected, including acts of God,
embargoes, governmental restrictions, strikes or other concerted acts of
workers, fire, flood, explosion, riots, wars, civil disorder, rebellion or
sabotage. The Party suffering such occurrence shall immediately notify the other
Party and any time for performance hereunder shall be extended by the actual
time of delay caused by the occurrence.
A-5-7
8.6 Independent Contractors. In granting, performing or exercising rights
under this Agreement, Roche and IGEN are and shall act at all times as
independent contractors and nothing contained in this Agreement shall be
construed or implied to create an agency, partnership or employer and employee
relationship between IGEN and Roche. At no time shall one Party make commitments
or incur any charges or expenses for or in the name of the other Party.
8.7 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any applicable Law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
8.8 Interpretation. The official text of this Agreement shall be English.
For purposes of this Agreement, except as otherwise expressly provided or unless
the context otherwise requires:
(a) the terms of this Agreement do not amend or supersede, and shall not be
used to interpret, the terms of the Merger Agreement or any of the Transaction
Agreements or Commercial Agreements specified therein, including the Covenants
Not to Sue (as defined in the Merger Agreement);
(b) the terms defined in this Agreement have the meanings assigned to them
in this Agreement and include the plural as well as the singular, and the use of
any gender herein shall be deemed to include the other gender;
(c) references herein to "Sections," "Subsections," "Paragraphs," and other
subdivisions without reference to a document are to designated Sections,
Subsections, Paragraphs and other subdivisions of this Agreement;
(d) a reference to a Subsection without further reference to a Section is a
reference to such Subsection as contained in the same Section in which the
reference appears, and this rule shall also apply to Paragraphs and other
subdivisions;
(e) the words "herein," "hereof," "hereunder," and other words of similar
import refer to this Agreement as a whole and not to any particular provision;
(f) the term "include" or "including" shall mean "including without
limitation";
(g) the term "to the extent" shall mean the degree to which a subject or
other thing extends, and such phrase shall not mean simply "if"; (h) the term
"or" is not exclusive; and
(i) the Appendices to this Agreement are hereby incorporated and made a
part hereof and are an integral part of this Agreement.
8.9 Cumulative Rights. The rights, powers and remedies hereunder shall be
in addition to, and not in limitation of, all rights, powers and remedies
provided at law or in equity. All of such rights, powers and remedies shall be
cumulative, and may be exercised successively or cumulatively.
8.10 Entire Agreement; Amendment. This Agreement, taken together with the
other Transactions Agreements, the Commercial Agreements, the Confidentiality
Agreement and the Letter Agreement, embodies the entire understanding of the
Parties with respect to the subject matter hereof and shall supersede all
previous communications, representations or understandings, either oral or
written, between the Parties relating to the subject matter hereof. This
Agreement shall not be amended, altered or changed except by a written agreement
signed by all of the Parties hereto.
8.11 No Third Party Beneficiary Rights. Except for the provisions of
Section 2.4(b) related to dismissal of the IGEN/Roche Actions following the
Termination Date, nothing contained in this
A-5-8
Agreement is intended to confer upon any person other than the Parties hereto
and their respective successors and permitted assigns, any benefit, right or
remedy under or by reason of this Agreement.
8.12 Counterparts; Effectiveness. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement. This Agreement shall not
become effective unless and until (i) signed and delivered by all Parties; and
(ii) joined by Meso Scale Diagnostics, LLC. and Meso Scale Technologies, LLC. as
evidenced by each of those companies signing the Joinder set forth on the
signature page herof.
8.13 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
8.14 Enforcement; Consent to Service of Process. The Parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any New York
state court or any Federal court of the United States of America sitting in New
York City, this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (i) consents to
submit itself exclusively to the personal jurisdiction of any New York state
court or any Federal Court of the United States sitting in New York City in the
event any dispute arises out of this Agreement, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, (iii) agrees that it will not bring any action
relating to this Agreement in any court other than in any New York state court
or any Federal court of the United States of America sitting in New York City
and (iv) waives any right to trial by jury with respect to any action related to
or arising out of this Agreement.
IN WITNESS WHEREFORE, the Parties have caused this Agreement to be executed
on its behalf by its duly authorized representative, all as of the date first
above written.
IGEN INTERNATIONAL, INC.
by /s/ RICHARD J. MASSEY
------------------------------------
Name: Richard J. Massey
Title: President and Chief
Operating Officer
ROCHE DIAGNOSTICS GMBH
by /s/ C.J. RUETSCH
------------------------------------
Name: Claus-Joerg Ruetsch
Title: General Counsel
A-5-9
by /s/ HEINO VON PRONDZYNSKI
-----------------------------------
Name: Heino Von Prondzynski
Title: Authorized Signatory
ROCHE DIAGNOSTICS CORPORATION
by /s/ STEVE A. OLDHAM
------------------------------------
Name: Steve A. Oldham
Title: Vice President, General
Counsel and Secretary
JOINDER: EACH OF MESO SCALE TECHNOLOGIES, LLC., A DELAWARE LIMITED
LIABILITY COMPANY AND MESO SCALE DIAGNOSTICS, LLC., A DELAWARE LIMITED LIABILITY
COMPANY JOINS THIS ONGOING LITIGATION AGREEMENT SOLELY TO CONFIRM THAT IT AGREES
TO BE BOUND BY SECTION 3.3 AND ARTICLE 8 OF THIS AGREEMENT AS THOUGH IT WERE
IGEN FOR THIS PURPOSE.
MESO SCALE TECHNOLOGIES, LLC.
A Delaware Limited Liability Company
By: /s/ JACOB N. WOHLSTADTER
------------------------------------
Print Name: Jacob N. Wohlstadter
Title: President and Chief
Executive Officer
Date: July 24, 2003
MESO SCALE DIAGNOSTICS, LLC.
A Delaware Limited Liability Company
By: /s/ JACOB N. WOHLSTADTER
------------------------------------
Print Name: Jacob N. Wohlstadter
Title: President and Chief
Executive Officer
Date: July 24, 2003
A-5-10
ANNEX 6
GLOBAL CONSENT AND AGREEMENT
GLOBAL CONSENT AND AGREEMENT (this "AGREEMENT") dated as of July 24, 2003
among Roche Holding Ltd, a joint stock company organized under the laws of
Switzerland ("PARENT"), IGEN International, Inc., a Delaware corporation (the
"COMPANY"), IGEN Integrated Healthcare, LLC, a Delaware limited liability
company and a wholly owned subsidiary of the Company ("NEWCO"), Meso Scale
Diagnostics, LLC., a Delaware limited liability company ("MSD"), Meso Scale
Technologies, LLC., a Delaware limited liability company ("MST"), Jacob
Wohlstadter, an individual whose business address is MSD, 9238 Gaither Road,
Gaithersburg, MD 20877 ("JW"), and JW Consulting Services, L.L.C., a Delaware
limited liability company ("JWCS").
WITNESSETH:
WHEREAS, simultaneously with the execution and delivery of this Agreement,
the Company, Newco, Parent and 66 Acquisition Corporation II, a Delaware
corporation and a wholly owned subsidiary of Parent ("SUB"), are entering into
an Agreement and Plan of Merger (the "MERGER AGREEMENT") pursuant to which,
among other things and on the terms and subject to the conditions set forth
therein, Sub will merge (the "MERGER") with and into the Company;
WHEREAS, simultaneously with the execution and delivery of this Agreement,
the Company and Newco are entering into an agreement (the "RESTRUCTURING
AGREEMENT") pursuant to which, prior to the Effective Time (as defined in the
Merger Agreement), the Restructuring (as defined in the Restructuring Agreement)
will be effected, as part of which (a) certain of the assets of the Company,
including the Company's limited liability membership interests in MSD, and the
Company's rights under and in respect of the MSD Agreements (as defined below)
will be transferred to Newco or one or more of Newco's Subsidiaries and (b)
Newco or one or more of its Subsidiaries will assume the Assumed Liabilities (as
defined in the Restructuring Agreement), including the Company's liabilities and
obligations under and in respect of the MSD Agreements;
WHEREAS, simultaneously with the execution and delivery of this Agreement,
the Company, Newco, MSD, MST, JW and JWCS are entering into a certain letter
agreement (the "LETTER AGREEMENT") that contemplates, among other things,
certain agreements, arrangements and contributions in connection with the
Transactions in consideration thereof and in consideration of the execution and
delivery by MSD, MST, JW and JWCS of this Agreement; and
WHEREAS, the Company and MST are the sole members of MSD;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"ACTION" means any claim, suit, action, arbitration, inquiry,
investigation or other proceeding of any nature (whether criminal, civil,
legislative, administrative, regulatory, prosecutorial or otherwise) by or
before any arbitrator or Governmental Entity or similar Person or body.
An "AFFILIATE" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first Person. For the avoidance of
doubt, (i) none of MSD, MST, JW, JWCS, Hyperion Catalysis International, a
California corporation, Wellstat Biologics Corporation, a Delaware
corporation, Wellstat Therapeutics Corporation, a California corporation,
Proteinix Corporation, a Delaware corporation, and Integrated
A-6-1
Chemical Synthesizers, Inc., a Delaware corporation, is an Affiliate of the
Company or Newco for purposes of this Agreement, and (ii) neither
Genentech, Inc., a Delaware corporation, nor Chugai Pharmaceutical Co.,
Ltd, a Japanese company, is an Affiliate of Parent for purposes of this
Agreement.
"CONSENT TO LICENSE AGREEMENT" means the Consent by MSD and MST to the
License Agreement and attached thereto.
"CONTINUING LICENSEE SUBSIDIARY" means IGEN LS LLC, a Delaware limited
liability company and a wholly owned Subsidiary of the Company.
"COVENANTS NOT TO SUE" means the Covenants Not to Sue dated as of the
date hereof among Newco, Parent, R Diagnostics, MSD and MST.
"EMPLOYMENT AGREEMENT" means the Employment Agreement dated as of
August 15, 2001 among MSD, the Company, MST and JW.
"GOVERNMENTAL ENTITY" means any domestic or foreign (whether national,
Federal, state, provincial, local or otherwise) government or any court of
competent jurisdiction, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign.
"I/R CONFIDENTIALITY AGREEMENT" means the confidentiality agreement
dated October 8, 2001 among the Company, R Diagnostics and F. Hoffmann-La
Roche Ltd.
"JOINDER OF THE ONGOING LITIGATION AGREEMENT" means the Joinder by MSD
and MST to Section 3.3 and Article 8 of the Ongoing Litigation Agreement
and attached thereto.
"LIABILITIES" means any and all debts, liabilities, commitments and
obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown,
whenever or however arising and whether or not the same would be required
by generally accepted accounting principles to be reflected in financial
statements or disclosed in the notes thereto.
"LICENSE AGREEMENT" means the License Agreement dated as of the date
of this Agreement between the Company and the Continuing Licensee
Subsidiary.
"LLC AGREEMENT" means the Limited Liability Company Agreement of MSD
dated as of November 30, 1995 by and between MST and the Company.
"M/R CONFIDENTIALITY AGREEMENT" means the confidentiality agreement
dated April 28, 2003 among the Company, MSD, R Diagnostics and F.
Hoffmann-La Roche Ltd.
"MSD AGREEMENTS" means all of the Contracts (as defined below) and
understandings, whether oral or written, between MSD or any of its
Affiliates or employees, on the one hand, and the Company or any of its
Subsidiaries (other than Newco), on the other hand, including, but not
limited to the agreements set forth on Schedule A to this Agreement, other
than any stock option agreements between the Company and any employee of
MSD (including all stock option agreements with JW granted to him in his
capacity as a consultant to the Company).
"MSD TRANSACTION DOCUMENTS" means (i) with respect to MSD and MST, the
Consent to License Agreement, the Joinder of the Ongoing Litigation
Agreement, and the Covenants Not to Sue, (ii) with respect to the Company,
the License Agreement and the Ongoing Litigation Agreement, (iii) with
respect to Newco, the Covenants Not to Sue, (iv) with respect to Parent,
the Covenants Not to Sue and the Ongoing Litigation Agreement and (v) with
respect to R Diagnostics, the Ongoing Litigation Agreement.
"ONGOING LITIGATION AGREEMENT" means the Ongoing Litigation Agreement
entered into on the date of this Agreement by and between the Company, R
Diagnostics and Roche Diagnostics Corporation, an Indiana corporation.
A-6-2
"PCR LICENSE AGREEMENT" means the PCR License Agreement dated as of
the date of this Agreement among Newco, R Diagnostics, F. Hoffmann-LaRoche
Ltd, a Swiss limited liability company, and Roche Molecular Systems, Inc.,
a Delaware corporation.
"PCR SERVICES AGREEMENT" means the License Agreement (Human IVD
Services and Animal Diagnostic Services) dated as of the date of this
Agreement among Newco, R Diagnostics, F. Hoffmann-LaRoche Ltd, a Swiss
limited liability company, and Roche Molecular Systems, Inc., a Delaware
corporation.
A "PERSON" means any individual, firm, corporation, partnership,
company, limited liability company, trust, joint venture, association,
Governmental Entity or other entity.
"POST-CLOSING COVENANTS AGREEMENT" means the Post-Closing Covenants
Agreement dated as of the date of this Agreement among Parent, the Company
and Newco.
"R DIAGNOSTICS" means Roche Diagnostics GmbH, a German limited
liability company.
A "SUBSIDIARY" of any Person means another Person, an amount of the
voting securities or other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first Person. For the avoidance of doubt, neither
Genentech, Inc., a Delaware corporation, nor Chugai Pharmaceutical Co.,
Ltd, a Japanese company, shall be deemed to be a Subsidiary of Parent for
purposes of this Agreement.
"TRANSACTION AGREEMENTS" means (i) this Agreement, (ii) the Merger
Agreement, (iii) the Restructuring Agreement, (iv) the Post-Closing
Covenants Agreement, (v) the Tax Allocation Agreement dated as of the date
hereof among Parent, Sub, the Company and Newco, (vi) the Ongoing
Litigation Agreement, (vii) the Release and Agreement dated as of the date
hereof among the Company, Newco, Hyperion Catalysis International, Wellstat
Biologics Corporation, Wellstat Therapeutics Corporation, Proteinix
Corporation and Integrated Chemical Synthesizers, Inc., (viii) the License
Agreement, (ix) the Improvements License Agreement dated as of the date
hereof between R Diagnostics and the Company, (x) the Covenants Not to Sue,
(xi) the PCR License Agreement and (xii) the PCR Services Agreement.
"TRANSACTIONS" means the transactions contemplated by this Agreement
and the other Transaction Agreements.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Except for Section 2.05, with respect to which only MSD, MST and JWCS shall
be deemed to have made the representations and warranties set forth therein,
each of (a) MSD and MST represents and warrants, severally and not jointly, to
Parent, the Company, Newco, JW and JWCS, (b) each of Parent, the Company and
Newco represents and warrants, severally and not jointly, to MSD, MST, JW and
JWCS and (c) each of JW and JWCS represents and warrants, jointly and severally,
to Parent, the Company, Newco, MSD and MST, in each case as of the date hereof
and as of the Effective Time, that:
SECTION 2.01. Organization, Standing and Power. If such Person is not a
natural Person, such Person is duly formed or organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized (in
the case of good standing, to the extent such jurisdiction recognizes such
concept) and has all corporate or limited liability company powers, as
applicable, governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted, except for such
governmental licenses, authorizations, permits, consents and approvals the
failure of which to have or obtain, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the business of such
Person and such Person's Subsidiaries, taken as a whole.
A-6-3
SECTION 2.02. Authority; Execution and Delivery; Enforceability. If such
Person is not a natural Person, such Person has all requisite corporate or
limited liability company power and authority, as applicable, to execute and
deliver this Agreement and each MSD Transaction Document to which it is a party
and to consummate the transactions contemplated hereby and thereby. If such
Person is not a natural Person, the execution and delivery by such Person of
this Agreement and each MSD Transaction Document to which it is a party and the
consummation by such Person of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate or limited liability
company action on the part of such Person. If such Person is a natural Person,
such Person has the full legal capacity to enter into, execute and deliver this
Agreement without the consent or approval of any other Person. Such Person has
duly executed and delivered this Agreement and each MSD Transaction Document to
which it is a party, and, assuming due execution and delivery hereof by each
other party hereto and thereto, this Agreement and each MSD Transaction Document
to which it is a party constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms.
SECTION 2.03. No Conflicts; Consents. (a) The execution and delivery by
such Person of this Agreement and each MSD Transaction Document to which it is a
party do not, and the consummation of the transactions contemplated hereby and
thereby and compliance with the terms hereof and thereof will not, conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any lien upon any of the properties or assets of such Person
or any Subsidiary of such Person under, any provision of (i) if such Person is
not a natural Person, the charter, organizational or formation documents of such
Person, (ii) any contract, lease, license, indenture, note, bond, agreement,
permit, concession, franchise or other instrument (a "CONTRACT") to which such
Person or any Subsidiary of such Person is a party or by which their respective
properties or assets is bound or (iii) subject to the filings and other matters
referred to in Section 2.03(b), any judgment, order or decree (a "JUDGMENT") or
statute, law, ordinance, rule or regulation whether foreign or domestic
applicable to such Person or any Subsidiary of such Person or their respective
properties or assets, other than, (A) in the case of clauses (ii) and (iii)
above, any such items that, individually or in the aggregate, (x) in the case of
each of Parent, MSD, MST, JW and JWCS only, would not reasonably be expected to
have a material adverse effect on the business of such Person and such Person's
Subsidiaries, taken as a whole, and (y) would not reasonably be expected to
materially impair the ability of such Person or any Subsidiary of such Person to
perform its obligations under this Agreement or any MSD Transaction Document to
which it is a party or consummate the transactions contemplated hereby and
thereby or (B) in the case of clauses (i), (ii) and (iii) above, any such items
that are waived or cured by operation of this Agreement or the Letter Agreement.
(b) No consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with, or permit from, any Governmental
Entity, is required to be obtained or made by such Person or any Subsidiary of
such Person in connection with the execution, delivery and performance by such
Person or any Subsidiary of such Person of this Agreement or any MSD Transaction
Document to which it is a party or the consummation of the transactions
contemplated hereby and thereby, other than such items that the failure of which
to obtain or make, individually or in the aggregate, (i) in the case of each of
Parent, MSD, MST, JW and JWCS only, would not reasonably be expected to have a
material adverse effect on the business of such Person and such Person's
Subsidiaries, taken as a whole, and (ii) would not reasonably be expected to
materially impair the ability of such Person or any Subsidiary of such Person to
perform its obligations under this Agreement or any MSD Transaction Document to
which it is a party or consummate the transactions contemplated hereby and
thereby.
SECTION 2.04. Brokers. No broker, investment banker, financial advisor or
other Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of such Person, other than in the case of the
Company, Lehman Brothers, Inc.
SECTION 2.05. Ownership of MSD, MST and JWCS. Each of MSD, MST and JWCS
hereby represents and warrants, severally and not jointly, to Parent and Newco,
as of the date hereof and as of the
A-6-4
Effective Time, that (i) Schedule B sets forth a true and complete list of all
the members, and their respective membership interests and voting rights, of
each of MSD, MST and JWCS and (ii) none of MSD, MST or JWCS has any members
other than as set forth on Schedule B.
ARTICLE 3
CERTAIN AGREEMENTS
SECTION 3.01. Consent. Each of JW, JWCS, MSD and MST (each, a "CONSENTING
PARTY") hereby acknowledges receipt of a copy of each Transaction Agreement, and
each Consenting Party has carefully reviewed, and consulted its legal advisors
with respect to, each Transaction Agreement. Each Consenting Party hereby
consents to the Transaction Agreements and the consummation of the Transactions,
and grants all waivers and consents which are necessary under the MSD Agreements
to permit the consummation of the Transactions and the performance by the
Company, Newco, and each Consenting Party of their obligations under the
Transaction Agreements in accordance with their terms. Notwithstanding the
preceding sentence, (a) the foregoing consents shall not (i) apply to any act or
omission which constitutes fraud in the inducement with respect to this
Agreement, the Letter Agreement, any MSD Transaction Document or the
Transactions, or (ii) affect any Consenting Party's rights to enforce this
Agreement, the Letter Agreement, any MSD Transaction Document to which it is a
party or any Transaction Agreement to which it is a third party beneficiary, in
each case, in accordance with its respective terms, and (b) from and after the
effectiveness of the Restructuring, all of the MSD Agreements will remain in
full force and effect and will be enforceable against each of the Consenting
Parties and Newco in accordance with their terms.
SECTION 3.02. Acknowledgement and Consent. (a) In furtherance and not in
limitation of Section 3.01, each Consenting Party acknowledges that, pursuant to
the Restructuring Agreement and as part of the Restructuring, all of the
Company's rights under and in respect of the MSD Agreements shall be assigned
to, and all of the Company's Liabilities under and in respect of the MSD
Agreements will be assumed by, Newco upon the effectiveness of the Restructuring
(the "MSD TRANSFER").
(b) Each Consenting Party hereby consents to the MSD Transfer and, as of
and with effect from the consummation of the MSD Transfer, unconditionally
releases the Company from its obligations, duties and Liabilities (express and
implied) under the MSD Agreements, whether arising before, at or after the MSD
Transfer. Each Consenting Party expressly consents to and accepts the assumption
by Newco of all the rights, obligations, duties and Liabilities (express and
implied) of the Company under the MSD Agreements, whether arising before, at or
after the MSD Transfer, and agrees to perform its obligations, duties and
Liabilities (express or implied) under the MSD Agreements in accordance with
their terms in favor of Newco. In this regard, MST hereby consents to the
admission of Newco as a Class A Member, a Class B Member and a Class C Member of
MSD, effective upon the effectiveness of the MSD Transfer, as a successor to the
Company, in accordance with Sections 8 and 9 of the LLC Agreement and hereby
waives compliance by the Company and Newco with the terms and conditions thereof
for the purposes of such admission. Each of the foregoing events is conditioned
upon the consummation of the MSD Transfer, shall occur simultaneously with the
MSD Transfer without any further action by any party, and, together with the MSD
Transfer, shall have the effect of amending the MSD Agreements.
(c) The Company, Newco and each Consenting Party accordingly agree that as
of and with effect from the MSD Transfer, each of the MSD Agreements will cease
to create or confer any rights or obligations on or as to the Company, except
for the Company's confidentiality obligations thereunder, which shall remain in
full force and effect notwithstanding the MSD Transfer, and each of the MSD
Agreements will continue as an agreement among the parties thereto (other than
the Company) and Newco on the same terms and conditions as those stated in such
MSD Agreement. The Company, Newco, MSD and MST agree to amend and restate each
such MSD Agreement to reflect such matters effective from the MSD Transfer.
A-6-5
(d) Each Consenting Party acknowledges and agrees that, notwithstanding any
provision of any MSD Agreement to the contrary, such Consenting Party shall not
be entitled to any payment from the Company as a result of or in connection with
the Transactions or the MSD Transfer, except as specifically provided in the
Letter Agreement and except as provided in any stock option agreements between
the Company and any employee of MSD (including all stock option agreements with
JW granted to him in his capacity as a consultant to the Company).
(e) As of and with effect from the consummation of the MSD Transfer, except
for the rights of the Continuing Licensee Subsidiary under the License Agreement
and the Consent to License Agreement, (i) Newco shall own all right, title and
interest in and to any and all intellectual property and other proprietary and
confidential information or materials owned by the Company as of the date hereof
or benefits acquired by the Company between the date hereof and immediately
prior to the consummation of the MSD Transfer (other than that owned by MSD,
MST, JW or JWCS) to which MSD, MST, JW or JWCS has any direct or indirect rights
or benefits (including patents, copyrights and trade secrets) pursuant to the
MSD Agreements and (ii) the Company thereafter shall hold no interest in MSD nor
shall it have possession of, or rights or access to, any proprietary or
confidential information of MSD, MST, JW or JWCS, and the Company will not own
or otherwise have rights or seek to own or otherwise have rights in any
intellectual property or other proprietary information or materials which MSD,
MST, JW or JWCS owns or to which MSD, MST, JW or JWCS otherwise has any direct
or indirect rights or benefits (including patents, copyrights and trade secrets)
pursuant to the MSD Agreements.
SECTION 3.03. Certain Claims. (a) Parent shall not, and shall not permit
any other Affiliate of Parent or encourage any other Person to, either before or
after the Effective Time, assert any rights or pursue any actions or claims,
whether directly or on a derivative basis, against (i) any Consenting Party or
any of its or his Affiliates or (ii) any of the current or former members of the
board of managers, members, managers, officers, employees, consultants,
advisors, attorneys, trustees or agents of any Consenting Party or any of its or
his Affiliates (in each case, solely in their capacities as such), in each case
for acts or omissions occurring (A) prior to the date of this Agreement or (B)
after the date of this Agreement and prior to the Effective Time, whether known
or unknown, and Parent shall not, and Parent shall not permit any Affiliate of
Parent to, cooperate with any Person in the assertion of any such rights or
pursuing any such actions or claims except (x) as required by subpoena or other
judicial or legal process or (y) as required by any inquiry by a Governmental
Entity, but in each case only to the extent such inquiry or requirement to
cooperate has not arisen as a result of a breach of this Section 3.03(a);
provided, however, that this Section 3.03(a) shall not (1) affect any Person's
right to enforce any Transaction Agreement, any MSD Transaction Document, any
I/R Agreement (as defined in the Restructuring Agreement) or any Newco I/R
Agreement (as defined in the Restructuring Agreement) or any provision herein or
therein in accordance with its terms, (2) apply to any act or omission which
constitutes fraud in the inducement with respect to any Transaction Agreement,
any MSD Transaction Document, any I/R Agreement or any Newco I/R Agreement or
(3) apply to any action permitted or required by the Ongoing Litigation
Agreement; provided further, however, that in the event this Agreement is
terminated, this Section 3.03(a) shall be null and void and shall not operate as
a waiver or release of any rights, actions, interests or claims that might have
been asserted or pursued but for this Section 3.03(a).
(b) No Consenting Party shall, and no Consenting Party shall permit any
other Affiliate of such Consenting Party or encourage any other Person to,
either before or after the Effective Time, assert any rights or pursue any
actions or claims, whether directly or on a derivative basis, against (i) Parent
or any of its Affiliates or (ii) any of the current or former directors,
officers, employees, consultants, advisors, attorneys, trustees or agents of
Parent or any of its Affiliates (in each case, solely in their capacities as
such), in each case for acts or omissions occurring (A) prior to the date of
this Agreement or (B) after the date of this Agreement and prior to the
Effective Time, whether known or unknown, and such Consenting Party shall not,
and shall not permit any Affiliate of such Consenting Party to, cooperate with
any Person in the assertion of any such rights or pursuing any such actions or
claims except (x) as required by subpoena or other judicial or legal process or
(y) as required by any inquiry by a Governmental Entity, but in each case only
to the extent such inquiry or requirement to cooperate has not
A-6-6
arisen as result of a breach of this Section 3.03(b); provided, however, that
this Section 3.03(b) shall not (1) affect any Person's right to enforce any
Transaction Agreement, any MSD Transaction Document, any I/R Agreement or any
Newco I/R Agreement or any provision herein or therein in accordance with its
terms, (2) apply to any act or omission which constitutes fraud in the
inducement with respect to any Transaction Agreement, any MSD Transaction
Document, any I/R Agreement or any Newco I/R Agreement or (3) apply to any
action permitted or required by the Ongoing Litigation Agreement; provided
further, however, that in the event this Agreement is terminated, this Section
3.03(b) shall be null and void and shall not operate as a waiver or release of
any rights, actions, interests or claims that might have been asserted or
pursued but for this Section 3.03(b).
SECTION 3.04. No Change Of Control; Other Agreements. (a) Each of the
Company, Newco, and each Consenting Party acknowledges and agrees that the
execution and delivery of the Transaction Agreements does not, and the
consummation of the Transactions will not, constitute a "Change in Control" as
defined in the Joint Venture Agreement dated as of November 30, 1995 among MSD,
MST and the Company, as amended, or the Employment Agreement.
(b) Each of the Company, Newco, MSD and MST acknowledges and agrees that
(i) upon the MSD Transfer, notwithstanding anything in the LLC Agreement to the
contrary, (A) the Company shall be permitted to transfer its entire interest in
MSD to Newco and (B) Newco shall be admitted as a member of MSD with respect to
the transferred interest, shall be bound as a member by the LLC Agreement and
shall execute and deliver to MSD and MST a signature page to the LLC Agreement
(but Newco shall be deemed a party to, and shall be bound by, the LLC Agreement
whether or not it delivers such signature page), (ii) Sections 8 and 9 of the
LLC Agreement with respect to the transfer of the Company's interest in MSD to
Newco are waived for purposes of the foregoing transfer and admission, and (iii)
the Company shall have no right to receive any distributions that may be made by
MSD following the MSD Transfer.
(c) This Agreement is deemed to constitute written notice to MSD, as
required pursuant to Section 2.7(c) of the IGEN/MSD License Agreement, dated as
of November 30, 1995, as amended, concerning the Merger and the other
Transactions.
(d) Each of the Company, MSD, MST and JW acknowledges and confirms that the
Employment Agreement dated as of August 1, 1997, among MSD, the Company, MST and
JW, is null and void and was superceded by the Employment Agreement.
ARTICLE 4
RELEASES
SECTION 4.01. Releases. Effective immediately prior to the Effective
Time, in consideration of mutual releases, covenants, licenses, agreements,
rights and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Parent, as to itself and its past, present and
future Affiliates (including, from and after the Effective Time, the Company),
and its and their respective successors, predecessors, assigns, heirs, officers,
directors, employees, consultants and trustees, on the one hand (in each case,
solely in their capacities as such), and each Consenting Party, as to itself or
himself and its or his past, present and future Affiliates, and its or his and
their respective successors, predecessors, assigns, heirs, officers, members of
the board of managers, members, managers, employees, consultants and trustees,
on the other hand (in each case, solely in their capacities as such), hereby (a)
releases, acquits and forever discharges the other and its or his past, present
and future Affiliates and its or his and their respective successors,
predecessors, assigns, heirs, officers, directors, members of the board of
managers, members, managers, employees, consultants and trustees (in each case,
solely in their capacities as such), in respect of and from, and (b) agrees not
to bring any Action against the other and its or his past, present and future
Affiliates and its or his and their respective successors, predecessors,
assigns, heirs, officers, directors, members of the board of managers, members,
managers, employees, consultants and trustees (in each case, solely in their
capacities as such) related to or arising out of, in the case of each of clause
(a) and (b), any and all debts, demands, Actions, causes of action, suits,
accounts, covenants,
A-6-7
Contracts, agreements, torts, damages and any and all claims, defenses, offsets,
Judgments, demands and Liabilities whatsoever, of every name and nature, both at
law and in equity, known or unknown, suspected or unsuspected, accrued or
unaccrued, which have been or could have been asserted against such other
Person, which the releasing Person has or ever had which arise out of or in any
way relate or are incidental to events, circumstances or actions taken by such
other Person prior to or as of the Effective Time; provided, however, that the
foregoing general release shall not (i) affect any Person's right to enforce any
Transaction Agreement, any MSD Transaction Document or any Newco I/R Agreement
or any provision herein or therein in accordance with its terms or (ii) apply to
any act or omission which constitutes fraud in the inducement with respect to
any Transaction Agreement, any MSD Transaction Document or any Newco I/R
Agreement. For the purposes of this Section 4.01, no Newco Company (as defined
in the Restructuring Agreement) is or ever has been an Affiliate of Parent.
ARTICLE 5
MISCELLANEOUS
SECTION 5.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the Effective
Time. This Section 5.01 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
SECTION 5.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given upon receipt by the parties at the following addresses (or at such other
address for a party as shall be specified by like notice) of a fax followed by
delivery of such notice by overnight courier of an international reputation:
(a) if to Parent or, after the Effective Time, the Company, to:
Roche Holding Ltd
Grenzacherstrasse 124
CH-4070 Basel
Switzerland
Attention: Bruno Maier
Fax: +41 61 688 3196
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Ulrika Ekman
Fax: (212) 450-3800
(b) if to Newco or, prior to the Effective Time, the Company, to:
IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, MD 20077
Attention: President
Fax: (301) 208-3789
A-6-8
and:
Joint Venture Operating Committee
IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, MD 20077
Attention: Chairman
Fax: (301) 208-3789
with a copy to:
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, NY 10019
Attention: Philip A. Gelston
Sarkis Jebejian
Fax: (212) 414-3700
and:
Potter Anderson & Corroon LLP
Hercules Plaza, 6th Floor
1313 N. Market Street
Wilmington, DE 19801
Attention: Michael D. Goldman
Fax: 302-658-1192
(c) if to MSD or MST, to:
Meso Scale Diagnostics, LLC.
9238 Gaither Road
Gaithersburg, MD 20877
Attention: President and Chief Executive Officer
Fax: (301) 947-7240
with a copy to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attention: Robert J. Waldman
Fax: (202) 637-5910
SECTION 5.03. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any applicable
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
A-6-9
SECTION 5.04. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties. Each party need not sign the
same counterpart.
SECTION 5.05. Entire Agreement; No Third-Party Beneficiaries. This
Agreement (a) taken together with the other Transaction Agreements, the MSD
Transaction Documents, the MSD Agreements, the Letter Agreement, the I/R
Confidentiality Agreement, the letter agreement dated November 6, 2002 between
the Company and R Diagnostics and the M/R Confidentiality Agreement, constitute
the entire agreement, and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter of
this Agreement; provided that as of and after the Effective Time, the I/R
Confidentiality Agreement shall have no further force and effect and shall be
superseded by Section 3.07 of the Post-Closing Covenants Agreement and (b)
except for the provisions of Section 3.03 and Section 4.01 of this Agreement, is
not intended to confer upon any Person other than the parties any rights or
remedies.
SECTION 5.06. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 5.07. Amendments and Waivers. (a) Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this Agreement, or
in the case of a waiver, by the party against whom the waiver is to be
effective; provided that prior to the Effective Time any waiver by the Company
shall also require the prior written consent of Parent.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 5.08. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties; provided, however, that the parties
acknowledge and agree that the conversion of Newco in accordance with Section
2.01 of the Restructuring Agreement and the continuation of Newco as a result
thereof shall be deemed not to be an assignment and shall not require any
consent of any party. Any purported assignment without such consent shall be
void. Subject to the preceding sentences, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
SECTION 5.09. Enforcement; Consent to Service of Process. (a) The parties
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Delaware state court or any Federal court of the United States
of America sitting in the State of Delaware, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, except as
otherwise specifically provided in any other Transaction Agreement with respect
to the parties thereto, each of the parties hereto (i) consents to submit itself
to the personal jurisdiction of any Delaware state court or any Federal Court of
the United States sitting in the State of Delaware in the event any dispute
arises out of this Agreement or any Transaction, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, (iii) agrees that it will not bring any action
relating to this Agreement or any Transaction in any court other than in any
Delaware state court or any Federal court of the United States of America
sitting in the State of Delaware and (iv) waives any right to trial by jury with
respect to any action related to or arising out of this Agreement or any
Transaction.
A-6-10
(b) Parent hereby appoints Roche Holdings, Inc., with offices on the date
of this Agreement at 1201 N. Orange Street, Suite 1050, Wilmington, Delaware
19801, as its authorized agent (the "AUTHORIZED AGENT"), upon whom process may
be served in any suit, action or proceeding arising out of or relating to this
Agreement or any Transaction that may be instituted in any court described in
Section 5.09(a). Parent agrees to take any and all reasonable action, including
the filing of any and all documents, that may be necessary to establish and
continue such appointment in full force and effect as aforesaid. Parent agrees
that service of process upon the Authorized Agent shall be, in every respect,
effective service of process upon Parent.
SECTION 5.10. Termination. In the event the Merger Agreement is
terminated pursuant to its terms prior to the Effective Time, this Agreement
shall automatically and simultaneously terminate. In the event of such
termination, no party shall have any liability to any other party pursuant to
this Agreement. It is understood that consummation of the Merger shall not
constitute a termination of this Agreement.
SECTION 5.11. Interpretation. When a reference is made in this Agreement
to a Section, Schedule or party, such reference shall be to a Section of or a
Schedule or party to this Agreement unless otherwise indicated. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". The words
"hereof", "herein" and "hereby" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. The words "date hereof" shall refer to the date of
this Agreement. The term "or" is not exclusive. The word "extent" in the phrase
"to the extent" shall mean the degree to which a subject or other thing extends,
and such phrase shall not mean simply "if". The definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such
terms. Any agreement or instrument that is defined or referred to herein or in
any agreement or instrument that is referred to herein, means such agreement or
instrument as from time to time amended, modified or supplemented. References to
a Person are also to its permitted successors and assigns.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
ROCHE HOLDING LTD
By: /s/ DR. FRANZ B. HUMER
------------------------------------
Name: Franz B. Humer
Title: President and Chairman
By: /s/ ERICH HUNZIKER
------------------------------------
Name: Erich Hunziker
Title: Chief Financial Officer
IGEN INTERNATIONAL, INC.
By: /s/ SAMUEL J. WOHSTADTER
------------------------------------
Name: Samuel J. Wohstadter
Title: Chairman and Chief
Executive Officer
A-6-11
IGEN INTEGRATED HEALTHCARE, LLC
By: /s/ RICHARD J. MASSEY
-----------------------------------
Name: Richard J. Massey
Title: President and Chief
Operating Officer
MESO SCALE DIAGNOSTICS, LLC.
By: /s/ JACOB N. WOHLSTADTER
------------------------------------
Name: Jacob N. Wohlstadter
Title: President and CEO
MESO SCALE TECHNOLOGIES, LLC.
By: /s/ JACOB N. WOHLSTADTER
------------------------------------
Name: Jacob N. Wohlstadter
Title: President and CEO
JACOB WOHLSTADTER
/s/ JACOB N. WOHLSTADTER
--------------------------------------
JW CONSULTING SERVICES, L.L.C.
By: /s/ JACOB N. WOHLSTADTER
------------------------------------
Name: Jacob N. Wohlstadter
Title: President and CEO
A-6-12
SCHEDULE A
MSD AGREEMENTS
1. Joint Venture Agreement dated as of November 30, 1995, as amended, among
IGEN International, Inc. (the "Company"), Meso Scale Diagnostics, LLC.
("MSD") and Meso Scale Technologies, LLC. ("MST").
2. Limited Liability Company Agreement of Meso Scale Diagnostics, LLC. dated
as of November 30, 1995, as amended, between the Company and MST.
3. IGEN/MSD License Agreement dated as of November 30, 1995, as amended,
between the Company and MSD.
4. MSD/MST Sublicense Agreement, dated as of November 30, 1995, as amended,
among the Company, MSD and MST.
5. License Agreement dated as of November 30, 1995 among the Company, MSD and
MST.
6. Employment Agreement dated as of August 15, 2001 among the Company, MSD,
MST and Jacob N. Wohlstadter ("JW").
7. Consulting Agreement dated as of August 15, 2001 between the Company and
JW.
8. Letter agreement dated August 15, 2001, as amended, among the Company, MSD
and MST regarding employees.
9. Letter agreement dated August 15, 2001, as amended, among the Company, MSD
and MST regarding equipment.
10. Letter agreement dated August 15, 2001 among the Company, JW and JW
Consulting Services, L.L.C. ("JWCS") regarding insurance.
11. Letter agreement dated August 15, 2001 among the Company, MSD, MST and JW
regarding litigation and settlement fees and expenses.
12. Letter agreement dated August 15, 2001 among the Company, MSD and JW
regarding certain advisory and related activities.
13. Letter agreement dated November 30, 1995 between the Company and JW
regarding indemnification.
14. Indemnification Agreement dated as of October 26, 2001 between the Company
and JW.
15. Indemnification Agreement effective as of November 30, 1996 between the
Company, JW and JWCS.
16. Agreement of Sublease for space at 9905A Gable Ridge Terrace, dated August
15, 2001, between the Company and MSD.
17. Agreement of Sublease for space at 9905D Gable Ridge Terrace, dated August
15, 2001, between the Company and MSD.
18. Agreement of Sublease for space at 9905B Gable Ridge Terrace, dated August
15, 2001, between the Company and MSD.
19. Agreement of Sublease for space at 9915A Gable Ridge Terrace, dated August
15, 2001, between the Company and MSD.
20. Agreement of Sublease for space at 9907C Gable Ridge Terrace, dated August
15, 2001, between the Company and MSD.
A-6-13
21. Agreement of Sublease for space at 9141 Industrial Court, dated August 15,
2001, between the Company and MSD.
22. Agreement of Sublease for space at 9101-9169 Arbuckle Drive, dated August
15, 2001, between the Company and MSD.
23. Agreement of Sublease for space at 8000 West Park Drive, dated August 15,
2001, between the Company and MSD.
24. Agreement of Sublease for space at 16020 Industrial Drive (Shared with the
Company), dated August 15, 2001, between the Company and MSD.
25. Agreement of Sublease for space at 9149-9161 Industrial Court (includes
"Clean Room"), dated August 15, 2001, between the Company and MSD.
26. Agreement of Sublease for space at 9234-9246 Gaither Road, dated August 15,
2001, between the Company and MSD.
27. Letter Agreement dated March 12, 2003 by and among the Company, MSD, MST,
JWCS and JW, amending the MSD Agreements with respect to the formation of
MSD Europe, L.L.C.
28. Letter agreement among MSD, the Company and MST dated January 30, 2001
29. Letter agreement among MSD, the Company and MST dated November 29, 2000
30. Letter agreement among MSD, the Company and MST and the attached
non-binding term sheet dated February 20, 2001
31. Letter agreement among JW, MSD and the Company dated August 15, 2001
32. Employment Agreement among MSD, the Company, MST and JW dated as of August
1, 1997
33. Confidentiality agreement dated April 28, 2003 among the Company, MSD, R
Diagnostics and F. Hoffmann-La Roche Ltd.
34. Letter agreement dated the date of the Agreement among the Company, Newco,
MSD, MST, JW and JWCS
A-6-14
SCHEDULE B
OWNERSHIP OF MSD AND MST
Meso Scale Diagnostics, LLC.
The members of Meso Scale Diagnostics, LLC. ("MSD") consist of IGEN
International, Inc. ("IGEN") and Meso Scale Technologies, LLC. ("MST").
The membership interests of IGEN and MST in MSD are as follows:
Class A (voting) interest: 31% held by IGEN and 69% held by MST
Class B (non-voting) interest: 100% held by IGEN and none held by MST
Class C (non-voting) interest: 100% held by IGEN and none held by MST
The voting rights of IGEN and MST with respect to MSD are set forth in the
Joint Venture Agreement, dated as of November 30, 1995, among MSD, MST and
IGEN, as amended, and in the MSD Limited Liability Company Agreement, dated
as of November 30, 1995, between IGEN and MST, as amended.
Meso Scale Technologies, LLC.
The sole member of MST is Jacob N. Wohlstadter, who holds 100% of the
membership interests and all voting rights associated therewith.
JW Consulting Services, LLC.
The sole member of JW Consulting Services, LLC. is Jacob N. Wohlstadter,
who holds 100% of the membership interests and all voting rights associated
therewith.
A-6-15
ANNEX 7
IGEN INTERNATIONAL, INC.
16020 INDUSTRIAL DRIVE
GAITHERSBURG, MD 20877
July 24, 2003
Meso Scale Diagnostics, LLC.
9238 Gaither Road
Gaithersburg, MD 20877
Attn: Jacob N. Wohlstadter
Meso Scale Technologies, LLC.,
JW Consulting Services, L.L.C. and
Jacob N. Wohlstadter
Dear Mr. Wohlstadter:
As you are aware, IGEN International, Inc., a Delaware corporation
("IGEN"), and Roche Holding Ltd, a joint stock company organized under the laws
of Switzerland ("PARENT"), have agreed to enter into certain transactions, which
include: (i) the merger of 66 Acquisition Corporation II ("MERGER SUB"), a
Delaware corporation and wholly-owned subsidiary of Parent, with and into IGEN
pursuant to the Agreement and Plan of Merger, dated as of the date hereof (the
"MERGER AGREEMENT"), among IGEN, IGEN Integrated Healthcare, LLC, a Delaware
limited liability company ("NEWCO"), Merger Sub and Parent (the "MERGER"), (ii)
the transfer, prior to the Merger, of certain of IGEN's assets to Newco (or to
one or more of Newco's subsidiaries), the assumption by Newco (or one or more of
Newco's subsidiaries) of certain of the liabilities of IGEN, and the conversion
of Newco from a Delaware limited liability company to a Delaware corporation
pursuant to the Restructuring Agreement, dated as of the date hereof, between
IGEN and Newco (the "RESTRUCTURING"), and (iii) the execution and delivery of
certain other transaction agreements in connection with the foregoing. As part
of the Restructuring, IGEN has agreed to contribute, transfer and assign to
Newco all of IGEN's right, title and interest in and to the agreements
previously entered into by two or more of the parties to this letter agreement,
as set forth on SCHEDULE 1 attached hereto (collectively, the "JOINT VENTURE
DOCUMENTS"), and Newco has agreed to assume all obligations and liabilities of
IGEN under the Joint Venture Documents.
In connection with the Proposed Transactions (as defined herein) and as a
condition to their willingness to execute and deliver the Merger Agreement and
the other agreements referenced above, IGEN and Parent have requested that Meso
Scale Diagnostics, LLC. ("MSD"), Meso Scale Technologies, LLC. ("MST"), Jacob N.
Wohlstadter ("JW") and JW Consulting Services, L.L.C. ("JWCS") execute and
deliver one or more of the documents listed on SCHEDULE 2 to this letter
agreement, including the Global Consent and Agreement, dated as of the date
hereof, among Parent, IGEN, Newco, MSD, MST, JW and JWCS (the "GLOBAL CONSENT").
In consideration of the execution and delivery of such documents by MSD, MST, JW
and JWCS, (i) IGEN and MST hereby agree to extend the expiration of the term of
the Joint Venture Agreement as set forth in Section 8.1 thereof in accordance
with the terms of this letter agreement (but not IGEN's obligation to provide
funding to MSD under the Joint Venture Agreement other than pursuant to the
terms of this letter agreement), (ii) Newco hereby agrees to make or cause to be
made to MSD by wire transfer the Closing Payment (as defined herein), and IGEN
hereby agrees to provide Interim Funding (as defined herein) to MSD, in
accordance with the terms of this letter agreement and (iii) the parties to this
letter agreement hereby agree to be bound by the other agreements and
understandings set forth in this letter agreement. For purposes of this letter
agreement, "PROPOSED TRANSACTIONS" shall have the same meaning as the term
"Transactions" as defined in the Global Consent.
A-7-1
1. Closing Payment and Interim Funding. In the event the Merger is
consummated, on the first business day following the date of the Effective Time
(as defined in the Merger Agreement) of the Merger, Newco shall make or cause to
be made to MSD by wire transfer a Class C capital contribution in the amount of
U.S. $37.5 million (the "CLOSING PAYMENT"); provided, however, that in the event
the date of the Effective Time has not occurred prior to December 1, 2003 (the
expiration of IGEN's existing obligation to provide committed funding to MSD
under the approved 2003 budget), IGEN shall provide continued funding to MSD to
be paid monthly on the first day of each month commencing on December 1, 2003 in
an amount per month equal to 1/12 of the aggregate committed funding of IGEN
under the approved 2003 budget pursuant to the Joint Venture Agreement (the
"INTERIM FUNDING") until the earlier to occur of (i) the date of the Effective
Time or (ii) the termination of the Merger Agreement in accordance with its
terms, which Interim Funding shall reduce the amount of any Closing Payment and
shall be treated as a Class C capital contribution to MSD. In the event the date
of the Effective Time does not occur, MSD shall not have any obligation to repay
any amounts provided to MSD as Interim Funding pursuant to this letter agreement
or otherwise (except to the extent IGEN is entitled to receive distributions on
the Class C interests pursuant to the Joint Venture Documents).
2. Assignment of IGEN's Rights Hereunder to Newco. MST, MSD, JWCS and JW
acknowledge that, upon the effectiveness of the Restructuring, this letter
agreement, and all of IGEN's rights and obligations hereunder, shall be assigned
by IGEN to Newco.
3. Consents. IGEN consents to MSD and MST granting the consents and
joining in the licenses as set forth in the Consent to License Agreement.
4. Joint Venture Agreement Extension. Notwithstanding anything in the
Joint Venture Agreement to the contrary, the term of the Joint Venture Agreement
as set forth in Section 8.1 thereof shall expire on the later of (i) November
30, 2003 or (ii) the earlier of (a) the date of the Effective Time or (b) the
termination of the Merger Agreement prior to the Effective Time in accordance
with its terms; provided that IGEN's obligation to provide funding to MSD under
the Joint Venture Agreement beyond November 30, 2003 shall not be extended other
than pursuant to the terms of this letter agreement.
5. Developments. IGEN confirms and agrees that it will deliver a copy of
all tangible items and electronic records or files included within the
Developments (as defined in Section 3.6 of the Joint Venture Agreement) to MSD,
and, upon MSD's request, agrees to provide MSD with reasonable access to copies
of tangible items and electronic records or files included within the
Developments in IGEN's possession or control.
6. Confidentiality. Notwithstanding the terms and conditions of any of
the Joint Venture Documents, MSD may disclose the terms and conditions of one or
more of the Joint Venture Documents and Confidential Information (as defined in
Section 5.1 of the Joint Venture Agreement) to one or more third parties in
connection with a proposed sale, acquisition, merger, financing or other similar
transaction (including strategic collaborations) involving MSD (including
disclosure of such information as required by a governmental rule or regulation
and/or as reasonably requested by a third party to conduct a due diligence
review) so long as (i) MSD provides written notice of such disclosure or
proposed disclosure (any such notice to be kept confidential by the recipient
thereof and not to be disclosed to any third party) to IGEN or, from and after
the Effective Time, if any, Newco, no later than 30 days following such
disclosure or, if earlier, its agreement to provide such disclosure, and (ii)
each third party agrees to maintain the disclosed terms and conditions of the
Joint Venture Documents and Confidential Information as confidential and to not
disclose such information to any third party other than its attorneys,
accountants and other professional advisors who agree to maintain such
information as confidential and to not further disclose such information to any
third party.
7. Confirmation Regarding Treatment of Options. IGEN confirms and agrees
that (i) on May 9, 1997 IGEN granted to JW a ten-year non-qualified stock option
to purchase 180,000 shares of common stock of IGEN at the exercise price per
share specified therein and (ii) effective August 1, 2000 IGEN granted to JW a
ten-year non-qualified stock option to purchase 75,000 shares of common stock of
IGEN
A-7-2
at the exercise price per share specified therein, pursuant to IGEN's 1994 Stock
Option Plan (collectively, the "JW OPTIONS"). Consistent with Section 7.04 of
the Merger Agreement, such JW Options shall be deemed "Company Stock Options"
and shall be cancelled upon the occurrence of the Effective Time and JW, as the
holder of such options, shall be entitled to receive the consideration described
therein as payable to holders of Company Stock Options.
8. Representations and Warranties. Each of the parties to this letter
agreement represents and warrants to the other parties to this letter agreement
that the execution, delivery and performance of this letter agreement have been
duly authorized by such party (including in the case of IGEN, by the Joint
Venture Operating Committee of the Board of Directors of IGEN), that this letter
agreement constitutes a valid and binding obligation of such party, enforceable
in accordance with its terms, that such party has the right, power and authority
to grant the rights and perform the obligations hereunder and under the Joint
Venture Documents, and that neither the execution and delivery of this letter
agreement nor the consummation of the performance of such party's obligations
under this letter agreement constitutes a violation of, or default under, or
conflicts with, (i) any terms of the articles of incorporation, bylaws or other
organizational documents, as applicable, of such party, (ii) any order, judgment
or decree of any court or governmental body binding upon or affecting such
party, or (iii) any contract, commitment or other agreement or understanding to
which such party is a party or by which it is bound.
9. Termination. In the event the Merger Agreement is terminated pursuant
to its terms prior to the Effective Time, this letter agreement shall
automatically and simultaneously terminate. In the event of such termination, no
party shall have any liability to any other party pursuant to this letter
agreement, except that IGEN will remain liable for any accrued and unpaid
Interim Funding as of the date of such termination. It is understood that
consummation of the Merger shall not constitute a termination of this letter
agreement.
10. Miscellaneous. This letter agreement and the terms and conditions
hereof (including payments to be made after the date hereof) shall survive the
expiration of the term of the Joint Venture Agreement or the termination for any
reason of the Joint Venture Agreement. This letter agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This letter agreement may not be assigned by
any party without the prior written consent of the other parties hereto, except
(i) that the parties acknowledge and agree that the conversion of Newco in
accordance with Section 2.01 of the Restructuring Agreement (as defined in the
Merger Agreement) and the continuation of Newco as a result thereof shall be
deemed not to be an assignment and shall not require the consent of any party
and (ii) for the assignment by IGEN to Newco or an assignee described in the
foregoing clause (i) in accordance with the provisions of paragraph 2 above.
This letter agreement shall be deemed to modify and amend the Joint Venture
Documents to the extent necessary to reflect the matters addressed in this
letter agreement. It is agreed that the parties to this letter agreement shall
be entitled, in addition to any and all other remedies, to an injunction or
injunctions to prevent breaches of this letter agreement and to enforce
specifically the terms and provisions of this letter agreement. This letter
agreement shall be governed by and construed in accordance with Delaware law
(excluding choice of law principles) except for those provisions applicable to a
specific Joint Venture Document, in which case the governing law provision set
forth in such Joint Venture Document shall apply. Any provision of this letter
agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
letter agreement, or, in the case of a waiver, by the party against whom the
waiver is to be effective. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
A-7-3
Please confirm that the foregoing accurately sets forth our agreement with
respect to the matters described in this letter agreement by signing in the
space provided below and returning a copy to IGEN's General Counsel.
Sincerely,
IGEN INTERNATIONAL, INC.
By: /s/ SAMUEL J. WOHLSTADTER
------------------------------------
Name: Samuel J. Wohlstadter
Title: Chairman and Chief
Executive Officer
AGREED UPON AND ACCEPTED:
IGEN INTEGRATED HEALTHCARE, LLC
By: /s/ RICHARD J. MASSEY
--------------------------------------------------------
Name: Richard J. Massey
Title: President and Chief Operating Officer
MESO SCALE DIAGNOSTICS, LLC.
By: /s/ JACOB N. WOHLSTADTER
--------------------------------------------------------
Jacob N. Wohlstadter
President and Chief Executive Officer
MESO SCALE TECHNOLOGIES, LLC.
By: /s/ JACOB N. WOHLSTADTER
--------------------------------------------------------
Name: Jacob N. Wohlstadter
Title: President and Chief Executive Officer
A-7-4
JW CONSULTING SERVICES, L.L.C.
By: /s/ JACOB N. WOHLSTADTER
--------------------------------------------------------
Name: Jacob N. Wohlstadter
Title: President and CEO
/s/ JACOB N. WOHLSTADTER
---------------------------------------------------------
JACOB N. WOHLSTADTER
A-7-5
SCHEDULE 1
LIST OF JOINT VENTURE DOCUMENTS
1. Joint Venture Agreement dated as of November 30, 1995, as amended,
among IGEN, MSD and MST ("JOINT VENTURE AGREEMENT").
2. Limited Liability Company Agreement of Meso Scale Diagnostics, LLC.
dated as of November 30, 1995, as amended, between IGEN and MST.
3. IGEN/MSD License Agreement dated as of November 30, 1995, as amended,
between IGEN and MSD.
4. MSD/MST Sublicense Agreement, dated as of November 30, 1995, as
amended, among IGEN, MSD and MST.
5. License Agreement dated as of November 30, 1995 among IGEN, MSD and
MST.
6. Employment Agreement dated as of August 15, 2001 among IGEN, MSD, MST
and JW.
7. Consulting Agreement dated as of August 15, 2001 between IGEN and JW
("CONSULTING AGREEMENT").
8. Letter agreement dated August 15, 2001, as amended, among IGEN, MSD
and MST regarding employees.
9. Letter agreement dated August 15, 2001, as amended, among IGEN, MSD
and MST regarding equipment.
10. Letter agreement dated August 15, 2001 among IGEN, JW and JWCS
regarding insurance.
11. Letter agreement dated August 15, 2001 among IGEN, MSD, MST and JW
regarding litigation and settlement fees and expenses.
12. Letter agreement dated August 15, 2001 among IGEN, MSD and JW
regarding certain advisory and related activities.
13. Letter agreement dated November 30, 1995 between IGEN and JW regarding
indemnification.
14. Indemnification Agreement dated as of October 26, 2001 between IGEN
and JW.
15. Indemnification Agreement effective as of November 30, 1996 between
IGEN, JW and JWCS.
16. Agreement of Sublease for space at 9905A Gable Ridge Terrace, dated
August 15, 2001, between IGEN and MSD.
17. Agreement of Sublease for space at 9905D Gable Ridge Terrace, dated
August 15, 2001, between IGEN and MSD.
18. Agreement of Sublease for space at 9905B Gable Ridge Terrace, dated
August 15, 2001, between IGEN and MSD.
19. Agreement of Sublease for space at 9915A Gable Ridge Terrace, dated
August 15, 2001, between IGEN and MSD.
20. Agreement of Sublease for space at 9907C Gable Ridge Terrace, dated
August 15, 2001, between IGEN and MSD.
21. Agreement of Sublease for space at 9141 Industrial Court, dated August
15, 2001, between IGEN and MSD.
A-7-6
22. Agreement of Sublease for space at 9101-9169 Arbuckle Drive, dated
August 15, 2001, between IGEN and MSD.
23. Agreement of Sublease for space at 8000 West Park Drive, dated August
15, 2001, between IGEN and MSD.
24. Agreement of Sublease for space at 16020 Industrial Drive (Shared with
IGEN), dated August 15, 2001, between IGEN and MSD.
25. Agreement of Sublease for space at 9149-9161 Industrial Court
(includes "Clean Room"), dated August 15, 2001, between IGEN and MSD.
26. Agreement of Sublease for space at 9234-9246 Gaither Road, dated
August 15, 2001, between IGEN and MSD.
27. Letter agreement dated March 12, 2003 by and among IGEN, MSD, MST,
JWCS and JW, amending the Joint Venture Documents with respect to the
formation of MSD Europe, L.L.C.
28. Letter agreement among MSD, IGEN and MST dated January 30, 2001.
29. Letter agreement among MSD, IGEN and MST dated November 19, 2000.
30. Letter agreement among MSD, IGEN and MST and the attached non-binding
term sheet dated February 20, 2001.
31. Confidentiality agreement dated April 28, 2003 among IGEN, MSD, Roche
Diagnostics GmbH and F. Hoffmann-La Roche Ltd.
A-7-7
SCHEDULE 2
LIST OF DOCUMENTS REGARDING PROPOSED TRANSACTIONS
1. Covenants Not to Sue (a copy of which is attached to this Schedule 2).
2. Consent by Meso Scale Diagnostics, LLC. and Meso Scale Technologies,
LLC. to License Agreement (the "CONSENT TO LICENSE AGREEMENT") (a copy
of which is attached to this Schedule 2).
3. Global Consent and Agreement (a copy of which is attached to this
Schedule 2).
4. Joinder by Meso Scale Diagnostics, LLC. and Meso Scale Technologies,
LLC. to Section 3.3 and Article 8 of the Ongoing Litigation Agreement
(as defined in the Merger Agreement, a copy of which is attached to
this Schedule 2).
A-7-8
ANNEX 8
IGEN INTEGRATED HEALTHCARE, LLC
16020 INDUSTRIAL DRIVE
GAITHERSBURG, MD 20877
July 24, 2003
Mr. Samuel J. Wohlstadter
c/o IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, MD 20877
Dear Sam:
We refer to the Agreement and Plan of Merger, draft dated as of July 24,
2003 (the "MERGER AGREEMENT"), among Roche Holding Ltd, 66 Acquisition
Corporation II, IGEN International, Inc. ("IGEN") and IGEN Integrated
Healthcare, LLC ("NEWCO"). Terms used herein and not defined shall have the
meanings assigned to such terms in the Merger Agreement.
At the request of the Board of Directors of IGEN and as an accommodation to
facilitate completion of the transactions contemplated by the Merger Agreement,
you hereby agree to subscribe for a new series of preferred stock to be issued
by Newco following its conversion into a corporation for an aggregate cash
amount of $7,500,000 (the "PURCHASE AMOUNT"). The Purchase Amount shall be
reduced by any reduction agreed to by the parties to the Letter Agreement (as
defined below) in the aggregate amount Newco is obligated to pay to MSD (as
defined below) pursuant to Section 1 of the Letter Agreement and shall be
payable at such time and from time to time as Newco is obligated to pay MSD an
aggregate amount in excess of $30,000,000 pursuant to Section 1 of the Letter
Agreement, on substantially the terms specified in the Summary of Principal
Terms and Conditions attached hereto as Exhibit A (the "TERM SHEET"). For the
avoidance of doubt, the aggregate amount to be paid pursuant to Section 1 of the
Letter Agreement includes any Interim Funding provided pursuant to Section 1 of
the Letter Agreement. As used herein, "Letter Agreement" means the letter
agreement dated as of July 24, 2003, among IGEN, Newco, Meso Scale Diagnostics
LLC. ("MSD"), Meso Scale Technologies, LLC., JW Consulting Services, L.L.C. and
Jacob N. Wohlstadter.
This letter shall not be assignable by any party without the prior written
consent of each other party (and any purported assignment without such consent
shall be null and void), except that (a) you may assign this letter without
Newco's consent (provided, that such assignment shall not relieve you of any of
your obligations hereunder) and (b) Newco may assign this letter to any other
entity the common stock of which will be distributed to IGEN's stockholders in
the transactions contemplated by the Merger Agreement. This letter is intended
to be solely for the benefit of the parties hereto and is not intended to confer
any benefits upon, or create any rights in favor of, any person other than the
parties hereto. This letter may not be amended or waived except by an instrument
in writing signed by each party. This letter may be executed in any number of
counterparts, each of which shall be an original, and all of which, when taken
together, shall constitute one agreement. Delivery of an executed signature page
of this letter by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof. This letter shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
A-8-1
If the foregoing correctly sets forth our binding agreement, please
indicate your acceptance of the terms hereof (including the Term Sheet) by
returning to us an executed counterpart hereof.
Very truly yours,
IGEN INTEGRATED HEALTHCARE, LLC
By: /s/ RICHARD J. MASSEY
------------------------------------
Name: Richard J. Massey
Title: President and Chief
Operating Officer
Accepted and agreed to
as of the date first
written above by:
SAMUEL J. WOHLSTADTER,
By: /s/ SAMUEL J. WOHLSTADTER
----------------------------------
Name: Samuel J. Wohlstadter
A-8-2
EXHIBIT A
IGEN INTEGRATED HEALTHCARE, LLC
$7,500,000 PREFERRED STOCK
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
Stock Subscription:........... Pursuant to a Stock Subscription Agreement (the
"STOCK SUBSCRIPTION AGREEMENT") to be entered
into between IGEN Integrated Healthcare LLC, a
Delaware limited liability company that will be
converted into a corporation ("NEWCO"), and
Samuel J. Wohlstadter ("SJW"), at the Effective
Time SJW will purchase from Newco newly issued
shares of Newco's preferred stock, par value
$1.00 per share (the "NEWCO PREFERRED STOCK"),
for an aggregate cash amount of $7,500,000 (the
"PURCHASE AMOUNT"). The Purchase Amount shall
be reduced by any reduction agreed to by the
parties to the Letter Agreement (as defined
below) in the aggregate amount Newco is
obligated to pay to MSD pursuant to Section 1
of the Letter Agreement and shall be payable at
such time and from time to time as Newco is
obligated to pay MSD an aggregate amount in
excess of $30,000,000 pursuant to Section 1 of
the Letter Agreement. For the avoidance of
doubt, the aggregate amount to be paid pursuant
to Section 1 of the Letter Agreement includes
any Interim Funding provided pursuant to
Section 1 of the Letter Agreement. "Letter
Agreement" means the letter agreement dated as
of July 24, 2003, among IGEN, Newco, Meso Scale
Diagnostics LLC. ("MSD"), Meso Scale
Technologies, LLC., JW Consulting Services,
L.L.C. and Jacob N. Wohlstadter.
Use of Proceeds:.............. Newco shall use the Purchase Proceeds to make
Class C capital contributions to Meso Scale
Diagnostics, LLC., a Delaware limited liability
company ("MSD"), in exchange for Class C
membership interests of MSD ("RELATED CLASS C
INTERESTS").
Liquidation Preference:....... Each share of Newco Preferred Stock will have a
liquidation preference of $0.01 per share,
which is the amount a holder of one share of
Newco Preferred Stock would be entitled to
receive if Newco were liquidated.
Other Economic
Characteristics:.............. Except for its liquidation preference, the
economic characteristics of the Newco Preferred
Stock will mirror, in all respects, Newco's
economic interest in the Related Class C
Interests. A proportionate part of the Newco
Preferred Stock will be redeemed in connection
with any redemption by MSD with respect to the
Related Class C Interests at a price identical
to the redemption price paid to Newco for the
Related Class C Interests. No distributions on
the Newco Preferred Stock will be paid unless
and until "Distributions" (as defined in the
Limited Liability Company Agreement of MSD) are
paid in respect of the Related Class C
Interests, in which event distributions will be
paid on the Newco Preferred Stock in the same
manner and amount as such "Distributions."
A-8-3
Redemption:................... Newco may redeem any outstanding Newco
Preferred Stock for $0.01 per share after such
time as Newco is no longer entitled to receive
any "Distributions" (as defined in the Limited
Liability Company Agreement of MSD) with
respect to Related Class C Interests.
Ranking:...................... Pari passu with Newco's existing and future
preferred stock.
Voting and Approval Rights:... The holders of shares of the Newco Preferred
Stock will be entitled to all voting rights
required by the DGCL and will be entitled in
the aggregate to 1000 votes on all matters on
which the holders of Newco common stock may
vote. In addition, Newco will not consent to
any adverse change to the terms of the Related
Class C Interests without the consent of the
holder of the Newco Preferred Stock.
No Restrictions on
Transfer:..................... The Newco Preferred Stock will be transferable,
subject to applicable restrictions of Federal
Securities Laws.
Condition to Obligation to
Purchase:..................... The occurrence of the Effective Time.
A-8-4
ANNEX 9
RELEASE AND AGREEMENT dated as of July 24, 2003 (this "Release and
Agreement"), among IGEN International, Inc., a Delaware corporation (the
"Company"), IGEN Integrated Healthcare, LLC, a Delaware limited liability
company and a wholly owned subsidiary of the Company ("Newco"), and each company
listed on the signature pages hereto under the heading "Related Companies"
(each, a "Related Company" and collectively, the "Related Companies").
WHEREAS Roche Holding Ltd, a joint stock company organized under the laws
of Switzerland ("R Company"), 66 Acquisition Corporation II, a Delaware
corporation and a wholly owned subsidiary of R Company ("Sub"), the Company and
Newco have entered into an Agreement and Plan of Merger dated as of July 23,
2003, (the "Merger Agreement"), providing for the Merger (as defined in the
Merger Agreement);
WHEREAS simultaneously with the execution and delivery of the Merger
Agreement, the Company and Newco are entering into an agreement (the
"Restructuring Agreement") pursuant to which, prior to the Effective Time (as
defined in the Merger Agreement), the Restructuring (as defined in the
Restructuring Agreement) will be effected;
WHEREAS simultaneously with the execution and delivery of the Merger
Agreement, R Company, Parent, the Company and Newco are entering into an
agreement (the "Post-Closing Covenants Agreement") that sets forth certain
agreements that will govern certain matters that may arise following the
Effective Time;
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
hereby agree as follows:
ARTICLE I
MUTUAL RELEASES
SECTION 1.01. Mutual Releases. In consideration of the mutual releases,
covenants, agreements, rights and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, effective as of the
Release Time (as defined below), the Company, as to itself and its past, present
and future affiliates (other than any Newco Company (as defined in the
Restructuring Agreement)), and its and their respective successors,
predecessors, assigns, heirs, officers, directors, employees, consultants and
trustees, on the one hand (in each case, solely in their capacities as such),
and the Related Companies, as to themselves and their past, present and future
affiliates, and their respective successors, predecessors, assigns, heirs,
officers, directors, employees, consultants and trustees, on the other hand (in
each case, solely in their capacities as such), hereby (a) releases, acquits and
forever discharges the other and its and their past, present and future
affiliates, and its and their respective successors, predecessors, assigns,
heirs, officers, directors, employees, consultants and trustees (in each case,
solely in their capacities as such), of and from the Released Matters (as
defined below) and (b) agrees not to bring any claim, suit, action, arbitration,
inquiry, investigation or other proceeding of any nature by or before any
arbitrator or Governmental Entity (as defined in the Merger Agreement) or
similar person or body (each, an "Action") against the other and its and their
past, present and future affiliates and its and their respective successors,
predecessors, assigns, heirs, officers, directors, employees, consultants and
trustees (in each case, solely in their capacities as such) related to or
arising out of the Released Matters; provided, however, that this Release and
Agreement shall not (i) affect any person's right to enforce this Release and
Agreement, any Transaction Agreement (as defined in the Merger Agreement), any
Commercial Agreement (as defined in the Merger Agreement), any Newco I/R
Agreement (as defined in the Restructuring Agreement) or any provision herein or
therein in accordance with its terms, (ii) relieve Newco or any Related Company
from the obligation to pay any amounts accrued or due and payable under any
Related Company Agreement (as defined in Section 2.02), (iii) apply to any
pursuit of any Action against any person other than in connection with a
Released Matter, (iv) be, or be construed as, a grant to the Company (or any
affiliate thereof (other than any Newco Company)) of a license, express or
implied, any freedom to operate, or any covenant not to sue under any
intellectual property owned by,
A-9-1
licensed to, or otherwise held at the Effective Time by any Related Company; or
(v) be, or be construed as, a grant to any Related Company (or any affiliate
thereof) of a license, express or implied, any freedom to operate, or any
covenant not to sue under any intellectual property owned by, licensed to, or
otherwise held at the Effective Time by the Company or any Newco Company.
SECTION 1.02. Reimbursement. In the event of any Action among the parties
to this Release and Agreement (including, for purposes of this Section 1.02,
affiliates, successors, assigns, heirs, officers, directors, employees,
consultants or trustees that are third party beneficiaries under this Release
and Agreement) in which a party to such Action (the "Prevailing Party") obtains
a final and nonappealable order of a court of competent jurisdiction that
provides or states that the other party breached Section 1.01, then the
Prevailing Party shall be entitled to reimbursement from the other party of its
legal fees and expenses incurred in such Action.
SECTION 1.03. Certain Agreements. (a) The Company and each of the Related
Companies hereby agree that as part of the Restructuring, each Related Company
Agreement that is not a written agreement executed on behalf of each of the
parties thereto shall be memorialized in writing and executed on behalf of each
of the parties thereto. In furtherance and not in limitation of Section 1.05
(a), each of the Related Companies acknowledges that, pursuant to the
Restructuring Agreement and as part of the Restructuring, all of the Company's
rights under and in respect of the Related Company Agreements shall be assigned
to, and all of the Company's Liabilities under and in respect of the Related
Company Agreements will be assumed by, Newco immediately prior to the Effective
Time (the "Related Company Transfer").
(b) Each of the Related Companies hereby consents to the Related
Company Transfer and, as of the Release Time, except as otherwise expressly
provided in Section 1.01, unconditionally releases the Company from any and
all obligations, duties and Liabilities (express and implied) under the
Related Company Agreements whether arising before, at or after the Related
Company Transfer. Each of the Related Companies expressly agrees to perform
its obligations, duties and Liabilities (express or implied) under the
Related Company Agreements in favor of Newco, and Newco expressly agrees to
assume and perform the Company's obligations, duties and liabilities
(express or implied) under the Related Company Agreements in favor of the
Related Companies. Each of the foregoing is conditioned upon the
consummation of the Related Company Transfer, shall occur without any
further action by any party, and, together with the Related Company
Transfer, shall have the effect of novating and amending the Related
Company Agreements.
(c) The Company, Newco, and each of the Related Companies accordingly
agree that as of and with effect from the Related Company Transfer each of
the Related Company Agreements will no longer create or confer any rights
or obligations on or as to the Company (or its affiliates (other than any
Newco Company)) but will continue among the parties thereto (other than the
Company) and Newco on the same terms and conditions as those stated in such
Related Company Agreement. The Company, Newco and each of the Related
Companies agree to amend and restate each such Related Company Agreement to
reflect such novation.
SECTION 1.04. Representations and Warranties. Each of (x) the Related
Companies represents and warrants, severally and not jointly, to the Company and
Newco and (y) the Company and Newco represents and warrants severally and not
jointly, to each of the Related Companies, in each case as of the date hereof
and as of the Effective Time, that:
(a) Organization, Standing and Power. Such person is duly
incorporated or formed, validly existing and in good standing under the
laws of the state of its incorporation or formation, as applicable and has
all corporate or limited liability company powers, as applicable,
governmental licenses, authorizations, permits, consents and approvals,
except for such governmental licenses, authorizations, permits, consents
and approvals the failure of which to have or obtain, individually or in
the aggregate, would not reasonably be expected to have a material adverse
effect on the business of such person and such person's subsidiaries, taken
as a whole.
A-9-2
(b) Authority; Execution and Delivery; Enforceability. Such person
has all requisite corporate or limited liability company power and
authority, as applicable, to execute and deliver this Release and Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery by such person of this Release and Agreement and the consummation
by such person of the transactions contemplated hereby has been duly
authorized by all necessary corporate or limited liability company action
on the part of such person. Such person has duly executed and delivered
this Release and Agreement, and, assuming due execution and delivery hereof
by each other party hereto, this Release and Agreement constitutes its
legal, valid and binding obligation, enforceable against it in accordance
with its terms.
(c) No Conflicts. The execution and delivery by such person of this
Release and Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation of or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancelation or acceleration of any obligation or to loss of a material
benefit under, or result in the creation of any lien upon any of the
properties or assets of such person or any subsidiary of such person under,
any provision of (i) the charter, organizational or formation documents of
such person, (ii) any contract, lease, license, indenture, note, bond,
agreement, permit, concession, franchise or other instrument (a "Contract")
to which such person or any subsidiary of such person is a party or by
which their respective properties or assets is bound or (iii) subject to
the filings and other matters referred to in Section 1.06(d), any judgment,
order or decree (a "Judgment") or statute, law, ordinance, rule or
regulation whether foreign or domestic applicable to such person or any
subsidiary of such person or their respective properties or assets, other
than, in the case of clauses (ii) and (iii) above, any such items that,
individually or in the aggregate, would not reasonably be expected to
materially impair the ability of such person or any subsidiary of such
person to perform its obligations under this Release and Agreement or
consummate the transactions contemplated hereby
(d) No Consents. No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, or permit
from, any Governmental Entity, is required to be obtained or made by such
person or any subsidiary of such person in connection with the execution,
delivery and performance of this Release and Agreement or the consummation
of the transactions contemplated hereby, other than such items that the
failure of which to obtain or make, individually or in the aggregate, would
not reasonably be expected to materially impair the ability of such person
or any subsidiary of such person to perform its obligations under this
Release and Agreement or consummate the transactions contemplated hereby.
ARTICLE II
MISCELLANEOUS AND GENERAL
SECTION 2.01. Notices. All notices, requests, claims, demands and other
communications under this Release and Agreement shall be in writing and shall be
deemed given upon receipt by the parties at
A-9-3
the following addresses (or at such other address for a party as shall be
specified by like notice) of a fax followed by delivery of such notice by
overnight courier of an international reputation:
(a) if to Newco or, prior to the Effective Time, the Company, to
IGEN Integrated Healthcare, LLC
16020 Industrial Drive
Gaithersburg, MD 20877
Attention: President
Fax: (301) 208-3789
(b) if to the Related Companies, to
Wellstat Therapeutics Corporation
930 Clopper Road
Gaithersburg, MD 20878
Attention: Legal Counsel
Fax: (240) 683-3794
SECTION 2.02. Definitions. Unless otherwise noted, terms used but not
defined in this Release and Agreement shall have the meaning set forth in the
Merger Agreement. In addition, the following terms shall have the following
meanings:
An "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person. For the avoidance of
doubt, (a) none of the Related Companies, MSD, MST, JW and JW Consulting is
an affiliate of the Company or Newco for purposes of this Release and
Agreement and (b) none of the Company, Newco, MSD, MST, JW and JW
Consulting is an affiliate of any of the Related Companies for purposes of
this Release and Agreement.
"Related Company Agreements" means all Contracts, promises,
commitments or understandings (whether oral or written) between the Company
or any of its affiliates, on the one hand, and any Related Company or any
of its affiliates, on the other hand.
"Release Time" means the time immediately prior to the Effective Time.
"Released Matter" means any and all debts, demands, Actions, causes of
action, suits, accounts, covenants, Contracts, agreements, torts, damages
and any and all claims, defenses, offsets, Judgments, demands and
Liabilities (as defined in the Merger Agreement) whatsoever, of every name
and nature, both at law and in equity, known or unknown, suspected or
unsuspected, accrued or unaccrued, which have been or could have been
asserted, relating to, based upon or arising from, or in connection with
any relationship between the Company or any of its affiliates at or prior
to the Release Time, on the one hand, and any Related Company or any of its
affiliates, on the other hand, or any Related Company Agreement, in each
case in existence at or prior to the Release Time.
SECTION 2.03. Interpretation. When a reference is made in this Release
and Agreement to a Section, Exhibit, Schedule or party, such reference shall be
to a Section of, or an Exhibit, Schedule or party to, this Release and Agreement
unless otherwise indicated. The headings contained in this Release and Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Release and Agreement. Whenever the words "include",
"includes", or "including" are used in this Release and Agreement, they shall be
deemed to be followed by the words "without limitation". The words "hereof",
"herein", "hereby" and "hereunder" and words of similar import when used in this
Release and Agreement shall refer to this Release and Agreement as a whole and
not to any particular provision of this Release and Agreement. The words "date
hereof" shall refer to the date of this Release and Agreement. The term "or" is
not exclusive. The word "extent" in the phrase "to the extent" shall mean the
degree to which a subject or other thing extends, and such phrase shall not mean
simply "if". The definitions contained in this Release and Agreement are
applicable to the singular as well as the
A-9-4
plural forms of such terms. Any agreement or instrument that is referred to
herein means such agreement or instrument as from time to time amended, modified
or supplemented. References to a person are also to its permitted successors and
assigns.
SECTION 2.04. Severability. If any term or other provision of this
Release and Agreement is invalid, illegal or incapable of being enforced by any
applicable Law (as defined in the Merger Agreement), or public policy, all other
conditions and provisions of this Release and Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Release and Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 2.05. Counterparts. This Release and Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties. Each party
need not sign the same counterpart.
SECTION 2.06. Entire Agreement; Third Party Beneficiaries. This Release
and Agreement constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof. Nothing contained in this Release and
Agreement is intended to confer upon any person other than the parties hereto
any benefit, right or remedy under or by reason of this Release and Agreement,
except the persons referred to in Sections 1.01 and 1.02, who shall be third
party beneficiaries of this Release and Agreement.
SECTION 2.07. Governing Law. This Release and Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
SECTION 2.08. Assignment. Neither this Release and Agreement nor any of
the rights, interests or obligations under this Release and Agreement shall be
assigned, in whole or in part, by operation of law or otherwise by any of the
parties without the prior written consent of the other parties. Any purported
assignment without such consent shall be void; provided, however, the parties
acknowledge and agree that the conversion of Newco in accordance with Section
2.01 of the Restructuring Agreement and the continuation of Newco as a result
thereof shall be deemed not to be an assignment and shall not require any
consent of any party. Subject to the preceding sentences, this Release and
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 2.09. Enforcement; Consent to Service of Process. The parties
agree that irreparable damage would occur in the event that any of the
provisions of this Release and Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Release and Agreement and to enforce specifically the terms and
provisions of this Release and Agreement in any New York state court or any
Federal court located in the State of New York, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the personal jurisdiction
of any New York state court or any Federal court located in the State of New
York in the event any dispute arises out of this Release and Agreement or any
transaction contemplated in this Release and Agreement, (b) agrees that it will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (c) agrees that it will not bring any
action relating to this Release and Agreement or any transaction contemplated in
this Release and Agreement in any court
SECTION 2.10. Modification or Amendment. The parties hereto may modify or
amend this Release and Agreement only by written agreement executed and
delivered by duly authorized officers of the respective parties. At any time the
parties hereto may waive compliance with any of the agreements or
A-9-5
conditions contained herein. Any agreement on the part of a party to any such
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Release and Agreement to
assert any of its rights under this Release and Agreement or otherwise shall not
constitute a waiver of such rights.
SECTION 2.11. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Release and Agreement shall survive the
Effective Time (as defined in the Merger Agreement). This Section 2.11 shall not
limit any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
SECTION 2.12. Termination. In the event the Merger Agreement is
terminated prior to the Effective Time, this Release and Agreement shall become
null and void.
IN WITNESS WHEREOF, this Release and Agreement has been duly executed and
delivered as of July 24, 2003, by the duly authorized officers of the parties
hereto.
IGEN INTERNATIONAL, INC.,
by /s/ RICHARD J. MASSEY
------------------------------------
Name: Richard J. Massey
Title: President and Chief
Operating Officer
IGEN INTEGRATED HEALTHCARE, LLC,
by /s/ RICHARD J. MASSEY
------------------------------------
Name: Richard J. Massey
Title: President and Chief
Operating Officer
Related Companies:
HYPERION CATALYSIS INTERNATIONAL,
by /s/ SAMUEL J. WOHLSTADTER
------------------------------------
Name: Samuel J. Wohlstadter
Title: Chairman and Chief
Executive Officer
WELLSTAT BIOLOGICS CORPORATION,
by /s/ SAMUEL J. WOHLSTADTER
------------------------------------
Name: Samuel J. Wohlstadter
Title: Chairman and Chief
Executive Officer
A-9-6
WELLSTAT THERAPEUTICS CORPORATION,
by /s/ SAMUEL J. WOHLSTADTER
-----------------------------------
Name: Samuel J. Wohlstadter
Title: Chairman and Chief
Executive Officer
PROTEINIX CORPORATION,
by /s/ SAMUEL J. WOHLSTADTER
------------------------------------
Name: Samuel J. Wohlstadter
Title: Chairman and Chief
Executive Officer
INTEGRATED CHEMICAL SYNTHESIZERS,
INC.,
by /s/ SAMUEL J. WOHLSTADTER
------------------------------------
Name: Samuel J. Wohlstadter
Title: Chairman and Chief
Executive Officer
A-9-7
ANNEX 10
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") is made as of the 24th day of
July, 2003, by and between IGEN International, Inc. ("IGEN"), a Delaware
corporation having a principal place of business at 16020 Industrial Drive,
Gaithersburg, Maryland 20877, United States of America, and IGEN LS LLC ("LLC"),
a Delaware limited liability company having offices at 16020 Industrial Drive,
Gaithersburg, Maryland 20877, with reference to the following facts:
WHEREAS, IGEN has conducted research on, has developed and owns rights to
certain technology and products with respect to, among other things, the
detection and/or quantification of compounds for diagnostic procedures based on
electrochemiluminescent compounds; and
WHEREAS, IGEN and LLC are willing to enter into a non-exclusive license, as
is set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and promises set forth below, LLC and IGEN (the "Parties") hereby agree as
follows:
1. Definitions. As used in this Agreement, capitalized terms shall have
the respective meanings set forth below:
1.1 Affiliate. "Affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person. The term
"person" means any individual, firm, corporation, partnership, company,
limited liability company, trust, joint venture, association, Governmental
Entity or other entity. The term "Government Entity" means any domestic or
foreign (whether a national, Federal, state, provincial, local or
otherwise) government or any court of competent jurisdiction, agency or
commission or other governmental authority or instrumentality, domestic or
foreign. Neither Genentech Inc., 1 DNA Way, South San Francisco, California
94080-4990, USA nor Chugai Pharmaceutical Co., Ltd, 1-9 Kyobashi 2-chome,
Chuo-ku, Tokyo, 104-8301, Japan shall be deemed an Affiliate of LLC for
purposes of this Agreement. Neither Meso Scale Diagnostics, LLC., 9238
Gaither Road, Gaithersburg, Maryland, USA 20877 ("MSD") nor Meso Scale
Technologies, LLC., 9238 Gaither Road, Gaithersburg, Maryland, USA 20877
("MST") shall be deemed an Affiliate of IGEN for purposes of this
Agreement.
1.2 Affiliate Sublicensee. "Affiliate Sublicensee" means an
Affiliate of a party to whom a sublicense has been granted as provided
under Section 2.4 hereof.
1.3 ECL Assays. "ECL Assays" means:
(a) any and all immunoassay methods (except as set forth in
subsection (c), below) for human in vitro diagnostic testing consisting
of or based on the Licensed ECL Technology:
(1) that when sold in any jurisdiction
(A) that requires regulatory approval or registration for
the manufacturing, marketing and selling of human in vitro
diagnostic products (including Analyte Specific Reagents as
defined by applicable FDA regulations (currently 21 CFR
sec. 864.4020) and similar products by any other name under any
and all applicable regulations of foreign jurisdictions), has
been approved by or registered, as so required, with the
governmental agencies that have responsibility for regulating
such products in the jurisdiction in which the sale takes place
(and when sold in the United States, Europe or Japan, has been
approved or registered, as applicable, as a human in vitro
diagnostic product by the U.S.
A-10-1
Food and Drug Administration, under the European IVD Directive,
or by the Japan Ministry of Health, respectively); or
(B) in which approval or registration specified in
(a)(1)(A), above is not required, has been manufactured in
accordance with the regulations of the governmental agencies, if
any, that have responsibility for regulating human in vitro
diagnostic products in the jurisdiction in which the sale takes
place; and
(2) manufactured and sold solely in Reagent Packs; and
(3) in which the detection or quantification of an analyte is
determined by the binding of an antibody or antibody fragment (or the
antigen if the analyte is an antibody).
(b) For purposes of this Agreement, ECL Assay shall include:
(1) a Folate assay, an RBC Folate assay and a Vitamin B-12 assay
provided such assay meets the requirements in subsections (a)(1) and
(2) and where detection or quantification of an analyte is determined
by the binding of the specific proteins to Folate, RBC Folate and
Vitamin B-12;
(2) notwithstanding any limitation in subsection (c) below, any
and all assays (except Multi-Array Assays) for the analytes set forth
in Appendix Y attached hereto and for use on ECL Instruments (which
includes analytes which are or may be construed to be chemical agents
or weapons), provided such assays meets all of the requirements in
subsection (a) above; and
(3) reagents, such as antigens, antibodies, magnetic
microparticles and calibrators, used in assays that meet the
requirements in subsection (a), (b)(1) or (b)(2), above and controls,
cleaning solutions, diluents and substrates.
(c) Notwithstanding anything contained in subsection (a), (b)(1) or
(b)(3), above, (but specifically excluding subsection (b)(2), above) to
the contrary, ECL Assays shall not include any assay method:
(i) for drugs of abuse (including amphetamines, barbiturates,
benzodiazepines, cocaine, metabolite, ethanol, LSD, methadone,
methaqualone, opiates, phencyclidine, propoxyphene and THC);
(ii) for therapeutic drug monitoring (other than for digoxin and
digitoxin), including monitoring of acetominophen, amikacin,
carbamazepine, cyclosporin, gentamicin, lidocaine, phenobarbital,
NAPA, phenytoin, free phenytoin, primidone, procainamide, quinidine,
salicyhlate, theophylline, tobramycin, valproic acid, free valproic
acid and vancomycin;
(iii) for detection of exposure to chemical agents or weapons;
(iv) for detection of the biological agents, toxins or weapons
set forth in Appendix X attached;
(v) for allergies other than total IgE;
(vi) that incorporates or includes one or more nucleic acids or
utilizes or is designed for the detection of one or more nucleic
acids or uses one or more compounds that is/are: (y) composed of one
or more nucleotides or analogs thereof; or (z) capable of binding
with one or more nucleotides or analogs thereof; or
(vii) that is a Multi-Array Assay.
A-10-2
1.4 ECL Instrument.
(a) "ECL Instrument" means a diagnostic instrument that uses or is
based upon Licensed ECL Technology solely for use with ECL Assays (and
does not include peripheral devices used with diagnostic instrument(s)
such as printers, sample preparation devices, non-ECL modular units, IT
equipment and software for post analytical analyses) so long as such
diagnostic instrument satisfies each of the following criteria:
(i) has a maximum throughput of 65 or more test results per hour
for a majority of ECL Assays marketed by LLC and all of its Affiliate
Sublicensees; and
(ii) is specifically designed to hold six or more Reagent Packs
on board the instrument for automated testing; and
(iii) each Reagent Pack on board the instrument has a quantity
of antibodies or antibody fragments (or those specific proteins used
for the Folate assay, RBC Folate assay and Vitamin B-12 assay; or
antigens in the case where the analyte in the immunoassay is an
antibody) that is manufactured, calibrated and designed to report 50
or more individual results provided that the requirement of 50
reported results per Reagent Pack does not apply to prepackaged
calibrators, controls, diluents and cleaning solutions; and
(iv) the sole and exclusive method of performing the ECL Assay
is by the instrument directly accessing, and using reagents from, the
Reagent Packs described in (iii), above; and
(v) weighs 88 kg or more; and
(vi) is designed to hold on board the instrument 100 or more
disposal reaction cups or 10 or more non-disposable reaction cups;
and
(vii) cannot perform any Multi-Array Assay; and
(viii) uses platinum as the sole and exclusive material for the
permanently installed electrode in the flow cell that generates
electrochemiluminescence; provided, however, that any other material
used by IGEN or its successors or assigns, or any of their respective
licensees under ECL Technology, in an instrument that incorporates
ECL Technology may also be used; and
(ix) has a physical size of 314,000 cubic centimeters (measured
by integrating the total volume encompassed by the entire instrument)
or more, and has an actual footprint of 4,880 square centimeters or
more; and
(x) performs each of the following functions (whether or not the
instrument performs other functions), in any order and regardless of
the materials employed to perform the function (with the proviso that
this shall not modify or supercede any of the limitations set forth
in (i) through (ix), above): (1) accepts and aliquots patient samples
or accepts an aliquoted patient sample for performing the ECL Assay;
(2) directly accesses, and uses antibody reagents (or those specific
proteins used for the Folate assay, RBC Folate assay and Vitamin B-12
assay; or antigens in the case where the analyte in the immunoassay
is an antibody) directly from, the Reagent Packs described in
subparagraph (iii), above; (3) dispenses the antibodies (or those
specific proteins used for the Folate assay, RBC Folate assay and
Vitamin B-12 assay; or antigens in the case where the analyte in the
immunoassay is an antibody) for purposes of performing the ECL Assay;
(4) accesses and aliquots magnetic beads directly from the Reagent
Packs on board the instrument; (5) incubates the patient sample with
antibodies (or those specific proteins used for the Folate assay, RBC
Folate assay and Vitamin B-12 assay; or antigens in the case where
the analyte in the immunoassay is an antibody) for conducting the ECL
Assay; (6) transfers the
A-10-3
incubated sample to the flow cell in the instrument where the
electrochemiluminescence reaction takes place; (7) activates the
magnet at the electrode in the instrument for purposes of drawing the
magnetic beads to the electrode; (8) activates the electrode to
perform electrochemiluminescence; (9) reads light generated by the
electrochemiluminescence reaction; (10) flushes out and cleans the
flow cell following the performance of the electrochemiluminescence
measurement; and (11) interprets the light signal from the
electrochemiluminescence to provide the diagnostic result specific to
the patient sample.
For the avoidance of doubt and for the sake of clarification, if a
diagnostic instrument that uses or is based upon Licensed ECL
Technology satisfies each of criteria set forth in subparagraphs (i)
through (x) is or could be subdivided into two or more modules, then
the module that performs the function described in subparagraph
(x)(8), above, must meet all of the criteria set forth in
subparagraphs (i) through (x), above; it being understood that in the
event such module fails to meet all such criteria then the diagnostic
instrument (both before and after being so subdivided) shall not
qualify as an ECL Instrument.
(b) Notwithstanding anything contained in subsection 1.4(a) to the
contrary, the Elecsys 1010 instrument, the Elecsys 2010 instrument and
the ECL module of the E-170 instrument sold by Roche Diagnostics GmbH at
the Effective Time are ECL Instruments.
1.5 ECL Patent Rights. "ECL Patent Rights" means:
(a) All patents, patent applications and patent rights listed in
Exhibit A hereto; and
(b) Any other patent applications or patents issued to IGEN or its
Affiliates relating to ECL Technology that claim their earliest priority
from a patent application filed by IGEN or an IGEN Affiliate on or
before the Effective Time; and
(c) Any other patents or patent applications that claim priority to
one or more of the patents and patent applications listed in Exhibit A
including corresponding foreign applications or patents; any patents or
patent applications that claim priority to a priority application of one
or more of the patents and patent applications listed in Exhibit A
including corresponding foreign applications or patents; and
(d) any substitutions, divisions, continuations, continuations in
part, renewals, reissues, confirmations or registrations of the patents,
patent applications and patent rights under Sections 1.5(a), (b) and (c)
above and extensions of the foregoing, now existing or hereafter filed.
1.6 ECL Technology. "ECL Technology" means detection methods and
detection systems, which employ electrochemiluminescence in detection
and/or quantification, including but not limited to ECL reagents, ECL
assays and/or immunodiagnostic detection methods by which light generation
occurs when a molecular compound (such as a ruthenium metal chelate) is
electrically stimulated by applying a voltage to an electrode which
triggers a chemical reaction to emit photons.
1.7 Field. "Field" means:
(a) the analyzing of specimens taken from a human body, including
without limitation, blood, bodily fluid or tissue, for the purpose of
testing, with respect to that human being, for a physiological or
pathological state, a congenital abnormality, safety and compatibility
of a treatment or to monitor therapeutic measures.
(b) Notwithstanding anything contained in subsection 1.7(a), above,
to the contrary, the Field shall not include analyzing for (A) life
science research and/or development, including at any pharmaceutical
company or biotechnology company, (B) patient self testing use; (C) drug
discovery and/or drug development (including at any pharmaceutical
company or biotechnology
A-10-4
company), including clinical research or determinations in or for
clinical trials or in the regulatory approval process for a drug or
therapy, or (D) veterinary, food, water, or environmental testing or
use.
(c) Notwithstanding anything contained in subsection 1.7(b), above,
to the contrary, in the event a Product that has been sold or placed
solely for the uses specified in subsection 1.7(a), above, is
incidentally used outside those specified uses without the knowledge or
consent of LLC or any of its Affiliate Sublicensees (without a duty to
inquire or investigate), then such incidental use shall be considered
inside the Field and such sale or placement shall not retroactively be
considered outside the Field.
1.8 Licensed ECL Technology. "Licensed ECL Technology" means the ECL
Patent Rights and any and all proprietary or confidential or technical
information relating to ECL Technology owned by IGEN or any of its
Affiliates or licensed to IGEN or any of its Affiliates from a third party
with the right to grant the licenses under Section 2.1 hereof, in each case
as existing as of the Effective Time, including, but not limited to
techniques, designs, specifications, instruments, compounds, devices,
ideas, technical information, processes, schematics, inventions,
discoveries, methods, know-how, show-how, hardware and software (including
object codes and source codes) based on ECL Patent Rights, whether or not
the same is eligible for protection under the patent laws of the United
States or elsewhere, and whether or not any such processes and technology,
or information related thereto, would be enforceable as a trade secret or
the copying of which would be enjoined or restrained by a court as
constituting unfair competition. "Licensed ECL Technology" shall include
without limitation, the inventions in the ECL Patent Rights. "Licensed ECL
Technology" shall not include technology related to gene amplification or
Nucleic Acid Probes or methods using Nucleic Acid Probes.
1.9 Multi-Array Assay. "Multi-Array Assay" shall mean an assay that
includes, without limitation, (a) the use of disposable electrodes or (b) a
patterned surface used for one or more measurements. Multi-Array Assay
shall not include measurements practiced as of the date hereof on the
Elecsys 1010, Elecsys 2010 and Modular E170 and their successor instruments
wherein one or more analytes of the electrochemiluminescent measurement is
performed on a reader that performs the electrochemiluminescent measurement
in a permanently installed flow cell as long as (x) the
electrochemiluminescent measurement is performed using the electrodes used
for initiating electrochemiluminescence that are permanently installed in
such flow cell contained in the reader wherein the one or more analytes are
captured on paramagnetic beads and (y) no electrode that is disposable,
consumable or not permanently installed in the reader is used to initiate
electrochemiluminescence.
1.10 Non-Exclusive. "Non-Exclusive" as to the grant of a license
right means that the licensor may during the Term of this Agreement
exercise the licensed rights itself in the licensee's field or grant
non-exclusive licenses in the licensee's field to a third party, or retain
for itself any non-exclusive license rights.
1.11 Nucleic Acid Probe. "Nucleic Acid Probe" shall mean one or more
compounds that is/are: (y) composed of one or more nucleotides or analogs
thereof; or (z) capable of binding with one or more nucleotides or analogs
thereof.
1.12 Prior Agreement.
"Prior Agreement" means the License and Technology Development
Agreement between Roche Diagnostics GmbH (t/k/a Boehringer Mannheim GmbH)
("ROCHE") and IGEN (t/k/a IGEN Incorporated), dated September 23, 1992.
1.13 Product(s). "Product(s)" means ECL Instruments, service for ECL
Instruments and spare parts; and ECL Assays.
A-10-5
1.14 Reagent Pack. "Reagent Pack" shall mean the prepackaged reagent
bottles that: (i) are designed to go on board an ECL Instrument and (ii)
hold specific concentrations and volumes of reagents, including the
required antibody, antibodies or antibody fragments (or those specific
proteins used for the Folate assay, RBC Folate assay and Vitamin B-12
assay; or antigen in the case where the analyte in the immunoassay is an
antibody), that have been calibrated where technically required and which
are used in combinations for conducting an ECL Assay on an ECL Instrument.
For the avoidance of doubt and for the sake of clarification, if two or
more reagent bottles are combined, packaged or sold together for conducting
the prescribed ECL Assay on an ECL Instrument, then such multiple bottles
shall constitute one Reagent Pack.
1.15 Term. The "Term" of this Agreement shall mean the entire period
of time this Agreement is in full force and effect and shall begin at the
Effective Time and terminate automatically upon the later of (a) the
expiration of the last-to-expire of the patents included in the ECL Patent
Rights that is not earlier invalidated, or its enforcement enjoined, by a
final decision of a court of competent jurisdiction from which no further
appeal may be taken or (b) complete loss of confidential and proprietary
status for all of the Licensed ECL Technology. The term "Effective Time"
shall have the meaning ascribed to that term in Merger Agreement of even
date herewith by and between, inter alia, IGEN and Roche Holding Ltd (the
"Merger Agreement").
2. Grant and Scope of Licenses.
2.1 License Grant. During the Term of this Agreement, and subject to
the terms and conditions of this Agreement, IGEN and its Affiliates grant
to LLC, only for use in the Field, an irrevocable, perpetual,
Non-Exclusive, worldwide, fully-paid, royalty-free right and license under
the Licensed ECL Technology, to develop, have developed, prepare derivative
works based on, reproduce, use, manufacture, have manufactured, distribute,
have distributed, display, perform, modify, import, sell, offer for sale,
have sold, lease and otherwise commercially exploit Products.
2.2 Included (Excluded) Rights.
(a) The rights and licenses granted in Section 2.1 hereof include
the right of LLC to grant to its distributors, contract manufacturers,
toll manufacturers, component suppliers, leasing agents and other third
parties engaged by LLC hereunder to assist LLC in commercializing the
intellectual property rights licensed to it hereunder (the "Authorized
Third Parties") immunity from suit under the Licensed ECL Technology in
the Field but solely for the benefit of LLC, and further includes the
right of LLC to grant immunity from suit under the Licensed ECL
Technology to LLC's customers for use or subsequent sale of those
Products in the Field. Furthermore, Authorized Third Parties shall have
such rights to use the Licensed ECL Technology licensed to LLC hereunder
in the Field as may be necessary to allow such Authorized Third Parties
to assist LLC and its Affiliate Sublicensees in the commercialization of
Licensed ECL Technology; provided, however, that the exercise of such
licensed rights by such Authorized Third Parties shall not constitute a
sublicense by LLC hereunder. LLC shall: (i) assure that the Authorized
Third Parties' use of the Licensed ECL Technology licensed hereunder to
LLC is utilized by such Authorized Third Parties for the exclusive
benefit of LLC and its Affiliate Sublicensees and only in the Field and
to that extent only as permitted by this Agreement; and (ii) cause each
Authorized Third Party to assign to LLC any and all intellectual
property rights to ECL Technology which such Authorized Third Party may
develop or create. LLC shall indemnify IGEN and its Affiliates (and
their respective officers, directors, shareholders, representatives,
employees, consultants and agents and each of the heirs, executors,
successors and assigns of the foregoing) against any loss, cost, damage
or liability (including reasonable attorneys' fees) arising from LLC's
failure to perform its obligations under the preceding sentence. In
addition, any Authorized Third Party which does not comply with (ii)
above shall not benefit from the immunity from suit described in this
Section if such Authorized Third Party sues IGEN or any of its
Affiliates or sublicensees to the extent such suit
A-10-6
by such Authorized Third Party is based on those intellectual property
rights which should have been assigned to LLC in accordance with (ii)
above.
(b) LLC shall have no right to develop, use, manufacture, have
manufactured or sell ECL Assays that are packaged specifically for, and
function only for use on, instruments manufactured or sold by IGEN or
its licensees or resellers.
(c) No rights are licensed or deemed licensed to LLC hereunder or
in connection herewith, other than those rights expressly licensed to
LLC in Sections 2.l and 2.2 and Section 2.7 below.
2.3 Out-of-Field Licenses. Nothing contained in this Agreement shall
be construed to limit or restrict, in any way or manner, any right of LLC
or its Affiliates to use, license, transfer or sell its owned or licensed
intellectual property rights (excluding the rights licensed to LLC
hereunder) anywhere in the world and/or for any purpose, whether inside or
outside the Field.
2.4 Sublicenses. Except as provided in this Section 2.4, LLC shall
not have the right to grant sublicenses to the licenses granted in Article
2 hereof to any third parties; provided, however, LLC may sublicense its
rights to any of its Affiliates, but only for so long as such entity
remains an Affiliate of LLC. All Affiliate Sublicensees shall be subject to
the provisions of this Agreement, including but not limited to the
confidentiality provisions. LLC shall cause each Affiliate Sublicensee to
assign to LLC any and all intellectual property rights to ECL Technology
which such Affiliate Sublicensee may develop or create. LLC shall indemnify
IGEN and its Affiliates (and their respective officers, directors,
shareholders, representatives, employees, consultants and agents and each
of the heirs, executors, successors and assigns of the foregoing) against
any loss, cost, damage or liability (including reasonable attorneys' fees)
arising from LLC's failure to perform its obligations under the preceding
sentence. On a semi-annual basis, LLC shall provide to each of its
Affiliate Sublicensees, with a contemporaneous copy to IGEN, a written
description of LLC's obligations under this Agreement and the steps to be
taken by LLC and the Affiliate Sublicensees to ensure compliance with those
obligations. Contemporaneously with delivery of such description, LLC shall
notify IGEN in writing of all sublicenses with Affiliate Sublicensees.
2.5 Out-of-Field Sales.
(a) LLC and IGEN will, within ninety (90) days prior to the end of
each calendar year, jointly engage a mutually acceptable, independent,
neutral third party to monitor LLC's compliance with the licenses
granted hereunder (the "Field Monitor"). The expense of the Field
Monitor will be shared equally by LLC and IGEN. LLC will give the Field
Monitor full access to such records as are necessary for the Field
Monitor to review placements and sales of Products by LLC and its
affiliates, sublicensees, distributors and agents to confirm whether LLC
is adhering to the Field and Product limitations of its license
hereunder. Such examination shall be confidential and information
disclosed or reviewed shall not be disclosed to IGEN except as is
necessary for the Field Monitor to report the results of the examination
process. The Field Monitor will be instructed to prepare and deliver a
report to LLC and IGEN within 90 days following the end of each calendar
year. Such report will include a worldwide list of sales or placements
of Products by LLC, and its respective affiliates, sublicensees,
distributors and agents, during the preceding year that were not within
the Field. Without limiting the generality of the foregoing, the report
will identify LLC sales or placements of Products in violation of the
license grant. For purposes of this Section 2.5, references to LLC,
either by name or as a "party" or "seller," shall include such party's
affiliates, sublicensees, Authorized Third Parties, distributors and
agents that sell Products under the license granted hereunder.
(b) In the event of out-of-Field sales, LLC may continue to sell
Licensed Products for out-of-Field uses of such ECL Instrument until
IGEN notifies LLC in writing that it is prohibited from making any
further such sales. In addition, LLC will pay to IGEN within thirty (30)
days
A-10-7
after receiving the Field Monitor's report 65% of all undisputed
revenues earned through out-of-Field sales of Products for the prior
year. Except as provided below in Section 5.1, the payment provisions of
this Section 2.5(b) shall be the exclusive remedy of IGEN for
out-of-Field sales by LLC under this Agreement. IGEN shall have no right
to terminate this Agreement for out-of-Field sales by LLC, or its
Affiliates Sublicensees.
(c) LLC and its Affiliate Sublicensees shall market and sell
Products only to or place Products only with customers who LLC or its
Affiliate Sublicensees reasonably believe, based on prior knowledge of
and experience with such customer (or customers having substantially
similar operations), without a duty to inquire or investigate, will use
the Products solely in the Field, provided LLC or its Affiliate
Sublicensee gives such customer a notice, in customary documentation for
Products (e.g. quotation, package insert or invoice), of the limitations
on the authorized use of the Products. If LLC or any of its Affiliate
Sublicensees receive credible information that a specific customer is
using the Products outside of the Field, then LLC and its Affiliate
Sublicensees shall comply with the provisions of Section 2.5(b) [Out of
Field Sales] of this Agreement. In such event, the Products previously
sold to or placed with the customer (i.e. ECL Instruments) prior to
receipt of such information shall not retroactively be considered out-
of-Field sales.
2.6 Covenants. LLC hereby covenants that it will not, under any
circumstances, actively advertise or market the Products in fields other
than those included in the Field.
2.7 Limited Use for Evaluation and Regulatory Approvals. On the
terms and subject to the conditions set forth herein, IGEN hereby grants
LLC a limited, Non-Exclusive, royalty-free, worldwide right and license,
during the Term of this Agreement and under the Licensed ECL Technology, to
provide Products (which may include, for the limited purposes of this
Section 2.7, ECL Assays that do not satisfy the condition of Section
1.3(a)(1)) to the following users for the specified limited purposes set
forth below in this Section 2.7:
(a) laboratories and centers not making clinical determinations on
patients;
(b) clinical research organizations, contract research
organizations, clinical service organizations and laboratories not
making clinical determinations on patients; and
(c) the life sciences market, including pharmaceutical companies,
academic laboratories and biotechnology companies;
so long as in the case of each of the forgoing clauses (a), (b) and (c), (i)
neither LLC nor any of its Affiliates, distributors or agents, directly or
indirectly, receives any cash or other consideration in exchange for so
providing such Products; and (ii) such Products are used solely for the
development or evaluation testing of Products or to obtain or extend regulatory
approval for Products.
3. Ownership.
3.1 Licensor Retains Ownership. LLC (for itself and its Affiliate
Sublicensees) acknowledges and agrees that LLC has no rights in or to the
intellectual property rights licensed to LLC, other than the license rights
specifically granted herein. Nothing in this Agreement shall obligate IGEN
or its Affiliates to obtain ownership of or sublicensing rights to
intellectual property rights obtained from or licensed from third parties.
4. [RESERVED]
5. Books Of Account.
5.1 Business Records. LLC shall keep, and cause its Affiliates to
keep complete and accurate sales and accounting records and accounts of all
uses of Licensed ECL Technology, in sufficient detail to enable IGEN to
confirm that the use of its licensed intellectual property rights by LLC
and its
A-10-8
affiliates, sublicensees, distributors and agents complies with the terms
of this Agreement. Once each year during the Term of this Agreement, IGEN
may designate an independent certified public accountant reasonably
acceptable to LLC to conduct, during normal business hours, an examination
of the records referenced above. Such examination shall be confidential,
and the information disclosed shall not be communicated to IGEN except as
is necessary for the accountant to report the results of the examination
process. Such accountants shall execute a confidentiality agreement
reasonably acceptable to LLC. All records necessary to confirm the extent
of LLC's out-of-Field sales, if any, shall be made available upon request
and reasonable advance notice in Mannheim or at LLC Affiliates by
arrangement through LLC. If any audit conducted on behalf of IGEN shows
that LLC, or any of its affiliates, sublicensees, distributors or agents,
underpaid amounts due to IGEN for out-of-Field sales under Section 2.5,
then LLC shall immediately pay to IGEN any deficiency, with interest
thereon calculated in accordance with Section 5.3.
5.2 Retention. Records required to be maintained hereunder shall be
retained for not less than three (3) years.
5.3 Interest. All payments due hereunder from LLC that are not paid
to IGEN when due and payable as specified herein shall bear interest,
compounded monthly, at an annual rate equal to two percent (2%) above the
U.S. dollar reference rate ("prime rate") charged from time to time by
Citibank, N.A. (or a successor bank that is the largest bank headquartered
in New York City) from the date due until paid or at such lower rate as
shall be the maximum rate permitted by law.
6. Dispute Resolution; Venue And Choice Of Law.
6.1 Good Faith Resolution. In the event that at any time during the
Term of this Agreement a disagreement, dispute, controversy or claim should
arise out of or relating to the interpretation of this Agreement, or
performance by a Party under this Agreement, or a breach of this Agreement
by a Party, or any claim by a Party that any provision of this Agreement is
invalid (a "Dispute" or collectively "Disputes") , one Party shall give
written notice to the other Party that a dispute exists and the Parties
will then attempt in good faith to resolve their differences before
resorting to arbitration provided in Section 6.2. If the Parties cannot
resolve the disputed matter within thirty (30) days after such notice, then
either Party shall be free to submit the disputed matter to binding
arbitration in accordance with Section 6.2 hereof. For purposes of this
Article 6, the terms "Party" and "Parties" shall include each of the
signatories to this Agreement and/or any one or more of their respective
Affiliates, whether the reference is to a Party as a claimant or a Party
against which a claim is made.
6.2 Arbitration.
(a) The Parties intend Section 6.2 hereof to be enforceable in
accordance with the Federal Arbitration Act (9 U.S.C. Section 1, et
seq.), including any amendments to that Act which are subsequently
adopted, notwithstanding any other choice of law provision set forth in
this Agreement. In the event that either Party refuses to submit to
arbitration as required herein, the other Party may request a United
States District Court to compel arbitration in accordance with the
Federal Arbitration Act.
(b) Any dispute or other matter in question between LLC and IGEN
arising out of or relating to the formation, interpretation,
performance, or breach of this Agreement, whether such dispute or matter
arises before or after termination of this Agreement, shall be resolved
solely by arbitration if the Parties are unable to resolve the dispute
through negotiation pursuant to Section 6.1 hereof. Arbitration shall be
initiated by the delivery of a written notice of demand for arbitration
by one Party to the other. The date on which the other Party receives
such written notice shall be hereinafter referred to as the "Arbitration
Notice Date."
A-10-9
(c) Each Party shall appoint an individual as arbitrator and the
two so appointed shall then appoint a third arbitrator. If either Party
refuses or neglects to appoint an arbitrator within thirty (30) days
after the Arbitration Notice Date, then the arbitration shall be
conducted by a single arbitrator appointed by the American Arbitration
Association. If two arbitrators are appointed but do not agree on the
third arbitrator within sixty (60) days after the Arbitration Notice
Date, each of the arbitrators shall nominate within sixty-seven (67)
days after the Arbitration Notice Date three individuals. Each
arbitrator shall then within seventy-two (72) days after the Arbitration
Notice Date decline two of the nominations presented by the other
arbitrator. The third arbitrator shall then be chosen from the remaining
two nominations by drawing lots. Notwithstanding anything contained
herein to the contrary, if the third arbitrator is not chosen with
seventy-two (72) days after the Arbitration Notice Date, then the
American Arbitration Association shall appoint the third arbitrator
within seventy-seven (77) days after the Arbitration Notice Date. The
arbitrators shall not be or have been affiliated with, or have any
personal, financial or business relationship with, either of the Parties
or any Affiliate of either Party; the arbitrators shall not have a
personal or financial interest in the result of the arbitration.
(d) The arbitration hearings shall be held in Borough of Manhattan,
State of New York or such other place as may be mutually agreed by the
Parties, shall be conducted in the English language and shall be
conducted as confidential proceedings (except to the extent necessary to
enforce the award resulting therefrom). Unless the Parties agree
otherwise, the arbitrators shall commence the arbitration hearing within
thirty (30) days after the selection of the third arbitrator. The
arbitrators shall issue orders to protect the confidentiality of
proprietary information, trade secrets and other sensitive information
disclosed. Pending the arbitration hearing, at the request of a Party,
the arbitrators may issue temporary injunctive or other equitable relief
to address any violation or threatened violation of this Agreement. All
awards shall be made based on a majority vote of the arbitrators, shall
be in writing, shall not be considered confidential information of
either Party, shall be issued within sixty (60) days after hearings
before the arbitrators are completed, and shall state the reasoning on
which the award rests unless the Parties agree otherwise. In addition to
any relief at law which may be available to an aggrieved Party for such
breach, such Party shall be entitled to injunctive and other equitable
relief as the arbitration panel may grant. The arbitrators shall deliver
a copy of the award to each Party personally or by registered mail. Any
party may request within ten (10) days after receiving the decision
that, for good cause, the arbitrators reconsider and modify such
decision. The arbitrators shall have thirty (30) days after such request
to modify their decision, if they consider it appropriate. Thereafter,
the decision of the arbitrators shall be final, binding and
nonappealable, except to the extent appeals are permitted by the Federal
Arbitration Act, with respect to all persons, including (without
limitation) persons who have failed or refused to participate in the
arbitration process. Judgment upon the award rendered may be entered in
any court having jurisdiction thereof.
(e) Each Party shall bear its own costs in connection with any such
arbitration including, without limitation, (i) all legal, accounting,
and any other professional fees and expenses, (ii) the fees and expenses
of its own arbitrator, and (iii) all other costs and expenses each Party
incurs to prepare for such arbitration. Other than set forth above, each
side shall pay, (iv) one-half of the fee and expenses of the third
arbitrator, and (v) one-half of the other expenses that the Parties
jointly incur directly related to the arbitration proceeding.
(f) Except as provided above, arbitration shall be based upon the
Commercial Arbitration Rules of the American Arbitration Association.
Discovery shall be limited at the discretion of the arbitrators, so that
the timing and extent of such discovery shall not interfere with the
normal business operations of the Parties. The arbitrators may proceed
to an award notwithstanding the failure of either Party to participate
in the proceedings.
A-10-10
(g) In the event of subsequent actions or proceedings to confirm
the award or to enforce the judgment entered thereon or any other rights
flowing therefrom, the prevailing Party shall be entitled to recover its
reasonable attorney's fees incurred in such actions or proceedings.
(h) The fact that the dispute resolution procedures specified in
this Article 6 shall have been or may be invoked shall not excuse any
Party from performing its obligations under this Agreement, and during
the pendency of any such procedure the Parties shall continue to perform
their respective obligations in good faith.
6.3 Limited Recourse to Courts. This Article 6 shall be the
exclusive dispute resolution procedure for Disputes under this Agreement
and no Party shall bring Disputes before any court, except as appeals to
arbitration awards are permitted by Section 6.2. Except as permitted by
Section 6.2, the Parties hereby waive any right to appeal an arbitration
award to any court. The provisions of Section 6.2 may be enforced, and
judgment on the award (including without limitation equitable remedies)
granted in any arbitration hereunder may be entered, in any court of
competent jurisdiction. The Parties hereby submit to the non-exclusive in
personam jurisdiction of the federal courts in New York for such purposes.
THE PARTIES HEREBY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY FOR MATTERS
RELATED TO DISPUTES SUBMITTED TO ANY COURT.
6.4 Governing Law. This Agreement is made in accordance with and
shall be governed and construed under the laws of the State of New York,
U.S.A., without regard to its conflicts of laws rules.
7. Term And Termination.
7.1 Term. This Agreement shall remain in full force and effect for
the Term, unless terminated earlier in accordance with Section 7.2 below.
7.2 Termination for Cause. (a) LLC may, in its sole discretion,
terminate this Agreement, effective after the grace periods described
below, by giving written notice of such termination to IGEN, if IGEN fails
materially to comply with any material obligation of this Agreement, and
IGEN fails to cure such breach within sixty (60) days after written notice
thereof by LLC or, if such breach cannot reasonably be cured within sixty
(60) days, IGEN fails to commence to cure such breach within said sixty-day
period and diligently continue to cure such breach, unless otherwise
specified in this Agreement; provided, however, that if IGEN is unable to
cure a breach due to Force Majeure, then such 60-day period shall be
extended for a period of time reasonable under the circumstances. If there
should be a dispute between the parties as to whether a breach exists which
entitles LLC to terminate for cause, the matter shall be resolved promptly
under the provisions of Article 6 hereof and all attempts to terminate
shall be stayed. Upon termination by LLC, all payments then outstanding
under this Agreement and payable by LLC shall become immediately due and
payable.
(b) (i) From time to time during the term of this Agreement, LLC
may in advance of first sale, placement or other commercialization of a
proposed product that uses or incorporates Licensed ECL Technology,
request in writing that IGEN confirm that such proposed product is a
Product. At Roche's request, IGEN shall confirm in writing receipt of
such notice. This request process described in this Section 7.2(b)(i) is
only available on a product-by-product basis. A single request under
this process shall not apply to groups or ranges of products. Each such
request shall include sufficient information to enable IGEN to make a
determination of whether the proposed product is a Product. If IGEN does
not respond within sixty (60) days of its receipt of such request, IGEN
shall be deemed to have responded that the proposed product is not a
Product. If IGEN responds that the proposed product is not a Product and
LLC disagrees with such response, a dispute as to the interpretation of
this Agreement shall be deemed to exist. This dispute shall be resolved
in accordance with Article 6 hereof. If the final result in the dispute
resolution is that such proposed product is not a Product, and such
proposed product is
A-10-11
subsequently sold, placed or otherwise commercialized by or on behalf of
LLC or any of its Affiliates, that sale, placement or commercialization
shall be considered a material breach of this Agreement by LLC and IGEN
shall have the right to terminate this Agreement upon delivering written
notice to LLC, effective immediately. LLC shall have no right to cure
such a breach or to challenge or seek any review, by arbitration or
otherwise, of such termination.
(ii) If LLC or any of its Affiliates sells, places or otherwise
commercializes an instrument that uses or incorporates Licensed ECL
Technology (that previously had not been the subject of the process
described in Section 7.2(b)(i) above) which IGEN believes is not an ECL
Instrument, then IGEN may deliver a notice of immediate termination to
LLC. LLC shall have no right to cure such a breach. If there should be a
dispute between the Parties as to whether such a breach has occurred,
the matter shall be resolved promptly under Article 6 and all attempts
to terminate shall be stayed. Termination shall be effective
immediately, and without any further action by IGEN, the final result
pursuant to Article 6 is that such instrument used or incorporated
Licensed ECL Technology and was not an ECL Instrument.
(iii) If LLC or any of its Affiliates sells, places or otherwise
commercializes an assay that uses or incorporates Licensed ECL
Technology (that previously had not been the subject of the process
described in Section 7.2(b)(i) above), which assay IGEN believes is not
an ECL Assay, then IGEN may deliver a notice of breach to LLC. Upon
LLC's receipt of such notice (the "Notice Date"), the Parties agree to
appoint a single arbitrator within ten (10) days after the Notice Date;
provided, however, that if an arbitrator is not jointly appointed by
such date, the American Arbitration Association shall appoint such
arbitrator. Unless the Parties agree otherwise, the arbitrator shall
commence the arbitration hearing within thirty (30) days after its
appointment to determine whether or not the assay in question is or is
not an ECL Assay. Such hearing shall last no longer than five (5)
consecutive business days, during which the Parties shall present their
positions on the matter in question. The arbitrator shall be directed to
issue its decision within thirty (30) days after the end of the hearing.
Except for the time periods specified in this Section 7.2(b)(iii),
Section 6.2 shall apply to the arbitration described in this Section
7.2(b)(iii). If the final result pursuant to such arbitration is that
the assay in question is an ECL Assay, LLC shall not be in breach of
this Agreement. If the final result pursuant to such arbitration is that
the assay in question is not an ECL Assay, then such sales of such
assays shall not constitute a breach of this Agreement if: (A) all sales
by or on behalf of LLC or its Affiliates of such assay shall cease
within twenty (20) business days after determination of the final result
pursuant to Section 6.2; and (B) LLC and its Affiliates shall assign or
sublicense, as the case may be, to IGEN all patents, patent applications
and other intellectual property rights for the analyte-specific reagent
for such assay (and the analyte-specific reagent assay method) which LLC
and its Affiliates owns or has licensed, with the right to sublicense.
If LLC or any of its Affiliates continues to sell, place or otherwise
commercialize such assay after the date which is twenty (20) business
days after determination of the final result pursuant to Section 6.2,
LLC shall have committed a material breach of this Agreement and IGEN
shall have the right to immediately terminate this Agreement upon
delivering written notice to LLC. LLC shall have no right to cure such a
breach or to challenge or seek any review, by arbitration or otherwise,
of such termination.
(iv) Neither Party shall have the right to seek or obtain
injunctive or equitable relief or to otherwise initiate proceedings at
law in order to prevent, delay or limit: (A) any of the arbitration
proceedings contemplated by this Section 7.2(b); or (B) IGEN's
termination of LLC if such termination is permitted under the terms of
this Section 7.2(b).
(c) In the event LLC breaches any of its obligations hereunder,
then IGEN shall be entitled to seek and obtain both monetary damages,
specific performance of this Agreement and/or equitable or injunctive
relief, but, except as described in Section 7.2(b) above, IGEN shall not
be entitled to seek or obtain a termination of this Agreement.
A-10-12
7.3 Effect of Termination. Upon termination of this Agreement for
cause prior to the expiration of the Term set forth in Section 7.1 hereof,
and upon expiration of this Agreement at the end of its Term, all licensed
rights under Section 2 of this Agreement shall cease. Notwithstanding any
expiration or termination, the provisions of Sections 2.5 (with respect to
obligations that accrue prior to termination), 3, 5, 6, 7.3, 8, 9, 10, 11,
12, 13 and 14 shall survive. LLC may, in the case of termination of this
Agreement, market and sell a reasonable inventory of Products existing at
the time of such termination in the Field; provided however, that such
sell-off period shall be limited to nine (9) months following the date of
termination and all of such sales shall be conducted in accordance with and
subject to the limitations of this Agreement.
7.4 Bankruptcy. LLC shall retain the rights granted to it as a
licensee under Section 365(n) of the United States Bankruptcy Code in case
of the bankruptcy, insolvency or winding-up of IGEN.
8. No Patent Warranty. IGEN specifically excludes any representation or
warranty, express or implied, that IGEN will successfully obtain any patent.
9. Indemnification, Liability, Infringement.
9.1 Defense of Third Party Infringement Actions. If the manufacture,
production, sale, or use of any Product results in a claim, suit or
proceeding brought by a third party (each, an "Action") alleging patent
infringement against LLC or IGEN (or any of their respective Affiliates),
such party shall promptly notify in writing the other party. The party
subject to such Action (the "Controlling Party") shall have the exclusive
right and obligation to defend and control the defense of any such Action
using counsel of its own choice; provided that the Controlling Party shall
not enter into any settlement of such Action without the written consent of
the other party, which consent may be withheld in the unfettered discretion
of the other party if such settlement admits the invalidity or
unenforceability of any patent rights of the other party, and otherwise may
not be unreasonably withheld. The Controlling Party agrees to keep the
other party reasonably informed of all material developments in connection
with any Action.
9.2 Suits for Infringement by Others. In the event either party
becomes aware of any actual or threatened infringement of any Licensed ECL
Technology by any third party, that party shall promptly notify the other
party, and the parties shall discuss the most appropriate action to take.
IGEN shall have the sole right to bring, at its own expense, an
infringement action against the third party infringer and shall be entitled
to keep any awards made in such proceeding. LLC may elect to appear as a
party to the suit and shall, at IGEN's request, assist IGEN without expense
to IGEN.
9.3 Product Liability Indemnity. LLC expressly and unequivocally
agrees to and hereby does indemnify, release, defend and hold IGEN (and its
Affiliates, sublicensees and licensors and their respective officers,
directors, shareholders, representatives, employees, consultants and agents
and each of the heirs, executors, successors and assigns of the foregoing)
harmless from and against all claims, damages, losses, costs and expenses,
including reasonable attorneys' fees, arising in favor of any person, firm
or corporation resulting from or arising out of liability in any way
relating to the Products sold, placed or otherwise commercialized by LLC or
its Affiliates or any Authorized Third Parties, including without
limitation, the manufacture, packaging, use, sale or other distribution of
Products by LLC or its Affiliates or sublicensees, or any representation
made or warranty given by LLC with respect to any Product provided that
IGEN (a) gives LLC notice of such claim, (b) cooperates with LLC, at the
LLC's expense, in the defense of such claim, and (c) gives LLC the right to
control the defense and settlement of any such claim, except that LLC shall
not enter into any settlement that affects IGEN's rights or interest
without IGEN's prior written approval. IGEN shall have no authority to
settle any claim on behalf of LLC. LLC agrees to maintain proper product
liability insurance policies, reasonably acceptable to IGEN, everywhere it
sells Products and to furnish satisfactory evidence of same upon request by
IGEN from time to time.
A-10-13
9.4 Waiver of Claims. LLC shall not assert, and LLC shall insure
that its Affiliates Sublicensees do not assert, any claims against IGEN and
its licensors for any matter for which LLC has provided indemnity to IGEN
under Sections 9.3 and 9.5 hereof. LLC shall indemnify, hold harmless and
defend IGEN and its licensors against any such claims.
9.5 Breach by Affiliate Sublicensee or Authorized Third
Party. Failure of an Affiliate Sublicensee or Authorized Third Party to
adopt and satisfy a condition stated in this Agreement applicable to LLC or
an Affiliate Sublicensee or Authorized Third Party, as the case may be,
shall be considered a breach of this Agreement by LLC. LLC and such
Affiliate Sublicensee shall be jointly and severally responsible for and
indemnify IGEN and its Affiliates (and their respective officers,
directors, shareholders, representatives, employees, consultants and agents
and each of the heirs, executors, successors and assigns of the foregoing)
against any loss, cost, damage or liability (including reasonable
attorneys' fees) arising from the breach by such Affiliate Sublicensee of
this Agreement. LLC shall indemnify IGEN and its Affiliates (and their
respective officers, directors, shareholders, representatives, employees,
consultants and agents and each of the heirs, executors, successors and
assigns of the foregoing) against any loss, cost, damage or liability
(including reasonable attorneys' fees) arising from the failure by an
Authorized Third Party to adopt and satisfy a condition stated in this
Agreement applicable to Authorized Third Parties.
9.6 Title and Authority. IGEN hereby represents and warrants to LLC
that: (i) IGEN has the requisite corporate power and authority enter into
this Agreement and to grant the license to LLC under Licensed ECL
Technology hereunder and fully perform its obligations hereunder, and that
the grant of rights and licenses, and the performance of its obligations
hereunder, will not conflict with its charter documents or any agreement,
contract or other arrangement to which it is a party or by which it is
bound; (ii) IGEN has title to or license rights in the Licensed ECL
Technology sufficient to grant such license rights to LLC and its
Affiliates; (iii) IGEN has not assigned, transferred, licensed or otherwise
disposed of Licensed ECL Technology in any manner that limits or restricts
LLC's or its Affiliates' exploitation of the license granted by IGEN
hereunder; and (iv) no consent, notice, approval, authorization, waiver or
permit, to or from any person (other than the consent attached hereto),
including, but not limited to, any Governmental Entity or third party
holder of intellectual property rights is required to be obtained or made
by IGEN in connection with its execution, delivery and performance of this
Agreement.
9.7 Completeness of Exhibit A. IGEN hereby represents and warrants
to LLC that Exhibit A includes all patents and patent applications which:
(a) exist at or prior to the Effective Time; (b) are owned and/or
controlled by IGEN and/or any Affiliate thereof; and (c) cover ECL
Technology. If, after the Effective Time, it is discovered that IGEN has
breached any of its representations and warranties under this Section 9.7
and additional patents or patent applications should have been or should be
included in the patents and patent applications set forth in Exhibit A,
then (i) such additional patent and patent applications shall be deemed
automatically included in Exhibit A as of the Effective Time, without any
amendment of this Agreement or other further action required of the
Parties, and (ii) LLC shall hold a license to such additional patents and
patent applications under and in accordance with the terms of this
Agreement, as of the Effective Time. The foregoing shall be LLC's exclusive
remedy for a breach by IGEN of the representations and warranties in this
Section 9.7.
9.8 Indemnity. IGEN hereby agrees to indemnify and hold harmless LLC
and its Affiliates (and their respective directors, officers, employees,
consultants and agents and each of their heirs, executors, successors and
assigns of the foregoing) (collectively the "Indemnitees") against all
losses, claims, damages, liabilities, fees and expenses (including
reasonable attorneys' fees), judgments, fines and amounts paid in
settlement (in the case of settlements with the approval of LLC (which
approval shall not be unreasonably withheld)) incurred by or imposed upon
the Indemnitees (or any one of them) as a result of a breach by IGEN of any
of IGEN's representations and warranties in Section 9.6; provided that LLC:
(a) gives IGEN notice of such claim, (b) cooperates with IGEN, at
A-10-14
IGEN's expense, in the defense of such claim, and (c) gives IGEN the right
to control the defense and settlement of any such claim, except that IGEN
shall not enter into any settlement that affects LLC's rights or interest
without LLC's prior written approval. LLC shall have no authority to settle
any claim on behalf of IGEN.
10. Disclaimer Of Warranties; Further Action.
10.1 Disclaimer. EXCEPT AS OTHERWISE PROVIDED HEREIN (E.G. SECTION
9.6, 9.7 and 9.8 REPRESENTATIONS, WARRANTIES AND INDEMNIFICATIONS) THE
INTELLECTUAL PROPERTY RIGHTS LICENSED HEREUNDER ARE PROVIDED BY IGEN "AS IS
WHERE IS" AND IGEN MAKES NO, AND DISCLAIMS ALL WARRANTIES AND
REPRESENTATIONS, EXPRESS OR IMPLIED, CONCERNING: (a) LICENSED INTELLECTUAL
PROPERTY RIGHTS COVERED BY THIS AGREEMENT, INCLUDING WITHOUT LIMITATION,
ANY EXPRESS OR IMPLIED WARRANTY OF DESIGN, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE AS TO LICENSED INTELLECTUAL PROPERTY RIGHTS OR ANY
PRODUCT; (b) THE COMMERCIAL SUCCESS OF ANY PRODUCT; (c) THE EXISTENCE,
VALIDITY OR SCOPE OF LICENSED INTELLECTUAL PROPERTY RIGHTS; (d) ANY PRODUCT
BEING FREE FROM AN INFRINGEMENT ON PATENTS OR OTHER INTELLECTUAL PROPERTY
RIGHTS OF THIRD PARTIES; (e) WHETHER ANY THIRD PARTIES ARE IN ANY WAY
INFRINGING LICENSED INTELLECTUAL PROPERTY RIGHTS COVERED BY THIS AGREEMENT;
OR (f) THE ACCURACY, UTILITY OR SUFFICIENCY OF ANY TECHNICAL INFORMATION
TRANSFERRED TO LLC HEREUNDER. THE PARTIES SPECIFICALLY AGREE THAT NEITHER
PARTY SHALL BE SUBJECT TO AND THAT EACH DISCLAIMS: (A) ANY OTHER
OBLIGATIONS OR LIABILITIES ARISING OUT OF BREACH OF WARRANTY, AND (B) ALL
CONSEQUENTIAL, INCIDENTAL, CONTINGENT, PUNITIVE AND EXEMPLARY DAMAGES
WHATSOEVER WITH RESPECT TO (i) ANY DISPUTES BETWEEN THE PARTIES UNDER THIS
AGREEMENT OR (ii) CLAIMS MADE BY ONE PARTY AGAINST ANOTHER PARTY ARISING
FROM THE COURSE OF CONDUCT WITHIN THE RELATIONSHIP OF THE PARTIES UNDER
THIS AGREEMENT (WHETHER SUCH CLAIMS ARISE UNDER CONTRACT, TORT, STRICT
LIABILITY OR OTHERWISE), EVEN THOUGH A PARTY MAY HAVE BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. THE LIMITATION OF DAMAGES IN CLAUSE (B) ABOVE
SHALL NOT APPLY TO DAMAGES PAID TO UNRELATED THIRD PARTIES (WHETHER
PURSUANT TO JUDGMENT OR SETTLEMENT) FOR WHICH A PARTY HAS AN OBLIGATION TO
INDEMNIFY THE OTHER PARTY HEREUNDER.
10.2 Export Control. LLC agrees, and shall cause its Affiliate
Sublicensees to agree, to abide by all laws and regulations of the United
States Government, or the government having jurisdiction therefor,
governing the export or re-export of any Products. LLC shall inform itself
as to the details of such laws and regulations and their amendments.
10.3 Additional Documents. Each party agrees to execute such further
papers or agreements as may be necessary to effect the purposes of this
Agreement.
10.4 Governmental Approvals and Marketing of Products. LLC shall be
responsible for obtaining all necessary governmental approvals for the
development, production, distribution, sale and use of any Product, at
LLC's expense, including, without limitation, any safety studies. LLC shall
have sole responsibility for any warning labels, packaging and instructions
as to the use of Products and for the quality control for any Product.
A-10-15
10.5 Patent Marking and Labeling. LLC shall mark all Products, or
their containers, in accordance with the applicable patent marking laws.
LLC shall mark/label conspicuously all Products utilizing or intended for
use with the Licensed ECL Technology made by or for it, and shall cause
each of its Affiliate Sublicensees to mark conspicuously all such Products,
with a label license bearing the following legend.
NOTICE TO PURCHASER: LIMITED LICENSE
The purchase of this product allows the purchaser to use it solely
for detection by ECL Technology for human in vitro diagnostic uses. No
general patent or other license of any kind other than this specific
right of use from purchase is granted hereby.
10.6 No Use of Names. Except as required by Section 10.5 hereof,
neither LLC nor any of its Affiliates shall have the right to use the name
"IGEN" or any variation thereof, or any other corporate name, trade name,
trademark, service name, service mark or brand name proprietary to IGEN or
any IGEN licensor or any of the respective Affiliates, in connection with
the advertising, sale, lease or use of Products.
11. Confidentiality. LLC and IGEN agree for themselves and their
Affiliates, and on behalf of their respective officers, employees and agents,
that until the later of (i) 10 years from the Effective Time hereof or (ii) 5
years after the termination date of this Agreement, each will treat as
confidential, using the same degree of care as it uses for its own confidential
and proprietary information, but in no event less than reasonable care, and
shall not disclose to any third party, and shall not use for its own benefit or
the benefit of any third party (except as permitted hereunder, including
disclosures to Affiliates, permitted sublicensees or subcontractors to the
extent necessary to have Products manufactured and subject to confidentiality
obligations at least as restrictive as those contained herein) the Licensed ECL
Technology (and any other information marked as confidential, and reports
generated by the Field Monitor or accountant pursuant to Sections 2.5 and 5.1)
furnished to it by the other party unless the furnishing party ("Discloser")
otherwise agrees in writing or unless such information clearly and convincingly
falls within the following exceptions:
(a) Such confidential information was known to the receiving party
("Recipient") prior to the time of disclosure by the Discloser or was in
the public domain at the time of disclosure by Discloser as can be
documented by written records; or
(b) Such confidential information is or becomes publicly known after
disclosure by Discloser through no fault or omission attributable to
Recipient; or
(c) Such confidential information is given to Recipient from sources
independent of Discloser who have the right to disclose it; or
(d) Such confidential information is independently developed by
employees of Recipient that did not have access to it as can be documented
by written records; or
(e) Recipient is required to disclose such confidential information to
a court of law or to appropriate governmental agencies to enable Recipient
to carry out the evaluation of a Product or to secure a governmental
approval, or as otherwise required by law; provided, however, that (1)
Recipient gives the Discloser prompt written notice of such required
disclosure and reasonably assists the Discloser in its efforts to prevent
or limit such disclosure; and (2) any confidential information disclosed
pursuant to this Section 11(e) shall otherwise remain confidential
information for the purposes of this Agreement.
For purposes of this Agreement, IGEN's confidential information shall include
(subject to the exclusions in (a)-(e) above) all information relating to ECL
Technology or the Licensed ECL Technology whether such information is owned by
IGEN or licensors of IGEN (other than Roche) and whether disclosed to ROCHE by
IGEN or any licensor of IGEN (other than Roche) before or after the Effective
Time.
A-10-16
Furthermore, confidential information shall include all confidential information
disclosed by IGEN to ROCHE or ROCHE to IGEN under the Prior Agreement or the
Judgment (as defined in the Improvements License Agreement, dated as of the date
hereof, by and between IGEN and ROCHE (the "Improvements License Agreement")).
Access to such confidential information must be restricted to the Recipient's,
sublicensee's, or subcontractor's employees or agents with a need to have
access. The Recipient acknowledges that by virtue of this Agreement it acquires
only such rights as set forth under the terms and conditions of this Agreement
and only so long as it is in effect and does not acquire any rights of ownership
or title in the Discloser's confidential information. In addition, each of the
parties agrees to execute appropriate confidentiality agreements with third
party collaborators of such party prior to disclosing the other party's
confidential information to such third party collaborator. Upon termination or
expiration of this Agreement, each party, its sublicensees, subcontractors and
their employees and agents shall immediately discontinue use of the other's
confidential information, except as otherwise permitted under the provisions
hereof. The Parties agree that this Section 11 sets out in their entirety the
Parties' confidentiality obligations with respect to the subject matter of this
Agreement, and that this Section 11 shall supersede in its entirety as of the
Effective Time all prior confidentiality agreements or arrangements with respect
to the subject matter of this Agreement between or among the Parties and their
Affiliates (including confidentiality agreements or arrangements between IGEN
and Roche Diagnostics GmbH and its Affiliates).
12. License Registration. LLC shall pay all costs and legal fees
connected with registration of this Agreement in those countries where it (or
its Affiliate Sublicensees, Affiliates, distributors and/or agents) sells
Products, where required, and shall otherwise ensure that the laws of all the
countries where sales of its Products occur are fully satisfied. None of such
amounts shall be deductible against amounts payable to IGEN hereunder. IGEN
shall provide reasonable assistance to LLC in effecting such registrations if
LLC reimburses any out-of-pocket expenses incurred in providing such assistance.
13. Interests in Intellectual Property Rights.
13.1 Preservation of Title. LLC acknowledges that IGEN shall retain
full ownership and title to the intellectual property rights it licenses to
LLC hereunder and that LLC has no rights in or to such intellectual
property rights other than the express license rights specifically
confirmed herein. Neither LLC nor any of LLC's employees, Affiliates or
sublicensees, or any of their respective employees, have rights under this
Agreement to practice or use the Licensed ECL Technology outside the Field.
13.2 Reservation of Rights. IGEN reserves the right to use for any
purpose (commercial or noncommercial), anywhere in the world, and the right
to allow other parties to use for any purpose, anywhere in the world, any
Licensed ECL Technology licensed hereunder, without IGEN or such other
parties being obligated to pay LLC any royalties or other compensation.
14. Miscellaneous.
14.1 Waiver. No delay or omission on the part of either Party to
this Agreement in requiring performance by the other Party or in exercising
any right hereunder shall operate as a waiver of any provision hereof or of
any right or rights hereunder; and the waiver, omission or delay in
requiring performance or exercising any right hereunder on any one occasion
shall not be construed as a bar to or waiver of such performance or right,
or of any right or remedy under this Agreement, on any future occasion. Any
agreement on the part of either Party to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of
such Party.
14.2 Assignment. This Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their permitted successors and
assigns; provided, however, that: (a) neither Party shall assign any of its
rights and obligations hereunder except as consented to by the other Party,
which consent shall not be unreasonably withheld, and (b) such consent
shall not be required with respect to an assignment of (i) any or all of
its rights and obligations hereunder to an Affiliate of such
A-10-17
assigning Party; or (ii) all (but not less than all) of its rights and
obligations hereunder to an acquirer of all or substantially all of the
assets or business of the assigning party related to such Party's use of
ECL Technology, whether as incident to a merger, consolidation,
reorganization, acquisition or otherwise. In addition, IGEN may assign,
without LLC's consent, all of its rights under this Agreement to IGEN
Integrated Healthcare, LLC ("NEWCO") as a part of the transactions
contemplated by the Merger Agreement. Whenever there has been an assignment
or a sublicense by IGEN or LLC, as the case may be, as permitted by this
Agreement, the term "IGEN" or "LLC" as used in this Agreement shall also
include and refer to, if appropriate, such assignee or sublicensee.
14.3 Notices. Any notice or other communication required or
permitted to be given to either Party hereto shall be in writing and shall
be deemed to have been properly given and to be effective on the date of
delivery if delivered in person or by facsimile (with electronic
confirmation of receipt and with a confirmation copy sent by
internationally-recognized air courier service), to such Party at the
following address:
In the case of IGEN:
IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, Maryland 20877
United States of America
Attention: President
Fax No. (301) 208-3789
With a copy to IGEN's designated legal counsel.
In the case of LLC:
IGEN LS LLC
16020 Industrial Drive
Gaithersburg, Maryland 20877
United States of America
Attention: President
Fax No. (301) 208-3789
With a copy to LLC's designated legal counsel.
Either Party may change its address for communications by a notice to
the other Party in accordance with this Section.
14.4 Headings. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
14.5 Force Majeure. Any delays in performance by any Party under
this Agreement (other than a Party's failure to make payments hereunder)
shall not be considered a breach of this Agreement if and to the extent
caused by occurrences beyond the reasonable control of the Party affected,
including but not limited to acts of God, embargoes, governmental
restrictions, strikes or other concerted acts of workers, fire, flood,
explosion, riots, wars, civil disorder, rebellion or sabotage. The Party
suffering such occurrence shall immediately notify the other Party and any
time for performance hereunder shall be extended by the actual time of
delay caused by the occurrence.
14.6 Independent Contractors. In granting, performing or exercising
rights under this Agreement, LLC and IGEN act and shall act at all times as
independent contractors and nothing contained in this Agreement shall be
construed or implied to create an agency, partnership or
A-10-18
employer and employee relationship between IGEN and LLC. At no time shall
one Party make commitments or incur any charges or expenses for or in the
name of the other Party.
14.7 Severability. If, under applicable law, any term, condition or
provision of this Agreement is invalid or unenforceable, or otherwise
directly or indirectly affects the validity of any other material
provision(s) of this Agreement (the "Severed Clause"), then this Agreement
shall remain in full force and effect, except for the Severed Clause. The
Parties agree to renegotiate in good faith the Severed Clause and be bound
by the mutually agreed substitute provision.
14.8 Interpretation. The official text of this Agreement shall be
English. For purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms of this Agreement do not amend or supersede, and
shall not be used to interpret, the terms of the Improvements License
Agreement, the Covenants Not to Sue, dated as of the date hereof, by and
among NEWCO, MSD, MST, Roche Diagnostics GmbH, Roche Holding Ltd, and
LLC, the License Agreement (Human IVD, Veterinary IVD, HLA Typing,
Paternity, DNA Manufacturing and Plasma Testing), dated as of the date
hereof, by and among NEWCO, F. Hoffmann-La Roche Ltd ("Roche/Basle"),
ROCHE and Roche Molecular Systems, Inc. ("Roche/USA"), or the License
Agreement (Human IVD Services and Animal Diagnostic Services), dated as
of the date hereof, by and among NEWCO, Roche/Basle, ROCHE and
Roche/USA;
(b) the terms defined in this Agreement have the meanings assigned
to them in this Agreement and include the plural as well as the
singular, and the use of any gender herein shall be deemed to include
the other gender;
(c) references herein to "Sections," "Subsections," "Paragraphs,"
and other subdivisions without reference to a document are to designated
Sections, Subsections, Paragraphs and other subdivisions of this
Agreement;
(d) a reference to a Subsection without further reference to a
Section is a reference to such Subsection as contained in the same
Section in which the reference appears, and this rule shall also apply
to Paragraphs and other subdivisions;
(e) the words "herein," "hereof," "hereunder," and other words of
similar import refer to this Agreement as a whole and not to any
particular provision;
(f) the term "include" or "including" shall mean "including without
limitation";
(g) the term "to the extent" shall mean the degree to which a
subject or other thing extends, and such phrase shall not mean simply
"if";
(h) the term "or" is not exclusive; and
(i) the Exhibits, Appendices and Annexes to this Agreement are
hereby incorporated and made a part hereof and are an integral part of
this Agreement.
14.9 Cumulative Rights. The rights, powers and remedies hereunder
shall be in addition to, and not in limitation of, all rights, powers and
remedies provided at law or in equity. All of such rights, powers and
remedies shall be cumulative, and may be exercised successively or
cumulatively.
14.10 Entire Agreement; Amendment. This Agreement and any and all
Schedules and Appendices referred to herein, together with the other
agreements referenced herein and the Transactions Agreements (as defined in
the Merger Agreement), embody the entire understanding of the parties with
respect to the subject matter hereof and shall supersede all previous
communications, representations or understandings, either oral or written,
between the Parties relating to the subject
A-10-19
matter hereof. This Agreement shall not be amended, altered or changed
except by a written agreement signed by all of the Parties hereto.
14.11 No Third Party Beneficiary Rights. Except for the provisions
of Section 2.2(a) related to immunity from suit and Article 9 relating to
Indemnitees, nothing contained in this Agreement is intended to confer upon
any person other than the Parties hereto and their respective successors
and permitted assigns, any benefit, right or remedy under or by reason of
this Agreement.
14.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank]
A-10-20
IN WITNESS WHEREOF, both LLC and IGEN have executed this Agreement, in
duplicate originals, by their respective officer hereunto duly authorized, as of
the day and year hereinabove written.
IGEN LS LLC IGEN INTERNATIONAL, INC.
By: /s/ RICHARD J. MASSEY By: /s/ SAMUEL J. WOHLSTADTER
-------------------------------------------- --------------------------------------------
Name: Richard J. Massey Name: Samuel J. Wohlstadter
Title: President and Chief Operating Officer Title: Chairman and Chief Executive Officer
July 24, 2003
--------------------------------------------
(Date)
[Signature Page to License Agreement]
A-10-21
CONSENT BY MESO SCALE DIAGNOSTICS, LLC. AND MESO SCALE
TECHNOLOGIES, LLC.
The undersigned, Meso Scale Diagnostics, LLC. ("MSD") and Meso Scale
Technologies, LLC. ("MST"), on behalf of themselves and their respective
Affiliates, hereby consent to the foregoing License Agreement dated as of July
24, 2003 and hereby consent to and join in the licenses granted to LLC and its
Affiliates in the License Agreement. The foregoing consents relate only to the
rights of MSD and/or MST and their respective Affiliates and not to any rights
of any third parties. Furthermore, MSD and MST hereby represent and warrant to
LLC and its Affiliates that each of them hereby waives any right that either of
them may have to in any way restrict or limit LLC and its Affiliates' exercise
of the licenses granted in the License Agreement during the Term thereof.
Furthermore, MSD and MST hereby represent and warrant that neither of them has
licensed, assigned or otherwise disposed of any rights that either of them have
or may have had in the Licensed ECL Technology that is licensed to LLC under the
License Agreement (other than rights that MSD may have licensed to MST under
that certain MSD/ MST Sublicense Agreement dated November 30, 1995) in any
manner that would restrict or limit LLC's and its Affiliate Sublicensees'
exercise of the licenses granted in the License Agreement. MSD and MST hereby
agree to indemnify, hold harmless and defend LLC and its Affiliates from and
against any loss, cost, damage or liability (including reasonable attorneys'
fees) resulting from or arising out of a breach of any of the representations or
warranties made by MSD and MST herein.
The foregoing consents and related agreements shall apply to the License
Agreement dated as of July 24, 2003 and shall not apply to any amendments,
modifications or supplements made thereto or waivers granted thereunder after
the date hereof, except to the extent agreed to in a separate writing by MSD and
MST. All terms not defined herein shall have the meanings set forth in the
License Agreement.
MESO SCALE DIAGNOSTICS, LLC. MESO SCALE TECHNOLOGIES, LLC.
By: /s/ JACOB N. WOHLSTADTER By: /s/ JACOB N. WOHLSTADTER
-------------------------------------------- --------------------------------------------
Name: Jacob Wohlstadter Name: Jacob Wohlstadter
Title: President and CEO Title: President and CEO
July 24, 2003 July 24, 2003
-------------------------------------------- --------------------------------------------
(Date) (Date)
A-10-22
APPENDIX Y TO THE LICENSE AGREEMENT
ECL ASSAYS ACCORDING TO ARTICLE 1.3 (b)(2)
T4
T3
free T3
free T4
T uptake
TSH
anti-TPO
Thyreoglobulin
anti-Thyreoglobulin
TSH Receptor
Prolactin
LH
FSH
Testosterone
Progesterone
Estradiol
hCG
hCG+(Beta)
SHBG
DHEA-S
hGH
ACTH
Cortisol
Insulin
Ferritin
Folate
RBC Folate
Vitamin B12
Vitamin D
C-Peptide
Troponin T
CK-MB
Myoglobin
pro-BNP
Anti-HBs
HbsAg
Anti-Hbe
HbeAg
Anti-HBc
Anti-HBc/IgM
Anti HAV
Anti-HAV/IgM
Anti-HCV
anti-HIV
anti-HIV p-24
HIV Antigen
HIV Combined
anti-Rubella IgG
anti-Rubella IgM
anti-Toxoplasmosis IgG
anti-Toxoplasmosis IgM
anti-CMV IgG
anti-CMV IgM
H. Pylori
anti-HGV
anti-HTLV
(Beta)-Crosslaps
Osteocalcin
PTH
IgE
Digoxin
Digitoxin
AFP
CEA
PSA
free PSA
CA 15-3
CA 19-9
CA 12-5
CA 72-4
Cyfra 21-1
NSE
S 100
P1NP
PAPP-A
Lp-PLA2
sCD40L
IL 18
Survivin
A-10-23
ANNEX 11
IMPROVEMENTS LICENSE AGREEMENT
THIS IMPROVEMENTS LICENSE AGREEMENT (the "Agreement") is made as of the
24th day of July, 2003, by and between Roche Diagnostics GmbH ("ROCHE"), a
German limited liability company having a principal place of business at
Sandhofer Strasse 116, D-68305 Mannheim, Germany, and IGEN International, Inc.
("IGEN"), a Delaware corporation having a principal place of business at 16020
Industrial Drive, Gaithersburg, Maryland 20877, United States of America:
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and promises set forth below, and in consideration for the granting of
intellectual property rights to ROCHE and its Affiliates from IGEN pursuant to
agreements between ROCHE and IGEN (the "Parties") and their respective
Affiliates, the Parties hereby agree as follows:
1. Definitions. As used in this Agreement, capitalized terms shall have
the respective meanings set forth below:
1.1 Affiliate. "Affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person. The term
"person" means any individual, firm, corporation, partnership, company,
limited liability company, trust, joint venture, association, Governmental
Entity or other entity. The term "Government Entity" means any domestic or
foreign (whether a national, Federal, state, provincial, local or
otherwise) government or any court of competent jurisdiction, agency or
commission or other governmental authority or instrumentality, domestic or
foreign. Neither Genentech Inc., 1 DNA Way, South San Francisco, California
94080-4990, USA, nor Chugai Pharmaceutical Co., Ltd, 1-9 Kyobashi 2-chome,
Chuo-ku, Tokyo, 104-8301, Japan, shall be deemed an Affiliate of ROCHE for
purposes of this Agreement. Neither Meso Scale Diagnostics, LLC., 9238
Gaither Road, Gaithersburg, Maryland, USA 20877 ("MSD") nor Meso Scale
Technologies, LLC., 9238 Gaither Road, Gaithersburg, Maryland, USA 20877
("MST") shall be deemed an Affiliate of IGEN for purposes of this
Agreement.
1.2 Assays. "Assays" means any and all methods, and the labels and
reagents used therein, that use ECL Technology for detection and/or
quantification.
1.3 Copycat Instrument.
"Instrument" shall mean an Instrument based on ECL Technology that:
(1) weighs 70 kg or more and has a volume of 251,000 cubic
centimeters or more and has a footprint of 3,900 square centimeters or
more; and
(2) (a) uses the same software code as an ECL Instrument (as
defined in the License Agreement) manufactured by, for or on behalf of
Roche or any of its Affiliates (as long as such software code is
proprietary to Roche, any of its Affiliates, or an Authorized Third
Party (and such software is not licensed to IGEN by such Authorized
Third Party)); or (b) would literally infringe (i) any of the claims of:
US Patent No. 6,042,786 (Oonuma et al.); US Patent No. 5,772,962 (Uchida
et al.); US Patent No. 5,628,962 (Kanbara et al.); or claims 3, 5, 6, 7,
8, 9, 10, 11, 12 or 13 of US Patent No. 5,639,425 (Komiyama et al.) if
sold in the United States or (ii) any of the English language claims
which grant from EP 1 275 966 A1 (Sugiyama et al.) if sold in the
corresponding jurisdictions.
1.4 ECL Technology. "ECL Technology" shall mean detection methods
and detection systems, which employ electrochemiluminescence in detection
and/or quantification, including but not limited to ECL reagents, ECL
assays and/or immunodiagnostic detection methods by which light
A-11-1
generation occurs when a molecular compound (such as a ruthenium metal
chelate) is electrically stimulated by applying a voltage to an electrode
which triggers a chemical reaction to emit photons.
1.5 Field. "Field" means:
(a) the analyzing of specimens taken from a human body, including
without limitation, blood, bodily fluid or tissue, for the purpose of
testing, with respect to that human being, for a physiological or
pathological state, a congenital abnormality, safety and compatibility
of a treatment or to monitor therapeutic measures.
(b) Notwithstanding anything contained in subsection 1.5(a), above,
to the contrary, the Field shall not include analyzing for (A) life
science research and/or development, including at any pharmaceutical
company or biotechnology company, (B) patient self testing use, (C) drug
discovery and/or drug development (including at any pharmaceutical
company or biotechnology company), including clinical research or
determinations in or for clinical trials or in the regulatory approval
process for a drug or therapy, or (D) veterinary, food, water, or
environmental testing or use.
1.6 Hitachi.
"Hitachi" means Hitachi High Technologies Corporation and its
Affiliates.
1.7 Hitachi Intellectual Property Rights. "Hitachi Intellectual
Property Rights" means the Hitachi patents, patent rights, patent
applications, unpublished patent applications and technical information
that is used by Hitachi in the development and manufacture of the Elecsys
Model 2010 and the ECL Module of the E-170 Instrument, and that has been
licensed to ROCHE for sublicense to IGEN and its sublicensees. The Hitachi
Intellectual Property Rights include the patents and patent applications
disclosed in Exhibit F (Hitachi patents and patent applications) other than
those patents and patent applications denoted on Exhibit F as "jointly
owned."
1.8 Instruments. "Instruments" means instruments that use ECL
Technology for detection and/or quantification.
1.9 Judgment.
"Judgment" means the final order of judgment issued by the U.S.
District Court for the District of Maryland on February 15, 2002 in the
matter IGEN International, Inc. v. Roche Diagnostics GmbH, Case No. PJM
97-3461.
1.10 Licensed Product(s).
"Licensed Product(s)" shall mean all Product(s) manufactured, used,
sold or otherwise commercialized under the licenses and sublicenses granted
by ROCHE hereunder.
1.11 Molecsys Program.
"Molecsys Program" shall mean the research and development program,
commenced and terminated by ROCHE predecessor Boehringer Mannheim GmbH
prior to its acquisition by the ROCHE Group, for ECL-based DNA probes.
1.12 Non-Exclusive.
"Non-Exclusive" as to the grant of a license right means that the
licensor may during the Term of this Agreement exercise the licensed rights
itself in the licensee's field or grant Non-Exclusive licenses in the
licensee's field to a third party, or retain for itself any non-exclusive
license rights.
A-11-2
1.13 Open System.
"Open System" means an ECL Instrument (as defined in the License
Agreement) manufactured by, for or on behalf of LLC or any of its Affiliate
Sublicensees (as defined in the License Agreement), which is designed or
modified by, for or on behalf of LLC or its Affiliate Sublicensees to
accept, and is capable of operating with, reagents manufactured by, for or
on behalf of third parties without permission, authorization or license by
LLC or its Affiliate Sublicensees (as defined in the License Agreement).
1.14 PCR Technology. "PCR Technology" shall mean the technology that
is covered by claims of the patents, and the claims from the patents which
issue from the patent applications, listed in Exhibit E hereto.
1.15 Prior Agreement.
"Prior Agreement" means the License and Technology Development
Agreement between ROCHE (t/k/a Boehringer Mannheim GmbH) and IGEN (t/k/a
IGEN Incorporated), dated September 23, 1992.
1.16 Product(s). "Product(s)" means all products and services that
are based on (i.e. uses or incorporates) ECL Technology including, but not
limited to Instruments (including, without limitation, specially developed
consumables and related software, i.e., tips and cups used with
Instruments), service for Instruments and spare parts; Assays (including,
without limitation, reagents, calibrators, controls cleaning solutions,
diluents, and substrate); and peripheral equipment that uses ECL
Technology.
1.17 ROCHE Improvements. The term "ROCHE Improvements" shall mean
the following in the form existing at the Effective Time:
(a) The entire Elecsys 1010 instrument;
(b) The entire Elecsys 2010 instrument;
(c) All aspects of the ECL assays that ROCHE or any of its
Affiliates developed prior to the Effective Time;
(d) All aspects of the instruments or assays that arose out of the
Molecsys Program;
(e) The PCR Technology;
(f) The method of ROCHE or any of its Affiliates for coating
magnetic beads;
(g) The ECL module of the E-170 instrument; and
(h) All aspects of the ECL Technology and Robotics that prior to
the Effective Time Roche or any of its Affiliates used or developed to
be used in performing ECL testing; provided, however, that this part (h)
shall not include specific antibodies, antigens or other
analyte-specific reagents.
1.18 Robotics. The term "Robotics" shall mean the
components/features that are used in ECL Instruments (as defined in the
License Agreement) being sold by ROCHE or any of its Affiliates at or prior
to the Effective Time and that are described in Exhibit B of the Covenants
Not to Sue, of even date herewith executed by NEWCO, MSD, MST, ROCHE and
Roche Holding Ltd (the "Covenants Not to Sue").
1.19 ROCHE Licensed Patent Rights. The term "ROCHE Licensed Patent
Rights" shall mean rights arising out of or resulting from (i) any and all
U.S. and foreign patent applications and patents owned by Roche (or its
Affiliates), covering ROCHE Improvements; (ii) any other patent
A-11-3
applications or patents owned by ROCHE (or its Affiliates) relating to ECL
Technology that claim their earliest priority from a patent application
filed on or before the Effective Time; (iii) any other patents or patent
applications that claim priority to one or more of the patents or patent
applications listed in Exhibit D including corresponding foreign
applications or patents; and any patents or patent applications that claim
priority to a priority application of one or more of the patents and patent
applications listed in Exhibit D including corresponding foreign
applications or patents; and (iv) any substitutions, divisions,
continuations, continuations in part, renewals, reissues, confirmations or
registrations of the patent applications and patents rights described in
Sections 1.19(i), (ii) and (iii) above listed and extensions of the
foregoing, now existing or hereafter filed. The ROCHE Licensed Patent
Rights include the patents and patent applications disclosed in Exhibit D
(ROCHE Patents and Patent Applications), the patents and patent
applications identified as "jointly owned" in Exhibit F and the PCR
Technology.
1.20 ROCHE Licensed Technology. The term "ROCHE Licensed Technology"
shall mean so much of the technology, including without limitation,
patents, patent applications, techniques, designs, specifications,
instruments, compounds, devices, ideas, technical information, processes,
schematics, inventions, discoveries, methods, know-how, show-how, hardware
and software (including object codes and source codes) based on the ROCHE
Improvements as is proprietary to ROCHE (or its Affiliates) or licensed to
ROCHE or its Affiliates with the right to grant the license under Section
2.2(a) hereof (excluding Hitachi Intellectual Property Rights), whether or
not the same is eligible for protection under the patent laws of the United
States or elsewhere, and whether or not any such processes and technology,
or information related thereto, would be enforceable as a trade secret or
the copying of which would be enjoined or restrained by a court as
constituting unfair competition.
1.21 ROCHE Licensors. The term "ROCHE Licensors" shall mean Hitachi
and Affiliates of ROCHE that license ROCHE Licensed Patent Rights or ROCHE
Licensed Technology to ROCHE with right to sublicense to IGEN.
1.22 Term. The "Term" of this Agreement shall mean the entire period
of time this Agreement is in full force and effect and shall begin at the
Effective Time and terminate automatically upon the later of the (a)
expiration of the last-to-expire of any patent issued for ROCHE Licensed
Patent Rights or Hitachi Intellectual Property Rights, that is not earlier
invalidated, or its enforcement enjoined, by a final decision of a court of
competent jurisdiction from which no further appeal may be taken; and (b)
complete loss of confidential and proprietary status for all ROCHE Licensed
Technology. The term "Effective Time" shall have the meaning ascribed to
that term in that certain Merger Agreement of even date herewith by and
among, inter alia, IGEN and Roche Holding Ltd (the "Merger Agreement").
2. Grant and Scope of License.
2.1 Prior Agreement Superceded. The Parties agree that this
Agreement and the LLC License Agreement supercede in their entirety as of
the Effective Time the Prior Agreement and the License for Improvements
dated May 28, 2002, granted to IGEN by ROCHE pursuant to the Judgment.
2.2 Licenses.
(a) During the Term of this Agreement, and subject to the terms and
conditions of this Agreement, ROCHE and its Affiliates grant to IGEN an
irrevocable, perpetual, Non-Exclusive, worldwide, fully-paid,
royalty-free right and license (with the right to sublicense) under
ROCHE Licensed Patent Rights and ROCHE Licensed Technology, to develop,
have developed, prepare derivative works based on, reproduce, use,
manufacture, have manufactured, distribute, have distributed, display,
perform, modify, import, sell, have sold, offer for sale, lease and
otherwise commercially exploit Products in all fields, including the
Field. No license, express or implied, is
A-11-4
granted hereunder for use of the ROCHE Licensed Patent Rights or ROCHE
Licensed Technology for any products not using or incorporating the ECL
Technology.
(b) During the Term of this Agreement, and subject to the terms and
conditions of this Agreement, ROCHE and its Affiliates grant to IGEN an
irrevocable, perpetual, Non-Exclusive, worldwide, fully-paid,
royalty-free right and sublicense (with the right to sublicense) under
Hitachi Intellectual Property Rights, to develop, have developed,
prepare derivative works based on, reproduce, use, manufacture, have
manufactured, distribute, have distributed, display, perform, modify,
import, sell, have sold, offer for sale, lease and otherwise
commercially exploit Products in all fields other than the Field. No
license, express or implied, is granted hereunder for use of the Hitachi
Intellectual Property Rights for (i) any products not using or
incorporating the ECL Technology or (ii) in any part of the Field.
2.3 Included/Excluded Rights.
(a) The rights and licenses granted in Section 2.2 hereof include:
(i) the right of IGEN to grant to its distributors, contract
manufacturers, toll manufacturers, component suppliers, leasing agents
and other third parties engaged by IGEN to assist IGEN in
commercializing the intellectual property rights licensed hereunder (the
"Authorized Third Parties") immunity from suit under the licensed
intellectual property rights for use of the ECL Technology, and (ii) the
right of IGEN to grant immunity from suit under the licensed
intellectual property rights to IGEN's customers for use or subsequent
sale of the Licensed Products, in each case only as permitted within the
limitations of this Agreement. IGEN shall: (i) assure that the
Authorized Third Parties' use of the intellectual property rights
licensed hereunder to IGEN is utilized by such Authorized Third Parties
only as permitted by this Agreement; and (ii) cause each Authorized
Third Party to assign to IGEN any and all intellectual property rights
to Roche Licensed Patent Rights, Roche Licensed Technology or Hitachi
Intellectual Property Rights which such Authorized Third Party may
develop or create. IGEN shall indemnify ROCHE and its Affiliates (and
their respective officers, directors, shareholders, representatives,
employees, consultants and agents and each of the heirs, executors,
successors and assigns of the foregoing) against any loss, cost, damage
or liability (including reasonable attorneys' fees) arising from IGEN's
failure to perform its obligations under the preceding sentence. In
addition, any Authorized Third Party which does not comply with (ii)
above shall not benefit from the immunity from suit described in this
Section if such Authorized Third Party sues ROCHE or any of its
Affiliates or sublicensees to the extent such suit by such Authorized
Third Party is based on those intellectual property rights which should
have been assigned to IGEN in accordance with (ii) above.
(b) IGEN shall have no right to develop, use, manufacture, have
manufactured or sell assays that contain barcodes (or other labeling)
which make them useable on (i) ECL Instruments manufactured, sold or
placed by ROCHE or its licensees (excluding IGEN, its Affiliates,
Sublicensees or Authorized Third Parties) or resellers in the Field
(unless such ECL Instrument is an Open System) or (ii) Copycat
Instruments manufactured by IGEN, its Affiliates, Sublicensees or
Authorized Third Parties which are used in the Field.
(c) No rights are licensed or deemed licensed to IGEN hereunder or
in connection herewith, other than those rights specifically licensed to
IGEN in Section 2.2 above and this Section 2.3.
2.4 Out-of-Field Licenses. Nothing contained in this Agreement shall
be construed to limit or restrict, in any way or manner, any right of IGEN
or its Affiliates or Sublicensees to use, license, transfer or sell its
owned or licensed intellectual property rights (excluding the rights
licensed to IGEN hereunder) anywhere in the world and/or for any purpose,
whether inside or outside the Field.
A-11-5
2.5 Sublicenses. IGEN shall have the right to grant sublicenses to
(i) any Affiliate of IGEN and (ii) other entities not being IGEN Affiliates
(such other entities being the "Sublicensees") on condition that the
sublicense is in writing and binds the IGEN Affiliate or Sublicensee to the
conditions applicable to IGEN under this Agreement and to the conditions
applicable for IGEN Affiliates and Sublicensees stated in this Agreement.
IGEN's Affiliates and Sublicensees shall have no right to sublicense to any
third party. IGEN shall cause each Affiliate or Sublicensee to assign to
IGEN any and all intellectual property rights to Roche Licensed Patent
Rights, Roche Licensed Technology or Hitachi Intellectual Property Rights
which such Affiliate or Sublicensee may develop or create. IGEN shall
indemnify ROCHE and its Affiliates (and their respective officers,
directors, shareholders, representatives, employees, consultants and agents
and each of the heirs, executors, successors and assigns of the foregoing)
against any loss, cost, damage or liability (including reasonable
attorneys' fees) arising from IGEN's failure to perform its obligations
under the preceding sentence. IGEN shall provide ROCHE with a copy of each
sublicense granted by IGEN hereunder with respect to Hitachi Intellectual
Property Rights or PCR Technology within ten (10) days following execution
of such sublicenses. ROCHE may deliver copies of such sublicenses with
respect to Hitachi Intellectual Property Rights or PCR Technology to ROCHE
Licensors. IGEN shall ensure and be liable for full compliance therewith
for its permitted sublicensees. On a semi-annual basis, IGEN shall provide
to each of its Affiliates and Sublicensees, with a contemporaneous copy to
ROCHE, a written description of IGEN's obligations under this Agreement and
the steps to be taken by IGEN and its Affiliates and Sublicensees to ensure
compliance with those obligations. Contemporaneously with the delivery of
such description, IGEN shall notify ROCHE in writing of all sublicenses
with Affiliates or Sublicensees.
2.6 Unauthorized Sales.
(a) The licenses to IGEN set forth in this Agreement shall not
include the right to manufacture, have manufactured, sell, have sold,
distribute, have distributed or otherwise commercialize any Copycat
Instrument in the Field ("Field Limitation"). ROCHE and IGEN will,
within ninety (90) days prior to the end of each calendar year, jointly
engage a mutually acceptable independent, neutral third party to monitor
IGEN's compliance with the Field Limitation of its licenses granted
hereunder (the "Field Monitor"). The expense of the Field Monitor will
be shared equally by IGEN and ROCHE. IGEN will give the Field Monitor
full access to such records as are necessary for the Field Monitor to
review placements and sales of Copycat Instruments by IGEN and its
affiliates, sublicensees, distributors and agents to confirm whether the
Parties are adhering to the Field Limitation applicable to IGEN. Such
examination shall be confidential and information disclosed or reviewed
shall not be disclosed to ROCHE except as is necessary for the Field
Monitor to report the results of the examination process. The Field
Monitor will be instructed to prepare and deliver a report to ROCHE and
IGEN within 90 days following the end of each calendar year. Such report
will identify all sales or placements of Copycat Instruments within the
Field and Products (e.g. assays) used on such Copycat Instruments in the
Field ("Unauthorized Sales"). For purposes of this Section 2.6,
references to IGEN, either by name or as a "party" or "seller," shall
include IGEN's affiliates, sublicensees, Authorized Third Parties,
distributors and agents that sell Copycat Instruments and Products (e.g.
assays) used on such Copycat Instruments under the license granted
hereunder.
(b) In the event of Unauthorized Sales, IGEN may continue to sell
such Copycat Instruments and Products until ROCHE notifies IGEN in
writing that it is prohibited from making any further such sales. In
addition, IGEN will pay to ROCHE within thirty (30) days after receiving
the Field Monitor's report 65% of all undisputed revenues earned through
Unauthorized Sales for the prior year. Except as provided below in
Section 5.1, the payment provisions of this Section 2.6(b) shall be the
exclusive remedy of ROCHE for Unauthorized Sales by IGEN under this
Agreement. ROCHE shall have no right to terminate this Agreement for
Unauthorized Sales by IGEN, or its affiliates or sublicensees.
A-11-6
2.7 Covenants. IGEN hereby covenants that it will not, under any
circumstances, actively advertise or market Copycat Instruments in the
Field.
3. Ownership.
3.1 ROCHE Retains Ownership. IGEN (for itself and its Affiliates and
Sublicensees) acknowledges and agrees that IGEN has no rights in or to the
intellectual property rights licensed to IGEN, other than the license
rights specifically granted herein. Nothing in this Agreement shall
obligate ROCHE or its Affiliates to obtain ownership of or sublicensing
rights to intellectual property rights obtained from or licensed from third
parties.
4. [RESERVED].
5. Books Of Account.
5.1 Business Records. IGEN shall keep, and cause its Affiliates and
Sublicensees to keep complete and accurate sales and accounting records and
accounts of all uses of the PCR Technology and the Hitachi Intellectual
Property Rights in sufficient detail to enable ROCHE to confirm that the
use of the PCR Technology and the Hitachi Intellectual Property Rights by
IGEN and its affiliates, sublicensees, distributors and agents complies
with the terms of this Agreement. Once each year during the Term of this
Agreement, ROCHE may designate an independent certified public accountant
reasonably acceptable to IGEN to conduct, during normal business hours, an
examination of the records referenced above. Such examination shall be
confidential, and the information disclosed shall not be communicated to
ROCHE except as is necessary for the accountant to report the results of
the examination process. Such accountants shall execute a confidentiality
agreement reasonably acceptable to IGEN. All records necessary to confirm
the extent of IGEN's Unauthorized Sales, if any, shall be made available in
Gaithersburg, Maryland upon request and reasonable advance notice. If any
audit conducted on behalf of ROCHE shows that IGEN, or any of its
affiliates, sublicensees, distributors or agents, underpaid amounts due to
ROCHE for Unauthorized Sales under Section 2.6, then IGEN shall immediately
pay to ROCHE any deficiency, with interest thereon calculated in accordance
with Section 5.3.
5.2 Retention. Records required to be maintained hereunder shall be
retained for not less than three (3) years.
5.3 Interest. All payments due hereunder from IGEN that are not paid
to ROCHE when due and payable as specified herein shall bear interest,
compounded monthly, at an annual rate equal to two percent (2%) above the
U.S. dollar reference rate ("prime rate") charged from time to time by
Citibank, N.A. (or a successor bank that is the largest bank headquartered
in New York City) from the date due until paid or at such lower rate as
shall be the maximum rate permitted by law.
6. Dispute Resolution; Venue And Choice Of Law.
6.1 Good Faith Resolution. In the event that at any time during the
Term of this Agreement a disagreement, dispute, controversy or claim should
arise out of or relating to the interpretation of this Agreement, or
performance by a Party under this Agreement, or a breach of this Agreement
by a Party, or any claim by a Party that any provision of this Agreement is
invalid (a "Dispute" or collectively "Disputes"), one Party shall give
written notice to the other Party that a dispute exists and the Parties
will then attempt in good faith to resolve their differences before
resorting to arbitration provided in Section 6.2. If the Parties cannot
resolve the disputed matter within thirty (30) days after such notice, then
either Party shall be free to submit the disputed matter to binding
arbitration in accordance with Section 6.2 hereof. For purposes of this
Article 6, the terms "Party" and "Parties" shall include each of the
signatories to this Agreement and/or any one or more of their respective
Affiliates, whether the reference is to a Party as a claimant or a Party
against which a claim is made.
A-11-7
6.2 Arbitration.
(a) The Parties intend Section 6.2 hereof to be enforceable in
accordance with the Federal Arbitration Act (9 U.S.C. Section 1, et
seq.), including any amendments to that Act which are subsequently
adopted, notwithstanding any other choice of law provision set forth in
this Agreement. In the event that either Party refuses to submit to
arbitration as required herein, the other Party may request a United
States District Court to compel arbitration in accordance with the
Federal Arbitration Act.
(b) Any dispute or other matter in question between LLC and IGEN
arising out of or relating to the formation, interpretation,
performance, or breach of this Agreement, whether such dispute or matter
arises before or after termination of this Agreement, shall be resolved
solely by arbitration if the Parties are unable to resolve the dispute
through negotiation pursuant to Section 6.1 hereof. Arbitration shall be
initiated by the delivery of a written notice of demand for arbitration
by one Party to the other. The date on which the other Party receives
such written notice shall be hereinafter referred to as the "Arbitration
Notice Date."
(c) Each Party shall appoint an individual as arbitrator and the
two so appointed shall then appoint a third arbitrator. If either Party
refuses or neglects to appoint an arbitrator within thirty (30) days
after the Arbitration Notice Date, then the arbitration shall be
conducted by a single arbitrator appointed by the American Arbitration
Association. If two arbitrators are appointed but do not agree on the
third arbitrator within sixty (60) days after the Arbitration Notice
Date, each of the arbitrators shall nominate within sixty-seven (67)
days after the Arbitration Notice Date three individuals. Each
arbitrator shall then within seventy-two (72) days after the Arbitration
Notice Date decline two of the nominations presented by the other
arbitrator. The third arbitrator shall then be chosen from the remaining
two nominations by drawing lots. Notwithstanding anything contained
herein to the contrary, if the third arbitrator is not chosen with
seventy-two (72) days after the Arbitration Notice Date, then the
American Arbitration Association shall appoint the third arbitrator
within seventy-seven (77) days after the Arbitration Notice Date. The
arbitrators shall not be or have been affiliated with, or have any
personal, financial or business relationship with, either of the Parties
or any Affiliate of either Party; the arbitrators shall not have a
personal or financial interest in the result of the arbitration.
(d) The arbitration hearings shall be held in Borough of Manhattan,
State of New York or such other place as may be mutually agreed by the
Parties, shall be conducted in the English language and shall be
conducted as confidential proceedings (except to the extent necessary to
enforce the award resulting therefrom). Unless the Parties agree
otherwise, the arbitrators shall commence the arbitration hearing within
thirty (30) days after the selection of the third arbitrator. The
arbitrators shall issue orders to protect the confidentiality of
proprietary information, trade secrets and other sensitive information
disclosed. Pending the arbitration hearing, at the request of a Party,
the arbitrators may issue temporary injunctive or other equitable relief
to address any violation or threatened violation of this Agreement. All
awards shall be made based on a majority vote of the arbitrators, shall
be in writing, shall not be considered confidential information of
either Party, shall be issued within sixty (60) days after hearings
before the arbitrators are completed, and shall state the reasoning on
which the award rests unless the Parties agree otherwise. In addition to
any relief at law which may be available to an aggrieved Party for such
breach, such Party shall be entitled to injunctive and other equitable
relief as the arbitration panel may grant. The arbitrators shall deliver
a copy of the award to each Party personally or by registered mail. Any
party may request within ten (10) days after receiving the decision
that, for good cause, the arbitrators reconsider and modify such
decision. The arbitrators shall have thirty (30) days after such request
to modify their decision, if they consider it appropriate. Thereafter,
the decision of the arbitrators shall be final, binding and
nonappealable, except to the extent appeals are permitted by the Federal
Arbitration Act, with respect to all persons, including (without
limitation) persons who have failed or refused to
A-11-8
participate in the arbitration process. Judgment upon the award rendered
may be entered in any court having jurisdiction thereof.
(e) Each Party shall bear its own costs in connection with any such
arbitration including, without limitation, (i) all legal, accounting,
and any other professional fees and expenses, (ii) the fees and expenses
of its own arbitrator, and (iii) all other costs and expenses each Party
incurs to prepare for such arbitration. Other than set forth above, each
side shall pay, (iv) one-half of the fee and expenses of the third
arbitrator, and (v) one-half of the other expenses that the Parties
jointly incur directly related to the arbitration proceeding.
(f) Except as provided above, arbitration shall be based upon the
Commercial Arbitration Rules of the American Arbitration Association.
Discovery shall be limited at the discretion of the arbitrators, so that
the timing and extent of such discovery shall not interfere with the
normal business operations of the Parties. The arbitrators may proceed
to an award notwithstanding the failure of either Party to participate
in the proceedings.
(g) In the event of subsequent actions or proceedings to confirm
the award or to enforce the judgment entered thereon or any other rights
flowing therefrom, the prevailing Party shall be entitled to recover its
reasonable attorney's fees incurred in such actions or proceedings.
(h) The fact that the dispute resolution procedures specified in
this Article 6 shall have been or may be invoked shall not excuse any
Party from performing its obligations under this Agreement, and during
the pendency of any such procedure the Parties shall continue to perform
their respective obligations in good faith.
6.3 Limited Recourse to Courts. This Article 6 shall be the
exclusive dispute resolution procedure for Disputes under this Agreement
and no Party shall bring Disputes before any court, except as appeals to
arbitration awards are permitted by Section 6.2. Except as permitted by
Section 6.2, the Parties hereby waive any right to appeal an arbitration
award to any court. The provisions of Section 6.2 may be enforced, and
judgment on the award (including without limitation equitable remedies)
granted in any arbitration hereunder may be entered, in any court of
competent jurisdiction. The Parties hereby submit to the non-exclusive in
personam jurisdiction of the federal courts in New York for such purposes.
THE PARTIES HEREBY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY FOR MATTERS
RELATED TO DISPUTES SUBMITTED TO ANY COURT.
6.4 Governing Law. This Agreement is made in accordance with and
shall be governed and construed under the laws of the State of New York,
U.S.A., without regard to its conflicts of laws rules.
7. Term And Termination.
7.1 Term. This Agreement shall remain in full force and effect for
the Term.
7.2 No Termination for Cause. In the event IGEN breaches any of its
obligations hereunder, then ROCHE shall be entitled to seek and obtain
monetary damages, specific performance of this Agreement and/or injunctive
or other equitable relief, but ROCHE shall not be entitled to seek or
obtain a termination of this Agreement.
7.3 Effect of Expiration. Upon expiration of this Agreement at the
end of its Term, all licensed rights under Section 2 of this Agreement
shall cease. Notwithstanding any expiration, the provisions of Sections 3,
5, 6, 7.3, 8, 9, 10, 11, 12, 13 and 14 shall survive.
7.4 Bankruptcy. IGEN shall retain the rights granted to it as a
licensee under Section 365(n) of the United States Bankruptcy Code in case
of the bankruptcy, insolvency or winding-up of ROCHE.
A-11-9
8. No Patent Warranty; Technology Exchange; Noninterference.
8.1 No Patent Warranty. ROCHE specifically excludes any
representation or warranty, express or implied, that ROCHE will
successfully obtain any patent.
8.2 Technology Exchange. IGEN and ROCHE agree and acknowledge that
the patents, patent applications, information and consulting regarding the
technology licensed hereunder heretofore delivered or provided to IGEN
through the Effective Time satisfies ROCHE's obligations to deliver such
material and provide such assistance as contemplated hereby or as required
by the Judgment. IGEN and ROCHE further acknowledge that ROCHE has no other
obligations to deliver such material or provide such assistance to IGEN.
8.3 Noninterference. In the event that any of the Improvements is
subject to contractual restrictions by third parties that limit or prohibit
IGEN from using such Improvements, ROCHE agrees not to interfere with, but
shall have no affirmative obligation to assist in, IGEN's efforts to obtain
a waiver of such contractual restrictions. Other than its seeking such
waiver, IGEN shall not interfere with ROCHE's relationship/contractual
arrangements with such third parties in IGEN's efforts to obtain such
waiver. In addition, in the event that ROCHE or any of its Affiliates has
an exclusive supplier or vendor, on IGEN's written request, ROCHE agrees to
waive such exclusivity with respect to IGEN and its Affiliates for the
commercialization of Products by IGEN and its Affiliates pursuant to this
Agreement, but ROCHE shall not be required to waive such exclusivity with
respect to other parties. The provisions of the foregoing sentence shall
not apply to require ROCHE to waive its exclusive supply arrangement with
Hitachi for ECL Instruments (as defined in the License Agreement).
9. Indemnification, Liability, Infringement.
9.1 Defense of Third Party Infringement Actions. If the manufacture,
production, sale, or use of any Licensed Product results in a claim, suit
or proceeding brought by a third party (each, an "Action") alleging patent
infringement against ROCHE or IGEN (or any of their respective Affiliates),
such Party shall promptly notify in writing the other Party. The Party
subject to such Action (the "Controlling Party") shall have the exclusive
right and obligation to defend and control the defense of any such Action
using counsel of its own choice; provided that the Controlling Party shall
not enter into any settlement of such Action without the written consent of
the other Party, which consent may be withheld in the unfettered discretion
of the other Party if such settlement admits the invalidity or
unenforceability of any patent rights of the other Party, and otherwise may
not be unreasonably withheld. The Controlling Party agrees to keep the
other Party reasonably informed of all material developments in connection
with any Action.
9.2 Suits for Infringement by Others. In the event either Party
becomes aware of any actual or threatened infringement of any intellectual
property rights licensed under this Agreement by any third party, that
Party shall promptly notify the other Party, and the Parties shall discuss
the most appropriate action to take. ROCHE shall have the sole right to
bring, at its own expense, an infringement action against the third party
infringer and shall be entitled to keep any awards made in such proceeding.
IGEN may elect to appear as a Party to the suit and shall, at Roche's
request, assist Roche without expense to Roche.
9.3 Product Liability Indemnity. IGEN expressly and unequivocally
agrees to and hereby does indemnify, release, defend and hold ROCHE (and
its Affiliates, sublicensees and licensors and their respective officers,
directors, shareholders, representatives, employees, consultants and agents
and each of the heirs, executors, successors and assigns of the foregoing)
harmless from and against all claims, damages, losses, costs and expenses,
including reasonable attorneys' fees, arising in favor of any person, firm
or corporation resulting from or arising out of liability in any way
relating to the Licensed Products sold, placed or otherwise commercialized
by IGEN, or its Affiliates, Sublicensees or Authorized Third Parties,
including without limitation, the manufacture, packaging, use, sale or
other
A-11-10
distribution of Licensed Products by IGEN or its Affiliates or
sublicensees, or any representation made or warranty given by IGEN with
respect to any Licensed Product provided that ROCHE (a) gives IGEN notice
of such claim, (b) cooperates with IGEN, at IGEN's expense, in the defense
of such claim, and (c) gives IGEN the right to control the defense and
settlement of any such claim, except that IGEN shall not enter into any
settlement that affects ROCHE's rights or interest without ROCHE's prior
written approval. ROCHE shall have no authority to settle any claim on
behalf of IGEN. IGEN also agrees to maintain proper product liability
insurance policies, reasonably acceptable to ROCHE everywhere it sells
Licensed Products and to furnish satisfactory evidence of same upon request
by ROCHE from time to time.
9.4 Waiver of Claims. IGEN shall not assert, and IGEN shall ensure
that its Affiliates and Sublicensees do not assert, any claims against
ROCHE and its licensors (including ROCHE Licensors) for any matter for
which IGEN has provided indemnity to ROCHE under Sections 9.3 and 9.5
hereof. IGEN shall indemnify, hold harmless and defend ROCHE and its
licensors (including ROCHE Licensors) against any such claims.
9.5 Breach by Affiliate, Sublicensee or Authorized Third
Party. Failure of an Affiliate, Sublicensee or Authorized Third Party to
adopt and satisfy a condition stated in this Agreement applicable to IGEN,
an Affiliate, Sublicensee or Authorized Third Party, as the case may be,
shall be considered a breach of this Agreement by IGEN. IGEN and such
Affiliate or Sublicensee shall be jointly and severally responsible for and
indemnify ROCHE and its Affiliates (and their respective officers,
directors, shareholders, representatives, employees, consultants and agents
and each of the heirs, executors, successors and assigns of the foregoing)
against any loss, cost, damage or liability (including reasonable
attorneys' fees) arising from the breach by such Affiliate or Sublicensee
of this Agreement. IGEN shall indemnify ROCHE and its Affiliates (and their
respective officers, directors, shareholders, representatives, employees,
consultants and agents and each of the heirs, executors, successors and
assigns of the foregoing) against any loss, cost, damage or liability
(including reasonable attorneys' fees) arising from the failure by an
Authorized Third Party to adopt and satisfy a condition stated in this
Agreement applicable to Authorized Third Parties.
9.6 Title and Authority. ROCHE hereby represents and warrants to
IGEN that: (i) ROCHE has the requisite corporate power and authority to
enter into this Agreement and to grant the license to IGEN under ROCHE
Licensed Patent Rights, ROCHE Licensed Technology and Hitachi Intellectual
Property Rights hereunder and fully perform its obligations hereunder, and
that the grant of the rights and licenses, and the performance of its
obligations hereunder, will not conflict with its charter documents or any
agreement, contract or other arrangement to which it is a party or by which
it is bound; (ii) ROCHE has title to or license rights in such licensed
intellectual property rights sufficient to grant such license rights to
IGEN and its Affiliates; (iii) ROCHE has not assigned, transferred,
licensed or otherwise disposed of such licensed intellectual property
rights in any manner that limits or restricts IGEN's or its Affiliates'
exploitation of the license granted by ROCHE hereunder; (iv) no consent,
notice, approval, authorization, waiver, or permit, to or from any person,
including, but not limited to, any Governmental Entity or third party
holder of intellectual property rights, is required to be obtained or made
by ROCHE in connection with its execution, delivery and performance of this
Agreement; and (v) Exhibit F includes all Hitachi patents and patent
applications which ROCHE has the right to sublicense to IGEN, and that
ROCHE has no other rights to Hitachi patents and patent applications which
ROCHE has the right to sublicense to IGEN.
9.7 Completeness of Exhibit D. ROCHE hereby represents and warrants
to IGEN that the Exhibit D includes all patents and patent applications
which: (a) exist at or prior to the Effective Time; (b) are owned and/or
controlled by ROCHE and/or any Affiliate thereof; and (c) satisfy the
definition of ROCHE Improvements (other than PCR Technology or Hitachi
Intellectual Property Rights). If, after the Effective Time, it is
discovered that ROCHE has breached any of its representations and
warranties under this Section 9.7 and additional patents or patent
applications should have been or should be included in the patents and
patent applications set forth in the
A-11-11
Exhibit D, then (i) such additional patent and patent applications shall be
deemed automatically included in Exhibit D, as of the Effective Time,
without any amendment of this Agreement or other further action required of
the Parties, and (ii) IGEN shall hold a license to such additional patents
and patent applications under and in accordance with the terms of this
Agreement, as of the Effective Time. The foregoing shall be IGEN's
exclusive remedy for a breach by ROCHE of the representations and
warranties in this Section 9.7.
9.8 Indemnity. ROCHE hereby agrees to indemnify and hold harmless
IGEN, its Affiliates and any sublicensee (and their respective directors,
officers, employees, consultants and agents and each of their heirs,
executors, successors and assigns of the foregoing) (collectively the
"Indemnitees") against all losses, claims, damages, liabilities, fees and
expenses (including reasonable attorneys' fees), judgments, fines and
amounts paid in settlement (in the case of settlements with the approval of
IGEN (which approval shall not be unreasonably withheld)) incurred by or
imposed upon the Indemnitees (or any one of them), as a result of a breach
by ROCHE of any of ROCHE's representations and warranties in Section 9.6;
provided, that IGEN: (a) gives ROCHE notice of such claim, (b) cooperates
with ROCHE, at ROCHE's expense, in the defense of such claim, and (c) gives
ROCHE the right to control the defense and settlement of any such claim,
except that ROCHE shall not enter into any settlement that affects IGEN's
rights or interest without IGEN's prior written approval. IGEN shall have
no authority to settle any claim on behalf of ROCHE.
10. Disclaimer Of Warranties; Further Action.
10.1 Disclaimer. EXCEPT AS OTHERWISE PROVIDED HEREIN (E.G. SECTIONS
9.6, 9.7 and 9.8 REPRESENTATIONS, WARRANTIES AND INDEMNIFICATIONS) THE
INTELLECTUAL PROPERTY RIGHTS LICENSED HEREUNDER ARE PROVIDED BY ROCHE "AS
IS WHERE IS" AND ROCHE MAKES NO, AND DISCLAIMS ALL WARRANTIES AND
REPRESENTATIONS, EXPRESS OR IMPLIED, CONCERNING: (a) LICENSED INTELLECTUAL
PROPERTY RIGHTS COVERED BY THIS AGREEMENT, INCLUDING WITHOUT LIMITATION,
ANY EXPRESS OR IMPLIED WARRANTY OF DESIGN, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE AS TO LICENSED INTELLECTUAL PROPERTY RIGHTS OR ANY
PRODUCT; (b) THE COMMERCIAL SUCCESS OF ANY PRODUCT; (c) THE EXISTENCE,
VALIDITY OR SCOPE OF LICENSED INTELLECTUAL PROPERTY RIGHTS; (d) ANY PRODUCT
BEING FREE FROM AN INFRINGEMENT ON PATENTS OR OTHER INTELLECTUAL PROPERTY
RIGHTS OF THIRD PARTIES; (e) WHETHER ANY THIRD PARTIES ARE IN ANY WAY
INFRINGING LICENSED INTELLECTUAL PROPERTY RIGHTS COVERED BY THIS AGREEMENT;
OR (f) THE ACCURACY, UTILITY OR SUFFICIENCY OF ANY TECHNICAL INFORMATION
TRANSFERRED TO IGEN HEREUNDER. THE PARTIES SPECIFICALLY AGREE THAT NEITHER
PARTY SHALL BE SUBJECT TO AND THAT EACH DISCLAIMS: (A) ANY OTHER
OBLIGATIONS OR LIABILITIES ARISING OUT OF BREACH OF WARRANTY, AND (B) ALL
CONSEQUENTIAL, INCIDENTAL, CONTINGENT, PUNITIVE AND EXEMPLARY DAMAGES
WHATSOEVER WITH RESPECT TO (i) ANY DISPUTES BETWEEN THE PARTIES UNDER THIS
AGREEMENT OR (ii) CLAIMS MADE BY ONE PARTY AGAINST ANOTHER PARTY ARISING
FROM THE COURSE OF CONDUCT WITHIN THE RELATIONSHIP OF THE PARTIES UNDER
THIS AGREEMENT (WHETHER SUCH CLAIMS ARISE UNDER CONTRACT, TORT, STRICT
LIABILITY OR OTHERWISE), EVEN THOUGH A PARTY MAY HAVE BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. THE LIMITATION OF DAMAGES IN CLAUSE (B) ABOVE
SHALL NOT APPLY TO DAMAGES PAID TO UNRELATED THIRD PARTIES (WHETHER
PURSUANT TO JUDGMENT OR SETTLEMENT) FOR WHICH A PARTY HAS AN OBLIGATION TO
INDEMNIFY THE OTHER PARTY HEREUNDER.
10.2 Export Control. IGEN agrees, and shall cause its Affiliates and
Sublicensees to agree, to abide by all laws and regulations of the United
States Government, or the government having
A-11-12
jurisdiction therefor, governing the export or re-export of any Licensed
Products. IGEN shall inform itself as to the details of such laws and
regulations and their amendments.
10.3 Additional Documents. Each Party agrees to execute such further
papers or agreements as may be necessary to effect the purposes of this
Agreement.
10.4 Governmental Approvals and Marketing of Licensed Products. IGEN
shall be responsible for obtaining all necessary governmental approvals for
the development, production, distribution, sale and use of any Licensed
Product, at IGEN's expense, including, without limitation, any safety
studies. IGEN shall have sole responsibility for any warning labels,
packaging and instructions as to the use of Licensed Products and for the
quality control for any Licensed Product.
10.5 Patent Marking and Labeling. IGEN shall mark all Licensed
Products, or their containers, in accordance with the applicable patent
marking laws. IGEN shall mark/label conspicuously all Licensed Products
utilizing or intended for use with the PCR Technology made by or for it for
use in the diagnostic field or the research field, and shall cause each of
its Affiliates and Sublicensees to mark conspicuously all such Licensed
Products, with a label license bearing one of the following legends, as the
case may be depending on whether the Licensed Product is sold for use in
the diagnostic field or the research field:
LEGEND FOR USE ON LICENSED PRODUCTS DESIGNED AND SOLD FOR USE IN
DIAGNOSTIC FIELD.
NOTICE TO PURCHASER: LIMITED LICENSE
The purchase of this product allows the purchaser to use it solely
for amplification by PCR of nucleic acid sequences and detection by ECL
Technology for diagnostic uses. No general patent or other license of
any kind other than this specific right of use from purchase is granted
hereby.
LEGEND FOR USE ON LICENSED PRODUCTS DESIGNED AND SOLD FOR USE IN
RESEARCH FIELD.
NOTICE TO PURCHASER: LIMITED LICENSE
A license under U.S. Patents 4,683,202, 4,683,195 and 4,965,188 or
their foreign counterparts, owned by ROCHE Molecular Systems, Inc. and
F. Hoffmann-La ROCHE Ltd ("ROCHE"), has an up-front fee component and a
running-royalty component. The purchase price of this product includes
limited, nontransferable rights under the running-royalty component to
use only this amount of the product to practice the Polymerase Chain
Reaction ("PCR") and related processes described in said patents solely
for the research and development activities of the purchaser when this
product is used in conjunction with a thermal cycler whose use is
covered by the up-front fee component and a detection system based on
ECL Technology. Rights to the up-front fee component must be obtained by
the end user in order to have a complete license. These rights under the
up-front fee component may be purchased from Applied Biosystems or
obtained by purchasing an Authorized Thermal Cycler. No right to perform
or offer commercial services of any kind using PCR, including without
limitation reporting the results of purchaser's activities for a fee or
other commercial consideration, is hereby granted by implication or
estoppel.
10.6 No Use of Names. Except as required by Section 10.5 hereof,
neither IGEN nor any of its Affiliates or Sublicensees shall have the right
to use any of the names "ROCHE," "ROCHE DIAGNOSTICS," "HITACHI," "ELECSYS"
or any variation thereof, or any other corporate name, trade name,
trademark, service name, service mark or brand name proprietary to ROCHE or
any ROCHE Licensor or any of their respective Affiliates, in connection
with the advertising, sale, lease or use of Licensed Products.
11. Confidentiality. ROCHE and IGEN agree for themselves and their
Affiliates, and on behalf of their respective officers, employees and agents,
that until the later of (i) 10 years from the Effective Time hereof or (ii) 5
years after the expiration date of this Agreement (in perpetuity as to
confidential and
A-11-13
proprietary information of Hitachi, or such shorter period as Hitachi agrees
with IGEN in writing or to which ROCHE is subject), each will treat as
confidential, using the same degree of care as it uses for its own confidential
and proprietary information, but in no event less than reasonable care, and
shall not disclose to any third party, and shall not use for its own benefit or
the benefit of any third party (except as permitted hereunder, including
disclosures to IGEN Affiliates and permitted sublicensees or subcontractors to
the extent necessary to have Products manufactured and subject to
confidentiality obligations at least as restrictive as those contained herein)
the ROCHE Licensed Patent Rights, ROCHE Licensed Technology or Hitachi
Intellectual Property Rights (and any other information marked as confidential,
and reports generated by the Field Monitor or accountant pursuant to Sections
2.6 and 5.1) furnished to it by the other Party unless the furnishing party
("Discloser") otherwise agrees in writing or unless such information clearly and
convincingly falls within the following exceptions:
(a) Such confidential information was known to the receiving party
("Recipient") prior to the time of disclosure by the Discloser or was in
the public domain at the time of disclosure by Discloser as can be
documented by written records; or
(b) Such confidential information is or becomes publicly known after
disclosure by Discloser through no fault or omission attributable to
Recipient; or
(c) Such confidential information is given to Recipient from sources
independent of Discloser who have the right to disclose it; or
(d) Such confidential information is independently developed by
employees of Recipient that did not have access to it as can be documented
by written records; or
(e) Recipient is required to disclose such confidential information to
a court of law or to appropriate governmental agencies to enable Recipient
to carry out the evaluation of a Product or to secure a governmental
approval, or as otherwise required by law; provided, however, that (1)
Recipient gives the Discloser prompt written notice of such required
disclosure and reasonably assists the Discloser in its efforts to prevent
or limit such disclosure; and (2) any confidential information disclosed
pursuant to this Section 11(e) shall otherwise remain confidential
information for the purposes of this Agreement.
For purposes of this License, ROCHE's confidential information shall
include (subject to the exclusions in (a)-(e) above) all information relating to
the ROCHE Licensed Patent Rights, ROCHE Licensed Technology and Hitachi
Intellectual Property Rights whether such information is owned by ROCHE or ROCHE
Licensors and whether disclosed to IGEN by ROCHE or any ROCHE Licensor before or
after the Effective Time. Furthermore, each Party's confidential information
hereunder shall include all confidential information of such Party disclosed to
the other Party under the Prior Agreement or the Judgment. Access to such
confidential information must be restricted to the Recipient's, sublicensee's,
or subcontractor's employees or agents with a need to have access. The Recipient
acknowledges that by virtue of this Agreement it acquires only such rights as
set forth under the terms and conditions of this Agreement and only so long as
it is in effect and does not acquire any rights of ownership or title in the
Discloser's confidential information. In addition, each of the Parties agrees to
execute appropriate confidentiality agreements with third party collaborators of
such Party prior to disclosing the other party's confidential information to
such third party collaborator. Upon expiration of this Agreement, each Party,
its sublicensees, subcontractors and their employees and agents shall
immediately discontinue use of the other's confidential information, except as
otherwise permitted under the provisions hereof. The Parties agree that this
Section 11 sets out in its entirety the Parties' confidentiality obligations
with respect to the subject matter of this Agreement, and that this Section 11
shall supercede in its entirety as of the Effective Time all prior
confidentiality agreements or arrangements with respect to the subject matter of
this Agreement between or among the Parties and their Affiliates (including
confidentiality agreements or arrangements between IGEN and Roche Diagnostics
GmbH and its Affiliates).
A-11-14
12. License Registration. IGEN shall pay all costs and legal fees
connected with registration of this Agreement in those countries where it (or
its Affiliates, Sublicensees, distributors and/or agents) sells Licensed
Products, where required, and shall otherwise ensure that the laws of all the
countries where sales of its Licensed Products occur are fully satisfied. None
of such amounts shall be deductible against amounts payable to ROCHE hereunder.
ROCHE shall provide reasonable assistance to IGEN in effecting such
registrations if IGEN reimburses any out-of-pocket expenses incurred in
providing such assistance.
13. Interests in Intellectual Property Rights.
13.1 Preservation of Title. IGEN acknowledges that ROCHE, its
Affiliates and ROCHE Licensors, where applicable, shall retain full
ownership and title to the intellectual property rights it licenses to IGEN
hereunder and that IGEN has no rights in or to such intellectual property
rights other than the express license rights specifically confirmed herein.
Neither IGEN nor any of IGEN's employees, Affiliates and Sublicensees, or
any of their respective employees, have rights under this Agreement to
practice or use the ROCHE Licensed Patent Rights, ROCHE Licensed Technology
or Hitachi Intellectual Property Rights to develop, manufacture, sell or
otherwise commercialize products not based on the ECL Technology or, with
respect to the Hitachi Intellectual Property Rights, to copy, make, have
made, use and/or sell Products in the Field.
13.2 Hitachi Interest. Hitachi, as subcontractor for ROCHE, owns the
Hitachi Intellectual Property Rights that have been licensed to ROCHE for
sublicense to IGEN.
13.3 Reservation of Rights. ROCHE reserves the right to use for any
purpose (commercial or noncommercial), anywhere in the world, and the right
to allow other parties to use for any purpose, anywhere in the world, any
ROCHE Licensed Patent Rights and ROCHE Licensed Technology licensed
hereunder, without ROCHE or such other parties being obligated to pay IGEN
any royalties or other compensation. Without limiting the generality of the
foregoing, ROCHE reserves the right to license any Party to use the ROCHE
Improvements in non-ECL Technology applications and in any fields,
including without limitation all fields outside the Field.
14. Miscellaneous.
14.1 Waiver. No delay or omission on the part of either Party to
this Agreement in requiring performance by the other Party or in exercising
any right hereunder shall operate as a waiver of any provision hereof or of
any right or rights hereunder; and the waiver, omission or delay in
requiring performance or exercising any right hereunder on any one occasion
shall not be construed as a bar to or waiver of such performance or right,
or of any right or remedy under this Agreement, on any future occasion. Any
agreement on the part of either Party to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of
such Party.
14.2 Assignment. This Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their permitted successors and
assigns; provided, however, that: (a) neither Party shall assign any of its
rights and obligations hereunder except as consented to by the other Party,
which consent shall not be unreasonably withheld, and (b) such consent
shall not be required with respect to an assignment of (i) any or all of
its rights and obligations hereunder to an Affiliate of such assigning
party; or (ii) all (but not less than all) of its rights and obligations
hereunder to an acquirer of all or substantially all of the assets or
business of the assigning party related to such party's use of ECL
Technology, whether as incident to a merger, consolidation, reorganization,
acquisition or otherwise. In addition, IGEN may assign, without Roche's
consent, all of its rights under this Agreement to IGEN Integrated
Healthcare, LLC ("NEWCO") as a part of the transactions contemplated by the
Merger Agreement. Whenever there has been an assignment or a sublicense by
IGEN or ROCHE, as the case may be, as permitted by this Agreement, the term
"IGEN" or "ROCHE" as used in this Agreement shall also include and refer
to, if appropriate, such assignee or sublicensee.
14.3 Notices. Any notice or other communication required or
permitted to be given to either Party hereto shall be in writing and shall
be deemed to have been properly given and to be effective
A-11-15
on the date of delivery if delivered in person or by facsimile (with
electronic confirmation of receipt and with a confirmation copy sent by
internationally-recognized air courier service), to such Party at the
following address:
In the case of IGEN:
IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, Maryland 20877
United States of America
Attention: President
Fax No.: 1-301-208-3789
With a copy to IGEN's designated legal counsel.
In the case of ROCHE:
ROCHE Diagnostics GmbH
Sandhofer Strasse 116
D-68305 Mannheim
Federal Republic of Germany
Attention: Legal Department
Fax No.: 011-49-621-759-4461
With a copy to Roche's designated legal counsel.
Either Party may change its address for communications by a notice to
the other Party in accordance with this Section.
14.4 Headings. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
14.5 Force Majeure. Any delays in performance by any Party under
this Agreement (other than a Party's failure to make payments hereunder)
shall not be considered a breach of this Agreement if and to the extent
caused by occurrences beyond the reasonable control of the Party affected,
including but not limited to acts of God, embargoes, governmental
restrictions, strikes or other concerted acts of workers, fire, flood,
explosion, riots, wars, civil disorder, rebellion or sabotage. The Party
suffering such occurrence shall immediately notify the other Party and any
time for performance hereunder shall be extended by the actual time of
delay caused by the occurrence.
14.6 Independent Contractors. In granting, performing or exercising
rights under this Agreement, ROCHE and IGEN act and shall act at all times
as independent contractors and nothing contained in this Agreement shall be
construed or implied to create an agency, partnership or employer and
employee relationship between IGEN and ROCHE. At no time shall one Party
make commitments or incur any charges or expenses for or in the name of the
other Party.
14.7 Severability. If, under applicable law, any term, condition or
provision of this Agreement is held invalid or unenforceable, or otherwise
directly or indirectly affects the validity of any other material
provision(s) of this Agreement (the "Severed Clause"), then this Agreement
shall remain in full force and effect, except for the Severed Clause. The
Parties agree to renegotiate in good faith the Severed Clause and be bound
by the mutually agreed substitute provision.
14.8 Interpretation. The official text of this Agreement shall be
English. For purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms of this Agreement do not amend or supersede, and
shall not be used to interpret, the terms of the License Agreement, as
of the date hereof, by and between IGEN and IGEN LS LLC, the Covenants
Not to Sue, the License Agreement (Human IVD, Veterinary IVD, HLA
Typing, Paternity, DNA Manufacturing and Plasma Testing), dated as of
the date
A-11-16
hereof, by and among NEWCO, F. Hoffmann-La Roche Ltd ("Roche/Basle"),
ROCHE and Roche Molecular Systems, Inc. ("Roche/USA"), or the License
Agreement (Human IVD Services and Animal Diagnostic Services), dated as
of the date hereof, by and among NEWCO, Roche/Basle, ROCHE and
Roche/USA;
(b) the terms defined in this Agreement have the meanings assigned
to them in this Agreement and include the plural as well as the
singular, and the use of any gender herein shall be deemed to include
the other gender;
(c) references herein to "Sections," "Subsections," "Paragraphs,"
and other subdivisions without reference to a document are to designated
Sections, Subsections, Paragraphs and other subdivisions of this
Agreement;
(d) a reference to a Subsection without further reference to a
Section is a reference to such Subsection as contained in the same
Section in which the reference appears, and this rule shall also apply
to Paragraphs and other subdivisions;
(e) the words "herein," "hereof," "hereunder," and other words of
similar import refer to this Agreement as a whole and not to any
particular provision;
(f) the term "include" or "including" shall mean "including without
limitation";
(g) the term "to the extent" shall mean the degree to which a
subject or other thing extends, and such phrase shall not mean simply
"if";
(h) the term "or" is not exclusive; and
(i) the Exhibits, Appendices and Annexes to this Agreement are
hereby incorporated and made a part hereof and are an integral part of
this Agreement.
14.9 Cumulative Rights. The rights, powers and remedies hereunder
shall be in addition to, and not in limitation of, all rights, powers and
remedies provided at law or in equity. All of such rights, powers and
remedies shall be cumulative, and may be exercised successively or
cumulatively.
14.10 Entire Agreement; Amendment. This Agreement and any and all
Schedules and Appendices referred to herein, together with the other
agreements referenced herein and the Transactions Agreements (as defined in
the Merger Agreement), embody the entire understanding of the Parties with
respect to the subject matter hereof and shall supersede all previous
communications, representations or understandings, either oral or written,
between the Parties relating to the subject matter hereof. This Agreement
shall not be amended, altered or changed except by a written agreement
signed by all of the Parties hereto.
14.11 No Third Party Beneficiary Rights. Except for the provisions
of Section 2.3(a) relating to immunity from suit and Article 9 relating to
Indemnitees, nothing contained in this Agreement is intended to confer upon
any person other than the Parties hereto and their respective successors
and permitted assigns, any benefit, right or remedy under or by reason of
this Agreement.
14.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank]
A-11-17
IN WITNESS WHEREOF, both ROCHE and IGEN have executed this Agreement, in
duplicate originals, by their respective officer hereunto duly authorized, as of
the day and year hereinabove written.
ROCHE DIAGNOSTICS GMBH IGEN INTERNATIONAL, INC.
By: /s/ C.J. RUETSH By: /s/ RICHARD J. MASSEY
---------------------------------------- ----------------------------------------
(Signature) (Signature)
Claus-Joerg Ruetsch Richard J. Massey
---------------------------------------- ----------------------------------------
(Printed Name) (Printed Name)
General Counsel President and Chief Operating Officer
---------------------------------------- ----------------------------------------
(Title) (Title)
July 24, 2003 July 24, 2003
---------------------------------------- ----------------------------------------
(Date) (Date)
And
By: /s/ HEINO VON PRONDZYNSKI
----------------------------------------
(Signature)
Heino Von Prondzynski
----------------------------------------
(Printed Name)
Authorized Signatory
----------------------------------------
(Title)
July 24, 2003
----------------------------------------
(Date)
[Signature Page to Improvements License Agreement]
A-11-18
ANNEX 12
COVENANTS NOT TO SUE
AMONG
IGEN INTEGRATED HEALTHCARE, LLC
MESO SCALE DIAGNOSTICS, LLC.
MESO SCALE TECHNOLOGIES, LLC.
ROCHE DIAGNOSTICS GMBH
ROCHE HOLDING LTD
AND
IGEN LS LLC
A-12-1
COVENANTS NOT TO SUE
These Covenants Not to Sue (this "Agreement") are made as of July 24, 2003,
entered into by and among IGEN Integrated Healthcare, LLC, a Delaware limited
liability company ("NEWCO"), Meso Scale Diagnostics, LLC., a Delaware limited
liability company, and Meso Scale Technologies, LLC., a Delaware limited
liability company (collectively "Meso Scale"), Roche Diagnostics GmbH, a company
duly organized and validly existing under the laws of the Federal Republic of
Germany ("Roche Diagnostics"), Roche Holding Ltd, a company duly organized and
validly existing under the laws of Switzerland (together with Roche Diagnostics
referred to as "Roche") and IGEN LS LLC, a Delaware limited liability company
("LLC").
WHEREAS, IGEN International, Inc. and Roche Diagnostics are parties to an
Improvements License Agreement dated as of the date hereof (the "Improvements
License Agreement"),
WHEREAS, IGEN International, Inc. and LLC are parties to a License
Agreement dated as of the date hereof (the "License Agreement"),
WHEREAS, as a part of the transactions contemplated by the Merger
Agreement, IGEN is expected to assign all of its rights under the License
Agreement to NEWCO,
WHEREAS, Meso Scale are parties to one or more license agreements between
themselves and with IGEN International, Inc. relating to ECL Core Technology (as
defined herein), and
WHEREAS, the parties hereto desire to enter into this Agreement,
NOW, THEREFORE, in consideration of these premises and the mutual covenants
herein contained, NEWCO, Meso Scale, Roche and LLC (each singly a "Party" and
collectively the "Parties") hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, capitalized terms shall have the respective
meanings set forth below. Capitalized terms used in this Agreement and not
defined below shall have the meanings given to such terms in the Merger
Agreement.
1.1 "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person. The term "person" means
any individual, firm, corporation, partnership, company, limited liability
company, trust, joint venture, association, Governmental Entity or other
entity. The term "Government Entity" means any domestic or foreign (whether
a national, Federal, state, provincial, local or otherwise) government or
any court of competent jurisdiction, agency or commission or other
governmental authority or instrumentality, domestic or foreign. Neither
Genentech Inc., 1 DNA Way, South San Francisco, California 94080-4990, USA,
nor Chugai Pharmaceutical Co., Ltd, 1-9 Kyobashi 2-chome, Chuo-ku, Tokyo,
104-8301, Japan shall be deemed an Affiliate of LLC for purposes of this
Agreement. Neither Meso Scale Diagnostics, LLC., 9238 Gaither Road,
Gaithersburg, Maryland, USA 20877 nor Meso Scale Technologies, LLC., 9238
Gaither Road, Gaithersburg, Maryland, USA 20877 shall be deemed an
Affiliate of NEWCO for purposes of this Agreement.
1.2 "Commercial Agreements" means the License Agreement and the
Improvements License Agreement.
1.3 "Covered NEWCO Activity" means any NEWCO Activity that is covered
by the covenant not to sue contained in Section 2.1.
1.4 "Covered NEWCO Entities" shall have the meaning contained in
Section 2.2.
A-12-2
1.5 "Covered NEWCO Technology" means each of the following (i)
developed, discovered, invented and/or acquired by a NEWCO Party or any of
its Affiliates, in each case, after the Effective Time; and (ii) which such
NEWCO Party or such Affiliate owns or has a license to use:
(a) ECL Core Technology;
(b) Any improvements to reagent technology used in the ECL Assays
(as defined in the License Agreement) for those analytes listed on
Exhibit A attached hereto; and
(c) Any improvements to components/features that are used in ECL
Instruments (as defined in the License Agreement) being sold by Roche or
any of its Affiliates at or prior to the Effective Time and that are
described in Exhibit B attached hereto.
Notwithstanding the foregoing, for the avoidance of doubt and for
the sake of clarification, paragraphs (b) and (c) above shall not
include any of the following:
(i) Any polymerase chain reaction ("PCR") (nucleic acid testing)
technology;
(ii) Any technology relating to assays for analytes not listed
on Exhibit A;
(iii) Any components/features of ECL Instruments that are not
described in Exhibit B;
(iv) Any new components/features of ECL Instruments that are
developed, discovered and/or invented after the Effective Time; and
(v) Any devices that are peripheral to ECL Instruments, do not
use ECL technology and are not described in Exhibit B, such as
printers, sample preparation devices, non-ECL modular units, IT
equipment and software for post-analytical analyses, or improvements
to any peripheral devices.
1.6 "Covered Roche Activity" means any Roche Activity that is covered
by the covenant not to sue contained in Section 3.1.
1.7 "Covered Roche Entities" shall have the meaning contained in
Section 3.2.
1.8 "Covered Roche Technology" means each of the following: (i)
developed, discovered, invented and/or acquired by a Roche Party or any of
its Affiliates, in each case, after the Effective Time; and (ii) which such
Roche Party or such Affiliate owns or has a license to use:
(a) ECL Core Technology;
(b) Any improvements to reagent technology used in the ECL Assays
(as defined in the License Agreement) for those analytes listed on
Exhibit A attached hereto; and
(c) Any improvements to components/features that are used in ECL
Instruments (as defined in the License Agreement) being sold by Roche or
any of its Affiliates at or prior to the Effective Time and that are
described in Exhibit B attached hereto.
Notwithstanding the foregoing, for the avoidance of doubt and for
the sake of clarification, paragraphs (b) and (c) above shall not
include any of the following:
(i) Any polymerase chain reaction ("PCR") (nucleic acid testing)
technology that is not specifically included in Roche Improvements
(as defined in the Improvements License Agreement);
(ii) Any technology relating to assays for analytes not listed
on Exhibit A;
(iii) Any components/features of ECL Instruments being sold at
the Effective Time that are not described in Exhibit B;
(iv) Any new components/features of ECL Instruments that are
developed, discovered and/or invented after the Effective Time; and
A-12-3
(v) Any devices that are peripheral to ECL Instruments, do not
use ECL technology and are not described in Exhibit B, such as
printers, sample preparation devices, non-ECL modular units, IT
equipment and software for post-analytical analyses, or improvements
to any peripheral devices.
1.9 "ECL Core Technology" means detection methods and detection
systems, which employ electrochemiluminescence in the detection and/or
quantification of an analyte, including but not limited to ECL reagents,
ECL assays and/or immunodiagnostic detection methods by which light
generation occurs when a molecular compound (such as a ruthenium metal
chelate) is electrically stimulated by applying a voltage to an electrode
which triggers a chemical reaction to emit photons.
1.10 "Effective Time" shall have the meaning contained in the Merger
Agreement.
1.11 "NEWCO Future Patents" and "Roche Future Patents" shall mean U.S.
or foreign patents issued to a person covering subject matter within the
Covered NEWCO Technology or Covered Roche Technology, respectively, that
claim their earliest priority from a patent application filed by a person
after the Effective Time, or in the case of Covered NEWCO Technology or
Covered Roche Technology acquired from a third party after the Effective
Time, that claim their earliest priority from a patent application filed by
a person either before or after the Effective Time.
1.12 "Intellectual Property Rights" means all existing or future U.S.
or foreign (a) patents, patent applications or other patent rights
(including without limitation utility patents or "utility models"), (b)
copyrights and rights of authors, (c) trademarks, trade names, logos,
service marks and Internet domain names, (d) data and database rights, (e)
designs and registered designs, and (f) all registrations, extensions,
substitutions, divisions, continuations, continuations-in-part,
reexaminations, reissues, renewals and confirmations of any of the
foregoing.
1.13 "Merger Agreement" means the Agreement and Plan of Merger dated
as of the date of this Agreement among Roche Holding Ltd, 66 Acquisition
Corporation II, IGEN International, Inc. and NEWCO.
1.14 "NEWCO Activity" shall have the meaning contained in Section 2.1.
1.15 "NEWCO Parties" means NEWCO, Meso Scale, and, prior to the
Effective Time, LLC.
1.16 "NEWCO Property Rights" means any and all Intellectual Property
Rights owned by a NEWCO Party or its Affiliates on or after the Effective
Time, or which any of them have the right to license or sublicense to third
parties on or after the Effective Time (excluding Intellectual Property
Rights licensed to a NEWCO Party under the Improvements License Agreement).
1.17 A "person" means any individual, firm, corporation, partnership,
company, limited liability company, trust, joint venture, association,
domestic or foreign (whether national, Federal, state, provincial, local or
otherwise) government or any court of competent jurisdiction,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, or other entity
1.18 "Roche Activity" shall have the meaning contained in Section 3.1.
1.19 "Field" means
(a) the analyzing of specimens taken from a human body, including
without limitation blood, body fluid or tissue, for the purpose of
testing, with respect to that human being, for a physiological or
pathological state, a congenital abnormality, safety and compatibility
of a treatment, or to monitor therapeutic measures.
(b) Notwithstanding anything contained in subsection 1.19(a),
above, to the contrary, the Field shall not include analyzing for (A)
life science research and/or development, including at any
pharmaceutical company or biotechnology company, (B) patient self
testing use; (C) drug discovery and/or drug development (including at
any pharmaceutical company or biotechnology
A-12-4
company), including clinical research or determinations in or for
clinical trials or in the regulatory approval process for a drug or
therapy, or (D) veterinary, food, water, or environmental testing or
use.
1.20 "Roche Parties" means Roche and, after the Effective Time, LLC.
1.21 "Roche Property Rights" means any and all Intellectual Property
Rights owned by a Roche Party or its Affiliates on or after the Effective
Time, or which any of them have the right to license or sublicense to third
parties on or after the Effective Time (excluding Intellectual Property
Rights licensed to a Roche Party under the License Agreement).
2. COVENANT NOT TO SUE BY ROCHE PARTIES
2.1 "Covenant by Roche Parties. Subject to the limitations set forth
in Section 2.3 below, each Roche Party hereby covenants and irrevocably
agrees (for itself and each of its Affiliates) that it shall not directly
or indirectly assert, authorize, pursue or induce any third party to assert
or pursue, assist or cooperate with any third party in asserting or
pursuing, or seek to obtain any recovery with respect to any legal or
equitable cause of action, suit, claim, defense, offset, counterclaim,
cross-claim or pleading or other proceeding of any sort whatsoever,
participate in any proceeding or action, or make any allegations against a
NEWCO Party or any of the Covered NEWCO Entities (as defined in Section 2.2
below) asserting that the:
(i) manufacture, use, sale, offer for sale, importation, or
exportation of any product, or
(ii) act of authorizing others to manufacture, use, sell, offer for
sale, import, or export any product, or
(iii) provision of any service, or
(iv) practice of any method, or
(v) promulgation of any specification,
after the Effective Time (the activities referred to in (i) through (v)
above inclusive being referred to, collectively, as the "NEWCO Activities")
that is both (i) conducted with respect to Products that use or incorporate
ECL Technology (as such terms are defined in the Improvements License
Agreement) and (ii) covered by or includes, in whole or in part, directly
or indirectly, or is performed or used in conjunction with, any of the
claims under Roche Future Patents, constitutes direct infringement,
contributory infringement, inducement to infringe, or otherwise violates,
misappropriates or infringes any legal right under any of the Roche Future
Patents.
2.2 Parties Protected. The covenant of Section 2.1 above shall
extend to the NEWCO Parties' Affiliates and to the NEWCO Parties' and such
Affiliates' respective officers, directors, advisors, consultants,
representatives, employees, agents, customers, distributors, licensees,
sublicensees, successors, assigns and any other third parties involved in
the Covered NEWCO Activities, including without limitation when products or
services included in the Covered NEWCO Activities are incorporated into,
bundled with or used in combination with other products and services. The
parties protected under this Section 2.2 are hereinafter referred to as
"Covered NEWCO Entities."
2.3 Limitations on Scope of Covenant by Roche
Parties. Notwithstanding anything to the contrary herein:
(a) the covenant not to sue granted in Section 2.1 above shall not
extend to any future claims, suits, actions or proceedings for breach of
contract brought by a Roche Party or any of its Affiliates to the extent
based on breaches by a NEWCO Party or any of its Affiliates of any of
the Commercial Agreements;
(b) nothing in this Agreement shall preclude any of the Roche
Parties or their respective Affiliates from providing any evidence
regarding any of the Roche Property Rights pursuant to subpoena or court
order or as otherwise required by law.
A-12-5
2.4 Covenant Not Retroactive. The covenants granted under this
Article 2 shall not have retroactive effect to activities of a NEWCO Party
(or any predecessor, including IGEN, or assignor) or any Covered NEWCO
Entity prior to the Effective Time.
2.5 Covenant Runs With Roche Property Rights. Any sale, transfer or
other disposition of a Roche Future Patent or any of the Intellectual
Property Rights licensed to IGEN under the Improvements License Agreement
(whether by a Roche Party or any subsequent holder or transferee) shall be
made subject to the covenant granted under this Article 2 and the assignor
shall cause any subsequent holder or transferee to agree in writing to be
bound by the covenant granted under this Article 2 as though an original
party to this Agreement.
2.6 Covenant with Respect to Covered NEWCO Entities. This Agreement
shall extend to and be for the benefit of the Covered NEWCO Entities. To
receive such benefits, each Covered NEWCO Entity shall be bound by the
terms and conditions of this Agreement as if it were named herein.
3. COVENANT NOT TO SUE BY NEWCO PARTIES
3.1 Covenant by NEWCO Parties. Subject to the limitations set forth
in Section 3.3 below, each NEWCO Party hereby covenants and irrevocably
agrees (for itself and each of its Affiliates) that it shall not directly
or indirectly assert, authorize, pursue or induce any third party to assert
or pursue, assist or cooperate with any third party in asserting or
pursuing, or seek to obtain any recovery with respect to any legal or
equitable cause of action, suit, claim, defense, offset, counterclaim,
cross-claim or pleading or other proceeding of any sort whatsoever,
participate in any proceeding or action, or make any allegations against a
Roche Party or any of the Covered Roche Entities (as defined in Section 3.2
below) asserting that the:
(i) manufacture, use, sale, offer for sale, importation, or
exportation of any product, or
(ii) act of authorizing others to manufacture, use, sell, offer for
sale, import, or export of any product, or
(iii) provision of a service,
(iv) practice of a method, or
(v) promulgation of a specification,
after the Effective Time (the activities referred to in (i) through (v)
above inclusive being referred to, collectively, as the "Roche Activities")
that is both (a) conducted with respect to Products (as defined in the
License Agreement) within the Field and (b) covered by or includes, in
whole or in part, directly or indirectly, or is performed or used in
conjunction with, any of the claims under NEWCO Future Patents, constitutes
direct infringement, contributory infringement, inducement to infringe, or
otherwise violates, misappropriates or infringes any legal right under any
of the NEWCO Future Patents.
3.2 Parties Protected. The covenant of Section 3.1 above shall
extend to the Roche Parties' Affiliates and to the Roche Parties' and such
Affiliates' respective officers, directors, advisors, consultants,
representatives, employees, agents, customers, distributors, licensees,
successors, assigns and other third parties involved in the Covered Roche
Activities, including without limitation when products or services included
in the Covered Roche Activities are incorporated into, bundled with or used
in combination with other products and services. The parties protected
under this Section 3.2 are hereinafter referred to as "Covered Roche
Entities".
3.3 Limitations on Scope of Covenant by NEWCO
Parties. Notwithstanding anything to the contrary herein:
(a) the covenant not to sue granted in Section 3.1 above shall not
extend to any future claims, suits, actions or proceedings for breach of
contract brought by a NEWCO Party or any of
A-12-6
its Affiliates to the extent based on breaches by a Roche Party or any
of its Affiliates of any of the Commercial Agreements;
(b) in the event the License Agreement is terminated or expires,
nothing in the covenant not to sue granted in Section 3.1(a) above or in
Section 3.1(b) above shall prevent or hinder a NEWCO Party or its
Affiliates from asserting or authorizing or inducing any third party to
assert or assisting any third party in asserting or seeking to obtain
any recovery with respect to any legal or equitable cause of action,
claim, defense, offset, counterclaim, cross-claim or pleading of any
sort whatsoever, or participating in any claim, suit, action or
proceeding, or making any allegations against a Roche Party or any
Covered Roche Entity that any Covered Roche Activity after the date of
termination or expiration constitutes direct infringement, contributory
infringement, inducement to infringe, or otherwise violates,
misappropriates or infringes any claim under a NEWCO Future Patent; and
(c) nothing in this Agreement shall preclude any of the NEWCO
Parties or their respective Affiliates from providing any evidence
regarding any of the NEWCO Property Rights pursuant to subpoena or court
order or as otherwise required by law.
(d) The covenant not to sue granted in Section 3.1 above shall not
extend to any future claims, suits, actions or proceedings of any sort
brought by Meso Scale Diagnostics, LLC. ("MSD") and/or Meso Scale
Technologies, LLC. ("MST") against any of the Covered Roche Entities
arising out of or related to claims that the Roche Activities conducted
after the Effective Time in conjunction with ECL Core Technology that
either involves the use of, or constitutes direct infringement,
contributory infringement, inducement to infringe, or otherwise
violates, misappropriates or infringes, any Intellectual Property Right
of MSD and/or MST in or relating to Multi-Array Assays, carbon
electrodes and/or disposable electrodes; provided, however, the
foregoing exception to the covenant not to sue granted in Section 3.1
above shall not limit or affect the "Consent by Meso Scale Diagnostics,
LLC. and Meso Scale Technologies, LLC" attached to the License
Agreement.
3.4 Covenant Not Retroactive. The covenants granted under this
Article 3 shall not have retroactive effect to activities of a Roche Party
(or any predecessor or assignor) or any Covered Roche Entity prior to the
Effective Time.
3.5 Covenant Runs With NEWCO Property Rights. Any sale, transfer or
other disposition of a NEWCO Future Patent or any of the Intellectual
Property Rights licensed to LLC under the License Agreement (whether by a
NEWCO Party or any subsequent holder or transferee) shall be made subject
to the covenant granted under this Article 3 and the assignor shall cause
any subsequent holder or transferee to agree in writing to be bound by the
covenant granted under this Article 3 as though an original party to this
Agreement.
3.6 Covenant with Respect to Covered Roche Entities. This Agreement
shall extend to and be for the benefit of the Covered Roche Entities. To
receive such benefits, each Covered Roche Entity shall be bound by the
terms and conditions of this Agreement as if it were named herein.
4. INTELLECTUAL PROPERTY
4.1 No Ownership, Rights or License. Nothing contained herein shall
confer on the NEWCO Parties or any Covered NEWCO Entity any ownership
interest or other interest (legal or equitable), right or license in or to
any Roche Property Right. Nothing contained herein shall confer on the
Roche Parties or any Covered Roche Entity any ownership interest or other
interest (legal or equitable), right or license in or to any NEWCO Property
Right. No Party shall have an obligation to exercise efforts to create any
Intellectual Property Rights, whether or not incorporated in a Future
Patent. Furthermore, no Parties shall have any obligation to disclose or
license any Future Patent to any other Party.
A-12-7
5. TERM
5.1 The Parties agree that this Agreement will become effective at
the Effective Time.
5.2 In the event the Merger Agreement is terminated pursuant to its
terms prior to the Effective Time, this Agreement shall automatically and
simultaneously terminate. In the event of such termination, no Party shall
have any liability to any other Party pursuant to this Agreement. It is
understood and agreed that the consummation of the Merger shall not
constitute or cause a termination of this Agreement.
5.3 This Agreement shall terminate as to the covenant granted under
Article 2 on the last date on which a Roche Party or any of its Affiliates
may assert or bring any legal or equitable claim against any Covered NEWCO
Entity under any Roche Future Patent. This Agreement shall terminate as to
the covenant granted under Article 3 on the earlier of (a) the last date on
which a NEWCO Party or any of its Affiliates may assert or bring any legal
or equitable claim against any Covered Roche Entity under any NEWCO Future
Patent or (b) the date that the License Agreement is terminated in
accordance with its terms.
6. WARRANTY AND LIMITATION OF LIABILITY
6.1 Each Party represents and warrants to the other Parties that it
has the full right and power to grant and perform the covenants specified
herein.
6.2 IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY
HEREUNDER OR ANY OTHER PERSON FOR ANY INDIRECT, SPECIAL, INCIDENTAL,
CONSEQUENTIAL, EXEMPLARY OR MULTIPLE DAMAGES OR LOST PROFITS ARISING OUT OF
THE BREACH THIS AGREEMENT OR ANY OTHER CAUSE OF ACTION, CLAIM, DEFENSE,
OFFSET, COUNTERCLAIM, CROSS-CLAIM OR PLEADING OF ANY SORT WHATSOEVER
ARISING THEREFROM.
6.3 In the event of any legal or equitable cause of action, suit,
claim, defense, offset, counterclaim, cross-claim or other proceeding in
which any Covered NEWCO Entity or any Covered Roche Entity, as the case may
be (the "Prevailing Party"), obtains a final and nonappealable order of a
court of competent jurisdiction that provides or states that any Covered
Roche Entity or any Covered NEWCO Entity, as the case may be, breached
Article 2 or Article 3, as applicable, then the Prevailing Party shall be
entitled to reimbursement from the non-prevailing Covered Roche Entity or
Covered NEWCO Entity, as the case may be, of its legal fees and expenses
incurred in such cause of action, suit, claim, defense, offset,
counterclaim, cross-claim or other proceeding.
7. GENERAL
7.1 Applicable Law. This Agreement is made in accordance with and
shall be governed by and construed under the laws of the State of New York,
U.S.A., without regard to its conflicts of laws rules.
7.2 Assignments. This Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their permitted successors and
assigns; provided, however, that: (a) none of the Parties shall assign any
of its rights and obligations hereunder except as consented to by the all
of the other Parties, which consent shall not be unreasonably withheld, and
(b) such consent shall not be required with respect to an assignment of (i)
any or all of its rights and obligations hereunder to an Affiliate of such
assigning Party; or (ii) all (but not less than all) of its rights and
obligations hereunder to an acquirer of all or substantially all of the
assets or business of the assigning Party related to such party's use of
ECL Technology, whether as incident to a merger, consolidation,
reorganization, acquisition or otherwise. Whenever there has been an
assignment by a Party as permitted by this Agreement, the term "NEWCO
Parties," "NEWCO Covered Entities, "ROCHE Parties" or "ROCHE Covered
Entities," as used in this Agreement, shall also include and refer to, if
appropriate, such assignee.
A-12-8
7.3 Independent Contractors. In granting, performing or exercising
rights under this Agreement, each Party acts and shall act at all times as
independent contractors and nothing contained in this Agreement shall be
construed or implied to create an agency, partnership or employer and
employee relationship between any of the Parties hereto. At no time shall
one Party make commitments or incur any charges or expenses for or in the
name of the other Party.
7.4 Entire Agreement; Amendment. This Agreement and any and all
Schedules and Appendices referred to herein, together with the other
agreements referenced herein and the Transactions Agreements (as defined in
the Merger Agreement), embody the entire understanding of the parties with
respect to the subject matter hereof and shall supersede all previous
communications, representations or understandings, either oral or written,
between the Parties relating to the subject matter hereof. This Agreement
shall not be amended, altered or changed except by a written agreement
signed by all of the Parties hereto.
7.5 No Waiver. No delay or omission on the part of any Party to this
Agreement in requiring performance by any other Party or in exercising any
right hereunder shall operate as a waiver of any provision hereof or of any
right or rights hereunder; and the waiver, omission or delay in requiring
performance or exercising any right hereunder on any one occasion shall not
be construed as a bar to or waiver of such performance or right, or of any
right or remedy under this Agreement, on any future occasion. Any agreement
on the part of any Party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such
Party.
7.6 Third Party Beneficiaries. Except for Articles 2 and 3 of this
Agreement, nothing contained in this Agreement is intended to confer upon
any person other than the Parties hereto and their respective successors
and permitted assigns any benefit, right or remedy under or by reason of
this Agreement.
7.7 Notices. Any notice or other communication required or permitted
to be given to any Party hereto shall be in writing and shall be deemed to
have been properly given and to be effective on the date of delivery if
delivered in person or by facsimile (with electronic confirmation of
receipt and with a confirmation copy sent by internationally-recognized air
courier service), to such Party at the following address:
In the case of NEWCO, MESO SCALE or, prior to the Effective Time, LLC:
16020 Industrial Drive
Gaithersburg, Maryland 20877
United States of America
Attention: President
Fax No.: 1-301-208-3789
With a copy to NEWCO's designated legal counsel.
9238 Gaither Road
Gaithersburg, Maryland 20877
United States of America
In the case of Roche or, after the Effective Time, LLC:
Roche Diagnostics GmbH
Sandhofer Strasse 116
D-68305 Mannheim
Federal Republic of Germany
Attention: Legal Department
Fax No.: 011-49-621-759-4461
With a copy to Roche's designated legal counsel.
Any Party may change its address for communications by a notice to the
other Parties in accordance with this Section.
A-12-9
7.8 Headings. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
7.9 Severability. If, under applicable law, any term, condition or
provision of this Agreement is invalid or unenforceable, or otherwise
directly or indirectly affects the validity of any other material
provision(s) of this Agreement (the "Severed Clause"), then this Agreement
shall remain in full force and effect, except for the Severed Clause. The
Parties agree to renegotiate in good faith the Severed Clause and be bound
by the mutually agreed substitute provision.
7.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.11 Exhibits/Attachments. This Agreement includes the following
exhibits and attachments which are hereby incorporated by reference:
Exhibit A -- Roche ECL Assays
Exhibit B -- Components/Features of ECL Instruments
7.12 Interpretation. The official text of this Agreement shall be
English. For purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms of this Agreement do not amend or supersede, and
shall not be used to interpret, the terms of the License Agreement, the
Improvements License Agreement, the License Agreement (Human IVD,
Veterinary IVD, HLA Typing, Paternity, DNA Manufacturing and Plasma
Testing), dated as of the date hereof, by and among NEWCO, F.
Hoffmann-La Roche Ltd ("Roche/Basle"), Roche Diagnostics and Roche
Molecular Systems, Inc. ("Roche/USA"), or the License Agreement (Human
IVD Services and Animal Diagnostic Services), dated as of the date
hereof, by and among NEWCO, Roche/Basle, Roche Diagnostics and
Roche/USA;
(b) the terms defined in this Agreement have the meanings assigned
to them in this Agreement and include the plural as well as the
singular, and the use of any gender herein shall be deemed to include
the other gender;
(c) references herein to "Sections," "Subsections," "Paragraphs,"
and other subdivisions without reference to a document are to designated
Sections, Subsections, Paragraphs and other subdivisions of this
Agreement;
(d) a reference to a Subsection without further reference to a
Section is a reference to such Subsection as contained in the same
Section in which the reference appears, and this rule shall also apply
to Paragraphs and other subdivisions;
(e) the words "herein," "hereof," "hereunder," and other words of
similar import refer to this Agreement as a whole and not to any
particular provision;
(f) the term "include" or "including" shall mean "including without
limitation";
(g) the term "to the extent" shall mean the degree to which a
subject or other thing extends, and such phrase shall not mean simply
"if";
(h) the term "or" is not exclusive; and
(i) the Exhibits, Appendices and Annexes to this Agreement are
hereby incorporated and made a part hereof and are an integral part of
this Agreement.
[Remainder of Page Intentionally Left Blank]
A-12-10
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the
day and year first above written.
IGEN INTEGRATED HEALTHCARE, LLC
By: /s/ RICHARD J. MASSEY
------------------------------------
Name: Richard J. Massey
----------------------------------
Title: President and Chief Operating
Officer
----------------------------------
IGEN LS LLC
By: /s/ SAMUEL J. WOHLSTADTER
------------------------------------
Name: Samuel J. Wohlstadter
----------------------------------
Title: Chairman and Chief Executive
Officer
----------------------------------
ROCHE DIAGNOSTICS GMBH
By: /s/ C.J. RUETSCH
------------------------------------
Name: Claus-Joerg Ruetsch
----------------------------------
Title: General Counsel
----------------------------------
By: /s/ HEINO VON PRONDZYNSKI
------------------------------------
Name: Heino Von Prondzynski
----------------------------------
Title: Authorized Signatory
----------------------------------
A-12-11
ROCHE HOLDING LTD
By: /s/ DR. FRANZ B. HUMER
----------------------------------
Name: Franz B. Humer
----------------------------------
Title: President and Chairman
----------------------------------
By: /s/ ERICH HUNZIKER
------------------------------------
Name: Erich Hunziker
----------------------------------
Title: Chief Financial Officer
----------------------------------
MESO SCALE DIAGNOSTICS, LLC.
By: /s/ JACOB N. WOHLSTADTER
------------------------------------
Name: Jacob N. Wohlstadter
----------------------------------
Title: President and Chief Executive
Officer
----------------------------------
MESO SCALE TECHNOLOGIES, LLC.
By: /s/ JACOB N. WOHLSTADTER
------------------------------------
Name: Jacob N. Wohlstadter
----------------------------------
Title: President and Chief Executive
Officer
----------------------------------
A-12-12
EXHIBIT A
ROCHE ECL ASSAYS
T4 Anti-HBs AFP
T3 HBsAg CEA
free T3 Anti-Hbe PSA
free T4 HbeAg free PSA
T uptake Anti-HBc CA 15-3
TSH Anti-HBc/IgM CA 19-9
anti-TPO Anti HAV CA 12-5
Thyreoglobulin Anti-HAV/IgM CA 72-4
anti-Thyreoglobulin Anti-HCV Cyfra 21-1
TSH Receptor NSE
anti-HIV S 100
Prolactin anti-HIV p-24 P1NP
LH HIV Antigen PAPP-A
FSH HIV Combined Lp-PLA2
Testosterone sCD40L
Progesterone anti-Rubella IgG IL 18
Estradiol anti-Rubella IgM Survivin
hCG anti-Toxoplasmosis IgG
hCG+(Beta) anti-Toxoplasmosis IgM
SHBG anti-CMV IgG
DHEA-S anti-CMV IgM
hGH H. Pylori
ACTH anti-HGV
Cortisol anti-HTLV
Insulin
Ferritin (Beta)-Crosslaps
Folate Osteocalcin
RBC Folate PTH
Vitamin B12
Vitamin D
C-Peptide
IgE
Digoxin
Troponin T Digitoxin
CK-MB
Myoglobin
pro-BNP
A-12-13
EXHIBIT B
COMPONENTS/FEATURES OF ECL INSTRUMENTS
Any component/feature of an ECL Instrument, which component/feature
performs one or more of the following functions:
1. Dispenses the antibodies (or those specific proteins used for the
Folate assay, RBC Folate assay and Vitamin B-12 assay; or antigens in the
case where the analyte in the immunoassay is an antibody) for purposes of
performing an ECL Assay;
2. Accesses and aliquots magnetic beads directly from the Reagent
Packs on board the ECL Instrument;
3. Incubates the patient sample with antibodies (or those specific
proteins used for the Folate assay, RBC Folate assay and Vitamin B-12
assay; or antigens in the case where the analyte in the immunoassay is an
antibody) for conducting an ECL Assay;
4. Transfers the incubated sample to the flow cell in the ECL
Instrument where the electrochemiluminescence reaction takes place;
5. Performs one or more pre-wash steps; or
6. Flushes out and cleans the flow cell following the performance of
the electrochemiluminescence measurement.
Capitalized terms in this Exhibit B shall have the meanings assigned to
them in the License Agreement.
A-12-14
ANNEX 13
LICENSE AGREEMENT
(HUMAN IVD, VETERINARY IVD, HLA TYPING, PATERNITY, DNA MANUFACTURING AND PLASMA
TESTING)
This LICENSE AGREEMENT (Human IVD, Veterinary IVD, HLA Typing, Paternity,
DNA Manufacturing and Plasma Testing) (the "AGREEMENT") is dated as of the 24th
day of July, 2003, by and among IGEN INTEGRATED HEALTHCARE, LLC, a Delaware
limited liability company having offices at 16020 Industrial Drive,
Gaithersburg, Maryland 20877 ("IGEN"), F. HOFFMANN-LA ROCHE LTD, a Swiss limited
liability company with its principal place of business at Grenzacherstrasse 124,
CH-4070 Basle, Switzerland ("ROCHE/BASLE"), ROCHE DIAGNOSTICS GMBH, a German
company with its principal place of business at Sandhofer Strasse 116, D-68305
Mannheim, Germany ("ROCHE/GERMANY") and ROCHE MOLECULAR SYSTEMS, INC., a
Delaware corporation with its principal place of business at 4300 Hacienda
Drive, Pleasanton, California 94588 USA ("ROCHE/USA") (Roche/Basle,
Roche/Germany and Roche/ USA shall hereinafter be referred to collectively (or
separately as the context requires) as either "ROCHE" or "ROCHE") (hereinafter
IGEN and Roche may separately be referred to as a "PARTY" or collectively
referred to as "THE PARTIES").
W I T N E S S E T H:
WHEREAS, Roche/Basle owns or controls all right, title and interest in and
to certain patents and patent applications outside of the United States the
claims of which are directed to aspects of PCR technology, and Roche/USA owns or
controls all right, title and interest in and to corresponding patents and
patent applications in the United States;
WHEREAS, Roche/Germany owns or controls all right, title and interest in
and to certain patents and patent applications both in the United States and
outside of the United States the claims of which are directed to aspects of PCR
technology;
WHEREAS, IGEN is interested in, among other things, acquiring a worldwide
license from Roche under certain of Roche's patents for the purpose of
developing and commercializing PCR-based in vitro human diagnostic products for
use in clinical diagnostic testing;
WHEREAS, IGEN is also interested in acquiring a worldwide license from
Roche under certain of Roche's patents for the purpose of developing and
commercializing PCR-based paternity testing products for use in parentage
determination;
WHEREAS, IGEN is also interested in acquiring a worldwide license from
Roche under certain of Roche's patents for the purpose of developing and
commercializing PCR-based in vitro animal diagnostic products for use in animal
testing; and
WHEREAS, IGEN is also interested in acquiring licenses from Roche under
certain of Roche's patents for other purposes described herein;
WHEREAS, Roche is willing to grant such license to IGEN upon the following
terms and conditions.
AGREEMENT:
NOW THEREFORE, for and in consideration of the covenants and undertakings
hereinafter set forth, and in consideration for the granting of intellectual
property rights to Roche and its Affiliates from
A-13-1
IGEN pursuant to agreements between Roche and IGEN and their respective
Affiliates, IGEN and Roche hereby agree as follows:
ARTICLE 1
DEFINITIONS
In addition to other terms defined elsewhere herein, the following terms
shall have the following meanings when used herein (any term defined in the
singular shall have the same meaning when used in the plural and vice versa,
unless stated otherwise):
1.1 "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person. The term "person" means
any individual, firm, corporation, partnership, company, limited liability
company, trust, joint venture, association, Governmental Entity or other
entity. The term "Government Entity" means any domestic or foreign (whether
a national, Federal, state, provincial, local or otherwise) government or
any court of competent jurisdiction, agency or commission or other
governmental authority or instrumentality, domestic or foreign. Neither
Genentech Inc., 1 DNA Way, South San Francisco, California 94080-4990, USA,
nor Chugai Pharmaceutical Co., Ltd, 1-9 Kyobashi 2-chome, Chuo-ku, Tokyo,
104-8301, Japan, shall be deemed an Affiliate of ROCHE for purposes of this
Agreement. Meso Scale Diagnostics, LLC. ("MSD"), 9238 Gaither Road,
Gaithersburg, Maryland, USA 20877, shall, at all times and notwithstanding
any change in circumstance, be deemed an Affiliate of IGEN for purposes of
this Agreement; provided, however, that Affiliates of MSD shall not
necessarily be, and shall have to qualify independently from (e.g., not
through or under) MSD as, Affiliates of IGEN. Meso Scale Technologies, LLC.
("MST"), 9238 Gaither Road, Gaithersburg, Maryland, USA 20877, shall not be
deemed an Affiliate of IGEN for purposes of this Agreement.
1.2 "Animal" means all animals, other than human, whether dead or
alive or extinct, and specifically includes animal embryos but not human
embryos.
1.3 "Animal Breeding Applications" means the analysis of biological
specimens for the determination of genetic traits in Animals for the
purpose of selective breeding of said Animals. Animal Breeding Applications
specifically exclude testing for disease-related traits for the purpose of
treating the test Animal for that disease.
1.4 "Animal Diagnostics Field" means use of products and diagnostic
processes utilizing PCR solely for analyzing specimens taken from an Animal
(excluding a Human), including without limitation, blood, bodily fluid or
tissue, for the purpose of testing, with respect to that Animal, for a
physiological or pathological state, a congenital abnormality, or the
safety and compatibility of a treatment; monitoring therapeutic measures or
for detecting: microorganisms or any other analyte associated with
infectious and/or non-infectious diseases in Animals; Animal genetic
diseases; genetic predisposition to disease in Animals, or genetic traits
in Animals, including determining the sex of Animals, but specifically
excluding Animal Identity Applications, Animal Breeding Applications, GMO
Testing Applications, and testing performed on Animal tissue intended for
use in xenotransplantation.
1.5 "Animal Identity Applications" means the analysis of biological
specimens for the identification of individual Animals whether living, dead
or extinct, or their remains, including, without limitation, parentage
determination.
1.6 "Complete Diagnostic Kit" means a product dedicated for use in
connection with the practice of PCR in the Licensed Fields as applicable,
it being understood that a product shall be deemed to be so dedicated if it
is either: (i) a product having a package insert indicating its use
primarily in connection with the practice of PCR, or (ii) a product which
by virtue of its design, operation or construction has no other substantial
practical utility, and which product is comprised of,
A-13-2
at a minimum, the essential active reagents for amplification (e.g.,
primers, nucleotides, enzymes, etc.) and the essential active reagents for
detection (e.g., probes, labeled nucleotides, etc.; but does not
necessarily include reagents necessary for performing
electrochemiluminescence (e.g., tri-propyl amine (TPA)) of a target nucleic
acid in the Licensed Fields, which reagents would include the
oligonucleotides (i.e., primers and, if required, probes), nucleotides,
enzymes, buffers and associated co-reactants essential to perform
amplification and detection of nucleic acid using PCR. For purposes of this
Agreement IGEN shall only convey the necessary rights for End-Users to
perform PCR-based testing services in the Licensed Fields with the Sale of
a Complete Diagnostic Kit.
1.7 "Component System" means any products (e.g. kit, reagent or group
of reagents), Sold together which will provide an End-User with the
essential active reagents necessary to perform one or more of the following
processes in connection with the practice of PCR:
(a) Sample preparation, that is, the treatment of a sample in order
to render a nucleic acid therein amplifiable: such a Component System
may have as its essential active reagents, for example, the cell lysing,
stabilization and/or precipitation reagents essential to expose and
prepare DNA for amplification;
(b) The amplification of one or more designated nucleic acid
sequences: such a Component System may have as its essential active
reagents, for example, the oligonucleotides and/or nucleotides, enzymes,
buffers and associated co-reactants essential to perform amplification
of nucleic acid using PCR; and/or
(c) Detection, that is, the treatment or modification of an
amplified nucleic acid so as to render it detectable, identifiable
and/or quantifiable: such a Component System may include labelled
primers, probes (including binding partners or reporter molecules),
fluorescent intercalating or tagging agents, and any device provided
therewith to enable the detection, identification or quantification of
the nucleic acid.
1.8 "Diagnostic Services" means analyzing specimens taken from a
human being or Animal, including without limitation, blood, bodily fluid or
tissue, for the purpose of testing, with respect to that human being or
Animal, for a physiological or pathological state, for a congenital
abnormality, for safety and compatibility of a treatment or to monitor
therapeutic measures or any use of PCR as a testing service to provide to a
person data, results or interpretations of any application of PCR for
purposes of therapy or diagnosis of an Animal or a human being, including,
without limitation, clinical laboratory services, and parentage
determination, whether or not a fee is charged for such services.
1.8A "DNA Manufacturing Field" means the manufacture in the United
States, and the Sale worldwide, directly or through distributors, of DNA
Products.
1.8B "DNA Products" means specific, individual DNA molecules produced
by means of any method that practices PCR technology.
1.9 "Distributors" means the distributors performing a bona fide
distribution function to which IGEN or any of its Affiliates grants the
right to Sell Licensed Products. IGEN's Affiliates shall not be deemed to
be "Distributors" for purposes of this Agreement.
1.10 "Effective Time" shall have the meaning ascribed to that term in
that certain Merger Agreement of even date herewith by and among, inter
alia, IGEN International, Inc. and Roche Holding Ltd (the "Merger
Agreement").
1.11 "End-Users" means the customers, including doctors, hospitals,
testing and research institutions, which perform PCR (including diagnostic
testing) and/or the detection of a target nucleic acid, and clinical and
other laboratories, purchasing and using products sold pursuant to this
Agreement.
1.11A "Expanded Test Process" means the method claims (if they are
Valid Claims) of US5,210,015 and 5,487,972, the method and reaction mixture
claims 1-12 (if they are Valid Claims)
A-13-3
of US5,804,375, US5,994,056 and US6,171,785, the foreign counterparts
thereto and any reissue and/or reexamination patent rights thereof.
1.12 "GMO Testing Applications" means the detection and/or analysis
of nucleic acid sequences of Animals, including live animals, carcasses,
meat and meat by-products, and materials derived therefrom, solely for the
purpose of determining the presence of, or derivation from,
Genetically-Modified Organisms. In this context, "Genetically-Modified
Organism" shall mean an Animal in which the genetic material has been
altered in a way that does not occur naturally by mating and/or natural
recombination.
1.13 "HLA Typing" means genotyping of specific HLA loci in order to
assess the probability of acceptance of a transplant of a human organ or
tissue or bone marrow or other human component.
1.14 "Human Identity Field" means use of, and includes products and
processes utilizing PCR for the sole purpose of determining human identity
or distinguishing among human beings, whether living or dead. The term
"Human Identity Field" shall include forensic testing for use in, or in
preparation for, death investigations or other legal proceedings, but such
term shall specifically exclude testing for tissue typing and the parentage
determination.
1.15 "IGEN Sellers" means IGEN and its Affiliates and Distributors.
1.16 "Instrument" means an electrical, mechanical or
electro-mechanical device which is intended to be used in connection with
the practice of PCR.
1.17 "In Vitro Human Diagnostics Field" means use of, and includes
products and diagnostic processes utilizing, PCR for the measurement,
observation or determination of attributes, characteristics, diseases,
traits or other conditions of human beings for diagnostic purposes,
including, without limitation:
(a) Genetic testing, including determinations of genetic
predisposition;
(b) Oncology and cancer predisposition testing;
(c) Testing for tissue typing;
(d) Infectious disease detection, confirmation and monitoring;
(e) Therapeutic drug monitoring; and
(f) Blood screening.
1.18 "Licensed Fields" means the Animal Diagnostics Field, the
Paternity Field, HLA Typing, the In Vitro Human Diagnostics Field, the
Plasma Testing Field, and the DNA Manufacturing Field.
1.19 "Licensed Patents" means the United States and foreign patents
and patent applications of Roche listed in Exhibit "1" attached to this
Agreement, as amended from time to time, including any other patents or
patent applications that claim priority to one or more of the patents or
patent applications listed in Exhibit 1 including corresponding foreign
applications or patents; and any patents or patent applications that claim
priority to one or more priority applications of one or more of the patents
and patent applications listed in Exhibit 1 and any divisional,
continuation, continuation-in-part, extensions, reissues, renewals, and
re-examinations of such patents and patent applications, and any
corresponding foreign counterparts of such patents and patent applications.
In the event that a patent application or patent owned by Roche (with the
right to license to IGEN), which includes a Valid Claim covering a PCR
Related Invention and is entitled to an earliest priority date not later
than five (5) years from the Effective Time, is not included in Exhibit 1,
such patent application or patent shall be deemed automatically included on
Exhibit 1 for the purposes of the Agreement as of the Effective Time,
without any amendment of this Agreement or other further action required of
the Parties. Notwithstanding anything to the contrary in this definition,
Licensed Patents shall not include (a) any rights to inventions for
biological and chemical target information such as nucleic acid sequences
(e.g., specific primer and probe sequences) which the making, selling or
using of would
A-13-4
infringe a Valid Claim of a patent or patent application owned by Roche and
available for license to IGEN that is not listed on the version of Exhibit
1 attached to this Agreement as of the Effective Time; or (b) any rights
(including any Valid Claims within the Licensed Patents) to inventions for
Instruments and/or automation of PCR Related Inventions.
1.20 "Licensed Product" means any product (excluding in all cases
stand alone enzyme reagents and Instruments) for use in connection with the
practice of PCR and/or the detection of a target nucleic acid in the
Licensed Fields (or (a) with respect to the DNA Manufacturing Field, shall
mean DNA Products, (b) with respect to the HLA Typing Field, shall mean a
reagent kit manufactured by IGEN or its Affiliates containing a
thermostable DNA polymerase in combination with all such other reagents,
enzymes or materials, whether packaged together or separately, as are
necessary to perform a PCR-based assay for the HLA Typing Field), the
manufacture, importation, use, offer for Sale or Sale of which would
infringe a Valid Claim of Licensed Patents, made by, on behalf of or for
IGEN or any of its Affiliates. Licensed Products include, but are not
limited to, any of the following or a combination of any of the following:
(a) a Complete Diagnostic Kit; and/or
(b) a Component System; and/or
(c) a reagent, accessory, device or system which is used or Sold to
be used by End-Users in connection with the practice of PCR and/or the
detection of a target nucleic acid, including the steps of sample
preparation, amplification and/or detection; and/or
(d) reagents Sold to be used by End-Users as replacement components
in regards to a Component System.
Licensed Products include Not Yet Approved or Not Yet Registered In
Vitro Human Diagnostics Products.
1.20A "Licensed Test" means the performance of a Licensed PCR Test or
a Licensed Expanded PCR Test by IGEN or its Affiliates in the Plasma
Testing Field for the purpose of determining nucleic acid sequences of any
one analyte in a Test Sample. Multiple performance of a Licensed Test for
any one analyte at any one point in time in any one Test Sample, for
reproducibility, shall be considered as one Licensed Test. Performance of a
multiplex PCR test shall be treated as multiple Licensed Tests; e.g., one
Licensed Test for each analyte targeted by the multiplex PCR test. See
examples provided in Section 4.5B.
a) "Licensed PCR Test" means the performance by IGEN or its
Affiliates of an analytical procedure that uses one or more Test
Processes.
b) "Licensed Expanded PCR Test" means the performance by IGEN or
its Affiliates of an analytical procedures that uses an Expanded Test
Process in addition to one or more Test Processes.
1.21 "Net Sales" has the meaning set forth in Article 3 herein.
1.22 "Not Yet Approved or Not Yet Registered In Vitro Human
Diagnostics Products" means Complete Diagnostic Kits and/or Component
Systems which are Sold to End-Users who use them for diagnostic purposes
and/or health care of a human subject and whose use is, in countries with
an approval or registration process, not yet approved by a regulatory
agency having jurisdiction over the Sale of such products regardless of
whether the labeling and/or other written materials accompanying such
products contain recommendations and/or instructions for such use. In
countries without an approval or registration process, the labeling has to
clearly identify the intended use of the product (e.g. "For In Vitro
Diagnostic Use"). The Parties agree that regulatory submissions for Not Yet
Approved or Not Yet Registered In Vitro Human Diagnostic Products shall, in
countries with an approval or registration process, if required, be filed
not more than twenty-four (24) months after the
A-13-5
first commercial Sale of such Not Yet Approved or Not Yet Registered In
Vitro Human Diagnostic Product.
1.23 "Patent Rights" means the Valid Claims of patents and patent
applications, including, without limitation: utility or design patents or
patent applications which are original; divisional, continuation or
continuation-in-part patents and patent applications; reexaminations,
extensions and reissues of patents; and confirmation patents, importation
patents, registration patents and patents of addition.
1.24 "Paternity Field" means analysis of human genetic material to
ascertain whether two or more individuals are biologically related, but
specifically excludes analysis of forensic evidence for a sexual assault
investigation. The Paternity Field specifically excludes the Human Identity
Field.
1.25 "PCR" means the technology involving the amplification of a
nucleic acid sequence and the complement of that sequence by repeated
cycles of oligonucleotide mediated, template directed synthesis involving
the extension of a primer oligonucleotide by incorporation of monomeric
nucleotide triphosphates whereby the sequence, its complement and
subsequent synthetic copies thereof are repeatedly separated and used as
templates for further cycles of synthesis.
1.26 "PCR Related Invention" means any process, method, test, kit,
reagent and/or group of reagents for performing or, by virtue of its
design, operation and/or construction, has no other substantial practical
utility than for performing, one or more of the following operations in
connection with the practice of PCR:
(a) Sample collection, preparation, transport and/or isolation of
nucliec acid sequences from a sample, that is, the treatment of a sample
in order to render a nucleic acid therein amplifiable and/or detectable,
which may have as its essential active reagents, for example, the cell
lysing, stabilization and/or precipitation reagents essential to expose
and prepare DNA for amplification and/or detection; and/or
(b) The amplification of one or more designated nucleic acid
sequences using PCR, which may have as its essential active reagents,
for example, the oligonucleotides and/or nucleotides, enzymes, buffers
and associated co-reactants essential to perform amplification of
nucleic acid using PCR; and/or
(c) Detection, that is, the treatment or modification of nucleic
acid amplified using PCR so as to render it detectable, identifiable
and/or quantifiable: which may include as its essential active reagents
labelled primers, probes (including binding partners or reporter
molecules), and fluorescent intercalating or tagging agents; and/or
(d) The synthesis, purification, labeling, and/or immobilization of
nucleic acid probes used in PCR (i.e., one or more compounds that
is/are: (y) composed of one or more nucleotides or analogs thereof; or
(z) capable of binding with one or more nucleotides or analogs thereof);
and/or
(e) The control of contamination.
1.26A "Plasma Testing Field" means the performance of a Licensed Test
solely for screening blood or blood products and/or quality control
purposes at various stages in the production of blood products, and shall
specifically exclude any use of a test result for diagnostic or treatment
of disease in any particular individual. IGEN and its Affiliates may notify
potentially infected donors of the results of Licensed Tests when either
(a) such notifications required by law or governmental regulation, or (b)
such potentially infected person is charged a fee by IGEN or its Affiliates
for such notification. When potentially infected donors are notified in
accordance with either (a) or (b) above, such notification shall not be
considered as use of a test result for diagnosis or treatment of disease in
any particular individual.
A-13-6
1.27 "Reagent Agreement Plan" or "RAP" means a program (whether known
as a Reagent Agreement Plan, Reagent Rental Plan or other successor or
similar plan) for the Sale of one or more Component Systems in conjunction
with the supply of an Instrument whereby the price for such Royalty Product
includes the acquisition cost or leasing cost of an Instrument, the cost of
servicing such Instrument, interest charged for the financing of such
Instrument, and/or other items of cost recovery in connection with the
supply of such Instrument.
1.28 "Research Collaborator" means a Third Party performing research
and development for IGEN and/or its Affiliates under a contract with IGEN
and/or any of its Affiliates, which contract:
(a) Provides that the work performed by such Third Party under the
contract (which shall include a protocol) is directed toward the
development of Licensed Products; and
(b) Provides that the reagents necessary to perform the work under
the contract are supplied free of charge by IGEN or its Affiliates and
requires that such reagents may be used only for the development of
Licensed Products and that any reagents not consumed in performing the
work under the contract either be returned to IGEN and its Affiliates or
be disposed of as laboratory waste.
1.29 "Roche Patented Enzyme" means any enzyme the manufacture, use or
Sale of which would Infringe a Valid Claim of a Roche patent within
Licensed Patents, provided that such Valid Claim is a composition of matter
claim.
1.30 "Royalty Payment Period" means the period beginning on the
Effective Time and ending on the expiration of the current calendar quarter
and each calendar quarterly period thereafter.
1.31 "Royalty Product" means (a) any Licensed Product Sold for use in
the In Vitro Human Diagnostics, Animal Diagnostics, HLA Typing and
Paternity Testing Fields, (b) any Licensed Product made in the DNA
Manufacturing Field, (c) any Instrument, accessory, device or system made
by, on behalf of or for IGEN or any of its Affiliates and Sold (whether or
not pursuant to or in connection with a RAP) for use with Licensed
Product(s) in the Licensed Field(s) where the manufacture, importation,
use, offer for Sale or Sale of Instrument, accessory, device or system
would infringe a granted or issued Valid Claim of Licensed Patents, and (d)
the performance of Licensed Tests internally for screening of IGEN's or its
Affiliates' own blood products.
1.32 "Sale" means the act of selling, leasing or otherwise placing or
distributing (including by means of Reagent Agreement Plans).
1.33 "Sell" means to make or cause to be made a Sale.
1.34 "Sold" means to have made or caused to be made a Sale.
1.34.1 "Territory" includes all countries of the world.
1.34.2 "Test Process" means with respect to the Plasma Testing Field
(a) the polymerase chain reaction process covered by the method claims of
US 4,683,195 and 4,683,202, the foreign counterparts thereof and any
reissue and/or reexamination patent rights thereof, (b) the reverse
transcription process covered by the method claims of US 5,407,800, US
5,322,770 and US 5,310,652, the foreign counterparts thereof and any
reissue and/or reexamination patent rights thereof, or (c) the method
claims of US 5,008,182, US 5,176,995 and US 5,219,727, and claims 1-4, 8, 9
and 15-18 of US 5,476,774, the foreign counterparts thereof and any reissue
and/or reexamination patent rights thereof.
1.34.3 "Test Sample" means human blood or plasma or any product
derived therefrom.
1.35 "Third Party" means any person that is neither a Party to this
Agreement nor an Affiliate of any Party to this Agreement.
1.36 "Valid Claim" shall mean in any country the claim of a patent or
pending patent application which (a) has not expired, (b) has not been
disclaimed or (c) has not been revoked, held
A-13-7
invalid or otherwise declared unenforceable by a tribunal of competent
jurisdiction over such claim in such country from which no further appeal
has or may be taken.
ARTICLE 2
GRANTS
2.1 Grant of License by Roche to IGEN.
(a) Subject to the terms and conditions of this Agreement, Roche
grants to IGEN and its Affiliates, a non-exclusive worldwide right and
license under the Licensed Patents as follows:
(i) to make, have made, import, use, offer to Sell and Sell
Licensed Products in the Licensed Fields in the Territory, and authorize
End-Users to perform Diagnostic Services using such Licensed Products in
the Licensed Fields in accordance with the label license provided with
the purchase of such Licensed Products as set forth in Article 5 below
(the "LABEL LICENSE").
(ii) to grant a limited, non-transferable, royalty free sublicense
under the Licensed Patents to Research Collaborators of IGEN and/or its
Affiliates to practice PCR under their respective contracts with IGEN
and/or its Affiliates, in accordance with the terms and conditions of
this Agreement, solely for purposes of doing applied research and
development, improvement, quality control and/or quality assurance for
IGEN and/or its Affiliates of Licensed Products to be Sold or otherwise
commercialized in the Licensed Fields in accordance with the other terms
and conditions of this Agreement; and
(iii) to use PCR technology internally at IGEN or its Affiliates
for the research, development, improvement and quality control and
quality assurance of Licensed Products for Sale in the Licensed Fields,
and to practice PCR technology solely in the United States to make
Licensed Products in the DNA Manufacturing Field; and
(iv) to perform Licensed Tests within the Plasma Testing Field
within the Territory for internal use only.
2.2 Sublicensing. Except as provided in Section 2.1(a)(ii), neither IGEN
nor any of its Affiliates may sublicense any rights granted under this Agreement
or convey any implied license except through valid Label Licenses.
2.3 Restrictions. Notwithstanding the foregoing, IGEN understands and
agrees that the above licenses to IGEN and its Affiliates shall not include:
(a) the right to grant sublicenses or to convey any implied licenses,
except to the limited extent expressly provided in Sections 2.1(a)(ii) and
2.2 and Article 5;
(b) the right to Sell Roche Patented Enzymes (stand alone) for use
with Component Systems made by or for IGEN or its Affiliates;
(c) the right to convey with the Sale of any enzyme, Instrument or
other product on a stand-alone basis, i.e. independent of the Sale of a
Component System or a Complete Diagnostic Kit which has a Label License
bearing the legends set forth in Article 5, the right to practice any
process, method or test covered by a Valid Claim of any of the Licensed
Patents;
(d) the right to "have made" Roche Patented Enzymes;
(e) the right to "have made" Licensed Products (other than Roche
Patented Enzymes) by a Third Party (except as permitted by Section 2.4
below), and provided further that:
(i) all of such products so manufactured by such Authorized Third
Party carry IGEN's or its Affiliates' own name and those trademarks,
tradenames, brand names and/or labels that IGEN or its Affiliates is
using on such products when Sold by IGEN or its Affiliates and, in the
event that any such products also carry the name of such Authorized
Third Party, it shall be only
A-13-8
to the effect that such Authorized Third Party manufactured such
product, or a part thereof, for IGEN or its Affiliates and is otherwise
consistent, including by its size and location, with recognition of the
product as an IGEN (or its Affiliate's) product; and
(ii) all such products so manufactured by such Authorized Third
Party are purchased by or otherwise transferred to IGEN or its
Affiliates and/or otherwise sold by IGEN or its Affiliates to End-Users;
and
(iii) such Authorized Third Party manufacturing for IGEN shall not
be a seller or distributor of unlicensed products (which products
Infringe Valid Claims of the Licensed Patents) in connection with the
manufacturing operations for IGEN;
(f) the right, under Licensed Patents, for IGEN or its Affiliates to
perform or otherwise engage in Diagnostic Services, other than clinical
trials performed by or on behalf of IGEN or its Affiliates for purposes of
clinical research and development of Licensed Products or the registration
of Licensed Products; or
(g) the right to convey the necessary rights for End-Users to perform
PCR based Diagnostic Services under the Licensed Patents in the Licensed
Fields, except in conjunction with the Sale of a Complete Diagnostic Kit.
2.4 Included Rights.
(a) The rights and licenses granted in Section 2.1 hereof include: (i)
the right of IGEN or its Affiliates to grant to its distributors, contract
manufacturers, toll manufacturers, component suppliers, leasing agents and
other third parties engaged by IGEN or its Affiliates to assist IGEN or its
Affiliates in commercializing the intellectual property rights licensed
hereunder (the "Authorized Third Parties") immunity from suit under the
licensed intellectual property rights, and (ii) the right of IGEN or its
Affiliates to grant immunity from suit under the licensed intellectual
property rights to IGEN's or its Affiliate's customers for use or
subsequent sale of the Licensed Products, in each case only as permitted
within the limitations of this Agreement.
(b) No rights are licensed or deemed licensed to IGEN or its
Affiliates hereunder or in connection herewith, other than those rights
specifically licensed to IGEN or its Affiliates in Section 2.1 or 2.3(e)
above and as permitted in this Section 2.4.
2.5 Grant Back Licenses/Additional Licenses. At the request of Roche,
IGEN shall enter into good faith negotiations with Roche for a worldwide,
royalty-bearing, field-limited, non-exclusive license agreement with respect to
IGEN Patent Rights claiming PCR Related Inventions. At the request of IGEN,
Roche shall enter into good faith negotiations with IGEN with respect to a
license under Licensed Patents for fields other than the Licensed Field ("Other
Field(s)") when Roche has the right to grant such license in such Other Field(s)
to IGEN and Roche makes it a practice to license such Other Fields to Third
Parties.
ARTICLE 3
NET SALES
3.1 Calculation of Net Sales. Net Sales with respect to the Sale of
Royalty Products for use in the Licensed Fields, other than the Plasma Testing
Field, by an IGEN Seller to End-Users shall mean the gross invoice price to
End-Users for such Royalty Products, less: (a) deductions for allowances,
discounts, including cash discounts, and returns all to the extent customarily
given in the trade by the IGEN Seller (except that discounts, credits or similar
allowances provided to purchasers of Royalty Products in consideration of the
purchaser's agreement to purchase non-Royalty Products shall not be deducted),
(b) sales taxes, duties and transportation, if separately stated on the invoice,
(c) amounts repaid or credited by reason of rejection or return, (d) outbound
transportation costs prepaid or allowed and costs of insurance in transit and
handling charges (or other similar charges), and/or (e) compulsory payments and
A-13-9
rebates to Third Parties related to the Sale of the Licensed Products paid or
payable pursuant to agreements (including, without limitation, managed care
agreements) or governmental regulations.
3.2 Distributor Net Sales. In the event Royalty Products are Sold to
Distributors and IGEN cannot obtain accurate and complete Net Sales for Sales by
the Distributors to the End Users of such Royalty Products, then IGEN may use
the gross invoice price for the Sale of Royalty Products by IGEN or its
Affiliates to the Distributors, less the allowable adjustments as set forth in
3.1 above, multiplied by 1.67 as the Net Sales for such Royalty Products.
3.3 RAP Sales. In the case of the Sale under a Reagent Agreement Plan of
a Component System, the Net Sales of such Component System shall be reduced by a
percentage ("RAP DEDUCTION") to allow for deduction of non-manufactured service
charges included in such Net Sales, including such charges as interest for the
financing of Instruments supplied and the cost of Instrument service. The RAP
Deduction (a) shall be determined by IGEN according to generally accepted
accounting principles prior to the first commercial Sale of such Component
System and shall be subject to the reasonable acceptance of Roche, and (b) shall
be adjustable by IGEN, but not more than once per calendar year, and subject to
reasonable acceptance by Roche.
3.4 Interaffiliate Transfers. If IGEN transfers any Royalty Product to an
Affiliate which becomes the End-User, then the Net Sales of such Royalty Product
shall be determined based the average Net Sales of such Royalty Product to all
Third Party End-Users during the accounting period or, if no average Net Sales
of such Royalty Product is available for such period, at a reasonable value
based upon the average prices, as actually sold, of products available in the
marketplace similar to such Royalty Product.
3.5 Royalty Products with Multiple Uses.
(a) Where Royalty Products are Sold for use in connection with the
practice of PCR, but are also used by End-Users for purposes other than in
connection with the practice of PCR, the Net Sales of such Royalty Product
shall be the proportion of the Net Sales thereof equal to the proportion of
such Royalty Product's use in connection with the practice of PCR, provided
that IGEN reasonably demonstrates to Roche the proportionate uses of such
Royalty Product in accordance with generally accepted accounting
principles.
(b) Where the Royalty Product in subsection (a) above is an Instrument
which is Sold independently of a Reagent Agreement Plan in a given Royalty
Payment Period, then the royalties payable on the Net Sales of such
Instruments shall equal the Net Sales of such Instruments multiplied by the
fraction A/B where A is the number of assays Sold for use in such
Instruments in such period involving the practice of PCR, and B is the
aggregate number of assays of all types Sold for use in such Instruments in
such period.
ARTICLE 4
CONSIDERATION AND PAYMENTS
4.1 License Fee Due to Roche. IGEN shall pay to Roche a non-refundable,
non-creditable license fee in the amount of FIFTY MILLION DOLLARS
(US$50,000,000) as follows:
(a) IGEN shall pay to Roche/Basel a non-refundable, non-creditable
license fee of TWENTY-FIVE MILLION DOLLARS (US$25,000,000) (the "Basel
Fee") no later than two (2) Business Days following the Effective Time; and
(b) IGEN shall pay to Roche/USA a non-refundable, non-creditable
license fee of TWENTY-FIVE MILLION DOLLARS (US$25,000,000) (the "USA Fee")
payable no later than two (2) Business Days following the Effective Time.
"Business Day" shall mean any day other than a Saturday, Sunday and
any day on which the banks in Germany, Switzerland or the United States or
the federal courts in the United States are permitted or required by
applicable law to close.
A-13-10
The Basel Fee and the USA Fee shall be paid in US Dollars made by wire
transfer to the following accounts:
Basel Fee:
UBS AG, Zurich, Switzerland
To the account of: F. Hoffmann-La Roche Ltd
Account No. 230-10345032.0
SWIFT Code: UBSWCHZH80A
With the reference: DI-PCI-9962
USA Fee:
Roche Molecular Systems, Inc.
Chase Manhattan Bank of New York
ABA No.: 02000021
Account No.: 32389657
4.2 Royalties Due to Roche/Basel for products Sold in the In Vitro
Diagnostics Field. IGEN shall account to and pay to Roche/Basel for each
Royalty Payment Period during the term of this Agreement a royalty equal to the
percentages, listed below, of the Net Sales of Royalty Products that are (i) in
the In Vitro Human Diagnostics Field, (ii) Sold in any of the European Union
Member States, Switzerland, Norway, Liechtenstein or Iceland ("EUROPE"), and
(iii) at the time of such Sale, covered by, or the use thereof is covered by,
one or more Valid Claims of Licensed Patents in the country of Sale:
(a) 12% until December 31, 2005; and
(b) 6% thereafter.
4.3 Royalties Due to Roche/USA for products Sold in the In Vitro Human
Diagnostics Field. IGEN shall account to and pay to Roche/USA for each Royalty
Payment Period during the term of this Agreement a royalty equal to the
percentages, listed below, of the Net Sales of Royalty Products that are (i) in
the In Vitro Human Diagnostics Field, (ii) Sold in the United States, and (iii)
at the time of such Sale, is covered by, or the use thereof is covered by, one
or more Valid Claims of Licensed Patents in the United States:
(a) 12% until December 31, 2005;
(b) 8% from January 1, 2006 until December 31, 2010; and
(c) 7% thereafter.
4.4 Other Royalties to Roche/Basel for products Sold in the In Vitro Human
Diagnostics Field. IGEN shall account to and pay to Roche/Basel for each Royalty
Payment Period during the term of this Agreement a royalty equal to the
percentages, listed in Section 4.3 (a), (b) and (c), of the Net Sales of Royalty
Products that are (i) in the In Vitro Human Diagnostics Field, (ii) Sold in any
country or territory of the world excluding the United States and Europe, and
(iii) at the time of such Sale, covered by, or the use thereof is covered by,
one or more Valid Claims of Licensed Patents in the country of Sale.
4.5 Other Royalties to Roche/USA. IGEN shall account to and pay to
Roche/USA for each Royalty Payment Period during the term of this Agreement a
royalty equal to the percentages listed in Section 4.5 (a) and (b) below, of the
Net Sales of Royalty Products that are (i) in the Animal Diagnostics Field and
the Paternity Field, (ii) Sold in any country or territory of the world, and
(iii) at the time of such Sale covered by, or the use thereof is covered by, one
or more Valid Claims of Licensed Patents in the country of sale:
(a) For Royalty Products in the Animal Diagnostics Field:
(i) 8% until December 31, 2005;
(ii) 5% from January 1, 2006 until December 31, 2010; and
A-13-11
(iii) 4% thereafter.
(b) For Royalty Products in the Paternity Field:
(i) 12% until December 31, 2005;
(ii) 8% from January 1, 2006 until December 31, 2010; and
(iii) 7% thereafter.
4.5A [Reserved].
4.5B Royalties Due to Roche in the Plasma Testing Field. IGEN shall
account to and pay to Roche/USA for each Royalty Payment Period during the term
of this Agreement a royalty equal to the amounts listed below for Licensed Tests
that are (i) in the Plasma Testing Field, and (ii) at the time of such test
covered by, or the use thereof is covered by, one or more Valid Claims of
Licensed Patents in the country where the Licensed Test is performed:
a) sixteen dollars ($16) for each Licensed PCR Test performed in any
country or territory of the world by IGEN or its Affiliates, or
b) twenty-five dollars ($25) for each Licensed Expanded PCR Test
performed in any country or territory of the world by IGEN or its
Affiliates.
The following examples are presented for clarification of the
procedure to be followed in determining the royalties due for Licensed
Tests, where Licensed PCR Tests or Licensed Expanded PCR Tests, performed
internally by IGEN or its Affiliates, for both initial screening of pools
and reflux testing necessary to detect the positive sample(s) in a pool
identified as a true positive.
a) Licensed Tests performed for initial screening: Number of pools
multiplied by the number of analytes tested for multiplied by the fixed
royalty rate for a Licensed Expanded PCR Test (e.g., 700 pools X 3 (HCV,
HIV, HBV) X $25 = $52,500)
b) Licensed Tests performed for reflux testing: Number of true
positive samples multiplied by the number of reflux tests performed to
identify each positive sample. For example, in a pool size of 600 which is
subdivided in 6 pools with 100 samples each, the following would apply: The
6 pools of 100 are each tested (6 tests). The individual members of these 6
pools are arranged in a 10x10 matrix (10 rows with 10 individual samples in
each row and 10 columns with 10 individual samples in each column). Each
row is pooled as a pool of 10. Each column is pooled as a pool of ten.
These 20 pools of ten are then tested to identify the positive member by
row and column (20 tests). Thus, in order to detect a positive plasma, 26
Licensed Test would have to be processed. In the event that 15 true
positive plasmas were identified by Licensed Expanded PCR Tests the royalty
would be calculated as 15 X 26 X $25 = $9,750).
Reference or control PCR tests carried on in connection with testing
of a Test Sample shall be royalty free. If a new chemical or a new lot of
chemical is introduced into the testing which make control tests necessary,
such tests shall be royalty free.
4.5C Royalties Due to Roche for products Sold in the DNA Manufacturing
Field. IGEN shall account to and pay to Roche/USA for each Royalty Payment
Period during the term of this Agreement a royalty equal to the percentages
listed below, of the Net Sales of Licensed Products that are (i) in the DNA
Manufacturing Field, (ii) Sold in any country or territory of the world, and
(iii) at the time of such Sale covered by, or the use thereof is covered by, one
or more Valid Claims of Licensed Patents in the country of sale:
(a) for direct Sales of such Licensed Products to end users, earned
royalties equal to three percent (3%) of such Net Sales; and
(b) for Sales of such Licensed Products to distributors, earned
royalties equal to five percent (5%) of such Net Sales.
A-13-12
4.5D Royalties Due to Roche for products Sold in the HLA Typing
Field. IGEN shall account to and pay to Roche/Basel for each Royalty Payment
Period during the term of this Agreement a royalty equal to the percentages
listed below, of the Net Sales of Licensed Products that are (i) in the HLA
Typing Field, (ii) Sold in any country or territory of the world, and (iii) at
the time of such Sale covered by, or the use thereof is covered by, one or more
Valid Claims of Licensed Patents in the country of sale:
(a) a royalty of twenty percent (20%) on Net Sales of such Licensed
Products; provided, however, that such royalty rate shall apply only for so
long as any claim of U.S. Patent Nos. 4,683,195 or 4,683,202 (if Sold in
the United States), or any claim of corresponding foreign patent rights in
the country of Sale, shall be in force. Thereafter, the Parties shall
negotiate in good faith a reduced royalty rate for such Licensed Products
licensed hereunder.
4.6 Reporting and Payment.
(a) With respect to the royalties required pursuant to Section 4.2,
4.3 and 4.4 and 4.5D, IGEN shall, within sixty (60) days after the close of
each Royalty Reporting Period, provide to:
KPMG Fides Peat
Steinengraben 5
CH-4003 Basel, Switzerland
To the attention of: Licensing Trustee
Fax: +41 61 286-9401
or another trustee as notified to IGEN by Roche, an account of all Net
Sales of such Royalty Products outside the United States and within the
United States and of the royalty due pursuant to Section 4.2, 4.3 and
4.4 and 4.5D in respect to the preceding Royalty Reporting Period,
according to the royalty report forms in Exhibit "2". Simultaneously,
when it delivers such account, IGEN shall make payment of the royalty
amount shown, as follows:
Credit Suisse, Basel
Switzerland
Account No. 0504/920 654/62-1
SWIFT Code: CRESCHZZ40R
To the account of: KPMG Fides Peat
With the reference: DI-PC1-9962
Each royalty report of IGEN will be released by KPMG Fides Peat to Roche
after one (1) calendar year following the subject Royalty Reporting
Period.
(b) The royalties payable by IGEN in US Dollars to Roche on the Net
Sales outside of the United States of all Royalty Products by the IGEN
Sellers in the Licensed Fields shall be converted by IGEN from the currency
in which the Sales were made to US Dollars converted using the method used
by IGEN for internal financial reporting purposes in accordance with United
States generally accepted accounting principles.
(c) With respect to the royalties required pursuant to Section 4.5,
4.5B or 4.5C, IGEN shall, within sixty (60) days after the close of each
Royalty Reporting Period provide to:
Roche Molecular Systems, Inc.
1145 Atlantic Avenue
Alameda, CA 94501
Attention: Licensing Department
an account, on a U.S./ex-U.S. basis, of all Net Sales of such Royalty
Products Sold and of the royalty due pursuant to Section 4.5, 4.5B or
4.5C in respect to the Royalty Reporting Period, according to the
royalty report forms in Exhibit "3". Simultaneously, when it delivers
such
A-13-13
account, IGEN shall make payment of the royalty due in US Dollars by
wire transferred to the bank account as shown below:
Roche Molecular Systems, Inc.
Chase Manhatten Bank of New York
ABA No.: 02000021
Account No.: 323839657
4.7 Withholding.
(a) Any withholding tax levied by a government, in the country where
payment originates, on payments made by IGEN to Roche shall be borne by
Roche. IGEN shall use commercially reasonable efforts to do all things
necessary to enable Roche to claim exemption therefrom under any double
taxation or similar agreement in force and shall produce to Roche proper
evidence of payment of all withholding tax and other certification that
might be required by the respective double taxation agreement.
(b) In case any taxing authority holds: (i) that any payment from any
Affiliate of IGEN to IGEN is in effect a royalty payment from such
Affiliate of IGEN to Roche, and (ii) such royalty payment to Roche is
subject to a withholding tax, then, at such time, the Parties will discuss
the issue and try to find an appropriate solution satisfying the business
interests of both Parties.
(c) Except as otherwise provided in subsections (a) and (b) above, all
payments of royalties and other consideration made by IGEN to Roche under
this Agreement shall be made in full without deduction of taxes, charges
and any other duties that may be imposed on such payments to Roche.
4.8 Books and Records.
(a) IGEN shall keep a complete and accurate set of books and records
relating to the quantity of Royalty Products shipped by or for IGEN and its
Affiliates and the Sales of Royalty Products by IGEN and its Affiliates.
Such books and records shall contain sufficient detail to substantiate the
computation of the Net Sales of Royalty Products and the amount of
royalties payable under this Article 4 as well as all other information in
the statements of account provided for in Section 4.7 above, and shall be
maintained by IGEN for a period of not less than three (3) years from the
date of such Sales.
(b) Roche shall be entitled, upon reasonable notice to IGEN, to have
such books and records audited by an independent certified public
accounting firm retained by Roche and reasonably acceptable to IGEN (which
acceptance shall not be unreasonably withheld), provided that any such
audit occurs during IGEN's normal business hours not more than once in any
calendar year. Roche also shall be entitled to have copies of the books and
records of each of IGEN's Affiliates relating to the quantity of Royalty
Products shipped by or for such Affiliate and such Affiliate's Sales of
Royalty Products audited, upon reasonable notice to such Affiliate, by an
independent certified public accounting firm retained by Roche and
reasonably acceptable to such Affiliate, provided that any such audit
occurs during such Affiliate's normal business hours not more than once in
any calendar year. Roche agrees that all audited information shall be
confidential to IGEN and IGEN's Affiliates. Any such audit will be limited
to those records required to be maintained pursuant to Section 4.8(a) and
the Sales associated therewith.
(c) Any person conducting an audit on behalf of Roche will be required
to protect the confidentiality of such information and shall provide to
Roche a report only of the ultimate conclusions resulting from such audit.
Except where IGEN disputes the conclusion of the audit by written notice to
Roche, IGEN shall pay promptly to Roche the amount of any royalties
determined by such an audit to be outstanding, along with interest accrued
up to and including the date of payment as provided in Section 4.9 below.
The costs of such an audit shall be borne by Roche; provided, however,
that, if such audit determines that the royalties paid by IGEN for any
audited Royalty Payment Period were at least five percent (5%) less than
the royalties otherwise due and
A-13-14
payable, then IGEN shall reimburse Roche for the costs of such audit. If
such audit determines that IGEN has overpaid the amount of royalties
otherwise due and payable for the audited Royalty Payment Period, then
Roche shall credit the amount of such overpayment, plus interest at the
rate provided in Section 4.9, to IGEN against future royalties payable by
IGEN.
4.9 Past Due Payments. If IGEN fails to pay any amount specified under
this Agreement after the due date thereof, the amount owed shall bear an
interest of one percent (1%) per month from the due date until paid, provided,
however, that if this interest rate is held to be unenforceable for any reason,
the interest rate shall be the maximum rate allowed by law at the time the
payment is made.
4.10 No Multiple Royalties. At no time shall more than one royalty be
payable by IGEN upon the Net Sales of any one Royalty Product, regardless of
whether the manufacture, use and/or Sale of such Royalty Product would infringe
more than one Valid Claim of one or more Licensed Patents and regardless of
whether such product qualifies as a "Royalty Product" for purposes of this
Agreement under more than one of the criteria for designating a product to be a
"Royalty Product" as provided in Section 1.31 above.
4.11 Most Favored Licensee.
(a) If, after the Effective Time, Roche grants to any Third Party a
license in the In Vitro Human Diagnostics Field under substantially
equivalent terms and conditions as granted to IGEN herein but under more
favorable royalty rates than those given to IGEN under this Agreement,
Roche shall promptly notify IGEN of such more favorable royalty rates, and
IGEN shall have the right and option to substitute such more favorable
royalty rates for the royalty rates contained herein.
(b) IGEN's right to elect such more favorable royalty rates shall
extend only for so long as and shall be conditioned on IGEN's acceptance of
all the same conditions, favorable or unfavorable, under which such more
favorable royalty rates shall be available to such Third Party including
any increase in license fees and the application of milestones payments, if
any. Upon IGEN's acceptance of all such terms of such Third Party
agreement, the more favorable royalty rates shall be effective as to IGEN
on the effective date of such Third Party agreement.
(c) Notwithstanding the foregoing, in the event that Roche shall
receive substantial nonmonetary consideration in the form of technology or
intellectual property rights to technology, as a part of the consideration
for its granting such a license to a Third Party, then this Section 4.11
shall not apply.
(d) It is understood by the Parties that a trustee has been appointed
by Roche, who will be managing certain of the royalty reporting and royalty
payments from IGEN to Roche under this Agreement as described in Sections
4.2, 4.3 and 4.4. IGEN is entitled to contact the trustee should IGEN wish
to review compliance by Roche with this Section 4.11. At present, KPMG
Fides Peat, Basel, Switzerland is the said trustee. Roche shall promptly
provide written notice to IGEN of any change in trustee.
ARTICLE 5
LABEL LICENSES
5.1 Label Licenses on Royalty Products Sold in the In Vitro Human
Diagnostics, Animal Diagnostics, HLA Typing, Paternity Testing and DNA
Manufacturing Fields.
(a) IGEN agrees that it shall mark conspicuously all Component Systems
for amplification made by or for it, and shall cause each of its Affiliates
to mark conspicuously all such Component Systems made by or for such
Affiliates, with a Label License bearing the following legend or such
alternative legend as shall be mutually agreed to by the Parties:
THE PURCHASE OF THIS PRODUCT ALLOWS THE PURCHASER TO USE IT FOR
AMPLIFICATION OF NUCLEIC ACID SEQUENCES FOR HUMAN IN VITRO DIAGNOSTICS [OR
ANIMAL DIAGNOSTICS, OR HLA TYPING OR PATERNITY TESTING,
A-13-15
AS THE CASE MAY BE]. NO GENERAL PATENT OR OTHER LICENSE OF ANY KIND OTHER
THAN THIS SPECIFIC RIGHT OF USE FROM PURCHASE IS GRANTED HEREBY.
(b) IGEN agrees that it shall mark conspicuously all Component Systems
for detection made by or for it, and shall cause each of its Affiliates to
mark conspicuously all such Component Systems made by or for such
Affiliates, with a Label License bearing the following legend or such
alternative legend as shall be mutually agreed to by the Parties:
THE PURCHASE OF THIS PRODUCT ALLOWS THE PURCHASER TO USE IT FOR
DETECTION OF NUCLEIC ACID SEQUENCES FOR HUMAN IN VITRO DIAGNOSTICS [OR
ANIMAL DIAGNOSTICS, OR HLA TYPING OR PATERNITY TESTING, AS THE CASE MAY
BE]. NO GENERAL PATENT OR OTHER LICENSE OF ANY KIND OTHER THAN THIS
SPECIFIC RIGHT OF USE FROM PURCHASE IS GRANTED HEREBY.
(c) IGEN agrees that it shall mark conspicuously all Component Systems
for amplification and detection made by or for it, and shall cause each of
its Affiliates to mark conspicuously all such Component Systems made by or
for such Affiliates, with a Label License bearing the following legend or
such alternative legend as shall be mutually agreed to by the Parties.
THE PURCHASE OF THIS PRODUCT ALLOWS THE PURCHASER TO USE IT FOR
AMPLIFICATION OF NUCLEIC ACID SEQUENCES AND FOR DETECTION OF NUCLEIC ACID
SEQUENCES FOR HUMAN IN VITRO DIAGNOSTICS [OR ANIMAL DIAGNOSTICS, OR HLA
TYPING OR PATERNITY TESTING, AS THE CASE MAY BE]. NO GENERAL PATENT OR
OTHER LICENSE OF ANY KIND OTHER THAN THIS SPECIFIC RIGHT OF USE FROM
PURCHASE IS GRANTED HEREBY.
(d) IGEN agrees that it shall mark conspicuously all Royalty Products
other than Component Systems for amplification, Component Systems for
detection, Component Systems for amplification and detection, and Complete
Diagnostic Kits made by or for it and Sold in the In Vitro Human
Diagnostics, Animal Diagnostics, HLA Typing, Paternity Testing and DNA
Manufacturing Fields, and shall cause each of its Affiliates to mark
conspicuously all such Royalty Products, with the following legend or such
alternative legend as shall be mutually agreed to by the Parties:
THE PURCHASE OF THIS PRODUCT ALONE DOES NOT IMPLY ANY LICENSE UNDER
PATENTS OWNED BY ROCHE MOLECULAR SYSTEMS, INC., F. HOFFMANN-LA ROCHE LTD OR
ROCHE DIAGNOSTICS GMBH COVERING PCR AMPLIFICATION OR DETECTION.
(e) IGEN agrees that it shall mark conspicuously all Royalty Products
in the DNA Manufacturing Field made by or for it and Sold, all such Royalty
Products, with the following legend or such alternative legend as shall be
mutually agreed by the Parties:
THIS PRODUCT WAS MADE USING THE POLYMERASE CHAIN REACTION ("PCR")
PROCESS WHICH IS COVERED BY PATENTS OWNED BY ROCHE MOLECULAR SYSTEMS, INC.
AND F. HOFFMANN-LA ROCHE LTD. NO LICENSE TO USE THE PCR PROCESS IS CONVEYED
EXPRESSLY OR BY IMPLICATION TO THE PURCHASER BY THE PURCHASE OF THIS
PRODUCT. INFORMATION ON PURCHASING LICENSES TO PRACTICE THE PCR PROCESS MAY
BE OBTAINED BY CONTACTING THE LICENSING DEPARTMENT, ROCHE MOLECULAR
SYSTEMS, INC., 1145 ATLANTIC AVENUE, ALAMEDA, CALIFORNIA 94501.
(e) IGEN agrees that it shall mark conspicuously all Complete
Diagnostic Kits made by or for it, and shall cause each of its Affiliates
to mark conspicuously all Complete Diagnostic Kits made by
A-13-16
or for such Affiliates, with a Label License bearing the following legend
or such alternative legend as shall be mutually agreed to by the Parties:
THE PURCHASE OF THIS PRODUCT ALLOWS THE PURCHASER TO USE IT FOR
AMPLIFICATION AND DETECTION OF NUCLEIC ACID SEQUENCES FOR HUMAN IN VITRO
DIAGNOSTICS [OR ANIMAL DIAGNOSTICS, OR HLA TYPING OR PATERNITY TESTING, AS
THE CASE MAY BE]. NO GENERAL PATENT OR OTHER LICENSE OF ANY KIND OTHER THAN
THIS SPECIFIC RIGHT OF USE FROM PURCHASE IS GRANTED HEREBY
5.2 Maintenance of Label Licenses by Distributors. IGEN agrees to use its
reasonable efforts to ensure that the IGEN Distributors maintain on all Royalty
Products Sold by such Distributors the Label Licenses provided for in this
Article 5 that are to be applied by IGEN and its Affiliates.
5.3 Misuse by Purchasers of Licensed Products. In the event that Roche
becomes aware that any purchaser of any Licensed Product is misusing the
purchased Licensed Product in violation of the applicable Label License on such
Licensed Product and therein is infringing the Licensed Patents, Roche shall
provide evidence of such misuse to IGEN. Upon receipt of such evidence, IGEN
shall notify such purchaser of the purchaser's misuse and shall use its
reasonable efforts to obtain a written assurance from such purchaser that the
purchaser shall not engage in such misuse in the future. If the purchaser
refuses to provide such written assurance, then IGEN shall cease, to the extent
permitted by any applicable law or statute, the Sale to such purchaser of the
Licensed Product which was being misused until such time as the purchaser
provides such written assurance. If, notwithstanding the purchaser's provision
of such written assurance, the purchaser persists in misusing the Licensed
Product, then IGEN, on receiving actual knowledge of such continued misuse,
shall discontinue, to the extent permitted by any applicable law or statute, the
Sale to such purchaser of such Licensed Product.
5.4 Additional Label Licenses. In addition to the Label Licenses provided
for in Section 5.1 above, Roche may request that IGEN apply additional Label
Licenses on Licensed Products made by or for IGEN or its Affiliates. The Parties
shall negotiate in good faith concerning the need for and/or the content of any
such additional Label Licenses.
5.5 Incorrect Application of Label Licenses. In the event that Roche
notifies IGEN that IGEN or any of its Affiliates is incorrectly applying one of
the Label Licenses provided for above, then IGEN shall consult and cooperate
with Roche in taking such reasonable steps as it or Roche may suggest to apply
such Label License correctly and comply with the provisions of this Article 5.
ARTICLE 6
THIRD PARTY CLAIMS; LIMITATION ON LIABILITY; INDEMNIFICATION
6.1 Defense of Third Party Infringement Actions. If the manufacture,
production, sale, or use of any Licensed Product results in a claim, suit or
proceeding brought by a Third Party (each, an "Action") alleging patent
infringement against ROCHE or IGEN (or any of their respective Affiliates), such
Party shall promptly notify in writing the other Party. The Party subject to
such Action (the "Controlling Party") shall have the exclusive right and
obligation to defend and control the defense of any such Action using counsel of
its own choice; provided that the Controlling Party shall not enter into any
settlement of such Action without the written consent of the other Party, which
consent may be withheld in the unfettered discretion of the other Party if such
settlement admits the invalidity or unenforceability of any patent rights of the
other Party, and otherwise may not be unreasonably withheld. The Controlling
Party agrees to keep the other Party reasonably informed of all material
developments in connection with any Action.
6.2 Product Liability Indemnity. IGEN expressly and unequivocally agrees
to and hereby does indemnify, release, defend and hold ROCHE (and its
Affiliates, sublicensees and licensors and their respective officers, directors,
shareholders, representatives, employees, consultants and agents and each of
A-13-17
the heirs, executors, successors and assigns of the foregoing) harmless from and
against all claims, damages, losses, costs and expenses, including reasonable
attorneys' fees, arising in favor of any person, resulting from or arising out
of liability in any way relating to the Licensed Products sold, placed or
otherwise commercialized by IGEN, or its Affiliates, Distributors, or Authorized
Third Parties, including without limitation, the manufacture, packaging, use,
sale or other distribution of Licensed Products by IGEN or its Affiliates, or
any representation made or warranty given by IGEN of any of its Affiliates with
respect to any Licensed Product provided that ROCHE (a) gives IGEN notice of
such claim, (b) cooperates with IGEN, at IGEN's expense, in the defense of such
claim, and (c) gives IGEN the right to control the defense and settlement of any
such claim, except that IGEN shall not enter into any settlement that affects
ROCHE's rights or interest without ROCHE's prior written approval. ROCHE shall
have no authority to settle any claim on behalf of IGEN. IGEN also agrees to
maintain proper product liability insurance policies, reasonably acceptable to
ROCHE everywhere it sells Licensed Products and to furnish satisfactory evidence
of same upon request by ROCHE from time to time.
6.3 Waiver of Claims. IGEN shall not assert, and IGEN shall ensure that
its Affiliates do not assert, any claims against ROCHE for any matter for which
IGEN has provided indemnity to ROCHE under Sections 6.2 and 6.4 hereof. IGEN
shall indemnify, hold harmless and defend ROCHE against any such claims.
6.4 Breach by Affiliate, Authorized Third Party or Research
Collaborator. Failure of an Affiliate, Authorized Third Party or Research
Collaborator to adopt and satisfy a condition stated in this Agreement
applicable to IGEN, an Affiliate, Authorized Third Party or Research
Collaborator, as the case may be, shall be considered a breach of this Agreement
by IGEN. IGEN and such Affiliate shall be jointly and severally responsible for
and indemnify ROCHE and its Affiliates (and their respective officers,
directors, shareholders, representatives, employees, consultants and agents and
each of the heirs, executors, successors and assigns of the foregoing) against
any loss, cost, damage or liability (including reasonable attorneys' fees)
arising from the breach by such Affiliate of this Agreement. IGEN shall
indemnify ROCHE and its Affiliates (and their respective officers, directors,
shareholders, representatives, employees, consultants and agents and each of the
heirs, executors, successors and assigns of the foregoing) against any loss,
cost, damage or liability (including reasonable attorneys' fees) arising from
the failure by an Authorized Third Party or Research Collaborator to adopt and
satisfy a condition stated in this Agreement applicable to such parties.
ARTICLE 7
PATENT ENFORCEMENT
7.1 Notice of Substantial Infringement. In the event IGEN becomes aware
of an alleged Substantial Infringement of a Licensed Patent in a given country
by an unlicensed Third Party, IGEN may invoke the provisions of this Article 7
as to enforcement and royalty abatement by providing written notice thereof to
Roche, including documentary evidence of Infringement and market data as to the
infringing Sales activity which are in Roche's good faith judgment reasonably
reliable. "SUBSTANTIAL INFRINGEMENT" or "SUBSTANTIALLY INFRINGING" as used in
this Article 7 shall mean that the alleged infringing Sales of the Third Party
in the given country are at least fifteen percent (15%) of total Sales of
Competing Products in such country. "COMPETING PRODUCTS" means all products
essentially equivalent to a Complete Diagnostic Kit and which test for the same
analytes and which directly compete with each other for use in or in conjunction
with PCR (for example, a test for the presence of an organism would not be
considered to be testing for the same analyte as a test for a specific drug
resistant subspecies of such organism, but two PCR-based tests both of which
detect the presence of HIV1 (even if using different sequences of the genome)
would be considered to be testing for the same analyte whereas two tests, one
for HIV1 and one for HIV2, would be considered to be testing for different
analytes).
7.2 Enforcement and Royalty Abatements. If Roche fails, within sixty (60)
days of such notice of Substantial Infringement of a Licensed Patent by a Third
Party in a given country, to enter into license negotiations with or enforcement
proceedings against such Third Party in such country, or if having timely
A-13-18
entered into license negotiations with such Third Party, Roche fails to obtain
an executed license agreement or enter into enforcement proceedings with such
Third Party within six (6) months of said notice, then IGEN shall be entitled to
a fifty percent (50%) reduction in royalties on IGEN's Net Sales of Royalty
Products which are Competing Products with such Substantially Infringing Sales
in such country as of such notice, continuing until Roche provides written
notice to IGEN that either a license has been granted to such Third Party or
enforcement proceedings have been brought against such Third Party. In the event
the Substantially Infringing Sales shall exceed thirty percent (30%) of total
competing Sales in any particular Royalty Payment Period, then the royalty
reduction shall be one hundred percent (100%) for such Royalty Payment Period.
An enforcement proceeding shall mean a court action or other legal action
brought before a competent patent authority in the relevant country. An
enforcement proceeding pursued against such infringer for Sales of such
infringing product in one Major Territory shall satisfy Roche's obligation to
pursue enforcement hereunder against such products in all countries. If no
Substantial Infringement exists in any such Major Territory, then a suit in any
other country where such Substantial Infringement exists shall satisfy Roche's
obligation hereunder. "MAJOR TERRITORY" shall mean any of the United States,
Great Britain, Germany, France, Italy, The Netherlands and Japan.
7.3 Continuing Royalty Payment Obligations. Except to the extent provided
in Section 7.2, IGEN's obligation to pay royalties on the Net Sales of Royalty
Products Sold by the IGEN Sellers shall remain in effect to the extent provided
for in this Agreement notwithstanding any alleged infringement by any Third
Party of any of the Licensed Patents.
7.4 No IGEN Right to Enforce the Licensed Patents. It is expressly
understood that nothing contained herein shall in any way grant or be construed
to grant to IGEN the right to enforce the Licensed Patents. Roche shall have the
sole right to bring legal action to enforce the Licensed Patents against any
alleged Infringement by any Third Party.
ARTICLE 8
TERM AND TERMINATION
8.1 Term. The term of this Agreement shall commence as of the Effective
Time and shall continue in full force and effect, unless terminated sooner in
accordance with Section 8.2 below, until the expiration date of the last to
expire of the Valid Claims of the Licensed Patents.
8.2 Termination. This Agreement, and the licenses granted to IGEN and its
Affiliates herein, are perpetual and irrevocable, except to the extent
termination is permitted in this Section 8.2:
(a) IGEN may terminate this Agreement with respect to all or any one
or more of the Licensed Patents for any reason by written notice to Roche
at any time during the term of this Agreement.
(b) Roche may terminate this Agreement immediately upon written notice
to IGEN if IGEN fails to make the payments in accordance with Section 4.1.
(c) In the event that IGEN does not make any royalty payments which
are due and payable (other than under Section 4.1), Roche may deliver
written notice thereof to IGEN. If IGEN, within sixty (60) days after
delivery of such notice to IGEN (the "Notice Period"), makes such payment
to Roche, then Roche shall not have the right to terminate this Agreement
for such non-payment. If, at the expiration of the Notice Period, IGEN has
neither paid such royalty payment to Roche nor disputed the payment
obligation in a written notice to Roche, then Roche may, upon written
notice to IGEN following the Notice Period, terminate this Agreement. If,
during the Notice Period, IGEN provides written notice to Roche that IGEN
disputes such payment obligation, then the Parties shall arbitrate such
dispute in accordance with Section 11.2. If the arbitration award requires
IGEN to pay all or any portion of such royalty payments to Roche (the
"Arbitrated Amount"), then IGEN shall pay such Arbitrated Amount to Roche
within thirty (30) days after final resolution of the dispute or, if IGEN
fails to do so, Roche may, upon written notice to IGEN following such
30-day period, terminate this Agreement. If the arbitration award does not
require IGEN to pay any portion of such
A-13-19
royalty payments to Roche, then Roche shall not have the right to terminate
this Agreement with respect to such claimed non-payment.
(d) Bankruptcy. IGEN shall retain the rights granted to it as a
licensee under Section 365(n) of the United States Bankruptcy Code in case
of the bankruptcy, insolvency or winding-up of ROCHE.
(e) Expiration or termination of this Agreement shall not affect the
ability of any Party to seek resolution of any matter arising prior to such
expiration or termination pursuant to Article 11 herein.
(f) The Parties agree that the provisions of this Section 8.2 shall
not be considered when making the determination pursuant to Section
4.11(a), nor amended in the event of exercise of Section 4.11(b).
(g) In the event of the termination of any license, in whole or in
part, under this Agreement, the manufacture and/or Sale by the IGEN Sellers
of products covered by such license shall cease immediately to the extent
that such manufacture and/or Sale no longer is licensed as a result of such
termination, except that such products in inventory as of the date of such
termination may be Sold in accordance with the terms and subject to the
restrictions of this Agreement for a period of one hundred eighty (180)
days following such termination and royalties shall be due and payable on
the Net Sales of such products in accordance with the terms of this
Agreement.
8.3 Survival of Certain Rights Upon Expiration or Termination. All rights
granted to and obligations undertaken by the Parties hereunder shall terminate
immediately upon the expiration of the term of this Agreement (as set forth in
Section 8.1 above) or the termination of this Agreement (pursuant to Section 8.2
above) except for:
(a) The obligations of IGEN to pay any and all royalties or other
consideration accrued hereunder prior to such expiration or termination (or
during the one hundred eighty (180) day period following termination in the
case of inventory as of the date of termination);
(b) The right of Roche to have audited by an independent certified
public accounting firm the books and records of IGEN and IGEN's Affiliates
as provided in Section 4.8 above;
(c) The indemnification provisions of Section 6.2 above;
(d) The procedures set forth in Article 11 herein in respect of any
matter arising prior to such expiration or termination; and
(e) Any and all confidentiality obligations provided for in this
Agreement; and
(f) Sections 4.9, 8.2(e), 8.2(g), 8.3, 10, 12.1, 12.3, 12.5, 12.8,
12.9, 12.10, 12.14, 12.15, 12.17, 12.18 and 12.20.
ARTICLE 9
ADDITIONAL COVENANTS AND AGREEMENTS
9.1 IGEN shall not, and shall cause each of its Affiliates not to, enter
into a joint venture or other arrangement with any Third Party that would result
in the conveyance to such Third Party of benefits substantially equivalent to
those that would be received from a sublicense under the Licensed Patents
licensed under this Agreement. Nothing in the foregoing shall restrict or limit
IGEN's rights to sublicense, assign or transfer its rights hereunder in
accordance with Sections 2.1, 2.3(e), 2.4 or 12.9.
9.2 IGEN shall not, and shall cause each of its Affiliates not to, arrange
Sales of Royalty Products (or utilize the definitions relating thereto) to
reduce in bad faith the Net Sales for which royalties are payable by IGEN
hereunder.
9.3 IGEN shall not tolerate and shall enforce the provisions of any
contract with a Research Collaborator of IGEN in the event that such Research
Collaborator of IGEN repeatedly and materially
A-13-20
fails to adhere to the provisions of its contract with IGEN and/or any of its
Affiliates requiring that Licensed Products necessary to perform the work under
such contract may be used only for the purposes of the protocol and that any
Licensed Products not consumed in performing the work under such contract either
be returned to IGEN and its Affiliates or be disposed of as laboratory waste.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
10.1 Representations and Warranties of IGEN. IGEN hereby represents and
warrants to Roche as follows:
(a) The execution, delivery and performance of, and the consummation
by IGEN of the transactions contemplated by, this Agreement have been duly
authorized by all necessary action on the part of IGEN and no further
consents by IGEN are needed in order to consummate the transactions
contemplated hereby.
(b) This Agreement, when executed and delivered by Roche/Basle,
Roche/Germany and Roche/USA in accordance with the provisions hereof, shall
be a legal, valid and binding obligation of IGEN, enforceable against IGEN
in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the enforcement of creditors' rights generally and by
limitations on the availability of specific performance and other equitable
remedies against IGEN.
(c) IGEN's execution of this Agreement shall not constitute a breach
or default under any contract, instrument or agreement to which IGEN or any
of its Affiliates is a Party or by which IGEN or any of its Affiliates is
bound.
(d) All persons who will execute this Agreement on behalf of IGEN have
been duly authorized to do so by all necessary action on the part of IGEN.
10.2 Representations and Warranties of Roche. Roche hereby represents and
warrants to IGEN as follows:
(a) Roche/Basle has the full power and right to grant to IGEN and
IGEN's Affiliates the license outside of the United States under the
Licensed Patents, and Roche/USA has the full power and right to grant to
IGEN and IGEN's Affiliates the license in the United States under the
Licensed Patents, set forth in Section 2.1, 2.2. and 2.4 above.
(b) To the best of Roche's knowledge, Exhibit "1" constitutes a
complete list of all granted U.S. patents (or where a corresponding U.S.
patent is not granted as of the Effective Time, then a representative
corresponding published U.S. or European patent application is listed)
owned by Roche or its Affiliates as of the Effective Time and available for
license to IGEN, which meet the criteria of Section 1.19 herein. IGEN's
exclusive remedy for a breach of the foregoing representation and warranty
shall be inclusion of the missing patents in Exhibit 1 as required by
Section 1.19 herein. For the purposes of such list, where a U.S. patent
application from which priority has been claimed has been abandoned and
succeeded by one or more continuations and/or continuations-in-part, any
such granted continuations and/or continuations-in-part, will be listed.
Where no such U.S. Licensed Patents have been issued, the granted non-U.S.
Licensed Patents or corresponding representative published application are
listed. Subject to the terms, conditions and limitations of this Agreement,
IGEN, its Affiliates and End-Users shall be immune from any suit for
infringement of any patent rights which would constitute a failure of this
representation and warranty.
(c) The execution, delivery and performance of, and the consummation
by Roche of the transactions contemplated by, this Agreement have been duly
authorized by all necessary action, and the execution, delivery and
performance of, and no further consents are needed in order to consummate
the transactions contemplated hereby.
A-13-21
(d) This Agreement, when executed and delivered by IGEN in accordance
with the provisions hereof, shall be a legal, valid and binding obligation
of Roche, enforceable against Roche in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the enforcement of
creditors' rights generally and by limitations on the availability of
specific performance and other equitable remedies against Roche.
(e) Roche's execution of this Agreement shall not constitute a breach
or default under any contract, instrument or agreement to which Roche or
any of its Affiliates is a Party or by which Roche or any of its Affiliates
is bound.
(f) All persons who will execute this Agreement on behalf of
Roche/Basle have been duly authorized to do so by all necessary action on
the part of Roche/Basle, and all persons who will execute this Agreement on
behalf of Roche/Germany have been duly authorized to do so by all necessary
action on the part of Roche/Germany, and all persons who will execute this
Agreement on behalf of Roche/USA have been duly authorized to do so by all
necessary action on the part of Roche/USA.
10.3 No Other Representations or Warranties. Except as otherwise
expressly set forth herein, the Parties make no other representation or
warranty, express or implied, with regard to PCR or any other matter hereunder
whatsoever.
ARTICLE 11
DISPUTE RESOLUTION; VENUE AND CHOICE OF LAW
11.1 Good Faith Resolution. In the event that at any time during the term
of this Agreement a disagreement, dispute, controversy or claim should arise out
of or relating to the interpretation of this Agreement, or performance by a
Party under this Agreement, or a breach of this Agreement by a Party, or any
claim by a Party that any provision of this Agreement is invalid (a "Dispute" or
collectively "Disputes"), one Party shall give written notice to the other Party
that a dispute exists and the Parties will then attempt in good faith to resolve
their differences before resorting to arbitration provided in Section 11.2. If
the Parties cannot resolve the disputed matter within thirty (30) days after
such notice, then either Party shall be free to submit the disputed matter to
binding arbitration in accordance with Section 11.2 hereof. For purposes of this
Article 11, the terms "Party" and "Parties" shall include each of the
signatories to this Agreement and/or any one or more of their respective
Affiliates, whether the reference is to a Party as a claimant or a Party against
which a claim is made.
11.2 Arbitration.
(a) The Parties intend Section 11.2 hereof to be enforceable in
accordance with the Federal Arbitration Act (9 U.S.C. Section 1, et seq.),
including any amendments to that Act which are subsequently adopted,
notwithstanding any other choice of law provision set forth in this
Agreement. In the event that either Party refuses to submit to arbitration
as required herein, the other Party may request a United States District
Court to compel arbitration in accordance with the Federal Arbitration Act.
(b) Any dispute or other matter in question between Roche and IGEN
arising out of or relating to the formation, interpretation, performance,
or breach of this Agreement, whether such dispute or matter arises before
or after termination of this Agreement, shall be resolved solely by
arbitration if the Parties are unable to resolve the dispute through
negotiation pursuant to Section 11.1 hereof. Arbitration shall be initiated
by the delivery of a written notice of demand for arbitration by one Party
to the other. The date on which the other Party receives such written
notice shall be hereinafter referred to as the "Arbitration Notice Date."
(c) Each Party shall appoint an individual as arbitrator and the two
so appointed shall then appoint a third arbitrator. If either Party refuses
or neglects to appoint an arbitrator within thirty (30)
A-13-22
days after the Arbitration Notice Date, then the arbitration shall be
conducted by a single arbitrator appointed by the American Arbitration
Association. If two arbitrators are appointed but do not agree on the third
arbitrator within sixty (60) days after the Arbitration Notice Date, each
of the arbitrators shall nominate within sixty-seven (67) days after the
Arbitration Notice Date three individuals. Each arbitrator shall then
within seventy-two (72) days after the Arbitration Notice Date decline two
of the nominations presented by the other arbitrator. The third arbitrator
shall then be chosen from the remaining two nominations by drawing lots.
Notwithstanding anything contained herein to the contrary, if the third
arbitrator is not chosen with seventy-two (72) days after the Arbitration
Notice Date, then the American Arbitration Association shall appoint the
third arbitrator within seventy-seven (77) days after the Arbitration
Notice Date. The arbitrators shall not be or have been affiliated with, or
have any personal, financial or business relationship with, either of the
Parties or any Affiliate of either Party; the arbitrators shall not have a
personal or financial interest in the result of the arbitration.
(d) The arbitration hearings shall be held in Borough of Manhattan,
State of New York or such other place as may be mutually agreed by the
Parties, shall be conducted in the English language and shall be conducted
as confidential proceedings (except to the extent necessary to enforce the
award resulting therefrom). Unless the Parties agree otherwise, the
arbitrators shall commence the arbitration hearing within thirty (30) days
after the selection of the third arbitrator. The arbitrators shall issue
orders to protect the confidentiality of proprietary information, trade
secrets and other sensitive information disclosed. Pending the arbitration
hearing, at the request of a Party, the arbitrators may issue temporary
injunctive or other equitable relief to address any violation or threatened
violation of this Agreement. All awards shall be made based on a majority
vote of the arbitrators, shall be in writing, shall not be considered
confidential information of either Party, shall be issued within sixty (60)
days after hearings before the arbitrators are completed, and shall state
the reasoning on which the award rests unless the Parties agree otherwise.
In addition to any relief at law which may be available to an aggrieved
Party for such breach, such Party shall be entitled to injunctive and other
equitable relief as the arbitration panel may grant. The arbitrators shall
deliver a copy of the award to each Party personally or by registered mail.
Any party may request within ten (10) days after receiving the decision
that, for good cause, the arbitrators reconsider and modify such decision.
The arbitrators shall have thirty (30) days after such request to modify
their decision, if they consider it appropriate. Thereafter, the decision
of the arbitrators shall be final, binding and nonappealable, except to the
extent appeals are permitted by the Federal Arbitration Act, with respect
to all persons, including (without limitation) persons who have failed or
refused to participate in the arbitration process. Judgment upon the award
rendered may be entered in any court having jurisdiction thereof.
(e) Each Party shall bear its own costs in connection with any such
arbitration including, without limitation, (i) all legal, accounting, and
any other professional fees and expenses, (ii) the fees and expenses of its
own arbitrator, and (iii) all other costs and expenses each Party incurs to
prepare for such arbitration. Other than set forth above, each side shall
pay, (iv) one-half of the fee and expenses of the third arbitrator, and (v)
one-half of the other expenses that the Parties jointly incur directly
related to the arbitration proceeding.
(f) Except as provided above, arbitration shall be based upon the
Commercial Arbitration Rules of the American Arbitration Association.
Discovery shall be limited at the discretion of the arbitrators, so that
the timing and extent of such discovery shall not interfere with the normal
business operations of the Parties. The arbitrators may proceed to an award
notwithstanding the failure of either Party to participate in the
proceedings.
(g) In the event of subsequent actions or proceedings to confirm the
award or to enforce the judgment entered thereon or any other rights
flowing therefrom, the prevailing Party shall be entitled to recover its
reasonable attorney's fees incurred in such actions or proceedings.
A-13-23
(h) The fact that the dispute resolution procedures specified in this
Article 11 shall have been or may be invoked shall not excuse any Party
from performing its obligations under this Agreement, and during the
pendency of any such procedure the Parties shall continue to perform their
respective obligations in good faith.
11.3 Limited Recourse to Courts. This Article 11 shall be the exclusive
dispute resolution procedure for Disputes under this Agreement and no Party
shall bring Disputes before any court, except as appeals to arbitration awards
are permitted by Section 11.2. Except as permitted by Section 11.2, the Parties
hereby waive any right to appeal an arbitration award to any court. The
provisions of Section 11.2 may be enforced, and judgment on the award (including
without limitation equitable remedies) granted in any arbitration hereunder may
be entered, in any court of competent jurisdiction. The Parties hereby submit to
the non-exclusive in personam jurisdiction of the federal courts in New York for
such purposes. THE PARTIES HEREBY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY FOR
MATTERS RELATED TO DISPUTES SUBMITTED TO ANY COURT.
11.4 Governing Law. This Agreement is made in accordance with and shall
be governed and construed under the laws of the State of New York, U.S.A.,
without regard to its conflicts of laws rules.
ARTICLE 12
MISCELLANEOUS
12.1 Disclaimer. EXCEPT AS OTHERWISE PROVIDED HEREIN THE INTELLECTUAL
PROPERTY RIGHTS LICENSED HEREUNDER ARE PROVIDED BY ROCHE "AS IS WHERE IS" AND
ROCHE MAKES NO, AND DISCLAIMS ALL WARRANTIES AND REPRESENTATIONS, EXPRESS OR
IMPLIED, CONCERNING: (a) LICENSED INTELLECTUAL PROPERTY RIGHTS COVERED BY THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF
DESIGN, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO LICENSED
INTELLECTUAL PROPERTY RIGHTS OR ANY PRODUCT; (b) THE COMMERCIAL SUCCESS OF ANY
LICENSED PRODUCT; (c) THE EXISTENCE, VALIDITY OR SCOPE OF LICENSED INTELLECTUAL
PROPERTY RIGHTS; (d) ANY LICENSED PRODUCT BEING FREE FROM AN INFRINGEMENT ON
PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES; (e) WHETHER ANY
THIRD PARTIES ARE IN ANY WAY INFRINGING LICENSED INTELLECTUAL PROPERTY RIGHTS
COVERED BY THIS AGREEMENT; OR (f) THE ACCURACY, UTILITY OR SUFFICIENCY OF ANY
TECHNICAL INFORMATION TRANSFERRED TO IGEN HEREUNDER. THE PARTIES SPECIFICALLY
AGREE THAT NEITHER PARTY SHALL BE SUBJECT TO AND THAT EACH DISCLAIMS: (A) ANY
OTHER OBLIGATIONS OR LIABILITIES ARISING OUT OF BREACH OF WARRANTY, AND (B) ALL
CONSEQUENTIAL, INCIDENTAL, CONTINGENT, PUNITIVE AND EXEMPLARY DAMAGES WHATSOEVER
WITH RESPECT TO (i) ANY DISPUTES BETWEEN THE PARTIES UNDER THIS AGREEMENT OR
(ii) CLAIMS MADE BY ONE PARTY AGAINST ANOTHER PARTY ARISING FROM THE COURSE OF
CONDUCT WITHIN THE RELATIONSHIP OF THE PARTIES UNDER THIS AGREEMENT (WHETHER
SUCH CLAIMS ARISE UNDER CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE), EVEN
THOUGH A PARTY MAY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE
LIMITATION OF DAMAGES IN CLAUSE (B) ABOVE SHALL NOT APPLY TO DAMAGES PAID TO
UNRELATED THIRD PARTIES (WHETHER PURSUANT TO JUDGMENT OR SETTLEMENT) FOR WHICH A
PARTY HAS AN OBLIGATION TO INDEMNIFY THE OTHER PARTY HEREUNDER.
12.2 Export Control. IGEN agrees, and shall cause its Affiliates to
agree, to abide by all laws and regulations of the United States Government, or
the government having jurisdiction therefor, governing the export or re-export
of any Licensed Products. IGEN shall inform itself as to the details of such
laws and regulations and their amendments.
A-13-24
12.3 Additional Documents. Each Party agrees to execute such further
papers or agreements as may be necessary to effect the purposes of this
Agreement.
12.4 Governmental Approvals and Marketing of Licensed Products. IGEN
shall be responsible for obtaining all necessary governmental approvals for the
development, production, distribution, sale and use of any Licensed Product, at
IGEN's expense, including, without limitation, any safety studies. IGEN shall
have sole responsibility for any warning labels, packaging and instructions as
to the use of Licensed Products and for the quality control for any Licensed
Product.
12.5 Confidentiality. ROCHE and IGEN agree for themselves and their
Affiliates, and on behalf of their respective officers, employees and agents,
that until the later of (i) 10 years from the Effective Time hereof or (ii) 5
years after the expiration date of this Agreement, each will treat as
confidential, using the same degree of care as it uses for its own confidential
and proprietary information, but in no event less than reasonable care, and
shall not disclose to any Third Party, and shall not use for its own benefit or
the benefit of any Third Party (except as permitted hereunder, including
disclosures to IGEN Affiliates and permitted sublicensees or subcontractors to
the extent necessary to have Licensed Products manufactured and subject to
confidentiality obligations at least as restrictive as those contained herein)
the confidential information furnished to it by the other Party unless the
furnishing party ("Discloser") otherwise agrees in writing or unless such
information clearly and convincingly falls within the following exceptions:
(a) Such confidential information was known to the receiving party
("Recipient") prior to the time of disclosure by the Discloser or was in
the public domain at the time of disclosure by Discloser as can be
documented by written records; or
(b) Such confidential information is or becomes publicly known after
disclosure by Discloser through no fault or omission attributable to
Recipient; or
(c) Such confidential information is given to Recipient from sources
independent of Discloser who have the right to disclose it; or
(d) Such confidential information is independently developed by
employees of Recipient that did not have access to it as can be documented
by written records; or
(e) Recipient is required to disclose such confidential information to
a court of law or to appropriate governmental agencies to enable Recipient
to carry out the evaluation of a Product or to secure a governmental
approval, or as otherwise required by law; provided, however, that (1)
Recipient gives the Discloser prompt written notice of such required
disclosure and reasonably assists the Discloser in its efforts to prevent
or limit such disclosure; and (2) any confidential information disclosed
pursuant to this Section 12.5(e) shall otherwise remain confidential
information for the purposes of this Agreement.
For purposes of this License, ROCHE's confidential information shall
include (subject to the exclusions in (a)-(e) above) all information relating to
the Licensed Patents. Access to such confidential information must be restricted
to the Recipient's, its Affiliates, subcontractor's, Authorized Third Parties'
or Research Collaborators' employees or agents with a need to have access. The
Recipient acknowledges that by virtue of this Agreement it acquires only such
rights as set forth under the terms and conditions of this Agreement and only so
long as it is in effect and does not acquire any rights of ownership or title in
the Discloser's confidential information. In addition, each of the Parties
agrees to execute appropriate confidentiality agreements with Third Party
collaborators of such Party prior to disclosing the other Party's confidential
information to such Third Party collaborator. Upon expiration of this Agreement,
each Party, its Affiliates, subcontractors, Authorized Third Parties or Research
Collaborators and their employees and agents shall immediately discontinue use
of the other's confidential information, except as otherwise permitted under the
provisions hereof. The Parties agree that this Section 12.5 sets out in its
entirety the Parties' confidentiality obligations with respect to the subject
matter of this Agreement. Neither Party nor any of its Affiliates shall make any
public announcement of or otherwise disclose to any Third Party this Agreement
or any of its terms without the prior written consent of the other Party.
A-13-25
12.6 License Registration. IGEN shall pay all costs and legal fees
connected with registration of this Agreement in those countries where it (or
its Affiliates, Distributors and/or agents) sells Licensed Products, where
required, and shall otherwise ensure that the laws of all the countries where
sales of its Licensed Products occur are fully satisfied. None of such amounts
shall be deductible against amounts payable to ROCHE hereunder. ROCHE shall
provide reasonable assistance to IGEN in effecting such registrations if IGEN
reimburses any out-of-pocket expenses incurred in providing such assistance.
12.7 Reservation of Rights. ROCHE reserves the right to use for any
purpose (commercial or noncommercial), anywhere in the world, and the right to
allow other persons to use for any purpose, anywhere in the world, any Licensed
Patents licensed hereunder, without ROCHE or such other persons being obligated
to pay IGEN any royalties or other compensation.
12.8 Waiver. No delay or omission on the part of either Party to this
Agreement in requiring performance by the other Party or in exercising any right
hereunder shall operate as a waiver of any provision hereof or of any right or
rights hereunder; and the waiver, omission or delay in requiring performance or
exercising any right hereunder on any one occasion shall not be construed as a
bar to or waiver of such performance or right, or of any right or remedy under
this Agreement, on any future occasion. Any agreement on the part of either
Party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such Party.
12.9 Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their permitted successors and assigns;
provided, however, that: (a) neither Party shall assign any of its rights and
obligations hereunder except as consented to by the other Party, which consent
shall not be unreasonably withheld, and (b) such consent shall not be required
with respect to an assignment of (i) any or all of its rights and obligations
hereunder to an Affiliate of such assigning party; or (ii) all (but not less
than all) of its rights and obligations hereunder to an acquirer of all or
substantially all of the assets or business of the assigning party related to
such party's use of the Licensed Patents, whether as incident to a merger,
consolidation, reorganization, acquisition or otherwise. Whenever there has been
an assignment or a sublicense by IGEN or ROCHE, as the case may be, as permitted
by this Agreement, the term "IGEN" or "ROCHE" as used in this Agreement shall
also include and refer to, if appropriate, such assignee or sublicensee.
12.10 Notices. Any notice or other communication required or permitted to
be given to either Party hereto shall be in writing and shall be deemed to have
been properly given and to be effective on the date of delivery if delivered in
person or by facsimile (with electronic confirmation of receipt and with a
confirmation copy sent by internationally-recognized air courier service), to
such Party at the following address:
If to IGEN:
IGEN Integrated Healthcare, LLC
16020 Industrial Drive
Gaithersburg, Maryland 20877
Attention: President
Telephone: 1-301-869-9800
Facsimile: 1-301-208-3789
With a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: David Redlick, Esq.
Telephone: 1-617-526-6000
Facsimile: 1-617-526-5000
A-13-26
If to Roche, to each and all of the following:
F. Hoffmann-La Roche Ltd.
Grenzacherstrasse 124
CH-4070 Basle, Switzerland
Attention: Legal Department
Telephone: 011-4161-688-5974
Facsimile: 011-4161-688-1396
Roche Diagnostics GmbH
Sandhofer Strasse 116
D-68305 Mannheim
Germany
Attention: Legal Department
Telephone: 011-49-621-759-6434
Facsimile: 011-49-621-759-4461
Roche Molecular Systems, Inc.
4300 Hacienda Drive
Pleasanton, California 94588
Attention: President
Telephone: 925 730 8250
Facsimile: 925 225 0369
Roche Molecular Systems, Inc.
1145 Atlantic Avenue
Alameda, CA 94501
Attention: Licensing Department
Telephone: 510 814 2823
Facsimile: 510 814 2763
Roche Molecular Systems, Inc.
1145 Atlantic Avenue
Alameda, CA 94501
Attention: General Counsel
Telephone: 510 814 2898
Facsimile: 510 814 2956
Either Party may change its address for communications by a notice to the
other Party in accordance with this Section.
12.11 Headings. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
12.12 Force Majeure. Any delays in performance by any Party under this
Agreement (other than a Party's failure to make payments hereunder) shall not be
considered a breach of this Agreement if and to the extent caused by occurrences
beyond the reasonable control of the Party affected, including but not limited
to acts of God, embargoes, governmental restrictions, strikes or other concerted
acts of workers, fire, flood, explosion, riots, wars, civil disorder, rebellion
or sabotage. The Party suffering such occurrence shall immediately notify the
other Party and any time for performance hereunder shall be extended by the
actual time of delay caused by the occurrence.
12.13 Independent Contractors. In granting, performing or exercising
rights under this Agreement, ROCHE and IGEN act and shall act at all times as
independent contractors and nothing contained in this Agreement shall be
construed or implied to create an agency, partnership or employer and employee
relationship between IGEN and ROCHE. At no time shall one Party make commitments
or incur any charges or expenses for or in the name of the other Party.
A-13-27
12.14 Severability. If, under applicable law, any term, condition or
provision of this Agreement is held invalid or unenforceable, or otherwise
directly or indirectly affects the validity of any other material provision(s)
of this Agreement (the "Severed Clause"), then this Agreement shall remain in
full force and effect, except for the Severed Clause. The Parties agree to
renegotiate in good faith the Severed Clause and be bound by the mutually agreed
substitute provision.
12.15 Interpretation. The official text of this Agreement shall be
English. For purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms of this Agreement do not amend or supersede, and shall
not be used to interpret, the terms of the License Agreement, dated as of
the date hereof, by and between IGEN International, Inc. and IGEN LS LLC,
the Improvements License Agreement, dated as of the date hereof, by and
between Roche/Germany and IGEN International, Inc., the Covenants Not to
Sue, dated as of the date hereof, by and among IGEN, MSD, MST,
Roche/Germany, Roche Holding Ltd, and IGEN LS LLC, or the License Agreement
(Human IVD Services and Animal Diagnostic Services), dated as of the date
hereof, by and between the Parties;
(b) the terms defined in this Agreement have the meanings assigned to
them in this Agreement and include the plural as well as the singular, and
the use of any gender herein shall be deemed to include the other gender;
(c) references herein to "Sections," "Subsections," "Paragraphs," and
other subdivisions without reference to a document are to designated
Sections, Subsections, Paragraphs and other subdivisions of this Agreement;
(d) a reference to a Subsection without further reference to a Section
is a reference to such Subsection as contained in the same Section in which
the reference appears, and this rule shall also apply to Paragraphs and
other subdivisions;
(e) the words "herein," "hereof," "hereunder," and other words of
similar import refer to this Agreement as a whole and not to any particular
provision;
(f) the term "include" or "including" shall mean "including without
limitation";
(g) the term "to the extent" shall mean the degree to which a subject
or other thing extends, and such phrase shall not mean simply "if";
(h) the term "or" is not exclusive; and
(i) the Exhibits, Appendices and Annexes to this Agreement are hereby
incorporated and made a part hereof and are an integral part of this
Agreement.
12.16 Cumulative Rights. The rights, powers and remedies hereunder shall
be in addition to, and not in limitation of, all rights, powers and remedies
provided at law or in equity. All of such rights, powers and remedies shall be
cumulative, and may be exercised successively or cumulatively.
12.17 Entire Agreement; Amendment. This Agreement and any and all
Schedules and Appendices referred to herein, together with the Transaction
Agreements (as defined in the Merger Agreement), embody the entire understanding
of the Parties with respect to the subject matter hereof and shall supersede all
previous communications, representations or understandings, either oral or
written, between the Parties relating to the subject matter hereof. This
Agreement shall not be amended, altered or changed except by a written agreement
signed by all of the Parties hereto. In the event of any inconsistency between
the terms of this Agreement and the Improvements License Agreement dated as of
the date hereof, between Roche/Germany and IGEN International, Inc. (the
"Improvements License Agreement") (e.g., if a product or service is licensed
under the Improvements License Agreement and does not require the license under
this this Agreement), then the terms of the Improvements License Agreement shall
control.
A-13-28
12.18 No Third Party Beneficiary Rights. Except for the provisions of
Section 2.1, 2.3(e), and 2.4(a) relating to immunity from suit and Article 6
relating to Indemnitees, nothing contained in this Agreement is intended to
confer upon any person other than the Parties hereto and their respective
Affiliates, successors and permitted assigns, any benefit, right or remedy under
or by reason of this Agreement.
12.19 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.20 Sales Tax. In the event any sales, use or similar tax (if any) is
required to be collected or paid in connection with the Sale of Royalty Products
by IGEN Sellers pursuant to this Agreement, IGEN shall pay the same and hold
Roche harmless with respect thereto.
[Remainder of Page Intentionally Left Blank]
A-13-29
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers effective as of the Effective Time.
IGEN INTEGRATED HEALTHCARE, LLC
By: /s/ RICHARD J. MASSEY
------------------------------------
Name: Richard J. Massey
----------------------------------
Title: President and Chief Operating
Officer
----------------------------------
Date: July 24, 2003
----------------------------------
F. HOFFMANN-LA ROCHE LTD
By: /s/ DR. FRANZ B. HUMER
------------------------------------
Name: Franz B. Humer
----------------------------------
Title: Chairman and Chief Executive
Officer
----------------------------------
By: /s/ ERICH HUNZIKER
------------------------------------
Name: Erich Hunziker
----------------------------------
Title: Chief Financial Officer
----------------------------------
Date: July 24, 2003
----------------------------------
A-13-30
ROCHE DIAGNOSTICS GMBH
By: /s/ C.J. RUETSCH
----------------------------------
Name: Claus-Joerg Ruetsch
----------------------------------
Title: General Counsel
----------------------------------
By: /s/ HEINO VON PRONDZYNSKI
------------------------------------
Name: Heino Von Prondzynski
----------------------------------
Title: Authorized Signatory
----------------------------------
Date: July 24, 2003
----------------------------------
ROCHE MOLECULAR SYSTEMS, INC.
By: /s/ H. DREISMANN
------------------------------------
Name: Heiner Dreismann
----------------------------------
Title: President, Roche Molecular
Systems
----------------------------------
Date: July 24, 2003
----------------------------------
A-13-31
ANNEX 14
LICENSE AGREEMENT
(HUMAN IVD SERVICES AND ANIMAL DIAGNOSTIC SERVICES)
This LICENSE AGREEMENT (Human IVD Services and Animal Diagnostic Services)
(the "AGREEMENT") is dated as of the 24th day of July, 2003, by and among IGEN
INTEGRATED HEALTHCARE, LLC, a Delaware limited liability company having offices
at 16020 Industrial Drive, Gaithersburg, Maryland 20877 ("IGEN"), F. HOFFMANN-LA
ROCHE LTD, a Swiss limited liability company with its principal place of
business at Grenzacherstrasse 124, CH-4070 Basle, Switzerland ("ROCHE/BASLE"),
ROCHE DIAGNOSTICS GMBH, a German company with its principal place of business at
Sandhofer Strasse 116, D-68305 Mannheim, Germany ("ROCHE/GERMANY") and ROCHE
MOLECULAR SYSTEMS, INC., a Delaware corporation with its principal place of
business at 4300 Hacienda Drive, Pleasanton, California 94588 USA ("ROCHE/USA"
or "RMS") (Roche/Basle, Roche/Germany and Roche/USA shall hereinafter be
referred to collectively (or separately as the context requires) as either
"ROCHE" or "ROCHE") (hereinafter IGEN and Roche may separately be referred to as
a "PARTY" or collectively referred to as "THE PARTIES").
WITNESSETH:
WHEREAS, Roche/Basle owns or controls all right, title and interest in and
to certain patents and patent applications outside of the United States the
claims of which are directed to aspects of PCR technology, and Roche/USA owns or
controls all right, title and interest in and to corresponding patents and
patent applications in the United States;
WHEREAS, Roche/Germany owns or controls all right, title and interest in
and to certain patents and patent applications both in the United States and
outside of the United States the claims of which are directed to aspects of PCR
technology;
WHEREAS, IGEN is interested in, among other things, acquiring a worldwide
license from Roche under certain of Roche's patents for the purpose of
performing PCR-based in vitro human and animal diagnostic testing procedures;
WHEREAS, Roche is willing to grant such license to IGEN upon the following
terms and conditions.
AGREEMENT:
NOW THEREFORE, for and in consideration of the covenants and undertakings
hereinafter set forth, and in consideration for the granting of intellectual
property rights to Roche and its Affiliates from IGEN pursuant to agreements
between Roche and IGEN and their respective Affiliates, IGEN and Roche hereby
agree as follows:
ARTICLE 1
DEFINITIONS
In addition to other terms defined elsewhere herein, the following terms
shall have the following meanings when used herein (any term defined in the
singular shall have the same meaning when used in the plural and vice versa,
unless stated otherwise):
1.1 "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person. The term "person" means
any individual, firm, corporation, partnership, company, limited liability
company, trust, joint venture, association, Governmental Entity or other
entity. The term "Government Entity" means any domestic or foreign (whether
a national, Federal, state, provincial,
A-14-1
local or otherwise) government or any court of competent jurisdiction,
agency or commission or other governmental authority or instrumentality,
domestic or foreign. Neither Genentech Inc., 1 DNA Way, South San
Francisco, California 94080 4990, USA, nor Chugai Pharmaceutical Co., Ltd,
1-9 Kyobashi 2-chome, Chuo-ku, Tokyo, 104-8301, Japan, shall be deemed an
Affiliate of ROCHE for purposes of this Agreement. Meso Scale Diagnostics,
LLC. ("MSD"), 9238 Gaither Road, Gaithersburg, Maryland, USA 20877, shall
at all times and notwithstanding any change in circumstance, be deemed an
Affiliate of IGEN for purposes of this Agreement; provided, however, that
Affiliates of MSD shall not necessarily be, and shall have to qualify
independently from (e.g., not through or under) MSD as, Affiliates of IGEN.
Meso Scale Technologies, LLC. ("MST"), 9238 Gaither Road, Gaithersburg,
Maryland, USA 20877, shall not be deemed an Affiliate of IGEN for purposes
of this Agreement.
1.2 "Animal" means all animals, other than human, whether dead or
alive or extinct, and specifically includes animal embryos but not human
embryos.
1.3 "Animal Breeding Applications" means the analysis of biological
specimens for the determination of genetic traits in Animals for the
purpose of selective breeding of said Animals. Animal Breeding Applications
specifically exclude testing for disease-related traits for the purpose of
treating the test Animal for that disease.
1.4 "Animal Diagnostic Services Field" means use of diagnostic
processes utilizing PCR solely for analyzing specimens taken from an Animal
(excluding a Human), including without limitation, blood, bodily fluid or
tissue, for the purpose of testing, with respect to that Animal, for a
physiological or pathological state, a congenital abnormality, or the
safety and compatibility of a treatment; monitoring therapeutic measures or
for detecting: microorganisms or any other analyte associated with
infectious and/or non-infectious diseases in Animals; Animal genetic
diseases; genetic predisposition to disease in Animals, or genetic traits
of Animals, including determining the sex of Animals, but specifically
excluding Animal Identity Applications, Animal Breeding Applications, GMO
Testing Applications, and testing performed on Animal tissue intended for
use in xenotransplantation.
1.5 "Animal Identity Applications" means the analysis of biological
specimens for the identification of individual Animals whether living, dead
or extinct, or their remains, including, without limitation, parentage
determination.
1.6 "Combination Service" shall mean a Licensed Service or Licensed
Animal Service offered in combination with another non-PCR diagnostic
assay(s) or together with a non-testing service(s) such as a specialized
interpretive service or a consultative service (e.g., genetic counseling)
as part of a package, where the Licensed Service or Licensed Animal Service
is not separately billed.
1.7 [Reserved for future use].
1.8 "Diagnostic Services Field" means the field of human in vitro
diagnostics for the detection, quantitation, monitoring, genotyping, or
phenotyping, of genetic and infectious diseases, disease susceptibility,
genetic pre-disposition to disease or cancer; analyzing specimens taken
from a human being for the purpose of testing, with respect to that human
being, for a physiological or pathological state, for a congenital
abnormality, for safety and compatibility of a treatment or to monitor
therapeutic measures; or any use of PCR as a testing service to provide to
a person data, results or interpretations of any application of PCR for
purposes of therapy or diagnosis of a human being, including, without
limitation, clinical laboratory services, whether or not a fee is charged
for such services; tissue transplant typing, including testing performed on
animal tissue intended for use in xenotransplantation; Parentage
Determination; diagnosis, disease management; and clinical trials, whether
or not a patient result is provided directly or indirectly to a patient.
Licensed Field shall specifically exclude any services performed for
screening of blood and/or blood products.
1.9 "Diagnostic Product" shall mean an assemblage of reagents,
including but not limited to reagents packaged in the form of a kit, useful
in performing in vitro diagnostic procedure.
A-14-2
1.10 "Effective Time" shall have the meaning ascribed to that term in
that certain Merger Agreement of even date herewith by and among, inter
alia, IGEN International, Inc. and Roche Holding Ltd (the "Merger
Agreement").
1.11 [Reserved for future use].
1.12 "GMO Testing Applications" means the detection and/or analysis
of nucleic acid sequences of Animals, including live animals, carcasses,
meat and meat by-products, and materials derived therefrom, solely for the
purpose of determining the presence of, or derivation from,
Genetically-Modified Organisms. In this context, "Genetically-Modified
Organism" shall mean an Animal in which the genetic material has been
altered in a way that does not occur naturally by mating and/or natural
recombination.
1.13 "Homogeneous PCR Technology" shall mean 5' Nuclease Technology
and Valid Claims of United States Patent Nos. 5,491,063, 5,571,673, and
6,171,785 B1, and any reissue or reexamination patents thereof, and only
the processes defined by the method claims (if they are Valid Claims of)
United States Patent No. 5,994,056, and any reissue or reexamination
patents thereof, and only the method and primer claims (if they are Valid
Claims) of United States Patent No. 5,573,906, and any reissue or
reexamination patents thereof; and any Valid Claims of the foreign
counterparts of the foregoing listed patents or claims.
1.14 [Reserved for future use].
1.15 "Licensed Animal Service(s)" shall mean either:
a) "Service A": the performance by IGEN or its Affiliates of an in
vitro diagnostic procedure utilizing PCR Technology, RT and RT-PCR
Technology and/or Quantitation Technology on a sample of material
obtained from an animal solely to detect the presence, absence or
quantity of a nucleic acid sequence associated with a disease or
condition within the Animal Diagnostic Services Field; or
b) "Service B": the performance by IGEN or its Affiliates of an in
vitro diagnostic procedure utilizing Homogeneous PCR Technology on a
sample of material obtained from an animal solely to detect the
presence, absence or quantity of a nucleic acid sequence associated with
a disease or condition within the Animal Diagnostic Services Field.
Licensed Animal Services include but are not limited to, any combination of
the steps of collecting a sample for analysis, isolating nucleic acid sequences
therein, amplifying one or more desired sequences, analyzing the amplified
material, including sequence analysis, and reporting the results.
1.16 [Reserved for future use].
1.17 [Reserved for future use].
1.18 "Licensed Fields" means the Animal Diagnostic Services Field and
the Diagnostic Services Field.
1.19 "Licensed Patents" means the United States and foreign patents
and patent applications of Roche listed in Exhibit "1" attached to this
Agreement, as amended from time to time, including any other patents or
patent applications that claim priority to one or more of the patents or
patent applications listed in Exhibit 1 including corresponding foreign
applications or patents; and any patents or patent applications that claim
priority to one or more priority applications of one or more of the patents
and patent applications listed in Exhibit 1 and any divisional,
continuation, continuation-in-part, extensions, reissues, renewals, and
re-examinations of such patents and patent applications, and any
corresponding foreign counterparts of such patents and patent applications.
In the event that a patent application or patent owned by Roche (with the
right to license to IGEN), which includes a Valid Claim covering a PCR
Related Invention and is entitled to an earliest priority date not later
than five (5) years from the Effective Time, is not included in Exhibit 1,
such patent application or patent shall be deemed automatically included on
Exhibit 1 for the purposes of the Agreement as of
A-14-3
the Effective Time, without any amendment of this Agreement or other
further action required of the Parties. Notwithstanding anything to the
contrary in this definition, Licensed Patents shall not include (a) any
rights to inventions for biological and chemical target information such as
nucleic acid sequences (e.g., specific primer and probe sequences) which
the making, selling or using of would infringe a Valid Claim of a patent or
patent application owned by Roche and available for license to IGEN that is
not listed on the version of Exhibit 1 attached to this Agreement as of the
Effective Time; or (b) any rights (including any Valid Claims within the
Licensed Patents) to inventions for Instruments and/or automation of PCR
Related Inventions.
1.20 "Licensed Service(s)" shall mean either:
a) "Service A": the performance by IGEN or its Affiliates of an in
vitro diagnostic procedure utilizing PCR Technology, Other Technology,
RT and RT-PCR Technology and/or Quantitation Technology on a sample of
material obtained from a human being solely to detect the presence,
absence or quantity of a nucleic acid sequence associated with a human
disease or condition within the Diagnostic Services Field; or
b) "Service B": the performance by IGEN or its Affiliates of an in
vitro diagnostic procedure utilizing Homogeneous PCR Technology on a
sample of material obtained from a human being solely to detect the
presence, absence or quantity of a nucleic acid sequence associated with
a human disease or condition within the Diagnostic Services Field.
Licensed Services include but are not limited to, any combination of
the steps of collecting a sample for analysis, isolating nucleic acid
sequences therein, amplifying one or more desired sequences, analyzing the
amplified material, including sequence analysis, and reporting the results.
1.21 "Net Service Revenues" shall mean gross invoice price for the
Licensed Services or Licensed Animal Services performed by IGEN or its
Affiliates (or the fair market value for any nonmonetary consideration
which IGEN or its Affiliates agrees to receive in exchange for Licensed
Services or Licensed Animal Services), less the following deductions where
they are factually applicable and are not already reflected in the gross
invoice price:
a) discounts allowed and taken, in amounts customary in the trade
(which shall include the difference between the dollar amount charged by
IGEN or its Affiliates for a Licensed Service and the Medicare and/or
Medicaid Limits of Allowance and/or reimbursement limitations of a Third
Party insurance program); and
b) actual bad debt, up to two percent (2%) of gross invoice price
for Licensed Services or Licensed Animal Services, which bad debt IGEN
or its Affiliates can prove and document that it was reasonable and
diligent in its efforts to collect payment.
No allowance or deduction shall be made for commissions or
collections, by whatever name known.
1.21.1 The Net Service Revenues of those Licensed Services or
Licensed Animal Services that are performed by IGEN for any Affiliate of
IGEN shall be determined based on the average Net Service Revenues from all
Third Parties during the period on a test by test basis.
1.21.2 The Net Service Revenues of those Licensed Animal Services
that are performed by IGEN or its Affiliates for any Third Party, for which
IGEN or its Affiliate, as the case may be, either a) does not charge a fee,
or b) charges a nominal fee, not commensurate with the value of such
Licensed Animal Services, after consulting with IGEN or such Affiliate,
Roche/USA or its designee shall assign a flat fee as a royalty for each
such Licensed Animal Service performed. All such Licensed Animal Services
performed shall be stated on Attachment I with a corresponding royalty due
per Licensed Animal Service. Notwithstanding any provision contained in
Section 1.21 to the contrary, no amounts shall be deducted from any royalty
due in accordance with this Section 1.21.2.
A-14-4
1.21.3 It is hereby understood and agreed that, to the extent
feasible, Licensed Services, Licensed Animal Services and Combination
Services shall at all times be invoiced, listed and billed by IGEN and its
Affiliates as a separate item in IGEN's or its Affiliate's invoices, bills
and reports to customers. Net Service Revenues for determining royalties on
a Licensed Service or Licensed Animal Service which is part of a
Combination Service shall be determined by multiplying the gross invoice
price, less applicable deductions, by the appropriate fraction in
Attachment I-A or I-B, as applicable, hereto. The fraction specified in
Attachment I-A or I-B, as applicable, for a particular Licensed Service or
Licensed Animal Service shall be set by Roche/USA or its designee after
consultation with IGEN or its Affiliate, as applicable, as accurately
reflecting the value contributed by the Licensed Service or Licensed Animal
Service to the overall value of the Combination Service as offered by IGEN
or its Affiliate, and as set forth in Section 2.4. Attachment I-A or I-B,
as applicable, hereto shall be modified as new Combination Services are
identified and new royalty-bearing fractions set, and as set forth in
Section 2.4.
1.22 "Other Technology" shall mean the processes covered by the
method claims (if they are Valid Claims) of United States Patent Nos.
5,008,182, 5,677,152, 5,773,258 and 5,176,995, and any reissue or
reexamination patents thereof, and the claims (if they are Valid Claims) of
United States Patent No. 5,110, 920, and any reissue or reexamination
patents thereof; and any Valid Claims of the foreign counterparts of the
foregoing listed patents or claims.
1.22A "Parentage Determination" means analysis of human genetic
material to ascertain whether two or more individuals are biologically
related, but specifically excludes analysis of forensic evidence for a
sexual assault investigation.
1.23 "Patent Rights" means the Valid Claims of patents and patent
applications, including, without limitation: utility or design patents or
patent applications which are original; divisional, continuation or
continuation-in-part patents and patent applications; reexaminations,
extensions and reissues of patents; and confirmation patents, importation
patents, registration patents and patents of addition.
1.24 [Reserved for future use].
1.25 "PCR" means the technology involving the amplification of a
nucleic acid sequence and the complement of that sequence by repeated
cycles of oligonucleotide mediated, template directed synthesis involving
the extension of a primer oligonucleotide by incorporation of monomeric
nucleotide triphosphates whereby the sequence, its complement and
subsequent synthetic copies thereof are repeatedly separated and used as
templates for further cycles of synthesis.
1.26 "PCR Related Invention" means any process, method, test, kit,
reagent and/or group of reagents for performing or, by virtue of its
design, operation and/or construction, has no other substantial practical
utility than for performing, one or more of the following operations in
connection with the practice of PCR:
(a) Sample collection, preparation, transport and/or isolation of
nucliec acid sequences from a sample, that is, the treatment of a sample
in order to render a nucleic acid therein amplifiable and/or detectable,
which may have as its essential active reagents, for example, the cell
lysing, stabilization and/or precipitation reagents essential to expose
and prepare DNA for amplification and/or detection; and/or
(b) The amplification of one or more designated nucleic acid
sequences using PCR, which may have as its essential active reagents,
for example, the oligonucleotides and/or nucleotides, enzymes, buffers
and associated co-reactants essential to perform amplification of
nucleic acid using PCR; and/or
(c) Detection, that is, the treatment or modification of nucleic
acid amplified using PCR so as to render it detectable, identifiable
and/or quantifiable: which may include as its essential
A-14-5
active reagents labelled primers, probes (including binding partners or
reporter molecules), and fluorescent intercalating or tagging agents;
and/or
(d) The synthesis, purification, labeling, and/or immobilization of
nucleic acid probes used in PCR (i.e., one or more compounds that
is/are: (y) composed of one or more nucleotides or analogs thereof; or
(z) capable of binding with one or more nucleotides or analogs thereof);
and/or
(e) The control of contamination.
1.27 "PCR Technology" shall mean polymerase chain reaction technology
covered by Valid Claims of United States Patent Nos. B1 4,683,195, B1
4,683,202, and 4,965,188 and any reissue or reexamination patents thereof;
and any Valid Claims of the foreign counterparts of the foregoing listed
patents or claims.
1.28 "Quantitation Technology" shall mean the method claims (if they
are Valid Claims) of United States Patent Nos. 5,389,512 and 5,219,727, and
any reissue or reexamination patents thereof, and claims 1-4, 8, 9 and
15-18 (if they are Valid Claims) of United States Patent No. 5, 476,774,
and any reissue or reexamination patents thereof; and any Valid Claims of
the foreign counterparts of the foregoing listed patents or claims.
1.29 "RT and RT-PCR Technology" shall mean the reverse transcription
process covered by the method claims (if they are Valid Claims) of United
States Patent Nos. 5,407,800, 5,310,652, 5,561,058, 5,618,703 and
5,322,770, and any reissue or reexamination patents thereof, and the claims
(if they are Valid Claims) of United States Patent No. 5,693,517, and any
reissue or reexamination patents thereof; and any Valid Claims of the
foreign counterparts of the foregoing listed patents or claims.
1.30 [Reserved for future use].
1.31 [Reserved for future use].
1.32 [Reserved for future use].
1.33 [Reserved for future use].
1.34 "Territory" includes all countries of the world.
1.35 "Third Party" means any person that is neither a Party to this
Agreement nor an Affiliate of any Party to this Agreement.
1.36 "Valid Claim" shall mean in any country the claim of a patent or
pending patent application which (a) has not expired, (b) has not been
disclaimed or (c) has not been revoked, held invalid or otherwise declared
unenforceable by a tribunal of competent jurisdiction over such claim in
such country from which no further appeal has or may be taken.
1.37 "5' Nuclease Technology" shall mean only the processes defined
by the method claims (if they are Valid Claims) of United States Patent
Nos. 5,210,015 and 5,487,972 and any reissue or reexamination patents
thereof and the reaction mixture claims (if they are Valid Claims) of
United States Patent No. 5,804,375 and any reissue or reexamination patents
thereof; and any Valid Claims of the foreign counterparts of the foregoing
listed patents or claims.
A-14-6
ARTICLE 2
GRANTS
2.1 Grant of License by Roche to IGEN.
(a) Subject to the terms and conditions of this Agreement, Roche
grants to IGEN and its Affiliates, a non-exclusive worldwide right and
license under the Licensed Patents as follows:
(i) to perform in vitro human and/or animal diagnostic testing
procedures on a sample of material obtained from a human or animal, as
applicable, solely to detect the presence, absence or quantity of a
nucleic acid sequence associated with a disease or condition in the
Licensed Fields within the Territory.
2.2 The Licensed Patents hereunder may be used solely for the performance
of Licensed Services and Licensed Animal Services and for no other purpose
whatsoever, and no other right, immunity or license is granted expressly,
impliedly or by estoppel.
2.3 IGEN expressly acknowledges and agrees that the license pursuant to
this Agreement is personal to IGEN and its Affiliates alone and IGEN and its
Affiliates shall have no right to sublicense, assign or otherwise transfer or
share its rights under the foregoing license. IGEN further agrees that Licensed
Services and Licensed Animal Services will be performed, offered, marketed and
sold only by IGEN and/or its Affiliates, except as provided in Section 2.3(a),
and that IGEN shall not authorize any other party, including its Affiliates,
except those IGEN Affiliates named in Attachment V, as may be amended from time
to time by written notice from IGEN to Roche.
a) IGEN and its Affiliates may offer, market and sell Licensed
Services or Licensed Animal Services that are performed by other
laboratories subject to the following conditions:
i) Each laboratory performing Licensed Services or Licensed Animal
Services for IGEN or its Affiliates must be separately licensed under
Roche's diagnostic services program.
ii) IGEN's and its Affiliate's report forms must list all Licensed
Services or Licensed Animal Services marketed and sold by IGEN or its
Affiliates which are performed by another laboratory even though IGEN
and its Affiliates will not be obligated to pay royalties on those
Licensed Services or Licensed Animal Services.
iii) IGEN or its Affiliates must contact Roche/USA or its designee
to verify that a new laboratory to which it seeks to send samples for
performance of Licensed Services or Licensed Animal Services is properly
licensed by Roche before sending samples to that laboratory.
iv) Each laboratory performing Licensed Services or Licensed Animal
Services for IGEN and its Affiliates must report and pay royalties on
Licensed Services or Licensed Animal Services performed for IGEN and its
Affiliates.
2.4 For each Combination Service that IGEN or its Affiliates intends to
offer pursuant to this Agreement, and at least sixty (60) days before IGEN or
its Affiliates intends to offer any such Combination Service, IGEN or its
Affiliates shall:
a) notify Roche/USA or its designee of such proposed Combination
Service, such notice to include a complete and detailed description of the
proposed Combination Service; and
b) obtain from Roche/USA or its designee a duly authorized agreement,
in the form of Attachment I-A or Attachment I-B, as applicable, hereto, for
such Combination Service, which agreement shall indicate the fraction or
percentage of the package price of such Combination Service, less
appropriate deductions, on which royalties shall be paid.
For any Combination Service(s) claimed by IGEN or its Affiliates on royalty
reports for which IGEN or such Affiliate has not satisfied the criteria set
forth in subsections (a) and (b) above, the royalty payable on such Combination
Service shall be assessed at 100% of the package price of such Combination
A-14-7
Service, less applicable deductions. As to all other Licensed Services offered
by IGEN or its Affiliates which are not part of a Combination Service, IGEN or
such Affiliate, as the case may be, agrees to inform RMS of the availability
from IGEN or such Affiliate of each such Licensed Service within thirty (30)
days after IGEN or such Affiliate commences offering the Licensed Service.
2.5 Roche hereby grants to IGEN and its Affiliates the right and IGEN and
its Affiliates accept and agree to credit Roche as the source of Licensed
Patents in IGEN's and its Affiliates', promotional materials and any other
materials intended for distribution to Third Parties with respect to Licensed
Services or Licensed Animal Services as follows:
"This service is performed pursuant to an agreement with Roche Molecular
Systems, Inc., F. Hoffmann-La Roche Ltd, and Roche Diagnostics GmbH."
ARTICLE 3
ADDITIONAL LIMITATIONS AND ACKNOWLEDGMENT ON DIAGNOSTIC PRODUCTS
3.1 IGEN acknowledges and agrees that the license granted hereunder is for
the performance of Licensed Services and License Animal Services only and does
not include any right to make, have made, import, offer or sell any products,
including devices, PCR reagents, kits or Diagnostic Products.
ARTICLE 4
CONSIDERATION AND PAYMENTS
4.1 [Reserved for future use]
4.2 Royalties Due to Roche in the Diagnostic Services Field. For the
rights and privileges granted under Section 2.1 of this Agreement IGEN shall pay
the following royalties tto RMS:
a) For Licensed Services in the Diagnostic Services Field defined as
Service A: an amount equal to fifteen percent (15%) of Net Service Revenue
per each Service A performed; provided, however, that such amount shall
equal 15.5% of Net Service Revenues for each Service A falling within the
scope of U.S. Patent No. 4,965,188; and
b) For Licensed Services in the Diagnostic Services Field defined as
Service B: an amount equal to:
i) (for infectious disease testing): twenty percent (20%) of Net
Service Revenues per each Service B performed; and
ii) (for non-infectious disease testing): eighteen percent (18%) of
Net Service Revenues per each Service B performed.
4.3 Royalties Due to Roche in the Animal Diagnostic Services Field. For
the rights and privileges granted under Section 2.1 of this Agreement IGEN shall
pay the following royalties to RMS:
a) For Licensed Animal Services in the Animal Diagnostic Services
Field defined as Service A: an amount equal to:
i) for detection of agents associated with infectious disease
testing: five percent (5%) of IGEN's or its Affiliate's Net Service
Revenues for each Service A performed; provided, however, that such
amount shall equal 5.5% of Net Service Revenues for each Service A
falling within the scope of U.S. Patent No. 4,965,188; and
ii) for detection of genetic diseases, genetic predisposition to
disease, genetic traits, and for sex determination, including
determining the sex of embryos: nine percent (9%) of IGEN's or its
Affiliate's Net Service Revenues per each Service A performed; provided,
however, that such
A-14-8
amount shall equal 9.5% of Net Service Revenues for each Service A
falling within the scope of U.S. Patent No. 4,965,188.
b) For Licensed Services defined as Service B: an amount equal to:
i) for detection of agents associated with infectious disease
testing: eight percent (8%) of IGEN's or its Affiliate's Net Service
Revenues for each Service B performed; provided, however, that such
amount shall equal ten percent (10%) of Net Service Revenues for each
Service B falling within the scope of U.S. Patent No. 4,965,188; and
ii) for detection of genetic diseases, genetic predisposition to
disease, genetic traits, and for sex determination, including
determining the sex of embryos: twelve percent (12%) of IGEN's or its
Affiliate's Net Service Revenues per each Service B performed; provided,
however, that such amount shall equal fifteen percent (15%) of Net
Service Revenues for each Service B falling within the scope of U.S.
Patent No. 4,965,188.
4.4 Reports. IGEN and its Affiliates shall deliver to RMS, within sixty
(60) days as of the end of and for each semiannual calendar period, i.e. the six
(6) month periods that are January 1 through June 30 and July 1 through December
31 (each a "Reporting Period"), a true and accurate royalty report ("Royalty
Report"). Each Royalty Report shall indicate the number of Licensed Services or
Licensed Animal Services performed during the relevant Reporting Period and the
detail specified below. Each Royalty Report shall be submitted either (a) on the
"Summary Royalty Report", a copy of which is attached hereto as Attachment III
or Attachment IV, as applicable, or (b) on a form generated by IGEN or its
Affiliate which duplicates the format of the Summary Royalty Report; and
includes at least the following:
a) (i) with respect to Licensed Services: the name of each Licensed
Service and Combination Service by target or analyte (e.g., HIV
Quantitation, Cystic fibrosis/ HLA and specifying either Service A or
Service B) and the number performed or (ii) with respect to Licensed Animal
Services: the name of each Licensed Animal Service and Combination Service
by target or analyte (e.g. FIV, Mycobacteria paratuberculosis, etc. and
specifying either Service A or Service B) and the number performed;
b) the gross invoice price billed for each Licensed Service or
Licensed Animal Service, as applicable, and Combination Service and any
amounts deducted from that gross invoice price in determining Net Service
Revenues (e.g., amount not reimbursed by third-party payer or Combination
Service approved must be stated and annotated);
c) Net Service Revenues and the calculation of total royalties
thereon; and
d) the calculation of the royalties payable to RMS. If no royalties
are due, it shall be so reported.
In the event IGEN or any of its Affiliates, as applicable, is unable to
calculate Net Service Revenues as prescribed in Section 1.21, IGEN or such
Affiliate shall so inform RMS, and upon RMS's written consent, IGEN or such
Affiliate shall calculate royalties as follows:
Upon receipt by RMS of satisfactory documentation verifying IGEN's actual
percentage of gross billings collected for IGEN's most recently ended fisacl
year (the "Collection Rate"), IGEN shall be permitted to calculate Net Service
Revenues based on the Collection Rate. In the event that IGEN wishes to avail
itself of such privilege, then IGEN shall notify RMS thereof in writing using
Attachment II and shall represent and confirm to RMS its Collection Rate for its
most-recently completed fiscal year, whereupon such rate shall be specified in
Attachment II. Thereafter during the Term of this Agreement, IGEN shall deliver,
within ninety (90) days after the end of IGEN's fiscal year, to RMS satisfactory
documentation that verifies the Collection Rate. If IGEN's Collection Rate
varies by at least five percent (5%) of the rate stated in Attachment II, RMS
shall amend Attachment II accordingly. Should IGEN fail to provide the required
updated documentation, IGEN shall calculate Net Service Revenues and royalties
due as prescribed in Section 1.21 for the remaining term of the Agreement.
A-14-9
The correctness and completeness of each Royalty Report shall be attested
to in writing by an authorized representative of IGEN.
In the event that, during any Reporting Period, IGEN and its Affiliates
performs no tests which are Licensed Services or Licensed Animal Services, IGEN
shall so indicate on the Royalty Report, by checking the appropriate box
regarding License Services or Licensed Animal Services.
4.5 [Reserved for future use]
4.6 Reporting and Payment.
(a) [Reserved for future use]
(b) The royalties payable by IGEN in US Dollars to Roche on the Net
Service Revenues generated outside of the United States on all Licensed
Services and Licensed Animal Services by IGEN or its Affiliates in the
Licensed Fields shall be converted by IGEN from the currency in which the
revenues were generated to US Dollars converted using the method used by
IGEN for internal financial reporting purposes in accordance with United
States generally accepted accounting principles.
(c) Simultaneously with the delivery of each Royalty Report, IGEN or
its Affiliates shall pay to RMS the royalty due under this Agreement for
the period covered by such report. All payments due RMS hereunder shall be
payable in United States currency and sent together (unless such payment is
wire transferred as provided below) with the Royalty Report by the due date
to the following address:
Roche Molecular Systems, Inc.
1145 Atlantic Avenue
Alameda, CA 94501
Attention: Licensing Department
IGEN may make payment of the royalty due in US Dollars by wire transferred
to the bank account as shown below simultaneously with the delivery of the
Royalty Report:
Roche Molecular Systems, Inc.
Chase Manhatten Bank of New York
ABA No.: 02000021
Account No.: 323839657
4.7 Withholding.
(a) Any withholding tax levied by a government, in the country where
payment originates, on payments made by IGEN to Roche shall be borne by
Roche. IGEN shall use commercially reasonable efforts to do all things
necessary to enable Roche to claim exemption therefrom under any double
taxation or similar agreement in force and shall produce to Roche proper
evidence of payment of all withholding tax and other certification that
might be required by the respective double taxation agreement.
(b) In case any taxing authority holds: (i) that any payment from any
Affiliate of IGEN to IGEN is in effect a royalty payment from such
Affiliate of IGEN to Roche, and (ii) such royalty payment to Roche is
subject to a withholding tax, then, at such time, the Parties will discuss
the issue and try to find an appropriate solution satisfying the business
interests of both Parties.
(c) Except as otherwise provided in subsections (a) and (b) above, all
payments of royalties and other consideration made by IGEN to Roche under
this Agreement shall be made in full without deduction of taxes, charges
and any other duties that may be imposed on such payments to Roche.
4.8 Books and Records.
(a) IGEN shall keep a complete and accurate set of books and records
relating to the quantity of Licensed Services or Licensed Animal Services
performed by or for IGEN and its Affiliates and
A-14-10
the revenues of IGEN and its Affiliates generated thereby. Such books and
records shall contain sufficient detail to substantiate the computation of
the Net Service Revenues of Licensed Services or Licensed Animal Services
and the amount of royalties payable under this Article 4 as well as all
other information in the statements of account provided for in Section 4.4
above, and shall be maintained by IGEN for a period of not less than three
(3) years from the date of such Sales.
(b) Roche shall be entitled, upon reasonable notice to IGEN, to have
such books and records audited by an independent certified public
accounting firm retained by Roche and reasonably acceptable to IGEN (which
acceptance shall not be unreasonably withheld), provided that any such
audit occurs during IGEN's normal business hours not more than once in any
calendar year. Roche also shall be entitled to have copies of the books and
records of each of IGEN's Affiliates relating to the quantity of Licensed
Services or Licensed Animal Services performed by or for such Affiliate and
such Affiliate's revenues generated therefrom audited, upon reasonable
notice to such Affiliate, by an independent certified public accounting
firm retained by Roche and reasonably acceptable to such Affiliate,
provided that any such audit occurs during such Affiliate's normal business
hours not more than once in any calendar year. Roche agrees that all
audited information shall be confidential to IGEN and IGEN's Affiliates.
Any such audit will be limited to those records required to be maintained
pursuant to Section 4.8(a) and the revenues associated therewith.
(c) Any person conducting an audit on behalf of Roche will be required
to protect the confidentiality of such information and shall provide to
Roche a report only of the ultimate conclusions resulting from such audit.
Except where IGEN disputes the conclusion of the audit by written notice to
Roche, IGEN shall pay promptly to Roche the amount of any royalties
determined by such an audit to be outstanding, along with interest accrued
up to and including the date of payment as provided in Section 4.9 below.
The costs of such an audit shall be borne by Roche; provided, however,
that, if such audit determines that the royalties paid by IGEN for any
audited Royalty Payment Period were at least ten percent (10%) less than
the royalties otherwise due and payable, then IGEN shall reimburse Roche
for the costs of such audit. If such audit determines that IGEN has
overpaid the amount of royalties otherwise due and payable for the audited
Royalty Payment Period, then Roche shall credit the amount of such
overpayment, plus interest at the rate provided in Section 4.9, to IGEN
against future royalties payable by IGEN.
4.8A Licensed Services and Licensed Animal Services performed by IGEN
prior to execution of this Agreement shall be royalty bearing and reported to
RMS together with the first Royalty Report due hereunder.
4.9 Past Due Payments. If IGEN fails to pay any amount specified under
this Agreement after the due date thereof, the amount owed shall bear an
interest of one percent (1%) per month from the due date until paid, provided,
however, that if this interest rate is held to be unenforceable for any reason,
the interest rate shall be the maximum rate allowed by law at the time the
payment is made.
4.10 No Multiple Royalties. At no time shall more than one royalty be
payable by IGEN upon the Net Service Revenues of any one Licensed Service or
Licensed Animal Service, regardless of whether the performance, use and/or sale
of such Licensed Service or Licensed Animal Service would infringe more than one
Valid Claim of one or more Licensed Patents and regardless of whether such
product qualifies as a "Licensed Service" or "Licensed Animal Service" for
purposes of this Agreement under more than one of the criteria for designating a
product to be a "Licensed Service" or "Licensed Animal Service" as provided in
Section 1.20 or 1.15 above.
4.11 Most Favored Licensee.
(a) If, after the Effective Time, Roche grants to any Third Party a
license in the Diagnostic Services Field or the Animal Diagnostic Services
Field under substantially equivalent terms and conditions as granted to
IGEN herein but under more favorable royalty rates than those given to IGEN
under this Agreement, Roche shall promptly notify IGEN of such more
favorable royalty
A-14-11
rates, and IGEN shall have the right and option to substitute such more
favorable royalty rates for the royalty rates contained herein.
(b) IGEN's right to elect such more favorable royalty rates shall
extend only for so long as and shall be conditioned on IGEN's acceptance of
all the same conditions, favorable or unfavorable, under which such more
favorable royalty rates shall be available to such Third Party including
any increase in license fees and the application of milestones payments, if
any. Upon IGEN's acceptance of all such terms of such Third Party
agreement, the more favorable royalty rates shall be effective as to IGEN
on the effective date of such Third Party agreement.
(c) Notwithstanding the foregoing, in the event that Roche shall
receive substantial nonmonetary consideration in the form of technology or
intellectual property rights to technology, as a part of the consideration
for its granting such a license to a Third Party, then this Section 4.11
shall not apply.
ARTICLE 5
[RESERVED FOR FUTURE USE]
ARTICLE 6
THIRD PARTY CLAIMS; LIMITATION ON LIABILITY; INDEMNIFICATION
6.1 Defense of Third Party Infringement Actions. If the manufacture,
production, sale, or use of any Licensed Service or Licensed Animal Service
results in a claim, suit or proceeding brought by a Third Party (each, an
"Action") alleging patent infringement against ROCHE or IGEN (or any of their
respective Affiliates), such Party shall promptly notify in writing the other
Party. The Party subject to such Action (the "Controlling Party") shall have the
exclusive right and obligation to defend and control the defense of any such
Action using counsel of its own choice; provided that the Controlling Party
shall not enter into any settlement of such Action without the written consent
of the other Party, which consent may be withheld in the unfettered discretion
of the other Party if such settlement admits the invalidity or unenforceability
of any patent rights of the other Party, and otherwise may not be unreasonably
withheld. The Controlling Party agrees to keep the other Party reasonably
informed of all material developments in connection with any Action.
6.2 IGEN shall assume full responsibility for its and its Affiliates'
performance, use and sale of the Licensed Services and Licensed Animal Services
and shall defend, indemnify and hold RMS (and its Affiliates, sublicensees and
licensors and their respective officers, directors, shareholders,
representatives, employees, consultants and agents and each of the heirs,
executors, successors and assigns of the foregoing) harmless from and against
all claims, damages, losses, costs and expenses (including reasonable attorneys'
fees) for death, personal injury, illness, property damage or any other injury
or damage, including any damages or expenses arising in connection with state or
federal regulatory action (collectively "Damages"), resulting from or arising
out of liability in any way relating to the performance, use and sale by IGEN or
its Affiliates, including its officers, directors, agents and employees, of the
Licensed Services and Licensed Animal Services.
6.3 Waiver of Claims. IGEN shall not assert, and IGEN shall ensure that
its Affiliates do not assert, any claims against ROCHE for any matter for which
IGEN has provided indemnity to ROCHE under Sections 6.2 and 6.4 hereof. IGEN
shall indemnify, hold harmless and defend ROCHE against any such claims.
6.4 Breach by Affiliate. Failure of an Affiliate to adopt and satisfy a
condition stated in this Agreement applicable to IGEN or an Affiliate shall be
considered a breach of this Agreement by IGEN. IGEN and such Affiliate shall be
jointly and severally responsible for and indemnify ROCHE and its Affiliates
(and their respective officers, directors, shareholders, representatives,
employees, consultants and agents and each of the heirs, executors, successors
and assigns of the foregoing) against any loss, cost, damage or liability
(including reasonable attorneys' fees) arising from the breach by such Affiliate
of this Agreement.
A-14-12
ARTICLE 7
PATENT ENFORCEMENT
7.1 Continuing Royalty Payment Obligations. IGEN's obligation to pay
royalties on the Net Service Revenue of Licensed Services or Licensed Animal
Services performed by IGEN and its Affiliates shall remain in effect to the
extent provided for in this Agreement notwithstanding any alleged infringement
by any Third Party of any of the Licensed Patents.
7.2 No IGEN Right to Enforce the Licensed Patents. It is expressly
understood that nothing contained herein shall in any way grant or be construed
to grant to IGEN the right to enforce the Licensed Patents. Roche shall have the
sole right to bring legal action to enforce the Licensed Patents against any
alleged Infringement by any Third Party.
ARTICLE 8
TERM AND TERMINATION
8.1 Term. The term of this Agreement shall commence as of the Effective
Time and shall continue in full force and effect, unless terminated sooner in
accordance with Section 8.2 below, until the expiration date of the last to
expire of the Valid Claims of the Licensed Patents.
8.2 Termination. This Agreement, and the licenses granted to IGEN and its
Affiliates herein, are perpetual and irrevocable, except to the extent
termination is permitted in this Section 8.2:
(a) IGEN may terminate this Agreement with respect to all or any one
or more of the Licensed Patents for any reason by written notice to Roche
at any time during the term of this Agreement.
(b) [Reserved for future use].
(c) In the event that IGEN does not make any royalty payments which
are due and payable, Roche may deliver written notice thereof to IGEN. If
IGEN, within sixty (60) days after delivery of such notice to IGEN (the
"Notice Period"), makes such payment to Roche, then Roche shall not have
the right to terminate this Agreement for such non-payment. If, at the
expiration of the Notice Period, IGEN has neither paid such royalty payment
to Roche nor disputed the payment obligation in a written notice to Roche,
then Roche may, upon written notice to IGEN following the Notice Period,
terminate this Agreement. If, during the Notice Period, IGEN provides
written notice to Roche that IGEN disputes such payment obligation, then
the Parties shall arbitrate such dispute in accordance with Section 11.2.
If the arbitration award requires IGEN to pay all or any portion of such
royalty payments to Roche (the "Arbitrated Amount"), then IGEN shall pay
such Arbitrated Amount to Roche within thirty (30) days after final
resolution of the dispute or, if IGEN fails to do so, Roche may, upon
written notice to IGEN following such 30-day period, terminate this
Agreement. If the arbitration award does not require IGEN to pay any
portion of such royalty payments to Roche, then Roche shall not have the
right to terminate this Agreement with respect to such claimed non-
payment.
(d) Bankruptcy. IGEN shall retain the rights granted to it as a
licensee under Section 365(n) of the United States Bankruptcy Code in case
of the bankruptcy, insolvency or winding-up of ROCHE.
(e) Expiration or termination of this Agreement shall not affect the
ability of any Party to seek resolution of any matter arising prior to such
expiration or termination pursuant to Article 11 herein.
(f) The Parties agree that the provisions of this Section 8.2 shall
not be considered when making the determination pursuant to Section
4.11(a), nor amended in the event of exercise of Section 4.11(b).
A-14-13
(g) In the event of the termination of any license, in whole or in
part, under this Agreement, the performance by IGEN and its Affiliates of
services covered by such license shall cease immediately to the extent that
such performance no longer is licensed as a result of such termination.
8.3 Survival of Certain Rights Upon Expiration or Termination. All rights
granted to and obligations undertaken by the Parties hereunder shall terminate
immediately upon the expiration of the term of this Agreement (as set forth in
Section 8.1 above) or the termination of this Agreement (pursuant to Section 8.2
above) except for:
(a) The obligations of IGEN to pay any and all royalties or other
consideration accrued hereunder prior to such expiration or termination;
(b) The right of Roche to have audited by an independent certified
public accounting firm the books and records of IGEN and IGEN's Affiliates
as provided in Section 4.8 above;
(c) The indemnification provisions of Section 6.2 above;
(d) The procedures set forth in Article 11 herein in respect of any
matter arising prior to such expiration or termination; and
(e) Any and all confidentiality obligations provided for in this
Agreement; and
(f) Sections 4.9, 8.2(e), 8.2(g), 8.3, 10, 12.1, 12.3, 12.5, 12.8,
12.9, 12.10, 12.14, 12.15, 12.17, 12.18 and 12.20.
ARTICLE 9
ADDITIONAL COVENANTS AND AGREEMENTS
9.1 IGEN shall not, and shall cause each of its Affiliates not to, enter
into a joint venture or other arrangement with any Third Party that would result
in the conveyance to such Third Party of benefits substantially equivalent to
those that would be received from a sublicense under the Licensed Patents
licensed under this Agreement.
9.2 IGEN shall not, and shall cause each of its Affiliates not to, arrange
the performance of Licensed Services or Licensed Animal Services (or utilize the
definitions relating thereto) to reduce in bad faith the Net Service Revenues
for which royalties are payable by IGEN hereunder.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
10.1 Representations and Warranties of IGEN. IGEN hereby represents and
warrants to Roche as follows:
(a) The execution, delivery and performance of, and the consummation
by IGEN of the transactions contemplated by, this Agreement have been duly
authorized by all necessary action on the part of IGEN and no further
consents by IGEN are needed in order to consummate the transactions
contemplated hereby.
(b) This Agreement, when executed and delivered by Roche/Basle,
Roche/Germany and Roche/USA in accordance with the provisions hereof, shall
be a legal, valid and binding obligation of IGEN, enforceable against IGEN
in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the enforcement of creditors' rights generally and by
limitations on the availability of specific performance and other equitable
remedies against IGEN.
A-14-14
(c) IGEN's execution of this Agreement shall not constitute a breach
or default under any contract, instrument or agreement to which IGEN or any
of its Affiliates is a Party or by which IGEN or any of its Affiliates is
bound.
(d) All persons who will execute this Agreement on behalf of IGEN have
been duly authorized to do so by all necessary action on the part of IGEN.
10.2 Representations and Warranties of Roche. Roche hereby represents and
warrants to IGEN as follows:
(a) Roche/Basle has the full power and right to grant to IGEN and
IGEN's Affiliates the license outside of the United States under the
Licensed Patents, and Roche/USA has the full power and right to grant to
IGEN and IGEN's Affiliates the license in the United States under the
Licensed Patents, set forth in Section 2.1.
(b) To the best of Roche's knowledge, Exhibit "1" constitutes a
complete list of all granted U.S. patents (or where a corresponding U.S.
patent is not granted as of the Effective Time, then a representative
corresponding published U.S. or European patent application is listed)
owned by Roche or its Affiliates as of the Effective Time and available for
license to IGEN, which meet the criteria of Section 1.19 herein. IGEN's
exclusive remedy for a breach of the foregoing representation and warranty
shall be inclusion of the missing patents in Exhibit 1 as required by
Section 1.19 herein. For the purposes of such list, where a U.S. patent
application from which priority has been claimed has been abandoned and
succeeded by one or more continuations and/or continuations-in-part, any
such granted continuations and/or continuations-in-part, will be listed.
Where no such U.S. Licensed Patents have been issued, the granted non-U.S.
Licensed Patents or corresponding representative published application are
listed. Subject to the terms, conditions and limitations of this Agreement,
IGEN, its Affiliates and customers shall be immune from any suit for
infringement of any patent rights which would constitute a failure of this
representation and warranty.
(c) The execution, delivery and performance of, and the consummation
by Roche of the transactions contemplated by, this Agreement have been duly
authorized by all necessary action, and the execution, delivery and
performance of, and no further consents are needed in order to consummate
the transactions contemplated hereby.
(d) This Agreement, when executed and delivered by IGEN in accordance
with the provisions hereof, shall be a legal, valid and binding obligation
of Roche, enforceable against Roche in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the enforcement of
creditors' rights generally and by limitations on the availability of
specific performance and other equitable remedies against Roche.
(e) Roche's execution of this Agreement shall not constitute a breach
or default under any contract, instrument or agreement to which Roche or
any of its Affiliates is a Party or by which Roche or any of its Affiliates
is bound.
(f) All persons who will execute this Agreement on behalf of
Roche/Basle have been duly authorized to do so by all necessary action on
the part of Roche/Basle, and all persons who will execute this Agreement on
behalf of Roche/Germany have been duly authorized to do so by all necessary
action on the part of Roche/Germany, and all persons who will execute this
Agreement on behalf of Roche/USA have been duly authorized to do so by all
necessary action on the part of Roche/USA.
10.3 No Other Representations or Warranties. Except as otherwise
expressly set forth herein, the Parties make no other representation or
warranty, express or implied, with regard to PCR or any other matter hereunder
whatsoever.
A-14-15
ARTICLE 11
DISPUTE RESOLUTION; VENUE AND CHOICE OF LAW
11.1 Good Faith Resolution. In the event that at any time during the term
of this Agreement a disagreement, dispute, controversy or claim should arise out
of or relating to the interpretation of this Agreement, or performance by a
Party under this Agreement, or a breach of this Agreement by a Party, or any
claim by a Party that any provision of this Agreement is invalid (a "Dispute" or
collectively "Disputes"), one Party shall give written notice to the other Party
that a dispute exists and the Parties will then attempt in good faith to resolve
their differences before resorting to arbitration provided in Section 11.2. If
the Parties cannot resolve the disputed matter within thirty (30) days after
such notice, then either Party shall be free to submit the disputed matter to
binding arbitration in accordance with Section 11.2 hereof. For purposes of this
Article 11, the terms "Party" and "Parties" shall include each of the
signatories to this Agreement and/or any one or more of their respective
Affiliates, whether the reference is to a Party as a claimant or a Party against
which a claim is made.
11.2 Arbitration.
(a) The Parties intend Section 11.2 hereof to be enforceable in
accordance with the Federal Arbitration Act (9 U.S.C. Section 1, et seq.),
including any amendments to that Act which are subsequently adopted,
notwithstanding any other choice of law provision set forth in this
Agreement. In the event that either Party refuses to submit to arbitration
as required herein, the other Party may request a United States District
Court to compel arbitration in accordance with the Federal Arbitration Act.
(b) Any dispute or other matter in question between Roche and IGEN
arising out of or relating to the formation, interpretation, performance,
or breach of this Agreement, whether such dispute or matter arises before
or after termination of this Agreement, shall be resolved solely by
arbitration if the Parties are unable to resolve the dispute through
negotiation pursuant to Section 11.1 hereof. Arbitration shall be initiated
by the delivery of a written notice of demand for arbitration by one Party
to the other. The date on which the other Party receives such written
notice shall be hereinafter referred to as the "Arbitration Notice Date."
(c) Each Party shall appoint an individual as arbitrator and the two
so appointed shall then appoint a third arbitrator. If either Party refuses
or neglects to appoint an arbitrator within thirty (30) days after the
Arbitration Notice Date, then the arbitration shall be conducted by a
single arbitrator appointed by the American Arbitration Association. If two
arbitrators are appointed but do not agree on the third arbitrator within
sixty (60) days after the Arbitration Notice Date, each of the arbitrators
shall nominate within sixty-seven (67) days after the Arbitration Notice
Date three individuals. Each arbitrator shall then within seventy-two (72)
days after the Arbitration Notice Date decline two of the nominations
presented by the other arbitrator. The third arbitrator shall then be
chosen from the remaining two nominations by drawing lots. Notwithstanding
anything contained herein to the contrary, if the third arbitrator is not
chosen with seventy-two (72) days after the Arbitration Notice Date, then
the American Arbitration Association shall appoint the third arbitrator
within seventy-seven (77) days after the Arbitration Notice Date. The
arbitrators shall not be or have been affiliated with, or have any
personal, financial or business relationship with, either of the Parties or
any Affiliate of either Party; the arbitrators shall not have a personal or
financial interest in the result of the arbitration.
(d) The arbitration hearings shall be held in Borough of Manhattan,
State of New York or such other place as may be mutually agreed by the
Parties, shall be conducted in the English language and shall be conducted
as confidential proceedings (except to the extent necessary to enforce the
award resulting therefrom). Unless the Parties agree otherwise, the
arbitrators shall commence the arbitration hearing within thirty (30) days
after the selection of the third arbitrator. The arbitrators shall issue
orders to protect the confidentiality of proprietary information, trade
secrets and other sensitive information disclosed. Pending the arbitration
hearing, at the request of a Party, the
A-14-16
arbitrators may issue temporary injunctive or other equitable relief to
address any violation or threatened violation of this Agreement. All awards
shall be made based on a majority vote of the arbitrators, shall be in
writing, shall not be considered confidential information of either Party,
shall be issued within sixty (60) days after hearings before the
arbitrators are completed, and shall state the reasoning on which the award
rests unless the Parties agree otherwise. In addition to any relief at law
which may be available to an aggrieved Party for such breach, such Party
shall be entitled to injunctive and other equitable relief as the
arbitration panel may grant. The arbitrators shall deliver a copy of the
award to each Party personally or by registered mail. Any party may request
within ten (10) days after receiving the decision that, for good cause, the
arbitrators reconsider and modify such decision. The arbitrators shall have
thirty (30) days after such request to modify their decision, if they
consider it appropriate. Thereafter, the decision of the arbitrators shall
be final, binding and nonappealable, except to the extent appeals are
permitted by the Federal Arbitration Act, with respect to all persons,
including (without limitation) persons who have failed or refused to
participate in the arbitration process. Judgment upon the award rendered
may be entered in any court having jurisdiction thereof.
(e) Each Party shall bear its own costs in connection with any such
arbitration including, without limitation, (i) all legal, accounting, and
any other professional fees and expenses, (ii) the fees and expenses of its
own arbitrator, and (iii) all other costs and expenses each Party incurs to
prepare for such arbitration. Other than set forth above, each side shall
pay, (iv) one-half of the fee and expenses of the third arbitrator, and (v)
one-half of the other expenses that the Parties jointly incur directly
related to the arbitration proceeding.
(f) Except as provided above, arbitration shall be based upon the
Commercial Arbitration Rules of the American Arbitration Association.
Discovery shall be limited at the discretion of the arbitrators, so that
the timing and extent of such discovery shall not interfere with the normal
business operations of the Parties. The arbitrators may proceed to an award
notwithstanding the failure of either Party to participate in the
proceedings.
(g) In the event of subsequent actions or proceedings to confirm the
award or to enforce the judgment entered thereon or any other rights
flowing therefrom, the prevailing Party shall be entitled to recover its
reasonable attorney's fees incurred in such actions or proceedings.
(h) The fact that the dispute resolution procedures specified in this
Article 11 shall have been or may be invoked shall not excuse any Party
from performing its obligations under this Agreement, and during the
pendency of any such procedure the Parties shall continue to perform their
respective obligations in good faith.
11.3 Limited Recourse to Courts. This Article 11 shall be the exclusive
dispute resolution procedure for Disputes under this Agreement and no Party
shall bring Disputes before any court, except as appeals to arbitration awards
are permitted by Section 11.2. Except as permitted by Section 11.2, the Parties
hereby waive any right to appeal an arbitration award to any court. The
provisions of Section 11.2 may be enforced, and judgment on the award (including
without limitation equitable remedies) granted in any arbitration hereunder may
be entered, in any court of competent jurisdiction. The Parties hereby submit to
the non-exclusive in personam jurisdiction of the federal courts in New York for
such purposes. THE PARTIES HEREBY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY FOR
MATTERS RELATED TO DISPUTES SUBMITTED TO ANY COURT.
11.4 Governing Law. This Agreement is made in accordance with and shall
be governed and construed under the laws of the State of New York, U.S.A.,
without regard to its conflicts of laws rules.
A-14-17
ARTICLE 12
MISCELLANEOUS
12.1 Disclaimer. EXCEPT AS OTHERWISE PROVIDED HEREIN THE INTELLECTUAL
PROPERTY RIGHTS LICENSED HEREUNDER ARE PROVIDED BY ROCHE "AS IS WHERE IS" AND
ROCHE MAKES NO, AND DISCLAIMS ALL WARRANTIES AND REPRESENTATIONS, EXPRESS OR
IMPLIED, CONCERNING: (a) LICENSED INTELLECTUAL PROPERTY RIGHTS COVERED BY THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION, ANY EXPRESS OR IMPLIED WARRANTY OF
DESIGN, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO LICENSED
INTELLECTUAL PROPERTY RIGHTS OR ANY SERVICE; (b) THE COMMERCIAL SUCCESS OF ANY
LICENSED SERVICE; (c) THE EXISTENCE, VALIDITY OR SCOPE OF LICENSED INTELLECTUAL
PROPERTY RIGHTS; (d) ANY LICENSED SERVICE BEING FREE FROM AN INFRINGEMENT ON
PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES; (e) WHETHER ANY
THIRD PARTIES ARE IN ANY WAY INFRINGING LICENSED INTELLECTUAL PROPERTY RIGHTS
COVERED BY THIS AGREEMENT; OR (f) THE ACCURACY, UTILITY OR SUFFICIENCY OF ANY
TECHNICAL INFORMATION TRANSFERRED TO IGEN HEREUNDER. THE PARTIES SPECIFICALLY
AGREE THAT NEITHER PARTY SHALL BE SUBJECT TO AND THAT EACH DISCLAIMS: (A) ANY
OTHER OBLIGATIONS OR LIABILITIES ARISING OUT OF BREACH OF WARRANTY, AND (B) ALL
CONSEQUENTIAL, INCIDENTAL, CONTINGENT, PUNITIVE AND EXEMPLARY DAMAGES WHATSOEVER
WITH RESPECT TO (i) ANY DISPUTES BETWEEN THE PARTIES UNDER THIS AGREEMENT OR
(ii) CLAIMS MADE BY ONE PARTY AGAINST ANOTHER PARTY ARISING FROM THE COURSE OF
CONDUCT WITHIN THE RELATIONSHIP OF THE PARTIES UNDER THIS AGREEMENT (WHETHER
SUCH CLAIMS ARISE UNDER CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE), EVEN
THOUGH A PARTY MAY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE
LIMITATION OF DAMAGES IN CLAUSE (B) ABOVE SHALL NOT APPLY TO DAMAGES PAID TO
UNRELATED THIRD PARTIES (WHETHER PURSUANT TO JUDGMENT OR SETTLEMENT) FOR WHICH A
PARTY HAS AN OBLIGATION TO INDEMNIFY THE OTHER PARTY HEREUNDER.
12.2 [Reserved for future use].
12.3 Additional Documents. Each Party agrees to execute such further
papers or agreements as may be necessary to effect the purposes of this
Agreement.
12.4 Governmental Approvals and Marketing of Licensed Products. IGEN
shall be responsible for obtaining all necessary governmental approvals for the
performance of any Licensed Service or Licensed Animal Service, at IGEN's
expense, including, without limitation, any safety studies. IGEN shall have sole
responsibility for the quality control for any Licensed Product.
12.5 Confidentiality. ROCHE and IGEN agree for themselves and their
Affiliates, and on behalf of their respective officers, employees and agents,
that until the later of (i) 10 years from the Effective Time hereof or (ii) 5
years after the expiration date of this Agreement, each will treat as
confidential, using the same degree of care as it uses for its own confidential
and proprietary information, but in no event less than reasonable care, and
shall not disclose to any Third Party, and shall not use for its own benefit or
the benefit of any Third Party (except as permitted hereunder, including
disclosures to IGEN Affiliates and permitted subcontractors to the extent
necessary to have the services licensed hereunder performed and subject to
confidentiality obligations at least as restrictive as those contained herein)
the confidential information furnished to it by the other Party unless the
furnishing party ("Discloser")
A-14-18
otherwise agrees in writing or unless such information clearly and convincingly
falls within the following exceptions:
(a) Such confidential information was known to the receiving party
("Recipient") prior to the time of disclosure by the Discloser or was in
the public domain at the time of disclosure by Discloser as can be
documented by written records; or
(b) Such confidential information is or becomes publicly known after
disclosure by Discloser through no fault or omission attributable to
Recipient; or
(c) Such confidential information is given to Recipient from sources
independent of Discloser who have the right to disclose it; or
(d) Such confidential information is independently developed by
employees of Recipient that did not have access to it as can be documented
by written records; or
(e) Recipient is required to disclose such confidential information
to a court of law or to appropriate governmental agencies to enable
Recipient to carry out the evaluation of a Product or to secure a
governmental approval, or as otherwise required by law; provided, however,
that (1) Recipient gives the Discloser prompt written notice of such
required disclosure and reasonably assists the Discloser in its efforts to
prevent or limit such disclosure; and (2) any confidential information
disclosed pursuant to this Section 12.5(e) shall otherwise remain
confidential information for the purposes of this Agreement.
For purposes of this License, ROCHE's confidential information shall
include (subject to the exclusions in (a)-(e) above) all information relating to
the Licensed Patents. Access to such confidential information must be restricted
to the Recipient's, its Affiliate's or subcontractor's, employees or agents with
a need to have access. The Recipient acknowledges that by virtue of this
Agreement it acquires only such rights as set forth under the terms and
conditions of this Agreement and only so long as it is in effect and does not
acquire any rights of ownership or title in the Discloser's confidential
information. In addition, each of the Parties agrees to execute appropriate
confidentiality agreements with Third Party collaborators of such Party prior to
disclosing the other Party's confidential information to such Third Party
collaborator. Upon expiration of this Agreement, each Party, its Affiliates or
subcontractors and their employees and agents shall immediately discontinue use
of the other's confidential information, except as otherwise permitted under the
provisions hereof. The Parties agree that this Section 12.5 sets out in its
entirety the Parties' confidentiality obligations with respect to the subject
matter of this Agreement. Neither Party nor any of its Affiliates shall make any
public announcement of or otherwise disclose to any Third Party this Agreement
or any of its terms without the prior written consent of the other Party.
12.6 License Registration. IGEN shall pay all costs and legal fees
connected with registration of this Agreement in those countries where it (or
its Affiliates and/or agents) performs Licensed Services and Licensed Animal
Services, where required, and shall otherwise ensure that the laws of all the
countries where performance of its Licensed Services and Licensed Animal
Services occurs are fully satisfied. None of such amounts shall be deductible
against amounts payable to ROCHE hereunder. ROCHE shall provide reasonable
assistance to IGEN in effecting such registrations if IGEN reimburses any
out-of-pocket expenses incurred in providing such assistance.
12.7 Reservation of Rights. ROCHE reserves the right to use for any
purpose (commercial or noncommercial), anywhere in the world, and the right to
allow other persons to use for any purpose, anywhere in the world, any Licensed
Patents licensed hereunder, without ROCHE or such other persons being obligated
to pay IGEN any royalties or other compensation.
12.8 Waiver. No delay or omission on the part of either Party to this
Agreement in requiring performance by the other Party or in exercising any right
hereunder shall operate as a waiver of any provision hereof or of any right or
rights hereunder; and the waiver, omission or delay in requiring performance or
exercising any right hereunder on any one occasion shall not be construed as a
bar to or waiver of such performance or right, or of any right or remedy under
this Agreement, on any future
A-14-19
occasion. Any agreement on the part of either Party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such Party.
12.9 Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their permitted successors and assigns;
provided, however, that: (a) neither Party shall assign any of its rights and
obligations hereunder except as consented to by the other Party, which consent
shall not be unreasonably withheld, and (b) such consent shall not be required
with respect to an assignment of (i) any or all of its rights and obligations
hereunder to an Affiliate of such assigning party; or (ii) all (but not less
than all) of its rights and obligations hereunder to an acquirer of all or
substantially all of the assets or business of the assigning party related to
such party's use of the Licensed Patents, whether as incident to a merger,
consolidation, reorganization, acquisition or otherwise. Whenever there has been
an assignment or a sublicense by IGEN or ROCHE, as the case may be, as permitted
by this Agreement, the term "IGEN" or "ROCHE" as used in this Agreement shall
also include and refer to, if appropriate, such assignee or sublicensee.
12.10 Notices. Any notice or other communication required or permitted to
be given to either Party hereto shall be in writing and shall be deemed to have
been properly given and to be effective on the date of delivery if delivered in
person or by facsimile (with electronic confirmation of receipt and with a
confirmation copy sent by internationally-recognized air courier service), to
such Party at the following address:
If to IGEN:
IGEN Integrated Healthcare, LLC
16020 Industrial Drive
Gaithersburg, Maryland 20877
Attention: President
Telephone: 1-301-869-9800
Facsimile: 1-301-208-3789
With a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: David Redlick, Esq.
Telephone: 1-617-526-6000
Facsimile: 1-617-526-5000
If to Roche, to each and all of the following:
F. Hoffmann-La Roche Ltd.
Grenzacherstrasse 124
CH-4070 Basle, Switzerland
Attention: Legal Department
Telephone: 011-4161-688-5974
Facsimile: 011-4161-688-1396
Roche Diagnostics GmbH
Sandhofer Strasse 116
D-68305 Mannheim
Germany
Attention: Legal Department
Telephone: 011-49-621-759-6434
Facsimile: 011-49-621-759-4461
A-14-20
Roche Molecular Systems, Inc.
4300 Hacienda Drive
Pleasanton, California 94588
Attention: President
Telephone: 925 730 8250
Facsimile: 925 225 0369
Roche Molecular Systems, Inc.
1145 Atlantic Avenue
Alameda, CA 94501
Attention: Licensing Department
Telephone: 510 814 2823
Facsimile: 510 814 2763
Roche Molecular Systems, Inc.
1145 Atlantic Avenue
Alameda, CA 94501
Attention: General Counsel
Telephone: 510 814 2898
Facsimile: 510 814 2956
Either Party may change its address for communications by a notice to the
other Party in accordance with this Section.
12.11 Headings. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
12.12 Force Majeure. Any delays in performance by any Party under this
Agreement (other than a Party's failure to make payments hereunder) shall not be
considered a breach of this Agreement if and to the extent caused by occurrences
beyond the reasonable control of the Party affected, including but not limited
to acts of God, embargoes, governmental restrictions, strikes or other concerted
acts of workers, fire, flood, explosion, riots, wars, civil disorder, rebellion
or sabotage. The Party suffering such occurrence shall immediately notify the
other Party and any time for performance hereunder shall be extended by the
actual time of delay caused by the occurrence.
12.13 Independent Contractors. In granting, performing or exercising
rights under this Agreement, ROCHE and IGEN act and shall act at all times as
independent contractors and nothing contained in this Agreement shall be
construed or implied to create an agency, partnership or employer and employee
relationship between IGEN and ROCHE. At no time shall one Party make commitments
or incur any charges or expenses for or in the name of the other Party.
12.14 Severability. If, under applicable law, any term, condition or
provision of this Agreement is held invalid or unenforceable, or otherwise
directly or indirectly affects the validity of any other material provision(s)
of this Agreement (the "Severed Clause"), then this Agreement shall remain in
full force and effect, except for the Severed Clause. The Parties agree to
renegotiate in good faith the Severed Clause and be bound by the mutually agreed
substitute provision.
12.15 Interpretation. The official text of this Agreement shall be
English. For purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms of this Agreement do not amend or supersede, and shall
not be used to interpret, the terms of the License Agreement, dated as of
the date hereof, by and between IGEN International, Inc. and IGEN LS LLC,
the Improvements License Agreement, dated as of the date hereof, by and
between Roche/Germany and IGEN International, Inc., the Covenants Not to
Sue, dated as of the date hereof, by and among IGEN, MSD, MST,
Roche/Germany, Roche Holding Ltd, and IGEN LS LLC, or the License Agreement
(Human IVD, Veterinary IVD, HLA Typing,
A-14-21
Paternity, DNA Manufacturing and Plasma Testing), dated as of the date
hereof, by and between the Parties;
(b) the terms defined in this Agreement have the meanings assigned to
them in this Agreement and include the plural as well as the singular, and
the use of any gender herein shall be deemed to include the other gender;
(c) references herein to "Sections," "Subsections," "Paragraphs," and
other subdivisions without reference to a document are to designated
Sections, Subsections, Paragraphs and other subdivisions of this Agreement;
(d) a reference to a Subsection without further reference to a Section
is a reference to such Subsection as contained in the same Section in which
the reference appears, and this rule shall also apply to Paragraphs and
other subdivisions;
(e) the words "herein," "hereof," "hereunder," and other words of
similar import refer to this Agreement as a whole and not to any particular
provision;
(f) the term "include" or "including" shall mean "including without
limitation";
(g) the term "to the extent" shall mean the degree to which a subject
or other thing extends, and such phrase shall not mean simply "if";
(h) the term "or" is not exclusive; and
(i) the Exhibits, Appendices and Annexes to this Agreement are hereby
incorporated and made a part hereof and are an integral part of this
Agreement.
12.16 Cumulative Rights. The rights, powers and remedies hereunder shall
be in addition to, and not in limitation of, all rights, powers and remedies
provided at law or in equity. All of such rights, powers and remedies shall be
cumulative, and may be exercised successively or cumulatively.
12.17 Entire Agreement; Amendment. This Agreement and any and all
Schedules and Appendices referred to herein, together with the Transaction
Agreements (as defined in the Merger Agreement), embody the entire understanding
of the Parties with respect to the subject matter hereof and shall supersede all
previous communications, representations or understandings, either oral or
written, between the Parties relating to the subject matter hereof. This
Agreement shall not be amended, altered or changed except by a written agreement
signed by all of the Parties hereto. In the event of any inconsistency between
the terms of this Agreement and the Improvements License Agreement dated as of
the date hereof, between Roche/Germany and IGEN International, Inc. (the
"Improvements License Agreement") (e.g., if a product or service is licensed
under the Improvements License Agreement and does not require the license under
this this Agreement), then the terms of the Improvements License Agreement shall
control.
12.18 No Third Party Beneficiary Rights. Except for the provisions of
Section 2.1 and 2.3 relating to license rights and performance by other
laboratories and Article 6 relating to Indemnitees, nothing contained in this
Agreement is intended to confer upon any person other than the Parties hereto
and their respective Affiliates, successors and permitted assigns, any benefit,
right or remedy under or by reason of this Agreement.
12.19 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.20 Sales Tax. In the event any sales, use or similar tax (if any) is
required to be collected or paid in connection with the performance of Licensed
Services or Licensed Animal Services by IGEN and its Affiliates pursuant to this
Agreement, IGEN shall pay the same and hold Roche harmless with respect thereto.
[Remainder of Page Intentionally Left Blank]
A-14-22
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers effective as of the Effective Time.
IGEN INTEGRATED HEALTHCARE, LLC
By: /s/ RICHARD J. MASSEY
------------------------------------
Name: Richard Massey
Title: President and Chief
Operating Officer
Date: July 24, 2003
F. HOFFMANN-LA ROCHE LTD
By: /s/ DR. FRANZ B. HUMER
------------------------------------
Name: Franz B. Humer
Title: Chairman and Chief
Executive Officer
Date: July 24, 2003
By: /s/ ERICH HUNZIKER
------------------------------------
Name: Erich Hunziker
Title: Chief Financial Officer
Date: July 24, 2003
ROCHE DIAGNOSTICS GMBH
By: /s/ C.J. RUETSCH
------------------------------------
Name: Claus-Joerg Ruetsch
Title: General Counsel
By: /s/ HEINO VON PRONDZYNSKI
------------------------------------
Name: Heino Von Prondzynski
Date: July 24, 2003
A-14-23
ROCHE MOLECULAR SYSTEMS, INC.
By: /s/ H. DREISMANN
----------------------------------
Name: Heiner Dreismann
Title: President, Roche Molecular
Systems
A-14-24
ANNEX 15
LEHMAN BROTHERS
July 24, 2003
Board of Directors
IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, MD 20877
Members of the Board:
We understand that IGEN International, Inc. (the "Company") intends to
enter into an agreement and plan of merger (the "Agreement") with Roche Holding
Ltd ("Roche"), its subsidiary, 66 Acquisition Corporation II, and NewCo (as
defined below), pursuant to which (1) Roche will purchase 100% of the
outstanding common stock of the Company for $47.25 per share, and (2) a
subsidiary ("NewCo") of the Company containing certain assets and liabilities of
the Company will simultaneously be spun-off to IGEN stockholders in a taxable
transaction ("the Proposed Transaction"). The terms and conditions of the
Proposed Transaction are set forth in more detail in the Agreement.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company's stockholders of the consideration to be received by such stockholders
in the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction; (2) publicly available
information concerning the Company and Roche that we believe to be relevant to
our analysis; (3) financial and operating information with respect to the
business, operations and prospects of the Company and NewCo furnished to us by
the Company, including, without limitation, certain projections of future
financial performance of the Company and NewCo prepared by the management of the
Company; (4) a trading history of the Company's common stock from its initial
public offering on February 3, 1994 to the present; (5) a comparison of the
historical financial results and present financial condition of the Company with
those of other companies that we deemed relevant; and (6) a comparison of the
financial terms of the Proposed Transaction with the financial terms of certain
other transactions that we deemed relevant. In addition, we have had discussions
with the management of the Company concerning its business, operations, assets,
financial condition and prospects and have undertaken such other studies,
analyses and investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they
are not aware of any facts or circumstances that would make such information
inaccurate or misleading. With respect to the financial projections of the
Company and NewCo, upon advice of the Company, we have assumed that such
projections have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company and NewCo and that the
Company and NewCo will perform substantially in accordance with such
projections. In addition, you have not authorized us to solicit, and we have not
solicited, any indications of interest from any third party with respect to the
purchase of all or a part of the Company's business. In arriving at our opinion,
we have not conducted a physical inspection of the properties and facilities of
the Company and have not made or obtained any evaluations or appraisals of the
assets or liabilities of the Company. Our opinion necessarily is based upon
market, economic and other conditions as they exist on, and can be evaluated as
of, the date of this letter.
A-15-1
LEHMAN BROTHERS
IGEN International, Inc.
July 24, 2003
Page 2
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
received by the stockholders of the Company in the Proposed Transaction is fair
to such stockholders.
We are acting as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services in connection
therewith. In addition, the Company has agreed to indemnify us for certain
liabilities that may arise out of the rendering of this opinion. We also have
performed various investment banking services for the Company in the past and
have received customary fees for such services. In the ordinary course of our
business, we may actively trade in the debt and equity securities of the Company
and Roche for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company in connection with its consideration of the Proposed Transaction. This
opinion is not intended to be, and does not constitute, a recommendation to any
stockholder of the Company as to how such stockholder should vote with respect
to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
By: /s/ FREDERICK FRANK
------------------------------------
Vice Chairman
A-15-2
ANNEX 16
BIOVERIS CORPORATION
2003 STOCK INCENTIVE PLAN
1. Purpose
The purpose of this 2003 Stock Incentive Plan (the "Plan") of BioVeris
Corporation, a Delaware corporation (the "Company"), is to advance the interests
of the Company's stockholders by enhancing the Company's ability to attract,
retain and motivate persons who make (or are expected to make) important
contributions to the Company by providing such persons with equity ownership
opportunities and performance-based incentives and thereby better aligning the
interests of such persons with those of the Company's stockholders. Except where
the context otherwise requires, the term "Company" shall include any of the
Company's present or future parent or subsidiary corporations as defined in
Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the "Code") and any other business venture
(including, without limitation, joint venture or limited liability company) in
which the Company has a controlling interest, as determined by the Board of
Directors of the Company (the "Board").
2. Eligibility
All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options, restricted stock or other
stock-based awards (each, an "Award") under the Plan. Each person who has been
granted an Award under the Plan shall be deemed a "Participant".
3. Administration and Delegation
(a) Administration by Board of Directors. The Plan will be administered by
the Board. The Board shall have authority to grant Awards and to adopt, amend
and repeal such administrative rules, guidelines and practices relating to the
Plan as it shall deem advisable. The Board may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the Board
shall be made in the Board's sole discretion and shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.
(b) Appointment of Committees. To the extent permitted by applicable law,
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"), which Committee will
consist of not less than two members, each member of which shall be an "outside
director" within the meaning of Section 162(m) of the Code and a "non-employee
director" as defined in Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All references in the Plan to the
"Board" shall mean the Board or a Committee of the Board or the executive
officers referred to in Section 3(c) to the extent that the Board's powers or
authority under the Plan have been delegated to such Committee or executive
officers.
(c) Delegation to Executive Officers. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to grant Awards to employees or officers of the Company or any
of its present or future subsidiary corporations and to exercise such other
powers under the Plan as the Board may determine, provided that the Board shall
fix the terms of the Awards to be granted by such executive officers (including
the exercise price of such Awards, which may include a formula by which the
exercise price will be determined) and the maximum number of shares subject to
Awards that the executive officers may grant; provided further, however, that no
executive officer shall be authorized to grant Awards to any "executive officer"
of the Company (as defined by Rule 3b-7 under the Exchange Act) or to any
"officer" of the Company (as defined by Rule 16a-1 under the Exchange Act).
A-16-1
4. Stock Available for Awards
(a) Number of Shares. Subject to adjustment under Section 8, Awards may be
made under the Plan for up to 5,300,000 shares of common stock, $0.001 par value
per share, of the Company (the "Common Stock"). If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part (including as the result of shares of Common Stock
subject to such Award being repurchased by the Company at the original issuance
price pursuant to a contractual repurchase right) or results in any Common Stock
not being issued, the unused Common Stock covered by such Award shall again be
available for the grant of Awards under the Plan, subject, however, in the case
of Incentive Stock Options (as hereinafter defined), to any limitations under
the Code. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
(b) Per-Participant Limit. Subject to adjustment under Section 8, the
maximum number of shares of Common Stock with respect to which Awards may be
granted to any Participant under the Plan shall be 500,000 per calendar year.
The per-Participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code ("Section 162(m)").
5. Stock Options
(a) General. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of BioVeris Corporation, any
of BioVeris Corporation's present or future parent or subsidiary corporations as
defined in Sections 424(e) or (f) of the Code, and any other entities the
employees of which are eligible to receive Incentive Stock Options under the
Code, and shall be subject to and shall be construed consistently with the
requirements of Section 422 of the Code. The Company shall have no liability to
a Participant, or any other party, if an Option (or any part thereof) that is
intended to be an Incentive Stock Option is not an Incentive Stock Option.
(c) Exercise Price. The Board shall establish the exercise price at the
time each Option is granted and specify it in the applicable option agreement
provided, however, that the exercise price shall not be less than 100% of the
fair market value of the Common Stock, as determined by the Board, at the time
the Option is granted.
(d) Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement, provided, however, that no Option will be granted
for a term in excess of 10 years.
(e) Exercise of Option. Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(f) for the number of
shares for which the Option is exercised.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may, in its sole discretion, otherwise provide
in an option agreement, by (i) delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price and any required tax withholding
A-16-2
or (ii) delivery by the Participant to the Company of a copy of irrevocable
and unconditional instructions to a creditworthy broker to deliver promptly
to the Company cash or a check sufficient to pay the exercise price and any
required tax withholding;
(3) when the Common Stock is registered under the Exchange Act, by
delivery of shares of Common Stock owned by the Participant valued at their
fair market value as determined by (or in a manner approved by) the Board
in good faith ("Fair Market Value"), provided (i) such method of payment is
then permitted under applicable law and (ii) such Common Stock, if acquired
directly from the Company, was owned by the Participant at least six months
prior to such delivery;
(4) to the extent permitted by applicable law and the Board, in its
sole discretion by (i) delivery of a promissory note of the Participant to
the Company on terms determined by the Board, or (ii) payment of such other
lawful consideration as the Board may determine; or
(5) by any combination of the above permitted forms of payment.
(g) Substitute Options. In connection with a merger or consolidation of an
entity with the Company or the acquisition by the Company of property or stock
of an entity, the Board may grant Options in substitution for any options or
other stock or stock-based awards granted by such entity or an affiliate
thereof. Substitute Options may be granted on such terms as the Board deems
appropriate in the circumstances, notwithstanding any limitations on Options
contained in the other sections of this Section 5 or in Section 2.
(h) Repricing. In no event shall any Option be repriced at any time during
the term of such Option (other than adjustments for stock splits, stock
dividends, recapitalizations and similar events as provided herein and in the
documents governing such Option), without the prior affirmative vote of a
majority of outstanding shares of voting stock of the Company present at a
stockholders' meeting in person or by proxy and entitled to vote thereon.
"Repriced" means any of the following or any other action that has the same
effect: (1) lowering the strike price of an option after it is granted, (2) any
other action that is treated as a repricing under generally accepted accounting
principles, or (3) canceling an option at a time when its strike price exceeds
the fair market value of the underlying stock, in exchange for another option,
share of restricted stock, or other equity, unless the cancellation and exchange
occurs in connection with a merger, acquisition, spin-off or other similar
corporate transaction. Any amendment or repeal of this provision shall require
the affirmative vote of a majority of outstanding shares of voting stock of the
Company present at a stockholders' meeting in person or by proxy and entitled to
vote thereon.
(i) Director Grants. On the day following each Annual Stockholders
Meeting, each non-employee director shall automatically be granted an option to
purchase 4,000 shares of Common Stock. Any person who is appointed or elected as
a non-employee director at any other time shall automatically be granted an
option to purchase 4,000 shares of Common Stock on the date of such appointment
or election. Notwithstanding anything herein to the contrary, each non-employee
director of the Company who is serving at the closing of transactions
contemplated by the Agreement and Plan of Merger entered into among Roche
Holding Ltd, 66 Acquisition Corporation II, IGEN International, Inc. and the
Company, shall receive an option to purchase 4,000 shares of Common Stock as of
such closing date.
6. Restricted Stock
(a) Grants. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, a "Restricted Stock Award").
(b) Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any.
A-16-3
(c) Stock Certificates. Any stock certificates issued in respect of a
Restricted Stock Award shall be registered in the name of the Participant and,
unless otherwise determined by the Board, deposited by the Participant, together
with a stock power endorsed in blank, with the Company (or its designee). At the
expiration of the applicable restriction periods, the Company (or such designee)
shall deliver the certificates no longer subject to such restrictions to the
Participant or if the Participant has died, to the beneficiary designated, in a
manner determined by the Board, by the Participant to receive amounts due or
exercise rights of the Participant in the event of the Participant's death (the
"Designated Beneficiary"). In the absence of an effective designation by a
Participant, Designated Beneficiary shall mean the Participant's estate.
7. Other Stock-Based Awards
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.
8. Adjustments for Changes in Common Stock and Certain Other Events
(a) Changes in Capitalization. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than a normal
cash dividend, (i) the number and class of securities available under this Plan,
(ii) the per-Participant limit set forth in Section 4(b), (iii) the number and
class of securities and exercise price per share subject to each outstanding
Option or other stock-based award, and (iv) the repurchase price per share
subject to each outstanding Restricted Stock Award shall be appropriately
adjusted by the Company (or substituted Awards may be made, if applicable) to
the extent the Board shall determine, in good faith, that such an adjustment (or
substitution) is necessary and appropriate. If this Section 8(a) applies and
Section 8(c) also applies to any event, Section 8(c) shall be applicable to such
event, and this Section 8(a) shall not be applicable.
(b) Liquidation or Dissolution. In the event of a proposed liquidation or
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a liquidation or
dissolution on any Restricted Stock Award or other stock-based award granted
under the Plan at the time of the grant.
(c) Reorganization Events
(1) Definition. A "Reorganization Event" shall mean: (a) any merger or
consolidation of the Company with or into another entity as a result of which
all of the Common Stock is converted into or exchanged for the right to receive
cash, securities or other property or (b) any exchange of all of the Common
Stock of the Company for cash, securities or other property pursuant to a share
exchange transaction.
(2) Consequences of a Reorganization Event on Options. Upon the occurrence
of a Reorganization Event, or the execution by the Company of any agreement with
respect to a Reorganization Event, the Board shall provide that all outstanding
Options shall be assumed, or equivalent options shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof). For purposes
hereof, an Option shall be considered to be assumed if, following consummation
of the Reorganization Event, the Option confers the right to purchase, for each
share of Common Stock subject to the Option immediately prior to the
consummation of the Reorganization Event, the consideration (whether cash,
securities or other property) received as a result of the Reorganization Event
by holders of Common Stock for each share of Common Stock held immediately prior
to the consummation of the Reorganization Event (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
A-16-4
majority of the outstanding shares of Common Stock); provided, however, that if
the consideration received as a result of the Reorganization Event is not solely
common stock of the acquiring or succeeding corporation (or an affiliate
thereof), the Company may, with the consent of the acquiring or succeeding
corporation, provide for the consideration to be received upon the exercise of
Options to consist solely of common stock of the acquiring or succeeding
corporation (or an affiliate thereof) equivalent in fair market value to the per
share consideration received by holders of outstanding shares of Common Stock as
a result of the Reorganization Event.
Notwithstanding the foregoing, if the acquiring or succeeding corporation
(or an affiliate thereof) does not agree to assume, or substitute for, such
Options, then the Board shall, upon written notice to the Participants, provide
that all then unexercised Options will become exercisable in full as of a
specified time prior to the Reorganization Event and will terminate immediately
prior to the consummation of such Reorganization Event, except to the extent
exercised by the Participants before the consummation of such Reorganization
Event; provided, however, that in the event of a Reorganization Event under the
terms of which holders of Common Stock will receive upon consummation thereof a
cash payment for each share of Common Stock surrendered pursuant to such
Reorganization Event (the "Acquisition Price"), then the Board may instead
provide that all outstanding Options shall terminate upon consummation of such
Reorganization Event and that each Participant shall receive, in exchange
therefor, a cash payment equal to the amount (if any) by which (A) the
Acquisition Price multiplied by the number of shares of Common Stock subject to
such outstanding Options (whether or not then exercisable), exceeds (B) the
aggregate exercise price of such Options. To the extent all or any portion of an
Option becomes exercisable solely as a result of the first sentence of this
paragraph, upon exercise of such Option the Participant shall receive shares
subject to a right of repurchase by the Company or its successor at the Option
exercise price. Such repurchase right (1) shall lapse at the same rate as the
Option would have become exercisable under its terms and (2) shall not apply to
any shares subject to the Option that were exercisable under its terms without
regard to the first sentence of this paragraph.
(3) Consequences of a Reorganization Event on Restricted Stock
Awards. Upon the occurrence of a Reorganization Event, the repurchase and other
rights of the Company under each outstanding Restricted Stock Award shall inure
to the benefit of the Company's successor and shall apply to the cash,
securities or other property which the Common Stock was converted into or
exchanged for pursuant to such Reorganization Event in the same manner and to
the same extent as they applied to the Common Stock subject to such Restricted
Stock Award.
9. General Provisions Applicable to Awards
(a) Transferability of Awards. Except as the Board may otherwise determine
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
(b) Documentation. Each Award shall be evidenced in such form (written,
electronic or otherwise) as the Board shall determine. Each Award may contain
terms and conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each Award
may be made alone or in addition or in relation to any other Award. The terms of
each Award need not be identical, and the Board need not treat Participants
uniformly. The Board, in its sole discretion, may take such further action, in
respect of the Plan or any Award, as it, in its sole discretion, determines to
be fair and equitable in light of the circumstances presented (including without
limitation in the context of a reorganization event or any change in control of
BioVeris) as long as such action would not materially and adversely affect the
Participant.
(d) Termination of Status. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a
A-16-5
Participant and the extent to which, and the period during which, the
Participant, the Participant's legal representative, conservator, guardian or
Designated Beneficiary may exercise rights under the Award.
(e) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. Except as the Board may otherwise
provide in an Award, when the Common Stock is registered under the Exchange Act,
Participants may, at the Company's option, satisfy such tax obligations in whole
or in part by delivery of shares of Common Stock, including shares retained from
the Award creating the tax obligation, valued at their Fair Market Value;
provided, however, that the total tax withholding where stock is being used to
satisfy such tax obligations cannot exceed the Company's minimum statutory
withholding obligations (based on minimum statutory withholding rates for
federal and state tax purposes, including payroll taxes, that are applicable to
such supplemental taxable income). The Company may, to the extent permitted by
law, deduct any such tax obligations from any payment of any kind otherwise due
to a Participant.
(f) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.
(g) Conditions on Delivery of Stock. The Company will not be obligated to
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) Acceleration. The Board may at any time provide that any Award shall
become immediately exercisable in full or in part, free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.
10. Miscellaneous
(a) No Right To Employment or Other Status. No person shall have any claim
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then a Participant who exercises an Option between the record date
and the distribution date for such stock dividend shall be entitled to receive,
on the distribution date, the stock dividend with respect to the shares of
Common Stock acquired upon such Option exercise, notwithstanding the fact that
such shares were not outstanding as of the close of business on the record date
for such stock dividend.
(c) Effective Date and Term of Plan. The Plan shall become effective on
the date on which it is adopted by the Board, but no Award granted to a
Participant that is intended to comply with Section 162(m) shall become
exercisable, vested or realizable, as applicable to such Award, unless and
A-16-6
until the Plan has been approved by the Company's stockholders to the extent
stockholder approval is required by Section 162(m) in the manner required under
Section 162(m) (including the vote required under Section 162(m)). No Awards
shall be granted under the Plan after the completion of ten years from the
earlier of (i) the date on which the Plan was adopted by the Board or (ii) the
date the Plan was approved by the Company's stockholders, but Awards previously
granted may extend beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that to the extent required by
Section 162(m), no Award granted to a Participant that is intended to comply
with Section 162(m) after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award, unless and until such
amendment shall have been approved by the Company's stockholders if required by
Section 162(m) (including the vote required under Section 162(m)).
(e) Governing Law. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
A-16-7
ANNEX 17
SECTION 262 Of The Delaware General Corporation Law
sec. 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to
sec. 251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or
sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
A-17-1
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, then, either a constituent corporation before
the effective date of the merger or consolidation, or the surviving or
resulting corporation within ten days thereafter, shall notify each of the
holders of any class or series of stock of such constituent corporation who
are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section. Such notice may, and, if
given on or after the effective date of the merger or consolidation, shall,
also notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within 20
days after the date of mailing of such notice, demand in writing from the
surviving or resulting corporation the appraisal of such holder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given,
A-17-2
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If
no record date is fixed and the notice is given prior to the effective
date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may
A-17-3
participate fully in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
A-17-4
[BACK COVER OF PROSPECTUS]
Until , 2004, all dealers that effect transactions in these
securities, whether or not participating in this distribution, may be required
to deliver a prospectus.
IGN-SPS-03
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware, or
the Delaware Corporation Law, provides, in general, that a corporation shall
have the power to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, other than
an action by or in the right of the corporation, because the person is or was a
director or officer of the corporation. Such indemnity may be against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such action,
suit or proceeding, if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and if, with respect to any criminal action or proceeding, the
person did not have reasonable cause to believe the person's conduct was
unlawful.
Section 145(b) of the Delaware Corporation Law provides, in general, that a
corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor because the person is or was a director or officer of the corporation,
against any expenses (including attorneys' fees) actually and reasonably
incurred by the person in connection with the defense or settlement of such
action or suit if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interest of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
be indemnified for such expenses which the Court of Chancery or such other court
shall deem proper.
Article X of BioVeris's certificate of incorporation requires
indemnification to the fullest extent authorized by Delaware law of any person
who is or was a director or officer of BioVeris who was or is made a party or is
threatened to be made a party to or is otherwise involved in any proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director or officer of the BioVeris or was serving
at the request of the BioVeris as a director, officer, employee or agent of any
other enterprise.
The right to indemnification under Article X of BioVeris's certificate of
incorporation is not exclusive of any right to indemnification that any person
may otherwise have. BioVeris will enter into separate indemnification agreements
with Messrs. Samuel Wohlstadter, Richard Massey, Joop Sistermans, Anthony Rees,
Robert Salsmans, George Migausky, Don Elsey and Daniel J. Abdun-Nabi and Mrs.
Nadine Wohlstadter, pursuant to which BioVeris has agreed to indemnify such
officers and directors to the fullest extent authorized by law, and to purchase
and maintain insurance on behalf of such officers and directors.
Section 145(g) of the Delaware Corporation Law and Article X of BioVeris's
certificate of incorporation permit BioVeris to purchase and maintain insurance
on behalf of any person who is or was a director or officer of the corporation
against any liability asserted against the person and incurred by the person in
any such capacity, or arising out of the person's status as such, whether or not
the corporation would have the power to indemnify the person against such
liability under the provisions of the law. As authorized by Section 145(g) of
the Delaware Corporation Law and Article X of BioVeris's certificate of
incorporation, and as required by BioVeris's indemnification agreements,
BioVeris will have in effect directors' and officers' liability insurance
policies.
II-1
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index.
(b) Not applicable.
(c) Opinion of Lehman Brothers (included as Annex 15 to the proxy
statement/prospectus which is a part of this registration statement).
ITEM 22. UNDERTAKINGS
(a)(1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (a)(1) immediately preceding, or (ii) that purports
to meet the requirements of section 10(a)(3) of the Securities Act of 1933
and is used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 20 or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this amendment to the registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in Gaithersburg, Maryland on this
11th day of December, 2003.
BIOVERIS CORPORATION,
By: /s/ SAMUEL J. WOHLSTADTER
------------------------------------
Name: Samuel J. Wohlstadter
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to the registration statement has been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ SAMUEL J. WOHLSTADTER Chairman, Board of Directors; December 11, 2003
------------------------------------------------ Chief Executive Officer
Samuel J. Wohlstadter (Principal Executive Officer)
/s/ GEORGE V. MIGAUSKY Vice President and Chief December 11, 2003
------------------------------------------------ Financial Officer (Principal
George V. Migausky Financial and Accounting
Officer)
/s/ RICHARD J. MASSEY President, Chief Operating December 11, 2003
------------------------------------------------ Officer; Director
Richard J. Massey
/s/ RICHARD CASS Director December 11, 2003
------------------------------------------------
Richard Cass
/s/ ANTHONY REES Director December 11, 2003
------------------------------------------------
Anthony Rees
/s/ ROBERT R. SALSMANS Director December 11, 2003
------------------------------------------------
Robert R. Salsmans
/s/ JOOP SISTERMANS Director December 11, 2003
------------------------------------------------
Joop Sistermans
II-3
EXHIBIT INDEX
EXHIBITS
--------
2.1 Agreement and Plan of and Merger dated as of July 24, 2003,
among Roche Holding Ltd, 66 Acquisition Corporation II, IGEN
International, Inc. and IGEN Integrated Healthcare, LLC
(included as Annex 2 to the proxy statement/prospectus which
is a part of this registration statement).
3.1(9) Certificate of Incorporation of BioVeris Corporation.
3.2 Form of Certificate of the Voting Powers, Designations,
Preferences and Relative, Participating, Optional and Other
Special Rights and Qualifications, Limitations or
Restrictions of Series A Participating Cumulative Preferred
Stock of BioVeris Corporation. Filed as Exhibit A to the
Form of Rights Agreement which is filed as Exhibit 4.1 to
this registration statement.
3.3 Form of Certificate of Designation of Series B Preferred
Stock of BioVeris Corporation.
3.4(9) By-laws of BioVeris Corporation.
4.1 Form of Rights Agreement dated as of , 2003, between
BioVeris and Equiserve Trust Company, N.A.
4.2 Form of Right Certificate for BioVeris Series A Preferred
Stock. Filed as Exhibit B to the Form of Rights Agreement
which is filed as Exhibit 4.1 to this registration
statement.
4.3 Specimen Common Stock Certificate.
4.4 Specimen Series B Preferred Stock Certificate.
5.1(+) Opinion of Cravath, Swaine & Moore LLP regarding the
legality of securities being issued.
8.1(+) Opinion of Cravath, Swaine & Moore LLP regarding tax
matters.
10.1 License Agreement dated as of July 24, 2003, by and between
IGEN International, Inc. and IGEN LS LLC (included as Annex
10 to the proxy statement/prospectus which is a part of this
registration statement).
10.2 Improvements License Agreement dated as of July 24, 2003, by
and between Roche Diagnostics GmbH and IGEN International,
Inc. (included as Annex 11 to the proxy statement/prospectus
which is a part of this registration statement).
10.3 Covenants Not to Sue dated as of July 24, 2003, among IGEN
Integrated Healthcare, LLC, Meso Scale Diagnostics, LLC.,
Meso Scale Technologies, LLC., Roche Diagnostics GmbH, Roche
Holding Ltd and IGEN LS LLC (included as Annex 12 to the
proxy statement/ prospectus which is a part of this
registration statement).
10.4 License Agreement (Human IVD, Veterinary IVD, HLA Typing,
Paternity, DNA Manufacturing and Plasma Testing) dated as of
July 24, 2003, among IGEN Integrated Healthcare, LLC, F.
Hoffmann-La Roche Ltd, Roche Diagnostics GmbH and Roche
Molecular Systems, Inc. (included as Annex 13 to the proxy
statement/prospectus which is a part of this registration
statement).
10.5 License Agreement (Human IVD Services and Animal Diagnostic
Services) dated as of July 24, 2003, among IGEN Integrated
Healthcare, LLC, F. Hoffmann-La Roche Ltd, Roche Diagnostics
GmbH and Roche Molecular Systems, Inc. (included as Annex 14
to the proxy statement/prospectus which is a part of this
registration statement).
10.6(1*) Agreement dated May 25, 1990, between IGEN, Inc. and Eisai
Co., Ltd.
10.7(4) Supplemental Agreement dated July 23, 1997, between IGEN,
Inc. and Eisai Co., Ltd.
10.8(6) Extension Agreement dated July 11, 2002, between IGEN
International, Inc. and Eisai Co., Ltd.
10.9(1*) License and Technology Development Agreement dated May 19,
1993, between IGEN, Inc. and Organon Teknika B.V.
10.10(1*) Term Sheet for Consolidation of Research Projects dated
December 14, 1993, between IGEN, Inc. and Proteinix
Corporation.
10.11(1*) Term Sheet for Consolidation of Cancer Research Projects
dated December 14, 1993 between IGEN, Inc. and Pro-Neuron,
Inc.
10.12(10) Form of Indemnity Agreement entered into between BioVeris
and its directors and officers.
EXHIBITS
--------
10.13+ BioVeris 2003 Stock Incentive Plan (included as Annex 16 to
the proxy statement/prospectus which is a part of this
registration statement).
10.14(2) Lease Agreement dated September 27, 1994, between IGEN
International, Inc. and W-M 16020 Limited Partnership.
10.15(3*) Joint Venture Agreement dated as of November 30, 1995, among
Meso Scale Diagnostics, LLC., Meso Scale Technologies, LLC.
and IGEN, Inc.
10.16(3) Limited Liability Company Agreement of Meso Scale
Diagnostics, LLC. dated as of November 30, 1995, among Meso
Scale Diagnostics, LLC., Meso Scale Technologies, LLC. and
IGEN, Inc.
10.17(3*) IGEN/MSD License Agreement dated as of November 30, 1995,
between Meso Scale Diagnostics, LLC. and IGEN, Inc.
10.18(3+) Indemnification Agreement dated as of November 30, 1995,
between IGEN, Inc. and Jacob Wohlstadter.
10.19(5) Amendment No. 1 to Joint Venture Agreement dated August 15,
2001, among Meso Scale Diagnostics, LLC., Meso Scale
Technologies, LLC. and IGEN International, Inc.
10.20(5) First Amendment of Limited Liability Company Agreement of
Meso Scale Diagnostics, LLC. dated August 15, 2001, between
IGEN International, Inc. and Meso Scale Technologies, LLC.
10.21(5*) Amendment No. 1 to IGEN/MSD License Agreement dated August
15, 2001, between Meso Scale Diagnostics, LLC. and IGEN
International, Inc.
10.22(5) MSD/MST Sublicense Agreement dated November 30, 1995,
between Meso Scale Diagnostics, LLC., Meso Scale
Technologies, LLC. and IGEN, Inc.
10.23(5*) Amendment No. 1 to MSD/MST Sublicense Agreement dated August
15, 2001, between Meso Scale Technologies, LLC., Meso Scale
Diagnostics, LLC. and IGEN International, Inc.
10.24(5+) Consulting Agreement effective as of November 30, 1996,
between IGEN International, Inc. and Jacob N. Wohlstadter.
10.25(5+) Indemnification Agreement dated as of November 30, 1996,
among IGEN International, Inc., Jacob N. Wohlstadter and JW
Consulting Services, L.L.C.
10.26(5+*) Employment Agreement dated August 15, 2001, among Meso Scale
Diagnostics, LLC., IGEN International, Inc., Meso Scale
Technologies, LLC. and Jacob N. Wohlstadter.
10.27(8+) Indemnification Agreement dated October 26, 2001, between
IGEN International, Inc. and Jacob N. Wohlstadter.
10.28(10+) BioVeris Termination Protection Program.
10.29(7) Letter Agreement dated March 12, 2003, between IGEN
International, Inc., Meso Scale Diagnostics, LLC., Meso
Scale Technologies, LLC., and JW Consulting Services, L.L.C.
10.30* Solicitation, Offer and Award dated June 20, 2003, between
IGEN International, Inc. and the U.S. Army Space & Missile
Defense Command, as amended September 2, 2003.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Deloitte & Touche LLP.
23.4(+) Consent of Cravath, Swaine & Moore LLP.
23.5(9) Consent of Lehman Brothers Inc.
24.1 Power of Attorney (included on the signature page of the
initial filing of this registration statement).
99.1(10) Form of Proxy Card of IGEN International, Inc.
99.2 Opinion of Lehman Brothers, Inc. (included as Annex 15 to
the proxy statement/prospectus which is a part of this
registration statement).
99.3 Restructuring Agreement dated as of July 24, 2003, between
IGEN International, Inc. and IGEN Integrated Healthcare, LLC
(included as Annex 1 to the proxy statement/prospectus which
is a part of this registration statement).
EXHIBITS
--------
99.4 Post-Closing Covenants Agreement dated as of July 24, 2003
among Roche Holding Ltd, IGEN International, Inc. and IGEN
Integrated Healthcare, LLC (included as Annex 3 to the proxy
statement/prospectus which is a part of this registration
statement).
99.5 Tax Allocation Agreement dated as of July 24, 2003, among
Roche Holding Ltd, 66 Acquisition Corporation II, IGEN
International, Inc. and IGEN Integrated Healthcare, LLC
(included as Annex 4 to the proxy statement/prospectus which
is a part of this registration statement).
99.6 Ongoing Litigation Agreement dated July 24, 2003, by and
between IGEN International, Inc., Roche Diagnostics GmbH and
Roche Diagnostics Corporation (included as Annex 5 to the
proxy statement/prospectus which is a part of this
registration statement).
99.7 Global Consent and Agreement dated as of July 24, 2003,
among Roche Holding Ltd, IGEN International, Inc., IGEN
Integrated Healthcare, LLC, Meso Scale Diagnostics, LLC.,
Meso Scale Technologies, LLC., Jacob Wohlstadter and JW
Consulting Services, L.L.C. (included as Annex 6 to the
proxy statement/prospectus which is a part of this
registration statement).
99.8 Release and Agreement dated as of July 24, 2003, among IGEN
International, Inc., IGEN Integrated Healthcare, LLC,
Hyperion Catalysis International, Wellstat Biologics
Corporation, Wellstat Therapeutics Corporation, Proteinix
Corporation and Integrated Chemical Synthesizers, Inc.
(included as Annex 9 to the proxy statement/prospectus which
is a part of this registration statement).
99.9(7) Meso Scale Diagnostics, LLC., Financial Statements at
December 31, 2002 and 2001, and for the three years ended
December 31, 2002, 2001 and 2000, and Independent Auditor's
Report.
99.10 Letter Agreement dated July 24, 2003, among Meso Scale
Diagnostics, LLC., Meso Scale Technologies, LLC., JW
Consulting Services, L.L.C., Jacob N. Wohlstadter and IGEN
International, Inc. (included as Annex 7 to the proxy
statement/prospectus which is part of this registration
statement).
99.11 Letter Agreement dated July 24, 2003, between Samuel J.
Wohlstadter and IGEN Integrated Healthcare, LLC (included as
Annex 8 to the proxy statement/prospectus which is part of
this registration statement).
---------------
(+) To be filed by amendment.
+ Denotes management contract or compensatory plan or arrangement.
* Denotes confidential treatment applied.
(1) Previously filed as an exhibit to IGEN, Inc.'s Registration Statement on
Form S-1, as amended (Registration No. 33-72992), filed December 16, 1993.
(2) Previously filed as an exhibit to IGEN, Inc.'s Annual Report on Form 10-K
for the fiscal year ended March 31, 1995, filed July 14, 1995.
(3) Previously filed as an exhibit to IGEN, Inc.'s Form 10-Q for the quarter
ended December 31, 1995, filed February 14, 1996.
(4) Previously filed as an exhibit to IGEN International, Inc.'s Form 10-Q for
the quarter ended September 30, 1997, filed November 14, 1997.
(5) Previously filed as an exhibit to IGEN International, Inc.'s Amendment to
Form 8-K, filed September 5, 2001.
(6) Previously filed as an exhibit to IGEN International, Inc.'s Form 10-Q for
the quarter ended June 30, 2002, filed August 14, 2002.
(7) Previously filed as an exhibit to IGEN International, Inc.'s Form 10-K for
the fiscal year ended March 31, 2003, filed June 30, 2003.
(8) Previously filed as an exhibit to IGEN International, Inc.'s Form 10-Q for
the quarter ended December 31, 2001, filed February 14, 2002.
(9) Previously filed as an exhibit to BioVeris Corporation's Registration
Statement on Form S-4 (Registration No. 333-109196), filed September 26,
2003.
(10) Previously filed as an exhibit to BioVeris Corporation's Registration
Statement on Form S-4 (Registration No. 333-109196), filed November 12,
2003.